WEBVTT - Duncan Clark on US-China Tensions (Radio)

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<v Speaker 1>Media, China Cham and Duncan Clark joins me here on

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<v Speaker 1>the Singapore State at the New Economy Forum. I mean,

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<v Speaker 1>we've been listening there to the fact that Donald Trump

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<v Speaker 1>has formerly entered the U s presidential race and also

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<v Speaker 1>ed talking about China and Russia. We sort of thought

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<v Speaker 1>we might have an off framp between US China tentions

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<v Speaker 1>to with that meeting between presidents Biden and she. How

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<v Speaker 1>are you sort of landscaping the geopolitical landscape. Yeah, so

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<v Speaker 1>obviously the meeting didn't go badly in the sense that

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<v Speaker 1>it was cordial, but it doesn't really address the deeper issues.

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<v Speaker 1>It's maybe when you can call it some sort of botox,

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<v Speaker 1>if you will, for a situation where there's there's a

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<v Speaker 1>lot of a lot of pressure under the surface there

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<v Speaker 1>obviously from the technology war that you described, the trade war.

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<v Speaker 1>Interesting that you just mentioned if it's true that Trump

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<v Speaker 1>is formally declaring I mean this is was kicked off

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<v Speaker 1>really formerly by him, although Obama had, you know, ramped

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<v Speaker 1>up the pressure on China. But it's the one area

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<v Speaker 1>that the GOP and the Dems really agree on. It

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<v Speaker 1>is just maintaining pressure on China, so that won't change

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<v Speaker 1>either way. So it's it's an interesting thing. That's the

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<v Speaker 1>only thing that they can agree on at this China pressure. Yeah, absolutely,

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<v Speaker 1>but we're continuing to see the US China tech war

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<v Speaker 1>as well. It's kind of a matter of who's going

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<v Speaker 1>to blink first here too. It is I mean, you know,

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<v Speaker 1>we can talk about lose lose versus win win, which

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<v Speaker 1>perhaps we've lived in before. Um So, there's costs on

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<v Speaker 1>both sides for this. Uh So it's more of a

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<v Speaker 1>game of chicken in terms of who can maintain the pain.

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<v Speaker 1>And as we look at the semi conductor sector, we

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<v Speaker 1>see the pain ramping up over time for China. Of course,

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<v Speaker 1>it's also ramping up for US providers of capital, equipment

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<v Speaker 1>and other participants. But from a strategic standpoint in China

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<v Speaker 1>that's truly facing a big challenge. Sheeting Ping has clearly

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<v Speaker 1>enunciated his belief in indigenous innovation, the China's capacity to

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<v Speaker 1>innovate independently of the US and perhaps others, And so

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<v Speaker 1>that's the big bet. Will this bet payoff? Throwing lots

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<v Speaker 1>of money at the problem, will it be successful? There's

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<v Speaker 1>a lot of investor hope and optimism to the perhaps

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<v Speaker 1>the regulatory crackdown can potentially come to an air. What

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<v Speaker 1>is next then after the tech crackdown? And I guess,

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<v Speaker 1>how do we look at China tich right, And it's

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<v Speaker 1>perhaps instructives. Look at the property sectors. You've seen the

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<v Speaker 1>real estate developers have been hammered in China, uh and

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<v Speaker 1>seems like some easing over the last few days, extension

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<v Speaker 1>of certain deadlines of those policies. So perhaps that's precursor

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<v Speaker 1>to doing the same thing for tech, saying, you know,

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<v Speaker 1>the consequences of a downtown in the property sector, like

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<v Speaker 1>in the tech sector, is is pretty damaging, particularly when

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<v Speaker 1>you're maintaining the zero COVID or blanket overall, I kind

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<v Speaker 1>of make activity in China, So I think, you know,

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<v Speaker 1>we're probably the over the worst for the anti tech crackdown.

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<v Speaker 1>But the fundamental issue there remains, if they're private sector

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<v Speaker 1>tech companies in China, how does the government view them?

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<v Speaker 1>And we saw that famously with ant group the Ali

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<v Speaker 1>Baba spinoff two years ago without aborted I p O.

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<v Speaker 1>I think there is clear tension between the Communist Party

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<v Speaker 1>and the state on one hand, and these private sector

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<v Speaker 1>players getting too big if they can reach a new accommodation,

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<v Speaker 1>over control of data, over the sheer power of some

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<v Speaker 1>of these companies, which is a global problem. I mean,

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<v Speaker 1>look at tick Off, the debate about how powerful that is.

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<v Speaker 1>In China too, there's a debate about how big is

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<v Speaker 1>big tech, but it has a different flavor because of

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<v Speaker 1>the private sector element. China needs to figure out are

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<v Speaker 1>they going to allow private sector companies to become dominant

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<v Speaker 1>in certain years? If not, can they replace them? You

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<v Speaker 1>know you do? Sorry, excuse me, focus a quite closely

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<v Speaker 1>on Ali Barbera. I believe you have written a book

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<v Speaker 1>on Ali Baba as well. We know we're looking at

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<v Speaker 1>their earnings coming through tomorrow. Eleven eleven won't be reflected

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<v Speaker 1>in that not not a great shopping day for Ali Baba.

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<v Speaker 1>But but what happens to turn the consumer sentiment around here? Yeah,

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<v Speaker 1>so there's the number one thing is zero COVID. I

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<v Speaker 1>mean it is you know, if we see some maybe

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<v Speaker 1>Swiss Cheese approach to zero COVID. Now we're seeing certain governments,

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<v Speaker 1>local governments, not perhaps full the implementing, but we see uh,

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<v Speaker 1>you know, unrest. I think that this morning in Guangdo,

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<v Speaker 1>for example, where people are just fed up with us.

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<v Speaker 1>You know, I've been in and out of China on

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<v Speaker 1>and after the last two years. It is a painful

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<v Speaker 1>existence with the daily testing and the sort of uncertainty,

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<v Speaker 1>And it does seem there are signals now also reducing

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<v Speaker 1>quarantine for people coming in, you know, changing some of

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<v Speaker 1>the mechanics. Also, the sheer cost of maintaining the zero

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<v Speaker 1>COVID policy is stunning. I mean, the testing, the the

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<v Speaker 1>economic impact. So I think we're beginning to even though

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<v Speaker 1>they're maintaining the policy. I think we're gonna we're gonna

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<v Speaker 1>switch cheese our way out of this over time. Yeah,

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<v Speaker 1>it seems they're looking for an off ramp, But isn't

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<v Speaker 1>it when they're starting to slowly reduce some of those restrictions.

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<v Speaker 1>We've seen that twenty point plan as well. But when

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<v Speaker 1>you say you're going to unswervingly commit to COVID zero,

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<v Speaker 1>it's kind of hard to find that off roum. When

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<v Speaker 1>do you actually see a form reopening of China. Well,

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<v Speaker 1>some of it may be linked to vaccines, and again

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<v Speaker 1>this goes back to the indigenous innovation question. China has

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<v Speaker 1>been hoping that they can develop their own MR and

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<v Speaker 1>A vaccines from against state driven players rather than licensing

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<v Speaker 1>from same Madonna or Beyond Tech fiser as we've seen,

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<v Speaker 1>and again this anathema of having to work with private

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<v Speaker 1>sectors in China like Fu Soon, which had licensed Beyond

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<v Speaker 1>Tech for China, versus this dream of the state being

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<v Speaker 1>able to solve this problem. It's it's a question of

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<v Speaker 1>I had to say that really cliche, but face the

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<v Speaker 1>idea that a private sector of a foreign player is

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<v Speaker 1>going to solve this problem. I think that the costs

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<v Speaker 1>just mounting day by day, and so I think there'll

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<v Speaker 1>be some accommodation for some sort of licensing. There was

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<v Speaker 1>some discussion with the Chancellor Shortz's visit of some license

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<v Speaker 1>or some availability of vaccines to foreigners in China, but

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<v Speaker 1>that's the way out of this, I think formerly because

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<v Speaker 1>you obviously China is vulnerable otherwise, with an elderly population

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<v Speaker 1>with limited rural healthcare, they can't just open the gates

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<v Speaker 1>to COVID. When we look at when we look at

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<v Speaker 1>the steep slowdown in China though, I mean, there's so

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<v Speaker 1>many factors really affecting the geopolitical landscape. And we've been

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<v Speaker 1>talking about the war in Ukraine, We've been talking about

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<v Speaker 1>the increased pressure from Russia as well, and of course

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<v Speaker 1>as global inflation too. But does China's steep slowdown is

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<v Speaker 1>that one of the biggest impacts to the overall health

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<v Speaker 1>of the global economy. Well, strangely, if you think about it,

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<v Speaker 1>the zero COVID is actually repressing consumption and we have

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<v Speaker 1>more deflation in China. So one could argue that actually,

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<v Speaker 1>by China going out of zero COVID you would actually

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<v Speaker 1>perhaps see some inflationary impressures which would worsen the global

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<v Speaker 1>inflationary pictures. So at the moment, China is just a

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<v Speaker 1>very isolated situation. Reintegrating with the global economy is going

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<v Speaker 1>to take time, and it conferences like this, it's quite

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<v Speaker 1>apparent that the Chinese delicates are here, are are kind

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<v Speaker 1>of witnessing the fact that Chinese is not really very

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<v Speaker 1>present in terms of lots of debates in business investment,

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<v Speaker 1>investment flows beginning to go elsewhere, Supply chains are reforming

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<v Speaker 1>around China, and you know, the question is it's trying

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<v Speaker 1>to really fully committed to this you know, isolation or

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<v Speaker 1>to this separation of the domestic economy and the international economy.

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<v Speaker 1>And if they're not, they need to start beginning to

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<v Speaker 1>make moves. I think they're beginning to look at opening up.

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<v Speaker 1>It's going to take time. In twelve months time a

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<v Speaker 1>US China relations better or worse. And does that is

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<v Speaker 1>that impacted by whether or not we do see Donald

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<v Speaker 1>Trump as the Republican candidate. Yeah, I think the Trump

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<v Speaker 1>that's an interesting question, the analysis on that. I mean,

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<v Speaker 1>I think obviously the strong performance of the Democrats just

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<v Speaker 1>recently probably came as a bit of surprise to the

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<v Speaker 1>Chinese authorities, as did too many people that that going

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<v Speaker 1>into Bali, Biden is a much stronger player than they

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<v Speaker 1>had expected, potentially going beyond two years. Of course, they're

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<v Speaker 1>making that calculation. So a year from now, you know,

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<v Speaker 1>we're still going to be a year out from the presidentials.

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<v Speaker 1>It's still going to be unclear. I mean, I guess

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<v Speaker 1>the biggest factor will be events. Does anything happen with

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<v Speaker 1>regarding Taiwan, either statements on the Times government side or

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<v Speaker 1>the US side that or an accident that that precipitates

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<v Speaker 1>a crisis. Um, the hope is that this meeting you

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<v Speaker 1>know yesterday is reduced the temperature of it, but it

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<v Speaker 1>can easily flare up again. So it's still a very

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<v Speaker 1>precarious situation. Indeed, we thank you so much for your time.

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<v Speaker 1>Vid A China Chairman Duncan Clark with me here at

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<v Speaker 1>the Bloomberg New Economy Forum in Singapore,