U.S. and China: A New Paradigm
October 15, 2019
Bob Schieffer: I'm Bob Schieffer.
Andrew Schwartz: And I'm Andrew Schwartz of the Center for Strategic and International Studies, and this is The Truth of the Matter.
Bob Schieffer: This is the podcast where we break down the policy issues of the day. Since the politicians are having their say, we will excuse them with respect and bring in the experts, many of them from the CSIS, people who have been working these issues for years.
Andrew Schwartz: No spin, no bombast, no finger pointing, just informed discussion.
Bob Schieffer: To get to the truth of the matter on this episode, we'll talk with Jude Blanchette. Jude holds the Freeman Chair in China Studies at the Center for Strategic and International Studies. Previously he was engagement director at the Conference Board's China Center for Economic and Business in Beijing, where he researched China's political environment with a focus on the workings of the communist party in China, and its impact on foreign companies and investors. Thank you for being with us today.
Bob Schieffer: This week, China celebrated the 70th anniversary of communist rule. In Tiananmen Square, there were big parades, a light show. We saw weapons, including an ICBM. But in Hong Kong in stark contrast, some of the worst riots yet after a summer of violent protests. Our favorite question on this podcast is simply, what is this all about?
Jude Blanchette: Yeah. It was quite striking, the different narratives that you saw on display yesterday. Up in Beijing, you saw the epitome of communist party control, right? So you had the streets were completely emptied for the weeks leading up to the event. People who had been living in buildings along the Chang'an Avenue, the avenue of eternal peace, had been told to move, so that there was no risk whatsoever of any political unrest.
Andrew Schwartz: Including some reporters who were kicked out of their apartments.
Jude Blanchette: Absolutely, yeah.
Andrew Schwartz: US reporters were kicked out of their apartments, and told they had to move out.
Jude Blanchette: And then you could go down to Hong Kong, where you see the city. For decades, we'd been thinking of it as a bastion of stability, of economic order, of economic freedom. This is where multinational companies set up operations when they want to be trading into China, and it was chaos. We saw unprecedented levels of violence on both the protestors, but including we saw the use of live ammunition by police officers. An 18 year old protestor was shot in the lung yesterday. So what it showed to me is, despite all the power that the communist party has domestically, we saw power is different from control, and in Hong Kong we saw a city spinning out of control.
Bob Schieffer: I saw the handover of a Hong Kong in 1997. We took Face the Nation over there and broadcast from there when the British handed it over, and it was quite an impressive thing that we saw unfold. People wondered, "Would this really happen? Were they going to be autonomous in Hong Kong? How much would the communist government allow?" It worked fairly well over the years. There were some problems here and there. Why now? What happened here? What caused this current problem that we have?
Jude Blanchette: I think we'll look back 10 years from now and have a better understanding of all the complexities of this, but at least in the first draft of history, which is what we're talking about now, we see essentially the smashing together of two trajectories. One was on, in Hong Kong you've seen this extraordinary set of economic anxieties and concerns that have been mounting over the past 15 years, let's say, separate from this issue of communist party control, right? You've just seen that median house prices are essentially 20 times the median income in Hong Kong. So all the issues of economic anxiety, income inequality, access to jobs, access to education, affordable housing, all of these economic concerns have been rising and building. And again, remember Hong Kong is essentially a small island with not much property that's owned by a few key companies, who are oligarchs, who are in control of this.
Jude Blanchette: And so those frustrations now have collided with a second set of frustrations, which is certainly since the rise of Xi Jinping, the current General Secretary of the communist party of China in late 2012, there's been a more rapid erosion of this idea of autonomy in Hong Kong, which was ... you mentioned the 1997 handover, the basic core agreement there was, Hong Kong will be given a period of 50 years where it will have as they called the formulation, one country, China, two systems, the mainland system where the communist party has direct control, and Hong Kong where it's given, "High degree of autonomy," right? So you'll still have independent judiciary. They'll still be setting the laws. They'll still have some vote over who the political leadership is in Hong Kong, and that was supposed to last until 2047. The Problem is after Xi Jinping, many in Hong Kong came to believe that 2047 was ... that was collapsing in, and that really there was full assimilation into the mainland much more quickly.
Jude Blanchette: And so these two currents, or these two threads, I think really came together around 2013 and 2014, with the big Umbrella Movement protests, which erupted then, over the issue of who gets to elect the political leadership. Without going too much into detail there, that 79-day protest dissipated or ended. And from Beijing's perspective they thought, "Good, we're done with that problem. What they didn't understand is that those grievances were continuing to build, and that erupted early in this summer when the Hong Kong government put forward a very controversial extradition bill, that would potentially subject Hong Kong citizens to being extradited up to the mainland, where you have a judicial system run by the communist party. And there was just ferocious outpouring of dissent, and that essentially was the spark of this most recent round of unrest.
Bob Schieffer: You know, I remember when George Shultz was Secretary of State, and we were on a trip to Asia at one point and we were talking about Hong Kong, and he said, "There will always be a Hong Kong for the simple reason that everybody needs Hong Kong." What would be the impact if the communist government in the mainland took over Hong Kong, and it no longer was what it is today. What would be the impact of that?
Jude Blanchette: In the immediate, Hong Kong used to play an extraordinary important economic role for China, and therefore it played an extraordinarily important role for any US business or company that was looking to operate in China. If you go back to the handover in 1997, Hong Kong's GDP was about 18% of mainland China's GDP, now it's about 2%. So the economic role of Hong Kong in facilitating trade and business in the mainland has really deteriorated. Hong Kong was also the bastion of financial capitalism within the Asia-Pacific region. But again now you have alternative ... you have competitors, in Singapore for example, or Tokyo, or Seoul. So the impact of the, "Loss of Hong Kong," from a financial perspective would be less than it was 10 years ago. That being said, right now we're having this large discussion in the United States about strategic competition, and one of the threads of that is, "Where is China going? What's China's political evolution?"
Jude Blanchette: A naked and aggressive takeover of Hong Kong by the People's Liberation Army or the Paramilitary Forces, the People's Armed Police, once and for all, I think would fix for us what China's trajectory looks like. Now we're really returning back to a cold war narrative of a communist government that is increasingly aggressive, and it will be hard for forces within the US government here to be arguing for strategic patience on China, "Give it time, don't press too hard." That will become a very, very difficult narrative in, in the wake of a takeover.
Andrew Schwartz: Jude, everyone around the world was waiting to see yesterday what Xi Jinping would say if anything about Hong Kong. And one of the things he said was, "No power and nothing can stop China's rise and China's progress." What did you make of that?
Jude Blanchette: It's very Xi Jinping. It's very communist party. We should expect a party leader, and party leaders have been making similar utterances since Mao Zedong. This is just part of the political culture, and it's like an American president talking about the strength of our democracy, and our values. It's partly truth but it's partly wrote. It's just part of political speech. Unfortunately though, I think from Xi Jinping's perspective, those domestic imperatives about projecting strength to the country are now reinforcing international narratives of concern about where China is going, a point I was just talking about. Xi Jinping was clearly talking to, as he called in Chinese, his “Tong bao,” those from the Chinese nation, in which he was including Hong Kong. But that was a threat and the display of military equipment was also a threat, not only to Hong Kong but also a signal to the United States about the-
Andrew Schwartz: To stay out of there.
Jude Blanchette: ... unshakable power of this political system under it, and military capabilities under the communist party. But I think if he thought that that speech was going to fundamentally intimidate Hong Kong, if anything, it probably exacerbated. And if he thought that was going to shake the United States, unfortunately I think the effect will be to reinforced more hawkish voices here in the United States who are saying now, "See, we told you so."
Andrew Schwartz: So, what can the United States do? What are our policy options?
Jude Blanchette: I think Andrew, we had some of the major figures of the protest movement in Washington, DC a couple of weeks ago. We had them here, sitting at this table to talk about Hong Kong.
Andrew Schwartz: For your podcast, Hong Kong on the Brink, which we love. It's one of CSIS's newest podcasts.
Jude Blanchette: Well, you're a cohost, so you would say that.
Andrew Schwartz: Yeah well, that's the way we promote things around here, Bob, right?
Bob Schieffer: Right.
Jude Blanchette: They see two things the United States can do, essentially. One is a specific piece of legislation, which is now making its way through both the House and the Senate, which is called the Hong Kong Human Rights and Democracy Act. This is a multi-part piece of legislation, the most important piece of which is potentially revoking Hong Kong's separate trade status. And just as a quick aside here, in 1992 the United States passed the Hong Kong Policy Act. This is the wake of Tiananmen Square. The United States government is looking for ways to get tough on China, and essentially say to China, "Never again. We're going to raise the cost threshold for actions like what you did in Tiananmen Square." And part of that was saying, "Okay, we know the handover is coming up in 1997. What we're going to do is we're going to take you seriously on this 50-year pledge of semi-autonomy, and we're going to treat Hong Kong separately in terms of trading status from the mainland China. It will enjoy privileges you don't, because it's a freer rule of law based economy."
Jude Blanchette: This newer piece of legislation is saying, "We may revoke that, because if Hong Kong is de facto in de jour, not much different from the mainland, why the heck would we treat it differently?" The protesters want to see this legislation moved through, because they think this will be a powerful signal to Beijing of, "We, the United States, take this issue seriously. We're watching this, and we will enact to enact a penalty upon you if you take this step." The question I think for us is, do we think that will be a meaningful piece of legislation to deter Beijing? And my own sense is just looking at how Beijing is thinking about the issue of Hong Kong, and this core issue of political stability and territorial integrity, of which Taiwan and Hong Kong are fundamental red lines for the communist party, they're certainly taking into account this piece of legislation, but I think it's not one of the most important things they're thinking about. They've got more serious and tractable issues like, "How do we deter the protest movement from to build? If we did use force, how would we contain that, and what would our exit ramp be?" And here are the United States, I think just isn't a central feature of that debate.
Andrew Schwartz: So the young man who was shot is in stable condition. We're looking at this with eyes in the United States that this is horrifying, because the protests look like this is what would happen in New York City, if there was some kind of mass protest like this. And we're looking at it with pretty shock, and awe, and horror in our eyes. What is the United States going to do? If there is no way we can confront China on this, are we going to stand by and watch this happen?
Jude Blanchette: This is a discussion which is happening in the Pentagon, in the State Department, in the White House and up on Capitol Hill is, remember, we've got a lot of moving parts here in our relationship with China, and there are some who are in a way would see use of force in Hong Kong as the final green light for essentially a full frontal, "Let's break the relationship. Let's economically decouple. Let's get much more tough on sanctions. Let's take away Hong Kong's unique trade status. Let's forget this fiction of one country, two systems." There are others I think, who are cautioning more restraint, because it's difficult enough as it is to figure out, "What is our position on China? What is our long-term position on China? Do we want to move forward with the possibility of conflict to tomorrow, or do we find to find an off ramp with the United States where we can both stand up for our own values, recognize China as a strategic competitor under the communist party of China, but nonetheless trying to avoid conflict?"
Jude Blanchette: The communist party is primed to look for US intervention. It's already blaming what it calls Black Hands, which goes back to the Maoist Period of, it assumes the United States is orchestrating the events in Hong Kong. It looks at the bill, the Hong Kong Human Rights and Democracy Act as confirmation that the United States is meddling in what China sees as an internal matter. Anything that we would do to up the ante, and again, I'm not making a judgment on if we should or if we shouldn't, we must recognize that this is, there's nothing more central and a core conviction of the communist party than external meddling in what it sees as an internal matter. So if we do sanction, let's say party officials who are involved in this, like we're doing with the Magnitsky Act in Russia, we have to recognize that the blow back on this from China would be significant, and China is not a paper tiger, to again quote Mao on this, I would say.
Bob Schieffer: You illustrate so accurately in my view, this is not something happening in isolation. This is something that affects our overall attitude and policy toward China. How would you describe, number one, our relations with China right now, and what is exactly our policy toward China? Because as almost anybody that I talk to in the foreign policy fields will tell me, managing the China relationship is perhaps the most important part of our future.
Jude Blanchette: We're in many ways at the very early stage of this question of, "What is our relationship with China?" Partly because any transition from one paradigm to another, it takes a while to figure out what the heck the new paradigm is. And if I can very superficially describe the old paradigm that we're emerging from now, Mao Zedong dies in September 8th, 1976. Two years later, in December of 1978, we see the firm consolidation of power under this diminutive 4'11'' Sichuanese guy, named Deng Xiaoping. And for the next couple of decades, we came to define a strategy of economic engagement, people to people engagement, military and diplomatic engagement, trying to, as a way of essentially coaxing China out of its communist shell. And through these interactions and engagements, we thought that it would have a fundamentally, not liberalizing force, I think folks understood it was still be under party control, but at least we'd see the evolution of China, and its political and economic and military behavior change to a more manageable trajectory.
Jude Blanchette: No one believes in that paradigm really anymore. We recognize that both we've changed, and more fundamentally China has changed. When you talk with your Chinese friends and they will say, "In many ways, that was wishful thinking on the US. We never said we were going to move in that direction." So now what we're trying to figure out is, okay, we have ... the communist party is back, in many ways, the mask is off. Xi Jinping is not afraid of the sickle and hammer. They're no longer talking in Beijing about meaningful reform to, let's say the state owned economy. It's more open and transparent on the party's view of the private sector of industrial policy of where it sees its military force, and where it should project it. All of these have meant we've smashed the old paradigm.
Jude Blanchette: My stab at what the new paradigm is, is the US and China relationship is really the sort of epitome of a much larger structural shift, which I think happened around 2016. Not only do we have Brexit, not only do we have the election of Donald Trump, we had significant changes globally, concerns about technology and their effect on national security, concerns about globalization and the economic impact that has on localities, manufacturing, economic anxieties. These are happening across the board. Rise of populous nationalism, all these forces I think really came to a head in 2016. The United States, US-China relationship is kind of the accelerant. It's the rocket booster on it. It's the biggest single driver of this new paradigm, but it doesn't subsume it.
Jude Blanchette: And the same discussions we're having about China here in DC, if we were in Berlin, Canberra, Ottawa, we'd be having much the same discussion and many of the same anxieties. What do we do about Huawei and 5G? What do we do about technology? What do we do about globalization? What do we do about concerns over hiring someone from China who may be engaged in corporate espionage? so all of these discussions are ongoing right now. But I think moving forward, all the big fundamental drivers of economic growth, globalization, cross-border mergers and acquisition, the way you hired people, how you develop technology and distribute it, all of those are now being brought under the lens of a national security concern by governments around the world. That's what's driving policy now. It's no longer economic efficiency, globalization, supply chains. It's now looking about control over national security, and how we reassert that control. And that to me will be the operative driver of policy moving forward.
Bob Schieffer: You mentioned what do we do about Huawei? To me, this is one of the hardest problems that we face right now. Tell us what Huawei is, and what are our options there?
Jude Blanchette: Yeah, one of the frustrating things about working on China now is you've also got to be a technology expert. This is a new evolution for anyone looking at these, but to your point of your question, Bob, technology is such a fundamental driver to quickly connect us to Hong Kong. If you look at the Human Rights and Democracy Act, a core part of that is supplying of surveillance technology by US companies to Hong Kong authorities and looking for a way to stop technology moving from the US to Hong Kong to be used for nefarious purposes. Again, we see this constant thread of technology and national security, how US technology is developed, and then deployed and used.
Jude Blanchette: Going the other way though is this question of this Chinese company, Huawei, which was started by a man named Ren Zhengfei. Huawei is one of the most important technology companies in China, nominally private. I say nominally because there's a debate on in fact how much de facto control of the communist party may or may not have on it. It is the leading supplier of the full spectrum of 5G equipment. It has really no peer, globally. And so this has created a conundrum where Huawei is active and operating in areas around the world in frontier technology including 5G. There's not many replacements for it. And so, you have governments around the world trying to solve this conundrum of what's the alternative to Huawei-provided 5G equipment?
Bob Schieffer: And 5G is fifth generation?
Jude Blanchette: Generation, yeah. So Bob, you're already flexing your ... you're stressing the outer bounds of my understanding of any of this. So I'll do what I saw a guest on your show do so effectively, which is I'll say, it's an interesting question, Bob. I think the more important question we should be asking ourselves is, so this issue of 5G and Huawei is really just early days, and we've got to get better about thinking of how we're going to process these questions moving forward. And part of that is driving that 5G question and Huawei, there's some economic protectionism here that is masked by national security concerns and China concerns, we should expect that. But there also is a core question of folks fundamentally don't trust that Huawei is a private company, and they think it's a proxy for the communist party of China.
Jude Blanchette: Guess what? We're going to have a thousand of these debates moving forward, and at the heart of that is your question on, what is our policy on China? We've got to start having an honest discussion of, how do we evaluate China's political system, its political trajectory? Inwardly looking, we've got to have an honest conversation about, what do we stand for, what are our values and what are our bottom lines? And the problem is, we're having this China discussion where is in flux, and transforming at the same time, where we don't have a strong sense of political coherence here domestically and that's making this a harder discussion to have. Any discussion you have on China competition, always revolves around allies. Well guess what? We don't seem to be doing a great job on our alliance building and maintenance, right? Any question we have around China involves technology. Well guess what? China pours more into technological R & D in a year than we've done over the past 10 years. So a lot of these are domestic questions about getting our own house in order.
Bob Schieffer: But the president at this point does not want US companies to have any kind of connection with Huawei.
Jude Blanchette: Not only the US president, I'd say there's a broad swath of the national security community here.
Bob Schieffer: For the reason that if we buy their technology, or they find some way to use ours, or steal our technology, or whatever, you have the possibility that they're building a back door into all of our technology, our electric grid, everything in America that's connected to a computer, and most things are.
Jude Blanchette: That's the inbound purchase of Chinese technology. The outbound side of it, which is US technology being sold to China. The concern there is essentially this is a zero sum proposition, that everything a US company is doing to strengthen China economically is also strengthening it militarily. And if you view this as a strategic competition, I think the argument is, why the heck would you be taking our technology, that should be redounding to US national strength, and be giving it to someone who, if not an enemy is a frenemy.
Andrew Schwartz: So Jude, what's next in Hong Kong? What's next for the protesters, and what's the next move for The People's Republic? So fundamentally you've got both sides looking at each other with extraordinary mistrust and hostility, right? So from Xi Jinping's perspective and the communist party, they see this as a successionist movement, which is illegitimate. They don't recognize the core concerns that the protestors have. Looking the other way, the protesters see an increasingly aggressive and distant governing authority through Beijing and the local Hong Kong government they have absolute disdain for, both because of its handling of this, including police violence.
Jude Blanchette: We've got this stalemate now in where protesters feel the only way you keep the issue moving forward is increasingly radical behavior, otherwise this issue dies down. But that behavior then feeds into Beijing's feeling like this is spinning out of control. So the question now I don't think is, "Are we going to see a settlement?" Because it's very hard to see who the actors involved in that settlement would be. Remember, this is a largely leaderless protest. Joshua Wong, who was the symbol of the protests in 2014, he may say he wants to have a dialogue with the Hong Kong government. He doesn't control this movement, all right? He doesn't control the more radical elements of this.
Andrew Schwartz: And some of this is 17-year-old kids.
Jude Blanchette: You know a lot of it is 17-year-old kids. I mean, remember the protester who was shot was an 18-year-old. To your question of, where does this go next? I think unfortunately we need to be thinking about, we're entering into a period of prolonged stalemate, but where one side the protestors is looking to always keep this issue evolving and, in the news,, and that means increased desperation.
Jude Blanchette: Six months ago, it would have been absurd to think about the communist party using People's Armed Police to really ramp up and crack down on this movement, including Bob, those of us who've been looking at communist movements over the broad arc of history, recognize whether it's Hungary in 1956, Czechoslovakia in 1968, 1989 in Tiananmen Square. If they feel like they're backed into a corner, a communist party, an authoritarian political system will crack skulls. And so the question now for us is, to return to what we're talking about earlier, if violence is used there, is the United States willing to really bring significant pressure on China, and almost fast forward this issue we thought was down the road 10 or 15 years, about the US and China on a conflict collision?
Bob Schieffer: This is something we have to take very seriously.
Jude Blanchette: Agreed, yeah.
Andrew Schwartz: Because so far, the China has dealt with this through ... Hong Kong's police have dealt with it. They haven't sent in The People's Police.
Jude Blanchette: Right.
Andrew Schwartz: That's a major escalation if they do that.
Jude Blanchette: It is. But we've seen even on its own, the police are in a difficult position because the ... and again, just to talk about the social media element of this, this is a conflict that's playing out on Twitter with two alternative universes. People who are supportive of Beijing or the Hong Kong government put up clips of the more violent protestors. And vice versa, the protesters put up the clips of the few police officers who are using more aggressive violence. If you sit in one or either of those worlds, but not both, you have completely different narratives about this. The protesters say, "We're largely peaceful. There's a few bad eggs." The police say, "We're largely peaceful. We've been showing a great amount of restraint here." So restraint, I think we can all agree, the United States police would not show. There may be a few bad eggs or a few overreactions, but that shouldn't tarnish everything. So the social media element of this is really making it hard for all of us to get a good, accurate sense of what the situation on the ground is, and who the aggressor is here.
Bob Schieffer: Well, thank you very much, Jude, for bringing us the truth of the matter. I have the feeling we'll be asking you to come back, and I'm sorry about that, because no reflection on you, you're an excellent guest, but just because this is such a serious matter, and no one is quite sure where this is going or what the United States’ response should be. Well, thank you so much for being with us. We'll be back next week. I'm Bob Schieffer.
Andrew Schwartz: And I'm Andrew Schwartz, and if you want to hear more about Hong Kong, listen to Jude on Hong Kong on the Brink, wherever you get your podcasts.
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