Hi. I'm Andy Brown, the editorial director of the Bloomberg New Economy, and I'll be with you for the next few weeks sharing highlights of my two video broadcasts called on the front Lines and Bloomberg New Economy Conversations that look at how COVID nineteen is reshaping the global economy. You can find them all on Bloomberg dot com. Going into this pandemic, U S. China relations were at rock bottom.
They've since gotten much worse, with both sides trading blame for the COVID nineteen outbreak, spinning conspiracy theories, and abandoning cooperation on all fronts. To discuss what all this means for the post COVID economy, I caught up with two Wall Street Journal reporters, Ling ling Way and Bob Davis, who just published a book called Superpower Showdown. It's based on year as of inside reporting from the centers of
power in both Washington and Beijing. I hope you enjoyed this and other interviews on how the coronavirus is transforming the business world, and thanks to Stephanie Flanders for letting me hijack her feed. Bob and Linglan gets great to have you on the program. You've both been living and breathing this US China trade and economic war from the very beginning. Bob from Washington, d c U Lingling from Beijing. So bring us up to speed. How would both of
you score this showdown so far? Maybe Bob you can address that from a US perspective and ling Ling from a from a China perspective. Let's start with Bob. Sure, and thanks great to be with you. Andy, really really appreciate it. So you know, it's opening day and the baseball season, and I look at it that way. I mean we're like three three in the bottom of the seventeenth. The pictures are exhausted. Everybody wants to go home. I don't think there's a winner. It's just dragging on and
dragging on and they kind of taking a break. Uh. Sure. Also, thank you so much Andy for having a song. UM really honored to be here. Um. So, on the surface, it does seem like China has scored some tactical wings. You know, the Phase one trade agreement didn't really get into the matters that Uh, the leadership cares about the most industrial subsidies and as AU reform, none of it was in part of the group agreement. And yes, China did agree to buy tons of American products, especially act
UH purchases. However, you know, as we know that they're not meeting really meeting the targets now, and the stuff they're buying now is also what chinaese at the moment, the soybeans and porks and chicken feed and all that so um, you know. UH. And also Beijing seems to be using this trade agreement as some additional leverage over the trmmonistration, so the trum reministration wouldn't push too hard in matters like human rights and what's happening in Hong Kong.
So on the surface does look like, you know, Beijing is gaining some kind of upper hand. However, really dip down the cost of the trade war to China's super significant and first of all, UH, it has shattered UM investor confidence, you know, especially among business private businesses. You know, we have seen for months UM growth in private business UH investment have been plunging. And yeah, the only thing that's propping up China's economy now is state investment, state
sector investment. And another big casualty of this trade war to China is Chinese reform. Right now, there's no moment term to carry out all those needed changes to the Chinese economy. So longer term, um, I really think, Um, you know, if the momentum, the reform momentum, doesn't come back, it's really hard to see China will win in the long run. A lot of people congratulately Trump on standing up to China, but fault him for his tactics. What should he have done differently? Well, I mean I agree
with you know, the the reform effort in China is stalled. Um, the US isn't going to really get the purchases they you know, they expect. So you've got to kind of look at it from the US perspective. What do they get out of it? I mean, it's China changed in any significant way. I wouldn't say it's changed at all. Um, So what would be the alternative? The alternative clearly would have been to try to recruit allies to work together put pressure on China in a multilateral fashion. I mean
from day one, the Trump inistration rejected that. They blew off the Transpacific Partnership literally on the first day, and um, you know, various times just made it clear they wanted to go one on one with China. Early on in April two thousand seventeen, the French president mccrown had come to the US for a state dinner. He talked to Trump, talked to him, said, you know, we can work on this together. And Trump literally said to him, I got this one, you know. And and that's the way in
which they have tried. So yes, they've gotten China's attention, They've certainly gotten the world's attention, but they haven't really gotten very much in the alternative would have been to go the really hard slog route of you know, lining up report, running up allies, and confronting them with you know, with a united kind of world, sort of a w t O alternative. Langley, you're one of the very very few US reporters to have penetrated the Chinese leadership talk
ranks in John Nana High. First of all, I want to ask you what do they really make of Donald Trump? He was very confusing to the Chinese side, very unpredictable. You know, they spent really a lot of time figuring him out. But on the other hand, you know, in a sense they also felt like they had him figured out. His transaction, everything on the table. So get give some big number, give him big number, and he he would accept it. Briefly, who do they want to win the
November election? Trump or Joe Biden? Um? I think, um, you know, obviously there's some officials in China still think to this day Trump is a gift for China because he doesn't care about human rights and all those other issues. However, I do think there is a sense among at least some corners of the government they they're they're hoping for a new beginning because they're making things really hard for them, you know, as evidence by the recent very sudden decision
to close the Chinese consulate in Houston. So and they look at that Biden as someone that they might be able to talk to because Biden, as Bob mentioned earlier, he might choose to go back to those multilateral organizations and you know, choose to work with different nations, including China, on issues like climate change, you know, trade and all the other issues. You know how Chinese love dialogue and they're good at conducting dialogues. So in that sense, they're hoping,
you know, some of them. I can't speak for what president she did him want if I knew, I would have run a story about that, but I didn't. Just it's a little bit divided. It's hard really to see for sure staying with staying with China for for now. Some some people watching the glacial pace of economic reform in China, which you've just referenced, have come to the conclusion that changing Chinese trade practices is basically mission impossible.
I mean, if if she Pain truly believes that the state led economic model that he is building and reinforcing is essential to the continued uh survival of the Chinese Communist Party, what could possibly persuade him to change course. That's a great question for years, as you well know, Andy,
foreign pressure. What's good for reforms in China? You know, back during the w teer era, right Ju longy he's uh, he's a huge proponent for reforms used that uh, that w T negotiation to get China to do some very painful reforms, especially involving that SO era. Right now under Si jing Ping, that kind of uh, um, you know, that's no longer the case, um for impressure is actually bad for reform because um, this narrative of the US
trying to keep China down. It's really taking hold not just in a shilst coast, but also among the Chinese public. Ling Ling has taken us inside Humanhai, the Chinese leadership compound, take us inside the White House. So you've got Treasury Secretary Steve Manouchin on the one side, and he's pushing for a deal. Wall Street really wants a deal. You've got the hawk ish Pete Navarro on the other side.
He would like, probably to see all of American companies pull out of China and bring jobs back to America. And in the process, he would, hope, I imagine, sort of bring the Chinese economy to its knees. And then you've got a president who's swinging between these these two poles. How did all this play out in the negotiations? Well, I mean in our book, I mean, what we talked about is a Wall Street Trump and a blue collar Trump, and there are both. He is legitimately both of them.
On the one hand, his rants during the campaign about China ripping us off, ripping off the US um, you know, stealing jobs and all that sort of thing, he does genuinely believe that. Um. On the other hand, he looks obsessively to the to the markets, right, and he ping pongs between both of them. I mean you see that
playing out in his aids. Also, as you sort of you laid out, there are people in that White House who believe that China is the greatest threat to the United States is the rise of fascist and in the nineteen thirties, he is not one of them. Um, there are people in that White House who think, you know, you know, China is a problem. Certainly it's a problem, but you know, there's a lot of problems in the global economy, and you know, let's not let this get
out of hand. And he's not one of them either. So he goes from pole to pole, and the different advisors play off of that, um and so at some points you see the sort of blue collar ish, the Navarro and Lightheiser wing kind of went out. At other times, Uh, you know, he pulls back when the markets react the most. The clearest signal for watching somebody is unparticular as Trump is what are the markets doing? The markets react, you can count within within a week he'll back off on whatever,
you know, whatever it is. I think you can see this now on closing consulates this speech, that speech against China at the markets move, then it'll tamper down. If they don't, you'll see more. We're rapidly running out of time, but I just want to ask a couple more questions. I know you've done a lot of You did a lot of reporting on the impact of Chinese exports on
US manufacturing communities and so called China Shock. Right, it resulted in several million lost jobs and places like Pennsylvania, Michigan, North Carolina and helped propel Donald Trump to victory in the last election. What's happened to those communities since then?
Will they vote for him again? Well, you know a lot of those communities there have been so they're they're factory towns we're talking about about basically in the Southeast and the Midwest, and factory town have not done particularly well under Trump. Uh. Even before COVID manufacturing employments down the tariffs hit. Uh. They might protect some companies, but there are many more companies that use products than than
produce products. So you know, they were not beneficiaries of this trade pack or this trade fight, and I neither were the farmers. On the other hand, there are many, many, many other reasons. You know, workers and farmers are you know, supportive of Trump. I I don't think he's lost. You know, I'm doing a story now on factory towns. I don't
notice any you know, shrinking away. It's all the sort of other kind of people, right, the suburban housewives, the sort of classics that you hear about that where you see the shrinkage. But back his base, his base is still pretty damn strong. Okay, quick one for both of you. This showdown is obviously a lot about much more than trade. We've gone from a trade war to a tech wall, to a talent wall, to a financial wall. Now business leaders like Ray Dialio or Bridgewater a warning about a
shooting war. What is the sequel to superpower showed down? Where is this story going? Briefly from each of you, Well, I mean a shooting more is like, you know, into the world scenario. So no, I don't think we're going there. We've never got into a shooting world with the Soviet Union. I don't see why in the world would possibly get, you know, to that extent. I mean, I think we are probably at this point at in a cold war, right, I Mean it's a different sort of cold war, but
I think we're in it. I think one thing that's really hard to tell. I mean, we're also in the silly season, right, I mean, we've got three months to in an election. So I mean all the sort of tough you know steps that Trump is taking, if he wins the second term, does he really continue to that level? And if Biden you know, uh, defeats him. Um, I
think the long term strength trying to stroy disengagement. But clearly the tone will you know, will change enormously last work to you Lingle sure, Um, you know it's kind of ironic in away, right. So trade was the area where where the relationship started to crumble, and now trade is the one of the few remaining channels where both sides still talking to each other. So right now this relationship really is handing by a very very thing thread and by many other measures, we are already in a
new code war. I would just hope that you know, Chinese officials often say that the ball is in the U s court in terms of, you know, the future of the US trainer relationship. I would say it's in China's court as well. That's how US a present shiting thing still mikes it when he says, um, there are thousand reasons to have a good U. S. China relationship, not one single reason to spoilt. Let's hope he still believes that Bob Davis ling ling Way Superpower Showdown. Great book.
Thanks for being with us today, Thank you MU, thanks for listening. I hope you'll tune in later this year for a digital edition of the annual Bloomberg New Economy Forum, where business and government leaders from around the world will talk about the challenge of building a more sustainable and equitable post COVID economy.