Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
Speaker 2: and this is Trumppanomics, the podcast that looks at the
Speaker 2: economic world of Donald Trump, how he's shaping and shaking
Speaker 2: the global economy and what on earth is going to
Speaker 2: happen next. Well, it's the afternoon of Wednesday, the first
Speaker 2: of April in the UK, and we're well into the
Speaker 2: fifth week of a conflict in Iran that very few
Speaker 2: of America's allies wanted or even now fully understand. They are, though,
Speaker 2: dealing with the economic consequences, biggest of which being energy
Speaker 2: prices and an Iranian stranglehold over the stretch ofform moves.
Speaker 2: Last week, we looked at this crisis as an exercise
Speaker 2: in economic state craft, one in which, against the odds,
Speaker 2: Iran seemed to be doing rather well. In this episode,
Speaker 2: we're looking east to consider the view of the crisis
Speaker 2: from Beijing. Like many, the Chinese government would almost certainly
Speaker 2: prefer the conflict hadn't started. Brings instability to a region
Speaker 2: that's increasingly important and inflicts high oil and gas prices
Speaker 2: on an economy that relies on significant energy imports in
Speaker 2: a context of a still fragile domestic recovery. And yet,
Speaker 2: and yet, the fact that Donald Trump is once again
Speaker 2: demonstrating to the world his tendency to inflict wildly unpredictable
Speaker 2: and damaging swings in policy on his allies surely also
Speaker 2: provides something of a strategic opportunity for China. It's leaders
Speaker 2: liking to say these days that it's China that is
Speaker 2: the stable and predictable world power. Well, discussing this, we
Speaker 2: have first making her Trump and Noomic's debut, Fran Wang.
Speaker 2: Fran is where in London for a few weeks, but
Speaker 2: in her normal life she's a lynchpin of our China
Speaker 2: Economy and government team in Beijing, having covered China's economy
Speaker 2: for nearly twenty years. Fran, great to have you here,
Speaker 2: Thanks for having me and from our Washington, DC bureau
Speaker 2: Adam for our Adam is the senior geoeconomics analyst for
Speaker 2: Asia Pacific Bloomberg Economics, and he previously served as the
Speaker 2: senior advisor to Vice President Kamala Harris on the Indo
Speaker 2: Pacific space and Intelligence. He also has written a piece
Speaker 2: for US on how the war in Iran is changing
Speaker 2: the relationship between the US and China. We had you
Speaker 2: on Adam last when we discussed the Trump Administration's National
Speaker 2: Security Strategy document back in December of twenty twenty five.
Speaker 2: I feel like we've had several national security strategies since then.
Speaker 2: But welcome back to the show.
Speaker 1: Great to be here. It seems that things have certainly
Speaker 1: evolved since then.
Speaker 2: Evolved is one word for it. Yes, we'll talk about
Speaker 2: the economy sort of traditional trumponomics fashion. We're going to
Speaker 2: be interweaving the economy and the geopolitics, and we will
Speaker 2: get to the economy in a minute. But Adam, you
Speaker 2: have written a piece for US overnight, the conclusion of
Speaker 2: which I thought set the stage rather well. You say
Speaker 2: the risk of Beijing from a prolonged Middle East war
Speaker 2: are real and a near term off ramp remains far
Speaker 2: from certain for now, though China has the opportunity to
Speaker 2: leverage the situation to its benefit. So just give us
Speaker 2: a sense of how you reach that conclusion, and then
Speaker 2: we'll do some unpacking.
Speaker 1: Of course, so I think you've set it up well
Speaker 1: on the intro. There's no doubt that Beijing does not
Speaker 1: look kindly on the instability growing in the region right now.
Speaker 1: While they certainly have i'm sure some happiness and seeing
Speaker 1: the United States strategically dragged into another war in the
Speaker 1: Middle East that distracts them potentially from the Indo Pacific,
Speaker 1: as we'll talk a little bit about more, they're also
Speaker 1: just very worried about the long term potential for the
Speaker 1: Gulf to remain unstable, for oil supplies to be infrequent,
Speaker 1: and to put stress on the economy at a time
Speaker 1: when things are positive on the export side but still
Speaker 1: struggling domestically, when with consumption not reaching the levels that
Speaker 1: they need to maintain the demand necessary for the amount
Speaker 1: of production they're doing internally. But at the same time,
Speaker 1: there's no doubt that there are real opportunities for Beijing
Speaker 1: in this moment, and we can kind of look at
Speaker 1: that through three different lenses. The first is diplomatic. China
Speaker 1: has spent a significant amount of effort and breath pushing
Speaker 1: a narrative since Trump came to office that it is
Speaker 1: the United States, not China, that is bringing instability to
Speaker 1: the world, and that China is the real protector of
Speaker 1: the rules based international order and even the United Nations,
Speaker 1: and turning the narrative that was so persistent under pass administrations,
Speaker 1: particularly the Biden administration, on its head. And while certainly
Speaker 1: I think most of the world has the perspective to
Speaker 1: realize that there is a lot of hypocrisy potentially and
Speaker 1: that those arguments from Beijing, the reality is that the
Speaker 1: actions of the United States has taken since President Trump
Speaker 1: came to office, starting obviously with the Liberation Day tariffs,
Speaker 1: moving towards the eventual bombing of Iran alongside Israel in June,
Speaker 1: then of course the midnight raid to seize Nicholas Maduro
Speaker 1: f of Venezuela, and now this ongoing four plus week
Speaker 1: war in Iran. There is certainly appetite to accept this
Speaker 1: narrative in a way that there wasn't before, particularly among
Speaker 1: countries that are feeling the real pain of this instability
Speaker 1: and uncertainty. At the same time, diplomatically, China historically does
Speaker 1: not take particular interest in engaging in negotiations or trying
Speaker 1: to lead piecework around the world. But here there's this
Speaker 1: rare opening for them to potentially drastically increase their role
Speaker 1: in the Middle East and their relations with key partners,
Speaker 1: and that comes from a couple main drivers. The first
Speaker 1: being that they're one of the unique countries on this
Speaker 1: planet that have positive relations with Tehran and the Gulf
Speaker 1: built around a massive economic relationship with Iran as their
Speaker 1: primary economic conduit and partner, which is even dwarfed by
Speaker 1: the relations with the Gulf that obviously relies heavily on
Speaker 1: Gulf oil exports, but also a lot of economic trade.
Speaker 1: And as a result, given the fact that the United
Speaker 1: States is now considering ending the war without addressing the
Speaker 1: flow of oil through the Strait of Hormuz and Iran's
Speaker 1: control of that, there is this potential for Iran to
Speaker 1: emerge as an intermediary negotiator to try and reopen the strait,
Speaker 1: and that's not only because of those ties, but also
Speaker 1: the simple reality that they are the largest purchaser of
Speaker 1: the oil coming through the strait itself. Obviously, there's a
Speaker 1: lot left to determine there and chin It may not
Speaker 1: take that opportunity, but they certainly could more traditionally, though,
Speaker 1: there is a simple numbers problem here for the United States.
Speaker 1: The US has expended a huge amount of its most
Speaker 1: advanced munitions in this conflict and continues to on a
Speaker 1: day to day basis, and the reality is that those
Speaker 1: long range missiles like Tomahawk cruise missiles and those defensive
Speaker 1: missiles like Patriot interceptors are essential for any sort of
Speaker 1: Indo Pacific contingency, whether that be the United States trying
Speaker 1: to protect Taiwan or act in protection of the Philippines
Speaker 1: and the South China Sea contingency, and all of that
Speaker 1: leaves China in the mid term in a much better position,
Speaker 1: potentially militarily. The other part of that, too, is that
Speaker 1: we've seen a degradation in US assets through this conflict.
Speaker 1: We saw the loss of a command control aircraft called
Speaker 1: an a wax over the weekend, a strike that demonstrated
Speaker 1: some support that Iran maybe getting from countries like Russia.
Speaker 1: But nonetheless, the United States has few of these capabilities
Speaker 1: left in the world, and while it is certainly working
Speaker 1: to reconstitute them, those are years away, and as this
Speaker 1: war is prolonged, we may see the additional losses that
Speaker 1: further undermined its strategic position and its ability to enact
Speaker 1: potentially its military plans in the Pacific. The last part
Speaker 1: of this, I think we shouldn't forget is simply watching
Speaker 1: and learning from what the United States is doing. I
Speaker 1: think It's probably not lost to most people that this
Speaker 1: is the largest military operation the United States has undertaken
Speaker 1: arguably since the two thousand and three invasion of Iraq,
Speaker 1: and a lot has changed since two thousand and three
Speaker 1: in terms of the way of war and the way
Speaker 1: the United States plans to fight a war. And so
Speaker 1: here China is both I'm sure, concerned by the effectiveness
Speaker 1: of US capabilities, but also learning from what they've seen
Speaker 1: so far and taking the opportunity to see how the
Speaker 1: US is integrating drones, new missile systems, and its air
Speaker 1: power and naval power in a modern conventional fight. And
Speaker 1: I want to be clear, obviously a fight in the
Speaker 1: Indo Pacific, particularly over Taiwan, would have a very different character,
Speaker 1: but the tools would be the same, and there's much
Speaker 1: to be taken from this, and those who follow the
Speaker 1: know China actually built its modern military very much off
Speaker 1: of the lessons of the US invasion of Iraq in
Speaker 1: their early nineties and Desert Storm, and so here's another
Speaker 1: opportunity for them to learn and grow and be more
Speaker 1: effective in any sort of contingency. Not to belabor this
Speaker 1: too much is simply economic. Is the reality that China
Speaker 1: has positioned itself through its massive growth in green energy,
Speaker 1: its own domestic energy industry, and its reserves of oil
Speaker 1: that is brought in over the last several years to
Speaker 1: be able to weather this storm, and not only weather
Speaker 1: the short term storm, but potentially serve as a gas
Speaker 1: station for other parts of Asia. And we're starting to
Speaker 1: see that already with these small but important deliveries of
Speaker 1: key fuel stocks to the Philippines and Vietnam, and potentially
Speaker 1: more to come, building on goodwill, highlighting the unique role
Speaker 1: China can play as a stabilizing influence in the region
Speaker 1: and demonstrating that China is a country that can be
Speaker 1: prepared and can prosper through these types of crises. The
Speaker 1: repercussions from this war are extreme. There is no doubt
Speaker 1: that countries are going to have to rethink their energy
Speaker 1: security and their China also stands to gain the China
Speaker 1: has become by far the largest producer of green and
Speaker 1: renewable energy technology in the world, and obviously the most capable,
Speaker 1: it seems and commercially viable source of electric vehicles, both
Speaker 1: of which are going to be in high demand as countries,
Speaker 1: particularly in Southeast Asia and Africa, seek to insulate themselves
Speaker 1: from further crises.
Speaker 2: Well, that's the fantastic survey. Thanks Adam. And actually, and
Speaker 2: you've also taken us a little bit onto the economy.
Speaker 2: We're going to touch on a few things and sort
Speaker 2: of go deeper into the economy. But a few things
Speaker 2: that Adam mentioned there it's worth remembering since we haven't
Speaker 2: talked about the Chinese economy for a while on this show.
Speaker 2: The basic state of China's growth coming into this year,
Speaker 2: coming into this crisis, I mean it's recovering, but still
Speaker 2: quite subject to deflation and excess supply is still very
Speaker 2: dependent on exports. What's the basic state of the economy.
Speaker 3: Yeah, the economy has been recovering since it reopened from
Speaker 3: COVID zero four years ago now or three to four
Speaker 3: years ago now. However, the recovery has always been like
Speaker 3: two speed, with production staying very strong but consumption struggling
Speaker 3: to pick up. And the key reason why production has
Speaker 3: been strong is because of exports, and exports contributed to
Speaker 3: nearly a third of GDP growth last year, which was
Speaker 3: the highest since nineteen ninety seven. So exports have been
Speaker 3: a key support for China's growth, especially if you think
Speaker 3: about how long deflation has been plaguing the economy for years,
Speaker 3: and also domestic consumption has been so weak. Retail sales
Speaker 3: growth was still quite tapid despite government subsidized cash for
Speaker 3: clunkers program for like two years. So really domestically, China's
Speaker 3: economy is still suffering from over capacity as you mentioned,
Speaker 3: and also years long housing slump which really battered consumer
Speaker 3: and business confidence most countries.
Speaker 2: This is really an unwelcome shock, and I'm thinking, you know,
Speaker 2: I'm obviously sitting in the UK, but we're constantly doing
Speaker 2: the numbers of what it is going to mean for growth,
Speaker 2: for inflation, to have this significant rise in energy prices.
Speaker 2: I mean, China's not immune to that, right.
Speaker 3: Yeah, I mean China has been suffering from deflation, so
Speaker 3: price rises should be welcome. However, it depends on how
Speaker 3: broad the price rise will be. Judging from the current situation,
Speaker 3: you could see that most likely beneficiary would be upstream industries,
Speaker 3: oil minerals, resources companies. Downstream companies will find it extremely
Speaker 3: hard to pass the costs onto consumers because completion is
Speaker 3: still so fierce in the country. And if you think
Speaker 3: about how deeply rooted the excess capacity problem is The
Speaker 3: government has been launching the so called anti involution campaign
Speaker 3: for many many months now. The effect, however, is still
Speaker 3: quite limited. Unlike ten years ago when a similar campaign
Speaker 3: was launched, this time around, companies suffering from overcapacity are
Speaker 3: in privately owned industries and sectors the government may want
Speaker 3: to support, like renewable energy, so that makes it harder
Speaker 3: for the government to take a strong handed administrative approach
Speaker 3: to addressing this issue this time around.
Speaker 2: Such an ugly word, but they the involution. We should
Speaker 2: remind people what that means. I mean, the basic sense
Speaker 2: is that some of the reason that they've done so
Speaker 2: well in all these new technologies and other things in
Speaker 2: these industries is that they've got lots of companies competing.
Speaker 2: But that produces excess investment, excess supply.
Speaker 3: Is that the basic yeah, and lead to workers working
Speaker 3: extremely long hours without properly compensated.
Speaker 2: Which you could also say is a core part of
Speaker 2: the Chinese economic model. Just one last one for now
Speaker 2: for you, Fran again, just to remind us, because it's
Speaker 2: confusing when we talk about how they've built up their
Speaker 2: energy sufficiency, but they're also have been getting a lot
Speaker 2: of oil out of Iran. What is their capacity to
Speaker 2: withstand reduced supplies of oil and gas from the rest
Speaker 2: of the world.
Speaker 3: Yeah, as Adam mentioned, China has been building oil reserves
Speaker 3: over the past few years. Some analysts put China's oil
Speaker 3: reserves as sufficient for meeting more than eighty days of
Speaker 3: refining needs. So I'd say there is no short term
Speaker 3: immediate shortage oil shortage concern. However, for long term, even
Speaker 3: though China has been pushing for more renewable energy for
Speaker 3: more than a decade now, renewable energy still accounts for
Speaker 3: just about twenty percent of its total energy consumption. More
Speaker 3: than fifty percent of its energy consumption is met by coal,
Speaker 3: which China fortunately has abundant reserves of. However, if we
Speaker 3: want to reach present She's carbon neutral goals, and also
Speaker 3: if we don't want to repeat the serious air pollution
Speaker 3: problems were about decade ago, there's no way that China
Speaker 3: can switch back to coal in a massive way. So
Speaker 3: there's always a trade off you have to balance, and
Speaker 3: I think this well, the war in Iran will just
Speaker 3: strengthen China's determination to expound further into renewable energy.
Speaker 2: I guess on the one hand, China is trying to
Speaker 2: show off, it kind of got its strategy. It was
Speaker 2: ahead of the curve and preparing itself for these things.
Speaker 2: But it also wants to, where it makes sense, use
Speaker 2: some of its excess capacity or some of its strength
Speaker 2: in these sectors to make friends and influence people. So
Speaker 2: where are we seeing that?
Speaker 1: I think the reality is that a lot of this
Speaker 1: was already underway, right the push, particularly in parts of
Speaker 1: Southeast Asia and even in Europe, to push heavily into renewables,
Speaker 1: and the reality being to do that in most industries,
Speaker 1: particularly solar and wind. You're really talking about Chinese technology.
Speaker 1: Certainly there are some European companies putting out wind turbines
Speaker 1: as well, but for Southeast Asia this is a China question.
Speaker 1: And what we're seeing here now is less a new
Speaker 1: movement towards renewables, but rather an effort to revitalize and
Speaker 1: potentially speed up that transition. Now, you know, it's still
Speaker 1: very early going here. Were as much as this war
Speaker 1: seems to have gone on forever, it's only been four weeks.
Speaker 1: And if the crisis ebbs or starts to really stop
Speaker 1: here in the near term and the straight reopens, we
Speaker 1: may not see the same push with the same urgency
Speaker 1: that people are talking about it now. But I think
Speaker 1: that right now that's where we would expect to see
Speaker 1: further growth. We've already seen big inroads from companies like
Speaker 1: BYD and other electric vehicle companies throughout Southeast Asia now
Speaker 1: increasingly Europe, and efforts to push into other regions in
Speaker 1: particularly in the Middle East. So I think all of that,
Speaker 1: you know, the Chinese stand to benefit even if there's
Speaker 1: marginal change in the near term.
Speaker 2: This is an opportunity for China to sell its net
Speaker 2: zero technology and products to other goods. But also short
Speaker 2: term it can sell some fossil fuels to countries that
Speaker 2: have caught short. So what's happening there.
Speaker 1: What we've seen so far is very much an evolution,
Speaker 1: you know, since the start of the war, as the
Speaker 1: air and the pipeline of oil to Asia kind of
Speaker 1: moves its way through and starts to hit Asian markets
Speaker 1: that's been created by the shutdown of the Strait of Hormuz.
Speaker 1: And for some countries like China, Japan, Korea, Australia, they've
Speaker 1: got reserves, they have options, they have budget flexibility. But
Speaker 1: for others, particularly in Southeast Asia, who have much tighter
Speaker 1: fiscal realities. We're already starting to see this crisis turn
Speaker 1: into a shortage situation with key products, and we saw
Speaker 1: a declaration of an energy emergency in the Philippines. We've
Speaker 1: seen countries including Vietnam, Indonesia, and the Philippines discuss cutting
Speaker 1: flights between certain countries because of a lack of jet
Speaker 1: fuel availability because of limited storage in those countries. And
Speaker 1: so far, the limited reporting we have on what China
Speaker 1: the actions China has taken is to try and address
Speaker 1: those immediate concerns in some of these countries, and that's
Speaker 1: been with the delivery of jets fuel and diesel and
Speaker 1: trying to provide a little bit of its refining capability
Speaker 1: to meet its neighbors partners' needs. To keep in mind,
Speaker 1: this is also happening on top of the fact that
Speaker 1: China put in place and export ban on refined products
Speaker 1: almost immediately following the closure of the Strait of frommus
Speaker 1: which highlights how they are very clearly strategically thinking about
Speaker 1: how to deploy these refined products less for profit but
Speaker 1: more for diplomatic gain.
Speaker 2: I'm struck because in other context we talk about there
Speaker 2: being really quite difficult relations with Philippines, the Philippines out
Speaker 2: in the ocean, when they're increasingly fractious territorial disputes. Is
Speaker 2: there any sense that that could come into any of
Speaker 2: these conversations.
Speaker 1: I certainly can't speak to how Beijing is viewing this
Speaker 1: current moment, but the actions do speak clearly to the
Speaker 1: idea that they are both being flexible and creative in
Speaker 1: how they're utilizing these resources and seeing opportunity and seeing
Speaker 1: a moment to potentially reframe the discussion, even if marginally,
Speaker 1: in the domestic populations and the political environments in these countries.
Speaker 1: You know, Vietnam is a very different situation in terms
Speaker 1: of its historic political relationship, but even there, it's obviously
Speaker 1: a stressed relationship over the South China Sea and broader
Speaker 1: competition between the two And so the fact that they
Speaker 1: were willing to move quickly to deliver, just to be clear,
Speaker 1: are relatively small cargoes but would have a tangible impact,
Speaker 1: you know, does say something about them thinking creatively about
Speaker 1: how to use their leverage in this moment, with the
Speaker 1: idea that you know, they may not be able to
Speaker 1: do this for very long, depending on how long this
Speaker 1: conflict goes.
Speaker 2: Mid Fran it sort of feels like, I mean, all
Speaker 2: these potential levers economic and diplomatic that the Chinese can
Speaker 2: be thinking about deploying now. I mean it speaks to
Speaker 2: this the level of sort of redundancy that they've built
Speaker 2: into their economy. I guess President she Jen calls it
Speaker 2: the fortress economy.
Speaker 3: You know.
Speaker 2: It feels almost a bit like, you know when they
Speaker 2: sort of try and reassure you about jumbo jets and
Speaker 2: they say, you know, there's a million things that go wrong,
Speaker 2: and we have got another engine, and we've got you know,
Speaker 2: all these different things that we can resort to. It
Speaker 2: feels like China has all these additional spare engines sitting
Speaker 2: there and alternative planes, and the rest of the world
Speaker 2: has left itself rather vulnerable despite having gone through the
Speaker 2: COVID experience. Is this ultimately sort of bad news for
Speaker 2: the rest of us though, because it means that it's
Speaker 2: making the case for having all of this excess supply
Speaker 2: and redundancy in the Chinese economy, which, in if you're
Speaker 2: competing with Chinese products overseas, not much fun at all.
Speaker 3: Yeah, I think the price competitiveness will be there to stay.
Speaker 3: And also in terms of policymakers thinking. President she himself
Speaker 3: and the polar Buro have repeatedly stressed on the so
Speaker 3: called bottom line thinking, which I think it's basically always
Speaker 3: think about what you can do in area of crisis,
Speaker 3: even if your situation now is still quite safe. Our
Speaker 3: government sources, while speaking to us before, actually said frankly
Speaker 3: that one of the reasons that they are not in
Speaker 3: the rush to address of a capacity in sectors like
Speaker 3: renewable energy and other energy sectors is because of the
Speaker 3: possibility of a crisis like in a war. So and
Speaker 3: that was quite early, it was like a couple of
Speaker 3: years ago.
Speaker 2: We should still remember though that you may have lots
Speaker 2: of spare sources of energy and back up this back
Speaker 2: up that one thing they haven't got as a backup
Speaker 2: engine is anything to replace foreign demand to fuel their economy.
Speaker 2: As you mentioned at the start, they're very dependent on
Speaker 2: foreign export. If this continues, the risk of a global
Speaker 2: recession is what not one that China is well prepared
Speaker 2: to withstand right now?
Speaker 3: Right yeah, I think that would be a true concern
Speaker 3: for Beijing. If for demand collapse is because domestic demound
Speaker 3: I think in the past it was driven by two
Speaker 3: key sectors infrastructure and property. But infrastructure investment has been
Speaker 3: very inefficient now because of the saturation issue and because
Speaker 3: of the slowing pace of urbanization, and in terms of property,
Speaker 3: the government seems to be quite reluctant to repeat the
Speaker 3: aggressive stimulus it applied to rescue the sector back in
Speaker 3: probably twenty to fifteen. I think one of the reasons
Speaker 3: is because they hope to replace property as a growth
Speaker 3: engine with more innovative tach sector growth. So that makes
Speaker 3: it quite hard for the Chinese government to really find
Speaker 3: another immediate replacement for foreign demand.
Speaker 2: Of course, it's true of everybody. We're all wishing that
Speaker 2: it's not going to last too long. Of course, we
Speaker 2: tend to say the big disadvantage for China is how
Speaker 2: little it's used its military in fifty years, almost forty years.
Speaker 2: When people talk about this having in some sense lowered
Speaker 2: the bar for China to flex its muscles more than
Speaker 2: it already does militarily in Asia, is that a real
Speaker 2: prospect from this Because you've identified mainly diplomatic advantages.
Speaker 1: I think the bigger impact on China's potential calculus is
Speaker 1: the capabilities of the United States, and that comes down
Speaker 1: to the drawdown of US munitions in this conflict and
Speaker 1: advanced capabilities that may be destroyed. As we were discussing
Speaker 1: briefly before, you know, just to put that in context,
Speaker 1: the United States from twenty twenty one to twenty twenty
Speaker 1: four purchased two hundred and forty seven cruise missiles or
Speaker 1: Tomahawk cruise missiles. There's reporting now that the United States
Speaker 1: may have expended over twelve hundred of those missiles during
Speaker 1: this conflict. And I use that as just an illustrative
Speaker 1: example of the fact that the United States is simply
Speaker 1: not producing these tools at a rate to replace them
Speaker 1: in a timely manner. And while there's certainly a lot
Speaker 1: of focus now on an advancing the United States defense
Speaker 1: industrial base so that it can produce things faster, we're
Speaker 1: not so far seeing the fruits of that. And so
Speaker 1: that means that in some critical capabilities, the United States
Speaker 1: may be less positioned to follow through with some of
Speaker 1: its planning for a military operation in the Pacific in
Speaker 1: the next couple of years. And so as China thinks
Speaker 1: about what it wants to do and it's freedom of action,
Speaker 1: it has potentially more flexibility in that space in terms
Speaker 1: of learning, though, I mean, I think your point is
Speaker 1: spot on. What China desperately needs is military experience, and
Speaker 1: the reality being that the military hasn't conducted an operation
Speaker 1: of any sufficient size since nineteen seventy nine and the
Speaker 1: border fight with Vietnam. And so there is a lot
Speaker 1: they can take from watching and learning from the United States,
Speaker 1: and they will have a lot of data to work
Speaker 1: with coming both from their partner and Iran their own
Speaker 1: collection assets, and I'm sure working and talking with the
Speaker 1: Russians there'll be a lot they can learn and try
Speaker 1: and adjust their own planning to address. But at the
Speaker 1: end of the day, as you said, you know, the
Speaker 1: real test will be how they operate in a real scenario,
Speaker 1: and we simply don't know what that will look like.
Speaker 1: And so I don't think Beijing looks at this moment
Speaker 1: and says, ah, the window is now open for us
Speaker 1: to act, but simply that there is now opportunity for
Speaker 1: them to learn and grow their own military planning to
Speaker 1: potentially increase the odds of success when they choose to act.
Speaker 2: We should look ahead briefly to the Shi Trump summit delayed,
Speaker 2: but we were hearing from Karen Levitt and others this week.
Speaker 2: It's very much on schedule now in for May Adam.
Speaker 2: How do you expect all these advantages and the sort
Speaker 2: of complex picture that we've painted over the last thirty
Speaker 2: minutes or so, how do you think that will play
Speaker 2: out in the summit? How is this Iran conflict going
Speaker 2: to affect the way that summit looks and feels, and
Speaker 2: what possible outcomes.
Speaker 1: In many ways from the core outcomes that we're going
Speaker 1: to see in the objectives that both sides are moving
Speaker 1: forward on. From a more technical level, I don't think
Speaker 1: we're going to see much change at all in the
Speaker 1: sense that the priorities that were put forward prior to
Speaker 1: the Iran conflict, about maintaining stability in the relationship, ensuring
Speaker 1: the flow of critical minerals and rare earth to the
Speaker 1: United States, finding a tariff level that both countries are
Speaker 1: comfortable with, increasing Chinese purchases, and potentially addressing the future
Speaker 1: of Taiwan are all issues that are still on the
Speaker 1: table and have not shifted significantly because of the conflict
Speaker 1: in and of itself. But at the same time, there's
Speaker 1: no doubt that the overall narrative of the visit could
Speaker 1: be significantly impacted with how the United States ends this
Speaker 1: conflict and whether it emerges victorious as the President has said,
Speaker 1: or somewhat damaged by their inability to potentially open the
Speaker 1: straight of the horn moves, leaving Golf partners in a position,
Speaker 1: you know, potentially worse than they were prior to the
Speaker 1: conflict in terms of broader instability and the risk to
Speaker 1: the global energy supply chain. So I think that's really
Speaker 1: where we're going to see the impact. And I do
Speaker 1: think this is a good point to remind folks that
Speaker 1: for China, their relationship with Iran certainly has value to them,
Speaker 1: but at the end of the day, they're far more
Speaker 1: interested and concerned about their core needs and interest in
Speaker 1: the region, which is energy supplies. And so while you know,
Speaker 1: bombing of Iran has been a major issue for Bijing
Speaker 1: and their pushback of on the administration for doing so,
Speaker 1: I see it highly unlikely that the President she spends
Speaker 1: much time talking about Iran in and of itself with
Speaker 1: President Trump outside of what President Trump wants to raise
Speaker 1: during the meetings. The bigger question is where would they
Speaker 1: land on these critical issues that we've already gone over,
Speaker 1: and will the meeting go forward on the timeline that's
Speaker 1: been put forward, given the fact that we simply don't
Speaker 1: know right now when this war will end, and how
Speaker 1: that could impact both this meeting and the theoretically up
Speaker 1: to four additional meetings they're supposed to have this year.
Speaker 2: You would have been in a position to plan some
Speaker 2: of these international meetings when you were sitting in the
Speaker 2: White House and working working for the Vice President. And
Speaker 2: you have to feel sorry for the skeleton team that
Speaker 2: they're now trying to even begin to think about how
Speaker 2: that summit's to play out. Fran I give you a
Speaker 2: little last word just on that summit. I mean you
Speaker 2: and I were in Hong Kong together not so long
Speaker 2: ago talking about our expectations for the summit. Are you
Speaker 2: looking at that meeting from a different perspective now or
Speaker 2: expecting anything different to come out of it as a
Speaker 2: result of the last few weeks.
Speaker 3: I just wonder how China would make anny gains in
Speaker 3: terms of asking the US to relax its tech export technology,
Speaker 3: or would it ask for it at all now? Given
Speaker 3: the progress Chinese companies have made, and probably they want
Speaker 3: to put up a phase of not afraid of being
Speaker 3: boycott or cut off from key technology. We can't always
Speaker 3: give up our own. And another point is I think
Speaker 3: the US will asks for China to buy a lot
Speaker 3: more agricultural products. I think that could be one of
Speaker 3: the major requests by the US.
Speaker 2: Yeah, all those farmers who are hurting from well another
Speaker 2: reason now higher fertilizer prices, along with all the other
Speaker 2: ones that they've been given by this administration. Adam fran
Speaker 2: thank you so much, Thank you.
Speaker 1: Thanks for having.
Speaker 2: Thanks for listening to Trumponomics from Bloomberg. It was hosted
Speaker 2: by me Stephanie Flanders, and I was joined by Bloomberg
Speaker 2: Economics senior geoeconomics analysts Adam Ferrar and Fran Wang from
Speaker 2: Bloomberg's China Economy and Government team. Trumponomics was produced by
Speaker 2: Moses Dam with Summer Sadi and help from Amy Keen.
Speaker 2: Sound design was by Blake Maples and Kelly Gary. Please
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Speaker 2: and review it highly wherever you listen