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How businesses can adapt to the new world of heightened political risks and cutting-edge technologies were key themes of discussion on the second day of the Bloomberg New Economy Forum in Beijing.
“The biggest risk in 2020 is the relationship between the major trading powers and economies of the world,” Gary Cohn, former Goldman Sachs Group Inc. president and former director of the Trump administration’s National Economic Council, said on the forum’s sidelines.
If the world continues to fracture rather than working together, the global economy will suffer, said Cohn. “We need each other to grow.”
In a nod to the tensions over the race to dominate 5G technology, Li Zixue, chairman and executive director of ZTE Corp., said tensions over national security will be inevitable as it is rolled out. But he also sought to downplay the differences.
“The 5G network will certainly give rise to more complex and more severe security issues,” he said. “Personally, I believe these problems will be solved.”
Still, Diana Choyleva, chief economist at London-based Enodo Economics, reckons there’s only a 5% chance of the two superpowers agreeing on technology standards.
On Europe, former U.K. Chancellor of the Exchequer Phillip Hammond said the worst outcome for his country’s December election would be a “a very small Tory majority government” where Prime Minister Boris Johnson would be “captive” to hard-liners. If that’s not bad enough, he also warned that Labour leader Jeremy Corbyn’s policies would be an “economic disaster.”
Here’s a selection of remarks from some of those present:
As a carry-over from the forum’s first day, participants worried about a world where the U.S. and China build separate systems for trade and technology.
“Oh my God, it is so radical an idea to decouple,” Scott Kennedy, an expert on the U.S.-China economic relationship at the Center for Strategic and International Studies in Washington, said on Bloomberg Television.
The bar for “crazy” has moved from deterrence, anti-dumping and countervailing duties, to sanctions, and “now we are talking, ‘let’s rip these two economies apart,”’ which is “nuts,” Kennedy said.
Also pleading for more engagement between the two economies, and globally, was Susan Shirk, research professor and chair of the 21st Century China Center at the University of California San Diego and a former U.S. deputy assistant secretary of state.
“I believe that China is overreaching and America is overreacting and it creates a really dangerous dynamic,” Shirk said on Bloomberg Television. She recalled former U.S. Secretary of State Henry Kissinger’s remarks from the forum’s first day, and called for more “clear thinking in the U.S.”
Deal or No Deal
While corporate and political leaders mulled the way forward over the long-term, they also discussed how business must go on, divorced from the daily trade-war headlines.
Firms are “having to constantly adapt, and they can’t wait for political resolution” on Brexit or U.S.-China trade battles, said HSBC Holdings Plc interim Chief Executive Noel Quinn.
Michael Froman, Mastercard Inc. vice chairman and former U.S. trade representative, called the phase-one deal “largely a purchase deal,” and “the easy piece.” He echoed others at the forum in saying the real issue is how do the two countries accommodate each other when they are following different rules.
Froman warned that if China continues to part ways from U.S.-style industrial policy, “it will not be surprising to see opposition in the U.S. and Europe and elsewhere given the distorted effect on international trade. The question is: How do we move to a common set of rules?”
Beyond tariffs, analysts and business leaders mulled how to ensure that potential bifurcation in technology doesn’t hamper innovation.
Ian Bremmer, founder and president of Eurasia Group, told Bloomberg Television’s Haslinda Amin that while some U.S.-China decoupling already is underway, there are still questions over which countries will choose sides around a “virtual Berlin wall,” and “how high the wall is.”
“The level of trust has all but gone away” and while “the United States will continue to innovate on its own, and of course China will innovate on its own,” so many big global initiatives require collaboration, said Jerry Yang, co-founder of Yahoo and founding partner of AME Cloud Ventures.
“What we need is a strategy for tech engagement in China, and it’s time to have that conversation,” said Samm Sacks, a fellow on cybersecurity policy and China digital economy at the Washington-based New America Foundation.
We’ll end this on something of an optimistic note.
“Artificial intelligence is not the thing you see in the movies,” said Eric Schmidt, Google’s former chief executive officer and currently a top technical adviser to the Pentagon. “It’s going to revolutionize health care. That’s going to be better done by computers, advising the doctor: the doctor will make the decision.”
The New Economy Forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.
--With assistance from Kristine Servando.
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