May 18, 2026 • 32 mins
On this episode of the News Items Podcast, John Ellis sits down with economist and longtime China watcher Stephen Roach for a sweeping conversation about the uneasy future of the U.S.-China relationship. Roach reflects on three decades of watching China evolve from an open, fast-rising economic experiment into a far more centralized and controlled superpower under Xi Jinping. The discussion ranges from AI, semiconductors, and electric vehicles to Taiwan, Evergrande, COVID lockdowns, and the mounting global debt crisis. Roach argues that China’s technological rise is real and underestimated, but warns that both Beijing and Washington are trapped in a cycle of suspicion that makes meaningful cooperation increasingly difficult. Along the way, he offers rare firsthand insight into China’s political culture, the collapse of open debate inside the country, and why he still believes some form of U.S.-China collaboration remains possible before economic rivalry hardens into something far more dangerous
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SPEAKER_00 (00:00):
Hello and welcome back to the News Items Podcast.
I'm John Ellis.
I'm the founder and editor oftwo Substack newsletters.
One is called News Items, theother is called Political News
Items.
You can find them both atnews-items.com.
Our guest today is StephenRoach.
Mr.
Roach served as a senior fellowat Yale University's Jackson
(00:22):
Institute of Global Affairs for13 years, beginning in 2010, and
is a senior lecturer at the YaleSchool of Management.
In the fall of 2022, Mr.
Roach joined Yale Law School'sPaul Psy China Center as a
senior fellow.
Before coming to Yale, he was achairman of Morgan Stanley Asia
and the firm's chief economistfor the bulk of his 30-year
(00:44):
career at the investment bank,heading up a highly regarded
team of economists.
Mr.
Roach's current teaching andresearch program focuses on the
impacts of Asia on the broaderglobal economy.
At Yale, he has introduced newcourses for undergraduates and
graduate students on the quote,Next China and quote, the
(01:05):
lessons of Japan.
His writing and research alsoaddresses globalization, trade
policy, the post-crisis policyarchitecture, and the capital
markets implications of globalimbalances.
Mr.
Roach has long been one of WallStreet's most influential
economists, and we're verypleased to have this opportunity
to talk to him.
Thank you for doing this.
SPEAKER_01 (01:25):
Pleasure to be with you.
SPEAKER_00 (01:27):
So you have been going back and forth to China
for decades now.
It's been an important part, Isuspect the most important part
of your professional life.
When you think back to when youfirst traveled to Beijing, and
uh when you think about what'sgoing on there now, what are the
three or four things that havejust so dramatically changed in
(01:48):
China?
SPEAKER_01 (01:49):
Well, John, I started going there probably in
the early 1990s, but these werejust flybys.
I'd you know, I'd land inBeijing or Shanghai and uh make
a presentation and go on to thenext stop.
It was not until the Asianfinancial crisis of '97-98 when
I started going there on aregular basis.
(02:11):
I was heading up a globaleconomics team at Merck and
Stanley.
At the time, uh, yes, as youkindly said in your
introduction, we were highlyrated, but we had a terrible
forecast because we didn't haveany idea what was going on with
this crisis.
I had a hunch that China woulduh hold the key to the end game.
So I started going there in thesecond half of 1997 on a regular
(02:34):
basis, and it quickly becameevident to me that China was uh
very different than othereconomies that had fallen hard
in Asia during that period.
And, you know, I got hooked onthe place and started writing
about it, and one thing led toanother, and I think I published
my first article about Chinasomewhere in 1998, late 1998.
(02:59):
I think it was called The Landof the Rising Dragon, and the uh
finance minister at the timeread it or read a Chinese
translation of it and happenedto be um in the States on a
official visit to Washington,but was stopping in in Seattle
on his way back to visit Boeingand wanted to know if I wanted
(03:21):
to um meet him.
And you know, I jumped on aplane.
I think I took a couple ofplanes and we hit it off, and we
were great friends.
And as luck would have it, heintroduced me to one senior
leader after another, and Ibecame part of the inside debate
of China.
What surprised me when I firstwent there was how amazingly
(03:44):
open the place was to debate,exchange, even in quote official
meetings.
Um, you know, there was a lotof, I think, willingness to
speak what was on your mind, andnot a whole lot of sensitivity
to tough questions or evenconstructive criticism.
And, you know, here I am um, youknow, 25 years later, and I'd
have to say if there's one thingthat's changed the most for me
(04:08):
in my China experience, it'sthat latter point.
I mean, they they do not takekindly to engagement, debate,
and constructive criticism.
And uh my favorite example is uhI was sort of a founding
participant in the ChinaDevelopment Forum, which is um a
conference held immediatelyafter the so-called two
(04:30):
sessions, the National People'sCongress.
It was initially set up byformer Premier Zhuang Ji, who
became a friend of mine.
And I went every year, you know,played an active role in the
free and open debate that tookplace under the auspices of that
conference.
And then, you know, a couple ofyears ago, I started to get a
(04:52):
little concerned about China andwrote about it.
I became very concerned aboutwhat was going on in Hong Kong
and wrote about it, and theyexpressed um, you know, some
negative feelings toward that.
They they said to me, this isabout three years ago, you know,
we know that you are the longestappearing foreign delegate at
(05:12):
this conference.
I'd been there 25 years in arow.
And they said, you know, you cancome this year, but we don't
want you to speak.
And I had been given a lot ofspeaking roles there.
I've been keynote speakers andmoderator and panelists and all
that, but don't speak.
So I said to myself, and I foundthis out, you know, a few days
before I was gonna go about twoyears ago.
(05:35):
I said, you know, do I go or doI just cancel?
And I said, you know, I want tosee what it's like.
So I went.
True to form, they didn't let mespeak.
I did speak the very next day ata closed door session and told
them what I thought of theirrestrictions, which was not
particularly a warm and fuzzymessage.
They let me come again last yearunder the same ground rules, and
(05:58):
this year they refused to evenlet me attend.
So the longest serving foreigndelegate is now on the outside
looking in.
And, you know, the debate inChina is stifled, and you know,
I think that is just areflection of the willingness of
the leadership to allow free andopen discussion, which was, you
(06:18):
know, I said a sad thing to seefirsthand, and a sad thing to
see in terms of where it's goingnow.
SPEAKER_00 (06:25):
One of the things that you've written about, and
you cited in a recent column astudy that was published by the
Australian Strategic PolicyInstitute that had one stunning
statistic uh which said that inthe critical technology tracker,
China now ranks first in 66 of74 technologies.
(06:47):
Is that something that you sawyou know building uh course
across the 25, 30 years that youwere visiting there, or is this
something that happenedrecently?
What's your take on thisgigantic leap forward in
technological advance?
SPEAKER_01 (07:03):
Aaron Powell It's been building for a while.
You know, like like any umbreakthrough in science or
technology, it starts at theuniversity level.
I've had the occasion, theopportunity to speak at many of
China's leading universities andsee firsthand how impressive the
faculty is in terms of uhteaching, but research programs.
(07:25):
I've even seen firsthand how umseveral scientists that I got to
know at Yale have gone back toChina, their their homeland,
where they can get betterfunding than they can uh in the
United States and not face thediscrimination that has been
evident in, say, the past eightyears.
And you know, then you you knowyou spend time in the cities and
(07:48):
you know, ride the high-speedtrains, go in the subways.
I was at the 2008 Olympics, anduh they built a whole subway
line just to get you from thecenter of the city out to the um
the Olympic area for the openingceremony, the closing ceremony.
The high-speed rail is unlikeanything you see.
(08:08):
Uh, there is face recognitioneverywhere.
They have an antiquatedcurrency.
Nobody uses currency.
They just sort of tap theirphones.
It's all digitized.
I recently toured one of theirdark factories that makes fleek
state-of-the-art SUVs largelywith robots.
Uh, I also was back in Chinaabout three weeks ago and uh
(08:32):
toured a Tesla factory, a TeslaGiga factory in Shanghai.
And so I was shocked they didn'treally have robots, but they had
the fastest assembly line I'dever seen in my life.
There were cars finished, Teslasrolling off the assembly line.
I clocked them myself about uh35 seconds interval between
(08:52):
cars.
I also went to a digitizedfinancial court in Shanghai that
um, you know, the thepublic-facing part of it in
terms of filing cases andgetting supporting material is
all um AI-enabled and digitized.
So they they've got technologyeverywhere.
But that's not to say China'sperfect, because you know they
(09:14):
have a lot of things missingthat they need for sustainable
economic growth as well.
But uh the technology piece isuh extraordinary by by any
standards uh other than I canmeasure.
unknown (09:26):
Trevor Burrus, Jr.
SPEAKER_00 (09:27):
So recently in an interview, Elon Musk said that
China would win the AI racebecause they had superior
electricity, essentially, thatthe available electricity was 3x
what the U.S.
had.
Is that a a view you share?
Do you think that because oftheir ability to generate
electricity that far exceeds ourability that they will pull
(09:50):
ahead in the quote AI race, endquote?
SPEAKER_01 (09:53):
Aaron Ross Powell Well, I I think it's a con more
of a complex situation thanthat.
From what I understand, they'reactually lagging in data
centers.
They certainly do have thecapacity to generate power, but
you know, they're still about50-55 percent in terms of energy
(10:13):
sources, coal-based.
They are moving aggressively togreen technologies, but they're
coming off a low base, andthere's no question that they
will grow that aspect of theirpower generation very rapidly.
But, you know, this race to umartificial general intelligence
that everybody talks about, youknow, requires smart people, and
(10:36):
they have plenty of them, but sodo we.
And by the intelligence I'vebeen able to glean, you know, we
may be slightly ahead in thetheory and you know algorithms,
but you know, they're veryadvanced and some would say far
ahead in terms of applicationsand having huge databases to
(10:56):
feed into their machine learningmodel.
So their emphasis is really, Ithink, more on applications than
on theory.
And who's to say, you know, youknow, what aspect of AI will
ultimately be decisive indetermining a winner or a loser?
SPEAKER_00 (11:14):
Trevor Burrus, Jr.: Sebastian Malaby just published
a book on Demas Hasebas, thechief executive and founder of
DeepMind, uh, suggested that, orargues, that the U.S.
and China must come together andform a kind of strategic pact to
regulate AI.
Is that even remotely possible?
SPEAKER_01 (11:33):
Aaron Powell I think it's you know remotely possible.
I would agree with him that itwould be an important and
positive development for bothcountries in the world, whether
or not we are willing and theyare willing to put aside
national security concerns toconsider that type of
collaboration remains to beseen.
(11:54):
But I think we should make anattempt to begin to think about
the protocols that might allowus to collaborate more than we
are doing right now, rather thanview it as a race.
AI is as revolutionary as wethink it is, then um, you know,
this has an impact on um on theworld.
(12:17):
And you know, we've got quantumcomputing around the corner that
offers a sort of a similar setof concerns.
And I think collaboration andhaving guardrails to sort of
manage that collaborationultimately will be very
important for both of us.
SPEAKER_00 (12:33):
You wrote a piece recently with Senator, a former
Senator Max Baucus about BITBIT.
Can you tell us about that?
I thought it was a reallyinteresting piece and better you
explain it than me.
SPEAKER_01 (12:46):
Well, BIT stands for bilateral investment treaty.
We have about 40 of them inplace right now with uh our
partners around the world.
China has about 110 of them inplace, more than any other
country.
And basically what they do isthey're negotiated uh treaties
that allow for cross-borderinvestments between partners.
(13:09):
And they're inherentlypro-growth because if you can
get foreign investors to um putcapital into your industries,
uh, whether they'remanufacturing or services, you
can you can boost employment,income, consumption, and
ultimately GDP growth.
So they they provide growthdividends for both partners in
(13:33):
an arrangement.
We'd been negotiating abilateral investment treaty with
China for I think it was abouteight years up until 2017, and
Trump was elected, it was thenyou know entered office for the
first time, and he justsuspended, canceled the
negotiations, took the idea offthe table.
(13:55):
You know, at that point, he was,you know, any idea that was a
legacy from Obama, whether itwas, you know, the Iranian
nuclear deal or a bilateralinvestment treaty with China,
was considered to be inadequatefor uh the purpose, and he
canceled them.
And now I'm interested, youknow, to hear in this summit
that is going on right now inBeijing, there's at least some
(14:18):
rumors.
There was a piece just today inthe New York Times about the
consideration being given to amore restricted model version of
this called a an investmentboard that would allow
cross-border investments from usinto China and from China into
us in non-sensitive areas, whichI think would qualify if they
(14:42):
did not violate at this point,you know, uh undefined national
security uh protocols.
You know, at least there's talkabout it, and uh Max was a
senator, but it was also anambassador in China.
We've been talking about thisfor a long time.
And uh so we we wrote somethingand you know, it wasn't The
(15:05):
Economist last week thatrepresented our ideas for this
proposal.
SPEAKER_00 (15:11):
Yeah, I saw the I saw the story in the Times and I
thought, well, they just tookMr.
Roach's idea and kind ofreconfigured it so that it
wouldn't be credited to you.
SPEAKER_01 (15:22):
Well, I I don't know about that, but I I you know I I
put out a little bit about um myuh social media community
saying, Well, it's a partialstep in the right direction.
I'm gratified that it's uhbroadly consistent with what
we're doing, but we areproposing something more
ambitious, less restricted.
(15:42):
But you know, we'll we'll takeat this point we'll take a step
in the right direction and gofrom there.
SPEAKER_00 (15:47):
So we have to talk about the summit.
You know, you've had obviouslylong and uh deep experience in
China and with Chineseleadership and Chinese thought
leadership.
What what do you make of Mr.
Trump's uh visit to uh Beijing?
Is there reasons for optimism?
What's your take?
Uh I'm thoroughly confused byit.
So I need to talk to somebodywho isn't.
SPEAKER_01 (16:19):
We saw that live, you know, yesterday, last night,
and again, you know, all thegreat toasts.
But I think the odds of a majorbreakthrough are low.
I've looked at the last 22leader-to-leader summits between
the U.S.
and China going back to 1972with uh uh Mao and uh President
(16:40):
Nixon, and with the exception ofthe Nixon Mao summit, and then
the following one in 1979between Deng Xiaoping and Jimmy
Carter, those two were reallymajor earth-shattering events.
The the remainder of them, 20 ofthem, are basically placeholders
that don't achieve a whole lot.
(17:01):
Some of them backfire, and sothere's negative results.
I would I would put this in thecategory of placeholders so far.
That's probably unfair becausewe don't have the final readouts
yet, but I haven't seen anythingto lead me to believe that we
can expect a major breakthrough.
As I said, I am encouraged aboutthe investment board um idea
(17:24):
that gets put into the finalcommunique.
And, you know, I think there'sbeen a lot of focus, John, on on
Xi Jinping's views on Taiwan,which are very direct and um
bordering on a threat to theUnited States, that it should
make every effort to avoiddestabilizing the current sort
(17:47):
of one China philosophy thatmaintains a delicate equilibrium
right now between Taiwan, theUS, and uh the mainland.
SPEAKER_00 (17:59):
You know, the big theory going back to the
nineties was that if youintegrated China into the global
economy, uh that would open upChina to know the larger world,
and then that would leadinevitably to some form of
greater political freedom,greater ability to, you know, as
(18:20):
you said, speak freely anddebate freely, constructive
criticism welcomed.
That did not work out.
Why do you think that did notwork out?
SPEAKER_01 (18:30):
Aaron Ross Powell Well, you know, there are
several reasons, I think.
First of all, I'd say that thetheory was mainly ours and not
theirs.
They have a different systemthan we do for lots of reasons
for that, but mostly, you know,it's a communist society as
opposed to our free and opendemocracy.
And yet, you know, there weresome movements toward reform in
(18:54):
the 1980s, 1990s, the door onreform slammed shut in uh 1998
with the tragedy at TiananmenSquare, but then began to reopen
again in the early 2000s untilXi Jinping came to power.
And Xi Jinping, you know,believed in the um the strength
of China, was tightly alignedwith the strength of the party.
(19:18):
He felt the party wasdangerously corrupt and moved to
um clean out uh the corruptpieces of the party.
He's now moved in to do the samewith the military.
Obviously, his his hold on poweris far deeper, far more
extensive than any Chineseleader since Mao.
He's he's now serving his thirdterm, which had to get
(19:41):
permissioned by changing theconstitutional structure of
succession, uh, which prior toXi Jinping allowed for only two
five-year terms.
And he's he's basically elevatedhimself to a level of
authoritarian leadership thathas not been evident since Mao
in the 50s, 60s, and early 70s.
(20:03):
The other thing that I've done alot of work on in terms of my
own research on China is theirinability or their unwillingness
to simulate uh householdconsumption.
This is the People's Republic ofChina, but the people's
consumption share of the Chineseeconomy is around 40%, which is
(20:24):
the lowest by a long shot of anymajor economy in the world.
Ours is 65, 66 percent bycomparison.
And why is that?
You know, I I again I've done alot of research on that.
I think I know the answer.
The bottom line is they don'treally want to stimulate
household consumption becauseyou think about consumer
(20:47):
societies, you know, theyfeature um upward mobility, um
free and open communication.
It's an aspirational growthexperience, and that runs
against the grain of thecentralized power that is
manifested in certainly a leaderlike Xi Jinping, where the focus
is on technology and productionand the supply side of the
(21:12):
economy, and he's willing toignore, if not suppress, the
vitality on the demand side.
And maybe he's justuncomfortable with this
aspirational force that we callthe consumption in the West.
SPEAKER_00 (21:25):
What impact did you see from the pandemic?
I mean, how how did thepandemic, after five years now,
we can look back, what impactdid the pandemic have on the
leadership and and the societyat large from your research?
SPEAKER_01 (21:40):
Well, it was a uh wrenching experience for the
people and uh uh the leadership.
I was in China when SARS brokeout, and that was a real shock.
You know, they were not preparedfor that, but COVID dwarfed the
impact of of SARS by A longshot.
(22:01):
And you know, there was a bighush-hush over how the COVID
virus started.
You know, was it um you knowtransmitted through animals in a
live market in Wuhan, or did itcome out of a lab?
I don't know if we'll ever knowthe answer to that.
Uh, but you know, the Chinesehave this is just another
(22:22):
example of the heightenedsensitivity that Chinese leaders
have to being blamed for anyproblem in the world.
They did not have, you know,while they have leading uh
laboratories of scientificresearch, their approach to
public health was deficient.
So they didn't really know howto address the issues of spread.
(22:45):
So to them, it was aboutdraconian lockdowns.
They they just preventedcitizens from leaving their
homes, and and this reallyboiled over in uh Shanghai,
China's most uh dynamic uhmodern city in many respects
where citizens were restrictedto quarters for several months.
(23:08):
I want to say, you know, I mayhave to correct this in late
2020 or early 21.
But you know, this was anexperience that sparked
significant protest by theChinese people.
They spoke out directly againstuh Xi Jinping, and um he changed
(23:30):
the the policies in a verydramatic way that let the virus
run rampant in Shanghai with adeath toll that remains uh
unknown today.
And you know, the scarring ofthat experience is still with
China today.
And consumers in this rapidlymodern society were subjected to
a disease shock that they neverthought was coming.
(23:53):
I would say you know, we in theWest probably had a similar
reaction to that as well, but wehad better public health
practices to deal with it.
SPEAKER_00 (24:03):
Another thing that sort of hit the uh people of
China was as the propertycrisis, which really drove uh a
lot of economic growth for many,many years, and then suddenly it
went bust.
News items is obsessed withEvergrand.
Uh we report with some peoplecall it the Evergrande Daily
News.
But I wanted to ask you, I Idon't understand maybe you can
(24:25):
explain this, why China didn'tjust put Evergrand into some
form of bankruptcy and be donewith it.
Why have they let it why havethey let the property bankruptcy
process, I guess you call it,stagger on as long as it's
staggered on?
SPEAKER_01 (24:39):
Well, I think you answered it, John, and in your
uh in posing the question.
You know, the residentialconstruction sector at its peak
was accounting for about aquarter of the economic growth
in the nation, and they did notwant to curtail this major
source of growth.
That is a very Japanese-likeresponse.
(25:00):
Uh the Japanese had equity andproperty bubbles in the late 80s
and early 90s, and they did notwant to restructure their banks
until the late 90s.
And so they had the first ofwhat turned out to be three lost
decades because they were a weakneed in dealing with this threat
(25:20):
to their growth model.
And I think in the case ofChina, it was a similar, you
know, very human-like denialthat kept the government from
really going in hard andliquidating these insolvent,
unproductive companies.
unknown (25:35):
Trevor Burrus, Jr.
SPEAKER_00 (25:35):
I wanted to go back to Taiwan for a second.
90 percent plus of the world'shigh-end chips are manufactured
in Taiwan.
China, let's call it, absorbs uhTaiwan in the next five or ten
years.
What is what does that mean tothe global economy?
Secretary Bascent uh said thatit would be an economic
(25:58):
apocalypse.
That seemed like rather extremelanguage.
What is what's your view ofthat?
SPEAKER_01 (26:04):
Well, there's no question that the Taiwan uh
semiconductor corporation is byfar the most advanced, the
strongest producer of chips, youknow, uh ordinary as well as
high-end um idiot type chipsthat drive AI.
And uh if if the Chinese were totake over Taiwan by force and
(26:28):
utilize that force to constrainthe supply of those chips to the
rest of the world, including theUnited States, you know, that
would be catastrophic.
There's no sign that they wantto do that.
Uh, this is you knowhypothetical.
It's always easy to uhhypothesize catastrophic uh
scenarios.
(26:48):
We used to do that for a livingin Morgan Stanley, thank God I
can go now.
But China recognizes theimportance that the global
economy plays in supporting itsgrowth model, whether it's
exports or imports, and givingthem the components and parts
they need to producestate-of-the-art technology.
(27:09):
And um, if they were to takeover Taiwan by force, they would
squander any semblance ofconnectivity they have to the
world that they are so dependenton.
And they know that, and yetthere's a view in the U.S.
that was based on some testimonyby uh a retired admiral, uh his
(27:29):
name was Davidson, uh, who saidthat Xi Jinping has a window,
and I think he he initially laidthis out as coming in the 2025
to 2027 uh time interval bywhich he was going to move on
Taiwan.
He had no evidence for that, butthat's become sort of gospel in
(27:50):
security and defense purposes,and has caused many like um
Treasury Secretary to warn ofwhat would happen should that uh
come true.
I do not think that China wouldmake that move on Taiwan in this
time frame.
I personally think the biggestrisk to uh to Taiwan is our
(28:12):
destabilizing aggressive armsales supported on a bipartisan
basis by the U.S.
Congress.
And I think that's the subtextof Xi Jinping's warning that he
uh issued to President Trumpearlier today.
SPEAKER_00 (28:26):
As you follow China, what do you read?
How do you keep up to date withwhat's happening there, aside
from obviously the primaryresearch that you do yourself?
SPEAKER_01 (28:36):
Yeah, I mean, uh, you know, everybody's a China
expert.
Um, you know, I certainly readit all, and I find um, of
course, news items has a lot ofregular information.
I read Bill Bishop.
I try to read the um you knowall the official statements and
speeches and work reports of theChinese government.
(28:59):
I have an acting active networkof my own where I've been a
participant in a track twodialogue with Chinese and
American experts, the same groupfor about 15 years, uh, and we
communicate on a regular basis.
You know, I will I will look atanything and everything, and
there's plenty of it aroundright now.
SPEAKER_00 (29:18):
Aaron Powell I want to ask you one last question,
which is the entire world seemsto be drowning in debt.
How how concerned are you aboutthat?
Is that just a post-pandemic uhwe got to work our way out of
it, or is it it does it seemshere anyway that it just keeps
growing like a monster?
SPEAKER_01 (29:37):
Aaron Powell Well, it's a global problem, as you
know, but you know, we're now ata point where our debt-to-GDP
ratio is back to a level that welast saw in um the immediate
aftermath of World War II.
For a long time, don't worryabout it because we can afford
take on debt because interestrates are low, and that's a
(29:59):
reflection of low inflation.
And, you know, lo and behold,um, you know, we've had an
inflation shock after COVID thatcame from supply chain
disruptions.
And we're getting some um hintsof another one right now because
of the constriction of the uhenergy supply in the uh Strait
of Hormuz and how that'sspilling over into derivative
(30:22):
products like uh fertilizer,which have impacts on the food
chain and so on and so forth.
And so far, the inflation shockfrom the supply side has been
limited, but you know, you can'trule that out.
And if inflation goes up,interest rates will follow
despite President Trump's desireto get a friendly chair in who
(30:43):
will give him lower rates.
No one in their right mind, andKevin Warsh has a good mind, is
going to do that as a centralbanker.
The debt bomb that nobody'sworrying about because of the
low interest rates becomes farmore problematic as a result to
fund and finance.
And there's related to that, ifif we're the ones who really
(31:04):
break with our past strengthmore than other countries, then
there's uh risk to the US dollarthat could compound the domestic
interest rate risk as well.
Funding under thosecircumstances will be
complicated from foreign sourcesof capital as well.
I don't think we can take thislightly in any way whatsoever.
SPEAKER_00 (31:25):
I think we've taken enough of your time.
Thank you very much for talkingto us today.
And uh, we look forward toreading.
You have a substack which iscalled Conflict.
Am I correct on that?
SPEAKER_01 (31:36):
That is correct.
I like it quite a lot.
I'm writing a new book as wespeak.
SPEAKER_00 (31:42):
What's the book about?
SPEAKER_01 (31:43):
Well, I this is my third book on the US-China
conflict.
And the first two were werereally pretty negative.
And I will say they did areasonably accurate job in
projecting how this conflict wasgoing to unfold or what its
consequences were.
(32:04):
But I didn't want to end thestory, you know, on that basis.
So this new book book istentatively titled uh conflict
resolution.
I want to provide uh a way out.
And uh as somebody who iscongenitally pessimistic, it's
always good to write somethingthat's a little bit more
optimistic and allows me tosleep better uh at night.
(32:26):
And I'm about, I don't know, 75%of the way through the first
draft right now, and I hopeit'll be out at some point next
year.
SPEAKER_00 (32:34):
I look forward to reading it.
Again, thanks very much fordoing this.
And your Substacks uh Substackhandle, I guess, would be Google
Stephen Roach, R O A C H.
SPEAKER_01 (32:46):
If you do Roach Conflict, you'll find it.
SPEAKER_00 (32:48):
There you go.
Thanks very much.
Thank you, John.
SPEAKER_01 (32:51):
Pleasure.
Hello and welcome back to the News Items Podcast.
I'm John Ellis.
I'm the founder and editor oftwo Substack newsletters.
One is called News Items, theother is called Political News
Items.
You can find them both atnews-items.com.
Our guest today is StephenRoach.
Mr.
Roach served as a senior fellowat Yale University's Jackson
(00:22):
Institute of Global Affairs for13 years, beginning in 2010, and
is a senior lecturer at the YaleSchool of Management.
In the fall of 2022, Mr.
Roach joined Yale Law School'sPaul Psy China Center as a
senior fellow.
Before coming to Yale, he was achairman of Morgan Stanley Asia
and the firm's chief economistfor the bulk of his 30-year
(00:44):
career at the investment bank,heading up a highly regarded
team of economists.
Mr.
Roach's current teaching andresearch program focuses on the
impacts of Asia on the broaderglobal economy.
At Yale, he has introduced newcourses for undergraduates and
graduate students on the quote,Next China and quote, the
(01:05):
lessons of Japan.
His writing and research alsoaddresses globalization, trade
policy, the post-crisis policyarchitecture, and the capital
markets implications of globalimbalances.
Mr.
Roach has long been one of WallStreet's most influential
economists, and we're verypleased to have this opportunity
to talk to him.
Thank you for doing this.
SPEAKER_01 (01:25):
Pleasure to be with you.
SPEAKER_00 (01:27):
So you have been going back and forth to China
for decades now.
It's been an important part, Isuspect the most important part
of your professional life.
When you think back to when youfirst traveled to Beijing, and
uh when you think about what'sgoing on there now, what are the
three or four things that havejust so dramatically changed in
(01:48):
China?
SPEAKER_01 (01:49):
Well, John, I started going there probably in
the early 1990s, but these werejust flybys.
I'd you know, I'd land inBeijing or Shanghai and uh make
a presentation and go on to thenext stop.
It was not until the Asianfinancial crisis of '97-98 when
I started going there on aregular basis.
(02:11):
I was heading up a globaleconomics team at Merck and
Stanley.
At the time, uh, yes, as youkindly said in your
introduction, we were highlyrated, but we had a terrible
forecast because we didn't haveany idea what was going on with
this crisis.
I had a hunch that China woulduh hold the key to the end game.
So I started going there in thesecond half of 1997 on a regular
(02:34):
basis, and it quickly becameevident to me that China was uh
very different than othereconomies that had fallen hard
in Asia during that period.
And, you know, I got hooked onthe place and started writing
about it, and one thing led toanother, and I think I published
my first article about Chinasomewhere in 1998, late 1998.
(02:59):
I think it was called The Landof the Rising Dragon, and the uh
finance minister at the timeread it or read a Chinese
translation of it and happenedto be um in the States on a
official visit to Washington,but was stopping in in Seattle
on his way back to visit Boeingand wanted to know if I wanted
(03:21):
to um meet him.
And you know, I jumped on aplane.
I think I took a couple ofplanes and we hit it off, and we
were great friends.
And as luck would have it, heintroduced me to one senior
leader after another, and Ibecame part of the inside debate
of China.
What surprised me when I firstwent there was how amazingly
(03:44):
open the place was to debate,exchange, even in quote official
meetings.
Um, you know, there was a lotof, I think, willingness to
speak what was on your mind, andnot a whole lot of sensitivity
to tough questions or evenconstructive criticism.
And, you know, here I am um, youknow, 25 years later, and I'd
have to say if there's one thingthat's changed the most for me
(04:08):
in my China experience, it'sthat latter point.
I mean, they they do not takekindly to engagement, debate,
and constructive criticism.
And uh my favorite example is uhI was sort of a founding
participant in the ChinaDevelopment Forum, which is um a
conference held immediatelyafter the so-called two
(04:30):
sessions, the National People'sCongress.
It was initially set up byformer Premier Zhuang Ji, who
became a friend of mine.
And I went every year, you know,played an active role in the
free and open debate that tookplace under the auspices of that
conference.
And then, you know, a couple ofyears ago, I started to get a
(04:52):
little concerned about China andwrote about it.
I became very concerned aboutwhat was going on in Hong Kong
and wrote about it, and theyexpressed um, you know, some
negative feelings toward that.
They they said to me, this isabout three years ago, you know,
we know that you are the longestappearing foreign delegate at
(05:12):
this conference.
I'd been there 25 years in arow.
And they said, you know, you cancome this year, but we don't
want you to speak.
And I had been given a lot ofspeaking roles there.
I've been keynote speakers andmoderator and panelists and all
that, but don't speak.
So I said to myself, and I foundthis out, you know, a few days
before I was gonna go about twoyears ago.
(05:35):
I said, you know, do I go or doI just cancel?
And I said, you know, I want tosee what it's like.
So I went.
True to form, they didn't let mespeak.
I did speak the very next day ata closed door session and told
them what I thought of theirrestrictions, which was not
particularly a warm and fuzzymessage.
They let me come again last yearunder the same ground rules, and
(05:58):
this year they refused to evenlet me attend.
So the longest serving foreigndelegate is now on the outside
looking in.
And, you know, the debate inChina is stifled, and you know,
I think that is just areflection of the willingness of
the leadership to allow free andopen discussion, which was, you
(06:18):
know, I said a sad thing to seefirsthand, and a sad thing to
see in terms of where it's goingnow.
SPEAKER_00 (06:25):
One of the things that you've written about, and
you cited in a recent column astudy that was published by the
Australian Strategic PolicyInstitute that had one stunning
statistic uh which said that inthe critical technology tracker,
China now ranks first in 66 of74 technologies.
(06:47):
Is that something that you sawyou know building uh course
across the 25, 30 years that youwere visiting there, or is this
something that happenedrecently?
What's your take on thisgigantic leap forward in
technological advance?
SPEAKER_01 (07:03):
Aaron Powell It's been building for a while.
You know, like like any umbreakthrough in science or
technology, it starts at theuniversity level.
I've had the occasion, theopportunity to speak at many of
China's leading universities andsee firsthand how impressive the
faculty is in terms of uhteaching, but research programs.
(07:25):
I've even seen firsthand how umseveral scientists that I got to
know at Yale have gone back toChina, their their homeland,
where they can get betterfunding than they can uh in the
United States and not face thediscrimination that has been
evident in, say, the past eightyears.
And you know, then you you knowyou spend time in the cities and
(07:48):
you know, ride the high-speedtrains, go in the subways.
I was at the 2008 Olympics, anduh they built a whole subway
line just to get you from thecenter of the city out to the um
the Olympic area for the openingceremony, the closing ceremony.
The high-speed rail is unlikeanything you see.
(08:08):
Uh, there is face recognitioneverywhere.
They have an antiquatedcurrency.
Nobody uses currency.
They just sort of tap theirphones.
It's all digitized.
I recently toured one of theirdark factories that makes fleek
state-of-the-art SUVs largelywith robots.
Uh, I also was back in Chinaabout three weeks ago and uh
(08:32):
toured a Tesla factory, a TeslaGiga factory in Shanghai.
And so I was shocked they didn'treally have robots, but they had
the fastest assembly line I'dever seen in my life.
There were cars finished, Teslasrolling off the assembly line.
I clocked them myself about uh35 seconds interval between
(08:52):
cars.
I also went to a digitizedfinancial court in Shanghai that
um, you know, the thepublic-facing part of it in
terms of filing cases andgetting supporting material is
all um AI-enabled and digitized.
So they they've got technologyeverywhere.
But that's not to say China'sperfect, because you know they
(09:14):
have a lot of things missingthat they need for sustainable
economic growth as well.
But uh the technology piece isuh extraordinary by by any
standards uh other than I canmeasure.
unknown (09:26):
Trevor Burrus, Jr.
SPEAKER_00 (09:27):
So recently in an interview, Elon Musk said that
China would win the AI racebecause they had superior
electricity, essentially, thatthe available electricity was 3x
what the U.S.
had.
Is that a a view you share?
Do you think that because oftheir ability to generate
electricity that far exceeds ourability that they will pull
(09:50):
ahead in the quote AI race, endquote?
SPEAKER_01 (09:53):
Aaron Ross Powell Well, I I think it's a con more
of a complex situation thanthat.
From what I understand, they'reactually lagging in data
centers.
They certainly do have thecapacity to generate power, but
you know, they're still about50-55 percent in terms of energy
(10:13):
sources, coal-based.
They are moving aggressively togreen technologies, but they're
coming off a low base, andthere's no question that they
will grow that aspect of theirpower generation very rapidly.
But, you know, this race to umartificial general intelligence
that everybody talks about, youknow, requires smart people, and
(10:36):
they have plenty of them, but sodo we.
And by the intelligence I'vebeen able to glean, you know, we
may be slightly ahead in thetheory and you know algorithms,
but you know, they're veryadvanced and some would say far
ahead in terms of applicationsand having huge databases to
(10:56):
feed into their machine learningmodel.
So their emphasis is really, Ithink, more on applications than
on theory.
And who's to say, you know, youknow, what aspect of AI will
ultimately be decisive indetermining a winner or a loser?
SPEAKER_00 (11:14):
Trevor Burrus, Jr.: Sebastian Malaby just published
a book on Demas Hasebas, thechief executive and founder of
DeepMind, uh, suggested that, orargues, that the U.S.
and China must come together andform a kind of strategic pact to
regulate AI.
Is that even remotely possible?
SPEAKER_01 (11:33):
Aaron Powell I think it's you know remotely possible.
I would agree with him that itwould be an important and
positive development for bothcountries in the world, whether
or not we are willing and theyare willing to put aside
national security concerns toconsider that type of
collaboration remains to beseen.
(11:54):
But I think we should make anattempt to begin to think about
the protocols that might allowus to collaborate more than we
are doing right now, rather thanview it as a race.
AI is as revolutionary as wethink it is, then um, you know,
this has an impact on um on theworld.
(12:17):
And you know, we've got quantumcomputing around the corner that
offers a sort of a similar setof concerns.
And I think collaboration andhaving guardrails to sort of
manage that collaborationultimately will be very
important for both of us.
SPEAKER_00 (12:33):
You wrote a piece recently with Senator, a former
Senator Max Baucus about BITBIT.
Can you tell us about that?
I thought it was a reallyinteresting piece and better you
explain it than me.
SPEAKER_01 (12:46):
Well, BIT stands for bilateral investment treaty.
We have about 40 of them inplace right now with uh our
partners around the world.
China has about 110 of them inplace, more than any other
country.
And basically what they do isthey're negotiated uh treaties
that allow for cross-borderinvestments between partners.
(13:09):
And they're inherentlypro-growth because if you can
get foreign investors to um putcapital into your industries,
uh, whether they'remanufacturing or services, you
can you can boost employment,income, consumption, and
ultimately GDP growth.
So they they provide growthdividends for both partners in
(13:33):
an arrangement.
We'd been negotiating abilateral investment treaty with
China for I think it was abouteight years up until 2017, and
Trump was elected, it was thenyou know entered office for the
first time, and he justsuspended, canceled the
negotiations, took the idea offthe table.
(13:55):
You know, at that point, he was,you know, any idea that was a
legacy from Obama, whether itwas, you know, the Iranian
nuclear deal or a bilateralinvestment treaty with China,
was considered to be inadequatefor uh the purpose, and he
canceled them.
And now I'm interested, youknow, to hear in this summit
that is going on right now inBeijing, there's at least some
(14:18):
rumors.
There was a piece just today inthe New York Times about the
consideration being given to amore restricted model version of
this called a an investmentboard that would allow
cross-border investments from usinto China and from China into
us in non-sensitive areas, whichI think would qualify if they
(14:42):
did not violate at this point,you know, uh undefined national
security uh protocols.
You know, at least there's talkabout it, and uh Max was a
senator, but it was also anambassador in China.
We've been talking about thisfor a long time.
And uh so we we wrote somethingand you know, it wasn't The
(15:05):
Economist last week thatrepresented our ideas for this
proposal.
SPEAKER_00 (15:11):
Yeah, I saw the I saw the story in the Times and I
thought, well, they just tookMr.
Roach's idea and kind ofreconfigured it so that it
wouldn't be credited to you.
SPEAKER_01 (15:22):
Well, I I don't know about that, but I I you know I I
put out a little bit about um myuh social media community
saying, Well, it's a partialstep in the right direction.
I'm gratified that it's uhbroadly consistent with what
we're doing, but we areproposing something more
ambitious, less restricted.
(15:42):
But you know, we'll we'll takeat this point we'll take a step
in the right direction and gofrom there.
SPEAKER_00 (15:47):
So we have to talk about the summit.
You know, you've had obviouslylong and uh deep experience in
China and with Chineseleadership and Chinese thought
leadership.
What what do you make of Mr.
Trump's uh visit to uh Beijing?
Is there reasons for optimism?
What's your take?
Uh I'm thoroughly confused byit.
So I need to talk to somebodywho isn't.
SPEAKER_01 (16:19):
We saw that live, you know, yesterday, last night,
and again, you know, all thegreat toasts.
But I think the odds of a majorbreakthrough are low.
I've looked at the last 22leader-to-leader summits between
the U.S.
and China going back to 1972with uh uh Mao and uh President
(16:40):
Nixon, and with the exception ofthe Nixon Mao summit, and then
the following one in 1979between Deng Xiaoping and Jimmy
Carter, those two were reallymajor earth-shattering events.
The the remainder of them, 20 ofthem, are basically placeholders
that don't achieve a whole lot.
(17:01):
Some of them backfire, and sothere's negative results.
I would I would put this in thecategory of placeholders so far.
That's probably unfair becausewe don't have the final readouts
yet, but I haven't seen anythingto lead me to believe that we
can expect a major breakthrough.
As I said, I am encouraged aboutthe investment board um idea
(17:24):
that gets put into the finalcommunique.
And, you know, I think there'sbeen a lot of focus, John, on on
Xi Jinping's views on Taiwan,which are very direct and um
bordering on a threat to theUnited States, that it should
make every effort to avoiddestabilizing the current sort
(17:47):
of one China philosophy thatmaintains a delicate equilibrium
right now between Taiwan, theUS, and uh the mainland.
SPEAKER_00 (17:59):
You know, the big theory going back to the
nineties was that if youintegrated China into the global
economy, uh that would open upChina to know the larger world,
and then that would leadinevitably to some form of
greater political freedom,greater ability to, you know, as
(18:20):
you said, speak freely anddebate freely, constructive
criticism welcomed.
That did not work out.
Why do you think that did notwork out?
SPEAKER_01 (18:30):
Aaron Ross Powell Well, you know, there are
several reasons, I think.
First of all, I'd say that thetheory was mainly ours and not
theirs.
They have a different systemthan we do for lots of reasons
for that, but mostly, you know,it's a communist society as
opposed to our free and opendemocracy.
And yet, you know, there weresome movements toward reform in
(18:54):
the 1980s, 1990s, the door onreform slammed shut in uh 1998
with the tragedy at TiananmenSquare, but then began to reopen
again in the early 2000s untilXi Jinping came to power.
And Xi Jinping, you know,believed in the um the strength
of China, was tightly alignedwith the strength of the party.
(19:18):
He felt the party wasdangerously corrupt and moved to
um clean out uh the corruptpieces of the party.
He's now moved in to do the samewith the military.
Obviously, his his hold on poweris far deeper, far more
extensive than any Chineseleader since Mao.
He's he's now serving his thirdterm, which had to get
(19:41):
permissioned by changing theconstitutional structure of
succession, uh, which prior toXi Jinping allowed for only two
five-year terms.
And he's he's basically elevatedhimself to a level of
authoritarian leadership thathas not been evident since Mao
in the 50s, 60s, and early 70s.
(20:03):
The other thing that I've done alot of work on in terms of my
own research on China is theirinability or their unwillingness
to simulate uh householdconsumption.
This is the People's Republic ofChina, but the people's
consumption share of the Chineseeconomy is around 40%, which is
(20:24):
the lowest by a long shot of anymajor economy in the world.
Ours is 65, 66 percent bycomparison.
And why is that?
You know, I I again I've done alot of research on that.
I think I know the answer.
The bottom line is they don'treally want to stimulate
household consumption becauseyou think about consumer
(20:47):
societies, you know, theyfeature um upward mobility, um
free and open communication.
It's an aspirational growthexperience, and that runs
against the grain of thecentralized power that is
manifested in certainly a leaderlike Xi Jinping, where the focus
is on technology and productionand the supply side of the
(21:12):
economy, and he's willing toignore, if not suppress, the
vitality on the demand side.
And maybe he's justuncomfortable with this
aspirational force that we callthe consumption in the West.
SPEAKER_00 (21:25):
What impact did you see from the pandemic?
I mean, how how did thepandemic, after five years now,
we can look back, what impactdid the pandemic have on the
leadership and and the societyat large from your research?
SPEAKER_01 (21:40):
Well, it was a uh wrenching experience for the
people and uh uh the leadership.
I was in China when SARS brokeout, and that was a real shock.
You know, they were not preparedfor that, but COVID dwarfed the
impact of of SARS by A longshot.
(22:01):
And you know, there was a bighush-hush over how the COVID
virus started.
You know, was it um you knowtransmitted through animals in a
live market in Wuhan, or did itcome out of a lab?
I don't know if we'll ever knowthe answer to that.
Uh, but you know, the Chinesehave this is just another
(22:22):
example of the heightenedsensitivity that Chinese leaders
have to being blamed for anyproblem in the world.
They did not have, you know,while they have leading uh
laboratories of scientificresearch, their approach to
public health was deficient.
So they didn't really know howto address the issues of spread.
(22:45):
So to them, it was aboutdraconian lockdowns.
They they just preventedcitizens from leaving their
homes, and and this reallyboiled over in uh Shanghai,
China's most uh dynamic uhmodern city in many respects
where citizens were restrictedto quarters for several months.
(23:08):
I want to say, you know, I mayhave to correct this in late
2020 or early 21.
But you know, this was anexperience that sparked
significant protest by theChinese people.
They spoke out directly againstuh Xi Jinping, and um he changed
(23:30):
the the policies in a verydramatic way that let the virus
run rampant in Shanghai with adeath toll that remains uh
unknown today.
And you know, the scarring ofthat experience is still with
China today.
And consumers in this rapidlymodern society were subjected to
a disease shock that they neverthought was coming.
(23:53):
I would say you know, we in theWest probably had a similar
reaction to that as well, but wehad better public health
practices to deal with it.
SPEAKER_00 (24:03):
Another thing that sort of hit the uh people of
China was as the propertycrisis, which really drove uh a
lot of economic growth for many,many years, and then suddenly it
went bust.
News items is obsessed withEvergrand.
Uh we report with some peoplecall it the Evergrande Daily
News.
But I wanted to ask you, I Idon't understand maybe you can
(24:25):
explain this, why China didn'tjust put Evergrand into some
form of bankruptcy and be donewith it.
Why have they let it why havethey let the property bankruptcy
process, I guess you call it,stagger on as long as it's
staggered on?
SPEAKER_01 (24:39):
Well, I think you answered it, John, and in your
uh in posing the question.
You know, the residentialconstruction sector at its peak
was accounting for about aquarter of the economic growth
in the nation, and they did notwant to curtail this major
source of growth.
That is a very Japanese-likeresponse.
(25:00):
Uh the Japanese had equity andproperty bubbles in the late 80s
and early 90s, and they did notwant to restructure their banks
until the late 90s.
And so they had the first ofwhat turned out to be three lost
decades because they were a weakneed in dealing with this threat
(25:20):
to their growth model.
And I think in the case ofChina, it was a similar, you
know, very human-like denialthat kept the government from
really going in hard andliquidating these insolvent,
unproductive companies.
unknown (25:35):
Trevor Burrus, Jr.
SPEAKER_00 (25:35):
I wanted to go back to Taiwan for a second.
90 percent plus of the world'shigh-end chips are manufactured
in Taiwan.
China, let's call it, absorbs uhTaiwan in the next five or ten
years.
What is what does that mean tothe global economy?
Secretary Bascent uh said thatit would be an economic
(25:58):
apocalypse.
That seemed like rather extremelanguage.
What is what's your view ofthat?
SPEAKER_01 (26:04):
Well, there's no question that the Taiwan uh
semiconductor corporation is byfar the most advanced, the
strongest producer of chips, youknow, uh ordinary as well as
high-end um idiot type chipsthat drive AI.
And uh if if the Chinese were totake over Taiwan by force and
(26:28):
utilize that force to constrainthe supply of those chips to the
rest of the world, including theUnited States, you know, that
would be catastrophic.
There's no sign that they wantto do that.
Uh, this is you knowhypothetical.
It's always easy to uhhypothesize catastrophic uh
scenarios.
(26:48):
We used to do that for a livingin Morgan Stanley, thank God I
can go now.
But China recognizes theimportance that the global
economy plays in supporting itsgrowth model, whether it's
exports or imports, and givingthem the components and parts
they need to producestate-of-the-art technology.
(27:09):
And um, if they were to takeover Taiwan by force, they would
squander any semblance ofconnectivity they have to the
world that they are so dependenton.
And they know that, and yetthere's a view in the U.S.
that was based on some testimonyby uh a retired admiral, uh his
(27:29):
name was Davidson, uh, who saidthat Xi Jinping has a window,
and I think he he initially laidthis out as coming in the 2025
to 2027 uh time interval bywhich he was going to move on
Taiwan.
He had no evidence for that, butthat's become sort of gospel in
(27:50):
security and defense purposes,and has caused many like um
Treasury Secretary to warn ofwhat would happen should that uh
come true.
I do not think that China wouldmake that move on Taiwan in this
time frame.
I personally think the biggestrisk to uh to Taiwan is our
(28:12):
destabilizing aggressive armsales supported on a bipartisan
basis by the U.S.
Congress.
And I think that's the subtextof Xi Jinping's warning that he
uh issued to President Trumpearlier today.
SPEAKER_00 (28:26):
As you follow China, what do you read?
How do you keep up to date withwhat's happening there, aside
from obviously the primaryresearch that you do yourself?
SPEAKER_01 (28:36):
Yeah, I mean, uh, you know, everybody's a China
expert.
Um, you know, I certainly readit all, and I find um, of
course, news items has a lot ofregular information.
I read Bill Bishop.
I try to read the um you knowall the official statements and
speeches and work reports of theChinese government.
(28:59):
I have an acting active networkof my own where I've been a
participant in a track twodialogue with Chinese and
American experts, the same groupfor about 15 years, uh, and we
communicate on a regular basis.
You know, I will I will look atanything and everything, and
there's plenty of it aroundright now.
SPEAKER_00 (29:18):
Aaron Powell I want to ask you one last question,
which is the entire world seemsto be drowning in debt.
How how concerned are you aboutthat?
Is that just a post-pandemic uhwe got to work our way out of
it, or is it it does it seemshere anyway that it just keeps
growing like a monster?
SPEAKER_01 (29:37):
Aaron Powell Well, it's a global problem, as you
know, but you know, we're now ata point where our debt-to-GDP
ratio is back to a level that welast saw in um the immediate
aftermath of World War II.
For a long time, don't worryabout it because we can afford
take on debt because interestrates are low, and that's a
(29:59):
reflection of low inflation.
And, you know, lo and behold,um, you know, we've had an
inflation shock after COVID thatcame from supply chain
disruptions.
And we're getting some um hintsof another one right now because
of the constriction of the uhenergy supply in the uh Strait
of Hormuz and how that'sspilling over into derivative
(30:22):
products like uh fertilizer,which have impacts on the food
chain and so on and so forth.
And so far, the inflation shockfrom the supply side has been
limited, but you know, you can'trule that out.
And if inflation goes up,interest rates will follow
despite President Trump's desireto get a friendly chair in who
(30:43):
will give him lower rates.
No one in their right mind, andKevin Warsh has a good mind, is
going to do that as a centralbanker.
The debt bomb that nobody'sworrying about because of the
low interest rates becomes farmore problematic as a result to
fund and finance.
And there's related to that, ifif we're the ones who really
(31:04):
break with our past strengthmore than other countries, then
there's uh risk to the US dollarthat could compound the domestic
interest rate risk as well.
Funding under thosecircumstances will be
complicated from foreign sourcesof capital as well.
I don't think we can take thislightly in any way whatsoever.
SPEAKER_00 (31:25):
I think we've taken enough of your time.
Thank you very much for talkingto us today.
And uh, we look forward toreading.
You have a substack which iscalled Conflict.
Am I correct on that?
SPEAKER_01 (31:36):
That is correct.
I like it quite a lot.
I'm writing a new book as wespeak.
SPEAKER_00 (31:42):
What's the book about?
SPEAKER_01 (31:43):
Well, I this is my third book on the US-China
conflict.
And the first two were werereally pretty negative.
And I will say they did areasonably accurate job in
projecting how this conflict wasgoing to unfold or what its
consequences were.
(32:04):
But I didn't want to end thestory, you know, on that basis.
So this new book book istentatively titled uh conflict
resolution.
I want to provide uh a way out.
And uh as somebody who iscongenitally pessimistic, it's
always good to write somethingthat's a little bit more
optimistic and allows me tosleep better uh at night.
(32:26):
And I'm about, I don't know, 75%of the way through the first
draft right now, and I hopeit'll be out at some point next
year.
SPEAKER_00 (32:34):
I look forward to reading it.
Again, thanks very much fordoing this.
And your Substacks uh Substackhandle, I guess, would be Google
Stephen Roach, R O A C H.
SPEAKER_01 (32:46):
If you do Roach Conflict, you'll find it.
SPEAKER_00 (32:48):
There you go.
Thanks very much.
Thank you, John.
SPEAKER_01 (32:51):
Pleasure.
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