What Will China’s Economy Look Like In 10 Years?

Joe Weisenthal (0:01)

Hey, Odd Lots listeners, it's Joe and Tracy here. We've got a couple of quick editors' notes for you.

One is, our recent guest, Craig Wiggins, misidentified the company Aurora as building to scale. That was around the 1454 mark in the cannabis episode. The correct company is Afria.

Tracy Alloway (0:21)

And one more note for you before we begin. We actually recorded this episode on the week of October 8th, and we referred to some events that were taking place that week, notably a pretty big market sell-off globally, but especially in China.

Hello, and welcome to another edition of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:53)

And I'm Joe Weisenthal.

Tracy Alloway (0:55)

So Joe, I just want to double check, but you realize that I've moved to Hong Kong, right?

Joe Weisenthal (1:02)

I not only am I aware of the fact that you've moved to Hong Kong, I am incredibly jealous that you now live in Hong Kong because that's one of my favorite cities in the entire world with some of my favorite food.

And I think I'm going to come out and visit you in a few weeks in Hong Kong. So I'm actually personally excited to benefit from the fact that you moved out there.

Tracy Alloway (1:23)

Yes, and I promise to take you to some amazing restaurants. But in the meantime, one of the most exciting things about being in Hong Kong has to be writing about and observing the China story. And Hong Kong obviously is a special administrative region in its own right. But it's a good vantage point from which to observe everything that's been going on with the Chinese economy. And as you know, this is becoming more and more important given that the US seems to be on the verge of a trade war with China.

Joe Weisenthal (1:58)

Wait, so we're not talking about Chinese food on today's episode.

Tracy Alloway (2:02)

No, but we should probably do that. We should do a Odd Lots food spinoff, but we're not doing that today. Today we're going to...

Joe Weisenthal (2:14)

No, no, just all jokes aside, I'm interested for reasons beyond the food, and you're absolutely right that it just feels like there's a moment where understanding what's going on in China feels particularly important.

Tracy Alloway (2:27)

Right, and I should say we're recording this in a week that's been particularly terrible for Chinese markets and Chinese assets. When I left the office today, the Shanghai Composite was down something like 5 percent, 10 cents. The big internet giant that we have here had at one point dropped about 7.7 percent.

So it really feels like Chinese markets are bearing the brunt of a lot of the trade war pressures. But beyond that, one thing I've learned just from being here for a few weeks is that, of course, there is this ongoing question about China's economic adjustment and whether or not the aspirations of China's rulers, the Chinese Communist Party, are going to actually be compatible with modern capitalism.

Joe Weisenthal (3:21)

Right. It feels like with China, we're at the intersection of a short-term story and a long-term story. So the short-term story is maybe tensions with Trump, although that may turn into long-term.

There's the market sell-off, other sort of things like that.

And then the long-term, there's the efforts to restructure the economy, the effort to become really important in a bunch of big technological areas, which we've talked about before on the show. And so part of the question in my mind that I'm trying to wrap my head around is, to what degree do the short-term pressures sort of stymie the long-term efforts?

Tracy Alloway (3:57)

Right. That's actually a really good way of putting it, the intersection of a short-term and a long-term story.

So we actually have the perfect guest to talk about this today. Not only is he a sort of a long-running China expert, but he might actually be the coolest economist that I know. The last time I saw him in person, he was wearing a leather jacket and jeans and he was on his way to Glastonbury. So pretty cool.

Joe Weisenthal (4:23)

I'm pretty excited.

Tracy Alloway (4:25)

All right.

So our guest for this episode is George Magnus. He is now an independent economist.

He is also research associate at the China Center at Oxford University and SOAS. He is also the author of a new book called Red Flags, all about the pressures facing China and its ruling authorities. And he is the former chief economist at UBS. So George, thank you so much for joining us today.

George Magnus (4:53)

Well, thank you for having me.