Transcription
[Music] Right? China does not want to decouple from the US. China does not think that it is good for anybody. Uh, in the tech supply chain, like Japan and Korea are no longer just siding with the US. How many countries were able to use it as productively and use that and leverage that to really reach where China is today? Well, a few countries. So, how can China really, if it's a purely socialist economy, have also one of the most dynamic social entrepreneur, uh, kind of landscape?
Well, today I turned up the news and I saw the, the, um, uh, uh, Secretary of the Treasury, Treasury Secretary Scott Besson saying something like, US and China do not want to decouple. Great. Um, that sounds great because that, that has really should have been the case all along. And let me tell you about the China side. Um, no matter what they're saying outside and the, the outward, um, let me tell you about the China side. Uh, no matter what they're saying, you know, and outwardly, uh, internally, you're not actually allowed to mention decouple. We cannot mention the word decouple on the social media or anywhere. So that has been kind of a concept that, that really shows you where China stands, right? China does not want to decouple from the US. China does not think that that is good for anybody, nor for the world. China believes that there are ways to manage the relationship even if it is the most competitive two powers in the world today. Uh, even if they both have security needs to be satisfied, they believe that the relation should be, should be managed and they do not want to take the decoupling route.
There's a critical area in which there's inevitably a parallel system that will take place and that is technology, critical technology. But what we have seen is that, um, the tech autonomy, right, autonomous technology, especially in the choke points, if you will, for China, semiconductors, um, maybe thanks to the Biden export controls, have become much more domestically self-sufficient. Um, we've certainly seen a massive acceleration after the, uh, the controls started to take place and, uh, more broadly speaking, um, the, um, the, you know, the export controls, uh, have been effective starting from, uh, uh, Trump 1.0 zero. Really, it became an existential threat for China, which really relied critically on US technologies in some of these so-called choke point areas and that was an existential threat. Um, but ever since, and we can see this with the show, the, the semicon show, um, last year, that domestic capacity has significantly improved. Lots of gaps were filled. But more importantly, the point is that pivotal economies, companies, uh, in the tech supply chain like Japan and Korea are no longer just siding with the US. They also want to have a foot in China because they want to hedge their bets, especially in light of what is happening now with the trade wars, with the greater uncertainty, with less reliability coming from the US administration, as well as seeing economic opportunities in the autonomous tech chain in China. And I'm not sure that's exactly what the US wanted to see by saying that we need to, you know, kind of stop some of the, the critical technologies, uh, progress. It certainly has, uh, caused inflicted short-term pain, but really in gearing up of the whole country in tackling these really difficult issues, uh, in the, in the, in the last few years, and there has been substantial progress.
So I think in those areas where there it concerns national security, military, uh, uh, capabilities, there will inevitably be a parallel system. But I do see that there will be some normality or there should be some normality in mutually engaging with each other on, uh, the investment and, uh, and trade front, and most importantly, still the flow of of talent. Um, because from what I understand, the majority of OpenAI's research team consists of either Chinese nationals or Chinese, uh, um, uh, or, or, or, or, sorry, let me, let me start that sentence. Sure. How should I say this? Um, Chinese heritage. Sorry. Um, from what I understand, a company like OAI, a company like OpenAI, their research team have many, uh, um, uh, people with Chinese heritage or Chinese nationality even. And, um, that goes to show that, uh, there, there needs to be continuous flow of knowledge and to do great things, including collaborations, not only in AI, but in the, uh, biotech space and the, and in medicine, uh, in really important subjects where you have the top two countries with the leading minds and leading researchers, uh, should really be collaborating together. Not to mention the global challenges, uh, that we are facing. Um, and let's, you know, if we see another financial crisis around the corner, global financial crisis, I'm pretty sure that the two central bank governors are not going to be talking about decoupling. They're going to be talking about how to work together.
Well, first of all, you're absolutely right. China itself, and especially the government, I'm not sure about the, you know, that the ordinary Chinese citizens clearly understand that globalization is really one of the most fundamental drivers of China's prosperity. And globalization includes trade, in admitting China into, uh, the WTO, includes foreign investment, FDI, includes foreign technology know-how, managerial know-how, and all of that collaboration, which is why China does not want to decouple with the US. But that said, we look around the world, that is an open opportunity for virtually all of the countries, right? When you talk about global capital flows from the core to the periphery, that is the idea. The idea is to put capital into fast emerging economies with a higher marginal product of capital so that they can earn higher returns. This is not a purely, um, altruistic motive. This is the laws of capital flows and finance. And indeed, a lot of this capital went into developing countries, emerging markets in Argentina and, you know, Latin American countries, uh, uh, uh, etcetera, actually everywhere. But how many countries were able to use it as productively and use that and leverage that to really reach where China is today? Well, a few countries. You know, the country, the likes of of Korea and Singapore and Japan earlier on, a few countries that we know have gone to a rich income status, but the vast majority has have been stuck in a middle-income trap. China is still middle income, but it does cutting-edge technology. I'd argue that that is a very unique feature of the Chinese economy today. A developing country with only a quarter of standards of living of the West is able to do cutting-edge technology. And I think it has to be a combination of the interaction with the West through capital flows, through the knowledge links, through the universities. And you can say, my argument would be is that it was accelerated by a big state push. And again, I'm not trying to say that the state push is will always be important, but in certain stages, under certain conditions, that is actually what is often the missing link in many countries, including arguably in Europe and in the United States.
Well, first of all, I think these labels are less and less useful these days. Uh, if we look also look at Europe, right? Um, if we look at Latin America, but also the spectrum that ranges, uh, uh, you know, really, uh, uh, your your position, your preferences as a country between socialist ideals and then capitalistic, uh, instincts and market mechanisms and and so forth. I think it's, it's, it's less of the time when we were really seriously debating about a black cat or a white cat, as, um, as, uh, uh, Denging, uh, put it back then. But, but beyond socialism and capitalism, I think that China has fostered a unique model, a combination of coming back to our previous theme, a unique balance of state coordination and market mechanisms, um, and a balance between communalism and individualism. Uh, and actually indeed, many of the questions that we ask in cap, the most extreme capitalist countries like the United States and in certain parts of, and indeed in Europe, the most advanced economies are some, some of these critical questions that goes beyond, uh, what capitalist, uh, societies can offer. For instance, the big inequality issues, right? What is economically efficient may no longer be socially optimal. In fact, I'd argue that with increasing economic fragmentation, geopolitical considerations, the rise of geoeconomics, that we're really moving beyond just economic efficiency to talking about resilience, talking about national security. The economic nationalism that is arising is also response to some of the, the problems, the challenges that we have encountered in this more freewheeling capitalist societies. And indeed, even if we look at a purely from a purely economic perspective, uh, you know, in the last few years, there have been grand revisions of the, the old, the old, you know, pure capitalist society kind of, um, principles of open up everything, open up your capital flows, open up trade, your financial networks. We, we've had, we move beyond that.