Speaker 1: You know, in five years we've gone from trade war
Speaker 1: to tech war to early stages of a new Cold war.
Speaker 1: That high octane fuel can be easily ignited by a spark, Taiwan,
Speaker 1: South China, Sea, China's unlimited partnership with Russia, global recession.
Speaker 1: Any one of those are sparks that when you are
Speaker 1: embracing increasingly intense false narratives, could lead to an accidental clash. Hello, Stephanomics,
Speaker 1: here the podcast that brings you a new year in
Speaker 1: the global economy and a new year's aspiration that we
Speaker 1: end twenty three in better shape than we've begun it.
Speaker 1: Maybe I'm sitting on the wrong side of the Atlantic
Speaker 1: looking at the wrong kind of gray sky. Everything's just
Speaker 1: feeling a bit grim. But we're going to break out
Speaker 1: of that gloom now to offer you some fresh insight
Speaker 1: into the central issue of our time. One. I make
Speaker 1: no apologies for returning to on a regular basis China's
Speaker 1: place in the global economy and its relationship with the US.
Speaker 1: Stephen Roach is a long time contributed to the China debate.
Speaker 1: He has a new book out, and you just heard
Speaker 1: a taste of my conversation with him. But before we
Speaker 1: get to that lofty discussion. Our senior US economic policy editor,
Speaker 1: Chris Anstey, wants you to look inside the box your
Speaker 1: new trainers came in. You've probably never given much thought
Speaker 1: to desiccants. Not many have, But last year, those little
Speaker 1: packets you find in a box with a new pair
Speaker 1: of shoes were at the center of an international trade route.
Speaker 1: So in descad desiccand is m the little packet that
Speaker 1: is included in products that are shipped, and it's intended
Speaker 1: to take moisture out of the air. So, for instance,
Speaker 1: it prevents small build up or humility getting to a
Speaker 1: point where it can cause damage to the product. That
Speaker 1: was Bruce Main, president of a small safety consulting firm
Speaker 1: in an Arbor, Michigan. It turns out that China proposed
Speaker 1: a new production standard for descants last year that critics
Speaker 1: like Main say would have created a huge burden on
Speaker 1: manufacturers around the world. Suddenly, anyone making anything with a
Speaker 1: desiccant inside would be forced to worry about those little
Speaker 1: gel packets complying with a new standard. Shoemakers for sure,
Speaker 1: but also producers of food, electric products, textiles, artware, and
Speaker 1: leather goods, among others. The battle over this most obscure
Speaker 1: packaging item illustrates China's growing ambitions not just to dominate manufacturing,
Speaker 1: but to have a much stronger say in how products
Speaker 1: are made and traded around the world. Put in another way,
Speaker 1: the next round in the great global trade war between China,
Speaker 1: the US, and Europe may be waged by Wangi, government
Speaker 1: bureaucrats and design engineers over global standards. Here is Emily Taylor,
Speaker 1: an intellectual property lawyer who now heads Oxford Information Labs,
Speaker 1: a cyber intelligence consultancy. The Chinese approach which seems very daunting,
Speaker 1: very organized, long term and patient, and in response, you know,
Speaker 1: it can feel like we need to up our game
Speaker 1: in the West that China has understood that in many
Speaker 1: standards organizations it's a numbers game, is about putting people
Speaker 1: on planes or sticking people in the zoom room and
Speaker 1: having lots and lots and lots of submissions. And you know,
Speaker 1: in response to that, the West really seems to be
Speaker 1: scrabbling around at times and lacks that coordination. When most
Speaker 1: people use products and services, they don't give much thought
Speaker 1: to standards that govern how they're made. You might use
Speaker 1: the term gold standard or substandard but what are standards?
Speaker 1: There are scores of different standard setting bodies for everything
Speaker 1: from pharmaceuticals to electronics. These global standards organizations were developed
Speaker 1: over the past century and war by company representatives, technical
Speaker 1: specialists representing big buyers, and civic groups basically insiders that
Speaker 1: got together and settle on the most efficient, cost effective
Speaker 1: way to make things. Of course, the whole process has
Speaker 1: been dominated by the West, with an outside presence of
Speaker 1: American and European representatives. Now enter China, which unsurprisingly wants
Speaker 1: a say in setting global standards rather than simply accepting
Speaker 1: what others have decided. Last year, the Chinese his government
Speaker 1: put out a game plan for strengthening China's hand in
Speaker 1: standards setting. It's been dubbed China Standards, which gives a
Speaker 1: clue of the target date that they are aiming at.
Speaker 1: Bruce Mayne, the Michigan safety consultant, shared concerns about China's
Speaker 1: designs on the lowly desiccant. Those of us that were
Speaker 1: involved said, not certain. It really matters what the desiccant
Speaker 1: is made of or it just doesn't work. Is it
Speaker 1: effective in uh doing what it's supposed to do in
Speaker 1: terms of pulling moisture out of a package or preventing
Speaker 1: humidity from building up, and the size of the shape.
Speaker 1: The testing of the desiccating isn't necessarily something that we
Speaker 1: need a standard on. We certainly don't want to spend time,
Speaker 1: our time and energy trying to write those kinds of standards,
Speaker 1: so that's why we did not support it. That Ever,
Speaker 1: in the end, US representatives helped to kill off that
Speaker 1: desiccant proposed l but it illustrates concerns for standards to
Speaker 1: potentially become used as a tool for influence, and it
Speaker 1: reflects broader worries in places including the US and Europe
Speaker 1: about China's intentions. Probably the most contentious area of standard
Speaker 1: setting is the field of technology. Taylor, the intellectual property lawyer,
Speaker 1: has looked closely at China's rising role in standards development organizations.
Speaker 1: Last year, she set up a group called the DNS
Speaker 1: Research Federation to shine a light on standard setting as
Speaker 1: it applies to the Internet. Among the group's concerns is
Speaker 1: the way China is trying to push a new set
Speaker 1: of Internet Protocols or new i P that differs significantly
Speaker 1: from the open approach that underpinned the original structure of
Speaker 1: the Web. The fear is it could be a cyber
Speaker 1: security risk. Although surveillance takes place on the Internet today,
Speaker 1: absolutely it does. There are many human rights violations, but
Speaker 1: the Internet was not designed for surveillance. What we see
Speaker 1: with new i P is a network that is actually
Speaker 1: designed and optimized for surveillance, whether of a domestic population
Speaker 1: or through data sharing laws domestically perhaps internationally as well.
Speaker 1: Some of the tactics deployed by China in standard setting
Speaker 1: bodies have alarmed many observers, like when Chinese representatives show
Speaker 1: up in numbers in an effort to boost the chance
Speaker 1: of Chinese proposals winning adoption. But not everybody is convinced
Speaker 1: that China is wielding undue influence and standards. After all,
Speaker 1: Western nations do want China to continue to participate so
Speaker 1: that global companies don't have to deal with China standards
Speaker 1: being different from other markets. Al Kanyevsky is a fellow
Speaker 1: at Stanford Law School with a forthcoming book on standard
Speaker 1: setting in information and Communication technology. She argues that Western
Speaker 1: stakeholders are a little bit premature in their dire assessments
Speaker 1: of China's recent forays into standard setting, given that Western
Speaker 1: nations still dominate the process. Standardization system that is open,
Speaker 1: that is consensus base that doesn't exclude stakeholders is the
Speaker 1: system that we need for the technology to work. So
Speaker 1: I would be very worried if such initiatives to exclude
Speaker 1: particular stakeholders bait China BA or hawaigh bet particular European
Speaker 1: or American companies, if such initiatives would actually make it
Speaker 1: to standard setting bodies and would be adopted by them.
Speaker 1: But especially when it comes to technology, there's increased danger
Speaker 1: of two separate economic spheres developing on one side, the
Speaker 1: West with its own set of standards, on the other,
Speaker 1: China and other non democratic regimes. The US and European
Speaker 1: Union last year set up a new cooperation forum called
Speaker 1: the treat and Technology Council. One of the items on
Speaker 1: the agenda, you guessed it coordinating on standards. Nothing dry
Speaker 1: about this subject, In fact, maybe it needs a des second.
Speaker 1: I'm Chris Ansty for Bloomberg News. So having had that
Speaker 1: brilliant micro level example of the way China's role in
Speaker 1: the world is changing, We're going to go extremely big
Speaker 1: picture now with Stephen Roach, who will be a familiar
Speaker 1: figure to anyone listening. Who's taken an interest in the
Speaker 1: global economy and especially Asia for the past few decades.
Speaker 1: An economist, former chairman of Morgan Stanley. He is now
Speaker 1: a senior fellow at the Paul Si China Center at
Speaker 1: Yale Law School. He's written a lot over the years
Speaker 1: about the future of the US and China, and that's
Speaker 1: the subject of his new book, Accidental Conflict, America, China
Speaker 1: and the Clash of False Narratives. Stephen, very nice to
Speaker 1: have you on the show and to see you again,
Speaker 1: if only virtually. We are seeing a lot of books
Speaker 1: about potential conflict between America and China. But what what's
Speaker 1: your specific take. In the past five years, Stephanie, We've
Speaker 1: gone from a trade war to a tech war, to
Speaker 1: the early stages of a new Cold War, a ominous
Speaker 1: escalation of conflict that did not have to happen had
Speaker 1: it not been for the false narratives, and both nations
Speaker 1: embrace towards the other. So I guess we should digging
Speaker 1: into that a little bit. How do you see those
Speaker 1: false narratives developing and and how do they affect their
Speaker 1: relationship going forward? Do you think Okay, let me let
Speaker 1: me just answer that question in two parts. One, why
Speaker 1: do both UM nations have this UM penchant to embrace
Speaker 1: false narratives? And what are some of these key false
Speaker 1: narratives UH? My thesis and answering. The first one is
Speaker 1: that both nations are surprisingly vulnerable UH in terms of
Speaker 1: their economic prospects as well as there the stature as
Speaker 1: leaders in the world and the politics at play in
Speaker 1: both nations. And for example, you know, Joe Biden gets
Speaker 1: elected UM a couple of years ago, razor thin majority
Speaker 1: in the Congress but a strong bipartisan anti China view
Speaker 1: that allowed him no wiggle room to disengage from Trump's
Speaker 1: China policy. So UH, he on his first day in
Speaker 1: office repudiated a number of Trump's most unpopular policies, like
Speaker 1: the border wall construction in Mexico the Muslim travel ban,
Speaker 1: but he did nothing to change in China because if
Speaker 1: he had done that, he would have been skewered by
Speaker 1: his own party, let alone the Republicans. Hi Jinping has
Speaker 1: a similar political calculus, aspiring for great power status UM.
Speaker 1: The US is viewed as the greatest impediment to his
Speaker 1: um UH political objectives of this nationalistic China dream. So
Speaker 1: both nations have strong motives to blame others for their
Speaker 1: own vulnerabilities. The second part of the question is what
Speaker 1: are some of these false narratives. I have eight chapters
Speaker 1: in the book that detail false narratives, split evenly between
Speaker 1: both sides of the conflict. The one I'll focus on
Speaker 1: from the U S side is um we blame China
Speaker 1: for our trade deficit. Nations have trade deficits because they
Speaker 1: don't save uh and the US right now has the
Speaker 1: lowest domestic savings rate of any leading nation in history.
Speaker 1: And when you don't save and you want to grow,
Speaker 1: you import surplus savings from abroad, and you run massive
Speaker 1: current account or balance of payments deficits that drive multilateral
Speaker 1: deficits with many nations. In the last year, we have
Speaker 1: full data for the US RAN trade deficits with a
Speaker 1: hundred and six nations. China was the largest, but by
Speaker 1: no means the only one. But by blaming China for
Speaker 1: our trade deficit, just as we blamed UM Japan thirty
Speaker 1: years ago for very similar reasons, I might add, we
Speaker 1: are ducking the big issue that we need to address
Speaker 1: to fix our own vulnerable economy, and that is a
Speaker 1: shortfall of domestic saving a classic false narrative. The Chinese
Speaker 1: side is, you know, equally if not even more culpable.
Speaker 1: The one I'll single out for you is China recognized
Speaker 1: now nearly twenty years ago that it needed a restructure,
Speaker 1: rebalance its economy, and shift from an economy that was
Speaker 1: reliant on exports and investment a one that drew increasingly
Speaker 1: on consumer demand. They haven't done that. They blame that
Speaker 1: on America's stated policy to contain China's peaceful rise. Uh.
Speaker 1: The US does have a containment policy UM that has
Speaker 1: aimed directly at China, and that's a UM, you know,
Speaker 1: a key theme in many aspects of my book. But
Speaker 1: America's efforts to contain China have literally nothing to do
Speaker 1: with China's own inability to rebalance its economy to be
Speaker 1: driven more by internal private consumption. China's dropped the ball
Speaker 1: on this for a number of reasons that I detail
Speaker 1: on the book. But by fixating on US containment, they're
Speaker 1: guilty of an egregious false and narrative with respect to
Speaker 1: the US. I think as an economist, you've you do
Speaker 1: more in this book. I think that most people to
Speaker 1: to show the interconnections between that great power rivalry and
Speaker 1: the macro economic imbalances that opened up between US and
Speaker 1: China once China's growth took off, and as you've just explained,
Speaker 1: you end up with this sort of what you call
Speaker 1: a codependency, with the insufficient savings by the US being
Speaker 1: being matched by this massive trade deficit and if you like,
Speaker 1: excess exporting U by by China. And you've just highlighted
Speaker 1: there in a sense that was what each side has
Speaker 1: done wrong in failing to kind of get to grips
Speaker 1: with that. But I'm interested going forward. I mean, there
Speaker 1: is obviously an element of this which is just about
Speaker 1: China getting stronger but continuing to be very different from
Speaker 1: the US in terms of its values and the kind
Speaker 1: of global order that it wants to participate in, and
Speaker 1: the US increasingly thinking it should try and thwart that development,
Speaker 1: having kind of given up on the China becoming a
Speaker 1: more like the US. So I just wondered, how does
Speaker 1: that that sort of classic view which says, you know,
Speaker 1: the US tried was hoping that the China was going
Speaker 1: to become, you know, like Europe, and it's not like Europe.
Speaker 1: So now it has to just stop it being a
Speaker 1: prevent providing a rival economic system for the world. Not
Speaker 1: so sure that the US wanted to China to be
Speaker 1: like Europe. I think the US wanted China to be
Speaker 1: like America. UH. And this is a I think a
Speaker 1: hopelessly naive expectation that was framed around the time of
Speaker 1: China's push for w t O membership UM that took
Speaker 1: over a decade to negotiate. Finally UH culminated UM under
Speaker 1: President Clinton in late two thousand one h and his
Speaker 1: argument that he made to the Congress is, UM, you know,
Speaker 1: if we don't allow China to to join our system,
Speaker 1: than others are going to benefit from China's extraordinary rise.
Speaker 1: And by finding China to an American centric trading system
Speaker 1: under the w t O, UH, it's compliance with those
Speaker 1: rules would pretty much turn it into a system that
Speaker 1: mirrored hours that was that was just hopelessly naive. And
Speaker 1: this is a Washington failure as well as a European failure,
Speaker 1: and probably a Chinese failure as well. Lies at the
Speaker 1: heart of this conflict. The notion of coexistence, which is
Speaker 1: something that UH Henry Kissinger still as he's nearing a
Speaker 1: hundred years old right now, continues to stress as the
Speaker 1: ultimate um UH resolution for the U. S. China conflict
Speaker 1: um needs to be much more open than it has
Speaker 1: been under this sort of false premise of mirroring one
Speaker 1: systems values with the other. I was baking at the U. S.
Speaker 1: Treasury just as that deal was being finalized at the
Speaker 1: end of end of the nineties, and I guess the
Speaker 1: debate was had about whether it was realistic um to
Speaker 1: expect the China to be on anything like that trajectory.
Speaker 1: I guess the question arises of what's the alternative if
Speaker 1: you're Donald Trump or indeed some in the Biden administration
Speaker 1: that was the sort of original mistake was to let
Speaker 1: China into the World Trade Organization. But I'm not I'm
Speaker 1: not sure that you're saying that was a mistake. You
Speaker 1: just think we should have told ourselves a different story
Speaker 1: about it. I don't think it was a mistake at all,
Speaker 1: because you know, by engaging China and bringing China into
Speaker 1: the w t O, that was a powerful driver of
Speaker 1: of Chinese economic growth at that time and really powered
Speaker 1: its export led momentum. And from those exports, you know,
Speaker 1: income constrained American consumers are able to expand their purchasing
Speaker 1: power over low cost and increasingly high quality Chinese goods. UM.
Speaker 1: China became the largest purchaser for a long time of
Speaker 1: the U S treasuries to enable US to fund our
Speaker 1: budget deficits, and the Chinese market as our America's third
Speaker 1: largest and most rapidly growing export market over the last
Speaker 1: twelve or fifteen years. So there were huge benefits that occurred.
Speaker 1: And I think the mistake we made is that we
Speaker 1: wanted more. We expected China to transform uh it's system
Speaker 1: in a way that uh matched not just our economic needs,
Speaker 1: but are political and social value system. And you know,
Speaker 1: there there was reason to hope that that was occurring,
Speaker 1: UM under the sort of dunk shopping model of a
Speaker 1: market based socialism, where China was certainly taking on an
Speaker 1: opening up to a lot of Western values. But then
Speaker 1: along came Shi jin Ping ten years ago who reverse
Speaker 1: course on virtually all of that counter and we've taken
Speaker 1: enormous exception to that. Listening to you the way you
Speaker 1: describe China's motivations and it's different outlook on the world
Speaker 1: and indeed talk about coexistence, UM. You know, many would
Speaker 1: say that the title le Ville book sounded a bit
Speaker 1: odd because it doesn't sound like the conflict is accidental
Speaker 1: at all. I mean, you have a new rival power
Speaker 1: in the world which has very different views of kind
Speaker 1: of basic notions of whether it's press freedom or human rights, democracy,
Speaker 1: any of these things. I mean, it's sort of inevitable
Speaker 1: that they will come into conflict with the West broadly speaking,
Speaker 1: who believe that these values are important? Isn't it? Well,
Speaker 1: certainly to very powerful nations, you know, one the ruling
Speaker 1: hedgemon if you want to call it, for lack of
Speaker 1: a better term, and the other arising superpower, there was
Speaker 1: always the possibility of of conflict UH and friction. The
Speaker 1: concept of accidental conflict says that that by embracing false impressions,
Speaker 1: false narratives of the other, we build on these mistaken
Speaker 1: views that we harbor their politically expedient for our own purposes,
Speaker 1: and the false narratives UH collide, they duel with one another,
Speaker 1: and they have the potential to become the high octane
Speaker 1: fuel of conflict escalation. And again back to the to
Speaker 1: the first sentence I I uttered to you today, and
Speaker 1: that is, you know, in five years, we've gone from
Speaker 1: trade war to tech war to early stages of a
Speaker 1: new Cold war, that high octane fuel can be easily
Speaker 1: ignited by a spark. Taiwan, South China, see China's unlimited
Speaker 1: partnership with Russia, who is now waging an unconscionable war,
Speaker 1: America's own vulnerabilities, global recession, which is a distinct possibility
Speaker 1: this year. Any one of those are sparks that when
Speaker 1: when you are embracing increasingly intense false narratives, could lead
Speaker 1: to an accidental clash. I mean, just a few days ago,
Speaker 1: um I saw a report I'm sure as you did,
Speaker 1: of a fighter jet over the Chinese fighter jet over
Speaker 1: the South China. See that came uh extraordinarily close to
Speaker 1: an American aircraft. Uh. Accidents can happen, and big wars,
Speaker 1: world wars have been started by accidents in the past,
Speaker 1: and so I shows that title to express that potential
Speaker 1: in the context of this conflict. But those are genuine
Speaker 1: reasons why we might conflict with China, they're not They're
Speaker 1: not false reasons. China wants to take back Taiwan, which
Speaker 1: as far as we could see, does not want to
Speaker 1: be back in as part of China. Um it wants
Speaker 1: to have an unrivaled supremacy in East Asia, where we
Speaker 1: have and the US has powerful allies and security relationships.
Speaker 1: So is that a false narrative to be that China
Speaker 1: does want to take over these things and we don't
Speaker 1: want to let them. That seems to be the sort
Speaker 1: of uncomfortable truth. Those are Those are legitimate areas of
Speaker 1: dispute one s I believe strongly in and as does
Speaker 1: the other. I'm not arguing that those are false. But
Speaker 1: what I'm saying is that the confluent of these false
Speaker 1: narratives makes dispute resolution over legitimate issues all but impossible.
Speaker 1: I do end the book, you know, with a prescriptive
Speaker 1: approach to resolve disputes UH in the context of a
Speaker 1: conflicted relationship. The current architecture of engagement between these two
Speaker 1: UH leading superpowers is completely dysfunctional. The nations don't talk
Speaker 1: to one another. When they do talk, it's you know,
Speaker 1: it's zoom calls or There was a three hour plus
Speaker 1: meeting in Bali ahead of a G twenty meeting in
Speaker 1: November that accomplished nothing. And I make a fairly detailed
Speaker 1: proposal for a new organization that I call a U
Speaker 1: S China Secretariat, a permanent organization located in a neutral
Speaker 1: venue that is empowered to address all aspects of the relationship,
Speaker 1: from trade and economics to technology, cybersecurity, human rights, health
Speaker 1: fully staffed by equal complements of Chinese and American professionals
Speaker 1: working full time seven on all these and other aspects
Speaker 1: of the relationship. Two frame problems AH provide mutually authored
Speaker 1: UH policy white paper, sometimes with dissenting views from one
Speaker 1: from from one side or the other, but stressing a
Speaker 1: collaborative approach toward dispute resolution rather than the current contentious
Speaker 1: approach that we have right now. This relationship needs a
Speaker 1: far more role bust platform for engagement. And this may
Speaker 1: not be the perfect suggestion, but it sure as heckt
Speaker 1: beat what we've gotten now. Well, it's interesting that I,
Speaker 1: you know, we've talked to quite a lot of people
Speaker 1: about this issue over the months, and they all whatever
Speaker 1: whatever direction they come from, they all end up with
Speaker 1: a version of what you're talking about. There's a way
Speaker 1: of starting to rebuild trust, because that's one of the
Speaker 1: things that we worry has really gone by the wayside.
Speaker 1: I had we're going to run out of time, but
Speaker 1: I had two more questions for you and one of them.
Speaker 1: And it will sound a bit self interested since I'm
Speaker 1: sitting in the UK asking this, but I wonder whether
Speaker 1: you did think there was a role for Europe in
Speaker 1: UM helping to reduce the false narratives and potentially rebuild trust.
Speaker 1: And the reason I say that is although obviously the
Speaker 1: European Union has been, if you like, on the U
Speaker 1: S side of many of these disputes, it's also been
Speaker 1: much more reluctant than the US to see this as
Speaker 1: a zero sum conflict, and somewhere like Germany is obviously
Speaker 1: very torn about and very concerned about the possibility of
Speaker 1: a decoupling of the global economy. How do you see
Speaker 1: Europe's role? Is it completely just a bystander in this
Speaker 1: and how this relationship evolves, or could there be something
Speaker 1: more constructive that Europe could contribute. Europe is certainly not
Speaker 1: a bystander. It's a uh, you know, an important actor
Speaker 1: in the global economy, in the geopolitical arena, and does
Speaker 1: have i'd say more mixed feelings about its relationship with
Speaker 1: China right now than as evident certainly the United States UM.
Speaker 1: The US administration, however, has been putting a lot of
Speaker 1: pressure on its European allies to take sides in this dispute,
Speaker 1: and that's an uncomfortable place for Europe to be. But
Speaker 1: I think UH Europe has ample leeway to chart its
Speaker 1: own course with respect to China and to point out
Speaker 1: that some of the UH the issues that the US
Speaker 1: takes UM is such a close to an existential threat
Speaker 1: in the technology arena, for example, are things that Europe
Speaker 1: is handling very differently. And I would cite UH the
Speaker 1: the Huawei centric US fixation on the Chinese technology threat.
Speaker 1: Huawei has UH still has a significant presence in many
Speaker 1: European UH telecommunications sectors. Huawei has been investigated assiduously by
Speaker 1: the UK, by Italy and by other European economies, and
Speaker 1: the egregious threats of espionage that the US just takes
Speaker 1: for ranted through Huawei's UM the state of the art
Speaker 1: five G telecommunications infrastructure have never been validated. There was
Speaker 1: one instance of a backdoor leak UH in Italy a
Speaker 1: number of years ago that Huawei was quick to resolve.
Speaker 1: The Italian telecommunications providers have actually increased their reliance on
Speaker 1: Huawei since then. So I think that technology which is
Speaker 1: such a a major aspect of the growing conflict between
Speaker 1: the US and China is one that the Europeans could
Speaker 1: play a very constructive role in mediating and pointing out.
Speaker 1: I would hope a more constructive outcome. That's fascinating because
Speaker 1: of course there'll be lots of people very focused on
Speaker 1: this issue, clamoring as they listen to this to say
Speaker 1: that that's a that the European position that presents a
Speaker 1: naive view of of Huawei and the is always that
Speaker 1: point that's made that even if it's not happened yet,
Speaker 1: you know, there is a legal requirement for any Chinese
Speaker 1: company if if asked to provide information to the government,
Speaker 1: especially under sieg ng Ping. That's been quite clear. Yeah.
Speaker 1: I think the idea of trying to wall off one nation,
Speaker 1: one systems platform for from another because of the difference
Speaker 1: in systems that we've addressed earlier is the taking decoupling
Speaker 1: to its most destructive endpoint, and I think we need
Speaker 1: to avoid that. My final question is a bit more personal, Stephen.
Speaker 1: I mean, as long as I've been thinking about the
Speaker 1: global economy and sometimes and writing or reporting about it,
Speaker 1: um you have been an observer and an analyzer of
Speaker 1: of the global economy, but also US and China particularly,
Speaker 1: and having spent a lot of time in Asia, obviously,
Speaker 1: I just wondered whether they were looking back. I mean,
Speaker 1: what have you changed your mind on? I mean, when
Speaker 1: you see how the world has evolved relative to what
Speaker 1: we might have thought, say in the early nineties, Um,
Speaker 1: how have you been surprised? Have you changed? I mean,
Speaker 1: you obviously have changed your view in some important ways,
Speaker 1: both with regard to US and China in light of events. Yeah. Yeah,
Speaker 1: it's been a journey for me. Um. You know, I
Speaker 1: would say, um, you know, the perch I had at
Speaker 1: Morgan Stanley for thirty years was really, um, you know,
Speaker 1: a great um sort of learning experience from me. For
Speaker 1: the first half of that I was US based, focused
Speaker 1: on the US economy, which is something I did at
Speaker 1: the Federal Reserve prior to coming to Wall Street, and
Speaker 1: I was heading up the global economics team. And then
Speaker 1: along came the Asian financial crisis the late nineties. Uh.
Speaker 1: And you know, I'd been to Asia a lot, and
Speaker 1: I've been to China a few times, but I had
Speaker 1: no idea really what was going on inside. I had
Speaker 1: a hunch that China would really shape the endgame of
Speaker 1: what was then the worst and first crisis of globalization.
Speaker 1: Little did we know, but that's the way we thought
Speaker 1: of it then, and UM it quickly became evident to
Speaker 1: me that China was cut from a different cloth and
Speaker 1: would come out of the crisis um uh much better
Speaker 1: than the rest of Asia, especially Japan, which had been
Speaker 1: the leader. And so I switched my my role. Then
Speaker 1: I became a global economists fixated on Asia, especially on
Speaker 1: rising China, and eventually moved to Hong Kong and headed
Speaker 1: up Morgan Stanley's Asian businesses. And you know, I was
Speaker 1: really convinced that China's transformation along the lines of the
Speaker 1: dunk shopping model was really going to UH lead to
Speaker 1: a powerful unstopp of bowl engine, of a new engine
Speaker 1: of of global growth that UH could could benefit the
Speaker 1: West as well as itself. And then, as I indicated earlier,
Speaker 1: long term chijin Pain who has reversed much of that
Speaker 1: with this fixation on ideology and control that has had
Speaker 1: limited UM has limited the consumer and rebalancing at a
Speaker 1: time when China needs it the most. China has an
Speaker 1: aging population UH and the working age population is already contracting,
Speaker 1: and so when you have a contracting working age population,
Speaker 1: to stay the course of growth and prosperity, you need
Speaker 1: an acceleration of productivity growth. That's the economist in me.
Speaker 1: And under Shijing pain, productivity growth is going the other way,
Speaker 1: and so China is in trouble. Uh. And that has
Speaker 1: really been a tough pill for someone like myself who
Speaker 1: has been a die hard China optimist, A swollen Stephen Roach.
Speaker 1: That's a hell of a note on which to end,
Speaker 1: but I think we will try to do that. Thank
Speaker 1: you very much for your time and thanks for your book.
Speaker 1: Thank you, Stephanie. Great talking to you. As always. That's
Speaker 1: it for Stephanomics. We'll be back next week. In the meantime,
Speaker 1: please rate us wherever you get this podcast, and check
Speaker 1: out the Bloomberg News website for more economic news and
Speaker 1: views on the global economy. You should also follow at
Speaker 1: economics on Twitter. This episode was produced by Yang Yang,
Speaker 1: Summer Saddi, and Magnus Henrickson, with special thanks to Stephen
Speaker 1: Roach and Chris Hadsty. Mike Sasso is the executive producer
Speaker 1: of Stephanos