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Sharp China: Hong Kong Article 23; No Plenum and Another Market Setback; Trump and Taiwan; TikTok in Congress · Sharp China Podcast

• 0:04
  SPEAKER_01: Hello and welcome back to another episode of Sharp China.
• 0:08
  SPEAKER_01: I'm Andrew Sharp and on the other line, Bill Bishop.
• 0:12
  SPEAKER_01: Bill, how you doing?
• 0:14
  SPEAKER_00: Hello!
• 0:14
  SPEAKER_00: I always wanted to say it like you.
• 0:16
  SPEAKER_00: I'm good, thanks.
• 0:17
  SPEAKER_00: How are you?
• 0:17
  SPEAKER_00: And I hope everyone's doing well.
• 0:19
  SPEAKER_01: I'm doing well.
• 0:20
  SPEAKER_01: You know, somehow it's February all of a sudden.
• 0:23
  SPEAKER_01: Welcome to February, first episode of the month.
• 0:26
  SPEAKER_01: So we're going to be public this week.
• 0:28
  SPEAKER_01: Let's try to avoid getting cancelled.
• 0:30
  SPEAKER_00: Oh, that's right.
• 0:31
  SPEAKER_01: be on your P's and Q's here.
• 0:33
  SPEAKER_01: And as usual, you can subscribe to Sinocism for full access to all the shows we do or subscribe to the Stratequery bundle.
• 0:42
  SPEAKER_01: We'd love to have you on board.
• 0:44
  SPEAKER_01: But yes, the sun is shining, which is all I can really ask for.
• 0:48
  SPEAKER_01: We had a very gray January here in D.C., so I feel like that this is a good omen for what's to come in February.
• 0:56
  SPEAKER_01: I hope so.
• 0:56
  SPEAKER_01: It is beautiful out.
• 0:58
  SPEAKER_00: Martha,
• 0:58
  SPEAKER_00: Hard to be inside doing a podcast looking out the window, I gotta say.
• 1:01
  SPEAKER_01: Yeah, well, Tashi, don't worry.
• 1:04
  SPEAKER_01: Just an hour or so, wait, and then we can get rolling or you can get out to the park.
• 1:09
  SPEAKER_01: I'm now communicating directly with your dog here on the podcast.
• 1:13
  SPEAKER_01: We'll begin today with a headline from Nikkei Asia, Hong Kong unveils new security law in further repeal of liberties.
• 1:23
  SPEAKER_01: And I'll read from Nikkei,
• 1:24
  SPEAKER_01: The Hong Kong government on Tuesday unveiled details of its new security law that will close, quote, loopholes, end quote, not covered by existing legislation, providing another tool for authorities to further curtail civil liberties.
• 1:39
  SPEAKER_01: The new legislation would cover treason, insurrection, theft of state secrets, sabotage against public infrastructure, including computer systems, and external interference in domestic affairs.
• 1:51
  SPEAKER_01: The consultation paper also suggests that certain provisions would be subject to extraterritorial applications.
• 1:58
  SPEAKER_01: Patrick Poon, a visiting researcher at the University of Tokyo and expert on human rights, said the proposed legislation for the five crimes is broadly defined and captures, quote, all kinds of activities, end quote, including engagement with foreign entities about Hong Kong politics,
• 2:15
  SPEAKER_01: Quote, theft of state secrets is similar to the mainland charge of leaking state secrets to foreign entities, Poon added, noting the charges that were filed against human rights activist Huang Qi in mainland China after he exposed local corruption.
• 2:31
  SPEAKER_01: So Bill, the reason I wanted to start here is because I realized recently that in the entire time you and I have been podcasting, I've never really asked you about the state of affairs in Hong Kong.
• 2:42
  SPEAKER_01: So to start, this national security law was originally proposed in 2003, but do we have any sense as to why it's being passed now and what it might mean?
• 2:53
  SPEAKER_00: Well, so it's this Article 23, it's an article in the basic law that was supposed to have been passed and they first tried it in 2003, about six years after the handover from the UK to the PRC.
• 3:08
  SPEAKER_00: There were mass protests, they shelved it, and then they just sort of never really pushed it again.
• 3:14
  SPEAKER_00: And then, of course, after the protests four years ago, and then the national security law that was passed in Hong Kong, it was clear this was
• 3:23
  SPEAKER_00: The next thing that was coming, they were saying that the local Hong Kong leaders were saying it was coming last year, they said it would be this year.
• 3:30
  SPEAKER_00: And it's basically to fill in any possible remaining gaps around national security and national security laws.
• 3:37
  SPEAKER_00: And this time, there won't be any protests.
• 3:40
  SPEAKER_00: Hong Kong
• 3:59
  SPEAKER_00: just it's another PRC city you know this idea the sort of one country two systems after the protests of 2019 the national security law was pretty clear that that was not really in operation and it's just been further eroded since then this is I really again I just think is a reminder that a little I mean it's a reminder of what Hong Kong really is it's a mainland city now from a business perspective
• 4:27
  SPEAKER_00: You know, there's been this idea or this reality that Hong Kong was different and you could operate your businesses differently, more freedoms in Hong Kong, better access to information.
• 4:37
  SPEAKER_00: This Article 23 is another step towards, I think, forcing businesses to really question whether or not those things will remain true and operative going forward.
• 4:47
  SPEAKER_00: Yeah the Hong Kong government of course will say yes it's not a problem as long as you don't break this law that you know as long as you don't violate Article 23 then you're fine.
• 4:54
  SPEAKER_00: The problem is how expansive some of these definitions may or may not be.
• 4:57
  SPEAKER_00: I mean one thing back to the point of how this is converging with the mainland I mean they say very specifically at the beginning of the document
• 5:05
  SPEAKER_00: They talk about the national security law, the PRC, and they say how the same set of national security standards should apply throughout the country.
• 5:11
  SPEAKER_00: They're harmonizing it with the mainland in terms of the holistic, the approach is holistic national security is what they call it, which is basically
• 5:20
  SPEAKER_00: Pretty much everything is national security.
• 5:21
  SPEAKER_00: If you're on the national security side and you want to take a more expansive or aggressive definition, it just basically means almost like whatever you say is national security is national security.
• 5:32
  SPEAKER_00: So it's quite chilling.
• 5:34
  SPEAKER_00: It's not a surprise.
• 5:35
  SPEAKER_00: It is, though, again, like I said, for businesses, especially foreign businesses operating there, it's going to lead to a new round of questions about how viable it is to run their businesses out of Hong Kong, especially if they're in businesses related to information and data.
• 5:50
  SPEAKER_01: Yeah, I mean, you talk about the convergence with the mainland.
• 5:53
  SPEAKER_01: According to the Hong Kong Democracy Council, there have been more than 1,700 political prisoners arrested since 2019.
• 6:01
  SPEAKER_01: And I know that Beijing has cracked down on the freedom of journalists and curtailed judicial independence.
• 6:07
  SPEAKER_01: So the news this week is consistent with all those trends.
• 6:10
  SPEAKER_01: But reading about the security laws, I was struck by how similar it is to what we've talked about in mainland China, where
• 6:19
  SPEAKER_01: The the terms are so broad the scope of this law is kind of mind-boggling and it can sort of mean whatever the state wants it to mean and so that's the point.
• 6:30
  SPEAKER_00: Compliance then becomes pretty terrifying.
• 6:32
  SPEAKER_00: Right, right.
• 6:32
  SPEAKER_00: Well, you're you with your legal background you under I mean you get it right that and but that's the point it's the feature not not a bug of making it those sort of definitions so expansive and you know, there's there's also the the bit about sort of
• 6:46
  SPEAKER_00: Foreign interference, you know, there's a trial underway right now of Jimmy Lai, the former publisher of and owner of Apple Daily.
• 6:52
  SPEAKER_00: One of the charges is that he was reaching out to foreign politicians, foreign media, foreign, hostile foreign actors to undermine Hong Kong.
• 7:01
  SPEAKER_00: You know, this is all part of the general pattern of what's going on.
• 7:04
  SPEAKER_01: Yeah, including the attempt to apply it extraterritorially, which is kind of crazy to me.
• 7:10
  SPEAKER_00: I mean, that's why, you know, there are I think there are now 10 people from Hong Kong who have bounties on them who've left the territory who now have sort of global bounties on them.
• 7:19
  SPEAKER_00: And so it's just again, it's not a surprise that they are pushing this through.
• 7:25
  SPEAKER_00: I will guess that there's a 30 day consultation period.
• 7:29
  SPEAKER_00: I would be surprised if they make any material changes based on public feedback.
• 7:33
  SPEAKER_00: I'd be surprised if there's any
• 7:35
  SPEAKER_00: Real negative public feedback.
• 7:38
  SPEAKER_00: And then I would guess that it'll be put in, it'll be become, it'll be passed before or around July 1st, which is the anniversary.
• 7:46
  SPEAKER_00: It'll be the 27th anniversary of the handover.
• 7:48
  SPEAKER_00: They seem to like to do, like to do these things around the handover anniversary date.
• 7:53
  SPEAKER_00: And so, you know, I mean, from the Hong Kong perspective or the Hong Kong government, the Beijing government perspective, you know, Xinhua covered this when they, when it was announced, I think it was Tuesday.
• 8:04
  SPEAKER_00: You know, they quote the Chief Executive John Lee, the Chief Executive of Hong Kong talking about it and he says, you know, he talks about how
• 8:11
  SPEAKER_00: You know, there was a Hong Kong version of a color revolution in 2019 and how they described the protests, right?
• 8:17
  SPEAKER_00: And so this all just feeds into again, the mainland's reasons for its national security law and the whole, you know, the fears of color revolution and foreign infiltration and foreign interference.
• 8:28
  SPEAKER_00: And so it just is sort of the logical progression for how the mainland is
• 8:35
  SPEAKER_00: Managing Hong Kong and Where Things Are Headed.
• 8:38
  SPEAKER_01: Aside from where things are headed, I'm also curious about where things were.
• 8:43
  SPEAKER_01: So just as I take advantage of you on the podcast here and just ask you questions I'm curious about, when you were living in Beijing, what were some of the biggest differences between Hong Kong and the mainland before we saw this convergence?
• 8:58
  SPEAKER_00: Hong Kong was really for the most part outside of PRC law.
• 9:02
  SPEAKER_00: You had freedom of the press, freedom of publication.
• 9:06
  SPEAKER_00: Mainlanders would feel comfortable putting assets in Hong Kong or getting Hong Kong identity and feeling like that gave them
• 9:15
  SPEAKER_00: some legal protection and some protection of their assets, you know, that's changed over the last several years.
• 9:20
  SPEAKER_00: It's why there's so many, so many mainlanders are going to other countries, especially Singapore, leaving Hong Kong and putting their money in Singapore, because, because of the realization that actually they're, you're not beyond the reach of Beijing, if you're in Hong Kong.
• 9:32
  SPEAKER_00: You know, there used to be, it was fun, you know, for folks watching, interested in, you know, Chinese politics and all the great, wonderful gossip.
• 9:39
  SPEAKER_00: You know, Hong Kong used to have all these great bookstores where you could, magazines and where you could
• 9:45
  SPEAKER_00: Hong Kong Booksellers Arrested
• 10:00
  SPEAKER_00: Publishing a book about Xi Jinping and his alleged mistresses.
• 10:05
  SPEAKER_00: And so they crushed that a long time ago.
• 10:07
  SPEAKER_00: It's just a, you know, they still want to, you know, it's got a convertible currency, you know, it's much more connected to the global financial markets.
• 10:15
  SPEAKER_00: That is still there.
• 10:16
  SPEAKER_00: It has a different legal system.
• 10:19
  SPEAKER_00: Although I think, you know, in the things like the Jimmy Lai trial and some of the other trials, there are increasing concerns that the legal independence has been eroded, is in the process of being eroded.
• 10:28
  SPEAKER_01: Right.
• 10:29
  SPEAKER_01: I've read a lot of people describe the Jimmy Lai trial as essentially a show trial.
• 10:33
  SPEAKER_00: Well, I mean, you've already got officials saying he's guilty.
• 10:36
  SPEAKER_00: You know, you've already got senior people in Beijing saying, you know, he's guilty.
• 10:40
  SPEAKER_00: He did all this stuff.
• 10:41
  SPEAKER_00: I mean, there is no question, I think, what the verdict is going to be.
• 10:45
  SPEAKER_00: And he's in his 70s.
• 10:46
  SPEAKER_00: I'd be surprised if he doesn't spend the rest of his life in jail.
• 10:50
  SPEAKER_00: Yeah.
• 10:51
  SPEAKER_00: And he's a UK citizen.
• 10:53
  SPEAKER_01: And for anybody who's not familiar, he was the owner and publisher of a pro-democracy outlet, correct?
• 11:00
  SPEAKER_00: Well, I mean, just a big newspaper, Apple Daily, that was not a fan of the Communist Party, ultimately was supportive of the demonstrations in 2019.
• 11:11
  SPEAKER_00: And I think most people in Hong Kong were pro-democracy, right?
• 11:15
  SPEAKER_00: Or at least
• 11:18
  SPEAKER_00: Pro-Not Being Part of the Communist Party
• 11:45
  SPEAKER_00: He made a lot of friends in the West.
• 11:48
  SPEAKER_00: He has a lot of supporters, a lot of political support.
• 11:51
  SPEAKER_00: He is a UK citizen, as I said.
• 11:53
  SPEAKER_00: It doesn't matter.
• 11:54
  SPEAKER_00: They need to make a point.
• 11:58
  SPEAKER_00: I think from Beijing's perspective, they need to make a point.
• 12:01
  SPEAKER_00: Yeah.
• 12:02
  SPEAKER_00: And I think also what we're seeing with the national security law and now this Article 23 is the local Hong Kong officials, they have to prove their loyalty.
• 12:11
  SPEAKER_00: They have to prove that they are good cadres.
• 12:13
  SPEAKER_00: And so there, I think there's a real risk of overzealous implementation.
• 12:17
  SPEAKER_00: You know, I think we've seen that and I think we'll see that going forward to make sure that they are proving their loyalty to Beijing.
• 12:25
  SPEAKER_01: Yeah, it's all a tragic reflection of the state of affairs in Hong Kong and just with Xi more generally.
• 12:32
  SPEAKER_01: And the lie trial, I mean, it's sort of a microcosm.
• 12:36
  SPEAKER_01: There's nothing Westerners can do to intervene on his behalf or on Hong Kong's behalf.
• 12:43
  SPEAKER_00: No, I mean, there's lots of rhetorical, you know, governments put out statements, people write up ads, people say this is bad.
• 12:50
  SPEAKER_00: You know, the US government, other governments, they're not
• 12:53
  SPEAKER_00: willing to do anything material, you know, they're not willing to put any real significant sanctions on Hong Kong, you know, and even if they did, it probably wouldn't matter.
• 13:00
  SPEAKER_00: It wouldn't change the outlook.
• 13:01
  SPEAKER_00: And so, but you'll, you'll see lots of protests.
• 13:05
  SPEAKER_00: But I think, you know, Beijing is confident they could just ignore the, you know, the rhetorical protests.
• 13:11
  SPEAKER_01: Well, and Hong Kong is still a hub of international finance.
• 13:14
  SPEAKER_01: Right.
• 13:15
  SPEAKER_01: How much has that changed in the years since 2019?
• 13:17
  SPEAKER_01: I mean, obviously, as this crackdown continues, I can envision foreign investors becoming more and more uncomfortable with it.
• 13:28
  SPEAKER_01: But how much have they already been made uncomfortable and started to sort of withdraw from that market?
• 13:34
  SPEAKER_00: Well, I think you're seeing a lot of withdrawals.
• 13:37
  SPEAKER_00: You're seeing a lot of, you know, like, especially the financial side funds moving out of Hong Kong.
• 13:41
  SPEAKER_00: You know, the Hong Kong market is down a lot.
• 13:43
  SPEAKER_00: You know, there are lots of reasons, but I will bet that one of the reasons is just the general
• 13:50
  SPEAKER_00: You know, a little bit starting to lose confidence that this is really any sort of an independent place or an independent market.
• 13:56
  SPEAKER_00: You've got like the Jimmy Lai trial again, you know, the protests, you know, foreign government protests aren't going to change the outcome.
• 14:03
  SPEAKER_00: But I think the process
• 14:06
  SPEAKER_00: is also one of those things that just corrodes faith in independence of the judiciary in Hong Kong, corrodes the ability to argue that you'll get a fair shake or a fair hearing if you have a problem if you're a foreigner or a foreign company.
• 14:21
  SPEAKER_00: You're seeing, I think the Financial Times had a piece a couple weeks ago where talking about, I think it was Deloitte, you know, they now have, they now tell their employees when they travel to Hong Kong to like take burner devices, the same kind of advice.
• 14:35
  SPEAKER_00: Hong Kong Article 23
• 14:58
  SPEAKER_00: and China.
• 15:17
  SPEAKER_00: Maybe we'll keep what we have, but new investments will go somewhere else.
• 15:21
  SPEAKER_00: Or we'll keep a smaller presence and get rid of some operations, some people, business will expand elsewhere.
• 15:28
  SPEAKER_00: Because Hong Kong used to be very, very separate from China.
• 15:32
  SPEAKER_00: Now, again, it's just losing that uniqueness.
• 15:36
  SPEAKER_01: Yeah, no, I and I had friends who lived over there with family and after 2019 that they were expats working in Hong Kong and they just it was not tenable to stay in Hong Kong in the wake of all that.
• 15:50
  SPEAKER_01: And obviously COVID played a role in some of the changes we saw.
• 15:55
  SPEAKER_01: But to what extent does it hurt China to have that happen?
• 15:59
  SPEAKER_01: And does she care about any of that?
• 16:00
  SPEAKER_01: Well, I think they don't
• 16:04
  SPEAKER_00: The Hong Kong government is, you know, COVID also and their COVID policies hurt confidence and drove out a lot of, you know, not just expats, but drove away a fair number of people.
• 16:15
  SPEAKER_00: They have embarked on this campaign to sort of, you know, a global campaign to burnish Hong Kong's image as this business-friendly place and, you know, great for visiting, great for tourism.
• 16:26
  SPEAKER_00: I think that
• 16:28
  SPEAKER_00: Whether or not she cares, I mean the thing that the party and you know I think she cares the most about is making sure that Hong Kong is not a beachhead for color revolution for the mainland which I really think inside the system is how they saw what was happening in 2019 was if Hong Kong falls then
• 16:46
  SPEAKER_00: um that could easily spread into the mainland um and so political security is always always paramount yeah paramount um and so as long you know Hong Kong is now as I say it's it's you know it's ruled by patriots that's what they wanted it to be um they've changed the election rules so that the local elections are you know only approved candidates can run so so it's it's
• 17:08
  SPEAKER_00: of China
• 17:38
  SPEAKER_00: You know, it's China, we're a big market, there are lots of opportunities in the future, we believe, and so therefore these people will always come back because they want to make money.
• 17:49
  SPEAKER_00: I'm not sure, but I think that, you know, the folks, I don't have a lot of patience for the folks who say, like, nothing's really changed, it's really the same.
• 17:58
  SPEAKER_00: It's clearly changing a lot and it's just like, I mean if you're a company that's happy putting a bunch of money in Shanghai or somewhere in mainland China and operating under the rules of the road in the mainland China, then you should be fine in Hong Kong.
• 18:10
  SPEAKER_00: If you're in Hong Kong because you think Hong Kong is distinct and separate and you have all sorts of other protections that you don't have in the mainland, you're probably going to be going through a rethink, yeah.
• 18:20
  SPEAKER_01: Yeah, well, and we run into the same question over and over again, which is, is this a case where China hasn't considered the second and third order consequences of some of the decisions that are being made?
• 18:33
  SPEAKER_01: Or, you know, she and the party leadership has considered those consequences and disregarded them in the name of prioritizing national security and political security.
• 18:44
  SPEAKER_00: One question we got from JJ, he says, can you guys discuss the increasing migration of mainland citizens to Hong Kong via the talented people policy?
• 18:50
  SPEAKER_00: I know nothing about the talented people policy, but do you have any answer there?
• 19:09
  SPEAKER_00: Just a little bit.
• 19:10
  SPEAKER_00: I think that Hong Kong originally was hoping to get people from around the world.
• 19:15
  SPEAKER_00: But in many ways, in fact, I think it's primarily been, I forget the exact stats, but it's primarily been mainland citizens who are going to Hong Kong.
• 19:22
  SPEAKER_00: I mean, if you're a mainland citizen, there are still more freedoms in Hong Kong than in the mainland.
• 19:27
  SPEAKER_00: The internet is still not blocked.
• 19:29
  SPEAKER_00: If you have money, medical care is good.
• 19:31
  SPEAKER_00: You can go to get your kids into really good schools.
• 19:33
  SPEAKER_00: It's sort of a continuum.
• 19:36
  SPEAKER_00: And so it's not yet exactly like a Beijing or Shanghai, but the trends are more that way than staying kind of a unique sort of window on the world that's much more in sync with the norms of the world outside China than inside China.
• 19:51
  SPEAKER_00: But for a lot of people in Mainland, it's still a very attractive place.
• 19:53
  SPEAKER_00: Although I think, and I will bet over the next few years, though, that again, folks who can actually leave for, say, Singapore, have enough money to be able to have a good life in Singapore and get a visa or get a long-term visa.
• 20:08
  SPEAKER_00: You're going to see a lot of more people want that because that ultimately, they ultimately have protections, whereas in Hong Kong, you know, just like if you're in the mainland and you have assets in the mainland, you can't possibly have any sense of security that your assets will be there the next day if you get in trouble.
• 20:23
  SPEAKER_01: Yeah.
• 20:23
  SPEAKER_01: Well, in Hong Kong, the chief executive, John Lee, the Talented People Policy, for anybody who's curious, we'll put a link in the show notes.
• 20:31
  SPEAKER_01: This is an article, Hong Kong announces plans to trawl the world for talents.
• 20:36
  SPEAKER_01: In his first policy address since taking office in July, Lee said the government will set aside HK$30 billion to attract businesses to the city and launch a so-called Top Talent Pass scheme to entice talents to pursue their careers in Hong Kong.
• 20:50
  SPEAKER_01: That's after the local workforce shrank by about 140,000 people.
• 20:56
  SPEAKER_01: and that's from 2022.
• 20:59
  SPEAKER_01: It'll be interesting to monitor the progress but certainly I think it's just a grim reflection of where things stand in Hong Kong right now and also the vision that Xi has for the way functional societies should look and that's a consistent theme we've seen over the past several years but do you have any final thoughts here or should we move to markets?
• 21:26
  SPEAKER_01: A sell-off in Chinese stocks deepened, with a key index falling to a five-year low and wiping out all the gains it made last week.
• 21:46
  SPEAKER_01: on optimism over stronger support measures by the authorities.
• 21:50
  SPEAKER_01: The CSI 300 index of mainland shares slipped 0.9% ending the day below its close on January 22nd when authorities pledged more forceful measures to support the market.
• 22:02
  SPEAKER_01: The benchmark gauge tumbled 6.3% in January, a record sixth straight month of losses amid fears the authorities are still not doing enough to counter a deteriorating economic outlook and multi-year property crisis.
• 22:17
  SPEAKER_01: A Hong Kong court's decision this week to liquidate China Evergrande Group and jitters over losses linked to so-called snowball derivatives as well as structured derivatives in Hong Kong added to the slump.
• 22:30
  SPEAKER_01: So Bill, this dovetails with the news or lack of news regarding a third plenum where the party might devise more concerted actions on the economy.
• 22:41
  SPEAKER_01: The January Politburo meeting came and went without any mention of dates for a third plenum.
• 22:48
  SPEAKER_01: What do you make of the latest developments here?
• 22:50
  SPEAKER_00: So on the market, we talked about it last week and I wrote about the newsletter a few days ago, you know, the policymakers have been signaling they want a bottom in the market that, you know, they want to
• 22:59
  SPEAKER_00: Maybe not pop it back up immediately, but they want the selling to stop.
• 23:02
  SPEAKER_00: Stem the bleeding, yeah.
• 23:04
  SPEAKER_00: Stem the bleeding, and they pushed out a whole bunch of different measures, including, you know, some state buying as well as some places can't short and blah, blah, blah.
• 23:13
  SPEAKER_00: And, you know, it worked for a few days, and then it's not working now.
• 23:15
  SPEAKER_00: And I think that's pretty interesting that, you know, in some ways you may have folks who are selling what they have to the state.
• 23:22
  SPEAKER_00: So, you know, the state's left holding the bag in terms of these stocks.
• 23:25
  SPEAKER_00: I think also, you know, we've got what's today?
• 23:27
  SPEAKER_00: Today's Thursday.
• 23:29
  SPEAKER_00: So we have six more days of trading before the Lunar New Year holiday, where the markets will be off for a week.
• 23:37
  SPEAKER_00: I think the government's really not going to want to have the market going down a lot more into the Lunar New Year holiday.
• 23:45
  SPEAKER_00: However, as we're seeing, at least the short term, what the government wants doesn't necessarily mean what the market does.
• 23:51
  SPEAKER_00: And so at this point,
• 23:54
  SPEAKER_00: You know, it's hard to point to any reasons to be constructive and want to start buying Chinese stocks based on the data, based on what we can see from the economic policies.
• 24:07
  SPEAKER_00: You know, lots of people say it looks cheap.
• 24:10
  SPEAKER_00: does look cheap, Hong Kong looks cheap, cheap doesn't mean it can't get cheaper.
• 24:14
  SPEAKER_00: I'm not recommending either way on stocks, but I'm just saying that there continues to be I think this, you know, the thing that investors need is to see some sort of clearer and more supportive policy roadmap in terms of not only policies, but also some types of stimulus.
• 24:31
  SPEAKER_00: And I think that
• 24:33
  SPEAKER_00: The government, though, on the one hand is saying they want the market to bottom.
• 24:37
  SPEAKER_00: On the other hand, they're just not pushing out the kind of stimulus that investors seem to be wanting.
• 24:42
  SPEAKER_00: And so I think this is just going to skip along the bottom for best case, probably bounce around here for some time.
• 24:50
  SPEAKER_00: You know, worst case, the government has a lot of money.
• 24:53
  SPEAKER_00: You know, the Bloomberg report from last week is correct that SOEs are putting a couple hundred billion U.S.
• 24:58
  SPEAKER_00: dollars into the market.
• 25:01
  SPEAKER_00: um you know that's great but that's not ultimately at some point that money runs out it's not enough to really change things and you you really get in a situation where you just have a bunch of people who are happy to sell to the state funds yeah and just get out and so I think there this is a real this is actually a pretty um
• 25:18
  SPEAKER_00: This is a problem because, you know, it looks bad and I think they care about how it looks.
• 25:23
  SPEAKER_00: It's another thing that people can point to and say, look, there's a lot loss of confidence in policymakers and, you know, in what Beijing is doing.
• 25:32
  SPEAKER_00: But also, you know, they need a functioning capital market.
• 25:34
  SPEAKER_00: And they've been talking about this for a long time.
• 25:35
  SPEAKER_00: They need
• 25:37
  SPEAKER_00: a functioning capital market that allows all these, especially technology firms, to be able to raise capital.
• 25:43
  SPEAKER_00: Because as they try and restructure the economy, move towards this high-quality development, they're pushing on what they call the new productive forces, these various high-tech sectors.
• 25:56
  SPEAKER_00: The government has set up these funds, they're dumping a whole bunch of money into all sorts of high-tech research, especially around semiconductors.
• 26:04
  SPEAKER_00: But
• 26:04
  SPEAKER_00: It's, they need also to be able to channel capital more broadly than from government loans and government grants.
• 26:12
  SPEAKER_00: And so if the capital markets, if the stock markets are broken, and they, you know, one of the things they usually do when the markets are going down too much, and they want to at least stabilize it, is they halt IPOs.
• 26:22
  SPEAKER_00: Interesting.
• 26:23
  SPEAKER_00: But if you hold IPOs, because, you know, they think, well, there's a certain pool of money and if they're, you know, people want to buy IPOs because they usually pop, so then the money will go to the IPOs and won't go to the existing stocks, so the rest of the market will go down, is the thinking.
• 26:34
  SPEAKER_00: It's not actually true.
• 26:37
  SPEAKER_00: But then if they halt IPOs, then a bunch of companies that maybe need to raise capital to be able to pursue their research and development, they can't raise the capital.
• 26:48
  SPEAKER_00: And the VC market in many ways is not what it used to be.
• 26:51
  SPEAKER_00: I don't want to say frozen, but it's not what it used to be.
• 26:53
  SPEAKER_00: So they need a functioning capital market that can channel all these savings that individual Chinese people have into these more productive areas.
• 27:02
  SPEAKER_00: And that is
• 27:03
  SPEAKER_00: Not going to happen if people just assume that if they put their money in the market, it's going to go down 10, 15, 20 percent every year.
• 27:09
  SPEAKER_01: Yeah, no, I mean, that makes sense.
• 27:11
  SPEAKER_01: And in terms of investor sentiment, I can't say I'm shocked because even last week when we were talking about the market appearing to stabilize and we're talking about targeted policy steps that they're taking and messaging from leadership to try to bolster investor sentiment, I mean, you and I were qualifying that
• 27:31
  SPEAKER_01: talk with discussion of the structural issues that remain, the security issues that remain, the waning foreign investment, all these headwinds that have been a factor for the last 12 months, like they haven't gone away and so at a certain point it's hard to see without some sort of drastic action or reversal from the government how the trend does
• 27:57
  SPEAKER_01: actually changed in a meaningful, enduring way as we move forward here.
• 28:01
  SPEAKER_01: Like, right now we're in this cycle where there's, you know, one step forward, one step back.
• 28:06
  SPEAKER_01: It feels like every other day, and that's just where the market has been for a while, except the trend is steadily downward, you know?
• 28:15
  SPEAKER_00: I think everyone, including the top leadership, is really looking forward to the Lutonir holiday for, you know, for the Year of the Dragon.
• 28:22
  SPEAKER_00: At least the break.
• 28:23
  SPEAKER_00: Yes, this should be the first Lunar New Year holiday since 2019, since before the pandemic started where everyone actually, it's actually a quiet week.
• 28:34
  SPEAKER_01: Yeah, well, and then in terms of guidance from above,
• 28:38
  SPEAKER_01: The third plenum, for anybody who's not familiar, this is Bloomberg, the third plenum could offer clues about China's longer-term plans to address structural issues facing the economy.
• 28:48
  SPEAKER_01: Investors will be scouring the final statement for signals of potential policy pivots and future moves to steady the slowing economy.
• 28:56
  SPEAKER_01: The meeting normally comes in October or November, one year after China's new leadership team is set.
• 29:02
  SPEAKER_01: So that would have been last October or last November.
• 29:05
  SPEAKER_01: Delaying the meeting to 2024 marks the first time the third plenum has been held in an off-schedule year in over three decades.
• 29:13
  SPEAKER_01: So we're already deviating from norms here.
• 29:15
  SPEAKER_01: What do you think?
• 29:16
  SPEAKER_00: Well, we've talked about this a few times on the podcast.
• 29:19
  SPEAKER_00: I've written about it, you know, because originally the expectation would be this third plenum would be in the fall.
• 29:23
  SPEAKER_00: According to the party constitution, they have to hold one plenum a year.
• 29:26
  SPEAKER_00: They actually held the second plenum earlier in 2023.
• 29:29
  SPEAKER_00: So they actually didn't need to hold it.
• 29:32
  SPEAKER_00: in 2023
• 30:01
  SPEAKER_00: You know, every month there's a Politburo meeting, usually it's publicized, although not every time in the last few years.
• 30:10
  SPEAKER_00: And then, you know, since basically August, people have been saying, okay, maybe this is the Politburo meeting readout where they'll announce the dates for the plenum.
• 30:17
  SPEAKER_00: Yeah, so there was a Paul Bureau meeting readout came yesterday, the 31st, and there was nothing about the plenum.
• 30:23
  SPEAKER_00: There was very little about the economy.
• 30:24
  SPEAKER_00: It was really all about political.
• 30:25
  SPEAKER_00: It was about the Xi Jinping Thought Education Campaign.
• 30:28
  SPEAKER_00: It was about the work reports from some top bodies, the top party bodies.
• 30:31
  SPEAKER_00: It was a very political-focused meeting from what was given in the readout.
• 30:35
  SPEAKER_00: You know, these readouts all have at the end a sentence that says the meeting also discussed other matters.
• 30:40
  SPEAKER_00: Every readout has that.
• 30:41
  SPEAKER_00: Some people will say that, oh, they talked about this or that or that.
• 30:43
  SPEAKER_00: Nobody knows, they just don't tell you.
• 30:45
  SPEAKER_00: But that language is spoiler plate.
• 30:48
  SPEAKER_00: And so where we end up, you know, I think a couple things is we don't know why they didn't hold the third plenum in the fall.
• 30:57
  SPEAKER_00: There is speculation, oh, you know,
• 31:00
  SPEAKER_00: Trump and Taiwan
• 31:23
  SPEAKER_00: Because in the fall and early winter, at the end of October, you have this central financial work conference for seven, five years.
• 31:31
  SPEAKER_00: And then December, you have the annual central economic work conference.
• 31:34
  SPEAKER_00: And those both set out policy agendas, right?
• 31:38
  SPEAKER_00: For at least the financial work conference is really a longer time horizon, because it's really every five years.
• 31:43
  SPEAKER_00: So this time, it was the sixth year, I think.
• 31:46
  SPEAKER_00: The economic work conference is yearly, and it really lays out
• 31:49
  SPEAKER_00: sort of an assessment of where they are in the economy and sort of high level what to expect and what they're going to be looking at in the next year.
• 31:55
  SPEAKER_00: Obviously, things can change if problems arise or you have a thing like a pandemic and sort of all your plans get blown up.
• 32:00
  SPEAKER_00: But given those two big meetings, it's really hard to see why suddenly there would be a third plenum that would make this big change from what they've already been telling everybody they're going to do.
• 32:12
  SPEAKER_00: Because that would be even more dysfunctional.
• 32:16
  SPEAKER_00: Right.
• 32:16
  SPEAKER_00: And so where we are with the plenum, I think you've got, you know, back to our discussion about the markets and the economy in general, there's this continuous hope for, you know, they got to become more pragmatic.
• 32:27
  SPEAKER_00: They have to make these changes.
• 32:28
  SPEAKER_00: They need more stimulus.
• 32:31
  SPEAKER_00: They don't seem to think the economy is as bad as a lot of the folks calling for stimulus think it is.
• 32:37
  SPEAKER_00: They also have been very clear that they're in the middle of this transition of the growth model.
• 32:41
  SPEAKER_00: And so going back to massive stimulus just doesn't make any sense from what their high level goals are for how they want to develop the economy.
• 32:50
  SPEAKER_00: And so I think one of the reasons you see the market, people are just getting exhausted, hoping that there'll be some magical stimulus thing that's going to save us all.
• 32:58
  SPEAKER_00: And so people are just giving up.
• 33:00
  SPEAKER_00: yeah and I think though that that I don't see then the other thing people are hanging their hats on or some people are as well maybe the Premier Li it is it'll be his first work report at the National People's Congress you know because last year it was still the late Premier Li Keqiang gave the work report and then he then he stepped down as Premier Li Chang took over so this will be Li Chang's first sort of
• 33:20
  SPEAKER_00: National People's Congress, where he's running the show, so to speak.
• 33:23
  SPEAKER_00: So there's this hope that somehow the NPC will then push forward a bunch of big changes and more stimulus and that things will get more pragmatic and more focused on economic growth and etc, etc, etc.
• 33:33
  SPEAKER_00: You go back and you look at what they talk about in these work conferences last in October and in December, there's nothing out there that they're saying publicly that would support the belief that there are going to be some sort of big changes in the near future.
• 33:46
  SPEAKER_00: yeah um doesn't mean there won't be right because we can always be surprised but the arguments for why they may know they're going to be maybe these changes at a if there's a plenum a third plenum or the NPC really hinge more on gosh things are bad they have to do something versus they're telling us that they're going to do something because they're not telling us they're going to make these big changes
• 34:05
  SPEAKER_01: Right.
• 34:06
  SPEAKER_01: I mean, we've been studying it every week and there's not really any indication that there's that massive stimulus cannon coming.
• 34:13
  SPEAKER_01: At the same time, you mentioned earlier, they don't need or they didn't need to hold the third plenum last year because they had the plenum earlier in the year.
• 34:23
  SPEAKER_01: That's true, but I can also imagine being an investor looking around at the economy continuing to flounder and all of these headwinds, thinking to myself, you really do need to hold a third plenum here.
• 34:35
  SPEAKER_00: But it's more opacity, uncertainty, and again, you know,
• 34:41
  SPEAKER_00: It's possible that there will be a third plenum, you know, in 2018, they didn't announce the third plenum until late February, and they held it like two days later, I think, or one day later, they could do the same thing this time.
• 34:52
  SPEAKER_00: And then they roll right into the National People's Congress.
• 34:54
  SPEAKER_00: I think the NPC starts on the 5th of March this year, the CPPCC, I think, is the 4th of March.
• 35:00
  SPEAKER_00: It's possible.
• 35:01
  SPEAKER_00: But again, it's one of those things where
• 35:04
  SPEAKER_00: It's important that they hold it.
• 35:05
  SPEAKER_00: It'll be interesting when they hold it.
• 35:06
  SPEAKER_00: We'll learn lots of things.
• 35:08
  SPEAKER_00: It'll be worth parsing through, and they are meaningful.
• 35:12
  SPEAKER_00: But you look at like today, there's a PMI out that's better than expected.
• 35:19
  SPEAKER_00: There's some real estate data that's a little bit better than before.
• 35:22
  SPEAKER_00: If you take the position that the leadership has said and is following through on their promises where they have to transform the growth model,
• 35:32
  SPEAKER_00: You know, and you look at what they're doing around, you know, they're hardening the system.
• 35:35
  SPEAKER_00: They are prepared to deal with pain and disruptions.
• 35:39
  SPEAKER_00: They are prepared to grind through lots of problems.
• 35:43
  SPEAKER_00: And ultimately, maybe once they get through the grinding, things will be much better, but that will be a very painful process.
• 35:50
  SPEAKER_00: And so I think the problem is, is like the fast money, the investors, especially the foreign investors, you know, they don't want to be around for the grinding.
• 35:59
  SPEAKER_00: Right.
• 35:59
  SPEAKER_00: Right.
• 36:00
  SPEAKER_00: But the question is, if you're a PRC policymaker, do you suddenly do something short term to sort of pop the market up?
• 36:07
  SPEAKER_00: Or do you stick with your plan because you think ultimately your plan is correct?
• 36:11
  SPEAKER_00: And I think, at least from Xi Jinping's perspective, it sure looks like they think they've got the right plan.
• 36:17
  SPEAKER_01: Yeah, Xi is choosing door number two.
• 36:19
  SPEAKER_00: Doesn't mean they do, but I think
• 36:22
  SPEAKER_00: They or She believes they're pretty much on the right path, and even folks in the system who think they're not, I think it's pretty hard to make the case and be convincing that they're not until something really bad happens.
• 36:36
  SPEAKER_01: Well, one more question before we shift to a variety of US-China topics.
• 36:40
  SPEAKER_01: Chris on Twitter tweeted at us, a question for AtSharpChinaPod, you've talked a lot about the slumping Chinese real estate market.
• 36:48
  SPEAKER_01: Slumps don't last forever.
• 36:50
  SPEAKER_01: So what opportunities do foreigners have to buy into the market while it's at or near the bottom?
• 36:55
  SPEAKER_01: So I wanted to include this for two reasons.
• 36:57
  SPEAKER_01: One, I'm genuinely curious about the mechanics of Americans trying to buy property in China and whether that's even possible.
• 37:05
  SPEAKER_01: And then two, this is very much not an investment advice podcast.
• 37:10
  SPEAKER_01: We also have to make that disclaimer on Sharp Tech frequently.
• 37:13
  SPEAKER_01: But I wonder whether the logic of that question still makes sense.
• 37:17
  SPEAKER_01: Would it actually be a good idea to buy into the real estate market at this point or sometime in the near future?
• 37:23
  SPEAKER_01: Do you have any thoughts?
• 37:25
  SPEAKER_00: Well, not investment advice.
• 37:27
  SPEAKER_00: I think buying an individual property
• 37:31
  SPEAKER_00: In China, it depends on the city.
• 37:33
  SPEAKER_00: I bought and sold property in Beijing quite a long time ago.
• 37:37
  SPEAKER_00: It was easy as a foreigner to buy property back then.
• 37:43
  SPEAKER_00: Since then, Beijing and I think most cities, if not all cities, have housing purchase restrictions to sort of cool the market.
• 37:50
  SPEAKER_00: They put them in various levels and stages over the last 15 years or maybe
• 37:55
  SPEAKER_00: 12, 13 years, and you know, it became harder for foreigners to buy.
• 37:59
  SPEAKER_00: You had to have a certain period of residence and proof that you pay taxes, etc, etc.
• 38:04
  SPEAKER_00: I don't know what the status is for foreigners to buy in most cities now.
• 38:08
  SPEAKER_00: I don't think those rules are gone.
• 38:10
  SPEAKER_00: I'm not interested.
• 38:11
  SPEAKER_00: I wouldn't buy.
• 38:13
  SPEAKER_00: Myself wouldn't be buying property.
• 38:15
  SPEAKER_00: I think if you really believe that there are opportunities to buy, you know, to invest in PRC property, you know, if you're going to live there and you want a place to live and you've been there for a long time,
• 38:25
  SPEAKER_00: go for it.
• 38:44
  SPEAKER_00: like you can always get cheaper.
• 38:46
  SPEAKER_01: So that would be my concern and my warning to Chris on Twitter.
• 38:49
  SPEAKER_00: But I'm not not this.
• 38:51
  SPEAKER_00: We do not give investment advice.
• 38:52
  SPEAKER_00: And I would I would I just, you know, me personally, I've done my thing with Chinese real estate for now.
• 38:58
  SPEAKER_00: And I'm not, you know, also, I know some foreigners who still own personally owned property have been trying to get, you know, sell it.
• 39:04
  SPEAKER_00: It is a more complicated process to sell it than it is to buy it.
• 39:08
  SPEAKER_00: Interesting.
• 39:09
  SPEAKER_00: And, you know, depending on how you bought it will determine whether or not you get the money out.
• 39:14
  SPEAKER_00: Okay.
• 39:15
  SPEAKER_00: And so, you know, you end up with lots of potential friction and complications buying individual properties as a foreigner that you don't have in other markets, in many other markets.
• 39:27
  SPEAKER_01: Well, you've convinced me.
• 39:28
  SPEAKER_01: I'm going to hold off on my real estate investments for the time being, but we shall see what the future holds for all of us here.
• 39:35
  SPEAKER_01: But speaking of which, let's shift gears and talk U.S.-China.
• 39:39
  SPEAKER_01: We have a couple different topics to cover.
• 39:42
  SPEAKER_01: First, we got a second question from JJ, the second JJ question on this podcast.
• 39:47
  SPEAKER_01: How would Taiwan fare if Donald Trump wins the presidential election this fall?
• 39:52
  SPEAKER_01: So this has been a buzzy topic lately.
• 39:55
  SPEAKER_01: There was a clip that went viral recently where Trump was asked about whether his administration would defend Taiwan in the event of an invasion by China.
• 40:06
  SPEAKER_01: And he said, if I answer that question, it'll put me in a very bad negotiating position.
• 40:11
  SPEAKER_01: With that being said, Taiwan did take all of our chip business.
• 40:15
  SPEAKER_01: And then this week, a spokesman from Beijing was asked about those comments and said, quote, the U.S.
• 40:21
  SPEAKER_01: will always pursue America first, and Taiwan can change from a chess piece to a discarded chess piece at any time.
• 40:29
  SPEAKER_01: So this seems like it'll be an ongoing story.
• 40:32
  SPEAKER_01: Do you have any thoughts on the recent conversation there?
• 40:35
  SPEAKER_00: Yeah, so that Trump clip was from last year, and he actually, if you listen to the whole clip, he basically said what a US president would say, you know, strategic ambiguity.
• 40:44
  SPEAKER_00: That was my reaction to it, honestly.
• 40:45
  SPEAKER_00: Yeah, I mean, you know, the bit about the chips of, you know,
• 40:49
  SPEAKER_00: They also supply a lot of U.S.
• 40:50
  SPEAKER_00: companies.
• 40:51
  SPEAKER_00: I mean, it is whatever.
• 40:53
  SPEAKER_01: I had two reactions just for the record.
• 40:55
  SPEAKER_01: So number one, I watched it and it was being quote tweeted by all these people who were outraged by Trump because Biden has been a lot more direct about it.
• 41:05
  SPEAKER_00: And it was it was from last year and it was edited.
• 41:08
  SPEAKER_00: It was just one of those things where, again, be careful of getting excited about video clips going around Twitter.
• 41:13
  SPEAKER_00: We should know that by now.
• 41:15
  SPEAKER_00: Right.
• 41:15
  SPEAKER_00: Well, and Biden.
• 41:17
  SPEAKER_01: Biden's comments have actually been the departure from American foreign policy, whereas Trump was more consistent, at least as far as I understood it.
• 41:25
  SPEAKER_01: So from a strategic standpoint, I think that even Beijing has no idea how Trump feels or what he would do, and that has some benefits.
• 41:34
  SPEAKER_01: My other takeaway from the clip, though, was that Trump's characterization of the chip industry and what has happened in that industry is just wrong and bizarre.
• 41:43
  SPEAKER_01: So I guess take the good with the bad in that clip.
• 41:47
  SPEAKER_00: But well, but but back to your question, I mean, I think, you know, the the the comment from the
• 41:54
  SPEAKER_00: China Hong Kong Article 23
• 42:07
  SPEAKER_00: They've been pretty consistent with that kind of sentiment.
• 42:10
  SPEAKER_00: I think they'll become even more consistent if, for example, the U.S.
• 42:14
  SPEAKER_00: Congress can't pass an aid package for Ukraine and they'll sort of use it both in official statements and in other ways they'll sort of push out messaging about how the U.S.
• 42:24
  SPEAKER_00: is just fundamentally unreliable.
• 42:26
  SPEAKER_00: So therefore you should
• 42:27
  SPEAKER_00: you know, come join the warm embrace of the motherland.
• 42:31
  SPEAKER_00: Right.
• 42:31
  SPEAKER_00: It's only a matter of time before you're abandoned by the West.
• 42:35
  SPEAKER_00: Resistance is futile, they'll abandon you, etc, etc.
• 42:38
  SPEAKER_00: I think that, you know, and I tweeted today, sort of on top of that Bloomberg story, joking but sort of not, Taiwan's problem or challenge, I should say not problem, challenge in the US is, you know,
• 42:54
  SPEAKER_00: The Taiwan government, DPP, they've done a very good job of getting people in DC very concerned about Taiwan.
• 42:59
  SPEAKER_00: You know, Congress, think tank world, media.
• 43:05
  SPEAKER_00: Most Americans, I don't think, care.
• 43:07
  SPEAKER_00: And so if there really were a crisis, a lot of Americans are like, huh, where?
• 43:10
  SPEAKER_00: What?
• 43:11
  SPEAKER_00: Thailand?
• 43:11
  SPEAKER_00: What?
• 43:12
  SPEAKER_00: You know, I mean, don't mean to joke, but I'm actually being quite serious.
• 43:16
  SPEAKER_00: And I think that Taiwan, you know, I said on this tweet, I said, you know, it's too bad Taiwan didn't buy a Super Bowl ad, you know, because, you know, basically they need to do a marketing campaign to get more Americans to know what Taiwan is and care.
• 43:29
  SPEAKER_00: Right.
• 43:44
  SPEAKER_00: Okay, so then very important Sharp China question for you as we all get prepped for the Super Bowl.
• 43:58
  SPEAKER_01: If we're strategizing on behalf of Taiwan here, how can we get Taylor Swift up to speed on the Taiwan Relations Act and the porcupine strategy for maintaining peace in the Taiwan Strait?
• 44:10
  SPEAKER_01: What do you think?
• 44:11
  SPEAKER_00: They should just offer her a bunch of money, extra money to come do, add a show in Taiwan for her on her, the international leg of her tour, which I think starts like this week or this weekend.
• 44:22
  SPEAKER_00: Right.
• 44:22
  SPEAKER_00: She's going to be in Tokyo, you know.
• 44:24
  SPEAKER_00: She's not going to Hong Kong.
• 44:26
  SPEAKER_00: She's not going to the mainland.
• 44:28
  SPEAKER_00: But if she suddenly added a stop in Taiwan, that would be quite a thing.
• 44:33
  SPEAKER_00: And honestly,
• 44:34
  SPEAKER_00: You know, it would sell out, but also the Taiwanese government could definitely afford to just write her a big check and say, you know what, come here.
• 44:41
  SPEAKER_01: Yeah, whatever it takes.
• 44:43
  SPEAKER_01: Yeah, I mean, jokes aside, the logic makes sense where you can step back and say Taiwan has been very successful at raising the salience of these issues in DC,
• 44:54
  SPEAKER_01: But we've hit the point now where communicating to a broader American audience should be a real priority because the reality is in many ways the impact of war in Ukraine is actually more attenuated from the daily lives of Americans than a war in Taiwan would be or a PRC invasion of Taiwan would be, certainly in terms of disruptions to the global economy.
• 45:17
  SPEAKER_01: But
• 45:18
  SPEAKER_01: It's not clear how many Americans understand that and how many politicians are going to be able to make that case convincingly to their constituents.
• 45:27
  SPEAKER_00: Well, let's hope they never have to make that case because there are no winners from that kind of a conflict.
• 45:32
  SPEAKER_00: But my point is just that I think Taiwan, you know, they have a sort of an awareness and a recognition problem in the U.S., you know, they have to look beyond D.C.
• 45:42
  SPEAKER_00: I do think also that if they, and they're not going to, I mean, we're sort of joking, but, and I don't have a political consulting firm on the side where I will place ads for a 30% VIG, although I hear that's a really good business.
• 45:53
  SPEAKER_00: Oh boy, yes.
• 45:53
  SPEAKER_00: I would love to hear TikTok's answers.
• 45:54
  SPEAKER_00: Did you see the exchange between Tom Cotton and Shoujichu at the congressional hearings this week?
• 46:16
  SPEAKER_00: Yeah, I did watch it.
• 46:17
  SPEAKER_00: I watched it with my wife last night.
• 46:19
  SPEAKER_00: We watched the clip and, you know, it's just unfortunate.
• 46:22
  SPEAKER_00: I don't think, you know, like Senator Cotton wouldn't ask, you know, a white CEO.
• 46:29
  SPEAKER_00: I don't think, I think he's had other TikTok representatives who weren't of Asian descent and I don't think he asked them if they were Communist Party members.
• 46:36
  SPEAKER_00: I think the way, the whole way he was asking the questions, the tone he was using, the language he was using, which was really, I mean,
• 46:44
  SPEAKER_00: Tiktok
• 47:09
  SPEAKER_00: basically makes it look like it's really just all about some nasty performance as opposed to really focusing on the substance.
• 47:15
  SPEAKER_00: And it's just unfortunate on a whole bunch of levels.
• 47:18
  SPEAKER_00: And frankly, at the end of the day, I think it kind of helps TikTok.
• 47:21
  SPEAKER_01: No, that's exactly right.
• 47:22
  SPEAKER_01: If you take these issues seriously and care about addressing the concerns surrounding TikTok,
• 47:29
  SPEAKER_01: This undermines the credibility of that mission and that's why it was so frustrating to watch and it's it underscores the importance of being precise with the language precise in describing the actual concerns with TikTok because watching that hearing what happened there helps TikTok make the case that look
• 47:50
  SPEAKER_01: Anyone who's worried about TikTok and its role as a foreign influence tool is engaging in McCarthyism and racist paranoia and yada, yada, yada.
• 47:59
  SPEAKER_01: And that's what that clip looked like to everybody who watched it.
• 48:04
  SPEAKER_00: But again, you can't watch that clip and not see echoes of that.
• 48:08
  SPEAKER_00: right.
• 48:09
  SPEAKER_00: But at the same time, and again, that just distracts from the real substantive important issues that are involved in these TikTok questions.
• 48:16
  SPEAKER_00: And so, you know, I also like he asked the shows that you at one point, I think he asked him how long you live in Beijing, and he was like, four or five years.
• 48:22
  SPEAKER_00: Well, you know, I lived there for 10 years.
• 48:23
  SPEAKER_00: So if I grew up on the hill, am I going to get are you my agent?
• 48:27
  SPEAKER_00: Part 2
• 48:57
  SPEAKER_00: because they can't actually tell the real truth about what the relationship is and how that company and how influence can be exerted on that company.
• 49:05
  SPEAKER_00: That is a real issue.
• 49:06
  SPEAKER_00: Going after the CEO personally, who is a Singaporean citizen, whose wife is an American citizen, two kids are American citizens, as he said in the hearing and the way Senator Cotton did it, again, it is not constructive.
• 49:17
  SPEAKER_01: Yeah well and that's what's frustrating is there are questions that you can ask that Shoujichu can't answer and that in itself speaks volumes and that's where you should be strategically speaking.
• 49:29
  SPEAKER_00: Well yeah I mean he dodged he wouldn't condemn you know the Xinjiang stuff right I mean they always it's always the question and then obviously he's very well schooled by
• 49:37
  SPEAKER_00: All the advisors that TikTok pays in DC, you know, they prep you for these hearings and he clearly, you know, he's earning his salary.
• 49:44
  SPEAKER_00: I think he gets paid a lot of money.
• 49:47
  SPEAKER_00: But now we're all talking about the Tom Cotton exchange when really the focus should be on the issues around TikTok and ByteDance, you know, the Wall Street Journal Hunter article on Tuesday talking about this Project Texas and actually
• 49:59
  SPEAKER_00: and more.
• 50:19
  SPEAKER_00: Well, it is pretty remarkable.
• 50:20
  SPEAKER_00: And
• 50:35
  SPEAKER_01: I'm sure you experience it and I experience it because we now follow this every week but every month or two there's a story like that Wall Street Journal story where it turns out that everything TikTok said it's doing it's not actually doing and there's still all sorts of holes
• 50:52
  SPEAKER_00: But then what we end up with is because TikTok has been so good at hiring really skilled lobbyists and you know PR firms in DC you know and convincing the various political campaigns that they all need TikTok for the elections that you all you end up with is these performances on Capitol Hill but then substantially nothing happens and nothing is going to happen.
• 51:15
  SPEAKER_00: We've talked about this before in several podcasts including the one we did with Ben the joint
• 51:21
  SPEAKER_00: The three-way podcast, the polyamorous podcast, whatever you want to call it.
• 51:27
  SPEAKER_00: I don't know.
• 51:29
  SPEAKER_00: Back in November, I think it was November, is that there's all this shouting and pointing over here and basically rhetorical fists being thrown, but nothing's going to happen.
• 51:41
  SPEAKER_00: And nothing's going to happen before the election at the minimum.
• 51:44
  SPEAKER_00: You know, it's just one of those things where it's sort of a DC show at this point, and a lot of what we saw yesterday was just one actor, one scene from that DC show.
• 51:53
  SPEAKER_01: Yes, and not particularly productive if you care about these issues, but I guess our government isn't always productive.
• 52:01
  SPEAKER_00: However... Sorry, can I add one thing to that?
• 52:04
  SPEAKER_00: Sorry to jump in about DC.
• 52:06
  SPEAKER_00: So a reporter, he works at the National Review, he tweeted on Monday, I think, that
• 52:13
  SPEAKER_00: On Monday night, the Club for Growth President David McIntosh is doing an off-the-record briefing tonight in D.C.
• 52:20
  SPEAKER_00: on the, quote, political risk of restricting or banning TikTok with Kellyanne Conway.
• 52:25
  SPEAKER_00: Oh, boy.
• 52:26
  SPEAKER_01: So, this is... So, Kellyanne is on the TikTok payroll now?
• 52:30
  SPEAKER_00: They pay really well.
• 52:32
  SPEAKER_00: I mean, I don't know.
• 52:32
  SPEAKER_00: You know, again, this is just like everyone has decided... I'm sure they do.
• 52:35
  SPEAKER_00: Will you be attending the fireside chat with Kellyanne Conway on Monday night?
• 53:00
  SPEAKER_00: No, I think it was already this week and no.
• 53:04
  SPEAKER_00: I'm sorry you missed it then.
• 53:06
  SPEAKER_01: It's really a shame.
• 53:08
  SPEAKER_01: Yeah, well, and that's the thing is there's so much money involved and the bureaucracy of actually taking action here.
• 53:16
  SPEAKER_01: It's not even immediately clear what the best path would be if the government wanted to take action.
• 53:22
  SPEAKER_01: And so there's just so many different hurdles to actually address any of the underlying concerns.
• 53:28
  SPEAKER_00: And as this person, Jimmy Quinn, who tweeted about this off-the-record thing, he also notes that the Club for Growth is backed by Jeffrey Yass, who's one of the biggest investors in ByteDance, who's given the Club for Growth like $60 million, and he's got, I think his shares in ByteDance are on paper worth billions and billions of dollars.
• 53:48
  SPEAKER_00: So there are very powerful interests in the US who have a lot of money at stake, who have no interest in TikTok getting banned, and Congress is not going to go against these people.
• 53:57
  SPEAKER_00: Right.
• 53:58
  SPEAKER_00: They've proven that.
• 53:58
  SPEAKER_00: They'll talk and they'll hold these hearings and they'll throw up their hands and they'll say mean things and they'll make it look like they're really angry and they're going to do something and nothing happens.
• 54:06
  SPEAKER_00: Sorry, I'm cynical.
• 54:10
  SPEAKER_00: What can I say?
• 54:11
  SPEAKER_01: Well, the key is you and I are laughing and having a good time.
• 54:15
  SPEAKER_01: So even if it's grim, even if the actual news is a little bleak and the cynicism is obviously warranted at this point, I'm not holding my breath for any action on TikTok.
• 54:25
  SPEAKER_01: certainly in 2024, and I'll be shocked if we get it done this decade because TikTok is just so big and powerful and there's so much money involved.
• 54:35
  SPEAKER_01: But who can say?
• 54:37
  SPEAKER_01: Continuing down the list here, we also have an update to our discussion last week on the meeting between
• 54:44
  SPEAKER_01: Wang Yi and Jake Sullivan.
• 54:46
  SPEAKER_01: I'll read from the White House readout.
• 54:48
  SPEAKER_01: National Security Advisor Jake Sullivan met on the 26th and 27th with Foreign Minister Wang Yi in Bangkok to follow up on the Woodside Summit between President Biden and President Xi last November.
• 55:01
  SPEAKER_01: This meeting was part of the effort to maintain open lines of communication and responsibly manage competition in the relationship as directed by the leaders.
• 55:10
  SPEAKER_01: Mr. Sullivan stressed that although the United States and China are in competition, both countries need to prevent it from veering into conflict or confrontation.
• 55:20
  SPEAKER_01: And then Jake Sullivan also gave a speech on Tuesday at the Council on Foreign Relations discussing the state of the U.S.-China relationship.
• 55:28
  SPEAKER_01: will link that speech in the show notes.
• 55:31
  SPEAKER_01: Most of what was said by Sullivan in that speech looked pretty boilerplate and consistent with a lot of what we've heard from the Biden administration.
• 55:39
  SPEAKER_01: Did you have any thoughts on it?
• 55:41
  SPEAKER_01: Did we learn anything new this week?
• 55:43
  SPEAKER_00: No, I mean, I wasn't the audience for that.
• 55:44
  SPEAKER_00: It was the opening speech for this forum I was at yesterday.
• 55:47
  SPEAKER_00: It was the only on the record public part of it, of that forum.
• 55:52
  SPEAKER_00: It was really, I don't think it was, there was nothing that seemed particularly newsworthy.
• 55:56
  SPEAKER_00: It was really kind of just a re-articulation of the Biden approach to China, so no real surprises.
• 56:02
  SPEAKER_01: And it didn't seem like there was anything noteworthy from the Wang Yi meeting, except for this potential call with Joe Biden at some point in the next couple of months.
• 56:13
  SPEAKER_00: I think
• 56:27
  SPEAKER_00: You know, Sullivan in his speech, and in the Q&A, I mean, he did reiterate that they understand they're not doing engagement for engagement's sake, they understand the pitfalls of some of the history.
• 56:37
  SPEAKER_00: You know, they're trying to have constructive, useful dialogues in areas where they think they can, there are overlapping common interests where they can make progress.
• 56:46
  SPEAKER_00: But they're not just going to go have meetings to have meetings and then not do things because, you know, they're talking was what I heard him say.
• 56:53
  SPEAKER_00: I mean, I'm paraphrasing, but that I think was one of that's again, not a new message.
• 56:57
  SPEAKER_00: But I think it's important, you know, as we talked about this on the podcast a lot is sort of the, you know, do you, you know, there are some folks who don't even talk to them.
• 57:05
  SPEAKER_00: It's crazy.
• 57:05
  SPEAKER_00: It's all just failed engagement.
• 57:07
  SPEAKER_00: You know, I think
• 57:08
  SPEAKER_00: The Biden Administration, a lot of the allies, they absolutely are pushing the Biden Administration to make sure that they are trying to have discussions with the Chinese side.
• 57:16
  SPEAKER_00: And that's what we've been seeing, you know, since the beginning of the damage control for the balloon.
• 57:21
  SPEAKER_00: Right.
• 57:21
  SPEAKER_01: Yeah.
• 57:22
  SPEAKER_01: No, absolutely.
• 57:23
  SPEAKER_01: And building ties with allies and doing right by allies and deepening partnerships around the world has been a hallmark of the Biden strategy all along.
• 57:32
  SPEAKER_01: And so it is consistent with the approach that they've been taking for the past couple of years.
• 57:38
  SPEAKER_01: Speaking of the Biden administration, I'll read from Asia Financial.
• 57:43
  SPEAKER_01: U.S.
• 57:43
  SPEAKER_01: Commerce Secretary Gina Raimondo said on Monday, the expanding sales of Chinese electric vehicles in the West were a national security risk for the United States and the European Union.
• 57:54
  SPEAKER_01: Quote, a sophisticated EV and then an autonomous vehicle is filled with thousands of semiconductors and sensors.
• 58:01
  SPEAKER_01: It collects a huge amount of information about the driver, the location of the vehicle, the surroundings of the vehicle.
• 58:08
  SPEAKER_01: Do we want all that data going to Beijing?
• 58:11
  SPEAKER_01: The Commerce Secretary had earlier noted how Beijing has banned the passage of vehicles made by US EV giant Tesla in certain parts of the country, citing national security concerns.
• 58:22
  SPEAKER_01: Well, think about that, she said.
• 58:24
  SPEAKER_01: Do you have any thoughts on those comments, Bill?
• 58:26
  SPEAKER_00: A Conversation for Sinocism
• 58:44
  SPEAKER_00: um the fact that it's up you know the Secretary of Commerce is saying that I think is pretty interesting um and I think you'll be hearing more about that I'm just guessing I don't know anything but I'm guessing you'll hear more about that of the U.S.
• 58:54
  SPEAKER_00: government though I think you know there aren't really Chinese EVs here because of the existing tariffs and and I think we mentioned it last time too but I keep hearing the tariffs are going to go up again to like 40% on the Chinese EVs
• 59:06
  SPEAKER_00: And that's leaving aside whether or not Trump gets a second term.
• 59:09
  SPEAKER_00: If he gets a second term, then, you know, forget about it.
• 59:12
  SPEAKER_00: Right.
• 59:13
  SPEAKER_00: 80% tariffs.
• 59:15
  SPEAKER_00: Yeah, it's get rid of like PNCR, all sorts of stuff will probably happen.
• 59:20
  SPEAKER_00: But I think this is an area too, where you're going to hear more from the European side about concerns.
• 59:26
  SPEAKER_00: You know, the countries that are worried about Huawei, I think legitimately will also be worried about these connected Chinese vehicles.
• 59:31
  SPEAKER_00: And in some ways, focusing more on national security issues as a reason to limit imports of these vehicles is probably an easier path in some ways than trying to go through an anti-subsidy investigation and go through the WTO.
• 59:45
  SPEAKER_00: Right.
• 59:45
  SPEAKER_00: So this may end up, and you know, we've talked about this, the Chinese have, the Chinese government has hurt itself by the treatment of Tesla because they're telling everybody that this is how they've used these things.
• 59:55
  SPEAKER_01: Yeah well and it is interesting because there are parallel concerns there with the Chinese EVs or PRC tech products more generally where on the one hand there are questions about data collection and data security and then on the other there are concerns about protecting domestic industries from competing on price with companies that are heavily subsidized by the CCP and then can drive some companies out of business or
• 1:00:21
  SPEAKER_01: eat into the profits, at least, of various important and really successful domestic manufacturers.
• 1:00:28
  SPEAKER_00: It's convenient, almost.
• 1:00:30
  SPEAKER_00: The domestic politics around, I think, a coming surge in PRC autos, not just EVs, but also there's a lot of overcapacity for gas-powered cars now in the PRC, too.
• 1:00:40
  SPEAKER_00: But again, the national security angle is one that clearly we're going to be hearing a lot more about.
• 1:00:46
  SPEAKER_01: Yes, well, I'm just glad that Secretary Raimondo listens to the podcast.
• 1:00:50
  SPEAKER_00: No, I don't know.
• 1:00:52
  SPEAKER_00: I don't know if she does, but I hope so.
• 1:00:54
  SPEAKER_00: I hope someone over there does or who knows.
• 1:00:57
  SPEAKER_00: I have not yet to get hate mail from them.
• 1:00:59
  SPEAKER_00: So there you go.
• 1:01:00
  SPEAKER_00: Yeah.
• 1:01:01
  SPEAKER_01: That's the ultimate sign that you've got an engaged listener.
• 1:01:05
  SPEAKER_01: Well, on that note, I think we can close it out.
• 1:01:08
  SPEAKER_01: I will say, though, happy anniversary to all of us.
• 1:01:12
  SPEAKER_01: The spy balloon is one year old as of Friday.
• 1:01:15
  SPEAKER_01: It brings me back, you know, we're all getting ready for the Super Bowl a year ago.
• 1:01:21
  SPEAKER_01: And then lo and behold, the unmanned civilian airship.
• 1:01:24
  SPEAKER_01: Do you have any plans to celebrate, Bill?
• 1:01:27
  SPEAKER_00: So I think Tasha and I, we're going to go release some red balloons.
• 1:01:30
  SPEAKER_00: of America
• 1:01:43
  SPEAKER_00: It Is
• 1:02:14
  SPEAKER_00: in Congress
• 1:02:29
  SPEAKER_00: have to release more of the findings, what the balloon was doing, what they found on it, then it'll be back in the news cycle.
• 1:02:36
  SPEAKER_00: But for now, we can just celebrate that a year on, the balloon's gone.
• 1:02:41
  SPEAKER_00: I mean, I don't know what else to say.
• 1:02:42
  SPEAKER_00: I just hate that damn balloon.
• 1:02:44
  SPEAKER_01: There's nothing left to say.
• 1:02:45
  SPEAKER_01: We've all said plenty about the balloon.
• 1:02:48
  SPEAKER_01: The only reason I even know that this is the anniversary is because Politico EU wrote up a little spy balloon memories article.
• 1:02:56
  SPEAKER_01: They're trying to watch your newsletter.
• 1:02:58
  SPEAKER_01: Yeah, and they document several inconsistencies with the official narrative that's been put forth in terms of what exactly was happening.
• 1:03:06
  SPEAKER_01: So, the adventures with the unmanned civilian airship will continue for eternity.
• 1:03:12
  SPEAKER_01: For now, Bill, it is great to see you as always.
• 1:03:15
  SPEAKER_01: I hope you have a great weekend.
• 1:03:16
  SPEAKER_01: Get out there in the woods with Tashi this afternoon and we'll keep it rolling in the weeks to come.
• 1:03:23
  SPEAKER_01: Yeah, thanks Andrew.
• 1:03:24
  SPEAKER_00: Thanks everybody.