Global Summit Insights: The podcast discusses the implications of the summit in Tianjin, where China is hosting key global leaders, aiming to reshape the global world order and challenge institutions like the IMF and World Bank.
Geopolitical Strategies: China's approach to geopolitics is highlighted as multipolar and consensus-driven, contrasting with the US's ideological and military-focused strategy, emphasizing economic cooperation over ideological alignment.
Economic Developments: The potential establishment of a new development bank by China and its partners could challenge existing financial systems and offer alternatives to the Western-dominated financial order.
Investment Implications: The discussion touches on China's efforts to create a financial system that protects asset sovereignty, potentially impacting global investment flows and offering alternatives to the SWIFT system.
Currency Dynamics: China is exploring alternatives to the US dollar, possibly through a basket of currencies, amidst concerns over US debt levels and the stability of the dollar.
China's Economic State: The podcast addresses the complexities of China's economy, noting regional disparities and challenges like deflationary pressures, while highlighting China's state-managed economic resilience.
US-China Relations: A potential improvement in US-China relations is anticipated, with possible compromises that could stabilize the US dollar and reduce tensions, despite ongoing trade disputes.
Geopolitical Risks: The podcast explores geopolitical tensions, including China's relationships with India and Saudi Arabia, and dismisses the likelihood of a Chinese invasion of Taiwan, emphasizing China's role as a global mediator.
Transcript
China is hosting a summit in Tian Jin right now. It is with the Shanghai Corporation organization and very famous members are attending. Russia, Putin, North Korea, Kim Jong-un is attending as well. And China is really trying to understand and maybe reshape the global world order. What is what does that mean? I've invited a phenomenal guest to the show, Professor Jang. He can help us understand the mentality, what is happening right now on the ground because he is based in China. He's based in Beijing. And I love getting different perspectives on this channel. We often look from one direction to the other. Let's look the other way. Let's try to understand what is the mission here of this of this summit and what can we learn from it? How will that reshape future um developments like how what can we take away as an investor from this summit because things like a new development bank are being discussed and how will that challenge for example the IMF or the World Bank. So lots of implications could come out of this and I'm really excited to learn more about it. Before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we much much appreciate it. Now, Professor Jung, it's a great pleasure to have you on the channel. Thank you so much for joining us. >> Thank you so much for inviting me, Kai. >> Yeah, it is your first time on the channel and we need to, you know, take a look into your brain first and understand where you're coming from. Um, you you run a really interesting YouTube channel called Predictive History with a lot of videos going viral. Um, because you're really managing to to sort of connect game theory with geopolitics. So maybe tell us a bit more about the title or the name of your your channel predictive history and what do you try to achieve? >> Right. So um I'm trying to start a new global intellectual academic movement which is trying to uh reimagine history for the 21 21st century. Um I believe that if history uh is to be taught well and it is be relevant and it has to accomplish three goals. The first is that it has connect the different elements of the past. It has to tell a coherent story of humanity. Second element is that it has to explain the present. Why are things the way they are? The third element is to predict the future to give us insight into what could happen in the future. So my theory is that if if we understand history, we understand that we are working with certain assumptions and values. These assumptions and values um give us a theoretical framework to understand the present and the past. But then we can turn this theoretical framework into a predictive model to make assumptions uh and predictions about the future. If these predictions turn out to be accurate, they validate our model. I believe that through this work process, we can gain a better understanding of our past, present and future. And therefore, we as humans have better control over uh ourselves and our society. >> Very complex but very interesting because uh the the history or the history often helps us predict the future. we should learn from history and it often repeats itself, right? Or at least it rhymes so we should know our history, right? >> So really interesting. Um maybe applying it to today like I mentioned the summit that is happening in Tanzin right now like how can we put that into context like very broadly speaking at first. >> Yeah. So I think this summit in Tenzing shows the disparity in approach between the United States and China. United States very much is interested in maintaining its hijgemony. It's maintaining a unipolar world um and as a result it is angering a lot of um countries including Russia, including Iran, um including China. The Chinese approach is one that is based on a multipolar institutional uh approach that tries to build consensus and harmony within the geopolitical system. The Americans are very much interested in projecting military might. The Chinese system focuses on um ensuring that everyone benefits economic economically from cooperation. H >> how is that I'm I'm trying to put some sense here. Very complex topic, very interesting topic of course because the Shanghai corporation has members as you said like Russia um Iran Pakistan which we in the west of course don't regard as the most friendliest of nations. is like how how can you put that into a framework um that is seen as friendly and makes sense like multipolar world everybody's doing well I think sounds like something we should all strive to achieve but how do you get those players at the table and achieve that >> right so um the diff the main difference is that Americans take an ideological approach to geopolitics Americans have a neoliberal mindset and they insist that if you um buy into this neopolitical neoliberal liberal mindset, then you're a good guy. But if you don't buy into this neoliberal mindset, then you're a bad guy. And that's how Americans differentiate the world. If it divides the world into good and bad, good are those nations that uh believe in human rights, believe individual rights, uh believe in free markets and bad are those who don't. The Chinese approach is that all ideologies are important. All ideologies are relevant. Let's ignore the ide sorry let's ignore the ide ideological issue and focus more on how we can work together and the way we can work together is through trade open trade multilateral trade >> the the positions of trade though and uh maybe China is in a bit of an advantage because it's of course the strongest partner in this so of course it's an easy thing to say let's work together and trade because they're the ones to be most benefiting from it of course what is China offering maybe other member nations of the Shanghai Corporation Organization maybe in return because the US I like the comparisons is dealing with massive trade deficits of course because it feels like it's financing the world. what can China offer in return that partner nations like I don't know let's say Russia buys from China >> right so um the United States believes that it's created this rulesbased national order but if you look at it uh in reality uh this rulesbased international order is heavily biased towards the United States and its allies basically what we're what we've been seeing in the developing world for the past um few decades is all these resources precious resources are going to United states uh and the western countries really cheaply. Um there's tremendous money laundering, capital flight from these third world nations to uh the de to to the first world nations. Um the uh elite of these developing nations have been co-opted by the Americans and that's why we we've seen pretty limited development e economic development in uh Africa in South America in the Middle East. Now Chinese approach is uh let's create a system in which um there's more fairness, there's more equity in which uh these develop nations have more ownership over development process and so um um China has been building infrastructure in Africa and South America. China has 31 ports that it invested in in South America. less infrastructure will um enable these countries to better leverage their resources. >> Yeah, it's it's interesting because um you know in terms of mentality as well like Chi said that we shouldn't foster cold war mentality um between our nations which is an interesting statement because of course here in the west we're very anti-Russia that anti-China is being promoted of course as well because China always wants the best of us meaning our money. Um, so how do we do like how do we get rid of that cold war mentality? Maybe more detailed question, Professor Jung, is like what's the mentality towards the West in China? I'm curious. >> Well, I mean um, most Chinese I've met love the West. um the the the uh you know if you're a Chinese parent your greatest ambition is to have your child learn English and have your child go learn um technology science from western countries because the perception in China is that um even though China has um accelerated it its economic growth these past 30 40 years China still lacks the west in terms of creativity innovation so they really want their children to go to the west and learn western innovation and creativity and that's really the power of western soft power. Um the west has has a great image in China. Um and you know this is really the main resource. This is really the main power that the west has its image as a benevolent creative um open generous society. And um that's why these past few years um you know all these um conflicts that America has started has really done um much damage to the western image in in China. >> By the way like I want to make a switch on more to economic matters and turn how this SEO meeting sort of really also shapes um economic trends as well. So um >> right >> professor it's really interesting because you know China is also offering like financial support to some of its member um nations to maybe start establishing banks and international or foster international trade. What do you think is the number one takeaway from the economic side from this summit? Well, I think that because of the war in Ukraine, Chinese see an opportunity to reinvent, re-imagine, reestablish the global financial order. So, as you know, after Russia invaded Ukraine, um the United States imposed sanctions on Russia, which in the long term uh discredits the credibility of the um western financial system. So the example is that right now Europe and United States collectively have frozen $300 billion in Russian assets. Now um that's a terrif terrifying signal if you are a Chinese investor or you're you're a um non western investor because it seems that um at any time your assets can be stolen stolen from you. Also uh remember the sections included that Russia would be um would be eliminated from the Swift system. So Russia would no longer be able to use the Swift financial system. And so this has given opportunity for China to build alternatives to the western uh financial model. Uh a model that would uh first and foremost protect the sovereignty of all assets. So if you invest in China then the Chinese government would never ever steal your assets. Also to create an alternative to Swift to facilitate uh faster and um and to to facilate um uh greater economic trade around the world. It's an interesting aspect because we've been talking about project embbridge for example here on this platform before as well like new monetary um just just orders maybe financial systems being installed as well. Um the SEO development bank is an interesting um idea in the it's currently an idea in my op like from what I've been reading here but it's about to get executed here on the idea like how could that reshape financial markets as well. I mentioned in the intro it could potentially challenge the World Bank or the IMF and how is that maybe institutionalizing what China has been doing um for for decades meaning like investing in foreign countries like in Africa for example. Um how is that a new theory? >> Yeah. So China has been looking for alternative to the IMF World Bank system for a long long time. The issue with the IMF and World Bank system is that from the Chinese perspective it's really an arm of American foreign policy. Um I mean the World Bank in IMAF is used to open um the markets of de developing world uh world countries and force its assets to be stolen or or sold really cheaply to western nations and from the Chinese perspective um this is a very um disadvantaged system for the third world. So let's build a system that would be less political that will be more independent of uh national interests and which is more multilateral um so having different stakeholders and ensuring that the consensus is built around the world to make to ensure that all nations benefit from a system from a Chinese perspective IMF World Bank they're all just an arm of American foreign policy >> now it's it's interesting like China has been using for example foreign investments or foreign direct investments to secure resources for example. So they've been using it from a political side as well. I'm just challenging Jinu here a little bit, Professor Jang. Um with bringing in the other member nations, do you think that will expand? Will they be reaching out to other members uh financially as well? Do you think that will be expanded? >> Well, I mean that's a great point. I mean, if you're a nation and you have control over these multilateral organizations, then you're definitely going to want to use them to um expand your national interest. That's just human nature. That's just geopolitics. That's the way it should be. The argument that that China would make is that America has has been in control of the system for too long. Um, ever since the Brennan Woods um, conference, it's been and and because it's always been a top dog, America has grown corrupt. It's grown arrogant. It's grown um, selfish. And because China is a new player in the game, then that benefits the world because China is forced to be um, to build consensus to ensure that lynships are more win-win and not so lopsided. So um China really needs to go out and um persuade the world to join its organizations and that's a benefit to the world right now. >> What what kind of developments should we be monitoring over the next 10 years perhaps um out of the Chang Shanghai Corporation organization? What uh do you think will have biggest impacts also on financial markets since we're on a financial YouTube channel here? Well, I mean the reality is that um the Chinese system, the Chinese government is trying to build um multilateral institutions that parallel and can compete with the western model. So development banks are one aspect of it. But um a really important aspect are these trade networks, right? So um China is trying to um um conceptualize and implement its belt and road initiative both across the land and and and in the sea. So these trade work trade networks and their uh and how robust they are and how um viable they are are very important indicator of how China is growing is going to grow um economically. Uh the Chinese government is very interested in creating alternative to the swift system. Um the Chinese government is obviously also really interested in trying to create alternatives to the US dollar and that I think will be the main source of friction between China and United States over the next 5 to 10 years because as we know the source of American power is the petro dollar. And so um if Saudi Arabia and other Gulf state countries start using more um rem more Chinese currency then that's a threat to uh US hijgemony. So I think that's where the real source of the conflict will be. Uh the conflict will be over these trade networks. Um so people argue that this war between Israel and Iran it's really to disrupt uh China's um expansion plans in the Middle East. China is trying to is trying to expand its belt and road initiative. Russia is trying to build the north south corridor. So Iran would be crucial in the development of uh new trade networks. Um and and then the relationship between um China and these Gulf state oil oil countries are also very important. >> Yeah, you you touch on lots of interesting topics here that I need to follow up on like alternatives to US dollar. Is China really trying to place the remimi as as the alternative or are there other potential currencies in the works? Um will there be let's we've been discussing like a brrics currency or maybe an SEO currency. Um what are you hearing? What are you seeing? >> Look, I think Chinese policy makers are realistic. Um you know, China practices a real politic form of geopolitics and I don't think Chinese believe that the B will ever replace the US dollar. the US dollar right now is is too ingrained. Um it's too entrenched. Um but at the same time there's global concern about the viability of the dollar because right now the US debt the national debt has reached $ 37 trillion. So there's absolutely no way the Americans are going to pay off that debt. Um so I think the Chinese policy makers they're realistic. So they they will look at multiple possibilities. The first possibility is um staying with the US dollar. Uh the second possibility is try is trying to create a basket of currencies um that sort of compete against the the dollar. Ideally the rem would would replace the US dollar. Um and that shows that China has really made it in the world. But I think the third possibility is the most unlikely and I think Chinese polic policymakers are um aware of that and that's why they would opt for the second option which is to create a basket of currencies that complement and supplement the US dollar. >> Yeah, interesting take there. And maybe one other thing I need to follow up with you here is Saudi Arabia of course of a relationship and my mind because coming from the gold p angle here is China is establishing vaults in Saudi Arabia to make trade easier. What what is your take on that? How do you interpret that move? Yeah. So, um the situation in Saudi Arabia, I think it's more volatile and more fragile than people um uh really understand. I I think Saudi Arabia um their old reserves are not going to last as long as they once believed. I think that for the past decade, Saudi Arabia has has been trying to build alternatives to its um oil economy. it's it's been focusing on tourism on on more uh knowledge economy and that has not really worked. So um the situation in Saudi Arabia it's much more volatile uh than people um give it credit for than than people understand and I think China sees opportunity uh to use this volatility to build strong relations with Saudi Arabia because at the end of the day China is completely dependent on the Middle East for its oil supply and right now it gets a lot of oil from Iran but as we know Iran is a heavily sanctioned country. It's possible that a war breaks out between Israel and Iran. So, China would want to um build strong relations with Saudi Arabia to um secure its oil supply in the future. >> Oh my god, you just opened a whole new can of worms that we could potentially dive down. Is this just a geopolitical situation? How how China would potentially back Iran and what that could look like? Will they would they send troops? Maybe just humor us for a second and humor is maybe the wrong word, but uh what is your take on that? Would China actually go that far? Well, I mean the Chinese policy for thousands of years is not to get involved overseas and it's worked out really well for China for thousands of years. I see absolutely no reason why China would entangle itself in affairs as far away as the Middle East especially uh because um you don't really you don't you can't control the risk element in the Middle East. It's entire it's entirely possible that a war between Israel and Iran could drag in the entire world because Iran would close off the street of humus the oil supply to East Asia, Japan, South Korea and China. It would be cut off thus destroying their um economies. Um so the first point I will make is that there's no way that China would ever send ground troops anywhere in the world uh beyond its its borders. That's the first point. Second point is that China sees its power as being the global mediator as as being the facilitator for peace. So if a conflict ever breaks out between the United States and Iran, China would stay neutral in order to maintain its role as mediator. Um they would want this war to conclude as quickly as possible. They would want as less dam as less damage to the global economy as possible. And and China can only do that if it stays neutral. So I guarantee you if a war ever breaks out, China will be the neutral party. It will be the mediator. Russia on the other hand will probably protect Iran. >> Yeah. It's interesting because Russia has been proposing China to be a guer of security in Iran as well, which sort of seems contrary to what you've just mentioned. Uh is that the wrong interpretation? And like why would Russia make that suggestion sort of knowing that China would say no to that uh proposition? Well, I mean, um, geopolitics, it's a very strange game. So, um, I draw your attention to the fact that, um, Putin has signed a mutual defense pact with North Korea. It's North Korea that sent troops to Ukraine. Now, the problem with this is that we imagine North Korea to be a client state of China, right? So, it's almost as though Russia is interfering in um China's sphere of influence. So, I So, I just point that out to um show you how complicated the game is. Um there are no clear lines in geopolitics. Every player, every nation is trying to maximize um its opportunities, trying to maximize its best outcome. And it and to do that, it has to maintain different possibilities. It cannot commit to one strategy. It has to be very flexible and um and how and how it sees the world. >> Professor Jan, like having you on the show, like so many questions are popping into my head. I'm trying to get them in order because you're unique. You offer very unique perspectives that we don't often have here on this channel. But uh on the terms of geopolitics, like what is the relationship with China and India? >> Yeah. So um the Chinese India relationship is extremely tense. This goes back to um the border war between India and China around the year 1960. This is like right after the founding of both the people's republic of China as well as the um Indian uh democracy and India saw this as a massive betrayal um of its relationship with with China. they felt that Chinese back that that the Chinese backstabbed it and this um border you know um is extremely important because both India China gets its water supply from the Tibetan plateau. So if it controls the Tibetan plateau controls all of East Asia so this is a conflict that's going to simmer in the in the background. uh right now we see uh growing uh a growing reconciliation between India and China and that's wonderful but long-term geopolitically um water supply is going to be a huge issue between these two countries. China is right now creating is putting all sorts of dams around that area and that's a major extent threat to the survival of India. Um India gets most of its water from that region. If China cuts off its the water supply then India is really screwed. Yeah, I've been calling India sort of the Trojan horse within the bricks because India is also flirting with the US, flirting with the West. So, it's trying to play both sides. What do you make of that statement? Like, is India a Trojan horse and uh are they really trying to play both sides to the best advantage that they get? >> Yeah, I mean, but I mean that's not really fair to India because every nation is trying to do that. So, we're we we see this really strong relationship between China and Russia. But if you just look at it from a geopolitical perspective, there's going to be much more tension between Russia and China than between China and the United States. The reality is that China and United States don't share a border. Um they don't have a history of conflict and um I mean the reality is that Russia and China do have divergent jiblical interests especially in Central Asia. Um, you know, they're both trying to be the top dog in Central Asia, which will allow them to control trade routes throughout throughout Asia. >> Yeah. Interesting. Um, again, it's like I'm jumping around a little bit because I have so many questions for you that you can help me answer. And one of them is actually like what is the true state of the economy in China? Like what is it really like? Like we're getting a lot of news here in the west. I'm just looking at China manufacturing PMI hits five month high. But then on the other end, you hear that China might be in a deflationary scenario right now already economically. What what is the true state? >> Well, I mean the the the problem with China is that it's a it's a huge country, right? >> And the economic disparity between the cities and countryside are huge. The economic disparity between the north and south is huge. So, it's hard to make generalizations >> about the Chinese economy. But what I will say is that um China has both advantages and disadvantages in its economy. The disadvantage is the lack of consumer spending power. Um and so for the past 10 years, the Chinese government has been encouraging consumers to spend more and more. But um because of the real estate bubble collapse, uh because of of geopolitical issues, because because of trade sanctions, Chinese consumers are more reluctant to spend money. So we are seeing some deflationary um a deflationary spiral in China, especially these past couple of years. At the same time, the entire economy is still very much state managed. So the debt issue is not as um as pressing in China as it would be in the United States and in other western countries. So China still has a lot of tricks um up its sleeve in terms of its of its economy and has yet to play them. So uh it's very hard to make a conclusive statement about the state of the of the Chinese economy. >> Yeah. Interesting. Like that's sort of the message I'm getting as well. you hear very different like data points but they're all pointing in different directions right so it's always difficult to sort of make sense like debt to GDP is one thing deflationary scenarios you hear about so it's an interesting statement you just made there as well professor jung appreciate that um coming more to back I don't know zooming out geopolitics we do have to address the US tariff the US China tariff let's call it a war for lack of better term or debate debacle whatever it is you want to name it um how do you how do you see that playing out like Who will give in? Who will end up on? Is there even a win-win scenario possible maybe? >> Yeah. So, I think this US tariff war um it's indicative of tensions um in how the US and the Chinese perceive how the financial system should develop in the future. Um you know what we forget is that in 2008 the the global economy basically collapsed. it was China who basically saved the global econom economy by taking on all this massive debt. Um so 2008 the Chinese economy basically saved the world and right now we're seeing massive economic issues throughout the western world. The United States and Europe really wants China to do to be the white knight again to save the world. But China is reluctant, extremely reluctant to make the sacrifice again because because obviously um this debt has be paid off by the Chinese people at some point and China does not want to mortgage its future. Um and that's really the policy of Singinping to try to ring in the overheating Chinese economy to try to try to reduce the debt levels to make the economy much more sustainable. So that's where the conflict is. Uh the United States wants China to open up its more its financial system some more. Um China wants to uh bring its debt under control. So I think what will happen in the next six months is that behind the scenes China United States will come to a compromise. Publicly it will seem as though China has won and the United States has lost but in reality uh China has been forced to make compromises that will help um stabilize the US dollar and reduce US debt. It's entirely possible. Okay. And I I'm just you know throwing some possibilities out there. Um Trump did say that he wants 600,000 Chinese students in the United States. Okay, that's double the level of Chinese students in United States right now. And so how would China pay for this? Well, Chinese consumers would take out a lot of debt in order to finance their children um going to United States to study. And this would be um a win-win for everyone, right? The United States would get more um consumers. It it would basically save the American higher education system and Chinese get a better better education. >> Yeah, it's interesting like compromise. I think that's what it comes down to because >> Yeah, it it's so like so multifaceted. It's very difficult to actually come up with proper scenarios and even put it in proper terms in my opinion especially with being bombarded with so many news items as well. Um maybe from an investor perspective like for our audience here Joe and Jane Blow watching like what can we take away from this? What do you think some of the ramifications will be over the next six months maybe of a tariff deal on the financial markets? Is it you said stabilize the US dollar? Um what what does that mean for you and what other implications could it have on the economies? >> Yeah. Um personally I'm I don't do financial investments. I I don't do financial investment advice but uh my main takeaway from this is that the US dollar is still pretty stable um and um China will eventually come to a reproachment with United States. I I I think one of the biggest surprises one of the geopolitical surprises with the next year possibly half a year is how quickly the USChina relationship improves. >> That is that is a statement. I like hearing that and uh that'll be fascinating cuz I want to see that as well cuz right now everything seems to be going head-to-head here with potential for for disaster quite honestly and we haven't even touched on Taiwan yet. Um and what that actually means and how complicated that situation is cuz it hasn't been thrown into the whole discussion that's why I've sort of left it out. Um it's it seems to be on the periphery. Just maybe just two seconds on that. Um what is your take on that on that matter? >> Okay. Okay. I'll bet you a million dollars China does not invade Taiwan. Okay, I'm willing to make that bad. I don't have a million I don't have a million dollars. Too bad, but I'm willing to make you that bad. I will go and borrow a million dollars and I'll make you look bad that China does not invade Taiwan. Right. The Pentagon is has been pro promoting this in order to get more funding for its East Asian operations. This is not in um this is not being discussed in China. Uh no one's thinking about Taiwan right now. Well, I've been hearing very little about it lately. So, I was just in my research for this interview, it's it's popped up, but very on the periphery. Um, so I was like, okay, it doesn't seem to be a big topic of negotiation or discussion at all right now. So, >> yeah, it's not an issue in Taiwan. You would think that of all the countries in the world, the country that would be most afraid of a of an invasion, the country that would spend a lot of time in the news media discussing a possible Chinese invasion would be Taiwan. But go to Taiwan, spend a month there, spend a year there. They don't they don't talk about it. They don't care. It's not relevant to them. >> No. Fantastic. Really really interesting. Professor John, he's like, I'm so appreciative of your time. Very unique insights. We'll definitely have to have you back in six months, the latest to see uh if you if your predictions and about the US China relations are are coming true. We all hope so. >> Hey, if if China invades Taiwan, invite me back and I'll give you a million dollars. >> I'll come and collect as well. >> Yeah. Yeah. >> No, no. Fantastic. Professor Jen, really appreciate it. I'll definitely, as I mentioned before to you before hitting the record button, I've downloaded quite a few episodes of your uh YouTube channel to my iPad for my travels this week uh to catch up on really really great content. Thank you so much for putting that out and thanks so much for joining us. Um we'll send everybody to your YouTube channel. How can we direct our viewers to you? >> Yeah, so my YouTube channel is pretty history. Um just just type in in YouTube and and my videos will will come out. And on my YouTube channel as well will also be links to my Substack. Um, so, so yeah, best place is to watch my my videos. >> Fantastic. Awesome. Thank you so much for joining us. Really, really appreciate it. And, uh, everybody else, thanks so much for tuning in to Sore Financially. I love this episode with Professor Jung. Very different perspectives. It's really refreshing to hear different angles as well. Hope you appreciate it as well. If you did, put a comment down below. Let us know what you think. And of course, if you haven't done so, hit that like and subscribe button. Helps us out tremendously. Beat the algorithm, who's a absolute nasty beast these days. and uh help us thrive together. Thank you so much and we'll be back with lots more. Take care out there. [Music]
China vs USA: A NEW World Order | Professor Jiang
Summary
Transcript
China is hosting a summit in Tian Jin right now. It is with the Shanghai Corporation organization and very famous members are attending. Russia, Putin, North Korea, Kim Jong-un is attending as well. And China is really trying to understand and maybe reshape the global world order. What is what does that mean? I've invited a phenomenal guest to the show, Professor Jang. He can help us understand the mentality, what is happening right now on the ground because he is based in China. He's based in Beijing. And I love getting different perspectives on this channel. We often look from one direction to the other. Let's look the other way. Let's try to understand what is the mission here of this of this summit and what can we learn from it? How will that reshape future um developments like how what can we take away as an investor from this summit because things like a new development bank are being discussed and how will that challenge for example the IMF or the World Bank. So lots of implications could come out of this and I'm really excited to learn more about it. Before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we much much appreciate it. Now, Professor Jung, it's a great pleasure to have you on the channel. Thank you so much for joining us. >> Thank you so much for inviting me, Kai. >> Yeah, it is your first time on the channel and we need to, you know, take a look into your brain first and understand where you're coming from. Um, you you run a really interesting YouTube channel called Predictive History with a lot of videos going viral. Um, because you're really managing to to sort of connect game theory with geopolitics. So maybe tell us a bit more about the title or the name of your your channel predictive history and what do you try to achieve? >> Right. So um I'm trying to start a new global intellectual academic movement which is trying to uh reimagine history for the 21 21st century. Um I believe that if history uh is to be taught well and it is be relevant and it has to accomplish three goals. The first is that it has connect the different elements of the past. It has to tell a coherent story of humanity. Second element is that it has to explain the present. Why are things the way they are? The third element is to predict the future to give us insight into what could happen in the future. So my theory is that if if we understand history, we understand that we are working with certain assumptions and values. These assumptions and values um give us a theoretical framework to understand the present and the past. But then we can turn this theoretical framework into a predictive model to make assumptions uh and predictions about the future. If these predictions turn out to be accurate, they validate our model. I believe that through this work process, we can gain a better understanding of our past, present and future. And therefore, we as humans have better control over uh ourselves and our society. >> Very complex but very interesting because uh the the history or the history often helps us predict the future. we should learn from history and it often repeats itself, right? Or at least it rhymes so we should know our history, right? >> So really interesting. Um maybe applying it to today like I mentioned the summit that is happening in Tanzin right now like how can we put that into context like very broadly speaking at first. >> Yeah. So I think this summit in Tenzing shows the disparity in approach between the United States and China. United States very much is interested in maintaining its hijgemony. It's maintaining a unipolar world um and as a result it is angering a lot of um countries including Russia, including Iran, um including China. The Chinese approach is one that is based on a multipolar institutional uh approach that tries to build consensus and harmony within the geopolitical system. The Americans are very much interested in projecting military might. The Chinese system focuses on um ensuring that everyone benefits economic economically from cooperation. H >> how is that I'm I'm trying to put some sense here. Very complex topic, very interesting topic of course because the Shanghai corporation has members as you said like Russia um Iran Pakistan which we in the west of course don't regard as the most friendliest of nations. is like how how can you put that into a framework um that is seen as friendly and makes sense like multipolar world everybody's doing well I think sounds like something we should all strive to achieve but how do you get those players at the table and achieve that >> right so um the diff the main difference is that Americans take an ideological approach to geopolitics Americans have a neoliberal mindset and they insist that if you um buy into this neopolitical neoliberal liberal mindset, then you're a good guy. But if you don't buy into this neoliberal mindset, then you're a bad guy. And that's how Americans differentiate the world. If it divides the world into good and bad, good are those nations that uh believe in human rights, believe individual rights, uh believe in free markets and bad are those who don't. The Chinese approach is that all ideologies are important. All ideologies are relevant. Let's ignore the ide sorry let's ignore the ide ideological issue and focus more on how we can work together and the way we can work together is through trade open trade multilateral trade >> the the positions of trade though and uh maybe China is in a bit of an advantage because it's of course the strongest partner in this so of course it's an easy thing to say let's work together and trade because they're the ones to be most benefiting from it of course what is China offering maybe other member nations of the Shanghai Corporation Organization maybe in return because the US I like the comparisons is dealing with massive trade deficits of course because it feels like it's financing the world. what can China offer in return that partner nations like I don't know let's say Russia buys from China >> right so um the United States believes that it's created this rulesbased national order but if you look at it uh in reality uh this rulesbased international order is heavily biased towards the United States and its allies basically what we're what we've been seeing in the developing world for the past um few decades is all these resources precious resources are going to United states uh and the western countries really cheaply. Um there's tremendous money laundering, capital flight from these third world nations to uh the de to to the first world nations. Um the uh elite of these developing nations have been co-opted by the Americans and that's why we we've seen pretty limited development e economic development in uh Africa in South America in the Middle East. Now Chinese approach is uh let's create a system in which um there's more fairness, there's more equity in which uh these develop nations have more ownership over development process and so um um China has been building infrastructure in Africa and South America. China has 31 ports that it invested in in South America. less infrastructure will um enable these countries to better leverage their resources. >> Yeah, it's it's interesting because um you know in terms of mentality as well like Chi said that we shouldn't foster cold war mentality um between our nations which is an interesting statement because of course here in the west we're very anti-Russia that anti-China is being promoted of course as well because China always wants the best of us meaning our money. Um, so how do we do like how do we get rid of that cold war mentality? Maybe more detailed question, Professor Jung, is like what's the mentality towards the West in China? I'm curious. >> Well, I mean um, most Chinese I've met love the West. um the the the uh you know if you're a Chinese parent your greatest ambition is to have your child learn English and have your child go learn um technology science from western countries because the perception in China is that um even though China has um accelerated it its economic growth these past 30 40 years China still lacks the west in terms of creativity innovation so they really want their children to go to the west and learn western innovation and creativity and that's really the power of western soft power. Um the west has has a great image in China. Um and you know this is really the main resource. This is really the main power that the west has its image as a benevolent creative um open generous society. And um that's why these past few years um you know all these um conflicts that America has started has really done um much damage to the western image in in China. >> By the way like I want to make a switch on more to economic matters and turn how this SEO meeting sort of really also shapes um economic trends as well. So um >> right >> professor it's really interesting because you know China is also offering like financial support to some of its member um nations to maybe start establishing banks and international or foster international trade. What do you think is the number one takeaway from the economic side from this summit? Well, I think that because of the war in Ukraine, Chinese see an opportunity to reinvent, re-imagine, reestablish the global financial order. So, as you know, after Russia invaded Ukraine, um the United States imposed sanctions on Russia, which in the long term uh discredits the credibility of the um western financial system. So the example is that right now Europe and United States collectively have frozen $300 billion in Russian assets. Now um that's a terrif terrifying signal if you are a Chinese investor or you're you're a um non western investor because it seems that um at any time your assets can be stolen stolen from you. Also uh remember the sections included that Russia would be um would be eliminated from the Swift system. So Russia would no longer be able to use the Swift financial system. And so this has given opportunity for China to build alternatives to the western uh financial model. Uh a model that would uh first and foremost protect the sovereignty of all assets. So if you invest in China then the Chinese government would never ever steal your assets. Also to create an alternative to Swift to facilitate uh faster and um and to to facilate um uh greater economic trade around the world. It's an interesting aspect because we've been talking about project embbridge for example here on this platform before as well like new monetary um just just orders maybe financial systems being installed as well. Um the SEO development bank is an interesting um idea in the it's currently an idea in my op like from what I've been reading here but it's about to get executed here on the idea like how could that reshape financial markets as well. I mentioned in the intro it could potentially challenge the World Bank or the IMF and how is that maybe institutionalizing what China has been doing um for for decades meaning like investing in foreign countries like in Africa for example. Um how is that a new theory? >> Yeah. So China has been looking for alternative to the IMF World Bank system for a long long time. The issue with the IMF and World Bank system is that from the Chinese perspective it's really an arm of American foreign policy. Um I mean the World Bank in IMAF is used to open um the markets of de developing world uh world countries and force its assets to be stolen or or sold really cheaply to western nations and from the Chinese perspective um this is a very um disadvantaged system for the third world. So let's build a system that would be less political that will be more independent of uh national interests and which is more multilateral um so having different stakeholders and ensuring that the consensus is built around the world to make to ensure that all nations benefit from a system from a Chinese perspective IMF World Bank they're all just an arm of American foreign policy >> now it's it's interesting like China has been using for example foreign investments or foreign direct investments to secure resources for example. So they've been using it from a political side as well. I'm just challenging Jinu here a little bit, Professor Jang. Um with bringing in the other member nations, do you think that will expand? Will they be reaching out to other members uh financially as well? Do you think that will be expanded? >> Well, I mean that's a great point. I mean, if you're a nation and you have control over these multilateral organizations, then you're definitely going to want to use them to um expand your national interest. That's just human nature. That's just geopolitics. That's the way it should be. The argument that that China would make is that America has has been in control of the system for too long. Um, ever since the Brennan Woods um, conference, it's been and and because it's always been a top dog, America has grown corrupt. It's grown arrogant. It's grown um, selfish. And because China is a new player in the game, then that benefits the world because China is forced to be um, to build consensus to ensure that lynships are more win-win and not so lopsided. So um China really needs to go out and um persuade the world to join its organizations and that's a benefit to the world right now. >> What what kind of developments should we be monitoring over the next 10 years perhaps um out of the Chang Shanghai Corporation organization? What uh do you think will have biggest impacts also on financial markets since we're on a financial YouTube channel here? Well, I mean the reality is that um the Chinese system, the Chinese government is trying to build um multilateral institutions that parallel and can compete with the western model. So development banks are one aspect of it. But um a really important aspect are these trade networks, right? So um China is trying to um um conceptualize and implement its belt and road initiative both across the land and and and in the sea. So these trade work trade networks and their uh and how robust they are and how um viable they are are very important indicator of how China is growing is going to grow um economically. Uh the Chinese government is very interested in creating alternative to the swift system. Um the Chinese government is obviously also really interested in trying to create alternatives to the US dollar and that I think will be the main source of friction between China and United States over the next 5 to 10 years because as we know the source of American power is the petro dollar. And so um if Saudi Arabia and other Gulf state countries start using more um rem more Chinese currency then that's a threat to uh US hijgemony. So I think that's where the real source of the conflict will be. Uh the conflict will be over these trade networks. Um so people argue that this war between Israel and Iran it's really to disrupt uh China's um expansion plans in the Middle East. China is trying to is trying to expand its belt and road initiative. Russia is trying to build the north south corridor. So Iran would be crucial in the development of uh new trade networks. Um and and then the relationship between um China and these Gulf state oil oil countries are also very important. >> Yeah, you you touch on lots of interesting topics here that I need to follow up on like alternatives to US dollar. Is China really trying to place the remimi as as the alternative or are there other potential currencies in the works? Um will there be let's we've been discussing like a brrics currency or maybe an SEO currency. Um what are you hearing? What are you seeing? >> Look, I think Chinese policy makers are realistic. Um you know, China practices a real politic form of geopolitics and I don't think Chinese believe that the B will ever replace the US dollar. the US dollar right now is is too ingrained. Um it's too entrenched. Um but at the same time there's global concern about the viability of the dollar because right now the US debt the national debt has reached $ 37 trillion. So there's absolutely no way the Americans are going to pay off that debt. Um so I think the Chinese policy makers they're realistic. So they they will look at multiple possibilities. The first possibility is um staying with the US dollar. Uh the second possibility is try is trying to create a basket of currencies um that sort of compete against the the dollar. Ideally the rem would would replace the US dollar. Um and that shows that China has really made it in the world. But I think the third possibility is the most unlikely and I think Chinese polic policymakers are um aware of that and that's why they would opt for the second option which is to create a basket of currencies that complement and supplement the US dollar. >> Yeah, interesting take there. And maybe one other thing I need to follow up with you here is Saudi Arabia of course of a relationship and my mind because coming from the gold p angle here is China is establishing vaults in Saudi Arabia to make trade easier. What what is your take on that? How do you interpret that move? Yeah. So, um the situation in Saudi Arabia, I think it's more volatile and more fragile than people um uh really understand. I I think Saudi Arabia um their old reserves are not going to last as long as they once believed. I think that for the past decade, Saudi Arabia has has been trying to build alternatives to its um oil economy. it's it's been focusing on tourism on on more uh knowledge economy and that has not really worked. So um the situation in Saudi Arabia it's much more volatile uh than people um give it credit for than than people understand and I think China sees opportunity uh to use this volatility to build strong relations with Saudi Arabia because at the end of the day China is completely dependent on the Middle East for its oil supply and right now it gets a lot of oil from Iran but as we know Iran is a heavily sanctioned country. It's possible that a war breaks out between Israel and Iran. So, China would want to um build strong relations with Saudi Arabia to um secure its oil supply in the future. >> Oh my god, you just opened a whole new can of worms that we could potentially dive down. Is this just a geopolitical situation? How how China would potentially back Iran and what that could look like? Will they would they send troops? Maybe just humor us for a second and humor is maybe the wrong word, but uh what is your take on that? Would China actually go that far? Well, I mean the Chinese policy for thousands of years is not to get involved overseas and it's worked out really well for China for thousands of years. I see absolutely no reason why China would entangle itself in affairs as far away as the Middle East especially uh because um you don't really you don't you can't control the risk element in the Middle East. It's entire it's entirely possible that a war between Israel and Iran could drag in the entire world because Iran would close off the street of humus the oil supply to East Asia, Japan, South Korea and China. It would be cut off thus destroying their um economies. Um so the first point I will make is that there's no way that China would ever send ground troops anywhere in the world uh beyond its its borders. That's the first point. Second point is that China sees its power as being the global mediator as as being the facilitator for peace. So if a conflict ever breaks out between the United States and Iran, China would stay neutral in order to maintain its role as mediator. Um they would want this war to conclude as quickly as possible. They would want as less dam as less damage to the global economy as possible. And and China can only do that if it stays neutral. So I guarantee you if a war ever breaks out, China will be the neutral party. It will be the mediator. Russia on the other hand will probably protect Iran. >> Yeah. It's interesting because Russia has been proposing China to be a guer of security in Iran as well, which sort of seems contrary to what you've just mentioned. Uh is that the wrong interpretation? And like why would Russia make that suggestion sort of knowing that China would say no to that uh proposition? Well, I mean, um, geopolitics, it's a very strange game. So, um, I draw your attention to the fact that, um, Putin has signed a mutual defense pact with North Korea. It's North Korea that sent troops to Ukraine. Now, the problem with this is that we imagine North Korea to be a client state of China, right? So, it's almost as though Russia is interfering in um China's sphere of influence. So, I So, I just point that out to um show you how complicated the game is. Um there are no clear lines in geopolitics. Every player, every nation is trying to maximize um its opportunities, trying to maximize its best outcome. And it and to do that, it has to maintain different possibilities. It cannot commit to one strategy. It has to be very flexible and um and how and how it sees the world. >> Professor Jan, like having you on the show, like so many questions are popping into my head. I'm trying to get them in order because you're unique. You offer very unique perspectives that we don't often have here on this channel. But uh on the terms of geopolitics, like what is the relationship with China and India? >> Yeah. So um the Chinese India relationship is extremely tense. This goes back to um the border war between India and China around the year 1960. This is like right after the founding of both the people's republic of China as well as the um Indian uh democracy and India saw this as a massive betrayal um of its relationship with with China. they felt that Chinese back that that the Chinese backstabbed it and this um border you know um is extremely important because both India China gets its water supply from the Tibetan plateau. So if it controls the Tibetan plateau controls all of East Asia so this is a conflict that's going to simmer in the in the background. uh right now we see uh growing uh a growing reconciliation between India and China and that's wonderful but long-term geopolitically um water supply is going to be a huge issue between these two countries. China is right now creating is putting all sorts of dams around that area and that's a major extent threat to the survival of India. Um India gets most of its water from that region. If China cuts off its the water supply then India is really screwed. Yeah, I've been calling India sort of the Trojan horse within the bricks because India is also flirting with the US, flirting with the West. So, it's trying to play both sides. What do you make of that statement? Like, is India a Trojan horse and uh are they really trying to play both sides to the best advantage that they get? >> Yeah, I mean, but I mean that's not really fair to India because every nation is trying to do that. So, we're we we see this really strong relationship between China and Russia. But if you just look at it from a geopolitical perspective, there's going to be much more tension between Russia and China than between China and the United States. The reality is that China and United States don't share a border. Um they don't have a history of conflict and um I mean the reality is that Russia and China do have divergent jiblical interests especially in Central Asia. Um, you know, they're both trying to be the top dog in Central Asia, which will allow them to control trade routes throughout throughout Asia. >> Yeah. Interesting. Um, again, it's like I'm jumping around a little bit because I have so many questions for you that you can help me answer. And one of them is actually like what is the true state of the economy in China? Like what is it really like? Like we're getting a lot of news here in the west. I'm just looking at China manufacturing PMI hits five month high. But then on the other end, you hear that China might be in a deflationary scenario right now already economically. What what is the true state? >> Well, I mean the the the problem with China is that it's a it's a huge country, right? >> And the economic disparity between the cities and countryside are huge. The economic disparity between the north and south is huge. So, it's hard to make generalizations >> about the Chinese economy. But what I will say is that um China has both advantages and disadvantages in its economy. The disadvantage is the lack of consumer spending power. Um and so for the past 10 years, the Chinese government has been encouraging consumers to spend more and more. But um because of the real estate bubble collapse, uh because of of geopolitical issues, because because of trade sanctions, Chinese consumers are more reluctant to spend money. So we are seeing some deflationary um a deflationary spiral in China, especially these past couple of years. At the same time, the entire economy is still very much state managed. So the debt issue is not as um as pressing in China as it would be in the United States and in other western countries. So China still has a lot of tricks um up its sleeve in terms of its of its economy and has yet to play them. So uh it's very hard to make a conclusive statement about the state of the of the Chinese economy. >> Yeah. Interesting. Like that's sort of the message I'm getting as well. you hear very different like data points but they're all pointing in different directions right so it's always difficult to sort of make sense like debt to GDP is one thing deflationary scenarios you hear about so it's an interesting statement you just made there as well professor jung appreciate that um coming more to back I don't know zooming out geopolitics we do have to address the US tariff the US China tariff let's call it a war for lack of better term or debate debacle whatever it is you want to name it um how do you how do you see that playing out like Who will give in? Who will end up on? Is there even a win-win scenario possible maybe? >> Yeah. So, I think this US tariff war um it's indicative of tensions um in how the US and the Chinese perceive how the financial system should develop in the future. Um you know what we forget is that in 2008 the the global economy basically collapsed. it was China who basically saved the global econom economy by taking on all this massive debt. Um so 2008 the Chinese economy basically saved the world and right now we're seeing massive economic issues throughout the western world. The United States and Europe really wants China to do to be the white knight again to save the world. But China is reluctant, extremely reluctant to make the sacrifice again because because obviously um this debt has be paid off by the Chinese people at some point and China does not want to mortgage its future. Um and that's really the policy of Singinping to try to ring in the overheating Chinese economy to try to try to reduce the debt levels to make the economy much more sustainable. So that's where the conflict is. Uh the United States wants China to open up its more its financial system some more. Um China wants to uh bring its debt under control. So I think what will happen in the next six months is that behind the scenes China United States will come to a compromise. Publicly it will seem as though China has won and the United States has lost but in reality uh China has been forced to make compromises that will help um stabilize the US dollar and reduce US debt. It's entirely possible. Okay. And I I'm just you know throwing some possibilities out there. Um Trump did say that he wants 600,000 Chinese students in the United States. Okay, that's double the level of Chinese students in United States right now. And so how would China pay for this? Well, Chinese consumers would take out a lot of debt in order to finance their children um going to United States to study. And this would be um a win-win for everyone, right? The United States would get more um consumers. It it would basically save the American higher education system and Chinese get a better better education. >> Yeah, it's interesting like compromise. I think that's what it comes down to because >> Yeah, it it's so like so multifaceted. It's very difficult to actually come up with proper scenarios and even put it in proper terms in my opinion especially with being bombarded with so many news items as well. Um maybe from an investor perspective like for our audience here Joe and Jane Blow watching like what can we take away from this? What do you think some of the ramifications will be over the next six months maybe of a tariff deal on the financial markets? Is it you said stabilize the US dollar? Um what what does that mean for you and what other implications could it have on the economies? >> Yeah. Um personally I'm I don't do financial investments. I I don't do financial investment advice but uh my main takeaway from this is that the US dollar is still pretty stable um and um China will eventually come to a reproachment with United States. I I I think one of the biggest surprises one of the geopolitical surprises with the next year possibly half a year is how quickly the USChina relationship improves. >> That is that is a statement. I like hearing that and uh that'll be fascinating cuz I want to see that as well cuz right now everything seems to be going head-to-head here with potential for for disaster quite honestly and we haven't even touched on Taiwan yet. Um and what that actually means and how complicated that situation is cuz it hasn't been thrown into the whole discussion that's why I've sort of left it out. Um it's it seems to be on the periphery. Just maybe just two seconds on that. Um what is your take on that on that matter? >> Okay. Okay. I'll bet you a million dollars China does not invade Taiwan. Okay, I'm willing to make that bad. I don't have a million I don't have a million dollars. Too bad, but I'm willing to make you that bad. I will go and borrow a million dollars and I'll make you look bad that China does not invade Taiwan. Right. The Pentagon is has been pro promoting this in order to get more funding for its East Asian operations. This is not in um this is not being discussed in China. Uh no one's thinking about Taiwan right now. Well, I've been hearing very little about it lately. So, I was just in my research for this interview, it's it's popped up, but very on the periphery. Um, so I was like, okay, it doesn't seem to be a big topic of negotiation or discussion at all right now. So, >> yeah, it's not an issue in Taiwan. You would think that of all the countries in the world, the country that would be most afraid of a of an invasion, the country that would spend a lot of time in the news media discussing a possible Chinese invasion would be Taiwan. But go to Taiwan, spend a month there, spend a year there. They don't they don't talk about it. They don't care. It's not relevant to them. >> No. Fantastic. Really really interesting. Professor John, he's like, I'm so appreciative of your time. Very unique insights. We'll definitely have to have you back in six months, the latest to see uh if you if your predictions and about the US China relations are are coming true. We all hope so. >> Hey, if if China invades Taiwan, invite me back and I'll give you a million dollars. >> I'll come and collect as well. >> Yeah. Yeah. >> No, no. Fantastic. Professor Jen, really appreciate it. I'll definitely, as I mentioned before to you before hitting the record button, I've downloaded quite a few episodes of your uh YouTube channel to my iPad for my travels this week uh to catch up on really really great content. Thank you so much for putting that out and thanks so much for joining us. Um we'll send everybody to your YouTube channel. How can we direct our viewers to you? >> Yeah, so my YouTube channel is pretty history. Um just just type in in YouTube and and my videos will will come out. And on my YouTube channel as well will also be links to my Substack. Um, so, so yeah, best place is to watch my my videos. >> Fantastic. Awesome. Thank you so much for joining us. Really, really appreciate it. And, uh, everybody else, thanks so much for tuning in to Sore Financially. I love this episode with Professor Jung. Very different perspectives. It's really refreshing to hear different angles as well. Hope you appreciate it as well. If you did, put a comment down below. Let us know what you think. And of course, if you haven't done so, hit that like and subscribe button. Helps us out tremendously. Beat the algorithm, who's a absolute nasty beast these days. and uh help us thrive together. Thank you so much and we'll be back with lots more. Take care out there. [Music]