00:00First of all, this trade deal that we're all anticipating today, tomorrow, you know, perhaps even in the days ahead if it doesn't happen today.
00:08What are the implications in terms of U.S.-China relations?
00:11I think it's been clear for some time that President Trump and President Xi wanted to find some form of accommodation, primarily on trade and on the economic relationship.
00:24Certainly the moves that the Chinese have made on rare earths really caught America's attention and showed that China had leverage over the United States, as well as the United States having leverage over China on things like semiconductors.
00:41So I don't think we're going to see a sort of warming of relations.
00:45I don't see relations between U.S. and China ever being warm in the coming period.
00:49But I think this does seal off, if this deal happens, and I expect it to happen, I think this will address a series of trade irritants between the two countries.
01:02But both sides know the other's got a lot of leverage over it.
01:05So they'll proceed cautiously, carefully.
01:08Neither side wants to have a direct armed conflict, that's for sure.
01:11This doesn't have a direct impact on the security issues in the region, in the South China Sea, on Taiwan or whatever.
01:17But it creates a climate where there's not mutual hostility on the trade front.
01:23But the thing is, longer term, it changes very little, right?
01:27Relations will always be dogged by all those issues, including Taiwan, including rare earths.
01:33I think that's right.
01:35There is a systemic rivalry between Western countries and China.
01:40China is a communist system.
01:41And it's not trying to dominate the world in the same way that the Soviet Union was trying to dominate the world.
01:48But it certainly wants to dominate its region and its space.
01:51And that includes effectively taking control of Taiwan, of dominating the South China Sea.
01:58And that's not in the long-term interest of the United States.
02:01Now, whether the United States is prepared to do what is necessary to uphold Taiwan's democratic system, we'll wait and see.
02:11There's a lot of uncertainty on that score.
02:13I think the Chinese feel if they wait long enough, Taiwan will fall into their laps.
02:17Because under this administration, certainly, the United States does not look as though it's willing to reach out and defend Taiwan.
02:25So, we'll see how all that develops.
02:28John, it looks like this is a China that's more confident, right?
02:32Because it feels like it has the leverage, especially with rare earths.
02:37The Cubs it imposed recently was a pretty offensive move.
02:42How are you reading it?
02:43I mean, how worrying is it for the world?
02:45I think the Chinese really do believe that the East is rising and the West is in decline.
02:50I think they believe there is change underway in the global system so that China can re-establish its leading role in the global economy,
02:59which I had for most of the last 2,000 years.
03:01The last 250 years, when Europe and America have been the dominant global economies,
03:07is an exception against the norm as far as the Chinese are concerned.
03:15The Chinese feel that they're coming back.
03:17I think the global financial crash meant that they were less in awe of the Western financial, Western economic model
03:24and believe that their own system is more effective.
03:27And certainly, they have shown by their strategic investments in rare earths, in renewable energy, in robotics and so on,
03:36and other technologies, that they can direct investment and direct the state-owned industries in China
03:44so that they can create a dominant position which gives them leverage over the West.
03:50So, I think that's what we're seeing at the moment.
03:52And I think the very competitive, aggressive approach that both sides, frankly, have taken over the last few years,
04:03I think we'll continue to see that.
04:04We heard from Robert Lighthizer earlier, he talked about strategic decoupling between the two sides.
04:11What might that mean for the rest of the world?
04:13I mean, you know, countries in this part of the world have resisted taking sides between the two.
04:20I'm just wondering, maybe they could be forced at some point in time.
04:23I think we've seen over the last few years, not least in the pandemic, that we have a range of dependencies upon China.
04:33And China has a range of dependencies on the West.
04:35And both sides are really resolved to reduce those dependencies.
04:38I don't think it goes as far as decoupling.
04:40I think it's Ursula von der Leyen, the European Commission president, captured it when she talked about de-risking the relationship.
04:48Now, to what extent de-risking is actually happening is debatable.
04:51But I do think that both sides are going to reduce their mutual dependencies whilst continuing to trade and do business with one another elsewhere.
05:01I mean, the fact is, China is an economy in purchasing power terms roughly the same size as the United States.
05:07Every economy in the world needs to deal with China as well as with the United States.
05:12You can't completely decouple the two systems.
05:15But I think you can reduce your dependency, reduce your vulnerability to the other side.
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