Henry Wang on China's Role in the New Emerging World Order

28:14system. You know, China is, when U.S. is pulling out the UNESCO, China is also a big support of UNESCO and so on and so forth. So I think China is doing a lot of that kind of activities now. When it comes to U.S.-China relations, you know, you mentioned that your book was selling well in China. I'm really curious, what is the biggest misunderstanding or the biggest concern that you hear from Chinese people on the ground when it comes to U.S. policy? And I realize it's a little bit unfair we're treating you as a spokesman for an entire country in China. We really don't intend to do that. We don't intend to do that.

28:50But I'd be curious, like, what sort of questions do you get on a daily basis from the average Chinese person about America and what it's doing? Well, I think the biggest throwing point basically that bothers ordinary Chinese is that we see the U.S. navies coming to Chinese Taiwan Street or South China Sea. Quite often we see airplane patrol in this part of the world. We never see Chinese aircraft or navy go to Hawaii or go to Caribbean. We never see that. But we see the U.S. military presence very strong. We have the 40 ,000 U.S. military personnel in South Korea just neighboring China. And another, I don't know how many, you know, it's quite 30 ,000, 40 ,000 probably in Japan.

29:44And we have now in Philippines, and then they have also missiles, mid-range missiles placed there. And also they are going to place new missiles in Japan now and South Korea. So those things actually, because China felt, you know, Taiwan is part of China. And certainly the people in the U.S. say, oh, China is a democracy. We have to defend that. But China has a Chinese-style democracy, meritocracy. It also works perfect, you know, not perfect, but at least works well for this most populous country in the world. So I think, you know, we all have a different governing style. But just because our governing style is with you, and then that's why you need to, because Taiwan, because the reason for protecting Taiwan is Taiwan is a democracy, now we have to protect that.

30:28But I think, you know, China can also absorbing that. And, you know, China promised Taiwan, you know, no tax to be given to federal government, a lot of autonomy. And China announced that Taiwanese will be free to work in the mainland. No visa needed, no anything needed. We are already two million Taiwanese working in the mainland. And there's half a million husband and wife married across the street. And then before Taiwan, you know, former president of Taiwan, you know there's six million mainland flooded the time with with tourism sending the money spending restaurant hotels you know there was almost in integrated already if not for the foreign interference so i i think the chinese say okay please maybe just let us you know peacefully unified like like germany you had the you know east germany west germany unified and And let's also hope North Korea, South Korea unified.

31:25So basically, they were really looking for less interference on that. And so I think that would be greatly improving the region. Because in the communique that established three communique China and U.S. have, it sounds very clear U.S. will not maintain, you know, will just maintain normal ties, no official ties. But then we see U.S. officials, Parliament Manchin, Nancy Pelosi, keep visiting Taiwan. Or Taiwanese leaders coming to visit the U.S. So those probably bother a bit of ordinary Chinese. But of course, again, we understand, of course, the U.S. was a world policeman for a long time. But now we see many countries also that the governing model is not working perfectly.

32:05We have all the domestic issues. U.S. has it. The European has it. All the countries have that. But China, on the other hand, seems to maintain a pretty good status. And that also keeps lifting people out of poverty. So I think they should give China some credit for doing that rather than, OK, it's always shown in front of China's doorsteps and you have a U.S. parade of military muscles all the time. So that's a little bothering you for the Chinese, basically. When you think about China's relationship with the other BRICS countries, with African countries, with the Global South countries, so to speak, have you seen substantive changes in those relationships, specifically since the wake of October 2023 and the start of the war on Gaza and countries sort of rethinking, you know, has this prompted a concrete rethinking about, you know, you said the U.S.

33:04was the global policeman, and a lot of people have perceived that. In the wake of this ongoing war, has there been a substantive change in the way countries want to have a relationship with China? Well, absolutely. You know, this year was for the first time you see China-ASEAN summit at the GCC. Gulf countries all came to ASEAN. So you had the first China-ASEAN GCC summit. And then you can see also the BRICS countries expanding. UAE was there. And there's a lot of Middle East countries really coming to China. You also have the Shanghai Corporation Summit recently. You had Turkey. You had the Iranian president.

33:54You have a lot of people from that region. So I think China's role does play because China, for example, a few years ago, China clinched a deal between Saudis and Iranians. Rather than, you know, we are seeing the current chaos going on. China also, of course, in the 14 different fractions of Palestinian group, had a Beijing-Palestinian declaration. And China could probably do more in promoting peace between Israel and the Palestinian. China also maintained good relations in the past with Israel. So I think that sooner or later, probably those countries will realize that we cannot really let just what happened in Gaza, the humanitarian crisis, the deaths of thousands of tens of thousands of people, what happened in your living room on a daily basis.

34:41I mean, where is the, you know, children are dying and all those things. So that kind of justice, where is the justice now? So, of course, there's always problems to start with. But I think we cannot because a two-run doesn't make a right. I really think that we should continue to have this international moral power that the United Nations Security Council should really exercise rather than, you know, be vetoed all the time. So I'm thinking, you know, China probably could play more role in the future. But let's solve this Ukraine crisis if the BRICS country peacemaking can happen, not by China.

35:18And I'm sure that model could be applied to other conflicts in other regions. China also trying to, you can see Prime Minister Moody and the Prime Minister of Pakistan was at the same table a few months after fighting in China. We see Armenia and Azerbaijan president coming to the summit in Tianjin as well. So probably China is building up its mediating power. and peacekeeping power as time goes on.

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38:00Crypto trading provided by Backed Crypto Solutions, LLC. Complete disclosures available at public.com slash disclosure. Just going back to globalization for a second, I think everyone agrees, and you've already talked about this, that China has been a huge beneficiary from globalization over time. But I get the sense that there is still a feeling within China that some aspects of the global economic order or trade agreements are unfair to China. How do you sort of square that tension? And where do you think the concern or the worries over unfairness actually comes from? And by the way, I could ask this question to American officials as well.

38:37The U.S. is a massive beneficiary of the global economic order, and yet the Trump administration clearly feels very aggrieved about America's place in the world. But when it comes to China, where does the sense of unfairness actually come from? Well, there's quite a few. Actually, you see, one of the things that the U.S. was treating the pure deficit as the only reason they started the tariff war. I was giving a talk just last April, a few months ago, at the U.N. Security Council, where they called a special arena meeting in New York. 80 countries represented by the U.N. participated. Where I gave a speech there, I was saying that, for example, U.S.

39:18is only looking at the goods deficit, you know, merchandise deficit. But out of that deficit, maybe 30%, 40%, 50 % was produced by multinationals, 30 % by U.S. For example, out of the$400 billion deficit that Trump is levy on China,$300 billion deficit, he immediately waived$100 billion because a lot of companies are made goods in China. Apple has to source their iPhone from India, but it's not enough. So they have to lift that sanctions on those deficits. Anyway, and there's a lot of intertwined. But also, the U.S. is enjoying$1 trillion trade surplus on the service trade. They are not counting that.

40:00And also, the calculation about China's export. For example, every phone we made in China, iPhone made here, China probably made labor costs. You know, 80 % was made by multinationals. EV cars are the same. So, while you're just purely looking at the trade deficit numbers, a lot of money was not made in China. was made by international, multinational companies, and they're not sending back to the country. So that's why I agree with President Trump to have more investment back to the U.S., because multinational made a lot of money in China and elsewhere, but they should really investment back rather than put in the tax havens.

40:36So that's why the global minimum tax proposed by OECD has agreed by over 100 some countries, but it's not practiced yet on that now. So that's one aspect. The other aspect I could say is the, for example, U.S. is starting these sanctions on China, for example, forbidding the use, selling the chips to China. So that is really, and also they call in the Trump administration, you know, high fence, small yard, and all those things. And there is 1 ,500 Chinese companies on the U.S. entity list. I mean, maybe China has a dozen or two dozen of U.S. companies, but compared with the magnitude of the U.S., it's too much, too many.

41:18overuse of the security reasons to really restrict all the Chinese companies on that. So that's really become a problem. And so that's why China started to say, okay, if chips can be the dual-use goods, right, you can say, okay, it can be used for security or military. Same is true for rare earths, right? Rare earths can be making for airplanes, tanks, everything. So when China started a little bit on that, then the U.S. started to relax on the sale of the chips now quite a bit. So you can see, you know, morally, it's the same reason. If the U.S. doing things in the first term, China didn't respond like that.

41:54But now China is starting to respond like that. So I think that's why we see quite a few agreements made between U.S. and Chinese officials. Because China is much resilient now, much stronger. And also U.S. has realized if they really sanction so hard on China, the Christmas shopping season will be coming up. Their shelves will be empty. You know, American consumer will suffer and they're not going to hurt Trump's base. That's why we keep extending. They talk to each other more friendly than talk to India, Brazil and others. So I think they probably realize that too large is economy. They can really agonize each other.

42:31They have to find a way to collaborate. The Christmas shopping season is my personal Super Bowl. Yes. Earlier this year, actually not that long ago, Bloomberg reported. So therefore, it's absolutely true. It says, quote, officials in Beijing verbally encouraged regulatory agencies and local governments to curb technology transfers and equipment exports to India and Southeast Asia. And there were some stories about Foxconn engineers, for example, who may have been part of some sort of moving the supply chain of those Apple iPhones that you meant part of the final assembly, perhaps, to India. And this report that Chinese officials may have been pushing back against it.

43:10I get like rhetorically the existing system where American companies do a lot of manufacturing or in China has been incredibly beneficial. Is China totally comfortable with the fact that as part of this globalization, some of this manufacturing may end up leaving or as, you know, U.S. seeks to diversify its sources? Is China comfortable with this? China is, I think, is pretty comfortable now. That's why China is more confident. For example, 2019, before COVID, U.S. is the largest trading partner of China. And now U.S. is falling to the third place or even fourth place now because ASEAN has become the largest trading partner of China since the ASEP, Regional Comprehensive Partnership Agreement.

43:54And then that is actually happening because, you know, Vietnam becomes China's fourth largest trading partner now. And Indonesia, Malaysia are now expanded to Latin American, you know, most Latin American countries, China is their largest trading partner. And also with Africa, now China lifted all the tariffs from African countries' products to come to China. You will see a flood of African products coming to China. So I think, you know, that probably China doesn't mind. There's a low, maybe a little bit labor intensive because the labor, average labor workforce, migrant workers age is 43 years old.

44:29It's getting old, China. So there's a lot of shoemaking or low-income labor cost jobs. Went to Vietnam, went to Asia. China really doesn't mind. China now is focused on the high end now. For example, China is focused on the green power transition. So there's no curbs? Like, there's no curbs as far as, like, from your perspective, there's no impulse of the government to curb moving some of these more advanced things. again, talk about iPhones and such, to a country like India? Not really. I think China still encourages the investment. For example, BYD or CATL, and I know quite a few companies still very bullish investing overseas.

45:12There may be sensitive military or rare stuff that China may be questioning a little bit. But on the general, I think things are still quite open. Yeah. Is there an argument to be made that China should perhaps open its own economy further if it actually desires more economic integration with the rest of the world? Because we're talking about globalization still, but China still has capital controls, still has currency controls, still has some restrictions on investment and things like that. Should it be more open? Absolutely. I agree with you. I think China should be more open. And that's why we've been, that's our think-time role to promote that.

45:51For example, we propose people promoting the visa. Now China has issued, unilaterally issued the visa for 40-some countries, now European countries, Australia, Japan, South Korea. I urge also to recommend China to policymakers to open visa for U.S. citizens, for Canadian citizens coming to China free. But also on the trade policy, I think there should be more liberalization. continuously. I know that the government is looking at that, and the 15th five-year plan will probably be even more open. Of course, there's always rooms to improve. I totally agree. And they have opened a financial sector quite a long time ago.

46:30And as you said, maybe currency, they should be more convertible. And also on the investment in the culture, in other areas, pharmaceuticals and now China also welcome foreign universities come to China to open their branches and doing, I'm on the board of Duke Kunsan University in China, which is a giant advantage between Duke University and Wuhan University. You know, we have so many international students there and NYU Shanghai is operating very well. So we hope to have more global exchanges. I agree with you, you know, there are still more rooms. That's why I think this kind of talk between China and the U.S.

47:11Now we see TikTok is almost maybe have a deal there. And it's great. So this is the style we should continuously talk and engage and reach agreement and open up further to accommodate each other. First comes diplomacy through dance videos, Joe. And then comes an easing of currency restrictions. Well, podcast recordings have to be. That's right. Just to be clear, you know, obviously we don't expect you to be the representative of the entire Chinese perspective. Tracy and I need to establish that we do not represent the entire United States and the questions that we have. You mentioned the goods trade deficit.

47:48And of course, one of the things is, you know, obviously China has gotten much richer thanks to the booming industrial sector. The U.S. has benefited from a lot of less expensive, more sophisticated goods that it buys. But there is this source of concern, and I say this a couple of weeks after that military parade, there is a source of concern that without a robust American manufacturing capacity, that we can no longer be a powerful military country as well. And I know I do not believe it is China's role to sort of help the U.S. figure out its industrial capacity questions. Nonetheless, from the perspective, does the U.S.

48:26concern make sense to you? Perhaps there are things that seem unfair. Certain technology transfer restrictions seem counter to the spirit of globalization, etc. But is the U.S. fundamentally wrong to be concerned that as more and more of the world's share, however you want to measure it, of manufacturing of advanced goods somehow become centered around China, that that long term weakens the national security position of the United States? Well, I think we are now in a more intertwined world. There's quite a bit of a competitive advantage, like David Recanto mentioned many years ago. So what I think U.S.

49:06is still leading, U.S. is very good at inventing innovation. You see Silicon Valley, you see AI. By the way, Jason Wong said half of the AI talent is coming from China. U.S. is a big harvester of Chinese talent, too. And that's why I'm saying several million Chinese students went to the United States. I mean, probably half of them return, still half remain. That greatly benefited the U.S. economy. So what I think that is really, U.S. is good at doing zero to one, and maybe China is good at one to 100. So all the world 100 universities, top 50, still in the United States. The reason China did all this manufacturing, because as I mentioned, China has 70 % of the global speed railway, 60 % of the global 5G networks, 10 largest container port, 7 of inch.

49:58They have the infrastructure to do that. So this is a value chain, supply chain for the world, not for China. So made in China is made for the world. I think the U.S. is only worried about if they cannot make big ships or aircraft. Now they go to South Korea to do that now. So they still find a way to do that. But I don't think that you have to depend totally on the manufacturer. So if we are living in the pre-trade war era, where we buy so much chips from the US, 70 % of China's energy depends on the import. China spends more money buying the chips than China importing energy. So now they're not selling to China.

50:36Then the US company loses a big profit center, and then they really reduce their R &D budget. And China is forced to do re-invent well, and there's a lot of waste there. So we see this separation is really no good, all on security reasons. We should not over-secure lines, and we should really display each other's competitive advantage. I want to ask one more question about security philosophy. Obviously, when Russia invaded Ukraine, the U.S. imposed all kinds of sanctions on Russia and tried to constrain its ability to trade at all or make any money. Going back to Israel's war in Gaza, and you express the horror that you see from that and the sort of response to that.

51:21But China still trades with Israel as the U.S. does. In the future, in a sort of different global world order, would it ever be part of China's diplomatic arsenal to take a more heavy hand in some of these conflicts and say, oh, we're not going to trade you? We're not going to sell you advanced technology that you need to run your economy or run your military, et cetera. Because so far, despite the sort of concerns or the response, there hasn't been any change in the trading relationship. Could it ever get to that point where China views its sort of diplomatic commercial power that way in conflicts that it's not directly involved in?

51:59Well, I think China certainly would like to do more, you know, like what is happening on the WHO. China has already fulfilled its obligations, too. I think the key is really we need to restore the UN authority and principle, particularly the UN Security Council. Maybe we should also reform that, too. Maybe we should add G20 members, other 16 G20 members as associate permanent member of the UN. And we should really not let the unilateral single veto be abused. For example, since the founding of UN, Russia abused, used the veto 100-some times, 20, 40 times. U.S. 100 times, China 20 times. We need to really control that.

52:45So I think we'll reform UN to reflect this multi-polar world. And in the future, if there's any problem that happens, let's send the UN peacekeeping force to do that. And so if the old security member have a big majority and General Assembly have a big majority, we should make that happen. So I think reform this multi-polar world, we also need to reform you and to reflect that because the world no longer fits, the superstructure does not fit the reality today now. All right, Henry Wong, founder and president for Center for China and Globalization. So fantastic to have you on the show. Can we do a live Odd Lots in Beijing with you at some point?

53:22Yeah, yeah, please. We welcome that. All right, we are going to, as soon as we get off this call, Well, we are going to begin the preparations to figure out how we're going to make this happen. So great chatting with you. Thank you for staying up late in your time to talk with us. And I hope to talk to you again soon. Thank you. Thank you so much, both of you. Thank you so much.

53:53Tracy, I really enjoyed that conversation. It was interesting thinking about, you know, this idea that rhetorically there are a lot of people on both sides of the aisle who say things like, oh, we need to get out of this sort of competition framework, et cetera. It doesn't really feel like anything is actually happening on that front. Yes. One thing that struck me from the conversation was, I guess, how economically oriented it feels like all of Chinese policy actually is. And I suppose maybe that gets back to this idea. This is an old idea now, but that social contract idea about the CCP. So as long as people feel that their lives are getting better, then the CCP has strong support.

54:37I think the economic focus really came through in that conversation. I think, you know, obviously, from the U.S. perspective, there is this view that, you know, Henry used the word global policeman. And a lot of people would say, yes, absolutely. And that a big role of the U.S. Navy specifically is enforcing the fact or freeing the world for trade. Right. That part of the reason that the world can trade freely. That that's like a public good provided by the U.S. This is a public good, and Adam Posen has talked about this, and others have talked about this idea that these things go hand in hand.

55:15And it's interesting because, so Henry talked about this impulse for continuation of global trade, including with the U.S., etc. There clearly, to my mind, seems to be less of an appetite from China to like, or it's not obvious that there is a— To fill the gap, basically. Yeah, or that, you know, and I guess there's question like, does the world need such muscle to trade, right? Could you have a world of trade where there is not one entity that has a truly global military footprint? I think these are really interesting questions. Henry, of course, talked about, especially in that last answer, restrengthening the UN, et cetera.

55:56Restructuring. Restructuring the UN, exactly. It's not entirely obvious to me that these institutions, as they're constructed, can really be revived, even with lots of Chinese money going into them. I think that's still kind of TBD. Well, I think this is it, right? Even if you restructured the Security Council so that, you know, you wouldn't have one powerful member vetoing stuff all the time. Even if people agreed to do things, what is the UN actually going to do, right? Right. What is the UN actually going to do? I don't we didn't get into it that much, but like the idea of a sort of more, I don't know, bricks composed peacekeeping force.

56:34I bet there are a lot of people in the US who would love that. They're like, yeah, let's have peace. Let's have a ceasefire. Someone else take care of the peace. Yeah, let's have a ceasefire in Russia and Ukraine. And also, let's not have it be particularly dominated by Western peacekeepers shouldering that burden. I bet a lot of people in the US would love that. I would, you know, head with more time. I would love to really explore like what the constraints on that actually happening are there. But I thought that was a very useful sort of overview of some of these questions from the Chinese perspective.

57:02Absolutely. Don't explore the constraints, Joe. Just take credit for solving U.S.-China tensions on the podcast. OK. In less than an hour. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at CarmenArmond, Dash O 'Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more OddLots content, go to Bloomberg.com slash OddLots. We have the daily newsletter and all of our episodes. And you can chat about all of these topics 24-7 in our Discord, discord.gg slash OddLots.

57:39And if you enjoy OddLots, if you want us to go to Beijing and talk to more people on the ground, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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