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Clyde Prestowitz: How American Companies Became Subservient to Beijing and How to Stop It With Industrial Policy

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“Because everything it makes is in China … China can compel Apple to do whatever it pleases … And it’s not just Apple. Many major American companies are highly reliant on production in China, and all of them are subject to coercion by the Chinese Communist Party.”

At the National Conservatism Conference in Miami, Florida, I sat down with leading China expert Clyde Prestowitz, who led the first U.S. trade mission to China in 1982. Prestowitz is the author of “The World Turned Upside Down: America, China, and the Struggle for Global Leadership.”

He makes the case for reshoring manufacturing, especially of essential products, and for America to adopt an industrial policy to level the playing field with China.

“To any free, rule-of-law system—U.S., European, Japanese—the Chinese Communist Party is an enemy. Absolutely,” Prestowitz says.

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Jan Jekielek:

Clyde Prestowitz, such a pleasure to have you back on American Thought Leaders.

Clyde Prestowitz:

Thank you. Thank you.

Mr. Jekielek:

It’s been… Gosh, I think it must be a year and some since we last spoke about your fantastic book, “The World Turned Upside Down.” It’s still a book that I recommend for people to understand the current realities the U.S. has vis-a-vis China and the Chinese Communist Party and the history that led us to this place, especially with respect to the trade imbalance. Let’s recap how things changed over the last five to seven years with respect to how the U.S. deals with China.

Mr. Prestowitz:

Well, I think the Trump administration dramatically changed the approach of the U.S. to China on trade by imposing tariffs on imports of many goods from China. But there was also at the same time a deeper phenomenon going on, which was that the Chinese government was increasingly making life difficult for foreign producers in China, and not just American, but other foreign producers as well. The Chinese government was subsidizing and emphasizing more theft of technology from foreign companies. So there was already a beginning shift and then Trump came along and raised the tariffs. And Bob Lighthizer negotiated what turned out to be an agreement with China that the Chinese did not fulfill. But the non-fulfillment demonstrated to many Americans that the previous policies that we had been pursuing were not really realistic policies.

Then came the COVID, and suddenly many global companies realized that when they had made their investments in China, they had never imagined that the supply chain could be a problem. But it became a big problem, partly because of COVID, partly because of increasingly tight Chinese government regulations. And then thirdly, because the Chinese adopted this lockdown system of dealing with COVID, which closed the ports, closed the factories. And we are still suffering from that infrastructure failure.

Mr. Jekielek:

Well, what’s really interesting is that, in a sense, what you wrote in the book predicted this outcome, right?

Mr. Prestowitz:

Well, I think I told you on an earlier interview that when I first signed up to do this book, the Smith Richardson Foundation, which funded me, told me that they wanted me to write something outside the box. And that was in February of 2018. In March of 2019, “The Economist” magazine cover story was, the West made the wrong bet on China. At that moment, the box began to move and I had to run like crazy to stay ahead of the box. I’m still running.

Another important point that I should have hit earlier is that the national security threat posed by the offshoring of production to China began to become much clearer in the Trump years. And so the problem of semiconductors, the fact that the semiconductors are mostly not made in the U.S. anymore became suddenly a major issue, which then opened the field for not just semiconductors, but what about all the things that go into semiconductors, and so forth? In addition to the supply chain problem, suddenly you also have a national security issue related to the way that globalization was taking place in becoming so reliant upon Chinese-based production.

Mr. Jekielek:

What other areas are there like this and what steps are being taken to try to rectify this? 

Mr. Prestowitz:

Well, right now California has declared that there’ll be no more gasoline for automobiles after 2035. So, that assumes that there are going to be a lot of electric vehicles, and electric vehicles need batteries. Where are the batteries all made? Well, they’re made in China. In addition to electric vehicles, California and many other states are heavily pushing the development of solar panels. Where are all the solar panels made? They’re made in China. Okay, you can assemble the parts for solar panels in the U.S., and some companies are doing that, but the parts are made in China.

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So there’s been some talk of, I think it’s called friend-shoring.

Mr. Prestowitz:

Friend-shoring, yes. Janet Yellen, Secretary of the Treasury, interestingly because Janet… I’ve known Janet forever. And for a long time, she was very conventional; globalization, free trade, normal conventional wisdom. Suddenly Janet Yellen is telling us we should friend-shore. That’s a huge shift.

Mr. Jekielek:

Maybe just quickly explain what that means for the benefit of our audience there.

Mr. Prestowitz:

Sure.

So friend-shoring means that if you’re a producer that sells in the U.S. market, maybe instead of putting your production in China, you put it in a friendly country like Canada, or Mexico, or the UK, but not in China.

Mr. Jekielek:

And so how much reshoring or friend-shoring, let’s use both terms, has actually happened since this dramatic realization that you described?

Mr. Prestowitz:

Well, in the last couple of years, not a lot, but it’s growing momentum. And so for example, Apple… Which is probably the single American company that is most reliant on China… Apple has begun to move some of its production into Vietnam and into India. Other companies like Volkswagen, for example, have begun to move some of their production into the U.S. or into Mexico. So there’s a growing momentum.

Mr. Jekielek:

And so what about the trade policy? We know that former president Trump upended the way the trade was done with China, how has that changed or not since?

Mr. Prestowitz:

Well, interestingly, the Biden administration has stuck pretty much with the Trump policy. Biden has been under a lot of pressure from industry to repeal the tariffs that were imposed by Trump, and largely he hasn’t done it. On top of that, Biden has been very effective in getting financing for reshoring. So this CHIPS bill that recently passed the Congress is really going to very quickly result in at least a doubling, probably more than a doubling, of semiconductor production in the U.S.

Mr. Jekielek:

Let’s look at the Chinese economic reality right now. So one thing we do know for sure, it looks like the real estate sector is imploding. And real estate is I think, to put it lightly, massively important to Chinese economic growth and so forth. So what is the actual reality there as far as you know?

Mr. Prestowitz:

China is in a tough spot right now. As you said, the real estate which accounted for at least half, if not more, of Chinese growth is in big trouble. Prices falling, banks going bankrupt, and empty apartments and houses all over the country. So it’s not going to be the growth engine anymore. And then on top of that, Xi Jinping and his drive to erase COVID has been closing down big cities: Shanghai with 30, 40 million people, Shenzhen, 30 million people, and Chengdu with 25, 30 million people. They’re all just stopping, and so that’s had a huge negative impact. And then on top of that, nature is catching up with China. Back in the 1990s, China had a young population, but now it’s getting old. And because of the old one-child policy, there aren’t many young people. So the workforce is declining and getting older. And so in fact, by the end of this century, forecasts are that the Chinese population, which is now 1.4 billion people, is going to be 700 million.

If you do the numbers, so you look at the decline in China’s population and say, “Well, they’re going to be cut in half by the end of the century.” And if you look at U.S. population, including immigration into the U.S, it’s a reasonable bet that the U.S. population will be 500 or 600 million by the end of the century. So we would be approaching the population size of China with a young population, whereas China is going to have a lot of old people.

Mr. Jekielek:

Since you mentioned lockdowns, let’s discuss this. Every credible study now that I’ve read about the impact of lockdowns on society tells us the impact is cataclysmic with marginal, at best, benefit in controlling a respiratory virus, like a coronavirus that results in COVID. As we speak, I believe it’s about 60 million people that are still locked down in China. So what is the Communist Party up to there?

Mr. Prestowitz:

Oh, it has been a huge human issue in China because, as you say, being locked down has multiple downsides for the individual in China, probably more so in China than in the U.S., because being locked down in China meant that a lot of people couldn’t get food, had trouble just getting water. China has a much more densely located population, so people live on top of each other. And the human suffering in China was much greater than in the U.S., or anywhere else. And it has interestingly raised strife within the Communist Party. There are some Communist Party leaders who see it as a potential dead end for the party. Xi Jinping is in control. His opponents have to tread carefully, and they are treading carefully, but there is dissension within the party over the lockdown policy. And I mean, very impossible to predict, but if there were going to be some kind of an implosion or breakdown of the Chinese Communist Party, this could be the kind of issue that brings it.

Mr. Jekielek:

And so my own view on the lockdowns is simply that Xi Jinping and the Communist Party has been celebrating the success of the lockdowns as a means of dealing with COVID for years. And the Communist Party always has to be right. So, despite the incredible cost, they simply can’t backpedal. Can’t say, “This was wrong.” It sounds simplistic and crazy, but that’s how these communist regimes work. At least that’s my view. I’m curious what your thoughts are.

Mr. Prestowitz:

Well, I think Xi has really… He’s put himself on the line here. And as we know, this coronavirus, it mutates. I think there’s a lot more lockdown coming and maybe the eventual lockdown is, lockdown Xi Jinping.

Mr. Jekielek:

So, we have this real estate bubble. We know real estate isn’t going to be the driver of economic growth building. What do the other sectors look like, and how important is the current influx of U.S. capital, which continues to be significant?

Mr. Prestowitz:

Well, it’s important. On the one hand, there is an influx of U.S. capital, but there’s also widespread discussion around the free world of the need to be not dependent on China. So for example, the German government… unbelievably, because Germany thought it was an exception and that it could handle China. But the German government is now talking about putting limits on German investment in China and preventing German companies from transferring certain kinds of engineering technology to China. So, that’s a new ball game. That’s a new environment that we will see evolving.

A problem for China is, in a way, not so much capital. China has a lot of capital, but it doesn’t have any consumption. If you look at its economy today, its exports are soaring. It’s economic growth is almost entirely driven by exports, very little by domestic consumption. But the export game is getting more difficult because other countries are beginning to realize that they’re being essentially set up as targets by China. And so the rest of the world is adopting a different attitude. And I think it’s going to be very difficult for the Chinese to generate domestic consumption because that would, in many ways, reduce the dominance of the party. So it’s going to be very interesting to watch how this plays out in China over the next 5 to 10 years.

Mr. Jekielek:

Something that’s happened within the last year is Russia invades Ukraine. The Russia-Ukraine war, a shift in focus, if you will. I think prior to that, people were a lot more focused on China, but now Russia, Ukraine, Russia-Ukraine. And certainly, in the information space, it’s a massively dominant topic. So what is the impact of this on China? And of course China is coming out on Russia’s side here. And I’ll just add as another piece is that there’s this whole de-dollarization process starting to go on where they’re settling the petrol accounts with yuan and so forth.

Mr. Prestowitz:

I think that the Russian invasion, which as you said, Xi Jinping had kind of signed off. He met with Putin before Putin gave the order. Obviously, the two of them said that they had a no limit friendship. And so Xi gave the okay. Putin made his move. And on the one hand, the Putin move set a shock through Europe. And because Xi was attached to that shock, it also shifted the European attitude toward China. The Europeans began to see, “Oh wow, these Chinese have been telling us that they’re good guys, but they’re not such good guys.” And so a lot of the negative reaction to Putin has also rubbed off of China and then Xi Jinping.

I also think, interestingly, that I’ve been surprised by the European reaction. We still have to wait for the winter to see if the Europeans continue to hang tough. But so far, the Europeans have been hanging much tougher than I thought they would. And interestingly, that’s particularly true by the countries like Poland, and Estonia, and Lithuania who were occupied by the Russians. They know what it’s like to be under the Russian rule. They don’t want it, and they’re sending that message to the rest of the European Union, which I think is very powerful.

Japan at the same time has never had a warm and friendly relationship with Russia. And the Russian role here combined with the threat that China poses to Japan has also woken the Japanese up. And so the Japanese are now doubling their national defense expenditure. They’re loosening up on their willingness to participate in joint military operations. So there’s been really a sea change from what we’ve been used to over the past 40 years.

Mr. Jekielek:

Well, but what about this other element where basically because of a larger proportion of accounts now being settled in non-dollar currency, what is the impact of that?

Mr. Prestowitz:

Dollar issue is interesting. I’m skeptical that the Chinese and the Russians will be able to establish a viable non-dollar system. I’m skeptical because neither the RMB, the Yuan, the Chinese currency, nor the ruble are reserve currencies. And they’re not reserve currencies for good reasons. And so if you’re going to set up an alternative system without a reserve currency, you got to prove that to me. But from my perspective, if they were able to do it, I don’t think it would be entirely bad for the U.S. On the one hand, it would reduce our ability to apply this kind of financial retaliation. On the other hand, it would force us to balance our own tree, and it would force us to bring more production into the U.S. to reduce our dependence on China and other suppliers, and bring the jobs, and the technology, the production back to the U.S. I don’t think they can do it. But if they can do it, it doesn’t worry me too much.

Mr. Jekielek:

It’s a very fascinating perspective to be. I mean, maybe just explain the implications of these not being reserve currencies. My theory is that China might eventually take Russia to the cleaners with this exchange, right?

Mr. Prestowitz:

Well, China is not a reserve currency because if you’re Chinese, you live in China. You cannot just go by dollars. If the Chinese government removed that repression, if they said, “Hey, the market is open, you want to get dollars? Fine.” All of the money in China would rush into dollars. There wouldn’t be any RMB. The ruble is a little bit different because it does have backing by oil and gas, by real natural products, but nobody trusts the Russian government. And so it’s very hard to imagine that much of the world is going to put significant reliance on currencies that have no real backing. We’ll see.

Mr. Jekielek:

Yes. No. And this is just for the uninitiated, right? It’s the idea that a currency will still be worth what it’s supposed to be worth is the issue here, as opposed to a government deciding randomly to change that, which is the reason why what you said would happen if…

Mr. Prestowitz:

Right, yes.

Well, over the last year and a half, the dollar has risen on average something like 20 percent. Think about this, the yen today is at 143 yen to the dollar. That’s what it was 10 years ago. Since it’s beginning, the Euro was valued at between a $1.25 and a $1.40. Today, a euro is like 95 U.S. cents. Now, why is that happening? It’s happening because there’s turmoil in the world, and people all over the world want to keep their money in a safe spot. The dollar is a safe spot. So unless other countries can become as safe as the dollar, it’s not going to go away.

Mr. Jekielek:

Well, so since we’re just on this, we are experiencing considerable inflation. And the information that I’m getting suggests it’s much larger actually than the official statistics. You can look at the food price increases and so forth as some indicator of this. So what impact will that have on the trust people have in the dollar? Because that seems like a foundational question.

Mr. Prestowitz:

Well, it’s a very good question. And if you looked at it only in terms of inflation, it would worry people. But you have to look at, “Okay, so we have inflation. What’s being done to deal with inflation?” And Chairman of the Fed, Powell, has just been raising interest rates. Well, that’s what you do to stop inflation. So if you’re outside the U.S. and you’re looking at the U.S,, and you’re saying, “Geez, I’m holding these RMB or I have these euros and these yen, do I want to put them in the dollars or not?” Well, yes, the Fed is doing what it should do. I’ll say, “Yeah, maybe I will.”

Mr. Jekielek:

Well, and it’s also a question of relative inflation, because all these other currencies are doing spectacularly, or something like that.

Mr. Prestowitz:

Yes, exactly. Yes. Well, the other banks do it. Exactly.

Mr. Jekielek:

Right. Okay, that’s super interesting.

You mentioned a bit earlier that Apple has a particular dependency on the Chinese regime. It’s not the only company I might add. There’s quite a few. But let’s discuss a little bit of the impact of that reality.

Mr. Prestowitz:

Well, Apple went to China in the late 1990s. It moved its production facilities out of California, moved everything to China. At the time, Chinese labor was very cheap. The Chinese government was offering free land, no taxes for 25 years, utilities at half cost. It looked like a beautiful package for Apple. And Tim Cook who had worked for Dell before working for Apple, had taken Dell to China. He went to Steve Jobs and he said, “We should go to China.” And Steve agreed. And so Apple went to China. But now what has happened is that virtually everything Apple makes is made in China. So if there’s a lockdown, and there is right now… Apple’s facilities are in Chengdu. There’s a lockdown in Chengdu right now. And on top of that, increasingly you’re seeing Chinese companies copying Apple technology and eating Apple share in the Chinese market. So even Apple, married as it is to China, has begun to experiment with moving some production to India and to Vietnam.

But there’s another element to this that I think people need to be aware of, and that is that we Americans think of Apple as an American company. And it is technically an American company chartered as a corporation in the United States, I think in the state of Delaware. But in fact, because everything it makes is in China and because whereas in America we have a rule of law, so the U.S. government can’t compel Apple to do a lot of things, even if it wants to. That’s not true in China. China can compel Apple to do whatever it damn well pleases. And so Apple has, in a way, been captured politically by China. So when Apple testifies before the Congress or lobbies U.S. government entities, it presents itself as an American company, but officials have to keep in mind that it is in a way more subservient to Beijing than it is to…

In Washington, Apple has instant entrée. It has armies of lawyers and lobbyists. It’s powerful. In Beijing, it’s on its knees. And it’s important. And it’s not just Apple. Many major American companies are highly reliant on production in China. And all of them are subject to coercion by the Chinese Communist Party. That’s a very important reason why we need to reshore or friend-shore to make our companies much less dependent on China.

Mr. Jekielek:

So obviously, you describe a huge amount of exposure and a huge amount of leverage that Beijing has. This isn’t the only… I’m holding a piece of Apple technology in my hand here, although it’s a bit older. I don’t know where it was manufactured. But what other companies would be of note to consumers, to their viewers?

Mr. Prestowitz:

Think General Electric, think General Motors, Boeing—virtually any major manufacturing industry will be highly reliant on China. I mean, during the height of COVID, our masks were coming from China. The F-35 has a component that’s made in China, that tells you the extent, the penetration of products made in China.

Mr. Jekielek:

Even something that’s so sensitive.

Mr. Prestowitz:

Absolutely vital to national security, Chinese are piece of it.

Mr. Jekielek:

So what is the significance of the massive amount of dollars that China is holding?

Mr. Prestowitz:

Oh, it doesn’t bother me too much. China doesn’t have that much compared to what they need from us. I mean, if China were to sell all its U.S. dollar holdings tomorrow, it would cause a bump in the market, but it wouldn’t be a catastrophe.

Mr. Jekielek:

What is the amount? Is it-

Mr. Prestowitz:

Oh, I think it’s on the order of maybe $200 or $300 billion. That’s big, but the U.S. dollar market is in trillions, not in billions.

Mr. Jekielek:

So another question, there’s considerable Chinese and frankly other investments in American real estate, American land, land that has suspected national security issues related to it.

Mr. Prestowitz:

Right.

Mr. Jekielek:

For example, near military bases. So what is the significance of that in your mind?

Mr. Prestowitz:

Well, one of the things that bothers me in the U.S. China relationship is the ignorance of the U.S. side on the extent of and the limits to which the Chinese will go to obtain intelligence. So the Chinese have been buying up land near American bases. That land is not being bought in order to grow wheat. They’re watching the bases. And when we talk about intelligence, we just automatically tend to think, “Oh, intelligence, okay. That’s what the CIA does.” Or, “That’s what the military does.” It’s true in the U.S. But in China, all of them are doing intelligence. Even there was a figure, a number thrown out last week that China spends more money on domestic security than it does on its army, navy, and military security. Well, all of that effort that’s being made of domestic security is gathering intelligence.

And if you think about the hacking that has been done, I’m sure that your insurance company, or your bank, or somebody has sent you a message to say, “Oh my God, we’ve been hacked.” Well, yes, China has gathered up millions, maybe billions of categories of classified information. So they know your name. They have your social security number. They know your telephone number. People that we would think are not critical in any way, but the Chinese are gathering that information. Sun Tzu, the Chinese war God or war theorist, he said, “Know yourself, know the enemy. You have nothing to worry about, know the enemy.” Well, Chinese really pay attention to Sun Tzu, and they know us very well.

Mr. Jekielek:

So we’ve talked about this on the show with multiple guests in the past, but so the Chinese, U.S. as the enemy?

Mr. Prestowitz:

It depends on… The Chinese, 1.4 billion of them. So for the vast majority of those people, the U.S. is a country that’s far away and doesn’t concern them very much. Because they’re propagandized, they probably have a negative feeling about the U.S. But a lot of their kids come to university here. But if you talk about the Chinese Communist Party, yes, the Chinese Communist Party is an enemy. The Chinese Communist Party is a clear and present danger to any free rule of law system. U.S., European, Japanese. The Chinese Communist Party is an enemy, absolutely.

Mr. Jekielek:

So one of the things that comes through in “The World Turned Upside Down,” is you advocating for something which until recently is kind of an anathema, certainly in DC. And with basically this mantra of free trade at all costs, open markets. You are an advocate of establishing industrial policy in America.

Mr. Prestowitz:

Well, we’re doing it. It’s happening. Congress just passed the CHIPS Act. Both parties voted for it to assure that we have a… Not necessarily have an industry, but that we have the leading semiconductor industry. And the same kind of attitude is being taken toward other technologies, towards telecommunications. The U.S. government single-handedly has deeply wounded Huawei, the major Chinese telecom company. So we, de  facto, are practicing industrial policy. Secretary Raimondo, at the commerce department, has set up a team  of people to evaluate industries and identify those that are most important, that we need to have substantial production in the U.S., and how we need to do that. And so I have to say, I’m a happy warrior. I have been personally arguing for and fighting for an American industrial policy for more than 40 years. And hey, finally it’s happening. I’m a happy guy.

Mr. Jekielek:

Well, so maybe for the benefit of our audience, what does that mean? 

Mr. Prestowitz:

So what that means is that the government plays a role in helping to finance or to entice investment and research and development in particular industries. Typically, the industries that you’re talking about are advanced technology industries or industries that contribute. For example, on the one hand, you don’t think of General Motors in the same terms that you think of Intel. Intel is clearly a high tech company. General Motors, you don’t put them in the same category of technology. However, General Motors buys a lot from Intel. So if you want Intel to be strong, you also want GM to be strong. And so industrial policy would aim at being sure that Intel’s healthy and being sure that GM is in a position to keep buying a lot of Intel chips. Or if it’s not GM, then somebody else has to be a buyer out there.

Mr. Jekielek:

Well, and the context of this is that when you have these giant companies, like Huawei as an example, these are not independent multinationals working with profit as their primary motive, even though it is a motive. They’re actually working at the behest of the Chinese regime. So you have these giant… I mean, it’s kind of the epitome or… You would still call it industrial policy, but it’s these companies are deeply intertwined with the national security and-

Mr. Prestowitz:

Well, an argument against what the Biden administration is doing is, “Oh, it’s industrial policy. It’s interfering in free markets. We don’t want that.” Well, the irony is that these companies, as we said, they’re active in China. So if they’re not subject to a U.S. industrial policy, they’ll be wholly subject to a Chinese industrial policy. So you can’t escape industrial policy. So if China’s going to have one, we need to have one, if nothing else, to offset the Chinese policy.

Mr. Jekielek:

That’s a very interesting way to put it because, of course, they are leveraging what they have on these companies maximally constantly, because that’s just how the CCP operates, right?

Mr. Prestowitz:

Right. Yes.

Mr. Jekielek:

They see it as their role to do that almost, right?

Mr. Prestowitz:

Yes. No, absolutely.

And also, you have the aspect that U.S. venture capital has been very active in China. Well, if the Chinese are trying to propagate particular industries of technology, they will welcome, they will attempt to entice U.S. venture capital to invest in those technologies in China. That’s not good for the U.S. We want that invested in U.S. technology. So I think you cannot escape an industrial policy.

Mr. Jekielek:

So we’re at a very volatile time, it seems to me. We have this Russia, Ukraine war. It’s not really clear how it’s going to turn out. All the powers are using extensive information warfare to make it harder to see what’s actually going on, all the players, right? This is just the way things work these days. The Chinese economic situation is arguably the worst that it’s been in a considerable amount of time.

Mr. Prestowitz:

Yes. Oh, yeah. At the time in 2008, 2009, when we had what we called the Great Recession, that hit China pretty hard. But I would say this is even harder. China hasn’t had this experience since the 1980s. This is a new impact for China.

Mr. Jekielek:

Well, and there’s the debt to GDP, the ratio…. China is highly, highly levered even compared to the U.S., which we say is very highly levered. Right?

Mr. Prestowitz:

Right, right. Right.

Well, the Chinese GDP is leveraged in a different way. So the Chinese government doesn’t have a lot of debt, whereas the U.S. government does have a lot of debt. Chinese GDP is more leveraged in terms of its growth—is dependent on real estate. Real estate does have a lot of debt, which somebody’s going to have to step in and take care of. So far, the national government of China has been able to put all of that debt onto the local governments, but the local governments don’t have the taxing power to really handle it. So we’ll see what happens. It’ll be very interesting to see how Beijing handles that.

Mr. Jekielek:

Then on top of all this, they are locking down and wherever apparently they believe it’s needed.

Mr. Prestowitz:

Right, yes. They’re tying their own hands, so we’ll see what happens.

Mr. Jekielek:

There’s still this huge push, especially from some of these… from the BlackRocks, from some of the hedge funds, to push massive amounts of capital into China, tie it to index funds, even given this reality. Right?

Mr. Prestowitz:

Right.

Mr. Jekielek:

So they’re basically saying, “We think these are great growth opportunities.”

Mr. Prestowitz:

Well, it has been. I think I sense that there has been a pullback from that. Ray Dalio hasn’t raised the Chinese flag in the last several months. And I think that reality is beginning to also make itself felt on Wall Street. And what I really would like to see is some legislation that would prevent investment by index funds of any money that is coming to individuals, say, through social security or government pensions. I don’t think that U.S. government source money ought to be invested in the Chinese market. And I think that message is beginning to be read, but I would like to see it clamped and stamped.

Mr. Jekielek:

Yes And to your point, I talked about this on this show three years ago, I remember this, the Military Thrift Savings Fund, basically the pensions of the veterans in military are… There’s many of this-

Mr. Prestowitz:

The irony of a Korean vet who’s fought in Chinese and Korean, his pension is investing in China, give me a break.

Mr. Jekielek:

Well, no, exactly. But we’re three years down the road and that still hasn’t changed bizarrely somehow.

Mr. Prestowitz:

No, no.

Mr. Jekielek:

Right?

Mr. Prestowitz:

Right.

Mr. Jekielek:

And some of these companies are actually companies that are actively Chinese military involved companies.

Mr. Prestowitz:

Yes, that’s crazy.

Mr. Jekielek:

So any final thoughts as we finish, Clyde?

Mr. Prestowitz:

Well, I think that an important thing to keep in mind is that China has a highly integrated and coordinated face to the world. The U.S. face to the world is a million different opinions. China, only one opinion gets spread to the world. But the truth is that there are a lot of differing opinions in China that may not be being expressed. And I think it’s going to be very interesting to see how the unheard voices get directed in China. It’ll be fun to watch.

Mr. Jekielek:

You think that maybe they will decide to get out of the lockdowns and pin them on Xi?

Mr. Prestowitz:

It’s very hard for me to imagine that… And Xi Jinping has to have a lot of enemies in China. He’s put a lot of people in jail, so he has to have a lot of enemies. And if he’s going to strangle China with these lockdowns, you have to imagine the enemies are going to try to take some action. So we’ll see how it plays out.

Mr. Jekielek:

Well, Clyde Prestowitz, it’s such a pleasure to have you on again.

Mr. Prestowitz:

Thanks very much. Good to see you.

This interview has been edited for clarity and brevity.

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