Managing Director, Macro Trends Group, Bain & Company
Distinguished Fellow, Asia Research Institute, National University of Singapore; Author, Has China Won? The Chinese Challenge to American Supremacy; Former Permanent Representative to the United Nations, Republic of Singapore
Penner Family Chair in Asian Studies and Cling Family Distinguished Fellow, Edmund A. Walsh School of Foreign Service, Georgetown University; Former Senior Director for Asian Affairs, National Security Council
Columnist, The New York Times
KRISTOF: Welcome to this virtual meeting at the Council on Foreign Relations about the way forward in U.S.-China relations. This is an on-the-record meeting, and we have three terrific panelists.
We have Karen Harris, a managing director of Bain & Company, in charge of the Macro Trends Group. We have Kishore Mahbubani, who had a very distinguished career as a diplomat before embarking on another distinguished career as an academic. And you see his product placement behind him. His most recently book is Has China Won? They’re over his right shoulder. And Evan Medeiros ran Asian affairs for the Obama White House in the National Security Council and, as you can see from his product placement, is now a scholar at Georgetown University.
We will later turn to questions so please get your questions ready, half-past the house. But, Karen, let me start with you. You’re advising companies all the time. You’re dealing with their questions. Are we seeing a decoupling of U.S.-China relations on the business side of things? And, you know, is that going to be exacerbated as we see politicians on both sides of the aisle in this country engage in some pretty harsh rhetoric toward China?
HARRIS: It’s a really interesting question, Nick, because the companies that we work with and talk to, they’re having to balance not just policy, and laws, and the strict boundaries, but also managing their own risk assessments and social change, which can be very, very rapid. And so most of the companies in the tech hardware space have already been grappling with some form of decoupling with tariffs having been implement. There was the hold your breath and hope they go away period. Then they ran out of breath and had to start really thinking about what they could do to make their supply chains more resilient to any sort of geopolitical change.
And that was taking place well before the pandemic, though the shutdown of Wuhan and then all of China really highlighted or underscored that dependency in sectors outside of tech hardware. Things that—medical supplies, pharma, some automobile parts, which created more incentive to do that. Now, companies can’t turn off the lights in China and turn on the lights somewhere else overnight. This is a multiyear movement for many of them. And so I think regardless of what happens with policy, this uncertainty and volatility is going to keep the direction of travel in moving critical functions, perhaps duplicating, but also moving altogether some of those necessary functions because businesses can’t take the risk of a blackout. They can’t take the risk of sudden tariffs. These are U.S. and multinationals.
The other two assessments that they’re needing to make now is there is also an internal—we can’t view U.S.-China relations in isolation. There is a domestic element to that. We talk often about China’s stability issues, and their emphasis on stability. But in the U.S. there is a discussion and narrative about the role of globalization and economic inequality that domestic employers need to think about, and they think about in terms of their customers.
And then finally, I think as we’ve all seen over the past week, examples of injustice can go viral. It’s a different type of a virus than COVID, but we could imagine a situation in which a video or some information about China’s treatment of the Uighurs or some other ethnic minority goes viral and makes companies really to question for their customers, for their employees how they’re doing business. And that could happen quite quickly. And so I think regardless of whether we think an administrative change in the U.S. might thaw or not thaw Chinese relations, that direction, that momentum will be difficult to reverse as this point.
KRISTOF: And, Karen, how does Hong Kong fit into this, and the concerns about China’s role—the mainland’s role in Hong Kong? There are obviously so many headquarters that are based in Hong Kong. Do you anticipate that many of them will move off base in ways that will undermine U.S.-China business ties, including in the mainland?
HARRIS: Yeah. It’s hard to tell at this point. I mean, Hong Kong is a Chinese territory. We may or may not question whether this is—the recent regulatory changes and legal changes are in—are consistent with prior agreements, but it is—it is their territory. If in the most extreme case it’s quite an opportunity for Chinese companies to have access to the Hong Kong talent pool. It is relatively easier to move a headquarters than it is to move a manufacturing plant—especially in a complex product where there are many different types of inputs. And so that is movement. That could have a more rapid impact than some of the longer-term issues we’re seeing. But it also means the decision can be delayed longer than some of the—than the on-the-ground more asset-heavy decisions that have to be made now.
KRISTOF: Kishore, let me turn to you. You have watched U.S.-China relations for decades now. And you’re in the neighborhood. You’ve also warned that we, in the U.S., risk overreacting politically and in every other way to China’s missteps in ways that will do real damage to ourselves as well as to China, and to the relationship. So why do you say that? How do you see that?
MAHBUBANI: Well, let me begin by emphasizing that all the countries in the region want to see a very strong U.S. presence in the region, because one reason why East Asia has done so well over the last thirty, forty years has been a very benevolent American presence, open American markets, and a sense of calm and stability that American provided to this region, especially after the Vietnam War ended, and so on and so forth. So everyone was expecting America to be, in a sense, a pillar of stability in this region. And what is, of course, causing great alarm in the region is that the United States has basically decided to launch a geopolitical contest against China without working out any kind of comprehensive long-term strategy. And it’s reacting in very erratic and sort of unpredictable ways.
And everybody in this region is very alarmed because at the end of the day we wanted to see a strong American presence. We also want to live with China. We have to live with China. We cannot wish it away. China has only been around for four thousand years, and it’s going to be around for another four thousand years. So it’s a reality that we will have to deal with. And so what is puzzling all of us is that frankly the United States could do a much better job in managing the return of China than the way it has. All it has to do is listen to the advice of someone, you know, like George Kennan, who will give very good, profound advice to America when it was taking on the Soviet Union.
And he, of course, advocated a containment policy which cannot work against China, obviously. But he did say, you know, at the end of the day your successful will depend on your American domestic spiritual vitality at home. You don’t see that happening in America. People actually are more worried about American than China in some ways domestically. He said continue with friends and allies. The Trump administration, as you know, is alienating friends and allies and making them quite nervous. And he said, don’t insult your adversary. That’s happening with China. And of course, he said—the final thing he said: Be humble. But that’s not something you give credit to the Trump administration for.
So at the end of the day—
KRISTOF: Humility is not one of our great strengths.
MAHBUBANI: Yeah. But at the end of the day, I want to emphasize that the whole region will breathe a huge sigh of relief, especially with the pressing immediate challenge of COVID-19, if both U.S. and China could just press the pause button. Just press the pause button maybe for two or three years on this geopolitical contest and let us focus on what really we need to do to really, for example, take care of COVID-19, revitalize the global economy, get growth back. These are the priorities. This is what the U.S. and China should be working together on today.
KRISTOF: Kishore, let me push back just a little bit. I think some Americans listening will say: Well, we may have to deal with China for the next four thousand years, but maybe not with this particular regime. And that, you know, just as we did not have to deal with the Soviet Union for another four thousand years. And they would say that at a time when a million Uighurs and other ethnic minorities are being detained in Xinjiang, that China’s making moves on Hong Kong, that we can’t pause single handedly. It takes two. So what—you argue that the United States is at risk of demonizing Xi Jinping in ways that cause instability. But how do you react that those Americans who see Xi Jinping fundamentally behaving differently than his predecessors?
MAHBUBANI: Well, I think, Nick, you once wrote a column in which you stated, very brilliantly I must say, that when it comes to dealing with China one must have the capacity to hold contradictory ideas in one’s head. So you’re absolutely right about Uighurs, and the detention, and that’s wrong. And I completely agree with all that. Now, when you’re talking about maybe one million Uighurs, but at the same time you also have 1.4 billion Chinese who in four thousand years of history have never experienced the kind of improvement in the standard of living that they have experienced in the past forty years. In fact, the past forty years for the Chinese people, for the 1.4 billion, have been the best forty years in four thousand years.
And when you go to China—you know, you’ve been there too—the people there overall are very happy with the improvements that they’ve experienced. And so when the United States says: Why don’t you get rid of the Chinese Communist Party? For example, the response is: Actually, my life has improved dramatically under the Chinese Communist Party. And I say sometimes the word “communist” itself is part of the problem because in American sort of terminology if you’re a communist you’re bad, if you’re democratic you’re good.
And then you don’t see behind that and see that actually, from what the neighbors can see, you know, we used to live in Southeast Asia. You know, in Southeast Asia the Chinese Communist Party used to export communism and destabilize Southeast Asia. Fortunately, they stopped that in 1978 after Deng Xiaoping came to Southeast Asia. So we don’t see—we no longer see China as a communist threat to the region. Certainly, Chinese power will be a challenge. And at the same time, the Chinese government is developing formidable capabilities in many dimensions. And we have to learn to live with it.
And so—and certainly we have to deal with the Chinese leaders. And I would say that when I watch the insults that are thrown at Xi Jinping, the demonization of Xi Jinping, I think that’s very, very unwise, because you have to work with him. And there’s a very important cultural dimension. You lived in Asia. You know how important face is in Asia, right? I mean, when you talk to people even if you disagree with someone—you know, in Japanese culture you don’t say no. (Laughs.) You learn to say no in such a way that you don’t offend the person. You know that very, very well. That’s true not just in Japanese culture, and the Chinese, and in Southeast Asian culture, in Indonesia. You know, you are either alus or kasar—you know, soft or rough. You know, all these—all these things matter.
So when you’re dealing with a new China, which is stronger, more powerful, you’ve got to accept China for what it is. You cannot—I mean, I know many Americans think that they can transform China, but future historians, as I say in my book, will be very puzzled that a young republic—less than two hundred fifty years old with one-quarter the population—believes that if the United States engages China, China will become like America and not America like China. Future historians will be very puzzled by that expectation. So it’s—we are entering a completely new world. And let us keep our minds open on how to deal with this new world.
KRISTOF: Evan, you’ve actually dealt with these issues on the very frontline, from the White House. And I guess—I mean, you dealt with a whole range of issues, obviously—economic, business, security, and so on. It seems to me that if we screw up in the business sphere, in the economic sphere, or in trade, or in this election year in the rhetoric, for example, then to some degree that can be repaired later. What I maybe worry most about would be some security crisis, possibly in the South China Sea, maybe something in the East China Sea or, you know, around Taiwan. And I wonder to what extent you wake up at 3:00 a.m. worrying about that. And if so, what it is exactly that you would worry about?
MEDEIROS: So, Nick, you’re absolutely right. Security issues and security competition, what professors and scholars call the security dilemma, is absolutely one of the drivers of competition in the relationship. And it’s been growing in recent years. I mean, I think the U.S.-China relationship in the last decade has transitioned from sort of a low-intensity security dilemma to one that’s much more high intensity. And if we’re not careful, it could transcend from a security dilemma to sort of just outright rivalry on both sides. And there are a variety of drivers of that. Maritime disputes are one of them. You mentioned the South China Sea and East China Sea.
From my perspective, there’s two aspects of these maritime disputes. One is just sort of the pure military security aspect. You have Chinese vessels, both military and paramilitary, that are present and constant on almost a daily basis. They are harassing countries in the region, other claimants—Malaysia, Vietnam—who are conducting completely legal and legitimate drilling within those countries, either their territorial waters or their EEZs, that happen to overlap with China’s Nine-Dash Line, right, its sort of diffuse claims toward the region.
And so when you have the Chinese more present there, harassing other countries, it raises the prospect of armed—you know, armed conflict. It’s been surprising how much pushback there’s been from Indonesia, for example. And there’s also a conceptual component to it. So not just the risk of a clash, but conceptually the basis for China’s activities is to put forward this idea that it possesses what it calls historic rights. And historic rights is a concept that has absolutely no basis in international law. In fact, it’s been effectively invalidated in 2016 by the International Tribunal on the Law of the Sea, which the Chinese just summarily rejected because it didn’t serve their interests.
So you know, whenever you have this combination of, you know, security differences between China and claimants, you’ve got the U.S. military there, you have the Chinese pushing the boundaries, and you have a conceptual difference, this begins to look like, you know, a recipe for a security crisis. The question is, is China ever prepared to bound this crisis. There’s been a lot of discussions between the Chinese and our friends in Southeast Asia through ASEAN about a code of conduct, but the Chinese just drag these on endlessly. The code, if it ever comes about, is probably not going to be binding, even though a binding code would lock in place China’s relative superiority in the South China Sea.
So we should be concerned about it. But I would say right now, as of 2020, I’m far more concerned about possibly escalations in tensions between America and China over Hong Kong, and the implications and the tie-up for that to Taiwan. But the broader point I’d make is security issues absolutely are an important component of U.S.-China competition. But what’s important to remember about the U.S.-China relationship is what we’re seeing is a broadening and deepening of competition. So we’re not just competing on security issues, but we’re also competing on economic issues, and now technology issues, and ideological issues.
So we have a U.S.-China relationship that is moving from, you know, areas that we were able to manage and sometimes bound to broad-spectrum competition in new areas. And if the ideological component becomes a defining component of the relationship, then we’re looking at competition that has sort of—begins to have the feel of the Cold War, though I don’t really like that term to apply to the U.S.-China relationship. Over to you.
KRISTOF: And, Evan, so given the risks of a security crisis and, for example, those tensions over Hong Kong that you mentioned, should the U.S. continue to send Navy ships through the South China Sea or through the Taiwan Strait in ways that are, on the one hand, important to assert international maritime rights, and on the other hand may risk a(n) accident and escalation?
MEDEIROS: From my view, unquestionably yes. Because we’ve emerged at the point in which these uses of force—whether they’re freedom of navigation assertions or whatever you want to call them—are signals of intent, right? Demonstrations of capabilities which are important to influencing Chinese perceptions about America’s role in the region. But they also send important signals to allies and partners, right? One of the sort of tried and true lessons that I learned from my time at the NSC is one of the complications at the heart of America’s Asia policy, and especially the U.S.-China relationship, is America has to balance three audiences simultaneously: signals to Americas, signals to China, and signals to American allies and partners in East Asia. And it’s very difficult to get that balance right at any given point. So I think that those demonstrations.
But here’s the kicker, Nick. The real challenge is: How do you take those actions in a way that doesn’t lead to miscalculation or a crisis? And that’s where very high-quality security and military dialogue come in. This is where confidence and security-building measures come in, right? To bound the competition so there’s some degree of predictability on both sides, right? America and the Soviet Union developed these kind of patterns of competitive interaction during the Cold War.
One of the problems that we have, at least I can talk from my experience in the Obama administration, was that we would negotiate these things. And, you know, it took a long time because the Chinese would drag their feet. And then the Chinese wouldn’t abide by them. I mean, we negotiated ones related to air-to-air interactions and naval interactions. And the Chinese just wouldn’t abide by them. And so, you know, until we get, you know, a leadership in Beijing that really—that deeply appreciates the risks associated with these—you know, the fact that the U.S. military and the Chinese military, which are both highly capable and coming into contact with one another, until they appreciate the risks, you know, I worry that the intensity of the security dilemma will go up.
Final point, which is, you know, to pick up on some of the points that Kishore made, you know, he listed a litany of bad decisions on the part of the Trump administration. And, you know, I’m certainly no fan of the Trump administration, just as a loyal American, but also somebody that worked for President Obama. But I think it’s important not to lay all of the mistakes at the feet of the United States. I mean, when you have a regime in Xi Jinping that feels as if he’s constantly pushing the boundaries, constantly exploring how much he can do with China’s economic capabilities and military capabilities, I think that that feeds into the competition. So there’s responsibility and culpability on both sides. Over to you, Nick.
KRISTOF: Karen, Evan raised the question of whether we’re in a second Cold War, and whether that will define the way forward for U.S.-China relations. So are we in a new Cold War, or headed there?
HARRIS: I agree with Evan. I’m not a fan of the term. I understand that it’s tempting because it’s probably the most recent historic analogue. But there’s pretty important distinctions that make this look a lot more like a return to a great powers rivalry looking back a century or more rather than the Cold War. We—today the U.S. and China are neither in a Cold War nor hot, thankfully, battle over values, although to Kishore’s earlier point the U.S. may be—might have been positioned if it were asserting that values lens a little bit more. But today it’s certainly over control. Control of supply chains, global rulemaking, as Evan pointed out how critically important rulemaking and rule abiding is. Multilateral institutions. Trade, and the currency of trade, and technology, amongst other things.
The U.S. dollar may be the last universal monetary system instead of being replaced by another currency, for example. And we could easily see two scenarios. You could see one in which the U.S. could resist its loss of power and control and create conflict, or in another scenario retreat into its corner, leaving China to sit at the center of its own network, in more of a sphere of influence model, as long as there is a fulfilling agreement—or agreement around some critical aspects to the U.S. For example, climate could become one. Not in this administration, but in a future administration.
I think the Cold War analogy also fails to take into account the role of Europe, which seems to be trying to decide now whether it wants to be or can be another power. I think it would like to be, but certainly needs a little more momentum in that direction and a little more self-assertion around certain issues, like technology. And then farther out, the role of India, which today has an interesting role in balancing power, but may over time become an important force. I guess the final distinction that I would draw is there is no—this isn’t a battle over land directly. There’s no obvious territorial battle outside of a few very small areas.
But we do have two new borderlands that are quite critical—cyberspace, where Russia is a meaningful player, and outer super, which is increasingly important for supporting technology and is territory, although unpopulated. And that creates a very different dynamic from what we saw in the Cold War. And so while I understand it’s a good shorthand for a rivalry, it’s one many people were alive to witness so it resonates, it doesn’t quite fit the facts that we see today.
KRISTOF: And, Kishore, as we look ahead at the way forward, I think you would argue that we, Americans, have a false confidence and that we don’t appreciate—well, I mean, the question your book title raises, Has China Won?, that China may be winning. Is that—tell us—(laughs)—tell us if we are falsely confident, and if we are making a misjudgment as we—as we apply strategy.
MAHBUBANI: Well, I mean, just to respond to Evan’s point that I’m not really fair in my evaluation of U.S. and China, let me say it very bluntly: That the Chinese do have a kind of a comprehensive long-term strategy that they’re working towards and the United States doesn’t have a comprehensive long-term strategy. Let’s be very clear about that distinction.
And at the same time, I think the United States has great difficulty understanding that the world has changed fundamentally, that the past 200 years of Western domination of world history was always an aberration because from the year one to the year 1820 the two largest economies were always those of China and India. And at some point in time they will come back, and they’ve decided to come back. And as I document elsewhere, unfortunately the time when China and India decided and Asia come back, the West went to sleep after the Cold War and thought we didn’t have to make adjustments. We already won. We are on top. We can just go on autopilot. And I think the biggest mistake the United States made was to be on autopilot at a time when all of Asia is rising.
So in that sense China is winning, and the United States is not. But equally importantly, you know, as you know, Graham Allison talked a bit in that book Destined for War, and he talks about how when you have structural changes, and I agree, that basically you get competition. But he also makes a very important point in his book. He says—you know, he says many Americans keep saying: Why can’t the Chinese be like us? (Laughs.) Graham Allison says, be careful. Be careful. If the Chinese today were behaving just like the United States was behaving when it was emerging with Teddy Roosevelt at the helm, he would have—you know, Teddy Roosevelt launched a war against Spain, seized territories, took over, did whatever he wanted to do, exercised his muscles very powerfully.
And if you compare—if there was Teddy Roosevelt in China today, trust me, he or she would take over the South China Sea in twenty-four hours. The Chinese have the military capability to do that. They can shut all—take over all the rocks that they want to. And so by contrast, actually, you notice that relatively speaking there has been strategic restraint.
Just one more anecdote. When I was ambassador to Canada, high commissioner to Canada, the Canadians told me that U.S. and Canada had a long-term about dispute about some straits. Was it international waters or Canadian waters? The Canadians said national, the U.S. international, the lawyers kept arguing. Then one day the U.S. sent a destroyer in and the argument was settled, and the Canadians said: OK, we can’t take on an American destroyer.
So at the end of the day, from the point of view of other countries in the world, great powers behave in certain ways. That’s a reality of four thousand years of history. And so fortunately for us, so far, touch wood, relative to what China could be doing with its power, and so on and so forth, it’s actually been behaving quite restrained. It hasn’t fought a major war in forty years. Actually, hasn’t fired a bullet across its border in thirty years. Now, that shows remarkable degree of strategic restraint, which is good for the region. And so if we can encourage that kind of strategic restraint and have a dialogue with the Chinese, instead of trying to carry out, you know, various kinds of maneuvers that embarrass them and so forth, I mean, that’s the way we have to be. At the end of the day, one reality that every Asian country accepts is that the return of China is unstoppable. Now we have to deal with it. And the question is, how do we deal with it?
And I also believe at the end of the day if the primary goal of the American government is to improve the wellbeing of its people—which it should be, because America’s the only major developed country where the average income of the bottom 50 percent has gone down over a thirty-year period—and if the primary goal of China is to improve the wellbeing of its people, then both of them can work together to improve the wellbeing of their people. The issue is whether or not the primacy of America is more important than the interests and the wellbeing of its people. And I would suggest, honestly, that maybe for now, for the next ten, twenty years, focus on the wellbeing of your people and maybe put a pause button the primary, and see whether you get a more stable world order.
KRISTOF: We’ll turn to audience questions in a little bit, but I want to ask Evan first just to help us think about China. And you know, I think I’m actually fairly typical of a lot of Americans in feeling soured by China over the last fifteen or twenty years. And there was a time, I think, when a lot of us were sort of optimistic that there would be a gradual opening up and reform that, you know, Jian Zemin would lead to somebody a little more open-minded, and so on, and so on. And instead the opposite has happened, and Xi Jinping has gone backward. And I feel profoundly ambivalent and torn about this. I periodically am asked to, you know, sign some letter either denouncing China or denouncing measures against China. And I’m really torn.
As Kishore says, you know, what China has done in lifting more people out of poverty more quickly than any other country in history is astounding. Opening one university a week for years is astounding. The fact that a baby born in Beijing today has a longer life expectancy than a baby born in Washington. And yet what China has done in Xinjiang is barbaric. What it is doing to Hong Kong, the threats to Taiwan. I am concerned about the South China Sea. And although they haven’t fired a shot, you know, they’re—right now on the Indian border, they are certainly behaving in an incredibly unhelpful role. And in trade I think a lot of us, likewise, feel soured that they seem to have systematically cheated.
So I don’t know how to put this together. I don’t know—I just don’t have a framing to understand whether we should be tougher on China and kind of—or whether this—you know, Xi Jinping is a passing phase, as perhaps President Trump, and there are, you know, opportunities. How—tell me how we should think about the way forward in the context of all this contrary evidence.
MEDEIROS: Well, Nick, I share your ambivalence and frustration. As somebody that’s devoted their professional career to studying China, traveling there, researching it, you know, of course, trying to make U.S. policy, it’s very difficult to understand and to contextualize this shift from Hu Jintao to Xi Jinping and, you know, sort of the acceleration of some of the more worrisome trends in terms of domestic politics, domestic economics, you know, social changes, especially Uighurs and Tibetans as well. So I think it’s difficult to understand.
But what’s important, I think, is to distinguish that sentiment, which I think is real, and I think if you approach it from the perspective of American interests we should be concerned about these trends, not because America thought that China was going to be a Jeffersonian democracy. I mean, I have great response to Kishore. His book is wonderful. But I think this argument that America expected China to change into its image is strawman argument. I mean, if you go back and look at Reagan policy, Bush policy, Clinton policy, the best strategic bet was to encourage these trends in China to see how China reacted to them, and also because America and Asia, especially Singapore, was benefitting from the trends towards political openness, and certainly economic openness. But this notion that American strategy was predicated on this grand expectation, and now our expectations have been so dashed and crushed that we just want to get rid of the CCP, I think is a narrative that is fundamentally ahistoric.
And so if you approach these questions from the perspective of what’s in America’s interest—American economic interest, political interest, diplomatic and security interests—I think the U.S. needs to be concerned about the trajectory that China is—Xi Jinping is taking China, especially the extent to which he is, you know, privileging state-owned enterprises, industrial subsidies, industrial policy over the role of market forces. The extent to which Xi Jinping has sought to use economic integration as a source of political and diplomatic coercion, the extent to which Xi Jinping is starting to use this more capable military to push other countries around in the region, including Singapore.
So we should be concerned not sort of generically about the growth in Chinese power and capabilities, but how Xi Jinping has sought to use those capabilities and his vision for China, which looks increasingly Leninist and authoritarian in character, which leads to certain natural conclusions about what China is going to do going forward. So this is not a question of sort of Western domination being replaced by Eastern concepts. I think it’s fascinating for me—I woke up this morning and read this wonderful article by the Singaporean prime minister in Foreign Affairs today. And when you look at the concepts—he struggles with this issue of how does Asia position itself in the U.S.-China conflict?
And what’s interesting is many of the concepts that Prime Minister Lee appeals to are fundamentally Western ideas. These are enlightenment ideas of social and cultural diversity creating stronger societies, right? The idea of enlightened self-interest. And that because Xi Jinping has not embraced the concept of enlightened self-interest, which is a predicate for strategic restraint and strategic reassurance, which would create a more stabilizing environment. So this is—this is not Western domination being replaced by a rising East. This is sort of a combination of experiences and concepts in both—(inaudible, technical difficulties).
But when we look at China, you know, this is about a country starting to use its growing capabilities in ways that, you know, undermine the basic rules, norms, and institutions that have served global interests—not American interests, global interests—for the past seventy years. And the question is, is what can America and American in concert with allies, partners, likeminded countries, institutions, create an environment that shapes China’s preferences? Is it possible to sort of convince Xi Jinping and the Chinese leadership that these pathways ultimately are going to lead to conflict and aren’t going to serve China’s political, economic, and security interests?
And what we see now, I think, is a Xi Jinping that actually feels pretty confident in his choices about political and economic governance, right? State-directed, authoritarian leadership is actually working. And when it comes to doing things like adopting the national security law in Hong Kong, China can get away with it with very minimal pushback. I mean I would note that aside from Japan and Australia, I don’t think any other government in Asia, including Singapore, really said or certainly did very much in opposition to that. And so the question is, is what lessons does Xi Jinping draw from that? And what does that mean for other security and economic challenges going forward, in particular Taiwan.
So over to you, Nick.
KRISTOF: Well, at this point I’d like to invite members to join the conversation with questions. Please, we don’t have time to have each panelist answer each question, so if you can direct a question to a particular panelist, or I will do that for you. And remember that this is on the record. And with that, Carrie, can we have the first question?
(Gives queuing instructions.)
We’ll now take our first question from Peter Galbraith.
Q: Thank you. And my question is for Kishore. Good to see you, albeit remotely.
The question I have is, you say China has—written a book saying China has won. And of course, we see around the world China’s influence, including ports in Sri Lanka, investments in Africa. My question is—first question is, why should we care? And in particular on the South China Sea, you know, even if it turns out there’s a lot of oil and gas there, hydrocarbons, which we don’t know, you know, the world probably has enough of those. So is this really something that should be—I mean, it was one thing to have a Cold War over Berlin, or the possible invasion of Western Europe. But should we really care that much about the South China Sea, or China’s influence in Africa?
KRISTOF: Yeah, Kishore.
MAHBUBANI: Yeah, Peter. Thank you for that question. And that’s exactly the sort of question that I try to answer in my book, Has China Won?, which is: What exactly are American core interests in this geopolitical contest that we just launched against China? And you touch on a very important dimension. In the Cold War, with the Soviet Union and United States, it was very much a kind of a zero-sum game. And you sort of chose won or the other. But today’s world has changed so much that in fact the number-one trading partner for many of American allies is not United States, it’s China. Including Japan, South Korea, until recently India, and certainly all of Southeast Asia.
And I would say that—you know, I always say that, you know, there are seven-point-five billion people in the world. Three hundred and thirty million in the United States, one-point-four billion in China. That still leaves six billion people outside. The vast majority of the six billion people outside do not want to see this U.S. China geopolitical contest at this point in time, and they don’t want to get involved—the vast majority. Their view is, you know, you guys really want to go and slug it out, that’s your problem. Please don’t get us involved. Nd I think that is a fairly strong sentiment. And that sentiment is very, very different from the first Cold War.
KRISTOF: Kishore, can I—just interrupt for just a moment? But I mean, isn’t it—wouldn’t you acknowledge that there are genuine security concerns about freedom of navigation, for example, for regional states in the South China Sea?
MAHBUBANI: Absolutely. Absolutely. And I completely agree with you. And I think freedom of navigation—and I’m glad you used that phrase, “freedom of navigation,” because at the end of the day the country that needs freedom of navigation most of all is the world’s number-one trading power. Now, the world’s number-one trading power used to be the United States. Today it’s China. China paradoxically has got a greater interest in freedom of navigation. And in the South China Sea, there’s no question whatsoever that nobody’s going to block freedom of navigation. The issue, as you know, is about who owns these various rocks and reefs, and so on and so forth. And that’s territorial issues.
But I also want to emphasize that at the end of the day the countries of the region are slowly, gradually trying to work something out, right? Behind the scenes, as you know, there’s a lot of diplomacy going on. Why would the United States want to take the lead then in getting involved, as Peter Galbraith has just said, why do you think you want to be ahead of the region? And I remember in the Cold War, by the way, one reason why the United States was very successful in the First World War is that the ASEAN countries—and I was very much part of the ASEAN team fighting with the U.S. against the Soviet Union when I was ambassador to the U.N.
The U.S. would say: You guys know the region better. Why don’t you take the lead? We’ll follow you. And I thought that was very wise on the part of the United States. United States didn’t try to take the lead. They said, no, you know this region better. You take the lead. You speak out. And sure enough, the world would listen to us, people in Southeast Asia. So in the same way, what I’m asking for is a more thoughtful strategy where you think very, very hard about what can really work. Rather than—in many cases, sadly, there’s a lot of posturing without strategic thinking. And that’s dangerous.
KRISTOF: Carrie, can we have another question, please?
STAFF: We will take our next question from Joanna Shelton.
Q: Good afternoon. And I have to say, it’s just a fascinating discussion.
I would like to focus my question a big narrower than the discussion has been most recently, to Karen, and ask you to please expand a bit on the question of supply chains. My question is: How much current movement or planning do you see among U.S. companies with manufacturing facilities in China, to shift at least some of their supply chains to other countries in Asia and elsewhere?
HARRIS: It’s a great question, Joanna.
I would say there is not a single multinational company that doesn’t have it on their board agenda as an item. So does that result in execution in the near term? Not necessarily. But it would be—I would say it would be foolish not to at least be considering what an abrupt lack of access could look like. We’ve just gone through the world’s most unfortunate lab experiment on what it looks like when you lose access to your workforce, to transportation, to production in other countries through the lockdown for this pandemic. It wasn’t a tabletop exercise. It was a humanitarian crisis that also had an economic exercise on it.
And so specifically there are certain industries that are not going to come back to the United States. I doubt we’ll see garment manufacturing move. The beneficiaries of many products will be the neighbors around China. But there’s a limit to how much those nations can absorb. They have neither the depth of workforce nor the productivity of workforce to absorb—to become—there’s no second China in the world. But certainly there’s an increasing list of products that used to feel that they sat in a—or companies that sat—not in high security areas—if you traded in military goods and certain types of technologies you were always under some—or, historically under a lot of restrictions.
But between base commodities, through tourism, which are very unlikely to be heavily regulated, sits most companies. And things like—back to the example of medical supplies and pharma, I would be pretty surprised if we didn’t see some sort of regulatory change around that. So your question has a great meta point behind it, which is there is a lot of momentum around these conversations. And the reality of them, how quickly it can be done, what plans are, I think we have—we have fired the start gun. And if you can imagine the situation, if you are the leadership, you have fiduciary responsibility for a company, in two years’ time if there were a meaningful break point in U.S.-China relations, in a second Trump administration, something that really shut down trade for some period of time, you would not have done your duty as a fiduciary not to have thought through what alternatives are at this point. And I think that’s the reality that most business leaders are quite acutely attuned to these days.
KRISTOF: And, Carrie, over to you for another question.
STAFF: We will take our next question from Hans Binnendijk.
Q: Good morning. Great conversation. Thank you.
So I would like to turn to the question of long-term U.S. strategy towards China. And it seems to me that to be successful that strategy has to have a much larger multilateral, multinational component to it. And so my question really goes to that. Especially if you look at our European allies, but our major Asia allies as well, we have convergence in some areas with U.S. and their interests, and divergence in others. So if we were to construct that long-term strategy, where do you see the areas of maximum convergence so that you can develop kind of a unified transatlantic position, might bring other Asian allies in? I mean, where are those areas? Is it rule of law? Is it predatory economic practices? Is it technology theft? Is it South China Sea? I mean, what are they like? Where do you start to try to build a multinational strategy?
KRISTOF: Evan, let me turn to you on that. And let me just add slightly to that question. I mean, to what extent is it possible in that long-term relationship to have a productive cooperation on trade, on fentanyl shipment, on climate change, in public health, even as there are ongoing maybe profound disputes about other issues?
MEDEIROS: Yeah, those are great questions. Hans, thanks for asking this one, because I think it’s basically the sort of core policy challenge for the United States going forward. The way I think about the multilateral component to it, or the multinational component, is there’s a transatlantic agenda and a transpacific agenda. And they’re really different agendas. The transatlantic agenda is really one that’s fundamentally focused on a convergence on economics, technology, and sort of rights and values, right? And it’s important to understand, right, the members of the EU, it’s a big diverse organization, you’re never going to have total agreement, right? You have the Northern European countries right now that are very concerned about China. Southern European far less so. Central and Eastern European leaning toward China.
I mean, European countries will be a challenge, but nonetheless there is a core nub of a transatlantic agenda. The problem is, is that Trump has so alienated them—both because of transatlantic issues that have nothing to do with China and his China strategy—that you basically have many of them hedging, right? I mean, the fact that Merkel decided to postpone, you know, the big EU-China Leipzig summit I think is an indication of, you know, her trying to figure out how much she can rely on American versus China. She’s going to wait until after the election—the U.S. election.
The transpacific agenda is a very different agenda, because security is at the very top, right? And of course, you have American allies and partners, the core being Japan, Korea, and Australia. And America really needs to get serious about the game with long-term military competition with China, which means thinking about a—first and foremost, a geographic diversification of its military footprint. Number two, thinking—rethinking concepts of operations, CONOPS, related to force projection in Asia, because China has effectively made vulnerable the traditional elements of that. And then, of course, there’s an economic component to it. So I’d like to see a sort of multilateral TPP-like agreement, right? You need—the only way to be able to balance China’s economic power is through a coalition of Asian economies, and ideally Asian and European economies.
And the big question, interestingly, with transpacific is will there be a values agenda, right? Because that’s—there’s a lot of concern in the United States about growing ideological competition between America and China. But will that be a component of a transpacific agenda? It’s unclear to me that it will be that. But I think security and economics will be the heart of it.
Nick, very briefly, on your question about sort of how do we balance cooperation and competition, the simple answer is nobody really knows, right? I think that ideally you want a relationship that is competitive, but by acknowledging the realities of competition, bounding that competition, and preserving space for cooperation. But to be honest, recent history sort of suggest we may not be able to add that balance. Or, to put it differently, the balance may not be simultaneous. It may be sequential. We may go through five or ten years of putting competition, especially security competition, at the forefront. And after a few sort of experiences, sort of near-death experiences, or experiences that really shock us, we may realize that we have to bound competition through institutions and begin looking at the cooperative agenda.
I mean, the reality is we just went through a(n) episode with—or, we’re going through the episode with COVID that should have engendered broad-spectrum U.S.-China cooperation, right? If you had asked me when I was at the White House: What’s the one scenario in which the U.S. and China could and should come together, right, I probably would have come up with either a pandemic, or maybe saving an American astronaut on Mars, right? But we’re going through that, and actually you had this episode accentuate U.S.-China differences, not bring the two countries together. And we should all be chastened by that.
KRISTOF: Carrie, another question, please?
STAFF: We’ll take our next question—
KRISTOF: Sorry, Kishore, did you just want to jump in? Please just very quickly.
MAHBUBANI: Can I just—yeah, very, very briefly. I’m glad the word “multilateral” came up. Because I want to refer to a speech that Bill Clinton gave in 2003 in Yale. And he said something like this, he said: If America is going to be number one forever, then we can keep on doing whatever we want to do. But he says, but if you consider the possibility that we may no longer be number one, then surely it’s in America’s interest to promote multilateral institutions, multilateral rules, multilateral processes. And I say, if there’s one easy route for America to gain, in a sense, synergies with the rest of the world, reverse its policy of weakening multilateral institutions—like the U.N., WHO, et cetera—and work toward strengthening them. And that would be the best American strategy.
KRISTOF: Amen on that.
MEDEIROS: Also the Asia-Pacific pivot.
KRISTOF: Yeah. Carrie, next question, please?
STAFF: We’ll take our next question from Tara Hariharan.
Q: Thank you so much. My question follows up on the previous one about supply chains, but specifically about U.S.-China technology and innovation competition. We’ve seen all of the rhetoric about Huawei. Both U.S. and China on their own sides are trying to reshore, trying to decouple. But how feasible is it actually, specifically from the Chinese side, to be able to decouple from U.S. technology and intellectual property, given that they are still so highly reliant on U.S. intellectual property, and it sounds like for as much as the National People’s Congress would like to support nationalistic innovation and Made in China 2025, that the realities on the ground are that maybe China cannot keep up with those commitments. Thank you.
KRISTOF: Karen, what’s your take on that?
HARRIS: Well, it certainly depends on the time horizon we’re talking about. Tomorrow? No. Ten years from now? I think there’s a meaningful probability that China could develop its own technology in semiconductors, for example. There’s a question about certain technologies and how advanced they need to be. But there are areas where China is already leading in terms of technology, and likely to continue to lead. It will be very difficult for any market to maintain pace with China in automotive capabilities. They have thirty million—a market two times the size of the U.S. market. There’s just a scale advantage in those investments that make it hard to keep up. Artificial intelligence is a place that China has been investing.
And interestingly, I think to the last question and conversation, a place where cooperation between the U.S. and China—right now it feels like a race to develop, if you read a lot of commentary. But one scenario that we toy with at Bain in our group is at the moment China and Russia have a lot of joint interests. De-dollarizing, the lack of—to have their own sovereign internet, cyberspace as sovereign space rather than as a more public common, and the regulation that allows an individual government to control that space, rather than having multilateral rules. China has been promoting a new set of interests around the internet through the U.N. recently, lost in the pandemic shuffle.
But China and Russia are not necessarily great long-term friends. I think we’ve seen a lot of historic evidence that that’s not the case. And Russia is very assertive internationally in its use of cyber and technology to destabilize other regimes. So if the U.S. and China don’t think ahead to what kind of rules we want to have in place that prevent that sort of cyber and technological destabilization, what the appropriate roles of AI are, and really just continue to full-throttle develop that, I think that’s a really lost opportunity for global stability. So I guess under—to your question specifically, there are technologies where it would be very difficult for China to catch up in the near term. And there are technologies where they have already created some daylight between themselves as the U.S. And I wouldn’t underestimate the degree to which that stays as a pretty tight rivalry across a lot of dimensions, which again, incents both powers to really be thoughtful about the rules of engagement. Although, I fear that’s not happening right now, at least.
KRISTOF: You know, we are almost out of time. I’m not sure we can really fit another question in. So let me instead just ask each of the panelists just very briefly, in thirty seconds or so, you know, give us some final sense of what the American discussion about U.S.-China relations is missing, what we’re not paying sufficient attention to.
Evan, why don’t we start with you?
MEDEIROS: Well, right now what we’re not paying sufficient attention to is the fact that the—I think the challenge from China has grown very, very rapidly. And we haven’t really thought through what a coherent strategy is going to look like, because the Trump administration has so sort of dominated with their delegitimization of the Communist Party, you know, the efforts to go after Huawei. I mean, the U.S. really needs a fundamental rethink of its strategy because, as Kishore said, the world is changing, right? And American interests are changing. And so we need to, you know, conduct this rethink.
And a critical component of it, that we haven’t really talked about today, is going to be America’s own domestic policy. I mean, by far the best strategy for America in Asia is to improve our own capabilities at home. And I’m not just talking about the current moment, fraught with, you know, political and social change. You know, fundamentally we need to think about retooling the American economy and investing in infrastructure, education. And I understand that that’s a happy point, and people make that at CFR sessions all the time. But if you really want to affect Chinese strategic calculations and build better coalitions in Asia, then you need to make the American offer look better. And that’s fundamentally about what’s going on at home.
KRISTOF: Kishore, what are we missing?
MAHBUBANI: I actually completely agree with Evan. And at the end of the day, George Kennan was right. The outcome of the contest will depend on the domestic spiritual vitality of each society. And as I said, for the Chinese people, the past forty years have been the best forty years in four thousand years. And let me just add a very important statistic that I mentioned earlier. The United States is the only society—major developed society where the average income of the bottom 50 percent, 5-0 percent, has gone down over the last thirty years. If the bottom 50 percent in America had grown as much as the bottom 50 percent in China over the last thirty years, the bottom 50 percent in America would be up here. America would be a happier society, a stronger society, and one that, I would say, that the region would like to see.
KRISTOF: And Karen.
HARRIS: Just quickly, I think, you know, building on Kishore’s point, we shouldn’t underestimate the importance of the U.S. domestic situation in influencing China. What’s fascinating—a dynamic that’s changed, in 1972 China was almost totally self-sufficient—poor, but self-sufficient. And the U.S. lived and died on oil imports from the Middle East. Today the U.S. is—in many respects, trade has become optional. It can almost—it can provide its own fuel, crudely speaking, pun intended, at a top level. It can feed itself. And that is a very different dynamic and structure to which—to approach trade. And really requires a more thoughtful consideration of what the U.S. interests are, and what the institutions to support those should be.
KRISTOF: And I will—I would mention two things that I think the conversation maybe doesn’t acknowledge enough. And one is, that we in America, I think we have a historic propensity to turn challenges into monsters and exaggerate their threat. And I think, you know, we did that with Gamal Abdel Nasser. We did that with Vietnam. We did that with Saddam Hussein. And I think it’s a propensity that we need to be careful about. I see immense challenges vis-à-vis China, but I think we also need to be careful of this own tendency on our part.
And secondly that when we have conversations about protecting Americans and American interests, then, you know, there are ways to do that other than confronting China. And I’ve written about the struggles in my hometown in rural Oregon. A quarter of the kids on my old school bus died from drugs, alcohol, suicide. And you know, the way to protect those lives is not so much with vigorous intellectual property negotiations with Beijing, or other stances vis-à-vis China. It’s to invest at home in American education, in American job training, in the capacity here. And I’m not sure that we always fully appreciate that point.
And with that, thank you all for joining from all around the world. Thank you very much to our panelists for their remarks. And I’d also note that this conversation, the recording and the transcript will be on the Council on Foreign Relations website so you can consult it soon. And with that, thanks very much and thanks to our speakers.