Pres. Xi made clear China isn't backing away from centralizing its economy: Michelle Caruso-Cabrera

President Xi met with American business leaders on the sideline of the China Development Forum. Joining us right now is Michelle Carusa Cabrera, of course the CNBC contributor and a friend of the show. It’s good to see you. Good morning. Good to see you. So we have heard a lot about this. What was the take away of what happened? This was pretty important. So I spoke with one of the CEOs who attended the meeting. And overall, I think the number one thing that was clear to this person was that China is not backing away from centralizing its economy, that it is not going to pursue pro market reforms as was suggested in her speech by the head of the IMF, which is a big negative think a lot went there to hear what the chairman was going to say about, you know, their the future of the economy and it’s clear that they’re trying to send a very positive message about the economy. She told these CEO’s that the economy hasn’t peaked, that a lot of people tell them how they should fix their economy, but they know how to fix their economy. But the bottom line is that the business environment is terrible and that they don’t want to do the pro market reforms that have been suggested. They don’t believe in them. When you speak to Chinese officials and you ask about the private sector, the response you get back is, oh, we love small businesses. In other words, they conflate the private sector with small businesses. And then they go on to say because it’s smaller than the government, Right, Right. And then they go on to say, but you know, they’re not big enough and stable enough to support an economy. That’s why we have to back the big state owned businesses. They like big business as long as they’re owned by the state and controlled by the state and that’s not a recipe for growth. I I think some of the take away from this too though is it, this was another kind of preaching to them, yes, people have been getting this message where OK, we’re going to lecture you and tell you what, what you need to be doing on some of these things. I think the other message that comes out of it that maybe even more concerning from a geopolitical standpoint though is the Chinese government not only saying don’t tell us how to run our economy. Don’t tell us how to run our our borders. And and in what they’ve said said from some of the conversations I’ve heard too I saw a picture of some of the people who were there have spoken with some of them too from what I’ve heard on this, just the idea that Taiwan they very much see as part of their borders and don’t want anyone messing with. It’s a red line. Absolutely. In the same sentence, when speaking about Taiwan, she said we don’t interfere with other people’s borders. They shouldn’t fear interfere with ours. Now there are disputes about them interfering with other people’s borders, but absolutely this is we are on two different strategic directories, trajectories, the United States and China. The hawkish take on this and you it’s not hard to find it from the journal or anywhere today, Is that getting in bed these, these CEO’s deferentially sitting there, nodding and getting in bed with the CCP At the same time, we’re worried about China exporting malware into our grids, for if we ever do have some type of confrontation, they won’t even need to fire a a a shot. At that point, when they decide to handle their own oversupply of everything over there by dumping crap like they’ve done in the past, they’re going to dump E VS Someone called it a bloodbath. Oh my God, how could you do that? But when they start dumping E VS here like they’re dumping other places, there’s going to be tariffs. There’s going to be, oh, that’s going to be a hellish nightmare. And all these guys were over there just not even questioning what’s happening because it’s a Faustian bargain they need to make with the CCP, right? Yeah. So two things I would say. Janet Yellen made a speech yesterday. The Treasury Secretary made a speech yesterday in Georgia highlighting exactly what you said. We saw what the Chinese did with steel. We saw what they did with aluminum. And now we see them doing it with EVs, with lithium and ion batteries and with solar panels. That is not going to won’t get fooled again, right? I think you’re absolutely right. Doesn’t matter who’s going to win in November, If the Chinese try to export their electric cars to the United States, there’s going to be tariffs. They’re going to be prohibited. That’s never going to happen here. The CEO’s who what they have to go right. Remember a lot of people who invested in China did it starting 20 or 30 years ago when the bargain was different, when they were reforming, when they were reducing the role of government in business, when they were starting to distribute capital to the private sector in a much bigger fashion. They’ve done all of that has gone in reverse and now here they are. This is a very different bargain than when they got in originally. They have to go because they’ve invested so much that they were doing so well. You know they’ve got a huge class of people that are still not up the to to the standard of living for a lot of the rest of the world. So they were gonna switch to a consumer driven economy and the only way to do that was to continue along with this style of capitalism they had. And so at this point he’s as you said no backtracking on on on on going back centralized economy. No, no they’re not going to go back to that but the way that they’re going to try to have their economy flourishes at the at the expense of the rest of the world. Yeah, I you know the line is 800 million people emerge from poverty over there just you know another 500 million to go to your point about if they were to continue on the path of reform. I would say that as we sit here and talk about what we think they should be doing. I think she’s response would be Oh yeah everybody thinks we you know what we should be doing with our economy. Let us handle. Yeah. Don’t tell us how don’t tell us how. But we’re going to it’s going to be at our expense though and the rest of the world’s expense that’s how they’re going to. So, you know, so two things when you look at asset allocations around the world. I was just speaking with Dan Ives, your previous guest in the in the makeup room, which is where a lot of conversations have you see right. And you know why he’s traveling to Asia so much because asset allocation to the United States has increased dramatically because people are not investing in China anymore because it is now uninvestable. So he has to spend a lot more time over there talking to institutional investors about the United States. So the United States has benefited. The other thing I would say is we’ve been talking about China finally getting rid of yield curve control and finally raising interest rates. We go back 40 years. And if you had said, Oh my God, Japan’s going to crash, Yeah. And it’s never going to recover, not for decades. I think we would have thought the global economy would have suffered far more dramatically than it did, and it hasn’t. Are we going to suffer because China isn’t going to grow as much? Absolutely, because so many companies invested so much there. But look at the resilience of the United States. I mean you know the market cap of NVIDIA is larger than a lot of, you know the major stock markets, the top, you know 20 listings in some of the major stock markets in Europe. You know we have the dynamism here still more so than any. I wish we knew that, I wish we knew that the outcome would be similar to what happened in terms of but but I don’t, I don’t see it. I think this is, I think that it’s a totally different situation. It is because with Japan we weren’t worried about going to war. The problem with China is that we’re worried about going to war over Taiwan. Pretty big deal. It’s a huge deal. I I think it’s hard to ever look at the economy without going through that that prism first. Absolutely. I mean, and it’s why, why we have this new industrial policy when it comes to chips, why there’s pressure from the Pharmaceutical industry to say, oh, you’re going to subsidize the chip industry. Well, you need to subsidize the Pharmaceutical industry if you’re going to start using that prism of national security. But, Greg, it starts to get very, very getting pulled towards this intervention. That’s why it’s 1159 and change on the doomsday clock. We’re gonna just been there. Still a three day week. No, no, but they’re not. You can slip in tomorrow. Yeah, right until till 7:30. No, but it we’re like 1159 and 40 seconds or something. Remember that close. I feel better than that.