Business Prof. REVEALs China’s Insane Advantage Over We… — Transcript

Welcome back to Neutrality Studies, everybody. My name is Pascalotaa, and today I'm talking to Giles Chans, the author of the fascinating books Doing Business in China and China and the Credit Crisis. He's about to publish another book shortly on China's global impact in technology, geopolitics, and the new multipolar order. So I thought that's a wonderful thing to talk about.

Charles, welcome.

Pascal, well, thank you very much for having me, and I just want to record before I start talking about myself a bit to say that I'm a great admirer of your platform because I think that there's a great and increasing need now for truth and true discussions which are free of various sorts of censorship, which unfortunately we now see in the West as well as China. So it's a great thing to be on your show, and I feel very honored to be here, and thank you very much for having me and thank you very much.

Yeah, thank you very much for coming online, and yeah, do tell us a little bit more about yourself and about your background. How is it that you are so connected to China and the business world there?

I thought I'd better say a little bit about my background because lots of people say lots of things about China and everything else, and it's important to establish one's credentials as somebody who knows what they're talking about. I got involved with China first of all because I met a Chinese lady at the World Bank in 1984 where I was working, and she was from Beijing, and there weren't too many people from mainland China working in America or indeed at the World Bank at that time. We got together, we got married in London four years later, and I ended up going to China to meet her family in April 1988, and I was then 37 years old, and that's the first time I went to China.

And then from that, we developed first of all activities, a very successful business which advised multinational corporations like Boots, Marks and Spencers, Vodafone, Rolls-Royce, and other British and indeed European multinationals in China up until 1995, and we also helped a lot of Chinese state-owned companies because there weren't many, in fact any private companies in China in the early '90s, to acquire technology—by technology I should add—from Europe and one or two deals in the US.

That was for six years up until the middle of '95. We had two small children, so we decided that I decided that running a business with about 10 or 15 employees and very busy flying around all over the place was not really compatible with bringing up two small children. You have to choose one or the other. So we sold the business.

And then the second big China activity I was involved with was much later as my children were at school, and we set up in 2003 a very small investment banking operation which was a subsidiary of a much larger bank, focused on helping private Chinese companies to raise capital in Hong Kong and also in London on the stock market.

And the first deal we did actually was with a small Chinese auto manufacturer called Gile, which you might have heard of. Gile is now the second largest car producer in China after BYD and a leader in the electronic vehicle industry.

We did a lot of deals for private Chinese companies between 2003 and the end of '07, and when we sold the business, luckily just before the crash, we exited. I then spent 10 years or 12 years teaching at Dartmouth College, which is an Ivy League university in America, in the business school and also at Peking University.

So that's my experience of China. I saw it really when it was just starting to develop, when the economy was really all completely controlled by the government, the emergence of the private sector, which is really what's created the modern Chinese economy along with the direction from Beijing, which I think is important.

And I saw it all the way through really to the emergence of the private sector and then subsequently as a professor or visiting professor at Peking University, talking to my students and the other faculty members about what they thought about the rest of the world and what they thought about China.

So I think, I hope, that's a solid background for the sort of comments that I'm going to make and the sort of discussion we're going to have.

Yeah. So I mean, from all of these experiences, how did you come to understand China's business world and how it's different and maybe how it interlinks with China's development model? Because over the last 30 years, we've—I think China is just the single most successful model in lifting 800 million people out of poverty and into the middle class.

That's just unheard of, unrivaled. And it is something that has to do with the way that the entire entity works and how it allowed for business to happen. What's your assessment?

I think it's a completely—the first starting point with China or indeed other countries which are outside North America and Europe is that China is completely different to us.

They come from a completely different place, and it's very difficult. I think that the first moves that were made in the West towards China, first of all by America and Europe, of course Europe has been following America for a long time. So I'll talk about America really as a proxy for Europe in this context.

Was for China to join the World Trade Organization. The first sign-off was in November '99 by Americans, and then it actually went through in 2001, and America supported that idea because they thought that if they bring China into the World Trade Organization, into the world which they dominated, then China would eventually become like America and they could fit it into the American system.

That's what they thought at the time. They would make China into a liberal democracy.

That's really what they believed in Washington in '99 and 2001. And I'm sure you can see that now. That's how they thought.

But what they didn't understand, of course, was that China is completely different. And the Chinese had very different ideas to the Americans. China is a very ancient culture, as we all know, at least 5,000 years old in recorded history, goes back further than that but in recorded terms.

So the Chinese perception of themselves and the West was very different to what the Americans thought of China, and that is still the case.

So I think that, back to your question, how is it that China has developed this remarkable—has been remarkably successful? It's a combination of pragmatism, top-down, very enlightened top-down government, and in particular the entrepreneurial and business skills of the Chinese people, I would say in one sentence.

And you'd like me to say some more, wouldn't you?

Hey, very brief intermission because I was recently banned from YouTube. And although I'm back, this can happen anytime again. So please consider subscribing not only here but to my mailing list on Substack. That's pascalota.substack.com. The link's going to be in the description below. And now, back to the video.

Maybe a little bit more about the development model that they followed because yes, okay, they entered the World Trade Organization and really opened up and actually kind of agreed to them becoming the factory of the world, right?

And starting to produce at really cheap prices. And for a long time, you know, there were a couple of economists who were saying, "Oh, the Chinese are getting the worst part of the deal."

Because when you look at the smile curve of where all the value added and so on is produced, actually, just being the sweatshop of the world won't get you very far.

Now no, it got China ver—

That's how they thought. But what they didn't understand, of course, was that um China is completely different. And the Chinese had very different ideas uh to to the Americans and uh China is a very ancient culture as we all know um

you know at least 5,000 years old in recorded goes back further than that but in recorded terms so the Chinese perception of themselves and and the west was was very different to what the Americans thought of of China and that

is still the case. So I think that when back to your question, how is it that uh China has developed this remarkable has been remarkably successful? It's a combination of pragmatism, top-down uh very enlightened top-down government and uh in particular the entrepreneurial and

business uh skills of the Chinese people I would say in in in one sentence.

And you'd like me to say some more, wouldn't you? Hey, very brief intermission because I was recently banned from YouTube. And although I'm back, this can happen anytime again. So, please consider subscribing not only here, but to my

mailing list on Substack. That's pascalota.supstack.com. The link's going to be in the description below. And now, back to the video.

maybe a little bit more about the the the development model that they followed because yes, okay, they they entered the uh the World Trade Organization and really opened up and actually kind of agreed to them becoming the the factory

of the world, right? And and starting to produce at really cheap prices. And for a long time, you know, there were a couple of of economists who said who pointed who were saying like, "Oh, the Chinese are getting the worst part of

the deal." Because when you look at the smile curve of where all the the the value added and so on is produced actually you know just being the the the the sweat shop of the world uh won't get

you very far now no it got China very very far and and it it developed into many many different uh uh different directions how did you how did you perceive that the starting point really was I mean I think that you have to talk

about individuals as being very important Dang Shia just China was very fortunate that when Ma died. Uh Dang Shia Ping his colleague from for many years from the 1920s in forming the Communist Party of China was a very

pragmatic far and highly intelligent in fact brilliant man and he he saw that a complete change from the Mao period the cultural revolution and all that had to happen and he knew inside out that China's potential um and so he

encouraged after a decent period from the late '7s the changes reform And these these start took a long time to happen. But gradually over a period of years, Chinese began to uh to to start thinking about doing things for

themselves about starting their own businesses. And state companies were encouraged to go abroad to America to Europe uh and to to buy technology from other places, bring it back, learn about it and apply it. In other words, to

modernize the Chinese economy. Uh the the other important development that happened in the starting really almost from the late 70s early 80s was that Chinese uh people in Hong in Guandong Guanjo province next to Hong Kong. The Hong Kong Chinese saw an opportunity

here. They went across the border uh talked to people in uh Guandong and set up factories uh in just across the border from Hong Kong to manufacture uh all sorts of very cheap products like shoes, hats, clothes, those sorts of

things. they saw that uh there was an am infinite amount of very cheap labor and that's where the uh the whole export and also private sector started in China was from Hong Kong and Guanong and when you'll remember that there was a an

interruption tieman square 1989 4th of May when uh the Chinese government shot on the protesters and the basically the economy closed down for two or three years uh because Dong uh was terrified of instability and the Chinese are

terrified. But he he paid a visit several years later in 1992. Where did he go? He went to southeast China to Guandrop and that's where uh the the whole economic re revolution be began in China and he went down there and and he

said in a loud voice uh let a thousand flowers bloom and a hundred thoughts contend meaning let everyone do what they want and saying what they want and we're not going to stop them from doing that and that was a huge change for

China and that's really the signal to the Chinese people that the brakes were off and they could go for it and that's really from 1992 if you look at export growth uh in in China from 1992 to to

2000 spectacular change and then from 2000 obviously onwards I actually made a note um for another point I want to make later of the last three months of each year from 1998 to 2006 these are Chinese exports to America America uh the United

States of America last three months October through to December 1998 the total was 19 billion US 19.1 by 2003 the total was 43.9 billion by 2006 the total was 81.3 billion so from 1998 the last three months of the year 19 to 2006 81 billion

That's how fast the whole thing expanded and developed. And my first book actually was really about the first part of it was about this extraordinary explosion of exports from China into the developed world particularly America had a huge impact on price levels and uh in

fact that's why the title of the book was China and the credit crisis because uh what happened after 20201 was that um Greenspan who is the governor of the central bank in in obviously the Fed chairman uh much influenced by Bernani, a

professor then at Princeton, believed that there was inadequate demand in the US and he kept interest rates very low for very long right up until 20034. In fact, he was much criticized at the time for doing so by people like William

White who was president of the Bank of International Settlements. But Greenspan did did that and the result was that you've got uh a wildly overheated uh financial system in America. Uh we had an expression which emerged in 2002 or

three called the search for yield. Interest rates were at one or one and a half% for a long time and bankers in America just needed uh to create instruments whereby they could get returns of three, four, 5%. And so

that's where the whole subprime industry came from. And I argue in the book that uh in fact the um suppressed price inflation that we saw in America from the mid to late 90s and through to the 2000s was not the result of inadequate

demand as Greenspan and uh Bernani believed but it was actually the impact of globalization and in fact particularly uh China's emergence onto the global scene and in fact if you consider that China then a population of accounted for about uh 20 to 25% of

global population. It doesn't now because Africa and Indonesia have become more populous, but then it was about 23 or 25%. And if you suddenly add a quarter of the world's population, you're going to get a huge impact. I

remember being interviewed on BBC news in about 2000 uh and the broad the newscasters were sitting at the table and they said to me I was then working uh uh I'd been I became quite well known for this bank that we'd started and I

used to get called in to talk about these sort of things and the interviewer said Mr. chance, what does China joining the World Trade Organization mean? And I said, well, if you join uh about a quarter of the world's population to the

rest of the world, it's bound to have a huge impact. And the newscasters said at this, you know, from on another planet, they couldn't even begin to understand what that meant. And I think that was the problem with Mess Bani and

Greenspan. They just didn't had no comprehension of the impact that America was making in the late 90s and through the early 2000s. So this policy of keeping interest rates low for a long time because of lack of demand was wrong

and it led to the credit crisis and the credit crisis led eventually to quantitative easing which was a huge mistake. A huge mistake. Why? It's created massive debt levels in America, in France, in Britain, in Italy. Uh, and

all these countries have debt to GDP of well over well between 100 and 140%. I think Italy is about 150%. And these are nonsustainable.

They and they will have to something will have to happen and there will be a huge financial crisis. This all in my view goes back to the uh misdiagnosis in the early 2000s of China's impact on the global economy.

So that's my first big that's the book I wrote in uh in 2009 and since then I should just add since 2009 there's been a lot of economic research. I was looking this morning at a paper from the

bank of France of 2022. It's now generally accepted amongst economists uh that uh globalization in other words China's emergence into the rest of the world has did create downward significant downward pressure on price levels throughout the throughout Europe

and America and is responsible or was responsible for a possibly 2 to 3% lower inflation that otherwise would have been the case. But economists are very good at looking backwards. Nobody at the time 2008, n 10 understood this except me

actually because I'd been working in China. I'd seen all this happening. I I educated a business school in America and I could I that's why I wrote the book China and the credit crisis. So really the book is about China didn't

itself cause a credit crisis deliberately but without China's emergence onto the global economy the credit crisis would not have happened and we wouldn't have had quantitative easing. The other problem of course was Bernani, Mrs. Bernani and Greenspan.

Bernani did his PhD thesis at Princeton or Harvard I think on the Great Depression in the early 1930s when interest rates were kept too high for too long and it made the depression much much worse. So as soon he as he saw this

this apparently lack of demand in late 90s and very low inflation he immediately concluded the problem must be lack of demand and therefore uh the central banks must not make the same mistake that they did the 1930s. Hence

the very low interest rate policy which which went through to about 2004. By then of course the damage was done. So I I think that uh Bernanki and Greenspan got it completely wrong and uh they made a huge mistake and that's really what my

book was about. Uh the other thing that the book was about before you make a comment is that 2008 was a great moment a watershed for Chinese perception of the rest of the world. Until 2008 the Chinese believed that following America

and the West was the right thing for them to do. America had a model which worked. They should try to pursue it.

2008 came as a huge shock and the Chinese were immediately forced to create a massive stimulus package of $440 billion uh which they pumped mostly into infrastructure in China which offset the downward impact from uh from the great financial crisis uh and they

changed their whole they went away and thought about it and they changed their whole development model and policy to think to concentrate on their own ideas not on American ideas and That's really where things like bricks and belts on

road and the whole Chinese independent development model came from came from 2008 the great financial crisis. So that's really what I wrote about in 2009.

This is this is quite fascinating. So the the the crisis in the west the financial crisis uh um that started with the Leman shock. I mean this to you is the wakeup call was the wakeup call for China to

say like no wait we need to we need to change our strategy and actually the whole silken road one belt one road and feeding into bricks is is then kind of the outcome of that saying like no no no

this is not sustainable this is we need something different and we need to build it not just alone but together with others.

Yes. I think I I think that was a moment when they they they sort of woke up and they realized that following the western model was uh that it wasn't the right model for them and it was non-sustainable. Uh you'll understand

I'm sure because you've thought about China the stability to the Chinese is very very important. They've had you know thousands of years of history and they've had periods of when uh been extremely unstable in various regions fighting with other regions. uh but

they're prepared to pay a very high price for stability in a way perhaps in Europe and America that were not and so any any suggestion that that their system might be destabilized uh is you know something that is very un

they don't like so um uh that's where it came from and that's where their policy I think developed in that way the how much how big was the impact of like let's say and I can't p put my

finger on when it started but at some point in the mid2010s the US started to systematically sabotage the WTO the World Trade Organization and and the the the the taking down of the system the way it used to work and you know the

United States does that sporadically right uh you start with Breton Woods but then you end with uh with Nixon taking down the gold standard and you you have the GAT that gets transformed into the WTO as a gold standard a new not not not

not sorry the the the I shouldn't use the same word actually because I really just mean as the as the um infrastructure on which world trade works and then and then that gets sabotaged over the 2010s uh with then

suddenly these these flimsy excuses of national security and whatnot. How big was the impact of this kind of you know the the United States changing the rules of the game that it itself wrote uh mid game and at what point do you think

China really wrapped its head around how to deal with that? Well, I think I think that 20089 was the big wakeup call. I think they they realized that they didn't want to be subject to these I remember when I was

teaching at Py University Business School in 2009 talking to some of the students and faculty Chinese faculty people about the whole and I remember them saying very clearly we don't want to be part of the system it's unstable

why don't we just rely on our own ideas I mean China is a very ancient culture they have they're very proud they think they know a lot of things they do know a lot of things uh And so they think they

they can do it themselves. They don't need the American model. And so it's proved. And we're still trying to get our heads around the fact that the Chinese themselves have thought of a way of doing things which is not our way.

It's their way, but it works. And we still can't accept that. But it does work. where they've told this remarkable sort of top-down uh essentially controlled system uh which involves a lot of uh competition and uh free market competition uh

between different companies uh and which creates a very d or can create a very dynamic economy. uh unfortunately I will talk a little bit more if you want me to about why under shei this is not turning out so well but uh they've got this

remarkable sort of directed uh system where currently you've got a sort of two-speed economy in China where you've got these highly subsidized sectors creating uh tremendous uh gains in critical areas like AI for example robots electric vehicles batteries all

the things that China thinks are important And China is forging ahead in a lot of these areas ahead of everybody else. And then you have the rest of the Chinese economy uh which at the moment which used to work very well when it was

allowed to but under Xiinping uh isn't being allowed to. and because he's stamping on the private sector which is the great driver of economic growth and dynamism in China um that that is not working and so the rest of the Chinese

economy is kind of stybering along and there just is a lack of of dynamism. You look at the latest growth figure I think for the first quarter of 2026 yearon year I think they came up with five% almost all of that came from capital

investment and export growth export growth in China is regarded as being for by this government at least by as an important growth driver. But if you look at the budget deficits sorry the trade deficits that America has with America

with Europe I think the American trade deficit is I can't remember the numbers off by offh hand but it's enormous 200 and something billion dollars the same with with the EU and typically uh if you get say um hundred million dollars of

trade between a country and China accounts for something like twothirds of it is Chinese exports and onethird of it is Chinese imports and that's a standard pattern across the board and it's nonsustainable. It can't go on. The rest

of the world won't accept this. So the Chinese economy we've been talking about for a long time does have to change. Uh but unfortunately this government under Xiinping is not is not the right government to change it. Uh why? because

uh they put a great deal of emphasis on on strengthening and maintaining the position of the party of the communist party and in particular in Xiinping's case preserving and maintaining his own position and that comes ahead of creating a prosperous and successful

Chinese economy unlike Dong Shia whose own who felt so secure in his own position because of his relationship with Ma over many years didn't have to worry about it uh and he was able therefore to take the sort of bold and

risky steps that he took. That is not the case now in China. That's what I think.

And so which which which parts of the Chinese economy are are not performing as well as they as it should. And what do you make out of the sheer fact that China uh in now in 2026 is just is just capable of producing so

many things and not just things that they export but also things that are being used internally, right? I mean the the level of infrastructure that China is building is out of is out of this world. I mean when it comes to to

bridges to buildings to ports to to airports to railways uh I mean everything that they're able to do with their in like with what they have internally that's the that's also the other thing um they China is relying on

a couple of critical imports especially energy but China is working also on high speed on changing that um this kind of reliance um and what it allowed them to build which is also like further um selfre reliance for instance in the in

the information technology space and what people call digital sovereignity. China just seems to have an infinite capacity of supplying itself with what it needs.

Well, it it it it's it's partly based on the great economic strides made in the last 20 or 30 years. uh and China's adopted under she particularly this sort of top down government-led subsidy scheme which uh which concentrates on

certain sectors but underneath that the Chinese economy I uh if if you use purchasing power parity which the IMF the international monetary fund the world bank used to measure current uh different uh um different countries economies against each other I think

it's the correct measure because it get it it adjusts for differences in exchange rates and prices. China's been the largest economy in the world for some years and it's now substantially larger than the US economy. The general perception that America's still got the

biggest economy in the world, but it doesn't. China's economy is bigger and that's one reason why the Chinese impact is so enormous and becoming enormous and actually that's partly what my book that I'm writing now, my second book is

about. uh China's adopted Xiinping has adopted this self-sufficiency idea called dual circulation and creating a sort of internal circulation economic circulation system which supplies a lot or most of what China needs and this has been a deliberate policy over the last

three or four years within China because he wants to reduce ways in which uh his en so-called rival or enemy I mean particularly the Americans can can damage China and that's directly aimed at that at that. Um so I think that kind

of part partly um answers your question but um China since I suppose uh 19992 developed this remarkably diverse and successful economy uh and it's just a very big country with a huge population very clever people and they've made it

work and uh I think anyone who hasn't been to China should go there because uh we we'll come later on to whether this is the Chinese century or not. I hope that's something we can talk about in a

moment. But uh uh it is a remarkable spectacle. Let's talk about just that because your new book that you going that you're writing on will will have also the title of like how then China will impact the multipolar order. So how do you see

that? I mean is um you know I I think one of the misunderstandings in the west is that we think that because we try to remake the world in our image everybody else and every other other other culture

must be trying to do that from their side. Although my interpretation is that that's not what the Chinese are after.

But how do you how do you interpret it? I totally agree with you Pascal. I think our perception is that that the Chinese are an enemy. This is this I mean you'll have to go back to a vulvitz and the

vulfeits doctrine if you know what that is which he wrote in when he was deputy secretary of defense under the elder bush and the vulfeits doctrine uh was the idea that um which really came after 1990 when the Berlin war fell vulvitz

deputy secretary of defense wrote this idea this doctrine this paper to say that the American girl must be to make sure they were number one and any rival anywhere around the world must be crushed. I mean it's much longer than

that but that in one sentence is what the B of its doctrine stated. The Elder Bush George W. Bush uh George HW Bush when this came up to his desk threw it threw it back and said this is a load of

rubbish I can't possibly this is who are these idiots but that after 911 it became the attack on on America from somewhere from by bin Laden and who lived in Afghanistan or somewhere like that. uh the American it was much easier

to to persuade the American elite that uh in fact uh this strategy of the vulfeits doctrine America first everywhere should prevail. That's the starting point for all this. It came from the Vulovitz doctrine which actually was then used in my opinion uh

by um Vulovitz who was a a Zionist uh to was then used u to to demolish uh the enemies of Israel. But I don't perhaps we better not get on to that subject because that's another totally different subject but uh uh and will

involve um a lot of uh your your listeners sending you rude messages. So let let's stick with China because like Zionism talk that about that too but let's stick with I want to talk about the vul of its

doctrine because uh that is where the American thing comes from and of course Britain here in Britain and also in Europe we followed blindly along behind the Americans for years because they provided the security up Britain and we

haven't yet learned now that the Americans at Trump's taking away this we haven't yet learned to think for ourselves uh in Britain and in Europe and we will in the next few years but taking time. Uh so when when you when

when I when you talk about uh the way that Europe and America look at China, uh we have to talk about America and Washington DC because uh everybody else follows along behind them. And this is where it comes from. This idea that

they're an enemy, they're a rival. Therefore, we have to get we have to get rid of them, which seems an extraordinary way to think, but that's where it comes from. Okay. Uh and that I'm just addressing the the point that

you made. I think we can if you like get on I mean the book I'm writing at the moment is called China's global impact technology geopolitics and the new multipolar order and what I'm trying in the book to uh people who haven't

thought much about this uh you obviously have but there are many many people who haven't thought at all about it is to sort of bring them up to speed a bit with where China's coming from and talk about the impact they've had China's

emergence has had on the rest of the world over the last 30 or so years. For example, the price effect that I described earlier in the talk in the late '9s uh or before 2000 um and the whole dotcom boom thing which led

eventually to the credit crisis uh and then of course bricks was uh wasn't particularly a China innovation but I think China after the great financial crisis 2008 uh decided to use brick as it was then there was no South Africa

until 200 2011 um but Russia, Iran and China and Brazil as a vehicle and then the belt and road initiative in 2013 which has made a huge impact in for example Southeast Asia, Africa across the world and uh was

something we don't see much of in Europe and America or indeed where you are in Kyoto I don't suppose but it it is making and has made and will make an enormous economic and geopolitical impact involving billions of dollars and many many

different projects. Another impact I think has been important in the west in America, Canada uh and in Europe is the invasion of our schools and universities by mainland Chinese students. I did some research on this and I discovered that

up until a year or two ago, 20 to 25% of all students attending a university in America and UK are from mainland China.

It's an extraordinary large number that 20 to 25%. Why it is I I I never understood that why it is that China has so much economic success uh and and is now so good at all of this but there's

still this huge drive of sending uh kids off to to universities abroad uh because it seems to me they must have the best they must have so so many good schools over there. Well, they don't. And and and well, you you teach at Kyoto, so you

you know very well the the I mean, I'm sure that Kyoto is one of the finest universities certainly in Japan, probably in Asia. Uh uh but the Asian certainly the Chinese I' been interested to know what you think about this being

a professor at Kyoto. I found when I taught undergraduate and graduate classes, MBA classes in Beijing Peing University, Chinese educational system is brilliant at learning and what it teaches you to do is to read all the books uh quickly, stick them in your

head and when you come to take the exam, be able to spill it all out. Again, the idea of thinking independently and for yourself and drawing your own conclusions is not something the educational system in China uh is very

good at teaching. And that goes right back to the meritocratic uh civil service exams which were introduced by the first emperor thousands of years ago. It's always been a great uh the source of honor in China as I'm sure it

is in Japan to become to pass a civil service exam which is very competitive.

Uh and it's been based on reading texts uh and regurgitating them in exam and not allowed to think much for yourself.

And that is the reason why uh parents who can afford it, educated people in China have been sending their children to Harvard and whichever university, good universities they can get into and also not so good university they can get

into in in Europe and particularly in Britain and in America and Canada is because they they see the need for a much more rounded education than they can get in China. I'd be interested to know Pascal what you think about um

Japan and Kyoto in that context about the roundness of it and I find it I find it quite funny because like actually on this in in this department the Japanese education system is much more like the Chinese one. It's

also more geared especially especially up to high school on on on learning in terms of remembering than in learning in terms of of of how to produce. Which is why a good part of the of the professor's uh you know education actually that we

try to give to students at the university is to try to undo a little bit of that and say like no now you're you're you have to get ready to the to the knowledge production phase of life which means which which is a different

kind of skill set including of course presentation and dialectics and whatnot. Um but the the school system itself is geared more toward that. Um yet also in Japan you have um very good number of uh of Chinese students who come also here

to the universities and actually a lot of Japanese programs are trying to cater to that of course because the ch the Japanese universities are running out of students because the the the birth rate is declining so heavily. So actually you

know English language education and also geared not just towards America and UK and Europe but also geared toward uh Chinese students who then learn in uh in English. Although I must say a lot of Chinese students also learn and study in

Japanese. They are much better at learning Japanese than our uh you know North Americans and Europeans. So there's there's a there's a big mix here. But it it definitely speaks to the dynamism also that then uh that comes

out of China. I I was wondering though you know how what all of this then does to the uh to the business sector at the moment in China. Right. On the one hand you have uh you have this now 30 years

of development. On the other hand you have huge expectations into the future. Are you a little bit worried that the um you know that the the the meteoric rise of of China in as an economy um is is

also is also creating expectations about the future that might be difficult to meet and we know about China that there's a lot of people who work in these um very demanding jobs that that do have a difficult time of of uh of

keeping up and and that there are people who are resating. So what is the what's the business what what is what is your thinking about how the inside China develops this point about uh it's very difficult to plug a solution

out of the air and say this is what you should do that's what you should do I think that but my original point I made some minutes ago was that the Chinese system uh which was incredibly successful for a number of years is

because the government allowed it to develop and the reason it's kind of become less dynamic is because it's become less and less compatible with the strength and uh I'm just making sure my uh my my my computer doesn't

um it's become less and less compatible with the survival of the the way the communist party works in China at the moment. Um I can go back if you like to this I mean I was teaching at at Peak

University 20101 that's when I think that the communist party really began to get worried about its position in China.

It could see that the buoyant dynamic uh economy was producing mega stars like Jack Mahar and many other people like the the founder of BYD and other very successful business people who'd made billions and these became the role

models for Chinese people. the party didn't like it and they wanted to be the role model and what Xiinping's done in the last 10 or 15 years since he's been president is to put the party back front and center and

that's meant telling people like Jack Mah you know if you don't if you don't tow the line you'll be in prison you watch it m and that's that's that's the problem uh is in China at the moment is that the the party as it currently

exists and a dynamic growth internally uh an adamic economy which developed its own demand consumer demand investment demand outside of government investment depends on a more dynamic system. So the the communist party has to change and this is well known in China and people

have been trying to get rid of Xiinping for a number of years because of that but he refuses to go. So the question his third term comes up next year in 2027. Okay that's his third fifth year fiveyear term and the question is will

he go for he I think he's now 71 or 72 years old. Will he go for a fourth term or will they succeed the external forces led by people like Hujint who's a former president Wjabar former prime minister

they and others will they be able to get rid of him and put somebody else who can manage this change within the party which is consistent with it a more dynamic forward-looking economic system or will Chi Ping stay in power and

continue to repress society in China that's one of the big deals at the moment.

I've had I've had discussions on this on this channel, you know, with with with people who also are who also argued that um you know, there are still these different strains within the party within the entire uh uh state apparatus

that are still more um loyal to let's say let's say the Mauist um heritage that are more dogmatic or ideological.

And then we've got the the and he and Tang Chang he called it the uh the the strain of the of the denists uh who are the the more business focused uh folks that are also inside the party and

inside the the state apparatus who are more focused on how to increase trade just trade over everything versus well ideology first and trade second. Do you see also this or did you see this kind of uh uh uh um these two parts of of the

soul? Yes, it it's it's very much so. There's a huge battle. There has been a huge battle for some time. Chin Ping has uh employed a weapon of anti-corruption drive and he's man he's used that to get rid of lock up or kill people that were

opposed to him. Latest latest person was a former member of the pullet bureau standing committee called General Jung, the head of the people's liberation army in China who's now in prison for corruption and he's he's conducting a huge purge within the top

levels of the army because all these people want want they can all see what I've just been saying is that she's done his time. He shouldn't have stayed on for more than 10 years and it's time he went. We need somebody else who's

different. And it's rather like saying about President Trump, you know, we want a different kind of guy. He's the wrong person. But in America, it's easy to replace him. We just have to wait for two or three years. In China, it she's

made it very difficult. So, you're right. There's a great battle going on. Wjaba, Hujint and other people still have a lot of power because they they were Hujint was a president for 10 years and Munjaba was a very good prime

minister. I think uh they still have a lot of power. So, we'll see what happens. I mean, I think the big question October 27 when the next u I think it's the 19th Congress of the Communist Party occurs is whether Chiing

will succeed in getting another five-year term or not. If they manage to put somebody else in, I think a good guy would be somebody called Hu Chuna, who's currently been sidetracked off to vice chairman of the CCPIT. It's a kind of a

non-job but um he's got a brain. He's went to peing university which is very difficult to get into. 10 million people take the GAR the entrance entrance exam every year in China and about 2,000 of those 10 million people go to peing

university and another 2,000 go to Chinua. So if you get in to peing university it means you're very very good at reading all your books and and learning them. Mhm.

Uh and he went to peing Hu Jin Hua went to peaking university. So he's a very clever guy and he's also liberally minded. Uh I think that Chin Ping has been trying to dig up dirt on him but

hasn't been able to. So if he could dig up some dirt, he'd he'd arrest him and put him away because he knows that he's a threat.

Okay. So we we have this internal rivalry which will certainly also continue and you know the the business of politics is is not is not the cleanest one to start with. But if we look at the way that China has learned

how to deal with the United States, you know, there are a couple of things that really surprised me over the last one, two years, one is that China could stood stand very firm when it came to the idea

of tariffs from the United States. The other thing is that they did actually threaten the uh the rare earth card and that they were not shy about it anymore as they were before. And the third one was just recently that China announced

that it um would forbid its um its petroleum uh sector from like implementing US sanctions uh when it cames to when it comes to Iran and that they would support these uh petroleum manufactur uh uh um yeah manufacturing uh companies in case they

came under secondary or tertiary uh US sanctions. I mean, how do you interpret chi China's like economic approach toward um managing this aggression?

Again, this is like the outcome of the wolf of its doctrine that is still like raining down on China from the United States.

Well, I would say that it's it's kind of exactly what you've said. I mean, I think that China would prefer to have as you made a comment earlier that China would prefer to be uh to be friends with

everyone. I mean, it's not as quite as simple as that because China and we all know that we're all very different to each other and there will be disputes.

But going around killing people and attacking countries is not the right way to go. China would prefer to have a more uh diplomatic engagement. And as I said, I think right at the beginning, if we start thinking now about where things

are going to go from here, which is I think of interest to everybody, uh there's been various projections. My own my own idea is that uh there will be a a financial problem. At the moment it's impossible to see America and Europe the

west in any way giving into China or doing any sort of deal with them because uh you know China is a threat and something we haven't mentioned is COVID and that's one of the big impacts which China has made in recent years on on the

world. COVID came out of China. Um I was there when it actually started in China.

I can talk about that a bit. uh and uh but in any case it came out of China and I think the rest of the world and particularly America and European countries associate COVID with China and that churned that was instrumental COVID

was instrumental in turning our perceptions of China away from sort of in interest and curiosity and some support into the idea that China is an enemy and that's what a lot of people now think about China. They're bad news.

They're people we shouldn't be doing business with. But the the fact is though that uh China's there and the own the China attitude I think is you see a connected peaceful world serves Chinese interests for two reasons. First of all

uh they're the biggest trader in the world by far and it's in their economic interest to be able to do business with them. Secondly, I think it it uh leads into something within the Chinese uh spirit and education. The idea of

dowoism which started around 500 BC and the idea that one should be uh life ought to be simple uh peaceful uh restful and you know one one shouldn't be aggressive at all. I'm I'm very much simplifying Darism and and and Buddhism as as well

uh also suggest is something that most Chinese uh uh unconsciously or consciously mostly unconsciously they are affected by three thought uh beliefs one is Buddhism one is Dowism and the other is Confucianism it's rather like most Europeans are influenced whether

they get most Europeans don't go to church but they're still influenced by Christian ideas and Christian norms. In China, Chinese people are all influenced to some extent by Buddhism, Dowoism, and Confucian Confucianism. Although if you ask many Chinese about Dism, they won't

know what you're talking about. Some of them will, but most many of them won't.

But it they are affected by these ideas. And the the idea that the world should be peaceful and connected uh is not just beneficial for them for economic reasons. I I would argue it's also beneficial for cultural reasons.

Yeah. And then how how does that now at the moment also impact the business world? Like I mean if you when or when you advise uh people who want to do business with China and they only have experience let's say in

Europe and North America not that they're the same but I would say we can like culturally we can read each other.

when you then when when you advise them of of how to approach um how to build s a successful business in and with China, what what what do you tell them and and how would that impact then the the the

the future, you know, when China will potentially be even much much larger and much more important, right?

Well, that the best thing you can do is to buy this book. The second best thing though you can do is I I'll just paraphrase one or two ideas uh that uh the most important thing in China as in

many Asian societies I'm sure I'm sure this is true in Japan is to communicate with people on a personal basis in other words for them to trust you and they may not like you but it's better if they do

like you and why not but the Chinese operate on a personal basis with people so if you're trying to do business with people in China the first thing to do is uh not to be rude to them or punch them

in the nose, but try and develop a personal relationship with them. This is the whole key to doing business in China. People that understand that uh will get along. People who don't will have will will find all sorts of

problems. The Chinese will behind their back say something like he here's another stupid ignorant proud uh foreigner and we'll show we'll we'll teach him a lesson. So that that's very important. You know, big we we're we're speaking today like only

two days or so out before Donald Trump is supposed to meet Xi Jinping in uh in Beijing, right? I mean, I think they're going to meet in on on the 13th and we're speaking to today on the 11th. Um

do do you think that there's any kind of future for the for for the rel the Chinese American relationship if the if the US doesn't change its tune toward China significantly? Well, on that I come back to my idea that I think that

something that it's it's an economic and I am also an economist as well a historian. Uh I worked in a in in a bank and investment bank for for a number of years before I got into China. Uh is

that I I think there's going to be a massive financial crisis starting in the US starting because of the inflation. I mean Pascal you and I will it's not difficult to see that inflation is on the way up. It it has to be oil prices

have gone up from $50 a barrel to $120 a barrel. And oil products, we see them everywhere, plastic and everything else, let alone food, let alone fertilizer.

The shortage of fertilizer, food prices, and so on and so forth. Inflation has to go up and it'll start going up in a in a month. We'll start to see the effect impact in a month or two from 2 or 3% up

to five six even eight or even 10% per annualized inflation. Interest rates will have to go up. What will higher interest rates five six 7% do to the um debt interest payments which have to be made by uh the American system which

last year were $1 trillion and that was at a relatively low interest rate. It it will break the system, right? Has to. I mean, if you think that the US defense budget last year was $800 billion and debt interest payments,

interest on the debt, public debt of America were a trillion dollars. And I haven't even talked about private debt of which there is a great deal.

Non-public debt uh hedge fund managers borrowing from each other uh and all sorts of uh balance sheets with assets which have been exchanged and may not have the right value. This is every 20 or 25 years. It's the way the system

works. You have to have some sort of crash in order to bring people back down to earth. We haven't had one since 2008.

Before that was 1987. I was an investment manager at the time so I remember it very well. 2008 uh I was just involved with China I wrote wrote this book uh and then I'm I think 19707374 we're due for another one and if there

is a crash which I think there will be how will America think about being friends with China they will need China just like they did in 2008 who bailed out America partly the Chinese by buying their debt and by launching their own um

huge stimulus package 450 50 billion that helped to bail out the global system and that we'll have to do that again. China too has problems as we've discussed as I have mentioned they have their own internal problems economic

problems. I think both sides will see it's in their interest to cooperate but perhaps I'm just being over optimist too.

I mean I don't I don't have any doubts that China sees the benefits of cooperating with the United States. I mean everything they've been doing for the last 30 40 years has been like cooperation based but the problem is

that at the moment the other side has been building up this China threat narrative so strongly um even before even before co very much what if there's a crisis what I described what do you think then what do

you do you think that will change the the perceptions within Washington if there is a major financial you're I don't know how old you are you're probably too young to remember what 2008 crisis would bite.

No more hours. We all thought that the that the western world was finished. We really did. It was major event. Lemons went lemons went their stands when went AIG massive rescue package. General Motors had to be bailed out. Uh it was a

huge thing and we've a lot of people under 45 of course they they won't remember it because it was what 18 years ago. No, but you or you 40 40 42 or 43 or something.

40 40. But I I do remember how how impactful that was and how how people were scared for for jobs and and and getting new jobs and so on. But how do you think that will happen in in

Washington if that happens again? What do you how do you think that'll change perceptions of China?

I don't think it will change the perception. I mean in what's how would China actually if we just assumed a perfect repeat of 2008 perfect repeat like uh debt crisis and the and of course all of those ninja loans and then

banks going down and and bad debt everywhere and everybody's scared. Oh my god, what if it is on my uh uh balance sheets and and and so on. Um and then the government stepping in. I mean, how would China even try to help the United

States even if they wanted? How would they? Well, last time they bought their debt and they launched their own massive uh they bought bonds and which helped public debt and also they launched their own massive internal stimulus program to

try and boost the Chinese economy and therefore boost that uh through that the world economy. And uh they made a huge effort to try and and help uh you know the American the whole world economy from crashing and they always feel after

that they felt at the time Americans the west didn't appreciate it. Uh they they would do something similar this time I think they would uh but they might be more commercial about it. They might say rather like uh well they might say to

the Americans look um we can help you. We can we can buy this. We can lend you some money. We can uh uh we can we can inject liquidity into the system which you can't uh and we will keep the system

afloat on these conditions. It might be a bit more commercial this time. They but they have the they have the financial and economic power to to do that. They are in fact a larger economy than the US in in uh in

purchasing power terms. Yes. Yes. or the lot of course like a lot of a lot of Chinese interests are bound in that thing right inside the United States. So I mean if the if the if the US economy goes down a

lot of value I mean of of Chinese held value actually also goes down. So there's a lot of interest very much on their interest to keep the system to keep the thing going and that's why it's it's you know America

whatever happens to America the dollars the other point is the dollar is going to stay the world currency. There's a lot of talk about ddollarization, but if you look at the numbers, you look at Swift in Belgium, which processes mo

almost all the international transactions, millions every day, something like 92 or 3% uh are done in dollars now today. Okay, I don't it's not going to change very much. The dollar the dollar is the global currency and the dollar is made in America. So,

America's not going away and the ch I think the Chinese know that. So the next 50 years is China and America and then everybody else. The question is are China and America going to be enemies or friends? And I think that if there's a

crisis in America, which I think there will be the the it will change the American way that they look at China because they need help.

That would be a very positive. you Jazz, you're making you're making the case for a for for a big economic crash to look forward to it in order to avert the the the warfare that might be coming if there isn't.

Well, I may be wrong. What do you think, Pascal? I would hope that if there is uh economic downturn uh that actually that could lead to uh to a better relationship, but that is just my something that friends of mine call my

morbid optimism. Well, I I I I think that's where we are. Look at the I I I have a great friend who's older than I worked for Morgan Stanley all his life, a senior investment banker who's about 85, lives in New York, and we we used to

talk two or three times a week about America and China until the uh the trade dispute last year in September, October when China pulled out the rare earth card and basically sumped the Americans and Trump well in in with a big T and a

small T. Uh I didn't mean a pun but it has been um but I I think that uh I said to him at the time the fact that the Chinese have ruled out the rare earth card Americans F-35 fighter uses about

900 pounds of rare earths. You can't build American fighters without the rare earth and China has almost all of them.

So you have to do a deal. Uh and look how that's changed the relationship between America and China. Every now and again, you have to have some event like that which uh and punches America on the nose and makes them realize that they've

got to be reasonable and they're part of another world and not just a Hollywood movie.

No. And it's an interconnected world. I I just I just hope that sinks in. It's an interconnected world and we need each other so it doesn't make sense again to punch each other on the nose. So, well, I mean, if we have a huge crisis,

uh I know we've been going for an hour now. you probably want to stop they that one and and again for to ask you where people can find um you your books and if you have a place where you

also between books like publish I don't have a place but uh you you've uh I think if you could uh I think you've got the name of my book uh and it's being published by Anthem Press I'm still writing it will come out next year

2027 the title uh it my name is Giles Chance and uh it's technology geopolitics China's global global impact, China's global impact colog, technology, geopolitics, and the new multipolar order. And in it, I talk about the impact that China's made over

the last 30, 40 years, but most importantly, where I think we are now and where I think we're going to go in the next 20 to 30 years, just like we've been discussing today.

We will of course do a shout out about your book again once it's out. The other two books will be linked in the description box below. And with Thank you very much. with that. Thank you so much for your time today, Jazz.

I'm so honored to be on your show. I I'm great. As I said before, I think you're doing a fantastic job. We need these uh platforms like yours and others bring on in I don't know about me, but a lot of

other people who bring on very interesting people. I learn a lot from them and I don't read newspapers anymore really. And I think a lot of people don't.

We have podcasts now. So, I'm very glad we have this ability. Jazz Chance, thank you so much for your time today. Thank you. Bye-bye.