Latest / Sharp China Podcast / Sharp China: The US-China Strategic Channel; Continued Drama in the South China Sea; The Next Phase of Chip Controls; Black Myth: Wukong

Transcript

Sharp China: The US-China Strategic Channel; Continued Drama in the South China Sea; The Next Phase of Chip Controls; Black Myth: Wukong · Sharp China Podcast

0:04
SPEAKER_02: Hello and welcome back to another episode of Sharp China.
0:08
SPEAKER_02: I'm Andrew Sharp and on the other line, Bill Bishop.
0:13
SPEAKER_02: Bill, it's great to see you.
0:15
SPEAKER_02: A gorgeous fall day in Washington, D.C.
0:18
SPEAKER_02: Crisp 70 degrees as we record this.
0:21
SPEAKER_02: How you doing?
0:22
SPEAKER_00: I'm good.
0:23
SPEAKER_00: It's nice to be back.
0:24
SPEAKER_00: I missed you.
0:24
SPEAKER_00: I feel like we've been we've been away for a long time.
0:27
SPEAKER_00: We only did only one podcast in about a month.
0:29
SPEAKER_02: I know we have a lot to catch up on here.
0:32
SPEAKER_02: It was a busy couple of weeks.
0:34
SPEAKER_02: We are outside the paywall this week.
0:36
SPEAKER_02: So I just want to note up front that for anybody who would like to receive weekly
0:41
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0:43
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0:46
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0:48
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0:53
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0:57
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1:01
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1:04
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1:07
SPEAKER_02: We'll keep you informed and entertained.
1:10
SPEAKER_02: And Bill, you've been off Twitter lately, so I'm more reliant than ever on your Substack presence.
1:15
SPEAKER_02: You've been more active on Substack notes lately.
1:18
SPEAKER_00: Yeah,
1:19
SPEAKER_00: I still read Twitter,
1:21
SPEAKER_00: X,
1:21
SPEAKER_00: whatever you want to call it,
1:22
SPEAKER_00: but I've just taken a break because the China-related discourse is broken down.
1:25
SPEAKER_00: It's just sort of not a particularly useful place right now.
1:28
SPEAKER_00: It's kind of funny to watch how that discourse has shifted.
1:33
SPEAKER_00: Again,
1:34
SPEAKER_00: there's some really good Chinese language accounts,
1:37
SPEAKER_00: fewer and fewer worthwhile English language accounts tweeting about China.
1:42
SPEAKER_00: It's too bad.
1:43
SPEAKER_02: A healthy choice, though.
1:44
SPEAKER_02: I support you, and I've become an avid user of the Substack app.
1:48
SPEAKER_02: I haven't taken the plunge yet and started posting my own notes,
1:51
SPEAKER_02: but maybe that'll come later in the fall.
1:53
SPEAKER_00: Notes is good.
1:54
SPEAKER_00: Notes is actually kind of fun, and we'll see.
1:57
SPEAKER_00: Like anything, as it gets more popular, you get more bots.
2:01
SPEAKER_00: It's always nice when it's not many people.
2:03
SPEAKER_00: The law of the internet.
2:04
SPEAKER_00: Yeah, right?
2:04
SPEAKER_00: Exactly.
2:05
SPEAKER_00: No, exactly.
2:06
SPEAKER_02: All right.
2:07
SPEAKER_02: Well, we do have a lot to catch up on today.
2:10
SPEAKER_02: There have been more clashes in the South China Sea over the past couple of weeks.
2:14
SPEAKER_02: But I wanted to start bigger picture because while we were away,
2:18
SPEAKER_02: the Financial Times had a story about the so-called strategic channel that has
2:22
SPEAKER_02: emerged between National Security Advisor Jake Sullivan and PRC Foreign Minister
2:27
SPEAKER_02: Wang Yi.
2:28
SPEAKER_02: The two of them and their delegations have met several times around the world over
2:33
SPEAKER_02: the past few years in Vienna,
2:35
SPEAKER_02: Malta,
2:36
SPEAKER_02: Thailand.
2:37
SPEAKER_02: And then they met again last week in Beijing.
2:40
SPEAKER_02: And so this Financial Times story was timed with that meeting last week.
2:45
SPEAKER_02: And the headline was the inside story of the secret back channel between the U.S.
2:50
SPEAKER_02: and China.
2:51
SPEAKER_02: And the FT writes,
2:52
SPEAKER_02: the channel has played a vital role managing relations between the rival
2:56
SPEAKER_02: superpowers during a period fraught with tensions.
3:00
SPEAKER_02: At a time when the U.S.
3:01
SPEAKER_02: is consumed by the idea of competition with China and Beijing can shift abruptly
3:06
SPEAKER_02: between supreme confidence and paranoia about its standing in the world.
3:10
SPEAKER_02: The channel has been a shock absorber that officials say has helped cut the risk of
3:15
SPEAKER_02: a miscalculation by both nations.
3:18
SPEAKER_02: And then further down,
3:18
SPEAKER_02: there's a quote from Rush Doshi,
3:20
SPEAKER_02: a former NSC official who attended the meetings with Wang Yi.
3:24
SPEAKER_02: And the story says it was important to explain to China what the U.S.
3:29
SPEAKER_02: was doing and not doing.
3:31
SPEAKER_02: Quote from Doshi,
3:33
SPEAKER_02: diplomacy is how you clear up misperception and avoid escalation and manage competition.
3:39
SPEAKER_02: It's not actually at odds with competition, but part of any sustainable competitive strategy.
3:46
SPEAKER_02: So I thought this story was interesting because it's clear the officials in that story,
3:50
SPEAKER_02: both named and unnamed,
3:52
SPEAKER_02: are talking about the strategic channel as an achievement in diplomacy.
3:57
SPEAKER_02: But from the outside, I'm not sure how much has actually been accomplished by any of those meetings.
4:03
SPEAKER_02: So what do you think?
4:04
SPEAKER_02: I mean,
4:04
SPEAKER_02: it's hard to have a concrete answer about meetings and what was achieved in
4:09
SPEAKER_02: meetings we didn't attend.
4:11
SPEAKER_02: But how do you think about the question there?
4:13
SPEAKER_00: Well,
4:14
SPEAKER_00: I think one thing that's clear,
4:17
SPEAKER_00: especially on the Chinese side,
4:19
SPEAKER_00: is that engagements aren't particularly useful unless they're with either the
4:22
SPEAKER_00: absolute top Xi Jinping or people who are very close to the top.
4:25
SPEAKER_00: And so Wang Yi,
4:27
SPEAKER_00: as not only former foreign minister and then foreign minister again after the
4:31
SPEAKER_00: downfall of Xinjiang,
4:33
SPEAKER_00: he's also his bigger job.
4:34
SPEAKER_00: He's on the Politburo and he's the director of the Central Foreign Affairs Commission.
4:40
SPEAKER_00: of which Xi Jinping is the chair.
4:42
SPEAKER_00: And so when you're talking to Wang Yi,
4:43
SPEAKER_00: you know that that is basically,
4:47
SPEAKER_00: you know,
4:47
SPEAKER_00: you're effectively one step removed from Xi Jinping.
4:49
SPEAKER_01: Right.
4:49
SPEAKER_00: That's the inner circle.
4:50
SPEAKER_00: And so that's why the channel is valuable, right?
4:53
SPEAKER_00: You're not mucking around sort of wondering how things are going to flow up through
4:57
SPEAKER_00: the bureaucracy or which part of the bureaucracy you're talking about,
4:59
SPEAKER_00: right?
4:59
SPEAKER_00: You can't have Biden and Xi talk all the time.
5:01
SPEAKER_00: They're very busy people.
5:02
SPEAKER_00: They only have...
5:04
SPEAKER_00: you know, very arranged meetings at sort of long intervals.
5:08
SPEAKER_00: So from that perspective,
5:10
SPEAKER_00: I think there isn't a more useful channel to have,
5:14
SPEAKER_00: I think,
5:15
SPEAKER_00: what are relatively candid discussions.
5:18
SPEAKER_00: You know, it's interesting.
5:19
SPEAKER_00: It's a national security advisor on the U.S.
5:20
SPEAKER_00: side, not Secretary of State.
5:22
SPEAKER_00: Part of it may be personality.
5:23
SPEAKER_00: The Chinese side really don't seem to like Blinken.
5:26
SPEAKER_00: And so it might be easier to deal with Sullivan.
5:28
SPEAKER_00: I think they also see Sullivan as being more important, more influential.
5:32
SPEAKER_00: So, you know, what has been accomplished is,
5:35
SPEAKER_00: I think the U.S.
5:36
SPEAKER_00: feels like it's been able to explain its positions and the rationales for actions it's taking.
5:41
SPEAKER_00: I don't think it's changed any minds on the Chinese side.
5:44
SPEAKER_00: They were able to,
5:46
SPEAKER_00: after the balloon incident,
5:47
SPEAKER_00: then they had a meeting with Biden,
5:49
SPEAKER_00: a Xi-Biden meeting last November.
5:51
SPEAKER_00: There's been some movement on...
5:54
SPEAKER_00: sort of cooperation around fentanyl.
5:56
SPEAKER_00: The militaries are talking again.
5:58
SPEAKER_00: You know, what's interesting though, like is, so this meeting, Jake Sullivan goes to Beijing.
6:03
SPEAKER_00: They actually met outside Beijing.
6:05
SPEAKER_00: It's really nice to see they built this whole conference center for APEC.
6:08
SPEAKER_00: And there's, I think there's a rooftop, like a, what is it?
6:10
SPEAKER_00: A Kapinski Hotel, I think out there.
6:13
SPEAKER_00: And it's a beautiful, beautiful conference center, beautiful grounds.
6:16
SPEAKER_00: It's sort of up in the mountains,
6:17
SPEAKER_00: I think up in Huairo outside Beijing,
6:19
SPEAKER_00: sort of on the way up to the parts of the Great Wall.
6:22
SPEAKER_00: And so they met out there.
6:23
SPEAKER_00: You know,
6:23
SPEAKER_00: it's sort of a secluded,
6:24
SPEAKER_00: I think they,
6:25
SPEAKER_00: you know,
6:25
SPEAKER_00: they would say it's like a sort of different than being in downtown Beijing.
6:29
SPEAKER_00: But, you know, so this meeting, this trip, right, he met with Wang Yi.
6:33
SPEAKER_00: They met with the vice chairman of the Central Military Commission,
6:35
SPEAKER_00: Zhang Youxia,
6:36
SPEAKER_00: a meeting they've been wanting for quite some time.
6:38
SPEAKER_00: And they met with Xi Jinping.
6:39
SPEAKER_00: And it's like,
6:40
SPEAKER_00: well,
6:40
SPEAKER_00: okay,
6:40
SPEAKER_00: that's the first meeting,
6:41
SPEAKER_00: you know,
6:41
SPEAKER_00: the National Security Advisors had with the vice chairman since...
6:45
SPEAKER_00: Susan Rice, National Security Advisor in 2016 had that meeting.
6:48
SPEAKER_00: So it's like, okay, they did this eight years ago.
6:49
SPEAKER_00: Then for various reasons, a lot of these meetings stopped happening.
6:53
SPEAKER_00: And now things are back to where they were eight years ago.
6:56
SPEAKER_00: Okay, is that progress?
6:58
SPEAKER_00: Or is that managing towards some sort of a...
7:02
SPEAKER_00: near-term sort of stability in the relationship, which I guess is a pot.
7:06
SPEAKER_00: I mean, and I think you can argue is a positive outcome given where things were headed last year.
7:11
SPEAKER_00: But in terms of actual substantive progress,
7:13
SPEAKER_00: you know,
7:13
SPEAKER_00: the Chinese aren't changing their views on support for Russia.
7:16
SPEAKER_00: You know, they're not changing their views on sort of their economic model and what the U.S.
7:20
SPEAKER_00: says is, you know, exporting over capacity.
7:23
SPEAKER_00: They're clearly not changing their behavior in the South China Sea.
7:26
SPEAKER_00: I mean, there was a, we'll talk about later in the podcast, there was a
7:29
SPEAKER_00: a resupply by helicopter of a Philippine ship while I think while the national
7:34
SPEAKER_00: security advisor was in Beijing which seemed positive and then two days later
7:38
SPEAKER_00: basically the Chinese rammed the same ship
7:41
SPEAKER_00: which was sort of like whatever they may have thought the U.S.
7:44
SPEAKER_00: side discussed about the South China Sea and the Philippines and whatever they
7:47
SPEAKER_00: thought they may have achieved.
7:49
SPEAKER_00: I think the Chinese are sending a very clear message that they're just going to do what they want.
7:52
SPEAKER_02: Right.
7:53
SPEAKER_02: Yeah.
7:53
SPEAKER_02: I mean,
7:53
SPEAKER_02: and that's why I asked the question in terms of what's being accomplished,
7:57
SPEAKER_02: because you do have the PRC supporting Russia's military industrial complex.
8:02
SPEAKER_00: I think what's being accomplished, and I know that the U.S.
8:05
SPEAKER_00: side would say this,
8:05
SPEAKER_00: and they've said this many times,
8:07
SPEAKER_00: is what's being accomplished is it allows them to explain the positions and the
8:12
SPEAKER_00: rationales for and potential future policies in a way that will minimize
8:18
SPEAKER_00: misunderstandings when those policies are announced.
8:21
SPEAKER_00: And so, you know, the Chinese, for example, the Chinese
8:23
SPEAKER_00: don't like the chip sanctions.
8:24
SPEAKER_00: They know that there's going to be... They're like an annual thing.
8:28
SPEAKER_00: So there'll be another round on or about October 7th, right?
8:31
SPEAKER_00: The second anniversary of the... There'll be the third year.
8:36
SPEAKER_00: They first announced what?
8:37
SPEAKER_00: On October 22.
8:37
SPEAKER_00: So this will be the third round of sort of October 7-ish chip controls.
8:43
SPEAKER_00: Right.
8:43
SPEAKER_00: And so they know that's coming.
8:44
SPEAKER_00: They don't like it.
8:46
SPEAKER_00: But at the same time, it won't be a surprise.
8:49
SPEAKER_00: And so I think the idea here is to minimize...
8:52
SPEAKER_00: Minimize surprises, increase communication.
8:55
SPEAKER_00: I think the Chinese also are...
8:57
SPEAKER_00: And I think the US,
8:58
SPEAKER_00: I would say that from the Chinese perspective,
9:00
SPEAKER_00: the whole US election season is always...
9:05
SPEAKER_00: it's always a bit uncertain and confusing and without,
9:09
SPEAKER_00: I mean,
9:09
SPEAKER_00: I don't,
9:09
SPEAKER_00: you know,
9:09
SPEAKER_00: there was some press about,
9:10
SPEAKER_00: well,
9:11
SPEAKER_00: what did,
9:11
SPEAKER_00: you know,
9:11
SPEAKER_00: did Sullivan say something about,
9:13
SPEAKER_00: you know,
9:13
SPEAKER_00: what a Harris administration would do?
9:15
SPEAKER_00: I don't, I don't think so.
9:15
SPEAKER_00: Cause he doesn't know.
9:16
SPEAKER_00: And I don't think he'll be part of a Harris administration.
9:18
SPEAKER_01: Right.
9:18
SPEAKER_00: But I think the Chinese very much want to understand the process and,
9:21
SPEAKER_00: you know,
9:22
SPEAKER_00: they're,
9:22
SPEAKER_00: they're going to of course be trying to understand what policies may look like,
9:26
SPEAKER_00: you know,
9:26
SPEAKER_00: once Biden is gone,
9:27
SPEAKER_00: you know,
9:29
SPEAKER_00: since he's already a lame duck,
9:30
SPEAKER_00: but I don't think actually the U S side can even tell that,
9:32
SPEAKER_00: but I think it's important for the Chinese to understand that,
9:35
SPEAKER_00: It's in their interest to keep the U.S.
9:37
SPEAKER_00: relationship relatively stable around the election,
9:39
SPEAKER_00: because if there were any sort of crisis between now and November 5th,
9:43
SPEAKER_00: it could really force then China to become a much more significant issue in the
9:48
SPEAKER_00: campaign that ultimately,
9:49
SPEAKER_00: I think,
9:50
SPEAKER_00: would force either candidate or lead either candidate to take even tougher measures
9:56
SPEAKER_00: towards China,
9:57
SPEAKER_00: which is not in their interest.
9:58
SPEAKER_02: Yeah,
9:59
SPEAKER_02: I mean,
9:59
SPEAKER_02: I guess to the extent the engagement is seen as a bulwark against real escalations
10:06
SPEAKER_02: and worsening relations,
10:08
SPEAKER_02: I wonder whether it's meetings with Jake Sullivan that are preventing PRC
10:14
SPEAKER_02: escalations and actual kinetic conflict,
10:17
SPEAKER_02: because that's what the administration officials seem to be implying.
10:20
SPEAKER_02: And I don't totally buy that.
10:22
SPEAKER_00: I don't totally buy that.
10:23
SPEAKER_00: I think they said after this meeting last week that,
10:26
SPEAKER_00: you know,
10:26
SPEAKER_00: the expectation should be there will be a Biden-Xi call sometime next few weeks.
10:31
SPEAKER_00: I think that means, I think that what they're shooting for is before the end of September.
10:35
SPEAKER_00: There may or may not be a meeting later in the fall.
10:38
SPEAKER_00: I mean, the obvious opportunities are either the APEC or the G20, which are both after the election.
10:46
SPEAKER_00: And so, you know, it'll be interesting to,
10:49
SPEAKER_00: You wonder how much value this Xi Jinping would see in a meeting with Biden then
10:53
SPEAKER_00: just because Biden will be two months away from retirement,
10:57
SPEAKER_00: regardless of who the president is.
10:59
SPEAKER_00: But that still may happen.
11:02
SPEAKER_00: I think,
11:03
SPEAKER_00: though,
11:03
SPEAKER_00: that I go back to the point about the idea that these engagements are good for stability.
11:10
SPEAKER_00: I mean,
11:10
SPEAKER_00: you look at what happened around at the Sabita Shoal two days after Sullivan left
11:14
SPEAKER_00: and you think,
11:15
SPEAKER_00: okay,
11:16
SPEAKER_00: the Chinese,
11:17
SPEAKER_00: you know,
11:17
SPEAKER_00: basically they,
11:18
SPEAKER_00: you know,
11:18
SPEAKER_00: they're ramming Philippine ships in Philippines,
11:21
SPEAKER_00: inclusive economic zone.
11:22
SPEAKER_00: It's like, and the US has been very clear that, you know, if there's, for example,
11:28
SPEAKER_00: The US and China and the US and Philippines have a mutual defense treaty.
11:31
SPEAKER_00: And so there are the treaty with a mutual defense clause.
11:33
SPEAKER_00: And so there's a real problem there where the Chinese are playing very close to the line,
11:37
SPEAKER_00: where if there's an accident and somebody dies on the Philippine side and the
11:41
SPEAKER_00: Philippines say they asked the US for help,
11:43
SPEAKER_00: the US needs to help.
11:44
SPEAKER_00: Yeah, no, exactly.
11:46
SPEAKER_00: And so you wonder,
11:47
SPEAKER_00: I think,
11:48
SPEAKER_00: and again,
11:49
SPEAKER_00: I don't think that the folks on the ground around Sabine Scholl are out of control.
11:52
SPEAKER_00: I don't think that they would be acting that way, sort of going rogue, so to speak.
11:58
SPEAKER_00: I think the US should clearly look at that as basically a,
12:02
SPEAKER_00: yeah,
12:02
SPEAKER_00: yeah,
12:02
SPEAKER_00: yeah,
12:02
SPEAKER_00: we had this nice talk,
12:03
SPEAKER_00: but we're not changing our behavior.
12:04
SPEAKER_00: This is a directive from Beijing.
12:06
SPEAKER_02: No, exactly.
12:07
SPEAKER_02: And I think...
12:08
SPEAKER_02: This Financial Times feature was useful as a window into how the policymakers under
12:14
SPEAKER_02: Biden have seen the policy.
12:16
SPEAKER_02: And my problem with the way it's framed from members of the administration is that
12:21
SPEAKER_02: it seems to me like they're mistaking activity for achievement,
12:25
SPEAKER_02: which is the old John Wooden quote.
12:27
SPEAKER_02: to bring basketball into it but like if the current approach isn't yielding
12:31
SPEAKER_02: progress on prc support for russia isn't yielding progress on prc over capacity
12:38
SPEAKER_02: issues and the way china is disrupting the global economy and if it's not yielding
12:43
SPEAKER_02: progress in the south china sea where the prc actions have gotten worse and worse
12:48
SPEAKER_02: and worse over the last 12 months which we can get to
12:51
SPEAKER_02: then at what point do the people crafting that policy and that strategy begin to
12:57
SPEAKER_02: reevaluate the approach?
12:59
SPEAKER_02: Reading it,
13:00
SPEAKER_02: I was wondering,
13:01
SPEAKER_02: I don't know whether it's actually useful to painstakingly clarify to Wang Yi
13:06
SPEAKER_02: exactly what the government is and isn't interested in doing,
13:10
SPEAKER_02: the U.S.
13:11
SPEAKER_02: government,
13:11
SPEAKER_02: that is,
13:11
SPEAKER_02: because the element of unpredictability may be more of a deterrent to some of the
13:16
SPEAKER_02: problematic PRC behaviors of the last couple of years.
13:19
SPEAKER_02: I don't know.
13:20
SPEAKER_00: Potentially.
13:21
SPEAKER_00: I think around things like Taiwan,
13:23
SPEAKER_00: like cross-state stuff,
13:24
SPEAKER_00: I think it's very important to be communicating and being very explicit because the
13:29
SPEAKER_00: risks of misunderstandings and miscalculations are,
13:32
SPEAKER_00: I mean,
13:33
SPEAKER_00: the downside risk is catastrophic.
13:35
SPEAKER_02: Well,
13:35
SPEAKER_02: so there was this other note in the story where a second official is quoted saying,
13:40
SPEAKER_02: we're not trying to drag China into a conflict over Taiwan.
13:44
SPEAKER_02: Nothing could be further from the truth.
13:46
SPEAKER_02: And that's what's being communicated at these meetings.
13:49
SPEAKER_02: And the second official added that Beijing had become pretty conspiratorial about U.S.
13:54
SPEAKER_02: intentions.
13:55
SPEAKER_02: underscoring the paranoia,
13:57
SPEAKER_02: the FT writes,
13:59
SPEAKER_02: Xi had told European Commission President Ursula von der Leyen a few weeks before
14:04
SPEAKER_02: the summit that the U.S.
14:05
SPEAKER_02: was trying to goad China into attacking Taiwan.
14:09
SPEAKER_02: So there had been several meetings of the strategic channel by that point.
14:12
SPEAKER_02: And for some reason, Xi still thinks the U.S.
14:15
SPEAKER_02: is trying to goad China into attacking Taiwan.
14:17
SPEAKER_02: So
14:18
SPEAKER_02: It's just the misunderstanding still seemed to exist,
14:22
SPEAKER_02: or at least there's a willful misunderstanding on the PRC side in that case.
14:28
SPEAKER_02: I don't know.
14:29
SPEAKER_00: Well,
14:29
SPEAKER_00: again,
14:30
SPEAKER_00: it's hard,
14:31
SPEAKER_00: you know,
14:32
SPEAKER_00: that that was an interesting story about Xi's comment,
14:35
SPEAKER_00: you know,
14:35
SPEAKER_00: about sort of being tricked into the U.S.,
14:36
SPEAKER_00: trying to trick them into a conflict over Taiwan.
14:39
SPEAKER_00: I think that...
14:42
SPEAKER_00: Never underestimate the currency that conspiracy theories have in political systems,
14:46
SPEAKER_00: even open political systems,
14:47
SPEAKER_00: but especially in closed political systems.
14:50
SPEAKER_00: I think that there must be some folks in the system who are able to get memos or
14:55
SPEAKER_00: policy papers up to the C-level who have been arguing that that's really the U.S.'
14:59
SPEAKER_00: 's goal.
14:59
SPEAKER_00: This is a way to
15:01
SPEAKER_00: keep China down is by somehow entangling them in a fight over Taiwan.
15:06
SPEAKER_00: I really don't know anybody in the U.S.
15:11
SPEAKER_00: government or policy community who thinks that it's in the U.S.
15:15
SPEAKER_00: interest to have a war over Taiwan.
15:17
SPEAKER_00: Right.
15:17
SPEAKER_00: I mean, one, it's pretty obvious it would be a disaster.
15:20
SPEAKER_00: And two, it's not at all clear that the PRC wouldn't prevail.
15:23
SPEAKER_02: And so I think... I mean, it would be a disaster for Taiwan and the whole world in that scenario.
15:27
SPEAKER_02: Yeah.
15:27
SPEAKER_00: For everybody.
15:28
SPEAKER_00: And I think that that,
15:29
SPEAKER_00: again,
15:30
SPEAKER_00: I really don't,
15:31
SPEAKER_00: you know,
15:31
SPEAKER_00: maybe some people will tell me I'm crazy,
15:33
SPEAKER_00: I'm naive,
15:33
SPEAKER_00: the deep state wants a war over Taiwan.
15:35
SPEAKER_00: I just,
15:35
SPEAKER_00: I don't know anybody who I think has any ounce of sense who thinks that a war over
15:41
SPEAKER_00: Taiwan is a good idea or that somehow the U.S.
15:44
SPEAKER_00: could use some stratagem to sort of induce Xi to invade Taiwan as a way to trap and keep down China.
15:51
SPEAKER_00: But that doesn't mean that that idea doesn't have currency inside parts of the PRC system.
15:56
SPEAKER_02: Right.
15:56
SPEAKER_02: And it's hard to know exactly what she was playing at when he communicated that to Ursula von der Leyen.
16:03
SPEAKER_02: But it's just an example of where there seems to be a breakdown in understanding,
16:08
SPEAKER_02: even with all these efforts at correcting any misunderstandings.
16:12
SPEAKER_00: Part of it, though, could also be the sort of, again, trying their best to paint everything as the U.S.
16:18
SPEAKER_00: 's fault and sort of, you know, oh, we don't want this, but they're forcing us or they're the bad actor.
16:25
SPEAKER_00: They're the ones causing the problems, right?
16:26
SPEAKER_00: Which is,
16:27
SPEAKER_00: of course,
16:27
SPEAKER_00: how,
16:27
SPEAKER_00: you know,
16:28
SPEAKER_00: the problems with the Philippines and the South China Sea,
16:30
SPEAKER_00: it's the U.S.,
16:31
SPEAKER_00: It's a perfect segue.
16:33
SPEAKER_00: Yes.
16:33
SPEAKER_00: The problems with Japan or the U.S., the problems with Taiwan or the U.S.
16:36
SPEAKER_00: Right.
16:37
SPEAKER_00: And the Taiwan.
16:38
SPEAKER_00: But the Taiwan issue, too, I think is just back to the one thing about that meeting.
16:41
SPEAKER_00: I think it is important.
16:44
SPEAKER_00: You know, the Chinese do seem quite unhappy with or they are quite unhappy with the new president.
16:49
SPEAKER_00: And I guess we'll start hearing more talk about,
16:52
SPEAKER_00: because October 10th is like the national day,
16:56
SPEAKER_00: the double 10 for the Republic of China.
16:58
SPEAKER_00: And the president always gives a speech.
17:00
SPEAKER_00: And so,
17:01
SPEAKER_00: you know,
17:01
SPEAKER_00: given the reaction to his inauguration speech,
17:03
SPEAKER_00: I think the next sort of big speech he's likely to give will be this October 10th speech.
17:09
SPEAKER_00: And we'll have to see how...
17:12
SPEAKER_00: I think there's some concern about sort of what he may say and then how the PRC reacts to it.
17:17
SPEAKER_00: And of course, we've got October 1st is the 75th anniversary of the founding of the PRC.
17:23
SPEAKER_00: And so there should be quite a big celebration in Beijing.
17:27
SPEAKER_00: You know, Xi will no doubt, I'm pretty sure he'll give a big speech.
17:30
SPEAKER_00: It'll be,
17:32
SPEAKER_00: it's going to be a sort of a sensitive two-week period end of this month into the
17:37
SPEAKER_00: first 10 or 12 days of October.
17:39
SPEAKER_02: Yeah,
17:39
SPEAKER_02: I mean,
17:41
SPEAKER_02: the William Lai quotes,
17:43
SPEAKER_02: he had some quotes over the weekend that were pretty spicy and uncommonly frank in
17:47
SPEAKER_02: terms of China and the territory that they have not tried to reclaim from Russia.
17:53
SPEAKER_00: Yeah, I mean, you know, Jiang Zemin, he worked out a border deal with the Russians.
17:58
SPEAKER_00: And a lot of people like to say,
17:59
SPEAKER_00: oh,
17:59
SPEAKER_00: you know,
18:00
SPEAKER_00: and I've joked before,
18:01
SPEAKER_00: too,
18:01
SPEAKER_00: like if she were really serious about,
18:03
SPEAKER_00: you know,
18:03
SPEAKER_00: getting back all the Chinese territory that's stolen,
18:05
SPEAKER_00: then,
18:05
SPEAKER_00: of course,
18:06
SPEAKER_00: they'd go after this.
18:07
SPEAKER_00: massive amount of territory in northeastern China and now parts of northeastern Russia,
18:11
SPEAKER_00: like Vladivostok,
18:13
SPEAKER_00: unlikely.
18:14
SPEAKER_00: They've sort of walked past that.
18:16
SPEAKER_00: Although it is interesting, you do get censored for the most part if you talk about the Chinese internet.
18:20
SPEAKER_00: So there is some sensitivity.
18:21
SPEAKER_02: That's interesting.
18:22
SPEAKER_02: Well, and William Lai is not shy about poking the bear, as it were.
18:27
SPEAKER_02: And I don't know whether that's a good idea.
18:29
SPEAKER_02: And I also don't know
18:31
SPEAKER_02: how the PRC will respond as that trend continues.
18:36
SPEAKER_02: So we'll have to wait and see if it continues in early October.
18:39
SPEAKER_02: But summer's over, Bill.
18:41
SPEAKER_02: It's going to be a busy fall here on the podcast.
18:44
SPEAKER_02: Don't I know it.
18:46
SPEAKER_02: And it was a busy summer in the South China Sea.
18:49
SPEAKER_02: So I'm going to read from Monday's cynicism on August 31st.
18:55
SPEAKER_02: A China Coast Guard vessel repeatedly rammed the BRP Teresa Magbanua at Sabina Shoal.
19:02
SPEAKER_02: The PRC side says its vessel was the victim of ramming by the Philippine ship,
19:07
SPEAKER_02: but even the video released by the PRC makes it obvious the PRC boat was the aggressor.
19:12
SPEAKER_02: The crisis at this shoal has intensified,
19:15
SPEAKER_02: with the PRC making it explicitly clear that they will not allow the Philippines to
19:20
SPEAKER_02: establish a permanent presence there,
19:23
SPEAKER_02: as they did with the Sierra Madre at Second Thomas Shoal,
19:26
SPEAKER_02: even though this shoal is also well within the Philippines' exclusive economic zone.
19:32
SPEAKER_02: This is a public episode,
19:33
SPEAKER_02: so for anyone who's unfamiliar with this controversy,
19:36
SPEAKER_02: I'll just note three things.
19:39
SPEAKER_02: One,
19:39
SPEAKER_02: a shoal in oceanography and geoscience is a natural submerged ridge,
19:45
SPEAKER_02: bank,
19:46
SPEAKER_02: or bar that rises from the bed of a body of water close to the surface or above it,
19:52
SPEAKER_02: which poses a danger to navigation.
19:54
SPEAKER_02: And these shoals can also be used to build military outposts.
19:58
SPEAKER_02: And China has done that elsewhere in the South China Sea.
20:01
SPEAKER_02: And the Philippines,
20:02
SPEAKER_02: meanwhile,
20:03
SPEAKER_02: has secured shoals within its exclusive economic zone by stationing ships atop the
20:09
SPEAKER_02: shoals to prevent them from being seized by the PRC.
20:13
SPEAKER_02: And there was a previous controversy surrounding an outpost at Second Thomas Shoal
20:18
SPEAKER_02: where the PRC Coast Guard was essentially blockading Filipino ships and preventing
20:23
SPEAKER_02: them from using construction materials to reinforce a damaged ship that had been
20:28
SPEAKER_02: stationed at Second Thomas Shoal.
20:31
SPEAKER_02: And in late July,
20:32
SPEAKER_02: it was revealed that the Philippines had secretly reinforced that ship,
20:36
SPEAKER_02: likely with the help of the United States,
20:39
SPEAKER_02: despite all the PRC efforts to essentially blockade the resupply and construction
20:45
SPEAKER_02: materials that were going to Second Thomas Shoal and the Sierra Madre,
20:49
SPEAKER_02: which was at risk of sort of disintegrating.
20:52
SPEAKER_02: And then the PRC would go in and claim that territory.
20:56
SPEAKER_02: Since then, the Chinese Coast Guard has turned its attention to a different show.
21:02
SPEAKER_02: And there were five confrontations between the China between China and the
21:06
SPEAKER_02: Philippines in the month of August.
21:09
SPEAKER_02: Do I have those baseline details right, Bill?
21:12
SPEAKER_02: I think so, yeah.
21:13
SPEAKER_02: Okay.
21:14
SPEAKER_00: Yeah, yeah, yeah.
21:15
SPEAKER_00: I mean,
21:15
SPEAKER_00: the five confrontations,
21:17
SPEAKER_00: I mean,
21:17
SPEAKER_00: maybe some folks will quibble over whether or not it's confrontations,
21:20
SPEAKER_00: but there were probably five incidents or five sort of encounters.
21:23
SPEAKER_02: Yes,
21:24
SPEAKER_02: and in late July,
21:26
SPEAKER_02: I expressed optimism that maybe things would calm down in the wake of a resolution...
21:31
SPEAKER_02: Just so you know, whenever we express optimism on the podcast, we tend to have it blow up on our faces.
21:36
SPEAKER_02: Just a horrendous jinx.
21:38
SPEAKER_02: Entirely my fault.
21:40
SPEAKER_02: This entire situation is my fault.
21:42
SPEAKER_02: I apologize to everyone.
21:44
SPEAKER_00: So when we start talking about what a great season the Commanders are going to have
21:47
SPEAKER_00: when the NFL season kicks off,
21:48
SPEAKER_00: you know they're going to suck again.
21:50
SPEAKER_02: I'm never going to make the mistake of being optimistic about the Commanders.
21:53
SPEAKER_02: Although, hey, Dan Snyder is out of town these days, so maybe things are looking up.
21:58
SPEAKER_02: They still suck.
22:00
SPEAKER_02: The current controversy is centered on the BRP Teresa Magbanua and the Philippines
22:06
SPEAKER_02: attempts to resupply that ship.
22:09
SPEAKER_02: We learned last week that the ship has a helipad and can be resupplied by helicopter.
22:15
SPEAKER_02: But the ramming continues and it seems like the behavior is getting even more aggressive.
22:22
SPEAKER_02: What do you make of where things stand right now?
22:24
SPEAKER_02: I mean,
22:25
SPEAKER_02: every time I look at Twitter,
22:26
SPEAKER_02: like every three or four days,
22:28
SPEAKER_02: there's a new incident that looks pretty dangerous.
22:32
SPEAKER_00: So there was an attempt a week ago or so that was blocked by Chinese boats.
22:39
SPEAKER_00: And then last week, the Philippine side had said, well, we're running out of supplies.
22:42
SPEAKER_00: And then I believe it was while Sullivan was in Beijing,
22:46
SPEAKER_00: the Philippines actually were able to resupply by helicopter,
22:50
SPEAKER_00: which,
22:50
SPEAKER_00: again,
22:51
SPEAKER_00: is risky because if the Chinese decided to start water canyoning a landing helicopter,
22:55
SPEAKER_00: you could very quickly have a crash and people are dead.
22:58
SPEAKER_00: So it seemed positive that they had allowed this,
23:01
SPEAKER_00: that they had interfered with this helicopter resupply.
23:04
SPEAKER_00: And then two days later,
23:05
SPEAKER_00: though,
23:05
SPEAKER_00: the ship,
23:06
SPEAKER_00: it's at anchor,
23:06
SPEAKER_00: but I guess it was trying to,
23:08
SPEAKER_00: for whatever reason,
23:08
SPEAKER_00: it was taking up its anchor to move around.
23:10
SPEAKER_00: And then all of a sudden,
23:11
SPEAKER_00: basically,
23:12
SPEAKER_00: it had this,
23:13
SPEAKER_00: you know,
23:14
SPEAKER_00: was collided with the PRC ship,
23:17
SPEAKER_00: Coast Guard vessel,
23:18
SPEAKER_00: Chinese Coast Guard vessel,
23:19
SPEAKER_00: which even the Global Times and the PRC side
23:22
SPEAKER_00: the way they're trying to spin it as they were the victims,
23:25
SPEAKER_00: from the way they,
23:25
SPEAKER_00: I mean,
23:26
SPEAKER_00: basically,
23:27
SPEAKER_00: somehow,
23:27
SPEAKER_00: if they were the victims,
23:28
SPEAKER_00: it would be that the Philippines vessel somehow backed into the Chinese Coast Guard vessel.
23:32
SPEAKER_00: It was crazy, right?
23:34
SPEAKER_00: And so the broader picture,
23:35
SPEAKER_00: though,
23:36
SPEAKER_00: is the Chinese,
23:36
SPEAKER_00: and you see it in various messaging from not only government,
23:39
SPEAKER_00: but in propaganda,
23:40
SPEAKER_00: is that they will not allow the Philippines to establish a permanent presence at
23:45
SPEAKER_00: the Sabina,
23:46
SPEAKER_00: or also known as Escoda Shoal,
23:48
SPEAKER_00: or in Chinese,
23:48
SPEAKER_00: the Xiangbingjiao,
23:49
SPEAKER_00: They've been very clear.
23:51
SPEAKER_00: They made a mistake.
23:52
SPEAKER_00: They were too soft,
23:53
SPEAKER_00: allowing the Philippines to ground the Sierra Madre at Second Thomas Shoal or Renai
23:59
SPEAKER_00: Jiao in Chinese.
24:00
SPEAKER_00: And so they're not going to let it happen again.
24:02
SPEAKER_00: They are trying to make it so that the Philippines have to remove the ship.
24:07
SPEAKER_00: And once they remove their vessel, then that's it.
24:11
SPEAKER_00: Because the Chinese have so much more...
24:14
SPEAKER_00: so many more vessels from either the maritime militia,
24:17
SPEAKER_00: the Chinese Coast Guard,
24:18
SPEAKER_00: the PLA,
24:18
SPEAKER_00: that once there's no Philippine ship on the shoal,
24:21
SPEAKER_00: the Chinese can very quickly block access.
24:23
SPEAKER_02: So practically speaking, in that scenario, the Chinese come in and just...
24:29
SPEAKER_02: establish a permanent presence there,
24:31
SPEAKER_02: potentially build on the shoal,
24:33
SPEAKER_02: and there's nothing the Philippines can do?
24:35
SPEAKER_00: To actually build on it or just keep the Philippines out, keep Philippine fishermen out.
24:38
SPEAKER_00: It's what they've done at Scarborough Shoal.
24:41
SPEAKER_00: Since 2012,
24:41
SPEAKER_00: there was a similar...
24:43
SPEAKER_00: In the Obama administration,
24:44
SPEAKER_00: there was a similar situation at Scarborough Shoal.
24:47
SPEAKER_00: The US side, including Kirk Campbell, who's now in the US administration, they...
24:52
SPEAKER_00: The US side and the Chinese side, they actually met and discussed it.
24:54
SPEAKER_00: And the US side thought that they had a deal where both the Chinese would leave the shoal,
24:59
SPEAKER_00: the Philippines would leave the shoal,
25:00
SPEAKER_00: and they'd work it out.
25:01
SPEAKER_00: The Philippines left, but the Chinese stayed and they blocked it off since then.
25:05
SPEAKER_00: And so that's why...
25:06
SPEAKER_00: You know,
25:07
SPEAKER_00: it's hard to imagine a situation where the Philippines would agree to some sort of
25:10
SPEAKER_00: a deal over this Sabina Shoal,
25:12
SPEAKER_00: where the Chinese would say,
25:14
SPEAKER_00: yeah,
25:14
SPEAKER_00: we'll leave it alone.
25:15
SPEAKER_00: You leave it alone.
25:15
SPEAKER_00: You know, that's it.
25:17
SPEAKER_00: Because they've been burned already.
25:18
SPEAKER_00: And so now we're in a situation where there's this one Philippines vessel at the Shoal.
25:23
SPEAKER_00: It can now only be resupplied by air,
25:26
SPEAKER_00: at least as of the way things have progressed over the last few weeks.
25:30
SPEAKER_00: So that obviously limits what you can bring in.
25:32
SPEAKER_00: And it's, I think, inherently riskier.
25:35
SPEAKER_00: And so now the question is, do the Philippines just dig in and stay there?
25:39
SPEAKER_00: Are the Chinese,
25:40
SPEAKER_00: have they decided that they're going to be more aggressive even if the Philippine
25:43
SPEAKER_00: ship is an anchor?
25:44
SPEAKER_00: They're going to say cut the line or try and push the ship off the shoal like they were doing?
25:48
SPEAKER_00: I mean,
25:48
SPEAKER_00: this last week before this latest ramming,
25:50
SPEAKER_00: you know,
25:51
SPEAKER_00: there are pictures going around where they'd also,
25:53
SPEAKER_00: the Chinese also sent in two tugboats.
25:55
SPEAKER_00: I know.
25:56
SPEAKER_00: Like, were they going to just drag the ship away?
25:57
SPEAKER_00: I mean, quite possibly, right?
25:59
SPEAKER_00: And so the challenge is that the Philippines really can't do this alone.
26:05
SPEAKER_00: They don't have the capacity.
26:07
SPEAKER_00: They don't have the number of ships to actually keep the Chinese at bay if the
26:10
SPEAKER_00: Chinese really want them to move off the shoal.
26:12
SPEAKER_00: And so then the question becomes, do they ask for the US to get involved?
26:16
SPEAKER_00: And if so, does the US say yes?
26:17
SPEAKER_00: Because if the US says no, then what's the point of a treaty?
26:20
SPEAKER_00: If the US says yes, then it's an escalation.
26:23
SPEAKER_02: Right.
26:23
SPEAKER_02: Well,
26:23
SPEAKER_02: and one of the interesting aspects of the way this has all unfolded over the last
26:27
SPEAKER_02: year or so is that one strategy on the Philippines part is assertive transparency.
26:34
SPEAKER_02: Is that what they call it?
26:35
SPEAKER_02: The assertive transparency approach?
26:37
SPEAKER_01: Yeah.
26:53
SPEAKER_02: They are filming everything that the PRC is doing in the South China Sea.
26:57
SPEAKER_02: And so we have high-definition video of the ramming incidents and the pretty
27:05
SPEAKER_02: massive holes that are being put in some of these naval vessels.
27:10
SPEAKER_00: Or Coast Guard vessels, yeah.
27:11
SPEAKER_02: Yeah,
27:12
SPEAKER_02: and another thing that occurred to me watching the videos is the videos are always
27:17
SPEAKER_02: zoomed in on the ships doing the ramming for obvious reasons,
27:21
SPEAKER_02: but what's often omitted,
27:23
SPEAKER_02: and you'll have to look through several photos,
27:26
SPEAKER_02: but if there's any zoomed out photos,
27:28
SPEAKER_02: there are dozens of PRC ships and boats that surround these naval vessels and Coast
27:35
SPEAKER_02: Guard vessels.
27:36
SPEAKER_02: Yes.
27:37
SPEAKER_02: Where it's usually like 10 Chinese boats to one Philippine boat.
27:40
SPEAKER_02: And the power dynamics there are fairly striking.
27:44
SPEAKER_02: And so, yeah, it does become a question of when does the U.S.
27:48
SPEAKER_02: get involved and what is the U.S.
27:51
SPEAKER_02: willing to do to try to deter this behavior?
27:54
SPEAKER_00: And I think going back to what happened at Second Thomas Shoal is the U.S.
27:58
SPEAKER_00: did get involved in terms of helping the Philippines... Covertly reinforce it.
28:05
SPEAKER_00: ...reinverse that ship so that sort of the Chinese clever strategy,
28:09
SPEAKER_00: just waiting for that ship to disintegrate and then swooping in,
28:12
SPEAKER_00: that looks like it's been delayed for many years in the way that that ship was reinforced.
28:18
SPEAKER_00: Mm-hmm.
28:19
SPEAKER_00: Because I think if, for example, you get the U.S.
28:23
SPEAKER_00: Army Corps of Engineers or naval engineers who decide to come address a problem
28:27
SPEAKER_00: like that,
28:28
SPEAKER_00: they can probably do a pretty good job of securing even a disintegrating vessel.
28:33
SPEAKER_00: Right.
28:35
SPEAKER_00: And so I think the Chinese are really pissed off.
28:37
SPEAKER_00: Both at the top level,
28:39
SPEAKER_00: because their really clever plans for Second Thomas Shoal have been dashed,
28:43
SPEAKER_00: at least in the near term,
28:45
SPEAKER_00: but also the folks who have operational responsibility for getting the Philippines
28:50
SPEAKER_00: off these shoals.
28:51
SPEAKER_00: So you imagine the guy who has to explain up the chain that basically the
28:54
SPEAKER_00: Philippines and Americans did this stuff under our watch.
28:58
SPEAKER_00: And so now you potentially,
29:00
SPEAKER_00: I think,
29:00
SPEAKER_00: have a dynamic in that system where you have either the same commander or
29:05
SPEAKER_00: commanders or a different one who knows what happened that has to basically show
29:08
SPEAKER_00: that they're overzealous or they're overcompensating so it doesn't happen again,
29:11
SPEAKER_00: which I think then potentially adds additional risks of an escalation.
29:16
SPEAKER_02: Yeah,
29:16
SPEAKER_02: well,
29:17
SPEAKER_02: and there was a Xinhua commentary last month that said China will never be deceived
29:22
SPEAKER_02: by the Philippines again.
29:24
SPEAKER_02: You could just as easily read that.
29:26
SPEAKER_00: That says a lot, right?
29:28
SPEAKER_02: The fact that they're saying basically they tricked us, they deceived us.
29:31
SPEAKER_00: And they probably feel like the United States tricked them and deceived them.
29:34
SPEAKER_00: Well, because I think the U.S.
29:35
SPEAKER_00: did, because I don't think the Philippines could have done it without U.S.
29:39
SPEAKER_00: help.
29:40
SPEAKER_02: But then they just move on to another shoal here.
29:43
SPEAKER_00: Right,
29:43
SPEAKER_00: but the other thing is,
29:44
SPEAKER_00: so for example,
29:45
SPEAKER_00: I think it was one of the CCTV accounts,
29:49
SPEAKER_00: this Yu Yan,
29:51
SPEAKER_00: Tan Tian,
29:53
SPEAKER_00: in their description of the latest incident at the subpoena show,
29:57
SPEAKER_00: they said that there was a U.S.
29:59
SPEAKER_00: spy plane watching.
30:00
SPEAKER_00: So, I mean, the U.S.
30:01
SPEAKER_00: knows everything that's going on.
30:03
SPEAKER_00: Right.
30:03
SPEAKER_00: Well,
30:04
SPEAKER_00: potentially even more so than the Philippines do in terms of the ability to see all
30:07
SPEAKER_00: the different assets the PRC is bringing to bear.
30:09
SPEAKER_00: So it really comes down to what is the U.S.
30:12
SPEAKER_00: going to do in this show and are the Philippines going to ask for help?
30:15
SPEAKER_00: And again,
30:15
SPEAKER_00: I just it is,
30:16
SPEAKER_00: though,
30:16
SPEAKER_00: to me,
30:17
SPEAKER_00: really quite striking that this escalation happened just like 48 hours after
30:21
SPEAKER_00: Sullivan left.
30:22
SPEAKER_00: It's not a sign that the meetings went well in my book.
30:25
SPEAKER_00: Right.
30:25
SPEAKER_02: I mean, we should be explicit about that.
30:27
SPEAKER_02: It reflects pretty poorly on the diplomatic efforts because literally within days,
30:33
SPEAKER_02: we're right back where we started in the South China Sea.
30:36
SPEAKER_00: Or whether or not it reflects poorly on the efforts,
30:38
SPEAKER_00: it just reflects on the reality of the situation,
30:40
SPEAKER_00: which is that you can talk,
30:42
SPEAKER_00: talk,
30:42
SPEAKER_00: talk,
30:42
SPEAKER_00: but the Chinese have a specific view about
30:45
SPEAKER_00: these shoals in the South China Sea, and they're not going to be dissuaded by diplomacy.
30:50
SPEAKER_02: Right.
30:51
SPEAKER_02: The limits of what those diplomatic efforts can achieve, I think, is made clear by the past week or so.
30:57
SPEAKER_02: And I'm not an expert in maritime military tactics, nor will I pretend to be one on this podcast.
31:04
SPEAKER_02: But I think the question here has been clear for a while, which is what sort of options does the U.S.
31:10
SPEAKER_02: have
31:11
SPEAKER_02: to deter this behavior without escalating it into a full-blown conflict?
31:16
SPEAKER_02: And then in parallel to that question, what sort of costs are incurred by the U.S.
31:23
SPEAKER_02: as far as credibility in both the eyes of allies like the Philippines and others in
31:28
SPEAKER_02: the region,
31:29
SPEAKER_02: and then also credibility in the eyes of the PRC itself if there's no meaningful U.S.
31:34
SPEAKER_02: response to these continued escalations, which are now a weekly occurrence at this point?
31:40
SPEAKER_00: But it's also a question of basic numbers.
31:43
SPEAKER_00: So,
31:43
SPEAKER_00: for example,
31:44
SPEAKER_00: from the Philippine Armed Forces today,
31:47
SPEAKER_00: they put out some data that said that there are now 203 Chinese vessels swarming
31:52
SPEAKER_00: various parts of the West Philippine Sea,
31:54
SPEAKER_00: which is the part of the South China Sea around the Philippines.
31:56
SPEAKER_00: That's what the Philippines call it.
31:58
SPEAKER_00: They say nine Chinese warships and 53 Chinese maritime militia ships around the Sabina Shoal.
32:05
SPEAKER_00: So those are just numbers of those numbers of ships that the U.S.
32:09
SPEAKER_00: I mean, I think we could send like two Coast Guard.
32:11
SPEAKER_00: I mean, they just the U.S.
32:12
SPEAKER_00: doesn't have the manpower.
32:14
SPEAKER_00: Yeah.
32:14
SPEAKER_00: The Philippines don't have the manpower.
32:16
SPEAKER_00: The Chinese have just overwhelming numbers on the water.
32:20
SPEAKER_02: Yeah.
32:21
SPEAKER_02: Well, and so where does that leave the U.S.
32:24
SPEAKER_02: as far as options continues to be an open question.
32:28
SPEAKER_00: Yeah.
32:28
SPEAKER_00: No.
32:28
SPEAKER_00: And I think that the Chinese keep pushing closer to forcing more decisions from the U.S.
32:34
SPEAKER_00: And to me, I mean, in some ways, I really do think it's right now more dangerous than Taiwan.
32:39
SPEAKER_00: And that goes back to,
32:41
SPEAKER_00: even though this happened 48 hours after,
32:43
SPEAKER_00: you know,
32:44
SPEAKER_00: Sullivan was in Beijing,
32:45
SPEAKER_00: again,
32:46
SPEAKER_00: it's still important that there are channels for the U.S.
32:49
SPEAKER_00: and the Chinese to talk.
32:50
SPEAKER_00: And it is important that the National Security Advisor meets with the Vice Chairman
32:54
SPEAKER_00: of the Central Military Commission,
32:55
SPEAKER_00: Zhang Yuxiao.
32:55
SPEAKER_00: You know,
32:56
SPEAKER_00: one of the outcomes from this meeting,
32:57
SPEAKER_00: again,
32:57
SPEAKER_00: you know,
32:59
SPEAKER_00: was supposed to be an outcome from the November Biden-Xi meeting last year.
33:02
SPEAKER_00: And now they've agreed nine plus months later that,
33:06
SPEAKER_00: although they haven't set a date,
33:07
SPEAKER_00: is there will be a call between the head of Indo-PACOM and the head of the Southern
33:12
SPEAKER_00: Theater Command.
33:13
SPEAKER_00: Again,
33:14
SPEAKER_00: that's great they're talking because if there's something,
33:16
SPEAKER_00: if there's any sort of something kinetic over one of these shoals,
33:20
SPEAKER_00: it'll be between those two.
33:23
SPEAKER_00: But it's like...
33:26
SPEAKER_00: that call isn't actually scheduled.
33:27
SPEAKER_00: They just agreed to have it, even though they agreed to have it last November.
33:29
SPEAKER_00: Maybe they agreed a bit.
33:30
SPEAKER_00: It was like a stronger handshake.
33:32
SPEAKER_00: I don't know, like an agreement.
33:35
SPEAKER_00: Right.
33:36
SPEAKER_00: But I mean, being a little bit facetious, I do think it's going to happen.
33:39
SPEAKER_00: And I think you can say that's better they're talking than they're not.
33:43
SPEAKER_00: But again,
33:44
SPEAKER_00: the Chinese,
33:44
SPEAKER_00: I think,
33:45
SPEAKER_00: they are very clear this is their territory,
33:47
SPEAKER_00: even though no one else agrees with that.
33:49
SPEAKER_00: And they're very clear that they, you know, might makes right.
33:52
SPEAKER_00: They have the might
33:54
SPEAKER_00: compared to every other country in the region in terms of, you know, they want to take those shoals.
33:58
SPEAKER_00: Ultimately, they can take them.
33:59
SPEAKER_00: And unless the U.S.
34:00
SPEAKER_00: gets involved, there's very little any other country can do.
34:03
SPEAKER_02: Right.
34:03
SPEAKER_02: Well, you talk about things getting kinetic.
34:05
SPEAKER_02: The U.S.
34:06
SPEAKER_02: and the Philippines have a mutual defense treaty in the event of an armed conflict.
34:11
SPEAKER_02: And I don't know, things are getting awful kinetic right now as things
34:16
SPEAKER_02: The Chinese Coast Guard actively tries to ram these ships and they're,
34:20
SPEAKER_02: again,
34:21
SPEAKER_02: giant holes in the sides of ships.
34:23
SPEAKER_02: And it will be interesting to watch over the next couple of months.
34:27
SPEAKER_02: This is where I do worry about this being an election year in the United States and
34:34
SPEAKER_02: the remainder of Biden's term.
34:36
SPEAKER_02: Like, I mean...
34:37
SPEAKER_02: Biden seems to have been at Rehoboth Beach for the last couple of weeks.
34:40
SPEAKER_02: I love Rehoboth Beach.
34:41
SPEAKER_02: I'm happy for him.
34:43
SPEAKER_02: But who knows how active anyone in the administration will want to be with the
34:48
SPEAKER_02: election hanging in the balance.
34:49
SPEAKER_02: But it just doesn't look like any of this is going away.
34:52
SPEAKER_02: And I've been taken aback by how much worse it seems to have gotten in a matter of weeks here.
34:57
SPEAKER_02: So...
34:58
SPEAKER_02: I don't know what the right answer is, but I hope people are asking the question, at least internally.
35:03
SPEAKER_02: We'll find out.
35:04
SPEAKER_00: But yeah,
35:05
SPEAKER_00: I do think,
35:06
SPEAKER_00: again,
35:06
SPEAKER_00: back to the earlier comment,
35:10
SPEAKER_00: if the Chinese are smart,
35:11
SPEAKER_00: they will not try and have some sort of a real escalatory crisis between now and
35:14
SPEAKER_00: the election,
35:15
SPEAKER_00: because that only will just make the race to be even tougher on China for both candidates.
35:21
SPEAKER_00: Because if there's some sort of real crisis,
35:23
SPEAKER_00: there will be no benefit to either candidate to be sort of seen as conciliatory or dovish.
35:30
SPEAKER_00: That's just not how the domestic politics work.
35:32
SPEAKER_02: Yeah,
35:33
SPEAKER_02: I think that is important to keep in mind in the midst of all this is that it's
35:37
SPEAKER_02: counterproductive for China to escalate in its own right.
35:40
SPEAKER_02: And they're…
35:41
SPEAKER_00: But they may not care.
35:42
SPEAKER_00: Again, for them, they see it as sovereignty.
35:46
SPEAKER_00: It's not clear how that gets factored into the decision-making process.
35:50
SPEAKER_00: I do think there was a piece,
35:51
SPEAKER_00: I think,
35:52
SPEAKER_00: in the Washington Post earlier this week that was really interesting that counted
35:54
SPEAKER_00: the number of ads in...
35:58
SPEAKER_00: I think below the presidential level, election ads in the U.S.
36:02
SPEAKER_00: that talk about China and sort of blame China for something or say that some
36:08
SPEAKER_00: candidates are weak on China.
36:10
SPEAKER_00: And actually,
36:10
SPEAKER_00: in this election cycle,
36:11
SPEAKER_00: it's disproportionately the Democratic candidates who are using China as a way to
36:16
SPEAKER_00: attack their opponents.
36:17
SPEAKER_00: Interesting.
36:18
SPEAKER_00: Yeah.
36:19
SPEAKER_00: So again, I think from the Chinese perspective,
36:23
SPEAKER_00: you know, the best thing to do is sort of keep calm before the election and not make things worse.
36:28
SPEAKER_00: But I don't think that that is,
36:29
SPEAKER_00: you know,
36:29
SPEAKER_00: that ultimately isn't their,
36:30
SPEAKER_00: you know,
36:31
SPEAKER_00: deciding factor in how they go forward and pushing forward what they believe are their,
36:35
SPEAKER_00: you know,
36:35
SPEAKER_00: correct policies.
36:36
SPEAKER_02: Well,
36:37
SPEAKER_02: it clearly has not informed their near-term behavior in the South China Sea,
36:41
SPEAKER_02: but perhaps that will evolve as the election gets closer here.
36:46
SPEAKER_02: I'm not hopeful.
36:47
SPEAKER_02: I'm not going to make the mistake of being optimistic on this point.
36:52
SPEAKER_02: But speaking of escalations, let's shift to news that came in last week from Bloomberg.
36:59
SPEAKER_02: The government of Prime Minister Dick Schoof will likely not renew certain ASML
37:05
SPEAKER_02: licenses to service and provide spare parts in China when they expire at the end of
37:10
SPEAKER_02: this year,
37:11
SPEAKER_02: according to people familiar with the matter.
37:13
SPEAKER_02: The decision is expected to cover the company's top of the line deep ultraviolet
37:18
SPEAKER_02: lithography or DUV machines,
37:20
SPEAKER_02: said the people asking not to be named,
37:23
SPEAKER_02: discussing sensitive government decisions.
37:26
SPEAKER_02: So this is the next phase of chip controls.
37:29
SPEAKER_02: We discussed this possibility over the summer.
37:32
SPEAKER_02: What do you think of the news?
37:33
SPEAKER_00: What do you make of it?
37:34
SPEAKER_00: So first of all, it's interesting.
37:36
SPEAKER_00: Speaking of, you know, the Chinese taking actions in the South China Sea just days after Sullivan left.
37:41
SPEAKER_00: Well, you know, this leak
37:43
SPEAKER_00: you know, Bloomberg ran the story while Solomon was there.
37:46
SPEAKER_00: So perhaps it's coincidence or perhaps not.
37:51
SPEAKER_00: I think that the devil will be in the details about exactly what ASML decides to honor or not honor.
37:58
SPEAKER_00: I mean,
37:59
SPEAKER_00: it is a sort of,
38:02
SPEAKER_00: I remember I just talked to someone who has some familiarity with this stuff and
38:06
SPEAKER_00: they just said,
38:07
SPEAKER_00: well,
38:07
SPEAKER_00: it really,
38:07
SPEAKER_00: it's going to come down to what the actual rules are and what ASML agrees to.
38:12
SPEAKER_02: Okay.
38:13
SPEAKER_02: In terms of what they're willing to sell or what they're willing to maintain?
38:16
SPEAKER_00: What they're willing to maintain, what they're willing to service.
38:18
SPEAKER_00: I mean, it's one of those things where, you know, it's really pretty problematic.
38:23
SPEAKER_00: You know,
38:23
SPEAKER_00: these science firms have paid a bunch of money,
38:25
SPEAKER_00: not only for the equipment,
38:26
SPEAKER_00: but for the service and spare part and maintenance.
38:29
SPEAKER_00: And then, you know, ASML has to break these contracts.
38:31
SPEAKER_00: Well, ASML, what do they have to give money back?
38:33
SPEAKER_00: I was going to say, it seems like there could be liability.
38:37
SPEAKER_00: Yeah.
38:37
SPEAKER_00: It's pretty messy.
38:39
SPEAKER_00: And then, of course, the...
38:41
SPEAKER_00: So we'll see.
38:42
SPEAKER_00: I mean,
38:42
SPEAKER_00: I think,
38:43
SPEAKER_00: you know,
38:43
SPEAKER_00: what's interesting is this new Dutch prime minister,
38:45
SPEAKER_00: he comes out of the security services or he has a background in the security services.
38:50
SPEAKER_00: I think he's got a more of a hawkish view towards or more of a sort of stronger
38:56
SPEAKER_00: sense of a national security view towards China and sort of has seen what the
38:59
SPEAKER_00: Chinese have done in Europe and in the Netherlands specifically.
39:04
SPEAKER_00: And so I think he's willing to take a bit of a tougher line,
39:06
SPEAKER_00: even though ASML is really the Netherlands' most important company.
39:10
SPEAKER_02: Yeah,
39:10
SPEAKER_02: he said the Netherlands has to be very careful in talks with Beijing in an
39:15
SPEAKER_02: interview with Bloomberg earlier in August.
39:18
SPEAKER_02: Yeah,
39:19
SPEAKER_02: I mean,
39:20
SPEAKER_02: the Bloomberg story,
39:21
SPEAKER_02: it had some helpful clarifying notes where they wrote machine maintenance is
39:25
SPEAKER_02: indispensable in the daily operations of a chip making plant.
39:29
SPEAKER_02: It is so critical that equipment suppliers like ASML and Applied Materials send
39:34
SPEAKER_02: their own engineers to be stationed at the fabs operated by major clients.
39:38
SPEAKER_02: Without ASML's DUV gear,
39:41
SPEAKER_02: it will be increasingly difficult for Chinese technology champion Huawei and its partner,
39:46
SPEAKER_02: semiconductor manufacturing international corp,
39:49
SPEAKER_02: SMIC,
39:49
SPEAKER_02: to make breakthroughs in their current capability,
39:52
SPEAKER_02: which lags two generations behind industry leader
39:55
SPEAKER_02: Taiwan Semiconductor Manufacturing Co.
39:58
SPEAKER_02: And ASML does a huge amount of business with China.
40:04
SPEAKER_02: We went over it this summer.
40:05
SPEAKER_02: It's nearly 50% of their revenue.
40:08
SPEAKER_02: And Finbar Birmingham,
40:10
SPEAKER_02: a correspondent for the South China Morning Post,
40:12
SPEAKER_02: said that in July,
40:14
SPEAKER_02: we saw a whopping 339% rise in Chinese imports of chip making equipment from the Netherlands.
40:20
SPEAKER_02: Yeah.
40:21
SPEAKER_00: Why wouldn't you buy whatever you could buy if you're on the Chinese side?
40:24
SPEAKER_00: Because you just don't know how much worse...
40:26
SPEAKER_00: You assume things are going to get...
40:27
SPEAKER_00: Controls are going to get tougher,
40:29
SPEAKER_00: and so you might as well start stockpiling.
40:32
SPEAKER_00: I mean, we've talked about this before.
40:34
SPEAKER_00: The U.S.
40:35
SPEAKER_00: approach has slowed China down on some areas, but it's been so far so full of holes that the U.S.
40:43
SPEAKER_00: very much is running the, I think, very significant risk of actually...
40:48
SPEAKER_00: over the next five, 10 years, having this turn out to be a positive policy for the PRC.
40:53
SPEAKER_00: Because it focuses the PRC.
40:55
SPEAKER_00: It focuses them.
40:56
SPEAKER_00: It focuses them.
40:57
SPEAKER_00: Yeah, it's been a very...
41:01
SPEAKER_00: And so we'll see, like, again, we should expect a new round of these controls around October 7th.
41:07
SPEAKER_00: You know,
41:07
SPEAKER_00: they didn't do anything for the first anniversary of Commerce Secretary Raimondo endorsing,
41:12
SPEAKER_00: quote unquote,
41:13
SPEAKER_00: endorsing the Huawei phone that was introduced on our visit last year.
41:18
SPEAKER_00: But, you know, Huawei has, I mean, it's been reported in the press.
41:21
SPEAKER_00: Huawei has built up this network of fabs.
41:25
SPEAKER_00: The U.S.
41:25
SPEAKER_00: government knows all about them.
41:26
SPEAKER_00: They're fully equipped and they haven't done anything about it over the last 18 months.
41:30
SPEAKER_00: And so because of lobbyist pressure,
41:33
SPEAKER_00: foreign governments are resisting for their own reasons,
41:36
SPEAKER_00: South Korea,
41:36
SPEAKER_00: Japan,
41:37
SPEAKER_00: the Netherlands.
41:38
SPEAKER_00: And Huawei is now this massive national champion,
41:42
SPEAKER_00: which is effectively sort of leading the entire process inside China to break free
41:48
SPEAKER_00: of foreign,
41:49
SPEAKER_00: especially U.S.
41:50
SPEAKER_00: control over the entire semiconductor stack.
41:52
SPEAKER_00: And again, it doesn't mean that it's going to happen tomorrow, but
41:55
SPEAKER_00: that they are focused in a way that they never would have gotten focused,
41:59
SPEAKER_00: had things that just sort of kept going the way they were going three years ago or
42:01
SPEAKER_00: four years ago.
42:02
SPEAKER_02: Yeah,
42:03
SPEAKER_02: I would say the PRC has been incredibly motivated over the last couple of years and
42:08
SPEAKER_02: also continues to be incredibly reliant on the DUV machines from ASML in terms of
42:14
SPEAKER_02: their chip ambitions.
42:16
SPEAKER_02: And if all those machines suddenly stop working over the next year or two...
42:21
SPEAKER_00: No, it would be a problem.
42:22
SPEAKER_00: That's a dent.
42:22
SPEAKER_00: Yeah.
42:23
SPEAKER_00: And it's clearly what the US has done.
42:24
SPEAKER_00: It's clearly slowed the Chinese down.
42:26
SPEAKER_00: The other problem,
42:26
SPEAKER_00: of course,
42:27
SPEAKER_00: is that,
42:28
SPEAKER_00: for example,
42:29
SPEAKER_00: on the sort of the NVIDIA chips for the sort of cutting edge chips for AI,
42:33
SPEAKER_00: the Chinese still have some access to it through black market,
42:37
SPEAKER_00: through smuggling,
42:38
SPEAKER_00: through cloud computing.
42:39
SPEAKER_00: I mean, there's this entire loophole around access to cloud compute.
42:44
SPEAKER_00: where you can run your models on the most advanced NVIDIA chips on offshore cloud computing platforms.
42:51
SPEAKER_00: The US government knows about it,
42:52
SPEAKER_00: but because of various industry pressures,
42:54
SPEAKER_00: they won't close the loophole.
42:55
SPEAKER_00: Right.
42:56
SPEAKER_02: It seems like it would be a pretty easy loophole to close.
43:00
SPEAKER_02: That's a phone call and a clear order.
43:03
SPEAKER_00: It would be painful to the companies that make money from those loopholes.
43:08
SPEAKER_02: Yes, that's true.
43:10
SPEAKER_02: But in terms of effective policy, there are clear steps that the US government can take.
43:14
SPEAKER_02: And it's just a question of when.
43:16
SPEAKER_00: Again,
43:16
SPEAKER_00: back to my point,
43:18
SPEAKER_00: this is a very,
43:18
SPEAKER_00: very risky approach the US government has taken by going after something that is so
43:22
SPEAKER_00: core to the Chinese economy,
43:24
SPEAKER_00: but doing it in a way that is just having too many loopholes.
43:28
SPEAKER_00: Yep.
43:28
SPEAKER_00: Swiss cheese approach.
43:30
SPEAKER_00: But again, I don't know that those will ever all fully be closed because there is concern that
43:36
SPEAKER_00: You know,
43:36
SPEAKER_00: and then Chinese will say this and there is concern and you know,
43:39
SPEAKER_00: it's,
43:39
SPEAKER_00: it's stifling PRC development.
43:41
SPEAKER_00: It's hurting individuals.
43:43
SPEAKER_00: Yeah.
43:43
SPEAKER_00: It's hurting their common people, you know?
43:48
SPEAKER_00: OK,
43:48
SPEAKER_00: well,
43:49
SPEAKER_00: I mean,
43:49
SPEAKER_00: you don't have to be modeling the next generation nuclear weapons with these chips,
43:53
SPEAKER_00: right?
43:53
SPEAKER_00: You know, why are you building multiple carrier groups and hypersonics using American technology?
43:57
SPEAKER_00: I mean, you can't have it both ways.
44:00
SPEAKER_00: Well,
44:01
SPEAKER_02: and then the other news that broke on Monday was that China has threatened severe
44:05
SPEAKER_02: economic retaliation against Japan if Tokyo further restricts sales and servicing
44:11
SPEAKER_02: of chip making equipment to Chinese firms.
44:14
SPEAKER_02: complicated US-led efforts to cut the world's second largest economy off from advanced technology.
44:19
SPEAKER_02: So this was the other domino that we mentioned over the summer.
44:23
SPEAKER_00: Yeah, it's not just... And I think we might have talked about it on the podcast.
44:27
SPEAKER_00: I know I had a newsletter a couple weeks ago.
44:29
SPEAKER_00: I mean, it's really Toyota, very specifically...
44:32
SPEAKER_00: that Toyota is very concerned that the Chinese will cut off access to certain critical minerals.
44:37
SPEAKER_00: And so Toyota has told the Chinese government that they, you know... Please don't do this.
44:42
SPEAKER_00: Yes.
44:42
SPEAKER_00: Well, I think they might have left out please.
44:45
SPEAKER_00: And so, you know, Toyota is a very important company.
44:49
SPEAKER_00: And so the Japanese are not on board and the U.S.
44:51
SPEAKER_00: does not seem to be willing to sort of escalate it and basically tell the Japanese
44:55
SPEAKER_00: we're going to do it anyway and you're going to have to abide by it.
44:58
SPEAKER_00: And so...
44:59
SPEAKER_00: You know,
44:59
SPEAKER_00: it's frustrating because 2010,
45:01
SPEAKER_00: the Chinese,
45:03
SPEAKER_00: you know,
45:04
SPEAKER_00: they didn't say they banned exports of certain rare earths to Japan,
45:07
SPEAKER_00: but all of a sudden nothing was getting approved through customs.
45:10
SPEAKER_00: And it was obvious what the Chinese were doing.
45:13
SPEAKER_00: And so 14 years later, I mean, everyone knows that- You've had time to diversify.
45:18
SPEAKER_00: Everyone knows that there is like critical vulnerabilities to all sorts of rare earths
45:26
SPEAKER_00: from the PRC and yet no one has really taken it seriously right yeah Biden fits and
45:33
SPEAKER_00: starts and now there's more efforts now but it's like okay 14 years later Japan is
45:37
SPEAKER_00: still unwilling to act because China has this leverage over them I mean shame on
45:42
SPEAKER_00: the shame on the Japanese side shame on the American side that they're still there
45:45
SPEAKER_02: It's a really good point because I saw this news and I thought to myself,
45:50
SPEAKER_02: all right,
45:51
SPEAKER_02: this just heightens the importance of diversifying rare earth supply chains over
45:56
SPEAKER_02: the next 10 years.
45:57
SPEAKER_00: But I forgot about the Obama administration incident.
45:58
SPEAKER_00: Yeah, no, it's really true.
45:59
SPEAKER_00: And
46:07
SPEAKER_02: I would say it remains to be seen whether ASML will comply with everything and
46:14
SPEAKER_02: Toyota could get squeezed here.
46:17
SPEAKER_02: But it does... The stakes for all these countries are very, very real.
46:23
SPEAKER_02: I mean, you're talking about national champions for both the Netherlands and Japan.
46:28
SPEAKER_02: And so...
46:29
SPEAKER_02: If the U.S.
46:29
SPEAKER_02: is able to successfully get those countries on board and force these companies to
46:35
SPEAKER_02: take a haircut,
46:36
SPEAKER_02: it would be a real accomplishment.
46:38
SPEAKER_02: And we'll see whether it happens over the next couple of months here,
46:41
SPEAKER_02: because I don't think this is going to be the last update on the chip controls that
46:46
SPEAKER_02: we have on the podcast.
46:48
SPEAKER_02: No, I don't think so either.
46:50
SPEAKER_02: To keep it moving,
46:51
SPEAKER_02: Xi Jinping at the National Education Conference in 2018 in a speech that was titled
46:57
SPEAKER_02: Cultivating Socialist Builders and Successors with Comprehensive Development in Morality,
47:03
SPEAKER_02: Intelligence,
47:04
SPEAKER_02: Physical Fitness,
47:05
SPEAKER_02: Aesthetics and Labor.
47:08
SPEAKER_02: He says, "...our education must never cultivate destroyers and gravediggers of socialism.
47:14
SPEAKER_02: We must never cultivate people who have Chinese faces but not Chinese hearts,
47:19
SPEAKER_02: lack Chinese sentiment,
47:20
SPEAKER_02: and are devoid of Chinese flavor.
47:23
SPEAKER_02: Various hostile forces have never stopped implementing strategies of westernization
47:27
SPEAKER_02: and division against our country."
47:29
SPEAKER_02: never stopped subverting and sabotaging the leadership of the Communist Party of
47:33
SPEAKER_02: China and the socialist system of our country,
47:36
SPEAKER_02: and have always attempted to plan color revolutions in our country.
47:41
SPEAKER_02: One of their main efforts is to compete for our youth.
47:44
SPEAKER_02: Comrade Mao Zedong once said,
47:46
SPEAKER_02: imperialists say that there is no hope for our first and second generations,
47:50
SPEAKER_02: but what about the third and fourth generations?
47:52
SPEAKER_02: There is hope.
47:54
SPEAKER_02: Is what the imperialists say true?
47:56
SPEAKER_02: I hope it's not, but it might be.
47:59
SPEAKER_02: Now,
47:59
SPEAKER_02: she continues,
48:00
SPEAKER_02: it seems that college students are roughly within the scope of the third and fourth generations,
48:05
SPEAKER_02: and there will be fifth and sixth and even dozens of generations in the future.
48:10
SPEAKER_02: The struggle for the youth is long term and severe, and we cannot afford to lose.
48:15
SPEAKER_02: We must be vigilant.
48:18
SPEAKER_02: So, Bill, this particular speech was made public in the latest issue of Chusha.
48:25
SPEAKER_02: Chusha.
48:26
SPEAKER_02: Yeah.
48:26
SPEAKER_00: Chusha.
48:27
SPEAKER_02: Yeah.
48:27
SPEAKER_02: I knew I was going to mispronounce that.
48:29
SPEAKER_02: I apologize.
48:31
SPEAKER_02: Do you read any significance into the decision to publicize this message now?
48:36
SPEAKER_00: I mean, it was the weekend before school starts.
48:39
SPEAKER_00: It's twice a month.
48:41
SPEAKER_00: It is now in the Xi era.
48:42
SPEAKER_00: It's basically every lead essay is effectively a speech or a series of quotes from
48:47
SPEAKER_00: Xi on a specific theme.
48:49
SPEAKER_00: And usually it's a speech from,
48:51
SPEAKER_00: sometimes from a speech a few months ago,
48:53
SPEAKER_00: or in this case,
48:54
SPEAKER_00: it was a speech from six years ago.
48:56
SPEAKER_00: Cheery back to school message there.
48:58
SPEAKER_00: Yeah, exactly.
48:59
SPEAKER_00: Back to school.
49:00
SPEAKER_00: Instead of your back to school target sale, here's your back to school socialist successor pep talk.
49:06
SPEAKER_00: I mean,
49:06
SPEAKER_00: yes,
49:07
SPEAKER_00: I would say that the messaging in there,
49:09
SPEAKER_00: it's stark and it's important to read it,
49:10
SPEAKER_00: but it's not at all surprising.
49:12
SPEAKER_00: It's very much fits with
49:14
SPEAKER_00: you know,
49:14
SPEAKER_00: everything,
49:15
SPEAKER_00: certainly everything we've seen in the,
49:16
SPEAKER_00: since in the six years since,
49:18
SPEAKER_00: if not the years before as well.
49:21
SPEAKER_00: I also think that he's not necessarily wrong.
49:24
SPEAKER_00: And when he quotes Mao, when he talks about the third generation, that also ties into the U S views.
49:28
SPEAKER_00: I think it was John Foster Dulles and sort of peaceful evolution and
49:32
SPEAKER_00: And how eventually the communism would fall because by the third generation,
49:37
SPEAKER_00: I'm totally paraphrasing here,
49:39
SPEAKER_00: but people would want something else.
49:41
SPEAKER_00: They would be susceptible to other ideas.
49:44
SPEAKER_00: And so,
49:45
SPEAKER_00: again,
49:45
SPEAKER_00: I would also look at this and say,
49:48
SPEAKER_00: gee,
49:48
SPEAKER_00: that's one of their lessons from the fall of the Soviet Union.
49:50
SPEAKER_00: They've done a lot of work on what to learn from the fall of the USSR and how not to fall.
49:55
SPEAKER_00: And this is certainly one of them.
49:57
SPEAKER_00: And so,
49:58
SPEAKER_00: you know,
49:58
SPEAKER_00: you see it with the way that the textbook revisions political thought classes in
50:05
SPEAKER_00: colleges and universities,
50:06
SPEAKER_00: et cetera.
50:06
SPEAKER_00: So, no, it's just it's just it's just the way things are now.
50:09
SPEAKER_00: And it's unfortunate, but it's just it's it's a good it's a good reminder of the reality of sort of.
50:17
SPEAKER_00: The education,
50:18
SPEAKER_00: the state of education in China and how and how she sees the Western really see
50:23
SPEAKER_00: what what really sees sees China is in a real ideological struggle with the West.
50:28
SPEAKER_00: Yeah.
50:29
SPEAKER_00: And it's doing everything they can to fight off or push off any sort of
50:33
SPEAKER_00: infiltration from from those kind of corrosive Western ideas.
50:37
SPEAKER_02: Right.
50:38
SPEAKER_02: I mean, nothing in there was particularly surprising.
50:40
SPEAKER_02: It's consistent with a lot of the messaging from the state over the last several years.
50:45
SPEAKER_02: Ramon says Bill and Andrew, a lot of time is spent analyzing the content of she's speeches.
50:51
SPEAKER_02: What I want to know is who is writing them.
50:53
SPEAKER_02: Are they all written by she himself?
50:55
SPEAKER_02: Are there professional speech writers in China, like in Western traditions?
50:59
SPEAKER_02: If so, isn't she himself vulnerable to crafty writer thought?
51:04
SPEAKER_02: Or perhaps is there some official party apparatus that is responsible for speeches?
51:09
SPEAKER_02: Anything that is officially put out circles back in as an input to the whole system.
51:14
SPEAKER_02: It seems possible to slowly poison the thinking of the entire party this way.
51:18
SPEAKER_02: Do you have any answer for Ramon there?
51:21
SPEAKER_00: That's an interesting question.
51:22
SPEAKER_00: I mean,
51:23
SPEAKER_00: I think that there's,
51:26
SPEAKER_00: you know,
51:26
SPEAKER_00: you've got his general office,
51:27
SPEAKER_00: and right now the head of that is Tai Chi.
51:29
SPEAKER_00: I think when she wrote this, I think it was Dingxue Xiao, but I could be wrong.
51:33
SPEAKER_00: I mean,
51:33
SPEAKER_00: there are folks who control the flow of this kind of sort of paper to Xi,
51:38
SPEAKER_00: as well as also his daily activities.
51:40
SPEAKER_00: You'd probably,
51:42
SPEAKER_00: you know,
51:43
SPEAKER_00: these kind of speeches,
51:44
SPEAKER_00: they may get input from the Central Policy Research Office,
51:47
SPEAKER_00: who,
51:47
SPEAKER_00: you know,
51:47
SPEAKER_00: again,
51:48
SPEAKER_00: are staffed by,
51:48
SPEAKER_00: you know,
51:49
SPEAKER_00: handpicked by the general secretary.
51:52
SPEAKER_00: unlikely they will be putting things in there that he himself didn't believe in or agree with.
51:57
SPEAKER_02: So we think he's reviewing all of these before he delivers the speeches.
52:01
SPEAKER_02: There's just a lot of Xi Jinping thought put out into the world.
52:04
SPEAKER_02: So I,
52:05
SPEAKER_02: I saw this email and I was like,
52:07
SPEAKER_02: yeah,
52:07
SPEAKER_02: I wonder,
52:07
SPEAKER_02: I mean,
52:08
SPEAKER_02: he's pretty prodigious as a writer and speaker.
52:11
SPEAKER_02: Um,
52:12
SPEAKER_02: So I'm sure there's a body that's helping churn all this great material out.
52:18
SPEAKER_02: How how are she speeches released?
52:21
SPEAKER_02: Because it seems like there's sort of a secretive element here where they're dripped out over time.
52:27
SPEAKER_00: Well, rarely.
52:28
SPEAKER_00: I mean, rarely.
52:29
SPEAKER_00: So, for example, you know, you'll have like a big like.
52:32
SPEAKER_00: Maybe on National Day, she will give a speech.
52:36
SPEAKER_00: She'll give it live and everyone will see it.
52:38
SPEAKER_00: Oftentimes,
52:39
SPEAKER_00: there'll be a propaganda package report of a speech she gave where you'll get sort
52:45
SPEAKER_00: of a text that's an excerpt from the speech.
52:48
SPEAKER_00: You may... Oftentimes, you'll see she's speaking, but not necessarily hear him.
52:52
SPEAKER_00: Or if you hear him speak, it'll only be part of the speech.
52:55
SPEAKER_00: So usually, you'll never get the full speech unless it's live or close to live.
52:59
SPEAKER_00: And then over time...
53:01
SPEAKER_00: Some speeches are secret.
53:02
SPEAKER_00: They never get released.
53:03
SPEAKER_00: You never even hear about them.
53:04
SPEAKER_00: Sometimes when they're released,
53:05
SPEAKER_00: like a book of she's thoughts on some topic or she's discourses on some topic,
53:11
SPEAKER_00: there'll be a bunch of new speeches that have never been released where you'll get
53:15
SPEAKER_00: something he said five years ago.
53:18
SPEAKER_00: I have not gone back.
53:19
SPEAKER_00: I've not done the work to go back and see how much of what's in this
53:24
SPEAKER_00: This Chosher essay that's his speech from 2018 at the National Education Conference.
53:29
SPEAKER_00: Is it everything that was released at the time or is there new stuff in here?
53:33
SPEAKER_00: I just I've been a little bit behind.
53:35
SPEAKER_00: But it is you have to be careful.
53:37
SPEAKER_00: And like when you see stuff in sort of People's Daily or CCTV,
53:41
SPEAKER_00: you have to be careful to assume that it's the actual full content of the speech,
53:44
SPEAKER_00: because oftentimes there are bits that don't get released either at the time or ever.
53:49
SPEAKER_00: Right.
53:49
SPEAKER_02: Well, so how much of a departure is that cadence and strategy from his predecessors as general secretary?
53:57
SPEAKER_02: Like, is this unique to Xi Jinping?
54:00
SPEAKER_00: No, I think it's pretty, pretty standard.
54:02
SPEAKER_00: I mean,
54:03
SPEAKER_00: what's what's unique is that Xi is now every lead essay is either a speech or
54:08
SPEAKER_00: quotes from Xi,
54:09
SPEAKER_00: which I think is a relatively new thing.
54:12
SPEAKER_00: It wasn't that way under Hu Jintao or Jiang Zemin, I don't believe.
54:17
SPEAKER_02: But they would have speeches that were not made public until the party decides.
54:22
SPEAKER_00: There are all sorts of secret speeches.
54:24
SPEAKER_00: They all have secret speeches.
54:25
SPEAKER_00: That's just sort of what they do.
54:27
SPEAKER_00: And so, again, there's stuff that you won't even know.
54:32
SPEAKER_00: And then maybe there'll be someone who will refer something to some speech that you never even heard of.
54:36
SPEAKER_00: And then you'll know that there was some speech on some topic,
54:39
SPEAKER_00: but you never see the full text or you'll never see it in the public domain.
54:43
SPEAKER_00: Potentially, intelligence services get access to it.
54:45
SPEAKER_00: But it'll never show up in the public domain.
54:47
SPEAKER_00: You also have things like... So usually there's a monthly polypure meeting that's publicized.
54:53
SPEAKER_00: And then that day or the day after, then there will be a polypure study session.
54:59
SPEAKER_00: And it doesn't happen every month, but it happens most months.
55:03
SPEAKER_00: But this is the 20th Party Congress, the polypure, right?
55:08
SPEAKER_00: So far, they have had...
55:11
SPEAKER_00: 16 study sessions.
55:14
SPEAKER_00: What's interesting is there's actually a page on People's Daily that you can see
55:19
SPEAKER_00: the list of the study sessions by Party Congress,
55:22
SPEAKER_00: Politburo,
55:22
SPEAKER_00: and the topics and the dates.
55:24
SPEAKER_00: And so, for example, for this 20th Party Congress, Politburo, there have been 16 study sessions.
55:31
SPEAKER_00: The table that lists out the study sessions lists...
55:35
SPEAKER_00: Basically, there's a 13th study session that is skipped over.
55:39
SPEAKER_00: So it goes from the 12th study session to the 14th.
55:43
SPEAKER_00: So what was discussed at the 13th study session?
55:46
SPEAKER_00: Right, right.
55:47
SPEAKER_00: And so far, and it should have happened probably in April, right?
55:52
SPEAKER_00: And clearly there was a study session because they won't go from 12 to 14 and they're not superstitious.
55:59
SPEAKER_00: I was going to say, I'm not sure whether that superstition exists in the Chinese tradition.
56:05
SPEAKER_00: So that's just,
56:06
SPEAKER_00: I mean,
56:06
SPEAKER_00: that's just,
56:06
SPEAKER_00: it's not quite a speech,
56:07
SPEAKER_00: but it's just one example of like,
56:10
SPEAKER_00: okay,
56:11
SPEAKER_00: you know,
56:11
SPEAKER_00: there are these things that happen that sometimes they just don't tell you.
56:15
SPEAKER_02: Right.
56:16
SPEAKER_02: Well,
56:16
SPEAKER_02: and I mean,
56:17
SPEAKER_02: do you think Western policymakers look at the cadence of study session releases or
56:23
SPEAKER_02: she speeches?
56:25
SPEAKER_02: Do you think they look at them as real predictors of policy or is some of this
56:29
SPEAKER_02: treated as political theater or are they mostly overlooked by Western policymakers?
56:36
SPEAKER_00: I think the folks, the analysts who really focus on this stuff, they take them seriously.
56:40
SPEAKER_00: I mean, you know, again, the challenge, of course, is.
56:45
SPEAKER_00: You know,
56:45
SPEAKER_00: the difference between the folks who get appointed positions and the folks who sort
56:48
SPEAKER_00: of work on this for most of their careers.
56:51
SPEAKER_02: Yeah.
56:51
SPEAKER_02: I mean,
56:52
SPEAKER_02: it's been interesting to me hosting this podcast with you and reading cynicism just
56:58
SPEAKER_02: because it seems like for all the speculation about what the CCP wants or believes
57:04
SPEAKER_02: about the world,
57:06
SPEAKER_02: there are periodic reminders that we get from Xi saying,
57:09
SPEAKER_02: that make the CCP worldview pretty explicit.
57:13
SPEAKER_02: And for whatever reason,
57:14
SPEAKER_02: a lot of people in these policy debates continue to act like it's a big parlor game
57:19
SPEAKER_02: trying to guess at Xi's real intentions and how China views the West.
57:24
SPEAKER_02: And maybe they're just not actually reading the speeches,
57:27
SPEAKER_02: but the speeches are always pretty striking to me.
57:30
SPEAKER_02: Maybe it's because they're in Mandarin and not released in English.
57:33
SPEAKER_02: That could be part of it, too.
57:34
SPEAKER_02: But
57:35
SPEAKER_00: Well, I am reading, and it's not yet released yet.
57:37
SPEAKER_00: I have an advanced copy of Kevin Rudd's latest book called On Xi Jinping.
57:45
SPEAKER_00: And it is...
57:46
SPEAKER_00: I think it comes out...
57:47
SPEAKER_00: I think it's early next year,
57:49
SPEAKER_00: maybe the beginning of...
57:50
SPEAKER_00: Or later this fall,
57:53
SPEAKER_00: where he did it as his first...
57:55
SPEAKER_00: I mean,
57:56
SPEAKER_00: he's pretty prolific.
57:56
SPEAKER_00: He just got a PhD at Oxford.
57:58
SPEAKER_00: And...
57:59
SPEAKER_00: it's a very, it'll be very controversial.
58:02
SPEAKER_00: It will upset a lot of people,
58:04
SPEAKER_00: probably a lot of scholars because he,
58:06
SPEAKER_00: but so far I'm finding it very useful and very good.
58:09
SPEAKER_00: And he, he really takes a look at what she and the party say and why that matters.
58:16
SPEAKER_01: Yeah.
58:17
SPEAKER_00: Yeah.
58:18
SPEAKER_00: And what the world view is.
58:19
SPEAKER_00: And it's, it's, it's really important.
58:21
SPEAKER_02: Yeah.
58:22
SPEAKER_02: Um,
58:23
SPEAKER_02: well,
58:23
SPEAKER_02: good question from Ramon because it gave me an excuse to ask you some of those
58:27
SPEAKER_02: questions that I'd been wondering.
58:29
SPEAKER_02: Um,
58:29
SPEAKER_02: Final note here, Black Myth Wukong.
58:33
SPEAKER_02: CNBC says,
58:34
SPEAKER_02: China's first attempt at a top-tier video game has smashed world records,
58:40
SPEAKER_02: bolstering the industry's global ambitions just a few years after Beijing's gaming crackdown.
58:45
SPEAKER_02: Black Myth Wukong,
58:47
SPEAKER_02: an action game set in mythological China,
58:50
SPEAKER_02: sold more than 10 million units three days after its launch on August 20th.
58:54
SPEAKER_02: Ten days later, the title still ranked second by revenue in the U.S.,
58:58
SPEAKER_02: and number one globally.
59:00
SPEAKER_02: Bill, quickly, can you catch me up on the context surrounding this game?
59:05
SPEAKER_02: I saw there was some controversy about it on Twitter.
59:09
SPEAKER_02: There was an angry back and forth I saw.
59:11
SPEAKER_00: Yeah, that's noise.
59:13
SPEAKER_00: So what's really interesting,
59:14
SPEAKER_00: and my full disclosure,
59:15
SPEAKER_00: when I first moved back to China in 2004,
59:17
SPEAKER_00: 2005,
59:17
SPEAKER_00: it was to do an online MMORPG startup.
59:19
SPEAKER_00: We were trying to do like a...
59:28
SPEAKER_00: Anyway, it was a disaster, but it got me back to China.
59:31
SPEAKER_00: It cost me a lot of money, a lot of time.
59:32
SPEAKER_00: And the rest is history.
59:33
SPEAKER_00: Here we are.
59:34
SPEAKER_00: Spent several years in the game industry.
59:37
SPEAKER_00: And we failed because of what we did, not because of... Startups are hard anywhere.
59:44
SPEAKER_00: They're especially hard in China.
59:45
SPEAKER_00: But on the game side... So the gaming industry in China is fascinating.
59:48
SPEAKER_00: It is a...
59:49
SPEAKER_00: I think it's by revenue now the biggest in the world.
59:52
SPEAKER_00: It's primarily mobile and online games.
59:55
SPEAKER_00: And you have companies like Tencent,
59:56
SPEAKER_00: which I think is the biggest game company in the world,
59:58
SPEAKER_00: or maybe the second biggest now after Microsoft Activision.
1:00:02
SPEAKER_00: The console games or the AAA games where you play them on an Xbox or a PlayStation,
1:00:09
SPEAKER_00: that market has been small in China.
1:00:11
SPEAKER_00: It was very small for a long time because of piracy.
1:00:13
SPEAKER_00: I will admit to once having an Xbox with a special chip that you could play all the crack games.
1:00:18
SPEAKER_00: Oh, boy.
1:00:19
SPEAKER_00: It's okay.
1:00:20
SPEAKER_02: The statute of limitations has run on that one.
1:00:23
SPEAKER_00: It's a long time ago.
1:00:24
SPEAKER_00: But so for a long time,
1:00:27
SPEAKER_00: there was no market in China for these console games,
1:00:30
SPEAKER_00: like these really,
1:00:31
SPEAKER_00: really heavily produced console games.
1:00:32
SPEAKER_00: And instead, the business model went to these online games.
1:00:35
SPEAKER_00: A lot of them are these multiplayer online role-playing games,
1:00:38
SPEAKER_00: but then there are these other mobile games.
1:00:41
SPEAKER_00: And the games are free, but then you buy stuff.
1:00:43
SPEAKER_00: You basically do things in the game.
1:00:45
SPEAKER_00: You keep generating revenue.
1:00:45
SPEAKER_00: These games are like...
1:00:47
SPEAKER_00: generate massive amounts of revenue.
1:00:50
SPEAKER_00: In the Chinese game industry,
1:00:51
SPEAKER_00: though,
1:00:52
SPEAKER_00: for many years,
1:00:53
SPEAKER_00: there have been studios that focus on outsourced work for AAA titles by Japanese studios,
1:01:00
SPEAKER_00: European studios,
1:01:01
SPEAKER_00: American studios.
1:01:01
SPEAKER_00: Well, they will go and have the Chinese teams do all the art.
1:01:04
SPEAKER_00: There's incredibly talented artists in China who can do all the game art,
1:01:08
SPEAKER_00: the character settings,
1:01:10
SPEAKER_00: everything.
1:01:10
SPEAKER_00: They can really do a good job.
1:01:13
SPEAKER_00: But the actual devoting the tens of millions of dollars needed to trying to create
1:01:19
SPEAKER_00: a console game in China has,
1:01:21
SPEAKER_00: for a long time,
1:01:22
SPEAKER_00: no one wanted to touch it because of the dynamics of the Chinese market and the
1:01:26
SPEAKER_00: piracy issues,
1:01:27
SPEAKER_00: as well as the risks are so high because it's such a hit-driven business.
1:01:33
SPEAKER_00: So these guys, I think some or all of them came out of Tencent.
1:01:36
SPEAKER_00: they took this classic Chinese story,
1:01:38
SPEAKER_00: you know,
1:01:39
SPEAKER_00: the,
1:01:39
SPEAKER_00: the,
1:01:39
SPEAKER_00: the,
1:01:40
SPEAKER_00: you know,
1:01:40
SPEAKER_00: um,
1:01:41
SPEAKER_00: so we'll call journey to the West.
1:01:43
SPEAKER_00: Everybody in China knows it, right.
1:01:45
SPEAKER_00: They did an amazing job with the art.
1:01:47
SPEAKER_00: They used the top of the line.
1:01:49
SPEAKER_00: Uh, I think they started with the unreal four engine, then they moved the unreal five engine.
1:01:52
SPEAKER_00: So they have the top of the line sort of graphics engine.
1:01:56
SPEAKER_00: And they did,
1:01:56
SPEAKER_00: you know,
1:01:57
SPEAKER_00: they went around China and they built in like realistic scans of all,
1:02:01
SPEAKER_00: like a lot of famous historical sites.
1:02:03
SPEAKER_01: Hmm.
1:02:04
SPEAKER_00: I haven't played it.
1:02:05
SPEAKER_00: My nephew who doesn't speak any Chinese has been playing it and says the game's great.
1:02:08
SPEAKER_00: Obviously, there are millions of people playing it.
1:02:10
SPEAKER_00: The reviews were quite high.
1:02:12
SPEAKER_00: The art looks great.
1:02:13
SPEAKER_00: If you look at some of the game trailers, it looks like it's a really fun game to play.
1:02:17
SPEAKER_00: And so it's great to see them have such a success, at least certainly in China.
1:02:22
SPEAKER_00: So in China, it's on PlayStation, then it's over Steam, so you can play it on a Windows PC.
1:02:26
SPEAKER_00: Okay.
1:02:27
SPEAKER_00: How much success it gets from selling outside of China remains to be seen.
1:02:32
SPEAKER_00: But it could be really the first breakthrough game globally for consoles,
1:02:37
SPEAKER_00: like a AAA game from a Chinese studio.
1:02:39
SPEAKER_00: You've had Chinese games, like online games.
1:02:42
SPEAKER_00: I think the most successful one globally has been Genshin.
1:02:47
SPEAKER_00: I think that's the game that's really sort of broken through globally.
1:02:51
SPEAKER_00: But that's, again, that's more of the traditional online game, not actually specifically your console.
1:02:56
SPEAKER_00: So overall, this is really interesting.
1:02:59
SPEAKER_00: It's not at all clear how replicable it is because these are, you know, it's like making a movie.
1:03:04
SPEAKER_00: It's a hit-driven business.
1:03:05
SPEAKER_02: I was going to say, yeah, it's like a blockbuster movie, basically, for the gaming industry.
1:03:09
SPEAKER_02: Yeah.
1:03:09
SPEAKER_00: And so this studio,
1:03:11
SPEAKER_00: they say they have plans for similar,
1:03:14
SPEAKER_00: like the next game will be on another sort of famous Chinese myth,
1:03:19
SPEAKER_00: although they haven't said which one.
1:03:22
SPEAKER_00: It'll be interesting to see if they can remain independent.
1:03:24
SPEAKER_00: They've made enough money from,
1:03:25
SPEAKER_00: I mean,
1:03:25
SPEAKER_00: they have some investors,
1:03:26
SPEAKER_00: but if they've made enough money from the sales of this game,
1:03:29
SPEAKER_00: that they can keep funding for the next game,
1:03:30
SPEAKER_00: or if they then have to take in another round.
1:03:32
SPEAKER_00: Excuse me, another round of investment.
1:03:34
SPEAKER_00: But it's really interesting to see how they've broken through because for a long time,
1:03:38
SPEAKER_00: this sort of building for console games was seen as something that the Chinese
1:03:41
SPEAKER_00: developers just,
1:03:42
SPEAKER_00: it wasn't their focus and they hadn't really made much progress.
1:03:46
SPEAKER_00: Now you have a Chinese studio that's built a world-class game for consoles.
1:03:49
SPEAKER_00: And it's really amazing to see how much the industry has developed.
1:03:53
SPEAKER_02: That is really cool.
1:03:55
SPEAKER_02: I am a total gaming neophyte beyond FIFA and NCAA football,
1:04:02
SPEAKER_02: but that's an interesting story about the market.
1:04:06
SPEAKER_02: The economics of the AAA games don't make sense to me, even in America.
1:04:11
SPEAKER_02: And so, or Japan is another one that is mastered the AAA format.
1:04:16
SPEAKER_02: But being able to pull it off in China is great.
1:04:20
SPEAKER_02: And I think it's a good story for the world.
1:04:24
SPEAKER_02: More diversity in the gaming market.
1:04:25
SPEAKER_00: Yeah, so we'll see.
1:04:26
SPEAKER_00: I mean, again, the technical talent is there.
1:04:29
SPEAKER_00: The artistic talent is there.
1:04:30
SPEAKER_00: One of the challenges have been for a long time, the sort of the storytelling part of it.
1:04:34
SPEAKER_00: And,
1:04:34
SPEAKER_00: you know,
1:04:34
SPEAKER_00: they were able,
1:04:35
SPEAKER_00: the studio Game Science,
1:04:37
SPEAKER_00: able to take this traditional,
1:04:38
SPEAKER_00: you know,
1:04:38
SPEAKER_00: everyone in China knows this story.
1:04:40
SPEAKER_00: What's the story?
1:04:41
SPEAKER_00: Journey to the West.
1:04:42
SPEAKER_00: Journey to the West.
1:04:43
SPEAKER_00: Right.
1:04:43
SPEAKER_00: And so and so they basically have been able to take it and make a really compelling storyline around it.
1:04:48
SPEAKER_00: We'll see if they can extend it into other stories.
1:04:51
SPEAKER_00: And, you know, there may not be original stories.
1:04:53
SPEAKER_00: It may just be they'll find some other famous myth mythology and they'll use that.
1:04:57
SPEAKER_00: But it is it is a real I mean, it's good for them.
1:05:01
SPEAKER_00: It's a real achievement.
1:05:02
SPEAKER_02: Yeah,
1:05:02
SPEAKER_02: well,
1:05:03
SPEAKER_02: and that's much better than diving into the controversy over some of the reviews
1:05:07
SPEAKER_02: and whether they were skewed.
1:05:09
SPEAKER_00: And that's just like,
1:05:11
SPEAKER_00: it was,
1:05:12
SPEAKER_00: I think they,
1:05:12
SPEAKER_00: when they sent out review copies,
1:05:13
SPEAKER_00: there was guidance about,
1:05:15
SPEAKER_00: you know,
1:05:15
SPEAKER_00: like,
1:05:15
SPEAKER_00: don't talk about,
1:05:16
SPEAKER_00: what is it,
1:05:17
SPEAKER_00: like feminism or misogyny or some other,
1:05:19
SPEAKER_00: or censorship.
1:05:20
SPEAKER_00: And, you know, that's like par for the course in China.
1:05:23
SPEAKER_00: Of course, you're not going to talk about it.
1:05:25
SPEAKER_00: I think they just sort of sent it out to foreign reviewers,
1:05:27
SPEAKER_00: not realizing that that was just like going to cause controversy.
1:05:30
SPEAKER_01: Hmm.
1:05:32
SPEAKER_00: And it is unfortunate.
1:05:33
SPEAKER_00: It's the reality of the market in China.
1:05:35
SPEAKER_00: And, you know, they, again, I mean, you read my newsletter yesterday.
1:05:38
SPEAKER_00: It was the news that this well-known artist was arrested on his return to China for,
1:05:43
SPEAKER_00: sounds like for making a statue that insulted or a sculpture that insulted Mao,
1:05:47
SPEAKER_00: right?
1:05:47
SPEAKER_00: And so, I mean, these guys are, these teams are building games in a very different way.
1:05:54
SPEAKER_00: sort of speech and political environment.
1:05:56
SPEAKER_00: And so you can criticize that,
1:05:59
SPEAKER_00: but at the same time,
1:06:00
SPEAKER_00: if you just accept the reality of that,
1:06:02
SPEAKER_00: then maybe focus on what they've actually built versus the controversy.
1:06:08
SPEAKER_02: No, I know.
1:06:08
SPEAKER_02: It's a much better area to focus on.
1:06:10
SPEAKER_02: It's an inspiring entrepreneurial...
1:06:13
SPEAKER_02: success story and as far as the gaming controversies that's just one area online
1:06:18
SPEAKER_02: where people are always too upset and can't be reasonable and so to maintain sanity
1:06:24
SPEAKER_02: i try not to delve into that world too frequently and the other thing too is just i
1:06:28
SPEAKER_00: mean you look at like again you know there's controversy there are issues with some
1:06:32
SPEAKER_00: of the things that play the developer said but the reality is is you know you got
1:06:36
SPEAKER_00: 10 million or so people are playing who don't care
1:06:39
SPEAKER_00: And so you can still think these are problems,
1:06:41
SPEAKER_00: but you also have to look at the business success and say,
1:06:44
SPEAKER_00: okay,
1:06:44
SPEAKER_00: well,
1:06:44
SPEAKER_00: that's interesting because whatever people are getting upset about or something
1:06:48
SPEAKER_00: they're upset about,
1:06:49
SPEAKER_00: it doesn't actually matter for what they built in terms of their business.
1:06:52
SPEAKER_02: particularly in the context of the last 30 years of the gaming industry in China.
1:06:58
SPEAKER_02: Well, that is a great place to end.
1:07:01
SPEAKER_02: I've kept you too long.
1:07:02
SPEAKER_02: Go enjoy the majestic fall weather with Tashi.
1:07:07
SPEAKER_02: It's been too hot for my dog,
1:07:09
SPEAKER_02: Ollie,
1:07:09
SPEAKER_02: the last couple of weeks,
1:07:10
SPEAKER_02: he's been sweating it out in August,
1:07:12
SPEAKER_02: but I feel like they finally made it.
1:07:15
SPEAKER_00: And it's, it's beautiful.
1:07:16
SPEAKER_00: Unfortunately, I gotta, I gotta, I can look out the window while I do my newsletter today, but it is,
1:07:20
SPEAKER_00: It is beautiful here and it's good to be back.
1:07:23
SPEAKER_00: And I think we hope everyone had a nice summer.
1:07:27
SPEAKER_00: It is crazy to think another summer has passed.
1:07:30
SPEAKER_02: Yes.
1:07:30
SPEAKER_02: And we'll keep it rolling next week.
1:07:32
SPEAKER_02: You can subscribe to the show in the show notes, subscribe to Cynicism, subscribe to Stratechery.
1:07:38
SPEAKER_02: And Bill, have a good couple of days.
1:07:40
SPEAKER_02: I will talk to you soon.
1:07:41
SPEAKER_02: You too.
1:07:42
SPEAKER_02: Thanks, Andrew.
1:07:42
SPEAKER_02: Thanks, everybody.