WEBVTT - Selig on U.S.-China Trade

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Jason

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<v Speaker 1>Kelly on Bloomberg Radio. When the world is going haywire,

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<v Speaker 1>especially when it comes to trade, and especially when it

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<v Speaker 1>comes to the United States and China, what do we need,

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<v Speaker 1>Paul Sweeney? We need a double shot of Stephan Sea Like,

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<v Speaker 1>that's what we need. Partner for Bridge Park Advisors and

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<v Speaker 1>of course former Under Secretary of Commerce for International Trade

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<v Speaker 1>at the Department of Commerce during the Obama administration, joining

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<v Speaker 1>us on the phone from Long Island. Stephen, how the

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<v Speaker 1>heck are you? It's been a while? Get as I

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<v Speaker 1>am fine, Jason. Good to hear your voice. Um, and

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<v Speaker 1>please pass on my regards to Carol, and good to

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<v Speaker 1>talk to you Paul as well. I will I will

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<v Speaker 1>certainly do that. Thanks for joining us. So, UM, I

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<v Speaker 1>gotta ask you. I mean, since we last talked, which

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<v Speaker 1>was probably a month six weeks ago, you know, U

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<v Speaker 1>s China relations I feel like have taken a turn

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<v Speaker 1>and a turn and a turn all down word in

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<v Speaker 1>many ways. Where are we right now? Well? I think

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<v Speaker 1>you're quite right. I think the relationship with China needs

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<v Speaker 1>to be described as one under increasing dress with the

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<v Speaker 1>dynamic of the relationship only getting more challenging. And you know,

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<v Speaker 1>in our conversations in the past, we were largely focused on,

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<v Speaker 1>you know, the trade spac that we had with China,

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<v Speaker 1>which the current administration largely viewed in the context of

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<v Speaker 1>our bilateral trade deficit, primarily and manufactured goods. But in

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<v Speaker 1>the recent weeks we've seen that really become or that

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<v Speaker 1>conflict become expanded and take on a number of different fronts,

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<v Speaker 1>and the technology war has come really into focus, from

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<v Speaker 1>more than fiber theft and intellectual property issues to just

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<v Speaker 1>last week, as you know, the FCC labeled z t

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<v Speaker 1>E and Huaweiha security threats. And now we're also faced

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<v Speaker 1>with a number of ideological UM issues coming out of

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<v Speaker 1>China and those are being manifest in the recently imposed

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<v Speaker 1>Hong Kong's security laws, and of course UM the issue

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<v Speaker 1>with the weaker's UH in China and our recently just

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<v Speaker 1>passed weaker Weaker Human Rights Policy Act which was signed

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<v Speaker 1>into UH signed into law. So UM, not only is

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<v Speaker 1>it deteriorating, Jason, I think it is becoming more complex

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<v Speaker 1>and the tensions are taking on a number of different fronts.

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<v Speaker 1>So Stephan I was talking about this very topic earlier

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<v Speaker 1>this morning, and the guests we had on challenge the

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<v Speaker 1>premise I had, which was President Trump was primarily responsible

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<v Speaker 1>for this increasing tension between the two countries with trade

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<v Speaker 1>war and tariffs and rhetoric. And this guest pushed back

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<v Speaker 1>and said, no, is actually President She in his opinion,

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<v Speaker 1>that was kind of instigating, uh, the challenging tensions between

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<v Speaker 1>the US and China by China asserting more aggressively. It's

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<v Speaker 1>pre is economically, militarily, and not not just in the

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<v Speaker 1>region but globally. How do you view that how we

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<v Speaker 1>got here? Is Is there any blame to be put

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<v Speaker 1>around here? Is it equally shared? Paul, I think it's

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<v Speaker 1>a mistake to ascribe blame to any individual or any leader.

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<v Speaker 1>And I think this really is a function of certain

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<v Speaker 1>structural issues that are much more important than any one individual.

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<v Speaker 1>And so if you look at the trade if you

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<v Speaker 1>look at the trade issue, it is primarily a function

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<v Speaker 1>of the fact that China, after after being accepted into

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<v Speaker 1>the World Trade Organization, still remains a state, a largely

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<v Speaker 1>state controlled economy UM and has limited market access for

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<v Speaker 1>foreign companies and supports their large portion of their economy

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<v Speaker 1>UM from the state one Two is if you look

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<v Speaker 1>at the technology issues, China in fact has very little

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<v Speaker 1>um fla xability here as they are going to have

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<v Speaker 1>cannot rely on the US and the West for technology

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<v Speaker 1>if they're going to move up the value chain and

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<v Speaker 1>avoid this so called middle income trap, if they want

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<v Speaker 1>to continue to grow wealth and prosperity in their country.

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<v Speaker 1>And and as it relates to the human rights issues, boy,

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<v Speaker 1>you know, the Communist Party, the Chinese Communist Party has

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<v Speaker 1>never expressed a real interest in human rights. And we've

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<v Speaker 1>seen that, you know, for generations and as recently as

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<v Speaker 1>Tianamen Square. And so none of that should come as

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<v Speaker 1>a surprise to us. So I think all of this

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<v Speaker 1>predates g predates Trump, and is fundamentally a reflection of

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<v Speaker 1>two different systems that are largely incompatible. So, Stephen Hong Kong,

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<v Speaker 1>how big of a deal is that? Both in economic

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<v Speaker 1>terms and financial terms, especially when it comes to our

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<v Speaker 1>core audience, as you know, being being Wall Street, but

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<v Speaker 1>also as a marker in the evolution in of China

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<v Speaker 1>US relations. You know, I think China would not be

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<v Speaker 1>behaving Lee would not be behaving as aggressively with Hong

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<v Speaker 1>Kong as they have been if they didn't believe, certainly

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<v Speaker 1>from a Chinese perspective, that the economic fallout would be

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<v Speaker 1>limited because they do look at the management of their

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<v Speaker 1>economy as a core competency of the Chinese Communist Party,

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<v Speaker 1>and obviously they're facing similar sort of pressures coming out

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<v Speaker 1>of COVID. So UM, I don't think they view these

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<v Speaker 1>Hong Kong issues through an economic lens as being um

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<v Speaker 1>highly problematic. I think from our audio or your audience

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<v Speaker 1>is um perspective. You know, boy, you know this was inevitable. Um.

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<v Speaker 1>We knew what was going to happen, We just didn't

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<v Speaker 1>know it was going to necessarily happen this quickly. But

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<v Speaker 1>I think more than anything, it points out that the

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<v Speaker 1>Chinese view about the rule of law, because don't forget

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<v Speaker 1>they had an agreement um that they enterde um uh

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<v Speaker 1>that this exactly, this sort of thing exactly wouldn't happen.

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<v Speaker 1>But their their view of about these sorts of agreements,

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<v Speaker 1>I think is not going to be particularly vertical, and

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<v Speaker 1>they are going to continue to behave in a way

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<v Speaker 1>that is in their narrow best interests. So Stephan, in

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<v Speaker 1>the last block, we're chatting about China as it relates

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<v Speaker 1>to rising tensions with the US trade tariffs. Hong Kong.

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<v Speaker 1>I'm gonna talk about the economics of China right now.

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<v Speaker 1>Obviously the days of double digit growth are gone. I

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<v Speaker 1>think the printed number that they want you to buy

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<v Speaker 1>into is a six kind of GDP growth. Really give

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<v Speaker 1>us a sense of where you think China is over

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<v Speaker 1>the next couple of years in terms of its ability

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<v Speaker 1>to grow its economy. Well, look, China is clearly slowing,

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<v Speaker 1>but they were slowing from you know, a very rapid

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<v Speaker 1>uh growth and they will continue to be uh, you know,

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<v Speaker 1>the engine of Asia, and so you know, I do

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<v Speaker 1>think the most interesting question for China is going to

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<v Speaker 1>be their ability to move from a manufacturing, infrastructure based

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<v Speaker 1>economy to a more consumer based economy, which is um

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<v Speaker 1>you know, and has been challenging for a number of

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<v Speaker 1>developing economies. But that will be the key and clearly

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<v Speaker 1>what the Chinese Communist Party is focusing on to get

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<v Speaker 1>to the next leg of growth. So Stephan, I gotta

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<v Speaker 1>talk deal making because we had uber Um do a deal.

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<v Speaker 1>We had, you know, Mr Buffett pulls something off. We've

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<v Speaker 1>had some activity. When it comes to M and A,

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<v Speaker 1>you are ultimately a deal maker. How does it feel

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<v Speaker 1>out there right now? You know, Jason, it's it's it's

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<v Speaker 1>muted for sure. I think deal activity is likely to

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<v Speaker 1>be concentrated in certain sectors, and those sectors are largely

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<v Speaker 1>going to um align with those sectors that are doing well.

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<v Speaker 1>You know, right before you had me back, one of

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<v Speaker 1>your commentators is talking about record hizes in techno oology

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<v Speaker 1>shares and in the nasdack. So you could imagine, whether

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<v Speaker 1>it's Uber and Postmates or other similar companies, that there

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<v Speaker 1>will be enthusiasm for deals in those sectors. But I

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<v Speaker 1>don't think you're going to see, you know, broad baking,

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<v Speaker 1>broad based deal making activity across the more cyclical part

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<v Speaker 1>of parts of our economy. Stuff. And I know you've

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<v Speaker 1>spent some time in your career on the TMT space

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<v Speaker 1>technology and media telecommunications. Boy, we're seeing an industry that's

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<v Speaker 1>just been disrupted the traditional media business like you've never seen,

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<v Speaker 1>you know, I guess, culminating in the Walt Disney company

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<v Speaker 1>buying out most of Rupert Murdoch's news corps. Do you

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<v Speaker 1>ever expect the big technology companies Apple, Google, Facebook to

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<v Speaker 1>ever jump into the deep end of the pool and

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<v Speaker 1>get into the content side of the business. Um. You know,

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<v Speaker 1>boy who knows you know, those particular buyers have unlimited

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<v Speaker 1>capital u uh um. You know, those sixpanies that you're

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<v Speaker 1>referencing make up something like the overall overall market cap

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<v Speaker 1>of our entire equity markets. And a lot of those

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<v Speaker 1>traditional media companies in certain sectors are obviously facing very

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<v Speaker 1>challenging UM times, and so you could imagine um, you know,

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<v Speaker 1>real deal making activity in that in in in some

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<v Speaker 1>of those areas, as as those companies look to take

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<v Speaker 1>advantage of depressed valuations across the sector. And how's Wall

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<v Speaker 1>Street feeling right now? Stephen? Just before we let you go,

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<v Speaker 1>I mean beyond just deal making, you talked to a

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<v Speaker 1>lot of very senior people on Wall Street. We're talking

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<v Speaker 1>about kind of going back to work ish. Um, what's

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<v Speaker 1>sort of the mood around the Wall Street community? You know,

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<v Speaker 1>I think it's it's pretty much mirrors what's happening in

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<v Speaker 1>the overall economy, which is a mood of uncertainty and

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<v Speaker 1>some instability. UM. I think people really don't know what

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<v Speaker 1>the new normal is going to be. I think to

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<v Speaker 1>some degree, because the markets have outperformed the real economy,

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<v Speaker 1>there's um some if not enthusiasm on Wall Street. There's

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<v Speaker 1>there's there's certainly not UM panic. Uh. You know, the

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<v Speaker 1>fixed income markets have been highly receptive to capital raising

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<v Speaker 1>throughout this coronavirus pandemic, even in those industries that are

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<v Speaker 1>facing some significant challenges. And so I think in terms

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<v Speaker 1>of Wall Street UM people are expecting less m and

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<v Speaker 1>a dealmaking activity, but a pretty robust financing calendar, both

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<v Speaker 1>on the equity and on the fixed income side to

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<v Speaker 1>keep folks busy. Yeah, yeah, makes sense. All right. Seven.

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<v Speaker 1>Great to catch up with you. Always a treat. Stephan

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<v Speaker 1>Celia's managing partner for Bridge Park Advisors, former Under Secretary

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<v Speaker 1>of Commerce for International Trade at the Department of Commerce

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<v Speaker 1>during the Obama administration. He joined us on the phone

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<v Speaker 1>from Long Island,