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00:00FUTURE MAP AND HE IS IN THE CITY TODAY TO TALK ABOUT HIS LATEST BOOK, THE FUTURE IS ASIAN. HOW DO YOU SQUARE THAT? > > ASIA IS A LOT MORE THAN CHINA. CHINA IS THE LARGEST ECONOMY IN THE REGION BUT IT IS 1.5 BILLION PEOPLE OUT OF THE FOUR POINT 5 BILLION PEOPLE OF ASIA. SO 3 BILLION PEOPLE IN ASIA ARE NOT CHINESE. FASTEST-GROWING MARKET. IN INDIA, THEY ARE GROWING SIGNIFICANTLY FASTER THAN CHINA. IF YOU TAKE THE MARKETS OF SOUTH ASIA AND SOUTHEAST ASIA, A YOUNGER POPULATION. 2.5 BILLION PEOPLE. ASIA AS A WHOLE IS COLLECTIVELY RISING IMMENSELY AND I WANT PEOPLE TO REMEMBER THE COOLING OF CHINA DOES NOT MEAN A COOLING OF THE COLLECTIVE ASIAN STORY. PAUL: A 6% GROWTH RATE IS NOT SUSTAINABLE. > > EXACTLY. AND THEY ARE ADDING A HUNDREDS OF BALL -- THEY ARE ADDING HUNDREDS OF BILLIONS OF DOLLARS A YEAR TO THE ECONOMY. THEY HAVE BEEN GLOBALIZING RAPIDLY. WHILE WAY MARKET SHARE -- HUAWEI'S MARKET SHARE. THAT WILL CONTINUE BECAUSE DESPITE PRESSURE FROM THE U.S., THE PUSHBACK IN CERTAIN COUNTRIES WHERE THE U.S. HAS SWAY, MOST COUNTRIES ARE SAYING IF WE DO NOT SEE THE EVIDENCE AND THE QUALITY IS GOOD, WE WILL GO WITH QUALITY. AND IT TURNS OUT SOME COUNTRIES LIKE GERMANY AND THE U.K. SAY THEY WILL STILL WORK WITH HUAWEI. SHERY: AND WE HAD THE CTE -- ZTE SAW THAT. WHAT LESSON DID THE CHINESE TAKE AWAY FROM THIS? > > GREAT QUESTION. I THINK THE MOVE GAVE THE U.S. ADMINISTRATION TOO MUCH CONFIDENCE BECAUSE THEY PICKED THE RIGHT TARGET IN THE SENSE OF A COMPANY THAT WAS VULNERABLE TO AMERICAN HIGH-TECH, DEPENDENT ON AMERICAN HIGH-TECH COMPONENTS, CHIPS FROM QUALCOMM AND SO FORTH. SO THAT OBVIOUSLY LEFT THEM EXPOSED. BUT THE KEY LESSON IS THAT CHINA WILL PURSUE PERMANENT SUBSTITUTION. IDENTIFY THE EXACT CATEGORY OF GOODS FOR WHICH ONE DEPENDS ON THE U.S. AND SUBSTITUTE THEM THROUGH ALTERNATE SUPPLIERS. WHEN IT COMES TO SEMI CONDUCTORS, THERE ARE PLENTY FROM TAIWAN, SOUTH KOREA, JAPAN. IN THOSE WILL BE THE BENEFICIARIES OF CHINA'S REACTION TO WHAT HAPPENED WITH ZTE IN THE TRADE WAR. SHERY: WE CONTINUE TO SEE THE TRADE NEGOTIATIONS AND IT SEEMS THE HARDEST PART ART TECH AND STRUCTURAL ISSUES. LOWEST HANGING FRUIT IS CHINA PROMISING TO BUY MORE U.S. GOODS. > > WE COULD EASILY SEE IF WE ARE ABLE TO COME TO A TRADE RESOLUTION, DOUBLING OR TRIPLING THAT NUMBER OVER TWO TO FIVE YEARS. SHERY: HOW POSITIVE IS THIS CONCESSION FROM CHINA ON CHINA TRADE TALKS? IS THIS APPEASING THE U.S. OR COULD IT EVENTUALLY LEAD TO MORE DIFFICULT ISSUES AND ALL OF THE IP THEFT ISSUES AND TECHNOLOGY TRANSFER GETTING SALT? -- GETTING SOLVED? > > LET'S SEPARATE TRADE FROM IP BECAUSE IT IS DIFFICULT TO MAKE THESE PRUDENT -- MAKE THESE PROJECTIONS SO FAR OUT. IT IS JUST ABOUT FACE-SAVING AND FINDING A COMPROMISE SHORT-TERM TO APPEASE TRUMP AND THEY KNOW THE WAY TO HIS HEART, TO SAY LET'S GET MORE SOYBEANS ACROSS THE OCEAN AND RESTORE ENERGY EXPORTS TO THE LEVEL THEY WERE AT AND THAT WILL NOT REALLY SOLVE THE UNDERLYING STRUCTURAL ISSUES AROUND IP. BUT I WANT TO GIVE SOME CREDIT TO THE TOUGH POSTURE OF THE TRUMP AND EUROPEANS WHO HAVE BEEN EQUAL AMOUNT IT AT STAKE WHEN IT COMES TO THE ISSUES OF IP. SO YOU MIGHT SEE AN OPENING WHERE IT WILL BE MORE OF THESE IP CORDS AND ALLOW MORE FOREIGN -- QUARTZ -- COURTS AND ALLOW MORE FOREIGN OWNERSHIP. CHINA IS PUSHING THEIR CHINA ACCOUNT LIBERALIZATION I WANT TO HAVE A CREDIBLE FINANCIAL SYSTEM AND REGULATORY ENVIRONMENT TRUSTED BY THE GLOBAL COMMUNITY. THAT IS TRILLIONS OF DOLLARS AT STAKE. THEY HAVE TO DEMONSTRATE A DEGREE OF OPENNESS AND IP PROTECTION IS ONE WAY TO DO IT. I AM CAUTIOUSLY OPTIMISTIC THEY WILL MAKE GOOD ON SOME OF THE PROVINCES. PAUL: AND YOU HAVE SEEN AN ACCELERATION CHINA HAS MADE. > > IT GOES BACK TO THE PERMANENT SUBSTITUTION. IT IS NOT JUST SIGNED CONDUCTORS. A HOST OF AREAS ARE PUSHING FOR SELF-SUFFICIENCY. CHINA USED TO IMPORT 70% OF COMPONENTS FOR ELECTRONIC EXPORTS, WHICH ARE TWO THIRDS OF THE TOTAL MARKET OF ELECTRONIC COMMITMENT -- EQUIPMENT. NOW THEY ONLY IMPORT 20%. THEY HAVE BEEN SUBSTITUTING FOR DECADES. THEY ARE ALMOST SELF-SUFFICIENT IN MANY AREAS. SO NOW WHEN IT COMES TO THE AREAS IDENTIFIED IN MADE IN CHINA 2025, SEMI CONDUCTORS, 3D PRINTING, THEY ARE GOING TO PUT THEIR FOOT ON THE ACCELERATOR. THIS IS PART OF THE PERMANENT SUBSTITUTION. SUBSTITUTE THE U.S. FOR THINGS THAT ARE TECHNOLOGICALLY SOPHISTICATED AND VULNERABLE TO U.S. ADMINISTRATION EXPORT CONTROL AND GET THEM INSTEAD FROM PROXIMATE TRADING PARTNERS LIKE JAPAN OR EUROPEANS OR MAKE THEM YOURSELF. THAT WILL LEAD TO ONE OF THE BIGGEST ISSUES IN GLOBAL ECONOMICS, DECOUPLING. WILL THERE BE AN ASIAN DECOUPLING THAT WILL ACCELERATE AS A RESULT OF THE TRADE WAR? IT IS THE LAST THING THE TRUMP

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Cooling of China Doesn't Mean Cooling of The Collective Asian Story, Khanna Says

Parag Khanna, managing partner of strategic advisory firm FutureMap and author of "The Future Is Asia," talks about the region's economies, Huawei Technologies Co., and the trade spat between China and the U.S.. He also discusses the prospects of the Made in China 2025 plan on "Bloomberg Daybreak: Asia." (Source: Bloomberg)

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