00:00You were just in China for about a month, I believe, speaking to the foreign companies, Chinese companies, policymakers and the like on the ground.
00:07What has those conversations been like?
00:10Well, what's missed in the West, I think, is that China is just steadily moving ahead.
00:16You know, it's not perfect. They've got some problems.
00:19But, you know, when people talk about a downturn in China, the next word is collapse.
00:24They don't say that about anywhere else in the world.
00:26Yeah, there's nothing in between.
00:27It's far from collapse. It's moving along.
00:29People are adjusting. The companies are powering ahead.
00:32China's ahead ahead on technology in EVs, batteries, green energy, pure competitor with quantum AI.
00:45They've taken a whole different model with I mean, there's countries and companies all over the world adapting Chinese AI models now because they're open source,
00:53where the U.S. focus on AGI and kind of winning that battle.
00:57It's going in two directions.
00:59The implications, I guess, several fold, but implications for foreign companies that are doing business in China that might be missing that headline, that things are developing and moving and thriving very slowly and steadily.
01:14Foreign companies in China know this well, but because of the heavy duty anti-China politics in the U.S., they are keeping quiet in what they do.
01:22They tell me they've got to be in China for three reasons.
01:25The market.
01:25Even if the market is 3%, that's $9 trillion in new economic activity over a decade.
01:30The second one is Chinese innovation.
01:33Just one example.
01:34Huawei is building a million square meter innovation facility in the Qingpu district of Shanghai for 35,000 people.
01:42That's just one little corner of innovation.
01:45And the third one, they believe their next global competitor is coming out of China because the Chinese companies are very good.
01:51And they've got to know them so they can compete or maybe even partner with them to go out.
01:58You mentioned about the whole trade.
02:01I'm just wondering in terms of rare earths.
02:03What are American companies telling you about rare earths now?
02:06Has there been some sort of a growing sense that what was implied in Busan is happening?
02:11There is an improvement in these licenses now?
02:13Well, I think for now what you're hearing is that China is delivering and not really messing with the licenses because of the framework deal that was done in Korea.
02:24But, you know, look, we taught China how to do export controls.
02:28Their export control laws have words, wording from the U.S. laws.
02:32And so we said, you can't have our top chips.
02:36We're going to slow you down.
02:37And China said, OK, you can't have our rare earth.
02:40We're going to stop you in your tracks.
02:41And so that escalation had to stop.
02:45And it did.
02:45But it is still sitting there.
02:47So, you know, we've got this year framework on trade, which really wasn't much to it other than a ceasefire.
02:54And it would hopefully be held together because she's going to Trump's going to go to China in the spring.
03:00She's supposed to go to the U.S. in the fall.
03:02And that will hold it together.
03:04And the bottom line is China has a huge advantage in this trade negotiations now.
03:09Because Trump really needs a deal.
03:12Because he has to prove that the trade war was worth it and that he won.
03:16The only way you do that is a China deal.
03:19And China will just kind of have been waiting it out and figuring out what they can get out of it.
03:24And then no matter what's in that deal, it will be advertised as the best deal ever.
03:28So they're just kind of working their way through it.
03:31Usually you have people working for a year to put together a trade deal.
03:35Then the principles meet.
03:36This time the principles met.
03:38Now the next year you've got people working together to try to come up with some kind of a trade deal.
03:42But the businesses are very happy.
03:45They're very happy because it brings down the tone they can work.
03:49And one part of the trade deal that nobody talks about that I think may happen is the president likes big numbers.
03:55You have to have big numbers you can tout in a trade deal.
03:57The only way you get big numbers, we can only, America only has so much to sell to China.
04:02So LNG, Boeing's other stuff.
04:04How do you get big numbers?
04:06Chinese investment in the U.S.
04:08And myself and some others on Capitol Hill have been pushing joint ventures.
04:11Let's do what China did in the 90s.
04:13Bring Chinese companies in on a joint venture.
04:15Require technology transfer.
04:17And that way the U.S. can catch up on manufacturing and technology we don't have.
04:21We'll see if we're humble enough to do this.
04:23But I think it's a possibility.
04:24This could be somewhat transformative if it goes in a certain direction.
04:29One of the things that emerged from the meeting a couple of weeks ago in Korea was that we'll be here again in 12 months' time.
04:35And the cadence of a one-year increment that will revisit the deal.
04:39Is that a hindrance to business planning?
04:41How do companies deal with that?
04:43A 12-month outlook that seems to be okay, but then we'll see what the settings are looking like in 12 months.
04:47Well, a 12-month is better than they've had.
04:49They've had, like, one week before.
04:51It's been changing so rapidly they couldn't plan.
04:56Now they at least have a bit of a horizon on planning.
04:59And they've gotten pretty adaptable.
05:01Everybody's got five plans sitting there on how they move ahead.
05:05What are tech companies seeing when it comes to the progress on chips?
05:09Does the U.S. still lead in terms of innovation?
05:11Is that gap still quite wide, or how are you seeing it now?
05:14Yes.
05:15The U.S. chips are far advanced, and it's really hard to get there.
05:20But China does incremental innovation.
05:24They will take a certain chip, and they'll add different high-bandwidth memory and configure it a certain way and make it good enough.
05:30You know, we think we can slow them down, but we are basically speeding them up in their innovation and figuring out workarounds as they invest very heavily in, you know, trying to become ahead with top chips.
05:45Never underestimate China.
05:47Jim, final question for you.
05:49The world's gotten used to a lot more Chinese exports this year.
05:51Is that a reality that persists into next year?
05:55Yes, and it's not good.
05:57I mean, China has overcapacity that is, you know, look, the party's slogan would be anything worth doing is worth overdoing.
06:06And, you know, when they decide they're going to make cars, everybody makes cars.
06:09And so they have all this overcapacity because they've invested so much in it, and now they're sending that overseas.
06:15And they redirected, what, the U.S. exports to U.S. are down 20%.
06:19That stuff has been sent to other countries.
06:21These other countries are not going to put up with that.
06:23So China's going to have to figure out a way to bring that down.
06:27But local governments keep this overcapacity going because they get a value-added tax.
06:33And the value-added tax, it comes out of production of those factories.
06:36That's how they're funding the government now because they don't have real estate money.
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