[CC may contain inaccuracies] What is the risk here that we'll see a more forceful response from Beijing of course I've already announced military test
missile tests and the like. Given that presidency is perhaps not coming from the strongest
position in what is a critical year for him. Yes that's true. I would say though in comparison to previous
crises that the United States has has experience with China more specifically the 1995 96 Taiwan Straits crisis. China is in a
much stronger position now which is why there is a heightened level of concern here in the United States and amongst the
Department of Defense. But I take your point that for Xi Jinping this is a really critical window between now and the 20th party
Congress October November sometime this year. He really can't afford to be seen weak when ostensibly provoked
by the United States. And again that's why there is significant concern about where this could go with the end game here
particularly as you know we considered what we continue to watch. This relationship is as probably the great strategic
competitive relationship of our time. Where does this go from here.
Well first of all I hope we get to next Monday without this really spiraling into a crisis. And I should just say I think
that's probably the most likely outcome of this is we're going to see another three or four days of significant tensions as the
People's Liberation Army does a series of live fire drills exercises the United States will move some military hardware
into the region. So this is going to feel tense. I think what this really signals though is that the bilateral
relationship has unfortunately moved into a much more contentious period where it's it's beyond trade now. It's beyond
technology and far. We're now actually seeing this move into the domain of actual military strategy.
And what that means is we're going to have to really be watching out for were slight missteps and calculations can can lead to
exacerbating crises. Yet even if you take a look at how the military drills are planned some are saying this actually
resembles a naval blockade that should we be worried about enormous these style sort of invasion of Taiwan at this point. I
mean given what's happened with Ukraine I think tensions are very high. Are these concerns warranted at this point.
No. For the sake of this short discussion I will say this is not a
normative style invasion we should be worried about. And I should say that what what the PLO is doing with the formation of
the proposed exercises that they are doing is to make it look like this is what we would do in a blockade. This is a threat.
This is attempt to be a deterrent message to the United States and to Taiwan to say there is a price for your salami slicing or
there is a price for these high level engagements between the U.S. and Taiwan. I would say personally though I wouldn't be
working as an investor as an MNC about this sort of bolt from the blue invasion.
I would be worrying about an experience or an event we have where the PLO rubs up against a Japanese air fighter or a U.S.
air fighter and we're really primed with the level of distrust in the relationship for that to spiral.
I would completely put away in fantasyland the idea that Xi Jinping is going to wake up and say now is a good day to invade
an island 90 miles off my shore. Yeah. So tell us a little bit about the reaction from neighbors. I mean this cannot sit well
with the likes of as you mentioned perhaps Japan and also South Korea where Speaker Pelosi is headed next. Yeah. So right now
you're seeing no real distance between U.S. allies and partners in the region.
They're not going to want to create any daylight between them and the U.S.. Privately though of course they're watching this
with great unease. I think there was a time some doubt about whether or not Pelosi
should have made the trip. I don't think anyone doubted that she at some point could make a trip. But why now. It's August. Beit
ISE is starting the meeting between senior party officials. 20TH Party Congress is coming.
This was almost designed to really antagonize Beijing. So I think a lot of partners and allies in the region are going to
have this dual headed approach of both. On the one hand somewhat sympathetic as the U.S. tries to bolster the defense of Taiwan
and show some support. But on the other hand apprehensive because for us this is a faraway crisis. If Japan Australia
Philippines Singapore. This is right in your backyard. And so they're going to of course be watching this warily.
It's a domestically cave or it's always a domestically key here for the leadership in China. But this year in particular talk to
me about the insight you have in you potentially that the huge pressure points that there is happening within China. Right. The
property market the regulatory crackdown whether or not we see a continuation of Covid 0 and its current formation what would be
some of those conversations and potentially you know faction forming at as you say these meetings that I heard that might be
happening at the moment. Yeah. Let me just before I give my analysis take two things off the table. One is a full on
collapse. And the other is the fact that you know Xi Jinping. He's going
to be purged from office. Neither of those are gonna happen. But this is definitely not the year Xi Jinping wanted to have. As is
your question indicated starting with the war in in Ukraine. Through this just a significant economic softening that we're
seeing in large part the result of policy decisions that Beijing has made. Know this is not so it's not so much structural forces
that are now depressing economic performance. This is some really boneheaded decisions Beijing has made around Covid 0 and
its interventions and then lack thereof in the property market. What is this going to lead to in terms of the 20th party
Congress and beyond. I would say again Xi Jinping will remain in power but right now this is definitely shaping the choices of
personnel. There is probably at the margin a stronger bargaining hand for those who are looking to move their people up into the
Politburo in the central committee as opposed to Xi Jinping being able to run the deck. I would imagine this is shaping the
conversation about who's going to be premier in a different way than it was probably going to be the case six months ago or if
the economic performance was was doing better. But final comment here on this. Xi Jinping is 70 years old. He's pretty set in his
ways. I would not expect that dramatically different policy approach
to the domestic economy or foreign affairs after the 20th party Congress. And just quickly what do you make of Washington's
messaging here especially coming from the Biden administration. It's a mess and it's a mess in an area of extraordinary
significance where the precise word we use really matters. And I have to say the best reassurance we could make to Beijing is
simply to have a consistent clear message across the U.S. government without these wide deltas and swings and
discrepancies. It's really contributing to an already volatile situation.