We now have the G-7 meetings that are happening this week.
China is not physically there, but certainly they are an important part of
the audience. What is the message of the United States
and other members the G7 want China to take away from these meetings this week?
David, you're so right. They may not be present physically, but
certainly China is one of the main topics and it appears that the
administration is going to work with its allies to try and get a united and very
strong statement about being tough on China, both from a national security
perspective, but also to coordinate economically.
As President Xi takes a look at his economy right now, does he have any
doubts, do you think, at all about its growth pattern?
Because it was a true economic miracle in the history of the world.
I think we've seen anything like it. At the same time, we're getting some
numbers, including this week we've gone from the word China, indicating that
that growth is really slowing down. And some people are even saying maybe
China will not, after all, pass the United States in the size of its
economy. It's been clear for a long time that Xi
Jinping has been worried about the economy.
And one of the reasons behind the whole corruption campaign that he started when
he first came into office is because they couldn't govern and they were
concerned about the state of the economy.
And even until today, he's still sending out policy enforcement teams to ensure
that mayors and governors are actually implementing the policies that he has
dictated from Beijing. They have a lot of reason to be
concerned about the economy. As we've seen in reports just recently,
youth unemployment is at an all time high at about 20 percent.
Even though they've dealt with a lot of the systemic risk coming out of the real
estate market for the small and medium size real estate companies, a number of
them are going to go bankrupt. This has an impact then on the banking
system. And while they're not concerned about
the large banks, they do believe that a number of the mid-sized banks who are
operating in the provinces are in facing very difficult challenges.
If, as you say, prisons, she is concerned about his economy, there's the
West. I mean, to include both United States
and Europe and Japan, does it represent a potential help to him or is it part of
the problem for him? I think this is going to depend on Xi
Jinping himself. And if he decides that he wants to be
engaged with the West, then he needs to take the kind of steps to provide market
access for companies to provide more consistency.
Regulatory risk is one of the biggest challenges that we see today because
we're not quite sure what policies are going to come from the new XI
administration. By the same token, he's very concerned
about the export markets. Right now, exports are really what's
driving the Chinese economy and we see weakness in those markets.
And certainly as there is concerns about a recession ahead and weakness in some
of their export markets, combined with the politics of trade with the United
States and trade with European Union, I think that's a real concern that they
have to have. And so.
Part of it is how do they create the confidence at home to unlock consumer
demand, and they haven't been able to do that yet.
They haven't been able to get consumers out spending their money in any
significant way. And at the same token, how did they
build relations either with the United States to keep those markets open or can
they find new markets? And part of what we're seeing with this
more active foreign policy by Xi Jinping and his new team is how they build
relations to compensate for some of the challenges that they're seeing in their
trade with the United States. Do you read very much into the increased
pattern, apparently, of meetings with U.S.
Representative Jake Sullivan meeting in Vienna with his counterpart?
We had Nick Burns, the U.S. ambassador, going in to meet with the
foreign minister. Do you read anything into that?
Because there's talk maybe. Tony Blinken, the secretary of state,
would go over maybe Janet Yellen. Mm hmm.
Well, I hope that this is a recognition that there's concern about the free fall
of the bilateral relationship, and both sides seem concerned about that.
We run the risk of being slightly isolated, as we talked about in the G-7
context. Certainly the Biden administration would
like to ensure that our allies are moving in lockstep with us on China.
But we haven't been seeing that necessarily.
One of the stories has gotten a lot of attention in the United States press at
least, is sort of the curtailment of operations into the consulting
organizations over in China, the cutting off of data.
Is there a risk that we're in? We'll know even less than we did before
about what's really going on in the country.
I think there is a large concerned about data in many different ways.
One is China definitely has been limiting access by foreigners to data,
whether it's economic data, whether it's data that they're concerned about on
national security purposes. We saw the whole issue when Deeds listed
overseas and they were forced to delist then from the United States.
That was an issue over national security concerns about the kind of data that
D.D. would be sharing.
The other thing, obviously, one part of that is the access that American or
foreign consulting firms get to data. But another part of it is also what the
Chinese are planning to do with data. They look at data as a factor of supply.
They're creating a new regulator that's going to be in the National Development
and Reform Commission. And for them, it's almost as a
commodity. How can they get access to large amounts
of data that they can collect internally?
Is the government. They're developing new regulations to
control the flow of data, whether it's cross-border access by foreign firms or
even internally. Who gets access to what kind of data?
And then there are potentially even looking to commercialize that data.
Deborah, finally, what about capital markets?
Because there is repos, as I understand, executive order at the White House to
limit U.S. investment in China, particularly in
technology areas. How big a threat, too, would that be
perceived to be by President Xi? Well, initially, I think it's very clear
that the outbound, some kind of an outbound investment restrictions are
going to be put in place by the administration.
And the big question is how broad they're going to be and whether they're
voluntary initially or if you have to have preapproval.
And so it's it's going to be a big test and
it's going to be much bigger than just capital markets.
It's going to actually impact anyone who's looking to invest.
Even companies who might be looking to make acquisitions or invest in different
sectors in China. Initially, the administration is say
it's going to be limited to just a few categories, but subsequent
administrations can broaden that. It's going to set an interesting
precedent. And it, of course, is of concern to the
Chinese. In part, they've been able to benefit
certainly from capital flowing in to China these days.
There's actually a lot of capital in China.
And, you know, one of one of the interesting statistics that we've seen
recently is China has almost a thousand billionaires.
There's a lot of money in China. And more and more money from other
countries, particularly from the Middle East, is now flowing into China.
So it's yet to be seen what the impact is going to be if these outbound
investment. But hopefully when the administration
does put it in place, it's not putting it in place in a way that disadvantages
American companies.