← Sharp China with Bill Bishop
Sharp China with Bill Bishop
The PLA Purges One Week Later; World Leaders Flock to Beijing; A Trump-Xi Phone Call; Panama Canal Resolution?
01:02:30
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- [00:00]
A
Foreign. Welcome back to another episode of Sharp China. I'm Andrew Sharp. And on the other line, Bill Bishop. Bill, how you doing?
- [00:16]
B
Doing well, Andrew. Hi, everybody.
- [00:18]
A
Here again in frigid Washington, D.C. just surviving the winter, you and I.
- [00:22]
B
Although at least today there are signs of melting.
- [00:25]
A
Oh, indeed. You know, we did make it above 32 degrees this week, which was a big win. I did some snow clearance, some ice clearance around my property, so I'll take it. You know, a couple hours above freezing is a big win at this point. Um, as for the show today, we are going to begin with where we were last week. The biggest story of the year so far. I will read a headline from the New York Times. Ruptures in China's leadership could be due to paranoia and power plays. And the Times writes, since taking the reins of the world's most populous superpower nearly 14 years ago, Xi Jinping has ravaged the ranks of the Chinese Communist Party. He has taken down ruling officials, security chiefs, and children of the party's red aristocracy. But even by those standards, his latest purge was remarkable. The Chinese Defense ministry's announcement on January 24 that the country's top military leader, General Zhang Yosha, and an associate, General, Liu Zhenli, were under investigation for grave violations. Startled officials and analysts in Washington. U.S. officials have been trying to sift through the murky waters of elite politics in Beijing to figure out why China's leader took such a dramatic step. But current and former US officials say that no obvious reason has emerged behind Mr. Xi's latest actions. The Chinese leader could be acting out of paranoia, defending himself against a real political challenge, or genuinely attempting to address high level corruption in the People's Liberation Army. They say U.S. intelligence analysts have concluded in assessments in recent years that Xi has an extreme level of paranoia. The officials say he has now removed all but one of the six generals he appointed to the Central Military Commission in 2022. And the article continues from there, noting that current and former U.S. officials said they were unaware of General Zhang having been a US Intelligence asset or having handed over nuclear information. An amusing framing there because it's like, well, if he was giving us nuclear secrets, we didn't know about it. But in general, I think that's a good summary for anybody who missed it a week ago.
- [02:43]
B
I mean, I just think the headline does not, you know, is way overexc what they have in the story. I mean, he's a dictator, of course he's paranoid. Tosh, they're all dogs, but he's a dog. I mean, you know, that, that like, you're not going to be a dictator. You're not going to be on top of that system if you're not paranoid. Okay.
- [02:59]
A
You don't survive 15 years if you're not paranoid.
- [03:02]
B
So the short answer from that long story, which had some interesting quotes, is that we have no idea still what really happened. And for all the speculation that has continued over the last 10 days in public and various YouTube x lots of substacks, we just know that they've gone down. We know that there was that one PLA Daily editorial on the 25th and subsequently there have been three commentaries so far.
- [03:26]
A
Right. Has there been any, any sort of shred of information released by the PLA Daily? And is that where we would look?
- [03:33]
B
You know, you're trying to, trying to read through what do these commentaries talk about? And you know, again, it could be corruption, it could be. Have some political elements. The political elements, you know, again, we, we don't know. There are people trying to sort of go back and say, well, I'm based on my reading of these things over the last year and a half, therefore, it's about Taiwan or this or whatever. It's just not. Nothing is dispositive. And so we're still at the same. I mean, again, we're sort of where we were last time. People still got to write about it, you got to talk about it. It's still interesting, it's still important given what's going on the pla. But we are not. I don't, I just don't. From, from my vantage point of trying to. Talking to lots of people, reading lots of stuff, trying to understand what's going on. I don't feel like the ball has moved at all since last week in terms of what really is going on here.
- [04:12]
A
Yeah, the black box is blacker than ever as we sit here trying to parse the details.
- [04:18]
B
But I will say at the same time, what is it, 10 days on or thereabouts? It's like things are also proceeding as normal. You know, Xi has had a steady procession of foreign leaders. There was the Finnish Prime Minister, the UK Prime Minister, the Uruguay President yesterday. It's again, from what's observable. It all looks like it's just, you know, it was just not that big a deal. Yeah, I think, I'm not saying it wasn't. I'm just saying, at least from the outside, what we can see, keeping up appearances.
- [04:52]
A
She is still very much in charge, attending all these public meetings. Yeah.
- [04:56]
B
And there was a, there was A special meeting of the National People's Congress Standing Committee today. That was the agenda. It was a one day meeting and the agenda was specifically to deal with qualifications of some delegates for the upcoming National People's Congress which I think convenes on. I think that starts on the. I think it's March 5, March 4 or March 5 for the annual two sessions. And there have been some speculation, oh they're going to deal with Zhang Youxia and Liu Zhengli because they're even NPC estate. But there is the State Central Military Commission and so they got to be taken off that. It's too early. It happened that it was three people, three NPC delegates who are officials part of the military industrial complex whose cases had not been announced. There had been rumors they hadn't appeared in public for a while. But they're, they're toast too. Okay. So again this is a. And they're around one of them I think had been like overseeing some of the jet fighter development. Other was in the nuclear. I mean they're, they're, they're senior people in the military industrial weapons development complex.
- [05:52]
A
So the purge continues.
- [05:54]
B
So there's. Yeah, right. There's a lot more to this purge that we don't see. We sort of get these various glimpses of it and you know, again, what happened with Johnny Osha, what happened with generally that case, we just really don't know much more than we did a week ago.
- [06:09]
A
Yeah, well, it's unclear whether we'll ever know more. I will say I enjoyed last week's discussion of Uncle Zhang and the Beijing pizza place. That might be the one shred of information that's emerging.
- [06:21]
B
And as more than one listener messaged me, it was LM plus for those who remember Beijing. Okay. Yes, it's very good. And the Italian guy is now out of. He's somewhere in Europe.
- [06:32]
A
Ah, okay.
- [06:33]
B
Undisclosed him. So again, all rumors, but it was just sort of to. It was really kind of a. Huh. Maybe, you know, again, the idea that you could have been a senior PLA general in the last bit, the last few years of the Hu Jintao era and not be corrupt is again pure fantasy. Yeah. Not possible. And so the question really is it's not, you know, was Huanchang corrupt? It's why now? Right. Why now? Why now? And that is. I think we just, we. We just don't know what the proximate. What the trigger was for this. What appears to be really a decapitation strike at really the top. The top of the PLA. Right. Under Xi Jinping.
- [07:13]
A
Totally. I mean five of six generals that were appointed in 2022 are no longer on the Central Military Commission. There was also a big story from the Wall Street Journal about all this that declared quote, in purging his top generals, Xi Jinping put the command of the armed forces in the hands of one man himself. Now his vision alone.
- [07:32]
B
But that's the way it's, I mean again, that was another article that was like they have to write something but there was actually nothing I didn't find there was anything like particularly revelatory ground breaking. Right. Or actually explain what really what the reasons are for his downfall.
- [07:47]
A
It may not be revelatory to you or people who listen to this podcast even, but it does dovetail with where we landed last week, where the upheaval could very well be bad news for everyone in Taiwan and everyone around the world whose hoping to avert a conflict around Taiwan because we just, we just don't know.
- [08:07]
B
I mean again, I think from the Taiwan perspective, the great news for the last week for Beijing is the opposition parties in the, and the legislative un The Taiwan's legislature blocked this large, this request for a very large increase in the defense budget significantly watered it down. And so again if you're in Beijing and you know you've got the number two person in the, in the KMT party, it's been in China for this think tank forum. Just met with Wahuning who's on the standing committee who oversees Taiwan policy. So it's his portfolio obviously she ultimately oversees it. The politics in Taiwan are not going, the trends are not necessarily going against Beijing at this point.
- [08:48]
A
The party's long term aims. Yeah, I mean they're undermining what was happening there is they're undermining the DPP's efforts to spend on armament over the next several years.
- [09:00]
B
So again, I think, you know, it's a different, longer discussion but I think as long as there is the Chinese side that can see glimmers of a possible political path, or at least the trends are, are not foreclosing the possibility of, of, of a political solution then.
- [09:21]
A
That would delay the threat of force.
- [09:23]
B
Is a threat of force, but is makes the decision to try and do something that would potentially be catastrophic, less likely. That's the hope. We don't know but that is the hope.
- [09:34]
A
That's. Look, and I'll, I'll take a little bit of hope in the middle of all this because imagining who she would appoint to replace all the generals that he's purged on the Central Military Commission. I can't imagine I'm going to appoint anybody who's going to disagree with him about potentially invading and that would. There were probably some theories that maybe Zhang was somebody who could have disagreed.
- [09:57]
B
With him, some hypotheses, but again, nothing dispositive. Again, there's been some work attempting to sort of show through textual analysis that, you know, somehow you can discern that there was a difference in law and sort of talking about Taiwan at a time contingency. I can't. Again, not a lot of work put into it, so. So kudos for doing the work. Not convincing at this point.
- [10:18]
A
Interesting. Okay, well, related to all this, over the weekend, there were lots of rumors that Ho Wodong committed suicide. We don't have any confirmation that those rumors are true. But what did you make of that news cycle? Hoadong, another general who was purged, I mean, last year.
- [10:35]
B
It's rumor. It's rumor palooza. I mean, this is, you know, this is.
- [10:38]
A
Well, I mean, starting from the baseline of. We just don't know. What could that possibly imply if he's so.
- [10:44]
B
I mean, it would be. I. I mean, again, I'm putting you.
- [10:49]
A
On the spot here.
- [10:50]
B
Feel free to beg off once you're detained for investigation. I think it's at least from reports of other detainees and how they are monitored 247 with guards in their rooms, in their cells and things like. And we've seen it in some of the propaganda videos every year before that, the CCDI plenum they have in January for the anti corruption ideological work. I think last year they had one and they sort of showed that they all have like rubber pens and rubber toothbrushes and rubber combs. I mean, everything's padded rubber. It would be very, very difficult to actually kill yourself.
- [11:23]
A
Wow, okay.
- [11:24]
B
So you know, maybe Hui Dong, because of his stature, is held in a slightly looser condition and conditions and therefore was able to do it. I think that's crazy.
- [11:32]
A
I missed that.
- [11:33]
B
Oftentimes what you hear when these officials off themselves, it's usually right before they're caught. And it ends up basically helping all the people. They. Because it's another, you know, they can't rat out anybody, right? So maybe their family gets to keep some of the money and it's just, it's. But in this case, again, certainly possible, but so far has not, has not been confirmed. Would be pretty shocking. You know, there was one, I think it was Jung Yong a few years ago who offed himself. But it was, I think right as they were closing in. So he was not yet in custody.
- [12:09]
A
Right. And it's much, much harder to kill yourself if you're already in custody. Yeah, well, it just added to the spectacle of news and speculation and rumor over the last several days and came completely out of left field.
- [12:25]
B
No, I mean there's clearly, clearly something's clearing, something going on and honestly there's, you know, these rumors are, they're all worth watching. But, but at this, at the same time, I mean Huedong is already fallen and so it's.
- [12:42]
A
Right.
- [12:42]
B
The implications.
- [12:43]
A
But it doesn't speaking aren't, I mean it's not necessarily moving the needle one way or another in terms of xi's control or whatnot. One final question here. Last week I read an article from CIA, CIA analyst Chris Johnson in Foreign affairs in which he said Xi's actions indicate he has, quote, a knack for long term patient planning punctuated by political blitzkriegs and that outsiders who doubt his hold on power may need to reboot their thinking about party army relations. Then other commentators I've read have said essentially none of this would be happening if xi's hold on power and his authority over the PLA were secure. We are all in we don't know mode. But while we don't know, do you think those two perspectives are both valid reads on the implications of last week's news?
- [13:33]
B
So I think also the foreign affair is also after, after Chris Johnson's piece, there's another piece by two of his former colleague, Johnson and John Culver, which was I think complementary to what Chris wrote. And I think that you have to talk about what is control. On the one hand you can control the organization in the sense that they're not going to move against you, they're not going to take you out, but you can also, it's a large organization, you can't necessarily control everyone, not being corrupt or not not violating discipline. Okay, Right. So maybe it's a spectrum. And so I think sort of the, the, sort of the binary discussion. Well, he took out, you know, my view and I've written about it, we've talked about it, is that this shows that ultimately Xi Jinping for the really important stuff in the pla, you know, it's his organization, they're not going to call the shots, they're not going against him. However, the culture of the PLA has generate from, for several generations of leadership has been fundamentally corrupt and she has actually made a lot of progress towards dealing with that corruption, but clearly has a long way to go. And again, I think some of what may be happening here is the realization that isn't a new realization, but the realization. But the fact, as I think Chris Johnson wrote sort of what he was talking about, it takes time to get things set up. But this realization that there was at least one generation, if not two generations of the PLA leadership that was just fundamentally corrupt because for a long time you could not get promoted without buying your promotion.
- [15:08]
A
Right.
- [15:09]
B
And so you're not just talking about. I mean, so ultimately, and we went.
- [15:13]
A
We ran through that a couple years ago, where there's sort of like an angel investor system where you, you were.
- [15:19]
B
It was not just like these guys had a bunch of money at bank. It was really like crowdfunding my promotion and then the people who bought a piece with graft contracts and graft. Yeah. So, I mean, it is not a, it's not a system that can be cleaned out in a couple years. And so I think part of this also may be that again, one of the questions will be, is there a lower level where at the kernel level or even below, are they cleaner or not? It's quite possible it's not because just fundamentally, the culture in the PLA has just been so corrupt for so long that fundamentally, it ultimately he can keep going further down the next level. And it's still finding people are corrupt because there's also. There's so much money being invested in the defense industries right now that the opportunities for grasp for graft are just. I mean, it's just generational wealth. If you can pull it off 100%.
- [16:21]
A
Yeah, generational wealth, at least for a while. And then the story gets a little bit more complicated for people and their families, I would imagine.
- [16:29]
B
So back to your question. I mean, so I think the control question is it's, it can be. No, they're not listening to Xi about everything because there's still corruption. But that's not the same as they're trying to like, overthrow Xi and, and.
- [16:40]
A
Ignoring his orders and subverting his authority.
- [16:43]
B
A puts or, or, or a coup or subvert. Well, I mean, in some ways they are subverting his authority. If they're, if they're not actually, you know, they're not playing along with the graft. But that's not the same as we're trying to, you know, overthrow Xi and install like a John Yoshi or somebody or, you know, some of the fantasies last summer about they were going to like, you know, have this group of. I think it was Zhang Osha and Wang Yang, you know, with the help of Hu Jintao, who was miraculously going to arise from whatever state he's in to oversee this sort of coup against Xi Jinping. I mean, that I think is that again, I think is more in fantasy land.
- [17:22]
A
But I will say, digesting all this news now in January or now it's February 2026, it's difficult to divorce what we're seeing and the scale of what we're seeing and how dramatic it is from a lot of the rumors and speculation that we were wading through last year. And I mean, rereading the New York Times article on the pod just now, it occurred to me she is definitely paranoid. But in this specific circumstance, there remains an open question as to whether he was paranoid or appropriately vigilant about threats to his power and ability to direct the pla.
- [18:02]
B
Right. I mean, the idea that he's paranoid and that's why he moved against Zhangshan Liu Zhang Li assumes that that means that there was something else going on beyond just corruption. And again, one, I think he's not where he is if he's not paranoid. You just can't be a dictator and be successful if you're not paranoid. And two, the assumption that this paranoia that drove this, that is just assuming a lot of things about which we don't yet really have any real evidence, I don't think.
- [18:30]
A
Right. Well. And paranoia implies an authoritarian leader who's like sitting in a walled off room somewhere and imagining threats to his power. And maybe the threats to his power were not quite as imagined in some of these cases.
- [18:45]
B
No. And I mean, I should, to be fair, there could also be some of his advisors who were encouraging him in that because they are trying to do it for their own reasons.
- [18:52]
A
Yeah. Get promoted to the central military telling.
- [18:55]
B
The boss that, you know, so and so's planning this and you need to go inspect, you know, their, their homes or whatever. I mean, you just. There, there.
- [19:02]
A
Everyone wants to be the next drummer in Spinal Tap. Who knows how high you can rise in the midst of all this? Yeah, well, we'll see whether more details emerge. It's a very frustrating story to talk about. I'm sure you've experienced it writing about it and talking about it over the last couple weeks because they're just isn't enough concrete detail to formulate any sort of definitive statement on what's happening here. But whatever is happening here does appear to be genuinely seismic news. And we'll see what.
- [19:32]
B
No, it is seismic. You know, whether or not it was about Some sort of fundamental political dispute or, you know, it's still seismic, the fact that he's now down to him and one other guy on the cmc.
- [19:44]
A
Yeah, yeah. Well, we'll continue to monitor the situation. For now. We will shift gears and I'll read from the South China Morning Post. British Prime Minister Keir Starmer has faced backlash over, over his trip to China amid claims that the UK government has been, quote, tricked by Beijing. Conservative leader Kemi Badenoch accused Starmer of adopting a supine and short termist approach, adding that Prime Minister came back to the UK with quote, next to nothing apart from a Labubu doll. She told the Commons, of course Britain should engage with China even though the Chancellor wasn't allowed to go, even though they are an authoritarian state who seek to undermine our interests. So Bill, we are clearly having quite a moment here as various world leaders and middle powers, so called middle powers, look to Beijing and attempt to reestablish business ties. What did you think of the conversation around the Keir Starmer trip? The British media and various British politicians, as I just read, are being pretty critical of what Starmer was attempting to undertake there. But what did you think?
- [20:57]
B
So, I mean, I think in general, I don't, I think it's kind of crazy to think that the, the head of a, you know, head of the UK hadn't, you know, been to China in eight years. I think generally speaking you should have these kind of leader, leader, leader to leader discussions. You know, the, the bigger issue is what do they have to give up and what do they get. And you know, honestly the optics at least of this trip were very much that the UK was a supplicant and that Starmer, Prime Minister Starmer was very much in supplicant mode. And I think you, you know, you saw that going on going in and you know, the reporting out of the UK press, which I'm the UK press, is the political partisanship. I mean, talk about like, you know, the Chinese like to talk about having these struggle spirit or the fighting spirit. I mean, when it comes to like partisan political reporting, the uk, the Chinese side can learn from the uk. I mean they are just absolutely the bloodlust in UK media. Honestly. Unbelievable.
- [21:49]
A
It's really entertaining to read because you juxtapose it like the Canadian media, they're pretty in the bag for Mark Carney, all things considered. And I get a real kick out of the British press just laying into Starmer over and over around this particular trip. A people full of bile. I would Say, I mean, you know.
- [22:09]
B
You, you get so, so the whole, the whole decision to approve the, the PRC embassy, which again, apparently the Chinese said there's no trip until you approve it. So it was approved a week before the trip. I think that ultimately it's not, you know, really clear what the UK got out of it. You know, the, the Prime Minister, he's on substack. He wrote a post over the weekend just titled China where he sort of talked about the importance of why he went and what he got for the UK and it was a couple billion in export commitments, billion investment. And like a lot of leaders turned off a little. Yes, little. There were some typos that they fixed. They met with. I don't know who they met with. At one point they completely misspelled one of the leaders names. They misspelled Jalaji's name as Xhao. It was just sort of. I think part of the challenge is the UK and the UK government on my understanding is the China expertise. At least the folks who are advising the Prime Minister are. It's, it's pretty thin.
- [22:57]
A
Yeah.
- [22:57]
B
And it showed, I think from this trip. But at the same time, you know, then he went to Japan and you know, it's, it's. I had a, was on a podcast yesterday talking about this. I mean it's, it's, it's, it's not binary like oh, he's just completely, you know, he didn't go as far as I think the Canadian Prime Minister Carney. It is important that he is engaging with China. But I think they, you know, the question really will be, you know, they obviously they, they made the decision about the embassy for the PRC embassy. They made the decision last fall about keeping China out of the enhanced tier of this foreign influence registration scheme. They had. It's only Russ, Russia and Iran. Even though people expected it would be China. Yeah, these, these, the spy case was.
- [23:38]
A
Dropped because nobody would testify that China's.
- [23:42]
B
Threat, you know, there was sort of. Was it a cock up? Was it, was it, you know, it's, it doesn't look good. And then, you know, the, honestly the interesting. And I talked about a little bit yesterday on this thing with, with this podcast with Tara Palmeri is, you know, his biggest problem when it comes to Starmer's biggest problem when in part because of China is Epstein and this Peter Mandelson thing because Peter Mandelson who was the UK ambassador to the, at the beginning of this Trump administration, who had to be with recall because he was not forthcoming about all of his ties with Epstein and he's all over the latest exposure. He had lots of China ties. He represented Huawei. He may have been helping push through this Chagos Islands deal that involves Diego Garcia. That looks to be pretty favorable for China, which now the US is upset about. And political, you know, the political opponents in the UK are upset about.
- [24:30]
A
He was driving a lot of this stuff.
- [24:32]
B
Interesting. So anyway, ultimately I think the short answer is or the longer answer is, you know, the Prime Minister. Prime Minister Starmer, this from a domestic political perspective. His trip to China looks to have been a negative for him. And in terms of what he actually got out of it from Beijing, again, it does not seem like there was a big, big windfall for the uk, you know, and they certainly didn't get anything on Jimmy Lai. At least he doesn't seem to. He says he talked about it, but.
- [25:00]
A
No mention from the Chinese side and nothing of substance.
- [25:03]
B
I mean, we'll see. Jimmy Lai hasn't been sentenced. You know, usually what happens if someone gets sentenced and then maybe they get released on medical grounds, we'll see. But in general at least though, Starmer wasn't as sort of forward leaning about the new world order that Prime Minister Carney was.
- [25:22]
A
Yeah, I think that's a fair and responsible read on what's actually happening here. Like, I think there's a good chance that we look back in nine months and say that none of this was quite as seismic as many folks made it seem. But Starmer, he gave a decent amount to make that trip happen. And that's the risk when you're prioritizing engagement for engagement sake.
- [25:45]
B
I mean, one of the, one of the me just, I think it just shows how little leverage the, the UK has. I mean, yeah, one of the, one of the sort of deals he touted was that the tariffs on UK whiskey went from 10% to 5%. Yeah. I mean, nothing.
- [26:02]
A
It's not nothing.
- [26:03]
B
It's not nothing. But when you're talking about, I mean, I had a couple of friends who were big whiskey dealers in Beijing. That's why I developed a taste for whiskey when I could still drink the folks who were buying the really good whiskey. A 5% reduction in tariff is not going to be meaningful.
- [26:18]
A
Right.
- [26:18]
B
In terms of whether or not they buy it or not. Maybe like middle lower tier, you know, maybe that'll help some of those sales. But. And I think also someone posted in one of the chats that they also got a deal for to export more trout, which I guess we'll see.
- [26:31]
A
Yeah, well, there you have it.
- [26:33]
B
UK Trout, I guess, is pretty good.
- [26:35]
A
Well, and look, I mean, like the UK government, it matters that they're not designating China a national security threat in a variety of contexts. And the mega embassy in downtown London, even symbolically, is a pretty interesting call at this moment.
- [26:50]
B
Yeah. But I mean, the problem is, is it was. It was. That was a bag of. A bag of stinky stuff that was handed to the current Prime Minister by one of his predecessors who did the deal originally. And so they really would have taken a lot to reverse that decision. And I think, you know, you saw from the, like My five, my six, they put out a statement saying they could mitigate the risks. The Trump administration has, I don't think has actually come out against that. The House Select Committee did. But that's not the same as the Trump administration. You know, I mean, people need embassies. The UK Needs to get a new embassy in China. Yeah, well, look, and Soviets had a massive embassy in D.C. for, for a long time now. It's, you know, split up. But I mean.
- [27:32]
A
And right by our house.
- [27:33]
B
I don't know.
- [27:34]
A
Our houses. Yeah, there's no.
- [27:36]
B
I mean, it turned out this is a, this is an aside, but if you remember, one of the, One of the revelations for the Aldrich James case was he ratted out to the. The Soviets that the CIA had a pro or the NSA or they had a program to tunnel under the embassy to put listening devices up through the floor.
- [27:51]
A
Okay, well, perhaps MI6 is tunneling as we speak here.
- [27:55]
B
No, but it turned out it was. It was over one of the nice houses over near, for those folks in new D.C. kind of a block or so a couple blocks over from like the National Cathedral and St. Albans and ncs, those two schools. And one of my high school buddies was a block away. I mean, I was like, wow, we were playing quarters when they were tunneling like a block away.
- [28:12]
A
You could have tunneled your way over.
- [28:14]
B
Yeah.
- [28:15]
A
Played quarters with some Soviets. Yeah. Big picture, these countries can make their own decisions, but I would say they are bad decisions independent of any US Considerations.
- [28:27]
B
But if you look at it from Beijing's perspective, you think about it, over the last three weeks, they've had to the prime ministers of two NATO allies, us, Two NATO members, US Allies and two members of the Five Eyes Intelligence Sharing alliance, basically make pilgrimages. Homages to Xi. Xi Jinping.
- [28:46]
A
Right.
- [28:47]
B
And that's that. It's not a binary like, oh, they flipped and they hate America and they hate Trump, but it's like, okay, there is there, there are fissures in the U.S. relationships with these traditional allies that, like water, the Chinese are able to get in and start exploiting. And I think that's what's going on.
- [29:04]
A
No question. To the extent China is rooting for these countries to come to Beijing and bend the knee and negotiate favorable deal, that's a win. And to the extent China is rooting for these countries to gravitate away from any kind of united alliance with the United States, there's been more progress over the last 12 months than there had been over the previous five to 10 years. I wrote about the trips on Sharp Text last week, and my ultimate takeaway is that people like Keir Starmer and Mark Carney are making a mistake, deepening any sort of structural reliance on China or the Chinese market. And some of the double speak that they use discussing China and the importance of engagement is a big reason the world wound up where we are today. And I'll link that in the show. Notes for people.
- [29:54]
B
Yeah, I mean, there's a lot of. I think you talked about it. I mean, there's a lot of sort of, you know, back to the 1990s kind of approach, at least in sort of what Starmer was talking about. And that is dangerously.
- [30:07]
A
Yeah, exactly.
- [30:08]
B
Or desperate. I mean, the UK economy is not doing great, but it just, it's, again, it's smacked of supplication in some ways. It was unfortunate.
- [30:16]
A
Yeah. And we got a ton of thoughtful feedback on the podcast a few weeks ago where we talked about Mark Carney.
- [30:22]
B
And look, yes, there's a whole thread about Andrew.
- [30:25]
A
There was a thread about me. It's fine. We also got a few really good Canada emails from Graham, Peter, Rock and Chad. I'm not going to read all of them on the show because they were all very long, but I appreciated how thoughtful and respectful everyone was. And I learned something from every single person who wrote in. I don't personally regret my criticism of Carney because I think he's making some tactical mistakes that benefit him in the short term politically in Canada. And I don't think a lot of these decisions will age well for a variety of reasons. But I really enjoyed hearing from everybody. And again, everyone was super respectful even as they disagreed. So I appreciate that. And those are just my takes. Do you have any other thoughts on the procession that is underway to start the year here? We got Mertz going later this month as well.
- [31:17]
B
Now, the Post reports today that the Spanish prime minister is going to go again. I mean, again it's, it is a. Look, it's China. And it shouldn't be any surprise that these leaders want to go, want to talk. I mean, I think, you know, Xi Jinping has to travel less because more of these leaders are willing to go make the. You know, they're the ones that, they're willing to deal with the jet lag in a long trip. I think on the Canada side, you know, what's interesting, right, is the UK For a long time has allowed in Chinese connected vehicles, Chinese EVs. Yeah. You know, that's not going to change this. You know, the Canada allowing it is more problematic, I think, for the, for the US Relationship because of the easier to get. But also. Yeah, also because of the USMCA and those renegotiations. But I think, again, you know, these, these are. Call them, you know, they like, called middle powers. You know, they're trying to navigate a changing world and it's not easy. I think there would be benefit to them banding together more. Matt Turpin had a good piece over the weekend in his substack where he's talking about sort of an alternative universe where these, like, where he talked about how Carney had actually gone and then gone to Tokyo and supported Japan and the way it's being abused by China right now. You know, sort of, if you really are a middle power and you're trying to navigate between these two, you know, navigate this rupture, you know, trying to go it alone with China is just naive folly.
- [32:39]
A
Right. It hasn't worked very well for most of the people who have tried to do that over the last. Most of the countries over the last 10.
- [32:45]
B
Well, it didn't, it didn't work when China was a lot weaker and a lot less rich and powerful.
- [32:50]
A
Indeed.
- [32:50]
B
Not going to work. It's not going to work now.
- [32:52]
A
And to your point, it is really important context for both Canada and the UK These aren't countries that are dealing from a position of economic strength right now. And so any terms that are negotiated are probably going to be even less favorable than they would have been 10 or 15 years ago.
- [33:07]
B
But Canada and the UK are also different. I mean, you know, Trump is not joking about making the UK the 51st state. The Trump administration is not meeting with separatists like they are meeting with these Alberta separatists from Canada. I mean, if you're a Canadian leader, I mean, the US Is gone kind of nuts about Canada. Yeah, unfortunately.
- [33:24]
A
Yeah, it's in a pretty nasty place, the relationship between the US And Canada and It's a very sensitive time.
- [33:31]
B
So I think Starmer has done a better job or at least has tried to do a better job of navigating Trump than, I mean, Carney just, I mean, again, he made his hands are tied potentially. He doesn't like Trump well in the.
- [33:43]
A
Friction which helped Carney get elected last year. And so he's played up some of the back.
- [33:48]
B
Right. That's the irony is if, if Trump sort of not pushed so hard on Canada, he would have had much more of a like minded leader in Canada who would have been much more like minded on China too, probably.
- [33:58]
A
Yeah, indeed. All part of the grand strategy that gives all of us an annual.
- [34:04]
B
But the net. But the net, we'll move on. But the net result is again, it can be overstated. Sort of the, you know, the world is changing in these, these traditional allies are all like running to Beijing. I mean, they're hedging. That is an important place to end. They still have long, they still do a lot of things with the us the bureaucracy still do a lot together. Today there's the meeting in the US for this new critical minerals consortium that the US has convened with dozens of countries.
- [34:31]
A
There's a lot of countries will participate.
- [34:33]
B
They're still all working with NATO. There's a lot that they still do together. So when you get past the leader level kind of rhetoric and some of the, some of the media and op ed, I mean, for example, the FT wrote a piece, an editorial, not an op ed, but an editorial from the Financial Times about the purge of Zhang Yoshi and Liu Zhengli. And the concluding paragraph compared it to Trump's removal of several U.S. generals. And it's just like they're not apples to apples. It's not great what Trump did. But if you honestly believe, if you're sitting in London, you honestly believe what is happening in Beijing is similar to what happened in D.C. a few months ago. Tell me what you're smoking and where I can buy it.
- [35:12]
A
That take may have needed a couple more hours in the oven. Fair enough. And I mean, I think that's a good place to net out on all this is we'll see what happens. But nine to 18 months from now, we may look back and say, all right, well, none of that was quite as dramatic as people made it seem. As I said earlier, speaking of China's relationship with the rest of the world, Cheshire released an article this weekend that was headlined follow the path of financial development with Chinese characteristics and Build a strong Financial Nation. And it prints a speech she gave in January 2024, in which she said in part, what is a strong financial nation? It should be based on a strong economic foundation, possess world leading economic strength, scientific and technological strength, and comprehensive national power, and at the same time possess a series of key core financial elements. First, possessing a powerful currency that is widely used in international trade, investment and foreign exchange markets and holds the status of a global reserve currency. Now, that piece spawned a number of stories in Western media about Xi's ambitions for the renminbi. As someone who's been in this space for years now, how do you handle the quarterly spate of stories on China wanting to make the renminbi a global reserve currency?
- [36:38]
B
So the, so the China is steadily making the RMB more important in global capital trade and financial flows. It is very far from replacing the US Dollar.
- [36:50]
A
Yeah.
- [36:51]
B
Or, or the yen or, you know, even the euro. This is a, you know, this excerpt of the speech they ran is interesting because this latest issue of Chu Shi has several other articles about building a strong financial nation. And of course, some of the media picked up this comment about reserve currency. It was nothing new.
- [37:13]
A
Right.
- [37:14]
B
And this speech, actually, this excerpt was a reiteration or sort of an explication, I think, of comments he'd made or the conclusions of this Central Financial Work conference from a few months prior to. And so again, there's real sort of consistency, continuity there, I think, you know, ultimately that, you know, and it's always a question of why do they, why do they choose, you know, why do they choose this time to run these speeches from two years ago or, you know, 18 months ago? And we don't know, you know, is this editorial calendar for Choshi set months ahead? Did they, somebody say, look, you know, there's this increasing talk over the last few months. I mean, the US Dollar has been declining. There's increasing talk about, about sort of shifting away from US assets because of the, you know, because of Trump risk and, you know, what's going on in the US and so is this, is this sort of a, you know, they picked that time to do it? I'm, I mean, this is an internal party journal. The guys who read it aren't really like playing the Forex markets. I'm not sure like this was what that message was.
- [38:16]
A
Okay, but, well, but there's always an audience for these type of stories. That's why every three or four months people start speculating. Well, maybe the audience.
- [38:26]
B
But structurally, I mean, you know, structurally, there's a long way to go before, you know, the RMB is like truly a reserve currency that replaces the US dollar. I mean again you, I got a.
- [38:35]
A
Long way to go. I mean I'm not a macroeconomics expert.
- [38:38]
B
You have to have the broad and deep market. You also have to have the ability to actually get your money out freely, convert it. Right. Not have capital controls and you know, you also have to have transparency and the ability to actually have access to credible and non manipulated information.
- [38:57]
A
Right.
- [38:58]
B
And so there's a ways to go. There's no question that they've been increasing usage of the RMB and trade settlements that you know, there are, you know, as the Chinese capital markets are improving and the, you know, the stock market goes up and there's more appetite for PRC bonds, I mean the trends are moving that way. But the idea that suddenly we're going to wake up and the RMB is replaced the US dollar, I mean again, that is not anything realistic even I think in the medium term.
- [39:29]
A
Yeah, I mean everyone.
- [39:30]
B
It's also treats. It's not clear that the, it's also not clear that the Chinese want to be like the US have the responsibility of the reserve currency like US dollar because that comes with downsides. What's also interesting, this piece too and we, I translated. We can put a, put a link to the show notes. It's also talking about what finance is supposed to be and very much a sort of pushing back on the idea of Western financial capitalism. And it feeds back into what we've seen around corruption, crackdowns in the finance industry and restrictions on banker pay and frankly a lot of things like if you were back in the Occupy Wall street day or part of the progressive wing of a certain party in the US you'd probably read parts of this like, oh, that should be our manifesto for reigning in Wall Street.
- [40:11]
A
Yeah, of course. I mean there's a lot of, a lot of alignment I would say between that movement and some of the initiatives she has undertaken over the last several years trying to clean up corruption and whatnot. What do you think of this take that just came to me as you were discussing some of the political roadblocks? The RMB could one day become a global reserve currency, but not as long as the CCP is in power. Grade the take one to 10.
- [40:39]
B
That's like saying the Chinese can't innovate because the CCP controls information. I think that ultimately the Chinese technocrats, the financial technocrats are very smart. They can I think make the RMB have a much bigger role in global financial flows than it has now within the current framework of their political economy.
- [41:00]
A
Okay, there you go. So sounds like you're not on board with that take. I would argue.
- [41:06]
B
But it's also not binary. It's like do they flip and they replace US dollar or do they just get a bigger share and they're clearly on track for a bigger share. But that doesn't mean it replaces.
- [41:16]
A
There's going to be more security in the RMB than there is and has.
- [41:20]
B
But I mean, dollars.
- [41:20]
A
That's what I'm talking about. And I think yeah, there are so many reasons that putting your money into the RMB if you're a sovereign wealth fund or a state somewhere, like there are just so many risks and a lot of those risks tie back to.
- [41:37]
B
Yeah, but there are risks in the US dollar and their risk. I mean look at how the US has weaponized, you know, the financial system with all the different sanctions. And so there are lots of countries and you know, corporates, you know, who, who and individuals who don't want exposure to the US dollar system because of the risk of US government actions. Yeah. And so there's a lot of forces that also would want some sort of.
- [41:59]
A
An alternative who want to de risk from the dollar. But there alternatives when you look out at the global market right now and maybe the RMB will get there, but there are many, many.
- [42:10]
B
Certainly not. Certainly not bitcoin, which continues to crash.
- [42:13]
A
Yeah, well, who knows where we'll be. Changes unseen in a century, always a possibility. 10, 15 years from now. Keeping it moving. Speaking of the United States of America, I'm going to read from Truth Social. Bill. I did this for the podcast. I visited Truth Social Dotcom right before we came on to record to read a readout that was offered by President Trump of a call with Xi on Wednesday morning. And going to truth social.com always means wading through all kinds of spammy, crappy pop up ads. But I did it for the podcast. That was my sacrifice today. I have just completed an excellent telephone conversation with President Xi of China. Trump writes. It was a long and thorough call where many important subjects were discussed, including trade, military, the April trip that I will be making to China, which I very much look forward to. He puts in parentheses Taiwan, the war between Russia and Ukraine, the current situation with Iran, the purchase of oil and gas by China from the United States, the consideration by China of the purchase of additional agricultural products, including the lift, including lifting the soybean count to 20 million tons for the current season. They have committed to 25 million tons for next season. Airplane engine deliveries and numerous other subjects, all very positive. The relationship with China and my personal relationship with President Xi is an extremely good one. And we both realize how important it is to keep it that way. I believe there will be many positive results achieved over the next three years of my presidency having to do with President Xi and the People's Republic of China. Yeah. So that's the readout on Trump's side. Xinhua also released a readout in Chinese. I have not read an English version yet. Any takeaways?
- [44:03]
B
Well, I translated it. I mean, I have the. The. From the Xinhua readout, which is essentially, usually the Chinese side beats the US But Trump actually posted before the Xinhua got the Chinese version out. You know, Trump mentions Taiwan once in the Xinhua readout. There's no mention of Ukraine. I mean, and she, just to be clear, she had, a few hours ago, had a. Had a video call with Putin.
- [44:24]
A
Okay.
- [44:24]
B
So it was interesting how they stacked the two. Stacked the two calls on the. On the same day. There's no mention of Ukraine. In the Shinha readout that I have in front of me, there is a section where very clearly, if you remember the Busan meeting, there was no mention of Taiwan. And the readout which was. Which was kind of interesting, in this one, Xi very specifically says. Or the readout specifically says, Xi Jinping emphasized that the Taiwan question is the most important issue in China US Relationships. Taiwan is Chinese territory. China must defend its national sovereignty and territorial integrity and will never allow China to be separate or Taiwan to be separated. The US Side must handle the issue of arms sales to Taiwan with caution. And then when it says what Trump said, which, again, we don't, you know, this is the Xinhua version of what Trump said to Xi.
- [45:08]
A
Yeah.
- [45:08]
B
You know, take it with a grain of salt. Says that Trump said, I value China's concerns regarding the Taiwan question and am willing to maintain communication with the Chinese side to keep US China relations good and stable during my term. Term. So make of that what you will. I am hearing, you know, there was that big arm sales in. In December that the Chinese got really upset about. $11 billion. I'm hearing there's another one that's been teed up again, going back to the. The commentary we saw around the Reese a couple weeks ago of the national defense strategy. It didn't mention Taiwan. You know, they're giving up on Taiwan. The US Certainly seems to be willing to sell arms to Taiwan. You know, there's the budget issue. Right. Whether or not the Taiwan, you know, the sort of the, the Taiwan budget problems in the, in their legislature.
- [45:53]
A
Right.
- [45:53]
B
But it certainly sounds like the US Is, and this may be why this was brought up, why she brought this up is because they may be concerned that there's going to be another big arm sales.
- [46:00]
A
Yeah.
- [46:01]
B
And they're trying to, and they're trying to get the president to back off on it because maybe they'll threaten like it'll, it'll, the summit in April won't happen. And President Trump appears to really want the summit. So we'll see.
- [46:10]
A
Very interesting. Well, there was a story last week as well in the South China Morning Post. Taiwan has set up a top tier firepower coordination hub in partnership with the United States to sharpen asymmetric strike integration as military pressure from Beijing intensifies. The new Joint Firepower Coordination center, the highest level facility of its kind in Taiwan is designed to coordinate long range precision strike planning and intelligence sharing across the island's military services. So all part of the same story there. It does look like the partnership is deepening between the United States and Taiwan despite some of the softening rhetoric. And it's sort of a, a question of watch what the US Is doing more so than what the US Is saying. But we'll see whether the second tranche of arms shipments or arms purchases is announced over the next couple of months. That's an interesting nugget as context for the emphasis from Xi there. And beyond that, I don't really have too much to say about the call because it's not really clear how much of substance was discussed. I mean, Trump listed about 15 different topics there. Any other thoughts? We also have more US China news to run through.
- [47:26]
B
No, I mean, again, I think it's less than about two months away from a likely Trump visit and so far it's on schedule. I think if there's another big arms sales to Taiwan before then, the Chinese could derail it.
- [47:38]
A
Huh.
- [47:38]
B
Or at least will threaten to derail it. Yeah, but there's, I think that, you know, the Chinese want this trip to happen, this critical minerals meeting going on in D.C. today, we're recording on Wednesday. I mean, that's again, that is a, to the whole idea about the US doesn't, you know, is abusing all its allies at the same time. They're convening all these allies to deal with China's control over the railroad supply chain, which is a, is existential risk to many of these economies, including America's economy. And so it goes back to the you know. Yes. You know, there are things that Trump is doing that look like he's being nicer to China, but at the same time, there's a lot of things he's doing that I think Beijing realizes. You know, they see as just part of the longer term structural challenges and competition in the US China relationship. They certainly don't seem to see any sort of structural change in how the US Is approaching China.
- [48:30]
A
Yeah, yeah, well. And hardening the system on the American side. I mean, because they. Is the meeting in D.C. this week, is that related to the strategic minerals stockpile and the $12 billion fund?
- [48:45]
B
Yeah, no, that, that, that is all, it's all, it's all part of these efforts by the US to. Yes, it's so, so this one is the, it's just going on today where they, and it's related to this Project Vault thing. It's related to. There's, I think there was something in the news today that the, in the Senate, they're trying to get $30 billion more for the US Export Import bank to actually support some of these mining some of these commitments. And that's. So I think the Trump administration, we talked about this ad nauseam. Trump won Biden. They all knew this was a problem. They admired it. They wrote lots of papers, they had a bunch of meetings. Nothing really happened. I think Xi Jinping finally deciding to fully play the rares card last year, not against just the US but also against the fact that the controls they rolled out really were truly global. They weren't just direct to the US and so they freaked out the eu, they freaked out Japan. They're using again on Japan. We are maybe at a tipping point where actually there's enough of an, where there's enough of a momentum and a realization of how this is. China has too much leverage that things may actually be happening this time. That's move towards solving this problem. The challenge, right, is so whether they can fix it in two years or three years, what does China do as its leverage erodes? Because this is a big weapon that the Chinese have and that they're using. They've weaponized these supply chains. And if, if it really does look like they're going to start losing that leverage, do they decide to do something to use it while they can? Because use it or lose it.
- [50:16]
A
Yeah, no, that's fair and will be interesting to monitor over the next couple of years. And also it sounds great to commit $20 billion to solving the problem, however much the Senate is willing to commit. And then of course, you've got the $12 billion in seed money committed by the White House this week and the Export Import Bank. It will take several years to even get initial results from any of these efforts, and probably closer to five to ten years, I've heard.
- [50:49]
B
I mean, if done right, I've heard less, but we'll see. Yeah, I think ultimately, you know, and it doesn't have to be go from 100 to zero. I mean, there are, you know, GM figured out how to do it right. So they don't, they don't rely on the Chinese rare earths. And so, you know, it's not, it's not as hard, not as hard as building, as replicating ASML's EUV machine.
- [51:09]
A
Yes.
- [51:09]
B
And now if it's long overdue, to.
- [51:13]
A
Commit a ton of money to take the problem seriously.
- [51:16]
B
And not just money, but commit to prices, you know, to commit to offtake agreements, to commit to price floors, to commit to all the things that will blunt the PRC efforts to destroy these markets, which is how they've. One of the ways they've been able to gain such control.
- [51:29]
A
Yeah, drive people out of business. There's no question. Well, another story that emerged over the last week or so I'll read from a Wall Street Journal story. The headline was China Loses a Foothold in Panama. Panama Supreme Court of Justice declared late Thursday that two government contracts to operate ports at the mouths of the Panama Canal, Balboa on the Pacific and Cristobal on the Atlantic, are unconstitutional. The High Court's decision means Panama Ports is no longer authorized to operate in Panama. And CK Hutchinson Hong Kong Company Controls Panama Ports. It's a win for the Trump administration, which has been complaining for more than a year about the Chinese presence in the country. Panamanian President Jose Raul Molino, a US Ally, has already withdrawn Panama from China's Belt and Road Initiative. Now the two port concessions will need to be auctioned off. It remains to be seen how Panama will ensure that China is blocked from the bidding, but it almost surely will be. The ruling is also a win for Panamanians. A lack of confidence in their politicians has long fueled speculation around Panama City that something fishy has gone down more than once between the Hong Kong company and Panamanian governments since 1997, when the concessions were first awarded. Those rumors are unsubstantiated, and the government extended the concessions beginning in 2023 for another 25 years. But an April 2025 audit report by Panama's comptroller found irregularities, including alleged non payment of fees that might have cost Panama hundreds of millions of dollars. So there you have it, Bill. Resolution to something that we've been talking about on and off for the past 12 months or so. Do you think this resolution will be durable? What cards does China have to play? Spot?
- [53:20]
B
So CK Hutchinson is going to file an appeal. I mean, we'll see how that process plays out. The various Chinese organs are already having their sort of connections, rhetorical conniption fit and, you know, we'll just have to see how it plays out. And I mean, again, I don't know the details. Maybe they did find issues with what so the payments. Yeah, maybe this was contrived because they're getting pressure from the Trump administration. I don't know. Yeah, I think ultimately China made it clear that these are Chinese companies, that the CK Hutchinson is a Chinese company. By the way, they had the conniption fit over the initial, the announcement of the initial deal for that broader global ports deal and then reporting that effectively the Chinese side had blocked an agreed deal because they wanted a majority share of this consortium for Costco, the state owned shipping company. So, I mean, there's no question that these, the Chinese government views these as Chinese ports. Yeah, right. Whether or not legally they can be taken away by the Panamanian government, I don't know. And again, this could be a complete bullshit deal case that is just a sort of a contrived to effectively expropriate these assets from CK Hutchinson. They could also have turned out that they found stuff where CK Hutchinson was not paying, not abiding by the deal.
- [54:33]
A
Yeah, yeah, well, and, and so what can they do?
- [54:36]
B
I mean, they're gonna, you know, they're gonna throw the conniption fit and then if the case, if, if CK Hutchinson loses its appeal and the, and the ports are taken back, then, you know, I mean, maybe they'll, I mean that, you know, they want to start pushing economic coercion on Panama. I mean, Panama for a long time was very close to Taiwan. So Taiwan would be happy to take Panama back.
- [54:54]
A
Right. Well, and my understanding, I could be wrong on this, but my understanding is that CK Hutchinson deal, their appeal of this ruling, even if they were successful, that would entitle them to remuneration for the ports, but not regaining, not getting it back. So we'll see what happens. It looks like a win for the Trump administration. And you know me, Bill, nothing drives me crazier than the DC Cocktail party talking point. Trump has been a gift to China and it drives me crazy. Not because I love Trump, just to be Clear for the cynicism commentators, but just because it doesn't really, it doesn't really align with what I'm seeing every week.
- [55:40]
B
There are real being taken, it's too fast. So there are areas where he's been a real gift to China and there are areas where he hasn't been. And I think for the view from Beijing is like, let's exploit it while we can. But structurally we still have these broader issues in the US China relationship.
- [55:56]
A
Yeah, well, and stories like this are an example of real steps, steps that are being taken by the US side. And it's not like this happened as a coincidence. I mean, Marco Rubio's first trip as Secretary of State was to Panama and the investigation that led to that decision last week was opened on Trump's first day as president.
- [56:14]
B
It'll be dicey for Beijing if they start decide to use their sort of break out the normal economic coercion toolkit on Panama over this case because again, for a long time Panama was one of the countries that recognized Taiwan and then the Beijing was able to peel them away. And you know, there are economic benefits from trade for being, you know, dumping Taiwan for Beijing for the prc. But if China takes away those economic benefits in a fit of peak over these two ports, then, you know, Taiwan potentially be more than happy to spend some money and get Panama back.
- [56:49]
A
Right. Well, and I think Chinese ships, I mean, China's still the biggest exporter in the world.
- [56:54]
B
Yeah, but they're not. I mean the idea that they would not allow Chinese ships to the Panama Canal, I mean, that's, I think that's not reasonable in anything short of a real conflict, which, you know, let's not go there.
- [57:03]
A
No, but I'm saying if China wanted to punish the Panamanians somehow by withholding cargo that goes through there or something.
- [57:10]
B
Like that's not let them pay to go around in that scenario. Go around South America. Yeah, exactly.
- [57:16]
A
A much longer trip, more scenic perhaps. Well, we also had Nvidia news because we can't record the podcast without Nvidia news. You're not going to believe it, Bill. The H200AI chips are still awaiting final approval from Washington nearly two months after Trump greenlit exports as the US government conducts a national security review before granting licenses to Chinese customers. So the plot continues to thicken.
- [57:44]
B
So what's interesting about that is that I don't know if Trump knew what he was doing or he had other advisors who were smart, who wanted, you know, basically said, okay, you can agree to sell these H2 hundreds, allowing VD to sell these H2 hundreds to China. But we have to go through a security review process. And it's not just going to be the Commerce Department's bis. It's going to involve other agencies, including the State Department, which has a non proliferation bureau. So what I'm hearing is that article talked about state problem hearing. Specifically, it's a non proliferation bureau that is holding up these sales. And that is really interesting because there's no way that Secretary of State and National Security Advisor Marco Rubio, who traditionally has been very tough on China, doesn't know this is happening. So it sets up, I think, an interesting question about what is the dynamic inside the Trump administration around China? And you know, honestly, David Sachs can, you know, Howard Lutnick doesn't seem to care about national security. David Sachs can work with him, can roll bis, might be harder for David Sachs to roll Marco Rubio with the President and get these sales approved. So this could be, this could take longer than people think. Then again, then Jensen Hua can call President Trump and President Trump gets. Tell, tell Marco Rubio, just clear it.
- [58:56]
A
Well, yeah, and I, I joke with my beleaguered tone on all of this because on some level my eyes are just fully glazed over at this point with the Nvidia story. But as far as the security review, when this was mooted a couple months ago, I did understand it at the time as being a, a fully jerry rigged process to just bring them back to the United States so that you could legally charge a fee, charge the fee that the White House wants to charge for the export of these chips. But perhaps there's more to the security review than I was giving the government credit for. And either way, anytime you involve the government in anything, it's going to slow down the process which appears to be happening here.
- [59:43]
B
And then, you know, the question is from China's perspective, right, there had been this talk about, well, they, you know, will they approve purchases, how will they approve them, what are the conditions, who can buy them? You know, this was not something the Chinese side had negotiated. This was not sort of part of a condition for the April visit, April summit. And so if the sales doesn't happen, is that something somehow the Chinese will start pressuring the US to make it happen because we want to have the summit? Or is this one of those things where the, the company Nvidia got to the President, the president said, oh yeah, why not? And then, but hadn't really. Again, this is where we talked about earlier. The process was broken around these sales because it was CEO to president with David Sachs encouraging it.
- [60:23]
A
Well, and a lot of people with power have different ideas about what this policy should be. And that's probably reflected in the execution here.
- [60:31]
B
Right. But so now, you know, the folks like the Non Proliferation Bureau, I mean, they're very serious and maybe the president, if they have, they can either come up, I think, with onerous conditions that you can sell these. But here are the conditions and aiming that maybe so onerous, the Chinese side doesn't want them. It certainly could be that they just get overruled. But I think it's interesting because Marco Rubio has really. He's not at all doing anything publicly on China that would go against the president.
- [60:57]
A
Right.
- [60:57]
B
But in this case, you know, he's Enes, he's now security advisor, he's Secretary of State. It's just interesting that this is where the holdup is moving in the shadows.
- [61:07]
A
Who can say?
- [61:08]
B
Smart. Why? I mean, there's no. I mean, he's. He's clearly a skilled bureaucrat and he understands that you don't want to be on the wrong side of the president publicly. Yeah.
- [61:16]
A
Well, I look forward to more Nvidia discussions every single week with you, and it's great to see you. On that note, we will come back next week. We're outside the paywall this week, so if you'd like to subscribe and get access to every episode that Bill and I record, you could subscribe to Cynicism, or you can subscribe to Stratachery, where you'll get access to daily tech writing from Ben Thompson, along with five podcasts a week from me. Either one, I think, is a great deal. I really enjoy reading Ben. I really enjoy reading you every day, Bill. And we're going to be back for subscribers next week. Who knows what the world will look like in the meantime, enjoy the remainder of the week. Give my best to Tashi. No interruptions from Tashi on today's show. I was a little disappointed.
- [62:08]
B
He is out in the snow.
- [62:09]
A
Oh, good. Out frolicking as the snow hopefully continues to thaw. I'm not going to get my hopes up too high on that front. All right, enjoy the week week and I'll talk to you on the other side.
- [62:20]
B
Thanks, Andrew. Thanks, everybody.