FT Alphachat · Financial Times

What China wants: Brad Setser, and Freya Beamish

March 1, 2019·45 min·3 clips

Setser argues China's state-backed aviation industry puts the entire U.S. aerospace export economy on a collision course.

Washington gets the first word. A Charles Schwab sponsor segment rolls into a committee hearing where Marco Rubio asks whether markets alone can deal with China's industrial ambitions. The room has mostly emptied out, which makes the scene feel stranger and sharper. Rubio, chairing a small-business committee, comes across less as a campaign figure than as a senator worrying at a practical problem: what can government do to help business? The episode sits with that question instead of waving it away. China's push to dominate high industries is treated as a policy problem that private firms may not be able to solve on their own. Then the conversation shifts to money. The guest moves from industrial policy to exchange rates, setting the Fed and the ECB beside the People's Bank of China. Major currencies float. The PBOC, in this telling, works inside goals set elsewhere, including exchange-rate goals tied to the State Council. So its independence has limits. A floating yuan once looked like it might work for China's central bank, the State Council, and the United States. That version never really landed. The guest says China's currency stayed heavily managed, even though the methods changed. Weakness changes the politics. With China's economy weak and the dollar strong, both the U.S. and China sound nervous about a yuan left to slide. The savings pool adds another layer. A once-45% savings rate meant people wanted reliable assets, so currency management was never just a tidy fight about manipulation.

As heard by us

A focused FT Alphachat episode on China's managed currency, state-backed competition, and the market signals investors should watch.

FT Alphachat turns China policy into a market story, starting with Marco Rubio's question about whether U.S. companies can compete when Chinese rivals may have state backing, then moving into the mechanics of China's managed currency.

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Why you'd press play

You want a clearer read on how Washington policy and China's currency moves can show up in your portfolio.

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