Will China's Economy Collapse? with Ann Lee

so when the publisher asked me to write this book the issues were we different than what China faces today although not everything has been addressed so back in 2015 and 16 you know people were talking about well China's economy collapse because there was capital flight the reserves are falling below 3 trillion so the markets were very nervous about what was going on there and so I was approached and asked to address these issues and so my book largely starts off by addressing the shadow banking industry and the associated issues with that and then I also discuss other areas such as you know the shrinking labor pool the tensions between US and China that could lead to a trade war so I try to talk about all the areas that people say are vulnerabilities of China and then I more or less discuss how China's policy makers are addressing them and then talk about possibly how could China may be actually surprised on the upside given that Beijing has been very proactive in trying to upgrade the economy from being a middle-income economy to what they hope to be you know a rich economy like the u.s. someday and so they have a number of initiatives there which I'm sure a number of you are aware of so so that's sort of you know quick summary and overview of my book I'm happy to talk about you know what's happening since then so obviously people were worried about the shadow banking industry and I don't know how many of you had followed that or you know folks who are in the financial industry and understand what that means but basically you know there are a lot of non-financial institutions that were involved that and some financial institutions but they weren't regulated perhaps that created lots of wealth management products that were off balance sheet and weren't really recorded and they were creating a lot of debt in the country and so so a lot of people were worried that this vast accumulation of debt would be unsustainable and if there was you know missed debt payments you would have a Lehman Brothers type of situation in China so I talked about the numbers there and when you look at comparisons of what China's debt levels are in the shadow banking system versus say the US or the UK from a percentage percentage perspective it's actually not so out of line frankly their debt levels are not worse than ours in many respects and so I talked about that hasn't reached a point where it should be so worrisome but more importantly two things the policymakers were aware of it and were trying to come up with ways to address it and so they have lots of ways that a lot of policy tools so they were trying to juice up the stock market there to maybe get these companies to go public to sort of ecwid eyes you know turn their debt to equity so that would be one way of do leveraging more recently the government has announced you know various asset management rules where they're trying to close all the loopholes that the shadow banking industry in China or taking advantage of and so you know I guess people are expecting those rules to come out you know before March and and that process of de leveraging and getting these firms to cooperate and and abide by the rules you know they'll be probably given as much time as they need probably initially they'll be given a year and a half but it could take longer depending on how serious these issues are and how seamlessly they could make that transition and so so not only do they have policy tools and that these people are on top of it but essentially I make the argument that economics financial markets you know these are these are social constructs right these are this is more of a social science they're not hard sciences so so like with any nation or civil society you come up with your own rules to make it work for you and and while they have adopted many of the Western Way of doing things in order to sort of assimilate into our global financial system whatever is happening within their borders they can come up the world's to deal with it because they're using their own currency and so they have more flexibility there to sort of test out different policies to see what kind of effects they may have and and adjust accordingly and so unlike the US where you know they don't have like lots of rules and regulations I've accumulated over decades they have taken a approach of being more flexible so if something doesn't work they'll just throw it out and start over again so for instance you know when they wanted to ban winter a cold you know because they wanted to clean the environment and realize that that had a negative effect on people who had no other source and were freezing in the winter then they kind of backtracked so the same will be true in the financial system in China their approach to the economy if things are not going to work out the policymakers will step back and course-correct because they have that ability to and and given that their their you know number one objective really is to ensure sort of a stable economic environment their to provide as many jobs as possible to their citizens and to try to ensure that all their citizens eventually will have a decent standard of living by Western standards then then you can see that they're going to probably bend the rules on the number of things especially when it comes to you know say bankruptcies and other debt issues that they'll probably figure out ways to address it so that it doesn't cause a lot of economic pain and a lot of job losses and and and such because you know their primary concern is not about profit making per se but more about ensuring you know social stability and harmony there and and so from that standpoint you know I would say that whatever happens whatever is thrown China's way they're going to bend like the bamboo they're going to deal with that problem in probably a very unconventional way by our standards and and ensure that the economy doesn't collapse and when I say collapse I would mean you know where there would be civil unrest where you know institutions start breaking down because you know people are starving and you know you'd be on the edge of revolution or something like they will do everything possible to avoid that scenario so so from that standpoint we could say okay there's probably limited downside there what could be on the upside well China you know as we know his been catching up on the high technology front that government has been pouring you know billions into R&D research in a number of areas whether it's environmental research you know entered technology research and material sciences to biotech and so if they come up with an innovation that would be the equivalent of the Internet that the US government had been able to help create that could really launch China's economy up you know with an upside surprise and given that the sciences is an area that they heavily promote with their young people they certainly graduate more students in the stem and just in the stem categories and so with more people working on these types of issues it's entirely possible that they come up with some breakthrough technology that could really you know take you know China and maybe Humanity in a completely different direction and that would be you know the best-case scenario we don't know if that will happen but but you know it's out there as a possibility areas where you know could be dangerous for China clearly and geopolitically you know the the one area where I take no bets on is you know if US and China really have a serious confrontation that leads to some kind of security situation that I would say all bets are off but you know that would be true for all countries in the world I would think but hopefully you know barring something that extreme I think that China can still survive increased tensions with the US should things start escalating where there are more quotas and tariffs being placed on products going back and forth between US and China while maybe in the short term you know it could hurt some Chinese companies but I think because China has developed such a vast trading network they could you know try to they could they could easily try to fill in some of the lost demand elsewhere or just do something internally but what they have done is that they've really pushed forward with their belt and Road initiative and that is for those of you who are not familiar with it basically China's version of the Marshall Plan to try to build out infrastructure throughout the world and bring in developing countries into the modern economy and and thereby creating more China's in the future and so this you know this effort is going to take obviously a lot of capital a lot of manpower and China is pouring a lot of effort into this area and I would say that this is sort of their backup strategy I would say if things with the West got more tense and so and so while that's not necessarily going to go completely smoothly clearly there have been deals that have been cancelled in the past so they have to you know really negotiate with all these countries that they're going to try to build infrastructure with to ensure that they're completely on board with all what they signed up for its but I think it's still something that of the world sees a desperate need for there's clearly demand for that and and so where there is a problem in a demand certainly if China wants to meet it I don't think that they're going to be stopped and so I so I think that overall this is really a more positive story that I see and and so with that maybe I'll turn it over to questions let's do try something we don't have a huge group today so what I'd like to do is go around the room and have each person I want to I think it's great if we know who's in the audience because I want to make this more discussion so if each person would just say who they are that would be terrific so just go quickly around the room start right here and say what company are with know nothing else I couldn't hear you visually Jackson freelance every levy Tantra erekt which little shelf digital ventures I'm Joe limestone and retired from Chase after gaming Sparkle group Laurie Sherman just interested let's say he from China service my name's Jesse made johan willfully unemployed i just relocated from China back to the United States welcome back great so a lot of financial folks and some others mixed in um talk about the you know you've talked about kind of potential scenarios for collapse talk about we saw about a year and a half ago real disruption in the Chinese stock market you know where it made the disruption we saw day before yesterday c-minor talked about if is there any risk of contagion and why is the Chinese stock market divorced from the Chinese economy in terms of you know the Chinese economy is kind of like this or like this and the Chinese stock market is just like that well a couple things so the Chinese stock market is much smaller part of the GDP then say the US stock market of ours you have also you know far fewer in doesn't management firms they're managing less money relative to what we have here and I think that you know China stock markets they represent a very small handful of companies most of them are SOE z-- a lot of you know the growth in China have been from small private companies are not listed on Chinese stock markets and so you know they're driving Chinese growth there but that's not necessarily reflected in their stock market and you know relatively speaking far fewer people have their money in the stock market then say perhaps us people having our money exposed in the stock market whether it's via pension funds or insurance or other areas so with the Chinese a lot of people have put their extra wealth in real estate as opposed to the stock market so it's somewhat to couple that way I think that stock markets in general tend to be volatile because they're all about perceptions and unless you have some big players there that can sort of control the volumes and sort of the direction it would be it could be sort of chaotic and so if volumes are smaller in China then certainly they're more they're it's apt to be more volatile and and so I think that it'll that will change over time but you know they haven't been around as long and so so I would say that those are you know what I think are sort of the major reasons why and it's just it's divorced from the economy that you just you get great economic data and the market just ignores it well I don't know if it's necessarily divorced what you have is you know a lot of people in the stock market that are just retail investors they may not be very well versed in economic languages they're probably not watching all the economic data a lot of retail investors as you know our momentum traders they probably just are in for the quick buck they're not necessarily looking at fundamentals so so you're not going to necessarily find a close correlation there so I think that's part of the reason why and and even today you know even in the u.s. stock markets right people can argue all the fundamentals seem fine like why is it suddenly so volatile and went up too fast would be the argument that we'd hear from some of our fund managers but what's interesting is that I remember in Taiwan when we had a kind of a crash in 87 and then in 2008 when Lehman Brothers failed what we had was serious social unrest that you know Taiwanese who had lost money in the stock market came and demonstrated in in rather large numbers and in Hong Kong they hear you think Hong Kong the home of capitalism they felt they had been misled in the purchase of some of these products and ultimately the Hong Kong government actually had to step in we don't get that in me I guess in 1933 we got it but we haven't we certainly when we have these flash crashes we don't see demonstrations but in Asia we do I wonder if the Chinese government worries about that I think the Chinese government worries about anything that can trigger unrest and certainly people who have demonstrated in China were demonstrating either you know really bad pollution and their heirs or having their homes seized any number of things that are related to their well-being if there was more what more people invested in the stock market the lower levels then certainly that could be a possibility but I would think that at this point people that play in the stock market probably are more sophisticated and probably have extra cash and so aren't as you know I guess hurt as much if it had crashed but certainly some people would be hurt but I think that you know the Chinese government you know is trying its best to keep speculation from overtaking the Chinese financial markets and so that's why they've been you know rather slow in opening it up we have Chinese in the audience and we have Americans who've lived in China how many of you have been offered a product a wealth management product with a guaranteed rate that far exceeds anything that could have been obtained without taking on high risk so somebody comes to you and says all right I absolutely will give you 25% a year in China the United States it's tough to offer those products really the sec unless if your name is Brett Madoff yeah it's it's tough the way the SEC regulates it it's pretty tough to seriously market but in China literally you know on your phone every week you're offered this kind of product am I the only person isn't because my phone is somehow with that Beijing number in in the back maybe they know I'm gullible no lower than right exactly and it seems to me what's so interesting is when you think of of an economic crisis okay you I think about massive defaults under these a lot of these are our Ponzi schemes or not precisely but you know they're using new investors money to pay high returns to older invest your money but and the Chinese c.src doesn't really regulate these well I mean I think it's it's such an interesting kind of high risk way of operating and people are constantly offering you this stuff well that was part of the shadow banking system yeah that's do it right that the government has decided to tackle and so I think that with their broad mandate to put out these rules to ensure that they can't continue to operate that way there'll be a de leveraging process that I'm sure will cause some hiccups could actually cause the government you know the economy to slow down somewhat this year but I'm quite sure that these folks have been studying this very closely and are trying to ensure that it you know not one thing will cause you know a contagion that will lead to collapse because everybody who's dealt with China for a long time says the folks who make economic policy if they make a mistake they fix the mistake well those are offensive right because you know whatever wealth management product that collapses there it will be denominated in RMB which is their currency and so given that the Chinese government has complete control over their currency there are the ones that make up the rules as to how they're going to deal with that problem so they can easily you know come up with new rules to handle these one-off situations or whatever they are as they go through the delivering process you were again I don't I don't see this as a short or even midterm rat risk but did you worry that what we're seeing today in China's economy is underfunding of the private sector and over funding of the public sector what we've seen is a complete if we had a screen I could show the data but what we've seen is a complete flip of private credit the ratio of private credit to public credit has reversed so in 2013 you had around 72 percent of the credit provided to private enterprises so 28 percent provided to state-owned enterprises now it's reversed now we have these inefficient monopolistic elephants getting 72% of the credit and 28% is going to the private sector and we know both Chinese who live in China and those who study China here know that the state-owned sector is really inefficient and the growth that has occurred in China has been in the private sector well aren't they planting the seeds of like long term risk no not necessarily so they're state-owned enterprises certainly there's some of them that are not very efficient but if they were to close them down they would still have to pay welfare to these people anyway so for them to keep them employed at least they keep them productive and and while it may not be profitable they can basically use that extra capacity in projects that are what the government what Beijing deeming as a priorities namely the Belton Road initiative and so yes we've seen sort of a move back to the state-owned enterprise sector mostly because Beijing has these initiatives that no single private company is large enough and would have the appetite to take on these sort of projects and risks it requires the government taking the lead and so so so really what do you what kind of aluminum cement steel those are private companies everywhere else they have both private and public right and so are we over capacity number it's the massive over capacity of exists in China which is not only destructive to China its destructive to the rest of the world is because of this provision of credit unlimited credit to state-owned enterprises well I'm not saying that that is necessarily a good way for them to deal with it but they have basically tried to provision the extra capacity to like I said these other infrastructure projects which can help absorb some of this excessive capacity and like I said their number-one priority is not necessarily profitability their number one priority is actually to try to keep social and rest from bubbling up and the way to do that is to provide jobs and so you have a lot of people who don't have a lot of skills and what are you going to do with these people I mean I think that you know economies all over the world are actually going to be faced with this problem of you know do you have all these people on welfare or do you just try to keep them in their job and hopefully find new ways to use whatever they're producing in a productive way and so I think that's why you see so much of this government money that has flipped into you know Xi Jinping's pet projects such as the infrastructure projects and he's also announced that he wants to reduce poverty by 2020 and so how is he gonna do that I mean they basically plan to move a lot of poor people into homes that have power energy and and try to lift their you know their standard of living by using government money to do this and so so yes I think that from a percentage-wise we've seen a tilt that way but that doesn't mean that the private sector isn't still robust the private sector is getting a lot of money from venture capitalists you're seeing a lot of companies being funded the way Silicon Valley folks are being funded with equity was you know companies acquiring them and having those kind of exits and so that new economy is actually thriving and driving a lot of upside growth in China and so we see basically you know the government trying to provide a safety net to the SOE s that have not done well and for the people who are not keeping up but also providing sort of the fertile ground for a lot of entrepreneurs to actually develop new companies and to take the country in a different direction and here they have created lots of incubators provided a lot of capital to these folks so that so that that possibility is there well I always thought I was an optimist on China I have whenever I'm in a room they everybody says you're the most optimistic but and you put me to shame let me just win you know in my investment career I sought monopolies monopolies are great for investors because your profit margins are guaranteed you don't have competition you can provide cheap service you know nobody can come in and compete with you it's a wonderful thing it ain't great for the consumer and an ingrate for the economy but it's great for the investor when the Chinese government looks at these sectors that are inefficient in monopolistic and their solution is merge the two Oleg arcs to become a monopoly something's wrong that is not that is not good economic theory and it's ultimately gonna be a it's gonna tamp down economic growth and create troubles now I agree with you that there all the Chinese the people who make the economic policy are really smart they're really well-prepared the organization Department of the Chinese Communist Party make sure that these folks have gone through incredible training before they reached the top but boy some of these policies having said that some of these policies are 40 years I've watched it and it's been the private sector that his driven growth and what I'm seeing is the prime yes there is the venture there is the equity side but you know you always need debt and the private sector the public sector is chasing the private sector out of the debt markets and I see it in businesses that I look at and it's it's troubling and you implied but I'm not sure whether you meant that there would be no that the government would somehow find a way so that nobody got burned as opposed to other countries where there's a sharing of the burden so could you talk a little bit about some of that if any of that non-performing wealth management products and do you think that the government's could shelter under some conditions certain types no I can't speak for how they're gonna deal with every single one I'm sure that they're going to try to let some go and and we've seen actually some bankruptcies already so they haven't caused contagion and you know how much they bailed out some of the folks and how much the people had to eat those losses it's not entirely clear but I think that their objective is to make sure it doesn't spread and so to the extent that if you know if it's just a number of super wealthy individuals they're probably gonna just have them eat the cost for the most part but I think that what they're going to and and this is gonna be trial and error right because they've never done this before so they're probably gonna make some mistakes so I would not be surprised if there would be another kind of panic that ensues once they put this rule in place and and maybe there might be a messy unwind at some point but if it you know got to be dicey then yeah the government will step in try to you know freeze things much like what happened with their stock market like when it starts you going to freefall they basically stopped trading they basically you know told various folks to kind of step in and so we in the West might not agree with those steps and think oh that's so heavy-handed you know that's not a free market etc etc but from the Chinese standpoint remember they just have different objectives from us they just want to make sure that the economy you know may hit a bump in the road but it's not going to hit some have a collision and just you know go off the rails and so will that create moral hazard perhaps but you know we could say the Federal Reserve did something similar in 2008 they went and saved some of these big banks when they could have all gone under because they had so many so much bad derivative debt on their books and and basically kept the financial markets afloat and so a lot of people felt you know that is the hole too big to fail and we're really upset by that but but you know the Federal Reserve and the US government did it because they don't want you know the whole system to fall apart and people having going to barter systems and having total chaos that way right so so the governments are going to step in when they need to and to the extent they need to and so I would say the Chinese policymakers watched very closely what we did during that period took lots of notes on what to do and what not to do and I think that they're going to basically apply some of those lessons with this delivering exercise the the United States Trade Representative a few weeks ago submitted to the US Congress a report which you know is anybody wants to read it it's it's really quite amazing it's almost 200 pages and it's it's worth reading if you're interested in us-china trade relations the most important right at the beginning he says that the United States heard in allowing China to join the WTO on the terms that we did that the ensuing 16 years close to 17 now has created enormous injury in the United States and he then goes on in this hundred and seventy pages to list all the actions that China has taken that hurt the United States he he basically argues that the WTO never envisioned having a country like China as a member that the state-controlled economy allows it to do things that we never anticipated and you almost can't fix it when you read between the lines he doesn't say this you can't really fix it through WTO mechanisms it's a it's a fascinating read I mean it's really if you're interested in us-china relations I almost think it's a that and the National the strategic the national strategic and security documents are equally worth it but this one is about ten times longer do you think if this is more than words then the solar panel tariffs and the washing machine tariffs are nothing that we're going to start finding China for IPR violations for any state participation in a particular industry so you know they've already we already have steel and aluminium and cement building materials telecommunication I can just go on and on a name and it'd be most of them most of the economy is there a risk to China's economy which you do mention in the book that kind of the us-china relationship could really derail China there's certainly a risk I think any trade war you're gonna create risks that's gonna hurt both the US and China and this is going to restrict flows of information flows of Commerce and it's going to make things you know much more difficult for citizens of both countries because it's going to create inflation it's going to cause unemployment but I think that what I talk about in my book is that if the u.s. decides to go down this very extreme route China can still survive this so China's actually already been denied various acquisitions you know China try to you know buy semiconductor companies try to you know in buy various high tech companies and have been blocked by Sophia's and so what China has done instead is try to just have their own homegrown domestic innovation centers to develop all this technology on their own and China I think has gotten to the point where they have that capability to do that yes it's probably gonna take them longer but they're they have the brainpower the manpower the willpower to to pursue this route so so I think that if the u.s. decides to go hardcore and say you know we're just not going to deal with China and these fronts in the end the u.s. might actually lose out given that China is actually pursuing a lot of things like AI like you know a whole number of high tech initiatives where it's a very close race in terms of innovation with the US and if China somehow pulls ahead then it would be the u.s. loss if we decide that we don't want to engage in trade with China because then we might be missing out on any of the latest technology so so I would you know I would say that it's it's you know not gonna be a pretty pretty picture if if the u.s. decides to pursue this but I think that given you know what I've seen in terms of what China's developed in terms of their capabilities you know they're quite capable at this point I think of replicating a lot of this on their own I had a hand back here yeah and I had some questions about the economic development I'm wondering which of perspectivism economic development well there is dead I mean China's economic development now is more about you know trying to create reforms to sort of address whatever imbalances exist in the economy because they inherited a lot of obviously the SOE they operated as a command economy before they join the modern economy right and so so they have a lot of legacy that they have to deal with and a lot of the reforms are to try to address these issues and they're going to basically take their time to slowly pivot away from that into more of a market oriented economy and so I don't know if that's what you're asking me Priti father wait so you're asking me whether having foreign companies to the developing countries whether that's for the developing um I think it's all the Devils in the details right so I think it depends on how they structure a lot of these things but you know a lot of these countries they don't have a lot of technical know-how and China has built a lot of expertise around infrastructure development and so for them to go in there and basically design whatever infrastructure plans they have and and teach these people or manage the project that way I don't see how that could be wrong once the infrastructures developed then those local economies can start to flourish in ways that they can't at this point and and then over time they'll develop the expertise I'm sure to take on the big engineering projects too but that would take time right it's not something that people are going to learn right away if there have been an agrarian society for instance from the private from the developing countries that shine is going into I mean if they have problems paying it off China I'm sure will renegotiate those the debt in ways that they will roll it over or they'll just change the term so that so that they can pay it off I'm you know that is again just another thing that you know people invent and create and it can be modified it's not set in stone in any way so de Venezuela and so so in their relationship with China today right so so basically it's just a contract really of you know two parties and what they want agree to and so if if they miss a debt payment then they'll just go back to the negotiating table and right and and just figure out a you know another deal in EMR province and recently China had one of these initiatives where they are building a dam in the northern parts of Myanmar actually in the catching area territory and they negotiated with the the Burmese government they didn't negotiate it with the local patching governments they have their own kind of independent government set up there and so one of the things that they did is the catching people were really upset about the deal they didn't like the way that China's negotiated with the Burmese government didn't negotiate with them and so actually Beijing the capital they called up my friend to come up there with a caching delegation to actually negotiate specifically with them and say what do you got one like we want this dam in place we want these infrastructure projects going through the catching not state the catching territorial territory what can we do for you as well as negotiating the original projects and so actually this dam has been shut down for a couple of years but they're just doing basically all they can to negotiate properly with the locals there in all aspects and they just doing a very good job of basically negotiations in those aspects that Chinese wouldn't love that if I switched it and have people going in and negotiating directly with the scenes young government Peggy yeah one of the more unusual retaliation strategies that I've read about recently if we get into a trade war it came from the colonial times and I don't know what you think of their relationship to the Chinese government but they said if the US starts slapping on tariffs we can just stop sending Chinese students to the United States which was an interesting idea and terrifying to the US higher education community but there are many reasons why the Chinese students may want to start start staying at home for all these good economic don't think that would be wise I mean I I would see them suggesting that you know people not necessarily spend their tourist dollars here as a you know more logical way to hurt us as opposed to just a thing that just words words are cheap right so so they could throw all kinds of things out there and they may not follow through with it I'm more worried Peggy you know I think I circulated and you saw some of the language in the national security strategy and the national defense strategy which talks about the universities and Silicon Valley as engines of entrepreneurship which are stolen by foreign students so especially in the stem area it you didn't say so but you you could easily add the next sentence by saying well we need to restrict Chinese students in stem now I called chairman of universities I know I said I hope you guys are standing up and screaming that this would be catastrophic for the United States and I think they were I think they are but I think also there is heavy screening of applicants candidates coming from China and I know they have an awful lot of Chinese students are coming down not instead let me used to be it was all stemmed right but now you know kids are coming just come they're much less worried about the non-stem right students but it was quite a jar when I read I was it's very jarring very jarring top it's very interesting are you saying it sounds a little charitable China's approach of course the US has long history of feeling it's been charitable to the rest of the world and I was a I just wanted to connect that I made a comment before but I'm not sure I called what you meant by something about on the certain conditions China would create on the China's right so the Chinese have basically decided that what their experience was worth sharing with other developing countries who wanted to also I guess develop economically in the same way basically admiring a very admiring of China's economic miracle and so China basically has sort of offered various countries that oh you know we can share our lessons on like how we've approached economic development and this is you know how we did it it was you know based on cheap labor based on infrastructure investment etc etc and so with the belt and Road initiatives that would be one way of them exporting you know those ideas to these countries as you suggested before though the Chinese model for itself is very much a political model for all the reasons that you say so we'd also be political model um well you could read it as such I don't think they see it that way right because they basically see it as sort of a practical approach to economic development so they're not necessarily advocating authoritarianism per se neither are they advocating democracy they're basically you know saying well these are the steps we took to ensure that economic development can take root and start growing organically and if we want to interpret that as oh you know a more hands-on command economy approach state you know capitalism what-have-you I guess you could you could make that draw that conclusion but like I don't think it's explicitly that way I you know I think the United States has maybe put 20 people 20 million people in poverty instead that's comparison but you know when they go into countries like in Syria or Libya or you know places where where the United States and Great Britain have destroyed you know you can say that the their their money they obviously the war is development and they are spreading developments across the world and you know by and they can cite you can actually scientifically know that certain infrastructure projects will spur economic activity and in the future creates trading partners like in in Africa these days and I and in my opinion China is is also trying to end geopolitics in the world bye-bye there doesn't road initiative and in inner politics you know so basically end wars in the future and you probably start thinking about humans I think it's pretty to talk about you know trade wars you know China has this idea they call it win-win strategy so that when they go to country they they really mean when when you know both are gonna win not like Western zero-sum games so you know I think the rest of the world will see they gonna like what China is doing for them and create small China's other questions Patrick you must you've been quiet how do the markets fit into all of this you worked at a Chinese organization for a number of years we could think about the Chinese stock market the Chinese regulated c.src Chinese STC is like a mismatch you can give me whatever second day and he came to lose whatever said he can make more than 10% and he can't with 110 percent so you know it's a dislocated from the Chinese economy because there's only on Shanghai there's what 20 100 stocks and then attenders 18 but 4000 is there but that's going to increase every year of flash of 340 IPOs as we get higher revival that's when he mentioned the whole Road I actually think it's commodity so city get storage of sales for commodities so China right now it's 26 cities with 26 MTR systems with what $26 just a metro right by 2020 do you know how many they're gonna build 40 new systems and 40 new cities that's 900 billion dollars right let's say there's 200 million of middle class coming out there by 2020 president she wants 550 right let's just say it's 200 you give that 200 million people Hong Kong square-footage living which is 120 square foot per person you're not enough housing in China there's a reason why for over capacity and then many of the issue ease didn't close there northeast operation shop she whole covers they need all the capacity and keep commodity prison down there's not enough commodities to leave the China growth so they need that silk world to vote if you would if you find a way to put in your money the training for commodities a lot of World Series so it defaults on their death don't pay their debt back the trade off so debt is a social science that can be restructured me to create it to be more China needs that's actually pretty sad other folks we haven't heard from a lot of folks in the audience go ahead since we've got silence from the others you were talking about how there may be of course the big buzz and hype about the new technologies blockchain technology I'm kind of curious if you have any kind of thought about how the Chinese government is looking at blockchain technology in the future and it seems like just inherently kind of a technology that the the government would not be super okay with because it kind of supersedes some controls but I don't know if you have any ideas about this technology in house well blockchain from what I understand can be applied to anything and everything right so far the government has only come out against Bitcoin and other cryptocurrencies but that doesn't mean they're against blockchain I think blockchain actually could really streamline and make efficient a lot of things you know it could completely overturn economics as we know it too right because today a lot of the industries like the music industry or advertising or all these other industries are you know because they're being digitized a lot of those royalties are going away and it's easy to copy and whatever but blockchain can actually track all those very seamlessly right if someone wanted to use an image and and and they're not paying royalties the blockchain can find it right with AI and then basically have someone pay you know the actual originator of that some kind of royalty fee and and it would be done very cheaply because you don't have to have you know people intermediating this so I think that blockchain would be very promising and I don't see why the Chinese government wouldn't embrace it in some form or other but you know I think it's in its early days and so I'm able to see what sort of regulations will revolve around that yeah well join me in thanking and for giving so generously of her time the book is available outside and she's available to sign it

Channel: National Committee on U.S.-China Relations

Views: 30,287

Keywords: chinese economy, xi jinping, us-china relations, economics, gdp, china

Id: YZvm-cNlPus

Length: 64min 9sec (3849 seconds)

Published: Wed Feb 21 2018