Transcription
So today I said China is not a threat to the world. If China was a threat to the world, then 1971-72 was a far worse threat to the world. So why are you now against China, and you made friends with China back then? It is simply human nature again that it is not China is not a threat to the West. China is, maybe, a threat to the supremacy, the hegemony of some country. And if you are not able to call a spade a spade, then you have a little problem. And thank God we're in a university situation in America where there's still the possibility, I hope, of speaking the truth.
And so America doesn't like the fact that somebody else is coming close to it. When Japan rose in the late 80s and early 90s, the book was written, "Japan Number One," right? America reacted, and the Plaza Accord, just down the street, not far from here, in 1986, in a sense, changed the course of Japan's future up to today. So America is not going to allow anyone, or indeed any country in history, rising would not allow a second power to surpass it. And so I always believe that the world can, much of the problem can best be solved when America, the number one country, and China, the number two country, work together.
And for the last 30, 40 years, as I said at an Asia Society event about 10 years ago, when Kevin Rudd first joined us as the head of our think tank, I said in that meeting outside of what the White House in Hay Adams Hotel, that China is very happy to play second fiddle to the United States. And the ambassador of China to Washington D.C. was sitting in the front row. He did not dispute that statement. Of course, he cannot agree to it either, as a representative of China, but he did not dispute the statement. So that means that China was very happy to play second fiddle to the United States. But it takes the number one to have the magnanimity, the wisdom, the long view to deal with a rising power. If you do not give the rising power the room to grow, history tells us we will not have a good ending. And how can you deny 1.4 billion people wanting a better life? So I think that it is a very sad thing from China's perspective. There's no choice. They have to improve. They were so pitifully poor in those years that they have to give their people a better livelihood. And rising means economic rise, means technological improvement. And up to a certain point, some people don't like it anymore.
So I said that one of the world's biggest problems today is America is still living in the world of 1946. In 1946, America has all the moral authority in the world. America has a superiority economically, militarily, politically, like no other country ever in human history has ever enjoyed. But the world has changed. Europe has risen. Russia is no longer the same Russia. Japan has risen. Now China has risen. India is in the process. So America still thinks that we can do anything we want. It is like, "I am Mike Tyson, you are Ronnie Chan, and you are in the boxing ring." And of course, you can do anything you want, right? But that was 1946. It's like LeBron James in the dunking contest with Yao Ming, not with Ronnie Chan. He dunked me, right? But it's Yao Ming. So the world has changed. America is still by far the number one. But the losing of self-confidence on the part of the United States is really a problem to the world. And I think this is unnecessary. But sadly, history tells us otherwise.
If the conflict is within, just within the bounds of trade, I say hallelujah. That would be the best scenario we can hope for. My worry is that it will go way beyond trade, just like what happened under the Biden administration. And frankly, my attitude is a very pragmatic one. I'm a business guy, okay? I'm pragmatic. Get it done. I said, get it over with. Do the 60% on day one if you can. China will no doubt be hurt, but so will the United States. Can China withstand it? Can America withstand it? Don't just look at the one side of the equation. China will be hurt. Although, just a little story, I was with a group of my mentees. I took care of a group of wealthy second-generation hardworking entrepreneurs. And one guy said to me, he's the biggest in his industry, manufacturing in China. He said, "60% tariff? I can manage that, but not every industry can." So, China will suffer. Not everybody is as good as my friend.
But that said, let me just tell you something else. I invited Jamie Dimon to speak at the Chairman of JP Morgan about 5 months ago in Hong Kong. And he went. As you know, he's, you know, one of the top bankers in the world. And he said, you know, he went out a lot of risks that as a leading banker he has to deal with and be concerned with. And then he basically, at the end, said in so many words, my real concern are none of those, but two more beyond that. Number one, nuclear proliferation or hard power military. Number one. Number two, structural inflation. I know nothing about the military, so I'm not qualified to talk about that. But structural inflation. I'm a business guy, and I just don't see how America can handle the structural inflation that will come if Trump were to do what he did, 60% tariff, and not just on China, and now also in Canada, on Mexico, and the rest of the world. I believe that we're entering into a huge period of rising inflation, not just on a cyclical basis. I don't watch. I just saw before coming in here, one of the Fed governors was saying that he's now leaning towards maybe in December have one more cut if there's nothing. And to what happened in this, and I don't read that. That clouds my mind in understanding the overall picture. I'm not a trader. I don't look at the screen every day and buy and sell bonds and currency and interest rate swaps and what have you. I don't. So what I'm really concerned is that the structural inflation that will result will be so severe that he who inflation will be tremendous. And he who has the most debt, and America has a lot of debt, would have to face the music. And so I think that it is no longer like 1946 where America can deal with anybody at will. That is not the case anymore. And it is probably good that Europe rose, Japan rose, China rose, India is rising, Vietnam is rising. And America has learned to adjust to a new world with America still by far being the top leader economically, militarily, and if you are wise, politically.
But my worry is that America is painting herself into a corner. Last year, I was in the Middle East six times. I've been going to the Middle East for 49 years. The last 49 years, I'm there all the time. And the former central bank governor of Israel was sitting right here. But I go to Arab countries more than I go to Israel these days. And they told me last year, four minister-level persons from four different countries, Egypt, Saudi Arabia, UAE, and Israel, told me that America is no longer the primary player in this region. I felt sad to hear that. And then two weeks ago, I had three ladies and gentlemen at my office, the same room where I hosted Hank for dinner. And that is Barroso, the former president of the European Commission, the former foreign minister of Spain, Rancha Gonzalez, who is now the dean of the Sciences Po in Paris, and then a gentleman from the Secretariat, former secretary general of the foreign affairs of France, who was successively the French ambassador to Japan, UK, Germany, and China. And I said this, I made a statement over dinner. I said, "From what I can observe, I worry that America is also retreating from Europe." And the signs to me are quite obvious. What was their reaction? The reaction was zero. No reaction. That means nobody disputed my statement. And that is very telling. These three are truly leaders of Europe in many, many ways relating to international affairs. And so it saddened me as an American citizen to see America's position in the world being undercut by ourselves. Nobody can undercut America. Just like the US dollar, nobody can damage the dollar except one country. And if you say it's China, you don't know what the heck you're talking about. It's only the United States that can undermine the US dollar. And over the last 30 years, America has been doing double time, it seems, to undercut the supremacy of the US dollar. And now I don't understand how it can be good for America or indeed anywhere in the world.
I believe something that nobody, most people don't believe the same way as I do. And that is even China. People think that China, oh, they, the RMB will replace the US dollar. Ladies and gentlemen, if you believe so, as far as I'm concerned, you don't know anything about China. Even China doesn't mind having the US dollar being the leading currency because it keeps a more stable environment economically on the international scene. So I think that it is, you know, very sad that what I observe today. Even the international police. It is, you may not like the police, but it's better to have a police than not have a police, as long as the police is not overbearing. And I'm afraid that sometimes it gets a little overbearing. And so I think that, you know, we are entering into a period of the world that is so complicated that I have never seen before. So eight years ago, I gave a talk at the University of Chicago on "Eight Ways to Damage Mankind" to a group of graduate students. And sorry to say, all eight of them are being played out in front of my eyes. And that is really very sad and to me, dangerous. And that's why I tell my son, who is now 42, when she was when he was 32, I said him one day, I said, "Son, I don't admire your generation. My generation is the luckiest. Your generation is doomed."
So given that background, I asked two questions. The first question is easy. Can China defeat America? No way. The harder question is, can America defeat China? Meaning that it accomplishes what it tried to do in containing China's rise. The answer is most likely not. And if both sides cannot do it, then it will become a long, drawn-out contest which becomes a psychological game in the short run. Okay. So in that situation, neither side can win, but both sides can lose. So the name of the game is not to lose. Whoever loses first loses big. Doesn't mean that the other guy may not also lose, but that's secondary. So if both sides cannot win, it is really how you prevent yourself from losing. And we all know the problems in China today: economic, political, structural, social, serious. And so if you have, if you force me to make a bet, like a businessman has to decide, buy or no buy, sell or no sell, I say China is in a very precarious position in the short run. But if China can get over that hump in the next, say, 5 years, I think that the tide may turn. Then time may be on the side of the Chinese. Because it is no longer a game of how many punches you can throw. It is how many punches you can absorb. And growing up in the Vietnam War years, I knew anti-war sentiment can easily rise in the United States. So if China can get over this short-term hump, which is not easy, then I think that time may be on China's side. America has challenges also with now the new government. Maybe challenges will become even more serious domestically and internationally. And by the way, if either country loses, I believe it will not be because of international affairs, not because the other guy beat you up. It's because you beat yourself up. China can beat herself up. America can beat herself up too. Meaning China can beat up China. US can beat up US. And in the long haul, I think that time may not be in the US's side. So I think that the best, of course, is for us to resolve all that thing.
So let me jump to my final conclusion, and that is America, if you were to read history, America ends conflicts in only one of two ways. The other is, "I win, you lose." Second World War, Cold War, Iran War, "I win, you lose." And America is not a bad winner. The other way, however, exists, and that is what I call the Korean War model, where America knows that it cannot win, then it will very quickly get the heck out of there. There's Korean War, there's Vietnam War, there's Afghanistan. So it is not like we have not seen it before. Somebody reminded me today, "America has not won a war since World War II." I said, "Like Israel has never won a war since 1967." And so I think that both sides should, in my opinion, clean up their own house internally instead of picking a fight outwardly. Because at the end of the day, it is your own house inwardly that will determine your future, not the international side of things, although that is very troublesome, and we all know.