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00:00As we continue our review of the first quarter of the 21st century, we turn to one country that has been a story, well, really many stories, in and of itself.
00:09Our colleague Enda Curran takes us through China's remarkable transformation.
00:18China joining the WTO in 2001 was probably one of the most consequential decisions, not just for China's economy, but for the world economy.
00:26The WTO agreement will move China in the right direction.
00:28So companies could shift there and both tap into the Chinese market and, of course, export from China to the rest of the world.
00:39The slowdown is not only in the developed country. It will also become a sharp slowdown in the developing country.
00:48The global financial crisis reverberated all around the world.
00:51China is going forward with a half trillion dollar stimulus package.
00:55It will build schools and subways, power plants and hospitals.
01:00China played a crucial role in stepping up, spending that money, generating all of that demand and activity.
01:06And in that period, China did become the world's second biggest economy.
01:09The belt and road position China as someone who is willing to invest and a source of new capital at a time when capital was becoming scarcer.
01:27They invested into ports, they invested into rail networks, they invested into motorways.
01:32Well, China has been a victim of its own economic success in so many ways.
01:36As China moved up the value chain, then it became a threat to some of those Western economies that have been doing business with China in the first place.
01:44We've been ripped off by China.
01:46No longer are the doors just open for free two-way trade.
01:52China had the virus under control, so they took opportunity and I really took a leap in terms of electric vehicles and in lithium batteries in particular.
02:00Clearly, that window was when the rest of the world was caught napping.
02:05China was doing just fine.
02:08It wasn't until later when China started to impose restrictions on its real estate sector and its real estate sector started to slow down that you began to see some of the breaks being hit on China's economy.
02:18The problem being that home buyers are afraid to buy homes, worried about distressed developers not being able to deliver on the homes a year later.
02:27The slump has been going on for several years now, and I think it has taken some of the gloss off of China's economy for the rest of the world.
02:36Afsani Beshlas of Rock Creek and Elizabeth Economy of the Hoover Institution have spent a good part of the last 25 years traveling to the Middle Kingdom and coming back to try to make sense of it for us.
02:47They looked back at some of the country's biggest changes and challenges.
02:53Elizabeth, you've been going to China for quite a few years now.
02:56As we look back over the first 25 years of this century, how has China changed?
03:01The transformation has been extraordinary, of course.
03:03I think if you look back to 2000, for example, China was an economy of $1.2 trillion.
03:11GDP per capita was around $1,000, and it was making more bicycles than cars.
03:16It was very much trying to adapt its domestic politics and economics to the demands of the international community.
03:23What we see today is pretty radically different from what we saw in 2000.
03:27Its GDP per capita now is $13,000.
03:30Of course, it's not making bicycles so much anymore as, you know, the most EVs, electric vehicles in the world, and cutting-edge electric vehicles, largest manufacturer, consumer, and exporter.
03:41Today, you have China saying, you know, we're front and center, and we'd like the international community to adapt to us.
03:47So what you have is China no longer being a rule-taker, but a rule-maker.
03:52I know you've just recently been in China.
03:54How does it feel on the ground, as it were, over there?
03:57It is a tale of two Chinas in many respects.
03:59Thriving around in Beijing, there's no traffic.
04:03There's a kind of gray pall that seems to have settled over the city.
04:07The economic activity is not what you might expect.
04:10You don't see cranes dotting, you know, the landscape, a lot of new building and enthusiasm.
04:15You don't have the sense of a dynamic economy.
04:17But when you meet with Chinese officials and you meet with, you know, Chinese tech leaders, you definitely have a sense of confidence.
04:25And, you know, the Chinese officials believe that they have a model that works, and that model is investing in technology.
04:31I visited an EV factory where they're producing 300,000 EVs in a year, and they only have 2,100 people on their factory floors.
04:41And the factory is spotless.
04:42You could eat off the floor.
04:43It's extraordinary.
04:45And they are very confident.
04:46They're confident about their ability to compete with the United States.
04:48They're confident that they're on the right trajectory.
04:51Again, though, I think for the broader, you know, swath of Chinese people, you know, consumption is not rebounded.
04:57They're not feeling it.
04:58This is very much an economy of haves and have-nots.
05:01And the haves are moving ahead very aggressively.
05:04One of the things we've seen over the last 25 years is a migration, first of all, into the middle class, from the rural into the urban setting.
05:11Is that continuing?
05:12I think it's one of the interesting things that we haven't seen the middle class continue to expand.
05:18And the Chinese are just beginning to wake up to the fact that artificial intelligence and their move toward robotics, you know, they already have 250,000 robots.
05:26I think we have about 10,000, you know, in their factories operating.
05:30They're going to put people out of work.
05:32And so one of the factories that we visited was an autonomous vehicle factory.
05:36And the person who was, you know, taking us on the sort of tour of the factory said that they are now being told by the local government that they're going to need to help find jobs for the people that their autonomous vehicles supplant.
05:51At the same time, the local government's not allowing them to charge any more than regular taxi drivers or DD drivers because they don't want those people to go out of work.
06:00So I think they have not figured out how they're going to manage the technological change and the demands for employment.
06:07How much success has China already had in reshaping the international community?
06:11I would say much less than we might anticipate.
06:15It doesn't seem as though much of the rest of the world is interested in trading the current international system for a China-led international system.
06:24That being said, if you're looking for Chinese technological influence or economic influence globally, certainly the Belt and Road and the Digital Silk Road have been transformative.
06:33Look at Huawei, which has, you know, 70 percent of the 4G in Africa.
06:38Their satellite system now rivals GPS.
06:41So I think they can look at any number of metrics and say we've had a success.
06:46At the same time, of course, there have been protests in virtually every Belt and Road country about how China's done business.
06:53Interest and the desire, the willingness to have Chinese investment stems from the fact that they can't get that kind of investment from any other country.
07:01So I think, you know, if we were to go in and really be competitive, for example, in Africa, in this idea that we're going to promote our tech stack globally, I think we'd be welcomed.
07:14Do we understand in the West just how far ahead China is getting in some respects in technology and manufacturing?
07:21I think most people think of China as producing consumer goods, their toys, you know, basic goods.
07:26And that is the way they started.
07:29But today it's a whole other world.
07:32So what is happening is most of us are now reliant on not just their basic ingredients being made, but the new molecules being developed in China.
07:41EV cars, let's say.
07:43The batteries that they are producing are so far ahead than the ones we're producing.
07:48So they are jumping ahead in ways that we did not expect.
07:52They might have less power constraints, the way they're building nuclear plants and the way they're using clean energy and renewable energy, the opposite of what we're doing in the U.S.
08:01And that's because the government in China is putting so much capital to work alongside the private sector, something that in the most recent past we're not doing.
08:13What is that enormous move forward for China as an economy, as a government, for the people of China?
08:20So if we look at the people of China, when this whole process started 20, 25 years ago, there was hope.
08:28They were growing fast, double-digit growth.
08:31A lot of opportunities for people to get new jobs, move from agriculture to industry, into cities, and get out of that extreme poverty.
08:40And right now, what's happening, because of the overcapacity, let's say, if you're producing EV cars, you might be getting paid less because they have the overcapacity.
08:51You're lucky to have a job.
08:52So the situation for the individual may not have got better, but China as a whole continues to do well.
08:59I think one thing that I found very interesting is we in the U.S. always say China should start consuming more.
09:08And if they consume more, they will export less.
09:10We will have less of a problem, and they will deal with their growth with domestic consumption.
09:16What is very clear with President Xi, but also really maybe people who came before him, they're not interested in domestic consumption.
09:25They're interested in world supremacy, as has become evident.
09:29So you need to do the quantum.
09:31You need to do the AI.
09:32You need to be ahead on robotics.
09:34You need to be ahead on producing things so that you control your own destiny, but potentially you control other people's destiny.
09:42And I think that's what we've missed, really realizing ourselves here.
09:48How have Chinese relations with the United States and with the West changed over these 25 years?
09:54Obviously, when we had the Nixon and the Kissinger period and the opening up and WTO,
10:01it was the West hoping that China would open up to U.S. goods and to a more liberal democratic system.
10:11And as one went to China and you would talk to your Chinese counterparts, it was always a very open dialogue.
10:17What has been very different the last few years is that China has become more closed.
10:22If there's one thing that is changing with the Chinese, because they've always been very careful in how they show their hands to the rest of the world,
10:29they are showing more overconfidence than before.
10:32The other thing is that if you sit in China today, who would expect that the U.S. would be kneecapping its own universities,
10:42its own research, its own biotech, is investing less in technology at scale, is not investing in nuclear power,
10:51and is not working with its allies.
10:54So in a way, if you're sitting in President Xi's seat today, you see a lot of potential for China.
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