WEBVTT - Who's Running China's Economy Now? 0:00:00.200 --> 0:00:03.159 She Jinping, the President of China has been in office 0:00:03.240 --> 0:00:05.160 for five years, and it looks like he will be 0:00:05.200 --> 0:00:08.160 around a lot longer. While he's at it. Here are 0:00:08.160 --> 0:00:10.560 some more names you might want to become familiar with, 0:00:11.000 --> 0:00:15.319 Leo Chu, E Gong, Leo Kun. These three men will 0:00:15.320 --> 0:00:19.480 be the brains behind China's economic and financial policy, probably 0:00:19.520 --> 0:00:22.200 for at least the next five years, and that means 0:00:22.320 --> 0:00:25.800 they could also help direct or deflect a possible trade 0:00:25.800 --> 0:00:29.080 war between the US and China. All in all, they 0:00:29.080 --> 0:00:32.560 will shape the world's second largest economy and in turn 0:00:32.840 --> 0:00:34.960 have a major impact on the rest of the world. 0:00:44.640 --> 0:00:48.120 Welcome to Benchmark. I'm Scott landman and economics editor at 0:00:48.120 --> 0:00:52.240 The Bloomberg News in Washington, And I'm Daniel Moss, economics 0:00:52.240 --> 0:00:56.320 writer and editor at Bloomberg View in New York. So, 0:00:56.520 --> 0:00:59.880 Dan she Jinping seems pretty firmly in control of China 0:01:00.040 --> 0:01:04.080 these days. Why should we care about some of his underlings. 0:01:04.120 --> 0:01:07.320 She may be firmly in control, but he can't be 0:01:07.480 --> 0:01:12.920 everywhere doing everything at all times. He also knows that 0:01:12.959 --> 0:01:18.120 the party's success depends on economic stability. That means no 0:01:18.400 --> 0:01:22.119 economic blow ups. The more range of opinions you can 0:01:22.200 --> 0:01:26.200 listen to the safer you'll be all right. Well, let's 0:01:26.200 --> 0:01:29.560 find out some more about this range of opinions with 0:01:29.600 --> 0:01:33.479 our guest, Nicholas Lardie is one of the foremost scholars 0:01:33.480 --> 0:01:36.840 on China's economy, having studied it for decades. He's been 0:01:36.880 --> 0:01:40.400 a senior fellow at the Peterson Institute for International Economics 0:01:40.400 --> 0:01:44.039 in Washington for fifteen years, and his most recent book 0:01:44.240 --> 0:01:49.200 is Markets Over Mao, The Rise of Private Business in China. Nick, 0:01:49.400 --> 0:01:52.920 welcome to Benchmark. Thank you. First of all, Nick, who 0:01:53.080 --> 0:01:58.160 is Leocha? Well, Leocha is a sort of economic technocrat 0:01:58.200 --> 0:02:01.720 who has served in a couple of administrations over the 0:02:01.760 --> 0:02:06.360 past decade at fairly high positions. He hasn't been extremely visible, 0:02:06.400 --> 0:02:09.079 but he's been vice chairman of one of the most 0:02:09.120 --> 0:02:12.639 important committees that deals with the economies of National Economic 0:02:12.680 --> 0:02:16.040 Development and Reform Commission. He's also been head of a 0:02:16.080 --> 0:02:19.040 small leading group on sin Anton economics, which is a 0:02:19.160 --> 0:02:23.560 very important behind the scenes advisor. And now he's going 0:02:23.600 --> 0:02:27.480 to be a Vice Premier with a pretty broad economic portfolio. 0:02:27.639 --> 0:02:30.160 How did he get so close to sheet and ping 0:02:30.240 --> 0:02:34.359 over the years to eventually get into this kind of position. Well, 0:02:34.400 --> 0:02:37.320 you're right, he has developed a good relationship with Seejing Ping, 0:02:37.600 --> 0:02:41.040 and all indications are that he will continue to be 0:02:41.120 --> 0:02:46.560 a fairly influential voice. I would caution, however, that a 0:02:46.600 --> 0:02:50.360 little bit hard to know exactly where Leucha stands on 0:02:50.520 --> 0:02:54.480 some issues. He seems to be able to serve masters 0:02:54.520 --> 0:02:59.040 that have disparate views on economic issues, so I don't 0:02:59.040 --> 0:03:01.480 necessarily think he's going to be in the driver's seat, 0:03:02.080 --> 0:03:04.680 but he will be a very strong implementer of the 0:03:04.760 --> 0:03:09.000 policies that he wants to support. Taking a broader look 0:03:09.160 --> 0:03:12.760 at the Chinese economy, Nick, you've written that China is 0:03:12.880 --> 0:03:17.280 much more of a private sector economy than popular discourse 0:03:17.320 --> 0:03:20.720 would seem to recognize. There's a lot of talk about 0:03:20.760 --> 0:03:25.040 how President she has semantic control of the political system, 0:03:25.120 --> 0:03:28.760 what's happening on the ground with the economy, how much 0:03:29.000 --> 0:03:32.959 day to date control does he have. Over the last 0:03:33.000 --> 0:03:36.160 few years, he has exerted a great deal more control 0:03:36.200 --> 0:03:38.440 over the economy. There has been what I think is 0:03:38.520 --> 0:03:42.120 fairly described as a bit of a resurgence of the state. 0:03:42.680 --> 0:03:46.000 About three quarters of China's GDP is being generated by 0:03:46.040 --> 0:03:51.560 private firms, but under She, we've seen proliferation of industrial policies. 0:03:52.200 --> 0:03:55.400 State banks have been lending more money to state companies, 0:03:55.440 --> 0:03:59.480 and she aspires that the state will play a much 0:03:59.520 --> 0:04:03.080 bigger in the economy. How successful that will be ultimately, 0:04:03.200 --> 0:04:05.760 I think remains to be seen. But when we talk 0:04:05.800 --> 0:04:09.880 about private companies in China, don't a lot of them 0:04:10.080 --> 0:04:14.840 have Communist Party cells or leaders that are installed to 0:04:14.880 --> 0:04:19.760 help direct the company business in line with objectives that 0:04:19.839 --> 0:04:23.359 the party has set. Ultimately by President she Well, China 0:04:23.400 --> 0:04:27.960 for more than two decades has required Party committees in 0:04:28.080 --> 0:04:31.880 all enterprises, whether they're state owned or privately owned. So 0:04:31.960 --> 0:04:34.159 this is not a new development, at least in a 0:04:34.200 --> 0:04:37.600 technical sense. Now, what really remains to be seen is 0:04:37.680 --> 0:04:40.479 are these committees going to take a much stronger role 0:04:40.600 --> 0:04:43.800 than they have had in the past. Certainly, there's not 0:04:43.880 --> 0:04:48.640 much evidence that party committees in private enterprises have persuaded 0:04:48.680 --> 0:04:50.880 these companies to do things that they think are against 0:04:51.080 --> 0:04:53.360 their interests. On the other hand, if you're a big 0:04:53.360 --> 0:04:58.400 company like Ali Baba and your Jack Ma the billionaire CEO, 0:04:58.680 --> 0:05:03.240 you certainly want to be perceived as carrying out policies 0:05:03.279 --> 0:05:06.440 that are consistent with those of the party. Talk to 0:05:06.520 --> 0:05:10.880 us about Ye Gung, the new Central Bank governor. Last 0:05:10.960 --> 0:05:15.520 month in Hong Kong, there was some chat that Leo 0:05:16.520 --> 0:05:20.200 would get both jobs vice Premier and governor of the 0:05:20.240 --> 0:05:22.599 People's Bank of China. What does it say that the 0:05:22.720 --> 0:05:25.640 deputy governor has been elevated. Well, I think it's a 0:05:25.720 --> 0:05:28.200 very important move. I think it would have been unrealistic 0:05:28.240 --> 0:05:31.640 for Leucha to be a Vice Premier and of the 0:05:31.720 --> 0:05:35.120 Central Bank governor simultaneously. This is something Drew m g 0:05:35.360 --> 0:05:38.360 did back in the late nineties. But I think the 0:05:39.120 --> 0:05:43.000 Central Bank governor's job has become much more important, much 0:05:43.040 --> 0:05:46.560 more time consuming, and requires a lot more international travel 0:05:46.680 --> 0:05:49.840 than Liuhu could undertake. I think the fact that he 0:05:50.000 --> 0:05:53.160 Gang has been elevated implies that we will have a 0:05:53.279 --> 0:05:58.560 substantial continuity on monetary policy, exchange rate policy, and all 0:05:58.560 --> 0:06:02.000 the things at the Central Bank has an influence on 0:06:02.600 --> 0:06:06.160 He is Western educated, he went back to China in 0:06:07.640 --> 0:06:10.440 He's worked his way up in the Central Bank over 0:06:10.480 --> 0:06:14.280 a period of several decades, and he has been the 0:06:14.400 --> 0:06:18.120 lead brains behind some of the most important reforms in 0:06:18.160 --> 0:06:21.559 the financial sector over the last twenty years, and most 0:06:21.600 --> 0:06:25.919 notably he was the architect for the liberalization of interest rates, 0:06:25.960 --> 0:06:29.440 which started in the late nineties and was not really 0:06:29.480 --> 0:06:33.640 completed until about the middle of twenty thirteen. So it 0:06:33.680 --> 0:06:36.760 was a very long, gradual process in which they moved 0:06:36.760 --> 0:06:39.200 from a system in which all interest rates on both 0:06:39.240 --> 0:06:43.839 deposits and loans were fixed and immovable to one in 0:06:43.920 --> 0:06:48.640 which these rates are now being determined largely by market forces. Nick. 0:06:48.680 --> 0:06:51.720 As long as we're talking about China Central Bank, can 0:06:51.760 --> 0:06:55.760 we talk about how much power central bank actually has 0:06:55.800 --> 0:06:59.200 the People's Bank of China. The independence of China Central 0:06:59.200 --> 0:07:02.480 Bank is differ from that of say, the Federal Reserve 0:07:02.680 --> 0:07:06.280 or European Central Bank. Right, yes, the Chinese Central Bank 0:07:06.400 --> 0:07:10.040 is not independent in the traditional sense of that word. 0:07:10.480 --> 0:07:13.520 It needs to get approval for any major changes in 0:07:14.080 --> 0:07:17.200 the interest rates that it tries to influence, or things 0:07:17.240 --> 0:07:20.720 like the discount rates and so forth. Changes in exchange 0:07:20.800 --> 0:07:23.440 rate policy that it manages have to be approved at 0:07:23.600 --> 0:07:27.120 much higher level. On the other hand, the Central Bank 0:07:27.160 --> 0:07:31.200 in China, at least under the previous governor, has had 0:07:31.240 --> 0:07:34.400 an enormous influence on the economy and they have hit 0:07:34.520 --> 0:07:39.160 The bank has weighed in on a range of economic policies, 0:07:39.320 --> 0:07:45.680 fiscal policy, tax policy. So yes, it's not independent, it's 0:07:45.720 --> 0:07:48.640 not completely free to carry out the usual kinds of 0:07:48.680 --> 0:07:52.480 monetary operations without approval. But you would not find the 0:07:52.480 --> 0:07:55.840 head of the Federal Reserve in the United States offering 0:07:55.920 --> 0:08:00.120 opinions about tax policy fiscal policy in the same way 0:08:00.160 --> 0:08:03.680 that we've seen in China. So the Central Bank governor 0:08:03.720 --> 0:08:07.440 has been a key economic policy maker weighing in on 0:08:07.520 --> 0:08:12.160 a very broad range of economic issues. In the West, 0:08:12.360 --> 0:08:15.960 nick Way used to the finance minister or the treasury 0:08:16.000 --> 0:08:20.120 secretary of a given nation being the big economic cheese. 0:08:20.680 --> 0:08:23.560 Is that the case in China, Well, it certainly hasn't 0:08:23.600 --> 0:08:27.120 been in recent years. The Ministry of Finance in China 0:08:27.640 --> 0:08:31.320 seems to focus primarily on the tax side, the collection 0:08:31.400 --> 0:08:35.600 of taxes, changes in the tax laws, enforcement of tax laws, 0:08:35.640 --> 0:08:38.360 and so forth, and they have not been a big 0:08:38.400 --> 0:08:43.480 shaper of broad macro economical policy in the same way 0:08:43.520 --> 0:08:47.000 that we would be familiar with in the United States. 0:08:47.080 --> 0:08:49.560 So I think the Central Bank has actually been more 0:08:49.600 --> 0:08:53.959 important in that domain than most other agencies in China. 0:08:54.480 --> 0:08:56.760 So the name that we have as the new Finance 0:08:56.760 --> 0:09:00.439 Minister as someone named Leo Kuhn, and I can as 0:09:00.440 --> 0:09:03.200 even as somebody who who spent a few years in 0:09:03.440 --> 0:09:07.199 China covering China's economy. I was not familiar with him. 0:09:07.360 --> 0:09:09.040 What do we know about him and what does his 0:09:09.080 --> 0:09:13.480 appointment say about any kind of direction of policy? Well, 0:09:13.520 --> 0:09:16.480 I think very little. The previous Ministry of Finance was 0:09:16.480 --> 0:09:19.120 a man who came out of the tax Bureau of 0:09:19.160 --> 0:09:21.680 the Ministry and was promoted to be minister. I'm not 0:09:21.720 --> 0:09:26.280 even aware, as you aren't, about the background of Leo Clinton, 0:09:26.280 --> 0:09:29.760 but I would not expect him to be a main 0:09:29.840 --> 0:09:33.280 shaper of policy. I would expect the person that we 0:09:33.320 --> 0:09:36.280 haven't talked about who would be much more important is 0:09:36.360 --> 0:09:39.440 Gauasu Ching, who has now been named to head, who 0:09:39.480 --> 0:09:43.120 has been head of the Central Bank, the Bank Regulatory Commission, 0:09:43.559 --> 0:09:46.320 and is now going to take charge of the merged 0:09:47.000 --> 0:09:51.839 Bank and Insurance Regulator. He's a very strong reformer. He's 0:09:51.880 --> 0:09:55.720 a much stronger personality, and I think he'll work very 0:09:55.720 --> 0:10:00.640 well together with people like Leo and e Gun. Let's 0:10:00.840 --> 0:10:05.760 switch to look at the broader economic dynamic, particularly between 0:10:05.880 --> 0:10:09.560 the world's two largest economies, China and the United States. 0:10:10.440 --> 0:10:14.320 We hear a lot about the Trump administration's desire to 0:10:14.480 --> 0:10:19.320 reduce America's trade deficit with China. We also hear a 0:10:19.360 --> 0:10:23.839 lot about tariffs and other measures that may be imposed. 0:10:24.440 --> 0:10:28.679 Can you break this down a bit for us? In particular, 0:10:28.880 --> 0:10:33.880 I'm wondering, given the extent of global supply chains, how 0:10:33.960 --> 0:10:38.120 much of the stuff the US imports from China actually 0:10:38.160 --> 0:10:42.800 originates somewhere else from an American company. Well, a very 0:10:42.880 --> 0:10:46.480 large share of what China sells to US is actually 0:10:46.520 --> 0:10:50.120 produced by what we would call for an affiliates, that is, 0:10:50.200 --> 0:10:54.439 multinational companies based in China. Many of them, of course, 0:10:54.600 --> 0:10:58.359 are US multinationals, but there's some European and other multinationals 0:10:58.400 --> 0:11:04.680 operating in China. It and these companies typically supply final 0:11:04.760 --> 0:11:08.880 products that are based on long production chains. As your 0:11:08.920 --> 0:11:12.000 questions suggests, they're buying inputs from all over the world, 0:11:12.559 --> 0:11:15.640 producing products in China, and then selling them back into 0:11:15.679 --> 0:11:19.559 the United States. So the Chinese content of these products 0:11:19.640 --> 0:11:23.360 is typically very low. Obviously, the best examples are the 0:11:23.480 --> 0:11:28.160 Apple products iPhones, iPads, which are made almost exclusively in China, 0:11:28.360 --> 0:11:36.560 and the foreign content is of the value of the product. Now, 0:11:36.679 --> 0:11:39.440 what this means is if tariffs are put on those 0:11:39.520 --> 0:11:43.520 kinds of products consumer electronics in particular, we will impose 0:11:43.640 --> 0:11:46.720 some pain on China, but a great deal of the 0:11:46.760 --> 0:11:50.960 pain will be transferred to the countries and the companies 0:11:51.000 --> 0:11:54.079 that are supplying all the inputs that go in to 0:11:54.240 --> 0:11:57.480 these consumer electronic products. So this will have an adverse 0:11:57.480 --> 0:12:05.120 effect on companies in Korea, Japan, Taiwan, Singapore, Malaysia and others. 0:12:05.200 --> 0:12:08.559 So this is where I think Mr Trump makes a 0:12:08.640 --> 0:12:10.920 mistake when he says it's easy to win a trade war. 0:12:11.760 --> 0:12:14.680 Both countries will lose if there's a trade war, and 0:12:15.080 --> 0:12:17.720 we will not just impose costs on China, but a 0:12:17.760 --> 0:12:20.600 lot of these costs will be transmitted to other countries, 0:12:20.920 --> 0:12:24.920 particularly those in East Asia. Your example of the iPhone 0:12:25.200 --> 0:12:30.280 is an interesting one. Apple an iconic American company headquartered 0:12:30.280 --> 0:12:33.960 in California. But if I hear you correctly, Nick iPhones 0:12:34.080 --> 0:12:37.040 might be subject to tariffs, well, they could be that. 0:12:37.080 --> 0:12:39.480 The rumor is consumer electronics will be on the list. 0:12:39.679 --> 0:12:43.480 And interestingly, Apple doesn't make any of these products. The 0:12:43.520 --> 0:12:46.160 products are actually made by a time when he's company 0:12:46.480 --> 0:12:50.040 that operates in China, it's actually one of China's biggest employers, 0:12:50.080 --> 0:12:55.000 a company that is technically hun High or it sometimes 0:12:55.000 --> 0:12:57.560 goes by its trade name of Fox Con. So it 0:12:57.600 --> 0:13:02.200 just shows the complexity you have an iconic American designed 0:13:02.400 --> 0:13:06.640 product by an American firm, Apple sold in the United States, 0:13:07.200 --> 0:13:10.880 but it's being produced in China by a Taiwanese company 0:13:11.000 --> 0:13:14.880 that is drawing parts and components from the global supply chain. 0:13:15.360 --> 0:13:18.959 Now as we record this, some of the details are 0:13:19.000 --> 0:13:21.920 still in flux, but it does seem like there will 0:13:21.960 --> 0:13:26.240 be a trade conflict between the US and China that 0:13:26.280 --> 0:13:30.320 could go on for some time. Nick, how do you 0:13:30.360 --> 0:13:34.080 see this playing out? And also when we talk about 0:13:34.120 --> 0:13:39.480 again people like Leocha and e Gong, when they're making 0:13:39.520 --> 0:13:43.760 decisions that affect China's economy or how China approaches these issues, 0:13:44.280 --> 0:13:47.760 what objectives are they going for and what are they 0:13:48.080 --> 0:13:51.920 trying to protect as far as China's economy goes well, 0:13:51.960 --> 0:13:56.760 I think they're doing everything possible to avoid a trade 0:13:56.800 --> 0:14:00.240 conflict with the United States. Leoha made a trip to 0:14:00.400 --> 0:14:04.280 Washington several weeks ago to try to enter into serious 0:14:04.280 --> 0:14:09.640 discussions with the US administration. Quite frankly, he was basically rebuffed. 0:14:10.240 --> 0:14:13.080 Posture of the administration seems to be, we don't want 0:14:13.120 --> 0:14:17.080 to negotiate anymore. That hasn't been sufficiently effective in the past. 0:14:17.360 --> 0:14:19.440 We want to see some results, so they're going to 0:14:19.520 --> 0:14:22.800 this more unilateral approach. I think the other person to 0:14:22.880 --> 0:14:25.960 figure in this discussion should be Wang Chi Shan. Wang 0:14:26.000 --> 0:14:29.400 Chi Shan has been named Vice president of China. He 0:14:29.520 --> 0:14:33.600 is well known to many Americans in the financial sector, 0:14:33.600 --> 0:14:36.080 in the business sector, and I think he will play 0:14:36.240 --> 0:14:39.720 a similarly large role in trying to manage the economic 0:14:39.760 --> 0:14:43.760 relationship with the United States. So, Nick, when we see 0:14:44.160 --> 0:14:50.200 large headline numbers fifty billion, sixty billion associated with US 0:14:50.240 --> 0:14:57.040 actions against China, is that really just a negotiation? How 0:14:57.040 --> 0:14:59.560 should we be looking at this? Well, I think that 0:14:59.640 --> 0:15:02.240 remained to be seen. The administration is probably going to 0:15:02.280 --> 0:15:05.640 announce a target of a very big number thirty six. 0:15:06.200 --> 0:15:09.120 We don't know exactly, but we will take some time 0:15:09.160 --> 0:15:12.080 to identify the exact products that they're going to impose 0:15:12.160 --> 0:15:15.640 these tariffs on. So this currently certainly could set up 0:15:15.680 --> 0:15:19.920 a window in which negotiations ensued, and it might not 0:15:20.080 --> 0:15:23.880 just be with the Chinese. If consumer electronic products are 0:15:23.880 --> 0:15:27.800 on the list to be subject to high tariffs, then 0:15:27.840 --> 0:15:30.480 you would probably have companies like Apple and other US 0:15:30.560 --> 0:15:35.359 consumer products companies lobbying the administration to exempt their products 0:15:35.360 --> 0:15:39.280 from such tariffs. And quite frankly, I think one of 0:15:39.280 --> 0:15:41.200 the reasons has taken a long time for this to 0:15:41.200 --> 0:15:44.560 play out is it's very difficult to identify products that 0:15:44.640 --> 0:15:47.240 we could impose tariffs on that would not have adverse 0:15:47.280 --> 0:15:52.560 effects on our own companies for other countries in Asia 0:15:52.680 --> 0:15:55.680 that supply inputs to the products that are being exported 0:15:55.720 --> 0:15:59.360 from China. So thinking about how this might play out, 0:16:00.400 --> 0:16:03.280 does China have more to lose from a trade war, 0:16:03.680 --> 0:16:06.080 does the US have more to lose from a trade war? 0:16:06.680 --> 0:16:10.200 Or are they both likely to lose in a trade war? Well, 0:16:10.240 --> 0:16:12.560 I think in a trade war, if it comes to that, 0:16:12.800 --> 0:16:15.960 both countries would lose quite substantially. US consumers are going 0:16:16.000 --> 0:16:19.360 to pay more. We're not going to create any new 0:16:19.440 --> 0:16:23.640 jobs if pariffs are put on consumer electronic products. You know, 0:16:23.720 --> 0:16:27.640 Apple is not going to start producing iPhones in Silicon 0:16:27.760 --> 0:16:30.400 Valley tomorrow. That we simply don't have the capability to 0:16:30.440 --> 0:16:33.920 produce many of the products that we import from from China. 0:16:34.280 --> 0:16:38.320 So what would happen is some of these electronic manufacturing 0:16:38.360 --> 0:16:44.440 services companies like con also have production facilities elsewhere in Asia, 0:16:44.520 --> 0:16:47.840 so they will simply switch the production of these products 0:16:47.920 --> 0:16:52.320 from China to Vietnam or India or other places where 0:16:52.360 --> 0:16:56.480 they have facilities already in place. They couldn't do a 0:16:56.480 --> 0:16:59.440 complete substitution in the short run because their capacity is 0:16:59.520 --> 0:17:02.640 very heavily concentrated in China, but some of the production 0:17:02.680 --> 0:17:05.439 would move. So this is a long way of saying 0:17:06.280 --> 0:17:11.119 not likely to have any positive effect on employment in 0:17:11.160 --> 0:17:15.640 the United States. Likely to have very large negative impact 0:17:15.840 --> 0:17:19.360 on consumers because prices will go up. Nick, how much 0:17:19.720 --> 0:17:23.200 is the US to blame for its large trade deficit 0:17:23.280 --> 0:17:29.560 with China. It's pursuing a policy of fiscal expansion at 0:17:29.600 --> 0:17:34.800 a time when China is pursuing a policy of fiscal consolidation. 0:17:35.720 --> 0:17:39.719 What's going on here? Well, I think what's going on 0:17:40.000 --> 0:17:44.320 is that the level of saving in the United States 0:17:44.400 --> 0:17:47.680 is very low, and the expansion of the fiscal deficit, 0:17:47.720 --> 0:17:49.920 which is occurring and will continue for quite a few 0:17:49.920 --> 0:17:54.280 more years, means that are saving short spot from a 0:17:54.359 --> 0:17:58.000 national perspective, will be getting bigger and bigger, which means 0:17:58.040 --> 0:18:00.359 we need to borrow money from the rest of the world. 0:18:00.800 --> 0:18:02.760 And the only way the rest of the world will 0:18:02.840 --> 0:18:06.240 have the money to lend to us is if they 0:18:06.440 --> 0:18:10.679 sell us more products than we buy from them. So ultimately, 0:18:11.119 --> 0:18:16.160 the trade imbalances are largely a function of these macroeconomic 0:18:16.280 --> 0:18:19.920 variables much more than they are a function of tariffs 0:18:20.000 --> 0:18:23.800 or trade restrictions or protectionism. And I think you can 0:18:23.800 --> 0:18:27.160 see that very clearly. In the case of China, their 0:18:27.560 --> 0:18:30.600 current account surplus, which is a broad measure of goods 0:18:30.600 --> 0:18:33.359 and services and a couple of other things, is only 0:18:33.480 --> 0:18:38.240 one point two percent of their GDP. It's extremely small 0:18:38.960 --> 0:18:41.960 by international standards. So globally they did not have a 0:18:41.960 --> 0:18:44.720 big surplus, but they have a big surplus with the 0:18:44.800 --> 0:18:47.560 United States. The United States has a big deficit with China, 0:18:47.880 --> 0:18:50.840 and I think it's a function of problems that originates 0:18:51.520 --> 0:18:54.920 in the US economy. In other words, the administration portrays 0:18:55.000 --> 0:18:57.720 China is being highly protectionists, and it certainly his protection 0:18:57.800 --> 0:19:00.320 is in some domains, but it is not I have 0:19:00.520 --> 0:19:04.239 a big global trader plus. It's global trade surplus is 0:19:04.480 --> 0:19:07.920 very small relative to the size of its economy. It's 0:19:08.080 --> 0:19:12.440 much much less than the surplus of Germany, for example. Well, Nick, 0:19:12.600 --> 0:19:15.159 this story is obviously far from over, and we'll all 0:19:15.240 --> 0:19:17.240 be listening to what you have to say in the 0:19:17.320 --> 0:19:20.639 coming months on whatever happens between the US and China 0:19:20.720 --> 0:19:23.320 on trade. Thank you so much for coming on our podcast. 0:19:23.520 --> 0:19:29.960 Thank you. Benchmark will be back next week. Until then, 0:19:30.040 --> 0:19:32.360 you can find us on the Bloomberg terminal, the Bloomberg 0:19:32.359 --> 0:19:35.879 dot com, our Bloomberg app, and podcast destinations such as 0:19:35.920 --> 0:19:40.160 Apple Podcasts, Spotify, or wherever you listen to podcasts. Please 0:19:40.160 --> 0:19:42.320 take the time to rate and review the show, and 0:19:42.400 --> 0:19:44.840 you can also find us on Twitter. You can follow 0:19:44.880 --> 0:19:49.639 me at at scott Landman Dan, You're at moss under 0:19:49.680 --> 0:19:53.680 School Echo, and Nick's employer at the Peterson Institute is 0:19:53.720 --> 0:19:57.280 at at p I I E. Benchmark is produced by 0:19:57.320 --> 0:20:00.800 Tofu Foreheads. The head of Bloomberg Podcasts is chessca lev 0:20:01.119 --> 0:20:02.880 Thanks for listening, See you next time.