Let me ask you the most basic question. If there is something of a new paradigm that businesses are facing investors are facing.
What is that paradigm and how does it change what they do in China. Well that really is a great question. And thank you so
much for having me back again. I'm delighted to be with you. We look at this really as she 3.0.
We're looking at a whole new world in some ways for foreign companies doing business in China. One Xi Jinping is entering
into a very political year as he attempts to be take on the presidency for the third time now as part of the party general
secretary. There were no term limits but for the first time he is well positioned after 10 years to really take control in a
way that we haven't seen since Mao. And what I mean is over the last 10 years it's almost been like a chess game where he has
been able to position many of his people into positions of leadership that now when he takes on this third term they will
be his people with his vision to implement his policies. So what does this really mean for the foreign business community.
One the Chinese have been very clear that they want to continue to open to foreign firms but they're going to do it in their own
way. It's not going to be across every sector. But there still will be huge opportunity.
But at the same time they're going to be looking at implementing a whole series of regulations in some ways almost to make China
more professional. It's been a little bit of the Wild West.
We've seen the growth of large firms like Alibaba and Tencent and May Taiwan and others. They're looking to break down that
monopoly power in part because of concerns about clearly the threat to the party but also because over 95 percent of China's
businesses are small and medium sized enterprises and they're responsible for 60 percent of China's growth. So in order to
allow those companies to flourish they need to introduce some new policies.
But a lot of the policies that we're starting to see whether it's anti monopoly whether it's rules around data whether it's
rules on tech are perhaps trending in the direction that countries in the West might be looking at. But with a Communist
Party spirit to them. So so for the investor for the U.S. business going over there is there a predictability to it.
Because sometimes it feels like it just comes out of the blue particular cell the regulation we've seen in the big tech
sector. So other places as well. Private tutoring or is it more predictable than we think. If you step back and look at the
areas of Xi Jinping priorities one to eliminate financial risks to to address to poverty alleviation and three to focus on
climate change in that big picture. Some of these steps are predictable just in the way that they've
implemented has come as a surprise. And so if we look at what they're doing in the context of
whether it's Deedy and data data is actually a very good example one because of the national security implications that they have
but also because they look at data as actually a factor of supply.
And so as they're looking to transition the economy in part focusing on rising consumer demand but also they have considered
in many sense that data was a free good. That now there has to be a price on and there has to be some control over. So they're
implementing new rules. And it was interesting to see that it was actually the Internet
authority that was the first in to do the investigations around. It wasn't the financial authorities and the restrictions that
have come out as a result of further IPO listings are coming from the Internet. And the concerns over data and foreigners
access to data in China which is comes from President Xi himself as he came into office. I think that he sort of looked around
looked at the past 10 years of Hu Jintao and said that he had to get the country under control that there had been limited reform
that the style of collective leadership had actually made it very difficult for Hu Jintao to get much done during his time
and that he also had many of the people from the previous administration so to speak from.
From President Jiang Zemin around him. So he couldn't really implement his own vision. So what she has
been doing as I was saying is one getting his people into place but two he realized that in order to govern the country he had
to find a vehicle to do that and a vehicle that reached from the top all the way down to the smallest cities.
And that was the party because even when he was sitting in office when he was coming out with new policies even to this day
10 years later he still has policy enforcement teams that he has to send out into the provinces to ensure that policy is being
implemented. And the way that he expects.
So I think as we look ahead and we look into next year this political year when he is going for the presidency one of the
things to watch is going to be the size of his standing committee. And this is is you know the group of. Men who roll
China. Are the most powerful and the number of. 5 7 9 4 Xi Jinping.
It's in his interests to try and make that a smaller group so that he can have more control and less of this collective
leadership. For others who still have control and many of them are previous
politicians whose people are still in place it's going to be there and in their interest to push for a larger size. And I
think that's one of the criteria that we should be watching to see how well he does and how well he's consolidating his power
to implement policy going forward. There is you know well there are investors right now who are asking the serious question is
China investable at this point given all the things we've seen. When you think about investing you've always got market
opportunity in China. No one would deny that. What about the political risk during your time there. Do you think it's going
up right now or going down. The degree of political risk for investors. Well there's no question that it's going to be a
bumpy road ahead for foreign investors. And that as we said while there may be some clarity around the direction that the
Chinese government wants to go when it comes to whether it's market opening or the new regulations that they're taking there
isn't complete transparency on what the process is and the timing of any of the regulations take what we're seeing around
the VIX these vehicles that are being used for many Chinese companies to actually get around the rules in China to establish
overseas and then use that vehicle to invest. And that's that's the way that many foreigners are investing in the Ali Baba's and
the other big companies in China. There was a rumor coming out of China that they were going to
cut off that vehicle which their regulatory authority has come out and said that's not true. But I am sure that what they're
going to do is take a very serious look at what those entities look like and put some new rules around them because the whole
intent of these VIX ISE was actually to get around the regulatory structure.
So by their very nature they need to bring some transparency and clarity to that. And that's going to make it very difficult for
foreign investors to continue that route. And we're going to see more and more of these types of actions that while in the big
picture understandable perhaps from a Chinese context for an investor they're going to be unpredictable. And finally Deborah
maybe one of the big political risk questions and that is human rights issues because we saw this come up this week as Senator
Mitt Romney really took on Ray D'Alessio saying how can you deny that there are real human rights violations for an investor. Put
aside the morality of it just for a moment. For an investor or a company doing business in China how does one factor that in. Is
it a significant factor in decisions about how to go into China how big to go into China. I think the U.S. government has taken
an important stance in its own set of values when it comes to voicing its concerns about human rights for foreign investors.
Absolutely. This is going to continue to be an issue. The Biden administration has stated very clearly that its expectation is
that American companies will represent American values when they're overseas. How that is factored in is very complicated
because while American companies may take a stance it's not necessary that all of our competitors are going to be taking the
same stance. And I do think as part of this we need to focus on what's the
best interests of the American economy and American firms and American economic security which is the basis really for our own
national security. It's a very complicated question to factor in but it's really very critically important one.