Dysfunction and Dependence: A Close Look at the U.S.-China Relationship

Published on
30 November, 2018
China, Geopolitics, Financial System
64 minutes

Dysfunction and Dependence: A Close Look at the U.S.-China Relationship

Featuring Stephen Roach

Stephen Roach, former chairman of Morgan Stanley Asia and author of “Unbalanced: The Codependency of America & China,” sits down with Grant Williams to provide another perspective on the relationship between the two world powers. Roach, a noteworthy China bull, breaks down the dysfunctional economic and political relationship between the U.S. and China, and makes a prediction about the ongoing trade war between the two countries. Filmed on November 16, 2018 in New York.

Published on
30 November, 2018
China, Geopolitics, Financial System
64 minutes


  • SB

    Stewart B.

    11 12 2018 12:55

    0       0

    There is a suggestion that China now will grow into a Japan style economy. This may happen.

    There are other analogues. In the 50s/60s the USSR grew strongly. In fact many academics (eg Samuelson) believed USSR would overtake US. Contrary to what us market types think, states can some times still grow under extractive absolutist government control, but it is almost always from a low base and is only sustainable for a small number of decades.

    I hope this is not the case.

  • SL

    Seth L.

    7 12 2018 15:57

    1       0

    This was really good. An incredibly interesting perspective with very valuable insights. Interestingly though, I still came away bearish from it. If economic freedom is being contracted, so too will growth.

  • LB

    Louis B.

    6 12 2018 00:27

    3       0

    Great interview, thanks.
    This man has nothing to sell or gain financially from being here.
    But wow... reading the comments, it's plain to see how divisive this subject is!
    As the saying goes: the more one knows, the more one realises how little one knows.
    But, it seems, many here prefer to know even less... Suffering from cognitive dissonance, maybe?
    Co-dependency and imbalance will lead to something, but we simply don't know what yet.
    i prefer to keep an open mind and keep learning.

  • HH

    HODL H.

    4 12 2018 21:31

    0       0

    Annoying around 20 minutes in he talks about Corruption campaign but doesn't discuss Xi and his family's corruption...sweet

  • AM

    Andrew M.

    3 12 2018 14:46

    3       0

    Please can we get Kyle Bass, Mike Green or Raoul interviewing either Diana Choyleva and/or Leeland Miller (for a long form this time). They are two of the best China watchers out there. Both very unbiased and apolitical, while Diana's background growing up in Bulgaria before the wall came down makes her insights pretty special.

  • DP

    David P.

    3 12 2018 10:55

    2       2

    The piece of chinese history at the beggining was interesting. Later on in the interview, it appeared pretty obvious that he was focused on generalities, maybe to not offend some people. A bit dissapointing.

  • JB

    Jason B.

    2 12 2018 23:45

    13       3

    Stephen Roach would have been applauding the Soviet Union central planning economic miracle too. Oh wait. A lot of American "economists" was applauding the Soviet Union as a model for economics until it collapsed...

  • yd

    yon d.

    2 12 2018 23:25

    9       0

    Exceptional interview and Grant's presentation is perfect! Grant's questions are clear, concise and controlled. Thank you so much Grant for bringing such an amazing guest, who's wisdom is pulled to the surface through a wonderful interview.

    Thank you, RealVision

  • YW

    Yowshi W.

    2 12 2018 19:05

    0       0

    Dont know what happened since update...but page doesn’t scroll as fluidly as it used to...

  • JO

    James O.

    2 12 2018 17:50

    6       3

    The comments made me suspicious that this guy is someone who Ben Hunt might call a stalking horse. Not worth listening to, far too many complications in his background for him to match the truthfulness of Kyle Bass.

  • MM

    Mike M.

    2 12 2018 16:40

    7       6

    Academic versus Steve Bannon, Kyle Bass......? An easy decision for the guys who reside in the real world.

  • BT

    Brian T.

    2 12 2018 15:26

    3       3

    Grant was his usual excellent self asking a lot of open ended questions and being extremely respectful of someone with obvious gravitas. I did not find Mr. Roach's more sanguine views on China particularly compelling, however. I saw very little specific refutation of the arguments of Kyle Bass and other China bears. Mr. Roach noted that the Chinese are working on their debt problem, but did not describe any reasonable path out of some sort of meaningful Yuan devaluation or other debt-deflationary economic calamity. In fact, he described no path at all. The most telling part for me was the last minute or so of the interview where Mr. Roach stated he could not see a framework for resolving the core differences between the U.S. and China over the important issues such as intellectual property rights and hacking. If this is the best a bull can do, the bears win flat out. Timing is of course an unknown, as the wheels can be kept on the bus far longer than anyone expects. However, it seemed pretty clear to me that Roach offers no tactical, concrete ways that China can escape from its overindebtedness, and no clear way or even a rough dirt path of how the U.S. and China can resolve extremely important strategic differences. If he doesn't know what it could be, who can?

  • DS

    David S.

    2 12 2018 15:17

    6       0

    RVTV is doing a great job bringing many different points of view to subscribers with in-depth interviews. The comment section’s purpose is to get more information pro and con on the interview. If you agree or disagree give your reasons. Many comments do not discuss the ideas but are mere ad hominem attacks. This makes RVTV's job much harder to find quality people to be interviewed. It can be RVTV’s Achilles heel - a weakness despite overall strength. If necessary, it would be better to drop the comment section than to lessen the quality of interviewees. I much prefer both. DLS

  • ZY

    Zheng Y.

    2 12 2018 13:15

    2       2

    Mr Roach know a little about asia, even with his five years ground experience, check out Japan and China median income and std, u know he speak nothing about the real social and economy structure of both country. The only thing he right, is the ending which predict the upcoming event,

  • ZY

    Zheng Y.

    2 12 2018 13:15

    0       1

    Mr Roach know a little about asia, even with his five years ground experience, check out Japan and China median income and std, u know he speak nothing about the real social and economy structure of both country. The only thing he right, is the ending which predict the upcoming event,

  • RD

    Rahul D.

    2 12 2018 07:03

    2       0

    Interesting conversation. Enjoyed listening to Roach’s co-dependency framework. He is right on the US-China trade war prediction. The 1 Dec agreement at the G20 is purely cosmetic and won’t last.

  • JW

    James W.

    2 12 2018 03:53

    1       9

    Seems inevitable in retrospect that we would hear this descent into psychobabble and rot. Far more insightful fortunately is the commentary from RV subscribers.

  • DS

    David S.

    2 12 2018 02:57

    4       2

    Thanks for a very instructive interview. This is not the forum, but the Chinese/US trade war is only a small part of a rapidly changing world. If we do not blow ourselves up first, Japan, China, India, Pakistan, Southeast Asia along with Australia and New Zealand are forming a massive market. They will figure it out with or without the West. If you want to make money long term, medium term or short term, you need to figure out how to invest in these markets. Focusing your portfolio on Chinese debt problems is insufficient. DLS

  • GB

    Gordon B.

    1 12 2018 17:05

    2       0

    A countervailing opinion https://www.theepochtimes.com/why-china-has-already-lost-the-trade-war_2494509.html
    Not Kyle Bass

  • MP

    Matthew P.

    1 12 2018 14:21

    16       6

    WOW. His counter argument to quantitative facts e.g. debt/gdp ratio is “meh, I dont think that matters” and addresses chinese currency manipulation by explaining the benefits of a low value currency. Lol.

    The fact that this guy is an educator at an ivy league school which he made sure to mention many times and such a prominent figure in us china relations is unbelievable.

  • SL

    Stephen L.

    1 12 2018 10:23

    3       0

    Great interview, thanks grant. On balance, i still feel bearish.

  • my

    markettaker y.

    1 12 2018 03:15

    11       14

    Wow - Grant was very gentle with Roach. A total sell-out, this guy. Hard to even know where to begin. I feel like he gets almost everything completely wrong. But most unforgivable is his whitewashing of CCP rule in every conceivable way. Talk about 'wrong side of history.'

  • WD

    William D.

    1 12 2018 03:03

    1       3

    Great content. Hard to find a better 1 hour on China. That he doesn’t forecast is intelligent, because as said, the data is published for reasons beyond giving foreign investors a accurate reading on economic activity....

  • KS

    Kathleen S.

    1 12 2018 02:49

    18       9

    I for one am not buying the Steven Roach China dream story. The rise of China is a globalist banking and corporate engineered event, Henry Kissinger and David Rockefeller have their elite fingerprints all over it. A largely agrarian communist country with a GDP of 300 billion in 1981 does not in 37 years become an industrialized urban country with a GDP of 12 trillion dollars (that is a mind numbing 4000% increase) without the support of the western banking and corporate establishment. In order for China to acheive this growth the US middle class was destroyed, their jobs were sent overseas and they have been sustained for the last four decades on ever increasing government social programs, FED created financial bubbles in housing and stock market and never ending lowering of interest rates which allows them to take on greater and greater amounts of debt without ever receiving an increase in wages. It is all bullshit - and like Kyle Bass said in the Bannon interview, we have had a trade war for decades only the US never bothered to fight back - until Donald Trump. If what Miles Kwok says about the China banking system is true and I know what he says is really hard to believe, but than again if someone told me that Central Banks can print money out of nothing and then can lend it to goverments with interest - I wouldn't believed them (oh, but wait that is true); thus maybe what Miles says is true and in that case buckle up because China might be coming in for that hard landing after all.

  • MR

    Mathew R.

    1 12 2018 01:11

    9       0

    Appreciate the alternative view.

  • VS

    Victor S.

    30 11 2018 22:04

    6       14


  • DD

    David D.

    30 11 2018 19:54

    18       2

    This made me more bearish on China tbh

  • JL

    Jeffrey L.

    30 11 2018 19:12

    4       7

    The issue is technology theft. Without tech theft, China wouldn't have 1/100 of the power they think they have. No Prof. Roach, the savings rate in the USA isn't on the radar as an issue.

  • JJ

    Joe J.

    30 11 2018 19:10

    5       2

    34 min in...The similarity between debt fueled growth and an overleveraged economy of japan and china was discussed....He pointed out that some Chinese "insider" is thinking about it. What am I supposed to do with that? Maybe that is good enough for an academic, but I want to know what they are thinking about and how they plan on solving it. Bernanke was "thinking" about the subprime crisis too, where did that get us. Listening to all the China interviews, this was the weakest IMO. Way to many generalities.

  • HO

    H2 O.

    30 11 2018 17:56

    21       11

    He is a good guest to have, but he is a fool where it comes to understanding China's motivations and the means it is employing to those ends. This is not about having the right "lens", this is about properly judging intent. People like this are wholly reliant on their elite contacts in Beijing that they are desperate to maintain to the point that it irredeemably distorts their "analysis" and understanding of what is going on.

  • JS

    J S.

    30 11 2018 17:52

    8       2

    It would be nice to know if Prof. Roach has any current personal interest in/from China. Same way Kyle disclosed in his.

  • EL

    Elizabeth L.

    30 11 2018 16:02

    12       0

    Thank you RV for doing your series of interviews on China. We need to be able to understand China to the best of our ability and you are contributing to that effort. Grant so good to have you back doing these in-depth interviews on current critical topics.

  • OT

    Omar T.

    30 11 2018 16:00

    12       1

    I would just like to point out the difference between the long format interviews with business and investment professionals vs. ones like this one from academic minded professors. Academic professors seem to be trained to develop their ideas over semesters. As a result, I ended up feeling like Grant in the end, not sure if the hour interview changed anything or what exactly to take away from it. I would suggest doing what they do in other interviews at the end, "In 30 seconds, summarize your position of why the China bears are wrong?", or "what are the most important ideas you want the audience to take away from this interview?"

  • SU

    Shakeel U.

    30 11 2018 15:58

    4       0

    Raoul can you please create a video, to explain the dangers of the Fed printing too many dollars, increasing the money supply and the effect on inflation. It feels like this topic is widely misunderstood.

  • SU

    Shakeel U.

    30 11 2018 15:38

    14       1

    It was good to get a different perspective on China, many thanks Real Vision.

    Request, can you please bring Peter Schiff to Real Vision? Peter Schiff has a unique view on China and the US that we've not heard on RV before.

  • AD

    Anne-Marie D.

    30 11 2018 13:35

    14       6

    "...but we need China to buy treasuries because we have these massive budget deficits."


    The Chinese do not fund US budget deficits and the US Federal Govt is not in debt to China. The US Govt is the monopolist issuer of US dollars and it can create as many US dollars as it likes to fund whatever policy goals it likes (which seem to be mostly military). Because it has a sovereign, free-floating, non-pegged, non-convertable fiat currency (just like Australia, Japan, Canada, the UK, etc.) it can issue as many treasuries as required for Fed to defend whatever interest rate it decides to set.

    Here's what happens with China.
    1) US and China do a trade deal.
    2) US buys stuff from China.
    3) China gets paid in US dollars and the Chinese Govt has an account at the Fed (basically a checking account).
    4) China swaps its US dollars (one type of financial instrument) for US treasuries (another type of financial instrument) to earn some interest (basically a savings account at the Fed).
    5) At maturity, the Fed puts the dollars plus whatever interest is owed (which can be created by the US Govt with a few keystrokes at anytime) back into the China's "checking" account and says "what do you want to do now?"

    Economists need to stop teaching students and the general public, old, wrong information that is based on national curriencies being pegged to the gold standard when govts DID have to go into debt by selling bonds to raise money. This was so they didn't break the peg. Today, there is no peg. National govts that control their own currencies do not have to borrow money (from the public or other foreign govts) in order to spend. They can create as much money as they need to fund whatever policies they want. The US (or any other currecny issuing govt) can never default on "debt" in their own currency since they control how and when money is created.

    Here's Alan Greenspan saying as much: https://www.youtube.com/watch?v=Ck3FuTzZvhI

  • PD

    Peter D.

    30 11 2018 13:17

    15       1

    Ironically, far from countering Bass, Roach reinforces much of what he says. Roach cites high debts, bad demographics, pollution and questionable economic data as problems, but provides no positives that are in any way commensurate with those challenges. A devastating presentation, from a credible source. Grant, as usual, was great in drawing out the arguments.

  • Nv

    Nick v.

    30 11 2018 12:24

    4       4

    Most intelligent China on Real Vision interview yet.
    Fantastic to hear detailed arguments on both sides of the issue.

    Well done RV

  • CM

    Carlos M.

    30 11 2018 11:05

    3       0

    great interview and a breath of fresh air( would be interesting to put him and kyle bass in a room), I was a bit disappointed on his reply on currencies though.

  • PJ

    Peter J.

    30 11 2018 11:03

    3       1

    Terrific interview, combined with what are in IMO the more narrow perspectives from the Kyle Bass interviews, together they give a good view of where the China / US relationship is and food for thought of where they may go from here.

  • PU

    Peter U.

    30 11 2018 10:26

    2       0

    Classic RV! Excellent!

  • DR

    David R.

    30 11 2018 10:07

    12       6

    A much better, refreshing perspective from someone who actually lived & worked in the region for awhile as have I, unlike the myriad of bears on RV who frankly seem rather clueless and have been repeatedly wrong for years about this matter (and will be wrong again). Frankly, as the great Sir John Templeton and others have shown, you earn can make a windfall and take comfort going against a large majority who are poorly informed and all on the same side of the boat, as it eventually bodes for large losses for them and huge out-sized gains for the minority on the other side, an asymmetric investment opportunity - among the best setups one can hope for.