China’s Two-Track Reality: Industry Power vs. Economic Strain | Global Macro | Ep.91
Summary
China Macro Outlook: The guest sees a dual economy with a dynamic modern sector but a broader sluggish backdrop, suggesting headline 5% growth masks ~3–3.5% potential and ongoing stimulus dependence.
Industrial Policy Focus: China’s strategy targets dominance in the fourth industrial revolution with EVs, batteries, solar, wind, IoT and AI, but this advanced slice is only ~10–12% of the economy and cannot resolve structural imbalances.
US-China Trade: Expect persistent trade frictions as booming Chinese exports meet weak imports and global overcapacity, with transshipment to third countries and rising pressure from the US, EU, and emerging markets.
Rare Earths: China retains processing dominance and can wield leverage, but this may erode as the US/EU build processing capacity; any restraint could be temporary and weaponization risk remains.
Belt and Road: BRI has shifted from heavy lending to trade, standards, and governance influence across the Global South, supporting resource access and export channels while reinforcing China’s geopolitical reach.
RMB Internationalization: Incremental progress via invoicing, swaps, and CIPS is noted, but capital controls and lack of sustained deficits limit reserve status; the dollar’s role remains dominant for surplus holders.
China Equities: Policy efforts to buoy the stock market provide limited consumption lift as households primarily hold property and deposits; prior 2014–15 intervention failures temper expectations.
Taiwan Risk: Beijing prefers gradual integration but military or blockade risks persist, against a backdrop of broader geopolitical competition for alignment across Asia, Latin America, and Africa.
Transcript
you can be really successful in, you know, doing the kinds of things that China does, [music] but without really making much of a mark on [music] ultimately the things that are going to find you out. If you can't solve the problem of inequality and you know labor force um dynamic and [music] income growth and debt capital misallocation, you have to solve these problems eventually or you suffer from the consequences. [music] Um and I think that's the big danger as far as I see it in China. >> Imagine [music] spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes, and their [music] failures. Imagine no more. Welcome to Top Traders Unplugged, the [music] place where you can learn from the best hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today's conversation, [music] remember to keep two things in mind. All the discussion we will have about investment performance is about the past [music] and past performance does not guarantee or even infer anything about future performance. Also understand [music] that there's a significant risk of financial loss with all investment strategies and you need to request and understand the specific risks from the investment [music] manager about their product before you make investment decisions. Here's your host, veteran hedge fund manager Neils [music] Kstrop Larson. Welcome or welcome back to another conversation in our series of episodes that focuses on markets and investing from a global macro perspective. [music] This is a series that I not only find incredibly interesting as well as intellectually challenging, but also very important given where we are in the global economy and [music] the geopolitical cycle. We want to dig deep into the minds of some of the most prominent experts to help us better understand what [music] this new global macrodriven world may look like. We want to explore their perspectives on a [music] host of game-changing issues and hopefully dig out nuances in their work through [music] meaningful conversations. Please enjoy today's episode hosted by Alan Dunn. Thanks for that introduction, Neils. Today I'm delighted to be joined by George Magnus. George is a research associate at the China Center in Oxford University and at the School of Oriental and African Studies in London. He was chief economist and then senior economic adviser at UBS investment bank. Uh and while he was there he served as the chair of the investment committee for the pension and life insurance fund. Earlier in his career he worked at sock genen SG Warberg and before that at Lori Milbank and at Bank of America. George great to have you on. How are you? >> Um pretty good Alan. Thanks for having me. >> Great. Well you you've worked at some uh some big names in in the banking world and your career spans uh many decades. What got you interested in economics and the markets in the first place? >> Well, to be brutally honest, it was an accident. Um, I got uh thrown out of class A level at school for uh um not resisting the temptation to chat during English lessons. And um um the only other A level that I was kind of interested to do or that was available to me really was economics. I took it twice and got an E. Um and um so I kind of fell into economics a little bit by accident but by the time I did my master's degree actually at SOASS uh yeah I was quite interested in uh development economics in particular and uh aid and trade and that whole kind of argument and um yeah and then I kind of uh went to study in the US um at the University of Illinois and then came back worked for the government for a while um as an economics writer. So writing basically economics propaganda for the British government. Uh not propaganda, you know, but just kind of pitching the what what the UK economy was all about and the insurance industry and the you know the budget and so on and so forth. And then um uh then started off with uh my first job actually was with Lloyd's Bank um as an economist and um yeah just kind of never looked back from there really. >> Very good. and you've obviously um had some senior roles particularly at UBS you're as a chief economist there and then senior economic adviser but obviously as you've transitioned towards the latter part of your career you very much focused on China um what what really was it about China that um motivated you to to really focus on that >> well my my first exposure to China really was um was when I was with Warbergs and um we used to send or the company used to send uh you know small bands of uh people to Beijing uh to go and pitch for their foreign exchange business and this is you know back in the sort of early 90s really or late 80s early 90s. Uh so this was pretty smallcale stuff at the time. Uh so I just kept on going back to China and I was it was always a little bit on my kind of portfolio. Um I mean my principal interests really for many well for decades really was obviously you know the economics of you know developed markets and you know the US, UK, Europe etc etc Japan and then after the financial crisis which um I had a I mean as as calls go you know I had a pretty good financial crisis um but it was uh obviously as everybody remembers it was a pretty scary time but when we came out of the financial crisis in like 200 09 2010 um I mean everybody's doing QE everybody's you know got balance sheets inside out the focus is huge ubiquitous um there's very not a lot of space really and I'm thinking really what's the next big game in town really for economists you know and um now so this is kind of after the financial crisis when you know China was starting to flex its muscles a bit even before CIP came power >> and yeah I thought China was going to be the next big story and um here we are >> very good and it certainly has been a big part of the the narrative um I mean as an economist when you're looking at China is it a different set of skills than when you're looking at say the US economy I mean from their perspective of you know the data the amount of data we get from the US you know high frequency data that are reasonably reliable I think people would say whereas with China there's always skepticism about the about the data. Um I mean how do you think about you know approaching China from an economic analysis perspective? Yeah, it's interesting really. I mean obviously there's a sort of a facious answer to that which is with you know Donald Trump firing the head of the uh statistics service um or whatever it was or the employment you know numbers. I mean it's it was starting to resemble a little bit like oh yeah this all looks very familiar from you know years and years of studying China. Um okay I think there's still a world of difference and um the the statistics in China I mean there are ubiquitous quantities of statistics micro macro top down bottom up. um a lot of the macro stuff isn't really very helpful anymore and um some of it never was, you know, like GDP, but um it it's um it's difficult to know um you know, how to deal with it. I I think it's interesting because in some respects, you know, China doesn't fit the script of your kind of run-of-the-mill one of economics 101 um uh rookie who kind of grows up uh you know to look at the economy in a certain way. Well, China's achieved, you know, some extraordinary things with a toolkit that we wouldn't really recognize, right? So, uh they don't have rule of law. They have lots of laws but they don't have a rule of law. They don't have property rights in the way that we understand them. I mean they have institutionalized rules and laws and regulations over the years and decades which made a big difference to um you know predictability and um and analytical method. But um you know the Chinese kind of system gets by on kind of social relationships between families, between firms and local governments and special relationships that exist. Um in other words, it doesn't it doesn't work exactly on the same kind of playbook um as it does in um a developed economy or even many emerging and middle- inome economies. uh so it is a little bit different in that regard. Having said that, I don't really have much patience with the idea that you know, China's economy works on different rules to um you know, Germany or Italy or you know, Malaysia or whatever. You know, supply the laws of supply and demand are the laws of supply and demand and you can't really mess with that. And you know the the what economists really do which is they look at how systems basically um hang together and where they become functional and dysfunctional and you know we're trained to be basically look for the things that actually work and don't work. I I think it's it's a pretty standard toolkit and indeed just sorry as last point um it's been quite interesting to see especially during the last 10 years how a number of Chinese economists um who are brave souls really to be honest because you can get arrested or you know punished for speaking your mind but some of them actually have become quite vocal on uh Chinese social media in terms of trying to explain from their perspective what they think is wrong with the Chinese economy and what they think the government ought to do about it and it's well dissimilar really in many respects from the way that many of us in the west kind of look at China as well. >> Okay, interesting. Well, we might get to that. I mean maybe just to set the scene uh where we're at currently with the Chinese economy and maybe just go back a few years. Obviously we had um you know uh I suppose towards the the the latter part of the last decade and into this decade that that the China real estate bubble that seemed to go on forever and then as we got done into kind of 2021 or so you know there was a shift towards common prosperity uh from Xi um anti- kind of tech anti-education sector there was the the kind of a conscious effort to deflate the property uh bubble red lines, three red lines, an anti-corruption campaign, and all of that kind of culminated with, you know, Everrand and the the the bursting of of the bubble. China went into a deep slowdown. Um they've been grappling with that. We obviously had significant stimulus announced last year. Things have stabilized it seems looking at it from the outside like where do you see it now in the context of that adjustment? Are they starting to come out of it or bouncing along the along the bottom or how would you characterize what the economy is now? Is certainly true to say that there is no such unitary thing as the Chinese economy. Right? might say this about lots of places in the world but in China's case obviously there is an incredible dichotomy between a modern sector with um worldclass companies uh global brands um and uh I mean we all who you know in electric vehicles and batteries and solar wind turbine uh you know all of this kind of stuff we know we know who these uh who these companies are you Internet of Things is, you know, the sort of cellular modules is dominated by about a half a dozen Chinese companies. Um, Deep Seek obviously is, you know, I mean, achieved notoriety recently, but for very different reasons. It's, you know, founded by a hedge fund proprietor. Um, so not quite the same sort of industrial model um that many other companies have uh basically been following. But China basically has this duality has a modern sector, advanced manufacturing, um the envy of the world in many respects. Um and uh you know all basically this is part of the government's big plan really to dominate what Cinping calls the fourth industrial revolution which is basically uh if you want to take it up to the appropriate level I mean this is the way in which you know China thinks it's going to reclaim its position of dominance in the world and elbow aside the United States and the west. Okay. So this part of the economy dynamic, modern um probably some firms are pretty productive. Um and uh you know obviously there's no question that you know China is innovating in its own uh specific way. This is about I don't know 10% 12% of the economy. This is these are the so-called strategic emerging industries as they've been identified um during the last 10 or 15 years. And then you've got the rest of the economy which actually is in deep doodoo to be honest. Right? So features misallocation of capital um the limitations of debt capacity because you know a lot of local governments and ses you know basically couldn't shouldn't carry more debt but have to issue keep issuing debt in order to keep current on current payments and elmortization. uh demographic decline um stagnant productivity uh you know or deter you know loss uh waste corruption loss you know this is all basically part of the sort of the non-modern economy um which has required stimulus every single year since co and even before that sometimes um so going back to the you know Chinese statistics which we were talking about a few minutes ago I mean if the Chinese government really believed their economic statistics, they wouldn't be stimulating the economy every year in the way that they have done or had to in order to hit unrealistically high growth targets. So there is a there's this dichotomy and um there's a kind of an issue. I mean there's no reason why the two um phenomena shouldn't live side by side for a considerable period of time. um as indeed uh and I always and I'm lots of other people highlight the Japanese case 40 35 40 years ago um where they had a you know kind of a modern industrial sector that was the envy of the world but um they these islands of technological excellence as I describe them you know existed in a sea of macroeconomic um trouble and imbalances asset bubbles and so on and then I think in some respects the same is true of China in the 2020s. How does this all end? I don't really know. Uh I mean there are similarities with Japan. Uh but it's there are sufficient dissimilarities that it makes prediction really really difficult. But we know a couple of things are true. A that you can have this dichotomy um of two things being perfectly true. you know, great modern sector, um, kind of troubled rest of economy. And the second thing is that just because you've got industrial might and worldclass companies doesn't mean they can solve your macroeconomic problems. In fact, they probably can't uh because the link between these two separate parts of the economy is industrial policy on an unprecedented scale. And that's uh you know the Chinese spend more on industrial policy than any country in the world on defense. Um so that gives you kind of a little bit of an idea about just how how scaled up this issue is. So >> yeah, >> the economy is motoring along at what the government says is about 5% peranom. It's not really 5%. It's kind of an artificial 5%. um it's underlying potential rate of growth probably no more than about three or three and a half um and um yeah it part of it is very successful some of it is not yeah I mean obviously uh as you say um industrial policy has been a big focus and and you know it seems to be that the you know that China has reverted to type in terms of an export oriented um um economic policy uh obviously for a long time the the the great hope would be that the economy would rebalance towards a consumer le economy or more service type economy which is always seem to be something that's going to come along in the future. I mean how re realistic is it to expect that to happen at some stage in the future or not do you think >> um just a couple of things here just I mean to tweak the question and answer a little bit rather than to anything else the um I mean I I still think China's kind of presents with investment growth rather than exportled growth definitely was true after joining the WTO in 2001 China did have export-led growth Uh but since the financial crisis really it's been investment growth now Chinese exports >> but has that has that not shifted like I mean the roads to nowhere and all of that seems to and yeah yeah >> absolutely so I mean definitely certainly this year exports have been booming. >> Yeah. >> But the main issue really because because trade is actually a smaller proportion of GDP now than it was say 10 or 15 years ago. I we should not confuse China's balance of payment surpluses which are enormous right it's like the trade surplus is probably over a trillion US dollars manufacturing surplus probably almost two trillion um we shouldn't cons we shouldn't confuse the trade surplus with export-led growth because really what's happening is exports are booming and imports are in the tank right the import growth in China in volume terms is basically flatlining or negative. >> So what's happening in China is that there's a weakness of domestic demand specifically household consumption. >> Um has I mean it's been a feature since certainly since co >> um and it's not gotten better despite government initiatives to try to change it. So we've had changes in child care payments, um changes in or increases in pension payments. We've had this sort of cash for clunkers equivalent where you know you can cash in your old consumer durables for uh new new ones because the government subsidizes the exchange. Um and there have been there's been countless measures to try to bolster the property market and uh force up uh property transactions and uh reduce inventories and so on. So it's not like the government has been inactive. Um, but I think it's gone past the point now where incremental changes in policies that affect consumption are going to be enduring or effective. Um and so what what really I think needs to happen is the entire model the economic development model of the PRC would have to change towards something that emphasizes household income growth consumption services and so on more than it does now. And to do that you have to have I think um something which the CCP the Chinese Communist Party can't offer um which is political reform because once you change the distribution of economic power away from the state towards households and consumers and private firms implicitly you're changing the distribution of political power as well and the one thing the CCP will not do is compromise that resandra is to rule unchallenged. the party leads everything and nothing is going to interfere with that. Final point on this. We've just had the sort of bare outlines of the 15th five-year plan which was um [clears throat] agreed at the fourth plenum of the central committee last week. And since then we've had a communicate from the fourth plenum uh a proposal from the central committee which goes into a little bit more detail and an explainer um from um uh Tijin Ping himself. This is normal practice. We won't see the plan in full uh until next spring at the National People's Congress, but um the emphasis of the plan is unquestionably on industrial policy and economic security. Everything else is secondary. Having said that, there will be some fiscal I mean it is proposed that there will be some fiscal support for the consumer and household sector and public goods and services. We shall see to what extent that happens and how quickly it's introduced. But I'm quite skeptical that there's going to be a meaningful shift in the direction of economic policy or in the economy um in the near predictable future. >> Yeah. I mean obviously you mentioned various fiscal measures. I mean there's a suggestion that a lot of the policy has been directed towards boosting the stock market as a means of boosting wealth and sentiment. Um is that something that might have a meaningful impact do you think? >> Um not really. I mean uh they tried this in 2014 2015 and it all ended um uh rather badly when you know there was a sort of a botched um depreciation of the exchange rate and um and you know the leverage in the stock market became untenable and actually it kind of even before the the foreign exchange policy uh snafu uh the stock market already kind of snapped. Um this time round, um the government, I think, has been a bit more careful. Um and they they've certainly uh put their kind of their weight, should we say, or their rhetoric and certainly behind a kind of a buoyant stock market. And I think that to be fair um the the stocks of companies that have benefited in you know other countries related to AI and technology uh you know were they had lagged behind in China and the the the government's posture towards private firms has certainly softened compared with what it was in 2021 2022. Um, so there's definitely been a bit of catch up here, but I mean households don't own a lot of equity. I mean, most of household savings are held in the form of property or bank deposits. Um, so the, you know, it certainly helps a bit uh certainly the urban middle class if um the stock market is doing better. Um but I don't think the impact on the economy or on consumption for that matter is going to be that big. I mean just to give you one estimate um the decline in property prices since 2021 um okay depends whose numbers you use. If you use the National Bureau of Statistics then on average u house prices or property prices have come down by about 20 25%. Private estimates suggest that it might be more than that, maybe more like 30 or even 40%. Uh so the estimate of the destruction of household wealth obviously varies depending on which um which measure of house prices you want to use. But um you know we're talking really about a destruction in um household wealth that might amount to something in the region of about 20 to 33% of GDP obviously you know in Ireland and Spain and parts of Britain and the United States. I mean we know what that feels like. >> And obviously I mean we talked about different tools used in the west and in in China. I mean the the the standard response to that in the west was quantitative easing money printing I might call it or may not but certainly liquidity and asset purchases QE. Um China has been happy to accumulate a lot of debt but not print a lot of money. what I mean what what is there philosophical whole process around QE and that type of policy >> you know certainly we haven't had a sort of comparable situation where the people's bank of China is being hoovering up you know copious amounts of bonds from the public but at the same time you know they have other ways in which they're basically trying to pump credits into the economy um and they can do it directly through I mean obviously the banking system is pretty much exclusively stateowned. Not all of it, but most of it. And the big banks um you know uh will be beneficiaries of and and most kind of smaller banks as well will be beneficiaries of local government you know guidance programs on credit and uh subsidized um credit which the government helps to uh propagate. So uh I mean we we've seen you know despite the fact that the growth of credit has actually slowed over the last like 5 to 10 years from you know 15 to 18% peranom to something like 7 to 8% peranom you have to put that in the context of what's happened to nominal growth in the economy. I mean that the money value of GDP has only grown by about 3.6% 6% in the last year. So if credit is growing at 8% you know it's it's there's a generosity about that which continues to lead to the situation where the credit multiplier or the credit intensity of GDP is still rising quite quickly. So I don't think that they haven't done QE in the way that we did it, but they've got other ways. They've had other ways of trying to maintain buoyant monetary conditions and liquidity conditions. >> Who's borrowing that that that money then? That if credit is still growing at 7 or 8% of GDP while >> economies Yeah. the I mean the principal borrowers are local governments and Okay. Um I mean there are I mean I think it sort of varies. I mean it's a kind of a moving feast but there may be about a dozen there are 32 uh provinces in China about 12 11 or 12 of which of of these local governments at the very high level. Obviously local government goes from you know province to uh you know to city and to community and village and so on so forth. But the local governments really the agents of they deliver the economic growth that China sets targets for. So you have you have this kind of structure of um hierarchy of local governments. Um many of which actually are at or close to the point where they can't really they borrow anymore without you know they have to borrow or they have to borrow in order to to payance and immortization on their loans. So, so they're debt constrained. Um, but they do keep borrowing and they have these um offbalance sheet um entities called local government finance vehicles which um everybody keeps saying that they need to be brought under control but uh they're still kind of uh beavering away and borrowing money. Um, so this is a lot of the money is sort of is ending up in local governments obviously because they they need it sometimes to stay solvent, sometimes to meet the programs for infrastructure which they're required to implement regardless and to meet the demand for public goods and services of course. >> Okay. So I mean you mentioned kind of parallels with Japan but differences. I mean when you're speaking there it sounds like the very reminiscent of Japan and you know these kind of uh a lot of um kind of uh well certainly in the private sector uh zombie banks or zombie entities and is is that the kind of the impression I'm get getting from you is that in this kind of non-dnamic sector a lot of entities kind of struggling along on on life support but but but not being put out of business but still part of the economy. Yeah. So they I mean the similarities really I mean in a nutshell obviously is you know you have this kind of dynamic modern sector envy of the world etc etc. Uh but you also have kind of a macroeconomic backdrop against that uh or you know the sort of the the overall kind of macro environment is much more circumspect. It's you know it presents with imbalances with asset bubbles with misallocated capital. Um there are vested interests between government entities and corporate interests that are resistant to change. There's a reluctance to introduce political reform. There are governance issues you know which um uh are blockages really. there's a almost I mean in some respects you know obviously China Japan to all intents and purposes was a one party state um much more so maybe in the past than it probably is today even though today obviously the LDP still is a big the big party but but this kind of substitution of control over um you know you have cutthroat competition but you have very very you know specific um control by central government or by government entities. I mean there are uh I mean lots of lots of things basically are replicated in a way in in in China today that featured in Japan. The big differences are Japan's corporate sector was you know up to its ears in debt whereas in China that's not the case except for S so ses and local governments but private firms to the extent that we recognize them as private firms are probably in a much better position than they were in Japan. Japan Japan never had capital controls. China is never going to get rid of them as far as I can see. Um [clears throat] so you've got effectively a more closed economy operating behind capital controls, outward capital movements. Um you've got a range of policy tools which are probably broader than the ones that the Japanese had. Um and you know just sheer size of China gives it an opportunity to um absorb shocks in ways which maybe the Japanese didn't have. The asset bubble in real estate probably is worse in Japan than it is in China. Um but anyway uh we may be kind of arguing not arguing but we may be kind of trying to sort of separate out um too many kind of minutia here. I mean there are plenty of similarities that make us that should make us concerned that this dichomous you know economy in China um will one day we'll have to reach some kind of closure um but we really don't really know which way it's going to go. >> I mean you talked about the importance of the industrial uh policy and the focus there and obviously mentioned the huge trade and current account surplus. Um so this is obviously something that's antagonizing the the rest of the world uh particularly the US. Um you know the the the negotiations on tariffs have been ongoing for for a long time at various highs and lows along the way. How do you see that playing out? Do you think there's a well and maybe who's got the stronger hand and how do you ultimately see it playing out? Uh obviously we're speaking now in advance of what is build to be you know a meeting between Xi Jinping and uh President Trump um um during the APEC conference um in days to come uh amid speculation that there's going to be some kind of a deal um or a trade you know some compromises and trade deal and I think that that's poss quite likely to happen but I think that we shouldn't be too deflected by that. Um I mean it's not a game ch it's not going to be a gamecher. It's not going to change the fundamental uh adversarial relationship between the US and China. It'll be it'll be good for as long as it lasts. U um and it may last, you know, may last a few months, it may last a year or two. I don't know. But um uh obviously it's a big problem. Um I would say um compared with the first Trump administration um Beijing has learned a few lessons about how to deal with Trump and um they've obviously got a kind of a playbook against which they want they've been willing and able to use leverage against the United States um particularly on the subject of rare earths which I think everybody knows about now and even if they agree not to um exercise that control for a year, which is the speculation. There's no question that they would use it again if they needed to or wanted to. Um and it at at best it'll take time, um for the United States and other countries in Europe, uh for example, to build up their own processing, uh capacity. I mean for China this might be a wasting asset because um they don't control the supply of rare earth but they do have a monopoly pretty much over the processing which means that if we were to spend the money uh on processing rare earths um we can we can find supplies and we that that leverage which China has you know may not endure uh at infinitism but I think the Chinese have also kind of realized that they can um have an impact on their relationship with America and others um by exercising leverage and if they can find leverage in other industries or other uh products I'm pretty sure they they will um >> but it is a problem I think uh for China I mean if industrial policy poses problems for you know a kind of a a nice rosy soft landing of the economy at home which it does it also poses is a problem because China is dependent on the rest of the world for um getting rid of the overcapacity at home exports and so on so forth. And even if the exports to America have dropped like a stone, which they have, uh you know, trans shshipment and rrooting through third countries has compensated to some degree and increased exports to the EU and to Africa, for example, are um are certainly on fire really in 2025. And this is not something which I think people and other countries particularly emerging countries are going to be totally comfortable with if it happens you know for the foreseeable future because China already accounts for about a third of global manufacturing. They can only increase that share at somebody else's expense. So whether it's Brazilian steel or Turkish EVs or you know Indonesian uh textiles or whatever it happens to be um I mean countries will feel that their um reliance on cheap Chinese imports um is undermining their own industrialization and industrial plans at home. So this I just don't think this can continue without more trade friction. >> Mhm. Obviously the US has taken that stance but as you say other emerging economies like the likes of Brazil etc haven't. I mean they've got the benefit I suppose in terms of cheaper uh industrial goods coming in. Um I mean is this somewhat linked to China's previous you mentioned Africa and China was active there in the the um the the belt and roads initiative. Is that as still as as as much of a feature of the landscape? You don't hear as much about it these days. Is that still are they still as active on that front as they were? >> I I think it is. I think it's just the character has changed. It's I mean for during its heyday, which was from 2013 to about 2017, the um the belt and road initiative was predominantly about lending. It was about financing of infrastructure projects um all over the place. Um which were to the benefit of course of Chinese infrastructure construction companies. Um but those numbers have kind of fallen away quite significantly since then. Um but the Barri is still important to China. Um a it's C Jinping's foreign policy project. So, you know, so long as he's in charge, it's going to be important. Um, but it's important because of um accessing raw materials. It's important because of selling uh consumer goods and technology goods. It's important because of the bifocation of technology in terms of standards, protocols, um, and the kind of, uh, separate way the decoupling effectively of markets because of, uh, data privacy or data regulation laws and so on so forth. And of course, it's also important because of governance initiatives. So uh Beijing has launched four major governance initiatives uh about development, security, civilization and governance itself with the the last being actually the global governance initiative which was um released or announced actually within the last year. uh I mean in general these are for these are targeted towards the so-called global south um whatever that is um but actually within the global south of course the belt and road initiative countries are um you know have almost a sort of a pride of place um and obviously it's expanding all the time with new countries added and new countries applying for membership and so on so um this is really a sort of a way in which I think China wants particularly emerging and middle- inome countries to you know align their political narratives around that of China and to be receptive to um commerce, trade, investment, cultural exchanges, people-to-people exchanges and this is really their uh you know the the Chinese way of of trying to um yeah reframe the institutional and governance basis of the of the global system. >> Okay. And is the ultimate goal for these economies to be uh increasingly export destinations? Is is that a key part of the the the idea? >> Well, many of them and already have China as their principal, you know, trade. Yeah. I mean, the main export market. Um and um so I think I think trade is the glue you know or a glue um that binds them together with China. It's quite interesting really. I mean now you know Trump at the moment as we speak is is in Asia and he's signed I don't know all sorts of agreements with Malaysia and Azang and um you know other countries as well. I mean there there is this sort of promiscuous relationship which a lot of countries have with both America and China. I mean some of them are obviously aligned locktock and barrel with what we call the crinks right which is China, Russia, Iran, North Korea. Um some of them are aligned you know locktock and barrel with the United States but maybe some of those alignments have stressed because of the reciprocal tariffs and so on and so forth. But there's a lot of countries in the middle um particularly in Asia I would say but also in Latin America where um you know they are both economically uh kind of not well dependent or you know reliant on trade with China but from a political and security point of view much more comfortable with the United States um warts and all. So yeah, this is uh I mean it will be for the foreseeable future and this is going to outlive Trump and probably Cinping, but I think for the foreseeable future, this is going to be our you this will be a battleground for the two big powers to um to fight over is the you know the loyalty or you know [snorts] um not loyalty is perhaps the wrong word but the you know the alignment he's come with with that. >> Yeah. You mentioned at one point there capital controls and you felt that obviously they've been a feature of the Chinese approach and you suggested that that would continue to be the case. I mean, we're in a world now of concerns about the dollar's reserve status. You know, investors are looking, you know, what are the alternatives, gold, the euro, renim has always been put forward as as obviously the the one that would ultimately topple the dollar, but we've never really uh progressed. Um, and obviously with capital controls, it prevents the full internationalization of Mimi. What's what is the Chinese perspective on this? Clearly, they would like to see the dollar's role diminish a bit, but they're not pushing the yuan forward as the alternative. uh not as obviously as they have been in the past. Although in the documentation that's just come out um following the fourth plenum um there are certainly references which I suspect we will see uh repeated in the 15th 5-year plan about uh promoting and accelerating the internationalization of the the renb. So they talk about this uh in kind of very kind of general terms. So I would say um and it's certainly something which they would be I don't think they actually want the renb to basically replace the US dollar uh because they don't want all the obligations that come with it and it would be entirely inconsistent of course with uh for them to you know to embrace this whilst having a system of capital controls in in situ which as I said I don't think that's going to um going to be diluted at all. Well, it's there's a lot of rhetoric about this um which uh I've been kind of pushing back against for as long as I can remember. Um, I mean it's quite difficult for you to I don't mean you I mean it's quite difficult for China to to replicate the role of the US dollar with the renm unless they allow foreigners to accumulate claims on them which means that they Chinese either have to run large trade deficits in perpetuity or they have to have free and open capital movements um so that foreigners can acquire those claims. So neither of those two things are going to happen, right? I mean I'm not saying ever because the government of China could change and you know leadership can change but for the foreseeable future and certainly while Cinping is in power these things are not going to happen. So yes, I think we are seeing incremental changes in the usage of the renmb in commerce. for example, for the purposes of invoicing, for example, as a denomination for swap agreements between some central banks and the PPC and for example in um uh payment systems um helped of course by China's own um CIP system which is it's not an alternative to Swift as some people make out because it actually uses Swift. It's an alternative to chips which is the the payment system um the dollar based kind of uh uh payment system. Um so there are incremental changes taking place there. This is true. So we are we are moving to a or we are going in a world really where the dollar's relative position has been declining. But ironically, the major beneficiaries according to the BIS that does the annual survey of all of this, the major beneficiaries have been the Aussie dollar, the CAN dollar, the Swedish croner and a couple of other currencies, but not the renm. And uh a lot of the a lot of the statistics that um uh that are get kind of banded around about how much of Chinese commerce and trade is denominated in R&B is basically Hong Kong based trade and Russia based trade. So a lot of the uh statistics that purport to show you know rising levels of remb and you know commerce and trade with China it comes either because of the redenomination of trade with Russia uh following the uh Ukraine war um but also via Hong Kong with a lot of Chinese companies roundtpping you know their invoicing and payments um kind of operations. Um so yeah I think it's uh it's something that is remarkable. I mean remarkable in the sense of merits a remark rather than fantastic because it's remarkable but it's not really something which is I mean if you were a dollar you wouldn't be particularly worried about it yet which is not to say that the Americans couldn't one day have a sewis moment you know if they really uh kind of screw up on international relations or you know lose a war or something like that. Um but for the moment I think that most of us talk about replace I mean internationalizing the usage of the Redmmin B is fine but ultimately what matters is not how you invoice your trade or how you pay for it but how surplus countries hold their balances >> mostly they hold them in US dollars of some description. >> I mean the other element of this is Hong Kong. you touched on the Hong Kong uh system um and we've gone kind of gone from at times been the Hong Kong dollar been under pressure to being having kind of excess liquidity in Hong Kong in recent times as well. I mean is is there a long-term plan there for alignment with the renim or not or will they two systems stay in running in parallel for for as long as we can see? Yeah, I mean I suppose in the I mean, you know, for what it's worth, in the long term, whatever that is, I mean, I can't really see the reason why China might want might not want to basically incorporate Hong Kong as, you know, in in its fullest sense as an integral part of the mainland. And so it wouldn't make any sense to have an Hong Kong tolerance on. But to be honest, this is a little bit theoretical. I think real time which is you know our time I think China still feels there's a value you know there's a I mean it it's long ago Hong Kong ceased to have any kind of economic significance for uh greater China because it's been overtaken by so many other places and by the greater Bay Area itself in Toto. Um but I think from a financial and commercial point of view um Hong Kong still fulfills quite a number of advantages uh for the [music] PRC >> and for the people's bank as well. [music] >> Just shifting gears a bit. I mean in terms of the um the Chinese Communist Party's standing in in in [music] China now and um you know this is something you hear of there was a you know a spectator magazine article recently talking about you know how secure is Xi really and these kind of suggestions come up from time to time but um you you touched on how the kind of you had this anti- technology anti- capitalist uh stance a few years ago which has softened in in recent times Um, I mean, obviously the the the the objective for the CCP is to remain in power at all times. Is there has there been a shift there? Do you sense that they're operating differently or or what's your read on that? >> Um, well, I think yeah, I mean that it has been a kind of quite a I was going to say an exciting time. I mean it certainly was a rather feisty period of weeks leading up to the fourth premium because there was a lot of speculation that Tiinping was under pressure. You know he got rid of um I mean eight or nine senior members of the PLA, eight of whom were in the central committee, one of whom was in the poly bureau. Um people thought that you know maybe power is becoming more diffuse in China. Maybe Si Jinping is kind of figurehead. I I think this speculation is going to keep cropping up time and time again. Um and until until it's real, I think we just have to assume it's just speculation. Um that kind of because I don't know for whatever reason. Well, it certainly it doesn't feel now a week after the plenum that there's been any kind of real change in the power structure that we can see. So yeah, I mean Tijin Ping's firmly in power. He uh I mean we are coming up to uh so he's in been in power now. Uh so the first period was 2012 to 2017. Second period to 2024. third. This is the third one which is runs until uh 2029. So by 2026, by next year, maybe 2027, um it's quite possible that the party may be thinking and he may be thinking about succession. It's not a shoe in that he's going to stay in situ until um he's removed or until he is too ill to carry on. Um I mean it's quite possible he could prepare for his own uh succession. So there's kind of everything to look out for really. Um but I don't think there's any kind of slippage or lessening of the preeminence of control in China from him and from the upper uh echelons of the party. I think the um the yeah the I mean the political structure of China looks to me about you know about as firm as it has ever done really to be honest. >> Obviously any conversation around China Taiwan has to be mentioned. Um again any observation there or what speculation is always um you know to the forest of what will ultimately happen or how it'll play out but uh any insight as to if or when China may ultimately move on Taiwan. We know that Cinping kind of wants what he calls the reunification. Okay, that word itself is highly charged because it's questionable, in fact deniable that Taiwan uh was ever really part of the PRC for any length of time anyway. But um we know that he he wants to see this resolved, you know, kind of on his watch kind of thing. Uh which suggests that, you know, that there is a kind of a vague clock ticking. I'll leave it to kind of military experts really to make the judgment as to whether the PLA is in any shape or form at the moment, particularly given the leadership um changes um to make a move on on Taiwan. Um I mean against that, you know, it's not always been the case that autocratic powers or even democratic powers, you know, are prepared for conflicts which they find themselves having to fight. So whether that's an issue or not, I'm not really sure. I mean, I would I'm pretty sure that the Chinese would much rather there was a sort of an osmosis in Taiwan in which, you know, through maybe some Chinese efforts from the mainland, you know, that the mood in Taiwan changes over time uh to become less hostile to unification or to um uh not less h maybe even favorable uh towards it. Obviously the risk of of military or blockades or something like that. Clearly that risk is is real and we have to live with it. Um but I just Yeah. I don't really have any insight as to whether it's increasingly likely or decreasingly likely. It's a possibility. Yeah. >> Yeah. So I mean sum it up. It sounds like from an economic perspective I mean you thrown a parallel with Japan although and noted the differences but um I guess the key thing is the size of this dynamic size side of the economy versus the the the stagnating ban. It seems like overall you you're probably more pessimistic than optimistic. Is that fair to say? >> I think so. I mean I think I uh in some discussions I've had with you know some of my um friends and colleagues you know we talk about whether China is on a at a precipice or plateau. I I think it's probable that they are on a plateau, right? I think the the underlying momentum of the economy I think is much more sluggish save only for their industrial prowess and I don't think we should use industrial prowess as a benchmark as to whether they are succeeding or failing as an economy because Chinese have always been entrepreneurial. Chinese have always surprised with their ability to cope with adversity, containment, export controls, whatever it happens to be. Um, and you know, they have their own ways of innovating which and evading what they regard as containment. Well, you know, which they're proving to be, you know, not successful if not in everything than in some things. So you you can be really successful in you know doing the kinds of things that China does but without really making much of a mark on ultimately the things that are going to find you out if you can't solve the problem of inequality and you know labor force um dynamic and income growth and debt capital misallocation. you have to solve these problems eventually or you suffer from the consequences. Um, and I think that's the big danger as far as I see it in China. Okay, very good. Before we wrap up, we always like to get some perspective from people as to uh uh things that have been helpful during their career or advice you would give uh to people starting off if they wanted to get more proficient on macro and China analysis. Any any things? I know you've written a book yourself, so I'm sure you would give that a mention, but anything else? >> Well, uh I mean I think the sort of the literary stuff and the writing comes a bit later. I mean I um I mean I I sometimes um uh do it a little bit less now. Um but I certainly have been um sort of on the circuit of going to talk to um sort of A-level students at schools in the UK um about you know if they want to develop a career in economics or going to the city or finance whatever. I mean I think um I mean I think finance is probably a much different place now from what it was when I uh was a kind of a rookie economist. Um, and it's a little bit I think it's probably more restrictive and you know there are compliance departments that are bigger than good knows what else. Um, but I think um I think uh getting your hands dirt if you want to be you if you want to develop an economics career obviously you can go to work for the government of your country if you want and they'll train you pretty well. Um uh but I think working in finance is a great place to to go. Um it's uh it's pretty unforgiving if you get it wrong and if you continue to make mistakes, but it's um it's very I mean spiritually and and uh materially it's very rewarding um if you succeed. And I think it's very exciting as well. So I wouldn't I wouldn't be tempted to put people off. Uh in fact, I' I'd kind of encourage them to, you know, just see what it's like. Um if you don't like it, you can always try something else. >> Absolutely. Well, for from all of us who are in the game, I I think we all agree with that. It is always very interesting. Um, but George, very much appreciate you coming on uh to chat with us today. It's always uh fascinating to get your perspective on China. Uh, and people can obviously follow your work on on your own website uh at at georgemagnus.com. And for all of our listeners and Top Traders Unplugged, thanks for joining in and we'll be back again soon with more content. Thanks for listening to Top Traders Unplugged. If [music] you feel you learned something of value from today's episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you'll be sure to get all the new episodes as they're released. We have some amazing guests lined up for you. And to ensure our show continues to [music] grow, please leave us an honest rating and review in iTunes. It only takes a minute and it's the best way to show us you love the podcast. We'll see you next time on Top Traders Unplugged. [music]
China’s Two-Track Reality: Industry Power vs. Economic Strain | Global Macro | Ep.91
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you can be really successful in, you know, doing the kinds of things that China does, [music] but without really making much of a mark on [music] ultimately the things that are going to find you out. If you can't solve the problem of inequality and you know labor force um dynamic and [music] income growth and debt capital misallocation, you have to solve these problems eventually or you suffer from the consequences. [music] Um and I think that's the big danger as far as I see it in China. >> Imagine [music] spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes, and their [music] failures. Imagine no more. Welcome to Top Traders Unplugged, the [music] place where you can learn from the best hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today's conversation, [music] remember to keep two things in mind. All the discussion we will have about investment performance is about the past [music] and past performance does not guarantee or even infer anything about future performance. Also understand [music] that there's a significant risk of financial loss with all investment strategies and you need to request and understand the specific risks from the investment [music] manager about their product before you make investment decisions. Here's your host, veteran hedge fund manager Neils [music] Kstrop Larson. Welcome or welcome back to another conversation in our series of episodes that focuses on markets and investing from a global macro perspective. [music] This is a series that I not only find incredibly interesting as well as intellectually challenging, but also very important given where we are in the global economy and [music] the geopolitical cycle. We want to dig deep into the minds of some of the most prominent experts to help us better understand what [music] this new global macrodriven world may look like. We want to explore their perspectives on a [music] host of game-changing issues and hopefully dig out nuances in their work through [music] meaningful conversations. Please enjoy today's episode hosted by Alan Dunn. Thanks for that introduction, Neils. Today I'm delighted to be joined by George Magnus. George is a research associate at the China Center in Oxford University and at the School of Oriental and African Studies in London. He was chief economist and then senior economic adviser at UBS investment bank. Uh and while he was there he served as the chair of the investment committee for the pension and life insurance fund. Earlier in his career he worked at sock genen SG Warberg and before that at Lori Milbank and at Bank of America. George great to have you on. How are you? >> Um pretty good Alan. Thanks for having me. >> Great. Well you you've worked at some uh some big names in in the banking world and your career spans uh many decades. What got you interested in economics and the markets in the first place? >> Well, to be brutally honest, it was an accident. Um, I got uh thrown out of class A level at school for uh um not resisting the temptation to chat during English lessons. And um um the only other A level that I was kind of interested to do or that was available to me really was economics. I took it twice and got an E. Um and um so I kind of fell into economics a little bit by accident but by the time I did my master's degree actually at SOASS uh yeah I was quite interested in uh development economics in particular and uh aid and trade and that whole kind of argument and um yeah and then I kind of uh went to study in the US um at the University of Illinois and then came back worked for the government for a while um as an economics writer. So writing basically economics propaganda for the British government. Uh not propaganda, you know, but just kind of pitching the what what the UK economy was all about and the insurance industry and the you know the budget and so on and so forth. And then um uh then started off with uh my first job actually was with Lloyd's Bank um as an economist and um yeah just kind of never looked back from there really. >> Very good. and you've obviously um had some senior roles particularly at UBS you're as a chief economist there and then senior economic adviser but obviously as you've transitioned towards the latter part of your career you very much focused on China um what what really was it about China that um motivated you to to really focus on that >> well my my first exposure to China really was um was when I was with Warbergs and um we used to send or the company used to send uh you know small bands of uh people to Beijing uh to go and pitch for their foreign exchange business and this is you know back in the sort of early 90s really or late 80s early 90s. Uh so this was pretty smallcale stuff at the time. Uh so I just kept on going back to China and I was it was always a little bit on my kind of portfolio. Um I mean my principal interests really for many well for decades really was obviously you know the economics of you know developed markets and you know the US, UK, Europe etc etc Japan and then after the financial crisis which um I had a I mean as as calls go you know I had a pretty good financial crisis um but it was uh obviously as everybody remembers it was a pretty scary time but when we came out of the financial crisis in like 200 09 2010 um I mean everybody's doing QE everybody's you know got balance sheets inside out the focus is huge ubiquitous um there's very not a lot of space really and I'm thinking really what's the next big game in town really for economists you know and um now so this is kind of after the financial crisis when you know China was starting to flex its muscles a bit even before CIP came power >> and yeah I thought China was going to be the next big story and um here we are >> very good and it certainly has been a big part of the the narrative um I mean as an economist when you're looking at China is it a different set of skills than when you're looking at say the US economy I mean from their perspective of you know the data the amount of data we get from the US you know high frequency data that are reasonably reliable I think people would say whereas with China there's always skepticism about the about the data. Um I mean how do you think about you know approaching China from an economic analysis perspective? Yeah, it's interesting really. I mean obviously there's a sort of a facious answer to that which is with you know Donald Trump firing the head of the uh statistics service um or whatever it was or the employment you know numbers. I mean it's it was starting to resemble a little bit like oh yeah this all looks very familiar from you know years and years of studying China. Um okay I think there's still a world of difference and um the the statistics in China I mean there are ubiquitous quantities of statistics micro macro top down bottom up. um a lot of the macro stuff isn't really very helpful anymore and um some of it never was, you know, like GDP, but um it it's um it's difficult to know um you know, how to deal with it. I I think it's interesting because in some respects, you know, China doesn't fit the script of your kind of run-of-the-mill one of economics 101 um uh rookie who kind of grows up uh you know to look at the economy in a certain way. Well, China's achieved, you know, some extraordinary things with a toolkit that we wouldn't really recognize, right? So, uh they don't have rule of law. They have lots of laws but they don't have a rule of law. They don't have property rights in the way that we understand them. I mean they have institutionalized rules and laws and regulations over the years and decades which made a big difference to um you know predictability and um and analytical method. But um you know the Chinese kind of system gets by on kind of social relationships between families, between firms and local governments and special relationships that exist. Um in other words, it doesn't it doesn't work exactly on the same kind of playbook um as it does in um a developed economy or even many emerging and middle- inome economies. uh so it is a little bit different in that regard. Having said that, I don't really have much patience with the idea that you know, China's economy works on different rules to um you know, Germany or Italy or you know, Malaysia or whatever. You know, supply the laws of supply and demand are the laws of supply and demand and you can't really mess with that. And you know the the what economists really do which is they look at how systems basically um hang together and where they become functional and dysfunctional and you know we're trained to be basically look for the things that actually work and don't work. I I think it's it's a pretty standard toolkit and indeed just sorry as last point um it's been quite interesting to see especially during the last 10 years how a number of Chinese economists um who are brave souls really to be honest because you can get arrested or you know punished for speaking your mind but some of them actually have become quite vocal on uh Chinese social media in terms of trying to explain from their perspective what they think is wrong with the Chinese economy and what they think the government ought to do about it and it's well dissimilar really in many respects from the way that many of us in the west kind of look at China as well. >> Okay, interesting. Well, we might get to that. I mean maybe just to set the scene uh where we're at currently with the Chinese economy and maybe just go back a few years. Obviously we had um you know uh I suppose towards the the the latter part of the last decade and into this decade that that the China real estate bubble that seemed to go on forever and then as we got done into kind of 2021 or so you know there was a shift towards common prosperity uh from Xi um anti- kind of tech anti-education sector there was the the kind of a conscious effort to deflate the property uh bubble red lines, three red lines, an anti-corruption campaign, and all of that kind of culminated with, you know, Everrand and the the the bursting of of the bubble. China went into a deep slowdown. Um they've been grappling with that. We obviously had significant stimulus announced last year. Things have stabilized it seems looking at it from the outside like where do you see it now in the context of that adjustment? Are they starting to come out of it or bouncing along the along the bottom or how would you characterize what the economy is now? Is certainly true to say that there is no such unitary thing as the Chinese economy. Right? might say this about lots of places in the world but in China's case obviously there is an incredible dichotomy between a modern sector with um worldclass companies uh global brands um and uh I mean we all who you know in electric vehicles and batteries and solar wind turbine uh you know all of this kind of stuff we know we know who these uh who these companies are you Internet of Things is, you know, the sort of cellular modules is dominated by about a half a dozen Chinese companies. Um, Deep Seek obviously is, you know, I mean, achieved notoriety recently, but for very different reasons. It's, you know, founded by a hedge fund proprietor. Um, so not quite the same sort of industrial model um that many other companies have uh basically been following. But China basically has this duality has a modern sector, advanced manufacturing, um the envy of the world in many respects. Um and uh you know all basically this is part of the government's big plan really to dominate what Cinping calls the fourth industrial revolution which is basically uh if you want to take it up to the appropriate level I mean this is the way in which you know China thinks it's going to reclaim its position of dominance in the world and elbow aside the United States and the west. Okay. So this part of the economy dynamic, modern um probably some firms are pretty productive. Um and uh you know obviously there's no question that you know China is innovating in its own uh specific way. This is about I don't know 10% 12% of the economy. This is these are the so-called strategic emerging industries as they've been identified um during the last 10 or 15 years. And then you've got the rest of the economy which actually is in deep doodoo to be honest. Right? So features misallocation of capital um the limitations of debt capacity because you know a lot of local governments and ses you know basically couldn't shouldn't carry more debt but have to issue keep issuing debt in order to keep current on current payments and elmortization. uh demographic decline um stagnant productivity uh you know or deter you know loss uh waste corruption loss you know this is all basically part of the sort of the non-modern economy um which has required stimulus every single year since co and even before that sometimes um so going back to the you know Chinese statistics which we were talking about a few minutes ago I mean if the Chinese government really believed their economic statistics, they wouldn't be stimulating the economy every year in the way that they have done or had to in order to hit unrealistically high growth targets. So there is a there's this dichotomy and um there's a kind of an issue. I mean there's no reason why the two um phenomena shouldn't live side by side for a considerable period of time. um as indeed uh and I always and I'm lots of other people highlight the Japanese case 40 35 40 years ago um where they had a you know kind of a modern industrial sector that was the envy of the world but um they these islands of technological excellence as I describe them you know existed in a sea of macroeconomic um trouble and imbalances asset bubbles and so on and then I think in some respects the same is true of China in the 2020s. How does this all end? I don't really know. Uh I mean there are similarities with Japan. Uh but it's there are sufficient dissimilarities that it makes prediction really really difficult. But we know a couple of things are true. A that you can have this dichotomy um of two things being perfectly true. you know, great modern sector, um, kind of troubled rest of economy. And the second thing is that just because you've got industrial might and worldclass companies doesn't mean they can solve your macroeconomic problems. In fact, they probably can't uh because the link between these two separate parts of the economy is industrial policy on an unprecedented scale. And that's uh you know the Chinese spend more on industrial policy than any country in the world on defense. Um so that gives you kind of a little bit of an idea about just how how scaled up this issue is. So >> yeah, >> the economy is motoring along at what the government says is about 5% peranom. It's not really 5%. It's kind of an artificial 5%. um it's underlying potential rate of growth probably no more than about three or three and a half um and um yeah it part of it is very successful some of it is not yeah I mean obviously uh as you say um industrial policy has been a big focus and and you know it seems to be that the you know that China has reverted to type in terms of an export oriented um um economic policy uh obviously for a long time the the the great hope would be that the economy would rebalance towards a consumer le economy or more service type economy which is always seem to be something that's going to come along in the future. I mean how re realistic is it to expect that to happen at some stage in the future or not do you think >> um just a couple of things here just I mean to tweak the question and answer a little bit rather than to anything else the um I mean I I still think China's kind of presents with investment growth rather than exportled growth definitely was true after joining the WTO in 2001 China did have export-led growth Uh but since the financial crisis really it's been investment growth now Chinese exports >> but has that has that not shifted like I mean the roads to nowhere and all of that seems to and yeah yeah >> absolutely so I mean definitely certainly this year exports have been booming. >> Yeah. >> But the main issue really because because trade is actually a smaller proportion of GDP now than it was say 10 or 15 years ago. I we should not confuse China's balance of payment surpluses which are enormous right it's like the trade surplus is probably over a trillion US dollars manufacturing surplus probably almost two trillion um we shouldn't cons we shouldn't confuse the trade surplus with export-led growth because really what's happening is exports are booming and imports are in the tank right the import growth in China in volume terms is basically flatlining or negative. >> So what's happening in China is that there's a weakness of domestic demand specifically household consumption. >> Um has I mean it's been a feature since certainly since co >> um and it's not gotten better despite government initiatives to try to change it. So we've had changes in child care payments, um changes in or increases in pension payments. We've had this sort of cash for clunkers equivalent where you know you can cash in your old consumer durables for uh new new ones because the government subsidizes the exchange. Um and there have been there's been countless measures to try to bolster the property market and uh force up uh property transactions and uh reduce inventories and so on. So it's not like the government has been inactive. Um, but I think it's gone past the point now where incremental changes in policies that affect consumption are going to be enduring or effective. Um and so what what really I think needs to happen is the entire model the economic development model of the PRC would have to change towards something that emphasizes household income growth consumption services and so on more than it does now. And to do that you have to have I think um something which the CCP the Chinese Communist Party can't offer um which is political reform because once you change the distribution of economic power away from the state towards households and consumers and private firms implicitly you're changing the distribution of political power as well and the one thing the CCP will not do is compromise that resandra is to rule unchallenged. the party leads everything and nothing is going to interfere with that. Final point on this. We've just had the sort of bare outlines of the 15th five-year plan which was um [clears throat] agreed at the fourth plenum of the central committee last week. And since then we've had a communicate from the fourth plenum uh a proposal from the central committee which goes into a little bit more detail and an explainer um from um uh Tijin Ping himself. This is normal practice. We won't see the plan in full uh until next spring at the National People's Congress, but um the emphasis of the plan is unquestionably on industrial policy and economic security. Everything else is secondary. Having said that, there will be some fiscal I mean it is proposed that there will be some fiscal support for the consumer and household sector and public goods and services. We shall see to what extent that happens and how quickly it's introduced. But I'm quite skeptical that there's going to be a meaningful shift in the direction of economic policy or in the economy um in the near predictable future. >> Yeah. I mean obviously you mentioned various fiscal measures. I mean there's a suggestion that a lot of the policy has been directed towards boosting the stock market as a means of boosting wealth and sentiment. Um is that something that might have a meaningful impact do you think? >> Um not really. I mean uh they tried this in 2014 2015 and it all ended um uh rather badly when you know there was a sort of a botched um depreciation of the exchange rate and um and you know the leverage in the stock market became untenable and actually it kind of even before the the foreign exchange policy uh snafu uh the stock market already kind of snapped. Um this time round, um the government, I think, has been a bit more careful. Um and they they've certainly uh put their kind of their weight, should we say, or their rhetoric and certainly behind a kind of a buoyant stock market. And I think that to be fair um the the stocks of companies that have benefited in you know other countries related to AI and technology uh you know were they had lagged behind in China and the the the government's posture towards private firms has certainly softened compared with what it was in 2021 2022. Um, so there's definitely been a bit of catch up here, but I mean households don't own a lot of equity. I mean, most of household savings are held in the form of property or bank deposits. Um, so the, you know, it certainly helps a bit uh certainly the urban middle class if um the stock market is doing better. Um but I don't think the impact on the economy or on consumption for that matter is going to be that big. I mean just to give you one estimate um the decline in property prices since 2021 um okay depends whose numbers you use. If you use the National Bureau of Statistics then on average u house prices or property prices have come down by about 20 25%. Private estimates suggest that it might be more than that, maybe more like 30 or even 40%. Uh so the estimate of the destruction of household wealth obviously varies depending on which um which measure of house prices you want to use. But um you know we're talking really about a destruction in um household wealth that might amount to something in the region of about 20 to 33% of GDP obviously you know in Ireland and Spain and parts of Britain and the United States. I mean we know what that feels like. >> And obviously I mean we talked about different tools used in the west and in in China. I mean the the the standard response to that in the west was quantitative easing money printing I might call it or may not but certainly liquidity and asset purchases QE. Um China has been happy to accumulate a lot of debt but not print a lot of money. what I mean what what is there philosophical whole process around QE and that type of policy >> you know certainly we haven't had a sort of comparable situation where the people's bank of China is being hoovering up you know copious amounts of bonds from the public but at the same time you know they have other ways in which they're basically trying to pump credits into the economy um and they can do it directly through I mean obviously the banking system is pretty much exclusively stateowned. Not all of it, but most of it. And the big banks um you know uh will be beneficiaries of and and most kind of smaller banks as well will be beneficiaries of local government you know guidance programs on credit and uh subsidized um credit which the government helps to uh propagate. So uh I mean we we've seen you know despite the fact that the growth of credit has actually slowed over the last like 5 to 10 years from you know 15 to 18% peranom to something like 7 to 8% peranom you have to put that in the context of what's happened to nominal growth in the economy. I mean that the money value of GDP has only grown by about 3.6% 6% in the last year. So if credit is growing at 8% you know it's it's there's a generosity about that which continues to lead to the situation where the credit multiplier or the credit intensity of GDP is still rising quite quickly. So I don't think that they haven't done QE in the way that we did it, but they've got other ways. They've had other ways of trying to maintain buoyant monetary conditions and liquidity conditions. >> Who's borrowing that that that money then? That if credit is still growing at 7 or 8% of GDP while >> economies Yeah. the I mean the principal borrowers are local governments and Okay. Um I mean there are I mean I think it sort of varies. I mean it's a kind of a moving feast but there may be about a dozen there are 32 uh provinces in China about 12 11 or 12 of which of of these local governments at the very high level. Obviously local government goes from you know province to uh you know to city and to community and village and so on so forth. But the local governments really the agents of they deliver the economic growth that China sets targets for. So you have you have this kind of structure of um hierarchy of local governments. Um many of which actually are at or close to the point where they can't really they borrow anymore without you know they have to borrow or they have to borrow in order to to payance and immortization on their loans. So, so they're debt constrained. Um, but they do keep borrowing and they have these um offbalance sheet um entities called local government finance vehicles which um everybody keeps saying that they need to be brought under control but uh they're still kind of uh beavering away and borrowing money. Um, so this is a lot of the money is sort of is ending up in local governments obviously because they they need it sometimes to stay solvent, sometimes to meet the programs for infrastructure which they're required to implement regardless and to meet the demand for public goods and services of course. >> Okay. So I mean you mentioned kind of parallels with Japan but differences. I mean when you're speaking there it sounds like the very reminiscent of Japan and you know these kind of uh a lot of um kind of uh well certainly in the private sector uh zombie banks or zombie entities and is is that the kind of the impression I'm get getting from you is that in this kind of non-dnamic sector a lot of entities kind of struggling along on on life support but but but not being put out of business but still part of the economy. Yeah. So they I mean the similarities really I mean in a nutshell obviously is you know you have this kind of dynamic modern sector envy of the world etc etc. Uh but you also have kind of a macroeconomic backdrop against that uh or you know the sort of the the overall kind of macro environment is much more circumspect. It's you know it presents with imbalances with asset bubbles with misallocated capital. Um there are vested interests between government entities and corporate interests that are resistant to change. There's a reluctance to introduce political reform. There are governance issues you know which um uh are blockages really. there's a almost I mean in some respects you know obviously China Japan to all intents and purposes was a one party state um much more so maybe in the past than it probably is today even though today obviously the LDP still is a big the big party but but this kind of substitution of control over um you know you have cutthroat competition but you have very very you know specific um control by central government or by government entities. I mean there are uh I mean lots of lots of things basically are replicated in a way in in in China today that featured in Japan. The big differences are Japan's corporate sector was you know up to its ears in debt whereas in China that's not the case except for S so ses and local governments but private firms to the extent that we recognize them as private firms are probably in a much better position than they were in Japan. Japan Japan never had capital controls. China is never going to get rid of them as far as I can see. Um [clears throat] so you've got effectively a more closed economy operating behind capital controls, outward capital movements. Um you've got a range of policy tools which are probably broader than the ones that the Japanese had. Um and you know just sheer size of China gives it an opportunity to um absorb shocks in ways which maybe the Japanese didn't have. The asset bubble in real estate probably is worse in Japan than it is in China. Um but anyway uh we may be kind of arguing not arguing but we may be kind of trying to sort of separate out um too many kind of minutia here. I mean there are plenty of similarities that make us that should make us concerned that this dichomous you know economy in China um will one day we'll have to reach some kind of closure um but we really don't really know which way it's going to go. >> I mean you talked about the importance of the industrial uh policy and the focus there and obviously mentioned the huge trade and current account surplus. Um so this is obviously something that's antagonizing the the rest of the world uh particularly the US. Um you know the the the negotiations on tariffs have been ongoing for for a long time at various highs and lows along the way. How do you see that playing out? Do you think there's a well and maybe who's got the stronger hand and how do you ultimately see it playing out? Uh obviously we're speaking now in advance of what is build to be you know a meeting between Xi Jinping and uh President Trump um um during the APEC conference um in days to come uh amid speculation that there's going to be some kind of a deal um or a trade you know some compromises and trade deal and I think that that's poss quite likely to happen but I think that we shouldn't be too deflected by that. Um I mean it's not a game ch it's not going to be a gamecher. It's not going to change the fundamental uh adversarial relationship between the US and China. It'll be it'll be good for as long as it lasts. U um and it may last, you know, may last a few months, it may last a year or two. I don't know. But um uh obviously it's a big problem. Um I would say um compared with the first Trump administration um Beijing has learned a few lessons about how to deal with Trump and um they've obviously got a kind of a playbook against which they want they've been willing and able to use leverage against the United States um particularly on the subject of rare earths which I think everybody knows about now and even if they agree not to um exercise that control for a year, which is the speculation. There's no question that they would use it again if they needed to or wanted to. Um and it at at best it'll take time, um for the United States and other countries in Europe, uh for example, to build up their own processing, uh capacity. I mean for China this might be a wasting asset because um they don't control the supply of rare earth but they do have a monopoly pretty much over the processing which means that if we were to spend the money uh on processing rare earths um we can we can find supplies and we that that leverage which China has you know may not endure uh at infinitism but I think the Chinese have also kind of realized that they can um have an impact on their relationship with America and others um by exercising leverage and if they can find leverage in other industries or other uh products I'm pretty sure they they will um >> but it is a problem I think uh for China I mean if industrial policy poses problems for you know a kind of a a nice rosy soft landing of the economy at home which it does it also poses is a problem because China is dependent on the rest of the world for um getting rid of the overcapacity at home exports and so on so forth. And even if the exports to America have dropped like a stone, which they have, uh you know, trans shshipment and rrooting through third countries has compensated to some degree and increased exports to the EU and to Africa, for example, are um are certainly on fire really in 2025. And this is not something which I think people and other countries particularly emerging countries are going to be totally comfortable with if it happens you know for the foreseeable future because China already accounts for about a third of global manufacturing. They can only increase that share at somebody else's expense. So whether it's Brazilian steel or Turkish EVs or you know Indonesian uh textiles or whatever it happens to be um I mean countries will feel that their um reliance on cheap Chinese imports um is undermining their own industrialization and industrial plans at home. So this I just don't think this can continue without more trade friction. >> Mhm. Obviously the US has taken that stance but as you say other emerging economies like the likes of Brazil etc haven't. I mean they've got the benefit I suppose in terms of cheaper uh industrial goods coming in. Um I mean is this somewhat linked to China's previous you mentioned Africa and China was active there in the the um the the belt and roads initiative. Is that as still as as as much of a feature of the landscape? You don't hear as much about it these days. Is that still are they still as active on that front as they were? >> I I think it is. I think it's just the character has changed. It's I mean for during its heyday, which was from 2013 to about 2017, the um the belt and road initiative was predominantly about lending. It was about financing of infrastructure projects um all over the place. Um which were to the benefit of course of Chinese infrastructure construction companies. Um but those numbers have kind of fallen away quite significantly since then. Um but the Barri is still important to China. Um a it's C Jinping's foreign policy project. So, you know, so long as he's in charge, it's going to be important. Um, but it's important because of um accessing raw materials. It's important because of selling uh consumer goods and technology goods. It's important because of the bifocation of technology in terms of standards, protocols, um, and the kind of, uh, separate way the decoupling effectively of markets because of, uh, data privacy or data regulation laws and so on so forth. And of course, it's also important because of governance initiatives. So uh Beijing has launched four major governance initiatives uh about development, security, civilization and governance itself with the the last being actually the global governance initiative which was um released or announced actually within the last year. uh I mean in general these are for these are targeted towards the so-called global south um whatever that is um but actually within the global south of course the belt and road initiative countries are um you know have almost a sort of a pride of place um and obviously it's expanding all the time with new countries added and new countries applying for membership and so on so um this is really a sort of a way in which I think China wants particularly emerging and middle- inome countries to you know align their political narratives around that of China and to be receptive to um commerce, trade, investment, cultural exchanges, people-to-people exchanges and this is really their uh you know the the Chinese way of of trying to um yeah reframe the institutional and governance basis of the of the global system. >> Okay. And is the ultimate goal for these economies to be uh increasingly export destinations? Is is that a key part of the the the idea? >> Well, many of them and already have China as their principal, you know, trade. Yeah. I mean, the main export market. Um and um so I think I think trade is the glue you know or a glue um that binds them together with China. It's quite interesting really. I mean now you know Trump at the moment as we speak is is in Asia and he's signed I don't know all sorts of agreements with Malaysia and Azang and um you know other countries as well. I mean there there is this sort of promiscuous relationship which a lot of countries have with both America and China. I mean some of them are obviously aligned locktock and barrel with what we call the crinks right which is China, Russia, Iran, North Korea. Um some of them are aligned you know locktock and barrel with the United States but maybe some of those alignments have stressed because of the reciprocal tariffs and so on and so forth. But there's a lot of countries in the middle um particularly in Asia I would say but also in Latin America where um you know they are both economically uh kind of not well dependent or you know reliant on trade with China but from a political and security point of view much more comfortable with the United States um warts and all. So yeah, this is uh I mean it will be for the foreseeable future and this is going to outlive Trump and probably Cinping, but I think for the foreseeable future, this is going to be our you this will be a battleground for the two big powers to um to fight over is the you know the loyalty or you know [snorts] um not loyalty is perhaps the wrong word but the you know the alignment he's come with with that. >> Yeah. You mentioned at one point there capital controls and you felt that obviously they've been a feature of the Chinese approach and you suggested that that would continue to be the case. I mean, we're in a world now of concerns about the dollar's reserve status. You know, investors are looking, you know, what are the alternatives, gold, the euro, renim has always been put forward as as obviously the the one that would ultimately topple the dollar, but we've never really uh progressed. Um, and obviously with capital controls, it prevents the full internationalization of Mimi. What's what is the Chinese perspective on this? Clearly, they would like to see the dollar's role diminish a bit, but they're not pushing the yuan forward as the alternative. uh not as obviously as they have been in the past. Although in the documentation that's just come out um following the fourth plenum um there are certainly references which I suspect we will see uh repeated in the 15th 5-year plan about uh promoting and accelerating the internationalization of the the renb. So they talk about this uh in kind of very kind of general terms. So I would say um and it's certainly something which they would be I don't think they actually want the renb to basically replace the US dollar uh because they don't want all the obligations that come with it and it would be entirely inconsistent of course with uh for them to you know to embrace this whilst having a system of capital controls in in situ which as I said I don't think that's going to um going to be diluted at all. Well, it's there's a lot of rhetoric about this um which uh I've been kind of pushing back against for as long as I can remember. Um, I mean it's quite difficult for you to I don't mean you I mean it's quite difficult for China to to replicate the role of the US dollar with the renm unless they allow foreigners to accumulate claims on them which means that they Chinese either have to run large trade deficits in perpetuity or they have to have free and open capital movements um so that foreigners can acquire those claims. So neither of those two things are going to happen, right? I mean I'm not saying ever because the government of China could change and you know leadership can change but for the foreseeable future and certainly while Cinping is in power these things are not going to happen. So yes, I think we are seeing incremental changes in the usage of the renmb in commerce. for example, for the purposes of invoicing, for example, as a denomination for swap agreements between some central banks and the PPC and for example in um uh payment systems um helped of course by China's own um CIP system which is it's not an alternative to Swift as some people make out because it actually uses Swift. It's an alternative to chips which is the the payment system um the dollar based kind of uh uh payment system. Um so there are incremental changes taking place there. This is true. So we are we are moving to a or we are going in a world really where the dollar's relative position has been declining. But ironically, the major beneficiaries according to the BIS that does the annual survey of all of this, the major beneficiaries have been the Aussie dollar, the CAN dollar, the Swedish croner and a couple of other currencies, but not the renm. And uh a lot of the a lot of the statistics that um uh that are get kind of banded around about how much of Chinese commerce and trade is denominated in R&B is basically Hong Kong based trade and Russia based trade. So a lot of the uh statistics that purport to show you know rising levels of remb and you know commerce and trade with China it comes either because of the redenomination of trade with Russia uh following the uh Ukraine war um but also via Hong Kong with a lot of Chinese companies roundtpping you know their invoicing and payments um kind of operations. Um so yeah I think it's uh it's something that is remarkable. I mean remarkable in the sense of merits a remark rather than fantastic because it's remarkable but it's not really something which is I mean if you were a dollar you wouldn't be particularly worried about it yet which is not to say that the Americans couldn't one day have a sewis moment you know if they really uh kind of screw up on international relations or you know lose a war or something like that. Um but for the moment I think that most of us talk about replace I mean internationalizing the usage of the Redmmin B is fine but ultimately what matters is not how you invoice your trade or how you pay for it but how surplus countries hold their balances >> mostly they hold them in US dollars of some description. >> I mean the other element of this is Hong Kong. you touched on the Hong Kong uh system um and we've gone kind of gone from at times been the Hong Kong dollar been under pressure to being having kind of excess liquidity in Hong Kong in recent times as well. I mean is is there a long-term plan there for alignment with the renim or not or will they two systems stay in running in parallel for for as long as we can see? Yeah, I mean I suppose in the I mean, you know, for what it's worth, in the long term, whatever that is, I mean, I can't really see the reason why China might want might not want to basically incorporate Hong Kong as, you know, in in its fullest sense as an integral part of the mainland. And so it wouldn't make any sense to have an Hong Kong tolerance on. But to be honest, this is a little bit theoretical. I think real time which is you know our time I think China still feels there's a value you know there's a I mean it it's long ago Hong Kong ceased to have any kind of economic significance for uh greater China because it's been overtaken by so many other places and by the greater Bay Area itself in Toto. Um but I think from a financial and commercial point of view um Hong Kong still fulfills quite a number of advantages uh for the [music] PRC >> and for the people's bank as well. [music] >> Just shifting gears a bit. I mean in terms of the um the Chinese Communist Party's standing in in in [music] China now and um you know this is something you hear of there was a you know a spectator magazine article recently talking about you know how secure is Xi really and these kind of suggestions come up from time to time but um you you touched on how the kind of you had this anti- technology anti- capitalist uh stance a few years ago which has softened in in recent times Um, I mean, obviously the the the the objective for the CCP is to remain in power at all times. Is there has there been a shift there? Do you sense that they're operating differently or or what's your read on that? >> Um, well, I think yeah, I mean that it has been a kind of quite a I was going to say an exciting time. I mean it certainly was a rather feisty period of weeks leading up to the fourth premium because there was a lot of speculation that Tiinping was under pressure. You know he got rid of um I mean eight or nine senior members of the PLA, eight of whom were in the central committee, one of whom was in the poly bureau. Um people thought that you know maybe power is becoming more diffuse in China. Maybe Si Jinping is kind of figurehead. I I think this speculation is going to keep cropping up time and time again. Um and until until it's real, I think we just have to assume it's just speculation. Um that kind of because I don't know for whatever reason. Well, it certainly it doesn't feel now a week after the plenum that there's been any kind of real change in the power structure that we can see. So yeah, I mean Tijin Ping's firmly in power. He uh I mean we are coming up to uh so he's in been in power now. Uh so the first period was 2012 to 2017. Second period to 2024. third. This is the third one which is runs until uh 2029. So by 2026, by next year, maybe 2027, um it's quite possible that the party may be thinking and he may be thinking about succession. It's not a shoe in that he's going to stay in situ until um he's removed or until he is too ill to carry on. Um I mean it's quite possible he could prepare for his own uh succession. So there's kind of everything to look out for really. Um but I don't think there's any kind of slippage or lessening of the preeminence of control in China from him and from the upper uh echelons of the party. I think the um the yeah the I mean the political structure of China looks to me about you know about as firm as it has ever done really to be honest. >> Obviously any conversation around China Taiwan has to be mentioned. Um again any observation there or what speculation is always um you know to the forest of what will ultimately happen or how it'll play out but uh any insight as to if or when China may ultimately move on Taiwan. We know that Cinping kind of wants what he calls the reunification. Okay, that word itself is highly charged because it's questionable, in fact deniable that Taiwan uh was ever really part of the PRC for any length of time anyway. But um we know that he he wants to see this resolved, you know, kind of on his watch kind of thing. Uh which suggests that, you know, that there is a kind of a vague clock ticking. I'll leave it to kind of military experts really to make the judgment as to whether the PLA is in any shape or form at the moment, particularly given the leadership um changes um to make a move on on Taiwan. Um I mean against that, you know, it's not always been the case that autocratic powers or even democratic powers, you know, are prepared for conflicts which they find themselves having to fight. So whether that's an issue or not, I'm not really sure. I mean, I would I'm pretty sure that the Chinese would much rather there was a sort of an osmosis in Taiwan in which, you know, through maybe some Chinese efforts from the mainland, you know, that the mood in Taiwan changes over time uh to become less hostile to unification or to um uh not less h maybe even favorable uh towards it. Obviously the risk of of military or blockades or something like that. Clearly that risk is is real and we have to live with it. Um but I just Yeah. I don't really have any insight as to whether it's increasingly likely or decreasingly likely. It's a possibility. Yeah. >> Yeah. So I mean sum it up. It sounds like from an economic perspective I mean you thrown a parallel with Japan although and noted the differences but um I guess the key thing is the size of this dynamic size side of the economy versus the the the stagnating ban. It seems like overall you you're probably more pessimistic than optimistic. Is that fair to say? >> I think so. I mean I think I uh in some discussions I've had with you know some of my um friends and colleagues you know we talk about whether China is on a at a precipice or plateau. I I think it's probable that they are on a plateau, right? I think the the underlying momentum of the economy I think is much more sluggish save only for their industrial prowess and I don't think we should use industrial prowess as a benchmark as to whether they are succeeding or failing as an economy because Chinese have always been entrepreneurial. Chinese have always surprised with their ability to cope with adversity, containment, export controls, whatever it happens to be. Um, and you know, they have their own ways of innovating which and evading what they regard as containment. Well, you know, which they're proving to be, you know, not successful if not in everything than in some things. So you you can be really successful in you know doing the kinds of things that China does but without really making much of a mark on ultimately the things that are going to find you out if you can't solve the problem of inequality and you know labor force um dynamic and income growth and debt capital misallocation. you have to solve these problems eventually or you suffer from the consequences. Um, and I think that's the big danger as far as I see it in China. Okay, very good. Before we wrap up, we always like to get some perspective from people as to uh uh things that have been helpful during their career or advice you would give uh to people starting off if they wanted to get more proficient on macro and China analysis. Any any things? I know you've written a book yourself, so I'm sure you would give that a mention, but anything else? >> Well, uh I mean I think the sort of the literary stuff and the writing comes a bit later. I mean I um I mean I I sometimes um uh do it a little bit less now. Um but I certainly have been um sort of on the circuit of going to talk to um sort of A-level students at schools in the UK um about you know if they want to develop a career in economics or going to the city or finance whatever. I mean I think um I mean I think finance is probably a much different place now from what it was when I uh was a kind of a rookie economist. Um, and it's a little bit I think it's probably more restrictive and you know there are compliance departments that are bigger than good knows what else. Um, but I think um I think uh getting your hands dirt if you want to be you if you want to develop an economics career obviously you can go to work for the government of your country if you want and they'll train you pretty well. Um uh but I think working in finance is a great place to to go. Um it's uh it's pretty unforgiving if you get it wrong and if you continue to make mistakes, but it's um it's very I mean spiritually and and uh materially it's very rewarding um if you succeed. And I think it's very exciting as well. So I wouldn't I wouldn't be tempted to put people off. Uh in fact, I' I'd kind of encourage them to, you know, just see what it's like. Um if you don't like it, you can always try something else. >> Absolutely. Well, for from all of us who are in the game, I I think we all agree with that. It is always very interesting. Um, but George, very much appreciate you coming on uh to chat with us today. It's always uh fascinating to get your perspective on China. Uh, and people can obviously follow your work on on your own website uh at at georgemagnus.com. And for all of our listeners and Top Traders Unplugged, thanks for joining in and we'll be back again soon with more content. Thanks for listening to Top Traders Unplugged. If [music] you feel you learned something of value from today's episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you'll be sure to get all the new episodes as they're released. We have some amazing guests lined up for you. And to ensure our show continues to [music] grow, please leave us an honest rating and review in iTunes. It only takes a minute and it's the best way to show us you love the podcast. We'll see you next time on Top Traders Unplugged. [music]