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Today, President Joe Biden is hiking tariffs on a wide range of Chinese imports, including semiconductors, batteries, solar cells, and critical minerals, in an election year bid to bolster domestic manufacturing and critical industries. The moves represent Biden's most comprehensive update to the China tariffs first imposed by his predecessor, former President Donald Trump, and a recognition that a hawkish approach to trade with Beijing remains popular with US voters. Still,
Biden must strike a careful balance. Additional tariffs risk increasing prices for consumers already HEARDing from inflation and inspiring the ire of China, which could choose to retaliate in Kime. And then there's Taiwan. Today, the US and Taiwan navies conducted joint drills in the Western Pacific in April. This was coming from Reuters reporting that out citing for unidentified people briefed on the matter. This is China's military has ramped up its activities in and around Taiwan over the
past few years. As we like to say, I say it a lot. It's complicated, and that's what a new book gets into. Joining us is Siman Khan. He's professor and Dennison Chair in History and International Relations at Tuff's University. He's a historian his new book, The Struggle for Taiwan, A History of America, China and the Island Caught Between. He joins us right now from Boston. Silman, so great to have you here with us. When we talk about
geopolitical concerns right now. Yes we talk about Russia and Ukraine. Yes we talk about the Middle East, but we also talk about the complicated, increasingly complicated relationship the US has with China, and a big reason is Taiwan. First of all, when you sat down to write this book, what was top of mind for you? Was it to give us all a history? Lesson?
What was it?
Thank you for having me, Carol. There was a lot on my mind. I simply wanted people to understand how we got to this point. I wanted a legislator or an official flying to Taiwan to be able to read the book on the plane and say, Okay, I know what's behind all this. Because we're now at a point where there are large numbers of ships floating too close to one another, too many planes in the sky, and the US and China seemed to my mind to be one accident and a bad decision away from something that
could go horribly, horribly wrong for all of us. And going through the history shows you both how we got here, but also that there were various ways out along the way, and there are moments that we can look to and learn from and that might help us better navigate the future.
Well, it's interesting that you say that, and I do wonder it always feels so delicate, if you will, And I think about going back to when Nancy Pelosi what was it the summer of twenty twenty two, and took a visit she was then what US House speaker, and she went to visit Taipei. That was not a great situation, to say the least.
It was not a great situation. And if you cast your mind back to that, you might remember who she Jin, who was the editor of a tabloid, saying her plane should be shot down, which was remarkable. It's not something that you would expect to be said, because usually Beijing has been quite good at controlling the level of vitriol
that gets into propaganda. But you think about it, and then you cast your mind back to the Heinan spyplane incident that kicked off George W. Bush's presidency, and you say, you know, a Chinese plane collided with an American plane. But we all managed to walk away from that alive. That was partly because there was an interest in both Beijing and in Washington and getting along and in not
going to roar. When Pelosi went to Taiwan, the thought that kept going through my mind was if this goes wrong, do we have that mutual commitment to getting out of it? A life is still intact. And the answer seemed to be uncertain, which is not something you want to think about when there are two great powers armed with nuclear weapons.
You know, it's interesting. I feel like we have that conversation a lot about, you know, both of us, kind of whether it was the Middle East with Iran and Israel, about walking away and saying, wait a minute, the risks of moving forward are escalating. Are just it's too much that's at stake. But when you look at what's happening in Taiwan and the US and China. Is that willingness to walk away and preserve some calmness if you will? Is that willingness kind of waning if you will.
I think it's waxing and waning, to be honest, it depends in any given moment. It was heartening to see some commitments with both Joe Biden and she Thing reaching out to one another and saying, can we walk away from this? It was heartening to an extent to see some recognition that while China might be a competitor, we don't want to go all the way into cataclysm in some contact with Chinese officials to that effect. What was not heartening, however, was the fact that the waxing happened too.
So you mentioned the terroriffs just now, you mentioned the possibility of you mentioned the drills, And it's an election year, and in an election year, everybody advis to get tough on China. One of the things Donald Trump did was to forge a bipartisan consensus around the idea that we needed to get.
Tough on China.
And that's something that in an election year will lead to what to my mind amounts to a lot of fosturing and a lot of dangerous bosturing, because the sensitivities in Beaging are such that you don't know when things will go wrong.
Well well as you know, getting tough, the United States getting tough on China right, maybe through tariffs, and then there's something different. I feel like when it comes to Taiwan. Is that fair to say that that is a whole other level in terms of what China, how it's use Taiwan and the importance of it.
I think it's certainly a whole other level to Beijing. I think Taiwan is one of those spots that hurts and that they felt they had a commitment from the United States to a one China principle that the United
States still says we do not challenge that. But if you look at things like trying to bolster Taiwan's diplomatic partnerships, if you look at things like Belosi's visit to Taiwan and other senior lawmakers visits to Taiwan, you really do have to wonder, especially if you're sitting in Beijing, how committed is the United States to that principle that's being you know, in some ways at the core of the relationship between the two countries since Nixon and Kissinger went
to China. If that is being challenged, it opens up a can of worms that's just far more sensitive than even a trade dispute would be. And that's one of the reasons this is so dangerous because I don't think even now there's sufficient understanding within the United States about just what Taiwan means to China. That's not to say that Taiwan shouldn't enjoy the fruits of a democracy. It's worked very hard to get to. It just means that some caution and some prudence would be in order.
Why did you know?
It feels like with President g the one country two systems, you know, policy that seemed to work. It doesn't feel like it does anymore.
So one country two systems is a fascinating concept, and Bunshapping was actually the person who came up with it, right, And when Dun comes up with it, it's interesting he actually wants.
It to work like two systems.
He's very explicit about saying, you know, when Hong Kong comes back under one country two systems, I don't want to tamper with the second system. It's the goose that lays the golden eggs. Why would I change something that's working, and that actually starts off a huge debate in Taiwan at the time. Maybe one country, two systems is the way to go. What changes under Chijinbang, of course, is
that the second system bit gets left out. Hong Kong, if you look at it today, is not a place that it was even ten years ago, even twenty years ago, when you could commemorate the Tianeman Square massacre, when you could criticize the government in Beijing, when you can do all sorts of things that you know mainland China proper, you probably could not have got away with. That's not
the case anymore. So what Chijin Bang has demonstrated is that one country, two systems is a nice concept, but it can change with the people charged.
With implementing it.
And if you're sitting in taipe Ai and you say, look, we worked really hard to get to a democracy where there have been peaceful transitions of power, one country, two systems doesn't look all that attractive anymore.
I want to get back to Suman Khan, professor and share in history and international Relations at TUF's University. He's got a new book out, The Struggle for Taiwan a history of America, China and the island caught between. He's still with us from Boston, Soman. How do we get here where Taiwan is caught between the United States and China, and we know that it's a nation that Beijing covets, protects ownership. You see it very clearly, and yet as you note, it wasn't historically Chinese.
Historically it starts off being its own weird level waste station between East Asia and Southeast Asia maritime terms, and then the Qing dynasty conquers China.
Along with other parts of the world.
And conquerors Taiwan. That dynasty then loses Taiwan to the Japanese Empire in the War of eighteen ninety four to five, and Taiwan is ceded to in perpetuity. Perpetuity lasts till the end of World War Two, and the United States at the Cairo Declaration says that Taiwan is going to
be restored to the Republic of China. Problem with that declaration being there's many different China's at the time, including of course the Communists and the civil war that erupts between the Communists and the nationalists that would be, the nationalists would be.
The Republic of China.
Is one that the United States is not sure where it stands on.
It wants to wash its hands of the nationalists.
And when the nationalists are eventually beaten back to the island of Taiwan, the betting money is sooner or later, this too, is.
Going to become part of the People's Republic of China.
What the nationalists set up on Taiwan is a police state by the way, that has a whiff of settler colonialism to it, so there's not much sympathy for it. But when the Korean War breaks out, Truman sends the Seventh Fleet to the Taiwan Street and that begins the separation of the island from the government that is governing China. For much of the next few decades, the United States is going to be stopped trying to choose between two Chinas.
And it's only when Henry Kissinger and Richard Nixon decide to make peace with the PRC in nineteen seventy one that the United States once again has a modus vende with Beijing. But that leaves the fate of Taiwan uncertain because for domestic reasons, the United States feels it cannot come to a definitive handing over as it were, of Taiwan to the PRC. But the One China principle acknowledges that Chinese on both sides of the Taiwan Strait maintained that there is but one China, that Taiwan is a
part of China. That the United States does not dispute this formulation.
That is more or less.
The situation that attains still normalization of relations between the United States and the PRC with Jimmy Carter overseasation comes with the Taiwan Relations Act, which means that the President is supposed to think about the defense of Taiwan, that being in the interests of the United States, which of course has Beijing howling mad. But that is where we are, and as a result, Taiwan has maintained a separation from China to this day.
Well, you know, it's interesting, so you give that that history, and I feel like it's been a tortured relationship a little bit on the part of US and US politicians about what the US role is right in terms of protecting Taiwan.
It remains a tortured relationship, you know, if you look at the Taiwan Relations Act and ask how is this consistent with the one China principle? Right, and so it doesn't look all that consistent, But one can talk one's way into thinking of it that way. If the United States remains committed to the defense of Taiwan at some level, that is saying we have an interest in what is happening here and we're willing to tell China what to
do about it. So to maintain that that is somehow consistent with the idea that Taiwan is part of China seems to me to be untenable. Why is the United States committed to this? I think there's a whole host of reasons. There is partly credibility. One wants to show China one can be tough. There is domestic political consideration. One doesn't want to appear weak on China before one's constituents.
There is I.
Think among some people now there is some consideration, and this is probably what should be the argument if one we're going to make an argument, this is.
Why the United States should defend Taiwan.
Taiwan did everything right despite the United States foisting a police state on it. It made the transition to democracy. You know, that's an example for us in some ways on how to hand power over peacefully and how to deal with disinformation and what has been created on that island something that excites some sympathy.
Well, so you know what I was thinking is I'm listening to you and I'm thinking, and I've thought about this a lot when we talk about Taiwan, is that what does Taiwan want and what's its own kind of independent thought in all of this? And I think about it especially. We spend so much time, as you would imagine, talking about semiconductors, the importance of TSMC, how important it is to the world, the global world of semiconductors. But I do think about what does Taiwan want in all
of this? What can it do independently if anything?
So I think what Taiwan wants. And you actually saw a consensus on this in the elections earlier this year. There doesn't seem to be any rush to unify with China. The three parties that were contesting the election mainly we're all pretty much agreed on that there is a fact
that wants to declare independence outright. What's weighing against that of course is if one declares independence outright, one is stuck with a situation where that might provoke China into destroying such independence de facto independence as exists at the moment, and there's no guarantee that the United States would do the right thing there. One never knows what the United States will do or not do at a given moment.
So I think if you asked what is the one thing most people in Taiwan are agreed on, it would be we don't want to jeopardize what we have. How one goes about that as a separate thing. Does it come with a commitment to declaring independence? Maybe some point down the line, if one has prepared one's defenses to the point where they could withstand or at least cost China a lot if there were to be assault.
And one of the.
Things that has sharpened this conversation in Taiwan is what happened in Ukraine. It looked like the reason the United States was willing to commit money to Ukraine and or Ukraine was the fact that the Ukrainians, against quite a bit of the betting money, stood up for themselves. Would Taiwan be willing to do that? And one of the interesting things about studying the past and studying how wars break out in the past and what people do is you never know till the last moment. There's an element
of choice that comes into it. But it is a conversation that's being had over there, and it's a conversation that's being had with increasing intensity.
Just thirty seconds, and I need you to be quick if I can, if I may the driver's seat. Who's in the driver's seat in this triangular relationship US, China or Taiwan.
Nobody everybody has the illusion they're in the driver's seat, but they're all jostling for the steering wheel.
That can cause issues, as we know. I hope we can continue this conversation in the future because I do feel like this is an important issue. And you're absolutely right with what's going on in Russia Ukraine right now, very very topical and very very relevant. Congratulations on the book. Suman Khan, Professor and Dennison Chair in History and International Relationships relations excuse me at Tufts University. His new book that is out, The Struggle for Taiwan, A History of America,
China and the Island Caught Between. And you can if you missed any of it, be sure to catch it on our podcast feed. You're listening and watching Bloomberg Business Week. I'm Carol Masser, and this is Bloomberg.
This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Messer and Tim Stenebek on Bloomberg Radio.
All right, everybody, this is Bloomberg Business Week. Carol Masser. Tim Stenevik is off today. He should be back tomorrow, I believe, cross my fingers miss him very much. We do want to get to some news out of the global fintech space today and Groups quarterly earnings falling nineteen percent as a Chinese fintech pioneer founded by Jack Ma, struggling to find new drivers of growth, falling regulatory clamp downs at home. We know the Chinese market very specific,
so there's a lot going on. I will say more generally when it comes to growth. AI Digital Crypto all top of mine. When it comes to those in the fintech space and trying to think about how they fuel growth and ongoing innovation. Our next guest has some thoughts on all of it. Stephanie Chwo is partner at Portage Ventures, a global fintech platform. They've got over two billion in assets under management, and she is joining us from San
Francisco with a beautiful backdrop. Steph, Hey, good to have you here with us.
How are you?
I'm great, Thanks for having me, Carl, Well, listen for the track.
Well, We're excited to have you here because I do feel like I feel like there is go back a couple of years and all we talked about was fintech and fintech innovation, and I feel like it got a little millow, but we're back at it. First of all, for our audience, tell us a little bit more about your firm. Fill in kind of the holes and specifically what you guys are up to.
Two and a half billion dollar fintech platform.
We've got an early stage fund that focuses on Series A and Series B investing five to twenty five million dollar lead checks. We've got a late stage each fund as well, and all we do is fintech across payments, banking, wealth management, insurance. So we have been at this for about the last decades, so have seen the rise and fall over the last little while.
All right, so where are we in the cyclone? What's interesting? What's kind of really innovation? What is just like, Okay, here's a tweak on something that's already out there, but we can do it a little bit a little better, and it's just kind of you know, kind of maybe general business, if you will.
The numbers are actually pretty study. I was looking at them earlier today. We're nowhere near the all time highs. In twenty twenty one, we're one and every four dollars was going into fintech. We're now looking at about seven billion dollars of fintech investing in Q one of the about sixty billion dollars the venture dollars going into the market, so it's now more like one in every eight dollars.
But it's been pretty study the last four quarters.
We're now kind of close to where we were in twenty seven teen terms in terms of where the fintech market is. But I think overall we're still super bullish on the market. Financial services is still a twelve and a half trillion dollar industry of which we're still scratching the surface. Only two percent of the total dollars flowing
into financial services actually is flowing through FinTechs today. I think we're still in the opening innings despite being at a kind of plateau in the market for now.
Well it's interesting too, you know, And we were just talking with some very senior members over at Wells Fargo. I do feel like the financial establishment still is very involved in everything and anything in the financial world. Having said that, you guys have a pretty big portfolio, tell me a little bit about some of the companies and what's kind of interesting, what's new, what do you think is kind of a trend of the future when it comes to this space.
So I think the thing that everybody's talking about right now is AI. I think that will be the biggest pops in the market in terms of valuation, in terms of what investors are looking at right now, is AI.
Within financial services. I think the.
First early use cases that we're seeing across our portfolio, and we have a number of portfolio companies that are spending time in this space, are efficiency use cases. So how you work with large corporates today, I think every board is thinking about the efficiency use case. On the cost side, customer service, how to think about coding, how
to think about the below the line marketing dollars. I think all of that is very clearly improvements in underwriting, improvements and lending, and I think AI in the financial services arena will start there. I think we're spending a lot of time thinking about how the customer experiences could end up eventually becoming more powerful in this space. That's
we're still very early there. I think we will see the advent of pretty interesting domain specific models, but again and agents that will help you actually execute on new experiences. All of that is still to come, but AI is clearly where most large corporates I think today in the fintech space are focused.
I do think in terms of what's new. It's interesting. Yeah, sorry, do I.
Go there because I feel like, you know, it helped me out here, Drill down if you will, and be more specific if you can, and just because I feel like you guys are seeing things come across your desk or in your inbox, if you will, in terms of how it really changes our world. Because I think I heard a lot of we're early on in the inning. I feel like it's a lot of back office I
I heard what you said about efficiencies. I feel like it's a lot of mundane tasks that all of a sudden we don't have to deal with anymore because of AI. But how are you thinking about it? Go the innovative rout of how things really get disrupted here in the fintech space.
I think, again, we're still in the early innings. I think let's talk a little bit about the future of commerce. I was just reading a report that more than fifty percent of payments in e commerce are now actually done via some kind of digital wallet, like a PayPal. I think over time, the way in which we buy and the way in which we search, which is a corollary
of fintech, will be completely different. Imagine a world in which your recommendation engine and the way you buy and discover goes through doesn't actually go through a one or doesn't actually go through separate sites. It's all done in an auto automated and automatic way through one search engine that allows you to have access to everything in the market. I think that's one vision of what a future agent
led e commerce experience could look like. I think fraud is another very clear area that's going to be impacted here. There's new fraud vectors that have popped up because of GENI, but also I think real time fraud rails, because now we've got a whole bunch of new real time rail use cases where you can send money via crypto in an instant and there's no recourse. You've got RTP networks and fednow networks. There's a whole new set of fraud
vectors that have emerged from this. I think because of that real time nature, we're going to see new advances in fraud models that you will use both JENI in the workflow, but also traditional mL in the workflow as well.
So these are two.
Areas that we're spending time on that I think will be very impacted by AI going forward.
Does great And forgive me if I missed this, but did you say also crypto having a role in all of this.
I think crypto as it relates to, like the most obvious crypto use cases infintech today have been payments, where stable coin flows are really democratizing and making global payments a very different landscape. It gives access to the emerging markets to US dollar denominated real treasury treasury and yield which I think has not had which is not really which the developing markets have not really had access to date, and so that's an area that we're watching closely as well.
Because there are and stable coins and real time transactions means, unlike our domestic payment rails, in crypto, there is no recourse if you don't have the right recipient, and therefore there's whole new sets of fraud and payments engines that need to be developed on the front end in order to protect users.
Listen real quickly thirty seconds here. Because you do have a portfolio of companies. We just talked with the Wells Fargo team in investment banking and markets about private equity having a lot of companies that maybe are going to want to come to market, whether it's IPO, but I am curious, are you looking to do some exits on your companies this year? And again just got about twenty five thirty seconds.
I think we're seeing a lot of interesting private equity exits, particularly take privates in the payment processing space. I think example these aren't in our portfolio, but Newvey. There was also an advent transaction called mypos that happened in the UK. I think we're going to continue to see sponsor led exits in this market, but I'm most interested in the new wave of potential consumer ipoxs that we're going to see over the next three years.
All Right, well, really fun to check in with you. Look forward to doing it again in the future. Steph Chu. She's partner at portage Ventures global fintech platform. As we said that two billion in assets undermanaged man