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Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
And I'm Joe Wisenthal.
Joe, do you realize it's almost the end of twenty twenty four?
Yeah? Well, yeah, it's crazy.
You know.
It's been a really warm month in October.
Yeah, I know.
So I feel like we got this free month of summer and so yeah, like we're basically almost here and we sort of like got a free, one less month of winter.
It feels like I feel like the warm weather is also throwing everyone's sense of time off. Yeah, but anyway, we're almost done with twenty twenty four. Who knows what the rest of the year is going to look like, but that means that twenty twenty five is coming up. And you know what I think of When I think of twenty twenty five.
You and I think of the same thing. And we're the only two journalists in America that don't think of Project twenty.
Twenty Oh yeah, of course. Okay, So Joe and I are thinking of Made in China twenty twenty five, which, of course was the big program that China launched ten years ago. Almost ten years ago now back in twenty fifteen to bulk out strategically important advanced technology sectors. And so I'm kind of curious what exactly happens in twenty twenty five, how much progress China has made on this front.
You know, next year, are they suddenly going to like declare victory in advanced technology and that'll be the end of it. What criteria are they actually using to judge its success. I have a bunch of.
Questions, you know, I just have to say that I appreciate things like made in twenty twenty five initiatives or even like you know, five year plans or ten year plans or whatever, just because they provide a very convenient spot to go back and look, did the goals get
hit or not. It's one thing to talk about moonshots and like, oh, we're going to lead all this, But unless you put a date on when you want to achieve it by, you don't really know whether you're successful, right because you never really know where you are in sort of the arc of progress. But if you have a system that puts dates on where you want to be, at least you can go back and judge, well, were
we successful or not. And so now we're on the verge of being able to look at the start of that initiative and the end of that initiative and sort of a say whether it worked or not.
Is that your pitch for All Thoughts World Domination twenty twenty five.
Well, we'd have maybe twenty thirty five, okay, and we need some like very specific metrics, you know, we have to like really know what that means in advance, and then yeah, we'll see if we hit it or not.
Okay, you're right, though, deadlines are very important. So speaking of deadlines, why don't I go ahead and bring in our very perfect guests for this particular episode. We're speaking with Gerard de Pippo, senior geoeconomics analyst over at Bloomberg Economics, as well as Rebecca Ka Chung Wilkins, senior correspondent for the Government and Economy Team Asia. I knew her back when I was in Hong Kong and she covered China
credit and she was so good at it. So who better to kind of draw the connection between technology and finance and economics than these two. So Girard and Rebecca, thank you so much for coming back on our lots.
Thank you for has such a pleasure to be here.
Let's start with the beginning. I guess twenty fifteen, China decides to launch this Maid in China twenty twenty five program. What was the thinking behind it, what were the goals?
Well, I think one thing to remember is this sort of a hole Made in China industrial policy. This comes just a couple of years into President She's in pain getting his leadership underway in China. So this is also very much President She's vision for the Chinese economy, his idea that these key sectors, these key industries are sentially
going to underpin the national development. So this is not sort of, I suppose, just a discussion about china strategic ambitions, but also specifically She's own vision for the direction for China.
Also that in the context of Chinese industrial policy, so Made in China twenty five is an example of an iterative process and also sort of a reflective process with the rest of the world. So there obviously were other industrial policies before, and that would include something like the Medium Long Term Plan from two thousand and five, which
is a fifteen year plan. There are of course five year plans, but also mad in China twenty five was partially inspired by Germany's Industry four point zero plan, which is much less detailed than ambitious. But there's a sort of a reactive effect there which ends up having knock on effects because then the US reacts to Made in China twenty five, and so it's just part of the cycle.
I think what makes Made in China twenty five different than other plans that China had is that it was more comprehensive, more ambitious, and much more focused on not just catching up, but actually leading in ten strategic sectors. Previous plans have been more about say lower value added or megaproject right, and this is basically they want to be the world leader and all the technologies that circut twenty fifteen they had identified as being the most important.
That's interesting. So one way of thinking about development is like, Okay, we're going to build lots of bridges and rail and housing and hospitals and other sorts of things, but this is about really leading the technological frontier. And of course this is what is the source of tremendous angst in Washington, d C. And various US industrial giants and so forth. I mean I don't know if we need to like list all fifteen, but what are the big areas that China felt it had to pursue.
Sure, so they have ten strategic sectors, but then within that there's any number of technologies. So the big ones would be like information technology, which includes things like semiconductors, five G artificial intelligence, and then things like aviation and space technology, Energy equipment whichuld include things like solar panels,
and then new energy vehicles, things like electric vehicles. So it spans pretty much everything, but it's skews towards the industrial sector, and it's really a manufacturing based view of development.
So one thing that was interesting, Jared is you said that it was an iterative process. How has it changed in your mind from like twenty fifteen to now. Has there been maybe more of a focus or a shift in direction.
A few things the original made in China twenty five Blueprint, which is what people treat as being the plan that was announced in early twenty fifteen, But then actually when people talk about all the targets, those mostly come from something that's commonly called the Green Book, which was published by the Chinese Academy of Engineers, and that's where you have the two hundred and fifty plus targets that are looking at specific technologies over time. It is sort of
like an authoritative addendum. But then on top of that, there are something like four hundred plus other authoritative documents going through technologies, going through different levels of government. So it's not just one thing, and that's part of the fact that those other plans don't come out at exactly
the same time. That makes it iterative. The other thing that I think is really important is the Chinese government realized around twenty nineteen that the phrase mid in China twenty five was provoking antibodies in the West, particularly in the US. I would say that, along with Belton Road Initiative or the two slogans ended up having the biggest
effect in a discourse. But BRI is, you know, more favorably viewed in a lot of parts of the world, whereas been at China twenty five was considered more of a threat by a lot of industrial economies. So what
did China do. They actually tamp down on it, so you will struggle to find any direct references to it now in Chinese official documents, at least publicly, But it's not dead, So a lot of the key goals are now incorporated into the fourteen to five year plan, which is the one that we're currently in going through twenty
twenty five. The other thing to keep in mind is that the targets were what they thought circa late twenty fifteen, right, So I would think that within the Chinese government they actually have adjusted some things or realized that maybe that wasn't the right forecasts. Some of them were actually quite vague, for things like what nanometer technology would semi conductors be circa twenty third, because of course they didn't actually know.
But my strong suspicion is that this framework still remains in place, but it's sort of an evolution because the point is not necessarily to hit all those individual targets. It's are you basically fulfilling the plan in the broad sense? Are you actually achieving leadership and all those key technologies.
I just add there that, you know, some of that antipathy among Western powers around the idea, and even the phrase of made in China twenty twenty five is still
sort of quite live. I was at a meeting with some policymakers think tankers at university recently, and there was still this quite lively discussion I call it politely discussion between a visiting European political advisor and Hong Kong officials and Chinese officials about precisely what made in China is, whether it's just an industrial policy or in the view of this particular visitor, something much more sort of malign.
I just got to say, so weird to be the idea of like technological development along these lines being malign. I mean, you know, this is human progress, right, technology advances and countries want to be technological leaders, and I understand why governments and companies around the world feel threatened by it. But anyway, just one of the main storializing right.
Because for instance, the US will say, well, we want to develop more clean energy technology domestically because it's important for the environment. But on the other hand, you could probably have more progress on the clean energy front if you just imported a bunch of stuff from China.
Right now, one of the challenges here are the differences here is precisely over what it means when Beijing says it's going to back a certain sector. Right. The idea that if Beijing identifies let's say, electric vehicles or solar panels as a sector to back. It really can throw its weight behind it. It can ask banks to provide cheap credit, it can ask local governments to provide land
at cheap or no cost. It can get state owned enterprises to pour there's significant resources, talent, innovation into those industries. It really has sort of a huge machinery that it can redirect, which you know other countries feel is quote unquote unfair, and in some ways that's sort of behind the whole accusation around unfair use of subsidies. For instance.
I will try to channel both Beijing and Washington to address your comment. So from Beijing's perspective, I think they would say it's a bit ridiculous that the WES was more or less fine with China moving up the value chain as long as it wasn't in sectors that are too high value added or too competitive with advanced economy industry. So textile is fine, but when you say, oh, we want to have our own jet airliners, that becomes a problem.
And I think there's actually truth to that, right, So what changes that China went from lower to higher value added and now it's companies are direct competitors in many cases with like G seven companies On the US side, I think part of the response would be, well, the threat part of it is it's not development per se, It's that the Chinese government, particularly of late, is quite clear that self reliance or self sufficiency are the maybe
primary goal. This is clear in the third Planum that came out in July that it's about self reliance, and self reliance has a heavy national security undertone. So I'll go back to what I was saying earlier that I think both sides sort of feed off each other. So why is China so worried about self reliance? Well, part of that is a response to Western tariffs and US export controls. But the fact is they are basically saying we want to be free to the extent they can
be from the Western technological supply chain. And they're doing that because they're worried about national security. So of course in Washington they would think, why are you worried about national security? Right, So it sort of goes in both directions.
I guess I could see this sort of malign angle also if it's like this is not real technological development, this is just loss making companies that are backed by the government that are going to then bankrupt and destroy the industrial base of the West and not actually make any progress. I guess I get all of these debates and nuances and why people talk about China overcapacity as
a problem and all that stuff. But Okay, the other thing that happened over the last several years is, in addition to these ominous sounding phrases and slogans like made in twenty twenty five and the Belton Road initiative that created anxiety in the West, the US like actively started to try to suppress Chinese technological development, starting under the Trump administration and then obviously continuing under the Biden administration, and it may get ratcheted up even further under the
next administration. Whoever that is, what's that done? How would you describe specifically what the US has tried to do in terms of constraining China's technological development and what's the basics of the impact that these efforts have had.
What the US is trying to do is somewhat subject to debate. The official line is that the United States is not trying to stop China's development. It's not about overall delinking of the economies. Is just about select de risking. It's about remaining ahead in the strategic and critical technologies of the future. But it's not about sort of stifling
the macro economy of China. In Beijing, the view is that it's all around containment and that the United States mostly but some other Western countries are trying to encircle China and basically prevent it from moving up the ladder economically and technologically. Is it working. It's complicated because there's a series of policies. So when we talk about what started, the thing that people mostly focus on is, of course the trade war, which effectively started in twenty eighteen in
a Trump administration. The purpose that the trade war is complicated. It wasn't really to stunt China's growth, though there were people in the Trump administration would have hoped that it was actually for the president, for President Trump's perspective, to try to balance trade and get a deal, which we got in the form of the Phase one deal, whatever
you think of that. But the other thing that happened that I think was actually a bigger deal from the Chinese perspective was when the US added Huawei to the Commerce Department's entity list in early twenty nineteen, because what that signal was that the United States was effectively trying to kill what was arguably China's best global technology company.
The US would say, we're not trying to kill it, but the restrictions are pretty draconian, and there's very much that vibe, And so what it did was convinced not just Beijing but the local governments and Chinese companies that otherwise would it prefer to just use sometimes cheaper or better foreign inputs, like for semiconductors, that actually what Beijing was saying about self sufficiency was indeed a national security imperative.
Is it working. It's complicated, but our basic take is that at the macro level, what's happening in a Chinese economy is primarily due to the property sector. You could call it a meltdown, because it's pretty dramatic. That Chinese government arguably started that with the three Red Lines policy. But I would be careful about conflating the idea that Chinese economic weakness is due to basically industrial policy, when really there's clearly a more obvious macro phenomenon that explains it.
On the technology side, the export controls, I think are really the crux of the question of are they slowing China's development? I think they're The focus on the US side is primarily on semiconductors, and there's even recent news as Bloomberg has reported that, for example, TSMC, the famous semiconductor foundry in Taiwan, might have been sending some Nvidia
chips to Huawei through some indirect body. Maybe they didn't know about it, But there's all this debate about how far ahead is China really and are they actually able to make the most advanced chips on their own, And I think that is really the question of when you get to how effective are the export controls, it looks like they are having some effect, but not a lot. At a macro perspective.
We also sort of discovering in real time precisely the sort of miscalculation the idea of export controls. Initially, the belief was that it would help the US stay ahead by eight to ten years. But last year we saw Huawei launch their Mate sixty smartphone, which included a seven nanometer chip that suggested actually that Huawei's chip making partner, Smick, was actually somewhere between sort of four or five years behind.
So there have been these sort of series of nasty surprises and led to recalibrations of precisely where Chinese tech advancement actually is.
So just on the idea of what the US needs to do here, I mean, one of the criticisms of some of its response is that the problem really is the cost of these technologies. So in order to make them domestically and maybe internationally competitive, the US really needs to bring down the cost curve. And that's hard to do when you're competing with China and it has maybe
fewer regulations and certainly cheaper labor. Is there anything that can be done on that front to make American technology more competitive, for instance, via more tariffs.
In theory, if the US erects tariff falls, which we already have, but if Trump is re elected, he's promising sixty percent tariffs on China, which would be huge and might shut off eventually a good share of direct US China trade. His theory, as he explained recently on his Bloomberg interview with John Micklethwaite, is that essentially that will compel all these companies to reshore or onshore production back in the United States to sell in the United States.
Now generally speaking, import substitution has a pretty bad track record internationally. But the US has the advantage of being the largest economy in the world, right and it's the largest consumer market, and so there is some feasibility to it.
But I think something that might be under emphasized in a general discourse is that the tariffs, particularly as they are constituted now, but especially if they increase them, also hit a lot of intermediate goods right, actually makes it more expensive to import things like steel or all the components you need to build a factory or inputs for whatever, And so you have to sort of decide. So the US wants to protect at steel sector, Okay, we can
do that. We do do that, but that also means it's steel costs more in the US, and it means construction costs than or up, which means making a factory and say Taiwan or China or whatever is cheaper. So there are trade offs there. In my personal view, I don't think tariffs are a good way to go about it. I think industrial policy, which is a much wider set of tools as some promise, but tariff to me are like a sledgehammer.
I think there's a really interesting point about intermediate I mean, I imagine that even if you were to go into an Intel factory or fab somewhere in the United States, they are just numerous imported goods of all sorts. So if we want Intel to be a powerhouse, the idea of tariffs are going to make that much easier. I think it's complicated, And then of course there's all the questions about like how do you know it's coming from China, or what if the final assembly is somewhere else, et cetera.
Let's get into civics. Both of you talk about some key industries where China was in twenty fifteen and where they are today in twenty twenty five, and what kind of progress has been made.
Well, I think the sort of really obvious consumer ones where we've seen these kind of extraordinary leaps in evs and solar panels. I mean, I think a company like BYD, which is basically unheard of. I think globally a couple of years ago, now a Chinese leader outpacing its global competitors.
It thinks it's going to sell half of its products overseas in the future, so certainly also doesn't really see tariffs or potential tariffs as an impediment to its expansion overseas, and I think in a way it's sort of unimaginable.
I remember reporting in China about a decade ago around the time that Made in China was actually announced, and officials OCA Gunment officials are very excited to take me to a lithium battery factory which batteries were going to be used for electric vehicles, and it seemed to have to say, like something of a pipe dream, Like I said, totally misunderestimated the future of this sector and the future
of the company. But even at that time, it was something that you know, local officials were really had this sort of razor sharp focus.
On evs are probably the best example, because they are the technology where China has exceeded the plan, so to speak, right, they've done much better than their internal forecasts would have suggested in the twenty fifteen documents. But there are other sectors where they've also done well, so unmanned area vehicles, which is to say drones like that DJI makes China is clearly the world's leader, and that the US tries to restrict imports and use of that in the US,
but elsewhere they're dominant. There are other things like solar panels that China clearly has dominance in other areas, they're not exactly their world leader, but they're clearly starting to catch up, and they're better off than they would have been, say circa twenty fifteen. So semiconductors are one area where they're not the world's leader, but they are on a relative basis stronger than they were five years ago. Industrial robots, things like that, machine tools. There are other sort of
you know, maybe more obscure things like large tractors. So part of the plan talks about things like agricultural equipment and pharmaceuticals. They're also making gains. So really in all areas except arguably for maybe commercial aircraft, they're making relative gains.
I guess the other element in China in some ways China sort of had set itself up to succeed because there are some areas right JO where you know, China was already a global leader.
Yeah. Well, so that's a good point because the new energy vehicle plans go back to I believe two thousand and nine, right, so when they're deciding in twenty fifteen, whereas it's going to go some of those technologies, they already had plans in place that were underway, and so they could sort of project, Okay, we already know how
this is starting to work, whereas other things like artificial intelligence. Yeah, it was a thing people spoke about in twenty fifteen, but it wasn't nearly as real as it is now, right, so that was much more speculative.
Can we maybe talk about semiconductors specifically, because this obviously has been a very hot button area for both the US and China and maybe one of the areas where we've seen a lot of money pouring in. How's that shaking out?
I mean, by and large, semi conductors is probably the one area where the US has had most success in rolling out export controls and curbing China's access to these really key strategic technologies. And part of that is down to, you know, the success of the Biden administration enlisting support from its allies. It's just a handful of companies that
are involved in making these types of chips. And you know, there's an argument you made that unless Biden had sort of convinced Japan and the Netherlands to come on site, that actually the controls that he rolled out would have been far, far less effective. And one key area here is actually preventing China from accessing the manufacturing equipment that's needed to actually make these types of really advanced chips that are used in AI and quantum computing.
There's an interesting and I think quite important counterfactual to be discussed, which is that you know, what if the US had not done the export controls. In essence, what the US is doing is imposing import substitution on China in a way that China hadn't preferred. But we can also see in the data, including for filings for Smick, their main foundry, that they upped the amount of subsidies
they were getting after twenty nineteen. Right, So it means that China sort of turned the industrial policy dial from ten to eleven. You could debate how much effect it has, but it seems clear that that is the overriding priority now more than anything else, actually semic conductors, right, because they know that is the keynode both sides except that
is it working. I mean, clearly it has slowed down their ability to get the most advanced chips, but China's clearly making gains on so called legacy nos or mature nodes, right, so sort of slightly older technology, and they're building out a lot of capacity there and that's something that they still have access to a lot of the lithography equipment to do. So other areas like packaging, they've improved it's design, maybe some improvement, but that they're still lagging the West,
so qualcomm and video, et cetera. I think, really, as Rebecca said, it's the equipment, so specifically, the most advanced lithography machines that China as far as we know, has not been able to make on its own, and that is the current roadblock.
But like whatever the most advanced lithography machine that China is able to make today on October twenty fourth, twenty twenty four, is it substantially higher than the most advanced lithography machine that China was able to make at some point in twenty fifteen, And is the number of years gap between that most advanced machine versus the one that ASML makes is it perceived to have narrowed?
I actually don't know the narrowing of the generations Gerardine, Okay.
Well, first of all, this is something where I think would be subject to debate. Right, So there's the fact, as Rebeca already mentioned, the Mate Pro, the Huawei phone that had the seven animeter chip. When that came out, there was a debate, and I don't think it's been conclusively settled as far as I know, as exactly what
happened how they got those chips. The fact that we have news recently saying that maybe actually Huawei is kitting chips from TSMC indirectly as a wrinkle, because if that's true, then it would suggest that actually they don't have their own technology. They're essentially just finding a way around the export controls, which is a problem for the US in one sense, but it also means that maybe the export controls are working in that China doesn't have the indigenous
capacity to make those things on lithography. I'm not an expert on that, which is a super technical topic, but my strong suspicion is that the quality of China's domestic capacity has increased, but the gap is still there. And so TSMC, I believe, is still pretty confident in SML that they're, you know, the world's leader, and there's there's going to be a gap going forward.
I just had you, the gap that we know of now between Smick and the industry leaded to TSMC is about two generations, so that's roughly four years. But as Gerard says, there is actual sort of still life debate over precisely where that gap might be. Something it's bigger, something it's smaller.
So I think semiconductors are also. They're interesting for many reasons, but one of them is that the technological race is very much ongoing. So if More's law hasn't been exhausted yet, so if there's still the ability to get to lower and lower nanometers, then you could imagine that TSMC or the West or whatever is able to stay ahead. But if that slows, if at some point in a not too distant future, that innovation is not moving as quickly, I would imagine that with enough resources, the odds of
China catching up is higher. So there are other areas, like say commercial aircraft right where there's clearly an innovative field, but it's not as cutting edge as semiconductors, and yet COMAC China is struggling. I think that is more of a function of the sort of dualopoly nature of that market and the difficulty of having sort of product integration and then sort of market share. But from a technological perspective, they're getting there and they eventually will catch up.
So the other thing I was wondering is the role of foreign investment, and I don't just mean foreign direct investment, but also companies that come into China and set up factories and then workers learn some of those techniques for advanced manufacturing and things like that. Obviously there's a debate over intellectual property and things like that as well. But what role does FDI, foreign investment, foreign expertise play in China's technological progress?
Now, I would say a lot less than the ease to So it would vary by sector and technology, right, But generally speaking, if you look at, for example, the trade data that China Customs puts out, they actually break down whether the entity that's doing the trading is a state on enterprise, is a foreign funded enterprises which is basically an FDI company, or actually a private Chinese company. And what you see is that China's exports are now
overwhelmingly dominated by private Chinese companies. So in the two thousands, during the sort of peak China Shock years, a lot of that growth and exports were actually foreign invested firms in China that had set up factories. Over the past decade that it's shifted, it's really just private firms, and so I think more and more, at least in terms of brands and manufacturing, it's really indigenous companies that are
doing the work. Now. There are some things like AI where I think having some of the research links might still matter, but by and large, I think China is moving closer towards indigenous innovation, as they call it.
One area that we really see that transition that Gerard is talking about is about ten years ago, if you're a foreign investor in China setting up a factory, you were deeply concerned about IP and about you know, information leakage and all of those sort of issues. And now actually, as we see for example, more Chinese going to set up their own factories overseas in part in response to issues around tariffs, we actually see state owned enterprises and
private businesses. Chinese private business is concerned about that same problem, concerned that you know, their international competitors and local workers will actually be picking up sort of technological skills and be picking up on potential company secrets and they're worried about information leakage the other way.
One big question. You know, we're obviously in the US doing our own industrial policy of various sorts. One thing we haven't really gotten into in the Maid and twenty fifteen specific conversation is the operationalization of a goal. Okay, so it's one thing to say in ten years we want to be leaders in all these areas. And I
think you know clearly they've made extraordinary strides. And I'm sure this is a very long, separate question, but I'd be curious from both of you, you know, maybe start with Rebecca, Like, you know, you went to that factory ten years ago and it seemed like a pipe dream, and now it's extraordinary. How would you characterize what the government did, or what the government did along with banks and other et cetera and private companies to make these dreams of reality.
Well, just the scale of resources that were poured into these sectors. I mean, the sort of two key parts of the MAID. In China, on the one hand, there was this idea of self sufficiency, that China should be less reliant on other countries, and it wanted to essentially to stand on its own. Two feet and that was
clearly linked fundamentally to a national security goal. The other part of it was this drive for innovation that China wanted to create these sectors that became global competitors, that they were able to export high value added goods into the rest of the world. So there was these sort of dual ambitions that were also feeding into the sort
of raison detre for supporting all of these industries. And I think there's also this sort of prevailing issue too for Beijing about the idea of needing to really shore
up its own security. So, for example, Beijing officials are increasingly sort of concerned about making sure that has access to its own sources of energy, particularly in any kind of, you know, potential wartime scenario, and that is part of a whole ethos that we see also for example, in food security in China too, but really an increasing focus on trying to make sure that Beijing isn't unnecessarily exposed and perhaps even exposed in any way to oversee supply chains for these key areas.
In terms of policy instruments, quantifying what China's doing is actually very difficult, except for things like rebates for electric vehicles or things that show up in listed firm data, but things like state linked credit or even totally in government guidance fund allocations is quite difficult. I would say, you know, in China's case, subsidies are not new, so
subsidies are not the secret sauce. What is different now? Well, generally speaking, around really twenty thirteen twenty fourteen, they tried to pivot to more market orientation. The big policy innovation at that time was the reinvigoration of government guidance funds, which are essentially state owned private equity funds or venture capital funds. Those played a very large role in the first say five ish years of the plan. My sense is they've slowed in part because they weren't having the
market oriented return so they were hoping to have. But in general, the state's essential ownership of much of the financial sector matters a lot, and you see private investors in the stock market, for example, where if Beijing says this sector is a priority, then people invest in it. Or on the other side, when they said, you know, five or so years ago that ed tech was not a priority, that tanked, and so there's a way of sort of allocating all the market resources towards priority sectors.
The other thing I would flag is that there are some technologies I think EV is the best example of this where they really got the market orientation right in a sense that they allowed consumers to adjudicate. So every EV company, if actually eligible, could get the credits for purchases to reduce the price of their evs. Their localities might have been helping them in different ways, but ultimately the best cars from a consumer perspective, one out like
so vyd why is byd great. It's not just subsidies. Yes, they benefited from somethings, but a lot of other companies did too. I think the hard part now for China, and this is what their system is less good at, is while they might have fixed the problem of picking winners so to speak, by having the market do it, they're less bad at eliminating losers. And there's a consolidation
that now has to happen. That you look at areas like solar panels where a lot of these companies they have negative margins actually, right, so how do you address that? So it's sort of like the tide goes in and goes out, But as long as it's market oriented it's generally more effective.
Yeah, I think it's interesting. A lot of people forget the sort of volatility that we've seen, especially in EV funding specifically because a few years ago we had lots of Chinese EV makers that were going bankrupt, and there are still some going bankrupt now, but there are also those that are sort of getting I guess, revived from the dead with new funding. So it's interesting to see that flow kind of go back and forth. But what
happens in twenty twenty five? So the Maid in China label brand is being downplayed somewhat, So what exactly does that anniversary the end of the timeframe actually mean.
I kindly add one more for Geral, which I'm also curious about, which is what happens in twenty thirty.
Well, in both cases, I would say the fifteenth and sixteenth five year plans respectively, Right, I think it's iterative. So Made in China twenty twenty five, somewhat misleadingly, actually has a lot of targets to go out to twenty thirty. They're typically vaguer than the twenty twenty five targets, but the plan doesn't end in twenty twenty five, and so I think they will as part of the five year plan that will be coming out in early twenty twenty
six will probably essentially incorporate some of that. And as I said up front, there are so many documents that are associated with this one blueprint. It's like think of it as the phrase I prefer as someone that's coined as cascade of plans. Right, It's not just one plan. It's a plan that then begets a whole bunch of other plans, and it is iterative and requires a lot. It actually, I think eats up a lot of the bureaucracy is time because they have to assess and reassess
and come up with new targets. But the bottom line is China's definitely not giving up an industrial policy. The signals coming out of Beijing in recent years, if anything, suggests there's an even greater urgency in part to the national security concerns. And so whatever the successor to Made in China twenty twenty five is, it's going to happen. It probably won't be called Made in China twenty forty or whatever, but it's going to exist.
Part of the question is, I guess over that packaging precisely because of all of the responses and suspicions that were provoked by the made in China twenty twenty five label, and it's no longer advantageous. In fact, it's sort of geopolitically disadvantageous to be advertising your industrial policy in this way.
If you're Beijing and Gerard, you read all of those plans, right, the hundreds and hundreds of pages, thousands of pages.
There are plenty of people around the world to do that work for us. Even reading just the so called green Book of the targets is quite a slog.
All right, we're going to have to leave it there, but thank you so much to both of you for coming on all thoughts.
That was great, Thank you, Thank you so much. Joe.
I thought that was a fantastic overview of what China is doing and to some extent, what the US is trying to do too.
I did too. I had a lot of thoughts, and obviously anyone who listens to the podcast knows that we're both extremely interested in this specifically and all the other things related to it. Can I say, you know one thing at the end, and Gerard was talking about like I think he called it a cascade of plans and all I've been reading, you know, a lot of Chinese history,
twentieth century history. They love meetings and planted They always have all these like work groups and study groups and random people or it's like I'll get appointed to a new study group. I don't know if that's good or bad, but they love a study group.
I think it's funny that you're just discovering this. Actually, you know, one of the interesting books just speaking of bureaucracies, One of the interesting books I read when I moved to Abu Dhabi was about Saudi Arabian government ministries and what it was actually like to work there, and it was sort of a similar thing. There were lots of meetings and people kind of getting paid to not do very much. But it was super interesting.
As a meeting hater myself, I guess whenever I read I note when they're like, it rings a bell in my head. When I see another study group or work committee or something like that getting formed, I'm like, oh God, that sounds so awful. But no, I thought that was good. And look, I mean, you know, this gets back to many of our big themes, and I get why the US and the West is anxious and all this stuff. But on the other hand, I would just say things
like economic development is technological development. This goes back to Ricardo Houseman and the ability to make complex machines. That is what it means to get wealthier, or that seems to be the ability to do complicated things and move up the value chain. And when we look at Boeing and we look at what our own manufacturing like a lot of the issues I get the impression are projecting
our own problems abroad. Like, you know, one way for China to close the gap on aircraft to make better and cheaper airplanes, But another way for China to close the gap on aircraft is for the US to not be able to make planes. And we can converge in two directions, and one way of maybe if we want to avoid that divergence would be getting better at making airplanes ourselves.
Well, the other thing I was thinking about, and this is sort of speculative or kind of fuzzy, but the socioeconomic I guess aspect of this, which is, you know, a lot of the jobs in advanced technology they might pay well relative to other manufacturing jobs, but like some of them aren't very much fun. Right, It's like if you're working in a fab or something, you're wearing like one of those suits and you're staring at tiny chips
all day and you're indoors, et cetera. But at the same time, in China, you know, we've seen a lot of like popular dissatisfaction. Yeah, you have the live flat movement where people are like, why should I even bother trying because my life is never going to get better? And so I kind of wonder like how all of that plays into some of this as well.
There's a really good video by Asianometry that people should watch. It's basically what does someone who work in a fab actually do? And it's an issue here. I mean they talk about, you know, this is not a job. I mean, there are jobs in engineering and tech and hard tech in the US that many people would find to be
an extraordinary, challenging and interesting and highly remunative career. But there are also a lot of jobs in engineering and hard tech in the United States that I think or anywhere, that people would find to be quite miserable, et cetera. But this is why we need humanoid robots.
That's right, Okay, shall we leave it there?
Let's leave it there.
This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Jill Wisenthal. You can follow me at the Stalwart. Follow our guests Gerard de Pippo He's at GDP nineteen eighty five and Rebecca Chung Wilkins, She's at our Chun Wilkins. Follow our producers Carman Rodriguez at Kerman armand Dashel Bennett at Dashbot and Kelbrooks at Calebrooks. Thank you to our producer Moses Ondam and from our Odd Lots content. Go
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