Billionaire CALLED OUT on China! Threw Down His Napkin and Walked Out of the Room

Summary

The video discusses the risks and challenges of investing in China, focusing on the implications of Chinese leadership under Xi Jinping. It highlights institutional resistance, the impact of a lack of rule of law, and the economic risks tied to investing in Chinese markets. The conversation also explores the role of influential figures like Schwarzman in promoting China’s economic interests in the U.S., as well as the geopolitical tension surrounding U.S.-China relations, particularly regarding trade and tariffs. The discussion underscores the complexities of navigating investments in a rapidly shifting Chinese economy.

Takeaways

• 😀 Xi Jinping's leadership may be focused on asserting China’s dominance, even at the expense of its people, through economic or military strategies.
• 😀 Some believe that China might try to dominate through technological advancements like AI, which could be seen as an effort to save the economy.
• 😀 Institutional investors are becoming more cautious about investing in China due to concerns over its lack of rule of law, potential risk of war, and the unpredictable nature of the government.
• 😀 Investors are increasingly prioritizing rule of law, human rights, and economic stability when choosing where to invest, as highlighted by the higher standards required by pension managers.
• 😀 Despite China’s significant GDP growth, its stock market has underperformed, making it a risky investment for those looking for returns in line with the economy's expansion.
• 😀 Wall Street has been influenced by influential figures like Schwarzman and Ray Dalio, who advocate for better relations with China, often because they benefit from special access to Chinese markets.
• 😀 Some argue that creating 'cheerleaders' for China among influential investors helps to mask the risks associated with doing business in China, leading to unequal benefits for the few.
• 😀 Special access to the Chinese market can be seen as a form of bribery, giving a few companies and individuals an edge over others in a pyramid-like structure.
• 😀 Many of the individuals who have succeeded in China’s market are used to lobby for more favorable relations with China, which can deceive others into underestimating the risks involved.
• 😀 There’s a view that China’s population may not be as large as it seems, with a significant portion still living in poverty, which undermines the narrative of China’s economic might.
• 😀 The tariffs imposed by the US under Trump were seen as a necessary economic maneuver, akin to a currency devaluation, aimed at helping the US economy by reducing trade deficits.
• 😀 The overall economic strategy of the Trump administration involved understanding the effects of tariffs and currency devaluation, while also recognizing China as a strategic challenge to the US.

Q & A

What does the speaker imply about Xi Jinping's approach to governing China?

The speaker suggests that Xi Jinping's approach is one of an absolute dictator, willing to pursue extreme measures like technological advancements or war on Taiwan without concern for the impact on the Chinese people.

How does the speaker describe the institutional resistance to investing in China?

The speaker notes that institutional resistance to investing in China is at an all-time high, with concerns about lack of rule of law, the risk of war, and other factors leading institutional investors to demand much higher expected returns to offset these risks.

What does the speaker mean by the 'prudent man rule'?

The 'prudent man rule' refers to the higher fiduciary duty that institutional investors, especially pension managers, have when making investment decisions, ensuring that they act in the best interest of the people they manage funds for.

How does the speaker describe the performance of China's stock market over the last 18 years?

The speaker explains that while China's economy has grown significantly, the stock market has performed poorly, with an investor who invested in the Shanghai Shenzen 300 losing a third of their money over the past 18 years.

What was the interaction between the speaker and Schwarzman at the lunch in New York City?

At the lunch, Schwarzman argued that China was misunderstood and that the US should meet them halfway, but the speaker challenged this view by asking whether that meant allowing human rights abuses and intellectual property theft to continue, leading Schwarzman to disengage from the conversation.

How does the speaker critique the role of Wall Street in relation to China?

The speaker criticizes Wall Street for being complicit in China's actions, chasing profits while ignoring or downplaying significant human rights violations, and argues that China creates 'cheerleaders' by giving special access to a few, thereby manipulating their narrative.

What does the speaker mean by describing China's strategy as 'genius'?

The speaker refers to China's strategy as 'genius' because they use special access to the Chinese market as a tool to create influential cheerleaders who lobby for China in the US, while the majority of investors lose out.

What is the speaker's view on the narrative that China is misunderstood?

The speaker rejects the idea that China is misunderstood, emphasizing the country's human rights abuses, economic manipulation, and lack of rule of law, which make the notion of misunderstanding a convenient excuse for those profiting from China’s system.

How does the speaker differentiate between the US and China's trade deficits and surpluses?

The speaker contrasts the US's trade deficit with China’s surplus, explaining that tariffs imposed by the US during a trade deficit are essentially a form of currency devaluation, which helps the US economy by bringing in additional external revenue.

What does the speaker suggest about the effectiveness of Trump's tariffs?

The speaker suggests that Trump's tariffs were an effective form of currency devaluation, lowering the dollar’s value by 10% and helping to reduce the US's fiscal deficit, although the speaker believes Trump failed to effectively communicate this strategy.