WEBVTT - Apple Producers Crisscrossing the Developing World 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:19.960 --> 0:00:22.200 All Right, everybody, China you know has long been at 0:00:22.200 --> 0:00:24.919 the heart of Apple supply chain, about eighty percent of 0:00:24.920 --> 0:00:29.440 the company's manufacturing partners holding a footprint in that country. Now, 0:00:29.440 --> 0:00:31.680 as US and China Relations Hour, which is something we're 0:00:31.680 --> 0:00:33.640 going to talk about a little bit later on, new 0:00:33.680 --> 0:00:36.520 production sites are changing the way Apple's devices are made. 0:00:36.560 --> 0:00:38.920 And this is according to today's Bloomberg Big Take, this 0:00:39.000 --> 0:00:42.920 is a story deemed a priority by the Bloomberg editorial team. 0:00:42.960 --> 0:00:44.440 It's a must read, basically. 0:00:44.120 --> 0:00:48.200 Jess Meantime, speaking of Apple devices, the company is working 0:00:48.240 --> 0:00:51.360 on a revamped iPad pro for next year. This would 0:00:51.400 --> 0:00:54.800 be its first major overhaul in a half decade. Carol, 0:00:55.080 --> 0:00:57.600 it can't come soon enough after sales slipped to its 0:00:57.600 --> 0:01:00.840 lowest level since the cusp of the pandemic this past quarter. 0:01:00.880 --> 0:01:02.480 All right, there's a lot going on, so let's get 0:01:02.480 --> 0:01:04.600 to it. Today's Apple Round Up back with us as 0:01:04.600 --> 0:01:06.959 our own Mark German. He's chief technology correspondent here at 0:01:07.000 --> 0:01:09.080 Bloomberg News. As you know, he said, go do for 0:01:09.240 --> 0:01:11.679 all of us on everything to do with Apple. He 0:01:11.760 --> 0:01:13.880 joins us once again on Zoom from Los Angeles. Mark, 0:01:13.880 --> 0:01:15.800 great to have you back with us. We do want 0:01:15.840 --> 0:01:18.880 to start a big picture, if we may, about Apple's 0:01:18.920 --> 0:01:21.480 massive supply chain, so much of it's still in China, 0:01:21.640 --> 0:01:24.560 that seems to be changing, but very slowly. Give us 0:01:24.600 --> 0:01:25.640 a little perspective here. 0:01:26.280 --> 0:01:28.160 Yeah, Carol, thank you so much. I'm very happy to 0:01:28.200 --> 0:01:31.560 be back. So the Apple supply chain, the modern supply chain, 0:01:31.600 --> 0:01:34.080 i should say, set up about two decades go by 0:01:34.200 --> 0:01:37.600 Tim Cook. The idea was to build all the products 0:01:37.640 --> 0:01:41.200 through a company called fox Con in China, have the 0:01:41.280 --> 0:01:45.680 manufactured there at scale, at speed, with precision, and then 0:01:45.720 --> 0:01:48.880 shipped globally. Right. But over the last decade or so, 0:01:48.960 --> 0:01:52.920 we've seen some changes there. They've added additional manufacturing partners, 0:01:52.920 --> 0:01:58.280 companies like Quanta Computing, companies like Jabble, companies like Pegatron 0:01:58.360 --> 0:02:02.240 and Tata, and now you're seeing them retain their Chinese 0:02:02.320 --> 0:02:05.400 base of manufacturing. All those companies still build products for 0:02:05.440 --> 0:02:08.800 Apple in mainland China, but in terms of growth in 0:02:08.880 --> 0:02:12.720 terms of expansion of supply chain that's happening external to China. 0:02:12.800 --> 0:02:17.600 So you're seeing new sites in places like Thailand, India, Vietnam, 0:02:17.800 --> 0:02:20.560 and Malaysia, right those four countries, but with the majority 0:02:20.560 --> 0:02:23.760 share of that expansion happening particularly in India, and then 0:02:23.880 --> 0:02:26.520 Vietnam is a close second, Malaysia third, and Thailand fourth. 0:02:26.880 --> 0:02:29.600 So when you're looking at that expansion in those particular 0:02:29.639 --> 0:02:31.560 areas that you were just talking about, how does that 0:02:31.639 --> 0:02:33.480 translate financially for Apple? 0:02:34.800 --> 0:02:38.000 Well, India is a big example of how it translates financially. 0:02:38.040 --> 0:02:40.679 India and their Prime Minister, you know Modi there, they've 0:02:40.720 --> 0:02:45.520 implemented terif related rules and fines that if you produce 0:02:45.639 --> 0:02:49.680 products externally to India and then import them into the country, 0:02:49.720 --> 0:02:52.640 there's really high import taxes. So what Apple had to 0:02:52.639 --> 0:02:55.560 do from a financial perspective is build new sites in 0:02:55.639 --> 0:02:58.799 India to produce versions of the iPhone for sale to 0:02:58.919 --> 0:03:00.600 save on those taxes. 0:03:01.600 --> 0:03:03.919 Do other countries want Apple? I feel like it's a 0:03:03.960 --> 0:03:06.720 stupid question mark, but I mean I would assume everybody's 0:03:06.760 --> 0:03:09.600 buying to be like here, co produce manufacturer, you know here? 0:03:09.919 --> 0:03:10.720 Is that the case? 0:03:11.840 --> 0:03:14.280 I mean every country you can name up to the 0:03:14.360 --> 0:03:17.760 United States is throwing as many incentives at Apple and 0:03:17.760 --> 0:03:21.240 these other technology companies chip companies in order to get 0:03:21.280 --> 0:03:26.080 them to produce products in their respective countries and cities. Obviously, 0:03:26.120 --> 0:03:29.040 anytime Apple comes into your city, it's an economic you know, 0:03:29.080 --> 0:03:32.400 boom for the area. You're talking about much more employment, 0:03:32.520 --> 0:03:35.040 much more spending. So it is a positive and that's 0:03:35.040 --> 0:03:38.760 why those incentives exist. Now, speaking of the US, I 0:03:38.800 --> 0:03:41.080 will add you know, Apple doesn't do anything other than 0:03:41.120 --> 0:03:45.960 token manufacturing at a city in a small part in Austin, 0:03:46.080 --> 0:03:49.360 Texas for one mac. So I really count that as 0:03:49.360 --> 0:03:52.400 basically no production in the US and not being facetious. 0:03:52.720 --> 0:03:54.200 But what they will be doing is they will be 0:03:54.240 --> 0:03:57.680 working with TSMC to produce a very small number of 0:03:57.800 --> 0:04:01.280 chips at a plan in Arizona, starting some time at 0:04:01.320 --> 0:04:02.560 the tail end of next year. 0:04:02.760 --> 0:04:04.360 Well what I want to know though, is like I've 0:04:04.360 --> 0:04:06.360 bought an Apple product. My husband and I and I 0:04:06.440 --> 0:04:08.600 just I think over the years and we have been 0:04:08.600 --> 0:04:11.920 fascinating just kind of tracking it through the supply chain 0:04:11.960 --> 0:04:14.680 and knowing when it's on our shores on the West coast. 0:04:14.680 --> 0:04:18.799 I mean, it's just such an incredibly efficient supply chain, 0:04:18.960 --> 0:04:24.680 and I do wonder will that efficiency potentially change over time, 0:04:25.000 --> 0:04:27.760 and then will it also maybe cost me more for 0:04:27.800 --> 0:04:28.520 an Apple device. 0:04:29.600 --> 0:04:32.800 I think the answer is no on both. They've been 0:04:32.800 --> 0:04:36.760 shipping products from Vietnam and Malaysia and Thailand for a 0:04:36.800 --> 0:04:39.960 couple of years now, and there really hasn't been any 0:04:40.040 --> 0:04:42.760 hiccups that I think the consumer has noticed, either on 0:04:42.800 --> 0:04:47.800 a pricing perspective, but also on shipment times. If you 0:04:47.880 --> 0:04:51.560 think about the releases, where the timing really matters for 0:04:51.600 --> 0:04:53.680 when you receive the product. That's really when a new 0:04:53.720 --> 0:04:57.880 product goes on sale, particularly the iPhone, and the first 0:04:58.000 --> 0:05:00.840 round of iPhones are still shipped from China, so you're 0:05:00.880 --> 0:05:03.159 not going to see any hiccups there. In all likelihood, 0:05:03.839 --> 0:05:06.080 there have been some changes on pricing. There are going 0:05:06.120 --> 0:05:08.120 to be a few tweaks of pricing in some countries 0:05:08.120 --> 0:05:11.880 on the new iPhones being announced on September twelfth. They 0:05:11.920 --> 0:05:14.120 should also go in sale September twenty second, by the way, 0:05:14.800 --> 0:05:16.800 but I don't think those are production related. I think 0:05:16.800 --> 0:05:21.200 those are parts related, and obviously inflation and the current 0:05:21.640 --> 0:05:24.760 state of the economy globally, so I don't I wouldn't 0:05:24.800 --> 0:05:27.120 put two and two together personally, do you think. 0:05:27.000 --> 0:05:30.159 This would have happened without the US China tensions that 0:05:30.200 --> 0:05:31.040 are currently going on. 0:05:32.480 --> 0:05:35.760 I think that what really got the ball rolling on 0:05:36.320 --> 0:05:40.799 opening new sites outside of China was the Donald Trump 0:05:40.839 --> 0:05:45.560 tariffs that were a key a key issue in twenty 0:05:45.600 --> 0:05:50.680 seventeen to twenty nineteen, right. Those really scared Apple and 0:05:50.720 --> 0:05:53.240 made them start investigating how they can push some of 0:05:53.279 --> 0:05:56.560 that supply chain outside of China. Quite frankly, it shouldn't 0:05:56.600 --> 0:06:00.160 have taken Trump to get Apple to think outside of China, 0:06:00.240 --> 0:06:02.400 but that's what really did it, and I think that 0:06:02.480 --> 0:06:06.000 acceleration has been caused by those tensions. I think something 0:06:06.000 --> 0:06:08.159 that people don't talk about enough, to be honest with you, 0:06:09.200 --> 0:06:13.680 is TSMC and the impact of production there. So TSMC 0:06:13.800 --> 0:06:17.400 they manufacture all of Apple's modern chips that go into 0:06:17.400 --> 0:06:21.640 all their products. They're based in Taiwan, so you're seeing 0:06:21.720 --> 0:06:25.840 a lot of production happening there. I'm no geopolitical expert, 0:06:25.880 --> 0:06:28.120 but I think you know, Taiwan is probably a major 0:06:28.240 --> 0:06:32.360 risk point for Apple, and if the Taiwan factory goes down, 0:06:32.400 --> 0:06:34.000 I mean, I'm told it can take even up to 0:06:34.120 --> 0:06:36.880 north of the year for Apple and TSMC to build 0:06:36.960 --> 0:06:39.240 up a site at that same capacity elsewhere. 0:06:39.279 --> 0:06:41.120 I love that you went there, because did you see 0:06:41.120 --> 0:06:44.880 the story on the Bloomberg about the Fox Colon Technology 0:06:44.880 --> 0:06:49.920 Group founder. I guess he's running for Ago and basically said, 0:06:50.040 --> 0:06:54.040 you know that he's safe because he because of how 0:06:54.080 --> 0:06:57.120 much did they play into Apple supply chain, and basically 0:06:57.279 --> 0:07:00.120 also how much I guess Chinese either pension fund are 0:07:00.160 --> 0:07:03.640 so on and so forth invest in it that Beijing 0:07:03.680 --> 0:07:05.120 isn't going to want to play around with them. And 0:07:05.160 --> 0:07:08.960 I wonder if that's the same story for TSMC well. 0:07:09.000 --> 0:07:11.720 I think that's the same logic that applies to Apple. 0:07:11.800 --> 0:07:14.280 I think it's the same logic that applies to CSMC. 0:07:14.800 --> 0:07:18.400 But it's only logical until it's not until something changes 0:07:18.440 --> 0:07:21.520 in the world and the global economy and these geopolitical tensions, 0:07:21.880 --> 0:07:24.800 then it's fine. But when something changes, then it's a 0:07:24.880 --> 0:07:26.560 nightmare and it's the end of the world for them. 0:07:26.560 --> 0:07:28.960 And the question is is there that plan be in 0:07:29.040 --> 0:07:32.080 place in order to mitigate that damage. And I think 0:07:32.120 --> 0:07:34.400 what Apple's trying to do to mitigate that is opening 0:07:34.480 --> 0:07:37.200 up these production lines outside of China, and I think 0:07:37.280 --> 0:07:39.400 if you look ten years down the road, it's very 0:07:39.440 --> 0:07:42.120 possible that the majority of the Apple supply chain will 0:07:42.120 --> 0:07:43.960 be outside of China, but it's going to take a 0:07:43.960 --> 0:07:47.000 long time. It's been moving very slow. It's been more 0:07:47.000 --> 0:07:49.560 of an augmentation outside of China rather than a replacement 0:07:49.600 --> 0:07:50.040 at this point. 0:07:50.080 --> 0:07:50.840 Great perspective. 0:07:50.880 --> 0:07:52.920 I want to switch gears real quickly and ask you 0:07:53.040 --> 0:07:55.200 about the iPad pro. What do we know so far 0:07:55.320 --> 0:07:57.040 about what could be coming for next year? 0:07:57.880 --> 0:08:00.760 So it'll be a redesigned ipet pro next year with 0:08:00.840 --> 0:08:03.120 an M three chip. Speaking of TSMC, that's going to 0:08:03.120 --> 0:08:06.080 be their next generation three and nanimeter processor designed by Apple. 0:08:06.760 --> 0:08:09.200 You're going to see OLED displays. So now the iPad 0:08:09.240 --> 0:08:12.120 will be using the same screen technology as the iPhone. 0:08:12.280 --> 0:08:14.600 Remember when Apple shifted to old in twenty seventeen with 0:08:14.640 --> 0:08:17.480 the iPhone ten. You're gonna get that same new screen technology. 0:08:17.600 --> 0:08:20.520 It looks so much better these days. Everyone's used to 0:08:20.560 --> 0:08:22.720 old on their phone, so they don't really know the difference. 0:08:22.760 --> 0:08:25.560 But next time you see an iPad from today, hold 0:08:25.640 --> 0:08:28.720 up an old iPhone next to an lcdipad and you'll 0:08:28.720 --> 0:08:31.440 see the difference. You're also going to see that new 0:08:31.480 --> 0:08:35.480 design I mentioned improved cameras slightly larger display on the 0:08:35.480 --> 0:08:37.520 top end model. So I think it's going to overall 0:08:37.520 --> 0:08:40.120 be a very compelling new product. First redesign to the 0:08:40.120 --> 0:08:42.600 iPad pro since the tail end of twenty eighteen, as. 0:08:42.520 --> 0:08:45.920 Well, Magic keyboard twenty seconds, imagineboard. 0:08:45.920 --> 0:08:48.240 That's right, I forgot about that new function row at 0:08:48.280 --> 0:08:51.280 the top, larger trackpad, make it a little bit more laptop. 0:08:51.400 --> 0:08:54.800 Likely costs, yeah, probably between three hundred and fifty and 0:08:54.800 --> 0:08:55.559 four hundred dollars. 0:08:55.720 --> 0:08:57.760 Okay, it's an important device to Apple. 0:08:57.880 --> 0:08:58.240 Quickly. 0:08:59.520 --> 0:09:01.959 It used to be more important. Now it's sort of lagging, 0:09:02.160 --> 0:09:04.880 and it's really important for Apple to make it important again. 0:09:05.720 --> 0:09:06.800 I think they'll get it done. 0:09:06.920 --> 0:09:09.920 I say, we use our iPads still a lot, along 0:09:09.960 --> 0:09:13.200 with everything else Apple in our world. Mark German, thank 0:09:13.240 --> 0:09:16.079 you that big perspective. I think so important to understanding 0:09:16.120 --> 0:09:18.679 this company and just the world, and great to get 0:09:18.679 --> 0:09:20.400 an update on what's going on in terms of the 0:09:20.440 --> 0:09:23.400 iPad pro. Mark German a go to on all things Apple. 0:09:23.440 --> 0:09:25.120 We say it a million times because it's so true. 0:09:25.160 --> 0:09:27.800 He's chief technology correspond at Bloomberg News. Joining us on 0:09:27.880 --> 0:09:29.240 zoom from our La bureau. 0:09:29.800 --> 0:09:33.360 You're listening to the Bloomberg Business Week podcast. Catch US 0:09:33.400 --> 0:09:36.760 live weekday afternoons from three to six Eastern Listen on 0:09:36.800 --> 0:09:40.839 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:09:41.120 --> 0:09:53.640 or watch US live on YouTube. 0:09:54.800 --> 0:09:57.760 All right, everybody, another twenty four hours and another twenty 0:09:57.760 --> 0:10:01.480 four hour news cycle package news on China. This includes 0:10:01.600 --> 0:10:05.040 US Commerce Secretary Gena Ramondo saying today that the majority 0:10:05.080 --> 0:10:08.120 of US China trade has nothing to do with national 0:10:08.160 --> 0:10:11.040 security and that it's possible to promote and protect experts. 0:10:11.080 --> 0:10:14.480 At the same time, she commented on the exact framework 0:10:14.720 --> 0:10:16.400 to do so. 0:10:16.440 --> 0:10:21.400 We agree to establish a new Commercial Issues Working Group, 0:10:21.840 --> 0:10:26.520 a formal working group which will involve US and Chinese 0:10:26.559 --> 0:10:29.960 government officials and very importantly US. 0:10:29.640 --> 0:10:35.959 And Chinese commercial private sector representatives as we seek solutions 0:10:36.000 --> 0:10:40.640 on trade and investment issues and to advance US commercial 0:10:40.679 --> 0:10:41.960 interests in China. 0:10:42.000 --> 0:10:44.600 And that, of course is the US Commerce Secretary Gena Ramando, 0:10:44.640 --> 0:10:48.360 who has been meeting with Chinese official Many would ask, 0:10:48.520 --> 0:10:50.480 is it really possible to do bith to promote and 0:10:50.559 --> 0:10:52.679 protect experts At the same time, we have a great 0:10:52.800 --> 0:10:55.600 voice on this and excited to have back with us 0:10:55.640 --> 0:10:57.680 one that we have leaned on a lot in the 0:10:57.679 --> 0:11:00.720 past when it comes to US China relations, the intersection 0:11:00.800 --> 0:11:04.760 between geopolitics, policy, and the markets with US the Stefan Seelig. 0:11:04.800 --> 0:11:08.880 He's managing partner Bridge Park Advisors. He is a former 0:11:08.960 --> 0:11:11.960 Undersecretary of Commerce for International Trade at the US Department 0:11:12.000 --> 0:11:16.079 of Commerce. That was during President Obama's administration. He's once 0:11:16.120 --> 0:11:18.920 again with us on zoom from Long Island. Sefan, so 0:11:19.000 --> 0:11:20.000 good to have you back with us. 0:11:20.040 --> 0:11:23.280 How are you I'm great, Thank you, Carol. Great to 0:11:23.320 --> 0:11:24.280 hear your voice again. 0:11:24.440 --> 0:11:27.679 Well, same here. Tell us about what we heard from 0:11:27.720 --> 0:11:31.840 the Commerce secretary. Is it possible to do both promote 0:11:31.920 --> 0:11:34.240 and protect exports at the same time. 0:11:35.679 --> 0:11:38.680 Yeah, I mean, I think these clearly are two different 0:11:39.080 --> 0:11:41.480 tracks on the one hand. On the other hand, I 0:11:41.520 --> 0:11:46.440 think over the last number of years, those messages have 0:11:46.520 --> 0:11:50.120 become somewhat muddled, and the Chinese have interpreted a lot 0:11:50.160 --> 0:11:53.480 of the actions that have been taken both in the 0:11:53.480 --> 0:11:58.920 Biden and Trump administrations as actions that are meant to 0:11:58.960 --> 0:12:02.840 depress their development and the rise of China, as opposed 0:12:02.880 --> 0:12:06.600 to protecting our national security interests. And as the secretary said, 0:12:06.600 --> 0:12:09.920 they really are different things. And I think the value 0:12:09.960 --> 0:12:14.120 of this dialogue, which is really just re establishing what 0:12:14.200 --> 0:12:16.200 had been in place. And frankly, what I had led 0:12:16.280 --> 0:12:23.240 during my tenure is to is to foster relationships that 0:12:23.280 --> 0:12:27.439 will allow us to potentially make progress in what is 0:12:28.080 --> 0:12:30.600 a fiercely competitive relationship. 0:12:30.880 --> 0:12:32.880 Well, take us back, I mean take us back to 0:12:32.880 --> 0:12:35.880 your time during the Obama administration, the importance of the 0:12:35.960 --> 0:12:40.199 US commercial relationship with China. Rank it and how you 0:12:40.240 --> 0:12:43.240 all approached it then, and what you believe was how 0:12:43.360 --> 0:12:46.280 China ranked it as well? And is it very different today? 0:12:47.520 --> 0:12:51.240 Well, look, it has primacy in so many ways. We're 0:12:51.280 --> 0:12:54.200 talking about the two biggest economies in the world. The 0:12:54.240 --> 0:12:58.520 amount that we import and export to each other is 0:12:58.960 --> 0:13:02.480 very significant, with the exception of Mexico in Canada, there 0:13:02.520 --> 0:13:06.359 are no two more important relationships in Mexico and Canada 0:13:06.600 --> 0:13:09.679 is obviously because they are border states. When I was 0:13:09.760 --> 0:13:12.800 Under Secretary, I spend more time in China than any 0:13:12.880 --> 0:13:16.479 country by far, and I work to foster the relationship 0:13:16.520 --> 0:13:20.160 with my counterpart at the Ministry of Commerce to reflect 0:13:20.200 --> 0:13:20.840 that reality. 0:13:21.559 --> 0:13:25.800 But do they rank this relationship as important and do 0:13:25.840 --> 0:13:27.280 they still? You think today? 0:13:28.640 --> 0:13:31.680 For sure? And in many respects, I think they view 0:13:31.679 --> 0:13:34.600 it as more important because the number of issues that 0:13:34.640 --> 0:13:38.360 we're competing on are growing, but also the number of 0:13:38.400 --> 0:13:41.280 issues that we need to cooperate on are also growing. 0:13:41.360 --> 0:13:43.960 So as their economy grows, and as they look to 0:13:44.120 --> 0:13:49.640 establish themselves as a major player both in political, economic, 0:13:49.720 --> 0:13:54.800 and commercial spheres, you know, their ability to work effectively 0:13:54.840 --> 0:13:58.680 with the United States becomes only more important. And I 0:13:58.720 --> 0:14:03.199 think that's exacerbate right now, Carol, because frankly, you know, 0:14:03.320 --> 0:14:06.520 their economy is slowing, and they're facing a set of 0:14:06.559 --> 0:14:09.360 economic issues that we haven't seen or they haven't seen 0:14:09.720 --> 0:14:10.400 in decades. 0:14:11.480 --> 0:14:14.080 What is the biggest issue, because you laid out some 0:14:14.200 --> 0:14:16.040 of it just teasing it there, and when you're talking 0:14:16.040 --> 0:14:18.400 about the economy, but then there's the geo political issues, 0:14:18.440 --> 0:14:20.840 there's the financial markets. There's also when you think about 0:14:20.880 --> 0:14:23.120 the property concerns and how that's tied to the economy. 0:14:23.160 --> 0:14:26.080 Which is the most pressing issue at this point. 0:14:26.760 --> 0:14:29.080 Well, I mean, look from their perspective, they have a 0:14:29.120 --> 0:14:31.560 slowing economy. This year, it's going to grow it roughly, 0:14:31.760 --> 0:14:34.120 you know, four percent, which is, you know, far less 0:14:34.120 --> 0:14:36.840 than the double digit growth than they've had in the past. 0:14:37.360 --> 0:14:39.720 But I would say it's still you know, roughly two 0:14:39.960 --> 0:14:43.160 x what we're growing at as you point out, you know, 0:14:43.240 --> 0:14:48.760 they have a real estate crisis in the making country Garden, 0:14:48.760 --> 0:14:54.000 which is their largest developer, may default on their debt payments. China, 0:14:54.000 --> 0:14:59.680 Evergrand filed for Chapter eleven. Their exports are slumping for 0:15:00.240 --> 0:15:02.160 you know, all the reasons that we're talking about, which 0:15:02.200 --> 0:15:06.920 is our economies begin to fringe sure and the impact 0:15:07.800 --> 0:15:12.560 of sanctions on their economy. Exports alone are down fifteen 0:15:12.600 --> 0:15:17.320 percent year over year for them. They're facing rising unemployment, 0:15:17.480 --> 0:15:21.480 especially amongst young people, where some statistics suggest that more 0:15:21.480 --> 0:15:24.080 than one out of every five young people in China 0:15:24.120 --> 0:15:27.240 are now unemployed, which is going to have real risks 0:15:27.280 --> 0:15:31.600 to social stability in that country. They're seeing failing or 0:15:31.760 --> 0:15:36.960 slowing foreign investment in the country, The remendee is depreciating, 0:15:37.120 --> 0:15:39.960 and consumers are losing confidence, which is causing them to 0:15:40.000 --> 0:15:42.560 spend less money than they had in the past as 0:15:42.600 --> 0:15:45.520 they look to save. And so for all of those reasons, 0:15:45.560 --> 0:15:49.560 the Chinese economy is under real pressure, and I think 0:15:49.600 --> 0:15:52.360 as a result of that, it reminds them, and not 0:15:52.520 --> 0:15:55.720 just us, about how vital each we each are to 0:15:55.800 --> 0:15:57.640 each other in our success. 0:15:58.080 --> 0:16:00.720 Seven do you think you know? So, China's made it 0:16:00.840 --> 0:16:04.680 very clear that they don't want to be the manufacturer 0:16:04.720 --> 0:16:06.600 to the world, and they have definitely taken steps for that. 0:16:06.640 --> 0:16:09.960 We talked about this earlier in a segment about Apple 0:16:10.640 --> 0:16:15.440 slowly moving you know, iPhone production elsewhere, but it's still 0:16:16.080 --> 0:16:20.280 for the most part in China. But should we want 0:16:20.360 --> 0:16:24.280 China to be developing its domestic economy? Should we want 0:16:24.520 --> 0:16:28.160 it to be moving along from you know, kind of 0:16:28.200 --> 0:16:30.960 a very special emerging market to more of like a 0:16:31.040 --> 0:16:34.880 developed world and developed market. Should we want that? 0:16:36.080 --> 0:16:38.520 Well, you know, it's a two edge short, right, because 0:16:38.560 --> 0:16:44.760 you know, that competition that they're that development underscores makes 0:16:44.800 --> 0:16:47.640 them stronger in some ways, but it also makes us 0:16:47.680 --> 0:16:51.080 stronger because they're going to be buying more of our 0:16:51.240 --> 0:16:54.560 products and services, and they're going to have more money, 0:16:55.320 --> 0:16:58.000 you know, to spend in our economy through either foreign 0:16:58.000 --> 0:17:02.040 directive investment, intermediate goods, or otherwise. So it depends on 0:17:02.120 --> 0:17:04.160 if you think of them as a competitor but also 0:17:04.200 --> 0:17:05.800 as a customer, and they're both. 0:17:07.040 --> 0:17:09.320 So what do you think is the right strategy for 0:17:09.359 --> 0:17:12.440 the Biden administration to take towards China when they are 0:17:12.560 --> 0:17:14.320 economically vulnerable at this point? 0:17:15.760 --> 0:17:19.040 Well, look, I think what the Secretary said is extraordinarily 0:17:19.080 --> 0:17:22.880 important that it's about, you know, communication. The President said 0:17:22.920 --> 0:17:29.360 to the Secretary when before she left, that we need 0:17:29.400 --> 0:17:32.880 to communicate to avoid conflict. And I think in any 0:17:33.040 --> 0:17:37.000 in any situation where you have fierce competitors, you also 0:17:37.240 --> 0:17:41.720 need intense diplomacy. And the Secretary is a very capable 0:17:41.760 --> 0:17:45.199 commercial diplomat, and that's what she went over there and 0:17:45.280 --> 0:17:48.080 is over there doing now. And frankly, what hasn't happened 0:17:48.119 --> 0:17:50.560 over the last five years when there have been no 0:17:50.800 --> 0:17:57.840 face to face meetings between our commerce secretary or under 0:17:57.840 --> 0:18:00.840 secretaries and their counterparts in Stefan? 0:18:01.200 --> 0:18:05.200 What's more important the stress with or the tensions between 0:18:05.280 --> 0:18:07.560 China and Taiwan, and then how that relates to the 0:18:07.640 --> 0:18:10.920 rest of the world, or the relationship that President Ji 0:18:11.119 --> 0:18:14.520 has with President putin What should we spend more time 0:18:14.560 --> 0:18:15.480 on or it can be both. 0:18:16.760 --> 0:18:20.600 You know, I'm not sure I could ordinately rank them, Carol, 0:18:21.040 --> 0:18:26.399 but clearly China has different interests geopolitically and economically and 0:18:26.440 --> 0:18:29.800 commercially than we do. And you know what I've always 0:18:29.840 --> 0:18:32.240 said is, you know, hitting China over the head with 0:18:32.320 --> 0:18:34.880 a cudgel is not going to be an effective way 0:18:34.960 --> 0:18:37.639 to actually make progress, and what we need to do 0:18:37.880 --> 0:18:40.920 is to look for win win outcomes where there are 0:18:40.960 --> 0:18:44.520 things that advance our interests and advance their interests and 0:18:44.560 --> 0:18:45.200 their whole. 0:18:45.000 --> 0:18:48.880 Host boks sephan if I may, I'd love to talk 0:18:48.920 --> 0:18:50.840 to you a little bit about politics, because we were 0:18:50.880 --> 0:18:53.040 just talking a lot about the importance of that relationship 0:18:53.040 --> 0:18:58.080 between US and China. The Republican presidential hopefuls the debate 0:18:58.200 --> 0:19:00.479 last week talked a lot about China. There was a 0:19:00.520 --> 0:19:04.600 lot of pushback. Is that cause for concern when you 0:19:04.640 --> 0:19:06.919 see that? I know some of it is all just 0:19:07.040 --> 0:19:09.720 grandstanding and performance, but some of it is not. 0:19:11.160 --> 0:19:14.000 Yeah, I guess, Carol, you know it's really not just 0:19:14.080 --> 0:19:16.280 the Republicans. In fact, the only thing I can think 0:19:16.320 --> 0:19:19.680 of where the Republicans and Democrats seem to be agreeing 0:19:19.880 --> 0:19:22.840 is getting tough with China. And I think there's a 0:19:22.840 --> 0:19:25.320 little bit of a contest between them as who can 0:19:25.440 --> 0:19:29.600 appear to be tougher with China. And I don't think 0:19:29.720 --> 0:19:34.960 being tough is necessarily always being smart, and so, you know, frankly, 0:19:35.000 --> 0:19:37.760 I think the conversation that should be about what should 0:19:37.760 --> 0:19:41.000 we be doing to advance our interests as opposed to 0:19:41.560 --> 0:19:45.760 what should we be doing just to punish China. 0:19:45.119 --> 0:19:48.160 And is that a cause for concern at all? 0:19:49.800 --> 0:19:52.639 Well, for sure, especially just as I mentioned, you know, 0:19:52.680 --> 0:19:56.160 with China's economy being under pressure, I think the last 0:19:56.160 --> 0:19:58.280 thing we want to do is push them so hard 0:19:58.320 --> 0:20:03.000 that they lash out and take actions that would be 0:20:03.160 --> 0:20:05.199 adverse to us. And we get into this, you know, 0:20:05.280 --> 0:20:07.919 tit for tat because you know, as you've said, you know, 0:20:07.960 --> 0:20:10.240 these are the two biggest economies in the world, and 0:20:10.320 --> 0:20:12.880 we can punish each other plenty, and that doesn't really 0:20:12.920 --> 0:20:13.320 help us. 0:20:13.400 --> 0:20:16.080 Would you want to be back in the White House advising. 0:20:17.800 --> 0:20:19.320 Well, you know, look, I think it was it was 0:20:19.359 --> 0:20:21.320 an honor for me to you know, do that during 0:20:21.359 --> 0:20:23.840 the Obama administration, and I think, you know, to the 0:20:23.920 --> 0:20:25.919 extent that you know you are called to do that, 0:20:26.720 --> 0:20:28.480 I think it's a really hard thing to turn down 0:20:28.600 --> 0:20:31.040 for any of us that care about our country. 0:20:31.840 --> 0:20:34.760 When you're looking at some of the Republican candidates, who 0:20:34.840 --> 0:20:36.920 kind of stands out in your mind that when you're 0:20:36.920 --> 0:20:39.719 thinking about the US and China relations as far as 0:20:39.760 --> 0:20:42.200 what could be a potential viable candidate in that sort 0:20:42.240 --> 0:20:46.680 of realm, Well, I'm. 0:20:46.520 --> 0:20:50.719 Not sure that that's an easy answer. Jess, because as 0:20:50.720 --> 0:20:53.000 I've said, I think there's just a lot of a 0:20:53.040 --> 0:20:56.240 lot of piling on. And I also would say, is 0:20:56.280 --> 0:20:58.760 you know, what people say on the stage in the 0:20:59.040 --> 0:21:03.080 you know, primaries season is probably not necessarily going to 0:21:03.720 --> 0:21:06.480 directly inform their policies. You know, if they get into 0:21:06.480 --> 0:21:10.160 the they get into the Oval. You know that being said, 0:21:10.720 --> 0:21:12.439 you know, I think this has to be you know, 0:21:12.600 --> 0:21:16.560 on the radar screen for whoever is sitting in the 0:21:16.600 --> 0:21:21.160 Oval office because of the importance not only you know, geopolitically, 0:21:21.240 --> 0:21:25.400 but commercially and economically for you know, employment in our country, 0:21:25.960 --> 0:21:28.600 the success of our economy and our consumer well. 0:21:28.640 --> 0:21:33.360 And I'm curious to Stefan about your clients and those 0:21:33.400 --> 0:21:36.200 CEOs that you are talking about, you know, is US 0:21:36.320 --> 0:21:38.840 China typically top of mind for them or I'm curious 0:21:38.880 --> 0:21:40.200