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Quest Means Business
Trading Up and Down; Davos Forum Opens; Oil Price Examined; World Economic Outlook; Saudi Arabia and the Oil Market; Top Chinese Companies Leaders Not Worried About GDP; Why the Love of Gold?; The Oscars' Race Controversy. Aired 4-5p ET
Aired January 19, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
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RICHARD QUEST HOST: A true topsy-turvy day on Wall Street. The market opens higher, gives away all the gains and then comes back towards the close as
the gavel is hit, trading comes to an end. It is Tuesday. It is the 19th of January.
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QUEST: Tonight, drowning in oil and clutching at straws. Oil experts warn prices have still further to fall. As the prices fall, economies tumble.
The IMF is warning of hard times ahead.
And China misses its growth forecast and now everyone wonders what's next.
I'm Richard Quest live at the world economic forum with some new friends. We all mean business.
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QUEST: Good evening from Davos. The data has arrived and the global economic picture looks very different this evening. Three blockbuster
reports released on Tuesday and they show a world in economic flux. Whether it be tumbling oil, China's transition or sluggish global growth.
(BEGIN VIDEO CLIP)
QUEST: The International Energy Agency says the world is drowning in oil and has an emphatic belief that prices can fall lower, certainly lower than
they have been at $30. There are signs China's landing may be getting harder. It posted its weakest GDP growth in a quarter of a century. And the
International Monetary Fund says slowing china and falling oil prices will pull down global growth. The IMF has cut its forecast for the third time in
a year.
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QUEST: You get an idea of the sort of economic picture we're painting and what they'll be dealing with when they arrive at the world economic forum
for the rest of the week. I spoke to the IMF's chief economist, Maurice Obstfeld, and he explained why the fund has lowered its outlook once again.
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MAURICE OBSTFELD, IMF CHIEF ECONOMIST: We do see bigger negatives than I think we would have anticipated. Many countries that depend on oil exports
and depend on them for public finance are being squeezed very hard. And of course it's always hard to see whether an oil price decline is due to
supply or demand. If it's due to demand then we don't expect to see big positive responses. In this case we think supply is a big part of the
story.
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QUEST: The supply side of the story is going to get worse in many ways. You heard the IEA, the International Energy Agency, they are talking about the
world drowning in oil. If Iran starts pumping more and the price goes down further, Maurice, which countries are you most concerned about?
OBSTFELD: Well, we first of all believe that markets are anticipating Iranian exports. And one of the things we're seeing now, downward pressure
on oil, is due to those expectations. So the actual impact might be less than anticipated. But there's a range of countries in the developing world
which are being really squeezed, whether we look at Africa, Latin America and we do worry about those.
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OBSTFELD: Those countries -- the Middle Cast, of course. Those countries face a pretty strong adjustment process.
(END VIDEO CLIP)
QUEST: Maurice, time for us to take you to the worry wall. All this week we will be at the worry wall. The year started with so many worries and
difficulties, and now we're trying to get you the idea. So zero to ten, Klaus Schwab is already at an 11, how worried are you about 2016 and how it
pans out? Where would you like to be on the wall with 10 being extremely worried?
OBSTFELD: I think the fundamentals, while not good, don't really point to crisis. My worry is more that financial market reactions to the
fundamentals can tip us over. So I would go with about a three on that worry wall.
QUEST: A three on the worry wall, which as the day and the week progresses, you will see us add to it. Policy makers already beginning to heed the
warnings of the IMF and others. The Governor of the Bank of England, Mark Carney signaled on Tuesday the economic climate is no longer ripe for an
interest rate hike in the U.K. any time soon.
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MARK CARNEY, GOVERNOR, BANK OF ENGLAND: It's clear to me that since last summer progress has been insufficient along these dimensions to
warrant raising interest rates at this time. The world is weaker and U.K. growth has slowed. Due to the oil price collapse, inflation has fallen
further and will likely remain very low for longer.
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[16:05:10]
QUEST: That's Mark Carney. Joining me is Ken Rogoff, former Chief Economist at the IMF who knows only too well the business of doing the world economic
outlook and the significance of it. Good to see you.
KENNETH ROGOFF, IMF FORMER CHIEF ECONOMIST: Good to see you, Richard.
QUEST: So we've had this warning now from the IMF and we've had the IEA saying drowning in oil. What do you make of it all? How complex has the
situation now become?
ROGOFF: Well, it's really bad for oil exporters. It's not so bad for oil importers. It's fantastic for Europe, for Japan, and the United States is a
little more a mix. So you know, it used to be when the price is oil is going up, what does that mean, we're going to have a recession. Now they're
saying the price of oil is going down and we're going to have a recession.
QUEST: OK, so with for the first time, and we'll talk about it more in this program, we are hearing the "r" word being used, recession. Is that
realistic or is it just hyperbole?
ROGOFF: I think it's not particularly heightened for the United States and Europe, maybe a little bit, but we're talking about China growth recession.
If we're talking about Russia or Brazil, they're in recession.
QUEST: OK, they're in recession. Emerging markets are being clobbered. Now tell us the significance of the China announcement today. First of all, do
you believe the number at 7%?
ROGOFF: (Inaudible) Didn't they say 6.8 --
QUEST: 6.9, 6.9.
ROGOFF: Yes, it's like you know that's -- if that's what the real number is I'd be clapping, but nobody believes it. I mean when they inch it down a
tenth of a percent we don't even notice that, we really think it fell more.
QUEST: You think it's a lot lower.
ROGOFF: Yes, I think it's 5%.
QUEST: Right, now, at 5%, who gets clobbered and where? And how serious is that?
ROGOFF: Well, certainly Brazil, anyone that exports commodities, Russia, oil, Germany exports a lot to China but they don't get clobbered as bad as
if you only exported to China.
QUEST: And what about other countries in South East-Asia, emerging markets that have not done the hard work of sorting out their economic situation?
ROGOFF: Well, we're worried about the debt situation in Asia, of course.
QUEST: You are?
ROGOFF: I mean there's a lot of dollar debt, their exchange rates are tanking, meaning it's expensive to pay that dollar debt.
QUEST: As we turn to the United States, Mark Carney says no interest rate rises in the U.K. Do you now think I mean Stan Fisher's four rises in 2016
is just pie in the sky for the U.S. for the Fed? We're not going to get three or four rises in interest rates this year or do you think we might
still?
ROGOFF: I think we might still. I mean I think for the U.S. and Europe, the risks are elevated, but they're nothing like emerging markets. We may still
be facing pressure. Obviously if he'd known the markets were going to go down so much, he might not have said it that way.
QUEST: Join me at the worry wall. This year you even get a choice of color.
ROGOFF: I'll take red.
QUEST: Oh you're going to take red, all right. Where are you on the worry wall?
ROGOFF: Well, I'm going to pick here for China and emerging markets, but I'm going to pick down here for the U.S. and Europe. Sorry to be difficult.
QUEST: Not at all. Thank you very much. As you can see this is the way it's going to be going during the course of the week. Thank you very much.
ROGOFF: Pleasure, pleasure.
QUEST: Let's hope everybody is (inaudible) all over the wall. Thank you. Ken Rogoff joining me.
Now, it was a photo finish for the Dow Jones industrial average.
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QUEST: The Dow was up 167 points at one stage during the session. The low, it was down 85 points. Now that shows you it's a 252-point swing during the
course of the session. OK, so the numbers may not be that huge. You've had 300 or 400 in either direction. But it's the mere fact that the index can
go so far in opposite directions in one session, that volatility, and once again it was falling oil prices which pulled the market lower.
Europe had seen the best of the day and they shrugged off the fears and pushed higher. It was mining stocks interestingly, usually maybe that led
the way there. That growth number from China could mean more stimulus. This was the best day of the year for most markets with Paris having the best of
the day up 2%.
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QUEST: The world is in their words drowning in oil. The world's top experts warn prices are likely to head lower, after the break.
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QUEST: The world's energy experts say oil prices are headed downhill, and that's a major concern for the economic thinkers in the ski resorts of
Davos.
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QUEST: Prices reached the peak in June of 2014. And since then the trails of gone decidedly steeper and more challenging. 2016 is strictly a double
black diamond, for experts only, and the International Energy Agency warns it is littered with hazards.
The first is over supply. The IEA says 2016 will be the third year in a row where supply exceeds demands by one million barrels a day. It's almost 1.5%
of supply.
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QUEST: Adding to the supply glut Iran is poised to fill any gap left by producers being pushed out by low prices. And with weak demand, there's
nowhere to go. The IEA blames the economic weakness in China and other emerging economies that's paired the warm weather. I spoke to the Chief
Executive of Crescent Petroleum. He told me the demand side of the equation is most important.
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MAJID JAFAR, CEO, CRESCENT PETROLEUM: The last five years we've seen ten million barrels per day more on the market. Over half of that from the U.S.
and two million each from Iraq and Saudi and about a million from Russia. What's more relevant to the price is what's happened with Chinese demand.
(END VIDEO CLIP)
QUEST: Oil prices in New York and London, they moved in opposite directions.
(BEGIN VIDEO CLIP)
QUEST: For the U.S. it was concerns about the supply glut and that pushed Texas down more than 3.4%. Brent, the global benchmark rose after strong
oil demand came in from China.
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QUEST: John Defterios is CNN's emerging markets editor.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Nice to be back - nice to be back. A lot to talk about.
QUEST: What do you make of this? I mean the clearest indication of difficulties and complexity is what I've just said about WTI going one way,
Brent going the other, when they have gone in tandem for the last six months to a year.
DEFTERIOS: Yes, in fact because WTI now with the ability for the U.S. exporters to go into the global market has equalized the price. What I find
interesting about this IEA report Richard, they didn't pull any punches with the language; drowning the market with oil. There's so much oil in the
market they're going to run out of space for supply. But if you break it down, what they're suggesting here, in the last year they have added the
size of Kuwait, about 2.6 million barrels onto the market in terms of supply. The other kind of subtlety here, half of it came from OPEC
countries, the other half from non-OPEC countries. What does that tell us?
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DEFTERIOS: Within OPEC like Saudi Arabia they're fighting for market share. There was a couple of question marks -
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QUEST: But when you say fighting for market share, Iran is now going to be fighting for market share, Russia is fighting for market share. If the
price is set on the international exchanges. Where does that fight go, just by pumping more?
DEFTERIOS: Well that's exactly the game right now. It's interesting that Saudi Arabia took 1.5 million barrels according to Majid Jafar in the last
three years filling the void left by Iran. Iran wants to come back into the market.
I thought it was interesting the IEA suggested that Iran is prepared Richard, and you heard it here first, half a million barrels a day. They're
going to the high side coming onto the market, another half a million by June and they'll stand by that and another half a million by the end of the
year. It's going to be a fight within OPEC itself. That's not a market share fight, they want to battle for control within OPEC.
QUEST: But Jafad also said, and it's well known that the U.S. has put in up to 5 million barrels and it may only take out half a million this year
because of fracking. So that almost evens out against Iran's increased production.
DEFTERIOS: Indeed. 600,000 barrels corrected from the U.S. fracking market so far. Another -- probably a million is going to come after the market.
Iran is going to fill that void. I think where the Saudi strategy could be working here. $400 billion with the major projects, deep water projects,
Kazakhstan, Nigeria, Angola are coming off the market but for Saudi Arabia, the strategy they thought was going to take 12 months is going to take a
lot longer. So what does this tell us? The oil price will likely go down further than where we are today.
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QUEST: I'm frothing to get in here. Because --
DEFTERIOS: You are?
QUEST: I am.
DEFTERIOS: I got to tell you that position I'm trying to pull you through - I see China is marked on the board I guess we should talk about China.
QUEST: Forget about China, we can update in the week. Look, I can hear viewers -- the dear viewer joining us this evening -- saying so what? So
what? I have got cheaper gasoline, my oil prices are going down for the factory where I work, production costs are going down and eventually
airline tickets will go down. So what?
DEFTERIOS: Look, I'm on the other side of the fence on this one. I think there's a lot more destruction created by the falling price of crude. We've
seen 250,000 jobs lost in America alone. There's going to be a lot more dislocation. The new twist to this story is that the U.S. frackers are
very flexible. So if that price does recover to $50 a barrel, there's 3,500 wells that can come back online really quickly.
The deep water wells will not come back on line. The frackers are competitive so the price will stay pretty low.
QUEST: And we will talk more about it. That's good. Pretty Low. We'll talk about the worry wall and we may even let you get close to it.
DEFTERIOS: I was just going to talk about China, i don't need to mark it.
QUEST: John Defterios. Coming up next, confidence is what it's all about and chief executive confidence isn't what it used to be. Some people, chief
execs, are worried about when it comes to the global economy and some senior people are even starting to use the "r" word, recession. Is that
realistic? Another "r" word, in a moment.
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QUEST: The chairman of Pricewaterhouse Coopers, PWC, they'll get cross if we start spell it out these days but I'm old enough I'll get away with it.
Anyway PWC says, the chairman says he sees tremendous opportunity when he looks at the global economic landscape despite many challenges. His
optimism is not mirrored in PWC's latest survey.
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QUEST: The study shows a decline in Chief Exec confidence about the global economy and growth. And the top threats, over regulation is always there.
But geopolitical instability that rocketed up to the second place from number four. Currency volatility was there as well. They're all
interlinked.
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QUEST: I asked Dennis Nally what he thinks is the driving -- drop in chief executive sentiment this year.
DENNIS NALLY, CHAIRMAN PWC: Economic environment, a lot of instability all around the world. You know, whether it's China, whether it's slow growth
right here in Europe. You think about the geopolitical issues that are out there, concerns about the Middle East, other parts of the world as well.
Think about the price of oil. What does that mean? Who would have thought today that we'd be talking about the price of oil less than $30 a barrel.
QUEST: What is the significance of that reduction in the price of oil?
NALLY: Well, you know, I think it just points to me there's good and bad here as you eluded. It depends where you sit, what chair you're in as to
how you think about that as a concern or an opportunity.
QUEST: But it's destabilizing whichever way we look at it.
NALLY: That is the point. That is the point. So are we talking about $30 a barrel, $20 a barrel, are we talking about $40 or $50 a barrel of oil.
Nobody knows the answer to that. That's the concern that everybody has.
QUEST: And in that concern, CEO's have to do business and they have very little control over those geopolitical issues.
[16:20:11]
NALLY: You're absolutely right. So let's talk about things that they can control. So when you think about, you know, the theme of Davos this year,
the fourth industrial revolution. Technology, what's happening. Changing the way business gets done. Changes in term of impacts to society. CEOs
have the ability to at least influence their organizations on how to use technology in a very different way.
QUEST: If they're up to it, if they have thought about it, if they have mastered the art themselves. Do you think they are or do you think too many
CEOs are still trying to put out the crisis du jour.
NALLY: No, I think CEOs have turned, I think they're focused on the longer term, that's why I'm actually encouraged. I think - I think CEOs are
looking at the long-term viability, the sustainability of their business. What is going on with technology, how do they really compete in today's
world. So I'm actually more encouraged by that than what others are saying at this point.
QUEST: Imagine my surprise that China's GDP number came in exactly where the government said it would come in.
NALLY: Well, let me tell you something. All the concern about the lowest growth in how many years. For all of us who have been following China for
the last several years, they're doing something that's never been done before. They are in the midst of a very difficult transformation of their
economy. If you thought that economy 12 months ago had significant potential, I don't know what's changed. To me the story line is think about
the longer term, think about the ability of the government to make this transformation. And if you think about it from a longer term perspective,
you've got to still be positive about China. QUEST: The worry wall.
NALLY: The worry wall, I love it, I love it.
QUEST: 2016 --
NALLY: That's a great chart.
QUEST: Yes, it started badly. Make a nice big mark. You're going for a 3. So you are optimistic.
NALLY: I am optimistic. You know I think there's concerns, i think there's issues --
QUEST: How can you -- I'm going to challenge you here. How can you go for a 3 when your survey should have you up at a 7 or an 8?
NALLY: Yes, I happen to have a different point of view on this. I think with all of these challenges, there continues to be tremendous
opportunities in the world. And I see --
QUEST: In 2016?
NALLY: In 2016. You didn't expect that, did you? - He didn't expect that.
QUEST: I'm going to ask one more question. Aren't you - aren't you - aren't just being Pollyanna going for 3?
NALLY: No, absolutely not. I'm a very realistic person. I'm a business guy. I look to the future.
(END VIDEO CLIP)
QUEST: And a business guy and there is Dennis Nally's 3 on the chart. And he says it was geopolitical risks that he is mostly concerned about. Not
all global leaders are so optimistic. I want to show you "Time's" latest article, "Time" magazine.
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QUEST: This is the front cover and it says "The next recession and where to hide." it was written by Rana Foroohar, the assistant managing editor at
"Time" and CNN's global economic analyst. Missing a very fine dinner.
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RANA FOROOHAR, ASSISTANT MANAGING EDITOR, TIME MAGAZINE: That's right. I gave up a venison steak to be here with you, Richard.
QUEST: The venison is delighted.
FOROOHAR: The global economy is not.
QUEST: All right. Rana, what -- the next recession.
FOROOHAR: Yes, the "r" word.
QUEST: The "r" word.
FOROOHAR: I'm using it.
QUEST: Why?
FOROOHAR: Well for starters if you look historically, recessions tend to come every eight to ten years. We're almost there. You know we've been on a
recovery for going on seven years so in a way historically it's time. But I would also argue that China, the fall of China, the crash of China is the
echo of 2008.
QUEST: In what sense because they're now going through - they're having their version of subprime, high debt, unleveraging.
FOROOHAR: That's right. I mean you know we had it -- in the States we had a huge debt bubble, obviously threw the world into the great recession. We
stopped spending. Somebody else had to spend. That's the way the global economy works. China did it and they've now got a debt bubble. It's
bursting.
QUEST: Right, so when China stops spending and the U.S. next year what 1 1/2, 2, maybe 21/2 if we're lucky.
FOROOHAR: People are saying the figure will start with 1. You know. This is not good news.
QUEST: If the figure starts with 1, all right, it's not a technical recession but de facto it will certainly feel like it is because there
won't be the job creation or the earnings improvement.
FOROOHAR: Right, and I mean if you ask the average American, they haven't felt the recovery to begin with. You know wages have been flat throughout
this recovery. But if you look beyond the U.S. to the world, you don't need two quarters of negative growth to have a recession. The IMF has just
downgraded its global forecast for the third time within a year. It's now 3.4% a year. That feels very slow to a lot of people.
QUEST: In that regard, does the U.S.'s raising of interest rates look foolhardy and certainly the prospect of three or four further increases, as
Stan Fisher suggested recently, looks out of his mind?
[16:25:12]
FOROOHAR: Well Stan Fisher being out of his mind, we'll talk about that in a minute. But no, I don't think that the first rate hike is foolhardy. I
mean the fact is that the financial markets have been expecting this for a while. We have an incredible disconnect between stock markets and Main
Street in the U.S. And people need to see that resolved and rates have to hike for that to happen.
QUEST: The worry wall, what color do you want? Green, blue, red or -
FOROOHAR: Bright red, Richard. And you know all this magical thinking over there.
QUEST: You can beyond 10 if you really want to.
FOROOHAR: 11. It goes to 11, right here.
QUEST: And your biggest worry.
FOROOHAR: Biggest worry is hard landing in China which plunges the world into recession.
QUEST: Gosh, you're really cheerful tonight.
FOROOHAR: OK, I'm going to go have my venison.
QUEST: Go have your venison, it's too bad somebody else hasn't eaten it because let's face it in Davos it's - you eat what you can.
Thank you very much. We carry on. It may have caused the IMF to trim its global growth outlook. China's Richard Mann says he isn't worried about his
country's slowing GDP where others see concerns. We'll explain.
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QUEST: Hello action I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment when Baidu's President tells us China's economic growth is
still very impressive and no pride in prejudice. The academy award President apologizes for the lack of diversity in this year's Oscar
nominations.
Before that, this is CNN and on this network, the news always comes first.
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QUEST: News to CNN, ISIS has confirmed the death of the masked militant known as Jihadi John. The Pentagon said back in November last year that
Jihadi John as he became know, may have been killed in a drone strike targeting a vehicle that he was traveling in.
The latest edition of ISIS' (inaudible) magazine published an image of Jihadi John with his face unmasked along with an obituary.
The violence suffered by civilians in Iraq at the hand of militant groups like ISIS is staggering. According to the United Nations it says 19,000
people have died in the last two years with half of those deaths taking place in Baghdad. Three million people have become displaced inside Iraq.
The U.S. Supreme Court has agreed to review the legality of President Obama's executive action on immigration reform. The Obama plan would lift
the threat of deportation of millions of migrants living illegally in the U.S. More than two dozen states have been vigorously challenging the plan.
[16:30:00] The International Monetary Fund has cut its global growth forecast for the third time in less than a year.
The IMF cited a sharp downturn in China and the falling price of oil. Speaking to me earlier this hour, Ken Rogoff, former chief economist at the
Fund explains who wins and who loses in this environment.
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ROGOFF: It's really bad for oil exporters. It's not so bad for oil importers. That's fantastic for Europe, for Japan and the United States is
a little more mixed. So, you know, it used to be when the price of oil's going up - oh, what does that mean? Are we going to have recession?
Now they're saying the price of oil is going down and we're going to have a recession.
(END VIDEOCLIP)
QUEST: The oil market could drown in oversupply according to the International Energy Agency. The IEA says 2016 will be the third year in a
row where supply exceeds demand by a million barrels a day. The actress who set up the meeting between the drug lord known as "El Chapo" and Sean Penn is now being investigated on suspicion of money
laundering. Mexico's attorney general says they want to determine if any drug money
went into Kate Del Castillo's tequila business. She denies any links with "El Chapo" when he was arrested and is back in
prison earlier this month. Saudi Arabia has been leading the charge to keep pumping says OPEC and
cannot cut supply unilaterally. Adel Al Jubeir is Saudi Arabia's minister of foreign affairs.
He spoke exclusively to Wolf Blitzer in "THE SITUATION ROOM."
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WOLF BLITZER, CNN HOST: The price of oil is now what? Under $30 a barrel. There are concerns this has to do with Saudi Arabia's manipulation of the oil market. How are low are you willing to let the price of oil go?
ADEL AL JUBEIR, FOREIGN AFFAIRS MINISTER, SAUDI ARABIA: Well first of all, Wolf, I think I want to clarify that the oil price is determined by its
supply and demand in the market and there was an oversupply because of overproduction in a number of countries that led to a drop in the price.
And Saudi Arabia refused to cut its production in order to support high- price producers because this would have just set the stage for a drop in both prices and volumes down the road.
And so we let the market determine where the equilibrium should be and what we're seeing now is the market price.
BLITZER: The allegation against Saudi Arabia has prices going down a) you want to hurt Iran which is clearly an adversary of yours.
Also to stop the development of alternative energy sources. Your reaction to that?
AL JUBEIR: I think that people should go back to Adam Smith and basic economics. It's about supply and demand. You cannot manipulate the market
and be able to do so consistently and so if you let market forces play out, then the equilibrium is set naturally.
But if you try to manipulate it one or another, eventually you overshoot or you undershoot and you pay a tremendous for it.
I think there is a lot of speculation and a lot of theorizing about why something is happening and it reminds me of the conspiracy theories we have
in the Middle East. In the Middle East, the conspiracy theories have to do with what the Great Powers are doing. In the West the conspiracy theories have to do with what
the oil powers are doing.
(END VIDEOCLIP)
QUEST: That's the Saudi foreign minister talking to Wolf Blitzer in "The Situation Room."
Today at the World Economic Forum the U.S. Vice President Joe Biden called for a massive push to find a cure for cancer.
Mr. Biden says the U.S. would speed up the approval of new drug combinations to fight the disease.
Also Leonardo DiCaprio and will.I.am were among four artists who received the 2016 Crystal Awards. The prize is given to individuals who are
committed to improving the state of the world. DiCaprio says it's an imperative that we end our reliance on fossil fuels.
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LEONARDO DICAPRIO, ACTOR: Last week President Obama told those who continue to deny the irrefutable science behind climate change that they
will find themselves increasingly lonely in the swell of voices calling for action.
But studies also show us that those who deny the reality of climate change will also find themselves less economically successful.
We simply cannot afford to allow the corporate greed of the coal, oil and gas industries to determine the future of humanity.
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QUEST: The leaders of two of China's most important companies say they're not worried about China's GDP figures. Chinese growth came in on target at
6.9 -- but still the worst in 25 years. And the stocks ministry presents higher - go figure. The government may be
moved to stimulus was the reason. The global ripple effect of that Chinese slowing economy is one of the issues here at Davos and the president of Baidu, China's internet search
giant says never mind, he's still optimistic. [16:35:08] Ya-Gin Zhang spoke to Nina dos Santos.
(BEGIN VIDEOCLIP)
YA-GIN ZHANG, PRESIDENT, BAIDU.COM: There will be some (hiccup/pick up) (ph) on the way and overall I see the policies towards innovation and the
policy towards more domestic consumption - you know, to service. These are certainly the right direction, and especially I think the new initiatives like Internet Plus that is essentially moving the economy to a
much healthier state, you know, using the technologies from the internet business model to transform the traditional industry.
So that is a very optimistic point.
NINA DOS SANTOS, CNN ANCHOR AND CORRESPONDENT: We've had intervention in the stock market, intervention in the currency markets.
ZHANG: Yes.
DOS SANTOS: Do you have confidence in the policy mix that's coming through? Because your investors are also using you as a proxy to bet on
China.
ZHANG: Right. You know, we are very confident. You know, if you look at especially at the adoption of technologies in the traditional industry for
example, manufacturing and also the overall shift from you know just the offline industry to online. That is so impressive.
For example, e-commerce, you know, the online to offline 02 (ph) activities. For example, right now a lot of people use the internet to
book restaurants, book movie tickets and, you know, for taxi rides. And those things will help restructure the raw (ph) the economy in a much, much
healthier state. So I'm very, very excited about the future.
(END VIDEOCLIP)
QUEST: China's growth figures aren't dampening the ambitions of China's richest man either. Wang Jianlin, head of the Dalian Wanda Group and told
Andrew Stevens he doesn't see a hard landing to the Chinese economy.
(BEGIN VIDEOCLIP)
WANG JIANLIN, CHAIRMAN, DALIAN WANDA GROUP, VIA INTERPRETER: Absolutely not. I do not only use the word "not," but I have to stress absolutely
not. It's true that there are difficulties in the investment and export sectors. Maybe there's zero growth or even negative growth.
But the service industry in China has great demand, especially in tourism, going abroad, sports, movies and catering.
So after three or five years when the service sector comprises 60 percent of the China's GDP, then China's economy will be totally stable.
ANDREW STEVENS, CNN ASIA-PACIFIC EDITOR: There is big debts within the official banking system, in the shadow banking system, in the provincial
governments. Does this debt issue have potential to derail economic growth?
JIANLIN, VIA INTERPRETER: But that issue of the central government shouldn't be a big concern. The debt issue in first- and second-tier
cities aren't either because their real estate markets' improving. But the third- and fourth-tier cities are in trouble because they can't
sell the unsold homes and couldn't sell new land. The debt and have to sell the unsold land in these cities is the issue.
But the Chinese government needs to solve.
STEVENS: We've all watched what's happened in the stock market in China. We've also had a surprise devaluation of the Yuan.
People are suggesting outside China that the central authorities do not have their economic policy under control. Do you share those concerns?
JIANLIN, VIA INTERPRETER: The stock market stumbled last year and there are fluctuations in the exchange right this year, but they are two
different issues. I think the fluctuations in the exchange rate is normal and they should become stable in the near future.
It's not a big issue because China has $4 trillion of foreign exchange reserves and a trade surplus of several hundred billion dollars every year.
So the government does have ways to solve the issue.
(END VIDEOCLIP)
QUEST: Some news in to CNN this evening. Sarah Palin, the former governor of Alaska, and the vice presidential candidate in 2008 has endorsed Donald
Trump for the U.S. presidency. The endorsement comes less than two weeks ahead of the caucuses - the crucial votes - or caucus more to the point - in the state of Iowa.
Come for the economics, stay for a bit of singing, nay, yodeling.
(SINGING/YODELING)
QUEST: Singing lessons from the experts, in a moment.
(COMMERCIAL BREAK)
(SINGING/YODELING)
[16:41:15] QUEST: Ah! Look at that. A scene for the Christmas card, except it's in late January. But it's Davos and it has been snowing so
it's all rather pleasant. U.S. stocks eked out a small gain on the week's first trading day. The volatility seemed tame in comparison to what we suffered over the past two
weeks. The wing sent investors running to the safety of government bonds and gold. Now, the shiny stuff has been moving and shaking markets for thousands of
years. What is the love of gold? Max Foster explains.
(BEGIN VIDEOCLIP)
MAX FOSTER, CNN ANCHOR AND LONDON CORRESPONDENT: Homer called it the glory of the immortals. To the Incas, it was the sweat of the sun.
The Egyptians believed it would support them in the afterlife. For thousands of years, gold has tempted explorers, supported empires and has
become a market barometer. Its value stems from its rarity. All the gold mined over the course of civilization wouldn't fill four Olympic-sized swim pools.
A direct link between gold and currency emerged in 550 B.C. when the first gold coins were struck in what is now part of modern Turkey.
In the 19th century, currencies around the world were fixed to gold. That lasted until 1971 when President Nixon announced the U.S. would no longer
exchange dollars for gold at a set price. For investors though, gold still glitters in times of crisis. Its value peaked at $1,900 an ounce in 2011 and demand often spikes at times of
market stress as investors look for a safe haven. Despite the allure, gold is not immune to economic realities. A slowdown in China has pulled prices down, and gold's usefulness is limited, its
primary purpose today, for jewelry. Still many follow in the footsteps of the Spanish conquistador Hernan
Cortes. He said, "I and my companions suffer from a disease of the heart that can be cured only with gold."
(END VIDEOCLIP)
QUEST: All that glitters is not necessarily gold. Here in Davos there are dozens of hotels to choose from. You have the futuristic InterContinental
Hotel that has views of the mountains and the valleys, you have the historic Seehof which dates back to 1869, or you have the cozy Spengler
Hostel for travelers on a budget or perhaps those that WEF want to put somewhere else.
These aren't just places to rest your heads. IHG which owns brands like Holiday Inn and Crowne Plaza says consumers are looking for individuality
in what it calls the 'age of I.' Joining me now, Richard Solomons, the CEO of 'I'HG.
(LAUGHTER)
QUEST: What does that thought mean? Sounds (inaudible) what are you saying here about this branding, this shift in branding relationships?
RICHARD SOLOMONS, CEO, INTERCONTINENTAL HOTELS GROUP: Well it's our latest trends report and what people want is individuality's really important -
think about me as a person, personalized but I want to actually be included in something as well.
So having ways that they can feel like members and involved with the brand and involved with the business connects them much more strongly, and it's
what people are looking for in this digital age.
QUEST: But it's relatively easy to say and extremely difficult to do, particularly if you've got as many hotels, as many rooms and as many guests
as you have. How do you do it? How does one do it?
SOLOMONS: You know your customers well, you understand them, you segment properly by needing (ph) occasion. You connect with them through Rewards
Club - I think you're a member of our Rewards Club. If you stay with us a bit more often, maybe the highest, newest tier, the Spire - Spire Elite.
[16:45:06] But it is actually about understanding customers, talking to them, listening to them and engaging with them.
QUEST: Are you quite upset that you won't be the largest hotel company in the world once Arne Sorenson at Marriott gets Starwood?
SOLOMONS: No actually. I think just being big for the sake of being big isn't helpful. We have sufficient scale and we're very focused on having
really targeted brands, not just being big.
QUEST: Right. But on those targeted brands, China - you heard me say tonight that China is slowing down. How concerned are you? Because you're
putting huge efforts into China, vast investments into that country, and it's slowing down.
Now I know you're going to tell me it's all about the long-term. But the short-term's going to be painful.
SOLOMONS: It may be painful, you're talking about 6.8/6.9 percent growth in an already very big market. China's actually from revenue perspective
is our fastest-growing market. Growing demand, we're opening more hotels. We signed and opened more hotels in the first three quarters of this year than we have before. So there's no precedent for China. It's not happened
before - an economy created like that so quickly in such a short space of time.
But what I see on the ground, I'm optimistic. Certainly for the long-term and right now I'm not pessimistic for short-term.
QUEST: On this question of China and how you have to run the company, as the chief exec, give us a bit of insight that this is something you can't
take your eye off - these vast projects other side of the world where there could be economic troubles.
SOLOMONS: Well our business model is, you know, we don't own the hotels. We own eight of the 5,000 - we just announced our 5,000th hotel. We've got
1,300 in the pipeline. China is a big piece of the business, but we're in 100 other countries.
So I think good people on the ground is the answer.
QUEST: The Worry Wall awaits your ministrations.
SOLOMONS: Yes.
QUEST: What color pen would you like? What, a green, a red or blue?
SOLOMONS: Blue is a middle ground.
QUEST: All right, so the year started badly but tell me are you very concerned, are you not concerned? Where would you go on the Worry Wall?
SOLOMONS: I'm not very concerned. I'd go around 4. You know, the world has had - sorry, wasn't straight enough.
QUEST: That's all right, it's all right.
SOLOMONS: -- the world has had issues, uncertainties, economic ups and downs forever. As a business person, as a business, you have to be agile,
you have to be, you know, prepared -
QUEST: But -
SOLOMONS: -- for ups and downs, but actually investing for the long-term and not letting too many journalists pull the downturn too quickly --
QUEST: Oh! -
SOLOMONS: -- and putting off long-term business decisions.
QUEST: Go and open another hotel.
SOLOMONS: (LAUGHTER). Good to see you, Richard.
QUEST: Good to see you Mr. Solomons. Now, here in Davos, the hills are alive to the sound of economics and yodeling. Handling the global economy
takes skill and so does making music in this alpine community.
(BEGIN VIDEOCLIP)
(MUSIC -- Yodel-ay-hee-hoo!)
QUEST: Yodeling, the music of the mountain.
(MUSIC -- Yodel-ay-hee-hoo!)
QUEST: The true sound of music.
(JULIE ANDREWS YODELING IN "THE SOUND OF MUSIC") High on a hill was a lonely goatherd Lay ee odl lay ee odl lay hee hoo
QUEST: Well, there's more to yodeling. Here in Davos, the Yodel Choir Parsenn, the experts.
(CHOIR YODELING)
STEFAN SCHMID, YODEL CHOIR PARSENN: We have some new yodelers that just started last year maybe and some that have been here together for more than
30 years.
(CHOIR YODELING)
QUEST: Yodeling is an integral part of alpine tradition passed down through the generations.
SCHMID: Way back in the past when there was no mobile phone, I think the communication from the farmers being up on the Alps down to the valley was
like by the voice, how they were singing to their wives or to their families down there. They could tell, well, he's OK.
(CHOIR YODELING)
QUEST: To get that authentic yodeling sound, you need sharp changes in pitch. And if that sounds simple, let an amateur have a go.
(Yodeling/breaks glass).
(LAUGHTER)
QUEST: The difficulty with yodeling, you mustn't meander slowly up to that top note, you jump right to it. (Yodeling with choir leader).
(CHOIR YODELING)
QUEST: These are the local farmers, the business people, even the baker. And yodeling is in their blood. Once a year the world leaders pretend they
own Davos, but these are the real people of the mountain.
(CHOIR YODELING/RICHARD QUEST DIRECTING)
(END VIDEOCLIP)
[16:50:04] QUEST: Ah. Why the president of the group behind the Oscar Awards says she's heartbroken and frustrated over this year's nominees.
(COMMERCIAL BREAK)
QUEST: The president of the group that runs the Oscars says she will make big changes to ensure there's more diversity in the awards.
It comes after some of the top nominations featured an all-white short list and that's the second year in a row this has happened.
Cheryl Boone-Isaacs tweeted, "I'm both heartbroken and frustrated about the lack of inclusion. This is a difficult but important conversation." And
most importantly she says, "It's time for big changes." Some black film personalities have said they'll now boycott the Oscars.
Sian-Pierre Regis as founder and editor-in-chief of "SwaggerNewYorkcom" joins me now.
As we look at this, let's be blunt, men of the world here. Do they have a valid point, the Spike Lees and the critics of this world. Were there
people - were there actors and actresses of color who should have been nominated.
SIAN-PIERRE REGIS, FOUNDER, SWAGGERNEWYORK.COM: The answer to that, Richard, is absolutely. And there were a few of them too.
I mean, you know, Idris Elba in "Beast of No Nation" absolutely should have been nominated.
If you look at "Creed" for example, you have Sylvester Stallone who is nominated but not Michael B. Jordan. After watching the movie, I think
most people would say that really Michael gave just as great a performance as Sly Stallone.
The problem lies -
QUEST: Right.
REGIS: -- in the Academy itself. The people that are watching this are largely white at 90 percent, largely male at 70 to 80 percent and they're
voting for people that reflect their lifestyles and that is a problem in a very diverse America.
QUEST: And how do you solve that problem? Because arguably, Sian-Pierre, arguably, those people you're talking about in the liberal arts, they're
part of that liberal elite. So for you to turn - for people to be turning 'round and say actually they
may be as racist and bigoted others less savories is quite a damning accusation.
REGIS: Yes, I mean, I think calling them racist is a little bit extreme. What I'm saying is that they are - you will only go for something that
makes you feel something, right? And if you are a white male in this country, --
QUEST: Right.
REGIS: -- specific things are going to pull on your cord. Cheryl Boone- Isaacs, the president, hasn't exactly said what they're going to do to help make this a bit more diverse.
But an example last year they let in 372 new members and that is about 150 more members than they've ever actually let in on average.
A lot of those people are black, a lot of them are women and they're going to have to continue that trend if they want to see a difference and they
don't want #OscarSoWhite to be the storyline coming out of a show like that.
QUEST: Fascinating. Now, from your contacts in Hollywood in the industry tonight, is this one of these people - one of these subjects - that people
are saying gets pushed to the side or are they saying we've really got to deal with this and we've got to deal with it sooner rather than later.
REGIS: They're going to deal with it over the next month and they're certainly going to deal with it on February 28th when the "Oscars" goes
live. It will be a continuing conversation, especially with the social climate
that's happening in this country - Black Lives Matter is very important, feminism is a big issue, right.
They're going to have to deal with these issues because only a small part of this larger cultural movement.
[16:55:15] QUEST: Sian-Pierre. Good to see you, sir. Thank you for coming in. Lovely to have you on the program as always. Sian-Pierre Regis
joining us from New York. Wall Street has sent Netflix stock up over 8 percent in afterhours trading. It reported 4th quarter earnings. It topped 75 million subscribers. That
was the number the Street was looking for with the biggest boost coming from international growth.
We will have a "Profitable Moment" after the break. QUEST MEANS BUSINESS, Davos.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." This is the CNN Worry Wall tonight. We know the year has started badly and we know there are great worries,
whether it's Taiwan or the Gulf Region or oil or China or ISIS. People are worried.
And so now we're saying how worried are you? If you look over here, it is very worried and beyond, here not worried at all.
You can join in @RichardQuest #WorryWall and we will combine all your answers along with our guests during the course of the weeks.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in Davos. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's
profitable. Going to love you and leave you with a bit of yodeling.
(CHOIR YODELING)
END
