 Good afternoon everybody. My name is Kaiser Guo and I am the host as you just heard from the of the Seneca podcast Which is a weekly conversation of current affairs In China coming from the China project This is a really good time to be convening a panel albeit a very brief one necessarily on China and the future of security Security is surely something that's very much top of mind for Xi Jinping and for the rest of Chinese Communist Party's leadership Just a month out from the 20th party Congress, which will convene on October 16th And that falls on really what's been a rough year both domestically and in foreign policy a year ago Xi Jinping was positively brimming with confidence of the party leadership seemed to have not merely survived it probably to have emerged stronger from a series of pre battering stress tests systemic stress tests The trade war of course the technology cold war the you know deprivation of key tech inputs from the United States and from some of its allies There was the sort of international Proberium that China had suffered because of Xinjiang and because of the Hong Kong Well, it's sort of taming of Hong Kong and the national security law and of course They they've there was the the COVID pandemic But coming out of that that they felt like not only had they They endured it, but they had actually come out with increased popular support increased sort of a sense of regime rigid regime legitimacy and You know, they felt positioned to now undertake Some some pretty big moves to pull the band-aids off and to address some of the the deeper underlying problems That have be deviled China for for some years You know to break eggs and you make an omelette and so they you know, they really wanted to address their vulnerabilities in in core technologies like semiconductors to try to win the future in AI to really You know curb the power of these powerful tech platforms You know to kind of put China onto a new kind of post carbon footing with electric vehicles and other green tech the program was and Nick no mistake it was a program was being called, you know common prosperity My colleagues and I at the China project had another name for it We were calling it the red new deal the things are looking though very very different for Xi Jinping right now The Omicron variants have buffeted China's economy as she's zero COVID approach Held up as evidence of you know, tremendous state capacity. Just the year ago is now widely seen of Proof as proof of his inflexibility Economic security that even food security are sort of back on the table the Russian invasion of Ukraine has strengthened the transit light Atlantic Alliance it's Casting, you know the quad and Aukus in a new light and making all the more conspicuous Beijing's dearth of any respectable allies really Even as this crisis looms in the Taiwan Strait It's it's early to be sure but it does appear that China's big push toward high-tech self-sufficiency is also already encountering considerable difficulties The common prosperity agenda is on the back burner if not completely on hold what should we Make then of what's happening with the party Congress and what can we expect from this third Xi Jinping term? Which is all but certain now I am really delighted to be to introduce this outstanding panel We've got Ling Ling Wei who's a veteran reporter for the Wall Street Journal who recently came back to the United States after Being in China for many years. She's the co-author of the outstanding book super power showdown Which chronicles the Trump trade war a Ling Ling great to see you again Thank You Kaiser. Oh, we also got Kendra Schaefer who is head of tech policy research for Beijing based consultancy Trivium She's really one of the go-to people who I I turned to when I want to understand China's tech regulation and she can be counted on for really deeply informed and very highly original Perspectives so welcome Kendra great to have you good to be here And we're also joined by my dear friend Damian ma who is the managing director and co-founder of macro polo I think tank of the Paulson Institute and also a go-to person I really to understand really for me the ins and outs of elite politics in China and much more great to have you on Damian Was good to be with you guys are All right, Linlin, let me let me start with you You have been making the point in a lot of your reporting that Xi is not the omnipotent ruler That he's often made out to be and that there actually have been challenges to his authority What has this Terribly challenging year for him revealed about the limits to Xi Jinping's power and and how should we try to Right-size the actual control the actual, you know of power that he does wield in China because that is not inconsiderable Sure Kaiser great to be here If we look back on what Xi Jinping has done in the past decade Undoubtedly, he's accomplished a great deal of consolidation of political power You know, he now has firm control over Hard power institutions like the military and the domestic security apparatus He overturned the way China has been ruled since since Deng Xiaoping and you look at the political standing committee The party chief used to be a kind of first among equals But Xi has made himself the chairman of everything. So by all those measures, he is very powerful However, if you look at how successful He has been in terms of implementing his agenda Especially in the economic arena, you see the limits to his power For instance, you pointed out the common prosperity agenda, right? That's what he promoted last year It has heard private sector sentiment badly Making entrepreneurs feeling unsafe and unwilling to make investments So he has had to pull back from that agenda The common prosperity slogan that was everywhere last year has been barely mentioned this year It's probably one of the most noticeable setbacks She has had encountered in recent years Then you also see him pulling back from or at least hitting the pause button on this near Blanket crackdown on the private tech sector Even though pressure on those private firms still remains In addition, he has had to also to walk back from some very ambitious Energy targets after severe power shortage last year. So in short, yes Xi is immensely powerful But he doesn't have absolute power and he's still constrained by China's political system and economic reality Right, right, right Jamie in 2022 as I said didn't exactly go as Xi had envisioned. What is your take On the extent if any to which this has actually weakened him politically as he goes into this party congress Is he going to face any kind of challenge? Well, I think He has certainly bundled I think the handling of you know, the covid approach Um now the question is whether Um the perpetuation of the zero covid approach is actually going to uh, you know Exact serious, you know a collateral damage to him to him politically doesn't look like it at this point Especially I think if our assumption is that he walks in and he wins his third term That pretty much shows that uh that yet. Yes There there's probably some controversy and damage, but ultimately, uh, you know, I think he's got a bit of a Teflon Um feature on them where things kind of just slip You know slip off a little bit and so it doesn't look like it's it's it's really hurt them significantly But I think if you were to point out one thing to kind of you know, criticize him for Over the year is it is the handling of of the economy and I think that's the question on a lot of people's minds on markets on businesses is you know, when is this When will there be a plan B? Not even when the zero covid policy will be lifted But will there be a plan B? Or are we just going to see Whack-a-mole lockdowns as far as far as the eye can see and that's a that's a huge problem And we all know that you know, Chinese economy is not just being hit by zero covid But they also have to manage a property crisis So we're getting hit on on on two fronts and and this is uh hugely problematic At least two fronts. There's also the tech component and the end of that But as we speak Xi Jinping is actually headed to the fabled Silk Road City of Samarkand In Uzbekistan for the summit of the Shanghai cooperation organization. He's going to Kazakhstan first What do you see is the significance of the fact that he's finally Taking a trip abroad and actually he's got uh, you know, this the first one since the pandemic started But there are a few more on his schedule coming up I understand that you know People are are starting to speculate does this mean maybe that zero covid might finally be coming to an end If the dear leader is is traveling I think it's probably one of the most positive signs we've seen in in about two years And it's not just shooting pink right leech on true another Paula girls standing can be Remember having to travel outside of the country. So yes, yes, and she has plans to I think go go go to g20 Uh, later this year in Jakarta Where you might be with president biden So this is probably one one of the best signs we've seen but again going to my previous point is I think, you know, knowing knowing how knowing the chinese approach. They're not just going to sort of lift zero covid with one fell You know one fell swoop. It's not going to happen that way But I think what they can do is they should lay out some sort of exit plan or plan b where they say here are these You know here's sort of the next phase of how we are going to deal with this policy And maybe it's, you know, uh, low hanging through like getting rid of some of the more, you know, stringent quarantine policies But step by step they need to sort of give them a bit more confidence that what we see is not what we're going to get for another 12 months And that that I think will Naturally, uh, imbue some confidence. I think in businesses and markets and also in the economy Lingling, uh, same with you. I mean liling and david may mean have a hard stop in just 15 minutes So I've got to stack questions for them first But is there any likelihood lingling that xijin ping will anoint a successor next month that I mean see she himself As we probably all knows, uh, he was kind of anointed in 2007 and that was sort of the norm Uh, he would be next in line as general secretary, uh, five years before he actually took office Uh, until of course she broke from that How would we know if we're watching the party congressman's proceedings? How would we know if a successor had been tapped and and would that signal clearly that she intended this term to be his last? Sure, uh, that's certainly an indication of the strengths of xijin ping's power Um, I think one sign of whether or not he will name successor Uh, is to see who becomes the next vice president Is a position currently occupied by Wang Qishan If someone much younger gets that position in she's next term The person might be seen as a you know potential successor But it's a bit hard to believe all she wants is just one more term So even if he agrees to name successor now It can still change as he continues to try to secure and strengthen his power I just wanted to add one more quick follow-up point to what damien just said and I completely agree that you know, uh, the challenge To she's leadership per se, you know, it's very limited But but I do want to emphasize that there have been challenges to his authority Especially in terms of the economic management and those challenges coming from the more pragmatic and techno technocratic side of the party in particular He's number two premier li kechang and he's underlings at the state council You know, as we know the premier and the government system he has overall have seen their power weakened significantly for most of the past decade and You know president she as we said earlier has taken personal charge of the economy among other key levers of power And has overturned the division of labor between the party and the government However, there's still a mechanism for forces like the premier to challenge she's authority on economic issues And they have done that through say council inspections So one thing to be on the lookout for in terms of the upcoming party congress in terms of final results is not not You know, it's obviously, you know, she taking control of the top leadership position again and also in the makeup of the Standing committee and whether or not he will have to make certain concessions on key Personals like the premier executive vice premier and whether or not, you know, he has to Will have to make any concessions on policy priorities going forward speaking of the the composition of the standing committee looking at the the Central committee in the Politburo, you know, the 25 member Politburo and the 300 odd people in the central committee It it's very clear that technocrats are on the ascent. So Kendra We have seen many many appointments of graduates of beihang Formerly the beijing university of aerospace and astronautics Rising through the ranks in the pre-party congress round of provincial appointments Um, this seems very significant. Uh, this is very different than what we saw in the in the 18th and the 19th party congress Where uh, they were sort of technocrats were out of fashion What what's your take on what this means for beijing's priorities or or the policy direction that we might expect coming in the next five years Yeah, well, I mean Kaiser. I don't think it'll surprise anyone if I say beijing is leaning very heavily on technology and innovation policy to cure kind of a whole host of social ills, right both International and domestic right and that's a trend that is guaranteed to continue and definitely going to ramp up Um, you know, most obviously it's clear that getting china out from, you know, what's kind of perceived to be the the boot heel of western sanctions on advanced technologies via indigenous innovation Has become one of china's, you know top three policy priorities, right? That's true in all kinds of areas chips satellite navigation and aerospace, etc, right so Beijing is putting policymakers in place that understand the importance of that competition And hopefully have the capabilities to move that forward, right? So the the competition over advanced technologies is heating up But we'll also see technology leaned on more heavily As a solution to a kind of host of domestic problems, right? We see that all the time if for example China's got this looming aging population crisis, right? Which has has the potential to to threaten food security over the next 20 years As as china's older farming generation kind of ages out of the profession and isn't replaced, right? I think the average age of the chinese farmers really high. It's something like 50 right 55 And kids don't want to go into the fields Anymore they want to go to the cities and and do other work or go online And so there's a question of who's gonna gonna till the field, you know, 20 years from now Um, and when you don't have enough farmers You kind of have two options, right? You have immigration or automation um And china already doesn't have a great immigration policy But when you have a bunch of bureaucrats in place at technocrats specifically making agricultural policy Um, and the options are immigrants or robots It's going to be robots, right? You're going to see all of that policy support go into, um, you know Next generation technologies that can solve that social problem. We see that everywhere. We see it in covid um, you know, obviously the the and the entire health system and and um, almost every other sector autos environment, etc, etc So, you know that influences having those people in place influences policy in a number of ways We'll come back to a little more on technology in just a bit But um i want to shift and talk a little bit about china's foreign policy And let me just throw this one to whoever wants it Of will we likely see any shift in in she's foreign policy during this third term? I mean china has some seriously fraught foreign relations and not just with the us We have of course the krain war that's ongoing and it's really found it very difficult to maintain what i've described as a pro russian neutrality Uh, what what do we expect to see in terms of foreign policy direction? Maybe we'll start with you ling ling and then damien you can chime in Foreign policy direction. Sure. Um, right. Um, so It's very uh, they're they're very few sign that shijing pin will change his foreign policy focus competition with the united states will remain Pretty much central to whatever he does on foreign policy front and you know, um, interestingly, um, you know Based on my conversations with chinese diplomats and um, you know, they're saying that Basically, it's very hard for us to make any changes because we have been left with no breathing room Uh, I guess the american side probably fails the same way. So, um, you know, we're really expecting a more assertive aggressive, you know stands in terms of our china's relationship with the us and other western countries and as you mentioned earlier kaiser She's first trip right in nearly three years is to go to central asia and to potentially meet with putin What does that say to us, right? It's uh at the time when putin, you know, is suffering setbacks in ukraine and chinese If if not anything else, but symbolically it's a very strong statement that this alignment Beijing has had with Moscow is here to stay Damian I'm specifically and we ask you, um You know, I think that that a lot of us have with our interlocutors in china have Concluded that beijing is basically decided now that irrespective of who sits in the white house or what parties in power in congress The position of the united states is that we will constrain and contain box in china thwart its rise and that Uh, that isn't a partisan Matter at all. And so we there's zero trust. Do you sense that there's there's With the c taking his new third term that there's any possibility for at least a sort of you know A detente or a little let alone a rapprochement Well, this is clearly a two-way street, right? So it's not just entirely at the beijing and it's entirely at the washington And I uh, I would say that I think both sides to kind of piggyback up off of what lingning has just said Is that I don't think either side thinks sort of just a purely bilateral approach is is really going to be effective Or is really going to work So it's going to have to be some sort of multi-lateral on both sides And the question is just what sort of specific coalitions and groupings are we going to see? Whether you know this russia, uh, this beijing-moscow thing actually endures or is just more fleeting What kind of coalitions are we going to have? You know on sort of the us led side And it's entirely possible. They're going to get a lot of Sort of a heterodox set of groupings dealing with different kinds of problems for example On security is going to look kind of probably quite different than on let's say supply chains Because you know, there's just some some contradictory elements in terms of the economic side versus the security side of things I think on the economic side, I'll just spend just 30 seconds on that. I think the key question there is You know if the idea is some sort of modest selective decoupling whichever term of endearment you want to use I think I think the question is How do you realistically substitute a chinese manufacturing sector? That's about four trillion dollars Which is about the size of the german GDP right That seems pretty formidable So when people at when people talk about decoupling I usually want to ask well, okay Find the credible viable substitute to china. Is it mexico? Is it indonesia? What is it? And if we can't have a good answer to that It's going to be very it's actually going to be very tough in reality to do it well and to do it disruptively So I think I'll just leave it at that We've been talking about decoupling for four years and in each of those four years our trade deficit with china has increased Right Kendra, I I've often bemoaned the way that I mean, maybe it's ironic because I'm saying this at a future security forum But a way the way that that in the u.s We've tended in recent years to just view everything china through the single lens of national security To view china's motives as focused entirely on great power competition, you know in the same way that ours are um And and that can really steer us I think into a lot of wrong ideas about beijing And what beijing actually intends to do Kendra, can you offer us some good examples from your world the world of you know tech policy in china of how we sometimes Misinterpret or or mischaracterized the way that china thinks and and what the The the actual motives of what they do are and they're not maybe all always quite as sinister as we imagine Oh, absolutely. Yeah, absolutely Um, what one of the biggest misconceptions I see in my day-to-day work is a kind of widespread Understanding about the way that beijing is approaching data security and data policy um One of those misconception is kind of based on the premise That we tend to think of china as a country obsessed with information control Right because information control means power and the ccp's primary objective is staying in power and so, you know By that reasoning it kind of naturally follows that the same logic would apply to the way the country is approaching Data security right from this opaque and kind of a rationally protectionist perspective only Um, and of course to a certain extent that's true The ccp does love its control over information And from the outside on a surface level that rationale seems to kind of bear out right now Right story after story over the last couple of years Outlines how china is cutting off access to chinese data shutting down access to shipping data Forcing companies to localize their data in china preventing the export of data right So we get this national security only message, but the fascinating part is from beijing's perspective The long-term goals are completely different right china sees The locking down of some types of sensitive data as the first step towards enabling a robust international data trade Right beijing very clearly articulated its intentions to kind of turn china into this global epicenter of data trading right to take china's Vast data wealth right by some estimates china generates like more data than any other country in the world And and capitalize on that wealth right, but but but the key there as fine as china as far as you know Chinese policymakers are concerned Is that The law has not yet identified Which data is safe to trade and which data isn't safe to trade So we've only got one more minute unfortunately, and I do have one question I want to ask and you know we hear all the time now that we mustn't try to out china china right That there's you know, and then I think that's that's broadly true I mean, I think there's many examples where we we we have tried and we look bad in doing so But at the same time, and there's obviously a lot of things that china is doing that are laudable And that maybe we ought to to maybe speak to emulate kind of give me an example of some of the things that china is doing in the realm of Of of you know the the digital world where maybe we ought to learn something I mean aren't they curbing their tech platforms in a way that we've been unable to Yeah, I mean because we have time all trunk We don't have a lot of time I'll truncate this but one of the most interesting policies that came out of china in the last year We're studying is their policy on recommendation algorithms. Yeah Right. It was really revolutionary one of the things that it does Is it requires tech companies to allow consumers to opt out of being targeted by algorithms, right? Not let e-commerce sites or social sites to use your user data to serve you content or product recommendations, for example It requires platforms to show consumers the keywords that are being used to target them Which is you know, my colleague turned to me and said, oh god, what if facebook thinks i'm fat You know, we don't know what decisions the machines have made about us, right? And it forbids the use of algorithms to conduct price discrimination break the law Etc. So we're actually looking right now very at a very weird and unique situation where chinese consumers and gig workers have more rights On the chinese internet At least in terms of consumption and privacy than american citizens do and that's a concern to me Well, unfortunately, uh, i've lost two of my guests already. I mean, they're they had to hop off We had the hard stop and uh, appreciate everyone and i'm sorry that i wasn't able to get to more of the audience questions But we very much appreciate it. Thank you so much kentra and thanks to to the lingling and to danien