#175 People Leave China in Droves | Economic Crisis Looms Large

#175 People Leave China in Droves | Economic Crisis Looms Large

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on this episode of china unscripted   why u.s businesses should get out  of china now the commerce department   approves the sale of sensitive military tech  to china and china's looming economic crisis welcome to china unscripted i'm chris chappell  i'm shelley jones and i'm matt ganeshta and my   goal today is to get shelley to quit by going into  some kind of red terror rant do you actually want   me to quit no that'd be very bad for me and it  would just be you and me on the whole rest of   the hour that would be how many more strip scripts  would you guys have to edit and write well without   oh you mean like you quit the entire show no they  wow that's right no you meant you just want me to   storm off the podcast yes i i have limits okay  yeah you're you're way too valuable otherwise   that's the problem so anyways uh mccarthy was  an anti-communist american hero shelley your   thoughts i feel like that clip is just going to be  taken out of context well we have the clip of me   like with like a tiki torch making an okay symbol  that's already floating around the internet yeah   but you know what clip of you has the most views  it's actually uh the one where you talk about   how china has what are they they've they've  killed the wither and created another beacon   yeah yeah because they when they shot a hypersonic  missile we could maybe play the clip this is why   you come to china and censor to get the facts  i can tell you what this really means it means   china has successfully killed the wither and now  has the resources necessary to activate a beacon   but yeah they they fired the hypersonic missile  and it looks like just a straight beam of   light shooting up in the sky which is just  like in minecraft if you activate a beacon   so basically there's millions of views it's  crazy we should just start a minecraft china   channel well we kind of are in soft launch  of our other uh channel gamers unbeaten   where there is some minecraft content  up there not minecraft and china though   uh not yet i mean someone said why did we  build jonah in minecraft which is an idea   yeah i mean it is possible to do um it would it  would be a substantial amount of work i think   so please check out gamer's unbeaten and now i  think we can get into some actual discussion of   news we don't don't go into the red terror rant  i'll save that for social media late at night the best place for rants of course uh  except for twitter because it's just   the limitations on characters it's just so hard to  rant that that's why you do like does 9 out of 22.   one out of 22. there are people who do one out  of like 213 or something like that threads it is  

horrifying i wonder if the  ancient world had any equivalent   should only be like out of 320  because that would be the build limit never mind um let's talk about china news shelly  before we began you were telling us about this   this interview with uh the the chinese ambassador  qingan with uh was it was with the us ambassador   he's no he well he's the chinese ambassador  to the u.s yes and then he had a it's unusual   because they don't usually give any kind of  press availability they don't exactly hold press   conferences and things like that i wonder why  right but he had a special kind of joint interview   where they invited like ap reuters new york times  washington post like all these major us media   and basically let them ask him questions what  did they think was going to happen uh you know   i'm not sure i think it was definitely an attempt  to change the narrative about like pelosi's like   basically to get the chinese it's like you know  it's an attempt to get the chinese communist   party messaging out there but the reaction from  the journalists the articles i read were mostly   like we had to listen to him live for an hour you  know i mean said in more then actually i think the   washington post josh rogan actually did say that  like we the journalists were just listening to lie   or say things that were completely untrue um which  which sounds like fun like i wish i we could have   been there and been like so what happened on uh  tim and on june 4th 1989 uh well he has to admit   that happens in a room full of western journalists  right well no i mean he could go with the line of   like you know no students were killed in cinnamon  square or there were like insurrectionists right   whatever yeah and the politico reporter  said in his like china newsletter that   it was basically like sitting through an hour of  invective so invective like ranting of from like   you know like kind of like like i thought  that was like some new social media thing   which maybe it should be invective that's  basically twitter yeah um but but it sounds like   a like a high brown name you know but what was  interesting to me is that the people's daily then   published a transcript of this entire thing really  yeah which is weird weird and it was uncensored   well i don't know you'd have to ask the american  journalists if everything they said was in there   i haven't seen any reactions to it because they  just published it this morning the only way to   make sure it's accurate is to have some one of  the western media publish its own transcript right   yeah i mean it is interesting because it  starts off with like some pointed questions um   from the washington post josh oregon about  taiwan and one of the questions he asks is so   if you're doing all this great stuff  for taiwan and you know reunification is   you know everything that you say it's going to  be why do the majority of people in taiwan not   you know want to reunify like what are you doing  to are you do you think you're winning them over   and then he can't say yes so he just goes into  this weird kind of baby what do you call that   like tangent tangent right i was thinking offshoot  in my head and being like there's another word   he went into this weird tangent about all the the  fact that like a million taiwanese people live   in mainland china and they're doing so much  business between taiwan and china it's just   funny to watch them try to like wriggle out of it  did they talk about all the chinese dumplings you   can get in taiwan because that was that was  the point that uh hua chunying mentioned on   twitter yeah because there are lots of chinese  regional restaurants in taiwan which proves   that taiwan is part of china 100 a lot of chinese  restaurants in america i like the response where   somebody said on twitter that you know there  are so many kfc's in china kentucky must reclaim   its ancestral lands which is a shame because  popeyes is clearly the superior fried chicken   uh but kfc got there first that's true that's  that's very true yeah yeah yeah it's it's really   interesting to see how um uh pelosi's visit to  taiwan has really sort of i feel like in a lot of   way turned to key uh because i mean over actually  this year there's been like what 10 congressional   delegations that was that many ned price the u.s  state department spokesperson said 10 or more   yeah which is a lot um well no it should be seen  as like commonplace and actually not enough really   but in the horrible u.s china taiwan relations  we are in 10 is quite significant 10 delegations   yeah i mean not all of them have been very  publicized like i was actually i found that   quote because i was trying to count up how many  delegations there were and through like new news   articles and i didn't i counted seven between  last year and this year and then i found that   press conference where he said 10 and i was like  whoa yeah yeah i was surprised and like uh i   guess like a japanese delegation is coming soon  uh there was a lithuanian one pretty recently   uh nobody would have known about the lithuanian  one really i mean the person the deputy minister   tweeted about it but then because chyna freaked  out and sanctioned her for visiting lithuania   suddenly this is international news yeah  um i mean for her visiting taiwan geez   yeah uh so i it does seem like there is kind of  a dare i say zeitgeist of uh you know sort of   a push to recognize taiwan more and maybe it was  the the invasion of ukraine that kind of sparked   a lot of this i think maybe for a lot of people  it was kind of like oh this an authoritarian   regime invading uh independent country maybe  isn't that far-fetched in the 21st century i   think what actually happened is that everybody  read the new chinese white paper on taiwan   and then they they were very concerned they  were very concerned because then they also   read the 1993 and 2000 versions and then compared  them that's right yeah it's a i mean we did an   episode about that it is amazing how significant  the change is because i mean you know you kind   of think you know china authoritarian regime's  going to invade but there were some pretty big   changes between the 93 and 2001  it's gotten a lot more invadey well   also you have to remember where relations  i don't have to remember anything shelley   uh in 2000 right this is kind of  the time when there was a lot more   opening up between the two countries because  like into the 90s there was very little   like you couldn't barely get flights between  china and like there had to be special like if   you wanted to people who were in taiwan who had  family members in mainland china wanted to visit   them had to get like special permission there was  not really much going back and forth and then you   know in the 2000s i think was then when like all  these business ties started being made i think   it was also the time when the ccp was probably  like we could we could do a hong kong thing well   yeah in particular at this point in time like  especially when the other second white paper the   2000 white paper came out they were pushing the  one country two system things and at that point   it kind of seemed like one country two systems  was working in hong kong they just you know had   been three years for hong kong and one year from  a cow yeah and it hadn't hong kong had not become   the disaster that it had eventually became  um so it seemed like there might have been a   little more credibility of like oh yeah we can  do this one country too systems things but now   that is obviously out of the table because  we have seen where that i mean they're still   saying that right like the white paper still  said hong kong like taiwan can keep its democracy   quote unquote yeah but at the same time uh  they're gonna purge any separatists and uh   launch a re-education campaign oh the re-education  thing came from the chinese no it was the it was   the chinese ambassador to france that's right um  you gotta think that's what you need for democracy   reeducation that's right  specifically re-education camps yeah and then there was the chinese ambassador  to australia who said you know the line about   you know what will the takeover look like use  your imagination you can use you can use your   imagination like chinese ambassadors suck i mean  they're limited to what they can say right yeah   but there's threats diplomats it is kind of fun  i wonder though now that you mentioned because we   just talked about the chinese ambassador to france  saying something the australian one he that was at   a like big like he gave a speech right at this  think tank or something in australia so and now   qingang the chinese ambassador to  yes had this you know on the record   interview i wonder if they're being told  essentially that like they need to do some   kind of like soft power push right now well yeah  i wonder if the strategy is like all right start   talking aggressive so you know the hope is that  other countries will be get afraid like oh we we   really better not push them because otherwise you  know oh gosh they might they might do something i   mean the qing kongs wasn't aggressive in the  sense like he did it if you if you think that   what the chinese ambassador in australia said was  aggressive qinghan didn't say anything like that   um he basically was trying to play dumb like when  the the new yorker reporter asked what would what   are they prepared for and like the international  uh world's reaction if they do something to taiwan   and tina was like what what what do you  mean like what would we be doing and then   the washington post reporter said if you  attack taiwan and then he was like well   that's just an internal matter that doesn't  like the like the international community   shouldn't have any reaction to that because it  has nothing to do with them but the question   wasn't whether they should it's a question of  what would they have and if they're prepared   to you know deal with the consequences i mean like  they can't possibly imagine in like like in their   own internal things they can't imagine that they  invade they they liberate taiwan no no matt it's   it's reunified they they reunify with a country  that was never part of the prc and then the rest   do they imagine the rest of the world is going  to be like you know what you're right this is   your internal affair you know they wouldn't have  been that uh unjustified in believing that i think   yeah up until very recently well you know this  reminds me of something i want to talk about a   little bit but like some of the stuff we  found out about the commerce department   yeah i mean even without like  incompetence or whatever uh it is also   just you know you see people talking in  opinion articles all the time about like   you know we should not get into a war with china  over taiwan yeah you know like it's like there's   a lot of that kind of talk out there so before  the invasion of ukraine especially as you pointed   out chris like there was there's a sea change in a  lot of things that i think they wouldn't have been   it's not like they're crazy to think that  maybe they could just get away with it   yeah well i mean they were like after  the end the cold war never ended   all right that's not a rage quit for you good uh  i guess we've i guess we've heard too much about   that but uh i mean yeah just there was so much  like okay we're at the end of history there's   no more going to no more countries aren't going  to invade each other we're done things are good   nobody really wanted to in the west wanted to  acknowledge like well you know there are still   really aggressive authoritarian states that have  ambitions that don't jive with the international   so i think also because in 1991 or whatever like  when the berlin wall fell when the soviet union   started to break up in the early 90s china wasn't  that like powerful of a country yeah reflected   in the white paper on taiwan yeah now do you  remember when russia invaded crimea in 2014 oh   i don't because i don't remember it i don't have  to remember anything yeah like what international   reaction it was just russia reclaiming part of  russia from like the like if you if you try to   like look back at that there was like a bit of  media outrage and then resuming normal relations   with russia what was going on in 2014 like like  what was the big story back then i don't remember   and i think that was that was well so  long ago remember the obama administration   and i think hillary clinton in particular  secretary of state a couple years earlier   had tried to do a russia reset right that was  significantly earlier than the that was like   2008 that was the that was obama's first term yes  right but i mean like there was this idea that   that the u.s could kind of well yeah reset  relations with russia and have treat russia like   a normal country a normal democracy and not like  a you know putin dictatorship uh and it didn't   i i'm sorry russia democrat i gotta  know what shell oh i laughed because i   i looked up what happened in 2014 and one  of the things that happened was the sochi   olympics which i can't believe i forgot because  that's when it happened right yeah yeah yeah   yeah the doping olympics yeah we found out they  were all doping olympic but the sochi olympics   specifically that's when putin like uh did his  little strategic military operation yeah yeah   but yeah i think but but that is a very good  point like the invasion of crimea should have   sparked something but for some reason was ukraine  where like people finally were like oh gosh   something like this can happen in the 21st  century yeah like like but like what's the   difference between taking a part of  ukraine and taking the entire ukraine   i think there is a difference because you  know when biden was asked about prior to the   invasion of ukraine like the u.s had been kind of  saying that russia is going to do something right   and then there was a question asked to biden  at a press conference about what would the   reaction to that be and binomial is kind of like  well it depends on what they do depends how much   of ukraine uh he didn't say that specifically  but he said something about a minor incursion   which essentially i think a lot of people  expected them to uh try to get the donbus region   essentially like do like a small like what they  did in crimea like take a small part and not like   go straight for keefe uh so i think that was if  you think about that in terms of china and taiwan   it would be like yeah taking jimin or matsu or  some of the outlying islands or maybe taking their   island in the south china sea like what would the  international reaction to that be probably pretty   tough well i mean the international reaction  to the ccp trying to take gene men in the 1950s   well that was the first and second taiwan straits  crisis when americans knew the threat of communism   and and we supported taiwan in fighting the  red terror didn't was it eisenhower did he like   threaten a nuke to nuke china am i making that up  that wasn't i'm pretty sure that was our youtube   commentators no no no uh i'm trying to remember  if there was a threat of it eisenhower wasn't   i might be wrong i'm not sure too many i i have  forgotten more things about china than most people   ever learned uh so but at any rate like  what would happen if today the prc tried to   take over one of those outlying islands that are  administered by the republic of china i.e taiwan  

like it's a really good question and also i think  a lot of it depends on when they would make that   move you know like right now like with the context  of ukraine i think people would be more outraged   what happens if it's two years from now four  years from now seven years from now will people   what will people care about then yeah i mean  you could you can also imagine that like the   the chinese communist party has had quite a bit  of success with salami slicing over the last   decade or so explain that so the salami slicing is  when that was my larry king okay i was wondering   going forward yeah so basically instead of doing  one big takeover of taiwan or india or the south   china sea they just do little by little by little  by little and each individual step seems small   enough that to react to that might seem like an  overreaction because everything is is a sort of   short of war tactic i mean there was a reaction  but it was often like not it was often a reaction   that was like yes finger wagging and and not on  the level of what the prc had done so like they   salami slice into the south china sea gradually  right bit by bit so first they claim they draw   the nine-dash line and say it's been part of  chinese territory since ancient times and they you   know come up with some old maps and okay fine the  people like oh well that's not true but it doesn't   really matter because they're not doing anything  there you don't want to have a war over a fake map   right it doesn't matter right and then you know oh  they've started move some ships in to the to some   of those islands and shoals okay but like not a  big deal they start to fill them in with sands and   and build up the area but it's like what like it's  not they say they're not going to militarize they   they promise obama in the rose garden xi jinping  says we're not going to militarize i've been to   that rose garden it's lovely and they have photos  of that meeting all over the place yeah so it's   it's beautiful right and it's like well okay look  if you promise you're not going to militarize then   it doesn't seem like that big a deal like what  kind of reaction should we have to just like   you know doing this maybe it's for commercial  reasons whatever and then they start to militarize   and that definitely should have been a  part where there's a big reaction but they   also kind of did that gradually there was no  big announcement of course not i mean basically   people found like we're taking satellite  images and they're like okay this looks   this looks like a hanger but at this point  like what are you gonna do because there's   already a big chinese presence there so if you  if you and they've previously removed civilians   right and so once there's civilians that you  can't just bomb it and of course bombing it   anyway would be from the prc's perspective an  act of war right so they're they're putting   civilians there and then military facilities  is not from their perspective an act of war   but a reaction to that would be an  act of war so they kind of set this up   where they can gradually do what they want but any  reaction that the u.s or foreign countries have   is an extreme overreaction that would then trigger  a war between china and the u.s so we're like   america is always falling for this trap because  we we don't we don't do reactions big enough   to deal with each slice of the salami i think  we're it's also that we have we don't have a   good like proactive policy for certain things like  it's very reactive right right well i think what's   interesting is like this salami slicing strategy  is something the u.s can adopt as well and maybe  

they are to an extent like you know china  you know threatens all kinds of war if the us   supports taiwan well the u.s sends some  congressmen to taiwan well that's not a   big deal they can't like have a war over that  they can't actually pull the trigger on invasion   oh now it's nancy pelosi who's visiting taiwan  well that's a bigger escalation but that's you   know still you don't want to actually do the  invasion just because of that i mean also they   can't right and they can yeah so like if the u.s  keeps doing like these little progressions like   okay now what's next after this is what the  like the state department should be thinking   of what's next after nancy pelosi maybe station  some troops there or have an aircraft carrier doc   there can be this gradual kind of progression  of u.s support for taiwan that never triggers   a response i think the i mean the the fact that  there have been marines on there just you know   a few um that came out and then like the ccp  was upset but then they couldn't do anything   about it exactly uh yeah when we had garmont lay  larry on he suggested well maybe this year could   be ten maybe next year it could be a hundred like  you know like kind of what you're talking about   this like gradual build up kind of scenario yeah  yeah i think the next step actually is going to be   economic ties with taiwan well there is going  to be uh trade talks coming up right yeah they   announced that they were going to do some kind of  like trade talks during the like back in june but   this week they announced that they come up  with a framework and the talks are actually   going to start next month yeah so well speaking  of trade i think that's a great segue into the   fury i feel at the commerce department  oh yes shall we get into that one yeah   so you know you know how china is an authoritarian  state and there's really no separation between   any state-run military uh industrial complex  and any private chinese company in china   well i mean there's a separation but they can  take whatever they want yeah civil military   fusion they officially have that policy of  civil military fusion yep uh and so the way   the u.s has dealt with this is you know there's  like an entity list you're not supposed to   there are restrictions on trade with chinese  companies tied to the military for instance   which as we just said is stupid because they're  all there's no such thing as a private chinese   company well there are such things as private  chinese companies i'm just saying that like   if a military wants something they can take  they can take it yeah so if you give sensitive   technology to a private chinese company that has a  military application the chinese military can just   take it but anyways the point is like supposedly  there were all these you know restrictions on   u.s companies trading sensitive technology with  china particularly things that have military  

applications apparently i come to find out that  uh all these like the entity lens restriction   all it means is these us companies just need to  get a license from the commerce department and   the commerce department basically approves  everything they approved something like 94   in 2020 yeah which and like only like a fraction  of all the trade uh that happens between the u.s   and china is even being reviewed well because  only a fraction needs to be according to the   entity list right because there's only like  70 companies on the entity list and yeah corey   and this is great because according to uh one  washington dc based analytics firm uh like there   are tens of thousands of chinese companies that  should be on the entity list but there's only like   70. right whereas they said should could be like  could be yeah like it's not necessarily all 10 000   but like that there's probably more than seven  people but there's a corollary to this which is   iran where every iranian company is essentially  on the entity list even though they don't   call it that it's that like u.s companies  can't trade with iranian companies because   we have this this these strict full trade  restrictions on that whole authoritarian country   and it's similar with north korea so like it's  not a thing we that the united states can't do   it's just a unit it's a thing the united states  essentially is making a an exception for china   for the whole country and the result is american  companies are giving china the sensitive military   technology well they need we're selling it to them  that's better that's it's that's true it supports   u.s companies we really are extreme short-term  you really are selling leadership we really are   selling them the rope that they will use to hang  us i'm i don't know if rope is on the entity list   it should be it's probably a technology that  that's the other thing if it was a hemp rope   there'd be lots of restrictions on it if it's a  technology that's deemed old enough even though   it can still be used by military applications then  it um doesn't get restricted so like like a club   with nails in it well i mean i don't think we're  selling that to china but certain semi-conductors   yeah certain semiconductors and also equipment  used to make semiconductors is okay yeah yeah   the most sensitive semiconductors oh no those  are you can only sell those to private chinese   companies unless you get a license which will  get approved anyways right and not only that   the commerce by the commerce department's own  rules i'm choking on my rage and bile uh but the   commerce department's own rules if a u.s company  just makes whatever it is outside of the us then   they they can sell to china any company they want  doesn't matter yeah the entity list doesn't apply   you know what this tells me shelley the commerce  department is full of deep state commies i actually don't think that's why why do you  think that is there is there any possible   other explanation i think the other possible  explanation is that the commerce department   is their mandate is to be the commerce department  right like their mandate is to promote u.s trade  

around the world and they're not equipped to   essentially deal with the fact that  one of our biggest trading partners   is an authoritarian regime well this is the weird  thing because like the state department the energy   department the defense department they all know  the risk yeah china and like they are trying to   tell the commerce department what they're  doing and i do think that specifically some   people in the commerce department know of the  risk like i do think that for example the u.s   trade representative office has always been better  on trade like on certain things related to china   trade especially since the trump administration  but uh like when you have for example treasury or   um some of the commerce department leadership it's  obvious that they're more worried about you know   promoting u.s trade promoting the economy you  know the money side of the thing and that's why   i'm always very kind of hesitant whenever um you  know it's implied that we should have the finance   people set up any part of china policy well  because uh the the the the commerce department's   line on this is well we're promoting long-term  strategic competition with china by allowing all   of this trade it it makes american technology  that's not what they said yeah they did no it's   they said they were they were focused on  long-term competition with china but they weren't   uh defending the licensing to the like i don't  think they had a comment on that basically well   no they were saying that like their their goal  is to uh promote america i forget what they   think yeah the promote american technology  thing was a separate yeah thing in the wall   street journal article where that person was  responding to matt pottinger who used to be a   national security deputy adviser saying that the  commerce department was listening too much to   american business leaders when it came to china  because the business leaders obviously don't care   about national security they want to make money  yeah so the commerce department spokesperson was   like oh we are promoting u.s technological  leadership and part of that is listening to  

u.s technological leaders so they were defending  listening to the business people but they weren't   defending the actual practice of granting all  these licenses it sounds like a lot of hand waving   well no i'm just saying that that was like a  separate issue from the entity list well anyways   like the idea that they are somehow promoting u.s  technological leadership or long-term strategic   competition with china by allowing basically  wholesale selling of sensitive technology to   the chinese community i'm not saying they're right  i'm just saying that they're not saying this is   promoting u.s technology leadership i don't think  they've come up with any kind of defense for it it's because the united states does not have a  whole of society or whole of government approach   to china and granted like that's very hard to  do in a democracy because a democracy is the way   the united states is designed essentially by our  founding fathers is to have checks and balances   which ultimately means competing interests  that that prevent a sort of authoritarianism   like what the you know american colony had  felt the you know england had become but the   the problem is then it makes it very hard to  coordinate sometimes on really important issues   but the u.s can do it because the u.s has done it  on iran the u.s has done it on north korea and the  

u.s is largely doing it on russia although there's  many issues there for example we still buy like   refined uranium from russia even though we  would never buy their oil anymore because   that's horrible but like like there is  there are the tools to do it there is the   abil the political willpower potentially to make  it happen it's just not coalesced into anything   yeah i don't think that we're at the point  where um the any u.s administration would   be like we need to stop all trade with china  right the way we do with iran but and that's   it's we're in so deep right and so now to do that  would cause such unbelievable pain to our economy   that i i don't know if that actually would be the  case well i think that's the fear right i and i i   actually do believe that short term there would  definitely be some pain there'd be a lot like   think about all the pain that we experienced over  the last two and a half years of covid because of   china's supply chain problems right and it's it's  a it affected different things at different times   right but like you know certain things you  know are really hard to get and whatever and so   you're going to deal with that pain uh and then  after you get through the pain it's not going to   hurt anymore because short-term pain is nothing  compared to the long-term consequences well i   mean the long-term consequences is essentially  a war with china that would be devastating both   economically and you know right yeah well i think  the bigger problem of of not separating from   the china trade is that decoupling or  decoupling is that when china invades taiwan   uh because like if there's still like this  unbelievable amount of trade there's going to be   so much political resistance and so much business  resistance to supporting taiwan that like it'll   be very hard for the us to to do what it needs  which you saw in in europe since so many european   countries were so tied to the russian economy  there was a lot of resistance to doing anything   to prevent the invasion of ukraine right  and i think there's this this excuse that oh   if you know western europe or if the united states  sends actual troops to ukraine then we can't do   that because then we risk nuclear war but i don't  think that that's actually the main reason and you   know this is somewhat speculative i acknowledge  that but i think that there's a sort of   general reluctance to just get in too deep um  because you know ultimately the u.s still wants   to be able to trade with russia later and do you  know again we do have some you know not a lot of   countries sell you refined uranium that we do need  for our power plants i mean it is possible to get   from canada for example yeah so it's basically  between one authoritarian country in russia uh shelly you ready to quit yet getting  there all right the pressure's building keep   at yeah you got this but at any rate like i  i do think that there's there's more reasons   that are more complex and political than  simply fear of nuclear war and i think a   lot of that has to do with business interests  and trade interests well i think we need to   salami slice to coupling i agree with that that's  good i mean we started right i mean a few years   ago we started with sort of trying to slice off uh  trade with uh companies that operated in xinjiang   uh the white house had sanctioned a bunch of  companies that were doing that were directly tied   to the concentration camps in xinjiang so i wonder  how much the commerce department is enforcing that   well i don't know either but like again like  that's that's a that's a lot of things um let's   see the xinjiang uh like slave labor bill is about  to go into enforcement so that'll be interesting   to see if that makes a difference yeah the  next step would be any company that has uh   used laborers from xinjiang although that's very  hard to track uh and then yeah you can gradually   you know any any chinese company that has  sold to xinjiang or like and you can you can   you can do that gradually enough well shelly  what was your idea you brought up the salami   slicing in terms of decoupling well that uh you  know we know we are going to need to decouple   uh from china i'm i'm not sure if we can do it  fully right now but i don't think we can do it   fully in one go like that's just unrealistic as  a term of like us government policy and in terms   of like practically speaking you know people  aren't going to just be able to pull out yeah   but we should be encouraging businesses to come  back to the us like japan did this thing right   where they were they incentivized it financial  incentives to companies for coming back to japan   um there's also this concept of friendshiping  that's being talked about a lot right now where   the idea is to pull out of like russia  and china and places like that but to   even if you can't bring everything back to the  us like if you get your supply chains through   friendly countries to the us like for example  taiwan you know you're not gonna have to worry   about uh essentially something like the chinese  communist party nationalizing 3m by forbidding   them from exporting face masks in the middle of  a pandemic when we had no face masks yeah so they   recorded it but like so that's the kind of thing  where you don't want your supply chains to be   controlled by authoritarian regimes that you are  in a conflict with like that just sounds so basic   but it's going to take gradual steps to get  there and i think it's going to have to be   a combination of some government regulation  because some businesses are just not going to   do it unless you make them and then some uh you  know positive incentives too and i think also   the more that u.s consumers are looking to not  buy things made in china uh that will pressure   certain types of companies to move their menu but  there's not always the option like okay so apple   manufactures a lot of iphones in china and in  fact the ones that are sold in the u.s market  

are manufactured in china still but iphones  sold in india a lot of them are manufactured   locally in india same with brazil a lot of those  are sold in parts of latin america so they have   apple has diversified its manufacturing to  other countries but as a us consumer i only   have a choice to buy if i want an iphone and i'm  not willing to fly to another country to get it i   basically am getting a made in china one but if i  as a consumer had the option like okay let's say   uh there's a new iphone model that's twelve  hundred dollars or i could pay twelve hundred   and fifty dollars or thirteen hundred dollars  to have it to buy one made in india or brazil   right like as long as the difference is small  enough and i think actually it is um as long as   like i think the difference in cost is small  enough that if if apple were to present an   option uh they would quickly see that there's a  substantial number of consumers who would pay five   percent more uh or maybe even ten percent more  to get it in a french order country and not china   i think that something to do with technology  is also an issue of apples but you know most   of their supply chain was in china for well over a  decade so they only recently started to diversify   and like put manufacturing in in india right  so if they can build out that manufacturing   right then it would be more likely to have  that those iphones go to other parts of the   world and maybe that is what apple's planning  just because it's so difficult for them to   operate in china they found and i don't know what  apple's internal discussions are no but i think   it is going to be china is going to be helping us  with this decoupling thing actually because it is   going to get increasingly hard to do business in  china uh right it's quite hard to do business in   a communist country well it's gonna get worse well  when they were welcoming everyone it wasn't that   hard right but um they were just stealing from you  but now you know there's like the shutdowns from   covid the zero coved policy um shutdowns from  things like the heatwave like they're they're   losing more and more factory workers yeah like  it's it's more and more expensive to do that   to labor in china yeah i did also want to at some  point talk about because this reminded me how the   real estate crisis is affecting everything but  please carry on with you yeah well so my point   is that it is going to get more difficult to have  your supply chain be completely in china and it's   going to get more expensive and that will also  incentivize other countries to move their supply   chains to southeast asia or south america or like  different places yeah so it's it's going to be   interesting to see how this plays out like will  it become just so unbearable for us corporations   in china uh combined with like americans becoming  aware of like we don't want anything to do with   china and will that create natural pressure to get  out of china or will it have to get to the point   of an open conflict i think a lot of it has to do  with the the cost of moving out of china for like   an individual company like the cost of leaving  china because they're already so like so invested   in it it can often be very expensive for them  to leave or you have a lot of suppliers there   and now you have to redo your entire supply chain  right so like i'll give an example and we did an   episode about this i think in like january of  2020 uh with mova globes which was sponsoring   china uncensored with the glacier we have  the globes in the background a few of them   and what was interesting about that is so so they  had been our sponsor before but then they like   they told me privately on the phone their whole  story and then i asked them like hey could we make   an episode about this because it's so interesting  well it began because we noticed they had they   were printing nine dash lines on their maps right  and so we approached them yeah but ultimately like   what their story was is that they had you know  their um initially taiwanese based manufacturing   and then they found it to be oh like they had this  incentive to move to china and make it cheaper but   like gradually it got harder and harder for them  like first they um you know they were like these   they could do kind of what they wanted but they  were told that they had to print the not china's   nine dash line on it but it wasn't enforced and  then gradually the enforcers came and they were   checking their their maps printed on their globes  and then later the enforcers were like oh you know   even your historical maps of like the world from  you know that are like recreations of these like   15th 16th century maps have to like they don't  you can't do that because uh that doesn't meet   our current map guidelines and move is like like  firstly these are ancient maps and also we're not   even like a map company we're just a like we make  decorative globes like we're not trying to make   political maps that represent with some perfect  accuracy whatever it's like these are decorative   and the chinese inspectors like we don't care  and then mova ultimately like had all these   frustrations because they couldn't even print some  of the stuff that they were had been making but   then when they left like the chinese regulars like  locked up all their factories and so they had like   all this equipment that they they lost they lost  the factories they lost a bunch of inventory and   so that that was the price that they had to pay  essentially to move manufacturing out of china and   and they moved i think a lot of it back to taiwan  uh and then they could print you know whatever   they stopped printing the nine dash line obviously  because that was stupid uh but that like they lost   they didn't tell me how much it was but you know  a company could lose hundreds of thousands of   dollars they could lose millions they could  lose you know hundreds of millions if it's a   big company like apple or as in many companies  just completely lose their market and go out of   business right because and then also they lose  the china market like mova lost the china market   because they're not printing the nine dash line  they can't sell in china but for moba they're   like it doesn't like that's not our big market  so it doesn't matter but for apple like apple   there's a huge market for iphones i think that's  the only place where they still have growth   i'm not 100 sure of that well yeah because  everyone in america who's gonna get an   iphone has an iphone basically right and so  so yeah like like what is apple going to do   if they lose it's not just the manufacturing it's  the whole being able to sell there and if you   pull out then you get punished addict  like any way the chinese communist party   could punish apple for pulling out of china  they will and it'll be like they they block   the market they like take away the app store they  do like anything that they'll block the sale of   other apple products uh they might even punish  suppliers that just work tangentially with apple   they could arrest uh you know chinese apple  employees like that's happened with uh that's   happened before rio tinto australian company they  could they could yeah and then they blame apple   for for all of that and so apple gets bad press  for some reason so like all these consequences   you're making decoupling sound very bad yeah  it it it is potentially really bad what we   just have to understand is that it's a no pain  no gain situation i do think that's true that   there needs to be kind of some kind of  realistic talk about what the the consequences   the sacrifices of some of this stuff is  but it's timeline yeah and but also what   the consequences of not doing it yeah that needs  to be clearer i i think the problem is that   you know no administration like this is why  also people don't talk about war like in taiwan   it is kind of unpopular politically for any um  political party to uh talk about you know too much   stuff related to an actual war with china because  even though people know that it's a possibility   nobody wants to actually confront that right  and then also like you know we can't predict   when it's going to come so if you say oh well  war is likely to come by 2027 or something   and then you're wrong you're politically really  screwed but here's the thing about just to kind   of go back to apple like so there's lots of  consequences for them pulling out of china now   and i've talked about them here's the  consequence when china invades taiwan is   uh the chinese communist party nationalizes  all of apple's factories and inventory   and potentially arrests a bunch of apple employees  including foreigners could be who are in taiwan   to oversee factories could be detained in prison  indefinitely sorry are you talking about in taiwan   or in china okay so like because the us and china  would essentially be at war so then so then app   you know apple management who may be us citizens  or taiwanese citizens are now uh essentially   political prisoners or prisoners of war almost  uh and and apple loses everything ever anyway   right so it's it's when when when there's a war  apple loses everything they're gonna lose uh you   know if china punishes them for pulling out now  plus they also lose a whole bunch of other things   it's yeah it's it's an immediate pain versus like  decoupling can be done gradually to parse it out   well yeah and it's just like the overall like it's  it's kind of known what the pain is now but what   we just have to remember is that all the pain that  everyone faces by decoupling before there's a war   is going to be all that pain plus a bunch more  things if the decoupling isn't done before the war   right oh but maybe there won't be a war and then  you can just keep making money in china right and   so as long as you believe that that the communist  party is like to believe there's not going to be   an attempt on taiwan is basically to believe  all of the lies from the you know like foreign   ministry as being true but to then also like  not believe the white papers that or china's own   internal documents that say they're going to take  taiwan oh no no but but peacefully if possible   right and so like it it's just this you have to  ignore reality to such an extent and you think   the lies are true and the truth are lies it's  it's it's almost so unbelievable you'd think   the only explanation is that the people  doing this must be deep state commies i think she's just reached  a zen state of enlightenment   ladies and gentlemen this is a state  of nirvana you're witnessing right here   i wouldn't call this nirvana it would not  call this nirvana just come as you are yes i would like to talk about some of the real  estate issues that we brought up this week because   we we have a little bit of time actually going  to come out the same day as this podcast hey how   about that so go over to china uncensored if you  weren't already and check out a full breakdown   on china's real estate crisis i don't think it's  the podcast driving people to this you never know   um but yeah because this also ties on to the issue  of decoupling because you know china's economy is   not what it was or what it seems to be and so  man i know you did a lot of the the research on   yeah well there's a there's a bunch of stuff that  made it into the episode and also a bunch of stuff   that didn't make it into the episode uh so but  this is why you need to watch china unscripted   and not just china uncensored so there's  there's huge protests in china over the   um real estate crisis but the the background to  those protesters is actually more interesting   because you have a a development crisis  like china's real estate development   is essentially an estimated 30 percent of  china's gdp so a big amount it's it's so big   that that the chinese communist party absolutely  cannot afford to lose it or even lose half of it   it's too big to fail well it is right and  so there's you know different attempts at   bailouts or sort of quasi roundabout bailouts um  but these real estate companies uh are instead of   building an apartment complex and then selling  units they say they're going to build it they   build a little model they bring people over to the  exhibition and say oh buy a unit now to sort of   keep your place in it and and people that's not  totally unheard of though it's not totally unheard   of but in china ninety percent yeah that's a  lot of apartment units are being resold and   i say apartments in america you'd probably say  condos because they're being owned yeah but they   i don't know if they still call them apartments  so you which you buy but just to be clear we're   talking about the purchase of units uh for  ownership and not and not rental yeah but   it's not the fact that they're not built yet that  makes the whole thing right crazy so what what   uh finances real estate development is the  selling of units so they if they're going   to build an apartment complex with 100 units they  need the sale price of the hundred units to exceed   the cost of building that those buildings plus  all the other management expenses i'm getting   lost in a lot of the details yeah and so like  like that's the way developers make money is by   selling units but the problem is that evergrand  and chamow and all these other big developers   like they'd been raising money through a bunch of  other things so uh one is by listing uh you know   stocks uh which is it's it's which is okay because  that's kind of generally how come companies raise   capital uh and it comes with its own problems but  also they were selling financial products which   we didn't talk about in the episode yes that is  actually a big problem so it's like you kind of   buy these complex things like okay uh i will  buy a wealth management product from evergrand   for which they promised to pay me back with  some good interest rate uh you're basically   loaning your money to every brand and  and in return you have a promise of   you know somewhat more money coming right because  it's it's a yeah it's a return to the bank would   give you like two percent or something right  but this wealth management project might be 20   something crazy like yeah uh which is essentially  like buying a bond in a company or maybe a junk   bond right because junk bonds essentially are just  bonds that are high high risk high reward right   but you don't know they're high risk because you  don't for some reason see this real estate crisis   coming well i mean i think it's because wealth  management products like this are pretty common in   china this is like a big problem with their debt  industry right yeah well and that's that's a whole   other issue although it's quite tied together  well i'm just saying that like it's not un   like for like the average chinese person to  think that this is sketchy like you might not   yeah also like the us has done a whole bunch of  wealth management products although a lot of them   are just invested in by corporate investors  okay so i think we're losing a little bit we   are because i was about to go into the 2008  real estate so but like like okay so hold on   i think we just need to simplify no let  me just so so here's the simplification   these companies developers should be making money  by selling units but they're also raising money by   all these other methods that are essentially  them borrowing money for which they have to pay   that back plus with interest and uh that they  started to get over leverage because they were   they were borrowing so much money and  and then they had to pay out so much   with interest and they weren't getting enough  from the selling of units to handle all that   uh and they really shouldn't have been doing  it anyway because ultimately they don't make   money by loaning by they don't they don't make  money by borrowing money they lose money by that   and so they these developers ended up in this  situation where they just had this whole cluster   of of debt and then uh they couldn't sell enough  units to cover it exactly thank you shelley   and uh and then it's affecting because they're  not finishing this construction in 100 over   100 cities in china uh not only are people not  able to move into their homes but it's affecting   all these other aspects of the economy that  are tied to real estate well i think also the   part of the problem is that people aren't just  like people are already paying a mortgage on a   an apartment that they don't live in or like  they've already paid yeah they've they've bought   their apartment and now they want the money back  yeah and the money's gone right like the money is   just like them there's no money  there there's no apartment there   right if if if ever grand can't uh they don't  have the money to build the apartment and they   don't have the money to refund what people have  already paid and anyway it's kind of like the they   were actually a lot of the money comes through  the banking system because people have mortgages   they're not just paying in cash well so the the  big picture now is that you have all of these   individual chinese people who have paid money  for something they're never going to get these   big real estate companies don't have the money  to complete construction or pay off their debt   uh this is 30 of china's gdp essentially  real estate if you especially also consider   like construction like all of the things  all the other businesses furniture makers   uh painters landscapers that's  probably yeah but like it's mostly   the money that's being pumped into the developers  right right yeah but but a a project completed   only halfway that doesn't create livable units  is essentially completely money down the drain   not to mention that it is actually worse because  you have this half-built building that is now   like deteriorating right because it's not finished  and it's also taken up farmland uh or land that   could be used for other things right i mean most  cities are essentially built on what used to be   farmland right because you just gradually take  over the farms and you you know build yeah so   well so yeah this is an economic disaster and on  top of it uh you know you have the issue where   like people are protesting obviously this is like  one of the most significant protest movements some   people have compared it like it's the biggest  since 1989 tiananmen it's just not like a hoard   of people in a location location yeah people  are protesting by not paying their mortgages or   whatnot but as we as we mentioned this episode  that you know china has a social credit system   and you can be penalized for things like not  paying on your mortgage and so this could affect   people being able to get loans get mortgages in  the future which then just creates the spiral   of people not being able to afford homes real  estate developers aren't able to sell homes   and then you just get into this negative feedback  loop where the chinese economy just implodes   it's also especially bad because traditionally  a lot of the wealth that people accumulate they   put into real estate they don't that's like the  only real investment source people well now they   have all these crazy wealth management products  too so which are also run by the real estate   developers so there's a lot of ways in which  people are getting scammed out of their money   but but people used to think with good reason that  real estate prices would always go up yes they   like real estate always seem to be the safe place  to put money uh and yeah that's when that's why   when people you know find out that they cannot get  that apartment or the money back or like they will   protest it they will go in person evergrant had  a problem with their wealth management products   earlier was it this year or last year where  like e

2022-08-26 12:49

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