Thomas Fingar: Understanding China’s One Belt, One Road Initiative

you we're very fortunate to have doctor finger with us who has a long history in looking at Asia as a researcher he's been an analyst both within the government but also in the Academy and has written a number of scholarly tomes as well about Asia so we've got an expert of some note and I'm looking forward to hearing what he has to say and tonight's topic of discussion is the Belton Road initiative otherwise also known as one belt one Road and really we should start off by describing a bit about what this is and really what I think everyone understands one belt I would rather one Road but what is one belt well let me add my word of welcome and thanks to you for coming out tonight and for your interest in world affairs that one belt one road maritime Silk Road belt and Road initiative and a number of other descriptions all refer to the same cluster of activities it's not one thing it's not one plan it's not one program it's basically a very ambitious very expensive and pretty risky undertaking to build infrastructure kind of out from China through Central Asia South Asia and the belt part is maritime around Southeast Asia so it's a part of what I think has been described as the going-out policy it's a part of building infrastructure to increase economic activity so and if I'm not mistaken it was Xi Jingping who really was the initiator of this concept and and has started promoting it Xi Jinping now owns the idea the idea of building an integrated infrastructure network in this part of it was very old it goes back many decades it didn't happen it didn't happen for lots of reasons I think one of them is the numbers never made sense to build before China and India had developed to the extent that they have numbers may make sense now that I say Xi Jinping now owns it that the projects had begun the idea was floating around but in 2013 in two speeches one in Kazakhstan the other one in Indonesia he declared what became known as the one belt one road no initiative it has now been written in the Chinese Constitution it's identified with him if you want to get support for a project you can do it I'm carrying out Xi Jinping's directive here so if it works he gets credit if it doesn't work out he's on the end of the branch world by himself well well and that branch is a very expensive branch I mean I've heard numbers like 1.3 trillion dollars being floated is that approximate or is it just hard to really pin down what some of these numbers are the numbers themselves don't it should be taken not with a grain of salt but as an indication is a very expensive undertaking however it shakes out and whatever the numbers are today they're not connected to any detailed project planning and projects of this scale or the one thing we can be pretty sure of they'll be cost overruns but this is in the trillions of dollars for what has been brewing it as a part of the plan so when this plan is being put together I we have to look at it in multiple ways and and with multiple interests that are engaged in this I imagine of course you have to consider what the domestic interests are in doing this and I imagine some of that is to develop the western parts of the nation there's a regional component to it of course there's a global component maybe we can break those down and and start with the domestic and how building infrastructure we're familiar with in California how building infrastructure will aid both in unifying the state perhaps politically developing it economically unifying it perhaps culturally as well whatever those those aspects of of the domestic interests are for for she and for the nation well I think my starting point is that when reform and opening began at the end of 1978 China's infrastructure was almost non-existent there was very little that needed to be replaced had yet to be amortized they had as close to a blank sheet as one can imagine right I mean you think back to some of the pictures of Beijing and it really is bicycles going down I mean in the most developed parts of the city when I started going to Beijing in the 1970s you could go 10 or 15 minutes between cars passing on 10 hour month right so understanding that level of where we're talking about and the scale and the and the timeframe of which we're talking about is really astounding so in order to push ahead with the export-led growth the japan model or the south korea taiwan model of growth to get from factory to port you had to build ports on the first yen to build rail lines had to build roads and a lot of it was Japanese funded infrastructure construction which as it began to go into place China began to develop the capacity to build infrastructure as they got good at it they built more of it it became a jobs program of sort it became a way to demonstrate high rates of G and GDP growth by investing money in infrastructure construction started on the coast because that's where most of the people and all of the factories were gradually it moved in to the interior and the point you raised about tying the western portion of the country which has lots of vast open spaces and not very many people and to the coastal areas really need high-speed rail or you need a lot of airports they adopted a Field of Dreams approach build it and things will will develop as one travels around a lot of these are pretty underutilized at the moment but among the lessons that in the Beijing learned from this it's a good way to deal with industrial capacity now excess capacity welcome back to that it employs a lot of people it creates opportunities for people ordinary citizens rural citizens to move to the country to go back and forth to move goods it really does all of those things that infrastructure is supposed to do so a portion of the motivation for this is to take China's experience and transfer it to others it worked for us it can work for you to develop portions of the neighboring neighboring countries that also have very poor infrastructure or have infrastructure Central Asia that's tied to Moscow not to East West right and of course it's something that we're familiar with here in the United States the question of infrastructure we saw the development of the interstate highways of course early on in the 20th century and the development of electric rural rural electrification which also had a huge impact on developing of other parts of the country and of course it is the buzzword today in the current Trump administration this idea that we will in fact spend a trillion dollars to build infrastructure which is sorely in need of repair and the new infrastructure whether it be airports and the like so so the fact that this is a model is not something that should be surprising or even scary to anyone in when we look at the development of the domestic infrastructural projects but of course as you intimated that model is one that they want to export as well and this is in a regional fashion and again something that the United States has a fair amount of experience in doing early in the 20th century in the mid 20th century but let's look at how it now extends in the Chinese model an illustration of the pre announcement of the belton Road initiative were projects to build pipelines gas and oil pipelines into Kazakhstan with the initial ones that China became a net importer of oil for the first time in 1993 it's right about the time that with the border disputes with Kazakhstan and other Central Asian states were were resolved there was a desire to have an alternative to shipping oil out through the old Soviet now Russian pipeline system so the Cossacks were looking for a new market the Chinese had a new demand but there was no way to get it there so large project to build a pipeline started and stopped a few times that as the price of oil went up and down this became a sensible or non sensible project that a different motivation for China and partners on the other side were the minority people's frontier peoples the names differ but their folks from ethnic groups outside the national majority so non Han in China non Cossacks in Kazakhstan and they tend to live in border regions and they were left behind by the development model that was worrying it towards the coast they became too satisfied they became alienated and the Chinese feared an insurgency a separatist problem being larger than it was so building in structure as a way to give them a bigger role in economic development and modernization and it was faster and cheaper at the beginning to build short infrastructure across the border and let the ethnic groups interact in what was called a suitcase trade then it was to link either of them to the heartland of the countries so it started out turning borders from barriers into bridges that could link people and it was done as much for political as for economic reasons that's really astounding and it's really an interesting political example of how do you change the facts on the ground in an area which could have created as you say political tension in the center as well as dissatisfaction with those with those populist is out in the countryside or in the border regions and I imagine as we look around those borders it's a model that the Chinese will try to use again is it something that we're seeing in some of the other border areas not just the Kazakh border area but uh but south and north of the yes the construction of infrastructure into South Asia actually was more extensive earlier and the the terrain was more difficult the Indians for partly economic I think partly political reasons neglected the reason the South Asia was the least integrated portion of the globe that in India didn't act as a locomotive for growth and so the Chinese began to build the infrastructure and it completely changed the economics of the region Bangladesh Bhutan Nepal Pakistan because the economies of scale they could now interact with one another and with other parts of their own country in ways that they couldn't do before the infrastructure and that the Chinese built it was nice and it was built to benefit Chinese companies and Chinese interests but the benefits were widespread so there's receptivity in the region to building these projects because they were able to see the chains of positive change that are brought with it well well so far it sounds pretty terrific they've built these things they've taken care of some political issues they're developed they're an engine for growth economic growth regional areas where we hadn't seen it before but there seems to be a fair amount of criticism as well about the belt and road initiative and there are those who actually say that it is a it is an attempt by the Chinese to and that's both the party and the leadership to present a model that is a political model as well to the rest of the world and to sort of force it upon some of the other areas in which they are now creating an indebtedness whether it be through the building of infrastructure or because of political favor that they're trying to curry so maybe if we can address that a little bit or talk about those challenges before doing that let me put two other motivations so I think are important here to understand what the Chinese are trying to do one is they've got very substantial foreign exchange reserves most of which are sitting in New York they don't want to bring them back to China because they've already converted them to Chinese currency once on the books they're afraid of inflation they they bring three trillion dollars in there in fraid of of inflation very afraid because they remember that's why they won a civil war I was hyperinflation a second is excess capacity excess industrial capacity cement steel construction equipment and having built the infrastructure built over built housing in China there are tens of millions of people who work in the construction industry looking for something to do so the combination of money that they're not choose not to use in other ways that's available excess production that depresses prices in the case of steel we're watching play out in the news every day some of the consequences and unemployed workers who otherwise would be unhappy so if you could build and that's not like the aid programs that the United States that Japan that Europeans have have used for decades that that it goes back to 19th century thinking about exporting the excess capacity and hoping to gain some political benefits and of course what we called it dollar diplomacy in our country the Japanese called it yen diplomas didn't work for us it didn't work for Japan I don't think it's going to work a whole lot better for the Chinese let me use that as the opening to briefly respond to the other part the backlash and your concern about it that when countries around China thought this is terrific if the Chinese pay for if this is going to be a gift of course we will take it delighted to take it as the cost even on paper costs began to go up and folks in China began to ask why are you spending money giving things to countries that have a higher per capita GDP than we do with that and other factors coming and the decisions attorneys into loans mostly loans and for a Chinese perspective they're being generous because they're offering below market rates it's back to a point I made earlier why a market rates high nobody thought that could be paid off so the Chinese offering lower rates might be easier to pay him off might be able to build more but countries that would receive the loans I've begun to figure out that the opportunity cost might be very high to pay back the loan for the highway the railroad the bridge the port what ever might use up all of the money that would otherwise go to health care education Social Security for aging populations and Environmental Protection all of those other things that governments do so they're beginning to look in the mouth of the gift horse and decide it may not be so attractive the other aspect is as the Chinese want some assurance that they're going to be repaid they are asking for debt for equity kind of arrangement for concessions that begin to raise nationalist hackles sure there are cases where ports are being turned over is that raisin industry Lanka Sri Lanka where in fact the debt load was so high that the debt Frek wa tea was in fact the 99 year lease for one of the ports in sri lanka Hambantota there's an interesting history if ya there take a take a minute because it illustrates what I think people are anticipating maybe over generalizing from but the Chinese negotiated a deal to build this port in Sri Lanka I suspect that some money changed hands here bribes paid in order for it to happen but I don't want to assert that that's the case but when the president who concluded the deal was voted out of office his successor said this was a corrupt deal we're not going to honor it after all was being built in the hometown of the previous president sometime past maybe some more envelopes changed hands I don't know but the project was restarted it now more or less completed and it's not used that the port in Colombo is was adequate is still adequate to handle all of the commerce for Sri Lanka it's not that big a place so that Chinese now have taken over with a debt for equity swap and form over 99 yield on a port with no traffic which begins to look like a white elephant it might also though become a Naval facility it's there it's built the Chinese have expanded their naval capacity they've got the lease watch this space right so the Indian Ocean and some of the opportunities that may exist there as they're looking for this maritime belt maybe just gotten the new opportunity you know it's interesting because as you as you look at this there are two questions that arise one is the countries to which you are as China loaning the question of governance of those nations is an important one as let's say in Sri Lanka where the potential for corruption because of the structure of the state and it's and it's at times inability to to hold up to democratic norms is the case but also secondarily and this is something we've seen in in the West and Western Europe in particular when you have these types of loans there's always the potential for default and I with a long Greek last name I am very familiar with some of the issues that Greece has gone through with its with its lenders and of course they were not allowed to default because of their membership in the eurozone but there is nothing to prevent those who have lent from the Chinese state to not consider the potential for default yeah let me commander from two directions the Chinese learned lessons in Africa because that's where they started making grants grants with concessionary loans and the Chinese discovered what Europeans and North Americans discovered that countries that can't pay don't pay and we have a whole category called highly in tented indebted poor countries and the loaning countries basically wrote it all off and then imposed new can't for new loans and what they can do an anecdote on that I've been going in that China for a long time dealing with the mainland literally since ping pong in 1972 and shortly after I had retired from the US government I was in Beijing and an official friend said we need your help I said I assume you mean the United States not fingers said yeah that we for decades took great pride and made a big deal of saying we attached no conditions to loans and grants we no interfere in your eternal affairs the way the imperialists do the Soviets used to the Americans do no conditions said that was fine when we were playing with your chips now we've got billions of dollars of our money and hundreds of thousands of our people we can't not care about the quality of governance we can't not care about the ability to recover the investment on this what do we do that's a big question it was a big question what they are doing with the belt and road reflects some of the lessons here looking for collateral looking for constraints but as I joked a different time with Chinese they what are you gonna do when a country I used a name but here when they can't pay and they tell you you want your bridge take it back you want your road you can have it it's pretty hard it's pretty hard to recover if you've loaned money on these kind of projects Wow okay well so you know you build this infrastructure and it really doesn't it's not portable it is you you are you have it in the ground so then if we look at some of these other larger political concerns that we hear about today and I think they become even more pronounced since the recent change in the constitutional structure of the Chinese and with the rise of Xi Jinping's power with the reduction of well with the elimination of term limits constitutional elimination of term limits the question of sort of these larger strategic goals the Chinese model the Chinese dream as we look around the world and see not only an increase in going out with infrastructure development but also increases in military spending what you'll hear regularly from the current US administration is the concern with the stealing and of intellectual property and of military technologies just the other day we saw that the president stopped the takeover of an American technology company Qualcomm by Broadcom so clearly the fear is there the rhetoric is exacerbating the in the the conditions are changing how do we look at all this and and and put it into a context that's not fear-mongering but that is realistic in terms of how China does see its role in the world and how it is manifesting that vision I mean it's both an interesting and an important set of questions that in my starting point is we like to make sense out of developments as human beings we like to find patterns we like to find integrating themes we want to find a string to put through the beat so it all makes sense a fair amount of the commentary about China's belton Road about its vision of world water and so forth I believe is an imputation of design and strategy and purposiveness that doesn't exist there's an awful lot of decisions made for different reasons by different players different times that I hinted at some of them they got money they can otherwise spend they've got excess capacity they'd like to use they've got unemployed workers they'd like to to put to work they have regions of the country they'd like to to tie together that they need resources that they can't acquire easily without the infrastructure add to that of course they want international prestige and influence this is a way that has proven useful to them that the Chinese think spatially and see lots of Chinese in the Ornish but they think spatially I think more than Americans typically do and interior lines of supply that are safe from depredation by an adversary so moving from sea based to land-based routes has a tradition in China that lots of things feed into this I think there's much more of a company that wants to go abroad so they say we're part of Belton Road there are banks that are willing to lend money to make Xi Jinping look good that's much less than an integrated strategy will it increase Chinese influence yes and know that it gives them a bigger stake it gives others a bigger stake or a different kind of stake in the relationship with China but the caution and the backlash and the learning across borders that is taking place that will limit China as it has limited other players is China bigger absolutely is it got a bigger military absolutely it's more engaged all over the world if you look at the map if we had it that belt and road area the sea-based portion of that is the energy coming from the Middle East to China in China very heavily and going to remain very heavily dependent on energy from that part and the other is goods going to China's largest market which is the European Union right now they are all protected by the US Navy the fifth fleet and the seventh fleet Chinese for understandable reasons think they need a capacity to protect their own international trade I don't like being that dependent on the United States frankly I'd like them to pick up some of the responsibility in the cost of doing this but what they would view and what we view of ourselves is this is a very sensible defensive maintenance of stability in the international order you can turn it around and say it also has an offensive capacity and some of the things that Chinese have done is in the South China Sea to use that military capability to intimidate smaller neighbors doesn't look very appealing right and and one of the things I take away from your analysis also is that we outside of China tend to look at the state and the party is this monolith without these internal difficulties or challenges both to the power structure but also the diversity of the country itself the regional political players who are also competing within the state but but as but part of the reason of course is that it's very difficult to look at China in that more nuanced way when you're outside of it because it doesn't allow us necessarily to look in and understand what goes on within the country itself I have a few questions here and you know it and I'm there from the audience and it actually raises this question about infrastructure investment because there was this Asian infrastructure investment bank which during the Obama administration we most decidedly did not join some of our allies did and then there's also a second bank the Asia Development Bank and so one of the question asks about the difference between these two types of banks but I'm really curious about the AI IB we decided not to join it as I say other allies did was that a mistake it was a huge mistake in my judgment by the Obama administration that the explanation that they gave was they wanted to make sure that this new bank would meet the same kind of standards now followed by other international financial institutions that reflect the lessons learned from the not non repayment that infrastructure investment didn't have the spillover benefits that had been anticipated so this was a classic case of the quest for the perfect driving out the good and it played out in a way that made it China won the United States lost China's rise the United States in decline China's smart the United States is stupid all of these are exaggerations but the basic purpose or motivation for this bank I think or a few that I've mentioned one is by going to a multilateral investment bank China gains the cover of operating within a motive we'd love to give you this loan with no conditions no collateral but our international partners insist upon it that part of it is that China has come increasingly over the years to see that multilateral organizations are not automatically hostile to China's interest it can be a good mechanism for advancing and promoting China's interest as a major power China's starting point was like that of any major power the purpose of multilateral organizations is for the little guys to tie down Gulliver that didn't want to be constrained it's now learned if you play a leading role you can use this to your advantage and the third one that I'll mention here is the desirability of building infrastructure and if it's multilateral Development Bank there's not the same backlash against China imposed conditions I think it's a good thing it turns out to not be very different than the Asia Development Bank which is based in Manila largely funded by Japan it's not that different than the World Bank or the European Bank for Reconstruction and Development one of the things that goes all the way back to Adam Smith if you want infrastructure it almost certainly has to be built by governments companies don't build infrastructure I can spend all the money to build the road and you're going to drive on it and you didn't pay for it so it's one of these public service functions that governments do having another Bank and the Chinese have several others that were involved in the new Development Bank which used to be called the BRICS Bank they have their large if not the largest and some of these contributors have input they've got the most votes the final point I'll make on this at the time the AIB was proposed and then created there was a fight going on over voting ranks voting rights in the International Monetary Fund China wanted to have more votes because it has put more money into the fund the United States backed China's desire for more votes where were they going to come from the Europeans who put in a proportionally smaller share Europeans were not happy the Obama administration supported China we cast our vote in the IMF and Congress dragged its feet for a couple of years before it passed the enabling legislation while that was going on there was an Center for China to vent its dissatisfaction by starting its own bank right interesting well you know this question of multi national organizations and whether they're tying down Gulliver is one that seems to be quite topical in United States today but also affects China in particular when we think about the trans-pacific partnership something that during the election was a whipping boy by president by then candidate Trump since entering into office of course he refused to join the partnership and TPP has since been signed on to by the other members and and the United States remains outside how do you view TPP both as what often was presented as which was a bulwark against China but secondarily as an institution and as and as a multinational agreement that would create in many ways and achieve many of the things that the Bri the button road initiative is purporting to achieve yeah he's into it by saying I think the Trump decision to pull out of the TPP was even dumber than the Obama administration not to join the AIB this is one that something that the u.s. had pressed for for decades and we finally got it and walked away from it a second is the way in which you described it as a bulwark against China that also had some integrating that is the way it has come to be seen in my view that was not the original motivation that the motivation here was that the World Trade Organization a sensible let's have a one set of rules for the whole world know that way at major trading countries can operate with predictability I guess of 13 years that the Doha round was stalled is to bring agricultural and services into the World Trade Organization the areas where the States is the most competitive country in the world India and a few other developing countries blocked any progress on that the highly developed countries in Europe Japan North America said we got to do something else and something else in Asia was the trans-pacific partnership in Europe was TTIP trade and transatlantic trade and investment partnership North America NAFTA was key it's the hinge to both of these if we're in both of them we're not going to agree to one set of standards for Asia and a difference of the standards for you so it would have the effect of setting global standards that a much smaller number of countries would decide this but the countries in this negotiation kind of from more than 80% of world trade so the ones who stayed out would have little choice but to go along with this the United States was not very interested in TPP it was proposed initially by four small countries because they together they amounted to less than 5% of US trade when Japan said it was interested because it's fit with Prime Minister a base desire for a way to justify domestic economic changes that he thought and I agree were necessary for Japan he's willing to go in the United States first hello we've been trying to get these bilateral talks with Japan opening up the markets to these things for decades without success we got them in TPP and the portions that have been dropped out I think it's 22 articles have been dropped out of the comprehensive agreement of which we were part by the eleven that stayed in those 22 all brought direct benefit to the United States particularly in Japan a second second-biggest one with Vietnam that was there a part of this intended to counter China contain China I think it's a small part but it wasn't so much as a contained China keep it from rising as it was we need an infrastructure in Asia unlike Europe which that all kinds of organizations and that Asia is uninstallation like NATO to be the backbone in the anchor in Asia has always been said to be a non-starter it probably is a non-starter part of the reason it's a non-starter now is China doesn't want to be part of a collective security I raised it once all bilateral and no no alliances but this was a way of tying countries together so the institution's would interact if the institutions are interacting they have common stake they have shared interest if their shared interest they're going to take common and joint action to protect the security and stability that was the logic and it was open to China Xi Jinping at sunnylands asked President Obama about joining and he gave the correct formal answer far as the United States is concerned sure yeah but you got to ask the organizers of that which did not include the United States it was Brunei and Singapore and Ecuador and somebody else with the original four that set the terms of it but there was and is no reason that China couldn't join I frankly think would be easier for China to meet the conditions than it was for Japan well so we messed up on a IIb we did even worse on TPP what is it that the United States is doing right in regarding the relationship with China the rise of China it's in its you know we look at it as a rising state obviously it is becoming an economically dominant player that's GDP is rising it's bringing up hundreds and thousands of people out of poverty there are a lot of good stories that we can tell about about the Chinese state at this at this juncture but we live in a dynamic world with relative power where we're competing for that power as well what is it when we look at the current state of the United States whether it's diplomatically militarily or economically that the United States is really on the right track as as it as it relates to China the prologue to is is I'm I'm not the most objective observer because I was involved in doing a lot of the policy going back to the the Ford administration Ford and Carter Wright was one of the unofficial trial balloon guys because I was a kid and easily disavowed and then I was head of the China division in the State Department and then we're senior positions China has evolved pretty much as we anticipated it would now some that think we created a monster here but the the frame here is in 1978 a year and a half after Mao died became clear that China was going to launch a very different approach to development came known as reform and opening became clear you know I'd say if they did that we actually would have a way to engage with them and then shape cold war looked like it was going to go on forever Nixon and Mao shook hands we become tacit partners in the anti Soviet struggle we didn't expect anything else from China other than it would stay where it was on the globe they didn't expect anything more from us we didn't they'd have changed political system economic system by 78 they wanted to change they wanted to follow an export-led growth model the Japan model which really was the Taiwan model but the call it the Taiwan in order to do that you had to have access to the free world the term signs quaint now but the most advanced countries the OECD countries the liberal world order was confined to the United States and its allies the US was the gatekeeper China wanted to come in the u.s. decided to let China in without meeting any kind of preconditions other than played by the rules the same rules apply to you in this rules-based system logic was if we're going to have a partner in the neverending struggle with the Soviet Union better to have a strong partner than a weak partner we don't want to carry these guys we want them to carry their load so we enthusiastically assisted supported the drive for modernization made available technologies transfer opportunities for training investment and encouraged our allies to do so allies were willing to do it or to do it for competitive reasons access to the market China had very different expectations than we did that I'll simplify my bumper stickers China's expectation was get in get rich get out no use this to jumpstart modernization that China would then handle on its own and that it would change as little as possible only as late as necessary to keep the development bicycle upright the American expectation was good luck if you come into this system it's easy it's cheap to come in but as you benefit you're going to become more deeply enmeshed in it the more you become enmeshed in it the higher the cost to you of leaving the bigger your stake in the system that part of the expectation turned out to be realized I don't a secondary one was China would follow the trajectory of Taiwan of South Korea to some extent of Hong Kong of modernization creating a proliferation of interests that have to be managed in a political system in fact I'm holding up the cover of The Economist talks just about this where the cover story is how the West got China wrong right it has a picture of cheating things saying that that in fact was right part of the expectation that was the expectation I don't think anybody thought it would take as long as it has and the Chinese thought they'd get out and they'd be disengaged from this sooner we thought the transition would occur faster than four decades we were a little giddy by the mid 80s because of the People Power Revolution and so forth I actually think the likelihood of that transition a transformation occurring is still very real I think trying to be economically modern and politically not is just not not going to work as a headline so you could expand a little bit on that because that really is not the common right or the popular understanding of what in fact is going on at this moment is that not sounding too crude here but being modern is a little bit like being pregnant you're worried or not there's not degrees of being pregnant there how many months along that's different but you are you're not and if you're modern you can't be part way modern it's a it's a holistic set of relationships and expectations and rule of law and independent courts and and the like China has moved sometimes by fits and starts sometimes grudgingly sometimes we're cautiously along a pretty steady trajectory that bogged down a decade go because the next steps are heart china had a very smart approach in my view which was do the easy stuff first gain confidence build momentum reduce political opposition at home and learn from it the problem now for Dec there's no more easy stuff it's all fundamental structure of the system relationship of the government to the economy government to the society and I certainly don't expect that china is going to come out looking like the United States or like anybody else in particular it'll come out looking like a different China on it but it's reaching a point that on two dimensions where one is per capita GDP which moves around the threshold as every as global earnings go up but it's now about nine thousand a year which is associated with the transition to democracy like South Korea or Taiwan that if you get less than that it democracies don't seem to be sustainable China is almost there well it's not automatic just the other is that's about that same level of GDP per capita GDP is middle income China is now firmly in the middle income category it aspires to be a high-income country I'd like him to become a high income country we make a lot more money trading with rich countries than with poor countries but getting out of that middle income level middle income trap turns out to be very hard that World Bank 1965 there were about 50 countries in the middle income category in all the time since 13 have graduated and the only one of those that graduated that has more than 30 million people in South Korea now maybe going to be easier with 1.4 billion people but maybe not and that internal challenges are huge managing the social expectation societal expectations through the political system as growth slows is a huge challenge for Chuck and it seems that the reaction is to go the opposite way right now it's to in fact try to use technology the political system you have the party structure to in fact do the equivalent of a crackdown right on the pluralistic stresses and pressures that can bubble up from a society that is increasing in its educational opportunities and its GDP numbers and so there is this inherent conflict that we're observing right now it's an incredible dilemma because the Chinese leadership fears that loosening up allowing popular expressions of discontent excessive critic what they would regard to assess of criticism of the system will jeopardize growth and slow it further they need stability otherwise companies will go somewhere else because China's not the only game in town anymore there are now dozens and dozens of low-wage competitors lower wage competitors so they've got few tools and toolbox their repressive tools right they're trying to buy time in a hope that they can grow fast and then it'll be easier to make those tough societal political changes they probably missed the window of opportunity when growth was very high demographically there were still more Chinese who were old enough to remember the bad old days and kind of cautious about now the vast majority of China's population has no memory of anything except very rapid growth a rising China and they're all single kids that never had to share anything their expectations are very high and their family's expectations are very high and like kids everywhere that said don't tell me what you did for grandma what have you done for me lately and trying to contain that in order to grow out of the challenge is the strategy that Beijing seems to have adopted it's a high-risk strategy it's so it's fascinating because we don't have that nuanced understanding I think in general whether we read The Daily Press or even with our own understanding and exposure to the country but it seems to me that other countries who face similar challenges and I'm gonna push you on this a little bit because Turkey for example has at least in the urban environment where high growth educated population but what the leadership there has decided to do is actually play to the countryside right and that in fact the party or the leadership can find that support that it needs not necessarily in Beijing or Shanghai but maybe in the rest of the country yeah I mean it's a wonderful question because it underscores you know none of this stuff is automatic here that the urban rural ratios in Turkey and China are quite different that China has gone over as 48 from being a highly rural to a majority urban country and the urban population for China is more problematic because they are close proximity they're connected on social media they're more educated and more middle classes that demand more of it rural areas are very dispersed and less dependent on a smooth working system in Turkey you've still got huge numbers of people in the countryside that are not so dependent on government performance are more easily swayed by a populist the leader and all of the Turkish people urban or rural I think have a good reason to be mad at changes that they made in order to gain admission to the European Union making changes which they regard as distorting aspects of Turkish history and culture for the prize of getting into the European Union and European Union did not allow that to happen so there's backlash against Europe there's backlash against modernity and air21 is able to speak to that in its similar way in my judgment that mr. Trump is able to speak to the the portion of our own population that is most disadvantaged by the growing inequality in our system so really the headline there is this urban-rural divide we are looking at a highly urbanized society with very different demands on its political leadership and even if social media is not being or is being controlled to the degree that we assume is going to be controlled going forward with AI and other doesn't matter because you're inches away from your next-door neighbor and talking on the street that's exactly right and cities are fragile places there's a wonderful place as Sydney has produced 80 percent of the wealth of the world if you're in a countryside and you need water you got in the backyard and you get it you need food you can grow it or get it from a neighbor if you're living in a city and it's snowing and the gas goes off you're stuck if the trash isn't picked up it's unpleasant there's just more things that are provided either by the government directly or by companies that are organized for the community and the society that have to work very well or they haven't worked at all if the water treatment plant doesn't turn sewage into potable water you got problem on it so the people who live there because they're more vulnerable are more prone to demand action right now it's not a maybe it'll fix itself in a day or two yeah and I you know I used to spend time in Los Angeles and I remember also that an urban environment can create a great amount of pollution yes and so that seems to also be one of the major problems within this particular environment in this particular country yeah although the Chinese have reported considerable progress over the last few years in reducing this small particulate dimension of pollution I'm going to China on Monday so I'll see how much better is in Beijing since I was there in November but the moving of factories out of Beijing and a number of other city has moved the pollution somewhere else though that that it hasn't solved but it's moved it but the cities with the vocal populations are better and the other is moving out a lot of people that the migrant so-called migrant populations those who technically still live in a countryside have come to cities in search of jobs they don't have any rights in the city into health care or education and the like and they live in substandard housing and they burn coal they're not connected to the gas lines and so forth that in Beijing in other cities they've cleared out hundreds of thousands of these people and sent them home again that's a pretty unpleasant way to be moved and we certainly couldn't do it here but they can do it in China well thankfully we're not doing it here in America I like where I live and I have relatives who are visiting but like visiting me in San Francisco as well you know talking about belton Road initiative this evening has been fascinating it's given us an insight into how the Chinese state is expanding not only its it's excess capacities and financial wherewithal but also some of its ideology and some of its interest political interests but really some of the most fascinating part of tonight's discussion has been a look at the internal structure of the Chinese system it's its populace its internal conflicts and pressures and I think that will define in many ways how the United States will be able to deal with China because if it is a strong unified supportive state that has the the underwriting and under and and and popular support of its people then you're looking at a very strong nation with resources and increased military power that can assert its and even imply it's its ideology and its power to other parts of the world it's been a great evening to have this discussion with you we're gonna continue on with some of our questions afterwards but this brings the radio portion to a conclusion will open it up to some of your questions and I look forward to fielding some of those and I'm sure Tom looks Lord and thank you for the questions and I'm not sure which were yours in which will relay but they very good questions thank combination [Applause] [Music]

Channel: World Affairs

Views: 113,825

Rating: 4.3872709 out of 5

Keywords: World, Affairs, china, asia, infrastructure, investment, europe, trade, TPP, trump, silk road, nationalism, international

Id: 7a0CDbUCrS4

Length: 61min 55sec (3715 seconds)

Published: Wed Mar 14 2018