Lovely: Vitally Important Election for US-China Relations

Now, as I understand, typically this third plenum does focus on some economic issues. Going back in history, there were some major announcements coming out. This one's been delayed a year. Do we know why it was delayed? Well, I think it was delayed because the president, President Xi, was focused on other events. And there may be some more in the background that we don't know. One of the interesting things about the third plenum is that it allows for a bit of horse trading. Economic reforms, as China needs to undertake, create some winners and losers. And so the plenum allows a chance for multiple issues to be put on the table at the same time so that maybe I lose some some ways. I win in others. So it allows some political bargaining to happen that may allow us to see some real progress. Mary, let me put you in President G's chair right now. As he looks as his economy, what do you think his top priorities are? We have the property issues. You described local government, you've got use unemployment, which is an issue. You've got deflation in a lot of places. But what do you think of the big priorities for him? Well, we've written recently about what we think of as China's stuck transition. So China is transitioning from its old growth model to a new growth model, a new growth model that we're really just is just being born. And President Xi himself has warned about breaking the old before building the new. So I think that's really his problem right now. We see weak domestic demand, low consumer sentiment, low business sentiment, some signs of exit of foreign investors. So he has some work to do on the short run to revive the economy. In the short run, a little bit longer term, there's lots and lots of challenges. He has put his money down on innovation and so-called high quality development. This encompasses reforms to very broad sectors of the economy. But nevertheless, these things are things that need to be done and the changes need to be made now. So he needs to find a way to restore confidence while also helping to transition to an economy that's really built on investment, green greening the system, building a more sustainable system and building a more equal system. Mary, tell us about the relationship between the Chinese economy and the economies of the rest of the world, in particular, to start with the United States in particular, there's a lot of talk about a so-called second China shock, a lot of concern about subsidies of businesses over there with experts, United States that I could start with EVs, electric vehicles, By the way, Europe's concerned about that as well. How big an issue is that for China over China? It's a very big issue. And we've seen this in their, you know, diplomatic response to the US claims of over capacity. They have consistently said that the world needs their green energy products. They've doubled down on their strategy. It's not unusual in China for there to be lots of sort of rampant growth, particularly because a lot of industrial policy is uncoordinated. It's done through the provinces. And then there's a period of rationalization. And we're seeing some of that right now as some firms are surely going to exit because of weak earnings or even losses that overwhelm their ability to stay in business. So we're seeing China rationalize at the same time that we're seeing the West say, hey, no way are we going to experience what we experienced before. We're going to take preventative steps. And we saw President Biden just a few weeks ago levy tariffs on EVs, solar, medical equipment and other products as a way to get ahead of this so-called new wave of Chinese exports. Let's talk about those preventative measures as you call them. I wonder, as far as you can discern, what is U.S. policy economically, specifically with respect to China right now? There was a time we talked about decoupling. You said decoupling was way too much because it's too large an economy. Then it was de risking. But it seems like we're de risking an A lot of what China's trying to give us. Yeah, I mean every step we take seems to be more toward decoupling really than de risking. And the reason I say that is because de risking would have a specific targets. You know, when President Biden puts tariffs on medical supplies coming out of China, in some sense that's a bit de risking because we saw during the pandemic that we were over reliant on China for personal protective equipment and other medical supplies. So that would be a form de risking. But we see so many different approaches to moving away from China, Not only the the retention of the trade war tariffs, which had a very large effect on moving activity away from China, but to the new tariffs, to the export controls which have been, you know, very effective in limiting exports of semiconductors and semiconductor manufacturing equipment and supplies to China, to the listing of sanctions on a growing number of Chinese firms. So these are just some of the ways that US has basically signaled its desire to deintegrate with China. Mary, we have an election going on here in the United States, as you know, coming up in November. And, of course, President Trump when he was president, really took a very strong stance on China. It's not at all clear that President Biden backed off that for all the reasons you just described, in some ways even went further with it. How much of a difference do you think it makes in US China relations? Which man is the next president of the United States? I think it makes profound difference, President Biden. It has been more effective, I think, in terms of hitting China in ways that matter for US security, in particular the export controls. And the key to the success of the export controls has been coordination with other nations, in particular Japan and Europe, who hold key parts of the semiconductor supply chain. Without that coordination, the export controls would not be effective. President Trump is promising 10% tariffs across the board on all nations, a so-called flat 60 on China. This is a clear signal to the other nations that the US is in it for itself, so-called America first. And I think it would really undermine a lot of the policies that we're taking to push back on Chinese policies that we think are unfair, but also to diversify the global economy. So I think it is a vitally important election for US, China relations.