WEBVTT - The New China Playbook

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Tim

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<v Speaker 1>Stenebek on Bloomberg Radio.

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<v Speaker 2>You know, every day we get a bunch of headlines

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<v Speaker 2>out of China, and the most recent or at least

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<v Speaker 2>over night, China's economic recovery losing some momentum after we

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<v Speaker 2>saw an initial burst and consumer and business activity early

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<v Speaker 2>in the year. So it's been prompting some calls from

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<v Speaker 2>our policy stimulus to bolster growth. But I do feel

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<v Speaker 2>like Matt, on any given day, we're either seeing the

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<v Speaker 2>Chinese government get more involved in this sector, or there's

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<v Speaker 2>concerns again about transparency or just figuring out China's role

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<v Speaker 2>going forward.

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<v Speaker 1>Yeah, I mean, I also think the next chapter, investors

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<v Speaker 1>are hungry for more information on China, right. Investors here,

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<v Speaker 1>I think would like to know as much as possible

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<v Speaker 1>and would like to get more insight on and understanding

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<v Speaker 1>on how China works.

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<v Speaker 2>Right, And I think we thought we had the playbook,

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<v Speaker 2>and there's actually our next guest has written a book

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<v Speaker 2>that's called The New China Playbook. Beyond Socialism and Capitalism.

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<v Speaker 2>Kayu Jin is the author. She's also professor of economics

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<v Speaker 2>at the London School of Economics. She joins Matt and

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<v Speaker 2>me here in studio. Kay, you really good to have

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<v Speaker 2>you here with us. We only have six minutes. I

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<v Speaker 2>wish we had like twenty because I love this subject.

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<v Speaker 2>But our Adam Minta wrote a story about what the

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<v Speaker 2>West gets wrong about China? What do we get wrong?

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<v Speaker 2>In our conversations are questions and thinking about what China

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<v Speaker 2>is up to right now?

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<v Speaker 3>Well, first of all, that there's only one model that

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<v Speaker 3>can work, Western style capitalism, where China.

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<v Speaker 2>Has that we believe that that's the only thing that's

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<v Speaker 2>the work.

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<v Speaker 3>And that China has a centralized approach domined by an

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<v Speaker 3>almighty state. It's not at all like that. It's the

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<v Speaker 3>decentralized economic mechanisms, the Mayor economy which I wrote about,

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<v Speaker 3>that has galvanized creativity, innovation, pushing for reforms, and even

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<v Speaker 3>protecting the environment.

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<v Speaker 1>So how I mean, aside from reading your book, which

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<v Speaker 1>I'm sure is a great step, right, how can investors

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<v Speaker 1>better understand the Chinese economy how it works when we're

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<v Speaker 1>constantly looking at headlines that are rife with miss in

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<v Speaker 1>I don't know if misinformation is too strong, but definitely

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<v Speaker 1>they're biased.

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<v Speaker 3>Right, It's really important to separate hype from reality and

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<v Speaker 3>the macro versus micro And even if the great leaders

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<v Speaker 3>of any country, US and China say a lot of things,

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<v Speaker 3>you might want not to read too much into the

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<v Speaker 3>message and see what's actually going on on the ground.

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<v Speaker 3>People who visit China will have a better view. People

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<v Speaker 3>who look at data, which my book does and systematic

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<v Speaker 3>evidence will understand better. But right now there's a coexistence

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<v Speaker 3>of irreconcilable things that the West beliefs that can actually

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<v Speaker 3>coexist at the same time in China.

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<v Speaker 1>But getting on the ground is kind of what I

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<v Speaker 1>was where I was going. Do you tell your students

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<v Speaker 1>go to China? I mean, you can read my book right,

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<v Speaker 1>and you can study the country all you like, but

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<v Speaker 1>if you don't go there, you're never going to really

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<v Speaker 1>understand how this society works.

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<v Speaker 3>If people can go there, they'll form a much more

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<v Speaker 3>positive impression than if they won't. But it's also important

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<v Speaker 3>to suspend this historical lens and this bias that we

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<v Speaker 3>inherently have and look at China in a different perspectives,

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<v Speaker 3>see it for its own, see through a different lens.

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<v Speaker 2>Well, all right, slow down for a second, because what

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<v Speaker 2>I mean, many would say you know, what is it

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<v Speaker 2>in terms of China about human rights and restrictions. That's

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<v Speaker 2>true right in terms of what's at on social media,

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<v Speaker 2>But are you saying and that folks in China they're

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<v Speaker 2>kind of comfortable with that and that protectionism that their

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<v Speaker 2>leaders are giving them.

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<v Speaker 3>There's an implicit contract historically since history between the people

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<v Speaker 3>and the government that there's some level of deference, although

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<v Speaker 3>not blind submission, in exchange for security, government accountability, responsibility,

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<v Speaker 3>and economic delivery. That still holds today. They should talk

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<v Speaker 3>to people on the ground and Chinese people think, ask

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<v Speaker 3>them what they feel about these politicals.

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<v Speaker 2>Everybody, though, help me out here with a younger generation,

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<v Speaker 2>Like there's differently stories about you know, unemployment rate in

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<v Speaker 2>China surging to a record of twenty percent. Tell me

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<v Speaker 2>that there aren't younger Chinese individuals Like this isn't working

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<v Speaker 2>for me.

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<v Speaker 3>The new generation is super important for China's future. It's

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<v Speaker 3>going to shape it, and it's meaning a relationship with

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<v Speaker 3>the world. They're a positive force because look, they like

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<v Speaker 3>to spend and borrow, not to save as much, and

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<v Speaker 3>they're quite open minded and their values converge with the West.

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<v Speaker 3>But today the pressing problem is that education has raised

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<v Speaker 3>ahead of the economy, and many of the highly educated

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<v Speaker 3>are not productively deployed.

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<v Speaker 1>We do see an opaqueness though, right when jack Ma

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<v Speaker 1>disappears or when a Bloomberg journalist is arrested and not

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<v Speaker 1>heard from for a year, that's difficult for us to

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<v Speaker 1>wrap our heads around. Is that something that Chinese people

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<v Speaker 1>grow up understanding? Is that something that Chinese people accept

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<v Speaker 1>and what are we.

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<v Speaker 2>Getting wrong about that? Because that's happening.

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<v Speaker 3>Yeah, that spooks people, That spooks investors and confidence, which

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<v Speaker 3>is what is missing the Chinese economy today. But look,

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<v Speaker 3>you know the old playbook, it was about building factories, industrialization.

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<v Speaker 3>You didn't need that much in.

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<v Speaker 2>Go back to missing journalists or missing Jackma.

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<v Speaker 3>Jackma is called back now he's.

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<v Speaker 2>A year later. But it was really odd, right, and

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<v Speaker 2>here's a very prominent, you know, technology global figure and

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<v Speaker 2>someone that China was proud of in terms of what

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<v Speaker 2>he had built. So how do what did we get

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<v Speaker 2>wrong about that? Or how do you in.

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<v Speaker 3>The in the US capital it can arguably arguably rises

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<v Speaker 3>above politics in China, that can never be the case.

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<v Speaker 3>This is why China is not a capitalist society. Jackma

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<v Speaker 3>uh without going to his exceptional case is now needed

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<v Speaker 3>very much entrepreneurs like him because the economy is needed

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<v Speaker 3>and so important thing to know is that policy can

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<v Speaker 3>swift radically, change dramatically. Never read anything as permanent.

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<v Speaker 1>But are you saying that it's okay for a government

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<v Speaker 1>to just disappear people that makes investors? Does that not

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<v Speaker 1>make you uncomfortable even as a citizen. That would worry

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<v Speaker 1>me as a person.

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<v Speaker 3>It's not It's not okay at all. And the government

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<v Speaker 3>is learning the painful lesson of by by seeing that

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<v Speaker 3>the economy hasn't rebound as quickly, that investors are not

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<v Speaker 3>rushed back to look into China, that private entrepreneurs might

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<v Speaker 3>be holding back. It's all happening today. That's a lesson, ky.

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<v Speaker 2>You what is the global value chain going forward? In

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<v Speaker 2>China's role in that because it's been the manufacturer to

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<v Speaker 2>the world and we were all we all benefited by it, right,

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<v Speaker 2>goods cost very little, But what is you know, their

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<v Speaker 2>value chain going forward?

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<v Speaker 3>China's aspiration is not really to compete become like a US.

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<v Speaker 3>It wants to be a bigger, smarter Germany. That means,

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<v Speaker 3>bolstered by the triangle of AI communications and data. They

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<v Speaker 3>want to think themselves as a technical industrial power, not

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<v Speaker 3>a knowledge financialized economy like the UTH.

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<v Speaker 2>But can they get there with the concerns and kind

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<v Speaker 2>of nervousness that many other worlds feel right now?

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<v Speaker 3>Now you see it comes to China. Is why it's

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<v Speaker 3>so hard to lead China, right, It's so hard to

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<v Speaker 3>if you step from mouse how you're thinking, Oh, this

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<v Speaker 3>environment can never foster innovation. I don't. I don't agree

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<v Speaker 3>necessarily with that because on the ground, the domestic innovation

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<v Speaker 3>system is all encompassing. This is a massive market. Foreign

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<v Speaker 3>companies think that this is the fitness ground to train

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<v Speaker 3>their own their own companies, and there's a close proximity

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<v Speaker 3>proximity between AI autonomous vehicles and chip industries that stimulate demand.

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<v Speaker 3>So I would underestimate China's central advantages in technology.

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<v Speaker 2>Ran out of time.

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<v Speaker 1>Come back, I need more time.

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<v Speaker 2>I'd love to. I wish we had great I wish

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<v Speaker 2>we had more time. So come back and let's continue this.

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<v Speaker 2>I would love it. Ku Jin Professor Economics at LC

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<v Speaker 2>the London School of Economics. Her book is called The

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<v Speaker 2>New China Playbook, Beyond Socialism and Capitalism. It is out

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<v Speaker 2>now this is Bloomberg,