Jaw-Jaw: Melanie Hart on Finding Common Ground, While Competing with China
What is China’s vision of a reformed system of global governance? And how can the United States and China find common ground, while still competing with one another? How can the United States limit China’s ambitions, and what is the best way to prevail in this international rivalry? These questions – and many more – are addressed in the new episode of Jaw-Jaw!
Melanie Hart is a senior fellow and director for China Policy at the Center for American Progress. Dr. Hart’s research focuses primarily on China’s domestic political trends, U.S.-China trade and investment, Chinese foreign policy engagement in Asia, and U.S. foreign policy toward China. She founded and leads multiple U.S.-China Track II dialogue programs at CAP and frequently advises senior U.S. political leaders on China policy issues. She has a Ph.D. in political science from the University of California, San Diego and a B.A. from Texas A&M University. Most recently, she has co-authored two reports on China, Mapping China’s Global Governance Ambitions (February 2019) and Limit, Leverage, and Compete: A New Strategy on China (April 2019).
Brad Carson is a professor at the University of Virginia, where he teaches in the Batten School of Leadership and Public Policy. He served in the U.S. House of Representatives from 2001-2005 and was Undersecretary of the Army and acting Undersecretary of Defense for Personnel and Readiness in the Obama administration. He welcomes comments at email@example.com.
Brad: Melanie Hart, you have written that the United States is well-equipped to address the challenges China is posing, but that we are hindered by decades of strategic inertia. Can you talk about why we have strategic inertia in the United States, and exactly what that means?
Melanie: Absolutely. So, the United States, when it comes to investing in the foundation of national strength, the American people, our workforce are indeed economic comparative advantages. We are best at doing that when we have a peer competitor as we did in the Cold War with the Soviet Union. Since the end of the Cold War, the United States really didn’t have another bar to compete with. We were really out on our own, and we’ve had a pull-back in a lot of the kind of investments that had fueled some of our best innovations for decades. A lot of people talk about shale gas as a market phenomenon, but shale fracking technology came out of government R&D investments. We really need strong state support to be at our best at the forefront of innovation. Since the end of the Cold War, the U.S. has shifted its tax policy, eased taxes on corporations, and reduced the spending that it puts into rebuilding our foundations of national economic strength and innovation. And with China over time, that’s caught up with us. And unfortunately, we’ve done the same thing on the diplomatic front. After 9/11 the U.S. had to put a tremendous amount of resources into military campaigns and diplomatic initiatives in the Middle East, and we really didn’t invest as we needed to do in Asia and the broader global space. And China has taken advantage of both of those shortfalls on the U.S. side. In the economic space, China is focusing specifically on trying to leapfrog the United States on new industries where we don’t yet have an advantage and they can therefore gain it. And in the diplomatic space globally the U.S. isn’t out investing and defending liberal, democratic norms, and China is seeing that as an opportunity to push a Chinese perspective.
Brad: As someone who watched China here at the Center for American Progress, and someone who studied this for your entire adult life, do you have a since of whether China’s going to be able to execute on this strategy absent American intervention? For example, many people that we’ve talked to on this show have been surprisingly to me, a bit bearish on China’s ability to become a world economic power. Yes, they aspire to be leaders in all of these technologies, but they don’t, as you mentioned, have property rights. Their universities, as of now, don’t compete with those in the West. Do you think that, left to their own devices, they would actually be able to achieve these very ambitious goals that they’ve set for themselves?
Melanie: If I have learned one lesson over almost two decades of studying China, it is that we shouldn’t bet against the Chinese Communist Party’s ability to innovate within its own system to address the shortcomings that we expected to lead to their downfall. They’ve done fascinating innovation internally on how to extract some of the benefits of a more open, democratic governance model without giving up the political control that they like. Economically, they’ve found ways to utilize state control to achieve some of the innovation breakthroughs that we expect would have to achieve in a market, economic system. The way that they have done that is by utilizing their global, economic integration to extract high technologies and know-how from nations that do have an open market system. As long as China is integrated with a global economy and has partnerships with other nations, they can keep this going and they can extract the pieces of technology know-how that they’re unable to build at home and integrate that into the state-funded, state-powered machine to leapfrog the world in some major technologies. And One stunning example that I would put forward is quantum computing. China has a national quantum key communication network that is fairly broad in scope. It isn’t of course nationwide coverage, but it covers key regions across China. There are some major banks on the network, other Chinese entities. They are turning what had been a fairly theoretical approach into a deployed reality that they may be able to use to communicate with codes that the United States would not be able to break. That’s real. They built it. We shouldn’t underestimate what they can do if we don’t intervene.
Brad: Is quantum computing, which does seem an interesting possibility for the Chinese, they seem to be world leaders then too, is that an example of the U.S. helping provide the rope by which they might hang us? For example, you already mentioned they can’t develop semiconductors. The Nvidia chips, the AMD chips, things like that, that are necessary for high-end computing, super-computing, for the AI that is an ambition of theirs and that we are so concerned about, that’s enabled by Western-made chips that they otherwise can’t provide. Quantum computing also relies on technologies that they no doubt acquire from the West. I mean is this one of those examples where we’re actually feeding the beast that may come back to haunt us and if we chose to, as Donald Trump did with the ZTE, we might be able to cut it off almost at an instant’s notice if we were ambitious to do that.
Melanie: So there are different types of integration. On semiconductors, that is an of-this-moment supply chain dependence. Since that’s a supply chain situation whereby they’re dependent on particular U.S. corporations, we can cut that off. Quantum computing is a different scenario, because that’s knowledge that exists globally outside the United States. They’re not buying components. They’re trading knowledge with scientists from all over the world. That’s not an area where we can or probably even should try to cut off China’s access to its supply chain. We’re not actually building that stuff in the United States, so I’m not quite sure what we would cut off China from. The problem is, a lot of American experts, we’re not building a Quantum communication network in the United States, that I’m aware of. If anyone is going to run trials and experiments on a Quantum key network, they’re going to do that in China. China would benefit from whatever innovations come out of that. I would see that as an example of where there are these fascinating cutting edge technologies that may be transformational, but do not yet have a very clear commercial business case at scale that would encourage the private sector to develop them, those countries that are willing to put state money into R&D and deployment to give their scientists a laboratory to play in, they’re going to leapfrog ahead, and if we don’t want to get into that game, then we’re inviting our scientists, if you want to study Quantum computing they are only going to be so many facilities around, and if a lot of them are in China, then that’s where the actions going to be.
Brad: Under your leadership here at the Center for American Progress, you’ve recently released two reports discussing about U.S. policy toward China and also about what China wants in the world. I’d like to talk about that later one first. What is your view about what China under Xi Jinping wants? Again, unless arrested in some way, what do you think China wants to do? What would be their global ambitions? Because I think they are many people who might say, “Well, they’re a benign nation that is flexing its muscle a bit, but has not ambitions for a blue water navy or to challenge the U.S. role in the world.” While others again assert that they have much greater desires than that. What do you think?
Melanie: Sure. Separate from the economic dimension, so I mentioned that economically China needs to extract technologies and resources globally. When it comes to the global order or the global governance system, Xi Jinping himself and many other Chinese officials have made it rather clear that China’s ambition is to make the current system more authoritarian so that China will face less political risk by being integrated with that system. As I mentioned, China must be integrated with the global economy and the global community, so that they can keep their economy growing without taking on the kinds of political reform that make Xi Jinping and other Chinese leaders nervous. That integration therefore brings political risk, because that exposes Chinese citizens to other systems around the world, open, liberal, democratic systems, a free and open global internet, and in particular international norms and standards that hold leaders accountable to things that Beijing does not want to provide, such as guaranteed, universal human rights and protection from arbitrary detention, and things like that. So what Chinese leaders are saying is that while the global system is based on universal, liberal democratic values like freedom, democracy, and human rights, that is a threat to China’s national security, and therefore China wants to diversify the international system by bringing in more authoritarian values and norms so that China’s values are more represented and China faces less risks by being globally integrated.
Brad: What are the roots of these desires? For example, one could think that these may be Xi Jinping’s desires for China and a different leader in China might pursue a different course. A second source could be the Chinese Communist Party itself, so as long as the CCP is in charge of the country, this is going to be China’s direction. I think the third argument I mentioned to your thoughts about is these are structural factors about a wealthy nation with an incredible history, a deep pride in its past achievements, and that irrespective of who led it, even if it was a democratic government or a Singapore style of democracy, you would still have a very assertive China that would be seeking to revise the world order in its favor.
Melanie: Well, China’s now, if we measure China’s economy based on purchasing power parity, it is now the largest economy in the world. It would be crazy to expect that the largest economy in the world is not going to exert a shaping influence on the global system. The difference between China’s political system and the U.S. political system is a critical factor in China’s desire to shape the global order as it gains the power to do so. Chinese leaders and scholars will almost universally state that the current global system was shaped by the United States and other Western democracies to suit and fulfill their own national interests. As a developing economy, that is not a liberal democracy, China has different interests and therefore wants to shift the balance of interests that are favored in the system. Beijing likes to say that by doing so, China will be creating more benefit and representation for all developing economies around the world by making the system more diverse, more balanced, and more multilateral. China’s actions suggest otherwise. There’s a … China’s actions suggest that the favor really goes in China’s direction rather than being widely spread, but they view their interests as being different as ours and as soon as they have the power to start shaping, it’s quite natural expectation for them to do so.
Brad: So would it be different if Xi Jinping were toppled tomorrow, or if the CCP were thrown out of power, and you did have a different style of government there, would the challenge that China presents to us be different? For example, can you imagine a China that we could live with, that perhaps was like India, a nation that’s hugely populous with an incredible history as well that will grow in wealth over time, but doesn’t seem to be challenging the world order as it is. So when I’m thinking about what American policy should be, what are we most concerned about China? Is it something inherent in a wealthy, historic nation, or is it that Xi Jinping is a unique personality on top of a communist party that is a unique Leninist institution and that that is the driver of our challenge?
Melanie: Sure. I don’t … We shouldn’t … We cannot say that the Chinese Communist Party itself is an entity that we cannot have a good relationship with, because our relationship with the Party has been bad to good to bad to good over time, depending on what exactly is happening between the two nations. So that is clearly not the determining factor. Of course, the Party behaves differently at different levels of wealth, but I don’t buy the argument that it’s impossible to have a good relationship with the Chinese Communist Party. I also don’t buy the argument that this is entirely a Xi Jinping factor. If you look at, for example, some of the … During the Hu Jintao administration, right after the global financial crisis in ’08, ’09, in 2010, that is when we started to see Chinese leadership start to recognize that the U.S. had taken a pretty big stumble. That is when we started to see more voices in Beijing saying that perhaps the U.S. market system, perhaps the liberal democratic system is not as advantageous and naturally superior as they have long claimed. Maybe China has its own natural superiorities that have been under-represented thus far and the financial crisis was a way of demonstrating that. That was the turning point at which we began to see a new interest in playing a global leadership role in Beijing. They were still cautious at that point in time. They didn’t completely flip until the Trump presidency and the United States’ subsequent pullback from the multilateral arena. That was the next turning point within the Chinese leadership. But they were already watching shifts in the international system and thinking about how to respond to it. I think we have to also separate out Xi Jinping’s international policy with Xi Jinping, within the context of Chinese domestic politics. I see what we are getting with Xi Jinping as largely a reaction to the political fractions and elite political risk that was growing in Beijing in 2012 — 2011 and 2012 — in the run up to the last leadership transition. Xi Jinping was really given a lot of centralized authority as a way for the Party to try to clamp down on some shifts that they saw as an existential threat. That, because of those internal dynamics within China that also empowered him to carry out some global campaigns that it’s possible other leaders would not have carried out.
Brad: And what were those shifts that the Chinese Communist Party leadership saw as existential threats?
Melanie: Sure. If you put yourself in the standpoint of Chinese leaders, the mid-2000s were one interesting panic point, because that is when we began to see orange revolutions across Eastern Europe and Beijing began to obsess about the idea that they might get an orange revolution in China. Also, as China became more open, the Chinese Communist Party was opening up to the internet. There were a lot of people having discussions online. You were starting to have free press, not free press, but at least some kind of media oversight of local-level government, more public debate. There was concern about how China would manage the next step of its economic transition and whether that would bring more political risk for the Chinese Communist Party. Things began to get really interesting around 2011 when China was getting ready for the 18th Party Congress, the one at which Xi Jinping was anointed the new leader. There was a really interesting time. I was lucky enough to go to Beijing at that time with John Podesta and meet very senior Chinese leaders, including Bo Xilai in Chongqing. It was a very fascinating time in Chinese politics because there were actually developing two camps of senior Chinese leaders with two different visions about the future of China. And there was some interesting experimentation and testing of boundaries by leaders at the highest levels within the party system. You had Bo Xilai in Chongqing basically launching his own media campaign and popular campaign as a bid to get a seat on the Politburo Standing Committee in Beijing to force the hand of his superiors, an alternative vision run out of Guangdong with a more open approach to Chinese politics.
Melanie: That time, I think Americans tend to underestimate how terrifying it was for the Chinese Communist Party. My impression is that, at that time, China came pretty close to the kind of elite split that almost brought the party down during the Tiananmen era. And part of their reaction to that was once Xi Jinping was appointed as party secretary — Normally China does its decision making by consensus, and senior leaders in the Chinese Communist Party decided to give Xi Jinping more personalistic power and singular decision-making authority as a way to get things done and bring the party together, and address some of the political risks that they were concerned about. Not long after that, in 2013 perhaps … in 2014 is when China had the — when we saw the protests erupt in Hong Kong.
Brad: The Umbrella-
Melanie: The Umbrella Movement, yeah. So that sent another wave of terror through the Chinese Communist Party, because that was the first time that China saw protestors communicating through a technical means that they would be unable to cut off on the mainland. I studied a lot of local protests as part of my PhD research years ago, and one thing that’s fascinating is that in the early 2000’s, you would see massive protests erupt in China, 100,000 plus people. And one of the tools in Beijing’s playbook for response is they would flip a switch and shut down the entire telecommunications network for that entire area. You couldn’t make a phone call, you had no internet connectivity. So that would basically put an iron dome over the area of unrest so that images couldn’t leak out and you couldn’t have it spreading to other parts of the country. What happened in Hong Kong is that protesters began communicating with one another via a Bluetooth network where a signal could jump from mobile phone to mobile phone so they could create their own mesh network that bypassed the cellular towers. So even if you flip a switch on a cellular tower, you could still have the messages jump from protestor to protestor, a form of networked communication that the Party could not control. And there were rumors at the time that there were some activists traveling to Hong Kong to study the methods that were being used there and then going back to China. And that created … watching how those protests played out created a new type of panic in Beijing, because they realized that with technical advances they might not be able to put the dome down, to flip the switch, to limit unrest if it erupted again. And that triggered another wave of Party desire to clamp down on anything that they viewed as a possible political risk, and that played a role in what we see the party giving Xi Jinping so much authority to run anti-corruption campaigns, to give the state security services a lot of authority. All of these things are interrelated and play a part of the reason of why we’re seeing the approach that we do now.
Brad: Two questions from that. There’s still some rumors that Xi’s grip on power could be loosened in some way. There’s been even talk about assassination attempts. And because Chinese politics is so opaque, it’s sometimes — for outsiders at least — difficult to know how tight a grip he really has on power there. Has he healed those fissures? Of course, people like Bo Xilai were victims of his corruption campaign. Are those fissures that existed six, seven years ago now healed up and he has a tight vice on power there in your mind?
Melanie: So the interesting thing … It’s important to really pay attention to what Xi Jinping is saying, and he has made very clear that for 2019 he’s terrified. Domestically, China has a lot of big anniversaries in 2019, anniversaries of movements that, in theory, might could be utilized as a trigger to spark mass protests. I understand … I hear from friends that the party has sent down a message to the state security services that there will be no spark. So, they have no faith that the smallest spark could be managed, so no spark can be allowed to occur. That is not a message of strength and solidity. That is a message of panic. They feel that if any small movement were to get started, that trying to crack down against it could be a regime-ending situation. They are quite terrified, and that is why we see some of the behavior that we do from them domestically. At the same time, they have put in process a security regime that makes it extraordinarily costly for any normal Chinese citizen, Chinese official, Chinese scholar, to push back against some of the policies that they are rolling out, or push back against the direction that Xi Jinping is taking the country in. And it is an open question how that will play out. To what degree will Xi Jinping be able to keep this hard-line approach going and still achieve some of the economic goals that he has for China, and diplomatic goals that he has for China? Or will it be necessary to relax some of these controls and roll back some of the power they’ve given to the security establishment to return to politics as usual? We really don’t know. This is uncharted waters.
Brad: One of the things you’ve written about is that while, as you’ve just said, Chinese attitudes were hardening, the U.S. was slow to recognize this. Why was the U.S. so slow to really see what was going on in China?
Melanie: Right. China made quite a large shift, and the U.S. approach to China is only just now beginning to catch up. I think there were a few key factors. One is that it took a while for the business community to begin signaling the message of alarm that it is today, because many U.S. companies, they’re still making money in China. It’s just that they’re afraid that they could go bankrupt in five years, in 10 years’ time. And it’s so easy to discount the future in favor of the present. So the way that our corporations are run, the way that accountability works, if you’re making a lot of money today and you can guarantee profits for three years, that’s often put above what you expect to happen five years down the road. So from a commercial standpoint, the United States … Things had to get really dire before companies were serious about moving operations out of China, about being willing to risk their China operations in order to complain to the U.S. government or complain publicly. So, that was a lag in the business sector. Also, a lot of Americans were really willing to give Xi Jinping the benefit of doubt, because when he stepped into the leadership position, there was a lot of confusion and mixed messages. He was traveling around the country following previous trips made by Deng Xiaoping in the era of reform and opening, quoting Deng Xiaoping. He rolled out a Third Plenum reform document that called about letting market forces have full play. And those of us who engage deeply with China were aware, too, that there are many very hopeful reformers in Beijing. So within the Chinese Communist Party, within the Chinese government, there were a lot of people who thought that things were going to work out well, and were hoping that where they were seeing Xi Jinping begin to crack down and roll back political liberal reforms, they thought that that was perhaps a strategic tactic to push back some of the opposition to the economic reforms. Over time, it became very clear that a lot of that was bogus rhetoric. Some of the reform and opening that we got from Xi Jinping was probably never what we thought we were hearing. Also, we cannot forget or downplay the impact of China’s summer 2015 stock market crash. In summer 2015 China’s stock market basically went off the rails, and this was terrifying for the Chinese Communist Party. It also served as … It came at a critical time, and those in Beijing who opposed market reform and supported the return of … the strengthening of state control over the economy, were able to point to that and say, “You see what happens when you leave things to the market? Everything can just go off the rails suddenly.” So that was, unfortunately, something that tipped the balance in favor of the anti-reform camp, and Xi Jinping himself appears to have not been as much of a reformer as many had initially thought he was.
Brad: So President Obama and President Trump have both had to deal with Xi Jinping. We’re here at the Center for American Progress, which is an institution that’s seen as very closely allied to the Democratic Party. So let’s start with President Obama and his team. How do you grade their China policy? Because it was on their watch that many of these changes happened, and there are many critics who believe that he should have been tougher on China, and even many Democrats who say there should have been tougher action against China. How do you grade the Obama administration’s approach to China?
Melanie: I think the Obama administration did a good job at finding ways to work collaboratively with China where we had common interests. Climate change is one great example.
Melanie: Counter-terrorism, the Iran deal … Where we had common interests on global issues, in particular, they did a very good job at working collaboratively with China to change the world on those things, and we shouldn’t downplay that, or overlook that. I cannot grade them successfully on the way they reacted and dealt with China in areas where we had conflicting interests. In the South China Sea, as a think tank person, I never could figure out what the U.S. position was. What are our core interests in the South China Sea, what are our red lines in the South China Sea? That was never clear to me. And the economic space, on innovation policy, I never saw a coherent push on those issues. As a think tanker, I watched China roll out the foreign NGO law that imposed pretty startling restrictions on American thinktanks, trying to travel China just to do meetings and meet our counterparts, and understand what’s going on. And I was extraordinarily disappointed at the lack of a serious official response to that on the U.S. side. I was very disappointed that the U.S. formed a visa agreement with China for 10-year visas, in which the U.S. handed out 10- year visas to Chinese think tankers and academics like candy. But as a thinktank expert from the United States, the Chinese Embassy told me that China did not award us 10-year visas as per their policy, that that was not a part of the negotiations. So as an American, that was disappointing.
Brad: Now we have the Trump administration who seemingly have taken a much harder line about China. The National Security Strategy calls out China, there’s open discussion of peer competition. Even the word “containment” is occasionally used. In your report, though, you’re critical, and you don’t believe the Trump administration is really poised to take the necessary action to deal with China, either. Can you talk about the Trump administration’s handling of it, and why you don’t believe that they are pursuing the right policies today?
Melanie: Of course. I think we do have to give the Trump administration credit for naming the problem, and not being afraid to name the problem. And I also give them credit for not being afraid to break some eggs in the way they name the problem, because for too long, many U.S. leaders have always been too nervous about causing their Chinese counterparts to lose face, when I think China is forcing us to lose face all the time, so we should maybe not worry about that so much. So I do give them credit for those two things. However, in their strategy for responding to this issue, they have made some very … two very big stumbles. The first very big stumble is that they are alienating the rest of the world instead of working together with everyone else. On all of our complaints about China, they are not U.S. complaints, they are U.S. and allies’ complaints. They are regional complaints, they are global complaints. By taking on those complaints in a mano-a-mano, U.S. versus China manner, the Trump administration is forcing us to fight alone instead of with a global army, and they’re forcing us to take on all of the costs of that fight alone, instead of distributing them globally. Instead, as we outlined in our “Limit, Leverage, and Compete” report, I would like to see the United States finding ways to form partnerships with other nations to deal with the challenges we see with China. And I would also like to see us do that in ways that don’t bet our own economy and national security on our ability to convince China to change its practices. I think Xi Jinping’s been really clear about where he intends to take China. We should take his word for it and respect what he’s telling us that he intends to do. And if that isn’t something that we can partner with and collaborate with, if our economy can’t be that open to China when he’s going in that direction, why aren’t we doing a bit of a pivot and having much deeper partnership and integration with nations that do share some of our principles and do want to meet the same market standards? Environment standards, labor standards, for example. I think we can use a lot of our energy and use the backlash against China to form a global kind of united front on these issues. And in commercial sectors, for example, create new opportunities for our companies in other countries so they don’t have to be dependent on China. The other big criticism I have for the way the Trump administration is handling the China challenge is they are trying to counter everything that China’s doing, instead of doing good things ourselves. At home, there’s a lot of complaints about 5G, there’s a lot of complaints about China trying to dominate global technology markets. Where is the big push for U.S. R&D? Why are we stripping down support for Americans to go to college and obtain an education and be the next … invent the next quantum computing breakthrough? I would like to see a U.S. president who addresses the China challenge by making America stronger and invest at home, and focus on the home front. If we’re as strong as we can be, then I don’t think we have to worry about China. Unfortunately, that’s not the direction the administration is going in. that applies internationally as well. The administration is trying to counter China’s Belt and Road investments by lecturing at other countries and telling them they’re so naïve, and, “You shouldn’t take that money, and shouldn’t do that China project.” Well, where’s the U.S. alternative? We need to be making things and building things at home, and helping to finance them, helping our companies to get contracts in other countries so that we can put another offer on the table, and we’re not doing it. Those are positive things we can do that enable us to take on the China challenge and are actually good for America, whatever China does. So it doesn’t actually matter what Xi Jinping does. It doesn’t hook our future to our ability to shape China. It hooks our future to the good things that make us strong, regardless.
Brad: In your most recent report on China, you talk about the three-part strategy you’ve already mentioned about limiting, leveraging, and competing with China. Can you talk about what each of those things are? Limit, for example. You advocate some very specific policy reforms such as mandating transparency for U.S. educational and civil society institutions that receive Chinese government funding. Overhauling the U.S. legal framework on foreign interference. Stop allowing Chinese security services to operate within the United States illegally.
Brad: You talk about the limit aspect of limit, leverage, and compete, which is the hallmark of your own China strategy.
Melanie: Absolutely. We formulated this strategy to give policymakers a framework for understanding how to do what I don’t think the Obama administration did effectively. Which is, to toggle back and forth between working collaboratively with China in some ways, and in other cases, going at full spectrum competition or putting up barriers and limitations on what we do with China, or allow China to do in the United States. The limit part of the strategy, points out that there are ways in which China is using our open systems against us. Using our open democracy, our free press, our open commercial markets to carry out operations within the United States that benefit China at U.S. expense. And that calls for us to apply some remedies to reduce some of their ability to do that in areas ranging from our civil society space to our commercial space. And that’s a complicated challenge because we don’t want to apply remedies that damage us further, by undermining that openness. Which is one of our strategic assets globally. And so the way that we recommend doing that, is to utilize transparency to address that challenge by making America more like America. Instead of countering China by out-China-ing China. And as an example for how to do that, in the commercial space, we have a problem of China, the Chinese government setting up funds and companies to come to the United States to acquire critical technologies to fill their own strategic strategies. To fill gaps in technology like semiconductors that they haven’t been able to build at home and don’t want to continue purchasing from us. They still or purchase some of the technical know-how in the United States it is often hard to recognize where that’s happening. We have some screening mechanisms in the United States with the committee on foreign investment that try to block certain types of companies or action in certain types of industries. But it’s a very imprecise tool. So we recommend that all companies from all non-market economies just have to declare who they are before they come over and do mergers and acquisitions here. Right now they don’t. In China you can access public websites and find out all the detail about most Chinese companies, but that is not shared with U.S. regulators when they come into the United States. We often see that you’ll have private shell companies coming in to acquire U.S. technology. I have heard of some analysis that point to major state-owned Chinese conglomerates can have 25 to 30 layers of shell companies between the main owner and the company that actually shows up in the United States to acquire technology. Sometimes the last two layers of shell companies, one’s in Hong Kong, the next one’s in the Virgin Islands. Sometimes the last one is actually a U.S. company. And that’s how they’re running the money to acquire U.S. tech. So it’s not enough to block an SOE. You have to know who is this private company coming from the Virgin Islands? Who is there a real owner and what are they trying to acquire? And also for U.S. companies that are receiving Chinese funding to come in and do acquire U.S. technologies. We’ve called for some overhaul of our foreign influence legislation. We believe that if a company is using foreign government money to acquire assets in the United States, that should be something that is disclosed because if it’s not a threat than it shouldn’t need to be secret, it should be a problem.
Brad: One thing you also recommend is closing up some loopholes and the Foreign Agent Registration Act, which allows charitable nonprofit organizations to not always report their activity. So can you talk about maybe how the Chinese might be exporting that loophole and why you recommend trying to shut it down?
Melanie: Absolutely. So there’s a lot of concern in Washington about think tanks, universities, all kinds of research institutes accepting Chinese government or Chinese private funding for their activities. The concern is that if an organization accepts Chinese funding that might tilt their research practices, it might be intentional in a way, in terms of the institution. The institution may intentionally avoid saying things publicly because they don’t want to jeopardize that funding stream. It might also just be that Chinese money goes to support the types of projects that will be positive about China. And so that just beefs up the positive voices that are out there and the civil society system. We don’t accept Chinese funding here at the Center for American Progress, we never have. And our view is that any civil society organization should be willing to publicly disclose where their money’s coming from. If you’re not willing to do that, then there’s probably a problem. That should be how we handle funding, not just from China but from all government sources. So that if anyone has concerns about what influences that particular person’s research or views, you have the transparent ability to see where their funding is coming from and make your own judgment about how you want to assess the information that they’re giving you. One theme that runs throughout the “limit” section of our strategy is that a lot of China’s operations lose their impact when you bring them into the light. If there is Chinese money running throughout American think tanks to influence think tank work on China, well if all of that is made public and transparent then anyone listening to what just think tanks have to say about China, can look at where the money comes from and make their own decisions about how to receive what that person is saying. And across the board we think that transparency is important. If also we see a pattern of U.S. media institutions, including the Washington Post, publicizing articles from Chinese state press, Chinese propaganda outlets. And they are labeled, but the labeling isn’t really clear for a general audience, it might say paid for by Xinhua. I understand that Xinhua is Chinese state press, but my family members in Texas would not know that. And so our report calls for any Chinese state media in the United States to carry the kind of disclaimers that we already require on campaign ads, paid for by the People’s Republic of China. That way we’re not limiting China’s ability to distribute information in the United States, but we’re taking it into the light so that any Americans who are reading information that is Chinese propaganda understand that and they can assess that the same way that I do.
Brad: So the first part of your strategy is to limit China. The second, third parts are leverage and compete. Can you talk about both of those together? Because it makes sense that we would leverage those areas where we have in common with counter-terrorism, climate change, things like that, pandemic relief. And then the computing aspect too, which might be more controversial or might be of great interest. So tell us about those two aspects of your strategy?
Melanie: Sure. On the leverage pillar, we are recognizing that there are areas, particularly in the global space, where the U.S. and China have common interests and as a result, China’s capabilities can be leveraged in ways that are good not only for China, but for the United States and the global community. We often are concerned, rightly so about PLA expanding its capacity, but when you look at something like a counter-piracy or disaster relief, PLA capacity can be a good thing. It’s all about how they use it. If China is willing to use its strength and capacity in ways that benefit the global community, benefit other nations, that’s something we should support and encourage. And we don’t want the U.S. solving all of the world’s problems and paying the bill for everything, so that China gets off scot-free, either. There’s a fair responsibility principle at play as well. We don’t want to give China a pass on global issues, and that’s one concern I have about the Trump administration’s strategy. They don’t talk about the need to make sure that we are paying and carrying China’s weight on areas such as climate change. Of course, they pretend that’s not happening, so that might be why. But that’s very important part of U.S. strategy. The “compete” section, we point out that we have been slow to respond to Chinese competition partly because of the strategic inertia that we talked about earlier. Also, however, China is very adept at using gray-zone tactics to shift the game with the United States in ways designed to lull us into complacency and prevent a reaction. In the South China Sea, for example, they use apparently nonmilitary vessels to expand their positioning in maritime waters. They use a lot of small moves that add up to big change but are designed to not trigger an immediate U.S. military response. In the economic space, they siphon off technology bit by bit in ways that we can’t quite figure out how to react to in the moment. But that add up to a big shift over time. And we state that the U.S. has to stop trying to figure out how to react to the small tactical moves and instead move to full-spectrum competition at the full pattern of Chinese actions. And the number one thing that we need to do to do that is to invest in the home front. We call for the United States to launch a national competitiveness initiative to enable us to compete at full strength. Putting our money into R&D and to education and to infrastructure and to work force development. All the things that we have been lagging on since the end of the Cold War, but need to do to be able to compete at full strength. We also have specific recommendations on upgrading our defense capabilities and upping our diplomatic game as well.
Brad: We end every episode by asking our guests to recommend two or three books or blogs that they would offer to people who might be interested in this kind of subject. What would you recommend if asked that question?
Melanie: Sure, so I’m going to recommend three, and there are three that I think are worth reading in order, or at least going back to think about in order. The first is Susan Shirk’s 2008 book, China: Fragile Superpower. She does an extraordinary job at explaining at that point in time, right before and right at the beginning of the global financial crisis why was the Chinese Communist Party absolutely terrified? They perceived that with development, with China’s growing economic prosperity, there were some new political risks for the Chinese Communist Party regime. And a lot of what we saw under Xi Jinping is a reaction to the fears that were already prevalent at that point in time. So we should all go back and read Susan Shirk’s book to remind ourselves what produced what we see now with the Xi Jinping era. And then to really understand the Xi Jinping era my recommendation is Liz Economy’s most recent book, The Third Revolution: Xi Jinping and the New Chinese State. She does the best job that I’ve seen at laying out in a very clear and readable way China’s strategic intent. What is Xi Jinping really trying to do and what are the levers that he’s using to pursue his goals at home and abroad? And then third — this isn’t a book exactly — but I would really recommend that people do more reading of what the Chinese themselves are writing, particularly writings within the Chinese Communist Party. And toward that end, I would recommend Qiushi, the Journal of the Chinese Communist Party Central Committee. They do translate those into English, but they are really tailored for domestic audience. And I have found them to be particularly fascinating reading of late, in particular the way that they are utilizing Brexit and the stumbles within the United States during the Trump administration as evidence to argue that China’s political model is superior and able to survive the globalization era in a way that our political models will not be able to do so. And their argument that because of that China’s model is the one that should be deployed to reform the global governance system. That logic is fascinating, slightly terrifying, and very important for Americans to understand.
Brad: We will put links to all of those works on the website as well. Dr. Melanie Hart, senior fellow and director for China policy at the Center for American Progress. Thank you for being a guest on Jaw-Jaw today.
Melanie: Thanks for having me.
Music and Production by Tre Hester