the "washington journal" taking a look between the united states and china such as military to focus on the economy in joining us for that discussion is got kennedy with the center for strategic international studies senior is a advisor good morning and thank you for joining us what is the best way to think about the relationship economically the us hasat with china? >> we have a monster relationship alive the investments to be deeply integrated into supply chains and at the same time we are strategic competitors where we are facing we were international order to look

like we are deeply integrated at the same time facing monumental political struggles we have to figure out how to walk and chew gum at the same time and collaborate and compete fairly but also deal with the national security implications to be so interwoven. >> they underlie every decision the united states makes when it comes to chain on —- china? >> those issues play a large role with us economic competitiveness and the employment picture and inflation as well as many different industries will go from autonomous vehicles to quantum to semi conductors and all of that has national security of locations you can have a conversation about china's economy without also

bringing in national security soy washington often times seems that economic integrationna is negative for national security and is a mixed picture we don't have to decoupleto from china to advance our national security. >> the economic figures tell us the imports and exports is about 691 billion and thats shoppers spent more and on that same period exports are 154 billion. >> all of the talk about decoupling certainly there has been some specific areas like semie conductors and trade has

dropped new investment but actual overall trade has grown during the pandemic we had almost no travel between the two countries and that will pick up so we are adjusting the relationship and not eliminating. >> as far as the adjustment is concerned what does that look like? when us and china started to increase their relationship we saw a lot of american multinationals and the midwest and to use an export platform and a lot of the trade between the two countries and now 20 percent of that trade doing business for china and those

using as part g of the global supply chain they are still there but moving to southeast asia and so you see a transition in the way and then china was primarily competitive at the lower end of the technology and clothing and toys for now they are competitive at the top of the market it's a very different type of relationship targeting the same industries and position so that makes our relationship probably more competitive than it was decades ago. host: our guest is with us until 9:00 o'clock talking about the economic relationship of china and the united states you can call in.

the chinese premier made recent statements of themi decoupling of those relationships. those benefited from the single us cooperation with the basic national policy and then me will move forward. >> that's very well but for the chinese official perspective. and the premier that takes over is framing the challenge both beijing and washington are concerned about the vulnerabilities and china really started this was a great firewall you cannot

participate in the social media market and foreign banks have more limited access to the market. and so they've already been somewhat closed and then to be with a position of export controls and greater concern of investment going into china not decouple but reduce the over dependence on china. both sides are concerned about where we are going so we have a nationalist n conversation. but nevertheless a very large relationship.

those conversations that they represent with that trajectory or the economy is going spent the chinese forinister says they cannot compete to win and is not the conflict but theis whole competition with that containment and suppression of the zero sum game. so the chinese goal is to portray themselves and it is peaceful and inevitable and except that. and then everything thate the us is doing everything they are doing it is legitimate and inappropriate. and the us to make the relationship right.

the administration is not falling for that and have been pushing back. hard showing they are wrong economically and politically and pointing the one at the other and the chances going off the rails are quite high. >> what isth the tipping point? >> the number one issue is taiwan but we have enough deterrence to make it unlikely for the chinese to take any action in the near-term but that's the number one place on the economic front and the integrated economy but also those that have significant weaknesses not only inflation

and now these challenges china has a lot of financial challenges those that close even further and then there is ukraine out there with the possibility and then to provide military support and if that happens with the secondary sanctions and all of the small potential an individual that would pale in comparison to what would come next. >> we have a certain perspective over the china economy. what doin you know about the way it functions there quick. >> . >> and what you read me are from top officials in beijing

giving the appearance see official line. but when ina was there in the fall next week it is driven by the private sector shunned in china but the private sector accounts for twowo thirds of investment in china and then last year on the mat and then to be concerned of zero covid and the attack on the private sector and looking at where the china economy will go and how they will recover in the wake of the pandemic it's all about the private sector and

when will they start to invest again and innovate? and it is dicey but instead of focusing only on what chinese officials say the state owned enterprises at the weathervane part of a series that takes a look at china's economy independent you are up for. >>caller. >> it is such a conundrum but yet china such a threat so how do we unravel this so it works for the us it's hard to compete when you manufacture's

death and my vitamins all come from china and how do we do that with our relationship and make china pay attention to the free world like the russian oil thing and those that need to keep going and i know they have a private sector in china how do we do the free people of the world that we all need to live together quick. >> and i think your initial concern and your worries are

justified in the idea for what to do is understandable starting point with a deep relationship with a competitor to be at the national security andio the china economic that is identical but nevertheless i would say with the perspective of our economy national security we actually gain a lot if we can manage that economic relationship and our self-interest and also in terms of a national security during the first decade of china's entry of wto 2001 through 2011 there were significant job losses every economist is run the numbers that has said over the trade

deficit the manufacturing sector continues to grow. and in addition we can still innovate and over reliance on china even apple has announced a significant new investment in india is looking elsewhere they don't want to have all their eggs in one basket either but the national security front interdependence is not a guarantee to avoid war but it does give us leverage so as they get leverage and why is china not giving military aid to putin over ukraine because he knows were his economic bread is buttered so they know that those sanctions would come down superhard so that

leverage is something you don't want to just throw away i agree with the frustration and the concerns unfortunately i think thehe smart answer is not just to decouple and isolate them and use that leverage is smartly as we can to manage a complex relationship. >> good morning. want to ask you about the bill with saudi arabia and they went to go back to the gold backed economy wherever they are using if it is backed by

gold and if you have that will the united states go back to the gold standard or just continue to back with the good faith of the credit? >> that's a good question. i do think people are concerned about the global financial system right now the dollar is preeminent and seeing concern on that because he was overall that is 30 trillion of people are worried but nevertheless another reach in addition of the reason to pay its bills because after that financial system is a significant risk what i've seen as i work on china that asked for the

focuses but a lot of people have been talking about the economic superpower as the alternative to the dollar and the role is increased over the last seven or eight years china is a monsters superpower when it comes to trade because china's capital account is closed and they are very worried the dollars will come in and fallout and so they have kept the capital account closed and as a result china's currency is not very important internationally is still accounts for under 5 percent of daily international transaction and in the mideast the chinese trade with saudi arabia and others that it ends with russia as well but that is the exception to the rule

we're still in a dollar rdominated world with a variety of risk you see discussions of digital currencies not just cryptocurrency event central fact currencies as well that may provide greater information for policy regulators but doesn't fundamentally address the issue how the world operates using a currency in which the government that issues that currency faces a constraint. >> with the consequences with the semi conductors made in taiwan? >> sure. exactly and now the facts have

risen in east asian particularly in taiwan which produces over 90 percent of the most advanced chips in general so all of those iphones that you mention produced in china most start in taiwan but it's part of a long chain so the taiwan semi conductor the most irreplaceable company right now with that conflict in you cannot get access. it would hurt every single industry including the united states and also massively damaged china's economy.

we have mutually assured destruction and in some ways we are testing is a theory of peace. and then they turn their lights out and if the taiwanese but that they became impatient that would have a devastating effect on access and we have to figure how to keep the peace in the taiwan strait and expand and to reduce the dependence on that part of the world that right now that 60 percent from taiwan with the snap of the fingers it would take decades to make that shift and so with

the economic relationship there is no quick or easy solution have to manage a giant challenge and over time include our position. >> signing the chips act which would help american semi conductor companies as a firewall against china and other means united states can take to build those walls. >> let's just remember talking about competition and chips the concern is so much manufacturing occurred in taiwan which is 100 miles from the attack would reduce access taiwan is a very efficient producer is very goodd for the us economy is just over concentrated there in a vulnerable place the chips actual increase production and manufacturing with tsmc is building in arizona and a few others that are under construction and companies

that support those to provide materials also establishing in the us as well. that will help us with the most advanced and important chips that we have and that we need for our military will it totally replace the need for production a bar one —- abroad? know. you have to start someplace so the chips and science act is a good start congress passed it fully and we need to do even more than that are there other industries where the us needs to expand manufacturing and r&d because we're in a global race and the chips and science act is not the only piece of legislation passed last couple years for semi conductors and south korea and china and japan and the eu, brazil

, everybody is spending so in some ways the competition requires dc and industry to collaborate. >> the democratic line go ahead. >> good morning i am a truck driver i do containers and this just might go down and because we are cutting back for the competition and the jobs ares just declining i'm not working today but i want to know in the previous administration some of the customers were telling me

sending to other countries so i'm trying to understand how they do that? >> if i understand your primary concern what you are suggesting is a slowdown of us china trade with you are imports which is affecting container shipments and the rest of the economy including the trucking industry and you. and from when i waswa in china in the fall going through the covid pandemic and the economy they said 3 percent last year i would be surprised if that's what it was but obviously china last year because of its own supply chain issues decreased exports for a significant period in the us and the west economies went

slow down as our demand went down there were less exports out of china and other terms they continue to rise but if you do t the math actually it is a different picture what we are seeing is a cyclical slowdown a temporary program the economy starting to recover but we are seeing some diversification out of china that eventually it will come back to the us at some point because as our trade from china has dropped imports from india and vietnam have increasedd significantly so what we're seeing is more likely over the long-term is a replacement of china as opposed to just havingg everything produced domestically. so i do expect when we get to the cyclical downturn there

will be more containers coming and i'm not saying it's quick or easy or any specific individual case but probably it is a cyclical downturn bw looking to invest how are they looking to invest aside from germany quick. >> china's economy has slowed down 3 percent last year now they say they will aim for around 5 percent and probably hit that target and then having the worste year and 30 years in the next year you will see some growth in china's economy is very large 65 percent the size of the us

economy and projected to continue to narrow that cap so even aen slow-growing economy is still a big opportunity and the auto sector is by far the world's largest about 30 millionit cars produced and purchased every year about four times of the american market. saul of the big automakers in the us and europe and japan and korea tesla has a big plan to most productions for the chinese market because it is quite large including electric vehicle market but also starting to export to southeast asia and america and europe may have not started exporting that yet but they did in the fat on —- and the

folks in u the building was at the white house will pay more attention but we never thought of itt being an auto exporter and then to see more chinese exports as well. because of the concerns of strategic competition no one knows what export controls might be imposed next but a concentration of new investment most of germany's increase of investment is around four or five companies so you see the companies much more concerned and hesitant and risk-averse. >> talk about those folks in capitol hill now looking at

issues of chinamm having a hearing and an opening statement at that hearing in the chair talked about economic concerns and other security turns and then get response to it. this was an existential struggle and the most fundamental freedoms or estate and for the time being it's up to us to decide if that's the future we want for our children but it won't be for much longer without

legislative and though or pandering to the press and acting with a sense of urgency and to set the stage for the next hundred we cannot allow them to prevail we must learn from our mistakes much of the past half-century trying to win over with engagement to leave economic engagement in particular would lead to reforms in china the parties made the same that the only problem is it didn't work out the ccp laughed at us for the take advantage of our good-faith but that era of wishful thinking is over the committee will not allow the ccp to call us into complacency or maneuver us into submission. >> there is the opening statement for the committee. >> washington is appropriately

laser focused on china economy d competitive with us. it is going to be a long-term strategic competitor with us. you see what has happened in hong kong and the threats towards taiwan. there is a lot of good reasons to be deeply concerned about the trajectory of china. i would say though that we should not sell the u.s. short for their foreign policy over the past decades. china was focused on the strategy of integrating itself into the global economy and in some mary's adapting domestic rules to international norms. there was some genuine progress. it was a mixed bag. i think what's happened is that china has changed. no one expected a leader like xi

jinping with and as a result foreign-policy has to change without dealing with the china looking to integrate and get alongng with the west but one much greater ambitions and the kind that representative gallagher described we have to pay extremely close attention to what the chinese are doing with advanced technologies and their plans through taiwan and the rest of the region and it is already showing very significant changes we have done we are not focused on either end of pennsylvania avenue on a strategy of integration that tempering the integration and increasing the strength of the west more broadly and investing in our own economy and trying to strengtheno the economy to

others who share values. already turning the cornery significantly there's more that we can do better to better understand the chinese not just the statements out of the chinese leadership but how the chinese probably look at issues where the economy is going and where they are competitive but not as we mayot fear. we want to make sure and responding to this challenge regardless of whether china is a challenge are not the only this economy to operate the democracy to operate to reduce internal divisions and that's not the force of strength and i agree with a sense of urgency that this committee has we defaced some big choices about the best way to

respond t. >> independent line go ahead. >>caller: thank you. i just want to ask is china a west we owed them more money than any other country in the world? >> in terms of the us total that the chinese are holding 1 trillion of us government bonds. that is more than any other individual country but foreign governments hold between seven and 8 trillion of the 30 trillion so it is one 30th of the debt. them chances of them up there on —- up to sell all of that to tank the economy no one has

acted on it because if they did that $1 trillion would lose a lot of value. of course it is only one 30th and there are a lot of ways we can respond we have flexibility to manage interest rates and the monetary policy overall. in the same people are concerned china holding us that could giveve them leverage talking about the dominance of the rare earth but they never pulled the trigger because they would be hurting themselves. these significantly so we demand the commanding heights of most tech industries and they are operating in the dollar dominated world so we should understand we are interdependent and that means we are dependent and we need to reduce that dependence and

vulnerability but we have parts ourselves and we both have to worry about the vulnerabilities he faced to recognize the strengths thatre we have and not just give those up. >> from the center for strategic international studies republican line go ahead. >> my ears. when they guessed mentioned cyclical. it seems like that was a buzzword is the us inflation cyclical? >> the us and china right now face very different worlds in terms of inflation. the us inflation is pretty high right now the way the fed is acting they don't think it will go down anytime soon so that increases interest rates

talking about greater inflation and we have a very tight labor market which is also pushing up prices in some ways and that would be a challenge to get inflation underet control and regardless of the best efforts of the sediment washington does that you can see at some point we can tackle that and energy has a bigig effect on prices in the case of china they did have a significant inflation in 2021 but actually inflation is pretty low around 2 percent so they are in a better place inflation wise then we are but

i guess the reason i use the word cyclical is because you see ups and downs with inflation as we see changes in the business cycle right now and has a very tight labor market and so we don't want the downside of the cycle because that will be a significant employment and you don't want stagflation sopl it's not something that we want it makes people feel like, they are being robbed because then it's taken away by a price increase so the fed and the rest of the us government need to tackle. but it is cyclical when inflation is high if you like a permanent problem that at some point i expect us to turn the corner. >> democratic line.on >>caller: good morning. my question is china is making

significant investments in africa. i just would like to know how the united states iste responding to china's investments in africa because i think that is the sleeping giant i know they are at different stages of development but what is your view y on that quick. >> that's a great question. actually feel look at countries growing the fastest with potential many are in africa including india and vietnam. in terms of demographics and the lower stage of continents around the world it has very strong prospects and growth

democracies sit on —- to marketization has accelerated they give people reasonn for optimism. china is a big investor in africa state owned through the belt the road initiative and also doing business but also the private sector. over the last couple years pulled back as a result of the pandemic with its own domestice financial trouble so the built-in road is a lot smaller project than it used to be in the united states is slow to the game in terms of an organized effort and has provided a lot of aid in africa and support and the us has tried to increase collaboration through the g7 and bilateral to comeco up with

programs that are alternatives to thehe belton road but in terms of scale nowhere close but in terms of focus and trajectory he has seen a significant amount of action that eventually will translate into a greater investmentat that hopefully will lead to sustained economic growth in society. >> the trump administration imposed tariffs on china are those still in existence? >> indeed those tariffs that were imposed from 2018 through 2020, most of those are still in place. the effect of that is we did get an ideal phase 12020 with the chinese responded to the

terrace by negotiating a deal to commit to increase imports of american products and make changes to intellectual property rights regulations and open financiald services. i do think broadly speaking it was good to get the phase i deal and that restore the us's ability to negotiate with leverage against the chinese but economically i don't think us exports rose very much in the areas that were identified in that agreement there has been some continued improvement with intellectual property and financial services but the question is was the trade war worth it? i think that is a very mixed picture because the

relationship is more cantankerous not just because of the trade board but for different reasons. so going forward do we continue to use that approach and what do we do about the tariffs? if you took those away that would not necessarily solve the problem either we basically have adapted toed them and some of those may provide protection for us industries you don't want to take away. but broadly speaking should be simply approach china through a protectionist lens and increase defenses quick think we had the extremely competitive will globally even against the chinese and we still have a lot of advantages. those tariffs will not come away anytime soon most likely but we should not just continue that strategy we have real global advantages and

that will help us be internationally competitive. >> i'm late to the conversation but with respect to china and the belton road with countries defaulting and not wanting to honor the agreements but what about china's housing crisis i heard they're having problems with their own housing. >> those are important topics particularly on housing with the adult road which definitely does have an effect on many countries around the world because china's financial system is extremely inefficient and state directed

and housing is one of them but as they direct that financial system abroad it acts equally and efficiently so they hand out loans for the built-in road which was inefficient. and governments around the world often fund with week simple societies but look at big piles off money put in front of them but they took the loan without clear translation into commercial activity to pay them back so both sides went into the steals with not all of the right intentions or plans so we see a lot of those don't work out and that's why you see the possibilities of default the chinese has like other countries that participate in providing donor

loans and foreign aid don't want to take a loss on any of those funds to keep that pressure up see you are seeing a lotot of animosity because they think the chinese were intentionally trying to get them indebted to increase political control and actually so financial system is inefficient they made a bunch of mistakes typically that's how it operates by the us and others are trying to provide alternatives but global that is a significant obstacle to sustainable development and applies to students who get loans and countries that participate in programs like the belton road and china has lived in particular the

housing and commercial investment see you have seen overinvestment in cities and apartment blocks with no one living in them and they've done that because local governments don't have enough tax revenue selling their land to developers who make these investments and that has created my chinese debt is so high it hurt during the pandemic because no one is spending on anything. it is a strategy if you want good housing so what that meant is eventually a lot of those things weren't belt and then people protested so trying to fix that problem you

see some improvement in the financial sector housing market and that real estate sector is too big they need to constrains that have to pay attention to both challenges internationally and the debt problem created because of the way they manage the housing market. >> st. paul minnesota independent line. >>caller:er first of all i wanted to push back on what you said this is a problem since president xi came into power as a people the morning about since 2000 when there is that terrible humanan rights record and going into tiananmen square and in the us

we have chosen to ignore it for a long time because of the fact we were doing business and second i am in favor to decouple but if that's not in the t cards what about the possibility of leveraging things in i the us like the capital markets close to china and to encourage china's companies with the chinese communist party and the ccp does that and that we push back in that direction and thank you very much. >> these are important points that you may can reasonable havee can disagree and different perspectives and what that was like but

certainly those whose having china joined the wto will become a democracy just like the united states and never in the cards it did not turn out that way and you saw the conversation like that in the late nineties and early 2000 and as china was joining and working back then were raising concerns we should get expectations too high bit china's entry into the wto when combined with deterrence that we still maintained the whole time through taiwan in support of allies and say it on —- we did temporary chinese behavior in a lot of areas for a reasonable amount a of time.

we did not get improvement rates in china obviously but it is a mixed record in terms of our economy certain sectors in the us jobs were lost. communities were hurt and other regions did better. there has been more progress as well. there is still a very big concern because as the caller mentioned the chinese government hasn't gotten any nicer it has gotten tougher with advanced technologies in politics have gotten worse and the situation is not better by any stretch of the imagination in terms of foreign policy. yes we need to pull back and reduce dependence on china and make sure not through commercial interchange to provide those technologies going into weapons for

domestic surveillance which would be a danger to us or create human rights abuses nbc congress and the white house adopt sanctions regarding hong kong to your already starting to take steps in that direction but at the same time i want to suggest we don't want to throw the baby out withth the bathwater. there is a significant benefit not just ceos and wall street to have at commercial relationshipio but for americans if properly matched we can make mistakes and have to fix those but we don't want to get rid of the relationship entirely becauseia it benefits and national security with regard to ukraine so i think we need toe be careful to walk and chew gum and tie our shoes all at the same time.

>>en senior advisor of the trustee chair thank you for joining us. >> happy to be here.