The Grand Strategy Summit: American Leadership in the 21st Century
The China Challenge: Taiwan, Hong Kong, and the CCP
William Barr, Jude Blanchette, Matt Pottinger, Margaret Hoover (moderator)
The Ritz Carlton, Washington, D.C.
November 11, 2022
Full Transcript Below
Jim Byron: Ladies and gentlemen, please take your seats. My name is Jim Byron, I’m the president and CEO of the Richard Nixon Foundation. And welcome back to the Grand Strategy Summit for Day 2. I wanna begin though by recognizing that today is Veterans Day, as well as the 40th anniversary of the dedication of the Vietnam Veterans Memorial on the National Mall. And we celebrate the service and remember the sacrifice of veterans all across our country today.
In fact, at the Nixon Library in California, guests will be treated to an air show this afternoon, celebrating veterans in just a few matter of hours to thank our veterans for their service.
I’d also like to welcome back the members of the boards of directors of the Richard Nixon Foundation who have joined us this morning, especially Tricia Nixon Cox, the eldest daughter of President Mrs. Nixon and her husband Edward. Thank you, Tricia and Ed, for being here.
The Grand Strategy Summit kicked off last night with two national-security advisors taking the stage. Opening remarks were delivered by Dr. Henry Kissinger who, of course, needs no introduction as President Nixon’s national security adviser and secretary of state and a winner of the Nobel Peace Prize. Last evening, Dr. Kissinger outlined the Nixon grand strategy which was to, essentially, quote, “Combine power with purpose.” He went on, quote, “We should place the American interests in such a way that we were closer to Russia and China than they were close to each other, giving us a maximum flexibility.” Quote, “At the end of his period in office, Dr. Kissinger said last evening, ‘President Nixon had given a new strategy and a new meeting and a new direction to American foreign policy that linked power to purpose and moved America to a position where, at that point, it was dominating the policy in the Middle East and achieved military superiority in the military field and was engaged in meaningful discussions with adversaries which had a rational mission of peace at the end of it.'”
Then Robert O’Brien, who chairs the Nixon Foundation’s board of directors, spoke with my predecessor, nationally-syndicated radio host Hugh Hewitt, and expanded on what Dr. Kissinger said by applying such a strategy today, going around the world and exploring challenges with clear-eyed realistic solutions.
Today, we’ll cover a host of pressing topics and approach them from the position of what is best for America’s long-term national interest. A popular topic across the punditry today has to do with our country’s relationship with China. This is the most important bilateral relationship in the world today which has also become the most contentious. Many overstate it, many understate it, but few understand it. And those who will soon gather on this stage certainly understand it.
So, let’s begin the day by approaching a series of issues on China from a strategic perspective. To do that, I’d like to introduce William Barr, the 77th and 85th U.S. attorney general, one of only two people in the United States’ history to serve twice as attorney general of the United States.
Jude Blanchette, the freeman chair in China Studies at the Center for Strategic and International Studies. He holds an M.A. in modern Chinese studies from the University of Oxford and has spent the majority of his career focused on U.S.-China relations.
Matt Pottinger is distinguished visiting fellow at the Hoover Institution and chairman of the China program at the Foundation for Defense of Democracies. He served as deputy national security advisor from 2019 to 2021.
And Margaret Hoover, author and host of “Firing Line” on PBS, now also with CNN, will moderate this morning’s discussion. She is a great granddaughter of Herbert Hoover, the 31st President of the United States, which, please, welcome our distinguished panel this morning.
Margaret: Good morning. It works. Welcome Matt Pottinger, Attorney General Barr, Jude Blanchette. And thank you very much to the Nixon Presidential Foundation for having us here to have this really important discussion with incredibly well-informed experts, frankly, on this dynamic.
I think the place to start is where we are right now and how we got here. When Xi Jinping came on to the national scene, international scene, about a decade ago, many in the West expected that he would be a reformer, he would hearken back to the Nixon days of the Opening of China. “The New York Times” columnist Nick Kristof even wrote in 2013 that Xi would, quote, “Spearhead a resurgence of economic reform and probably some political easing as well. Mao’s body will be hauled out of Tiananmen Square on his watch and Liu Xiaobo, the Nobel-prize-winning writer, will be released from prison.”
Here we are, in 2022, Xi Jinping has secured an unprecedented third term as general secretary of the ruling Communist Party, making him China’s actually most powerful leader since Mao Zedong. This is not at all what the West had expected, so, I thought maybe, first, we’ll welcome you, Matt Pottinger. Can you, as the most recent appointee from the former administration who had your hands thick in China policy, tell us where we are right now.
Matt: Sure, Margaret, great to see you. Happy Veterans Day. I’m up in Canada this morning, so, it’s Remembrance Day here. And it’s great to be part of the seminar, I’m really really thrilled to be a part of it. Look, you know, a lot of people got Xi Jinping wrong. What’s not excusable is still getting him wrong, and I think it’s become really difficult to mistake any longer the nature of this leader and really the direction in which he’s steering China. We saw that at the once-every-five-years party congress that concluded last month, and, at that party congress, Xi Jinping really installed himself probably for another decade.
Man: From his earliest days, Richard Nixon was…
Matt: He also elevated the idea of struggle. This is the Stalinist idea, that China has to constantly identify and isolate its enemies and mobilize the Communist Party, almost 100 million members of the Communist Party, against those enemies. He has now written that into the Communist Party Charter as the de facto guiding principle and has demoted what we had all grown up seeing as the guiding principle under Deng Xiaoping, which was reform and opening. So, we’ve seen Xi Jinping effectively turn the page on “reform and opening” and to move towards this period of struggle, as he puts it.
So, you know, Xi Jinping was really hiding in plain sight all along, it’s just that his speeches were often ignored because the most important speeches that Xi Jinping gave were not the ones that he gave at Davos or when he was standing next to President of the United States in the Rose Garden, it was the speeches that he would give to his own Central Committee. They’re usually not translated into English, sometimes they’re kept secret for weeks or months or years after he gave them, but you really get a striking appreciation for where Xi Jinping is bringing the country. And it is hostile to the United States, it is sympathetic to Moscow. He believes deeply that communism will prevail, it’s very clear from his speeches that he thinks that capitalism will perish and that a Chinese model of socialism will continue to spread around the world.
So, there’s no more illusions anymore I think, particularly after the striking events which ended with his predecessor Hu Jintao being humiliated and wrenched out of his chair and walked off the stage. Xi Jinping has basically gotten rid of anyone who was competent in economics from the Politburo and he has elevated leaders who are known primarily for their jobs in the security apparatus or in military industrial endeavors like launching rockets and things of that nature. So, there’s no one left that we thought only a decade ago would really be the future of China. Those people have been demoted and retired and literally walked off the stage.
Margaret: Thanks, Matt. Jude, would you like to add to that? Is there anything that Matt left out or is there any color or nuance that you would offer?
Jude: Maybe just to liven the conversation we’ll, you know, let 100 flowers bloom, I’ll maybe just add on to what Matt said but have a slightly different tack, which is I think, you know, as the Yiddish proverb goes, “Man has a plan and god laughs.” I think Xi Jinping has a plan and Matt laid it out I think very well, Xi Jinping is in power but he’s not in control. And I think that’s what most dictators realize is, as they try to steer countries in complex geopolitical environments, let alone steer a country the size of China with 1.4 billion people, we’ve seen, over the past 10 years of XI Jinping’s time in power, aspiration crash into the rocks of reality.
And that’s what I think what makes predicting China’s future so difficult. I feel bad for poor Nick Kristof, that column, he’s been beat over the head with it for a decade. And I’ll be the first to admit that I don’t throw rocks at Nick Kristof because, having worked on China for two decades, getting China wrong is a permanent feature, of my job at least, given its complexity.
So, maybe just a few, you know, remarks to build on Matt, I think this is actually a moment where I’m less certain about China’s future trajectory than ever. You see this grand ambition, which Matt laid out, if you look at the 20th party congress’ work report, you look at Xi’s speech marking 100th anniversary of the CCP last year, you look at the history resolution of last year and the recent five-year plan, we know what Xi Jinping wants to achieve. We know very clearly the position he wants China to play in the international order, exerting China’s influence to shape the rules of the road, moving China’s economy up the innovation ladder to really be at the commanding heights of critical and emerging technologies, and making China…or forging China into what they called in the work report, “a modern socialist state.”
The problem is we see, the longer Xi Jinping is in power, the less likely achieving those goals is becoming. If you look at the gains China made under Deng Xiaoping just five or so years after Deng had been in power, the transformations for China that built its aggregate strength were remarkable. Xi Jinping seems to be making withdrawals from China’s strategic bank account and really creating headwinds for China that the U.S., and maybe we can talk about this later, needs to take advantage of. But more importantly, all of the main headwinds that we can classify China’s facing, demographic, productivity, Xi Jinping isn’t fundamentally addressing those. He’s putting band-aids on this, he is more I think fixated on security and stability than he is on addressing the real critical fundamental issues that China is facing.
So, you know, in summary, I think this is where I don’t quite know the road forward. If Xi Jinping continues on the course that he is on, he will either keep China in the strategic cul-de-sac that it’s now in or I think more worryingly and tragically, you know, back to the future Mao era sending this country headlong into a crisis. Or one can imagine but probably have to hope for that he’ll recognize the headwinds that China is now facing and course correct. I think that’s unlikely. You know, as Matt was saying, we know who this guy is, he’s been in power for 10 years, we know his priors, we know his assumptions, we know how he views the world. So, he’s unlikely to shift course.
So, for us I think this is a different challenge than it was 10 years ago when it was, “How do we compete with this rising power which is accumulating sort of strategic chits in its bank account and really flexing its muscle?” we are now dealing with something slightly different, a country with massive accumulated power but increasingly losing its way. And that raises a whole host of tricky questions on Taiwan, which I’m sure we’ll talk about, where and precisely how China challenges the United States and what we need to do. So, in short, “I don’t know” is the answer to almost every question I have about China because I think this really is an inflection point.
Margaret: General Barr, you served as attorney general under two different presidential administrations at the end of the last century, the beginning of this one. And really, you’ve overseen two different Chinas, this emergence of China as a global power on the world scene. But many don’t know that you began your career as a CIA analyst covering China. So, you’re intimately acquainted with the ascendance of China and truly how different it is from when you started behind the desk. At home, U.S. businesses and universities have played a role in the ascendance of China, and you gave some remarks at the Ford Presidential Library in July of 2020 where you pointed to the role that U.S. businesses have played. You said, “Over the years, corporations such as Google, Microsoft, Yahoo, and Apple have also shown themselves too willing to collaborate with the CCP.” You cited the recent example, at that time, of Apple removing the news app Quartz from its App Store in China after the Chinese government had complained about the coverage of Hong Kong democracy protests.
You also talked about how, when we normalize trade relations with China, instead of it bringing on an era of freedom, over the course of the next decade, American companies, such as Cisco, helped the Chinese Communist Party build a great firewall of China, the world’s most sophisticated system for internet surveillance and censorship. So, I wonder if you could talk a little bit more about the role U.S. businesses have played to get us to this point but then, looking forward, what are the responsibilities and what should the posture of U.S. businesses be vis-à-vis China?
William: Well, I think the original idea of our China policy was probably sound when it was adopted, which was try to bring China into the economic structure of the world. And, hopefully, by participating in that, they would become stakeholders in a set of international norms and, gradually, political reform would follow economic growth. And that obviously hasn’t happened. And what we’ve gotten is this state capitalism, very aggressive economic policy designed to supplant the United States rapidly as the supreme technological and economic power in the world. And it’s a highly orchestrated game plan, it involves some degree of central planning and regimentation, obviously, but it brings all levels of power to the table to try to capture the key areas of technology going forward and establish dominance in those. And part of that has been really sucking the life’s blood out of U.S. companies and, you know, try to lure them into China with great promises of returns, which never materialize. And then using a whole range of heavy-handed tactics, some of them unlawful, to foreclose the China market from U.S. competition, strip away the intellectual property, and use the presence of those companies to jump start their own competitive companies and, ultimately, leave those companies in China as sort of husks, empty husks.
So, we’ve been sort of feeding the machine, helping their economic growth and their advances in technology. And, you know, these business practices have been supplemented by an unprecedented industrial espionage program conducted by Chinese intelligence services through a lot of non-traditional collectors. There’s probably over a million people involved in this for China, which dwarfs all the other intelligence services of the world combined probably.
So, it has been the surrender of technology and currying favor with the Chinese in the hope of getting some kind of economic benefit from participating in the Chinese market that has induced these companies to really withstand or suffer, you know, the exploitation by the Chinese. And some of them are waking up to this, and the recent experience with COVID has brought about, I think, epiphany and people understand that we have to, you know, bring back home a lot of our supply chain and that, in order for our companies to compete effectively with the Chinese, we’re gonna have to counteract a lot of their tactics, their economic tactics.
Margaret: I wanna pose this question to all three of you in the context of the relationship between our economies, and recognizing the fact that there is an interdependency between our economies but also the role that the Chinese state has taken and the CCP has taken with respect to the innovations and the IP of American companies, what should be the posture of U.S. businesses and how should we think about the intertwining of our economies in the next decade? Do you wanna take that first, Attorney General Barr, and then we’ll go round robin?
William: Well, I would have a different answer if Xi hadn’t sort of shown his hand. I’ve been actually surprised at the degree of his bellicosity and his confrontational style and his provocative style. And I view him in the China led by the Communist Party as a very potential military antagonist, you know. And so, I think it’s very possible that we’re gonna be in a conflict with China. And so, I would treat them more from that standpoint than going in with this standpoint…
Margaret: So, what do we tell U.S. businesses then?
William: Well, U.S. business, I think, are learning but, you know, free trade is all very good if you have a level playing field, but the Chinese don’t play that way. And I think American companies, most of them are realizing that. And I think they’re also going to need not only help in protecting their intellectual property but some affirmative measures by the United States, including restrictions on doing business in China, the kinds of business in China, and the kind of technology we supply China in order to counteract what the Chinese are doing to various sectors of the economy to freeze out U.S. businesses.
Margaret: Jude, why don’t you start? And then, Matt, I’ll have you respond. I think we might see some differentiation in the point of view here between Jude and Matt, I’m just suspecting.
Jude: I mean, I always agree with 78.3% of what Matt says, so, I think we’re largely in agreement.
Margaret: I mean, there is this question of, you know, to what extent can we pull back our dependence on the Chinese economy…
Jude: I mean, I think the key questions are we have to start with, you know, the point that China is globally integrated. This is not just a bilateral conversation. So, the United States can take actions but there are other countries that will fill the gap. Let me get to the prognostic part in a minute, but just diagnostically. Number two is companies still wanna be in China. There definitely has been…and Matt and I’ve been in a lot of conversations, over the past, you know, couple years on this, there’s definitely been a fundamental mindset shift by companies driven by two things. Number one is, first, I think the paradigm shift that the Trump Administration brought to bear in how economic security and national security are intertwined. And the old days of just gallivanting around China as a corporation without any real thought of national security, that era is over.
But interestingly, I think, over the past year, it’s been this pincer movement of…it’s been actions China has taken which have really spooked companies. So, starting with the regulatory crackdown last summer and just this very aggressive national-security mentality which was latent and below the surface is now just really at the fore of how Chinese policy makers articulate their view of the economy. And they’re just more clear on where they see foreign enterprises playing into, you know, their drive for, you know, to build a national security state.
So, what I think that means is we’re in a complicated picture. And the key question for me is not how do we extract ourselves from China but how do we do it smartly and at what cost? There’s always the unspoken thing of every action we have has a cost associated with it. China is a globally-integrated economy, we need to set clearer rules. Companies can’t self-police, we’ve seen that, so, we definitely need to be exerting rules. But I think we need a clearer picture of what trade-offs and costs we’re willing to accept to extricate, you know, ourselves from China, where the realistic limits of it are. And I think, finally, we’ve got to get better at articulating precisely the areas where we’re identifying as no-go zones and where we might be frustrated but we have to allow activity to occur.
I’ll give one small example, and maybe people can throw a shoe at me, I don’t think Costco selling a 24.9% stake in a single terminal at Hamburg Port is something that we need to go to the mat for. I think that’s one where we’ve gotta say, “Okay, you know, we’re gonna make sure the Germans structure the deal such that Costco…it doesn’t turn into pariahs but we’ve gotta differentiate between what we’re gonna draw the line on and what we’re gonna look at somewhat skeptically.”
So, I say that as some of the difficult near-term example of there was a knee-jerk, “We’ve gotta stop Costco there.” And I think that’s one where we’ve gotta say, “We’re gonna watch it, it slightly agitates us, but we’re gonna let that go.”
Margaret: Matt Pottinger, why don’t you weigh in on this question about the interdependency of our economies…
Matt: Well, Jude is absolutely right that it’s really Beijing’s actions, XI Jinping’s actions, that have really spooked American and other businessmen in China, Chinese businessmen for that matter. And we have to recognize that this decoupling that’s been taking place, it’s been relatively orderly so far, it could accelerate, but the decoupling is really being driven by Beijing primarily. Xi Jinping is the protagonist in this whole evolution. And Xi Jinping has laid cards on the table, he has said that he wants to ensure that China is self-sufficient but he also wants to create what he calls the, quote, powerful counter measure of making industrialized economies increasingly dependent on Chinese supply chains so that he can use them as coercive leverage, like we’ve seen him use against Australia and against Sweden and other countries.
So, American businessmen have to recognize what the game is. You know, the game is an attempt by Xi to accumulate coercive leverage over U.S. businesses and other foreign countries and their governments and economies and act accordingly. That means that people have to hedge, it’s not fun to have to uproot from what had been sort of this Valhalla for production, it was easy for many years to set up in China, you had everything you needed for a supply chain, there were whole cities that were devoted to just one industry. I mean, you’d have, like, you know, a watchmaking city, everything you needed to make watches, everything you needed to make cell phones and smartphones. So, companies are gonna have to do some capital expenditure to build new supply chains so that they don’t find themselves completely caught out and at the mercy of some of these policies that Xi’s been pursuing. Zero COVID, for example, or a decision suddenly he makes, he wants to punish a foreign government by cutting off imports from that country. Or his common prosperity initiative, which is scaring the hell out of Chinese businessmen so much so that anyone who can get a passport right now is relocating to Singapore and Sydney and cities in the United States.
So, yeah, you know, the writing’s on the wall, those businesses that create hedges, that create alternative supply chains that they can shift to relatively rapidly are going to be in a far better position when Xi Jinping continues to do what he does best, which is accumulate power and destroy value.
Margaret: You know, the other piece of this in the context of the U.S. role in partnership with China has also been the role American universities have played. Which you also spoke to, Attorney General Barr, in that 2020 speech that you gave at the Ford Presidential Library. You know, what do we need to do, our universities and businesses working together in conjunction with the United States’ government, to protect the Homeland from the…what’s happening in universities, and I’ll just remind the audience what Attorney General Barr said in 2020. You cited that the Chinese Communist Party has also seeks to infiltrate, censor, and co-opt American academic and research institutions. For example, dozens of American universities host Chinese government-funded Confucius institutes, which have been accused of pressuring host universities to silence discussion or cancel events on topics considered controversial by Beijing. Universities must stand up for each other, refuse to let the CCP dictate research efforts or suppress diverse voices, support colleagues and students who wish to speak their minds, and consider whether any sacrifice of academic integrity or freedom is worth the price of appeasing CCP demands. What do universities need to do and what do we need to do to empower universities to work together against the backdrop of this new Chinese reality?
William: Well, one of the things I was most stunned by when I returned to office after 28 years was the intensity of Chinese activity, intelligence activity and gathering here, in the United States, specifically directed at cutting-edge technologies. And a lot of the fundamental R&D involved in those technologies is taking place in universities. And that is one of the primary targets of Chinese intelligence services. And it goes through non-traditional actors such as graduate students and it also involves the recruiting of fuzzy-headed professors who believe that academic freedom means that there should be no boundaries on, you know, the fruits of scientific research, even when it’s funded by the United States’ government.
So, on the one hand, we have situations where key scientists at universities are getting funds from the United States, which requires them to promise they’re not sharing their research with any other country, and also that they would disclose any relationship with a foreign entity. And we have situations where many of them have not done that, they have signed agreements with China and participated in the so-called Talents Program, which pays the professors substantial sums to get involved with the sharing the research with China and helping the Chinese set up competing entities. And it also includes injecting graduate students into key research programs who then steal the information and send it back to China.
I was surprised, no matter where I went in the country, if it had anything to do with one of the top 10 technologies that China is trying to become dominant in, the place was saturated with Chinese students, graduate students. And the universities frequently had no desire to cooperate with the United States and believed it was a matter of academic freedom. And, in fact, the Biden Administration shut down our China initiative, which was trying to target this activity. And they did it because of pressure from the academic community.
In our past crises, we’ve been able to get…you know, when we faced World War II and the Cold War, we were able to get business, academia, and government all on the same sheet working together cooperatively. But we’re far from that right now. And I thought maybe the China’s hypersonic test would maybe be sort of a Sputnik moment where people would understand what’s at stake. But, so far, it hasn’t.
The other thing that I find irritating is that we open our universities to all these Chinese students who are, essentially, you know, subsidizing the universities and many of them are there to take that back and help China compete against our companies. Now, traditionally, the downside of sending all your best and brightest to a foreign adversary is that they could be recruited by the foreign adversary but universities don’t permit that to happen. So, they’re off-bounds in terms of recruitment. So, you know, it’s one of these things where these universities really don’t view themselves as American institutions that have a stake in the outcome of our rivalry with China.
Margaret: Is there anything in our legal infrastructure that can be improved?
William: Well, I think the laws could be improved. I mean, we’ve been using this tool of FARA, Foreign Agents Registration Act, which wasn’t really meant for it, it’s vague…
Margaret: For the audience’s benefit, it was, you know, passed in 1938 primarily to combat Nazi propaganda?
Margaret: But you started using FARA to prosecute during your Administration when you were attorney general. Many cases have been brought recently but they have not been able to be prosecuted, they’ve failed at court. Is it because the law needs to be strengthened, it’s inadequate?
William: Well, I think the law operates in it first, I didn’t start using it, it was used before I arrived, but I continued to use it. Yeah. And it really hadn’t been used…and really, I think Mueller brought the FARA case against Flynn, and those are one of the early uses of it, and it is a tool that we can use to address the activities that I’ve described to you. And what it does is require people who are getting benefits from a foreign government in return for doing something for them to register that relationship. But it operates in a very delicate area, First Amendment rights and so forth, and sometimes it’s hard to tell exactly what kind of relationship is involved or what the motivations of the actor is. This guy who just got acquitted in New York was able to persuade the jury that, yes, he was receiving a benefit but the position he took was not because the foreign country was giving him a benefit but because he personally felt that way. So, it’s a very slippery statute.
I think one of the basic things we have to do is tighten it up and direct it more precisely, not strengthen it in the general sense so it can just be wielded as a sword generally in our society, but really focus on the specific activity we’re worried about and set the standards and give clear warning to people what is and is not permitted. And I think we need to do that.
Margaret: Matt Pottinger, I see you nodding your head here, on the big screen, maybe you could give us a specific example, if you have one? Or, I mean, do you agree that FARA’s laws, the 1938 laws, inadequate to the moment? And help us understand how it could be applicable to address the ascendance of China and perhaps the vulnerabilities the United States has here in the Homeland?
Matt: Yeah, I agree with Attorney General Barr that the tool, this 1938 law, is not meeting, at the moment right now, the number of cases that the Department of Justice has lost recently, even though there were, to my mind, fairly clear elements of, you know, efforts to lobby the U.S. government on a policy on behalf of a adversarial government. So, it looks to me like it does need to be improved. I don’t know whether you could actually tighten the focus of the law to be more stringent for what we call “adversarial states.” During the Trump Administration, we actually named five or six countries in executive orders as adversarial states, China’s at the top of that list. Maybe there could be a higher standard with respect to activities that are being undertaken on behalf of adversarial governments in Washington, DC.
The one area…and I agree that it was unfortunate, I agree with Bill that it really was unfortunate that the Department of Justice under the Biden Administration has been unwilling to go after those academics who are quietly double dipping, you know, taking U.S. government money to build important technologies and then, simultaneously, without disclosing that fact, taking money from the Chinese government to replicate their findings and their laboratories. So, I would not have ended that program. But where the Department of Justice has made progress under the Biden Administration has been in going after influence cases. So, cases in particular where the Chinese Communist Party is threatening the interests of Chinese Americans. You have a Chinese American who was planning to run for Congress, for example, and the Chinese premier spy agency paid Americans to go threaten this Chinese American in New York not to run for Congress and, if necessary, to physically harm him.
So, I’m heartened that the Department of Justice is going after some of these types of cases. Efforts to intimidate, coerce, and even do physical harm to Chinese Americans, you know, where the Chinese Communist Party is pursuing these kinds of strategies. So, that is an area where we’ve seen I think some helpful cases recently.
Margaret: General Barr just mentioned that one of the things he’d noticed in the 28 years that you hadn’t been in government and when you returned to government was the extent to which the Chinese intelligence services had become more sophisticated. And it strikes me, there was a report this week that Canadian intelligence had warned prime minister Trudeau that China’s government had covertly funded 2019 election candidates and was actually running candidates in Chinese Parliament. So, this is a global problem, this is not just the United States, but one would expect that, if their tentacles have developed in our neighbor to the north, that this level of sophistication probably exists at every level of the American economy, society, government as well perhaps. Jude, what is your analysis of this?
Jude: I think it’s something that was just touched on that we can maybe extrapolate out is the Communist Party does not do well in daylight. It operates best when people are ignorant of, unaware of, or tools are not in place to be able to effectively identify it and put in place restrictions or at least force transparency. So, something I think we might wanna think about is a broader sort of transparency or sunshine initiative where, like with FARA, like with some of the other tools that Matt was just mentioning…and this runs across the spectrum of state capitalism, of Chinese intelligence operations, you really see China is at its best when people are just unaware of what’s going on.
So, to take a state-capitalism example, in terms of our regulatory structure, we don’t treat the full ecosystem of state capitalism as a cartel like we should, we treat it as a bunch of individual companies. I just made a defense of Costco in in Germany but, if I can walk that back, you know, if you take the average Chinese conglomerate, you’re talking about an average number of subsidiaries is 15,000. A lot of these subsidiaries will be registered in overseas market economies, they’ll register as private companies, but it is a subsidiary of a subsidiary of a subsidiary of a state-owned enterprise. And all state-owned enterprises have one single owner, SASAC, which is the main state owner and shareholder. And regulator, by the way.
So, this is a functioning cartel but we don’t treat it as such. And we don’t really even have eyes on the extent of what the state capitalist ecosystem looks like. So, I think we could probably build a soup-to-nut sunshine initiative where we’re bringing to bear new tools that are there to simply identify, name, shine a spotlight, and put in place…basically, say to the Chinese, “We’re happy to have you invest in our economy but here are the requirements. Here’s what you have to be fundamentally and here’s what we need to know.” We’re dealing with this with the PCAOB and auditing requirements, it’s good that we are finally requiring Chinese companies who wanna list in our equity markets here to undergo the same standards as every other company.
So, part of this I think is just making it harder for the Communist Party to operate in the shadows. But this is also a way of doing so that redowns to our own basic values, right, of rules-based, transparent…anyone can come and play here but here are the rules and you’ve gotta abide by them. For so long China didn’t have to do this, and I think that’s part of what has occurred over the last five years, and really Xi Jinping has helped us with this by putting the Party at the center of everything is…you know, when I was living in Beijing, I feel like I’m the most dovish person in this room but I was in Beijing, I was always the most hawkish person because I kept saying to the business clients I was advising, “The Communist Party matters.” And for, you know, 8 of the last 20 years…you know, I moved to China in 2008, and, up till about 2016, companies would roll their eyes at me. And then, suddenly, you know, starting around 2016, they started to ask, “Hey, Matt, what is the Communist Party, by the way? You know, what does the Communist Party sell in our company and why does it matter?”
So, I think this has really been an awakening for us, and we’re in the early phases of identifying precisely what is the problem, what are the tools we need? And then, maybe this is the final soapbox comment, how do we combat it in a way that we stay true to our values? And this is the last sentence of George Kennan’s, you know, Long Telegram is, “How do we combat the cancer of the Soviet Union in ways that don’t undermine our own values?” This is a classic problem in myth, in story, in history is, “How do you combat the enemy without turning into the enemy yourself?” And it’s a fundamentally hard challenge, especially for an open liberal society where being open and liberal means, by definition, you face a level of threat that closed societies don’t.
Margaret: Go ahead, General Barr.
William: I agree with that. And the result of the Kennan telegram was we went on a cold war footing in the sense that we prepared for the worst, we hoped for the best, we tried to bring that about, but we prepared for the worst. We were in their face with NATO, we invested in our military, and, ultimately, brought Russia to its knees because they couldn’t keep up with us. We created a structure of alliances that actually could go operational in an effective way. And that’s what I think we have to do with China. I think the lesson of the Ukraine is that you can’t lead the way toward a successful armed initiative by your adversary and leave that open and cost-free, because they’ll take it if they can. And so, I think we have to focus on strengthening our military, a much more active intelligence program directed at China, and focus on important strategic relationships that will help us prevent China from dominating the Pacific. So, AUKUS was a good start at that but I think we have to expand that approach.
And that also goes to this question of our economic policy. One thing I noticed in government was that a lot of our allies want us to be much more collaborative and strategic in how we approach China’s technological threat. So, on the 5G front, for example, we were very good at saying, “No, no, no, no, you can’t use Huawei.” But what was our alternative? How can we get together with our allies and create an effective alternative to Huawei? There’s no one in the United States that’s working on that in the government, at least there wasn’t when I was there. And I still don’t think there is. And, you know, you have people like the Australians and the Japanese and others saying, you know, “What do we do? What do you want us…” you know, we need to rally around a game plan and we’re not doing that. So, these are not just economic issues that apply to us, we also have to keep in mind our allies.
Margaret: You mentioned Ukraine. One of the aspects of the Chinese relationship that has come to the forefront against the backdrop of Putin’s invasion of Ukraine is, perhaps, how Xi is thinking about Taiwan. Matt Pottinger, you recently returned from Taiwan and you’ve spent a lot of time frankly talking to the Taiwanese government, the Republic of China, the Democratic China. What do the Taiwanese need to be doing for their own security and what is your assessment of Xi’s posture towards Taiwan in the current moment?
Matt: Yeah. Well, look, what Taiwan needs to do is rapidly train not only its professional but relatively small active-duty military but also increase substantially in realism and in terms of the amount of time that people are spending in the reserve force, training them to fight not only to prevent China from landing on beaches in Taiwan but also to be able to fight for every city, every, you know, town, every farm, every mountaintop as well to demonstrate to China that Taiwan has the ability and the means to fight a very very painful war that China would not be guaranteed of succeeding in. They need to acquire weapons, many of which they’ve actually purchased from us but we’ve been unable to follow through and provide the weapons that Taiwan has purchased. Because I think, over the period of the 20 years of our war on terror, we dismantled really important parts of our military-industrial complex, parts that actually make advanced munitions, you know, missiles, Stinger missiles, Javelins, harpoon missiles that can threaten ships. Harpoon missiles that can be launched from trucks, not just from surface vessels. LRASMs, you know, these are missiles that can threaten Chinese ships that can be launched from American aircraft. All of these things we are behind on, we put a lot of our focus on counter-insurgency warfare and counter-terror warfare. And, as we’re seeing, these munitions are really really important, have proved to be extremely important, many of those munitions, to the Ukrainians.
We need to be the arsenal of democracy. We need to be able to arm not only Ukraine so that Ukraine can defend Europe from Russian aggression but also so Taiwan and Japan and Australia are capable of fighting, defending their own national security with us right there fighting alongside them, shoulder to shoulder. But these are things that we need to be rapidly scaling up.
Margaret: I mean, what is the posture of Xi Jinping? I mean, I know you’re not in Xi Jinping’s head but, you know, there is this question of how worried should the Chinese be? Is there an imminent threat to Taiwan? And then, aside from arming the Taiwanese, what else can we be doing about it, Jude?
Jude: I think undoubtedly there’s an imminent threat. I think we’re slightly thinking about the wrong threat in the broader discussion, a lot of the discussion is about this sort of D-Day style invasion. I think that’s the low-probability outcome I think the one Xi Jinping would least like to do. Because, once you start thinking about what the immediate effects are of actually launching an amphibious invasion on Taiwan, you start to see the costs accumulate for China very very quickly. It has a geographic advantage because Taiwan’s 100 miles from its shore, it has a geographic disadvantage because Taiwan’s 100 miles from its shore. So, any sort of military conflict in and around the Taiwan Strait, which is one of the most critical maritime corridors for China, China’s most prosperous populated provinces are right there, its major ports are right there, oil reserves are right there, not to say of the economic/diplomatic cost Beijing would pay for this.
But you raised a critical question. I could’ve told you on February 23rd of this year that Putin shouldn’t invade because it will be costly for Russia, it’ll lead to isolation, there’s no certainty of victory. And yet, what did we see? And as we see Xi Jinping increasingly isolated, powerful, there is, unfortunately, you know, a positive relationship between how dictatory you are and how many sort of miscalculations you make. So, this is something we have to watch carefully.
The only thing I would add on to what Matt said is I think military deterrence is necessary but not sufficient. I think we really need to be thinking about the entire toolkit here that starts with the question of, “What deters Xi Jinping and works back?” I think a credible military deterrent is, of course, the foundation of that but we also need to be thinking of ways that we signal realistic diplomatic, political, economic costs that China will pay not just for an invasion, because, again, I think that’s the low probability, but for the fact that Taiwan is under attack right now. I mean, you know, Matt heard this in Taipei, but, if anyone who’s visited there recently, you know, the Taiwanese are dealing with massive amounts of cyber attacks, political subterfuge. We have an election on November 26th, local elections in Taiwan, you can bet that the amount of misinformation, disinformation that’s gonna be directed by Beijing is gonna be massive. We’ve got the presidential election in January 2024, that’s gonna be vital.
So, Taiwan is under attack now. And I think that what we need to be deterring them on is these lower-level gray-zone tactics. This is a bad analogy but I think, you know, if we’re not deterring them now, at this threshold, Beijing is gonna be more emboldened by taking even more escalatory steps.
And final comment, the equation we need to be solving for is Beijing’s tactics, especially, if we imagine, there’s a speaker…McCarthy visit to Taiwan in March or April, Beijing is gonna do what it did after the Pelosi visit but more, and its actions will be designed to show that the U.S. bark is not as big as its bite. And so, we need to be thinking ahead about, “What are the actions Beijing is gonna take precisely designed to undermine U.S. credibility?” And like they did with the Pelosi visit, Beijing thinks it won that round. Right? Because we did not really respond. I’m not saying that was not the right call but we did not really respond, and Chinese propaganda…
Margaret: Explain why they think they won.
Jude: Chinese propaganda is saying, “Look, we conducted massive unprecedented military exercises, we flew short-range ballistic missiles over Taiwan, we splashed missiles into Japan’s EEZ, and guess what? The U.S. didn’t do anything.” So, propaganda is directed to Chinese citizens saying, “Look how strong we are. Compared to 1995-96, the last Taiwan Strait’s crisis, where the PLA had to just sit there and watch the U.S. sort of flex its military muscle, now we, essentially, stared down the U.S.,” and the propaganda directed at Taiwan is saying, “you think these guys are gonna be there for you? They weren’t there for you then?”
Margaret: And yet, there was all this pressure on Nancy Pelosi not to go but she went anyway.
Jude: I don’t wanna get into the politics of “should she, should she not,” it’s just a diagnostic comment of Beijing’s view. We just did [inaudible 00:54:44] with Beijing last week to talk about this again. And in their head, they came out of that round with a win because they showed that, for all the tough talk in the United States…
Margaret: Is that, “Tails I win, heads you lose”? I mean, are they going to spin it as a win either way?
Jude: Sure. But I think I can completely understand how they’re conceptualizing it as a win. So, yeah, I mean, propaganda is gonna propaganda but I think this is one where we need to learn lessons from the Pelosi visit because we’ve got round two coming up.
Margaret: Okay, so, what’s the lesson from the Pelosi visit? Because round two is on Monday. President Biden, President XI are actually going to be meeting in Asia, this is the first bilateral meeting of the President Biden’s Administration. And, Matt, I wanna get you in here too, what is the lesson from the Pelosi visit from your perspective, Matt Pottinger?
Matt: Yeah, well, look, I think that the most important lesson is what Beijing has demonstrated in terms of increasing capability to impose a blockade, launching missiles right over Taipei, as Jude said, launching missiles into Japan’s exclusive economic zone. The lesson is that we need to be training Taiwan troops, we need to be working much more vigorously with Japan. Japan should’ve responded, in my view, to those missiles that were launched into its exclusive economic zone. You you have to bring some form of reciprocity into play so that, as Jude said, Beijing doesn’t view this as a victory or propagandize that this was a victory and that there was no cost associated with Beijing’s moves. We have to impose costs for that. Part of that is getting our act together so that we can deter China and puncture its optimism that it can achieve its aims through war.
But it’s also puncturing Beijing’s optimism that it can acquire economic leverage over the United States. If we look at Vladimir Putin’s fateful decision to launch armored columns towards Kiev, he did that in part because Germany had led Europe in becoming increasingly dependent on Russian energy. So, we want a favorable balance of dependency economically, and we should require that American business and provide the incentives and also the deterrent to the American business to put ourselves in a position where we become increasingly depend on China for things like computer chips to batteries or solar panels. You know, I applaud the Biden Administration for the recent October 7 decision that they made to, basically, kneecap China’s ability to become the world’s primary manufacturer and supplier of computer chips. That is not a position we wanna put ourselves in because Xi Jinping has been very explicit in saying that he wants China to have that kind of coercive leverage over our economy. So, I’ll stop at that.
Margaret: In the final 2 minutes…and Attorney General Barr, I know you have something to say, so, I’ll start with you. But, in the final 2 minutes of this panel, President Biden and president XI will have their first bilateral meeting on Monday. What will each of you be looking for and listening to and what should we keep our ears open for, what to expect? And if you had something to say to the previous comment…
Matt: Yeah, look…
Margaret: Oh, I’m sorry. Matt, let me start with Attorney General Barr.
William: Well, actually, I’m not sure what to expect and I’m not really expecting anything. I just wanted to say…
Margaret: And did you wanna add something to Matt’s comment?
William: But I just wanted to say that it seems to me that strategic ambiguity works against the idea of deterrence. It may be a low probability but why don’t we just make it even lower by making clear what our intent is. And I think it’s time for strategic clarity and impose some predictability on what would happen if they attack Taiwan. So, that’s my two cents on the Taiwan issue.
Margaret: Okay. We’ll have Matt and then we’ll have you, Jude, wrap up with sort of how this all ends and how do we prevent this cataclysmic ending. But, Matt, what are you looking for out of a Biden-Xi summit?
Matt: Yeah. Well, it’s important that the President of the United States talk to Xi Jinping, this will be the first time they’ve met in person since President Biden was elected president. You know, one of the conclusions we drew from our time in office was that normal diplomatic channels don’t really serve to deliver messages up to the leader in that system. The system is much more rigid and the leader is far more remote, you know, his inner circle smaller and more insular than it was for Xi Jinping’s predecessors. So, it is important, my assumption is that the Biden Administration has come to a similar conclusion, so, it is important for them to be talking…it may be the only way to really lay down important and hard messages, including, to Bill Barr’s point, a message directly from President Biden to Xi Jinping stating that the United States will come to Taiwan’s defense in the event that Xi Jinping makes a fateful putinesque type of decision to militarily coerce Taiwan.
But I’m not expecting some kind of a breakthrough, I think it’s really more about having important hard conversations. It’s an opportunity for the president to really be very clear about the kinds of costs that Beijing is going to incur if it makes some of these fateful steps that they seem to be fantasizing about.
Margaret: Jude, is there a path towards a long-term equilibrium here?
Jude: I mean, basically what Matt said. And I think we need to have fairly modest expectations for this first, you know, face-to-face meeting that…
Margaret: We’re not gonna shift to strategic clarity in one meeting?
Jude: That’s a different discussion but I don’t wanna get into that. I mean, I think, from Biden’s perspective, we have articulated clearly. And honestly, I think, from Beijing’s perspective, they’re baking in that if they were to send the PLA across the Taiwan Strait, the United States would have some military reaction. The precise reaction depends on what the precise circumstance is. So, I think Biden’s made four comments, you know, that have clarified his own view of this. That is different from a substantive consensus in the U.S. strategic and policy community, which we’re not there yet, we’re sort of Biden and then walk-backs.
And then the final thing I would say that probably will constrain a little bit the outcomes of the meeting is I think probably both Xi Jinping and Biden enter the meeting thinking they’re in a slightly stronger position. You know, Xi Jinping has just come out of the 20th Party Congress, third term, he’s got his team in place. You know, China has a weak economy but, frankly, so does everybody, so, I doubt that’s gonna be some sort of gut blow to Xi Jinping as he comes into the meeting.
You know, I think, from Xi Jinping’s perspective, you know, imagine the briefings he’s getting, he’s looking at, you know, Biden’s approval numbers. I don’t think they’re gonna have the accurate read on the midterms, I think they’ll still see a sort of divided government. So, I think that’s gonna be a slight challenge is, you know, there’s not a clear winner or loser coming into the meeting.
So, and I think the final thing is it’s the what’s next out of this meeting. So, I think it’s really what happens out of the meeting that is a follow-on to this. But for all of us watching at home, I think, as Matt said, there’s a clear message from the administration on where are red lines on, and there’s some clarity about the costs we’re gonna impose on China. I think that’s good.
Margaret: Matt Pottinger, Attorney General Barr, Jude Blanchette, thank you very much for your insights on China.
William: Thank you.
Margaret: Thank you all very much.
Matt: Thank you, Margaret.
Watch the panel:
About the Grand Strategy Summit:
Fifty years after President Nixon’s historic diplomatic trips to China and the Soviet Union, great power competition has returned. To address America’s challenges on the world stage —only days after the hotly anticipated Midterm Election results— the Richard Nixon Foundation convened its inaugural Grand Strategy Summit: American Leadership in the 21st Century on November 10 and 11, 2022 at The Ritz Carlton, Washington D.C.
The Grand Strategy Summit is dedicated to establishing a consistent approach to a national (as opposed to a partisan) foreign policy, a long-term strategic direction for American statecraft —what President Nixon called “the long view.”
Considering the election results and the balance of power in Washington, summit participants discussed the pursuit of policies in America’s national interest, including how to manage the relationship with China as a major power in the 21st century, weigh the impact of ongoing Russian aggression in Ukraine, and project Western influence in the Middle East.