 And it is probably available in podcasts. In podcasts. I'm delighted that this evening we have a really wonderful box to introduce to you. This is happening at a time when China is doing fantastically well. China is going from strength to strength. Xi Jinping is consolidating his position and is consolidating his power. The rest of the world are now paying attention to how wonderfully China is doing. It's a time when there is really no reasons to think that China may be getting into trouble at all. Now, that is, of course, if you simply look at it from one particular dimension. And as you know, China is a complex matter. And therefore, there are many different angles to it. And we have this evening somebody who has written a really fantastic book, which is called Red Flags, why Xi Jinping's China is in jeopardy. And the author is, of course, George Madness. And he is a resource associate at SOAS and also at the Oxford China Center. He has a long and very distinguished career and I'm not going to repeat the long introduction that you would have read on our website. I would just highlight that he was the chief economist of UBS. He had made quite a bit of predictions that turned out to be true. And he's also author of three books, including only highlights. Two of them, Uprising Will Emerging Markets Shape or Shake the World Economy. With George is Jonathan Fanby CBE. Jonathan is the chairman of the China Research and Managing Director of the European Political Research at TS Lombard. He's written nine books on China. Again, I'm not going to read you all the very many excellent books he has written. And he is also a resource associate at the SOAS China Institute. And he has, at the end of the summer, published a new book, which is called Crucible, 13 Months That Forged Our World. It has China in it. It's not entirely about China. It's an excellent read. I think you should be checking it out. Jonathan had a distinguished career as a journalist. And as a journalist, he edited The Observer, as well as the South China Morning Post, when it was still the premier newspaper in East Asia, as I hope. What it is now, I think it's up to you to draw the conclusion. And I'm also delighted to introduce to you Kerry Gracie, who in fact needs no introduction. Is there anyone in this room who doesn't know who Kerry Gracie is? Yes, you don't. Excellent. Then you will have my verbal introduction for Kerry, because I was nearly tempted to simply dispense with that. But nobody should be left behind. Now Kerry is a remarkable and very distinguished journalist. But before that, she also was an incredibly entrepreneurial person, because she actually set up a restaurant before she went to Oxford to do her PPE. And after that, she would have also created an enterprise. She joined the BBC in 1987. She reported in China in the 1990s. And then in 2014, she became the China editor for the BBC. And in fact, she is up to today the only ever China editor of the BBC. So I think it's about time that the BBC get a new China editor. And that's for the simple reason that when she was actually reporting from China as the China editor, you could actually see the quality of the BBC's China reporting being actually really, really top notch. Kerry has also read documentaries about China for the BBC, TV and radio, for which she had won prizes like a Peer Body and an Emmy. I think something else that I perhaps should mention, even though that is not really that much related to China, is that since January 2018, Kerry has been playing the lead role in fighting for equal pay for women journalists in the BBC, which I think is something that we would all like to recognize. The format for this evening is that I will request George to make a short introduction to his book about 15 minutes. And then I will ask Jonathan and Kerry to provide their perspectives of having read the book. Over to you, George. Thanks very much, Steve, and a very good evening to you all. So this book that you've seen outside on the table, Red Flags, it's about the features and the sustainability of China's model seen through the prism of four contemporary economic challenges domestically and two external challenges. So the four domestic challenges relate to management of China's debt, trying to keep its currency stable and widely used in the world, aging and the so-called middle income trap, which the country is having to negotiate and address and make policies towards simultaneously in the face of growing issues of contention in each area. So it's quite a big task. And the two external challenges, as you can imagine, are trying to manage not only China's trade and investment vis-a-vis the West, but also its relations with Belt and Road countries around the world in the face of growing level of pushback, whether it's from Western capitals or from some of the recipients of Chinese financing in the Belt and Road. And specifically, all of these things are taking place in the context of, and this is the kind of key thing in the book really, of a change of governance under President Xi Jinping, which I conclude in the book is going to make it harder for China to meet its ambitious goals. If we were talking about somebody else's China, the conclusion might be very different and I might not have written the book, but in Xi Jinping's China, I think it matters. And it matters for a number of different reasons, many of which are perhaps intuitively or knowledgeably very obvious to you. The first is that in the last decades, China has changed remarkably from being a kind of a compliant customer of the West to becoming a very feisty competitor, first of all in low value goods and then in high technology or medium technology products nowadays, to becoming an adversary and rival in matters of trade and technology and now techie international relations. The second transformation that China has been through, always going through, was from an economy that thrived actually after 1979, 1980 on liberalizing reform, but has become one that has become dependent on credit creation, leading to chronic misallocation of lending and resources and considerable imbalances in the economy and inequalities, you don't have to take my word for it. Wen Zhimao himself referred to the imbalances in China with great significance in both 2007 and then 2011 before he stood down from office. And even last year at the 19th party Congress, Xi Jinping embraced the change in the party's central contradiction, which relates to imbalances in the economy and being inadequate to meet the better quality of life that people expect and so on and so forth. And the third and really important transformation is in its political system, from one that was known for its pragmatism and for managing change really well, to one that emphasizes more authoritarianism, it's become more controlling, more ideological, more oppressive and much less reformist than any of its predecessors in many ways. So I mentioned just at the beginning that the book was about the China model and you might think that that phrase is pretty innocuous. It's used all the time in all sorts of different contexts, but actually it's become very sensitive. It's become very sensitive in Western capitals. It's also become quite sensitive inside China just this month, according to Professor Zhang Weiying at Peking University and also Professor Sheng Hong at the Yunlu Institute, which is still just about managing to cling on to life after they, lots of fears that it might be shut down. But according to these esteemed professors, there are those in China, they say who have championed China's kind of exceptionalism in the Chinese model, specifying the role of the party, the state sector and industrial policy and they say that this view is not only wrong but is actually resulting in the pursuit of policies which threaten China's future and are leading to confrontation with the West. And Professor Zhang in particular says that these policies are incompatible with fair trade and world peace, his words, not mine, and that the real success in China over the last decades actually has not been anything exceptional about made in China, but actually about a universal model based on China's adaptation of marketization, entrepreneurship and the accumulation of technology brought in from other countries from all around the world. So this is quite a controversial view about where this model is actually leading and what its particular features and characteristics are today. Now I draw my conclusion in the book which is to say that we can't be so assertive or bold to actually say that China's model is doomed to fail. We simply don't know. Certainly China is not like, in many ways, not like the Soviet Union was at its peak. But we don't have any empirical evidence to demonstrate that authoritarian countries that specify the kind of features that I've described have actually become rich in terms of OECD type of income per head levels and certainly haven't been able to address satisfactorily the range of problems that China has before it as I outlined before. In fact, if you look at China under Xi Jinping and you see, for example, strengthening of state-owned enterprises, the expansion of party influence and state power, the increasing reliance on state-led industrial policy, disengagement from the US in particular and from other Western countries and the stalled reform efforts which actually have left many private firms really rather on the cusp as it were in terms of their role in the economy, it's quite easy to see why the future might look much more uncertain than what we have grown to expect in decades gone by and why China might actually face both a protracted period of much lower economic growth and unpredictable policy and political environment which we can get into during our discussion later. So in just a few minutes, I'm going to only summarize some of the key areas which I've kind of spoken about in the book. So I'm going to just record a little bit about debt, a little bit about aging, a little bit about middle income trap and about trade. So we're lots of other things we can get into in our discussion. Debt is the most pressing of China's problems. It's currently estimated that it reached a level of about 330% of GDP at the end of last year. Nobody really knows if there's a magic level, there isn't actually a magic level at which we can make any confident predictions, but what most of people agree about is firstly that the speed of accumulation of debt in China has been unique. So in 2008, debt to GDP was only about 120% of GDP. In June of 2018, it was probably about 340, 345%. The second thing is that the economy, as I said before, has become increasingly dependent on credit creation and on the explosion in financial assets. This is not always a good thing. The Japanese boasted about it and came a cropper. The Americans boasted about it and came a cropper. We'll have to see what happens in the Chinese case, but financial assets were about two and a half times GDP in 2008 and they're now over 500% of GDP. So there has been an extraordinary expansion of the financial system, which has gone way beyond what economists call financial deepening. Thirdly, there have been increasingly risky forms, not just of lending, but of funding the lending. So banks obviously have to raise deposits in order to make loans. Mostly they raise deposits from you and me and from companies and sometimes they raise deposits in rather more spurious ways, not spurious necessarily in terms of being risky, but in more opaque ways in the inter-bank market, from non-banking financial institutions and so on. And this has happened a lot in China. So the smaller banks in China, not the big four or the big five, but smaller medium-sized banks now rely about a third of their funding comes from overnight or very, very short maturity lending in the market. There's no historical analogy for a single country's banking system to have expanded as quickly as China's has without leading ultimately to levels of stress and retrenchment. I'm not predicting a financial crisis in China, the like of which we had in 2008 for the very simple reason that China's banking system is state-owned and no major or significant financial institutions will be allowed to go bust in my view. But that doesn't mean to say that China can escape the consequences of misallocation and of bad lending, which has clearly taken place in the last decade. But the way in which that manifests itself is sometimes through liquidity shortages, which one imagines the People's Bank of China would be very quick to meet, but somebody has to pay for the debt eventually. It can never just kind of disappear. And the way that people kind of pay for that debt is through a period of a protracted period of low growth, the like of which we've seen in the West during the last 10 years. As you know, since the end of 2016, there's been a very significant crackdown on some of the more egregious forms of risk-taking and lending and borrowing, which has resulted in a significant slowdown in the financial sector and in credit growth in some places, particularly for companies. On the other hand, households have been on a tear when it comes to debt. So the ratio of debt, household debt to income has grown from about 87% in 2008 to about 120% now, and it's bigger than it is in the United States. Will this program could persevere? We hope, I mean, economists hope that, or I should say that it's churlish actually for economists to say they hope it doesn't because what we all kind of wish on the Chinese authorities is that they will basically bite the bottom lip and allow this period of low growth to evolve so that they can wipe the debt out of the system in a rather orderly transition and orderly way. But the government is clearly very sensitive to still to low rates of growth and growth is falling in investment, in property, in retail sales, automobile sales and so on. So it remains to be seen whether the government will push back against this slowdown in growth bearing in mind that it is still committed to the maintenance of quite high growth targets. It also can't change the ownership structure of the banking system, which aligns incentives and rewards for those that are actually in control. It's like any banking system anywhere in the world. Vested interests always rule. The demographics in China are challenging, as I'm sure you'll know, it's not a very immediate problem in the sense of there's going to be a crisis next year. It doesn't really work like that, China is the fastest aging country now on the planet. It's not the oldest, which is Japan, but it is the fastest aging and by 2040 or 2050, most of China's demographic metrics will be substantially higher in terms of dependency ratios and support ratios and so on than many of its kind of Western counterparts. Part of the problem is the same as everywhere else in the world, that fertility is too low. It's not so much that people are living longer or being healthier when they retire and have longer lifespans in old age, but that the fertility rate is too low. I don't even think the two-child or one-child policy was the principal problem here, but I think that it certainly did lead to a very considerable problem of gender imbalance, but the working-age population is declining. The fertility rate is not rising despite the abandonment of the one-child policy and now the two-child policy. The retirement age is too low. There's no immigration to speak of and as the dependency ratio continues to rise inexorably over the next 20 or 30 years, you'll see that China will age so much faster than we did in the West. So the age structure in China will change in 20 years as fast as it did in the West during the last 100 years. So the phrase getting old before you get rich was really invented for China because when China kind of reaches this very advanced stage of aging, it's per capita income will be a fraction of what it was for us when we were at the same stage. So they're gonna have to obviously ensure that pensioner poverty is a problem that is addressed, have to ensure that the social security system is more generous and widespread and so on. Lastly, on the middle income trap, I mean, we could talk about this all night. I'm only gonna mention it for about 30 seconds. Escaping the middle income trap, which is an issue which Chinese leaders speak very openly about, is something which actually is fundamentally about the quality of your institutions and about raising productivity, having a good competitive regulatory, rule of law type of environment. I mean, in some of the independent press in China limited though it is, you can see these arguments being opined quite regularly. And ultimately this comes down to institutional change and also to the rate at which China can adapt its own technologies without being reliant on the rest of the world and particularly on the United States. And in this context, maybe the trade war will do China a favor. It's too early to tell, but certainly the emphasis on self-reliance is going to be a very significant factor in the future and it remains to be seen whether China can overcome quite considerable hurdles to do that. And finally on trade, I just want to kind of say that, I don't think this is an ordinary spat between the United States and China like the Americans have had with the Japanese, say in the 1980s. This is much more existential. It's about technology. It's about industrial policies, about the military implications of all of this and about obviously what the Americans charge as being unfair advantage given the policies which China is able to conduct for the benefit of state enterprises and private companies that are very closely linked to the state. I think my own view is that China was wrong-footed by Trump. I hate to say this normally, but I think that hubris got the better of Beijing and I think they weren't prepared for the vehemence with which Trump has prosecuted this trade conflict. And the tit-for-tat bit is pretty much done, right? So China has already retaliated for every dollar that Trump has raised punitive tariffs on China. The Chinese have matched that, but obviously because of the trade imbalance, the Americans can subject the other half of trade with China to punitive tariffs, whereas the Chinese have run out of space. So what are they going to do if the tariffs go up as scheduled to 25% on the 1st of January and the other half fall into the realm of higher tariffs in due course? Very difficult to know what the Chinese will do. Some people think they will devalue the currency. It's a very dangerous thing to do because actually it's an exercise in self-harm for China as well. Some people think that they'll just sort of turn a little bit harder on the screw in which they target American companies in terms of licensing, customs, procedures, red tape, regulations and so on, which seems to be the more likely to me, but we shall have to see. Ultimately, we must all hope that the leadership of both countries recognize that despite the fact that they have differences, big differences, that they can engage in ways in which their concessions can be made on both sides, concerning issues like access to markets, intellectual property protection and technology transfer. I mean, there's no way that I think the Chinese will give way or concede on what they regard as their sovereign right to be technological leaders in the future if that's what they choose to do, nor vice versa. So there has to be some give and take and we must hope that that is the way in which relationship kind of evolves. I'm reminded finally of a comment that was made by an American political scientist called Edward Lutwak, writing about Japan and Germany in the 1970s. He referred to the trade conflicts that the Americans had at the time as being the logic of conflict in the grammar of commerce. That was with allies. I think that phrase or that phraseology applies really aptly to the situation between the US and China and actually indeed between the Western China because it's not just the Washington Beltway, which actually is involved here because as we know, these relationships about trade and investment apply also to London and Paris, Berlin, Brussels and so on. So the danger, I mean, I think is that this conflict will linger and that it may spill over into other areas which are not as easily controllable as might be the case with regard to commerce. Thank you very much, George. I'll hand it over now to Jonathan to up to 50 minutes, please. Thank you. Just to pick up on George's last point before I get to the book, my own feeling is that we are getting engaged between the US and China into much more of what I think George, at one point, referred to as an existential issue and problem there where it certainly is this, the trade war is spilling out far beyond tariffs into strategic military matters, into cyber espionage, into lots of other areas which from the noises from the United States recently remind somebody as old as myself as the days when we were told to look for reds under the bed. This is, you know, Trump saying to his golfing buddies at his New Jersey club that all Chinese students are probably spies. Well, you know, that is going quite a long way. He rode back a little bit, but not all that much. And I read somewhere that apparently the CCTV cameras installed in most federal buildings in the United States are supplied by a company which is largely Chinese invested, including by the PLA, and there is a congressional investigation to see whether all the film that they are taking is being fed back to Beijing to be examined. I mean, they'll have to employ several million people to do that, I think. To go to George's book, and I don't just say because he's a friend of them because he's sitting next to me, but this is an absolutely excellent piece of work, perceptive, well-argued, full of information but without the detail becoming overwhelming, and a good read, well-written, if I dare say so, for an economist. It is written in very clear terms, which I'm wondering to express. As you're probably aware, work on China in recent years has tended to fall into two almost Manichean camps. There are those who see the economic rise of the People's Republic since 1978 as pointing inevitably towards the 21st century being owned by China, striking a contrast between its model, whatever that may actually be defined as, and messy Western democratic capitalism, especially after the 2008 crisis and the election of Donald Trump. Indeed, there was a contributor to People's Daily early this year who said Western capitalist democracy is in disarray. Now is the moment to seize our advantage, and that has a considerable echo. On the other hand, there are those who think that China is bound to collapse. The China's impending collapse school has been around since the very beginning of this century, with the idea that the flaws in the economic system will inevitably bring about political implosion too. George's book places himself in the middle ground, which is where I think it is sensible to be since I belong there myself, so I would say that, wouldn't I? Although he clearly belongs to its more skeptical wing as his why she's China is in jeopardy will indicate. Not doomed, China, by any means, and too early to tell in lots of ways with unknown unknowns involved, but still I think on the skeptical side. This is based largely on the four major flaws in China's economy, which George has mentioned now. And if I might be the devil's advocate for a moment to put a slightly counter case, which he can shoot down in a minute, the debt mountain is undoubtedly big, formidable in its size, but above all, formidable in the speed with which it has grown up. But I think there are signs that Liu He, the Xi Jinping's principal economic adviser who wrote the article, of course, about debt in the People's Daily a couple of years ago now, that he is pushing through a concerted attempt at deleveraging how long this will take and how it will work exactly is very difficult to tell, given the complexity of the number of means of funding and financing that have been worked out in China over recent years, going from the large banks through smaller banks, through trust companies, into pyramid schemes and straightforward Ponzi scams. One thing, of course, on China's side in this is that the debt is very largely domestic and the economy is still subject to capital controls, which, yes, you can get money out of China if you really want to, but capital flight has been made more expensive, more difficult among other things. So is the little known OECD regulation by which China has signed up to, by which in other countries which have signed up to this, it can actually identify bank accounts held by Chinese nationals outside the People's Republic, which, if that gets known, is quite a deterrent. There's also the state's control over the financial sector, which George mentioned, but certainly doing that, deleveraging or at least controlling the debt and then bringing it down a bit as a percentage of GDP will involve a slowdown in growth, and we'll come back to that in a minute because that is, growth is in a sense and the desire for growth, I think is at the centre of a great number of the challenges and problems China faces today. The currency is a problem, but I think it may have been somewhat overblown, I would say, in this devil's advocate mode at any rate, by the fact, the way that China has talked up the internationalisation of the Revenue and Bees, as though this meant it was going to become a freely convertible currency and a rival to the dollar. It was not because capital controls will remain in China for as long as there is an undeveloped domestic investment market and people are putting their money into property. If you lifted capital controls tomorrow, you'd have the biggest property bust the world has ever seen in Beijing, Shanghai and elsewhere. The demographics are indeed a really big long-term problem, along with a lot of other problems which are not mentioned very often, such as the shortage of water in northern China. And I would agree absolutely, George, that the main impact of that, the main reason for the trend of the demographics, has been the fall in fertility, together with more recently the sheer cost of having children, which I think anecdotally puts off quite a lot of younger Chinese who I know. Again, to take a devil's advocate view, you might say, well, actually, if Xi Jinping's social welfare schemes mean anything, you will have the development of a pensions system in China, and with robotisation, we'll actually need fewer young people coming into the workforce. This leads to the middle-income trap as the culminating point of the list of China's troubles and one which brings in broader social issues, as well as the strict economic consideration. And it's here, I think, that the inflection point, which George refers to in the book of China's trajectory, is likely to lie given the expectations aroused by growth in recent decades, and the way that civil society has been steadily squashed by the increase in communist power. And this brings me to what I think is striking about China's economic model and has become even more the case over the last three years or so, which is the place that it gives to politics. The underlying motivation for Deng Xiaoping's reforms of the late 1970s, I would argue, were basically political, to enshrine the Communist Party as the vehicle by which Chinese people could be made better off. Yes, there was an economic reason for it entirely, but after the Cultural Revolution and Mao, I think Deng's main aim was to make China a great power again and to make the Communist Party the central organ of that strengthening of power. That succeeded extraordinarily well and enabled the Party to strike an implicit bargain with China's people that it would make them better off materially so that they left the conduct of politics to them. That equation worked pretty well, but it produced a fixation with big growth numbers and initiatives such as the huge credit splurge after 2008, which was greatly celebrated, if we remember, in China at the time by Wen Zhabao, who a couple of years later was talking about the unbalanced and unsustainable nature of the economy. He changed his tune fairly quickly. But under Deng and Jiang Xi Min and Hu Jintao, to a large extent, the division was drawn between the Party and the management of the economy, and that has been breaking down under Xi Jinping, which comes with a potential cost that I think could be quite important, both, for instance, for the private sector, for the social fabric of the country and for the development of new technologies which tend to thrive in a unconstrained or relatively unconstrained environment rather than under the control of the state, as seems to be the leadership's aim at the moment. So I think Red Flags is an appropriate title for this book, not only because of the way that Red Flags serve as warning signals, but also because Xi Jinping is seeking to put China firmly under the single-party banner in place of the more diffuse system pioneered by Deng. And I think that that is where the basic problem is going to lie in China in the years to come, exacerbated probably by the trade war and by the, I think, repressive reaction which we're going to get to that in internal Chinese politics, with Xi, if we can take his recent statements as any kind of guide, not at all feeling, well, I was guilty of hubris, maybe I overstated where China was and where I thought it was going at the last party congress. Maybe I should have moderated my language because now China's got no friends in America. Everybody regards us as an enemy. No, there's none of that. It is the party was right. The party was absolutely correct. Its propaganda was on the right lines and we should do more of the same. And I think that is where a big danger lies. Thank you. Thank you very much, Jonathan. I think it's absolutely right that you highlight the title is Red Flags in Peru, not just singular. Over to you, Kerry. So I would like to start by echoing Jonathan in saying it's a great book. So well done, George. Very readable and very coherent on the challenges that China faces. One of the things that I thought about when I was reading it was I don't know if you've all seen the falling stars images on WeChat and on Instagram where you get kind of crazy rich young Chinese kind of parodying themselves falling out of a sports car or a private plane or down the steps of their penthouse suite and kind of all their excessive material goods kind of spreading out in front of them so all the things they love. I will be familiar with this, I'm guessing. So you can have your kind of ski gear or your jewels and your bling or your kind of foods that you love or whatever. Anyway, so while I was reading George's book I was thinking, oh, what would Xi Jinping's kind of falling star look like? I kind of imagined him kind of spread eagle down the steps of the great hall of the people with a copy of the governance of China in one hand and a glow kind of wound around cotton road roots in another and of course the Communist Party flag in front of him. And I was thinking, well, what would that differ from the falling star image from Mikhail Gorbachev in 1990, 1991? I mean, there's seven decades into Chinese Communist rule, seven decades of Soviet Communist rule. I mean, what would that have looked like? In some ways you would have had the same kind of stuff lying on the steps in front of him. I think science, maybe the old rocket aircraft carrier, maybe a gulag kind of an image. Of course, China doesn't have any gulag. It has vocational training centers in Xinjiang. But you get my point really, some of the stuff is the same and getting serious again, I suppose where Xi Jinping here he would be saying that, of course it's entirely dissimilar and there is no parallel and he wouldn't do a falling star anyway and if he did, then the content of it would be far more meaningful in GDP terms. The Soviet Union was never a big power strategic global competitor to the US economically. So the depth and breadth of Chinese economic advances enormously significant over the past 40 years in a way that the Soviet Union never did achieve. However, as George and Jonathan have pointed out we are in a new stage and a new game and China has incontrovertibly benefitted enormously from access to the American market and to the European market and that is now going to be closed off due to the fact that as Jonathan pointed out it's not clear that it is. We haven't got through the midterms yet so exactly what the Trump game is isn't entirely clear and we haven't seen it played out and China may have more cards up its sleeve etc. However, we are definitely in a newish place just quite how new still remains to be seen but as Jack Ma says of Alibaba we may be looking at the end of this period of history and we may be looking at the next 40 years of relying on other things for China's growth and one of the things obviously that China says it's going to rely on for its growth and its economic development is itself and it's going to put a whole big fake full moon over Chengdu any country that can do that can surely provide a bit of economic momentum at home and so Xi Jinping himself he says we have to cast aside illusions we have to rely on ourselves and you have a point in China now where innovation is enormously impressive so is China going to need to steal or extort its way to 21st century technology of course extort is not the language it would use but that's the kind of language that Trump and Pensenco used making the claim that China extorts American high tech in exchange for access to Chinese markets but if the question remains really no matter what language you use can China be self-reliant in terms of 21st century innovation to take it through the middle income the economic challenges of the middle income trap you've got the greater barrier in southern China you've got so many investment opportunities so many fundamental strengths of the Chinese economy but is it enough? and I can't answer that question George addresses the question in the book but I think he very wisely doesn't attempt to come to any firm conclusions on that either because there are just too many contingent variables and uncertainties and we are at a new point in history in China where no country has been before and there is no economy at the scale of China which is the political, the political economics are set out in the way they are in China we haven't been here before in history so anyone who tries to make a very firm prediction on where that's headed is in my view unwise the other factor that Jack Ma talks about obviously is the bottom node and that is as a new engine of Chinese economic growth and that, I mean it's not new I suppose but in that kind of construction and framing it is new and the scale of the ambition is new if it's to be believed but I think at the end of the day whether you look at China's domestic market or whether you look at both the road markets and the challenges there I think some of the interesting things that George was saying and Jonathan was chiming in on the capital allocation is very critical really because China doesn't have and this does relate back in my view to its politics and its absence of open discussion as well it doesn't really have very effective ways of assessing value and therefore it is going to end up misallocating resources of all kinds whether it's doing that domestically or whether it's doing that on the Belt and Road and if you have an increasingly monopolistic information structure and the kind of digital authoritarianism that China is headed in the direction of it's very hard to see how that is going to make effective decisions about allocation of many things in life I find that very puzzling so when I think about China's future there's so many inspiring things but there's also this is a great worry I think and as Jonathan says if you lifted the cap of controls tomorrow you'd get a property bust the fact is the condition is not worth what it says it is if you lifted cap of controls you'd get a property bust it means that nobody really believes those assets are worth what the price on them is it's a confidence trick it's a big short or is it? I mean I'm not an economist so George will tell me whether it's right or wrong but this is the kind of thing that worries me about the future George says the task for Xi Jinping is to establish a new contract for the party with a sophisticated citizenry but it's difficult when the party is the biggest vested interest in Chinese society how can it be responsive to the needs of others? so even if you say this is going to be a totally different experience from the last deterrent and dictator we had in China we're not going to have another Chairman Mao here because the feedback loops are so sophisticated now we aren't going to have any of the problems that we had in the Great Loop Forward or the Cultural Revolution because we have AI and big data and all the rest of it well I'm not convinced of that either I think it's very hard for a vested interest political vested interest which is not accountable to anyone to actually be responsive and so I mean many of you will have noticed what Fan Bing Bing you know the Chinese big film style where she disappeared for a couple of three months I think it was and you know when she finally reappeared crawling on humiliated hands and knees she said you know without the Communist Party there would be no Fan Bing Bing and that is kind of the point and that's somebody who's like about the biggest star in China without the Communist Party there is no Fan Bing Bing so if you have a society like that where the citizenry have no legitimacy distant from the party you know there is no China without the party there is no citizen without the party then there is no nothing without the party then the party is not accountable to anybody then you are not going to get a good contract between the party and a sophisticated citizenry or if you are I can't quite see how it's going to happen and because of that I worry about you know all the cascading other relationships through the economy because at the end of the day you know we need those contracts to function they have to be meaningful and if the party doesn't have to have really at the end of the day a very meaningful contract with anyone how can the contracts which cascade from that be meaningful either so I found George's book really fascinating I think the questions are vital I think he's right not to draw any firm conclusions because it's hard especially in the context of this huge inflection point in terms of US-China that we see in China in the world but I suppose I too am somewhere in the middle I'm not a China-collapsist but I'm not a China triumphalist either I think there are many huge questions which remain unanswered Thank you very much Kerry if there's no Communist Party power-facing, Kerry power-facing if there's no Communist Party then there is no red flag but since there is the Communist Party in charge in China there are red flags at least for the book and so perhaps we should be all going and grab a copy and read it now before I open it to the floor for questions and answers George is there anything you'd like to respond to to the two reviews Well first of all I'd like to thank both Kerry and Jonathan for A for being here and also for their very incisive kind comments not really, I mean Jonathan raised some points he said as devil's advocate most of which I could probably agree with very easily particularly when it comes to debt the distinguishing feature of course about China's debt issue is that it is domestic debt, it's not owed to foreigners by and large which makes it materially different from the situation surrounding Thailand, South Korea, Indonesia in the Asian crisis or Turkey, Argentina this year and so on and so forth materially different but of course that doesn't mean to say that countries that only have a domestic debt issue don't have problems so in the 1930s America's debt problem was a domestic one in the savings and loan crisis the Americans had in the 1980s it was a domestic debt problem in the financial crisis in 2008 it was a domestic debt problem in Japan in the 1980s it was a domestic debt problem so countries that have large and unsustainable levels of domestic debt also have a day of reckoning but not one that can be brought about by foreigners and by foreign capital because there's no foreign capital effectively to withdraw so it manifests itself in different ways the triggers are very different and they can be extended and lengthened so if you have a kind of opaque accounting systems you can hide bad loans you can do what bankers call extend and pretend which is basically is to push the the payments on loans into the future so that nobody recognizes a bad debt for the time being etc etc so the timing is a mugs game nobody is going to be able to do it but we know that eventually countries do run out of wiggle room and I think I don't know I mentioned in the introduction of the book that the Shanghai tower which is the tallest building I think certainly in China if not in the world there might still be the Dubai tower there's always one there's a bit of folklore about the topping out of tall buildings which is usually kind of a tipping point it may not be quite the tipping point that the new 50p piece in the United Kingdom will be but anyway I think that kind of time for China is kind of drawing near it's certainly nearer than it was 5 years ago and 10 years ago 10 years ago perhaps it wasn't even a problem but speed of debt accumulation etc the other thing I thought I quickly mentioned actually because I thought it was a really good point that Carrie made about how as I'll write it down here that actually doesn't have very efficient ways of assessing value that's really really an interesting point it's certainly for an economist to kind of consider because actually of course where everything is state directed and state controlled and top down it's kind of mandated because there isn't a question of value you can do anything you like until you can't and then eventually you do get found out if you introduce a blended system or markets with Chinese characteristics or whatever you want to call it then you start to introduce something which actually makes that system a little bit more sustainable which is effectively what the black cat and the yellow cat under which everything was all about was introducing kind of a blended system which actually underlies the success that China has had for the last 20 or 30 years the question also then now is Kaji is whether we've kind of reached a little bit at the end of the road in a way or reaching the end of the road because there are because for reasons that we've heard from you know on all the table this evening the political system kind of reached a point where the private sector is basically being kind of pushed aside a little bit there was sort of very curious incident taking place in China in the last few weeks in the stock market which has been falling very very substantially where private companies that weren't able to get loans from banks because of the priorities attributed to assigned to state companies had to pledge shares in order to get loans of course once the stock market starts falling the value of the collateral collapses which means that the companies become more and more commercially unviable and several companies actually have had to sell stakes back to state companies or themselves completely back to one or two state companies these are not widespread yet by any means and the stock market certainly seems to have stabilized for the time being but I think the you know the the assignation of value actually requires all sorts of structural changes which I think defy basically the China that we know you can't you know the Chinese government is or the Chinese state is the owner, the participant and the regulator in the system they have a huge conflict of interest and it's very difficult to kind of make that blended system work in complex economies I think unless you have clarity which actually allow you to assign value and to write it off when it's very very good point which I think should think about Thank you George, the floor is open and I will try to take a couple of questions first before asking George to respond and if you would like to address it to one or the other panelists don't feel discouraged from doing so anyone? Yes, I think we have a microphone and if you could wait for the microphone to catch to you Thanks very much. I think you already sort of addressed this in a way that you said that you saw the trade war as having sort of spillover into other areas that would be difficult to contain. Do you see this trade war as a sort of precursor to a sort of wider kind of technology war? I'm thinking in particular about the US's offset strategy where it sort of explicitly makes a link between its sort of technological preeminence and its strategic security and that we're seeing with the advent of AI the sort of confluence between commerce and strategy where advancements in these areas which are important for commercial activity are also very important potentially for in the strategic realm so I'd be interested to hear your thoughts on that. Thank you, I think there's another question I'll take two together. Okay. I'm a long-term human rights activist and it's never ceased to amaze me how much abuse of its own people the dictatorship in China has heaped over the last 60 or 70 years. Can the panel ever see a time I know that there is a deep cultural preference within China for stability at almost any cost but can the panel ever see a time when especially under the increasingly authoritarian policies of Xi Jinping when the social contracts between party government and the people starts to break down into significant internal disturbance which would probably have already happened in most other countries in the world had they been subjected to what government has done to them. Thank you. Thank you. George, will trade war become a tech war? Well, I'll take that one it's an easier question but well, I think you nailed it really I think that's the point I was trying to make, I'm trying to make it better now that the trade war really, yes ostensibly it is about commerce but underneath not much bigger things which are to do with well, the reason or amongst the reasons that the White House has cited for the implementation of punitive tariffs which I'm not saying is the right way to go about it but that's kind of where we are is the things like the China's policy called Made in China 2025 which identifies 10 sectors which in which each of these sectors are given quantitative targets to achieve certain kind of much higher levels of market share in terms of sales and revenues and that was basically followed very quickly in 2016-2017 with a series of State Council documents that had to do with what China wanted to achieve in terms of AI and robotics, big data by 2030-2035 and so on so the problem, well the issue that the Americans and others have with this is they think that China's industrial policies and its technology transfer policies and its intellectual property policies are unfair and give undue advantage to local companies obviously into the Chinese government because they are actually fake companies or private companies that are very closely related to the State and that's fundamentally what it's about and I mean if it was like if it was just about iPhones or something like that I don't think anybody would really care too much but this is ultimately this is about power and about military capacity I think if I just add to that, I mean if you look back over what Peter Navarro particularly at the White House has written it's always been about technology and when it's not about postal rates which he's also very exercised about but it's been about technology and I think the whole ZTE episode which really showed up how backward China was in this in a sense acted as an encouragement to the Trump administration to push things further with making it more difficult for Chinese acquisitions and technology in the US and that will continue and what is important with George mentioned is that you know so much of this is going into military use and where the boundaries are between civilian and military use is very cloudy everywhere but particularly in China I think so yes it's a technology thing and the interesting thing from that point of view will be how countries suppliers of technology for instance South Korea which is the biggest supplier of semiconductors to China or Japan, Harvey was just in there with a big business delegation last week in Beijing whether they will supply China with advanced technology or whether Trump will tell them South Korea and Japan hey if you want the American market you better stop collaborating with or selling into China so he can broaden out a very brief question to yours I don't think there's ever going to be any change from the Communist Party to the Saudi leadership there it's on the human right side I think that is now said it may be deplorable in every way but you know what's happening in Xinjiang at the moment is a very good example I think of pushing things as far as they can and in terms of getting away with it Kerry social contract will ever break down I think I mean basically agree with Jonathan I think that the scale of China and the means and the scale of the party means that it's very hard to imagine the circumstances in which the social contracts you know in which there would be a very significant difficulty for the part or in which the party would be forced to adjust that position because of course the whole way it operates is for you the citizen to feel that it the party is absolutely inexorable and invincible and in order to maintain that fiction it has to behave inexorable and invincible and that involves intimidating you so I mean we saw it in the summer where there were two academics some of you will be aware one was courageous enough to criticize the Belt and Road he got carted off in the middle of an interview he was doing with VOA and I mean it wasn't even a very out there criticism of the Belt and Road but he dared to criticize the PEP project so that was enough and then the other I mean the other was I actually wrote the quote down to read to you all actually from Professor Xu at Qinghua I said and he said I mean in a way it speaks directly to what you're asking he wrote a criticism really of the whole Xi Jinping project and the extension on two terms presidency etc and one line for example people nationwide including the entire bureaucratic elite feel once more lost in uncertainty about the direction of the country and about their own personal security and the rising anxiety has spread into a degree of panic throughout society he said but that's two people in you know at a 1.4 billion so most people wouldn't dream of daring to say anything like that and that means that Xi Jinping really does control the narrative and if you control the narrative you can get away with saying that locking up a million people in Xinjiang if that we don't know exactly how many but obviously that's the upper end of the estimate you can get away with saying that's vocational training who's going to contradict you so you know within China what is the contract between the citizen and the state currently fear greed and patriotism slash nationalism and you know it's interesting that Donald Trump's obviously going the same way in terms of American politics in the old days you know early 1990s dark days in China but many Chinese citizens had the sense that there was a different kind of society out there one that you might wish to aspire to and that provided an alternative model at the moment my experience from having been in China you know between 2014, 15, 16, 17 so really throughout the American election presidential election campaign in the first year of Trump was that already after 2008 and after the Afghan war the Iraq war the Arab Spring the 2008 financial crisis there were a lot of dents being knocked into the aspiration inside Chinese citizenry to follow the western example but certainly Donald Trump has kind of been the last nail in that coffin I would say so at the moment I don't think people in China feel that they've got much of an alternative anyway having said that I believe that dangers of Irish Xi Jinping, the thing that would keep me up at night are one is the first thing of the property bubble that Jonathan talked about a moment ago I think that would really cause him a lot of problems in terms of the social contract and another thing is military defeat if China lost a little war that it intended to win that would be very humiliating for the party and that would be the kind of damage to legitimacy that would be very problematic for him I think I think that I think that I think that lady there first yes again I will collect a couple of questions and then have them answered together yes the lady there if you can raise your hand so that the mic can come to you well thank you for your accent talk well my question is in a word do you think the red flag include the territory stability in China because I think the debt problem you previously mentioned is closely related to the tremendous spending on maintaining stability or in Chinese way especially in Xinjiang province but also in the rest of the country so if the government failed to address the debt problem and if the central government is no longer able to afford a high level of surveillance will it lead to some internal chaos or even the eventual succession of certain areas in China in the long term and that is my question thank you okay yes I think if you just give this to the gentleman yes well this is a kind of follow up to the last question by the human rights activist a question to George that if I heard you correctly you mentioned four internal factors which you think will contribute to the ultimate collapse or demise of Xi Jinping's China why is it that you did not mention the most important factor which is the repression of the Chinese people why it should have been the first I think least of all you didn't mention it at all how is it I mean this should be the first factor that it is a repressive regime and that will eventually I mean if you have any faith in human beings you should mention it and even if you don't have you should at least mention that this factor is there you can say I don't have any hope about it but at least do mention please okay I'll take one more sorry actually I don't have a question that's I do not completely agree with Professor George about his answer regarding to the first question about the current trade war between China and the United States Professor sorry to say that the trade war is not simple the current trade war between China and the United States is not simply the issue of trade but related to a lot of other matters but you said that the only focus on trade apart from trade as you focus on the technologies China foreign entrepreneur to transfer technology in order to operate in China or something like that but I think trade war is only a small point in this large picture I mean that is strategic competition now between China and the United States that is strategic competition so what is the question please no I don't know as I said before but I want to clarify that Miss Miss Miss Miss Professor to the first question yes I know with your answer I will miss more comments about that okay thank you I will try to see when I get another wrong in George a little bit curious you say you don't agree with my answer but actually I agree with what you say so what I was trying to say perhaps in articulately the trade conflict is like a tip of an iceberg so you say it's really about strategic competition I think that's what you said in strategic competition but in areas that go far beyond trade so I agree with that it's kind of what I was trying to say so but I'm not really sure I should pass the territories issue to my two colleagues actually the question really was about why didn't I mention repression because I do refer in the book to the nature of the governance system that's happened since 2012 and it has become repressive and I don't talk specifically about human rights but I do talk about the legitimacy of government up until now has really been aspiring or helping people aspire to ever rising living standards and prosperity and so on and that could be undermined as we've already discussed here this evening could be undermined of course under lots of different circumstances including as Carrie pointed out property prices should suddenly tumble for one reason or another or military defeat as she pointed out from an economics point of view as an economist rather than as a political philosopher which I'm not you know the issue of repression is I mean it's not unimportant of course but actually from the point of view of economic success or economic failure it's not really the kind of numero uno kind of topic because it is a topic if the legitimacy of the social contract breaks down which is and that's the topic that I've kind of tried to address which is that breakdown I'm not looking for a collapse of the communist regime by the way or the collapse of I mean he may be undermined by other factions in the communist party if something should go wrong because the concentration of power around him means that he's safe as long as everything is right but if everything something goes wrong which it's very likely to do at some point then he's personally liable as we've already kind of made clear but I don't really I'm not trying to minimize the issue of repression it's a terrible thing obviously but opinion surveys such as they are in China actually indicate quite high levels of satisfaction with the president and that's because by and large people still don't feel any immediate threat to their prosperity living standards but maybe that's a rather narrow way to look at I think there's one more question George which is about the relationship between debt and stability maintenance oh I missed the sense of the question but I mean the management of the debt situation I mean is kind of it's really it's central to the sustainability of stability in China so if you if you lost control of that situation because illiquidity began to appear in the financial system or because people that supplied funds to bank market or to you know sophisticated financial products suddenly withdrew their money because of lack of confidence or because property prices started to drop yeah that would breed instability quite quickly which would spread like wildfire so it's really it's on it's a kind of it is a tipping point kind of issue to maintain the stability of the financial system if you can't do that then you kind of lost you've lost that battle really right press on if you could have the microphone back yes I have the lady there we are sort of rather underrepresented in terms of questions from ladies I'm from Hong Kong so I would like to feedback about Carrie's point about the Greater Bay and the Bowen Road projects because you see the reason like reject or backing out from some African country and Malaysia about the Bowen Road project and also for the Greater Bay Area the central government makes Hong Kong to spend one trillion it's almost equal to one million one hundred billion pounds to build a man-made island that Hong Kong doesn't need as a money laundry process for the government control the central government control the construction company to capture the money and with all these factors add up some more red flags to you to reassess the ticking time for the birth of this economic bubble or how far is it coming in five years ten years or okay if you can hand the mic to the gentleman in front of you hi there it's a conflation of both Carrie's question, George's question that firstly with George the first red flag of aging is that something in my reading I've come across is that the average age of a farmer now is 57 in China and then it goes on to your point that you're saying that the watershed moments, the Great Leap Forward and the Cultural Revolution you could see potentially repeat themselves do you think there's a situation that China has an imminent kind of food security crisis okay I think this we've moved the mic to the front right to the front yes, can you pass the microphone please thank you professor, just one general question do you think this whole agenda of tightening control and strengthening state power only as a correspondence to the incoming economic crisis like Roosevelt government in the 1930s or is it also with the party incentive to come back to the stage with as an ever stronger organ but if the case is the first case it will be much much easier to apprehend than the party is treating of some values with the citizen but if it is the second case it could be more complicated it can be implied that in the future there is no incentive to lose in the control right, thank you Carol would you like to go first and then I come back to George so I'll just go very very quickly because I think mostly these are questions for George but I'm interested in you know that question about whether the motivation is purely because China faces these very challenging economic urgent economic ticking time bombs that George has set out whether that's the motivation entirely for Xi Jinping's control push or whether it's other things and as you say if it is other things then maybe they don't have the same incentive to quit being so controlling if they ever get through solving economic problems and I would say no it's more than the economic issues it would be my take on it and there's obviously a huge question and we could take all evening to discuss that but I think it is there are many other factors involved in that I think Xi Jinping's got some of that control instinct in his political philosophical DNA and I also think that you know those corruption problems weren't nothing that the Chinese Communist Party had before he took over in 2012 very very significant corruption and so the kind of you know let's put some calcium back in the spine of this organization let's get some coherent values I mean you may not like his values but he's certainly driving them down through the party and that means through the society and so I think the short answer to your question is it's much more than economic although economic is the bit that many Chinese people might think is legitimate and that even if he ever gets through George's you know long list to-do list he is not going to renounce that control Carrie there was a question that was specifically directed to us you which is the first one the better known initiative putting Hong Kong the- well I still think that's kind of I'm going to kick that ball to George basically because I don't know is the answer I mean yes I think it's fairly cynical to a degree and we've seen it in you know we see it in many of the Belt and Road projects the kind of you know who's cement factory who's steel plant you know we've got to find jobs for the boys and so there's definitely some of that going on and if it's going on in Hong Kong you know well there's a lot of bad stuff going on so I'm not and it's again back to this question of you know if there isn't a sensible allocation if there isn't if we haven't got any other means of resource allocation effectively then unfortunately you get all kinds of logic for allocating resources which are not ones that you as a citizen of Hong Kong might choose. Okay I think Jonathan would like to come in and then come to the move. Yeah I think also the Hong Kong thing you've got to put it in the context of and actually since the State Council white paper of what now four or five years ago how long it was you know there has been a definite move to draw Hong Kong closer into the people's republic I mean the one country two systems I remember at the time being there everybody thought about the second part of the two systems but now Beijing has made it quite clear that one country comes first and that's going to be the the greater Delta area or whatever I think Beijing wants and you can see it in all kinds of ways there. I say also just to go to introduce one element which we haven't mentioned which applies to human rights and a lot of the other issues that have been raised which is the of an independent rule of law in China and accountability there which I think underlies an awful lot of these problems and actually affects quite a lot of the economic problems too because it makes all the kind of sculled-up jury and you know inefficiencies that we've mentioned along the way easy if you've got political cover and to come finally to Xi Jinping I think the most telling perhaps early statement of his was right at the beginning in 2012 when I paraphrase it roughly that when the challenge came in the Soviet Union there was nobody strong enough to defend the party in the system and since he sees the party as being absolutely primordial he is quite sure that he is going to be the person who will be there to prevent a Soviet Union style collapse and I think that dictates an awful lot whether that is pure power accumulation for power accumulation's sake or in the sake of a greater good as he would no doubt put it I'll leave you to decide George? Yeah well I must be brief but I mean I just I agree obviously with both of my co-panelists have said to your question here at the front I mean there was a point when people thought that the concentration of power around Xi Jinping was really quite deliberate and designed to make sure that as the party was strengthened that local governments and provincial governments and state-owned enterprise executives would be more compliant so we need to be you know ruthless and powerful and show whose boss because otherwise people won't obey you know the center so to believe that that the other part of that belief you have to believe that underneath it all that Xi Jinping actually is a liberal reformer which I don't think he is so there was a point you know during the third planet wasn't there where there was a famous New York Times column saying when Xi Jinping was over in 2012 this is the beginning of liberalization and democracy in China you know this is going back to Bill Clinton make them rich and they'll be more like us yeah so I think it is endogenous to his beliefs and to Xi Jinping thought socialist characteristics etc etc the Greater Bay Area I think was quite interesting actually I think it's a white elephant right because just from an economic point of view there doesn't seem to be any need at all for that bridge that was recently opened given all the high-speed rail projects that are going on and the improvement in rail and road infrastructure but you know it's a huge engineering feat and I'm sure that a lot of as you said you know construction companies a lot of nice money out of it and so on and so forth and whether it'll you know I mean as far as I could tell reading the South China Morning Post I mean it looks like you know there's not going to be very much traffic on it and you have to play it's very complicated to buy the licenses and so on you won't buy two weeks in a row yeah I think it's it's kind of another example if you want I mean I don't want to be too childish about this because actually if you're a poor country and Chinese banks come and say you know we'll build you a new airport or we'll build you new highways or we'll do high-speed rail I mean what's not to like really unless it bankrupts you or you end up having to sign over your port you know to Chinese construction company so it's a bit sort of nuanced really but it is another example actually of the kind of lots of kind of glitz and you know wow factor but actually the commercial underpinnings, the value of these kinds of projects you know sometimes very questionable and the as far as I can see from that she didn't actually open it himself and the last question was you asked a question about the rural population no I think you know I don't really know about food security I mean I know one of the things that I didn't really address in the book really was the issue of apart from repression which the gentleman asked me about before but was the issue about you know climate change and environmental damage and so on and so forth so I mean I know that China I mean you know it has actually it has lost a bit of its food security because it now imports I think almost all of its kind of soy needs and I've looked I mean I've looked at the rural population from the point of view of labour transfer right so people still say there are you know half the population live in the countryside roughly and that China has this ambition you know to go from 50% urbanised to 75% urbanised by you know 2030 2040 but the trouble is that I mean that assumes that the population of the rural areas is the same now as it was 20 30 years ago which of course it isn't because it's much older and its gender composition has changed because a lot of women who went to work in factories have kind of gone back to take on you know family care and so on and so forth so the the mobility of labour from the rural side is less than it used to be this is just an age-related thing and so I think that that is the problem I mean it could be a food issue I don't really know to be honest we are now into the drinks reception time but I noticed that there was quite a bit of interest earlier so I am quite happy to have one last round of three questions if you're still interested I'll take it on this side please I think the gentleman in the middle first and then we'll go from there I was wondering if the panel could speak more to I think it was kind of briefly touched on but I think it's a really important point about the gender imbalance in China and the links that that might have with militarism and also kind of expansionism because kind of thinking about history the last time that the major power in Asia this much of a gender imbalance is when Genghis Khan kind of spread around kind of Europe and Asia for one reason to find more wives for young men with no jobs so well with AI and all those things from the gender balance and militarism Thank you, you could pass it to the gentleman next to you Thank you for the interesting discussion so far I would like to, well one question related to the trade side so one thing that hasn't been mentioned is that China holds quite a pile of U.S. government debt and it's said that it's kind of suicidal that China would evolve this aspect but in what conditions or what kind of leverage China would have when it would use this kind of aspect and what would basically happen if China would be pressed to kind of do something to manage the trade situation Okay, thank you I think I'll take one more Yes, you could pass to your Jack. Thank you I have some question about the middle class in China because I've been reading an article from the Economist saying Xi Jinping is very hostile to the middle class in China right now I'm kind of agree with this opinion because they used to be a period that's right after 1978 where the boom of the private business giving rise to the middle class in China and now what is happening in China is it seems to be a re-emphasis of the importance of staying down the business and a lot of the government policy is inclined in favour of staying down the business because well my parents have the private business only in China we can feel that kind of thing happening in this tendency It is said by some people that the approach of Xi Jinping is to control some big private business in China such as Alibaba, Tencent or AginDome and then take a very repressive approach against middle class and then leaving a lot of people still living at the base level where they can be highly inductionated and have been watched that's the way that he can adopt to strengthen the power of the communist policy so what's your opinion on this issue what do you think we'll be in the future thank you George, why don't you start with well I'll certainly take the middle question about US Treasuries China does hold a lot of US Treasuries less than it did and in fact during the financial crisis that China had in 2015-16 its reserves dropped by about 800 billion dollars and you would barely have noticed it if you were looking at the US Treasury market partly because the US Treasury market is influenced by all sorts of things not only who happens to own it but foreign governments happen to own it nowadays it might be a different issue because the US Treasury market itself is under a lot of pressure because American Federal Reserve is raising interest rates the economy is quite robust and so on so the bond market isn't very stable at the moment but it's an old chestnut this one I've been around this corner many many times in the last 10 or 15 years and the issue has always been that China wouldn't really sell its stock of US Treasury bonds unless it wanted to be send out a really aggressive signal to Washington about its intentions by which time one imagines that the Americans would have latched onto this and it's also an exercise in self-harm really because they hold so Chinese reserves are about 3 trillion dollars probably at least 2 thirds of that if not more in US bonds or US Treasury bills probably more if you include currency holdings as well so once you start selling if people start getting panicky about it and they start joining in with the Chinese in terms of selling then the value of Chinese assets goes down automatically and the reserves are actually looked at in China as a a little bit of a status symbol you know it's ours and we have to protect it and so on so I think that's a kind of a false threat actually I don't think the Chinese would do that things would have to get pretty desperate for them to do that I'm going to pass on gender imbalance and militarism I don't really know anything about that I'll deal with that briefly and I'll leave the third question to Jonathan then unless it was gender imbalance and Genghis Khan and militarism except if Genghis Khan was an early version of toxic masculinity then Xi Jinping needs to be a little bit careful not to go the same way and obviously we can all see how gender balance the top of the Chinese Communist Party is and if the state wants to get compliance from Chinese women on the things that it cares about I mean we talked earlier about fertility and someone was making the point, the very obvious point that you know it's enormously expensive in terms of financial investment but also human resource investment time investment the way that Chinese now bring up their kids it's tending towards the kind of Japanese model so I don't really have anything to say and I'll stop talking except to say women are an interesting quantity in China and you'll remember the feminist five in 2015 and the detention of those feminists in the spring of 2015 which was just a couple of months before Xi Jinping went to mark the anniversary of the women's conference it was the 20th anniversary and instead of that being a happy clapping moment for him you know Hillary Clinton pointed out that it was shameful that he was taking credit for this at the same time as locking up a few feminists who had merely been trying to say can we not be groping people on public transport which you wouldn't have thought was a very challenging point so that kind of underlying me too kind of energy in China the kind of me too of Chinese women who identify with the same challenges of women elsewhere in the world and yet are unable to talk about it because they're gathered by the political control mechanism which doesn't even acknowledge them throughout the Chinese Communist Party I mean or in its higher reaches I think it's interesting we'll see where it goes but I don't have any short answer is Xi Jinping hostile to the middle classes and private capital he's not he's not hostile to them so long as they remain good party servants that's a good snappy answer thank you very much the private sector will be co-opted and as for the middle class the urban middle, second generation middle class that I think is the biggest of red flags of all well thank you very much I think on that rather a cheery note of everything will be fine as long as everybody supports the party I will draw these panel discussions to a close but we have drinks and nibbles outside in the four-year aid and they are books I think being meant on a store by somebody and you're welcome to browse and if you're interested purchase copies and the panelists will be there for some time and so you will have a chance to talk with them thank you very much