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Inside China’s Business World with Patrick Jenevein · China Considered

0:08
>> Elizabeth Economy: Welcome to China Considered,
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a podcast that brings fresh insights and informed discussion to one of the most
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consequential issues of our time, how China's changing and changing the world.
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I'm Liz Economy, Hargrove Senior Fellow and co-director of the US, China and
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the World Program at the Hoover Institution at Stanford University.
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Today I have with me Patrick Jenevein, the author of a terrific new book,
0:30
Dancing with the Cautionary Tales of the New China from an Old China Hand.
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Patrick's a Texan who, not surprisingly,
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has spent most of his life in the energy business.
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More surprisingly, perhaps most of that time was spent doing business with China.
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The book is a firsthand account of what I think was a true roller coaster ride that
0:49
changed not only Patrick's business, but also his life.
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Patrick, it's great to have you with us.
0:55
>> Patrick Jenevein: Thank you, Liz, it's a treat to be with you, as always.
1:00
>> Elizabeth Economy: So, Patrick, before we get started,
1:02
just flash the COVID of your book.
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Because it's such a great cover.
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I want people to be able to see it.
1:08
There you go.
1:10
And the dragon is the sort of typical emblem for China.
1:14
Is there a reason that you decided to have that on your book?
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>> Patrick Jenevein: Yes, and it's a five toed dragon,
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which makes it an imperial dragon,
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which tells the imperial force in the PRC right now, we're paying attention to you.
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>> Elizabeth Economy: I love that.
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>> Patrick Jenevein: Very specifically, and I know you also had the book released
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on October 1, 2024, which was the 75th anniversary
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of the founding of the People's Republic of China.
1:45
And I saw in an interview that you said it was a birthday present to the Chinese
1:50
government.
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And I have to say, having read the book, I thought it's
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probably a present that they would like you to take back at this point.
1:59
But we'll get to that, I think, in our discussion.
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So let me start now with your first trip to China, which was in 1995.
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Why did you go?
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Where did you go?
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What was the result?
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I mean, you already had a successful business in Texas.
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What prompted you to, you know, travel to China?
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As a young, ambitious man, we wanted to expand our business,
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we wanted to grow, and we looked at going to California.
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And Gray Davis at the time talked about Texans as Texas power Pirates.
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And a guy, Bob Falleen, that I had known from the First National Bank in Dallas,
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worked in both Shanghai and San Francisco.
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And I met with him and
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he said that the communists are much harder to deal with in San Francisco.
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That's all I needed.
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And growing up in Texas, you're used to being pushed to frontiers, or not
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necessarily pushed, but drawn to frontiers and drawn to frontier challenges.
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And natural gas, we were really good at natural gas processing.
3:03
And a guy named Imin Jan, PhD physicist from the University of Houston,
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retired from ARCO when the price of oil dropped to $8 a barrel,
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but had grown up in Taiwan.
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And his family didn't have running water when he grew up.
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We wound up getting together to process natural gas for
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the China National Petroleum Corporation.
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That was the reason it was really interesting going out there.
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We had a couple of pilot projects.
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We needed to show that we could get equipment and personnel in, and
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that we could get personnel and money out, that worked.
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We also started a conversation with the CIA because trying
3:47
to find out who your partner was in China at the time was very difficult.
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Had a conversation with a guy on a desk in D.C. who said,
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yes, your counterparty is who you think it is.
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We went over to China, Dallas, to San Francisco, to Tokyo,
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to Beijing, to Ulamuchi, halfway around the Northern hemisphere and
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thinking my CIA and the USCIA is telling me I'm gonna be all right.
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Well, found out that they were wrong, that there was a 50 partner.
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You can laugh about that now and I'll laugh about that now too,
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because we know better.
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But then in 1995, as a 30 something year old, I didn't know better.
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Now I do.
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I came back and talked to that analyst and at the end he said, well,
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what else do you know?
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So that started an interesting relationship.
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>> Elizabeth Economy: Right? And
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maybe we'll hear a little bit more about that a little bit later.
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But you know, a lot of your book is about the challenges that you faced and
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they were, you know, significant.
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But you also had some significant successes.
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What do you consider to be your biggest success?
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Because you had a number of different ventures over the course of your,
5:02
you know, two and a half decades or so.
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>> Patrick Jenevein: Well, the success that matters is that we built
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relationships with Chinese and we made money together.
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And if you're making money together,
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you're creating jobs, you're raising everybody's boat.
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And there's an affair of the tides of men which taken to the flood leads to riches.
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Well, we did that.
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We saw that we were doing good things for Chinese.
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We were making money doing it.
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Some of the emissions from our natural gas fire power
5:35
plants was actually cleaner than the air many Chinese breathe.
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Your book, the River Runs Black at that time was a really important book for
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me to be able to read because you qualified it, you researched it, and
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you contextualized a lot of what you did that helped people like me know we were
5:54
doing the right thing, knowing that we were moving the right direction,
5:59
putting our business in a position to do good and to do well by doing good things.
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>> Elizabeth Economy: So, I mean,
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that's a great sort of very positive take on your engagement there.
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And you've written a lot about what it was like negotiating with the Chinese and
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with the Communist Party representatives that were both from the government and
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also, you know, in the state owned enterprises that you were working with.
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You know, as you think back to that sort of negotiating style and process,
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you know, how much similarity was there between the way that Americans might
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negotiate, the kinds of deals that you were doing and what you saw and
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what you dealt with from the Chinese side in terms of, you know,
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the style and the method and the tactics and strategies.
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Did you feel at home in terms of sort of working with your Chinese counterparts,
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or was it just an entirely new world?
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>> Patrick Jenevein: It was entirely new.
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One of our very first pilot projects was in Kalamai,
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so far Western China, in Xinjiang,
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where the Communist Party is abusing Uyghurs.
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We were going to provide a natural gas processing plant.
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So when natural gas comes out of the ground, it's gaseous.
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If you cool it or put a little pressure on it, you can liquefy it.
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And then if it's liquefied, then people can carry it around and
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in small tanks that you can put on the back of a bicycle.
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So here we were pushing that idea forward and China National Petroleum Company
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very shrewdly paired us against the Canadian firm and
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gave us essentially identical contracts are identical task.
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We got ours, we negotiated.
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I left Kalamayi thinking that we were done, Imeen.
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Dr Jan, my partner, stayed and when by the time I got home,
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they had changed the deal completely.
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So I sent him a fax and put confidential, you know, in big letters
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on the top to make sure that the Communist party people read it before imin.
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So here, it was almost like playing bridge where you're bidding across
8:25
the table without saying everything.
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You think so confidential, you mean?
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You've pushed our company into a position that we cannot strategically hold.
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We've already invested so much, we can invest more.
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The engineer from CNPC have out negotiated you.
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So there was a lot that was in there that complemented the CNPC
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engineers gave them a face showed that they had crushed an American
8:58
businessman in negotiating, which interestingly gave
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them more flexibility in the future for us to work together.
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So those ideas of face were fascinating
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to learn, another quick example.
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Our second pilot project was a gas fire, small gas fire,
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electricity generating project for a Chinese company that made carbon black,
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which generated for hard currency for
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them foreign currency reserves at the time when China needed it to get paid.
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Our young engineer, Gao Yang, who had been one of
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the most successful engineers of the Onomuchi grid,
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she was one smart hardworking lady.
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And the other folks in the utility didn't like how hard she worked because it
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made them look bad.
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So when she had the chance to work with a foreign company, ours,
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she did well, she would go to Kula.
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You should have to take a train from Ulamuchi to Kula, and
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then take a cab to the place and come with a briefcase and an invoice,
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and she'd get paid in cash, and then she would reverse the trip.
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Well, then the Kula or the carbon black plant started slow paying her and
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the general manager who could pay her started to be gone on trips.
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And one day, she just slammed that briefcase down on his desk in front of
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a lot of other people.
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I wasn't there, I heard this story and said, you're not treating us right.
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Well, that gave him face.
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He had shown in front of all those people that he was doing a good job for
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China and the Communist Party.
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>> Elizabeth Economy: So were these things that you picked up along the way,
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this idea of giving your Chinese interlocutor space, or was there a primer
11:03
that you read before you went to China, like how to negotiate with the Chinese?
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>> Patrick Jenevein: Well, you introduced me to Lucian PI's idea, so
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reading your work, reading Lucian's work helps contextualize what you're doing.
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But then, getting back to the end part of the question, we started to answer.
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Eventually, you understand that the Communist party is the one
11:29
that's negotiated with you, whether directly or not.
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Because the Communist party reserves the right to make or
11:36
the privilege to make every decision in China, whether it's prospective,
11:41
current, or even retrospectively.
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The Communist Party can change decisions, you know that, you've seen that, but
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a lot of Americans don't appreciate that, whether they're in business or government.
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And we're in business, we're negotiating and
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running joint operations with Communist party controlled outfits every day,
12:04
we're making decisions every day, and it's the same outfit.
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So there's, there's much more overlap than a lot of our, our diplomat,
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our diplomats that are there all the time understand that.
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But the elected officials have a hard time keeping up with that lesson.
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And so your book and Lucian's book or your books actually help.
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There's no questioning that.
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For me, because I'm a slow learner, maybe I have to go and
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actually learn lessons myself the hard way, one quick story.
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Start on that, we were in Dunhuang, and
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we were going to build a natural gas firepower plant that used a jet engine.
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Put the jet engine on the ground and a generator behind it.
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You feed it with a whole lot of natural gas, it spends really,
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really fast, which turns the generator really, really fast,
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which spits out a whole lot of electricity.
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But as soon as you take a jet engine into China, whether you put it on the ground or
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on an airplane or in a helicopter, you wind up working with
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the Aviation Industry Corporation of China, whether you expected to or not.
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It's divergent, you don't have a choice.
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Well, a guy named Mr. Joe, who's older than I,
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had been Deng Xiaoping's advisor of jet engines and
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rockets, and he was the lead AVOC guy.
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And here, we get through this initial meeting, and
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then we agree to break up into working groups.
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And I think, I assume,
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I'm going with the working group because that's where my mind is focused.
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And he mean the PhD physicists of no,
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you're going to go ride camels with Mr. Joe.
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Ride camels?
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Yes.
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And you're going to go out into the sand dunes and get on a camel and
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you're going to go out to a, a Buddhist monastery.
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Have fun.
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Really? I don't, I need to work.
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He says, no, I'll be fine without you.
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We can catch up.
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So I made a few mistakes.
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You're growing up in Texas, I know how to ride a horse.
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So a camel is just another long-legged, tall beast that you get on and ride.
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And it starts from an awkward position where the camel's on the ground and
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then lurches up.
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Well, I can ride that minutes, it's an animal.
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My mistake was that I was on the bigger camel in the front of the line and
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Mr. Joe was behind me.
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The worst mistake I made, that was turning around and
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looking at the camel that Mr. Joe was on as it was rising.
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And poor Mr. Joe's white-knuckle in the pommel,
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and that's bad enough, but
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I saw fear in his eyes and he did not like that.
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And to compound my already grievous error,
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there were witnesses, people took a picture of this event.
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So now, Joe's embarrassed, and he know and
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everybody else around him knows he was embarrassed.
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So that night he invites me to play Snickers.
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It's a pool table game.
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And with crowd of his minions up against one wall,
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he proceeded to beat me soundly,
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which allowed him to regain face at my expense.
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But I didn't care.
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Yeah.
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In Texas, you could call me what you want, what can you do is what matters, right?
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So anyway, there were plenty of opportunities to learn.
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>> Elizabeth Economy: Yes.
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>> Patrick Jenevein: Even though I could have.
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Even though I should have been able to from reading your books, but
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I still had to take those ones.
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>> Elizabeth Economy: No, no, for sure.
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I think that nothing beats on the ground experience.
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So no book is equal to that.
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So I want to talk about what I saw as one of your sort of
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biggest successes in China.
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And that was your partnership actually with AVIC on HT Blade, right?
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So how did that partnership come about?
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You mentioned Mr Zhou and this experience you just had with the jet engines.
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But how did you decide to partner?
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And what was this HT Blade?
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What was this joint venture?
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>> Patrick Jenevein: Well, at the plant ding Wong, where Mr Joe and
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I rode camels, we wound up making that power plant work.
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That's a long story.
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But we made it work.
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And we met good people.
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They were good in that they wanted to do what they said they would do.
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They wanted to do well for themselves, for their company, for their country.
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They were honest, they were smart, they were hardworking, and we'd like that.
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And these were great people to work with.
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We could talk about that a long time.
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But back to your question.
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Once we got that Dunhuang plant up and running, the jet engine on the ground,
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working with Havoc, then Sing John Wind Energy company found us and
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said, would you build a gas fired power plant on our wind farm.
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So that the wind farm can deliver electricity even when the wind's
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not blowing?
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Great idea [COUGH] it's really hard to make that work contractually.
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Insurance finance is a problem, but
17:34
we could figure out how to use project finance to build wind farms.
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That part wasn't that hard.
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Getting that started in China was hard because China had not done it before.
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Fast forward Wu Gang, who was the chairman of Jingfeng or Goldwyn.
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We actually had dinner in Dallas at the Dallas Petroleum Club.
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And I outlined, here's the business plan that you need to have for
18:02
Goldwyn to be able to have success in the United States.
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And he did it.
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He executed it and did a great job.
18:10
Anyway, we started to finance windfar or
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build project finance in China for Chinese companies.
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And we were working with GE on that too, because GE wanted to sell turbines.
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It made a lot of sense for everybody.
18:24
But then bombing the Chinese embassy in Belgrade and
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having warplanes collide over Hainan Dao or
18:31
Hainan island are acts of war, and it leaves some project finance folks.
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Those are acts of war and acts of war and project finance repel.
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I mean, they're antithetical to one another.
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So, after my strength is finance and
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being able to put projects together, develop projects.
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But we figured, we're our Patrick's project finance ideas are toast.
18:57
But here we were working with people we liked at Avic and it was April 1,
19:03
2001, when we were supposed to have a meeting about project finance.
19:10
And one of those acts of war happened, and frankly,
19:14
we went to lunch early and started drinking.
19:18
[COUGH] but by the end of it.
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Well, sorry, but that's true.
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By the end of that was April 2001, and by the end of the year,
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we were making blades for wind turbines.
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And HT is H is the Chinese better than I do.
19:37
Hong for aviation and Tong for
19:42
our T for our company.
19:46
[COUGH] so Havoc knew how to make airfoils, propellers for
19:52
engines, blades or helicopters, wings or airplanes.
19:57
Blade for a wind turbine is just a kind of airfoil.
20:02
So we said, avoc we know the wind business.
20:05
You know how to make airfoils.
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We've got a great relationship going.
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We know how to work with each other in ways that are beneficial to both of us.
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Let's start a company, make blades,
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wind turbines from that April lunch to seven years later was the biggest.
20:23
The second biggest wind farm wind blade maker in the world and
20:27
the biggest in China.
20:29
That's a short story on how you got there sorry.
20:32
>> Elizabeth Economy: Yeah, no, that's and that's, I think, for me, in any case,
20:36
that was the high point.
20:37
[LAUGH] as I was reading the book.
20:40
>> Patrick Jenevein: Well, we were gonna.
20:41
We were gonna take that company public for $1.8 billion.
20:44
>> Elizabeth Economy: Yeah, that would have been the high point.
20:46
We could get to why that didn't happen.
20:48
We can get to why that didn't happen.
20:51
But to begin with, then you decided, and AVIC decided,
20:54
right to expand the partnership, right.
20:57
And to move into thinking about what you could do in the United States.
21:02
And that's, I think, when things started to unravel, right?
21:08
>> Patrick Jenevein: That wasn't the well,
21:09
the start was really Xi Jinping's ascension.
21:12
We decided, so here in Texas, we decided for us to make sure this IPO for
21:18
$1.8 billion, initial public offer goes swimmingly,
21:23
we need to be able to show that we're selling blades around the world.
21:28
So our company, Tong Energy, started another company called Soaring Wind Energy
21:33
to develop wind farms around the world.
21:35
And we built a Wind Farm, Nebraska.
21:38
And we went to GE and said, hey,
21:40
GE, we want to buy about $100 million worth of your wind turbines.
21:44
Are you interested?
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And even GE says $100 million is a good transaction.
21:50
We said, but GE for our wind farm, using your wind turbines,
21:55
we want you to put our blades or HT blades on your wind turbines.
22:00
And that was working.
22:05
And then Xi Jinping started saying ascending and
22:09
telling Chinese that they needed to be much more patriotic.
22:15
And it was after a board meeting in baoding, which is 150 kilometers or
22:21
so south of Beijing, that at dinner again, somebody was drinking.
22:26
And one of my fellow board members said, well,
22:29
the IPO is not gonna work because the foreigner is gonna make too much money.
22:33
So I was complimented.
22:35
And one way, because we were so used to working with each other,
22:39
we didn't consider each other foreigners.
22:42
But I said to my co boardman, who the foreigner is, don't you?
22:47
And he said, yeah, I'm sorry, that's you but why?
22:53
Because Xi Jinping had said, the foreigner can't make so much money here.
22:59
We had worked our fannies off.
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We had done a great job.
23:03
We'd expanded the business.
23:04
And it took cooperation.
23:06
It took us working together.
23:08
We all knew that there.
23:10
But Xi Jinping had a different plan.
23:13
>> Elizabeth Economy: But even with the IPO sort of put on the back burner,
23:16
you move forward with the partnership, right?
23:19
I mean, it wasn't the end of the partnership.
23:22
>> Patrick Jenevein: No, we were still trying to make the company
23:29
grow to expand into the rest of the world.
23:35
But the Xi Jinping generated attitude was don't work with foreigners.
23:42
It was that bad case in point.
23:49
I can't remember the year right now, but
23:53
about 2012 or so [COUGH] what.
23:57
We own our company owned Our Texas company owned 25% of the Blade company and
24:03
AVIC and two of its subordinates, the other 75%.
24:07
One of those subordinates stole $8 million from our joint venture.
24:12
And nobody told us.
24:13
We were just looking at.
24:15
We were comparing one set of accounting records and
24:19
financials to the previous periods set of financials.
24:23
We said, you know, there's five.
24:25
There's $8 million missing.
24:26
It looks like $8 million is missing.
24:28
What do we do?
24:29
Do we forget to record inventory?
24:32
There could be a number of reasons.
24:34
We had $350 million of revenue at the time.
24:37
So $8 million is important.
24:39
But, it's easy,
24:40
you can understand how you might just haven't had an accounting error.
24:46
Well, found out, no, it wasn't an accounting error.
24:51
Bao Dingway Yang had actually stolen 8 million bucks.
24:54
And we said, okay, now that we know Avic in 2023,
24:58
Avic had more revenue than any other defense contractor in the world.
25:03
So they've got the cash.
25:05
We said, you've got the cash, Just put it back.
25:08
They said, yeah, we'll do that.
25:09
And they were somewhat embarrassed by it.
25:12
And then it didn't happen.
25:13
Didn't happen. Didn't happen.
25:14
And I went back and kinda maybe as a rude Texan, said, where the hell's the money?
25:20
You've got it.
25:21
Why haven't you put it back?
25:23
So the first thing that happens, we got a letter of reprimand from Abbott.
25:27
So HT Blade, our joint venture company, got a letter of reprimand from
25:32
AVIC saying, HT Blade, if you're going to pay one member a dividend,
25:37
you should pay all members a dividend.
25:39
And we said, that's, that's not right.
25:41
That money was stolen.
25:43
There was no dividend pay, we didn't receive any money.
25:48
Wait for this.
25:50
So what happens next?
25:52
You might be able to anticipate.
25:54
We got a bill from the local tax authority for the money that.
25:58
For the amount of money that was stolen.
26:02
So you think.
26:03
Yeah, you think that we can correct a theft by friendly negotiation?
26:09
And then, okay, maybe I was a little rough hewn as a kinda course Texan sometime.
26:15
[COUGH] But we got slapped with a tax bill from the local tax bureau.
26:20
So do you think that we could go to the local judicial authority and
26:25
say, hey, these people are messing up, are messing us around?
26:30
We didn't think so.
26:31
You might have more research that would prove me wrong.
26:34
But we didn't think so.
26:38
So anyway, that flips us back to what they started doing to us in Texas.
26:43
They hired our general manager.
26:46
They being AVIC, they hired our general manager.
26:49
They stole a wind farm, and they diverted financing.
26:53
You know, there were a few other things that were in there too, but
26:56
that's essentially it.
26:58
They started AVIC.
27:01
AVIC started a company to compete directly with us in Texas to do
27:06
the business that we were gonna do together.
27:09
So that's what it really started unraveling.
27:13
>> Elizabeth Economy: Right, which is something that I think, actually, a lot,
27:17
but certainly there have been a number of stories in China,
27:21
of Chinese companies doing that to their multinational joint venture partners,
27:27
where they start competitive companies.
27:30
But that's not.
27:33
Sorry, Patrick, are you speaking right now?
27:36
>> Patrick Jenevein: No.
27:37
>> Elizabeth Economy: Okay, your mouth was moving, [LAUGH] so it was very strange.
27:40
Sorry, Declan, hold that.
27:42
[LAUGH] Sorry, we'll just keep going.
27:45
Certainly there have been a number of stories about Chinese companies doing that
27:49
to their foreign joint venture partners inside China.
27:53
But I think yours may have been one of the first that I've heard of where the Chinese
27:58
company took on the American joint venture partner inside the United States and tried
28:04
to do something sneaky in terms of setting up a competitive partner in that way.
28:09
So I guess you got pushed then your back was against the wall and
28:14
you decided what to take them to arbitration.
28:17
Right. That was sort of the.
28:19
The first step in this process of seeing could you negotiate a settlement.
28:25
>> Patrick Jenevein: Yes, our soaring wind energy joint venture, which was the Texas
28:30
based joint venture, had a dispute resolution provision that was really long.
28:35
But a key part of it is Dallas, Texas, venue and in arbitration.
28:43
So, yes, we took AVIC to task starting in arbitration,
28:49
and we knew what a lot of American companies don't necessarily appreciate.
28:59
They do by now, I hope, that the subordinate unit,
29:03
wherever it is, is controlled by headquarters.
29:07
There may be.
29:08
They can say what color truck do you wanna buy?
29:12
When they can make that kind of decision, as long as it's the right decision.
29:16
If they bought the wrong color truck, the Communist Party will still reprimand them.
29:20
Anyway, we tied or linked the bad behavior of the Avicone
29:26
subordinate in Texas all the way to Beijing.
29:31
So headquarters in Beijing was responsible.
29:34
Building that Alter Ego chain was what really mattered.
29:39
We knew it was there.
29:41
We thought we knew how to build it.
29:43
And the arbitration award came out in the section on liability, like that said,
29:49
the evidence overwhelmingly shows that AVIC is a single business enterprise.
29:56
In short, it's probably ten pages or eight pages of the award.
30:00
So I've just summarized it, but we knew we would have to prove that,
30:05
to have a chance of collecting otherwise, like in China drywall.
30:10
I can't remember the guy's name that said, for China Drywall.
30:18
Let me back up just a little bit.
30:19
China Drywall was a suit that was brought in the Gulf coast by people who were.
30:27
Who had rebuilt hurricane, destroyed homes with drywall from China.
30:33
>> Elizabeth Economy: Yeah.
30:34
>> Patrick Jenevein: One of the leaders at China drywall said,
30:36
we don't care if you sue us.
30:38
All our assets are in China, and you can't get to them.
30:41
Well, we showed how you could get to them, and that's the right thing to do.
30:49
We've got to be able to expect each other, and by that way,
30:54
I mean Americans and Chinese to behave lawfully.
30:58
The Communist Party likes to control all the laws and be above the laws.
31:04
But that's bad for Chinese.
31:07
It's worse for Chinese than it is for anybody else.
31:10
Here I am.
31:10
We won, and then they returned the compliment of the lawsuit
31:15
by suing me personally for 300 million bucks.
31:20
And, you know, they started off trying to get me put in jail for
31:24
recording a conversation with a Communist Party representative in California, but
31:30
they wanted detectives from Pomona county and Fullerton county to put me in jail.
31:36
They wanted them to bring criminal charges against me.
31:40
Anyway, it's a rough fight, but what we won was really important, and
31:45
eventually we collected dollars in Dallas.
31:48
Should it have been more?
31:49
Of course, I would say yes.
31:52
But the system produces the results that it produces,
31:56
and at the end of eight years, everybody was worn out.
31:59
I was tired.
32:00
A friend in the Pentagon said, gentlemen, you've got combat fatigue.
32:06
So what are you talking about?
32:07
She said, I've been, I'm, I've been trained to recognize combat fatigue.
32:11
And you.
32:12
You've got it.
32:12
You need to do something different.
32:14
And my dear bride knew absolutely.
32:18
I was.
32:18
I was exhausted, but Yeah, it wasn't just that,
32:23
it wasn't even just the court case.
32:27
>> Elizabeth Economy: I mean, Abbott played hardball and,
32:29
and got a little scary too.
32:31
Right? Like trying to put you in jail and
32:33
death threats and, and other elements of this that you don't expect when you're,
32:38
you know, in arbitration and, and, you know, trying just to,
32:41
to write an injustice.
32:43
Right. They really.
32:45
Very personally.
32:46
>> Patrick Jenevein: Yeah, or when you have a commercial dispute,
32:50
the commercial disputes about money, it's not about attacking somebody's reputation,
32:56
somebody's asset, somebody's, well, commercial maybe, but
33:00
it's not about threatening families of, of litigants.
33:04
I mean, you know, we've risen above that.
33:07
Not that we're perfect in our our system at all.
33:10
Not that we don't have plenty of room to improve, but we don't do that.
33:14
You know, we expect a fair fight, and
33:17
the Communist Party cannot tolerate a fair fight,
33:22
because in a fair fight, they lo.
33:25
>> Elizabeth Economy: So where is Soaring Wind, where is AVIC today in
33:30
terms of their wind business in the United States?
33:35
Do they have a presence?
33:38
>> Patrick Jenevein: Not that I'm aware of.
33:41
>> Elizabeth Economy: Okay.
33:42
>> Patrick Jenevein: Our joint venture agreement.
33:46
And I said that I would not work in the wind business anywhere else
33:51
except through Soaring Wind.
33:53
And I still, I kept that commitment through the litigation and
34:00
now those opportunity sets have passed me but
34:04
AVIC would help other companies.
34:08
You know, they started.
34:12
Now, I can't remember the name of the company, but a company that actually
34:17
filed a opposition to a CFIUS finding that was going to build a wind farm.
34:23
The Pacific Northwest overlooking US Military bases.
34:28
Rawls, the company was Rawls Corp, so AVOC had actually gotten in behind Rawls,
34:35
that was an equipment provider and was providing finance to Rawls.
34:40
And the, in fact, the general manager of ours that they hired,
34:44
he and I were talking one time and he said, patrick, if you knew all.
34:48
All that went on with that, you'd have to go take a shower.
34:53
Was it that bad, she said, yes.
34:58
>> Elizabeth Economy: So China now globally, though, does lead in deployment
35:02
of clean energy, both within China and I think globally.
35:08
The United States in the previous administration sort of started a process
35:12
of trying to think about how to compete with the Inflation Reduction Act.
35:17
This administration is not as interested in the clean energy space, it seems.
35:22
Do you think it's time for the US just to cede the space?
35:26
Is it kind of game over whether we're talking about wind or solar?
35:31
What's your sense about where the US stands today in
35:35
a kind of competition with China in this space?
35:40
>> Patrick Jenevein: Well, you're pricking a Texas point of pride,
35:43
I don't like seeing a darn thing to the Communist Party.
35:48
That said, we do need to realize and
35:50
understand the Communist Party's true interest in renewable energy.
35:57
And it does a few things that are good for China and bad for Americans.
36:02
One, the Inflation Reduction act has the effect of
36:07
taking money from Americans and funding operations
36:13
in China that actually raise PLA capabilities.
36:18
If you're supporting BYD or some of the solar companies, you're supporting
36:23
the development of capabilities, technological capabilities and
36:28
technological expertise that has direct military application,
36:32
so that's something that you've got to work with.
36:36
Another thing that it does is it's given China the opportunity or
36:41
it's made China's position relative to rare earth minerals and
36:46
other critical minerals more valuable.
36:49
So if we would prioritize protecting people above
36:54
protecting just the environment and say,
36:58
what environments are we protecting for people,
37:03
if we could reduce the, and it would mean, and this is hard for
37:09
me to say because it sounds like seeding a lead,
37:13
and I don't like seeding leads.
37:16
Maybe I'm too competitive.
37:18
But I think we've got to realistically reduce that priority because
37:24
what the Communist Party can do militarily and through cyber and
37:29
through theft of IP is so damaging to the United States and
37:33
to Americans that we need to drop the priority of.
37:38
And I don't really mean drop the priority.
37:41
We, well, you can drop the priority several ways, but
37:43
the way I'd like to see is say, give us more time.
37:48
Let the Inflation Reduction act play out over time, but
37:52
give it more time to play out, because even extending the time helps us,
37:58
us in the US keep the lead that we ought to keep.
38:02
And if you're making stuff in China, they don't care about the people and
38:06
they don't care about the environment.
38:08
We care about both.
38:10
And we need to keep pushing those priorities.
38:14
A lot of people will say that gets into human rights.
38:16
Well, yes, it does.
38:18
But what do we do better than anybody else in the world,
38:21
the real source of our soft power is that we protect people from monarchs.
38:26
We've started protecting Americans from monarchs and
38:30
now and now we ought to be protecting people from authoritarians
38:35
like Xi Jinping who just wanna run roughshod over people.
38:39
I might be going on, [INAUDIBLE] >> Elizabeth Economy: Patrick, just,
38:42
just to clarify a little bit, I mean, the Inflation Reduction act, you know,
38:46
gives incentives to bring manufacturing here
38:49
to the United States in the clean tech and clean energy space, Right.
38:53
So by supporting BYD and others, what you're referring to is just like targets
38:58
for the use of electric vehicles on which we'd now put 100% tariffs on those
39:03
coming in from China because I think in that one area, the Inflation Reduction act
39:08
is actually very supportive of the kinds of objectives that you're talking about.
39:13
I think the other issue,
39:14
which I think is the second point that you made is on the environment.
39:18
Right, relative to protection of the environment and
39:23
sort of the dirty process of rare earths and
39:27
other mining activities and processing.
39:31
Right. That we basically have outsourced,
39:33
you know, to China and to other countries over the past few decades as, you know,
39:37
our environmental standards have risen.
39:39
And I think there has been a lot of talk about, you know, the need for
39:44
different kinds of permitting to enable, you know,
39:47
more mining to take place again in the United States.
39:50
So I think the Inflation Reduction act actually, I think, does address some of
39:55
the issues that you've raised as concerns, but perhaps doesn't address.
39:59
Address others.
40:00
And just to be completely clear,
40:03
when you say give the Inflation Reduction act more time to be enacted,
40:09
I assume what you mean there is continue to use and
40:12
invest in fossil fuels over a longer period of time before you put
40:18
on more stringent caps and demands for the use of clean energy.
40:23
Is that a fair?
40:26
>> Patrick Jenevein: Yes, but there's a whole lot, there's a whole lot in what
40:30
you're touching on first, more time for implementation.
40:35
It's been enacted, so I don't mean to be picking on your words too much, but
40:39
the implementation needs to take longer.
40:42
It also needs to be taken more,
40:44
with more awareness of what it really takes to implement some of its objectives.
40:50
And that's what I'm talking about.
40:52
Because if you, if you, if you drive the objectives too quickly,
40:56
you wind up driving money to China.
40:59
It takes a long time to.
41:01
There are rare earth minerals all over the world.
41:04
It's not that they're that rare.
41:06
But to your point, where are they processed?
41:08
They're processed where, or actually they're mined and processed in countries,
41:12
they don't care about the environment and don't care about people.
41:15
We care about both.
41:17
So if you rush it, if you rush the implementation of the idea,
41:22
you wind up penalizing Americans.
41:25
Then we wind up having to buy gear that is loaded up with magnets that are made
41:30
with rare earth minerals.
41:31
The wind turbines or even the cars, you wind up pushing.
41:37
We just don't have enough time to develop the capabilities in places
41:43
in the world that respect human dignity and respect environmental qualities.
41:50
>> Elizabeth Economy: Okay, fair enough.
41:52
I think that's a point of reasonable debate and
41:58
discussion, and so I'll cede that to you.
42:03
I agree that it's worth thinking that through in a more careful manner.
42:10
So let me just finish up with a couple of questions about China and
42:15
the Trump administration, multinationals.
42:18
China right now is making a big push to entice foreign direct
42:23
investment back into China as Xi Jinping has made this a big priority.
42:29
And what advice do you have to US Companies that might be tempted either
42:34
to enter China for the first time or to increase their investment?
42:38
Over the past several years, we've seen a complete fall off.
42:43
Basically, foreign direct investment into China has fallen off a cliff.
42:48
But now you're starting to see, I think, rumblings of renewed interest,
42:52
particularly as things become much more uncertain here in the United States.
42:57
What would you say to companies as they're looking at China anew?
43:02
>> Patrick Jenevein: Do your due diligence.
43:05
Do what you do well.
43:06
Do your due diligence and start with the framework.
43:09
Are There laws that make your projections reasonably reliable.
43:15
And right now, Xi Jinping has gutted those laws or gone around them.
43:20
Until Xi Jinping changes his mind and actually flips his
43:25
idea that laws should not apply to the Communist Party.
43:30
It's a really dangerous place.
43:32
Now, there might be any episodic or
43:35
any unique example where it's a good idea to go.
43:39
I can't think of one right now.
43:41
So, broadly, be awfully damn careful if you,
43:46
don't believe yourself.
43:49
If you hear yourself saying, well, I'm different.
43:55
Call this economy.
43:57
>> Elizabeth Economy: Nice, I was going to say call Patrick Genevieve.
43:59
I don't think you called me.
44:00
I think just, just, I think a 15 minute conversation with you,
44:04
Patrick, should be enough to put the fear of, of God or into, into anybody.
44:08
And what about here, with the new Trump administration?
44:12
What would you like to see this administration do to better, you know,
44:16
advance or protect US Business interests as,
44:20
as we're still doing business with China?
44:24
>> Patrick Jenevein: First, they need to invest in peace.
44:28
And you don't do that by going around and
44:31
swinging a baseball bat at everybody that, everybody that comes near you.
44:37
So I'd like to see Trump go to Xi Jinping.
44:40
And just as Trump skipped Zelensky to go to Putin, so
44:43
he ought to skip Putin and just go to Xi Jinping.
44:47
Putin doesn't really have enough to really matter materially for world peace.
44:54
I mean, he can disrupt it.
44:55
He's got nuclear bombs and that can be very disruptive.
44:59
So I do not diminish that at all.
45:01
But Xi Jinping has not cornered himself by starting war.
45:07
That gives Xi Jinping more negotiating flexibility.
45:10
And Trump could go to Xi Jinping and say, hey, I need your help.
45:16
I, Donald Trump, need your help.
45:18
That might be hard for him to say, but I need your help, Xi Jinping.
45:21
And you, Russia's about to implode and we're worried about
45:26
mineral security, agricultural security, weaponry.
45:31
I need your help, Xi Jinping.
45:33
And Xi Jinping, I know you've got a real estate problem.
45:36
You, a third of your, almost a third of your economy.
45:40
And I know real estate.
45:41
And I can bring cash.
45:44
[INAUDIBLE] So I'll be your advisor and I'll be a source of cash.
45:49
But you've got to reign in your behavior around Taiwan and
45:53
you've got to quit sending microelectronics to Putin.
45:56
You got to, you got to make him come to the, the table.
45:59
But you, Xi Jinping, you and I can make this happen.
46:03
>> Elizabeth Economy: Okay, well, we've heard that President Trump wants a grand
46:07
deal, a big deal with Xi Jinping, so we'll send that message directly to him.
46:13
Although I think he's past that point with Putin.
46:15
I guess we'll wait to see.
46:18
But I think that is definitely a bold new idea, Patrick.
46:21
I'm not sure I'm entirely on board with it, but I like the creativity behind it.
46:27
All right, I always finish [LAUGH]- >> Patrick Jenevein: Well,
46:30
you're right, Liz.
46:32
It does kick some cans down, down the road.
46:36
So we ought to talk about that.
46:40
I'll see further development,
46:43
the idea to use- >> Elizabeth Economy: You see
46:45
the strategic recommendation to me, maybe.
46:48
Okay.
46:49
All right.
46:50
Last few questions that I ask everybody.
46:54
First, what is your sort of must read book or article on China?
47:01
>> Patrick Jenevein: Well, your books are up there-
47:03
>> Elizabeth Economy: No, no, no.
47:04
Can't be my book.
47:05
Can't be my book.
47:05
Pick a different, pick a different book.
47:08
>> Patrick Jenevein: Well, the part is one really understand, how the party works.
47:13
And then Matt Pottinger's article on.
47:17
Read what China says.
47:20
That's really important.
47:21
Pay attention to what they say.
47:23
Don't discount it.
47:24
So those are two.
47:25
What's next?
47:27
>> Elizabeth Economy: Okay, and
47:27
you said the party is something that we don't know enough about, right?
47:31
The Chinese Communist Party.
47:32
We need to know more about that.
47:34
I think your book actually helps with that, in a very concrete way
47:39
because it's full of really important examples of how the party works.
47:44
So I think that's a.
47:45
I'll nominate your book for that.
47:47
And then, you know, finally, it sounds like you may,
47:50
you may have a different answer than a lot of people here.
47:52
On a scale of 1 to 10, what do you think is the likelihood of a kind of Nixon Mao
47:57
moment in the US China relationship in the next decade?
48:01
>> Patrick Jenevein: That's really hard.
48:04
But I think it's better than 50/50.
48:08
>> Elizabeth Economy: Okay- >> Patrick Jenevein: But,
48:09
it might be a six or six and a half, tops.
48:15
But that depends on what leadership we bring.
48:19
That depends on the United States of America.
48:23
>> Elizabeth Economy: All right, I mean,
48:25
Patrick, I have to say that usually people say it's around a one [LAUGH].
48:30
And so you who've experienced more challenges and more difficulty than I
48:34
think anybody I've had on this podcast thus far dealing with China, have the most
48:40
optimistic outlook for the US China relationship over the next 10 years.
48:45
I think that that says a lot about you as a person.
48:48
Basic, you got to be optimistic >> Patrick Jenevein: You got to be willing
48:53
to punch him in the nose, sorry.
48:56
But, you gotta, all right.
49:00
>> Elizabeth Economy: Well, I'm not sure that was part of the Nixon,
49:02
Mao negotiations-.
49:03
>> Patrick Jenevein: No, no.
49:05
But But, they both knew that they could punch each other in the nose and.
49:12
>> Elizabeth Economy: Fair enough.
49:13
Fair enough.
49:15
And on that note, let me thank you so much for taking the time to speak with me and
49:20
for your really, really a terrific and instructive book that I
49:25
think anybody who is interested in China or is working with China,
49:29
who plans to have some kind of dealing with China, should take the time to read.
49:36
>> Patrick Jenevein: Thank you, Liz.
49:37
Keep doing what you're doing.
49:40
We need you.
49:42
>> Elizabeth Economy: Thanks, Patrick.
49:43
If you enjoyed this podcast and want to hear more reasoned discourse and
49:46
debate on China, I encourage you to subscribe to China Considered via
49:49
The Hoover Institution's YouTube channel or podcast platform of your choice.