A New Policy Environment for China | Global Conference 2025

Tariffs and Trade Policy Critique: Secretary Robert Rubin argues that the current U.S. administration's reliance on tariffs and strategic decoupling is economically counterproductive and undermines the U.S. geopolitical standing.

• Rubin contends that the premise that trade deficits are inherently harmful is rejected by virtually all mainstream economists, including Larry Summers, in favor of comparative advantage.
• He warns that dismantling the post-WWII international trade regime and alliance systems serves the interests of no country and erodes U.S. "fealty" to commitments like USMCA with Mexico and Canada.
• While acknowledging the need to secure specific supply chains for national security, Rubin asserts that broad protectionism and "tearing apart" global institutions are the wrong approach.
• Rubin suggests that the current U.S. political animus toward China, driven by the Trump administration's historical belief in tariffs and unfair trade practices, creates a "huge problem" that is difficult to wind down.

China's Economic Structural Shifts: Panelists identified China's long-standing over-reliance on export, investment, and infrastructure as a primary structural challenge, a critique first voiced by Premier Wen Jiabao in 2013.

• Data presented indicates Chinese household consumption remains low at approximately 35% of GDP, compared to 69% in the U.S. and 53% in Japan.
• Fred Hu (implied) notes that China is at an inflection point where infrastructure and manufacturing are mature, necessitating a pivot to private consumption.
• Robert Rubin identifies two critical barriers to Chinese consumption: a lack of robust consumer credit (where households are net lenders) and an underdeveloped social safety net regarding pensions, healthcare, and unemployment insurance.
• Kevin Ng (implied) suggests that China's collective cultural framework may require government-led, collective subsidies (e.g., elevator retrofits) to stimulate spending, differing from Western individual-choice models.

Geopolitical Stalemate and De-escalation: The panel discussed the high-stakes "tit-for-tat" trade war, noting tariffs as high as 145% (U.S.) and 125% (China) as unsustainable and economically damaging to both sides.

• Fred Hu predicts that eventual negotiations will be driven by the rising real economic costs, including inflation and supply chain disruptions, rather than immediate diplomatic goodwill.
• Potential off-ramps for negotiation include cooperation on non-trade issues such as fentanyl control, climate change, and resolving conflicts in Ukraine or the Middle East.
• Rubin and others emphasize that a mutual "holding pattern" is inevitable, but the final landing point for the U.S.-China economic relationship will likely fall between the current embargo level and pre-tariff baselines.

Investment Strategies and Market Inefficiencies: Private equity leaders from Partners Group and other firms describe the current geopolitical climate as a source of market inefficiency that creates long-term investment opportunities.

• Partners Group operates a global relative value framework, investing roughly 40-45% in the U.S. and Europe, leveraging its 900+ institutional LPs to remain insulated from single-market geopolitical sentiments.
• Investment focus is shifting toward domestic-oriented Chinese companies less affected by export restrictions, such as the "Green Tea" fine dining chain (approx. 500 locations) and domestic growth stories in India and Japan.
• Kevin Ng notes that while traditional globalization is challenged, innovation ecosystems remain global; for instance, 60% of Silicon Valley unicorn founders are immigrants, and global data diversity is crucial for AI advancement.

Artificial Intelligence (AI) and Tech Decoupling: The panel debated whether AI development will lead to a fragmented "two-world" system or remain globally collaborative.

• Fred Hu observes that despite geopolitical tensions, open-source projects like DeepSeek demonstrate continued cross-border technical collaboration and knowledge exchange between Silicon Valley and China.
• Robert Rubin expresses skepticism about the depth of collaboration, citing "massive distrust" in both capitals that mirrors the barriers seen in messaging apps like WeChat and WhatsApp.
• The panelists agree on the necessity of global AI governance and safety standards to manage existential risks, drawing parallels to nuclear weapon safeguards championed by Robert Oppenheimer.
• A key bottleneck for AGI realization is identified as energy consumption, requiring international collaboration on power grid infrastructure and efficient energy production.

Climate Change and Sustainability: China is described as both the world's largest consumer of fossil fuels (specifically coal) and the single largest investor in renewable energy technologies.

• China's incremental capital investment in renewable capacity (wind, solar, fusion) exceeds the combined total of the next 10 largest economies.
• Panelists argue that China's energy transition is driven by economic pragmatism and domestic demand for clean air rather than moral posturing, as its middle class increasingly values environmental quality.
• Partners Group is actively investing in green technology and energy transition projects globally, including specific initiatives within China.

China's Role in the Global Order: The panelists largely rejected the notion that China is an "accidental threat," viewing its rise as a legitimate and unavoidable component of the changing global order.

• Fred Hu characterizes China's rise as a "blessing" that provides dual engines of global growth (trade and FDI) and technological diffusion to the Global South.
• Kevin Ng emphasizes that excluding a 1.4-billion-person farming society from the world order is impossible; the risk lies not in Chinese expansionism but in the spillover effects of its domestic policies on the international stage.
• Robert Rubin concludes that while China may focus on internal stability, the U.S. must move away from a containment posture and engage constructively, acknowledging that historical precedents show industrialization is impossible without open trade.