China

Zongyuan Zoe Liu, the Maurice R. Greenberg fellow for China studies at CFR, discusses China’s sovereign wealth funds, investments in the United States, and considerations for policy responses to foreign land ownership trends in the United States. Elizabeth Blosser, vice president of government affairs at the American Land Title Association, discusses recent state legislation on the purchase of U.S. property by foreign entities and individuals. A question-and-answer session follow their opening remarks. TRANSCRIPT FASKIANOS: Welcome to the Council on Foreign Relations State and Local Officials Webinar. I’m Irina Faskianos, vice president for the National Program and Outreach here at CFR. CFR is an independent and nonpartisan membership organization, think tank, and publisher focused on U.S. foreign policy. CFR is also the publisher of Foreign Affairs magazine. As always, CFR takes no institutional positions on matters of policy. Through our State and Local Officials Initiative, CFR serves as a resource on international issues affecting the priorities and agendas of state and local governments by providing analysis on a wide range of policy topics. We appreciate your taking the time to join us today. As a reminder, this webinar is on the record, and the video and transcript will be posted on our website after the fact, at CFR.org. And we are delighted to have over four hundred state and elected officials registered, representing over forty-seven states and U.S. territories. We are pleased to have Elizabeth Blosser and Zongyuan Liu with us today. We’ve shared their bios with you, so I will just give you a few highlights. Elizabeth Blosser is vice president of government affairs for the American Land Title Association, ALTA, which oversees the association’s state legislative efforts including annually monitoring state bills related to the real estate, mortgage, and title industries. She also serves on the board of directors for the Property Records Industry Association. Ms. Blosser has worked for legislators on the federal, state, and local levels, and has extensive experience managing political grassroots and public relations campaigns. Zoe Liu is the Maurice R. Greenberg fellow for China studies at the Council on Foreign Relations. Her work focuses on international political economy, global financial markets, sovereign wealth funds, supply chains of critical minerals, development, finance, emerging markets, and more. Dr. Liu is the author of Can BRICS De-dollarize the Global Financial System?, published by Cambridge University Press, and Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions, published by Harvard University Press. So thank you both for being with us today for this conversation on foreign asset ownership in the United States. Elizabeth, I thought we could begin with you, if you could give us a little background on specific policies regarding foreign land ownership in the United States up to now, and how could recent changes at the state level shape U.S. foreign policy going forward? BLOSSER: Yeah. Happy to talk about that. And want to say, we really appreciate the Council on Foreign Relations including us in this conversation. We especially appreciate it because we are not foreign policy experts. I have to admit I woke up this morning still a little bit surprised I was doing a webinar for CFR. But what we are experts on is the safe, certain, and legal transfer of real estate in this country, something that represents approximately 13 percent of GDP. So we think that’s very important. So there’s been a lot of conversations about foreign ownership of U.S. real estate. What we’ve tried to do over the course of the past year is really offer ourselves to legislators, regulators, and others who are looking to develop policy around this issue as subject matter experts. Notably, we don’t take a position on any of the legislation being considered in the space—again, because we’re not foreign policy experts. But, you know, whether you think these bills are good or bad, or right or wrong, there’s a lot of conversations happening around this. They’re going to continue. And so from our perspective, it is really important that whatever policy is developed and whatever laws are enacted, they fit within the current system of real estate transfer so that you don’t run into unintended consequences and you’re not adding risk for American real estate and landowners. If you think about it, besides a place to call home, real estate really represents one of the greatest generators of wealth in the country. So whenever you’re talking about shaping real estate policy, how you do that really matters. It matters to millions of everyday Americans. And so what we want to do is provide some subject matter expertise to make sure that there aren’t unintended consequences. And we think that can be accomplished by adding some procedures and protections within this legislation. And the good news is, there’s a lot of existing real estate law that can be leveraged for that purpose. So I’ll talk a little bit about some of the legislation we’ve seen. And it’s been extensive. So about a year ago all of a sudden we started seeing a lot of legislation pop up on this issue of foreign ownership of U.S. real estate. And to date, fourteen states have enacted legislation. Some states have enacted several bills. And this is—this is just last legislative session, so last year. And then most recently in Missouri, there was an executive order issued on this subject. Two states have enacted legislation for study committees on the topic. And as of right now, there are almost 150 active pieces of legislation in over thirty states moving on this topic. So it is a lot to track. As Irina said, we track all the legislation related to really real estate, title, and mortgage. And when you think about different topics, this one is just sort of off the charts in terms of the number of bills that are out there. Notably, there’s really no model legislation that has emerged in this space. But all the bills that have been introduced or enacted do two main things. One, they identify restricted parties. And, two, they identify impacted land or real estate. So in these bills, a restricted party could be a foreign government, it could be an entity, it could even be an individual. And the impacted properties could be anything from just agricultural land, to property that’s adjacent to or in a certain radius of critical infrastructure or military bases, or, in some cases, it could be all real estate within the state. So just to kind of give you an idea of the bills that passed last year, six dealt just with agricultural land, two with critical infrastructure, four with a combination of those two, and then eight touched on real property throughout the state, to some extent. So with these two elements, there are some challenges that come in with definitions. When you’re talking about these restricted parties, there’s not necessarily lists available to know who exactly is a restricted party. Some states have addressed this by pointing to federal lists, such as the Department of Commerce’s foreign adversary list, or the Department of State has a countries of particular concern list. But, you know, that has been a challenge. And you would think sort of definitions around real estate would be kind of straightforward, but unfortunately, that’s not as straightforward as you might think. For example, property that is considered ag land or farmland today can literally be a strip mall tomorrow. And conversely, property that’s not farmed today can be farmed in the future. And, you know, today we also have a lot of urban farming on land that is, you know, definitely not considered traditional agricultural land. Likewise, it’s really hard to figure out what properties are within a certain radius of critical infrastructure or military bases, even knowing where all of those places are. You kind of have to put together a map, and map that out, and survey. And, you know, there may be all sorts of reasons why you wouldn’t want to do that. So there’s definitely some definitional challenges as you look at this legislation to definitely be thinking about. Unfortunately, the more sort of focused and narrow the legislation is, the harder it is to sort of sort through some of these aspects. I mentioned unintended consequences. And I want to talk a little bit about what that might look like. And I will preface this by saying the majority of unintended consequences we think about from our perspective have to do with legislation that simply voids transactions. So rather than a divestment process of some sort, there’s legislation that says, you know, whether a transaction with a, you know, restricted party happens in the future, and in some cases in the past, that transaction is just simply void. Well, that creates some problems, because obviously, the local land records are going to show something different than that. So, you know, think about it from a consumer perspective. You have a seller who unknowingly sells property to a restricted party at some point. That transaction is considered void. Presumably, the property would revert back to the seller. So at that point, does the restricted party, you know, have reason to sue the seller for false enrichment, or others who were part of the transaction? From a business standpoint, liens that are on properties owned by restricted individuals that are, you know, transactions later considered void are unlikely to get paid. They’re not going to get paid. And those liens could be anything from a mortgage, to a mechanics or construction lien of some sort, or a tax lien—for all of those the local officials listening in today. And so, you know, that becomes a challenge, and that those liens are unlikely to be covered at that point. You know, if a transaction is voided, basically what a lienholder has is a note, but there’s no property to secure that interest anymore. From sort of an economic standpoint, transactions that are voided bring into question who owns the property. So, as I said, presumably the transaction’s voided, the property goes back to the seller, but the land records are going to show somebody else owns that property. And so there are serious questions about who has rights and responsibilities as it relates to that property. That kind of puts the property into limbo and creates clouds on title. That’s going to make that property unmarketable in some ways, really hard to transfer in the future. It certainly is going to impact the value of the property. So that’s obviously something to think about from a real estate standpoint and just an overall economic standpoint. And then, of course, I would be remiss if I didn’t mention that, you know, we are concerned about the liabilities some of these bills might cause for real estate professionals, whether you’re talking about a realtor, a lender, a title professional, or arguably even a county recorder. So those are some of the concerns that we have with legislation. I’ll talk about, just high-level, a few things that that we think can help address these concerns. I will say though, at the outset, I think we can expect a lot of changes going forward, right, in terms of what this policy looks like. This is a very new issue. As I said, there’s no—there’s no model that’s emerged. I think there’s going to be a lot of lessons learned as states look to implement this legislation. I think there’s probably been some lessons learned already. Notably, there has been litigation around some of this legislation. I assume there will be additional litigation that we will see. So that will impact things. Then you also have whatever’s going to happen at the congressional level. Certainly Congress is looking at this issue, and that might impact what states do in the future and what they’ve done in the past on this issue. So I think we can expect, you know, sort of changes and evolution in policy. And I think that that’s fine. I was talking to someone at the Uniform Law Commission recently about, you know, their process for updating model legislation or uniform legislation that’s been enacted in many states. And, you know, they do take a look after a set number of years at, you know, what’s happened, what new information has emerged. And they go back to legislators and ask them to make changes as necessary. And so we might see that happen. So there’s three main pieces we think about in terms of strengthening the policy around domestic real estate aspects. First, we think there needs to be an established enforcement authority within the legislation. There needs to be somebody within state government who has responsibility for enforcing the legislation. In many cases, that’s the state attorney general’s office. Sometimes it’s another agency within the state, depending on the type of real estate that’s been impacted. Second, we think there needs to be divestment processes built into the legislation versus just voiding transactions that have happened in the past, or may happen in the future. And that divestment process can really follow whatever is established in the state. It could be judicial foreclosure. It could be partition or receivership. Most state laws allow a restricted party a certain amount of time to divest themselves of the property. And if that doesn’t occur then there’s forced divestment after that period of time, hopefully using, again, established real estate transaction processes. And what that’s going to do is make sure that lienholders are paid, that the local land records are updated, and all that information is correct. And then finally, we really think it’s important for some protections to be built in. They need to be built in for the seller or previous owners of the property. They also need to be built in for future owners, so that, you know, the fact that the property was at one point an impacted property owned by a restricted individual should not impact somebody’s property rights down the road, a future owner of that property. I think there needs to be protections for lienholders and then also protections for real estate professionals. So that’s kind of a high-level overview. And I’m happy to take questions and dive into some of these issues in more detail. FASKIANOS: Fantastic. And, Zoe, let’s go to you to talk about the trends in Chinese global investments, and how the purchase of land and other assets in the United States has changed over the years. LIU: Yeah, sure. Thank you, Irina, for inviting me to do this. It’s truly a pleasure to, and I’m always happy to work with our state and the local legislators. So, you know, what Elizabeth just to described from a high level, in particular a lot of these reasons—the legislative changes or updates with regard to land, including farmland and real estate investment, or property in general—a lot of these really happened, I would say, starting from the past year, in particular. There was this one particular transaction. If I remember correctly, it was this Chinese company called Fufeng Group. Its U.S. subsidiary made an investment—or, purchased about three hundred acres of land in North Dakota. And the piece of land that this Chinese company purchased happened to be about twelve miles from the Grand Forks Air Force Base. So basically, it’s about a ten minutes’ drive by car. So I think it matters in the sense that first—from two perspectives. The first piece is, it’s important to understand who is the foreign investor which could become the asset owner of a particular piece of U.S. asset. And then, secondly, it also matters in terms of both national security perspective as well as in cases—in particular, in cases where CFIUS—which is the federal level panel of government agencies that review the national security implications of foreign investment in the United States—in cases where CFIUS do not necessarily have jurisdiction, then perhaps local legislators and state legislators can actually step in and fill the gap. So I wanted to just sort of first talk about, you know, who—why the individuals matter. You know, in this particular case that I talked about, the Fufeng Group, it’s a private company. And it’s, you know, based in China. But the reason why this triggered a national security concern is not necessarily because of the state ownership, but because this investment is related to a piece of the Grand Forks Air Force Base, which is reportedly to be home to a U.S. top secret drone technology base. So from that perspective, is there is this inherent—despite that this is a private Chinese company, the nature of the investment, in the sense that it’s—the location is in the proximity to a top-secret military base, makes this—from a national security perspective, triggered concerns. But in this particular case, CFIUS really did not have the jurisdiction in terms of rejecting the investment. Therefore, the investment could have moved forward. But what ended up happening, or obstructed the investment, was that actually local officials also reacted and took matters on their own hand. In particular, the city council sort of stepped in and say that, well, you know, despite that perhaps the city council may not necessarily directly have the authority to revoke the transactions, or so on so forth, there are other ways that the city council can actually do, such as the granting permit, or developing infrastructure, and so on, so forth. So there is this kind of disconnection—or, in other ways, it’s not necessarily, like, disconnection in the sense of what national security might—what national security concerns might mean for the local legislators, right? So the Fufeng Group—the Fufeng investment was a private company. And then that does not necessarily mean that all Chinese investment in the United States or all Chinese asset owners in the United States are, you know, not state-owned. In fact, there have been a lot of state-led investment from China in the United States. And a particular group of investors would it be the state-owned institutional investors, such as China’s sovereign funds. The most influential one would it be this group called China Investment Corporation, which is now the world’s second-largest sovereign wealth fund. And the size, as of the end of last year, the total assets under management of this state-owned institutional investor, China Investment Corporation, or CIC, was more than $1.1 trillion. In other words, the size of the asset under management by the state-owned investor is bigger than the GDP of Saudi Arabia. So from that perspective, you know, if you look at how these companies—how China’s state-owned institutional investors invest in U.S. assets, they will invest in not just in real estate. They also invest in startup companies in companies that have critical pieces of technologies that are to the interest of the Chinese government. So from that perspective, you know, not we—from local governments—from local legislators’ perspective, you need to know what—you need to know not just national security concern at that very high level, but you also need to know who is the investor or who are the potential asset owners. And then from that perspective, the inherent debate, perhaps, many legislators, especially at the local level, you are facing, is the promised job delivered by foreign investment versus the national security concern, because, you know, obviously, coming with foreign direct investment, there will be job created, there will be infrastructure being upgraded, and so on, so forth. So if the investment were to be blocked for national security concerns, then that also perhaps means the jobs were not necessarily going to be generated. Therefore, it perhaps would work if there were the so-called white-knight leaders that could have potentially step up when there is undesired foreign investor try to secure a piece of strategic asset, viewed as strategic from either federal or local perspective, and as a counterbalance, try to sort of defend against undesired foreign direct investment—foreign investors. And then finally, if I can just conclude by quickly saying that, you know, despite there is this whole panel of CFIUS review at the federal government level, again, I wanted to emphasize that CFIUS do not always have jurisdiction over every single piece of investment. And on top of that, could have foreigners, foreign investors, try to bypass the CFIUS review process? There are ways that foreigners could potentially do that. And one way to do that is to set up joint ventures by partnering with a U.S.-based company or U.S.-based institutional investor, so that the joint venture from a review—from a regulator’s perspective, this investment is made by a domestic entity rather than a foreign entity, despite the source of money comes from foreign investors. So, this—again, this ultimately relies upon deeper scrutiny from actual—the recipient of the investor, whether it is a local company or it’s a local government—it’s a local land managed or owned by a local legislator. So know your investor, and know the source—ultimate a source of money actually matters a lot, too. I will just stop there. And happy to answer any questions. FASKIANOS: Thank you both. Now, we’re going to go to all of you for your questions. And we also encourage you to share your experiences as well, because this is a forum for you to exchange your ideas. So with that, of course, we are on the record. (Gives queuing instructions.) So let’s go first—we have a raised hand from Mayor Mark Allen. Q: Hello. This is Mark Allen. Can you hear me OK? FASKIANOS: Yes. Q: OK. Thank you very much for having me today, for your discussion. Just wanted to chime in a little bit on foreign ownership within America. My state rep—she’s a state senator, Donna Campbell. I know she introduced some legislation during the most recent legislative session in Texas to prohibit foreign ownership of land in Texas. I’m not sure if her bill did ultimately get approved and voted on. But, you know, I do have a little bit of concern about that. We do have, you know, two projects going on in my city, which is a little bit east and northeast of San Antonio. And we have an existing factory that—it’s called Aisin AW. And they build transmissions for Toyota. And so they do have a Toyota factory that builds Toyota Tundra trucks down in San Antonio. And so what they do there is they build the transmissions there in our site, in Cibolo, and they, you know, put them in trucks and bring them on down there. But we do have another prospect. And they’re from South Korea. And they’ll be making electrolytes for Tesla. And so we’re—we still haven’t finalized the deal, so I can’t name the company. But we are, you know, a little bit concerned if there is, you know, like, a restriction on ownership of the land. Because I know that Aisin AW, it’s a company based out of Japan. And they did buy land in our city, in Cibolo, and then annexed into our city. And I’m assuming that the—our South Korean partners would be interested in doing the same. And so if this legislation does happen to go through in Texas, I just wanted to know if there’s any federal laws that would potentially trump that law that Donna Campbell, you know, put forth, or if there’s any compromise that could be made where the landowner, which could be an American, they could rent to the—to the foreign company. So that seems to me like a win-win, because the landowner would have a nice tenant there, with I’m sure they’ll make a pretty good amount of money on the rental situation even if it’s a long-term, you know, twenty, forty, maybe even sixty-year contract. So, just wanted to get your opinions on if there’s anything on the federal level that might trump what Donna Campbell is trying to do there in Texas. FASKIANOS: Who wants to—Elizabeth, do you want to go? BLOSSER: Yeah, I’ll jump in and just share that Texas is not on our list of states that enacted any legislation last year. So I know there’s been a lot of conversations at the state legislature there. I anticipate there will be additional conversations. You know, in terms of things happening at the federal level, whether it be legislatively or existing law, I think there are some good questions. There’s certainly a lot of questions that have been raised over fair housing. That would be less of sort of this business type of transaction, but more, you know, restricted parties being individuals and impact on residential real estate. I think a lot of these questions are going to be considered by courts and decided in the courts. And so I would—I would not even hazard to guess how that’s going to go. But there will be some impact there. In terms of the leasing question, I would just—like, some of these bills do include language regarding leasing. So I would take a look at that. And again, you know, in terms of who’s a restricted entity and what’s impacted property, it’s been a really wide variety of, you know, restricted parties. So it could be just government—foreign governments, right? And then they could be specifically laid out. Or it could be just certain types of foreign entities. So there’s a wide variety of impacted both property and restricted parties. So, you know, it’s kind of hard to say, but, you know, certainly we’ve heard too about, you know, the pending projects and other things. And I think Zoe did a really good job laying out sort of that balance on that point. LIU: If I can just quickly chime in here. I personally do not think that there would be any federal political willingness to—a political willingness to stop or obstruct this type of—at least from CFIUS perspective—this kind of investment, I mean, would not—would not be—would not be under the same type of national security review process, because neither Korea nor Japan are treated the same way as China, because they are U.S. allies. And then on top of that, one beneficiary—one beneficial factor would be the Inflation Reduction Act, which is very much in favor of localizing or near-shore and friend-shore and onshore a lot of the manufacturing product, and in terms of facilitating the renewable transitions. So from that perspective, I do not think there will be any federal obstruction in terms of making the—obstructing the investment. But there is the FIRRMA, the Foreign Investment Risk Review Modernization Act of 2018. So, FIRRMA expanded the scope and the reach of CFIUS. It include—sort of, it has the authority over certain transactions, including undeveloped land in proximity to facilities that are considered as sensitive for national security concerns or connected to critical infrastructure, critical technology, and so on, so forth. So from that perspective, unless the specific investment made by Toyota or the Korean company has any kind of that problem, I do not think existing legislator or the new legislature would potentially trigger any kind of obstruction. But, you know, Elizabeth can correct me if my interpretation of the legislation is wrong there. Q: Yeah, thank you very much for your answer there. We do have an Air Force base in the area, Randolph Air Force Base. And so it is within ten miles, for sure. So that could be a bit of a concern. But I think with them being friendly nations that we should be OK. LIU: Right. But the CFIUS did, I think, last year, right after the Chinese company investment—Chinese food company investment case, CFIUS did add a couple more U.S. Air Force—just U.S. military bases on sensitive—on the sensitive list. So you might want to check if your military bases is on that list. Q: Thank you very much. BLOSSER: I’ll just also throw out there, because I don’t think it’s been shared yet, but generally the countries that are listed in the state legislation that’s been introduced or enacted are China, Russia, North Korea, Iran, Cuba, Venezuela, Syria. That’s kind of—pretty close to comprehensive list. So those are—those are the countries that usually are referenced in the legislation. FASKIANOS: Thank you. I’m going to go next question from Justin Bielinski, who is the director of communications in the office of Wisconsin Senator Chris Larson: What is the best source of data to find out what level of foreign asset ownership exists at the state and local levels, and to compare how your state, community stacks up against other U.S. jurisdictions? Elizabeth, do you have that—those sources? BLOSSER: That is a great question. And I don’t think that there are necessarily great sources for that data. As I mentioned, Mississippi and South Dakota passed legislation to do a study on these types of things. It’ll be interesting to see what data comes out. I don’t—you know, I don’t think it will be possible to go into a state and try and look at all the land records and figure out things like beneficial ownership and the, you know, status of individuals who own various property. Maybe you can take a segment and study that and get that information. So, you know, I have seen some studies come out. I know the National Association of Realtors puts out some information annually on this topic. And I’m not exactly sure how that information is gathered. From a title perspective, we certainly do not gather or retain that type of information. And then, of course, it’s strictly prohibited and illegal for us to ask about country of origin, or political affiliation, or things of that nature in a real estate transaction. I don’t know, Zoe, if you have other data sources. LIU: I was going to mention the National Association of Realtors, their annual report. They basically talk about, you know, to what the level of the transaction—what are the levels of transaction, whether they are—you know, what type of investment, whether they invest in—or, they purchase in existing homes or new homes, or to what extent the transaction is made by cash. And if all transactions are made by cash, then there are kind of further financial security, or safety, or legal implications. And then in terms of farmland investment, I think USDA—the Department of Agriculture, USDA, the Department of Agriculture does have this farm service agency. They put out an annual report on foreign ownership and foreign investment in U.S. agricultural land. So they would show, like, which countries are the largest share of—which country owns the largest share of U.S. agricultural land, and how much. So that would be another source. In terms of—in terms of just the generic foreign investment at the federal level, and to what extent it triggers a CFIUS review, CFIUS does have annual report. I think they have done the 2023 press release. But I don’t think the 2023, like, statistics is out yet. But CFIUS do have annual report. But I would—in general, I would agree with Elizabeth that there is really a lack of comprehensive data sources that allows for just a direct oversee who owns what and in what types of asset. Then if you—if you broaden the definition of—which, if we just take a holistic view of foreign asset ownership in the United States, then this asset can include financial assets, that include U.S. Treasurys, corporate securities, or any other types of financial investment. And for those type of data at the federal level, especially for U.S. Treasurys ownership, the Treasury Department published numbers on that, and then the Federal Reserve also have comprehensive data in terms of who—what types of foreign investors owns what type of U.S. financial assets. FASKIANOS: Thank you. I’m going to take the next question from Mayor William Lewis of Havelock, North Carolina, with a raised hand. Q: All right. Can you hear me good? Can you—OK. FASKIANOS: Yes. Q: Cool. Yeah, Will Louis, down here in eastern North Carolina. We have Marine Corps Air Station Cherry Point. And one thing you guys have not mentioned that we’ve seen a little bit of a trend on, particularly around our training ranges where there are some really, really large properties that are available, is this digitizing property rights. Where they’re selling—where we have one organization that is an American organization that is using foreign money to digitally purchase properties, and then sell NFTs based on those properties. And I don’t know—I haven’t—in all the things I’ve heard about CFIUS, and doing research on that, that’s a different level of scrutiny. And, you know, that can be changed so fast at any given time that you don’t even know who does own a property. And being able to protect those pieces around the range. Have you guys heard anything about that, or have any insight on what levels of scrutiny that may require in the future? And just for reference, we have a project right now that in the next month may get sold that way, that is literally right next to our ranges. And if you present the company to CFIUS for review, they’re an American company that just sells the digitized pieces of the property. So a whole different level of concern. BLOSSER: We could probably do a whole conversation on NFTs and real estate, and what that looks like. You know, this is an issue the Uniform Law Commission is looking at, and others. You know, my understanding of the process is basically you have an LLC that owns properties, and then really you’re transferring the LLC versus the property. And so that brings up lots of questions about local land records. And so it’s a big—it’s a big conversation. I will say, as somebody who’s a board member for the Property Records Industry Association, you know, the way that we do land records in this country is very unique. And it is very local, where those records are kept at, generally, the county level, local government level. You know, to protect people’s property rights, they record on the local land records, and that provides constructive notice. And really, that’s been the backbone of property ownership in this country for hundreds of years. And, you know, is it a perfect process? No, absolutely not. Is it arguably the best process out there today? Yeah. So I think when you start talking about NFTs and that piece, there’s a lot of issues that get pulled into that. But that’s a really interesting perspective. And, frankly, something I’m going to do some more research on, and educate myself more on. LIU: I really do not have too much to add here to the conversation, you know, besides what Elizabeth just mentioned. But one thing that struck me was a lot of the—a lot of the transactions could potentially be made by cryptocurrency, not just for—obviously, not just for NFTs, but also for the transaction of a particular real house. Like, you know, they—in the transaction, the property owner would just say that she or he would be happy to take cryptocurrencies. And that—for me, that is something very interesting, because it has direct implications for tax payment and a lot of things like that. So far, I mean, I’ve never made a transaction using cryptocurrency and I really do not know what are the implications for taxation. So perhaps, you know, for Mayor Lewis’s office, you need to, you know, take the entrepreneurship and pioneer work to help us understand it better. FASKIANOS: Thank you. I’m going to take the next question from representative Aundré Bumgardner, who is Connecticut house assistant majority leader: Maine stands out among U.S. states for its high percentage of foreign-owned land. Why is this the case? Elizabeth, you want to? BLOSSER: I don’t know that I have a good answer to that one. I don’t know what the—what would necessarily be a driver of that. LIU: If I can—if I can quickly chime in here, just very briefly. I mean, I did—I’ve done research in food security. And as far—if I understand this correctly—and please do correct me if I’m wrong—if I understand it correctly, that a lot of the foreign-owned land again in Maine, a lot of this is related to farmland, and a lot of this is related to concerns with regard to food security. And there are—it’s probably worth looking into who are the owners of land in Maine. My guess is that, given that China, just in the grand scheme of foreign-owned U.S. agricultural land, China’s ownership is less than 1 percent. So probably, China’s ownership and may be minimal, whereas countries like Canada looms large in the—in the totality of the picture, and the geographic proximity perhaps makes sense, both from food security perspective, as well as invest just for the resource such as timber. FASKIANOS: Thank you. And he had a follow-up question: Why do we see more foreign ownership of U.S. agricultural lands than we do from Black, indigenous, or Latino farmers combined? How does U.S. policy through the farm bill shape this phenomenon? And again, I don’t know if you study this, Elizabeth, or you’ve been following this. BLOSSER: Yeah. You know, again, sort of data on some of this stuff is limited to get a big picture. A lot of times, state-by-state, people have a good view on this. I do think, going back to kind of discussions in Congress, there are a lot of conversations about this issue, specifically as it relates to agriculture. You know, I would not be surprised to see legislative language make itself—and, you know, its way into to the farm bill, especially given that the Government Accountability Office, the GAO, recently released a report just within the last couple of weeks kind of talking about concerns about communication breakdown between the USDA and CFIUS. So, you know, I could—I could see some policy on the federal level come down through the through the farm bill. You also might see something come through the National Defense Authorization Act, the NDAA. LIU: Elizabeth, you just reminded me in terms of the legislation, restrictions in terms of foreign ownership of U.S. land. Like, not all state has legislative restrictions against foreign ownership, which is—which reminds me of the earlier question with regard to Maine. If I remember it correctly, I don’t think Maine has foreign—has restrictions against the foreign ownership. But it—although it did have procedures to say, if it’s a foreign investor, if a foreign owner, you have to report it. But there is no restrictions. But, you know, a lot of these legislative changes over the past year would mean that, you know, perhaps more state would enact additional foreign ownership restriction laws, or even become more restrictive. But just a thought. FASKIANOS: Thank you. In the Q&A there’s some resources. Evan Meyer has shared an article that you might want to take a look at. And Zamora Gaston, legislative assistant for Representative Marcus Evans from Chicago, Illinois, is—responds to Justin’s question: In Illinois, certain foreign persons have to disclose their agricultural land holdings to the Illinois Department of Agriculture. And there is a bill that has been proposed during this session that will require the Illinois Commission on Government Forecasting and Accountability to provide to the legislature a report that details noncitizen purchases of real estate, and percentage of noncitizen-owned real estate, and offers recommendations to make it easier for citizens to purchase real estate. So that might be legislation that other states might want to look into raising, passing. There is a written question from Joshua Ward—Councilman Joshua Ward from Pemberton Township in New Jersey: Being that we live right next to McGuire Air Force Base and we have farmland that is owned by foreign entities, it raises concern for my local citizens about this. Is there a way local municipalities can ask for assistance in investigating concerns? BLOSSER: You know, I think those are conversations to have with your state elected officials in terms of, you know, what policy is coming down the road. But sort of the last conversation reminds me to say that, you know, sort of restrictions, especially as it relates to ag land, aren’t necessarily new. We saw a whole slew of bills get passed last year but, you know, there’s bills—or, legislation that’s been on the books, you know, back to the ’80s, and before, regarding reporting or review of certain transactions by, you know, a state’s department of agriculture, or others. So I would also check to see sort of what maybe some of the requirements in your state currently are. FASKIANOS: So I’m going to ask a question. How do you balance legitimate national security concerns with legislation that might discriminate against individuals of certain national origins? LIU: I guess it’s really hard, because it seems to me that a lot of these national security concerns, so it’s specifically directed against undesired investors, that are either U.S. rivals or U.S. competitors, or entities that are—entities or individuals that are under U.S. sanctions. So it’s very easy for the—for investors—for the investment process, meaning the law firms and the companies that are the recipient of the investment, to be—to self-select themselves outside of the investment process. So from that perspective, I do not—I really do not have a good answer, Irina. FASKIANOS: OK. Let’s go next to—oh, Zamora Gaston has a raised hand. So follow up. Q: I was wondering—Zoe touched on this earlier—about investments from foreign nationalities and startup companies, or businesses in general. I was wondering if there was any congressional oversight or what state-led legislation that you would suggest we look into. LIU: Thank you for the question, Zamora. Right now, there are there are—there are I don’t know how many bills in Congress that are specifically targeting China. But the direct, most relevant piece of a process would be the CFIUS national security concern review process. And in order for the review process to be triggered, the—it has to either satisfy national—it has to satisfy a certain percentage of investment, and in a particular company. And that particular company would also be of strategic relevance, or in an industry that are relevant for national security. Now, in the current political scenario, everything can potentially be national security concerns. So, I would anticipate a lot of additional, more stringent CFIUS reviewing processes against Chinese investment, specifically state-led investment, coming up. In terms of how local legislators can respond to this, I mean, this is really—this is really a calculation that local legislators you need—you would have to have the conversation among yourself, and with your—with your own constituencies. Because, again, who are the investors matters, and to what extent these investors, whether they are Chinese, they are Russian, they are from the Middle East or elsewhere—to what extent they have state connections. The point here—the reason I wanted to make this point is because not all investment—not all, you know, foreign investment in the United States from U.S. competing countries are state-owned entities. And there are private company that really just want to invest for business purposes, right? But the over-securitization of investment make things very difficult. Therefore, you would really have to have a serious conversation in terms of what are the—what are the priorities? Do you think the job being created, the tax revenue being generated, is—basically, the benefit, like, outweighs the potential risk? And if you do think—you do value the benefit, then what are the countermeasures that you can compartmentalize the national security risk? In other words, you take the investment but how are you going to safeguard the national security concern that, you know, CFIUS or other people who are opposing the investment might raise? You know, part of this could be through, like, a contract. You can have specific, concrete terms by saying that, you know, there should not be forced technology transfer, and so on so forth. So this is really a conversation that you would have to have with your own constituencies and figure out is the national security concern a real concern, and then do you have the countermeasures that can balance out the potential national security threat. Q: Thank you so much. FASKIANOS: Thank you. Zoe, to build on that—let me see. Wait. We might have—Vice Mayor Ted Bui from Fountain Valley, California has a question: Foreign entities that are here on an EB-5 visa, are they a concern as well? And, second, are we only concerned with entities that are here from China, or are there other countries as well, like Vietnam? LUI: I can chime in on this, and Elizabeth can correct me and enrich the conversation. So on the EB-5 visas, this is interesting, because with EB-5 visas you really apply to business and business individuals and in the context of China in particular these are usually rich individuals who are—who want to eventually migrate to the United States. So from that perspective, as long as—you know, as long as you have a clean understanding of this person’s source of money, and the connection, and the company’s capital structure—meaning to what extent—again, it’s know your investor and know the business person. As long as you have a clear understanding of the ultimate source of money, there is a high chance—there is a high chance that a lot of these projects coming from a private individual may be from somebody who wanted to, you know, eventually migrate to the United States. Therefore, the national security concern would be not as severe as a state-owned enterprise investment. And then, I would say that not just China. Right now the reason why China becomes a national—Chinese investment become a national security concern was because a lot of the—a lot of the demonstrated patterns by—at least, viewing from Western investor—Western policymakers and Western companies perspective—China tend to have strategic motivation, or their investment is not necessarily just for pure financial returns. And the Chinese—the strategic nature of Chinese investment also not only apply to U.S. companies, but also to their investment in other companies—in companies in other countries as well. One good example, would be 2015 Chinese company’s investment in a German robotic company called KUKA. And this Chinese company, again, it’s private. It’s called Midea. It’s basically a Chinese appliance maker. It has—it does not make anything advanced, like, you know, weapons or anything. No, it just, like, make refrigerators, or toasters, or coffee machines. But this company is very interested in making itself a pioneer in smart home appliances, like smart appliances. Now, whenever—now, when everything touched upon the issue about “smart” or “chips,” now it started to touch upon a series of other things. Like, you know, do you want your coffee machines to start spying on you? Things like that. But I’m not saying that, you know, the Chinese appliance makers are doing that. But those are the kind of concerns in countries like the United States and—or Western companies. And when you—when a Chinese company, even a private company investing in a robotic—in a piece of company that are strategically—yes, it is very much of the German industry’s strategic concern. The reason why the process could go forward, could go through, was primarily for two reasons. First, in Germany there was no other competing bidders willing to offer a counter bid. And then, secondly, at that time, Germany did not really have a robust investment screening process. But from the U.S. perspective, we really did. We have a robust review process. And oftentimes, we can mobilize our private investors to sort of offer a counterargument. Now, not just to China. There are other countries like Russia, as Elizabeth mentioned earlier, from other countries that are considered as U.S. rivals. But I’m not exactly sure about Vietnam, because Vietnam is very much a beneficiary from a lot of this supply chain diversification. BLOSSER: Yeah, I’ll chime in. Again, you know, we don’t really comment on the foreign policy, you know, who should and shouldn’t be included in these bills, what—and, you know, impacted property should or shouldn’t be included in in the bills. But this kind of goes back to what I said earlier about definitions matter in this legislation. Like, how do you draft definitions that are somewhat evergreen, right? You’re putting this into law. That really gets to what you’re trying to accomplish on a foreign policy front, whether that be around the restrictive parties or the impacted properties. And that is difficult. I don’t think there are great answers to that. Like I said, you know, some states have, you know, referenced the federal lists, which sort of narrows it down and allows you to deal with sort of changes over time. In terms of Vietnam, I don’t recall off the top of my head them being listed in any of the bills that I’ve seen. FASKIANOS: Wonderful. Well, we are at the end of our time. Thank you very much to both of you for doing this—Elizabeth Blosser and Zoe Liu. We appreciate it. And to all of you, for your questions and comments. We will send out the link to the webinar recording and transcript, as well as other resources. You can follow Elizabeth on X at @EABlosser, or you can also follow the American Land Title Association at @ALTAonline and Zoe at @ZongyuanZoeLiu. Zoe is also a contributor to CFR blog Asia Unbound. So you can sign up for that if you wish to receive notifications for that at CFR.org. And, as always, we encourage you to visit CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for the latest developments and analysis on international trends and how they’re affecting the United States. And we also encourage you to share your suggestions for future webinars by emailing us to [email protected]. So, again, thank you all for joining us today. We appreciate it. (END)

Thomas Graham, distinguished fellow at CFR, and Zongyuan Zoe Liu, Maurice R. Greenberg fellow for China studies at CFR, lead the conversation on China-Russia relations. FASKIANOS: Welcome to today’s session of the Winter/Spring 2024 CFR Academic Webinar series. I’m Irina Faskianos, vice president of the National Program and Outreach at CFR. Thank you for joining us. Today’s discussion is on the record and the video and transcript will be available on our website CFR.org/academic if you would like to share the materials with your colleagues or classmates. As always, CFR takes no institutional positions on matters of policy. We are delighted to have Thomas Graham and Zongyuan Zoe Liu with us to discuss China-Russia relations. Tom Graham is a distinguished fellow at CFR. He is the cofounder of Yale University’s Russian, East European, and Eurasian Studies program and sits on its faculty steering committee. He was special assistant to the president and senior director for Russia on the National Security Council staff during which time he managed a White House-Kremlin strategic dialogue, and he was director for Russian affairs on the staff from 2002 to 2004. His most recent book Getting Russia Right was published by Polity Books in October 2023. Zoe Liu is the Maurice R. Greenberg Fellow for China studies at CFR. Previously she served as an instructional assistant professor at Texas A&M’s Bush School of Government and Public Service. Dr. Liu’s most recent book Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions was published by Harvard University Press in June 2023. So, Tom and Zoe, thanks very much for being with us today. I thought we would start with you, Tom, talking about Russia’s relationship with China and then we will go to Zoe for her perspective on China’s relationship with Russia. So over to you. GRAHAM: Thank you very much, Irina, and it’s a real pleasure to be here with all of you today. Let me start by saying that the Russia-China relationship began to improve in the very late 1980s, the late Soviet period, after a period of intense rivalry in the 1960s, 1970s, and early 1980s. It slowly continued to improve in the post-Soviet decades but it really accelerated in 2014 with Russia’s seizure of Crimea and its fomenting of rebellion in the eastern regions of Ukraine at that time. This led to a serious deterioration in relations with the West and Russia at that time began to turn more to China as a counterbalance, as another option in managing its relations on the global stage and, clearly, the relationship has taken off since 2022 with the Russian invasion of Ukraine which led to a total collapse in relations between Russia, Europe, and the United States. And Russia needed China as that counterbalance, as that other great power on the global stage that will provide the type of backing that it needed to persist in its growing conflict with the West. And what we’ve seen over the past two years is Russia increasingly relying on China for support in many areas, first on the diplomatic stage. Despite the fact that China abstained in many UN resolutions about the—condemning Russia for its aggression against Ukraine it still has in its public pronouncements supported Russia’s version of what has happened, NATO aggression as the fundamental factor leading to the conflict in Ukraine, and it’s also continued to coordinate with Russia at the UN Security Council and other international fora on a range of geopolitical economic issues that are important to the two countries. Second, as Russia’s relationship and trade with the West began to collapse under the weight of Western sanctions the bilateral trade with China became critically important to Russia’s economy. Trade between the two countries has soared over the past three years. It now reached in 2023 the level of $240 billion. That is about—more than twice what it was in 2019. It’s not only been the trade. China has also moved in to provide the types of consumer goods that the Western companies used to provide that they no longer could under the sanctions regime. So if you travel to Russia today, particularly in Moscow, you’ll see a lot of Chinese cars that you didn’t see just a couple of years ago. Chinese smart phones have replaced iPhones as the smart phone of choice for Russians. In addition, China also became a lifeline as far as the export of Russian oil was concerned. Russia now exports, roughly, half of its oil to China. It was significantly less before the conflict in Ukraine began. Of course, Russia provided that at discounted prices but nevertheless it was an important source of revenue for Russia that allowed it to continue to fund its military operations in Ukraine. And, finally, there has been significant military support. China has not provided the—any lethal aid in any significant amounts as far as we are aware but has provided many dual-use items, things like trucks or excavators that were important for building the trenches that provided a very solid defensive line for Russia in Ukraine over the past couple of years. And in addition there continued to be very close military cooperation, joint exercises, that demonstrated that Russia had an important ally on the global stage and also Russia continued to sell important sophisticated military equipment to China as a way of demonstrating the closeness of the strategic alignment. And the final factor has been the relationship between Xi and Putin. These two leaders have met over forty times in the past decade but most importantly they’ve met face to face twice since the beginning of the conflict, once in Moscow and once in Beijing, again, underscoring the close political relationship and making the point from the Russians’ standpoint that the Western efforts to isolate Russia on the global stage have in fact failed. Just very quickly, there are a number of factors beyond the Xi-Putin relationship that underlie this—and undergird this relationship. The economies are complementary. Russia provides natural resources. China provides manufactured goods. The two countries are brought together by a common resistance to what they see as a U.S. effort to dominate the global stage. And, finally, the two countries do have authoritarian systems, and bureaucracies that are compatible, and make—(inaudible)—for a close working relationship between the two countries. So what we’ve seen is a growing strategic alignment and this has grown much deeper over the past couple of years. All that said, it’s important to remember that there are significant frictions in the relationship that are concealed by this desire to push back against Western and particularly U.S. policies on the global stage. There are still historical grievances that date back to Russia’s seizure of Chinese territory in an unequal treaty in the eighteenth century. There are strong nationalist and racist elements in the two countries, and then the final factor that I think creates a great deal of friction is the very asymmetric relationship between the two countries. China’s economy is ten times the size of Russia’s at this point. That gap is continuing to grow. The relationship very much is tilted in China’s favor at this point. This is something that will be a factor over the long term and will lead, I think, to increasing friction in the relationship. But it’s not going to do that until both Russia and China have dealt with what they see as the U.S. challenge. So let me leave it there, Irina. FASKIANOS: Thank you, Tom. And, Zoe, let’s go to you now to give your perspective on China’s relationship with China and react to whatever—what Tom just shared with us. LIU: Yeah. Sure. Thank you, Irina, for having me and it’s truly a great pleasure to be here, especially with Tom, to do this event with our local and university partners. So I wanted to pick up a little bit on what Tom mentioned in terms of bilateral trade. China’s latest trade numbers just came out a few days ago and what has surprised me the most is that if you just plot numbers—plot the numbers in terms of who China is trading or has traded more over the last year and, of course, trade grew so fast, actually you will be—at least I am surprised that China’s—despite that the United States remains to be China’s largest trading partner but U.S.-China trade has declined the most where as China’s trading with Russia, as Tom correctly pointed out, reached a record high and grow the most significant. So this is why I wanted to sort of focus my perspective on, yes, China and Russia but more on the China-Russia in the global context and I guess the way that I see China-Russia relationship has always been, yes, we do see increasingly over the past—over the past decade there is a strong argument to say that China and Russia’s interest have converged. But I think this interest convergence should also be examined in the broader context of China’s changing relationship with the existing global system and this global system is also led by the United States. So, in other words, I guess what I wanted to say is China-Russia’s relationship as well as the seemingly interest convergence today is qualitatively different from the 1950s, the Sino-Russia alliance, and as Tom also correctly pointed out the two countries in the relationship really significantly improved both bilaterally and multilaterally over the past three—two or three decades since Sino-Soviet split, especially after 2000s. A few timelines or milestones just on top of my mind would be 2001. We are familiar that in December 2021 China joined the WTO but also in 2001 China and Russia signed the treaty of good neighbors and friendship and cooperation. And then 2001 was also when the Shanghai Five group was—received a significant upgrade into the Shanghai Cooperation Organization, which has since evolved into the largest regional organization that does not include the United States. So from that perspective I guess what I wanted to really emphasize or to emphasize is that China’s relationship improvement with Russia is all—has also been taking place in the broader context of China’s relationship improvement with the United States and the U.S.-led multipolar world up until perhaps the recent ten years since President Xi Jinping took power in 2013. And I—what Tom mentioned struck me and I wanted to emphasize was the shift of angle in terms of 2014 and I do think that Russia’s annexation of Crimea and in particular the West or U.K., European—several European countries threatening of kicking Russia and Russian financial institutions off the SWIFT system. At that time, it was a big wakeup call not just for President Putin but also for the Chinese policymakers as well because global financial crisis was the first time when Chinese policymakers tried to implement renminbi internationalization. The whole idea was to—was more economically orientated. The idea was to hedge currency risk. China was the largest trading partner of so many countries. And yet, whenever China was doing trade or a Chinese entity was doing trade, inevitably, because of the dominance of the U.S. dollar, there will be inherent economic and currency cost, right? So—but Russia’s annexation of Crimea in 2014 and the threatening of kicking Russia off SWIFT, from China’s perspective as well as Russia’s perspective the dominance of the U.S. dollar becomes some sort of nondiversifiable risk in the existing system. Therefore, you started to see not just President Putin were interested in developing the Russian version of SWIFT but China actually accelerated the development of a renminbi-based financial infrastructure, although previously in the immediate aftermath of global financial crisis the motivation to develop a broader use of renminbi and the renminbi financial infrastructure was mostly to hedge or reduce China’s economic vulnerability. But later you started to see the geoeconomic factor there and the convergence of China and Russia in terms of hedging the geoeconomic risk of the dollar’s dominance or for that matter USA hegemonic power really accelerated after 2018 during the Trump administration with the heightening of U.S.-China trade war. And, obviously, since Russia’s or Putin’s war against Ukraine now this time the West actually did sanction—not just put an oil cap on Russia’s energy export but also kick the Russian financial institutions off the SWIFT. Now this recent development accelerated a lot of this development towards removing or reducing their dependence on the dollar, not just for economic purposes but also for geopolitical reasons, and China and Russia not only see eye to eye each other bilaterally—they have also been trying to expand regional blocs such as the BRICS, such as the Shanghai Cooperation Organization, with the goal to basically form a(n) anti-American or anti-American dominance, not necessarily alliance but a partnership. And at the same time China and Russia also see the opportunity at least in the energy transition and Russia’s relevance in continuing the support of energy demand not just in Russia but also a lot of these emerging market economies including India, including many parts of Southeast Asia and Latin America and Africa. So from that perspective, China and Russia does—the interest convergence is not adjusted bilaterally. It’s also in the global and multilateral framework, and perhaps the moment when—what really worries me now is that it’s not necessarily, say, that at the people to people level there is a tremendous convergence between China and Russia because fundamentally I really do not think the Chinese people are at a people-to-people exchange level. Chinese people are interested in going to Russia. I think I am a good example. I was born and raised in China, and I’ve become an American citizen, and my family always encouraged me and my generation to come to study in America rather than going to Russia, and now you see the same. You hear Chinese families complain that they no longer have or they have less and less opportunity to study in America. People never complained that they couldn’t go to Russia, right? So the people-to-people level exchange is not something that worries me. What worries me is really about—is really at a strategic level, the perception in Beijing that America is doing all it can to contain China’s economic growth, this sort of push to China having less an alternative but have to depend—have this strategic alignment with Russia and I think this is not just economically or financial or militarily dangerous. Perhaps it’s even more dangerous in the long run such as challenging the U.S. dominance not just economically or militarily but also financially in the global financial system. Now, the moment when China and Russia were able to expand this alternative economic and financial currency system to offer a hedge or even a refuge or a shelter to American sanctions I do worry that we are going to lose a lot of our leverage against regimes that are not considered as our friends or even our enemies. I will just stop there. FASKIANOS: Fantastic. Now we are going to go to all of you for your questions. Please click the raise hand icon on your screen to ask a question. On an iPad or Tablet click the more button to access the raise hand and when you’re called upon accept the unmute prompt, state your name and affiliation followed by your question, and you can also submit a written question via the Q&A icon. You can vote for other questions you’d like to hear asked or answered from your window at any time and we will alternate. So the first question—I need to see if we have raised hands yet. OK. We will go to Stefano Cavalleri. And if you could identify yourself, please. Q: Good afternoon. My name is Stefano Cavalleri. I am attending executive master’s in international relations at CSIS/Syracuse University Maxwell College, and I’m going to prepare—my capstone project is about basically this shift proclaimed by Russia to the east or to the Indo-Pacific, which—a policy which was proclaimed after the annexation of Crimea. So Professor Liu mentioned this convergence of interests; but at the same time I think we must recognize that Russia is a revisionist power in Europe but not in the Indo-Pacific, while China is a revisionist power in the Indo-Pacific but not in Europe. So I think that this creates a kind of—a lot of concerns about this strategic alignment, whether it is really possible or not. So I want to know your view, both from Professor Graham and Professor Liu, about this policy of go to the—to the east, and if—my understanding is that the might of Russia could be useful in order to exploit the Arctic route from them reaching Vladivostok, and then from Vladivostok to—even to India because of the Chennai Maritime Corridor, and also to Japan or to Australia, especially for shipments of liquefied natural gas. This could be something to—interesting for Russia, but I don’t see for China. I see a lot of competition, especially in the South Sea China. So I want to know your views and if it makes sense really for Russia to become a kind of Pacific power, because Russia has never been a Pacific power, right? Not even air carriers. Just the submarines, right? So your view. Thank you. FASKIANOS: Thank you. GRAHAM: Who wants to go first on that, Irina? Should I take a stab at answering that— FASKIANOS: Absolutely. GRAHAM: Thank you, Stefano. That’s a very—it’s an important question but a very complex one, as you indicated in your commentary. First, there were good reasons and good strategic and economic reasons why Russia began to look eastward. We all know that global economic growth was taking place in East Asia, the Asia Pacific region. It was a very dynamic part of the globe economically, technologically, and so forth. And so Russia, which had been excessively reliant on Europe for trade and investment, needed to diversify and East Asia provided in an obvious way the way to do that. It accelerates, and President Putin announces this turn to the East in 2014-2015 because of the sharp deterioration in relations with the West as a consequence of Russia’s seizure of Crimea. So it becomes, in a sense, a—not a forced option but a possible outlet for Russia in order to deal with the growing challenges it’s facing—it was facing in the West and that has undergirded the relationship over the past decade and will for several years into the future. All that said, there are frictions in the relationship that will play out over time, some we’ve already talked about. I think the—one in particular that is concern in Russia is what I mentioned before, this great asymmetry in power between the two countries where you look at sort of economic development of the two countries, China clearly in the lead, and that gap between the size of the Russian economy and the Chinese economy will grow in the future. Technologically China has probably surpassed Russia in its capabilities. If you look at Chinese activities in space, Chinese activities in artificial intelligence, it really dwarfs what Russia is doing at this point. So there is some concern in Moscow about how this relationship with China will develop over time and if you talk to Russian experts, Russian officials, I think there’s an understanding that if not now but certainly if you look forward to the 2030s that Russia needs a hedge against China and what it’s trying to do is develop that hedge right now in Eurasia and the Global South. The organizations that Zoe talked about—the Shanghai Cooperation Organization, the BRICS—are rightfully elements of, perhaps, an alternative international order from the standpoint of both Beijing and Moscow. But from Moscow’s standpoint these are also efforts to constrain China within a network or a web of relationships that will allow Russia to feel more comfortable in containing whatever Chinese ambitions might be geopolitically, economically, particularly in the regions that are most—that are adjacent to Russia. So very good relations at this point. There are good strategic reasons for that. From Moscow’s standpoint, as you look farther down the road Moscow is concerned about growing Chinese power and beginning to think about how it might hedge against that in 2030 and beyond. FASKIANOS: Zoe, do you want to add to that? LIU: Sure. I guess I’ll just add a little bit of a footnote to what Tom just mentioned. One thing, Stefano, your excellent question raised and caught my eye was your correct identification of revisionist power in different contexts, and I think you are correct. And I also think it’s worth remembering that despite the convergence of interest in certain areas, as Tom mentioned, the fundamentally important fact is that China’s rapid economic rise, in particular becoming the second—from one of the poorest country in the world to the second-largest economy, China’s rapid rise did not benefit from a good relationship with Russia but because of China’s or America’s socialization of China, welcoming China into joining the U.S.-led global system, from WTO and so on and so forth. So from that perspective, despite that the—Russia and China under the leadership of Putin and Xi Jinping they have respective ultimate goals in terms of changing or revising the existing global order, but I have to say their levels of grumpiness against the existing system are very different and for different reasons. At least for China, the goal is not to completely abandon the existing U.S.-led system because China still need, very much so—especially now with the investment screening and export controls, China still very much need a good relationship or reduce the tension with the West in order to—for it to create a better environment for the Chinese economy, whereas for Russia the situation is completely different. And I think that you correctly also identified areas where the Chinese and Russia would have a lot of competitions. But to what extent I think that the existing competition is all—I would view it through the lens of, again, changing global environment. Pre-Russian invasion of Ukraine perhaps there will be more international partners who are interested in investing in Russia like in—especially, for example, in Russia’s Far East area to develop the LNG project and so on and so forth. But since Russia’s invasion of Ukraine a lot of Western partners as well as the Japanese and the Koreans they started to divest their asset ownership. So from this perspective I would echo what Tom mentioned. This unequal relationship in the changing global environment perhaps makes Russia economically and financially, perhaps, reliant on China more. Now, the issue you raised with regard to the Arctic transit route and the relatively competitiveness in the global sea lane here I would say that, yes, it is right that China—although China is not necessarily a(n) Arctic power but it does have a seat in the Arctic Council. Now, with the climate change and energy transition I think not just China and Russia find themselves relevant for the changing sea lanes. But you’re starting to see countries like Norway they wanted to be more active in this—in the so-called—in the governance of global commons. So, perhaps, from that perspective whether China and Russia can compartmentalize areas where they have tensions versus where they think closer alignment would result in better benefit for them that it is an issue to what extent we can compartmentalize those issues. But excellent question. Thank you. FASKIANOS: Thank you. I’m going to take the next question, which is written from Robert Mogielnicki who’s an adjunct assistant professor from Georgetown University: Do you believe that the current state of China-Russia relations has significant implications for the Middle East? If so, where and how, and should we expect more cooperation, alignment of interests, more competition, or a healthy dose of both in this region? Who wants to take that question? LIU: I can take a first stab at it and then Tom can correct me. So, Robert, thank you. I see where you are coming from, and thank you very much for joining us today. I do see—I mean, you do research in this area, so, obviously, you have a view. But I do think that there is significant implications on at least the two aspects. The first part is energy. Obviously, the—if I were Saudi Arabia, I would not be happy to see that the West, despite the oil price cap on Russian oil export, somehow sabotage Saudi Arabia’s oil export share in the Chinese economy. Even now Russia is the largest oil supplier to China, as Tom correctly pointed out. So from that perspective it has implications in the short run in terms of who could provide more shares for the Chinese economy or, for that matter, the overall energy—the overall energy supply to China and India. Remember, the price—despite the price—oil price cap for Russians’ oil export is China and India leading the way on purchasing Russia’s oil, right? So from—we can debate to what extent the price cap matters, but at least if I were Saudi Arabia I would not be happy. And then, secondly, the financial implication is also very significant. Obviously, GCC countries in general, Saudi Arabia would be the undisputed leader there. The moment that America not only kicked Russia out of the SWIFT but also seized Russian reserves, guess who is more worried? Yes, China is worried, but Saudi Arabia is even more worried. So, from that perspective, the implications for the Middle East are tremendous. They would have to reevaluate with whom they wanted to be aligned more closely. Now, obviously, the tensions in the Gaza situation and the Red Sea pose renewed attention or even potential spillover the new—(inaudible)—or renewed—(inaudible)—between Russia and Saudi Arabia. But with all that being said, perhaps we will see GCC countries to be more—making more strategic move. Perhaps they would—they would want to learn a few pages from India’s playbook, trying to balance the relationship between the East and the West. To what extent Saudi Arabia could be—adopt India’s sort of foreign policy position, that is unknown. That is relatively unknown because, ultimately, the United States still is the guardian of the Gulf. We still have a stronger military presence in the Middle East. GRAHAM: Yeah. Robert, I think this is a very good question. As I look at the situation the question, I would ask is the extent to which Russian and Chinese interests overlap in the Middle East at this point, particularly in the context of the current—of the current conflict. China continues to be concerned about the flows of energy exports out of the Middle East. That’s important for China’s own growth. It’s not entirely reliant on Russia nor does it want to be as far as its energy sources are concerned. So they have to be concerned about the instability, some of the things that the Houthis are doing in that region, some of the Iranian goals in that region in a way that Russia doesn’t, in part because instability in the Middle East could have a positive impact on oil prices, which is an important component of the Russian federal budget. So I think there’s a little friction there. That won’t necessarily play itself out dramatically in the near term but it’s something I think that people in Washington need to keep in mind. The other issue here that’s worth considering is that both Russia and Iran are in some ways competitors for entry into the—or control of share in the Chinese energy market. There’s another place where Chinese and Russian interests don’t fully overlap in the Middle East. So a sort of clever policy on the part of Washington would be aware of these differences and we tried to look this year at the ways that they can exploit that in the future. There are areas where our interests overlap with China in terms of stability. That is not necessarily an interest of Russia. So there are things that the United States could do in its public and diplomatic posture that may introduce an element of friction in the relationship between Russia and China, which would clearly be good from the standpoint of our interests right now. FASKIANOS: Thank you. I’m going to take a question from JY Zhou with a raised hand. And I did not pronounce your name correctly, so if you could correct me that would be great. Q: Hi. My name is Chris Nomes. I’m a student here at James Madison University and I had a question on Russia and Chinese relations in the sense of Africa. How much coordination and cooperation is there between the two nations when it comes to their operations in Africa in their—both their economic and military and political aspects? Thank you. GRAHAM: Zoe might know more about this. I think this is a very good question, Chris, and one that we need to focus on. My take on the question would be that there’s not a great deal of cooperation and coordination between the two countries when it comes to Africa. China has clearly been much more active in Africa over—in recent years for, again, a whole host of reasons that are important for Chinese economic development, access to resources, farmland, and we can go through the list. Russia’s interest in Africa has been of a different sort, more focused on providing security to certain regimes in Africa to gain access to certain resources. The point I would make here is it’s not clear to me the extent to which Russian activities in Africa have actually been a well thought through and coordinated activity coming out of the Kremlin. We’ve heard a lot about the role of Wagner forces in Africa in recent years. I think it’s important to remember that the Wagner forces were a private military company, that they didn’t necessarily factor into all the decisions that the Kremlin has made. In fact, the Wagner forces—its leader recently who has—as we know was killed last summer, Yevgeny Prigozhin—in fact had his own interest, and the way I see it working is not so much as acting under Kremlin direction as his developing interesting ideas for his own commercial purposes and then checking with the Kremlin to see whether those ran contrary to a Kremlin interest or not. So the short point that I’m making here is I think Chinese have pursued a much more coordinated policy in developing their relations with Africa over the past several decades. The Russian policy has been a bit more chaotic involving private actors, government actors, and that the two countries have, largely, operated in different dimensions on the African continent and therefore I don’t see—maybe Zoe has better information than I do—any particular extensive coordination of the two countries’ activities in Africa and I don’t expect to see that going forward either. LIU: I would agree with Tom in terms of the lack of concerted effort between—or cooperation between China and Russia in the context of Africa, although South Africa and recently Egypt have become members of the expanded—South Africa was members of the BRICS much earlier but then recently Egypt was also part of the expanded version of the BRICS. You see China, Russia share this kind of platform with a lot of these African—with African economies through the context of BRICS dialogue, BRICS summit, and—but that’s—from my research I think that’s pretty much it and China and Russia also see Africa very differently. As Thomas correctly pointed out, if you think about China’s early—China’s engagement with Africa actually it’s not just recent years or is not just through the lens of Belt and Road Initiative. China started its economic engagement with Africa back in the 1950s. At that time China was one of—perhaps one of the poorest country in the world, and despite China’s economic backwardness the country under revolutionary leaders like Mao Zedong and Zhou Enlai, they started foreign aid to African countries. They built railways like the Tanzania-Zambia railway and so on and so forth. So from that perspective China’s economic relationship or economic engagement with Africa it does not really start. The origin was not economical to begin with. It is with the support of the majority of African countries mainland China or Beijing were able to gain the seat or replace Taiwan and gain the seat in the U.N. So from now fast forward it seems that a lot of the conversations has been, like, is China doing a new commercialism and a new mercantilism and things like that. But, ultimately, China sees Africa not just from the lens of natural resources but there are broader geoeconomic and geostrategic plans behind that and a very important piece of China’s reengagement with Africa also resonates with China’s reckoning itself or the identity of a developing country because having the identity of a developing country, having that name tag, is very important for China in the existing global trading system such as getting the benefit of certain WTO preferential treatment, and so on and so forth. So, again, whereas a lot of these concerns are less so clear for Russia, however, as Tom correctly pointed out,  the private security firms, the Wagner Group’s model is something that China and Chinese private security firms they are aware of. But China can’t—the Chinese private security firms cannot afford to go on that route for political reasons. But then, obviously, economic—for political and economic reasons fundamentally I think the outside look like when China’s presence on the—at the upgrade of the Djibouti port into a military base was already very, very contentious. So China in many ways cannot afford to go down the Wagner Group model but it’s not—that doesn’t mean that China is unaware of that kind of business model. FASKIANOS: Thank you. I’m going to go next to a written question from Nicole Diaz: Thank you so much for your insights. I was wondering if you could explain how are China and Russia relations regarding disinformation campaigns in other regions of the world. Do they cooperate or do they act by their own to improve their international image? And Nicole is a student at New York University. GRAHAM: I’ll take a first stab at that and then Zoe will add and correct as necessary. First, I think this is a very important issue, Nicole, and one that’s going to garner a lot of attention, particularly here in the United States as we move towards a presidential election in November of this year. I would say there’s a fundamental difference between the way China conducts its information or disinformation campaigns abroad and the way Russia does. China has been focused, largely, on presenting a positive image of China itself. Russia has been focused more on disruption and it tries to use disinformation—its disinformation campaigns in the United States not to present a pleasant or attractive image of Russia as much as it is to exacerbate tensions inside the United States. So it looks for fault lines in the political system. It tries through its social media and other methods to widen that dysfunction in the United States. This is sort of in line with where Russia stands on a lot of issues and I think it’s a fundamental sort of difference in the way Russia approaches international affairs and the way China does at this point. Zoe has already talked about sort of attitudes towards the current world order. Russia is, clearly, focused on disruption. It’s displeased with what it calls American hegemony. It’s trying to undermine that through all means possible in the belief that it has not benefited in any significant degree from the U.S.-led world order. China, as Zoe pointed out, has drawn some benefits from this world system, doesn’t want to see it entirely overthrown, although they probably would like to rebalance it in a certain way that would be advantageous—more advantageous to China. So think of Russia as a disrupter, China more as a revisionist in the sense of wanting to rebalance a system more in its favor but not out to destroy the system or to disrupt the system to the extent that Russia is interested in doing that. LIU: I guess I just wanted to add one little thing to what Tom explained just now, which is the audience. I think Tom is absolutely right in terms of Russia being disruptive, trying to sort of seek—create a wedge in terms of—create a wedge seeking the fault lines in our Western political system, especially in election year. Whereas I think the audience—the Chinese media or misinformation campaign is more focused—is more targeted at both the Chinese domestic people as well as the Chinese overseas diaspora. On the one hand, they are focusing on—for the global audience they focus on telling the—using President Xi Jinping’s word is about telling the Chinese story and telling the Chinese story well, meaning they wanted to present a good and positive image about China, combating the global campaign about China is doing bad here and there. So that’s what they are trying to do there. But then on the other hand China has been trying very hard to show that, well, while you know all these things about China let us tell you what are the bad things about the Western system especially for the domestic audience, and I constantly get emails and as well as messages on social media like WeChat and WhatsApp from my Chinese friends saying that the reasons one was—the border dispute, the refugee crisis in American border, and people are—on Chinese social media people were obsessed that there is going to be a civil war in America, going to sort of disrupt the entire world. So, this kind of misinformation campaign, I think the audience is also very different and, obviously, the content is different. FASKIANOS: Thank you. I’m going to go next to a raised hand from Wilson Wameyo who’s calling in from Poland, I believe. If you can identify yourself. Q: Hello. Good evening. It’s evening here in Poland. I’m Wilson Wameyo. I’m studying for a master’s in international relations, international security, and development. And my question to our guests is I want to know in all this relationship between Russia and China what is the place of Taiwan in all this? Can we also say that is a factor of China supporting Russia because it has the same problem in the issue of Taiwan? Because if you look at the two cases there are some kind of semblance in the situation. So what is the situation—what is the part of Taiwan in all this? Can you say something about this? GRAHAM: I could start again, Irina, and Zoe knows— FASKIANOS: Sure. GRAHAM: —the Chinese angle to this much better than I do. Can then sort of add or subtract as necessary. Again, it’s a very good question, Wilson. The point I would make is that I see more differences between Ukraine and Taiwan than similarities. I mean, one of the reasons that China has abstained in U.N. votes concerning Russia’s aggression against Ukraine is that it was a clear violation of the territorial integrity of Ukraine. This is something that China hasn’t supported historically. Taiwan is, from the standpoint of Beijing, an integral part of China and it certainly doesn’t want other countries separating Taiwan from China over the long haul. So I think the way China thinks about these issues are quite different. From the Russian standpoint, it enjoys or needs China’s backing in order to maintain its position on the conflict in Ukraine. All that said, I don’t think that Moscow believes that it has to come out a hundred percent in support of the Chinese position on Taiwan and I don’t think that China is necessarily expecting that in a conflict situation. These two countries do have different interests—Russia more focused on Europe, China, obviously East Asia. But broader than that Russia would provide no more support to China in a Taiwanese scenario than China is providing Russia in the Ukraine scenario, and my guess is that it would actually in fact have less to offer. That wouldn’t necessarily undermine the relationship. I think the two countries realize that they have different interests. The point that Moscow and Russian officials always admit about the relationship with China, it’s not an alliance. We’re not always together, but we’re never against one another. And that’s what they would—the position they would take on a Taiwan scenario. We’re not going to be against China but we’re not necessarily going to be fully supportive. LIU: And I think from so many aspects Russia’s facilitation of the separatist movement in post-Soviet states as well as Russia’s earlier recommendation of Mongolia, which leads to the separation of Mongolia and the Chinese territory a lot of this really contradicts one of the fundamental tenets of Chinese foreign policy which is the inviolability of national sovereignty and that is something that China always emphasizes while—and that’s also a cornerstone piece of China’s policy towards Taiwan which, again, China considers as the core of the core interests of China, right? So from that perspective, Beijing is finding itself a very hard—a very difficult situation with regard to Russia’s war against Ukraine and it so far has not called it as an invasion. But what is it? So from—and Beijing also finds itself sort of sandwiched in between the West and Russia. But I do think that mainland China and Taiwan has—both sides have learned an important lesson from the—Russia’s war or Putin’s war against Ukraine. On the mainland side I think at least Beijing felt that or have already expressed that they’re feeling the fear that external intervention is becoming a bigger threat managing the relationship with Taiwan. We’ve seen Chinese policymakers talking about this in the National People’s Congress as well as the two sessions. They were talking since last year. The government report emphasized that we need to—rather than emphasizing a Taiwan local separatist power they emphasized international intervention. And then, secondly, I think Beijing also recognized that—the need for self-sufficiency. A lot of the Taiwan contingency also propelled Beijing to realize if there were a Taiwan contingency Beijing at least needs to prepare the economy—the mainland economy to be able to endure severe Western sanctions, and if not at least making sanctioning China even more costly or at least equally costly for the sanctioners. FASKIANOS: Thank you. I’m going to go next to a written question from Susan Knott, who’s studying at the University of Utah: Salesforce Commercial proclaims that data is the goal of the AI frontier. 60 Minutes highlighted how well China is positioned to become dominant in all sectors because of long-standing control of data and the use of AI and data management. Having taught several students from China, I admire China’s cultural wealth of a strong educational foundation for those who qualify for higher-ed opportunities. These two factors will quickly put China in the lead in many sectors. Where does Russia stand? GRAHAM: Where does Russia stand in big data and AI? I think the short answer is far behind the United States and China at this point. Russia devotes relatively little of its GDP to research and development. As a percentage of its GDP it’s probably one-half or less of what China or the United States devotes of GDP. That is about one-tenth the size of the American and the Chinese economy. So that gives you a sense of sort of what Russia’s effort is in this realm. It doesn’t have the access to the big data that China does nor that the United States does so it will try to make some progress in this area. The two global leaders here are going to be China and the United States, and Russia is going to be a distance—I wouldn’t even say third in this regard. There are probably other countries that are more advanced in this area than Russia will be. LIU: I would agree with Tom but I also add at the same time there’s a limited space of cooperation between China and Russia. I remember—Tom, you can correct me if I’m wrong—I remember last year there was the China-Russia joint declaration in which the two again stated as they always do, saying that we are going to seek cooperation in advanced technology and so on and so forth. And in addition to that there is also this China-Russia technology industrial cooperation fund which is financed by—and the fund is capitalized by Russia’s sovereign funds, which is now being sanctioned by the West, and China’s sovereign fund. Then there is also additional Russia-China renminbi investment fund. So through this kind of joint ventures there might be a small pocket of money for the two countries to explore cooperations in big data and artificial intelligence. But the limits is that given that both China and Russia are under—in terms of scientific development, in particular semiconductor and the chips and the quantum computing and artificial intelligence a lot of these are under severe U.S. export controls. So from that perspective I think Russia probably is going to lag behind not just the United States but also China. GRAHAM: Yeah. Let me just make one point here. I think you always see this talk about cooperation. But AI gets to sort of fundamental elements of power in the current period and China, no matter what its relationship with Russia, is not going to give it access to the core secrets of its national power. There’s not that type of trust between Russia and China nor is there that type of trust between—obviously, between China and the United States. So this is a very—this is an area of competition. Both the United States and China want to compete and they want to come out ahead in this competition. Nobody’s going to bring Russia along as a competitor. FASKIANOS: Great. Well, we’re at the end of our time and we have so many questions. But I thought I would just take the moderator prerogative to ask you the last one. Sorry we couldn’t get to all the questions. We have a group here of students and professors, and I thought maybe you could just say just a short few words about going into government or academia and the value of doing so. LIU: Tom is more equipped to say because he has so many hats. (Laughter.) FASKIANOS: All right, Tom. Well, Zoe, you can too. But— GRAHAM: Look, I mean, they’re two different areas. Each has their—each has their place. The point I would make I have served in government and I think there’s no greater honor than working in the service of your country. And so I would urge people who are thinking about careers to seriously consider it. The pay is not as good as in the private sector but the issues that you get engaged in and the chance to do good and get involved in doing good not only for your country but farther afield cannot be compared in any place outside of government, as far as I am concerned. So I have a preference for government but academia, obviously, has its value as well. Academics are truth seekers and we actually need a lot of truth. In government you try to manipulate the truth in order to create facts that are advantageous to your own country. So that’s the way I would divide the two professions, going forward. FASKIANOS: And, Zoe, any words of inspiration from you? LIU: Sure. I think both my parents and my mentors have told me that before I be a good scholar or anybody else, they have always emphasized that, Zoe, you want to be a good person. I think being a good person is important. Either you serve for the government or work in academia. The idea is, you want to be a person that at least you are somebody who people would want to work with you. I think I benefit a lot by following the instructions given by my parents and my mentor. FASKIANOS: Wonderful. Sorry to put you both on the spot but it’s always good to hear that perspective for students who are thinking about what they’re going to pursue in their lifetime. So thank you for that and for this terrific hour. Again, I’m sorry to all of you. We couldn’t get to the questions and comments but I commend Tom Graham and Zoe Liu’s books to you all. For the professors on this call, if you are so inclined to assign their books in your class they would be happy to do a Zoom with your students. So I will put that out there. If we’re—we get hundreds of requests I may have to walk that back, but I wanted to offer that here. So, again, you can follow their work also on CFR.org. The next Academic Webinar will be on Wednesday, February 14, at 1:00 p.m. with Esther Brimmer, who is a senior fellow in global governance at CFR, talking about governing the global commons. And, again, I encourage you to learn about CFR paid internships for students and fellowships for professors at CFR.org/careers. Follow @CFR_Academic on X and visit CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for research and analysis on global issues. Again, thank you to both of you and to all of you for joining us. (END)

National Security Advisor Jake Sullivan discusses U.S.-China relations and the Biden administration’s policy priorities for the relationship going forward. This event is co-organized by the 21st Century China Center at UC San Diego’s School of Global Policy and Strategy, as part of its annual China Forum.