They Called The Trade Wars & China's Housing Crash | Nikhil Kamath | WTF is Finance Ep 4

**Nikhil Kamath** (0:06)
Matthew, as someone living in California is the world turning left again, are we going back to socialism?

**Matthew Klein** (0:12)
Not in California, no, actually California, San Francisco is, you know.

**Nikhil Kamath** (0:16)
If I take San Francisco out of it.

**Ning Zhu** (0:18)
No, well, no, I mean.

**Nikhil Kamath** (0:41)
Shouldn't debt be priced by the ability of the borrower to pay back?

**Matthew Klein** (0:45)
Right, but that's the thing, they can, they can. They can always print the money.

**Ning Zhu** (0:48)
The US cannot always print it its way out of any kind of trouble.

**Nikhil Kamath** (0:56)
Question here, is de-dollarization real? Do you think crypto has future? Can you wager a guess as to what will happen again in the next 10 years?

**Matthew Klein** (1:04)
Well, this is the interesting question, right? I'm talking about in theory, right? In practice, it doesn't work this way.
That's where it gets tricky.

**Ning Zhu** (1:11)
Probably just one thing that is to embrace whatever comes.

**Nikhil Kamath** (1:15)
That sounds scary.
Thank you both for doing this. Matthew, would you like to go first and tell us a bit about yourself?

**Matthew Klein** (1:40)
Sure.
I write about economics and finance. I wrote a publication called The Overshoot, and I co-wrote the book Trade Wars Are Class Wars.

**Nikhil Kamath** (1:48)
And Ning?

**Ning Zhu** (1:49)
I'm a professor at Shanghai Jiaojun University and Tsinghua University, and also I wrote a few books on investment in China's macro economy. One of them is titled China's Guaranteed Bubble, Predicting the Collapse of China's Housing Bubble. And then I've been advising policy makers in China and many other parts of the world on macro economics and monetary policies.

**Nikhil Kamath** (2:09)
Since we are in China today, maybe we can begin by you telling us how the Chinese economy is doing now.

**Ning Zhu** (2:17)
I think the economy is stabilizing. I think we have been having some corrections in the housing market over the past five years. That's taking a drag on the macro economy. That being said, I think the new growth engine, I mean, being the so-called new quality productive forces, higher end manufacturing, new technology, AI and high-end semiconductors are coming up pretty strongly.
There are a couple of issues that's bothering the economy right now. One is, of course, consumption, which is not growing as strongly as people are hoping for. The other is, of course, increasing frictions on the export or the trade side of the economy. But both sides are doing okay, relatively speaking, in the global context, people are just wishing for the better.

**Nikhil Kamath** (3:04)
Can you bucket China into 10-year periods? Because I don't have that much context. I've read a few books in China, but I don't see...
I want to know what changed between 2000 to 2010, 2010 to 20, and what is the last six years like?

**Ning Zhu** (3:23)
I think probably one...
I think one benchmark people commonly use is the general growth speed. I think for the first 10 years of this century, it was growing over 9%. And for the past decade or so, it was around 7, and over the past five years, it's more around 5 So I think that's a numerical summary. But then I think if I have to use major milestones in history, 2000 marks China's entrance into the WTO, which is really helpful to China's economy. And then of course, we have the 4 trillion stimulus packages coming out in 2009, which is a big boost for both infrastructures and the housing bubble. And I think of course COVID is like a shock to the economy. And then the correction or the crackdown on the housing sector is having a lot of influence over the economy over the past five years.

**Nikhil Kamath** (4:16)
Matthew, this is like a conversation. So feel free to button wherever you like.

**Matthew Klein** (4:20)
Sure. I think one thing, you know, as Ning was saying, I think it was worth emphasizing the extent to which COVID was really a break, not obviously uniquely for China, but for a lot of the economies in the world. And you know, one of the big points of contention that we've seen in sort of China's relationship with other countries, and it's come up recently in the past few weeks at the G7 meeting, is this idea of China's rising trade surplus and the idea that the new productive forces that are beneficial on one hand for Chinese producers are considered very threatening for competing companies and Europe in particular with motor vehicles. And I think one piece of context that's helpful here is that if we look at China's external balance with the rest of the world, in the years immediately leading up to the pandemic, the trade surplus, depending on how you measure it, it's around 100 to 200 billion dollars a year, which is, on one hand, is a big number, but it's the global economy, we're talking about tens of trillions, right?