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China Hits $1 Trillion Trade Surplus in 2025: Mercantilism or Western Myth? | Silk & Steel · UK Column Radio

0:01
Speaker 1: Hello and welcome to another episode of the Silk and
0:04
Speaker 1: Steel Podcast. Today we have the distinguished Professor Warwick Powell
0:11
Speaker 1: from Australia join us. So thank you, welcome back, Warwick.
0:16
Speaker 1: Always good to have you.
0:17
Speaker 2: Great to be with you.
0:20
Speaker 1: So the reason I want to talk to you today
0:24
Speaker 1: is about there's a couple big items China talking points
0:31
Speaker 1: on Western media lately, and one particular issue is the
0:36
Speaker 1: China's one trillion dollar trade surplus. And this has got
0:41
Speaker 1: a whole bunch of articles written about how China is
0:44
Speaker 1: practicing predatory, mercandileist policy. You know, the West is a
0:50
Speaker 1: helpless victim. What is your take on that?
0:55
Speaker 2: Well, certainly one trillion dollars as a headline number provoked
1:02
Speaker 2: some pretty strong reactions from certain sections I guess of
1:06
Speaker 2: the Western political spectrum and also the commentariat. Unfortunately, the
1:12
Speaker 2: kind of reactions that we got were ultimately pretty shallow,
1:17
Speaker 2: lacked intellectual integrity really, and ultimately I think are not
1:24
Speaker 2: self serving but self defeating. The surplus, of course, results
1:29
Speaker 2: from the fact that the world buys more from China
1:33
Speaker 2: than China has brought from the world, and there has
1:35
Speaker 2: been an appreciable growth in Chinese exports over the last
1:40
Speaker 2: three to four years relative to the long run pattern
1:44
Speaker 2: of export growth in the previous ten but in saying that,
1:48
Speaker 2: we need to break those numbers down a little bit, right, So,
1:52
Speaker 2: and I'll deal with that in two parts. Ones obviously
1:54
Speaker 2: on the Chinese export part, and the other part I'll
1:56
Speaker 2: touch on is the import part, because that's where there's
2:00
Speaker 2: quite a lot of shall we say, intellectual deceit going on,
2:06
Speaker 2: because nobody really ever wants to talk about China as
2:09
Speaker 2: an importer other than to say that Chinese import growth
2:12
Speaker 2: rates are substantially slower in recent years than export growth rates.
2:17
Speaker 2: But on the export side of things, the principal exports
2:21
Speaker 2: that have grown in the last four years or thereabouts
2:24
Speaker 2: revolve around China's new technology areas in electric vehicles, in
2:30
Speaker 2: lithium ion batteries, in wind turbines, and also in solar pvs,
2:41
Speaker 2: and of course, interestingly in the last couple of years,
2:44
Speaker 2: in microprocesses. So Chinese microprocesses have been developing and of
2:52
Speaker 2: course now have an export market as well. These core
2:58
Speaker 2: technology areas have shot up in large part because China
3:04
Speaker 2: is a dominant player in these technology spaces. It has
3:08
Speaker 2: gotten manufacturing capabilities and efficiencies to a point where the
3:14
Speaker 2: costs of these things have dropped dramatically. In the case
3:20
Speaker 2: of evs, EV's today from China on a like for
3:24
Speaker 2: like model for model kind of comparative basis to traditional
3:29
Speaker 2: internal combustion engine vehicles, you'd go with the evs every
3:34
Speaker 2: day of the week now they are so much more
3:37
Speaker 2: cost competitive, and in terms of the higher end models,
3:40
Speaker 2: you know, in terms of features and add ons, there
3:44
Speaker 2: is no doubt that the Chinese evs today represent far
3:48
Speaker 2: better value for money. Unsurprisingly, as a result of that,
3:53
Speaker 2: they've been making inroads into not only the traditional markets
3:57
Speaker 2: for high end motor vehicles like west in Europe. Of course,
4:01
Speaker 2: you know they're not accessible in the United States, so
4:04
Speaker 2: don't worry about that, but they are actually making incredible
4:07
Speaker 2: in roads in the developing world, in the Global South,
4:11
Speaker 2: and that's because of their cost competitiveness. The second reason
4:15
Speaker 2: they're really attractive is because it contributes to particularly the
4:22
Speaker 2: Global South's ongoing electrification, which means that these countries are
4:29
Speaker 2: no longer as dependent upon imported petroleum as they once were,
4:35
Speaker 2: and this contributes in the long run to energy sovereignty. Right,
4:38
Speaker 2: So if you think about these things that China's actually
4:41
Speaker 2: been exporting. They contribute to energy sovereignty for developing nations.
4:47
Speaker 2: The other thing is China, by the way, is actually
4:49
Speaker 2: exporting quite a lot of is machinery and equipment, and
4:54
Speaker 2: that of course contributes also to the economic development of
4:58
Speaker 2: the global South. These are things that China has actually
5:03
Speaker 2: been leading the world in and which drives this surge
5:07
Speaker 2: in exports post pandemic, which is the period that has
5:11
Speaker 2: really gotten some Western commentators and some Western governments seriously
5:18
Speaker 2: anxious and twisted up about. On the import side, the
5:22
Speaker 2: argument often runs that China is no longer importing from
5:25
Speaker 2: the world. Well, China imports about four hundred billion dollars
5:28
Speaker 2: worth of staff. It's a very significant importer. And if
5:33
Speaker 2: you spoke to people in Australia, where I am, you
5:38
Speaker 2: would certainly view China as a very important trading partner
5:42
Speaker 2: because Australia actually runs a trade surplus with China. So
5:47
Speaker 2: there are many things that China imports, and in fact
5:49
Speaker 2: across all of the dominant categories that China imports, ranging
5:53
Speaker 2: from crude oil through to aluminium, steel iron or not
5:58
Speaker 2: steel iron, or copper, gold, et cetera, et cetera. Aeroplanes,
6:05
Speaker 2: civilian aircraft, semiconductors. The volumes have actually been increasing, So
6:11
Speaker 2: volumes have been growing, even if China's not playing as
6:15
Speaker 2: much for them. But that's a commodity price question, right,
6:17
Speaker 2: But volumes have been growing. So China is importing stuff
6:20
Speaker 2: and importing a lot of stuff, and in fact these
6:24
Speaker 2: two things related, Carl, So many of Chinese exports are
6:31
Speaker 2: dependent upon a whole bunch of imports. On average, we
6:36
Speaker 2: have in China about twenty five percent foreign value added,
6:41
Speaker 2: which means that for the things China manufactures, about twenty
6:44
Speaker 2: five percent of the value the export value actually comes
6:48
Speaker 2: from the costs of imports themselves. That's on average, So
6:52
Speaker 2: there's actually a bunch of stuff where foreign import input
6:57
Speaker 2: costs represent much higher proportions of total value. So in evs,
7:01
Speaker 2: for example, some of the evs will have foreign input
7:04
Speaker 2: costs comprising over fifty percent, which means that when the
7:10
Speaker 2: reaction that's emerged in the last sort of week or
7:13
Speaker 2: so to this one trillion dollar surplus says Chinese, China's
7:18
Speaker 2: R and B is undervalue and it needs to be
7:23
Speaker 2: appreciated substantially. You know, the Financial Times talked about a
7:27
Speaker 2: fifty percent appreciation over five years. Others have thrown all
7:32
Speaker 2: sorts of numbers around ten to thirty percent undervaluation. Well,
7:36
Speaker 2: the message actually is be very careful what you wish for,
7:41
Speaker 2: because in a world of complex global value chains, and
7:45
Speaker 2: China of course is central to all of these value chains,
7:48
Speaker 2: it's connected upstream and downstream. If you strengthen the R
7:52
Speaker 2: and B anymore, that will actually reduce the costs of
7:57
Speaker 2: many of these products, making them more competitive on the
8:00
Speaker 2: global market. And in fact, we've seen this pattern over
8:04
Speaker 2: the last ten years, where as the R and B appreciated,
8:07
Speaker 2: it's done so gradually. Chinese exports have not diminished. China's
8:14
Speaker 2: trade surplus has actually continue to accumulate, and that's a
8:18
Speaker 2: consequence of the fact that Chinese production systems are firstly
8:22
Speaker 2: very efficient globally competitive, but also because a lot of
8:27
Speaker 2: the costs that go into these products that ultimately get
8:31
Speaker 2: manufactured and exported are actually costs incurred by importing things.
8:36
Speaker 2: So this one trillion dollars is a trigger that should
8:43
Speaker 2: cause people to reflect the lot, but I think they're
8:46
Speaker 2: reflecting on the wrong thing, and I mean Westerners. They're
8:49
Speaker 2: reflecting on exchange rates, they're reflecting on this mercantilest stuff. Well,
8:53
Speaker 2: China's a big importer. What they really need to turn
8:56
Speaker 2: their minds to is the production problems that the West
9:02
Speaker 2: now has deeply embedded in their economic systems.
9:07
Speaker 1: There's also some distortion in how the statistic is reported.
9:12
Speaker 1: Right for example, when the iPhone is being made in
9:16
Speaker 1: Chinese factories and exported to United States, that counts to
9:19
Speaker 1: where China's export. But whereas we now know out of
9:24
Speaker 1: the actual value of iPhone that those sold for over
9:27
Speaker 1: one thousand dollars only like maybe ten dollars is being retained,
9:34
Speaker 1: ten dollars of that profit goes to China. The line's
9:38
Speaker 1: share of the each iPhone sold goes to Apple. But
9:43
Speaker 1: that is not how the accounting is doing because they're
9:46
Speaker 1: just looking at the import export figures from the custom
9:50
Speaker 1: They just see that the iPhone, the entire value of
9:54
Speaker 1: an iPhone has been the exported from China. And also
9:59
Speaker 1: the fact that that they discount the fact where companies
10:04
Speaker 1: like Apple, a lot of American companies they're making Apple
10:07
Speaker 1: makes tens of billions of dollars in China every year,
10:11
Speaker 1: but because the iPhone is producing China when they're sold
10:14
Speaker 1: to the Chinese customers. Again it doesn't enter into the
10:17
Speaker 1: custom uh import export numbers, so it's not counting in
10:21
Speaker 1: part of that that that balance of trade. And right
10:24
Speaker 1: now US is selling a lot of services to China
10:30
Speaker 1: that again is not being properly counted for you know,
10:33
Speaker 1: you have you have uh, you know, American brands KFC, McDonald,
10:38
Speaker 1: KFC is on every street corners in China, Starbucks. Right
10:42
Speaker 1: a lot of this corporate profit is being taking out
10:46
Speaker 1: of China go to US. But again that is not
10:49
Speaker 1: counted toward the import export figures. So I think there's
10:54
Speaker 1: a lot of distortion. But also there's a lot of
10:57
Speaker 1: copium in the Western prize because whenever they talk about
11:01
Speaker 1: competitiveness of Chinese company, it's they always spun it as
11:06
Speaker 1: somehow Chinese cheated, whether it's you know, stealing intellectual properties
11:12
Speaker 1: or theys through unfair state subsidies, you know, somehow. The
11:16
Speaker 1: idea is Chinese government is flooding the market with trillions
11:21
Speaker 1: of dollars to support these Chinese industries that make them
11:26
Speaker 1: undercut their Western counterparts, which is completely ridiculous because it's
11:31
Speaker 1: not like, you know, the Chinese government have endless resources
11:37
Speaker 1: to subsidize the entire consumer base of the global population.
11:43
Speaker 1: And the other thing is, you know, like you already mentioned,
11:47
Speaker 1: it's because currency manipulation, because Chinese somehow artificially keeping the
11:53
Speaker 1: R and BE low. That that has been a talking
11:55
Speaker 1: point I think for the last twenty to thirty years. Yeah,
12:01
Speaker 1: so I think unfortunately, you know, all these reporting is
12:06
Speaker 1: not helping uh their audience in the West to gain
12:11
Speaker 1: a true picture of what's emerging in China. But what
12:17
Speaker 1: why do you actually, I might going on tanging a
12:21
Speaker 1: little bit forgiving, why do you think that the Western
12:25
Speaker 1: media reporting are like that? I mean, they're not They're
12:29
Speaker 1: not really serving their core audience. You know, their their
12:34
Speaker 1: their Western Anglo audience in terms of actually understanding China.
12:39
Speaker 1: You know, even if they're in competition with China, you've
12:41
Speaker 1: got to understand your competitors or what their true advantage
12:44
Speaker 1: is to have any kind of hope to deal with
12:47
Speaker 1: the problem. But right now it just seems like they
12:51
Speaker 1: just produce a lot of coping.
12:53
Speaker 2: They look. Myths are actually very important in all societies,
12:57
Speaker 2: right and in some respects myths help people navigate their
13:02
Speaker 2: society and figure out where they fit into it and
13:05
Speaker 2: how amidst not necessarily meaning falsehoods, but the stories that
13:09
Speaker 2: we tell ourselves. And I think one of the issues
13:12
Speaker 2: is that over the course of the last seven or
13:15
Speaker 2: eight decades, in particular, there have been a whole series
13:18
Speaker 2: of mythologies that have been developed and which have become
13:22
Speaker 2: embedded in popular culture about the West's own understanding of
13:26
Speaker 2: itself and how it then views others. Its principal understanding
13:30
Speaker 2: of itself is that it is an exemplar of free
13:34
Speaker 2: market capitalism and liberal parliamentary democracy, all of which equals
13:41
Speaker 2: civilizational success. The idea that another place with a large
13:48
Speaker 2: number of people has not emulated that particular model or
13:52
Speaker 2: follow that particular recipe, that mythology has also become incredibly
13:57
Speaker 2: successful means that you've got to explain that success. And
14:02
Speaker 2: you either explain that by reference to the idea that
14:05
Speaker 2: perhaps other models are legitimate as well, but that undermines
14:09
Speaker 2: your first mythology, or you've got to delegitimize the other,
14:13
Speaker 2: and that's what they do. So the success of China
14:17
Speaker 2: is because it breaks the rules, is because it steals,
14:21
Speaker 2: is because of X, Y and Z, or it's because
14:24
Speaker 2: of the benevolence of the West. So often you'll find
14:27
Speaker 2: in parts of the Western discourse that China's development and
14:31
Speaker 2: its success is because America allowed it to join the
14:36
Speaker 2: World Trade Organization, because the Americans invested in China to
14:42
Speaker 2: give rise to them to industrial development. So you've got
14:46
Speaker 2: these sorts of things going on, all of which, of
14:49
Speaker 2: course seek to either promote a sense of self aggrandizement
14:54
Speaker 2: or at least function as a kind of a self
14:57
Speaker 2: esteem play. Now, none of that is particularly helpful in
15:01
Speaker 2: the long run. It's certainly helpful in the short run,
15:04
Speaker 2: because I think everybody all over the world wants to
15:07
Speaker 2: at least feel good about their society and their place
15:10
Speaker 2: to a certain point. But if you ultimately lose sense
15:15
Speaker 2: of perspective on your own mythologies, then you actually become
15:20
Speaker 2: totally detached from reality itself. And if reality and your
15:25
Speaker 2: mythology has become too far apart, eventually reality will have
15:31
Speaker 2: its revenge on you. You know, mythologies can become part
15:34
Speaker 2: and parcel of realities, but you just can't have them
15:37
Speaker 2: to be too far apart. And I think that where
15:41
Speaker 2: we've reached in Western discourse is a stage where the
15:46
Speaker 2: mythologies that have been part and parcel of this sense
15:49
Speaker 2: of civilization or self esteem over the course of the
15:52
Speaker 2: last eighty years, and certainly during the last thirty years
15:56
Speaker 2: of Pats Americana, that is literally running out of steam.
16:01
Speaker 2: And China's success is actually the principal reason for that,
16:06
Speaker 2: because frankly, China shouldn't have been as successful as it
16:10
Speaker 2: has been if the Western stories were sustainable. So I
16:16
Speaker 2: think that that's probably the main reason. It's a self
16:18
Speaker 2: esteem proposition to start with, but it is incredibly unhelpful
16:21
Speaker 2: in the long run, because it's also clear that many
16:24
Speaker 2: of the concerns that people in the West articulate about
16:28
Speaker 2: their own societies and their own economies, the industrialization, unemployment,
16:32
Speaker 2: social fragmentation, living standards, reduced literacy, numeracy, and all these
16:39
Speaker 2: sorts of things. All of these are real problems. But
16:43
Speaker 2: blaming someone else for those problems ultimately and paradoxically disables
16:51
Speaker 2: you from doing anything about them. You can only sit
16:55
Speaker 2: on the sidelines and complain. And yet many of these
16:59
Speaker 2: problems funda mentally caused by structures and institutions that have
17:04
Speaker 2: long dominated the American political economy. Why is it that
17:11
Speaker 2: American capital over the course of the last sixty years
17:15
Speaker 2: progressively replaced labor with machines in the United States or
17:20
Speaker 2: shifted operations overseas. But these are decisions being made by
17:25
Speaker 2: American capital. They weren't lured, and you know, there wasn't
17:29
Speaker 2: anything nefarious going on when American capital in the nineteen
17:33
Speaker 2: fifties actually began relocating to other parts of the world.
17:37
Speaker 2: Actually first went to places like the Philippines for cheap
17:42
Speaker 2: labor former American colony, and clothes were made there particularly,
17:48
Speaker 2: and then sold back to North American consumers. So I
17:53
Speaker 2: think coming to grips with the fact that many of
17:56
Speaker 2: the causes of today's problem in North America and also
18:02
Speaker 2: in Western Europe, are actually self induced over a long
18:07
Speaker 2: period of time. That's a hard thing to do, but
18:10
Speaker 2: it's going to be a necessary thing to do if
18:12
Speaker 2: these societies are going to find ways of addressing the
18:16
Speaker 2: problems that they're now starting to genuinely recognize. Blaming others
18:21
Speaker 2: won't help. Talking about Chinese exchange rates actually won't help.
18:25
Speaker 2: In fact, if they actually got their way, which is
18:28
Speaker 2: a rapid and significant appreciation of R and B, it
18:31
Speaker 2: could actually make things substantially worse for them. I mean,
18:34
Speaker 2: imagine the costs of raw materials, intermediate goods, and capital
18:38
Speaker 2: equipment increasing by thirty percent for North America. Imagine that
18:44
Speaker 2: that's certainly not going to help American industrialization one bit.
18:49
Speaker 2: And so you know, you've got to be very careful
18:51
Speaker 2: what you wish for and ultimately, you know, building industry.
18:57
Speaker 2: As I think we've discussed before, it's not something that
19:01
Speaker 2: happens in five years. Industrial development, particularly to the levels
19:06
Speaker 2: that China has achieved, has taken eighty years and has
19:10
Speaker 2: taken forty hard years in recent times, built on the
19:14
Speaker 2: foundations of the previous decades. So the problems that have
19:17
Speaker 2: emerged in North America and Western Europe over the course
19:19
Speaker 2: of the last forty to fifty years are going to
19:22
Speaker 2: take a generation or more to address.
19:26
Speaker 1: Well. I think this might be a problem of people
19:29
Speaker 1: are always fighting the last war. Right when they're talking
19:32
Speaker 1: about currency reevalue is how China must led R and
19:37
Speaker 1: B appreciate. They're probably thinking of United States past experience
19:45
Speaker 1: from its competitor like Japan. You know, back in the
19:49
Speaker 1: late nineteen eighties and nineteen early nineteen nineties, Japan looks
19:54
Speaker 1: like it was on the pace to surpass United States
19:58
Speaker 1: as the number one economy and then US imposed Plaza
20:03
Speaker 1: Accord on Japan, which included a very sharp appreciation of
20:08
Speaker 1: Japanese yen, which led to other issues like the Japanese
20:12
Speaker 1: asset bubble, and then led to the last decades of
20:17
Speaker 1: the job Japanese economy, which which Japan is still facing today.
20:22
Speaker 1: And I think I have a feeling it comes like
20:26
Speaker 1: maybe it comes from the recognition, oh, we've done this before.
20:30
Speaker 1: You know, we have dealt with economic competitor like Japan before,
20:35
Speaker 1: and we are able to address that issue, and now
20:38
Speaker 1: we just got to apply the same playbook against China.
20:43
Speaker 1: Do you think that's a reasonable assumption.
20:46
Speaker 2: Yeah, Look, there is a tendency to fight yesterday's wars,
20:51
Speaker 2: and without bringing yourself up to date with the contemporary situation.
20:58
Speaker 2: It's actually the easy thing to do to treat today's
21:02
Speaker 2: challenges as analogues of some previous experience. But of course
21:07
Speaker 2: the circumstances are entirely different. China is integrated into global
21:11
Speaker 2: value chains in far more complex ways than the Japanese
21:14
Speaker 2: have wherever integrated. China's economy, of course, is substantially larger
21:20
Speaker 2: than Japan's was at the time, and China is simply
21:26
Speaker 2: a larger place importantly, of course, China doesn't have an
21:32
Speaker 2: American basis on its territory, whereas Japan still does, which
21:37
Speaker 2: of course delivers an incredible amount of leverage to the
21:41
Speaker 2: United States when they're seeking to impose particular policy changes,
21:46
Speaker 2: which they successfully did in relation to Japan, but they'll
21:50
Speaker 2: have no chance of doing in relation to China, so
21:54
Speaker 2: the circumstances are fundamentally different. The United States again would
21:59
Speaker 2: be well advise, particularly the think tankers and various commentators
22:03
Speaker 2: and advisors, would be well advised to actually take a
22:06
Speaker 2: good hard look at reality, and if that means updating
22:11
Speaker 2: their prior assumptions about the state of the world, then
22:14
Speaker 2: they should do it because it will actually provide the
22:17
Speaker 2: kind of clarity that you need from a diagnostics point
22:20
Speaker 2: of view that will then enable policymakers and communities at
22:24
Speaker 2: large to imagine new kinds of solutions to the problems
22:28
Speaker 2: at hand. Otherwise you'll end up applying the wrong diagnostics,
22:33
Speaker 2: resulting in the wrong prognosis and ultimately implementation of things
22:36
Speaker 2: that at best will have no effect, but at worst
22:41
Speaker 2: will actually make things worse. Right, and it seems that
22:45
Speaker 2: at the moment, so much of the American body politic
22:50
Speaker 2: is responding with things that actually make problems worse. And
22:54
Speaker 2: if it didn't affect the rest of the world, I
22:56
Speaker 2: don't think anyone would care. But clearly the American economy
23:01
Speaker 2: has hasn't continues to be a big player in the
23:04
Speaker 2: global saying It's military obviously is everywhere, and a destabilized
23:11
Speaker 2: and dysfunctional North America is actually not a great thing
23:15
Speaker 2: for the rest of the world. And so people do
23:18
Speaker 2: have I think legitimate reasons to hope and wish that
23:22
Speaker 2: America will get better clarity on the nature of its
23:25
Speaker 2: problems and challenges and have more sensible approaches to tackling them.
23:31
Speaker 1: I think that's one of the biggest misunderstanding of a
23:34
Speaker 1: lot of talking heads in the West, is that China
23:38
Speaker 1: and Russia they actually do not want to destroy United States.
23:42
Speaker 1: They do not want to destabilize the United States because
23:45
Speaker 1: they recognize is that where to happen, you will be
23:49
Speaker 1: you will create a huge chaos in the international system,
23:53
Speaker 1: and it's not good for economic stability for for the globe.
24:00
Speaker 1: And but but you know in there zero sum mentality
24:04
Speaker 1: that you know, it's like that's the only thing they
24:07
Speaker 1: can see.
24:08
Speaker 2: Uh.
24:09
Speaker 1: And and as you as you said, the more they
24:12
Speaker 1: become detached with reality, they less energy is devoted to
24:18
Speaker 1: address the real structural problem that the Western economy face.
24:22
Speaker 1: But I see right now, unfortunately, you know, it's totally
24:28
Speaker 1: going United States in particular, but collective West as a
24:33
Speaker 1: whole as well is really going in the opposite direction,
24:36
Speaker 1: in the sense that as China continue to rise, the
24:40
Speaker 1: copium production continue to rise even more in the West, uh,
24:46
Speaker 1: in the press, and that is really not helping them
24:50
Speaker 1: to address the real issues that cause them to lose
24:56
Speaker 1: the competitive edge versus chain. Now not that that we
25:02
Speaker 1: we are I think we both agree on that part.
25:04
Speaker 1: But now is there okay. I saw an economist reporting
25:09
Speaker 1: that they're arguing that because the China's trade practice or
25:13
Speaker 1: China's overcapacity whatever. Now we are returning back to a
25:18
Speaker 1: world where you know, actually, I think the title of
25:22
Speaker 1: the article is something like China is destroying the international
25:25
Speaker 1: trade in the in the sense that China is selling
25:30
Speaker 1: have nothing. You know, China wants nothing from the rest
25:34
Speaker 1: of the world because it can make everything itself, and
25:37
Speaker 1: it's flooding the world market with the Chinese product. So this,
25:41
Speaker 1: this is obviously unbalanced and unsustainable. And it's going to
25:45
Speaker 1: destroy the global trade. And and and I saw people
25:51
Speaker 1: even make an analogy to the pre Opium War uh
25:56
Speaker 1: economic relationship between China and written when you know Channel
26:02
Speaker 1: imperfamously said that we have no needs for your fancy
26:07
Speaker 1: little gadgets. We can make everything our own. Yeah, I
26:14
Speaker 1: don't know what.
26:18
Speaker 2: Well. This is a piece that was in the Financial
26:20
Speaker 2: Times a couple of weeks ago by Harding, and I
26:23
Speaker 2: think it was called something like China's making Trade Impossible.
26:27
Speaker 2: And it started with the analogy, or with the story
26:30
Speaker 2: of Lord McCartney being told by the Channel Emperor that
26:35
Speaker 2: that China makes everything it needs and it has no
26:37
Speaker 2: need for foreign things. Now, one of the bizarre things
26:40
Speaker 2: about this piece is the analogy itself, because fifty years
26:45
Speaker 2: after McCartney reported on that particular encounter, the British responded
26:52
Speaker 2: with gunboat diplomacy in the Opium Wars. And I wonder
26:56
Speaker 2: sometimes whether, in fact, deep down some of these Western
27:00
Speaker 2: talking heads as you call them, kind of wish for
27:04
Speaker 2: or pine for something like that to happen again. And
27:07
Speaker 2: if that is something that they think is how the
27:11
Speaker 2: British should respond, then of course that's a very very
27:14
Speaker 2: dangerous and irresponsible thing to be implying. The other thing
27:19
Speaker 2: about that particular article is the idea that somehow again
27:23
Speaker 2: that China is exporting the world to death. What it
27:27
Speaker 2: doesn't tell you is that Chinese net exports is a
27:30
Speaker 2: proportion of China's economy is less than three percent. In
27:33
Speaker 2: other words, China imports a lot of stuff as well,
27:37
Speaker 2: as I mentioned, and people who become obsessed with Chinese
27:43
Speaker 2: exports never really want to talk about China's imports, and
27:48
Speaker 2: if they do, they grudgingly make some remarks along the
27:51
Speaker 2: lines of, well, China's importing less and less, or the
27:56
Speaker 2: rate of import growth is much slower. It's flatlined. In
28:00
Speaker 2: dollar terms, it has been a little bit flatter, but
28:02
Speaker 2: that's partly because of the rise of the value of
28:05
Speaker 2: the RMB. Actually, so China's buying more and paying less.
28:10
Speaker 2: But in volume terms, if you actually measure things by
28:13
Speaker 2: tons and liters or barrels or units such as civilian aircraft,
28:19
Speaker 2: china His imports have actually continued to rise. Probably the
28:24
Speaker 2: one thing where the rate of import growth has slowed
28:28
Speaker 2: down a bit in the last few years is unsurprisingly
28:32
Speaker 2: crude oil, and that's because of the growth of electrification
28:38
Speaker 2: in transportation in China, right, But aside from that, you
28:43
Speaker 2: know those other areas, whether it's sign or copper, aluminium, semiconductors,
28:50
Speaker 2: and in fact, here's the other interesting one. Semiconductor numbers
28:53
Speaker 2: have actually grown as well. And in fact, if there
28:55
Speaker 2: weren't export controls from the West on semiconductor exports to
28:58
Speaker 2: China and other high tech equipment, China would have bought
29:01
Speaker 2: a lot more of them as well. So when you
29:04
Speaker 2: take all of these things into account, together with the
29:09
Speaker 2: four areas of exceptional growth in export terms from China,
29:13
Speaker 2: you take all of that into account, Chinese imports and
29:16
Speaker 2: exports are actually relatively balanced anyway, in monetary terms. It's
29:22
Speaker 2: really not as big an issue as many of these
29:25
Speaker 2: people make it out to be. I get why it's
29:27
Speaker 2: a political issue. There are some optics involved, obviously, you know,
29:31
Speaker 2: figures like one trillion dollars, But the political issues actually
29:36
Speaker 2: go to the fact that the impacts are concentrated in
29:40
Speaker 2: a number of key sectors. And these are sectors that
29:44
Speaker 2: have material significance, certainly historically but also today, but also
29:50
Speaker 2: have a sense of cultural significance too, And I'm particularly
29:55
Speaker 2: talking about vehicles, right. So the passenger mode of vehicle
29:58
Speaker 2: industry has clearly been for the past one hundred years
30:02
Speaker 2: or so a cultural symbol of industrial modernity, from the
30:07
Speaker 2: days when cars were first being made in the late
30:10
Speaker 2: eighteen hundreds and eventually the emergence of mass manufacture in
30:15
Speaker 2: the twenties and thirties. The ability of a country to
30:19
Speaker 2: give birth to a passenger motor vehicle industry sector is
30:24
Speaker 2: really a sign of its industrial sophistication, and it occupies
30:30
Speaker 2: an important cultural role in that regard, and of course
30:34
Speaker 2: it has been a very significant employer. So making motor
30:38
Speaker 2: vehicles traditionally, historically has employed a lot of people, and
30:44
Speaker 2: they're concentrated. So not only are they concentrated in sectors,
30:48
Speaker 2: they're also concentrated geographically, which amplifies the political fallout when
30:55
Speaker 2: sectors experience downturns because you end up with parts of
30:59
Speaker 2: the world that are visibly affected. So the United States,
31:03
Speaker 2: of course, has the automotive sector concentrated in Detroit, and
31:09
Speaker 2: we've seen what Detroit looks like as a result of
31:13
Speaker 2: transformations in the auto sector. Its population has shrunk dramatically
31:19
Speaker 2: over the last twenty five years. So there are very
31:21
Speaker 2: visible signs of industrial competitive decay. So I think for
31:26
Speaker 2: cultural reasons, there are concerns, So I kind of get
31:30
Speaker 2: the political reaction, that emotional reaction, but that is not
31:36
Speaker 2: the foundations for a rational response, because in the end,
31:43
Speaker 2: if your only way of responding to these challenges is
31:47
Speaker 2: to react angrily and carry on, then you're never really
31:52
Speaker 2: going to get a grip of why it is that
31:56
Speaker 2: this particular factory or this particular company is experiencing a
32:01
Speaker 2: reduction in sales, is experiencing an increase in costs, or
32:06
Speaker 2: a reduction in relative competitiveness. For fifteen years, the West
32:12
Speaker 2: has been well and truly pre warned about China's ambitions
32:17
Speaker 2: in electric vehicles. In twenty eleven, a well known commentator,
32:25
Speaker 2: well known today especially who talks persistently about Chinese excessive
32:30
Speaker 2: investments and insufficient consumption and all of that. I won't
32:34
Speaker 2: name anybody, but you know, it's the arguments that really matter.
32:38
Speaker 2: But this particular observer published a piece in twenty eleven
32:43
Speaker 2: which highlighted the investments that China was making in EV
32:48
Speaker 2: as an example of over investment of wasteful capital investment
32:56
Speaker 2: twenty eleven. Right by twenty twenty, EV production started to
33:01
Speaker 2: ramp up and progressively impact the global market thereafter. During
33:07
Speaker 2: this entire period, Western companies, which began with a technology edge,
33:14
Speaker 2: began with established distribution networks, began with capital investments in
33:20
Speaker 2: the ground, were in the box seat to respond and
33:24
Speaker 2: actually lead the world in the transformation of passenger motor
33:28
Speaker 2: vehicles from ices into hybrids and ultimately into pure evs,
33:35
Speaker 2: and they singularly failed to do that. That tells us
33:39
Speaker 2: something about the public policy frameworks that were operational in Germany,
33:44
Speaker 2: the UK, France, United States, Japan. You've got to remember
33:51
Speaker 2: Toyota decided that batteries EV's was not the go, and
33:55
Speaker 2: they made massive commitments. They made a big bet on
33:57
Speaker 2: hydrogen hybrids, and then Hydrogen decided that evs per se,
34:04
Speaker 2: pure evs were not the way to go. So significant
34:08
Speaker 2: public policy failure and also of course, significant corporate failure.
34:13
Speaker 2: And now the chickens have come home to roost. The
34:18
Speaker 2: global market is shifting away from ices in part because
34:25
Speaker 2: the evs offer a lower cost, higher quality alternative with
34:29
Speaker 2: the added benefit of enabling countries to become energy sovereign.
34:38
Speaker 2: And becoming energy sovereign not only mitigates risks around access
34:43
Speaker 2: to energy, and we've seen some recent incidents where Americans,
34:49
Speaker 2: the American Navy has intersected oil tankers. So there are
34:56
Speaker 2: risks in the movement of the physical commodity itself, but
35:00
Speaker 2: traditionally you've also got to pay for that commodity with
35:03
Speaker 2: foreign exchange. And if you don't need to import so
35:06
Speaker 2: much oil, you actually reduce the burden that you have
35:10
Speaker 2: in terms of being able to access foreign exchange as well,
35:12
Speaker 2: particularly US dollars. So there's a double barrel benefit of
35:17
Speaker 2: shifting your transportation sector to hardcore electrification. All of this
35:23
Speaker 2: happened over the last fifteen years. It wasn't like the
35:27
Speaker 2: Western governments and Western corporations weren't pre warned. It was
35:31
Speaker 2: there for everyone to see. They just didn't act appropriately.
35:37
Speaker 2: This is part of the problem, right, And the lesson
35:39
Speaker 2: that needs to be learned from that from the West
35:42
Speaker 2: point of view is be more mindful of what's happening,
35:48
Speaker 2: find pathways to collaborate where there are clear technology leaderships
35:52
Speaker 2: elsewhere in the world, and look for win wins where
35:55
Speaker 2: you can. That's the lesson to be learned.
36:00
Speaker 1: That's interesting because you know, even as the narrative goes
36:05
Speaker 1: even into more bizarre world territory. Uh, there are pragmatic
36:11
Speaker 1: people in the West, you know, they're they're pragmatical companies
36:14
Speaker 1: in the West that continue to deepen their engagement in
36:18
Speaker 1: China and continue to profit, you know, Like recently there's
36:21
Speaker 1: another article called Germany is seeking a divorce from China,
36:26
Speaker 1: you know, which is basically talk about how the German
36:29
Speaker 1: advanced manufactured China is moving into the traditional forte of
36:34
Speaker 1: German industry, which is advanced manufacturing, machine tools, et cetera.
36:39
Speaker 1: But German automakers actually are committed to invest even more
36:46
Speaker 1: in China, moving their R and ds in China, and
36:49
Speaker 1: to deepen their collaboration with Chinese EV companies in China
36:54
Speaker 1: because they do recognize that if they're gonna make it,
36:57
Speaker 1: if they're going to be able to be compared additive globally,
37:00
Speaker 1: they will have to be able to prove themselves in
37:03
Speaker 1: the Chinese market because that is an area with a
37:06
Speaker 1: fierce years competition and and and and there are also
37:12
Speaker 1: American companies like Apple and Tesla who are not you know,
37:16
Speaker 1: they're not decamping from China. So so there are clearly
37:20
Speaker 1: people who aware what's going on, and and and and
37:24
Speaker 1: and actually you know, have been to China, work with
37:27
Speaker 1: China in the past, and then there's this political talking
37:31
Speaker 1: class that's just you know, pulling things out of there
37:34
Speaker 1: butt and and keep on selling those fantasies and comforting
37:39
Speaker 1: myth as you as you put it to the public.
37:43
Speaker 1: It's a speaking of which this of of active misinformation
37:50
Speaker 1: in the Western media. I think there's a story you
37:52
Speaker 1: want to talk about how the Western media miss reported
37:58
Speaker 1: a recent are article in the Chinese magazine. I think
38:03
Speaker 1: it was choice which is reported cated past Jimpin speeches
38:08
Speaker 1: and then which allows the Western journalists to cherry pick
38:13
Speaker 1: and then mistranslate and then misinterpret what she Jim Pink
38:17
Speaker 1: actually said.
38:18
Speaker 2: Right, yeah, expect that, Yeah, look, yeah, look the look.
38:25
Speaker 2: I'll add one last thing to your observations about some
38:28
Speaker 2: of those industries that are actively seeking to deepen their
38:31
Speaker 2: engagement in China, and that is in the area of
38:35
Speaker 2: chemical manufacturing. There are German chemical manufacturers that are expanding
38:41
Speaker 2: their operations in China in large part because they can
38:44
Speaker 2: access cheap russant Russian gas which they are now unable
38:48
Speaker 2: to access in Germany. Just saying, I think is how
38:53
Speaker 2: they put it. Yeah. Look, there was in the last
38:56
Speaker 2: forty eight hours or so early this week, and what
39:00
Speaker 2: that probably around the fifteen sixteenth or thereabouts of December.
39:05
Speaker 2: The Chinese Intellectual Journal, the leading journal of the Communist
39:10
Speaker 2: Party of China Chilsup, which incidentally means seeking truth right
39:16
Speaker 2: suha til seeking truth from trap from fact. It published
39:24
Speaker 2: an article which pulled together some excerpts from twelve speeches
39:31
Speaker 2: and other texts from sijinpin on the question of demand
39:40
Speaker 2: and demand management and boosting demand as a critical initiative,
39:47
Speaker 2: and this set of exerts, and there were twelve of them,
39:51
Speaker 2: run from comments made in twenty fifteen all the way
39:54
Speaker 2: through to comments made in twenty twenty five, the comments
39:59
Speaker 2: made in twenty which of course appeared as the first
40:04
Speaker 2: little set of exits. Number one of twelve in this
40:08
Speaker 2: article talked about the idea that in the past Chinese
40:17
Speaker 2: production capacity was below par, there wasn't enough of it,
40:21
Speaker 2: and through significant effort it's been built up and now
40:24
Speaker 2: there is excessive capacity. And so, as you know, there's
40:30
Speaker 2: been this narrative that's been run for quite some time
40:33
Speaker 2: that Chinese exports is because of weak domestic demand. So
40:40
Speaker 2: that's the argument, and that weak domestic demand exists because
40:44
Speaker 2: households are financially repressed, they don't get paid enough, and
40:50
Speaker 2: that there's no social security system which forces households to
40:54
Speaker 2: save a lot, and therefore they don't spend. That's the story.
40:59
Speaker 2: And so the fact that this first excerpt mentions this
41:06
Speaker 2: idea of excessive production capacity was lept on by a
41:11
Speaker 2: bunch of you know, China watchers in the West as
41:15
Speaker 2: a bit of a haha, you know, there you go moment.
41:19
Speaker 2: But of course when you read the whole lot, you
41:23
Speaker 2: realize that, in fact, the remarks that she'd in Pin
41:27
Speaker 2: made over the course of the last ten years represents
41:33
Speaker 2: a subtle, complex and dialectical approach to this question of
41:41
Speaker 2: production and consumption and investment as part and parcel of
41:48
Speaker 2: this broad question of demand. So the title of the peace,
41:53
Speaker 2: of course related to demand shoot your as opposed to consumption. Right,
41:59
Speaker 2: so often people can use these two things. So it
42:01
Speaker 2: was SHUEI will not shelf at. And the reason why
42:04
Speaker 2: this matters is because in macroeconomics, demand actually comprises consumption
42:11
Speaker 2: and investment. So how are we to better understand this
42:17
Speaker 2: body of materials that was published. Well, basically, my view
42:21
Speaker 2: is is that you've got to look at it holistically.
42:23
Speaker 2: You've got to treat the whole thing as a body
42:26
Speaker 2: of thought and understand how it fits together. Not cherry
42:30
Speaker 2: pick the fact that he talked about excessive capacity in
42:35
Speaker 2: twenty fifteen, because if we did that, we can actually
42:39
Speaker 2: then compare it to what happened after twenty fifteen in
42:41
Speaker 2: any case, and realize that twenty fifteen China announced made
42:45
Speaker 2: in China, twenty twenty five production actually increased, consumption increased.
42:50
Speaker 2: So this idea that you know, she didn't pin commented
42:54
Speaker 2: on excessive capacity back then as if that means something
43:00
Speaker 2: side of context, it doesn't mean anything at all. It
43:02
Speaker 2: meant something because in part this was off the back
43:06
Speaker 2: of massive government liquidity injections on the back of the
43:12
Speaker 2: global financial crisis. So remember in the first half of
43:16
Speaker 2: the twenty tens, the Chinese government injected something like four
43:21
Speaker 2: hundred tillion RMB into the system. This really spurred the
43:27
Speaker 2: whole show on, and that remark in twenty fifteen really
43:31
Speaker 2: was set in that context. Anyway, the whole point of
43:36
Speaker 2: this body of comments that were made is to actually
43:39
Speaker 2: say that supply and demand are intimately integrated with each other,
43:44
Speaker 2: and in fact there are passages in this body that
43:47
Speaker 2: says supply and demand are inseparable from each other. You
43:52
Speaker 2: need supply to satisfy demand, and you need demand to
43:56
Speaker 2: spur on innovation and supply. So the question of demand
44:02
Speaker 2: management is fundamentally driven by the idea of investment, particularly
44:08
Speaker 2: strategic investment in high tech areas, which again is talked
44:13
Speaker 2: about explicitly in this body of experts. It talks also
44:18
Speaker 2: about the centrality of government investment, particularly when private investment
44:23
Speaker 2: is a little bit retarded or is not strategically oriented.
44:27
Speaker 2: And it also talks about the need to boost consumption
44:33
Speaker 2: through boosting wages, improving the social security situation. And there's
44:40
Speaker 2: actually another paper from the Peterson Institute of Economics which
44:45
Speaker 2: actually explodes some traditional myths on that front as well.
44:49
Speaker 2: But basically Chideinpin's argument is that supply and demand a
44:53
Speaker 2: intimately integrated and the real issue that needs to be
44:57
Speaker 2: understood is to achieve and sustain and work towards a
45:03
Speaker 2: dynamic balance dun Te Ping Hong dynamic balance through an
45:13
Speaker 2: understanding of the need to promote the dual circulation concept.
45:19
Speaker 2: So this is this idea that demand and supply a
45:23
Speaker 2: part of a circulation system. And when you get Western
45:27
Speaker 2: commentators or you know, China watchers in the West, leap
45:32
Speaker 2: on one part of this story, it again does great
45:36
Speaker 2: disservice to people around the world, particularly people who don't
45:40
Speaker 2: read Chinese and who rely upon these interpreters to dead
45:46
Speaker 2: light and provide context and interpretive understanding of Chinese public
45:51
Speaker 2: policy thinking. It does a great disservice to all of
45:54
Speaker 2: them when it distorts the fundamental framework that drives China's
46:02
Speaker 2: own way of understanding how to govern macroeconomic variables, supply
46:09
Speaker 2: and demand, and how it thinks about the role of government, markets, innovation,
46:19
Speaker 2: household incomes, and the interactions between investment and consumption. And
46:25
Speaker 2: unless you actually appreciate that through the lens of a
46:29
Speaker 2: Chinese perspective, you'll actually never really understand what on earth
46:34
Speaker 2: China's up to. And if your mission in life is
46:37
Speaker 2: to understand what China's up to for whatever reasons, but
46:40
Speaker 2: you just want to understand it and you want to
46:42
Speaker 2: shed light on it so that other people can understand
46:45
Speaker 2: what China's up to and can make sensible decisions around it,
46:49
Speaker 2: You're not helping anybody if you just want to cherry
46:52
Speaker 2: pick bits and pieces that somehow suit your particular narrative agenda.
46:57
Speaker 2: It's just another recent example of how Western tropes are
47:02
Speaker 2: a disservice to the West itself. It's unsurprising, of course,
47:07
Speaker 2: in this environment how a whole bunch of people sort
47:11
Speaker 2: of start to think, oh, well, you know, used to
47:14
Speaker 2: spend twenty years trying to back back all of these
47:17
Speaker 2: misinterpretations and distortions. But in the end, you know, what
47:21
Speaker 2: can you do if it generates self harm? You know,
47:26
Speaker 2: it's unfortunate for the reasons that I discussed earlier, but
47:29
Speaker 2: people get tired of trying to help guide Western analysts
47:35
Speaker 2: through to a better understanding of Chinese public policy making
47:40
Speaker 2: and particularly the ways in which Chinese leaders think about
47:46
Speaker 2: and frame the world that they are seeking to understand themselves.
47:51
Speaker 2: Then to administer.
47:56
Speaker 1: Yeah, especially when you know they have to read the
48:00
Speaker 1: entire document to to to look for these specific passages
48:07
Speaker 1: that will conform to their own ideas about China. I mean,
48:12
Speaker 1: this is not misunderstanding. This is strategically missing the forest
48:17
Speaker 1: for the treat And what Pinion is talking about is
48:21
Speaker 1: actually he's talking about addressing an issue that faced a
48:24
Speaker 1: lot of industrial societies today, and whereas they made this
48:29
Speaker 1: into a uniquely like a Chinese problem that finally she
48:35
Speaker 1: JP is admitting to. And I saw a comment Arnold Bertrande,
48:40
Speaker 1: who is a French entrepreneur who tweet extensively about Chinese
48:43
Speaker 1: She actually made a tweet about the exact article. And
48:46
Speaker 1: I was reading through the comments and one person said,
48:50
Speaker 1: in China, the government government treat the treat governance as
48:56
Speaker 1: an engineering problem. In the West, the other notice is
49:00
Speaker 1: treat it as a message in problem. I think that's
49:04
Speaker 1: pretty much sum set up.
49:06
Speaker 2: Yeah. Look, China, you know, with a combination of a
49:12
Speaker 2: long tradition of viewing the world and holistic terms, coupled
49:19
Speaker 2: with a Marxist tradition which also views the world in
49:24
Speaker 2: system terms, actually has a way of thinking about the
49:29
Speaker 2: world which understands it as a dynamic process. So the
49:35
Speaker 2: idea is that the world is always in flux, things
49:39
Speaker 2: are always changing, and that in the economic sphere, the
49:45
Speaker 2: aim is to you can't stop change. What you can
49:50
Speaker 2: do is guide change. Sometimes you can accelerate change. Sometimes
49:55
Speaker 2: you might want to slow down some change because as
49:59
Speaker 2: change can ta used to happen and unfold itself through
50:02
Speaker 2: complex processes and feedback loops, you've also got to try
50:06
Speaker 2: to maintain some sense of dynamic ping Honk balance. And
50:17
Speaker 2: the reason why it's a dynamic balance is to try
50:21
Speaker 2: to get away from the idea that we are aiming
50:23
Speaker 2: to arrive at this static equilibrium state. It's dynamic because
50:33
Speaker 2: fundamentally the world is a process of change. So this
50:37
Speaker 2: is the Daoist traditions, together with the Marxist traditions, really
50:41
Speaker 2: shedding a light on a way of thinking about the world.
50:44
Speaker 2: But if your framework is actually in neoclassical economics framework
50:48
Speaker 2: of supply demand, where time actually doesn't really play a role,
50:53
Speaker 2: then you don't have a way of grasping change. What
50:57
Speaker 2: you have a way of grasping is simply this sense that, well,
51:01
Speaker 2: things are out of kilter, and therefore we've just got
51:05
Speaker 2: to push something to get it back into kilter. And
51:08
Speaker 2: this framework simply looks at distortions. Right, the world naturally
51:13
Speaker 2: is equilibriating, so goes the argument, and when it's not equilibriated,
51:18
Speaker 2: we just need to find and remove the distortion. That's
51:22
Speaker 2: the framework that gets brought to this whole story from
51:24
Speaker 2: a whole bunch of mainstream trained China watchers, and they
51:29
Speaker 2: miss the mark whether they're right or wrong, is in
51:31
Speaker 2: a sense a bit different because what they firstly need
51:34
Speaker 2: to comprehend is how it is the Chinese policy makers
51:39
Speaker 2: actually frame the world themselves. There's no point sort of
51:43
Speaker 2: imposing your view on the Chinese policy matrix if the
51:48
Speaker 2: Chinese policy makers themselves are actually framing the world in
51:51
Speaker 2: a different way. If you want to understand policy making
51:54
Speaker 2: in China, you've got to do your best to think
51:58
Speaker 2: like the people who are actually doing the analysis, the
52:01
Speaker 2: people who are undertaking the diagnostics, the people who are
52:05
Speaker 2: evaluating the different prognoses available. There's no point simply imposing
52:11
Speaker 2: a Western clatt neo classical frame. It's meaningless. And unfortunately,
52:16
Speaker 2: I think you get a bunch of this and the
52:19
Speaker 2: idea that somehow you can pick one word or one
52:22
Speaker 2: phrase from ten years ago and try and elaborate an
52:26
Speaker 2: entire trope around it. You know, look, at best, it's
52:30
Speaker 2: a little bit far fetched. And yeah, look if you
52:34
Speaker 2: read through the whole thing. Look, I actually read it
52:36
Speaker 2: at about midnight my time, because I saw these messages
52:40
Speaker 2: pop up on social media threads and you know, with
52:44
Speaker 2: this haha, gotcha, you know I told you so, you know,
52:47
Speaker 2: finally admitted blah blah blah, and I thought, to myself,
52:50
Speaker 2: this seems a little unusual. So I found the link
52:55
Speaker 2: to the full story, which incidentally wasn't provided by the
52:58
Speaker 2: people who were posting this anyway. I found the link
53:01
Speaker 2: to the full story, and I read through it, and
53:06
Speaker 2: I thought, this is just so. It's sort of a
53:10
Speaker 2: willful deceit. It's sort of a self deceit because you're
53:13
Speaker 2: ignoring a whole bunch of stuff that you, yourself could know
53:16
Speaker 2: if you bothered reading the whole thing. And there's no
53:18
Speaker 2: reason why the people who posted these things didn't read
53:21
Speaker 2: the whole thing, so they're cherry picking. And that's well,
53:27
Speaker 2: it's deceitful to yourself first and foremost, and it doesn't
53:30
Speaker 2: help anybody anyway. And I think in the end, it
53:33
Speaker 2: just exposes you to the charge that you are missing
53:38
Speaker 2: actually the big picture, the real story, by focusing and
53:44
Speaker 2: on one remark from ten years ago that was decontextualized.
53:51
Speaker 1: Speaking of Chinese governance and Western misreporting. I think there
53:56
Speaker 1: is a story you wanted to talk about, which is
53:59
Speaker 1: a sentencing of Hong Kong billionaire media title Jimmy Lai.
54:05
Speaker 1: And this has often been talk about in the Western
54:09
Speaker 1: media as oh, China is oppressing billionaires again, or you know,
54:13
Speaker 1: China is crushing Hong Kong's democracy. What's your take on that?
54:19
Speaker 2: Yeah, I'll be pretty brief on it, but you know,
54:22
Speaker 2: your viewers might not know. But I'm born in Hong Kong,
54:25
Speaker 2: so I continue to have an abiding interest in Hong
54:29
Speaker 2: Kong and of course a soft spot for what happens
54:33
Speaker 2: in Hong Kong. And Jimmy Lai was sentenced earlier this week.
54:39
Speaker 2: The judgment came after some one hundred and fifty six
54:43
Speaker 2: days of evidence and argumentation. He was represented by well
54:49
Speaker 2: paid legal team and barristers, and the judgment ran into
54:54
Speaker 2: eight hundred pages or thereabouts. It was a damning indictment
54:58
Speaker 2: on Jimmy Lai insofar as the charges of sedition and
55:03
Speaker 2: colluding with foreign powers was concerned. The fact that he
55:08
Speaker 2: pleaded not guilty, I think is how can I put
55:15
Speaker 2: this politely? Is unfortunate because there are so many published
55:23
Speaker 2: records of Jimmy Lai seeking soliciting, the direct intervention by
55:33
Speaker 2: the Americans in particular, but also the English from time
55:36
Speaker 2: to time on Hong Kong matters and on Hong Kong
55:40
Speaker 2: people and on mainland Chinese people through calling for sanctions, etc.
55:46
Speaker 2: And ultimately also making two remarks which I think are
55:50
Speaker 2: particularly telling. One is this sense that he saw himself
55:54
Speaker 2: as a warrior in a war against the Communist Party
55:58
Speaker 2: of China and the people Republic of China, and that
56:02
Speaker 2: he identified not only as a warrior, as a belligerent
56:08
Speaker 2: or as a participant in this war, but that he
56:11
Speaker 2: saw this as a war between the People's Republic of
56:15
Speaker 2: China and the United States of America, when he said
56:19
Speaker 2: that I'm fighting your war, this is your war, and
56:23
Speaker 2: I'm one of you. And the reason why I think
56:26
Speaker 2: that that's particularly telling is because it harks back to
56:30
Speaker 2: the way that the United States in the years immediately
56:33
Speaker 2: after the founding of the People's Republic of China framed
56:37
Speaker 2: the question of China itself and the decisions made by
56:42
Speaker 2: the United States at that time to back and recognize
56:46
Speaker 2: the Republic or continue to recognize the Republic of China
56:48
Speaker 2: and to support Chan Kai Chek. And many of your
56:53
Speaker 2: viewers will, you know, who have a historical event, and
56:56
Speaker 2: I know that that's well they should, because you bring
57:01
Speaker 2: a historical sensibility to everything that you do. When Senator
57:06
Speaker 2: McCarthy gave his very famous speech in nineteen fifty one
57:10
Speaker 2: when he attacked what he believed were Communist sympathizers in
57:14
Speaker 2: the State Department. He described Chang Kai Shek as our
57:21
Speaker 2: guy fighting our war, and then he went on to
57:26
Speaker 2: explain what he meant by that, And he meant by
57:29
Speaker 2: that very explicit idea that Chang Kai Shek was our
57:35
Speaker 2: Christian guy fighting the godless communists. It was our war,
57:42
Speaker 2: and Jimmy Lai invoked that sense that this was an
57:47
Speaker 2: American war against communist China. That's the first thing. The
57:52
Speaker 2: second thing, of course, was his remark, which I think
57:56
Speaker 2: is quite incendary, though some would say it was more
58:00
Speaker 2: of an allegory or an analogy rather than should be
58:04
Speaker 2: taken literally. But the idea that you know, America could
58:08
Speaker 2: smote China with the press of one big red button
58:12
Speaker 2: by dropping a nuclear bomb. Now you know, say what
58:17
Speaker 2: you will about it, interpret it how you you on.
58:19
Speaker 2: But if the charge is one of sedition and collusion,
58:23
Speaker 2: then I don't think that there's any doubt at all
58:26
Speaker 2: that Jimmy Lies saw himself as and you know he
58:29
Speaker 2: would have he genuinely believed that I don't doubt Jimmy
58:32
Speaker 2: lies'ess sincerity in his beliefs, but that's the point. He
58:36
Speaker 2: was dead set sincere in his beliefs that he was
58:39
Speaker 2: a warrior or America, and he sought to enlist America's
58:44
Speaker 2: support in a war that he believed actually was America's war.
58:48
Speaker 2: So he's been found guilty. He will be sentenced in
58:53
Speaker 2: the new year. Whether or not he gets life sentence,
58:57
Speaker 2: and whether or not he needs to serve terms concurrently
59:01
Speaker 2: or consecutively will be an interesting thing to watch. The
59:04
Speaker 2: fact that you've got a bunch of bloviators in the
59:06
Speaker 2: West carrying on about free Jimmy Lai, particularly from the UK,
59:11
Speaker 2: and it makes me kind of laugh because the idea
59:15
Speaker 2: that the British actually think that they have a right
59:17
Speaker 2: to comment on the internal affairs of another place simply
59:21
Speaker 2: because they colonize that for over one hundred years is
59:24
Speaker 2: an insult. And the British really should focus a hell
59:28
Speaker 2: of a lot more on their own problems, because they've
59:31
Speaker 2: got a hell of a lot of problems, and to
59:33
Speaker 2: think that they're still in a position to dispense judgment
59:38
Speaker 2: and opinion as if there as if they're still the
59:41
Speaker 2: colonial Lords in the Far East is an indictment on
59:47
Speaker 2: the state of British politics and the exceptionalist conceit of
59:52
Speaker 2: the British elite.
59:56
Speaker 1: Yeah, and also Jimmy Laye's second in command in his
59:59
Speaker 1: Apple d the media Empire is literally American fun c
1:00:04
Speaker 1: I A family. I mean, he said he has nothing
1:00:08
Speaker 1: to do with his father's you know, c I A dealings,
1:00:11
Speaker 1: but you know, we'll have to take his word for it.
1:00:14
Speaker 2: Yeah.
1:00:15
Speaker 1: Well, thank you again, Professor Power for making your time
1:00:21
Speaker 1: to talk to us. It's always refreshing uh an eye
1:00:25
Speaker 1: opening uh to to hear you talk about the matter
1:00:28
Speaker 1: related to China and economics, and look forward to have
1:00:32
Speaker 1: you back on my show in the in the not
1:00:36
Speaker 1: too far future. So thanks, thanks, thanks professor, it's been great,
1:00:44
Speaker 1: And for the audience tuning in, thank you for listening.
1:00:48
Speaker 1: Until next time, Bye bye,