Connection, thats part of the chinese state. The United States is the number one largest for the economy and china is number two, and they are fighting each other, and therell be damage to global trading. Connell but trades only the tip of the iceberg. The real question is this are we in this together or going our separate ways . Chinas now in the hunt for new markets. You see that with things like belt anded road, part of an Economic Initiative to reach them into that billion market. Connell the next moves are crucial, and this is the challenge of china. Connell so for the United States to challenge presented by china is about much more than headlines generated during a trade war. Im Connell Mcshane. Over the next hour were going beyond tariffs to bring you a unique look at the clash of cultures and beliefs thatll shape the direction of the Global Economy for decades to come. Much of our conversation will happen here in new york, but well also take you to chinas capital city, beijing, and schoen general. Earlier this year i spent time reporting in both cities. Its busy, its loud and it is the Perfect Place to start if you want to really understand modern china. What do you think of the trade war between the u. S. And china, this city really is the center of ate all. They actually call it the Silicon Valley of china, and this is where it all began back in the 1980s. Since then its really been built up, and youll see the headquarters of some of the more famous chinese tech companies, zte, even huawei. And thats what brought us here to begin with. Huawei, the controversial Chinese Telecom giant accused of spying, blacklisted by the United States government. It was a 45 minute drive for us from downtown to huaweis Corporate Headquarters. We were met there by an englishman, vp andrew williamson, and we knew just by the extension of the invitation that huawei had a story it wanted us to hear. Why are you here . Well, weve always been very open and transparent about inviting journalists like yourself, esteemed journalists, news organizations to come and visit is huawei. I think theres lots of misunderstanding, lots of misinformation out there about what we do. Connell the biggest misunderstanding, williamson says, is theres no connection between huawei and the chinese government. That brought us straight to the most sensitive of topics, whether huawei can be used to facilitate spying if asked to by the government here in china. We operate in over 170 countries arounding the world, many of those countries are now deploying their 5g networks, and so we work very closely we those partners to build out the hardware. But at all times the telecom partners, customers are completely in charge of all the data. Its theres no need for us to touch the on any of the data. Connell theres no need for you to, but could you . No. Not without the permission of the telecom people. Connell could you do it without their permission . Is it technically possible . To my knowledge, its not technically possible. Connell we made our next stop at dji, a company that makes the majority of the drones sold in the United States. Officials there were quick to show us some of the latest in drone technology, even encouraging us to test it out for ourselves. Believe it or not, im the one flying this drone right now, so if i go this way, the drone comes with me. In a different time, dji would be celebrated both in the u. S. And china, but in todays world trust doesnt come easy, and Company Officials have to answer questions about whether their drones can be used to spy. I have a drone and i dont want my data to be seen by anyone, is that easy for me to do . How do i do that . The fact is that your data sits on the drone itself. Thats fundamental. Connell but does it automatically come back to you . No. Connell visiting company like dji and huawei gives us a sense of how companies operate, but beijing is still the center of chinas government and culture where the ancient mixes with the modern for many years American Companies look to capitalize on the Chinese Consumer while the American Consumer scooped up relatively cheap chinese goods. It was or at least seemed to be a mutually beneficial relationship. Somewhere along the line the rise of can china seemed to shift in many peoples minds from being all about opportunity to being more about competition or even a threat. That raises a central question for us, what will relations between the u. S. And china look like as in the transition continues . Translator you know that china is shifting from highspeed growth to high quality development. We are advancing the supply side structural or reform which means there will be some decelebration in the deceleration in the growth. Its unrealistic for the worlds second is largest economy e to sustain highspeed growth. As to whether friction has an impact on the economy, i think to some extent it does. The trade thats in china and the u. S. Reaches over 630 billion last year. With the imposition of tariffs, such a trade would be affected, especially greatly influenced the companies that rely on the u. S. Markets. Connell all right. We have a terrific panel assembled here in new york to talk more about these issues. The author of aftermath, jim rick earths, joins us rickers. Edward lawrence has been leading foxs coverage of the trade fight, and chief strategist patrick. I begin with you on this and kind of the big picture of dealing with can china. One of the things that strikes me as you heard there is over the last decade or so the attitude towards china from people in the United States has shifted dramatically. What have your observations been . Theres been a dramatic shift. Even the title of your show, the challenge of china, 10, 15 years ago it would have been called the opportunity of china, and the discussion would have been about how u. S. Companies can get into china, if theyre not, why arent they. A couple things changed. First of all, there was the 2008 financial crisis, and the recession that changed americans views of globalization. It also changed chinese views of the u. S. As an aspirational model. China has become wealthier, its also become more influential, and in the process its become more assertive about many things. Connell right. And then you have xi jinping who took office, promised a lot of reforms but instead has actually taken china in a more authoritarian direction, and that has caused concern not just on the economic front, but in terms of values and political influence. Connell jim, were going to come back to edward on the modern day reporting on this, but patrick bring up globalization which in many ways has turned into almost a dirty word for lack of a better term. So much different than it was say when bill clinton was president in the 90s that we have changed the way we look at that and, as a result, probably changed the way we look at china, right . Thats a good thing. Better late than never. Globalization was the idea that somehow we would help china get richer, give them access to our intellectual property, give them direct foreign investment, they would grow richer and want to be like us, the idea that we were an aspirational model. Theyre communests, theyre atheists, they have their own model. They were willing to take all the help and money, of course, but they didnt want to be like us. This idea that give them a little time, theyll get richer, theyll be just like us, that was a western myth. That was never true in china. Now with we have to con front this. In the 1960s nobody was saying why are the supply chains not in russia. Remember, it was a big deal when they sold pepsi cola. Its not clear to me why we do business this is where im going to disagree very profoundly. I think right now to draw a line between maos 1989 Tiananmen Square and xi jinpings bright line, i think that ignores a lot of whats taking place. Ive spent a great deal of time in china, much of my life. My first visit was in 1986. It is unrecognizable today, and im not just talking about material wealth, im talking about the daily life of people. You know, when i first arrived in china, people all worked for state work, it controlled every aspect of their life. They didnt own businesses, they didnt own property. Now they travel the world, they work, they travel, they study abroad. Things have changed significantly in china in ways that xi jinping has to contend with. He wants to take china backwards in many ways, its not entirely clear to me that hes going to succeed in doing that. Right now it seems hes dominant in that chinas going to an authoritarian direction, but the fact that china opened up to the world and the fact that we have actually traded with them and interacted with them has changed china in profound ways that i dont think weve seen the conclusion of. Connell i wonder how that affects how we cover the modern day back and forth between the two countries. You mentioned how president xi has taken a more author tate i stance on this. He has to show within the country itself that he is a strong leader, and he cant back down to the United States. He has to you cant give concessions and look like weak because theres always somebody behind him whos up to come forward. Connell i want to talk about this concept thats come up, thats been mentioned more than ever before, this word decoupling, kind of the buzzword for what might happen in the future. And the idea would be the world would kind of split into two, right . One system control by the United States, the other dominated by china. And, jim, when we were in china, we talked to a number of people about this. Interesting to get their views. One was a guy whos actually an american whos worked in Venture Capital in beijing. Well listen to what he had to say, here this it is. Are we seeing a true decoupling . I think some companies have started to do it. Theyre starting to make those efforts. Whether or not any of them are truly e selfsufficient, i think were years away from that, but i see an urgency and feardriven approach because of what happened with zte and huawei that they need to decouple their reliance on inputs. Connell all right, referencing the chinese viewpoint, which well talk about huawei in a moment, but, jim, in your view, you talked about how globalization didnt work. Are we headed to a split, essentially, between the u. S. And china . Sure. The touchstone there is the speech that mike pence ghei in october 2018 gave, socalled pence doctrine. Its the only time trump didnt same something after himself. [laughter] we talk about the currency wars and the trade wars, and those are important topics, but mike pence put that in a larger context. He said we have to look at geopolitical confrontation in the south china sea, human rights violations, uighurs and catholics who are dissenters, they put you on the operating table without an anesthetic, remove your organs. Thats 40 youre dealing with who youre dealing with. And pence really set the stage for cold war two, which is where were going. Coral col you hear that from sours on both sides, edward, a quoteunquote new cold war . Well, the decoupling on the decoupling issue, about a month ago we did hear chinese sources are telling us the directive out of beijing is to dedown federal the United States decouple from the United States. The soybean industry, the imports of agriculture from ukraine hit record levels between china and ukraine. So trying to replace what theyre getting from the United States. And thats, thats the way their companies are moving at this point. Connell patrick . The United States faces a multidimensional challenge from china whether its on security, economics, etc. And the problem is that if we glob all those things together as one big problem, it may it virtually e insures that we dont solve any of them. Connell so your point is take them one at a time. Yeah. There are some things that are negotiable with china, some things are entirely unnegotiable with china. I think it makes sense, for instance, in some areas to decouple. It might not make sense for can Chinese Companies that, for whatever reasons cant comply with u. S. Securities laws to be listed on the u. S. Stock exchanges, trying to move them off of it might make sense for both countries. Companies such as huawei may, and its role in telecom may present security challenges connell right. That the United States has to respond to. But when people talk about this idea of complete decoupling, you know, weve never seen, cold war aside in which russia really wasnt the second largest economy in the world, weve never seen a world in which the two largest economies in the world are really at loggerheads with each other and trying to undermine each other. Connell thats the risk, right . What patrick e brings up in a good point. If we do go down this road, youve got to be careful what you wish for as a kind of final point on this topic in that what happens to global growth, for example, in this hypothetical where we truly go our separate ways . Well, people i keep pointing out the costs, and theyre correct, there are costs to trade wars, etc. , but how much does an Aircraft Carrier cost . It costs over 6 billion. The point is if youre in that kind of confrontation, these costs are relatively small compared to the alternatives. Connell want to make a final point, patrick . I think we need to be careful if we give countries and companies ultimatums, do business with the United States or china, we might be surprised which side a number of countries and companies choose. And china is sweetening the pot with the belt and road initiative. Connell right. Its been kind of a tough point in the negotiations here, weve been unable as the United States to line everybody up against china like some had predicted. Exactly. The president hasnt come to those deals yet, although we do have a deal maybe with japan, the European Union. But what this has done is brought the publicity to the forefront, talking about them stealing intellectual property, forced transfer of technology from us. It has brought other countries to sort of whisper about that, starting to talk about it. Not necessarily lining up behind the United States against china, but starting to talk about it and say, hey, they do that to us too. Connell all right, on that point, stay right there, we want to get into it a little bit more as we continue. Technology, thats what so much of this is based on, and those two terms intersect at the infamous electronics market. We have a tour that might help you understand Chinese Business culture ahead. Plus, fox business with a rare look inside the Corporate Headquarters of huawei. My interview with a topictive from that Controversial Company is also coming up. Im your mother in law. And i like to question your every move. Like this left turn. Its the next one. You always drive this slow . How did you make someone i love . That must be why youre always so late. I do not speed. And thats saving me cash with drivewise. My son, he did say that you were the safe option. And thats the nicest thing you ever said to me. So get allstate. Stop bossing. Where good drivers save 40 for avoiding mayhem, like me. This is my sons favorite color, you should try it. 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So come ask, shop, discover at your local xfinity store today. Connell well, certainly you heard about intellectual prosecute theft. American companies being forced to give away Crucial Technology in order to access the chinese market, and almost no one disputes thats happened for many years. There is, however, something deeper at least worth looking at, and that is the role that culture plays in all of this. So with that, we take you back now to the city of shenzhen. This sprawling metropolis of 12. 5 Million People was just a tiny fishing village 40 years ago. Now its home to some of chinas Largest Technology companies and the nations best known electronics market, the multifloor Shopping Mall is a tech geeks dream, but theres more to it than that. Is the iphone youre looking at here really an iphone . How about the headphones or the drone . Who really made them . Heres a new vocabulary word. It refers to the counterfeit consumer goods, lookalikes, knockoffs, and this market is traditionally full of them. Now, a although e the culture is changing in p lean years, the term has never really been insulting here. The products often had new innovations not included in the original. In the western world this edition may be seen as stealing, but perception is very different than reality in california. So with that, we hit the streets trying to get a sense of how the people and some to have government potentials view the growing tension bet