Confronting Chinese State Capitalism

welcome to csis online the way we bring you events is changing but we'll still present live analysis and award-winning digital media from our drakopolis ideas lab all on your time live or on demand this is csis online two one okay good afternoon and good evening or for those watching from new zealand uh you need to get some sleep uh thanks everybody for joining welcome to this csis event confronting chinese state capitalism i'm scott kennedy trustee chair in chinese business and economics and i'm delighted to be co-hosting this program today with jude blanchett freeman chair in china studies here at csis we hope wherever you are whether you've had one shot two shots or no shots yet you're doing well we appreciate you spending some time with us and a star-studded group of experts for this very important issue chinese state capitalism is getting a lot of attention lately for three reasons although china hasn't reverted to full-scale mao era planning and there are still markets in china for goods services labor credit etc the idea that china was an economy in transition from plan to market is over instead china's leadership has clearly stated they are proud of their model and think it works for them instead we are seeing more in-system innovation with changes to state-owned enterprises within them and around them and the role of the communist party secondly china's economy has continued to grow its high-tech ambitions have expanded and the effect on the rest of the world at a minimum simply out of economic gravity is more pronounced china is shaping the trajectory of industries supply chains innovation uh who wins and who loses around the world secondly it's also having a big effect on international institutions such as the wto the world bank and regional institutions who are sending and enforcing the rules of the game and finally the us and china are locked in a strategic competition there is a clash of systems because china's state capitalist system is not transitioning and the u.s and others are figuring out at least trying how to respond individually and collectively some have talked about outright decoupling so we've heard about partial decoupling small yard high fences big yards high fences diversifying supply chains or in the spirit of if you can't beat them join them the u.s becoming more statist and perhaps we could call it american state capitalism so there's been a lot of attention and ink spilled already on chinese state capitalism but we're still far from confess consensus on the full fact pattern and on the right policy path so today's event is part of our effort at csis to address this need today's event will help set the agenda make sure we're asking the right questions getting some initial answers to those questions then in early march we're hosting a two-day private workshop to dig into these issues in more detail and then in the spring we'll issue a report featuring the ideas first discussed here today and in the workshop we'll have a rollout event for that report as well today's event will proceed in a straightforward manner uh jude blanchett will moderate the first panel on the institutions of state capitalism i'll then moderate a discussion on a result market distortions and finally we'll have closing remarks from jim mcgregor chairman for greater china for apco worldwide he is someone who's spoken written widely on this subject and will tell us where we're going in the right direction or where and if not which direction we should go in so let's turn now to jude and the fantastic four who are joining him on panel number one for their discussion on state capitalist institutions over to you well thank you very much scott um and i agree this is a very important topic and you're right this is a an excellent group of guests we have and in recognition of just how high esteem i hold them i have shaved my head uh only about 45 minutes ago which in the time of covet is the ultimate sign of respect but i i really am thrilled to have uh four four friends and intellectual mentors joining me today i think as we delve it delve into this discussion of trying to understand precisely what has evolved what has changed what has stayed consistent um it is these four individuals who i think are doing some of the most interesting path-breaking work to help us understand this so for the next 45 minutes i'm going to be turning to each of them in sequence to ask a series of questions drawn from much of their recent work and if i could just give them a verbal introduction and going in order that i'll be addressing questions i'm joined by barry naughton the so-called luck chair of chinese international affairs at university of california san diego meg rithmart who's the f warren mcfarlane associate professor of business administration at the harvard business school andrew batson who's china research director at gaffield dragonomics and wendy luder who's the chair of chinese economics and trade at the indiana university's hamilton luger school of global and international studies and so without further ado i want to turn to barry naughton um barry you've been watching the process of china's economic policy uh um and it's it's approached economic development unfold for much of the past four decades of reform and opening um and as i've been reading your work including some of your your recent work that's trying to unpack what's going on here one of the things that strikes me about the c administration or the xi jinping administration's approach to economic policy is it combines elements of both planning and market forces in ways that we haven't seen before and and to me one of the most striking features is the intentionality of how it's guiding economics in in what you call in a recent essay this project of grand steerage which i should plug the our csis podcast pakiology where where we spent a great deal of time talking about this last week um but if before the idea of a broad expansion of china's material base was sufficient for chinese leaders essentially growing the economic pride and dealing with some of the redistributive issues when they can at the margin she seems to be saying it and again i'm borrowing from your your your essay that really it's about steering the economy towards some more defined goals so at a conceptual level i wanted to ask you can you help summarize how beijing views the limits and the role of markets and my immediate follow-up gonna be how are they thinking about planning in a sense what's new and how beijing views these two forces which i think in the the west we often see as standing diametrically opposed to each other and china seems to have a more an increasingly more fusionist approach that's right jude and i think as scott said in his introductory remarks i mean i really feel that the mainstream opinion in beijing is that market institutions work pretty well they're pretty happy with the set that they've got and that their main task now is to is to harness these market institutions toward a set of goals that they see as being increasingly important so i mean in in a way i think you could summarize the attitude this means something like this markets are pretty robust instruments yeah it's true that they're pretty good at servicing a broad array of consumer demand but they're also pretty good at servicing a set of increasingly visionary state objectives especially when the state has lots of resources behind it that can that can flow through uh institutions like government guidance funds the state dominated financial system and restructured state enterprises joint ventures between state enterprises and private enterprises all these instruments they see as being uh pretty well suited to uh fulfill their vision of the future which increasingly is one of technological transformation rebuilding of china and continuing uh ascent of china on the world stage as you were talking one of the things i remember i think it was lingling way i had an article a few years ago and i think it was igong she interviewed and said you know when is china going to let the remnant b freely float and he said something to be effective well the problem with doing that is we don't know where the market equilibrium will end up landing and i thought that was an interesting comment into how into how beijing views the problem of market allocation of resources is when you have defined objectives that you want to achieve allowing essentially a smithy and invisible hand to to guide and shift resources means you don't you don't know where where you're going to end up landing and that and that's a problem um and the surprising thing is the apparent confidence they feel in their ability to steer us toward the future i mean uh you see for instance in the innovation driven development strategy you see them say you know very clearly there's a round of technological revolution it's green ubiquitous intelligent technologies we're going to implement them in the infrastructure that we're building today so it's you know it's it's a degree of confidence about steerage that i think is is very almost inconceivable in an american context we spoke about this on the podcast but i wonder if i can throw in an ad hoc question which is on the drivers of this increasing confidence you you mentioned about steerage a lot of the framing of this outside of china is 2008 global financial crisis it's a kind of a gut punch to the reformers in beijing it diminishes the the esteem that many held here in the united states as well for the ability of of market bait systems to avoid some of these cataclysmic downturns um when you look at this grand steerage projects um what do you see as being some of the significant negative and positive drivers for it if a negative driver is okay that western model doesn't appear to work that well do you see any positive drivers shaping this this view sure i mean i think there's two main positive drivers right the one is that china's traditional growth miracle phase reached an inevitable end around 2010 i mean the massive migration into old style factories and building cities uh that that kept growth at 10 for more than 30 years but it can't last forever so beginning in the 2000s there was a search for where are the new growth drivers going to come from what do we do to keep growth high especially given that we're we're investing enormous amounts so we have the freedom to decide where we're going to invest that and i think the second thing is the conviction that there really is a new technological revolution and uh you hear them say sometimes you know in the 19th century in the early 20th century we miss three or four technological revolutions we're not going to miss this one so those push push them a lot i think i wanted to ask you um i'm going to hold off on one of the questions i was going to ask and bring it around to the end just because i want to make sure we have time to get through but but the question that of course i think lingers on everyone's mind even if they can conceptually understand this new um this this new model that thing is looking to construct is is the darn thing going to work and i think in your in your essay and i'm going to hold this up this the faithful decisions which is just an absolutely excellent excellent overview of many of the opportunities and challenges that beijing will face in the next phase of development you say something to the effect that this is a big gamble um that really xi jinping is going all in on this and if this if the if they end up you know hitting blackjack that many of the issues that that whether that's middle income trap or some of the issues around total factor productivity or or some of the dead issues essentially they can techn technologize their way over or or out of these um but i want to know where you come down on this of of if we were if we were talking in 2035 the year of xi jinping achieving the modern socialist nation vision um how will we be talking about this did this work out did this gamble work out or is this just yet another in a long line of mal investments but on an extraordinary scale that's that's the 64 000 question and nobody knows for sure i think it is a huge gamble but let me try and give a typical economist two-handed answer um i think 2035 we're mostly going to be looking at a technologically sophisticated and very successful china but the main reasons for this have to do with china's existing manufacturing base which is the biggest and most diverse in the world uh huge domestic market and amazing human resources which are being added to you know every month every day uh and so china has lots going for it it's gonna succeed in many of these ventures is the grand steerage project going to work is it going to add anything to that here i'm a little bit more skeptical i think of the steerage is going to is is tends to be a diversion of resources toward the state and the creation of lots of dysfunctional incentives i don't think it's probably going to end up adding much to where china would be anyway but china anyway is going to be something very very formidable so i'm i'm hedging my bets a little bit here but i hope that's a good enough answer well no one would remember what you would say here today one way or the other so you you could have gone all in uh and said it's going to be a disaster or a great success um so meg i want to turn to you now i've asked barry to kind of lay out some of the 35 000 foot elevation but now i want to drill down a little bit we're doing this event on on state capitalism but as wendy has tried me on a few occasions about the limitations of using the freight state capitalism and meg you you have as well i actually want to start out with a a taxonomic question should we be calling this state capitalism and here i'll i want to flag your your really fantastic new uh co-authored working paper where you've got a different name for this which i'll let you unpack but um is this the right word we should be using and and if not what is this um what is this misdiagnosis by calling the state capitalism where is this leading us right sure well thanks for having me it's a privilege to be here with this group of people from whom i've already learned so much in my life um and with you and scott so um uh so the the kind of idea of china's state capitalism i don't want to say it's not state capitalism right because state capitalism we think first of all is an ill-defined term people use it to describe any economy in which there's maybe state ownership including with sovereign wealth funds or national resource companies and it's it's you know it's used to describe democracies like norway and brazil and india as well as autocracies and tends to take on this more um sinister tone right when we think about autocracies but um and we think of state capitalism as look you know the state may own some companies the state main owns some financial resources and it uses that ownership or uses that heavy hand of the state to accomplish certain objectives which have traditionally been developmental objectives so trying to generate economic development the management of national resources or competing in global sectors so unless we have state ownership and state intervention we'll be gobbled up by multinational corporations from the developed world etc so what's different about china um which we argue in in that paper and we call it party state capitalism which is convenient right um is that you know china is an authoritarian regime and so but it's governed by a party state and that has certain organizational features that are important um and you know as you and barry we're talking about this sort of post 2008 post 2010 it's hard to date it and we've had arguments about that but um turn you know back towards embracing the role of the state the logic is really driven by something my co-authors and i argue that is different from those developmental or global competition logics although they're in there right of course this idea of technological competition um you know trying to push a means of growth beyond what's been driving it for the past two 30 years and in 2010 but there's a different set of logics also that's worth paying attention to and those are primarily political right so um you know along with the idea that you know china needs state intervention in order to achieve certain technological goals to compete with the united states that logic is very much driven by risk management both domestically and internationally so looking at international risks such as china's reliance on the us and other other countries for technological supply chains or demand right financial risk so how much can we trust the private sector actually to allocate capital and do so in a way that will ensure financial stability and social stability in china and so what's different about china is the organizational features of the party state itself and i'm happy to say more about that um but also this logic that it's really about politics so um if i get to say briefly you know when i got to harvard business school 10 years ago you know everyone said you know well isn't it just true that if they don't deliver 10 growth you know they can't their regime won't won't stay stable right that's the whole thing and so it used to be this idea that growth that i don't think that was ever correct but used to be this whole idea that economic growth is in service of political stability but now i would say economic interventions are all in service of political stability so politics is definitely the bottom line even if that costs growth in some ways although those things are tied up together yeah thanks and you remind me i do remember that um that which was banging around in the mid to late 2000s i remember it being eight percent but i think we went and then it was eight and then it was six i think we kept lowering the threshold you know china's got to bring in one percent growth or else the whole thing collapses um well you know i i'm packing that a bit more um i i'd be curious the next question i was going to ask you was about the ccp the party integrating into the economy and private sector companies but maybe i'd actually like to ask you um what are the defining features of this party state capitalism obviously it's partly in the name party state but i wonder if could you unpack it at one layer lower what do you see when you look at this system from a comprehensive view sure so um i mean that's really the same question so and or i'll answer it in the same way i would answer it which is you know a lot of the times when we think about state capitalism we think about national champions that are state-owned or sovereign well funds are again these national oil companies things like that and in china for you know for decades it was the private sector versus the state sector and that division i mean which is painfully clear to most people who observe china and especially to policymakers in dc and elsewhere that division is no longer really an appropriate division right for either policy makers or for academics right so we used to think you know and all of the phrases that we use to describe that like the state advances the private retreats right are all about oh where do you move this needle between the private sector and the state sector but now you have really a huge number of interventions from the party state from beijing that are making that um that division less uh appropriate and so you know barry mentioned the government guidance fund so you know this and he's been the one to teach me about this which is that for the first time really we have massive amounts of state capital that's going toward non-state-owned companies right and you see this as part of policy debates everywhere how can we disentangle what's up private you know if the state has one percent two percent 20 30 what makes it a state firm right we can no longer easily answer those questions and that's not it's consistent with state capitalism but it's slightly different um so that kind and then there's the more political role of the party state so we see government officials seconded to all kinds of you know private sector firms including alibaba gili you know all of these things tend to have you know government monitors in the state of shareholder with a lot of firms and you know if i could just say one thing about that which is that's typically um interpreted as evidence that the ccp is behind everything and controlling everything but i really see it as quite different from that i i see it as almost a a a perception of weakness rather than strength right which is it's the party state saying these companies are important and i need my i need a line of sight i need monitoring capacity over firms otherwise i don't trust what they're doing and if you look what happened in china's financial sector for example in the last you know 10 years tremendous growth of corporate debt not just among state-owned firms um you know tremendous moments of financial instability and i think all of that has taught the ccp that it needs more interactions with all kinds of firms in order to make sure that that monitoring capacity and response capacity is there the second feature i would say of what we might think of as party state capitalism um is really and this is i think interesting because um is the the role of campaigns um which is just so important um to how the ccp does everything i mean as many of you have seen you know xi jinping declared victory over poverty very recently is a great op-ed in the financial times about that by kristen looney about how you know that is it's a feature of campaigns so what are campaigns they're mobilizational and you know they tend to accomplish some goals as barry said you know they may accomplish some goals they you know they won't accomplish others but you know they come through all of this propaganda mobilization there's frequently you know huge misallocation of resources so we think about made in china 2025 that's a campaign right and it's executed in certain ways and you have all kinds of mobilization and over investment in something like semiconductors or other sectors right and it's hard to understand that campaign party state style um state intervention outside of the chinese context that's not something we would see in other state capitalist type regimes yeah and i would just flag that for folks who read the party state paper you have a really good graph where you've got two columns essentially showing what elements of state capitalism uh persist and what are new elements it's a very nice visual look i also just want to put a placeholder pin um and i don't want to get an argument in the middle of an event but i would say i i i'm the you know hopefully i think one of the things we could talk about in the march workshop is on this idea of party integration into firms i i 100 agree with you on what the intentionality is on it i think that the two things which persist for me are as you build out institutional du jour capacity for the party to be more embedded in firms a dynamic look about where does that expand to and i would just say with my old consulting hat on we dealt with a bunch of cases where the the party secretary in a firm took like uh took some some license with this new power that that they had to intervene in in operational decisions especially around personnel so even if the intentionality is about minimizing blind spots for the party you've now essentially created an architecture for more party involvement which in a dynamic way i think could be very problematic and the second is um even if it's a defensive posture that this you know the mark wu you know paper on the chinese challenge how are we supposed to deal with this from an institutional and and legal manners so even if we take a more minimalistic view or sort of um a political view of why they're doing this i still think we end up at the same result of what the heck do we do we do about it but um anyway uh um andrew i wanted to talk to you and and meg um and please feel free to weigh in on the ongoing argument of how we should think about how we should think about party sales um um you know meg just name checked the kind of the gojin mintoy you know the state advances the the private sector received which of course was a a big debate in the post 2008-2009 period when we felt like we had clear enough delineations between the two that we could have it taking aside the the um what i think meg points out the really the elements of blurriness which make even just saying uh state versus private it feels to me very much like we are we are in yet another kind of the party state advances the private sector of which there is a real meaningful one in china but that the party sector private sector is being squeezed um i wanted to ask you as a long-time observer of the the size scope scale of the state and the private sector how would you typify where we are is that the right framework to think about um or do we need a new kind of heuristic or intellectual architecture to track these undulations of party state advancing and private private sector retreating yeah it's a fantastic question and it's one that i've been you know i puzzling over for probably at least 10 years and and probably more so i mean the way that i've tried to answer this question um for myself is really to take a quantitative approach um and not so much look at you know the government rhetoric you know what government talks about sos what does government say about sues but to look at the economic reality and say you know what are the what are the numbers showing us uh in terms of the size of the state sector in terms of what they produce uh and what does the private sector produce and i think when i do that it's actually i thought that it would bring a lot of clarity and actually in a way kind of confused the issue even more so i think if you ask is the state sector advancing at the expense of the private sector um you can you you can answer it both ways you could say yes it is and no it isn't um and i promise i'm not trying to cop out of your question so i'm going to explain you know why uh why you can answer it both ways so i think if you you can look at the advance of the state sector and from a couple of angles you can look at it just purely from the chinese domestic perspective like the structure of the china's own economy or you can look at it from the global perspective of china within the context of the whole world and if you look at it domestically the answer is i've come up with pretty straightforward it seems that state and enterprises produce somewhere around 25 30 of the chinese economy and actually that number has not really changed a lot uh over the period of which i've been able to gather data for about 25 years um so really the share of the chinese economic output that's being produced by suvs today under xi jinping is not significantly different than it was under hu jintao and it's not even really that different than it was in the later years of johnson which is even more surprising so in that way i don't i don't think there's a there's been a massive change in the balance of the economy between state-owned enterprises and private enterprises um and i to me that's evidence that there are a lot of continuities between what the xi jinping administration is doing and what previous administrations have done right she of course did not invent the idea that soes are and should be a central part of the economy he hasn't actually you know taken large chunks of the chinese economy away from the private sector and handed them to soes so i think what's kind of changed more under xi is sort of the things that kind of things meg was talking about where there's a change in the relationship between the government and the private sector where the private sector is you know expected to kind of listen more to government guidance and the government has more channels for for influencing how the private sector works um the caveat to all that is that if you look at the trajectory of the development and the development of china state sector in a more global context it's pretty different right so you know obvious fact china's economy has been growing much much faster than the rest of the world for basically the last 20 30 40 years right if the share of state and enterprises and the chinese economy has been basically stable what that means is that soes have been growing just as fast as the rest of the economy right they've been going just as fast as the private sector and so in absolute terms of course china's sov's are massively bigger than they were 10 years ago 20 years ago they're unimaginably larger entities than they were at that time and also they've gotten just a lot lot bigger relative to the rest of the world so let me give you a couple of i have some numbers in my notes here so i think this will help clarify things so in year 2000 china was about three and a half percent of global gdp so today it's roughly like 17 so pretty big increase um so share of china's economy is about the same therefore the share of global gdp that's being produced by china's suvs is also up a lot right so now on my estimates the china's soes are producing about four and a half percent of global gdp that's compared to about one percent back in 2000 and you know four and a half percent maybe doesn't sound like a lot it is a very very large number right the gdp of the uk of france of india is less than four and a half percent of gdp right so from the perspective of those of those of us outside of china right it's obvious that china state sector is advancing right they've gotten much they've gotten much much bigger uh their international activities are much more important and it's they're producing you know very substantial change in the structure of the world economy right so that's one of the reasons i think why you know we're having events like this because you know people are noticing this and and they're reacting to it and that's a you know that's a natural and you know unavoidable result to a change of this magnitude i think that those are astounding um those are astounding statistics but like i was just as i was listening to you talk i was making me think do we at some point need to even though we have a strict definition of a state-owned enterprise as it falls under chinese law um i wonder you know do we think about moving forward especially with you know mixed ownership reform and what you know some of what meg is doing about talking about investments going both ways from state to private and private to state um if we're trying to basically wrap our arms around how big is the state sector is it is it helpful to to stay on with with typical definitions and delineations which allow you to do the comparative work you're doing andrew or do we need to create expanded definitions if what we're really asking outside of specialist literature is how big is the state and its influence over the economic sector and and and the size of state actors soes of course are are one particular actor with a really clear delineation and definition but i think in common parliaments we're we're asking when you say the golden ninth way we probably mean something a little bit larger that this is that's not a question so much as it is um rambling um but but provoked by what you were saying on how important it is to get a accurate designation of how big um the state sector is um funny i'll i'll i won't make you answer that that um nonsensical question but wendy if i can turn it to you um because this is you know soes are what you live in live and breathe um and just reading some of your recent work which you've been kind enough to share you're also really honing in on some evolutions here where you're taking the s in soe but you're now adding a p of of the party which is seeing some um uh you know de joure and de facto changes in terms of how it integrates with leadership with corporate governance um i wanted to you know one of the questions on soes for me is um by definition the first s means they're owned by the state so the what does it matter if the party is increasing its authority within what were already de joure state entities what are the practical and for our audience kind of more strategic impacts of that well even if soes belong to the state it doesn't mean that they always behave how the state wants them to so we have to think back when she came to power many soes just as andrew has just told us especially the largest and most strategically important companies had massively expanded in size and so the state was really struggling to regulate them and corruption was widespread so she's response to this problem as you've just diluted has been to increase party control in soe governance so i want to talk specifically about what does that mean in concrete terms so if we know this how do we go out and observe it in the real world and see it as it's happening now so one of the first indications that this was going to be the case was instead of relying on existing government agencies like the government ownership agency sussex she instead authorized the new central level leading small group for comprehensively deepening reform to be the body that formulated his administration's roadmap for the future sov reform back in 2015. and he's also as we all know launched a major party-led anti-corruption campaign in which smes remain a main focus i've also shown in my research that under xi compared to the previous leader hu jintao soe leaders whose careers are managed by the party have rotated from one soa to another more often and they've also more frequently had joint appointments that combine these managerial and party leadership positions together so board chairman and party secretary for example i would be one of the most common of those types of joint appointments and another way that the ccp has strengthened its control over soes is as jude your team has written about at csis directing them to revise their corporate charters to specify party building requirements and really formalize the party's leadership role in corporate decision making and last but certainly not least the she administration has formalized what has been a longer standing practice of soe party committees discussing so-called major decisions things like corporate strategy budgets senior personnel appointments before they go to the board of directors for final determination so the cumulative result of all of these measures is that party control over soes is significantly stronger now uh under xi and at the risk of provoking more debate i would say that although many including some on this panel may view she's vision for soes as being radically different from his predecessors the chinese leadership's vision for soes has actually been surprisingly consistent if elusive and that is to somehow combine party state control with market competitiveness now on a global scale so in the past chinese leaders like jerome t thought that the best way to achieve this vision was to make soes look more like private companies and it seems hard to believe now but separating the state from companies used to actually be an official goal of reform and this just isn't true for xi jinping so international market competitiveness is still important but he doesn't want soes to behave more like private companies he wants sovs to act more like soes and he views bringing the party back into the state sector as the way to achieve this um i just was thinking i was reading chosen magazine the recent one reproduced a speech from xi jinping that he gave down in it's hobe somewhere but it was just in the recent edition the speech is from 2012 and there's a line in there about something like you know everyone shouts the slogans but very few people actually do it and as you were just talking one day about the the continuities and vision from you know prishi to poshy it does seem that you can really pull the thread on many of the things that xi jinping has been driving and implementing and find really strong antecedents back into previous previous leadership iterations the big difference to me seems to be he's just laser-like focused on implementing where previous general secretaries have either been constrained or didn't have the the sort of the bandwidth or the uh or the alacrity to do because you're right you there's a jung-sum in quote for everything whether that's party building or or you know uh or strengthening chinese you know enterprise on a global scale um and so that that seems to me to be the real significant distinguisher of she wendy if i can just ask a kind of a final practical question and and if you know i know no one on this panel likes crystal balls but um i think what many in dc are trying to and indeed in capitals around the world who are writing laws or regulations to try to make sense of this is um and i think you know meg meg spoke to this um that we shouldn't necessarily think about this as a we're trying to implement a command and control 2.0 where we want the you know the party secretary to be you know down there making enterprise decisions and yet looking at this from you know 30 feet away this looks like this will have especially moving forward some unintended knock-on effects for how private enterprises or soes will behave as you further graft the party onto the the corporate governance structure so as you think forward on this and i think following let's imagine we stay on this trajectory of further strengthening and tightening you know party integration at the corporate governance level how do you think this will fundamentally affect sort of soe commercial behavior and i know you're immediately going to say it depends where what which which company but if you could generalize um are we still going to see this this approach where soes have significant amounts of or have important amounts of autonomy until they don't in beijing decides they're needed for more strategic or or do we see a less daylight increasingly between commercial imperatives of the soe and the the political imperatives of the party well i think it's important to start as a ticking as a baseline what is the official claim for a stronger party oversight and how it might affect some commercial behavior so the official standpoint is that having a stronger role for the party is going to have economic as well as political benefits so the hypothesized logic here is that having these stronger soe party committees the anti-corruption campaign you know all of these mechanisms of increased party control i just mentioned are going to promote accountability and supervision and ultimately improve firm performance while minimizing corruption so yep sounds very good in theory in practice though we're already seeing a lot of the problems with stronger party oversight and you know staying at this more general level jew i think that we could agree you know putting politics over profits in terms of prioritization it has a commercial cost and if we look just at china's domestic reform it's made private sector investors both chinese and foreign less willing to literally buy into the administration's mixed ownership reform and greater party control of soe is thinking now about this outside of china it risks even greater reputational backlash and regulatory scrutiny abroad precisely because it affirms the perception in d.c brussels and other global global capitals that the party is supporting and directing soa activities overseas but you know even if stronger party of soes has these commercial downsides for individual firms or projects and i think we could also agree for the performance of china's overall state sector which as andrew tells us is still a very significant part of the economy this is the trade-off that chinese leaders are willing to make so we always have to remember that political logic not only economic logic is driving how china governs soes and also how the state views their performance we've just got a few minutes left i want to pose a just ask a question if anyone wants to weigh in um quickly on this which is to try to understand the the ripple effects of this party state capitalist model as it as it entrenches you know reforms modifies but but seems to be here to stay we've got some questions coming in that i'm just kind of casting my eye over and combining some of them i think one of them is what are the implications of this c um you know party state capitalism model for for the innovation story um in in china which has been so central to china's rise i don't know if anyone has either a 35 000 foot or a 1 000 foot comment on what are the practical knock-on effects are we still is china still going to be able to have a really vibrant innovative innovation sector um so you know that subsists or below this kind of this more party state model will the two combine will it have no effect is it does anyone have any any thoughts on that very i mean i i think so far my guess would be that all of these chinese industrial policies combined with the intensification of party state monitoring and control probably dampen china's overall innovative capability and innovative thrust i mean you know just take take alibaba as an example i mean here's a super innovative company that obviously is grappling with all kinds of political issues right now however they ultimately come out and you know i think these these are ways for the party to tax the economy and they have costs they have dead weight costs but they do as as wendy ended up saying but they do achieve some of uh the party state's objectives as well so i i see it as being relatively stable but with significant economic cause um thanks barry i i'm gonna i know we're kind of up against time but wendy i want to direct one final question to you if you don't mind giving just a 45 second answer to what is more than a 45 second question um which is on the party building um in um is there any as the party is sort of integrating into soes do you see any difference in party building behavior based on sector or are these more sort of uh blanket exertions by the party state i think the the subtext is are we seeing them focus much more on party building in strategically significant sectors versus let's say you know i don't know entertainment entertainment soes and third tier cities sure well you know my research i look primarily at the central soes that are the largest and most strategically important and you know owned uh by the central government and you know they're they're of course those companies by default there's a bit of a bias in the sample i'm looking at so i'd also defer to andrew for his thoughts on this but i haven't seen a whole lot of sector-specific effects and so in my research for example on those joint appointments of having you know the board chairman also be the party secretary of the firm and this was something i tested and looked at and i just didn't really find any evidence for that but i do feel that part of what i'm telling you is a result of the bias and the fact that i am looking at those large central non-financial soes that are concentrated in heavy industries so andrew might have more nuanced thoughts on the industry focus and party building efforts andrew any you have a few final nuanced thoughts you're looking at me like yeah that's not so much to not so much to be honest um well that's how highly wendy thinks of you you just seem like someone who would have a few additional nuances no she's the act she's the expert on this well yeah well i i'm gonna act on that andrew i won't i won't make you wait go down the road of formulating some nuanced thoughts on the spot um one of the questions we got uh which is which is very opposite says yeah that's great explanation of what's china doing but but what should the u.s do panel one which of course is a very nice segue to this person because i would say the entire function of panel two is to look into what possible responses the u.s and other market economies can implement to be able to address some of these uh challenges but i i want to first thank uh four panelists here um obviously as you can tell we're just um really scratching the surface not only on these topics but also the research that the four scholars here have been doing so recommend folks continue uh go out and find and read the work that they're doing i really want to thank lauren maranto alyssa perez clifton jones everyone at csis who who makes these online events uh seamless uh and and possible so really appreciate all their hard work and with that i will uh unceremoniously turn it over to uh comrade scott kennedy well thank you comrade jude and thank you for all the members of the first panel uh really extremely enlightening and uh if i could scratch the surface on much of my career then that uh i would learn a lot more than i've been doing so it's a terrific uh to take the baton from jude and to now shift the conversation to not what the institutions of state capitalism or party state capitalism look like but what are the effects of those institutions uh and what should we do about it and luckily i'm joined by a great fantastic four in their own right let me briefly introduce each of them then i'm going to ask each of them an introductory question and then i've got a series of follow-ups in which i hope to keep all of them engaged and focused and i know the audience has been sending me questions as well really we couldn't have a better group here this uh this afternoon carolyn bartholomew is chairman of the u.s china economic and security review commission whose job is to watch and keep uh stock of whether or not china is living up to its commitments and often when it's not explaining exactly what it's doing they really are done a fantastic job the last two decades since china joined the wto she's worked at senior levels in the us congress several positions with the house speaker nancy pelosi and in addition to u.s china relations she's an expert on terrorism trade human rights u.s foreign assistance programs appropriations uh the environment uh also joining us is rob atkinson who is president of the information technology and innovation foundation where he leads a prolific team of policy analysts and fellows that is successfully shaping the debate and setting the agenda on a host of critical issues at the intersection of technology innovation and public policy and i really uh have to commend rob on the great work that itif does and yes how prolific they are and really uh bending breaking the curve for the rest of us uh embarrassingly so really fantastic third daniel crosby who is a partner in the international trade practice of king and spalding and manages king and spalding's geneva office he helps sovereign and business clients to achieve practical economic objectives he specializes in trade investment matters related to public international law and anytime i go to geneva meeting with daniel is is top of the agenda is really extremely knowledgeable about the ins and outs of the wto and uh is paid of course paid a lot of attention to china as a result finally arthur krober founding partner and head of research with gaffcal dragonomics we have two folks from gaffcal dragonomics andrew batson in the first panel arthur here we have them appropriately separated so they don't squabble with each other during the afternoon andrew arthur is a great friend and he's in addition to being a founding partner dragonomics is also with the nyu stern school of business it's a non-resident fellow brookings qinghua center in beijing member of the council of foreign relations and of the national committee on u.s china relations so again a fantastic group and it's a real honor to have this conversation with the four of you let me begin our conversation looking at the effects of chinese state capitalism whether it's traditional one or with the growing role of the party in that equation and asks carolyn so you've been with uscc now for uh quite a few years and have followed china even longer in terms of the biggest most dangerous challenges china's state capitalist system presents to the us how things changed over that time and so what were the big challenges you used to be worried about and what are the big ones now and to what extent do you ascribe that shift if you've seen any to xi jinping's rise i think that was part of the conversation we heard in the first panel about how to identify issues of changing continuity in china state capitalism approach and and the sources of those that evolution great thank you very much scott thank you to jude and to csis for for having me on um i'm just going to take the luxury of making a comment about something that was said in the first panel and while everybody's focused on uh party or state or party state in the in the capitalism the state capitalism formation i think that we've probably done a disservice here in the u.s policy debate by not scrutinizing more the fact that we call it capitalism because it allows people here to to be thinking oh this is this is just what we do right this is free markets it's maximizing profit we know that what they're doing is maximizing politics over profits and would just point out um one of the things the commission saw last year was the difference between what the ccp is saying inside china and what it is saying outside china and one of the things that is doing inside china is exhorting the members to be grave diggers of capitalism so i think that we really need to be digging into that more that said that wasn't what you asked me about um uh i would say that that one of the first major challenges i'd highlight over the over the last 20 years is that how much china's economic power has grown um and as it's grown the leverage that it's gotten over its trading partners and i think under xi we've really seen its willingness to exercise that leverage um we see it in using economic coercion um i think that there's a there's a rebirth of this idea of dividing and conquer we see that um in the u.s the eu china trade agreement an investment agreement that's taking place there's this there's a sort of reversion to what we saw a lot of in the 1990s of just dividing and conquering whether that's dividing companies sectors uh or or countries and i think we're seeing more of that under xi again um uh jude i think mentioned the 2008 global financial crisis that certainly has had an impact on the ccp's belief in the rightness of its economic model another thing that i think has changed over the course of the past 20 years is uh through the belt and road initiative then the the exporting of that model of um state-managed economy and authoritarianism i think is a real challenge for the united states and for other uh liberal democracies in the world we have seen um far more uh more acute of china's impact on norms and rules of international trade and i think over the past 20 years we've seen weaknesses in the rules and the mechanisms of of global trade and i think we're going to have to figure out how to address them as we move forward i think another challenge is that we have seen china's pursuit of leadership in standard setting i presume that rob might talk about some of that when it comes to technology right the standards are foundational uh not just for the development of technology but also how it's applied and that has real consequences for us both in terms of innovation in terms of national security um technology right i mean 20 years ago the technologies that we're using even right now didn't exist people didn't people didn't know they didn't think about it the consequences of of them of the use of those technologies both china climbing up the value added chain uh in manufacturing and innovation um the continuing expanding uh problem of theft of intellectual property china's indigenous innovation efforts um right the the national security threats that come along from with a lot of this i would say the techno authoritarianism the implications of cyber ai use of big data again i hope that rob talks about some of these things but surveillance and repression and then moving into things like the expansion of digital currency again these are technologies that didn't exist 20 years ago and they've or they they've been enhanced and here i would specifically mention the national security implications of china's military civil fusion and what that means um combined with pla modernization what that means in terms of challenges we are sorry really seeing um the the interconnectedness interconnectedness of of national security and economic issues i've been thinking a lot about how much of this has changed or or expanded under xi jinping i think that uh certainly the concentration of power that he's done has been unseen in decades but as it's been mentioned before the the programs and policies that china has been pursuing have very deep roots i don't think that if she was there that we should expect that those change very much but i do think that what has changed under him is the shrinking of space inside china not just for dissent but even for disagreement which has real implications for the inability of reformers to do any of the reforms that we think need to be done as well as the structural reforms that they need to be done and that's combined with this increase in sort of bravado and aggression and the outside world that the willingness that them that the ccp is is as i said to use economic coercion this sense that they don't need they don't think that they need to compromise that they can just bully their way into accomplishing what they want to accomplish so i think that those are the trends that xi jinping has really changed and i would add again the global expansion of efforts to increase their influence that's super helpful let me ask you one follow-up before i go on to uh rob and ask him about tech issues and things and i think what we're seeing and what you help us understand is is that trying to come up with the right definition or right term is going to be difficult because in part we're not just talking about economic actors and traditional things but the ccp has lots of different roles and we're talking about the political economies and many different national security etc so um but let me ask about specifically because i know that you all follow um you know chinese industries and state-owned companies and private firms and to what extent have you all seen you know the the party state expand its attention to private companies we've got the case of alibaba and jack ma recently but uh and jen you mentioned this the the narrowing of space uh i call it sort of the harmonization of the private sector uh getting them to to adapt to is is that something that is is important because as as andrew said 30 25 to 30 of gdp is from the state sector which that means 75 to 80 let me do my math right uh 75 70 to 75 is from uh private companies but the party isn't just leaving them alone what do you see in terms of of attention to the private sector that's a good question scott i i think that what what we're seeing is we're seeing i mean i'll do a broad brush and say it's sort of a retreat from from the private sector uh when you look at what's happening with innovation right they've moved they're moving away from sort of um promoting micro entrepreneurs and and moving back into sort of state level innovation that's taking place um but but i think again that sort of the consequences of all of this right so ollie but we have talked over a number of years of whether these private companies are really private companies and and they aren't as the way that we know them the whole fact that the chinese that the ccp can reach into these companies to get them to do what they want means that it's not just the state sector right that is has consequences for us it's also the willingness of the ccp to use what is the purported private sector there that has consequences for us so you you see that you can see that in some of these belton road um investments that are taking place but i can't look at alibaba and think well boy that's a private company and therefore it's okay to be dealing with them and boy the chinese government would never go to them and say turn over your data to us i mean that's just it's just not a realistic view of what it is that's taking place so i understand this distinction between state-owned enterprises and non-state-owned enterprises but i think we have to really acknowledge the role that the party plays in in directing or or controlling or managing the private companies when they find it's that in their interest to do so yeah um thanks a lot let me turn to rob now uh rob atkinson um to talk about tech um and you know a lot of folks including myself and others in washington are looking at and one of the great strengths of what you all do is you all do a lot of math you actually calculate and look at what's going on in in detail and so talk to us a little bit about how china's high-tech drive has created distortions and advanced technology sectors um can we put numbers on what these effects have been if possible what if we can't do it now what would be the pathway to understand the consequences and conversely in in addition to maybe pointing to some of perhaps the negative effects are there any positive spillover effects from a state capitalist and i know i have to use capitalists and quotes because carolyn is is watching uh is there any positive spillovers from china's intensive investment in high-tech sectors sure all right well thank you scott uh it's really a pleasure to be here with all my other panelists let me start by saying i've listened to the other panel as well and and one of the ways i think to think about this is you have to ask the right question and then one of the key questions is what they're doing good and and the standard sort of neoclassical response is well what is good the the standard yardstick is are they maximizing what's called allocation efficiency or total factor productivity uh clearly if that's the yardstick then china is completely screwing up because they're not doing either of those things total factor productivity performance has been quite bad they're wasting enormous tens hundreds of billions of dollars so okay well maybe the next level up is it good for china's gdp growth probably not i can think of lots of other ways to maximize china gdp growth and you know blowing a half a trillion dollars every four or five years on this technology stuff so i don't think those are the right questions the right question is what is the effect of these policies on chinese technology industries what's the effect on u.s advanced technology industries and what's the effect on the pace of global innovation to use an orville shell term the chinese aren't doing this for wealth they're doing it for power and i think that's really what we have to look at here and so um why is that meaningful because i think again one of the problems economists make is one of the problems they have is sometimes they assume that all industries are more or less alike and innovation-based industries really function quite differently than than so you know a widget industry uh number one they have very high fixed cost and very large low marginal costs so you think about a company like boeing for them to sell the 787 dreamliner they spent billions and billions of dollars designing it making the tooling all of that they have to get that back in every plane sending semiconductors software new drugs very high fixed costs very low relatively low marginal cost that means that you maximize innovation in that industry by having the largest possible markets because what happens at the next step is every dollar of sales you get because it's higher profits than the dollar before these companies pour that back into r d semiconductors and biopharma for example about 20 going into r d the r d to sales ratio in semiconductors for example sorry the correlation between sales for semiconductors and r d the next year is about 0.9 for drugs it's about 0.96 in other words the more money they can make the more they're going to invest in r d and the last point of that is really what you could call this sort of superterry and model of innovation of competition in other words there's a lot of superitarian scholars if you will who argue that the relationship between competition and innovation is u-shaped if you have markets with too little innovate too little competition you get monopoly and no competition markets with way too much competition you can't make any money you don't innovate so there's a nice sweet spot in the u what our argument is is the chinese have distorted that u-curve moved it way over to the left meant too much competition and too little profits and less innovation so i'll give you a couple of quick examples first of all one we did a literature review last year in january really reviewing virtually every study academic study on the effect of chinese policies on r d and innovation around the world and virtually every study showed it was negative there was one study that showed it in europe it was positive but that study was later uh i think fairly convincingly attacked and rebutted by another study that showed that their methodology was mistaken and flawed um since then we've done a series of case studies i'll give you an example on solar so chinese market share in solar went up from you know almost zero in 2006 to 60 of the global market in 2013 and yet over that entire period the chinese received four percent of patents this chinese solar company are simply not innovative they're copiers they're copiers of uh poly uh the the you know the um you know the regular sort of standard and uh uh solar panel technology uh when you look at triadic patterns global triadic patents in that industry they peaked in 2010 and at 400 a year they're down to 60 a year and so what's happened is the chinese have taken over that market 100 percent due to subsidies they just massively subsidized their production and they put out a business a large number of innovative companies europe european american in particular many of those who were working on next generation solar like thin films thin film gender innovation is i will say dried up but it's certainly reduced you see that same thing in in 5g equipment um there would simply be no huawei and uh and zte without the chinese government even even mr ren said that a few years ago 20 years ago we did a big study on that we looked at that the foreign companies would have been able to take that market even today the foreign companies like um ericsson and um and nokia per dollar of sales they're more innovative they do more r d they do more patenting and most significantly they are much more uh they have much more provision of standard patent standards excuse me in the global standards bodies so what's happened is huawei and zte have taken their market share and as a result there is uh there is less r d there we um we estimated that there's 20 percent less global r d uh in the in the industry now because of huawei and zte uh 75 percent fewer essential 5g patents you see the same thing in semiconductors we have a report coming out on monday that stephen asel has done um chinese semiconductors simply don't patent very much they're again they're not innovators they're copiers oftentimes with stolen intellectual property from companies like micron or forced tech transfer intellectual property and they just lard on a large amount of subsidies so for example again we estimated just looking at patent rates um that if you took away 75 percent of the chinese semiconductor market which is pretty probably what you'd get if you didn't have chinese policies probably even less there'd be 500 more patents a year so this close by saying are there any positive effects of that i would say probably not but the one area where you could see positive effects and that is in more in process technology so they're not i think they have an overall negative effect on product technology but because they've scaled up so much in so many different industries we're going to see it in robotics we'll see it in vehicles um they have innovated in process just because they've built giant factories they've used that to drive down uh some costs so perhaps in process innovation the chinese policies have helped but in product innovation i believe they've been detrimental um that's extremely helpful and very clear and robust big framework and specific examples in addition to those sectors that you've just pointed to if we keep the same trajectory whether it's these sectors or others look out five ten years what's the world of technology innovation look like because of of china's approach yeah so i wrote a piece recently about i don't know six eight months ago in a journal called the journal of american affairs it was called who lost lucent and talked about why we lost in 2000 the u.s had you know the dominance in the global uh telecom equipment market we had lucid we had nortel nortel's canadian most of their jobs were in the us by 2008 we had zero um and the answer was we lost lucid for a lot of different reasons some anti-trust failures some regulatory failures but a lot of it was china so so now we no longer have lucid nobody cared at the time it was like oh yeah just you know it happens i think potentially in ten years you're gonna see i'm not i'm not predicting this but part of it depends upon what we do vis-a-vis china part of it depends on what we do in domestic policy part of it depends on what our corporate sector does but i could see a significantly smaller intel for example i could see a significantly smaller boeing for example if you just look at the recent study a recent article might have been southeast economic or um camerawares might have been reuters supposedly comac has already taken over 80 plane sails away from airbus and boeing comac has a potential of 737 equivalent 100 percent gear 100 funded by the state um not a very good plane but when you when all of your plane buyers are state-owned enterprises that you you you do what the master tells you and you buy those planes so i think you can see that um i think we'll see it potentially a big uh issue with electric vehicles the chinese are ahead now for in some cases good reasons they really push dvs more than we have and that's to their credit but they've done it on forced tech transfer and massive subsidies um i think the other next other big area we're going to see which we haven't really talked too much about is biopharma chinese are really really doubling down on on large molecule um biotechnology particularly genomic drugs and they're making some progress there but again making the progress on very very weak patent laws that allow the chinese companies to take foreign company ip um subsidies and a whole lot of other things so i i i'm kind of pessimistic scott i guess i'd say unless we have our own you know real robust policies here in the us i think i think we could see you know decline in market share globally in in a lot of major sectors uh i'm not saying the whole sky is going to fall but i think it's going to be tough sledding well uh thank you for that and the whole purpose of our project is so that we have uh robust policies that address these kinds of challenges and we're trying to define what the the problem is and and how to move forward and and so hopefully we'll we'll get uh an outcome that's a little bit more on the sunnier side if we can let me turn to daniel now to ask about the uh multilateral from the multilateral perspective you know when china joined the wto uh its accession protocol was 4 thousand plus pages maybe five thousand plus i forget uh and it required china to make thousands of changes to economic governance and as a wto member china has been a respondent in about 34 wto cases far fewer than the u.s and according to china when it's lost it's adjusted its domestic regulations to come into compliance so here's my question if china appears to be technically in compliance why should we view its system as such a major threat to the wto and the multilateral trading system how do these dangers exhibit themselves in your neighborhood and as i asked carolyn what was there a key turning point when it when china's involvement went in a much darker direction for you from from your vantage point thanks for that thanks for the question and uh thanks for the invitation as well so um following up on what the first panel said as well i like to say that my prognosis or analysis of based on that question and further systemic challenges was uh was pretty dark before starting but that was further compounded by some of the feedback on the first panel and of particular relevance to the trade angle is the uh reversion of soes even though they might stay the same size and have the same contribution to the economy in china when they act more like the state that's really the only issue that matters for wto purposes a lot of governments especially after the second world war under the gat a lot of them had uh state-owned enterprises and the only issue is uh what how the government influences uh the activities of those state-owned and enterprises um and the second issue is the blurring of the the line between state and private intervention generally and i know there that the wto has has rules about state-owned enterprises and and government intervention in state-owned enterprises there are no rules on state intervention in private companies as a direct positive rule there are other rules and principles that could be extrapolated but no one ever thought that that a government uh was going to intervene uh in the private sector the way china is doing so uh with that kind of feedback on the first panel as a launch into the first question i'd say first of all uh from just a purely legal perspective uh even during china's kind of post-accession honeymoon for a decade there when folks were still optimistic or some people were optimistic uh that it would continue its transition and evolution towards a market-oriented economy uh and its wto dispute uh compliance record was was really mixed and that that's not unusual but but for china to claim that it's got some you know great record it is not it's not really true because some of the clear kind of tax and more straightforward violations were brought into compliance with wto rules but the really commercially meaningful uh projects for for china of state directed uh development and politically difficult uh cases like control of information and the kind of uh issues like that that that have a state effect uh were fudged the the the compliance was fudged to the extent that uh you know the compliance was based on a legislative tweak or a negotiation without really properly amending the relevant laws and practices but uh i have to say uh the what i consider to be the the big issue is not you know what china has done with these cases that have been litigated at the wto that those can be managed with additional litigation under existing rules what we call compliance proceedings there's been talk about a non-violation case even under wgo rules there's there's political peer pressure uh in geneva which has been happening and you can even have new rules negotiated which is kind of in the mix now but the the real challenge of these legal technicalities pales in comparison to the real systemic threat raised by general secretary she's an overt proposal that his kind of socialist market economy with chinese characteristics for all of you follow that kind of stuff that that should serve as a systemic alternative to the existing kind of rules-based international order and i think that is what has been uh proposed uh by uh the general secretary and and i'll kind of hit on that a little bit now but first the the defining characteristic i think that the first panel went through of that new kind of alternative system it that characteristic is the main threat to the wto and that is economic direction by the state and by the ccp and the implementation of the state's plans and industrial strategy in place of market orientation and rules-based trade on which the wgo has always been based and so looking back you know the the wgo system and the gap before it have always accommodated a broad range of economic systems and there was more socialist europe and more capitalist north america in a way but that system also excluded for 50 years those systems where the state economic intervention was too prevalent and so it it couldn't interact with market-oriented systems so in order for the wto trading system to function at its most fundamental level the w2 members really have to be committed to the basic premise that the market should allocate resources i think as other panelists have have said uh you know except in accordance with some agreed rules you know we have you know not free markets we have tariffs we have certain uh agreements to limit uh mark market activity but always subject to transparency and this rule of law uh concept um that uh seemed to be kind of 1989 kind of end of history everybody's going to get there and we all kind of trusted that china is going to come out somewhere along those lines and even with that i'm not suggesting that one size fits all economically or that all countries should follow the market-oriented approach or even that the wto should aim for a universal membership but we do have to recognize from the geneva kind of wgo systemic standpoint that our existing multilateral trading system can only accommodate members who agree to converge into this fundamentally market-oriented system so my bottom line there is that the wto can't co-exist with china's systemic alternative which it's now pretty forcefully put out there uh because you can't tell the difference between the state and the market and if china decides to develop that alternative system then an alternative multilateral project can and i think should be devised to interface with the characteristics that china has chosen for its economy we're nowhere near that i think the phase one agreement for the united states tried to go in that uh direction but in a unilateral way that uh seems to uh need to be recalibrated to have a multilateral effect anyway but uh but this is not about decoupling uh from china i'm not suggesting that in any way rather about establishing some workable rule to guarantee reciprocal trade benefits where the market is not in charge and i think that's when we have to kind of recalibrate things based on china's direction she is in place for a long time they are going in a direction that's not consistent with the existing rules and it's fundamentally incompatible with this rules-based uh system and i think the biggest threat to answer your question is this false coexistence uh which which i think the narrative is out there now that we're really just the same and capitalism and this kind of private sector that we say exists is is all out there and that's all a cover for this kind of um political uh and power uh system that that's not based on those rules sure sure uh danny let me ask you one follow-up to that very clear answer and i really appreciate you fit a lot in there which is i i know that you just described this overall package of a system that has components to it that in some ways make it a whole that is not easily divided into certain segments but is there something in particular that is the most damaging or problematic that if that were the issue were tackled the integration problems that we see might be more manageable let me just say for example perhaps is it state funding or you know the level of of credit uh that companies in china receive uh or is it barriers to market access in china uh or something or is or am i just you know taking things in the wrong direction and really it's just structural systemic and there's nothing you can do even if you change one because there's all these other elements uh so i i actually i think the way that at least my interpretation of where china is taking its system right now there's not a lot we can do but but if they wanted to because i i don't think that they want to to disconnect their body politic from their economy and and and that's the fundamental problem so it it to to answer your question though uh you know when china joined the wto they they had to commit that their state-owned enterprises would not interfere with the commercial decisions of state-owned enterprises or state invested and enterprises and everything we heard on the first panel was that china is uh interfering uh in in a way that that is you know economically inefficient and and all these things but the whole idea of steerage and government guidance and all these things is is a direct contradiction of what they agreed and black letter uh obligations when they joined the wgo so they at least have to get back to proving somehow and and that's where i think it's not possible how do you prove that you're not whispering to your state-owned enterprise when we all know that that the state has has taken the reins back and said we don't even want you to pretend that you're acting like a private company we actually want you to act like a state and and that is contrary to the the black letter commitment that they made when they joined the wgo i guess the changes before a couple of years ago these kind of what we deal with in geneva is what we call measures and there was no measure that you could identify as a as a as problematic directly challengeable but right now you have you know this kind of placement of you know state communist party cells in not only soes but private companies i mean that that kind of stuff is is it provides a a new angle for addressing some of these issues uh through litigation which i can't believe you're gonna win or china is gonna change but but at least it's a direction to show that there is no market-based uh alternative to interact with with with china and we have to come up with some other kind of better way to accommodate uh their choice uh to pursue this different system but i i would add one one or two other things scott uh to to that list that that when you ask the one thing i would always say that whatever that one thing is whether it's state-owned enterprises or subsidies as you mentioned funding uh it always comes with yes we have to address those things but it's irrelevant without transparency disciplines and that's what i mean about rule of law and all the other things which are also black letter concepts since 1947 when the gap was founded everybody had to follow transparency judicial independence all these kind of basic rule of law concepts which we all know don't exist in china so if you enter into a new subsidies discipline or funding discipline but there's no way that you can confirm what's actually going on because there's there's no transparency inherent in that system of authoritarianism and an opaque operation generally or even kind of regulation by whispers it just i i don't see how how you're going to achieve a real change without getting both the substantive uh commitment to operate independently of the government or not to provide subsidies or where you do to make them public and transparent so so there's never a single thing that you can do there always has to be a kind of package uh but i mentioned two other just one line things uh and further uh to what rob mentioned on the tech stuff treating data and the movement of information as a national security risk i mean our lifeblood of our economy is all based on the movement of information and data and they call that a national security risk which for them it might be because of the way they that they operate their their system but that has an economic effect on the united states i listed industrial espionage but also i think what carolyn mentioned earlier this kind of fear of retaliation and retribution for kind of speaking your mind in public you know raising issues that don't fit the narrative you know appearing unfriendly all those things kind of uh really don't fit with the the the rules based kind of open economic system that that we all thought china uh signed up to so i think this kind of forum kind of more work being done based on actual information uh from china experts to to kind of put into the context of the the wto rules and principles and and and not addressing so much commercial cases like all the disputes you mentioned scott in the beginning those are all kind of commercial cases for a company or an industry or the agricultural sector but what we really need is cases that are systemic cases that you're not going to get a lot of applause from an industry but why don't we challenge you know transparency issues why don't we challenge general sov operation why don't we challenge judicial independence uh the only recourse in china is to the government through an international case because the courts are in independent and that has an economic effect and an economic value that we're not benefiting from but the china benefits from in the united states as we see from tick tock and all these other things going on sure so i'll stop there and let you that's very helpful very helpful uh you haven't made me more optimistic uh if i can tell you that uh and neither is carolyn or rob as well but i'm gonna turn now to arthur and see maybe if he might be able to uh give us a little bit of of historical development not just with china but in comparison to others and see if there's a way that we might be able to figure out how to manage this uh great uh economy political economy um and how far are what kind of adjustments we might need to make do we have to go to the full systemic type of adjustments that daniel discussed or are there other things that we might be able to do short of that so arthur i'm hoping that you could give us some historical perspective you know many of the worries expressed about china were previously expressed about japan in the 1970s and 80s and then japan appeared to liberalize its economy at least there's not as many wto cases against japan now is is that the larger trajectory china is moving on that same path um and secondly uh and we're just we're just not quite there yet just we'll uh get a few more uh a little bit more debt in china and they will realize uh the errors of their ways and and start to shift or united concerted pressure from the uh from the rest of the world and then they'll adjust secondly i just want to go back to the same question that i asked rob about costs and benefits are what are the do you have the same weighting of externalities and costs that china's system imposes on the rest of the world intent in terms of innovation etc or do you see any potential benefits um you know how should we judge this at the end of the day in terms of commercial consequences okay well i would i would definitely like to uh throw a ray of sunshine into this panel but um the um and in some ways i think i have a more i don't have quite as dire of you um as some of the other members of this panel but on your first question i think the answer you know is china just replicating some earlier trajectory of japan and we just kind of have to wait it out and i think the answer is pretty clearly no um there are a couple reasons for that one is first of all as as has been pointed out the the chinese system is completely different you have a an authoritarian political system that is deeply intertwined with the uh largest companies uh and it's becoming more so uh second of all and i think this is really the the more critical thing china is an independent geopolitical actor which japan never was and the third i think the issue was that not that japan liberalized in the 1990s but their economy basically hit a major roadblock which they mishandled and as a result they just became much less significant because they stopped growing relative to the rest of the world and at the end of the day they were they were the us had quite a bit of leverage over them because they were you know part of the u.s security alliance right um so china really the conditions in china are utterly different on all of those things and i would add one more which is that you know i think another perspective you could take and that i sometimes hear is well china's state capitalist or soe system is is so inefficient and imposes such costs that eventually it's going to break down right and so we don't want to be sanguine about it in the short run but in the long run uh it will just stop working because it can't work um and i'm also very skeptical of that view i mean and certainly if you go to china today there is no lack of confidence in the system in fact i think confidence in the system that they have is at an all-time high is you know in the 30 years that i've been looking at china and on that i think it's worth pointing out and sort of this is the kind of the basic view that i have vis-a-vis what should u.s policy be i think one of the issues is that there are a lot of aspects of the chinese state capitalist model that we might not like uh and have you know i think for good reasons for not liking the difficulty is that it works quite well right it has generated very high growth um over a very long period of time it has adapted successfully to a wide range of uh situations as andrew's research has pointed out in fact the state role in the economy has been pretty much constant over the last 25 years so it's not like it's they succeeded as long as they were reducing the state role and now that they're increasing the state role supposedly things will get worse no in fact the state role has been relatively constant throughout the whole time and they've weathered quite a few crises and in particular they've weathered the global financial crisis and the coveted crisis in some ways uh a lot better um than advanced economies and they seem to have a pretty good mechanism for achieving economic gains and i would just conclude on this by sort of making reference to rob's point about what are the right questions to be asked and to me the the criterion of success of the chinese economy is not that it is the most efficient way to do something not that it necessarily maximizes uh growth but it is very good at producing very large sustained gains in broad welfare that are reasonably well distributed throughout society alongside a lot of technological progress which is i think what we all want um and my bet uh with barry would be that you know if we come back in 15 years china will have seen a lot of progress on all of these dimensions we have to take it seriously and i think just to conclude i don't think that we have a lot of ability because the system works pretty well within china um i don't think that there is much ability for outside actors to try and force major structural changes within china on the grounds that oh this will be better for you if you do it some other way because the view is clearly this is working quite well for us given that and it's extremely helpful and given what daniel just said uh and what carolyn and rob said if if it works reasonably well it's not gonna crater on its own um do we need a daniel-like full systemic like re uh organization of how the rest of the world interacts with china uh because the lack of transparency uh lack limits to rule of law negative consequences for uh rest the other parts of the innovation supply chain etc just from from your perspective and then i want to go back and get uh carol and rob and daniel to weigh in before i hand things back to jude yeah so just a couple of comments and i would say i mean the the conversation here has been incredibly rich and i have like a notebook full of uh things that i've written down that i could comment on uh so i'm looking forward to the workshop on this but um yeah i think um the the priorities i would give are that you certainly for the united states and i think to a degree for europe the reality is that it's a lot easier to invest in and strengthen your domestic system than to try and gain consent among you know dozens of other parties about rewriting rules so in terms of the policy priorities i think most of the basically my view would be china is reality it has certain impacts i think we need to be discriminating about the specific kinds of harm that china imposes or the or the specific effects that it has and where those come from and because some of those are related to the state capitalist structure some of them are related to the authority and nature of the government some of them are uh related the fact that china is a really big economically powerful country and if it had any other political or economic system it would probably try to throw its weight around in similar ways just as the united states does in ways they're not really all that rules based so i think we number one need to be discriminating about the specific um challenges or harms that we are responding to number two focus mainly on strengthening the domestic resilience of our own individual country systems uh particularly in the united states and you know frankly i think this in the economic sphere uh means that we need to do more industrial policy with the united states i have no problem with that and i think the objections that are purely ideological and not really empirically based and then to the degree possible to work um you know within the the on either a plural lateral basis or a multilateral basis to create systems that are more resistant to the particular challenges that china faces i mean it's an it's a it's an old saw and a hairy hory chestnup at this point but tpp was clearly an example of an effort to do that i think it's a real shame that that was um uh that that was abandoned but things of that nature should be done secondary to the sort of domestic self-strengthening finally i have to say listening to daniel it sounds like you've outlined a pretty strong case for a nullification impairment case against china and the wto and um you know a question for him i guess would be why didn't why isn't that just part of the toolkit if if china is fundamentally incompatible with the rules of that system and if they've in fact broken uh key commitments that they made on entering uh maybe they should just be kicked out i'm not advocating that but i think the problem is you know what's being described is it's very difficult to rearrange the rules to make things work uh you may just have to create different groups well i want to get thank you for that good answer i want to uh allow uh carol and rob and daniel to respond just for uh 45 seconds max each i know that's not enough time it's totally unfair uh and you should sue me for trade violation as a result but can i get your on on the remedy the prescription of what to do your sense of of of focusing on the china challenge uh building at home and what's what's what's your mix of of of things to do carolyn yes well i would i think arthur did a good job of of laying out sort of the the universe of things that we need to do i don't think scott that there's going to be one answer i mean i think daniel was great in in terms of what needs to be done at wto which is a great road map right there for that but i i mean it's a it's a complex problem that we're facing right if it wasn't complex we would have solved it already which means we need a multi-faceted solution to it we have a lot of things we need to do back here at home we have a lot of alliances that we need to rebuild we have to figure out ways to to to build those alliances in ways that that target the issues that we need to try to get at and and you know i don't i don't have any magic a key to how to do all of this but i think that there's just a lot of work on a lot of different fronts that we need to do in order to address this and uh arthur i was just struck when you said it's working well right what they're doing is working well it's what they're doing is working well for them the question is how do we make sure that what they're doing or how we all respond is something that works well for us and it's not just us it's it's for other countries in in the in the world would foot stop that again oftentimes when i talk to chinese they say how well it's working and they don't even worry that it's not that's having enough negative effect on anybody else so they say well we're 30 of global gdp growth so of course it must be working well for everybody but that's obviously not the right answer rob what's your thoughts about this again if this were a regression model then one of one of the variables would be is it working relative to what uh you know yeah you're trying to i i would expect you to be growing at six percent a year unless something's fundamentally wrong with what you're doing it's easy to grow at that level because you're a big giant developing country that everybody wants to invest the question is is it working in in in the best sense of the term and i don't think it is but i would go to uh daniel's part i think we just realized look the wto is not working it just cannot work as structured it just cannot let's just accept that so then what do we do i i would say if i have 100 units to bet i'm going to put maybe 25 on constraining the chinese particularly punishing them for some of their more egregious behaviors that hurt our firms in an unfair way and then i would really put 75 percent on having a real industrial policy i mean i'm going to start using that term just because it makes people mad i mean i'm sorry we have to have an industrial policy now it's not you know going back to the 70s and looking at textiles and steel but you know an advanced industry strategy that's thoughtful that's focused on how do we get firms in the u.s to be able to be stronger technology leaders globally i think we should be putting a lot of our effort there because i think the other part is going to be hard to do that's very helpful and of course i think what you're also suggesting implicitly is that even if the us adopts industrial policy uh it's not american state capitalism that we still need the rule of law transparency uh and many other things to to make it efficient because we don't want to uh have the problems that the chinese uh have as well of course just super great the guy i respect the most on this by far is an economist named richard lipsy at university of british columbia and he and uh ken carla have a new piece that came out it's on um it's it's you can get it i'll send it to you scott it's a definitive piece on how countries have used legitimate industrial policy if you will or tech policy to go with the market to support firms not to replace it in a way that advances innovation and tech competitiveness and that's what we should be doing no but nobody in their right mind is talking about stalinist gas plan or you know turning over these companies into soes yeah well i can hear who she jin from global times watching and tweeting about this event right now dan crosby last word 20 seconds okay 30 seconds so i first of all i don't think anything about this discussion uh should be taken as as dire i think it's just a fact that china's decided to go in a certain direction uh i don't think any economist or anybody on the first panel would disagree that that what's going on is a reversion to state uh intervention and and that that's incompatible with basic kind of market precepts of letting the market work and allocate resources versus letting the state intervene uh to arthur's question uh about timing and why there's been no case on this as i tried to mention i think this is all from like 2017 until now um is the first time you've had any what we call measures any public uh writings or acknowledgement from the chinese that they're actually doing this now that writing is on the wall and on paper and i think that's uh it's going to be challenged the previous administration in the united states was not interested in using the wto to solve problems as you probably saw uh they did that through their phase one agreement uh and now i believe we're going to go back to the wto not as a non-violation case these are black letter direct violations of chinese commitments which is very different from a non-violation case which i think should be taken separately on all these issues that are not written down and they're just kind of precepts and and fundamental principles that china should also be challenged on but where it says china has to have judicial independence full stop china has to be transparent full stop all those black letter undertakings should be enforced and valued and retaliated against in the form of no trade with the united states until they change as an incentive for for them to to change and to balance out the level playing field daniel uh rob carolyn arthur thank you all so much for uh your thoughts um apologies to jude jim um but uh as you can see we had a vigorous discussion building a lot on what happened in the first panel gonna turn things back now to jude and to jim to pull everything together uh with them in charge i'm at ease uh jude over to you um whenever people quote uh mao zedong saying that to hogwa fung i i never rest at ease because we know what happened to hogwa fung so um but uh yeah thank you scott that was a great a really really fantastic discussion and i think i want to now pivot to to jim to help um i was going to say pull this all together but that's an unfair expectation jim but i i as someone who has spent an extraordinary amount of time on the ground in china talking to lots of chinese companies yourself a scholar and analyst of chinese state capitalism just as an initial threshold question i wanted to get any takeaways you had from the discussion but i think especially how does this compare to your on the ground experience and as you talk to lots of companies both foreign and chinese um how is what we've spoken about over the past hour and 45 minutes um overlapping with or diverging from some of the discussions that you're a part of well thanks jude um no i'll do my best to answer that question but you know i've got a pile of notes in front of me that i did before this and uh that i did during this so let me let me um step back a minute before i get to that you know let's look at where all this came from where did state enterprise came come from they came from the self-strengthening movement after the opium wars when they decided they had to have some some some modern industrial companies in order to compete with the world then we have mao taking over and he's got 10 000 russian advisers and 40 000 russians that go and and study in russia and they come back and they build a system modeled on the soviets um it's always been the commanding heights of the economy are going to be run by the state um private enterprise is merely a lubricant to make things work better and i i don't think we should forget that that is the way the party the party still looks at it and why would you do that i mean it's it's about it's about power um as as rob was saying but it's also about control i mean let's remember when boshilai when boshilai was um was ousted and and put in jail the people of chongqing were um were outraged that this had been uh you know there'd been a coup on the the guy who had gotten so much money out of this central government he gave them pretty good life um what did what did china do uh you know vice premier zhang dejong went down to chongqing to smooth things over and what did he do he he announced 350 billion rmb of 550 billion uh us dollars worth of contracts with soes to invest in chongqing twelve thousand dollars per chongqing resident they want to be able to continue to do that they you know if you have private enterprises and money's flowing around from different companies you you don't have have the control um look where where did say sac come from they watch the soviets they watch the oligarchs scoop up all the aspects of of of russia so they decided the party would be the oligarch and they would form sasak and they would get control of these things but then you had jurongji who comes in and does these reforms you know he's getting holding on to the big and getting rid of the small well there was 117 000 small soes that were scattered out there into the uh into the business ecosystem at the same time you had all these these um these uh village enterprises that were they were they were die home mouza they were red hats these were companies started in the 90s where they were basically uh no jesus private companies that put themselves under a branch of government because they needed that for protection and all of those things still exist where do they fit in i remember being in non-tong a few years ago visiting a a bus company and um it was uh it had been started by a private entrepreneur who put on a red hat went under the government built this great company he drops dead what happens does his family have any piece of that company no they're they're vanquished and the state now has that company so i think what's going on is not is not so different i do wonder about you know um andrew talking about 4.5 cents of global gdp comes out of the out of soes but let's look back let's remember back to the last internal report done in china uni rule did their report in 2011 showing that yeah these things were big and they were powerful and if you took away their subsidies they all lose money you know is that is that still the case or not i i don't know um wto i did a pretty good study of the wto a few years ago in china the wto to china is like a sino-foreign joint venture where you you you basically can um if the rules work for you you go with it if they don't work for you they they they don't exist and so after they were in the wto a while china looked around and said well we'd like to renew renegotiate this deal but of course we can't do that so we're going to ignore the parts we don't like and and go with the parts that work for us and then on top of that you have the whole tony soprano thing where companies are scared to death of china on the chinese government i mean i've had clients that would not go into the us trade representatives office in in washington out of fear that a chinese diplomat may see them think they're involved in helping uh usgr with trade now whether that's a well-founded fear or not and you know that that's that's definitely a fear they have you know we gave up the use of 301s um once um you know after the uruguay round really when we when we got into the wto trump has revised you know revive that i will we continue to use that those are not um um i don't know um i think what arthur said uh appealed to me um on you know what do you do with a wto do you form a different section for china you know remember when you first went to china in the 80s you know you'd go to a restaurant there'd be a foreigners room maybe wto needs a room for non-market economies um that that's a separate room and treat it differently because china's so great at getting us caught in our they're about process we're about process they're about outcomes and so they get us all tied up in our in our legalities i mean jude you had a report i read the top 100 chinese soe conglomerates have 1.5 million companies under them okay so you've got a wto case and you've got to do a discovery to find out you'll get all the details on on on so you can make your legal case well you can't do that in an opaque system so we get tied up in knots of our own legalities of our system where china can just power right through on on what you know on what they want to do competition is the only way that we can survive this um i do think that when well let me step back we live by china's rules in china every company changes the way it does things and governments change the way they do things in china okay when china leaves china they should not be able to play by china rules they should play by our rules and we have to figure out a way to do that without it just getting so tied up on in laws and using our own courts and our own law and our own laws against us competition there is a big opportunity right now if mitch mcconnell decides that he would like to do something for the united states other than destroy biden's presidency you got rubio you got cruz you've got holly you've got corn in these conservative republicans all with very strong industrial policy bills it looks like made in america 2025. it's on chips it's on quantum computing it's all the things that china's investing in marco rubio talks about we've got to give up free market fundamentalism we need 21st century um you know we need 21st century uh industrial policies and you know bear you know barry was talking about the grand steerage project we had a grand steerage project we've had a few of them one was 1791 with alexander hamilton when he put in um all kinds of protections for the us economy um and the other one was world war ii um you know with with the war production board when a series executive basically ran the entire economy and all the businesses that's what that's what china's doing now we have to we have to get back in and compete and i tell you biden's policies that he's had in his campaign are very close to what um has been put out also by menendez and also by schumer we have a chance now where congress and the white house can come together and we can wake up and grow up and compete i mean we've been we haven't been investing in r d we haven't been missing an s t completely screwed up our immigration system scam we're now scaring talent out of this country um you know biden is talking about something that's been talked about 20 years somebody that gets a phd in the hard sciences staple the green card to their you know to their diploma um with that ranting and raving i'll take a question or two well i knew uh i told scott i said the problem with getting jim on is it's just like pulling teeth to get an opinion out of him and so you've yet again shown shown that jim i want to you know we've got about five minutes left and actually i want to circle back and and ask if you can kind of just on the spot um list but also prioritize um methods of response and and so i'd like to start with you know here in the united states you've just been talking about some of these but i wonder if we could just pull these together in a list of three you know actions i also want to ask on the on the allied cooperation allied in partner cooperation front um obviously you know dealing with chinese state capitalism alone is like having a peeing section in a swimming pool um you know you need to be really doing this i think in conjunction or coordination uh with with other market economies so let's put aside the multilateral the wto and let's just talk about some possible bilateral cooperation you know you've got uh you know you got five minutes with the with the biden team what are the things we should be doing here one two and three and any thoughts on the uh international collaboration cooperation space i think you have to prove to them that we're a viable entity you know uh okay biden is in and he's got some quite experienced uh trade and and china people but that doesn't mean in four years we don't have josh hawley or or cruz or pompeo or somebody that is gonna you know take the country off in a wild direction again we have to restore confidence around the world in the american system i don't know how easy you can do that that's not you know a one two or three thing we also have to we have to get business working together because business you know globalized business works together pretty well and if we can if we can bring them together maybe business has to leave the system but i can tell you what i i i'm not answering your question but that's okay um the you know what i see business doing in china right now is doubling down because they're in china for china they're not pulling out um and they are scared of china you know foreign businesses in china um they may smile when they're meeting with the party secretary but they're scared when they go back to their boardroom because um they the you know they're under so much pressure there and they need that market um and so with dual circulation where you know china's plan is to make the world more dependent on china and china less dependent on the world these guys may have opportunities but they want a residence visa they don't want a visitor's visa they want to be there forever for the long term not just long enough that china can use them and get what they need from them and then um you know bid them goodbye um but that's what business is facing and also american companies um globalization has has pulled away um their allegiance to america and i don't say that in a patriotic way but all of their kpis are about shareholders and making money and so if china is a bigger market for you than america well then you you care more about dealing with the chinese government than the american government we have to figure out a way to to deal with that also our companies have to care about um our competition with china and they've got to be on our side and in doing it one of the least controversial despite what you know rob was saying about um you know industrial policy being a dirty word i actually find that that's one of these areas of of at least at a theoretical or conceptual level consensus um is that there needs to be more grand steerage of a of a more kind of rule of law based market economy friendly type here in the united states um you know we just have a couple minutes but what are some components of an industrial policy that you see um as as having any any bite here and i guess there's two ways we could think of bite one is as a as just building us resilience irrespective of a dedicated response to china just resilience as its own inherent good one that will have knock-on effects for the china competition guess the other way of thinking about it is you know what do we do as a part of industrial policy that is explicitly in response to china i tend to favor the former over the latter because i think we want to be steering in in a direction that's inherently good for the us rather than always on the defensive but but what are your thoughts on on what industrial policy might or should look like well it's a is nothing you can do overnight we need to invest in science and technology education we need to attract the best brains to america and keep them here and we need patient money um you know the i've had chip companies in silicon valley years ago telling me they needed to take chinese money because a private venture capital wouldn't invest in them because the return wasn't quick enough you need that you need the government needs to be involved if you look at back in american innovation in the earlier years it was it was government academia and companies working together we need to be uh we need we just need to kind of go back to some of the things we used to do um not you know we don't this isn't none of this is uh is brain surgery it's a lot of common sense well um that is a great uh optimistic way uh to end this gym and we're right at three o'clock so i want to thank you very much for for your participation and your thoughts here which i thought were um we're forceful direct but i think also helped paint uh paint a way forward that i'm i'm optimistic there's enough bipartisan overlap and and you know china we talk about china as a forcing function um yeah there's good and bad with that but i think one of the good things is it's there's more of a discussion now i think in the china watching community about the centrality of of us you know foundational resilience um and and positioning and pivoting the u.s economy in a way that's forward-looking to the 21st century um so i i think this is really a discussion that that's that's just beginning um but let me take an opportunity to really thank everyone here this has just been a fantastic event um and again this is really i think for a lot of us we're still at this stage of just trying to define what the heck it is um that we're dealing with when it comes to china's evolving state capitalist system um and then i think we've got the real hard work ahead of us which is taking some of these general agreement on principles and ideas about u.s resiliency about immigration reform about about enforcement of existing laws to not cede as much ground to to many of these uh state capitalist actors but i think this feels like the first inning um rather rather than the eight so i want to thank everyone and i will give the final final word to uh to comrad scott kennedy well thank you jude and thank you jim and to all of the panelists as well as our our staff on both of our teams and the trustee chair and freeman's chair and our csis team this is really a fantastic conversation i would not say it's the most optimistic conversation that i've ever participated in at csis but i do think it was quite realistic and i tend to look at things on the negative side lately particularly where u.s china relations has been going when folks told me the u.s wouldn't start a trade war i said you just wait and see and they wouldn't continue it while you just wait and see i actually think that we ought to have a little bit more optimism that uh that we can improve things uh i think the the pandemic and a lot of the problems that we've had with our domestic politics lately are give us uh color everything that we think about including uh our relationship in the competition with china and they look 1.4 billion x's tall but i think there's as i agree with jim there's some very reasonable realistic things that we could do and some no-nonsense things that we could do on on the trade side as well uh and on the international side so i actually think as big as this challenge is uh america is up to this challenge i appreciate everyone contributing today uh getting the conversation at csis rolling looking forward to our workshop in a few weeks and then we'll be back in touch with everybody in the general public public uh when we have a report ready in the spring to roll out so this is a conversation to be continued everybody thank you so much and wherever you are have a good afternoon evening or morning take care you

Channel: Center for Strategic & International Studies

Views: 20,186

Rating: 4.3648067 out of 5

Keywords: Center for Startegic and International Studies, CSIS, bipartisan, policy, foreign relations, national security, think tank, politics, china, Greater China, APCO Global, state-owned enterprises, China, Xi administration, Trump administration, state capitalism, Party-State, GavekalDragonomics, International Affairs, Harvard University, Trade, James McGregor, Communist Party, Asia, Asian Economics, Chinese Business and Economics, Economics, Freeman Chair in China Studies

Id: hcKESioKlwo

Length: 122min 50sec (7370 seconds)

Published: Tue Feb 16 2021