U.S. Faces Cold War 2.0 With China

to help companies resume production and key sectors. And I think what's interesting, Tim, this is all against a longer term backdrop of China's made in China statelet industrial policy to really change to make China so dominant in global high tech manufacturing. They want to be the world's dominant power on so many different levels. They certainly do. And we're really lucky to have joining us Robert Spalding, retired

Brigade your General for the U. S. Air Force. He's the author of War Without Rules, China's playbook for global domination. He joins us via zoom from Washington, d C. General, how are you, thank you, hey, It's good to have you with us. I just want to start with with what's happening in China right now. Uh, we see supply chain scenaris as a result of yet another lockdown, this

one the biggest lockdown in Shanghai. And I'm wondering if that is a weak point for China right now, because you do argue that China has thrown out the old rules of war. Well, I don't know if it's a weak point or they're actually testing our ability to weather through the supply chain shortages that are leading to increase

inflation in our own economy. So it's not just a FED lifting the money supply, it's also the shortages of you know, the type of goods that you know is adding to this increasing inflation that is really you know, gnarling our our own society. So there's a there's, you know, a given take here that we have to be aware of. You are a former China strategist for the Chairman of the Joint Chiefs of Staff and the Joint Staff at the Pentagon, also UH senior defense official and Defense tash

A to China. I mean, you understand this country. You speak Mandarin, you have watched I'm I'm assuming the evolution of this country, which we thought that by being involved would kind of bring us all closer uh in terms of globalization, but we're definitely seeing a different China play out.

Why did you want to write this book? Well, I wrote a book back in nineteen after I left the White House trying to explain what I had witnessed during my almost ten years working on US China relations in the Pentagon and then as a senior defense official in Beijing. And one of the real crucial documents that I relied on for that book was Unrestricted Warfare. But Unrestricted Warfare is so hard to read and inaccessible. I wanted to bring it out and allow regular people and policymakers to

really understand the way the Chinese think. And I think that's what war without rules is. It's it's allowing people to understand how the Chinese communist parties thinks in terms of competition and warfare with the West, which is totally the alien to the way we think about war and really doesn't involve weapons at all, and just bring that out so people can understand and anticipate how the Chinese might act or react to any given situation. What does

our audience need to understand? What does our investor audience need to understand when when thinking about China's push for for global domination your words China's playbook for global domination. Well, I think for investors, one of the challenges with regard to investing in China, particularly if you have assets in China, is a non convertible nature of their currency and their strict capital controls. You know, once you've gotten assets there in China, it's very hard to get them out. So

that's a problem. And ultimately, if you have a relationship with China, you can find yourself the subject of Chinese Communist Party influence. So Marriott Corporations saw that when they were asked to fire one of their employees that like to tweet. Then NBA saw that lost revenues when Daryl

Morey tweeted. So what happens when you are a country or a company that's trying to either sell to China or in some way be financially related to China, You're gonna find that you're that you have to listen to what the Communist Party says, or it can be financially detrimental to your business. You know. General, I wonder if companies global companies misread China they thought by being involved, that they would become that China would become more westernized.

But that's not what's happening, is it. Well, you know, I lived in China, Shanghai uh and What's University from two thousand two to two thousand four, and all of my neighbors were building factories in the Shanghai Spectral Economic Zone. And this is what I heard nearly universally, is that we were going to somehow transform China to be like

the United States. And I thought that was a little bit arrogant at the time, But yeah, truthfully, what's happened is rather than us changing China to be more like the US, they've been able to change us to be more like them. And then again, it's through these relationships where they're allowed to influence our corporate sector, financial sector,

or political system or academia. So it's a big problem. Well, and I think it's interesting coming out a time when we're focusing so much on E. S G factors and companies saying we've got to take a stand on these social policies. Our workers wanted, our customers were wanted, and yet when it comes to China, you do feel like everybody is so careful and so delicate with us. Right now is Robert Spalding, retired Brigadier General for the U. S Air Force. We are talking about his book War

Without Rulers, China's Playbook for Global domination. He's a former China strategist for the Chairman of the Joint Chiefs of Staff and the Joint Staff the Pentagon, as well as a senior defense official and defense attache to China. UM, go ahead, you actually we have like a million questions. Yeah,

we've been talking during the break, Brigadier General. Uh. You know something we've been thinking a lot about over the last couple of months, leverage in terms of, you know, what the US has done in the international community, have done the UK the you, the U S in response to Russia's invasion of Ukraine. And I wonder if we would do the same thing to China. And the reason why if China were to do something on an international scale similar to what Russia has done, because that was

part of the conversation early on in the invasion. Uh. And I'm thinking to myself, you know, the US and global supply chain is so much more intertwined with China than it is with Russia. In other words, we depend so much more on China than we do on Russia. And I'm wondering your take on that. What kind of leverage does the US have when it comes to dealing with China. Well, I think at this point very little. You know, they have a non convertible currency and strict

capital controls. Of course, the control most of the industrial based supply chain of the world. So I think we would be hard pressed. And I think what China wanted to do with regard to this Russian invasion of Ukraine is to see what other message methods we brought out to put pressure on the Russians that they might see

in the Taiwan scenario. So I think they have done a good job of in elating their economy from any kind of attacks, whether they be financial or trade related, and they've done even more now and are going to do even more realizing what we've been able to do with the Russian economy. But again, having a closed financial system really insulates him from a lot of the effects that the Russians have seen as a result of their

invasion of Ukraine. You know, I do wonder too when you say close financial system, and increasingly China has a closed system to the world in terms of how it does things. Will that since it feels like the endgame for China um general is all about influence in the world on a global scale. But if they continue to cut themselves off in some ways, can they be as

influential as they want to be? No? And I think you saw that when they tore up the trade deal, the original trade deal that was negotiated by Ambassador Leightheiser. I think they signaled that they were going to begin to decouple themselves from the global economy. Now they're going to take as much as they can before they go. But ultimately, they wanted to make sure that the United States did not have the type of books that China has into the United States. And so they weren't going

to give up, you know, control. They weren't going to give up. For instance, we've been hearing that they are going to allow their companies to be audited, you know, as for the new law passed by Congress. But I don't think they're actually going to do that. They're going to signal that they're going to do that, but they won't make take the full step because they are concerned about the United states influence over their own economy, something that they want to have, you know, influence over ours,

but does don't want the alternative to happen. So what's the endgame here? Though? Ultimately we've often talked about the world splitting into you know, China with its allies in the US and certain Western nations, although that gets a little complicated to uh and it's Alice. Is that where we're going? And I do think about is to mention you know, our audience, our investment audience, like, what do they need to be thinking about in this situation as

you put it out in your book. Well, I mean, like I said before, they have a non convertible currency and strict capital controls. There's a lot of money that's never coming out of China. Yes, we are resolving into more of a bipolar world. We are splitting apart. I think, um, for one, I would not be investing in China, and I think there's a lot of people who recognized now that China is uninvestable. I think the other the corollary that goes along with this, at some point you're gonna

have to write off those assets. You're not going to be able to recover that's going to be painful for for people, but ultimately, you know it is inevitable. But what about companies that have large exposure to China? I mean a company like Apple, for examples, of the company's revenue actually comes from greater China. What about that and and that's just revenue. I mean you think about what it does with the Taiwanese company fox Con and other

manufacturers there. Does that mean Apple's uninvestable? Well, it depends on what you assessed to be uninvestable. I think a Chinese company that can basically wipe out the share whole holders as can be done because the Communist Party basically has full control over their economy is I would say, more uninvestable than say an Apple. So yes, an Apple

is exposed to China. But ultimately, as we have this too coupling, Apple is going to continue to survive and thrive as a company, and probably I think ultimately they will be within societies that are thriving and more prosperous than they currently are because the supply chains are in China. So ultimately, yeah, we're gonna have a smaller um. All these companies that are relying on China for their numbers

they are gonna be they're gonna be smaller afterwards. But I think ultimately as a society, we're going to be better off because there's not going to be this influence of a totalitarian regime onto our corporate, financial, and academic

and political systems. But online, would you say that China is at war with the world, or at least with the United States specifically, and we can't think of war and conventional military you know, military modes if you will, I mean, they tend to wage a quiet war, right and and the whole point of war without rules to show people that the that China is a war with the United States, and it's a different kind of war.

It's not a war that we would necessarily fight, but it is one nonetheless, and it ultimately results in, you know, less prosperity for American people. And so I think ultimately recognizing this and beginning to invest in ourselves infrastructure, manufacturing, science and technology, STEM education, these are things that we haven't invested in ourselves in over thirty years, I think

we'll eventually lead us into a more prosperous place. Is go ahead, Carol, Is there the political will to do that? I mean, you know, Washington gets faulted for such short term thinking. But I'm wondering if there's political will to actually on shore in that way and just quickly if you could. Yeah, you know, I think that we did it during the first Cold War. We're in a Cold War again. I think we can must do that. So yes, all right, gonna leave it there, Thank you so much.

Really enjoy this. Uh retired brigadier don't know the US Air Force. Robert Spaulding his book War Without Rules, China's Playbook for Global domination