1 00:00:05,280 --> 00:00:08,159 Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the 2 00:00:08,160 --> 00:00:15,360 Speaker 1: global economy to you. If you don't like a bit 3 00:00:15,400 --> 00:00:18,680 Speaker 1: of road rage with your daily commute, I'd advise you 4 00:00:18,800 --> 00:00:23,479 Speaker 1: not to move to Ulan Bator or Moscow. Karachi and 5 00:00:23,600 --> 00:00:26,840 Speaker 1: Lagos would also be bad bets. According to a new 6 00:00:26,880 --> 00:00:30,560 Speaker 1: index compiled by a UK car parts supplier mr Auto. 7 00:00:31,200 --> 00:00:33,879 Speaker 1: The index pulls together a whole lot of data on 8 00:00:34,040 --> 00:00:38,440 Speaker 1: things like congestion, road safety, the quality of infrastructure, and 9 00:00:38,560 --> 00:00:41,479 Speaker 1: the number of road rage incidents to decide which are 10 00:00:41,479 --> 00:00:44,120 Speaker 1: the best and worst cities in the world for drivers. 11 00:00:44,680 --> 00:00:48,000 Speaker 1: The bad news for India is that two of its cities, 12 00:00:48,320 --> 00:00:52,440 Speaker 1: Mumbai and Kolkata, feature in the bottom three. If you 13 00:00:52,479 --> 00:00:54,880 Speaker 1: want to find out who comes top out of a 14 00:00:55,000 --> 00:00:58,200 Speaker 1: hundred world cities, well you'll have to wait till a 15 00:00:58,240 --> 00:01:01,600 Speaker 1: bit later. I'll be talking through results and the more 16 00:01:01,680 --> 00:01:06,000 Speaker 1: serious lessons with Bloomberg reporter Zoe is schnave iis but 17 00:01:06,120 --> 00:01:09,840 Speaker 1: first the future of China and its technology, both of 18 00:01:09,880 --> 00:01:13,000 Speaker 1: which are going to feature prominently at the Bloomberg New 19 00:01:13,000 --> 00:01:17,080 Speaker 1: Economy Forum, which gets underway on November twentieth in Beijing. 20 00:01:17,840 --> 00:01:19,920 Speaker 1: We touched on this a little while ago. You remember 21 00:01:19,920 --> 00:01:22,920 Speaker 1: when I was in Singapore. The idea that a more 22 00:01:23,000 --> 00:01:27,520 Speaker 1: antagonistic relationship between the US and China could drive a 23 00:01:27,640 --> 00:01:31,440 Speaker 1: technological fault line through the global economy, with countries and 24 00:01:31,480 --> 00:01:34,200 Speaker 1: businesses being forced to choose which side they were on. 25 00:01:34,640 --> 00:01:37,600 Speaker 1: But of course, all that assumes that China can start 26 00:01:37,640 --> 00:01:41,360 Speaker 1: developing world beating technologies that don't depend on the US. 27 00:01:42,120 --> 00:01:44,360 Speaker 1: In a minute, I'll talk to Bloomberg's chief economist, an 28 00:01:44,400 --> 00:01:48,080 Speaker 1: old China hand Tom Orlick, about China's plans to dominate 29 00:01:48,120 --> 00:01:50,440 Speaker 1: the technologies of the future and how they might have 30 00:01:50,480 --> 00:01:54,480 Speaker 1: been affected by Donald Trump. But first, Bloomberg Economy reporter 31 00:01:54,560 --> 00:01:58,480 Speaker 1: Karen and Look has this report from Beijing and Guandjong 32 00:02:05,920 --> 00:02:11,840 Speaker 1: h Here in China, American ideas, brands and technology are everywhere. 33 00:02:12,760 --> 00:02:15,640 Speaker 1: Strolling down the street in my neighborhood and Beijing, I 34 00:02:15,639 --> 00:02:18,760 Speaker 1: can see teenagers wearing Nike stepping out of you A 35 00:02:18,880 --> 00:02:22,400 Speaker 1: minivans on their way to Starbucks while rivetted to their 36 00:02:22,440 --> 00:02:26,720 Speaker 1: Apple iPhones. But will that change if the confrontation between 37 00:02:26,800 --> 00:02:29,400 Speaker 1: China and the US morphs into a battle to control 38 00:02:29,440 --> 00:02:38,160 Speaker 1: the technologies of the future. To help find an answer, 39 00:02:38,440 --> 00:02:40,720 Speaker 1: I've come to talk to local business people at the 40 00:02:40,760 --> 00:02:45,000 Speaker 1: Canton Fair. It's a massive trade show for Chinese exporters 41 00:02:45,080 --> 00:02:48,360 Speaker 1: that takes place twice a year in Guangzo. How massive, 42 00:02:49,000 --> 00:02:51,720 Speaker 1: the space is equivalent to a hundred eighty five soccer 43 00:02:51,800 --> 00:02:56,560 Speaker 1: fields with some exhibitors and a hundred eighty thousand foreign buyers. 44 00:02:57,120 --> 00:03:02,200 Speaker 1: There's everything here, from Bluetooth earbud two, solar powered refrigerators 45 00:03:02,400 --> 00:03:08,880 Speaker 1: to portable saunas. This is Mr Jong, who hails from 46 00:03:08,919 --> 00:03:12,440 Speaker 1: the surrounding Guangdong province. He's a sales manager at a 47 00:03:12,480 --> 00:03:15,959 Speaker 1: company that makes large led screens and smart TV's. He 48 00:03:16,000 --> 00:03:19,000 Speaker 1: would only give us his last name. All around him 49 00:03:19,000 --> 00:03:21,919 Speaker 1: and his booth are his company's televisions, which rely on 50 00:03:22,360 --> 00:03:25,639 Speaker 1: you guessed it, the Android operating system from American tech 51 00:03:25,680 --> 00:03:31,239 Speaker 1: giant Google. We use some Google and YouTube features in 52 00:03:31,400 --> 00:03:35,880 Speaker 1: some of our products, and especially for products are sold overseas. 53 00:03:36,000 --> 00:03:38,840 Speaker 1: If it is cut off, it could affect our manufacturing 54 00:03:38,920 --> 00:03:44,680 Speaker 1: and production. Mr Jong feels vulnerable. Earlier this year, the 55 00:03:44,720 --> 00:03:48,880 Speaker 1: Trump administration blacklisted Huawei Technologies, a big Chinese maker of 56 00:03:48,920 --> 00:03:52,520 Speaker 1: telecom equipment. It means that people who buy Huawei's new 57 00:03:52,520 --> 00:03:56,640 Speaker 1: smartphones won't get the latest versions of an Android. For 58 00:03:56,680 --> 00:04:00,320 Speaker 1: companies lower down on the technology chain. That's also a problem. 59 00:04:00,360 --> 00:04:03,600 Speaker 1: If the tech confrontation widens and draws them into they 60 00:04:03,600 --> 00:04:06,200 Speaker 1: could also lose access to these high tech parts and 61 00:04:06,240 --> 00:04:10,360 Speaker 1: operating systems that China can't replicate. The result could mean 62 00:04:10,400 --> 00:04:13,720 Speaker 1: the end for some businesses. This is what people mean 63 00:04:13,880 --> 00:04:17,360 Speaker 1: when they talk about a silicon curtain descending between the 64 00:04:17,480 --> 00:04:21,880 Speaker 1: US and China. We are very concerned about this trade 65 00:04:21,920 --> 00:04:24,560 Speaker 1: war between China and the US and if it involves 66 00:04:24,600 --> 00:04:27,520 Speaker 1: issues with Google, because we don't have anything better to 67 00:04:27,600 --> 00:04:30,800 Speaker 1: replace it for people who need this stuff around the world, 68 00:04:31,000 --> 00:04:33,359 Speaker 1: You don't have the better product that can replace it. 69 00:04:34,400 --> 00:04:37,600 Speaker 1: In the worst case scenario, would China be hopelessly left 70 00:04:37,600 --> 00:04:41,520 Speaker 1: behind without American technologies or could it adapt its own 71 00:04:41,520 --> 00:04:45,520 Speaker 1: innovations to fill the gap. The answer to that depends 72 00:04:45,520 --> 00:04:49,000 Speaker 1: on which sector you're looking at. That's according to Nicole Pung, 73 00:04:49,240 --> 00:04:53,159 Speaker 1: an expert in Hong Kong at Canalysts, a consulting firm 74 00:04:53,240 --> 00:04:57,599 Speaker 1: for some emerging technologies like cloud computing and AI. China 75 00:04:57,680 --> 00:05:01,080 Speaker 1: is actually a leading player on the global stage. But 76 00:05:01,160 --> 00:05:04,800 Speaker 1: when it come to some hardware, especially when it comes 77 00:05:04,839 --> 00:05:10,480 Speaker 1: to chipset manufacturing, and then some key materials for some 78 00:05:10,520 --> 00:05:16,200 Speaker 1: consumer devices for example, then Sho we know that US 79 00:05:16,400 --> 00:05:19,719 Speaker 1: as well as some other countries they're holding UM the 80 00:05:20,040 --> 00:05:22,560 Speaker 1: pattern and I P and and also don't know how 81 00:05:23,320 --> 00:05:27,760 Speaker 1: as well as the capability to develop an R and 82 00:05:27,920 --> 00:05:34,320 Speaker 1: D and also more importantly the human resources, the key 83 00:05:34,360 --> 00:05:38,920 Speaker 1: engineer people on this industry. They've been working on this 84 00:05:39,400 --> 00:05:42,359 Speaker 1: area for a very long time, and that's a very 85 00:05:42,760 --> 00:05:47,080 Speaker 1: strong foundation in certain areas. It definitely would take China 86 00:05:47,120 --> 00:05:51,359 Speaker 1: and Chinese company UM many years, say five to ten years, 87 00:05:51,839 --> 00:05:56,440 Speaker 1: to to be able to get to the level. Right now, 88 00:05:56,640 --> 00:06:01,480 Speaker 1: the US company is at Huawei, plans are well underway 89 00:06:01,480 --> 00:06:05,239 Speaker 1: to survive and grow even without access to U S technology. 90 00:06:05,600 --> 00:06:08,800 Speaker 1: The company is developing its own smartphone operating system known 91 00:06:08,839 --> 00:06:12,560 Speaker 1: as Harmony OS. That may not be an ideal solution 92 00:06:12,600 --> 00:06:15,440 Speaker 1: for now, but the Tech Giants founder and junk Fei 93 00:06:15,839 --> 00:06:18,680 Speaker 1: doesn't seem to expect the confrontation between China and the 94 00:06:18,800 --> 00:06:21,200 Speaker 1: US will last forever. Here's what he said at a 95 00:06:21,240 --> 00:06:28,000 Speaker 1: Bloomberg event this month. We have the ability to survive. However, 96 00:06:28,320 --> 00:06:32,279 Speaker 1: this is not what we pursue. We have no intention 97 00:06:32,320 --> 00:06:36,839 Speaker 1: in that personally, don't support doing everything every innovation ourselves. 98 00:06:37,480 --> 00:06:40,719 Speaker 1: But if we have to do it. Then we have 99 00:06:41,160 --> 00:06:45,480 Speaker 1: a temporary approach that we will well go on it ourselves. However, 100 00:06:45,600 --> 00:06:48,880 Speaker 1: this is not our long term strategy. Now we have 101 00:06:48,960 --> 00:06:59,159 Speaker 1: no problem to sustain our development. Back at the cant Unfair, 102 00:06:59,400 --> 00:07:02,640 Speaker 1: we talked to business people who also offered a nuanced perspective. 103 00:07:03,560 --> 00:07:07,000 Speaker 1: Tourette Muslim came to China from Syria twelve years ago. 104 00:07:07,680 --> 00:07:09,640 Speaker 1: He and a business partner set up a company that 105 00:07:09,720 --> 00:07:14,240 Speaker 1: makes home automation products. Their WiFi connected smart home systems 106 00:07:14,400 --> 00:07:17,240 Speaker 1: help you control your air conditioning and your lighting and 107 00:07:17,280 --> 00:07:20,480 Speaker 1: even your curtains. But look inside their products and you'll 108 00:07:20,520 --> 00:07:23,600 Speaker 1: find a lot of microchips and other components imported from 109 00:07:23,640 --> 00:07:28,000 Speaker 1: the US to be exact. But Muslim says he's not 110 00:07:28,080 --> 00:07:33,840 Speaker 1: so worried. Well, there's a lot of alternatives if we 111 00:07:34,040 --> 00:07:36,720 Speaker 1: who didn't get this from the US, so from the 112 00:07:36,800 --> 00:07:39,880 Speaker 1: China there is a lot of suppliers and they are 113 00:07:39,920 --> 00:07:47,000 Speaker 1: ready to supply to China or any other way. Nobody 114 00:07:47,000 --> 00:07:50,880 Speaker 1: could now with a bridgure or a sanction, I guess 115 00:07:50,960 --> 00:07:58,200 Speaker 1: one gay, So how much decoupling will actually happen. In 116 00:07:58,240 --> 00:08:01,200 Speaker 1: the last few years, we've seen a surge and barriers 117 00:08:01,280 --> 00:08:05,720 Speaker 1: that includes tariffs, foreign investments, even access to Chinese researchers 118 00:08:05,720 --> 00:08:09,600 Speaker 1: and scientists in the US, but the country's economies are 119 00:08:09,640 --> 00:08:14,280 Speaker 1: still extremely intertwined. Here's Scott Kennedy, an expert on the 120 00:08:14,360 --> 00:08:17,800 Speaker 1: US China economic relationship at the Center for Strategic and 121 00:08:17,880 --> 00:08:23,880 Speaker 1: International Studies in Washington. If Chinese would see the negotiations 122 00:08:23,880 --> 00:08:27,600 Speaker 1: with the United States is an opportunity to liberalize their 123 00:08:27,640 --> 00:08:31,440 Speaker 1: economy and make it more productive and see it less 124 00:08:31,480 --> 00:08:37,000 Speaker 1: as a threat that challenges their opportunity to develop and rise, 125 00:08:38,200 --> 00:08:41,600 Speaker 1: they could take advantage of this and there would there'd 126 00:08:41,600 --> 00:08:44,480 Speaker 1: be adjustments in the nature of supply chains and the 127 00:08:44,559 --> 00:08:47,240 Speaker 1: type of relationships we have, but it wouldn't be anything 128 00:08:47,600 --> 00:08:51,160 Speaker 1: close to decoupling. It be a reorganization that would benefit 129 00:08:51,240 --> 00:08:56,079 Speaker 1: China tremendously. At the same time, China's government, under President 130 00:08:56,160 --> 00:08:58,640 Speaker 1: Seegin Ping, it's going to do all it can to 131 00:08:58,720 --> 00:09:03,000 Speaker 1: reduce the country's rely on foreign technology suppliers. If Donald 132 00:09:03,000 --> 00:09:05,960 Speaker 1: Trump's goal really is to limit China's rise, then his 133 00:09:06,040 --> 00:09:08,680 Speaker 1: current approach is making them try all the harder to 134 00:09:08,760 --> 00:09:13,160 Speaker 1: build the technology of tomorrow. Even Mr Jung believes that 135 00:09:13,240 --> 00:09:18,120 Speaker 1: with a little bit of time, China might just be okay. 136 00:09:18,600 --> 00:09:21,480 Speaker 1: I believe that as time goes by, perhaps in ten 137 00:09:21,559 --> 00:09:24,640 Speaker 1: to fifteen years, Chinese companies will be able to have 138 00:09:24,760 --> 00:09:27,320 Speaker 1: business that could compete to be at the US top 139 00:09:27,360 --> 00:09:30,560 Speaker 1: technology companies. That is not to say that we will 140 00:09:30,600 --> 00:09:33,560 Speaker 1: replace them, but that Chinese companies will be able to 141 00:09:33,600 --> 00:09:37,240 Speaker 1: compete with them in the market. Fairly. So far, I 142 00:09:37,280 --> 00:09:40,040 Speaker 1: think we're a bit leg behind, and in the future 143 00:09:40,200 --> 00:09:42,840 Speaker 1: I think we can be as good. Give me some 144 00:09:42,920 --> 00:09:58,000 Speaker 1: time for Bloomberg News. I'm Caroline. Look so that's the 145 00:09:58,080 --> 00:10:02,800 Speaker 1: view of China and technology on the ground, But for 146 00:10:02,840 --> 00:10:05,120 Speaker 1: a longer view, I thought it would be worth having 147 00:10:05,160 --> 00:10:07,600 Speaker 1: a quick chat to our chief economists here at Bloomberg, 148 00:10:07,640 --> 00:10:11,200 Speaker 1: Tom Orlick, who's in Washington but spent eleven years in 149 00:10:11,280 --> 00:10:15,120 Speaker 1: Beijing and has published one soon to be two books 150 00:10:15,160 --> 00:10:19,560 Speaker 1: on the Chinese economy. Thanks for joining us, Tom, you 151 00:10:19,840 --> 00:10:22,440 Speaker 1: listen to that report there. I mean, it's an issue 152 00:10:22,440 --> 00:10:26,560 Speaker 1: we keep coming back to. How is China going to 153 00:10:26,679 --> 00:10:30,480 Speaker 1: navigate this next stage of its economic development and what 154 00:10:30,559 --> 00:10:33,800 Speaker 1: are the implications going to be um for the for 155 00:10:33,840 --> 00:10:38,200 Speaker 1: the rest of the world. Do you think that the 156 00:10:38,240 --> 00:10:41,920 Speaker 1: trade wars trade tensions we've had over the last couple 157 00:10:42,000 --> 00:10:44,719 Speaker 1: of years have changed the way the Chinese leadership is 158 00:10:45,080 --> 00:10:49,040 Speaker 1: thinking about that. So there's a couple of things which 159 00:10:49,040 --> 00:10:52,760 Speaker 1: are happening to China at the same time, Stephanie. So 160 00:10:52,800 --> 00:10:56,360 Speaker 1: the first one is that there's drivers of growth that 161 00:10:56,400 --> 00:11:01,959 Speaker 1: they've relied on traditionally, very very low cost labor, very 162 00:11:02,080 --> 00:11:07,120 Speaker 1: very extensive investment in expanding the capital stock. Um. These 163 00:11:07,200 --> 00:11:10,960 Speaker 1: drivers are running out of steam. Labor is expensive, the 164 00:11:11,000 --> 00:11:16,160 Speaker 1: workforce is shrinking, and the capacity to grow by investment 165 00:11:16,280 --> 00:11:18,720 Speaker 1: is just much less than it used to be. Now, 166 00:11:19,080 --> 00:11:23,400 Speaker 1: as that's happening, China needs to find new sources of growth, 167 00:11:24,240 --> 00:11:27,400 Speaker 1: and the obvious thing to do is to rely more 168 00:11:27,920 --> 00:11:29,719 Speaker 1: on the rest of the world. We were at the 169 00:11:29,760 --> 00:11:32,680 Speaker 1: rest of the world economy, So as the domestic drivers 170 00:11:33,000 --> 00:11:36,920 Speaker 1: dry up, China wants to export more and it wants 171 00:11:36,960 --> 00:11:41,720 Speaker 1: to accelerate the process of well. Friends call it technology 172 00:11:41,760 --> 00:11:45,600 Speaker 1: transfer um and enemies call it technology theft from the 173 00:11:45,640 --> 00:11:49,000 Speaker 1: rest of the world to drive increases in productivity. So 174 00:11:49,040 --> 00:11:52,360 Speaker 1: the challenge for China is that just at the moment 175 00:11:52,400 --> 00:11:56,680 Speaker 1: when the domestic drivers are fading, the scope to turn 176 00:11:56,760 --> 00:11:59,200 Speaker 1: to the global economy for a leg up, for an 177 00:11:59,200 --> 00:12:02,800 Speaker 1: acceleration in terms of growth, it's just become much weaker 178 00:12:03,480 --> 00:12:07,040 Speaker 1: because of that trade war with the United States, and 179 00:12:07,120 --> 00:12:09,320 Speaker 1: I mean we've we've talked, we've talked about it over 180 00:12:09,400 --> 00:12:11,719 Speaker 1: over the months, and in fact, when I was in 181 00:12:12,000 --> 00:12:15,040 Speaker 1: Singapore a couple of weeks ago, there was some concern 182 00:12:15,120 --> 00:12:19,360 Speaker 1: about this, I mean, the arguments with the US over Huawei, 183 00:12:19,400 --> 00:12:25,559 Speaker 1: over the sort of technological side of China's development. I mean, 184 00:12:25,559 --> 00:12:27,880 Speaker 1: they're not they're not going away. But when you hear 185 00:12:28,720 --> 00:12:31,080 Speaker 1: as in that piece, when you hear them talking about 186 00:12:31,679 --> 00:12:36,760 Speaker 1: how they're going to replicate these US technologies and become 187 00:12:36,840 --> 00:12:39,680 Speaker 1: less and less dependent on them from your experience in China, 188 00:12:39,720 --> 00:12:41,319 Speaker 1: do you think they'll manage to do that? Do you 189 00:12:41,360 --> 00:12:42,839 Speaker 1: think I mean, do you think they are they are 190 00:12:42,880 --> 00:12:45,360 Speaker 1: really accelerating their efforts to do innovation, and do you 191 00:12:45,360 --> 00:12:50,199 Speaker 1: think they will succeed? So, I think the first thing 192 00:12:50,240 --> 00:12:55,160 Speaker 1: to say is that if the Silicon curtain falls, if 193 00:12:55,320 --> 00:13:00,720 Speaker 1: China and the US do separate their technology sectors, there's 194 00:13:00,760 --> 00:13:04,240 Speaker 1: going to be an immediate blow to both sides. You've 195 00:13:04,280 --> 00:13:09,040 Speaker 1: got companies like Google, like Apple here in the United 196 00:13:09,080 --> 00:13:12,839 Speaker 1: States who in one way or another are deeply in 197 00:13:13,000 --> 00:13:17,680 Speaker 1: meshed with the Chinese technology sector. And on the Chinese side, 198 00:13:18,040 --> 00:13:22,640 Speaker 1: you have an entire electronics manufacturing supply chain that in 199 00:13:22,720 --> 00:13:27,120 Speaker 1: one way or another is dependent on imported US technology, 200 00:13:27,480 --> 00:13:32,800 Speaker 1: imported US ideas and components. So if you separated the two, 201 00:13:32,800 --> 00:13:37,880 Speaker 1: there would be an immediate and crushing blow to both sides. Um. 202 00:13:37,960 --> 00:13:42,400 Speaker 1: The question, looking further forwards is could China close the gap? 203 00:13:42,600 --> 00:13:47,280 Speaker 1: Could China do itself what it's currently relying on US 204 00:13:47,360 --> 00:13:49,760 Speaker 1: firms to do, And in a sense it's kind of 205 00:13:49,960 --> 00:13:53,600 Speaker 1: it's imponderable um or possibly the kind of question you'd 206 00:13:53,600 --> 00:13:56,000 Speaker 1: really want a kind of a technology expert rather than 207 00:13:56,040 --> 00:14:01,600 Speaker 1: an economists talking about yourself down. I know, I will 208 00:14:01,640 --> 00:14:04,000 Speaker 1: do healthcare next, and then we'll do genetics, and I'll 209 00:14:04,040 --> 00:14:06,440 Speaker 1: have an opinion on all of them. Um. But I 210 00:14:06,440 --> 00:14:08,560 Speaker 1: think there's a few things which which would make me 211 00:14:08,640 --> 00:14:11,120 Speaker 1: think that China's clan chances of closing the gap were 212 00:14:11,120 --> 00:14:15,200 Speaker 1: actually rather high. Um. So, firstly, China is just making 213 00:14:15,320 --> 00:14:21,560 Speaker 1: absolutely enormous investments in accelerating its research and development capacity. 214 00:14:22,040 --> 00:14:24,760 Speaker 1: It's investing more than anyone else in the world apart 215 00:14:24,800 --> 00:14:27,960 Speaker 1: from the United States in R and D. It's graduating 216 00:14:28,120 --> 00:14:31,280 Speaker 1: more science and technology graduates than anyone else in the world. 217 00:14:32,600 --> 00:14:35,040 Speaker 1: If we look at how it's doing UM. There's an 218 00:14:35,080 --> 00:14:38,680 Speaker 1: index called the Global Innovation Index. It's kind of the 219 00:14:38,720 --> 00:14:42,280 Speaker 1: benchmark in terms of how countries are doing and broadly 220 00:14:42,320 --> 00:14:46,720 Speaker 1: understood on their innovation program. China is accelerating up the 221 00:14:46,800 --> 00:14:50,800 Speaker 1: rankings on the Global Innovation Index. In the latest score, 222 00:14:50,840 --> 00:14:53,920 Speaker 1: they come in at number fourteen. That's ahead of Japan. 223 00:14:54,400 --> 00:14:56,760 Speaker 1: I think the idea that China is already and more 224 00:14:56,800 --> 00:15:01,080 Speaker 1: innovative economy than Japan is pretty striking UM. And then 225 00:15:01,120 --> 00:15:03,000 Speaker 1: the third reason why I think that they would have 226 00:15:03,040 --> 00:15:05,920 Speaker 1: some hope of closing the gap is that the US 227 00:15:06,040 --> 00:15:08,440 Speaker 1: is not the only show in town when it comes 228 00:15:08,440 --> 00:15:13,120 Speaker 1: to technology. Yes, in Silicon Valley, in the universities of 229 00:15:13,120 --> 00:15:16,760 Speaker 1: the Ivy League, there are some world beating scientists and 230 00:15:16,800 --> 00:15:20,800 Speaker 1: world beating innovators, but they're not the only ones in 231 00:15:20,800 --> 00:15:24,600 Speaker 1: the world. There's also Germany, There's also Japan, there's also 232 00:15:24,800 --> 00:15:28,240 Speaker 1: Career UM, there's also the United Kingdom UM. And if 233 00:15:28,240 --> 00:15:30,280 Speaker 1: there's one thing which the United States has not done 234 00:15:30,360 --> 00:15:33,080 Speaker 1: very well in the last two or three years, it's 235 00:15:33,160 --> 00:15:35,960 Speaker 1: bring these other countries with it in a kind of 236 00:15:36,160 --> 00:15:39,760 Speaker 1: alliance of the willing or coalition of the willing. And 237 00:15:39,800 --> 00:15:41,840 Speaker 1: if there's one thing that China is extremely good at 238 00:15:41,840 --> 00:15:47,400 Speaker 1: doing it's taking advantage of those breaks in relations between 239 00:15:47,400 --> 00:15:50,840 Speaker 1: other countries that that competitive, the competitive nature of the 240 00:15:50,840 --> 00:15:54,680 Speaker 1: relationship between other countries to get deals done and make 241 00:15:54,720 --> 00:15:59,240 Speaker 1: sure it continue to advance towards the technology frontier. And 242 00:15:59,320 --> 00:16:01,640 Speaker 1: they also seems to be able to use its scale 243 00:16:02,360 --> 00:16:05,400 Speaker 1: to its advantage in a way that other big countries 244 00:16:05,480 --> 00:16:07,520 Speaker 1: have not always been able to do. I mean, I remember, 245 00:16:07,600 --> 00:16:11,680 Speaker 1: you know, one reads about the failed development strategies of 246 00:16:11,720 --> 00:16:14,720 Speaker 1: the fifties and sixties, the f big effort of imports 247 00:16:14,720 --> 00:16:19,080 Speaker 1: substitution in India and Brazil, where there was this kind 248 00:16:19,080 --> 00:16:21,320 Speaker 1: of idea that if you if you had a big market, 249 00:16:21,360 --> 00:16:23,040 Speaker 1: that was all you really needed to do, and you 250 00:16:23,080 --> 00:16:25,040 Speaker 1: could close yourself off from the world and you would 251 00:16:25,040 --> 00:16:27,840 Speaker 1: be able to match anything that the US achieved. I mean, 252 00:16:28,640 --> 00:16:31,320 Speaker 1: those countries famously were not able to do that. But 253 00:16:31,440 --> 00:16:36,560 Speaker 1: somehow China has managed to make that it's the size 254 00:16:36,560 --> 00:16:41,240 Speaker 1: of its domestic market a real springboard. Yeah. I think 255 00:16:41,240 --> 00:16:44,200 Speaker 1: that's right, Stephanie. And clearly there are examples, and you 256 00:16:44,240 --> 00:16:47,520 Speaker 1: mentioned Brazil and India of big countries where size hasn't 257 00:16:47,560 --> 00:16:52,120 Speaker 1: been the determining factor, but size clearly is an advantage 258 00:16:52,400 --> 00:16:57,280 Speaker 1: and when you combine size with a relatively efficient government, 259 00:16:58,440 --> 00:17:04,000 Speaker 1: with a relatively skilled workforce UM, and with a state 260 00:17:04,000 --> 00:17:09,119 Speaker 1: owned banking system which can provide the finance businesses require, 261 00:17:09,920 --> 00:17:13,639 Speaker 1: I think scale does become extremely important UM and in 262 00:17:13,680 --> 00:17:17,320 Speaker 1: a sense that is why China presents the threat it 263 00:17:17,400 --> 00:17:22,200 Speaker 1: does to the United States. Because if you take an innovation, 264 00:17:22,680 --> 00:17:25,720 Speaker 1: whether it's a Chinese innovation or a US innovation or 265 00:17:25,720 --> 00:17:30,119 Speaker 1: a Japanese innovation, and you plug it into the Chinese 266 00:17:30,760 --> 00:17:34,719 Speaker 1: business sector, then because of the scale of the Chinese market, 267 00:17:35,160 --> 00:17:38,520 Speaker 1: China will be able to produce at a significantly larger 268 00:17:38,600 --> 00:17:42,920 Speaker 1: scale then it's foreign competitors. And when it does that, 269 00:17:43,480 --> 00:17:46,680 Speaker 1: the risk is that whether or not that's an indigenous 270 00:17:46,760 --> 00:17:50,119 Speaker 1: Chinese innovation or an innovation which has been borrowed or 271 00:17:50,119 --> 00:17:53,119 Speaker 1: paid for from from the US or elsewhere, it's the 272 00:17:53,200 --> 00:17:57,040 Speaker 1: Chinese firm that's going to become the global champion UM 273 00:17:57,080 --> 00:17:59,879 Speaker 1: and it's the foreign rivals that that are going to 274 00:17:59,920 --> 00:18:02,680 Speaker 1: be left scrambling for scraps. We should talk a little 275 00:18:02,680 --> 00:18:04,800 Speaker 1: bit about the short term because actually one of the 276 00:18:04,800 --> 00:18:08,040 Speaker 1: things that striking about the slowdown in the Chinese economy 277 00:18:08,280 --> 00:18:13,040 Speaker 1: UM that many people worry about is that the import 278 00:18:13,119 --> 00:18:17,400 Speaker 1: growth has slowed, particularly sharply when you're just looking short term, 279 00:18:17,560 --> 00:18:19,919 Speaker 1: is there a risk that China will turn out to 280 00:18:19,960 --> 00:18:22,040 Speaker 1: be even weaker than we thought next year and possibly 281 00:18:22,080 --> 00:18:25,919 Speaker 1: be the last straw in terms of the global recovery. 282 00:18:26,600 --> 00:18:29,760 Speaker 1: So there's always been this concern about China's growth data. 283 00:18:30,320 --> 00:18:35,200 Speaker 1: I mean, to put it charitably, China's economic data represents 284 00:18:35,200 --> 00:18:40,879 Speaker 1: a compromise between reality and political message management UM and, 285 00:18:40,920 --> 00:18:44,000 Speaker 1: so there's always been a question about whether we can 286 00:18:44,000 --> 00:18:47,919 Speaker 1: trust the GDP data or not. UM Now, import data 287 00:18:49,000 --> 00:18:52,800 Speaker 1: has a kind of intuitive appeal as an alternative gauge 288 00:18:52,800 --> 00:18:55,399 Speaker 1: of what's going on in the economy. It tells us 289 00:18:55,440 --> 00:19:00,679 Speaker 1: about consumers, it tells us about businesses, also tells us 290 00:19:00,720 --> 00:19:03,960 Speaker 1: about the exports sector, because a lot of China's exports 291 00:19:04,000 --> 00:19:08,040 Speaker 1: include substantial components and parts which they purchased from Korea 292 00:19:08,400 --> 00:19:13,560 Speaker 1: and Japan and elsewhere. UM So, imports are an important alternative, 293 00:19:13,760 --> 00:19:16,879 Speaker 1: alternative gauge of what's going on in China's economy, and 294 00:19:17,000 --> 00:19:22,320 Speaker 1: right now they present a picture of startling weakness. They're contracting. 295 00:19:23,119 --> 00:19:26,000 Speaker 1: So our view UM and we look at a broad 296 00:19:26,160 --> 00:19:29,160 Speaker 1: range of China's data. We look at GDP, we look 297 00:19:29,200 --> 00:19:32,439 Speaker 1: at imports. We look at things like electricity production and 298 00:19:32,520 --> 00:19:35,880 Speaker 1: rail freight and the pace of bank lending. Um Our 299 00:19:36,000 --> 00:19:39,119 Speaker 1: view is that, yes, imports are extremely weak, and there 300 00:19:39,160 --> 00:19:42,720 Speaker 1: are some serious problems in China's exports sector. We don't 301 00:19:42,720 --> 00:19:46,359 Speaker 1: think the overall economy is anything like contract, anything close 302 00:19:46,440 --> 00:19:50,160 Speaker 1: to contraction, and we don't think that's likely going forwards, 303 00:19:50,680 --> 00:19:54,960 Speaker 1: in large part because China's policymakers retain the means and 304 00:19:55,000 --> 00:20:00,160 Speaker 1: the motivation to provide sufficient stimulus to keep the economy growing. Well, 305 00:20:00,160 --> 00:20:02,640 Speaker 1: I'm excited to say we will get more insight into 306 00:20:02,680 --> 00:20:06,600 Speaker 1: that from Chinese policymakers and others at the New Economy 307 00:20:06,640 --> 00:20:09,000 Speaker 1: Forum next week, where you and I will both be 308 00:20:09,160 --> 00:20:19,800 Speaker 1: tom So watch this space. Thanks definitely. Now I'm going 309 00:20:19,880 --> 00:20:24,480 Speaker 1: to turn seamlessly to the twenty nineteen Driving Cities Index. 310 00:20:24,920 --> 00:20:28,320 Speaker 1: Which city in the world is best for drivers? Well, 311 00:20:28,480 --> 00:20:31,919 Speaker 1: the prize goes to Calgary in Canada, with runner up 312 00:20:32,000 --> 00:20:37,520 Speaker 1: rosettes for Dubai, Ottawa, burn in Switzerland, and wait for it, 313 00:20:37,640 --> 00:20:42,119 Speaker 1: al Paso, Texas. So those are the winners in overall rankings, 314 00:20:42,520 --> 00:20:46,359 Speaker 1: and if you look at just the individual measures, New York, Singapore, 315 00:20:46,600 --> 00:20:51,359 Speaker 1: Tokyo and London all come top for public transport. Manchester 316 00:20:51,440 --> 00:20:55,080 Speaker 1: in England interestingly comes top for safety with the smallest 317 00:20:55,160 --> 00:20:59,280 Speaker 1: number of road fatalities per a hundred thousand inhabitants. It's 318 00:20:59,280 --> 00:21:03,000 Speaker 1: followed by Stockholm and Oslo and Vienna, maybe less surprising. 319 00:21:03,520 --> 00:21:08,120 Speaker 1: The most dangerous cities on that measure of fatalities are Lagos, 320 00:21:08,560 --> 00:21:12,520 Speaker 1: not surprising, and Orlando, Florida, which I guess is probably 321 00:21:12,560 --> 00:21:15,720 Speaker 1: less surprising if you live in Orlando, Florida. Well, we're 322 00:21:15,720 --> 00:21:17,879 Speaker 1: going to talk a bit more about this and maybe 323 00:21:18,000 --> 00:21:22,720 Speaker 1: a bit more serious conclusions you can draw with Zoe 324 00:21:22,720 --> 00:21:26,639 Speaker 1: schneve Ice are economy editor here in London previously of 325 00:21:27,000 --> 00:21:32,320 Speaker 1: Vienna and Zurich, relevant to this conversation. And I was struck, Zoe, 326 00:21:32,359 --> 00:21:34,359 Speaker 1: when I was looking through this report. I mean, in 327 00:21:34,359 --> 00:21:36,600 Speaker 1: a sense, it's not surprising, but there is a clear 328 00:21:37,200 --> 00:21:40,320 Speaker 1: north south divide. I mean on the top you have Calgary, 329 00:21:40,440 --> 00:21:47,320 Speaker 1: burned dustl Edorf, and then towards the bottom there's Moscow, Lagos, Mumbai. 330 00:21:47,760 --> 00:21:50,720 Speaker 1: I mean, why is it that cities in developing countries 331 00:21:50,960 --> 00:21:54,440 Speaker 1: are struggling on all these measures? Infrastructure here does seem 332 00:21:54,520 --> 00:21:58,159 Speaker 1: to be key. Typically, we're experiencing a substantial increased in 333 00:21:58,119 --> 00:22:01,239 Speaker 1: individual wealth, and that in turn has led to an 334 00:22:01,280 --> 00:22:05,560 Speaker 1: increase in car ownership. At the same time, cities haven't 335 00:22:05,600 --> 00:22:09,880 Speaker 1: adapted the infrastructure to facilitate that boosting cars, and they 336 00:22:09,880 --> 00:22:14,159 Speaker 1: also haven't invested in public transport to give people in 337 00:22:14,200 --> 00:22:17,000 Speaker 1: a different way of getting around. Yeah, and it sort 338 00:22:17,000 --> 00:22:18,640 Speaker 1: of tells you, I guess the other thing that we 339 00:22:18,720 --> 00:22:20,119 Speaker 1: and it's one of the reasons why they are going 340 00:22:20,160 --> 00:22:23,400 Speaker 1: to be talking about urbanization and cities at the New 341 00:22:23,400 --> 00:22:27,200 Speaker 1: Economy Forum next week that when we talk about the 342 00:22:27,240 --> 00:22:30,679 Speaker 1: recipe for economic success these days, we are often talking 343 00:22:30,720 --> 00:22:34,120 Speaker 1: about these super successful connurbations. You know, there's these are 344 00:22:34,400 --> 00:22:38,360 Speaker 1: parts of countries that are doing fantastically well. And so 345 00:22:38,400 --> 00:22:40,600 Speaker 1: the recipe for success, if you like, is to create 346 00:22:40,720 --> 00:22:43,600 Speaker 1: these very livable places and you have and you have. 347 00:22:43,640 --> 00:22:51,080 Speaker 1: Competition between cities now almost more important than competition between countries. 348 00:22:51,400 --> 00:22:53,040 Speaker 1: So what is it that you know, we've talked about 349 00:22:53,040 --> 00:22:55,560 Speaker 1: the cities that are not doing well. What are cities 350 00:22:55,600 --> 00:22:59,359 Speaker 1: doing right that we can see in this in this index, again, 351 00:22:59,400 --> 00:23:04,360 Speaker 1: infrastruct is the key measure here. Nowadays it often feels 352 00:23:04,400 --> 00:23:06,560 Speaker 1: like being able to get around a city without a 353 00:23:06,680 --> 00:23:11,320 Speaker 1: car is the real sign of a city's prosperity. Um My. 354 00:23:11,720 --> 00:23:14,639 Speaker 1: Our colleague Justin Fox pointed out on this podcast just 355 00:23:14,680 --> 00:23:18,879 Speaker 1: a month ago that the US census data suggests that 356 00:23:19,320 --> 00:23:22,600 Speaker 1: public transport is now increasingly used by more affluent people. 357 00:23:23,240 --> 00:23:25,639 Speaker 1: So when I think about the cities that I've lived in, 358 00:23:26,320 --> 00:23:30,719 Speaker 1: um they all have had incredible public transport systems, and 359 00:23:30,760 --> 00:23:33,760 Speaker 1: in two of them, in Zurich and in London, now 360 00:23:34,119 --> 00:23:36,520 Speaker 1: I'm in the luxurious position of not even having to 361 00:23:36,600 --> 00:23:39,800 Speaker 1: use them. I can walk. So cities that are walkable, 362 00:23:39,840 --> 00:23:42,919 Speaker 1: cities that are approachable, cities where you can afford to 363 00:23:43,080 --> 00:23:47,040 Speaker 1: live near where you work, or if you work further away, 364 00:23:47,280 --> 00:23:49,280 Speaker 1: where there is an easy way of getting to work. 365 00:23:49,600 --> 00:23:54,080 Speaker 1: That does increasingly make cities more livable and make people 366 00:23:54,119 --> 00:23:56,760 Speaker 1: want to stay in these cities. You've got a large 367 00:23:56,840 --> 00:23:58,880 Speaker 1: number of people will now hate you that they've heard 368 00:23:58,920 --> 00:24:00,680 Speaker 1: that you can walk to work in the center, in 369 00:24:00,720 --> 00:24:03,440 Speaker 1: the center of London, but I certainly enjoy are quite 370 00:24:03,480 --> 00:24:06,160 Speaker 1: often cycle to work. It strikes me though, I mean, 371 00:24:06,160 --> 00:24:09,960 Speaker 1: there's definitely a downside to having a fantastically successful city, 372 00:24:09,960 --> 00:24:12,400 Speaker 1: and we have seen it in spades in the UK. 373 00:24:13,119 --> 00:24:18,760 Speaker 1: There's so much concentration of wealth and economic success in 374 00:24:18,800 --> 00:24:23,280 Speaker 1: the southeast of England, and particularly around London. There is 375 00:24:23,320 --> 00:24:29,240 Speaker 1: a great lot of resentment outside the southeast for that success, 376 00:24:29,400 --> 00:24:32,919 Speaker 1: and a feeling not entirely unjustified that people in the 377 00:24:32,960 --> 00:24:36,640 Speaker 1: southeast don't understand the struggles that people and the rest 378 00:24:36,640 --> 00:24:38,959 Speaker 1: of the country have had, which I think did feed 379 00:24:39,000 --> 00:24:43,480 Speaker 1: importantly into that into that Brexit vote, and of course 380 00:24:43,680 --> 00:24:47,199 Speaker 1: most people in London voted Remain. It's going to be 381 00:24:47,240 --> 00:24:49,960 Speaker 1: a test, isn't it, Zoe the next few years if 382 00:24:50,000 --> 00:24:53,600 Speaker 1: and when Britain does leave the EU. London still has 383 00:24:53,760 --> 00:24:56,080 Speaker 1: a lot of the advantages we see in this index 384 00:24:56,600 --> 00:25:00,760 Speaker 1: of infrastructure livability, but it won't to have those kind 385 00:25:00,760 --> 00:25:03,159 Speaker 1: of legal advantages of being in the EU. And we 386 00:25:03,200 --> 00:25:05,639 Speaker 1: see some people have already had to move because of 387 00:25:05,680 --> 00:25:09,080 Speaker 1: those changes. And the reason that I can walk to 388 00:25:09,119 --> 00:25:13,760 Speaker 1: work is because people have left and made flat more affordable, 389 00:25:13,840 --> 00:25:16,919 Speaker 1: at least for me in this case. Um No, but 390 00:25:17,040 --> 00:25:19,280 Speaker 1: London is an amazing city and I think people will 391 00:25:19,320 --> 00:25:22,840 Speaker 1: be torn whether to actually leave. Some of them, of course, 392 00:25:22,880 --> 00:25:27,479 Speaker 1: will have to leave. Frankfort Luxembourg are becoming banking hubs, 393 00:25:27,960 --> 00:25:30,679 Speaker 1: and that is in part because of Brexit, and because 394 00:25:30,840 --> 00:25:34,080 Speaker 1: certain bank functionality will have to be conducted from within 395 00:25:34,119 --> 00:25:36,880 Speaker 1: the European Union at the same time when they look 396 00:25:36,880 --> 00:25:40,040 Speaker 1: at the infrastructure in those cities. I've never had to 397 00:25:40,359 --> 00:25:42,399 Speaker 1: miss a flight in London, huge as it may be. 398 00:25:42,920 --> 00:25:45,560 Speaker 1: I certainly have in Frankfort. Yeah, and I'm headed to 399 00:25:45,600 --> 00:25:49,000 Speaker 1: Berlin tomorrow and that's another rather challenging airport, so we 400 00:25:49,280 --> 00:25:52,320 Speaker 1: shall see Zernie. Thank you, thank you very much. I 401 00:25:52,359 --> 00:25:56,040 Speaker 1: did a piece once that was around the idea that 402 00:25:56,080 --> 00:25:59,560 Speaker 1: Britain should let London go, that everyone will be better 403 00:25:59,600 --> 00:26:03,199 Speaker 1: off if London had formed its own city state with 404 00:26:03,280 --> 00:26:05,600 Speaker 1: its own priorities, and what was amazing about it was 405 00:26:05,640 --> 00:26:09,919 Speaker 1: how popular it was among people outside London and inside London. 406 00:26:10,040 --> 00:26:12,320 Speaker 1: Maybe it was a bit of a precursor to that 407 00:26:12,840 --> 00:26:25,600 Speaker 1: to that Brexit vote. Thanks for listening to Stephanomics. We'll 408 00:26:25,640 --> 00:26:27,840 Speaker 1: be back next week and we will be in Beijing 409 00:26:28,320 --> 00:26:31,440 Speaker 1: in the meantime. You can find us on the Bloomberg Terminal, website, 410 00:26:31,520 --> 00:26:33,960 Speaker 1: app or wherever you get your podcasts. We'd love it 411 00:26:34,000 --> 00:26:35,800 Speaker 1: if you took the time to rate and review our 412 00:26:35,840 --> 00:26:39,080 Speaker 1: show so it can reach more listeners. For more news 413 00:26:39,080 --> 00:26:42,800 Speaker 1: and analysis during the week from Bloomberg Economics, follow as 414 00:26:42,880 --> 00:26:46,080 Speaker 1: Economics on Twitter and you can also find me on 415 00:26:46,280 --> 00:26:50,240 Speaker 1: at my Stephonomics. The story in this episode was reported 416 00:26:50,240 --> 00:26:54,159 Speaker 1: by Carolyn Look, mio Han, and Yinan Zoo. It was 417 00:26:54,240 --> 00:26:57,199 Speaker 1: written by Karen and Look and Jeff Black, produced by 418 00:26:57,240 --> 00:27:00,840 Speaker 1: Magnus Hendrickson, and edited by Scott Lamber, who is also 419 00:27:00,920 --> 00:27:05,240 Speaker 1: the executive producer of Stephanomics. Special thanks to Tom Rlick, 420 00:27:05,640 --> 00:27:11,000 Speaker 1: Zoe Schnewiss, Gou Yuan, Stephen Engel, Bobby Islam, and rosslyn Chin. 421 00:27:11,720 --> 00:27:14,520 Speaker 1: Francesca Levy is the head of bloombow Podcasts.