Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. When the world is going haywire,
Speaker 1: especially when it comes to trade, and especially when it
Speaker 1: comes to the United States and China, what do we need,
Speaker 1: Paul Sweeney? We need a double shot of Stephan Sea Like,
Speaker 1: that's what we need. Partner for Bridge Park Advisors and
Speaker 1: of course former Under Secretary of Commerce for International Trade
Speaker 1: at the Department of Commerce during the Obama administration, joining
Speaker 1: us on the phone from Long Island. Stephen, how the
Speaker 1: heck are you? It's been a while? Get as I
Speaker 1: am fine, Jason. Good to hear your voice. Um, and
Speaker 1: please pass on my regards to Carol, and good to
Speaker 1: talk to you Paul as well. I will I will
Speaker 1: certainly do that. Thanks for joining us. So, UM, I
Speaker 1: gotta ask you. I mean, since we last talked, which
Speaker 1: was probably a month six weeks ago, you know, U
Speaker 1: s China relations I feel like have taken a turn
Speaker 1: and a turn and a turn all down word in
Speaker 1: many ways. Where are we right now? Well? I think
Speaker 1: you're quite right. I think the relationship with China needs
Speaker 1: to be described as one under increasing dress with the
Speaker 1: dynamic of the relationship only getting more challenging. And you know,
Speaker 1: in our conversations in the past, we were largely focused on,
Speaker 1: you know, the trade spac that we had with China,
Speaker 1: which the current administration largely viewed in the context of
Speaker 1: our bilateral trade deficit, primarily and manufactured goods. But in
Speaker 1: the recent weeks we've seen that really become or that
Speaker 1: conflict become expanded and take on a number of different fronts,
Speaker 1: and the technology war has come really into focus, from
Speaker 1: more than fiber theft and intellectual property issues to just
Speaker 1: last week, as you know, the FCC labeled z t
Speaker 1: E and Huaweiha security threats. And now we're also faced
Speaker 1: with a number of ideological UM issues coming out of
Speaker 1: China and those are being manifest in the recently imposed
Speaker 1: Hong Kong's security laws, and of course UM the issue
Speaker 1: with the weaker's UH in China and our recently just
Speaker 1: passed weaker Weaker Human Rights Policy Act which was signed
Speaker 1: into UH signed into law. So UM, not only is
Speaker 1: it deteriorating, Jason, I think it is becoming more complex
Speaker 1: and the tensions are taking on a number of different fronts.
Speaker 1: So Stephan I was talking about this very topic earlier
Speaker 1: this morning, and the guests we had on challenge the
Speaker 1: premise I had, which was President Trump was primarily responsible
Speaker 1: for this increasing tension between the two countries with trade
Speaker 1: war and tariffs and rhetoric. And this guest pushed back
Speaker 1: and said, no, is actually President She in his opinion,
Speaker 1: that was kind of instigating, uh, the challenging tensions between
Speaker 1: the US and China by China asserting more aggressively. It's
Speaker 1: pre is economically, militarily, and not not just in the
Speaker 1: region but globally. How do you view that how we
Speaker 1: got here? Is Is there any blame to be put
Speaker 1: around here? Is it equally shared? Paul, I think it's
Speaker 1: a mistake to ascribe blame to any individual or any leader.
Speaker 1: And I think this really is a function of certain
Speaker 1: structural issues that are much more important than any one individual.
Speaker 1: And so if you look at the trade if you
Speaker 1: look at the trade issue, it is primarily a function
Speaker 1: of the fact that China, after after being accepted into
Speaker 1: the World Trade Organization, still remains a state, a largely
Speaker 1: state controlled economy UM and has limited market access for
Speaker 1: foreign companies and supports their large portion of their economy
Speaker 1: UM from the state one Two is if you look
Speaker 1: at the technology issues, China in fact has very little
Speaker 1: um fla xability here as they are going to have
Speaker 1: cannot rely on the US and the West for technology
Speaker 1: if they're going to move up the value chain and
Speaker 1: avoid this so called middle income trap, if they want
Speaker 1: to continue to grow wealth and prosperity in their country.
Speaker 1: And and as it relates to the human rights issues, boy,
Speaker 1: you know, the Communist Party, the Chinese Communist Party has
Speaker 1: never expressed a real interest in human rights. And we've
Speaker 1: seen that, you know, for generations and as recently as
Speaker 1: Tianamen Square. And so none of that should come as
Speaker 1: a surprise to us. So I think all of this
Speaker 1: predates g predates Trump, and is fundamentally a reflection of
Speaker 1: two different systems that are largely incompatible. So, Stephen Hong Kong,
Speaker 1: how big of a deal is that? Both in economic
Speaker 1: terms and financial terms, especially when it comes to our
Speaker 1: core audience, as you know, being being Wall Street, but
Speaker 1: also as a marker in the evolution in of China
Speaker 1: US relations. You know, I think China would not be
Speaker 1: behaving Lee would not be behaving as aggressively with Hong
Speaker 1: Kong as they have been if they didn't believe, certainly
Speaker 1: from a Chinese perspective, that the economic fallout would be
Speaker 1: limited because they do look at the management of their
Speaker 1: economy as a core competency of the Chinese Communist Party,
Speaker 1: and obviously they're facing similar sort of pressures coming out
Speaker 1: of COVID. So UM, I don't think they view these
Speaker 1: Hong Kong issues through an economic lens as being um
Speaker 1: highly problematic. I think from our audio or your audience
Speaker 1: is um perspective. You know, boy, you know this was inevitable. Um.
Speaker 1: We knew what was going to happen, We just didn't
Speaker 1: know it was going to necessarily happen this quickly. But
Speaker 1: I think more than anything, it points out that the
Speaker 1: Chinese view about the rule of law, because don't forget
Speaker 1: they had an agreement um that they enterde um uh
Speaker 1: that this exactly, this sort of thing exactly wouldn't happen.
Speaker 1: But their their view of about these sorts of agreements,
Speaker 1: I think is not going to be particularly vertical, and
Speaker 1: they are going to continue to behave in a way
Speaker 1: that is in their narrow best interests. So Stephan, in
Speaker 1: the last block, we're chatting about China as it relates
Speaker 1: to rising tensions with the US trade tariffs. Hong Kong.
Speaker 1: I'm gonna talk about the economics of China right now.
Speaker 1: Obviously the days of double digit growth are gone. I
Speaker 1: think the printed number that they want you to buy
Speaker 1: into is a six kind of GDP growth. Really give
Speaker 1: us a sense of where you think China is over
Speaker 1: the next couple of years in terms of its ability
Speaker 1: to grow its economy. Well, look, China is clearly slowing,
Speaker 1: but they were slowing from you know, a very rapid
Speaker 1: uh growth and they will continue to be uh, you know,
Speaker 1: the engine of Asia, and so you know, I do
Speaker 1: think the most interesting question for China is going to
Speaker 1: be their ability to move from a manufacturing, infrastructure based
Speaker 1: economy to a more consumer based economy, which is um
Speaker 1: you know, and has been challenging for a number of
Speaker 1: developing economies. But that will be the key and clearly
Speaker 1: what the Chinese Communist Party is focusing on to get
Speaker 1: to the next leg of growth. So Stephan, I gotta
Speaker 1: talk deal making because we had uber Um do a deal.
Speaker 1: We had, you know, Mr Buffett pulls something off. We've
Speaker 1: had some activity. When it comes to M and A,
Speaker 1: you are ultimately a deal maker. How does it feel
Speaker 1: out there right now? You know, Jason, it's it's it's
Speaker 1: muted for sure. I think deal activity is likely to
Speaker 1: be concentrated in certain sectors, and those sectors are largely
Speaker 1: going to um align with those sectors that are doing well.
Speaker 1: You know, right before you had me back, one of
Speaker 1: your commentators is talking about record hizes in techno oology
Speaker 1: shares and in the nasdack. So you could imagine, whether
Speaker 1: it's Uber and Postmates or other similar companies, that there
Speaker 1: will be enthusiasm for deals in those sectors. But I
Speaker 1: don't think you're going to see, you know, broad baking,
Speaker 1: broad based deal making activity across the more cyclical part
Speaker 1: of parts of our economy. Stuff. And I know you've
Speaker 1: spent some time in your career on the TMT space
Speaker 1: technology and media telecommunications. Boy, we're seeing an industry that's
Speaker 1: just been disrupted the traditional media business like you've never seen,
Speaker 1: you know, I guess, culminating in the Walt Disney company
Speaker 1: buying out most of Rupert Murdoch's news corps. Do you
Speaker 1: ever expect the big technology companies Apple, Google, Facebook to
Speaker 1: ever jump into the deep end of the pool and
Speaker 1: get into the content side of the business. Um. You know,
Speaker 1: boy who knows you know, those particular buyers have unlimited
Speaker 1: capital u uh um. You know, those sixpanies that you're
Speaker 1: referencing make up something like the overall overall market cap
Speaker 1: of our entire equity markets. And a lot of those
Speaker 1: traditional media companies in certain sectors are obviously facing very
Speaker 1: challenging UM times, and so you could imagine um, you know,
Speaker 1: real deal making activity in that in in in some
Speaker 1: of those areas, as as those companies look to take
Speaker 1: advantage of depressed valuations across the sector. And how's Wall
Speaker 1: Street feeling right now? Stephen? Just before we let you go,
Speaker 1: I mean beyond just deal making, you talked to a
Speaker 1: lot of very senior people on Wall Street. We're talking
Speaker 1: about kind of going back to work ish. Um, what's
Speaker 1: sort of the mood around the Wall Street community? You know,
Speaker 1: I think it's it's pretty much mirrors what's happening in
Speaker 1: the overall economy, which is a mood of uncertainty and
Speaker 1: some instability. UM. I think people really don't know what
Speaker 1: the new normal is going to be. I think to
Speaker 1: some degree, because the markets have outperformed the real economy,
Speaker 1: there's um some if not enthusiasm on Wall Street. There's
Speaker 1: there's there's certainly not UM panic. Uh. You know, the
Speaker 1: fixed income markets have been highly receptive to capital raising
Speaker 1: throughout this coronavirus pandemic, even in those industries that are
Speaker 1: facing some significant challenges. And so I think in terms
Speaker 1: of Wall Street UM people are expecting less m and
Speaker 1: a dealmaking activity, but a pretty robust financing calendar, both
Speaker 1: on the equity and on the fixed income side to
Speaker 1: keep folks busy. Yeah, yeah, makes sense. All right. Seven.
Speaker 1: Great to catch up with you. Always a treat. Stephan
Speaker 1: Celia's managing partner for Bridge Park Advisors, former Under Secretary
Speaker 1: of Commerce for International Trade at the Department of Commerce
Speaker 1: during the Obama administration. He joined us on the phone
Speaker 1: from Long Island,