Thank you all for attending today. First, I want to share with you the foundation we've built over the past year. Last April, Yesterday, April 9th, marked the end of Treasury Secretary Yellen's 6-day visit to China. This was Yellen's second visit to China after a gap of 9 months. In recent days, Yellen's visit to China has been a focal point between China and the U.S. The international media also paid great attention to Yellen's visit to China. Today, let's talk about the story behind Yellen's visit to China, the overt and covert struggles between China and the U.S. Speaking of Yellen's visit to China, we might have to start from last November, when the China-U.S. summit took place in San Francisco during the APEC meeting. At that time, APEC was held in San Francisco, and Xi Jinping and Biden held a bilateral summit there. During the summit, the two sides did reach some consensus, but these consensuses always need to be implemented through continuous communication. So, on January 30th this year, U.S. Assistant Secretary of State Sullivan was saying to the media that there would soon be a phone call between the leaders of China and the U.S. We agree that the President and Chairman Xi should make statements and should make the call as soon as possible. I think it was also confirmed at the Woodside summit because China and the United States are known to be the two most powerful countries in the world right now. However, these two countries do not get along, with ideological differences between them, and at the same time, there's a competitive stance globally. So, it becomes very difficult for the leaders of these two countries to meet, averaging more than a year to see each other once. But think about it, there are many issues between these two countries that need to be communicated and resolved. So, if face-to-face communication is not possible, then it has to be done through phone calls, by chatting over the phone. So, on January 30th this year, the U.S. announced that soon, the leaders of China and the U.S. would have a phone call, but this "soon" suddenly stretched to April 2nd, the day after April Fool's Day. I heard that the original plan was to have this phone call on April 1st, but then both sides felt it was inappropriate. Two country leaders, having a call on April Fool's Day, might give the media some material to work with. So, the phone call took place on April 2nd. During this phone call, a lot of discussion was about TikTok, The U.S. said it's not about banning or not banning, but the U.S. demands TikTok to sever ties with Chinese companies to ensure national security. For example, The U.S. was particularly concerned at the time that China appeared to be supporting Russia in restoring its military production capabilities. Because the U.S. has now discovered that Russia's original military production capacity was insufficient, but after fighting with Ukraine for these two years, it seems that its military production capacity is gradually being restored, continuously producing a stream of military supplies, seemingly able to support Russia in this war. They believe that China is providing covert support for Russia's production capabilities behind the scenes. Of course, the U.S. is very displeased with these developments. Then, China, in this summit call between the heads of state, mentioned that the Taiwan issue is China's red line. You, the U.S., cannot cross it, and moreover, you need to implement it. You can't just verbally talk about a one-China policy but then secretly sell missiles to Taiwan and F16 jets. This is something China cannot accept. So, in reality, both sides essentially talked past each other, but China and the U.S. are engaged in friction, cooperation, and competition. Regarding issues where neither side could compromise, they just talked past each other. But in areas where both sides can cooperate, can talk about, those need to be implemented immediately. On April 2nd, after the phone call between the leaders of China and the U.S., Yellen had already arrived in Guangzhou by April 4th. You can imagine, there's also a time difference between China and the U.S., so in effect, as soon as the phone call between the leaders of China and the U.S. ended, Yellen essentially set off from the U.S. So on April 4th, she arrived in Guangzhou, and on April 5th, Yellen talked for three hours with China's Vice Premier He Lifeng in Guangzhou. The United States seeks to establish a healthy, mutually beneficial economic relationship with China. This healthy relationship must provide a fair competitive environment for businesses and workers of both countries. After talking for three hours, they took a night cruise on the Pearl River and had a Chinese meal, the menu of which was even shared online. Then, on April 6th, she headed north to Beijing, where she met with Yi Gang, the governor of the People's Bank of China, and Li Qiang, the Premier of the State Council. Currently, under the strategic guidance of the leaders of both countries, Sino-U.S. relations are showing a stabilizing and rebounding attitude. I believe that in the past year, we have placed our bilateral relations on a more stable foundation. This does not mean ignoring our differences or avoiding difficult conversations. It means we understand that only through direct and open communication with each other can we make progress. She also met with Liu He, a retired Vice Premier, Speaking of Liu He, it's actually quite interesting. Yellen met with Liu He during both of her visits to China, even though Liu He has already retired. According to the hierarchy of Chinese officials, he has retired. Think about it, a sitting U.S. Treasury Secretary meeting Liu He during both visits to China, what does this imply? It implies that although Liu He has officially retired, he still plays a very significant role in China's economic decision-making process. In fact, as far as I know, Liu He currently still resides in Zhongnanhai, actually still actively participating in the process of China's economic policy and decision-making. So Yellen met with Liu He in Beijing. So, for Yellen's visit to China, the most important goal was actually made very clear before the visit I am particularly concerned about the global spillover effects of the overcapacity we see in China. In the past, in industries such as steel and aluminum, the support of the Chinese government led to massive overinvestment and overcapacity. Chinese companies hope to export them abroad by lowering prices. This has maintained China's production and employment, but forced industries in other parts of the world to shrink. Now, in the "new" industries like solar energy, electric vehicles, and lithium batteries, we see the accumulation of overcapacity. China's overcapacity distorts global prices and production patterns, harming American companies and workers, as well as companies and workers around the world. So, think about it, after China joined the WTO, the capacity of steel production began to grow rapidly. That 95% of the world's crude steel production is from China, only 5%, the so-called economy, a certain share of the production of high-end steel, is still held by Japan and a few countries in Europe. The rest is all dominated by China. So, the United States believes that this story cannot be repeated. The United States can no longer tolerate China repeating what happened over a decade ago in the steel industry. It is crucial for the President and me that American companies and workers can compete in a fair competitive environment. In previous discussions with China, we have already increased capacity. I plan to make it a key issue. I plan to list this issue as a key discussion topic on my next trip to China. That is to say, the United States demands that China restrict its capacity to maintain trade balance. So, what the United States was referring to this time, the so-called new energy industry, mainly refers to China's new three categories. What are the new three? They are the new energy vehicle industry, the lithium battery industry, and the photovoltaic industry. So, the reason why it caused such great concern in the United States is actually quite understandable. Now, in the new energy vehicle industry, I've already talked about it a few days ago in the Xiaomi program. Currently, in the global new energy vehicle industry, about 65% of the capacity comes from China. That is to say, for every three new energy vehicles produced, two are made in China. Think about it, that's a terrifying number, isn't it? The lithium battery industry is also exaggerated. In the lithium battery industry, 60% of the global production comes from China. What's even more terrifying is that in the fine processing of lithium, the final refining step, 72% of the global production is controlled by China. The photovoltaic industry is even more terrifying. After 20 years of development, 80% of the global capacity in the entire photovoltaic industry comes from China. This includes the production of silicon wafers, where 97% of the global production of silicon wafers is made in China. Think about it, this puts a lot of pressure on countries like the United States and Europe. What's more terrifying is that in these three industries in China, not only is the production volume large, but the cost is also very low. Take the photovoltaic industry, for example, The products produced by China's photovoltaic industry cost 10% less than India, 30% less than the United States, and 60% less than Europe. Think about it, the game is unplayable, right? If you are 60% cheaper than Europe, what can those European manufacturers do? New energy vehicles are not much different. I talked about it a few days ago in the Xiaomi car program, Xiaomi car, it has the potential to be a disruptor because Xiaomi, as a company, played the role of a price butcher in the smartphone industry. And it really turned the whole smartphone industry upside down because its cost control was so successful. Now, the general cost of China's new energy vehicles is significantly lower than those produced by European and American countries, except for Tesla. Tesla's costs are still very successfully controlled. Apart from that, the cost of new energy vehicles from traditional automotive powerhouses is far higher than in China. The lithium battery industry is no exception. Take Tesla, now many cars actually use batteries from CATL. That means the cost control of these Chinese battery productions is very successful. Therefore, this creates a great sense of crisis for the United States and Europe. So, Yellen's visit to China was actually aimed at resolving this issue. However, Yellen thought during the visit that China only had an overcapacity issue, believing China couldn't digest it on its own and wanted to push these products to the rest of the world. China is really too big now for other countries to accept or to absorb, to accommodate so much capacity from China. But because China has so much capacity, it will affect the global price market. That means, the world must be forced to accept all these cheap and affordable goods from China. So he demanded China to control its overcapacity, you can't dump all this capacity on other countries. That's Yellen's reasoning. Whether it's He Lifeng or Li Qiang meeting with Yellen, they both emphasized repeatedly that China's new three categories are not overcapacity, but rather there is a lack of capacity on a global scale. Because if you look at these industries, their growth exceeds 50% every year. Why does it grow more than 50%? It's because of strong demand. Strong demand allows it to grow so quickly, right? So, it's not about overcapacity, but insufficient capacity. The reason you think it's overcapacity is because of your lack of competitiveness. Then, Li Qiang, He Lifeng, including Liu He, kept telling Yellen, if you talk about the principles of free trade, right? The fairest principle of market economy is free trade, how can you engage in protectionism? Thinking about it now, actually, this scene is a bit ridiculous. Just think about it, back in the early days of China's reform and opening up, we actually imposed a lot of special tariffs for protection against these Western countries, believing that the products produced by the United States and Europe were low-priced and of good quality, but unexpectedly, 40 years later, the tables have turned. Now the products produced by China, make the United States and Europe feel incredible. Unbearable, needing special tariffs for protection. So who exactly makes sense in this argument, or how to evaluate China's so-called new energy industry the issue of overcapacity and the industrial tsunami? First of all, I want to say, do you remember, right after China joined the WTO, it's not only the current industries that have taken over the world, many industries have taken over the world. Right, the first to take over the world was actually the garment industry. Everyone knows the volume of the garment industry produced by China every year, 70 billion pieces. 70 billion pieces, accounting for 50% of global production. So, after China joined the WTO, it quickly dominated the world in garments. The second industry is furniture. By 2006, China had become the world's largest furniture manufacturing country. The GDP from this sector accounted for about 35% of the global industry, with the actual production exceeding 50%. It overturned the traditional furniture powerhouses. The third industry is white goods (home appliances). Before the economic reforms, China's home appliance industry was lacking. But after the reforms, through foreign investment and joint ventures, China's white goods grew significantly. Eventually, not only was the quality good, but the prices were low. Now, China dominates 50% of the global production in the white goods industry, with the air conditioning sector taking up 80%. Not to mention the small commodities in Yiwu. Hence, China is called the "World's Factory," synonymous with "Made in China." This actually describes the past 20 to nearly 30 years, where China's industries continuously took over the world. But have you noticed that in the past, this so-called "Made in China", "World's Factory" didn't cause much unrest in the US and Europe? Why? Because the industries China dominated were exactly those the developed countries were reluctant to engage in, the so-called sunset industries. Take the steel industry, for example. In fact, the US had largely abandoned its crude steel industry before China took over the world, moving it abroad. Including garments, toys, furniture, and white goods, the US had given up early, considering these industries to have low technological content and low added value, perfectly fine to be manufactured in other countries. So, there wasn't much conflict between China and the US, or between China and Europe, even though China rapidly dominated these industries. But this time, what's the significant difference? It's that China's rising "new three" categories, meaning new energy vehicles, including the lithium battery industry and the photovoltaic industry, are actually sunrise industries, not sunset ones. What's meant by sunrise industries? As the world recognizes the concept of environmental protection, and the prospects of carbon neutrality and greenhouse gas emissions, these green energy industries will be booming for the next 20 to 30 years. Consider the current growth of photovoltaics, growing at a rate of about 30% to 50% per year. Germany announced that by 2035, it will fully utilize green energy industries, meaning traditional power companies will be phased out. Imagine if this industry were dominated by China, it means not the industries you don't want but those you do want and wish to develop are taken over by China. So, in my view, the crux of the conflict between China and the US this round is that China isn't taking over sunset industries but sunrise ones. And these sunrise industries aren't the traditional labor-intensive ones but are technology-intensive industries. And in the photovoltaic industry, China leads significantly in technology, not just as a labor-intensive industry but also a technology-intensive one. Look at the photovoltaic industry; it's global, and China alone has filed 150,000 patents, ranking first worldwide, far ahead indeed. Moreover, in the photovoltaic industry, there's something called photovoltaic conversion efficiency, which has an industry average of 23%, but the world record holder, at 27%, is from China, set last year by a Chinese company. So, in terms of technology, China truly leads in the photovoltaic industry, which is no exaggeration. Of course, this relates to China's early support for the photovoltaic industry over the past 20 years. Because when China entered the year 2000, it began to vigorously support the photovoltaic industry. During these years, China used a lot of subsidies. From 2006 to 2012-2013, many companies defrauded national subsidies. It is said that China’s total subsidies for the photovoltaic industry reached 160 billion. At that time, many companies were purely for defrauding national subsidies to engage in the photovoltaic industry. But in this process, China's photovoltaic industry was gradually developed. So, in 2009, China's photovoltaic industry had already begun to experience involution domestically and started looking to go overseas. Seeking to expand abroad, Because at that time, the Chinese government provided a lot of subsidies to this photovoltaic industry. If you invested, there were subsidies of 50%-70%, so the costs for these companies were relatively low. They began dumping in the United States and Europe. At that time, both the United States and Europe started anti-dumping investigations against China's photovoltaic industry. As a result, special tariffs were increased, Suddenly bringing down the exports of China's photovoltaic industry at that time. The first time, and the second time, actually, was from 2014 to 2016, At that time, the United States enacted a Section 301, Again against China's photovoltaic industry, Beginning another so-called investigation into unfair trade practices. The third time was in 2019, The United States conducted another so-called investigation against China's photovoltaic industry. But this time, you will find that, these three times the United States targeted China's photovoltaic industry, Each time the impact on China's photovoltaic industry was less and less. Why? It's because China's photovoltaic industry Is now first, actually, all industry subsidies have already been phased out. Second, it is indeed through technological integration that led to a very significant reduction in product costs. Over the past ten years, the cost of China's photovoltaic production has been reduced by 80%. So, this is actually achieved through technological iterations, mainly, And not through cheap labor. Think about it, India and Vietnam also have photovoltaic production companies, Why is their cost even higher than China’s? So, China's ability to withstand foreign attacks in these areas is getting stronger. This indeed shows that China's technology in this area Is relatively advanced. So, in this, we have to talk about, Then you say, between China and the United States, now around such a new energy industry, The covert and overt struggle between the two, who is reasonable? So, today I am going to share my view, I personally believe that, First of all, free trade is definitely the most important principle globally. Because so-called overcapacity, in fact, benefits consumers. Because in the process of capacity competition and involution, prices will inevitably drop. Do you still remember the mobile phone industry back then? When the smart phone industry first came out, it was a luxury, But because of the involution of China's mobile phone industry, Eventually, global smartphones entered a cheap era for the masses. So, who ultimately benefits? It’s the consumers. And who ultimately suffers? It’s the traditional mobile phone powerhouses, Like Ericsson and the like, eventually all went down. Only Apple and Samsung survived. But this should be a normal phenomenon in the process of market competition, right? So, in my opinion, so-called overcapacity, if it can't be sold, Or if you eventually sell below cost for a long time, then the market will punish you. You might as well close down, and when you really do close down, In fact, this overcapacity issue will no longer exist. So, the principle of free trade is very important. And if we look at it the other way, then your Apple phones essentially Dominate the global high-end phone market, isn’t that overcapacity? Isn’t that an industrial tsunami? For example, Coca-Cola, you dominate the world's beverage market channels, Isn’t that overcapacity? Your Tesla, now is outstanding in the new energy vehicle industry, isn’t it? Isn’t that overcapacity? Isn’t that an industrial tsunami? I personally think, this is actually a market where skills are honed based on merit. Whoever can outcompete the other, will be the ultimate beneficiary. Of course, we also have to acknowledge that, in this era of globalization, If a product destroys the industries of other countries, Then, due to the industries in these countries, workers may generally become unemployed. So, in these countries, The demand for some principles of trade balance also makes sense. Take the automobile industry, for example, in Europe, I mentioned, 6% of people are related to the automobile industry. In Japan, it's even higher. If Japan's automobile industry were defeated by China's, I believe Japan's national fortune would be over. So for these countries, protecting these industries and demanding some trade balance, I personally think is reasonable. So, actually, in this process, it's about dividing the international interest structure. Back in the day, after World War II, the United States also had its own excess capacity. How was that excess capacity managed? It was through the Marshall Plan, right? Aiding these countries, while at the same time getting them to buy some American products. That ultimately established the United States' status as a superpower after WWII. In fact, from a certain perspective, today's China is also emulating the path the United States once took. Through its market economy, China has created a status as the world's factory. Then, from labor-intensive industries, it now spreads and develops into technology-intensive upstream industries. After its own domestic market cannot absorb these products, It realizes this through the Belt and Road Initiative and by exporting to foreign countries. So, more of this is actually a dispute of interests. Because Janet Yellen herself is an economist, she of course knows the principles of free trade. So, this is actually a dispute over interests. Because Yellen is an economist, she certainly understands the principles of free trade. So, when Yellen was meeting with Chinese government leaders, She said this, she said, The United States is now pursuing a healthy, win-win economic competition, Not a winner-takes-all type of competition. Plainly speaking, it's worry that China, in the new green energy industry, Will form a winner-takes-all kind of situation. At the end of the day, I personally think that the United States and European countries, To win against China in this international competition, The most important principle is still to defeat China through regular economic competition, Not by using so-called trade principles, negotiations, tariffs to contain China. As I said, with the acceleration of new energy industry iterations, Prices continuously dropping, and Moore's Law taking effect, Actually, the effectiveness of these trade barriers is gradually decreasing. Like I said about the photovoltaic industry, even if you use trade barriers, Through tariffs, the impact on China's photovoltaic industry is now quite small. Because from 2019, the cost of electricity production in China's photovoltaic industry, Has already been lower than petrochemical products. It can also enter the grid at a parity status. Think about the competitiveness globally, Even if you use trade barriers, you might still find it hard to stop. At the end of the day, over the past two decades, Whether it's the United States or Europe, they haven't paid enough attention to these industries. This is one reason, of course, another reason is that, In countries like Europe, it's that their own Social welfare levels, I think, might be too high. Of course, some might say it's because China's social welfare is too low. Right, of course, this is two sides of the same issue. So over the years, over the past few decades, Europe has raised its industrial workers and the entire society's social security level To a relatively high level. From a certain perspective, it has a precondition, This precondition is your economic competitiveness. If you don't have strong economic competitiveness, Your country isn't able to provide such a high level of social security for its citizens. So, if this competitiveness is defeated by China, Then the social security level of these European countries, Or rather, the level of social welfare, will be difficult to sustain. This is actually a structural problem. Some people often ask, why can't China raise [its standards] to the level of Europe, Instead of asking Europe to gradually lower its standards? This is another topic entirely. Of course, I personally believe that China, indeed, with the development of its industries, Should really raise the compensation level of its industrial workers, And improve China's social security level. Because after all, you already have competitiveness in this industry. Then, you should raise the wage level of your industrial workers, And improve the level of social security. Then, the industrial tsunami that China exhibits, Won't be so daunting. It won't be destructive. Because when you deal with Western countries now, Everyone thinks the products produced by China have a destructive advantage. If that's the case, then the competition might become more positive. But what I want to mention is the new three aspects, China's aggressive competitiveness in green energy, Indeed poses a new challenge to the United States and European countries, Regarding China's manufacturing capability, In the transition from labor-intensive to technology-intensive industries, How should Western countries including the United States, Europe, and Japan face this? If this crucial battle is lost, Then the international economic landscape in the next 20 years, May indeed undergo a profound change. Alright, that's all I have for today. Thank you, everyone.
