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Arthur Kroeber

lines on the record: 156
first: 2025-06-19
most recent: 2025-06-19
sittings or episodes: 1
sources: podcast

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“Double counting, which is hard to resolve, where debt gets counted at different levels in the system. It's one piece of debt, but depending on how long the chain is, it gets counted in various different places. And I've long had the view that many of these much larger estimates of debt don't fully account for the double counting.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I would respectfully disagree with Victor on that. I mean, it's impossible to know for sure. And the problem is that you have the problem of formal debt. which is debt issued by government entities. And then you have contingent debt, which is debt issued by corporations that may or may not essentially be fronts or windows for local governments. There is also a very significant problem of”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I still think that that is a local government fiscal problem, which ultimately is a central government fiscal problem if you look at the consolidated balance sheet of the central and local governments put them all together. China's government debt is still probably less as a share of GDP than US federal government debt, right? The US is over 100%. China is probably under 100%.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Relative to what it needed to be. But after that had run for three or four years, it became clear that a lot of this was going into wasteful projects and it didn't deliver good return. And now they've been struggling for the last decade for how to unwind that. But I think it's important to understand that the underlying model was actually an okay model. It just wound up being done in a way that was completely uncoordinated and excessive and led to a lot of, and incentive structures that enable local governments to rein it in when they needed to.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Infrastructure is good infrastructure, just like build whatever you want. And so what happened at that point was that all of the commercial banks got into this business of lending money to local governments for these infrastructure projects. And their underwriting standards were much less robust than the China development banks had been. And local governments just, you know, it was free money to them. So they just took all the money and they ran with it. And then that created this kind of Frankenstein's monster. Even so, I think you had quite a lot of that money in the first few years went into, probably generated pretty good return because China was still underbuilt.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And if you look at the first few cases of where this was done in the early 2000s, they had these estimates of what the land would ultimately be worth that seemed ridiculous and astronomical at the time. They were in fact way too low. They were way, way conservative on what the actual land price appreciation would be. So you had a period of about eight or nine years where essentially the development banks, the state-run development banks were doing this in a fairly controlled way very, very successfully. And then what happened was that after the 2008 financial crisis, the government said, oh, we just have to spend a lot of money to gin up growth because there's been this global economic catastrophe. And so they did a massive cash infusion into the banks and to the state-owned enterprises that said, spend, spend, spend, and basically all”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Grappling with the problem that China at that point had a severe shortage of housing and infrastructure of all kinds, including urban infrastructure. And the question was like, we need a lot more of this stuff. How do we build it? How do we finance it? And they realized, oh, actually, as we build this stuff out, the values of this land are going to skyrocket. So let's essentially take some financing against that future land price appreciation and use that to build the infrastructure that makes everything possible”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess my view on this is that this local government land based financing model was actually a pretty smart thing to do initially. And for a decade or so, it worked quite well. Local governments were sitting on a lot of these land assets. It was perfectly, the land assets originally were undervalued quite substantially And so it made sense for the local governments essentially to try and capitalize some of the future value of these things and use them to finance infrastructure development. And it actually, this was not sort of a rogue policy that local governments came up with on their own. It was actually sponsored by the central government and the China Development Bank back in the early 2000s, which was”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Because of the big industrial policy push. But fundamentally they're in a very different position than the Japanese companies were”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“You have local governments that borrowed a lot of money, invested in infrastructure, which is now delivering very low returns. They have a big debt problem. So you have very substantial debt problems in China that have significant negative macro consequences, but they're all isolated and they can be dealt with one by one. If you look at the industrial sector, it's not very highly leveraged. Debt levels, in fact, are not high. Most private companies in China have learned for many years they couldn't get access to bank credit because the banks only wanted to lend to state-owned enterprises, which were a secure, they had physical collateral and they had a state guarantee. Private companies for years have learned to make due basically financing their investment out of retained earnings and their leverage ratios are not that high. They're creeping up now over the last few years.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“In China today. So you have huge debt problems, right? So the property developer is very over leveraged. Huge problem. You've had a massive property crash in China over the last five years. That is a big, big problem.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“China does not have this problem at all because they looked at the problems that Japan got into. They looked at similar problems that Korea had in the late 1990s and they said, we will never allow this kind of cross-shareing between financial companies and corporations. This is way too dangerous. So they have kept the two quarantined. It is illegal for industrial companies to own a bank. They are allowed the bigger ones are allowed to have internal financing subsidiaries, but they can only sort of manage financing flows within the group. And it is also illegal for banks to load up on shares of industrial companies. So you have a distinct financial system and industrial system, which means that the particular type of macro problem that Japan got into is very, very unlikely to occur.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Stock values had to collapse by a similar amount, 80%, and everyone was holding shares in one another, so the banks, their capital got eroded because a lot of their capital was tied up in the land and in the stocks which were collateralized by land. And so they were unable to lend. They just had to deleverage as fast as possible. The companies had to deleverage as possible, fast as possible. And so the entire economy got engulfed by this phenomenon of debt deflation, which basically means that in the act of paying down the debt, because you're doing fire sales of assets, you're reducing the prices of those assets, introducing deflation. So the real value of your debt continues to grow even as you are supposedly reducing it because of the deflationary effect. It's very, very difficult to get out.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And all of that balance sheet rested by the late 1980s on land values that had just gotten completely detached from any form of reality. There was an investment thesis among investors who were playing the Japanese stock market in the late 80s that you did not look at the earnings of the Japanese companies. Those were irrelevant. What you looked at was the value of the land that they controlled. So it was essentially capital ratio where you assumed that this value of their underlying land capital was a permanent contribution to their wealth and prosperity. And so the valuations of these stocks, which got, again, crazy, you couldn't justify them by earnings. They say, well, it doesn't matter because the land that they're sitting on is so valuable. Then the land values collapsed by 80%.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“But then if you look at some of the specifics, so the big difference between the way that China and Japan are economically organized is essentially the relationship between the financial and the corporate sector. So Japan had this system where banks owned equity in these giant industrial companies and in the trading companies and vice versa. There were these cross-shareholdings, which meant that essentially the entire economy of Japan, the entire corporate and financial sector had one big balance sheet.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“So China just, in a very narrow sense, lives in a very dangerous neighborhood. And so they quite legitimately have, I think, some pretty significant national security needs. And they also have aspirations to be great power, and they want to do it on their own. So the incentive to get things right. Is much more existential in China than it was in Japan. Japan essentially could take the choice to sort of say, oh, well, we're going to have a stagnant economy and that's bad and whatever. But actually we'll be fine. And for China, it's not fine. So there is underlying it, I think there's a spur that increases the chances that the Chinese leaders will do the things that they need to do to keep the system more dynamic. It's not a guarantee, but it's a pretty strong incentive.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a good question. I guess I would start by emphasizing the ways in which China is very, very different than Japan. Sort of central thing that is really different that lies at the root of a lot of this is that China is an independent geopolitical actor in Japan was not. Japan at the end of the day, they could rely in the US for security. They were demilitarized. China basically is on its own. They're in a very dangerous neighborhood. They have 14 land neighbors that they share borders with. They have names like North Korea, Russia, Pakistan, Afghanistan. A lot of dangerous actors. Several of them have nuclear weapons, North Korea, Russia, Pakistan, and India.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Just by the government saying, oh, we want to do solar, it would not have worked unless you had this broader ecosystem of export-driven manufacturing, high competition, and international participation across many, many, many, many, many sectors of the economy. They all converged to create a successful result.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, the raw silicon inputs through all of the modules into the finished panels. And they said, we want to be in every stage of that. So they had a pretty deliberate strategy of trying to create people at every point in the supply chain, and they were willing to go through cycles of people not making any money. Comparison obviously in the United States is the US government gives one loan to one company Cylindra. It goes bad and everyone says this is proof that industrial policy does not work. And I think China actually has the right answer to that question and we had the wrong answer to that question. You have to be willing to accept some failures and some loss of government money along the way if you want to get to the end. But I really stress the ecosystem because a lot of this would not have worked.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“You can say, so what this did is it created a field in which maybe the government has the right ideas, maybe they don't, but you have a crucible in which their ideas can be tested, very competitive domestic market where you have a lot of the big international players doing their own thing as well, and so that the things that work get some validation and you can keep building on those successes. So I think that's a really important. And then just the sheer scale at which they were able and willing to support what appeared to be losing bets for a long time does matter, right? And you could contrast their view, for example, in solar energy, where they said, look, we want to be big in solar energy. And again, they started thinking about this in 2005. What do we need to do? So they identified the whole supply chain from the...”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And I was completely different than the old central planning regime, which was autarkic and inward-looking. Second, you had this domestic competition environment, which was really cutthroat and which involved a lot of international companies, right? And this is a little bit of a difference to Japan, which always kept the foreign companies out of its domestic market. They're companies operated globally very, very well, but the domestic market was very protected. China's domestic market was not that protected. And so they were always willing to bring in companies that they thought would be able to spark some technological change. And again,”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Are just producing essentially for domestic consumption. There's no incentive to keep up with global technology developments. So if you have this constant export focus, essentially what everyone is trying to do, if you have a closed domestic market, you can rig the domestic market and buy off your connections in government to make sure that you as a company have your market share. So there are a lot of ways to win that do not involve technological upgrading. And that is what dooms all import substitution regimes. If you have an export-driven economy, you can't rig the global economy. Ultimately, you have to compete, right? And you can't compete just on price. You have to compete on raising your game. And Japan did this successfully. Taiwan did the successfully. Korea did the successfully. China's done that successfully. So that's answer one is that you had this underlying system, which was heavily incentivized in technological upgrading across the board. So that's what you were sitting on top.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“But he turned out to be, I think, totally correct in terms of saying this is a really big thing. So it was just not that wild a bet to say that green energy is going to be really important. And so we should place a lot of bets on that. But why does this work? And why is this different from a central planning thing, right? I think that's a really important point. So a couple of things. So first of all, the Chinese system like the systems that preceded it in East Asia, Japan, Korea, Taiwan, and so forth has always put a lot of emphasis on being good at exporting. So there are a lot of pressures within the system to create industries that can export, right? The reason this is important is if you have a totally closed system, which frankly is what I think Donald Trump is trying to create in the United States.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Saying that green energy was going to be an important industry in the future, everyone was saying that, right? You had the Kleiner Perkins guy, John Doer, right? John Doore was the big VC who said circa 2007, I'm going to put all of my bets on green energy because this is the future, right? He turned out to be wrong from the standpoint of his investment returns.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“We're going to promote all of them, basically. And some of them may work, and some of them may not. And the successes will pay for the failures. I guess I'm still confused on why many other countries have tried similar things, like Nidi was a Japanese version of this, right? Yeah. Look at their economy now and their high-tech sector. So a couple things. So first of all, I would say that even if you go back to like 2005, 2006, when they started thinking about this,”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“No, no. I mean, I think basically the analogy with the VC fund is a pretty good one. I've made it many times. Think of China as like a giant VC fund that is just willing to lose huge amounts of money for a really long time on the assumption that a few of the bets will pan out. And so China as a state, as a government, is uniquely able to throw a lot of money at things for a really long time, not care about what the returns are.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“In the 21st century, yeah. No, it's definitely perilous. So if you look at China has a list of key industries, it's called the Strategic Merging Industries. They came up with it basically in 2010. It built on previous iterations of industrial policy. Most of it is not really an effort to predict With high degree of specificity, what comes next? They're mostly pretty obvious things like semiconductors, industrial automation, new materials, all this kind of stuff that I think would be on anyone's list if you were just sort of running a VC fund and saying what are the sectors that we think are”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, did China need to spend that much in subsidies? Probably not, right? But had they spent less, would they have had the same effect? Maybe, maybe not. They tried various different types of subsidies. So initially there were producer subsidies to just like get companies to produce more. Then they had a lot of buyer subsidies. So at the individual level, but also the city government level to promote things like electric buses. And so I think all of that played a role. And I think what was important was that the government set a very clear direction and they said we want this to happen and we really want it and we don't know how long it's going to take. And we're just going to keep trying different things until it works because the goal of creating this electric vehicle sector and the whole supply chain for it, that's what we want at”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“To creating this outcome, you know, I think the thing is it's like the old slogan about advertising half of it works, but you don't know which half.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“But they stuck at it. And then the thing that finally flipped the switch was this catalytic foreign investment that showed the Chinese companies what they needed to do to actually compete in the consumer market. And then they got very good at that very quickly.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Loaded up on a lot of German car designers that were able to transform their kind of technology base into much more appealing packages. And then by 2022 or so, they were able to compete with Tesla both on price and on quality. I think what that shows you is that number one the Chinese government made a pretty good bet on this kind of leapfrogging idea that there are technologies of the future we need to get in early subsidize the heck out of them you know some of the estimates that have been made about the level of subsidies given to the EV industry and related supply chains it's $200 or $300 billion huge huge amounts of money that did not generate that much of a return financial return for a really long time”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And it seems like one of the things that happened was that the Chinese companies by 2019 had gotten pretty good at the underlying technology of electric cars, specifically the batteries and then the software systems that govern the cars. But they were terrible at consumer design. They had not figured out how to make these appealing products that people would want to buy. And Tesla did have appealing products that people wanted to buy. They were big status symbols. So BYD and its competitors said, okay, this is the part we have to figure out. How do we achieve this? And basically they recognize that they had to up their design game. They, among other things, went to Germany and...”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“BYD to produce electric vehicles. BYD is basically a private company. This worked okay for 10 or 12 years, and BYD got pretty good. And particularly what they started to figure out was the supply chain. So they got very good at making the batteries. But still, when you got to 2018-2019, BYD was still not that exciting a company. Most people in China really didn't want to buy electric vehicles. They seemed really inconvenient. The sexy cars were like the big SUVs that the joint ventures were putting out and so forth. And then in 2018, the Chinese government made the decision that they would allow Tesla to come in and build a wholly owned gigafactory in Shanghai. They had never approved a wholly owned automotive company before. They started cranking out cars in 2019, which became immensely popular.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“2010, 2015 had been doing this for 25 years, and they were basically no closer to having globally competitive, conventional car makers than they had been 25 years before. So in the late 2000s, 2005, 2010, they started thinking, well, this and other related kind of industrial policies are not working very well. We are not generating the national champions that we thought that we were going to do. So what do we do about this? And their answer was leapfrog. Let's try and figure out what is the next stage of technological development that people really aren't working on yet. Let's work on that, and then maybe we can get in on the ground floor. And so what they came up with in large measure was renewable energy, specifically electric vehicles. So they started having a pretty comprehensive set of subsidies and other kinds of industrial support for companies like”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And basically, this failed. It failed massively over the next 25 years. Foreign companies came in, General Motors, VW, Toyota, Honda, and so forth. And they did very, very well. And the joint venture partners in China basically just sat around and clipped coupons from the dividends that these companies, that these joint ventures were producing, all of the technological inputs continuously came from the foreign partners, all of the design ideas. Vehicle companies in China building kind of low-end vehicles. So a lot of the cars that wound up getting made in China were made by local firms. But if you look at the share of profits and total value in the system, it was dominated by these joint ventures, which were in turn dominated by the foreign partners. So China, you know, circa”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you go back to the early 1990s, China recognized that pretty much every other country that had gotten rich had done so in large part by building up an automotive industry that then served as a mechanism for creating innovations and other sectors. You look at the US, you look at Germany, you look at Japan, you look even at Korea, which is very successful. So they said, okay, we have to have a big auto industry. This is one of the key industries that we have to support. So starting in the early 1990s, they had this strategy of bringing in foreign companies, making them do joint ventures in a 50-50 basis with Chinese auto companies. And the theory was that eventually the Chinese companies would learn and then you would be able to develop your own national champion, auto companies, and kick the foreigners out.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Is viable because would we accept that? Absolutely not. And so, why should we expect them to accept something that we would consider an absurd and completely unreasonable infringement on our sovereignty? It just doesn't work that way”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Etc., etc. So, I think that could be achieved. I think it will be very, very difficult in the current political environment. And then just in terms of sort of the grand bargain that you suggest is China is very interested in not being pigeonholed. They didn't want to be pigeonholed in low-value added manufacturing. They wanted to do the high-tech stuff. Now they're doing that. They don't want to be pigeonholed in manufacturing. They want all of technology, including AI. So I don't think that any strategy, which is premised on the idea that China should accept arbitrary limits on what it can do.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“A few technologies that were military, and then a very, very small proportion of technologies dual-use technologies that could go either way. And it was those dual-use technologies that had to be controlled very carefully. Now basically, everything is dual use. Any technology that you can imagine can be put to some kind of military use. So it becomes much more risky to have these patterns of investment, particularly when you don't know where the data is flowing and how that will feed into someone else's defense production base. And I think that is a legitimate concern. And so in my ideal world, you would have a lot more Chinese investment in the United States, but it would be very carefully regulated. In the same way that China very carefully regulates the direct investments by foreign companies in its economy, they have very strict rules about data localization.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And you might want to put protections around that, all kinds of rules of the road. But in an ideal world, I think we would have a lot more of that. Now, first question is, why is that so difficult? Why do you essentially have a consensus in Washington that not only do we have to prevent the export of U.S. technology goods to China, But we also have to prevent Chinese companies from investing in the US. This is basically agreed on in Washington. And the reason is data. Fundamentally, there is a view that any manufacturing process today is also a data creation machine. And where does that data go and who benefits from that data? And the other thing is that it used to be back 30 or 40 years ago you could divide the world into most technologies which were essentially for civilian use.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“45 years ago, they were an industrial basket case, basically. They said, we want to get industrially strong. How do we do that? We get all the leading companies in the world to invest here. And we will learn from them. And that's how you do it. So if we're serious about that, we should be serious about figuring out ways that we can bring Chinese industrial investment into the United States. To me, it would be a win-win because Chinese companies at an individual level would love that. see the US as a huge market. They can't get into it right now. They would love the opportunity to tap into it more. We could learn from them. And if you did that, basically you would be saying whatever we're in with China, it's not a Cold War because we are willing to have high levels of direct investment by both sides.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Why do I think that? Well, first of all, I think if the US is serious about revitalizing its industrial base, and I think there's a good case for trying to do that selectively, it is not going to happen unless you invite in the world's leading players and have them compete. That is how China industrialized.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think the question is you can say what you want and you're sort of ideal state of things, but then how do you get there? Because there are a lot of people in China who would say, well, no, we want it all and we can. So why should we make that deal with you? So if I take this down basically to the level on which the United States and China are now starting to negotiate, right? My personal view on this would be that it would make a lot of sense for the US to be much, much more open to a direct investment by Chinese companies in manufacturing in the United States. And I'm thinking particularly things like electric vehicles, that whole supply chain, green energy, industrial automation, all of those things.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“We don't know for sure because there really isn't reliable public polling, but a lot of people say that, and my perception is that that could well be true, that there is a lot, and all you have to do is look at. The Chinese internet, the blogosphere, they don't have Twitter, but they have local equivalents. There is a lot of unfettered nationalist, highly militaristic thinking there that the government spends most of its time keeping in check. Every so often they sort of unleash it because they're in a spat with Japan or whoever, and they need to, in a popular opinion. But mostly they try and tamp that down. So a fully a Chinese system that was fully representative of actual... Popular views. We don't know exactly what that might be, but it could be very, very difficult to deal with.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Similar to what we have today. So it's a fantasy to think that we have a problem here is just this particular regime. And we could just get them to change their minds. No, the sort of Chinese approach on this has very deeply rooted. In both the institutional cultural history of China itself and its position, its geographical and geopolitical position in the world. And so it's going to have interests that create a lot of friction and conflict with the perceived interests of the United States under any government. And it's probably going to be quite successful at managing its economy because they've been very successful for many, many decades.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And make the Communist Party of trying to disappear tomorrow and replace it with something else. What would that something else look like? Well, if that something else were to be successful at governing China, it would almost certainly share many of the characteristics of the Chinese Communist Party. It would have a strong determination to for China to be an independent geopolitical actor taking care of its own security with very strong military so that it could defend itself against all of its real and perceived security threats. It would be committed, as every Chinese government since the mid-19th century has been, to maximizing the rate of technological progress and making sure that as much as possible of China's core technology needs were met by domestic production rather than imports. It would be very, very”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Issue, which is how does this end? This does not end by China going away or turning it into something completely different. It's too big. It is too successful. The economic model is successful on its own terms, has a lot of problems, but it's fundamentally successful, and it is deeply integrated with the entire global economy in ways that are beneficial for China and beneficial for most of the other countries in the world. So everyone has some sort of a stake in China continuing to succeed. And so this is just not going to go away. And the other sense in which it's not going to go away is let's say you could wave a magic wand”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“But when you take account of stuff from China coming in through third countries and so forth, basically that remains the same. So it's just, and then if you talk about investment flows, there's $600 billion or more of U.S. corporate investment in China, which generates huge amounts of sales, much larger than U.S. exports to China. So the integration of the two economies is just extraordinary. There's basically no precedent for it at any point in economic history. And it is just a completely different order of magnitude to what was going on during the Cold War. So, you know, one question would be, okay, if you really want to cold war, does that mean that what you want to do is you want to reduce those trade and investment flows back down to essentially zero? And if so, how do you do that, right? So that's a very difficult problem. But I think you got at sort of the more core conception.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Right Or Yeah, well, there's a few different questions in there, so let me break that down. So, first, I think the first thing that you alluded to there is essentially, is a Cold War the right framing for whatever this conflict is that we have with China? My answer to that is absolutely not. And you can address that question both empirically and conceptually. So empirically, if you just look at patterns of trade and investment during the Cold War, The actual Cold War with Russia, the Soviet Union, the Soviet Union never accounted for more than about 1% of U.S. trade, and investment flows were basically non-existent. China, at its peak about 10 years ago, accounted for 17% of US trade, which is about the same amount as Japan did in the late 80s and early 90s. And that number has come down a little bit on the surface.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“There has to be an agreed set of rules about how it interacts with the rest of the world so that everyone feels that they are benefiting, not just in financial terms. And we don't really have that agreement now.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source