Speaker 1: Hello, and welcome to the New Economy. I'm Stephanie Flander's
Speaker 1: head of Bloomberg Economics. One thing I've noticed in twenty
Speaker 1: five years of writing and thinking about the global economy,
Speaker 1: we spend so much time anticipating the big changes that
Speaker 1: are coming down the track. By the time they actually happened,
Speaker 1: they seem like old news. When it comes to the
Speaker 1: rise of China, it's not old news at all. It's
Speaker 1: happening right now, and not at all in the way
Speaker 1: that many Western policymakers hoped in the late nineties nineties
Speaker 1: when they were negotiating to bring China into the World
Speaker 1: Trade Organization the w t O. Back then, I was
Speaker 1: working for Larry Summers, then Deputy Treasury Secretary. We found
Speaker 1: ourselves grappling with what became the Asia Financial crisis. A
Speaker 1: string of countries, Thailand, Indonesia, Career all ended up letting
Speaker 1: go of their currencies, and Chinese exporters were saying the
Speaker 1: Chinese currency needed to fall as well to let them compete.
Speaker 1: I remember going along with Summers in early to a
Speaker 1: grand room in the Forbidden City in Beijing for an
Speaker 1: audience with the man who was then steering Chinese economic
Speaker 1: policy Ju Rongji. He gave a magisterial assessment of what
Speaker 1: had happened in the region. It may have been the
Speaker 1: jet lag, but I think even Summers felt a bit outclassed.
Speaker 1: You made clear that when it came to the currency,
Speaker 1: China would hold firm, and that was good news for
Speaker 1: the region and the world. It helped stop more dominoes
Speaker 1: from falling, at least in Asia. But there was a
Speaker 1: message in that restraint. This was a country that was
Speaker 1: willing to think long term. Fast forward to today, and
Speaker 1: China is punching its weight in ways that confront the
Speaker 1: so called Washington Consensus head on. Now the US presidents
Speaker 1: doing a bit of that himself. We might get to
Speaker 1: that later with two people who've spent probably an unhealthy
Speaker 1: amount of their lives thinking about China, Tom Olick and
Speaker 1: Andrew Brown. But first, here's end a current senior Asia
Speaker 1: economy correspondent for Bloomberg News from the streets of Hong Kong.
Speaker 1: In my past three years covering China and the regions
Speaker 1: economies for Bloomberg News, I have seen a marked increase
Speaker 1: in China's global influence. Until two thousand and fifteen, for example,
Speaker 1: the only global body led by China was the International
Speaker 1: Network for Bamboo and Britan. It now has a much
Speaker 1: bigger say at the i m F through more voting
Speaker 1: rights and high level representation. It has its own Global
Speaker 1: Development Bank, the ai i B, set up to arrival
Speaker 1: the World Bank, and in the face of Donald Trump's
Speaker 1: trade policies, China's leaders are claiming to be the champions
Speaker 1: of globalization. Here's Curtis Chin, former US Ambassador to the
Speaker 1: Asian Development Bank under president's George W. Bush and Barack Obama,
Speaker 1: and now the inaugural Asia Fellow at the Milkan Institute.
Speaker 1: Every country, through its development systems, through its partnerships, at
Speaker 1: the end of day of looking out after its own interests.
Speaker 1: That's very different in China today or Europe, in the
Speaker 1: US today or in the past. I think the real
Speaker 1: question comes back to when a country advances its own
Speaker 1: interests by advancing a form of global economic government in
Speaker 1: US as advanced free trade and connectivity. The key question
Speaker 1: is what countries in looking out after their own interests
Speaker 1: harm other countries. I think that's the question today. When
Speaker 1: I speak with officials and business people and economists, there
Speaker 1: are usually two takes and much china Is growing influence
Speaker 1: means for the world economy. Optimists say China offers a
Speaker 1: vital source of financing to government's desper to build infrastructure
Speaker 1: and grow their economies. Critics say the likes of the
Speaker 1: ai I B are merely window addressing for China's spider's
Speaker 1: web of lending channels and lack of transparency, and are
Speaker 1: effectively an arm of the Commonist Party. Alicia Garcia Herrero
Speaker 1: has worked in the official sector for institutions such as
Speaker 1: i m F during the Mexico crisis. She has also
Speaker 1: worked for the European Central Bank and Bank for International Settlements.
Speaker 1: ALSIE is now based in Hong Kong as Chief Asia
Speaker 1: Economists for French Banknetics Is. Here's how she sums up
Speaker 1: the two pronged aspect of Chinese finance overseas. China's new
Speaker 1: model is a two layer model. So you see what
Speaker 1: you see. You don't see what is happening unless you
Speaker 1: really look at it very carefully, and even then we
Speaker 1: probably still don't don't know what is happening at its
Speaker 1: full meaningful for us. Recently, a backlash has been growing
Speaker 1: against China's expanding influence. There's the very public trades about
Speaker 1: McDonald chump, but there's also ongoing disputes with Europe at
Speaker 1: a w t O and smaller skirmishes like Malaysia's government
Speaker 1: dropping plans for China to fund major infrastructure works and
Speaker 1: Australia's government blocking Huawei from completing the build the nation's
Speaker 1: five G phone network. Here's Curtis Chin again. The China's
Speaker 1: approach to development, to lending, to assistance to its neighbors,
Speaker 1: not just in Asia but also in African around the
Speaker 1: world has had benefits, but it's also come with challenges
Speaker 1: that countries are now really beginning to think through. The
Speaker 1: I m F two has warned the China maybe loading
Speaker 1: up poor nations with even more debt, and others saying
Speaker 1: China's overall lending lack of transparency. China, of course refutes
Speaker 1: those complaints. Here's a I I BE president Jin Lacun,
Speaker 1: who recently spoke with Bloomberg Television. Contrary to some other
Speaker 1: people's misconception, it's not a program dominated by China. It's
Speaker 1: the program by which China works with other countries working
Speaker 1: with international financial institutions multi lactal Devember banks. So it's
Speaker 1: kind of cooperation. Unfortunately, some people miss under students as
Speaker 1: kind of China program. China wants to to take advantage
Speaker 1: of these to promote its own interests, which nothing could
Speaker 1: be further from the truth. So how do we get
Speaker 1: to this point? Complacency among Western leaders play the role.
Speaker 1: Lending by the International Monetary Fund and World Bank often
Speaker 1: carried bitter conditions that enraged nations from Indonesia to Greece,
Speaker 1: sparking riots on the streets. The process of navigating loan
Speaker 1: approval was also laced with politics. I spoke with Louis Cows,
Speaker 1: formerly of the IMF and World Bank and now lead
Speaker 1: Asia economists at Oxford Economics. There's no doubt about it
Speaker 1: that China's cloud globally has been on the rise. It
Speaker 1: has been on the rise, I think for two reasons.
Speaker 1: One is a very obvious one. It's an economic one. Simply,
Speaker 1: if you're if you're becoming bigger economically, you you carry
Speaker 1: more cloud, you do more trade, people look more at you,
Speaker 1: You have more money to spend on development and delton
Speaker 1: road projects, all kind of things. Also, I would say
Speaker 1: the global financial crisis did hurt a little bit, you know,
Speaker 1: the image of Western style democracy and capitalism, and so
Speaker 1: that has also played in China's favors. The global financial
Speaker 1: crisis a moment that laid bare the fragilities of the
Speaker 1: Western model and gifted China and opportunity to step up
Speaker 1: on the global stage. However, witnessed the limitations of the
Speaker 1: Western model as an official at the i m F
Speaker 1: during the rescue of Mexico in the nineteen nineties. We
Speaker 1: were late. So this is our fault to reform the
Speaker 1: existing institutions which were not working, I would say, especially
Speaker 1: for those newcomers. So that's our fault thing that we
Speaker 1: were naive not to realize that it was not only
Speaker 1: about you know, China in manufacturing, but it was much
Speaker 1: more rooming already then and and we were not naive
Speaker 1: not to be more general years with such a growing power.
Speaker 1: For now, China's influence is still increasing. In September, President
Speaker 1: She greeted African leaders in Beijing and promised over sixty
Speaker 1: billion in financing. That was around the same time that
Speaker 1: Donald Trump said he would skip two major so much
Speaker 1: in Asia in November, stoking concerns about American commitment to
Speaker 1: the region. That's an opportunity China is keen to exploit
Speaker 1: through pushing its view of a future with itself at
Speaker 1: the heart of the global economy. Here's Louis Harris. My
Speaker 1: main worry about the future is a little bit that
Speaker 1: collision course between these different economic models and what they
Speaker 1: would mean for for relations globally between the US and China,
Speaker 1: between China and other countries more generally, you know, and
Speaker 1: I don't want to be too negative because you know,
Speaker 1: China's growth is definitely a positive for the rest of
Speaker 1: the world, and China's willingness to invest in other countries
Speaker 1: is on a net basis a positives of the world.
Speaker 1: But that you know, the issue of these different economic
Speaker 1: morals is going to become an issue not with not
Speaker 1: just with the US, but also with other countries. We
Speaker 1: see that, you know, the Europeans have issues with China's model,
Speaker 1: and I think that we see it a little bit
Speaker 1: in India and Brazil as well. So this is you know,
Speaker 1: we're not this is not a Dante. Just as the
Speaker 1: architecture of global trade is being challenged, the world economies,
Speaker 1: government structures are evolving to accommodate China's role. That was
Speaker 1: in the current reporting from Hong Kong. Well, listening to
Speaker 1: all that with me have been Andrew Brown, who's a
Speaker 1: former columnist and bureau chief in China for the Wall
Speaker 1: Street Journal, but now the editorial director for the New
Speaker 1: Economy Forum at Bloomberg. And our own chief economist, Tom Ulick,
Speaker 1: who has just moved back to Washington after eleven years
Speaker 1: in Beijing. Maybe our q Andrew, if if you go
Speaker 1: back to when China joined the w t O at
Speaker 1: the beginning of the century, you know, how is the
Speaker 1: reality of China's rise compared with the kind of predictions
Speaker 1: that we were making around that time. Yeah, well, you
Speaker 1: have you have to remember that China's entry into the
Speaker 1: w t O was part of a much bigger project,
Speaker 1: which was to bring this rising power into the global
Speaker 1: economic financial security architecture. Was summed up by Bob Zelleck
Speaker 1: with the phrase that China should become a responsible stakeholder
Speaker 1: in the global system, the US led global system. And
Speaker 1: it's worked pretty well in places. China is now the
Speaker 1: biggest contributor to UN peacekeeping. Chinese ships are involved in
Speaker 1: anti piracy off the coast of East Africa, keeping the
Speaker 1: sea lanes open to the Persian Gulf. China has signed
Speaker 1: up to arms control agreements as signed does not proliferate
Speaker 1: nuclear weapons. That's been very successful. The bit that they
Speaker 1: got long was on integrating China into the global economy,
Speaker 1: in particular into the w t O, and what they
Speaker 1: failed to consider were the implications of integrating China's massive
Speaker 1: armies of cheap labor and its deep pools of capital
Speaker 1: into the global economy. Um it was seen as a
Speaker 1: slam duck that China's markets were closed, America's were opened,
Speaker 1: and so when China brought down tariffs, you would get
Speaker 1: this rush of US exports into China. In fact, what
Speaker 1: happened was that you had this China shop. Two million,
Speaker 1: two and a half million American workers lost their jobs.
Speaker 1: Whole towns were decimated, and you can see it now
Speaker 1: in the US rust belt. On the financial side, what
Speaker 1: happened was that short Chinese purchases of US treasuries kept
Speaker 1: interest rates low, and that was good for business, but
Speaker 1: it also led to financial excess and of hose gave
Speaker 1: rise to the two thousand and eight financial crisis. The
Speaker 1: third mistake that I think they made was that they
Speaker 1: thought the American policy makers at the time thought that
Speaker 1: this was going to be the start of economic reforms
Speaker 1: in China, and that once China joined the w t O,
Speaker 1: we would see the economy progressively become more open, and
Speaker 1: in fact it turned out to be the high watermark
Speaker 1: of reform. And then right now what you're seeing is
Speaker 1: reformed stalling and even going backwards. Tom Um. We tend
Speaker 1: to view other people's other nation's success through the prism
Speaker 1: of our own insecurities. I guess if you were China,
Speaker 1: you'd say that you wouldn't be complaining about our success
Speaker 1: if you hadn't been having if you didn't have all
Speaker 1: these problems in your own backyard with with populism and
Speaker 1: other things. Aren't they aren't we just um, shouldn't we
Speaker 1: just focus on our own concerns rather than blame it
Speaker 1: all on China. Well, one of the funny things, Stephanie,
Speaker 1: is that when you sit in Beijing, as Andy and
Speaker 1: I did for for a number of years, what you
Speaker 1: see coming through on the Chinese propaganda and the Chinese
Speaker 1: newspapers and television is a certain amount of if not glee,
Speaker 1: at least kind of like smug self satisfaction, the evidence
Speaker 1: of sort of social dysfunction and political dysfunction that you
Speaker 1: see in the US and Europe. There's nothing that China
Speaker 1: television likes better than broadcasting a riot in Greece or
Speaker 1: a violent protest in the United States, and the implicit
Speaker 1: messages look, that system is broken and our system works. UM.
Speaker 1: Coming back to your question about whether it's sort of
Speaker 1: unfair to blame populars blame the dysfunctions that we have, UM,
Speaker 1: whether we'd be less dissatisfied with China if we didn't
Speaker 1: have these dysfunctions at home. I think there's certainly an
Speaker 1: element of truth in that. But what I would add
Speaker 1: is that whilst the sources of the dysfunctions we see
Speaker 1: in the West are complex, and they relate to social
Speaker 1: policy failures, they relate to the rise of technology, they
Speaker 1: relate to forces unleashed by globalization that go beyond just
Speaker 1: the rise of China. China is part of the picture,
Speaker 1: and it is Chinese imports, cheap Chinese imports, Chinese industrial
Speaker 1: policy giving what many see as an unfair advantage to
Speaker 1: Chinese firms, which is to blame for an element of
Speaker 1: the problems that we see in terms of inequality and
Speaker 1: lost wages. And one of the things that enders sort
Speaker 1: of focusing on in that piece is the way that
Speaker 1: China itself has taken a more muscular role in some
Speaker 1: of these institutions, and it is creating in the case
Speaker 1: of the infrastructure, by creating its own institution for having
Speaker 1: influence on the world. When you look at what they've
Speaker 1: done in Africa and Latin America, is this a country
Speaker 1: that is actually trying to impose an alternative model onto
Speaker 1: the world or is it just pursuing its core national interest.
Speaker 1: I'm not sure we can effectively divide those two things. Um,
Speaker 1: when China pursue us its national interest, it does so
Speaker 1: in a way which is suited to and driven by,
Speaker 1: and accommodated to its national model. So when the US
Speaker 1: goes overseas, it goes it goes goes overseas with its
Speaker 1: mighty private corporations and its free markets, and those are
Speaker 1: the approaches which which benefit those corporations and also perpetuate
Speaker 1: the the U S model. And when China goes overseas,
Speaker 1: it goes overseas with its huge state owned banks and
Speaker 1: it's huge state and enterprises and companies that want to
Speaker 1: do business with China. Countries that want to do business
Speaker 1: with China then have to do business with the China model.
Speaker 1: So the pursuit of self interest and the perpetuation or
Speaker 1: the expansion of a particular model of governance. I think
Speaker 1: they go hand in hand. But are they encouraging in
Speaker 1: these deals? Are less transparent way of doing business? Are
Speaker 1: they pulling these countries away from the kind of things
Speaker 1: that the West would have tried to push on them,
Speaker 1: you know, rule of law, transparency, I mean, and the
Speaker 1: end of talked about the optimists and the pessimist views
Speaker 1: of of China when it comes to this, this lending
Speaker 1: and development aid in other countries, what do you think?
Speaker 1: I mean, regardless of what you think about the Belton
Speaker 1: Road initiative, which is really the prime vehicle through which
Speaker 1: China is providing infrastructure of the world, whether you think
Speaker 1: that this is a geopolitical play, whether you think, like
Speaker 1: many in India do, that this is neo colonialism with
Speaker 1: China as the metropol building infrastructure, lending money to small
Speaker 1: neighbors to bring them into its orbit and to create
Speaker 1: dependencies are on Chinese periphery. But whether you just think
Speaker 1: the whole thing is a big marketing scam, it's hard
Speaker 1: not to feel positive about China building infrastructure across some
Speaker 1: of the most unstable and less least developed parts of
Speaker 1: the world, from Central Asia to the Middle East and
Speaker 1: North Africa. I mean, it's a good thing that China
Speaker 1: is powering up Pakistan by building power stations there. Of course,
Speaker 1: be much better if it put in clean power stations
Speaker 1: rather than the old model that it's um, you know,
Speaker 1: knocking around in China. UM. But that I think is
Speaker 1: is very positive. The problem is the way the Chinese
Speaker 1: go about it. I mean, you know, Tom and I say,
Speaker 1: living in China, we've watched this happening, and Chinese infrastructure
Speaker 1: is is heroic in its ambition. I mean they build airports,
Speaker 1: they build train stations, they build whole cities ahead of demand,
Speaker 1: and it just sort of sits there empty, you know.
Speaker 1: And eventually the idea is that, you know, given the
Speaker 1: pace of urbanization in China, all of this surplus infrastructure
Speaker 1: will eventually come in useful and often it does, um,
Speaker 1: but very often it doesn't. And this form of of
Speaker 1: of development is hugely wasteful. You can afford it if
Speaker 1: you're tiner and you're a continental sized economy and you
Speaker 1: have deep pools of savings. If you're a Sri Lanka
Speaker 1: and you build a port and you haven't got done
Speaker 1: your preparatory work and you don't know whether it's going
Speaker 1: to turn a profit or not, and it doesn't and
Speaker 1: you don't have any ships coming in, you can bankrupt
Speaker 1: the country. And that's what we're seeing now across much
Speaker 1: of the developing world. The rise of great powers has
Speaker 1: almost always caused trouble, as we know when you look
Speaker 1: through history, in fact, that the rise of the US
Speaker 1: as a superpower was more or less the exception. In
Speaker 1: your gut, Andy and Tom, do you think we are
Speaker 1: on a fundamentally peaceful trajectory as China starts to really
Speaker 1: punch its weight in in the world, or do you
Speaker 1: worry at some point about where this is going to go.
Speaker 1: Look a lot of everybody is talking now about the
Speaker 1: fucilities trap and learned Lee quoting Thusive at Ease who
Speaker 1: said that you know, it was the rise of Athens
Speaker 1: and the fear that they's inspired in Sparta that made
Speaker 1: war inevitable. And Graham Allison at Harvard has talked about this,
Speaker 1: and he's looked at power transitions that have occurred through
Speaker 1: history and mostly they end in in war. I certainly
Speaker 1: don't think that war is inevitable. Certainly not war these
Speaker 1: days between great powers and in a nuclear age is
Speaker 1: almost unthinkable. Um. I don't think China and the US
Speaker 1: are going to go to war. China certainly doesn't want that.
Speaker 1: I worry more about Chinese nationalism and the particular kind
Speaker 1: of nationalism that you have in China now, which is
Speaker 1: a resentful type of nationalism that looks backwards to this
Speaker 1: century of humiliation. I worry that that's combined with a
Speaker 1: military build up navalism that we're seeing in China, combined
Speaker 1: now with aggressive or expansive Chinese territorial claims, particularly in
Speaker 1: the maritime Dome. I worry about an arms race that
Speaker 1: this is triggering in Asia. I worried particularly about Taiwan,
Speaker 1: whether China is going to run out of patients with
Speaker 1: Taiwan and it's pro independence leanings and course nuclearization. The
Speaker 1: nuclear arms race in Asia now, I think it's one
Speaker 1: to be worried about. So when you started that, I
Speaker 1: actually thought that you were going to say, but this
Speaker 1: is all too gloomy, and you ruled out the really
Speaker 1: catastrophic nuclear global scenario. But then your list of other
Speaker 1: things to worry about was so long, and I'm not
Speaker 1: sure I feel like I've ended up in a in
Speaker 1: a happier place. Tom, just in your gut, Are you
Speaker 1: as worried about the sort of regional implications, the regional
Speaker 1: instabilities that come out of this, even if we're not
Speaker 1: necessarily looking I hope at the end of the world. Um. So, Firstly,
Speaker 1: I think the mention of Thucidites trap reminds me that
Speaker 1: international relations as a discipline hasn't come up with any
Speaker 1: new new new paradigm since since ancient Greece, which I
Speaker 1: think reflects badly on international relations scholars. Um. Coming back
Speaker 1: to the question, I think Andy, you know, hit several
Speaker 1: nails on the head. But Um, for me, the key
Speaker 1: point that he made in which I agree with, is
Speaker 1: are we going to see an all out conflict between
Speaker 1: China and the United States? Clearly not in the nuclear
Speaker 1: age that would be catastrophic for all concerned. Are we
Speaker 1: going to see more frequent conflicts over specific issues like
Speaker 1: the South China see potentially like Taiwan, potentially around North Korea? Yes,
Speaker 1: I think absolutely. As China rises, China's interestful increasingly clash
Speaker 1: with those of the U S and its neighbors, and
Speaker 1: those regional hot spots are going to get hotter. I
Speaker 1: think there's there's quite a lot coming through this conversation
Speaker 1: about what we've said about the w t O, the
Speaker 1: decline of multilateralism that moved to a more kind of
Speaker 1: deal based global economy and geopolitics and more nationalism. I
Speaker 1: think that's definitely when people look at China and also
Speaker 1: frankly look at the US and other parts of the world,
Speaker 1: that feels like where we're heading is more nationalism, less
Speaker 1: multilateralism and move away from from rule based decision making.
Speaker 1: Plenty to be discussed, among other places, at the New
Speaker 1: Economy Forum. I'm sure we're talking about that in Singapore.
Speaker 1: But Tom Marlick and Andrew Brown, thank you very much,
Speaker 1: Thank you, Thanks hester thanks for listening to The New Economy.
Speaker 1: Today's episode was reported by Enda Current with editor Malcolm
Speaker 1: Scott and produced by Magnus Hendrickson. Francesca Levy is the
Speaker 1: head of Bloomberg Podcast. M