WEBVTT - Big Take Asia: The US Pledged to Contain China’s Tech Ambitions. It’s Not Working. 0:00:00.120 --> 0:00:02.800 Hey, Odd Loots listeners. This episode, you're about to hear 0:00:02.840 --> 0:00:05.240 us from another podcast here at Bloomberg, the Big Take 0:00:05.280 --> 0:00:06.600 Asia podcast. 0:00:06.600 --> 0:00:09.840 And in this episode you are going to hear about 0:00:09.920 --> 0:00:14.400 China's efforts to dominate industries of the future. Specifically, it 0:00:14.520 --> 0:00:18.439 is looking at China's ten years old Made in China 0:00:18.560 --> 0:00:22.079 Plan to see how the country is actually faring when 0:00:22.079 --> 0:00:24.920 it comes to advancing key technologies. 0:00:25.239 --> 0:00:27.159 This episode of Big Take Asia will give you a 0:00:27.200 --> 0:00:29.880 preview of the next episode of Odd Lots, arriving on Thursday, 0:00:29.920 --> 0:00:33.240 when we'll speak with co authors of a new Bloomberg report. 0:00:33.240 --> 0:00:35.559 We're going to be speaking with Bloomberg's Asia Government and 0:00:35.600 --> 0:00:39.680 Politics correspondent Rebecca Chune Wilkins as well as Bloomberg Economic 0:00:39.760 --> 0:00:40.960 analyst Gerard de Pippo. 0:00:41.400 --> 0:00:44.680 They will help us unpack the China twenty twenty five 0:00:44.720 --> 0:00:48.479 plan and what their research has uncovered. In the meantime, 0:00:48.800 --> 0:00:57.480 enjoy this episode of The Big Take Asia Bloomberg Audio Studios, Podcasts, 0:00:57.800 --> 0:00:58.880 Radio News. 0:01:00.240 --> 0:01:03.880 The US presidential election is a week away and the 0:01:03.960 --> 0:01:08.160 contest between Donald Trump and Kamala Harris could not be tighter. 0:01:08.920 --> 0:01:11.760 The two candidates are going head to head on everything 0:01:12.040 --> 0:01:16.480 from the economy to immigration, but one area they agree 0:01:16.560 --> 0:01:19.559 on is the need to curb China's rise. 0:01:20.000 --> 0:01:24.000 We've got hundreds of billions of dollars just from China alone, 0:01:24.120 --> 0:01:26.920 and I haven't even started yet. But taris are two 0:01:27.000 --> 0:01:29.319 things if you look at it. Number one is for 0:01:29.400 --> 0:01:31.360 protection of the companies that we have. 0:01:31.560 --> 0:01:34.839 Here in a policy about China should be in making 0:01:34.880 --> 0:01:37.959 sure the United States of America wins the competition for 0:01:38.000 --> 0:01:41.840 the twenty first century, which means focusing on the details 0:01:41.880 --> 0:01:45.800 of what that requires, focusing on relationships with our allies, 0:01:45.959 --> 0:01:49.520 focusing on investing in American based technology. 0:01:50.000 --> 0:01:54.360 So how is the US doing versus China, which superpower 0:01:54.440 --> 0:01:57.360 is leading the race for dominance of the twenty first century? 0:01:58.720 --> 0:02:03.280 Rebecca Chung Wilkins, Bloomberg's Asia Government and Politics correspondent, says 0:02:03.320 --> 0:02:05.840 a good way to try to answer this question is 0:02:05.880 --> 0:02:10.559 by looking at the key emerging technologies that China identified 0:02:10.639 --> 0:02:14.680 as its priority back in twenty fifteen when it announced 0:02:14.680 --> 0:02:19.960 it's made in China twenty twenty five plan are came 0:02:20.160 --> 0:02:22.920 and when you look at that plan now nearly a 0:02:23.040 --> 0:02:27.679 decade later, new research by Bloomberg Economics and Bloomberg Intelligence 0:02:28.040 --> 0:02:31.840 shows that made in China twenty twenty five has largely 0:02:32.400 --> 0:02:33.399 been a success. 0:02:33.919 --> 0:02:38.239 So of the thirteen key technologies tracked by Bloomberg researchers, 0:02:38.639 --> 0:02:42.120 China has achieved a global leadership position in five of 0:02:42.120 --> 0:02:49.360 them and is catching up fast in seven others. 0:02:49.680 --> 0:02:54.080 Welcome to the Big tich Asia from Bloomberg News. I'm wanh. 0:02:54.160 --> 0:02:56.640 Every week we take you inside some of the world's 0:02:56.639 --> 0:03:01.280 biggest and most powerful economies and the markets, tyccoons and 0:03:01.440 --> 0:03:05.880 businesses that drive this ever shifting region. Today on the show, 0:03:06.360 --> 0:03:10.880 how did China get ahead in key technological advances despite 0:03:11.040 --> 0:03:14.600 US efforts to prevent that from happening? And would a 0:03:14.600 --> 0:03:23.360 Harris or Trump administration change that? Rebecca says back in 0:03:23.400 --> 0:03:26.680 twenty fifteen, when the Maiden China Plan was announced by 0:03:26.680 --> 0:03:30.200 the Chinese Communist Party, it was all about helping the 0:03:30.240 --> 0:03:32.880 country achieve two big goals. 0:03:33.200 --> 0:03:37.080 One is this self sufficiency, not wanting to be reliant 0:03:37.120 --> 0:03:40.520 on other countries, and is preparing for any kind of 0:03:40.560 --> 0:03:43.920 scenario where, for example, China might be cut off from 0:03:44.080 --> 0:03:47.720 say its energy supply or whatever it might be. And China, 0:03:47.760 --> 0:03:50.720 more broady does have a sort of preoccupation or prevailing 0:03:50.800 --> 0:03:55.160 concern with preserving its own security, so standing on its 0:03:55.200 --> 0:03:59.160 own two feet, and the second is becoming increasingly competitive 0:03:59.200 --> 0:04:01.960 and in fact a globe leader in some of these 0:04:02.040 --> 0:04:04.520 key strategic areas. So there's both a sort of inward 0:04:04.520 --> 0:04:07.000 and an outward element to the maiden in China plan. 0:04:08.200 --> 0:04:11.800 The plan highlighted ten priority sectors for the nation to 0:04:11.840 --> 0:04:17.840 focus on, including aerospace equipment, energy saving cars, biomedicine, and 0:04:17.960 --> 0:04:22.080 high end machine tools and robots. And now, almost ten 0:04:22.160 --> 0:04:26.120 years later, according to the analysis by Bloomberg, China has 0:04:26.320 --> 0:04:29.719 in fact become a global leader in many of these 0:04:29.760 --> 0:04:30.520 key areas. 0:04:30.839 --> 0:04:34.520 So those sectors include solar panels, unmanned aero vehicles, those 0:04:34.560 --> 0:04:38.159 are drones, graphene which is a coating material that's using 0:04:38.240 --> 0:04:41.800 tons and tons of sectors, high speed rail, and electric vehicles. 0:04:42.560 --> 0:04:46.159 Now, does China have any natural advantages that makes it 0:04:46.240 --> 0:04:49.000 possible that it's been able to take leading positions in 0:04:49.080 --> 0:04:52.400 these sectors or is this simply by design and the 0:04:52.440 --> 0:04:53.120 will of Beijing? 0:04:53.839 --> 0:04:56.800 Well as worth saying that even in twenty fifteen, China, 0:04:57.000 --> 0:04:59.680 as we determine, was already a global leader in three 0:04:59.720 --> 0:05:04.440 of them these sectors, in graphene, solar panels, and in 0:05:04.640 --> 0:05:07.080 unmanned area of vehicles, so they had a sort of 0:05:07.320 --> 0:05:09.800 somewhat of a headstart in any case. But the other 0:05:09.839 --> 0:05:12.159 important element here to remember, I think, is that when 0:05:12.240 --> 0:05:15.000 Beijing does signal out an area for support, when it 0:05:15.080 --> 0:05:19.160 signals out a key policy priority, it really is able 0:05:19.240 --> 0:05:24.760 to throw the full weight of its economy essentially behind that. So, 0:05:24.880 --> 0:05:28.680 for example, if it decides that electric vehicles are a priority, 0:05:28.800 --> 0:05:32.360 say it can ask banks to lend it credit cheaply. 0:05:32.680 --> 0:05:35.920 It can get local governments to lease it land cheaply 0:05:36.000 --> 0:05:38.800 or perhaps even at no or low cost. It can 0:05:38.880 --> 0:05:42.280 also get large state owned enterprises to use the sort 0:05:42.279 --> 0:05:45.479 of full force of its resources, it talents, and direct 0:05:45.560 --> 0:05:48.720 it towards those industries. So you know, Beijing has an 0:05:48.720 --> 0:05:53.520 incredibly sort of powerful basis here, an incredibly powerful set 0:05:53.560 --> 0:05:57.159 of resources to direct towards these industries when it has 0:05:57.200 --> 0:05:58.560 selected these priorities. 0:06:00.000 --> 0:06:03.240 This is one key area where China hasn't caught up 0:06:03.279 --> 0:06:08.159 to the US, and that's in advanced semiconductors. That's in 0:06:08.240 --> 0:06:11.640 part because of some key things the US has done 0:06:11.760 --> 0:06:14.000 to keep its rival from catching up. 0:06:14.320 --> 0:06:17.080 There's sort of three big tools for economic stakecraft that 0:06:17.120 --> 0:06:21.120 we've seen. One of them is tariffs, imposing these high 0:06:21.480 --> 0:06:25.400 costs for imports coming into the US, sometimes prohibitively high. 0:06:25.760 --> 0:06:29.240 The second are export controls, essentially trying to prevent the 0:06:29.279 --> 0:06:34.080 transfer of US technology, goods, services overseas to other parts 0:06:34.080 --> 0:06:36.400 of the world. And the final part of that are 0:06:36.520 --> 0:06:40.440 financial sanctions. The big area where we can say that 0:06:40.600 --> 0:06:43.200 some of the US export controls and so on have 0:06:43.320 --> 0:06:47.599 been more effective is in sort of high advanced semiconductors. 0:06:47.960 --> 0:06:49.760 And it's important to remember in this context such just 0:06:49.800 --> 0:06:52.719 a handful of companies involved in this kind of really 0:06:52.760 --> 0:06:56.159 advanced semiconductor tech manufacturing. And it's fair to say the 0:06:56.160 --> 0:07:00.680 Biden administrations they have been successful in building consensus among 0:07:01.040 --> 0:07:06.120 allies among other countries trying to contain China's access to semiconductors. 0:07:06.600 --> 0:07:11.200 And so we saw Dutch companies, Japanese companies essentially falling 0:07:11.240 --> 0:07:16.520 in line in preventing China from accessing the actual products 0:07:16.560 --> 0:07:19.160 needed to manufacture these types of chips. 0:07:19.400 --> 0:07:22.840 And in light of that of the US having allies 0:07:22.920 --> 0:07:26.720 to support its approach to trade on China and its 0:07:26.720 --> 0:07:29.920 approach to contain China, what is China done to make 0:07:29.960 --> 0:07:32.920 sure it has access to the technologies it needs. 0:07:33.360 --> 0:07:36.240 China's actually has been stoppiling like that. That's the sort 0:07:36.240 --> 0:07:39.360 of fundamental basis of this. They're stop piling a record 0:07:39.360 --> 0:07:43.760 amount of semiconductor equipment, and that includes these high end 0:07:44.200 --> 0:07:48.480 video chips. If preparing essentially for a number of further curbs. 0:07:48.560 --> 0:07:51.400 It's looking further out thinking if we see these kind 0:07:51.440 --> 0:07:54.200 of moves accelerate, if they're expanded, where will we be 0:07:54.640 --> 0:07:57.120 and how do we try and future proof against that. 0:07:57.680 --> 0:08:00.640 But it's not just semiconductors where the UA is trying 0:08:00.640 --> 0:08:05.640 to use export controls to slow China down. After the break, 0:08:05.880 --> 0:08:08.440 a look at the other tools the US is using 0:08:09.320 --> 0:08:24.000 and will a new administration keep them going. The US 0:08:24.040 --> 0:08:27.480 has leaned on its allies to limit China's access to 0:08:27.560 --> 0:08:33.000 advanced technologies like semiconductors. Meanwhile, the US is also concerned 0:08:33.040 --> 0:08:35.960 about its ability to be a leader in other sectors 0:08:35.960 --> 0:08:39.720 as well. Some of these areas were outlined back in 0:08:39.760 --> 0:08:43.240 twenty twenty two by National security advisor Jake Sullivan. 0:08:43.480 --> 0:08:48.200 Computing related technologies, biotech, clean tech are true force multipliers 0:08:48.240 --> 0:08:51.640 through the tech ecosystem, and leadership in each of these 0:08:51.679 --> 0:08:56.280 areas is a national security imperative. We're investing in the 0:08:56.280 --> 0:08:59.960 industries of the future and strengthening the resilience and security 0:09:00.080 --> 0:09:01.199 of our supply chains. 0:09:01.960 --> 0:09:07.400 Sullivan calls these technologies a national security imperative. Bloomberg's Rebecca 0:09:07.480 --> 0:09:10.520 Chung Wilkins says that's an important thing to take note 0:09:10.520 --> 0:09:13.839 of because over time she's seen a change in the 0:09:13.880 --> 0:09:17.199 way the US talks about the need to restrain China. 0:09:17.280 --> 0:09:19.800 Yeah. I think in the early days of the trade war, 0:09:19.840 --> 0:09:23.400 a lot of the focus was on the sort of wrongdoing, 0:09:23.440 --> 0:09:27.520 as they alleged of Chinese companies, But over time that 0:09:27.559 --> 0:09:31.400 has really morphed into this whole discussion over national security 0:09:31.880 --> 0:09:36.200 and increasingly this focus on China's preparedness for a war. 0:09:36.760 --> 0:09:40.640 And in fact we've almost seen the true real concerns 0:09:40.679 --> 0:09:44.240 at the heart of some of these economic policies over 0:09:44.320 --> 0:09:48.160 sort of military might. Essentially, it's this question of deterrence 0:09:48.679 --> 0:09:52.920 whether or not Beijing and Washington will essentially adopt this 0:09:53.040 --> 0:09:58.000 idea that the cost of this trade conflict and trade 0:09:58.040 --> 0:10:01.160 war and the cost of this increase in competition are 0:10:01.200 --> 0:10:05.080 worth it or not. It comes sort of, I suppose, 0:10:05.120 --> 0:10:08.840 to this fundamental question of to what extent both sides 0:10:08.960 --> 0:10:13.760 feel that their own national security is fundamentally at risk. 0:10:16.480 --> 0:10:20.240 On the campaign trio, Trump and Harris have advocated different 0:10:20.280 --> 0:10:24.440 approaches towards China, even as both agree on the need 0:10:24.640 --> 0:10:28.600 to thwart its rise. I asked Rebecca what Trump currently 0:10:28.679 --> 0:10:29.600 has in mind here. 0:10:30.200 --> 0:10:33.120 Well, we just in a way have just seen an amplification, 0:10:33.280 --> 0:10:37.000 perhaps unsurprisingly, of some of his previous policies. He's mentioned 0:10:37.080 --> 0:10:41.880 this possibility of sixty percent tariffs across all Chinese imports 0:10:41.920 --> 0:10:42.640 into the US. 0:10:42.760 --> 0:10:43.840 But it would be crazy high. 0:10:44.080 --> 0:10:47.080 That would be crazy high, and it would really hurt 0:10:47.080 --> 0:10:50.360 the Chinese economy. One Bank, for example, estimates that it 0:10:50.400 --> 0:10:53.840 could essentially har Chinese GDP growth, So it would really 0:10:54.000 --> 0:10:57.359 be a significant hit to China, but also a significant 0:10:57.400 --> 0:10:59.840 hit to the US if that then results in a 0:11:00.080 --> 0:11:01.400 higher cost of goods. 0:11:01.720 --> 0:11:05.480 Bloomberg's editor in chief John Mikkelswaet pressed Trump on that 0:11:05.559 --> 0:11:07.720 point in an interview earlier this month. 0:11:08.000 --> 0:11:10.520 You're talking about sixty percent trade on that, sixty perent 0:11:10.559 --> 0:11:12.640 tariffs on that, You're talking, as you said, one hundred 0:11:12.679 --> 0:11:15.560 two hundred percent or things you don't really like. You're 0:11:15.559 --> 0:11:18.360 also talking about ten to twenty percent tariffs on the 0:11:18.360 --> 0:11:20.280 rest of the world. That is going to have a 0:11:20.320 --> 0:11:22.880 serious effect on the overall economy, and yes, you're going 0:11:22.960 --> 0:11:26.040 to find some people who were gained from individual tariffs. 0:11:26.400 --> 0:11:28.600 The overall effect could be massive. 0:11:28.679 --> 0:11:33.040 I agree, it's going to have a massive effect. Positive effect. 0:11:33.280 --> 0:11:36.439 It's going to be a positive Let me just no, no, 0:11:36.600 --> 0:11:37.960 let me committed. 0:11:38.200 --> 0:11:39.920 The other thing to remember with Trump is that he 0:11:39.960 --> 0:11:43.800 has taken a more protectionist stance. Writ large, he's not 0:11:43.840 --> 0:11:46.720 just concerned about Chinese imports, but he's concerned about imports 0:11:46.720 --> 0:11:49.920 from everyone, including, for example, the European Union. 0:11:50.200 --> 0:11:52.959 What do we know about Harris's approach if she wins. 0:11:53.040 --> 0:11:55.760 Well, Harris's approach we expect to be more consistent with 0:11:55.840 --> 0:11:59.360 the Biden administrations. I will say she too has focused 0:11:59.400 --> 0:12:03.040 on this idea of jobs and sort of American industrial policy, 0:12:03.080 --> 0:12:07.000 trying essentially to build up some of those manufacturing bases. Again, 0:12:07.440 --> 0:12:12.360 She's been critical of Trump's proposed tariffs, but she has 0:12:12.440 --> 0:12:16.280 been quite firm on some of the national security risks 0:12:16.320 --> 0:12:17.679 that the US faces. 0:12:18.280 --> 0:12:21.679 So, Rebecca, is either approach really doing a great job 0:12:21.840 --> 0:12:23.840 in containing China's tech development. 0:12:24.080 --> 0:12:28.240 Well, if we look at the success of the Biden 0:12:28.280 --> 0:12:30.960 administration and we look just going back to the beginning 0:12:30.960 --> 0:12:33.640 at some of those maiden China targets. For example, we 0:12:33.720 --> 0:12:37.960 can see that actually they aren't successful, or they haven't 0:12:38.000 --> 0:12:42.920 been successful in certain key areas if we exclude semiconductors. 0:12:43.320 --> 0:12:47.040 Actually trade has found a way to get through sanctions 0:12:47.120 --> 0:12:52.240 haven't been hugely successful. So that's one question for Harris 0:12:52.280 --> 0:12:54.960 that this need to perhaps recalibrate the approach. 0:12:56.480 --> 0:12:59.880 Despite the US efforts to slow down China, the world 0:13:00.080 --> 0:13:04.520 outside the US is increasingly driving Chinese evs, surfing on 0:13:04.640 --> 0:13:08.600 Chinese smartphones, and powering their homes with Chinese solar panels, 0:13:09.280 --> 0:13:12.160 and Rebecca says there might be better approaches for the 0:13:12.280 --> 0:13:14.760 US to maintain its competitiveness. 0:13:15.400 --> 0:13:19.800 One approach to thinking about what would be more effective 0:13:19.920 --> 0:13:23.120 than sanctions is this idea that Adam Posen from the 0:13:23.120 --> 0:13:27.679 Peterson Institute has mentioned, which is suction not sanctions. Essentially 0:13:28.000 --> 0:13:33.319 that the US should be making use and taking up talent, resources, 0:13:33.480 --> 0:13:37.680 innovation coming from China and partnering with it in order 0:13:37.720 --> 0:13:41.719 to advance its own industries and its own key sectors. 0:13:41.960 --> 0:13:44.880 So basically taking away all the talents so that the 0:13:45.000 --> 0:13:45.880 US makes use of. 0:13:45.840 --> 0:13:49.160 It, taking the best of what China has developed, and 0:13:49.240 --> 0:13:52.520 then building on that to develop and innovate at a 0:13:52.559 --> 0:13:53.440 faster pace. 0:13:58.040 --> 0:14:00.960 This is the Big Take Asia from bloom News. I'm 0:14:01.000 --> 0:14:04.079 wan ha. If you'd like to hear more about Bloomberg's 0:14:04.120 --> 0:14:06.880 research on the Maiden China Plan, check out the conversation 0:14:07.040 --> 0:14:10.600 on Odd Lots with my colleagues Joe Weisenthal and Tracy Alloway. 0:14:10.800 --> 0:14:12.840 The other thing that happened that I think was actually 0:14:12.880 --> 0:14:16.320 a bigger deal from the Chinese perspective was when the 0:14:16.400 --> 0:14:20.560 US added Huawei to the Commerce Department's entity list in 0:14:20.880 --> 0:14:23.840 early twenty nineteen, Because what that signal was that the 0:14:23.920 --> 0:14:27.360 United States was effectively trying to kill what was arguably 0:14:27.640 --> 0:14:31.160 China's best global technology company. The US would say, We're 0:14:31.200 --> 0:14:34.200 not trying to kill it, but the restrictions are pretty draconian, 0:14:34.480 --> 0:14:36.000 and there is very much that vibe. 0:14:36.440 --> 0:14:38.920 And check out our last episode where you can hear 0:14:38.960 --> 0:14:43.080 more about one critical market that China's focusing on EVS 0:14:43.520 --> 0:14:47.400 and how one Chinese carmaker BYD is dominating the electric 0:14:47.480 --> 0:14:51.560 auto market globally. That's on our Big Take Asia feet. 0:14:51.960 --> 0:14:55.320 This episode was produced by Young Young, Jessica Beck and Naomi. 0:14:56.200 --> 0:14:58.480 It was mixed by Alex Sugiera and fact checked by 0:14:58.560 --> 0:15:01.760 Eddie Dun was edited by Caitlin Kenny and Daniel Tan 0:15:01.880 --> 0:15:05.720 Kate Maoy Shaven as our senior producer, Elizabeth Ponso is 0:15:05.720 --> 0:15:09.120 our senior editor, Nicole Beemster Bower is our executive producer, 0:15:09.520 --> 0:15:13.280 and Sage Bauman is Bloomberg's head of podcasts. Please follow 0:15:13.320 --> 0:15:16.680 and review The Big Tick Asia wherever you listen to podcasts. 0:15:16.800 --> 0:15:19.600 It really helps new listeners find the show. See you 0:15:19.640 --> 0:15:20.080 next time,