Dr. Wang Huiyao's dialogue with Yale senior fellow Stephen Roach on world economy China-US relations

distinguished guest ladies and gentlemen good afternoon it's great honor for me to welcome you to ccg Global dialogue series events today our guest is Professor Steven roach senior fellow at y University the former chairman of Morgan stany Asia now let's welcome mayel meu the Secretary General of ccg to deliver the welcome REM marks your excellencies Dear Professor roach ladies and gentlemen good afternoon we are delighted to have all of you at the center for China globalization be our ccg Global dialogue today our distinguished guest is Steven roach senior fell at y University and the former chairman of Morgan Stanley Asia our dialogue today will focus on the theme global economic Outlook and the implications for China ccg is China's leading international think tank with extensive Global influence CG is the first Chinese social Think Tank to enter the Global's top 100 and the first to obtain spal consultative status with the United Nation CG launched the global dialogue Series in November 2020 ccg founder and president Dr huya Wang and ccg other experts have engaged in in-depth dialogues with over dozens internationally renowned opinion leaders including like Pas carami Lauren Summers Thomas Freedman Martin WF Graham Allison Dalo Adam pson Joseph Knight Wendy Cutler and many other senior policy makers well-known Think Tank researchers notable Chinese experts prominent media figures and many wellknown figures around the world I sincerely hope today's dialogue will also be great success now please welcome the founder and president of Center for China and globalization former Council of State Council of China Dr huawang to introduce our distinguished guest speaker floor is yours Dr well okay thank you Dr M and ambassadors uh dear Steve and of course our uh great friends and uh uh fellows and uh you Representatives media uh circles and all the people that gathered here at the center of China globalization uh this afternoon so we are very pleased to have another uh ccg Global dialogue series as Dr M mentioned we have uh conducted since 2020 and probably the most uh frequent Global uh dialogue that uh uh broadcast internationally uh for the last several years so today we are very pleased to to welcome an old friend and uh we're honored to uh uh uh welcome uh Steve roach the senior fellow at y University uh and also former chairman of Morgan standing Asia so so we're going to the format is that we're going to have uh Steve Roach Give us a keynote then I'm going to have a dialogue with him and and then we'll open for Q&A and then of course uh we we have this really a great discussion uh I'd like to formally introduce uh Steve uh for his is a very impressive career uh Professor Steve roach served as a senior fellow at the Y University Jackson Institute of global Affairs for 13 years actually beginning 2010 as a senior lecture at y School of Management and in the fall of 2022 Steve joined the y Law School power chai China Center as a senior fellow of course before coming to Yale he was vice chairman of Morgan Stanley Asia and then firms Chief Economist for the bulk of his 30 years career at Morgan stany so that's very long and he lived many years in Asia and in Hong Kong and and a frequent travel to to Beijing and and China he haded actually h a highly regarded team of economists around the world and uh so Steve's current teaching and research programs uh focus on the impacts of Asia on Border global economy uh at y i where he currently u based now he has introduced new courses for undergraduates and graduate student on the next China and the lessons of Japan his right-and research has also uh address the globalization trade policy the post crisis policy and uh and also U Capital markets implications of global imbalances his Works has actually appeared aam academic journals books Congressional testimony and has been disseminated widely in the domestic and international uh uh media so Steve's opinion on the global economy has been known to shape the policy debate from from actually Beijing to Washington and and vice versa his latest book unbalanced the codependency of America and China exams the risk and opportunity of what is likely to be the world most important economy relationship in the 21st century so also of course uh prior to join the Morgan sty in 1982 which is a you know for 40 some years ago Ro served as a research staff of the Federal Reserve board and was also research fell of the bookings institution so Steve holds a PhD in economics from New York University and he is a member of a council of Foreign Relations uh and also uh and a member of investment community at Metropolitan Museum of Art the China Advisory Board of environment defense fund and also economic advisor Board of University of Wisconsin so just a name a few uh so Steve actually uh is a is a no stranger to China but also is he's the old friend of ccg uh I remember as early as December 2016 te we already invited Steve uh to give us a talk for the CCD organized lunch at that time he discussed the China's crucial role in the global economy and the importance of maintaining constructive Sino us relations of course as recent as uh uh December 2021 I had a extensive dialogue uh virtually with him during the co U between myself and Steve and our discussion covered reflection of the sign of us relationship insights into the economic relations and causes of trade war between the two countries and of course that that is still available on the YouTube and on the ccg website I I remember very well Steve was saying you know China the US should set up a j to working uh office uh secretary office either in Geneva somewhere really to tackle daily China us relations so that is a brilliant idea I and I still I I I I I really like that so I think you know last time when I met uh Steve he was at the China development Forum he was a frequent participant of China development for and he has many ideas I mean uh we see a lot of his new thinking and and I would like to uh find out what his latest thinking so we're having this uh uh ccg uh afternoon uh ccg Global dialogue that really welcome uh Steve to give us his latest thinking and uh so without the fur Ado let's welcome uh Dr Roach to give us his keyote let's welcome thank you thank you Henry for your kind remarks and um it's pleasure to be back here in front of ccg and um try to stimulate ulate some um thinking on China its role in the world economy the uh conventional wisdom is that um China is the world's most powerful engine of economic growth and I think um that has been true uh for number of years but I think we need to rethink that dynamic between China in the world and the world in China my thesis that I want to um just lay out for you today with uh the support of a few slides that I brought with me uh is that uh the engine the Chinese global growth engine is not as powerful as it used to be uh there are some new sources of global growth that are that are evident but even they are not enough to give the world the same type of support that we have become accustomed to and the US China conflict which is an ongoing subject of my own writing and research represents probably um the single greatest threat to the overall Glo Global growth dynamic in the years ahead so how do we get my slides up there okay so this is a um a busy slide but it shows you a couple of things uh one the imf's latest projections of global growth through the year 2029 and two a couple of horizontal lines one drawn at 3.5% the black line on the top which represents the trend rate of growth in the world economy since 1960 and then the red line at 2 and a half% below which the world is normally uh considered to be in a global recession the forecast um looks okay between now and 2029 but it's most importantly below Trend and when the world is growing below Trend it lacks the cushion that is normally required to deal with shocks should they occur uh and U that leaves the world vulnerable uh to the onset of a a new uh recession uh the China Outlook is a um very different Outlook than we are accustomed to in examining your long Dynamic and major source of global growth on the left the solid black line is the five-year Trend in Chinese GDP growth and it's moving steadily lower and projected to do so between now and 2029 the peak fiveyear growth rate was 11.7% in the Year 2007 and by the end of the forecast period uh that number is projected to be 3.8% that is a dramatic slowdown uh by any account that you can think of and the um the Slowdown uh can be broken down into short-term or cyclical uh pressure such as the um uh the property crisis uh or longer term structural issues that I will will talk about shortly that have to do with demography uh total Factor productivity uh and geostrategic conflict with the United States the um property problem is China's major cyclical growth impediment uh in my view and the government has just um uh announced a new property support package um in my humble opinion uh it's a step in the right direction but it is not nearly large enough to absorb the excess inventory on the supply side of your housing market The Lending support package of the pboc uh isn't adequate uh to um uh take up uh the outsize inventory of housing stock that is now overhanging uh the supply side of the Chinese property Market uh at Yale I've taught two courses over the years uh that bear on this issue uh one is a big uh class on the Chinese economy in a second seminar is on the lessons of Japan and uh if you study the lessons of Japan carefully you will note that the property crisis which lasted for 18 and a half years uh in Japan was a major impediment uh to uh the recovery of the Japanese economy um in the aftermath of the Lost Decades of the the 19 90s and early 2000s and by many measures the property problems in uh China are every bit as large as those which we saw uh in Japan and we are only in the very early stages uh of addressing uh that problem it took 19 years uh to address the Japanese property problems the structural issues in China uh are also uh surprisingly quite Japanese likee I show you two uh major uh structural issues that uh are now afflicting the Chinese economy the Aging of the population the working age population of course peaked in the year 2015 uh and uh the recent decline in total Factor productivity in my lectures on Japan I have the same um Confluence of structural problems that I can show you but I'm not going to show them to you today in the interest of time uh I want to assure you the chart looks identical the only difference is uh it took place 20 years earlier uh in Japan the way we do economics from a growth accounting point of view uh is when a nation is faced with a demographic problem of an aging population the only way you can maintain rapid e economic growth is to offset the demographic headwinds through increased productivity growth uh Japan was unable to do that and I worry about China's capacity to do that uh as well tfp as you see has been declining actually since the year 2011 in large part reflecting the fact that much of Chinese economic activity is now taking place in low productivity s soes uh and the private sector which has historically been a strong source of productivity growth in China is now feeling the pressures of um regulatory restraints especially in the internet platform area so these two um uh conditions uh make uh uh China um sort of a worrisome parallel of what we saw uh in Japan where the headwinds from an aging population will not be offset by an increase in productivity of those that are still on the job so you know there's this is a long chart here I'm not saying that China is the next Japan but there are clearly some worris and parallels as seen from the standpoint of asset bubbles debt intensity the incidence of corporate zombies uh the Aging the demography and of course conflict with the US uh Japan was in conflict with the US on trade policy in the late 80s and now it's China the US always needs to blame somebody for its growth problems uh and we like blaming large uh Asian Nations um one other thing about the Japan comparison that I will leave you with and then move on to the um the topic at hand the global growth Dynamic is the notion of the Chinese growth shock itself on the surface it doesn't seem to be a big deal I mean you can see what happened in Japan uh 45 years the green bar on the left of 7 and a qu% growth and followed by 45 years of less than 1% growth China has slowed but by in no way is that slowing um as severe as that which is evident in um has been evident in Japan but it is all relative and what you see on the right uh is the difference between uh the growth comparisons and the high growth period uh Japan and China versus that which has occurred recently uh in Japan and that which is projected to occur over the next five years in China if you take that IMF forecast uh as an accurate projection of what is to come and you can argue against that the deceleration of Chinese economic growth plotted on the right is almost identical to that which has happened uh in Japan uh since 1991 that's a grow shock uh whether you want to admit it or not and when there's a grow shock you know that sort of changes everything the idea that you can count on rapid growth uh as the rising tide that um uh sort of masks all underlying problems that gets drawn into serious question uh and if the IMF forecast is correct uh on looking at over the next five years of China maybe you're more optimistic than that so it's less of a concern uh but I'm not uh then the possibility of a Chinese growth shock being comparable to that experienced in Japan is something you need to take very seriously so what's all that mean to World economic growth this uh graph measures the cumulative contribution uh to of China to Global growth and you can see something very interesting about this and that bar um second bar from the left uh shows uh the Chinese growth contribution at its maximum close to 33% um from U um sorry from 2010 to 2019 no that's yeah maybe I'll do that yeah thank you from 2010 to 2019 then came Co and postco the um Chinese contribution to Global growth has slowed dramatically uh the 32 went down to about 24 and again on the basis of the imf's forecast uh it's going to drop further to about 21% uh over the uh three years 2027 to 2029 and so China is still the most powerful engine in the world but the power of the engine is diminishing uh and the idea that you know we're talking about China is being um uh in and of itself enough to account for over 30% of global growth that needs to be rethought um who's filling the void Well India is trying uh and um you know if you look around the world for new sources of global growth you can see that the Indian source which was um you know onethird of that of of China's in the 2010 to 2019 um interval when China's impetus to Global growth was at its maximum that Indian source uh is almost doubling um by 2027 to 2029 when the Chinese um uh growth contribution is slowing uh I'm optimistic on India I'm not as historically have not been as optimistic on India as I have been on China uh but there's a lot of attention being given to India right now as a new source of global growth and it's something we need to look at uh very carefully in the years ahead um the rest of the world I'm afraid to say doesn't really matter I mean you look at the U uh the US share it's been roughly stable around accounting for 10% of global growth uh for a long period of time um I'm sorry I know we have an ambassador here from uh Europe but Europe is even less consequential uh in making a contribution uh to Global growth in the United States and then if you look um um elsewhere in the world Japan oan Latin America Middle East I mean they barely show up on the chart so if you're looking at the global growth Dynamic recently currently and perspectively uh um China us and India those are the three sources that will matter the most and I uh stressed here this afternoon that the Chinese growth engine is not going to be what it used to be um the final thing I want to talk to you about though is the impact of uh conflict especially us China conflict on the global growth Dynamic this is a worrisome development and potentially a big deal uh for the Chinese economy itself uh the export share of the Chinese economy uh has come down dramatically from its peak in 2007 but it's um you know on the rise recently and xiin ping in his latest policy pronouncements is placing major emphasis uh on manufacturing lead uh export Le uh growth uh in China especially in the advanced technology and in the capital goods area the us at the same time uh has uh resisted uh uh Chinese uh export growth uh and um uh thanks to uh former president Trump who as you know was convicted of 34 felony charges uh today in New York uh we are in the midst of a major trade war with China that was sparked by President Trump but continued under the B Administration these are um us tariffs on Chinese products which were virtually nothing uh and they're still holding at about 19.3% of um uh overall um imports from China today and China of course has reciprocated uh and that has had um uh significant impact on Chinese demand for USM made Goods the Biden Administration has um as I said uh continued to prosecute Donald Trump's trade war and I find this um you know I'm trying to be fair I'm not being either supportive of a Republican or a Democrat I'm critical of both um when uh President Biden took office on January 20th [Music] 2021 he signed 17 executive orders that Unwound some of the most unpopular uh acts of the Trump Administration uh the trade wall uh the border wall with Mexico the travel ban on uh Muslims um us um getting out of the Paris agreement on climate change the World Health Organization he reversed all of that but he did not unwind uh Trump's tariffs and um a few weeks ago he announced a further expansion of U tariffs under this provision of the US trade Act of 1974 known as section 301 uh and the most worrisome aspect uh of those tariffs I think were in these um uh uh areas involving um uh Chinese production of alternative uh Energy Products batteries electric vehicles uh and solar cells there's a number of other uh items that are being the tariffs are um uh increasing the points been made don't worry about um electric vehicles um uh you know the tariffs are going to 100% but the US doesn't buy too many uh cars electric cars made in China at least not yet I think this is a huge strategic uh mistake driven by uh election year politics uh in the United States the world is in the grips of a horrific climate problem desperately in need of new Solutions through uh alternative non-carbon fueled Energy Products uh to take a protectionist stand against a country like China that has a comparative advantage uh in producing uh the non-carbon Alternative Energy Products that are world in the grips of climate change desperately needs U is a a blunder potentially of historic proportions in my view uh it is um uh precisely uh the wrong thing at the wrong time and an example of how poisonous politics can be in shaping trade policy for the world's leading Nation uh president uh Biden has made a big deal about uh um ending America's what he called Forever Wars that was the rationale that he used for getting out of uh Afghanistan uh in the summer of 2021 uh I worry that he is getting himself uh even deeper into a new forever war against um Chinese trading practices the US continues to make the same mistake on trade policy today that it made with Japan and that is um putting pressure on one nation at a time when it um really faces uh a trade balance that's made up of Many Many Nations um we call it a multilateral trade balance you can't fix a multilateral problem by putting bilateral pressure on one of your trading partners we have a multilateral trade trading problem uh because we have big budget deficits that depress our domestic saving when economies don't save and they want to grow they import Surplus savings from abroad they run massive current account and trade deficits with many many nations uh to um attract the foreign capital and so what has happened um in the United States is we've done to China what we did to Japan in the late 80s we've reduced the Chinese uh share of our trade deficit just like we reduce the Japanese share the Chinese share of our trade deficit is gone down sharply from a peak of about 50% in 2015 to about uh 21% last year but our budget deficits gotten bigger our domestic saving has gotten lower and so the result is all we've done is we've diverted trade away from China toward other nations that have picked up the slack and those nations are listed right here uh Mexico Vietnam Canada South Korea Taiwan India Ireland and Germany uh and and if you decompose their share of us Imports 70% of that collection of nations are higher cost producers than the US so our trade policies are actually imposing um the functional equivalent of tax hikes uh on American uh workers again an example of the poisonous impact of Politics on trade policy we did did it with Japan we're doing it again with China and that gets me back to where I started with and that is the global economic Outlook uh I showed you in that first slide that Global growth um doesn't really have the cushion that it would need uh to withstand um the pressures of an unexpected shock what this slide shows you is that we've had a shock in the global economy the list is too long to go through but basically every two to three years and given uh the mounting pressures on the US China trade flont trade front um you cannot rule out the possibility of another shock uh in the next year or so markets are not priced for that that's what this chart on the right shows uh and uh the global economic Outlook uh this is a a forward-looking forecast of world economic growth it's the weakest that it's been uh since the early 1990s and so uh the possibility uh of an unpleasant surprise in global growth cannot be ruled out in light of this mounting conflict between the United States uh and uh China and uh Henry mentioned a book I wrote a number of years ago what he didn't mention was a book I wrote last year uh that uh can be ordered on Amazon right now as you're sitting there uh it's called accidental conflict and it focuses on the risks the mounting risks of conflict between the United States and China uh in light of uh the Trump tariff Wars that have been uh prosecuted further by President Joe Biden uh and makes the case that unless uh something major is done to bring our Nations together and Henry mentioned my proposal for establishing a us China Secretariat which I continue to be very much in favor of that the possibilities of accidental conflict are something to take very seriously and with pressures building uh to this very day in the South China Sea the Taiwan Straits uh the new tariffs that President U Biden is imposing on China this is something to take very seriously and something that we must stand up and say no to today uh if we are uh serious about defending the strength and resilience of the global economy thank you very much thank thank you uh Steve uh for your excellent uh presentation I think it's really very helpful for all of us uh to have a better understanding of what's uh what's going on and I think you outlined the the global growth and what what China's uh contribution can be and uh and continue uh to be uh challenge opportunities but also you talk about uh the experience of Other Nation like Japan India and then you talk about uh you know continuously what are the uh problems that uh that we are having uh uh now so so this is great I mean this is very good uh uh uh you know overview and now we want like get into dialogue section and uh I I would like to uh uh you know ask you some questions first you mention about this U IMF forecast I think that was very interesting because IMF actually uh recently uh they they they mentioned that uh projector growth for night uh 2024 will be five% right up from 4.5% uh active uh where where uh the they I know 4.5% in 2025 so so they actually increased their projection by 0.4% and uh uh so this is uh this is interesting but but also you mentioned those of course the trend is is coming down and uh uh uh so so so the question i' would like to ask is that of course China you know with with magnitude with the size of its economy and and such a big uh uh second largest economy they cannot when when when the bases are low they have a lot of a big percentage but even now today you know even 5% or 4. 5% probably equal to 10% 10 years ago of or 15% 20 years ago so so every year there there's a large equivalent of I don't know if it's Australia or Indonesia GDP added to China and uh and also the other thing is they they they are now uh uh from high speed grows to high quality and uh so uh for example remember years many years ago they were talking about 700 million shares to exchange for 1747 now China become the largest alute export in the world so so there's a lot of quality changes how do you interpret that even though the speed may come down but the quality we picked up and and then that is still you know needed and then how we can uh really continue that kind of a from from high speed to high quality and what are the things we still need to be uh cautious of and how we can really continue that positive momentum even though we are not achieving the high speed we used to have well um you touch on a few things Henry one the imf's forecast revision uh half a point you know in the way that forecasting accuracy goes these days you know it's an upward revision but it doesn't change the basic story of an economy that is still growing um uh at best about half the pace that it did in the high growth uh era when the Chinese e economy grew uh 10% for 31 years from 1980 to 2011 you're right that as the base gets bigger uh smaller increments uh uh mean more uh but you know my point on the growth shock that I tried to end with is that this has been abrupt uh the Slowdown has been concentrated in the last few years uh and when uh China was growing rapidly for much much longer than anybody thought the expectations were built in that China and the world could could count on rapid growth irrespective of the Bas effects uh going forward and this notion that uh the leadership uh continues to um boast about in addressing Global forums like the China development forum and I heard Premier Lee say this um at the China development form at the end of March that China accounts for uh I think the number he used was 35% of global growth that's out of date that number is no longer accurate and it's going to get uh smaller your final point though is I think the most important that is moving away from a focus on the quantity to the quality of growth U I've had the the privilege and the opportunity of making speeches in this country for you know every year of the last quarter century and I've always pounded the table on precisely that shifting from uh a fixation on quantity uh to improve quality of economic growth how do we measure the quality of economic growth you know you can measure it uh through um you know Environmental mental metrics and I was delighted to wake up this morning and uh Drive um uh across town and see a beautiful blue sky in in Beijing and I think there has been some improvement uh in air quality in China over the last I don't know 10 years uh my favorite scientific metric for quality though is total f factor of productivity and the trend there is is worrisome uh in uh from the 2011 to 2019 period uh a 10-year period uh tfp growth as we call it has been dropping by a little over 1% a year and that follows a big upsurge uh in the prior uh 15 years uh and that is a worrisome sign of deteriorating quality of Chinese economic growth uh because it raises questions about the efficiency of Labor and capital in generating uh uh sustained growth in overall economic output you cannot have high quality growth with weak tfp and a final metric to think about and it gets a lot of discussion in China is um uh measures of the equality or inequality of the income distribution and you know the conclusion is pretty straightforward based on most metrics that China and China is not alone in this respect certainly has problems with uh amounting income inequality as well thank you thank you Steve excellent point I think U absolutely I think we need to address all those uh uh inequality and uh and uh you know that uh uh common Prosperity that is really China can you know the better life of the of the people is really the target of of the government to to strive for and uh so so so so you know while maintain the high quality we have to maintain equality so that's really a good point but I'd like to also touch upon the the the other issue you raised you you talk about Japan uh you talk about uh aging population and then whether they going to China get to repeat what Japan has has gone through and also uh the what are the impetus what are the next drive for the uh for the Chinese economy real State Market is you also mentioned that is slowing down and so what are the what are the what are the next uh uh biggest uh uh you know transformative policy that government can propos so here I'd like to uh discuss a a bit of our thinking with you is that for example uh we have you know the the third planning of 20th party Congress is going to have in July we are expecting a lot of new policies you know we are thinking you know you talk about real estate uh Premier League mentioned at the at the uh China development Forum in March this year that urbanization of 300 million migrant workers would be probably be the next Drive so I'm thinking you know how we can translate that into concrete policy in addition to trade in and other policies uh I'm thinking of for example in the in the there's in the last 45 years of China opening up there's every 10 years there's always a revolutionary policy that drived up the the the process for example in the 80s the government you know had a policy of a contract the land for the farmers to grow whatever they like uh the break away of a plant economy and we change Chinese Society from a society of a shortage to a society of abundancy so that policy has really uh changed China dramatically and then second decade policy was that government realized you know the real estate market in the cities why can't we allocate the flats for the workers and the citizens urban urban resident in the cities privatize that almost very minimum cost and so everybody in the city has apartment or buy apartment that actually cultivated 400 million middle class and then in the in the in the year of uh two 2000 afterwards China John WT it's another revolutionary policy where they have uh you know as a handful of so so does the trade do the trade did the trade but now you know six million company can conduct foreign trade and China become largest trading nation in the world so the for the last 10 15 years we are thinking you know the where are the where are the next low inh handful revolutionary policy that we can tap into so Prem actually uh his comment at China development form stimulated me to think you know we are now have urbanization you also mentioned in your presentation about you know Japan other country 80% Western Country us China is only 66% according to the Premier League but only 50% has the H C and the City resident benefit the other 16 does not have it so so we talk about 300 million migrant workers live in the city uh but they are not enjoying the city right so the reason for that is they have a household land in a rural area so the rural area household land is empty with seniors and youngsters but also they are renting a big uh you know a lot of uh apartments in the city so there's a lot of we redundancy in the waste so I'm thinking you know if we can really like in the '90s privatized department for the uh for the workers can we you know allow the farmers who are already settled in the city to sell their household land in a rural area and so that they can get first uh startup Capital to buy the real estate secondhand down payment in the cities and and avoid this 9 billion people travel around doing the Chinese New Year visiting each other and also to adjust to make social justice so would that be a going hand for the biggest policy that we can we can uh you know hope for and I would like to hear your comments on that thank you Steve um I I think it's a great idea Henry I like your thinking I would like to broaden it out though because you introduce this by saying every 10 to 15 years there's a big change that injects new energy uh a new source of growth into showing and I have been um pounding the table for longer than I care to remember about the need uh for a new imp impetus to household sector private consumption in China the the numbers are very clear uh the latest share of Chinese GDP going to private household consumption uh is below 38% 38% that's ridiculously low now your proposal goes right to one aspect of that uh and that is to the 300 million migrant workers who clearly have the potential to be T tapped as a new source of consumption uh I would say that that is necessary but not sufficient so I'm endorsing you but I would say uh of equal significance uh would be the need to really uh inject much more funding and vitality uh into the social safety net health care and retirement because I think that is the biggest uh impediment to discretionary consumption because it keeps families who are aging rapidly um predisposed toward uh precautionary saving in providing for the future and to the extent that a nonsignificant portion of those families uh lack uh hooko uh because of their residency preference that would be additive to that problem so I would combine the two uh uh into a much broader uh uh program aimed at injecting new stimulus uh into private household consumption uh in China I think it's a good idea uh but it's not enough on its own just say one other thing about uh the current Chinese policy strategy uh like you I was also at the China development forum and heard uh Premier Lee uh address policy priorities for China and he repeated a theme that he had um emphasized in his work report um a month earlier to the National people's Congress saying that the real priority the most important priority uh is focusing on new productive forces aimed at boosting manufacturing uh and in particular a new round of export-led growth in China he mentioned in addition to that the need to stimulate uh domestic demand along the lines of what you and I have been talking about the first priority though is one that is um clearly causing a lot of negative reaction in the US increasingly in the G7 uh and it's all wrapped up in this excess capacity debate that I alluded to in my own uh comment so uh you know this twofold strategy uh is uh important for China uh but um uh it it creates uh conflicts that I think are also problematic uh in shaping the growth Outlook in this country great thank thank you Steve absolutely I agree uh you you you mentioned that we should really have new uh uh strong impetus or stimulus or all revolutionary policy that badly leaded not by China but also for the world uh I think real estate is one of the biggest Factor because uh in the Chinese traditional thinking if you have a piece of asset then you are confident you're going to spend more uh you're not going to take the wallet close to your chest and then with with withhold from spending so I think stabilized the real estate market is is crucial and actually in China I I read somewhere there's there's apartment built enough to house 200 million people so so 300 milon migrant workers if we move them to the cities and let them have the legitim identity to live in the cities they could to contributed to the stability of China now I'd like to uh ask you another question you you mentioned about uh just now new productive High new productive coures uh New Quality productive forces uh and U you know interesting you also mentioned the the tension on those tariff you know president uh Biden raised on the on the EV cars batteries and and the solar all those new green energy technology and product actually according to the U you know International autonomy agency uh you know in order to combat climate change according to the Paris Accord you know we probably need more you know like at Le 800 gaw of new green power to to come back and now we can only prod use a quar of that and then the world needs to spend $4.5 trillion US dollar a year on Green Spending the world is only spend 1.8 trillion far from over Supply so I was even read that the European government is considering to extend their uh you know phrasing out of the diesel gasoline driven car originally it set by 20135 now it's extend to 2040 because they want to extend the life of of diesel and the gasoline car so if we are having a changing climate so badly and uh it's really strange to see that uh us and even sometimes you know Western countries are so calling for more uh products more technology available to combat the climate change now China has developed that and now there they're refusing to have it and they even put tariff on that and we you know 90% of the commercial flights is supplied by Boeing and Airbus we don't see it's overc capacity so so I'm I just want to get your opinion from non-chinese what do you think about you know where urgently need the green products in this world and China you know after so many years of experiment hardw workking and trial and and of course with opening up of help of every country now have this product available now the country says no no no you over capacity so so what do you think what what's your take on this uh this this question I think it borders on Insanity in a world that is facing unmistakable signs of climate change there is no such thing as excess capacity in non-carbon green Energy Products if anything there's a shortage of um of Alternative Energy Products uh China is providing an enormous service and a benefit to the world in producing lowcost uh Clean Energy Products that the world desperately needs to protect itself against the ravages of climate change China has the technology the scale and therefore by definition the comparative advantage in delivering exactly what a climate torn world needs and we resist this purely for uh political uh pressures because uh we have this uh desire uh led by the United States to contain uh Chinese economic growth and development we also have as you have in China National Security concerns I can think of No Greater National threat to National Security than destabilizing uh the world's climate and so if we're serious about um uh looking at National Security or from the standpoint of security of our planet uh we need to be um I think much more U uh appreciative of of the need to allow Nations that have comparative advantage in giving the world what it needs support rather than uh resistance thank thank you thank you for your for your uh you know very good uh uh views that look at this issue so so I appreciate that and uh uh absolutely uh you know the the the the world is is really burning you know we need to really work together uh also in your you mentioned about the book you have you know uh you know this would be my last question I would like to open up but but I'd like to ask you this question before I do so the you mentioned about the book accidental conflict American China and The Clash of force narratives which is exactly right down because uh uh you gave me that book uh last year I I read it I I I found it very fascinating you know the the perception of both countries China and the west and and us and then of course the the narratives are are totally different and uh so how can we really get more uh uh right narratives of course I mean uh you talk about for example National Security there's there's too much emphasis on the National Security now there's a driving up all those things but but equally important even more important climate security uh food security energy security uh you know environment security and health security he Health security absolutely the the the the the benefit ifting of the M human security you know we recently had just had a big Symposium in Washington talk about human security so so I think those are really important so how can we really gradually have the right narrative and have a global governance for those common concerns rather than we developing two camps you know there's there's a there's more security Alliance buil up but on the other hand China is doing a lot of economic allines uh for the globalization so so how can we really converge that and maybe you know China and us has has a moral responsibility for the Mind Comfort human security so so exactly I like the idea of a secretary office of a Comm secretary for the China us relation be right on well let me just give you my my theory behind um your important question Henry um when I started working on this book four or five years ago uh I started out with some of the ideas that I summarized in the slides today and that is that we have in the United States many false Impressions about China and then as I did the research I said wait a second there's a number of false Impressions that China has about the United States as well and the reason that both Nations have um false Impressions or false narratives about each other uh and they have such important in impacts on the policy actions that we take toward one another is because of politics uh we let political pressures Drive wrong directional policies in my view that's true of trade policy uh in the US and it's true of um China's uh concerns about America's threat to its National sovereignty so what I end the book on uh is uh recognizing that the politically driven process of Engagement that both Nations have embraced since the early 1970s um is more driven by politicians than by technocrats and politicians uh tend to operate on the basis of appealing to uh workers or promising their citizens a better life and they get us into trouble so my proposal is for a new organization that I call a us China Secretariat uh that really changes the architecture of Engagement between the two superpowers takes it out of the hands of the politicians the leaders who are driven by their own personal political agendas with all due respect you have that same problem that we do uh and puts it in the hands of uh technocrats who have a broad remit to deal with all aspects of the relationship uh not just when the leaders meet once a year but 24 hours a day seven days a week and they deal with trade economics Innovation policy technology transfer industrial policies subsidies of State own Enterprises the big existential issues like Health cyber climate um it's an organization that is built around a collaborative model of research based on a common mutually agreed upon database is an organization that um collectively works on the oversight and compliance of existing bilateral agreements and should disputes arise uh it screens disputes and has a built-in dispute resolution mechanism uh we need a new architecture of Engagement the current structure is creating conflict as opposed to conflict resolution and if we don't get serious about addressing our mutual issues uh we will not have conflict resolution we'll continue to have conflict escalation uh and that is the biggest risk of accidental conflict we've got to change it yeah thank you thank you Steve that that's absolutely crucial I I all for I'm all for this proposal you know China us should really have a close working team and also you you mentioned about the policy on both side absolutely I think you know we see this the the the the US of course because of globalization affecting many working class and then you know but the but the the the real estate no the war street is really making you know hitting alltime High and the 1% War street is equal to the 40 50% of the mass population in the US and then the Gap is is big there's a lot of social injustice but then we cannot really have that all blamed on China because uh you know the business is making all the all all the politicians need someone to blame that's right that's why again I'm not in favor of a political solution to the type of superpower conflict that we have absolutely so so I think on that note I I I I think we'll finish our our dialogue but I think I I totally agree we should increase dialog you know Mutual exchanges and of course and create a new Narrative of the China and us had a huge responsibility uh for the human security and for the future to come so now I I'll open for the for the question I know the China Daily report is here is that right and and also I have a Beijing daily and the China information center and and and Global People magazine so anybody wants to start okay we have this we have this there there three three in the row okay there's okay okay from backwards it's fine uh first of all my name is e Jung I'm a reporter from the G magazine so I hope to thank ccg for organizing this event uh so uh I have two questions if okay so my first question is so we actually had an interview with Professor roach about 11 years ago and uh uh back then like Professor roach said uh he's a he's he is a long-term Optimist of the Chinese economy so I'm wondering ing uh is is right now are you still believe this so and my second question uh uh is about uh Latino American relations so uh so uh we Professor R and missan discussed like there are certain F false impression of China and us have on each other uh but what we see is so despite so when when facing economic difficulties uh China have a greater consensus on thinking like uh the the cooperation with us will be a solution of the economic SC stagnation when the US politicians tend to believe the relationship with China is a threat to their Economic Development so I think this is a a great differen so like in this situation uh do you think do you both think in your so so your your both's perspective do you think the current uh trade dispute between China uh demonstrated long-term Trend in the US uh US foreign policy towards China or it is more like a a short-term policy it is just a symptom that the US politic is US politician is trying to adjust to a new reality of the bilateral relationship between China and us thank you yeah those are good questions let me deal first of all with my own view if I met you 11 years ago and I said I was up optimistic over the long term 11 years is a long term so you know I I stayed optimistic probably for 10 of those 11 years that's a long time right um I think you know more seriously uh my Outlook is certainly more cautious uh today than it was uh back then and in fact more cautious right now with respect to China going forward than it has been at any point in the 25 years I've been actively uh involved uh in uh your uh following your economy both living here and uh from abroad and I've changed my view in the last year or so uh in large part uh for the reasons I mentioned in my presentation uh the demographic changes are happening much more quickly than we thought uh the UN demographic projections um as recently as two to three years ago called for Chinese population uh to Peak uh in 2031 uh it happened in 2021 10 years earlier uh and number two um the tfp issue uh total Factor productivity the trends have been weak uh and there are an outgrowth of conscious policy choices that the Chinese government has made uh not only to throw more support behind low productivity s soe uh but to put tighter regulations on higher productivity private sector especially internet platform companies and the third and final consideration in my uh shift um uh has to do with uh my deepr rooted concerns about the US China conflict uh which have really gone uh from bad to worse over the last few years which gets me to your second question um on the conflict itself um we we there are different perceptions on both sides of the relationship uh about the role that each Nation can play in supporting or in constraining uh each other's Prosperity you're entirely correct the Washington view is that China is a threat to long-term uh Prosperity China has not had that view about the United States uh until I would say the last year it was a a year ago uh at the national people's Congress uh in um early 2023 when President XI underscored for the first time that us China policies uh were now posing the longterm threat of suppression all around the containment uh of China's growth and development objectives and this represents a shift uh in his point of view as as well and so both of these perceptions um they come from different places but they end with the same uh emphasis on mutually shared perceptions of conflict which I think are worrisome for the long-term stability of our economic and um political relationships there's still I think um good spirit on a People to People basis but even that over time I think uh becomes adver verely affected if the economic and political and trade and Technology conflict continues to deepen yeah no I I had maybe add a little bit on that is that I feel that uh you know Chinese economy as you mentioned you know the the the Aging population demographic changes and all those things but on the other hand you know there's there's more syy now you have the best infrastructure in the world you have 70% of the 5G networks you 12 million freshly graduate single child while educated talent pool and of course you have uh older old 1.1 billion smartphone users so so there's a lot of productive for example China already become a cashless society and then the productivity is at all time high probably in terms of certain areas so I I I'm not that pessimistic but I think you know the things could CH as for China us relation of course presid also mentioned you have 1,000 reasons to be in good relations not a single reason to be in bad relation I I think China was responding more to the US hostile policy but still we want to maintain good relation president she even invited 50,000 American young people to come to China so so let's let's hope for the best the second uh the gentleman from Bloomberg I suppose yeah yeah hi I'm James from Bloomberg um I have a question about overc capacity but I wanted to S of a step away from the three three news or the new Energy Products you're talking about and look more broadly at the economy if you look at steel production or if you look at you know all the things that go into housing um production is still the same level as it was before the three red lines policy was brought in we're looking at a billion tons of steel being produced this year but demand for that domestically is nowhere near where it was and so that's being exported and so March steel exports were at a record uh you're seeing petrochemical exports for Plastics and also other things also things that can't be used in housing anymore in China are being exported um but if you think about the green transition and the decarbonization excess steel capacity and excess steel production is one of the steel production is a Big Driver of carbon emissions so it would seem that China is exporting these products because it has it continues to produce domestically even though there really isn't a need for it to even be making these products in the first place and they're making those products is leading to Greater um carbon emissions so of think about the over capacity question more broadly than just batteries and EVs and solar panels do you think that there needs to be more done in China to deal with the you know the the capacity issues that are being seen in in the industrial economy and the second question is on on the the tariffs that the US has put in place specifically um the argument of the USR and the government is that they're providing space for domestic industry and for foreign investment to build those same sectors in the US that China built over the last 10 years in China do you not agree that I mean their argument is that this will lead to production of these products in the US which will eventually drive down prices because it will lead to a competitive industry in the US and also in China do you not think that that is a useful uh policy uh choice that they are trying to make and over the over long term do you think that that will lead to cheaper prices for these Goods globally thank you well um you know I think that there are certainly areas um and you point to Steel where uh there is a supply demand uh imbalance uh domestically that is uh being reflected in uh sending that Supply out into foreign markets I would argue that that uh is a symptom of a bigger problem in China uh and that is letting um too much of the industrial sector uh now being um supported and driven by state-owned Enterprises that are less susceptible to Market pressures that might um otherwise promote a more rational um uh balance between supply and demand and I think the the emphasis on S soe Le industrial activity uh does create inefficiencies with uh important Global re repercussions and that just underscores uh the need uh for uh intensified efforts uh at s soe reforms uh that over time I think would begin to alleviate that type of problem the rationale that you uh describe uh for uh putting up barriers uh to protect nent um uh green energy production in in the developed world I reject that completely I think um uh if anything it will uh make the um competitive pressures uh less intense as protectionism always does and I think the the cost differential us China EU China on EVS um batteries uh even solar panels is so wide that protectionism all that will do I think will again uh keep the global price level higher than would otherwise uh be the case so I think this is a a tax on uh precisely the types of products that are World Afflicted with climate change needs more than ever and I would not be in favor of that or support that type of rationale uh to just quote give us time to catch up thank you okay we have the lady in the front yes thank you for the opportunity I'm journalist from China internet information center and the first question you have just stressed the importance of total Factor productivity you said that China cannot achieve the high quality growth with a weak F uh total Pro total Factor productivity so what are the suggestions for Chinese government to improve total Factor productivity and the second question how would you evaluate the trade relation between China and us uh how would you sorry how would you evaluate the impact of the US election on China us trade relations thank you tfp policies uh again I would this there's a long debate of this in the economic and policy literature and um you know investing in human capital Innovation all part of the um uh the agenda and you know these are areas where I think China is in uh very good shape to to um boost tfp my theme that I have underscored several times today is to shift the mix of economic support away from low productivity s soes to higher productivity private sector especially technology uh companies without doing that uh many of the other things that are being achieved so successfully in China we will just get lost uh in in the equation that would be my single most important objective um in terms of the election um what we've seen from President Biden as I indicated in my presentation has been a surprising and disappointing continuation of the protectionist approach that was sparked by President Trump and I don't see any signs that President Biden uh is going to rethink this approach should he be reelected uh at the end of this year and um former president Trump uh who the last I checked is still running even though he might be behind jail bars um in in November is in favor of massive further increases uh of tariffs on Chinese products and so I don't think we can count on him for delivering spontaneous relief uh on the US China trade front either okay good maybe last round I don't know if China Daily or Beijing daily was here was okay yeah thank you uh I'm a business reporter from China Daily I got two questions my first question is China has made progress in containing the risk of a debt deflation Loop and increasing efforts to support housing inventory digestion so how do you see those moves to stabilize the economy and uh what efforts are leaded to do more to um booster China's uh economic recovery or tackle some structural issues and my second question is um actually recently China's top leadership has addressed the importance of deepening economic structural reforms and so the PO will be held in jly with a key focus on reforms so what will be the um key policy Focus for China to deepen economic reforms thank you what was the the first one with some structur issues like the property sector okay sorry sorry yeah the um the recent initiatives I think are steps in the right direction but only steps uh the property sector package is um I think has the right Focus aimed at absorbing the um the inventory overhang of unsold housing units but the funding support uh as um uh announced by The People's Bank of China is too small if there's a lesson that we've learned from earlier housing uh property crisis whether the Japan or the United States is you need what we call a big bazooka that means a big gun a large package air on the side of doing too much not too little this package is too little it's incremental it absorbs only a small portion of the overhang it's going in the right direction but it need needs far more um uh funding support uh to really make a major dent in the overhang of unsold housing units in terms of the upcoming third plenum um I think the government has been very explicit uh in emphasizing uh whether it's um president XI or Premier Lee uh the efforts on new productive forces uh new technologies uh and president she has in fact even indicated in a signed article uh late last year that his metric of success would be tfp so that's very clear what's not clear though is the second issue one that Henry and I have both addressed uh and that is to really uh deepen and expand the emphasis on supporting uh consumer Le rebalancing in China Henry has some proposals uh on U huko reform uh and um transferring ownership of rural residents that is very important and I support them I have made um uh recommendations for years uh on the social safety net Health Care uh and retirement uh I think policies need to be um uh formulated more explicitly and more comprehensively to address address uh the shortfall of domestic uh household consumption uh in China without uh the Chinese consumer I think um economic growth is going to remain a big um question mark uh in the years ahead and the third plenum is the time to address that and I would hope that more progress will be made um you know in the upcoming uh uh reform agenda great so so on that note we we have to conclude because our time has has has come to running out and uh I really uh uh would like on behalf of center of China globalization thank uh Steve for this excellent uh you know presentation and exchanges and dialogue and also with our uh parti we have several ambassadors we have many Diplomat and international Journeys Think Tank Scholars so really a great uh exchange we had today and of course we're going to share this online and to our to our audience in China and outside China and this is really good occasion uh at this uh uh you know uh really timely exchange on those new ameran policies on China and economic development and China uh you know uh China us relations so as a top expert in this respect we we really appreciate your your insights your uh suggestions your proposal and your uh advice so on on behalf of all the audience here again i' would like to thank you and also I would like to give you a few books that ccg produced to as as token appreciation we had a book for from Graham Alison from uh Joseph n and also one of my books so thank you for for coming [Applause]

Channel: Center for China and Globalization

Views: 6,602

Keywords: Center for China and Globalization, CCG, think tank

Id: EdqZkf-mTDk

Length: 91min 57sec (5517 seconds)

Published: Fri May 31 2024