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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: We all know what happened in San Francisco with APEC,

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Speaker 2: and there seemed to be a thaw. She didn ping

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Speaker 2: and Joe Biden obviously met. There was some perceived deliverables

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Speaker 2: on fentanyl on Milton Mill dialogue, but at least they

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Speaker 2: met face to face.

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Speaker 1: Where are we four months after that? Is the thaw sustainable?

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Speaker 3: You know, we think that San Francisco was an important

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Speaker 3: and concrete meeting and productive meeting because it served to

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Speaker 3: in a relative sense, stabilize the relationship. Before San Francisco,

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Speaker 3: we didn't have the deep connections at at the cabinet

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Speaker 3: level that we certainly do now, and we've achieved some

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Speaker 3: specific gains, first on fentanyl leading cause of death in

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Speaker 3: the United States Americans eighteen to forty five. We've seen

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Speaker 3: the Chinese help us, the government here, help our drug

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Speaker 3: enforcement agency.

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Speaker 1: So it has happened. You had a working group meeting already.

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Speaker 3: Oh, yes, we've had many meetings and we've been at

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Speaker 3: to have been trying to work with the Chinese to

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Speaker 3: cut down the flow of precursor chemicals from black market

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Speaker 3: firms here to the drug cartels.

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Speaker 2: But they've never acknowledged that that was coming from here.

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Speaker 2: Have they acknowledged that?

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Speaker 3: Well, you know, we had an important White House led

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Speaker 3: delegation here at the end of January. We spent a

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Speaker 3: lot of time with the Minister of Public Security Wong

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Speaker 3: shi Ohang. Secretary Alejandro Mayorkas had a meeting in Vienna.

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Speaker 3: So we are working on fentanyl and trying to reduce

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Speaker 3: the threat of fentanyl by cooperating with China.

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Speaker 4: Number one. Number two.

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Speaker 3: You know, we didn't have any significant communication between our

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Speaker 3: two militaries for a year and a half. After the

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Speaker 3: visit of Speaker Nancy Pelosi to Taiwan, we're beginning.

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Speaker 4: To have those contacts now. We've got to do a

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Speaker 4: lot more.

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Speaker 3: Third, the President and President Chijinping agreed that we should

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Speaker 3: have the beginnings of a dialogue between the two governments

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Speaker 3: on the risks associated with artificial intelligence. We're going to

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Speaker 3: do that. It's ahead of us, but it's very important.

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Speaker 3: And the fourth agreement I think is really fundamental. COVID

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Speaker 3: separated are two people's students, tourists, business people. We need

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Speaker 3: to get our people meeting again.

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Speaker 2: Well, aside from the moral hazards of ai there's more

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Speaker 2: pressing issues with AI, and that's the curbs on advanced semiconductors,

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Speaker 2: quantum computing and others that seems to be at least

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Speaker 2: from Commerce Department and other sources that we've heard from Washington,

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Speaker 2: potentially is going to get a the list is going

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Speaker 2: to get longer on the number of items that are

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Speaker 2: going to be under the export controls. We heard from Wange,

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Speaker 2: the Foreign minister here, he was quite angry, I guess

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Speaker 2: you could say at the National People's Congress on the

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Speaker 2: sidelines of that essentially saying they were bewildering level of

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Speaker 2: trade curbs, unfathomable, absurdity.

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Speaker 1: What's your response to Wangy?

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Speaker 3: My response is this, every country has a duty and

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Speaker 3: responsibility to protect its national security, and what the President

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Speaker 3: has done over the last year and a half is

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Speaker 3: to make it impossible for sensitive American technology, advanced semiconductors

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Speaker 3: for AI purposes, to be sold to China because we

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Speaker 3: know it will happen. We know that with the PLA,

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Speaker 3: the People's Liberation Army will take advantage of that technology

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Speaker 3: to strengthen itself at the expense of the American military.

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Speaker 3: We're not going to do that. We're not going to

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Speaker 3: compromise on national security, and we're not going to negotiate.

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Speaker 4: And you can.

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Speaker 3: Bet that the government here in Beijing is taking similar measures.

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Speaker 3: They have not allowed for most of the last twenty

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Speaker 3: years the export of core sensitive national security applied Chinese

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Speaker 3: technology to the United States. And so every government, and

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Speaker 3: certainly our government, has a right to take these decisive steps,

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Speaker 3: and that's.

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Speaker 4: What we're doing.

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Speaker 2: We've heard the terminology that essentially these are high walls

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Speaker 2: but small garden as far as the number of products

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Speaker 2: that are on the export curb list, but again it

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Speaker 2: seems to be widening. If these are the industries of

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Speaker 2: the future, potentially it's going to widen and broaden. We're

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Speaker 2: also hearing that the Biden administration wants to and is

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Speaker 2: exerting pressure on allies like the Netherlands, like Japan, like Germany,

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Speaker 2: like South Korea to further the curbs of other products

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Speaker 2: into China. How does that not expand that pressure and

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Speaker 2: actually bifurcate the relationship further.

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Speaker 3: We've been very clear that we adhere to a small

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Speaker 3: yard high fence scenario, meaning these are targeted actions. We

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Speaker 3: have the prohibition on the sale of advanced semiconductors we

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Speaker 3: have the President's Executive Order of August two thousand and

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Speaker 3: three that regulates a investment by American companies in the

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Speaker 3: AI sector. Here, these are common sense actions by the

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Speaker 3: United States. Any American government would have to take this

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Speaker 3: action given the competition we have underway in the military

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Speaker 3: sphere between the People's Liberation Army and the United States.

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Speaker 3: And I don't think there's an American alive who would

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Speaker 3: say that we should sell advanced technology to the PLA.

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Speaker 4: So the President's Actor of.

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Speaker 3: The National Defense here, and as I say, we're not

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Speaker 3: going to nego shade or a compromise on this. And

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Speaker 3: these are the actions that a government has to take

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Speaker 3: to protect in the twenty first century, in an age

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Speaker 3: when technology is at the heart of international politics, some

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Speaker 3: of it has to be regulated.

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Speaker 1: How much of a national security thread is TikTok?

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Speaker 3: Well, you know, I think you know, the White House

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Speaker 3: has spoken to this, The President has spoken to it,

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Speaker 3: and I think Jake Sullivan asked the right questions when

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Speaker 3: he spoke to it this week at the White House.

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Speaker 3: He said, do we want an American company or a

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Speaker 3: Chinese company to own this very important technology TikTok? Do

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Speaker 3: we want an American company to have access to the

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Speaker 3: data of millions of Americans or a Chinese company.

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Speaker 1: But where do we draw the line?

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Speaker 3: And the answers to both questions are obvious when it

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Speaker 3: comes to TikTok, But where.

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Speaker 1: Do you draw the line?

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Speaker 2: Because it could extend to evs, it could extend to

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Speaker 2: any other potential app that would come into the US market.

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Speaker 3: I can tell you that over the last several years,

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Speaker 3: we have kept to a narrow band restricting a narrow

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Speaker 3: band of ten technologies that are at the heart of

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Speaker 3: our national security, that are critical of the national security.

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Speaker 3: And we believe that what we call de risking is

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Speaker 3: a sensible in fact, it's a necessary policy of the

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Speaker 3: United States. One of the lessons of the pandemic is

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Speaker 3: that we have to alter our supply chain on certain

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Speaker 3: critical materials and critical minerals so that we control them

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Speaker 3: back home or they're close to home. We don't want

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Speaker 3: to be overly dependent on China for technologies that we

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Speaker 3: must have to defend our borders and defend our country.

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Speaker 2: How worried or concern should the United States be about

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Speaker 2: what we heard again and again and again in the

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Speaker 2: National People's Congress, and that is the unleashing of new

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Speaker 2: productive forces. Obviously, they need to do that to build

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Speaker 2: out their own AI capabilities, their own advanced chips, and

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Speaker 2: they're going to throw a lot of money, state back

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Speaker 2: money to this.

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Speaker 1: How much of a concern will that ultimately be.

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Speaker 3: No, I think there's a growing concern around the world

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Speaker 3: that if part of what the govern here tries to

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Speaker 3: do to deal with its own internal economic problems is

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Speaker 3: to ramp up manufacturing and export that excess production at

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Speaker 3: artificially low prices or dumping to the rest of the world,

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Speaker 3: whether it's Europe on EVS, whether it's the United States,

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Speaker 3: whether it's Japan and South Korea. That's going to royal

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Speaker 3: and disturb and complicate global trade. And we have been

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Speaker 3: very clear about this. I gave a speech just two

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Speaker 3: weeks ago warning about the problems of excess capacity. Our

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Speaker 3: Treasury Department has worn about the same problem.

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Speaker 2: You get out and about how bad is the Chinese

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Speaker 2: economy from your perspective.

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Speaker 3: Well, I think it's clear that if you look at

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Speaker 3: the official reports of the government and you look at

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Speaker 3: the some of the projections for economic performance over the

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Speaker 3: next couple of years, most economists would say that the

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Speaker 3: economy here will slow down at some point that the era,

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Speaker 3: a four decade era of high single digit growth is over.

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Speaker 4: The number of structural problems they've got to deal with.

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Speaker 3: These aren't for the United States to decide. They're for

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Speaker 3: the government of China to decide. But that was obviously

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Speaker 3: the key issue at the double session of the parliamentally

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Speaker 3: long way that took place here in Beishing over the

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Speaker 3: last two weeks.

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Speaker 1: Yeah, I was definitely there. I also talked to a

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Speaker 1: lot of businesses.

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Speaker 2: And we all know about the FDI numbers, foreign direct

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Speaker 2: investment down to the lowest gain since nineteen ninety three.

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Speaker 2: There is hesitation not only because of the economy is weak,

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Speaker 2: but also because of the myriad of different national security

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Speaker 2: and the opacity of such policy. Especially coming out of

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Speaker 2: the National People's Congress. We didn't get a lot of

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Speaker 2: clarity on policy. We do know, and you were in

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Speaker 2: that sixty minutes interview where you did talk about US

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Speaker 2: companies such as Bain and Company, Mints and others who

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Speaker 2: have seen raids and they've seen arrests of US citizens.

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Speaker 2: Can you elaborate on the threat and the pall that

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Speaker 2: has been cast over the investment community and doing business

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Speaker 2: Americans doing business in China at this time.

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Speaker 3: I think this is a question central to the US

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Speaker 3: China relationship for the next year and the year beyond.

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Speaker 3: We have a five hundred and seventy five billion dollars

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Speaker 3: two way trade relationship. China's the third largest trade partner

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Speaker 3: of the United States. There are thousands of American companies

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Speaker 3: doing business here. Here's the problem. They're hearing conflicting signals.

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Speaker 3: Some senior Chinese government officials say private sector investment is

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Speaker 3: welcome in China.

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Speaker 4: Your investment will be protected.

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Speaker 3: But then these companies are also hearing a different message,

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Speaker 3: whether it's the raids against American companies of last March

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Speaker 3: in April, whether it is the opacity of the kind

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Speaker 3: of espionage law where espionage is defined in such a

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Speaker 3: general way that normal activities in any other country of

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Speaker 3: the world, the collection of data could be construed as espionage.

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Speaker 3: And so we see American firms backing away or at

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Speaker 3: least being very cautious about investing a lot of money

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Speaker 3: here because they're not sure where the lines are. And

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Speaker 3: I think the voices that they're hearing from the government

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Speaker 3: here in China about national security they're the strongest and

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Speaker 3: loudest voices right now.

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Speaker 2: Is it more than just the due diligence companies, the

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Speaker 2: consultancies that have been rated, Other industries also in jeopardy.

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Speaker 3: I think so, I mean, I think it does go

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Speaker 3: beyond those firms that were rated a year ago. It

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Speaker 3: gets to the fact that a lot of companies don't

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Speaker 3: know what the direction of the economy is here and

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Speaker 3: where policy guidelines and parameters will be, and so they're

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Speaker 3: not quite sure if they make a major investment whether

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Speaker 3: that's going to be a rational decision. So a lot

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Speaker 3: of people are sitting on their money. Very few companies

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Speaker 3: are leaving this market at such a big market, an

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Speaker 3: important market.

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Speaker 4: But a lot of companies have plan b's as well.

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Speaker 2: Revenues down for companies like Apple, But there are two

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Speaker 2: sides to that. One also Tesla, we've heard that government

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Speaker 2: agencies have been instructed to not potentially buy Apple iPhones

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Speaker 2: or even China here in China, right, So that also

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Speaker 2: casts a paul too on the appetite to invest in

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Speaker 2: particular two large bellwethers like.

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Speaker 1: Tesla and Apple.

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Speaker 3: You know, we've been very consistent in our government saying

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Speaker 3: we do not want to see a decoupling of these

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Speaker 3: two economies. We're the two the US and China, the

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Speaker 3: two largest economies in the world. We're critical for each

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Speaker 3: other's success given the trade relationship. We're fundamental to the

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Speaker 3: health of the global economy. So we've been very consistent

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Speaker 3: in saying that's not what we're after, but we are

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Speaker 3: de risking. We are shutting down advanced technology transfers sales

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Speaker 3: to China because for national security reasons.

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Speaker 2: You mentioned about the PLA, the People's Liberation Army. We

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Speaker 2: do know at the National People's Congress China increase the

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Speaker 2: military budget by seven point two percent, the biggest increase

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Speaker 2: in five years. First of all, are you concerned by

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Speaker 2: that or how should we read that?

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Speaker 3: Well, we're concerned about is the fact that the PLA

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Speaker 3: is not transparent about how the money is being spent.

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Speaker 3: You know, in the issue of China's nuclear weapons build up,

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Speaker 3: they're not transparent with the rest of the world, and

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Speaker 3: that's a problem. And of course, you know, the United

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Speaker 3: States has been a principal military actor in the Indo

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Speaker 3: Pacific since the close of the Second World War. What

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Speaker 3: we've been doing and President Biden has had a lot

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Speaker 3: of successiveness is to build up our alliances with Japan,

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Speaker 3: the Republic of Korea, the Philippines, Thailand, Australia.

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Speaker 4: We've created Aucus, and.

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Speaker 3: Of course we have the Quad with India, all designed

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Speaker 3: to protect the democratic countries of this region and protect

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Speaker 3: international law in places like the Taiwan Strait and the

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Speaker 3: South China Sea.

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Speaker 2: How much potentially is the Philippine and China trouble right

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Speaker 2: now of flashpoint? I know Anthony Blincoln will be in

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Speaker 2: Manila next week with the Japanese counterpart. We also will

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Speaker 2: be talking to President Marcos next week. Seems to be

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Speaker 2: a very critical time over the difficulties over the tewod

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Speaker 2: Thomas shol and it seems to be an amplified tension

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Speaker 2: between Manila and Beijing.

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Speaker 1: Deusy it that way, We're.

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Speaker 3: Concerned about the activities of the Chinese Navy, the PRC

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Speaker 3: Navy and the Coastguard in the South China Sea, particularly

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Speaker 3: at tewond Timas Shoal at Scarborough Shoal.

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Speaker 4: The PRC has had.

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Speaker 3: An extravagant legal claim that is not supported international law.

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Speaker 3: The International Court of Justice decided in July twenty sixteen

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Speaker 3: in favor of the Philippines against the People's Republic of China,

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Speaker 3: and Beijing has completely ignored that. So the Philippines has law,

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Speaker 3: international law on its side and the strong support of

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Speaker 3: the United States.

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Speaker 2: The last time you and I talked in October, you said,

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Speaker 2: obviously you want to see it more from China as

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Speaker 2: far as using their influence either in Tehran to also

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Speaker 2: essentially not support Hamas or some of these issues. Obviously

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Speaker 2: that is happening in Gaza. A lot has happened since

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Speaker 2: then as well.

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Speaker 1: We have the Red Sea shipping issues.

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Speaker 2: The war in Ukraine as well has gone into a

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Speaker 2: third year. Now, what do you want to see more

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Speaker 2: from Beijing on a diplomatic front to end potentially broker

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Speaker 2: some peace in Ukraine, in the Red Sea as well

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Speaker 2: as in Gaza.

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Speaker 3: We've been concerned for two years now by the support

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Speaker 3: of Beijing for Russia's illegal, barbaric war in Ukraine. We've

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Speaker 3: recently sanctioned seventeen Chinese companies that we believe are assisting

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Speaker 3: in the defense industrial base of Russia for the prosecution of.

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Speaker 4: That illegal war in Ukraine.

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Speaker 3: And we're very much concerned by what the government here

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Speaker 3: is not doing to arrest some of the more nefarious

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Speaker 3: activities of Iran and around back militia or Anian back

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Speaker 3: militia and throughout the Middle East. So we have a

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Speaker 3: disagreement on these issues. We've been very vocal about it.

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Speaker 3: So they're not doing enough.

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Speaker 4: We don't believe they're doing enough.

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Speaker 2: They just sent their Ukrainian envoy Lehuey to Kiev. Any

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Speaker 2: progress there that you would say is measurable progress.

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Speaker 3: It doesn't seem to be much progress that's come out

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Speaker 3: of that trip, not that far the week, not as

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Speaker 3: much as we can see.

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Speaker 2: Yeah, mill to mill dialogue. Has there been any progress there?

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Speaker 2: It was cut off essentially by the China after Nancy

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Speaker 2: Pelosi's visit. Has there been any measurable progress there?

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Speaker 4: Well?

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Speaker 3: The two presidents, President Biden and President She agreed in

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Speaker 3: San Francisco that we would begin again serious high level

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Speaker 3: communication between our militaries. This is hasn't happened. It's beginning

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Speaker 3: to happen. And it's critical because our two militaries are

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Speaker 3: operating in very close proximity to each other in the

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Speaker 3: Spratleys and Paracels and the Sincakus and the Taiwan Strait.

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Speaker 3: And so Chairman our new Chairman of the Joint Chiefs.

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Speaker 3: Chairman Brown has had a discussion with his Chinese counterpart,

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Speaker 3: and we hope very much, as Secretary Austin, we'll be

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Speaker 3: able to talk to his counterpart in the coming weeks

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Speaker 3: or months, and then we hope there'll be even conversations

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Speaker 3: at a more tactical level.

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Speaker 4: Between our militaries.

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Speaker 3: This is common sense because you want to drive down

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Speaker 3: the possibility of any kind of accident or misunderstanding between

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Speaker 3: our air forces or our name.

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Speaker 2: How important are the next seven months ahead of the election.

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Speaker 2: I don't want to get you to speculat on whether

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Speaker 2: Donald Trump is elected again as the president, but he

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Speaker 2: has talked about issues with NATO and the like. Even

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Speaker 2: Wange has talked about what this administration is doing in

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Speaker 2: the Indo Pacific is akin to a NATO for East

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Speaker 2: Asi or the Indo Pacific. Do you think this election,

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Speaker 2: if Donald Trump were elected, your work is going to

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Speaker 2: be diminished.

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Speaker 3: I'm not going to answer that question with all due respect.

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Speaker 3: I'm going to focus on my job here, which is

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Speaker 3: to represent President Biden.

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Speaker 4: In the United States.

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Speaker 3: I don't think it's helpful for me or anybody else

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Speaker 3: in our mission to be talking about our election. So

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Speaker 3: what we've got to do is continue the progress from

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Speaker 3: the San Francisco meaning to continue to stabilize the relationship.

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Speaker 4: What that could mean.

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Speaker 3: In the next few months is that we continue to

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Speaker 3: work on climate change together. John Podesta is our new

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Speaker 3: climate negotiator. That we work on food security, that we

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Speaker 3: work in promoting American agriculture here. One fifth of our

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Speaker 3: exports in the United States go to China, and that

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Speaker 3: we also compete with China on issues like technology, the

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Speaker 3: TikTok issue. On this security and military issues we've talked

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Speaker 3: about and unleveling the playing field for American companies here

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Speaker 3: because it's not level with IP intellectual property violations, force

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Speaker 3: technology transfer.

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Speaker 4: So we've got a job to do. That's what we're

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Speaker 4: focused now.

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Speaker 2: I know Hong Kong is not your remit directly, but

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Speaker 2: you were just there. There's no secret that you were

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Speaker 2: there at a time. As well, the fast tracking of

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Speaker 2: Article twenty three Security Bill, which we'll add on top

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Speaker 2: of the China led National Security Law from twenty twenty.

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Speaker 2: What did you see here and want to find out about?

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Speaker 2: You know, how this will potentially I'm not saying this

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Speaker 2: is going to happen but diminish the role Hong Kong

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Speaker 2: has played as an international financial center and the transparency

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Speaker 2: that is needed for that to do be sustaining.

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Speaker 4: Right, You're right, Steve, Hong Kong is a unique place.

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Speaker 3: We've had a concert there for one hundred and eighty

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Speaker 3: one years, and it's an independent conscept that it doesn't

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Speaker 3: come under my purview.

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Speaker 4: But I went at the invitation of.

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Speaker 3: My colleague and friend, Greg May, the US Consul General

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Speaker 3: in Hong Kong. We had a lot of internal meetings.

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Speaker 3: I met with the American business community. I went over

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Speaker 3: to the University of Chicago and met Chinese and American students.

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Speaker 3: So I wanted to get a good look at what's

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Speaker 3: happening there, and it was good to be there.

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Speaker 4: I hadn't been there in five years.

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Speaker 3: As you know, we have serious concerns about the Article

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Speaker 3: twenty three legislation. We'll see what happens and the coming

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Speaker 3: weeks as to whether or not that moves forward. But

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Speaker 3: the concerns are about the right of people to dissent,

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Speaker 3: freedom of speech, freedom of assembly, and the State Department's

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Speaker 3: been very clear about that concern that we have over

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Speaker 3: the last several weeks.

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Speaker 1: Yeah, did you hear directly from businesses there in.

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Speaker 4: Hong Kong, a lot of American businesses. Yes.

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Speaker 2: Yeah, we even had a suggestion that, no disrespect to

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Speaker 2: you as ambassador, that perhaps Taylor Swift could be a

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Speaker 2: cultural ambassador.

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Speaker 1: Are you trying to get her to come to China?

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Speaker 3: So what role would that be, Steve, my three daughters

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Speaker 3: and my granddaughter with never forgive me if we didn't

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Speaker 3: try to get Taylor Swift.

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Speaker 4: To come to China.

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Speaker 3: You know, Chinese people need to see American culture and

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Speaker 3: American life and all of its manifestations.

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Speaker 4: And she's a brilliant artist.

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Speaker 2: So how prevalent are these exit bands and how is

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Speaker 2: this limiting and preventing Americans from potentially running the risk

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Speaker 2: of coming here?

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Speaker 3: Unfortunately, there are a great number of Americans who are

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Speaker 3: subject to exit bands in China, and that means they

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Speaker 3: can't leave the country. Either their passport's taken away or

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Speaker 3: they go to the airport and they're not allowed to leave.

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Speaker 4: And we fundamentally object to that.

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Speaker 2: I know the TikTok ban or potential ban is a

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Speaker 2: legislative issue, but does it not set the stage for

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Speaker 2: other potential actions that will further bifurcate the US China relationship.

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Speaker 3: Steve, the bill is with the Senate. I don't want

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Speaker 3: to get ahead of the Senate, but I will say

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Speaker 3: this for a number of complaints from the government here

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Speaker 3: in Beijing this week about the American debate on TikTok,

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Speaker 3: I find it supremely ironic because government officials here are

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Speaker 3: using the X platform to criticize the United States. They

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Speaker 3: don't give their own citizens the right to use X,

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Speaker 3: to use Instagram, to use Facebook, to have access to Google,

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Speaker 3: and so it is ironic, indeed that the government here

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Speaker 3: is complaining about a process when they shut down access

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Speaker 3: for one point four billion Chinese to all these platforms.

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Speaker 2: With the TikTok issue, obviously, this is something that came

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Speaker 2: up in the previous administration. China's had time now to

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Speaker 2: come up with a rebuttal or some sort of defense.

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Speaker 2: Do you feel that this is an escalation not only

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Speaker 2: on the US front coming from Congress, but also China's.

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Speaker 1: Ability to fight back.

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Speaker 4: We see it this way.

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Speaker 3: Technology is in many ways now at the heart of

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Speaker 3: the competition between the United States and China, whether it's

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Speaker 3: commercial technology TikTok, for instance, or whether it's technology that

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Speaker 3: can be transformed into military technology used to compete against US,

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Speaker 3: and President Biden and our administration have been very clear

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Speaker 3: we're not going to allow the export of American technology

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Speaker 3: to China that would compromise our national security.

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Speaker 2: A year ago, so we had the spy balloon. Obviously

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Speaker 2: that derailed any kind of progress. We've had an amping

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Speaker 2: up of these export curves and restrictions potentially on more products.

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Speaker 2: Does that run the risk that that thought we saw

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Speaker 2: in San Francisco could be kibosh.

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Speaker 3: It is in the interest of both China and the

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Speaker 3: United States to proceed on military to military communication, a

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Speaker 3: discussion of artificial intelligence, and certainly unfentanyl in the interests

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Speaker 3: of both countries, but we know that we're competing at

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Speaker 3: the same time. San Francisco did not resolve all the

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Speaker 3: problems between the two governments and on military, on technology,

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Speaker 3: on human rights. We have profound differences with China and

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Speaker 3: will continue to talk about those