Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. I'm Carol Master.
Speaker 1: Welcome to the Bloomberg Business Week Extra. It's a weekly
Speaker 1: podcast with a favorite conversation from the week, and this
Speaker 1: week it was with Dan Blumenthal, director of Asian Studies
Speaker 1: at the conservative think tank American Enterprise Institute, his former
Speaker 1: senior director for China, Taiwan, and Mongolia at the Department
Speaker 1: of Defense. He also served as a commissioner on the
Speaker 1: congressionally mandated US China Economic and Security Review Commission. Well,
Speaker 1: he's got a new book out. It's called The China Nightmare,
Speaker 1: The Grand Ambitions of a Decaying State. Dan notes in
Speaker 1: his books introduction that he wrote his book mainly to
Speaker 1: accurately diagnose the exact nature of the challenge that China
Speaker 1: poses to the US and its allies. Check it out.
Speaker 1: There's no doubt that China has viewed US as its
Speaker 1: main rival for global power for a very long time,
Speaker 1: and we've we've just woken up to for that in
Speaker 1: the last four or five years. Or I wanted to
Speaker 1: put out this book to argue just exactly what kind
Speaker 1: of libel it is. So it's it's not just defendant
Speaker 1: and strong although it's very formidable, but it also has
Speaker 1: it's beset by many weaknesses and frustrations, and because of that,
Speaker 1: it's compensating for some of these internal weaknesses by lashing
Speaker 1: out on the world stage in very dangerous ways. So
Speaker 1: why do you call it the China nightmare? Then? Well,
Speaker 1: the nightmare scenario is that's strong enough, which it is
Speaker 1: right now, to cause lots of global instability to do
Speaker 1: what it's doing, lashing out in Taiwan straight taking over
Speaker 1: Hong Kong Australia. But it's also got a whole set
Speaker 1: of weaknesses inside that is accelerating its path to lashing
Speaker 1: out and trying to externalize insternal problems distract its population
Speaker 1: from many of those internal problems. What's really fascinating to
Speaker 1: me is that they are at this point right where
Speaker 1: they want to play. It feels like more on the
Speaker 1: global stage be thought of, not for being the manufacturer
Speaker 1: to the world, but really developing those higher tech economies, industries, sectors,
Speaker 1: if you will. At the same time, it does feel
Speaker 1: like they're pushing back as well. That's right. There is
Speaker 1: a contradiction there. On the one hand, they very much
Speaker 1: need international cooperation, cooperation with the U s US businesses,
Speaker 1: multinational businesses in order to move up the value chain
Speaker 1: of technology or success to our markets and so forth.
Speaker 1: But on the other hand, they've been acting in very
Speaker 1: provocative ways that is causing not just US but our
Speaker 1: allies in Europe and in Asia and Australia to say, uh,
Speaker 1: you know, we've had enough. You've been also responsible on
Speaker 1: on COVID nineteen and we wanted investigations. So there is
Speaker 1: this big contradiction. So what's the role of government, spiess
Speaker 1: excuse me, of government specifically in all of this. Obviously
Speaker 1: we need to have a relationship China is you know
Speaker 1: when it's interesting. We did the Bloomberg New Economy Form
Speaker 1: and we talked about um finance and trade. We talked
Speaker 1: about global cities, we talked about the climate, we talked
Speaker 1: about global health. And a question came out up during
Speaker 1: one of the many sessions, and it was like, well,
Speaker 1: do we have to think about China? Do you have
Speaker 1: to worry about China? And someone said, yeah, you've got
Speaker 1: to think about China with everything that's going on in
Speaker 1: this world. They matter. So how do we figure out
Speaker 1: the right strategy, the right policy for a nation, a
Speaker 1: government and economy that matters so much in our world,
Speaker 1: but one that I think it's safe to say that
Speaker 1: many disagree with. Yeah, that's that's the big challenge. So
Speaker 1: we have areas where we absolutely do need to cooperate,
Speaker 1: and that's in commercial relations. They're a big market for
Speaker 1: so many of our own of our own goods, and
Speaker 1: the technology relationship is interrelated. But I think we've started
Speaker 1: and we can do a better job with this to
Speaker 1: to craft policies that restrict our highest end technology. And
Speaker 1: we have to do this in consert with our allies
Speaker 1: from getting into the wrong hands of China. Uh. And
Speaker 1: we'll see more of that under the Biden administration. But
Speaker 1: but we also need to make sure that China knows,
Speaker 1: through our presence throughout Asia, throughout Japan, and around China,
Speaker 1: to our military presence and diplomatic presence, the China knows
Speaker 1: that there's a high price to pay for throwing out
Speaker 1: the order, the world order that has served it so well.
Speaker 1: So it's it's extremely complicated. We have to we have
Speaker 1: to move along to diplomatic track and find ways to
Speaker 1: trade and and do commerce with China while at the
Speaker 1: same time not allowing China to overturn uh the order
Speaker 1: or bolio course countries into doing this bidding. So just
Speaker 1: about forty seconds we're gonna do some news will come back.
Speaker 1: So then for the incoming Biden administration, they need to
Speaker 1: continue to some extent the strategy with China of the
Speaker 1: past administration. The Trump administration, well, all all signals say
Speaker 1: they will. In many domns, I think they want to
Speaker 1: lower the tone of the relationship, But in terms of
Speaker 1: the pushback against certain line behaviors, every indication is they
Speaker 1: want to continue with that, and there's broad by partisan
Speaker 1: political support from pushing back against various different kinds of malfeasance, Dan,
Speaker 1: what worries you the most about China? What worries me
Speaker 1: the most about China is a great miscalculation in terms
Speaker 1: of it's it's pushing around Taiwan or or pushing around
Speaker 1: a country going too far thinking that the United States
Speaker 1: won't come to one of the allies or partners defense.
Speaker 1: I think that miscalculation on China's part is really worrisome.
Speaker 1: I'm not as worried as Henry Kissinger is about an
Speaker 1: inevitable conflict, but there is so much military power being
Speaker 1: brought to there around China's periphery by China UM that
Speaker 1: I think China could miscalculate and that would be a catastrophe. Well,
Speaker 1: it's you know, it is really interesting. I mean, we
Speaker 1: obviously look at it from you know, China from a
Speaker 1: lot of different perspectives here at Bloomberg, obviously the political
Speaker 1: perspectives and the trade perspectives UM. But it was really
Speaker 1: fascinating for us in the last few weeks to see
Speaker 1: the pushback against someone like a Jack Ma of Ali Baba,
Speaker 1: and of course the and financial I p O. Because
Speaker 1: it's interesting, as we talked about at the top, this
Speaker 1: contradiction that we kind of see from g and China
Speaker 1: in that they want to be on the global stage.
Speaker 1: They want to be perceived, you know, certainly as a
Speaker 1: much more developed economy. They want to play in the
Speaker 1: big industry certainly developed them domestically. And there you have,
Speaker 1: you know, a star when it comes to um you
Speaker 1: know kind of the world and certainly the online world.
Speaker 1: And yet because of things that Ma said, you know,
Speaker 1: he was really reined in and it really put kind
Speaker 1: of a shutter over Chinese tech companies. Well, that's right,
Speaker 1: and China under shi Jing Ping is going in the
Speaker 1: wrong direction. There is no question that when Jack ma
Speaker 1: was coming up as an entrepreneur, China allowed for much
Speaker 1: more free market activity and entrepreneur activity. The state sector
Speaker 1: and controlled by the party under shi jing Ping of
Speaker 1: businesses has just grown. And it's it's a trend that's
Speaker 1: going to hurt China. It's gonna trend that's gonna hurt
Speaker 1: the global economy. But that's a perfect example. Jack you
Speaker 1: would think is untouchable. He says the wrong thing about regulators,
Speaker 1: and he's the real band, as he said by shi
Speaker 1: jing Ping. You know, and I also do wonder you know,
Speaker 1: what is one of the things that you think most
Speaker 1: probably Americans are most people don't understand about China and
Speaker 1: the mission it's on. I mean, I've always been kind
Speaker 1: of amazed, in awe a little terrified about about these
Speaker 1: ten year plans. But they do create a plan about
Speaker 1: where they want to go. And yet we have an
Speaker 1: economy here in the U S where it's often short sighted.
Speaker 1: Right if your public you're thinking about the quarters, it's
Speaker 1: really hard to make those big investments. Um, what is
Speaker 1: it that you think that maybe some people are missing
Speaker 1: about the Chinese story and they and they have to
Speaker 1: make sure that they don't well. I think one big thing,
Speaker 1: particularly if you're interested in the markets and the economy,
Speaker 1: is that kind of had this big reform market reform
Speaker 1: plan that it undertook from through through the accession to
Speaker 1: the w t O, But they really reversed much of
Speaker 1: that and in the latter parts of of let's say
Speaker 1: two two thousand nine, and they started taking on enormous
Speaker 1: amounts of debt. But they also started to change their
Speaker 1: political system in ways that wouldn't support market with them.
Speaker 1: That became extremely afraid of if they opened up too
Speaker 1: much their free market too much, that other Russian influences
Speaker 1: about political liberty would would seep into the system. So
Speaker 1: they've clamped down. I don't think people know enough about that.
Speaker 1: They started clamping down on this type of behavior free markets,
Speaker 1: uh and and freeing of speech in two thousand and
Speaker 1: two thousand nine. It's just been going downhill from there
Speaker 1: with China pursuing these strategies and all these things that
Speaker 1: you know, Dan, can they hit some of the growth
Speaker 1: rates that they have been laying out at this point,
Speaker 1: we know that recently Chinese President g so the economy
Speaker 1: can double in size by and that the country can
Speaker 1: reach high income status in the next five years. And
Speaker 1: this has to do with the Communist Party's ambitious plans
Speaker 1: for the nation's future. You know, can they get there,
Speaker 1: especially when I see some of the and some of
Speaker 1: the tactics that you're laying out right now in terms
Speaker 1: of how they are clamping down, whether it's on human rights, uh,
Speaker 1: when they're pushing back on some of their successful business folks, Um,
Speaker 1: how do you see it? I don't think they can
Speaker 1: get there unless they unless they return to the path
Speaker 1: of of market reforms. So just from an economic efficiency
Speaker 1: point of view, they're they're facing a lot of trouble. Also,
Speaker 1: you know, many times countries in in China situation which
Speaker 1: are um, you know, sort of trapped and you know
Speaker 1: what they call a middle income trapped innovate their way
Speaker 1: and innovate their way out of it. There's no question
Speaker 1: that China is spending a lot on R and D
Speaker 1: from from the state, you know, technology, and they'll have
Speaker 1: some payoffs from that. But in terms of really setting
Speaker 1: up the rule of law, efficient capital markets, protection of
Speaker 1: intellectual property, letting entrepreneurs like Jack Mark continue to invent
Speaker 1: and innovate, that's going in the wrong direction, so I
Speaker 1: don't I don't see it. And then of course there's
Speaker 1: this huge demographic lab where getting old so quickly, I mean,
Speaker 1: they will have the same demographic pictures Europe. And that
Speaker 1: wraps up our Bloomberg Business Week Extra podcast with Dan Bloomenthal,
Speaker 1: director of Asian Studies at the conservative think tank American
Speaker 1: Enterprise Institute, his new book, The China Nightmare, The Grand
Speaker 1: Ambitions of a Decaying State. You've been listening to Bloomberg
Speaker 1: Business Week Extra, be sure to listen to Bloomberg Business
Speaker 1: Week Radio, airing live Monday through Friday at two pm
Speaker 1: Wall Street Time on Bloomberg Radio. I'm Carol Masser, and
Speaker 1: this is Bloomberg