 Dear Kevin, it's a great pleasure to not to have you but to see you with a bird With a bird which is something new Apparently it's my it's my attempt at Ernest Hemingway So I would like to thank you very much We would have preferred to have you with us, but it was not possible this time I just remind our friends that you are very well known of course as a former prime minister of Australia And I see of Australia in the Australian way and former minister for an affairs also of Australia that you are currently the president of the Asia Society Institute and And that you are one of the most famous Experts on China So I am going to give you immediately the floor. We want to listen to your views on the political Situation China and the interface between domestic politics and international affairs we just had the panel on the Asia in general panel with different views on what China is up to and what Saving being what kind of leader sitting being is and what are his goals? Foreign policy goals in the short medium to long term now the floor is yours And we are eager to listen to you. Well, thank you very much to T. Ray And you are from France or do I say it's from France? If I am from Australia very good Thank you Terry, let me spend say 10 to 15 minutes on one question which is What is Chinese domestic politics looking like Between now and the 20th party Congress at the end of 2022 Secondly what does Chinese economic policy look like in that period given all the recent publicity about a return to socialism And then thirdly what does this mean for the long-term trajectory of Chinese foreign policy and strategic policy? So what did I try and spend if it's okay with you five minutes on each of those and then let's have a discussion on Chinese domestic politics I Think it's fair to say that Xi Jinping has moved the center of gravity of the Chinese Communist Party further to the left during his nine years in office We see this of course in terms of the reassertion of the centrality of the Communist Party in every element of Chinese governments and in Chinese life We see it also with the assertion of himself as the supreme leader within the Communist Party And we also see it in terms of a range of crackdowns against his political opponents Through a series of Maoist style party replication campaigns of the type which Mao used way back in Yanan in 1942 and This together with the anti-corrupting Campaign has been the means by which he has sought to eliminate any political opposition Against himself from within the leadership echelons of the party And so as a consequence if you look at the combined impact of these measures over the last nine years It is quite a different set of Chinese politics now than we had very much at the end of the Hu Jintao period in November of 2012 Of course, one of the reasons why Xi Jinping is doing that is ideological Xi Jinping as I've said to many analysts is fundamentally a Marxist-Leninist and As a consequence, he will not ultimately tolerate any Diversity of view which undermines the centrality of the party's position as the Leninist vehicle of the Chinese revolution And so in other words, he is contracting the private space for dissent Political dissent is contracting the space for let's call it the entrepreneurial class in the private sector He is also as it were contracting this space for what you can do in your normal lifestyle They've been for example new restrictions on the gay and lesbian community in China There's now new restrictions on The number of computer games that you can play and when you can play them and what their content should be so Ideology and the central role of the party has been a principal motivation motivation, but it's moved to the left But this is also individual and political and that is that he seeks to acquire the Re-election of himself as China's General secretary at the 20th Party Congress and reappointment as China's president the following March That's all about 12 months from now So there is quite an intensive political campaign by him against any would-be opponents to that extension of his term in office a Period in office, which you would like to see extended in my judgment through to about 20 35 I Said I'd also address where she didn't think is going on the economy Parallel to what I just said to you The move to the left on the Chinese Political spectrum has been matched by a move to the left and Chinese economics We've seen this in both the ideological domain and the new configuration of concepts of China's new development concept as a replacement concept for reform and opening We've seen it in China's new doctrine of the dual circulation economy Which is code language for greater national economic self-sufficiency and self-reliance and less dependency on the international market And thirdly, we've also seen it in the contracting space For the private sector and a reassertion of the role of state and enterprise sector and as part of that a new Domain for Chinese industry policy that is state intervention in Driving the new mega corporations of the future in the new technologies of the future And so all these shifts have occurred at much the same time as we've seen those unfolded in politics Although the move to the left on the economy did not start back in 2013 In fact, we've seen them intensified since 2017 So what are the motivations for that? Once again, it's ideological Xi Jinping that wants to see the reassertion of the party state He does not like Chinese billionaires becoming the role models for China's youth for the future He also believes to hold on to power. He must see bigger wealth redistribution to China's Lower working classes and its lower middle classes he also Believes that this is all necessary in order to deliver the long-term Realization of his national ambition for China to become a global superpower by 2049 And he believes that that can only happen as a consequence of the state driving this Of course the problem with this shift in the economic model from 35 years of reform and opening to what Xi Jinping now called the new state new national development concept Driven by a more greater reliance on the party state within the middle of it rather than the private sector is Whether this whole model and experiment will work or not or whether we will as a result see China's animal spirits having been crushed and whether his economic growth numbers will start to come down and right now we are in this process of Change and it's too difficult to predict how it's going to land This new direction was articulated most clearly in the 14th five-year plan Which is promulgated by the party in the country in March of this year And much of what I've just described is articulated in the pages of that plan Which of course is then taken down to the provincial and sub-provincial level But given the private sector represents 60% of GDP Represents some 90% of all Chinese innovation And of course 80% of all China's employment generation There's a question as to whether this move to the public sector move to the state and its State and enterprise sector move to the industry policy Drivers of China's guided market model now The real question lies as to whether this will in fact backfire that yet The last thing I wanted to spend four or five minutes on a TV Is what does all this mean in terms of China's foreign policy and strategic policy? If I could put my summary position as a bit like this Xi Jinping has taken Chinese politics to the left for the reasons I'd explained He's taken economic policy more recently to the left for the other reasons. I've explained But at the same time he's taking Chinese nationalism to the right and the reason for that is that it is Reflection of his desire to have a more assertive Chinese foreign policy his desire to Realize more foreign policy goals in the short to medium term rather than the medium to long term But also because Xi Jinping realizes that Domestic nationalism provides another pillar for domestic political legitimacy for the Chinese Communist Party as well Political legitimacy in the past for the Communist Party given they don't have elections proceeds from three pillars one is traditional Marxist-Lerner's ideology within the party and all 95 million members of the party and it's the Internal as it were orthodoxy the internal language of orthodoxy and practice of that orthodoxy Which provides legitimacy in the eyes of the party for its continued role and also those who would voluntarily support the party's ideological mission The second pillar of orthodoxy though in the Deng Xiaoping period given the party ideology collapsed after the cultural revolution Was what happened with Deng's economic transformation of the last 35 years and the new pillar for legitimacy was prosperity and That is prosperity rose not just for the country, but for individuals within it And so the Communist Party with the scene is to seen as delivering the goods However The third pillar of legitimacy has been nationalism and rising Chinese national power and the assertion of that Power particularly against the United States also against Japan, but also against other members of the so-called West This is becoming more important as a pillar for legitimacy as a question mark begins to arise over China's slowing economic growth rate the Actions taken against the Chinese entrepreneurial class And whether in fact the economic miracle of the last 35 years may begin to slow down And deliver less in the future than it has in the past. That makes nationalism more important So what does it mean in practice? And I'll conclude on these comments. It means that in the next decade Assuming Xi Jinping is reappointed We will see a progressive the more assertive China over Taiwan over the South China Sea over the East China Sea Over its policies with its 14 neighboring countries Also, you'll see a more assertive Chinese international economic policy You'll also see a more assertive position by China in the international rules-based order and China's seeking to enhance its position within The UN system within the Bretton Woods machinery, but also with new Multilateral institutions, which China itself creates Where will that land us by the end of the decade? I think We should not anticipate any early move by China against Taiwan Not because China has issued the use of force But because China believes that the balance of power will be more to its advantage Against the United States by the end of the decade rather than the beginning of the decade Similarly with the South China Sea and Similarly with both Japan and the US in the East China Sea So I do not see as it were immediate flash points in the next year or two in either in any of these Important theaters, but I do see flash points emerging toward the end of the decade as the balance of power slowly Changes unless the Americans of course can arrest and that's balance of power and partnership with our lives in this part of the world So Terry having spoken now for just under 15 minutes on Chinese politics the economy Nationalism and its impact on Chinese foreign and strategic policy. I'm happy to take any questions you may have following those remarks Well, thank you very much Kevin for this extremely clear statement, I have two simple questions for you the first one is is The economic political model of China I see economic Political because politics the party is everywhere. Is it viable? From an economic viewpoint in the long term. It's a very important question because if the answer is positive it would mean that the Western capitalist approach to Economics or to economic development Would not be the only possible one and that will be the first time in modern History that we have a real alternative model the Soviet Union failed because of its incapacity To solve the economic problem within its political framework So do we have or do you have some clear views on these very basic questions? That's my first question and I put the second question at the same time because we are Interrelating here politics and foreign policy domestic and foreign policy my second Question is something we have briefly discussed in the previous one and it is the following The traditional strategic The the traditional Chinese approach to strategy is in the Sun Tzu spirit that is to win Without having to wage a war. Okay, and in that sense strategic patience Could be enough to resolve the Taiwan problem because of the long-term Strategic patience should be enough, but on the other hand It is the fact that Xi Jinping Stated the number of times clearly openly That the Taiwan problem would be solved during his mandate So nobody knows exactly how long his mandate will be But if we take him to its worlds It means that in the next few years He wants to have solved the Taiwan problem So there is a some kind of contradiction and my question to you is how do you explain? that Xi Jinping took the risk of being so assertive and so precise in terms of time framework about Taiwan Okay. Thank you, Terry. Let me take those in sequence. I Think on the question of whether the economic model will work The honest answer is the jury is out But you are right to say this This is a very large gamble by Xi Jinping That China has found a New path to development to overcoming the middle-income trap Without further liberalizing the economy and without liberalizing politics In fact within the economy itself and your right to call it the economic political model Xi Jinping has been quite explicit about his formulations on this he has said that China is now Embraced on a period of a Guided market economy No longer market economy Not a longer a socialist market economy But a guided market economy. It's a new term And the mechanism for the guidance for example Is the massive injection of Industry guidance funds into the economy Driven by state and enterprises Against the strategic definition of core innovation driven industry sectors for the future Now you are from la Ville France and I know well the importance of later within the French economic development model But this is something which is ten times as big in scale And in relative scale against anything which our friends in France would have experimented with before And it's to be driven by state-owned corporations So it's big They conceive it as being different They see it as also a The third phase in China's socialist model evolution The failures of the pre-78 period The capitalist excesses of the post-78 period and now the moderation into the Xi Jinping period Into a guided market economy with greater common prosperity Of course in Europe and the West we're familiar with the whole debates around the toise and what in terms of capitalism and social democracy and Socialism but this is different because the debates in the West between capitalism socialism and social democracy Were within a liberal political system a democratic political system, and this is within an authoritarian political system The only thing I'd say by way of definitive analysis of whether it will succeed or not Is those who are most active students in the international community today of China's economic development model people like Nick Lardy at the Peterson Institute in Washington and Barry Norton who I think is out of Berkeley and the United States West Coast in San Francisco If you read carefully what they have written the last 12 months They are skeptical about whether this can work and neither of these Scholars they are scholars. They're not polemicists, and they're not Classic think tankers as such they are analysts of the Chinese economy They are skeptical as to whether Xi Jinping and can continue to generate the productivity growth necessary To actually engender long-term sustainable economic growth in China to break through the middle income trap Without China falling victim to the economic and financial burden of an aging population a Shrinking population and a shrinking workforce participation rate So that's my attempted answer at the first question. I'll be very brief on the second on Taiwan. I Do not think Xi Jinping Wants to go to war able Taiwan anytime soon. I Think he's highly cautious. You just referred to Swinza bingpa Article one in the art of war Which Swinza wrote? Teary says war is a great matter of state which must be studied carefully Because if you lose a war you lose the state Now for those reasons that is etched into the cerebral cortex of most Chinese leaders And as a consequence they take a highly cautious approach to the conduct of war therefore Xi Jinping intends in my judgment to be political leader of China through until 2035 and By that stage you'd be 82 years old still younger than dung before dung retired from active politics at around about the age of 87 So for those reasons I suspect that his career planning personally And the strategic patience necessary to engender a bigger Balance of power advantage for China during the course of this decade would still enable him to Threaten and it necessary take another reaction say by the end of this decade or early in the 2030s To achieve his objective with much greater certainty of success than with that to be the case Anytime soon. I'll leave my comments there Thank you very much