our next two speakers have a lot of information to share with you all um we have Sheng Wu he is a professor at the Chinese University of Hong Kong and also associate director of the Asian Institute of Supply chains and Logistics he has been published in numerous academic journals and specifically his research on the supply chain impact of covid-19 and the trade War has led to not only republication but also him giving lectures to the FED to the IMF to the Asian development Bank among others so he will be speaking about Supply chains as well as other issues on China we also have uh sanjana goswami with us she is a professor at the Lee Kuan Yew School of public policy for real this time and she is an international trade Economist who specializes in labor markets so she's also at the National University of Singapore and um and spoke about the China shock last year and we'll be going into that a bit more this year as well so please join me in welcoming our two speakers on China thank you uh thank you everyone can everyone hear me yes yes okay so um my slide deck uh yeah so uh I'm gonna be very quickly going through two major events between us and China when it comes to International Trade uh thanks for the introduction I just want to also add that I am an academic and I'm a trade Economist so we don't we're not very good at predicting the future but we dive into understanding what is going on now and what happened in the past so that's kind of what I'm going to walk you through what is that academic what are the academics saying about all this what can we learn from it going forward so I'll be talking about first the China shock very briefly and then talking about the U.S China trade War which is currently ongoing and in the Forefront of all this what really we are thinking about are distributional impacts the thing is that these shocks did not impact everyone in the same way depends where you're located what occupation skill wage education and so on right so that is the major learning from uh this stuff okay so everybody knows that China uh you know became a huge export Powerhouse in a very short period of time so this graph just basically shows how quickly it did that it went from five percent of uh World manufacturing value added or exposed to 15 to 20 in such a short span of time this graph shows the same thing it's a little small so I'll tell you what to look at in 1990 these are all um the top countries by share of exports and China didn't even feature in the top list in 1990 in 2000 it's the first green bar that you see so green are developing countries uh when it joined the WTO it was already you know among the top 10 or so by 2010 it was already number one and if you see 2020 10 years later the second country is not even close it's maybe halfway of what China has so all of this happened really quickly so hence came the term the China shock right so what I would like to clarify here is that there is a misconception that all of this happened because China joined the WTO all other countries reduce their tariffs China has all this access and that's what helped it do that that is actually not that accurate most countries had already reduced their tariffs the only thing that had changed that now the uncertain is gone now the producers in all these countries they don't have to wonder whether these tariffs will be remain low whether will they will go up so that really helps businesses to make decisions for the long run which helps them put them on the growth path right and that is the issue we are having now there's so much uncertainty businesses are not able to plan long term so joining the WTO meant that China itself had to do a bunch of domestic reforms which it was already doing prior to joining the wtu but it had to do even more and all of these things combined really led to this spectacular growth that we saw so what is the china shop why do we need to study it why do we care about it it's basically the very rapid group of Chinese exposed to the world but there are three features of this shock one is that it was very large now before this when trade economists are trying to understand how trade affects the income distribution or employment there weren't really such big Stark shocks to really study because for the most part trade shocks are like some countries reduce their tariffs right but then tariffs are put in you know they're negotiated with other countries it's not random you know you decide it's very intentional so there are a lot of things going on it's not like a shock coming from outside so the china shop was large so we can capture it second it was unexpected uh China was certainly one of the countries that could have grown like it did but it was not really on people's radar there were some other countries that could have shown good growth potential but nobody really imagined China would grow like that so it is unexpected it's like an external shock and third China the China shock is a very specific shop uh other large countries usually specialize in like Commodities or things like that but China had a very narrow comparative advantage and this is very different from what used to happen before China was good at labor intensive manufacturing very very specific so now the thing is that the tree the very first trade model predicted exactly what we saw happen but what we didn't know what would be the magnitude of such shocks is that when you compete with a country that is very specialized in something of course you know you're going to lose employment in that thing and so on so all of those things happened but what the major learning from the China shock is not that import competing jobs were lost it's that the effect the of these jobs where these scarring impacts they were permanent uh so for instance for the U.S manufacturing jobs were the high paying jobs for non-college educated workers right and now when these jobs are not available there is really no replacement so it's a permanent earnings loss for them either a reduction or loss and that is what we as a labor economists or trade economists did not anticipate that's such a big uh you know impact would be had so that is the major learning from the channel so there are distributional impacts and they can be large and they can be persistent so the china shop held the research Community because now we have a shock we can actually study what happens when there's trade how does it affect distributions there's so many papers on this and it also helps with policy we can understand what could be what can be used now that we know this happens right so this is just one figure from the first paper that started this movement 10 years ago Auto Dawn and Hansen if you want to learn anything about the China shock you should Google these three names and you'll get a bunch of results I believe they also have a website where they call it all this information and basically this chart shows the blue line is China's Imports to the US divided by what the US is consuming so Chinese import penetration into the us and that had been going up right from 1987 to I can't see but until 2007 or so at the same time the U.S manufacturing employment population is going down right now if you show this to an economist they are not easily convinced I mean it clearly they're correlated right one is going up one is going down at the same time but they're not convinced that one causes the other and that hence the China shock study so I'll very briefly tell you what we know there's so many papers on this I have a few myself but basically uh China's rapid rise while it was really really great for everyone enormously positive for World welfare they created these identified losers in these pockets and uh basically they have this permanent job loss right uh the industries that were facing the competition not only did they shut down factories they had to fire people they had to basically the structure of their you know operations changed and at the same time it was not all negative because the exporters or producers that need inputs now suddenly had access to all these cheaper inputs and they actually created enough jobs to more than offset the job losses from China but like I said that's not the of course there's going to be job losses but the learning here is that these job losses were scarring and permanent so basically oh I went too far in by the time we'd get to 2016 there's already a little bit of grumble about oh maybe trade is not helpful maybe trade is taking away jobs and you know all of that and in the 2016 presidential campaign both Donald Trump Bernie Sanders they were voicing opposition to trade integration you know we should protect our workers and all of that uh but we could not have anticipated that we are going to actually have that after Decades of the us being you know the champion of reducing tariffs across the world that they're suddenly going to become protectionists so here we are so in 2018 out of nowhere suddenly there were these large tariffs so initially uh so actually I'll explain the graph first so you can see that the Blue Line the solid blue line where U.S tariffs on Chinese exports so on average in the beginning of 2018 they were around three percent right and they stand now at around 20 or so and this is the average of all products so this is a very high average so some some products have really high type of increases for China the the average in the beginning in 2018 was around eight percent and now it stands also around 21 22 percent so this is huge nobody would have expected this and truly I'll tell you the short run uh results of this but we don't even begin to understand what the long run effects might be of such a reversal because the same models are the same analysis we did for the Tariff reduction don't apply to this because now the economy the world has changed so and all the you know action that you see the lines going up so between 2018 2019 all of the action of the trade War happened they started with washing machine tires solar panel tariffs and so on and full-blown tariff war between us and China this graph shows uh when we got to January 2020 both countries were you know going back and forth and they decided let us keep these high tariffs but for now let's not go back and forth anymore uh and there were a bunch of things in this document called The Phase One agreement which really didn't do anything but one of the very talked about points was that China was now to buy 200 billion dollars extra of stuff from the US which obviously did not happen and even if it had to happen I mean it just makes the us more dependent on China so the whole point was a bit lost on most people so this is where we are and then of course economists started digging into the data and learning more about it so currently what we know about the short run effects uh some are very obvious the U.S exports or Chinese exports on all these products that with tariff went down but what was interesting was that it was complete pass-through in other words the Tariff was completely passed on to the consumers in both sides and this is not something you would normally expect so consumers board the brand of these increased prices of the tariffs um and then of course we had distribution impacts in both countries again it matters where you're located right if you are located in an import competing sector you know maybe you are working for one of these washing machine companies it's great for you but if you're located in an exporting you know sector it's not good for you if you're located in a firm that needs to buy cheaper inputs and now they are tariffs it's not good for you so again there are all these distributional impacts and it's quite interesting we can get into it but researchers have studied electoral impacts and so on so forth and basically where we stand now is that in the short run it appears that the U.S China trade War definitely has not reversed the China shock situation at all and it will not because the import competing sector which is supposed to protect didn't really show substantial job increase but the other sectors the export sector which was hit right they saw job losses and the sector which needs all these cheaper inputs also saw job losses so if anything we are creating these new sort of mechanisms for you know job losses and that's kind of where we are and this is just the short run we don't even know where we'll be in the long run so I'll just stop there and maybe leave uh you know answer other things while we do q a because there's a lot of other interesting um results from all of this so hopefully that was useful for all of you sorry thank you yeah if you want to just give the um and if we could get jingu's slides pulled up yeah okay so all right so I think at this point everybody is Sleepy a little bit including myself so I'm gonna stand hope you don't mind all right so um I mean it's a great order we have an economist start with uh Trey and I'm I'm a person from business school so uh uh so you'll see kind of the Viewpoint we have we share some similarity but the you know the problem that we're chasing is uh you know I think there's still some complimentary part so I'm gonna talk about some Trends in global manufacturing and the supply chain um and include three parts first is about this 20 years of manufacturing globalization so I want to talk a little bit about history so while we are here today and then I'm going to do about one one thing I think one of the speakers earlier talk about the ipef I'm gonna provide my angle and I'm gonna provide you know there's any parts that uh you know still related to what China China still play a lot a large part ipf will not happen my prediction is without China and my sir is I'm gonna talk about some prediction on China and then the next period I want to call it globalization 2.0 I don't see globalization dying so I'll tell you why uh so uh I mean for the record I work with some of your colleagues before I have an article in Wall Street Journal in the South China Morning Post and also in VOA so you can go to my website to learn more 20 years of manufacturing globalization so why China Rises right I think as you know China joined WTO in 2003 so this is the open of the product and service Market in China that promoted this strong growth and modernization and this is one thing to think about a fundamental reason is about global trade or Global Supply Chain is just a trans National Arbitrage or production factors so think about what China has back in 2003 you know I think that's up to the night September 11 episodes right you see the direct reason is China supports U.S effort uh you know the operation in Afghanistan but the fundamental reason is these two countries are too complementary to each other U.S got technology and Innovation and capital goods the machines China got cheap lands and also we have labor okay so fundamental they should work together it's just September 11 and also you know the aftermath that creates a reason for for that is the very much moment that U.S support China joining WTO and why China and the US are not getting away with each other to me I think the fundamental reason is China has grown so as China accumulate Capital China's Innovation potentials threaten the United States position in technology and advanced manufacturing so I'm showing two picture here this is not my work but it shows that between before 2003 back in 2000 what is the central manufacturing Hub so well connected with a lot of export I'm not here this morning but I know the complexity the data sets are represented is the most complicated with a lot of product offering in this region it's not China Japan so that back in 2000 and then look at 2017 is clearly China right here it replaces Japan becomes the central Hub of the manufacturing in this uh you know APAC region so that's the rise of China and also I think a lot of voices on manufacturing moving out of China real location of a global supply chain I want to tell you this is not just happened after the trade War it has been happening as China is slowly upgrading is manufacturing capability I call it full round first round 2008 2015 that is because of the production cost squeeze exchange rate US dollar and the Chinese Yuan I think it was uh something about like a 1.8 right now US dollar versus Chinese Yuan become 1.6 so exchange rate labor Capital cost land prices all goes up we all know the housing you know the housing prices in China so this is the the basically the cost uh story and you see some of the you know older others manufacturing you know no end manufacturing move elsewhere you know for example to the Asian countries the second round 2016 and 2018. this is also initiated by China itself you know at that time you know wherever I go in China you know from the you know Central provinces like Hunan to next to Shanghai you know you see a lot of manufacturing producing say window turbines it's that every province is producing wind turbines right so we have a supply side problem we have too much capability so that was initiated by China itself uh it's called Supply stand reform and over capacity reduction so these two runs you do see some of the manufacturing gold style standard production facility shifted out of China but this is not due to the United States China do it on itself the third and four round are attributed to the United States the third round 2018 to 2021 this is the trade War as we have a you know just seeing six batches of Terror virus all of a sudden happen in the third quarter of 2018 right and this is by you know Donald Trump and his counterparty presidency in China um and then at that time president Trump calls for a comprehensive decoupling which didn't happen because we know supply chain are too complicated some of these are easy to break like apparel like a commodity but electronic you know uh EVS this is difficult to that the whole industrial chain has been centered as the picture I showed you earlier in China and around China so not to mention other dependents such as FDI rental capital r d so this is our all very large and difficult to fully in decent angle the fourth round is 2022 or 21 second order to present this is after you know uh President Biden came into office this is what we call this is targeted decoupling and Biden has some policy which is I think are effective I have a papers French Shoring the Deep green sound of the manufacturing back to the US re-shoring at a near U.S and according to the China U.S conflict escalation because you see the cheap as some of these technology bands they're very very targeted because they're realizing full decoupling is impossible so they go for targeted decoupling to maintain U.S advantage so this is picture come from my paper basically I'm showing this is U.S sourcing restructuring before and after trade War so before the trade War the green means the orders are increasing so U.S companies like to go to China to to give their manufacturing order to China but look at the Asian countries it's all red there's no opportunity for Asian okay and after 2018 uh I draw another picture using data you see China basically the counter is almost white there's no increase anymore slowly increasing but they're all more opportunity for Asian countries becoming green and also you see Japan becoming green again and of course you see in the Mexico and the and the Latin America so there's an opportunity so that is where the U.S uh you know has been effective in terms of diversifying its sourcing it's no longer that dependent on China so this is what we see upon the data and also there's a covid-19 that is also related to China because I think back in uh 2020 2020 my U.S friends told me you know Jane you know all of our 3M you know the our surgical mask is all hold by your by Chinese custom because the biggest Factory is in Shandon province of China and I said this is not China's fault look at the map is around the 2020 the outbreak of covid-19 almost all the country around the world they issue export ban on ppie China included it's just China has the most capacity and the 3M biggest Factory is placed in in China but I think people learn from this you know from this mistake that when this thing kind of thing happens you have some local production capability you know this is something very very important right so that also increasing you know some of the manufacturing say near Shoring reassuring and trying to diversify their sources okay so next I'm going to talk about ipef a little bit uh so ipef so I also want to discuss you know different country stands so the goal for ipf is U.S try to return to the APAC to restore influence and make it bigger including Indian the indo-pacific region and then the US The Stance is talking about money is not enough we need to talk about the rules the standards the regulations and countries in this region they actually have different attitudes Japan and South Korea I think they look forward to U.S return to maintain the balance they're very close to China and China has growing you know very big and fast Indian they definitely benefit okay for the process of reducing dependence on China initiated by the US and by the Europe and the Asian countries I think they're in a subtle stage right now like I talked to some of the speaker yesterday they hope to improve the original economic development but they do not want to particularly Target China politically so they're mostly neutral and trying to maintain the balance and I read some of the uh the lines after ipf and what I read is the criticism I see is there is more like a talking shocking it's a hamburger without a beef when China initiate a trade agreement with countries they talk about the economy so this is the beef but for the ipef is these things are less convincing to me and also China will try to you know provide the economic growth uh think about since the last 20 years 40 of the worst economic growth is in China and that will generate spill over to the laboring region but we all know this is going to be more challenging for China continue to do so given the current you know China's own economic growth so the traditional trade-off when we think about the global supply chain and a trade before ipes it's just about cost efficiency and concentration risk so we are all talking about the economy okay and then the cost aspect so I'll skip some of my uh my paper uh in interest of time but this is I'm showing you the multinational us company they are very the following the mercantilism is all about cost reduction it's not about the patriotism like uh some or or so what but this is the new trend four pillars of ipf this is a new trend they talk about the resilient economy include supply chain resilience they talk about connected economy this is about a digital trade standard the third one is the clean uh energy so this is to address the climate change and the last one is about the fair uh economy so tax and anti-corruption uh you know Corporation criticism you know I'm China A lot of them coming from a fair economy so I break it into the forces driven Global Supply Chain restructure into the economic forces so digital economy green economy industrial policy and my my viewpoint is China has advantages as long as it's economic factors but China has a huge disadvantages when it comes to no economy factors the value the French sharing you know front sourcing you know the near searching this is when China facing some uh challenges for this non-economy Factor so let's break it into pieces digital green resilient economy remember like I said China still have advantages first resilient economy so first of all China manufacturing is very resilient so this is a you know this is the part I disagree with some of our media friends because I also read you know a lot of resus and China said oh you have this covid-19 the City Lockdown Factory Canada open because I do I have a paper are comparing Chinese Factory versus say other manufacturing Hub when Kobe hits tagu in South Korea by faring in Germany Detroit and Milan in Italy what you find is that the speed the factory reorder recovered from the shop even though China has very tough policy is more resilient and faster than other manufacturing centers in the world so you can read my paper okay so this is the mobility of this country how agile it is how in a way the people are Cooperative with the government I'm not coming until whether they like it or not but this is channel the Chinese Trends you don't find it elsewhere so Manufacturing in China according to the data my research is very resilient I also have a working paper look at Shanghai lockdown last year you can request me you know to get a copy that we also find that is very resilient most of the manufacturing capability and then the shipping volume just recover after one month and then rebouncing back so I don't find the you know evidence that says you know resilient economy is this is what ipf pushing for China has disadvantage I don't find it in the in the data in my research second is about digital economy I say this is the tale between two countries because when it comes to Connected economy and digital economy well ipf asking for 80 of the digital economy is just spreading out between two countries U.S and China for example let me tell you tiktok or cry they have operations in mainland China they also have operations say in Brazil they are making in terms of the revenue about 200 million dollars in Brazil better than making 100 times of that Revenue in China and in U.S okay so if you talk about you know who's paying for this you know Tick Tock the videos the online shopping is just U.S and China so in terms of technology and Market size is just these two companies but I think iqf is gonna to challenge you know some countries because this is new words also in the fields of information system we're talking about digital or sorry terrorism I know some of you you know read papers article I even have a book related to this uh this issue so when the data security becomes more like you know uh the government is more concerned about and want to have a control you share the value political trust and data security this will become a more emerging issues whether you want to adopt a U.S Digital internet company or maybe a Chinese Digital internet company that will create problems as we see today but again China has advantage in the in this Digital internet companies the third one is the green economy and I don't I think this is this is my the point I'm making who is the producer okay at this very moment uh we cannot have a green economy without China if you look at the EV sales the wind the turbine uh the the PVS the the batteries the the real Earth the solar panels the red share this is the Chinese capacity share in the world so when the Germany uh is pushing for the the green energy you essentially what you'll find is uh it needs the solar panels shifted from function high so we do see the shipment data the view of leading data we do see that that increasing uh and because of Ukrainian War the EV cars China is increasing that's the share of the uh of the global market uh more than 50 percent and then when it comes to the now economy factor I would say you know this is a problem this is a major challenge China is is facing so first of all as I said the competition between the US and China I fundamentally to me is the is the economy but when the economy interest becoming bigger enough it become political so uh we do see you know some unilateral containment the trend of smaller high fences imposed from U.S and China like a tariff export control uh and the rule of origin so usmca so they're not checking about uh you know the product final assembly but they talk about the parts and the components and also U.S in the U.S is a trend of the listing of of a Chinese stock so this is the unilateral containment we also see you know in a way that they are also increase investment U.S is making us is moving more effort in the r d and the industrial policy Distortion through conversation so this is something oh you know let me let's be realistic U.S is also doing industrial policy and also conversation uh and not just China is an expert that U.S is also doing that 40 years ago if you look at history China did that for this cheap industry until U.S you know think uh no sorry Japan Japan did it for the cheap industry 40 years ago until U.S think oh this is too much I don't want Japan to move into that direction and we all know what happened they signed a deal with uh with a Japan and U.S is also trying to leverage its allies so strangling the Allies emphasizing the value so technology product standard economic trade rule near shore for ensuring human rights and the Democracy concern so I have a papers uh look checking all of these issues whenever this becomes uh institutionalized written into the law you do find the company they consider this and they may they may rethink where they want to Source find their supplier okay so this is going to be challenges faced by China and let me tell you you know one of the reasons I say you know this is political but mostly because of the economical U.S trying to maintain its advantage and Technology I look at all the patent filing data Global pattern filing data signed by the Paris the PCT Accord uh so and look at the industry you look at you know past five five years U.S and China which industry they have applied their patents and I'm looking at the share of a Chinese patterns divided by the U.S applications and you see the top several industry that China is 70 74 56 40 of all the patents us has fouling and the registered globally and look at this industry data communication telecommunication audio visual technology control industry control and the communication basic program this is Huawei we're talking about okay so so the reason you see that you know one of the U.S Target Huawei I think fundamental reason is this communication kind of communication this is what Huawei good about is threatening U.S position in terms of this uh you know technology uh in this domain but if you look at some of the industry that I would say China is pretty weak in terms of Technology Innovation for example Pharmaceuticals China is only two percent of U.S filing okay all the patents so will you think U.S will will Target a Chinese pharmaceutical company no it wants Chinese market you can also use some of the old you know pharmaceutical drug technology but it can open the factory in China and get this Market okay so this is this is trying to make sense why why this thing you know Huawei is targeted and and hopefully you know uh as a media reporter we can think deeply you know the fundamental reason so the the the yellow ones these are the industry I think are sort of dangerous if China play catching up fast and U.S find it threatening and any potentially maybe some of the Chinese companies will be the next Huawei okay so that's my argument so uh before I conclude I want to give some prediction on China and globalization 2 2.0 the first I think is uh you know the U.S order I don't expect that coming back uh when the supply chain has restructured when you see a lot of you know Factory being built in Mexico the capacity is there for long term so I'm not going to expect them to come back but so as China's only viable solution you know I think you know some of the speaker talk about me is not profitable to go to Laos or go to the middle Asia but this is the only solution is the Chinese manufacturing capacity capacity was shipped to domestic knee and appear on the road countries no matter these countries are can afford the products no matter the the volatility you know the the uncertainty there but no other option so I think this is something will happen so you see the trend of uh Chinese uh you know domestic Market domestic consumption uh still goes up but this is the export export uh is uh it's pretty flattened but the domestic consumption goes up so number two I think China will maintain its strengths in Quality Labor so among the reporter we have in the room I think some of you have a you know Chinese or Eastern Asian Heritage then you understand this the Chinese family will support the children's allergic education at low cost and they don't calculate the the investment return the investment returned to me if you look at the salary the the the a lot of young people are paid in mainland China the investment in education in China could be even negative but it gives you Trinity to the family okay so you've also look at the Chinese government how much budget they allocate to education each year the central government I'm talking about you you this is is not really a high Lumber by any standard comparing to the peering countries but in terms of you know this is something the extracurriculum so if you really can read Chinese actual curriculum you know like I'm one of the the kids myself when I was young you know in the evening and the weekend I all go to all these places to learn additional English additional uh Olympic mathematics something like that this is the investment the Chinese family as a tradition they do they don't care about the return okay so who is really providing extra subsidy to to to for the Quality Labor my viewpoint is uh you know let's don't forget about the Chinese tradition about the family I think this is very different comparing to other countries if you if you're not if you do not live in China so uh plus China has a traditionally raising High skill and uniform labor at the very last this is due to the U.S intellectual return is mostly due to U.S contribute greatly to Chinese industrial obligation so when the tension between the U.S and China goes up you will see and I have witnesses that is that my friends who use for say Google's Travelers car way more he just returned to Baidu I'll man the driving you know smooth from Silicon Valley to Beijing so you see through all of these intellectual returnees you know they still go back home so something we understand China is I think we still go to his history over thousands of years that this is really like an agriculture country for a long time and people stick to their home to their to their land do not you know become that mobile around comparing to other countries and the third I predict China will maintain its high production Network centrality I look at the trade between the China and also the rsap and also the Belt Road region I find that they're more most of the time they're complementary and Cooperative uh Asian countries for example so Asian is also relying on on China so the complexity index if you go to check the Harvard website you find that in terms of the complete industrial chain right I mean I'm not talking about a new product a new product according to Harvard website I checked last night is like 17 but in terms of the companies of produce any kinds of product China ranked number one in the world according to this Harvard website so Asian all the Asian countries comparably are smaller they will need something from China to complete its industrial change so complementary and Cooperative eventually I don't think China's production network centrality will you know will will drop um and number four what trademark decreased globalization 2 picks up so what's globalization 2 is that after covid-19 after U.S China trade War all this disruption at the sea which is also threat in Singapore economy by the way uh is that we do see that people or countries around the world have a tendency to do restoring and a new Shoring right because you can just export your uh export your standard your licensing your technology knowledge and cross-border financing the Tesla Factory will be built in Mexico for example it will be exactly the same standard as the Shanghai Factory they already have okay so this is this is the idea this is a globalization too so we do not need to look at all these shipping containers over there but something more virtual the pattern licensing the cross-border financing and the knowledge and then you know the tenant transfer and number five uh the geo-economy buffer zone faces opportunity as I mentioned since China joined WTO in 2003 20 years 80 of the global economic growth according to the data is just allocated to two countries half and half U.S and China so countries like Asian country if they want to develop manufacturing I don't have a chance I cannot compete with China in terms of the production factors but I think now is the time and this is something good for Singapore right because if a machine country they need a kind of financial services I think still this is Singapore will be the Hub uh so we can you know look at this is something we call the geo-economic buffer zone they can serve as the bridges and platform to carry out economic cooperation and promote course for the trade and this is one last uh you know Insight I want to I want to share here is even though there will be opportunity in places like Singapore like Asian countries you will still find a lot of Chinese businessmen so in May I was visiting the U.S for almost one month I take a detour to Mexico I look at the economic zone man it's like all these factories you see a lot of Chinese business over there so Chinese companies are really good at dealing with this emerging economy like Asian countries like like Mexico I think in a way they're better to do that than the US businessmen and the European businessman why emerging economy on certain political situation institution is weak right there could be Corruptions anywhere right and think about this is what the Chinese businessman has been dealing with for decades so they're good at it okay and if you send the EU businessman to Mexico you know to Laos to Cambodian you know you do know like you know okay we are recording here so but you get an idea is that that weak institutions this is something the Chinese businesses are really good about so I also went to Hanoi in in the Vietnam so at least none of our MBA you know kids about my age to visit the Vietnam and we all see it's like the top managers are Chinese but the middle tier are all local Vietnamese okay and and it works really well so how to deal with the emerging developing country and weak institution this is they know how to do it okay so summary China's rise in globalization has relied on its comparative advantage in labor industrial scale so U.S and China work with each other I think this is Destiny and now the conflict Rises because it's no longer that complementary and then also you know my viewpoint is uh you know I'm not talking about any kind of political regime kind of story you know your belief your value but just for an economic perspective they're becoming more alike so second the impact of say natural disaster covet and geopolitical risk had lack of frequent disruption Global Supply Chain so the whole Trend going forward anywhere in the world is about restoring near sharing and friend showing and a third we need to pay attention to the geo-economic buffer zone like Asian countries Asian countries and and Mexico uh I forgot my last popular point I I even changed some slides last night okay so India Mexico southeast Asia and Africa I think they have the potential to be the new Factory in the next staircase to council Africa if you really look far into the future it may happen uh but we I think there's a lot of opportunity you know for for Indian and also we already see it's happening in Mexico so you probably read the news already I think the latest quarter Mexico is U.S number one in terms of that importing okay so this is a that something is already changing so the world is changed but I'm trying to provide some prediction I'm not that pessimistic I agree that China is not doing optimal as the first Speaker you had yesterday right but I don't think this thing will will go go go go that go go away and I think the Asian as a whole is complementary and Cooperative in certain industry certain product it is the competitor but it still needs to you know work with with China all right I know there's a ton of information there we have questions already you [Music] foreign [Music] is that in fact we have seen in the last few years uh China's uh growing conflict to it a number of countries in fact uh besides us it has conflict with India it has conflict so it a number of asean countries people in Europe are also not very comfortable with China so I mean various parts of the world we have seen that there is growing question mark of our China's overall uh political behavior and which is also uh uh putting uh question mark our uh trade issues like you know with Australia also China is having a big kind of trade War which is now uh slowly being resolved so in the long run in fact I mean considering China's increasing friction with large number of countries globally uh do you think to sustain a long-term uh growth trajectory China needs to you know review its policy of aggression and muscle taxing political muscle relaxing including in the indo-pacific because in fact I mean the last few years we have seen a number of countries including in Europe they're coming out with individual indo-pacific policy ipef is uh is a product of uh the concerns of various countries in the indo-pacific region so do you think China has to actually rebalance its uh overall geopolitical approach uh to to sustain a a a a very steady and high economic growth rate thank you go to Uncle first okay I'll do it okay so uh anyway so uh for your record I'm flying to Beijing tomorrow [Laughter] so I want to I want to make sure but anyway you have your first Speaker you have your first Speaker yesterday right I think he already comment on the China Polo to uh foreign policy right and I think one Viewpoint I really appreciate is he says they're trying to maintain the New Balance right so it's trying to make the country stable remain control at the same time don't question about the economic growth that is something China something uh China were definitely asking for so achieving that a new balance I think that's it and the second is if you think about a company perspective all of these ipe factors including not economy Factor these are just additional constraints right so if there's a certain policy for example if you look at the the Shanghai lockdown last year April uh what what I do see from the list is every country they have a white list in Chinese we call it buy mindan so if you're a big company if you're producing a lot of GDP you know the comp this the government put it on the white list so there's actually have a lot of you know map ways to help you operating uh you know through throughout so so I think the you know um yeah the New Balance I think that's one thing and don't and and and if China doesn't have an economy growth anymore if that's assumption it's definitely not good for the region don't so so let's not hopefully that that's not gonna gonna happen yeah hello this is Monita from Bangladesh um you talked about um U.S uh sourcing restructuring so you uh you also mentioned that China has huge capacity right and do you think that uh Nia showing offshoring or reassuring these are taking place and this capacity could be replaced because for example you know uh us import uh almost 100 billion dollars of garments from China and its uh share is decreasing over the last decade from 37 percent to two to one percent in 2022 and there is no other manufacturing base like Bangladesh is the second largest government exporter but still its share is only 10 percent so is it possible to uh replace the huge capacity do you think that uh this uh dependency will reduce further I'll just briefly comment so despite all these near-suring fan showing reassuring which I think you'll be able to comment on better uh so I was an event with uh the supply chain managers based out of Singapore that help companies do this stuff and they have been getting a lot of inquiries in the past few years you know can we see Vietnam maybe let's see as an option so and so forth It's just that the Chinese are so good at producing certain things you need maybe 10 vietnams to replace something like that so in my opinion we are not going to see a enormous shift out of China very soon just because they are just so good at producing certain things I'm not sure about Garmin per se but there's definitely many other Industries in which it would be really hard to imagine that the production would actually move at a substantial rate even in the next 10 years so I would just want to add that right let me lock very quickly on Vietnam because I read some of your colleague work on the comments on Vienna Vienna definitely does not possess any you know any challenge to the Chinese capability it's not 10 deal now you're probably like a 20 or 30 of that at least even Vietnam is just half of say guangxi Province population you know just a tiny Province one of the you know multiple provinces in China and that's a half a population is Vietnam so China uh to to me I think if you think about the quality High skill and uniform labor you know maybe let's see what happened to India next but I cannot really find uh other other countries are capable of using that even the uh the new Factory in in next to in the in the Mexico economic zone I'm looking at is they're becoming more automatic because even in Mexico you do not find that many labor so becoming more more automatic yeah so I don't think you know we see news that apple is Shifting say parts to Vietnam and iPhones to India remember that's only a tiny share of iPhone but uh yeah but I think you know some of the uh you know other uh less complicated products who would demand less incomes for example if you look at Elon Musk he just visited China and actually he's not very welcomed by the central government as you can see because he's trying to persuade uh some of the battery Factory to open open uh also manufacturing right in Mexico and why is that he has acquired a land which is a hundred times bigger as the mega Factory of Tesla in Shanghai so why he needs such a big land is just not for Mega Factory it's also for the whole parts and components that we're talking about so uh so how much how much time you need to really make that 100 times land of you know Evie zong become really mature right then you are you probably replace but before that uh I have a paper on the usmca any company Katie poor part and the principal part you still shipped it from this region to U.S but the cheap part the less you know like a technology driven part the complementary part the tires the glasses you find that this uh they started to have a local Manufacturing in the in Mexico yeah for example Camille and then Matt hello uh this is comella based in South Korea and Jing you mentioned about uh that so many experts from Chinese experts coming back to China can you open it up a bit more what was the reason why black does U.S kick them out or China attract them and also is there any statistics about that uh statistic I I don't I don't know but the the reason I think is when changes happen right so if you think about uh us as a cell right so I have a paper that look about the for example the legalization of marijuana in certain states of the US but just think about say if you are purchasing apparel or garments for your kids do you want the button of the shirt that your kids is wearing coming from a factory that worker can use marijuana sorry oh anyway to any any of the parents here you see the point right so it's not just China happened since there are a lot of things happen in the in the US as well when this thing happened people people may use oh this is not my my my my my my the value my belief I want to change change places so I think that could could also happen right so if a U.S China conflict increases I don't know it could make certain people think it's less secure uh in the in the US in a way right so they may they may return so so I don't know so when when there's a lot of things social scenes happening which is saying for China and the us as an example I give you so I have a data empirically I show that when the state when the state legalized the drug uses and marijuana you find a lot of manufacturing they change the factory they move to the neighbor states in the United States because it's like oh my worker is being less focused be using this uh you know substances right I mean is for entertainment use but again still affect the productivity yeah so when things happen people people move around okay uh I'm angry from the conversation Indonesia so I think I'm just going to repeat previous questions but I was just like wondering like um I think at this point of time yes China is uh probably Irreplaceable uh based on its capacity both in uh quality or numbers but well we have to admit that negative sentiments toward China is quite uh big and uh I mean like we are a big player like you as um has certain influence uh towards other countries and uh let's say Southeast Asian countries which rely heavily on China is basically quite pragmatic uh we could say so last week just exactly last week I published an article about how uh please correct me if I pronounce this uh incorrectly because we're in Indonesia doesn't really know how to pronounce it but how makes Suey ice cream Outlets uh mixed way do you know that with wrap and white logo Miss way or how we we don't know how to read that but in Indonesia we call it mixed way okay but there are a lot of mixer outlets in Indonesia that it is open every like every week and every neighborhood that uh and the queue is long and the argument of the article the author says that mixer actually does does more uh for a soft diplomacy compared to the Chinese government himself itself so basically what to do uh best there compared to the Confucian Institute uh basically so what to do like with currently negative sentiments or China uh what can China actually do uh to like perhaps like block these influences like uh from like uh it's competitor let's say the U.S so that like the diversion like uh previously mentioned about like how textiles now come from Pakistan how can China do basically in terms of diplomacy to block this possible uh sifting and trade uh right now like in a non-high politics uh that's probably that's basically my question this way I don't know how to talk yes yes what can China do what can China do yeah that's very costly I would say you don't know you can only Factor as some product I also mentioned you know I'm not I'm not waiting for all that it's very very costly and yeah so so we'll see how the story goes it needs to find a new balance right I mean when the uh when the economy like we still see the numbers in the past several months if the numbers are not doing well I think you know it's uh it's well it's compulsory for for certain things to to change ideologically you know like uh you know I've been in the US for six years I'm born and raising mainland China I work in Hong Kong and I'm really a global citizen I go to EU every every few months but I can tell you ideologically it's very difficult to talk to each other but you know yeah but for the company per se is all economical I'm I'm going to optimize my profit function subject to additional constraints right so if any constraint that is very clear and a very long lasting that is very good if there's any kind of variability in stability unsecure you know uh uncertain policy I'm gonna put a big discount Factor over there so this is a decision a company I'm making uh eventually yeah don't you think it will be like better if uh China or put the approach in a more on micro you know micro economy rather than micro micro economy like companies that do the diplomacy rather than another how centralized China is but I think that works better like we Indonesian based on survey like 65 percent of Indonesian we are China in France in Indonesia but I believe like 80 percent of us love misui so like you know uh this based on the paper of one of our China Indonesian relations uh experts probably like I don't think like it has been applied uh by China government to actually use this a micro economy tools that's a really interesting point I'll just add that I think the US and China are very focused on each other and even the US has exhibited some strange Behavior over the past many years so I think in general countries are quite conflicted they don't want to get in the middle of it this is on a broader level but I think what you're saying on the micro level is interesting but actually a lot of products we buy most people don't even realize they are Chinese so I guess you know do they want to be more in the face or do they want to be in the background yeah so so this is something I think you know politically you know you can refer to the first talk yesterday try to play that video again uh so and thank you for not uh you know creating a lot of challenge for myself but just economically 10 years ago I visited Singapore we find more like a local street food now you see a lot of franchising from mainland China same thing if you go to Europe uh one of the reasons I love Euro I think I'm more European than I look it's like every places you go to you find a grandma recipe for design for that and every restaurant is very different but now over the time major U.S European cities you find more and more chains restaurant chain the sutron Hot Pot it's like there's replacing some of the local flavors I don't find it really boring so this is I think uh you know some of the challenges we are we are facing in terms of the the benefit the cost and return the skill you economy is really good but in terms of you know if you want to have a very big variety and you have a different preferences you know those are costly the same thing goes for Innovation so uh in a way I still think the the the the structure in the U.S this is the best for the for the Innovation is you you let people to think you know in different directions give the degree of freedom right but in terms of the scale economy uniform and Quality Labor well I think China have strengths still today okay final question goes to Matt thank you hi uh Matt haldane with the South China Morning Post um yeah so uh my question might be a little related to that uh I'm wondering I don't think there's any Illusions about uh China having a an advantage um right now in in supply chain and talent uh relate to production um you know there's a lot of grumbling from companies even in moving um uh opening up facilities overseas tsmcs kind of grumbled rather loudly about the semiconductor policies um but there's a political push to make this happen uh so what are the what are the realities about you know why why are you optimistic about uh the supply chain staying China focused say over the next 20 years um you know what will we see um it seems like you're saying you we will not see an unraveling of this uh situation of the growth in China that perhaps has happened in over the last 20 years so what's what's keeping the supply chain uh China focused with the political Trends happening the way they are I think it's because of the fourth round of uh of manufacturing moving out of China I call it targeted decoupling right the third round I say the first two round China initiate itself the the third and the fourth round is Trump's completely coupling and abidance targeted decoupling this is the Target that the couple we are talking about say for example chip industry you find numbers you know I I may be wrong with the statistics so please fact check you may find a lumber that 90 of the Chiefs are actually very mature technology so this is not the latest technology like a three Nano meter we're talking about 90 or 95 of the chips so under the decoupling the target topic the coupling U.S idea is okay China you can produce these chips but this 90 of the chip in terms of the the whole industry profit margin maybe just 10 percent okay I know for the the AI chips the you know the Nvidia chips those are the three nanometers five and seven nanometer we talked about these may be less than ten percent of the of the whole Market but this is the 90 of the profit okay so this is something so the way I think uh outside the box you know um you know I I mean I think system is the economic story but when the economies share you know this is too much it becomes political so so that is why you know think about the 90 of chips U.S does not want it to produce itself right may not want to produce itself because it's not profitable so that's why I think you know this region nation and the China Cooperative or complementary whatever you say I think they still stay uh uh uh have some manufacturing cover so you know in the in the foreseeable future whenever you know decades after maybe India goes up and maybe you know half a century later is Africa I don't know it's too far I think what you said mncs are profit driven right but perhaps the trade policies are politically motivated yes and in terms of two completely different things right and a technology if you see it you know what will us really want to protect is this advantage in this technology when this technology is too much Choice like everybody have it you know it's like a patent expired in 10 or 20 years then why not you know you have a manufacturing capacity to bring down the cost and the prices I oh go ahead markets like um over time you can see capacity to grow in production in markets like India I know you know Vietnam of course you mentioned a small portion of what what China can produce but when you have multiple markets combined together eventually that capacity will grow and with political incentive being so strong to build that out that China plus one strategy um like does does China's role erode or you you think the the strengths are just too compelling to stay in China next 10 years I I think it would be very interesting to look at India so so so let's wait and see yeah Vietnam is still too small as we have a discussed yeah I think in the end uh what is going to be produced where there's also like you know sharing of ideas so these companies will try to keep protect that and only maybe produce the low valued Parts in other countries you know we they it's too complicated to predict to be honest so they might do Manufacturing in some places but not share intellectual property which is where the profits are yeah the best technology another example for example I see this dance the S Siri they only do it in Germany but e-serie and the C Series that can do it in Mexico they can do it there's a big Mercedes-Benz Factory next in Beijing but they don't do the S Series only in Germany yeah that's clear that we could do a fellowship just on China if we wanted to um thank you both so much for your Insight thank you so much okay [Applause] [Music]