Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick takes Tim Stinovic on Bloomberg Radio DATDS and go
Speaker 1: by without obviously significant headlines out of China. We're watching
Speaker 1: their economy, which we know is seeing pressures. We also
Speaker 1: see Chinese official es Central Bank announcing lots of measures
Speaker 1: to christian the economy, and so he watched up playing
Speaker 1: out in the market's government departments today pledging more steps
Speaker 1: to help companies resume production and key sectors. And I
Speaker 1: think what's interesting, Tim, this is all against a longer
Speaker 1: term backdrop of China's made in China statelet industrial policy
Speaker 1: to really change to make China so dominant in global
Speaker 1: high tech manufacturing. They want to be the world's dominant
Speaker 1: power on so many different levels. They certainly do. And
Speaker 1: we're really lucky to have joining us Robert Spalding, retired
Speaker 1: Brigade your General for the U. S. Air Force. He's
Speaker 1: the author of War Without Rules, China's playbook for global domination.
Speaker 1: He joins us via zoom from Washington, d C. General,
Speaker 1: how are you, thank you, hey, It's good to have
Speaker 1: you with us. I just want to start with with
Speaker 1: what's happening in China right now. Uh, we see supply
Speaker 1: chain scenaris as a result of yet another lockdown, this
Speaker 1: one the biggest lockdown in Shanghai. And I'm wondering if
Speaker 1: that is a weak point for China right now, because
Speaker 1: you do argue that China has thrown out the old
Speaker 1: rules of war. Well, I don't know if it's a
Speaker 1: weak point or they're actually testing our ability to weather
Speaker 1: through the supply chain shortages that are leading to increase
Speaker 1: inflation in our own economy. So it's not just a
Speaker 1: FED lifting the money supply, it's also the shortages of
Speaker 1: you know, the type of goods that you know is
Speaker 1: adding to this increasing inflation that is really you know,
Speaker 1: gnarling our our own society. So there's a there's, you know,
Speaker 1: a given take here that we have to be aware of.
Speaker 1: You are a former China strategist for the Chairman of
Speaker 1: the Joint Chiefs of Staff and the Joint Staff at
Speaker 1: the Pentagon, also UH senior defense official and Defense tash
Speaker 1: A to China. I mean, you understand this country. You
Speaker 1: speak Mandarin, you have watched I'm I'm assuming the evolution
Speaker 1: of this country, which we thought that by being involved
Speaker 1: would kind of bring us all closer uh in terms
Speaker 1: of globalization, but we're definitely seeing a different China play out.
Speaker 1: Why did you want to write this book? Well, I
Speaker 1: wrote a book back in nineteen after I left the
Speaker 1: White House trying to explain what I had witnessed during
Speaker 1: my almost ten years working on US China relations in
Speaker 1: the Pentagon and then as a senior defense official in Beijing.
Speaker 1: And one of the real crucial documents that I relied
Speaker 1: on for that book was Unrestricted Warfare. But Unrestricted Warfare
Speaker 1: is so hard to read and inaccessible. I wanted to
Speaker 1: bring it out and allow regular people and policymakers to
Speaker 1: really understand the way the Chinese think. And I think
Speaker 1: that's what war without rules is. It's it's allowing people
Speaker 1: to understand how the Chinese communist parties thinks in terms
Speaker 1: of competition and warfare with the West, which is totally
Speaker 1: the alien to the way we think about war and
Speaker 1: really doesn't involve weapons at all, and just bring that
Speaker 1: out so people can understand and anticipate how the Chinese
Speaker 1: might act or react to any given situation. What does
Speaker 1: our audience need to understand? What does our investor audience
Speaker 1: need to understand when when thinking about China's push for
Speaker 1: for global domination your words China's playbook for global domination. Well,
Speaker 1: I think for investors, one of the challenges with regard
Speaker 1: to investing in China, particularly if you have assets in China,
Speaker 1: is a non convertible nature of their currency and their
Speaker 1: strict capital controls. You know, once you've gotten assets there
Speaker 1: in China, it's very hard to get them out. So
Speaker 1: that's a problem. And ultimately, if you have a relationship
Speaker 1: with China, you can find yourself the subject of Chinese
Speaker 1: Communist Party influence. So Marriott Corporations saw that when they
Speaker 1: were asked to fire one of their employees that like
Speaker 1: to tweet. Then NBA saw that lost revenues when Daryl
Speaker 1: Morey tweeted. So what happens when you are a country
Speaker 1: or a company that's trying to either sell to China
Speaker 1: or in some way be financially related to China, You're
Speaker 1: gonna find that you're that you have to listen to
Speaker 1: what the Communist Party says, or it can be financially
Speaker 1: detrimental to your business. You know. General, I wonder if
Speaker 1: companies global companies misread China they thought by being involved,
Speaker 1: that they would become that China would become more westernized.
Speaker 1: But that's not what's happening, is it. Well, you know,
Speaker 1: I lived in China, Shanghai uh and What's University from
Speaker 1: two thousand two to two thousand four, and all of
Speaker 1: my neighbors were building factories in the Shanghai Spectral Economic Zone.
Speaker 1: And this is what I heard nearly universally, is that
Speaker 1: we were going to somehow transform China to be like
Speaker 1: the United States. And I thought that was a little
Speaker 1: bit arrogant at the time, But yeah, truthfully, what's happened
Speaker 1: is rather than us changing China to be more like
Speaker 1: the US, they've been able to change us to be
Speaker 1: more like them. And then again, it's through these relationships
Speaker 1: where they're allowed to influence our corporate sector, financial sector,
Speaker 1: or political system or academia. So it's a big problem. Well,
Speaker 1: and I think it's interesting coming out a time when
Speaker 1: we're focusing so much on E. S G factors and
Speaker 1: companies saying we've got to take a stand on these
Speaker 1: social policies. Our workers wanted, our customers were wanted, and
Speaker 1: yet when it comes to China, you do feel like
Speaker 1: everybody is so careful and so delicate with us. Right
Speaker 1: now is Robert Spalding, retired Brigadier General for the U.
Speaker 1: S Air Force. We are talking about his book War
Speaker 1: Without Rulers, China's Playbook for Global domination. He's a former
Speaker 1: China strategist for the Chairman of the Joint Chiefs of
Speaker 1: Staff and the Joint Staff the Pentagon, as well as
Speaker 1: a senior defense official and defense attache to China. UM,
Speaker 1: go ahead, you actually we have like a million questions. Yeah,
Speaker 1: we've been talking during the break, Brigadier General. Uh. You
Speaker 1: know something we've been thinking a lot about over the
Speaker 1: last couple of months, leverage in terms of, you know,
Speaker 1: what the US has done in the international community, have
Speaker 1: done the UK the you, the U S in response
Speaker 1: to Russia's invasion of Ukraine. And I wonder if we
Speaker 1: would do the same thing to China. And the reason
Speaker 1: why if China were to do something on an international
Speaker 1: scale similar to what Russia has done, because that was
Speaker 1: part of the conversation early on in the invasion. Uh.
Speaker 1: And I'm thinking to myself, you know, the US and
Speaker 1: global supply chain is so much more intertwined with China
Speaker 1: than it is with Russia. In other words, we depend
Speaker 1: so much more on China than we do on Russia.
Speaker 1: And I'm wondering your take on that. What kind of
Speaker 1: leverage does the US have when it comes to dealing
Speaker 1: with China. Well, I think at this point very little.
Speaker 1: You know, they have a non convertible currency and strict
Speaker 1: capital controls. Of course, the control most of the industrial
Speaker 1: based supply chain of the world. So I think we
Speaker 1: would be hard pressed. And I think what China wanted
Speaker 1: to do with regard to this Russian invasion of Ukraine
Speaker 1: is to see what other message methods we brought out
Speaker 1: to put pressure on the Russians that they might see
Speaker 1: in the Taiwan scenario. So I think they have done
Speaker 1: a good job of in elating their economy from any
Speaker 1: kind of attacks, whether they be financial or trade related,
Speaker 1: and they've done even more now and are going to
Speaker 1: do even more realizing what we've been able to do
Speaker 1: with the Russian economy. But again, having a closed financial
Speaker 1: system really insulates him from a lot of the effects
Speaker 1: that the Russians have seen as a result of their
Speaker 1: invasion of Ukraine. You know, I do wonder too when
Speaker 1: you say close financial system, and increasingly China has a
Speaker 1: closed system to the world in terms of how it
Speaker 1: does things. Will that since it feels like the endgame
Speaker 1: for China um general is all about influence in the
Speaker 1: world on a global scale. But if they continue to
Speaker 1: cut themselves off in some ways, can they be as
Speaker 1: influential as they want to be? No? And I think
Speaker 1: you saw that when they tore up the trade deal,
Speaker 1: the original trade deal that was negotiated by Ambassador Leightheiser.
Speaker 1: I think they signaled that they were going to begin
Speaker 1: to decouple themselves from the global economy. Now they're going
Speaker 1: to take as much as they can before they go.
Speaker 1: But ultimately, they wanted to make sure that the United
Speaker 1: States did not have the type of books that China
Speaker 1: has into the United States. And so they weren't going
Speaker 1: to give up, you know, control. They weren't going to
Speaker 1: give up. For instance, we've been hearing that they are
Speaker 1: going to allow their companies to be audited, you know,
Speaker 1: as for the new law passed by Congress. But I
Speaker 1: don't think they're actually going to do that. They're going
Speaker 1: to signal that they're going to do that, but they
Speaker 1: won't make take the full step because they are concerned
Speaker 1: about the United states influence over their own economy, something
Speaker 1: that they want to have, you know, influence over ours,
Speaker 1: but does don't want the alternative to happen. So what's
Speaker 1: the endgame here? Though? Ultimately we've often talked about the
Speaker 1: world splitting into you know, China with its allies in
Speaker 1: the US and certain Western nations, although that gets a
Speaker 1: little complicated to uh and it's Alice. Is that where
Speaker 1: we're going? And I do think about is to mention
Speaker 1: you know, our audience, our investment audience, like, what do
Speaker 1: they need to be thinking about in this situation as
Speaker 1: you put it out in your book. Well, I mean,
Speaker 1: like I said before, they have a non convertible currency
Speaker 1: and strict capital controls. There's a lot of money that's
Speaker 1: never coming out of China. Yes, we are resolving into
Speaker 1: more of a bipolar world. We are splitting apart. I think, um,
Speaker 1: for one, I would not be investing in China, and
Speaker 1: I think there's a lot of people who recognized now
Speaker 1: that China is uninvestable. I think the other the corollary
Speaker 1: that goes along with this, at some point you're gonna
Speaker 1: have to write off those assets. You're not going to
Speaker 1: be able to recover that's going to be painful for
Speaker 1: for people, but ultimately, you know it is inevitable. But
Speaker 1: what about companies that have large exposure to China? I
Speaker 1: mean a company like Apple, for examples, of the company's
Speaker 1: revenue actually comes from greater China. What about that and
Speaker 1: and that's just revenue. I mean you think about what
Speaker 1: it does with the Taiwanese company fox Con and other
Speaker 1: manufacturers there. Does that mean Apple's uninvestable? Well, it depends
Speaker 1: on what you assessed to be uninvestable. I think a
Speaker 1: Chinese company that can basically wipe out the share whole
Speaker 1: holders as can be done because the Communist Party basically
Speaker 1: has full control over their economy is I would say,
Speaker 1: more uninvestable than say an Apple. So yes, an Apple
Speaker 1: is exposed to China. But ultimately, as we have this
Speaker 1: too coupling, Apple is going to continue to survive and
Speaker 1: thrive as a company, and probably I think ultimately they
Speaker 1: will be within societies that are thriving and more prosperous
Speaker 1: than they currently are because the supply chains are in China.
Speaker 1: So ultimately, yeah, we're gonna have a smaller um. All
Speaker 1: these companies that are relying on China for their numbers
Speaker 1: they are gonna be they're gonna be smaller afterwards. But
Speaker 1: I think ultimately as a society, we're going to be
Speaker 1: better off because there's not going to be this influence
Speaker 1: of a totalitarian regime onto our corporate, financial, and academic
Speaker 1: and political systems. But online, would you say that China
Speaker 1: is at war with the world, or at least with
Speaker 1: the United States specifically, and we can't think of war
Speaker 1: and conventional military you know, military modes if you will,
Speaker 1: I mean, they tend to wage a quiet war, right
Speaker 1: and and the whole point of war without rules to
Speaker 1: show people that the that China is a war with
Speaker 1: the United States, and it's a different kind of war.
Speaker 1: It's not a war that we would necessarily fight, but
Speaker 1: it is one nonetheless, and it ultimately results in, you know,
Speaker 1: less prosperity for American people. And so I think ultimately
Speaker 1: recognizing this and beginning to invest in ourselves infrastructure, manufacturing,
Speaker 1: science and technology, STEM education, these are things that we
Speaker 1: haven't invested in ourselves in over thirty years, I think
Speaker 1: we'll eventually lead us into a more prosperous place. Is
Speaker 1: go ahead, Carol, Is there the political will to do that?
Speaker 1: I mean, you know, Washington gets faulted for such short
Speaker 1: term thinking. But I'm wondering if there's political will to
Speaker 1: actually on shore in that way and just quickly if
Speaker 1: you could. Yeah, you know, I think that we did
Speaker 1: it during the first Cold War. We're in a Cold
Speaker 1: War again. I think we can must do that. So yes,
Speaker 1: all right, gonna leave it there, Thank you so much.
Speaker 1: Really enjoy this. Uh retired brigadier don't know the US
Speaker 1: Air Force. Robert Spaulding his book War Without Rules, China's
Speaker 1: Playbook for Global domination