Shane Leary joins Miles Yu to discuss the long-awaited meeting between President Biden and Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation Summit in San Francisco, the importance and challenge of establishing a military-to-military communications hotline with China, and US Treasury Secretary Janet Yellen’s recent statements regarding de-coupling. Follow the China Center's work at https://www.hudson.org/china-center
Shane Leary joins Miles Yu to discuss the long-awaited meeting between President Biden and Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation Summit in San Francisco, the importance and challenge of establishing a military-to-military communications hotline with China, and US Treasury Secretary Janet Yellen’s recent statements regarding de-coupling.
Follow the China Center's work at https://www.hudson.org/china-center
Miles Yu:
Welcome to China Insider, a podcast from Hudson Institute's China Center.
Shane Leary:
It's Tuesday, November 14th, and we have three topics this week. The first is the upcoming meeting with Biden and Xi Jinping and what this means for US-China relations going forward. The second is the history and importance of military-to-military communications hotlines and how China's ideological regime makes these nearly impossible. Third is the future of US-China economic relations in light of recent statements from US Treasury secretary Janet Yellen. Miles, how are you?
Miles Yu:
Very good. Shane. Nice to be with you again.
Shane Leary:
Yes, wonderful. Well, so for our first topic, there has been a lot of hype around the meeting between President Biden and Xi Jinping, which will take place tomorrow in San Francisco, and I'm sure our listeners are eager to hear your thoughts on this. We of course, have had the usual litany of hopes and expectations, some hoping this could bring a thaw in US-China relations. Of course, there's the optimism surrounding a normalization of high-level military communications or a crisis hotline, which has been on the docket for every cabinet level meeting we've seen this past year. And then of course there's the desire to improve our working relationship on specific issues like climate change. So Miles, I want to start with an initial two questions. First, what are your expectations broadly for this meeting, that is how significant do you think this could be in terms of US channel relations? And second, what do we know about the agenda thus far and what's on the table?
Miles Yu:
You look at the hype, you use the word hype to describe it. That's precisely what it is. This is not supposed to be a historical meeting between the two leaders of the two countries because they have been in communication in the last year, at least they have once in body and then they have this extensive several hours long conversation in March. And then we have a lot of cabinet-levels visits. So the agendas were always there. Nobody should have any doubt. But the problem is China wants to make this as big as possible. So in the end, it is no longer an epic summit where dozens of leaders from the much larger Asia Pacific region come here. This whole event is now turned into a farce just between Xi and Biden. This is ridiculous because there's no substantial topics that have not been talked about already.
The question is whether China is going to be willing to solve those problems and that's the problem. There are many reasons for China to hype this for historic reasons, political reasons for China is of great utility, but the for United States, we just happen to play along. So that's not really great. Last Friday, Chinese foreign ministry spokesperson, Wang Yi answered, international press a question and he did a great amount of promoting about this meeting in his views. This is like Jesus meets Muhammad, Elvis meet Nixon. This is much bigger than that. And this is what he said this summit he used the word summit is not a meeting. It's supposed to be a meeting on the sidelines, right? It's not even a main agenda of epic conference. And one we said this summit between Biden and Xi will be, and I quote of strategic all dimensional and the direction redefining importance. This is just a little bit too much. Why does China have to hype this? Well, because every time in moments like this, Chinese Supreme leader need international forum to salvage domestic credibility and legitimacy that has lost due to some of the very bad policies.
I can think of three major movements in recent US-China relationship. One is in the midst of the cultural revolution. In 1970s, Mao almost destroyed the country. The country was brought to the brink of collapse and he has lost a lot of credibility and legitimacy. Well, who salvage that? It's a Richard Nixon. So he went to China. China deliberately hyped this Nixon-Mao meeting what was supposed to be very transactional because Nixon on his mind to ask China to basically help United States get out of Vietnam so his 1972 reelection would be very good, but China hyped this whole thing. And so it is in the eye of the Chinese people that their leader who has screwed up the country finally gained international respect. Second moment was right after Tianmen massacre. That was such a big blow to the Chinese people's confidence in the Communist party's leadership and credibility.
So who salvage that? That's why right after Tianmen Massacre, China had this need to hype up this dialogue and a strategic communication with the American presidency. So we did that and that was a mistake. Right now, this is the third moment that when Chinese Communist party is facing legitimacy and credibility problem, that is Xi Jinping's 10-year rule in China has once again brought China's economy to near collapse. And he is hated by more people inside and outside of China since Mao. So he needs credibility and legitimacy restoration. This is why they constantly beg the United States to hype up this kind of a strategic dialogue between Biden and Xi. So this is a very cynical play of Americans naivete in my view. Secondly, secondly, if you look at what China is doing in the Pacific region on a weekly, even daily basis, the Chinese military is harassing and intimidating many of the neighbors, the Philippines, Japan, and Taiwan of course, and India.
So the tensions were there and there are really, really not really popular in the region. Most of the countries, China is bullying our Americas friends and allies. So some is like this in San Francisco, hobnobbing, dining, and wining serve a very particular purpose that is to demoralize American allies in the region that are daily intimidated and harassed by China because United States is only country capable of countering China's aggression in the region. So that's why it is a very cynical play. Again, I would also say a forum like this is a very good opportunity for Xi Jinping to sell to the world, the Chinese Communist Party model of governance. His here make a big speech and denouncing a global order full of conflict and the instability, and China is the only country that can save the world. Keep in mind Xi Jinping's public image, his own self designation in China is that he is the only global leader capable of running the world, he is direction provider to the world. So that's basically he want to fulfill that kind of self-promotion, self-designation in San Francisco. And of course Xi Jinping also knows that the current administration has this extreme aversion to confrontation. He believe the current administration full of nice guys not really ready psychologically for conflict with China. So that's why he's come here to exploit that kind of psychology. So I think overall there is very little substance, but there's mostly for the optics and to serve other purposes. Most of it is almost like a political warfare in my view.
Shane Leary:
So given what you've just outlined in terms of China stealing the show from the broader economic summit and what Xi Jinping hopes to gain optically from this shifting to the US perspective, what is the best we could hope to get out of a meeting like this? And given what China stands to gain from a meeting like this, how would you advise the president to go into this meeting and approach this?
Miles Yu:
I don't why we agreed to Chinese demand that to make this a meeting to summit of strategic importance. There is none. American administration's major approach dealing with advertisers like China is to seek specific concrete result. In other words, everything is business-like is transactional. China doesn't look that way. They care far less about specific improvements, but they want to elevate everything to something that's not really there. So it's very abstract and hollow. And if you push China really, really hard on specific promises, specific policy changes, they'll do it. But they really didn't mean it like the pledge to get rid of militarization in the South China Sea, like all the trade policies. I think Ryan House right now is pushing for this weaponization of artificial intelligence. That's a good thing, but you do not really have to believe what China is going to promise in this country. China is not really ready and unwilling to implement anything design.
Shane Leary:
Looking at the broader picture of US China relations, I mean we hear a lot of dismay about the current relationship between the two countries, regret that it's soured and hope for a thaw. But I'd like to ask you broadly how desirable is a thaw at this time? And I just want to frame that a little bit. I mean, obviously no one wants tension to escalate too far, but you've spoken in the need for candid diplomacy with China, and it seems to me that given the fundamental ideological differences between our systems and coming off of decades of a naive approach to this relationship, there's bound to be friction, there's bound to be growing pains, if you will. So could we say that the tension we're feeling right now is actually an indication that in some ways we've righted our approach to dealing with China? And I guess if so, what should that relationship look like going forward?
Miles Yu:
Well, the reason why I spent several minutes earlier to talk about China's motive and intentions, very important. And I don't think in Washington and in many other Western capitals, we have a sufficient understanding of China's motives. We treat China like a normal country like any other one. So therefore we engage China from a transactional point of view. We want China to do this, this A, B, C, D, it's very specific. China doesn't think that way. It has something much larger. They want to enhance the survivability of the regime, number one. They want to demoralize Americans allies. And speaking of which, this is very important. Why is that America not counter China's daily bullying and intimidation operations in our region, we have not taken any actions because we fear China might retaliate, that fear can be exploited by the Chinese and they have been doing so admirably.
You ask for the right approach. I think right now we have to deal with China like a normal country. I would never have agreed to China's demand that to move the meeting between Biden and Xi during the actual agenda of the epic to Wednesday, which is ahead of the main agenda of epic. So this sounds like this is far more important, this bilateral meeting. So this is all something, even small procedure can be manipulated. Secondly, we have to deal with China through candor. In the previous administration, we just told the Chinese what the real issues are. If you do not agree to solving specific issue agenda, we are willing to perfectly walk away. So a lot of times their best strategy is to ignore China for a moment rather than to deal with them. So that's why it's very important. China also realized it's one of the biggest weaknesses and vulnerability is that Chinese economy is so intrinsically related to international free trading system. So they cannot afford being totally cut off. So we have a lot of leverage and cards in hand and good cards we have, but we have not played very smartly.
Shane Leary:
For our next topic, I want to turn our attention more directly to what has been a goal in every cabinet level meeting we've seen in the past year that is a reestablishment of military-to-military communications. This of course will be a top agenda item for Biden and Xi this week, which we knew. But this past weekend this was confirmed by White House National security advisor Jake Sullivan in statements regarding the meeting. So Miles, I want to give you an opportunity to maybe zoom out a bit and talk about what these lines of communications have looked like historically with the People's Republic of China. Maybe even if you'd like, how these function during the Cold War with the Soviet Union and whether we've been incomparable situations before to where we find ourselves now that is lacking these lines of communication with a great power while tensions are increasing over a specific flashpoint like Taiwan.
Miles Yu:
That's a very, very important question and I think to establish the basic raw engagement to avoid misinterpretation and miscalculation of strategic intent of two adversaries, very, very important. You mentioned about Cold War, we have to understand the nature of our adversaries. China is a communist country, so was the Soviet Union. We have to understand in the communist system, the military commanders are not independent. They have no professional independence even on purely military matters. The party have total control, has total control of the military. We are very lucky we only had one case of success to contact the Soviet military during the entire Cold War to avert a disaster. That moment was very peculiar and we're lucky That was 1954. In 1954, the Chinese communist bombarded the Taiwanese held islands of Kimo and Maju for the first time. And President Eisenhower just tried to try his luck.
He picked up the phone, took over General Trukov in Moscow. That was the only time Trukov was able to convince the Soviet leadership party leadership to ask the Chinese Communist party to back off. The reason was because 1954, there was intense power struggle right after Stalin's death in 1953. So the Soviet union's military under Trukov could play a very important role. And then that was the only time we can see that. Similarly into this China no PLA commander could act independently to even pick up the phone call or to even pick a phone call, even place the phone call to his counterpart. In Washington, it's very, very difficult because PLA is strictly under the supreme leader himself. There's no way the CCP will allow any of its senior military leaders to have professional direct communication with the US counterparts or else the consequences will be very, very deadly.
And also, don't forget, if you don't believe me, I got to give you two examples. We had hotlines military-to-military hotlines in the nineties and the early 2000s, and none of them really proved to be working. In 1999, for example, there was a accident bombing of Chinese embassy in Belgrade, Yugoslavia. And we tried to contact their military. We tried to contact their leadership to no avail. And in 2001 there was EP-3 plane crash incident. There was a military-to-military hotline at the time. And our ambassador to China at the time was a US four-star admiral. His name is Prower, he become ambassador after as a retirement. The thinking was that since he a military, he could use his ambassador power to develop a professional relationship between Chinese military and his counterpart. He has some friends over there inside Chinese military.
But in both cases, 1999, 2001, the phone calls from military high commands in Washington. Only Hawaii went to China and then no Chinese military leader could dare to pick up the phone to answer the phone. So that military hotline is totally futile. So why even if Xi Jinping and the Biden signed agreement tomorrow or Wednesday or this week in San Francisco to establish a new hotline, the chances that Chinese side will pick up the phone during time of crisis are almost zero in my view. So I think the best way to communicate with the Chinese and military is to operationally repause the PLS provocation and the dangerous maneuvers and make sure that PLA understand every time their pilots or their ship captains harass American ships or American planes, there will be consequence, there will be cost to each PLA operators. We have to really control the operational domain. So another way we can deal with the China's military miscalculation is that we have to work out a joint patrol, a joint operation with all the countries in the region of like-minded countries to drill constantly to work on the rules of engagement and to enhance joint and multilateral interoperability to deal with the PLS road rage in air and on a sea. And that partly is deterrence, but also it's very practical. So we have not done that. And that's a pivot
Shane Leary:
For our last topic. I want to turn our attention to statements made by US treasury secretary Janet Yellen, who met with Chinese vice Premier Lan Fo’an this weekend in San Francisco. She stated very explicitly, we do not seek to decouple our economy from China's, which was a qualification after she expressed concern regarding Chinese firms facilitating the flow of equipment vital to Russia's military effort, stating this sort of behavior would be met with significant consequences. US-China economic relations are at the top of a lot of minds both in and outside of the beltway. What did you make of this meeting and her statements here?
Miles Yu:
Well, first of all, her statement is very soft and I think she did express something that's very admirable. There are two major objectives. One is to compete with China responsibly. And secondly, Ms. Yellen wants to intensify communication with her counterpart in China. Number three, secretary Yellen wants to create a healthy economic relationship with China. That's her words. And lastly, I think that she want to assure the Chinese and repeatedly even too excessively in my view, that the US would never seek decoupling from China. So those are my point. And my question is, yes, those are good intentions, but I don't think secretary Yellen is the ideal person to deliver this message. If I were President Biden, I would choose our ambassador to Japan, ambassador Emmanuel to do, because that'd be more strict and more straightforward and more powerful. But those ideas were expressed in her statement.
Now question is, is it possible to realize any of those agenda that objectives that particular yen mentioned without addressing the three basic economic realities of China? Number one, China is essentially a non-market economy. Number two, China is a hundred percent a communist monopoly. It's a communist country. Number three, China does have a economic and technological military ambition for global dominance. We have to keep the three things in mind when we're dealing with China, particularly on the economic ground as well. Let's just say she wants to compete with China responsibly. It's very, very difficult to do so because China views competition with the United States as a matter of life and death that is not bound to free market mechanisms. There is no way the nature of the current regime would allow China to behave responsibly. China will continue to conduct IPO theft militarization for global domination will continue to abuse or human rights will continue.
So we've been talking about with China, unless for more than half a decade, half a century, this kind of a consistency still will remain. Secondly, she wants anticipate communication with her counterpart, yes, to talk about specific issues, but which topics the United States and Secretary Yellen have not discussed intensely with the CCP leaders. All of them have been talked about. So it's not about the intensity of the communication, it's about total intransigency of the CCP. So a third thing, she wants to create a healthy economic relationship with China. Fantastic. We all want to, but China is controlled by the Chinese Communist Party. There's no property rights. Every company must comply with the CCP espionage and security organizations and their ridiculous security laws. There's a massive IPO stealing. We're talking about something, not transactional, but systemic and ideological because the United States and China are completely two different political and economic systems. We have to addressed that. And then finally, I want to say something about decoupling because Secretary Yellen said this emphatically multiple times. Well, since when did decoupling become a dirty word in Washington?
In my view, all the major trade and financial problems of the West stem from coupling international free market system with non-market, communist planned economic system. So in my view, coupling actually is the original thing. Secretary yelling is right, that the United States government does not seek decoupling, but decoupling is happening at the decent speed by Western companies and the foreign investors because China is basically on investible, that's decoupling whether Secretary Yellen likes it or not. So Chinese government knows this. That's one of the things that her counterpart deputy minister talks about constantly because Chinese economic reality forced China to face the issue of decoupling. And as a matter of fact, since I mentioned that every economic policy is actually a political policy in China. In fact, CCP actually views economic coupling with the West as a major political and ideological risk. So the CCP has already greatly reduced its coupling assets and projects with the West in general and the United States in particular.
For example, the total trade volume has dropped greatly between United States and China. The total US export to China constitutes only 7.5%. Only 17.9% of all US import from all countries is from China. That 17.9% of import from China is far smaller than the number, same number a few years ago. And this number actually placed in Mexico and Canada as the US is two top trading partners. China has fallen to the third. China's holding of US Treasury notes also witness a steady decline dropping to a mere 860 billion from well over 1 trillion just a few years ago. China's holding of US debt considers only about 11% of all US foreign debt. Japan is at the top right now. Japan's holding of American treasury notes considered 15%. So all I think both sides see the inevitable trend of decoupling. So for Secretary Janet Yellen to constantly emphasize that point, I don't think it's not really, square is not squaring with the reality because reality is not necessarily complied with American policy. Policy may not have a decoupling component, but the reality is different.
Shane Leary:
Well, I think that's a great note to end on. Miles, thanks so much for taking the time. Look forward to doing this again next week.
Miles Yu:
Alright, see you next week.
Shane Leary:
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