Podcast: From Bad to Worse: US/China Relations with Zanny Minton Beddoes

TRANSCRIPT: From Bad to Worse: US/China Relations with Zanny Minton Beddoes

Zanny Minton Beddoes:

We are certainly in a period of really terrible US-China relations and they've been getting worse for years. And this year in particular as the pandemic hit and even, frankly, in the last few weeks, things have got worse and worse.

Ian Bremmer:

Hello and welcome to the GZERO World Podcast. I'm Ian Bremmer and here you'll find extended versions of the interviews for my show on public television.

The US-China relationship has devolved to its most dangerous point in decades on nearly every front, technology, trade, defense, human rights, pandemic response. Today I'll dive into all that and what the future holds for China on the global stage with Zanny Minton Beddoes, she's Editor-in-Chief of The Economist. Let's get to it.

Announcer:

This G Zero World Podcast is brought to you by Walmart. Around the world, Walmart aspires to use its strengths to transform the systems on which we all rely, setting ambitious sustainability goals, supporting the communities we serve, and creating development and advancement opportunities for our 2.2 million associates. Learn more at corporate.walmart.com/globalresponsibility.

Ian Bremmer:

Zanny Minton Beddoes, Editor-in-Chief of The Economist from an undisclosed location somewhere in the north of England. Very good to be with you Zanny.

Zanny Minton Beddoes:

Very nice to see you too, Ian, as always.

Ian Bremmer:

So the big fight right now, and we're talking about an awful lot on this side of the Atlantic, you're talking about an awful lot in your pages on that side of Atlantic. Do you think we are now heading into a new Cold War?

Zanny Minton Beddoes:

Well, we are certainly in a period of really terrible US-China relations and they've been getting worse for years. And this year in particular as the pandemic hit and even, frankly, in the last few weeks, things have got worse and worse.

Do I think it's a new Cold War? Well, I have some issues with the framing "Cold War". The old Cold War was between the USSR and the USA, the USSR, Soviet Union, very important nuclear power ideological faux, but frankly economic minnow. The difference with China is that China is a huge economy with which we are very integrated. So I'm not sure the phrase is the right one, but yes, we are heading to very, very worrying relationship between these two countries.

Ian Bremmer:

Before we get into what's at stake, I kind of want to go back a bit because if we think about 1989 and the wall came down, the Soviets had their Gorbachev, but the Chinese, I mean, Tiananmen Square, very different lesson.

Zanny Minton Beddoes:

I think two very important things happened in 1989. One as you say, the fall of the Berlin Wall and the beginning of the end of the Soviet Union. And with it the sense that the US had won the Cold War and Frank Fukuyama publishes The End of History with a question mark, and there is a sense of the ideological supremacy of western liberalism is there. And there's that kind of unipolar moment US reigns supreme.

The other thing that happened, as you say in 1989 was Tiananmen Square. And I think what we are realizing now is that what happened in Tiananmen Square actually is the shadow of that is driving the early 21st century much more than the aftermath of the hubristic moment of 1990 in the sense of US unipolarity.

So you are right that the expectation was, I think in 1990s, 2000s, that as China integrated into the world economy, a China would be created that would be a responsible stakeholder that would, the most optimistic people hoped, become a more democratic, more liberal place. The expectation in some sense was that what had happened in other parts of the post Cold War world would happen in China.

And I think what we've learned is that that gamble, that expectation has been proved wrong. China has indeed grown extraordinarily, the most amazing poverty reduction we've ever seen, the world has ever seen. An unbelievable increase in standards of living. The Chinese economy has grown dramatically, but it has not really become in important ways a responsible economic stakeholder. It's still a mercantilism, heavily subsidized, in important ways, non-liberal economy.

And at the same time and now increasingly under President Xi Jinping, really obviously, it's becoming, if anything, more authoritarian.

And so that sort of underpinning that the logic that said "if you bind China into the global system, it will become more like the rest of the system" doesn't seem to have been upheld. And I think now what we face is the consequences of how do we deal with a China that is the world's second-biggest economy that has incredible links with all of our economies. It's a very, very powerful player that is increasingly assertive but which has a very different ideological framework. It is absolutely not a democracy or going to be anything like that, but it is a country with which we're really interlinked.

Ian Bremmer:

So to just shine a light on this, would you say that now looking back, Tiananmen Square was at least as important to the world today as the fall of the Berlin Wall?

Zanny Minton Beddoes:

I think both were really important. I don't want to underplay the really extraordinary changes that took place post 1989 in Eastern Europe in the former Soviet Union in many other emerging economies that became market economies in that period. But certainly if you look at what is shaping the world today, it is the combination of an increasingly assertive, very authoritarian and economically rising China. That's the big question we have now, and the kind of challenge I think that the world faces is that this is unlike the Soviet Union, which whose economy was always a relative minnow, was not integrated and then, frankly, which fell apart very quickly. That is not even though in China.

Ian Bremmer:

The CIA didn't know that. But yes, you're absolutely right.

Zanny Minton Beddoes:

No they didn't. But by the time you got to 1989/1990, it was very clear that these command economies were falling apart very quickly.

Ian Bremmer:

So we think about what's happening now and you put a very clear point that the Americans and Chinese do need each other. There is a great level of integration in the treasuries that the Chinese hold and the goods that they produce that the Americans want. The real estate that the tourism, you name it, and not just the US, the UK, the Europeans more broadly.

Right now in the United States being hawkish on China is almost the only game in town. Do you think that's appropriate? And if so, how much so?

Zanny Minton Beddoes:

I think there has been in the US over the past few years a growing recognition on both sides of the aisle, that the old approach wasn't working. That kind of level of trade and the economy narrowly China wasn't playing by the rules. And that integration and into access to the WTO hadn't really changed China. At the same time, it was catching up very dramatically and very rapidly in technology and it is an authoritarian regime. And so there was a kind of realization in the US that all those three put together, that rather than being a kind of strategic partner, America suddenly thought of China as the strategic competitor and a rather worrying one.

And so the question I think that the US has been grappling with and everybody else sort of by extension, is how do you deal with a country with which your economies are extremely integrated?

Think of global supply chains. Think of the number of companies that produce things in China. Think of the integration as you say, it's not just the holding of treasuries but it's the financial integration. It's enormous. And so how can you safely continue that integration, continue that interaction with a country whose ideology you absolutely don't share and that you fundamentally don't trust.

And I think what the US has been going through in the past three, four years accentuated by the president of the Trump administration, because as so often, President Trump in a kind of somewhat clumsy and transactional and crude way identifies a real issue. We can talk about this, but I think has not necessarily gone about trying to deal with it in the right way, but certainly shone spotlight on it.

And at the same time, I think, and it really has been the last three to four years, this hardening on both sides of the aisle in the US of attitudes towards China.

But what I don't think we have yet is a consensus, or indeed, a kind of strategic sense about how you go from the old world where you hope that integrating with China would make it a responsible stakeholder, to managing relations with the country with which you are integrated but which you no longer trust.

And we have a whole global system of trade rules and so forth, which is not really appropriate for that because that was set up, really, before China and bringing China into it hasn't worked. But we have all of this integration which is kind of why I find this metaphor of the new Cold War or this adage not that helpful, because the new Cold War suggests it'll be like the old Cold War. We'll have nuclear deterrence, we'll have military buildup, we'll disentangle our economies.

But let's just think through what that means. It means really an unwinding of a lot of the globalization we've had so far. What does it mean for third countries? What does it mean for countries in Europe? What does it mean for countries in the emerging world who have very close links with both economies? So I think we haven't really thought through how to do it, let alone how do we deal with the kind of common challenges we all face. And the pandemic is the obvious one. But climate change, all these huge global challenges which we can only deal with if the US and China can work together.

Ian Bremmer:

It's not so easy for the Europeans right now figuring out how they're supposed to balance between these two behemoths that are not getting along on any front. So tell me do you think, is it a foregone conclusion because we ostensibly share political systems and values and the rest, that the UK and the Europeans are basically all going to be in the American camp?

Zanny Minton Beddoes:

I think the UK has shown in the last couple of weeks with its decision on Huawei to now ban Huawei, that when forced to choose between a kind of big supplier and a close ally, it was going to go with a close ally. It's not clear to me that every country in Europe will do that and the calculus will shift. And the further you go to the emerging world where countries have huge economic ties with China but are very untrusting of it and very suspicious of it, becomes a much more difficult calculus.

Ian Bremmer:

The hawks in the Trump administration would say, "Actually, the dangers of military confrontation go up if we ignore this," it's now when there's still asymmetrical power towards the United States, China's the second-largest economy, they don't have the military capabilities, they're still comparatively weak. This is when we need to pressure them as much as humanly possible in order to align, to get them to play more by American rules or else this is going to hurt them a lot more than it hurts the West.

Zanny Minton Beddoes:

I've heard that argument too. That's the argument you hear from a lot of US hawks, but let's play that through, because my question always then is okay, but what is your end goal? What is it you are actually trying to get China to do? Because I think there is a growing view in China that what the US really wants is to keep China down, to prevent China from returning to what it sees as its rightful place at the kind of world's top table.

And I think similarly in the US there is a growing view that what China seeks is sort of global domination and kind of Xi Jinping has some sort of expansionist, global hegemonic ambition of his own.

Those two visions are fundamentally incompatible. So unless both sides can find a strategic vision that they can both sign up to that allows them to acknowledge the other giant power's existence, we're in real trouble.

And I would hope that one can do that. That even with countries who have a fundamentally different ideology that you don't trust, that you don't share, that frankly you find abhorrent. That you can find ways of dealing with those countries not just to prevent a dissent into military conflict, but also to tackle the global challenges that we need to tackle, climate change, pandemics.

What's really profoundly depressing about this particular moment is that in the face of the worst pandemic since 1918, which is ineluctable global in nature and demands a global response, we haven't had that.

Ian Bremmer:

Not even close. In fact we have the opposite. We don't have just countries fighting each other.

Zanny Minton Beddoes:

Absolutely. And the question then is, how do you assign blame for that? Does either side have a kind of strategic approach? And the common, I guess the sort of common way of putting it, is that China thinks very, very long term but we just don't know quite what their goals are. But that the US recently at least has been behaving in a rather short term is transactional manner. And I think there's some truth to that.

I think that the Trump administration rightly diagnosed a problem, but I'm not sure that going about it in the form of sort of unilateral attacks, really not trying to bring allies along terribly effectively, without any sort of seemingly clear strategy of what the end goal is, is as effective as it would've been if the US were articulating a clearer strategic approach.

Ian Bremmer:

Now I wonder, clearly China has been and is a rising power and irrespective of what kind of end goals you impute for Xi Jinping, some level of accommodation needs to be made, and some level of are you going to let them be at the table needs to be answered. So I look for example at this Huawei issue where the United Kingdom and your prime minister had said that they wanted to work with Huawei, they were going to let them in. And there was an about-face that changed very dramatically over the course of just the past days even.

What do you think, if there were a proper strategy between the US, the UK and allies, is that strategy that we want to destroy Huawei? We want to prevent them from being able to roll out 5G and being the national champion of China?

Zanny Minton Beddoes:

So let me kind of abstract from Huawei itself because I think you have to take a couple of steps back. In a world of no trust where you don't trust this behemoth of a trading partner at all, and you certainly are leery of its ideology and its underlying goals. What is the kind of trading architecture you could create for that? I think that's what you are really asking. And I think that it involves thinking about what areas of your economy are critical such that you would not want to have any involvement from companies from that country.

And I think it may well be that 5G is rightly on that side of the line, but I think what we haven't had is going through what is included, what is critical, what is not critical? Is it okay to buy t-shirts from China, I assume so. What is not okay to do? And then thinking through what the consequences of that are.

But what it feels like at the moment is it's a kind of an attack on one company and then more recently on ByteDance and then there's a whole slew, it feels like the US is using its very, very large financial arsenal. Because it is dominant in the global economy and dominance in the global financial system, it has a huge arsenal at its disposal and it is using it effectively, but without it seems a clear strategic sense of what it is trying to keep out of Chinese hands and what it isn't.

Ian Bremmer:

I mentioned the Huawei issue because, you said "maybe it's okay to sell t-shirts presumably". Well, if Huawei's on the wrong side of the line and those t-shirts have chips in them, then it probably is. I mean in the sense that anything...

Zanny Minton Beddoes:

And if your argument is that Huawei having Huawei infrastructure in your 5G is dangerous because it is unclear what they do, some parts of it are made in China, it's going to become harder now. In one part of the argument was that because of the recent US sanctions, the oversight of Huawei infrastructure that the UK had pioneered, the UK has for the last few years had this special office that essentially looks at all Huawei infrastructure to make sure that it is okay. That process of oversight has become much harder because of the US sanctions. So that's one argument that you can no longer trust, you can no longer verify and in the absence of trust, if you can't verify it's too dangerous.

But the second is that you have to think, well what about Microsoft or Apple produces a huge amount in China, what can we actually produce there? And if we can't have any form of integration, that involves a much, much greater decoupling both of software and of hardware than I think anybody has thought through.

The most extreme version is that you have to have two tech ecosystems, separate hardware, separate software companies, completely different. But even if you go down that route, then what do countries, the third party countries do? If you're in Indonesia or in India or in Brazil.

Ian Bremmer:

They they'll have they'll to choose. There's no question. But you put your finger on something we hadn't talked about yet because we've been mostly framing this in terms of governments. But you mentioned Microsoft, you mentioned Apple, and of course one of the big changes here that has really underpinned what we've seen in the United States and Europe is that so many of these private sector corporations, big corporations that had been voting to give their technology to the Chinese for decades because they wanted access to the market are suddenly saying, "We are not so sure we have a future in China, so we want the government to take a tougher line." While you have some companies, Tesla for example, Elon Musk that are still saying, "No, we're all in in China and don't come after us."

Do you see a sea change in the private sector or do you think it's going to be much more divided over the coming years?

Zanny Minton Beddoes:

I think it's going to be more divided. I think it's going to depend on where your main markets are or what you are doing, on how big and important the Chinese market is for you. So I think a conglomerate based in Asia, I will have a very different outlook to one based in the UK, certainly in the US. But I suspect that what we are seeing is the US itself is increasingly off limits to Chinese companies, I think, of all sorts and that the US will be a sort of outlier.

But the bit that will be tricky is what happens in Europe, what happens in Africa, what happens in the fast-growing emerging markets? If we are thinking not one year, but 10 years, what are we trying to create here? And I'm sure you would agree, that we will lose a huge amount if we undo the trade links, if we undo the efficiencies that have come from an integrated globalized world economy.

And it's not simply a case. And I think sometimes people think this, that you can just split things up, China one side us the other, and everything's, it's not, it's a fundamentally different world. And it's one that I'm not naive at all about China.

What we haven't talked about yet is how much this is predicated on China continuing in the way it has. Because one thing I think to bear in mind is that it's perfectly possible that the Xi Jinping direction for China is not one that will last decades. So the gamble that doesn't seem to have been a good gamble thus far may yet pay off over time. But I certainly wouldn't stake anybody's national security on it, but it may yet.

Ian Bremmer:

But as you said, no matter where you come out, the development of a strategy is going to imply at least some level of decoupling, some level of saying there is a line beyond which we should not be engaging. And wherever you draw that line, because of the integration of these two economic systems, you're also talking about a line that unwinds some of the globalization that has been so critical. An ideology that the economist in many ways has been founded on, that has driven so much wealth, so much opportunity, especially in the West.

Zanny Minton Beddoes:

Yeah, absolutely. We know the economist was founded to fight for free trade, and this is certainly a world where some elements are going to be deemed to be off limit. That's very clear. But what I think I'm arguing for is not that we shouldn't be having that conversation, we absolutely should, but it is that conversation should be done amongst allies and in a strategic manner. And what I worry about right now is that it is a transactional, unpredictable, slightly ad hoc set of punishments and blandishments essentially put in place by the US by itself.

Ian Bremmer:

Two other issues I want to get to that we haven't talked about. One Hong Kong, precisely because this is what's driven some of the harshest blowback from the United Kingdom with the functional ending of the "one state, two systems" rule. Now that we have this new national security law. And now today as we speak, we see move towards a one-year delay ostensibly because of coronavirus in the upcoming Hong Kong elections further eroding this.

But we see the Germans, the largest economy in Europe saying, "We're not going to let Hong Kong affect our trading relationship with China. It's too important." So given the size of China, given the integration of the Chinese economy, it's one thing to talk about on some areas of technology and trade, we're going to have to create some decoupling because we can't trust it. But as China become functionally too big to really push back on some of these critical political issues?

Zanny Minton Beddoes:

No, no, no, absolutely not. Absolutely not. Not if the West acts in unison, absolutely not. I think that you are absolutely right, that Hong Kong has brought home, very powerfully I think, in the UK political circles that what China is up to and that it has essentially ripped up the agreement that was there, that it is absolutely focused on what it sees as its own national security and preventing Hong Kong becoming any kind of hotbed of festering opposition to the regime. It is a very, very clear indication of where China is now going and what sort of China it is.

That said, I don't think it's at all too late or indeed at all impossible for the West actually to have a really big impact on the way China behaves, particularly, if the West acts in concert.

The US is big enough that the US can make a difference with individual actions, whether it's against individual companies or sanctions and so forth. One thing that the Trump administration has achieved is a real sense that, in China, that this hurts when the US acts. So I think that there's been a really important role played by the US in the last few years, but what I think we haven't had is the development of a strategic perspective. And I think that's what we need. And that strategic perspective would ideally include the West acting in concerts, just as the West did when we created the existing global trade rules.

Ian Bremmer:

And then the second point I wanted to talk about, because we haven't discussed the response to coronavirus, and of course as you know the Chinese economy rebounded from coronavirus faster than any other major economy, but also many in the West with a lot of reason have pointed the finger at the Chinese for having obscured, covered up, the original outbreak.

You even have people like Peter Navarro saying that they have to pay the United States for the costs of coronavirus. Obviously that's not going anywhere, but to what extent does there need to be a reckoning for the way that coronavirus initially emerged and was obscured by the Chinese government?

Zanny Minton Beddoes:

So I don't really know what a reckoning would add up to. I think this is a very powerful example of just how bad the relationship has got, just how kind of short termist both sides of behaving and thinking. Rather than China welcoming in outside observers and analysts to understand what had happened, how it had spread, where it's come from. And rather than the US as it did with Ebola sort of taking the lead, given the preeminence of its epidemiological talent and epidemiological institutions, we didn't have either of that. We had, as you say, China kind of refusing to acknowledge that it's had any role in this at all. And in fact rather aggressively propagating an opposite view through its diplomacy and so forth.

And we've had President Trump talking about kung flu and all of those kind of things. So both sides I think have are to blame for the fact that this has been a pandemic from a multilateral perspective has been appallingly handled.

A reckoning sounds to me like a kind of, "Let's pin all the blame on you." Rather than pinning blame, I think it is much more like, "How can we work together? There's an enormous amount that we need to work together on. It's not just getting a vaccine, it's making sure that the vaccine is globally available." There's a huge amount of stuff still to do, and one would hope that you would have the world's two biggest economies working hand in glove. And I think actually in the science area there is much more cooperation, but the political theater is deeply negative. So China absolutely bears a lot of blame for that, but it's not just China.

Ian Bremmer:

Zanny Minton Beddoes, thank you so much. Great to be with you.

Zanny Minton Beddoes:

Thank you.

Ian Bremmer:

That's it for today's edition of the GZERO World Podcast. Like what you've heard? I hope so. Come check us out at gzeromedia.com and sign up for our newsletter Signal.

Announcer:

This GZERO World Podcast is brought to you by Walmart. Around the world, Walmart aspires to use its strengths to transform the systems on which we all rely. Setting ambitious sustainability goals, supporting the communities we serve, and creating development and advancement opportunities for our 2.2 million associates. Learn more at corporate.walmart.com/globalresponsibility.

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