American Enterprise Institute

Web event — The China nightmare: A conversation with Dan Blumenthal and Lt. Gen. H. R. McMaster

Introduction: Kori Schake, Director, Foreign and Defense Policy Studies, AEI

Remarks: Dan Blumenthal, Director, Asian Studies, AEI

Remarks: H. R. McMaster, Fouad and Michelle Ajami Senior Fellow,

2:30–3:30 p.m. Tuesday, November 17, 2020

Event page: https://www.aei.org/events/the-china-nightmare-a-conversation- with-dan-blumenthal-and-lt-gen-h-r-mcmaster/

Kori Schake: I’m Kori Schake, and I lead the Foreign and Defense Policy team at the American Enterprise Institute. And I have the pleasure today of moderating this conversation between two outstanding policymakers and scholars of China and the US-China relationship.

The first is Dan Blumenthal, who directs Asian studies here at AEI. He has worked in the Defense Department as senior director for China, Taiwan, and Mongolia. He’s been a commissioner on the congressionally mandated US-China Economic and Security Review Commission. And he is the author of a terrific new book, which is called “The China Nightmare: The Grand Ambitions of a Decaying State.”

And we are going to be talking about it with him and with retired Lieutenant General H.R. McMaster, former national security adviser, a distinguished soldier whose reputation in service was as one of the most innovative and adaptive minds in the American military. I’m delighted to have both of them with us here today. I’m sorry. I neglected to say, H. R. is also the author of a new book called “Battlegrounds: The Fight to Defend the Free World.”

So, it is a great joy to have you both here. Thank you both for making time to talk about China policy. And Dan Blumenthal, let’s start with you, my friend.

Dan Blumenthal: Well, thank you very much, Kori. Thanks for your leadership at AEI. Thank you so much, Gen. McMaster, for joining us as an ex-solider, as an author, as someone who really helped reshape China policy over the last few years. I think there are many people, who are also viewing this event, who worked with you to do that. And I’m very thankful, as we all are, to you for doing that.

So, “The China Nightmare: The Grand Ambitions of a Decaying State,” what does my book mean by that? Well, China certainly has grand ambitions and great power. But it also has weaknesses and vulnerabilities. And, in fact, if we read carefully Chinese language documents, they speak about these weaknesses very often. The nightmare, the tagline is “a strong nation, a strong power beset by weaknesses, a frustrated power, a strong but frustrated power poses a special kind of danger.” So, what is that danger?

Well, first, let’s start with the strengths, which are probably much well-known to this crowd, then the weaknesses. The strengths. Well, first of all, China is an empire. That’s key. It’s often overlooked. China is, arguably, the last remaining empire in the world. If you looked very carefully at a map of the last Chinese dynasty, the Qing dynasty, and juxtaposed that against a map of the People’s Republic of China today, they would look very, very similar. So, imagine that for a sec. Imagine if, for example, the Ottoman Empire, the Turks still claimed and ruled most of the Middle East and never broke up.

Important because China still claims many of the territories. Taiwan is considered the last holdout of the last Chinese dynasty. Hong Kong was considered that as well. Its behavior in Xinjiang and Tibet, multiethnic, multireligious places that were conquered in a very grisly, genocidal way during the Qing Dynasty, are considered places that China needs to keep under its hold to maintain this empire.

It’s a Leninist empire. It’s a Leninist empire, meaning Xi Jinping has exerted enormous, centralized control over this empire through Leninist means. It is no doubt that he is a

powerful figure. He has purged his enemies. He’s taken control of so many of the policymaking shops and policymaking bodies inside of China.

As I will get into very soon, this also pose as weaknesses. But he’s a powerful, powerful figure. And he’s enshrined in the constitution, if you want to call it that, of China that he has no successor. The regular succession process was supposed to be 2022, but now, he’s injected some instability into the system because we don’t know when the succession process will take place.

Okay. Strengths and ambitions. We know a lot about those. Military power. China’s become a lethal military force. The US military sometimes talks about how it’s afraid they could lose a war to China if it doesn’t start to compete more effectively at Taiwan Strait and other places. It’s not a passive military power. It uses military power every day at Taiwan Strait to intimidate Taiwan, in the South China Sea to push its territorial ambitions, around India, increasingly, its presence in the Middle East around oil-producing states to secure oil.

It is a power that wants to reshape the global order. It talks about this now openly. It uses terms that sound extremely beneficial to the world, benevolent, such as creating a community of common destiny or the Belt and Road Initiative, which we all know very much about. What China really means to do with these initiatives is to reshape the order, to create a geopolitical forum that replaces US alliance systems and puts China at the center of a network of new strategic partners that are part of this Belt and Road Initiative. It’s more geopolitical than it is economic. In that sense, it’s already made progress in its ambitions.

Other strategies and tactics include, as we’re all uncovering, including our friends in Australia and New Zealand and Europe, is the use of a sophisticated political network of influence, of Chinese agents trying to co-opt Western elites to subvert democracies and to bring Western elites more in line with China’s own policy and its own preferences. It has a very strong view, in short, of the way it wants the world order to look, much more authoritarian.

By definition, it would be much more corrupt if China does succeed, using technology as not for good purposes but for nefarious purposes, for the purposes China uses them at home to perfect authoritarianism. These are the ambitions and some of the strengths that China has. It’s competing with the United States. It is trying to diminish the influence of the United States in the Indo-Pacific, in particular, but elsewhere, as well.

But this is not the whole China story. And my book talks about this in some detail. China is also beset by weaknesses, insecurities, and vulnerabilities. It says so itself. In a leaked document in 2013, Document 9, it’s called in English, it identifies in some degree of detail just what it fears.

One of its biggest fears is what it calls Western spiritual pollution. What it means by that is that with all the contact and commerce with the West comes ideas about liberty and rule of law and governance. And Xi Jinping is cracking down on that sort of teaching in the education system, even in the business system, because it terribly fears the influence of Western ideas.

Another weakness is the economy has been slowing for a very long time. It’s not well- known, but in 2008 or 2009, depending on the way you calculate it, Xi’s predecessor, Hu

Jintao, decided to stop the process. Not decided — well, it’s under tremendous political pressure to stop the process of political and economic reform, very slow political reform, but economic market-based reform. So now, the state sector in China has come roaring back. And China talks about how it’s going to have a socialist market economy, socialism with Chinese characteristics that it wants to see the rest of the world adopt, a state-run system. It’s created a lot of debt in China.

Debt has doubled since 2008, a real drag on the economy. It’s slowing down even before COVID, structurally. Misallocation of capital, misallocation of land because of property rights. There’s still a lot of rural poverty. And, of course, there is the very vexing question of demography, the future of demography in China.

China’s getting old as we speak. It’s going to be the largest country to get old before it gets rich. Its demography will look like Europe’s by 2030. The only really growing cohort, age cohort, in China, according to well-respected demographers, is the 50- to 64-year-old cohort, which over generations will be very, very large. And if you think just about the public health strains on the system, the fiscal strains on the system, the productivity on the workforce, this is a key weakness in China and, frankly, not one that it’s doing very much about.

Good money is leaving China to the tune of at least $700 billion. It’s buying property in safe places like the United States and in Australia. Chinese elites are trying to send their kids abroad. They’re not betting on the future of China. And there’s more fractures inside the regime, as my book gets into in some detail.

The book gets into the detail about China’s struggle with legitimacy. Since it’s abandoned the Communist Revolution as its legitimacy, it’s terribly afraid that some equivalent of Gorbachev will take power who will make big mistakes and reform China too much. Xi Jinping is trying to fight against that.

Okay. So, what’s the nightmare? So, it’s strong and it’s weak, right? But just because it has its weaknesses, self-assessed, it doesn’t mean it’s just sitting back and looking inwardly to help solve those social problems. It’s acting aggressively on the international stage.

Let’s just take COVID-19 as one case study. Obviously, a prominent one right now. So, I argue that because China is so embedded in the international system, its own political maladies and infirmities cannot be contained to China. So, Wuhan officials, December of 2019, who were starting to realize they had an epidemic on their hands that could turn into a pandemic, were too afraid, because of the incentives in the political system, to report the problems to Xi Jinping. It clamped down on any bad news. The problem was festering in Wuhan. Anyone who was discussing it, anyone who was coming forward to say, “We might have a pandemic on our hands,” was silenced.

Obviously, we know what happened since then. Millions of people left Wuhan before the rest of the world was told about the drastic nature of this problem. Millions of people left and infected the rest of the world. Let me just say that we still don’t know to this day how many people were infected in China, how many people have died from the disease, what the real story of the economic wreckage is. We may never know.

So, the nightmare is that it cannot contain its own internal problems. It’s too embedded in the international system. But, again, a perfect case study of the fact that China does not sit still

when it’s under pressure. Xi Jinping is under tremendous pressure, I argue. Xi Jinping is facing an internal backlash at home. He’s being criticized by prominent figures whom he’s silencing, figures such as Ren Zhiqiang, a tycoon who had a following of millions of people. And he criticized Xi for being incompetent, an emperor who has no clothes.

Other prominent figures have been saying the same thing, that Xi cannot handle and mishandled COVID and is causing an international backlash against him. But Xi doesn’t back down from this pressure. In fact, he escalates.

So, during this same year that China’s been suffering from COVID, it has picked a fight with India. It is pressuring and bullying Australia for having the temerity to say, “We need a thorough investigation of the origins of COVID.” It is pressuring the Europeans to remove any language about Chinese disinformation campaigns around COVID. It is coercing and intimidating Taiwan as we speak. It marched into Hong Kong and removed the hope for any democracy in Hong Kong during this period of time. It continued its pressure in the South China Sea during this period. It continues brutality in Xinjiang.

So, the nightmare scenario is as Xi gets more frustrated, he will try to compensate with more external aggression. And that’s what we have been seeing.

Let me just wrap up, before I turn it over to Gen. McMaster for some comments and then to Kori for some questions and comments, by saying the book doesn’t have that many — let’s say it doesn’t have that many suggestions for policy. It has a way of thinking about policy and strategy, which is to say that any competitive strategy, by definition, has to put our strengths against China’s weaknesses, just like it puts its strengths against our weaknesses.

It has tremendous weaknesses, one of which is the fear of being encircled by democracies. There’s a lot more we can do to show China that that fear will come to fruition by working more closely with allies, by making sure that we keep our military power very strong around China. It’s afraid of overstretch. As I said before, it’s minding an empire. More emphasis on delegitimization of Xi’s actions in Xinjiang and elsewhere will force it to spend more to defend itself through propaganda and influence campaigns.

There are many more weaknesses we can press on. The key is to moderate China’s behavior. The key is to make sure China’s on defense and not offense and not posing greater threats to us, rather having to defend its own system, more pressure on Xi Jinping. And I hope to get more into that in the question and answer period.

Thank you very much. I hope you read the book. And I turn it over to Gen. McMaster.

H. R. McMaster: Hey, Dan, thanks for that excellent summary. And Kori, thanks for the opportunity to be with you and at AEI, a place that I have relied on for many, many years for the best scholarship and thinking about the challenges that we’re facing internationally. So, great to be at AEI. Great to be with you, Dan, and to celebrate this great gift you’ve given us here. You know, it’s not a happy story, necessarily, but it’s an important story, and it’s at the right time.

So, I’d just like to say that I think “The China Nightmare” is arriving just in time, just in time because it is a dangerous time, as Dan has just talked about, in connection with the increasing aggression of the Chinese Communist Party during the global pandemic. It’s dangerous

because this increasingly aggressive Chinese Communist Party is interacting as well, you know, with the change of administration here in the United States. It’s, I think, a dangerous time as the Chinese Communist Party leaders, despite these weaknesses and their fears and concerns, I think they may also believe that the United States is weakened these days, that they’re watching kind of the combination crises that we’re going through in connection with the pandemic, a recession, the, you know, social and political divisions laid bare by George Floyd’s murder and by our vitriolic partisan environment here during a presidential election.

I think it’s dangerous as well, you know, because those leaders of the Chinese Communist Party maybe believe they’re now in a position of relative advantage. And this anxiety that Dan describes so much, so well in the book may lead them to the belief that there is just only a fleeting window of opportunity that they have to take advantage of now or maybe between now and the Communist Party Congress in 2022. Dangerous because the party is not only accelerating its effort to extend and tighten its exclusive grip on power internally, but the party is also exporting more aggressively its authoritarian-mercantilist model as it employs this strategy of co-option, coercion, and concealment. I think it’s dangerous, of course, because this new tributary system that the party leaders envision aims to intimidate and create servile relationships that create exclusionary areas of primacy across the Indo-Pacific and beyond.

And it’s also dangerous because the strategy employs pernicious means of persuasion and, you know, sophisticated forms of economic aggression that threaten to reshape the international order and to bend it toward China’s interests. It’s dangerous, of course, because this new order would advance the Chinese Communist Party’s ambition to dominate the data-driven global economy and achieve supremacy over global communications and logistics infrastructure.

It’s dangerous because many leaders across the Indo-Pacific and the world, I think, are not doing enough to compete effectively. And I think some even today continue to help the party conceal its aggression. The party co-opts elites in free and open societies with, you know, false promises of impending liberalization and the lure of vast profits. I think we should maybe consider and work on together across the free world, the recent opening of China’s financial markets so investors can help the party fund its unprecedented peacetime military buildup, compensate for the weaknesses that Dan lays out in the book, especially those associated with the increasing levels of debt. And then, you know, we maybe ought to not help the party as much as we have in applying emerging technologies that are critical to achieving its vision of economic and military primacy and exporting its authoritarian- mercantilist model.

So, Dan’s book, as I mentioned, at the outset, it has arrived just in time. I think his book is a — it’s a call. It’s a call for us to wake up from our nightmare and realize that we do have agency and influence in this competition with the Chinese Communist Party. And Dan, you know, I think that what your book argues for, in large measure, is to turn what the party views as weaknesses, and the fact that we actually have a say in how we’re governed, rule of law, freedom of speech, and turn those into our competitive advantages. I think we have an approach to this competition that should be a bit introspective, as well as defending against the pernicious forms of aggression that we see the Chinese Communist Party engaged in.

But I think his book has arrived just in time, as well, for us to reject this false dilemma of how some have interpreted, you know, this Thucydides Trap. And I think this false dilemma

is one between, you know, either accommodating with the party or welcoming what would be a disastrous war. I think as Dan lays out in the book, there’s plenty of ground in between those extremes. And I would argue, again, that this approach of accommodation towards the party would actually make conflict more likely rather than the form of sensible competition that Dan advocates for in the book.

And, of course, his book has arrived just in time to provide a corrective to those in China and in the free world who would argue in favor of accommodating and just managing America’s and the free world’s decline because they see the party’s vast strength and overlook its weaknesses. And these are those who also regard the diverse and vast Chinese population as monolithic, which, of course, it’s not. His book has arrived, I think, just in time for a new administration, which will no doubt face continued Chinese Communist Party aggression, combined with false promises of cooperation, on issues like climate change or on North Korea’s nuclear and missile programs.

Dan’s argument for maintaining a truly competitive strategy informed by not only the grave threat of the party’s designs and the grand ambitions that Dan lays out in the first chapter of the book, but also the profound weaknesses, I think, is extremely compelling. So, we are in Dan’s debt for helping us wake up from our nightmare and realizing if we do not compete effectively, and if the Chinese Communist Party succeeds in realizing those big ambitions that Dan describes, that our world will be less free, less prosperous, and less safe.

So, we have work to do. Dan, I look forward to the conversation with you and Kori. And thanks, again, for producing really the right book, an important book at the right time.

Kori Schake: So, H. R., your comments were a nice reminder that one of your less-noticed but beautiful talents is as a book reviewer. I’ve long been a fan of the reviews that you would write in the IISS journal, Survival. And both of you make a strong case that China’s behavior necessitated a change in American attitudes. And I’d be curious when you think we should have noticed that change.

You know, H. R., you are the architect of the most important success of Trump administration foreign policy, the national security strategy that highlighted the need to compete with China and to understand China as an aggressive, destructive power in the international order. I’d be interested in both of your perspectives when that realization first came for you. When did China do something that alerted you that the notion that we could cooperate and include them into being a responsible stakeholder, when did that fail? When should the rest of us have noticed? Dan, maybe you start.

Dan Blumenthal: Well, Kori, I’m a bit of an outlier. You know, I was at the Pentagon in the first George W. Bush administration. And if you just looked at it from the perspective of military buildup, a military modernization program, I think there are a number of people advocating for a more intense focus on China’s focus on us, frankly, China’s focus on how successful we were in the wars in the 1990s in their view and how they were going to neutralize those advantages. And we’re quite open about the fact that they had at least the Taiwan Straits in their sights.

So, I think some caution back then would have been in order. I think you can go through a whole list of things that were probably wrongheaded looking back, you know, trying to get China to join a 1,000-ship navy as if it would be a collective security partner. Maybe some

more and tougher action after a very provocative anti-satellite test in 2007, I think 2009, 2010, when China really started to push in terms of the South China Sea and make very strong statements and block shipping and so forth.

I think people tried in the Obama administration, Secretary Clinton, Secretary Gates, to push back, and we started to have a bit of a focus in Southeast Asia. But I think back then, you know, probably by 2009, 2010, 2011 when it was acting so — you know, it had assessed that we were on our heels because of the financial crisis, they had an opportunity, and they started to really throw their weight around inside the South China Sea, East China Sea. I think that, really, we began to have a focus, but we should have really stuck with it back then and said, “Wow. They’re really trying to undermine our influence and our position in East Asia.”

Kori Schake: Gen. McMaster, did you have a different temporal aha moment about China than Dan did?

H. R. McMaster: Well, you know, Kori, you know, as national security adviser, it was a period of education for me on the problems associated with China. I spent most of my career in Europe and across the Middle East and South Asia. So, you know, I was, obviously, a special military officer and as, you know, a student of international relations. I had followed, you know, the shift in the approach from Deng Xiaoping’s, you know, opening up and reform movement. I think really under Hu was when it was discernable, under Hu Jintao, that China was going to be more aggressive.

You know, I think you can go back to the George W. Bush administration. Dan covers this in the book. In the conclusion, he talks about how there was a recognition, that this was a military competition. I think it is the largest peacetime military buildup maybe in history, right? It’s 800 percent increase in their defense budget since the mid-’90s. So, I think the defense perspective was maybe a little bit ahead.

You know, I think a turning point maybe is around Bob Zoellick’s speech, you know, the “responsible stakeholder” speech. In that speech, you know, he gets criticized a lot of times for it, you know, because, hey, they didn’t become a responsible stakeholder. But, you know, sometimes in life you’re disappointed. And in that speech, he also laid out that, you know, there’s a chance that China’s not going to get on this path of being a responsible stakeholder.

So, there are those who were aware of it, I think, and those who were trying to raise the alarm bells, certainly. But I think it all kind of came to a head. Certainly, by 2017, we had clung to wishful thinking for far too long, especially in connection with the aggressive actions in the South China Sea, as Dan mentioned.

And I think it goes back especially maybe to the financial crisis in 2008. This is when China was emboldened. I think, you know, they thought the West maybe had some things to each them before then. And when they saw the financial crisis, they thought, “Hey, maybe our system is better, right? Maybe we should be more aggressive at exporting it as well.”

So, you know, Kori, I had the privilege of coming into the Trump administration, you know, right at this I think breakpoint here. You know, President Trump had run on being tough on China position already. And when I had the opportunity to convene the Principals Committee of the National Security Council, I read a couple of excerpts of previous administrations’ policies for China that revealed this fundamental assumption that China, having been

welcomed into the international order, would play by the rules and, as it prospered, would liberalize its economy and its form of governance. And, of course, that wasn’t true.

And I just observed it in that meeting. I think I said, “We’re about to affect the greatest shift in US foreign policy since the end of the .” And, you know, I’m proud of, also, the fact that this is a bipartisan approach now. I think there is a strong recognition, you know, across both parties that, hey, we have to compete, right? We vacated critical arenas of competition based on that assumption. And, you know, if you’re not on the field, you know, you’re not going to be able to compete effectively. So, we are, essentially, reentering a lot of these arenas.

Kori Schake: I’d be interested whether you guys disagree. It seems to me that we still have the same objective, which is a China that plays by the rules of the international economy, of the existing international order, but that in the national security strategy and in the policies you are advocating in both of your very good books that what you are arguing for isn’t a different objective. It’s a different strategy. It’s a strategy that doesn’t believe that the arc of history bends towards justice. That it believes you have to actually bend the trajectory. And you do it by competitive strategies. You do it by forcing the Chinese off of their strong suits and onto their weak suits. Do you think that’s correct, or do you believe we have a different objective in mind than we did before? Dan?

Dan Blumenthal: Yes. A great question. So, objectives. I think, you know, so some of them are very short term, which was we saw this enormous momentum that China had built up over the course of the last decade or so. And some of it is just blunting that momentum. And in some cases, blunt tools were necessary for that and sort of put China back on its heels, which I think has started to a certain extent.

I think in terms of playing by the rules, you know, so I would say that as long as — a CCP under Xi Jinping, rather than say a CCP under a Deng Xiaoping, a Jiang Zemin, or Hu Jintao, doesn’t want to play by the rules. You know, they have a lot of rules. They wanted to find them themselves. They’re very clear about what those rules should be. They’re very clear in their party congress about what they should be. And so, we have to either create tremendous pressure on the system so that China decides by itself that it’s moving in the wrong direction, while absolutely holding out a welcoming hand to say, “We don’t have anything against China.”

Actually, in the United States, we’ve always been on the side of China. We’ve been — I get into this in the book to quite an extent. I mean, from the US missionary missions, to World War II, to inviting a very weak and divided China into the UN Charter as a charter member of the UN Security Council, we’ve always been on the side of China. It’s that we can’t be on the side of this China.

We can certainly foresee a China that has a more decent and just and liberal government, a change from within, a more moderate CCP, you know, or something else. Then, we could see them really not just playing by the rules, but accepting that many of the rules benefit them. But I think right now, we’re in this sort of shock where we have to compete in order to show them that they have no plausible path to victory or success.

Kori Schake: H. R.?

H. R. McMaster: Yeah, well, Kori, I would say the chances of a change of behavior under Xi Jinping and under the party are pretty slim, right? So, in the long run, I think that what you’re laying out is exactly the right approach, right, which is to convince maybe Chinese leadership over time that they can have enough of their China dream and achieve enough of national rejuvenation without doing so at the expense of the rights of their own people or at our expense, internationally, through the promotion of this authoritarian-mercantilist model and an effort to remake the international order in a way that’s to the free world’s profound disadvantage. I think going forward, it’s important for us to really recognize the nature of this competition and to recognize the Chinese Communist Party’s role in perpetuating it.

Oftentimes, you know, our discussions about China policy are self-referential, right? Like, what is it? We must have done something to upset — maybe because it’s just because Donald Trump is so mean, you know, that Xi Jinping is acting out. No, that’s not it at all. In fact, the Chinese Communist Party has its own ambitions that are independent of our actions, right? And so, we have to recognize that, first of all.

And I think, also, it’s important for us to recognize that this is not a US-China problem. What Dan outlined at the beginning, it shows, hey, this is a free world–China problem. And it’s going to require a great deal of international cooperation that’s already ongoing but needs to be expanded. And so, I think that we can compete effectively, certainly, if the world’s largest economies come together and tell China, “Hey, you’re not going to be able to remake the world order in a way that’s favorable to you and unfavorable to us.”

You know what? There’s the saying, you know, the phrase that President Obama used, you know, during the kind of the last days of this cooperation and engagement strategy that was a hopeful strategy that was not really grounded in reality, which is, “We have more to fear, you know, from a weak China than a strong China.” Well, we’re not trying to keep China down, but we do have quite a bit to fear from a strong China under the direction of the Chinese Communist Party. So, it just is going to require us to be much more competitive.

Kori Schake: We have an avalanche of great questions from people participating in the call, the first from Mark Reedy from UC Davis. Was the suppression of COVID information in Wuhan driven by local CCP officials or central officials? What implications does this have for reforms and further centralization within the party? And Dan, I’m going to give that one to you.

Dan Blumenthal: Yes, great question. Absolutely. Fear of reporting to the central authorities. So, what Xi Jinping has created is a party and a bureaucracy that’s frozen, cannot function without his decision-making and without his decision-making and a few of his key lieutenants. So, all the incentives in the localities are essentially to not bring bad information. I mean, again, not a big surprise in an authoritarian system.

It’s just, you know, I’m sort of going to combine that with H. R.’s great point about not being self-referential. The system has changed. The system has really changed under Xi Jinping. It’s something we missed as to why they didn’t open up to cooperation or rules-based order. But there’s no question that Wuhan officials were waiting for guidance from the center, were afraid to give them bad news, were not going to act without guidance from the center. And that’s the system that Xi’s created, a much more centralized, totalitarian system.

And I think the second part of that are implications. I mean, that’s why it’s so hard, and that’s why I’m not giving up on reforms inside of China. But many people are because there used to be a lot more room for localities and provinces to experiment with policies, particularly when it came to public health. But this shows that Xi Jinping is governing with an iron fist. And I gotta say, he really is paralyzing the functioning of the Chinese state.

Kori Schake: H. R., I’d appreciate it if you would take a swing at this next one from Richard Ong from Eagle Capital Management. If China wants to change the world order, are they willing and/or able to lead that new order? What’s the end goal? If it’s difficult to govern a large country like China, can they take on the greater China area?

H. R. McMaster: Yeah. Well, you know, it’s a great question. And Dan, you may want to comment as well. But I think China’s actually pretty successful so far, right, in terms of creating servile relationships with countries in the region. Now, it’s also eliciting a backlash, right, by those who are anxious about it because I think when we hear from our Singaporean friends or from Vietnamese friends when they say, “Hey, don’t ask us to choose between the United States and China,” I think our response should be, “Hey, we’re not asking you to choose between the United States and China. We’re asking you to choose between sovereignty and servitude,” right?

Because, really, these laying of these debt traps, for example, the indebting, you know, future generations of citizens of these countries so that China can have outsized influence and maybe control over critical and strategic infrastructure, whether it’s physical infrastructure, you know, like the port in Sri Lanka, which is a well-known example, or if it’s communications infrastructure, associated with fifth-generation communications data flows. So, I think that China is actually succeeding.

Now, which countries are they succeeding in, you know, significantly or enjoying significant success? It’s typically in corrupt regimes, right, because the new vanguard of the Chinese Communist Party is the Chinese National Bank official with its duffel bag full of cash, you know, along with a party official. So, again, this goes to Dan’s point, you know, of turning what China’s perceive weaknesses into strengths. This is why rule of law is so important in our efforts to help countries develop a rule of law, to develop freedom of the press, and a Fourth Estate that can hold the curtain back on this behavior. And it’s really been people having a say in elections. It’s been the exposure of these pernicious forms of aggression in the press that have been most important.

I mean, one of the best, you know, journalists on China, he’s worked in China for years, John Garnaut, his study in Australia was groundbreaking in connection with showing really the full range of the party’s activities in Australia, for example. You know, Sri Lanka voted out a government. It had a bit of a boomerang effect, you know, voted out a government because of the corruption there. In Malaysia, there’s big political backlash. In Ecuador — you know, so, you have many of the examples of successful responses to Chinese aggression.

So, I think to answer the question more directly, they’re doing it. We have to be concerned. But, you know, we’re not helpless here. We can compete effectively — we, being, you know, the United States and other free and open societies.

Kori Schake: I really love the way you framed the choice, not as one between the US and China, but one between sovereignty and servitude. I think that’s really powerful, H. R.

The next question up I want both of you to take a shot at, first you, Dan. Mark Schoomaker’s interested in both of your perspectives on the relationship dynamics between Xi Jinping and Kim Jong Un, in particular over North Korea’s nuclear posture.

Dan Blumenthal: Well, I think H. R. has some very close insights into that. As someone who, you know, played more the role of an outside adviser for many years, I would say that they’re both very frustrated with one another. I mean, so, the traditional — you know, to H. R.’s point about what global order does China want, they have articulated it in their 19th Party Congress report. And it has a lot to do with being servile to China.

But Korea and Vietnam, in particular — and I say this in the book as well — so, Korea and Vietnam were the most significant countries in the tributary system — are assigned a very particular role of playing a servile role of deference, you know, in — we see echoes today, as I argue in the book, of the way China used to deal with these countries in the past. So, you co-opt the leads to become, in the past, as Confucian and as Chinese oriental as possible so that they automatically want to do what you say. And that has been, in Korea, that was carried on through Mao and carried on through the Communist Revolution.

But, of course, recently, Kim Jong Un is refusing a lot of both because he’s rejecting many of his father’s relationships with China, but also just because he feels like the Chinese Big Brother is too heavy-handed. I think Xi Jinping often feels like he doesn’t control Kim Jong Un. Obviously, I think the pressure campaign that H. R. and his staff designed put a lot of maybe incentives on China and Xi to put more pressure on Kim. But I think it was like pulling teeth. I mean, it’s not something that they wanted to do in and of itself.

I think after so many years of these sorts of talks, what we realized is China and our interest actually don’t really align. I mean, we’d like them to. The only time they align is when China sees the alternative, which is immense pressure from the United States on China as something much worse than living with the status quo. But that’s a very hard policy to sustain.

Kori Schake: H. R.?

H. R. McMaster: Yeah. I think we have a North Korea strategy, and China has a US strategy, right? They want to figure out how they could use the North Korea problem set to push us out of Northeast Asia as the first step in isolating their main regional, you know, rival, Japan, right? And they see, you know, the nuclear and missile programs primarily through that lens.

I think we did have some initial success, you know, with reframing it with Chinese counterparts and trying to convince them, “Hey, this is not in China’s interest for North Korea to have the most destructive weapons on Earth, not only because it’s of the direct threat to countries around the world, but the effect on the nonproliferation regime.” And also, the fact that, you know, North Korea’s never met a weapon it didn’t try to sell to somebody, including its nuclear program to Syria until the IDF took out that facility.

So, I think we’ve made some progress. We got unprecedented sanctions in place thanks to the Herculean efforts of Nikki Haley. But those remain to be really enforced by China who controls, of course, 95 percent of the trade with North Korea.

There are more means available to this. I don’t know what direction the Biden administration will go. But we haven’t put secondary sanctions on Chinese banks that are facilitating illicit financial flows into North Korea. We haven’t used the president’s Article II authorities, which I think may be sufficient for this, to work with other countries to interdict some of the smuggling operations in the maritime domain, for example.

There’s a lot more that can be done on national pressure. But as soon as the first summit was announced in Singapore, I think Xi Jinping had what my daughters would call FOMO. You know, he had a fear of missing out, right, because what he did is for the US to be able to solve this problem, you know, without China, right? That would be — he saw that as a significant danger. And this is when the olive branch was offered to Kim Jong Un, who had never even spoken to Xi Jinping.

And so, you know, I think China sees the whole problem differently from us. They view it as a US problem. I wish that Japan–South Korea relationship would get better because I think that has a lot to do with being able to convince China to act against North Korea’s nuclear and missile programs. Every provocation, I think, for example, ought to be seen as pushing us together, closer together, because, really, what China wants to do is use the North Korea issue as a way to drive a wedge, you know, between us, between us, our allies and between Japan and South Korea.

Kori Schake: I’m going to ask you to take the next question, Dan. It’s from Doug Carr. How possible is it for Xi to decide the time to reclaim Taiwan is at hand while he’s still at the height of his power and before the US military is fully prepared for the China threat?

Dan Blumenthal: Well, it’s something we all should be extremely concerned about, given the level of military power that China is projecting over and around the Taiwan Strait right now, given the kind of flybys they’re doing with their various fighter aircraft over Taiwan, so brigades that are moving. We should be extremely concerned. And to H. R.’s point before, also, about US distraction at this moment, the US not taking it all that seriously.

What I think China wants to do, you know, having observed for many, many years China’s strategy on Taiwan, is not do a full invasion. What they want to do — they view President Tsai Ing-wen, to some of my points earlier about Taiwan’s success being one of the biggest threats to China that there is. Why? Because it’s a democracy in a Chinese cultural context, in some ways, more Chinese than China, because it didn’t go through the Communist Revolution.

So, what they want to do — and Tsai, to them, the very existence as the president of the Republic of China, Taiwan, is an affront — is an affront to this imperial mindset and an affront to Xi Jinping’s rule, authoritarian rule. They want to embarrass her. They want to bring her down.

How do you do that? You can grab an offshore island and show that Taiwan and the US are impotent. You can fly your aircraft over Taipei without any answer. You can tire out the Taiwan Air Force, force the United States to respond.

The message, if you read very carefully — and my book gets into this somewhat — is the Chinese uses of force are very different from our own. So, using force without necessarily

thinking you’re going to achieve a military victory, but to rearrange the entire geostrategic framework.

They did that when they fought Vietnam in ’79. They lost the military operations, but they won the geostrategic battle. They broke an alliance between the Soviets and Vietnam. I think that’s what they’re looking for. Let’s say, uses of force that are less than an invasion, it shows the US to be impotent. And it tells the Taiwanese, “You are alone. Pick a more accommodating leader. And we will work with you.”

Kori Schake: A related Taiwan question that I’d like to give to you, H. R., from Spike Dearing. If the PRC pull the trigger on a forceful reunification with Taiwan and the US does not directly intervene, how does the Indo-Pacific region respond? Will the US reputation as a reliable military partner and ally be damaged beyond repair?

H. R. McMaster: Yeah. That’s a great question. You know, I don’t know. I mean, I think that there could also be an effect of really, you know, the countries in the region recognizing the grave danger there. And I think what you would have is you would have an acceleration of improved capabilities in the Self-Defense Forces in Japan, for example. I think other countries in the region would also, you know, improve their ability to deter conflict with China, you know, by denial, right, by convincing the PLA and the Chinese Communist Party they can’t accomplish their objectives through use of force in the region.

So, you know, I think the approach of strategic ambiguity is good. I think that China shouldn’t assume that the United States won’t respond. I mean, this is the assumption, obviously, that North Korea, and encouraged by the Russians and the Chinese to a certain extent, made in June of 1950. Right? They made the wrong calculation.

So, you know, I think conventional deterrence is immensely important. I would say that the top priority now ought to be the increased capabilities of the Taiwanese Armed Forces. I’m glad to see, you know, the expediting of the armed sales, for example, to Taiwan. And I think President Tsai Ing-Weng’s military reform efforts — I think, she recognizes that she’s in a race, right, in a race to be able to establish deterrence by denial. I hope that they are also doing more thinking about what Dan talked about, which is how to defend and deter against actions that fall below the threshold of what might elicit a concerted, you know, conventional military response. But it is a dangerous time, I think, Kori.

Kori Schake: Another question that I want to go first to you with, H. R., from Anthony Caito from Corban University. What are the unforeseen consequences for an American strategy that desires to further loosen military restrictions on Japan so they can offset some Chinese regional expansionism in East Asia? Namely, any downside to emboldening Japan to be a greater military actor in Asia?

H. R. McMaster: Yeah, I don’t think so. You know, I really feel now that Japan has got to be one of our strongest allies in terms of how we see our interests, but also, of course, it’s a thriving democracy and a free-market economic system. They have their own challenges with demographics and so forth, you know, but I think they’re going to get through that, obviously. I mean, I think that the vision that Japan has for the region has been immensely positive in terms of the free and open Indo-Pacific. They’re on the side of sovereignty rather than, you know, servitude.

And unlike most of the Chinese investments, their investments in the region have been immensely beneficial to the people of the region because they get returns on their investments, and they create lasting employment and so forth. So, I think Japan is looked at quite favorably in the region. It’s a strong partner.

But, you know, when you look at the threat to the Senkaku, for example, it’s very much analogous to the threat to Taiwan. And the types of capabilities Japan would develop, I think, would strengthen deterrents in the region — would help convince China not to be more aggressive from a military perspective. And I think a strong SDF, a Japan SDF, would help preserve peace in the region.

Kori Schake: Next, to you, Dan, from Louisa Greve from the Uyghur Human Rights Project. We talked about Russia’s near abroad, and Dan applies the term to China in the book. What is China’s near abroad, and what role has it played in the CCP’s turn to a police state form of governance?

Dan Blumenthal: Well, thank you. So, I think the way I talk about it is, again, going back to this often-overlooked fact that China is a continental empire. So, it’s still sitting on those lands conquered by the Qing. It’s still ruling over parts of Mongolia. It’s ruling over Xinjiang. It’s ruling over Tibet. We, in the United States, to H. R.’s points in his book and elsewhere about strategic narcissism, we look at China as a maritime threat, as a maritime nation. We look basically at that one coast that it has, its attempts to get out into the Pacific Ocean, the Indian Ocean, the South China Sea, create a maritime force that is able to do that.

But if you’re sitting in Central Asia, to a certain extent in Russia, India, you’re very much looking at China as a continental power. The term “near abroad” I would say — and you’re right to do so because there’s a lot of both paramilitary force, as well as PLA force, that’s operating in those areas. So, you know, when it comes near abroad, I mean, the first strategy and the first desire of China when it came to turning to Central Asia after the Soviet Union fell was to put down what they viewed as the “Uyghur threat,” Uyghur activism, Uyghur awakening, relationships. You know, they’re Turkic in their ethnicity, so, relationships with Turkey and Turkic groups.

Unfortunately, very unfortunately, unforgivably, this has turned from concerns with Uyghur activism and Uyghur cultural demands to blatant concentration camps and, even worse, in the use of Orwellian systems to suppress, use of biometrics to figure out the DNA of Uyghur families, you know, the suppression of religious rights. There’s shaving of beards of Muslim men and not giving them Halal foods. I mean, just awful.

And, you know, one thing that’s been very disappointing — so I talk about it in terms of US grand strategy has to look at China from a continental and maritime perspective and, again, turning that into a weakness because, you know, the more we have relationships, better relationship with India, better relationships with Central Asia, the more you multiply China’s problems, the more you multiply China’s things we have to worry about.

Russia, obviously, dealing with Russia is a hugely complicated issue, but the [inaudible] the wedges we can drive. But you also have to look at it from this awful human rights situation. And when you have an empire that believes the Han nation is the only ruling nation, then you’re going to end up by putting down all religious minorities and all ethnic minorities, and that’s what’s happening.

Kori Schake: So, I’m going to give the penultimate question to H. R. It’s from John Soladay. How dependent have we become on China in the manufacturing sector? What should we do about it? Do we have the political will to see a significant rise in the price of imported goods? H. R., I know you’ve been doing some work with the good economists out at the Hoover Institute, so that’s why I’m directing it to you.

H. R. McMaster: Okay. I don’t know if a retired general should talk economics or not. I mean, but I do know some. I know some economists here, as you know, Kori, some of the best ones. But I do think that you can’t look at our economic relationship with China separate from the security relationship, right? And that’s because of — and maybe I’ll ask Dan to comment on this too, Kori — but, you know, of course, Chinese companies have to, by law, act as an extension of the Chinese Communist Party.

And so, it’s really important, I think, that to do business in China, we ought to have kind of like an economic equivalent of the Hippocratic oath, right, to not do any harm, you know, especially to ourselves, but also to the Chinese people. I think the first rule ought to be that we shouldn’t engage in business relationships or finance any Chinese efforts that help them perfect this Orwellian technologically enabled surveillance police state, right? We shouldn’t participate in that, clearly.

Second, I think we should also not participate in, you know, to paraphrase Lenin, if did say this, you know, we shouldn’t sell them the rope so they can hang us, right? I mean, we shouldn’t be transferring technologies that allow China to gain an unfair and dominant position in the emerging data-driven global economy or to give the People’s Liberation Army differential advantages over our Armed Forces.

And then, I think the third, which is more difficult, is that we should not engage in business relationships that sacrifice long-term viability of our companies and the jobs of our workers based on the lure of short-term profits and access to the market. And this is, of course, you know, kind of the forced transfer of intellectual property and sensitive technologies that are then applied in the Chinese companies that enjoy state support and then manufactured goods with artificially low prices, dump them on the international market, and reduce our company’s market share, right?

I mean, you know, the big examples of this are solar panels and wind turbines and, you know, high-density batteries. And, you know, there are many, many examples, even the automotive industry to a certain extent, although they haven’t bought the Chinese industry up to that level of competition yet.

But yeah, so, I think those are the rules that we ought to try to follow. I think we need some international agreements to do that because companies, they won’t offer their — they won’t give up their market share in China if they know a competitor is just going to move in. And that’s a disincentive. I think there ought to be an international agreement that our companies across the free and open societies to other democracies will adhere by local rules but only do so when they don’t violate the universal declaration on human rights, for example.

I think another measure we could take is to offer visas to Chinese nationals and their families who are employed by US companies but are subjected to the course of power of the Chinese Communist Party, right? People automatically think, “Oh, China, industrial espionage,

restrict visas.” I think make them more available, right, and create conditions for a brain drain if the party’s going to put them under that kind of course of power.

So, I think there is a lot we can do from an economic competition standpoint. I think the Trump administration did put a lot of important measures in place, but there’s much more we can do.

Kori Schake: Dan, as you comment, can I ask you to fold in an answer to Júlia Vera Monclús’s question about what do you think about the regional comprehensive economic partnership?

Dan Blumenthal: Okay. That one is easy. It’s not much of a trade agreement. It’s certainly not China driven, you know. So, it’s not much of a trade agreement. It’s way below the sort of standard trade agreements that we sign. It’s a political sign, for sure, that ASEAN, the Southeast Asian nations, are going to move forward with their visions of regionalization. It’s extremely important to them. And we ought to take that seriously.

I hope that the next administration can overcome this sort of bipartisan turn against trade because when it comes to Southeast Asia, the access to our market is such a powerful tool, without causing, as I understand it, too many distortions that we were worried about with say a country as big as China. So, you know, our step is important from a geopolitical standpoint but less important from an economic standpoint. We can do better in terms of what’s good from an economic and geopolitical standpoint.

In terms of the comment on H. R.’s great comments about — so, I think we’re going to have this debate, particularly in free-market circles, AEI and elsewhere, it’s about — the way I would put it is we are in an economic competition. We’ve never really been in an economic competition with a strategic competitor, a military competitor. And they’re trying to erode our advantages. There’s no question. They’re trying to erode our technological advantages.

The questions that we’re going to be debating are how much government intervention is necessary in the markets when it comes to critical supply chains and when it comes to military use of technology because so much of that is commercial off-the-shelf. If we go too far with too much government intervention, obviously, all kinds of problems for our own competitiveness. But it’s a moment right now where there is going to be government intervention in the marketplace. And that’s how I would put it. And that’s where I would sort of put our intellectual energy and policy energy and focus on what, where, and for what and for what purposes.

Kori Schake: So, Dan, you have partly answered this, but I want to ask it overtly because it’s a question from Jing Zhang, the father of an outstanding up-and-coming scholar at the American Enterprise Institute, Linda Zhang. And her dad asks, “Will US policy towards China significantly change under President-elect Biden’s administration?”

Dan Blumenthal: First of all, sir, you have a terrific and highly skilled, important daughter who has done great work for this book, “The China Nightmare,” and so many other projects. So, I don’t think it’s going to be a significant change. I mean, maybe H. R. has a different point of view. I mean, I think what H. R. and others did in the Trump administration have been widely accepted, at last in concept, that we’re in a strategic competition. It’s a

competition that needs to stop China from revising the global order that has benefited us and so many Chinese.

I think that certain policies, once the Biden team gets in there, after the huge rhetoric of the campaign they’ll see they serve American interests. The damage done to Huawei’s reputation, for example, as well as the attempts though uneven to stop us and our allies from selling certain capabilities to Huawei, other companies like that, have a very big effect on China, have a very big political effect on China, by the way.

Other attempts, the way we’re talking about China as a competitor, we were talking about the Chinese Communist Party as different from China. Hopefully, the relationship with Taiwan remains as good and as wholesome. I think down the line, H.R. and his team and others have managed to change the way the United States is talking about China as a competitor, as a problem, other initiatives that need to continue.

Of course, there’s matters of degree. And H. R. pointed out that President-elect Biden has talked about the importance of climate change. You know, there’s all kinds of ways that the CCP and Xi can manipulate US desires. So, you know, if we, for example, just one scenario, go forward and ask Xi Jinping to pledge to lower carbon emissions in an accelerated fashion, his list of requests and asks will be very high, and they won’t be related to climate change. They’ll be related to Taiwan. They’ll be related to Huawei. And we’ve seen that before.

And hopefully, you know, President-elect Biden has had enough experience with that to see, you know, what we’re talking about. You know, we’re going to silo these issues. We’re not going to start giving away other strategic things that matter to us in return for something that’s supposed to be both of our interests, climate change.

But there are dangers when you start off saying, “There are areas that we need to cooperate with China.” I think on the public health front, that’s a mistake because China still has to pay the price for its — still, to this day, lack of transparency at best and other malignant behavior when it comes to COVID. So, to go forward and just say, “Let’s cooperate on COVID and public health,” I think would be a mistake without holding them accountable.

Kori Schake: Gen. McMaster, any closing comments?

H. R. McMaster: No. It was just a pleasure to be with —

Kori Schake: Thank you both for this excellent master class on how US policy should deal with a malignant China. Thank you, my friends, for joining in. Thank you for your smart questions. And go read both of these books. They’re both terrific.

H. R. McMaster: Hey, Dan, congratulations. It’s great to be with you too. See you guys. Thanks so much. Take care, everybody. Be well.

Dan Blumenthal: Thank you too. Thanks, Kori. Thanks, everyone, for viewing this.