April 23, 2025 • 29 mins
The world's top economic and financial authorities descend on Washington this week for the IMF/World Bank Spring Meetings. The focus this year is overwhelmingly on trade, as US President Donald Trump's reciprocal tariffs hang over the event. And nowhere are levies more painful than in China, where the highest rates threaten economic growth.
Arthur Kroeber, founding partner of research consultancy Gavekal Dragonomics and author of China's Economy: What Everyone Needs to Know, joins Katia Dmitrieva in Washington for a discussion about the new trade era, China's economic travails and how the trade stalemate with the US could end.
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Speaker 1 (00:01):
The IMF World Bank Meetings kicked off this week in Washington,
and this year it feels very different. The world trade
system is in chaos, and the US, usually a world
leader in many ways, is now the cause of this
chaos with President Donald Trump's tariffs on the world. You're
(00:24):
listening to Asia Centric from Bloomberg Intelligence. I'm Katy Dmitrieva
and this week I'm in Washington for the IMF World
Bank Meetings, where the world's economic leaders have gathered for
the week, and where the global trade war is hanging
over the city. Arguably, the US and China is the
relationship and trade deal to get right, and so far
(00:46):
there don't seem to be many off ramps. Every few
days it seems tariffs are escalated, heated words are exchanged,
and the leaders of the world's two largest economies aren't
getting any closer to actually talking. This week, we have
probably the ideal person to talk to about this. We
have Arthur Kroeber, co founder and head of research at
gav Kal Dragonomics and author of China's Economy What Everyone
(01:10):
needs to Know. Arthur, thank you so much for joining us.
Speaker 2 (01:12):
Great to be here.
Speaker 1 (01:14):
So let's kick off just as a scene setter. What's
going on this week in DC? I noticed this year
it's a bit more quiet in some ways. You know,
there's usually kind of posters up or flags, but it's
a lot more quiet this year. What does it kind
of feel like?
Speaker 3 (01:31):
Well, I think the difference between this year and all
past years is that we have the mother of all
trade wars sitting in the background. Trump, despite having back
down from his most extreme tariffic proposal, still has ten
percent tariffs on pretty much everyone in the world, twenty
five percent tariffs on some products like Steve Will and aluminium,
(01:52):
and anywhere between one hundred and forty and two hundred
and fifty percent tariffs on China, depending on exactly how
you count them. And so I think anyone who's looking
at the macro economy in any country or in the
world as a whole, it just has to say, we
don't really know what's going on until we see what
the impact of these tariffs are. And remember the economic
(02:15):
data that we have to work with only goes up
to the end of last month. Well, we didn't have
all of these tariffs. So we're in a whole new
world and no one is quite sure what is in
that world. So I think that probably accounts for the
feeling of amusement that you may see around here.
Speaker 4 (02:31):
Yeah.
Speaker 1 (02:32):
I mean, usually the IMF meetings are really more focused
on macro central banks, and this year it really is
arguably about not just trade, but specifically US and China
or that relationship.
Speaker 3 (02:45):
Yeah, and I think what the transformation that we went
through at the beginning of April was that Trump initially
announced these very high tariffs on essentially every country in
the world, and what we were left with was much
lower tariffs, still significant ones in most countries, and gigantic
ones on China. And what's interesting to me is that
(03:05):
of all of the countries that got hit with these
high terrifs, China was the only country that responded to
this by direct retaliation. They ratcheted up their own teriff
rates on US products to very high levels, and so
you got into this tit for tat war of terrif escalation,
which has left US in a very unusual spot. So
two largest economies in the world tariff levels that, if
(03:28):
they're fully enforced, basically mean that there's a trade embargo
between the US and China, And we've just never been
in a place like this.
Speaker 1 (03:37):
Before how bad does it get before there is a
deal that's to be made.
Speaker 3 (03:44):
Well, if you're talking about the US and China specifically,
I think the Chinese have actually made their position quite clear.
They've said, we don't like trade wars. We don't think
they're good for everyone. They put out a white paper saying, look,
if you look at the total economic relationship between the
US and China, Yeah, we have a goods trade surplus,
but the US has a big services trade surplus with China. Plus,
(04:05):
US companies make a ton of money in the Chinese
market from domestic production. By my estimates, the sales of
US companies in China are about triple the value of
US exports to China. So when you add all that together,
according to the Chinese, actually it's a balanced economic relationship.
So they think this whole thing's unreasonable. So that's their position,
(04:26):
and they've said they're not going to raise tariffs anymore
because at this level, tariffs are a joke.
Speaker 4 (04:30):
That is a literal quote from the Chinese Ministry of Commerce.
Speaker 3 (04:35):
And they've said, look, if you're willing to talk about
real things and be reasonable, we're happy to have a discussion,
but we're not going to make the first phone call.
Speaker 4 (04:45):
And the US has taken the position.
Speaker 3 (04:47):
That no, China has to make the first call, and
I don't think that's going to happen. So they're at
a stalemate now where China has laid out its position,
has stated that it's open to negotiation but is waiting
for the US to make the first move.
Speaker 4 (05:02):
In the US is saying we're not going to make
the first move.
Speaker 1 (05:04):
So where do we go from here? Because you've covered
China as an academic, as a journalist, analyst, So in
your view, how does this play out? How does this end?
You know, is it the case that she might end
up making that call? You just said, probably not. But
how does this I mean it has to go somewhere?
Speaker 3 (05:27):
Right, Well, it's a good question, and maybe it doesn't
have to go anywhere, Maybe it just stays in place.
But I'll give you a few ideas about how things
could play out from here. So number one, she is
absolutely not going to make that first call. The Chinese
have been very, very explicit and pretty i would say,
open about what their negotiating agenda is. And I think
(05:50):
the other thing that's important to add is that they
tried sending messages to the Trump administration in January February
several times about specific things that could be discussed on try,
including many of the things that Trump administration has talked about,
like ventanyl flows and stuff like that, And each time
that they sent these ideas through, they got no response,
(06:12):
and instead they got more tariffs on ventanyl into two tranches.
So their view is, look, we've tried to negotiate, Trump
has showed no interest, So we're going to stop and
we're going to do our thing and we're going to
protect our economy as best we can. And they have
a lot of tools that they can use, and then
(06:32):
if the US wants to negotiate, it is on them
to come to us and explain what it is that
they want to talk about.
Speaker 4 (06:38):
Then we're happy to talk. So I don't see that
they're likely to move at all.
Speaker 3 (06:41):
And there's going to be a lot of pressure in
the Chinese economy this year, but my sense is that
the government is confident that they can handle the pressure
and so there's no reason for them to make a move. Now.
If you look at the Trump administration, essentially, of two
things that have been said, one is President Trump has
said I want Chijen Pain to make the first call.
Speaker 4 (07:00):
That's not going to happen.
Speaker 1 (07:01):
He said that a few times, several times.
Speaker 3 (07:03):
Yeah, and him saying it more times doesn't make it
any more likely to happen. So I think that's just unrealistic.
And then you have the Treasury Secretary Scott Bessens, who said, look,
our negotiation strategy is we're going to cut lots and
lots of trade deals with other countries first, and then
we're going to all gang up on China and get
China to change its ways.
Speaker 4 (07:23):
Or put another.
Speaker 3 (07:24):
Way, what he's saying is we're going to go to
countries and say, if you want lower tariffs, then the
price of those lower tariffs is that you have to
increase your trade and investment restrictions with China. And that
is his stated open negotiating strategy. I think there is
almost no chance that that can possibly work.
Speaker 1 (07:43):
You mean other countries, Yeah, other countries.
Speaker 3 (07:45):
Won't do it because the majority of countries in the
world have China as their number one trading partner. Many
of them rely quite significantly on flows of technology or
investment to or from China. These are very deep, complex
relationships that have been built up over de kids, and
no leader in his right mind would throw that down
the drain for some kind of a deal with the
(08:07):
US administration that has shown that it doesn't really adhere
to deals for more than three or six months at
a time.
Speaker 1 (08:13):
Even with the tariff levels where they are, though, I mean,
it's going to be really painful for economies like Vietnam, Cambodia.
Speaker 4 (08:19):
Yeah.
Speaker 3 (08:19):
So I think there will be a few countries, you know,
like Vietnam, which depends heavily on essentially being a conduit
for trade from Chinese component factories through to final demand.
Speaker 4 (08:32):
In the US.
Speaker 3 (08:33):
But even there, you'd think that they have a big
incentive to deal. But you know, a few days ago,
Hijin Ping went to Hanoi, he got the red carpet treatment.
They signed forty five different agreements. You know, probably some
of them were, you know, not all that meaningful, but
Vietnam was signaling, look, we think that this is a
really important relationship. We value the Chinese relationship and the
(08:53):
US relationship. So I think even a country like Vietnam
is going to push back pretty hard in some stance
on being told to cut back trade with China because
they just can't afford.
Speaker 2 (09:04):
To It's literally impossible for them to do so.
Speaker 3 (09:07):
I think the problem that you have here is that
the United States has set out some very unrealistic expectations
for what can happen, and I think basically those expectations
have to be ground down and then the US has
to find some other way to negotiate. And we saw
a glimpse of this a while back when Trump announced
(09:30):
that electronics imports.
Speaker 2 (09:32):
Would be exempt from tariffs.
Speaker 3 (09:34):
And what was interesting there is that the Chinese government
the instant that that message came out, they had a
statement that said, this is a good step, this is
in the right direction. We'd like to see more, but
we're looking with interest. So that was a very clear
signal from China that they were looking at that as
a possible off ramp. That you exempt a whole bunch
of specific products from tariffs, you lower the temperature and
(09:58):
then you can start to have a discuss about things.
So again, I think that the Chinese have been clear
that they're looking for a way to negotiate because this
is not an ideal situation for them, but they're only
willing to.
Speaker 2 (10:10):
Go so far.
Speaker 3 (10:11):
And then the problem was after that Chinese statement, Trump
and Secretary of Lucnik came out with statements saying, oh no, no,
these these exemptions electronic, They're only temporary. So they backed
write up that off ramp onto their tariff super highway,
and they're still speeding down the road.
Speaker 5 (10:30):
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Speaker 1 (10:57):
The other question that comes with a potential deal or
what it might look like, is whether China actually needs it.
You know, we've had a lot of economists in the
private sector coming out with revised estimates for China's growth
this year. They're not necessarily going to be able to
make the five percent target. So what's your view on that.
Is it possible with these tariffs to meet that target?
Speaker 3 (11:18):
Yeah, it's going to be tough. So before the tariffs,
China had launched quite a lot of monetary and fiscal support,
and with all of that support, we thought they might
just be able to hit the five percent for this year.
And then the tariffs come on, and you know, most
economists estimate that they'll knock off at least a point
(11:41):
and probably two from Chinese GDP growth this year, so
they'll essentially eat up all of the stimulus that has
already been announced. So if they want to get close
to five they're going to have to do a lot more,
And they've talked a lot about stimulating consumer demand, et cetera.
But it's going to be tough. So I think that's
one of the reasons that these their preferred outcome here,
(12:03):
that there is some kind of negotiation and the tariffs
come down. They're not trying to prolong this unnecessarily, but
they also want a deal that kind of makes sense
and reflects economic fundamentals, and that frankly doesn't make their
government look too weak. So Xi Jinping really has to
look strong, and I think this is one of the
(12:24):
reasons that they decided to retaliate, which no other country did.
But I think number one they were frustrated that all
their efforts to negotiate had been rebuffed. And then number two,
they thought, well, we're going to get high tariffs no
matter what we do. So politically, what's the best way
for us to play this. What's the best way for
(12:44):
us to mobilize public support at home for what we
know is going to be difficult no matter what we do.
And I think they came up with the answer that
we're going to fight back and we're going to prove
that we're strong and we're standing up to Trump. So
politically it's pretty important for them to to, you know,
maintain that posture. But it's going to be tough, and
you know, if there is no resolution to this within
(13:06):
the next three or four months. I'm personally pretty skeptical
of the hit five percent.
Speaker 1 (13:12):
Even with the additional monetary.
Speaker 3 (13:14):
Even with additional stimulus, it's just very, very hard to
get consumer confidence going. Again, that's not something you can
turn a switch on. But I think the point is
they're willing to take that pain. Essentially, what they're saying
is like, Okay, maybe we don't hit our five percent,
maybe we get three and a half percent.
Speaker 4 (13:30):
We'll live with that.
Speaker 3 (13:32):
Because we think that we can live with that outcome
more than the US public can deal with a lot
lower growth and higher inflation that's going to come down
the road from tariff. So if we have to, we'll
just play a waiting game and we'll see who cracks first.
And we bet that it's the Americans that.
Speaker 2 (13:49):
Will crack first.
Speaker 1 (13:50):
Yeah, So literally a game of chicken.
Speaker 3 (13:52):
It's a game of chicken, or economic attrition or you know,
whatever you want to call it.
Speaker 4 (13:57):
Yeah.
Speaker 1 (13:57):
Yeah, And you've just said that consumer in China it's
not just about flipping a switch. You know, it doesn't
happen overnight. This really doesn't happen in a few years.
What's your read on the government's moves right now to
try to stimulate the consumer is that, you know, they
had this trade in program that seemed very successful, but
(14:18):
sort of a longer term.
Speaker 3 (14:20):
Well, I want to back up and just give you
my theory of what ails the Chinese consumer. Please do
because the reality is, I mean, if you go back
to twenty nineteen, before the pandemic, Chinese consumer is in
pretty good shape. It was a vibrant, fast growing consumer market,
very diverse consumption of both products and services, becoming more sophisticated,
(14:40):
doing a lot of international travel.
Speaker 4 (14:42):
It was a very positive story.
Speaker 3 (14:44):
And basically what we've seen in the last years is
that story went off the rails. I think reason number
one was that you had the pandemic and everything shut
down for a few months in twenty twenty, and China
was really the only major economy in the entire world
that did not help out consumers and households during the pandemic.
The US mailed stimulus checks, most European countries put in
(15:07):
employment or wage guarantees. China did nothing, so there was
a big hit to consumer confidence. Then things came back
a bit, and then they got the second round of
the pandemic in twenty twenty two, Shanghai lockdowns.
Speaker 4 (15:19):
It was really bad, and I.
Speaker 3 (15:21):
Think Chinese consumers were just traumatized by that sort of
double whammy of getting hit and not getting any support
from the government, so they were very cautious coming out
of the pandemic. And then, of course, the other thing
that happened in that period is that the Chinese government
decided to squash the property market, which is the main
source of household wealth. They've done a very effective job
of that, and they've been very determined not to reinflate
(15:44):
the property bubble. But what that means is that one
of the key sources of household confidence, which is their
rising wealth, has been knocked out. So you have kind
of a bad employment market PTSD from the COVID lockdowns
and a comatost property sector and you add all that
(16:04):
stuff up, and Chinese consumers are just they do not
want to spend an extra nickel if they can avoid it.
And so how do you reverse that cycle because that
also feeds into business confidence business as well. Consumers aren't buying,
so we're not going to hire or invest in new
acqui And if business is aren't hiring, then households say, wait,
(16:26):
if I lose my job, I'm not going to get
a new one because no one's hiring. So you have
a negative confidence spiral and you have to do a
bunch of things to turn that around. And I think
they're going to have to do quite a bit more
in terms of promoting private sector business confidence, which they've
started to do with the Internet companies. They probably have
(16:48):
to do a little bit more to support the property
market than they're comfortable doing now, and they probably just
have to pump a lot more government money into the
system than they have done so far. And I think
at the end of the day they will be willing
to do all of those things, but they're doing them
kind of slowly and step by step, so it's not
going to be easy for them to turn.
Speaker 2 (17:09):
On a dime and get consumer confidence up again.
Speaker 1 (17:12):
Yeah, and for the consumer specifically, do you see these
measures as sort of a shorter term, you know, trying
to address the issues in the short term, or do
you see this as fundamentally potentially changing the psychology of
the consumers longer term? In other words, can this actually
create a consumer led economy?
Speaker 3 (17:31):
Well, so, I think a lot of the stuff that
they've done up until now has been essentially short term,
like these trade in programs, and trade in programs did
work a lot better than I thought they would, frankly.
Speaker 1 (17:42):
And that's the equipment and home applying.
Speaker 3 (17:44):
So if you have an old appliance or an old car,
you can trade it in, you can get a subsidy
to buy a new one, and that's you know, been
reasonably effective. But essentially what that does is says you're
going to buy something in two or three years anyway,
Why don't you buy it now, so that's just borrowing
demand from the future. It's not really creating new sustainable demand,
so that's more of a short term fix. Similarly, you know,
(18:06):
JD dot Com has set up a fund to buy
goods from exporters for resale on the domestic market, so
that's again that's kind of like a short term gimmick
that's not going to really get.
Speaker 4 (18:17):
You very far.
Speaker 3 (18:18):
But I think the thing that has changed is that
since last December, Xijionping has made it very clear that
promoting consumption is a top political primary and this is
very different than at any other time in his administration.
So the political importance of promoting consumption has now become paramount,
and that makes a big difference. In the Chinese system
(18:39):
and the Chinese system, a lot happens based on signals
from the top government officials, and for the last five years,
the signals were mainly, we have to invest a lot
in high tech industry to become self sufficient. It was
all a supply side strategy. Now the signal is very
clearly we need to work on demand. And so what
usually happens is that they flail around for while after
(19:01):
these signals go out and then gradually they figure out
tools that help them get to.
Speaker 2 (19:07):
The desired political objective.
Speaker 3 (19:08):
So I think that is important, and I think over
the course of a year or two, what that will
mean is that you'll probably get stronger consumer activity. I
don't think you're headed towards a consumer led economy because
the DNA of huge and pain in the communist parties.
Speaker 4 (19:24):
It's all about growth.
Speaker 3 (19:26):
Comes from investment in technology. That's what they really believe
at bottom. So even if they've made a pretty big
pivot right now to support consumption, I think their longer
term strategy is still very much all about technology investment.
Speaker 1 (19:40):
Interesting because that isn't necessarily I mean quite aside from
what officials in China have said. I mean, you heard
Janet Yellen speak about the importance of China pivoting to
the consumer. You're seeing a lot of other countries who
are hoping that that happens so they don't get access
stuff from China.
Speaker 3 (20:01):
Yeah, and I just think that it's going to be
a long, hard slog to achieve that. You know, other
central bankers, trade ministers, you name it. They've been talking
for decades literally about how China needed to invest less
and consume more, and the Chinese have been, you know,
(20:25):
not very interested in what these people have to say.
So I don't think that they're really going to take
too many cues on their domestic policy from Janet Yellen,
to be frank shocking, but I think there is a problem,
which is more and more countries are running bigger and
bigger trade deficits.
Speaker 2 (20:46):
With China on goods.
Speaker 3 (20:48):
And some countries don't care because they're never really going
to have manufacturing anyway.
Speaker 4 (20:52):
But a lot of countries do care.
Speaker 3 (20:53):
They want to have their own manufacturing sectors and they
don't want them to be hollowed out by cheap Chinese goods.
So I think the way to get around that, and
you've seen this, I think with some of the negotiations
between China and the European Union is for countries to say,
all right, if you want to export your stuff to us,
there's going to be a terif on it. But if
you want to build factories in our countries to build
(21:16):
that stuff with local employment, with local supply chains, with
technology transfer, fine, so you can serve our markets, but
you have to do it based on investment in this
country rather than buy exports. And that is actually what
the United States said to Japan in the nineteen eighties.
(21:37):
We're absorbing a lot of imports of Japanese cars, semiconductors,
other things, and essentially we came up with a modus
vivendi where the Japanese companies agreed to invest a lot
more in production in the United States. Japanese companies still
make a ton of money from the US market, but
a lot more of it is from domestic production.
Speaker 2 (21:56):
Here rather than through exports.
Speaker 3 (21:59):
And that is a viable way of addressing the problems
that are created by these mercantilist economies that like China
or Japan, that really want to stay export driven forever.
As you say, we're going to take some of those
exports and we're going to compel them to turn into
domestic production somewhere else.
Speaker 1 (22:19):
But we're talking so much about trade these days, I
feel like there might be some other risks we're missing.
Is there something else investors should be thinking about?
Speaker 3 (22:27):
Well, it's a fair point, because you know, if you
look at the US economy, for example, imports are only
about eleven or twelve percent of GDP.
Speaker 2 (22:38):
In China, it's.
Speaker 3 (22:40):
About the same imports around ten or eleven percent of
GDP exports are you know, the high teens, but you
still have a very large part of the economy. These
are both gigantic economies and most of it, frankly, is
domestically driven. So the multipliers of trade are very high,
and that's where the change is occurring. So it makes
sense to to pay attention to it. But you're right,
(23:02):
China is a big economy, and before the trade war
rolled along all of us China economists were talking about
other stuff, mainly deflation. And this gets to the consumer
stuff that we were talking about a minute ago, that
China for the last basically three years has had a
falling price level, which is very unusual. China has had
(23:23):
some episodes of deflation before in the last thirty years,
but this is the longest.
Speaker 4 (23:27):
It's the most sustained.
Speaker 3 (23:28):
It's not the deepest, but it's the one that's lasts
the longest, you know, And it reflects in part this
lack of business confidence, lack of consumer confidence. People hoarding
savings and not willing to spend it. So what winds
up happening is that you have a lot of money
available to invest in creating new supply, but you don't
(23:48):
have enough demand to buy the stuff that they're making,
and so it all winds up heading into exports. And
so the question that a lot of us were focusing
on was how is trying to get out of this
deflationary trap that it seems to be in. And some
people say, well, this is like Japan in the nineteen
nineties and they're really heading off the rails. And I
(24:08):
was never in that camp. I won't bore you with
a long list of reasons why China is not Japan
in the nineties, but it really not.
Speaker 4 (24:16):
It has a lot more growth.
Speaker 3 (24:17):
Potential than Japan did at that point. They have made
some mistakes and macropolicy, but if they correct those mistakes,
they could certainly get back onto a much more vibrant
economic growth track, you know, even with some of these
trade disruptions. But what that means is Number one, I
think they have to be a little bit more aggressive
on fiscal policy.
Speaker 4 (24:38):
Interest rates.
Speaker 3 (24:39):
Real interest rates are quite high in China. They can
come down. They've been reluctant to get close to the
zero bound, but I think they need to do more
work there.
Speaker 4 (24:48):
And then the big thing is they have an over.
Speaker 3 (24:52):
Regulated service sector. Because my two liner on China's economy
is manufacturing is over invested and services are overregulated. So
they have all this investment in making stuff, which they're
ver good at, but no one in China wants to buy.
But a lot of the service sectors have lots of regulation,
(25:12):
lots of state owned enterprises that participate in them, not
enough space for entrepreneurial innovation. And so if you deregulated
service sectors, you might be able to get a lot
more employment opportunities for people as private entrepreneurs figure out
how to do things better. In education and healthcare, in
transport logistics, in tourism and entertainment, all of these things
(25:35):
are subject to a lot of controls. So my thesis
on this was that they could do a lot more
on that, and that would be sort of a key
to getting more dynamic and essentially consumer oriented growth.
Speaker 4 (25:51):
The problem is a lot of the.
Speaker 3 (25:53):
Service sectors wind up being very close to Communist party
sort of control red lines, you know, like you can
think about finance, media and so forth. They don't want
to deregulate these very much because it would be too
dangerous politically. So they've got a bit of a problem
there in terms of how do you get enough dynamism
back into the economy while not crossing any of these
(26:14):
political red.
Speaker 1 (26:15):
Lines without losing control.
Speaker 2 (26:16):
Yeah, essentially exactly.
Speaker 1 (26:18):
So deflation, service sector deregulation question work. Yes, trade war.
Where do you see China in about four years time,
specifically the economy in about four years time?
Speaker 3 (26:32):
Uh?
Speaker 4 (26:33):
Boy, that is really hard.
Speaker 3 (26:35):
Well, because you know, this trade war thing is so
large and so unpredictable.
Speaker 4 (26:40):
You really don't know.
Speaker 3 (26:42):
Is the entire global trading system just going to be
completely reconfigured over the next four years, or are we
going to have this storm that abates and we go
back to something like that.
Speaker 4 (26:51):
We had a couple of years ago. Both are possible,
you know.
Speaker 3 (26:55):
I think basically what China is going to look like
in four years is if you think that they're sort
of a technological superpower now, they're going to be much
more of a technological superpower across more sectors. You look
at industrial automation robots, they're the biggest consumer, they're not
the biggest producer.
Speaker 4 (27:16):
They're innovating very quickly.
Speaker 3 (27:17):
They're also doing a lot of innovation in new sources
of green energy like hydrogen things like that. So I
think the technological development at China, if anything, is only
going to accelerate. But this could well happen against the
backdrop of an economy as a whole that's still pretty sluggish,
that's growing maybe only three percent a year, still kind
(27:39):
of deflationary. Both of those things can be true at
the same time, essentially because China is so gigantic that
they can have a very vibrant set of tech sectors
that are globally competitive and leading edge and innovation, and
an overall economy that's still kind of slow. And I
think this is one of the things that people in
the rest of the world have a hard time wrapping
(28:00):
their minds around. They think, if China slows down that much,
then the edge is going to come off its technological
gains also, and I just don't think that's true. So
I think the main thing we have to think about
is China as a growing technological force in many more
fields than we see it today on the one hand,
(28:20):
but also China potentially being a slower growing economy, and
those two things can exist simultaneously, I think for many years.
Speaker 1 (28:29):
That's maybe a good note to leave it on. Okay,
thanks so much for joining us.
Speaker 2 (28:33):
This week.
Speaker 4 (28:33):
It was my pleasure. Thank you.
Speaker 1 (28:35):
You've been listening to Asia Centric from Blueberg Intelligence. I'm
Katidmitrieva in Washington. You can find our podcasts on Apple Podcasts, Spotify,
or wherever you listen. This episode was produced by Clara
Chen and Special help this week was given by Rachel
Lewis Kriski here in Washington. Thanks so much for listening.
The IMF World Bank Meetings kicked off this week in Washington,
and this year it feels very different. The world trade
system is in chaos, and the US, usually a world
leader in many ways, is now the cause of this
chaos with President Donald Trump's tariffs on the world. You're
(00:24):
listening to Asia Centric from Bloomberg Intelligence. I'm Katy Dmitrieva
and this week I'm in Washington for the IMF World
Bank Meetings, where the world's economic leaders have gathered for
the week, and where the global trade war is hanging
over the city. Arguably, the US and China is the
relationship and trade deal to get right, and so far
(00:46):
there don't seem to be many off ramps. Every few
days it seems tariffs are escalated, heated words are exchanged,
and the leaders of the world's two largest economies aren't
getting any closer to actually talking. This week, we have
probably the ideal person to talk to about this. We
have Arthur Kroeber, co founder and head of research at
gav Kal Dragonomics and author of China's Economy What Everyone
(01:10):
needs to Know. Arthur, thank you so much for joining us.
Speaker 2 (01:12):
Great to be here.
Speaker 1 (01:14):
So let's kick off just as a scene setter. What's
going on this week in DC? I noticed this year
it's a bit more quiet in some ways. You know,
there's usually kind of posters up or flags, but it's
a lot more quiet this year. What does it kind
of feel like?
Speaker 3 (01:31):
Well, I think the difference between this year and all
past years is that we have the mother of all
trade wars sitting in the background. Trump, despite having back
down from his most extreme tariffic proposal, still has ten
percent tariffs on pretty much everyone in the world, twenty
five percent tariffs on some products like Steve Will and aluminium,
(01:52):
and anywhere between one hundred and forty and two hundred
and fifty percent tariffs on China, depending on exactly how
you count them. And so I think anyone who's looking
at the macro economy in any country or in the
world as a whole, it just has to say, we
don't really know what's going on until we see what
the impact of these tariffs are. And remember the economic
(02:15):
data that we have to work with only goes up
to the end of last month. Well, we didn't have
all of these tariffs. So we're in a whole new
world and no one is quite sure what is in
that world. So I think that probably accounts for the
feeling of amusement that you may see around here.
Speaker 4 (02:31):
Yeah.
Speaker 1 (02:32):
I mean, usually the IMF meetings are really more focused
on macro central banks, and this year it really is
arguably about not just trade, but specifically US and China
or that relationship.
Speaker 3 (02:45):
Yeah, and I think what the transformation that we went
through at the beginning of April was that Trump initially
announced these very high tariffs on essentially every country in
the world, and what we were left with was much
lower tariffs, still significant ones in most countries, and gigantic
ones on China. And what's interesting to me is that
(03:05):
of all of the countries that got hit with these
high terrifs, China was the only country that responded to
this by direct retaliation. They ratcheted up their own teriff
rates on US products to very high levels, and so
you got into this tit for tat war of terrif escalation,
which has left US in a very unusual spot. So
two largest economies in the world tariff levels that, if
(03:28):
they're fully enforced, basically mean that there's a trade embargo
between the US and China, And we've just never been
in a place like this.
Speaker 1 (03:37):
Before how bad does it get before there is a
deal that's to be made.
Speaker 3 (03:44):
Well, if you're talking about the US and China specifically,
I think the Chinese have actually made their position quite clear.
They've said, we don't like trade wars. We don't think
they're good for everyone. They put out a white paper saying, look,
if you look at the total economic relationship between the
US and China, Yeah, we have a goods trade surplus,
but the US has a big services trade surplus with China. Plus,
(04:05):
US companies make a ton of money in the Chinese
market from domestic production. By my estimates, the sales of
US companies in China are about triple the value of
US exports to China. So when you add all that together,
according to the Chinese, actually it's a balanced economic relationship.
So they think this whole thing's unreasonable. So that's their position,
(04:26):
and they've said they're not going to raise tariffs anymore
because at this level, tariffs are a joke.
Speaker 4 (04:30):
That is a literal quote from the Chinese Ministry of Commerce.
Speaker 3 (04:35):
And they've said, look, if you're willing to talk about
real things and be reasonable, we're happy to have a discussion,
but we're not going to make the first phone call.
Speaker 4 (04:45):
And the US has taken the position.
Speaker 3 (04:47):
That no, China has to make the first call, and
I don't think that's going to happen. So they're at
a stalemate now where China has laid out its position,
has stated that it's open to negotiation but is waiting
for the US to make the first move.
Speaker 4 (05:02):
In the US is saying we're not going to make
the first move.
Speaker 1 (05:04):
So where do we go from here? Because you've covered
China as an academic, as a journalist, analyst, So in
your view, how does this play out? How does this end?
You know, is it the case that she might end
up making that call? You just said, probably not. But
how does this I mean it has to go somewhere?
Speaker 3 (05:27):
Right, Well, it's a good question, and maybe it doesn't
have to go anywhere, Maybe it just stays in place.
But I'll give you a few ideas about how things
could play out from here. So number one, she is
absolutely not going to make that first call. The Chinese
have been very, very explicit and pretty i would say,
open about what their negotiating agenda is. And I think
(05:50):
the other thing that's important to add is that they
tried sending messages to the Trump administration in January February
several times about specific things that could be discussed on try,
including many of the things that Trump administration has talked about,
like ventanyl flows and stuff like that, And each time
that they sent these ideas through, they got no response,
(06:12):
and instead they got more tariffs on ventanyl into two tranches.
So their view is, look, we've tried to negotiate, Trump
has showed no interest, So we're going to stop and
we're going to do our thing and we're going to
protect our economy as best we can. And they have
a lot of tools that they can use, and then
(06:32):
if the US wants to negotiate, it is on them
to come to us and explain what it is that
they want to talk about.
Speaker 4 (06:38):
Then we're happy to talk. So I don't see that
they're likely to move at all.
Speaker 3 (06:41):
And there's going to be a lot of pressure in
the Chinese economy this year, but my sense is that
the government is confident that they can handle the pressure
and so there's no reason for them to make a move. Now.
If you look at the Trump administration, essentially, of two
things that have been said, one is President Trump has
said I want Chijen Pain to make the first call.
Speaker 4 (07:00):
That's not going to happen.
Speaker 1 (07:01):
He said that a few times, several times.
Speaker 3 (07:03):
Yeah, and him saying it more times doesn't make it
any more likely to happen. So I think that's just unrealistic.
And then you have the Treasury Secretary Scott Bessens, who said, look,
our negotiation strategy is we're going to cut lots and
lots of trade deals with other countries first, and then
we're going to all gang up on China and get
China to change its ways.
Speaker 4 (07:23):
Or put another.
Speaker 3 (07:24):
Way, what he's saying is we're going to go to
countries and say, if you want lower tariffs, then the
price of those lower tariffs is that you have to
increase your trade and investment restrictions with China. And that
is his stated open negotiating strategy. I think there is
almost no chance that that can possibly work.
Speaker 1 (07:43):
You mean other countries, Yeah, other countries.
Speaker 3 (07:45):
Won't do it because the majority of countries in the
world have China as their number one trading partner. Many
of them rely quite significantly on flows of technology or
investment to or from China. These are very deep, complex
relationships that have been built up over de kids, and
no leader in his right mind would throw that down
the drain for some kind of a deal with the
(08:07):
US administration that has shown that it doesn't really adhere
to deals for more than three or six months at
a time.
Speaker 1 (08:13):
Even with the tariff levels where they are, though, I mean,
it's going to be really painful for economies like Vietnam, Cambodia.
Speaker 4 (08:19):
Yeah.
Speaker 3 (08:19):
So I think there will be a few countries, you know,
like Vietnam, which depends heavily on essentially being a conduit
for trade from Chinese component factories through to final demand.
Speaker 4 (08:32):
In the US.
Speaker 3 (08:33):
But even there, you'd think that they have a big
incentive to deal. But you know, a few days ago,
Hijin Ping went to Hanoi, he got the red carpet treatment.
They signed forty five different agreements. You know, probably some
of them were, you know, not all that meaningful, but
Vietnam was signaling, look, we think that this is a
really important relationship. We value the Chinese relationship and the
(08:53):
US relationship. So I think even a country like Vietnam
is going to push back pretty hard in some stance
on being told to cut back trade with China because
they just can't afford.
Speaker 2 (09:04):
To It's literally impossible for them to do so.
Speaker 3 (09:07):
I think the problem that you have here is that
the United States has set out some very unrealistic expectations
for what can happen, and I think basically those expectations
have to be ground down and then the US has
to find some other way to negotiate. And we saw
a glimpse of this a while back when Trump announced
(09:30):
that electronics imports.
Speaker 2 (09:32):
Would be exempt from tariffs.
Speaker 3 (09:34):
And what was interesting there is that the Chinese government
the instant that that message came out, they had a
statement that said, this is a good step, this is
in the right direction. We'd like to see more, but
we're looking with interest. So that was a very clear
signal from China that they were looking at that as
a possible off ramp. That you exempt a whole bunch
of specific products from tariffs, you lower the temperature and
(09:58):
then you can start to have a discuss about things.
So again, I think that the Chinese have been clear
that they're looking for a way to negotiate because this
is not an ideal situation for them, but they're only
willing to.
Speaker 2 (10:10):
Go so far.
Speaker 3 (10:11):
And then the problem was after that Chinese statement, Trump
and Secretary of Lucnik came out with statements saying, oh no, no,
these these exemptions electronic, They're only temporary. So they backed
write up that off ramp onto their tariff super highway,
and they're still speeding down the road.
Speaker 5 (10:30):
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Speaker 1 (10:57):
The other question that comes with a potential deal or
what it might look like, is whether China actually needs it.
You know, we've had a lot of economists in the
private sector coming out with revised estimates for China's growth
this year. They're not necessarily going to be able to
make the five percent target. So what's your view on that.
Is it possible with these tariffs to meet that target?
Speaker 3 (11:18):
Yeah, it's going to be tough. So before the tariffs,
China had launched quite a lot of monetary and fiscal support,
and with all of that support, we thought they might
just be able to hit the five percent for this year.
And then the tariffs come on, and you know, most
economists estimate that they'll knock off at least a point
(11:41):
and probably two from Chinese GDP growth this year, so
they'll essentially eat up all of the stimulus that has
already been announced. So if they want to get close
to five they're going to have to do a lot more,
And they've talked a lot about stimulating consumer demand, et cetera.
But it's going to be tough. So I think that's
one of the reasons that these their preferred outcome here,
(12:03):
that there is some kind of negotiation and the tariffs
come down. They're not trying to prolong this unnecessarily, but
they also want a deal that kind of makes sense
and reflects economic fundamentals, and that frankly doesn't make their
government look too weak. So Xi Jinping really has to
look strong, and I think this is one of the
(12:24):
reasons that they decided to retaliate, which no other country did.
But I think number one they were frustrated that all
their efforts to negotiate had been rebuffed. And then number two,
they thought, well, we're going to get high tariffs no
matter what we do. So politically, what's the best way
for us to play this. What's the best way for
(12:44):
us to mobilize public support at home for what we
know is going to be difficult no matter what we do.
And I think they came up with the answer that
we're going to fight back and we're going to prove
that we're strong and we're standing up to Trump. So
politically it's pretty important for them to to, you know,
maintain that posture. But it's going to be tough, and
you know, if there is no resolution to this within
(13:06):
the next three or four months. I'm personally pretty skeptical
of the hit five percent.
Speaker 1 (13:12):
Even with the additional monetary.
Speaker 3 (13:14):
Even with additional stimulus, it's just very, very hard to
get consumer confidence going. Again, that's not something you can
turn a switch on. But I think the point is
they're willing to take that pain. Essentially, what they're saying
is like, Okay, maybe we don't hit our five percent,
maybe we get three and a half percent.
Speaker 4 (13:30):
We'll live with that.
Speaker 3 (13:32):
Because we think that we can live with that outcome
more than the US public can deal with a lot
lower growth and higher inflation that's going to come down
the road from tariff. So if we have to, we'll
just play a waiting game and we'll see who cracks first.
And we bet that it's the Americans that.
Speaker 2 (13:49):
Will crack first.
Speaker 1 (13:50):
Yeah, So literally a game of chicken.
Speaker 3 (13:52):
It's a game of chicken, or economic attrition or you know,
whatever you want to call it.
Speaker 4 (13:57):
Yeah.
Speaker 1 (13:57):
Yeah, And you've just said that consumer in China it's
not just about flipping a switch. You know, it doesn't
happen overnight. This really doesn't happen in a few years.
What's your read on the government's moves right now to
try to stimulate the consumer is that, you know, they
had this trade in program that seemed very successful, but
(14:18):
sort of a longer term.
Speaker 3 (14:20):
Well, I want to back up and just give you
my theory of what ails the Chinese consumer. Please do
because the reality is, I mean, if you go back
to twenty nineteen, before the pandemic, Chinese consumer is in
pretty good shape. It was a vibrant, fast growing consumer market,
very diverse consumption of both products and services, becoming more sophisticated,
(14:40):
doing a lot of international travel.
Speaker 4 (14:42):
It was a very positive story.
Speaker 3 (14:44):
And basically what we've seen in the last years is
that story went off the rails. I think reason number
one was that you had the pandemic and everything shut
down for a few months in twenty twenty, and China
was really the only major economy in the entire world
that did not help out consumers and households during the pandemic.
The US mailed stimulus checks, most European countries put in
(15:07):
employment or wage guarantees. China did nothing, so there was
a big hit to consumer confidence. Then things came back
a bit, and then they got the second round of
the pandemic in twenty twenty two, Shanghai lockdowns.
Speaker 4 (15:19):
It was really bad, and I.
Speaker 3 (15:21):
Think Chinese consumers were just traumatized by that sort of
double whammy of getting hit and not getting any support
from the government, so they were very cautious coming out
of the pandemic. And then, of course, the other thing
that happened in that period is that the Chinese government
decided to squash the property market, which is the main
source of household wealth. They've done a very effective job
of that, and they've been very determined not to reinflate
(15:44):
the property bubble. But what that means is that one
of the key sources of household confidence, which is their
rising wealth, has been knocked out. So you have kind
of a bad employment market PTSD from the COVID lockdowns
and a comatost property sector and you add all that
(16:04):
stuff up, and Chinese consumers are just they do not
want to spend an extra nickel if they can avoid it.
And so how do you reverse that cycle because that
also feeds into business confidence business as well. Consumers aren't buying,
so we're not going to hire or invest in new
acqui And if business is aren't hiring, then households say, wait,
(16:26):
if I lose my job, I'm not going to get
a new one because no one's hiring. So you have
a negative confidence spiral and you have to do a
bunch of things to turn that around. And I think
they're going to have to do quite a bit more
in terms of promoting private sector business confidence, which they've
started to do with the Internet companies. They probably have
(16:48):
to do a little bit more to support the property
market than they're comfortable doing now, and they probably just
have to pump a lot more government money into the
system than they have done so far. And I think
at the end of the day they will be willing
to do all of those things, but they're doing them
kind of slowly and step by step, so it's not
going to be easy for them to turn.
Speaker 2 (17:09):
On a dime and get consumer confidence up again.
Speaker 1 (17:12):
Yeah, and for the consumer specifically, do you see these
measures as sort of a shorter term, you know, trying
to address the issues in the short term, or do
you see this as fundamentally potentially changing the psychology of
the consumers longer term? In other words, can this actually
create a consumer led economy?
Speaker 3 (17:31):
Well, so, I think a lot of the stuff that
they've done up until now has been essentially short term,
like these trade in programs, and trade in programs did
work a lot better than I thought they would, frankly.
Speaker 1 (17:42):
And that's the equipment and home applying.
Speaker 3 (17:44):
So if you have an old appliance or an old car,
you can trade it in, you can get a subsidy
to buy a new one, and that's you know, been
reasonably effective. But essentially what that does is says you're
going to buy something in two or three years anyway,
Why don't you buy it now, so that's just borrowing
demand from the future. It's not really creating new sustainable demand,
so that's more of a short term fix. Similarly, you know,
(18:06):
JD dot Com has set up a fund to buy
goods from exporters for resale on the domestic market, so
that's again that's kind of like a short term gimmick
that's not going to really get.
Speaker 4 (18:17):
You very far.
Speaker 3 (18:18):
But I think the thing that has changed is that
since last December, Xijionping has made it very clear that
promoting consumption is a top political primary and this is
very different than at any other time in his administration.
So the political importance of promoting consumption has now become paramount,
and that makes a big difference. In the Chinese system
(18:39):
and the Chinese system, a lot happens based on signals
from the top government officials, and for the last five years,
the signals were mainly, we have to invest a lot
in high tech industry to become self sufficient. It was
all a supply side strategy. Now the signal is very
clearly we need to work on demand. And so what
usually happens is that they flail around for while after
(19:01):
these signals go out and then gradually they figure out
tools that help them get to.
Speaker 2 (19:07):
The desired political objective.
Speaker 3 (19:08):
So I think that is important, and I think over
the course of a year or two, what that will
mean is that you'll probably get stronger consumer activity. I
don't think you're headed towards a consumer led economy because
the DNA of huge and pain in the communist parties.
Speaker 4 (19:24):
It's all about growth.
Speaker 3 (19:26):
Comes from investment in technology. That's what they really believe
at bottom. So even if they've made a pretty big
pivot right now to support consumption, I think their longer
term strategy is still very much all about technology investment.
Speaker 1 (19:40):
Interesting because that isn't necessarily I mean quite aside from
what officials in China have said. I mean, you heard
Janet Yellen speak about the importance of China pivoting to
the consumer. You're seeing a lot of other countries who
are hoping that that happens so they don't get access
stuff from China.
Speaker 3 (20:01):
Yeah, and I just think that it's going to be
a long, hard slog to achieve that. You know, other
central bankers, trade ministers, you name it. They've been talking
for decades literally about how China needed to invest less
and consume more, and the Chinese have been, you know,
(20:25):
not very interested in what these people have to say.
So I don't think that they're really going to take
too many cues on their domestic policy from Janet Yellen,
to be frank shocking, but I think there is a problem,
which is more and more countries are running bigger and
bigger trade deficits.
Speaker 2 (20:46):
With China on goods.
Speaker 3 (20:48):
And some countries don't care because they're never really going
to have manufacturing anyway.
Speaker 4 (20:52):
But a lot of countries do care.
Speaker 3 (20:53):
They want to have their own manufacturing sectors and they
don't want them to be hollowed out by cheap Chinese goods.
So I think the way to get around that, and
you've seen this, I think with some of the negotiations
between China and the European Union is for countries to say,
all right, if you want to export your stuff to us,
there's going to be a terif on it. But if
you want to build factories in our countries to build
(21:16):
that stuff with local employment, with local supply chains, with
technology transfer, fine, so you can serve our markets, but
you have to do it based on investment in this
country rather than buy exports. And that is actually what
the United States said to Japan in the nineteen eighties.
(21:37):
We're absorbing a lot of imports of Japanese cars, semiconductors,
other things, and essentially we came up with a modus
vivendi where the Japanese companies agreed to invest a lot
more in production in the United States. Japanese companies still
make a ton of money from the US market, but
a lot more of it is from domestic production.
Speaker 2 (21:56):
Here rather than through exports.
Speaker 3 (21:59):
And that is a viable way of addressing the problems
that are created by these mercantilist economies that like China
or Japan, that really want to stay export driven forever.
As you say, we're going to take some of those
exports and we're going to compel them to turn into
domestic production somewhere else.
Speaker 1 (22:19):
But we're talking so much about trade these days, I
feel like there might be some other risks we're missing.
Is there something else investors should be thinking about?
Speaker 3 (22:27):
Well, it's a fair point, because you know, if you
look at the US economy, for example, imports are only
about eleven or twelve percent of GDP.
Speaker 2 (22:38):
In China, it's.
Speaker 3 (22:40):
About the same imports around ten or eleven percent of
GDP exports are you know, the high teens, but you
still have a very large part of the economy. These
are both gigantic economies and most of it, frankly, is
domestically driven. So the multipliers of trade are very high,
and that's where the change is occurring. So it makes
sense to to pay attention to it. But you're right,
(23:02):
China is a big economy, and before the trade war
rolled along all of us China economists were talking about
other stuff, mainly deflation. And this gets to the consumer
stuff that we were talking about a minute ago, that
China for the last basically three years has had a
falling price level, which is very unusual. China has had
(23:23):
some episodes of deflation before in the last thirty years,
but this is the longest.
Speaker 4 (23:27):
It's the most sustained.
Speaker 3 (23:28):
It's not the deepest, but it's the one that's lasts
the longest, you know, And it reflects in part this
lack of business confidence, lack of consumer confidence. People hoarding
savings and not willing to spend it. So what winds
up happening is that you have a lot of money
available to invest in creating new supply, but you don't
(23:48):
have enough demand to buy the stuff that they're making,
and so it all winds up heading into exports. And
so the question that a lot of us were focusing
on was how is trying to get out of this
deflationary trap that it seems to be in. And some
people say, well, this is like Japan in the nineteen
nineties and they're really heading off the rails. And I
(24:08):
was never in that camp. I won't bore you with
a long list of reasons why China is not Japan
in the nineties, but it really not.
Speaker 4 (24:16):
It has a lot more growth.
Speaker 3 (24:17):
Potential than Japan did at that point. They have made
some mistakes and macropolicy, but if they correct those mistakes,
they could certainly get back onto a much more vibrant
economic growth track, you know, even with some of these
trade disruptions. But what that means is Number one, I
think they have to be a little bit more aggressive
on fiscal policy.
Speaker 4 (24:38):
Interest rates.
Speaker 3 (24:39):
Real interest rates are quite high in China. They can
come down. They've been reluctant to get close to the
zero bound, but I think they need to do more
work there.
Speaker 4 (24:48):
And then the big thing is they have an over.
Speaker 3 (24:52):
Regulated service sector. Because my two liner on China's economy
is manufacturing is over invested and services are overregulated. So
they have all this investment in making stuff, which they're
ver good at, but no one in China wants to buy.
But a lot of the service sectors have lots of regulation,
(25:12):
lots of state owned enterprises that participate in them, not
enough space for entrepreneurial innovation. And so if you deregulated
service sectors, you might be able to get a lot
more employment opportunities for people as private entrepreneurs figure out
how to do things better. In education and healthcare, in
transport logistics, in tourism and entertainment, all of these things
(25:35):
are subject to a lot of controls. So my thesis
on this was that they could do a lot more
on that, and that would be sort of a key
to getting more dynamic and essentially consumer oriented growth.
Speaker 4 (25:51):
The problem is a lot of the.
Speaker 3 (25:53):
Service sectors wind up being very close to Communist party
sort of control red lines, you know, like you can
think about finance, media and so forth. They don't want
to deregulate these very much because it would be too
dangerous politically. So they've got a bit of a problem
there in terms of how do you get enough dynamism
back into the economy while not crossing any of these
(26:14):
political red.
Speaker 1 (26:15):
Lines without losing control.
Speaker 2 (26:16):
Yeah, essentially exactly.
Speaker 1 (26:18):
So deflation, service sector deregulation question work. Yes, trade war.
Where do you see China in about four years time,
specifically the economy in about four years time?
Speaker 3 (26:32):
Uh?
Speaker 4 (26:33):
Boy, that is really hard.
Speaker 3 (26:35):
Well, because you know, this trade war thing is so
large and so unpredictable.
Speaker 4 (26:40):
You really don't know.
Speaker 3 (26:42):
Is the entire global trading system just going to be
completely reconfigured over the next four years, or are we
going to have this storm that abates and we go
back to something like that.
Speaker 4 (26:51):
We had a couple of years ago. Both are possible,
you know.
Speaker 3 (26:55):
I think basically what China is going to look like
in four years is if you think that they're sort
of a technological superpower now, they're going to be much
more of a technological superpower across more sectors. You look
at industrial automation robots, they're the biggest consumer, they're not
the biggest producer.
Speaker 4 (27:16):
They're innovating very quickly.
Speaker 3 (27:17):
They're also doing a lot of innovation in new sources
of green energy like hydrogen things like that. So I
think the technological development at China, if anything, is only
going to accelerate. But this could well happen against the
backdrop of an economy as a whole that's still pretty sluggish,
that's growing maybe only three percent a year, still kind
(27:39):
of deflationary. Both of those things can be true at
the same time, essentially because China is so gigantic that
they can have a very vibrant set of tech sectors
that are globally competitive and leading edge and innovation, and
an overall economy that's still kind of slow. And I
think this is one of the things that people in
the rest of the world have a hard time wrapping
(28:00):
their minds around. They think, if China slows down that much,
then the edge is going to come off its technological
gains also, and I just don't think that's true. So
I think the main thing we have to think about
is China as a growing technological force in many more
fields than we see it today on the one hand,
(28:20):
but also China potentially being a slower growing economy, and
those two things can exist simultaneously, I think for many years.
Speaker 1 (28:29):
That's maybe a good note to leave it on. Okay,
thanks so much for joining us.
Speaker 2 (28:33):
This week.
Speaker 4 (28:33):
It was my pleasure. Thank you.
Speaker 1 (28:35):
You've been listening to Asia Centric from Blueberg Intelligence. I'm
Katidmitrieva in Washington. You can find our podcasts on Apple Podcasts, Spotify,
or wherever you listen. This episode was produced by Clara
Chen and Special help this week was given by Rachel
Lewis Kriski here in Washington. Thanks so much for listening.
Hosts And Creators
John Lee
Tom Corbett
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