Transcription
So ahead of this discussion, I went back into my notes. This is a worry. And I'm looking into previous speeches that you've given and previous interviews that you've given to CNN, including an interview that we did. And this is an interview that came from 2015.
So if we were to step into the time machine, this is the era of peak Obamacore global optimism. This was the era of the Paris climate agreement when that was signed. Um, this was when the Iran nuclear deal was reached, etc. And US-China relations' intention was a talking point then. Um, so of course, we brought that up in discussion. And this was a quote. And I quote here, gentleman, the glasses in the front row, need you to listen to this quote because there's going to be a quiz afterwards. Pop quiz for you. So, sorry.
So, this is what you told me. Um, according to my notes, you said, quote, "If anyone says, and this is Dr. Kevin Rudd, circa 2015, if anyone says there is a crisis between China and the US, that is, that's a Chinese saying for nonsense. Um, it's like a big noisy family." Or Australians would say, "bullshit." And I think that quote is classic Kevin Rudd. First of all, working into fluent Mandarin Chinese like a pro. Um, never a hawk nor a dove. Ever the wise owl. And saying, "Do you know what? Look, it's just one big noisy family."
But of course, we know that was then and this is now. So, as we go out of the time machine, back into the present, more than a decade on, give us the temperature check in this ultra hot room. Where does US-China relations stand today?
This is where anyone in political office defends their record. Um, so two things happened in 2015 which are worth reflecting on. The first, for those of you with a memory of financial markets, it's when China experienced its first domestic financial crisis. Uh, and if you go back to August of that year, you see the Chinese stock market plummeting, uh, to historic lows. Uh, this created shockwaves, uh, in the Chinese official system, and in my deconstruction of events in Beijing was fundamental in causing Xi Jinping to conclude that market-based solutions to China's economic challenges and opportunities, uh, were in fact too unstable for the Chinese political system to handle. Um, this was a big event, and actually its follow-through was, by the time you got to 2017, the beginnings of this fundamental redirection, uh, at a macro level, of the course of Chinese national political economy back towards the state and away from the market.
The second thing that happened in 2015 was Xi Jinping had already launched his technology strategy for the future called "Made in China 2025." So if I was to look at two big turning points in 2015, uh, it was those, and the flow-through consequences of both those decisions we still feel today.
Where's the current state of the relationship lie? Look, if you, um, try to look at the endrails of Xi Jinping and President Trump and the most recently concluded summit in Beijing, it is effectively what I describe as a temporary mutual stability pact. Temporary mutual stability pact. None of the fundamental economic tensions, none of the fundamental technology tensions, and certainly none of the fundamental geopolitical and geostrategic tensions have been resolved, um, from the perspective of either party. But they've concluded that in both their interests, which are to do with economic stability and not further exacerbating the tariff war, they've decided to call timeout. Yeah. But to call it anything more than timeout, I think misreads the times. Will it be timeout for the rest of this year? Probably. Next year, probably. 2018 for me, question mark.
You call it a temporary strategic stability pact. The words that they used in the readout after the May summit in Beijing was strategic stability. Both sides agreed to strategic stability. But in the eyes of Beijing, in the eyes of the Trump administration, what are their definitions of that? And where's the middle section in the Venn diagram?
That is a question which, um, you get different answers from depending on who you discuss this with in the Trump administration. And I've not been back to Beijing since then, uh, to interrogate our Chinese friends. I think from the American lens, if you go through the component parts of this formula, which, I won't use the Chinese, you've already reprimanded me for that. So, no, no, please do not. We have students among us. Okay. Um, positive strategic stability. And so nothing happens in the Chinese system with language like this unless it's been worked over and worked over and worked over, as you know from your time looking at these things. So what does it mean being constructive? That is, genting about those areas that we can cooperate, um, and that is both in the economy and in elements of social policy, maybe even in the environment, but not with the Trump administration. Um, strategic stability, uh, is code language for, be mindful of our Taiwan red lines. Uh, otherwise, all bets are off, and we will then be automatically catapulted into a period of strategic instability. And so the component parts of this construct are, let's be constructive where we can, uh, in the economic competition, let's be non-kinetic. And from the Chinese lens, let's not deteriorate further in terms of greater export controls on technology or higher tariff walls around the general economy. But Uncle Sam, watch out in terms of the T-word, Taiwan, because we will not move on that. That's their interpretation. The American interpretation, uh, is not entirely the same.
Yeah. Let's be non-kinetic is a Chinese interpretation of strategic stability. And yet a very kinetic event took place earlier this week in the form of that long-range ballistic missile test into the Pacific, um, which rattled Australia. Um, it rattled the region. Um, why did you think China did? I'm not feeling particularly rattled, but okay. Give us your perspective on why did China do this? Why now? And the response, um, from Australia and the US.
I think Rana Mitt is Rana still with us this afternoon? Where are you, Rana? I'm gonna do you in, mate. Um, by the way, full disclosure, Rana was my supervisor when at the tender age of 59, I started my DPhil at Oxford. And so, and he mysteriously participated in my ability to pass that course. So, Rana, I love you dearly. That's right. Anyway, um, since then, he's been elevated to, uh, to Harvard, but don't tell the Oxford people that. Um, but he said this morning, uh, it was a great phrase, a very Rana-esque phrase, where he said this was a piece of geostrategic throat-clearing by the Chinese. And there's a lot of wisdom in that observation for those of us who have studied CCP form over a long period of time, which is before they go whack, the habit is to go tap. Um, which is just to remind you of what China is capable of. Um, and you see this across their economic statecraft. You see it across their geostrategic statecraft. So this was a means by which to demonstrate, uh, to the wider region, uh, that China is a formidable nuclear power, b, it has long-range missiles, and c, just be careful.
Yeah. Um, of course, I think part of the surround sound for this has been what, um, Australia has done recently in relation to its Pacific island diplomacy. Those of you who don't follow the detail of this, in the last six to 12 months, Australia has signed, uh, bilateral security pacts with Papua New Guinea and most recently with Fiji. And these are pacts, these are mutual defense treaties. Uh, in addition to that, and the Australian government has been engaged in a series of other treaty-type, treaty-like, uh, agreements and negotiations with a range of other Pacific island countries. And so therefore, I think our PLA friends were in the business of saying, "Just remember who we are and where we are." And I think to go to challenge your proposition of rattled, I don't see any element of that in Australia's response because they continue, uh, to double down on their forward-leaning diplomacy among all 16 island states of the Pacific.
Is there a sense of bracing for what could happen next? More projections of strength, more missile tests, especially as the PLA nears this anniversary next year, 100 years of the People's Liberation Army in 2027. Should we expect more showcases from China?
Well, um, as previous Chinese leaders have stated, um, revolution is not a dinner party. And so from the perspective of the PLA, as the armed wing of the Chinese Communist Party, they have never been reluctant to demonstrate that as a Leninist entity, they are prepared to use force. Look at the history of the party before 1949. Repeated uses of Leninist violence against its own ranks to purify the ranks of the party. Think of what happened in Jiangxi. Think about what happened in Yan'an. And think about what happened in other internal struggles. And post-49, the use of force in the anti-landlord movement, the use of force in the anti-rightist movement, and of course, the use of force in the Cultural Revolution. Externally, the Red Army, should I say, the People's Army, has also been making plain its message. So this is not unique. It was only a year or so ago that you had the circumnavigation of Australia by the PLA Navy. This was, that was a first. This most recent test, I suppose, is another type of first. But the bottom line is the PLA has never quite got the memo that every time you do this, it creates an equal and opposite reaction on the part of regional states. And therefore, the idea that everyone will go, "Oh dear, that's frightening and that's concerning. Let's flock to Beijing." That is not actually the psychological effect. In fact, it's the reverse effect. And in internal Chinese politics, my view is that this actually represents a triumph of the PLA and the CMC over the Chinese Foreign Ministry because the Chinese Foreign Ministry normally would be cautionary about such measures because of the diplomatic and political impact in the region.
Earlier this week, we heard from US President Donald Trump, who said that he expects to have another meeting with Xi Jinping on September 24th, around the time of the UN General Assembly in New York City. Um, this would be, of course, following their earlier summit in May. And a lot has changed between May and what will be happening in September, from the recent missile test this week to the return of open kinetic conflict in Iran, the end of sanctions, the return of sanctions on Iranian oil, to the ever-quickening development timeline in the world of AI. When these two leaders meet again, um, how do you think that laundry list of discussion points is going to shake out in terms of what will be the priority items to discuss in end of September?
From the Chinese side, I would argue that Xi Jinping will seek to push harder again on the question of Taiwan, uh, and in terms of weakening levels of American strategic and political resolve. For example, uh, what is now being described by President Trump as a negotiating tool, that is the next tranche of American arms sales to Taiwan, will be front and center, not just in itself, but also as a precedent for what then follows in terms of subsequent arms sales to Taiwan by the United States. Um, all of which occur basically under the terms of the Taiwan Relations Act back in 1979. So I think that's on the Chinese list. Will the United States move on that? Um, that is a much more contested question between various branches of the administration and certainly between the administration and the Congress.
On the economic box, um, don't discount the possibility that Xi Jinping, having not delivered President Trump any economic wins in Beijing, does come to the United States with an economic win of one description for President Trump or another, perhaps targeted on farm states, given the proximity of the midterm elections and the fact that Republican candidates are doing it hard at present, even in red states. I was recently in Montana, and, um, and it's surprising the change in political sentiment on the ground in a number of deep red, deep MAGA states at present. So don't rule out that possibility. Uh, precisely what form of quote trade deal will it be? To deal with farm products alone, or farm products plus civil aviation, doing more for Boeing and Seattle? Open question mark.
The final category, uh, which both sides have agreed to, is it possible to begin to frame bilateral guardrails around the question of quote, dangerous and destabilizing AI models? Um, what I referred to, I think last night, as the mythos moment. Um, Secretary Bessant has planned two sets of negotiations before September 24th with Hurley and the Chinese team on that. Will that actually produce an outcome or a mechanism towards an outcome? Possibly. But, um, there is not a lot of optimism in Washington about that at present.
Could you take us back to what you mentioned just now, but when you were in deep MAGA territory in Montana and you sensed this shift in political tone? Is this in regards to American attitudes towards China?
Now, what I sensed, um, in various, let's call it, red states across the United States, is a deep political reaction, uh, against the current administration because of Iran, and because of the impact on the price of gas. Um, and this being a bridge too far for most hardened MAGA supporters. And, um, I think that's a new factor in American politics, and I think is playing through until the midterm election politics. But there's a long way to go still between now and the first Tuesday in November.
Absolutely. We'll see that play out in the midterm elections. Um, Taiwan, that is Xi Jinping's red line. As you said, if and if this September 24th summit does go ahead, she is going to push hard on Taiwan. Uh, at the last Trump summit in Beijing, there was no mention of Taiwan in the White House readout. Um, when you most recently served as the Australian ambassador to the United States, behind the scenes, what kind of discussions were taking place among policymakers about Taiwan? How, when Taiwan is omitted entirely in the readout, is Taiwan part of the equation at all with the Trump administration? Um, could you give us a look into that? And also, how worried should Taiwan be?
Um, well, without reflecting on what I did in my last job, because that would probably get me into trouble, well, more trouble. Um, the, um, let me reflect on Taiwan more generally as the dynamic in US-China relations. If you look carefully at two pieces of evidence, if you accept the proposition that deterrence of China on Taiwan has two constituent parts: one is the capabilities set of the United States armed forces in the Indo-Pacific region, and that of their allies, and how those assets are deployed on a given day and around given contingencies and realities. And the second is the Chinese net calculus of American political will. Remember, deterrence equals capability plus will, in terms of a conclusion by the Chinese leadership that Taiwan is too difficult of a military proposition.
On the first of those legs of the deterrence equation, which is the capability set of, um, Indo-Pacific Command, Indo-Pacific Command, as I've observed it, has not changed its capability set or its pattern of activities. I'll add one caveat in a minute to do with Iran and Gulf deployments. Minister, good to see you. I hope that was the minister that I've just shook hands to. It matches the photograph. Yes, confirm. I looked at my photograph, too. So, I won't keep you long, Minister. I'm just providing the entertainment on the way through. You're the main act. Um, but if you look, for example, at the military exercises which Indo-Pacific Command conducted recently in the Philippines, these were large-scale, and they involved for the first time significant overseas deployments by the Japanese armed forces, together with other regional countries as well. And this was really at about the same time as the summit was being held in Beijing. So before we look at the declaratory aspects of US policy, that is, what President Trump has said in interviews about Taiwan, the operational military reality on the ground on the part of Indo-Pacific Command has not really changed. The caveat was that because of what's transpired in Iran and in around the Gulf, there has been a transfer of assets into the Indian Ocean from the Pacific Ocean, and that has been real and measurable. But as things begin to stabilize and normalize, that will also rectify. What will take longer to rectify is the impact in terms of what's called magazine depth, or the inventory of weapons and equipment, or weapons in particular, that have been discharged and used already in the Gulf.
On the declaratory side, which is the other part of the deterrence equation, President Trump gave a famous interview coming out of Beijing to Fox and Brett Baer, which my haiku summary is as follows: A, Taiwan is a very long way away. It's 9 and a half thousand miles from the United States, and it's 59 miles from Taiwan. Actually, it's closer to 100 miles, but let's not get picky. Point two, um, that, um, Taiwan stole all of our semiconductors. This is President Trump's position. Uh, point three, I don't think they'll invade while I'm around, but they could do so just afterwards. And point four, is everyone should just be calm. Now, if you're sitting in Taiwan, these were not the ingredients of calmness-inducing remarks. Um, but as I said, at the same time as these things have been declared, the operational reality of Indo-Pacific Command had not changed one bit.
So where do we now stand? It is still, I think, the most unstable and most volatile issue not just in the US-China relationship, but more broadly across the Indo-Pacific region. And that's as it's seen from Seoul, as it's seen from Tokyo, as it's seen from Southeast Asia, and as it's seen from our part of the world, down under.
So we had these two powers, US and China, in a state of, as you put it, temporary strategic stability. When Trump and Xi meet again, presumably, according to Trump, end of September, this is a relationship that will be tested by Taiwan. There may be opportunity to support the relationship in terms of new economic deals to be announced, and also if they decide to come together and introduce guardrails in regards to AI, it becomes increasingly powerful. Setting the stage for the next meeting between Xi and Trump, the platform for grand power bargaining that takes place. Could you give us a sense of the back channels that lead up to the next summit and the role that the Asia Society plays in this?
No. We just want to hear the secret sauce. I think, look, the bottom line is, um, we at Asia Society know, um, members of the US administration very well. We work with them very closely. And secondly, we work very closely with Secretary Bessant. And if you look at the machinery of the US-China relationship at the moment, Secretary Bessant, the Secretary of the United States Treasury, is the key interlocutor with the Chinese. His counterpart is Hurley Fan. And, uh, Hurley Fan has also a parallel mandate from Xi Jinping. So this is where it occurs. This is where it happens. And like most good think tanks, we all feed into whichever side of the process that we can, because we'd all like to see a positive outcome.
One broader comment though, which I think is relevant to our European friends, and I touched on this in my remarks this morning, is because Secretary Bessant is leading these negotiations, Secretary Bessant is acutely aware of the full dimensions of Chinese industrial policy, manufacturing policy, and technology policy. And, uh, what is occurring in terms of the export of surplus manufacturing supply from China to global markets. This is of enormous disruption not just here in France, but right across Europe, and in particular Germany, as we've seen the numbers which have been referred to earlier today. This will not be absent from the discussions which are had with the Chinese side. And therefore, as I've indicated earlier today, this is so much part of China's own development equation, doubling down on investing in industry, doubling down investment in manufacturing, doubling down on investment in technology through the so-called new productive forces, and subsidizing these enterprises to a degree which is somewhere between three and nine times the average subsidy level which applies to the OECD, depending on the individual sector we are talking about. So therefore, this looms very large, not just in Brussels, not just in Paris, not just in Berlin, but frankly, right across the rest of the world, including in industrializing Southeast Asia. So this will be a large question also sitting across the background of whatever occurs on September 24th in Washington and beyond.
Yeah. Um, we have hit time. Um, we'll leave it at that. Dr. Kevin Rudd, thank you for answering my questions. I'm sorry we didn't have enough time to open up to Q&A. I was very greedy there. But also like to thank you for your leadership for the society and also for global diplomacy. So let's give it up for Dr. Kevin Rudd. Thank you very much.