Duncan Clark on US-China Tensions (Radio)

are you sort of landscaping the geopolitical landscape. Yeah, so obviously the meeting didn't go badly in the sense that it was cordial, but it doesn't really address the deeper issues. It's maybe when you can call it some sort of botox, if you will, for a situation where there's there's a lot of a lot of pressure under the surface there obviously from the technology war that you described, the trade war.

Interesting that you just mentioned if it's true that Trump is formally declaring I mean this is was kicked off really formerly by him, although Obama had, you know, ramped up the pressure on China. But it's the one area that the GOP and the Dems really agree on. It is just maintaining pressure on China, so that won't change either way. So it's it's an interesting thing. That's the

only thing that they can agree on at this China pressure. Yeah, absolutely, but we're continuing to see the US China tech war as well. It's kind of a matter of who's going to blink first here too. It is I mean, you know, we can talk about lose lose versus win win, which perhaps we've lived in before. Um So, there's costs on both sides for this. Uh So it's more of a game of chicken in terms of who can maintain the pain. And as we look at the semi conductor sector, we

see the pain ramping up over time for China. Of course, it's also ramping up for US providers of capital, equipment and other participants. But from a strategic standpoint in China that's truly facing a big challenge. Sheeting Ping has clearly enunciated his belief in indigenous innovation, the China's capacity to innovate independently of the US and perhaps others, And so that's the big bet. Will this bet payoff? Throwing lots

of money at the problem, will it be successful? There's a lot of investor hope and optimism to the perhaps the regulatory crackdown can potentially come to an air. What is next then after the tech crackdown? And I guess, how do we look at China tich right, And it's perhaps instructives. Look at the property sectors. You've seen the real estate developers have been hammered in China, uh and seems like some easing over the last few days, extension

of certain deadlines of those policies. So perhaps that's precursor to doing the same thing for tech, saying, you know, the consequences of a downtown in the property sector, like in the tech sector, is is pretty damaging, particularly when you're maintaining the zero COVID or blanket overall, I kind of make activity in China, So I think, you know, we're probably the over the worst for the anti tech crackdown.

But the fundamental issue there remains, if they're private sector tech companies in China, how does the government view them? And we saw that famously with ant group the Ali Baba spinoff two years ago without aborted I p O. I think there is clear tension between the Communist Party and the state on one hand, and these private sector players getting too big if they can reach a new accommodation, over control of data, over the sheer power of some

of these companies, which is a global problem. I mean, look at tick Off, the debate about how powerful that is. In China too, there's a debate about how big is big tech, but it has a different flavor because of the private sector element. China needs to figure out are they going to allow private sector companies to become dominant in certain years? If not, can they replace them? You know you do? Sorry, excuse me, focus a quite closely on Ali Barbera. I believe you have written a book

on Ali Baba as well. We know we're looking at their earnings coming through tomorrow. Eleven eleven won't be reflected in that not not a great shopping day for Ali Baba. But but what happens to turn the consumer sentiment around here? Yeah, so there's the number one thing is zero COVID. I mean it is you know, if we see some maybe Swiss Cheese approach to zero COVID. Now we're seeing certain governments, local governments, not perhaps full the implementing, but we see uh,

you know, unrest. I think that this morning in Guangdo, for example, where people are just fed up with us. You know, I've been in and out of China on and after the last two years. It is a painful existence with the daily testing and the sort of uncertainty, And it does seem there are signals now also reducing quarantine for people coming in, you know, changing some of the mechanics. Also, the sheer cost of maintaining the zero COVID policy is stunning. I mean, the testing, the the

economic impact. So I think we're beginning to even though they're maintaining the policy. I think we're gonna we're gonna switch cheese our way out of this over time. Yeah, it seems they're looking for an off ramp, But isn't it when they're starting to slowly reduce some of those restrictions. We've seen that twenty point plan as well. But when you say you're going to unswervingly commit to COVID zero, it's kind of hard to find that off roum. When

do you actually see a form reopening of China. Well, some of it may be linked to vaccines, and again

this goes back to the indigenous innovation question. China has been hoping that they can develop their own MR and A vaccines from against state driven players rather than licensing from same Madonna or Beyond Tech fiser as we've seen, and again this anathema of having to work with private sectors in China like Fu Soon, which had licensed Beyond Tech for China, versus this dream of the state being

able to solve this problem. It's it's a question of I had to say that really cliche, but face the idea that a private sector of a foreign player is going to solve this problem. I think that the costs just mounting day by day, and so I think there'll

be some accommodation for some sort of licensing. There was some discussion with the Chancellor Shortz's visit of some license or some availability of vaccines to foreigners in China, but that's the way out of this, I think formerly because you obviously China is vulnerable otherwise, with an elderly population with limited rural healthcare, they can't just open the gates to COVID. When we look at when we look at the steep slowdown in China though, I mean, there's so

many factors really affecting the geopolitical landscape. And we've been talking about the war in Ukraine, We've been talking about the increased pressure from Russia as well, and of course as global inflation too. But does China's steep slowdown is that one of the biggest impacts to the overall health of the global economy. Well, strangely, if you think about it, the zero COVID is actually repressing consumption and we have

more deflation in China. So one could argue that actually, by China going out of zero COVID you would actually perhaps see some inflationary impressures which would worsen the global inflationary pictures. So at the moment, China is just a

very isolated situation. Reintegrating with the global economy is going to take time, and it conferences like this, it's quite apparent that the Chinese delicates are here, are are kind of witnessing the fact that Chinese is not really very present in terms of lots of debates in business investment, investment flows beginning to go elsewhere, Supply chains are reforming around China, and you know, the question is it's trying to really fully committed to this you know, isolation or

to this separation of the domestic economy and the international economy. And if they're not, they need to start beginning to make moves. I think they're beginning to look at opening up. It's going to take time. In twelve months time a US China relations better or worse. And does that is that impacted by whether or not we do see Donald Trump as the Republican candidate. Yeah, I think the Trump

that's an interesting question, the analysis on that. I mean, I think obviously the strong performance of the Democrats just recently probably came as a bit of surprise to the Chinese authorities, as did too many people that that going into Bali, Biden is a much stronger player than they had expected, potentially going beyond two years. Of course, they're making that calculation. So a year from now, you know, we're still going to be a year out from the presidentials.

It's still going to be unclear. I mean, I guess the biggest factor will be events. Does anything happen with regarding Taiwan, either statements on the Times government side or the US side that or an accident that that precipitates a crisis. Um, the hope is that this meeting you know yesterday is reduced the temperature of it, but it can easily flare up again. So it's still a very precarious situation. Indeed, we thank you so much for your time.

Vid A China Chairman Duncan Clark with me here at the Bloomberg New Economy Forum in Singapore,