Adam Tooze on the Big Misconceptions of the Chinese Economy

Joe Weisenthal (0:02)

Bloomberg Audio Studios.

Tracy Alloway (0:04)

Podcasts, radio, news.

Joe Weisenthal (0:19)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:25)

Tracy, we recently interviewed US. Trade Representative Catherine Tai about, obviously, the changing nature of our relationship with China on trade. I feel like, though, we could, this entire podcast could just be about that, right? There's an infinite number of angles to explore.

Tracy Alloway (0:43)

Okay, we're a China trade podcast now. It's done.

Joe Weisenthal (0:45)

Yeah, it's done.

Tracy Alloway (0:46)

No, you're absolutely right. So one thing, this has been hovering in the background all year, basically, but you've been hearing this mention of China over capacity. And I think even President Joe Biden was talking about this idea of China flooding global markets with artificially low priced exports. And then beyond that, a big narrative this year has been China's economy slowing. And so I guess one question I have, or one thing that seems very noteworthy to me that I would love to dive into a little bit more is Chinese growth has been slowing, the renminbi has been appreciating, and there have been all these new trade restrictions since the Trump administration and continuing into the Biden administration as well. And yet China's current account surplus, and I know there's some discussion about how accurate the official numbers might be, etc., etc.,

but the surplus is going up again, which seems kind of remarkable.

Joe Weisenthal (1:47)

Totally. It's a really weird moment, because I'll look at images of some sort of battery plant or factory or some transportation. I'm like, oh, this is the future. There's extraordinary what's being built and the efficiency and all that. And then you read these headlines that basically talk about an economy in crisis. We're facing their worst challenges since Deng Xiaoping or whatever, it's sort of a slow down. And it's hard to like, they fit together in some way, but on some level, I still have a hard time reconciling the dual China narratives right now.

Tracy Alloway (2:20)

Absolutely. And then the other tension that I observe all the time and I have a lot of questions about is this idea that, okay, China seems committed to the export-driven economic model. Even though, again, as far as I can tell, all the headwinds right now seem to be coming on the export side. And yet, like, there's still not that much effort, as far as I can tell, to increase consumption or to maybe, I don't know, do like consumer stimulus or something like that. So, yeah, you're right. It does feel like a strange moment.

Joe Weisenthal (2:55)

And then I guess two other sort of dimensions of this is like one of the points and Ambassador Tai mentioned this is like this view that like China isn't playing by the rules, or at least the rules that maybe the members of the WTO for many of the last decades had accepted. And it always sort of questions like, why, you know, every country has a different arrangement, right? You know, in the US, companies pay the health care of their workers. In Europe, the government pays for health care. Like every country has different rules. So like part of me wonders like, what is it about China and this sort of state-directed capitalism that they have there that's like particularly like, oh, no, this crosses a line and the rules of trade don't really work with them. And then too, you know, this idea of like over capacity and dumping, like I get that perhaps intuitively in a pure commodity, such as, say, steel. But when it comes to some other things like solar or petrochemicals or things that really, you know, are very, or cars, like I have, I struggle with this notion that like it's a useful concept, but maybe it is. But anyway.

Tracy Alloway (4:04)

Rather than us wondering about all these questions and thinking aloud, let's ask our guest.

Joe Weisenthal (4:09)

Well, I am thrilled to say that we are welcoming back on the show multi-time Odd Lots guest. But it's been a while since we've talked to him, but someone who could help us understand all of these things. We're going to be speaking with Adam Tooze, professor at Columbia. He's the director of the European Institute and the chair of the Committee for Global Thought. He travels all around the world and he was actually in mainland China this summer. So Adam, thank you so much for coming back on Odd Lots. It's been too long.

Adam Tooze (4:38)

Yeah, it has. It's a pleasure to be here, guys.