00:01There's a phrase which China's President Xi Jinping likes to use.
00:06The world is undergoing changes which have not been seen in a hundred years.
00:13Now these changes have appeared to arrive, but they're delivered unexpectedly by Donald Trump.
00:22Epic fury. I said I like that name.
00:26Amid the noise of war, the stance of another major power is speaking volumes.
00:31The U.S. is demonstrating itself to be a force for instability in the world.
00:41And that gives President Xi and China a chance to present themselves as the adults in the room.
00:48China is happy to see the United States getting bogged down in the Middle East.
00:53China has long viewed the existing order as being too dominated by the U.S.
00:58So Trump's challenges to that order actually presents Xi Jinping a very good opportunity.
01:03And the question is whether Xi is ready to seize it.
01:07In many ways, he already has.
01:09Trump's first trade war made China realize that dependence on the U.S. is a very dangerous thing.
01:16China's exports to the U.S. fell about 20 percent last year.
01:20But in the end, China had a record trade surplus hitting 1.2 trillion U.S. dollars.
01:26China deliberately tried to diversify away from the U.S. as a consumer base.
01:32So do Trump's actions strengthen China or expose it to more risk it cannot control?
01:43The U.S.-China relationship is the most important bilateral relationship in the world.
01:48And it will help define the century.
01:51And it's in the hands of two very different leaders.
01:54It's hard to imagine two people with more different approaches to leadership.
02:01President Trump is brash. He's impulsive.
02:05You don't have the cards right now.
02:07Xi Jinping is guarded, methodical.
02:10Someone who plays the long game, not the Twitter game.
02:15China's policymakers see Trump as someone who's transactional and pragmatic,
02:21who likes to make deals.
02:23They also realize that Trump is very unpredictable.
02:26President Trump makes a lot of threats.
02:29What the markets have realized is that he doesn't execute all of those threats.
02:36A lot of them are just quietly forgotten.
02:39And the Internet, as usual, has found a name for it.
02:43Taco.
02:43Taco.
02:44Taco, as you would call it.
02:46Trump always chickens out.
02:47The term is actually pretty popular on Chinese social media, too.
02:53On Chinese social media, people love Donald Trump.
02:56He actually has many nicknames.
02:58Another really popular nickname for Trump is Chuan Jianguo,
03:03which actually means Trump the nation builder.
03:05Chuan Jianguo.
03:07Chuan Jianguo.
03:07Chuan Jianguo.
03:08Chuan Jianguo.
03:08It's not praising Trump as a nation builder for the United States.
03:13It's more like Trump helping China to become a superpower.
03:19We're seeing Xi is basically just sitting back to enjoy the benefits as a flurry of Western leaders coming to
03:27Beijing.
03:28Mark Carney meets Xi Jinping in Beijing.
03:30It's vital that we build a more sophisticated relationship.
03:34They know that China, like all nation states, will act in its own self-interest.
03:40What they are seeking and signaling is a hedge against the United States, which they now view as an unreliable
03:48partner.
03:51And China has learned this the hard way.
03:54China was really caught off guard by Trump's first trade war because it was launched just months after his first
04:01visit to China, where he received a lavish welcome.
04:06So, since then, it has been preparing itself.
04:10In China, there's a famous saying.
04:13Learning is like sailing upstream.
04:15Pause, and you're pushed back.
04:18And this mindset now shapes Beijing's strategy in the second trade war.
04:23President Trump tried to deal a knockout blow to China.
04:28What the US wasn't expecting was that China would hit back.
04:33China retaliated on the US with tariffs of 125%.
04:38China has learned how to play this game, and President Trump knows that.
04:43This latest headline coming in from the Supreme Court, global tariffs struck down.
04:47China says it is assessing President Trump's second tariff investigation this week as the US continues its effort to rebuild
04:55the key trade policy.
04:57The roller coaster has had an impact.
05:00Last year, China's exports to the US fell about 20%.
05:03But if you look at India, they jumped 12.8%.
05:08To Southeast Asian countries, they rose 13.5%.
05:12And to the EU, up 8.4%.
05:16But trade flows are just one arm of China's strategy.
05:19Explicit export controls on rare earth magnets.
05:23Rare earth materials is the trump card.
05:27China imposed export controls on seven types of rare earth minerals and magnets made of them.
05:33These export controls are really inflicting pain on the US manufacturing base,
05:38because these rare earth magnets are used in everything from iPhones and EVs to big-ticket weapons like fighter jets
05:45and missiles.
05:47The pain goes beyond US manufacturers, since producers around the world are impacted by these controls.
05:53And although these measures could backfire as countries explore ways to lessen their reliance on China, those efforts will take
06:01time.
06:02China dominates the supply chain, mining over 60% of the world's rare earths and refining over 90% of
06:09them.
06:10Rare earths by themselves are not big deals.
06:13The entire category, the market cap was not even 10 billion US dollars.
06:18As a result, other countries, they have pretty much given up on rare earth production and refinery process.
06:26China has its own advantages.
06:28Its labor cost is really low, and its environmental standards are pretty lax.
06:33The rare earth industry has been considered strategic for decades.
06:36China has the world's most complete industrial catalogues.
06:42But despite the trade wins against Trump, China has issues its industrial success can't fix.
06:49Beijing set a GDP growth target of 4.5% to 5% for the year.
06:53That's the lowest since 1991.
06:56China's economy has a lot of really serious problems.
07:00Local governments, businesses, real estate developers, they borrowed too much.
07:07And they used those borrowed funds to build too much capacity.
07:12Bridges to nowhere.
07:15Steel mills producing more steel than anyone could ever need.
07:20Ghost towns of empty property.
07:23As a result of that overcapacity, China now has a deflation problem.
07:28For years, China's economic rise has been fueled by its booming exports and investment.
07:34But last year, we saw China's fixed asset investment decline for the first time on record.
07:39So it's really just the exports that keep the economy going.
07:45Chinese workers are seeing their pay cuts or even getting fired and struggling to find jobs.
07:50Some of them choose to go into the gig economy, which doesn't really provide a sense of job security.
07:55What a lot of countries realized was that China was actually exporting its deflation overseas.
08:02Whatever they couldn't dump to the United States, they were dumping to Southeast Asia, Latin America or Europe.
08:10That complicates the relationships China is forging.
08:14Even as more countries engage China to hedge against an unreliable U.S.
08:18China has been keen to assert its economic strength for political influence.
08:23But it's not willing to get entangled in military conflicts far from home.
08:28Seizure of Venezuelan President Nicolas Maduro.
08:31Iran continues to attack its Gulf neighbors.
08:34China certainly has never committed to put troops on the ground to defend Venezuela or Iran.
08:42There's a lesson there which other friends of China are going to take away from that.
08:48For Iran and Venezuela, China is their most important economic lifeline.
08:53But for China, these two countries are ultimately not that important.
08:57Iran accounts for about 13 to 40 percent of China's oil imports.
09:01And Venezuela only accounts for 4 percent.
09:03So this is not a small number, but it is replaceable for China.
09:08But the bigger problem here is the Strait of Hormuz.
09:12If Iran continues to close down the Strait, then China will have a problem sourcing nearly half of its oil
09:19imports.
09:20The Strait of Hormuz is a vital lifeline for 20 percent of the world's gas and oil flows.
09:25The reduction in traffic increases the threat of an inflation crisis and global recession.
09:31If this war drags on and spreads to other countries, then China's economic interests can be threatened.
09:39So, for now, China seems focused on only fighting the trade war, an arena where it holds more advantages.
09:46The United States is the world's biggest economy.
09:49It has the world's most powerful military.
09:54Is China quite the equal of the United States?
09:57I think the answer on that, at least for now, is still no.
10:02For nations caught in the middle, there's really only one way forward.
10:07Hedging will be the key word for 2026 or 2027.
10:12When two superpowers are having this historical fight, they want you to take sides, but no one wants to.
10:32The Wallet is the reliability of the costs of the Street dólar value.
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