CHINAMacroReporter

June 24, 2021
'China steps up crackdown on bitcoin mining industry'
‘China’s latest intervention places further pressure on what was once one of the world’s most vibrant markets for trading and mining digital currencies.’ ‘It comes at a time when many governments are scrutinising the industry’s effect on the environment and determining the types of financial oversight that should be applied to cryptocurrencies.’
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June 24, 2021
'Congress on China: Then and Now'
‘With the Senate voting on June 8, 2021, to adopt the United States Innovation and Competitiveness Act, it is safe to say that this is the most comprehensive action by Congress on China policy EVER.’ ‘The language of the United States Innovation and Competitiveness Act is about a long-term competition with China as opposed to war with an enemy.’
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June 24, 2021
'Hong Kong’s Apple Daily newspaper folds under government pressure'
Apple Daily was much more than a newspaper. To its fans, it was a defender of freedoms. To its foes, it was the defiler of national sovereignty.’
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June 24, 2021
The End of 'Apple Daily' - and Freedom of the Press in Hong Kong
Through arrests and freezing of assets, Beijing has forced the closing of Hong Kong’s last pro-democracy newspaper, the Apple Daily.
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June 20, 2021
‘Why do business and political leaders in the West persist in getting China so wrong?’
From that I suggested that to invest successfully in China, you have to understand – and be aware of - what those differences are.
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June 20, 2021
‘Why do business and political leaders in the West persist in getting China so wrong?
‘Why do business and political leaders in the West persist in getting China so wrong?’
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June 17, 2021
'Back-to-Back Rebukes of China Mark a Turning Point'
‘The one-two punch of public criticism smacks directly into Mr. Xi’s assertion that China won’t stand for lecturing by other nations, suggesting anxiety in key capitals is prompting governments to seek alignment with the U.S. over attempting to manage the relationship with Beijing on their own.’
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June 17, 2021
'Meet the New Chinese Economy, Same as the Old Chinese Economy'
If a recovery led by investment in real estate and industrial production, with consumption lagging behind, sounds familiar, it may be because the same could be said of the makeup of China’s growth before Covid-19.’
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June 17, 2021
Part 1 | 'Is China exporting inflation?'
‘Beijing is moving swiftly to protect its factories and workplaces from rising costs.’ ‘Still, rising prices in China, by far the world’s biggest manufacturer and exporter, could be felt around the world.’
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June 17, 2021
Bernie Sanders: 'Don’t Start a New Cold War With China'
‘The pendulum of conventional wisdom in Washington has now swung from being far too optimistic about the opportunities presented by unfettered trade with China to being far too hawkish about the threats posed by the richer, stronger, more authoritarian China that has been one result of that increased trade.’
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June 17, 2021
Part 2 | 'Is China exporting inflation?'
“Is China exporting inflation? In renminbi terms, it’s not so obvious. But in U.S. dollar terms, it starts to get more sizable.” ’
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June 13, 2021
'Forget about China': Clyde Prestowitz
Clyde Prestowitz has influenced U.S. foreign trade and investment policy for many decades, both inside and outside government.
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June 9, 2021
'Joe Biden Worries That China Might Win'
‘Biden worries that China is in competition for America, and not only that—they might win. This belief underpins the Biden doctrine.’
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June 9, 2021
'From the G7 to a D-10: Strengthening democratic cooperation for today's challenges'
‘A “Democratic-10” or “D-10” is aimed at rallying the world’s most powerful democracies around a common cause— advancing a rules-based democratic order based on shared values and common interests.’
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June 9, 2021
Biden Worries China Might Win
‘Biden has taken the vital first step of correctly diagnosing the strategic challenge facing the country.’ ‘Like Harry Truman at the start of the Cold War and George H. W. Bush at its end, the president now has an opportunity to create a framework for a new era.’
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June 9, 2021
Joe Biden: 'My trip to Europe is about America rallying the world’s democracies'
‘This is a defining question of our time: Can democracies come together to deliver real results for our people in a rapidly changing world?’
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June 9, 2021
'NATO & China's Challenges to Europe'
‘Even though China does not pose a direct military threat to NATO, contrary to Russia or terrorist groups, Beijing’s growing economic influence and diplomatic assertiveness in Europe coupled with its growing military relationship with Russia do have major implications for the transatlantic economy as well as its security.’
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June 3, 2021
5 | Two Caveats
‘Highlighting the strategic questionability of China’s policies doesn’t mean that Beijing’s fears of the outside world are completely unjustified.’
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June 3, 2021
1 | 'Wolf Warriors Killed China’s Grand Strategy—and We'll All Come to Miss It'
‘The predominant feature of Chinese conduct today is not grand strategy but a belligerent, defensive nationalism that lashes out without heed of consequences.’ Sometime in 2020, China came unmoored from its grand strategy.
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June 3, 2021
4 | Why China Abandoned Its Grand Strategy
‘The most persuasive explanation is that China has poisoned itself through its own rhetoric.’
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June 3, 2021
6 | The Risks & the Dangers
‘The real danger is that once toxin has spread through the system, there is no knowing where it will end.’
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June 3, 2021
2 | Blame It on Xi
‘In China’s case, the Xi era has seen the accumulation of somewhat counterproductive policies that catalyzed a breakdown.’
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June 3, 2021
3 | Enter the ‘Wolf Warriors’
‘What changed in 2020 was that nationalism for its own sake became the predominant motif of Chinese conduct.’
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June 3, 2021
Killing China's Grand Strategy
Trend: Under the Xi Jinping administration, China has amped up abrasive ‘Wolf Warrior’ diplomacy; cracked down within its borders, despite protests and criticisms from other countries; become increasing bellicose in responding to those protests and criticisms, and any other pushback it doesn’t like; and increased its aggressive rhetoric and actions against neighbors. Risks: If this sounds like a problem just for the world’s Ministries of Foreign Affairs, think again – the impact extends deep into business and finance.
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May 30, 2021
'Final Thoughts'
'Just as Brzezinski foresaw the two new contending blocs –– requiring greater “geostrategic skill” –– that are forming today, Kissinger has emphasized the unprecedented dangers that AI could introduce into a divided world.’
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May 30, 2021
China's ‘Anti-Hegemonist Bloc’
‘To counter U.S. coalition building, China has enhanced its diplomatic, economic, and military relationship with both Russia and Iran in recent months, resulting in the closest ties these countries have had in the post-Cold War era.’
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May 30, 2021
Postscript: China Doubts U.S. Allies Support
'Chinese leadership is also cynical about the effectiveness of a U.S.-led Cold War-style bloc.’
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May 30, 2021
Biden’s ‘Anti-China Bloc’
‘Throughout President Joe Biden’s first 100 days in office, his administration has largely continued the Trump administration’s hawkish approach toward China.’ ‘President Biden has also made international coalition building to confront the growing power and influence of China his primary foreign policy initiative.’ ‘Chinese leaders and the public are not convinced by the statements recently made by President Biden that these U.S.-led alliances are “not anti-Chinese” and that the United States is “not looking for confrontation” with China.’
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May 30, 2021
What China Thinks About Biden's China Policy
And that is what makes Cheng Li’s ‘Biden’s China strategy: Coalition-driven competition or Cold War-style confrontation?' so valuable. Cheng has decades of close relationships with China’s leaders and high officials. They trust him not to attribute their comments and so speak freely and honestly to him. Cheng is the person I rely on most to convey China’s positions.
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May 30, 2021
Worse for China than Trump
‘Many Chinese now believe that the Biden administration could be more detrimental to U.S.-China relations than the Trump administration.’
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May 30, 2021
'Biden’s China strategy: Coalition-driven competition or Cold War-style confrontation?'
‘Senior officials on the foreign policy team have frequently emphasized three “C” words: competition, cooperation, and confrontation.’
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May 30, 2021
The Trump Legacy
‘From Beijing’s perspective, the hawkish approach to China in the final year of the Trump administration revealed that the Trump team sought to defeat and destroy China in much the same way that the United States defeated the Soviet Union in the Cold War.’
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May 27, 2021
'China Bets on Productivity Over Population to Drive Its Economy'
‘Beijing has a two-pronged approach to maintaining economic growth as its population shrinks.’ ‘First, it intends to slow the decline of the urban workforce by raising the retirement age and encouraging migration of more of the country’s 510 million rural residents to cities.’ ‘Second, it plans to raise productivity -- a measure of economic output per worker -- with the latest five-year plan emphasizing better vocational education and more investment in scientific research, automation and digital infrastructure.’ [see second chart above]
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May 27, 2021
'Why Demographics is (Close to) Destiny'
‘Demographics may not be destiny, but for students of geopolitics, they come close.’
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May 27, 2021
'Lousy demographics will not stop China’s rise'
‘The old maxim ‘demography is destiny’ no longer holds in the same way that it used to.’ ‘A shrinking and ageing population may not have the same gloomy implications in the 21st century.’
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May 27, 2021
'Sex and the Chinese Economy'
‘A rise in China’s male-female ratio may have contributed to between one-third and one-half of the increase in its trade surplus with other countries.’ ‘The sex imbalance thus likely underpins an important source of tension between China and the US. Yet bilateral engagement has paid scant attention to this linkage.’
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May 27, 2021
'Demography + Technology is Destiny'
The census showed that the number of births nationwide fell to the lowest level since 1961, following a nationwide, manmade, famine caused by Mao’s “Great Leap Forward” that killed tens of millions of people, and that China’s total population could peak in the next few years.
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May 27, 2021
'China: Births Falling'
‘China’s total population could peak in the next few years, spurring profound changes for the world’s second-biggest economy.’
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May 27, 2021
'Demography + Technology is Destiny'
The census showed that the number of births nationwide fell to the lowest level since 1961, following a nationwide, manmade, famine caused by Mao’s “Great Leap Forward” that killed tens of millions of people, and that China’s total population could peak in the next few years.
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May 27, 2021
'China: Getting Old Before Getting Rich'
‘Over the past two generations, China has seen a collapse in fertility, exacerbated by Beijing’s ruthless population-control programs.’ ‘With decades of extremely low fertility in its immediate past, decades more of that to come, and no likelihood of mass immigration, China will see its population peak by 2027.’
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May 27, 2021
'China Bets on Productivity Over Population to Drive Its Economy'
‘Beijing has a two-pronged approach to maintaining economic growth as its population shrinks.’ ‘First, it intends to slow the decline of the urban workforce by raising the retirement age and encouraging migration of more of the country’s 510 million rural residents to cities.’ ‘Second, it plans to raise productivity -- a measure of economic output per worker -- with the latest five-year plan emphasizing better vocational education and more investment in scientific research, automation and digital infrastructure.’ [see second chart above]
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May 27, 2021
'China: Getting Old Before Getting Rich'
‘Over the past two generations, China has seen a collapse in fertility, exacerbated by Beijing’s ruthless population-control programs.’ ‘With decades of extremely low fertility in its immediate past, decades more of that to come, and no likelihood of mass immigration, China will see its population peak by 2027.’
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May 27, 2021
'China: Births Falling'
‘China’s total population could peak in the next few years, spurring profound changes for the world’s second-biggest economy.’
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May 27, 2021
'Why Demographics is (Close to) Destiny'
‘Demographics may not be destiny, but for students of geopolitics, they come close.’
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May 27, 2021
'Sex and the Chinese Economy'
‘A rise in China’s male-female ratio may have contributed to between one-third and one-half of the increase in its trade surplus with other countries.’ ‘The sex imbalance thus likely underpins an important source of tension between China and the US. Yet bilateral engagement has paid scant attention to this linkage.’
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May 27, 2021
'Lousy demographics will not stop China’s rise'
‘The old maxim ‘demography is destiny’ no longer holds in the same way that it used to.’ ‘A shrinking and ageing population may not have the same gloomy implications in the 21st century.’
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May 20, 2021
'Apple in China: No Plan B'
“This business model only really fits and works in China. But then you’re married to China.” ‘The Chinese government was starting to pass laws that gave the country greater leverage over Apple, and Mr. Xi would soon start seeking concessions. Apple had no Plan B.’
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May 20, 2021
'Tim Cook and Apple Bet Everything on China.'
‘For Apple, a clean break with China is impossible.’
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May 20, 2021
'Apple held hostage by its Chinese puzzle'
"The massive and complete supply chain ecosystem in China is key to the iPhone maker's success, but it has also created a gigantic organism that would struggle to move somewhere else."
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May 20, 2021
‘Censorship, Surveillance and Profits: A Hard Bargain for Apple in China’
‘Apple built the world’s most valuable business on top of China. Now it has to answer to the Chinese government.’
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May 20, 2021
Apple in China
‘But just as Mr. Cook figured out how to make China work for Apple, China is making Apple work for the Chinese government.’ ‘Behind the scenes, Apple has constructed a bureaucracy that has become a powerful tool in China’s vast censorship operation.’
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May 20, 2021
'Apple Reaches $2 Trillion'
“This business model only really fits and works in China. But then you’re married to China.” ‘The Chinese government was starting to pass laws that gave the country greater leverage over Apple, and Mr. Xi would soon start seeking concessions. Apple had no Plan B.’
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May 15, 2021
‘Scenario Three: Leadership Challenge or Coup
‘By removing de jure term limits on the office of the presidency — and thus far refusing to nominate his successor for this and his other leadership positions — Xi has solidified his own authority at the expense of the most important political reform of the last four decades: the regular and peaceful transfer of power.’
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May 15, 2021
Invitation to a Trivium Flash Talk: 'China's Data Environment from a Big-Picture Perspective.’
‘This talk is designed to cut through the tech and legal jargon, and lay out the top-level strategic rationale underpinning China's thinking on data. We'll cover:’
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May 15, 2021
Invitation to a Trivium Flash Talk: 'China's Data Environment from a Big-Picture Perspective.’
‘This talk is designed to cut through the tech and legal jargon, and lay out the top-level strategic rationale underpinning China's thinking on data. We'll cover:’
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May 15, 2021
After Xi: A Succession Crisis to Rock the World
A new risk to add to your analyses and strategic planning: A succession crisis in China. By removing term limits on his stay in office and by not naming a successor, Secretary General Xi Jinping ‘has pushed China towards a potential destabilising succession crisis, one with profound implications for the international order and global commerce,’ writes Richard McGregor of the Lowy Institute and Jude Blanchette of the Center for Strategic & International Studies
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May 15, 2021
‘Scenario Four: Unexpected Death or Incapacitation'
‘Even if the CCP’s claim that Xi Jinping has no designs to remain in office for life is true, his evisceration of succession norms leaves the country ill-prepared for his sudden death or incapacitation.’
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May 15, 2021
'Regime change in China is not only possible, it is imperative.'
‘We must make regime change in China the highest goal of our strategy towards that country.’ ‘The US and its allies cannot dictate to China the political system by which it is governed. But they can and must engineer conditions which embolden and enable those in China who also want regime change to achieve it.’
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May 15, 2021
After Xi: A Succession Crisis to Rock the World
A new risk to add to your analyses and strategic planning: A succession crisis in China. By removing term limits on his stay in office and by not naming a successor, Secretary General Xi Jinping ‘has pushed China towards a potential destabilising succession crisis, one with profound implications for the international order and global commerce,’ writes Richard McGregor of the Lowy Institute and Jude Blanchette of the Center for Strategic & International Studies
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May 15, 2021
'Regime change in China is not only possible, it is imperative.'
‘We must make regime change in China the highest goal of our strategy towards that country.’ ‘The US and its allies cannot dictate to China the political system by which it is governed. But they can and must engineer conditions which embolden and enable those in China who also want regime change to achieve it.’
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May 15, 2021
'After Xi: China's potentially destabilising succession crisis'
‘By removing de jure term limits on the office of the presidency — and thus far refusing to nominate his successor for this and his other leadership positions — Xi has solidified his own authority at the expense of the most important political reform of the last four decades: the regular and peaceful transfer of power.’ ‘In doing so, he has pushed China towards a potential destabilising succession crisis, one with profound implications for the international order and global commerce.’
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May 15, 2021
‘Scenario One & Two: Xi Steps Down'
‘In this scenario, Xi thwarts the current consensus by handing over his leadership positions to at least one individual from the current Politburo Standing Committee (as per existing regulations).’
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May 12, 2021
The Poem that Cost Billions
The billion dollar losses that came from quoting an 1,100-year-old poem, toWhy foreign companies in China have Stockholm Syndrome
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May 10, 2021
'A 1,100-Year-Old Poem Cost Meituan’s Outspoken CEO US $2.5 Billions'
‘On Monday, because of an 1,100-year old poem about events 2,200 years ago posted by the founder of food delivery giant Meituan, investors panicked, and sank the company’s market cap by $15.6 billion. And Meituan CEO Wang Xing, who posted the poem, lost $2.5 billion of his wealth.’
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May 9, 2021
'The Housing Bubble That Just Won’t Pop'
‘China’s cities are plagued by a diverging trend: high demand and exorbitant prices for residential properties in tier 1 cities and yet an oversupply in smaller, lower-tiered cities.’
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May 7, 2021
'Would China really invade Taiwan?'
‘Is Taiwan really "the most dangerous place on earth?" No. Or at least, not right now.’
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May 7, 2021
'Don't Help China By Hyping Risk Of War Over Taiwan'
‘China is marshaling its full range of capabilities to intensify pressure on Taiwan below the threshold of conflict.’ ‘Beijing's goal is to constantly remind Taiwan's people of its growing power, induce pessimism about Taiwan's future, deepen splits within the island's political system and show that outside powers are impotent to counter its flexes.' ‘Its approach is guided by the Chinese aphorism, "Once ripe, the melon will drop from its stem [瓜熟蒂落]," ’‘This strategy may require more time than war, but it would come at less cost and risk to Beijing.’
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May 7, 2021
'China Threat: A "perception gap" between the U.S. and Taiwan'
‘While the U.S. talks up the medium-term military threat, the democratic island sees the moves as part of a bigger, more immediate problem: "gray zone" warfare from Beijing that is meant to wear down the morale of not just the Taiwanese military, but also the island's people.’
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May 7, 2021
'The most dangerous place on Earth'
‘Taiwan is an arena for the rivalry between China and America.’ ‘Although the United States is not treaty-bound to defend Taiwan, a Chinese assault would be a test of America’s military might and its diplomatic and political resolve.’
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May 7, 2021
'The Most Dangerous Place on Earth'
‘China's top priority now and in the foreseeable future is to deter Taiwan independence rather than compel unification,’ note Richard Bush (Brookings (retired)), Bonnie Glaser (German Marshall Fund in America), and Ryan Hass (Brookings Institution)
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May 7, 2021
'Another China-Related Risk for Investors & Corporations: Taiwan'
"Taiwan poses the biggest geopolitical risk in Asia and is likely to only increase, a reason it has to be built into investors’ [and corporates' models]" according to Arthur Kroeber, head of research at Gavekal.
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May 5, 2021
'Western companies in China succumb to Stockholm syndrome'
‘Senator Marco Rubio of Florida has a point when he calls Delta Air Lines “the height of hypocrisy” for opposing voter legislation in the US state of Georgia while partnering with a government he accuses of being “actively engaged in genocide” in Xinjiang.’
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May 4, 2021
'The Surprising Strength of Chinese-Japanese Ties'
At their summit in April, ‘after years of veiled messaging Japanese Prime Minister Yoshihide Suga U.S. President Joe Biden, ‘formally acknowledged that they are working together to deter China’s military power in Asia and compete with China economically.’
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May 3, 2021
'How Will the Digital Renminbi Change China?'
‘China's new digital renminbi by itself will not help the currency to challenge the US dollar’s global dominance.’ ‘Its true significance instead lies in its potential to shift the competitive balance of power between the country’s technology giants and traditional banks.’
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May 2, 2021
'Fanning the Flames of War'
I recently received an email from a former U.S. ambassador and influential senior foreign policy expert taking me to task for publishing so many hawkish posts about U.S. policy toward China in the ‘China Macro Reporter.’ These are, he said, ‘in some ways fanning the flames of a potential war. Please back down, at least a bit.’ ‘This is not the Malcolm I remember or know,’ he ended.
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May 2, 2021
‘A trend for hostility toward China, inflamed under Trump, is a recipe for American failure’
‘A trend for hostility toward China, inflamed under Trump, is a recipe for American failure.’ ‘Hostility toward China, much of it misinformed historically and strategically, has deepened in the United States in recent years, with a consensus hardening among both Republicans and Democrats that China is at root an adversary that must be thwarted.’ ‘Four years under President Donald Trump have enlarged and inflamed that trend, but it is a recipe for American failure.’ ‘The Joe Biden administration needs to seriously rethink Washington’s approach to Beijing.’
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April 30, 2021
'World Economic Outlook, April 2021: Managing Divergent Recoveries'
‘The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.
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April 29, 2021
Biden China Policy: What We Know at the 100 Day Mark
Friday, April 30, marks 100 days of the Biden Presidency.On Thursday, President Biden gave a speech to a Joint Session of Congress that summed up many of policies – including those on China - as he nears the 100-day mark.And several major media outlets and think tanks are getting an early start on their analyses.Here's Senator Lindsey Graham: "I'm not very impressed with the first 100 days.”‘ "He's been a disaster on foreign policy.” ’‘ “Russia and China are already pushing him around, so I'm very worried." ’
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April 29, 2021
'Biden’s First 100 Days: Setting the Table for U.S.-China Strategic Competition'
‘Biden is focused on accumulating as much leverage as possible to deal with China from a position of strength and to dispel the growing Chinese perception that the United States is a power in decline.’
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April 29, 2021
'What Joe Biden Said About China in His First Speech to Joint Session of Congress'
“We’re in competition with China and other countries to win the 21st Century.”
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April 29, 2021
'Biden's Speech Calls for U.S. to Take On China and Russia'
‘President Biden justified his broad vision to remake the American economy as the necessary step to survive long-run competition with China
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April 29, 2021
'What does Biden’s first 100 days tell us about his approach to China?'
‘What we have learned from the first 100 days is that we are likely to have both a confrontational and competitive relationship with China, similar to Trump’s policy but with some important nuances.’
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April 29, 2021
'China's Response to Biden's Speech'
‘It is natural for the two sides to have competition in some fields, but we should advocate fair competition, like competing with each other for excellence in a racing field, not beating each other on a wrestling arena.’
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April 26, 2021
'The New Age of Autarky'
‘The United States, China, and India are each now engaged in what seems like a paradoxical enterprise: the quest to increase their global status while also turning inward to become more self-sufficient.’
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April 26, 2021
'China Inside Out: A Conversation with Susan Shirk & Tony Saich'
‘The centralization of power, quite predictably, leads to this kind of echo chamber effect, which is really quite dangerous. And it's something that we should be factoring in when we think about how to deal with China now.’
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April 24, 2021
'Xinhua News Agency on the "Strategic Competition Act of 2021" in the U.S.' | 新华社评美“2021年战略竞争法案”
‘The bill is full of Cold War mentality and ideological prejudice, wantonly misinterpreting, slandering and discrediting China's development strategy and domestic and foreign policies, and grossly interfering in China's internal affairs.’
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April 23, 2021
'A new era of bipartisanship on China in Congress?
‘The Strategic Competition Act codifies a bipartisan U.S. position on a range of China-related issues and telegraphs to U.S. allies the federal government is unified.’
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April 23, 2021
'Xi at the Climate Summit: Domestic Obstacles to Carbon Neutrality'
‘Xi’s reticence at the summit could be driven by domestic considerations. He needs to balance divergent interests between domestic industrial groups and international expectations, the need to show China’s green image and also not be seen as caving to U.S. diplomatic pressure.’
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April 21, 2021
‘Scenario One & Two: Xi Steps Down'
‘In this scenario, Xi thwarts the current consensus by handing over his leadership positions to at least one individual from the current Politburo Standing Committee (as per existing regulations).’
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April 21, 2021
'Threat of Chinese sanctions tests Japan's resolve on Taiwan'
"We advise Japan to stay away from the Taiwan question. The deeper it is embroiled in, the bigger the price it will pay." Communist Party-backed Global Times' editorial.
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April 21, 2021
‘Scenario Four: Unexpected Death or Incapacitation'
‘Even if the CCP’s claim that Xi Jinping has no designs to remain in office for life is true, his evisceration of succession norms leaves the country ill-prepared for his sudden death or incapacitation.’
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April 21, 2021
‘Scenario Three: Leadership Challenge or Coup
‘By removing de jure term limits on the office of the presidency — and thus far refusing to nominate his successor for this and his other leadership positions — Xi has solidified his own authority at the expense of the most important political reform of the last four decades: the regular and peaceful transfer of power.’
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April 20, 2021
'Xi calls for new world order (again)'
‘We must not let the rules set by one or a few countries be imposed on others, or allow unilateralism pursued by certain countries [read America] to set the pace for the whole world.’
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April 20, 2021
'Beijing won total control of Hong Kong. Now, the "brainwashing" begins.'
April 15 was not a normal Thursday in Hong Kong. That occasion, the first “National Security Education Day” since China imposed a tough security law in June, was the most visible display of Hong Kong’s fall from a relatively free, boisterous territory to an ­Orwellian place that resembles the repressive mainland.’
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April 19, 2021
‘The US-Japan Joint Statement grossly interferes in China's domestic affairs'
‘The US-Japan Joint Leaders' Statement grossly interferes in China's domestic affairs and severely violates basic norms governing international relations. China deplores and rejects it.’
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April 19, 2021
'Tokyo Flexes Its Talons'
‘The alliance with Japan is the single most important international relationship America has.’
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April 18, 2021
'Taiwan in US-Japan statement: show of resolve or diplomatic calculus?'
"The statement shunned more specific language like 'defend Taiwan' to avoid unnecessarily provoking China."
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April 17, 2021
'Is growth in China soaring or slowing?: The answer depends on how you calculate growth'
‘It was China’s fastest growth on record, underlining the strength of its recovery. Yet it also illustrates the oddities in how GDP is reported.’
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April 17, 2021
'Margaret Ng's Statement at Conclusion of Today's Trial'
‘There is no right so precious to the people of Hong Kong as the freedom of expression and the freedom of peaceful assembly.’
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April 16, 2021
U.S.-Japan Joint Leaders’ Statement: “U.S. - JAPAN GLOBAL PARTNERSHIP FOR A NEW ERA”
‘President Biden and Prime Minister Suga exchanged views on the impact of China’s actions on peace and prosperity in the Indo-Pacific region and the world, and shared their concerns over Chinese activities that are inconsistent with the international rules-based order, including the use of economic and other forms of coercion.’
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‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit

‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
by

Malcolm Riddell

|

CHINADebate

July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
The Honorable William Zarit

Here's a break from hearing my views.

This issue highlights the insights of China expert, Bill Zarit:

  • Career Minister, U.S. Foreign Service (retired)
  • former Chairman, AmCham China
  • Now, Senior Counselor at The Cohen Group, a consultancy founded by former Secretary of Defense William Cohen.

Fascinating and useful insights from a leading China expert from on the ground in Beijing and Washington.

  • You will find the edited transcript of our conversation, below.

‘US, China Dig In Despite Hopes for Thaw’ reads a headline from Voice of America.

  • ‘The United States and China appear no closer to easing mounting tensions despite a recent flurry of diplomatic activity by high-profile U.S. officials to the Indo-Pacific region.’

Still, as Bill Zarit pointed out to me:

  • ‘U.S.-China government-to-government communication - is resuming.’

‘And the direction is for more and better communication.’

  • ‘This is one of the critical points of getting the relationship back on track.’

‘Though I don’t see much changing from the Chinese side during its present administration,’

  • ‘We can still communicate.’
  • ‘We can also find common ground to help lower the temperature and avoid serious conflict.’

One reason the Biden administration isn’t making much headway with communication is China’s appraisal of the U.S. side of the relationship.

  • ‘In so many of the meetings I have had in China,’ Bill says, ‘Chinese officials and former officials, with only one exception, blame the U.S. entirely for the deteriorating relationship.’

‘From these meetings, as well as my own observations, I don't see that much is going to change with the way China is looking at the US during the current Chinese administration.’

  • ‘With continuity of leadership in China, we're going to have a similar trajectory.’

That trajectory might change if U.S. communication were to include full U.S. responsibility for scuttling the relationship and promises to meet China ‘halfway.’

  • Since that isn’t going to happen, I don’t have much hope for progress.

Instead the Biden administration is signaling it wants to communicate but only as it strengthens itself.

  • ‘"Deterrence today is real, and deterrence is strong," Ely Ratner, U.S. assistant secretary of defense for Indo-Pacific security affairs, told lawmakers Thursday during a hearing focused on Washington’s China policy,’ reports VOA.

‘Speaking alongside Ratner, Daniel Kritenbrink, assistant secretary of state for East Asian and Pacific affairs, told lawmakers:’

  • ‘ "Intense competition requires intense diplomacy," he said. "We are committed to managing this competition responsibly and to maintaining open lines of communication with the PRC.” ’

Communication, like deterrence, can be seen as a tactic.

  • Tactics to deal with China the Biden administration has – a strategy, not so much.

‘From what I've seen, the U.S. doesn't seem to have a China strategy,’ says Bill.

  • ‘Now, we've got tactics.'
  • ‘But we really don't have an end game.’

He contrasts this with China.

  • ‘The Chinese, on the other hand, certainly have a strategy, and they're putting all of their efforts into realizing the goals of the strategy: modernization, becoming a major power in the world, and “common prosperity” ’ - to name just three.

These are a few of the many insights Bill Zarit shared with me during two long conversations.

  • Bill Zarit is more formally the ‘Honorable William Zarit,’ having retired from the U.S. Foreign Service with the rank of ‘Career Minister’ (the equivalent of the U.S. Army/Marine rank of lieutenant general).
  • Today, he is Senior Counselor at The Cohen Group, a consultancy founded by former Secretary of Defense William Cohen, ‘where Zarit advises western multinationals working in the Chinese commercial market.’
  • From long experience living and working in China, he is among the most astute observers of China today.
  • (You can find Bill’s bio here.)

Bill's latest insights derive from three recent activities:

  • He has just returned from five months in China (where he had lived for many years previously and now splits his time between there and the U.S.). While in China, he met with senior Chinese officials and heads of foreign businesses.
  • As a former Chairman of AmCham China, he participated in AmCham China’s annual weeklong ‘Washington Doorknock,’ where he met with senior administration officials, and legislators, and think tanks to gage the contours of U.S. policy toward China and to provide input from those on the ground in China.
  • He spoke at and took part in the U.S. Chamber / AmCham China – ‘Annual China Business Conference’ (a conference, Bill believes is the best of its kind), sharing observations and absorbing the thoughts of other experts on the beleaguered relationship.

He has consolidated his thoughts from these three events into ‘Eight Points.’

  • Bill agreed to let me share them here on condition that I make clear: He is speaking for himself and not for AmCham China or The Cohen Group.

Before I get to the Eight Points, I realized as Bill and spoke that sprinkled throughout his comments were phrases such as:

  • ‘For me, goal number one is what is in the interest – short, medium, and long term - of the United States.’
  • ‘To stay competitive globally and to the benefit of the country, U.S. companies need to be in China.’
  • ‘The point is: How do we work with China in the interests of the United States?’

Taken together, I sum all these up into a touchstone:

  • ‘Does it benefit the U.S.?’

This is a deceptively powerful way to frame discussion of an issue.

  • The question doesn’t suggest an answer.
  • But it sets up a useful starting point for analysis of policy and action.
  • And it narrows the path for the sides to talk past each other.

An analysis that begins with Bill’s question - ‘Does it benefit the U.S.?’ – changes the focus and tenor of the discussion.

  • It moves away from the all too common and not very useful (except politically) China-bashing to a more dispassionate consideration of the issues.
  • May not feel as good but should lead to better policies.

Next time you read about a new policy toward China or a comment from an official or legislator – or are just thinking about a China policy – ask Bill’s question:

  • ‘Does it benefit the U.S.?’ - and see if you don't arrive at a sharper understanding.

On to Bill Zarit’s Eight Points:

Point 1 | China blames the U.S.

‘In so many of the meetings I have had in China,’ Bill says, ‘Chinese officials and former officials, with only one exception, blame the U.S. entirely for the deteriorating relationship.’

  • ‘Most of them really believe that the U.S. that is responsible for the deterioration of this relationship.’
  • ‘Propaganda plays a role, but certainly also divergent historical and cultural viewpoints.'

‘In the US, we tend to blame China for the disputes.’

  • ‘But I think we are more clear-eyed, and realize that it is both sides who are involved in the deterioration of the relationship.’

‘And the fact is, both sides are responsible.’

  • ‘And both sides have to approach the problems looking at it that way.’

‘From these meetings, as well as my own observations, I don't see that much is going to change with the way China is looking at the US during the current Chinese administration.’

  • ‘With continuity of leadership in China, we're going to have a similar trajectory.’

Point 2 | ‘The U.S. has tactics but doesn’t seem to have a China strategy.’

‘From what I've seen, the US doesn't seem to have a China strategy.’

  • ‘Now, we've got tactics.’
  • ‘And some of those tactics are competing in areas where we need to compete, aligning where we should be able to cooperate.’
  • ‘But we really don't have an end game.’

‘The Chinese, on the other hand, certainly have a strategy, and they're putting all of their efforts into realizing the goals of the strategy.’

  • ‘Modernization, becoming a modern society and a modern economy by 2049.
  • ‘Becoming a major power in the world. The regional power for Asia at least and even more influential throughout the world.’
  • ‘The “common prosperity” effort - which frankly is hard to fault as a concept - to continue to bring people out of poverty and to have the majority of the people in the country living a reasonably good life.’
  • ‘This is all fairly clear.’

‘With all this in mind, I know that with such rapid changes taking place in China, plus an aggressive leadership there, it's difficult to have a clear strategy.’

  • ‘But isn’t that when strategy is needed even more?’
  • ‘We need to get clear on where the US wants to be in five, ten years vis-à-vis China, and the rest of the world for that matter.'
  • ‘And don’t we need to focus on America’s long-term interests in this world that at times seems to be upside down.’

‘Do we know how to deal with a China that is increasingly strong and influential - and to deal with it in a way that's going to benefit the United States?’

  • ‘Because for me priority number one is the interest of the United States, the long-term interests of the United States.’

Point 3 | ‘The presence of U.S. businesses in China is in the interest of the U.S.’

‘The U.S. business presence in China is in the interests of the U.S.’

  • ‘To stay competitive globally and to the benefit of the country, U.S. companies need to be in China.’
  • ‘I think this is an important point that we need to stress with the Hill and the administration.’

‘That said, we hear certain US officials claim that our companies are supporting the Chinese Communist Party and that these firms need to get out of China.’

  • ‘U.S. businesses that have been in China for 20 or 30 years are now under attack by some of our own political leadership.’

‘How is it that U.S. companies are supporting the Chinese Communist Party?’

  • ‘Some say since our companies are doing business in China, they are paying taxes, employing people, transferring technology, all of which benefits the Chinese economy.’

‘Those who are critical of U.S. business in China will make the argument that, by extension, we are also supporting the Chinese Communist Party.’

  • ‘But I feel that the benefits far outweigh the risk.’

‘To stay competitive - and again to the benefit of our country - U.S. companies need to be in China.’

  • ‘And that’s what we need to stress with the Hill and even with the administration.’

‘Here there are two of the main benefits to the U.S.:’

  1. ‘China is a “stress test” or “fitness center” for U.S. companies (an idea I stole from Joerg Wuttke, who just stepped down as long-time president of the EU Chamber of Commerce in China).’
  2. ‘U.S. companies influence China through the way we manage our companies, including our democratic values, labor rights, environmental protection, rule of law, intellectual property protection, and anti-corruption.’

‘Let me first explain the idea of China as a “stress test” or a “fitness center” for U.S. companies operating there.’

  • ‘China is becoming one of the most competitive markets in the world.’
  • ‘At the same time, China’s marketplace is becoming more discerning.’
  • And, in response, the Chinese are producing increasingly competitive products and technologies.’

‘Because of these realities, operating in China focuses and sharpens U.S. companies.’

  • ‘If you're competing successfully in China you will have a much better chance of competing globally.’
  • ‘And without that competitive edge, it's going to be very difficult for our companies to compete globally.’

‘Second, U.S. companies encourage the adoption of U.S. values in China.’

  • ‘We run our companies with democratic values, including labor rights and a sense of rule of law.’
  • ‘We also operate with respect for intellectual property and environmental protection, and with a definite respect for anti-corruption.’
  • ‘And the more U.S. companies influence China to adopt these values, the greater the benefit to the U.S.’

Point 4 | ‘We are witnessing cognitive dissonance in China. China is in the midst of a charm offensive to attract foreign investment and foreign technology; at the same, we are seeing raids on companies.’

‘We seem to be getting some cognitive dissonance out of China.’

‘On the one hand, coming from the top in China is a charm offensive targeting foreign business.’

  • ‘The Chinese leadership has realized that for economic and development reasons, foreign investment and foreign technology need to continue to come into China.’
  • ‘So you hear, for example, the leadership promoting foreign investment in China.’

‘Then on the other hand, China is passing laws - anti-espionage laws, national security laws, cyber security laws - that are very restrictive to data sharing, data flows.’

  • ‘Now it seems that economic data of all kinds is such a sensitive national security issue that China is restricting them.’

'Based on these laws, the Chinese are investigating and raiding U.S. companies that provide data and other information to businesses, and taking Chinese employees into custody, all without explaining what's going on.’

  • ‘Research and consulting companies in China are the eyes and the ears of foreign investors.’

‘For investment to come into China - for Western companies or foreign companies to feel comfortable and to want to continue working in China - they need to access to data.’

  • ‘Investors just want to know what's going on in China economically.’
  • ‘This is normal. This is not espionage.’

‘Frankly, I haven't heard anything from the China side that would help explain this cognitive dissonance.’

  • ‘I'm not sure where this is coming from. Could it be China’s security people are not talking with the economic people?’

‘We do know, of course, that for the present Chinese administration, national security is job number one.’

  • ‘The economy is still important, but it seems to be secondary now to political and security considerations.’

‘The bottom line is that national security really trumps everything else.'

  • ‘And again, this is antithetical to what China is trying to do on the economic development side.’

Point 5 | ‘Communication is critical.’

‘During the weeklong AmCham China ‘Doorknock’ in Washington, there was little good news about the U.S.-China relationship from the administration, the Hill, or think tanks.’

  • ‘That said, communication – U.S.-China government-to-government communication - is resuming.’

‘And the direction is for more and better communication.’

  • ‘This is one of the critical points of getting the relationship back on track.’

‘Though I don’t see much changing from the Chinese side during its present administration,'

  • 'We can still communicate.’
  • ‘We can also find common ground to help lower the temperature and avoid serious conflict.’ 

Point 6 | ‘Moderate U.S. Congress members agree to keeping the trade lanes open with certain parameters, having better communications with China, and working with allies in dealing with China.’

‘The AmCham China ‘Doorknock’ team had meetings on the Hill with a number of thoughtful, moderate, reasonable legislators and staff members.’

  • ‘The response was better than I had expected.’
  • ‘In a word, I was encouraged.’

‘That’s because what we heard in most of the meetings was very much in agreement with what we were thinking:’

  • ‘Keep the trade lanes open with certain parameters - because keeping those trade lanes open benefits our country;’
  • ‘Have more communication at all levels of the government. And we seem to be going in that direction;’
  • ‘Work with allies and partners - something that this administration certainly has done successfully; and’
  • ‘Restart people-to-people engagement with China.’

‘Moderate U.S. Congress members met with us, as did some others who are tougher on China, yet reasonable.’ 

  • ‘But unfortunately few people who are really hawkish on China did (would?) meet with us.

‘A note regarding the risk of war, my sense is that we're not going to go to war.’

  • ‘I don't see how going to war is in the interest of anybody.’
  • ‘And I would assume that most of our policymakers agree with that.’

‘But from the rhetoric we have heard on the Hill and elsewhere in Washington, I don't think we can totally assume that everyone wants to avoid that.’

  • ‘There is talk about going to war with China – though it seems to me that much of it is just performative.’

‘Performative or not, when the Chinese hear it, they're alarmed.’

Point 7 | ‘The House Select Committee on the Chinese Communist Party seems to be anti-China, believing that everything China does is bad.’

‘The  Select Committee on the Chinese Communist Party appears to be dominated by anti-China folks.’

  • ‘The Committee seems to be anti-China, believing that everything China does is bad.’
  • ‘And I'm not so sure that that's going to be all that constructive.’

‘We met with the leadership of the Select Committee on the Chinese Communist Party.’

  • ‘My take on the Select Committee - having watched the initial hearing – is how one-sided it seemed to me.’

‘The folks in Congress and especially the folks on the Select Committee are saying that it's bipartisan, and I agree.’

  • ‘Also there is room within the committee for members to have differences of opinion, some more hawkish, some less hawkish.’

‘But while bipartisan, I don't think it's unbiased.’

  • ‘This is based on the witnesses called for the first hearing: They were all China Hawks.’

‘Yes, I agree with much of what the China Hawk witnesses said. There is usually at least a kernel of truth.’

  • ‘But by just inviting China Hawks as witnesses, it looks as if everything China does is bad.’
  • ‘And that is not necessarily true. I don't think that's true.’
  • ‘Going forward, I hope the Select Committee will be more evenhanded.’

‘I mentioned to some Select Committee folks that it seems very anti-China.’

  • ‘And there was pushback.’

‘In defense of the Committee leadership and the people who are speaking for the committee, the committee is inviting companies and other folks to later hearings.’

‘I would hope that they would also listen to folks who are on the ground in China.’

  • ‘It's not that we are biased in favor of China - that's not the point.’

‘The point is:’

  • ‘How do we work with China to the benefit of the United States?’

Point 8 | ‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’

‘I agree that there is a need for the U.S. to have certain outbound investment controls.’

  • ‘I know that that flies in the face of free investment flows and so forth.’

‘But I think under the present circumstances that we do need to protect our technology.'

  • ‘And this is one way to do it.’

‘The folks who are making policy and implementing policy on a national review of outward investment understand that it needs to be targeted and narrow.’

  • ‘And that we need to work in conjunction with our allies and partners.’

‘So I was encouraged to hear - from the administration and from people very intimately involved with putting these policies together - that that's how this investment review is going to go.’