Bass and Pettis – Dueling Perspectives on China’s Economic Reality

Published on
October 16th, 2020
Duration
48 minutes

Up Next

Related Videos

Stephen Clapham and Kyle Bass: Accounting Schemes at Chinese Tech Giants
The Kyle Bass Interviews ·

Stephen Clapham and Kyle Bass: Accounting Schemes at Chinese Tech Giants

China vs. the U.S. – Trade War to Cold War?
The Kyle Bass Interviews ·

China vs. the U.S. – Trade War to Cold War?

The Wild West of Crypto: Outlaws, Double Agents, and the Dismantling of the Silk Road
The Kyle Bass Interviews ·

The Wild West of Crypto: Outlaws, Double Agents, and the Dismantling of the Silk Road

The Kyle Bass Interviews: Stephen K. Bannon’s China Warning
The Kyle Bass Interviews ·

The Kyle Bass Interviews: Stephen K. Bannon’s China Warning

The Kyle Bass Interviews: The Billionaire Chinese Dissident
The Kyle Bass Interviews ·

The Kyle Bass Interviews: The Billionaire Chinese Dissident

The Kyle Bass Interviews: Escaping Thucydides’s Trap
The Kyle Bass Interviews ·

The Kyle Bass Interviews: Escaping Thucydides’s Trap

Mark Cuban in Conversation with Kyle Bass – The Maverick Investor
The Kyle Bass Interviews ·

Mark Cuban in Conversation with Kyle Bass – The Maverick Investor
38

Bass and Pettis – Dueling Perspectives on China’s Economic Reality

The Kyle Bass Interviews ·
Featuring Michael Pettis

Published on: October 16th, 2020 • Duration: 48 minutes

Michael Pettis, senior fellow at the Carnegie-Tsinghua Center for Global Policy, and Kyle Bass of Hayman Capital Management are both keenly focused on the complex task of discerning China's economic reality. In this interview, Bass and Pettis attack the important issues of capital flight, China's massive economic inequality, and their domestic debt burden, just to name a few. They both tend to agree on what is most important, but not always the takeaway from the data. It is the nuanced differences in their interpretations of the current state of affairs that had even Kyle Bass remarking at how much he was able to take away from this enlightening and pleasantly civil back and forth. Filmed on October 7, 2020.

Comments

Transcript

  • NA
    Nicolas A.
    19 October 2020 @ 12:24
    6 1
    Kyle at it again, love the ending “it’s rare when I speak to someone about China and actually learn something”. The hubris is phenomenal. Selective listening will do that I guess. Terrible for an investment manager to actively seek out confirmation bias.
    • MW
      Max W. | Real Vision
      19 October 2020 @ 20:36
      4 0
      I think what he meant is his research process is so exhaustive that he rarely talks with people have something to say that he hasn't heard before. I'm sure he engages with people who disagree with him but less frequently with people who disagree with him and have also gone as deep into the subject such that they have new data he has not yet seen.
    • mc
      matthew c.
      13 November 2020 @ 15:12
      0 0
      Should we trust anyone living under the thumb of the CCP?
  • JQ
    Joao Q.
    8 November 2020 @ 17:46
    1 0
    Pettis is one of my references to understand capital/trade flows and China. I have just viewed this interview and the comment on AliPay on the context of a basically insolvent banking system was prescient of the suspension of Ant Group's IPO. A must watch interview.
  • WG
    Wade G.
    27 October 2020 @ 17:29
    0 0
    Absolutely outstanding discussion. Stunning RV can bring us Bass & Pettis. I feel fortunate to be able to watch two great minds discussing such an important and timely topic. Thank you.
  • JL
    Jade L.
    27 October 2020 @ 11:25
    0 0
    This interview is really really good. Especially from someone who apparently understand China and is inside China. Would be great to have a follow-up interview in the future.
  • FM
    Fabio M.
    25 October 2020 @ 23:30
    3 0
    One of the best interviews ever in RV. Congratulations!
  • CC
    Cole C.
    24 October 2020 @ 19:09
    3 0
    Great interview, extremely knowledgeable discussion and got the feeling they each benefitted as much if not more then us viewers.
  • ML
    Max L.
    23 October 2020 @ 14:07
    1 0
    Fantastic.
  • RR
    Research R.
    21 October 2020 @ 09:52
    3 0
    This is one of the best videos on RV i have seen in some time. Well done RV, please more of these nuanced, balanced and informed discussions.
    • AW
      Aaron W.
      22 October 2020 @ 02:33
      1 0
      Agree, one of the best China overviews yet!
    • MW
      Max W. | Real Vision
      22 October 2020 @ 21:19
      5 0
      You'll enjoy next Monday's interview with Mike Green and Louis Vincent Gave.
  • WA
    Wole A.
    22 October 2020 @ 15:10
    4 0
    This is the kind of interview I come to Real Vision for
  • WC
    Wilson C.
    20 October 2020 @ 07:38
    9 0
    This is the old Kyle (which I like) vs the recent China bashing persona. IMHO, it would be valuable for RV subs to get more interviews with people in China (ie, working in / traveling regularly to) vs interviews with people with opinions based on reports/analysis. It's like commenting on US/Wall street without ever having spent time there. China is a big enough elephant that warrants better from RV to help us invest or not. People like Pettis, Andy Xie (ex-Morgan Stanley), Kai Fu Lee ("AI Superpowers"), etc people who are living and breathing in Beijing, Shanghai, Shenzhen, Huangzhou, etc. The Mike Green interview w/ Chris Balding was like "huh?", not someone I trust to have a pulse on China (ie, not close enough to the players). There are tons of hedge fund managers, investment bank folks making money in Hong Kong/China re: understanding the real chinese environment, I would love to hear some of their insights (though they may be reluctant to share the honeypot with others).
    • WP
      WARREN P.
      20 October 2020 @ 20:35
      3 0
      Totally agreed that people working/traveling regularly in China should be listened to. Surprised that Mr. Bass did not bash Mr. Pettis as he did to Mr. Fink/Mr. Schwarzman in an early interview in May.
    • WP
      WARREN P.
      20 October 2020 @ 20:42
      1 0
      Also agreed that this is the typical Kyle vs the China bashing persona.
  • AC
    Andrew C.
    19 October 2020 @ 19:29
    0 0
    I really enjoy listening to Kyle for innumerous reasons, and I have for many years. He's one of those managers through whose ideas and approach became sort of like a mentor from afar for me. But, I think what I respect most about him is that he is such a class act.
  • PJ
    Peter J.
    19 October 2020 @ 14:29
    1 0
    Excellent discussion, needs a rewatch and a read of the transcript, so much detail.
  • JN
    Jeffrey N.
    18 October 2020 @ 00:09
    3 2
    The argument that China reached the end of the growth derived from rapid government led modernization was reached some time ago makes sense. And because those in power will not want to make the needed reforms, the future is likely to be either lost decades or a crisis; probably the former since the government would probably do everything possible to avoid a crisis. This implies a low growth and poor investment returns like Japan’ lost decades going forward. Under that scenario, my question is whether increased foreign trade via new trade routes growing out of OBOR investment combined with the governments efforts to explicitly boost the prospects for the large portion of the population that is is still poor would together generate meaningfully higher growth rates?
    • JC
      Jason C.
      18 October 2020 @ 20:11
      2 1
      I think the Chinese have planned for the end of their easy gains, so they'll still be able to make gains in exactly those places you suggest. OBOR is basically colonization in all but name, so the question becomes will the West, who has been anti-colonialist since their mea culpa, stand by to let it happen? I think the elephant in the room is will China be allowed peaceful transition to global hegemony or will there be war with China to prevent it?
    • NA
      Nicolas A.
      19 October 2020 @ 12:30
      6 0
      Yeah but Japan was a democracy and still got whacked so I’m not sure I really buy their argument that China needs to change its political and institutional framework to avoid a lost decade. Sure, we would all love them to become a liberal democracy but it won’t happen and if you’ve ever spent a minute in China you’ll know nobody is even asking for it. One thing I can guarantee is that the ones who have studied the failed models of Russia and Japan and so forth the most are the Chinese. They are hell bent on avoiding going down the same path and they have a domestic economy of a scale that gives them a much higher probability of success. I would not bet against China, but if you want to I hear Kyle Bass has a great product for you (and I’ll take the other side of the trade all day long as long as his views are still as unfounded as they are).
  • AR
    Alex R.
    19 October 2020 @ 11:39
    1 0
    Brilliant
  • PM
    Pascal M.
    19 October 2020 @ 07:32
    2 0
    World class interviewing skills, world class straight to the point, elegantly expressed very knowledgeable Pettis 👌 please more 👍
  • MC
    Mark C.
    19 October 2020 @ 05:14
    2 0
    Great interview. As always, I learned a bunch.
  • DP
    Duane P.
    19 October 2020 @ 04:06
    2 0
    Top notch interview!
  • LT
    Lisa T.
    19 October 2020 @ 02:57
    2 0
    Awesome interview. Lots of information to process in this interview.
  • MS
    Mark S.
    18 October 2020 @ 19:24
    2 1
    Very good!
  • DW
    David W.
    18 October 2020 @ 11:31
    3 0
    Really great interview.
  • AW
    Alexander W.
    18 October 2020 @ 11:26
    2 0
    That was real good!!!
  • BA
    Bruce A.
    18 October 2020 @ 07:30
    4 3
    Kyle is best when he's 'contained and measured' and this was a great example of Kyle at his best.
  • MD
    Matthew D.
    18 October 2020 @ 05:39
    4 0
    Absolutely outstanding!
  • JC
    Jason C.
    17 October 2020 @ 17:53
    5 0
    Can we get the thumbs up/down icons for videos colored whenever we click them? Sometimes I thumbs up a video and then later on I try to do it again.
    • JC
      Jason C.
      17 October 2020 @ 17:54
      1 0
      Should go without saying that this is one of those videos - great insight
  • LS
    L S.
    16 October 2020 @ 14:31
    3 4
    That was a good one, thanks to Kyle Bass and Michael Pettis. I'm wondering, since I also follow generational ideas and forgetting: isn't the coming period (last segment here, great stuff) worrisome for China acting out when their crisis period, or Pettis' "adjustment period" hits? The others that had to go through that were NEVER going to resort to war, but China seems more than willing and also capable. And they currently have quite a few adversaries, if not frank enemies, both regionally (look at Russia, India) and internationally. My prediction is that in the next 10-12, and possibly in the next 6 years, China starts some version of WWIII. Any thoughts on this?
    • JC
      Jason C.
      17 October 2020 @ 17:49
      1 0
      I see this as inevitable. Will result from the next (current) economic crisis. When times are tough, people go to war - especially if they've been experiencing increasing prosperity. As for whether it will be a world war, I think that is also likely, though it could take place in the form of proxy wars instead. Very likely could happen over Taiwan, maybe India. Russia could be either an enemy or an ally. US will almost definitely be involved.
  • DL
    Darren L.
    17 October 2020 @ 07:06
    4 0
    I think they both underestimate the competitive advantage that China's leading position in AI and 5G will give them.
    • JC
      Jason C.
      17 October 2020 @ 17:33
      0 2
      'Fake, dumb, and poor' – Huawei exec unloads on China 5G https://www.lightreading.com/5g/fake-dumb-and-poor-huawei-exec-unloads-on-china-5g-/d/d-id/764654
  • RT
    Ryan T.
    17 October 2020 @ 15:30
    1 0
    This enlightening discussion inspired me to review my understanding of several topics related to international economics. Printed out the transcript to read and reflect as well. It's an outstanding session!
  • OA
    Olivier A.
    17 October 2020 @ 15:29
    1 0
    Fantastic interview. I'm likely to watch it a couple more times. This is one of the most overlooked topics at the moment, as China's economy has rebounded so strongly, but large crises often lead to the end of economic manias...
  • BV
    Bas V.
    17 October 2020 @ 09:55
    1 0
    Easily the best interview on the topic realism of chinese economic prospects I have ever seen.
  • BD
    Bryan D.
    17 October 2020 @ 07:54
    1 0
    Great conversation. Going to have to watch it a few times to soak it in.
  • AI
    Andras I.
    17 October 2020 @ 07:01
    2 0
    Bonus material: The Grant Williams podcast - Dr. Marc Faber
  • MD
    Matt D.
    17 October 2020 @ 03:04
    1 0
    I agree - awesome discussion. It seems a genuine, honest assessment on the Chinese economy. Vintage RV. Thanks Kyle and Mr Pettis.
  • TD
    Thomas D.
    17 October 2020 @ 00:46
    4 0
    Awesome have been waiting for Pettis to come on here for two years!
  • ID
    Igor D.
    16 October 2020 @ 21:42
    3 0
    What brand vest is that?
  • DM
    Dominic M.
    16 October 2020 @ 21:19
    18 0
    Now THIS is how you debate—perspicacious and professional on both sides. Really outstanding discussion. Thank you both. I'd love to see more "Dueling Perspectives" on RV. I'm not sure if anyone is familiar with the podcast Intelligence Squared, but they do an Oxford-style debate between two teams discussing the topics of the day. This may not be RV's style, but something similar, along the lines of "Dueling Perspectives," would be appreciated. 10/10
  • BB
    Bob B.
    16 October 2020 @ 20:50
    3 0
    Absolutely Excellent 10 out of 10!
  • LB
    Lorenzo B.
    16 October 2020 @ 19:55
    5 0
    More Pettis pls
  • BM
    Biju M.
    16 October 2020 @ 19:45
    10 0
    Whenever I start to think that RV is not worth the money, you guys come up with something like this! Excellent. Thanks
  • SS
    Sunny S.
    16 October 2020 @ 19:29
    2 0
    Really great, new insights. This is what people want to see from Kyle Bass, probing curiosity on a topic he understands well.
  • FB
    Frank B.
    16 October 2020 @ 19:28
    5 0
    I pretty much read every thread that Pettis puts out on Twitter. So much insight and he has great way of explaining things. Fantastic to have him on RV!
  • SS
    S S.
    16 October 2020 @ 12:30
    31 1
    I'll be honest. When I saw this interview pop up on RV. I thought Oh no, Kyle is gonna do another CCP/China bashing interview and was tempted not to watch it. What a pleasant surprise. What an amazing interview this was. Maybe Kyle's finest, purely focused on the financial/banking system in China and not on the geopolitics. 10/10
    • LS
      L S.
      16 October 2020 @ 13:52
      1 2
      I'll have to watch it. I too thought "Another 10 months have gone by, and Bass is 'early' (read:wrong) about the China prediction." Is there any real famous caller who has been right more than once? I see this trend in macro, and it shows me that, at least for the big calls, the guys just positioned appropriately but most people would say it was luck. Good for them, because that covered them for their whole lives. But it's funny. Maybe Michael Burry will be the 1 guy who can make the big call twice. I'm not sure his time horizon on the passive investing bubble. My suspicion is that it won't be a discrete point or crash, just continuous decline, so he won't get that much credit. Mike Green is in the same camp.
    • GH
      Gregory H.
      16 October 2020 @ 19:21
      7 11
      @S S. - Even if it was just another "CCP/China bashing interview", why would that be bad? What is there to defend about the CCP? Organ Harvesting? Religious Persecution? No individual freedoms?
  • JK
    John K.
    16 October 2020 @ 19:21
    6 0
    You guys should have more videos like these. It’s far more of a back and forth than typical video. I prefer these styles. Not a debate but watching two people discuss a topic they know deeply yet differ on viewpoints is fascinating
  • GL
    G L.
    16 October 2020 @ 17:53
    3 0
    The China current account deficit was driven by the travel sector - basically growing ranks of newly middle-class Chinese increasingly travelling, and these tourists spending USDs abroad. This is well established, and has been a driver for years. The reversal is down to transient factors such as the collapse in the travel sector as well as the collapse in the price of oil imports.
  • JI
    JWD I.
    16 October 2020 @ 17:13
    2 1
    Just incredible...wow!
  • ar
    andrew r.
    16 October 2020 @ 15:49
    2 0
    Superb!
  • PD
    Peter D.
    16 October 2020 @ 15:41
    32 0
    Kyle Bass is way too smart to make "China-bashing" videos (which he has tried in that past: Bannon, Wengui etc....) work. This piece shows Bass at his best: smart, analytical, challenging his own theses. Five stars.
  • SJ
    Steven J.
    16 October 2020 @ 10:19
    4 0
    First comment on a video after watching about 50 videos. One of the best if not the best interviews regarding China! This guy is the bomb!
    • CJ
      Charles J.
      16 October 2020 @ 14:31
      5 0
      I'd encourage you to search out more interviews that Pettis has done. Off the top of my head, I'm pretty sure the Hidden Forces podcast did a very good one with him. Pettis is absolutely brilliant.
  • MS
    Martin S.
    16 October 2020 @ 13:44
    2 0
    That was brilliant!
  • SS
    Simeon S.
    16 October 2020 @ 12:48
    1 0
    High GDP on capitalized expenses! Love it
  • VB
    Vikram B.
    16 October 2020 @ 12:39
    52 0
    The kind of stuff I want RV to do more of. Deep subject matter expert with good communication skills and no obvious axe to grind, talking to a respectful subject matter enthusiast who tries his best to keep his strongly held personal biases out of the interview. Another example - Kiril Sokoloff with Lacy Hunt
  • LB
    Lars B.
    16 October 2020 @ 12:33
    2 0
    I got goosebumps at the end.
  • DO
    DIOGO O.
    16 October 2020 @ 12:07
    4 0
    SUPERB INTERVIEW! ONE OF A KIND!!
  • ds
    durgesh s.
    16 October 2020 @ 11:57
    2 0
    Excellent conversation , very few guys know so much about China and are willing to share
  • VP
    Veselin P.
    16 October 2020 @ 11:26
    2 0
    The interviewee knows his stuff. Every now and then I see a RV video and I go like, daam, this guy is knowledgeable on his topic
  • RY
    Roy Y.
    16 October 2020 @ 11:07
    1 0
    great addition to the China debate. Thank you both.
  • TE
    Tom E.
    16 October 2020 @ 11:03
    4 1
    That was masterful. Great interview Kyle.
  • MB
    Michael B.
    16 October 2020 @ 10:44
    1 0
    Very informative talk, very worth while listening to.
  • DD
    Dmitry D.
    16 October 2020 @ 09:38
    2 0
    Great discussion. This was the interview to make and RV delivered as usual!
  • EO
    Erk O.
    16 October 2020 @ 08:23
    5 0
    My dream guests! Kyle and Pettis! I`ve been following Pettis closely. He has deep understanding of Emerging market economies, especially China. Couldn't wait to see the interview!
  • KT
    Kris T.
    16 October 2020 @ 07:29
    5 0
    Magnificent!
  • PB
    Pieter B.
    16 October 2020 @ 06:07
    9 1
    This was a fantastic conversation! Thanks a lot Kyle & Michael!

Chapters

  1. 00:00:47
    How Capital Flows Affect China
  2. 00:09:15
    Is China Short on Dollars?
  3. 00:14:47
    Foreign Investment Inflows
  4. 00:18:44
    Capital Flight, Cashless Payment Networks, and China's Insolvency Problem
  5. 00:25:41
    Dealing with Dollar Debts
  6. 00:28:11
    The Relationship Between Savings Rate, Inequality, and Accounting Tricks
  7. 00:33:55
    Discerning the Current Reality
  8. 00:39:30
    Economic Outlook for China