The host of Wall Street Week David Westin joining us as he does every day
at this time. David, the president of the United
States over there in Japan for the G-7 summit.
A lot to talk about. And I'm told that China is at the top.
China is not there actually represented. But they basically are the main people
that President Biden try to communicate with.
So we thought we'd actually turn to Ian Bremmer and get his sense of what
message he is trying to communicate. He is founder and president of Eurasia
Group and author of Crisis How Three Threats and Our Response Will Change the
World. That is now out in paperback this week.
And I'm told it has a new epilogue dealing with Russia's war in Ukraine.
Ian, thanks so much for being with us. So what is the message from your
perspective for the United States wants the G7 to send to Beijing from these
meetings? Well, they want a more coordinated
message. I mean, if you think about the last year
and a half, the G7 has gotten much stronger, much more consolidated, more
aligned, because policy on Russia responding to the invasion is virtually
completely in sync. That is not true on China, on China.
You have a whole bunch of countries in the G7 that want greater security
coordination with the U.S., but at the same time, they want greater economic
engagement with China. And the Americans are talking about deep
risking. They're talking about near shoring.
They're talking about friends shoring. And, you know, Biden's managed to get
the Canadians saying that he's gotten Ursula von der Leyen saying that, but
not Macron, not all of Schultz, not even Casita.
Quite. In Japan.
And so in that regard, there is a hope that coming out of this G7, you're going
to have a much stronger statement of unity in where you can do business with
the Chinese and where the G7, not just the United States, doesn't want to.
And by the way, that's why despite the debt limit crisis, Biden was not willing
to pull the plug on his personal attendance in the G7.
He cut off Papua New Guinea. Big deal.
He cut off the Australians. That really hurt.
And the quad, he was not going to pull the plug on the G7.
So I'm really curious what that line between the one hand where you can do
business and where you don't want to do business, because we have seen some
meetings now. We saw, of course, Tony Blinken, the
secretary's day meeting with his counterpart over.
Then you have the U.S. ambassador Nick Burns, meeting with the
foreign minister in Beijing. Are things starting in the ISE, starting
to break up a little bit? And more importantly, Jake Sullivan with
his Chinese counterpart in Vienna last week.
And that was twelve hours of meetings, by far the most constructive and
engaging since the Biden administration actually took office.
So, yes, there is more high level engagement on issues that matter between
the United States and China. But I don't want to in any way make
people believe that that implies friendliness or trust.
Those things are in very short supply. And what I would say is that the United
States is trying to make it more clear in what areas there will be an
adversarial relationship where the playing field is not level and won't be
level. And, you know, of course, we've seen
this with 5G. We've seen it with semiconductors, but
that we just saw it in Montana with tick talk.
And that's been the issue de jure for a lot of U.S.
policymakers over the course of the past few months.
This is going to expand in areas of key technology, critical minerals, an area
where the United States wants to align with his friends in competition with
China. Even when I look at the Middle East
right now, the Chinese are starting to displace the Americans for influence, in
part because the Americans are producing all this oil and gas and the Chinese are
buying it, buying it increasingly from the Middle East.
Well, if there isn't really friendship and trust and if there is still
competition, can you still have cooperation between these two powers?
Well, it's not like there's a choice. I mean, U.S.
China trade relations right now are at their highest level in terms of absolute
amount of trade as they ever been historically.
I mean, you know, Elon Musk is all about beating up on George Soros, asked him to
do that on China. He won't.
Why? Because he makes a lot of money off of
the Chinese. He doesn't make any off of George Soros,
at least not since he pulled the shares. LeBron James.
Ask him about Black Lives Matter, all about free speech.
How about on China? He's going to take their side in Hong
Kong and Taiwan. Why?
Because the future of the NBA is in China.
So, I mean, can you cooperate? The entire corporate and financial
community is cooperating, as we know in the United States.
And we lionize their power and they do control and capture a lot of the
regulatory environment that does matter. But what's the limit to that, I guess?
Is there a limit to that? I mean, when you hear about some of
these consulting firms having their offices raided, when you hear from
corporate executive, U.S. corporate executives who say, yeah, we
want to go do business with China, but we're not going to send our CEO or
anyone important over there to the mainland at risk of them being detained.
What does that tell you? Well.
Most of the CEOs, American CEOs I talked to had not been traveling, of course, to
China during the pandemic and now are very much focused on getting over there.
And because they need those relationships and they need to engage
with their workers on the ground, their management, but also with their Chinese
partners and with the regulators, with the government.
So it hasn't frozen American executives, in fact.
You know, there've been letters recently signed by all sorts of American CEOs
trying to get the Biden administration to take a more balanced view on China
and particularly members of Congress, Democrats and Republicans.
I will say that senior Chinese officials no longer believe that they can leverage
the U.S. private sector to lobby for them, and
certainly not publicly given the American political environment in the
way that they could have before the pandemic.
So I think that matters. I also think that there are a number of
corporations look on the back of the particularly the the the raid on Bain
Consulting. And there's been others on on companies
of other countries in the last few months.
Definitely a lot of U.S. corporations are thinking more carefully
about how much more they want to invest in China going forward.
But very few are pulling out the existing investments that they actually
have. China is expected to become the largest
economy in the world roughly by 2030 2032.
In that environment, of course, a lot of countries, including the United States,
are going to end up with more exposure, not less.
So let me pick up on that specifically, because it has been assumed that China
would surpass United States in nominal size of economy.
Some people are questioning that. So we were asking whether China may have
peaked because they are slowing down. We saw numbers even this week that were
weaker. What is President Jiang think?
Because his or his attitude toward the strength of the Chinese economy might
affect his bargaining position? Well, it's not like President Xi is
talking to any Americans directly about this issue.
Right. And he's not talking to many Chinese.
So we don't know clearly the level of subsidy that the Chinese are are still
putting into under productive sectors. Real estate, for example.
Weak banks all imply that they are still quite concerned in the near-term about
what their growth is going to look like medium term.
They're very worried about demographics. They're very worried about
non-performing loans, especially in the corporate sector.
And they're worried about headwinds from policies driven primarily, but not
exclusively by the United States, things like export controls on semiconductors
that have the potential to reduce Chinese growth in the highest tech and
most productive sectors. So they are concerned.
I would not say that that concern leads them to believe that they won't become
the largest economy in the world. But, David, when they right now, their
per capita income is something like 12000 dollars.
It's a fifth of the United States. They're still a.
We call them a medium income country. But compared to the U.S., they're a poor
country. And and when they become the largest
economy in the world, they're still going to be a poor country.
And so I do think that the level of pressure on China, on what they need to
spend that money on and there are constraints internationally will be
very, very significant. Let's also remember that for all of
Chinese military strength and they're planning to build out another thousand
nuclear weapons in the next 10 years, and that should give us all pause for
concern. By the way, the Russians are exporting
that enriched uranium to them. The United States today spends more
money on defense than the next 10 countries combined.
And that, of course, includes China. The Chinese are very well aware of that.