 Thanks very much Mike. It's a pleasure to be here. I think General Miller got it right that it's very difficult to be a keynote The final keynote after lunch. It's a lot more difficult to be the real final keynote after the audience thinks They've already heard a great keynote final keynote address, but I will do my best It is a great pleasure to be here and have the opportunity to talk about China as a rising power It is certainly an issue that has been a central concern for the Obama administration over the past eight years Undoubtedly will be at or near the top of the agenda for the next administration Before I talk about China's a rising power though Let me say that I think it's important to note that yes China is rising But it already has risen quite a bit and when you talk with Chinese officials and scholars these days about their country They don't often refer to China as a regional or emerging power anymore They talk about China as a major power and at times as a global power And indeed China's economic footprint is global. It is the second largest economy in the world It was responsible for 16% of global GDP last year and 35% of global GDP growth over the past five years It is a nuclear power has the largest standing army and its ability to project conventional force in its own backyard And beyond is significant and growing and even beyond these traditional metrics of Economic strength and military strength. I think what matters with China is that it has a stated and demonstrated desire to shape norms and institutions globally In and of itself. I think that's not a bad thing China's global ambition offers the United States opportunities for partnership for cooperation and for burden sharing But what matters is the character of the Chinese state its intentions and how it goes about realizing or trying to realize its objectives So in about the next 20 minutes or so, and I will try to keep us on track a time wise so that you get your break I'm going to talk a little bit about how I see China beginning to shape the world around it Offer a few ideas about what I think it means for the United States and for US policy And also to take the theme of the conference about complexity and certainty Seriously, I just offer a couple of thoughts about Uncertainty in China and how that might change the trajectory that I'm going to set out So I see China's rise in three contexts first in its own backyard second in terms of its global footprint and third in terms of its leadership in global governance It's rise in the Asia Pacific. I think is the most clear and immediate manifestation of its ambition I like to think of China's strategy as it has emerged over the past several years as all roads lead to Beijing I think it is constructing a trade investment and security architecture that's going to if fully realized Reshape the Asia Pacific landscape. It is doing this through institutions Some of which are old and some of which are new such as the Shanghai cooperation organization the Asia Infrastructure Investment Bank regional comprehensive economic partnership and Proposed things such as the free trade area of the Asia Pacific China is either the architect or certainly a lead player in all of these institutions The granddaddy institution is one belt one road or as it now is called belt and road initiative And this is a Chinese initiative that involves 65 countries across four continents to connect China To the Middle East and Africa and Europe both over land and by sea Initially in its initial incarnation Belt and Road was really just an infrastructure plan And we in the analyst community tend to think tended to think of it as an opportunity for China to simply rid itself of its excess industrial capacity But as it has emerged as it has grown in the Chinese conception It has potential to be something quite a bit more including Sort of a free trade and investment regime across all of these countries an opportunity for China to spread its soft power As one Chinese scholar Wang Yiwei has said it is an opportunity for China to shift the geopolitical Center of the world away from the United States and back to Eurasia Generally speaking China receives a lot of kudos for its economic and institutional initiatives in the region But as everyone in this room is certainly aware it has also generated significant concern over its behavior in the security arena As I think it's moving from staking its claims virtual sovereignty in the nine-dash line To trying to realize them and everyone here of course is familiar with the many different Chinese moves in this regard I think you know pushing on the East China Sea anyway to establish an air defense identification zone the construction of artificial islands Placing oil rigs in waters contested with Vietnam Preemptive rejection of the ruling by the permanent international court of arbitration over the Chinese dispute with the Philippines and of course numerous I think Annoying and potentially destabilizing dangerous actions at times by the Chinese military US and the rest of the region have responded in a variety of ways freedom of navigation military exercises new and enhanced defense partnerships Diplomacy mill-to-mill engagement with China But I would say that thus far none of these moves has really prevailed in terms of producing a course correction by the Chinese I Think that the China's rise in the Asia Pacific Raises two fundamental issues for the United States first How do we engage with Chinese initiatives that are additive for the region? But may marginalize either on purpose or not the United States So thinking about for example one belt one road Do we seek a way into these initiatives? Do we compete with them or do we simply ignore them and go about our business? And second on the security realm, I think we have to begin to think and I know a number of people here at the Naval War College Do this? What is the objective for the United States in the security realm over the long term? And how are our relative capabilities going to match up against those of the Chinese? Are we going to continue to aim for predominance? Are we going to try to create a system a grand bargain a system of trade-offs or you know mini-bargons? Over areas like Taiwan or Korea with the Chinese or are we going to eventually accept? You know so what some have proposed the spheres of influence and basically seed the Asia Pacific to China Which I'm clearly not recommending But I do think these are the kinds of ideas that are out there and I think we are going to have to grapple with them Seriously because China's rise in the region really does raise very basic questions of the sustainability of the current US role there China's rise has also been marked by a vast expanded global footprint Over the past decade or more of course China has gone far outside its borders to seek resources It is the largest consumer of many resources, you know 50% of all aluminum 45% of zinc and copper 30% of soy beans and you can pick your your resource and China is usually the largest consumer And in so doing it has exported labor it's exported capital so its economic footprint really is all throughout the world More recently as China's economy is shifting from investment led to consumption based and services economy We're seeing that China is now looking more toward advanced industrialized countries in Europe and certainly in the United States Seeking access to financial services Technology buying real estate So we should be expecting in the United States an increasing Engagement with China in terms of Chinese investment, which will raise some questions, which I'll come back to in a minute At the same time as China is expanding its global economic footprint. It's also expanding its global security footprint I think it quite rightly says that it wants to be able to protect its own people and its own assets throughout the world It has established its first logistics base in Djibouti And it's said that part of the reason behind that is is because of the Belt and Road initiative that it's going to you know serve a function in you know protecting its trade and assets there and and connectivity But I think if you read the Chinese analysts and scholars and what they're saying there's talk about more bases right there are those who say why shouldn't China have bases throughout the world and Most recently some scholars have talked about you know whether China should have allies, right? So why shouldn't China have a more formal system of alliances something akin to what the United States has and by the way Why couldn't China have some of the same allies that the United States has? So Xi Jinping has placed a lot of importance on the People's Liberation Army on strengthening the military And I think we're going to see a far more expanded role for China's military moving forward And we're going to need to start thinking ahead of the curve in terms of how that military and how it's the military's engagement with other Countries is going to begin to involve evolve Finally, I think Both the economic and the security footprint have been accompanied by a new push on the part of Xi Jinping in particular to Push China's political power and I think this is differentiated from his push to try to Develop Chinese soft power because really what Xi Jinping is doing is not actually exporting soft power Because I don't think that Xi Jinping has a good understanding of what soft power really is But what he's really doing is trying to control the political narrative outside of China's borders And I think this is happening through things like the Confucius Institutes It's happening through Chinese media companies purchasing Chinese language media in other countries It's happening through the establishment of Chinese think tanks within China and outside of China that are designed to counter The Western narrative as Xi Jinping puts it I think it happens through the denial of visas to foreign scholars who are critical of China So I think that there is a way that Xi Jinping is trying in fact to promulgate a Chinese narrative and a Chinese Sort of control of the Chinese political narrative outside his own borders The implications of China's expanding global footprint. I think the most important really is as I suggested that we need to start Thinking ahead of the curve. So for example in the economic realm Now we have a city's review process For you know to review Chinese purchases that might in some way affect our security interests But what happens when we have Chinese companies? Who begin not to buy technology directly but begin to invest in labs and universities? For example, I know the Chinese company that's going to it's planning to invest in MIT or Yale and begin to invest in basic Science or you know certain kinds of technologies that could have Significant defense applications. What is our control for that kind of Chinese investment? I think we are ill prepared for the variety of new ways in which Chinese economic actors are going to begin to engage with our Economy, how do we differentiate between a state-owned enterprise interests and a private enterprise interests in China when the Chinese Government says that it plans now or would like to take a stake of at least 1% in all major Chinese private enterprises So I think that's something we need to think about as I suggested I think in the Security realm China's expanded military presence, you know certainly has a lot of opportunity for the US anti piracy Afghanistan security in Afghanistan China already has significant peacekeeping forces, which are very supportive of global norms But again, what would a system of Chinese bases a system of Chinese allies actually mean for the United States? And finally, I think it is very difficult for us to respond to Chinese efforts to control the political narrative You know we pride ourselves on being an open society And we set ourselves out as a model and we have tended to believe that by modeling good behavior We will eventually you know win the game And it's not clear to me that that is the case For example, what do we think about Chinese entertainment companies Buying movie theaters film distribution companies So that soon entertainment doesn't have any mention of Tibet or human rights or June 4th So I just think we need to be sensitive. This is not to be enormously alarmist But just to give you a little bit of a flavor for the kinds of new Interactions that I think we're going to be having with China that we ought to at least be sensitive to Finally on the global governance front. She has made Xi Jinping has made I think quite clear That he wants China to play a large Significant role in establishing norms and institutions and there's a great Comment in a speech he made in 2014 Where he said that he wants China not only to contribute to writing the rules of the game But to construct the playgrounds on which the games are played I think we've had notable cooperation with China on issues like Ebola on climate change Iran But these are hard work. These this cooperation is hard work You know, there are always different equities at stake different priorities and different values I think there's also a difference between cooperation on pandemics And cooperation on things like climate change And I think it was we're looking forward some of the sort of critical issues that we're going to be looking at Cooperation on cyber right where our values sort of openness and having a multi-stakeholder approach Are quite different in fact diametrically opposed to the Chinese emphasis on a state-centered stakeholder approach and protection of sovereignty I also think China is a global power means that there's no issue that's off limits anymore So when I look at China in the Arctic for example China has been not China is now an observer On the Arctic Council. We are a member of the Arctic Council But China has begun to talk about itself as a polar power and that has a research Capacity in Shanghai of a thousand people working on Arctic issues He's talked about the Arctic as a global commons. I think gradually China is going to be pushing It's already doing a lot of joint investment and research actually with other Arctic countries Gradually China is going to make a push I think to become a member of the Arctic Council. Do we care? What do we think about this? I think these are the kinds of issues again that we need to look a little bit around the curve and be prepared So before I offer some thoughts and just some concluding thoughts about US policy Let me highlight two areas that I see of uncertainty In China today that that might alter or even perhaps derail the type of trajectory that I am suggesting The first would be a sustained a sustained slowdown in the Chinese economy. I would give this about a 50 50 Chance it's clear that economic reform is not proceeding as planned in China They're rising debt levels continue state-owned enterprise reform has stalled We have all the problems with state intervention that we saw in the stock market and currency over the past year certainly there is growing discontent among the multinationals both European and American that are doing business in China Roughly 75% have said that they feel less welcome today in China than they did last year and 25% moved some of their assets out of China over the past year It is becoming a less friendly and a much more challenging environment to do business I think the slowdown in the Chinese economy Has a couple of different potential implications certainly for social stability I think that's part of the reason the state-owned enterprise reform has stalled because they're afraid of laying off millions of workers But I think it could have implications for China's ability to project influence It could also as many people say lead to Growing nationalism right to a display of external strength to try to keep the waters at home calm Although I think we're already looking at a highly nationalistic China today So I think that's one thing that we want to bear in mind is this this possibility that the Chinese economy Has a sustained economic slowdown the second and I think less Disgust is the potential for a political backlash against Xi Jinping and this I might put at about a 10 to 15 percent chance You know she has aggregated Tremendous institutional power in China. I think as much not more power than any Chinese leaders since Mountedome, but it's not clear how much this institutional power is matched by actual support particularly within say the top 20 percent of the business Political official scholarly certainly certainly elite. I think his anti-corruption campaign as well as the political repression Have alienated Sizable portion of this elite and there's a lot of discussion of Conflict even within the standing committee of the Politburo over the direction that Xi Jinping is taking Taiwan and Hong Kong Clearly, there's enormous discontent in both those places I don't I'm not predicting a coup at the 19th Party Congress in 2017 But I don't think it's impossible that there might be some political pushback Against this very tough line that she is taking both at home and abroad So let me conclude now with just a couple of thoughts about US policy because I do think that Despite the fact that probably the overall tenor of my remarks has been To focus on the challenges that I think China Faces or it presents to us. I think there are also some positive some some positives and some opportunities First, I think the US can leverage Xi Jinping's ambition, you know with rights comes Responsibilities, I think we saw that very clearly in the case of Ebola where China's initial offer of support Was about a hundred fifty thousand dollars. It was less than Cuba's But the United States and the United Nations came together and we pushed China and to some extent shamed them Into making a pretty significant Effort I think there are efforts to build on our cooperation on climate change You know China has set out that it wants to be a leader in clean energy and green finance These are the kinds of things that where we can hold them accountable So as they develop the Asian infrastructure investment bank as they push forward with development Through the one belt one road We can hold China accountable for the types of investment the types of Resource development and infrastructure development that they make to ensure that it is environmentally sustainable I think we also need to be able to evaluate Chinese proposals judiciously There is after all a pretty big gap between the Asian infrastructure investment bank and an air defense Identification zone and I think there can be a tendency in the United States as Chinese proposals come fast and furiously You know with this Xi Jinping administration has been like an avalanche of proposals To not know how to react to be caught flat footed and to be defensive and to assume whatever is coming out of China Is necessarily in some way going to be bad for the United States? That's not the case. I mean we've called upon China to be a responsible stakeholder We've asked them to step up to the plate and when they do that as in the case of the AI IV We ought to be able to accept it again We don't have to join it, but we probably shouldn't attempt to develop a coalition to oppose it third I think And I you know This is a little bit perhaps not something that the US government does but it happens all around the US government I think we need to resist the temptation and it's a big temptation To put everything into the framework of US China competition So as someone who you know you just read a lot you can look at almost any Issue area whether it's clean energy or it's the issue of innovation or it's you know academic success and a report that's produced here or somewhere else Will almost inevitably place it in the in the context of a US China competition You know the Pew Foundation report on clean energy for example each year Will say China surpasses the United States or the United States surpasses China as a sort of the headline sometimes even almost the title of the report But what's the point of that? It's not what the report is about and yet we begin to develop I think a Mindset right that everything that is done our infrastructure is so much worse or their you know Educational system is so much worse or whatever it is that everything is placed in this comparative and competitive kind of framework even I think when we think about What's going on in the South China Sea today? There is this tendency to place it in this US versus China But if you look at what's taking place in the South China Sea and you see that you know Japan and India and Australia and Vietnam and all these different countries are doing exercises that don't necessarily Involve the United States and certainly don't involve China. It's not really all about the United States in China There's a lot of the rise of the rest that's taking place in the region And I think it would be helpful to us and helpful to the bilateral Relationship if we could just take the temperature down by not putting everything in this competitive framework Having said all that Let me say that that I think they're also you know There's some some some other actions we need to take and we need to work with our allies to push back When China does things that we don't like and this could be everything from things like you know When they pass a non-governmental law on foreign non-governmental organizations that will seriously undermine our capacity, you know in the capacity of Chinese civil society to work together or You know restrictions in business that require regulations on business that require them to transfer sensitive information in order to do business in China or Take what's going on in the South China Sea I think Oftentimes if we can form a concerted and united front with our allies and push back against the most egregious of the Chinese Actions or regulations you can get some moderation in Chinese behavior Finally I think you know the US must lead and there was the earlier question about the pivot or the rebalance As I said, it's easy to get into reactive mode with China because they're just constantly putting things out there They're always on the move both at home and abroad. It's a country that is in transition, right? So they're always passing new regulations and and new laws It's difficult to keep up But we also have to be sure that we're not only reacting to what it is that they're putting out there but that we are asserting our own interests and Perhaps making adjustments for what what it is that they're doing but also forcing them to adjust to us And I do think and I know there's a lot of criticism about the pivot and the rebalance But at least from my perspective, it's an absolutely Essential maybe the most important element of our policy toward China right now Because it really is an assertion at its heart I believe of a US interest in the region, you know interest in freedom of navigation in free trade through the TPP Right and through good governance through the kind of capacity building that we do in countries like me and Mar So I think you know, we need to Continue to push forward and to push our own initiatives and our own values and our own priorities Okay, so one last one last recommendation and this just harkens back to something I mentioned at the outset and that is again this capacity to think around the bend a little bit or to look around the bend And to pay attention to what Chinese scholars or Chinese officials are writing and saying Because the Chinese will often signal Intention a lot earlier than you start to see, you know, all the pieces come together It's a little bit like like a jigsaw puzzle, you know You hear something here and you read something there and then all the pieces start to come together and soon you have an entirely new Picture of what's going on in China and what China is doing We need to be able to to take our cues from you know Those little individual pieces and not wait until we have the picture already formed Because by then it's going to be too late for us to have a real chance to change it or affect it So let me conclude there I think we have about 10 minutes or so for questions still and I welcome any thoughts or comments or questions. Thank you Kevin Russell a US Army. We've talked a lot about grand strategy for the US, you know that big big key theme For our general direction on where we would like to go So as I listen to the presentation and I'm trying to come up with what would be our grand strategy For China, what do we say because if we say It's part of our grand strategy that we are for Democracy and open economies then it puts us absolute in contravention to China, which then automatically sets up this conflict So my question is how would we best frame? How we view China in our grand strategy, right? So Certainly, I don't think that there's you know any harm and the or anything that the Chinese should Get their backup about when it comes to saying, you know, we're we promote freedom of navigation and free trade I think what you're really talking about is is the democracy element of that and I think we can You know get around that by saying that, you know, we support the development of good governance, right? Transparency official accountability in the rule of law I mean we could say democracy because China says it is socialist democracy You know, whatever that really means But I think we're on pretty good ground in terms of dealing with China if we frame it in that in that way and You know, we have rule of law programs which now unfortunately are getting cut back in the current political environment But have been ongoing for you know a decade or more with the Chinese You know the rule of law is a central tenant of their political their own political reform platform under Xi Jinping You know, good governance official accountability. These are all things that I think can resonate in the Chinese System as well. So I think it's not that difficult to escape it if you're willing just to Translate democracy into some terms that are more acceptable to the Chinese today China is under the Controlling the Panama Canal They denied us the use of that canal What effect would that have on our country? China control the Panama Canal Actually hearing them. They have I can't hear what he's saying. Sorry. I don't think they control the Panama Canal, do they? I know I don't think they okay somebody I Well, and I think we would not be very happy about Chinese control over the Panama canal in terms of our you know trade with Latin America and You know, I think it would be a problem, but I I don't see that happening In the near future Bob behind US Navy. So with rising pluralism and aging demographic a Slowing economic growth are we perhaps reaching peak China in your future? So, yeah, the demographic issue is a serious one for China, you know in some cities such as Shanghai population Over 60 at this point is is 30% or 30% of the population in some of Chinese, you know Major cities is over 60 years old. They are quite concerned About it. I wouldn't say we're quite at the point of peak China I think you know what China is trying to do in terms of their economy Is shift it right again away from investment led growth and export led growth to services-based economy and They are trying in a variety of ways to promote innovation, right? You know the pouring money into R&D They are trying to loosen some of the educational restrictions to enable students to take time off And to go do startups, you know a lot of Chinese young people now want to do startups You know be the Jack next Jack Ma, you know, Alibaba I think you know if they can make the shift if they can make through this very difficult period of time If they can actually push through with the reforms and the state-owned enterprises, you know open up Sort of make rationalize their capital allocation. I think that there is potential that this is not yet This is not yet peak China They've also reformed their one-child policy. It hasn't yet Kicked into gear so that you can you know have two children but Yeah, it hasn't had quite the impact that they anticipated But over time it may help with the demographic challenge So I'm not quite prepared to say that that they've reached their moment in time and it's all downhill from there I think they still have a few tricks up their sleeve, but it's going to require Then pushing forward with the reform program they outlined back at the third plan of the 18th Party Congress in 2013 and not sort of You know moving backward from that point You've written very well on a number of subjects including the The environment and the pollution and the costs and how that can even push them backward You wrote that in the foreign affairs magazine and you've written a lot of things that are Centering on problems of China the thing that I would like to ask you doctor is if they had one problem Or two problems one would say well they'll work it through over time But there's a confluence of these problems the pollution gives them health care issues and health care concerns because the migration means They're not getting their claims Matt which means that they hoard money and how do you turn consumers into a consumer economy if they are hoarding because they're afraid So you got the environment and then you've got Corporations which you know Paulson and many other people and probably yourself would say look you got to wean them off of state control and At the same time they have really dangerous debt levels and Phenomenal over investment to deal with and there are three more and you know them better than I do So if you think about the confluence of those and you were to think of any country in the West that had those problems Even to a minor degree They couldn't do it So I'm not sure when you say to work through the reforms they're backed off the reforms because they're so scared that Communism is going to lose control And that is that paranoia will not go away How do you think it doesn't get far worse as? You know the fears of consumers the fears of the debt the bad banks and the list that you have You see an actual way other than do your homework try harder So I mean I guess I could say that You know if if Xi Jinping if the political leadership were I think I think the challenge now is that you're right Xi Jinping his his Basic a directive in his own mind is to clamp down on everything whether you clamp down on the economy You're clamping down on the political system right what it requires in my mind is you know Xi Jinping to be willing to to risk So maybe it's not as much doing your homework and hunkering down as being willing to Loosen the levers of control right loosen the levers of control over the economy loosen the levers of control over the political system somewhat because I think right now what he has is a rising middle class that is demonstrating every type of You know interest and value that rising middle classes have presented in every other country in the world right a desire for You know good education for their children for environmental protection for a health care system that works and he has yet to Deliver on any of them. I will say that one thing that he's not given credit for this leadership is not given credit For is when they came into power they did at least set out to address some of these hot-button political and social issues Right so he came when he came in yes, there was the anti-corruption campaign Yes, there was the political repression, but there was also this effort on the one-child policy on the environment On who co-reform on residency permit reform you could say that none of them has yet achieved It's objective none of the reforms has really come to fruition We're already four years in if this were the United States. He would not be reelected But it's not the United States And so he's probably got six more years to try to see these reforms through and to try to tinker and figure things out Which is why I think the potential for some kind of political pushback and some little bit of reform some some Moderation of his current policy might might be what What does the trick? You know having said all that I do tend to agree with you if this were a Western country Everybody would be looking at China and saying I mean would be looking and saying you know You are in desperate desperate straights. You're never going to get out of this But somehow China has this momentum of its own that you can't quite deny Okay. Thank you very much