The Global Trade Reset Was Inevitable | George Magnus
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The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. Thank you. Just close the f***ing door.

We've got a very important conversation today. I'm speaking to George Magnus, associate at the China Center at Oxford University. George has spent nearly a decade as an independent analyst focusing on China since leaving as chief economist at a major Wall Street firm. George, welcome to Monetary Matters. Thanks for having me, Jarek.

So, George, you have been focusing on all things China, and your expertise is extremely valuable at this juncture because as we record, the U.S. is in maybe a trade cold war, maybe a trade hot war. It is in a trade war with China. Tell us, rather, George, than asking what's going to happen, is Xi going to do this? Is President Trump going to lower tariffs? We don't know that. Probably President Trump and President Xi don't even know that.

Rather than that, George, I want to ask you the initial conditions. In a trade war with tariffs going up and down, who has an advantage, the US or the Chinese economy? I'd love for you to share what is compelling you as you answer that question. Talk about the imbalances within the Chinese economy and within the US economy. How do those differences shape what is going to happen and who might have the upper hand as this plays out?

It's always a good thing to start with easy questions, Jack. Yeah. So where to begin? I mean, I try to be sort of succinct about this. The world trading system and particularly, obviously, the U.S.-China trade relationship was not healthy before President Trump came to office again in January.

And I think a lot of people were kind of anxious about where it was all likely to be headed. And, you know, it wasn't like trade friction was like came out of the blue. I mean, we already had a number of instances where a lot of countries, actually, according to one report that I've seen, about 50 of the world's biggest trade companies.

trading nations so that's not just rich countries like America and the EU and Japan but also middle income countries and emerging countries um had all been levying um what they call trade defense measures which is essentially restrictions or tariffs against different types of Chinese products whether it was steel or aluminum or um electric vehicles batteries and so on and so um

I suppose if we then just kind of fast forward through the last kind of three months, as it were, I think really what's happened is that the obviously President Trump has, you know, sort of made a decision that this will not stand and that China has to be called to account for what his administration and others deemed to be unfair trade practices and

Non-tariff barriers. So these are what we call behind the border barriers to trade in which governments give special dispensation or privileges to local companies in terms of procurement or subsidies or below market borrowing, subsidized credit, etc., etc.

And I think really what this is, what this kind of trade, I was going to say trade war. I mean, it's a trade war with some countries between the US and China. It's now effectively a trade embargo because

The tariff rates are so high that the exports and imports across the U.S.-China continuum are going to collapse if something doesn't happen pretty soon. And I think really what the American administration is trying to do, maybe not in the best possible way, but that's for another discussion really,

is to try to break up the China-centric supply chains, particularly in critical areas that are relevant for national security. So this was just not only defense, but also technology, programs that have dual purpose, civilian, military use, and so on and so forth.

Obviously, the Trump administration has spoken about raising revenues and re-industrializing America, et cetera, et cetera. You can believe that or not believe it, as you will. But I think the kind of the principal issue really is to change the structure of the global trading system and get other countries to adopt trading arrangements with the United States, which are more efficient.

friendly to the US than they have been of late when they've been really much more pro kind of China. So I think this is really about, you know, the rules. I say the rules. I mean, there aren't any rules at the moment, but the way in which the world trading system is supposed to perform, it wasn't healthy before. It's probably not going to be very healthy now.

So when you say the U.S.-China trade relations and the nature of U.S.-China trade was not healthy before this, I'll just share a few pieces of data. So in 2023, China exported $430 billion worth of stuff to the U.S., and the U.S. exported only $147 billion. So we had a trade imbalance, a trade deficit with China of close to $300 billion. We have a

mild services surplus. So we export more services. When it comes to trade, it's almost $300 billion. So it is quite an imbalanced system. Explain the unhealthiness that you see in that. And is it unhealthy by the very nature of the fact that there's an entrainment imbalance and that it is persistent? Or is it, okay, an imbalance itself isn't bad, but China is doing things that are unfair and therefore that is why it's unhealthy? Again, great question. I mean,

I think that one thing I should say, actually, I think listeners may be kind of interested in is that the numbers you quoted, of course, are right using official sources. But in all probability, the Chinese goods surplus with the United States is bigger than those numbers say, because since the first Trump administration,

quite a significant proportion of Chinese exports are now routed or trans-shipped, just to use the technical word, through third countries like Vietnam, Cambodia, Mexico, Thailand, and so on. And so, and actually in passing, one of the reasons I think that if we kind of cast our minds back recently to the Rose Garden, you know, the big board that the president displayed there, where there were tariffs on, you know, 100 and something countries,

I mean, obviously not all of those countries are involved in the transshipment of Chinese products, but some very, very well-known countries like Vietnam and Mexico and Thailand are used for that purpose. So the issue really that I think the United States is trying to address really is it wants to address the bilateral deficit. In other words, it wants the deficit with China to shrink.

It's tariffs are not really a particularly useful way or even they could actually be worse than useful, useless. Actually, they could be quite harmful because actually the overall trade balance that you have as a country, whether you're the United States or China or Germany or South Korea, is basically not determined by trade regulations and by tariffs. It's determined really by

Without being too nerdy about it, it's determined by the balance in your domestic economy between savings and investment. And so if you want to really improve your trade balance overall, then you have to do something that is very, very different from using tariffs.

And actually, we've seen that really from the first Trump administration, which actually did use tariffs to try to influence the trade balance between the United States and China. It didn't work. In fact, America's deficit actually continued to rise after Trump left office in 2020, which

And I think that the reasoning really is that, you know, tariffs can actually alter the distribution of your deficit. So you may have a bigger or smaller deficit with China or with, you know, Japan or with Europe or whatever it happens to be. So you can shuffle those deck chairs around a little bit. It doesn't affect the big number, which is actually determined by other things altogether. And so.

Where we see where we find ourselves here is using the use of tariffs to influence something which probably will be very ineffective at addressing. But at the same time, obviously, the tool of tariffs is a clear message from the U.S. administration that, you know, that America is not happy with the structure of global trade.

and particularly not happy with the fact that China in particular has relied on and emphasizes industrial policies and export promotion

which really are at, it's almost like a zero-sum game. You know, if you go back to the kind of teachings of some of the great economic theorists like Adam Smith and David Ricardo, their teaching really was that the purpose of exporting is so that you can import more. So you should export what you're good at and import what you're not so good at or that you don't have.

And the problem with China, I think, is that its exports last year, for example, in 2024, Chinese exports grew at three times the volume of world trade, but its imports collapsed or not collapsed. They fell very sharply. And the problem there, of course, is about domestic policy in China. You know, everybody knows that the Chinese are supposed to be doing more about consumption. If you do something about consumption, people will import more goods from outside and

If China was importing more, we wouldn't really be in this situation today. So at the heart of this news flow, which kind of comes at us so fast, almost every day or every week,

is a problem about trade structure and trade imbalances, which is fundamentally about the different kinds of policies that China uses and deploys to fulfill its economic and political objectives. The trade balance is fundamentally about the relationship between, you said savings and investment, but investment and consumption. How good is a country at production?

producing stuff versus consuming stuff. China produces way more than it consumes. The U.S. consumes way more than it produces. That is what results in the trade imbalance. When it comes to China producing way more than it consumes, and in other words of saying that is it invests way more than it consumes, it saves way more than it consumes. Can you explain how that has been a key

driver of the Chinese economic model and what we can call its investment-driven growth model, the Chinese growth miracle over the past 20 and 30 years? To what degree has it relied upon an extremely high savings rate? And is that sustainable? And then we can get on how is that affected by the current changes? It didn't always used to be this way. So talk until about

I would say, I mean, just to take a cutoff point up until about the financial crisis in 2008. I don't, I mean, there were issues about China's economy, which its leaders at the time

which included President Hu Jintao and Premier Wen Jiabao. I mean, they were quite cognizant, or Wen was certainly very cognizant of the fact that China's economy was unbalanced. And I think he called it unbalanced, uncoordinated, unsustainable and unstable. So he said that twice, once in 2007.

and once before he stepped down from office in 2011. So it was something that already had started to cause concern for some of the leaders of China. But actually, nobody was really that bothered because China was growing very quickly. Its consumer sector, you know, the fabled Chinese middle class was expanding very quickly, etc, etc. So it wasn't really a problem that anybody was very conscious about or

you know, concerned about that much in the 2000s. But after the financial crisis, kind of everything changed really. So people may or may not remember, but in 2008, even before Lehman's went bust,

Chinese factory orders kind of dried up and hundreds of thousands of people were turned away from the coastal provinces where China's manufacturing hubs are predominantly and sent back to the countryside. And that was the first indication that we have really something was afoot. To try to address that, the Chinese government

basically spent, well, I say spent, I mean, they had a stimulus program that was equivalent to 14% of their national income. Anyway, to cut a long story short,

The bulk of this was not fiscal spending, wasn't budgetary spending, but was bank loans and setting up of all sorts of vehicles, particularly in local governments and provincial governments that were able to borrow vast quantities of money. And this was the big this was the kind of the the big turn, really, in China's shift from export led growth to investment led growth.

And over the subsequent years, and including when Xi Jinping came to power in 2012,

And subsequently, you know, China has had an unhealthily large investment rate. We know it's unhealthy because some of the things that we look at in terms of efficiency and productivity have been registering alarm bells for some time. The real estate market, everybody knows in China is basically now sort of gone bust. I mean, it'll be years of adjustment before that really settles down.

infrastructure, overbuilt, inefficient, unprofitable, big debt burdens that are company agents on. And so, yeah, it's the refusal or the insistence by the Chinese Communist Party to stand by this model, this industrial policy investment-led model. I mean, it's not like they don't know

that it isn't causing problem. And this year and late last year, the rhetoric has certainly changed. So, you know, Xi Jinping and Li Qiang, who's the premier, they talk now much more frequently about the priority of bolstering consumption. But actually, there is still quite a gap between the rhetoric and what it is they're actually doing to change their economic model.

Okay, we could talk about this for a long time, but in a nutshell, let me just say, I think the reason it's going to be difficult for China to change tack

is because once you prioritize or switch priority away from state enterprises and local governments towards households and private firms, you're not just transferring economic power and economic rights. You're actually transferring political power and rights away from the party and the state towards the private sector. I don't think this is something that Leninists are really very comfortable doing.

So there is a lot of talk about how China could

defray the consequences of the trade war very easily, more easily maybe than America could, by switching towards a more consumption-driven economy. I think that's like saying, well, it'll be nicer tomorrow when day follows night. I mean, that's like, of course, but actually getting the CCP to do that, I think, is quite a difficult task.

So, George, I'm going to oversimplify, but I think what you're saying is that China had an export-driven growth model before 2008, and they grew by exporting. Imports grew, but exports grew way more. Then in 2008 and 2009, they did stimulus from the state-owned banks that are nominally private, but they're controlled by the Chinese Communist Party. And they did a ton of lending and bank loans into real estate and property, but particularly

real estate. And so it was an investment driven, real estate driven growth model that worked for a while. But then it caused a giant real estate bubble that the Chinese Communist Party was not pleased with. I mean, there was tons of inequality and it's supposed to be a communist country. You can't have tons of inequality, right? And then so in 2019, maybe 2020, you tell me they kind of self-denominated their own property market to manufacture a deflation in the real estate, prick the bubble

And then the way that they grew out of that is that they returned once again to extreme amounts of exports somewhere towards the end of Trump's first term or the beginning of Biden's term. Do I have that roughly right? You got it not only roughly right, but pretty right.

I mean, obviously, COVID was a hugely important kind of intervening shock. And actually, lots of things were revealed during COVID, including where the vulnerabilities in the economy actually lay. Also, the kind of the extent to which the debt burden was something which had become problematic in the sense that

Local governments and state enterprises were financially very vulnerable. Lots of local governments actually can't afford to do what they're supposed to do, which is provide public goods and services without having to borrow money or indeed, to some degree, outsource some of their services now to private firms.

And I think with the other thing, of course, that COVID revealed was that if push comes to shove, actually private citizens, I mean, people may remember the November, December of, I think it must have been 2022,

um, the kind of the white placard protests and people were, you know, gathering in protests outside apartment complexes and so on and so forth. I think, um, I mean, probably the decision to abandon zero COVID policies was taken before those protests, but the protests did not, will not have gone down well, you know, with the party at the time. And, um, they did act quite quickly to try to, uh, diffuse that kind of problem. So I think, um,

Yeah, I mean, it just shows that there are kind of not just economic, but also potentially social vulnerabilities in China, which are not really. I mean, a lot of people think that, you know, China's success with electric vehicles and batteries and solar equipment and wind turbine manufacturing and all the modern stuff, quantum computing, biopharma, etc. I mean, all of these things. I mean, I don't want to be churlish and say this is all kind of a waste of time. It's obviously very, very good.

But actually, A, this is still a very small part of the economy, relatively speaking. And B, it doesn't really matter how good you are at innovation, even if we kind of accept all of the, you know, what scientists say about, some scientists say about innovation in China. Let's accept that they can do it, you know, on their own terms and in their own way. But actually, what really matters, it's not so much the innovation, it's how you diffuse that innovation to all the boring bits of the economy that nobody ever talks about.

which is really the 85-90% of activity, which is really where you get all the big productivity gains in the end. We're all trying to do that in the 2020s and 2030s, but it remains to be seen whether China's party state and the institutional rigidities which it has are up to that particular task.

George, you're the author of a book called Red Flags, Why Xi's China is in Jeopardy. You wrote that book in 2018. I'm curious if you think that China is in greater jeopardy now that the trade relations between China and the U.S. are so strained. But first, George, could you just walk us through the various so-called traps that you write about China's traps, how China faces a debt trap, a renminbi trap with their currency, an aging population trap, and then a middle income trap?

Can you describe some of those traps? Which are the most salient right now, do you think, and why? I'll kind of turn that slightly around. The demographic trap is something that gets a lot of publicity because people understand very well and very easily what that's about because we're all suffering, not suffering, we're all experiencing that kind of problem, which is that there aren't enough babies being born essentially to fill the boots of

working people who get to pension eligibility or retirement age.

And in China, the birth rate is now down to, I don't know, probably 1.1, maybe even in some provinces below that. So obviously, that's a big problem for China as well as it is for lots of other countries. But this is a kind of a glacial issue. This is something which is going to be playing out kind of incrementally and very slowly over a number of years. What we do know anyway is that the working age population in China is declining.

started to tip over into 2012. And it'll carry on falling really for the foreseeable future. In fact, if you look at most of the things that demographers look at in terms of old age population dependency ratio, youth dependency ratio, the costs of aging, kind

pensions, healthcare, residential care, et cetera, et cetera. On most demographic metrics, actually, the United States is probably in a better position by 2040, 2050 than China will be. So it is a big issue for them because obviously their income per head is much lower. America has income per head of, I don't know, $60,000, $65,000, and China is about $20,000. So

it makes a big major big difference but it's something that plays out over a long period of time i think uh up close and personal so to speak i think the more immediate issues really are about the debt that has been accumulated and again it's not really so much about the size of the debt as such um in relation to gdp or anything but the fact that the country's debt capacity in other words the ability of debtors to carry on

financing and refinancing their debt actually is reaching the limits actually because if you can only keep your payments to creditors kind of on schedule as it were by borrowing more and borrowing more in order to do that then obviously you've got a problem because you should be able to meet your debt servicing costs from cash flows or profits or savings or whatever it happens to be. So

There is a debt capacity problem in China. There is also a renminbi problem, which is, you know, for many, many years, the renminbi was a one-way ticket to appreciation. And then that all kind of swung around again, probably again just before COVID. And now I think the issue really is, you know, how far the renminbi might drop rather than how it might appreciate.

And OK, so there may be kind of a saving grace here, which is obviously as we speak, the dollar is under quite a lot of pressure. It's come down in trade weighted terms quite a lot over the last few weeks. So there may be some relief there. But actually, the renminbi hasn't exactly been strong.

against a weak dollar. And the problem with renminbi is that one of the ways in which the Chinese can offset the impact of tariffs to some degree is to let their exchange rate depreciate.

And once you do that, you might encourage the kind of outflows of capital, even though they're strictly controlled formally. You might encourage that kind of outflow. As we saw in 2015, 2016, when China lost about $800 billion worth of currency reserves, the

And so the government has to be quite careful about how it manages its currency. It certainly would like the currency to offset the tariffs to some degree, but I think it must be quite careful not to permit the currency to drop too far too fast. We don't really know how that will turn out. The other traps that I spoke about really were, I certainly spoke about the US

a governance trap, not really a trap as such. But there's obviously been a big change in the governance of China. Talk a lot about reform and opening up and about the virtues of the private sector, et cetera, et cetera. But this is not the same kind of rhetoric that we heard 10, 20, 25 years ago. This is a much more politicized approach to private firms and to the rules.

under which private firms are allowed to operate and make money. In other words, they have to be cognizant and compliant with political narratives and goals.

And then the external trap was really one that I only just began to explore in 2018, 2019, because that was when President Trump first came to office and instigated the trade tariffs of that time. Obviously, now it's kind of written in much, much bigger letters. But obviously, the external constraint on China is not trivial.

And if we think that China's success in the 2000s and the 2010s were essentially took place in the shadow, well not in the shadow, but in the wake of China's accession to the World Trade Organization and the breaking down of trade barriers, what we've got now is precisely the opposite. And so I think that this will be a problem.

And so, and I think the trade conflict is endemic really because, you know, in a nutshell, if I could just say this very quickly, I mean, China accounts for a third of global manufacturing value added now. I mean, that's the extent of its dominance in manufacturing and it's still geared towards kind of boosting that in the future.

But you can only do that at somebody else's expense. So if China's share of world manufacturing is going to continue to rise, America, Europe, Japan, Korea, I mean, we're all suffer reverses to compensate. And I think Turkey, Brazil, even kind of middle-income countries, Mexico. So I think a lot of countries are kind of reaching the point now where they are just kind of

not only wondering, but acting to try to preserve what they think are their rightful domain, really, to develop their own steel industry or their own car industry or whatever it happens to be. So I think this is a point of conflict which is not going to go away quickly. George, that currency issue is so important. The Chinese yuan, the renminbi, it

an allegation from the Trump administration and many economists is that China is intentionally weakening its currency so that its exports are more attractive. That's part of the reason China exports so much is it's cheap to produce in China so it can export a lot. And you referenced that the Chinese yuan had been strengthening from 2004 to 2014.

And so that may appear to fly in the face of the argument that China was weakening its own currency. But I guess would the argument be that Chinese currency should have been strengthening even more than it was from 2004 to 2014, and that from 2014 to 2024 and until now, the weakening of the yuan has been highly inappropriate. And just to set the stage, George, you know, there's a theory in economics. I mean, going back to even the gold standard of like

Like you're in Britain where you're in London. I'm in the US. If I have a trade deficit with if you have a trade deficit with me, then gold will flow out of the UK and into the US. And that will cause deflation in your currents in your economy, which will make it cheaper to to produce things. And.

Therefore, the balance will be restored. And in the IMF world, after Bretton Woods, we had policies to coordinate this. Now, since the 1970s, we have a floating exchange regime. Just give us a sense. Is it the case that when China... Is the theory of balancing that when China runs such a huge surplus...

that the surplus should strengthen the yuan and therefore make exports less attractive and therefore improve the exporting capacity of other countries. Is that the theory? And has the fact that the Chinese yuan has been weakening since 2014, does that fly in the face of that theory? And I guess, George, it's a long way of asking you,

you, to what degree do you agree with the allegation that China is manipulating its own currency? Well, I mean, the charges of manipulation were pretty vocal. I mean, there were constant congressional hearings about this. I don't really remember how long ago. It was quite some time ago. And then they all kind of seemed to kind of dry up or certainly went rather quiet.

But I think that, I mean, the theory is pretty straightforward, which is if you have a freely floating currency, then obviously you're running a big trade surplus or balance of payment surplus. Currency should go up and it kind of has an equilibrating kind of impact, theoretically at least. I mean, the trouble I think with, I mean, again, China is very different from kind of post-Bretton Woods system that we all kind of grew up in and remember.

all have because the currency is quite carefully controlled by the People's Bank of China. It's only allowed to move by about 2% either direction. It's fixed daily by the People's Bank of China. And, you know, you know something's happening when

You know, when the currency actually does move because over a period of days or weeks, because it wouldn't happen without the People's Bank of China actually giving its blessing. And the People's Bank of China isn't independent. It's an arm of the state council and so on and so forth. So I think that so that's point number one. Point number two is the, I mean, obviously currencies can go up and down for all sorts of other reasons apart from trade. So

The fact that the Renminbi or the Yuan was actually depreciating really, I mean, not in a straight line, but sporadically over the last few years.

I mean, it could have been due to lots of other things as well. But I think that in the round, if we're kind of looking at the situation here in spring of 2025, certainly over the last couple of years, if you look at the kind of the real value of China's exchange rate, in other words, adjusting for inflation differences, which can account for part of the reason why currencies fluctuate

But the real value of the renminbi has actually been declining gently for some time. And I think that has given Chinese exports a bit of a competitive advantage. And part of the reason for that, of course, is that there is no price pressure in China. And part of the reason and the explanation for that, of course, is that the Chinese demand and the domestic demand in the economy, particularly consumer demand, is not sufficiently robust

So that, you know, price pressures or producer prices or wholesale prices, as we call them, have been declining for quite some time. The broadest measure of inflation or deflation in China, which is called the GDP deflator, which is like

The widest measurement of inflation that you can find, much wider than the consumer price index, has been falling for about two years now consecutively each quarter. And so this is a big problem. I mean, it's not just something that you can kind of fix by maybe a little bit of intervention in the foreign exchange market, even if that was

feasible or likely. But it's about really the fact that China has lack of demand. If they could solve that problem about the lack of demand in the economy, prices would go up, the real value of the exchange rate would go up, imports would go up, and the adjustment mechanisms would be allowed to work a little bit better. But all of those seem to be blocked off, so far at least, because of the stickiness of

broad policy settings that the government has.

And if China were to stop fixing the yuan against the dollar and other currencies, in what direction would it go? Would it strengthen or would it weaken? In other words, is China keeping it artificially strong or artificially weak? Well, I think it's probably keeping it artificially strong. I mean, it's not strong in nominal terms. I think, you know, if you look at the kind of the daily fix, it's been kind of drifting, you know,

lower gradually over the course of this year. I think, you know, it would probably be the least line of resistance probably over the next two or three years would be for it to go down. I'm not...

I'm not trying to urge this in any kind of rapid change or not trying to suggest it's going to change very rapidly because obviously a lot of this to the other side of the coin, which is the value of the dollar itself, is rather uncertain at the moment. The dollar may have entered its own bear market for a year or 18 months. It's happened before since the collapse of Bretton Woods.

That might buy a bit of time. But obviously, we can track the value of the renminbi not just against the US dollar, but against other currencies as well. And so in what we call broad trade weighted terms, probably the renminbi will continue to depreciate would be my guess.

Modestly, I don't think the government wants it to do anything dramatic. I mean, I think it would be a very obvious and loud message from Beijing if they did actually devalue the currency by a significant amount. That would certainly get the U.S. Treasury jumping up and down, I would think, and the White House. I don't think the Chinese are quite ready to do that and maybe don't want to do it at all.

Right, because weakening the Chinese yuan even further would further make Chinese exports even more competitive, which could further exacerbate the trade deficit that the US has with China. Do you think the Trump administration wants a weaker dollar? Because if the dollar was weakened, it would make US exports more competitive. Yes. I mean, the now infamous paper, which was written by Steve Mirren,

last November when he was before he joined the administration. Obviously a lot of the things that have happened this year basically it just comes straight out of that paper. And that paper basically makes two

potentially incompatible points, really. One is they want the dollar to retain its reserve status and be first amongst equals, but just the world's primary currency. But they also think that that reserve currency status has made the dollar inordinately strong and stronger than it otherwise might be. So

It's kind of not easy to see how you can square all of that together. But I would say that at this juncture, that the administration is probably not unhappy if the dollar is a little bit on the back foot.

And if it falls further, which it well might, I think they would regard that as a good outcome. I think it is. I mean, a lot of people do conflate what's going on in the currency markets now with the dollar, with the dollar's loss of reserve currency status. These are two separate things, I think. And I think a lot of inertia has to be overcome before that actually becomes a big issue.

George, just as an aside, what's going on with China and gold? I see all sorts of anecdotal reports that China is stockpiling gold. Is that true? And how does that assist their strategy from the marginal reserve asset that China has from its trade surplus? It's still deploying it into dollars, but it's deploying it less into dollars and more into gold as well as other assets. George Harrison

There are different agencies in China that have different incentives to acquire reserves. I mean, obviously, the People's Bank of China is a central bank.

And it requires reserves for the usual reasons that central banks require reserves. But actually, China's sovereign wealth fund, which is a China investment corporation, and the state banks, particularly the big four, big five banks, have also been used as agencies to acquire and hide, I would say, reserves. So people have different motives for doing that. The

The gold is almost certainly exclusively for the purposes of ownership by the central bank and possibly by the sovereign wealth fund. I don't really know what their brief is, whether it includes precious metals. But yeah, I mean, China has been trying to, not trying, actually diversifying its reserves for some time now.

I mean, a lot of publicity is being given to the decline or the decline in the proportion of US treasuries that China is reported to hold. These data come from the US treasury's information system, the so-called tech system. But this only includes the treasuries of the

Treasury itself has kind of jurisdiction over in terms of monitoring and scrutinizing. And China holds U.S. assets like agency bonds and Fannie Mae, you know, for example, or Treasury bills or other forms of U.S. assets in different forms such that probably the...

Nominal value of the US dollar holdings of assets over the last few years hasn't really changed that much, I don't think. But gold is definitely a big diversifier. And I mean, obviously, you have to, you know, it doesn't give you a return unless the price goes up, as Dean, of course. And you have to pay for insurance. And it's not really a particularly useful asset to hold, except in times of economic and financial stress.

And of course, you know, we are going through a period of stress. So the returns to gold obviously will be rewarding for the investors. Yeah. BBC included. George, I now want to return to a question of

which country, U.S. or China, has various advantages or disadvantages in this trade war. You have written, George, about how China's exports to the U.S. account for 2.3% of China's overall economy, GDP, whereas the U.S. exports to China is only 0.5% of U.S. GDP. So could we draw from that, George, the conclusion that

the tariffs are going to hurt the Chinese economy more than the Chinese retaliatory tariffs are going to hurt the United States. Well, therein hangs a question.

which is obviously going to determine how and when negotiations eventually take place. Normally, I don't know if it's definitely not a rule, but normally we would expect, or I think economists would expect, that surplus countries have more to lose than deficit countries.

and supplier countries have more to lose than client countries or purchasing countries. So on that basis, it's possible that China has more to lose from a trade war or trade embargo than the United States. Having said that, we'll be much more conscious and much more exposed to almost daily commentary about the impact of the trade war on the United States than we will be with regard to China.

And actually, we can see it already. You know, there's lots of commentary about shelves emptying and, you know, container ship orders coming into Los Angeles being, you know, half of what they normally are and so on and so forth. So there'll be lots of telltale signs of stress if there isn't any kind of pullback from where we happen to be now with regards to tariffs in the next month or two.

I don't think there's any winners in a trade war. I think the issue is who loses what over what period of time. It would certainly seem to me at this particular juncture that the American economy may be more vulnerable than China and might have political consequences, obviously, for support for incumbents.

But I don't think that means that China gets off scot-free. China's economy is still riding on the coattails of quite a lot of stimulus that was unleashed last October, November, which were designed at the time to help the economy weather the headwinds that were coming from real estate and infrastructures pullbacks and

and so on and so forth. In fact, I mean, the main contributor to Chinese growth over the last three to six months has been the export sector, which obviously is not going to be after the spring. So, yeah, I mean, I think it kind of depends. You know, if you took a snapshot of where we are at the moment, you'd probably say that the U.S. economy would be exhibiting signs of stress earlier than in China. But that doesn't mean that China won't have its own. And in fact,

We can already see in the way in which export orders are affected in China. We can see it in terms of the concern which the government officials are expressing about the need to

step on the gas as it were with regards to consumer demand because what they do with that is the uh is the acid test and you know as i said before uh when we were talking earlier you know it's one thing to kind of talk about having to do something but actually what you do is very very important as well in the end um so um yeah i mean i i think that you know the idea that you know

that China can weather this trade war better than the United States over time. That's a very, very contentious assertion, I think.

You're saying that the US economy is more vulnerable to the trade war than China is, even though China's exports as a percentage of GDP is four times bigger than the US. Yeah. Well, I think it's just that it might take longer for the effects to be felt in China because lots of things are obviously going on all the time.

One of the things is that China's economy is, as I said, riding on the coattails of stimulus, considerable stimulus that was injected into the economy late last year. So to some degree, it might be able to weather a hit to exports once all of the pre-stocking and pre-ordering has worked its way out of the system. And so I would say that we might not see...

the impact on China in more substantial terms, perhaps until maybe the summer or fall. Whereas in the United States, it looks like we might see earlier indications of stress before the summer. Wow. Tell us about the Chinese stimulus. I know in September, there were over 10 different stimulus measures announced by China. A lot of them were

monetary rather than fiscal. Tell us about what was the real bazooka in terms of actually the government printing or borrowing money in order to subsidize the private sector? People were looking for like a bazooka, as you say, quite rightly. I mean, it's kind of what we all kind of think.

It's the appropriate kind of term. But there wasn't really one in the way that we would normally kind of expect to see one as there was, for example, after Lehman and, you know, when COVID struck. So I think in China, what you've seen over the last several months,

is one, continuation of relaxation of restrictions on home ownership, so easier mortgages, longer repayment periods, smaller pay downs of deposits to encourage people to buy. Local governments have been given subsidies to buy up unused or unsold housing.

interest rates have come down, bank reserve requirements have come down, liquidity is being provided very generously, the fiscal deficit is being allowed to increase and it is already kind of reasonably high as it is. And there was approximately a kind of a 10 to 12 trillion renminbi program of debt refinancings announced.

which will take place this year and next year and probably running into 2027 with multiple purposes. One is to relieve the, to some degree, the debt pressure on local and provincial governments. These are not new, these are new borrowings, but basically to replace existing borrowings, so cheaper borrowing in effect. So it's debt restructuring essentially.

Also, bank recapitalization for the five big banks, because the five big banks, I think the government is very concerned or is concerned that they should be able to fulfill an enabling role in the economy to kind of bring along their kind of smaller, more vulnerable brethren and take over weaker banks if necessary. So, I mean, I don't think we kind of

This kind of refinancing program, which is 12 trillion yuan, is like... It's over kind of 50%. GDP is about...

What about now? Something trillion yuan. So this is getting on for like 10% of the size of the economy. It's quite a lot of money, but it won't really have the kind of measured stimulus effect that a tax cut would. But anyway, if you combine debt refinancing, housing assistance, infrastructure, borrowing,

which I think is still continuing, plus monetary measures. And they did introduce one scheme, of course, for old for new. So small businesses and consumers could take their consumer durables and swap them for subsidized versions, newer versions of the same products and so on. So all of these things together certainly have lifted economic growth

lifted economic momentum a little bit over the winter. That's for sure. What have you made of the Chinese response so far?

How do you think it's going to play out? I guess there's three things, two of which we talked about. Number one, tariff retaliation from China, China putting tariffs on the US. Two, the Renminbi weakening, which we talked about that. Then the third that you've written about is President Xi reaching a deal. What are the odds of that? How are you thinking about it? What

What have you made of the relative appearing intransigence of the Chinese government so far, like appearing to be very, very tough? Right. I mean, I start off with an assumption, basically, that if they don't reach a deal and these tariff levels that we have on both sides endure through this year,

um but that's such an awful kind of outcome which will spill over from commerce into other areas which are much more dangerous um and i don't think that either side really want that to happen i mean maybe that's

wishful thinking i don't really know um but i start from the proposition or that really both sides are trying to control one another to get to the negotiating table i'm not sure what that kind of deal might look like it might not amount to very much other than just a modus vivendi a way of because of living together pulling back some of the very high tariff levels to something that's still high but not as bad as it was

And maybe, you know, some other things about purchasing from one another, certain kinds of products or volumes and so on. I don't want to go out on a limb as to what that might look like, other than it would be a kind of let's try and calm things down a bit. Because actually the alternative is just too horrific to contemplate, really.

I mean, both guys, you know, both sides are playing for pretty high stakes. And I think China's response is pretty much as we would have expected it to be, which is, you know, tit for tat tariffs. So just matching the United States one for one and also throwing in some other measures which give an indication of how peaked China.

I think Beijing is about Trump's policy. So, you know, there's been a sort of export restrictions on rare earths, which are obviously something that the Trump administration would like to diversify away from Chinese dependency, but that's not going to happen soon.

so restrictions on rare earth exports uh targeting of some u.s companies um investigations into mona anti-compact practices and what have you i mean all of these things could be completely trumped up things without much relevance but it's quite clear that um you know that china not happy with the situation and they want to uh appear tough and um

You know to the extent that any thing is reliable. I mean, it's kind of thought that China has said in the last, you know 24 hours when from where we're talking You know that Trump would have to remove all unilateral tariffs as a precondition for negotiations So yeah, I mean I think that

I think they're both kind of jockeying for position. You know, I guess the optics are such that neither side wants to be seen to blink, will be the first to, you know, capitulate, for want of a better phrase. I don't think that really matters. I think what really matters is what kind of a deal can they reach? And also, importantly, I think, is what kind of a deal can the United States reach with other countries like China?

the EU, Japan, Korea, India, for example. That's pretty important, actually. So it brings us back to where we started about supply chain geography and transshipment and the whole basis of China-centric supply chains. I mean, that's really what I think the United States wants to try to influence. So if it could claim some successes in

in those negotiations with those countries. I think that would be to the advantage of the US negotiating position.

But to be honest, I'm not really that bothered about who blinks. I just think it's important that they should reach some kind of an accommodation. It's not going to be great and it's not going to be the status quo, Angie, where they're not going back to where they were before January. But something better than what we have at the moment would be probably a good outcome.

And so as we record, the U.S. tariffs on the rest of the world other than China are at 10 percent because there was a 90 day exemption that President Trump put on announced on Truth Social on April 9th. So on July 9th, those reciprocal rates that he came out with the board on on the board on Liberation Day, April 2nd, are scheduled to go to those levels. So there may be a deal there.

And as we record that the U.S. tariff rate on China is 145 percent. And President Trump has said that it's very likely it's going to be a substantial reduction in those Chinese tariff rates. So likely the U.S. tariff rates on China, you know, for probably a lot of 2025 will be lower than 145 percent. How much lower? No one knows. But, George, rather than asking what picture do you think is more likely, I'm just going to paint you a picture that to me at this current juncture would appear a somewhat moderate scenario.

where the US reaches a deal where the US has a 10% tariff on the rest of the world, no reciprocal things, the things that are currently scheduled to come in July 9th. And let's say the US-China tariffs go down to a much lower level,

but still above 10%, 25%. And the 25% a few months ago would seem incredibly high, but of course, everything is relative and compared to 145%, 25% seems low. Just how different of a global economy is that from the economy before President Trump took office, one in which the US has 10% tariffs on the rest of the world and 25% tariffs on China? It's different in a materially adverse way.

But it's a lot better than where it otherwise might have been. So, I mean, it just shows you how just how the framing has changed in such a short period of time that my hunch is that if that's where we ended up in July, that there would be

You know great relief all round, you know markets will rally You know the end of the world would not be nigh and cetera and cetera but I think that but it's not you know, it's not a great outcome right because the

The imposition of restraints on trade like this is suboptimal, right? I mean, I know it's a bit boring and very kind of eco-nerdy, but, you know, what we used to call or what we still call kind of free trade, which is actually never really free, but actually it's freer than it

will become now, or is, is something that we associate with efficiency and productivity and rising living standards and so on and so forth. And this is all very standard kind of econ trade 101 stuff. And I think we take it as read that this is kind of the way in which the world really ought to be organized and structured for mutual benefit. But having said all of that,

I wanted to just return to a statement that I made when we were talking about this before, which was that the world trading system was not sustainable before Trump came to office. And the big trade imbalances that we have between China and the United States and China and a lot of other places speak to an imbalance in economic policies and industrial policies, which somehow has to be

restructure it. Ideally, we would do this around a big conference table at the IMF or the World Bank and everybody would agree and compromise and we'd kind of have a new trading system and a new monetary system and everything would be hunky-dory. That's not going to happen, obviously. And so I just kind of think that...

In the future, I mean, I don't know really how long that is, maybe certainly for the foreseeable future, you know, we're going to have a much more fractured and kind of somewhat dysfunctional trading system than we had until, you know, the end of last year.

in which there'll be more trade blocks, more countries that have to make big decisions about whether to align their commercial and investment interests with the United States or with China. I mean, some may choose one, some may choose the other, but I do think that sitting on the fence is going to be quite difficult.

And yeah, I mean, it won't be it'll be a less productive, less efficient world. But I think it's manageable. You know, I mean, I say that slightly with kind of biting my bottom lip. I mean, it's more manageable than living with a kind of rose garden terrace that we saw outlined quite recently.

And would a 25% tariff on China, would that be sufficient to reduce the trade deficit the US has with China, as well as perhaps stimulate manufacturing in the United States, which is a stated goal of the Trump administration? Yeah, I don't think it would. It might affect the bilateral deficit between the United States and China to some degree, but I don't think it would really affect America's overall deficit.

It would just lead to a redistribution of the deficit with other countries. Much as we've seen, you know, over the last seven or eight years since the trade war actually began,

As to the re-industrialization of America, I'm not buying that one really, to be a bit of a suspense. I mean, I think that, I mean, I can, when you read, as we do often, you know, now stories about the Taiwanese semiconductor manufacturing company, TSMC, saying that by, I don't know, 2030 or 2035, they plan to be producing 30% or 33%

of their height and chips in the united in arizona i mean those are the kinds of things where i think uh whether it's american companies or whether it's other companies that are permitted into the us um under like the america first investment act and all of a memorandum and so on i think these are things which will be noticeable in key sectors or industries or firms

But, you know, I don't think the United States really is going to re-industrialize across the board, you know. And actually, why should it? You know, I mean, Americans' companies don't really want to make toys and textiles. And I mean, in the way that they may be used to once upon a time. And I don't think like in basic consumer products, it really matters whether you import your LED screen from, you know, Cambodia or from China or wherever it happens to be.

It does matter when it comes to high-end technology, and it does matter when it comes to things that have civilian-military dual usage, and it does matter in areas that we deem to be important to national security and defense. So if that's what we mean by reindustrializing, which I don't think is what the Trump administration means, but it's what I would mean by it, because I think there are areas where it is quite important that countries should not

retain this kind of dependency on China. I think that goes without saying. I think that is something which I definitely think is going to happen and is happening. Slowly maybe, but I think it is happening. But the whole shtick about re-industrializing and being an industrial superpower, I'm sorry, I don't buy that. I think that's just for the birds, really.

And so you think that's unlikely, a re-industrialization of America is unlikely to happen with a 25% tariff. What about if the US has a 100% tariff on the rest of the world or 145% tariff on China? I understand that there will be severe economic consequences, but surely that could, you know, if there's all the factories or most of the factories are in China and there's an 145% tariff on China, surely that will incentivize the production of

production in the US, right? Yes, I think it probably would. So I think, I mean, to the extent that, you know, there would be certain things which the United States would say, you know, we just can't afford not to have this. You know, we've got to

you know, we have to, whatever the cost, you know, we're going to have to build something and make it here. I mean, you can do that for certain things, but there are, you know, there are certain things that you can't really speed up. I mean, you can't really certainly go from one day, from one month to the next to having enough. I mean, I know that they are mining or they're looking for rare earths in like in Montana and Wyoming and, you know, Arizona and so on. But actually it'll take a long time before they'll actually, before the United States,

could be potentially more self-sufficient in rare earths. It'll take, um, uh,

And at what cost to their government, to the budget, to the finances of state and local governments? I mean, it would be, I mean, autarky, I'm being extreme, but if you said 100% tariffs on everything, we want to basically build a new economy behind tariffs.

you know, a big wall. I mean, potentially you could do that, but, you know, it doesn't say very much about capacity, efficiency, and, you know, people would find ways around it. You'd find, you know,

you kind of find stuff in Brazil or in, you know, Argentina, or I don't know where else Canada even. Um, so yeah, I, I just don't think it's very practical. Um, and it's a cost that the United States doesn't have to commit itself to actually, you know, certain things, you know, I mean, trade is, you know, we can, we can import things from China, um, and from, you know, other countries that are maybe not strategically that, that significant. I

That's not a problem, I don't think. President Trump has also signed an executive order earlier in April that

is saying that the de minimis tariff exemption, that is the amount of small dollar items that tariffs don't apply to and under that, you know, if people have bought something from Timu from China, it almost certainly was exempt from the tariff because it's so, you know, it's only 15 bucks. Trump is going to raise that rate. He already has signed the executive order and it's that is scheduled to go to effect May 2nd. And then sometime later in the late spring, early summer, that tariff rate is going to go up even higher.

Just what do you think is happening there and why is that so significant? It goes right to the heart of the business model of these firms. I'm not really sufficiently familiar with the models of those companies and really what the hit is likely to be, but I imagine it's going to be pretty significant actually. I mean also I suppose it depends on whether the people that are

who are buying products from like Shane or, you know, Jimo and so on. I mean, where is the sort of, I mean, the technical word would be the elasticity, right? But where is the point at which people will say, you know, we just, I'm not paying that for that. Yeah.

But I'm already sure about that. I mean, I do think from what little I do know about their business model is that it will hurt them a lot. And I don't know whether they'll try to sort of, you know, do their shipment from other countries as well that may have 10% tariffs rather than the higher tariffs. But that's just how trade does shuffle around, you know. Anyone making predictions about...

where this tariff is going to end up and where the consequences are going to go up, it's almost destined to be wrong. You know, you could say, oh, tariffs are going down to 35 percent or actually they're going to go down to 45 percent or 20 percent. It's going to be wrong. Are there anything, George, that you can say with confidence right now, not about particular tariff levels, but sort of

more longer-term truths and observations that you think will be helpful as investors, economists, and people just looking at this are trying to navigate this uncertain environment? I think that we will have a much less, I mean, obviously, this is stating the bleeding obvious, as they say. But I think we are going to have a much more fractured and tariff-oriented trade structure in the world.

I think there will be countries, many of which may feel that they've been let down by Trump's administration, that may nevertheless still be more inclined to kind of feel they belong in the sort of America sphere.

There'll be others doubtless that will feel precisely the same about being in the China sphere. And there'll be a lot of countries in between that I think particularly emerging countries and developing countries

which I think will be a kind of fair game for both sides really to try to win over. So the fracturing of commercial relationships, I think, is one thing. I think for companies, like multinational companies, which are really the agents of what makes global commerce work in the medium to long run,

I think we're going to see a continuation of a trend which people have observed called siloing. Lots of companies in China, foreign companies, have already siloed some of the corporate functions like human resources, budgeting, research and development, etc.

data storage and transmission, simply because the laws and regulations in China and the laws and regulations in their home countries, whether they come from Britain or Germany or America or Japan or wherever, are in conflict now in so many different areas. And I think that siloing effect is going to spill over into China.

geography as well so that those companies that actually have businesses in China to sell products to the Chinese market obviously will have to stay there and will need to stay there

But a lot of companies, I think, and we already see this in the survey evidence from the American Chamber of Commerce and the EU Chamber of Commerce, a lot of companies that actually don't need to be in China will probably relocate to the Americas if they're serving Mexico, Canada, US, South America, and to Europe if it's for anywhere else. I also think that...

Yeah, there's going to be a lot of trade diversion, right? So lots of trade routes. I mean, there could easily be a kind of an India to Middle East to Mediterranean trade route. I mean, which, you know, probably people use it now anyway, but I think it will become...

That kind of trade diversion will be more intensively used. I mean, India looks to be, you know, potentially a kind of a winner, really, or from this kind of trade diversion that I think will happen. You said, you know, obviously we can't be pinned down and, you know, whatever we say, we might want to speculate about where tariff levels will settle. It's almost bound to be wrong, and I think that's correct. But, you know, but it is...

But I think this, as I have said, I think going back to the way things used to be, I think is probably the least likely outcome. I think we will probably live in a world in which tariffs are

Higher than they were, not as high as they've been threatened to be. And I think there's, I don't know whether that's, I'm not even sure whether it's a plan. I mean, but certainly I think, you know, there will be negotiations and I think there will be some sort of pullback.

But I think, yeah, I do think the US administration is at least serious about one thing, even though they may have gone about it rather chaotically. But I think they are certainly very serious about trying to change supply chain geography. And I think that's something that was always going to happen. And it was always going to be messy when it did. And we are living proof that it is.

George, one of my final questions for you is, so far, everything that's happened to the tariffs has only been on goods, things you can touch with your hands in the physical world. What about services, which is most of the global economy, I believe, as well as the

capital flows and the stock market? Do you think China would ever put a tariff or a tax on services that the US exports? And also, is there even precedent for that? And then also, would China stop capital inflows into the US? Would the US attempt to delist Chinese companies that are listed on the New York Stock Exchange? How are you assessing those risks? Some of these things are possible. I mean,

services trade, I think that the volume of world services trade is probably as big as it is in goods nowadays. They're much more difficult to tariff, right? Because they're online, often computerized. They can be, you know, you can't put them in a container and basically check it off.

So it's kind of harder to do. I mean, there are obviously restrictions on service industries that lots of countries maintain. But it's not impossible that there could be penalties for services, except that obviously one of the things, for example, that I mean, to take China's kind of case in point,

I mean, one of the things that there is still a red carpet there for is, for example, for financial services companies to try to come into China, share their know-how, investment banking, asset management, insurance. I mean, so it's not quite as contentious, I think, as goods.

I'm not saying it's impossible that there could be some initiatives to try to penalize some service providers, but I think the products are much more difficult to take action against.

Capital flows are kind of an interesting thing as well, because obviously there's been some speculation, again, a lot of it, some of it comes from the mirror, the Steve Mirren paper, about whether the United States might actually at some point reintroduce a withholding tax that was in operation until 1984, from the end of the Second World War until 1984, when it was lifted.

I mean, the reasoning here is that if you can restrain capital inflows into the United States,

You will in effect be pushing placing downward pressure on the trade deficit you're on the basis that since the trade the balance of trade of the balance of capital flows have to balance out to equal zero if you I mean the conventional thinking is if you have a big trade deficit you have to have all the capital coming in to finance it but actually that is a little bit kind of ageist in a way This is now

I mean, a very popular argument that actually capital flows are the determining factor. So if China has big surpluses,

Korea, Japan, Germany, for example, all of the surpluses have to be invested somewhere. A lot of them come to the United States. Capital inflows go up, so the trade deficit gets bigger. If you shut down capital inflows into the United States, trade deficit will get narrower. I mean, this is theoretically what some people think might happen. But that's a possibility. I mean, it's certainly been rooted. I mean, I'm not sure that this would be a very propitious time

uh given the sensitivity in the u.s treasury market and the us dollar market um i think it probably would have a big negative feedback but um it definitely kind of a watch this space

One thing that I think is an old canard, as we say, is the idea that the Chinese will basically dump US treasuries. I've been listening to this story for like 25 years. And I don't think that's a tool that they would use except in times of war. And they might not even get the opportunity to do that because preemptively the US treasury may freeze those assets anyway.

So, yeah, I don't think it's... And I don't think there's really much evidence to suggest that in the recent sell-off in US treasuries that China was one of the main actors. Yeah, it's just not in their interest to do that, to be honest. The classical theory is that a trade deficit would cause a capital surplus. You're saying that maybe the reason the US has a trade deficit to begin with is because it has a huge capital surplus from the rest of the world. And if the US was to shut down that flow...

that maybe it would resolve the trade deficit. I think one mechanism of that would be if the rest of the world stops recycling dollars back into the US or recycling money back in the US, there would be a weakening of the US dollar, right? Yeah. We don't actually know that. We don't actually know what... It would be a big risk to do this, I think. The equation says yes, but we don't know. The equation says yes, except the practicalities may be much more complicated.

Right. And so maybe a weakening of the dollar, according to you, maybe would be welcomed by the Trump administration, not in a drastic fashion, but in a gentle fashion. But what about the weakening of financial conditions with regards to widening credit spreads and the sell off in the U.S. stock market? How are you gauging the Trump administration and President Trump's impression?

in particular, is sensitivity to the stock market. People have been saying that President Trump doesn't care about the stock market like he did in Trump administration 1.0. But it does appear that the pivots and the moderations the president has made, perhaps in tone, if not in actuality, have been when the market has really been seizing up. And also, if there is a sensitivity from

of the Trump administration to financial conditions. How do you think that affects us over the next year and the course of this negotiation? Yeah, I'm not really sure whether it's the stock market or whether it's the bond market. I mean, obviously, everybody remembers always when things like this happen. You know, James Carville's famous quote about, you know, the intimidating part of the bond market. He wants to come back in another life as a bond market. And I definitely think that the significant jump in yields that we saw

I mean, yields go up for all sorts of reasons. You know, people get used to that and it's not like it never happens. I think it does matter when bond yields go up in a very, very short space of time and the dollar goes down, then you know something's, you know, there's sand in the gears. And I think that that was kind of a defining week, really, in a way.

um which which will have sent alarm bells out to the treasury for sure um that uh that something was a mess and you know something had to be pulled back um so yeah i mean and obviously when that happens you know there's no way the stock market is going to act independently so it's very difficult to know whether i mean i mean if you had falling bond yields and rising stock market obviously that

That's not a problem for I would imagine if you have declining stock market and rising bond yields that probably is a problem.

And I think there is, I think, I mean, we were talking earlier, weren't we, about, you know, who's better positioned and, you know, US or China in these trade, in this trade war and so on. And I think obviously, I mean, one thing the Chinese do know is, you know, where the pivot point and the pressure point is for the United States. And, you know, I suppose they could, you know, they would be very sensitive to the idea that anything that makes, you know, the bond market kind of misbehave

is something to which the administration probably would be very, very sensitive. So, yeah, things like that would have to be watched quite carefully. George, thank you so much for coming on. I've really wanted to interview you for a while, so I'm glad we finally got your insights here on the Chinese economy.

economic model and how that is going to be impacting in the ongoing trade war. People can find you on Twitter @GeorgeMagnus1. Your book is Red Flags: Why Xi's China is in Jeopardy! 2018. Where else can they find your work? And yeah, what else? Tell us about the work you do at Oxford. Yeah, well, I'm certainly sporadically in Oxford. I'm sort of in a kind of a triangle between Oxford, London and the West Country in the UK.

But actually all my kind of publicly solicited or commissioned or volunteered work is on my website, which is www.georgemagnus.com. And yeah, there's always something new up there, I hope.

Thanks again, George. Thanks, everyone, for listening. A reminder that you can find Monetary Matters on Apple Podcast and Spotify. Please leave a rating and review. It really helps the show. We're also on YouTube at the Monetary Matters Network. Please like and much more importantly, subscribe to the channel. Thanks again. Thank you. Just close this door.