 It is my great pleasure now to call Mr. Kevin Rudd, whom I think many of you know. There are many reasons for him to be known because he is a very famous man. Kevin, I am telling good things about you, so you should listen to them. He is a former Prime Minister of Australia, and he has become, he is now recognized as one of the best experts on China worldwide. Mr. Kevin Rudd speaks Mandarin fluently with a slight Australian accent. But this we can check during the Q&A session. And I have asked him to give us his assessment on the Chinese situation today, both from an internal viewpoint, that is economic, social, political situation, and external, that is foreign policy, in a large sense, the grand strategy if there is any and so forth and so on. So Kevin, please come. More importantly, we have been following the rugby score, so if you follow rugby, the cherry blossoms of Japan are now 28 against Scotland 21. So for those of you who follow this arcane sport, as I do and some around the table do, this is what we call a global upset. Well done, Japan. But the Scottish are still coming back, so we will see. Thank you, Thierry, for having me back at the World Policy Conference. Can you hear me at the back up there? Good. This is a big room. So, and I've got to keep you awake now that you've just eaten and it's a warm afternoon and you can already hear the calls of prayer outside. So it should be a challenge. I'm going to spend 10 minutes talking to you about what I think Xi Jinping's worldview is. And then I'm going to spend the following 10 minutes talking about what I think the American strategy is in response to that. And concluding thought on where that leaves the rest of us, in Europe and the rest of Asia, in Africa, as well as in Latin America. So the first one is Xi Jinping's worldview. I always think the beginning of wisdom in international relations is to understand how the other side thinks and why they think that way. And so we should adopt for the next 10 minutes at least a view that we are sitting around a large table of the Standing Committee of the Politburo. There's only seven of them. They're all men and they meet every week like a cabinet in a democratic state. They have formal cabinet documents and papers and it's important to probe how they see the world under Xi Jinping's leadership. So in 10 minutes here are what I see as their 10 core priorities if it was to be described as Masloff's hierarchy of needs starting from the biggest priority down to number 10 which is still important but not as important as number one. Priority number one in Xi Jinping's mind and the Standing Committee is keeping the party in power long term. Not short term, not as a transition to democracy but long term as the permanent government of China. And within that Xi Jinping's priority is for himself to be a long term leader. As you know he has changed the Chinese constitution to allow for there to be unlimited terms for the Chinese presidency. That will come up for final vote in 2022. And some of us think that if he gets his political way we could see Xi Jinping in power until the mid 2030s by which stage he would be in his early 80s almost young enough to become a candidate for the presidency of the United States. Priority number one therefore is keep the party in power and within that Xi Jinping staying in power. Priority number two again in this series of concentric circles I'll try and construct here is national unity. Sounds easy but when you look at the practicalities the razor sharp focus of the leadership is always on Tibet, Xinjiang and Taiwan and now more recently events in Hong Kong. Taiwan represents unfinished business for the Chinese revolution and whereas we would think it is irrational for China to throw so much of its strategic and political assets about regaining what it sees to be the renegade province from 1949 for this Chinese party leadership and for Xi Jinping in particular it is core business and if anything is likely to trigger a conflict in the wider region that looms still as a big candidate. Number three sustaining economic growth hard in the current circumstances the magical number in the Chinese leadership is 6%. Why? Because the party calculates internally they need that level of growth to sustain social and economic stability and to provide enough jobs for university graduates each year. Of course Xi Jinping since he has taken over six years or so ago has applied a different political economy model to his predecessors and it's one of the reasons that we're beginning to see a slowing in that growth. In part what Xi Jinping has tried to do is reinsert the party as a central factor as day to day market governance and Chinese entrepreneurs the Jack Ma's of this world have looked at this and said I don't like that. And as a result what we've seen in the last several years is the beginnings of a private fixed capital investment strike within the country uncertain about the future of its own private sector. Related to that task however of sustaining growth at 6% is not just keeping people happy with rising living standards manageable unemployment and poverty elimination to keep the party in power but the second element of it is to grow the capacity of the Chinese state globally. And that is where discussions earlier today particularly from John Soar and others about the centrality of the tech revolution in the economic strategy and grand strategy of the Chinese leadership it is front and center so that China wins the future global economic competition. Priority number four and it comes in part as a reflection of the excellent discussion we had earlier today between Laurent and Patrick about global climate policy in China's domestic governance that means sustainability and their reason for concern about it is because Chinese people want clean air they want clean water and they want food that won't poison them and if ever there is a lightning rod which takes those concerns back to the question of the Communist Party's legitimacy it's a failure to deliver clean air and when you see spontaneous protests across the whole country when the air isn't clean anymore they're not protesting per se about climate change they're protesting about particular matter concentrations in the air which has and is having a massive impact on public health so this has gone in the last 10 years from being a concern out there for the Chinese Communist Party leadership to a central concern it's the mirror image to priority number three which is of course sustained economic growth number five in Maslow's hierarchy of needs is this modernize the People's Liberation Army and this means turning it into not an agent for domestic political control because the technologies of the surveillance state now mean that the Chinese police and intelligence services are confident they can maintain domestic control historically part of the mission of the army Xi Jinping's mission is to turn the PLA into a body which can fight and win wars quote unquote that's his doctrine and so you see there's huge investment in the PLA in capital huge investment in the transformation of personnel and the removal of most of the previous leadership of the PLA and their replacement with the new rising professional leadership and on top of that a reorganization of China's military districts with principal focus being Taiwan and the United States priority number six in Maslow's hierarchy is as follows China's neighboring states this is where we flip if you like from the domestic priorities to those which we would classify as foreign priorities the neighboring states for China are 14 in number the largest number in the world for any country apart from Russia which also has 14 and in Chinese historical strategy it has been always a deep learning principle over many centuries that China's security domestically is threatened by one or other of its neighboring states and in fact in China's history a number of foreign invasions have resulted in those foreigners becoming the reigning dynasty for some several hundred years therefore the priority in turning China's neighboring states into benign neighbors and if possible compliant neighbors all 14 of them is a central organizing principle in the way in which this leadership looks at the world the principal objective there has been Russia Russia shares a very long border with China if you look at the transformation of the Russia relationship in Xi Jinping's period it has gone from what I would describe as strategic ambiguity five or six years ago to strategic condominium which is about where it is today obviously there are still resident reservations in Moscow about Beijing and the reverse applies as well but I personally am surprised by the rapid nature of the convergence not just of economic interest between the two but also a strategic view of the world priority number six seven, China looks at its continental periphery to its west as one huge zone of long term market opportunity for itself it's called Eurasia and therefore when you hear the Belt and Road Initiative that's part of a much wider Eurasian initiative partly China's attraction to this wider region is the Americans are not there and with the Russians now part of a wider strategic condominium there is no fundamental strategic objection to China developing this vast land mass comprising so many states extending all the way to Western Europe and the Gulf as being a future massive market for China's domestic surplus capacity on top of that also finding the opportunity of economic cooperation to turn this into a wider region of let's call it broader political compliance with China's own world view seven eight I should say and we're just about finished this list is turning to the east China's maritime periphery where number one problem is of course the United States from Beijing's perspective and when China looks east it sees threat, threat and threat it sees an array of American military alliances from Tokyo through Seoul the de facto arrangements with Taiwan down to the Philippines despite recent changes in the Philippines presidency traditional line structures also with Thailand and with Australia and as a consequence China's strategy is over time to push the United States back first to the first island chain but then to what's called the second island chain you think of the Japanese archipelago draw a line through the American territory of Guam down to the Philippines archipelago and then south and the reason for that is essentially Taiwan related but China to ultimately execute its military strategy in relation to Taiwan if it ever needed to it must have the Americans behind the second island chain and Chinese military modernization is designed around that organizing principle as well second last China's strategy for the rest of the world Latin America, Africa the rest of Asia and of course Europe which I partly touched on before it is again to extend China's massive market opportunities to find places where China's excess domestic capacity can be sold to the world at large but also through that in Africa and Latin America to make as many political friends and foreign policy friends as possible and you don't have to be a keen PhD in international relations to studying voting behaviors in the United Nations to know that China has succeeded in creating a massive voting constituency for itself out of Africa alone before you add a large slice of the rest of Asia and Latin America before you get to Europe or anywhere else and finally the tenth and what I describe as Xi Jinping's Maslovian hierarchy of needs is the future of the global rules based order itself China at this stage has this as a work in progress within its own think tanks it's not fully or finally conceptualized but if there are elements to it I would describe it as this one with the existing institutions of global governance which we've all described today in various presentations as being in decline China is actively investing finance and personnel as well as beginning to influence the regulatory and operational behavior of those institutions over time but secondly the parallel track is to build the institutions of its own outside of the UN framework and the Bretton Woods framework I've mentioned the Belt and Road Initiative infrastructure investment bank the Shanghai Cooperation Organization a security organization called SICA and others in various parts of the world as well China's strategy for the future of the rules based system therefore is a bigger voice and more persuasive voice in institutions that exist while simultaneously developing institutions which are more Sino centric which is the way which China views the existing institutions as being America centric but over time the think tanks are working around the Xi Jinping notion of what he describes as a global community of common destiny for all mankind there are a thousand think tanks at work on this at the moment they would see it as the antecedents of the next Atlantic Charter let's wait and see so I conclude Teary with that and because I've now spoken for just under 20 minutes let's move on the question of the United States and then let's take up the rest in Q&A the United States in observing all of this has had a number of different reactions for the last 30 years really since the fall of the Berlin Wall through until the Trump Administration if I could characterize U.S. strategy it's with three words engage shape and hedge engage China hence what you've seen bilaterally and multilaterally through the WTO and other institutions shape that is by that engagement try and shape China into becoming to use Bob Zelleck's term of 15 years ago from the American perspective a responsible global stakeholder that is a country which would accept the existing liberal international rules based system and that China would simply slide into it and hedge which is continue to however have a military capability about yourself if A and B above fail that was the hedge bid now we've moved to a different zone as of December 2017 President Trump and his national security team announced the formal end of strategic engagement read the U.S. national security strategy of November December 17 that's the formal turning point and what we see emerging again to quote John source this morning the new bipolar world that we are now facing this administration calls it strategic competition but it's not just the trade war it is also the unfolding tech war not just in terms of technologies in themselves the technological but the regulation of technology as well and tech standards as well and beyond that there are certain questions now about not just decoupling in technology but decoupling in finance and debates now in Washington about the future of the existing New York stock exchange listing of Chinese listed firms and open debates in Washington now about whether future U.S. administrations will allow U.S. pension funds to invest in Chinese corporations which are deemed to be of a strategic threat to the world and then you end up to the final stage of decoupling if this was to unfold in this direction with the future of the currency war itself China fears that continued dollarization of the entire global financial and economic system through its trading system and now seats to avoid as much as possible the intermediation of the dollar and to do it through bilateral currency exchanges but China has looked long and hard where will this might go which is the use of financial sanctions by the United States with Venezuela, with Iran and with other countries and therefore concerned that where this decoupling will end up is one form or another of U.S. financial sanctions with its allies of China itself and what then does China do China on the other hand does not wish to take the bold step to escalating its own currency the renminbi for reasons of lack loss of political control but it also faces the unfolding reality in the economy that it will soon face a current account deficit as well. This looms therefore as a major strategic challenge for our Chinese friends I'll leave my comments there we'll talk about Europe and the rest of the world I hope in the discussion we'll now have with Captain Moderator. Thank you Thierry