A (5:00)

Yeah. In terms of like where the specific policies fell short, according to critics, According to several U.S. officials and analysts speaking to the Washington Post, the latest round of measures pack far less punch than it might have because of the administration's apparent desire to accommodate American chip machinery firms and Dutch and Japanese equipment makers. And their governments. The delay those negotiations caused allowed China to stockpile tools and components, the officials and analysts said, speaking on the condition of anonymity to discuss negotiations pursued outside the public eye. So basically, it took so long that China even, even the aspects of the controls that made sense, it took so long to do any of this that China was able to acquire a lot of the tools that are now being curbed as part of these updates, massive stockpiling.

B (5:57)

And then even after this announcement, I think it goes, they come into effect, I think on the 31st of December, a lot of this stuff. So there's still another, a window of almost a month for, for stuffing the channel, so to speak, or more stockpiling. And so the chip companies, most of their stocks were up. Bloomberg had a piece on Friday saying the chip controls were going to be less than expected in terms of less strict than expected. So stocks, and the Japanese chip stocks all went up. And then clearly yesterday the controls came out and the chip stocks in the US for the most part went up because again, I think the, that the companies are, they're successful. I mean, the lobbying was successful. And, you know, so now we end up, you know, really the next phase. We can talk a minute about what the Chinese announced today. They announced what looks like a bit of a sort of response, but I think more going forward on the chip controls now, of course. Right. We have barely six weeks until, or seven weeks or so until this Trump administration. And one of the, one of the, you know, one of the big questions is who will become the Under Secretary of Commerce in charge of bis. And in the Biden administration, there were some names that came up, one in particular who had a much tougher view on China. The industry lobby was able to place their, I don't think there was their first candidate, but place an acceptable candidate in that position. The question is, will they be able to do that again? And then of course, the wild card will be what does Elon Musk want? Because we've already heard he's been asking around about BIS because it has SpaceX has potential issues with BIS. And so again, when we talk about who would be driving, sort of what kind of people would go in and how they would view China. If Musk has a voice or say into who or suggestions about who might be running bis, would he really pick someone who's going to be especially tough on China?

A (7:51)

Right.

B (7:51)

And Lighthizer, as we've now learned of your various reporting, Lighthizer does not appear like he's going to in the administration in any role. And so we'll see. We won't, you know, it's all sorts of speculation, but I do think that we came to the end of the Biden administration. They seem exhausted. The lobbying worked. I think all the lobbyists and the chip firms are going to have a good holiday bonus.

A (8:14)

I was going to say holiday bonus. All the lobbyists, they've been a good job. Yep.

B (8:20)

You know, it's D.C. and so lots of corruption, lots of things that look like they might be somehow corrupt or totally legal. So we'll find out in the new year who from Commerce goes to which chip firms and which related sort of lobbying law firms in that sort of. Because it's going to happen. Right. It's D.C. it's the revolving door. And so again, I think back to Greg Allen's quote, we've talked about this a bit, probably a bit ad nauseam on the podcast is again, you sort of do this partial halfway stuff. You've fully focused the Chinese side on de Americanizing as much as they can of their semiconductor stack. And yet you're letting them, you're letting smic, you're letting Huawei and its network of companies, you're letting them continue to grow and build and, you know, build out these massive fabs fully stocked with equipment. You've limited stuff at the highest end, but you're giving the Chinese time to start figuring out lots and lots of things. And so it may have slowed them down, but it also really motivated them. And so again, it just I think history is going to look back on the way the Biden administration and Secretary Raimondo prosecuted these controls and probably not look particularly kindly on them.

A (9:33)

Right. Well, and you mentioned the Huawei and SMIC related entities. From what I've read, there are fewer entities that are going to be added to the entity list as part of these updated export controls than there might have been under stricter and more effective policies. And we're not going to parse a lot of the specifics here. For anyone who would like to learn more, there's a good podcast on China Talk that was entirely dedicated to the updates.

B (10:00)

That's with with it's with Dylan, with Greg Allen and then Dylan Patel of Semi Analysis right now, George Snyder.

A (10:07)

It was, it was very comprehensive. And you know, you and I have talked about this, like you said, ad nauseam. So this is outside the paywall. So people might be discovering the show for the first time and may not have heard us talk about export controls on chips over the last two years. In the grand scheme of things, though, in terms of why this matters, it's just, it's become clearer that there have been real holes in these policies. And to me, the entire affair, it's important to the extent that AI and advanced computing are areas that are going to be critical to long term national security. And like the government has deemed China a long term national security threat and the United States has the ability to limit the progress of China in advanced computing hardware. And the government has just been really slow to act in any comprehensive way to use that leverage and preserve that strategic advantage. And I agree. I think it won't reflect well on the Biden administration officials who are responsible for overseeing all this.

B (11:15)

It's hard. There's a lot of money at stake and, you know, if the allies aren't on board or aren't, you know, the US Government didn't make enough of an effort to convince them or was not able to present a convincing effort. It, it's hard and I'm glad this time at least the media, when they were covering these controls, they really kind of saw through the sort of the spin coming from commerce about how, you know, toughest ever on China kind of stuff. Right. And there's a lot more skepticism about what they're really doing.

A (11:45)

Well, and it's interesting because in 2022, the export controls on semiconductors were widely praised and I think rightfully so. Like they were forward thinking and as comprehensive as they could have been.

B (11:56)

Then again, someone involved that described it to me is basically they were able to get them through because of Taiwan, because of the way, because of the Pelosi visit and the PRC reaction.

A (12:05)

And that was all before ChatGPT had hit and like the rest of the world realized that AI was going to be this seismic technology that would come, come to define our future, like commerce. And BIS was ahead of the game at that point. And then in the last two years, the story has gotten a lot more complicated.

B (12:22)

But so going forward again, back to the realm of speculation about what happens in the Trump administration. But for example, you look at again, someone like Elon Musk who may have an opinion on these policies and who should be running bis. Who would he talk to? He talks to Jensen Huang and Nvidia. Jensen Huang does not like these controls. We talked about it last year, right? There was that effort to unseat Greg Allen at CSIS because he was seen as being too negative or too much of a, like a articulate proponent of these controls. You know, New York Times had a story about sort of part of that.

A (12:57)

Too competent. Greg Allen.

B (12:59)

Right. Too competent for the New Yorking. The New York Times had part of the story about how a big donation was offered to csis, but it was included. That sort of, you know, had to have different voices talking about the chip controls. And so, you know, I mean he, you know, you look at what Xai is doing and who's his biggest supplier? Nvidia. You talk to him and say, hey, this is what we want to do. Maybe listen to that. And then again, you may end up in a situation where you have a Secretary of commerce coming in who, you know, Howard Lutnick, who's a finance guy, probably doesn't really have a strong opinion or strong knowledge of this sector. It's really quite possible that the worst has passed for these chip controls. I could be very wrong. I'm just speculating here, but I think that the momentum has just gone here in most of the DC sort of system and the lobbyists and their proxies are very powerful and very effective and it's worked.

A (13:58)

Yeah. Well, I have two big picture thoughts at the end of all this. Number one, I agree with you. These are good people who have been working really, really hard the past couple of years and there are lots of competing priorities to consider in any of these areas. At the end of the day though, the more I've read about it over the last year and a half, I think a lot of the arguments against chip controls from people like Jensen Huang are pretty facile. The idea that they haven't been effective so why continue pursuing them? Well, they haven't been effective because there have been huge, well known loopholes this entire time. And so I don't really buy the idea that, oh well, this is just hopeless anyways. The idea that this accelerates China's investment in an indigenous supply chain. I mean, the toothpaste is out of the tube on that one and China is moving that direction regardless of what the US government does in 2024.

B (14:56)

Well, that's what I liked about that quote from Greg Allen. I mean, it's something I written last week. Sort of similar sentiments, which is, you know, you can have the debate about whether or not these controls make sense, but if you're, if you make the argument that they don't make sense because they failed and you don't talk about all the lobbying and all the work that the industry and their proxies have been doing to undermine and neuter the controls, it's fundamentally really not an honest intellectual debate.

A (15:19)

Right, exactly. And it's just frustrating. And I just think it's been ineffective leadership on the part of the Biden administration and sort of an abdication of responsibility to make hard choices and push forward in the interest of US national security. And to your point, we have no idea whether the Trump administration will be any better. That'll be a podcast topic for the next few years.

B (15:41)

Well, one thing that, again, back to my earlier point where, you know, I think there's, you know, again, I'm not making predictions. I just want to say I think I would not rule out at a. God, I sound a little bit like Jim Cramer. This morning, Jim Cramer on Squawk Box on CNBC was talking about how he sort of felt like we were past sort of peak tough on China. And, you know, actually been having that conversation with people. And I think it's, it's, it's not a zero percent possible outcome. And I think when you look at one of the other tests will be TikTok. And what happens with TikTok, because, well, we should know the court, I guess the court's going to give a decision soon, like this week or next week, I think they said early December. If TikTok loses its court case, then the law goes into effect January 19, unless Biden gives them an extension, I believe.

A (16:28)

Right.

B (16:29)

And if the law is Trump takes over. Well, the law can be, the law can be in effect for one day and then Trump says don't enforce it. That's gonna be pretty interesting. Right. And the Wall Street Journal had a really good article last week about how TikTok or SIG, the big investor, Jeff Yassin's group, had hired this guy, Tony Sayag, I think, or Sayag, to basically be the Trump whisperer. And he's extremely effective. And so again, I think we may be in a situation where very quickly after Trump comes in that the whole sort of TikTok, the TikTok ban was sort of peak tough on China and D.C. and what was interesting, right, is we talked about, I remember we had a podcast with Ben Thompson like 13, 14 months ago where we said it will never happen because they have DC So wired, their lobbyists are so good. And yet ultimately Bytedance and TikTok lost because all the other companies like Facebook, the big companies, were advocating against TikTok. And you had enough of the people on the national security side who figured out a way to organize and work quietly, but then repel the efforts of the lobbyists and their proxies. The chip industry one is different, right? Because there are very few companies that are pushing for these bans. Right, right. So, so you're, you're just really, it's almost impossible to get them through in a really, really meaningful way, given the power and the money involved on the, on the side of the industry that's lobbying against the bans. Right. And again, that's why 2022, the Taiwan, that sort of, that Taiwan crisis was a catalyst for the first round that were surprisingly tough. Now, though, when you look at the TikTok again, that all that momentum around banning TikTok is, it's deflated. And so if Trump comes in and says, you know what, I'm not gonna don't enforce this ban, this is assuming TikTok loses his court case, you're not gonna see some, I really don't think you're gonna see the voices on, especially on the Republican side who were so adamantly against TikTok and ByteDance, you know, who are also very pro Trump. They're gonna be kind of stuck.

A (18:36)

Right.

B (18:36)

Muted, because I think they're gonna get in line. And so I think the odds, you know, the TikTok guys, and this Wall Street Journal story mentions it, but I think the, you know, Sig, the Susquehanna, the TikTok guys, they gotta be feeling pretty good again that maybe actually, you know, it's like the cockroach thing where they just, you know, they even survive a nuclear war where they're not, they're.

A (18:57)

Gonna come back, time will tell. I don't know if they're feeling good, but I definitely. They're feeling better. Yeah. This is more hope than they've had. Certainly more hope than they had after the legislation was passed in the Senate as part of the overall funding bill. I mean, the way that all happened, the odds, even after it passed in the House, the odds that it was going to pass in the Senate, they people had to be very clever and strategic about getting any of it through. And that again, speaks to the power of the TikTok lobbying operation. And then you have the chips and I mean, it's all happening in the context of this long term strategic competition and a Cold War 2.0, according to some. And I do think it's interesting as it sort of highlights the asymmetry in terms of the US China advantages, the respective advantages, because like, in broad strokes, you could look at the chip industry and say that because of the free market and the US system and constitutional protections and how attractive that is to innovators all over the world, like the US Owns the IP and has Leverage over all these world changing hardware technologies, including leverage over allied countries that produce critical components to the supply chain. But on the other hand, when the US Government wants to get something done, those private companies have rights and they can lobby like crazy. And even within government, like with the chip controls, you had multiple constituencies and agencies that had input before any of these policies were moving forward. And there were similar stories with TikTok, where, you know, TikTok could lobby the House, could lobby the Senate, and now is wired into the Trump administration apparently. And all of it is just a lot less efficient, strategically speaking, than a centralized system that the PRC has where one man decides and then the next day the policy is implemented.

B (20:58)

So I mean, it's just to be clear, there are, it's not. Yes, she is very powerful. There are, there are policy inputs and ways to, you know, I think some powerful interests inside the Chinese system have the ability to do some lobbying, but they certainly don't have much. Foreign companies have limited to no real ability. There's been some occasions where some of the big industry groups, the chambers of commerce, have had some impact, but ultimately it's, it's not the way it works here totally.

A (21:29)

And I'm speaking in very broad, reductive strokes.

B (21:32)

And in addition, you see what you see, the Chinese are very good at using the foreign companies to then pressure them to then lobby back into the U.S. no kidding. So, and so that goes back to when you look at, you know, you look at how the, you know, after the pandemic, you know, the, just the way the Chinese message to top CEOs, top companies, you know, in any administration, whether it's, you know, this current one or the previous Trump one. You know, I think again, that will be even more pronounced going forward. It's the real question is going to be how are they messaging through to Elon Musk and sort of are they making any asks at this point. Right. And how would they do that and.

A (22:10)

How effective will that surface area be under a Trump administration? I mean, I think that's like a complete wild card.

B (22:18)

It's a complete, it's a complete wild card and I think it's going to end up being schizophrenic and I think they're going to be policies that China is upset with. But I think that you. Again, we will. Again, we're all speculating. We're also speculating because right now as we're speaking, there's a martial law in South Korea which may or may not have been undone by the vote, although the President Yoon is not backing down quite yet.

A (22:38)

At least the images I saw didn't look undone.

B (22:41)

For now, it's, it's 2:30 on Wednesday, 230 Eastern Time in D.C. so, and you know, the opposition leader, I believe, is fairly pro China doesn't think there's a problem with, you know, Taiwan. And so if we wake up tomorrow, the next couple of days and there's a new president, that opposition leader is now president, it could, could totally scramble some of the South Korean policies toward the prc. And then all the work the US has been doing around working with Japan and South Korea and trying to sort of build a, what does Rahm Emanuel call like a lattice work of partners. So we'll see. Things can change very quickly.

A (23:15)

Yes.

B (23:15)

And I think they'll change even faster when Trump is president because there's just so much more volatility and unpredictability in the decision making.

A (23:23)

Right. Well, and the story in South Korea is changing literally every 20 minutes. I look at the Internet. So we're not not addressing that.

B (23:32)

So we're not going to announce the launch of Sharp Korea just because now.

A (23:35)

We'Re creating not today, maybe next week, who knows. But I will say before we move on, China did announce a ban in principle on exports to the United States of gallium, germanium, antimony and super hard materials such as synthetic diamonds, important components of electronics, fiber optics or semiconductors. It also tightened restrictions on the sale of graphite, a soft form of carbon used in electric car batteries and nuclear reactors. In each case, China is a major producer for some metals, such as gallium. It accounts for almost all of the global supply. So that was also from the Washington Post story. China telegraphed some of that last summer. I don't imagine any of that is a surprise to the United States States. But is anything notable about that development before we shift to domestic news?

B (24:29)

So a couple things, One, I don't, I don't think it's, I don't think it's a big surprise. I do think, though, it really is more of a warning shot to Japan especially as well as South Korea and Netherlands to not follow along in this latest round of updated controls because if you if in the, in the reporting and the sort of the briefing from folks in the Biden administration, part of the idea was the hope that they weren't going to force these other countries to join, but the hope was that this would create a sort of a template and then they would follow.

A (25:00)

Right.

B (25:00)

And I think what the Chinese have seen here is there is not A united front. And so this is a way of making very clear to, and especially to Japan, which had, has been my understanding, I think Bloomberg or someone reported this a couple months ago, too, is that the main reason that Japan was so resistant to this, these updates or some of the updates was that Toyota was concerned that they would lose access to. I think it was gallium.

A (25:24)

Right.

B (25:25)

I think it was ga. Right. And so this is just saying, yeah, you will lose access to it if you follow along. And so, you know, it is also, I think one of the questions had been, will the Chinese just suck it up and wait for Trump to come in, or will they put a marker down and say, you know, we're not going to be pushed around like we maybe were before? So, again, how the Trump administration reacts to this will be interesting too. I think it, you know, the US and some of its allies have been trying, especially Australia, been trying to find a way to break the PRC chokehold on processing of these rare earths and critical minerals. And, you know, the markets aren't working. The Chinese can get the price drop, the price so low that other processors just go bankrupt. And so perhaps this will accelerate those efforts. But once again, they're, by their, their multilateral efforts that require work with allies. Some of those allies may end up now being tariffed by the new president if he's mad at them about something. And so we'll see.

A (26:25)

Yeah, there are many other critical minerals and supply chain components that the PRC could refuse to export to the US Or US Allies. And so I just sort of understood this as a warning shot in the wake of the updates to the export controls.

B (26:40)

But I think, you know, again, this, this, there's a chance this is just seen as, okay, a good reminder of why there needs to be more decoupling and why the, you know, why the US and its allies need to end reliance on anything critical from China.

A (26:56)

Right.

B (26:57)

It should be seen that much, much easier and much easier said than done. You know, the, the, the issue with the drone manufacturer Skydio, I think, was last month where basically after they were involved in a sale to Taiwan, I think they sold to the Taiwan Fire Agency. It wasn't even a weapons drone or sort of a military drone. They were sanctioned and it turned out that, and they had been involved in lobbying efforts. Reportedly, they say they weren't, but reportedly they were involved in lobbying efforts in the US to ban dgi, the big Chinese drone manufacturer. Turned out the Chinese realized that they had one critical dependency, which is, you know, drones need batteries and all the batteries were only made in China, right? And so, and so the Chinese said the, to the battery factories, you can't sell these guys anymore. So now Skydio's, you know, scrambling to find alternate battery makers. And so in the short term, it can cause some pain and some upset, but it's just, here it is, the Chinese are reminding the US and other countries that you can't rely on China. And then again, in addition to this statement from the department from the Ministry of Commerce about these materials that can't, can't export to the U.S. now, you also had various industry groups come out and semiconductors come out and basically say they're going to do whatever they can to stop buying US semiconductor equipment and chips. Right? And so it's a, and this goes back to the discussion where on the one hand, you know, these, these controls, maybe, maybe we passed peak controls. But the reality is, is even if the US Tomorrow said, okay, we made a mistake, we're pulling back, the Chinese aren't going to shift their trajectory, they'll buy it. It's as a filled, fill the gap.

A (28:32)

And I was, I was talking about facile arguments, facile arguments from the chip industry, like they want to preserve this market access. There's no market turning back, going away at some point in the next 10 to 15 years. I mean, so it's, it just, the entire thing is kind of frustrating from a logic standpoint, but here we are. And yes, things are trending towards decoupling, whether we like it or not, whether it's convenient for either side or not. But there are structural forces in play that have continued to push us that direction. In any event, to keep it moving, we will shift to domestic PRC news. A couple different stories in parallel here. I'm going to call this the opacity segment, Bill, because I'm not sure how many concrete answers we're going to have to what's actually happening. But we'll start with two PLA stories that broke over the holiday week. First, there was a Financial Times report before Thanksgiving that PRC Defense Minister Dong Jun is being investigated as part of a broader probe into graft in the pla. And then the Ministry of Defense announced that Admiral Meow Hua, member of the Central Military Commission and director of the Political Work Department of the pla, has been suspended while under investigation, confirming rumors of the last several weeks. Let's start with the second one. The Defense Ministry said Meow was suspended from his duties amid an investigation for, quote, serious violations of discipline. Can you put this news in Perspective for people. Who is Mao and why was his suspension such big news in the China watching community? Because I saw a number of people saying, well, this is a much bigger deal than whatever may or may not be happening to Dong Jun. What do you think?

B (30:25)

So, so, so his problems have been rumored for quite some time. So it's interesting that actually they came true. You know, there are lots of rumors all the time to go through and in this case, the they were correct. He is, he's a member of the Central Military Commission, which is the main body that oversees the military.

A (30:46)

It's.

B (30:46)

The chair is Xi Jinping. He is, but he's also, again, he's head of the political work department, does all the sort of indoctrination, political training, very important post in terms of, you know, when you have a military, when you have to really focus on real political correctness in the military. In this case, you know, because it's again, it's a loyalty to the party, it's a party military, it's not a state military. And he's also someone who had worked in Fujian, had a long history of Xi Jinping, and so it is not at all clear what he did. There has been this long running corruption crackdown in the pla and maybe it's all linked or maybe there's just multiple different problems that are all coming up at once. There was a rocket force last year and that's continued through now. The last two ministers of Defense have officially been put under investigation. But it's a big deal that someone that senior in the PLA and in such an important position with such a history with Xi Jinping is somehow in trouble. It should not be seen as a sign of, say, a challenge to Xi Jinping or a sign of Xi Jinping's weakness. But I think now that it's been announced that he's been suspended and put under investigation, it's highly unlikely that they're going to say, oh yeah, there's nothing there, and put him back in his job. It's going to go through the process. The Minister of Defense, again, one of his issues was the belief is that he was brought up through the system and effectively pushed into that job in large part by Meowhua. Right. And so one of the questions would be, whatever problem there was with Meowhua, was it somehow related to Dong Jun? Now the. The Financial Times last week had that story quoting some US government sources. That's who said that Dong Jun was actually under investigation. Other reports, it was interesting. There were, there were mixed messages coming from the US Government about whether or not he was actually under investigation. The Chinese have denied it twice. They've denied other people, you know, they denied Li Xiangfu. So again, the denials are worthless until you say that, you know, they tried him out for some sort of a public appearance, which would be actually quite easy to do. But at least as of recording today on Tuesday, they haven't, they haven't done it.

A (32:54)

Yeah, I mean, they called the report a sheer fabrication.

B (32:58)

Yeah, I mean, they said, you know, again, so, so I would, you know, what I, what I had heard separately was, well, maybe he's not actually officially under investigation, but that he had been in for an interrogation for a talk. No idea if that's true. Certainly some of the US government sources who were quoted, not just in that FT article, were pretty confident. It sounded like there's also talk of more coming, so we're just going to have to see. But I think when you go back, and again, we've talked about this on multiple podcasts over the last few months. There is an ongoing corruption or political loyalty, political machinations, set of crackdowns underway in the pla, and we don't really know the full extent of it, at least people who only have access to public information. It also involves parts of the military industrial complex and the soe. Military industrial firms. Whether, you know, the big question then is what does this mean for sort of readiness and does this delay, for example, the possibility of an armed move against Taiwan, for example? And I think it depends on who you ask. It isn't. It isn't. The answer isn't totally clear.

A (34:11)

Yeah, I mean, that's where you trend toward just like pure speculation. But it is. I mean, it goes back to an old conversation we had where just in general, corruption was so endemic to the PLA system for so long that you'd have younger members of the plaque taking out loans from benefactors to pay their way up the ranks, and then they would pay their benefactors back with proceeds from corrupt activities as they advanced. I mean, it's just very difficult to upend that kind of an ecosystem without a lot of pain. So there's basically no PLA or military industrial complex investigation that would ever surprise me, given what, what she inherited.

B (34:58)

And he's made more progress than his predecessors. This kind of corruption can also lead to espionage risks. And so one of the things that's really interesting in particular about this Dong Jun case in the story last week is so say the US government actually has information that Dong Jun is really truly under investigation, even though it's not public and they've denied it. Well, then if you're Xi Jinping or you're in the Paleo, you're like, how did the US Know that?

A (35:22)

Right.

B (35:23)

Is somebody spying for them? Do they. Have they broken some communications? It's kind of a strange thing where you kind of wonder why US Officials would be telling reporters that this stuff is happening, if it's true, if it's coming out of some stream of intelligence that maybe the US doesn't want to lose.

A (35:40)

That's interesting. Yeah. Well, I wonder whether we will learn more. I mean, the fact that Dong Jun is still Defense Minister is certainly not dispositive.

B (35:50)

You know what we'll learn either he'll show up in some event, and at least that means for the time being, he's not under investigation. Maybe he's under suspicion, maybe he's got some problems, but he's. He's not to the. You're suspended, under investigation, or removed from your post under investigation. Or maybe like with Li Xiangfu, the previous Defense Minister, who just disappeared for a while, and then there were denials, and all of a sudden, oh, yeah, he's under investigation. Maybe that's what we'll learn at some point. We'll hear something. Right. It's pretty embarrassing for Xi and the PRC if Dongjun is going down, because he would be the third Defense Minister in a row.

A (36:29)

I know. I believe it was Rahm Emanuel who compared Defense Minister to the position of drummer and Spinal Tap.

B (36:37)

We're going to miss Rahm when he's gone. His tweets, I mean, he had sort of a kind of a. He wrote a goodbye letter to Japan last week in the Washington Post, and he talked a bit about his tweeting. And, you know, he. He's. I guess he can tweet as a private citizen, but I sure hope he does.

A (36:55)

I sure hope we still get Rahm on Twitter and he may not do a podcast. You know, I may have made the Spinal Tap joke. Now that I think about it, Rom was the one who invoked Agatha Christie with the Li Shang Fu disappearance. But, yeah, I mean, Li Shangfu was gone for several months before the government said anything official about his fate. And Dong Joon was in public no less than two weeks ago at the security meeting in Laos where he snubbed Lloyd Austin.

B (37:26)

Right. Snubbed the US Secretary of Defense. So. So again, it is a. It is an unsettling period. I think that it. It definitely, you know, somethings up in the pla. But we just can't see enough from outside to really have any, I think, well grounded or well founded judgment on whether or not this actually affects their ability to perform their mission.

A (37:47)

There you go. That's why this was the opacity segment. I'm glad you said that about the tensions and the potential threats from the PLA to xi, because there's always sort of a constant undercurrent of speculation about tensions between the PLA and xi. And I'm never sure how much stock to put into any of those rumors. But there were certainly people who reacted to this news saying, well, keep your eye on the pla. This is another sign that there's, you know, a real threat that she sees in the pla. But it sounds like you don't buy that line of argument in response to all this.

B (38:25)

I mean, it's doesn't look great, but it doesn't like what's been happening, at least what we can observe. There are plenty of other explanations to what's happening as opposed to there was some sort of like a push, a push against Xi or something, which of course a lot of people, I mean, I think there's a lot of hopium out there about, gee, wouldn't it, you know, this would be great if somehow. But, but again, we may never know the full details. It's possible that something like that has been underway or that's what he's worried about. You know, you really only actually know when it, it succeeds, right?

A (38:59)

Yes.

B (38:59)

Because even if it, even if there was one and it fails and they, you know, especially with military trials, they're not going to say, oh yeah, these guys tried to launch a coup.

A (39:08)

Right. There's not going to be like a, a breakout story in the PLA daily about the attempted coup that failed.

B (39:15)

Yeah, I just, again, I, you know, you never say never. I would, I would not put a lot of weight on that speculation or those rumors at this point. But clearly there is something that continues to roil through the pla. And it is, I'm sure, not something that Xi Jinping is particularly happy with.

A (39:34)

Right. Well, final bit of opacity news here. In your newsletter Monday, you wrote that there was no public announcement of a November Politburo meeting or study session. Usually in November, there would be the monthly Politburo meeting near the end of the month and then another in the first week of December to discuss economic work for 2025, just before the annual Central Economic Work Conference. You asked is the absence, or at least absence of publicizing a November Politburo meeting a sign that the rumors may be correct that the Central Economic Work Conference may convene a few days earlier than usual. So for anybody who's new to the podcast, what is the Central Economic Work Conference and how are you calibrating your expectations for the next week or two?

B (40:23)

So that work conference is shortened to the CEWC usually meets in the first two weeks of December. It's probably two day event. It effectively lays out the sort of assesses economic performance and state of the economy for the current year and lays out the high level sort of goals around economic work for the next year. And it has to mesh with the five year plan and whatever goals have been set on round reform like the third plenum in July and what it laid out for reforms. So to answer your question though we got an answer today. The answer is no because Bloomberg has a story and I think I'm not, I don't think it's an official. They usually don't announce the date of the meeting and sort of you just all of a sudden they announce it's happening. But according to Bloomberg, it's going to be the 11th to 12th December, which is really right where it usually happens. And so there had been a rumor last week that that pop Chinese stocks that one, it would be held early and two, there's also been a rumor, a talk going around that there's going to be at least a lot of talk in the, you know, they'll have the meeting and then they put out a, they give, they issue a readout and everyone pours over the readout to sort of see what does this mean for policy. They don't usually have targets and you know, specific policies per se, like we're going to do X trillion of stimulus for example. But it's more of sort of a high level, these are the directions we're going to go in and the policy sort of tweaks we're thinking about. But there's been talk that there will be a lot of discussion in the document about consumption, improving consumption and sort of idea of some sort of more consumption stimulus. We'll see. The idea last week at least that got stocks up was that oh, if it's meeting early, maybe it also it means they're really worried. And so therefore there's going to be more positive stuff in this. And then therefore, you know, by yeah, because it right.

A (42:17)

I mean by the way we did all of this last December where people.

B (42:21)

Were hoping for some sort of stimulus.

A (42:23)

It's just the cycle continues Here. It's great.

B (42:26)

So now we, you know, next week probably, you know, I guess it'll be the Wednesday, Thursday next week is what it looks like, that we'll have the, the meeting, we'll get a readout on the 12th, if it really ends on the 12th. And I think probably people's hopes, anyone who's hoping for some sort of significant shift or additional meaningful stimulus, their hopes will probably be disappointed. Right. And I think when you look at the recent data coming out of October, again, the economy's not doing great, but I think the leadership can point to signs that things are stabilizing, that what they've done so far is having a positive effect.

A (43:05)

Mm.

B (43:06)

And it's just not sure that that's. That there so much. It's just not sure that there's enough more data coming in that looks really bad for them to shift from where they already were starting at the end of September.

A (43:21)

Yeah. Is it fair to assume where they shifted there would have to be like impending calamity in order for the government to shift from their sort of slow and steady wins, the race approach to stabilizing the economy?

B (43:35)

I think so. And I think you could argue that by September there were enough warning signs related to the economy and also in sort of social stability that that may have really been what pushed them over to having an out of cycle meeting to talk about the economy at the end of September and then pushing out a package, what they call a basket of incremental policies, including more fiscal support, more monetary support. And so one of the questions, and I think we talked about it two weeks ago, was you've had this spate of, say, quote, unquote, lone wolf attacks, like the guy who drove his car into the people exercising in Zhuhai and killed at least 35 people. And you had several other similar incidents, either knife attacks or mass car ramming incidents. And since then, you've seen the political legal affairs system, the security services system has been going into overdrive, talking about how they need to do a better job of ensuring social stability and dealing with social contradictions and solving problems in the grassroots. And of course, a lot of these problems stem from economic issues. And so there is the possibility that the social tensions have gotten to the point where you might see more urgency from the top leadership to do more around, say, consumption or to help solve employment issues so that they can, you know, because. Because ultimately it's not just bad economic data. It is. Is spilling over into social stability.

A (45:02)

Right.

B (45:02)

And that, of course, is the most important thing from the perspective of top leadership. So that's possibly an argument for why maybe the CWC will be more positive than some people think. But again, you know, there's going to be a lot of noise between now and then, a lot of allegedly knowledgeable people leaking stuff. And you know, you go back and you look at the stuff in previous years and you just like, you know, in some ways you just gotta wait for the readout.

A (45:30)

I was gonna say, as two actually knowledgeable people, let's say just for the record, we don't know and we'll have to wait and see. No, and we also don't know why there wasn't a at least public November Politburo meeting.

B (45:45)

And you know, it's, you know, not, you know, usually there's a public policy, a meeting every month that's announced publicly. You get a readout and usually following that, that meeting, there's a study session on a, on a specific topic. November had neither. There have been a few months undersea where there are no, none of these meetings usually in the calendar. There are months where there aren't these meetings. Like if there's a, if there's a party congress that month, I think there won't be a meeting there. You know, just a couple other.

A (46:13)

I read May 2023 was the most recent month without a. Yeah, so, but.

B (46:17)

We, we have, we have no idea why. Yeah, right. We, we, we have, we have, we just don't.

A (46:24)

Sometimes that's the right answer. We have no idea here on Sharp China.

B (46:28)

But I've seen some people say, well, that may. That means the popular didn't meet. I think I'm skeptical. I think they probably met. They just didn't need to, you know, publicize it. You know, you find the Standing Committee meets fairly frequently. You've seen several, you know, it's always interesting when they have a big meeting or make a big decision. And for example, the most recent one, I think was around this September Politburo meeting where they, you know, again, it was an out of cycle theme around the economy, which was. And then in subsequent official sort of reporting about that, they mentioned, oh, and the day before the Standing Committee met and approved these measures. Right. And so it's not like the top guys aren't meeting. It's just, it's just why they didn't, you know, again, maybe they didn't have the meeting, but if they did, why they don't talk about, who knows? And we're not going to know. Yeah, this is just the way the way things are.

A (47:19)

Well, we'll see if we get more news from the Central Economic Work conference going forward. And it's really hard to know what exactly the economy looks like because there are sort of competing reports every day in terms of what the data is saying, even with the housing market. You wrote on Monday that the housing market is showing signs of rebounding a little bit in Beijing and Shanghai. And then there some numbers at Bloomberg that showed that the housing purchases were down last month. And it's just, it's hard to sort of wrap our arms around exactly what the conditions are on the ground again because it's pretty opaque from the outside. But we'll see what actions the policymakers take over the next month or so. For now, speaking of policymakers, we could talk about Trump World a bit. I mean, talk about something that's difficult to wrap your arms around. Donald Trump on X Over the weekend, the idea that the brics countries are trying to move away from the dollar while we stand by and watch is over. In all caps, we require a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US dollar or they will face 100% tariffs. 100% tariffs and should expect to say goodbye to selling into the wonderful U.S. economy. They can go find another sucker. There is no chance that the BRICS will replace the US Dollar in international trade. And any country that tries should wave goodbye to America. So, Bill, is that message an example of Trump noise that we should all just try to ignore over the next few years or is there something materially interesting to what he's saying there? What do you think?

B (49:16)

So one, I mean, this is the challenge is he's the president or he will soon be the president. You can't just ignore, can't just ignore.

A (49:22)

His tweets as much as you want to. Yes.

B (49:25)

And so again, the question would be, well, where did this come from? Like we had the, you know, we had the fentanyl, you know, the tweet last week or this true social post last week about how they were going to, you know, 25% tariffs on Mexico and Canada and an additional 10% on top of the additional tariffs on China over immigration and then fentanyl. Right. And you know, that came my understanding is that morning there had been a Fox News segment about, about a group of families who had lost loved ones to fentanyl and they have a former Trump 1 administration official as their lawyer and they had basically they had submitted a petition to the USTR asking for tariffs around the lack of enforcement on fentanyl. One of their representatives spoke on Fox News, talked about it. He got the idea, it got to him. And then all of a sudden there's the post on social media a few hours later. And so this one about brics, I don't know where it came from. It's not like there's a credible BRICS currency that's threatening the US Dollar's position anywhere in the near future.

A (50:37)

That's what's peculiar about the entire thing.

B (50:42)

So again, it's really, people talk about, well, how do we figure out what the heck's going on in Beijing? I mean, you tell me what's going on in Mar a Lago, right? It's sort of the same. I mean, the good news is people, ultimately there's a lot more leaking here, so probably we'll hear at some point exact what really went down. But no, I think, you know, on the one hand it sort of people who say, you know, the US Is just this, you know, evil hegemon, evil imperialist, and the dollar is sort of the one, one of the key, the key components of that, you know, hedge hegemony and imperialism. This just proves that, right?

A (51:21)

This advertises that explicitly. It is right. I mean, the tariffs, particularly the fentanyl related. Didn't Trump run a version of that playbook with some success during his first administration? Because China used to actually be exporting fentanyl and over the last several years it's been precursor chemicals.

B (51:43)

I mean, I think, I think with some of these countries there, there is more of a, you know, stick approach than a, let's have long discussions. And I think, you know, the Biden administration will say that they've made progress. You know, again, we'll, we'll see what, you know, that clearly the, you know, the Canadian prime minister flew to Florida a couple, like three or four days later, right, to sort of pay, you know, pay his respects. Mexican president has a little bit more pushed back. But I think ultimately, you know, these countries will, the US does have a lot of leverage, at least for now and, you know, on the idea of a BRICS currency. You know, I think China, you know, it goes, ties into the sanctions and the US Ability to wield the sanctions stick everywhere it wants and with a fairly large effect. A lot of these countries, the Russians, the Chinese, the Iranians, they would love to not have the US have this power with the dollar, but good luck to you if you want to put your reserves in the BRICS currency and rely on the Russians or The PRC or the South Africans.

A (52:52)

Right. Yeah, well. And also if you want to do deals with any other country around the world that also has the same calculus.

B (52:58)

And that's, and that's, and that's the problem is, is for all the problems the US has, it's still the, the broadest and deepest and most law oriented financial market in the world.

A (53:11)

Yeah. I mean, the Trump tweet, I have no idea. First of all, I appreciate him putting it on Twitter and not only Truth Social, so I don't, at least I don't have to go to Truth Social, I can at least follow it on Twitter. But it seemed to me to be sort of pure power projection, similar to some of the Beijing threats over retaliation on critical minerals and stuff like that. I think everybody right now is just talking about leverage they have. And I don't, I don't anticipate 100% tariffs on China in the near future.

B (53:46)

You know, one of the, and again, we're just, this is speculation. So apologies to the, to listeners. But you know, one of the issues, right, is the growing US Debt and deficits and somebody's got to keep buying Treasuries and there's a need for foreign demand for U.S. treasuries. And so maybe there's a concern that they don't have to park their money in US Dollars anymore. Right. It also came out last month. I think the Saudis increased their holding of U.S. treasuries. Right. And so this idea of the de dollarization, you know, that you hear a lot of tankies and a lot of sort of, sort of pro, sort of PRC people talking about, oh, you know, the dollar's dead and yada, yada, yada, and this, you know, every few months there seems to be like a range of conspiracy theories on X about sort of the end of the dollar and you know, maybe someday, but.

A (54:42)

Not imminent.

B (54:43)

Bet against the dollar. No, I mean, and not imminent enough.

A (54:46)

To justify this threat.

B (54:47)

But then again, maybe it'll all be in bitcoin. And what's. Is it World coin or.

A (54:52)

No, I'm sure there are several. I believe they're called shit coins. I don't know. I'm sure.

B (54:58)

Well, there's, yeah, there's one that Justin sun just bought into like $30 million to invest in the Trump family crypto. Great.

A (55:07)

Good luck with that $30 million investment. You mentioned the meeting with Trudeau and the call with Mexico's president. The Wall Street Journal, Ling Ling way. She wrote about this on Tuesday. Former and current Chinese officials, including China's former ambassador to Washington have had limited success in getting through to Trump's inner circle. So that story continues. And a key question for Beijing is what exactly Trump wants from China in his second term. Is it more purchases of American goods, speculated a Chinese foreign policy expert, or has he made up his mind to decouple? So I think we're not the only ones speculating. It certainly sounds like Beijing is in the dark in terms of where this is going.

B (55:52)

They're absolutely casting about to try and figure out what he wants. And again, I don't think it isn't clear. I think they should be, or they're probably heartened that Robert Lighthizer, it looks like, will not be in the administration because they don't like him and they don't like how he views China's economy and the trade with China.

A (56:14)

They did appoint a lighthizer protege as.

B (56:16)

Us and that's, you know, and that. And that, you know, he will be tough, but he does not, you know, he's a, he's younger. It's not clear he has the gravitas in the sort of Trump administration. Lighthizer was able to deal with Trump very well directly. Unclear if he maybe, maybe that this Jameson Greer can. I've heard people say good things about him, but he's a different lighthizer, sort of at a different level, different station.

A (56:45)

Yeah, no, that makes sense and drove a lot of policy. And Trump won.

B (56:49)

So, again, well, we just, you know, it's not clear. I mean, you've got Rubio, who's certainly sounded tough on China and pushed for some bills that are tough on China. And, you know, he'll. But again, I don't think how many of these folks are gonna do anything other than what the president wants. And then it goes down to what does the president want?

A (57:08)

Yeah, well.

B (57:09)

And who, who's. Who's really talking to the president about what he should be doing for China.

A (57:13)

Well, and even just as far as the lines of communication are concerned, it is notable that two of the three countries that were threatened by Trump last week have then met with Trump and opened a dialogue. And it sounds like some of those conversations were successful or productive. Trump apparently joked about annexing Canada when Trudeau was complaining about the tariffs. So maybe not necessarily constructive and productive on Trudeau's end. But. And she. There has been no call with Xi, and according to Ling, I don't think.

B (57:50)

There will be until he's president. I think it'd be.

A (57:52)

That makes sense. But also, Lingling away was saying that basically without back channels to sort of get a sense for what the conversation would look like, there's not going to be any outreach.

B (58:03)

They're not going to put the Chinese side or, you know, it's a death wish if you put Xi, if you put the big guy in a position where he's going to be somehow blindsided or surprised in a conversation. These calls are usually very scripted. Yeah. It's at least from the Chinese would not want to be in a situation where she could be surprised or embarrassed.

A (58:22)

Right. And that's just a reflection of the system and the way they operate is that. Right.

B (58:27)

I think until they get a good answer or have a really good idea of what, what the President is thinking, I think, I think that they'll probably hold off. I mean, she sent a congratulatory message which was misinterpreted initially in the media, as she called him. He didn't call him, he sent him a message. But, you know, I think that there's not, you know, you sent the message, that's fine. There's not a lot that sort of substance they can talk about at this point.

A (58:52)

Yeah.

B (58:53)

Well, so why. So why waste the time?

A (58:55)

Totally. And they also have access to every phone in America right now, so there's no need to even get on the phone with Trump. They can sort of divine the direction with the help of the mss.

B (59:09)

No, I wish it were funny. There was a new update today coming out where it's. They're like, the telecoms, they're like. Can't get them out.

A (59:17)

Yeah. Yeah. Well, that. It was, it was pretty shocking to read that over the holiday week. The New York Times had a great day.

B (59:25)

I'm just waiting for the mass text spam that basically said, you know, you could have just used Huawei and saved us all a lot of money and time.

A (59:33)

No kidding. Not comforting to be recovering from Thanksgiving and reading in the New York Times about a meeting in the Situation Room where they're all sitting there saying, well, how do we actually get them out? I would, I would have guessed that it would have been easier, but apparently that's still an open question. So.

B (59:53)

And again. And there has not been any public US Response other than allegations and condemnations. And so that's another question for the Trump administration comes in and gets, you know, maybe they've already have been fully briefed on the magnitude of what's happening. Will they decide that they need to basically push back harder and say, enough is enough, this is unacceptable.

A (60:18)

Right. And how would they go about doing that. In what arena did they push?

B (60:22)

And I think I would, I would imagine some of the people who are, who are on Trump's national security team would have the inclination to push back more, more so than what we've seen so far from the, from the Biden administration.

A (60:33)

So maybe we haven't reached peak tough on China. I never. Jim Cramer, always dangerous.

B (60:39)

Yeah, no, that. Right. And so, and so this is the thing. And it's also possible that there are going to be multiple layers. In some areas are going to be quite tough. In some areas are going to be surprisingly not tough. Yeah. And I think, you know, one of the, my, my base case just based on the first Trump administration is, is a sort of more, it's going to be important to have cognitive dissonance as you're trying to understand the Trump policies toward China and you probably have to be able to deal with some amount of policy incoherence.

A (61:11)

Well, policy incoherence will be familiar after the last two years of chip control conversations we've had. And what.

B (61:19)

Wow, you're a professional podcast. That was like a really good segue.

A (61:22)

Yes. And of course, who knows what the hell will happen with TikTok, but we talk. We started with TikTok and I want to end with a note on a bustling industry on the Chinese version of TikTok, Doyen6tone writes, China's micro drama industry has witnessed an extraordinary boom over the past couple of years, attracting hundreds of millions of viewers with its manic soap operas divided into bite sized episodes. But the industry is now facing government pressure to phase out the trashy storylines that have become its calling card. China's broadcasting regulator has issued two notices in recent weeks urging micro drama creators to stop using a series of sensationalist character tropes to attract audiences from the tyrannical CEO to the, quote, evil grandmother. The National Radio and Television Administration argued that the trend was not only causing micro dramas to, quote, depart from reality, but was also harming the, in harming the image of certain social groups, especially older women. So there's a serious take on this, which is it's pretty depressing state interference in what was a thriving growing industry that apparently millions and millions of people loved in China. On the other hand, I do just enjoy the idea of justice for mothers in law everywhere and evil grandmothers everywhere. So it made me smile over the holiday week. I don't know whether you have any thoughts on the way out.

B (62:55)

Are you telling us something about Charlie? No, no. You could delete. You could delete that Part, but, no, but, but I think. Well, again, who's the regulator? The radio and television administration. Because even though these are online dramas, it's tv. Right. And so you would have, you know, this is how they regulate. You know, you watch Chinese tv, the traditional terrestrial tv, cable tv and it's subject to all sorts of content, sort of parameters and controls and you know, and honestly they were late to do that, to bring that onto the Internet and go after streaming. And so this is totally not a surprise. But these micro genres are really interesting because they, they're very professionally done. I think they're starting to appear on TikTok and YouTube and going outside of China. But yeah, you can watch like three, four minute segments of a show.

A (63:47)

Yeah. And it probably tyrannical CEO or an evil grandmother somewhere. Do your daughters watch TV or do they just watch like content on their phones?

B (63:59)

They just do homework and go to the library and read books.

A (64:01)

That's right. Studying hard at college.

B (64:05)

Yes, that's right. No, dad, they. I think since I've been in college they've watched less tv. They used to watch, you know, obviously they watch Netflix. Yeah, they're a fair amount of reels consumption because I just feel like consumption.

A (64:19)

Habits are changing across generations.

B (64:21)

Definitely, you know, some TikTok, although they have realized that TikTok is damaging to their brains.

A (64:29)

Yeah. Well, they've got about six more weeks with TikTok or maybe not.

B (64:34)

Would they. Were they sit down in front of the TV and watch a full show when it was on 8 o' clock on like CBS or NBC? No.

A (64:40)

Yeah, it's. It's bizarre. I feel like young people don't do that anymore. Even my wife, she'll just sit there with Instagram reels for like an hour and a half and then go to bed. So maybe the regulators are going to have to start paying closer attention to online platforms as opposed to terrestrial television. A thought for the audience to ponder. But Bill, so it's great to see you again. It's great to be back. And we will keep it rolling next week. People can email us at email at sharp China fm. Give Tashi my best. I didn't see you guys during the holiday week so hopefully I'll run into you in the neighborhood in the meantime.

B (65:19)

He's good. He is not sick of turkey.

A (65:22)

I hope he enjoyed the turkey if enough if no one else in your family did. But we will keep it rolling next week and I will talk to you soon.

B (65:31)

Thanks, Andrew. Thanks everybody.