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00:00I would like to start at the summit. You had in a recent note some very detailed back and forth,
00:07the pluses and minuses and what may actually not get taken care of in September. Could we start
00:13there for investors who may be thinking too much of this meeting? And this is the summit between
00:17President Xi and President Trump, correct? That's right. That's right. I mean, I think,
00:21once again, expectations should be very, very low for what's about to happen. I think we're
00:25going to get a day-long summit, it looks like, at most, this time around. And both sides are
00:33trying to talk about deliverables. The Chinese side wants this to be superscripted and are very
00:37frustrated. The U.S. side doesn't understand why the Chinese side is so frustrated. But at the same
00:43time, they both agree there's not going to get a whole lot done at this meeting. You know, the big
00:49deliverable that might come out of it are details and some finalization of what that so-called board
00:54of trade needs to look like. Don't expect much beyond that. What do you mean? What is the board
00:58of trade? Walk us through that. So the U.S. trade representative famously says, I am the board of
01:04trade. And what that means is that Ambassador Greer has agreed with his counterparts that we're going
01:10to pick about roughly $30 billion worth of things that we are happy to import from you, we consider
01:15to be non-strategic. You'll do the same. And we're going to manage trade between us. So unlike what
01:21we've thought of trade deals as saying, look, we're going to open up free flow of trade, this is more
01:25about actually saying we're going to decide what's truly free and the rest of the stuff we're going to
01:29slap on tariffs. Is that a good thing? It's driven by a national security imperative from that
01:35standpoint. From both sides? From both sides. Certainly from our side and I think the Chinese
01:39side will determine what their national security priorities are. So it is, there are positives to it.
01:46I don't know how much it'll do in the long run, though, to take care of things like supply chain
01:50dependency on China and so forth, because it doesn't address the other critical issues like
01:54transshipment, which is a big one staring at us. Can you clarify how much we still rely on China
01:58in terms of supply chains, global supply chains? Immense amount, right? There really isn't anything
02:04in our homes, in our industrial centers, in our data centers, really even factories that is not
02:10coming, our hospitals is not coming by and large from China. What they did with rare earth metals
02:15really scared us, because I think it created this other discussion said, think about what if they
02:20did that with pharmaceuticals and surgical supplies and medical goods. Forget about everything else.
02:25Yeah, so a ton. And Shahzad, I mean, that's why we're kind of here right now, right? We have
02:30the export controls that China puts in place on critical minerals and permanent magnets. The United
02:34States says we're going to do the same thing on chip technology. And ultimately, the two sides who are,
02:39you know, heavy hitters in the world economy say, okay, okay, we got to reach some sort of truce
02:45here to calm markets down globally, and also to calm this diplomatic relationship down.
02:50Yeah, and I think one idea was, really, the predominant idea was that if the two leaders
02:55keep meeting each other, then the truce continues. Now, everybody realizes the truce is because
03:00we need the truce because we can't, we don't have the rare earths and the magnets. We're wholly
03:05dependent on China. We don't have a choice. We don't have a choice. And the Chinese won the truce,
03:08because that's the best way to keep kicking this thing down the road to push off tariffs for as
03:13long as possible, run out the clock on Trump, and then you deal with whoever the next president is.
03:18How's China feeling about the United States? And I bring that up because Chinese Foreign Minister
03:22Wang Yi will visit South Korea for two days from Wednesday to talk about North Korean bilateral and
03:27global issues with South Korean Foreign Minister Cho Hyun. And this is coming after President Trump
03:33ordered the Pentagon to reduce joint exercises with South Korea, citing their cost
03:36and his relationship with the North Korean leader. And there was also some connection with Iran and supporting
03:42and the denuclearization. What's your read, political read on that?
03:48So I don't necessarily align myself with the idea that wherever the U.S. tries to withdraw from a
03:53geography or something, China will try to step in necessarily, but at the same time, China is always...
03:58Will it at least embolden them?
03:59I think it can certainly embolden them, even if they don't want to take action immediately.
04:05Certainly, they may feel like they could and potentially the probability of success goes up, if you will.
04:10So they're doing all of this. I think on the other hand, vis-a-vis even the United States, though,
04:15on the other hand, even when they're showing up here, they are taking an aggressive tack.
04:19They're saying, look, we're watching what's happening in Congress.
04:21We're watching that, you know, you guys are not blaming us for an election interference and we don't
04:25like this. Don't try to threaten the troops. So apparently the tough talk is happening behind the
04:30scenes.
04:30I think oftentimes all of us kind of look at this from the perspective of the U.S. and what's
04:35the U.S.
04:36have in it. But maybe we could bring you in to look from the vantage point of China right now,
04:41right? There are economic pressures internally. How do those play in this broader discussion?
04:48Yeah. I mean, in some ways, this really is, I think she's, you know, the genius move,
04:53if I can call it that. The economy internally is pretty weak. Not only is the consumption side
04:59weak, the household side weak, and not only are they completely sort of failing to embark
05:04upon this economic transition that they've been talking about for, you know, decade and a half,
05:08really certainly at least the last five, six years in earnest, they are failing on all those
05:12accounts. Yet they are able to, because the expert machinery is running, they're able to,
05:17you know, show up at the table and deal with the U.S. not just as competitors and equals,
05:24but, you know, ones that oftentimes look like they have the cards rather than us.
05:27Does it ever matter? Because we always talk about Chinese deep pockets, right? And the
05:30government's always there to either boost up a company or boost up a sector. Those pockets
05:35are still pretty deep, right?
05:36The pockets are still pretty deep. And whereas their traditional way of doing stimulus isn't
05:41working, we have to remember they haven't really attempted household style side stimulus at
05:46all. So they, that's a whole other playbook that they could resort to.
05:50Will they?
05:50They, they just don't ideologically like to do that. It is, it is ironic. It's a communist
05:55party and they don't like to do welfare, but they could if they wanted to push company shove.
05:59I mean, all this, all of this comes down to job. That's, that's the power that the Politburo,
06:03that the communist party has within China. Of course, I mean, the growing middle class since
06:08Deng Xiaoping, I mean, just speaks volumes to that. But as you embark on this AI transition,
06:14like what, what does that do to what is still a very deeply industrial based jobs economy?
06:21Yeah. I think that is a big, big challenge for them. They do not have an answer for this as
06:25yet.
06:26They're already staring at obviously a very large youth unemployment problem. These young people will
06:30eventually become older. So you have to do something about them. Plus the new entrance.
06:34Uh, the communist party certainly has a big challenge out of itself. Yeah. Where are they
06:38in this transformation? We talk about whether it's EVs or, you know, pick even AI, like how
06:45advanced they are certainly when it comes to robotics and so on and so forth. So it sounds
06:49like they're so advanced and that we should be worried, but is that true? They are advanced.
06:55And we have to remember that we're talking about risk to the U S in terms of high tech and
06:59so on.
06:59Well, well, certainly, I mean, we can compete with them at this point when it comes to things like
07:03robotics, right? We, there's no factory in America that could just say, Oh yeah, we're
07:06competing with the Chinese when it comes to automation and robotics and such. And you
07:09have to remember, we're talking about AI related job losses a lot in this country. Now that transition
07:14to automation, especially in the manufacturing side has been happening for a long time in
07:17China. So they have this, they sort of know how to deal with it by now a little bit also
07:21compared to maybe other economies. Uh, but they are certainly very far ahead.
07:26It's, um, it's incredible.
07:28So what should investors be thinking about? You know, we've been talking about China forever and
07:32for such a long time. I know when I started my career like decades ago, you know, it was
07:37all about having access to the Chinese market. That's what was important to every global multinational
07:42company. Um, we think differently post COVID post what have you. Um, and so I do wonder how
07:51investors have to think about China's relationship with the world. We know China is friends with
07:57Iran, with Russia. You know, we talk about this other kind of axis of power, North Korea. Um, what is
08:04their role?
08:05I think their role from an economic standpoint is that you have to look at what China is becoming
08:09as a state, which is that they want to be this high tech superpower. They want to be this industrial
08:14giant. They say, well, we'll, we'll make the cheap goods and we'll make the advanced sophisticated,
08:18uh, goods. And, and the Chinese commodity story is incredibly interesting still. I mean,
08:22what's happening with oil, but even what's happening in other places, steel demand is down,
08:26yet China's buying up all the iron ore it can, right? So those relationships have broken down.
08:31They're not what they used to be. And, uh, so there are some interesting things happening inside the
08:35economy and the traditional model of thinking about China just doesn't apply anymore. Uh, you really do
08:40have to kind of watch it at a granular level. Yeah. You know, the trade hawks still are stuck on
08:45overcapacity and subsidies, right? And we even saw, uh, Peter Navarro put out a report that's
08:50made the rounds in the past week. I mean, what do you, what do you make of all that still
08:53hanging?
08:54I, you know, my message to my friends in DC has always been that you can talk about Chinese
08:58overcapacity all day long. It's not going to make an inch of a difference until, unless you can
09:02compel American companies to rethink their supply chain strategy in a very, very holistic and broad way.
09:07As long as though the government, now here's, here's the funny part, right? Cause you have
09:11the U S government getting involved in our companies now. So I do wonder, you know, kind of
09:16how ironic, um, that this is, but as long as we know the Chinese government can actively and
09:23aggressively get involved, is it not ever going to be a market that investors, global investors
09:28really want to embrace? Uh, well, if you're going, aligning yourself with companies that are in the
09:33states favor sectors that the state is, is favoring, then, uh, there's a pretty good chance,
09:38uh, that you could get in there. You can make money, especially with this, you know, the plethora
09:41of companies that are IPOing out of Hong Kong now, including Shanghai, of course, as well.
09:45Uh, so you've got that, but yes, you have to be very, very careful, uh, because, you know,
09:50look at what happened to Baba and so forth. The state decides the winners and losers at the end of
09:54the day. Just a real quick one here. What is the one thing through the end of the year
09:58that you think investors should be paying most attention to with China? Right now,
10:03I would say figure out what could break this truce maybe past November.
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