From london. Im francine lacqua. The chinese president begins a visit to the United States today. It is his first as chinas leader and comes with growing tensions over cyber hacking. New data from their most used suggests that the worlds secondlargest economy is stabilizing. We will have more on that in a moment, but first lets get the latest on president xis trip to the states. Cyber security seems to be a big problem. They will talk about the economy as well. They certainly well. The whole issue of cyber security, francine, and Cyber Espionage will probably overshadow this meeting as one of the most contentious issues they will be discussing in washington. Between problem lies the way that you define what is acceptable as espionage. The u. S. Thinks if you do best be large, Cyber Espionage, for the purpose of military information or political information, that is acceptable, as it has been when we have seen governments in states spying on each other in order to get a leg up in military and political affairs. The u. S. Seems to think that is ok, but they say what is not ok is Cyber Espionage for industrial purposes. That is when you have maybe a state actor, perhaps an army, th means toing cyber vacuum up information and distribute that to their own companies so that the companies can get a commercial advantage. This is what obama wants to talk about. When he says is that the u. S. Is preparing measures to take, if they cant find some sort of agreement and get china to desist from its alleged industrial Cyber Espionage. Francine interesting. Despite the turmoil we have seen in china, we are expecting more espionage than the actual turmoil. What will president xi jinpings message to u. S. Business be . David he will be landing in seattle tomorrow, or later today, depending on the time zone. Wholel be talking to a range of Business Leaders and what you want to do is give them the message that the u. S. And Chinese Markets. Are open to u. S. Business but the problem is and this is associated with the whole fiber issue ever since edwards noted revealed in 2013 that the u. S. Has been involved in some espionage, military the chinese have been trying to cut back on the access that many u. S. Technology companies have two Chinese Military and government agencies, to the banking system. They have been trying to cut back on that, and this is an issue for the u. S. Business. It will be discussed under the forum of the bilateral investment treaty, the area that will be talked about. We will be looking carefully to see what are the details of access to the Chinese Markets, and access for Chinese Technology companies into the u. S. Market. They have also been getting limitations on theim. Francine thank you so much. For more, lets bring in the managing director at camignac. Thank you so much for joining us. We talk about china day in, day out. It caused panic on the market. We talk about the spectrum of deflation janet yellen didnt do anything last week when a lot of the markets a big target investors were expecting her to do. What worries you growth, centralbank action, or market volatility . Concerning, it suspect, is the fact that the markets are only now discovering the unfortunate conjunction. On the one hand, Central Banks have to continue extremely easy Monetary Policy. Clearly the decision of janet yellen is an indication of that. But at the same time, markets are starting to realize that these extremely easy monetary policies have been ineffective. They have been very ineffective in economic growth, bringing inflation toward targets. When you have more of the same that has proven ineffective, as markets, you start being worried. Francine they seem great for the markets. They seem great for equities because of thesis cash. Didier it has managed to support risk assets by pushing down yields. It has done its course. They are yielding extremely low returns, and equity markets are quite expensive, so doing more qe wont take you very far. But conversely, as we saw last week, they are quick to get out of qe or interestrate policy. It is sort of like twitching the issue of returns. Doing more qe would lead to less thaand less results. The markets are right to be that the by the fact solutions have been tried it havent worked, and therefore it is quite concerning for the future. Also, president obama is meeting with the chinese president , xi jinping. What would be your first question to him . They are talking about espionage, but do you have a firm handle on the Economic Situation . Would you ask about the pboc . Do you feel comfortable that we understand enough about china . Didier clearly, we dont know enough about china. It is extremely difficult to really know what is going on. We have beenn, investing in china for over 20 years, our impression is that the economy is not collapsing. What is happening is that this rebalancing is probably faster than people think, and therefore for the outside world, for us, it does feel like they are hobbling. Manufacturing is going under, but the services are improving quite steadily. Look at ecommerce, retail. This is going well in china. It is the extent to which china can manage its economy. Without having the support from liquidity that has been provided for so many years by other countries. Today you are getting outflows from china because the u. S. Qe is over. Trayst all these carried coming back, which is happening at quite an unfortunate time because that is when china would like to open its capital accounts, let the outflows take place. Way, aoday is, in a victim, which is not politically correct. They are a victim of fed policy. If it wants to take its currency to the dollar, it means basically it needs to follow the same Monetary Policy is the u. S. , which of course is not at all what the chinese economy needs. Francine peggy so much. Retail sales in china. From the biggest bank card network, saying that the country may not be in the state of turmoil many think. Malcom scott has the story in hong kong. Andre looking at baidu alibaba, and what do these tell us about the state of the economy . Malcom they tell us that the rebalancing that is occurring means that some things are doing better and stabilizing, whereas the manufacturing areas where we are traditionally focused on our weakening. These frequency reports give us that feel. Firstly the baidu one, the google of china, the searches on small and mediumsized businesses are up in september, which is a good sign. He alibaba indicator, prices are up by 7. 4 . The official cpi is still below 2 . Maybe some Pricing Power at the consumer level is coming back, and its union pay indicator showed that this is a gauge of that this isards, stabilization in the allimportant property purchases section, key for their economy. Why is therecolm, such a difference between official data from the the gloomyand picture we have been pretrade in the market . The official figures and what we have seen from baidu and alibaba . Malcolm a lot of it is to do with these rebalancings. China, they in official data hasnt kept up with the changes sweeping across the economy. Some of the old yardsticks focused on things that were more driven by industrial production. X, cargo and rail cargo, electricity used, that is showing very weak conditions in china. But then these Services Indicators like the official services pmi remain well above the expansion zone, suggesting those areas of the economy are helping offset the weakness we are seeing in the export, lowering manufacturing areas. Francine welcome, thank you so much. Todaysngs us to twitter question are you less worried about china after the baiduibaba and figures. You would probably say yes, didier. Didier i would say that i didnt need those numbers. It is a fact that this rebalancing is a very difficult asked to perform. Francine we knew that, right . Didier thats right. And it is turning, which is why ,ife is incredibly difficult why brazil is getting into a war, precisely because it is a prime victim of this rebalancing. Francine you are intimating that the fed hasnt helped and hasnt sorted through the real economy, but it has created asset bubbles. Are you concerned we will have a huge correction inequities . Equities . Didier i am always concerned about it is quite possible. There is a sentiment today whereby support from Central Banks is something you cant get out of, but it is not effective anymore. I get the question sometimes what should janet yellen have done less thursday . There is no good answer. There was no good decision. When there is no good decision, it is telling you that youre hitting a deadend, and the adjustment factor has to be valuations. Francine we talked a lot about it here, that whatever she was going to do was is there a danger that she missed a window . That it will take longer to normalize . Didier i dont think there was a window. I think it will take verio, very long time to normalize. Investors are still quite optimistic and that is good news. We will have qe2 infinity or zero rates to infinity, and the only point im trying to make is that it is legitimate to consider a good news because the worlds upside is irrespective of the economy. The fact that the Central Banks are telling us, no, we should raise interest rates, because as a central banker that is our credibility at stake. We cannot keep the fed Balance Sheet lost forever. But we cant, because the economy is too fragile. Inflation pressure, deflation is too high. That is telling us that francine they are stock. Didier are stuck. Do you think they should focus on inflation . They dont have any power over inflation didier what they need, what we need, what every private or Public Sector entity needs, is nominal growth. Growth plus inflation. We are failing on both sides. But surely the oil price is not helping, and you can build an optimistic case saying that this is temporary and the oil price will go back up, and this deflationary scare will disappear. They could will happen in a few years. After all, u. S. Production has remained very strong, which is kept oil prices low, but investments have been cut. Two years down the line, it is likely that oil price will come down, and supply and demand balancw will be bettere. Balance will be better. I suspect that the Central Banks will have a very tough time convincing markets that they can do that much. Francine what does it mean for your investments . His currency the safer or more interesting way to play . Didier its a couple things number one, reduce equity exposure. That is the asset class that has risks. Second, with inequities, realize that the real issue is in zero inflation or deflationary pressure. The little equity exposure you keep, you want to have a real focus on those stocks that have Pricing Power. That is the key. It is not Pricing Power becomes the golden rule. Focus on these, which you can find in lots of different sectors. The second thing is i would manage the payer risk of further deflationary scare by holding some u. S. Treasuries. After all, you have 10 year rates in germany, and you have 220 points in the u. S. There is an asset which could still benefit from a deflationary scare. Francine thank you so much. It was great to have you on the program. Heres a look at what else is on our radar this tuesday morning. Israel and russia say they have worked out a way to avoid potential crashes between their troops, should they come across each other in syria. Russia is considering sending soldiers to aid president bashar alassad, and israel says it may take action to stop arms shipments from around and syria from iran and syria. Alexis tsipras has been sworn in as Prime Minister all owning his surprise victory sunday. The syriza party and the independents will have 355 seats in the parliament. A huge group of republican president ial contenders have gotten a little smaller. Says he wants to thin the field so the party can find an alternative to the current frontrunner. Well he didnt mention trumped by name, he urged others to pull out for the same reason. I tweet from Hillary Clinton has sent by a Technology Stocks lower. It tumbled 4. 5 yesterday. Stocks are down in europe this morning. Tweeted,after clinton price gouging is outrageous, and said she would release a plan to combat the high cost of prescription drugs. Between came during the defense of the decision to boost the decades old antibiotic by 54, saying it is a bargain. The u. S. Justice department is investigating vw after it admitted to cheating on air pollution tests, according to officials familiar with the inquiry. Berlin with is in the latest. Ceo. Ocus is now on the chris definitely. He has a reputation for being very detailed and so far he hasnt come out and said what he knew and when he knew it. The focus is still on him and we are still waiting for answers. Francine what happens next, chris . What are the chances of him losing his place . Are we going to see changes at the top . Well, that still remains to be seen. The next step is tomorrow evening. There is a meeting with the Supervisory Board, the top figures that really call the shots. It will be interesting to see what happens, what comes out of that meeting. It remains to be seen what happens in the next coming hours and days, and how volkswagen responds. They havent had much of a response besides the statement on sunday. The head of the u. S. Came out and apologized again and said they screwed up. Step, and weext are waiting to hear from the Board Meeting tomorrow. We will see what happens. Chris, might there be a criminal investigation . News from other automakers . The reputation has to be protected they need to come out to Say Something. Chris right, right. Daimler is being very cagey, saying they are not the subject of any probe. Bmw says it is not aware of anything right now. The french carmakers are also being a bit more proactive. One had a statement recently. But the scandal is really focused on volkswagen. They could be made a poster child. It is not as if carmakers dont do as much as they can to up their admissions are fuel economy ratings. It is incredibly important for the industry. So the industry does what it can. The problem is that volkswagen crossed the line and did something illegal. That is why they are in the firing line right now. The scandal is widening. We had a report today that south korea is also probing their vehicles. Germany wants clarification. The white house also said it was watching this closely. The scandals are pretty significant and it is pretty serious for volkswagen. Francine thank you so much for that. Chris reiter. Up next, and emergency meeting on the refugee crisis as the oecd publishes its latest migration report. We will have the latest after the break. Francine the european justices european ministers meet today about how to tackle the refugee crisis. The oecd releases its latest report within the next hour. Lets go to hunt nichols in berlin. How is Angela Merkel preparing . Hans it seems apparent that she is downplaying expectations. Trips really trying to down this idea that you will have a comprehensive solution coming out of this on it tomorrow. Here is what she said there will be a solution overnight. These deliberations will be important, but they surely wont allow us to set aside the problem. We will need patience and stamina. Her vice chancellor is in jordan on a twoday visit. He is calling on the u. S. As well as other states to accept or refugees. Had aday, the ambassadors meeting and they didnt get anywhere on approving this for000 redistribution plan, syrian and other refugees that are already in the eu. Today, the interior ministers will take a crack at it. If they dont get there, you will have the actual heads of state discuss it. In some ways, the dangers if they do get it through it will be almost steamrolled by germany. There is opposition from eastern states. Plan,y ar oppose this then we are going to be talking about potentially withholding funds to eastern eu countries that are not taking what was their share of the redistribution of refugees. That will further split the eastwest within the eu. I think we should take a look at what is happening right now between syria, croatia, slovenia, and hungary a war of words. Parliament has authorized the use of nonlethal force, so we have seen teargas deployed along the hungarianserbian border. Then we have some pretty hot rhetoric from the serbian foreign minister. Heres what he said yesterday, warning of a potential concentration camp. Serbia cannot allow itself to become a concentration camp, surrounded by wires with traffic close to. Way the, in some getan approach is to 130,000 redistributed but no one thinks those numbers will be final. Francine hans, thank you so much for the update. Like davidke it beckham. Actinginjured his hand for a bike brand. We speak to the ceo after the break. We will be talking about Brand Recognition and demand around the world, growth in china, and here in europe. You can follow me on twitter. I will see you shortly. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Francine welcome back to the pulse, live from london. Im francine lacqua, and here are bloombergs top headlines. Xi jinping begins his visit to the United States today. It is his first as chinas leader and comes amid growing tensions over cyber hacking. He will participate in the meeting tomorrow with top major techof companies, addressing the United Nations general assembly. There is much handwringing about the state of the chinese economy, but data from an alternative set of indicators sug