Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Speaker 1: Asia podcast. I'm deg Prisner. The expectations for the upcoming
Speaker 1: summit between Chinese President Chijinping and President Trump are intensifying.
Speaker 1: These two leaders are slated to meet in Beijing next
Speaker 1: week for what's being framed as a high stakes gathering.
Speaker 1: It was already delayed once because of the war, and
Speaker 1: discussions are expected to focus on the topic of Iran
Speaker 1: as the US and China attempt to navigate key friction
Speaker 1: points in their relationship that would include sanctions and trade barriers.
Speaker 1: For a closer look, let's bring in Bloomberg's Jenny Marsh.
Speaker 1: Jenny is Managing editor for North Asia Eco Gov. She
Speaker 1: joins from our studios in Hong Kong. Thank you for
Speaker 1: being here. So, Donald Trump last met with Chijinping in
Speaker 1: South Korea just six months ago, and so much has
Speaker 1: happened since then. Jenny, give me a sense of how
Speaker 1: this power dynamic, this power balance between the US and
Speaker 1: China has shifted in that period of time.
Speaker 2: Yeah, I mean it's quite incredible. I think you know,
Speaker 2: when this meeting was first sort of conceived and she
Speaker 2: and Trump decided they would meet four times this year.
Speaker 2: The watchword was just stability. You know, they have this
Speaker 2: one year trade truce sealed last year in South Korea,
Speaker 2: and everybody just wanted to keep the relationship on track.
Speaker 2: And what's happened since then is that Trump has sort
Speaker 2: of dramatically revised American foreign policy and sort of changed
Speaker 2: the global economic landscape in ways that it turns out
Speaker 2: have not been favorable to American power on the world stage.
Speaker 2: You know, it started with the sort of surprise snatching
Speaker 2: of Maduro from Venezuela in January, and then Trump has
Speaker 2: sort of followed that up now with this war in Iran,
Speaker 2: which has sort of really now bogged him down. And
Speaker 2: you know, we're going into the tenth week in a
Speaker 2: conflict that he seemingly can't really find a good way
Speaker 2: out of, and that has caused the deepest shock to
Speaker 2: global all supply in history. And so I think, you
Speaker 2: know that means that he is now looking towards the
Speaker 2: summit in a very different sort of from advantage point.
Speaker 2: It's very different than they imagined when they sort of
Speaker 2: thought about this back in Busan. I mean, essentially, now
Speaker 2: Trump is under enormous pressure to find a way out
Speaker 2: of the war without sort of conceding and essentially losing
Speaker 2: the war, and to sort of resolve the energy crisis.
Speaker 2: And it's only made China look smarter, it's made choosing
Speaker 2: Ping look vindicated, and a lot of his long term policies.
Speaker 2: And also, just like the adult in the room, to
Speaker 2: all the other countries around the world, who China, who
Speaker 2: the US rather has sort of derailed their energy supplies
Speaker 2: this year.
Speaker 1: I'm glad you mentioned that point, because she has long
Speaker 1: stressed the need for China to be self sufficient, and
Speaker 1: so what we have seen unfold since the end of
Speaker 1: February is that China was essentially well prepared for a
Speaker 1: situation such as this.
Speaker 2: Yeah, absolutely, I mean I think you know, China for
Speaker 2: a long time has been talking about self reliance, and
Speaker 2: a lot of that self reliance in recent years have
Speaker 2: been more kind of engineered towards technological self reliance, so
Speaker 2: trying to wean China off dependence on American high tech
Speaker 2: chips because that was the area where the US was
Speaker 2: sort of really squeezing China with its export controls. But
Speaker 2: sort of more broadly than that, you know, energy security
Speaker 2: has been a huge part of China's sort of economic
Speaker 2: policy for decades, and it's something which has been very controversial.
Speaker 2: You know, this goes back to before shoating paying. Chinese
Speaker 2: leaders have been investing huge amounts of money in renewable
Speaker 2: energies and in the auto industry that's proved. You know,
Speaker 2: it's reaped huge benefits because China has just leapfrogged over
Speaker 2: this sort of the combustible engine auto market to dominate
Speaker 2: renewable energies. And you know, you've had European countries and
Speaker 2: the US complaining in recent years that China sort of
Speaker 2: got this advantage in renewable energies and the green tech
Speaker 2: sector unfairly because it puts so much attention and money
Speaker 2: into sort of developing this technology. But if you're choosing
Speaker 2: a thing right now, I mean, it looks like absolutely
Speaker 2: the right choice because for a country that doesn't really
Speaker 2: have much of its own energy, you know, it has
Speaker 2: to import its oil. When you have massive sort of
Speaker 2: solar capacity and wing capacity, you suddenly have the energy
Speaker 2: commodities you need at your fingertips.
Speaker 3: And also the rest of the world.
Speaker 2: Is realizing how dangerous it is to rely on other
Speaker 2: countries for their energy, and now we're seeing other countries
Speaker 2: also realizing they need to sort of pivot more to
Speaker 2: renewables and who are you going to buy that from?
Speaker 1: So would you say that she has a great deal
Speaker 1: of incentive to avoid being party to this conflict between
Speaker 1: the US and Iran. I know that recently China's Foreign
Speaker 1: minister Wangyi met with Iran's foreign minister Arachi. It seems
Speaker 1: like China is trying to navigate the middle ground here,
Speaker 1: trying not to become quite a mediator, but at least
Speaker 1: a party with a potential to, let's say, facilitate a
Speaker 1: forum for the possibility of some type of resolution. Is
Speaker 1: that saying too much?
Speaker 3: I think that's right.
Speaker 2: I think sort of whether or not China wants to
Speaker 2: be a mediator is this closely watched question. When the
Speaker 2: US and Iran first came together for peace talks in Pakistan,
Speaker 2: there was a lot of reporting with people sort of
Speaker 2: on the Iranian side and even Trump himself suggesting that
Speaker 2: China had sort of used its influence over Iran to
Speaker 2: get the Iranians to those talks in Pakistan, and China
Speaker 2: did not like that claim at all, and we saw
Speaker 2: Chinese state media pushing back on it. It doesn't want
Speaker 2: to get its hands too dirty on this. It took
Speaker 2: She's in pink himself a long time, well over a
Speaker 2: month before he even commented on this war. You know,
Speaker 2: it really is America's war. And you know there's that
Speaker 2: famous saying, never interrupt your enemy when they're making a mistake.
Speaker 2: I think that's very much how China has seen things. However,
Speaker 2: it's going on so long now that no one is
Speaker 2: immune to the shocks of this war. And you know,
Speaker 2: in China doesn't have infinite reserves, and so we are
Speaker 2: seeing China sort of step up. She has spoken to
Speaker 2: the leader of Saudi Arabia, and now this week before
Speaker 2: the big sort of summit with Trump next week, the
Speaker 2: Uranian foreign minister, for the first time since the war, Bagan,
Speaker 2: has traveled to Beijing. And so you do see China
Speaker 2: making a more active role, but also being incredibly careful
Speaker 2: in its language to stay neutral. You know, they called
Speaker 2: on both sides, all sides to open the homewers strait yesterday,
Speaker 2: so being very careful not to sort of say Iran
Speaker 2: or the US one of them needed to do it
Speaker 2: more than the other. Everybody needs to act you know,
Speaker 2: to secure the free passage of that waterway.
Speaker 1: Jenny, when we continue the conversation, can we look at
Speaker 1: the economic relationship between the US and Iran. We'll have
Speaker 1: more with Bloomberg's Jenny Marsh when we continue here on
Speaker 1: the Debreak Asia podcast. Welcome back to the Debreak Asia Podcast.
Speaker 1: I'm Doug Krisner, and I'm speaking with Bloomberg's Jenny Marsh,
Speaker 1: Managing editor for North Asia Eco Gov. Jenny, can you
Speaker 1: help me understand the economic relationship where China and Iran
Speaker 1: are concerned. I believe Iran is formally a part of
Speaker 1: China's Belt and Road initiative right.
Speaker 2: As part of the Belton Road initiative. They have a
Speaker 2: strategic partnership. And the key thing is that China buys,
Speaker 2: at least it by about ninety percent of Iran's oil,
Speaker 2: which makes about eleven percent of China's.
Speaker 3: Overall crude supply.
Speaker 2: So there's a big economic partnership which is heavily tilted
Speaker 2: in China's favor.
Speaker 1: Beyond the immediate economic relief that Iran may get, assuming
Speaker 1: that there is some type of resolution that would allow
Speaker 1: for sanctions relief, do you have a sense that China
Speaker 1: would be willing to commit some type of capital to
Speaker 1: the Iranian economy to support any type of recovery that
Speaker 1: may be required as a result of this conflict, because
Speaker 1: Iran is going to be looking for some type of
Speaker 1: reparation or moneies that would be used to prop up
Speaker 1: the economy again after everything that the economy has been through.
Speaker 3: I think it's a good question.
Speaker 2: And you have seen other countries roll out some sort
Speaker 2: of economic aid.
Speaker 3: So South Korea has.
Speaker 2: Done that, not a huge amount, but it has offered
Speaker 2: the Iranians and economic aid.
Speaker 3: China could do the same. I think it would be.
Speaker 2: Very small potatoes compared to what the iraniance going to need.
Speaker 2: What you might see is Chinese companies who are you know,
Speaker 2: experts in infrastructure construction at very very competitive prices coming
Speaker 2: into Iran after the conflict ends to try and in
Speaker 2: helping to rebuild the country in that way, that would
Speaker 2: certainly make sense. I think Iran is more focused on
Speaker 2: trying to get money back from the US. It wants
Speaker 2: reparations from the American side for what it sees is
Speaker 2: sort of you know, they started this conflict, They've incurd
Speaker 2: all this damage to the country, so they're really focused
Speaker 2: on getting that from the US rather than sort of
Speaker 2: looking towards China.
Speaker 1: Help me understand the way that China may be using
Speaker 1: this conflict between the US and Iran to understand maybe
Speaker 1: the next step that it needs to take where Taiwan
Speaker 1: is concerned. I mean, does this enter the conversation at all?
Speaker 2: Yeah, it's very interesting and there are obviously lots of parallels.
Speaker 2: You know, the time one straight it's one of the
Speaker 2: world's busiest shipping routes. Taiwan also has a commodity the
Speaker 2: world can't live without, which is its high tech chips.
Speaker 3: I think there's a few ways of looking at it.
Speaker 2: I think for she, Trump is teaching him or reinforcing,
Speaker 2: a lesson that Putin already taught him, which is, you know,
Speaker 2: a much stronger military aiming to have a quick decisive
Speaker 2: strike on a smaller power can go quickly awry. You know,
Speaker 2: he saw this happen for Putin in Ukraine. Putin you know,
Speaker 2: years later still sort of bogged down there with massive
Speaker 2: costs to his country. And now Trump finding that actually
Speaker 2: he also can't you know, he can't just beat Iran easily.
Speaker 2: So I think that will give she pause, you know,
Speaker 2: thinking about any sort of military operation. I think what
Speaker 2: Trump is doing this year, not just with Iran, but
Speaker 2: also the blockades on Venezuela and Cuba are sort of
Speaker 2: maybe giving more of a plate of something that she
Speaker 2: could do, which would be just to choke off Taiwan
Speaker 2: from its energy supplies. Taiwan only has eleven days worth
Speaker 2: of L and G stored in the country. It's really
Speaker 2: it's sort of it's grid isn't very self sufficient. So
Speaker 2: you could see China sort of using this as a
Speaker 2: template not for an invasion, but as an economic blockade,
Speaker 2: which is something that the PLA sort of drills for.
Speaker 2: We've seen it in some of the military exercises they've
Speaker 2: done already. But I think as well, she probably has
Speaker 2: a preference for sort of the political solution to all
Speaker 2: of this, and I think that's what's been more on display.
Speaker 2: You know, you had he took a meeting with the
Speaker 2: KMT chair Toanngni I during the Iran the Iranian war.
Speaker 2: That was for the first time in a decade the
Speaker 2: KMT chair had gone to China and met with she
Speaker 2: and you know, and then also we've had this sort
Speaker 2: of crazy saga with the president of Taiwan trying to
Speaker 2: fly to Eswatini to visit one of Taiwan's twelve last
Speaker 2: diplomatic allies, and China sort of finding very novel and
Speaker 2: unorthodox ways of stopping that, leaning on African countries to
Speaker 2: block lie aeroplane going over their airspace. So it feels
Speaker 2: to me the Chinese would rather just sort of squeeze
Speaker 2: Taiwan politically to the point where it's president can't travel.
Speaker 2: It doesn't really seem like much of a president on
Speaker 2: the world stage platform you opposition party, the KMT, who
Speaker 2: are much more friendly towards Beijing, and try and bring
Speaker 2: the island closer to China and blur the lines between
Speaker 2: the two places.
Speaker 3: That was a much more sort of preferable option for she.
Speaker 1: So you mentioned the fact that China is the largest
Speaker 1: buyer of Iranian crude oil, and I'm wandering, Jenny, because
Speaker 1: I know the US Treasury was sanctioning some private oil
Speaker 1: refiners in China for processing Iranian crude. So to get
Speaker 1: back to the Trump Chiese summit, is this going to
Speaker 1: be a major sticking point here or is that going
Speaker 1: to be kind of water off a duck's back? Speak
Speaker 1: we'll ignore it because we have bigger fish to fry.
Speaker 1: Sorry to keep mixing metaphors here.
Speaker 2: I think it depends which part of the Trump administration
Speaker 2: you listen to. So overnight you had Gria talking about
Speaker 2: how this is going to be a big point, and
Speaker 2: they will talk about China's oil purchases from Iran at
Speaker 2: the summit, you know, China is essentially sort of the
Speaker 2: biggest sponsor of Iranian terrorism. And then Trump on the
Speaker 2: same day, striking a very different tone, he told reporters that,
Speaker 2: you know, if they have a deal with Iran, then
Speaker 2: these sanctions on Chinese banks aren't even going to be
Speaker 2: an issue, because the US itself will be giving Iran
Speaker 2: sanctions relief. So I think it really depends where things land.
Speaker 2: But certainly I think the US the main sort of
Speaker 2: leather they have right now for pressuring Iran to strike
Speaker 2: a deal is by choking off its oil revenue. And
Speaker 2: so if China continues to buy that oil, then they're
Speaker 2: diminishing sort of the US's strategy. And so in that case,
Speaker 2: you know, threatening the banks with secondary sanctions is one
Speaker 2: of the most powerful sort of tools they have against China.
Speaker 2: There is a story a Bloomberg story that China's banking
Speaker 2: regulator has instructed Chinese banks to comply with these new
Speaker 2: US sanctioned on refiners, so going against the blocking order
Speaker 2: that China issued itself. And I think that just speaks
Speaker 2: to the fact that, you know, China's strategy when it
Speaker 2: comes to US sanctions is to put its own economic
Speaker 2: interest first, so to avoid any blowback on its own economy,
Speaker 2: which seems to be how the banking sector is kind
Speaker 2: of navigating this.
Speaker 1: So, if we can agree that President Trump is arriving
Speaker 1: in Beijing on some weaker footing, is Beijing likely to
Speaker 1: try to extract some type of concessions as it relates
Speaker 1: to trade some of the other things that have already
Speaker 1: happened in the US China trade war.
Speaker 2: Yeah, you have to what does she want to do
Speaker 2: with this position found himself in so on trade. I
Speaker 2: think the Chinese is going to be very interested in
Speaker 2: the Section three oh one investigations and depending and we'll
Speaker 2: be pushing in the US to not kind of go
Speaker 2: aggressively on those as they try and reconstitute the tariff
Speaker 2: wall that the US Supreme Court sort of tore down
Speaker 2: earlier this year. That's one thing I think they'll be
Speaker 2: very keen on when it comes to sort of chip
Speaker 2: export controls. China does still need sort of the highest
Speaker 2: end in video chips, so they've made it clear they're
Speaker 2: not interested in sort of the mid range stuff, but
Speaker 2: if they can get access to sort of the best
Speaker 2: black wells, then I think that would be a bonus.
Speaker 2: And we're watching out to see if Jensen Huang from
Speaker 2: Nvidia is on the plane with Trump, which would be
Speaker 2: a signed that's very much on the agenda, and Gens
Speaker 2: has made it very clear he wants to sell more
Speaker 2: to China, and then I guess Chinese investment in the
Speaker 2: US is another hot topic that we're looking at where
Speaker 2: China could really push and Trump is sort of more
Speaker 2: dubbish on this than others in his administration. Chinese companies
Speaker 2: would like the chance to invest in America and access
Speaker 2: the world's biggest economy, particularly in the auto sector, and
Speaker 2: the likes of Forward have signaled that in some way
Speaker 2: they would like to JV with these Chinese companies who
Speaker 2: are so advanced in some of their technology. So that
Speaker 2: would also be another area that the Chinese potentially sort
Speaker 2: of try and make some headway on.
Speaker 1: Jenny, we can leave it there. Thank you so very much.
Speaker 1: It's always a pleasure. Bloomberg's Jenny Marsh, Managing Editor for
Speaker 1: North Asia Eco Gov, joining from our studios in Hong
Speaker 1: Kong here on the Daybreak Asia podcast. Thanks for listening
Speaker 1: to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Speaker 1: Each weekday, we look at the story shaping markets, finance,
Speaker 1: and geopolitics in the Asia Pacific. You can find us
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Speaker 1: the market moves from Hong Kong to Singapore and Australia.
Speaker 1: I'm Doug Prisoner and this is Bloomberg