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Bonus: Superpower Showdown · Stephanomics

• 0:03
  Speaker 1: Hi. I'm Andy Brown, the editorial director of the Bloomberg
• 0:07
  Speaker 1: New Economy, and I'll be with you for the next
• 0:09
  Speaker 1: few weeks sharing highlights of my two video broadcasts called
• 0:14
  Speaker 1: on the front Lines and Bloomberg New Economy Conversations that
• 0:19
  Speaker 1: look at how COVID nineteen is reshaping the global economy.
• 0:24
  Speaker 1: You can find them all on Bloomberg dot com. Going
• 0:28
  Speaker 1: into this pandemic, U S. China relations were at rock bottom.
• 0:33
  Speaker 1: They've since gotten much worse, with both sides trading blame
• 0:36
  Speaker 1: for the COVID nineteen outbreak, spinning conspiracy theories, and abandoning
• 0:42
  Speaker 1: cooperation on all fronts. To discuss what all this means
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  Speaker 1: for the post COVID economy, I caught up with two
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  Speaker 1: Wall Street Journal reporters, Ling ling Way and Bob Davis,
• 0:54
  Speaker 1: who just published a book called Superpower Showdown. It's based
• 0:59
  Speaker 1: on year as of inside reporting from the centers of
• 1:02
  Speaker 1: power in both Washington and Beijing. I hope you enjoyed
• 1:07
  Speaker 1: this and other interviews on how the coronavirus is transforming
• 1:11
  Speaker 1: the business world, and thanks to Stephanie Flanders for letting
• 1:15
  Speaker 1: me hijack her feed. Bob and Linglan gets great to
• 1:24
  Speaker 1: have you on the program. You've both been living and
• 1:28
  Speaker 1: breathing this US China trade and economic war from the
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  Speaker 1: very beginning. Bob from Washington, d c U Lingling from Beijing.
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  Speaker 1: So bring us up to speed. How would both of
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  Speaker 1: you score this showdown so far? Maybe Bob you can
• 1:43
  Speaker 1: address that from a US perspective and ling Ling from
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  Speaker 1: a from a China perspective. Let's start with Bob. Sure,
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  Speaker 1: and thanks great to be with you. Andy, really really
• 1:52
  Speaker 1: appreciate it. So you know, it's opening day and the
• 1:56
  Speaker 1: baseball season, and I look at it that way. I
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  Speaker 1: mean we're like three three in the bottom of the seventeenth.
• 2:02
  Speaker 1: The pictures are exhausted. Everybody wants to go home. I
• 2:05
  Speaker 1: don't think there's a winner. It's just dragging on and
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  Speaker 1: dragging on and they kind of taking a break. Uh. Sure. Also,
• 2:13
  Speaker 1: thank you so much Andy for having a song. UM
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  Speaker 1: really honored to be here. Um. So, on the surface,
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  Speaker 1: it does seem like China has scored some tactical wings.
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  Speaker 1: You know, the Phase one trade agreement didn't really get
• 2:27
  Speaker 1: into the matters that Uh, the leadership cares about the
• 2:31
  Speaker 1: most industrial subsidies and as AU reform, none of it
• 2:35
  Speaker 1: was in part of the group agreement. And yes, China
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  Speaker 1: did agree to buy tons of American products, especially act
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  Speaker 1: UH purchases. However, you know, as we know that they're
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  Speaker 1: not meeting really meeting the targets now, and the stuff
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  Speaker 1: they're buying now is also what chinaese at the moment,
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  Speaker 1: the soybeans and porks and chicken feed and all that
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  Speaker 1: so um, you know. UH. And also Beijing seems to
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  Speaker 1: be using this trade agreement as some additional leverage over
• 3:09
  Speaker 1: the trmmonistration, so the trum reministration wouldn't push too hard
• 3:14
  Speaker 1: in matters like human rights and what's happening in Hong Kong.
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  Speaker 1: So on the surface does look like, you know, Beijing
• 3:21
  Speaker 1: is gaining some kind of upper hand. However, really dip
• 3:24
  Speaker 1: down the cost of the trade war to China's super
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  Speaker 1: significant and first of all, UH, it has shattered UM
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  Speaker 1: investor confidence, you know, especially among business private businesses. You know,
• 3:37
  Speaker 1: we have seen for months UM growth in private business
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  Speaker 1: UH investment have been plunging. And yeah, the only thing
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  Speaker 1: that's propping up China's economy now is state investment, state
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  Speaker 1: sector investment. And another big casualty of this trade war
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  Speaker 1: to China is Chinese reform. Right now, there's no moment
• 4:00
  Speaker 1: term to carry out all those needed changes to the
• 4:04
  Speaker 1: Chinese economy. So longer term, um, I really think, Um,
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  Speaker 1: you know, if the momentum, the reform momentum, doesn't come back,
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  Speaker 1: it's really hard to see China will win in the
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  Speaker 1: long run. A lot of people congratulately Trump on standing
• 4:21
  Speaker 1: up to China, but fault him for his tactics. What
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  Speaker 1: should he have done differently? Well, I mean I agree
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  Speaker 1: with you know, the the reform effort in China is stalled. Um,
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  Speaker 1: the US isn't going to really get the purchases they
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  Speaker 1: you know, they expect. So you've got to kind of
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  Speaker 1: look at it from the US perspective. What do they
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  Speaker 1: get out of it? I mean, it's China changed in
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  Speaker 1: any significant way. I wouldn't say it's changed at all. Um,
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  Speaker 1: So what would be the alternative? The alternative clearly would
• 4:50
  Speaker 1: have been to try to recruit allies to work together
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  Speaker 1: put pressure on China in a multilateral fashion. I mean
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  Speaker 1: from day one, the Trump inistration rejected that. They blew
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  Speaker 1: off the Transpacific Partnership literally on the first day, and um,
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  Speaker 1: you know, various times just made it clear they wanted
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  Speaker 1: to go one on one with China. Early on in
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  Speaker 1: April two thousand seventeen, the French president mccrown had come
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  Speaker 1: to the US for a state dinner. He talked to Trump,
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  Speaker 1: talked to him, said, you know, we can work on
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  Speaker 1: this together. And Trump literally said to him, I got
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  Speaker 1: this one, you know. And and that's the way in
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  Speaker 1: which they have tried. So yes, they've gotten China's attention,
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  Speaker 1: They've certainly gotten the world's attention, but they haven't really
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  Speaker 1: gotten very much in the alternative would have been to
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  Speaker 1: go the really hard slog route of you know, lining
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  Speaker 1: up report, running up allies, and confronting them with you know,
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  Speaker 1: with a united kind of world, sort of a w
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  Speaker 1: t O alternative. Langley, you're one of the very very
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  Speaker 1: few US reporters to have penetrated the Chinese leadership talk
• 6:00
  Speaker 1: ranks in John Nana High. First of all, I want
• 6:03
  Speaker 1: to ask you what do they really make of Donald Trump?
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  Speaker 1: He was very confusing to the Chinese side, very unpredictable.
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  Speaker 1: You know, they spent really a lot of time figuring
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  Speaker 1: him out. But on the other hand, you know, in
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  Speaker 1: a sense they also felt like they had him figured out.
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  Speaker 1: His transaction, everything on the table. So get give some
• 6:24
  Speaker 1: big number, give him big number, and he he would
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  Speaker 1: accept it. Briefly, who do they want to win the
• 6:31
  Speaker 1: November election? Trump or Joe Biden? Um? I think, um,
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  Speaker 1: you know, obviously there's some officials in China still think
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  Speaker 1: to this day Trump is a gift for China because
• 6:43
  Speaker 1: he doesn't care about human rights and all those other issues. However,
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  Speaker 1: I do think there is a sense among at least
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  Speaker 1: some corners of the government they they're they're hoping for
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  Speaker 1: a new beginning because they're making things really hard for them,
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  Speaker 1: you know, as evidence by the recent very sudden decision
• 7:02
  Speaker 1: to close the Chinese consulate in Houston. So and they
• 7:07
  Speaker 1: look at that Biden as someone that they might be
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  Speaker 1: able to talk to because Biden, as Bob mentioned earlier,
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  Speaker 1: he might choose to go back to those multilateral organizations
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  Speaker 1: and you know, choose to work with different nations, including China,
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  Speaker 1: on issues like climate change, you know, trade and all
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  Speaker 1: the other issues. You know how Chinese love dialogue and
• 7:29
  Speaker 1: they're good at conducting dialogues. So in that sense, they're hoping,
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  Speaker 1: you know, some of them. I can't speak for what
• 7:36
  Speaker 1: president she did him want if I knew, I would
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  Speaker 1: have run a story about that, but I didn't. Just
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  Speaker 1: it's a little bit divided. It's hard really to see
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  Speaker 1: for sure staying with staying with China for for now.
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  Speaker 1: Some some people watching the glacial pace of economic reform
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  Speaker 1: in China, which you've just referenced, have come to the
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  Speaker 1: conclusion that changing Chinese trade practices is basically mission impossible.
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  Speaker 1: I mean, if if she Pain truly believes that the
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  Speaker 1: state led economic model that he is building and reinforcing
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  Speaker 1: is essential to the continued uh survival of the Chinese
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  Speaker 1: Communist Party, what could possibly persuade him to change course.
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  Speaker 1: That's a great question for years, as you well know, Andy,
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  Speaker 1: foreign pressure. What's good for reforms in China? You know,
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  Speaker 1: back during the w teer era, right Ju longy he's uh,
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  Speaker 1: he's a huge proponent for reforms used that uh, that
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  Speaker 1: w T negotiation to get China to do some very
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  Speaker 1: painful reforms, especially involving that SO era. Right now under
• 8:44
  Speaker 1: Si jing Ping, that kind of uh, um, you know,
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  Speaker 1: that's no longer the case, um for impressure is actually
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  Speaker 1: bad for reform because um, this narrative of the US
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  Speaker 1: trying to keep China down. It's really taking hold not
• 8:59
  Speaker 1: just in a shilst coast, but also among the Chinese public.
• 9:03
  Speaker 1: Ling Ling has taken us inside Humanhai, the Chinese leadership compound,
• 9:08
  Speaker 1: take us inside the White House. So you've got Treasury
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  Speaker 1: Secretary Steve Manouchin on the one side, and he's pushing
• 9:16
  Speaker 1: for a deal. Wall Street really wants a deal. You've
• 9:20
  Speaker 1: got the hawk ish Pete Navarro on the other side.
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  Speaker 1: He would like, probably to see all of American companies
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  Speaker 1: pull out of China and bring jobs back to America.
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  Speaker 1: And in the process, he would, hope, I imagine, sort
• 9:32
  Speaker 1: of bring the Chinese economy to its knees. And then
• 9:35
  Speaker 1: you've got a president who's swinging between these these two poles.
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  Speaker 1: How did all this play out in the negotiations? Well,
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  Speaker 1: I mean in our book, I mean, what we talked
• 9:47
  Speaker 1: about is a Wall Street Trump and a blue collar Trump,
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  Speaker 1: and there are both. He is legitimately both of them.
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  Speaker 1: On the one hand, his rants during the campaign about
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  Speaker 1: China ripping us off, ripping off the US um, you know,
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  Speaker 1: stealing jobs and all that sort of thing, he does
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  Speaker 1: genuinely believe that. Um. On the other hand, he looks
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  Speaker 1: obsessively to the to the markets, right, and he ping
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  Speaker 1: pongs between both of them. I mean you see that
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  Speaker 1: playing out in his aids. Also, as you sort of
• 10:16
  Speaker 1: you laid out, there are people in that White House
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  Speaker 1: who believe that China is the greatest threat to the
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  Speaker 1: United States is the rise of fascist and in the
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  Speaker 1: nineteen thirties, he is not one of them. Um, there
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  Speaker 1: are people in that White House who think, you know,
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  Speaker 1: you know, China is a problem. Certainly it's a problem,
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  Speaker 1: but you know, there's a lot of problems in the
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  Speaker 1: global economy, and you know, let's not let this get
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  Speaker 1: out of hand. And he's not one of them either.
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  Speaker 1: So he goes from pole to pole, and the different
• 10:40
  Speaker 1: advisors play off of that, um and so at some
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  Speaker 1: points you see the sort of blue collar ish, the
• 10:46
  Speaker 1: Navarro and Lightheiser wing kind of went out. At other times, Uh,
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  Speaker 1: you know, he pulls back when the markets react the most.
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  Speaker 1: The clearest signal for watching somebody is unparticular as Trump
• 11:00
  Speaker 1: is what are the markets doing? The markets react, you
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  Speaker 1: can count within within a week he'll back off on whatever,
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  Speaker 1: you know, whatever it is. I think you can see
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  Speaker 1: this now on closing consulates this speech, that speech against
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  Speaker 1: China at the markets move, then it'll tamper down. If
• 11:17
  Speaker 1: they don't, you'll see more. We're rapidly running out of time,
• 11:21
  Speaker 1: but I just want to ask a couple more questions.
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  Speaker 1: I know you've done a lot of You did a
• 11:26
  Speaker 1: lot of reporting on the impact of Chinese exports on
• 11:29
  Speaker 1: US manufacturing communities and so called China Shock. Right, it
• 11:34
  Speaker 1: resulted in several million lost jobs and places like Pennsylvania, Michigan,
• 11:38
  Speaker 1: North Carolina and helped propel Donald Trump to victory in
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  Speaker 1: the last election. What's happened to those communities since then?
• 11:47
  Speaker 1: Will they vote for him again? Well, you know a
• 11:51
  Speaker 1: lot of those communities there have been so they're they're
• 11:54
  Speaker 1: factory towns we're talking about about basically in the Southeast
• 11:57
  Speaker 1: and the Midwest, and factory town have not done particularly
• 12:02
  Speaker 1: well under Trump. Uh. Even before COVID manufacturing employments down
• 12:07
  Speaker 1: the tariffs hit. Uh. They might protect some companies, but
• 12:11
  Speaker 1: there are many more companies that use products than than
• 12:15
  Speaker 1: produce products. So you know, they were not beneficiaries of
• 12:19
  Speaker 1: this trade pack or this trade fight, and I neither
• 12:22
  Speaker 1: were the farmers. On the other hand, there are many, many,
• 12:25
  Speaker 1: many other reasons. You know, workers and farmers are you know,
• 12:29
  Speaker 1: supportive of Trump. I I don't think he's lost. You know,
• 12:32
  Speaker 1: I'm doing a story now on factory towns. I don't
• 12:35
  Speaker 1: notice any you know, shrinking away. It's all the sort
• 12:38
  Speaker 1: of other kind of people, right, the suburban housewives, the
• 12:41
  Speaker 1: sort of classics that you hear about that where you
• 12:44
  Speaker 1: see the shrinkage. But back his base, his base is
• 12:47
  Speaker 1: still pretty damn strong. Okay, quick one for both of you.
• 12:50
  Speaker 1: This showdown is obviously a lot about much more than trade.
• 12:55
  Speaker 1: We've gone from a trade war to a tech wall,
• 12:57
  Speaker 1: to a talent wall, to a financial wall. Now business
• 13:00
  Speaker 1: leaders like Ray Dialio or Bridgewater a warning about a
• 13:03
  Speaker 1: shooting war. What is the sequel to superpower showed down?
• 13:10
  Speaker 1: Where is this story going? Briefly from each of you, Well,
• 13:14
  Speaker 1: I mean a shooting more is like, you know, into
• 13:17
  Speaker 1: the world scenario. So no, I don't think we're going there.
• 13:19
  Speaker 1: We've never got into a shooting world with the Soviet Union.
• 13:21
  Speaker 1: I don't see why in the world would possibly get,
• 13:24
  Speaker 1: you know, to that extent. I mean, I think we
• 13:26
  Speaker 1: are probably at this point at in a cold war, right,
• 13:30
  Speaker 1: I Mean it's a different sort of cold war, but
• 13:31
  Speaker 1: I think we're in it. I think one thing that's
• 13:33
  Speaker 1: really hard to tell. I mean, we're also in the
• 13:36
  Speaker 1: silly season, right, I mean, we've got three months to
• 13:38
  Speaker 1: in an election. So I mean all the sort of
• 13:41
  Speaker 1: tough you know steps that Trump is taking, if he
• 13:44
  Speaker 1: wins the second term, does he really continue to that level?
• 13:48
  Speaker 1: And if Biden you know, uh, defeats him. Um, I
• 13:51
  Speaker 1: think the long term strength trying to stroy disengagement. But
• 13:55
  Speaker 1: clearly the tone will you know, will change enormously last
• 13:59
  Speaker 1: work to you Lingle sure, Um, you know it's kind
• 14:02
  Speaker 1: of ironic in away, right. So trade was the area
• 14:07
  Speaker 1: where where the relationship started to crumble, and now trade
• 14:11
  Speaker 1: is the one of the few remaining channels where both
• 14:15
  Speaker 1: sides still talking to each other. So right now this
• 14:18
  Speaker 1: relationship really is handing by a very very thing thread
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  Speaker 1: and by many other measures, we are already in a
• 14:24
  Speaker 1: new code war. I would just hope that you know,
• 14:27
  Speaker 1: Chinese officials often say that the ball is in the
• 14:30
  Speaker 1: U s court in terms of, you know, the future
• 14:32
  Speaker 1: of the US trainer relationship. I would say it's in
• 14:35
  Speaker 1: China's court as well. That's how US a present shiting
• 14:38
  Speaker 1: thing still mikes it when he says, um, there are
• 14:41
  Speaker 1: thousand reasons to have a good U. S. China relationship,
• 14:45
  Speaker 1: not one single reason to spoilt. Let's hope he still
• 14:48
  Speaker 1: believes that Bob Davis ling ling Way Superpower Showdown. Great book.
• 14:54
  Speaker 1: Thanks for being with us today, Thank you MU, thanks
• 15:00
  Speaker 1: for listening. I hope you'll tune in later this year
• 15:03
  Speaker 1: for a digital edition of the annual Bloomberg New Economy Forum,
• 15:07
  Speaker 1: where business and government leaders from around the world will
• 15:11
  Speaker 1: talk about the challenge of building a more sustainable and
• 15:15
  Speaker 1: equitable post COVID economy.