What is China’s Secret to Economic & Technological Prowess? W/Einar Tangen & Warwick Powell

All right, hello everybody and welcome to Geopolitical Trends, where truth matters. Excited to be with you as always. I'm even more excited because I have one of my two best friends and two of my favorite, uh, uh, uh, speakers here. He's going to be joining us for this interesting conversation. So with me is Einar Tangen, who is a senior fellow at the Tahir Institute, in addition to being a senior fellow at the Center for International Government Innovation, known as CIGI, in addition to being an international commentator on geopolitics and the global economy. Welcome, Einar.

Thank you, David.

And also with me is Dr. Warwick Powell. He's an adjunct professor at the Queensland University of Technology and also a senior fellow at Tahi Institute. Warwick is the author of of the very, very interesting book. If you get a chance to read it, it's called China: Trust and Digital Supply Chains: Dynamics of a Zero Trust World. In addition to this, Warwick also is the host of the TO Talks with Warwick Pao, which I'm going to share with you the link. And by the way, you guys, I highly recommend— I'm going to put in the chat box for you guys for later on, you can check it out. It's very, very interesting. So welcome, Oleg.

Great to be with you both.

Well, it's really a joy having both of you. I haven't talked to you guys for 2 months, so the community were wondering. So I'm gonna have to take you back to September 3rd, if I may, because I need to ask some specific questions that I saved for you. I'll start with you, uh, Einar. I would like you just to share with the community the significance of the V-Day parade that was hosted in Beijing?

Well, the biggest takeaway is that China has signaled to the world that there will never be another 100 years of humiliation in the immediate future. What you saw was a display of military advancement, which makes it clear that China can defend itself. Now, a lot of people want to say, oh, this, you know, China was flexing its muscle. Quite au contraire, it is not China who is, you know, sailing ships along the American coastline or threatening other entities or having 400 bases surrounding another country. China is very much aware and remembers clearly this 100 years of humiliation, the Japanese war, the the war against Japanese aggression and, you know, being occupied. And don't forget, this was something that was done by the colonial powers, the very ones who are complaining and saying, "Oh, China's flexing its muscle." So, very, very important from that perspective. It was also a commemoration of the fact of World War II, the anti-fascist war. And unfortunately, what we have going today is fascism is on the rise. We can see it clearly. You have people and governments who are saying you cannot trust— even there are people who are saying you cannot trust the governments that they head, you cannot trust the media, you can't trust institutions. These are all the means by which fascism rises, and this was, I think, a clear reminder that during World War II, we lost 100 million people worldwide, and of those, 35 million were from China, 27 million were from Russia. So these types of things have disastrous consequences. There's never been a period when you have good fascism. So it's something that people should be aware of. They should be aware of very much how much China suffered and sacrificed during this period.

Warwick, how do you see it? How do you, how do you see that parade? What does it, what does it mean on the bigger picture?

Well, it says never again, as Ina said. What's interesting about it for me is that whilst you have a bunch of Western commentators carry on about this as China flexing its muscles, What we actually have is a United States whose president tries to make a claim to being the peace president, and the only way he can do that is because America is perpetually at war. America is, on any given day of the week, engaged in multiple conflicts, and the big decisions that US presidents seem to have to make is whether or not they sign off on tomahawks to participate more in wars that they started. You know, so the contrast is actually very clear from my mind. One is obviously a recognition of the history of humiliation, demonstration of capability today after 100-odd years, um, that this again. And the second one is actually a very direct reminder to the world that, um, that China doesn't need to run around saying it's the peace country, because in, in practical terms, that's actually how it's lived. It's the United States that is the warmonger. Um, there's plenty of academic research that confirms that the United States has literally been at war for almost every year since its founding. And in fact, in the last 30-odd years, when it was supposedly at its most secure in the unipolar moment, it engaged more military interventions per year on average than it had done in all the previous years. And today we have, um, you know, America flexing its muscles with, uh, with naval presence off the coast of Venezuela. I mean, seriously, you know, if people want to talk about countries that destabilize regions and perpetuate or cause and perpetuate wars, then I think they need to take a good hard look at how Washington views the world and how Washington behaves.

Indeed. I'm glad you guys shared your perspective on this because I wanted the community to hear it from you. I was in Beijing at that time. And I just didn't get a chance to talk to you about this back then. So let's, uh, we're gonna move on. By the way, just for the community to know, we're gonna be addressing a host of issues. So I'll be talking with Einar and Warwick on a host of topics that you want to hear what they have to say, because those issues we're going to be talking about will have a direct impact moving forward economically, geopolitically, and otherwise. So I'm gonna move into the conversation, Einar, with the ongoing trade talks between now the US. Scotty Bassett just met with the Chinese Vice Premier Yi Lefeng. I hope I pronounce it correctly. And they sort of started new trade talks in Kuala Lumpur. What do you make out of that? Is it something of substance? Or is it, can you trust the Americans?

Well, no. Well, you can't. That's a broad question. There are Americans you can trust. Donald Trump is not one of them.

That's what I meant.

You know, and you do. I'm not saying this because I dislike him, which I do. I'm saying this because if you look at his history, it's very clear. Here's a guy who withdrew from the TPP, Trans-Pacific Partnership. Pacific Partnership, which the US had hijacked and made sure contained these 19 provisions which were going to protect only American brands and industries. He withdraws from it, insists on a new trade policy, which he personally gets involved with in terms of Canada and also Mexico.

And he—

if you go back take a look at what he said. It's the most beautiful, you know, best trade, fairest, uh, in history, you know, all, all the superlatives he generally uses in his very limited vocabulary. And then 4 years later, oh, they're cheating us, they're the worst people in the world, they, you know, they're doing terrible things to America, they're going back to rapists and drug addicts and drug dealers and this type of thing. So this is a, a person you cannot, uh, do a long-term deal with. Because he always wants to improve it. Uh, this is this kind of New York bottom of the barrel, um, type of, uh, real estate guy that he was and everyone considered. He was always on the edges, scrapping around, trying to improve his position marginally here and there, uh, just through bravado and, uh, this type of stuff. So he's taken his trademark approach in real estate, and he's now applying it to the United States. In terms of what goes forward, China has been studying.

They—

Beijing was surprised 8 years ago when he became president, or a little more than 8 years now, because they thought, oh, American presidents always use the China card, saying China bad, you know, I'm going to take tough actions. But when they get into office and there are mature people around them who explain that the Chinese and American economies are intertwined in ways that cannot be undone easily. It's a kind of Gordian knot. You know, this is the famed ball of string that, you know, once you pull one thing to try to undo it, it simply makes the ball of string tighter. So very difficult to deal with, and they back off, but not Trump. He doesn't really care about the realities. He plunges forward with this trade war. It ends up in this Phase 1, and I mention this because this is something your community should be paying attention to. China studied him. They know what his game plan is— bravado and all this thing, very transactional. They're not going to enter into an end-all, deal. There will not be anything of that type, but it's probable that they'll enter into something like a phase 2, and that is because Trump is desperate to bail out his soybean farmers. Um, also, uh, there are other parts of the trade angle that are affecting his base, so he needs to do something along those lines. So China can say, look, you drop these tariffs here and there, uh, we'll give you give you rare earth elements, but I don't think they're going to extend it to military. I think there will be a period when they say, well, we'll give you a year and we'll allow your car companies and anything that's civilian in use, uh, to, you know, use rare earths. We're not going to allow it on that area. And then this Phase 2 deal, and you can quite clearly see that it's going in that direction. Just prior to coming to China, uh, Trump announced that he was going to do an investigation of the Phase One trade deal, which was 5 years ago in 2020. I mean, why else would you bring up Phase One unless you were anticipating entering into Phase Two? And this is transactional. If he violates the terms, China immediately stops buying or cancels its orders for soybeans. So there would be immediate repercussions. And I think China has wisely seen that this is the only way you can deal with somebody like Donald Trump because he's so mercurial, so transactional, and completely untrustworthy.

Very interesting. Uh, uh, Warwick, before I'll, I'll turn it over to you, I'd like to play a clip because I'd like to get your reaction to it, and we'll continue our conversation here. So Let's take a listen because I do have some Chinese speakers in the community, so I'd like them to— I had a, I had a chance to read the translated version, Warwick, and one of the things that caught my attention regarding his speech has to do with the during the talks, they mentioned that this conversation, or these talks rather, includes the export control issues on each side. Is this a hint for sort of reference to the rare earth elements, or is it something that goes beyond, in your opinion, Warwick?

Well, I don't think the Chinese would have entertained a discussion on the question of the rare earth elements if there was not going to be a discussion on the long-standing American export controls on a raft of technologies. Let's not forget that, um, that most of the, uh, the dysfunctionality in the trading relationships was given rise to by the United States. Donald Trump in March 2018 launched the trade war, and he said at the time that trade wars are good and easy to win. Well, they haven't been so good for the United States. They certainly have been good have not been good for the rest of the world either. But, um, but that's the point, you know, no one wins in trade wars. But the United States has certainly experienced significant downsides, and, and quite clearly they're not easy to win. So I think that, um, what this signals, David, very clearly is that, um, the, the issues of concern to the Chinese side was also on the table. What's important about all of this, put aside the transactional issues, you know, there's a catalog of lists of issues, is actually what this tells us about change in the structure of the relationship and the dynamics at a global balance of power level. If this discussion was entertained in 2018 or 2019, there is no way known that the Chinese side would have felt as confident as it does today in laying out its terms and issues. It certainly would not have embarked upon the introduction of the, of the rare earth elements export licensing regimes. It just wouldn't have happened. The fact that it's happened now and that the discussion is actually shifting not from whether or not there's going to be this regime in place, but really around the implementation details, tells us absolutely everything we need to know about how the world has actually fundamentally changed from March 2018 to today.

Now, just, just to follow up on this point with you, Warwick, before I turn over to Einar, could these statements by the by China's trade representatives sort of paved the way for the upcoming meeting between Donald Trump and President Xi Jinping. I think it's on next Thursday, if I'm not mistaken, which is scheduled for next week. Will this sort of pave the way for some productive, if I may use the term, meeting between the two presidents, in your opinion?

Well, I think that was the aim. The aim was to try to identify the issues, narrow the issues, and get to a point where leaders could reasonably consider something that was constructive that would take things forward. Exactly what's going to be included in that discussion, I think, is still open to the work that needs to be done between now and then. You know, if people expect a detailed agreement to be achieved between now and the 30th, well, you know, they're really having some very high hopes on the bureaucrats involved on both sides being able to put something together. I think that there are many issues involved that will require much more time to address in their entirety. What we have, and we've seen this on both sides actually, is in their own ways remarks that suggest that where we've gotten to is a framework, right? Now, we've already had a few frameworks, right? Clearly, what we're progressing is this idea of there being a methodology that issues will be addressed, the mechanisms by which they will be addressed, and that enables the, the respective sides to deploy the personnel that they need to, to work their way through the detail. I mean, just take the rare earth elements export licensing regimes as a classic case in point. They've been introduced, the parameters were made clear, on the 9th of October, namely that as a matter of principle, the rare earth elements will not be provided to those who have exclusive military uses for them. Humanitarian and civilian uses will be par for the course. You just get— you'll be able to continue business as usual, subject to licensing. And of course, there's the big gray area in between, which is dual use. So what I suspect is going to happen will look something like the Rare Earth Elements Export Licensing Working Group, Implementation Working Group, where stakeholders from each side will become involved in addressing these operational details. Will there be, for example, a whitelisted fast lane? How does an enterprise get on a whitelist? How do we define things like mixed uses? And importantly, if we are going to have these kinds of definitions around the uses and the licensing permissions associated with that, how is it that uses are ultimately audited and verified? Yeah, so these are the operational matters that will actually take time to work through. And so when Besant the Peasant talks about there being a 12-month extension of time, I think that what we're talking about is a realization that implementing complex administrative arrangements ultimately requires a thoughtful endeavor from those impacted by the decisions on both sides. And that's what we're going to get. I seriously doubt— as Anna said— that China is going to bend on the question of military applications, though again, there may be some very particular conditionality attached to certain kinds of uses. You know, only time will tell on that front. But, um, but clearly the apoplectic reaction out of Washington when the announcements were made on the 9th of October speaks volumes, right? This actually tells us that the United States has an incredibly soft underbelly on this particular area. And to be honest with you, I don't think it's really to do with the mainstream economy, whether they were dual-use or civilian applications, but it's— it got everything to do with the American military-industrial complex. The, the military-industrial complex relies upon Chinese materials for about 78% of its parts. You know, that's, that's the reality of it, you know. And without the military-industrial complex functioning, I'm not sure what you'd say about American manufacturing, but you'd certainly start to come to a view that American hard power projection becomes severely constrained going forward.

You know, very interesting. And we're going to be touching on this aspect of the military, the use of the rare earth element. Uh, Einar, please correct me if I'm wrong. Will I be wrong if I say what I concluded personally, and this is my opinion, what I concluded from these talks is that now each side, the Chinese and the Americans, will move forward to the next step by implementing its own, some sort of an internal processes, whatever that might be. How do you see it playing out in the next few weeks, or maybe between now and the end of the year?

Well, I would go back to what Moritz pointed out, which is this is going to take a while, and this is part of China's strategy, which is to slow play the United States. You know, if you look at the last 11 months, it has been a roller coaster ride on a daily basis. I think most people would say it was equivalent to 11 years. Um, you know, it's, it's a, a weird thing. I mean, anything involving Trump and we're living in dog years. I mean, it's just so many things are happening. Can you imagine for the next 3 years dealing, uh, and a couple of months dealing with Donald Trump? So he's going to continue to be who he is. Uh, the only way to deal with them is slow play. I mean, O'Rourke is the expert on no-trust systems. I think he can go to that, but that's exactly what we have here. So it's not internal processes. It's a negotiated process, as he was talking about. And the question is, how— what is the US going to do about it? Because on one hand, they have no choice. And this is something that people have to do. And that's what O'Rourke was saying, this apoplectic reaction simply because they didn't. But, you know, what's surprising is that they're surprised. I mean, this whole issue about rare earths has been around for a long period of time. It's not like the US military doesn't know that it gets, you know, three-quarters of its materials from China. And it's not just rare earths. Uh, China has other pressure points out there, including, um, you know, a lot of treasuries They also have these strategic metals that really aren't available except from China and Russia. And that's why US trade with Russia, when it was running around telling everyone else they should— and still is— don't trade oil with, with Russia, you're supporting their economy. Well, the US last year increased their trade with Russia by 28% because they had to buy these rare earths and yellow cake and and some fertilizers and things like this. So, you know, the extent of the hypocrisy is astounding, but people have gotten over that. They know they're going to deal with an entity that will continue to change its stripes. It's, you know, it's a chameleon. It'll just keep changing. But in this particular case, it'll keep demanding more. So you just slow play it, put in these ideas of, okay, we'll deal with this next year. Why is that important? Because next year you're one year closer to the end of Donald Trump.

Yeah, that's very interesting, uh, uh, uh, Einar. But I'm going to follow up on this just regarding the upcoming meeting between President Trump and President Xi Jinping. Uh, you, you know, should we expect anything of, of, uh, substance out of that, or was it this nothing but a photo op for Donald Trump to score political victory here at home?

Uh, it's not going to be a photo op for Donald Trump. He will use it as a photo op, but quite frankly, what you're going to have is Xi Jinping has the upper hand here. I mean, that is, you know, Trump didn't come to Asia because he's interested in it. This is, I think, his second trip, uh, ever to come to this area where he wasn't being received in some sort of royal reception. He isn't interested in Asia except to the extent that he wants to tame it and contain it. So he's over here because he has no choice. All of his thoughts are there. So really, the whip hand is really in China's, but China is the one who's trying to be the adult in the room. The ones who are saying, okay, we have to slow play this fellow. He's not trustworthy. And it's not just China. China's interests, right? What they're pushing is this larger interest of the Global South, the rest of the world, those who are willing, those who need somebody to stand up to this incredible bully. And China is showing the way to other countries on how you can deal with Donald Trump. Now, smaller countries, they, you know, they feel like they have to kind of kiss the ring and do everything necessary to flatter him and things like that. But that is not what Xi Jinping is going to do. He'll get up there and just say, okay, we've reached it, we're going to continue the process, uh, we've reached some interim agreements, uh, there's going to be some trade back and forth. We'll, we'll buy some soybeans and things like that, and the U.S. will reduce this and take away that and take companies off their blacklists things like that. So to make very clear, this is a transactional agreement between two powers, and it's not asymmetrical except to the extent that China has shown that it has more cards than Donald Trump.

Very, very interesting. Uh, Warwick, I, I had a chance to read, uh, an article by, uh, Jeff Fox, this one part of the, uh, CNBC also published that one. In which the gist of it was that the tariff has cost companies now this year could hit $1.2 trillion, with consumers taking most of the hit. How do you anticipate this to continue into next year? What can we expect, especially for the American consumers?

Well, the implementation of the tariffs, interestingly, has already involved a significant number of exemptions from the Trump administration. What that tells you, of course, is the realization that tariffs do ultimately lead to additional costs imposed on, on buyers of products. We have also seen recent evidence of the president talking about increasing beef imports from Argentina so as to reduce the cost of beef for American consumers. So again, there is a realization that the barriers to trade can have significant adverse effects on American consumers. Up until now, the majority of the cost of tariffs has been absorbed by importing companies, and they have not passed on those costs yet to their final customer destination. Somewhere in the order of about two-thirds of costs have been absorbed by companies to date, and about 22%, 23% is already finding its way to the consumer's hip pocket. That is not sustainable. Over time, the companies that have been absorbing those costs and ultimately affecting their own margins and stability of operations and cash flows will begin passing those costs on. And that's what the article you're referring to actually begins to talk about, is that we will over time start to see those costs passed on to end buyers. The other interesting and important feature of tariffs is not only the effect on the consumer, which we usually think about as the householder or the individual end consumer, but that, for example, in the case of trade with China, 40% of that trade or thereabouts is in intermediate goods. These are goods that companies in America use to make things for Americans mainly, and to some extent some exports as well. So we're starting to, I think, see the unfolding of the impact of tariffs through supply chains to downstream enterprises and ultimately to downstream households. There is no avoiding that reality. I've said on many occasions that What we are witnessing now is the progressive adjustment of the American political economy and social settlement to a higher cost system and a lower standard of living system.

That's reality, simple as it is.

You know, uh, one final note on this topic, uh, Einar, and we'll move on into something else here, uh, because, uh, and I don't know, I'm gonna say it as, as I, as I see it, so But the way I see it is that— and please correct me if I'm wrong— the way I see it is that Scott Bessant underestimated China, my opinion, because now when he talks about a final deal, for example, on the TikTok US operations and a deferral, some sort of, on China's— in reference to the tightening of the rare earth minerals control— it seems to me that Scott Bessant doesn't understand You know, what really is happening? Is this because of his misunderstanding of China to begin with?

Scotty Mason is an interesting character. You know, he belongs to a party that doesn't tolerate his personal life. He has a husband and children. And, you know, this kind of duality in his, you know, His character is kind of odd. Um, remember, Scott Bessant was, uh, responsible for the rape of Southeast Asia through the Asian financial crisis. He was the number one lieutenant to Soros. This was planned. This did innumerable harm to Southeast Asia, which still reverberates throughout the region. All right, this, this was an engineered way of him making a lot of money. Financialization at its worst. So now he's coming into government. I don't know how it is that somebody who worked as the closest lieutenant to Soros is now the closest lieutenant to Trump, other than he seems to have a penchant for being able to insert himself as somebody who's willing to, you know, fawn and pretend that he's loyal. Trump seems to like him and rely on him as, quote, one of the adults in the room. Let's look at his cabinet, right? You, you talk about Scotty Bessant as if he's some power in there. He's a power by default because you have an education secretary who believes that AI is A1 sauce, and, you know, kids like A1 sauce. I mean, it's incredible. You have headsets You have, you know, I think there are 7 beauty queens who are now implanted as, as, uh, either secretaries or attorney general or in high positions within the Trump administration. They're selected for the way they look and their loyalty and the fact that they have no independent base rather than their competency. So Bessant, simply because he has worked in finance, is somehow seen as the adult in the room. He isn't. He's somebody who really doesn't care about anything, and his ability to be completely, you know, duplicitous is incredible. He said early on that, you know, the problem with the world today is financialization, you know, people betting on outcomes as opposed to the real economy. Well, who— guess who made $500 million plus doing exactly that. So he is— in terms of being surprised, there's no way anyone with any knowledge can be surprised. I mean, China had an issue with, uh, Japan over the, uh, territorial dispute, and they slowed down, all right, uh, the export of rare earths to Japan. And this is quite some time ago. And even before that, there were white papers that were put out by the, uh, you know, the Defense Department, etc., saying, oh, you know, we, we are very dependent on them. So this isn't new, and it's not the only area. I keep saying that there are many, many arrows in China's quiver, and it's, you know, all of a sudden the realization that you cannot continue to go slap around somebody you you know, depend on, has suddenly come to the Trump administration, and it's Bessant who has been tasked, because he's not completely competent, but by comparison, he's a mountain of competency compared to the idiots that are in the current administration.

Absolutely correct. By the way, the year you're referring to, Einar, was 2010. I remember because I had a chance to read that white paper regarding China's decision regarding the rare earth with Japanese. So let's move. Yeah, I beg your pardon.

It goes back earlier. I believe in the early 2000s there was a Pentagon white paper that—

okay, so you're referring to—

look, we're heavily dependent on this. We need to do something. And of course, no one did anything.

Interesting. Uh, uh, uh, War, I'm gonna ask your opinion regarding— and Alaska, Anna, as well, but let's start with you, War, regarding the China Fourth Plenum, which, uh, I had a chance to read. I'm gonna share the just the picture for now, but for the community, I will post the link for you to read it. So it's nothing classified or surprise. This is what the, uh, what came out out of that meaning. So I'm going to share it in a form of a link. For now, I would like to just, to like, just have, uh, Warwick's opinion on this 5-year plan. And can the Europeans or the Americans learn something from the Chinese model?

Well, what people learn from the work and success of others will ultimately be up to them. Um, uh, the history, I guess, in recent times shows that, um, that the United States and Europe tend not to take the work of non-Europeans that seriously, and, and in fact are consistently surprised at things that happen in China despite the fact that they were articulated in the various 5-year plans that have been unfolding over time. So you're talking about the 15th 5-year plan, which covers 2026 to 2030. Which means that we have had 14 5-year plans before then, right? So, um, if you go back and actually read those 5-year plans, you will find that, um, that China does articulate in quite a lot of detail what its objectives are for the subsequent 5 years. And if in fact, uh, what Chinese policymakers prioritized was actually taken seriously by those in the West, then the West should never be surprised by anything that China does. But of course it is. It doesn't take seriously China's 5-year plans because it views them through a particular distorted lens, which is that, you know, markets rule the day and governments simply need to step back. The idea of planning is, is, is an anachronism. It failed the Soviet Union, therefore it's bad, etc., etc. So there's nothing to learn at all. In any case, we've got a 5-year plan that's covering the next 5 years, and in many respects, of course, it builds on the work that's been achieved to date, but it also charts some important new territory, or at least creates some new areas of emphasis. It clearly continues the strong focus on high technology development and industrial development. On the back of research and development in the sciences and other areas. That's clearly been a foundational feature of China's economic transition story, particularly over the past 8 or 9 years as real estate was deleveraged and national capital was committed to expanding and deepening the capacity of China in high technology areas. But I think that there's some other important dimensions to the Five-Year Plan that are worth drawing some attention to, and they go to an emphasis on what I would describe as a commitment to greater quality in the circulation of the economic fruits. We're not just chasing economic growth for the sake of economic growth. We are now seeing a country that is committed to the idea that the fruits of economic development and growth are there to be shared by people no matter who they are and where they live. That means bridging the gap between the city and the country. It means creating new pathways of opportunity for young people. It means creating new services and opportunities for older people, the greying economy, so to speak. And it ultimately means a refreshed commitment to social services, um, as public goods. And we're going to see more and more of that because China's creating the kinds of physical surpluses that you need to be able to deliver a high quality of life. Let's not forget that the objective by 2035 is to realize a socialist economy. With a moderately prosperous society. Emphasis on society— it's not just an economy, it's actually a bunch of people. So you'll see in this particular Five-Year Plan a commitment to not just the Chinese economy but the Chinese people's economy. And the last thing that I'll mention is that I noticed reading through it is this idea of beautiful China. And I think that that's actually quite an important idea. It's not just an idea concerning the greening of China per se, but it's a broader sense that running a country well and delivering on the aspirations of its people is also a work of art in and of itself. And the kinds of thought and policy calibration that goes into these 5-year plans and ultimately their implementations in many regards is, um, is, is, is a work of art.

Very interesting. Uh, Einar, from a financial perspective, how do you see it, especially for the, the, the 5-year plan? In other words, given the changes that's taking place right now, for example, what we are noticing— and we're going to detail this as we move forward— BRICS swapping the US dollar for the Chinese yuan. How do you see the plan for this recent meeting inside the leadership in China vis-à-vis the financial structure of the world?

Well, I mean, this is something you should have been asking Warwick because this is his wheelhouse. But I can add that, look, you know, United States and Europe are in essence seizing money from Russia under this idea that they're at war with Russia, although they're just supporting a war, willing to fight to the last Ukrainian, etc. Um, and this has made everyone nervous. Uh, you can talk to people in the Middle East, South America, Africa, it doesn't matter where you talk to. The U.S. is a mercurial and demanding power, and they're all concerned that, you know, its ire could be turned on them at any moment, and then their assets are at risk. So they are all moving for alternatives. It does not mean the end of the dollar. That will only come if the United States continues in its plan to devalue it while trying to force it onto the international community. So economically, um, I, I'm, I'm shocked. I keep hearing, uh, going on shows and they see, oh well, China's really going through a tough time. I said, really? I said, let's look at the 14th Five-Year Plan indicated that China grew at 5.2%. You know, you compare that to, uh, the developed countries who were, uh, somewhere between a quarter to, uh, uh, a third of that, uh, and that gives you a better idea of where the reality is. Even developing, uh, and other emerging countries, uh, were growing much faster than the developed ones. And that's what we're facing right now, this kind of backlash. Uh, the rich are complaining that they're not rich enough. They haven't stolen enough from other, uh, entities. And they're saying, well, we deserve it. Why does America, you know, run around the world saying that it should have everything free and everyone should support it because it's already rich and powerful, although it doesn't seem to take its internal processes as seriously as War was pointing out? So economically, China has charted its course. You're already seeing the rating agencies coming out and say, you know, China's path going forward, 4.8%. I think it'll be more around 5%, but let us not quibble. The fact is China is emerging, all right, painfully. There's lots of pain in small businesses who are experiencing, you know, uh, the, the effects of what Donald Trump is doing. You know, this idea that they used to have these exemption of packages with a dollar value under $800 could come to the United States. Now that's been done away with. There are a lot of small businesses that depended on that. Uh, that has gone away. There is pain, but the fact is China is over the next period, uh, looking to continue expand. So economically, uh, China is doing well, uh, not as well as it wants to, not as well as it could if you didn't have some idiot in the United States, uh, doing, uh, what he's doing to ruin the global economy. He's creating so much uncertainty. Business operates on predictability, and Donald Trump has robbed that from the world, and he's robbed it from his own US dollar. So that is why it will continue to go down in terms of its prominence as others seek alternatives.

Well, you mentioned the dollar, uh, uh, that brings me to my next point, uh, Warak, the idea of BRICS now is swapping with the— I just read this morning that Indonesia has entered into some, uh, agreement with China regarding the swapping of the currency. But I know Ethiopia is moving its current— its debt from the US dollar, swapping it into the, the Chinese yuan or renminbi. How this is gonna— how this swapping the US dollar for the Chinese yuan is going to now have the impact on the global financial system moving forward?

Well, I mean, these are all relatively small-scale transactions in a sense, so in and of themselves they're not going to, you know, fundamentally change things. What they are though is evidence that change is happening, and, um, and, you know, there are sort of micro reasons, if you will, which are transactionally oriented you know, going to questions of interest rates, which countries are mindful of. But the other thing that countries are mindful of is that when you have debts denominated in foreign currencies, you've got to have ways of earning those foreign currencies to be able to service those debts. And the last thing that countries want to be exposed to is excessive amounts of US dollar-denominated debts, whereby they ultimately are captured by the United States because only the United States actually issues dollars. So countries need to earn US dollars to be able to settle those obligations denominated in US dollars. The Indonesian question, I think you might be referring to— well, there's been a couple of, uh, recent developments. One is the swap agreements that have been entered into, which enables central banks to provide liquidity support to each other. In the event of needing that for overnight settlements. The other thing that's interesting is that in the last 24, 38 hours or thereabouts, um, we've had news that, um, the Indonesian Central Bank has also issued a tranche— first time ever— a tranche of RMB-denominated bonds. So this is another way by which countries can get access to RMB that they intend on having available to again settle transactions with China. So there is an evolution towards currency multipolarity. One of the reasons why the US dollar is in some regards less in demand as it once was is because the United States, aside from weaponizing the system, is actually not a supplier of many things that the rest of the world needs and wants. Which can't be gotten elsewhere, right? So, so in, in the past, when countries accumulated dollars, um, they recycled those into American financial assets, you know, whether they were treasuries, stocks, or what have you. But there is some reluctance to do that now, um, and, uh, and you only do that because you, you believe that at some point down the track, those dollars will still be good for you know, real things that are useful to you. You know, for example, on global energy markets, but we're going to see a world in which increasingly sellers of oil and gas will settle in non-US dollar terms. We're starting to see a change in how other commodities such as iron ore are being settled. You won't need dollars to settle iron ore deals, et cetera, et cetera. So, um, the evolution's on. The weaponization of the dollar has hastened it. The actions of the Trump administration accelerate the, the emergence of currency multipolarity, ironically in an environment where President Trump also demands fealty to the US dollar. You know, his obsessions with BRICS is, is fundamentally about his belief that BRICS is out there to, um, to strip the US dollar of its reserve status. I mean, why would anybody bother doing that when the United States manages to do it, you know, all of that all by itself, far more effectively than anyone else? And the truth is, is that if you're interested in multipolarity as a trend, um, what's going on in the United States at the moment is arguably one of the most significant accelerants of this trend. Just sit back and let it happen, you know, there's nothing you can do about it. This is, this is the way of the administration, and it has unintended consequences which actually drive and accelerate the trends that are already in place rather than brings a halt to them. Unfortunately, there are periods during this process that, you know, manifest themselves in in certain forms of violence. And, and, you know, and that can be particularly when it becomes physical, you know, it can be, you know, very, very bad indeed.

For the community, I just want to let you know, I'm going to share a link with you for Warwick Powell's conversation with Professor Yanlian. Very interesting video if you want to take a look at it. I'm going to put in the chat box That's the reference to the link before the video. Make sure to check it out if you want to learn more about these financial aspects of it. So thank you very much, Warwick, for that explanation. And, and Ayner also, it makes more sense to understand at least where things are headed. So, uh, Ayner, I want to ask you, I have, I have 3 more questions because I know, uh, Warwick, uh, it's on, on some sort of schedule here. I want to ask you, Ayner, regarding Indonesia's recent purchase of the Chinese J-10C fighter jets. What does it mean on the bigger picture here? Because as we all know, usually, uh, to my knowledge, and I get the confirmation of this, is that Indonesia will purchase about 42 fighter jets. Of course, headlines are saying only 10, but the real number is 42. Uh, and, and knowing how Indonesia used to purchase fighter jets from the US, the F-15s, the old models. What does it say about Chinese military hardware on the global stage, in your opinion?

Well, there's a number of things that it's saying. First off, it's saying that the US is no longer trustworthy. There are real concerns. For instance, Qatar bought state-of-the-art system. What do you call it? Early warning system from the U.S. It means AWACS.

The AWACS?

No, no, it's not, not just the AWACS. They, they had a ground-based system.

Okay.

And yet somehow Israel was, with complete impunity and no warning to, uh, the Qataris, a bomb in their city, in their capital city.

Yeah.

And they flew a whole bunch of jets in there. So, uh, obviously, uh, the U.S. retains a switch that allows them to turn these machines off, and there are real concerns about whether that extends to helicopters, planes, etc. Then you get into cost. The cost of, uh, the, the J-10 is, uh, about probably 15 to 20% less. But let's get into maintenance and operations. Operations are half the cost. It's $22,000 for a, uh, an hour to run an F-35. It's half that, $11,000 to do it for a J-10. What else can the J-10 do? Well, it can go higher, it can go faster, it has longer range, it has missiles that have been proven, uh, most recently during this situation between Pakistan and India, that they're very effective. They have actually exceeded— one of the reasons people don't understand about why there were, you know, airplanes shot down on the Indian side is the Indians were told that the range of these Chinese missiles being fired from these planes was about 160 miles. Well, actually, they were taken out at about 210 miles, meaning Uh, the Indian pilots thought that they were safe, that they were beyond the range of these missiles. So you have a situation where the U.S. tends to oversell— they overrepresent, they talk about things that they could do and they don't actually achieve them— whereas China, on the other hand, tends to undersell. They tend to talk about very conservative numbers when in actuality they can do much more. So, and then you get into, uh, parts and all the type of things that you have to do on the ground to keep these, uh, things running. And once again, China's about a third of the cost, and because it's nearby, especially for them, they can get these parts, etc. So you have a situation where you have a country that you can't entirely trust that wants to charge you more initially and more for operation maintenance, it just doesn't make sense for countries to, you know, believe that this is their only option. And you're going to see a lot more of this happening. Africa is also interested. They no longer want to be held hostage by the US and the overburden— I mean, the amount of, you know, operations, maintenance that you have to put on these things, and you have to buy that from the US, and you're paying exorbitant prices. And these countries just say, we can't afford it even if we wanted it, but we can get a better plane for less money that costs less. Gee whiz, where's the decision in that?

That's true. That's common sense. Well, you're right, Einar, because I'm aware of the Saudis and the Egyptians. They have been in talks with the Chinese, and I know the Defense Minister of Egypt took a trip to Beijing. The Saudis did not do it, but they did it through some behind-closed-channels regarding the weaponry from China. So to China, the weapons of China seems to be now more sort of looked into by other countries as they move forward in strengthening their military dimension. So, Warwick, I want to ask you about Malaysia's recent agreement with the US. Before I'll do this, I want to just share with, with you, uh, and Einar, I did a survey in my community regarding whether, whether Malaysia caved in to the United States pressure for access to rare earth elements. Here's the outcome of the survey: 69% said yes in my community here, 23% said no, And 8% said, I don't know. How do you see it, uh, Warwick? Did Malaysia cave in to the Americans?

Well, there's no doubt that the United States will be applying an incredible amount of pressure on, uh, countries around the world as it scrambles to deal with its decades of failure in the development of core facets of its industrial architecture. The fact that it waltzes into Asia, as I mentioned at the outset, you know, largely out of the blue, you know, let's face it, Asia doesn't feature much in American strategic planning and certainly not in the time and effort of presidents traditionally. I guess says something about it, but there's no doubt that the United States would have applied incredible amount pressure. It has been doing so, incidentally, not just in relation to this particular set of issues, but also in relation to semiconductors and the, um, the, the emerging data center market in, um, an industry in Malaysia itself, right? So, um, Malaysia has been caught in the crosshairs to some extent, and, um, and it's I think for a small country, a relatively small country, it is difficult to withstand those sorts of pressures. Whether or not the agreement amounts to anything is always a different story, of course. So what you find with the Trump administration is a focus on optics and theater a lot more than on substance. And in fact, the various agreements or heads of agreements that it has entered into in the last few days as President Trump made his way through Malaysia and, and his meetings with Cambodia and others would suggest that these agreements were put together in haste. Many of them are poorly drafted, and many of them ultimately don't really have any execution mechanisms embedded into it. So perhaps, and this is only a perhaps, the willingness of the smaller countries to enter into these agreements has been taken on the basis that, that the Trump administration won't be here forever, and by the time serious questions of rubber hitting the road come, and perhaps they'll be dealing with a different administration. Having said that, you know, I saw Steve Bannon the other day telling the world that there is a plan for Trump to get his third term. And that plan will be released, you know, at the appropriate time. So there is certainly a view among certain sections of Trump's supporter base that the constitutional limits on presidential term limits don't apply or can be overcome. And, and I guess, you know, time will tell us how that unfolds. But, but for now, countries are making some decisions on the basis of the fact that And we've got some midterms in the US coming up in a year's time, and Trump's polling numbers at this stage are rather flaccid. He's certainly lost big numbers in the Gen X— sorry, the Gen Z males in particular, which is quite interesting because that's a demographic that swung heavily to Trump in 2024. So, you know, a lot of pressure would have been applied. Conceding to that pressure with agreements that are poorly drafted with little implementation hooks may be seen, as I said, may be seen to be something that you can do easily and, you know, wave the president on his way.

Wow, yeah, that would be very interesting to see this development. So, Aynur, I want to ask you about something that just happened. This one has to do with East Timor becoming the 11th member of ASEAN. What— how, how significant? I know East Timor is small country, to, I think, $2.2 billion GDP, 1.4 million people. So it's not in comparison to the big, big players, but how significant is this from a strategic perspective? In your opinion?

Well, what you have is countries who are being bullied, as Warwick was pointing out, and they are trying to band together for protection. It's like the wolves are circling and the sheep are kind of trying to circle so they can try to protect themselves from being eaten. I agree with— I mean, I read Article 3 of the communiqué. It's clearly, uh, it reads directly from the US position. There is absolutely no, uh, reciprocity. There's nothing given to— there's not one mention of what the US will do for Malaysia. It is simply, you can't do this, you can't do that, or if you want to consider this, you have to do it. But, you know, as Warwick said, absolutely no mechanisms to enforce it, no measures says you have to consult with us if, you know, before you, you know, you, you get up in the morning and think about technology. It's not actually that useful. And future, unfortunately, you have a situation internationally where making promises and not keeping them is becoming de rigueur. Countries just say, well, it doesn't matter, we're dealing with a madman, we'll just say yeah, sure, whatever, and then later on we'll say, oh, well, you know, for technical reasons we can't follow through. So hopefully that is what they're doing. But I'm a little disappointed given what you just said about, you know, Timor joining. It would have made more sense for Malaysia to take a, you know, a leading position to get together with the rest of ASEAN. And you've seen that in the last couple days. You've heard yesterday, you heard voices saying, look, we need to come together We don't need to be bullied anymore. And that would have been a far more effective response. But I think under the circumstances, um, Malaysia has one of a— it has a partial chain. Yeah, they're doing rare earths. They don't have the whole chain there, but they're interested in developing. They have the rare earth elements themselves, a lot of tailings from the mines that were, uh, that that are available that can be transformed, but it's the processing. And they would love to have, you know, billions or multi-billions, tens of billions of dollars in investment in processing technology, but that wasn't even part of the agreement. So it's not clear to me what Malaysia gets out of this other than, you know, taking pressure off from maniacal power which seems bent on, you know, basically grinding anybody in its way to show them that the powerful stay powerful by using their power.

Well, you're absolutely correct, Einar. I just don't foresee anything good coming out of— for Malaysia in this context, knowing that the US had its sights on— because I know they reached out to Australia for a conversation with Canberra regarding this particular aspect. They're talking also to, I think, Vietnam to a degree behind closed doors. So Malaysia, I was just shocked and surprised. That's the reason why I asked the community for their inputs. I have one last question for both of you gentlemen before I let you guys go, especially with Warwick's schedule. Europe, you've heard about the cancellation of the German Foreign Minister Yuan Wetfall. I know the media in his office are saying, oh, the foreign minister canceled the trip. I don't believe in that. I think the Chinese said, you know what, you need to stay home. And the reason for that, because it contradicts what the Germans wanted to do with the Chinese versus what they're saying. And my reference here is to the what they want to say regarding the status quo of Taiwan. That's one. Second one has to do with the rare earth. But given with the development that took place in the Netherlands, that took over a company that is now— it's part of it is in China processing. So how do you see Europe looking at China as the last savior, if I may use the term? If any of you wants to take the—

let Warwick start because he has a time.

All right, go ahead, Warwick.

Well, it's hard to take your European leadership seriously at the moment. It's a basket case. Um, they, uh, they have no, no strategy to, um, to get out of the mess that they got themselves into. And, um, and right now they are little more than a, um, than an extension or a rump of a flailing and failing transatlantic power. The Europeans are desperate for the United States to remain ensnared in its own military conflicts and conflagrations. And, um, and when you look across Europe— and I'm talking about Brussels, of course, when I say Europeans, because I think that there are many decent people with a lot more public policy strategic imagination than the folk in Brussels has, um, but the folk in Brussels basically have overseen the progressive dismantling of the European economic foundations The standard of living of Europeans in many parts of the member states is declining. The deindustrialization of traditional industrial heartlands continues apace. And of course, the Europeans, for, you know, for their own foibles, are now trapped in an economic model that is dependent upon the United States selling them very expensive liquid natural gas. So, you know, this is Europe 2025, you know, for a group of people who continue to talk about or continue to project this sense of civilizational leadership. Now, the idea that they've built something perfect and it's a stunning walled garden which enables them to protect themselves from the savages from the outside. They've literally let the weeds grow and the joint's falling apart. I mean, as I said at the outset, it's hard to take any of them seriously. The Nesperia question, I think, illustrates perfectly, right? The Dutch government, under pressure from the United States, waltzes in, takes, takes over a company, um, you know, under some pretext, you know, using a law that was enacted during, during the Cold War period. And having done that, um, the proverbial, um, doodoo hits the fan economically, where a whole bunch of downstream industries suddenly speak up and say, actually, we're going to have to shut our operations down if we don't get access to these chips. What did these idiots think was going to happen, that somehow the Chinese government was going to sit by and let a business owned by some of its citizens to be taken over, um, summarily by the Europeans under some false pretext, under pressure from the Americans? Of course not. Export controls were imposed pretty much within 48 hours, and, um, and the lessons of supply chain interconnectivity and the abject lack of foresight of those in Brussels and, you know, their various supporters in European national capitals is on full display. I mean, this is an absolute debacle. It says everything about the leadership that we find in Brussels and in its supporting capitals. And, um, and they seriously need to get their act together, overcome some of their phobias, and actually confront reality as it is rather than pretend to the rest of the world some fictitious sense of civilizational virtue. It's a nonsense, and they are failing miserably.

Well, you'll think they will have some common sense in even understanding. For example, when you look at— I looked at this chart and I read about the dependency of the Europeans and the Chinese, when you look at for the rare earth, China, Russia, and Malaysia, you will think they will think twice before embarking on a specific policy. So I just don't get it. Einar, how do you see it from the perspective of moving forward, given the issue between China and the United States? It's not going to be resolved overnight. So I'm assuming it's going to be for a while. How do Europeans anticipate to manage their economic position?

Well, as Warwick pointed out, Europe is trapped in its own hypocrisy, arrogance, and kind of litmus test politics. What do you have at the EU? You have leaders who are basically not wanted in their domestic, you know, political sense. They were just kind of carted off. Get rid of them. What do we do with them? Oh, let's send them over to Brussels. And you have people who do not represent the European people. They certainly don't seem to care that much about European economics. Most of them care, you know, their number one priority is being nice to Donald Trump. You know, it's the daddy syndrome of Rutte. I mean, and, you know, I, I, it's just, it's, it's, it's difficult to watch the EU, um, leadership out there uttering this kind of nonsense on a continual basis. But, you know, what you have here is, let's put it in its simplest terms, you have the United States saying that the world order is dependent upon the U.S., basically extracting getting things from everybody. You have China saying, look, you know, the world— that order is dead. We have to work together. We're in a multipolar reality, and that requires values and principles, not ideology. And, you know, they've said, you know, countries have to be secure, there has to be a path of development, there has to be respect for sovereignty, and there has to be a global— a way of settling issues through talk. As opposed to tanks. So, um, and then where do you have Europe? Europe is stuck in between. They're still trying to— they still have all the arrogance of a colonial power. Uh, they have difficulty understanding when countries that they have been using, abusing, like France, uh, in Africa, the Sahel, you have 7 nations who said, France, get out, we're tired of you taking advantage of us. Um, you, you're switched your physical colonialism to financial colonialism, and we're done with that. But they're having real hard times. You know, what was the reaction? You had some old general said, let's go in there and teach them a lesson. You know, let's, let's conquer them again, show them that we're in charge and that we have the right to take them. Well, that's at odds with this European notion that they're, you know, they're somehow representing as Warwick said, you know, civilizational, um, ideas and values, uh, that they talk about the rule of law and human rights and all this kind of stuff, but they don't— certainly don't do it. And that's where the hypocrisy comes in. So until they figure out how to get people into Brussels who actually represent them and can, you know, stand up, until the EU as an entity realizes the United States not trying to help them, they're going to be stuck in this position where they're neither fish nor fowl. They're neither part of the new order, nor are they respected by the existing old order, and they're going to continue to suffer and slide down, as we've seen many of them done economically.

Wow, that's very, very interesting and fascinating. I'm going to give you a last word, each one of you. But I want to share one picture with you. It's right here, and this one has to do with the world economy in 2026 moving forward. And when, when we look at the portion of the China share of this particular— it says, it says everything we need to, to, to know about. So I'll give you a final word, Warwick. You go first.

Look, all the things that we've been talking about today really speaks to a progressive decline or the disappearance or the last vestiges of Pax Americana. The, the world is changing and it has been for a long time, but we are now reaching in many regards the final episode, the denouement if you will, of Pax Americana. The question will be whether or not those in Washington are able to adjust to this new reality in ways that will enable America to maintain its prosperity and to fit into the world as a normal country, not an exceptional country, but as a normal country, and become a contributor to the world as a normal country instead of imposing its will on the world as a military belligerent. So this is where we're at. The changes will continue unfolding. So long as President Trump remains there, I think we are going to have plenty to talk about, particularly as he does have a predilection to chopping and changing. But the big picture trend, the big picture drivers and patterns are at work. Nothing's going to stop them, and, you know, one can only hope that America will learn sooner rather than later to live with these patterns and changes for its own good as much as it is for the rest, the good of the rest of the world.

Thank you very much, Warwick. Einar?

I agree with Warwick. I would extend it a little bit further. This is not only the end of Pax Americana. This is the denouement of 600 years of a colonial system which was based on rape, rob, and pillage. You know, America— there's nothing in America that belongs to the current political system. It was taken from the indigenous people, and then there are a series of wars involving the French, the British, Mexico, basically taking and in some cases buying things. You still see that going on with Donald Trump saying he's going to take Greenland, he's going to take Panama, he's going to— Canada is going to become the first 51st state, and in essence saying that Gaza somehow belongs to the United States. So this, this kind of imperial power, I'm going to rape, rob, and pillage, is coming to an end. Winter is coming, and China represents a as I said before, a new idea about how the world can operate based not on ideology— that will be reserved to the states themselves, the countries themselves— but simply on shared values. Everyone wants to be respected as a country, as a person, as a culture, as a religion. Everyone wants a path to development. Every country needs to be secure. And of course, there has to be a mechanism where countries, when inevitably there are issues that have to be solved, can solve them, as I said, not with troops and tanks, but with talks.

Indeed.

Well, gentlemen, I can't thank you enough on behalf of the entire community. I say thank you very much for sharing your knowledge, your insights, your wisdom, your analysis. At least the way I feel. And I'm not saying it to be Mr. Nice. You guys know me, how I operate. I'm a straight shooter. Anytime I listen to you, I came out with something new that I learned. And I'm sure the community shared the same sentiments. And Dave have expressed that to me.

So once again, I only feel that about you and Warwick.

I don't feel about myself. I can see all my mistakes.

No, both of you, truly, I mean it. And thank you so much, truly appreciate you carving out time for us here, and I look forward to seeing you next time. You take care.

Take care. Thanks, David.

Bye-bye.

Hi guys, hope you all enjoyed listening to Warwick and Einar. It's a delight to have them here. You know, that's— remember, they are busy people, and it was kind enough of them to allocate time for us so you can learn something from this. I hope you enjoyed it. Make sure you leave me some comments in the comment section. Make sure to check the website that I sent you for Warrick. He's starting now a YouTube channel there. It's called the TO Talks with Warrick Bowe. Very, very insightful. And remember to join me tomorrow for my conversation with none other than James Bradley. We will be having a conversation at 09:30 :00 AM Central Standard Time. I look forward to seeing you tomorrow. As always, remember, geopolitics impacts your daily life in more ways than one. Till next time, bye-bye.