Economic Outlook 2025│Martin Redrado, Fredrik Erixon, William Lee, Yide Qiao and Mike Rosenberg

[00:00:00] Speaker 1: I am not an economist. I know a little bit about geopolitics and a little bit about environmental sustainability and not too much about the global economy, but that's okay because these gentlemen do know quite a lot about the global economy. Let me introduce our panelists. On my left I have Frederick Erickson. He is the founding director of the European Center for International Political Economy. He's a published author. One of his books is called The Innovation Illusion and I understand you're working on a new book about machine technology and kind of where it wants to go and where it's going to take us whether we like it or not. Is that more or less correct? Next to him is Bill Lee. Bill is the chief economist of the Millikan Institute. He spent a number of years at Citibank as an economist there. He did his earlier work at the International Monetary Fund and at the Federal Reserve in the United States. He's got his Ph.D. from Colombia. Next to him is Dr. Cao. Dr. Cao is the vice chairman and secretary general of the Shanghai Development Research Foundation. He's also an advisor to the Ministry of Finance in China and truly one of China's best economists. And next to him is Martin Redrado. He is a visiting professor at Florida International University, if I have that correct, Martin. He has been the president of the Central Bank of Argentina. He's worked for the World Trade Organization for the World Bank. He's also a venture capitalist. He's a graduate of Harvard. So, you know, with these four gentlemen, I think we can really do a good job of understanding the global economy. And I'll start right away with perhaps, you know, the biggest issue for here, you know, outside the window in the hotel, you can, you know, you can see China across the Yellow Sea. What is happening with the Chinese economy? If I understand it properly, depending upon whether you look at purchasing power parity or dollars, China is the first or the second economy of the world. Something about a housing bubble, something about data not coming from the Chinese government. Dr. Cao, what do you see happening in the Chinese economy in the next, in this year and in the years after that? And what impact might that have for the world and South Korea? Yes. Thank you so much. [00:02:21] Dr. Cao: Thank you for your nice introduction. Actually, it's second time for me to attend the World Knowledge Forum. I feel very good to be back. You know, yesterday I've been attending many sessions. I feel China seems is a big elephant in the house. Everybody, you know, take care of China. China. My simple summarized the performance of Chinese economy until now in 2024 is mixed because government set the target for GDP growth for this year is around 5%. Actually, in first quarter, the GDP growth in China is 5.3%. But the second quarter, only 4.7%. So my feeling is 5% growth rate is achievable, much more. But governments should do more. I mean carry more expansion, physical and monetary policy. As the monitor say, the big issue now is housing or real estate market in China. In past two or three years, investment or sales in real estate market has been down. The issue is, I guess, I guess the situation in China has been different from that happened in US many years ago. In US, if real estate market come down, it will have a tremendous impact on banking sector. The issue is, you know, it will have a tremendous impact on banking sector. It will have a tremendous impact on banking sector. But in China, in China, in China, in China, usually, the time payment for mortgage loan is very high, even 40%, even 50%, until several months ago, government reduced the down payment to 30%. So that way, not necessarily Chinese are very rich because they accumulate funding from several generations to pay down payment. [00:05:03] Speaker 1: But they must be very unhappy if their housing, if they pay down payments and the houses are worth less money. [00:05:08] Dr. Cao: Yeah, the issue is because the downside of real estate market have a tremendous impact on local government because the revenue for local government, most from sale of land, now the sale of land, tremendous reduce. Also plus the expense for pandemic several years ago. So that's the, I guess, big issue. [00:05:45] Speaker 1: So, Bill, if I understand Dr. Kau is saying 5% growth is possible, but the banking sector is okay, but consumer confidence is going to go through the floor. Yes. Local. How do you see the Chinese economy, Bill? [00:05:57] Bill: I think we in the West often characterize China as suffering from… I think you need to hold the mic a little bit closer. The three daunting Ds, right? You have dismal demographics, daunting debt, and deficient demand. And all of that, I think, is tied up to the property markets. You're absolutely right. But the one thing that I want to emphasize is that everyone says you need to do more fiscal policy. And if you do more fiscal policy, that means you have to spend more, issue more debt. Trouble is, the local governments are so indebted now. Their official debt is about 35% of GDP. The unofficial debt, the local government financing vehicles, is about 45% of GDP. So, there alone, you're almost 100% of GDP. And Maastricht, right? When they created Maastricht and the Euro area, they said keep debt to less than 60% of GDP. So, China, even on the local level, not even counting the central government, is so indebted, it cannot do the need to fiscal policy to push up demand to get you the 5% growth. [00:06:57] Speaker 1: Now, Martin, in Latin America, China has enormous quantities of debt to Latin American countries, and China is very much engaged with Latin America. If China gets a cold, if China has problems, is that going to impact Latin America, or is it kind of safe? [00:07:15] Speaker 4: Well, Latin America has two key variables that is very much dependent on. One is interest rates in the U.S., and the other is commodity prices. In terms of the opportunities that you have, fortunately, we are on the verge of a commodity boom that is not based on what happened at the beginning of the year's 2000s, which was the industrialization of China. That led to a lot of very strong demand for industrial commodities and agricultural commodities. Now, there are three key trends in Latin America that are going in our direction. One is energy transition, the second one is energy security, and the third one is food security around the world. The demand in terms of green energy and the demand for energy transition is going to be so strong in the next decades. This is not a question of just one decade, but clearly when you look at, for example, the lithium triangle down in South America, which is composed by Chile, Bolivia, and Argentina, it has a relative advantage, for example, relative to Australia. In Australia, in Australia, you extract lithium from rocks. In this golden triangle, you extract lithium from salt, from salt sort of flats where you evaporate the salt. So clearly, there is a competitive advantage in lithium, in copper. In copper, we provide almost 60% of world copper. And as you know, lithium-ion batteries basically carry lithium and carry copper and manganese. So although China is very important in terms of what it provides as a source of demand, it is not the only source of demand. And there are these three key megatrends that are going on in the world. Not only I say energy transition, the green economy, but also energy security. And you have, for example, LNG, natural gas, which is one of the critical elements in the transition. We won't have green energy or hydrogen energy. It's costly. And one of the key transitions could be done by LNG, by liquid natural gas, which is provided, for example, from Mexico down to Argentina. Argentina has the second largest basing for second largest basing in shale gas in the world, which is called, in Spanish, vaca muerta. It's not a good name in English. [00:09:55] Speaker 1: That means dead cow, if I use my Spanish. [00:09:57] Speaker 4: Dead cow. I would say it's a cow that is very much alive because it's producing liquid natural gas. And for example, one of the big investments from Asia in Latin America is Petronas. Petronas is the Malaysian company that is projecting a pipeline coming from Baca Muerta down to the Atlantic and producing a liquefaction plant to export not only to Asia. To Asia. Exactly. [00:10:23] Speaker 1: So you say Latin America is not dependent upon China so much. [00:10:27] Speaker 4: So it is China dependent, but not so much. These three forces that are now in the world, again, energy transition, energy security and food security are providing other sources of demand rather than China. And interest rates. It's another important area because Latin America is dependent on flows, on capital flows from the rest of the world. So lower interest rates will mean more flows, not only to Latin America, I would say to all emerging markets. [00:10:55] Speaker 1: Let me stay with you just for a minute, Martin, because you used to be a central banker. Now, I'll get to you, Bill, in a minute. So, what do you think about the American economy while we are here at this debate stage? We have the, you know, Donald Trump is talking to Kamala Harris in Pennsylvania. I think I will be leaving this stage to go watch whatever happened there on the video. What do you think is going to happen to the American economy, depending upon who wins? And where is the Fed in this whole story? [00:11:23] Speaker 4: Well, I think that the Fed is much more critical than the American economy. And let me give you a biased answer. [00:11:29] Speaker 1: If you could hold the microphone a little bit closer. [00:11:30] Speaker 4: Yes, a biased answer as a former central banker. The Fed, in my view, got it wrong at the beginning of the pandemic. I think one of the biggest mistakes in political economy in history was calling inflation a transitory phenomenon, in particular in the US. And this came out in the FOMC, that is in the reports of the Federal Open Market Committee. And as you've seen, again, it was an unprecedented shock to the world economy. But the massive, the massive inflow of monetary policy, the massive inflow of fiscal policy, all done together, was a critical element that never happened before. And also, because we were all in our houses and we were all confined, this amount of money was basically channeled into goods and not into services. So we had that concept that all this flood of money, helicopter money that we had from fiscal push, you know, the Treasury giving out checks to all people that were in the houses, in the houses, in their houses, to many companies, many companies, unfortunately, that were paper companies. So we had a clearly a great fiscal expansion with a monetary expansion at a greater speed, at a fantastic speed that we've never seen before. So inflation was a natural cause that the Fed didn't catch at the beginning. I think they were too late to the game. What we've seen is phenomenal in a short period of time. In 12 months, we had a rise from 0 to 5.25%. It is unprecedented. We have to look to the decade of the 80s to see that kind of rise. And that has hurt the American economy in terms of the recovery. My point now is, will the Fed get it too late at this point in terms that the key question in the U.S. economy is the slowdown. And the slowdown that we have seen in the labor market, for example, if you look at the July meeting of the Federal Open Markets Committee, there you had already that the labor market was clearly with quite a slack. Two days before we had the increase in unemployment from 4.1 to 4.3%, the Fed met and it didn't move interest rates. In my view, they should have done it at that point. And now they are running behind the curve in terms of the key risk for the U.S. economy is not only a slowdown but also a recession. My point is that probably the U.S. Fed will react. We are in an electoral period. We will see at the next meeting of September 17 and 18 of the FOMC. My point is they should start decreasing interest rates at around a rate of 50 basis points, probably because they are running behind the curve. But most important, Mike, is not only what they do in September, but also forward guidance. As a central banker, it's very important that you give the private sector where you're going, the horizon. So it's very critical that the Fed comes out with a forward guidance of what are the next steps. In my view, what the U.S. needs at this point is at least a hundred basis points coming down. And then Martin, just to be clear, a basis point is a hundred. [00:15:01] Speaker 1: So when you're talking about half a percent or one percent. That's right. Bill, how do you see the-- [00:15:06] Speaker 4: Thank you for the clarification. [00:15:07] Bill: Yeah, let me just get in here for a second. Thank you. Bill, how do you see the American economy? [00:15:16] Speaker 1: What's going to happen in this election? How does it impact it? [00:15:19] Bill: When I first started as a professional economist, I spent my time at the Federal Reserve. And when I went to the IMF, they put me in charge of the U.S. desk. And they said, you know, Bill, you're going to have the hardest job at the IMF. And why is that? Because all these economists that we have here, these international economists from Argentina, from Asia, they're all trained in the U.S. And they know so much about the U.S. economy. The newspapers report exclusively about the U.S. economy. So everybody's a U.S. expert. Everybody's an expert on the U.S. economy. So let me just set the framework for what's normal in the U.S. economy. Number one, the unemployment rate between four and four and a half percent is considered normal. That's about most people's estimate of the natural rate. That's where the economy would be if we're growing at the natural rate of growth, which is about one and a half to two percent. And the Fed is now targeting inflation to come down to about two percent. And when people say, oh, my God, we're in a recession because we went half a percentage point up on the unemployment rate, three and a half to four and a half percent, a huge jump increase. There was no layoffs. Nobody was laying off people. The reason why the unemployment rate went up was because so many people said, wow, opportunities are good now. I should go and look for a job. And more and more people started looking for a job. So to say that the U.S. economy is teetering on a recession or even in a recession is ridiculous. That's number one. [00:16:45] Speaker 1: I think Mr. Trump will probably be saying that right now. But let's not get too deeply into this because otherwise we're not going to get it through the rest of the world. [00:16:51] Bill: But to characterize the U.S. economy, I think to fairly characterize, at least in this expert's opinion, it's doing very well, extraordinarily well. It's been growing at way above potential for several years now because it's rebounded, rightly because, Martin said, so much stimulus was put into the economy. Fiscal policy going forward only has two characteristics. One is from the Inflation Reduction Act, which is badly named because it didn't reduce inflation. All it did was reshape medical care. And the CHIPS Act, which is an industrial policy in the part of the United States to try to bring back a lot of manufacturing, especially of high-end semiconductors into the United States. That's where fiscal policy is right now. It's not doing anything other than reshaping the U.S. economy. It is actually overstimulating, as Martin said, the U.S. economy. Monitor policy is set at a short-term objective of bringing inflation back to 2%, and it seems to have done that. But I think for Korea, the most important part about the U.S. economy right now is what's happening to trade policy. Because as you know, right, Mr. Trump is – I love tariffs. That's the one campaign that he did from 2016 onward. And Biden and Harris have said, "We don't like tariffs, but they're okay." All of you have taken Econ 101. Econ 101, you say, "Tariffs are terrible. Tariffs distort. Tariffs make you worse off. Tariffs raise inflation. Tariffs lower growth." How much did the tariffs change U.S. growth? 0.3% over two years. 0.3%. How much did it raise prices? Consumer prices? Hardly at all. Hardly at all. Because a lot of it was absorbed in profit margins. Now, I think one of the things that you have to learn beyond Econ 101 is that we don't live in a world of free trade. We live in a distorted world. So what the tariff policy is trying to do across countries is to try to reshape your own economy. You're trying to subsidize certain industries and you're trying to prevent people from over-consuming other sectors. So it's really shifting consumption and shifting production. The first thing you learn about tariff when you take international economics, which I used to teach at Columbia, was tariff is a consumption tax and a production subsidy. Right? Those are two things. And it generates revenue. It generates revenue. Bill, we don't have time for your lecture. But I'm just saying the message here is tariffs are not necessarily a bad thing. They can be used wisely if they are used wisely. [00:19:20] Speaker 1: Well, if Trump wins the election, more tariffs are coming. Frederick, from a European perspective, how do you see the American economy? [00:19:26] Speaker 5: What's going to happen? Well, I mean, first of all, I mean, if we look at the broad orientation on trade policy, I think. I mean, the main answer to the question, why didn't Trump's increase in tariffs, why didn't it fuel consumer prices more? Why didn't it fuel inflation more? Well, partly because it was mostly bilateral. And that's what we know from trade policy, which is that if you go against one country, it may be a big country like China, and you raise tariffs on export from that country, what you're going to do is a reshuffling of trade. The export you used to get from China is now going to come from other countries. And this is what we've seen in American trade data. However, what the main tariff man, as he now labels himself, Mr. Trump, he wants to raise taxes on all use trade. It's not just about China anymore. He wants to have a 10% tariff on trade with Europe, 10% tariff on trade with Latin America. And I can assure you that is going to have an inflationary impulse in the economy. That's going to have consequences for both raising consumer prices in America and, of course, reducing export competitiveness of US firms. Because a lot of this import is going to American manufacturers that then re-exports what they import to the rest of the world. So I would be more careful about that trend in American policy. And mind you, what Trump is saying is that he wants to go back to the 19th century tax code in America, which is to erase all federal income tax and substitute that with tariffs. And that, of course, means that you need to have a giant increase in tariffs in order to affect it. I don't think it's possible to achieve that. [00:21:08] Speaker 1: Fred, Frederick, while you have the microphone, maybe you could talk a little bit about the European economy. We've talked about the Chinese economy. We've talked about the American economy. Five percent for China. Three, two and a half percent for the US. What do you see happening in Europe? [00:21:22] Speaker 5: Well, now we're really going into dark territories. No, I mean, cyclically, Europe has been, for all purposes, in what we can call a recession. And that, of course, has been true for a large economy like the German economy, which represents more than one third of the entire Eurozone economy. It's been way down by first the pandemic, by the war in Ukraine, which had a huge impact on energy prices. [00:21:54] Speaker 1: It's still going on two and a half years in. [00:21:56] Speaker 5: Yeah, yeah, it does. But, I mean, the energy price impact that came on the heels of Russia's invasion into Ukraine, I mean, that's been weakening a lot. That's been absorbed. That's been absorbed. It's been absorbed and energy prices has gone down. But, I mean, the major problem for Europe is not the cyclical short term. It's the fact that its long-term outlook isn't very, very good. We had just two days ago the formal president of the European Central Bank, Mario Draga, coming out with a very, very stern, depressing analysis of the European economy, where he's basically going to say that unless you do my program, which is pretty radical by European standards, you're first going to feel agony and then pain. And, you know, that's the former Central Bank president talking here, which is that Europe is on a long-term path of very, very weak underlying growth, weak GDP per capita growth, weak productivity growth, weak performance in the R&D sector, weak performance in corporate investments. [00:23:02] Speaker 1: But, Fredrik, at the same time, Europeans are happy. They have a high standard of living, amazing healthcare, long vacations. I mean, what's wrong with that? [00:23:13] Speaker 5: Well, I mean, long vacations, that may be true, but I don't think Europeans are happy. I think we are seeing a lot of resentment, a lot of frustration at the ballot boxes, and we've been doing that for quite some time. I think the rise of populism plus many other things, which of course happens both on the right and the left, is certainly a result of the fact that we live in a European economy with low economic opportunities, where we almost are permanently demoted to have low economic expectations. It's difficult to get a place to live, a house if you're a young person. Unemployment among young people are pretty high. We see demographic developments are not going to be helping us much, because we're going to push up costs for pensions and costs for healthcare, while we don't have sort of enough labor in order to substitute for those going into retirement. So, I'm pretty pessimistic about the European economy. [00:24:10] Speaker 1: Now, as you gentlemen talk about China, the United States, and Europe, it almost seems, and especially if you read the press and listen to the speeches, that we're moving to some kind of a new world order with trade blocks, which don't talk to each other, almost Orwellian in its... But I understand, if you look at the trade data, there's still enormous quantities of world trade going all around the world. Oh, absolutely. So, are we at the end of globalization as we know it, or is that just a political smoke screen and really the data doesn't support that? Well, that's... I'll go to all of you. I think all of you might have an opinion on this one. [00:24:47] Speaker 5: But if I just... I mean, I think it's a political smoke screen. What is true is that when you look at trade in manufacturers, trade in goods, it's been basically going sideways since 2014, 2015. But that's not surprising given that we are in a structural shift in the entire global economy, where we go towards services and we go towards much more tech-oriented type of cross-border flows and cross-border exchanges. And when we start to look at this world of new globalization, how knowledge, ideas, patents, technologies, digital services are crossing borders, I think we are on the verge of a new boom of globalization. Okay. It's just that a lot of people talking about it and sort of predicting the end of globalization, they are staring at old globalization. They're staring at sort of old trade in data. [00:25:37] Speaker 1: Yeah. Let me go from you to Martin and then to Dr. Cao and then back to Bill. Sure. Martin, go ahead. [00:25:42] Speaker 4: Well, there is a new globalization. And this new globalization is given by the concept of French shoring, near shoring or allied shoring. That is to say, what happened with the Russia invasion to Ukraine with the pandemic is that companies want suppliers to be reliable. So what you have at this point is companies that are looking for suppliers that are closer, that are reliable, that will have long-term contracts. So, for example, in the case of China and its relationship with the U.S., what you have seen is a diminishing of around 5% of Chinese export to the U.S. But wisely enough, the trade between China and Mexico, Mexico is used as a key supplier of the U.S., has increased by almost that amount or most. So what you see now is Chinese investments going into Mexico in order to supply the United States. So there is a different type of globalization and that is given by the type of suppliers that you get. Interestingly enough, you mentioned, Mike, the IRA, the Inflation Recovery Act, which had nothing to do with inflation but was mainly a... [00:27:01] Speaker 1: It's the new Green Deal, right, disguised as something else. [00:27:04] Speaker 4: It was a Green Deal, basically. I mean, basically giving subsidies to companies that produce 80% of their products, of their goods that go into the green economy. But, interestingly enough, with countries that have already free trade agreements with the United States. That is to say, if you produce a lithium battery that is done in Chile or in Peru or in Mexico that has already a free trade agreement, you got the subsidy of $7,500 of a car when you buy it in the United States. So I would say that there is a different globalization, that there is a different view of suppliers, and also what is over is the big trading agreements. Okay, the big sort of free trade agreements that we've seen of the European Union, free trade agreements with different blocks. We have had trouble in getting past a trade agreement between the European Union and Mercosur, which is Brazil, Argentina, Uruguay, and Paraguay. So big trade deals are over. It's more localized, focused on the kind of supplier. One last word about what Professor Lee said. My point, and if you look at what the Fed policy is, is the Fed policy is a risk management approach. So they do a base scenario and then they do the balance of risk in order to maintain in that scenario. My point is that inflation is no longer a risk, but a slowdown is a risk. You cannot maintain such high interest rates when inflation is going down to personal consumption expenditure to 2.6%. You cannot have a real interest rate of 2.5%, 5.5% over. So my point is that now the risk, the balance of risk is more on a slowdown. You don't only see it in the labor market, but also in the earnings of companies. But coming down to trade blocks is a new globalization what we are facing. [00:29:08] Speaker 1: Thank you, Martin. Dr. Cao, how do you see from China? Because there's an argument that says China, you know, the Americans see China as a threat. Chinese say we're just trying to do our own business, you know. How do you see China and are we at the end of globalization? [00:29:22] Dr. Cao: Okay. I fully agree what Martin just pointed out to the shift of foreign trade from China. I guess in the near future, whatever who take the White House, the American policy to China wouldn't be changing. That means they still will, they call small yard high fence by high tariff section or export control or whatever. But at the same time, yes, I want to point these strategies in some way play out. You look at the figure, the US export among the total US export, the share from China have already come down. [00:30:16] Speaker 1: A little bit or a lot? Come down. [00:30:18] Dr. Cao: Yeah, that's maybe reduce probably 5% or something like that. But at the same time, the amount of export from China to US still continue to growth. That's something happened at the same time. [00:30:36] Speaker 1: Yeah, yeah. [00:30:37] Dr. Cao: Also, as a Martin point, so in order to avoid the section or high tariff from US, some export to other country like Mexico, Vietnam or other country, they were exported to China. Also, now many Chinese companies to go overseas to make investments there. That's something just happening in China. So, what I try to say is I look at the data. Actually, yesterday, Chinese government issued the trade data August. It's very interesting. The export from China grows 8.7%. So, that's the prime point for Chinese economy. As William Lee pointed out, now in China, domestic demand is very efficient. But at the same time, unexpected, you know, most people actually export from China very strong. That supports China's continued growth. Maybe in this year, as I say, probably can reach 5% or maybe a little bit lower than 5%. So, that's the basic. [00:31:58] Speaker 1: Bill, on this issue of globalization, so, you know, are we seeing the end of globalization? Is it a new globalization, as Frederick says, or is it just a rearranging of globalization? [00:32:09] Bill: It's a recognition that globalization, as it was taking place after China joined WTO in early 2000, it was a huge distortion on the world economy because of China's success. China was so successful in producing stuff, goods, manufacturing goods and light industrial stuff. So successful, it was so cheap, everybody wanted to buy from China. So, China's success caused a huge distortion. And now, the world says, you know, besides efficiency and cheap stuff, I want safety in my supply chains. I want soundness and stability in my supply chains. [00:32:44] Speaker 1: And resilience. [00:32:45] Bill: And resilience so that I can depend on it. And national security. So, these are elements that have come in to reshape global trade. And the French showing that Martin talked about, he's absolutely right. By the way, you hear a consensus that's very unusual here, right? We all agree globalization is changing and needs to be ended. And I'm telling you why. Because of the additional things that have to be put in place. Safety, soundness, security, stability. And for Korea, I think the most important thing is really hinted at by what Martin said. Going into the new trade agreements should be much more regional, your main trading partners, and bilateral trade deals. Because they're easier to target. Korea knows what it wants to do with its own industry. You want to help certain industries. You want to push the resources into certain industries because it gives you a better economy, stronger economy. You do that with trade deals, bilateral trade deals, by putting those terms with your main trading partners. If you try to get five or ten countries together to agree on those same terms, that's almost impossible to get that agreement. Somebody's going to hold out, and it'll take forever to do that sort of stuff. So I think for Korea going forward, especially because Korea trades with both China and the U.S. Those are number one and two, I think, for Korea. [00:33:57] Speaker 1: Exactly. [00:33:58] Bill: Those are the main trading partners. So it's really, really smart. It's something I said last year when I was at this forum. To have these bilateral arrangements negotiated fairly quickly, and can be changed fairly quickly, depending upon how your economy changes. And what's smart about the arrangements for Korea is that your semiconductor agreements with the U.S. is to supply the U.S. with inputs for the high-end semiconductors. But also with China, you manage to negotiate with the U.S. ways of getting around the sanctions. So I think that for Korea, this new regionalization, this new French-shoring, French-shoring is Korea-shoring, as far as the U.S. is concerned. And I think that's something that is going to be very helpful for Korea going forward. [00:34:41] Speaker 1: Before we... Just a real quick question about Africa. Now, when we talked about this, none of you said, "Let me talk about Africa." But if... I don't think we do a good job talking about the world if we don't mention where does Africa fit into this new globalization. Frederick, do you want to try that one? I got Martin on the other side. If you don't, that's okay. Martin, you want to go ahead? And then go to Bill. Sure. [00:35:04] Speaker 4: What we've seen so far is Africa being a key supplier of commodities, in particular to China. And in return, getting a lot of infrastructure that is quite needed for the development and the logistics for Africa. Now, the key challenge that Africa has is that so far the Chinese policy towards this continent has been tried to get, tried to feed the industries that they needed to be fed in China, but more an extractive policy in terms of extracting minerals, extracting commodities, and not leaving value added inside of Africa. So, what we've seen is a pretty stable growth in Africa of around 5%, but very strong inequality in terms of the standards of living. So, clearly the policy that China has had, which has been clearly creating warnings in Latin America, is it going to have an extractive policy in terms of our commodities? What is China going to leave in our countries in terms of value added, in terms of creating employment? So far, its influence in Africa has been basically to extract the minerals or what it needs to feed its industry, but yet has not left better standards of living. And that's clearly one of the challenges for one of the key regions in the world in terms of producing commodities vis-a-vis the future. [00:36:37] Speaker 1: Bill, do you want to – because I understand that Chinese companies are also building railways and power dams and – [00:36:43] Bill: Yeah, I think for Africa, one of the things that it's challenged by is it's got to build infrastructure. Because as much as I say China is subject to dismal demographics because of the aging population, and Korea is as well, Africa is the other end of it. The youngest population in the world is located in North Africa, and they need jobs. And in order to get jobs, they need infrastructure investment. The lesson there is beware of people coming with gifts, right? The belt and road strategy was to say, "Oh, China says I am here to help you build your infrastructure, but in doing so I'll help you finance it." Now, China is the biggest creditor for emerging market economies, way over the IMF, way over the World Bank, way over anybody else. China is the largest creditor to emerging markets. And so China really has a very important role in restructuring this huge amount of debt because it's very hard for these emerging market economies to pay them off. And so far, the restructuring that China has done has really not helped relieve the burden on these countries. In fact, in some cases, like in Djibouti and in other places, they've taken equity as payment. All right, you can't pay for the port, port is mine, right? Can't pay for the dam in Peru, the dam is mine. So that is in some ways my criticism of how China, as the main creditor of the world, has not really proceeded responsibly in restructuring debt. [00:38:03] Speaker 1: Do you want to add to Africa or I'm ready for my last question? [00:38:08] Speaker 5: Absolutely. I mean, I think if we take that demographic viewpoint, I think there are huge opportunities that exist, especially in Western Africa and looking at sort of Nigeria, Ghana, that link could be sort of pretty amazing. But they need to step out of the commodity cycle, they need to have an economy which is less responsive to how that cycle moves. And of course, which has always been, or not always, but for a long time being the main problem, which is that they need to have institutional stability. And if they don't have institutional stability with the economy and with the political system, it's going to be extraordinarily difficult to attract foreign investments and get that more investment driven boom that they so much need. [00:38:51] Speaker 1: And I think the only point I'd add to that is there are 55 different countries in Africa, some have amazing institutions, others have weak institutions, and we really have to look at place by place. I have one last question, and then maybe we have time for a question from the audience. You know, we talk in this forum, we've been talking about innovation. We've been talking about, you know, AI and chips. And later today, they're going to talk about neurological innovation. Bill, you mentioned demographic crisis, you know, is technology or is digital technology the solution to increase productivity so that even if we have a lower population, we'll still have prosperity? Or is there something else going on? And how do all of you see this? And I guess you want to start, Bill, and then maybe, Frederick, you wrote a book on it and we'll get everybody's opinion. [00:39:40] Bill: Let me just frame the difficulties here. The fertility rate here in Korea, as you all know, is 0.72%, right? There's 0.72 births for every couple out there. In China, as bad as it is, it's 1.0. In Europe, it's 1.5. And in the U.S., it's close to 1.75. [00:39:56] Speaker 1: But you need 2.2 to keep your population, right? [00:39:59] Bill: They're all declining. But it's declining the worst in Korea. And I think one thing Korea has going for it is the high-tech AI kind of technology that you have. That is the biggest hope for increasing productivity and real wages and continuing to have growth. The trouble is how you execute it. Because one thing that happened about globalization and new technology in the U.S., so many people lost their jobs. Because the technology, the way it was implemented, was the substitute for people. I gave a talk in Silicon Valley and I said the challenge to every software developer out there is to develop an interface for the software and for the AI and for the technology that's being put in place so that you make a high school graduate as productive as a PhD, right? Maybe that's not so productive. At least as productive as an MBA. And so the software... [00:40:52] Speaker 1: It's too bad for our MBA students because they want to make more money than high school graduates. [00:40:57] Bill: Well, but high school graduates can be productive depending on how the software interface is put in place. And so if you use the people wisely, right, the people that you have, they can have very high incomes, very good jobs, or they could lose their jobs depending on how that technology is implemented. And that's really the key. [00:41:16] Speaker 1: Yeah. Martin, you want to go ahead? And I'll let you close this one, Frederick. Go ahead, Martin. [00:41:21] Speaker 4: The two contributions that Latin America could do in terms of increase of productivity in the use of artificial intelligence are in AgTech, in agricultural technology, for example, in terms of capturing what are the trends, the weather trends, the droughts, you know, the catastrophes that happened around the world in terms of droughts or in terms of floodings. Well, AI's capability is able to predict what kind of outlook you will have, and clearly that will increase agricultural and food security going forward. And in terms of minerals, as I said, in terms of critical minerals, also using AI in terms of detection, exploration can advance much more the productivity that you have in these two areas. [00:42:13] Speaker 1: Yeah. Dr. Cao? Yeah. Productivity, technology? [00:42:17] Dr. Cao: Yeah. My point is, yes, technology is very important to improve productivity. But at the same time, I still want to point out other aspects, particularly structural reform in most countries, still very important. In case of China, yes, we produce lots of commodity, but the people still, we still don't fully finish urbanization, still less 50% of people living in the city. That's something will become the driving force to push China to continue growth. [00:43:01] Speaker 1: Prosperity, prosperity for everyone. [00:43:04] Dr. Cao: Yeah. Also, other, you know, structural reform still needed in case of China. I guess maybe in other countries, a different way for the U.S., how to solve some extreme income inequality. That's something very important for China, for U.S., stabilize or push their economy. That's also the same importance as technology advance. [00:43:34] Speaker 1: Frederick, on this issue of technology, I mean, you're writing a new book about it. You've got the technological illusion. Is this stuff illusionary? Is this stuff going to make us better off? Is it going to make us slaves to robots? I don't know. [00:43:48] Speaker 5: No, I think, fortunately, I don't think they're going to make us slaves to robots. No, I mean, what I would say is basically that I don't think there is any question that new technology is going to have a positive contribution to underlying dynamics of the economy. It's going to contribute to productivity growth, for sure. The question is, what are the scales that we're talking about here? Are we talking about the type of gradual incremental structural shifts in technology composition in the economy that we've had for the past 40, 50 years with the sort of first arrival of more data and computer-generated type of change in technology? If that's the case, well, then we're not talking about a huge lift coming to the economy from AI or from quantum or from other emerging technologies. So I think the promise which is out there right now, of course, is that the knock-on effect from AI, quantum, what we're going to see in biomedicine, neuroscience, et cetera, is going to sort of change the path of productivity growth radically. And we're not seeing that yet. That's not what's coming out from the data. And it's partly an issue about the technology and technological development that it takes time in order to see how these things are going to merge. But the other point is that, well, technology is not sort of something which automatically is going to fuel up an economy just by adding more technology to an economy. It also depends on the dynamics of the economy and the extent to which that we can have entrepreneurs and companies that can start contest market with new technologies. And what we've seen for 40, 50 years, of course, is a gradual slowdown in markets for having that type of contestability, for making it easier to contest markets. We have examples, of course, over the past 15 years with, say, the arrival of the iPhone or Mark Zuckerberg and Facebook and sort of the social media change, which has been on extraordinarily importance in terms of changing some smaller markets like advertisement or media. But when we look at the big part of the economy, we haven't really seen that yet. It's much more of incremental, gradual change. It's positive. We need to see much more of it coming. But so far, this is not sort of the big bang that many have been expecting. [00:46:14] Speaker 1: Gentlemen, I think we've got the time right. We do have about seven minutes, ten minutes. That's about three, two, three minutes each. Kind of where do you see everything? Where do you see the global economy in 2025? How do you see these things coming together? I don't know. Maybe again, we can start with you, Martin, and then work our way down the line. How do you see the world? And by the way, Martin, I'm curious, what do you think about Malay? [00:46:37] Speaker 4: That's a long answer, but I'll try to keep it short. [00:46:42] Speaker 1: Malay is the president of Argentina, a very radical economic policy. I'm not sure if he's going to implement it or not. [00:46:49] Speaker 4: Well, let's start with the world economy. Clearly, the base scenario in terms of a risk management approach, where is the base scenario? We are going into a slowdown of the economy, a lower interest rate environment. The key question is, where is the new neutral interest rate? That is to say, where is the interest rate that is neutral vis-a-vis inflation? Is it 3%? Is it 2.75%? Well, that is the key question that will determine, in my view, if we have a slowdown and how that develops around the world. Two critical elements, obviously, is vis-a-vis the election in the U.S., is how the Russia-Ukraine war will end. It is clearly that with the Trump administration, there will be sort of a movement towards stopping the aid to Ukraine and probably forcing a peace agreement, which will be unfavorable to Ukraine, and what that means in terms of geopolitical trends. Obviously, what will happen in the Middle East, not only with the social consequence of that, but in the price of oil. You know, that is another critical element that we need to see in the next year. Longer term, and then I have a word about Millet, the key factor is, how is this geopolitical tension between China and the U.S. going to develop? How far is it going to go? What are the areas of competition that it will have? It will be in technology, in trade, it will be in the military side. From my point of expertise, which is monetary economics, what I see is that there will not be a replacement of the yuan for the U.S. dollar as a reserve currency. What I see is that in talking to, in my experience, in dealing with Chinese officials, is that China doesn't want to open its capital accounts so that foreigners can come in and out with speculative capital and manage their exchange rate as we have seen it so far. Last question about Millet. Millet is a new president in Argentina. He has been basically the result of the failure of the political class, of the traditional establishment political class, in not delivering better standards of living for Argentinians. That, in my view, Mike, is not a phenomenon just of Argentina. We have seen the failure of traditional politicians around the world, many cases in Latin America. We see it also in Chile. We have seen it in Colombia. We have seen it before in Brazil with Bolsonaro. We have seen it with Trump in the United States. We have seen it in Italy with Giorgia Meloni. So, there is a failure of traditional two-party system to provide the increase in the standards of living that people want at this point. So, Millet is the emergence of that. It's an outsider. You know, he was a commentator in TV shows two years ago. He didn't have any political structure. And it was basically Argentinians being fed up with the failure of the past, trying to elect a person that has been quite radical. I would say one key asset, and with this I finish, is that he has managed in a country that has overspent and over in debt, has managed to balance the budget in six months. His main asset has been to bring fiscal discipline to Argentina. Now, clearly, the question is, will that be sustainable? Will that be only reliable on one person or that could be widespread to the rest of the country? [00:50:40] Speaker 1: Thanks so much, Martin. Dr. Cao, how do you see everything? [00:50:44] Dr. Cao: Okay. Following what Martin said, I guess there are three accidental events which have a great impact on the global economy of next year. Is the election of US, war in Gaza, and Russia invasion of Ukraine. In addition of that, also, there's another factor, which is the tension between US and China. As I said previously, the tension wouldn't go away maybe in one or two decades. But at the same time, also, I want to point out a very important factor. Last year, there was a summit between the leader of US and China in San Francisco. So after that, you can see the interaction between US and China. Both sides or the leader of both sides don't want military conflict. That's something I think is good. So I guess next year, whatever, who take a White House, that the relation between US and China can be manageable. Still, I think, under control. Assuming that, so I guess the general situation of world economy, according to the forecast of some international economic organization, IMF, World Bank, recently, they raised the forecast of GDP next year. So, the term I want to use to describe what happens next year is mediocrity. It's not very high, not very low. [00:52:30] Speaker 1: Okay, mediocre. Bill, how do you see? Are you an optimist, pessimist? [00:52:35] Bill: My answer to your question, Mike, is who cares about everything? Focus on what's important. Focus on what you can do something about and what will affect your life. And right now, of all the topics we discussed here, the regionalization of the global economy is the one thing that's going to work in Korea's favor, because you can slip and slide across all these regions. Everyone considers Korea a vital trading partner. How do you preserve that position? That's the challenge for Korea going forward, right? War, yes, that's always on the horizon, especially if you look north, right? But the trouble with here is that you could really spoil things by joining sides, one way or the other, or by joining these large multilateral agreements or trying to get these deals put in place that take forever. So for me, again, my answer to you is focus on what's important to Korea and make sure you make it happen. [00:53:27] Speaker 1: And stay friends with both the U.S. and China. Is that the basic idea? Frederick, how do you see the world? Are you an optimist or a pessimist? Cautious optimism? [00:53:36] Speaker 5: Yes, I think cautious optimism is a good way to describe where I stand on many of these issues. I mean, there are lots of things to be pessimistic about and lots of uncertainties when it comes to situation Russia, Ukraine, looking at the broader developments in the Middle East with the potential of having sort of a much larger Arab conflict. We have other, so we talked about Africa previously, we have the Sahel and difficulties there. So we can spend a lot of things, focusing a lot of things that are going to make us more pessimistic. But the, I mean, the upsides, I think, are that more economies are beginning to figure out how they're going to manage the type of structural shifts that are happening in the economy. And these structural shifts are about moving from an old type of globalization which was multilateral or regional or it was organized on the principle that we're going to trade in predominantly goods. We have now technologies, we have now much greater ability to change services sectors and to get services sectors to become much more trade incentives, intensive than they were in the past. We have global flows of knowledge, ideas, technology, patents that are rising extraordinarily fast and help to reshape how firms work and how they integrate even at the workplace across borders. But how do we sort of configure that with the other trend, which is what we've been talking about on economic security and changes that are prompted by different risks connected to geopolitics and the risks of war? I think even if even if war may not be the consequence or more wars are going to be the consequence of all the dynamics that we see at play, I think there are problems for China, for America and for Europe and for many others in this configuration, which is that they are resorting back to very sort of state-centered idea for the management of the economy. We see industrial policies becoming stronger, we see in the Chinese economy that the state is obviously on the advance and having much more sort of stronger impulses in the direction of the Chinese economy, but that's also the development we're seeing in America and Europe as well. And it is going to be unhelpful, it's going to make it harder to make this configuration to work and figure out sort of beyond the old Bretton Woods structure of global economic management what we can do. But hopefully 2025 is going to be a year when we can sort of take a few more steps towards that configuration and figure out how we're going to get this to work. [00:56:32] Speaker 1: How to get this to work and live in coexistence, which is the theme of the panel, so that's the theme of the conference. Thank you gentlemen, thank you very much for your attention and thank you for your questions. [00:56:41] Speaker ?: Thank you.