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Quest Means Business

I.M.F. Cuts Growth Forecasts, Warns Of Rising Inequality; Macron Sets France 2030 Emissions Targets And Energy Goals; Prices Skyrocketing Amid Supply And Demand Crunch; Jamie Dimon Blasts Bitcoin As "Worthless"; U.S.-Taiwan Friendship Angers Beijing; U.S. Markets Mostly Flat After IMF Downgrades Outlook. Aired 3-4p ET

Aired October 12, 2021 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[15:00:18]

RICHARD QUEST, CNN BUSINESS ANCHOR: With an hour to go before the closing bell, the Dow is trading in a very narrow range as it has throughout the

session. You can see it is up and down, it is all over the place.

Now this is interesting because it's volatility is certain, but it shows the market is seeking direction. It doesn't really know which way to go at

the moment and we will talk more about that throughout the course of the program.

The markets and the main events we're following and bringing to you this evening. The I.M.F.'s Managing Director says she has always worked for the

public trust after surviving the World Bank scandal.

Emmanuel Macron says he'll spend more than $30 billion to bring down France's emissions.

And Jamie Dimon says he thinks Bitcoin is worthless.

We are live in New York. It is Tuesday. It's October the 12th. I'm Richard Quest and I mean business.

Good evening. Tonight, the head of the International Monetary Fund says she is ready to rally her staff after being told she can keep her job as

Managing Director. Kristalina Georgieva will remain in charge at the fund after its executive board said it had full confidence in her.

Georgieva had faced questions over her time at the World Bank where she was CEO, and accused of pressuring staff to boost China's rating in the bank's

Doing Business Report. Today, she insisted she had always worked for the public trust.

Kristalina Georgieva spoke to Becky Anderson a few moments ago. The I.M.F., she said will be a beacon of integrity under her leadership.

(BEGIN VIDEO CLIP)

KRISTALINA GEORGIEVA, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: The board of the I.M.F., in a comprehensive and impartial process, reviewed the

evidence, and it concluded that it has full confidence in leadership at the I.M.F.

So I can rally the fabulous staff of the I.M.F., work with our partners, those who are on this panel. To address the tough challenges we face. We

talk about the pandemic, we have climate, we have the issue of inequality, and of course, I take it to heart that we have to strive always to

demonstrate that what we do touches positively the lives of people.

And I take pride of what we have done at the I.M.F. in these two years to mobilize incredibly strongly to help our members, and I am confident -- I'm

confident that you would see the I.M.F. to be that beacon of integrity of our data and research as we have always been.

You're right. We have to always work for the public trust, and that's what I have been doing for 40 years.

(END VIDEO CLIP)

QUEST: The announcement of the executive committee's decision came just in time for the Fund to go back to its normal agenda. In other words, the

World Economic Outlook, which is published at the beginning of the annual meetings. This year, the fund has cut growth forecasts for both the world

and global and large economies, including a one percent cut for the United States -- as you can see, it's the largest just ahead of Germany.

And there's a warning of dangerous divergence in the global economy. There is a warning of the split between the advanced and the emerging, and the

advanced economies are expected to regain pre-pandemic paths, developments are still far behind. There will be a larger setback in living standards as

a result of it.

Each side also has their problems, the advanced economies, supply chain issues; for the emerging markets, it is vaccines. The I.M.F. said countries

need to be very, very vigilant on the question of inflation.

Gita Gopinath is the I.M.F. Chief Economist. She joins me from Washington. We will come to the issue of the WEO. I just want to follow through on

something that you said earlier today. You said on this question of -- because obviously, everybody is now looking at the economics, the data, the

analysis as a result of the issues at the World Bank.

You said we have a robust system in place at the I.M.F. in terms of making sure the credibility and integrity of our data and forecasts. So will you

be having any investigations? Will you be having any analysis? Will you be rethinking anything to see how you could do better, bearing in mind what

happened at the World Bank?

[15:05:21]

GITA GOPINATH, CHIEF ECONOMIST, INTERNATIONAL MONETARY FUND: Hello, Richard. Data integrity is of utmost importance to us at the I.M.F. It is

our bread and butter in what we put out into the data and forecasts, and we have a system in place that provides a lot of checks and balances in this

process.

We have multiple economists in multiple departments who pay attention to our numbers and our reports. We have a very solid trail of comments on who

suggests what when, and we also have the Independent Evaluation Office that frequently reviews our work.

So, we have many mechanisms in place. Now, of course, given how important data integrity is, we will continue to strive to making these processes

even more robust. But I just want to highlight, again, and remind everybody the data issue was never an I.M.F. issue. It was about the World Bank's

Doing Business Report.

QUEST: The -- talking of this morning's WEO, well, I mean, the downgrade is one thing, but you're warning about inflation for economies to be very,

very careful. This is as close as I will hear you say before you say we're in trouble.

GOPINATH: Richard, our projections -- and that's what's in this report -- has inflation coming back to normal ranges for the advanced economy group

and for emerging and developing economies by the middle of next year.

So our baseline remains that we expect some of these process to be transitory. That said, I think compared to a few months ago, it is

important to be more vigilant for the following reasons that we have a pandemic that's lasting longer, and we have supply side disruptions that

are lasting longer.

And this is such a unique recovery that we have to be absolutely watchful of all the developments on the inflation front.

QUEST: On the basis that you're in -- that one is in trouble with inflation. By the time you realize it, it's too late to do anything about

it more often than not, to forestall it. Do you think that major economies particularly the United States, arguably the U.K., possibly the E.U., do

you think they should be taking stronger action now?

GOPINATH: I think Central Banks have to look at their country specific circumstances to see how strong the recovery has been overall in their

economies and the labor markets, and what kinds of inflation pressures are you seeing?

If, as we have seen recently, a lot of it has been driven by headline inflation, and much less by core inflation and by services sector

inflation, then we expect some of these pressures to die down over time.

So you have to, you know, you have to remember that the Central Bank, there's little you can do about rising commodity prices, and this current

spike in energy prices that you have seen, it's important to watch out whether that feeds in to core inflation into more general wage and price

setting processes.

And so far, we have seen points to the fact that those all of that remains well-behaved, and therefore, we stick to our projection of inflation

returning to more normal levels next year.

But again, there is a high level of uncertainty.

QUEST: Now, if we, if we look at this divergence of economies, the problem here, Gita, is that you and I, and others, and we've all been talking about

it throughout the entire pandemic. And what appears to be happening is the self-fulfilling prophecy. Everybody said that the divergence will get

worse, that the inequality would grow, and that's exactly what is happening.

Are we -- is it too late to forestall it?

GOPINATH: Indeed, the other thing we all said was that we are all in this together, and the pandemic is not over anywhere until it's over everywhere.

I believe what we have seen in the last three months is precisely a consequence of that. The delta variant came out of a country with low

levels of vaccination rates, and we have a downgrade for the global outlook. We have supply chain disruptions, and we have inflation risks.

So we are all in this together. We have the ability to make a last push before the end of this calendar year to get 40 percent vaccinated in every

country, but that will require countries to deliver on their dose donation pledges, which they have not done in adequate numbers, and second for

surplus countries to kind of step out of the queue so that you can have deliveries to COVAX and to the African Union's AVAT to happen in these next

couple of months.

[15:10:17]

QUEST: Gita, I'm grateful for your time today. Thank you, ma'am. Thank you.

Clare Sebastian is with me. Two issues to talk about, Clare, let's do the Managing Director first.

So the board decided to stick. I mean, the U.S. Treasury last night said that Janet Yellen had spoken to the Managing Director. I'm guessing the

Europeans wanted her to stay, the U.S. did. It was over before the argument began.

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, well, just the 11th hour, Richard before the Annual Meetings, they managed to resolve this.

The U.S. is a key player. They hold the most voting shares on the I.M.F., so everyone was watching very closely to see what the U.S. would do and say

about this. And in the end, it came in the form of a phone call from Janet Yellen directly to the Managing Director, Kristalina Georgieva. She said

she was actually pretty sort of, I guess, severe, you could say, in terms of what she said if you believe the readout of this call.

She said that the report will raise legitimate issues and concerns, that it does underscore the need for shareholders to be vigilant in defending the

integrity of both the Bank and the Fund. But she said there was not enough basis for a change in leadership at the I.M.F. But it has led, Richard, to

questions about the credibility of the Fund from some going forward, including a former World Bank Chief Economist, Anne Krueger who said in an

op-ed last week, she said, "Should Georgieva remain in her position, she and her staff will surely be pressured to alter other country's data and

rankings, and even if they resist, the reports they produce will be suspect. The entire institution's work will be devalued."

So there are some very concerned that even though she has remained in her job, this scandal, if you call it that will leave a mark.

QUEST: And on the WEO. I mean, it's interesting, but it's not telling us -- I sort of feel like having covered all of this with you for the last six

months, the WEO is merely a reflection of what we could all see that the situation is getting worse, that the vaccines are not getting to the right

places in terms of the developing world, and the divergence inequality is growing.

SEBASTIAN: Yes, Richard, I think that we began this pandemic 19 months ago, almost to the day with sort of protectionism when it comes to PPE, and

we are now at this point where we're seeing sort of hoarding and protectionism when it comes to vaccines. So in that sense, you know, some

of the same impulses have persisted, every nation has fought for itself.

But I think what it also reinforces, as you said, is that the summer did not pan out to be the kind of summer we were hoping for it to be. Instead

of, you know, being this sort of euphoric re-entry into society, what we actually saw was a major step back in the recovery due to the delta

variant, very serious concerns about the shipping crisis, and very serious concerns about what that could do to inflation.

Look for those numbers over the next six to nine months.

QUEST: Clare Sebastian, thank you.

QUEST MEANS BUSINESS with you this Tuesday. Yes, it is Tuesday.

The oil and gas prices, volatile session, and winter is coming to Europe and the energy crisis is showing no sign of letting up. The President of

COP 26 says world leaders must keep their climate promises ahead of an upcoming conference, all of that in a moment.

(COMMERCIAL BREAK)

[15:15:56]

QUEST: The President of COP 26 has called on G20 countries to do what they said they would, set emissions targets and keep them, and to do it before

the U.N. Climate Change Conference starts in Glasgow at the end of the month.

(BEGIN VIDEO CLIP)

ALOK SHARMA, PRESIDENT, COP 26: Under the G20 Climate Energy Ministers Meeting in July, every G20 countries agreed to set out ambitious 2030

emission reduction targets before COP 26.

The U.K., France, Italy, Germany, the E.U., Canada, the U.S., Argentina, Japan, South Korea, and South Africa have done so, now the rest must

deliver, and all eyes will be on the G20 leaders meeting at the end of this month.

We know we can only tackle climate change if every country plays its parts. So, I say to those G20 leaders, they simply must step up ahead of COP 26.

(END VIDEO CLIP)

QUEST: So there are nine G20s without targets, including the BRICs -- that's Brazil, Russia, India and China -- and Australia where there are

particular issues. The conference opens at the end of this month in Glasgow.

The French President Emmanuel Macron says he wants to spend nearly $35 billion to bring down carbon emissions in France. And as part of that

agenda, he wants the country to rely on a triptych of clean energy. To hydrogen production giga factories by 2030, ramping up the country's

nuclear energy capabilities with small modular reactors and hundreds of millions of euros in developing new renewable technologies.

Melissa Bell with us from Paris. The thing about Emmanuel Macron that European leaders both love and loathe is that he is always coming up with

grand schemes. He's always got a plan, and it's usually a large one that puts France at the center of it.

So Melissa Bell, how much of what we're hearing now is for the French electorate, not a climate change COP 26.

MELISSA BELL, CNN PARIS CORRESPONDENT: Well, he would like you to believe, Richard, that it is a mixture of the two and that this grand plan, as you

say, to reinvent, to reinvigorate French industry, in fact, manages to strike both chords.

First of all, reaching that target of lowering France's carbon emissions by 35 percent by 2030, so meeting those targets set and referred to by Alok

Sharma today at UNESCO here in Paris. And on the other hand, speaking to an electorate that he knows that after the des gilets jaunes protest

movements, is going to be a rough campaign.

We are only six months away from that election, Richard, and so he needs to answer those fundamental questions about the French who want more jobs

brought back to France, who want to be able to raise their standard of living and their ability to exist, to function, to buy things, to find

work, and it is trying to marry those two that was all at the heart of this plan he announced today. An ambitious one, with a serious bill, a price tag

attached to it, Richard, 30 billion euros that will be invested to try and at once, make France's economy greener, and make it grow by bringing jobs

back to France.

But I think you're right, this arch-European that has framed everything in European terms six months before an election is all about investing very

heavily in French plans -- Richard.

QUEST: If the election were held tomorrow, Melissa, what do the latest polls suggest?

BELL: The latest poll suggests, Richard, that it is an extremely fragmented political landscape that presents itself with candidates that

have come up to the right of Marine Le Pen, which would have seemed unthinkable only several months ago.

Some candidates, Eric Zemmour, I'm thinking of who have a lot of media attention, who are doing extremely well in the polls, but have yet to

announce that they are even officially candidates. Emmanuel Macron himself has not confirmed that he will officially be a candidate.

So you have this sort of campaign that's gotten underway even before many of the candidates have announced their candidature, even before the main

parties have chosen, which of those candidates will represent them.

So it's pretty messy, and it's pretty hectic, and there's only six months to go.

[15:20:19]

QUEST: All right, but is Macron -- since we have you on, I'm going to make the most -- is Macron making the most of the dysfunction that now exists in

Germany? We know -- I mean the -- whether it's Rainbow, Jamaica Coalition, or Red, White and Blue Coalition, we don't know what the coalition in

Germany is really going. We know it's not going to be obviously Merkel or indeed her party, but we don't know the full composition. This gives France

an opportunity to slide in on Macron.

BELL: It gives France an opportunity to slide in, but again, Emmanuel Macron facing an extremely volatile and difficult to call election. This

was, remember, a political landscape that he himself obliterated when he took power in 2017. The traditional parties -- you mentioned what is

happening in Germany. Here, the traditional parties that had shared powers since 1958 swept aside by the wave, the phenomenon that was Emmanuel

Macron.

Then he created, of course, his party, itself did well at the legislative elections. He had all this power, then came the yellow vests, then came

COVID, and he simply hasn't had a chance, in his own terms, to prove to the French what it is he'd come in to do.

And yet, hence this very ambitious plan announced today. It's really trying to convince them that he is there to bring them tangible benefits in their

everyday life. And yet, he faces himself the consequences of his own victory in 2017 that is political parties that have been swept aside,

random and fairly eclectic candidates that can now present themselves, a far-right that remains fairly vibrant in the polls, Richard, and everything

to play for, and no predictions really that can be made at this stage. Polls really up in the air and a change almost daily in a campaign for the

time being really fixated on those polls.

And again, the random candidates that have come in from the outside that have yet to declare themselves and that could yet completely change the

face of this election.

QUEST: Thank you, Melissa. Melissa Bell in Paris for us tonight.

France and COP 26 are trying to advance the climate agenda in the midst of a brutal energy crisis that's gripping Europe, and much of the world.

Natural gas futures are up almost 90 percent year-on-year.

The global economy is making the transition from fossil fuels. It can't quite get there yet. CNN's Anna Stewart, with this report from London.

(BEGIN VIDEOTAPE)

ANNA STEWART, CNN REPORTER (voice over): Heating homes, cooking food, and fueling industry. Europe depends on natural gas for its energy needs. The

E.U. imports 90 percent of it, leaving the bloc vulnerable to a surge in prices over the last few months.

It's a classic case of supply and demand. As economies roar back to life, post pandemic, need more fuel, demand goes up.

On a supply side, a long winter depleted gas reserves and weak solar and wind output during the summer meant alternatives weren't able to fill the

gap.

STEWART (on camera): The effects are particularly clear here in the U.K. where at least nine energy suppliers went bust just in September. One

energy CEO told me many more could be at risk.

BILL BULLEN, CEO, UTILITA ENERGY: I think Warren Buffett famously said something like, you know, when the tide goes out, we get to see you

swimming naked. And you know, certainly some of those energy suppliers didn't forward hedge their positions, and consequently, we're now seeing

them buying energy at extraordinary high prices from the spot market and consequently they're failing.

STEWART (voice over): Countries including Spain, France, Italy, and Greece have already announced measures to protect consumers from the spike in

prices. But what's really needed to bring prices down is more fuel even if it damages country's climate targets.

HENNING GLOYSTEIN, DIRECTOR OF ENERGY, CLIMATE AND RESOURCES, EURASIA GROUP: A lot of countries across Europe are quietly switching on coal fired

power stations again. They've had been mothballed in the last few years, because, you know, they'd rather run something dirty than run out of

electricity.

STEWART (voice over): Gas is a cleaner options, and it's possible more could be on the way.

ANNOUNCER: For over 30 years, Gazprom has been a reliable gas supplier to the countries of Europe --

STEWART (voice over): President Vladimir Putin says Russia could export more gas amid accusations Europe's biggest supplier has been withholding

exports to keep prices high.

This offer though, may have strings attached.

GLOYSTEIN: They might be pumping less supply to Europe, because they want to support Nord Stream 2 pipeline, which is ready, going into Germany,

but it's not approved yet, and they have been sending less gas through their pipelines going through Ukraine and into Europe.

STEWART (on camera): Would approving Nord Stream 2, the new pipeline, would that solve the issue?

GLOYSTEIN: Probably not, just the regulatory process will take several months and even if it got approved right now, which it won't, it will take

several weeks for the gas to be fully piped through the system and arrive in Europe to make a difference.

[15:25:15]

STEWART (voice over): One of the simplest solutions to the gas crisis is out of policymakers' control. A mild winter would ease prices.

Within their control, speeding up the transition to cleaner energy sources without leaving consumers still reliant on gas out in the cold.

Anna Stewart, CNN, London.

(END VIDEOTAPE)

QUEST: The world's financial leaders are trying to fix corporate tax code, something long overdue. Top economists say what's being proposed is grossly

unfair to all the wealthiest nations.

(COMMERCIAL BREAK)

QUEST: In a recent interview, the Chief Executive of JPMorgan Chase, Jamie Dimon has bashed Bitcoin and he compared to cryptocurrencies to cigarettes.

He explained, he doesn't personally see the appeal, but if his clients want to continue buying Bitcoin, that's their prerogative.

(BEGIN VIDEO CLIP)

JAMIE DIMON, CEO, JPMORGAN CHASE: I personally think that Bitcoin is worthless, but I don't want to be -- I don't care. It makes no difference

to me. I don't think you should smoke cigarettes either, you know, but now it comes into like, okay, JP -- now, JPMorgan.

Our clients are adults, they disagree, that's what makes markets. So if they want to have access to buy or sell Bitcoin, we can't custody it, but

we can give them legitimate as clean as possible access.

(END VIDEO CLIP)

QUEST: Investors in Bitcoin relatively unfazed, it's at $56,000.00, nearly eight -- nearly doubling its worth over the last year. The co-chair of Bain

Capital admits he was drinking from a fire hose when it came to learning about crypto. Stephen Pagliuca told me he's still on the fence about the

future of bitcoin.

(BEGIN VIDEO CLIP)

STEPHEN PAGLIUCA, CO-CHAIR, BAIN CAPITAL: I think crypto, crypto is really defined as a technology, a culture, a way of thinking, distributed,

centralized ledgers, it could have those kind of profound impacts. On the other hand, you know, bitcoin, it could be the next tool craze. But I don't

know yet. I'm still on the fence.

QUEST: But on the fence means being prepared to take risk. On the fence means, when it comes to Bain being prepared to say, look, we do need to be

involved here and to be putting money and capital into these things.

Is that where you are going?

PAGLIUCA: Yes, we are involved already. We're looking at payments technologies, blockchain technologies, all sorts of things, exchanges,

businesses that do NFTs through our venture group, through our technology group. I continue to be amazed at all the changes that are happening within

NFTs and the values of those.

QUEST: The head of the SEC has basically said, we're going to regulate. You're a bank. You're a lender. Whatever it looks like, if it looks like

it, we're going to regulate it.

Does crypto and the industry require regulation now?

PAGLIUCA: I think it does. Right now, in terms of just the currencies, they've been very volatile. People come out with new currencies all the

time. There's no standard. There's nobody watching over it.

And my fear is that the person on the street reads about bitcoin and buys Dutch Coin, which doesn't have any backing and goes up to a dollar and then

down to 10 cents. So regulation I think plays a role in stabilizing the market.

And ultimately it'd be great for crypto and cryptocurrencies because people will know what they're getting. They'll know somebody is looking over it to

make sure it is capitalized enough, to make sure it is legit.

(END VIDEO CLIP)

QUEST: More of that interview with Stephen Pagliuca on Friday's program, including a search for ducks. You'll have to watch to find out more.

With me now is our digital correspondent, Paul La Monica, in New York.

I sort of know what Jamie Dimon meant when he said it's worthless. Technically, it is, in the sense that it is not backed by anything. And it

is only as good as the people who believe it's -- the speculators who believe it. But others don't agree.

PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: Yes. I think that Jamie Dimon has been a bitcoin bear for several years now. You know, critics of

his stance would point out that, back when Jamie Dimon first made extremely negative comments about the cryptocurrency about four years ago in 2017,

bitcoin was trading around, I believe, between $4,500 and $5,000.

It is now close to $60,000. So obviously, in those past few years, Dimon has been wrong. I think, though, I understand his point to a certain extent

about the cryptocurrency in his mind being worthless because it is not backed by anything, quote-unquote, "real."

But these are digital currencies that are being increasingly used by consumers. They're being backed and invested in by high-profile investors

like George Soros and Stanley Druckenmiller. So to dismiss it as the next tool mania and completely worthless, that might be a little shortsighted.

QUEST: The problem, of course, is one of regulation and security. I guess most investors -- look, there is a -- I'm fishing it out -- a 20 dollar

bill. Arguably, what backs this is only the -- certainly, it is a promise to pay the bearer but what backs it is the full faith and credit of the

U.S. government and the U.S. economy, of which we are aware.

If I buy a stock or a share, I know it can go down as well as up. But there is a company behind it. If I buy a derivative, there is a stock that

underlies the derivative unless it is a total synthetic. I wonder what this means for crypto.

LA MONICA: Yes. I think that, right now, for the average investor and many professionals as well, one of the big problems -- and this is where you get

the analogies to the late '90s and the dotcom bubble that spectacularly burst -- there are so many cryptocurrencies out there.

Bitcoin is the proverbial 800-pound gorilla ether, which is used for a lot of these NFT transactions. They are probably the Pepsi to bitcoin's Coke.

After that, though, is Dogecoin and Shiba Inu, are they really worth anything?

[15:35:00]

LA MONICA: The thousands of cryptocurrencies that are out there. You go back to the late '90s, we didn't need hundreds and thousands of ecommerce

online retailers. Obviously, internet retailing didn't turn out to be a fad. Look at Amazon. It is one of the largest companies in the world.

(CROSSTALK)

LA MONICA: Not every cryptocurrency is going to graduate to that level though.

QUEST: No. No, but there will be accidents on the way. And they -- if, because of digital finance and integrated markets, which we certainly

learned in a way in 2008 that we never wished to learn before, the chance of systemic risk in an unregulated asset class is huge.

And I can hear some of our viewers saying, yes, but, Richard, we want it to be unregulated. We don't want the government having a say. That's its

beauty.

But, Paul, I don't agree with that.

LA MONICA: I don't agree with that. And to be honest, I think most of the true professionals in the crypto space, that I talk to day in and day out,

they actually do want a bit of regulation. They recognize that something that is called a currency can't be this volatile.

That's more like a stock or a commodity than a paper-backed currency. At the end of the day, I think any sane individual that's investing in

cryptocurrencies would welcome some regulation, as opposed to, say, what might be happening in China, where there are bans on crypto mining and

potential bans on cryptocurrencies.

Professionals want rules that they can follow. They don't want the wild, wild west. They don't want these to go away, either. Rules means that it is

legitimate.

QUEST: Paul, I'm blaming you completely and utterly for the fact that we don't know where the password is for our bitcoin wallet. Though I remember

you being the one who was meant to look after it or maybe it was me or anyway.

LA MONICA: It's somewhere in the TimeWarner Center.

QUEST: Which is now Deutsche Bank.

LA MONICA: Yes.

QUEST: Somebody in Deutsche Bank could do well out of that.

(LAUGHTER)

QUEST: Good to see you.

The Chinese government has been showing off military muscle with Taiwan. It's not helping the already high tensions between the U.S. and China.

Before the end of the year, Joe Biden and the Chinese president are expected to have a virtual meeting.

The U.S. President has a balancing act of sorts. He has got to calm tensions across the straits and defend democracy in Taiwan.

Taiwan's government says it won't bow down to China and will fight to preserve its democracy. China expects an eventual reunification. And that's

one of the problems if it considers Taiwan a breakaway province. CNN's Will Ripley is in Taipei.

(BEGIN VIDEOTAPE)

WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice-over): Forceful words from the head of the world's largest one party state. China's president

saying a reunification of China and Taiwan, quote, "will definitely be achieved."

Taiwan's president firing back, pledging not to bow to pressure. This as the island shows its military might days after Taiwan's defense ministry

said nearly 150 Chinese warplanes flew over four days in its Air Defense Identification Zone.

Tensions between the two governments may be reaching a boiling point but they've been brewing for decades and a complex relationship that began with

war. In 1949, the previous Chinese government fled to Taiwan after a brutal civil war with the Communists.

Those Communists set up what is now the People's Republic of China. Both sides claimed they were the true authority of the island. And then came

decades of hostility with no travel, trade or even communication between the two sides.

In the 1990s, relations between Beijing and Taipei began to thaw; authorities put aside the issue of sovereignty in favor of more economic

and cultural cooperation. Still, China insisted Taiwan was a breakaway province that must eventually be reunited with the Mainland, even if that

means by force.

In Taiwan, two parties began to form, one that was more aligned with the People's Republic of China, another in favor of complete independence. In

2016, the pro Independence Party nominee, Tsai Ing-wen, was elected President of Taiwan.

Since then, relations started to deteriorate again. China started using its massive economic power against the much smaller democratic island for about

24 million people.

In 2018, they pressured international companies to consider Taiwan part of China and threatened to crack down on the business of anyone that didn't

comply.

Meanwhile, the U.S., which has no formal diplomatic relations with Taiwan, showed commitment to the island's defense and to preserving peace in the

Western Pacific.

[15:40:00]

RIPLEY (voice-over): That has been incensing Beijing, which believes Taiwan has no right to its own diplomacy.

In the past, China has stopped short of a full-scale military invasion. But every Chinese leader since the current government's founder, Mao Zedong,

has vowed to take control of Taiwan. Now with China's President Xi Jinping renewing his vows to bring the two together, Taiwan's fate hangs in the

balance -- Will Ripley, CNN, Taipei.

(END VIDEOTAPE)

QUEST: That's QUEST MEANS BUSINESS at the moment. Top of the hour, we'll make a dash for the closing bell. That's after you've enjoyed "CONNECTING

AFRICA."

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(CONNECTING AFRICA)

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QUEST: Hello. I'm Richard Quest. Together we'll have a dash to the closing bell. It is exactly two minutes away.

The IMF has slashed its expectations for the U.S. economic growth this year by a full percentage point. And it is warning of increased uncertainty over

how quickly the global economy can overcome the pandemic.

The Dow was mostly flat across the day. We've had this fall off, dramatic, in the last 15 minutes of trade or so, as we've seen -- look at it. It's

been up 30, 40, down 30, 40. Now it is off 108. Same story across all the major averages. They're flat. The September consumer price index comes out

tomorrow, as do the Fed minutes.

The head of the IMF says she is ready to rally her staff after keeping her job as managing director. The executive board of the fund said it had full

confidence in Kristalina Georgieva after she faced questions about her conduct as the World Bank CEO. Today, she insisted she'd always worked for

the public trust.

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KRISTALINA GEORGIEVA, MANAGING DIRECTOR, IMF: I think what we have done at the IMF in these two years, to mobilize incredibly strongly to help our

members.

And I am confident, I am confident that you will see the IMF to be that beacon of integrity of our data and research, as we have been always been.

You're right, we had to always work for the public trust. That's what I have been doing for 40 years.

(END VIDEO CLIP)

QUEST: The Dow components, as we come to the bell, are relatively widespread between those are the winners. Nike at the top. don't often see

that. Intel at the bottom, don't see that often, either. Most of them are just about tootling around the middle. Salesforce and Nike are more than 2

percent.

And so that's our dash to the bell. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. the closing bell is ringing.

"THE LEAD WITH JAKE TAPPER" starts now.

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