This podcast is originally published by BBC Business Matters in this link: https://www.bbc.co.uk/programmes/w172yzrsng5klrk.
BBC’s Description:
The World Health Organisation says it needs urgent safe passage to send supplies as people are ‘dying unnecessarily from a lack of water and medical care’.
President Biden and other world leaders have called on Egypt to open the border known as the Rafah crossing as tonnes of aid piles up.
Sam Fenwick discusses this and more business news from around the world with Tony Nash, chief economist at Complete Intelligence, in Texas, and Rachel Cartland, author, writer and expert on Hong Kong.
With CI Markets Free, our goal is to democratize financial insights. We believe that everyone should have access to powerful forecasting tools, enabling them to make informed decisions that align with their financial goals.
Transcript
BBC
Ask our guests today who join us from Hong Kong and Houston, Texas. Good evening to Tony Nash, CEO of Complete Intelligence. It’s an AI forecasting firm, so you should be quite well-placed to talk to us about chips and AI.
Tony Nash
Absolutely, yes. Thank you for having me.
BBC
It’s always good to have you on the show, Tony. Thank you for joining us. I want to just come to Tony Nash on this. As we say, Joe Biden arriving in the region on Wednesday had planned meetings with Jordanian which have now been canceled, also had a meeting with President Abbas of the Palestinian Authority and President CC of Egypt, all of which have been postponed according to the White House. What do you think Mr. Biden will want to achieve from this visit now?
Tony Nash
I think the biggest thing that Biden wants to achieve is the release of American hostages. And if that’s all that can be coordinated, then that’s a major win. It looks very good for the domestic population in the US, and it brings American citizens free and clear from this conflict. I really think that that’s the main priority for Biden’s visit at this moment.
BBC
Okay, thank you, Tony Nash. Let’s bring in Tony Nash. He’s the CEO of Complete Intelligence, and it’s an AI forecasting firm. He’s based in Houston in Texas. As we said, this policy has been in place 12 months. Do you think it has done anything more than just annoy chip makers in the United States?
Tony Nash
NVIDIA says that they comply with the laws that are in place, and they’ve already said that any announcement they made today really won’t have a meaningful hit on their business.
BBC
Although their shares nose-dived, and lots of other chip companies did the same.
Tony Nash
Yeah, they did. There was an estimate that it would hit about $100 billion for their business. It’s really unclear, but they’re a regulated company, they have to comply with what are called ITAR regulations, which is International Technology Regulations that the US government puts out. The real issue here is, will NVIDIA chips be used for Chinese military applications? That’s really what the US government is worried about. And so there are a thousand ways to circumvent the regulation, ship into a third country, all these sorts of things. So it’s not as if the chips won’t get into China. There have been ways to circumvent these regulations for hundreds of years. So they’ll find a way to get them. The real question is, will they get them at the scale that they want them?
BBC
We talked about this time, 12 months ago, we were having the conversations about why this policy had been brought in. And it seemed to be, prior to this, it had been about keeping China and the technology 20 years behind the advancements of the US. And now the policy had changed and they wanted to stop all advancements completely, just cut them off. It doesn’t sound like it’s working from what you’ve said.
Tony Nash
I don’t think anybody expects China’s advancements to stop completely, but I think having the state-of-the-art technology shipped into China to be placed in Chinese military equipment when China has been threatening Taiwan, they’ve been making other threats, the US has been threatening China, these sorts of things, of course, you want to hamper your adversary as much as you can. I think this is just normal technology regulation, export controls. Whoever has the leading edge technology wants to control the leading edge technology. Will China continue to develop its chips? Yeah, absolutely. Are they behind what NVIDIA is producing? Yes, they are. Will it take them a few years to catch up? Yeah, it’ll take them 5-10 years to catch up. But I think over time, China will definitely catch up with where the US is. It’s just going to take some time.
BBC
Now, apparently, NVIDIA was selling an A-800 and an H-800 type of chip, and they were able to do that because it went around the original ban, and then now those have been banned. Will it be that these chip companies will just make a chip that isn’t covered by the ban, and then the government will change the goalpost again?
Tony Nash
Well, that’s the way it works, right? That’s how regulatory arbitrage works. So NVIDIA will look to the letter of the law and conform a chip to match the letter of the law. And then if the trade regulators in the US want them to change, they’ll change. These types of regulations change pretty regularly, and technology companies have to adjust their output according to what the regulators say. This sounds extreme. It’s actually not extreme because there are ITAR regulations, technology export control regulations in most countries. It’s just because it applies to AI-specific chips that it’s really getting this level of attention.
BBC
Let’s talk to Tony Nash first. What do you make of this plan? Do you think it could rival the Panama Canal?
Tony Nash
Yeah, absolutely. I think it’s a great plan. I live in Texas, which is on the US border with Mexico. I think this railway plan is fantastic. There is already a lot of electronics manufacturing moving from Asia to Mexico to service the US. I think three years ago is the first year in 20 years that the US imported more televisions from Mexico than from China. So televisions are pretty straightforward to assemble now. And so more and more sophisticated electronics is moving to Mexico. What your guest said about obviously transiting things across Mexico, but also manufacturing things in Mexico, I think that’s very much on the table, especially as we see more trade regionalization and manufacturing regionalization.
BBC
Is that because of what we’re calling nearshoring, this thing that occurred during the pandemic?
Tony Nash
That’s right. Exactly. Similar. So the risks of having a majority of your manufacturing concentrated, I think Northeast Asia makes 35, 40 % of the world’s manufacturing goods. And so during the pandemic, we saw all the supply chains lengthened because they were bottlenecks. Whereas if we had had those, whether they’re in, say, Eastern Europe or for Europe or Mexico for the US or something like that, I think it reduces a lot of that transit risk for a lot of people. And I think East Asia is probably facing some reinvestment over the next, say, 10 years because that nearshoring or regionalization is a real… It’s definitely on the horizon.
BBC
What was interesting, Tony, is that Benjamin there was talking about investors from the US being interested in building that original rail line a century ago.
Tony Nash
Yes, and obviously, the US was very instrumental in building the Panama Canal as well. The US is very interested in developing Mexico and developing Central America. It doesn’t surprise me that that was the case 120 years ago. It doesn’t surprise me that that’s the case today.
BBC
Tony, there were concerns or have been concerns about what’s known as debt trap diplomacy, that if you borrow money off China, then they will somehow have you over a barrel. Has that come… That still a worry for the US, do you think?
Tony Nash
For the US? Not necessarily, but certainly for African countries. I remember speaking with African representatives probably six or seven years ago, talking to me about how can they restructure their debt for the Belt and Road. The really strange part about the Belt and Road is it’s fully financed in US dollars. We have a time right now where the US dollar is appreciating. Not only is that debt at a relatively high rate, I wouldn’t say it’s sky high, but a relatively high rate, but you have it in a currency that’s appreciating against most emerging market currencies. It’s very difficult for companies to pay back or countries to pay back. I think one of the things about Belt and Road that really isn’t covered that much is the Belt and Road peaked in 2017 and 2018. The funding that you have going into the Belt and Road today is about a fifth of what you had in 2017 and 2018. Construction projects like the transport construction projects that you highlighted, those things all happened in 2013 through 2018, really. The largest portion of investment coming out of Belt and Road right now today in 2023 is for mining. It’s not construction, it’s investment.
Tony Nash
When you look at what’s tabulated as Belt and Road investment, it’s really Chinese money going into mining worldwide.
BBC
Just gives us time at the end of the show to ask our two guests who’ve joined us today, Rachel Cartland and Tony Nash. What are your side hustles? Rachel, you tell me what you’re earning money from.
Rachel Cartland
What’s your side hustle? I’m retired. My husband is constantly reminding me that I’m busy all the time, but with nothing that brings in a dollar, although I have endless voluntary commitments, which are great things to do. I think it’s what they call a portfolio, isn’t it? -bits and pieces of things –
BBC
Absolutely.
Rachel Cartland
-rather than a side hustle.
BBC
-it sounds very satisfying. Tony Nash, do you have time for a side hustle when you’re doing your AI forecasting?
Tony Nash
I make time, Sam. I have to make time. So I run an AI company during the day. On the weekends, I have my own coffee roastery called Nerve Roaster, and I sell coffee as my side hustle because it’s what I love.
BBC
You love drinking coffee?
Tony Nash
Sorry?
BBC
You love drinking coffee?
Tony Nash
I love roasting coffee, so I sell roasted beans.
BBC
Fantastic. I had no idea, Tony. You are a man of many talents. Thank you very much for joining us on Business Matters. And thank you also to Rachel Cartland, author, writer, and expert on Hong Kong. That was Business Matters. Thank you so much for listening. My name was Sam Fenwick. The producer today was Hannah Malane. I’ll be back the same time tomorrow. Don’t join me if you can.