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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 3: I'm Joe Wisenthal, and I'm Tracy Alloway.

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Speaker 2: Tracy, you know, when it comes to US trade tensions

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Speaker 2: with China, obviously there are a number of people they

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Speaker 2: sort of reach back for the fear and the anxiety

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Speaker 2: of trade with Japan in the eighties. But I have

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Speaker 2: to say, like, I don't actually know much about that.

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Speaker 2: I wasn't paying that much attention to trade policy when

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Speaker 2: I was seven years old or nine years old and stuff.

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Speaker 3: That's very disappointing, even though I'm aware.

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Speaker 2: I know, even though I'm aware that that was a thing,

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Speaker 2: and probably some of the concerns, particularly about automobiles specifically

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Speaker 2: and the threat to Detroit and all that was popular

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Speaker 2: the way it is popular now, Like, I actually know

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Speaker 2: very little of it.

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Speaker 3: Don't you watch movies from the nineteen eighties. There are

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Speaker 3: quite a few villains from nineteen eighties cult classic movies

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Speaker 3: that end up being Japanese businessmen. And I do remember

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Speaker 3: some pop culture zeitgeiste moments from the Big Fear that

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Speaker 3: Japan Inc. Was going to eat the US economy. For instance,

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Speaker 3: there was that famous photo of I think it was

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Speaker 3: a bunch of congressmen smashing like a radio or a

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Speaker 3: TV or something in Washington in the late nineteen eighties.

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Speaker 3: Do you remember seeing that, which you can imagine. So

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Speaker 3: the idea was the US feels threatened by Japan's dominance

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Speaker 3: in certain primarily consumer electronic goods back then, but also

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Speaker 3: increasingly in computers, and so a bunch of politicians went

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Speaker 3: out and started smashing those publicly to make a statement.

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Speaker 3: That hasn't happened with China just yet, but you could

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Speaker 3: imagine something like that being done today, but it would

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Speaker 3: be with Chinese solar panels or something like that.

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Speaker 2: Oh, I'm looking at the photo. They smashed a boombox

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Speaker 2: right in front of the cavalon.

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Speaker 3: You can't get much more in nineteen eighties than smashing

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Speaker 3: a Japanese boombox.

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Speaker 2: This photo goes, it goes hard. As the kids say,

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Speaker 2: it's quite a photo. But you're right, And I do

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Speaker 2: remember the pop culture elements, and you know, movies like

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Speaker 2: Falling Down or the Villain in Back to the Future too.

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Speaker 2: I think it was, or maybe whatever, So I remember,

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Speaker 2: well what I certainly don't remember how it resolved or

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Speaker 2: why it faded or why you know, I know a

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Speaker 2: little bit, but not really like what the ultimate was there,

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Speaker 2: how similar it actually was, because yeah, I sure that

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Speaker 2: you know, it's one thing with boomboxes and cars, but

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Speaker 2: obviously there seems to be, at least in US policy circles,

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Speaker 2: this big national security element that dovetails with some of

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Speaker 2: the concerns about cars and solar and stuff like that.

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Speaker 2: And of course, when speaking of analogies, you know, we've

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Speaker 2: also talked about the history with the real estate bubble

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Speaker 2: and bust. We've talked with Richard kob about the similarities

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Speaker 2: of the real estate boom that Japan had and the

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Speaker 2: bust that subsequently followed, and there may be parallels there,

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Speaker 2: but I definitely feel like I need to wrap my

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Speaker 2: head around even further about how useful or not some

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Speaker 2: of these historical patterns are.

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Speaker 3: Absolutely. The other thing I would say is it is

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Speaker 3: remarkable in some respect that the commonality between Biden and

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Speaker 3: Trump is being tough on China trade. Right, That is

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Speaker 3: a common thread, And so no matter what happens in November,

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Speaker 3: it seems reasonable to expect that these trade tensions are

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Speaker 3: going to continue in one way or another. So I

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Speaker 3: definitely think it's worth talking about totally.

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Speaker 2: This is really an important element, and I'm glad you

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Speaker 2: brought it up, which is the complete Washington consensus. It

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Speaker 2: would seem at this point where there doesn't seem to

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Speaker 2: be any disagreement about the basic notion that we have

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Speaker 2: to do something on trade, that we have to amp

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Speaker 2: up the national security as whatever it is with respect

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Speaker 2: to China has become completely conventional wisdom of both parties.

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Speaker 2: And you know, when something is conventional wisdom like that,

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Speaker 2: it's probably good to question some things.

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Speaker 3: Absolutely, let's do it, all right.

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Speaker 2: I'm excited. We really do have the perfect guest today,

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Speaker 2: someone I don't believe we've ever had on the podcast before,

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Speaker 2: but someone who's work and writing I've admired and read

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Speaker 2: for a really long time. Really excited to be chatting

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Speaker 2: with Stephen Roach. He's a senior fellow at Yale Law School,

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Speaker 2: former chairman of Morgan Stanley Asia and has been talking

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Speaker 2: a lot about this topic for years and years and

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Speaker 2: has been warning about what he sees as the errors

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Speaker 2: of our current approach to China. So, Stephen, thank you

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Speaker 2: so much for coming on.

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Speaker 4: Odd lots well, great to be with you, Joe and Tracy.

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Speaker 4: I'm astonished at how young the two of you are.

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Speaker 5: Thank you don't know, what's.

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Speaker 4: Any firsthand knowledge of what it was like to live

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Speaker 4: in an era where Japan was our main economic enemy.

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Speaker 3: But well, I was out in the nineteen eighties, so

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Speaker 3: maybe I missed out on it because I was on

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Speaker 3: the other side. Japan in the nineteen eighties was great.

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Speaker 3: I gotta say just this.

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Speaker 4: One background note. I mean, I taught a seminar at

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Speaker 4: Yale for twelve years called the Lessons of Japan, and

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Speaker 4: in that seminar I went through in great detail what

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Speaker 4: happened to what at the time was Asia's first major

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Speaker 4: growth engine, the rise in the Fall, and how that

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Speaker 4: came into the crosshairs of American economic and political policy.

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Speaker 4: And that was just the first half of the course.

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Speaker 4: The second half of the course was to look at

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Speaker 4: those lessons to see how they applied to other economies

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Speaker 4: around the world. And you know, in keeping with your

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Speaker 4: pithy introduction, you know, the main candidate was China. So

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Speaker 4: how much of the China story has an antecedent in

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Speaker 4: our experience with is a very very important question. And

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Speaker 4: I'm delighted to talk to.

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Speaker 5: You about fantastic.

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Speaker 2: You know, one thing I remember at the time, and

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Speaker 2: I guess by this point I was eleven years old.

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Speaker 2: I remember George H. W. Bush vomiting onto the lap

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Speaker 2: of the former Prime minister while on some you know visit.

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Speaker 2: Well what happened? I mean, the story is so big,

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Speaker 2: As you mentioned, it was a whole lecture series that

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Speaker 2: you did over years at Yale. But like, how did

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Speaker 2: that end? Because I remember, like some of the anxiety

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Speaker 2: about cars from when I was ten or nine or whatever,

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Speaker 2: and they're eating or lunch and stuff like that. But

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Speaker 2: and then you know, by the mid nineties it did

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Speaker 2: not seem to be a thing that people were talking

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Speaker 2: about as much. How did I guess, in the minds

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Speaker 2: of the America or in the literal economics did that end?

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Speaker 2: What happened? How did that fade?

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Speaker 4: You alluded to the auto area that was a major

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Speaker 4: issue of contention that we've negotiated some voluntary export restraints

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Speaker 4: on Japan. And then Japan, who you know, we had

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Speaker 4: a very close security relationship with which is of course

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Speaker 4: very different than our current situation with China. Japan was

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Speaker 4: eager to shift some of its domestic auto production into

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Speaker 4: the United States through building and investing in American made facilities,

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Speaker 4: using American workers, And so we all ended up buying

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Speaker 4: Japanese cars, but you know, they were produced in the

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Speaker 4: United States. But I think the endgame was quite tough

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Speaker 4: for Japan. You know, Japan went from a growth miracle

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Speaker 4: to a growth bust, went through arguably three lost decades

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Speaker 4: of neo economic stagnation, a considerable amount of which was

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Speaker 4: an outgrowth of the currency policy that we and other

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Speaker 4: developed nations.

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Speaker 5: On Japan.

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Speaker 4: They voluntarily agreed to it, but that triggered a series

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Speaker 4: of policy blunders that led to acid bubbles. And you said,

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Speaker 4: you spoke with Richard Ko the balance sheet recession that

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Speaker 4: he's written so eloquently about that really left Japan flat

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Speaker 4: on its back for as I said, nearly three lost decades.

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Speaker 4: So Japan did an end around in moving production to

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Speaker 4: the US and then was effectively neutered as an economic

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Speaker 4: power by these lost decades. And so it didn't end

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Speaker 4: all that well for Japan.

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Speaker 3: Maybe we could step back for a second, because the

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Speaker 3: thing that I'm unclear on with the Japan US business

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Speaker 3: rivalry of the nineteen eighties is and you touched on

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Speaker 3: this Stephen already. But there was there is a security

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Speaker 3: alliance in place between the US and Japan. I mean,

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Speaker 3: the has lots of military bases in Japan. I grew

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Speaker 3: up on one of those. So how was it that

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Speaker 3: Japan's industry and technology was viewed as such an enormous

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Speaker 3: threat for the US, even if they were military and

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Speaker 3: strategic allies. That's the one thing I don't get.

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Speaker 4: Well, that's a fair point. The main issue in the

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Speaker 4: United States at that point was I think a total

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Speaker 4: misunderstanding of international economics. We had a large trade deficit

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Speaker 4: as a nation, and we came out of a horrible

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Speaker 4: recession in the early eighties that continued even in the

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Speaker 4: face of economic recovery, to leave our manufacturing sector under pressure.

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Speaker 4: The manufacturing recession continued well into the mid nineteen eighties,

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Speaker 4: even though the overall economic recovery was progressing nice. Our

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Speaker 4: politicians figured out that the main culprit in the manufacturing

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Speaker 4: recession was this thing that they didn't understand, but it

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Speaker 4: was a trade deficit, and the biggest piece of the

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Speaker 4: trade deficit was with Japan. They were highly critical of Japan.

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Speaker 4: The politicians were for unfair trading practices, for running an

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Speaker 4: undervalued currency, the yen in their case, and for basically

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Speaker 4: eating our lunch in terms of putting pressure on our

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Speaker 4: companies and our workers and our communities. You noted in

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Speaker 4: your intro that you know, there was a boombox that

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Speaker 4: was destroyed. There were a number of other highly public

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Speaker 4: episodes of destroying Japanese cars. There was even an unfortunate instance,

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Speaker 4: you know, in the late nineteen eighties where two displaced

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Speaker 4: laid off auto workers assaulted and ultimately murdered a Chinese

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Speaker 4: American in the late eighties, not being able to mistake

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Speaker 4: the difference between the two nationalities. So it wasn't a

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Speaker 4: particularly pretty period, but it unmasked a really critical misunderstanding

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Speaker 4: of the role that trade plays in an economy that

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Speaker 4: was evident in Japan, that is even more evident than

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Speaker 4: today in China, and that is, the US has trade

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Speaker 4: deficits with many countries, and it's wrong to single out

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Speaker 4: one country in an effort to eliminate the trade deficit.

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Speaker 4: You can't do it because our multilateral trade deficit, that

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Speaker 4: a trade deficit with many countries is an outgrowth of

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Speaker 4: our shortfall of domestic savings. When nations don't save and

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Speaker 4: they want to grow, they import surplus savings from abroad,

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Speaker 4: and they run what's called a balance of payments deficit

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Speaker 4: that gives rise to a multilateral trade deficit with many

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Speaker 4: many nations. So fast forward to today. In twenty twenty three,

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Speaker 4: we ran trade deficits with one hundred and six countries.

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Speaker 4: China was the largest, although it has come down. There's

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Speaker 4: a share of our overall trade deficit because of the

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Speaker 4: tariffs that were imposed and sustained from Trump to Biden.

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Speaker 4: But if you take China out of the equation, it

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Speaker 4: still leaves you with one hundred and five other countries

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Speaker 4: that we ran deficits with last year. So we tried

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Speaker 4: the japan recipe on China. We put huge tariffs on China.

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Speaker 4: The Chinese piece of the overall merchandised trade deficit, which

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Speaker 4: peaked out a little below fifty percent in twenty fifteen,

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Speaker 4: has since come down to a little below thirty percent.

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Speaker 4: So you say, wow, that's a great strategy, and Trump

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Speaker 4: would say, see my policy work. But we didn't boost

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Speaker 4: our domestic savings because we run these massive budget deficits.

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Speaker 4: So all that happened was the Chinese piece went somewhere else,

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Speaker 4: and that somewhere else were countries like Mexico, Vietnam, Canada, Korea, Taiwan, India, Ireland,

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Speaker 4: and even Germany. In large part, these countries are higher

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Speaker 4: cost producers, so the trade shifted from a low cost

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Speaker 4: producer like China to higher cost producers, which ends up

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Speaker 4: taxing American workers. So the policy reflects a total misunderstanding

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Speaker 4: of the way that international economics works in the context

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Speaker 4: of our saving short US economy.

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Speaker 2: So I want to obviously get into more soon about

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Speaker 2: the current conditions and the mistakes that you believe we're

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Speaker 2: making with respect to China. But you know, going back

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Speaker 2: to the parallels between China and Japan, and there's something

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Speaker 2: we talked with Richard Coo about is like they had

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Speaker 2: this real estate bubble and for Japan the aftermath is

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Speaker 2: really bad, multiple lost decades. And you know, obviously there

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Speaker 2: are a lot of academics and policy makers in China

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Speaker 2: today looking at that experience and hoping to avoid similar

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Speaker 2: loss decades after as they tried to control their own

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Speaker 2: real estate bubble, which is something they've done. I mean,

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Speaker 2: when you tell the story of what happened with US

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Speaker 2: and Japan, I listened to that and say, actually, it

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Speaker 2: seems like it turned out fairly well from the US perspective,

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Speaker 2: but that it turned out very badly from the Japanese perspective.

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Speaker 2: Had they not acquiesced in the same way to our

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Speaker 2: desire for export restrictions or building some of their vehicles

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Speaker 2: in the US, would that have allowed the country to

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Speaker 2: move from manufacturing to a robust industrial power in a

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Speaker 2: more stable manner that didn't result in so many lost years.

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Speaker 5: It's a fair point.

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Speaker 4: Japan had an economic model that it developed in the

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Speaker 4: aftermath of the total destruction of its economy during World

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Speaker 4: War Two that was very focused on boosting economic growth

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Speaker 4: through arts largely supported by a cheap or undervalued currency.

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Speaker 4: We called them on that. There was a currency agreement

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Speaker 4: in the mid eighties and the so called Plaza Accord

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Speaker 4: that forced the Japanese to revalue their currency. They panicked

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Speaker 4: over this threat to their economic model, and the Ministry

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Speaker 4: of Finance, which controlled the Central Bank as well as

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Speaker 4: the foreign exchange policy, basically ordered the Bank of Japan

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Speaker 4: to slash domestic interest rates. And that's what boosted asset

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Speaker 4: bubbles in equities and property, and when they burst.

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Speaker 5: Is all bubbles. Do you know?

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Speaker 4: The rest is history, one lost decade followed by another.

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Speaker 4: So this policy that was imposed from the outside on

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Speaker 4: Japan was not without consequences for other policy choices they made.

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Speaker 4: By no means was that the sole source of the

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Speaker 4: lost decade, As I teach it in my seminar. There

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Speaker 4: are many, many sources, but that was clearly an important

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Speaker 4: part of their story.

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Speaker 3: Talk to us about the Chinese economy now, and in particular,

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Speaker 3: how you would characterize trade relations between the US and China.

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Speaker 3: What are you seeing?

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Speaker 4: Well, the Chinese economy is in difficult shape right now.

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Speaker 4: It's facing a number of short term headwinds brought about

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Speaker 4: by the property crisis, which is very Japanese like, and

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Speaker 4: also financial problems amongst many of their local governments. And

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Speaker 4: that a combination of issues that certainly led to a

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Speaker 4: significant slowing of the Chinese economy relative to this historic

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Speaker 4: thirty plus years of ten percent growth. And yet you

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Speaker 4: know that is only part of the problem. China is

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Speaker 4: afflicted by a number of structural problems, not the least

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Speaker 4: of which is declining population, especially the working age piece

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Speaker 4: of the population, and weak productivity. What we learned from

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Speaker 4: Japan and this is very relevant for China, is when

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Speaker 4: the demography works against you is it certainly did and

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Speaker 4: continues to do so in Japan. You've got to have

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Speaker 4: strong productivity to offset that. You've got to get more

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Speaker 4: out of the surviving workforce, otherwise your growth will weaken,

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Speaker 4: and it has done that in Japan now for three

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Speaker 4: decades plus. China's got a similar problem. It's population is

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Speaker 4: now declining. We knew this was coming because of their

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Speaker 4: unsustainable one child family planning policy, but it's come sooner

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Speaker 4: than we thought. And their productivity problems are actually worse

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Speaker 4: right now than they were in the nineties in Japan.

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Speaker 4: So you know, China's got some structural issues on top

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Speaker 4: of the cyclical problems. US China trade relations your second question.

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Speaker 4: You know, the relationship is in the worst shape it's

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Speaker 4: been in since the US championed China's membership in joining

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Speaker 4: the WTO in late two thousand and one. We've had

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Speaker 4: tariffs initiated by Trump and sustained under Biden, who is

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Speaker 4: tightened the news further through sanctions and through making every

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Speaker 4: conceivable effort to contain Chinese technology under the guise of

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Speaker 4: national security risks, which as you pointed out earlier, were

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Speaker 4: not a serious consideration with Japan in the nineteen eighties.

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Speaker 2: So that is obviously does seem like a pretty big difference.

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Speaker 2: And when I think about the tensions between the US

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Speaker 2: and China, there seems to be the national security concerns,

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Speaker 2: the concerns that Chinese exporters are going to undermine American

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Speaker 2: industrial powerhouses, whether we're talking chips, planes, cars, solar powers, whatever,

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Speaker 2: and then the synthesis of the two, which is, well,

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Speaker 2: if we continue to let our industrial companies weaken, then

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Speaker 2: that also has security concerns directly due to our ability

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Speaker 2: to manufacture things like weaponry or whatever else from a

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Speaker 2: national security standpoint. So maybe the way i'd ask you

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Speaker 2: is setting aside trade, do you consider the national security

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Speaker 2: concerns real or is this something that has been more

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Speaker 2: ginned up in the head of policymakers in DC. Should

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Speaker 2: it inform how we trade with China.

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Speaker 4: I think that there has been a lot of exaggeration

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Speaker 4: of the so called security threat from China. Certainly, they

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Speaker 4: are moving ahead aggressively in the area of technological change

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Speaker 4: and innovation, and they're applying these breakthroughs to their military

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Speaker 4: capabilities as you would expect any leading power to do.

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Speaker 4: But I think personally, I've looked at a lot of

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Speaker 4: this very carefully wrote about it in my last book

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Speaker 4: called Accidental Conflict, or I lay out the thesis that

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Speaker 4: a lot of the national security concerns that have been

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Speaker 4: expressed by politicians and by executive branch officials, either in

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Speaker 4: the Trump or the Biden administration, are false narratives based

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Speaker 4: on the presumption of intent on the part of China.

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Speaker 4: They cannot really be validated. I mean, just take electric vehicles.

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Speaker 4: I mean, we had the spectacle of a Commerce Secretary

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Speaker 4: Jeana Raimondo warning that if China was, for some motive

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Speaker 4: that she was unable to articulate, felt like it, they

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Speaker 4: could transform Chinese made evs, presuming that they were allowed

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Speaker 4: to be sold in the US into vehicular weapons of

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Speaker 4: mass destruction. And there's just absolutely no credible evidence of that.

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Speaker 4: And you could argue the same thing with respect to

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Speaker 4: and I have Huawei on five G telecommunications, even TikTok

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Speaker 4: in terms of the allegations that TikTok as you know, corrupted,

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Speaker 4: you know, the minds of innocent young teenagers. We've got

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Speaker 4: concerns that have been raised over dock loading cranes that

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Speaker 4: are made in China, that you know, with the flick

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Speaker 4: of a switch, that the Chinese could disable all of

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Speaker 4: our dock loading infrastructure. You have an FBI director of

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Speaker 4: Christopher Ray, who's been negative on China as long as

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Speaker 4: I can remember, who's absolutely convinced that in China has

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Speaker 4: a stranglehold on America's utility infrastructure. And again, with just

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Speaker 4: a flip of a switch from Beijing, our entire public

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Speaker 4: utility system won't come to a halt. Our politicians are

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Speaker 4: eager and aggressive to warn of consequences based on the

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Speaker 4: presumption of intent that they have not been able and

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Speaker 4: are unwilling to validate. And I know that's an unpopular

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Speaker 4: view to hold in this bipartisan era of what I've

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Speaker 4: called sinophobia. But I've never seen in my adult lifetime

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Speaker 4: an adversary that's been so vilified as we are now

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Speaker 4: vilifying the Chinese.

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Speaker 5: So I find it very worrisome.

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Speaker 3: My sense of some of the concerns is that they

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Speaker 3: have more to do with the strategic importance of certain

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Speaker 3: industries and the idea that well, if something were to

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Speaker 3: happen with China, you know, for instance, if it were

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Speaker 3: to invade Taiwan, the assumption would be that the US

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Speaker 3: is cut off from Chinese exports, or at least they

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Speaker 3: would be disrupted in some way, And so it might

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Speaker 3: be desirable from the US's economic and national security perspective

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Speaker 3: to build out your own strategically important industries, so things

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Speaker 3: like batteries, semiconductors, maybe even solar panels. So I guess

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Speaker 3: I always thought they were coming at it from more

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Speaker 3: of an autarchy point of view rather than a vehicular

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Speaker 3: weapons of mass destruction point of view.

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Speaker 4: There's some of that tracy, I will every nation wants

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Speaker 4: to be able to stand on its own and not

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Speaker 4: be strategically reliant on others, especially on a nation who

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Speaker 4: has a different ideology, who you feel has been engaging

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Speaker 4: in activities, whether it's with respect to Taiwan, the South

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Speaker 4: China Sea, the partnership with Russia, who have to be

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Speaker 4: prosecuting a criminal war in Ukraine. So yeah, that's certainly

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Speaker 4: a part of the political equation. And you know, the

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Speaker 4: idea of being strategically reliant on production a whole is good.

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Speaker 4: But this just gets back to my economic lesson that

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Speaker 4: I tried to teach you guys.

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Speaker 5: Earlier on.

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Speaker 4: You know, if we want to be strategically reliance on

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Speaker 4: our own production, then we have to be able to

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Speaker 4: save more at home and reduce our tendency to run

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Speaker 4: these trade deficits which create this linkage with overseas production.

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Speaker 4: I gave you some of the numbers. I mean, you know,

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Speaker 4: we've cut our trade deficit with China, so you can

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Speaker 4: arguably say that, you know, we have made some progress

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Speaker 4: and at least weaning ourselves from the Chinese, but you know,

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Speaker 4: we've shifted our alliance to other countries. Our overall trade

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Speaker 4: deficit is bigger today, a lot bigger today than it

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Speaker 4: was when the Trump tariffs were imposed on China in

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Speaker 4: twenty eighteen. So you know, you've got a good point,

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Speaker 4: But it just the numbers just don't add up. And

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Speaker 4: the point you're making on strategy and its role in

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Speaker 4: shaping national defense, how do you stretch that to the

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Speaker 4: outright ban of TikTok? I mean, I have a hard

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Speaker 4: time with it.

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Speaker 2: What happens if we go down this route, because like

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Speaker 2: Tracy said, it's consensus. It's probably the case that if

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Speaker 2: we get another Trump presidency, we will see policy titan

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Speaker 2: or harden even further against China. What worries you about

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Speaker 2: this trajectory? How does it go bad?

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Speaker 4: Well, again, I'm not trying to sell my book because

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Speaker 4: you know it's it's been out for a while. But

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Speaker 4: I did write a book called Accidental Conflict, and.

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Speaker 5: That doesn't good.

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Speaker 4: Time to argue in the book, Joe is Look, both

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Speaker 4: nations are prone to politically expedient false narrative. Is that

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Speaker 4: they've framed about the other, and that has really poisoned

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Speaker 4: their relationship. We don't trust the Chinese for a second,

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Speaker 4: and they don't trust us either. They are convinced that

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Speaker 4: we want to bring them down. There's certainly a lot

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Speaker 4: of evidence that supports their view as well. And so

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Speaker 4: when you have this relationship that's gone from initially back

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Speaker 4: in the nineties and early two thousands, from a relationship

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Speaker 4: built on mutual trust to now a relationship that's built

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Speaker 4: on mutual distrust, it doesn't take much of a spark

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Speaker 4: to trigger a very worrisome escalation that could lead to

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Speaker 4: outright war. That's why I wrote this book, and I

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Speaker 4: subscribe to the notion that was articulated by the late

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Speaker 4: Henry Kissinger a number of years ago. Actually at a

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Speaker 4: Bloomberg Conference where he said, I think it was back

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Speaker 4: in twenty nineteen that the US and China were in

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Speaker 4: the early stages of a new Cold war. He described

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Speaker 4: them as being in the foothills of a new Cold war.

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Speaker 4: And you know, before he died, he said, you know

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Speaker 4: they're they're at a higher elevation now. It's a very

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Speaker 4: worrisome development and cold wars. When you've got two nations

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Speaker 4: acting in an adversarial position, both focused on national security

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Speaker 4: and building up their defense capabilities, you know, you can

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Speaker 4: come very close and possibly even get into the realm

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Speaker 4: of a kinetic, outright war. We came certainly close with

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Speaker 4: the Cuban missile crisis in nineteen sixty one. And you know,

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Speaker 4: if there was an accident, you know, at an invasion

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Speaker 4: of Taiwan or something in the South China Sea, there's

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Speaker 4: no telling where that could go. So I think the

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Speaker 4: time to take these concerns seriously is now, before.

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Speaker 5: It is too late.

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Speaker 4: We've got to come up with a better way, a

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Speaker 4: new way to frame our relationship with China to avoid

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Speaker 4: the specter of accidental conflict. And I write about that.

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Speaker 4: I have my own approach that I articulate in the

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Speaker 4: book that I'm again not trying to sell on this podcast,

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Speaker 4: but read chapter fourteen and you'll all right see in

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Speaker 4: all of its core detail.

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Speaker 3: Stephen, you know you mentioned earlier structural imbalances or weaknesses

438
00:30:48,520 --> 00:30:54,600
Speaker 3: in China's economy, and you've obviously been analyzing China's economy

439
00:30:54,600 --> 00:30:56,400
Speaker 3: for a very long time at this point. One of

440
00:30:56,440 --> 00:31:00,520
Speaker 3: the things that you hear sometimes is people talk about

441
00:31:00,560 --> 00:31:04,720
Speaker 3: the need for China to boost domestic consumption, so, you know,

442
00:31:04,840 --> 00:31:07,280
Speaker 3: rather than export all the goods that it makes to

443
00:31:07,320 --> 00:31:09,920
Speaker 3: the US, maybe it could sell more of those into

444
00:31:09,960 --> 00:31:12,920
Speaker 3: the country and that could aid with development and all

445
00:31:12,960 --> 00:31:16,560
Speaker 3: of that. And then I have to say, we're recording

446
00:31:16,600 --> 00:31:20,520
Speaker 3: this right before the Third Plenum, which I think is

447
00:31:20,520 --> 00:31:23,719
Speaker 3: scheduled to take place from July fifteenth to eighteenth, and

448
00:31:23,720 --> 00:31:27,400
Speaker 3: this is the big political event on the CCP calendar.

449
00:31:27,440 --> 00:31:30,280
Speaker 3: It's held every five years, and one would expect to

450
00:31:30,360 --> 00:31:34,200
Speaker 3: get a better sense of the economic direction that the

451
00:31:34,440 --> 00:31:37,920
Speaker 3: party wants to take China from this event. And in

452
00:31:37,960 --> 00:31:40,320
Speaker 3: the run up to the Planum, one thing we keep

453
00:31:40,360 --> 00:31:45,479
Speaker 3: hearing is Chinese officials say over and over again that

454
00:31:45,680 --> 00:31:49,120
Speaker 3: they're focused on export led growth and they want to

455
00:31:49,200 --> 00:31:54,600
Speaker 3: boost manufacturing, and they're very committed to the export sector.

456
00:31:54,640 --> 00:31:57,680
Speaker 3: And I guess my question is why, because it seems

457
00:31:57,760 --> 00:32:00,440
Speaker 3: like there's maybe not a consensus, but there is strong

458
00:32:00,520 --> 00:32:06,440
Speaker 3: feeling ex China that, you know, Chinese exports are problematic

459
00:32:06,480 --> 00:32:09,440
Speaker 3: in various ways. There are European countries that are actively

460
00:32:09,560 --> 00:32:13,680
Speaker 3: trying to get away from things like Chinese electric vehicles

461
00:32:13,760 --> 00:32:17,160
Speaker 3: and stuff like that. Why does China remain committed to

462
00:32:17,280 --> 00:32:19,520
Speaker 3: manufacturing as a source of growth.

463
00:32:20,080 --> 00:32:24,680
Speaker 4: The short answer to your question is they're good at it.

464
00:32:24,680 --> 00:32:30,960
Speaker 4: It's part of their central planning legacy to support strategically

465
00:32:31,760 --> 00:32:38,520
Speaker 4: and with financial resources, manufacturing led growth on the supply

466
00:32:38,760 --> 00:32:44,400
Speaker 4: side of their economy. They're bad at being able to

467
00:32:44,480 --> 00:32:49,960
Speaker 4: stimulate internal private consumption. The only demand they're good at

468
00:32:49,960 --> 00:32:54,720
Speaker 4: stimulating is, you know, the demand for new investment and

469
00:32:54,840 --> 00:33:02,479
Speaker 4: infrastructure and the building the manufacturing capacity underpins their export machine.

470
00:33:03,080 --> 00:33:08,000
Speaker 4: I have given I can't even count how many lectures

471
00:33:08,560 --> 00:33:13,640
Speaker 4: I've given inside of China since the year in two

472
00:33:13,680 --> 00:33:19,120
Speaker 4: thousand and seven on the imperatives of consumer led rebouncing.

473
00:33:19,760 --> 00:33:24,480
Speaker 4: I've given lectures at universities, I've given lectures to the government,

474
00:33:25,240 --> 00:33:28,680
Speaker 4: to senior leaders. I gave a series of them in

475
00:33:28,760 --> 00:33:32,000
Speaker 4: a last month again, and you talk about the third Planum,

476
00:33:32,040 --> 00:33:35,200
Speaker 4: which starts in a few days. You know, it is

477
00:33:35,280 --> 00:33:39,480
Speaker 4: my favorite item on the agenda that I would hope

478
00:33:40,080 --> 00:33:42,640
Speaker 4: they would embrace. But I'm convinced they're not going to

479
00:33:42,680 --> 00:33:45,640
Speaker 4: do it because you know, these third plans, and I've

480
00:33:45,680 --> 00:33:51,000
Speaker 4: studied them back to nineteen seventy eight, these third planems

481
00:33:51,040 --> 00:33:56,880
Speaker 4: are more about ideology and governance than they are about

482
00:33:57,040 --> 00:34:02,400
Speaker 4: really coming up with creative new policies to address thorny

483
00:34:02,440 --> 00:34:08,920
Speaker 4: problems like consumption or you know, industrial policy or productivity

484
00:34:09,200 --> 00:34:12,320
Speaker 4: or the like. So I understand the fact that everybody

485
00:34:12,400 --> 00:34:17,160
Speaker 4: is waiting for, you know, a clear signal that China

486
00:34:17,320 --> 00:34:21,279
Speaker 4: is going to move the needle on consumer demand. You know,

487
00:34:21,320 --> 00:34:24,600
Speaker 4: you're talking to somebody who's been arguing that for a

488
00:34:24,880 --> 00:34:26,040
Speaker 4: long long time.

489
00:34:26,520 --> 00:34:27,560
Speaker 5: I just don't see.

490
00:34:27,400 --> 00:34:31,720
Speaker 4: You're going to get it at this upcoming third pluint.

491
00:34:32,200 --> 00:34:34,000
Speaker 2: I want to actually just go back to one thing

492
00:34:34,160 --> 00:34:36,400
Speaker 2: you said earlier, which is that if we are serious

493
00:34:36,480 --> 00:34:41,040
Speaker 2: as a country about building up more strategic capacity in

494
00:34:41,120 --> 00:34:44,560
Speaker 2: various industries like cars or chips or whatever else, that

495
00:34:44,719 --> 00:34:47,239
Speaker 2: ultimately tariffs are not really the way to do it.

496
00:34:47,280 --> 00:34:50,200
Speaker 2: That we'd have to build up our domestic savings grow

497
00:34:50,320 --> 00:34:53,880
Speaker 2: less or buy less from abroad, or have less demand

498
00:34:54,080 --> 00:34:57,040
Speaker 2: for goods from abroad. We've done some things in the

499
00:34:57,120 --> 00:35:01,520
Speaker 2: US to boost domestic capacity, the Chipsack Inflation Reduction Act.

500
00:35:01,719 --> 00:35:06,360
Speaker 2: What actually moves the dial from a increasing domestic savings standpoint?

501
00:35:06,400 --> 00:35:08,240
Speaker 2: What policy allows that to happen?

502
00:35:08,560 --> 00:35:11,040
Speaker 4: No, the most important thing, Joe, is just to reduce

503
00:35:11,040 --> 00:35:14,120
Speaker 4: our budget deficits. And of course we're going exactly the

504
00:35:14,160 --> 00:35:19,400
Speaker 4: wrong way. Trump and Biden alike have done more damage

505
00:35:19,520 --> 00:35:24,359
Speaker 4: to the long term budget deficit and federal debt trajectory

506
00:35:24,400 --> 00:35:28,279
Speaker 4: than all of our previous presidents combined. But when you

507
00:35:29,160 --> 00:35:34,480
Speaker 4: boost domestic savings by cutting your budget deficit, by definition,

508
00:35:34,560 --> 00:35:39,000
Speaker 4: you are less reliant on surplus savings from abroad and

509
00:35:39,120 --> 00:35:41,799
Speaker 4: on the trade deficits. You need to give you the

510
00:35:41,880 --> 00:35:47,400
Speaker 4: capital that provides the access to that surplus savings from abroad.

511
00:35:47,680 --> 00:35:51,840
Speaker 4: So number one thing to do is make a meaningful

512
00:35:51,920 --> 00:35:56,440
Speaker 4: progress on the budget deficit, and do it sooner rather

513
00:35:56,520 --> 00:36:01,720
Speaker 4: or later, and use the proceeds to invest at home

514
00:36:02,000 --> 00:36:08,560
Speaker 4: in research and development and in building domestic infrastructure. We've got,

515
00:36:09,160 --> 00:36:13,160
Speaker 4: you know, a bipartisan infrastructure bill that was enacted by

516
00:36:13,200 --> 00:36:16,480
Speaker 4: the Biden administration that's taken a step in that direction,

517
00:36:16,719 --> 00:36:19,799
Speaker 4: but we need a lot more in the way of

518
00:36:19,920 --> 00:36:24,360
Speaker 4: modernized infrastructure than that bill is going to provide. And finally,

519
00:36:24,880 --> 00:36:29,120
Speaker 4: you know, use the windfall of boosting domestic saving to

520
00:36:29,280 --> 00:36:34,040
Speaker 4: invest in human capital, which we sorely need given the

521
00:36:34,080 --> 00:36:39,360
Speaker 4: status of our secondary and in some cases educational system.

522
00:36:39,480 --> 00:36:43,400
Speaker 4: So there's a lot that we can do, but politically

523
00:36:43,440 --> 00:36:48,919
Speaker 4: it's not attractive and not palatable to a short term

524
00:36:49,000 --> 00:36:51,080
Speaker 4: focused American politicians.

525
00:36:52,320 --> 00:36:56,920
Speaker 3: Stephen, you wrote recently what we in the journalism business

526
00:36:57,000 --> 00:37:00,440
Speaker 3: might call a punchy column in the Financial Time Times

527
00:37:00,520 --> 00:37:04,160
Speaker 3: with the headline it pains me to say Hong Kong

528
00:37:04,480 --> 00:37:08,879
Speaker 3: is over and this created quite a stir within Hong

529
00:37:08,960 --> 00:37:11,279
Speaker 3: Kong and maybe even beyond. Can you talk to us

530
00:37:11,320 --> 00:37:15,840
Speaker 3: a little bit about what your recent interactions with Chinese

531
00:37:15,880 --> 00:37:19,440
Speaker 3: officials and at various events in China have actually been, like.

532
00:37:20,239 --> 00:37:21,920
Speaker 5: Well, they've been different, Tracy.

533
00:37:22,040 --> 00:37:26,080
Speaker 4: I mean, I'm historically known as a good guy in China,

534
00:37:26,280 --> 00:37:30,120
Speaker 4: and you know, a member of the in crowd in

535
00:37:30,760 --> 00:37:32,719
Speaker 4: Hong Kong. I lived in Hong Kong for a number

536
00:37:32,719 --> 00:37:35,879
Speaker 4: of years when I was the chairman of Morgan Stanley Asia.

537
00:37:35,920 --> 00:37:36,760
Speaker 5: I love the city.

538
00:37:38,000 --> 00:37:41,799
Speaker 4: And you know right now, I'm I won't say I'm

539
00:37:41,880 --> 00:37:44,880
Speaker 4: public enemy number one, but I'm on their you know,

540
00:37:44,920 --> 00:37:50,359
Speaker 4: their top ten lists of sort of despicable commentators. What

541
00:37:50,520 --> 00:37:56,279
Speaker 4: I wrote in the FT in February is that you know,

542
00:37:56,320 --> 00:38:00,279
Speaker 4: the Hong Kong that we've known for a years, that

543
00:38:01,239 --> 00:38:08,320
Speaker 4: and loved and admired, is no longer a sustainable way

544
00:38:09,840 --> 00:38:14,840
Speaker 4: to view this city state going forward. And I cited

545
00:38:14,880 --> 00:38:19,080
Speaker 4: three reasons for that. One, the Hong Kong economy is

546
00:38:19,200 --> 00:38:23,080
Speaker 4: tied very tightly to the ups and downs of the

547
00:38:23,160 --> 00:38:27,160
Speaker 4: Chinese economy. China's in a slowdown for reasons we've talked

548
00:38:27,160 --> 00:38:32,240
Speaker 4: about earlier on this podcast, and so is Hong Kong.

549
00:38:32,920 --> 00:38:36,440
Speaker 4: And the slowing in both economies over the past dozen

550
00:38:36,600 --> 00:38:41,960
Speaker 4: years has been identical to the tenth of a percentage point.

551
00:38:42,719 --> 00:38:45,880
Speaker 4: And so if you don't have a rebound in the

552
00:38:46,000 --> 00:38:50,080
Speaker 4: Chinese economy, you're not going to get one in Hong Kong. Secondly,

553
00:38:50,760 --> 00:38:54,279
Speaker 4: the US China conflict, Hong Kong is caught right in

554
00:38:54,280 --> 00:38:58,520
Speaker 4: the crossfire. America is putting pressure on its trading partners

555
00:38:58,560 --> 00:39:03,120
Speaker 4: to embrace the friends shoring, and that diverts trade away

556
00:39:03,200 --> 00:39:06,960
Speaker 4: from China and Hong Kong and Hong Kong's a very

557
00:39:07,040 --> 00:39:12,640
Speaker 4: trade dependent city state. And thirdly politics, I mean, you know,

558
00:39:12,680 --> 00:39:17,760
Speaker 4: there are massive demonstrations in Hong Kong in late twenty nineteen.

559
00:39:18,360 --> 00:39:22,040
Speaker 4: Beijing imposed the National Security Law on Hong Kong in

560
00:39:22,160 --> 00:39:27,359
Speaker 4: early twenty twenty, and Hong Kong followed suit with its

561
00:39:27,520 --> 00:39:31,760
Speaker 4: own National Security law a few months ago, in March

562
00:39:31,800 --> 00:39:36,160
Speaker 4: of twenty twenty four, the so called Article twenty three.

563
00:39:36,800 --> 00:39:42,319
Speaker 4: And so the political environment is really very chilling in

564
00:39:42,400 --> 00:39:47,360
Speaker 4: Hong Kong right now, and the idea that this is

565
00:39:47,400 --> 00:39:54,239
Speaker 4: an autonomous city state that has been so resilient in

566
00:39:54,280 --> 00:39:57,360
Speaker 4: the past, I just don't think that's going to happen

567
00:39:57,400 --> 00:40:01,399
Speaker 4: again this time. And I worry in particular about the

568
00:40:01,440 --> 00:40:08,080
Speaker 4: economic linkages, but also the erosion of the rule of law. Recently,

569
00:40:08,880 --> 00:40:14,400
Speaker 4: one of Hong Kong's senior justices from the UK the

570
00:40:14,440 --> 00:40:17,800
Speaker 4: court system, the Final Appeals Court, which is the highest court,

571
00:40:18,320 --> 00:40:22,120
Speaker 4: has a unique system of also having foreign and domestic judges.

572
00:40:22,840 --> 00:40:26,120
Speaker 4: One of them resigned, a gentleman by the name of

573
00:40:26,200 --> 00:40:31,160
Speaker 4: Jonathan Sumption, and he wrote an article on the ft

574
00:40:31,320 --> 00:40:36,680
Speaker 4: in jerman talking about the brave dangers to the rule.

575
00:40:36,480 --> 00:40:38,920
Speaker 5: Of law in Hong Kong.

576
00:40:39,719 --> 00:40:43,759
Speaker 4: And was warning of a new strain of what he

577
00:40:43,840 --> 00:40:49,360
Speaker 4: called judicial patriotism. That doesn't sound like to me a

578
00:40:49,480 --> 00:40:54,280
Speaker 4: rule of law that is reflective of the autonomous values

579
00:40:54,320 --> 00:40:56,879
Speaker 4: of Hong Kong. So look, I've talked about these things.

580
00:40:56,920 --> 00:40:59,880
Speaker 4: They talked about them in China. They were so uncomfortable

581
00:41:00,120 --> 00:41:04,320
Speaker 4: refused to let me speak at this year's China Development Forum.

582
00:41:05,160 --> 00:41:09,440
Speaker 4: I gave an address on the same topic more recently

583
00:41:10,160 --> 00:41:15,040
Speaker 4: to the Foreign Correspondence Club in Hong Kong, and they

584
00:41:15,080 --> 00:41:18,480
Speaker 4: sort of chased me out of town. The politicians unleashed

585
00:41:18,600 --> 00:41:22,840
Speaker 4: almost everything they can in terms of at hominem attacks

586
00:41:23,520 --> 00:41:27,359
Speaker 4: on me. And you know, I'm looking forward to going back,

587
00:41:27,480 --> 00:41:31,560
Speaker 4: provided I can get guarantees of safe travel in both

588
00:41:31,600 --> 00:41:33,040
Speaker 4: directions on my next trip.

589
00:41:33,800 --> 00:41:34,760
Speaker 3: Do you want to go back?

590
00:41:35,200 --> 00:41:35,439
Speaker 5: Yeah?

591
00:41:35,600 --> 00:41:39,880
Speaker 4: No. I love Hong Kong, and I relished the opportunity

592
00:41:40,320 --> 00:41:46,360
Speaker 4: to engage in constructive criticism and free and open debate,

593
00:41:47,280 --> 00:41:49,160
Speaker 4: and I was actually able to do that.

594
00:41:50,040 --> 00:41:52,239
Speaker 5: A few weeks ago. I gave a.

595
00:41:52,000 --> 00:41:55,760
Speaker 4: Talk at the Agency Society, had a number of private meetings,

596
00:41:55,800 --> 00:41:58,880
Speaker 4: and then I had this very public speech at the

597
00:41:58,920 --> 00:42:03,160
Speaker 4: Foreign Correspondence It caused a lot of controversy, and I'm

598
00:42:03,160 --> 00:42:07,000
Speaker 4: sort of borrowing a page from the script of John

599
00:42:07,120 --> 00:42:08,439
Speaker 4: Lewis trying to make some.

600
00:42:08,360 --> 00:42:10,920
Speaker 2: Good trouble Stevid.

601
00:42:11,480 --> 00:42:14,319
Speaker 3: If I could ask just one more question so you

602
00:42:14,360 --> 00:42:18,640
Speaker 3: know again you are obviously an expert in the China economy.

603
00:42:18,680 --> 00:42:20,440
Speaker 3: You've been studying it for a long time. I think

604
00:42:20,480 --> 00:42:24,080
Speaker 3: you talked about studying the Planums since the nineteen seventies,

605
00:42:24,600 --> 00:42:29,520
Speaker 3: which is an extraordinary breadth of career. Could you talk

606
00:42:29,560 --> 00:42:33,320
Speaker 3: about what's been the most surprising to you over the

607
00:42:33,400 --> 00:42:37,000
Speaker 3: years in terms of China's economic policy. Is there one

608
00:42:37,000 --> 00:42:39,799
Speaker 3: thing that sticks out to you that has come as

609
00:42:40,000 --> 00:42:40,480
Speaker 3: a shock?

610
00:42:41,280 --> 00:42:44,560
Speaker 4: Yeah, I think fair question, Tracy. I mean I go

611
00:42:44,719 --> 00:42:51,040
Speaker 4: back to the Third Planum of two thy thirteen. She

612
00:42:51,239 --> 00:42:53,960
Speaker 4: and Payn had been in office for one year. Most

613
00:42:53,960 --> 00:42:57,200
Speaker 4: of us, myself included, thought he was going to be

614
00:42:57,360 --> 00:42:59,960
Speaker 4: cut out of the same cloth of his father, who

615
00:43:00,160 --> 00:43:04,200
Speaker 4: was a leading reformer in the eighties and nineties in

616
00:43:04,520 --> 00:43:10,680
Speaker 4: Goandong Province, and Sheijinping had the opportunity in the third

617
00:43:10,840 --> 00:43:18,040
Speaker 4: Plenum of November of twenty thirteen to demonstrate his commitment

618
00:43:18,719 --> 00:43:22,080
Speaker 4: to getting on with the reforms, reforms which it stalled

619
00:43:22,080 --> 00:43:28,040
Speaker 4: out under his predecessor, Ahujin Tao. And you know China

620
00:43:28,080 --> 00:43:31,239
Speaker 4: went into this three day meeting back in November of

621
00:43:31,280 --> 00:43:37,440
Speaker 4: twenty thirteen. The meetings concluded with a quote decision document

622
00:43:38,320 --> 00:43:43,359
Speaker 4: that listed over three hundred individual reforms, and we were

623
00:43:43,440 --> 00:43:51,160
Speaker 4: convinced that China was on a spectacular path of renewed

624
00:43:51,280 --> 00:43:55,840
Speaker 4: reform and opening up market based economic activity.

625
00:43:56,760 --> 00:43:58,960
Speaker 5: And it never happened, and.

626
00:43:59,600 --> 00:44:04,880
Speaker 4: The appointment of Ahijianping's third Plenteum of twenty thirteen.

627
00:44:05,280 --> 00:44:08,440
Speaker 5: Probably you know, my greatest.

628
00:44:09,000 --> 00:44:15,800
Speaker 4: Surprise and disconcerting development. The reforms that we were hoping

629
00:44:15,920 --> 00:44:19,600
Speaker 4: to take China to the next place as a market

630
00:44:19,719 --> 00:44:24,239
Speaker 4: based system that we in the West would be more

631
00:44:24,320 --> 00:44:30,200
Speaker 4: comfortable with never materialized. The initially focused on an anti

632
00:44:30,320 --> 00:44:36,040
Speaker 4: corruption campaign, which then took on a far greater focus

633
00:44:36,160 --> 00:44:44,040
Speaker 4: on control and a shift to a more backward looking ideology,

634
00:44:44,280 --> 00:44:51,360
Speaker 4: emphasizing sort of a leader centric model of a Chinese

635
00:44:51,440 --> 00:44:56,120
Speaker 4: governance which has deep roots in the history of China.

636
00:44:56,239 --> 00:45:00,279
Speaker 4: A couple of years later, we started hearing nothing but

637
00:45:01,520 --> 00:45:07,560
Speaker 4: Hijin Ping fought as a general concept guiding this new

638
00:45:07,600 --> 00:45:14,640
Speaker 4: ideology constant and continual continued reference. Ping is a core leader.

639
00:45:15,239 --> 00:45:20,680
Speaker 4: The consensus leadership model, which had been carefully assembled by dungshaping,

640
00:45:21,560 --> 00:45:25,560
Speaker 4: which had a regular plan of succession after two to

641
00:45:25,719 --> 00:45:30,680
Speaker 4: five year leadership plans, was eliminated. Chi Jinping is now

642
00:45:30,719 --> 00:45:36,239
Speaker 4: in his third five year leadership model. So the big

643
00:45:36,280 --> 00:45:38,440
Speaker 4: surprise of the big shock is just the one to

644
00:45:38,520 --> 00:45:44,200
Speaker 4: eighty that's happened for China under the fifth generation leader

645
00:45:44,960 --> 00:45:45,680
Speaker 4: Shijin Ping.

646
00:45:46,480 --> 00:45:49,839
Speaker 2: Stephen Roach, such a pleasure to finally chat with you

647
00:45:50,080 --> 00:45:52,440
Speaker 2: and to hear your perspective. Thank you so much for

648
00:45:52,719 --> 00:45:53,640
Speaker 2: coming on the podcast.

649
00:45:53,640 --> 00:45:56,200
Speaker 4: That was fantastic, My pleasure, great to talk to you,

650
00:45:56,280 --> 00:45:57,680
Speaker 4: and thank you for your great question.

651
00:46:10,960 --> 00:46:14,280
Speaker 2: Tracy. I really enjoyed that conversation, and I guess there

652
00:46:14,120 --> 00:46:17,319
Speaker 2: were big picture two things that sort of like struck me.

653
00:46:17,480 --> 00:46:19,960
Speaker 2: Is like, a, you don't get to talk to a

654
00:46:19,960 --> 00:46:23,480
Speaker 2: lot of people who have really studied China's economy.

655
00:46:23,360 --> 00:46:23,759
Speaker 4: For a time.

656
00:46:23,800 --> 00:46:26,359
Speaker 3: I know when Stephen was like, I've been studying plan

657
00:46:26,440 --> 00:46:29,279
Speaker 3: him since what was it, nineteen seventy eight, seventy nine,

658
00:46:29,400 --> 00:46:32,680
Speaker 3: that was, yeah, those are credentials totally.

659
00:46:32,719 --> 00:46:35,440
Speaker 2: And then the other thing that you don't get very

660
00:46:35,520 --> 00:46:39,600
Speaker 2: much is people who are critical of China in some ways,

661
00:46:39,640 --> 00:46:41,759
Speaker 2: which Steven is and you particularly talked about it in

662
00:46:41,800 --> 00:46:44,800
Speaker 2: the last answer with the turn, he identified under a

663
00:46:44,840 --> 00:46:48,520
Speaker 2: shushin ping, but who also think it's a mistake for

664
00:46:48,600 --> 00:46:51,960
Speaker 2: the US to raise tensions, right, because typically those two

665
00:46:52,040 --> 00:46:56,440
Speaker 2: views frequently go hand in hand. You identify concerning aspects

666
00:46:56,480 --> 00:46:59,720
Speaker 2: of the current leadership, and you say, therefore, the United

667
00:46:59,760 --> 00:47:02,879
Speaker 2: States needs to ratchet up tensions or ratchet up trade

668
00:47:02,880 --> 00:47:04,839
Speaker 2: restrictions or military restrictions, etc.

669
00:47:05,480 --> 00:47:06,200
Speaker 3: And so it's.

670
00:47:06,200 --> 00:47:09,920
Speaker 2: Refreshing to hear someone who identifies some of those concerns

671
00:47:10,040 --> 00:47:13,400
Speaker 2: but also doesn't think that the current approach is productive.

672
00:47:13,680 --> 00:47:17,799
Speaker 3: There's that old journalism maxim that if one side is

673
00:47:17,880 --> 00:47:19,799
Speaker 3: mad at you and the other side is happy, you

674
00:47:19,880 --> 00:47:22,360
Speaker 3: probably haven't done a good job. But if everyone is

675
00:47:22,440 --> 00:47:25,680
Speaker 3: mad at you, then you're probably going in the right direction.

676
00:47:26,200 --> 00:47:26,439
Speaker 5: Yeah.

677
00:47:26,480 --> 00:47:29,000
Speaker 3: I found that really interesting. I mean, I will say,

678
00:47:29,880 --> 00:47:36,359
Speaker 3: in hindsight, the trade tensions with Japan seem kind of outrageous,

679
00:47:36,600 --> 00:47:39,279
Speaker 3: and it is funny looking at some of the like

680
00:47:39,800 --> 00:47:44,040
Speaker 3: old nineteen eighties movies, reading some old you know, pop

681
00:47:44,040 --> 00:47:47,279
Speaker 3: boilers from the eighties and nineties where the characters are

682
00:47:47,360 --> 00:47:51,239
Speaker 3: Japanese businessmen who are going to assassinate the US economy,

683
00:47:51,320 --> 00:47:56,120
Speaker 3: it does seem ridiculous. I do think the military rivalry

684
00:47:56,360 --> 00:47:59,960
Speaker 3: is probably a key difference between what's happening in China

685
00:48:00,120 --> 00:48:02,560
Speaker 3: and Japan right now. I do think that you can't

686
00:48:02,719 --> 00:48:06,399
Speaker 3: entirely dismiss the experience of the pandemic, where we did

687
00:48:06,440 --> 00:48:10,759
Speaker 3: see certain important Chinese exports suddenly cut off from the

688
00:48:10,880 --> 00:48:13,400
Speaker 3: US economy, and so there is sort of a natural

689
00:48:13,440 --> 00:48:15,600
Speaker 3: response there to say, well, wait a second, maybe we

690
00:48:15,680 --> 00:48:18,480
Speaker 3: do want to build up some domestic capacity and some

691
00:48:18,520 --> 00:48:23,640
Speaker 3: resilience in key things like semiconductors. I get that, But

692
00:48:24,320 --> 00:48:29,919
Speaker 3: it is also true that America benefits enormously from Chinese exports. Yeah,

693
00:48:30,280 --> 00:48:34,640
Speaker 3: we all like having access to cheap consumer goods at

694
00:48:34,680 --> 00:48:38,440
Speaker 3: a time when green transition seems to be very important.

695
00:48:38,520 --> 00:48:43,120
Speaker 3: I imagine we want access to cheap and bountiful solar panels,

696
00:48:43,160 --> 00:48:46,520
Speaker 3: many of which come from China. So yeah, I can

697
00:48:46,560 --> 00:48:48,800
Speaker 3: see where Steven's coming from totally.

698
00:48:48,840 --> 00:48:51,520
Speaker 2: It also is just interesting, and again think about some

699
00:48:51,560 --> 00:48:55,400
Speaker 2: of our conversations with Richard Ku, the degree to which, okay,

700
00:48:55,440 --> 00:49:00,280
Speaker 2: because everybody saw how the Japan story played out, almost

701
00:49:00,320 --> 00:49:03,000
Speaker 2: certainly not going to play out the same way, and

702
00:49:03,080 --> 00:49:07,160
Speaker 2: as Steven mentioned, perhaps Japan made a pretty fatal mistake

703
00:49:07,360 --> 00:49:11,600
Speaker 2: when it agreed to limit exports and to agreed to

704
00:49:11,719 --> 00:49:15,839
Speaker 2: build more toyotas and so forth on American soil, and

705
00:49:15,880 --> 00:49:19,440
Speaker 2: then it had its bust. And of course, so obviously

706
00:49:19,560 --> 00:49:22,040
Speaker 2: Chinese policymakers are going to study that, and they're going

707
00:49:22,080 --> 00:49:25,920
Speaker 2: to study the sort of unilateral dismantling of the Soviet Union,

708
00:49:25,960 --> 00:49:29,000
Speaker 2: and they're going to study the property bubble that collapse.

709
00:49:29,080 --> 00:49:31,640
Speaker 2: So it's almost like there is no way it's going

710
00:49:31,680 --> 00:49:33,880
Speaker 2: to play out the same way this time, just because

711
00:49:33,920 --> 00:49:36,320
Speaker 2: of so much observation of history.

712
00:49:36,480 --> 00:49:39,840
Speaker 3: Well, and also going back to what's been said before

713
00:49:39,920 --> 00:49:42,520
Speaker 3: the plan, it does seem like Chinese policy makers are

714
00:49:42,560 --> 00:49:46,000
Speaker 3: so far committed to that export led growth, right. We

715
00:49:46,040 --> 00:49:49,719
Speaker 3: haven't seen any rhetoric about like, oh, we're going to

716
00:49:49,800 --> 00:49:52,680
Speaker 3: start transforming our economy and that sort of thing. It's

717
00:49:52,680 --> 00:49:56,080
Speaker 3: all very much focused on doing what they have been doing,

718
00:49:56,280 --> 00:50:01,160
Speaker 3: just maybe in a better way. So that's interesting. Shall

719
00:50:01,160 --> 00:50:01,640
Speaker 3: we leave it there.

720
00:50:01,760 --> 00:50:02,480
Speaker 2: Let's leave it there.

721
00:50:02,680 --> 00:50:05,560
Speaker 3: This has been another episode of the Audlots podcast. I'm

722
00:50:05,600 --> 00:50:08,480
Speaker 3: Tracy Alloway. You can follow me at Tracy Alloway and.

723
00:50:08,440 --> 00:50:11,040
Speaker 2: I'm Joe Wisenthal. You can follow me at the Stalwart.

724
00:50:11,320 --> 00:50:15,160
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725
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726
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727
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730
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731
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732
00:50:37,440 --> 00:50:40,359
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733
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734
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736
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740
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