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