IT BEING IS DOING VERY WELL
TODAY, AND BOND YIELDS COMING
OFF THE 3% RATE.
ALL GREEN ARROWS.
NEIL?
NEIL: THANK YOU VERY MUCH,
NICOLE.
>>> "WALL STREET JOURNAL" IS
REPORTING THAT CHINA IS READY TO
HIT BACK IF THE U.S. GETS NASTY
AND U.S. PULLS BACK ON CHINESE
INVESTMENTS, TIT-FOR-TAT ON
TARIFFS COULD EITHER GET WORSE
OR COULD GET SIGNS FROM CHINESE
LEADERSHIP, AS XI XINPING SEEMED
TO HINT HE WAS OPEN TO
ADDRESSING SOME CHINESE TARIFFS
ON U.S. AUTOS.
GREG IP IF WE HAVE THE UPPER
HAND IN THE FIGHT.
WHAT DO YOU THINK, GREG?
>> AS A PURE ECONOMIC MATTER THE
U.S. HAS THE LEVERAGE.
CHINESE EXPORTS TO THE U.S. ARE
ROUGHLY 4% OF GDP, FOR THE
UNITED STATES, U.S. EXPORTS TO
CHINA ARE WELL BELOW 1% OF GDP.
THEY HAVE A LOT MORE TO LOSE
ECONOMICALLY.
BASICALLIES BECAUSE THEIR
EXPORTS ARE LARGER WE HAVE MORE
TARGETS TO HIT.
THAT DOESN'T AUTOMATICALLY MEANS
THE U.S. WINS IN ANY
NEGOTIATION.
YOU HAVE TO PLAY YOUR HAND WELL,
THAT THE U.S. DOES OVERPLAY ITS
HAND.
NEIL: THERE IS ANOTHER CYNICAL
VIEW WE WOULD BE GRATEFUL OR THE
ADMINISTRATION WOULD BE GRATEFUL
FOR WHAT WOULD BE DEEMED MINOR
CONCESSIONS ON PART OF THE
CHINESE AND IT MIGHT MEAN JUST,
YOU KNOW, LOWERING TARIFFS ON
U.S. AUTO COMPANIES COMING IN,
FOR THAT MATTER, FORCING
FINANCIAL FIRMS TO SHARE OR HOOK
UP WITH CHINESE ENTITIES TO DO
BUSINESS IN CHINA.
THOSE WOULD BE SIGNIFICANT
DEVELOPMENTS.
IN OTHER WORDS IT WOULD NOT BE
AS SIGNIFICANT AS THE
ADMINISTRATION WANTS BUT IT
WOULD BE SOMETHING.
IN OTHER WORDS, HOW, I GUESS
DEPENDS ON EACH SIDE, HOW THEY
PLAY IT, RIGHT?
>> THAT IS WHY THE TRUMP
ADMINISTRATION HAS TO DECIDE
WHAT IS THE ENDGAME, WHAT DO
THEY WANT OUT OF THIS?
THEY THEMSELVES CORRECTLY SAID
ONE OF THE MISTAKES PRIOR
ADMINISTRATIONS MADE WITH CHINA,
ALLOWING TO DO THE ROPE-A-DOPE,
WHERE THEY MADE PROMISES IMPOSE
TWO OR THREE-YEAR TIME FRAMES,
NEVER FULFILL THEM.
STEEL IS PERFECTLY GOOD EXAMPLE.
THE CHINESE HAS BEEN PROMISING
SINCE MID 2,000s TO REDUCE
STEEL CAPACITY.
THEY MADE THREE OR FOUR
UNDERTAKING TO REDUCE STEEL
CAPACITY.
IN THAT THEORY, STEEL CAPACITY
ROSE AND ROSE, CREATING A
PROBLEM FOR THE WHOLE WORLD.
TO THEIR CREDIT THIS
ADMINISTRATION SAYS THEY'RE NOT
TAKING HALF-MEASURES LIKE THAT.
THEY HAVE TO DECIDE WHAT IS
THEIR BOTTOM LINE?
WHAT ARE THE TIME FRAMES AND
DELIVERABLES THAT THEY WILL HOLD
THE CHINESE TO?
NEIL: YOU FOLLOWED OBVIOUSLY THE
CHINESE ECONOMY, GREW ECONOMIC
JUGGERNAUT IN THE WORLD FOR SOME
TIME.
I HAVE ALWAYS, IN COVERING THEM,
DISCOVERED THAT THERE IS NO WAY
IN HECK SOME OF THE NUMBERS THAT
THEY REPORT CAN BE ACCURATE.
IN OTHER WORDS WHEN THEY WERE
GROWING ON QUARTERLY BASIS, 10%,
12%, I KNOW WHEN YOU GO FROM
NOTHING, I MEAN THE BIG
PERCENTAGE INCREASES WITHOUT A
QUESTION, BUT EVEN IN LATEST
PERIOD NORTH OF 6%?
DO YOU BELIEVE ALL OF THAT?
IT BEGS THE ISSUE THAT KEEPS
COMING UP WHETHER WE BELIEVE
ANYTHING THE CHINESE SAY OR ANY
COMMITMENTS THEY MIGHT MAKE?
>> NEIL, IF YOU ASKED ME THAT
QUESTION FIVE YEARS AGO I DON'T
BELIEVE IT.
TODAY I'M MORE ACCEPTING OF IT.
THEY HAVE MADE GOOD FAITH
EFFORTS TO IMPROVE THE QUALITY
OF THEIR DATA.
NOWADAYS, WHEN THEY HAVE,
NUMBERS ARE FUNNY, WE DON'T KNOW
WHICH DIRECTION ARE THEY FUNNY
THIS ARE THEY TOO HIGH, TOO LOW?
WHEN YOU LOOK AT THINGS --
NEIL: DO YOU EVER THINK THEY'RE
TOO LOW?
I THINK THERE IS WAY TO RIG
CURRENCY UNDERSTATES HOW MUCH
THE ECONOMY IS IMPROVING BUT
WHAT DO YOU THINK?
>> I DON'T REALLY KNOW.
I DON'T THINK THEY'RE TOO LOW.
WE'RE SEEING HALVING IN GROWTH
RATES FROM 10% TO FIVE OR 6%.
EVEN IF THAT IS OVERSTATED BY
ONE PERCENTAGE POINT, PROBABLY
NOT OVERSTATED BY MORE THAN IT
USUALLY IS.
THE TREND IS STILL THERE, A
PRONOUNCED SLOWING.
THIS IS WHY IT MATTERS IN THE
TRADE FRICTION.
THE CHIN NIECE ECONOMY IS
SLOWING.
EVERYBODY KNEW IT HAD TO SLOW.
IT IS SLOWLY MA YOU ARE DOING
ECONOMY.
THE EASY, LOW HANGING PROOF IS
BEEN PLUCKED ALL PEOPLE MOVING
FROM FARMS TO FACTORIES, SO
FORTH.
THEY HAVE ECONOMY INORDINATELY
DEPENDENT ON RISING DEBT TO KEEP
GOING.
THEY ARE VERY WORRIED BICYCLE
WILL STOP AND FALL OVER.
A TRADE WAR WITH THE UNITED
STATES IS VERY RISKY THING FOR
THEM.
THEY HAVE HIGH INCENTIVE TO
ESCAPE THE PROBLEM WITH THE
UNITED STATES WITH A WIN-WIN
SCENARIO.
BUT AT SAME TIME XI XINPING IS
BASICALLY, PEGS ALL HIS POWER TO
MAKING CHINA GREAT AGAIN.
HE IS A VERY KNACK --
NATIONALISTIC PIPE PRESIDENT.
IF THEY MAKE CONCESSIONS THAT
CHINA BELIEVES VIOLATES THEIR
LONG TERM NATIONAL GROWTH IT
WILL NOT AGREE TO THEM.
NEIL: INTERESTING.
HE IS UNDER ENORMOUS PRESSURE TO
FOLLOW UP ON A COMMITMENT HE
MADE TWO WEEKS AGO TO DO
SOMETHING BUT HE HASN'T DONE
THAT.
>> EXACTLY.
THERE WAS A COMMITMENT, FOR
EXAMPLE, TO END THE REQUIREMENT
THAT FOREIGN AUTO MANUFACTURERS
ALWAYS ENTER CHINA A JOINT
VENTURE.
THAT, IF THEY CARRY THROUGH WITH
IS VERY SIGNIFICANT BUT THERE IS
MY BIG IF, IF THEY CARRY
THROUGH.
THIS IS WHERE NOT JUST THE
UNITED STATES BUT THE U.S.
ALLIES WHO ALSO HAVE PROBLEMS
WITH CHINA, LIKE FRANCE, AS
EMANNUEL MACRON WAS MAKING A
POINT THAT EMANNUEL MACRON MADE
MANY TIMES, ALL THOSE COUNTRIES
HAVE TO KEEP CHINA'S FEET TO THE
FIRE.
AT THE SAME TIME, NOT INS ISING
ON DEMANDS CHINESE CAN NOT MEET