1 00:00:02,000 --> 00:00:05,160 Speaker 1: Hey, odd lots listeners. It's Joe and Tracy here. We've 2 00:00:05,200 --> 00:00:08,840 Speaker 1: got a couple of quick editors notes for you. One 3 00:00:08,960 --> 00:00:12,600 Speaker 1: is our recent guest Craig Wiggins, misidentified the company Aurora 4 00:00:13,039 --> 00:00:16,640 Speaker 1: as building to Scale that was around the four four 5 00:00:17,079 --> 00:00:20,800 Speaker 1: mark in the Cannabis episode. The correct company is Afria. 6 00:00:21,600 --> 00:00:24,279 Speaker 1: And one more note for you before we begin. We 7 00:00:24,360 --> 00:00:28,840 Speaker 1: actually recorded this episode on the week of October eighth, 8 00:00:28,960 --> 00:00:31,520 Speaker 1: and we refer to some events that were taking place 9 00:00:31,560 --> 00:00:35,360 Speaker 1: that week, notably a pretty big market sell off globally 10 00:00:35,479 --> 00:00:50,440 Speaker 1: but especially in China. Hello and welcome to another edition 11 00:00:50,479 --> 00:00:54,360 Speaker 1: of the Loots Podcast. I'm Tracy Alloway and I'm Joe. 12 00:00:55,600 --> 00:00:58,440 Speaker 1: So Joe, I just want to double check, but you 13 00:00:58,680 --> 00:01:02,080 Speaker 1: realize that I've missed of to Hong Kong, right. I 14 00:01:02,480 --> 00:01:04,479 Speaker 1: Not only am I aware of the fact that you've 15 00:01:04,480 --> 00:01:07,840 Speaker 1: moved to Hong Kong, I am incredibly jealous that you 16 00:01:07,920 --> 00:01:09,800 Speaker 1: now live in Hong Kong because that's one of my 17 00:01:09,880 --> 00:01:11,880 Speaker 1: favorite cities in the entire world, with some of my 18 00:01:11,920 --> 00:01:14,840 Speaker 1: favorite food and I think, are we gonna come out 19 00:01:14,840 --> 00:01:17,160 Speaker 1: and visit you in a few weeks in Hong Kong. 20 00:01:17,440 --> 00:01:21,080 Speaker 1: So I'm actually personally excited to benefit from the fact 21 00:01:21,120 --> 00:01:24,680 Speaker 1: that you moved out there. Yes, and I promised to 22 00:01:24,720 --> 00:01:28,200 Speaker 1: take you to some amazing restaurants. But in the meantime, 23 00:01:29,240 --> 00:01:31,440 Speaker 1: one of the most exciting things about being in Hong 24 00:01:31,520 --> 00:01:36,200 Speaker 1: Kong has to be, uh, writing about and observing the 25 00:01:36,319 --> 00:01:40,840 Speaker 1: China story. And Hong Kong obviously is a special Administrative 26 00:01:40,840 --> 00:01:44,000 Speaker 1: region in its own right, but it's a good advantage 27 00:01:44,040 --> 00:01:47,600 Speaker 1: point from which to observe everything that's been going on 28 00:01:48,080 --> 00:01:51,240 Speaker 1: with the Chinese economy. And as you know, this is 29 00:01:51,280 --> 00:01:54,640 Speaker 1: becoming more and more important given that the U. S 30 00:01:54,640 --> 00:01:56,720 Speaker 1: seems to be on a on the verge of a 31 00:01:56,760 --> 00:01:59,960 Speaker 1: trade war with China. Wait, so we're not talking about 32 00:02:00,120 --> 00:02:03,680 Speaker 1: Chinese food on today's episode. No, but we should. We 33 00:02:03,720 --> 00:02:06,760 Speaker 1: should probably do that, we should do a odd lots 34 00:02:06,880 --> 00:02:11,480 Speaker 1: food spinoff, but we're not doing that today. Today we're 35 00:02:13,240 --> 00:02:15,919 Speaker 1: on No. No. I I just just all jokes aside. 36 00:02:16,000 --> 00:02:19,559 Speaker 1: I'm interested for reasons beyond the food. And you're absolutely 37 00:02:19,639 --> 00:02:23,080 Speaker 1: right that it just feels like there's a moment where 38 00:02:23,160 --> 00:02:27,760 Speaker 1: understanding what's going on in China feels particularly important, right, 39 00:02:27,840 --> 00:02:31,600 Speaker 1: And I should say, Uh, we're recording this in a 40 00:02:31,639 --> 00:02:37,240 Speaker 1: week that's been particularly terrible for Chinese markets and Chinese assets. 41 00:02:37,560 --> 00:02:41,239 Speaker 1: When I left the office today, the Shanghai Composite was 42 00:02:41,320 --> 00:02:45,560 Speaker 1: down something like five cent ten cents. The big Internet 43 00:02:45,560 --> 00:02:49,280 Speaker 1: giant that we have here had at one point dropped 44 00:02:49,320 --> 00:02:53,280 Speaker 1: about seven points seven percent. So it really feels like 45 00:02:53,360 --> 00:02:55,880 Speaker 1: Chinese markets are bearing the brunt of a lot of 46 00:02:55,919 --> 00:03:00,080 Speaker 1: the trade war pressures. But beyond that, one thing I've 47 00:03:00,160 --> 00:03:02,680 Speaker 1: learned just from being here for a few weeks is that, 48 00:03:02,800 --> 00:03:07,920 Speaker 1: of course, there is this ongoing question about China's economic 49 00:03:08,040 --> 00:03:13,480 Speaker 1: adjustment and whether or not uh the aspirations of China's 50 00:03:13,600 --> 00:03:17,480 Speaker 1: rulers the Chinese Communist Party are going to actually be 51 00:03:17,600 --> 00:03:23,040 Speaker 1: compatible with modern capitalism. Right, it feels like with China 52 00:03:23,240 --> 00:03:25,760 Speaker 1: or at the intersection of a short term story and 53 00:03:25,800 --> 00:03:29,040 Speaker 1: a long term story. So the short term story is 54 00:03:29,120 --> 00:03:31,639 Speaker 1: maybe tensions with Trump, although that may turn into long 55 00:03:31,760 --> 00:03:35,360 Speaker 1: term there's the market sell off other sort of things 56 00:03:35,360 --> 00:03:38,280 Speaker 1: like that, and then the long term there's the efforts 57 00:03:38,320 --> 00:03:43,000 Speaker 1: to restructure the economy, the effort to become really important 58 00:03:43,000 --> 00:03:45,560 Speaker 1: in a bunch of big technological areas, which we've talked 59 00:03:45,560 --> 00:03:48,120 Speaker 1: about before on the show. And so part of the 60 00:03:48,200 --> 00:03:50,280 Speaker 1: question in my mind that I'm trying to wrap my 61 00:03:50,280 --> 00:03:53,080 Speaker 1: head around is to what degree to the short term 62 00:03:53,160 --> 00:03:58,040 Speaker 1: pressures sort of stymy the long term efforts, right, that's 63 00:03:58,080 --> 00:03:59,880 Speaker 1: actually a really good way of putting it, that in 64 00:04:00,040 --> 00:04:02,480 Speaker 1: her section of a short term and a long term story. 65 00:04:02,920 --> 00:04:05,960 Speaker 1: So we actually have the perfect guest to talk about 66 00:04:06,000 --> 00:04:08,680 Speaker 1: this today. Not only is he a sort of a 67 00:04:08,720 --> 00:04:12,280 Speaker 1: long running China expert, but he might actually be the 68 00:04:12,320 --> 00:04:16,240 Speaker 1: coolest economist that I know. The last time I saw 69 00:04:16,320 --> 00:04:18,960 Speaker 1: him in person, he was wearing a leather jacket and 70 00:04:19,080 --> 00:04:22,520 Speaker 1: jeans and he was on his way to Glastonbury. So um, 71 00:04:22,520 --> 00:04:26,880 Speaker 1: pretty cool. I'm pretty excited, all right. So our guest 72 00:04:27,320 --> 00:04:31,440 Speaker 1: for this episode is George Magnus. He is now an 73 00:04:31,480 --> 00:04:35,679 Speaker 1: independent economist. He has also research associate at the China 74 00:04:35,800 --> 00:04:39,039 Speaker 1: Center at Oxford University and so asked. He is also 75 00:04:39,080 --> 00:04:41,720 Speaker 1: the author of a new book called Red Flags, all 76 00:04:41,760 --> 00:04:47,040 Speaker 1: about the pressures facing China and its ruling authorities, and 77 00:04:47,120 --> 00:04:50,760 Speaker 1: he has the former chief economist at UBS. So, George, 78 00:04:50,800 --> 00:04:53,839 Speaker 1: thank you so much for joining us today. Well, thank 79 00:04:53,839 --> 00:04:57,120 Speaker 1: you for having me. Uh So, George, I guess just 80 00:04:57,160 --> 00:05:00,799 Speaker 1: as an initial question, maybe for our listeners, you could 81 00:05:00,800 --> 00:05:05,000 Speaker 1: walk us through how you became a China expert in 82 00:05:05,040 --> 00:05:10,280 Speaker 1: the first place. Yeah, sure, So I think my first 83 00:05:10,360 --> 00:05:14,280 Speaker 1: visit to China actually was in when I was a 84 00:05:14,360 --> 00:05:17,200 Speaker 1: kind of a rookie for an exchange economist at a 85 00:05:17,960 --> 00:05:20,120 Speaker 1: UK merchant bank that went by the name of s 86 00:05:20,160 --> 00:05:24,760 Speaker 1: G Warburg, which later was taken over by a Swiss 87 00:05:24,800 --> 00:05:29,880 Speaker 1: bank corporation which eventually merged with UBS. And so that's 88 00:05:30,279 --> 00:05:34,120 Speaker 1: how I kind of became kind of chief economist at UBS. 89 00:05:34,160 --> 00:05:37,320 Speaker 1: And then China was very then definitely not just the 90 00:05:37,400 --> 00:05:38,760 Speaker 1: kind of a place that I used to go to 91 00:05:38,839 --> 00:05:41,840 Speaker 1: pitch at the People's Bank of China and the State 92 00:05:41,839 --> 00:05:45,279 Speaker 1: Administration of Foreign Exchange for for f X business, but 93 00:05:45,400 --> 00:05:50,200 Speaker 1: also a much more kind of meaningful kind of investigations 94 00:05:50,200 --> 00:05:53,200 Speaker 1: into what made the economy tick and so on. But 95 00:05:53,279 --> 00:05:55,720 Speaker 1: I think my my big break, so to speak, came 96 00:05:55,880 --> 00:05:59,279 Speaker 1: when actually I took a step away from management functions 97 00:05:59,279 --> 00:06:02,880 Speaker 1: at UBS and had much more time to look at 98 00:06:03,120 --> 00:06:06,360 Speaker 1: serious issues like what was going on in you know, 99 00:06:06,440 --> 00:06:11,120 Speaker 1: the financial crisis and sub prime mortgages and the economy 100 00:06:11,160 --> 00:06:13,000 Speaker 1: on the other side of the world, which is which 101 00:06:13,040 --> 00:06:16,800 Speaker 1: is China. And I really have spent the last kind 102 00:06:16,800 --> 00:06:19,680 Speaker 1: of ten or fifteen years, i'd say, just trying to 103 00:06:19,920 --> 00:06:22,880 Speaker 1: penetrate what is really a kind of a very opaque 104 00:06:23,360 --> 00:06:30,640 Speaker 1: and still untransparent economic and particularly political system. I feel like, 105 00:06:31,120 --> 00:06:33,880 Speaker 1: at best I have I'm I'm sort of a tourist 106 00:06:33,920 --> 00:06:36,520 Speaker 1: when it comes to understanding China. I mean, I don't 107 00:06:36,520 --> 00:06:39,240 Speaker 1: even know if I'm that good at understanding the US. 108 00:06:39,279 --> 00:06:41,479 Speaker 1: But at no point have I ever felt like I 109 00:06:41,560 --> 00:06:44,840 Speaker 1: had a particularly good grasp on what's really going on. 110 00:06:44,920 --> 00:06:48,520 Speaker 1: I have some vague idea that they want to restructure 111 00:06:48,520 --> 00:06:52,360 Speaker 1: their economy and that they have overcapacity in some legacy 112 00:06:52,400 --> 00:06:57,080 Speaker 1: industrial state owned sectors. There are concerns about real estate bubbles, 113 00:06:57,400 --> 00:07:00,320 Speaker 1: and they want to lead in tech. And when after 114 00:07:00,320 --> 00:07:03,279 Speaker 1: I list off that that, I'm kind of coming to 115 00:07:03,320 --> 00:07:06,560 Speaker 1: the end of my feel for the Chinese economy. What 116 00:07:06,640 --> 00:07:10,800 Speaker 1: does it take to understand China? Is it repeated visits? 117 00:07:10,880 --> 00:07:14,680 Speaker 1: Is it repeated conversations? Is it a granular understanding of 118 00:07:14,720 --> 00:07:17,360 Speaker 1: the data beyond the headlines? Because I kind of feel 119 00:07:17,360 --> 00:07:20,920 Speaker 1: like I'm not alone, I suspect many American commentators really 120 00:07:21,000 --> 00:07:23,640 Speaker 1: have only the most vague sense of how the Chinese 121 00:07:23,640 --> 00:07:27,480 Speaker 1: economy really works. Well one, Joe, I think you're probably 122 00:07:27,520 --> 00:07:31,000 Speaker 1: being rather modest too. I mean, it is quite a 123 00:07:31,080 --> 00:07:35,040 Speaker 1: serious effort, really to try to understand a country that 124 00:07:35,120 --> 00:07:37,880 Speaker 1: basically doesn't really work in the same way that our 125 00:07:37,920 --> 00:07:41,800 Speaker 1: western economies work. But I would say that, you know, 126 00:07:41,840 --> 00:07:43,720 Speaker 1: a good place to start is you people need to 127 00:07:43,760 --> 00:07:46,680 Speaker 1: understand a little bit about China's history and about how 128 00:07:46,720 --> 00:07:50,400 Speaker 1: it got to where it is today. So obviously, during 129 00:07:50,440 --> 00:07:53,520 Speaker 1: the early years of the People's Republic under Mautsi Tong, 130 00:07:54,240 --> 00:07:56,680 Speaker 1: I mean, China actually grew quite quickly, but it was 131 00:07:57,200 --> 00:08:01,520 Speaker 1: still a pretty impoverished place um and nothing really changed 132 00:08:01,600 --> 00:08:03,720 Speaker 1: in terms of its ketch up on the rest of 133 00:08:03,720 --> 00:08:09,200 Speaker 1: the world until Dank Shaping came to power in the 134 00:08:09,240 --> 00:08:11,600 Speaker 1: end of the nineteen seventies beginning of the nineteen eighties, 135 00:08:12,040 --> 00:08:16,920 Speaker 1: and then then things started to really move because he 136 00:08:16,720 --> 00:08:20,320 Speaker 1: was he was basically renowned or is certainly people a 137 00:08:20,440 --> 00:08:23,560 Speaker 1: tribute to him the phrase that you know, I don't 138 00:08:23,600 --> 00:08:25,240 Speaker 1: care if it's a black cat or a yellow cat, 139 00:08:25,280 --> 00:08:27,640 Speaker 1: so long as it's a cat that catches mice, And 140 00:08:27,720 --> 00:08:31,640 Speaker 1: that was the kind of his way of basically saying 141 00:08:31,680 --> 00:08:34,120 Speaker 1: to the Communist Party that you know, we have to 142 00:08:34,120 --> 00:08:37,000 Speaker 1: be prepared to experiment with things that we haven't done before, 143 00:08:37,040 --> 00:08:41,560 Speaker 1: particularly the marriage or the interaction between you know, a 144 00:08:41,640 --> 00:08:44,880 Speaker 1: state run economic system and the use of market mechanisms, 145 00:08:44,880 --> 00:08:47,240 Speaker 1: So people need to understand a little bit how that 146 00:08:47,320 --> 00:08:51,440 Speaker 1: happened and and also how we've kind of reached a 147 00:08:51,480 --> 00:08:55,319 Speaker 1: point now. And I don't really mean in two thousand 148 00:08:55,360 --> 00:08:57,439 Speaker 1: and eighteen, because I think this has been brewing for 149 00:08:57,480 --> 00:09:00,040 Speaker 1: about five or six years, but it's a point and 150 00:09:00,120 --> 00:09:02,840 Speaker 1: I call in the book the end of extrapolation, because 151 00:09:03,040 --> 00:09:06,079 Speaker 1: whatever we thought we knew about China during over the 152 00:09:06,160 --> 00:09:08,640 Speaker 1: last thirty or thirty five years, I don't think you 153 00:09:08,679 --> 00:09:12,120 Speaker 1: can kind of extrapolate that on a spreadsheet and say, well, 154 00:09:12,200 --> 00:09:14,199 Speaker 1: because it's done this for the last you know, three 155 00:09:14,280 --> 00:09:16,840 Speaker 1: or four decades, we think we can probably you know, 156 00:09:16,880 --> 00:09:18,960 Speaker 1: push this forward into the future and this is what 157 00:09:19,080 --> 00:09:21,480 Speaker 1: China will look like in twenty thirty or twenty forty 158 00:09:21,600 --> 00:09:24,920 Speaker 1: or fifty, because I think it has reached that point 159 00:09:24,920 --> 00:09:28,920 Speaker 1: where it needs a big makeover, a big transformation. And 160 00:09:29,000 --> 00:09:30,560 Speaker 1: you know, you don't have to take my word for it, 161 00:09:30,600 --> 00:09:33,680 Speaker 1: because in two thousand and seven and two thousand and eleven, 162 00:09:33,720 --> 00:09:36,520 Speaker 1: so this is before Seeing Pin came to power. So 163 00:09:36,559 --> 00:09:39,960 Speaker 1: this was when Jujintao and when Jibau were the president 164 00:09:40,080 --> 00:09:44,280 Speaker 1: and the Premier of China respectively, and when Jibau notoriously 165 00:09:44,360 --> 00:09:47,160 Speaker 1: said in in in both in both of these years 166 00:09:47,200 --> 00:09:51,959 Speaker 1: that the Chinese economy was unstable and uncoordinated and unbalanced 167 00:09:52,760 --> 00:09:56,480 Speaker 1: and needed to to change. And even as recently as 168 00:09:56,559 --> 00:10:00,920 Speaker 1: last year at the Party Congress, he's said that the 169 00:10:00,960 --> 00:10:05,080 Speaker 1: economy was unbalanced and inadequate to meet the people's needs 170 00:10:05,120 --> 00:10:08,520 Speaker 1: for a better quality of life. So everybody agrees, including 171 00:10:08,559 --> 00:10:11,560 Speaker 1: the Chinese leadership, that it needs a transformation, it needs 172 00:10:11,559 --> 00:10:13,760 Speaker 1: a makeover. And so what we're all trying to get 173 00:10:13,760 --> 00:10:16,319 Speaker 1: to grips with really is how to try to understand 174 00:10:16,360 --> 00:10:22,160 Speaker 1: what's required and what whether this government really has the 175 00:10:22,240 --> 00:10:25,520 Speaker 1: wherewithal and the nouns to be able to make it happen. 176 00:10:26,120 --> 00:10:28,520 Speaker 1: So I have a sort of step back question, which 177 00:10:28,559 --> 00:10:31,280 Speaker 1: is do we have a good idea of where the 178 00:10:31,360 --> 00:10:35,040 Speaker 1: Chinese government actually wants to get to, Like is there 179 00:10:35,080 --> 00:10:39,080 Speaker 1: a clear vision of what they want their economy to 180 00:10:39,160 --> 00:10:43,400 Speaker 1: look like in ten or twenty or thirty years. Yes, 181 00:10:43,480 --> 00:10:47,960 Speaker 1: we do have an idea. In fact, the thirteenth five 182 00:10:48,040 --> 00:10:51,280 Speaker 1: Year Plan which was which is now sort of actually 183 00:10:51,360 --> 00:10:53,560 Speaker 1: getting towards the last couple of years of its of 184 00:10:53,640 --> 00:10:57,720 Speaker 1: its kind of limit. Um I mean, does layout kind 185 00:10:57,720 --> 00:11:02,040 Speaker 1: of guidelines and and signed posts for how to develop 186 00:11:02,200 --> 00:11:07,520 Speaker 1: China into a modern economy with with modern industries and 187 00:11:07,520 --> 00:11:11,640 Speaker 1: and moving away from its kind of traditional reliance on 188 00:11:11,720 --> 00:11:16,200 Speaker 1: heavy industry like steel and coal and chemicals to something 189 00:11:16,280 --> 00:11:19,160 Speaker 1: that's a little bit more familiar to us, in terms 190 00:11:19,160 --> 00:11:23,920 Speaker 1: of more service producing industries, more consumer oriented sectors, and 191 00:11:23,960 --> 00:11:26,600 Speaker 1: so on. And I was going to say the sexier bit, 192 00:11:26,600 --> 00:11:28,400 Speaker 1: but actually what I mean is kind of more interesting. 193 00:11:28,440 --> 00:11:32,600 Speaker 1: Bit about China's vision really came about in two thousand 194 00:11:32,600 --> 00:11:36,559 Speaker 1: and sixteen, so not that long ago, when Alpha Go, 195 00:11:37,440 --> 00:11:41,560 Speaker 1: as many people may remember, beat the reigning world champion 196 00:11:41,960 --> 00:11:46,079 Speaker 1: of the game Go, and this shocked the Chinese into 197 00:11:46,400 --> 00:11:50,199 Speaker 1: basically saying we want to be the world masters and 198 00:11:50,360 --> 00:11:58,200 Speaker 1: artificial intelligence by by so or five, and and in 199 00:11:58,240 --> 00:12:03,760 Speaker 1: between time there was also a very important industrial strategy 200 00:12:03,800 --> 00:12:09,400 Speaker 1: called Made in China, which happens to be basically the 201 00:12:09,440 --> 00:12:14,840 Speaker 1: butt of the White House's objections to China's trade and 202 00:12:14,920 --> 00:12:19,600 Speaker 1: industrial policies. And this sets out very clear quantitative, top 203 00:12:19,640 --> 00:12:24,360 Speaker 1: down targets about China's aspirations to be where it wants 204 00:12:24,400 --> 00:12:28,320 Speaker 1: to be in ten key sectors like um, you know, 205 00:12:28,400 --> 00:12:32,600 Speaker 1: BioMed and electric vehicles and green energy and so on. 206 00:12:33,280 --> 00:12:39,520 Speaker 1: By so, they definitely do have a very clear, top 207 00:12:39,640 --> 00:12:43,360 Speaker 1: down vision about what they want to achieve and the 208 00:12:43,480 --> 00:12:45,440 Speaker 1: kind of the time scale on which they want to 209 00:12:45,480 --> 00:12:49,080 Speaker 1: do that by. But in a way that's kind of 210 00:12:49,120 --> 00:12:52,079 Speaker 1: the easy bit. Right. You can say, you know, I 211 00:12:52,120 --> 00:12:54,120 Speaker 1: want to be Superman, but you you don't really know 212 00:12:54,160 --> 00:12:56,080 Speaker 1: how that's going to happen or what you need to 213 00:12:56,080 --> 00:12:58,440 Speaker 1: do to make that happen. And this is kind of 214 00:12:58,480 --> 00:13:01,240 Speaker 1: what we're all trying to this in Bowel really about 215 00:13:01,320 --> 00:13:05,440 Speaker 1: Chinese policy. At the moment, I hadn't realized that the 216 00:13:05,480 --> 00:13:10,120 Speaker 1: AlphaGo victory was such a wake up call moment. We 217 00:13:10,160 --> 00:13:12,760 Speaker 1: had another episode where we talked about the maid in China. 218 00:13:14,760 --> 00:13:17,920 Speaker 1: But one question that I have so you mentioned, okay, 219 00:13:17,960 --> 00:13:20,080 Speaker 1: there was this incident. They're like, all right, we want 220 00:13:20,080 --> 00:13:23,160 Speaker 1: to lead in AI. So they set out the national 221 00:13:23,240 --> 00:13:27,319 Speaker 1: priority that we want to be a leader and artificial intelligence. 222 00:13:27,600 --> 00:13:31,359 Speaker 1: What happens then, so they set the priority, what specifically 223 00:13:31,600 --> 00:13:35,400 Speaker 1: do they do to implement it? Well, in the first place, 224 00:13:35,800 --> 00:13:39,120 Speaker 1: it starts with with with targets, right, so they say that, 225 00:13:39,559 --> 00:13:41,360 Speaker 1: you know, we want to be a world leader, we 226 00:13:41,400 --> 00:13:46,000 Speaker 1: want to have market share of you know, or or 227 00:13:47,880 --> 00:13:52,080 Speaker 1: you know, we want to reduce our dependence on UM 228 00:13:52,120 --> 00:13:55,680 Speaker 1: you know, American semiconductor companies, because we want to develop 229 00:13:55,720 --> 00:13:58,440 Speaker 1: these industries ourselves. In fact, that happens to be a 230 00:13:58,520 --> 00:14:05,160 Speaker 1: very live issue for China, particularly since the incident that 231 00:14:05,200 --> 00:14:09,560 Speaker 1: we had earlier this year when the United States basically 232 00:14:10,200 --> 00:14:14,080 Speaker 1: sort of well restrained as ZnTe from being able to 233 00:14:15,080 --> 00:14:18,920 Speaker 1: access products, and that was subsequently kind of softened up. 234 00:14:18,920 --> 00:14:21,359 Speaker 1: It was a national security issue at the time, over 235 00:14:21,720 --> 00:14:26,360 Speaker 1: zes relationships with with Iran. But the the it starts 236 00:14:26,400 --> 00:14:30,400 Speaker 1: off really with you know, the prioritization of Chinese companies 237 00:14:31,080 --> 00:14:36,440 Speaker 1: gaining or winning market share in specific industries and sub sectors. 238 00:14:37,080 --> 00:14:40,160 Speaker 1: And then there are is a whole raft of industrial 239 00:14:40,240 --> 00:14:46,960 Speaker 1: policies that range from subsidies to tax benefits to the 240 00:14:47,000 --> 00:14:52,440 Speaker 1: facilitation of you know, university research departments with UM I 241 00:14:52,440 --> 00:14:55,840 Speaker 1: mean nominally private companies like for example bai Do and 242 00:14:55,960 --> 00:15:00,160 Speaker 1: ten Cent and UM and Ali Baba and san Me. 243 00:15:00,400 --> 00:15:02,000 Speaker 1: So there are you know, with all the kind of 244 00:15:02,080 --> 00:15:06,120 Speaker 1: leading tech companies in China to to basically help them 245 00:15:06,120 --> 00:15:08,800 Speaker 1: along their way to achieve these targets. I mean in 246 00:15:08,800 --> 00:15:13,000 Speaker 1: a way, I mean some of these companies are private 247 00:15:13,040 --> 00:15:16,200 Speaker 1: already we think of them as private, but actually then 248 00:15:16,360 --> 00:15:18,320 Speaker 1: they're kind of not private in the way that we 249 00:15:18,360 --> 00:15:21,840 Speaker 1: think about private companies in the West, because the chief 250 00:15:21,840 --> 00:15:25,440 Speaker 1: executives and the boards of these companies no precisely which 251 00:15:25,480 --> 00:15:27,840 Speaker 1: side of the you know, which their their bread is 252 00:15:27,880 --> 00:15:30,920 Speaker 1: buttered on. And um, you know, they wouldn't do anything 253 00:15:30,920 --> 00:15:34,720 Speaker 1: to fall foul of the government, and they basically, you know, 254 00:15:34,840 --> 00:15:41,960 Speaker 1: receive benefits and and favors and procurement privileges from the government. 255 00:15:42,000 --> 00:15:45,880 Speaker 1: So they are nominally private, but not kind of private 256 00:15:45,880 --> 00:15:49,040 Speaker 1: as we think of them. Um. So I want to 257 00:15:49,160 --> 00:15:52,760 Speaker 1: zero in on the corporate story a little bit because 258 00:15:53,280 --> 00:15:55,720 Speaker 1: on the day that we're recording this, we did just 259 00:15:55,720 --> 00:16:00,200 Speaker 1: see a very big sell off in Chinese stocks, and 260 00:16:00,280 --> 00:16:03,080 Speaker 1: it's kind of unusual. This came in the midst of 261 00:16:03,120 --> 00:16:05,680 Speaker 1: a global sell off, but it was a little bit 262 00:16:05,720 --> 00:16:09,320 Speaker 1: surprising because Chinese stocks had already fallen by quite a 263 00:16:09,320 --> 00:16:13,520 Speaker 1: lot before today. They had really borne the brunt of 264 00:16:13,560 --> 00:16:17,120 Speaker 1: some of the trade war concerns, so some people were 265 00:16:17,160 --> 00:16:21,800 Speaker 1: surprised that they fell out of bed today as well. Um, 266 00:16:21,920 --> 00:16:26,440 Speaker 1: what's going on here, and our Chinese companies as vulnerable 267 00:16:26,640 --> 00:16:29,560 Speaker 1: to the trade war fears as the market seems to 268 00:16:29,560 --> 00:16:36,040 Speaker 1: be implying, Well, it's this this particular week in which 269 00:16:36,040 --> 00:16:38,200 Speaker 1: we're doing this recording is it's been quite a little 270 00:16:38,200 --> 00:16:41,560 Speaker 1: bit complicated because the previous week the Chinese had been 271 00:16:41,600 --> 00:16:44,240 Speaker 1: on holiday, so there's been a little bit of a 272 00:16:44,280 --> 00:16:49,920 Speaker 1: catch up going on because markets have been weaker following 273 00:16:50,200 --> 00:16:54,760 Speaker 1: very robust US economic data and revised interest rate expectations, 274 00:16:54,760 --> 00:16:56,640 Speaker 1: So there was a little bit of catch up going on. 275 00:16:56,800 --> 00:16:59,520 Speaker 1: But you're absolutely right, Tracy. I think the you know, 276 00:16:59,600 --> 00:17:04,960 Speaker 1: there's there's an ongoing concern that even though the trade 277 00:17:05,000 --> 00:17:10,040 Speaker 1: conflict hasn't really compromised the Chinese economy or Chinese companies 278 00:17:10,440 --> 00:17:15,600 Speaker 1: in any material way as yet, and by the way, 279 00:17:15,720 --> 00:17:19,320 Speaker 1: if it has, then it's probably been offset by the 280 00:17:19,440 --> 00:17:24,119 Speaker 1: easing of lending and interest rate and bank reserve policies 281 00:17:24,160 --> 00:17:27,320 Speaker 1: that have been taken this year. But there is an 282 00:17:27,320 --> 00:17:31,600 Speaker 1: ongoing feeling that cumulatively the trade war will have an 283 00:17:31,600 --> 00:17:36,760 Speaker 1: effect on the Chinese economy, aggravating what is already a 284 00:17:37,080 --> 00:17:41,560 Speaker 1: slowing down in investment, and to some degree also in 285 00:17:41,600 --> 00:17:46,400 Speaker 1: the consumer sector as well. So there is for example, 286 00:17:47,119 --> 00:17:49,800 Speaker 1: quite close attention paid. It's always difficult to know what 287 00:17:49,880 --> 00:17:51,359 Speaker 1: to make of it, but just as it is in 288 00:17:51,800 --> 00:17:54,840 Speaker 1: the United States or in the EU, for example, people 289 00:17:54,880 --> 00:17:58,720 Speaker 1: pay a lot of attention to the purchasing manager in disease. 290 00:17:59,160 --> 00:18:03,520 Speaker 1: These are kind of vays of of major companies and 291 00:18:03,600 --> 00:18:07,720 Speaker 1: medium sized companies about sentiment that are that come out 292 00:18:07,800 --> 00:18:11,080 Speaker 1: usually at the first couple of trading days each month, 293 00:18:11,680 --> 00:18:15,959 Speaker 1: and the ones that came out at the beginning of October, 294 00:18:16,080 --> 00:18:19,280 Speaker 1: which is now just about kind of eight nine days 295 00:18:19,320 --> 00:18:23,560 Speaker 1: away behind us were notable really because they were quite 296 00:18:23,640 --> 00:18:25,960 Speaker 1: weak when they when you look at the curve of 297 00:18:26,040 --> 00:18:28,840 Speaker 1: components that are about export orders. Okay, that's kind of 298 00:18:28,880 --> 00:18:31,280 Speaker 1: what we would expect to see if tariff's are starting 299 00:18:31,320 --> 00:18:34,480 Speaker 1: to have an effect. They were quite weak when it 300 00:18:34,560 --> 00:18:38,800 Speaker 1: came to employment. Now that's quite important really because obviously 301 00:18:38,840 --> 00:18:44,040 Speaker 1: the legitimate legitimacy of the Communist Party, you know, basically rests, 302 00:18:44,400 --> 00:18:48,600 Speaker 1: amongst other things, but certainly importantly on you know, the 303 00:18:48,640 --> 00:18:53,240 Speaker 1: achievement of sustainable growth in living standards and prosperity without interruption, 304 00:18:53,560 --> 00:18:56,440 Speaker 1: in which high levels of employment are are really important. 305 00:18:56,480 --> 00:18:59,840 Speaker 1: So if the labor market is weakening, then that's obviously 306 00:19:00,080 --> 00:19:02,439 Speaker 1: think we need to kind of pay some attention to. 307 00:19:03,119 --> 00:19:05,879 Speaker 1: But there were other indications in these surveys that that 308 00:19:06,000 --> 00:19:09,960 Speaker 1: things are not going all that well for the economy. 309 00:19:10,080 --> 00:19:14,240 Speaker 1: And I think the trade conflict is something which cumulatively, 310 00:19:14,240 --> 00:19:17,159 Speaker 1: as I say, will have an effect not only on 311 00:19:17,440 --> 00:19:21,440 Speaker 1: the Chinese economy, but it might if it's protracted, it 312 00:19:21,520 --> 00:19:25,560 Speaker 1: might have an effect on the construction of supply chains 313 00:19:25,640 --> 00:19:30,440 Speaker 1: and the location of businesses by foreign companies who may 314 00:19:30,560 --> 00:19:36,000 Speaker 1: feel that it is judicious to diversify or move some 315 00:19:36,200 --> 00:19:40,400 Speaker 1: activities out of China. So these things could be cumulatively 316 00:19:40,480 --> 00:19:43,840 Speaker 1: quite important. George, I want to talk more about the 317 00:19:43,920 --> 00:19:47,239 Speaker 1: trade board tensions in a second, but Tracy started off 318 00:19:47,240 --> 00:19:49,600 Speaker 1: her question asking about the stock market, and something that 319 00:19:49,640 --> 00:19:52,840 Speaker 1: I'm always sort of curious about is how important is 320 00:19:52,920 --> 00:19:55,240 Speaker 1: the stock market in China? And I asked because I 321 00:19:55,280 --> 00:19:57,840 Speaker 1: think it's very important here for a number of reasons. 322 00:19:57,840 --> 00:20:01,280 Speaker 1: In the US, because of decent part of the population 323 00:20:01,359 --> 00:20:05,360 Speaker 1: owned stocks. It is arising stock market can spur more 324 00:20:05,400 --> 00:20:09,240 Speaker 1: investment as people want to flip startups onto the public market. 325 00:20:09,440 --> 00:20:12,359 Speaker 1: There's all kinds of reasons to watch the U s 326 00:20:12,359 --> 00:20:15,600 Speaker 1: stock market as a decent barometer for other bigger trends 327 00:20:15,600 --> 00:20:19,240 Speaker 1: in the US economy. Does the Chinese stock market play 328 00:20:19,280 --> 00:20:22,600 Speaker 1: that same role or is it not as good of 329 00:20:22,680 --> 00:20:26,439 Speaker 1: a gauge into what's going on. No, I mean it 330 00:20:26,600 --> 00:20:29,880 Speaker 1: isn't as good a gauge. I mean it's it's not 331 00:20:30,200 --> 00:20:35,000 Speaker 1: widely owned by Chinese households in the way that stocks 332 00:20:35,200 --> 00:20:40,240 Speaker 1: are held, either directly or through four oh one K 333 00:20:40,520 --> 00:20:45,280 Speaker 1: plans or other forms of pension assets. So ownership by 334 00:20:45,320 --> 00:20:50,600 Speaker 1: citizens of the Chinese equity market is not wide, and 335 00:20:51,520 --> 00:20:55,239 Speaker 1: it does doesn't have the same kind of role in 336 00:20:55,359 --> 00:21:00,679 Speaker 1: terms of equity rate capital raising for companies and and 337 00:21:00,680 --> 00:21:04,880 Speaker 1: and wealth ownership as it does in in the United States, 338 00:21:04,960 --> 00:21:08,120 Speaker 1: for example. I don't really think it has the kind 339 00:21:08,119 --> 00:21:12,040 Speaker 1: of economic effect or can have the kind of galvanizing 340 00:21:12,240 --> 00:21:15,800 Speaker 1: or destructive the economic effect that it might do in 341 00:21:16,240 --> 00:21:19,760 Speaker 1: Western countries. So I guess I'm curious. But if you 342 00:21:19,800 --> 00:21:25,320 Speaker 1: were to characterize the Chinese economy at the moment, how 343 00:21:25,320 --> 00:21:27,760 Speaker 1: would you do? So? Is it strong? Is it weak? 344 00:21:27,960 --> 00:21:31,399 Speaker 1: Is it going through a transition period? What does it 345 00:21:31,440 --> 00:21:36,080 Speaker 1: actually look like to you? I think it's definitely going 346 00:21:36,119 --> 00:21:39,440 Speaker 1: through a transition, I would say, Tracy. I mean it's um, 347 00:21:39,440 --> 00:21:43,800 Speaker 1: it's it's yet another transformation. It's waiting to happen, but 348 00:21:43,920 --> 00:21:45,800 Speaker 1: we don't really know what the end game is going 349 00:21:45,840 --> 00:21:51,119 Speaker 1: to look like. So the basic transformation is from a 350 00:21:51,680 --> 00:21:55,480 Speaker 1: or an economy that has become far too dependent on 351 00:21:55,680 --> 00:22:02,480 Speaker 1: credit creation to keep growing, far too in which misallocation 352 00:22:02,560 --> 00:22:07,360 Speaker 1: of resources and misallocation of lending has featured all two prominently, 353 00:22:07,920 --> 00:22:14,160 Speaker 1: and which needs to basically restructure away from its over 354 00:22:15,160 --> 00:22:22,199 Speaker 1: lee heavy dependence on capital investment and credit to a 355 00:22:22,400 --> 00:22:29,760 Speaker 1: greater reliance on more open service producing industries and and 356 00:22:29,760 --> 00:22:33,200 Speaker 1: and the consumer. So this is the kind of transition 357 00:22:33,280 --> 00:22:37,399 Speaker 1: which that the Chinese call it rebalancing. So this is 358 00:22:37,440 --> 00:22:39,480 Speaker 1: the kind of transformation China has got to try to 359 00:22:39,560 --> 00:22:44,200 Speaker 1: go through. But it's very very early days, and we're 360 00:22:44,240 --> 00:22:48,159 Speaker 1: already starting to run into a few issues with the 361 00:22:48,200 --> 00:22:53,959 Speaker 1: whole de leveraging cycle, which began with great seriousness at 362 00:22:53,960 --> 00:22:56,159 Speaker 1: the end of two thousand and sixteen. I think the 363 00:22:56,240 --> 00:23:00,520 Speaker 1: Chinese leadership became very cognizant of the fact they could 364 00:23:00,560 --> 00:23:05,600 Speaker 1: not carry on with this sort of overly heavy dependence 365 00:23:05,680 --> 00:23:10,000 Speaker 1: on credit creation um and they've been partially successful in 366 00:23:10,680 --> 00:23:15,960 Speaker 1: limiting the growth of lending to companies and in cleaning 367 00:23:16,040 --> 00:23:20,320 Speaker 1: up some of the more egregious forms of risk in 368 00:23:20,960 --> 00:23:24,719 Speaker 1: funding of that lending, in other words, through overnight and 369 00:23:24,960 --> 00:23:29,359 Speaker 1: very very short maturity deposits in the inter bank market 370 00:23:29,520 --> 00:23:33,720 Speaker 1: and through products that have become known as wealth management products. 371 00:23:33,720 --> 00:23:36,439 Speaker 1: So they've been quite quite adept at doing that up 372 00:23:36,480 --> 00:23:39,199 Speaker 1: to a point. But at the same time they haven't 373 00:23:39,240 --> 00:23:43,760 Speaker 1: really been able to get a strong grip on containing 374 00:23:43,800 --> 00:23:47,200 Speaker 1: the growth of debt by local governments, which are really 375 00:23:47,280 --> 00:23:53,200 Speaker 1: important agents in the economy, and household debt, which previously 376 00:23:53,359 --> 00:23:57,000 Speaker 1: was actually rather tame, is now on a bit of 377 00:23:57,040 --> 00:24:00,119 Speaker 1: a tear. In fact, the ratio of household debt to 378 00:24:00,240 --> 00:24:03,960 Speaker 1: income in China as of about June of two thousand 379 00:24:04,000 --> 00:24:08,240 Speaker 1: and eighteen was almost a hundred and so, you know, 380 00:24:08,440 --> 00:24:12,280 Speaker 1: it's a mixed scorecard. And during the course of this 381 00:24:12,400 --> 00:24:16,080 Speaker 1: year two thousand and eighteen, we've seen lots of exhortations 382 00:24:16,119 --> 00:24:20,240 Speaker 1: by the People's Bang of China and the regulatory agencies 383 00:24:20,240 --> 00:24:24,800 Speaker 1: to banks to lend more, to export companies, to small companies, 384 00:24:25,800 --> 00:24:29,399 Speaker 1: to local governments to spend more on infrastructure or issue 385 00:24:29,400 --> 00:24:34,440 Speaker 1: more bonds to fund infrastructure. Reserve requirements for banks have 386 00:24:34,520 --> 00:24:38,080 Speaker 1: been cut four times, interest rates have come down, so 387 00:24:38,680 --> 00:24:43,960 Speaker 1: this kind of accumulating evidence that actually the Chinese authorities 388 00:24:44,040 --> 00:24:46,679 Speaker 1: don't really like the consequences of de leveraging. And of 389 00:24:46,720 --> 00:24:50,159 Speaker 1: course it's not a good thing, you know, to have 390 00:24:50,240 --> 00:24:53,719 Speaker 1: to put your economy through a ringer to wash you know, 391 00:24:53,800 --> 00:24:55,840 Speaker 1: leverage out of the system. But if you don't do 392 00:24:55,880 --> 00:24:58,199 Speaker 1: it when times are good, you have to do it 393 00:24:58,240 --> 00:25:01,359 Speaker 1: when times are bad. And the worry is that if 394 00:25:01,440 --> 00:25:04,360 Speaker 1: the authorities are now kind of backing away from deleveraging 395 00:25:04,359 --> 00:25:08,000 Speaker 1: a little bit, that it just exacerbates the problem down 396 00:25:08,080 --> 00:25:11,960 Speaker 1: the road and it differs the rebalancing for along a 397 00:25:12,000 --> 00:25:17,000 Speaker 1: long time to come. So how much of this pause 398 00:25:17,080 --> 00:25:21,880 Speaker 1: on rebalancing or these exhortations two banks to lend more 399 00:25:22,400 --> 00:25:25,480 Speaker 1: and to continue the credit driven growth model, how much 400 00:25:25,560 --> 00:25:30,639 Speaker 1: are they in response to trade war led slow down 401 00:25:31,160 --> 00:25:33,440 Speaker 1: and thus sort of you know, sort of gets to 402 00:25:33,480 --> 00:25:36,760 Speaker 1: the question of whether the tensions with the US and 403 00:25:36,800 --> 00:25:39,520 Speaker 1: other parts of the world are sort of disrupting the 404 00:25:39,600 --> 00:25:43,840 Speaker 1: long term plans. Yeah, my my views, I don't think 405 00:25:43,880 --> 00:25:49,640 Speaker 1: the trade conflict to date has really had a marked 406 00:25:49,680 --> 00:25:53,199 Speaker 1: effects on what the authorities probably think is going on 407 00:25:53,280 --> 00:25:55,880 Speaker 1: in the economy. And if it has had any effect, 408 00:25:56,200 --> 00:26:00,760 Speaker 1: it's probably been compensated for by the easing of monetary 409 00:26:00,800 --> 00:26:04,280 Speaker 1: and financial policy, including, by the way, the depreciation of 410 00:26:04,280 --> 00:26:07,840 Speaker 1: of the yue, which has dropped by about eight percent 411 00:26:08,040 --> 00:26:13,639 Speaker 1: since the spring, pretty much offsetting the latest round of 412 00:26:13,920 --> 00:26:19,080 Speaker 1: ten percent tariffs, which the White House announced in September 413 00:26:19,160 --> 00:26:22,800 Speaker 1: or early October for the moment at least, but I 414 00:26:22,800 --> 00:26:26,520 Speaker 1: think it will become a bigger issue, particularly as the 415 00:26:26,520 --> 00:26:30,680 Speaker 1: tariffs go up to on the first of January two 416 00:26:30,680 --> 00:26:35,359 Speaker 1: thousand and nineteen, and also if President Trump decided to 417 00:26:35,640 --> 00:26:39,760 Speaker 1: broaden the implementation of punitive tariffs to the whole of 418 00:26:40,240 --> 00:26:43,520 Speaker 1: imports from China. Great George, I wanted to ask you 419 00:26:43,600 --> 00:26:46,480 Speaker 1: about this because when we talk about the things that 420 00:26:46,640 --> 00:26:51,040 Speaker 1: China could possibly due to offset a slowdown in its economy, 421 00:26:51,440 --> 00:26:54,080 Speaker 1: there are a couple of things that usually come up. 422 00:26:54,960 --> 00:26:58,440 Speaker 1: You know. One of them is always the US treasury issue. 423 00:26:59,600 --> 00:27:03,080 Speaker 1: China owns a lot of US treasuries, They're a major 424 00:27:03,119 --> 00:27:07,719 Speaker 1: creditor to the US, and there's this underlying theory that 425 00:27:07,840 --> 00:27:10,720 Speaker 1: at some point they could possibly sell off those holdings, 426 00:27:11,160 --> 00:27:16,359 Speaker 1: basically to um make a point about US policy. Uh. 427 00:27:16,440 --> 00:27:19,720 Speaker 1: And then there's also the Renman b issue that you 428 00:27:19,840 --> 00:27:24,600 Speaker 1: just alluded to. They could always devalue their currency, either 429 00:27:24,680 --> 00:27:28,800 Speaker 1: in an obvious or a slightly more stealthy way. But 430 00:27:28,880 --> 00:27:32,320 Speaker 1: there's also a greater fear that maybe at some point 431 00:27:32,480 --> 00:27:38,439 Speaker 1: China might try to overturn the US dollars supremacy in 432 00:27:38,480 --> 00:27:47,200 Speaker 1: the global financial system. How realistic are either of those threats, well, 433 00:27:47,480 --> 00:27:50,359 Speaker 1: I mean to the extent that anybody can predict how 434 00:27:51,080 --> 00:27:55,879 Speaker 1: things are going to evolve. I think the Chinese would 435 00:27:56,040 --> 00:28:00,800 Speaker 1: give them both very very serious thought from the point 436 00:28:00,840 --> 00:28:03,520 Speaker 1: of view of do we really want to do this 437 00:28:03,640 --> 00:28:07,560 Speaker 1: with all the consequences that they would entail, Because actually 438 00:28:07,560 --> 00:28:11,520 Speaker 1: both of these policies, which so either selling US treasuries 439 00:28:11,760 --> 00:28:15,800 Speaker 1: or and or allowing the yuan or the MMB to 440 00:28:16,160 --> 00:28:23,040 Speaker 1: depreciate much more aggressively, would be causes of self harm 441 00:28:23,119 --> 00:28:29,119 Speaker 1: and domestic instability. I think. So the treasury issue is 442 00:28:29,160 --> 00:28:33,080 Speaker 1: an old chestnut. We've been here many many times before 443 00:28:33,119 --> 00:28:36,880 Speaker 1: in the last kind of five to seven years, and 444 00:28:37,720 --> 00:28:39,680 Speaker 1: we should remember a couple of things. One is that 445 00:28:39,720 --> 00:28:43,480 Speaker 1: the Chinese have a great deal of pride in their 446 00:28:43,600 --> 00:28:46,160 Speaker 1: foreign exchange reserves. I mean, they did peek out at 447 00:28:46,160 --> 00:28:49,440 Speaker 1: about four trillion dollars in two thousand and fourteen. They're 448 00:28:49,440 --> 00:28:53,880 Speaker 1: now kind of hovering around three trillion. So I don't 449 00:28:53,880 --> 00:28:58,160 Speaker 1: think they would treat this very lightly. And I think 450 00:28:58,240 --> 00:29:04,560 Speaker 1: that there's no guarantee that selling US treasuries would actually 451 00:29:04,600 --> 00:29:08,080 Speaker 1: achieve the results that they would want, other than just 452 00:29:08,240 --> 00:29:13,000 Speaker 1: to make the White House really angry. So during two 453 00:29:13,040 --> 00:29:15,760 Speaker 1: thousand fifteen, two thousand and sixteen, when the Chinese were 454 00:29:15,760 --> 00:29:19,120 Speaker 1: going through a mini financial crisis, when they were going 455 00:29:19,160 --> 00:29:24,000 Speaker 1: through this, they bled about five to seven hundred billion 456 00:29:24,040 --> 00:29:29,480 Speaker 1: dollars worth of US dollar reserves without really impacting the 457 00:29:29,480 --> 00:29:32,960 Speaker 1: treasury market at all. Okay, so we could say that 458 00:29:33,080 --> 00:29:35,560 Speaker 1: times were different then because the FED wasn't raising rates 459 00:29:35,560 --> 00:29:38,480 Speaker 1: and the economy wasn't as strong. And so if China 460 00:29:38,560 --> 00:29:41,240 Speaker 1: did sell its treasury holdings or some of its treasury 461 00:29:41,280 --> 00:29:44,120 Speaker 1: holdings now, they would don't They would be doing so 462 00:29:44,240 --> 00:29:47,040 Speaker 1: into a falling market when you know, people expect the 463 00:29:47,080 --> 00:29:49,560 Speaker 1: FED to keep on raising rates and so on. That's true, 464 00:29:49,600 --> 00:29:52,840 Speaker 1: so it could have, you know, a more significant effect. 465 00:29:52,840 --> 00:29:55,080 Speaker 1: But I think it's it's like what happens if the 466 00:29:55,120 --> 00:29:57,840 Speaker 1: first five hundred billion dollars worth of sales don't work? 467 00:29:57,920 --> 00:29:59,840 Speaker 1: You know, do they keep on doing this? I mean 468 00:30:00,040 --> 00:30:02,480 Speaker 1: there is a level of reserves below which they will 469 00:30:02,800 --> 00:30:06,240 Speaker 1: clearly not want to go. And I think it's quite 470 00:30:06,320 --> 00:30:11,760 Speaker 1: dangerous because it's um it could quite easily trigger un 471 00:30:12,600 --> 00:30:16,880 Speaker 1: instability and lack of confidence in Chinese financial markets and 472 00:30:16,920 --> 00:30:20,960 Speaker 1: actually induce capital outflows at a time when they're trying 473 00:30:21,000 --> 00:30:25,640 Speaker 1: to stop that happening. The same applies with the currency depreciation. 474 00:30:25,760 --> 00:30:30,160 Speaker 1: So I think at the moment it's quite ironic, really, 475 00:30:30,200 --> 00:30:35,120 Speaker 1: but Treasury Secretary Steve munition Is basically said a few 476 00:30:35,160 --> 00:30:38,280 Speaker 1: things during the I m F meetings going on in 477 00:30:38,480 --> 00:30:42,760 Speaker 1: Bali about you know, China's manipulation of the currency and 478 00:30:42,800 --> 00:30:45,520 Speaker 1: so on so forth. If the Chinese actually did float 479 00:30:45,560 --> 00:30:49,200 Speaker 1: their currency, it would probably drop like a stone. And 480 00:30:49,240 --> 00:30:51,680 Speaker 1: I think at the moment the Chinese are doing whatever 481 00:30:51,720 --> 00:30:56,520 Speaker 1: they can to basically keep it from depreciating. Politically, of course, 482 00:30:56,560 --> 00:31:00,800 Speaker 1: they could change that policy. They could decide that if 483 00:31:00,840 --> 00:31:03,440 Speaker 1: the tariffs are going up as our schedule to do, 484 00:31:04,000 --> 00:31:07,960 Speaker 1: and because of the impacts of the domestic economy and 485 00:31:08,160 --> 00:31:11,680 Speaker 1: tariff's trade conflict and so on, that if they wanted 486 00:31:11,680 --> 00:31:15,840 Speaker 1: to compensate by depreciating the renmin be much more aggressively, 487 00:31:15,960 --> 00:31:19,720 Speaker 1: that they could allow a depreciation of maybe five ten 488 00:31:21,240 --> 00:31:23,800 Speaker 1: something like that. It would be unprecedented, I would say, 489 00:31:23,800 --> 00:31:26,640 Speaker 1: in in certainly in recent times, and I think it 490 00:31:26,640 --> 00:31:32,080 Speaker 1: would also be highly destabilizing for China for emerging markets 491 00:31:32,280 --> 00:31:36,080 Speaker 1: for China's rhetoric about wanting to be the leader of 492 00:31:36,120 --> 00:31:40,440 Speaker 1: globalization as the United States retreats. So none of this 493 00:31:40,520 --> 00:31:43,680 Speaker 1: stuff would really work. If China were seen to be, 494 00:31:44,160 --> 00:31:48,240 Speaker 1: you know, embarking on a competitive evaluation. Would it happen 495 00:31:48,280 --> 00:31:51,200 Speaker 1: politically anyway? It's possible. I don't think we can rule 496 00:31:51,240 --> 00:31:54,320 Speaker 1: it out, but it's not really something that I think 497 00:31:54,480 --> 00:31:58,320 Speaker 1: China's leaders, who are quite cautious and they do crave stability, 498 00:31:58,760 --> 00:32:01,760 Speaker 1: I don't think they would be very aggressive in in 499 00:32:02,120 --> 00:32:05,520 Speaker 1: allowing that to happen. Depreciation was probably gonna happen anyway, 500 00:32:05,560 --> 00:32:08,360 Speaker 1: but I would say it will be measured. George, you 501 00:32:08,440 --> 00:32:11,600 Speaker 1: mentioned earlier that you do think we're in for a 502 00:32:11,720 --> 00:32:16,200 Speaker 1: protracted US China trade war. There seemed to be two 503 00:32:16,240 --> 00:32:21,560 Speaker 1: dimensions to the US China tension. So the president when 504 00:32:21,640 --> 00:32:23,360 Speaker 1: he talked and I'm talking about the U S. President 505 00:32:23,360 --> 00:32:25,920 Speaker 1: President Trump now, when he talks about China, he he 506 00:32:26,000 --> 00:32:28,760 Speaker 1: tends to focus a lot on the UH the bilateral 507 00:32:28,840 --> 00:32:32,320 Speaker 1: trade deficit and wanting to balance out the numbers. And 508 00:32:32,360 --> 00:32:34,920 Speaker 1: that's usually how he seems to think about the world, 509 00:32:34,960 --> 00:32:38,560 Speaker 1: and most people, many mainstream economists, don't give him a 510 00:32:38,600 --> 00:32:42,360 Speaker 1: lot of credit. For that viewpoint, fairly or unfairly. On 511 00:32:42,400 --> 00:32:46,040 Speaker 1: the other hand, there is a more sort of sophisticated 512 00:32:46,120 --> 00:32:50,520 Speaker 1: and widespread backing for the idea that something must be 513 00:32:50,600 --> 00:32:54,880 Speaker 1: done to sort of counter China's industrial policy, that things 514 00:32:54,920 --> 00:33:00,240 Speaker 1: like the forced transfer of technology are patently unfair and 515 00:33:00,440 --> 00:33:03,240 Speaker 1: at least in spirit, violate the rules of free trade, 516 00:33:03,800 --> 00:33:06,040 Speaker 1: and that something must be done to sort of counter 517 00:33:06,080 --> 00:33:08,720 Speaker 1: what we were talking about earlier, the Made in China 518 00:33:09,640 --> 00:33:13,680 Speaker 1: initiative and various endeavors by the country to become a 519 00:33:13,840 --> 00:33:18,880 Speaker 1: dominant player in these industries. Ultimately, is there a path 520 00:33:18,960 --> 00:33:23,200 Speaker 1: in your view for China to continue it's technological and 521 00:33:23,240 --> 00:33:26,640 Speaker 1: industrial pursuits which might be a little bit more qualitative 522 00:33:27,240 --> 00:33:32,480 Speaker 1: and also satisfy the demands of the US. Is there 523 00:33:32,520 --> 00:33:34,280 Speaker 1: a is there a middle ground or are these sort 524 00:33:34,320 --> 00:33:41,640 Speaker 1: of fundamentally diametrically opposed goals? Well, um, I mean, they 525 00:33:41,680 --> 00:33:46,040 Speaker 1: are pretty fundamental on both sides actually, and it's quite difficult, 526 00:33:46,640 --> 00:33:51,440 Speaker 1: I think to see how UM either side could actually 527 00:33:51,520 --> 00:33:55,320 Speaker 1: back down and um and say that their goals have 528 00:33:55,400 --> 00:33:58,360 Speaker 1: been met, because that would not be the case. And certainly, 529 00:33:58,840 --> 00:34:04,840 Speaker 1: you know, China not contemplate actually any kind of intrusion 530 00:34:05,240 --> 00:34:07,800 Speaker 1: on what it would regard as its sovereign right to 531 00:34:08,480 --> 00:34:12,359 Speaker 1: have whatever industrial policies it deems to be appropriate. Um. 532 00:34:12,680 --> 00:34:15,160 Speaker 1: And at the same time, you know, the United States 533 00:34:15,760 --> 00:34:19,880 Speaker 1: has clearly recognized that, you know, China as an adversary 534 00:34:20,400 --> 00:34:25,560 Speaker 1: in technological matters but also closely related that to military 535 00:34:25,600 --> 00:34:30,800 Speaker 1: matters and the industrial policies that underlie both of those narratives. Really, 536 00:34:31,360 --> 00:34:34,240 Speaker 1: this is a serious issue where you know, you can't 537 00:34:34,320 --> 00:34:38,719 Speaker 1: really compromise, and I think I think in some respects, 538 00:34:38,719 --> 00:34:41,759 Speaker 1: I think we we should, you know, basically say that 539 00:34:42,160 --> 00:34:44,480 Speaker 1: whatever we think about tariffs is a policy or as 540 00:34:44,520 --> 00:34:48,440 Speaker 1: a tool, but that the concept of actually calling China 541 00:34:48,520 --> 00:34:53,000 Speaker 1: out on some of its practices actually is certainly a 542 00:34:53,040 --> 00:34:58,080 Speaker 1: defensible position. So is there a middle ground? Well, obviously 543 00:34:58,080 --> 00:35:03,880 Speaker 1: the atmospherics would have to calm down first, I imagine, um, 544 00:35:04,520 --> 00:35:08,320 Speaker 1: you know, and I'm just guessing here, but I imagine that, um, 545 00:35:08,360 --> 00:35:11,120 Speaker 1: in the end, the United States will accept that it 546 00:35:11,160 --> 00:35:16,320 Speaker 1: cannot change China's industrial policy, but the Chinese may eventually 547 00:35:16,400 --> 00:35:18,640 Speaker 1: decide that there are certain things that they could do 548 00:35:19,000 --> 00:35:24,160 Speaker 1: about intellectual property protection, about market access. And I don't 549 00:35:24,320 --> 00:35:26,880 Speaker 1: don't just mean rhetoric, which is kind of what we 550 00:35:26,960 --> 00:35:32,239 Speaker 1: largely get after you know, meetings between senior officials or 551 00:35:32,320 --> 00:35:34,600 Speaker 1: used to get them when they were having meetings. But 552 00:35:35,160 --> 00:35:39,759 Speaker 1: I pr protection market access, a willingness to engage and 553 00:35:39,800 --> 00:35:42,120 Speaker 1: to see where there might be some kind of mutual 554 00:35:42,600 --> 00:35:47,520 Speaker 1: advantages in in agreeing on you know, different types of 555 00:35:47,920 --> 00:35:52,120 Speaker 1: concessions for for industries. I mean I think that I 556 00:35:52,120 --> 00:35:55,879 Speaker 1: think the technological and military issues are existential. I think 557 00:35:55,920 --> 00:35:58,319 Speaker 1: it would be a mistake for either side to kind 558 00:35:58,360 --> 00:36:01,080 Speaker 1: of back off so speak, And I think, you know, 559 00:36:01,160 --> 00:36:05,520 Speaker 1: probably America's and the West's best kind of hope of 560 00:36:05,600 --> 00:36:09,120 Speaker 1: countering China is actually is to invest more in you know, 561 00:36:09,200 --> 00:36:12,799 Speaker 1: technological leadership to counter But I think there I think 562 00:36:12,920 --> 00:36:16,080 Speaker 1: I hope there would be a middle ground where, you know, 563 00:36:16,160 --> 00:36:17,920 Speaker 1: both sides are prepared to kind of back off a 564 00:36:18,000 --> 00:36:20,440 Speaker 1: little bit and compromise. I mean, that's the only way 565 00:36:20,480 --> 00:36:22,680 Speaker 1: you get to the middle ground. But I think the 566 00:36:22,719 --> 00:36:24,799 Speaker 1: atmospherics have to cool down a lot from where they 567 00:36:24,840 --> 00:36:28,560 Speaker 1: are at the moment, which is which is pretty feisty. So, George, 568 00:36:28,560 --> 00:36:33,480 Speaker 1: you mentioned the E word existential questions. Um, basically, I 569 00:36:33,520 --> 00:36:37,040 Speaker 1: have an existential question, which is that I'm acutely aware 570 00:36:37,120 --> 00:36:41,480 Speaker 1: that all three of us are outsiders basically peaking into 571 00:36:41,520 --> 00:36:45,720 Speaker 1: the Chinese system in varying degrees. Obviously you have a 572 00:36:45,760 --> 00:36:50,040 Speaker 1: better vantage point than either Joe or I do. But 573 00:36:50,560 --> 00:36:55,040 Speaker 1: I'm wondering. We've had Western commentators who have been warning 574 00:36:55,239 --> 00:37:00,279 Speaker 1: about pressures on the Chinese economy for decades now, and 575 00:37:00,480 --> 00:37:03,680 Speaker 1: people talking about how the depth fueled growth is going 576 00:37:03,760 --> 00:37:10,040 Speaker 1: to collapse. We've seen the Chinese economies struggle at various times, 577 00:37:10,080 --> 00:37:13,400 Speaker 1: but we've been pretty far off of a collapse. So 578 00:37:13,520 --> 00:37:17,319 Speaker 1: I guess my question is, to what degree should we 579 00:37:18,160 --> 00:37:22,400 Speaker 1: think about Chinese exceptionalism when it comes to the economy. 580 00:37:22,560 --> 00:37:25,600 Speaker 1: Is there a way that China can actually buck what 581 00:37:25,680 --> 00:37:30,879 Speaker 1: we think are intrinsic rules that that take place when 582 00:37:31,160 --> 00:37:37,040 Speaker 1: when economies operate. So the answer to that is, I 583 00:37:37,040 --> 00:37:39,759 Speaker 1: mean's a typical kind of economics answer, isn't it. It's 584 00:37:39,800 --> 00:37:43,680 Speaker 1: sort of yes and no. So there are bits of 585 00:37:43,800 --> 00:37:46,799 Speaker 1: Chinese exceptionism, if you want to call it that, which 586 00:37:46,840 --> 00:37:49,239 Speaker 1: I think we we we do have to recognize, and 587 00:37:49,280 --> 00:37:51,800 Speaker 1: it's why a lot of the kind of the calls 588 00:37:51,880 --> 00:37:54,120 Speaker 1: that sometimes have been made in the last kind of 589 00:37:54,160 --> 00:37:58,440 Speaker 1: five or ten years about you know, it's about to collapse, 590 00:37:58,440 --> 00:38:01,799 Speaker 1: it's about to implode, etcetera. Have persistently proved wrong. And 591 00:38:01,840 --> 00:38:05,200 Speaker 1: that is because the Chinese have a very kind of 592 00:38:05,280 --> 00:38:10,759 Speaker 1: marked system of control and have and can deploy tools 593 00:38:11,960 --> 00:38:16,080 Speaker 1: which most Western governments can't simply because of the role 594 00:38:16,160 --> 00:38:18,759 Speaker 1: of the state and the role of the party in 595 00:38:19,280 --> 00:38:24,440 Speaker 1: the economy. So I you know, I mean I've spoken 596 00:38:24,480 --> 00:38:27,400 Speaker 1: before myself about the possibility that China would kind of 597 00:38:27,480 --> 00:38:29,719 Speaker 1: come to what a lot of people have kind of 598 00:38:29,880 --> 00:38:32,279 Speaker 1: now colloquially called a Minsky moment, which is sort of 599 00:38:32,280 --> 00:38:36,680 Speaker 1: a point where leverage becomes far too high and causes 600 00:38:36,920 --> 00:38:41,000 Speaker 1: some kind of financial policy or financial system reaction. And 601 00:38:41,840 --> 00:38:44,040 Speaker 1: I mean, I think it is at that point, but 602 00:38:44,760 --> 00:38:47,600 Speaker 1: I don't think it's different from the rest of us. 603 00:38:47,640 --> 00:38:50,759 Speaker 1: And I don't think this is a charge about you know, 604 00:38:51,040 --> 00:38:53,520 Speaker 1: you Western as you think about things in a different way. 605 00:38:53,760 --> 00:38:57,960 Speaker 1: I don't think that really holds water, because the misallocation 606 00:38:58,000 --> 00:39:02,520 Speaker 1: of resources from excessive reliance on credit has to be 607 00:39:02,640 --> 00:39:09,600 Speaker 1: paid for one day by consumers, by governments, by creditors, 608 00:39:09,680 --> 00:39:13,360 Speaker 1: by companies. Um. You know, whether whatever the system of 609 00:39:13,960 --> 00:39:16,000 Speaker 1: governance you have, whether it's a kind of a free 610 00:39:16,040 --> 00:39:19,919 Speaker 1: market system or whether it's a state controlled system, and 611 00:39:20,800 --> 00:39:23,520 Speaker 1: what we call kind of financial deepening, which is when 612 00:39:23,960 --> 00:39:27,640 Speaker 1: you know, financial assets and liabilities grow at a multiple, 613 00:39:27,880 --> 00:39:30,759 Speaker 1: a big multiple of the rate of growth of the 614 00:39:30,800 --> 00:39:34,000 Speaker 1: economy for years and years on end. That cannot go 615 00:39:34,120 --> 00:39:39,920 Speaker 1: on ad nauseam without giving rise to bubbles, speculation, and 616 00:39:40,000 --> 00:39:43,279 Speaker 1: financial risk. And I honestly believe that this is the 617 00:39:43,320 --> 00:39:46,880 Speaker 1: point that China is at. When I say at the moment, 618 00:39:46,920 --> 00:39:49,160 Speaker 1: I don't mean you know, in October or November two 619 00:39:49,200 --> 00:39:52,480 Speaker 1: thousand and eighteen, but you know for the for the moment, 620 00:39:52,560 --> 00:39:54,680 Speaker 1: meaning for the next couple of years, two or three years, 621 00:39:54,760 --> 00:39:58,879 Speaker 1: and and that what the most likely manifestation of all 622 00:39:58,920 --> 00:40:02,920 Speaker 1: of this as it gets resolved, is a protracted period 623 00:40:03,040 --> 00:40:06,560 Speaker 1: of much lower economic growth than we've been accustomed to. 624 00:40:07,040 --> 00:40:10,799 Speaker 1: That's the big call. In my view. It's possible that 625 00:40:10,920 --> 00:40:16,520 Speaker 1: China could have a much bigger financial crisis, um if 626 00:40:16,560 --> 00:40:19,880 Speaker 1: you think about you know, our own ten years ago, um, 627 00:40:20,000 --> 00:40:23,680 Speaker 1: something along those lines. I think it's less likely because 628 00:40:23,880 --> 00:40:26,600 Speaker 1: I don't think China will allow any major banks or 629 00:40:26,640 --> 00:40:30,880 Speaker 1: financial institutions to go bust, and so the likelihood is 630 00:40:30,920 --> 00:40:35,399 Speaker 1: that there will be repression, financial repression, and they will 631 00:40:35,480 --> 00:40:39,799 Speaker 1: basically sit on and try to kind of evergreen the 632 00:40:39,920 --> 00:40:43,000 Speaker 1: bad loans and the misallocated lending for as long as possible, 633 00:40:43,040 --> 00:40:47,040 Speaker 1: But you know, not even centrally controlled economies can do 634 00:40:47,080 --> 00:40:51,600 Speaker 1: that in perpetuity. So my feeling is this has all 635 00:40:51,640 --> 00:40:54,960 Speaker 1: been building up. A lot of people have had premature 636 00:40:55,040 --> 00:40:57,560 Speaker 1: calls of collapse, and the calls for collapse themselves have 637 00:40:57,640 --> 00:40:59,880 Speaker 1: been wrong. But you know that there will be a 638 00:41:00,040 --> 00:41:02,560 Speaker 1: hay back for all of this. I think is inevitable 639 00:41:02,680 --> 00:41:06,040 Speaker 1: China or not? George, I want to ask one real 640 00:41:06,560 --> 00:41:09,520 Speaker 1: quick question before we go. So Tracy mentioned at the 641 00:41:09,560 --> 00:41:13,200 Speaker 1: beginning that you go to UH festivals like Glastonbury, the 642 00:41:13,280 --> 00:41:17,560 Speaker 1: music festivals, but I'm sure you also go to lots 643 00:41:17,600 --> 00:41:21,520 Speaker 1: of conferences and panels where elite thinkers and bankers and 644 00:41:21,560 --> 00:41:25,680 Speaker 1: economists gather and talk about serious issues. And I'm curious 645 00:41:26,160 --> 00:41:28,920 Speaker 1: when they look at what's going on in the US 646 00:41:29,040 --> 00:41:32,160 Speaker 1: with our political paralysis and our president, and they look 647 00:41:32,200 --> 00:41:36,120 Speaker 1: at what's going on in the UK dealing with Brexit, 648 00:41:36,480 --> 00:41:39,640 Speaker 1: and then they look at China with these multi year 649 00:41:39,680 --> 00:41:43,840 Speaker 1: plans and there's extraordinary investment into things like clean energy 650 00:41:43,960 --> 00:41:48,120 Speaker 1: and artificial intelligence. Have you sensed a swing in terms 651 00:41:48,160 --> 00:41:51,640 Speaker 1: of sort of elite viewpoints about the merits of a 652 00:41:51,640 --> 00:41:55,920 Speaker 1: more centrally planned system. Oh, I think that's definitely. Uh, 653 00:41:56,120 --> 00:41:59,160 Speaker 1: it's a good question, and I think that's definitely something 654 00:41:59,200 --> 00:42:03,560 Speaker 1: that has you know, has worked his way into public 655 00:42:03,600 --> 00:42:07,759 Speaker 1: discussion and political debate. Well, I would say it's not 656 00:42:08,040 --> 00:42:10,680 Speaker 1: you know, look, the Chinese have this great model, you know, 657 00:42:10,840 --> 00:42:13,000 Speaker 1: let's just copy it. I don't think. I don't think 658 00:42:13,040 --> 00:42:15,280 Speaker 1: I hear a lot of that, But I do hear 659 00:42:15,400 --> 00:42:19,720 Speaker 1: a lot of debate now about where should the lines 660 00:42:19,840 --> 00:42:24,400 Speaker 1: be between what we think the private sector is capable 661 00:42:24,440 --> 00:42:28,600 Speaker 1: and willing to do and where we think the government 662 00:42:28,760 --> 00:42:32,360 Speaker 1: or public authorities need to step in to make things 663 00:42:32,440 --> 00:42:37,279 Speaker 1: happen or to facilitate things happening more quickly. But I 664 00:42:37,320 --> 00:42:40,200 Speaker 1: do think that people have just kind of looked at 665 00:42:40,200 --> 00:42:43,799 Speaker 1: our own experience in the financial crisis and the build 666 00:42:43,880 --> 00:42:48,680 Speaker 1: up to it and since, and looked at the alternative 667 00:42:48,760 --> 00:42:52,280 Speaker 1: kind of governance systems, which obviously we see all around 668 00:42:52,320 --> 00:42:56,400 Speaker 1: us now, and a lot of governments and countries have 669 00:42:56,480 --> 00:43:00,839 Speaker 1: basically flirted with, or or done more than flotation with 670 00:43:01,160 --> 00:43:05,120 Speaker 1: autocratic forms of government and started to sort of ask 671 00:43:05,200 --> 00:43:08,200 Speaker 1: questions about, you know, where those red lines should be 672 00:43:08,320 --> 00:43:11,160 Speaker 1: and should we be a bit more accommodative about what 673 00:43:11,960 --> 00:43:14,280 Speaker 1: the role of the state or the role of public 674 00:43:14,600 --> 00:43:18,840 Speaker 1: sector agencies might be in trying to deliver better outcomes 675 00:43:18,920 --> 00:43:22,680 Speaker 1: that we all kind of want, all right, George mcnus, 676 00:43:22,800 --> 00:43:24,759 Speaker 1: I'm afraid we're going to have to leave it there. 677 00:43:25,280 --> 00:43:28,760 Speaker 1: Fascinating discussion. Thank you so much for me with us today. 678 00:43:28,840 --> 00:43:32,279 Speaker 1: That was George Magnus, the author of Red Flags. Why 679 00:43:32,520 --> 00:43:53,480 Speaker 1: She's China is in Jepardy. Thank you so, Joe. I 680 00:43:53,840 --> 00:43:57,000 Speaker 1: thought that was a really interesting conversation about the future 681 00:43:57,040 --> 00:44:00,680 Speaker 1: of China, and your question at the very end about 682 00:44:00,840 --> 00:44:05,160 Speaker 1: whether or not China's exceptionalism has kind of caused some 683 00:44:05,200 --> 00:44:10,200 Speaker 1: people to think about the benefits of Western democracy is 684 00:44:10,239 --> 00:44:13,040 Speaker 1: sort of spot on. It feels like there's just sort 685 00:44:13,040 --> 00:44:16,760 Speaker 1: of there's a pendulum of ideas that swings back and forth, 686 00:44:16,800 --> 00:44:20,320 Speaker 1: and we're at this period where a lot of elites 687 00:44:20,440 --> 00:44:24,239 Speaker 1: and intellectuals and economists in the West are fairly disgusted 688 00:44:24,640 --> 00:44:26,839 Speaker 1: by what they see in the US and they sort 689 00:44:26,880 --> 00:44:31,279 Speaker 1: of yearn for, uh, some of the more directed economic 690 00:44:31,360 --> 00:44:34,200 Speaker 1: approaches that they see in China, particularly when it comes 691 00:44:34,200 --> 00:44:37,960 Speaker 1: to investment in technology. But I always, you know, like 692 00:44:38,000 --> 00:44:40,799 Speaker 1: I said, it feels like it's a pendulum, and that 693 00:44:41,080 --> 00:44:42,960 Speaker 1: maybe I don't know whether we've swung all the way 694 00:44:42,960 --> 00:44:45,200 Speaker 1: to one side, but I don't think that it will 695 00:44:45,239 --> 00:44:47,760 Speaker 1: stay that way forever, and at some point it'll probably 696 00:44:47,760 --> 00:44:51,080 Speaker 1: swing back in the other direction. Well, I will say 697 00:44:51,200 --> 00:44:55,280 Speaker 1: that any China Bowl that you talked to in Hong Kong, 698 00:44:55,400 --> 00:44:58,720 Speaker 1: one of the big components of their China Bowl argument 699 00:44:58,920 --> 00:45:02,800 Speaker 1: is usually, China is a command economy, and it's able 700 00:45:02,920 --> 00:45:05,400 Speaker 1: to order a bunch of people around or pull a 701 00:45:05,440 --> 00:45:09,120 Speaker 1: bunch of lovers to engineer the outcome that it wants, 702 00:45:09,160 --> 00:45:13,520 Speaker 1: which is something that you never hear about in Western societies. No, 703 00:45:14,080 --> 00:45:16,600 Speaker 1: absolutely not. But then again, in five years we might 704 00:45:16,640 --> 00:45:22,120 Speaker 1: be hearing, uh, China is a command economy and uh technology, 705 00:45:22,120 --> 00:45:26,200 Speaker 1: technology never flourishes when there's not more market competition, and 706 00:45:26,440 --> 00:45:29,319 Speaker 1: they're gonna miss allocate and pick winners and losers wrong. 707 00:45:29,440 --> 00:45:32,840 Speaker 1: So you know, what they say today about how China 708 00:45:32,920 --> 00:45:35,520 Speaker 1: is able to stave off downturns and all this stuff, 709 00:45:35,719 --> 00:45:38,640 Speaker 1: it may not be what they say five years from now. Yeah, 710 00:45:38,719 --> 00:45:40,279 Speaker 1: but it does feel like we're getting to a bit 711 00:45:40,280 --> 00:45:43,359 Speaker 1: of a crunch point where whatever happens over the next 712 00:45:43,360 --> 00:45:46,680 Speaker 1: two or three years is going to bolster someone's argument 713 00:45:46,880 --> 00:45:49,439 Speaker 1: one way or another, Right, Tracy, when I come to visit, 714 00:45:49,480 --> 00:45:52,640 Speaker 1: you can we go across and uh go into China 715 00:45:52,719 --> 00:45:56,400 Speaker 1: without network out. Uh, well we can try, That's all 716 00:45:56,440 --> 00:45:59,600 Speaker 1: i'm gonna say. All Right, Well I'm looking forward to 717 00:45:59,600 --> 00:46:02,120 Speaker 1: seeing it. Yeah, it'll be good. There will be lots 718 00:46:02,160 --> 00:46:06,000 Speaker 1: of Chinese food, I promise. All right. On that note, 719 00:46:06,239 --> 00:46:09,160 Speaker 1: this has been another episode of the ad Thoughts Podcast. 720 00:46:09,239 --> 00:46:11,880 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 721 00:46:11,920 --> 00:46:15,160 Speaker 1: Tracy Alloway and I'm Joe Why Isn't All? You can 722 00:46:15,239 --> 00:46:18,439 Speaker 1: follow me on Twitter at the Stalwark, And you should 723 00:46:18,480 --> 00:46:23,160 Speaker 1: follow George on Twitter He's at George magnus one, and 724 00:46:23,239 --> 00:46:26,880 Speaker 1: definitely follow our producer So for Foreheads, he's at foreheads 725 00:46:26,960 --> 00:46:30,120 Speaker 1: t as well as the Bloomberg head of podcast, Francesco 726 00:46:30,200 --> 00:46:33,360 Speaker 1: Levie at Francesca Today. Thanks for listening.