Speaker 1: If we never ever have had guests bringing treats for us,
Speaker 1: and now this is two days in a row. This
Speaker 1: is incredible, happened? This is no two days in a
Speaker 1: row guests bringing in sweets for us, which which makes
Speaker 1: us very.
Speaker 2: Popular in our row because then we'll share them with
Speaker 2: a thank you so much.
Speaker 3: I can't definitely does this bring you guys back to
Speaker 3: Hong Kong?
Speaker 1: You know?
Speaker 3: Yes?
Speaker 4: Yeah, I remember every year. I actually kind of miss it,
Speaker 4: like all the zodiac theme things every year, like you
Speaker 4: would walk around the streets and they'd be all the
Speaker 4: pastries and things, but also the little gold statues in
Speaker 4: like the shape of a dog or a bear, not
Speaker 4: a bear of a pig, or like a dragon and stuff.
Speaker 4: I missed that. We don't get that so much more. Joe,
Speaker 4: do you know what your zodiac animal is in China?
Speaker 4: I used to monkey, monkey, monkey, and I'm a bore.
Speaker 2: I'm very hello, yes, what are you?
Speaker 3: I'm read it? So this last year was my year?
Speaker 4: Did you have a good year?
Speaker 3: I think so I got, But.
Speaker 4: I'm here to carman? What Chinese zodiac animal? Are you?
Speaker 3: The horse?
Speaker 4: A good one too?
Speaker 2: I did a deadlift one? Okay, so many Uh, this
Speaker 2: isn't after school Special, except.
Speaker 4: I've decided I'm going to base my entire personality going
Speaker 4: forward on campaigning for a strategic pork reserve in the US.
Speaker 2: Where's the best with imposta?
Speaker 4: These are the important question? Is it robots taking over
Speaker 4: the world? No.
Speaker 1: I think that like in a couple of years, the
Speaker 1: AI will do a really good job of making the
Speaker 1: odd launch podcast. And people say, I don't really need
Speaker 1: to listen to Joe and Tracy anymore.
Speaker 2: We do have the perfect welcome to lots more. Will
Speaker 2: we catch up with friends about what's going on right now.
Speaker 4: Because even when ad thoughts is over, there's always lots
Speaker 4: more and we.
Speaker 2: Really do have the perfect guest.
Speaker 1: I'm always sort of skeptical of like, like when people
Speaker 1: talk about the end of the dollar, it sort of
Speaker 1: seems like crank stuff to me.
Speaker 4: We have had this conversation so many times. And yes,
Speaker 4: a lot of the people who like having conversations about
Speaker 4: the end of dollar dominance, they are crank adjacent many
Speaker 4: of them. Many of them are firmly in crank territory.
Speaker 4: But I do think it is true if you look
Speaker 4: at what's happening in certain parts of the financial system, like,
Speaker 4: there are attempts being made, even if they're not officially
Speaker 4: called we are trying to move away from the dollar.
Speaker 4: They are called things like, well, we want a more
Speaker 4: resilient financial system, or we want one where we are
Speaker 4: not as tied or as reliant on what's happening to
Speaker 4: the dollar exposed exactly right. So the efforts are there,
Speaker 4: they are underway. Does it mean that things are going
Speaker 4: to change in the next like year, Absolutely not. I
Speaker 4: don't think so. But I don't think they can be
Speaker 4: disregarded in total.
Speaker 1: Well, in the studio with us, we have someone who
Speaker 1: is definitely not a crank or crank and Jason. Former
Speaker 1: guest Zoe Lu You've a great piece China wants to
Speaker 1: ditch the dollar in Noema magazine, and you know this
Speaker 1: is of course we've done episodes on China and the dollar.
Speaker 1: They want to dedollarize, et cetera. I actually find it
Speaker 1: kind of compelling. Maybe there's something going on here.
Speaker 3: Wow. First of all, I do not get to choose
Speaker 3: the title, and I've spoken like a true journalist.
Speaker 1: All journalists have had this. Although I've generally been pretty
Speaker 1: involved in.
Speaker 4: Titles, it's much less of a thing than it used
Speaker 4: to be. If you were working on a newspaper for many,
Speaker 4: many years, it was the sub editors who would choose
Speaker 4: the headline. I'm sorry, Zoe, we've totally interrupted you and
Speaker 4: hijack the conversation talk about journalists.
Speaker 3: No, no, no, no. I actually, do you appreciate your
Speaker 3: explaining of this, because sometimes I get people emailing me
Speaker 3: saying that, well, the title of your article, you're saying
Speaker 3: that China is trying to ditch the dollar. But in reality,
Speaker 3: when we finish reading our article, it turned out that
Speaker 3: you are not saying that China is going to ditch
Speaker 3: the dollar. The bottom line of my argument is that
Speaker 3: for their art, economic and geopolitical reasons for countries like
Speaker 3: China to try to reduce its exposure to the dollar
Speaker 3: based system. And the reason I'm saying this is because
Speaker 3: just think about it. You can imagine China as the
Speaker 3: factory of the world, and you are buying a lot
Speaker 3: of commodities using one currency, and you are trying to
Speaker 3: sell your commodities are in the same currency. This is
Speaker 3: the story of China's rice. This is how China accumulated
Speaker 3: at one point for trillion for exchange reserves denominated in dollar,
Speaker 3: but every time when Chinese exporters importers doing a transaction,
Speaker 3: it has to go through the entire banking system, which
Speaker 3: is not denominated in the Chinese currency. This is why
Speaker 3: the Chinese financiers are grumpy about grumpy about right. They
Speaker 3: are saying that, well, you know, we're the largest trading
Speaker 3: punder with more than one hundred and twenty country them
Speaker 3: the world, and yet our currency is a very minimum.
Speaker 4: How much of the urge to maybe diversify a little
Speaker 4: bit comes from waning economic growth? And I'm very conscious
Speaker 4: that we are recording this in a week. You know,
Speaker 4: we are here on January twenty fifth. It has been
Speaker 4: a terrible week for both the Chinese economy and its
Speaker 4: financial assets. There's been a lot of ink spilt about
Speaker 4: the crash in Chinese stocks. I think the CSI three
Speaker 4: hundred index is down something like forty percent over the
Speaker 4: past three years. There's a lot of conversation about structural
Speaker 4: weakness in China's economy at the moment. How much of
Speaker 4: this urge to maybe dedollarize is too strong a word,
Speaker 4: but sort of diversify currency options is part of this
Speaker 4: economic evolution that makes a lot of sense tracy.
Speaker 3: In fact, if we go back all the way to
Speaker 3: the early two thousands, that was actually the very first
Speaker 3: time when the Chinese officials was talking about seriously talking
Speaker 3: about diversifying their foreign exchange reserve holdings. So from that
Speaker 3: time on, with the growing of the Chinese foreign exchange
Speaker 3: reserve accumulation, the conversation has been focused has been focused
Speaker 3: on how to reduce the opportunity cost of investing all
Speaker 3: the foreign exchange asset in US treasuries. But things started
Speaker 3: to change around two thousand, after twenty fourteen, part of
Speaker 3: the reason was because of the West's threatening of kicking
Speaker 3: Russia off the Swift system. Now at that time the
Speaker 3: West did not go with the nuclear option with Russia,
Speaker 3: but it did sort of provided it did provide a
Speaker 3: wake up call for present putting as well as the Chinese.
Speaker 3: And one year later, it was around twenty fifteen that
Speaker 3: was a launch of CIPS, China's cross border interbank payment system.
Speaker 3: And at that time, again the idea was to facilitate
Speaker 3: broader use of the Internet of the reman be in
Speaker 3: the international system. But then systematically people started to realize, well,
Speaker 3: this can be a hatch or a insurance policy. Then
Speaker 3: things really started to get worse from Chinese perspective around
Speaker 3: two southern eighteen with the escalation of US China trade
Speaker 3: war during the Trump administration, and you have Chinese financial regulators,
Speaker 3: even the people the vice chairman of China's Securities Regulatory Commission,
Speaker 3: funcing how he came out and saying that, well, we
Speaker 3: should be prepared for the so called forced decoupling, meaning
Speaker 3: China was being kicked out of the US led global
Speaker 3: financial system. And obviously with Russia's invasion of Ukraine and
Speaker 3: present puddings more against uk in and the freeze of
Speaker 3: Russian reserves and kicking out of kicking Russia out of
Speaker 3: the swift system, this is really the moment where China realized,
Speaker 3: you know, we could be the next Russia. And by
Speaker 3: the way, China is not the only country in the
Speaker 3: world of facing that kind of insecurity. You have countries
Speaker 3: like Saudi Arabia started to worry, and at one point
Speaker 3: there was even floating the idea that Saudi Arabia was
Speaker 3: considering moving. The trading of shifting is part of the
Speaker 3: transactions of oil or denominating the oil price pricing in
Speaker 3: the Remanbi so this is where I think a lot
Speaker 3: of things have been underestimated.
Speaker 1: I'm glad who brought up oil. Actually I should mention
Speaker 1: we talked to Zoe last year. I think it was
Speaker 1: maybe last August. She's the author of Sovereign Funds, How
Speaker 1: the CPC finances its global ambitions. She's the Maurice R.
Speaker 1: Greenberg Fellow at the Council on Foreign Relations. Perfect guests literally,
Speaker 1: But actually I'm glad you brought up oil because I
Speaker 1: thought one of the most fascinating aspects of your piece
Speaker 1: on China and the dollar, and I had never seen
Speaker 1: anyone put this together, which is that if China is
Speaker 1: going to be I don't know, if it's a dominant
Speaker 1: provider of rare earth metals, and we talk about this
Speaker 1: all the time in the context of like batteries and
Speaker 1: clean tech and certain needs for high tech, et cetera.
Speaker 1: And there's you know, this talk a dependence on China
Speaker 1: for all these things. If China is going to be
Speaker 1: I don't know, maybe the Saudi Arabia of some of
Speaker 1: these commodities, then this is an opportunity to create brand
Speaker 1: new markets that aren't not from day one. You know,
Speaker 1: It's like saudis like a bulkhead.
Speaker 3: Yeah.
Speaker 1: Yeah, Like Saudi Arabia is like okay, maybe if they're
Speaker 1: all these years, maybe it'll trade a little bit more
Speaker 1: oil and some other currency. But China could create a
Speaker 1: new market for these and not and have it be
Speaker 1: undollarized from day one.
Speaker 3: I think that is an excellent point to summarize my argument,
Speaker 3: and I wish you were my editor right at the
Speaker 3: top of very much. So this is how I think
Speaker 3: about the relationship between energy and finance. Right right now,
Speaker 3: we are living through a moment of the so called
Speaker 3: energy transition, but this is actually not the very first
Speaker 3: time we leave. The human society lived through this from
Speaker 3: fire to coal to oil, and the next thing could
Speaker 3: be renewable or clean energy. Could it be a variety
Speaker 3: of renewable resources or clean energy sources. And the danger
Speaker 3: of this is that when we move from an oil
Speaker 3: denominated global economy, which is about eighty percent of the
Speaker 3: global economy now is a fueld by oil. Right so,
Speaker 3: oil is one commodity that has one single market. It
Speaker 3: does not matter where you are trading it, whether you're
Speaker 3: in Texas, you are in Dubai, or in Singapore or
Speaker 3: Shanghai or London. At least for most of the time,
Speaker 3: there is only one global oil market price change here
Speaker 3: it moves over there. But renewables is totally different because
Speaker 3: it's a very much decentralized and distributed system. And even
Speaker 3: for natural gas is the same thing. Right, there is
Speaker 3: no single global market for natural gas. So from this perspective,
Speaker 3: this decentralized and fragmented market provide opportunity for the emergence
Speaker 3: of a different trading hub, different trading system, and different
Speaker 3: pricing mechanism. And this is where China see energy transition
Speaker 3: as an opportunity to reduce their dependence on the dollar system.
Speaker 3: And China actually has the market power in this regards
Speaker 3: because it is already one of It is the world's
Speaker 3: largest import of a lot of commodities, and it also
Speaker 3: dominates a lot of the processing capacity for critical minerals.
Speaker 3: So from that perspective, you see China has access to
Speaker 3: the resources, has the processing capacity. They also have the
Speaker 3: manufacturing capacity in the transition through.
Speaker 4: Yeah, I didn't realize this. So I knew China had
Speaker 4: rare earth capacity, I didn't realize it also has the
Speaker 4: tungsten capital of the world in in Ganjo. Am I
Speaker 4: pronouncing that right, very right in Ganjo. And it's funny
Speaker 4: because I've been to Ganjo on my way to Guylan,
Speaker 4: but the sitting, Yeah, but this was like I mean,
Speaker 4: it must have been like two thousand and four or
Speaker 4: something when my mother was working in Beijing, and you know,
Speaker 4: I was at university at the time, and rare earth
Speaker 4: metals were not on my mind, So the importance of
Speaker 4: that particular city of flew over my head at that time.
Speaker 4: But Tungsten capital of the world, as you point out.
Speaker 3: The example that you pointed out is very important to
Speaker 3: Tracy because Ganjo is the it is the location where
Speaker 3: you I cannot believe you actually have been there because
Speaker 3: I have never been there. Many tourists would not even no.
Speaker 4: It was a way stop on the way to Guilan.
Speaker 4: And I remember I've had a lot of of adventures
Speaker 4: in getting lost in foreign places, but this was one
Speaker 4: of the places where we genuinely got lost because we
Speaker 4: were only there for a night and we really struggled
Speaker 4: to find a restaurant to eat in and no one
Speaker 4: back then spoke English, and you know, we didn't have
Speaker 4: translator apps and things like that, so I remember we
Speaker 4: went to a restaurant and we ordered something and I
Speaker 4: think we got back. I think we thought we were
Speaker 4: ordering like chicken or beef, and we got I'm pretty
Speaker 4: sure it was pan fried scorpions. In the end, this
Speaker 4: was one of my like only like no, no, but
Speaker 4: anyway it was. It was not a tourist destination, as
Speaker 4: you point out. It was really a way stop on
Speaker 4: the way to Gwaelan, which is definitely a tourist destination
Speaker 4: and is beautiful.
Speaker 3: Very much so. But Gun Joe is important in the
Speaker 3: sense that it has China's a second rare metals exchange mechanism,
Speaker 3: and the whole idea behind setting up this is rare
Speaker 3: mineral exchange mechanism has been to increase the pricing power
Speaker 3: of the reman be in a lot of these critical
Speaker 3: minerals very much relevant for the energy transition, and China
Speaker 3: not only have one. China not only has one, but
Speaker 3: has another one in ne Mango Can Oh sorry no,
Speaker 3: I was just pointing out the name of the city.
Speaker 3: I believe it's abouttle rare earth mineral and just a
Speaker 3: small segue about rare earth. This is another aspect of
Speaker 3: why Chinese finance seers have been grumpy. They're saying that, Well,
Speaker 3: you know, China, it is the largest rare mineral exporting
Speaker 3: country in the world for a lamp period the time,
Speaker 3: but they have been exporting rare earth at an extremely
Speaker 3: cheap price. The idea is, you sell rare earth is
Speaker 3: a very important mineral, but you sell it dirt cheap.
Speaker 3: In Chinese word, rare earth is called a heat tool.
Speaker 3: It's like a rare earth means the two too. It's like,
Speaker 3: literally it means dirt. So you are selling something precious
Speaker 3: at the price of a dirt. So this is why
Speaker 3: we are really interesting in sort of increasing the pricing
Speaker 3: power of their meanbi.
Speaker 4: Wait, but is that just to try to get market share?
Speaker 4: Because I think about rare earth's and I think finite resources,
Speaker 4: a lot of people are struggling to get them or
Speaker 4: reliable access to them. Why would you sell it cheap?
Speaker 3: That is an excellent question. For a long period of time,
Speaker 3: rare earth as a metal, it didn't have a lot
Speaker 3: of applications. In the transition to renewables. Like if we
Speaker 3: were having this conversation back in let's say two thousand
Speaker 3: and seven, the market is definitely very different from what
Speaker 3: we are saying today. So from that perspective, yes, having
Speaker 3: market share is important, but the problem is the demand
Speaker 3: is not necessarily as high as it is today.
Speaker 4: Oh I see, Okay, So a lot of the discussion
Speaker 4: around the shortage of rare earth metals is still very hypothetical,
Speaker 4: very much so.
Speaker 1: Something that has come up on a couple of episodes
Speaker 1: we've done, but I don't think we've talked about it
Speaker 1: with you is the Belton Road initiative and the degree
Speaker 1: to which that has or hasn't actually been particularly effective
Speaker 1: at creating a renmend B network that rival or a
Speaker 1: renmen be system. And I think what was it, like
Speaker 1: a lot of the lending is still dollarized, right Terseay? Yeah,
Speaker 1: what is going on with that? And how did how
Speaker 1: do you see like you know, obviously the geopolitics ort
Speaker 1: of building relationships. Of course we've seen the emergence and
Speaker 1: growing of the formal like bricks group of countries. How
Speaker 1: does that How do some of these endeavors play into
Speaker 1: China's currency strategy in your view?
Speaker 3: So, the Belt on the Road initiative initially started as
Speaker 3: a way for Chinese leaders in particular Season to address
Speaker 3: China's domestic overcapacity problem, right is after the financial during
Speaker 3: the financial crisis, China, due to the fort tralling, remenbe
Speaker 3: stimulate and then it creates a lot of domestic overcapacity. Therefore,
Speaker 3: using President czimping his own word, he said, you know,
Speaker 3: China's overcapacity problem is a problem for us, but it
Speaker 3: could be beneficial for other countries. So that was the contact,
Speaker 3: that was the background. But it's in reality, it's not
Speaker 3: necessarily how it was imagined. Right, You're right. A lot
Speaker 3: of the lending have been denominated in dollars. However, Chinese financiers,
Speaker 3: including Presidence MP himself as the leader, have been evasioning
Speaker 3: having bri Beldroom Road Initiative as a vehicle or a
Speaker 3: mechanism to broaden the use of remenbe along Beldom Road
Speaker 3: initiative countries. And they even created a sovereign funds to
Speaker 3: help broadening the use of remenb and that sovereign funds
Speaker 3: is called the Silk Road Fund, and it was launched
Speaker 3: around to south end it if I remember it correctly,
Speaker 3: it should be around two thousand fourteen, two thousand fifteen
Speaker 3: ish if I remember it correctly, And at one of
Speaker 3: those Bolt and Road initiative International Corporation Forum, President City
Speaker 3: things that I'm going to give it, you know, another
Speaker 3: capital injection, and this time the capital injection is going
Speaker 3: to be denominated like the capital injection is going to
Speaker 3: be in I mean B. The whole purpose is to
Speaker 3: broaden the use of REMENB through this initiative. And what
Speaker 3: is fascinating is once President made the announcement, the Chinese
Speaker 3: Central Banker at that time came out and saying that
Speaker 3: this is a great idea and we are going to
Speaker 3: use the socro defund as a mechanism to facilitate the
Speaker 3: reminbi internationalization initiative. But the important part here is to
Speaker 3: remember is the is not really internationalization. It's not that
Speaker 3: they are removing capital controls or anything like that. They
Speaker 3: are doing this through creating a relatively regional space for
Speaker 3: Chinese importers acts orders to make transactions right. And in
Speaker 3: this particular context is also very important because Seal Croade Fund,
Speaker 3: the creation of the Seal Code of Fund was using
Speaker 3: China's foreign exchange reserves managed by State Administration of a
Speaker 3: Foreign exchange or safe which was which is the foreign
Speaker 3: exchange reserve management arm of the People's Bank of China,
Speaker 3: and in order to create the Seal Crode Fund, the
Speaker 3: PBOC created a special entity called Buttomwood and although capitalizing
Speaker 3: the Sellcrode Fund was bottom with initial mission, it then
Speaker 3: later went on to create additional investment funds played a
Speaker 3: very important role in stabilizing China's stock market.
Speaker 4: Yeah, I remember this. I think it came up in
Speaker 4: another one of our episodes, although I cannot remember which one.
Speaker 4: Since you brought up she listening to you lay out
Speaker 4: why China wants this type of diversification, it makes a
Speaker 4: lot of sense. And I think this is in many
Speaker 4: ways an underappreciated aspect of Shishin Ping and the CCPs,
Speaker 4: that like, they are good at identifying problems and vulnerabilities,
Speaker 4: it's just that sometimes they're bad at maybe identifying solutions.
Speaker 4: And sometimes I think Dan Wang, another one of our guests,
Speaker 4: pointed this out in his annual letter. And I'm probably
Speaker 4: paraphrasing here, but like, sometimes the solution is more painful
Speaker 4: than the problem itself. And you could make that argument
Speaker 4: for things like housing, what happened in the for profit
Speaker 4: education space, the tech crackdown, all of those things. What
Speaker 4: is the mechanism or the scenario in which China's attempt
Speaker 4: to diversify away from the dollar ends up harming it
Speaker 4: in some way. Like essentially, what are the risks here?
Speaker 4: I feel like they need to be discussed.
Speaker 3: So let me take a step back by explaining what
Speaker 3: are the risk What are the motivations for China totempt
Speaker 3: to reduce exposure? Right? In addition to economic reasons, there
Speaker 3: are what I consider as very important geopolitical vulnerabilities that
Speaker 3: has direct financial security implication, and I describe it as
Speaker 3: the three eyes. I know that last time we talked
Speaker 3: about the four d s.
Speaker 1: Any great comment or has to have their thing or
Speaker 1: guest recently Jason Cummins from Resident REVN. Howard the three ends.
Speaker 1: So we like they say, all right, what are the
Speaker 1: three eyes?
Speaker 3: So the three eyes is under rising geopolitical tension, exposed
Speaker 3: countries like China to ill liquidity challenge. It's exposed countries
Speaker 3: like China to insecure challenge, and they find the other
Speaker 3: part would because of insecurity, because of ill liquidity. China
Speaker 3: is building an alternative to to ensure against a lot
Speaker 3: of these vulnerabilities. Right, So those are the three and
Speaker 3: the mechanism for China to achieve. This is to create
Speaker 3: an alternative system. It can be summarized as the split.
Speaker 3: You have settlement and payment, that's the S and a P.
Speaker 3: You have liquidity, which is l and liquidity. The whole
Speaker 3: idea of liquidity is to create international demand for the
Speaker 3: reminbi and the remanbi asset. Right, and then I would
Speaker 3: be creating a sort of this international international system to
Speaker 3: increase the insurance. And then the key part would be
Speaker 3: the trading. The whole idea of China being not just
Speaker 3: the world factory but also a very important player in
Speaker 3: global commodities market. Now the backfire scenario would be at
Speaker 3: the T scenario. Now you have all this plumbing system.
Speaker 3: You know, the settlement, the payment, A lot of these
Speaker 3: are the plumbing. Yes, you can make it the argument
Speaker 3: to say that the transaction volume on the swift on
Speaker 3: the Chinese CIPS system is still very low. But the
Speaker 3: point is it's approved of concept. The idea is you
Speaker 3: buy insurance, you hope that you don't need it, but
Speaker 3: in case you need it, you have it ready to go. Right,
Speaker 3: and if the worst case scenario for China would be
Speaker 3: with the continued supply chain diversification, you started to say, okay,
Speaker 3: so what the implication for global currency system would be
Speaker 3: China started to build its own trading system, whereas a
Speaker 3: denominating year may be whereas the rest of the world
Speaker 3: is trading an entirely different currency. Now, if in that
Speaker 3: scenario you have a currency war, and for central bankers,
Speaker 3: experience would be foreign exchange reserves are one day in
Speaker 3: the central bank, but the next day could be gone.
Speaker 3: China lived through this around two sixteen twenty seventeen. Within
Speaker 3: one year, foreign exchange reserves decreased from four tillion dollars
Speaker 3: to three trillion dollars. Right, so this experience is sort
Speaker 3: of very insecure from Chinese financier's perspective. Therefore, if the
Speaker 3: entire global trading system is split into two parts, to
Speaker 3: whom is China going to export in order to accumulate
Speaker 3: all the foreign exchange reserves? That back China's remy be
Speaker 3: internationalization operation.
Speaker 1: I just have one more question about the current state
Speaker 1: of things in China. We got to slew data recently.
Speaker 1: Not great, still slump, but a second year in a
Speaker 1: row of declining population. I believe more deaths than birds
Speaker 1: and a little bit worse than expected. This is another
Speaker 1: top demographics or another topic kind of like the dollar
Speaker 1: ridge with a lot of people have a lot of
Speaker 1: opinions and things to say, and I never really know
Speaker 1: how serious is What do you think of as the
Speaker 1: economic implications or any implications of a shrinking population?
Speaker 3: First of all, I would say that currently perhaps we
Speaker 3: are living through a mood swing of the Chinese economy
Speaker 3: because you know, during the around twenty twenty two, before
Speaker 3: China officially exited the zero COVID policies, you know, a
Speaker 3: lot of people in the West were anticipating in China's
Speaker 3: a rapid snap back. But obviously the economy, the recovery
Speaker 3: of the economy has been disappointing. Therefore, we are now
Speaker 3: becoming having this very much doom Seer's mood and demographics
Speaker 3: is one of the fourties that we talked about, and
Speaker 3: I think in the short run, perhaps the challenge is
Speaker 3: even even bigger than the long term implication. Now, the
Speaker 3: long term implication is that, well, you know, the labor
Speaker 3: premium that is China benefited from has shrinked. Obviously, that's
Speaker 3: one argument that you can say. But you know, China
Speaker 3: is also spending a lot of money and investing in
Speaker 3: artificial intelligence, robotics and all that. And I guess what
Speaker 3: Japan is a good example. Instead of labor, instead of
Speaker 3: relaxing the immigration policy, they use robotics, right, So I
Speaker 3: do think the short run implication is more severe because
Speaker 3: shrinking population the reason why birth rate goes lower. Part
Speaker 3: of the reason is because well, perhaps people are no
Speaker 3: longer getting married as often as the family formation rate.
Speaker 3: The marriage ratio declined, and it has a severe implication
Speaker 3: for the housing market because the demount for housing decrease
Speaker 3: and housing remen constitute about thirty percent of China's GDP,
Speaker 3: and without housing market recovery, it is very difficult for
Speaker 3: the Chinese economy to recover in the short run.
Speaker 4: I have just one more question, and it's not that important,
Speaker 4: but I'm going to ask it. Last time you were
Speaker 4: on the show, you gave us one of the greatest
Speaker 4: gifts in all LOTS history, which is knowledge of the
Speaker 4: existence of idiot sunflower seeds, which has become one of
Speaker 4: my all time favorite companies, like both for the business itself,
Speaker 4: but also for what it says about the development of
Speaker 4: the Chinese economy and what's happening now under Sheshan Ping.
Speaker 4: Give me a new uh wormhole to go down in
Speaker 4: the Chinese currency market, or the economy, or rare earth metals,
Speaker 4: any of those. I'm up for it.
Speaker 2: I think we can get obsessed with.
Speaker 3: This is a good question. I was trying to look
Speaker 3: through the Chinese economy. I'm trying to find like company
Speaker 3: icons that can correspond to a different era. I have
Speaker 3: the idea the watermelon seed that is won stunflower seed,
Speaker 3: but I have been struggling to find another one. And
Speaker 3: since we were talking about energy transition and potential Chinese
Speaker 3: potential challenge to the dollar based the system, I'm going
Speaker 3: to see Bui D. It's a good choice.
Speaker 1: You know.
Speaker 3: It just stands for bewed your dream right. And if
Speaker 3: you look at how buid the rise of Bui D
Speaker 3: and to what extent it challenges a lot of foreign
Speaker 3: ev makers, it shows that perhaps the Chinese market is
Speaker 3: extremely competitive and there are still reasons to be hopeful
Speaker 3: for the Chinese economy, especially for the high tech sector. However,
Speaker 3: I would offer another cautious piece here, which is if
Speaker 3: you look at bid and who's the largest shareholders of
Speaker 3: his publicly listed shares, you will find Central Roisin owns
Speaker 3: more than ten percent of his publicly listed shares.
Speaker 4: Yeah, it's funny you bring it up, because Joe and
Speaker 4: I were actually talking about this earlier in the week.
Speaker 4: Bid shares have also fallen a lot. And it's this
Speaker 4: incredibly promising company that I think has overtaken Tesla to become, yeah,
Speaker 4: to become the biggest maker of electric vehicles. But investors
Speaker 4: are really down on its outlooks. I think in part because,
Speaker 4: like the government has basically said, this is a really
Speaker 4: important part of our economy and we want to be
Speaker 4: leaders in the EV market, and so there's a lot
Speaker 4: of pressure on them to invest, especially if one of
Speaker 4: their dominant shareholders is actually a public entity. You know,
Speaker 4: they're all sort of working together for the future development
Speaker 4: of the Chinese economy. So that means reinvestment capex, it
Speaker 4: doesn't necessarily mean dividends and share buybacks.
Speaker 1: Also, maybe the dollar system is under some sort of threat,
Speaker 1: but the English system. If the leader of your domestic
Speaker 1: manufacturing is build your dreams, then I think the network
Speaker 1: effects of the English language are still extremely very much so.
Speaker 4: Lots More is produced by Carmen Rodriguez and Dashel Bennett,
Speaker 4: with help from Moses Ondom and Kale Brooks.
Speaker 2: Our sound engineer is Blake Maples.
Speaker 1: Sage Bauman is the head of Bloomberg Podcasts.
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