C.V. Starr & Co. Annual Lecture on China: Frayed Relations—The United States and China

Panelists discuss the relationship between the United States and China, how confrontational and sometimes false narratives in both countries are affecting it, and how the governments of both countries might respond to the escalation of tensions.

 

RUSSEL: Hello, everyone. Well, welcome to today’s Council on Foreign Relations meeting—“Frayed Relations: The United States and China.” Today’s meeting is part of the Council’s C.V. Starr & Company Annual Lecture on China.

I am Danny Russel. I’m vice president of the Asia Society. And I’m joined today by Professor Stephen Roach of Yale and author of the recent book you saw on the way in, Accidental Conflict; Bonny Lin of CSIS; and Ivan Kanapathy of Beacon Global Strategies in Georgetown and CSIS. So I’m not going to give a detailed bio on each of the speakers because it’s in your material.

What I will reinforce is the request to everybody to set their cell phones to stun so they don’t ring, warn you all that this program is on the record, warn you anything you say can and will be used against you on social media. And we will begin the discussion with the people on the stage for about thirty minutes, and then we’ll open it up to questions and comment from members.

So needless to say—but I’ll say it anyway—the U.S.-China relationship is frayed, and that sounds like a euphemism. There is an awful lot going on that we would like to touch on: priority issues like Taiwan, the Sino-Russia relationship, and technology, and tech limits; headline issues like the much-feared spy balloon; chronic issues like the South China Sea, handling North Korea, human rights, trade and investment; and governance issues like democracy standards, international law; and there’s geopolitics, too. As Xi Jinping has taught us, we’re faced with high waves and strong winds, and so on.

But I’d like to start by taking a step back from the headlines, taking a step back from the familiar agenda, and just asking ourselves what’s going on in the relationship, how would we characterize the state of U.S.-China relations today, what does it look like? And since you’ve just written a book that addresses that in no small measure, let me start with you, Steve.

ROACH: Thanks, Danny. It’s common in this country to start out by saying America has a serious China problem, and when you travel out to Asia—and I was there not in the mainland about three weeks ago—it was in Hong Kong—the view is that China has an America problem. My personal view is that we both have a relationship problem; a relationship that was comfortable for a long time but has now moved into—and the phrase I use in my book is the conflict phase of co-dependency where both nations—the U.S. and China—are afflicted actually by a comparable tendency to blame their vulnerabilities on their erstwhile partners. And the blame has gotten fabricated to the point where it has led to this serious escalation of conflict. It’s a blame that is manifested through many of the false narratives that I wrote about in this book. And I gave equal attention to false narratives on both sides of the equation.

And just—I’ll just finish by saying—examples. The U.S. has a massive trade deficit. We blame it on China because that’s the biggest piece of our trade deficit, but it really reflects much more our own lack of domestic saving that requires us to import surplus savings from abroad, run balance-of-payments deficits and trade deficits—last year, 2022—with 106 countries.

China’s got lots of problems. The one I focus on a lot in the book is their failed economic rebalancing. They blame that on America’s efforts to contain China. Both narratives are fact based, but they are distortions of cause and effect. And so, you know, the relationship is one that has now gotten to, I would say, a crisis point that did not have to happen if both nations were more secure about themselves and not willing to blame the other for their self-inflicted problems.

RUSSEL: So the relationship at a crisis point and a propensity to vilify and blame the other side rather than tackle the problems, a lot of the attributes of the security dilemma where the absolute conviction is that the other side is at fault and up to no good.

ROACH: Correct.

RUSSEL: Bonny, give us your perspective on the relationship. You’re a student of China.

LIN: Sure. Thank you. And it’s really great to be here.

I’m not so—I am worried about where the state of the relationship is, but I guess I wouldn’t quite say we’re at a crisis point yet. I would say the relationship has been very, very competitive, and if you go back, say, ten or so years, right, we used to talk about what are the stabilizing factors in the U.S.-China relationship. It used to be economics, right? And then what we saw during the beginning of the Trump administration was, with all the economic action that we were taking against China, there was a desire to make the military-to-military side of relationship a stabilizing aspect.

Now we’re now talking about a stabilizing aspect of the relationship. What we are seeing now, at least in the United States, is discussion of the need for guardrails, the need to find ways in which, if the competition continues to intensify, that it won’t go towards confrontation or a conflict. But there—we haven’t identified anything that would anchor the relationship and provide it with some form of way to deal with various different difficult issues that we might face.

I would note that internationally—at least my perception is I do feel that China and the United States are more divided in terms of both our foreign policy but also in terms of the relationships that we are building. What we saw from Russia’s invasion of Ukraine and the position that China took is a much—is a growing narrative about democracies versus autocracies. There is some truth to that; of course as a clear oversimplification of the relationship, but that is influencing the overall international perceptions.

And I would just add really quickly on the domestic politics—I think Stephen had mentioned this—there is definitely pressure on both sides, within both the governments, to take the much more competitive approach. In the United States I think there is bipartisan consensus on competition with China, and in China, I think our Chinese colleagues are probably not allowed to voice what is more moderate views, and the politically correct view is a view in which the United States is to blame for a lot of the issues in U.S.-China relations.

RUSSEL: Ivan, what do you see when you look at the relationship?

KANAPATHY: Danny, I think it’s—you know, it’s interesting to use the term “frayed,” and I think we use that more as a relative term and thinking back to recent history perhaps. And maybe we should just take a whole new sort of approach and look at things. And we’re in a stage where the two countries, you know, have—increasingly at odds from an interest perspective and, you know, no one can sort of deny that. And that’s very different—not very but, you know, that’s kind of grown over the past couple decades. And so looking at it, I think we have a much more honest relationship now than how I would characterize in the past where we’d tend to—on both sides, frankly—paper over differences, right? I mean that’s literally a term that the Chinese used to, you know, encourage us to do, right; put some issues—shelve disputes and things like that. And that, in my view—given current conditions and the relative power of the two countries comprehensively, that wouldn’t be healthy at all. That’s not a healthy relationship. A healthy relationship needs to be candid. And it’s not going to be the way it was before, and we may not have, you know, the pageantry, and the symbolism, or even as many contacts, you know, between countries as we used to have, but that doesn’t mean that we can’t have the key communications that are necessary to keep things stable.

So that’s sort of how I look at it and sort of how things have evolved for both sides.

RUSSEL: OK, so I heard Bonny lamenting the loss of balance and stabilizing forces in the relationship and Ivan celebrating the honesty and forthrightness of our collision and our friction. All right, well, there’s a lot to explore in that context.

Let’s zoom back out and pick up on something the Bonny alluded to in terms of sort of geopolitical environment that the U.S. and China operate in, whether we’re competing, or we’re fighting, or fraying, or even occasionally collaborating, or at least avoiding head-on collision.

Bonny, maybe—how does the U.S.-China relationship fit in the context—not just of democracies versus autocracies, but the growth of alliances? Are we recruiting a posse to defend and manage the rules-based order, or are we dividing the world into blocs?

LIN: I guess the reality is probably a little bit of both—(laughs)—because in order to be able to protect the rules-based order, the approach that this administration has taken is to strengthen our alliances and partnerships, which in some degrees does require a much deepening of relations, and a way in which our allies and partners also less dependent on China.

So what’s notable this year so far is in the major efforts, particularly on the defense security side, that we’ve achieved. If you start looking at activities since late last year, right, we had Japan’s rolling out of its key national security documents—National Security Strategy as well as the promise to significantly increase its defense spending.

We also saw earlier this year, when Secretary Austin went to the region, he had—he met with the Philippines, and they agreed to provide the United States with significantly—four additional military sites which our troops could access and operate from. This is on top of all the other efforts that’s happening including, for example, the NATO general secretary going to Japan and the ROK advocating for more linkages between NATO as well. And so from the perspective of if you are sitting in Beijing, you must see this as the United States—and they do actually say this quite explicitly—as the United States strengthening our allies and partners in an effort to contain China.

So as we are, from our perspective, trying to bolster our allies and partners to deter Chinese aggression, China is viewing this as the United States being much more active, operating in their own neighborhood, in many ways taking policies that are not different from their perspective—not too different from their perspective of the policy that we took during the Cold War to contain the Soviet Union.

RUSSEL: Ivan, what’s your reaction? Do you think we’re inadvertently backing into not just a frayed relationship, but a fully adversarial relationship? Is that where—is that where we’re heading?

KANAPATHY: Yeah, I think so.

RUSSEL: Is that where we want to head?

KANAPATHY: Well, I think it’s certainly not where anyone wants to head. I do think—I agree with everything Bonny said, and I think—you know, I think it’s important that everyone knows that I’d much rather be in a cold war than a hot war, right? So, you know, from that perspective, you know, I think what Bonny was just describing is some of this—some aspects of the relationship, and I would say more and more with time are becoming zero-sum. I mean, there are clearly—again, as we build an alliance network—the Quad, what have you—in the Asia-Pacific from China’s perspective, that is containment. And both are true depending on your perspective, I think.

And so, yeah, I think we have to accept that, and the question is—you know, the question at hand for us is how to keep it cold. And again, I’m not saying we need to use that term, but to avoid, you know, the conflict.

RUSSEL: Steve, Ivan just mentioned the zero-sum dynamic, and Bonny referred to the economic ties that have served as stabilizers, certainly in the past, and as ballast in the U.S.-China relationship.

You’ve looked very carefully and worked on the economic side of the relationship, both analyzing China’s economy and policies in terms of the U.S.-China economic relationship. What do you see? What does it look like? You certainly have been an optimist through much of your career with respect to China and China’s economy. What does it look like now?

ROACH: Well, I have been an optimist for about twenty-five years, but I am having a hard time maintaining that posture. I do believe that the Deng Xiaoping model—reforms and opening up—was a flexible model that led to a powerful takeoff, and then the process—an introspective process—that began in the first decade of the 2000s, where the leadership had come to an agreement that there was a transformation that was necessary to shift from exports and investment to more of a consumer-led growth model. So it was a flexible framework, as well.

And Xi Jinping comes in in late 2012. The first year, you know, there was a good deal of enthusiasm that he was going to enact comprehensive reforms that would turbocharge this transition. And these reforms enacted at the end of 2013—the so-called Third Plenum reforms—laid out hundreds of ideas to do that, but he failed to deliver. And he initially launched, you know, a massive anti-corruption campaign that quickly become focused more on power consolidation. And, you know, the subsequent turn of events in the last nine years in particular, have been disappointing.

What sort of pushed me to write about—I think I wrote an article recently called “The Lament of a Former Chinese Optimist” (sic; “A China Optimist’s Lament”). The demography we knew was going to be bad. We knew this was coming because of the one-child policy. The working-age population, in fact, has been declining since 2015, but it’s coming—as most things do in China—faster than we had expected. And for any economy to offset declining working-age population, the only way you can maintain a strong growth path is to boost worker productivity. And that’s not happening. And in fact, the productivity outlook for China is particularly bleak in light of what they have done to clamp down on the high productivity of the internet platform sector, how the power of economic growth has shifted back from a dynamic private economy to a more ossified, low-productivity state on enterprise. And then finally, the Twentieth Party Congress and its emphasis on security, and the U.S. response on technology, which is directly aimed at hobbling the broad thrust of what the Chinese call indigenous innovation in AI and quantum computing. That’s very negative for productivity.

So my medium-term—the longer-term outlook for China is significantly below the trajectory that I, the optimist, have been hoping for for a long time, and it’s hard to see a prompt turnaround of that going forward.

RUSSEL: Well, you touched on the technology area, and I’d like to pick up on that because it’s a thread that connects the economics with the security issues with the political issues. And I think there is a real question as to the extent to which the U.S. strategy is a defensive national security effort to build a high fence around a narrow yard to safeguard American technology and prevent it from leaching into a military application against us versus the prospect—certainly the perception among in Beijing—that the U.S. is out to undercut China’s economy and growth, and just to harm it.

Ivan, Bonny, how do you—how do you think about this?

KANAPATHY: Yeah, so obviously I think if you trace back a couple of years, it started very much—at least directed and more narrowly focused by it—you know, some of the U.S. actions that were focused on military-civil fusion policies that China had, and certain companies, universities, what have you, that we knew were participating in that—also human rights violations and things like that.

But as we know, sort of in—you know, definitely in this past October, this was broadened quite a bit. I think this is the question that goes exactly to the question Danny was asking, has this just bled over from just national security into economic competitiveness? And unfortunately, there isn’t a good answer because it could be both, depending on your perspective, because of China’s system—or our perception of China’s system that it’s very difficult to disaggregate when you go back, you know, another step down in the supply chain, et cetera; that we could be—and, frankly, we know that we are or have been helping, you know, improve China’s military which, again, is we would expect them to use the tools and the technology that they are gaining to do that.

And so—and so the two really, I think, are essentially blended. And the decision for the United States is, you know, are we willing to sort of give up the economic interdependence, interactions, and such—how much are we willing to give up, which may also hurt our own research and development in some cases, in order to stifle, you know, the military growth or the human rights violations and things like that.

ROACH: Can I just make just one very brief interjection?

RUSSEL: Of course.

ROACH: That last point you made, Ivan—the basic research share of federally sponsored R&D has plunged, so again, this is sort of the type of thing that I focus on in trying to develop false narratives. We might be more vulnerable to the type of basic research that used to drive our technology and leadership than we’re willing to admit, but we blame China for that. This is—I think we need to take a look at our own efforts in maintaining our leadership in things that we think are threatened by others.

LIN: And if I could add really quickly on what both have already mentioned, I think another dynamic driving—impacting the economic relations is that, as the prospect or the possibility of a crisis or conflict become more real, right, we are seeing businesses reconsider should they put all their eggs in China or should it be China plus one—all these other factors that businesses are now taking into consideration because of the overall security dynamic. So they are linked in not only the trade technology way that we’ve discussed, but also in the larger macro picture in terms of thinking about investing and engaging with China.

RUSSEL: Well, Bonny, one of the major variables in the equation for any potential investor—or frankly for any country in the region—is Taiwan. There is no bigger issue, there’s no bigger challenge in the U.S.-China relations. And if there is going to be a disaster, it seems a little more likely that it will start in the Taiwan Strait than in, say, a balloon. But it remains to be seen.

You’ve studied China hard. What’s your working hypothesis about the—Xi Jinping, the Chinese leadership’s strategy for Taiwan and for unification.

LIN: That’s a really good question. So last year we did a poll of many leading experts in D.C. about our understanding of China’s views on Taiwan. I think Ivan was participating in the poll, too. And I think one of the things that we’re grappling with is does China really have a coherent strategy for their goal for unification on Taiwan.

But what is becoming more and more clear, particularly since last August and then-Speaker Pelosi’s visit to Taiwan, is that China is willing to use limited amounts of force to demonstrate its displeasure against Taiwan. We haven’t seen China set a date for use of large-scale force—for example, an invasion of Taiwan, or to seize Taiwan by a particular date. But I would point out since the last couple months we’ve seen China increase its use of force to small amounts a couple of times. One time was in late December after Japan released its National Security Strategy. China did an increased elevation of force in Taiwan Strait with—actually with—sorry, not in Taiwan Strait—around Taiwan with Russia.

We also saw, right around Christmas, when the National Defense Authorization Act came out, China also did an increased elevation of a flight into Taiwan’s Air Defense Identification Zone. And this January, again, in response to what China viewed as U.S. arms sales as well as other problematic—China again escalated its activities in the Taiwan Strait.

So we’re seeing a recurring pattern of China being willing to use force at that lower scale against Taiwan. So I am worried moving forward that if we do see, for example, other activities that China views as problematic such as another house speaker visit to Taiwan or even some of the lower-level visits by our congressional leaders to Taiwan that that will force—from China’s perspective, it feels it will have to respond.

RUSSEL: OK, but the kind of application of force that you are describing sounds a lot more like military signaling than amphibious invasion.

LIN: That’s right, but there is the risk that if the signaling isn’t received well or if the dynamics are manageable, there is a risk of escalation.

RUSSEL: Ivan, what about the other side of the equation: the U.S. strategy? You served in the National Security Council. And there’s a certain tension between the sort of doctrine of the three communiques and one-China policy, and the U.S. doesn’t take a position on the resolution of cross-Strait issues as long as it’s peaceful versus the unsinkable aircraft carrier we can’t afford as a national security matter to allow the island of Taiwan to fall into the clutches of the People’s Liberation Army.

How should people think about the essence of U.S. strategy vis-à-vis Taiwan?

KANAPATHY: Dan, I would argue those two things are the same under current conditions, meaning, you know, saying that we can’t allow Taiwan to fall to the PLA or the Chinese Communist Party leadership is—I think for now and for the foreseeable future—the equivalent of saying we’re not going to allow this to be solved other than by peaceful means. I mean, it might be—sort of continue what Bonny was saying.

I actually am concerned about the invasion scenario, and I say that because, you know, in Beijing, as you know, they tend to believe their own propaganda, and they have to believe it’s part of the storyline that, you know, the leaders of Taiwan are actually not representing the true will of the people in Taiwan.

We know that to be a false narrative, but I think enough people in China believe that that they will continue these coercive efforts which, from what I can tell over the last few years—given Hong Kong, Ukraine, and a lot of other incidents—are only going to make it harder and harder to convince the Taiwanese people to peacefully or willingly accede, right?

And so in that—eventually this almost forces Beijing’s hand because it’s actually moving further and further out of reach the more coercive application they apply.

RUSSEL: Well, look, time flies when you are having fun. We’re going to go open the floor to members in a moment, but before we do, I want to really combine two questions that are very much on my mind, and ask each of you, number one, sort of what does success look like? What kind of relationship should the U.S. and China be aiming for? I realize that’s a big question to answer in one minute. And if you can throw in there at least one very practical recommendation about things that we ourselves could or should do. Is there a rule to live by or a mistake to be sure to avoid that you want to put into circulation?

So let me start with the author who has been ruminating on those issues.

ROACH: Yeah, one minute, OK. A relationship problem needs a relationship solution, and so in the fourth part of my book—of which there is an order form with a discount to you guys who are here—(laughter)—that you get if you want to order it—lays out a three-point plan to solve this from a relationship perspective: rebuilding trust—little things like reopening consulates, restarting foreign exchange programs, relaxing visa requirements, NGOs; but big things, tough things like health, and climate, and cyber.

The second one is forget zero-sum trade—it’s a recipe for conflict and it doesn’t work economically—and focus more on pro-growth market-opening initiatives that generate opportunity for both like a bilateral investment treaty.

And, thirdly—sorry for violating the one-minute rule—but the idea of, you know, we can fix this thing by sending diplomats, no slight intended, you know, to these one-off meetings is ludicrous. We did that for twenty years and look at the mess we’re in right now.

I am proposing a detailed proposal for a new organization, a U.S.-China secretariat that meets full-time, 24/7, working on all aspects of the relationship located in a neutral territory staffed equally by Chinese and American professionals that provides a new architecture of engagement that takes a troubled relationship into one that is a more constructive relationship. So that’s my shot.

RUSSEL: All right. Three for the price of one.

Bonny, where—

ROACH: (Inaudible)—that.

RUSSEL: —what would be a landing point for the relationship? And do you have anything that you want to throw out as a suggestion?

LIN: Yeah. Maybe—I guess I’m trying to think about what is actually politically feasible right now within both capitals and I am hard pressed to find any one major thing that would be easy for both countries to do and would have a significant impact in sort of shaping the relationship.

The only one thing I can point to, and this is where I’m going to disagree, is that I do think we need to maintain the high-level engagements and the—for example, if Secretary Blinken could have gone and these very high-level touch points are absolutely critical given that so many parts of our relationship are sort of spiraling in different directions.

I think—I like the idea of a—conceptually, of a secretariat. But I worry that that will be viewed too much by our allies and partners as the United States building a G2 with China, and given the fact that our entire approach to competition with China is built on working with our allies and partners it seems to me that could be—that does not align with currently the direction that this administration is going.

RUSSEL: Ivan?

KANAPATHY: Danny, just wondering in response, I don’t think that we can ever actually have trust in the relationship so I think efforts labeled as building trust are—may sound good but, you know, we’re dealing with fundamentally a Leninist party that its very existence is threatened by our mere existence—the values that we espouse and just, you know, our very, you know, ideals.

With that being said, I think we can absolutely have a solid working relationship with China just as we do with other, frankly, authoritarian countries. We have to be very transactional, I think. We have to ensure that we have verification and enforcement mechanisms.

We have to communicate clearly consequences instead of sort of just complaining about things—stop doing this, stop doing that—and then kind of out of the blue dropping a rule that, you know, cuts off all advanced semiconductors or what have you.

I think, you know, one—I guess, two quick examples that are very minor but may be a model, going forward, are Congress pass a law because Chinese companies listed on U.S. stock exchanges weren’t providing auditors with the information they needed that, you know, all other companies in the world do provide to securities regulators, and Congress said, hey, you’ve got X amount of time, a couple years, to do this or we’re going to kick you off our exchanges. And, lo and behold, during that time when push came to shove the Chinese opened up their books.

So I think that, you know, kind of communicating up front. We had a similar occurrence in the Commerce Department on export controls, inspections, and used checks in China recently where the Commerce Department wasn’t getting access to what they normally should get access to. And, again, they published a rule saying if I can’t get access by this deadline I’m going to put these companies on my export blacklist. Lo and behold, the ministry of commerce started facilitating these inspections by the U.S. embassy.

So there are ways, and it doesn’t sound happy as some of the things we used to do. But I think that’s progress.

RUSSEL: All right. So we’ve heard some—about some things that we could conceivably do with China. We’ve heard about some things that we have done and could do more to China. I’ll let you all in on a little secret, which is in my government career I was often heard saying there is no problem that we face or no situation that we’re in that is so bad, so threatening, so dire, that we can’t make it worse. (Laughter.)

So let’s be careful, let’s be deliberate, and what we want to avoid, if I can invoke Stephen, is an accidental war.

So, on that note, let me shift gears and invite the members, beginning with those of you who are here in 3-D, to ask questions. Remember, a question is a sentence with a question mark at the end of it and, of course, begin, please, with your name, rank, and serial number.

So, ma’am, can we start with you? Microphone.

Q: Thank you so much. Seema Mody, correspondent at CNBC.

It’s been about thirty-five minutes. We haven’t really touched on the spy balloon. I know it’s raising more questions than answers. But, Bonny, I would love your take on your reaction, how this could potentially impact the U.S.-China relationship and what it tells us more about the interest in surveillance and deep intelligence collecting. Thank you.

LIN: Sure. Happy to give some initial comments and I’m sure my panelists will also have thoughts.

In terms of the spy—in terms of the Chinese surveillance balloon we’ve already seen it starting to have an impact on U.S.-China relations, right. We’ve seen the immediate impact is Secretary Blinken postponing his trip to China and we know that he had quite a robust agenda that he wanted to discuss with his Chinese counterparts, and the more—the very important part of his trip to China wasn’t just his meeting with his counterparts but also the potential for him to meet directly with Xi Jinping and to relay the U.S. concerns directly.

So what we’re also seeing is after the—we shot down the surveillance balloon that the Chinese side were not—they weren’t willing to pick up the phone, so Secretary Austin tried to reach out to his counterpart and there was nothing.

So we’re seeing at one level both the postponement on our end but also a lack of willingness on the Chinese side to maintain channels for open communication at this—I guess I would call this a semi crisis moment in U.S.-China relations.

So if you look at all of this pieced together, I’m not confident, going back to the accidental miscalculation and all the risks associated with that, that if we do get ourselves in another situation where the risk is higher, where, potentially, a life might be lost, I’m not confident that we have the mechanisms in place that our two sides will be able to work it out in a way that doesn’t cause escalation and anger on both sides to make the situation more worse than what we’re seeing now.

RUSSEL: I will jump in as a—take the prerogative to say it is probably not a good thing when one nuclear power is using military force against the military equipment, the surveillance aircraft of another nuclear power. That’s nothing to trivialize as just a balloon.

But at the same time, I think this could be a teachable moment. It really highlights the fact that a situation can quickly lead from an incident to a crisis and from a crisis to conflict, and that is something that the world demands that the U.S. and China avoid.

ROACH: Well, I just have to interject.

One image for you to think about. False narratives on both sides of this troubled relationship combine to create—the best image I have is the high octane fuel of conflict escalation, and in the last five years we’ve gone from trade war to tech war to a new cold war. The fuel is highly combustible. Small sparks can lead to accidents—that’s the thesis of the book—and there are plenty of sparks. The balloon is just one. We’ve talked about a few others—Taiwan, South China Sea, the war in Ukraine. But there’s any one of a number of sparks.

So this conflict has to be better managed and contained or, you know, I have no idea what, you know, the next spark will be, but I can assure you there will be one.

RUSSEL: Let’s take a question from one of the members online.

OPERATOR: We’ll take our next question from Daniel Arbess.

Q: Thank you very much.

Steve, I want to pick up on the concept that you were just referring to, which is the combustibility and, more specifically in this context, think about our own role in contributing to this tense environment.

So my question is: What are we really fighting over here? I mean, do we need to have one global hegemon? Why are we dusting off the same playbook from the Cold War with the Soviet Union? China does not have an ideological need or a territorial need. They don’t have the same dynamic as the Soviet Union did relative to the United States. China’s got their own 1.3-billion-person population and growing to take care of.

So my question is if you roll back, Steve, to the—to what you just referred to of the past five years, we started a trade war by referring to the consequences of China entering the WTO and causing the employment—

RUSSEL: OK. Daniel, let’s fast forward to the question part.

Q: Yeah. No, I understand you want a question but we’re all members of the Council to have an opportunity to actually participate in a conversation. Otherwise, there’s no point in having a Council on Foreign Relations. It’s just a bunch of old people like me listening.

So, forgive me, but I’m going to provide background for my question and if people don’t like it, whatever. OK.

Steve, my question is to you we started a trade war referring to the fact that jobs were being taken. The job displacement took place twenty years earlier. OK. While we were pursuing the trade war China was quietly locking up with the Belt and Road Initiative the raw materials they need to create an internally integrated consumer economy of their own.

We are not insecure about China, I don’t think, being better than the United States. We know who we are.

So my question is what exactly are we fighting over here rather than focusing on where we have interests in common with China, which in the case of the United States is being able to export into China’s consumer economy such as it is while it’s around instead of being locked out of it as we are now?

ROACH: OK. Dan, you raise a lot of rich material. I’m disappointed you’re not here in person because the program I had, you know, had you as an in-person contributor. Now all I get to hear is your wonderful voice. But I do see a picture of you on the bottom of this screen here, which is, you know, very flattering. Probably taken about thirty years ago, I think. (Laughter.)

Q: I’m just up the street, Steve. I’m sorry.

ROACH: I know. I know.

Why do we need conflict, and that’s a fair point. Why did we need conflict thirty years ago to go after Japan for our trade deficit in virtually the same way that we have gone after China today?

My take on conflict is that, again, it goes back to my view of the relationship—the vulnerabilities that underpin our relationship and our unwillingness to address what we need. Here, I’m being an advocate for all of you to go out and read Richard Haass’s new book about, you know, the real benefits of strengthening ourselves in terms of the U.S. economy and our social and political system spillover into tempering national security risks.

And he argues, and I agree with him, that we’ve lost sight of that and I’m very concerned about the—you know, in a politically polarized environment in the United States we basically are now in agreement only on one issue and that is that China is the evil empire and we must, as we swore we were going to do in the red baiting of the early 1950s, do everything in our power to bring down the evil empire.

I think that is a destructive path for us. It squanders much of what was good in the relationship, and there were plenty of good things in that relationship before it went wrong.

A few weeks ago the U.S. House of Representatives passed a bill by a margin of 365 to sixty-five to establish a new House Select Committee on China bashing. That’s not the official name but take my word for it, that’s what you’re going to see from these guys. And I question any of you, challenge any of you, to come up with a piece of legislation that’s passed by that wide a margin in our House of Representatives in recent decades.

So, you know—

KANAPATHY: Balloon resolution.

LIN: (Laughs.)

ROACH: What? I’ll stop.

RUSSEL: Well, Steve, let’s take a variation on Dan’s question and ask both Ivan and Bonny. I think we can frame the question and there’s certainly a, very clearly, histrionic streak in parts of the United States when it comes to China. But what are we fighting—

ROACH: Parts?

RUSSEL: What are—yeah, parts. What are we—not what we are fighting against, but what are we trying to achieve in our efforts vis-à-vis China?

KANAPATHY: It’s a good question. So I take sort of Dan’s points that I think everyone knows the jobs went away a long time ago and those kinds of things. It’s not—only because I was at the White House for this—that’s not the reasons for the tariffs.

You know, they’re clearly articulated. It had to do with, of course, technology transfer, intellectual property theft, cyber intrusions into our commercial, you know, enterprises and things like that. That was the original basis, obviously, and I think there are a number of things that we’re fighting for, and Bonny’s touched on some of this, but our allies is one of the key ones.

I mean, Japan feels extremely threatened. There are, you know, near daily incursions into, you know, if not their territorial waters then the contiguous zone around the Senkaku Islands, which we are, you know, treaty bound to defend.

I think it was in the last twenty-four hours the Chinese coast guard, you know, reportedly has used weapons-grade lasers against the Philippines coast guard to prevent them from resupplying one of their military outposts in the South China Sea.

Again, so there’s also, obviously, other things that make the relationship difficult to move past like the not small matter of an ongoing genocide in that country. It is factually a genocidal regime and we shouldn’t sort of just paper over that and say, well, why can’t we just work together. I think that’s a betrayal of American values.

LIN: Yeah, and if I can add to that.

I think we’re also fighting for how we—what type of global order, what type of international system, we want. We all saw that when Russia invaded Ukraine China was at first blaming the United States and NATO for Russia’s invasion and it’s only over time as China has felt more pressure and more backlash from Europe that China’s position has shifted from complete—more or less complete political backing of Russia to a more semi-neutral position on Russia.

But we are seeing again and again, as Ivan had mentioned also, that as China operates in its neighborhood it believes that because it is much more powerful and much more stronger than its neighbors that it should be able to have its neighbors operate on the rules as well as what China wants.

China should be able to press all of its interest in all disputed territories to be able to secure what they view as their own territory. China is not taking into concerns the legitimate concerns that many of our allies and partners have, including many of which are democracies, right.

So as we look at China’s behavior I think it’s very important to think about not only U.S.-China dynamics but how China’s activities and behaviors against our allies and partners impact the international community and international order as a whole and what the United States needs to do to stand up to that type of behavior.

RUSSEL: Just to sum up, I agree with you, Bonny. I’d phrase it a little bit differently, namely, that the United States and China find themselves marooned on a small planet and we’re stuck with each other whether we like it or not.

I think, though, that there is a very legitimate question which is what do we want that world to look like. It’s a given that we don’t want it to blow up and there’s no question that there’s a tremendous amount of miscommunication, mistrust, and scapegoating.

But when I think about what kind of world I want to live in it looks a lot like the global system that we’re used to and a lot less like a Leninist system that we see in China with the carve-outs for China’s self-declared core interests that exempt it from what otherwise would be universal rights or international law.

Back to the room and, yes, ma’am?

Q: Thanks so much. Suzanne Nossel from PEN America.

I wonder if you could talk about how the two powers are doing in terms of the battle for global opinion. You know, you touched on, Bonny, sort of how that’s played out over Ukraine. It’s been extremely important to try to lay blame where it belongs and rally people around a particular side. How is the U.S. doing? How is China doing? You know, if this thing combusts where is the blame likely to be assigned?

LIN: Sure. I can offer some initial remarks, of course.

So I haven’t followed global public opinion on the United States nearly as carefully as I follow the global public opinion on China, and I would say that public opinion on China has deteriorated across the board, particularly when we look at advanced democracies and we look at European allies and partners.

There are pockets, for example, in the developing regions where support for China has potentially increasing, but I would just note a couple of things there. One is typically the polling in those regions are not as great so we don’t have necessarily the best large sample of polls to draw from.

But it is still indicative, right, and I would also note that in—if you look at most of China’s periphery, though—almost all the countries surrounding China—the opinion of China has been decreasing.

So there is possibly also the potential that as you go further away from China, as there’s more opportunities for China to potentially help these countries because there’s not really any conflicting core interests from China’s perspective that relations could be better.

ROACH: Let me just add, you know, we’re trying to do data points. Freedom House does an annual tabulation of rankings of countries around the world with respect to democracy and freedom of the internet.

China ranks poorly on both of them—(coughs)—excuse me—both of those. But the—I get choked up when I say this. In terms of the democracy rankings the United States has slipped, as you would expect, significantly in the last five years, especially since the election of you know who.

RUSSEL: I will add my experience, and I’ve done some work on Belt and Road and China’s development, is that there’s a huge divide in attitudes towards China from—on the Global South, on the one hand, and the industrialized West, which has increasingly been alienated from China, particularly Europe, in the aftermath of Xi Jinping’s at least tacit backing of the Russian war against Ukraine, and that in the Global South the—what it boils down to, largely, is the sense that the U.S. talks a good game but isn’t really putting anything on the table, not enough skin in the game. And that’s not to be confused with the broader sort of a pox on both their houses. We want to get the best out of the Americans and the Chinese and we don’t want them either to gang up together against us or to blow up planet Earth.

KANAPATHY: I want to add, though, Danny, just I think I saw a recent poll in India where they asked which country is your greatest threat to India and Pakistan came in third. One—first was China and second was the United States. So take that for what it’s worth.

RUSSEL: That’s pretty frightening.

One more from the room. Can we get a microphone over in the corner, please?

Q: Thank you very much. Tom Joyce, MUFG, Japan’s largest bank.

Could you speak a little bit more about the tightening grip of U.S. semiconductor policy? Specifically, how vulnerable do you think China is near term? Number two, what you think the view of our allies, South Korea and Taiwan, are of that policy and the risk you think of it, perhaps, backfiring or not on the United States longer term?

KANAPATHY: Yeah. So it’s—the most recent measures put in place—I guess October through December of last year, some export control measures—a few pieces of it, but one of the main pieces was preventing the export of advanced semiconductor-making equipment into China. And so what that tells us is the strategy right now is it’s not to stop China as a whole from having advanced semiconductors but it is to prevent them from developing the capability to indigenously produce them and that’s—that is—allows the United States, obviously, but also some allies—we understand that the Dutch government, Japanese government, are going to, largely, try to mirror these controls and that covers really the bulk of your advanced semiconductor manufacturing equipment.

So I think the idea is that through controlling that supply chain of equipment and then the advanced semiconductors themselves will be able to better have visibility over where these advanced semiconductors end up because now they all have to be produced outside of China and, obviously, it provides some leverage that, hopefully, is stabilizing, you know, like, to prevent sort of some of the more extreme or irrational actions and it’s not that different, frankly, from what China themselves are trying to do in various industries where they’re, you know, through dual circulation, as they call it, trying to indigenize their own supply chains but then also create dependencies on technology.

RUSSEL: Bonny or Steve, anything on the downstream unintended consequences?

ROACH: Yeah. Look, this is a huge deal, OK. China—we may not like to hear this, you know, Made in China 2025 and all of that. Not a great way to state their advanced technology aspirations.

But we know as economists—Western economists—that they need indigenous innovation to deal with the productivity issues I raised and to keep growing, and a key aspect of their indigenous innovation happens to be artificial intelligence and quantum computing, both of which require ever-increasing processing speeds to analyze and utilize their vast reservoir of big data.

Advanced semiconductors are aimed specifically at limiting the speed of their processing capacity. So this goes right to the core of China’s own competitive future and what surprises me about the Chinese response to this so far is that it’s been minimal and, you know, if we’ve learned anything from China over the last five years is when we do something to them we can expect retaliation in kind.

So there’s another shoe that’s going to drop here. This is a huge deal.

RUSSEL: Bonny?

LIN: I just really want to echo what Steve is saying in terms of Chinese retaliation to the United States has been minimal. I do wonder if it’s sparking more desire to be more self-reliant, more investment internally. At the same time, we’re also seeing that some of the big fund for Chinese semiconductors has been plagued with corruption, other issues.

So it definitely seems like at least internally within China they have a lot to do in terms of expanding as well as advancing its own semiconductor industry.

RUSSEL: OK.

KANAPATHY: Danny, if I could add, I’m not surprised the retaliation was minimal and I don’t think there’s a long history of China retaliating in substantive and significant ways to U.S. actions, to be honest with you. So—

RUSSEL: Well, something tells me that there’s probably a Chinese version of the Sicilian saying that revenge is a dish best served cold, so we better hope there isn’t retaliation coming.

There will be retaliation, however, if I don’t honor the arrival of the hour and the end of the session. It’s a testament to the salience of the issue, of the quality of the speakers, that members are, clearly, still enthusiastic about sharing their opinions and their comments.

So let me end the program there but—and by thanking you, the members, very much for your participating in today’s meeting. Thanks very much to the panelists, and just to remind that the video and the transcript of the meeting will be posted on CFR’s website very soon.

So please join me in a warm round of applause. (Applause.)

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