China Is Winning, Trump Doesn't Know It Yet

0:00Today is all about China and America. The G2, the big two are meeting today in Beijing. Question is, who is in the ascendancy? We're going to look at a little bit of Greek economic history. We're going to look at pre-First World War economic history. We're also going to look at rare politics from the point of view of today. That's all coming up, America and China, in a couple of minutes on the podcast.

0:33I used to think spreadsheets were just part of it. Ugh. But real-time cash flow? Wow. Invoices that chase themselves? Even better. Books that automate? That's a big one. And I can keep track from my phone while I get the job done. No spreadsheet in sight. What a life. Do right by yourself and your business and search XERO for your free trial. Conditions apply. Parles-tu français? Hablas espagnol? Parli italiano? If you've used Babbel, you would. Babbel's conversation-based technique teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world.

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1:40To understand the economy, you have to understand human nature. This podcast is powered by ACAST. How are you doing there? It is time for the podcast. John is doing a particularly brilliant, maybe largely late 19th century Chinese invitation, which might not go through the censors filter these days. But nonetheless, we're going to be talking about China. We're going to be talking about America, where we talk about the summit between Xi Jinping and Donald Trump, which is occurring as we speak in Beijing. This is seen as the meeting of the G2, the two great powers in the world. we're going to tease it out what does it mean economically politically, geo-strategically what does it all mean for us so quite apart from your Kung Fu Panda impressions which were particularly resonant there I'm good, I'm good you know I was wondering what the vibe in the room would be like as Trump walks in to meet Xi like it's going to be really awkward because on one hand you have Xi supplying Iran with loads of tech and missiles, apparently, allegedly.

2:57And then Trump choking China's oil by the Straits of Hormuz. By bombing the Straits of Hormuz. So how do they, I'm just wondering, like you know how blunt and undiplomatic I can be. I do, dear listener, you have no idea what it's like dealing with this creature. But I've just wondered, how do you, what's the opener of that conversation? before it descends into a shouting match, you know? Well, I think you've put your finger on something really interesting here. And it really reflects how the world has changed. The last time there were two great superpowers sitting down together, unambiguous superpowers, it was the Soviet Union and the United States about 30 or 40 years ago.

3:41And I remember doing a documentary from Iceland. and it was against the background of the crash in Iceland and the banks failing in Iceland. But what really fascinated me was also there was a little, so if you go to Reykjavik, tiny little city, beautiful, unusual. You have like the mad Atlantic Ocean out there, like the North Atlantic, and then you have this big mountain range behind it. And just nestled in under the mountains is this very small, very unprepossessing city, Reykjavik. Yeah. And in Reykjavik, just down by the sea, there is a tiny bungalow. Again, an unprepossessing, nothing outrageous bungalow.

4:27And in that bungalow, Reagan met Gorbachev on their own. There were two chairs. There were two chairs on their own. On their own with the two translators to begin the process of nuclear disarmament in the 1980s. And I remember when I went to Reykjavik, I thought to myself, I have to see this place. I have to walk around this. I have to go into this little place. To begin the process of nuclear disarmament in the 1980s. The fuck? John's AI has just spoken to me. His Chinese AI has just spoken to him from his phone. He just burst into life there. There you go. There you go. Little did you know that the Dave McWilliams podcast is actually entirely AI generated.

5:07So there I was. There I was. That's what you call a hallucination. This is what you call loose broadcasting, not a hallucination. lose broadcasting there i was in reykjavik just trying to take that in now again my point i'm making is that in the old days they used to get a neutral venue where neither side was playing at home where both sides were kind of exposed where there was a neutral referee in this case the Icelandics yeah who were kosher with the Russians and kosher with the Americans that nobody could actually say, well, we don't want to sit down in their country. And that created the space for deals to be done because you were coming with a, you're coming kind of naked, both of these great superpowers naked.

5:55And that was the way in which rail politic used to be done in the old years. Yeah, level playing field and all that. Level playing field. And you know, basically you keep your toys outside the room, you come in and as two individuals who have been either elected or nominated as leaders of these countries, you begin to do deals which are in your country's interest. So that's the way in which when we were younger these big deals were done. Now it is entirely different. Now you are basically arriving like a pro-consul at the emperor's no seriously, at the emperor's table and both emperors are sitting around they're kind of being fated and you know even psychologically.

6:38It's like at the meeting of the dons. Yeah, of course it is. It's like the Dons, but at least the Mafia Dons had probably a neutral area to go and meet. Yeah. But this has got sort of... Down the waterfront. Down the waterfront, exactly. But this has got kind of the supplicant and the emperor are the two macho guys. The theatrics of it are highly suggestive of a fight rather than a compromise. Yeah. Whereas when you see that little Icelandic building and you see the fact that it was very, very, very bare and very plain and there were no security around. The two of them just went in there, did their thing and stayed for hours.

7:17And again, no cameras. They didn't do the thing and then they came out and said, okay, we have a deal, right? They were called the SALT talks. Do you remember those? They were the nuclear disarmament. But again, that was the last time two big players sat down. This time, you might have remembered the last. Remember, Putin was entertaining fellows on his 17 ,000-foot-long table because he was afraid of COVID. It's like a little leprechaun, a little Russian, a little Slavic leprechaun. Can you pass the salt? Exactly. So here what we have, again, is a show of strength on both sides, right? The Chinese, it'll be in Beijing, probably in the Hidden Palace, all the hidden city, all that area.

7:59And with the Americans, it'll be Air Force One touching down and all that pomp and ceremony. So I think even at that, the chances of anything other than a Mickey waving fest are highly unlikely. But I do think then what you're pointing is you have the atmosphere of the whole thing. Yeah, exactly. Yeah. I mean, like what's China's view of America now? Because that's kind of changed. Well, all our views of America have changed. since Trump has got in. Well, Trump has weakened America, undoubtedly. So there's a thing in political history called the Thucydides Trap, John. Right. Right now. So there's two worldviews.

8:41The Thucydides Trap is referred to in economic and political history coming from the Greek historian Thucydides, who argued that the Polypnesian War between Sparta and Athens was inevitable. because of the way in which Athens was emerging as this new power and this threatened Sparta and the way the Spartans reacted to him was in effect a playbook that happens all over the world. And the playbook is that when a new power emerges, and emerges quite suddenly, as China has done, because think back to when I was talking about Gorbachev and Reagan and Reykjavik, China wasn't even in the picture. It was still very much a mysterious, closed-off kingdom.

9:31This was before Tiananmen Square. This was before Deng Xiaoping's reforms. This was basically in this interregnum between Deng Xiaoping and the Cultural Revolution of Mao Zedong. It was a real no-go area, right? Yeah, yeah. In the 70s and 80s, China was kind of a backwater. Completely backwater. Nothing was going on. Nothing was going on. And now it is the world's number one power on any practical basis. So what this thesis of Thucydides is, that it is always and ever when the rising power emerges and the incumbent power reacts. So what Graham Allison, this American historian, was saying is that basically, if you look at great flashpoints in history, a pattern emerges.

10:24It starts with tension. It starts with trade. It starts with tariffs. It starts with diplomatic spats. It starts with areas of geopolitical control. I can see all this between China and America, right? The trade wars, the tariff wars, the capital wars, the geopolitical wars, as you started there, China playing Iran, America being played by Iran, Israel playing America, et cetera, et cetera. And all these theatres of engagement, you see the two big powers, the emerging power and the incumbent power going head to head. And the core idea is that eventually this new power prompts a reaction in the old power that precipitates military conflicts.

11:15And what he did was Alison, this guy Graham Alison, looked at 16 examples down through history, as I said, mainly Europeans, the big powers, right? And what he identified was a pattern. And this pattern is not that it's inevitable that these powers go to war, but it is a warning sign of what typically can happen. So when you're looking at Xi and the Donald, a framework of analysis to say that this is the recurrence of a pattern between incumbent and rising powers and it's usually the reaction of the rising power and the great example of this that everybody identifies with is the Bismarckian Germany rising and this has been taken over by the Kaiser's Germany and it's the clash between the Kaiser's Germany and Britain.

12:09So Britain being the incumbent world power and particularly European power and the Germans emerging as the challenger power. And in a way the challenger goads the incumbent power and it depends on how the incumbent power reacts. Now there are many exceptions to this but it's a sort of a warning from history. But the other thing then is John most of us then thought well you know China and America are so enmeshed politically and economically and culturally that, you know, who would go to war when there's so much to lose? And this is the argument that was put up by a fellow called Norman Angel, or maybe Angel, I'm not sure.

12:49He wrote a book called The Great Illusion. The Great Illusion was published in 1913, important date. And it made the case that a war between Germany and Britain would be so deleterious to both sides that there's no way in the world they'd be stupid enough to do so. Yeah. Which is in effect the sort of argument you hear now about China and America. Yeah. Like, who's going to win this war? Yeah. Nobody's going to win this war. So something like Taiwan cannot drag them into war. A bit like people saying, remember 1914, like, really? The Serbs in Sarajevo dragging Germany and Britain into a war that will destroy the continent?

13:30That can't possibly happen. And again, Norman Angle's book was the best-selling book in England, reflecting a deep anti-war feeling on the part of the average English person. They wanted to believe it. They were buying this book in order to believe that war could not happen. They were very disappointed. They were very disappointed. They got me money back. Yes, exactly. Give it back for Christmas. Back to Waterstones. Exactly. Sell it on eBay on the 1914 version of eBay. So you have these two things, John. Thucydides and the Thucydides trap, right? I want listeners to be bullshitting about Thucydides tonight in the boozer, okay?

14:08Can I have two pints, please? And Thucydides. Thucydides. And when the barman talks to you about, what do you think? He said, well, I'm contemplating Thucydides because John and Macca were discussing Thucydides today. And who are you not to discuss Thucydides? So you've got Thucydides and Normal Angle. and then superimposing John is Reykjavik. God, we've been around the house. We have. We haven't even started. Okay, so here's the thing then. Walking into this room, back to this room again. Yes, you like the room. I do, yeah. But walking into this room, what is Trump hoping to get out of this? And what do you think China feels?

14:48What's their view of America? Okay, I think that's a really interesting question. I think that's the key thing. So over the last... So in Trump's first incarnation, the Chinese were very, very careful not to inflame him, not to upset his ego. They were trying to figure out what the hell is this thing. Yeah, they're trying to figure him out more than that. What the hell is this thing? Now they know what he is, right? And now they realize, how do we play this guy? How do we get under his skin? Yeah, everyone's thinking the same thing. Yeah, but the Chinese are basically looking at him and saying, look, Xi has been very, very explicit in saying, the East is rising, the West is declining.

15:27Now that he would never say China is rising, America is declining because that would inflame the Americans. But we can take it that that's what he's meaning. Yeah, yeah. So the Chinese believe that America is an empire on the decline. And they also believe that a wounded animal is a very dangerous animal. So what they're trying to do is they're trying to reiterate to Trump that they are the emerging power without inflaming him such that he throws all his toys out of the pram over the course of the next little while. Now, why do they think they are the emerging power? Because they look at America and they think, first of all, there are economic problems in the United States, right?

16:14Mainly the extraordinary inequality that the American economy has generated due to the financialization of America. We've spoken about this all the time. If you have an entire economic policy based on a monetary policy, which is to reduce interest rates all the time, as has been the case since 2007 with QE, etc., effectively what you're going to do is you're going to raise asset prices. And the idea is who owns asset prices? Rich people are poor people, rich people. So you automatically have a policy in America that's jaundiced towards rich people. For the Chinese, this looks and feels really, really unequal, but more importantly, a sign of fragility.

17:01Yeah. Last week, we also spoke about Peter Turchin's idea of elite overproduction. Yeah. But one of his ideas as well is just before the elite are overproduced, there is a wealth hump which pumps money up to the very rich away from the average person. And this is how asset price inflation affects the sociology of a country. So the Chinese look at this and they say, this financialization is creating the conditions for the wealth pump, which is enriching the 1 % in the United States. And that's not sustainable. And that's making America not rich, but poor. It's making it fragile. That's the first one.

17:39The second thing is they take the Bruce Springsteen playbook. They look at the collapse of American blue-collar industrial work as a result of the collapse of American manufacturing prowess. They say that this is not sustainable. And then the final one they look at is the macroeconomic implication or maybe say the result macroeconomically of all this is this massive explosion in the American public debt. Because if you don't want to tax your rich people, right, your tax base either erodes or you raise money some other way. So what the Americans have done is because they don't want to tax themselves, but they want to spend, they've increased their debt profile enormously.

18:24And China has been buying that debt. China has been buying that debt in order to keep the American consumer machine going, because the Chinese know that the only way... They need to sell. So basically, if you think about it, we've done this before. So the Americans have figured out that they have one thing the rest of the world wants to buy, which is dollars, because the rest of the world wants to buy dollar debt. But the reason the Chinese want to buy dollar debt is to keep the American consumer show on the road, because the American consumer show is what's buying Chinese products, right? Yeah, yeah, yeah.

18:57So that's the first thing. So economically, the Chinese are thinking, look, this all is suggestive of a power on the decline. And if you compare America, we go back to Reykjavik. If you compare America then to now, it's very, very clear that America has moved in the wrong direction on these big metrics. So that's what the Chinese are looking at economically. Okay. So then what are the Americans looking at? Are they looking at China as, you know, China has its own issues as well. They have a declining population, an aging population, and they had recently the real estate crisis. Yeah, so it's not all perfect in China.

19:41No, it's not all perfect. So the Chinese, though it's not all perfect, it's just one last thing. So the Chinese are also looking at the Americans getting bogged down in Iran. Right, yes, of course. Thinking, you know, can they sustain this for the next 50 years being the global policeman? And then they're looking at the American political system and they're thinking, okay, so you have a political system that can't reach any consensus. So you're either red or blue, conservative or liberal, Democrat or Republican. There's no middle ground in the United States. And of course, more importantly, they're looking at Trump as a symbol of the chaos of the United States.

20:21That's what I think they're saying. that only a dysfunctional system on the way, not out, but on the decline, can produce such a creature, right? Yeah, but ironically, Trump is kind of modeling himself on Xi, the strong man. Yes, he is, because he likes the strong guys. He's a good guy. He's a strong guy. He's a tough guy. He's a tough guy. He's a friend of mine. He's a good friend of mine. So that's the Chinese view. And then the question is, are we sugarcoating China's difficulties? Yeah, yeah. So China's difficulties, the main one, I think, you put your finger on both of them, and you're going to lose one in turn, is the demographic one.

21:01So the one-child policy that was introduced in China in the 1970s has created a situation that is unsustainable because there are not enough Chinese people. Ironically, you know, in a world where everyone thinks, oh my God, China's the most popular, there ain't enough of them. So the question always for China was, was it going to get old before it got rich? Yeah. And that is still the question. Is it going to get too old? So the population pyramid is completely inverted and there aren't enough young Chinese people to support older Chinese people. The model for this, of course, is Japan. Japan is 30 or 40 years ahead of China in this demographic reality.

21:40And as luck would have it, the Japanese catalyst for Japanese decline was a property market. Right. In the late 80s, early 90s, which is basically what Japan has been dealing with since. Right. And they were the original Asian tigers. They were the original Asian tigers. And Japan, in effect, set the model for all these countries. Right. Okay. And then people looking at China said, well, hold on a second. What you have is something broadly similar, which is a country getting very old very quickly. Yes, going through an amazing boom at the moment technologically and culturally, but technologically and economically.

22:19but characterized by similar problems. Now, here is where things get a little bit tricky when it comes to explaining why China has this internal banking crisis and why it's important. And this comes, this is a little bit, as I say, wonkish, as the economists would say. So let's go back to the American debt situation. So typically what would happen is if China was running a massive trade surplus with the United States, what would happen is the Chinese currency would rise against the dollar. And this would be a way of rebalancing the equilibrium between both countries. Because Chinese goods would get more expensive, American goods would get cheaper.

23:03And as a result of that, the Americans could outproduce the Chinese and or the Chinese would invest more in the United States, and that would create an equilibrium. But the Chinese are holding their currency down against the Americans because they don't want to destroy their exporting sector. But how do they do that? Well, this is basically how a central bank controls the exchange rate of a country. Yeah. So it decides to fix the exchange rate. So then what happens is that all the dollars that flow into China, they need to be what they call, remember we talked about sterilization last time? Yes.

23:41They need to be, in effect, neutralized. So what the Chinese need to do is they have to prevent their currency rising. Yeah. So they have to therefore sell their currency and buy dollars. Yeah. So then the dollars go into China, right? Yeah. Okay. So the Chinese central bank is selling their currency all the time, right? Just trying to push its value down. It means the dollars are coming. Who are they selling that to? This is an open market operation to themselves. Right. So basically when the dollars come in, right? Right. Because the central bank, so the money supply of the country is two bits.

24:16One is foreign reserves, which is a foreign currency, and one is called DCE, domestic credit. So domestically created money and foreign money, right? So what happens is the Chinese say, okay, nobody, nobody, everyone wants dollars, right? Nobody wants our currency. But the problem is that every time we sell stuff in the United States, right, we therefore need to neutralize that flow of money into China. So what they do, therefore, is they convert the dollars into domestic currency, right? That means the Chinese money supply expands. That Chinese money supply has to go somewhere. So that money supply has to find its way into internal investments in China.

25:04Right, okay. Those internal investments in China are largely going to be real estate and our technology or the green revolution. So what they've done is they've invested a huge amount in green energy, in nuclear, and all that sort of stuff, because Chinese heavily depend on coal, and they want to wean themselves off that. They then give the money to the Chinese banking system, and those Chinese banks lend it out in terms of both loans to the private sector, which are usually loans to real estate and or to the Chinese middle classes, are loans to the public sector, which is the Chinese state and state agencies.

25:48For infrastructure and that kind of stuff. For infrastructure and all that sort of stuff. And that is where you see this kind of parallel economy at work in China. So we tend, as Western Europeans or Westerners, to think public sector, private sector, very distinct. Okay? The Chinese don't see that. They see the public and the private sector as one of the same objective. So they have private companies which they're building, like Tencent and Alibaba and all these things, but they also have incredibly brilliant public sector, public infrastructure companies that are building the public infrastructure.

26:23And this is something that I think we don't understand. We've spoken about state capacity in Ireland in the last couple of podcasts. The Chinese have always understood, or not always understood, the Chinese have decided over the last 30 years that a highly efficient state infrastructure sector is necessary to create the dynamic for a highly competitive private sector. Right. This is something that the Chinese… Makes sense. It makes complete sense, but this must be therefore tolerant of the public sector losing money, overspending, creating the wrong projects, right? So, for example... We're good at that.

27:15We're very good. Tick, tick, tick. I was always thinking, like the delirium bats, the bats without the bats. Yeah, yes, exactly. Particularly fine example of public sector engineering. Okay, so I just want to understand this a little bit more. This kind of two-layered system that China has and how that works and how that's different to, you know, the Western. Okay, well, let's come back to that after. We make a few Yankee dollars and we sterilize them for Chinese renminbi and then convert them into euros and go to McEnnis. Right, McEnnis, I like that bit.

27:52This episode of the David McWilliams podcast is brought to you by Long Angle. Mark, have you ever come across Long Angle? Do you know what, John? I have heard of them. It's a private vetted community for people who've built serious wealth and are navigating what comes next. You know what strikes me about doing this show is every big economic story eventually lands on someone's kitchen table somewhere. A recession isn't an abstract thing if you're deciding whether to sell an asset. A housing crisis isn't academic if you're trying to figure out what to do with capital. The macro becomes very personal very quickly.

28:27And most people are navigating that without anyone who's actually been in the same position. You're absolutely right, John. And that's what Long Angle is. It's a vetted peer community, 8 ,000 members, no membership fee, where people at that level of financial complexity just help each other out, help each other to think clearly. Someone who's made the call you're about to make. You do need to qualify to get in. Which is the point. Longangle.com slash David. Longangle.com slash David.

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30:14explain to me that the kind of chinese system this kind of two-layered approach that they employ so it all starts with foreign money coming into china and the chinese wanting to prevent the chinese currency rising that is the key thing to understand so it means therefore that china is a wash with new money. Now that new money is coming to China because Chinese exports are so phenomenally powerful, not just in America, but everywhere in the world. So therefore China's awash with money. Now when you're awash with money, what happens tends typically to happen is you make big mistakes in certain areas.

30:55But if you manage to actually muscle through or shoulder on, you can actually probably get away with it. So keep that in the back of your head. So the Chinese have what they They call it two-layer capital structure. And the first layer is the private sector, which is driven by Chinese entrepreneurs trying to create internationally successful systems and companies which are ruled by the rules of capitalism, right? Shareholder value, all that good stuff. Sorry, can I just stop you there? So we accept that China is just not a communist country. At all. Like they're accused of by the Americans all the time.

31:33It's not a communist country at all. In fact, the most capitalist people I've ever met are Chinese people. I mean, I've been to China. It's amazing. It is capitalism in tooth and claw like you'll never see in the West. People are working all the bloody time. They're buying, they're selling, they're trading, they're investing. And they're getting rich. They're getting phenomenally rich. Yeah. I mean, it's a cliche, but, you know, Chinese people love gambling. They love cash. They have a very different relation with money, you know. So money is something that the Chinese, they believe in luck and they believe in all these sort of things that we don't.

32:07But at the core of it, this is a highly commercial country, right? A capitalist country in tooth and claw, as Bertie O 'Hearn once said about the operations, believe it or not, of Dublin Airport Authority. Tooth and claw? Yeah. He was referring to Ryanair and he said, we are not going to be capitalists like O 'Leary in tooth and claw. Google it, one of the great ones. Oh, man. Second only to his great one when he was referring to Temple Bar as Ireland's West Bank.

32:42What was the other one as well? The cloak and daggers. Oh, yeah. Was it cloak and mirrors? Cloak and mirrors, exactly. Anyway, so to come back, okay. So Chinese state-controlled industry is capitalist in its essence. and what it's trying to do is create the infrastructure that China needs off which to grow. Because what the Chinese understood is that in developing countries, you take Brazil, you take Colombia, you take any of the Latin American countries, they don't underperform because of a lack of entrepreneurs or for a lack of investment or a lack of people. What makes them underperform is there's no joined-up platform off which the private sector can operate.

33:29Yeah. So, for example, there's no railway system, right? Now, why does a railway system work? Because a railway system creates hubs, hubs of capital, hubs of people. It allows people to travel around, right? So what you have to understand is the railway system can't really make profit. The point for the Chinese is not to make profit out of those companies, but it's that that railway system integrates the Chinese society in such a way to allow the private sector in certain cities to perform its thing. So in a way, the state does a lot of the heavy lifting, right, from the private sector allowing it to do so.

34:09But the concept is a centrally planned economy that is capitalist. So whereas when we hear a centrally planned economy, we think Stalinism, right? We think no profit motivation. What they are is in the hold of a second. We are a centrally planned economy, but we are so impressive because the profit motive is front and central. This is creating a massive, massive Chinese middle class and this Chinese middle class is getting richer, quicker than any middle class ever in the history of humanity. But don't fuck with the Politburo. Yeah. Right? Yeah, yeah. That's their idea. Yeah, I was going to say like, so where is the line drawn between the public and private, you know, because...

34:50The line is drawn as you can make loads of money, Yeah. But this is the system. Yeah, yeah. And don't be doing your old Tiananmen Square stuff and looking for democracy and all that carry on. Yeah. Right? Because they looked at, and it's interesting, we started with Reykjavik. What really freaked out the Politburo in Beijing was the implosion of the Soviet Union. So if you can imagine, the Soviet Union was the senior partner in communism for 40 years. Yeah. And it was regarded as, it could well be inefficient, but it was permanent. It was a big thing. Yeah. Too big to fail? Yeah, exactly. But people thought it was too big to fail, and then it failed spectacularly in a number of weeks or months.

35:31Yeah. You know, the Soviet Union collapsed in a number of months, and the Chinese Politburo looked at that and said, ah-ah, we're not going down that route, right? Yeah. So Tiananmen Square, absolutely worth it in their eyes to keep the lid on a pro-democracy movement that had anarchy in its DNA. what those guys, or at least according to the communists, right? So then you have this incredible, just look at what China's achieved, right? With this capitalist but state-controlled infrastructure side. They have built 48 ,000 kilometers of high-speed rail. The United States has none. High-speed rail?

36:16No one line. Right. They have built 34 ultra-high voltage power transmission lines, like massive big things. The United States has none. None. Yeah. They built 3.6 million public EV electric vehicle charging points, which is 70 % of the world's total. 70 % of all the world's total. I know. I mean, they really are leading the kind of green revolution. Yeah. They have EV, electric vehicle penetration, 55 % in China of all cars are electric. Yeah. 9 % in the United States. And the creation of the infrastructure has created the demand. So they've created the charging points in order to allow the industry to actually do its thing.

37:04Whereas in America and Europe, we have said, well, a private sector can create the charging points. Let the market decide. The market doesn't decide, right? And, you know, they have, think about 5G. Yeah. They have 4.1 million 5G masts, space stations, right? The United States has a fraction of that. Yeah. So in this technological leap, what the Chinese have done is they've created public infrastructure, which has at its core intention to complement the private sector and allow the private sector to do its thing. And the EV is a great example of that. Whereas the Americans have said, let the market decide on infrastructure so they get poor or zero infrastructure in the wrong places.

37:56Yeah. And they're obsessing now about data centers as their answer to infrastructure, whereas the Chinese are building, you know, 50 ,000 kilometres of high-speed rail. The Americans have none. Yeah. Here's the thing, though, because at the beginning I was talking about how the Americans closing off and the Iranians closing off the Straits of Hormuz is kind of choking China's oil supply. Which is accelerating its transition. Exactly. But that's what I was going to say. China are leading the way in the kind of green revolution. They have built these massive solar farms. And the thing is, it has this dual effect, which is they're planting them in kind of arid, desert-y areas.

38:40But the solar panels themselves create a meadow because it creates a kind of a shadow where grass can grow. No way! And the panels themselves collect dew, which then drips down. And then, you know, they have to wash the panels, kind of keeping, you know, just basic maintenance. But all that water is not evaporating because it's in the shade and it's just burst into life. That's mad. So they're actually greening the desert. And now they have got loads of sheep and goats grazing in what was desert a few years ago. Do you know there was an Irish company that greened the desert in Saudi Arabia called Mastok and did exactly the same thing?

39:19Really? And created a whole agricultural base in Saudi Arabia based on greening the desert. but that was the objective. What you said is this is the unintended consequence of the sheep and goats. Yeah, yeah, yeah. It's amazing. But so you see what they've done. So the transition, you know, the Trump administration is obsessed by oil. Yeah. The Chinese are obsessed by the green transition. And the reason they know it is that basically this is the way the world is going. Yeah. And Trump won't even mention climate change. And they laugh at people and they tear up climate change agreements where the Chinese are at least genuflecting to it And they realize that they have to be market leaders in that area.

39:57So the battery-driven engines will be as important in the future as combustion engines were to the 19th century. And the Chinese want to win that particular war. So let me ask you then, what's Trump looking for out of this? What Trump is looking for is always a win to bring to Truth Social on Friday night. Yeah, yeah, yeah. It can be as simple as that. Any old win. Any old win. We beat them. We're better. I mean, the obvious issue here, this is what the Chinese really want to go on, is probably can they get concessions out of Trump on Taiwan and in return give him some rare earths or give him some sense that he has won something?

40:51Because what the Americans want from China, apart from all this sort of stuff, is access to rare earths. And maybe that's the Chinese plan. To just walsam up this sort of cul-de-sac. Yeah. And then, of course, what they would love is for the Americans to gradually, in the Cucidides world, John, to allow Taiwan to, in effect, be acquired by China. That's a small price, I'd say, for Trump. With no war. The Chinese have looked at Iran and thought, you know what? The Americans lost there. We could lose in Taiwan. So will Trump also be looking for Chinese help to find an off-ramp, as they say, in Iran?

41:41I wonder what that would be. I would say so. I would think it is. But I mean, again, we might, we'll come back to the Middle East because we did it last week, but it's very clear that the Iranians are playing chess and the Americans are playing drafts in this negotiation. because the Iranians have them by the balls because America couldn't knock Iran out. With all its military prowess, all it effectively has done is reduce dramatically American reserves of military hardware. And the Iranians are still standing. The Chinese will be looking at that, will be reminding Trump of that just to get his goat, I would say.

42:26But they're also looking at that and saying, well, you know, Taiwan, do we want to be involved in an amphibious attack on an island which is heavily defended? When in fact, if we play for time, what we might do is just acquire Taiwan anyway from these Americans. He should probably conclude, I think it could be Matsu Tong, but it might not have been when he was asked what he thought of, it was one of the communist leaders of China, when he was asked what he think of the French Revolution. he said it's far too early to say I love it we leave it there I would talk to you Tuesday

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