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00:00There is a big focus, of course, on that economic. Those economic numbers, that sort of book that they put out that gives everybody the roadmap. But everybody is obsessed right now about this new leadership and what that communicates to investors around the world. Well, Romain, thank you for having me on. Delighted to know you remember our first encounter back in the Jurassic era. You know, I think, you know, there will be understandable focus on the growth target in the budget and monetary policy stance. But I think Tom is correct in signaling a bigger issue here, which is the reorganization of Chinese governance. And I agree with the bulk of what he said. The one thing that I would add to that, which I think is really terribly important, is that the power of governance under this reorganization is likely to shift away from the state council, which is the sort of government structure of the Chinese system. Back to the party, which is going to drive these new super large committees, working committees, focusing on finance, technology, innovation and most likely security as well. So under XI, we've seen 10 years of growing concentration of party power under his singular leadership. Right. And this reorganization is likely to be the latest step in that regard. And I think that's very important for understanding the thrust of how China will be moved moving going forward, as well as China's engagement. Yes. A turbulent and contentious world. We'll talk about that engagement here, because it appears to be a worry of a lot of investors right now. The idea that for so many years China was opening up there was sort of moving outward to the world. And there is some concern that they may be looking a little bit more inward. The idea that they can grow and they can prosper kind of not completely independent of the rest of the world, but not. But certainly not with the hard ties, those hard globalization ties that we have come to rely on. Well, I mean, you know, it's a fair point remain. But, you know, partly they're doing this by design, but also by reaction to a world that is really putting tremendous pressure on China, especially the United States. It was in the last five years launched a trade war, a tech war, and now the early stages of a new Cold War in the latest round of export sanctions and the expanded blacklist or entity list squeezing Chinese companies leaves them with little choice but to turn inward, to develop the tools that they need to get their growth expectations. In the years and decades ahead. Well, Stephen, one of the arguments during the trade war that you just mentioned was that there's no way that China can thrive and grow without the American consumer base. And therefore, this is not the threat to American or a threat on the competition front to a lot of American tech companies that a lot of people were worried about. What's your take on that now that we're talking about turning inward and growth decelerating? Is this something that, say American corporates like Apple, Microsoft, et cetera, need to be taking more seriously? Well, they are taking it seriously. A lot of multinationals led by Apple, who probably made the biggest offshoring bet of any U.S. headquartered multinational on China. They're starting to diversify their offshore production by initially shifting some iPhone capacity to, of all places, India, possibly Vietnam, small shifts initially. But, you know, hedging offshore exposure to China is certainly an issue that is being considered actively in boardrooms of multinationals all over the world. But I just want to go back to the one point you said. It's not just that China needs the American consumer. The American consumer also needs a low cost, high quality production from China. And our treasury needs China as an important source of demand for treasuries that are required to fund outsized budget deficits. And finally, broadly based U.S. manufacturers need China because it's our third largest and most rapidly growing export market. So it's a two way linkage that we have to be mindful of. It's not just one way that we've got China by the short hairs. Stephen, I'm glad you mentioned that. Which brings me to just how much more we might need. China with a labor market so tight within the United States as it is. Well, look, there is there is a lot of pressure being put on China right now by the US Congress. I mean, I'm sure you have covered the first hearing of the new House Select Committee on China that took place earlier this week. But in addition to that, and you know, all of the pressures that are being brought to bear on China through Taiwan and, you know, China's own contribution to those pressures. The relationship is increasingly fraught here. And so it's hard to know if we have the wherewithal to pull back this inclination that we have for conflict. Right now, the United States, you know, I find it very worrisome. And the single largest global risk probably for the next several years that investors and citizens should be mindful of.

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Yale's Roach on the Changes Coming to China

Yale Professor Stephen Roach talks about the future US relationship with China. (Source: Bloomberg)

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