WEBVTT - Previewing the Trump-Xi Summit 

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak

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<v Speaker 1>Asia podcast. I'm deg Prisner. The expectations for the upcoming

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<v Speaker 1>summit between Chinese President Chijinping and President Trump are intensifying.

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<v Speaker 1>These two leaders are slated to meet in Beijing next

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<v Speaker 1>week for what's being framed as a high stakes gathering.

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<v Speaker 1>It was already delayed once because of the war, and

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<v Speaker 1>discussions are expected to focus on the topic of Iran

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<v Speaker 1>as the US and China attempt to navigate key friction

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<v Speaker 1>points in their relationship that would include sanctions and trade barriers.

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<v Speaker 1>For a closer look, let's bring in Bloomberg's Jenny Marsh.

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<v Speaker 1>Jenny is Managing editor for North Asia Eco Gov. She

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<v Speaker 1>joins from our studios in Hong Kong. Thank you for

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<v Speaker 1>being here. So, Donald Trump last met with Chijinping in

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<v Speaker 1>South Korea just six months ago, and so much has

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<v Speaker 1>happened since then. Jenny, give me a sense of how

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<v Speaker 1>this power dynamic, this power balance between the US and

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<v Speaker 1>China has shifted in that period of time.

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<v Speaker 2>Yeah, I mean it's quite incredible. I think you know,

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<v Speaker 2>when this meeting was first sort of conceived and she

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<v Speaker 2>and Trump decided they would meet four times this year.

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<v Speaker 2>The watchword was just stability. You know, they have this

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<v Speaker 2>one year trade truce sealed last year in South Korea,

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<v Speaker 2>and everybody just wanted to keep the relationship on track.

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<v Speaker 2>And what's happened since then is that Trump has sort

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<v Speaker 2>of dramatically revised American foreign policy and sort of changed

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<v Speaker 2>the global economic landscape in ways that it turns out

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<v Speaker 2>have not been favorable to American power on the world stage.

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<v Speaker 2>You know, it started with the sort of surprise snatching

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<v Speaker 2>of Maduro from Venezuela in January, and then Trump has

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<v Speaker 2>sort of followed that up now with this war in Iran,

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<v Speaker 2>which has sort of really now bogged him down. And

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<v Speaker 2>you know, we're going into the tenth week in a

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<v Speaker 2>conflict that he seemingly can't really find a good way

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<v Speaker 2>out of, and that has caused the deepest shock to

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<v Speaker 2>global all supply in history. And so I think, you

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<v Speaker 2>know that means that he is now looking towards the

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<v Speaker 2>summit in a very different sort of from advantage point.

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<v Speaker 2>It's very different than they imagined when they sort of

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<v Speaker 2>thought about this back in Busan. I mean, essentially, now

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<v Speaker 2>Trump is under enormous pressure to find a way out

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<v Speaker 2>of the war without sort of conceding and essentially losing

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<v Speaker 2>the war, and to sort of resolve the energy crisis.

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<v Speaker 2>And it's only made China look smarter, it's made choosing

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<v Speaker 2>Ping look vindicated, and a lot of his long term policies.

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<v Speaker 2>And also, just like the adult in the room, to

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<v Speaker 2>all the other countries around the world, who China, who

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<v Speaker 2>the US rather has sort of derailed their energy supplies

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<v Speaker 2>this year.

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<v Speaker 1>I'm glad you mentioned that point, because she has long

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<v Speaker 1>stressed the need for China to be self sufficient, and

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<v Speaker 1>so what we have seen unfold since the end of

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<v Speaker 1>February is that China was essentially well prepared for a

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<v Speaker 1>situation such as this.

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<v Speaker 2>Yeah, absolutely, I mean I think you know, China for

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<v Speaker 2>a long time has been talking about self reliance, and

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<v Speaker 2>a lot of that self reliance in recent years have

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<v Speaker 2>been more kind of engineered towards technological self reliance, so

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<v Speaker 2>trying to wean China off dependence on American high tech

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<v Speaker 2>chips because that was the area where the US was

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<v Speaker 2>sort of really squeezing China with its export controls. But

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<v Speaker 2>sort of more broadly than that, you know, energy security

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<v Speaker 2>has been a huge part of China's sort of economic

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<v Speaker 2>policy for decades, and it's something which has been very controversial.

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<v Speaker 2>You know, this goes back to before shoating paying. Chinese

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<v Speaker 2>leaders have been investing huge amounts of money in renewable

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<v Speaker 2>energies and in the auto industry that's proved. You know,

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<v Speaker 2>it's reaped huge benefits because China has just leapfrogged over

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<v Speaker 2>this sort of the combustible engine auto market to dominate

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<v Speaker 2>renewable energies. And you know, you've had European countries and

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<v Speaker 2>the US complaining in recent years that China sort of

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<v Speaker 2>got this advantage in renewable energies and the green tech

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<v Speaker 2>sector unfairly because it puts so much attention and money

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<v Speaker 2>into sort of developing this technology. But if you're choosing

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<v Speaker 2>a thing right now, I mean, it looks like absolutely

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<v Speaker 2>the right choice because for a country that doesn't really

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<v Speaker 2>have much of its own energy, you know, it has

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<v Speaker 2>to import its oil. When you have massive sort of

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<v Speaker 2>solar capacity and wing capacity, you suddenly have the energy

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<v Speaker 2>commodities you need at your fingertips.

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<v Speaker 3>And also the rest of the world.

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<v Speaker 2>Is realizing how dangerous it is to rely on other

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<v Speaker 2>countries for their energy, and now we're seeing other countries

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<v Speaker 2>also realizing they need to sort of pivot more to

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<v Speaker 2>renewables and who are you going to buy that from?

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<v Speaker 1>So would you say that she has a great deal

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<v Speaker 1>of incentive to avoid being party to this conflict between

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<v Speaker 1>the US and Iran. I know that recently China's Foreign

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<v Speaker 1>minister Wangyi met with Iran's foreign minister Arachi. It seems

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<v Speaker 1>like China is trying to navigate the middle ground here,

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<v Speaker 1>trying not to become quite a mediator, but at least

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<v Speaker 1>a party with a potential to, let's say, facilitate a

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<v Speaker 1>forum for the possibility of some type of resolution. Is

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<v Speaker 1>that saying too much?

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<v Speaker 3>I think that's right.

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<v Speaker 2>I think sort of whether or not China wants to

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<v Speaker 2>be a mediator is this closely watched question. When the

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<v Speaker 2>US and Iran first came together for peace talks in Pakistan,

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<v Speaker 2>there was a lot of reporting with people sort of

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<v Speaker 2>on the Iranian side and even Trump himself suggesting that

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<v Speaker 2>China had sort of used its influence over Iran to

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<v Speaker 2>get the Iranians to those talks in Pakistan, and China

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<v Speaker 2>did not like that claim at all, and we saw

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<v Speaker 2>Chinese state media pushing back on it. It doesn't want

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<v Speaker 2>to get its hands too dirty on this. It took

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<v Speaker 2>She's in pink himself a long time, well over a

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<v Speaker 2>month before he even commented on this war. You know,

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<v Speaker 2>it really is America's war. And you know there's that

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<v Speaker 2>famous saying, never interrupt your enemy when they're making a mistake.

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<v Speaker 2>I think that's very much how China has seen things. However,

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<v Speaker 2>it's going on so long now that no one is

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<v Speaker 2>immune to the shocks of this war. And you know,

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<v Speaker 2>in China doesn't have infinite reserves, and so we are

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<v Speaker 2>seeing China sort of step up. She has spoken to

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<v Speaker 2>the leader of Saudi Arabia, and now this week before

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<v Speaker 2>the big sort of summit with Trump next week, the

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<v Speaker 2>Uranian foreign minister, for the first time since the war, Bagan,

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<v Speaker 2>has traveled to Beijing. And so you do see China

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<v Speaker 2>making a more active role, but also being incredibly careful

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<v Speaker 2>in its language to stay neutral. You know, they called

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<v Speaker 2>on both sides, all sides to open the homewers strait yesterday,

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<v Speaker 2>so being very careful not to sort of say Iran

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<v Speaker 2>or the US one of them needed to do it

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<v Speaker 2>more than the other. Everybody needs to act you know,

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<v Speaker 2>to secure the free passage of that waterway.

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<v Speaker 1>Jenny, when we continue the conversation, can we look at

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<v Speaker 1>the economic relationship between the US and Iran. We'll have

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<v Speaker 1>more with Bloomberg's Jenny Marsh when we continue here on

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<v Speaker 1>the Debreak Asia podcast. Welcome back to the Debreak Asia Podcast.

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<v Speaker 1>I'm Doug Krisner, and I'm speaking with Bloomberg's Jenny Marsh,

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<v Speaker 1>Managing editor for North Asia Eco Gov. Jenny, can you

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<v Speaker 1>help me understand the economic relationship where China and Iran

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<v Speaker 1>are concerned. I believe Iran is formally a part of

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<v Speaker 1>China's Belt and Road initiative right.

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<v Speaker 2>As part of the Belton Road initiative. They have a

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<v Speaker 2>strategic partnership. And the key thing is that China buys,

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<v Speaker 2>at least it by about ninety percent of Iran's oil,

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<v Speaker 2>which makes about eleven percent of China's.

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<v Speaker 3>Overall crude supply.

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<v Speaker 2>So there's a big economic partnership which is heavily tilted

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<v Speaker 2>in China's favor.

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<v Speaker 1>Beyond the immediate economic relief that Iran may get, assuming

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<v Speaker 1>that there is some type of resolution that would allow

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<v Speaker 1>for sanctions relief, do you have a sense that China

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<v Speaker 1>would be willing to commit some type of capital to

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<v Speaker 1>the Iranian economy to support any type of recovery that

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<v Speaker 1>may be required as a result of this conflict, because

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<v Speaker 1>Iran is going to be looking for some type of

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<v Speaker 1>reparation or moneies that would be used to prop up

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<v Speaker 1>the economy again after everything that the economy has been through.

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<v Speaker 3>I think it's a good question.

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<v Speaker 2>And you have seen other countries roll out some sort

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<v Speaker 2>of economic aid.

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<v Speaker 3>So South Korea has.

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<v Speaker 2>Done that, not a huge amount, but it has offered

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<v Speaker 2>the Iranians and economic aid.

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<v Speaker 3>China could do the same. I think it would be.

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<v Speaker 2>Very small potatoes compared to what the iraniance going to need.

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<v Speaker 2>What you might see is Chinese companies who are you know,

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<v Speaker 2>experts in infrastructure construction at very very competitive prices coming

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<v Speaker 2>into Iran after the conflict ends to try and in

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<v Speaker 2>helping to rebuild the country in that way, that would

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<v Speaker 2>certainly make sense. I think Iran is more focused on

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<v Speaker 2>trying to get money back from the US. It wants

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<v Speaker 2>reparations from the American side for what it sees is

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<v Speaker 2>sort of you know, they started this conflict, They've incurd

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<v Speaker 2>all this damage to the country, so they're really focused

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<v Speaker 2>on getting that from the US rather than sort of

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<v Speaker 2>looking towards China.

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<v Speaker 1>Help me understand the way that China may be using

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<v Speaker 1>this conflict between the US and Iran to understand maybe

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<v Speaker 1>the next step that it needs to take where Taiwan

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<v Speaker 1>is concerned. I mean, does this enter the conversation at all?

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<v Speaker 2>Yeah, it's very interesting and there are obviously lots of parallels.

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<v Speaker 2>You know, the time one straight it's one of the

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<v Speaker 2>world's busiest shipping routes. Taiwan also has a commodity the

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<v Speaker 2>world can't live without, which is its high tech chips.

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<v Speaker 3>I think there's a few ways of looking at it.

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<v Speaker 2>I think for she, Trump is teaching him or reinforcing,

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<v Speaker 2>a lesson that Putin already taught him, which is, you know,

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<v Speaker 2>a much stronger military aiming to have a quick decisive

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<v Speaker 2>strike on a smaller power can go quickly awry. You know,

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<v Speaker 2>he saw this happen for Putin in Ukraine. Putin you know,

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<v Speaker 2>years later still sort of bogged down there with massive

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<v Speaker 2>costs to his country. And now Trump finding that actually

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<v Speaker 2>he also can't you know, he can't just beat Iran easily.

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<v Speaker 2>So I think that will give she pause, you know,

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<v Speaker 2>thinking about any sort of military operation. I think what

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<v Speaker 2>Trump is doing this year, not just with Iran, but

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<v Speaker 2>also the blockades on Venezuela and Cuba are sort of

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<v Speaker 2>maybe giving more of a plate of something that she

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<v Speaker 2>could do, which would be just to choke off Taiwan

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<v Speaker 2>from its energy supplies. Taiwan only has eleven days worth

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<v Speaker 2>of L and G stored in the country. It's really

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<v Speaker 2>it's sort of it's grid isn't very self sufficient. So

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<v Speaker 2>you could see China sort of using this as a

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<v Speaker 2>template not for an invasion, but as an economic blockade,

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<v Speaker 2>which is something that the PLA sort of drills for.

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<v Speaker 2>We've seen it in some of the military exercises they've

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<v Speaker 2>done already. But I think as well, she probably has

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<v Speaker 2>a preference for sort of the political solution to all

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<v Speaker 2>of this, and I think that's what's been more on display.

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<v Speaker 2>You know, you had he took a meeting with the

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<v Speaker 2>KMT chair Toanngni I during the Iran the Iranian war.

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<v Speaker 2>That was for the first time in a decade the

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<v Speaker 2>KMT chair had gone to China and met with she

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<v Speaker 2>and you know, and then also we've had this sort

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<v Speaker 2>of crazy saga with the president of Taiwan trying to

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<v Speaker 2>fly to Eswatini to visit one of Taiwan's twelve last

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<v Speaker 2>diplomatic allies, and China sort of finding very novel and

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<v Speaker 2>unorthodox ways of stopping that, leaning on African countries to

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<v Speaker 2>block lie aeroplane going over their airspace. So it feels

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<v Speaker 2>to me the Chinese would rather just sort of squeeze

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<v Speaker 2>Taiwan politically to the point where it's president can't travel.

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<v Speaker 2>It doesn't really seem like much of a president on

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<v Speaker 2>the world stage platform you opposition party, the KMT, who

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<v Speaker 2>are much more friendly towards Beijing, and try and bring

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<v Speaker 2>the island closer to China and blur the lines between

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<v Speaker 2>the two places.

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<v Speaker 3>That was a much more sort of preferable option for she.

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<v Speaker 1>So you mentioned the fact that China is the largest

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<v Speaker 1>buyer of Iranian crude oil, and I'm wandering, Jenny, because

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<v Speaker 1>I know the US Treasury was sanctioning some private oil

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<v Speaker 1>refiners in China for processing Iranian crude. So to get

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<v Speaker 1>back to the Trump Chiese summit, is this going to

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<v Speaker 1>be a major sticking point here or is that going

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<v Speaker 1>to be kind of water off a duck's back? Speak

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<v Speaker 1>we'll ignore it because we have bigger fish to fry.

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<v Speaker 1>Sorry to keep mixing metaphors here.

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<v Speaker 2>I think it depends which part of the Trump administration

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<v Speaker 2>you listen to. So overnight you had Gria talking about

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<v Speaker 2>how this is going to be a big point, and

0:13:15.280 --> 0:13:18.440
<v Speaker 2>they will talk about China's oil purchases from Iran at

0:13:18.480 --> 0:13:20.360
<v Speaker 2>the summit, you know, China is essentially sort of the

0:13:20.400 --> 0:13:24.920
<v Speaker 2>biggest sponsor of Iranian terrorism. And then Trump on the

0:13:24.960 --> 0:13:27.800
<v Speaker 2>same day, striking a very different tone, he told reporters that,

0:13:27.880 --> 0:13:30.200
<v Speaker 2>you know, if they have a deal with Iran, then

0:13:30.280 --> 0:13:32.720
<v Speaker 2>these sanctions on Chinese banks aren't even going to be

0:13:32.720 --> 0:13:36.640
<v Speaker 2>an issue, because the US itself will be giving Iran

0:13:36.720 --> 0:13:41.480
<v Speaker 2>sanctions relief. So I think it really depends where things land.

0:13:41.840 --> 0:13:45.600
<v Speaker 2>But certainly I think the US the main sort of

0:13:46.040 --> 0:13:48.640
<v Speaker 2>leather they have right now for pressuring Iran to strike

0:13:48.679 --> 0:13:52.160
<v Speaker 2>a deal is by choking off its oil revenue. And

0:13:52.200 --> 0:13:55.400
<v Speaker 2>so if China continues to buy that oil, then they're

0:13:55.400 --> 0:13:59.960
<v Speaker 2>diminishing sort of the US's strategy. And so in that case,

0:14:00.120 --> 0:14:03.640
<v Speaker 2>you know, threatening the banks with secondary sanctions is one

0:14:03.679 --> 0:14:07.440
<v Speaker 2>of the most powerful sort of tools they have against China.

0:14:07.920 --> 0:14:12.640
<v Speaker 2>There is a story a Bloomberg story that China's banking

0:14:13.080 --> 0:14:17.480
<v Speaker 2>regulator has instructed Chinese banks to comply with these new

0:14:17.600 --> 0:14:21.040
<v Speaker 2>US sanctioned on refiners, so going against the blocking order

0:14:21.560 --> 0:14:24.360
<v Speaker 2>that China issued itself. And I think that just speaks

0:14:24.360 --> 0:14:26.480
<v Speaker 2>to the fact that, you know, China's strategy when it

0:14:26.480 --> 0:14:29.600
<v Speaker 2>comes to US sanctions is to put its own economic

0:14:29.640 --> 0:14:33.560
<v Speaker 2>interest first, so to avoid any blowback on its own economy,

0:14:33.600 --> 0:14:36.160
<v Speaker 2>which seems to be how the banking sector is kind

0:14:36.200 --> 0:14:37.280
<v Speaker 2>of navigating this.

0:14:37.800 --> 0:14:40.440
<v Speaker 1>So, if we can agree that President Trump is arriving

0:14:40.480 --> 0:14:45.720
<v Speaker 1>in Beijing on some weaker footing, is Beijing likely to

0:14:45.800 --> 0:14:50.240
<v Speaker 1>try to extract some type of concessions as it relates

0:14:50.280 --> 0:14:52.720
<v Speaker 1>to trade some of the other things that have already

0:14:52.760 --> 0:14:55.360
<v Speaker 1>happened in the US China trade war.

0:14:56.800 --> 0:14:58.800
<v Speaker 2>Yeah, you have to what does she want to do

0:14:58.880 --> 0:15:03.120
<v Speaker 2>with this position found himself in so on trade. I

0:15:03.160 --> 0:15:05.280
<v Speaker 2>think the Chinese is going to be very interested in

0:15:05.360 --> 0:15:09.560
<v Speaker 2>the Section three oh one investigations and depending and we'll

0:15:09.600 --> 0:15:12.000
<v Speaker 2>be pushing in the US to not kind of go

0:15:12.120 --> 0:15:15.240
<v Speaker 2>aggressively on those as they try and reconstitute the tariff

0:15:15.280 --> 0:15:18.960
<v Speaker 2>wall that the US Supreme Court sort of tore down

0:15:19.120 --> 0:15:22.000
<v Speaker 2>earlier this year. That's one thing I think they'll be

0:15:22.120 --> 0:15:25.960
<v Speaker 2>very keen on when it comes to sort of chip

0:15:26.000 --> 0:15:29.680
<v Speaker 2>export controls. China does still need sort of the highest

0:15:29.760 --> 0:15:33.000
<v Speaker 2>end in video chips, so they've made it clear they're

0:15:33.040 --> 0:15:36.040
<v Speaker 2>not interested in sort of the mid range stuff, but

0:15:36.120 --> 0:15:38.040
<v Speaker 2>if they can get access to sort of the best

0:15:38.080 --> 0:15:41.480
<v Speaker 2>black wells, then I think that would be a bonus.

0:15:41.480 --> 0:15:44.840
<v Speaker 2>And we're watching out to see if Jensen Huang from

0:15:44.920 --> 0:15:47.320
<v Speaker 2>Nvidia is on the plane with Trump, which would be

0:15:47.320 --> 0:15:49.640
<v Speaker 2>a signed that's very much on the agenda, and Gens

0:15:49.680 --> 0:15:51.440
<v Speaker 2>has made it very clear he wants to sell more

0:15:51.480 --> 0:15:55.320
<v Speaker 2>to China, and then I guess Chinese investment in the

0:15:55.440 --> 0:15:58.920
<v Speaker 2>US is another hot topic that we're looking at where

0:15:59.000 --> 0:16:02.720
<v Speaker 2>China could really push and Trump is sort of more

0:16:02.760 --> 0:16:07.000
<v Speaker 2>dubbish on this than others in his administration. Chinese companies

0:16:07.040 --> 0:16:09.680
<v Speaker 2>would like the chance to invest in America and access

0:16:10.200 --> 0:16:14.240
<v Speaker 2>the world's biggest economy, particularly in the auto sector, and

0:16:14.480 --> 0:16:17.040
<v Speaker 2>the likes of Forward have signaled that in some way

0:16:17.560 --> 0:16:21.200
<v Speaker 2>they would like to JV with these Chinese companies who

0:16:21.200 --> 0:16:23.560
<v Speaker 2>are so advanced in some of their technology. So that

0:16:23.600 --> 0:16:26.600
<v Speaker 2>would also be another area that the Chinese potentially sort

0:16:26.640 --> 0:16:27.680
<v Speaker 2>of try and make some headway on.

0:16:28.120 --> 0:16:30.600
<v Speaker 1>Jenny, we can leave it there. Thank you so very much.

0:16:30.640 --> 0:16:33.960
<v Speaker 1>It's always a pleasure. Bloomberg's Jenny Marsh, Managing Editor for

0:16:34.080 --> 0:16:37.440
<v Speaker 1>North Asia Eco Gov, joining from our studios in Hong

0:16:37.560 --> 0:16:42.520
<v Speaker 1>Kong here on the Daybreak Asia podcast. Thanks for listening

0:16:42.520 --> 0:16:46.760
<v Speaker 1>to today's episode of the Bloomberg Daybreak Asia Edition podcast.

0:16:47.080 --> 0:16:50.200
<v Speaker 1>Each weekday, we look at the story shaping markets, finance,

0:16:50.560 --> 0:16:53.600
<v Speaker 1>and geopolitics in the Asia Pacific. You can find us

0:16:53.680 --> 0:16:57.840
<v Speaker 1>on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

0:16:57.880 --> 0:17:01.000
<v Speaker 1>else you listen. Join us again tomorrow for insight on

0:17:01.040 --> 0:17:05.160
<v Speaker 1>the market moves from Hong Kong to Singapore and Australia.

0:17:05.600 --> 0:17:08.080
<v Speaker 1>I'm Doug Prisoner and this is Bloomberg