'Cold War' between U.S. and China is threat despite leaders' phone call: Asia expert Stephen Roach

Economist Stephen Roche is considered one of the world’s leading experts on China. He’s the former Morgan Stanley Asia chairman and now a Yale senior fellow. Steven, great to have you with us. What should we expect, if anything, out of Secretary Yellen’s visit to China? Well, it comes at an important time. Melissa has all these visits do. First of all, you know when you’re talking about the XI Biden call, you got to cut the time in half because of consecutive translation. So they each got it maybe, I don’t know, 45 minutes of of airtime. But Secretary Yellen has got to deal with this imbalance between supply and demand, which is putting too many Chinese goods into the market right now in a source of concern for the US side. I was in Beijing last week and there’s a lot of talk about manufacturing and upgrading the the, the production on the supply side, but a lot of hand wringing over the lack of demand. So that imbalance is a big deal. And at the same time, we had many USCEOS over there in Beijing meeting with with President Xi in the sort of orchestrated meeting. So there is this acknowledgement on the part of Beijing that they need American business and yet there’s this strained relationship that runs underneath. Steven, I’m, I’m wondering what you think of this relationship and how it will be as we approach the elections, particularly when we’re looking at a potential Trump presidency. He’s already, you know, threatened very steep tariffs on Chinese goods. He has orchestrated, choreographed as a good word to describe last week’s meeting. You know, certainly China is demonstrated A willingness to continue to tell American businessmen that China is open for business. And American businessmen have been more than delighted to echo that same sentiment. But they remain cautious. I was a part of the group that was in China last week. Sentiment is weak. The Chinese policy makers are still giving mixed signals on their receptiveness to U.S. business. So you know it’s a pretty much a juries out on on where this is headed. Hey Steven, it’s Tim there. There’s there’s a lot of codependence that these countries have together and and you know, so whether it is international dynamics but the diplomacy is welcomed. Do you think Yellen heading to China has, is there anything related to just what’s going on in treasury markets or the biggest buyer of our treasuries? And you know are you at all concerned about this dynamic? There’s clear the Chinese central bank buying of gold and other diversifiers away from you know buying the stuff that historically China couldn’t get enough of. Well, Tim, I hear you on codependence. I wrote a book on that several years ago myself, but I don’t think that Secretary Yellen’s visit is to talk much about China’s role in buying gold or buying U.S. Treasuries. I think it has much more to do with just ongoing dialogue part of the continued communication on strategic economic issues, especially now this supply demand imbalance that I alluded to earlier. Steven, we got some manufacturing data out of China over the weekend and it was better than expected signaling that their economy is out of contraction. Did you get any reads on the ground there that would maybe just kind of say, OK, maybe there’s some sort of bottoming process going on here maybe from some of the contacts you have away from the government. Well, there’s hope that the the worst is over the the Premier did address the China Development Forum in the opening session and spoke hopefully about trends in the first two months of the year. But you know, these are tentative reads at best and given the the shortfall in Chinese growth last year and I think there’s still a lot of nervousness in Beijing as to where the economy is headed in the months ahead.

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