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Speaker 1: You know, in five years we've gone from trade war

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Speaker 1: to tech war to early stages of a new Cold war.

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Speaker 1: That high octane fuel can be easily ignited by a spark, Taiwan,

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Speaker 1: South China, Sea, China's unlimited partnership with Russia, global recession.

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Speaker 1: Any one of those are sparks that when you are

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Speaker 1: embracing increasingly intense false narratives, could lead to an accidental clash. Hello, Stephanomics,

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Speaker 1: here the podcast that brings you a new year in

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Speaker 1: the global economy and a new year's aspiration that we

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Speaker 1: end twenty three in better shape than we've begun it.

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Speaker 1: Maybe I'm sitting on the wrong side of the Atlantic

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Speaker 1: looking at the wrong kind of gray sky. Everything's just

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Speaker 1: feeling a bit grim. But we're going to break out

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Speaker 1: of that gloom now to offer you some fresh insight

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Speaker 1: into the central issue of our time. One. I make

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Speaker 1: no apologies for returning to on a regular basis China's

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Speaker 1: place in the global economy and its relationship with the US.

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Speaker 1: Stephen Roach is a long time contributed to the China debate.

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Speaker 1: He has a new book out, and you just heard

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Speaker 1: a taste of my conversation with him. But before we

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Speaker 1: get to that lofty discussion. Our senior US economic policy editor,

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Speaker 1: Chris Anstey, wants you to look inside the box your

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Speaker 1: new trainers came in. You've probably never given much thought

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Speaker 1: to desiccants. Not many have, But last year, those little

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Speaker 1: packets you find in a box with a new pair

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Speaker 1: of shoes were at the center of an international trade route.

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Speaker 1: So in descad desiccand is m the little packet that

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Speaker 1: is included in products that are shipped, and it's intended

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Speaker 1: to take moisture out of the air. So, for instance,

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Speaker 1: it prevents small build up or humility getting to a

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Speaker 1: point where it can cause damage to the product. That

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Speaker 1: was Bruce Main, president of a small safety consulting firm

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Speaker 1: in an Arbor, Michigan. It turns out that China proposed

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Speaker 1: a new production standard for descants last year that critics

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Speaker 1: like Main say would have created a huge burden on

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Speaker 1: manufacturers around the world. Suddenly, anyone making anything with a

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Speaker 1: desiccant inside would be forced to worry about those little

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Speaker 1: gel packets complying with a new standard. Shoemakers for sure,

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Speaker 1: but also producers of food, electric products, textiles, artware, and

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Speaker 1: leather goods, among others. The battle over this most obscure

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Speaker 1: packaging item illustrates China's growing ambitions not just to dominate manufacturing,

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Speaker 1: but to have a much stronger say in how products

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Speaker 1: are made and traded around the world. Put in another way,

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Speaker 1: the next round in the great global trade war between China,

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Speaker 1: the US, and Europe may be waged by Wangi, government

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Speaker 1: bureaucrats and design engineers over global standards. Here is Emily Taylor,

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Speaker 1: an intellectual property lawyer who now heads Oxford Information Labs,

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Speaker 1: a cyber intelligence consultancy. The Chinese approach which seems very daunting,

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Speaker 1: very organized, long term and patient, and in response, you know,

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Speaker 1: it can feel like we need to up our game

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Speaker 1: in the West that China has understood that in many

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Speaker 1: standards organizations it's a numbers game, is about putting people

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Speaker 1: on planes or sticking people in the zoom room and

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Speaker 1: having lots and lots and lots of submissions. And you know,

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Speaker 1: in response to that, the West really seems to be

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Speaker 1: scrabbling around at times and lacks that coordination. When most

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Speaker 1: people use products and services, they don't give much thought

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Speaker 1: to standards that govern how they're made. You might use

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Speaker 1: the term gold standard or substandard but what are standards?

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Speaker 1: There are scores of different standard setting bodies for everything

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Speaker 1: from pharmaceuticals to electronics. These global standards organizations were developed

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Speaker 1: over the past century and war by company representatives, technical

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Speaker 1: specialists representing big buyers, and civic groups basically insiders that

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Speaker 1: got together and settle on the most efficient, cost effective

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Speaker 1: way to make things. Of course, the whole process has

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Speaker 1: been dominated by the West, with an outside presence of

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Speaker 1: American and European representatives. Now enter China, which unsurprisingly wants

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Speaker 1: a say in setting global standards rather than simply accepting

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Speaker 1: what others have decided. Last year, the Chinese his government

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Speaker 1: put out a game plan for strengthening China's hand in

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Speaker 1: standards setting. It's been dubbed China Standards, which gives a

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Speaker 1: clue of the target date that they are aiming at.

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Speaker 1: Bruce Mayne, the Michigan safety consultant, shared concerns about China's

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Speaker 1: designs on the lowly desiccant. Those of us that were

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Speaker 1: involved said, not certain. It really matters what the desiccant

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Speaker 1: is made of or it just doesn't work. Is it

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Speaker 1: effective in uh doing what it's supposed to do in

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Speaker 1: terms of pulling moisture out of a package or preventing

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Speaker 1: humidity from building up, and the size of the shape.

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Speaker 1: The testing of the desiccating isn't necessarily something that we

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Speaker 1: need a standard on. We certainly don't want to spend time,

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Speaker 1: our time and energy trying to write those kinds of standards,

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Speaker 1: so that's why we did not support it. That Ever,

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Speaker 1: in the end, US representatives helped to kill off that

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Speaker 1: desiccant proposed l but it illustrates concerns for standards to

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Speaker 1: potentially become used as a tool for influence, and it

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Speaker 1: reflects broader worries in places including the US and Europe

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Speaker 1: about China's intentions. Probably the most contentious area of standard

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Speaker 1: setting is the field of technology. Taylor, the intellectual property lawyer,

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Speaker 1: has looked closely at China's rising role in standards development organizations.

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Speaker 1: Last year, she set up a group called the DNS

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Speaker 1: Research Federation to shine a light on standard setting as

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Speaker 1: it applies to the Internet. Among the group's concerns is

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Speaker 1: the way China is trying to push a new set

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Speaker 1: of Internet Protocols or new i P that differs significantly

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Speaker 1: from the open approach that underpinned the original structure of

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Speaker 1: the Web. The fear is it could be a cyber

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Speaker 1: security risk. Although surveillance takes place on the Internet today,

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Speaker 1: absolutely it does. There are many human rights violations, but

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Speaker 1: the Internet was not designed for surveillance. What we see

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Speaker 1: with new i P is a network that is actually

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Speaker 1: designed and optimized for surveillance, whether of a domestic population

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Speaker 1: or through data sharing laws domestically perhaps internationally as well.

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Speaker 1: Some of the tactics deployed by China in standard setting

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Speaker 1: bodies have alarmed many observers, like when Chinese representatives show

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Speaker 1: up in numbers in an effort to boost the chance

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Speaker 1: of Chinese proposals winning adoption. But not everybody is convinced

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Speaker 1: that China is wielding undue influence and standards. After all,

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Speaker 1: Western nations do want China to continue to participate so

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Speaker 1: that global companies don't have to deal with China standards

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Speaker 1: being different from other markets. Al Kanyevsky is a fellow

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Speaker 1: at Stanford Law School with a forthcoming book on standard

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Speaker 1: setting in information and Communication technology. She argues that Western

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Speaker 1: stakeholders are a little bit premature in their dire assessments

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Speaker 1: of China's recent forays into standard setting, given that Western

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Speaker 1: nations still dominate the process. Standardization system that is open,

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Speaker 1: that is consensus base that doesn't exclude stakeholders is the

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Speaker 1: system that we need for the technology to work. So

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Speaker 1: I would be very worried if such initiatives to exclude

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Speaker 1: particular stakeholders bait China BA or hawaigh bet particular European

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Speaker 1: or American companies, if such initiatives would actually make it

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Speaker 1: to standard setting bodies and would be adopted by them.

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Speaker 1: But especially when it comes to technology, there's increased danger

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Speaker 1: of two separate economic spheres developing on one side, the

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Speaker 1: West with its own set of standards, on the other,

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Speaker 1: China and other non democratic regimes. The US and European

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Speaker 1: Union last year set up a new cooperation forum called

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Speaker 1: the treat and Technology Council. One of the items on

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Speaker 1: the agenda, you guessed it coordinating on standards. Nothing dry

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Speaker 1: about this subject, In fact, maybe it needs a des second.

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Speaker 1: I'm Chris Ansty for Bloomberg News. So having had that

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Speaker 1: brilliant micro level example of the way China's role in

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Speaker 1: the world is changing, We're going to go extremely big

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Speaker 1: picture now with Stephen Roach, who will be a familiar

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Speaker 1: figure to anyone listening. Who's taken an interest in the

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Speaker 1: global economy and especially Asia for the past few decades.

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Speaker 1: An economist, former chairman of Morgan Stanley. He is now

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Speaker 1: a senior fellow at the Paul Si China Center at

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Speaker 1: Yale Law School. He's written a lot over the years

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Speaker 1: about the future of the US and China, and that's

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Speaker 1: the subject of his new book, Accidental Conflict, America, China

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Speaker 1: and the Clash of False Narratives. Stephen, very nice to

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Speaker 1: have you on the show and to see you again,

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Speaker 1: if only virtually. We are seeing a lot of books

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Speaker 1: about potential conflict between America and China. But what what's

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Speaker 1: your specific take. In the past five years, Stephanie, We've

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Speaker 1: gone from a trade war to a tech war, to

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Speaker 1: the early stages of a new Cold War, a ominous

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Speaker 1: escalation of conflict that did not have to happen had

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Speaker 1: it not been for the false narratives, and both nations

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Speaker 1: embrace towards the other. So I guess we should digging

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Speaker 1: into that a little bit. How do you see those

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Speaker 1: false narratives developing and and how do they affect their

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Speaker 1: relationship going forward? Do you think Okay, let me let

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Speaker 1: me just answer that question in two parts. One, why

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Speaker 1: do both UM nations have this UM penchant to embrace

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Speaker 1: false narratives? And what are some of these key false

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Speaker 1: narratives UH? My thesis and answering. The first one is

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Speaker 1: that both nations are surprisingly vulnerable UH in terms of

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Speaker 1: their economic prospects as well as there the stature as

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Speaker 1: leaders in the world and the politics at play in

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Speaker 1: both nations. And for example, you know, Joe Biden gets

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Speaker 1: elected UM a couple of years ago, razor thin majority

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Speaker 1: in the Congress but a strong bipartisan anti China view

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Speaker 1: that allowed him no wiggle room to disengage from Trump's

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Speaker 1: China policy. So UH, he on his first day in

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Speaker 1: office repudiated a number of Trump's most unpopular policies, like

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Speaker 1: the border wall construction in Mexico the Muslim travel ban,

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Speaker 1: but he did nothing to change in China because if

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Speaker 1: he had done that, he would have been skewered by

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Speaker 1: his own party, let alone the Republicans. Hi Jinping has

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Speaker 1: a similar political calculus, aspiring for great power status UM.

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Speaker 1: The US is viewed as the greatest impediment to his

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Speaker 1: um UH political objectives of this nationalistic China dream. So

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Speaker 1: both nations have strong motives to blame others for their

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Speaker 1: own vulnerabilities. The second part of the question is what

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Speaker 1: are some of these false narratives. I have eight chapters

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Speaker 1: in the book that detail false narratives, split evenly between

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Speaker 1: both sides of the conflict. The one I'll focus on

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Speaker 1: from the U S side is um we blame China

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Speaker 1: for our trade deficit. Nations have trade deficits because they

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Speaker 1: don't save uh and the US right now has the

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Speaker 1: lowest domestic savings rate of any leading nation in history.

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Speaker 1: And when you don't save and you want to grow,

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Speaker 1: you import surplus savings from abroad, and you run massive

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Speaker 1: current account or balance of payments deficits that drive multilateral

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Speaker 1: deficits with many nations. In the last year, we have

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Speaker 1: full data for the US RAN trade deficits with a

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Speaker 1: hundred and six nations. China was the largest, but by

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Speaker 1: no means the only one. But by blaming China for

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Speaker 1: our trade deficit, just as we blamed UM Japan thirty

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Speaker 1: years ago for very similar reasons, I might add, we

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Speaker 1: are ducking the big issue that we need to address

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Speaker 1: to fix our own vulnerable economy, and that is a

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Speaker 1: shortfall of domestic saving a classic false narrative. The Chinese

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Speaker 1: side is, you know, equally if not even more culpable.

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Speaker 1: The one I'll single out for you is China recognized

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Speaker 1: now nearly twenty years ago that it needed a restructure,

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Speaker 1: rebalance its economy, and shift from an economy that was

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Speaker 1: reliant on exports and investment a one that drew increasingly

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Speaker 1: on consumer demand. They haven't done that. They blame that

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Speaker 1: on America's stated policy to contain China's peaceful rise. Uh.

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Speaker 1: The US does have a containment policy UM that has

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Speaker 1: aimed directly at China, and that's a UM, you know,

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Speaker 1: a key theme in many aspects of my book. But

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Speaker 1: America's efforts to contain China have literally nothing to do

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Speaker 1: with China's own inability to rebalance its economy to be

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Speaker 1: driven more by internal private consumption. China's dropped the ball

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Speaker 1: on this for a number of reasons that I detail

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Speaker 1: on the book. But by fixating on US containment, they're

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Speaker 1: guilty of an egregious false and narrative with respect to

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Speaker 1: the US. I think as an economist, you've you do

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Speaker 1: more in this book. I think that most people to

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Speaker 1: to show the interconnections between that great power rivalry and

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Speaker 1: the macro economic imbalances that opened up between US and

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Speaker 1: China once China's growth took off, and as you've just explained,

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Speaker 1: you end up with this sort of what you call

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Speaker 1: a codependency, with the insufficient savings by the US being

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Speaker 1: being matched by this massive trade deficit and if you like,

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Speaker 1: excess exporting U by by China. And you've just highlighted

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Speaker 1: there in a sense that was what each side has

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Speaker 1: done wrong in failing to kind of get to grips

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Speaker 1: with that. But I'm interested going forward. I mean, there

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Speaker 1: is obviously an element of this which is just about

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Speaker 1: China getting stronger but continuing to be very different from

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Speaker 1: the US in terms of its values and the kind

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Speaker 1: of global order that it wants to participate in, and

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Speaker 1: the US increasingly thinking it should try and thwart that development,

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Speaker 1: having kind of given up on the China becoming a

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Speaker 1: more like the US. So I just wondered, how does

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Speaker 1: that that sort of classic view which says, you know,

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Speaker 1: the US tried was hoping that the China was going

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Speaker 1: to become, you know, like Europe, and it's not like Europe.

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Speaker 1: So now it has to just stop it being a

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Speaker 1: prevent providing a rival economic system for the world. Not

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Speaker 1: so sure that the US wanted to China to be

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Speaker 1: like Europe. I think the US wanted China to be

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Speaker 1: like America. UH. And this is a I think a

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Speaker 1: hopelessly naive expectation that was framed around the time of

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Speaker 1: China's push for w t O membership UM that took

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Speaker 1: over a decade to negotiate. Finally UH culminated UM under

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Speaker 1: President Clinton in late two thousand one h and his

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Speaker 1: argument that he made to the Congress is, UM, you know,

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Speaker 1: if we don't allow China to to join our system,

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Speaker 1: than others are going to benefit from China's extraordinary rise.

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Speaker 1: And by finding China to an American centric trading system

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Speaker 1: under the w t O, UH, it's compliance with those

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Speaker 1: rules would pretty much turn it into a system that

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Speaker 1: mirrored hours that was that was just hopelessly naive. And

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Speaker 1: this is a Washington failure as well as a European failure,

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Speaker 1: and probably a Chinese failure as well. Lies at the

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Speaker 1: heart of this conflict. The notion of coexistence, which is

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Speaker 1: something that UH Henry Kissinger still as he's nearing a

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Speaker 1: hundred years old right now, continues to stress as the

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Speaker 1: ultimate um UH resolution for the U. S. China conflict

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Speaker 1: um needs to be much more open than it has

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Speaker 1: been under this sort of false premise of mirroring one

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Speaker 1: systems values with the other. I was baking at the U. S.

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Speaker 1: Treasury just as that deal was being finalized at the

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Speaker 1: end of end of the nineties, and I guess the

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Speaker 1: debate was had about whether it was realistic um to

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Speaker 1: expect the China to be on anything like that trajectory.

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Speaker 1: I guess the question arises of what's the alternative if

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Speaker 1: you're Donald Trump or indeed some in the Biden administration

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Speaker 1: that was the sort of original mistake was to let

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Speaker 1: China into the World Trade Organization. But I'm not I'm

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Speaker 1: not sure that you're saying that was a mistake. You

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Speaker 1: just think we should have told ourselves a different story

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Speaker 1: about it. I don't think it was a mistake at all,

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Speaker 1: because you know, by engaging China and bringing China into

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Speaker 1: the w t O, that was a powerful driver of

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Speaker 1: of Chinese economic growth at that time and really powered

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Speaker 1: its export led momentum. And from those exports, you know,

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Speaker 1: income constrained American consumers are able to expand their purchasing

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Speaker 1: power over low cost and increasingly high quality Chinese goods. UM.

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Speaker 1: China became the largest purchaser for a long time of

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Speaker 1: the U S treasuries to enable US to fund our

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Speaker 1: budget deficits, and the Chinese market as our America's third

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Speaker 1: largest and most rapidly growing export market over the last

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Speaker 1: twelve or fifteen years. So there were huge benefits that occurred.

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Speaker 1: And I think the mistake we made is that we

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Speaker 1: wanted more. We expected China to transform uh it's system

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Speaker 1: in a way that uh matched not just our economic needs,

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Speaker 1: but are political and social value system. And you know,

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Speaker 1: there there was reason to hope that that was occurring,

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Speaker 1: UM under the sort of dunk shopping model of a

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Speaker 1: market based socialism, where China was certainly taking on an

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Speaker 1: opening up to a lot of Western values. But then

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Speaker 1: along came Shi jin Ping ten years ago who reverse

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Speaker 1: course on virtually all of that counter and we've taken

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Speaker 1: enormous exception to that. Listening to you the way you

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Speaker 1: describe China's motivations and it's different outlook on the world

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Speaker 1: and indeed talk about coexistence, UM. You know, many would

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Speaker 1: say that the title le Ville book sounded a bit

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Speaker 1: odd because it doesn't sound like the conflict is accidental

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Speaker 1: at all. I mean, you have a new rival power

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Speaker 1: in the world which has very different views of kind

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Speaker 1: of basic notions of whether it's press freedom or human rights, democracy,

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Speaker 1: any of these things. I mean, it's sort of inevitable

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Speaker 1: that they will come into conflict with the West broadly speaking,

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Speaker 1: who believe that these values are important? Isn't it? Well,

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Speaker 1: certainly to very powerful nations, you know, one the ruling

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Speaker 1: hedgemon if you want to call it, for lack of

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Speaker 1: a better term, and the other arising superpower, there was

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Speaker 1: always the possibility of of conflict UH and friction. The

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Speaker 1: concept of accidental conflict says that that by embracing false impressions,

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Speaker 1: false narratives of the other, we build on these mistaken

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Speaker 1: views that we harbor their politically expedient for our own purposes,

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Speaker 1: and the false narratives UH collide, they duel with one another,

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Speaker 1: and they have the potential to become the high octane

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Speaker 1: fuel of conflict escalation. And again back to the to

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Speaker 1: the first sentence I I uttered to you today, and

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Speaker 1: that is, you know, in five years, we've gone from

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Speaker 1: trade war to tech war to early stages of a

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Speaker 1: new Cold war, that high octane fuel can be easily

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Speaker 1: ignited by a spark. Taiwan, South China, see China's unlimited

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Speaker 1: partnership with Russia, who is now waging an unconscionable war,

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Speaker 1: America's own vulnerabilities, global recession, which is a distinct possibility

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Speaker 1: this year. Any one of those are sparks that when

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Speaker 1: when you are embracing increasingly intense false narratives, could lead

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Speaker 1: to an accidental clash. I mean, just a few days ago,

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Speaker 1: um I saw a report I'm sure as you did,

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Speaker 1: of a fighter jet over the Chinese fighter jet over

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Speaker 1: the South China. See that came uh extraordinarily close to

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Speaker 1: an American aircraft. Uh. Accidents can happen, and big wars,

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Speaker 1: world wars have been started by accidents in the past,

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Speaker 1: and so I shows that title to express that potential

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Speaker 1: in the context of this conflict. But those are genuine

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Speaker 1: reasons why we might conflict with China, they're not They're

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Speaker 1: not false reasons. China wants to take back Taiwan, which

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Speaker 1: as far as we could see, does not want to

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Speaker 1: be back in as part of China. Um it wants

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Speaker 1: to have an unrivaled supremacy in East Asia, where we

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Speaker 1: have and the US has powerful allies and security relationships.

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Speaker 1: So is that a false narrative to be that China

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Speaker 1: does want to take over these things and we don't

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Speaker 1: want to let them. That seems to be the sort

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Speaker 1: of uncomfortable truth. Those are Those are legitimate areas of

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Speaker 1: dispute one s I believe strongly in and as does

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Speaker 1: the other. I'm not arguing that those are false. But

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Speaker 1: what I'm saying is that the confluent of these false

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Speaker 1: narratives makes dispute resolution over legitimate issues all but impossible.

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Speaker 1: I do end the book, you know, with a prescriptive

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Speaker 1: approach to resolve disputes UH in the context of a

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Speaker 1: conflicted relationship. The current architecture of engagement between these two

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Speaker 1: UH leading superpowers is completely dysfunctional. The nations don't talk

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Speaker 1: to one another. When they do talk, it's you know,

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Speaker 1: it's zoom calls or There was a three hour plus

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Speaker 1: meeting in Bali ahead of a G twenty meeting in

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Speaker 1: November that accomplished nothing. And I make a fairly detailed

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Speaker 1: proposal for a new organization that I call a U

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Speaker 1: S China Secretariat, a permanent organization located in a neutral

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Speaker 1: venue that is empowered to address all aspects of the relationship,

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Speaker 1: from trade and economics to technology, cybersecurity, human rights, health

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Speaker 1: fully staffed by equal complements of Chinese and American professionals

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Speaker 1: working full time seven on all these and other aspects

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Speaker 1: of the relationship. Two frame problems AH provide mutually authored

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Speaker 1: UH policy white paper, sometimes with dissenting views from one

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Speaker 1: from from one side or the other, but stressing a

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Speaker 1: collaborative approach toward dispute resolution rather than the current contentious

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Speaker 1: approach that we have right now. This relationship needs a

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Speaker 1: far more role bust platform for engagement. And this may

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Speaker 1: not be the perfect suggestion, but it sure as heckt

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Speaker 1: beat what we've gotten now. Well, it's interesting that I,

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Speaker 1: you know, we've talked to quite a lot of people

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Speaker 1: about this issue over the months, and they all whatever

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Speaker 1: whatever direction they come from, they all end up with

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Speaker 1: a version of what you're talking about. There's a way

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Speaker 1: of starting to rebuild trust, because that's one of the

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Speaker 1: things that we worry has really gone by the wayside.

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Speaker 1: I had we're going to run out of time, but

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Speaker 1: I had two more questions for you and one of them.

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Speaker 1: And it will sound a bit self interested since I'm

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Speaker 1: sitting in the UK asking this, but I wonder whether

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Speaker 1: you did think there was a role for Europe in

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Speaker 1: UM helping to reduce the false narratives and potentially rebuild trust.

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Speaker 1: And the reason I say that is although obviously the

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Speaker 1: European Union has been, if you like, on the U

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Speaker 1: S side of many of these disputes, it's also been

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Speaker 1: much more reluctant than the US to see this as

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Speaker 1: a zero sum conflict, and somewhere like Germany is obviously

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Speaker 1: very torn about and very concerned about the possibility of

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Speaker 1: a decoupling of the global economy. How do you see

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Speaker 1: Europe's role? Is it completely just a bystander in this

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Speaker 1: and how this relationship evolves, or could there be something

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Speaker 1: more constructive that Europe could contribute. Europe is certainly not

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Speaker 1: a bystander. It's a uh, you know, an important actor

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Speaker 1: in the global economy, in the geopolitical arena, and does

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Speaker 1: have i'd say more mixed feelings about its relationship with

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Speaker 1: China right now than as evident certainly the United States UM.

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Speaker 1: The US administration, however, has been putting a lot of

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Speaker 1: pressure on its European allies to take sides in this dispute,

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Speaker 1: and that's an uncomfortable place for Europe to be. But

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Speaker 1: I think UH Europe has ample leeway to chart its

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Speaker 1: own course with respect to China and to point out

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Speaker 1: that some of the UH the issues that the US

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Speaker 1: takes UM is such a close to an existential threat

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Speaker 1: in the technology arena, for example, are things that Europe

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Speaker 1: is handling very differently. And I would cite UH the

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Speaker 1: the Huawei centric US fixation on the Chinese technology threat.

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Speaker 1: Huawei has UH still has a significant presence in many

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Speaker 1: European UH telecommunications sectors. Huawei has been investigated assiduously by

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Speaker 1: the UK, by Italy and by other European economies, and

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Speaker 1: the egregious threats of espionage that the US just takes

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Speaker 1: for ranted through Huawei's UM the state of the art

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Speaker 1: five G telecommunications infrastructure have never been validated. There was

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Speaker 1: one instance of a backdoor leak UH in Italy a

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Speaker 1: number of years ago that Huawei was quick to resolve.

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Speaker 1: The Italian telecommunications providers have actually increased their reliance on

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Speaker 1: Huawei since then. So I think that technology which is

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Speaker 1: such a a major aspect of the growing conflict between

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Speaker 1: the US and China is one that the Europeans could

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Speaker 1: play a very constructive role in mediating and pointing out.

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Speaker 1: I would hope a more constructive outcome. That's fascinating because

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Speaker 1: of course there'll be lots of people very focused on

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Speaker 1: this issue, clamoring as they listen to this to say

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Speaker 1: that that's a that the European position that presents a

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Speaker 1: naive view of of Huawei and the is always that

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Speaker 1: point that's made that even if it's not happened yet,

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Speaker 1: you know, there is a legal requirement for any Chinese

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Speaker 1: company if if asked to provide information to the government,

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Speaker 1: especially under sieg ng Ping. That's been quite clear. Yeah.

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Speaker 1: I think the idea of trying to wall off one nation,

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Speaker 1: one systems platform for from another because of the difference

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Speaker 1: in systems that we've addressed earlier is the taking decoupling

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Speaker 1: to its most destructive endpoint, and I think we need

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Speaker 1: to avoid that. My final question is a bit more personal, Stephen.

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Speaker 1: I mean, as long as I've been thinking about the

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Speaker 1: global economy and sometimes and writing or reporting about it,

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Speaker 1: um you have been an observer and an analyzer of

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Speaker 1: of the global economy, but also US and China particularly,

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Speaker 1: and having spent a lot of time in Asia, obviously,

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Speaker 1: I just wondered whether they were looking back. I mean,

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Speaker 1: what have you changed your mind on? I mean, when

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Speaker 1: you see how the world has evolved relative to what

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00:32:08,400 --> 00:32:12,080
Speaker 1: we might have thought, say in the early nineties, Um,

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00:32:12,520 --> 00:32:15,959
Speaker 1: how have you been surprised? Have you changed? I mean,

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Speaker 1: you obviously have changed your view in some important ways,

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Speaker 1: both with regard to US and China in light of events. Yeah. Yeah,

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00:32:24,360 --> 00:32:26,800
Speaker 1: it's been a journey for me. Um. You know, I

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00:32:27,440 --> 00:32:30,840
Speaker 1: would say, um, you know, the perch I had at

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00:32:30,840 --> 00:32:34,320
Speaker 1: Morgan Stanley for thirty years was really, um, you know,

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00:32:34,520 --> 00:32:38,160
Speaker 1: a great um sort of learning experience from me. For

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00:32:38,200 --> 00:32:42,880
Speaker 1: the first half of that I was US based, focused

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00:32:42,880 --> 00:32:46,320
Speaker 1: on the US economy, which is something I did at

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00:32:46,320 --> 00:32:49,880
Speaker 1: the Federal Reserve prior to coming to Wall Street, and

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00:32:51,840 --> 00:32:54,000
Speaker 1: I was heading up the global economics team. And then

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00:32:54,000 --> 00:32:58,840
Speaker 1: along came the Asian financial crisis the late nineties. Uh.

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00:32:58,840 --> 00:33:02,440
Speaker 1: And you know, I'd been to Asia a lot, and

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00:33:02,480 --> 00:33:04,160
Speaker 1: I've been to China a few times, but I had

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00:33:04,200 --> 00:33:07,480
Speaker 1: no idea really what was going on inside. I had

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00:33:07,480 --> 00:33:10,880
Speaker 1: a hunch that China would really shape the endgame of

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Speaker 1: what was then the worst and first crisis of globalization.

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Speaker 1: Little did we know, but that's the way we thought

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Speaker 1: of it then, and UM it quickly became evident to

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00:33:21,840 --> 00:33:24,040
Speaker 1: me that China was cut from a different cloth and

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00:33:24,040 --> 00:33:27,880
Speaker 1: would come out of the crisis um uh much better

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00:33:27,960 --> 00:33:32,320
Speaker 1: than the rest of Asia, especially Japan, which had been

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00:33:32,320 --> 00:33:36,840
Speaker 1: the leader. And so I switched my my role. Then

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Speaker 1: I became a global economists fixated on Asia, especially on

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00:33:41,640 --> 00:33:46,080
Speaker 1: rising China, and eventually moved to Hong Kong and headed

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00:33:46,120 --> 00:33:49,600
Speaker 1: up Morgan Stanley's Asian businesses. And you know, I was

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00:33:50,120 --> 00:33:54,400
Speaker 1: really convinced that China's transformation along the lines of the

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00:33:54,440 --> 00:33:58,600
Speaker 1: dunk shopping model was really going to UH lead to

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00:33:58,640 --> 00:34:02,760
Speaker 1: a powerful unstopp of bowl engine, of a new engine

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Speaker 1: of of global growth that UH could could benefit the

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Speaker 1: West as well as itself. And then, as I indicated earlier,

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Speaker 1: long term chijin Pain who has reversed much of that

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00:34:16,000 --> 00:34:20,879
Speaker 1: with this fixation on ideology and control that has had

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00:34:22,440 --> 00:34:27,279
Speaker 1: limited UM has limited the consumer and rebalancing at a

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00:34:27,320 --> 00:34:30,279
Speaker 1: time when China needs it the most. China has an

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00:34:30,320 --> 00:34:35,359
Speaker 1: aging population UH and the working age population is already contracting,

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00:34:35,880 --> 00:34:39,279
Speaker 1: and so when you have a contracting working age population,

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00:34:39,680 --> 00:34:42,719
Speaker 1: to stay the course of growth and prosperity, you need

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00:34:42,760 --> 00:34:46,640
Speaker 1: an acceleration of productivity growth. That's the economist in me.

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00:34:47,239 --> 00:34:51,839
Speaker 1: And under Shijing pain, productivity growth is going the other way,

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00:34:51,960 --> 00:34:55,439
Speaker 1: and so China is in trouble. Uh. And that has

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Speaker 1: really been a tough pill for someone like myself who

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00:35:00,239 --> 00:35:04,319
Speaker 1: has been a die hard China optimist, A swollen Stephen Roach.

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Speaker 1: That's a hell of a note on which to end,

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00:35:06,560 --> 00:35:09,719
Speaker 1: but I think we will try to do that. Thank

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00:35:09,719 --> 00:35:11,560
Speaker 1: you very much for your time and thanks for your book.

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00:35:11,680 --> 00:35:21,359
Speaker 1: Thank you, Stephanie. Great talking to you. As always. That's

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00:35:21,400 --> 00:35:23,840
Speaker 1: it for Stephanomics. We'll be back next week. In the meantime,

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00:35:24,120 --> 00:35:26,839
Speaker 1: please rate us wherever you get this podcast, and check

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00:35:26,880 --> 00:35:30,040
Speaker 1: out the Bloomberg News website for more economic news and

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00:35:30,160 --> 00:35:33,520
Speaker 1: views on the global economy. You should also follow at

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00:35:33,600 --> 00:35:37,440
Speaker 1: economics on Twitter. This episode was produced by Yang Yang,

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00:35:37,640 --> 00:35:41,640
Speaker 1: Summer Saddi, and Magnus Henrickson, with special thanks to Stephen

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00:35:41,719 --> 00:35:45,920
Speaker 1: Roach and Chris Hadsty. Mike Sasso is the executive producer

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00:35:45,960 --> 00:35:46,680
Speaker 1: of Stephanos