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Hearing on What Keeps Xi up at Night: Beijing's Internal and External Challenges HEARING ON WHAT KEEPS XI UP AT NIGHT: BEIJING'S INTERNAL AND EXTERNAL CHALLENGES HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION ONE HUNDRED SIXTEENTH CONGRESS FIRST SESSION THURSDAY, FEBRUARY 7, 2019 Printed for use of the United States-China Economic and Security Review Commission Available via the World Wide Web: www.uscc.gov UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON: 2019 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION CAROLYN BARTHOLOMEW, CHAIRMAN ROBIN CLEVELAND, VICE CHAIRMAN Commissioners: HON. CARTE P. GOODWIN MICHAEL A. MCDEVITT ROY D. KAMPHAUSEN HON. JAMES M. TALENT THEA MEI LEE MICHAEL R. WESSEL KENNETH LEWIS The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C. § 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 § 645 (regarding employment status of staff) & § 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of the “Consolidated Appropriations Resolution, 2003,” Pub L. No. 108-7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of the Commission); as amended by Public Law No. 109- 108 (H.R. 2862) (Nov. 22, 2005) (regarding responsibilities of Commission and applicability of FACA); as amended by Division J of the “Consolidated Appropriations Act, 2008,” Public Law Nol. 110-161 (December 26, 2007) (regarding responsibilities of the Commission, and changing the Annual Report due date from June to December); as amended by the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015, P.L. 113-291 (December 19, 2014) (regarding responsibilities of the Commission). The Commission’s full charter is available at www.uscc.gov. ii March 12, 2019 The Honorable Chuck Grassley President Pro Tempore of the Senate, Washington, DC 20510 The Honorable Nancy Pelosi Speaker of the House of Representatives, Washington, DC 20515 Dear Senator Grassley and Speaker Pelosi: We are writing to notify you of the Commission’s February 7, 2019 public hearing on “What Keeps Xi Up at Night: Beijing’s Internal and External Challenges.” The Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Pub. L. No. 106-398 (as amended by the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 § 1259b, Pub. L. No. 113-291) provides the basis for this hearing. At the hearing, the Commissioners received testimony from the following witnesses: Jude Blanchette, Senior Advisor and China Practice Lead, Crumpton Group; Timothy Heath, Senior International Defense Researcher, RAND Corporation; Andrew Wedeman, Professor, Department of Political Science, Georgia State University; Michael Hirson, Practice Head, China and Northeast Asia, Eurasia Group; Nicholas Borst, Vice President and Director of China Research, Seafarer Capital; Greg Levesque, Managing Director, Pointe Bello; Lieutenant Colonel Dennis Blasko, U.S. Army (Ret.), Independent Analyst; Rush Doshi, Brookings-Yale Postdoctoral Fellow; and Lindsey Ford, Director of Political-Security Affairs, Asia Society Policy Institute. This hearing examined the internal and external challenges the Chinese Communist Party (CCP) faces in its attempts to consolidate power at home and increase its influence abroad. The first panel explored the implications of President Xi and the CCP’s tightening control over economic and security policy making. The second panel examined China’s domestic challenges, considering China’s economic weakness and financial sector risks, the risks and benefits of China’s state-led economic policies, and the country’s reliance on a number of key foreign technologies. The third panel assessed China’s external challenges, focusing on the People’s Liberation Army’s shortcomings and the limits of Chinese soft, sharp, and hard power. The full transcript of the hearing, prepared statements, and supporting documents are posted to the Commission’s website, www.uscc.gov. Members and the staff of the Commission are available to provide more detailed briefings. We hope these materials will be helpful to the Congress as it continues its assessment of U.S.-China relations and their impact on U.S. security. The Commission will examine in greater depth these issues and the others in our statutory mandate this year. Our 2019 Annual Report will be submitted to Congress in November 2019. Should you have any questions, please do not hesitate to have your staff contact one of us or our Congressional Liaison, Leslie Tisdale Reagan, at 202-624-1496 or [email protected]. Sincerely yours, Carolyn Bartholomew Robin Cleveland Chairman Vice Chairman cc: Members of Congress and Congressional Staff CONTENTS THURSDAY, FEBRUARY 7, 2019 WHAT KEEPS XI UP AT NIGHT: BEIJING'S INTERNAL AND EXTERNAL CHALLENGES Opening Statement of Chairman Carolyn Bartholomew .....................................................6 Opening Statement of Senator Carte P. Goodwin (Hearing Co-Chair) .........................................................................................................7 Prepared Statement ...........................................................................................................8 Opening Statement of Senator James M. Talent (Hearing Co-Chair) .........................................................................................................9 Prepared Statement .........................................................................................................11 Panel I: The Threat from Within: “Party-ification” and Internal Threats to CCP Rule Panel I Introduction by Senator Carte P. Goodwin (Hearing Co-Chair) .......................................................................................................12 Statement of Jude Blanchette Senior Advisor and China Practice Lead, Crumpton Group ..........................................13 Prepared Statement .........................................................................................................16 Statement of Timothy Heath Senior International Defense Researcher, RAND Corporation......................................28 Prepared Statement .........................................................................................................30 Statement of Andrew Wedeman Professor, Department of Political Science, Georgia State University .........................44 Prepared Statement .........................................................................................................47 Panel I: Question and Answer............................................................................................60 Panel II: Domestic Dilemmas: Beijing’s Slowing Growth and Technological Dependency Panel II Introduction by Senator James M. Talent (Hearing Co-Chair) .......................................................................................................77 Statement of Michael Hirson Practice Head, China and Northeast Asia, Eurasia Group .............................................78 Prepared Statement .........................................................................................................81 Statement of Nicholas Borst Vice President and Director of China Research, Seafarer Capital ...............................100 Prepared Statement .......................................................................................................103 Statement of Greg Levesque Managing Director, Pointe Bello .................................................................................117 Prepared Statement .......................................................................................................119 Panel II: Question and Answer ........................................................................................139 iv Panel III: Backlash from Abroad: The Limits of Beijing’s Power to Shape its External Environment Panel III Introduction by Senator Carte P. Goodwin (Hearing Co-Chair) .....................................................................................................156 Statement of Lieutenant Colonel Dennis Blasko, U.S. Army (Ret.) Independent Analyst .....................................................................................................157 Prepared Statement .......................................................................................................159 Statement of Rush Doshi Brookings-Yale Postdoctoral Fellow ...........................................................................178 Prepared Statement .......................................................................................................181 Statement of Lindsey Ford Director of Political-Security Affairs, Asia Society Policy Institute ...........................194 Prepared Statement .......................................................................................................197 Panel III: Question and Answer ......................................................................................211 PUBLIC COMMENT SUBMITTED FOR THE RECORD Public comment submitted by Jean Public ......................................................................227 v WHAT KEEPS XI UP AT NIGHT: BEIJING’S INTERNAL AND EXTERNAL CHALLENGES THURSDAY, FEBRUARY 7, 2019 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION Washington,
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