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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,

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Speaker 2: and this is Trumppanomics, the podcast that looks at the

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Speaker 2: economic world of Donald Trump, how he's shaping and shaking

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Speaker 2: the global economy and what on earth is going to

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Speaker 2: happen next. Well, it's the afternoon of Wednesday, the first

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Speaker 2: of April in the UK, and we're well into the

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Speaker 2: fifth week of a conflict in Iran that very few

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Speaker 2: of America's allies wanted or even now fully understand. They are, though,

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Speaker 2: dealing with the economic consequences, biggest of which being energy

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Speaker 2: prices and an Iranian stranglehold over the stretch ofform moves.

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Speaker 2: Last week, we looked at this crisis as an exercise

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Speaker 2: in economic state craft, one in which, against the odds,

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Speaker 2: Iran seemed to be doing rather well. In this episode,

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Speaker 2: we're looking east to consider the view of the crisis

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Speaker 2: from Beijing. Like many, the Chinese government would almost certainly

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Speaker 2: prefer the conflict hadn't started. Brings instability to a region

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Speaker 2: that's increasingly important and inflicts high oil and gas prices

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Speaker 2: on an economy that relies on significant energy imports in

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Speaker 2: a context of a still fragile domestic recovery. And yet,

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Speaker 2: and yet, the fact that Donald Trump is once again

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Speaker 2: demonstrating to the world his tendency to inflict wildly unpredictable

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Speaker 2: and damaging swings in policy on his allies surely also

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Speaker 2: provides something of a strategic opportunity for China. It's leaders

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Speaker 2: liking to say these days that it's China that is

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Speaker 2: the stable and predictable world power. Well, discussing this, we

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Speaker 2: have first making her Trump and Noomic's debut, Fran Wang.

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Speaker 2: Fran is where in London for a few weeks, but

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Speaker 2: in her normal life she's a lynchpin of our China

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Speaker 2: Economy and government team in Beijing, having covered China's economy

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Speaker 2: for nearly twenty years. Fran, great to have you here,

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Speaker 2: Thanks for having me and from our Washington, DC bureau

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Speaker 2: Adam for our Adam is the senior geoeconomics analyst for

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Speaker 2: Asia Pacific Bloomberg Economics, and he previously served as the

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Speaker 2: senior advisor to Vice President Kamala Harris on the Indo

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Speaker 2: Pacific space and Intelligence. He also has written a piece

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Speaker 2: for US on how the war in Iran is changing

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Speaker 2: the relationship between the US and China. We had you

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Speaker 2: on Adam last when we discussed the Trump Administration's National

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Speaker 2: Security Strategy document back in December of twenty twenty five.

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Speaker 2: I feel like we've had several national security strategies since then.

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Speaker 2: But welcome back to the show.

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Speaker 1: Great to be here. It seems that things have certainly

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Speaker 1: evolved since then.

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Speaker 2: Evolved is one word for it. Yes, we'll talk about

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Speaker 2: the economy sort of traditional trumponomics fashion. We're going to

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Speaker 2: be interweaving the economy and the geopolitics, and we will

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Speaker 2: get to the economy in a minute. But Adam, you

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Speaker 2: have written a piece for US overnight, the conclusion of

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Speaker 2: which I thought set the stage rather well. You say

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Speaker 2: the risk of Beijing from a prolonged Middle East war

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Speaker 2: are real and a near term off ramp remains far

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Speaker 2: from certain for now, though China has the opportunity to

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Speaker 2: leverage the situation to its benefit. So just give us

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Speaker 2: a sense of how you reach that conclusion, and then

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Speaker 2: we'll do some unpacking.

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Speaker 1: Of course, so I think you've set it up well

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Speaker 1: on the intro. There's no doubt that Beijing does not

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Speaker 1: look kindly on the instability growing in the region right now.

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Speaker 1: While they certainly have i'm sure some happiness and seeing

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Speaker 1: the United States strategically dragged into another war in the

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Speaker 1: Middle East that distracts them potentially from the Indo Pacific,

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Speaker 1: as we'll talk a little bit about more, they're also

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Speaker 1: just very worried about the long term potential for the

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Speaker 1: Gulf to remain unstable, for oil supplies to be infrequent,

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Speaker 1: and to put stress on the economy at a time

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Speaker 1: when things are positive on the export side but still

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Speaker 1: struggling domestically, when with consumption not reaching the levels that

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Speaker 1: they need to maintain the demand necessary for the amount

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Speaker 1: of production they're doing internally. But at the same time,

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Speaker 1: there's no doubt that there are real opportunities for Beijing

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Speaker 1: in this moment, and we can kind of look at

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Speaker 1: that through three different lenses. The first is diplomatic. China

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Speaker 1: has spent a significant amount of effort and breath pushing

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Speaker 1: a narrative since Trump came to office that it is

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Speaker 1: the United States, not China, that is bringing instability to

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Speaker 1: the world, and that China is the real protector of

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Speaker 1: the rules based international order and even the United Nations,

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Speaker 1: and turning the narrative that was so persistent under pass administrations,

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Speaker 1: particularly the Biden administration, on its head. And while certainly

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Speaker 1: I think most of the world has the perspective to

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Speaker 1: realize that there is a lot of hypocrisy potentially and

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Speaker 1: that those arguments from Beijing, the reality is that the

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Speaker 1: actions of the United States has taken since President Trump

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Speaker 1: came to office, starting obviously with the Liberation Day tariffs,

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Speaker 1: moving towards the eventual bombing of Iran alongside Israel in June,

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Speaker 1: then of course the midnight raid to seize Nicholas Maduro

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Speaker 1: f of Venezuela, and now this ongoing four plus week

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Speaker 1: war in Iran. There is certainly appetite to accept this

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Speaker 1: narrative in a way that there wasn't before, particularly among

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Speaker 1: countries that are feeling the real pain of this instability

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Speaker 1: and uncertainty. At the same time, diplomatically, China historically does

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Speaker 1: not take particular interest in engaging in negotiations or trying

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Speaker 1: to lead piecework around the world. But here there's this

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Speaker 1: rare opening for them to potentially drastically increase their role

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Speaker 1: in the Middle East and their relations with key partners,

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Speaker 1: and that comes from a couple main drivers. The first

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Speaker 1: being that they're one of the unique countries on this

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Speaker 1: planet that have positive relations with Tehran and the Gulf

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Speaker 1: built around a massive economic relationship with Iran as their

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Speaker 1: primary economic conduit and partner, which is even dwarfed by

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Speaker 1: the relations with the Gulf that obviously relies heavily on

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Speaker 1: Gulf oil exports, but also a lot of economic trade.

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Speaker 1: And as a result, given the fact that the United

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Speaker 1: States is now considering ending the war without addressing the

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Speaker 1: flow of oil through the Strait of Hormuz and Iran's

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Speaker 1: control of that, there is this potential for Iran to

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Speaker 1: emerge as an intermediary negotiator to try and reopen the strait,

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Speaker 1: and that's not only because of those ties, but also

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Speaker 1: the simple reality that they are the largest purchaser of

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Speaker 1: the oil coming through the strait itself. Obviously, there's a

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Speaker 1: lot left to determine there and chin It may not

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Speaker 1: take that opportunity, but they certainly could more traditionally, though,

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Speaker 1: there is a simple numbers problem here for the United States.

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Speaker 1: The US has expended a huge amount of its most

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Speaker 1: advanced munitions in this conflict and continues to on a

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Speaker 1: day to day basis, and the reality is that those

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Speaker 1: long range missiles like Tomahawk cruise missiles and those defensive

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Speaker 1: missiles like Patriot interceptors are essential for any sort of

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Speaker 1: Indo Pacific contingency, whether that be the United States trying

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Speaker 1: to protect Taiwan or act in protection of the Philippines

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Speaker 1: and the South China Sea contingency, and all of that

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Speaker 1: leaves China in the mid term in a much better position,

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Speaker 1: potentially militarily. The other part of that, too, is that

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Speaker 1: we've seen a degradation in US assets through this conflict.

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Speaker 1: We saw the loss of a command control aircraft called

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Speaker 1: an a wax over the weekend, a strike that demonstrated

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Speaker 1: some support that Iran maybe getting from countries like Russia.

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Speaker 1: But nonetheless, the United States has few of these capabilities

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Speaker 1: left in the world, and while it is certainly working

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Speaker 1: to reconstitute them, those are years away, and as this

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Speaker 1: war is prolonged, we may see the additional losses that

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Speaker 1: further undermined its strategic position and its ability to enact

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Speaker 1: potentially its military plans in the Pacific. The last part

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Speaker 1: of this, I think we shouldn't forget is simply watching

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Speaker 1: and learning from what the United States is doing. I

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Speaker 1: think It's probably not lost to most people that this

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Speaker 1: is the largest military operation the United States has undertaken

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Speaker 1: arguably since the two thousand and three invasion of Iraq,

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Speaker 1: and a lot has changed since two thousand and three

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Speaker 1: in terms of the way of war and the way

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Speaker 1: the United States plans to fight a war. And so

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Speaker 1: here China is both I'm sure, concerned by the effectiveness

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Speaker 1: of US capabilities, but also learning from what they've seen

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Speaker 1: so far and taking the opportunity to see how the

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Speaker 1: US is integrating drones, new missile systems, and its air

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Speaker 1: power and naval power in a modern conventional fight. And

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Speaker 1: I want to be clear, obviously a fight in the

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Speaker 1: Indo Pacific, particularly over Taiwan, would have a very different character,

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Speaker 1: but the tools would be the same, and there's much

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Speaker 1: to be taken from this, and those who follow the

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Speaker 1: know China actually built its modern military very much off

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Speaker 1: of the lessons of the US invasion of Iraq in

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Speaker 1: their early nineties and Desert Storm, and so here's another

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Speaker 1: opportunity for them to learn and grow and be more

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Speaker 1: effective in any sort of contingency. Not to belabor this

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Speaker 1: too much is simply economic. Is the reality that China

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Speaker 1: has positioned itself through its massive growth in green energy,

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Speaker 1: its own domestic energy industry, and its reserves of oil

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Speaker 1: that is brought in over the last several years to

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Speaker 1: be able to weather this storm, and not only weather

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Speaker 1: the short term storm, but potentially serve as a gas

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Speaker 1: station for other parts of Asia. And we're starting to

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Speaker 1: see that already with these small but important deliveries of

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Speaker 1: key fuel stocks to the Philippines and Vietnam, and potentially

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Speaker 1: more to come, building on goodwill, highlighting the unique role

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Speaker 1: China can play as a stabilizing influence in the region

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Speaker 1: and demonstrating that China is a country that can be

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Speaker 1: prepared and can prosper through these types of crises. The

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Speaker 1: repercussions from this war are extreme. There is no doubt

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Speaker 1: that countries are going to have to rethink their energy

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Speaker 1: security and their China also stands to gain the China

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Speaker 1: has become by far the largest producer of green and

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Speaker 1: renewable energy technology in the world, and obviously the most capable,

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Speaker 1: it seems and commercially viable source of electric vehicles, both

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Speaker 1: of which are going to be in high demand as countries,

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Speaker 1: particularly in Southeast Asia and Africa, seek to insulate themselves

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Speaker 1: from further crises.

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Speaker 2: Well, that's the fantastic survey. Thanks Adam. And actually, and

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Speaker 2: you've also taken us a little bit onto the economy.

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Speaker 2: We're going to touch on a few things and sort

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Speaker 2: of go deeper into the economy. But a few things

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Speaker 2: that Adam mentioned there it's worth remembering since we haven't

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Speaker 2: talked about the Chinese economy for a while on this show.

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Speaker 2: The basic state of China's growth coming into this year,

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Speaker 2: coming into this crisis, I mean it's recovering, but still

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Speaker 2: quite subject to deflation and excess supply is still very

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Speaker 2: dependent on exports. What's the basic state of the economy.

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Speaker 3: Yeah, the economy has been recovering since it reopened from

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Speaker 3: COVID zero four years ago now or three to four

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Speaker 3: years ago now. However, the recovery has always been like

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Speaker 3: two speed, with production staying very strong but consumption struggling

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Speaker 3: to pick up. And the key reason why production has

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Speaker 3: been strong is because of exports, and exports contributed to

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Speaker 3: nearly a third of GDP growth last year, which was

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Speaker 3: the highest since nineteen ninety seven. So exports have been

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Speaker 3: a key support for China's growth, especially if you think

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Speaker 3: about how long deflation has been plaguing the economy for years,

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Speaker 3: and also domestic consumption has been so weak. Retail sales

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Speaker 3: growth was still quite tapid despite government subsidized cash for

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Speaker 3: clunkers program for like two years. So really domestically, China's

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Speaker 3: economy is still suffering from over capacity as you mentioned,

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Speaker 3: and also years long housing slump which really battered consumer

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Speaker 3: and business confidence most countries.

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Speaker 2: This is really an unwelcome shock, and I'm thinking, you know,

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Speaker 2: I'm obviously sitting in the UK, but we're constantly doing

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Speaker 2: the numbers of what it is going to mean for growth,

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Speaker 2: for inflation, to have this significant rise in energy prices.

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Speaker 2: I mean, China's not immune to that, right.

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Speaker 3: Yeah, I mean China has been suffering from deflation, so

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Speaker 3: price rises should be welcome. However, it depends on how

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Speaker 3: broad the price rise will be. Judging from the current situation,

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Speaker 3: you could see that most likely beneficiary would be upstream industries,

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Speaker 3: oil minerals, resources companies. Downstream companies will find it extremely

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Speaker 3: hard to pass the costs onto consumers because completion is

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Speaker 3: still so fierce in the country. And if you think

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Speaker 3: about how deeply rooted the excess capacity problem is The

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Speaker 3: government has been launching the so called anti involution campaign

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Speaker 3: for many many months now. The effect, however, is still

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Speaker 3: quite limited. Unlike ten years ago when a similar campaign

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Speaker 3: was launched, this time around, companies suffering from overcapacity are

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Speaker 3: in privately owned industries and sectors the government may want

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Speaker 3: to support, like renewable energy, so that makes it harder

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Speaker 3: for the government to take a strong handed administrative approach

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Speaker 3: to addressing this issue this time around.

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Speaker 2: Such an ugly word, but they the involution. We should

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Speaker 2: remind people what that means. I mean, the basic sense

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Speaker 2: is that some of the reason that they've done so

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Speaker 2: well in all these new technologies and other things in

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Speaker 2: these industries is that they've got lots of companies competing.

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Speaker 2: But that produces excess investment, excess supply.

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Speaker 3: Is that the basic yeah, and lead to workers working

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Speaker 3: extremely long hours without properly compensated.

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Speaker 2: Which you could also say is a core part of

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Speaker 2: the Chinese economic model. Just one last one for now

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Speaker 2: for you, Fran again, just to remind us, because it's

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Speaker 2: confusing when we talk about how they've built up their

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Speaker 2: energy sufficiency, but they're also have been getting a lot

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Speaker 2: of oil out of Iran. What is their capacity to

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Speaker 2: withstand reduced supplies of oil and gas from the rest

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Speaker 2: of the world.

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Speaker 3: Yeah, as Adam mentioned, China has been building oil reserves

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Speaker 3: over the past few years. Some analysts put China's oil

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Speaker 3: reserves as sufficient for meeting more than eighty days of

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Speaker 3: refining needs. So I'd say there is no short term

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Speaker 3: immediate shortage oil shortage concern. However, for long term, even

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Speaker 3: though China has been pushing for more renewable energy for

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Speaker 3: more than a decade now, renewable energy still accounts for

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Speaker 3: just about twenty percent of its total energy consumption. More

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Speaker 3: than fifty percent of its energy consumption is met by coal,

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Speaker 3: which China fortunately has abundant reserves of. However, if we

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Speaker 3: want to reach present She's carbon neutral goals, and also

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Speaker 3: if we don't want to repeat the serious air pollution

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Speaker 3: problems were about decade ago, there's no way that China

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Speaker 3: can switch back to coal in a massive way. So

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Speaker 3: there's always a trade off you have to balance, and

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Speaker 3: I think this well, the war in Iran will just

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Speaker 3: strengthen China's determination to expound further into renewable energy.

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Speaker 2: I guess on the one hand, China is trying to

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Speaker 2: show off, it kind of got its strategy. It was

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Speaker 2: ahead of the curve and preparing itself for these things.

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Speaker 2: But it also wants to, where it makes sense, use

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Speaker 2: some of its excess capacity or some of its strength

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Speaker 2: in these sectors to make friends and influence people. So

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Speaker 2: where are we seeing that?

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Speaker 1: I think the reality is that a lot of this

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Speaker 1: was already underway, right the push, particularly in parts of

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Speaker 1: Southeast Asia and even in Europe, to push heavily into renewables,

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Speaker 1: and the reality being to do that in most industries,

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Speaker 1: particularly solar and wind. You're really talking about Chinese technology.

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Speaker 1: Certainly there are some European companies putting out wind turbines

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Speaker 1: as well, but for Southeast Asia this is a China question.

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Speaker 1: And what we're seeing here now is less a new

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Speaker 1: movement towards renewables, but rather an effort to revitalize and

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Speaker 1: potentially speed up that transition. Now, you know, it's still

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Speaker 1: very early going here. Were as much as this war

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Speaker 1: seems to have gone on forever, it's only been four weeks.

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Speaker 1: And if the crisis ebbs or starts to really stop

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Speaker 1: here in the near term and the straight reopens, we

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Speaker 1: may not see the same push with the same urgency

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Speaker 1: that people are talking about it now. But I think

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Speaker 1: that right now that's where we would expect to see

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Speaker 1: further growth. We've already seen big inroads from companies like

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Speaker 1: BYD and other electric vehicle companies throughout Southeast Asia now

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Speaker 1: increasingly Europe, and efforts to push into other regions in

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Speaker 1: particularly in the Middle East. So I think all of that,

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Speaker 1: you know, the Chinese stand to benefit even if there's

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Speaker 1: marginal change in the near term.

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Speaker 2: This is an opportunity for China to sell its net

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Speaker 2: zero technology and products to other goods. But also short

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Speaker 2: term it can sell some fossil fuels to countries that

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Speaker 2: have caught short. So what's happening there.

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Speaker 1: What we've seen so far is very much an evolution,

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Speaker 1: you know, since the start of the war, as the

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Speaker 1: air and the pipeline of oil to Asia kind of

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Speaker 1: moves its way through and starts to hit Asian markets

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Speaker 1: that's been created by the shutdown of the Strait of Hormuz.

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Speaker 1: And for some countries like China, Japan, Korea, Australia, they've

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Speaker 1: got reserves, they have options, they have budget flexibility. But

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Speaker 1: for others, particularly in Southeast Asia, who have much tighter

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Speaker 1: fiscal realities. We're already starting to see this crisis turn

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Speaker 1: into a shortage situation with key products, and we saw

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Speaker 1: a declaration of an energy emergency in the Philippines. We've

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Speaker 1: seen countries including Vietnam, Indonesia, and the Philippines discuss cutting

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Speaker 1: flights between certain countries because of a lack of jet

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Speaker 1: fuel availability because of limited storage in those countries. And

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Speaker 1: so far, the limited reporting we have on what China

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Speaker 1: the actions China has taken is to try and address

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Speaker 1: those immediate concerns in some of these countries, and that's

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Speaker 1: been with the delivery of jets fuel and diesel and

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Speaker 1: trying to provide a little bit of its refining capability

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Speaker 1: to meet its neighbors partners' needs. To keep in mind,

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Speaker 1: this is also happening on top of the fact that

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Speaker 1: China put in place and export ban on refined products

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Speaker 1: almost immediately following the closure of the Strait of frommus

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Speaker 1: which highlights how they are very clearly strategically thinking about

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Speaker 1: how to deploy these refined products less for profit but

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Speaker 1: more for diplomatic gain.

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Speaker 2: I'm struck because in other context we talk about there

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Speaker 2: being really quite difficult relations with Philippines, the Philippines out

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Speaker 2: in the ocean, when they're increasingly fractious territorial disputes. Is

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Speaker 2: there any sense that that could come into any of

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Speaker 2: these conversations.

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Speaker 1: I certainly can't speak to how Beijing is viewing this

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Speaker 1: current moment, but the actions do speak clearly to the

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Speaker 1: idea that they are both being flexible and creative in

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Speaker 1: how they're utilizing these resources and seeing opportunity and seeing

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Speaker 1: a moment to potentially reframe the discussion, even if marginally,

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Speaker 1: in the domestic populations and the political environments in these countries.

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Speaker 1: You know, Vietnam is a very different situation in terms

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Speaker 1: of its historic political relationship, but even there, it's obviously

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Speaker 1: a stressed relationship over the South China Sea and broader

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Speaker 1: competition between the two And so the fact that they

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Speaker 1: were willing to move quickly to deliver, just to be clear,

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Speaker 1: are relatively small cargoes but would have a tangible impact,

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Speaker 1: you know, does say something about them thinking creatively about

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Speaker 1: how to use their leverage in this moment, with the

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Speaker 1: idea that you know, they may not be able to

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Speaker 1: do this for very long, depending on how long this

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Speaker 1: conflict goes.

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Speaker 2: Mid Fran it sort of feels like, I mean, all

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Speaker 2: these potential levers economic and diplomatic that the Chinese can

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Speaker 2: be thinking about deploying now. I mean it speaks to

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Speaker 2: this the level of sort of redundancy that they've built

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Speaker 2: into their economy. I guess President she Jen calls it

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Speaker 2: the fortress economy.

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Speaker 3: You know.

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Speaker 2: It feels almost a bit like, you know when they

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Speaker 2: sort of try and reassure you about jumbo jets and

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Speaker 2: they say, you know, there's a million things that go wrong,

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Speaker 2: and we have got another engine, and we've got you know,

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Speaker 2: all these different things that we can resort to. It

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Speaker 2: feels like China has all these additional spare engines sitting

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Speaker 2: there and alternative planes, and the rest of the world

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Speaker 2: has left itself rather vulnerable despite having gone through the

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Speaker 2: COVID experience. Is this ultimately sort of bad news for

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Speaker 2: the rest of us though, because it means that it's

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Speaker 2: making the case for having all of this excess supply

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Speaker 2: and redundancy in the Chinese economy, which, in if you're

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Speaker 2: competing with Chinese products overseas, not much fun at all.

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Speaker 3: Yeah, I think the price competitiveness will be there to stay.

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Speaker 3: And also in terms of policymakers thinking. President she himself

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Speaker 3: and the polar Buro have repeatedly stressed on the so

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Speaker 3: called bottom line thinking, which I think it's basically always

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Speaker 3: think about what you can do in area of crisis,

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Speaker 3: even if your situation now is still quite safe. Our

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Speaker 3: government sources, while speaking to us before, actually said frankly

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Speaker 3: that one of the reasons that they are not in

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Speaker 3: the rush to address of a capacity in sectors like

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Speaker 3: renewable energy and other energy sectors is because of the

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Speaker 3: possibility of a crisis like in a war. So and

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Speaker 3: that was quite early, it was like a couple of

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Speaker 3: years ago.

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Speaker 2: We should still remember though that you may have lots

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Speaker 2: of spare sources of energy and back up this back

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Speaker 2: up that one thing they haven't got as a backup

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Speaker 2: engine is anything to replace foreign demand to fuel their economy.

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Speaker 2: As you mentioned at the start, they're very dependent on

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Speaker 2: foreign export. If this continues, the risk of a global

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Speaker 2: recession is what not one that China is well prepared

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Speaker 2: to withstand right now?

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Speaker 3: Right yeah, I think that would be a true concern

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Speaker 3: for Beijing. If for demand collapse is because domestic demound

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Speaker 3: I think in the past it was driven by two

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Speaker 3: key sectors infrastructure and property. But infrastructure investment has been

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Speaker 3: very inefficient now because of the saturation issue and because

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Speaker 3: of the slowing pace of urbanization, and in terms of property,

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Speaker 3: the government seems to be quite reluctant to repeat the

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Speaker 3: aggressive stimulus it applied to rescue the sector back in

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Speaker 3: probably twenty to fifteen. I think one of the reasons

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Speaker 3: is because they hope to replace property as a growth

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Speaker 3: engine with more innovative tach sector growth. So that makes

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Speaker 3: it quite hard for the Chinese government to really find

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Speaker 3: another immediate replacement for foreign demand.

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Speaker 2: Of course, it's true of everybody. We're all wishing that

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Speaker 2: it's not going to last too long. Of course, we

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Speaker 2: tend to say the big disadvantage for China is how

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Speaker 2: little it's used its military in fifty years, almost forty years.

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Speaker 2: When people talk about this having in some sense lowered

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Speaker 2: the bar for China to flex its muscles more than

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Speaker 2: it already does militarily in Asia, is that a real

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Speaker 2: prospect from this Because you've identified mainly diplomatic advantages.

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Speaker 1: I think the bigger impact on China's potential calculus is

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Speaker 1: the capabilities of the United States, and that comes down

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Speaker 1: to the drawdown of US munitions in this conflict and

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Speaker 1: advanced capabilities that may be destroyed. As we were discussing

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Speaker 1: briefly before, you know, just to put that in context,

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Speaker 1: the United States from twenty twenty one to twenty twenty

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Speaker 1: four purchased two hundred and forty seven cruise missiles or

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Speaker 1: Tomahawk cruise missiles. There's reporting now that the United States

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Speaker 1: may have expended over twelve hundred of those missiles during

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Speaker 1: this conflict. And I use that as just an illustrative

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Speaker 1: example of the fact that the United States is simply

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Speaker 1: not producing these tools at a rate to replace them

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Speaker 1: in a timely manner. And while there's certainly a lot

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Speaker 1: of focus now on an advancing the United States defense

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Speaker 1: industrial base so that it can produce things faster, we're

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Speaker 1: not so far seeing the fruits of that. And so

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Speaker 1: that means that in some critical capabilities, the United States

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Speaker 1: may be less positioned to follow through with some of

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Speaker 1: its planning for a military operation in the Pacific in

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Speaker 1: the next couple of years. And so as China thinks

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Speaker 1: about what it wants to do and it's freedom of action,

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Speaker 1: it has potentially more flexibility in that space in terms

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Speaker 1: of learning, though, I mean, I think your point is

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Speaker 1: spot on. What China desperately needs is military experience, and

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Speaker 1: the reality being that the military hasn't conducted an operation

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Speaker 1: of any sufficient size since nineteen seventy nine and the

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Speaker 1: border fight with Vietnam. And so there is a lot

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Speaker 1: they can take from watching and learning from the United States,

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Speaker 1: and they will have a lot of data to work

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Speaker 1: with coming both from their partner and Iran their own

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Speaker 1: collection assets, and I'm sure working and talking with the

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Speaker 1: Russians there'll be a lot they can learn and try

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Speaker 1: and adjust their own planning to address. But at the

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Speaker 1: end of the day, as you said, you know, the

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Speaker 1: real test will be how they operate in a real scenario,

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Speaker 1: and we simply don't know what that will look like.

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Speaker 1: And so I don't think Beijing looks at this moment

440
00:26:29,680 --> 00:26:32,000
Speaker 1: and says, ah, the window is now open for us

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Speaker 1: to act, but simply that there is now opportunity for

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00:26:35,560 --> 00:26:39,480
Speaker 1: them to learn and grow their own military planning to

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Speaker 1: potentially increase the odds of success when they choose to act.

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Speaker 2: We should look ahead briefly to the Shi Trump summit delayed,

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00:26:49,960 --> 00:26:54,359
Speaker 2: but we were hearing from Karen Levitt and others this week.

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00:26:54,440 --> 00:26:58,560
Speaker 2: It's very much on schedule now in for May Adam.

447
00:26:58,640 --> 00:27:02,360
Speaker 2: How do you expect all these advantages and the sort

448
00:27:02,359 --> 00:27:07,359
Speaker 2: of complex picture that we've painted over the last thirty

449
00:27:07,400 --> 00:27:10,280
Speaker 2: minutes or so, how do you think that will play

450
00:27:10,320 --> 00:27:13,680
Speaker 2: out in the summit? How is this Iran conflict going

451
00:27:13,720 --> 00:27:17,000
Speaker 2: to affect the way that summit looks and feels, and

452
00:27:17,040 --> 00:27:19,000
Speaker 2: what possible outcomes.

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00:27:18,800 --> 00:27:21,239
Speaker 1: In many ways from the core outcomes that we're going

454
00:27:21,240 --> 00:27:23,720
Speaker 1: to see in the objectives that both sides are moving

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00:27:23,760 --> 00:27:26,560
Speaker 1: forward on. From a more technical level, I don't think

456
00:27:26,560 --> 00:27:28,240
Speaker 1: we're going to see much change at all in the

457
00:27:28,280 --> 00:27:31,359
Speaker 1: sense that the priorities that were put forward prior to

458
00:27:31,359 --> 00:27:35,920
Speaker 1: the Iran conflict, about maintaining stability in the relationship, ensuring

459
00:27:36,119 --> 00:27:39,399
Speaker 1: the flow of critical minerals and rare earth to the

460
00:27:39,480 --> 00:27:43,199
Speaker 1: United States, finding a tariff level that both countries are

461
00:27:43,200 --> 00:27:48,600
Speaker 1: comfortable with, increasing Chinese purchases, and potentially addressing the future

462
00:27:48,640 --> 00:27:51,159
Speaker 1: of Taiwan are all issues that are still on the

463
00:27:51,200 --> 00:27:54,320
Speaker 1: table and have not shifted significantly because of the conflict

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00:27:54,320 --> 00:27:56,560
Speaker 1: in and of itself. But at the same time, there's

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00:27:56,560 --> 00:28:00,320
Speaker 1: no doubt that the overall narrative of the visit could

466
00:28:00,359 --> 00:28:03,480
Speaker 1: be significantly impacted with how the United States ends this

467
00:28:03,600 --> 00:28:07,720
Speaker 1: conflict and whether it emerges victorious as the President has said,

468
00:28:08,240 --> 00:28:11,879
Speaker 1: or somewhat damaged by their inability to potentially open the

469
00:28:11,920 --> 00:28:15,399
Speaker 1: straight of the horn moves, leaving Golf partners in a position,

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00:28:15,720 --> 00:28:17,760
Speaker 1: you know, potentially worse than they were prior to the

471
00:28:17,800 --> 00:28:20,159
Speaker 1: conflict in terms of broader instability and the risk to

472
00:28:20,200 --> 00:28:23,720
Speaker 1: the global energy supply chain. So I think that's really

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00:28:23,720 --> 00:28:25,959
Speaker 1: where we're going to see the impact. And I do

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00:28:26,000 --> 00:28:27,960
Speaker 1: think this is a good point to remind folks that

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00:28:28,440 --> 00:28:33,080
Speaker 1: for China, their relationship with Iran certainly has value to them,

476
00:28:33,200 --> 00:28:35,000
Speaker 1: but at the end of the day, they're far more

477
00:28:35,000 --> 00:28:37,800
Speaker 1: interested and concerned about their core needs and interest in

478
00:28:37,840 --> 00:28:41,920
Speaker 1: the region, which is energy supplies. And so while you know,

479
00:28:42,160 --> 00:28:45,080
Speaker 1: bombing of Iran has been a major issue for Bijing

480
00:28:45,120 --> 00:28:49,360
Speaker 1: and their pushback of on the administration for doing so,

481
00:28:50,920 --> 00:28:53,520
Speaker 1: I see it highly unlikely that the President she spends

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00:28:53,600 --> 00:28:56,360
Speaker 1: much time talking about Iran in and of itself with

483
00:28:56,520 --> 00:28:59,960
Speaker 1: President Trump outside of what President Trump wants to raise

484
00:29:00,360 --> 00:29:03,800
Speaker 1: during the meetings. The bigger question is where would they

485
00:29:03,880 --> 00:29:06,160
Speaker 1: land on these critical issues that we've already gone over,

486
00:29:06,720 --> 00:29:10,000
Speaker 1: and will the meeting go forward on the timeline that's

487
00:29:10,040 --> 00:29:12,120
Speaker 1: been put forward, given the fact that we simply don't

488
00:29:12,160 --> 00:29:15,280
Speaker 1: know right now when this war will end, and how

489
00:29:15,320 --> 00:29:18,360
Speaker 1: that could impact both this meeting and the theoretically up

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00:29:18,400 --> 00:29:20,560
Speaker 1: to four additional meetings they're supposed to have this year.

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Speaker 2: You would have been in a position to plan some

492
00:29:22,440 --> 00:29:24,560
Speaker 2: of these international meetings when you were sitting in the

493
00:29:24,560 --> 00:29:26,920
Speaker 2: White House and working working for the Vice President. And

494
00:29:27,040 --> 00:29:30,600
Speaker 2: you have to feel sorry for the skeleton team that

495
00:29:30,880 --> 00:29:33,360
Speaker 2: they're now trying to even begin to think about how

496
00:29:33,400 --> 00:29:37,440
Speaker 2: that summit's to play out. Fran I give you a

497
00:29:37,440 --> 00:29:39,600
Speaker 2: little last word just on that summit. I mean you

498
00:29:39,640 --> 00:29:43,520
Speaker 2: and I were in Hong Kong together not so long

499
00:29:43,520 --> 00:29:48,200
Speaker 2: ago talking about our expectations for the summit. Are you

500
00:29:48,280 --> 00:29:51,320
Speaker 2: looking at that meeting from a different perspective now or

501
00:29:51,360 --> 00:29:53,560
Speaker 2: expecting anything different to come out of it as a

502
00:29:53,600 --> 00:29:55,400
Speaker 2: result of the last few weeks.

503
00:29:56,240 --> 00:30:00,200
Speaker 3: I just wonder how China would make anny gains in

504
00:30:00,280 --> 00:30:05,600
Speaker 3: terms of asking the US to relax its tech export technology,

505
00:30:05,720 --> 00:30:09,000
Speaker 3: or would it ask for it at all now? Given

506
00:30:09,320 --> 00:30:13,160
Speaker 3: the progress Chinese companies have made, and probably they want

507
00:30:13,200 --> 00:30:16,480
Speaker 3: to put up a phase of not afraid of being

508
00:30:16,560 --> 00:30:20,280
Speaker 3: boycott or cut off from key technology. We can't always

509
00:30:20,280 --> 00:30:24,640
Speaker 3: give up our own. And another point is I think

510
00:30:24,720 --> 00:30:28,480
Speaker 3: the US will asks for China to buy a lot

511
00:30:28,560 --> 00:30:32,640
Speaker 3: more agricultural products. I think that could be one of

512
00:30:32,680 --> 00:30:34,960
Speaker 3: the major requests by the US.

513
00:30:35,680 --> 00:30:39,200
Speaker 2: Yeah, all those farmers who are hurting from well another

514
00:30:39,280 --> 00:30:41,960
Speaker 2: reason now higher fertilizer prices, along with all the other

515
00:30:42,000 --> 00:30:47,160
Speaker 2: ones that they've been given by this administration. Adam fran

516
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Speaker 2: thank you so much, Thank you.

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Speaker 1: Thanks for having.

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Speaker 2: Thanks for listening to Trumponomics from Bloomberg. It was hosted

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00:31:08,000 --> 00:31:11,120
Speaker 2: by me Stephanie Flanders, and I was joined by Bloomberg

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00:31:11,200 --> 00:31:16,200
Speaker 2: Economics senior geoeconomics analysts Adam Ferrar and Fran Wang from

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00:31:16,240 --> 00:31:20,560
Speaker 2: Bloomberg's China Economy and Government team. Trumponomics was produced by

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00:31:20,600 --> 00:31:24,320
Speaker 2: Moses Dam with Summer Sadi and help from Amy Keen.

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00:31:24,920 --> 00:31:29,080
Speaker 2: Sound design was by Blake Maples and Kelly Gary. Please

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00:31:29,120 --> 00:31:32,239
Speaker 2: help others find us and enjoy this show, rate it

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Speaker 2: and review it highly wherever you listen