Economist Podcasts – Summary

Episode Title: "Xi’s not there: what China’s Venezuela response reveals"
Date: January 6, 2026
Host: Jason Palmer (with Rosie)
Main Guests: Aaron Connolly (Asia diplomatic editor), Kerryan Richmond Jones (international economics correspondent), Shira Aviona (reporter & contributor)

Episode Overview

This episode examines the geopolitical implications of America’s sudden extraction of Venezuelan President Nicolás Maduro, focusing especially on China's restrained response and what it signals for global alliances and influence. Additional segments explore the shifting dominance of the US dollar and evolving perceptions of value in the luxury handbag market.

1. Main Segment: China's Calculated Response to Venezuela Crisis

(00:16–08:28)

What Happened?

In a dramatic turn, just after meeting with Chinese diplomats, Venezuelan President Nicolás Maduro was seized during an American special forces operation. This has led to international condemnation from China but little beyond rhetoric.

Key Insights & Discussion Points

• China’s Alliance with Venezuela:

  • China is Venezuela’s biggest creditor and main buyer of oil, playing a vital role in enabling Venezuela to withstand US pressure for years.
  • Despite significant investments, Venezuela is not essential to China’s broader strategic goals, which remain centered in Asia.

  "China is absolutely important to Venezuela, and it would not have been able to resist American pressure over the last couple of decades without Chinese support. ... But Venezuela is not that important to China." (Aaron Connolly, 03:34)

• China’s Reaction:

  • China condemned the US operation and called for Maduro's release, but limited itself to statements, showing reluctance to escalate.
  • This reveals constraints in China’s willingness or capability to directly intervene outside its region of core interests.

  "China doesn't appear to be willing to go beyond rhetorical support." (Aaron Connolly, 03:20)

• Broader Asian Reactions:

  • North Korea echoed China in condemning the US.
  • US allies (e.g., Japan) made minimal or vague statements, focusing on consular support rather than challenging Washington.
  • Non-aligned Asian countries were cautious, worried about US tariffs impacting their economies and thus refrained from overt criticism.

  "Countries like Malaysia have a tradition of speaking out, but others like Indonesia have really kind of pulled in their horns." (Aaron Connolly, 04:23)

• Precedent for Taiwan?

  • The Venezuelan intervention is not seen as influencing China’s stance on Taiwan.
  • For Beijing, Taiwan is an “internal matter” and U.S. military deterrence—not international legal concerns—remains the key constraint.

  "China thinks about Taiwan as an internal matter ... it's really American military power that is preventing China from executing an attack on Taiwan." (Aaron Connolly, 05:40)

• Propaganda Opportunity for China:

  • While China can use the episode to criticize US hypocrisy, its practical advantage could come if instability in Venezuela becomes a liability for Washington.

  "China has a real interest in making sure now that Venezuela isn't stable, it could really cause a problem for America in its own hemisphere." (Aaron Connolly, 06:29)

• Impact on Venezuela & Other Chinese Partners:

  • Venezuela likely expected more robust backing from China.
  • The episode signals to other Chinese allies that support may be limited to words rather than tangible action, highlighting China's limits as a global power.

  "This really does show the limits of China's muscle and power around the world." (Aaron Connolly, 07:11)

• Possible U.S. Strategy:

  • By revealing China’s reluctance to get involved, the US may be intentionally undermining China’s credibility as a reliable partner, particularly in resource-rich Latin America.

  "They probably do want to make an example of Venezuela ... Latin American countries ... may think about potential downsides of that relationship based on what happened..." (Aaron Connolly, 07:48)

2. The US Dollar's “Exorbitant Privilege” Under Threat

(10:03–16:40)

Context

Following a sharp fall in the dollar’s value in early 2025—its worst start since 1973—the episode investigates whether the dollar's dominance as the world’s reserve currency is waning.

Key Points

• A Weak Dollar Isn't Always Good for Developing Countries:

  • Traditionally, a weaker dollar eases debt burdens, but recent US trade wars have increased risk premiums, raising borrowing costs even as the dollar fell.

  "Even though the dollar got weaker, the cost of borrowing in dollars for developing countries rose." (Kerryan Richmond Jones, 11:08)

• Long-Term Damage from Tariffs:

  • Trump’s trade measures caused a lasting erosion of confidence; even as tariff rates moderated, the dollar didn’t recover.

  "It's still below its value at the beginning of 2025, and that's because Trump seems to have done some longer term damage to erode the market's confidence in the dollar." (Kerryan Richmond Jones, 12:01)

• Shift Toward Other Currencies:

  • As trade flows shift away from the US, more countries are opting to use the yuan or euro instead of the dollar, with China actively encouraging trade in yuan.

  "China's very keen not to trade in dollars. ... As trade has contracted, so too have developing countries' enthusiasm for the dollar." (Kerryan Richmond Jones, 12:42)

• Implications of Losing Dollar Dominance:

  • The US has long benefited from “exorbitant privilege,” borrowing cheaply thanks to the dollar’s status.
  • If the dollar loses this role, others (perhaps Europe or China) could gain.

  "If the dollar gets knocked off its crown, theoretically, another country could get that benefit." (Kerryan Richmond Jones, 13:19)

• Digital Payments & Crypto’s Role:

  • Countries like China and Russia are building digital systems to bypass the dollar, while crypto could absorb niche roles (especially in avoiding sanctions).

  "You could get a network of countries all plugged into this system that circumvents the dollar..." (Kerryan Richmond Jones, 13:54)

• Dollar Still Dominant, But Vulnerable:

  • Despite trends, the dollar’s entrenched position is formidable:
    • "60% of foreign reserves in central banks [are] dollarized."
    • "90% of foreign exchange transactions are in dollars."
    • Over half of global trade is still in dollars.

  "The dollar is going to be incredibly hard to dislodge. But it's no longer as impossible as it once seemed." (Kerryan Richmond Jones, 15:39)

3. The Problem with Luxury Handbags

(16:58–22:22)

What’s Happening in Luxury Leather Goods?

• Rising Scrutiny of Craftsmanship:

  • Viral videos feature “bag destruction” tests, questioning whether expensive bags deliver quality commensurate with their price.
  • Some, like Hermes’s Birkin, still follow old-world craftsmanship, but most are mass-produced.

  "The leather was mediocre, construction was factory made, yet the prices were five times higher than the other quality brands." (Tanner Leatherstein via Shira Aviona, 17:30)

• Explosion of the Industry and Cutting Costs:

  • Industry growth has led to increased production demands, pressuring factories to ramp up cost multiples.

  "Whereas we might once have sold goods for eight times the price ... now we're trying to sell them for 12 to 15 times." (Shira Aviona, 19:15)

• Sales Shift:

  • Leather goods drove luxury growth (25–30% of expansion since 2019), but lately, their share is slipping as jewelry and experiences outpace them.
  • Declining sales of handbags account for the majority of luxury market contraction since 2023.

• Quality and Labor Issues:

  • Investigations revealed sweatshop-like labor conditions even in “Made in Italy” products.
  • Some brands are acquiring suppliers to improve oversight.

• What Luxury Really Means:

  • Real luxury once meant rarity and craftsmanship, now threatened by mass production.

  "Real luxury used to mean rare materials, masterful craftsmanship, genuine scarcity. But mass production changed everything." (Shira Aviona, 20:29)

• Consumer Demands:

  • Visible status and tactile quality still matter to buyers; disappointment leads them to other categories.

Notable Quotes & Timestamps

• On China–Venezuela Relations:

  "Venezuela would not have been able to resist American pressure over the last couple of decades without Chinese support."
  —Aaron Connolly, 03:34

• On Dollar Decline:

  "The dollar is going to be incredibly hard to dislodge. But it's no longer as impossible as it once seemed."
  —Kerryan Richmond Jones, 15:39

• On Luxury Handbags:

  "If you paid thousands of dollars for this bag, you shouldn't have to get it repaired."
  —YouTube commenter (paraphrased by narrator), 17:38

Conclusion

This episode spotlights the limits of China’s global influence when put to the test, the fraying of the postwar dollar order amid new digital and geopolitical realities, and the massification—and resulting devaluation—of status in luxury consumer goods. Each segment explores the complex interplay between perception and power—whether political, economic, or cultural—illustrating how quickly today’s institutions and brands can be questioned or undermined.