1 00:00:10,160 --> 00:00:13,720 Speaker 1: Hello, and welcome to another episode of the odd Locks podcast. 2 00:00:13,840 --> 00:00:17,880 Speaker 1: I'm chill, Why isn't and I'm Tracy Alloway, Tracy very 3 00:00:17,880 --> 00:00:19,239 Speaker 1: weak economic data. 4 00:00:19,079 --> 00:00:21,319 Speaker 2: Out of China. Yeah, to put it. 5 00:00:21,360 --> 00:00:24,919 Speaker 1: Start starting very directly now, The data has been very weak. 6 00:00:25,040 --> 00:00:30,160 Speaker 3: I have a collection of paraphrased headlines here. So we're 7 00:00:30,200 --> 00:00:34,559 Speaker 3: recording this on August sixteenth, and we just saw an 8 00:00:34,560 --> 00:00:37,680 Speaker 3: emergency rate cut from China. They also announced that they 9 00:00:37,720 --> 00:00:41,640 Speaker 3: would stop publishing the urban youth unemployment rate, which is 10 00:00:41,880 --> 00:00:42,839 Speaker 3: never a good. 11 00:00:42,680 --> 00:00:45,559 Speaker 1: Sign when you just announced that a certain data right 12 00:00:45,680 --> 00:00:47,599 Speaker 1: that people have been tracking for years suddenly will not 13 00:00:47,600 --> 00:00:48,599 Speaker 1: be published anymore. 14 00:00:48,400 --> 00:00:52,239 Speaker 3: Yet exactly and a particularly politically sensitive data point two, 15 00:00:52,479 --> 00:00:56,160 Speaker 3: Retail sales are coming in extremely weak, so rising less 16 00:00:56,200 --> 00:00:58,960 Speaker 3: than three percent a year. They used to be in 17 00:00:59,040 --> 00:01:02,320 Speaker 3: double digits. We have deflation setting in which is something 18 00:01:02,320 --> 00:01:04,679 Speaker 3: we spoke about on the episode we did with Richard Ku. 19 00:01:05,240 --> 00:01:09,680 Speaker 3: Manufacturing is contracting at exports are falling, the un is 20 00:01:09,760 --> 00:01:13,360 Speaker 3: dropping against the dollar. Bank loans at a fourteen year 21 00:01:13,520 --> 00:01:14,720 Speaker 3: low last month. 22 00:01:15,080 --> 00:01:15,800 Speaker 1: Camera. 23 00:01:16,040 --> 00:01:18,399 Speaker 2: I did. I Yeah, I know it's surprising, but I did. 24 00:01:18,440 --> 00:01:20,640 Speaker 1: Actually, I'm not surprised, I'm friend. 25 00:01:20,840 --> 00:01:23,160 Speaker 3: I did actually put together the data points because they're 26 00:01:23,240 --> 00:01:26,200 Speaker 3: so startling. And again, if you compare it with all 27 00:01:26,280 --> 00:01:29,640 Speaker 3: the excitement from earlier in the year about China reopening, 28 00:01:29,680 --> 00:01:32,640 Speaker 3: the end of COVID zero, there was this expectation that 29 00:01:32,760 --> 00:01:36,039 Speaker 3: China was going to end up being a positive catalyst 30 00:01:36,120 --> 00:01:38,880 Speaker 3: for global growth this year, and instead we are potentially 31 00:01:38,880 --> 00:01:40,240 Speaker 3: seeing the exact opposite. 32 00:01:40,400 --> 00:01:43,000 Speaker 1: Yeah, you bring up a good point. I think one 33 00:01:43,040 --> 00:01:44,560 Speaker 1: of the theories is that there would be this big 34 00:01:44,560 --> 00:01:49,240 Speaker 1: inflationary impulse globally from the China reopening, demand for steel, 35 00:01:49,360 --> 00:01:52,919 Speaker 1: demand for various metals, obviously, demand for oil and gasoline, 36 00:01:53,560 --> 00:01:56,000 Speaker 1: and that hasn't picked. You know, there has been this 37 00:01:56,120 --> 00:02:00,760 Speaker 1: pretty mild, sort of mediocre reopening. It has that global 38 00:02:00,920 --> 00:02:05,520 Speaker 1: shockwaves of anything people are talking about exporting deflation or disinflation. 39 00:02:05,960 --> 00:02:08,079 Speaker 1: And then on top of all of the sort of 40 00:02:08,120 --> 00:02:11,320 Speaker 1: like economic weakness that you bring up, there's also the 41 00:02:11,360 --> 00:02:14,280 Speaker 1: sort of like financial market weakness. So there was just 42 00:02:14,320 --> 00:02:17,679 Speaker 1: a story today about one of the companies that sell 43 00:02:17,800 --> 00:02:21,119 Speaker 1: some of these wealth management products missing payments. There's obviously, 44 00:02:21,160 --> 00:02:23,840 Speaker 1: I think it's a country Country gardens, the big developer 45 00:02:24,120 --> 00:02:27,520 Speaker 1: running into a lot of trouble similar similar to the 46 00:02:27,520 --> 00:02:31,200 Speaker 1: weakness we've seen in China evergrand So to your point though, 47 00:02:31,360 --> 00:02:34,040 Speaker 1: just this sort of slew of negative headlines. 48 00:02:34,280 --> 00:02:37,600 Speaker 3: Well, also, I think clearly there is concern that if 49 00:02:37,600 --> 00:02:40,839 Speaker 3: you get real economic weakness in China that could lead 50 00:02:40,880 --> 00:02:44,399 Speaker 3: to something bad for the global economy, just in terms 51 00:02:44,440 --> 00:02:47,360 Speaker 3: of real business activity. But I think there's also this 52 00:02:47,560 --> 00:02:52,440 Speaker 3: financial channel that is probably the one that's likely to 53 00:02:52,480 --> 00:02:53,799 Speaker 3: be the most problematic. 54 00:02:53,880 --> 00:02:54,959 Speaker 2: So if you think about. 55 00:02:54,800 --> 00:03:00,760 Speaker 3: China as in many ways a giant hoarder of financial assets, 56 00:03:01,120 --> 00:03:02,560 Speaker 3: the big question now is what are they going to 57 00:03:02,639 --> 00:03:05,280 Speaker 3: do with those financial assets. Do they have to, for instance, 58 00:03:05,280 --> 00:03:08,680 Speaker 3: start selling off some FX reserves in order to support 59 00:03:08,720 --> 00:03:11,680 Speaker 3: the UN Are they maybe going to buy fewer US treasuries? 60 00:03:11,919 --> 00:03:14,640 Speaker 3: So I think that is definitely one aspect of this 61 00:03:14,880 --> 00:03:16,320 Speaker 3: that is really worth exploring. 62 00:03:16,800 --> 00:03:19,959 Speaker 1: So many interesting elements right now we have, so we 63 00:03:20,080 --> 00:03:23,519 Speaker 1: have to dive deeper into what is going on right 64 00:03:23,560 --> 00:03:27,239 Speaker 1: now with the Chinese economy and what types of policy 65 00:03:27,360 --> 00:03:30,360 Speaker 1: response is we might get or we might not get there. 66 00:03:30,680 --> 00:03:32,520 Speaker 1: I always see, you know, there's like a furious debate 67 00:03:32,520 --> 00:03:34,639 Speaker 1: always on Twitter. It's like why don't they just why 68 00:03:34,639 --> 00:03:37,240 Speaker 1: doesn't the government just give more money to households, sort 69 00:03:37,280 --> 00:03:40,440 Speaker 1: of like the Richard Ku conversation, the sort of you know, 70 00:03:40,720 --> 00:03:43,920 Speaker 1: got to boost domestic demand, what's the reluctance to do that? Like, 71 00:03:43,920 --> 00:03:45,720 Speaker 1: all these sort of different questions, So I think we 72 00:03:45,800 --> 00:03:47,600 Speaker 1: really need to dive into them further. 73 00:03:47,720 --> 00:03:48,280 Speaker 2: Let's do it. 74 00:03:48,480 --> 00:03:48,640 Speaker 4: Well. 75 00:03:48,680 --> 00:03:51,480 Speaker 1: I'm very excited because I think we have the perfect 76 00:03:51,480 --> 00:03:53,320 Speaker 1: guest to discuss this. We're going to be speaking with 77 00:03:53,640 --> 00:03:56,840 Speaker 1: songmans Zoe lu. She is the Maurice Greenberg Fellow for 78 00:03:57,000 --> 00:04:00,200 Speaker 1: China Studies at the CFR, and she is also the 79 00:04:00,240 --> 00:04:03,480 Speaker 1: author of a new book, Sovereign Funds, How the Communist 80 00:04:03,480 --> 00:04:07,000 Speaker 1: Party of China Finances its global ambitions. Thank you so 81 00:04:07,120 --> 00:04:08,720 Speaker 1: much for coming on, Lots. 82 00:04:09,080 --> 00:04:11,160 Speaker 4: Thank you Joe and the Chasy for having me. And 83 00:04:11,280 --> 00:04:13,080 Speaker 4: I'm a big fan of the lots. 84 00:04:13,200 --> 00:04:15,800 Speaker 1: Very very kind of you to say, you know, why 85 00:04:15,840 --> 00:04:18,760 Speaker 1: don't we just start off like super simply in your view, 86 00:04:19,240 --> 00:04:23,520 Speaker 1: why hasn't China seen a more robust recovery since the 87 00:04:23,720 --> 00:04:25,600 Speaker 1: lifting of the COVID restrictions? 88 00:04:26,040 --> 00:04:28,640 Speaker 4: Well, I would say that actually I have always been 89 00:04:28,680 --> 00:04:29,400 Speaker 4: a contrarrian. 90 00:04:29,560 --> 00:04:30,960 Speaker 1: Oh good, I like this already. 91 00:04:31,200 --> 00:04:34,719 Speaker 4: I you know, if in November last year, I put 92 00:04:34,720 --> 00:04:39,000 Speaker 4: out a piece on foreign policy basically made an argument 93 00:04:39,120 --> 00:04:43,240 Speaker 4: to say that the zero COVID is the least economic 94 00:04:43,360 --> 00:04:46,920 Speaker 4: challenging problem that present decision ping was facing that day, 95 00:04:46,960 --> 00:04:49,719 Speaker 4: and even the party. In this case, it would be 96 00:04:49,760 --> 00:04:52,440 Speaker 4: the party. And even if the party decided to read 97 00:04:52,600 --> 00:04:56,520 Speaker 4: to remove zero COVID policy the next day, the economy 98 00:04:56,560 --> 00:05:00,280 Speaker 4: won't rebound sustain a robust to rebound very quickly. Hu. 99 00:05:00,920 --> 00:05:04,200 Speaker 4: And the reason it comes from what I characterize as 100 00:05:04,200 --> 00:05:10,960 Speaker 4: the four d's demand that demographics and decoupling. At that 101 00:05:11,000 --> 00:05:12,720 Speaker 4: time it was decoupling on now is the. 102 00:05:12,720 --> 00:05:14,960 Speaker 1: Risking this is great, the four d's. 103 00:05:15,120 --> 00:05:17,680 Speaker 2: I think it's like the four d's of the apocalypse. 104 00:05:17,839 --> 00:05:20,200 Speaker 1: Yeah, no, that's really I feel like if you want 105 00:05:20,240 --> 00:05:26,560 Speaker 1: to like have your thing, that's like a really demand debt, demographics, undecoupling. 106 00:05:26,560 --> 00:05:28,640 Speaker 1: I'm writing these down, So this. 107 00:05:28,720 --> 00:05:31,279 Speaker 3: Is exactly what I wanted to ask you, because I 108 00:05:31,360 --> 00:05:35,680 Speaker 3: remember even in twenty eighteen, twenty nineteen, there were concerns 109 00:05:35,760 --> 00:05:39,039 Speaker 3: and a lot of discussion about a slowdown in China's 110 00:05:39,160 --> 00:05:41,960 Speaker 3: economic growth, and then COVID happened, and we sort of 111 00:05:42,320 --> 00:05:45,159 Speaker 3: forgot about a lot of the structural issues that we 112 00:05:45,360 --> 00:05:48,919 Speaker 3: had been talking about, and then lo and behold, in 113 00:05:48,960 --> 00:05:51,160 Speaker 3: twenty twenty three, it feels like a lot of these 114 00:05:51,320 --> 00:05:55,440 Speaker 3: structural problems are coming back to haunt the Chinese economy. 115 00:05:55,600 --> 00:05:59,200 Speaker 3: Can you dive a little bit further into what those 116 00:05:59,240 --> 00:05:59,800 Speaker 3: issues are? 117 00:06:00,360 --> 00:06:03,680 Speaker 4: Yeah, sure, I would argue that a lot of these 118 00:06:03,800 --> 00:06:07,120 Speaker 4: structural problems exactly as to what you were describing, Tracy, 119 00:06:07,560 --> 00:06:10,840 Speaker 4: it seemed that during COVID, we were from both inside 120 00:06:10,920 --> 00:06:14,440 Speaker 4: China and outside China, we were overwhelmed by the sudden 121 00:06:14,520 --> 00:06:17,640 Speaker 4: pause of the economy because of the shutdown factories and 122 00:06:17,720 --> 00:06:22,440 Speaker 4: all that, And it seemed that temporarily the pause of 123 00:06:22,480 --> 00:06:27,560 Speaker 4: the economy covered up the structural problems that had been 124 00:06:28,440 --> 00:06:33,520 Speaker 4: embedded into the Chinese economic growth model. And then once 125 00:06:33,839 --> 00:06:39,440 Speaker 4: the Party suddenly exit the zero COVID policy, given you know, 126 00:06:39,480 --> 00:06:41,919 Speaker 4: the consumption pattern that we have observed here in America 127 00:06:42,040 --> 00:06:45,440 Speaker 4: or in Europe, people started to realize, oh, okay, so 128 00:06:45,520 --> 00:06:48,480 Speaker 4: this is a one point for billing market and people 129 00:06:48,560 --> 00:06:52,440 Speaker 4: are going to spend, and that would be powerful and inflationary, 130 00:06:53,320 --> 00:06:56,599 Speaker 4: you know, but you know, short term revengeful expenditure would 131 00:06:56,640 --> 00:07:01,159 Speaker 4: not necessarily overcome the long term structural problems that have 132 00:07:01,560 --> 00:07:05,360 Speaker 4: dragged the Chinese economy, even just from GDP terms. You know, 133 00:07:05,400 --> 00:07:07,440 Speaker 4: if we think about the Chinese economy. There are different 134 00:07:07,480 --> 00:07:10,560 Speaker 4: ways that you can argue that the Chinese economy has picked. 135 00:07:10,800 --> 00:07:14,800 Speaker 4: I mean, I'm not necessary that category. But if we 136 00:07:14,960 --> 00:07:18,680 Speaker 4: just imagurate from GDP perspective or in terms of export 137 00:07:18,920 --> 00:07:21,840 Speaker 4: as a percentage of GDP, the Chinese economy already picked. 138 00:07:21,880 --> 00:07:24,720 Speaker 4: You know, China surpass the Germany back in two thousand 139 00:07:25,440 --> 00:07:28,840 Speaker 4: ten to become the largest trading of the largest exporting 140 00:07:28,880 --> 00:07:33,160 Speaker 4: economy in the world and has at its height export 141 00:07:33,200 --> 00:07:35,600 Speaker 4: as a percentage of GDP was about thirty percent and 142 00:07:35,720 --> 00:07:38,920 Speaker 4: has since then plateaued. And the decrease right now is 143 00:07:38,920 --> 00:07:42,280 Speaker 4: about twenty something percent. And if you think about GDP growth, 144 00:07:42,360 --> 00:07:47,320 Speaker 4: the double double digital growth period already ended. So from 145 00:07:47,360 --> 00:07:51,120 Speaker 4: that perspective, what we actually observe goes back to the forties. 146 00:07:51,480 --> 00:07:55,800 Speaker 4: The problem with demand is not necessarily at you know, 147 00:07:55,840 --> 00:07:58,600 Speaker 4: I'm not talking about the ultimated demand. I'm specifically talking 148 00:07:58,640 --> 00:08:02,880 Speaker 4: about the house the consumption component of demand for a 149 00:08:02,920 --> 00:08:05,240 Speaker 4: long period of time. You know, yes, you can, we 150 00:08:05,280 --> 00:08:08,000 Speaker 4: can make it the argument to say household consumption as 151 00:08:08,040 --> 00:08:11,520 Speaker 4: a percentage contributing to the Chinese GP is you know, 152 00:08:11,680 --> 00:08:15,600 Speaker 4: is about forty percent. Yet it has been low and 153 00:08:15,800 --> 00:08:18,840 Speaker 4: you know, global average I'm not even talking about you know, 154 00:08:18,920 --> 00:08:21,640 Speaker 4: the OECD level. I'm talking about like a global average 155 00:08:21,680 --> 00:08:24,520 Speaker 4: it's about sixty percent of a GDP, whereas the Chinese 156 00:08:24,600 --> 00:08:27,280 Speaker 4: forty percent. We can make it the argument to say, well, 157 00:08:27,320 --> 00:08:30,440 Speaker 4: the China household consumption has been a drag on the 158 00:08:30,480 --> 00:08:36,440 Speaker 4: Chinese economy. However, up until twenty twelve. By the end 159 00:08:36,480 --> 00:08:41,560 Speaker 4: of twenty twelve, actually household consumptions contribution to GDP growth 160 00:08:41,720 --> 00:08:45,160 Speaker 4: at least has been on an upward trajection. In other word, 161 00:08:45,720 --> 00:08:48,760 Speaker 4: the growth of household consumption has been positive. You know, 162 00:08:48,760 --> 00:08:53,240 Speaker 4: you see Chinese people do discretionary vacations and all that, 163 00:08:53,559 --> 00:08:59,400 Speaker 4: but that has changed since two thousand thirteen. And if 164 00:08:59,400 --> 00:09:03,680 Speaker 4: we just actually in between Presence Jimping's two terms, the 165 00:09:03,800 --> 00:09:06,960 Speaker 4: second term was even worse than the first term. 166 00:09:07,520 --> 00:09:11,520 Speaker 1: So let's go further into that. A, why has it 167 00:09:11,559 --> 00:09:14,199 Speaker 1: gotten worse? And then b you know, there's all this 168 00:09:14,559 --> 00:09:17,320 Speaker 1: talk it's like, why don't they just do household stimulus? 169 00:09:17,320 --> 00:09:21,840 Speaker 1: There's some version of that, and people are sort of bemused, 170 00:09:21,880 --> 00:09:24,720 Speaker 1: maybe is the word. It's like, why isn't the Communist 171 00:09:24,720 --> 00:09:28,280 Speaker 1: party more willing to extend support directly to the people, 172 00:09:28,360 --> 00:09:31,880 Speaker 1: and you know, rebalancing things a why did it get worse? 173 00:09:31,960 --> 00:09:35,200 Speaker 1: But why is there this reluctant to do something like 174 00:09:35,240 --> 00:09:37,080 Speaker 1: what we did in US just sort of print money 175 00:09:37,120 --> 00:09:37,840 Speaker 1: and give it to people. 176 00:09:38,640 --> 00:09:42,959 Speaker 4: You know, Joe, that's an excellent, excellent question. You make 177 00:09:43,000 --> 00:09:44,880 Speaker 4: me think about the why aspect of it, right, yea, 178 00:09:45,040 --> 00:09:47,560 Speaker 4: So fundamentally, ber are I would argue about it. There 179 00:09:47,559 --> 00:09:50,640 Speaker 4: are two aspect of why there has been a decreasing 180 00:09:50,640 --> 00:09:54,760 Speaker 4: household consumption. The first one is, obviously you can't empirically 181 00:09:54,800 --> 00:09:58,040 Speaker 4: observe from the data, there has been a decline in 182 00:09:58,360 --> 00:10:03,559 Speaker 4: household income growth and household income growth up until President. 183 00:10:04,000 --> 00:10:09,000 Speaker 4: Before President came to power, household growth was income growth 184 00:10:09,120 --> 00:10:12,880 Speaker 4: was significantly faster than after he came to power, and 185 00:10:13,000 --> 00:10:16,760 Speaker 4: his again his second term was worse on average than 186 00:10:16,760 --> 00:10:19,480 Speaker 4: his first term. So that's one aspect in terms of 187 00:10:19,559 --> 00:10:22,600 Speaker 4: income household income growth. And then the second aspect of 188 00:10:22,640 --> 00:10:27,080 Speaker 4: it would be household balance sheet detioriation. And a lot 189 00:10:27,120 --> 00:10:30,560 Speaker 4: of this comes down to housing market property value depreciation 190 00:10:30,800 --> 00:10:35,560 Speaker 4: because of control on real estate policies and all that. Now, 191 00:10:35,840 --> 00:10:39,720 Speaker 4: the reason why beer has been a reluctant in terms 192 00:10:39,720 --> 00:10:45,199 Speaker 4: of stimulant basically provide stimulus checks to Chinese household it's 193 00:10:45,280 --> 00:10:49,280 Speaker 4: not that Chinese economists have not thought about that option. 194 00:10:49,559 --> 00:10:52,760 Speaker 4: You actually do see people do that on Chinese social 195 00:10:52,760 --> 00:10:55,280 Speaker 4: media when they realize that, oh, you know what, my 196 00:10:55,400 --> 00:10:58,800 Speaker 4: cousins in America be just a lineup, become just a 197 00:10:58,840 --> 00:11:01,480 Speaker 4: lineup or waiting their ho and then male would come in, 198 00:11:01,960 --> 00:11:04,840 Speaker 4: you know, stimulus check. You know some students were even 199 00:11:04,840 --> 00:11:10,760 Speaker 4: getting stimulus check. And then the problem becomes well, historically 200 00:11:10,800 --> 00:11:15,040 Speaker 4: there has not been this kind of president, but no 201 00:11:15,240 --> 00:11:18,959 Speaker 4: president does not necessarily stop the government from inventing one. Right, 202 00:11:19,440 --> 00:11:23,000 Speaker 4: And the deeper problem, I would argue is the politics. 203 00:11:23,240 --> 00:11:26,679 Speaker 4: The politics simply would not necessarily work. Part of that 204 00:11:26,840 --> 00:11:31,960 Speaker 4: is because empowering. This is probably deeper in the Chinese 205 00:11:32,000 --> 00:11:34,600 Speaker 4: political philosophy in the sense that well, you know, it's 206 00:11:34,600 --> 00:11:38,200 Speaker 4: a depending up on how which political scientists or political 207 00:11:38,200 --> 00:11:40,480 Speaker 4: economists you are talking to. Some people would say, oh, 208 00:11:40,520 --> 00:11:44,880 Speaker 4: you know, Chinese system is authoritarian capitalism or fragmented capitalism 209 00:11:45,080 --> 00:11:50,040 Speaker 4: or fragmented authoritarianism and things like that. But fundamentally, what 210 00:11:50,160 --> 00:11:54,160 Speaker 4: we observe is that the Chinese economic growth model has 211 00:11:54,200 --> 00:11:57,600 Speaker 4: been built upon financial repression, and at the center of 212 00:11:57,640 --> 00:12:01,760 Speaker 4: the financial repression or the Chinese banks and who controls 213 00:12:01,800 --> 00:12:04,880 Speaker 4: the bank is essentially the Chinese government led by the 214 00:12:04,960 --> 00:12:07,840 Speaker 4: Chinese Commedies and Party. Yeah. Other word, the Chinese commedies 215 00:12:07,880 --> 00:12:11,560 Speaker 4: to Party has always been at the center of a 216 00:12:11,600 --> 00:12:16,520 Speaker 4: capital allocation, and by empowering the household or for that matter, 217 00:12:16,640 --> 00:12:23,199 Speaker 4: the private sector, it basically dilute or potentially remove their relevancy. 218 00:12:23,800 --> 00:12:26,839 Speaker 3: Interesting, this is exactly what I wanted to ask you, 219 00:12:26,880 --> 00:12:29,480 Speaker 3: and I just did a thread on Twitter that made 220 00:12:29,480 --> 00:12:31,680 Speaker 3: a similar point. But how much of this is a 221 00:12:31,720 --> 00:12:36,120 Speaker 3: political economy problem in the sense that both on the 222 00:12:36,160 --> 00:12:40,480 Speaker 3: business side and the consumption side, where we've seen the 223 00:12:40,520 --> 00:12:45,120 Speaker 3: Communist Party be sort of well be controlling in many ways. So, 224 00:12:45,400 --> 00:12:48,520 Speaker 3: for instance, on private business, we've had the property crackdown, 225 00:12:48,800 --> 00:12:52,400 Speaker 3: the tech sector cracked down, and that would apparently seem 226 00:12:52,520 --> 00:12:56,040 Speaker 3: to perhaps make people more reluctant to do their own 227 00:12:56,040 --> 00:12:59,840 Speaker 3: startups and things like that. And then on the household side, 228 00:13:00,120 --> 00:13:02,760 Speaker 3: it does feel like you have a reluctance from the 229 00:13:02,800 --> 00:13:06,800 Speaker 3: party to sort of empower the individual at the risk 230 00:13:06,840 --> 00:13:10,200 Speaker 3: of losing some of their own power and perhaps the 231 00:13:10,280 --> 00:13:11,200 Speaker 3: collective power. 232 00:13:12,400 --> 00:13:16,599 Speaker 4: I am a political economist, so I would argue the 233 00:13:16,600 --> 00:13:21,000 Speaker 4: answer is yes is yes, you are rights and from 234 00:13:21,040 --> 00:13:24,120 Speaker 4: an intellectual perspective. I do think this is a political 235 00:13:24,200 --> 00:13:28,400 Speaker 4: economy problem, because if you look at the history of 236 00:13:28,440 --> 00:13:33,160 Speaker 4: the Chinese economic growth since nineteen forty nine, it's not 237 00:13:33,320 --> 00:13:38,880 Speaker 4: that the economy has never experienced shocks. Actually, the Chinese 238 00:13:38,920 --> 00:13:41,839 Speaker 4: system experienced a lot of shocks from even in the 239 00:13:41,960 --> 00:13:46,280 Speaker 4: nineteen fifties. You experience the Chinese economy experienced the Great 240 00:13:46,440 --> 00:13:49,760 Speaker 4: Leap forward, and when the Communists took over, they also 241 00:13:50,280 --> 00:13:54,000 Speaker 4: destroyed a lot of the banking systems in Shanghai and 242 00:13:54,520 --> 00:13:59,040 Speaker 4: elsewhere established by the Perierlist. Right, So, and then there 243 00:13:59,160 --> 00:14:02,400 Speaker 4: was also revolution and all that, but then there is 244 00:14:02,440 --> 00:14:05,920 Speaker 4: also the sudden stop of the cultural revolution. In other word, 245 00:14:06,120 --> 00:14:11,559 Speaker 4: the Chinese economic political economic system a is not short 246 00:14:11,840 --> 00:14:16,160 Speaker 4: of crisis, or for that matter, man made crisis. And secondly, 247 00:14:16,600 --> 00:14:21,560 Speaker 4: the Chinese political economic system was also not unfamiliar with 248 00:14:22,280 --> 00:14:26,720 Speaker 4: sudden reverse or sudden policy corrections. And what that means 249 00:14:26,720 --> 00:14:31,640 Speaker 4: for today, that basically means the growth, the rapid growth 250 00:14:31,720 --> 00:14:36,520 Speaker 4: of the Chinese economy has fundamentally been led by the 251 00:14:36,520 --> 00:14:41,280 Speaker 4: government and the party, and it's just a degree of 252 00:14:41,760 --> 00:14:45,520 Speaker 4: party state involvement. Now if we think about the rise 253 00:14:45,520 --> 00:14:49,400 Speaker 4: of dnaping. He corresponded to the rapid rise of China 254 00:14:49,480 --> 00:14:55,440 Speaker 4: and all that. But if we remember what actually made China, 255 00:14:55,880 --> 00:15:00,280 Speaker 4: the starting point of China's rapid growth was not necessary. Yes, 256 00:15:00,320 --> 00:15:03,240 Speaker 4: it was nineteen seventy eight the clear signal that Chinese 257 00:15:03,240 --> 00:15:05,680 Speaker 4: reform and opened up. But then there was a Chiamen 258 00:15:06,280 --> 00:15:08,520 Speaker 4: and the China was put under sanctions and all that. 259 00:15:09,000 --> 00:15:14,160 Speaker 4: And then nineteen ninety two he made this famous southern tour. 260 00:15:14,360 --> 00:15:16,440 Speaker 4: You know, he toured Shinzen and all those places, and 261 00:15:16,520 --> 00:15:21,040 Speaker 4: he gave a clear signal during his speech when he 262 00:15:21,120 --> 00:15:23,560 Speaker 4: was touring the south southern part of China. And I 263 00:15:23,720 --> 00:15:26,440 Speaker 4: was just recently revisited his speech, so I remember, this 264 00:15:26,480 --> 00:15:29,000 Speaker 4: is something that I learned very recently. This is why 265 00:15:29,000 --> 00:15:31,760 Speaker 4: I read his speech so many times. So he cited 266 00:15:31,800 --> 00:15:35,640 Speaker 4: this one example, this rich person. Apparently he was one 267 00:15:35,640 --> 00:15:38,680 Speaker 4: of the if not the earliest. He was one of 268 00:15:38,680 --> 00:15:43,400 Speaker 4: the earliest Chinese entrepreneur to make one hundred million um. 269 00:15:43,520 --> 00:15:46,680 Speaker 4: He was the founder of this sunflower seed company called 270 00:15:46,960 --> 00:15:52,520 Speaker 4: Shasguas or idiot sunflower seed when idiots the sunflower seeds 271 00:15:52,600 --> 00:15:57,720 Speaker 4: yes or food sunflower seeds shats guads. 272 00:15:56,720 --> 00:16:00,080 Speaker 2: And name. 273 00:16:00,920 --> 00:16:03,760 Speaker 4: At that time out of jealousy or some other or 274 00:16:03,880 --> 00:16:07,040 Speaker 4: other reasons. There were some voices among Chinese people or 275 00:16:07,080 --> 00:16:09,680 Speaker 4: policy makers to say, this guy becomes so rich, we 276 00:16:09,920 --> 00:16:13,040 Speaker 4: need to take him down. And in his in his speech, 277 00:16:13,560 --> 00:16:16,960 Speaker 4: don't some things that I'm aware of, these kind of recommendations, 278 00:16:17,240 --> 00:16:22,280 Speaker 4: but we cannot do that. He stracked it down. And 279 00:16:22,480 --> 00:16:26,240 Speaker 4: the reason he also explained why he the party cannot 280 00:16:26,280 --> 00:16:29,800 Speaker 4: do that. He said, if we punished him, that would 281 00:16:29,960 --> 00:16:34,400 Speaker 4: send a terrible signal. It would make people think that 282 00:16:34,520 --> 00:16:38,880 Speaker 4: we changed our policy of reform and open up. And 283 00:16:39,040 --> 00:16:42,120 Speaker 4: there are so many instances that we can do things 284 00:16:42,160 --> 00:16:45,160 Speaker 4: and make people think we changed our policies, and we 285 00:16:45,320 --> 00:16:48,840 Speaker 4: cannot do that. So from his perspective, you know, the 286 00:16:48,880 --> 00:16:52,560 Speaker 4: part the big risk, as he charakrized it, is to 287 00:16:52,800 --> 00:17:10,359 Speaker 4: make mistakes to make people think that we changed our policy. 288 00:17:12,920 --> 00:17:14,600 Speaker 1: Can I ask sort of I don't know, maybe it's 289 00:17:14,600 --> 00:17:18,399 Speaker 1: a devil's advocate question or I don't know how to 290 00:17:18,480 --> 00:17:22,720 Speaker 1: characterize it, but you know, obviously there's this big household 291 00:17:22,720 --> 00:17:25,280 Speaker 1: debt overhang that you're talking about. It seems from the outside, 292 00:17:25,320 --> 00:17:28,600 Speaker 1: and it seems from any commenters like a pretty unhealthy 293 00:17:28,800 --> 00:17:32,320 Speaker 1: real estate market in terms of the level of UH speculation, 294 00:17:32,440 --> 00:17:36,119 Speaker 1: the level of costs et cetera. It also seems as 295 00:17:36,200 --> 00:17:39,199 Speaker 1: though the government would like to sort of find a 296 00:17:39,240 --> 00:17:42,000 Speaker 1: way to get out of that trap where like so 297 00:17:42,119 --> 00:17:44,840 Speaker 1: where it's not all about, you know, not everything revolves 298 00:17:44,880 --> 00:17:47,360 Speaker 1: around the cost of housing or buying a new apartment. 299 00:17:47,800 --> 00:17:50,959 Speaker 1: Is there an argument to be made that stimulus direct 300 00:17:50,960 --> 00:17:55,679 Speaker 1: to households today under the current economic structure would just 301 00:17:56,000 --> 00:17:59,400 Speaker 1: sort of further fuel a real estate bubble or real 302 00:17:59,480 --> 00:18:03,080 Speaker 1: estate demand, and that until the sort of domestic economy 303 00:18:03,080 --> 00:18:05,560 Speaker 1: has shifted in some way more such that it's not 304 00:18:05,720 --> 00:18:08,760 Speaker 1: out of that dynamic, that it doesn't make sense to 305 00:18:08,960 --> 00:18:10,480 Speaker 1: boost demand for those reasons. 306 00:18:10,920 --> 00:18:15,439 Speaker 4: First of all, I would say household demand for properties 307 00:18:15,520 --> 00:18:18,600 Speaker 4: or for housing in China is on a perpetual decline 308 00:18:18,640 --> 00:18:23,800 Speaker 4: for two reasons. The first reason is that from empirical data, 309 00:18:23,840 --> 00:18:29,680 Speaker 4: we can't observe that China's urbanization rate has picked. And secondly, 310 00:18:30,160 --> 00:18:32,160 Speaker 4: demographic goes back to one of the four the. 311 00:18:32,080 --> 00:18:33,920 Speaker 1: Third year demographs demographics. 312 00:18:34,200 --> 00:18:37,280 Speaker 4: As of last year, Chinese population growth for the first 313 00:18:37,280 --> 00:18:40,520 Speaker 4: time declined, and there are some numbers saying that actually 314 00:18:40,600 --> 00:18:44,520 Speaker 4: now India's population is more than Chinese population. So from 315 00:18:44,520 --> 00:18:47,760 Speaker 4: the it's not just the population decline on its own 316 00:18:47,920 --> 00:18:52,440 Speaker 4: is not necessarily causing an immediate shock or negative shock 317 00:18:52,520 --> 00:18:56,080 Speaker 4: on housing demand, but is actually the lower family formation 318 00:18:56,240 --> 00:19:01,440 Speaker 4: rate and the idea that people, for whatever, for cultural reasons, 319 00:19:01,600 --> 00:19:05,000 Speaker 4: is very expensive to get married for fancy you know, 320 00:19:05,240 --> 00:19:08,000 Speaker 4: banquet and all that. But you know, it's also very 321 00:19:08,040 --> 00:19:11,920 Speaker 4: expensive to risk kids in China, especially in big cities. 322 00:19:12,160 --> 00:19:15,600 Speaker 4: So from that, so those are the two structural reasons 323 00:19:15,640 --> 00:19:20,399 Speaker 4: why demand for housing is on a perpetual decline in China. 324 00:19:20,800 --> 00:19:25,000 Speaker 4: Even if the government gives simulus checks to the Chinese household, 325 00:19:25,160 --> 00:19:29,520 Speaker 4: in the current mix of policy environment, I would not 326 00:19:29,640 --> 00:19:34,919 Speaker 4: necessarily be confident that the Chinese household are going to 327 00:19:35,600 --> 00:19:40,280 Speaker 4: a b incentivized to spend or be think that this 328 00:19:40,320 --> 00:19:42,439 Speaker 4: is a good time to buy house. And the reason 329 00:19:42,800 --> 00:19:47,560 Speaker 4: there are two reasons. The first reason is negative confidence 330 00:19:47,640 --> 00:19:53,679 Speaker 4: shock and the second is a deflationary policy environment. And 331 00:19:53,840 --> 00:19:57,720 Speaker 4: the negative policy the negative confidence part of that comes 332 00:19:57,800 --> 00:20:03,760 Speaker 4: from you know, people's material feeling up that their household 333 00:20:03,800 --> 00:20:08,359 Speaker 4: balance sheet deteriorated, as being filed by the Chinese people 334 00:20:08,400 --> 00:20:12,520 Speaker 4: as well. You know, I can impurely observe the value 335 00:20:12,560 --> 00:20:16,280 Speaker 4: of my house went lower, and yet I am still 336 00:20:16,280 --> 00:20:19,080 Speaker 4: paying a lot of mortgage. So you see, well, there 337 00:20:19,119 --> 00:20:22,639 Speaker 4: is early mortgage payment which the banks is not the 338 00:20:22,640 --> 00:20:25,080 Speaker 4: banks are not happy about it. And then on the 339 00:20:25,119 --> 00:20:29,879 Speaker 4: other hand, as the Chinese GDP grow slows down, you know, 340 00:20:30,000 --> 00:20:34,400 Speaker 4: three percent last year despite record a high export last year. 341 00:20:34,680 --> 00:20:37,680 Speaker 4: And then on top of that we see the move 342 00:20:37,760 --> 00:20:41,800 Speaker 4: out or the redistribution of global supply chains and international 343 00:20:42,440 --> 00:20:48,199 Speaker 4: multinational multinationals become less you know, bullish about the Chinese 344 00:20:48,200 --> 00:20:52,200 Speaker 4: market than you know, high paying jobs being there. There 345 00:20:52,200 --> 00:20:55,160 Speaker 4: are less high paying jobs being created, so Chinese people 346 00:20:55,160 --> 00:20:57,360 Speaker 4: becomes like, well, wait a moment, I don't think I'm 347 00:20:57,400 --> 00:20:59,520 Speaker 4: going to make more money. Therefore, they are not going 348 00:20:59,520 --> 00:21:01,359 Speaker 4: to be a sign to spend. They are going to 349 00:21:01,400 --> 00:21:06,560 Speaker 4: be more incentivized to save. Not because of good environment, 350 00:21:06,640 --> 00:21:10,919 Speaker 4: about because of lack of confidence and then deflationary policy 351 00:21:11,000 --> 00:21:14,600 Speaker 4: environment is because people are waiting. Well, it seems that 352 00:21:14,720 --> 00:21:17,120 Speaker 4: as fround the beginning of this year, the government has 353 00:21:17,400 --> 00:21:21,600 Speaker 4: put out so many policies to incentivize people to spend 354 00:21:22,040 --> 00:21:23,960 Speaker 4: or for that a matter of support the housing market. 355 00:21:24,520 --> 00:21:27,640 Speaker 4: And there is this popular saying if you don't buy, 356 00:21:27,760 --> 00:21:31,080 Speaker 4: if I don't buy, the housing price persone meter next 357 00:21:31,080 --> 00:21:34,159 Speaker 4: week is going to be cheaper by two hundred again. 358 00:21:34,640 --> 00:21:36,959 Speaker 3: So everyone weighs on strike right to try to get 359 00:21:37,000 --> 00:21:38,920 Speaker 3: a lower price. I think this is such a good 360 00:21:38,960 --> 00:21:42,840 Speaker 3: point because historically a lot of Chinese growth has been 361 00:21:42,920 --> 00:21:47,760 Speaker 3: driven by infrastructure investment and housing, and it feels like 362 00:21:48,280 --> 00:21:51,600 Speaker 3: infrastructure has kind of run its course. China does have 363 00:21:51,680 --> 00:21:53,760 Speaker 3: a lot of great infrastructure right now, and at the 364 00:21:53,840 --> 00:21:57,680 Speaker 3: same time, housing the other sort of twin engine of growth. 365 00:21:57,960 --> 00:21:59,600 Speaker 3: There are a lot of doubts about it, as you 366 00:21:59,720 --> 00:22:01,959 Speaker 3: just like out perfectly. I want to go back to 367 00:22:02,000 --> 00:22:05,399 Speaker 3: something you said earlier. I've never heard anyone phrase it 368 00:22:05,560 --> 00:22:08,840 Speaker 3: quite like this, but I think it's absolutely correct, the 369 00:22:08,920 --> 00:22:13,000 Speaker 3: idea that the Chinese economy is sort of predicated on 370 00:22:13,160 --> 00:22:18,640 Speaker 3: financial repression and that introduces inherent limitations in a situation 371 00:22:18,840 --> 00:22:21,159 Speaker 3: like this. Can you talk a little bit more about 372 00:22:21,240 --> 00:22:22,640 Speaker 3: how you see that working. 373 00:22:23,040 --> 00:22:26,240 Speaker 4: Sure, you know there are so many people talk about 374 00:22:26,440 --> 00:22:29,760 Speaker 4: financial repressions, and obviously people you know, Tracy, you are 375 00:22:29,760 --> 00:22:36,440 Speaker 4: absolutely right. A lot of infrastructure and housing have been 376 00:22:36,960 --> 00:22:40,560 Speaker 4: the twined growth engine for the Chinese economy because they 377 00:22:40,640 --> 00:22:44,600 Speaker 4: drive up aggregate demand and they also drive up global 378 00:22:44,600 --> 00:22:49,639 Speaker 4: commodity prizes. And to say that it's not that the 379 00:22:49,840 --> 00:22:54,440 Speaker 4: China built too much infrastructure or for the matter too 380 00:22:54,480 --> 00:22:57,960 Speaker 4: much housing is that the over built it to the 381 00:22:58,040 --> 00:23:03,000 Speaker 4: extent that if population growth, population keep growing, or more 382 00:23:03,119 --> 00:23:06,840 Speaker 4: international companies move into China, or there are more demand 383 00:23:06,920 --> 00:23:10,879 Speaker 4: for factories because of entrepreneurs and all that growing supply 384 00:23:11,000 --> 00:23:13,840 Speaker 4: growing demand. The whole idea is, this is the Chinese 385 00:23:13,920 --> 00:23:17,080 Speaker 4: policy maker's mentality. As long I build it, as I 386 00:23:17,240 --> 00:23:20,960 Speaker 4: provided the infrastructure, they will come. Right. But now the 387 00:23:21,000 --> 00:23:25,560 Speaker 4: problem is international companies are not coming for a variety 388 00:23:25,600 --> 00:23:28,920 Speaker 4: of reasons, and a lot of the reasons goes back 389 00:23:28,960 --> 00:23:34,359 Speaker 4: to my quote about dun shaping reasons. The Chinese leaders 390 00:23:34,359 --> 00:23:38,639 Speaker 4: have simply made policy choices and policy decisions, created a 391 00:23:38,720 --> 00:23:42,960 Speaker 4: huge uncertainty and signaled even if they did not have 392 00:23:43,000 --> 00:23:46,840 Speaker 4: the intention, but at least from our observation, they created 393 00:23:46,840 --> 00:23:51,800 Speaker 4: the signal that perhaps the Chinese government or the Party 394 00:23:52,000 --> 00:23:56,040 Speaker 4: changed their policies with regard to reform and open up. 395 00:23:56,320 --> 00:24:00,520 Speaker 4: So a lot of these boil down to yes, you know, 396 00:24:00,640 --> 00:24:02,680 Speaker 4: the Party is still very much out of the center 397 00:24:02,760 --> 00:24:07,120 Speaker 4: of capital allocation. Ye. In this whole idea of financial repression, 398 00:24:07,160 --> 00:24:11,399 Speaker 4: this whole idea is to use high savings that Chinese 399 00:24:11,440 --> 00:24:14,160 Speaker 4: people tend to save, and these high savings is being 400 00:24:14,240 --> 00:24:17,480 Speaker 4: channeled through Chinese banking system. And you know, the two 401 00:24:18,080 --> 00:24:22,200 Speaker 4: the four biggest banks are stayed owned and through lower 402 00:24:22,320 --> 00:24:27,000 Speaker 4: depositors saving rate, lower depositors rate, they are able the 403 00:24:27,040 --> 00:24:31,760 Speaker 4: banks are able to lend cheaply to support state owned 404 00:24:31,920 --> 00:24:38,000 Speaker 4: enterprises or channel credit to sectors that are prioritized by 405 00:24:38,080 --> 00:24:42,439 Speaker 4: the government. And it's many people you know who follows China, 406 00:24:42,960 --> 00:24:46,600 Speaker 4: especially stayed on enterprises. They are familiar with this idea 407 00:24:46,640 --> 00:24:50,280 Speaker 4: of the government has these guidelines or government guidelines for 408 00:24:50,680 --> 00:24:55,160 Speaker 4: prioritized prioritized sectors. Every five years or so, they would 409 00:24:55,200 --> 00:24:57,119 Speaker 4: update it, right, you know. 410 00:24:57,320 --> 00:25:01,200 Speaker 1: So we've talked about household demand, We've talked about debt, 411 00:25:01,560 --> 00:25:04,679 Speaker 1: talked about demographics. There was actually a headline just yesterday 412 00:25:04,680 --> 00:25:07,880 Speaker 1: and Reuter's China's fertility rate drops her record low one 413 00:25:07,920 --> 00:25:09,159 Speaker 1: point zero nine into. 414 00:25:09,280 --> 00:25:12,359 Speaker 3: The one headline I left off. 415 00:25:10,760 --> 00:25:14,359 Speaker 1: You had to save one for me. I appreciate that, 416 00:25:14,400 --> 00:25:17,720 Speaker 1: which is so obviously still going, you know, in the 417 00:25:17,760 --> 00:25:20,920 Speaker 1: wrong direction. And I want to talk about, you know, 418 00:25:21,040 --> 00:25:23,120 Speaker 1: the actual topic of your book. But I think maybe 419 00:25:23,119 --> 00:25:27,320 Speaker 1: there's the fourth D in your four D framework, the decoupling, 420 00:25:27,640 --> 00:25:29,399 Speaker 1: and so obviously I mean, I think there's some like 421 00:25:29,440 --> 00:25:33,440 Speaker 1: sort of intuitions like okay, like US or global multinationals 422 00:25:33,440 --> 00:25:37,119 Speaker 1: maybe like less inclined to invest in China. Obviously the 423 00:25:37,200 --> 00:25:40,359 Speaker 1: sort of growing trade tensions that started under Trump and 424 00:25:40,440 --> 00:25:43,720 Speaker 1: really have continued or maybe even ratcheted higher under Biden. 425 00:25:43,760 --> 00:25:45,679 Speaker 1: But how do you think of that we're decoupling? What 426 00:25:45,720 --> 00:25:46,440 Speaker 1: does it mean to you? 427 00:25:46,520 --> 00:25:46,600 Speaker 4: Like? 428 00:25:46,600 --> 00:25:48,400 Speaker 1: How do you how would you define it? 429 00:25:49,240 --> 00:25:54,000 Speaker 4: Honestly? I felt decoupling at the individual. First of all, Joe, 430 00:25:54,040 --> 00:25:55,879 Speaker 4: I appreciate that you asked me, you know how I 431 00:25:55,880 --> 00:25:59,680 Speaker 4: feel about it? Because people have people are very confused 432 00:25:59,680 --> 00:26:02,080 Speaker 4: about what is decoupling or what are talking about the 433 00:26:02,160 --> 00:26:05,000 Speaker 4: risking and there is actually no formal definition about what 434 00:26:05,080 --> 00:26:08,840 Speaker 4: they are at a personal level. The moment during COVID, 435 00:26:09,040 --> 00:26:13,640 Speaker 4: the moment I realized I cannot get a plan from 436 00:26:13,720 --> 00:26:17,000 Speaker 4: New York to go back to Shanghai or Beijing. For me, 437 00:26:17,800 --> 00:26:21,320 Speaker 4: that is a sign of decoupling. And right now there is, 438 00:26:21,640 --> 00:26:24,120 Speaker 4: if I am correct, there is still no direct flight 439 00:26:24,160 --> 00:26:28,600 Speaker 4: between New York and Beijing or Shanghai, and the flight 440 00:26:29,320 --> 00:26:32,280 Speaker 4: right now, I think there are concrete policies that you know, 441 00:26:32,359 --> 00:26:36,159 Speaker 4: the concrete initiatives in the evasion industry between US and 442 00:26:36,240 --> 00:26:38,880 Speaker 4: China and to increase the flight, but still very below 443 00:26:39,200 --> 00:26:42,119 Speaker 4: pre pandemic level. So what we are we can concretely 444 00:26:42,160 --> 00:26:45,800 Speaker 4: observe less and the less people to people communication. And 445 00:26:46,880 --> 00:26:51,440 Speaker 4: from economic sense obviously or political economy sense, decoupling obviously 446 00:26:51,520 --> 00:26:54,040 Speaker 4: means or for that you know right now we're talking 447 00:26:54,080 --> 00:26:58,160 Speaker 4: about the risk is very much a Western term if 448 00:26:58,160 --> 00:27:01,080 Speaker 4: we view it from China or Chinese as a maker's perspective, 449 00:27:01,119 --> 00:27:03,400 Speaker 4: because this is the term that they condemn a lot. 450 00:27:03,560 --> 00:27:06,600 Speaker 4: You see Premier Letiang in the China in the summer, 451 00:27:06,600 --> 00:27:09,639 Speaker 4: devils intandians that you know, decoupling is a terrible idea, 452 00:27:09,720 --> 00:27:14,120 Speaker 4: is a false prefaces and all that. But decoupling really, 453 00:27:14,600 --> 00:27:18,200 Speaker 4: I understand it from the perspective of supply chain diversification. 454 00:27:18,520 --> 00:27:24,000 Speaker 4: The idea really is really not about getting rid of 455 00:27:24,000 --> 00:27:26,400 Speaker 4: a China simply because of China is on every part 456 00:27:26,400 --> 00:27:28,600 Speaker 4: of your supply chain, How could you possibly get rid 457 00:27:28,600 --> 00:27:33,120 Speaker 4: of China? Right, But it's really about not being overly 458 00:27:33,200 --> 00:27:36,919 Speaker 4: reliant on your one simple supplier. The whole idea of 459 00:27:36,960 --> 00:27:39,480 Speaker 4: you know, eykon one on one used to be economy 460 00:27:39,560 --> 00:27:43,720 Speaker 4: of scale, but now economy of scale become a risk. 461 00:27:44,080 --> 00:27:48,119 Speaker 1: Huh, that's what that's very well put economies of scale 462 00:27:48,119 --> 00:27:48,800 Speaker 1: becoming a risk. 463 00:27:49,400 --> 00:27:53,040 Speaker 3: So why don't speaking of scale, why don't we talk 464 00:27:53,119 --> 00:27:56,000 Speaker 3: about the sovereign wealth funds? Because when you look at 465 00:27:56,000 --> 00:27:59,320 Speaker 3: the numbers of something like CiCe, I mean they're massive. 466 00:27:59,440 --> 00:28:03,800 Speaker 3: With China, numbers are almost always massive. The accumulation of 467 00:28:03,880 --> 00:28:07,399 Speaker 3: this wealth and the fact that it is held by 468 00:28:07,480 --> 00:28:12,240 Speaker 3: these public investment entities, what does that mean in times 469 00:28:12,680 --> 00:28:16,439 Speaker 3: like this? China has you know, billions, possibly trillions of 470 00:28:16,480 --> 00:28:19,320 Speaker 3: dollars worth of FX reserves. I can't remember the exact number. 471 00:28:19,920 --> 00:28:21,800 Speaker 3: I think there's some debate over it now as well. 472 00:28:22,440 --> 00:28:25,760 Speaker 3: But could they tap some of those assets to provide 473 00:28:26,080 --> 00:28:28,720 Speaker 3: support in times of economic slowdown? 474 00:28:29,640 --> 00:28:33,080 Speaker 4: Tracy, that's not excellent point. In times of economic slow down, 475 00:28:33,240 --> 00:28:36,960 Speaker 4: I would say there are opportunities, But in times of 476 00:28:37,080 --> 00:28:42,000 Speaker 4: economic crisis they have done that before. And actually China's 477 00:28:42,000 --> 00:28:47,640 Speaker 4: summer funds initially was not created for geopolitical or geoeconomic 478 00:28:47,840 --> 00:28:52,160 Speaker 4: aspiration power projection. It was created out of crisis. The 479 00:28:52,280 --> 00:28:56,360 Speaker 4: very first time that the Chinese policy makers used foreign 480 00:28:56,400 --> 00:29:00,760 Speaker 4: exchange reserves was to recapitalize the Chinese banks in the 481 00:29:00,800 --> 00:29:05,320 Speaker 4: early two thousands, when the major Chinese state owned banks 482 00:29:05,360 --> 00:29:09,200 Speaker 4: were crippled by non performing loans. At that time, some 483 00:29:09,280 --> 00:29:13,400 Speaker 4: of those banks were suffering from at non performing loans 484 00:29:13,400 --> 00:29:16,800 Speaker 4: as high as higher than twenty or twenty five percent, 485 00:29:16,960 --> 00:29:20,720 Speaker 4: so by definition they were actually they were, you know, 486 00:29:20,840 --> 00:29:24,080 Speaker 4: non solvent. So at that time they decided that they 487 00:29:24,840 --> 00:29:30,479 Speaker 4: created this special policy vehicle called Centraligin and used function 488 00:29:30,640 --> 00:29:36,280 Speaker 4: reserves through Centralkuigan to recapitalize these Chinese banks. They have 489 00:29:36,400 --> 00:29:40,480 Speaker 4: been quite successful. Therefore, when there were a few I 490 00:29:40,480 --> 00:29:43,600 Speaker 4: think it's around twenty fifteen if I remember correctly, there 491 00:29:43,680 --> 00:29:47,600 Speaker 4: was this baushining Hun crisis. It's another medium sized bank 492 00:29:47,680 --> 00:29:51,320 Speaker 4: crisis in China, and a lot of confusion at that time. 493 00:29:51,320 --> 00:29:53,000 Speaker 4: People were saying that, oh, you know, the central bank 494 00:29:53,080 --> 00:29:54,800 Speaker 4: is going to take it over. Actually it's not the 495 00:29:54,840 --> 00:29:57,800 Speaker 4: central bank, it was a Central Oigian. And now when 496 00:29:57,920 --> 00:30:00,920 Speaker 4: a lot of these bad loan managers, our bad debt 497 00:30:01,000 --> 00:30:04,160 Speaker 4: managers are the so called assets stayed owned asset management 498 00:30:04,160 --> 00:30:06,480 Speaker 4: the company, a lot of them are in trouble now 499 00:30:06,680 --> 00:30:09,560 Speaker 4: and the idea is, I wouldn't be surprised, you know, 500 00:30:09,760 --> 00:30:13,360 Speaker 4: Huisin is going to step in and take them under 501 00:30:13,440 --> 00:30:16,680 Speaker 4: on its balance sheet because this is a well established 502 00:30:16,720 --> 00:30:19,480 Speaker 4: channel that Central Cuisine knows how to do it and 503 00:30:19,680 --> 00:30:34,880 Speaker 4: do it successfully. 504 00:30:37,640 --> 00:30:40,800 Speaker 1: Stepping back further, I mean, you know, a lot of 505 00:30:40,840 --> 00:30:44,960 Speaker 1: sovereign wealth funds around the world. I associate with commodity 506 00:30:45,040 --> 00:30:48,760 Speaker 1: real commodity export countries, so obviously the Norwegian Sovereign Wealth 507 00:30:48,760 --> 00:30:51,520 Speaker 1: Fund one of the biggest, the various golf sovereign wealth funds, 508 00:30:51,560 --> 00:30:53,960 Speaker 1: and they tend to be in large part about sort 509 00:30:54,000 --> 00:30:59,479 Speaker 1: of currency stabilization given the inherent volatility of GDP and 510 00:30:59,520 --> 00:31:03,120 Speaker 1: their ex channel. You mentioned, you know, the sort of 511 00:31:03,240 --> 00:31:07,600 Speaker 1: origin of them and the banking crisis. Broadly speaking, what 512 00:31:07,720 --> 00:31:11,959 Speaker 1: purpose do they serve for China like currently sitting aside 513 00:31:11,960 --> 00:31:13,400 Speaker 1: the current economic weakness? 514 00:31:13,560 --> 00:31:16,080 Speaker 4: Ah? Sure? In the Joe, I appreciate that you mentioned 515 00:31:16,240 --> 00:31:19,880 Speaker 4: the origin of summern funds right, because a lot of 516 00:31:19,920 --> 00:31:22,959 Speaker 4: this is sovereign so called Summer and Wells fund. In 517 00:31:23,000 --> 00:31:25,640 Speaker 4: the entire universe of a sovereign Wells fund. As a 518 00:31:25,680 --> 00:31:29,560 Speaker 4: Tracy mentioned earlier, these funds are massive, and the Chinese 519 00:31:29,560 --> 00:31:32,719 Speaker 4: funds are actually see see I see alone it managed 520 00:31:32,760 --> 00:31:36,320 Speaker 4: more than one point three trillion asset, which is larger 521 00:31:36,320 --> 00:31:39,960 Speaker 4: than the size of Mexico's GDP. And I think Mexico 522 00:31:40,080 --> 00:31:43,160 Speaker 4: is like the world seventeenth largest economy or something like that, 523 00:31:43,800 --> 00:31:49,120 Speaker 4: and China has more than that, so broadly speaking, despite that, yes, 524 00:31:49,160 --> 00:31:51,520 Speaker 4: you know, originally these funds were the first time that 525 00:31:51,640 --> 00:31:54,240 Speaker 4: China did. It was to solve a crisis. And then 526 00:31:54,560 --> 00:31:59,280 Speaker 4: as China's reserve accumulation increased, or at least you know, 527 00:31:59,360 --> 00:32:02,800 Speaker 4: Tracy was, there is a debate with regard to how 528 00:32:02,840 --> 00:32:06,920 Speaker 4: we should think about the size of China's foreign exchange asset. 529 00:32:07,240 --> 00:32:10,360 Speaker 4: But if we think about if we think about foreign 530 00:32:10,360 --> 00:32:14,880 Speaker 4: exchange reserves using IMF's narrow definition, China's foreign change reserve 531 00:32:15,000 --> 00:32:18,520 Speaker 4: was at one point peaked at four trillion dollars. Right 532 00:32:18,560 --> 00:32:21,720 Speaker 4: now it's plate held around three trillion, slightly higher than 533 00:32:21,760 --> 00:32:27,880 Speaker 4: three trillion dollars. And as china reserve accumulates faster and more, 534 00:32:28,160 --> 00:32:31,840 Speaker 4: the debate in terms of how to better manage China's 535 00:32:31,880 --> 00:32:36,800 Speaker 4: foreign exchange reserves started, and after President Being came to power, 536 00:32:36,840 --> 00:32:41,880 Speaker 4: in particular, there has been a shift to strategically use 537 00:32:41,920 --> 00:32:47,560 Speaker 4: the foreign change reserves to serve certain foreign policy agenda 538 00:32:47,680 --> 00:32:51,920 Speaker 4: or to finance certain government initiatives, such as the creation 539 00:32:52,160 --> 00:32:57,280 Speaker 4: of the Sale Cow defund to specifically advance or finance 540 00:32:57,400 --> 00:32:59,280 Speaker 4: the belt hand the road initiative. 541 00:33:00,240 --> 00:33:03,720 Speaker 3: Right, So I remember Brad sets are recently just on 542 00:33:03,760 --> 00:33:06,840 Speaker 3: the debate over the size of FS reserves. Brad Setster 543 00:33:06,880 --> 00:33:10,440 Speaker 3: had a great piece of research about the possibility that 544 00:33:10,480 --> 00:33:13,840 Speaker 3: maybe China has an additional three trillion dollars. I think 545 00:33:13,880 --> 00:33:17,240 Speaker 3: it was worth of assets that aren't necessarily accounted for 546 00:33:17,360 --> 00:33:22,320 Speaker 3: in official statistics. The idea being that if it hadn't 547 00:33:22,400 --> 00:33:24,840 Speaker 3: channeled so much of that money into the Silk Road 548 00:33:24,880 --> 00:33:27,640 Speaker 3: Fund or Belt and Road and programs like that, this 549 00:33:27,720 --> 00:33:30,800 Speaker 3: would be an available pool of cash that it could 550 00:33:30,880 --> 00:33:35,560 Speaker 3: use for other things. What is the political appetite, I guess, 551 00:33:35,600 --> 00:33:40,120 Speaker 3: to move away from using that money to exert Chinese 552 00:33:40,200 --> 00:33:43,640 Speaker 3: influence in other parts of the world, buy up commodities 553 00:33:43,840 --> 00:33:47,760 Speaker 3: things like that, built ports in Africa, whatever, versus maybe 554 00:33:48,120 --> 00:33:50,800 Speaker 3: starting to channel some of it more domestically. 555 00:33:51,160 --> 00:33:54,520 Speaker 4: No, Tracy, that's accellent The point Brad and I wear colleagues, 556 00:33:54,560 --> 00:33:57,680 Speaker 4: and somehow we have done independent research on similar topics 557 00:33:57,680 --> 00:34:01,000 Speaker 4: and all that. His research has always been brilliant and 558 00:34:01,120 --> 00:34:03,920 Speaker 4: uh and and as solid. His charts are fantastic, and 559 00:34:05,240 --> 00:34:08,360 Speaker 4: sometimes I would question the color coding aspect of it, 560 00:34:11,400 --> 00:34:15,560 Speaker 4: but but his charts are great. My estimation of the 561 00:34:15,600 --> 00:34:19,520 Speaker 4: size of shadow reserves or whatever you know. They are 562 00:34:18,960 --> 00:34:23,319 Speaker 4: the assets foreign exchange assets that are not recorded on 563 00:34:23,480 --> 00:34:29,280 Speaker 4: China's official foreign exchange statistics, would would be in ballpark 564 00:34:29,760 --> 00:34:33,840 Speaker 4: in the same proximity to breast asthmate. And in particular 565 00:34:33,880 --> 00:34:37,319 Speaker 4: for a lot of these assets managed by State Administration 566 00:34:37,440 --> 00:34:40,880 Speaker 4: of Foreign Exchange. You know, it's established UH domestic and 567 00:34:41,040 --> 00:34:46,200 Speaker 4: international investment corporations. And my assessment of to what extent 568 00:34:46,360 --> 00:34:51,759 Speaker 4: this would be used to solve to project power globally, 569 00:34:52,320 --> 00:34:57,840 Speaker 4: I would say perhaps in the current global geopolitical environment, 570 00:34:58,480 --> 00:35:03,360 Speaker 4: not so much. And the reason is because this perhaps 571 00:35:03,440 --> 00:35:07,120 Speaker 4: is another point where China's policymakers tend to think differently 572 00:35:07,160 --> 00:35:12,160 Speaker 4: in terms of economic or financial management diversification. It used 573 00:35:12,200 --> 00:35:14,160 Speaker 4: to be the at least starting from two to seven 574 00:35:14,239 --> 00:35:16,799 Speaker 4: to two some thirteen. During this period of time, the 575 00:35:17,120 --> 00:35:21,400 Speaker 4: discussion about diversification of foreign change reserves has been diversified 576 00:35:21,400 --> 00:35:25,120 Speaker 4: away from US treasury is because the yield on US 577 00:35:25,160 --> 00:35:28,040 Speaker 4: strategies was so low and an opportunity for US to 578 00:35:28,120 --> 00:35:30,480 Speaker 4: hold most of our reserves in the US strateury is 579 00:35:30,520 --> 00:35:35,560 Speaker 4: so high. Therefore, we need to diversify in strategic asset overseas, 580 00:35:35,880 --> 00:35:39,520 Speaker 4: such as critical minerals or guests or you know, some 581 00:35:39,600 --> 00:35:43,200 Speaker 4: startup companies and all that, and certain people even put 582 00:35:43,239 --> 00:35:46,360 Speaker 4: out agenda in terms of these are the six areas 583 00:35:46,440 --> 00:35:48,719 Speaker 4: that we need to think about in terms of a 584 00:35:48,760 --> 00:35:54,960 Speaker 4: strategic asset. But now diversification becomes a risk, you know, 585 00:35:55,320 --> 00:36:03,960 Speaker 4: because diversification can not diversify away systemic risk, right and 586 00:36:04,000 --> 00:36:10,000 Speaker 4: for China at this moment, systemic risk becomes being sanctioned 587 00:36:10,600 --> 00:36:14,080 Speaker 4: by the West. This is my assessment. Obviously, you know 588 00:36:14,280 --> 00:36:16,640 Speaker 4: I did not get this from he or anybody. But 589 00:36:17,640 --> 00:36:22,320 Speaker 4: given what Russian given the West collective sanction against the Russia, 590 00:36:22,480 --> 00:36:26,640 Speaker 4: especially the freeze of Russian reserves, now you realize, well, 591 00:36:26,680 --> 00:36:30,640 Speaker 4: who has the largest oarn reserves in the world. It's China. 592 00:36:30,719 --> 00:36:34,280 Speaker 4: And where are most of the reserve invested or most 593 00:36:34,280 --> 00:36:37,759 Speaker 4: of the assets invested or owned by sovereign funds. Most 594 00:36:37,800 --> 00:36:42,359 Speaker 4: of the sovereign funds investing in Europe and America. They 595 00:36:42,360 --> 00:36:47,440 Speaker 4: are not necessarily politically aligned or geopolitically aligned in times 596 00:36:47,480 --> 00:36:50,400 Speaker 4: of geoeconomic contingency such as Taiwan. 597 00:36:51,480 --> 00:36:54,600 Speaker 3: I think that's a very reasonable assumption. You actually brought 598 00:36:54,680 --> 00:36:56,759 Speaker 3: up something that I wanted to ask you about as well, 599 00:36:56,760 --> 00:37:00,319 Speaker 3: which is China's buying of US treasuries, and there is 600 00:37:00,360 --> 00:37:04,160 Speaker 3: a sort of perpetual concern that one day China is 601 00:37:04,200 --> 00:37:08,120 Speaker 3: not going to be there to finance the US deficit. 602 00:37:08,200 --> 00:37:12,440 Speaker 3: I guess how realistic is that concern in an era 603 00:37:12,640 --> 00:37:17,640 Speaker 3: where China is potentially worried about something like sanctions. 604 00:37:19,560 --> 00:37:24,000 Speaker 4: To be honest, I would I'm not surprised that the 605 00:37:24,239 --> 00:37:28,279 Speaker 4: appetite for China to slow down or by less US 606 00:37:28,400 --> 00:37:32,160 Speaker 4: treasuries has exist or has already happened. Part of the 607 00:37:32,200 --> 00:37:34,560 Speaker 4: reason is because the conversation has already started in the 608 00:37:34,600 --> 00:37:38,719 Speaker 4: two thousands, and the people already start. People already realized, well, 609 00:37:38,719 --> 00:37:42,560 Speaker 4: there is opportunity cost of holding US treasuries. At that time, 610 00:37:42,640 --> 00:37:46,200 Speaker 4: the opportunity cost was purely in terms of economic But 611 00:37:46,360 --> 00:37:50,439 Speaker 4: now the problem becomes perhaps there is also geopolitical risk, 612 00:37:50,560 --> 00:37:54,040 Speaker 4: right the diversification, the diversification aspect of it, and then 613 00:37:54,640 --> 00:37:59,040 Speaker 4: the other aspect of the debate comes down to, well, 614 00:38:00,120 --> 00:38:03,880 Speaker 4: perhaps the China would not necessarily want to dump you 615 00:38:03,960 --> 00:38:09,200 Speaker 4: as a treasury enlarge amount too fast, either because ultimately 616 00:38:10,000 --> 00:38:14,080 Speaker 4: any volatility yin US a treasury market, or for that 617 00:38:14,120 --> 00:38:17,279 Speaker 4: no matter the depreciation of US dollar is going to 618 00:38:17,560 --> 00:38:21,920 Speaker 4: inflict a huge pan on the Chinese Central Mexic balance 619 00:38:21,960 --> 00:38:22,600 Speaker 4: sheet as well. 620 00:38:23,320 --> 00:38:25,520 Speaker 1: So I just have one more question, and this is 621 00:38:25,560 --> 00:38:27,680 Speaker 1: going to be one of those questions. It's totally unfair 622 00:38:27,840 --> 00:38:30,520 Speaker 1: because it's actually like incredibly open ended. We could probably 623 00:38:30,560 --> 00:38:32,600 Speaker 1: do another hour on this, but like, you know, it's 624 00:38:32,600 --> 00:38:35,080 Speaker 1: got to be like one question. But you know the 625 00:38:35,080 --> 00:38:37,640 Speaker 1: title of your book, how the Communist Party of China 626 00:38:37,680 --> 00:38:40,959 Speaker 1: or sovereign funds? How the Communist Party of China finances? 627 00:38:41,280 --> 00:38:44,239 Speaker 1: It's global ambition. We've been talking a lot about the financing, 628 00:38:44,800 --> 00:38:46,560 Speaker 1: but what are the global ambitions? 629 00:38:47,160 --> 00:38:48,440 Speaker 2: This is actually another episode. 630 00:38:48,440 --> 00:38:50,879 Speaker 1: I know it's a whole other episode because we are 631 00:38:50,920 --> 00:38:53,520 Speaker 1: probably of a whole series of like, but I do 632 00:38:53,560 --> 00:38:55,560 Speaker 1: think we should like touch on that, like how would 633 00:38:55,560 --> 00:38:59,840 Speaker 1: you summarize the global ambitions of the Chinese Communist Party. 634 00:39:00,440 --> 00:39:04,840 Speaker 4: I think the global ambitions have changed and evolved over time. 635 00:39:05,239 --> 00:39:07,760 Speaker 4: It used to be the case that from dun Shopping 636 00:39:07,800 --> 00:39:11,239 Speaker 4: onward before up until twenty thirteen or the end of 637 00:39:11,280 --> 00:39:16,560 Speaker 4: two thousand twelve, the global ambition has been growing the economy, 638 00:39:16,640 --> 00:39:19,920 Speaker 4: raising out of the people's life standard and so that 639 00:39:20,000 --> 00:39:23,840 Speaker 4: the party can stay in power. And starting from Twosun 640 00:39:23,920 --> 00:39:28,239 Speaker 4: thirteen onward, we started to see there is an inflation 641 00:39:28,960 --> 00:39:32,560 Speaker 4: of the party's ambition, from the Belt and Road initiative 642 00:39:32,960 --> 00:39:38,279 Speaker 4: to the building of shared human destiny, and a lot 643 00:39:38,320 --> 00:39:42,560 Speaker 4: of these reside or resonates with the present. The current leader, 644 00:39:42,600 --> 00:39:48,319 Speaker 4: President Jimpings, continue to search for great ideas and this 645 00:39:48,360 --> 00:39:51,160 Speaker 4: brings me back to Donaping. Don Shaping in his nineteen 646 00:39:51,200 --> 00:39:55,520 Speaker 4: ninety two tour he said, it is okay for us 647 00:39:55,640 --> 00:40:00,239 Speaker 4: to not have new ideas as long as we do 648 00:40:00,400 --> 00:40:05,040 Speaker 4: not the change with our economic reform and open app policy. 649 00:40:05,120 --> 00:40:08,000 Speaker 4: But right now the ambition seems to be changing, and 650 00:40:08,120 --> 00:40:11,319 Speaker 4: it seems to be a moving target with regard to 651 00:40:11,480 --> 00:40:14,759 Speaker 4: figuring out what exactly we are trying to do well. 652 00:40:14,840 --> 00:40:17,040 Speaker 1: I do think maybe we should at some point have 653 00:40:17,120 --> 00:40:20,359 Speaker 1: you back for like an hour, just unlike how this 654 00:40:20,440 --> 00:40:22,399 Speaker 1: is all changing and where it's all going and how 655 00:40:22,400 --> 00:40:24,920 Speaker 1: it's evolving a song with Zoe lud This was a 656 00:40:25,080 --> 00:40:28,160 Speaker 1: fascinating conversation. Really appreciate you coming on up. 657 00:40:28,840 --> 00:40:30,680 Speaker 4: Thank you both for having me and yeah, I'm a 658 00:40:30,719 --> 00:40:31,080 Speaker 4: big thing. 659 00:40:31,600 --> 00:40:46,879 Speaker 1: Thanks much, Tracy. I thought that was great. I need 660 00:40:46,920 --> 00:40:49,440 Speaker 1: to come up with something like the four d's of 661 00:40:49,560 --> 00:40:52,120 Speaker 1: something just like I feel like it's like a calling 662 00:40:52,200 --> 00:40:54,439 Speaker 1: card some big things like it's so good. 663 00:40:54,600 --> 00:40:57,239 Speaker 3: Well, I'm glad you asked that last question about the 664 00:40:57,280 --> 00:41:00,640 Speaker 3: ambitions of China, because I think it hints at the 665 00:41:00,760 --> 00:41:04,520 Speaker 3: fundamental tension here which and Zoe mentioned this, which is, 666 00:41:05,480 --> 00:41:11,120 Speaker 3: for years the party justified its control by promising economic growth. 667 00:41:11,160 --> 00:41:14,200 Speaker 3: So you have that social contract. But I think the 668 00:41:14,239 --> 00:41:18,920 Speaker 3: difficulty now is what if that control is coming at 669 00:41:18,920 --> 00:41:21,960 Speaker 3: the expense of economic growth. You know, if we're talking 670 00:41:22,000 --> 00:41:24,520 Speaker 3: about a lot of these difficulties are in fact a 671 00:41:24,560 --> 00:41:29,840 Speaker 3: political economy problem, then I think it raises that question 672 00:41:30,080 --> 00:41:34,080 Speaker 3: and becomes extremely tricky for the Party to actually navigate. 673 00:41:34,280 --> 00:41:38,040 Speaker 1: I hadn't really thought about that point before, about the 674 00:41:38,080 --> 00:41:41,960 Speaker 1: sort of I guess I would say inherently decentralizing effect 675 00:41:42,560 --> 00:41:46,960 Speaker 1: of more household demand, right that at some level, if 676 00:41:47,320 --> 00:41:50,600 Speaker 1: households have more cash, if they're less financially repressed, et cetera, 677 00:41:50,920 --> 00:41:53,520 Speaker 1: then at some level, like there's a limit of the 678 00:41:53,560 --> 00:41:57,120 Speaker 1: degree of control that political leaders can have about that 679 00:41:57,320 --> 00:41:59,840 Speaker 1: spending and where it goes and how that money is. 680 00:42:00,360 --> 00:42:02,520 Speaker 1: I hadn't really, like, you know, like I sort of 681 00:42:02,560 --> 00:42:07,000 Speaker 1: had this conception that well, maybe for like domestic industrial purposes, 682 00:42:07,640 --> 00:42:09,759 Speaker 1: you know, you know, you want to like prioritize the 683 00:42:09,760 --> 00:42:12,600 Speaker 1: interests of certain exporters or certain certain industries. But just 684 00:42:12,640 --> 00:42:14,680 Speaker 1: the idea of like an inherently like sort of like 685 00:42:14,800 --> 00:42:17,080 Speaker 1: decentralizing effect is one that I hadn't thought about at 686 00:42:17,080 --> 00:42:17,600 Speaker 1: all well. 687 00:42:18,000 --> 00:42:21,040 Speaker 3: And also it sort of highlights the importance of the 688 00:42:21,080 --> 00:42:24,320 Speaker 3: public business entities in China. And this is something that 689 00:42:24,360 --> 00:42:27,480 Speaker 3: I only realized from actually spending time in Beijing, which is, 690 00:42:27,640 --> 00:42:31,560 Speaker 3: you know, a lot of countries have big government buildings 691 00:42:31,680 --> 00:42:34,480 Speaker 3: or monuments of some sort. A lot of the biggest 692 00:42:34,480 --> 00:42:38,399 Speaker 3: buildings in Beijing are the CIC and the other sort 693 00:42:38,400 --> 00:42:41,080 Speaker 3: of state owned enterprises, and if you walk around the 694 00:42:41,160 --> 00:42:44,880 Speaker 3: ring roads of Beijing, you get a real sense of 695 00:42:44,920 --> 00:42:49,000 Speaker 3: their sort of monumental importance to the economy. There is 696 00:42:49,040 --> 00:42:52,640 Speaker 3: a there's physical evidence of it, which you can't really 697 00:42:52,680 --> 00:42:54,040 Speaker 3: appreciate unless you see them. 698 00:42:54,640 --> 00:42:56,560 Speaker 2: The other thing that I thought was really. 699 00:42:56,320 --> 00:43:01,759 Speaker 3: Interesting was the idea of more need for diversification in 700 00:43:02,000 --> 00:43:06,040 Speaker 3: order to offset the decoupling aspect that Zoe talked about. 701 00:43:06,120 --> 00:43:09,399 Speaker 3: But again in times like this where you need more 702 00:43:09,480 --> 00:43:12,160 Speaker 3: money to support the domestic economy, but at the same 703 00:43:12,200 --> 00:43:14,759 Speaker 3: time you're worried about the external environment, and you want 704 00:43:14,760 --> 00:43:18,560 Speaker 3: to diversify away from the US to sort of offset that. 705 00:43:18,560 --> 00:43:22,160 Speaker 3: That also seems really difficult to do so many interesting things. Also, 706 00:43:22,239 --> 00:43:24,720 Speaker 3: can I just say I am now, I'm slightly obsessed 707 00:43:24,800 --> 00:43:27,719 Speaker 3: with idiot melon seeds, and I'm going to go off 708 00:43:28,520 --> 00:43:29,560 Speaker 3: and research. 709 00:43:31,520 --> 00:43:33,120 Speaker 1: I guess I was going to do the same thing. 710 00:43:33,239 --> 00:43:35,000 Speaker 2: Yes, excellent, All right, shall we leave it there? 711 00:43:35,080 --> 00:43:35,759 Speaker 1: Let's leave it there. 712 00:43:35,840 --> 00:43:36,160 Speaker 2: Okay. 713 00:43:36,280 --> 00:43:39,080 Speaker 3: This has been another episode of the Odd Lots podcast. 714 00:43:39,280 --> 00:43:42,200 Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway. 715 00:43:42,560 --> 00:43:45,600 Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart. 716 00:43:45,800 --> 00:43:48,680 Speaker 1: Follow our guests song leand Zoe Lou at that same name, 717 00:43:48,719 --> 00:43:52,800 Speaker 1: Songwend Zoe Lou. Follow our producers Carmen Rodriguez at Carmen 718 00:43:53,000 --> 00:43:55,960 Speaker 1: Arman and dash Ol Bennett at dashbot, and check out 719 00:43:56,000 --> 00:43:59,359 Speaker 1: all of the Bloomberg podcasts under the handle at Podcasts, 720 00:43:59,760 --> 00:44:02,439 Speaker 1: and for more odd Logs content, go to Bloomberg dot 721 00:44:02,440 --> 00:44:05,680 Speaker 1: com slash odd Logs. We post transcripts, we have a 722 00:44:05,719 --> 00:44:08,480 Speaker 1: blog and a newsletter that comes out every Friday, and 723 00:44:09,800 --> 00:44:12,279 Speaker 1: before I forget, we also have a discord. It's really fun. 724 00:44:12,560 --> 00:44:15,080 Speaker 1: Twenty four to seven listeners like yourself are in there 725 00:44:15,160 --> 00:44:20,160 Speaker 1: chatting about all these topics, economics, macro stuff, currencies, super 726 00:44:20,200 --> 00:44:23,600 Speaker 1: interesting plays, discord, dot gg, slash. 727 00:44:23,200 --> 00:44:26,520 Speaker 3: Odlins, and if you enjoy odd Lots. If you like 728 00:44:26,600 --> 00:44:29,920 Speaker 3: these conversations, and please leave us a positive review on 729 00:44:29,960 --> 00:44:31,680 Speaker 3: your favorite podcast platform. 730 00:44:31,680 --> 00:44:32,480 Speaker 2: Thanks for listening.