Rattner: US Can’t ‘Out-Negotiate’ China

Economic Overview & Strategic Differences - China's economy exhibits a two-speed dynamic, with a weak domestic consumption sector contrasted by strong export-oriented, cutting-edge industries [2][3] - Despite a slower domestic economy and property challenges, China possesses significant fiscal space due to lower governmental leverage compared to the US [5] - China's latest 5-year plan emphasizes premier status in cutting-edge technology industries [6] Technological Competitiveness - China has transitioned from importing drugs to exporting drug development capabilities, offering faster and cheaper drug development [7][8] - While the US may lead in AI adoption and company valuation, China possesses competitive AI models, potentially gaining global traction due to lower costs [9] - China's EV industry boasts high-quality cars at competitive prices, despite having numerous companies undergoing consolidation [11] Trade Relations & Geopolitical Strategy - China may not prioritize economic focus on the US, feeling self-sufficient in its economic strategies [12] - The US lost the last trade dispute with China, highlighting China's ability to source resources elsewhere and the US reliance on Chinese manufacturing [12][13][14] - The US strategy of slowing China down through trade actions is not viable; the only way for the US to "win" is by improving its own capabilities [18][25] Investment Opportunities & Risks - China's stock market valuations are relatively cheap compared to the S&P, presenting potential investment opportunities [20] - Chinese LLMs (Large Language Models) in AI are valued significantly lower (4-10 billion USD) than comparable models like OpenAI (500 billion USD), indicating potential value [21][22] - Investing in China is considered risky, requiring caution and expertise [19] Market Access & Consumer Impact - Chinese EVs are gaining popularity in Europe despite efforts to restrict them [15] - High tariffs on Chinese cars in the US deny consumers access to cheaper, better vehicles, costing an estimated 160 billion USD annually based on a 10,000 USD price difference on 16 million cars [15][16]