What a katsu curry can tell us about the Japanese economy

**Luke Wilson** (0:01)
New data rings alarm bells about the health of China's economy. It's World Business Express from the BBC World Service. I'm Luke Wilson. The boss of the world's biggest bank has a warning for the UK government on tax, and why a fast food staple helps us understand what's going on with the Japanese yen.
We start the programme in China, where there are more signs of a slowdown in the world's second biggest economy. Fresh stats for July show unemployment ticking up, retail sales stalling, and real estate and infrastructure investment falling even further. Despite all that, at an address in Beijing, the Chinese president, Xi Jinping, said he is optimistic about the future.

**SPEAKER_2** (0:48)
We must remain firm in our confidence, work with determination, strive to build China into a great country, and advance national rejuvenation on all fronts through Chinese modernization, continuously creating a better life for the Chinese people and writing an even more magnificent chapter for the Chinese nation.

**Luke Wilson** (1:12)
But what can his government do to give the economy a boost? Duncan Wrigley is chief China economist at Pantheon Macroeconomics.

**Duncan Wrigley** (1:19)
Growth overall is still slow and probably still underneath the official target of 4.5% for the year, following a weak Q2.
That's the big picture. And when you filter down into the data, what you see are really two economies. You've got one which is vibrant and booming, and that's the high-tech manufacturing economy. And that's externally facing. China's exporting goods it wasn't before, AI-related, electric vehicles, all that kind of thing.
And then you've got the domestic economy, which is pretty sluggish still. People aren't spending much. The property market is in a downturn, and investment in things like infrastructure is very weak indeed.

**Luke Wilson** (2:03)
And do we know what's behind that? Why is the Chinese consumer feeling that way?

**Duncan Wrigley** (2:09)
Real estate is about 60 percent of household wealth, and it's been in a downturn since the second half of 2021 And the second thing is, if you look at this dual economy, the part which is booming, the high-tech manufacturing doesn't create many jobs, whereas the old industries, which are lagging behind, are where most of the jobs are. And so people are pretty pessimistic about the outlook for jobs.

**Luke Wilson** (2:32)
So what can Xi Jinping and the Chinese government do to try and turn things around, do you think?

**Duncan Wrigley** (2:38)
Yeah, well, they had a big meeting at the end of July, and this data is out for July, so they would have known this data. And they signal pretty clearly what they're going to do. So first of all, they're going to push ahead and speed up implementation, so the budgeted things they've already got in the pipeline. It's basically government spending and borrowing on traditional areas like building infrastructure. That's the staple choice of the Chinese government. The thing to understand is that the priorities of Chinese leaders right now are very much fixed on the long term. It's about restructuring the Chinese economy towards this much more high-tech manufacturing-led growth model, which they think can sustain growth for the years to come.

**Luke Wilson** (3:19)
Duncan Wrigley from Pantheon Macroeconomics. Rachel Winter is partner and investment manager at Killik & Co. Rachel, what impact does all this have on financial markets?

**Rachel Winter** (3:30)
Well, we are seeing a bit of weakness in Chinese markets in particular, actually. So, if we look at the MSCI China, which is quite a well-known Chinese equity benchmark, that's actually down about 15% over the course of the last five years. So, that shows there is a bit of nervousness among the equity investors about investing in China. And then if we look at some specific companies like Nike and Estee Lauder, these are big global brands that have historically sold a lot into China, and those two companies have both had share price falls of about 75% over the last five years. So, they really are struggling at the moment.

**Luke Wilson** (4:04)
Thanks, Rachel. We'll be back with you in a moment.
The boss of the world's biggest bank, JP Morgan Chase, has reportedly warned the UK finance minister that taxing banks more often drives jobs elsewhere. The Financial Times says Jamie Dimon made the comments in a phone call with John Healy last week. There have been calls for further taxes on banks after the UK's biggest announced rising profits last month. JP Morgan has previously revealed plans for a new 3 million square foot tower in London's Canary Wharf financial district.
For more than four decades, economists have used the price of a McDonald's Big Mac to compare the purchasing power of different countries' currencies. But when you're focusing on Japan, is a Big Mac still the best fast food to use? The country's currency, the yen, is in the spotlight after it fell to a 40-year low earlier this month, and the US and Japan jointly intervened to prop it up. What does that mean for the Japanese people? Earlier, I spoke to Jeffrey Yu, senior macro strategist at the American Bank BNY, who's come up with a Katsu Curry index to find out.