WEBVTT - Bonus: Superpower Showdown 0:00:03.080 --> 0:00:07.040 Hi. I'm Andy Brown, the editorial director of the Bloomberg 0:00:07.120 --> 0:00:09.799 New Economy, and I'll be with you for the next 0:00:09.880 --> 0:00:14.040 few weeks sharing highlights of my two video broadcasts called 0:00:14.560 --> 0:00:19.400 on the front Lines and Bloomberg New Economy Conversations that 0:00:19.520 --> 0:00:23.560 look at how COVID nineteen is reshaping the global economy. 0:00:24.160 --> 0:00:28.680 You can find them all on Bloomberg dot com. Going 0:00:28.680 --> 0:00:33.040 into this pandemic, U S. China relations were at rock bottom. 0:00:33.080 --> 0:00:36.680 They've since gotten much worse, with both sides trading blame 0:00:36.760 --> 0:00:42.199 for the COVID nineteen outbreak, spinning conspiracy theories, and abandoning 0:00:42.240 --> 0:00:47.320 cooperation on all fronts. To discuss what all this means 0:00:47.360 --> 0:00:50.160 for the post COVID economy, I caught up with two 0:00:50.240 --> 0:00:54.480 Wall Street Journal reporters, Ling ling Way and Bob Davis, 0:00:54.520 --> 0:00:59.480 who just published a book called Superpower Showdown. It's based 0:00:59.520 --> 0:01:02.400 on year as of inside reporting from the centers of 0:01:02.480 --> 0:01:07.560 power in both Washington and Beijing. I hope you enjoyed 0:01:07.560 --> 0:01:11.400 this and other interviews on how the coronavirus is transforming 0:01:11.400 --> 0:01:15.040 the business world, and thanks to Stephanie Flanders for letting 0:01:15.040 --> 0:01:24.080 me hijack her feed. Bob and Linglan gets great to 0:01:24.120 --> 0:01:28.759 have you on the program. You've both been living and 0:01:28.840 --> 0:01:32.440 breathing this US China trade and economic war from the 0:01:32.520 --> 0:01:37.560 very beginning. Bob from Washington, d c U Lingling from Beijing. 0:01:37.680 --> 0:01:40.120 So bring us up to speed. How would both of 0:01:40.240 --> 0:01:43.920 you score this showdown so far? Maybe Bob you can 0:01:43.920 --> 0:01:46.400 address that from a US perspective and ling Ling from 0:01:46.400 --> 0:01:49.559 a from a China perspective. Let's start with Bob. Sure, 0:01:50.000 --> 0:01:52.120 and thanks great to be with you. Andy, really really 0:01:52.160 --> 0:01:56.400 appreciate it. So you know, it's opening day and the 0:01:56.400 --> 0:01:58.760 baseball season, and I look at it that way. I 0:01:58.800 --> 0:02:01.960 mean we're like three three in the bottom of the seventeenth. 0:02:02.240 --> 0:02:05.480 The pictures are exhausted. Everybody wants to go home. I 0:02:05.480 --> 0:02:07.680 don't think there's a winner. It's just dragging on and 0:02:07.760 --> 0:02:13.480 dragging on and they kind of taking a break. Uh. Sure. Also, 0:02:13.600 --> 0:02:15.880 thank you so much Andy for having a song. UM 0:02:16.000 --> 0:02:19.000 really honored to be here. Um. So, on the surface, 0:02:19.320 --> 0:02:23.760 it does seem like China has scored some tactical wings. 0:02:24.160 --> 0:02:27.240 You know, the Phase one trade agreement didn't really get 0:02:27.240 --> 0:02:31.200 into the matters that Uh, the leadership cares about the 0:02:31.240 --> 0:02:35.680 most industrial subsidies and as AU reform, none of it 0:02:35.800 --> 0:02:39.720 was in part of the group agreement. And yes, China 0:02:39.760 --> 0:02:44.040 did agree to buy tons of American products, especially act 0:02:44.360 --> 0:02:48.720 UH purchases. However, you know, as we know that they're 0:02:48.760 --> 0:02:51.919 not meeting really meeting the targets now, and the stuff 0:02:51.960 --> 0:02:55.040 they're buying now is also what chinaese at the moment, 0:02:55.680 --> 0:02:59.800 the soybeans and porks and chicken feed and all that 0:03:00.520 --> 0:03:04.920 so um, you know. UH. And also Beijing seems to 0:03:04.960 --> 0:03:09.440 be using this trade agreement as some additional leverage over 0:03:09.520 --> 0:03:13.720 the trmmonistration, so the trum reministration wouldn't push too hard 0:03:14.080 --> 0:03:17.160 in matters like human rights and what's happening in Hong Kong. 0:03:17.480 --> 0:03:20.959 So on the surface does look like, you know, Beijing 0:03:21.080 --> 0:03:24.480 is gaining some kind of upper hand. However, really dip 0:03:24.560 --> 0:03:27.960 down the cost of the trade war to China's super 0:03:28.040 --> 0:03:32.360 significant and first of all, UH, it has shattered UM 0:03:32.440 --> 0:03:37.160 investor confidence, you know, especially among business private businesses. You know, 0:03:37.200 --> 0:03:41.800 we have seen for months UM growth in private business 0:03:42.080 --> 0:03:46.080 UH investment have been plunging. And yeah, the only thing 0:03:46.160 --> 0:03:50.040 that's propping up China's economy now is state investment, state 0:03:50.080 --> 0:03:55.480 sector investment. And another big casualty of this trade war 0:03:55.600 --> 0:03:59.880 to China is Chinese reform. Right now, there's no moment 0:04:00.160 --> 0:04:04.000 term to carry out all those needed changes to the 0:04:04.080 --> 0:04:08.440 Chinese economy. So longer term, um, I really think, Um, 0:04:08.480 --> 0:04:12.400 you know, if the momentum, the reform momentum, doesn't come back, 0:04:12.720 --> 0:04:14.960 it's really hard to see China will win in the 0:04:15.000 --> 0:04:21.080 long run. A lot of people congratulately Trump on standing 0:04:21.200 --> 0:04:24.719 up to China, but fault him for his tactics. What 0:04:24.960 --> 0:04:28.919 should he have done differently? Well, I mean I agree 0:04:28.920 --> 0:04:34.880 with you know, the the reform effort in China is stalled. Um, 0:04:35.040 --> 0:04:37.719 the US isn't going to really get the purchases they 0:04:37.760 --> 0:04:40.960 you know, they expect. So you've got to kind of 0:04:40.960 --> 0:04:42.560 look at it from the US perspective. What do they 0:04:42.600 --> 0:04:44.760 get out of it? I mean, it's China changed in 0:04:44.800 --> 0:04:47.960 any significant way. I wouldn't say it's changed at all. Um, 0:04:48.040 --> 0:04:50.719 So what would be the alternative? The alternative clearly would 0:04:50.720 --> 0:04:53.960 have been to try to recruit allies to work together 0:04:54.320 --> 0:04:57.839 put pressure on China in a multilateral fashion. I mean 0:04:57.880 --> 0:05:02.240 from day one, the Trump inistration rejected that. They blew 0:05:02.279 --> 0:05:07.600 off the Transpacific Partnership literally on the first day, and um, 0:05:07.640 --> 0:05:10.679 you know, various times just made it clear they wanted 0:05:10.720 --> 0:05:13.760 to go one on one with China. Early on in 0:05:13.839 --> 0:05:18.920 April two thousand seventeen, the French president mccrown had come 0:05:18.960 --> 0:05:22.560 to the US for a state dinner. He talked to Trump, 0:05:22.640 --> 0:05:24.600 talked to him, said, you know, we can work on 0:05:24.600 --> 0:05:27.120 this together. And Trump literally said to him, I got 0:05:27.160 --> 0:05:29.719 this one, you know. And and that's the way in 0:05:29.760 --> 0:05:33.240 which they have tried. So yes, they've gotten China's attention, 0:05:33.279 --> 0:05:36.279 They've certainly gotten the world's attention, but they haven't really 0:05:36.279 --> 0:05:38.719 gotten very much in the alternative would have been to 0:05:38.839 --> 0:05:41.679 go the really hard slog route of you know, lining 0:05:41.760 --> 0:05:46.440 up report, running up allies, and confronting them with you know, 0:05:46.560 --> 0:05:48.960 with a united kind of world, sort of a w 0:05:49.080 --> 0:05:55.560 t O alternative. Langley, you're one of the very very 0:05:55.720 --> 0:05:59.920 few US reporters to have penetrated the Chinese leadership talk 0:06:00.080 --> 0:06:03.320 ranks in John Nana High. First of all, I want 0:06:03.320 --> 0:06:07.400 to ask you what do they really make of Donald Trump? 0:06:08.160 --> 0:06:11.480 He was very confusing to the Chinese side, very unpredictable. 0:06:11.839 --> 0:06:14.640 You know, they spent really a lot of time figuring 0:06:14.720 --> 0:06:17.600 him out. But on the other hand, you know, in 0:06:17.600 --> 0:06:20.320 a sense they also felt like they had him figured out. 0:06:20.320 --> 0:06:23.640 His transaction, everything on the table. So get give some 0:06:24.080 --> 0:06:27.640 big number, give him big number, and he he would 0:06:27.680 --> 0:06:31.200 accept it. Briefly, who do they want to win the 0:06:31.240 --> 0:06:36.680 November election? Trump or Joe Biden? Um? I think, um, 0:06:36.720 --> 0:06:41.120 you know, obviously there's some officials in China still think 0:06:41.200 --> 0:06:43.640 to this day Trump is a gift for China because 0:06:43.760 --> 0:06:48.279 he doesn't care about human rights and all those other issues. However, 0:06:48.440 --> 0:06:52.680 I do think there is a sense among at least 0:06:52.680 --> 0:06:55.160 some corners of the government they they're they're hoping for 0:06:55.200 --> 0:06:58.320 a new beginning because they're making things really hard for them, 0:06:58.520 --> 0:07:02.279 you know, as evidence by the recent very sudden decision 0:07:02.360 --> 0:07:06.960 to close the Chinese consulate in Houston. So and they 0:07:07.000 --> 0:07:10.440 look at that Biden as someone that they might be 0:07:10.520 --> 0:07:13.840 able to talk to because Biden, as Bob mentioned earlier, 0:07:14.360 --> 0:07:18.320 he might choose to go back to those multilateral organizations 0:07:18.800 --> 0:07:23.120 and you know, choose to work with different nations, including China, 0:07:23.240 --> 0:07:26.680 on issues like climate change, you know, trade and all 0:07:26.680 --> 0:07:29.680 the other issues. You know how Chinese love dialogue and 0:07:29.720 --> 0:07:34.440 they're good at conducting dialogues. So in that sense, they're hoping, 0:07:34.800 --> 0:07:36.840 you know, some of them. I can't speak for what 0:07:36.920 --> 0:07:38.840 president she did him want if I knew, I would 0:07:38.880 --> 0:07:42.280 have run a story about that, but I didn't. Just 0:07:42.520 --> 0:07:44.840 it's a little bit divided. It's hard really to see 0:07:44.880 --> 0:07:49.400 for sure staying with staying with China for for now. 0:07:49.480 --> 0:07:53.640 Some some people watching the glacial pace of economic reform 0:07:53.680 --> 0:07:56.680 in China, which you've just referenced, have come to the 0:07:56.720 --> 0:08:02.320 conclusion that changing Chinese trade practices is basically mission impossible. 0:08:02.360 --> 0:08:05.800 I mean, if if she Pain truly believes that the 0:08:05.920 --> 0:08:10.560 state led economic model that he is building and reinforcing 0:08:10.960 --> 0:08:15.400 is essential to the continued uh survival of the Chinese 0:08:15.480 --> 0:08:19.640 Communist Party, what could possibly persuade him to change course. 0:08:20.600 --> 0:08:23.560 That's a great question for years, as you well know, Andy, 0:08:23.720 --> 0:08:26.880 foreign pressure. What's good for reforms in China? You know, 0:08:26.920 --> 0:08:30.680 back during the w teer era, right Ju longy he's uh, 0:08:31.040 --> 0:08:35.240 he's a huge proponent for reforms used that uh, that 0:08:35.600 --> 0:08:39.440 w T negotiation to get China to do some very 0:08:39.480 --> 0:08:44.080 painful reforms, especially involving that SO era. Right now under 0:08:44.080 --> 0:08:46.800 Si jing Ping, that kind of uh, um, you know, 0:08:47.160 --> 0:08:51.120 that's no longer the case, um for impressure is actually 0:08:51.240 --> 0:08:55.680 bad for reform because um, this narrative of the US 0:08:55.760 --> 0:08:59.000 trying to keep China down. It's really taking hold not 0:08:59.160 --> 0:09:03.000 just in a shilst coast, but also among the Chinese public. 0:09:03.520 --> 0:09:08.040 Ling Ling has taken us inside Humanhai, the Chinese leadership compound, 0:09:08.200 --> 0:09:12.680 take us inside the White House. So you've got Treasury 0:09:12.679 --> 0:09:16.840 Secretary Steve Manouchin on the one side, and he's pushing 0:09:16.880 --> 0:09:20.160 for a deal. Wall Street really wants a deal. You've 0:09:20.200 --> 0:09:24.120 got the hawk ish Pete Navarro on the other side. 0:09:24.240 --> 0:09:27.000 He would like, probably to see all of American companies 0:09:27.080 --> 0:09:29.960 pull out of China and bring jobs back to America. 0:09:30.160 --> 0:09:32.760 And in the process, he would, hope, I imagine, sort 0:09:32.760 --> 0:09:35.040 of bring the Chinese economy to its knees. And then 0:09:35.040 --> 0:09:40.040 you've got a president who's swinging between these these two poles. 0:09:40.600 --> 0:09:44.880 How did all this play out in the negotiations? Well, 0:09:44.920 --> 0:09:47.040 I mean in our book, I mean, what we talked 0:09:47.040 --> 0:09:49.720 about is a Wall Street Trump and a blue collar Trump, 0:09:49.840 --> 0:09:53.280 and there are both. He is legitimately both of them. 0:09:53.360 --> 0:09:57.079 On the one hand, his rants during the campaign about 0:09:57.120 --> 0:10:00.840 China ripping us off, ripping off the US um, you know, 0:10:00.920 --> 0:10:03.560 stealing jobs and all that sort of thing, he does 0:10:03.679 --> 0:10:07.720 genuinely believe that. Um. On the other hand, he looks 0:10:07.720 --> 0:10:10.880 obsessively to the to the markets, right, and he ping 0:10:10.960 --> 0:10:13.800 pongs between both of them. I mean you see that 0:10:13.840 --> 0:10:15.920 playing out in his aids. Also, as you sort of 0:10:16.280 --> 0:10:18.400 you laid out, there are people in that White House 0:10:18.559 --> 0:10:20.800 who believe that China is the greatest threat to the 0:10:20.840 --> 0:10:23.200 United States is the rise of fascist and in the 0:10:23.280 --> 0:10:26.280 nineteen thirties, he is not one of them. Um, there 0:10:26.320 --> 0:10:28.400 are people in that White House who think, you know, 0:10:28.640 --> 0:10:31.120 you know, China is a problem. Certainly it's a problem, 0:10:31.200 --> 0:10:32.559 but you know, there's a lot of problems in the 0:10:32.559 --> 0:10:35.120 global economy, and you know, let's not let this get 0:10:35.120 --> 0:10:36.760 out of hand. And he's not one of them either. 0:10:37.200 --> 0:10:40.480 So he goes from pole to pole, and the different 0:10:40.520 --> 0:10:44.440 advisors play off of that, um and so at some 0:10:44.520 --> 0:10:46.800 points you see the sort of blue collar ish, the 0:10:46.880 --> 0:10:51.720 Navarro and Lightheiser wing kind of went out. At other times, Uh, 0:10:51.760 --> 0:10:54.319 you know, he pulls back when the markets react the most. 0:10:54.920 --> 0:11:00.320 The clearest signal for watching somebody is unparticular as Trump 0:11:00.360 --> 0:11:03.240 is what are the markets doing? The markets react, you 0:11:03.280 --> 0:11:07.120 can count within within a week he'll back off on whatever, 0:11:07.440 --> 0:11:09.320 you know, whatever it is. I think you can see 0:11:09.360 --> 0:11:12.880 this now on closing consulates this speech, that speech against 0:11:13.440 --> 0:11:17.560 China at the markets move, then it'll tamper down. If 0:11:17.559 --> 0:11:21.920 they don't, you'll see more. We're rapidly running out of time, 0:11:21.920 --> 0:11:23.800 but I just want to ask a couple more questions. 0:11:24.200 --> 0:11:25.960 I know you've done a lot of You did a 0:11:26.000 --> 0:11:29.360 lot of reporting on the impact of Chinese exports on 0:11:29.520 --> 0:11:34.400 US manufacturing communities and so called China Shock. Right, it 0:11:34.520 --> 0:11:38.280 resulted in several million lost jobs and places like Pennsylvania, Michigan, 0:11:38.360 --> 0:11:42.280 North Carolina and helped propel Donald Trump to victory in 0:11:42.320 --> 0:11:47.320 the last election. What's happened to those communities since then? 0:11:47.880 --> 0:11:51.560 Will they vote for him again? Well, you know a 0:11:51.600 --> 0:11:54.520 lot of those communities there have been so they're they're 0:11:54.559 --> 0:11:57.760 factory towns we're talking about about basically in the Southeast 0:11:57.800 --> 0:12:02.200 and the Midwest, and factory town have not done particularly 0:12:02.240 --> 0:12:07.000 well under Trump. Uh. Even before COVID manufacturing employments down 0:12:07.559 --> 0:12:10.920 the tariffs hit. Uh. They might protect some companies, but 0:12:11.040 --> 0:12:14.920 there are many more companies that use products than than 0:12:15.040 --> 0:12:19.080 produce products. So you know, they were not beneficiaries of 0:12:19.160 --> 0:12:22.160 this trade pack or this trade fight, and I neither 0:12:22.240 --> 0:12:25.480 were the farmers. On the other hand, there are many, many, 0:12:25.559 --> 0:12:29.240 many other reasons. You know, workers and farmers are you know, 0:12:29.320 --> 0:12:32.120 supportive of Trump. I I don't think he's lost. You know, 0:12:32.760 --> 0:12:35.720 I'm doing a story now on factory towns. I don't 0:12:35.760 --> 0:12:38.800 notice any you know, shrinking away. It's all the sort 0:12:38.800 --> 0:12:41.520 of other kind of people, right, the suburban housewives, the 0:12:41.559 --> 0:12:44.360 sort of classics that you hear about that where you 0:12:44.400 --> 0:12:47.040 see the shrinkage. But back his base, his base is 0:12:47.080 --> 0:12:50.760 still pretty damn strong. Okay, quick one for both of you. 0:12:50.920 --> 0:12:55.040 This showdown is obviously a lot about much more than trade. 0:12:55.120 --> 0:12:57.040 We've gone from a trade war to a tech wall, 0:12:57.080 --> 0:13:00.560 to a talent wall, to a financial wall. Now business 0:13:00.640 --> 0:13:03.640 leaders like Ray Dialio or Bridgewater a warning about a 0:13:03.880 --> 0:13:09.600 shooting war. What is the sequel to superpower showed down? 0:13:10.120 --> 0:13:14.760 Where is this story going? Briefly from each of you, Well, 0:13:14.840 --> 0:13:17.160 I mean a shooting more is like, you know, into 0:13:17.200 --> 0:13:19.520 the world scenario. So no, I don't think we're going there. 0:13:19.559 --> 0:13:21.800 We've never got into a shooting world with the Soviet Union. 0:13:21.840 --> 0:13:24.520 I don't see why in the world would possibly get, 0:13:24.720 --> 0:13:26.520 you know, to that extent. I mean, I think we 0:13:26.600 --> 0:13:30.040 are probably at this point at in a cold war, right, 0:13:30.120 --> 0:13:31.720 I Mean it's a different sort of cold war, but 0:13:31.760 --> 0:13:33.680 I think we're in it. I think one thing that's 0:13:33.760 --> 0:13:36.080 really hard to tell. I mean, we're also in the 0:13:36.120 --> 0:13:38.120 silly season, right, I mean, we've got three months to 0:13:38.200 --> 0:13:41.000 in an election. So I mean all the sort of 0:13:41.120 --> 0:13:44.640 tough you know steps that Trump is taking, if he 0:13:44.679 --> 0:13:48.079 wins the second term, does he really continue to that level? 0:13:48.400 --> 0:13:51.800 And if Biden you know, uh, defeats him. Um, I 0:13:51.840 --> 0:13:54.800 think the long term strength trying to stroy disengagement. But 0:13:55.000 --> 0:13:59.200 clearly the tone will you know, will change enormously last 0:13:59.240 --> 0:14:02.640 work to you Lingle sure, Um, you know it's kind 0:14:02.640 --> 0:14:07.040 of ironic in away, right. So trade was the area 0:14:07.160 --> 0:14:11.440 where where the relationship started to crumble, and now trade 0:14:11.480 --> 0:14:15.240 is the one of the few remaining channels where both 0:14:15.240 --> 0:14:18.040 sides still talking to each other. So right now this 0:14:18.160 --> 0:14:21.520 relationship really is handing by a very very thing thread 0:14:21.640 --> 0:14:24.280 and by many other measures, we are already in a 0:14:24.360 --> 0:14:27.160 new code war. I would just hope that you know, 0:14:27.280 --> 0:14:30.240 Chinese officials often say that the ball is in the 0:14:30.360 --> 0:14:32.760 U s court in terms of, you know, the future 0:14:32.840 --> 0:14:34.960 of the US trainer relationship. I would say it's in 0:14:35.040 --> 0:14:38.400 China's court as well. That's how US a present shiting 0:14:38.440 --> 0:14:41.520 thing still mikes it when he says, um, there are 0:14:41.600 --> 0:14:45.720 thousand reasons to have a good U. S. China relationship, 0:14:45.800 --> 0:14:48.680 not one single reason to spoilt. Let's hope he still 0:14:48.680 --> 0:14:54.520 believes that Bob Davis ling ling Way Superpower Showdown. Great book. 0:14:54.680 --> 0:15:00.520 Thanks for being with us today, Thank you MU, thanks 0:15:00.520 --> 0:15:03.320 for listening. I hope you'll tune in later this year 0:15:03.360 --> 0:15:07.800 for a digital edition of the annual Bloomberg New Economy Forum, 0:15:07.880 --> 0:15:11.480 where business and government leaders from around the world will 0:15:11.520 --> 0:15:14.960 talk about the challenge of building a more sustainable and 0:15:15.120 --> 0:15:17.320 equitable post COVID economy.