01x05 - Globalisation

[bunniefuu]

In 1989, the Berlin
Wall was torn down.

The event symbolised the
triumph of Western capitalism.

Eastern European states
were freed from Soviet control,

sparking global economic growth.

That same year, China's communist
government crushed the Tiananmen Revolt.

By 1989, China's economy was still
only about 1/16th the size of America's.

The United States dominated
the world economy.

In the 1990s, there was the kind of Goldilocks
and the Three Bears just right economy

where it was growing
not too fast, not too slow.

Suddenly, technology
changed everything.

If you don't get on this technology
boom, you're gonna miss the whole thing.

This is not a fad.

Over three decades, you've kind
of gone from flat to fast to smart.

And it's not just changing,
it's reshaping your world.

As the globe becomes
increasingly connected,

power is shifting
from west to east.

People have called it the greatest
transfer of wealth in history.

China certainly
is a rising power.

It has four times as many
people as the United States.

We said the last rites
over communism,

not noticing that in the most populous
communist country of them all,

the Chinese embarked on
a policy of economic reform

that produced the biggest
industrial revolution in history.

The world has transformed
over the past 30 years.

In the blizzard of
news and events,

it's hard to make sense of
how we arrived here.

But if we stand back, we
can see how things connect.

We can see the road to now.

In 1990, at the end
of the Cold w*r,

the reunification of
communist East Germany

with capitalist West Germany, was
a huge organisational challenge.

The cost over time, was
estimated at 2 trillion Euros.

It was tough going for a few
years, but through the decade,

Germany emerged as an economic
colossus of 80 million citizens.

The new Germany anchored the
spectacular expansion of Europe,

as former Warsaw Bloc
countries embraced

the free flow of
goods and services.

The collapse of the Soviet Union had
left Germany's ally, the United States,

as the dominant economic power.

Japan, the other post-World
w*r II economic miracle,

had invested heavily in
electronics and manufacturing.

Symbolic of its challenge
to American dominance,

Japanese vehicles captured
a quarter of the US market.

As Tokyo became a
financial centre in the 1980s,

property speculation took hold.

These were the days when the land
underneath the Imperial Palace in Tokyo

was said to be worth more
than the state of California,

and when you had,
at the very high end,

this heavy competition
between Toshiba

and IBM and Toyota
and General Motors.

There was a sense, often encapsulated
in a saying by Chalmers Johnson,

who said, "The Cold w*r
is over and Japan has won."

Japan's dramatic
rise peaked in 1989,

and the following year,
the stock market collapsed.

The writing I was doing from
Japan in the late 1980s was saying,

"Take seriously how different
this economic system is

"from the Western-style
economic system,

"but also recognise
its potential brittleness

"for one reason of scale
and one reason of culture."

By 1992, the property
bubble had burst,

Japan's economy
flatlined, hampered by debt

and a shrinking
ageing population.

It was called the Lost Decade.

But other parts of the world were not
experiencing the same stagnation.

China's economic
growth from the 1980s

to the end of the 20th
century, was extraordinary.

Rigid central planning gave way
to a socialist market economy

that encouraged foreign investment
and rapid industrialisation.

China lifted hundreds of
millions of people out of poverty.

The greatest movement out of
poverty humankind's ever known.

By 1989,

China's economy was still only about
one-sixteenth the size of America's,

not much bigger than India's.

90% had less than $2 a day.

Now it's down to 1%.

And they're gonna make it zero.

India, the other
big power in Asia,

was also making strides
toward reducing poverty.

One indicator of a changing
economy in the early '90s

was frenetic activity at the Bombay
Stock Exchange in Mumbai.

It was the busiest
exchange in the world,

measured by the number
of transactions per day.

Every trade was greeted
with a kind of frenzy.

It does go beyond just
pushing and prodding.

It goes to deep shouting and

even fights, hand fights,
sometimes do take place.

But that's all part of the game, and
people do enjoy it at the end of the day.

The freewheeling nature
of the Bombay Exchange

was at odds with stifling
Indian bureaucracy,

which continued to hamper
economic development.

But India would continue

to pull greater numbers of its
people out of extreme poverty.

The defining characteristic of
the 21st century is technology.

It's become essential for
business and our personal lives...

..even in developing countries.

So, suddenly, connectivity became
fast, free, easy for you and ubiquitous.

Suddenly, I could touch people
I could never touch before,

and I could be touched by people
I could never be touched by before.

In the 1980s, the latest
in consumer products

was a clunky computer
storing data on floppy disks.

And Moore's Law, coined
by Gordon Moore in 1965,

the co-founder of Intel, said the
speed and power of microchips

will double roughly every 24 months,
and the price will stay roughly the same.

The big breakthrough at the end of
the 1980s was the World Wide Web.

It was a wonderful idea that Tim
Berners-Lee had at CERN in Switzerland,

the nuclear
accelerator facility.

And you had all these scientists
with their own computers

and different systems
which didn't match,

and he wanted them to
work together and connect.

For scientists like Berners-Lee,

communication and collaboration with
colleagues around the world was essential.

I was very lucky
with the timing,

very lucky with the way a
lot of people picked it up

and supported it and
became a community

which really developed
and brought it out.

Connecting all those computers
has changed the world,

but what Tim Berners-Lee did,
was to make it a public good.

The World Wide Web quickly
evolved beyond a communications tool

for scientists, the military
and governments.

Business people realised, it would
transform commerce around the world.

Number 14, 2002.

This is looking 39
and about 35,000...

There was a tech
boom in the late 1990s

that followed the World
Trade Organisation opening.

The Internet suddenly
became key to wealth creation.

Young people in New York with
no experience in share trading

launched themselves
into the fray.

I started out with 3,000.
Currently I'm up to 500,000.

A global computer network
meant market players

no longer needed brokers
to buy and sell for them

on stock exchanges
around the world.

Day trading rooms opened
up around New York

to cater for those
infected by dot-com fever.

..10.50 to 13 bucks a share.

150, 35 and three quarters,
leaves me at half a...

Startup technology companies built
on promises, but little if any income,

attracted massively
inflated valuations.

If you don't get on
this technology boom,

you're gonna be left in the dust,
you're gonna miss the whole thing.

Between 1995 and 2000,

America's NASDAQ technology
exchange Rose 400%.

What you've got now, this
money machine, the Internet,

the information
technology revolution.

This is not a fad.

This is a revolution

that's affecting the way we
do business and live our lives.

And that's why
it's so profitable.

Tech was also booming in India.

It had the entrepreneurs and it had a
quarter of the world's software engineers.

Bangalore became India's
answer to Silicon Valley,

though not the equivalent.

Electricity was an on-off affair and
telecommunications were erratic.

Infosys was one of its most
enterprising companies.

My desire has always been to create
wealth, legally and ethically, in India.

I also wanted to show how we can retain our
bright-winged boys and girls in the country

by giving
them high-quality jobs.

Indian engineers were much cheaper
than their North American counterparts.

US corporates began outsourcing
software designed to Bangalore,

where Sabir Bhatia
honed his skills.

I'm the geek in
the crowd, I guess.

Named as one of the Elite 100
who has had the greatest impact

on the computer industry of the world,
ladies and gentlemen, Sabir Bhatia.

In 1996, Bhatia launched one
of the first webmail services,

enabling free global
communication.

Hotmail.

Hotmail quickly attracted
millions of users...

..before Microsoft's Bill Gates
acquired it for $400 million.

Well, he got a good deal.

As the '90s came to a close,

the inflated world of technology
stocks was in trouble.

The dot-com boom
in the late 1990s,

where you would buy all
of your animal food online

and there were high
valuations for no actual work.

Many dot-com companies
were burning cash

and a long way off
making any profits.

In 2000, Japan tipped
back into recession,

which had an international
knock-on effect.

The dot-com bubble burst.

In 2000, all that came down.

There were layoffs in
Seattle and San Francisco.

An estimated 80,000 people were laid
off in California's Silicon Valley alone.

The shock to the US
economy was compounded

by the t*rror1st attacks
of September 11, 2001.

And for three or
four years, there was

profound dislocation
in the US economy.

A trillion dollars of investors'
money disappeared in the crash.

Companies had poured hundreds
of millions into network infrastructure.

The dot-com boom, bubble
and bust at the end of the 1990s

collapsed the price
of fibre-optic cable.

And so suddenly we were able
to spread this cable everywhere.

Honey, I wired the
world by accident.

Didn't mean to, but I did.

The US economy slowly
clawed its way back.

By 2004, it had
regained its strength

with new technologies
facilitating globalisation.

For American corporations,
it certainly was a bonanza

to be able to spread their markets
and their production system

around the world.

Then Disney could have
a huge presence in China

and Nike shoes could have its
production lines in Indonesia, and even

GE and other big
high-end manufacturers

could have sourcing
from around the world.

I go to Bangalore and I
suddenly discover that

my lost luggage on Delta Airlines
is being traced from Bangalore.

My software is being
written in Bangalore.

My cartoons are being
drawn in Bangalore.

And I had no idea that globalisation
had made this huge leap.

In the early 1990s, China's
leader Deng Xiaoping

demanded more
radical economic reform.

China opened
further to world trade.

It became the heart
of globalisation.

The economic model
was planned capitalism

run by and for the
Communist Party.

Because China could rule from
the top down, China could say,

"In five years, we're going to have a
fast-speed rail linking the entire country.

"We're going to
build new cities.

"We're going to
develop new industries."

Democracy, in some ways, has
been a drag on India's development.

Symbolic of China's rapid
development was the car industry.

At the turn of the century,

there were only 4 million
vehicles for 1.3 billion people.

By 2008, China had overtaken the
United States in manufacturing vehicles.

The government encouraged
foreign manufacturers

to set up plants around the country,

but only if they found
a Chinese partner.

Soon, 100 companies
were producing.

China, the ultimate negotiators,
they were able to say,

"You need our market so badly,
that this is the arrangement.

"You can come in, you can bring
your money and your capital,

"but, oh, by the way, you
can only own up to 50%.

"And in the same city, my other
partner will be your competitor.

Deal?"

In 2006, China was in a kind
of sunshine period in two ways.

One is, economically. It
had been a couple decades

of more or less steady
growth that every...

..almost every family in China could
register in its own family history.

If you thought to your
grandparents or your parents,

they were in the village,
they didn't have electricity,

now, maybe I'm in a
factory in Shenzhen,

but I have a better prospect
than my parents did.

So, economically, there was a sense
that it was continuing to move ahead,

and most people in most places
were better off than they were before.

Every spring, after Chinese families
celebrate the Lunar New Year,

there's a mass migration
from rural areas to the cities.

Workers can earn five times as much, toiling
in factories as they can in the fields.

The train system
is overburdened,

and it can take some workers 16
hours to get to cities like Guangzhou.

By 2017, 60% of the world's
consumable cheap goods

were being produced in China
and shipped everywhere.

I'm at Cairo Airport.
I go into the souvenir shop.

What would my wife like?

Why, what's that here?

It was a stuffed camel, and if
you squeezed its hump, it honked.

So I picked it up, turned it over, looked
on the bottom, and what did it say?

Say it with me now.
"Made in China."

Yeah, you're the lowest-wage
country in the Eastern Mediterranean.

There's now a country
half a world away

can make your honking hump
camel cheaper than you can.

Ship it and make a profit.

We said the last rites
over communism,

not noticing that in the most populous
communist country of them all,

the Chinese embarked on a
policy of economic reform...

..that produced the biggest
industrial revolution in history.

The Chinese
government recognised

there was much more money to be made
in technology than in tourist trinkets.

And the fastest-growing market?

The must-have personal
item - the smartphone.

China was the place to have
components made and assembled.

We have invented a
revolutionary mobile phone.

We're going to use a pointing
device that we're all born with.

We're born with 10 of them.
We use our fingers.

Apple technologies were designed
and engineered in the United States.

Many of its phones and other
products were assembled in China.

The starting salary for workers
building Apple products in 2018

was just US$300 a month.

Many earn overtime working
six long days each week

while living in a dormitory
attached to the factory.

From iMacs to iPods to iPhones, China's
cheap labour was the key to success.

It helped Apple
become the world's first

publicly traded
trillion-dollar company.

Apple and other Western companies
helped underwrite the development

of China's huge industrial base.

Giving people the skills to
make sophisticated equipment.

In 2007, the United States was
enjoying another financial boom.

President George W Bush had taken a
hands-off approach to financial markets.

The US was leading global
stock markets to record highs.

Stock valuations were wildly out
of kilter with fundamental values.

Late in 2008, Wall Street
came crashing down.

One big factor was that
far too many bad loans

had been invested
in American housing.

Millions of families couldn't
afford their mortgages.

Many abandoned their homes
or were ejected by the banks,

causing property
prices to fall further.

The crash was the most
serious dislocation and pain

the US economy has suffered since
the Great Depression of the 1930s.

We're going to let about
10 people at a time.

As soon as one comes out,
we'll let another customer in.

American regional
banks started failing.

Starbucks shuts down. A
bank doesn't just shut down.

It's not right. It's not right.

People couldn't immediately
get all their deposits back.

I have no confidence
now in the system,

so I just wanna get my
money and I wanna leave.

Big, old, respected banks
were also in trouble.

Fannie Mae and Freddie Mac, which
guaranteed $5 trillion worth of mortgages,

were bailed out and
saved from collapse.

The federal government promised them
$200 billion to keep them in operation.

But the government
resisted pleas

to save one of America's premier
investment banks, Lehman Brothers,

which had run up
debts of $620 billion.

The Bush administration decided
Lehman wasn't too big to fail.

The other enormous mistake
that George W Bush did

was to have the kind of laxness in
financial regulation and tax policy

that led to the bubble,

whose bursting in 2008 brought
the entire world economy down.

Stockbroker Ted Weisberg
has been making the journey

to the New York Stock
Exchange for 40 years.

His clients had
experienced a terrific boom,

so he knew there was
going to be a bust.

When it gets euphoric,
when it's too good to be true,

basically, there
are flags there.

We're in an
environment now where

the customers are clearly
working on adrenaline

and everybody's nerve
endings are really frayed.

I don't blame people for trying to make
money, people are opportunistic by nature,

but I think that greed kind of
clouded sensible judgment.

It's greed, baby!
Yeah, baby! Yeah! Loser!

Bankers and brokers had paid
themselves huge bonuses,

which turned out to be very
expensive for taxpayers.

The US Congress finally authorised
a $700 billion rescue package

for the finance industry.

I would love to hear the government
help out the average American,

before they help out these CEOs.

If the little guys ever wanted some
type of economic bailout plan,

the government would
probably shut their doors on us.

However, the big
bailouts didn't stave off

a deep recession,
which endured for years.

And it hasn't fully recovered
in distribution of income,

where most of the gains have gone to
the very top of the income distribution,

and that is a real problem
politically, socially and in other ways.

The financial crisis
of 2008 and '09

was truly global in
its consequences,

even on a volcanic
mid-Atlantic island

renowned for spectacular scenery
and home to just 300,000 people.

Iceland had privatised its
three main banks in 2000.

They tried to grow to
international size too quickly

and became enmeshed in
the global financial crisis.

There was money floating around.

They could ask for money
everywhere and they got it.

And before we knew it,

we had banks which were about
10, 11 times the GDP of the country.

In the age of loose
government oversight,

Iceland's banks
were laden with debt.

They'd spent heavily on
adventurous investing,

purchasing London property
and even other banks.

Economists started
raising the alarm in 2005

that a debt-fuelled disaster was
imminent in the land of the Vikings.

They just politely dismissed
what I was saying.

They had the line that they
had these young Vikings

operating fully in line
with European regulations

and they had just discovered
some secret, these young Vikings,

which the rest of the
world didn't know about.

In the space of a week in late
2008, all three banks failed.

Icelanders were furious.

Their new-found wealth
had been a mirage.

There were mass protests
and the government collapsed.

Iceland's poor governance
and financial excess

was a microcosm of the problems
facing larger capitalist nations.

Relative to the
size of its economy,

the banking collapse was the largest
of any country in economic history.

Incredibly, Iceland was in a
depression for only two years.

By devaluing its currency,
Iceland had more capacity

to deal with its debt crisis
than other European nations

like Spain, Portugal,
Ireland and Cyprus.

Unlike Iceland, they were locked into the
common European currency - the euro.

Greece was hit worst.

By 2010, it was
literally going broke.

Greeks were told that government
debt was approaching $400 billion.

Big cuts to government spending, to
jobs, wages and pensions were essential.

Most Greeks were outraged.

The streets of Athens
were plunged into chaos.

They asked me to pay more money
and nobody knows where it goes.

No money goes for education, no
money goes for the medical system,

no money goes for retirement.

We don't even know if we're
going to get retirement some day.

The way to think about it
is that for a lot of citizens,

there has been a deep
stagnation of living standards.

They don't feel like they're
doing better than their parents.

They fear that children are
going to do worse than them.

Tax evasion had become commonplace,
robbing the Greek government of revenue.

And corruption had flourished.

The black economy, in which billions of
euros were exchanged untaxed, was enormous.

The black economy, I used to
estimate to be about one-third

of our gross national product.

The latest information I just
received from the bank, it is 37%.

Bribing tax auditors had
become common practice,

to the point where global
anti-corruption experts

listed Greece as the most
corrupt nation in the Eurozone.

The corruption is
quite extensive.

I would say petty corruption
is almost endemic.

It is a serious problem.

Greece sought emergency help.

The European Union, the European Central
Bank and the International Monetary Fund

demanded severe cutbacks
in government spending,

at the very time that more
people needed welfare support.

Germany, Europe's strongest
economy, was critical to the negotiations.

The solution which Europe, under
the leadership of Angela Merkel,

chose, was to just give
Greece enough loans,

just tinker with the
institutions enough

to delay the crisis
to another day.

What do we see as a result?

Deep stagnation, huge
youth unemployment.

And what will we see when the
next economic crisis comes about?

Well, that's the open question,
but I fear that we'll see

a return to the depths
of the euro crisis,

the whole problem
starting from scratch.

While Greece struggled
in the Eurozone,

Germany prospered through the
scale of its manufacturing exports.

The German approach is to focus
on quality, invest in skilled workers

and keep them in jobs, even
during economic downturns.

Prestige brands like Audi sell more
cars in China than they do in Germany.

I mean, the last
crisis in 2008, 2009,

now we stick to our
people here in the factory,

we kept everybody on board, and this
was, I think, one of the main reasons

why we came out much faster, much
stronger of a crisis than anybody else.

Those same principles apply to
family-owned shoe company Meindl.

It's been making shoes in the
same village for three centuries.

Some people have
worked here for 40 years.

Fundamental to the
German business model

is that small-to
medium-sized companies

try to avoid going into debt.

They also prefer to keep control
of the companies within families

or small groups of investors

rather than selling equity
on the stock exchange.

In the United States, the Great
Recession officially ended in 2009,

thanks to the Federal Reserve
providing hundreds of billions of dollars

in emergency loans to banks.

In the first year of the
Obama presidency,

Congress provided
a big fiscal stimulus.

Nevertheless, the recession had a
long tail, and five years later, by 2013,

the so-called jobless recovery
was still causing deep pain.

The recession is not
over for most Americans.

Most Americans have basically seen
their incomes stagnate or fall since 2008.

In fact, the average typical
American income today

is lower than it was,
say, 15 years ago.

The federal minimum wage has been
static for more than 10 years, at $7.25.

But for bar staff in New Jersey,
a relatively affluent state,

the standard rate is
just $2.13 per hour.

For college-educated, one-time
journalist Natasha Vukilich,

tips help stave off starvation.

I wanna know who
set the bar at $2.13.

Couldn't they make it $2.57,
so at least we were closer to three?

Some states have moved
to raise the minimum wage

to $15 an hour over
the next few years.

Officially, about 8% of
Americans work two or more jobs,

but that doesn't count
people who work for cash.

Well, America's become a
rich country with poor people.

That's the irony.

The unemployed and underemployed

were a key constituency
courted by President Trump

during his 2016
presidential campaign.

For people who had lost
jobs in manufacturing,

Trump's promise to make America
great again, meant getting back to work.

We have a great plan.
It's gonna put people back.

They're gonna want to have
an incentive to go out and work

and make a lot of money
and have great jobs.

In Ohio, the billionaire played
to blue-collar car workers.

He said, "Don't sell your houses.
We're gonna bring the jobs back."

And there were thousands of people
working at the GM plant in that community,

and it's really the only
economic driver there,

and it's now been
closed completely.

So that's 14,000
people out of work.

He might sell himself as a dealmaker,
but he's not a miracle worker.

You can't just put jobs back into a
place where those industries are dying.

President Trump had promised tax
cuts for individuals and companies,

and he delivered,
starting in 2018.

Although criticised for favouring the rich
and providing a temporary sugar high,

there was a boost to economic
activity and job creation.

Unemployment fell to less than
4%, the lowest level in 50 years.

The United States is in a
race to the future with China.

Until now, its scientific and technological
leadership has been unchallenged.

It's trying to maintain its edge

through many of the best
universities and research institutes,

computer engineers drawn
from around the world,

and bankruptcy laws which allow
entrepreneurs to fail and try again.

What's actually globalising the
world today is digital globalisation.

And if you put digital globalisation
on a graph, by any measure

- cell phone usage,
Internet usage -

it looks like a giant
hockey stick, OK?

Big, accelerating graph.

The top tech and social
media companies,

mostly headquartered
on the US West Coast,

have a market value
exceeding $3 trillion.

Growth has come through sustained
international demand for their products

and the aggressive
use of tax havens.

In the years since
the crash of '08, '09,

you've had the growth of Apple,
Google, Facebook, Twitter,

Amazon, all these
other companies,

which both are phenomenally
valuable themselves, number one.

Number two, are phenomenally
dislocative of other enterprises,

including the news business
and downtown retail.

The colossal size and resources
of the big tech companies

have enabled the practice of buying up
or squeezing out small start-up companies.

Some legislators and analysts
want to break up the tech giants

and create more competition.

The case for breaking up Amazon,
Facebook, Google, perhaps Apple, is strong

because they are such integrated
production systems now

and while any one of those
people will say to you,

"Oh, there's nothing keeping new
people from entering the market.

"This is the most creative
time in world history."

The fact is, there's
tremendous barriers to entry.

The tech companies
grew so quickly

that US and international
regulators were outpaced.

Google was fined $9 billion
by the European Union

for abusing its market
dominance of search engines.

It's appealing the judgments.

Facebook overreached,
collecting personal data

without users' knowledge
for commercial gain.

While Facebook, Google and
other communication companies

have been in trouble
with US regulators,

in China, they've
effectively been locked out,

branded as
disruptive influencers.

The US government says China restricts
far too many American businesses.

The two biggest
economies in the world

have been locked in a
trade w*r since 2018,

imposing and threatening tariffs
on each country's products.

The key issue is that China
sells much more to the US,

than America sells to China.

America wants much better
access to Chinese markets.

The trade w*r is
about imposing tariffs

to force the Chinese
to change their ways

for the sake of legacy
industries - steel and the like.

Somebody had to do it,
so I'm taking on China.

In the Clinton administration
and the Bush administration

and then the Obama administration,
up until 2016, when Obama left office,

China was described as
America's strategic partner.

The US approach was
grounded in the theory

that as China engaged
more deeply with the West,

that it would become more
Democratic with freer markets.

In fact, the opposite happened.

This isn't my trade w*r.

This is a trade w*r that should
have taken place a long time ago

by a lot of other presidents.

Now, in all official documents,

China is designated
America's strategic adversary.

Well, that's a pretty
big difference.

And I think future historians
will look back and say,

why did successive
American administrations,

Democratic and Republican alike,

almost connive at China's rise,
seem to want to help it on its way?

Because the result was to
create a new superpower.

And, great goodness, a
communist superpower.

So this is one of
history's rich ironies,

that we celebrated the end of history,
the triumph of liberal capitalism,

then the Americans wake up to
the reality that this is no longer

a win-win partnership,

that it's potentially a zero-sum game
in which the winner may take all.

Although it's declined recently, China's
growth over the past four decades

averages about 10% per year.

One reason for the boom, according
to the US and European governments,

has been the wholesale
theft of intellectual property.

So people have called it the
greatest transfer of wealth in history.

It's a really pernicious means of undermining
the economic viability of Western states.

Well, a lot of people, even without
Trump, a lot of world leaders say,

somebody needs to
read China the riot act

over issues like intellectual
property and the like.

American businesses
claim IP theft of patents,

copyrights, scientific
and engineering secrets

is costing them hundreds of
billions of dollars every year.

But it's not just an
American problem.

Many advanced industrialised
nations have been targeted by China.

The theft of intellectual property
is death by a thousand cuts.

It's stealing the lifeblood
of Western economies

where companies spend
billions and billions of dollars

in research and development.

They're building the
cutting-edge products

and then having that intellectual
property stolen through cyber means,

exfiltrated out and handed over to
Chinese state-owned enterprises

who then build competitive
companies and in some cases destroy

the company that in fact had
developed that intellectual property.

At a meeting of the world's
20 biggest economies,

China's president Xi
Jinping acknowledged

that China had been
stealing secrets.

He said foreign businesses
would be compensated for IP theft.

As part of his goodwill offering,
President Xi promised that from 2020

foreign investors in China
would face fewer restrictions.

A critical focus of the US-China
trade w*r is new technology.

Electric vehicles,
information technology,

robotics, medical equipment,
pharmaceuticals and aerospace.

Made in China 2025 is Beijing's vision
to be a manufacturing superpower.

The tech w*r, which is now
an increasingly important part

of what is happening, is
about the 21st century.

The tech w*r is not
just about 5G networks,

it's about artificial
intelligence,

it's about quantum computing,
it's about payment platforms.

As Chinese payment
platforms like Alipay

spread globally through partnerships
in other emerging markets,

we all thought the Internet was
going to be a boon for democracy.

China built a great firewall, kept the
American tech companies at bay,

allowed its own tech
companies to rise up

to a level of parity with
their American counterparts.

So there's a multifaceted
challenge to American privacy.

One big point of conflict is the 5G
technology being promoted by Huawei,

the heavily subsidised shining star
of Chinese telecommunications.

It's the second largest manufacturer
of mobile phones in the world.

The US has warned its
allies that Huawei products

could be used for espionage.

I'm always a little cautious
about accepting at face value

some of the anxieties articulated by the
intelligence community in these cases.

I find it intriguing that the
UK intelligence authorities

and the German
intelligence authorities,

who are not slouchers when
it comes to understanding

the technological implications of
this kind of surveillance technology,

I find it intriguing that
they're much less spooked

than the Americans have
been and the Australians.

I don't think people
necessarily believe

that the way the
Trump administration

is trying to get China to play
by the rules of the game,

especially in intellectual property
and AI and all the sort of cyber areas,

is necessarily the best way.

Yet that does
have to be tackled.

And it's not just a matter
of Huawei and the 5G.

Down the track
in future decades,

we should prudently expect that
China is gonna be at the forefront

of a number of really
key technologies.

And the idea that we can now
insulate ourselves from those

and just buy American,

because we don't like what strings
the Chinese might attach to them,

is, I think, a misunderstanding
of the way in which

the balance of
technological power,

as well as the balance
of economic weight,

and, for that matter, military
weight, are shifting China's way.

And that's a new reality I think we're
gonna have to learn to deal with.

China is now the major trading
partner of many countries in Asia

and is fundamentally changing
the strategic balance in the region.

While President Trump
proclaimed "America first"

and withdrew from
international trade treaties,

China was doing the opposite.

It's been preaching
cooperative development

through its One Belt,
One Road initiative.

The idea is to build efficient
land and sea trading routes

between Asia and
Europe and Africa.

Asian countries, which have signed
up to the mega infrastructure plan,

include Vietnam, Laos, Malaysia,
Indonesia, Sri Lanka and Cambodia.

All have had big Chinese
investments in recent years.

We see this strong and
fast-developing middle class

across South East Asia,
not only in Cambodia.

It's happening in a
lot of those countries.

And it really is changing the
face of cities like Phnom Penh.

You see the construction
that's going on in those cities,

again, driven by economies
that are growing by 6% or 7%.

And also, Chinese investment is
really pushing that along as well.

China is also projecting
itself into the Pacific.

Papua New Guinea, Vanuatu,
Tonga and New Zealand

have agreed to participate in
China's Belt and Road Scheme.

China is building
stronger military forces

and dominating the
South China Sea.

It has ignored the territorial
claims of neighbouring countries

to take over low-lying
atolls and fortify them.

And Beijing has adopted a more
aggressive approach towards Taiwan.

China certainly
is a rising power.

It has four times as many
people as the United States.

It's a matter of inevitability

that its economy would be at some
point larger than the United States

as it might be already, depending
on the counting system you use.

And I think that is
just a fact of nature.

The US posture towards
China has hardened

from economic partner
to strategic threat.

As China becomes wealthier
with a growing middle class,

tensions within the
country are likely to grow.

The big puzzle, the black
swan that's so hard to predict,

is about the next 30 years,
is what happens in China.

What happens if the
slow growth comes?

What happens if a
financial crisis happens?

What happens if there's
a crisis at the top?

What happens if the trade w*r has
escalated rather than called off?

If we've learnt anything
from the last 30 years,

it should be that
history is unpredictable.

Globalisation has powered the world
economy during the past 30 years.

The volume and value of international
trade has increased exponentially.

Living standards have risen.

Many people are wealthier and
proportionately fewer live in poverty.

Telecommunications and
technology have connected citizens

in every part of the world

in ways which might have seemed
inconceivable way back in the 20th century.

Technology, really,
moves up in steps,

you know, basically you get a
step, a set of technologies emerge

and those technologies are biased
toward a certain set of capabilities.

They spawn new
technologies and the next step.

Big data, AI, mobility and the
cloud gave us a new platform.

This new platform was
biased toward complexity.

So basically, over three decades,

we have gone from
flat to fast to smart

and it's not just changing your
world, it's reshaping your world.

We're living in the
age of acceleration.

Speeding up technological change

and incorporating artificial
intelligence in everyday life,

is making our world both
more complex and uncertain

and economic power has
shifted from west to east.

Because China, to
everybody's surprise,

mastered the Internet, the
only other power in the world

to achieve technological parity with the
United States in the age of the Internet.

We are now on the
brink of a new Cold w*r.

It will be a Cold w*r about artificial
intelligence and quantum computing.

It will be a tech w*r.

And in that w*r,
it must be said,

China looks better placed to succeed
than the Soviet Union ever did.