Latest / UK Column Radio / The Strait of Hormuz Crisis: Why China Will Not Play Trump's Game | Silk and Steel

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The Strait of Hormuz Crisis: Why China Will Not Play Trump's Game | Silk and Steel · UK Column Radio

0:01
Speaker 1: Hello, and welcome to another episode of the Silk and
0:04
Speaker 1: Steal podcast. I'm your host Carlsa. Today I walk on
0:08
Speaker 1: back the crowd's favorite doctor Warwick Powell from Australia, a
0:13
Speaker 1: expert on China, on China relations and and uh and
0:21
Speaker 1: and one of my favorite guests on the show. Welcome
0:25
Speaker 1: back to Warwick.
0:26
Speaker 2: How are you, Kyle.
0:29
Speaker 1: Good Good? I can't believe we almost we made it
0:32
Speaker 1: halfway through twenty twenty six already. You know, like a
0:38
Speaker 1: lot of things has happened since the beginning of the year.
0:42
Speaker 1: It seems like ages ago when Trump actually started the
0:48
Speaker 1: war against Iran and now he said that he wanted
0:53
Speaker 1: to he wanted to impose a toe on the passage
0:58
Speaker 1: through the Straight Home Moose, and he won people to
1:00
Speaker 1: pay for it. First he said, you want the golf
1:03
Speaker 1: countries plus Israel to pay for US operation in the
1:09
Speaker 1: golf to keep the straight open. And more recently he said,
1:14
Speaker 1: you know what, in fact, China should pay because United
1:18
Speaker 1: States is trying to open the Straight hor mooz hold
1:21
Speaker 1: it open for China. So China should pay for the
1:25
Speaker 1: privilege of having US Navy trying to uphold the passage
1:31
Speaker 1: through the Straight or Herb Moose, So what's your take
1:34
Speaker 1: on that.
1:35
Speaker 2: But there's something a little bit strange, I think about
1:39
Speaker 2: the mentality that's being brought to the table here, which
1:42
Speaker 2: reduces everything to this idea of a financial transaction. But
1:48
Speaker 2: obviously that's the framework that President Trump brings to the
1:53
Speaker 2: table on just about everything. And you can see that
1:57
Speaker 2: he is now flapping around trying to find some kind
2:02
Speaker 2: of a transaction format that can dig him the United
2:07
Speaker 2: States Navy and the United States broad reputation out of
2:13
Speaker 2: the hole. And so each day there's something new. You
2:19
Speaker 2: can imagine that this is the kind of way that
2:22
Speaker 2: he would contemplate engaging in real estate transactions, where you know,
2:27
Speaker 2: you're throwing new things to either reshape a discussion or
2:33
Speaker 2: a negotiation, to try to open up a new angle
2:36
Speaker 2: on something, to maybe prod an obdurant counterparty along, to
2:45
Speaker 2: shift somebody who's digging their heels in or something. And
2:48
Speaker 2: it seems to me that as the days go by,
2:52
Speaker 2: for reasons that I think you can only put down
2:56
Speaker 2: to President's Trump's own life experiences and he's learned approach
3:03
Speaker 2: to dealing with the world, that we get this what
3:07
Speaker 2: is clearly a series of ad hoc reactive interventions lace
3:13
Speaker 2: with a heavy dose of personal peak where his displeasures
3:19
Speaker 2: and his anger and frustrations boil to the surface. But
3:24
Speaker 2: what is also clear, Kyl, is that the United States
3:28
Speaker 2: does not have actually a clear strategy or a game plan,
3:34
Speaker 2: or indeed even I think a clear picture of what
3:37
Speaker 2: a desirable outcome is anymore. If the main outcome originally
3:45
Speaker 2: and indeed over the last thirty years, has been the
3:48
Speaker 2: project of Greater Israel, then clearly that project right now
3:53
Speaker 2: is in tatters. The last piece of this jigsaw puzzle,
3:57
Speaker 2: if you will, as documented in various think tank documents
4:02
Speaker 2: in times past, was to isolate Iran and provide a
4:06
Speaker 2: clean pathway for a military attack which would ultimately lead
4:11
Speaker 2: to an overthrow of the Iranian government and clear the
4:17
Speaker 2: pathway then for a friendly environment with US military impositions
4:24
Speaker 2: across the region to secure the Greater Israel project. And
4:27
Speaker 2: it's in tatas then, of course we've got other objectives,
4:32
Speaker 2: the so called objectives around prohibiting Iran from developing a
4:36
Speaker 2: nuclear program and nuclear missiles. Well, that in many ways,
4:42
Speaker 2: of course is in tatters as well when you compare
4:47
Speaker 2: it to the situation that was the case in twenty fifteen,
4:50
Speaker 2: when Presidents Trump's great nemesis, the one that he actually
4:56
Speaker 2: really compares himself to, Barack Obama, had negotiated the JCPOA.
5:03
Speaker 2: And right now, right now, it's hard to say that
5:08
Speaker 2: the current state of play in relation to Iran and
5:12
Speaker 2: its nuclear program is any better from the United States
5:15
Speaker 2: point of view than it was eleven years ago in tatters.
5:19
Speaker 2: The Iranian government seems to be more consolidated and stable
5:24
Speaker 2: than it has been ever since the Americans created the
5:28
Speaker 2: mythology that the Islamic Republic was an unstable religious authoritarian regime.
5:38
Speaker 2: We saw the images of the funeral of the assassinated
5:43
Speaker 2: leader a week or so ago, a couple of weeks ago,
5:47
Speaker 2: perhaps now, where tens of millions of people gathered in
5:52
Speaker 2: public as part of the morning process. Now, whether it
5:55
Speaker 2: was ten million or forty million, I don't know. I
5:58
Speaker 2: didn't count them, but it was a very very large
6:03
Speaker 2: number of people. And that showed that the government does
6:10
Speaker 2: enjoy a large level of not just generic support from
6:16
Speaker 2: people in Iran, but a level of public energy that
6:22
Speaker 2: gives governments and leaders a renewed sense of purpose. And
6:28
Speaker 2: I think that this particular aspect was totally underestimated by
6:32
Speaker 2: the American intelligence community and by the politicians who prosecuted
6:37
Speaker 2: this Greater Israel project and campaign against Iran. So you know,
6:42
Speaker 2: and of course the oil which you touched on. I mean,
6:45
Speaker 2: what an absolute debarkle clor what an absolute debarkle On
6:49
Speaker 2: the twenty seventh of February this year, the straight upom
6:52
Speaker 2: moves was a free flowing body of water where one
6:56
Speaker 2: hundred and forty vessels would move through that passive on
7:00
Speaker 2: a daily basis, carrying twenty percent of the world's oil,
7:05
Speaker 2: together with twenty percent of the world's LNG, a large
7:10
Speaker 2: proportion of the world's helium about thirty percent, and a
7:14
Speaker 2: whole bunch of the world's peperrochemical products, not to mention,
7:18
Speaker 2: of course, carrying food and other things to the golf countries.
7:23
Speaker 2: No tolls, no risk of being interceded by missiles or drones, nothing,
7:31
Speaker 2: just a normal body of international water. So the claim
7:35
Speaker 2: went that both could travel up and down. Well that's
7:39
Speaker 2: all gone, now all gone. The United States, of course,
7:44
Speaker 2: can't even impose its own corridor, as it's sought to
7:50
Speaker 2: wrestle negotiating leverage on the back of the MoU. It
7:56
Speaker 2: broke the MoU. The MoU made it very clear that
7:59
Speaker 2: it was the Iranians who were to administer things for
8:02
Speaker 2: the sixty days, and of course the Americans decided that
8:05
Speaker 2: wasn't on, and they tried to create an environment where
8:12
Speaker 2: ships could skirt along the Omanian coast and bypass the
8:19
Speaker 2: Iranian waters, ostensibly undercover of US naval protection, so that
8:27
Speaker 2: insurers were willing to back the ships and ship owners
8:31
Speaker 2: would then be comforted that they would have safe passage. Well,
8:34
Speaker 2: that lasted about two days, didn't it, you know, until
8:37
Speaker 2: the first set of ships started being hit and the
8:39
Speaker 2: United States Navy could not protect them. The response then came,
8:43
Speaker 2: which was an intensification or an escalation of the war
8:48
Speaker 2: again with significant barrage of bombings and missile attacks on Iran,
8:56
Speaker 2: to which Irans responded. Bearing in mind and that we've
9:01
Speaker 2: been told for many months now that the Iranian Army,
9:04
Speaker 2: the Iranian Navy, and the Iranian Air Force have been
9:07
Speaker 2: totally decimated, right and for some miraculous reason they're able
9:12
Speaker 2: to respond, but not just respond in some petty kind
9:16
Speaker 2: of way, but to respond with some very serious and
9:20
Speaker 2: successful attacks on American basis. Facilities and equipment right across
9:24
Speaker 2: the Persian Gulf. And so right now, you know, as
9:29
Speaker 2: we speak, it's fair to say that the United States
9:37
Speaker 2: is on the wrong end of the stick of this
9:40
Speaker 2: particular war that it provoked and that it initiated. It
9:44
Speaker 2: currently has no way out. My own suspicion, Kyl, is
9:49
Speaker 2: that as rational as it may be for the United
9:53
Speaker 2: States to try to find a negotiated settlement to this dispute,
9:57
Speaker 2: there are two things which makes this almost impossible resolve
10:00
Speaker 2: in the short term. One is that there remains a
10:05
Speaker 2: strong body of political will amongst those inside the Beltwayne
10:09
Speaker 2: Washington for the Greater Israel project to continue, even as
10:16
Speaker 2: mainstream Americans begin to lose their willingness to support that
10:22
Speaker 2: particular policy ambition, and as Israel's own standing in the
10:27
Speaker 2: eyes of Americans continues to diminish. And of course, we
10:33
Speaker 2: have this political problem, which is we've got midterm elections
10:39
Speaker 2: coming up in early November, and there isn't a presidency
10:45
Speaker 2: that would want to go into a midterm elections on
10:48
Speaker 2: the back of a defeat in a military conflict that
10:52
Speaker 2: it had initiated. And so we're going to get the
10:54
Speaker 2: kick the can down the road approach. The Trump administration
10:59
Speaker 2: cannot and it's not just a question of vanity, right,
11:03
Speaker 2: It's not just a question of vanity. There's a whole
11:06
Speaker 2: lot more to it than just vanity. It's America's reputation.
11:11
Speaker 2: It's a reputation of its military capacity. It's a stripping
11:15
Speaker 2: away of the facade of military dominance and preponderance that
11:20
Speaker 2: cannot be admitted. And so you put these two things together,
11:27
Speaker 2: we shouldn't be surprised that the Americans have gone back
11:30
Speaker 2: into the stir of the hornets nest. It cannot abide
11:35
Speaker 2: by an agreement that ultimately requires America to take the
11:41
Speaker 2: l right, the United States has to accept that it
11:45
Speaker 2: cannot get most, if not all, of the things that
11:49
Speaker 2: it wanted from the very get go. And because of that,
11:53
Speaker 2: it is reluctant or in fact structurally unable to, in
11:57
Speaker 2: the term of the presidency that started this war, accept
12:00
Speaker 2: the loss. It's going to be a problem that the
12:03
Speaker 2: next presidency's gonna have to deal with. That means that
12:06
Speaker 2: this is likely to bubble away, sometimes not sometimes less
12:11
Speaker 2: for a long time to come.
12:16
Speaker 1: That's very grin because you know, the easiest solution for
12:21
Speaker 1: Trump administration to dig itself out.
12:23
Speaker 2: Of the whole.
12:24
Speaker 1: It's just to simply do nothing to chill.
12:27
Speaker 2: You know.
12:28
Speaker 1: If they haven't responded to, uh, the latest Urani enclosure
12:34
Speaker 1: of Straight or Home Moose, particularly in the southern Channel
12:38
Speaker 1: on the Omani side, you know, there wouldn't have been
12:41
Speaker 1: a wholesale shutdown of the entire Straight or Home Moose
12:45
Speaker 1: right now. And this again is leading to the global
12:50
Speaker 1: oil price spike. And I'm actually surprised the oil price
12:54
Speaker 1: spike hasn't uh, you know, there's a rise of just
12:59
Speaker 1: like a ten fifteen percent rising the oil price, but
13:02
Speaker 1: it hasn't really jumped like to the stratosphere. And I
13:07
Speaker 1: think it checks. The latest oil price today is about
13:11
Speaker 1: like eighty dollars, you know, like it hasn't shot up
13:14
Speaker 1: to like one hundred and twenty five dollars as it
13:17
Speaker 1: was before. And I think that was largely due to
13:21
Speaker 1: China's voluntary cut back of its oil imports. You know,
13:27
Speaker 1: China has now by all indications, cut about five million
13:33
Speaker 1: barrels of oil per day, and that's huge, that's that's
13:37
Speaker 1: a big number. The total as you mentioned, the total
13:42
Speaker 1: number coming out of the Persian Gulf before the war
13:45
Speaker 1: was twenty million barrels of oil per day. Now China
13:48
Speaker 1: just voluntarily, for whatever reason, to cut back five million
13:53
Speaker 1: dollars of oil barrels of oil import per day. And
13:58
Speaker 1: that is the fact, I think save a lot of
14:02
Speaker 1: the Global South nations because let's face it that, you know,
14:06
Speaker 1: when there's an oil shortage, the rich countries, they may
14:11
Speaker 1: have to pay for higher prices, but they're not going
14:14
Speaker 1: to have real shortages because they will be able to
14:17
Speaker 1: outbid the poor Global South countries for the limited oil
14:22
Speaker 1: that's on the market. And what by China cutting back
14:27
Speaker 1: on its own intake of the global oil supply, it
14:32
Speaker 1: creates a lot of slack for poor countries in particularly
14:37
Speaker 1: in Southeast Asia and South Asia. You know, I'm talking
14:41
Speaker 1: about countries like I'm living right now, Indonesia, Philippines, but
14:45
Speaker 1: also countries like India, but also countries like Australia where
14:50
Speaker 1: you live. They all even though Australia is not a
14:53
Speaker 1: Global South country, but Australia do depend on oil imports.
15:00
Speaker 1: They do actually depend on particular jet field imports from China.
15:05
Speaker 1: So all these countries essentially got their ass saved by China.
15:11
Speaker 1: And and you know, like I just recently saw a
15:15
Speaker 1: I think it was a mainstream media like a CN
15:18
Speaker 1: or BBCR. They say, oh, we don't know how, we
15:21
Speaker 1: don't actually know how China did it. We don't actually
15:25
Speaker 1: know how China did it, but it And they come
15:28
Speaker 1: always different conspiracy theories like oh, why why would China
15:32
Speaker 1: do that? Maybe like like they throw out a Tim
15:35
Speaker 1: Foil hat theories like maybe would Trump went to China
15:39
Speaker 1: he work out some secret deal with shijin pain that
15:42
Speaker 1: maybe the only reason China agreed to help out is
15:45
Speaker 1: because Trump has made some secret concession over Taiwan or
15:50
Speaker 1: something like that.
15:51
Speaker 2: And it's completely.
15:52
Speaker 1: Ridiculous because like why would you why? Why why can't
15:56
Speaker 1: you just concentrate on the facts. The fact is China
15:58
Speaker 1: we voluntarily we do is oil imports and that saved
16:02
Speaker 1: the asses of a lot of the global South nations.
16:05
Speaker 1: Just stick with that, you don't, don't don't, don't go
16:09
Speaker 1: throw out Tim Foyer hat theories with no factual evidence. Well,
16:15
Speaker 1: I like to get your take on that, doctor poll.
16:19
Speaker 2: Look two quick things. Firstly, just on the issue of
16:22
Speaker 2: the Americans chilling on in response to Iran's interventions to
16:31
Speaker 2: prohibit passage through the MANI inside of the straight of
16:37
Speaker 2: hor moves. There's a reason why it's impossible for the
16:40
Speaker 2: Americans ultimately the chill on that, because if they chilled
16:43
Speaker 2: on that, it would concede that Iran ultimately does exercise
16:47
Speaker 2: full control over the straight of hor moves. And the
16:49
Speaker 2: issue isn't just that they exercise control over the straight
16:52
Speaker 2: up horn moves and demonstrates the Americans don't have a
16:55
Speaker 2: military solution to this. It also signals the lynch pin
17:00
Speaker 2: that fundamentally catalyzes the transformation of the regional security and
17:07
Speaker 2: economic architecture. Because once it becomes evident to upstream states
17:13
Speaker 2: in the Gulf that there is no other way of
17:18
Speaker 2: passage other than by arrangement with Iran, than America's position
17:24
Speaker 2: in the Gulf really begins to fall away very quickly.
17:28
Speaker 2: It's already been severely hampered or damaged because the United
17:33
Speaker 2: States has demonstrably been able to be unable to defend
17:37
Speaker 2: its spaces across the region. But I had not tried
17:41
Speaker 2: to do something and muddy the waters so to speak,
17:44
Speaker 2: in relation to control over the straight offor moves, then
17:47
Speaker 2: it would have been game over in the region. So
17:50
Speaker 2: I think that it's a very difficult problem for the
17:53
Speaker 2: Americans without conceding ultimately their position. I struggle to see
17:58
Speaker 2: how this issue gets resolved unless one of two things happens.
18:02
Speaker 2: One that Iran is defeated and that greater Israel is
18:06
Speaker 2: imposed with American military preponderance re asserted in the region
18:09
Speaker 2: on the one hand, which seems unlikely at the moment,
18:13
Speaker 2: or on the other hand, that the Americans are ultimately
18:15
Speaker 2: booted out of the region. That seems somewhat more likely.
18:18
Speaker 2: But the Americans aren't going to walk out, you know,
18:22
Speaker 2: without without having a say about all of this. Look
18:27
Speaker 2: the China stuff. It's absolutely true that China voluntarily reduced
18:31
Speaker 2: its take of global seaborne oil, and that's had a
18:35
Speaker 2: demonstrable effect on global prices, much to the benefit of
18:40
Speaker 2: buyers in many parts of the world, including in the
18:43
Speaker 2: global South. As you say, I think the other thing
18:46
Speaker 2: that it tells us is that if all of these
18:51
Speaker 2: various attacks around the world, whether it's Venezuela, the attacks
18:55
Speaker 2: on Russian refineries, the French interceed on Russian container or
19:03
Speaker 2: petroleum tankers through to Iran, if all of this is
19:09
Speaker 2: about China, and maybe it is. If all of this
19:13
Speaker 2: is about China, well it hasn't worked very well, has it,
19:16
Speaker 2: Because what we've seen is the ability of China to
19:23
Speaker 2: dictate market prices as the world's largest buyer. This was
19:30
Speaker 2: unforeseen by many people. Clearly, there's been a view around
19:36
Speaker 2: that China has a vulnerability in relation to oil and
19:43
Speaker 2: that this was going to be the vector upon which China,
19:46
Speaker 2: or one of the vectors upon which China was to
19:48
Speaker 2: be contained. And you see this view from people inside Washington,
19:53
Speaker 2: of course, who will articulate this in various think tank reports,
19:57
Speaker 2: and you'll see this view from you various sections of
20:01
Speaker 2: the wider commentariat. I'm sure that there is an obsession
20:06
Speaker 2: about China inside Washington. So let's just accept that the
20:15
Speaker 2: politicians inside the BELTWAGH have a China bug. But it
20:21
Speaker 2: doesn't mean that these initiatives, if they are driven by
20:25
Speaker 2: that obsession, are ultimately founded on good strategy and a
20:28
Speaker 2: good understanding of how the world works. And clearly China
20:33
Speaker 2: was better able to handle this eventuality than anticipated all round.
20:39
Speaker 2: I've written a piece on my substack, a fairly detailed
20:42
Speaker 2: piece about China's preparedness for this, and it's been a
20:46
Speaker 2: preparation that's been undertaken for over two decades. This wasn't
20:51
Speaker 2: preparation it began two years ago. This was preparation that
20:53
Speaker 2: began twenty years ago. On top of that, what we've
20:58
Speaker 2: now seen is the Mai furial capacity, a genuine material
21:04
Speaker 2: power of China to dictate the global oil market, not
21:11
Speaker 2: Saudi Arabia, not the United States, not the so called
21:15
Speaker 2: swing states. On the supply side. China is the swing
21:20
Speaker 2: buyer that makes the market go up and down. And
21:25
Speaker 2: it looks like that China will enter the market when
21:28
Speaker 2: prices drop below fifty five dollars a barrel, and we'll
21:30
Speaker 2: leave the market when prices go up by eighty five
21:32
Speaker 2: or ninety dollars a barrel, which means that China is
21:36
Speaker 2: in a position now to essentially modulate global oil prices.
21:42
Speaker 2: That's real power.
21:49
Speaker 1: Yeah, and I and I'll add it on top of that.
21:54
Speaker 1: You know, as you say before, there's there's thinkkan like
22:00
Speaker 1: Hudson Institute that said, oh, this whole Iran war is
22:05
Speaker 1: Trump Administration's five D chess to get to China in
22:10
Speaker 1: order to you know, to choke off the supplies from
22:12
Speaker 1: Venezuela and Iran, to choke off China's growth. And China
22:18
Speaker 1: actually the data just came in and it showed that
22:21
Speaker 1: China's economic growth for the first half of twenty six
22:27
Speaker 1: is growing at four point seven percent. You know that
22:31
Speaker 1: that's double the rate of the US growth and UH
22:36
Speaker 1: and the European and and you know US European allies,
22:40
Speaker 1: so UH, which which makes it more ridiculous of the
22:45
Speaker 1: kind of the China will China collapse narrative that's been
22:48
Speaker 1: pedal around.
22:49
Speaker 2: UH.
22:50
Speaker 1: There was a recent a uh, let me let me
22:55
Speaker 1: look it up there. There's a recent article that came
22:59
Speaker 1: out from let's see from this is from Richard Sharma
23:09
Speaker 1: on China economy. This is an op ed in the
23:15
Speaker 1: Financial Times, and he argued that China's economy has peaked
23:20
Speaker 1: in twenty twenty one, right, and he's arguing, like because
23:26
Speaker 1: the United States has grow significantly more because you know,
23:32
Speaker 1: because this obscure the fact a lot of this is
23:35
Speaker 1: just statistic manipulation, and a lot of that is due
23:41
Speaker 1: to you know, price everything in US dollars, and it
23:47
Speaker 1: just so happens. Since twenty twenty one, there has been
23:50
Speaker 1: successful rate hikes in by the US central banks that
23:55
Speaker 1: led to the strengthening of the US dollar versus global currencies,
24:00
Speaker 1: and and and and a lot of global liquidity was
24:05
Speaker 1: being drained to support the US stock market. But the
24:11
Speaker 1: underlying economic growth of China in the last five years,
24:16
Speaker 1: I mean, I think that's it's that's undeniable. I mean
24:20
Speaker 1: to say that somehow China peaking twenty twenty one, this
24:23
Speaker 1: is like putting your head in the sand. What did
24:29
Speaker 1: happen in twenty twenty one was you know, China's real
24:33
Speaker 1: estate market peak? There was a real estate bubble in
24:37
Speaker 1: China that was that was being popped and now a
24:41
Speaker 1: lot of the money left that sector have been redirected
24:46
Speaker 1: into Chinese manufacturing and this led to what the other
24:50
Speaker 1: Western economists called the overcapacity problem in China. But at
24:58
Speaker 1: the end of the day, the real economy is based
25:01
Speaker 1: on what you make. It's not based on you know,
25:05
Speaker 1: crazy valuation of space X stocks. What's your take on that?
25:13
Speaker 2: Yeah, it was a funny story, wasn't it. It read
25:19
Speaker 2: like a bunch of copium on steroids. Really, and I
25:23
Speaker 2: feel it a little bit sorry for analysts now who
25:27
Speaker 2: are trapped in one of two possible narrative frames. One
25:33
Speaker 2: is the attempt to suggest that the China growth story,
25:39
Speaker 2: the China re emergence story, the rise of China story
25:43
Speaker 2: has peaked and it's over. So that's one thread and
25:46
Speaker 2: the other one, of course, that is running parallel and
25:49
Speaker 2: often by the same people on a different day, is
25:51
Speaker 2: that China's about the takeover the world. As we know,
25:55
Speaker 2: you can't have both, you know, you can't have a
25:57
Speaker 2: faltering on the edge of collapse system ready to take
26:01
Speaker 2: over the world because it's so big and dominant. It's
26:05
Speaker 2: a bit sad, really, and you can largely dismiss it.
26:09
Speaker 2: But you know, as you say, there were some very
26:12
Speaker 2: particular events around twenty twenty one. As a baseline, one was,
26:15
Speaker 2: of course, this property deleveraging. But what was interesting, actually,
26:20
Speaker 2: I think is not only was there a general rotation
26:23
Speaker 2: of the capital from the real estate sector into these
26:26
Speaker 2: high end manufacturing is that during this period in which
26:29
Speaker 2: China was supposedly struggling along its high tech manufacturing sector
26:35
Speaker 2: in particular evs, as well as its manufacturing of solar
26:39
Speaker 2: panels et cetera, et cetera, et cetera, batteries, you name,
26:42
Speaker 2: it actually expanded dramatically. Because had they not expanded dramatically,
26:48
Speaker 2: today's current complaints about China's export performance would not exist. Okay,
26:53
Speaker 2: so for some reason, you know, miracles upon miracles during
26:56
Speaker 2: a period of COVID when the real estate sector was
27:01
Speaker 2: being brought back down to worth. The foundations, well, the
27:05
Speaker 2: foundations for these high tech things have been laid over
27:08
Speaker 2: the previous decade, but they really got pulled together over
27:13
Speaker 2: the course of the last five years. The other thing
27:15
Speaker 2: I'd say about this is that there has been a line.
27:20
Speaker 2: This goes back to the straight uph Ho Moo situation.
27:24
Speaker 2: There was a line run during the course of March.
27:27
Speaker 2: I remember when the war was still the first forty
27:31
Speaker 2: odd days of this particular phase of the war was on.
27:34
Speaker 2: There was a line being run by certain Western observers
27:38
Speaker 2: that China had a huge vested interest in this war
27:43
Speaker 2: stopping one because of the oil situation. I think we've
27:47
Speaker 2: dealt with that more than adequately. But the other dimension
27:50
Speaker 2: is is that the impact on the global growth would
27:55
Speaker 2: be so severe that it would dramatically curtail China's trade
28:01
Speaker 2: and its export business. So they were observers who made
28:06
Speaker 2: that argument China needed to bring the war to an
28:09
Speaker 2: end because its export business would be severely damaged otherwise. Well,
28:15
Speaker 2: not only have we had four point seven percent growth
28:18
Speaker 2: for the first half of twenty twenty six. But the
28:20
Speaker 2: data for China's trade for the first half is out
28:23
Speaker 2: as well, and it shows that trade growth has increased
28:28
Speaker 2: substantially both import and exports, and in fact, China's imports
28:32
Speaker 2: have increased at a greater rate than its exports. But nonetheless,
28:36
Speaker 2: if the argument was that somehow global trade or global
28:40
Speaker 2: growth would damage China's exports, let alone it's trade overall, well,
28:44
Speaker 2: the evidence is is that all of those people who
28:46
Speaker 2: thought that that would happen were just wrong, right, just wrong,
28:50
Speaker 2: And in part they're wrong, Carl, because they have no
28:54
Speaker 2: idea what's going on in terms of the evolving contours
28:58
Speaker 2: of global value flow. The later starter showed that trade
29:03
Speaker 2: with the United States actually increased again, right, But it
29:07
Speaker 2: showed that for the first half of this year, the
29:11
Speaker 2: United States trade with China bilateral trade represented no more
29:14
Speaker 2: than eight point seven percent of total trade for China,
29:18
Speaker 2: compared to only a couple of years ago when that
29:20
Speaker 2: number was well over ten percent. So the relative significance
29:24
Speaker 2: of trade with the United States to China's trade overall
29:28
Speaker 2: continues to diminish, and that's despite trade rebounding with America,
29:34
Speaker 2: and the reason that that is the case is because
29:36
Speaker 2: trade with the rest of the world is growing much faster.
29:39
Speaker 2: Trade with the Global South, in particular the Belton Road
29:42
Speaker 2: Initiative participants, as well as trade with the EU, has
29:47
Speaker 2: been growing at a faster rate than trade overall. And
29:54
Speaker 2: so the war with Iran did not burtail China's trade.
30:01
Speaker 2: In fact, I think you could argue that for certain
30:03
Speaker 2: categories of things that actually boosted it. We saw ever
30:08
Speaker 2: since March a dramatic increase in countries around the world
30:13
Speaker 2: importing Chinese manufactured electric vehicles, Chinese manufactured clean energy systems,
30:20
Speaker 2: and Chinese manufactured batteries and storage solutions. The world has
30:25
Speaker 2: accelerated its electrification program as a response to the war
30:33
Speaker 2: against Iran. That has been to the substantial advantage of
30:38
Speaker 2: China's export sector. But it's done other things too. It's
30:42
Speaker 2: actually consolidated the reason for Chinese enterprises not only to
30:46
Speaker 2: export to these markets, but to actually set up batteries
30:48
Speaker 2: in these markets as well, to indigenize their productive capability,
30:53
Speaker 2: to be close to the markets, and to be able
30:56
Speaker 2: to serve those markets more effectively and more efficiently. So
31:01
Speaker 2: this is the other thing that's happened. Not only have
31:04
Speaker 2: we seen trade growth, We've also seen an acceleration of
31:09
Speaker 2: China's investment growth, and as the R and B value
31:13
Speaker 2: continues to progressively increase, which is, of course, by the way,
31:17
Speaker 2: what a whole bunch of these folks keep wanting. And
31:20
Speaker 2: these are the critics of China. They keep saying that
31:22
Speaker 2: the R and B is undervalued. The R and B
31:24
Speaker 2: has actually been increasing over the last twelve months. Visit
31:27
Speaker 2: the US dollars in particular. Well, investment overseas is actually
31:33
Speaker 2: even more cost effective from a Chinese enterprises point of view.
31:38
Speaker 2: So what are we going to see next? Car, What
31:40
Speaker 2: are we going to see next? Not only are we
31:41
Speaker 2: seeing a whole bunch of bloviating around trade surpluses and
31:45
Speaker 2: trade deficits, the next thing we're going to get is
31:48
Speaker 2: a whole bunch of bloviating from the usual critics about
31:51
Speaker 2: how China is increasing its investment into all these other places.
31:56
Speaker 2: It's buying things up. This is outrageous. It's buying up
31:59
Speaker 2: lands and factories and farms and whatever else, and mines.
32:03
Speaker 2: That'll be the next complaint. But you won't hear those
32:06
Speaker 2: complaints from the countries that are benefiting from it. You'll
32:09
Speaker 2: only hear those complaints from those sitting in Brussels, in London,
32:14
Speaker 2: New York and Washington, who for decades, arguably for centuries,
32:19
Speaker 2: have benefited from being able to exploit these countries instead
32:22
Speaker 2: of contributing to their capacity building. So that's my say.
32:27
Speaker 1: Speaking speaking of the currencies, you know, as you mentioned,
32:30
Speaker 1: Chinese currency is actually one of the field currency right
32:34
Speaker 1: now that's actually appreciating against the US dollars. You know,
32:38
Speaker 1: across much of the world, but particularly in Asia, Asian
32:43
Speaker 1: currencies are have sharply devaluated against the US dollars. This
32:48
Speaker 1: included global sales countries like the Philippines, like Indonesia, Thailand,
32:53
Speaker 1: but also more advanced economies like Japan and South Korea
32:59
Speaker 1: and all these because you know, all these countries depended
33:02
Speaker 1: on oil imports from the person Gulf for one and
33:08
Speaker 1: and uh and and another reason is you know, the
33:12
Speaker 1: capital has been suck out of these countries to support
33:16
Speaker 1: the increasingly stratos vehicle valuation of the U s stock market
33:23
Speaker 1: and and uh so so so trying to certainly stand out,
33:27
Speaker 1: and you also point into the fact that, uh, you know,
33:32
Speaker 1: the dollar dominance in the global trade system is actually destabilizing, uh,
33:41
Speaker 1: you know, like it's actually causing a lot of hardship
33:44
Speaker 1: and eraise the question why countries, especially when they're not
33:49
Speaker 1: trading with United States directly, when they're trading with each other,
33:52
Speaker 1: why do they need to use the US dollars when
33:57
Speaker 1: you know it's they're put them come completely at the
34:01
Speaker 1: whim of US Central Bank. So this is where I
34:06
Speaker 1: think people are looking for alternatives. Now, do you think
34:12
Speaker 1: the R and B settlement would be able to provide
34:17
Speaker 1: that alternative in global trade to the US.
34:20
Speaker 2: Hours Well, the short answer is yes. Now, these things
34:25
Speaker 2: don't materialize overnight, and there's no single moment that sort
34:30
Speaker 2: of heralds a new world monetary order. And that's largely
34:35
Speaker 2: because monetary systems evolve rather than have these clean black
34:40
Speaker 2: and white breaks. They evolve in part because the economic
34:44
Speaker 2: foundations and the systems that they're connected to also evolve
34:49
Speaker 2: only slowly. So for those of us who you know,
34:53
Speaker 2: have grown up in the age of social media, where
34:55
Speaker 2: we expect instant results, this is not the kind of
35:00
Speaker 2: circumstance that you would expect for the evolution of trading
35:04
Speaker 2: systems and monetary systems. So what's been happening well over
35:08
Speaker 2: the last five or six years. The R and B
35:12
Speaker 2: has been increasing its role as a settlement currency for
35:19
Speaker 2: trade purposes. The US dollar, of course remains the most
35:21
Speaker 2: substantial settlement currency, but the R and B has been
35:25
Speaker 2: increasing its role. It is now more significant as a
35:29
Speaker 2: settlement currency for trade with China than before. In fact,
35:33
Speaker 2: it's about fifty about fifty five percent of trade with
35:37
Speaker 2: China is now settled in the R and B, and
35:39
Speaker 2: it overtook the US dollar only on the last eighteen
35:43
Speaker 2: months or so, So the R and B, insofar as
35:47
Speaker 2: doing business with China, is now the most significant currency.
35:50
Speaker 2: The second thing, I think it's important to note that
35:52
Speaker 2: China has developed and has operated an alternative set of
35:56
Speaker 2: rails to what people call rails or systems enabled the
36:00
Speaker 2: tracking of these accounts, which is separate to the Swift system,
36:06
Speaker 2: which deals with interbank messaging, particularly for transactions made in
36:14
Speaker 2: US dollars. And because there are these new rails, so
36:20
Speaker 2: it's a SIP system c IPS. It was launched in
36:23
Speaker 2: twenty fifteen. There is a growing proportion of global trade
36:28
Speaker 2: settlements that is no longer tracked on the Swift network.
36:32
Speaker 2: In other words, they're on a different set of ledges altogether,
36:35
Speaker 2: So that's the second thing that's happened. The reason why
36:38
Speaker 2: that's significant, of course, is that from an interventions point
36:41
Speaker 2: of view, it means that they are no longer within
36:43
Speaker 2: reach the direct reach of the American ferry three or
36:47
Speaker 2: the American political class, unlike transactions that are enabled through
36:54
Speaker 2: interbank messaging on Swift, or of course when US dollars
36:58
Speaker 2: are actually used, which are out and four and kept
37:01
Speaker 2: track of by the FED. Because of this, countries are
37:06
Speaker 2: increasingly seeing the R and B as a safe settlement currency,
37:14
Speaker 2: a means of payment because it's not subject to the
37:18
Speaker 2: risks of being frozen or confiscated by the Americans. And
37:24
Speaker 2: it's also one that makes a lot of practical sense
37:27
Speaker 2: because more and more countries are trading more and more
37:32
Speaker 2: with China, and if you're doing more and more business
37:34
Speaker 2: with China, you do have to ask the obvious question,
37:38
Speaker 2: why is it that the business that we do with
37:42
Speaker 2: companies in China is being a zacted using the currency
37:47
Speaker 2: of a country who's not a party to these transit transactions.
37:53
Speaker 2: So President Lula asked the obvious question, what earlier this
37:56
Speaker 2: year or late last year, why is it that countries
38:01
Speaker 2: in Latin America who do business with each other do
38:05
Speaker 2: business with each other in US dollars. There's no reason
38:08
Speaker 2: to It can be done in other ways. China's also
38:13
Speaker 2: been progressively expanding the digital infrastructure to make onboarding into
38:20
Speaker 2: this process easier, quicker, and ultimately more robust. The ermB
38:28
Speaker 2: was launched as trial, and in fact it's still ostensibly
38:32
Speaker 2: in trial, and I suspect it's going to be being
38:35
Speaker 2: trialed for quite a number of years to come, but
38:37
Speaker 2: it's in real life trial. It was launched four or
38:41
Speaker 2: five years ago and with both domestic applications as well
38:46
Speaker 2: as cross border applications. The cross border applications are now
38:53
Speaker 2: going to be supported in a few ways. One is
38:57
Speaker 2: for multi central bank digital currency settlements. It'll be supported
39:01
Speaker 2: through a piece of infrastructure that was developed through a
39:05
Speaker 2: consortium project or spaced at the time by the Bank
39:08
Speaker 2: of International Settlements called Enbridge and Mbridge is a distributed
39:13
Speaker 2: ledger based system where participating central banks run a note
39:18
Speaker 2: of the ledger and no single bank can control the
39:23
Speaker 2: ledger and the recording of transactions on that ledger, provided
39:27
Speaker 2: that the rules are followed. Mbridge went live with a
39:34
Speaker 2: minimum viable product about eighteen months ago. And whilst it
39:38
Speaker 2: hasn't set the house on fire in volume terms, it's
39:42
Speaker 2: supported something like from memory and I might be wrong
39:46
Speaker 2: on this, about one hundred and sixty billion dollars worth
39:49
Speaker 2: of transactions, most of which is actually in E R
39:53
Speaker 2: and B or digital RMB. The reason why mbridge is
39:57
Speaker 2: significant in this is because it has been designed to
40:00
Speaker 2: specifically the support national currency based settlements, where country and
40:04
Speaker 2: country B are facilitating trade between companies in their respective countries,
40:09
Speaker 2: and instead of using the currency of country C the
40:12
Speaker 2: United States allow, for example, they literally transact in the
40:15
Speaker 2: currencies of countries A and B. The most recent piece
40:20
Speaker 2: of infrastructure that's been developed is one called sea bets,
40:25
Speaker 2: and sea bets is shrugby DA in Chinese. I can't
40:30
Speaker 2: remember what the acronym stands for, but it's a portal.
40:35
Speaker 2: It's a gateway that in effect sits on top of SIPs,
40:39
Speaker 2: which is for R and B settlements, and m bridge,
40:43
Speaker 2: which is for CBDC multinational CBDC settlements and seabits now
40:49
Speaker 2: sits on top of that as a gateway which enables
40:52
Speaker 2: participating banks, central banks and commercial banks, and also non
40:56
Speaker 2: bank financial service providers to interact with these systems now
41:02
Speaker 2: through relatively well, I was going to say straightforward, but
41:07
Speaker 2: nothing's ever quite straightforward in this space, but relatively easy
41:10
Speaker 2: to comprehend and understand technical interfaces. So it will take
41:19
Speaker 2: a central bank accounter party central bank somewhere in the
41:22
Speaker 2: order of six to twelve months worth of technical work
41:27
Speaker 2: to fully embed and integrate into these sea bets system,
41:33
Speaker 2: which enables them to participate in both SIPs digitally and
41:39
Speaker 2: also the CBDC ecosystem digitally in a combined way. If
41:45
Speaker 2: you integrate at a lower level, right, with fewer functionality
41:49
Speaker 2: and fewer services. Basically, it's a project that could be
41:53
Speaker 2: implemented between three to six months, and in fact you
41:56
Speaker 2: could get a trial up and running inside three months.
41:59
Speaker 2: So this is a very significant step forward. Not because
42:02
Speaker 2: it's a new set of rails. What's significant about this
42:06
Speaker 2: is that it's a new it's a new and easier, consolidated,
42:10
Speaker 2: single platform way of integrating right. So often with these
42:14
Speaker 2: things you've got to have an easy way to onboard,
42:18
Speaker 2: and when you've got multiple rails, steps and the mbridge
42:24
Speaker 2: system in this particular case, you want to actually have
42:29
Speaker 2: a consolidated single point of view right one window. What
42:33
Speaker 2: happens underneath the surface doesn't really matter so long as
42:38
Speaker 2: your interface delivers you the convenience of a single view,
42:42
Speaker 2: and that's what this system now does. I would expect
42:45
Speaker 2: as a result of that, over the next two to
42:48
Speaker 2: five years that the digital RMB will expand its role
42:55
Speaker 2: in cross border trade. Remember that when it was first
42:57
Speaker 2: launched four years or so ago, it's in simple focus
43:00
Speaker 2: was domestic. But now it is going to become a
43:03
Speaker 2: more significant means of payment across border transactions. And at
43:08
Speaker 2: the same time, because the infrastructure now exists and is
43:12
Speaker 2: easy to interface with and can be activated, the CBDC
43:16
Speaker 2: projects in other countries, whether they're up and running or
43:20
Speaker 2: whether they're part of research and development, will actually begin
43:24
Speaker 2: to be fast tracked as well. And I'll give you
43:26
Speaker 2: one example. This is probably a bit more technical and
43:30
Speaker 2: detailed than maybe some of our normal discussions, but I
43:34
Speaker 2: think people who are interested in global self developments and
43:36
Speaker 2: transformations of a multipolar world would appreciate the fact that
43:42
Speaker 2: these things are happening. Even though they're not the big
43:45
Speaker 2: headline stuff. These are the things that actually make the
43:47
Speaker 2: transition to a multipolar economic foundation globally possible. Nigeria is
43:55
Speaker 2: a very interesting case in point. And Nigeria launched its
43:58
Speaker 2: own CBDC years ago and it's had unlet's just say,
44:04
Speaker 2: modest success for now, certainly has not met expectations of
44:09
Speaker 2: the Central Bank in Nigeria, et cetera, et cetera. But
44:13
Speaker 2: with the opportunity to interact with the Chinese CBDC ecosystem
44:19
Speaker 2: through an Enbridge platform which enables national currency base trade
44:24
Speaker 2: to take place, there's every likelihood that the Nigerian CBDC
44:30
Speaker 2: will gain greater traction as a medium of exchange for
44:35
Speaker 2: international settlements. I should also say, and we'll duct oil back,
44:40
Speaker 2: I guess in the sense. Back to the question of Iran,
44:44
Speaker 2: there is no reason why a place like Iran could
44:48
Speaker 2: not make use of this infrastructure as well. We know
44:51
Speaker 2: that Iran has been sanctioned for a long time and
44:54
Speaker 2: continues to be sanctioned by the United States. It has
44:59
Speaker 2: engaged each in trade with China, sometimes through what is
45:03
Speaker 2: in effect BARTA, but also through one particular bank in
45:09
Speaker 2: China in particular that has been set aside in quarantine
45:12
Speaker 2: to handle transactions with Iranian counterparts. But something like a
45:19
Speaker 2: CBDC style blockchain based system such as Mbridge would give
45:27
Speaker 2: comfort to a country like Iran that participation in this
45:33
Speaker 2: particular system protects it not only from for the most part,
45:39
Speaker 2: from the sanctions of Americans, but it also protects it
45:44
Speaker 2: from the risk of being sanctioned by anyone else. And
45:48
Speaker 2: the reason is is that as a node if they did,
45:51
Speaker 2: and as big if but if the Iranian Central Bank
45:55
Speaker 2: was a node in this particular Mbridge network, then its
46:02
Speaker 2: position cannot be overrun by the others. This, by the way,
46:06
Speaker 2: is I suspect going to be the fundamental infrastructure and
46:09
Speaker 2: integration points for the Bricks payments platform as well. So
46:16
Speaker 2: Bricks in twenty twenty four when they met in Kazan
46:20
Speaker 2: resolved to progress discussions around a bricks payment system. Now,
46:27
Speaker 2: of course, some people got carried away and thought that
46:29
Speaker 2: that meant meant a bricks currency. No, that's not going
46:32
Speaker 2: to happen, certainly not for the next five ten years,
46:36
Speaker 2: notwithstanding a few crypto plays that emerged in and around
46:40
Speaker 2: the time which presented themselves as bricks related. What's likely
46:44
Speaker 2: to be happening is that the participating countries are exploring
46:49
Speaker 2: the technical means by which you can have interoperability between
46:56
Speaker 2: different computer systems that where as central banks operate, And
47:02
Speaker 2: to do that requires quite a lot of detailed work
47:06
Speaker 2: at a technical level, quite a lot of important detailed
47:09
Speaker 2: work at a database schema level, and ultimately you need
47:15
Speaker 2: policy and other related alignments. So you've got to get
47:18
Speaker 2: a lot of ducks lined up to pull these things off.
47:22
Speaker 2: And I think the technical foundations now are clearly there,
47:25
Speaker 2: and these technical foundations can be leveraged. So if Mbridge
47:29
Speaker 2: isn't used for bricks per se, there is no reason
47:33
Speaker 2: why the Mbridge design architecture in implementation, which incidentally has
47:38
Speaker 2: been run basically by Chinese software developers, could not be
47:43
Speaker 2: emulated in an environment where bricks nations run their own
47:49
Speaker 2: parallel system that is more or less the same as
47:52
Speaker 2: an Mbridge system with bridges that link the two together.
47:57
Speaker 2: So there's a lot going on in this cross border
47:59
Speaker 2: currency space, mainly at the technical level, but it's these
48:03
Speaker 2: technical foundations which will ultimately make it possible for the
48:08
Speaker 2: greater for ambitions at a strategic level too, increase the
48:12
Speaker 2: role of the R and B as a global settlement's currency,
48:15
Speaker 2: reduced risks of exposure to US sanctions, it can become
48:21
Speaker 2: real Sorry for going over time on that one.
48:26
Speaker 1: Okay, no worries. I hope that gives a very comprehensive
48:32
Speaker 1: picture to our audience the progress on the R and
48:36
Speaker 1: B settlements. But now I want to switch the lens
48:40
Speaker 1: a little bit to the recent Chinese missile test in
48:46
Speaker 1: South Specific because that creates a stir up a whole
48:49
Speaker 1: hornet's nest in the Angle five eye members like Australia
48:55
Speaker 1: and New Zealand, and there are opping arms about China
48:59
Speaker 1: firing a nuclear capable missile into a nuclear free a
49:04
Speaker 1: nuclear free zone in the Pacific. This is highly destabilizing,
49:08
Speaker 1: blah blah blah. But I never heard them saying a
49:12
Speaker 1: peep about the US testing of miss house in the
49:15
Speaker 1: same area. And actually went back to count it the
49:18
Speaker 1: number of times that China has done test missile tests
49:22
Speaker 1: in in South Pacific from the beginning of human history
49:28
Speaker 1: till now. I counted total of three times when China
49:31
Speaker 1: performed missile tests in South Pacific in an early nineteen
49:35
Speaker 1: eighties it is an ICBM test. The last one was
49:39
Speaker 1: in twenty twenty four and now this one. The total
49:41
Speaker 1: of three tests. Now United States have conducted hundreds hundreds
49:47
Speaker 1: of tests in the same area from nineteen sixty five
49:52
Speaker 1: to the present, and it's involved mostly ICBMs and also
49:58
Speaker 1: sub launched missiles. So never a peep from Australia or
50:05
Speaker 1: New Zealand. What's your take on this, doctor, Park.
50:10
Speaker 2: Look, when these countries get serious about nuclear submarines potentially
50:17
Speaker 2: carrying nuclear weapons, or American bombers that might be carrying
50:22
Speaker 2: nuclear weapons landing in Australia, but the Australian government not
50:26
Speaker 2: being willing to demand to know whether or not they
50:30
Speaker 2: in fact have nuclear weapons on board, Well, if they
50:33
Speaker 2: actually got serious about those issues, and you might take
50:37
Speaker 2: the expressed concerns about China's missile tests a little bit
50:43
Speaker 2: more seriously. But it is clearly a fairly large dose
50:50
Speaker 2: of hypocrisy at work, and in today's hyper sensitive geopolitical theater,
50:57
Speaker 2: it's of course what you'd expect, but it's hard to
50:59
Speaker 2: take it particularly seriously. What I think is actually more
51:03
Speaker 2: serious is who the message was really intended for and
51:08
Speaker 2: what the message was. The message wasn't intended for New
51:13
Speaker 2: Zealand or Australia, let alone the small islands nations of
51:18
Speaker 2: the Pacific. The message is to the United States, because
51:24
Speaker 2: at the end of the day, the security or the
51:30
Speaker 2: insecurity environment, if you're looking at things from Beijing's point
51:33
Speaker 2: of view in the Western Pacific, it's all about American pressure,
51:40
Speaker 2: military pressure through its network of bases in the Western
51:45
Speaker 2: Pacific aimed at containing China. What this missile test demonstrated
51:55
Speaker 2: was firstly that China has ability to deliver a long
52:04
Speaker 2: range intercontinental strike as a second strike capability. That's an
52:12
Speaker 2: important point to ramp home to military planners on the
52:16
Speaker 2: other side, who will not mistake the signal. Serious people
52:23
Speaker 2: in the business of defense planning, not the shrill people
52:28
Speaker 2: you know at the top of the department, but the
52:30
Speaker 2: people who actually operationalized plans, actually understand what the signal is,
52:34
Speaker 2: and that is that China has a genuine second strike capability.
52:38
Speaker 2: It can hit back even if it got struck first,
52:42
Speaker 2: which is a very significant piece of nuclear deterrence. It's
52:47
Speaker 2: part of the nuclear deterrence dright vector. That's the first thing.
52:53
Speaker 2: The second thing, Carl, is that it sent the signal
52:59
Speaker 2: that if the Americans believe that a conflict or a
53:07
Speaker 2: war with China against China around the question of Taiwan
53:14
Speaker 2: or the South China Sea, for that matter, is something
53:17
Speaker 2: that can be geographically contained, such as the war in
53:23
Speaker 2: Ukraine is contained to Ukraine, or you can contain the
53:27
Speaker 2: war in the Persian Gulf to the Persian Gulf. If
53:31
Speaker 2: the Americans think that they can somehow once again engage
53:36
Speaker 2: in a war on someone else's front doorsteps, thinking that
53:42
Speaker 2: mainland United States cities and towns are somehow immune from
53:46
Speaker 2: all of that, and that at some point the Americans
53:49
Speaker 2: can pack up and go back home, having left the
53:52
Speaker 2: mess behind, well they will be sorely mistaken, because this
53:58
Speaker 2: capability remind people that there will be no geographical containment
54:04
Speaker 2: if the Americans sought to prosecute a war against mainland China,
54:10
Speaker 2: that this will be a war that will see American
54:14
Speaker 2: mainland infrastructure targeted. Forget about Guam. Guam is inside twenty
54:21
Speaker 2: minutes or thereabouts at mac ten, Hawaii is within reach,
54:29
Speaker 2: But so is New York and so Lo Angelests, and
54:32
Speaker 2: so Washington, DC, and every other major city on the
54:35
Speaker 2: American mainland. This isn't a threat. It is a pointed
54:41
Speaker 2: reminder that this is not a war that the Americans
54:46
Speaker 2: should be contemplating lightly. If they think they can get
54:49
Speaker 2: away with a war in someone else's part of the
54:51
Speaker 2: world and not be affected themselves. The last lot of
54:56
Speaker 2: people that this little test was meant to explain them
55:01
Speaker 2: or remind people of some realities too, are, of course,
55:06
Speaker 2: the folks sitting in Manila, Tokyo, Soul, and Taipei. The
55:12
Speaker 2: message isn't that those places will be struck by these
55:15
Speaker 2: kind of missiles. The message to them is to fully
55:21
Speaker 2: understand that because the Americans understand that mainland America would
55:28
Speaker 2: be targeted in retaliation for any attacks on China, that
55:35
Speaker 2: none of these countries should expect the United States to
55:38
Speaker 2: come to their aid or to defend them. Put plainly, Manila, Stole, Tokyo,
55:45
Speaker 2: and Taipei need to understand that Washington will not put
55:49
Speaker 2: Washington or any other American city at risk in their defense.
55:54
Speaker 2: They are going to be pushed to the front and
55:57
Speaker 2: they will be on their own. Need to think very
56:00
Speaker 2: seriously about what that future looks like for them, because
56:05
Speaker 2: for the best part of seventy years they've conducted their
56:09
Speaker 2: business in the region on the assumption that firstly, the
56:13
Speaker 2: Americans will be there, and secondly that the Americans have
56:18
Speaker 2: the capacity and the preponderance to prevail. None of those
56:23
Speaker 2: assumptions can be dependent upon anymore, which means that forward
56:29
Speaker 2: thinking people in Manila, Taipei, Soul, and Tokyo need to
56:36
Speaker 2: be thinking about what a post America Asia looks like
56:41
Speaker 2: and what role they want to play in contributing to
56:45
Speaker 2: that asia. Do they want to play a destabilizing role
56:49
Speaker 2: in the hopes of keeping the American hegemon attached to
56:53
Speaker 2: the region, some might Do they want to play a
56:56
Speaker 2: constructive role in reframing an Asian security that actually delivers
57:01
Speaker 2: genuine security and prosperity. That's a hard question to answer
57:06
Speaker 2: in the short term, but that's what this missile test does.
57:11
Speaker 2: The fact that there's a little bit of anxiety and
57:13
Speaker 2: a bit of bloviating, and the fact that some folk,
57:16
Speaker 2: particularly the mouthpieces of the military industrial complex, user to
57:21
Speaker 2: ramp up anxieties to sell a few more missiles in
57:23
Speaker 2: the short term, well, of course you'd expect that, but
57:26
Speaker 2: that's not where the serious people are watching exactly.
57:32
Speaker 1: And speaking of the thousand rockets, China just recently landed
57:39
Speaker 1: a well, China became the second nation on Earth to
57:45
Speaker 1: land successfully. A reusable long march can be booster you know.
57:52
Speaker 1: So after Space Ax and more recently Blue Origin. Now
57:58
Speaker 1: China possessed the capability to uh to to recycle recapture
58:05
Speaker 1: its rocket boosters. This is this is a big news.
58:08
Speaker 1: I mean uh to think that China. There's I see
58:12
Speaker 1: a lot of copiums on social media say, oh China,
58:16
Speaker 1: just this is another intellectual property theft. You know how
58:20
Speaker 1: many spies in China carry out the stealing of the design,
58:25
Speaker 1: which is totally un serious because because the China rocket
58:31
Speaker 1: recaptured design is a radically different one from the one
58:35
Speaker 1: that's used by Musk. You know, La Musk has two
58:38
Speaker 1: designs for the falcon that they have a lander that
58:42
Speaker 1: that that do vertical landing and then they have the
58:46
Speaker 1: chopstick design to catch the starship, whereas China using these
58:53
Speaker 1: nets on ocean and they readjust the cables able to
58:58
Speaker 1: catch the catch the boots in a completely different design.
59:02
Speaker 1: But again there's a lot of there's a lot of
59:05
Speaker 1: American copium. But at the end of the day, all
59:08
Speaker 1: these copius amount to nothing because it's it's all about capability,
59:13
Speaker 1: as you say about the Chinese missile test or South
59:18
Speaker 1: specific at the end of the day, it's about capability.
59:22
Speaker 1: What capability you possess now, China also possessed the capability
59:27
Speaker 1: to recapture it's rocket booster, which will significantly make it
59:36
Speaker 1: cheaper to do satellite launches. This is one area China
59:42
Speaker 1: still remains behind United States, particularly behind space X. Space
59:48
Speaker 1: X did have a ten year lead. But I have
59:52
Speaker 1: you know, but whenever China does something, we ever China
59:55
Speaker 1: figure out something, they always very quickly figure out to
1:00:01
Speaker 1: commercialize it and commodify it to make it significantly affordable.
1:00:07
Speaker 1: And I think that's what's going to happen here. And
1:00:09
Speaker 1: I think that's a lot of the copimbilies, kind of
1:00:13
Speaker 1: the deep American anxiety of China catching up. What is
1:00:18
Speaker 1: your take on that, doctor?
1:00:19
Speaker 2: Only two things, well three things. Firstly, I think you
1:00:23
Speaker 2: and TP Jang did a great show on this not
1:00:26
Speaker 2: that long ago, right, so folks should if they actually
1:00:29
Speaker 2: want to get into this properly go and have a
1:00:32
Speaker 2: look at that. The two things I'll say very quickly
1:00:36
Speaker 2: is firstly, on the commercialization front, well, it will be
1:00:41
Speaker 2: a commercial competitor two SpaceX. And it's probably worth noting
1:00:47
Speaker 2: that after its debut on the Nastaq, space Sex's market
1:00:54
Speaker 2: cap has dramatically plummeted. That may or may not be
1:00:58
Speaker 2: a remark on the company itself, but all I'll say
1:01:00
Speaker 2: is that it resembles a pump and dump scheme almost perfectly.
1:01:08
Speaker 2: That's the first thing. The second thing, though, I think,
1:01:11
Speaker 2: you know, from a geopolitical perspective and a capability perspective,
1:01:15
Speaker 2: is exactly as you say. It reduces the cost and
1:01:18
Speaker 2: increases the frequency at which China is going to out
1:01:22
Speaker 2: a launch satellites. And this is critical because from China's
1:01:27
Speaker 2: point of view, it is still well short of where
1:01:30
Speaker 2: SpaceX is in terms of the number of satellites in orbit,
1:01:37
Speaker 2: and that ultimately does affect the ability of China to
1:01:42
Speaker 2: you know, run the kind of defense architecture that would
1:01:50
Speaker 2: rely upon you know, satellite communications and satellite based imaging. Right,
1:01:55
Speaker 2: So this is very significant. Arguably, there are two two
1:02:01
Speaker 2: domains where China would view itself I think as still
1:02:07
Speaker 2: being behind in a way that has some material significance.
1:02:12
Speaker 2: One is satellites and the ability to launch them. That's
1:02:18
Speaker 2: been resolved insofar as solving this recapture problem. The second
1:02:25
Speaker 2: one is submarines, and we don't need to get into
1:02:29
Speaker 2: that today, but I think that China has also been
1:02:32
Speaker 2: of course investing substantially both in its own submarine capabilities
1:02:35
Speaker 2: but also in all sorts of technologies to improve its
1:02:38
Speaker 2: ability to detect American nuclear submarines chasing through the ocean.
1:02:46
Speaker 2: So on both of those fronts, Beijing, I think the
1:02:53
Speaker 2: realistic people in Beijing would recognize that there is a
1:02:58
Speaker 2: capabilities gap that needs to be bridged. Washington, of course,
1:03:01
Speaker 2: will be seeking to make it more difficult for that
1:03:05
Speaker 2: bridge to be gapped, either by continually improving its technologies.
1:03:10
Speaker 2: Debatable that seems to be something that Washington doesn't seem
1:03:14
Speaker 2: so committed to these days. Instead, it seems to be
1:03:18
Speaker 2: more committed to a Tanya Harding style strategy, which is
1:03:21
Speaker 2: to try and trip others up. So yeah, look, I
1:03:25
Speaker 2: think it is a tremendously significant thing, not just for
1:03:28
Speaker 2: China actually, but for countries around the world that have
1:03:31
Speaker 2: long been denied the ability to launch their own satellites
1:03:35
Speaker 2: for their own purposes. And you know, for the global self,
1:03:39
Speaker 2: this is fantastic news. Yeah.
1:03:45
Speaker 1: And also, as you say, you know, like the one
1:03:48
Speaker 1: of the start links capability is tied with national security.
1:03:53
Speaker 1: You know, Pentagon in particular has a vested interest to
1:03:57
Speaker 1: have eyes over or Earth orbit to monitor battlefield all
1:04:02
Speaker 1: around the globe. And this is one area that China
1:04:06
Speaker 1: wished to catch up quickly. You know, we saw how
1:04:09
Speaker 1: important salite intelligence is during the recent Yran War, and
1:04:14
Speaker 1: I think Iran did receive some help in terms of
1:04:18
Speaker 1: satellite intelligence and targeting from from their access to the
1:04:23
Speaker 1: Chinese betal network. And this, this, this, this latest success
1:04:28
Speaker 1: of China will help them to ramp up that capability
1:04:32
Speaker 1: as well. And they they're trying to build their own
1:04:36
Speaker 1: constellations in the sky to compete with Starlink. And one
1:04:40
Speaker 1: of the things that Elon Musk is trying to do
1:04:43
Speaker 1: is he's trying to clutter the lower Earth orbit was
1:04:48
Speaker 1: his own satellite at least to take up all the
1:04:51
Speaker 1: best positions so there will be no space leftover for
1:04:56
Speaker 1: lake commerce. You know this. So this is a significant
1:04:58
Speaker 1: hurdle that China is to overcome, and I have four
1:05:01
Speaker 1: feet in them pulling it through, giving their their past records,
1:05:06
Speaker 1: so everything looks good. I'll give you the last word,
1:05:12
Speaker 1: Doctor Pile on this show.
1:05:16
Speaker 2: Well, once again, it's been an eventful fortnite. Every time
1:05:22
Speaker 2: I come and join you, I expect that we'll get
1:05:25
Speaker 2: to talk about more fun things, whether it's you know,
1:05:29
Speaker 2: travel in the Tibetan foothills or travel through the ancient
1:05:33
Speaker 2: Tea horse trails or something right, But unfortunately, for the
1:05:39
Speaker 2: time being, the world conspires against us. The good news
1:05:44
Speaker 2: come is that I think that the broad trajectory of
1:05:50
Speaker 2: global self development, particularly as a result of China's resilience,
1:05:55
Speaker 2: it's heft, and its technical and material capabilities, remains something
1:06:00
Speaker 2: that is unshakable and people need to remember that. I
1:06:05
Speaker 2: think the bad news is is that the United States
1:06:09
Speaker 2: has yet to come to terms with the fact that
1:06:11
Speaker 2: it could actually prosper in a multi polar world, but
1:06:17
Speaker 2: instead seeks to prosecute wars around the place, and these
1:06:21
Speaker 2: wars are likely to intensify for the foreseeable future. Is
1:06:25
Speaker 2: my own bad gut feeling rather than moderate and so
1:06:34
Speaker 2: we are going to continue to be in an era
1:06:37
Speaker 2: of instability and risk. One thing I'll say, also, just
1:06:44
Speaker 2: very very quickly, Kyle, is that I do a lot
1:06:46
Speaker 2: of work on what I say is what happens upstream,
1:06:51
Speaker 2: and that's really in the not even in the R
1:06:53
Speaker 2: and D space, but really just in the R space
1:06:56
Speaker 2: more than anything. The research space focus very much on
1:06:59
Speaker 2: materials research, what's happening in the energy sector and those
1:07:03
Speaker 2: sorts of things, And there are some very very exciting
1:07:07
Speaker 2: developments coming out of laboratories, Chinese laboratories in new materials
1:07:15
Speaker 2: and the new materials that can be substitutes for petrochemicals
1:07:22
Speaker 2: and plastics, through to developments in better use of copper,
1:07:29
Speaker 2: all sorts of things that will ultimately lead to a
1:07:34
Speaker 2: reduced impact on the world as we continue to harness
1:07:40
Speaker 2: energy from nature and try to make energy useful for humans. So,
1:07:46
Speaker 2: you know, from a big picture, long point of view,
1:07:49
Speaker 2: notwithstanding all of the issues that I think bring dark
1:07:54
Speaker 2: clouds to us, I think we can also put a
1:08:02
Speaker 2: little bit of money, if you will, on the work
1:08:04
Speaker 2: that scientists are doing in the upstream laboratories, which I
1:08:08
Speaker 2: think open up spaces for humans humanity to achieve high
1:08:15
Speaker 2: living standards for people across the world, not just in
1:08:19
Speaker 2: the first field, but in the global self and in
1:08:21
Speaker 2: ways that hopefully also have much less of an impact
1:08:25
Speaker 2: on the planet. So that's that's my parting thought for now.
1:08:31
Speaker 1: I just realized that I actually totally forgot one topic
1:08:35
Speaker 1: with this, The China Philippines new territorial dispute over the
1:08:41
Speaker 1: Buttanz Island, which was precipitated by you know, the US
1:08:48
Speaker 1: and Japan's plan to put missiles there into a China
1:08:52
Speaker 1: in case of a Taiwan contingency. Now, do you want
1:08:55
Speaker 1: to save that for.
1:08:56
Speaker 2: No, just very quickly, we're going to have a long
1:08:59
Speaker 2: chat of next time. But there's been a whole bunch
1:09:02
Speaker 2: of stuff happening in that part of the world right
1:09:04
Speaker 2: just south of Taiwan Island, Philippines, Taiwan, and also north
1:09:10
Speaker 2: of Taiwan Island in between Taiwan and Japan, and all
1:09:16
Speaker 2: of this has I think been quite counterproductive from the
1:09:20
Speaker 2: point of view of either the Philippines or the separatists
1:09:25
Speaker 2: on Taipei, or the hardliners in Washington, or even the
1:09:29
Speaker 2: hardliners in Tokyo, because it's done nothing more than open
1:09:34
Speaker 2: a window and invite mainland China to extend its naval
1:09:41
Speaker 2: patrols and its coastguard patrols and the rest of its
1:09:47
Speaker 2: legal and other interventions to make that footprint bigger and
1:09:53
Speaker 2: stronger and more permanent. Right, so new normals are getting created,
1:09:57
Speaker 2: right that didn't exist before Nancy Pelosi started that it
1:10:00
Speaker 2: was worth her while dropping into Taipei, and ever since
1:10:05
Speaker 2: then you know, we've had the Pelosi pulse working its
1:10:09
Speaker 2: way through this part of the world that has literally
1:10:11
Speaker 2: seen China's naval or at least maritime footprint right through
1:10:18
Speaker 2: its navy and through its coast guards, expand and become
1:10:24
Speaker 2: more permanent. This is a resource war in a sense,
1:10:29
Speaker 2: or a resource contest, more to point that neither Japan,
1:10:33
Speaker 2: nor the Philippines nor Taypei can actually win. China is
1:10:37
Speaker 2: the only industrial superpower in the world. What they're biting
1:10:44
Speaker 2: off here is a contest that requires material capability. Right
1:10:52
Speaker 2: If that's if that's the terrain that they want to
1:10:56
Speaker 2: play on, right, I don't know what is going through
1:11:00
Speaker 2: their head. Why do you choose the terrain in which
1:11:04
Speaker 2: those who you view as your adversaries have the strongest
1:11:08
Speaker 2: hand to play. I don't understand the strategic thinking other
1:11:12
Speaker 2: than to think that they've been pressured to a point
1:11:17
Speaker 2: that they have become increasingly desperate.
1:11:19
Speaker 1: So that's it, very well said. If people wish to
1:11:24
Speaker 1: follow your doctor power, where would they go?
1:11:27
Speaker 2: Substackwarrickpal dot substack dot com. And needless to say, I
1:11:32
Speaker 2: think people should go to Amazon and have a look
1:11:35
Speaker 2: for my latest book thermoeconomics in a time of monsters.
1:11:40
Speaker 1: Thank you very much, Doctor Power, for making your time
1:11:42
Speaker 1: to speak to us and to my audience. Thank you
1:11:46
Speaker 1: for tuning in until next time. Bye bye,