Susan Shirk - Ideas Lab Series - January 11th, 2023

[00:00:00] Susan

It’s obvious from the disarray that China is in now, that they didn’t take the time to actually make a plan for the transition, which is shocking. When you combine this with a lot of other mismanagement of the economy over the past decade, it really makes us all question the much vaunted competence of decision making in China.

There’s no longer this aura of this highly competent leadership in China.

[00:00:58] Intro

Imagine spending an hour with the world’s greatest traders. Imagine learning from their experiences, their successes, and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the world so you can take your manager due diligence or investment career to the next level.

Before we begin today’s conversation, remember to keep two things in mind. All the discussion we’ll have about investment performance is about the past, and past performance does not guarantee or even infer anything about future performance. Also understand that there’s a significant risk of financial loss with all investment strategies, and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions.

Here’s your host, veteran hedge fund manager, Niels Kaastrup-Larsen.

[00:01:54] Niels

For me, the best part of my podcasting journey has been the opportunity to speak to a huge range of extraordinary people from all around the world. In this series, I have invited one of them, namely Kevin Coldiron, to host a series of in-depth conversations to help uncover and explain new ideas to make you a better investor.

In the series, Kevin will be speaking to authors of new books and research papers to better understand the global economy and the dynamics that shape it so that we can all successfully navigate the challenges within it. With that, please welcome Kevin Coldiron.

[00:02:31] Kevin

All right, thank you Niels, and welcome everyone.

We’ve got a very important show for you today. Our guest is Susan Shirk, one of today’s most influential experts on US China relations and Chinese politics. Susan first visited China in 1971 and she’s been researching, teaching, and engaging with China ever since, including several years as Deputy Assistant Secretary of State in the East Asia Bureau for the Clinton administration.

She’s currently a research professor at University of California, San Diego, and chair of their 21st Century China Center. She’s joining us today to talk about her illuminating new book called Overreach: How China Derailed Its Peaceful Rise. Susan Shirk, thanks so much for joining us today, and welcome to the show.

[00:03:26] Susan

Thanks so much, Kevin. It’s great to be here. 

[00:03:29] Kevin

You first visited China over 50 years ago, and I was looking through your background, and I noticed that you had actually attended the Critical Language Program at Princeton in the sixties. I was wondering, is that where you first started studying the country and language?

[00:03:51] Susan

I went to Mount Holyoke College, and before I went to college I had the opportunity to be an exchange student in Japan. That stimulated my interests in Asia. Then I started taking some Asian history and politics courses at Mount Holyoke, but they didn’t have any opportunity to study language.

When this opportunity to be a critical languages student at Princeton, (which at the time was still an all male school) opened up, I certainly leapt at the chance. It had a lot of appeal in many respects. That’s where I started studying Chinese. Actually, I started the summer before at Columbia, because I grew up on Long Island.

I took an intensive summer course with the famous Loretta Pan. One of the most famous Chinese teachers ever. She was at Columbia. That’s where I started and then continued at Princeton.

[00:05:10] Kevin

I was really curious about that, because that’s quite a while ago, and China was an utterly different place then. It wasn’t integrated into the global economy. It was not really (I guess) on the radar screen. Why did you choose China back then?

[00:05:32] Susan

I started off with a focus on Japan, but then so much of the history of Japan actually takes us back to China. I just became fascinated with China, and this was in the 1960s, and Mao’s China was so mysterious. I thought it was fascinating, and the Cultural Revolution started. What was that all about? I do look back and think it was very odd to study a country that I might never have had the chance to visit. It would be like studying the moon. I was so fortunate that just when I was a PhD student doing my dissertation research in Hong Kong, where I interviewed refugees from mainland China, China opened up and I was fortunate enough to be in the first group of Americans to go into China after the ping pong team.

We were actually in China for a month. Our group of students, PhD students, we were there at the same time Henry Kissinger came to set up the Nixon visit. 

[00:07:00] Kevin

Wow. You said Princeton was all male when you were there in the sixties. How did it feel being a western woman visiting China in 1971?

How were you treated? 

[00:07:18] Susan

China was a place that treated women very differently, I’d say from Japan and Korea. I think that’s a really communist party ruled system. They do have a higher participation in higher education and just education more broadly for women and career opportunities, or job assignments (which is what it was then) were pretty good for women.

It was not a terribly sexist place. Of course, the situation today is a lot more complex. 

[00:08:07] Kevin

Your history with China is so extensive that I think if we did the usual career overview, that might consume our whole hour. I thought perhaps we could just jump to the end and ask you to explain what the 21st Century China Center is and what your role is before we move on to the book.

[00:08:27] Susan

Oh, thanks so much for asking me about it, because our center has probably the largest concentration of scholars studying contemporary China of any Chinese American university right now. We’re quite unique in that we’re both an academic research center and a think tank. Our goal is to do cutting edge research.

We have something called the China Data Lab, because we do a lot of empirical work in data of all sorts: media data, surveys, economic data, data on policy output (the Chinese system), and do it in a very rigorous way. Then we try to translate that knowledge into recommendations for wiser policy from the United States and actually from China as well.

[00:09:38] Kevin

A lot of our listeners, as you know, are in the financial markets. Is that data something that they could go to your center and access and use? 

[00:09:47] Susan

Yes, some of it certainly is, and we have blog posts. For example, my colleague Victor Shih, who probably is well known to investors in China. He has an amazing database of Chinese politicians, of central committee members, of provincial party committee members, going all the way back.

People can play with that data. We have a lot of other types of data that are available, or you can always contact the researcher and ask for permission.

[00:10:37] Kevin

Let’s talk about your book. Why did you decide to write this book? It’s very extensive. How long did it take you to finish it? 

[00:10:48] Susan

I actually started the research back around 2006, because that’s when things changed in Chinese policy, both foreign policy and domestic policy. Up until that time, US China relations and China’s relations with its neighbors and the rest of the world were going pretty well due to Chinese foreign policy of restraint. 

Chinese leaders, Deng Xiaoping and Jiang Zemin and Hu Jintao (during his first term) had a very good understanding that China’s rapid rise as an economic and military power would inevitably create these perceptions that China was a threat. They saw that their challenge was how do they show other countries, and people in those countries, that China wasn’t a threat, because its intentions were friendly, were benign.

They did a pretty good job of it. They opened up all sorts of trade agreements with their neighbors. They became the largest trading partner of pretty much all countries in Asia. They took a pretty flexible, pragmatic attitude toward foreign policy, with the exception of relations with Japan and Taiwan, which were always fraught because of being hot button issues of popular nationalism.

That changed in the mid two thousands. China’s civilian maritime agencies, all eight or nine of them, started shoving, pushing around the fishing boats and drilling rigs of other claimants in the South China Sea. That was very puzzling to me because the South China Sea hadn’t been a focal point of popular nationalism.

There was very little attention paid to it. I was very puzzled by why China was behaving that way in the South China Sea. That really had changed the narrative about what kind of rising power China was. People started seeing China as much more threatening. At the same time, domestic policy also had changed.

Social control became tighter with grid management of society. Censorship tightened up of the internet and commercial media, after a period which had been like peak freedom of information in China. This was right before the Olympics, and it was before the Global Financial Crisis. That was a puzzle to me, and I started doing research, and did a lot of interviewing in China.

One of my main sources really is talking to all sorts of political people, party people, business people, journalists, to try to understand what explained this sharp change in Chinese policy.

[00:15:01] Kevin

Yeah, and I wanted to ask you about that because the book really is peppered with, as you say, interviews – a lot.

My question was, I presume these are just people that you’ve met over the years through your various work there, but were they anxious to talk to you? In other words, did they want to get their point of view across or were they nervous? Does that put them at any risk with the book coming out?

Can people back out who they are? Some of them are critical of Xi Jinping and the direction of the country? Not all, but certainly some. 

[00:15:44] Susan

I’m always very careful not to identify people. I have been interviewing Chinese since the late 1960s for my research, and I’m happy to say that nobody has ever gotten into trouble because of talking to me.

I’m extremely protective of my sources. As social scientists, we have that obligation. It really is important to me. I’m very, very careful about that. 

[00:16:27] Kevin

I want to circle back to that at some point, but let’s talk about the evolution of the control regime in China. You said things started changing in 2006, and there’s a number of ironies that go through the book.

One of them, to me anyway, was that this change emerged under Hu Jintao, who you described as, in some sense, a weak leader. That power was dispersed through different bases that represented the different functions of the politburo and the people on the politburo, what they controlled.

You had a situation where it was a decentralized leadership, not a strong authoritarian figure at the top of it, and power was dispersed. How did this beginning of overreach emerge in what seems like not exactly a hands-off approach to governing, but certainly not the kind of concentrated power that we see under Xi Jinping?

[00:17:37] Susan

Yes. It is probably the most surprising thing that people who read my book will learn, which is, how did we get to where we are today? Today we have Xi Jinping who rules like a personalistic dictator, really, with a cult of personality and relying just on a small circle of advisors whom he has known for years, and not paying much attention to the professionals in the government or even in the party.

Power is very centralized, very concentrated. That leads to overreach, which is the title of the book and the concept, which the book is all about, which is taking things too far; doing them in a very exaggerated way, in a manner that actually snaps back to harm yourself – that is costly to yourself.

This type of dynamic of power concentration, I explain how that leads to overreach, but remarkably, it actually started under a very different leadership system of collective leadership in which China was ruled by a nine man political oligarchy of senior leaders in the party, in the standing committee. Each of them was responsible for a particular portfolio of bureaucracies. 

These bureaucratic interests became very hived-off from one another. The Barons at the top, they’re very protective of their own interest groups and started hyping international threats and domestic threats in order to get bigger budgets and more bureaucratic influence for the agencies they were in charge of.

What I call the control coalition, the internal police: this is public security bureaucracies, the state security bureaucracies, the military, the Paramilitary People’s Armed Police, the propaganda department. These security interests were lead by Zhou Yongkang. They basically hijacked Chinese policy and became very, very powerful by hyping these threats.

Also, the state agencies in charge of the economy got into a logroll with the control bureaucracy because these bureaucracies were protective of the state owned enterprises, and less supportive of the private enterprises. They wanted the state to start playing, once again, a more active role in guiding the economy, especially to develop China’s indigenous technology.

It’s a complicated story which I try to make clear and vivid, but at the end of Hu Jintao’s 10 years in office, China was very corrupt because each one of these Barons was able to collect a lot of rents, a lot of bribes because they were so powerful and had all this patronage to promote other officials subordinate to them.

It was very corrupt. You also had open splits in the leadership, as we saw in that drama with Bo Xilai, the Chongqing party secretary in 2012. That enabled Xi Jinping to make the case for a more concentrated leadership system, and other party leaders agreed with that at the time. 

[00:22:36] Kevin

That’s a really, I think, clear summary. Maybe if I could just repeat it back to you and see if you agree with my summary?

You used this concept, logrolling, which I hadn’t heard before, and my interpretation was that you’ have these nine oligarchs, these nine portfolios of power, and there’s this implicit agreement that, hey, I’ll agree to give you the resources, let you do what you want, as long as you agree to let me do what I want. 

You have nine separate silos of power that had, in some sense, no checks and balances between them. Within each silo there was this almost mini overreach of their particular portfolio which was justified based on hyped internal and external threats.

That is the beginnings of overreach. Is that right? 

[00:23:39] Susan

That is right. Of course, logrolling is a term we usually use in a legislative setting, especially in the US Congress. It is, as you describe it, which is trading support for one another’s projects, not checking them.

That’s the important thing. There were no mutual checks. They could have served as vetoes of one another, but they didn’t do that. The main reason they didn’t do that is the cohesion at the top maintaining this facade of unity among China’s leaders is so important. Public splits in the leadership could bring down the whole house of cards, because most authoritarian regimes fall top down, not bottom up.

They fall because of power struggles, splits, open splits in the leadership, which then emboldened the public to come out on the street. That’s what happened in Tiananmen in 1989. 

[00:25:00] Kevin

So, Xi Jinping takes over in 2012, and he’s taking over a situation where you’ve got these. (I’m using nine), but you’ve got these different power bases that have been unchecked, corruption has spread.

Presumably there’s dissatisfaction with this. He comes in and says, “I’m going to clean up.” He starts concentrating power, tackling corruption, purging the top generals of the military. My sense is that was quite an internally, domestically popular move initially. Is that right? 

[00:25:47] Susan

That is right. The anti-corruption campaign was extremely popular among the public. In fact, Xi Jinping has been popular with the public right up until recently. There, due mostly to his overreaching in the zero Covid extreme method, which the public finally was fed up with.

Up until that time our surveys, at China Data Lab, indicated that Xi Jinping’s popularity was pretty strong. Recently the public has started to want at least some modification in the zero Covid approach. 

Among the leadership, the other leaders, of course, this concentration of power, originally they thought it was needed and it would benefit all them. Xi came in acting as if all of the interest groups were going to be supported by him. He actually issued a very market oriented economic reform document, back in 2013, most of which has just been left as words on paper not been carried out.

Originally everyone was very excited and they thought that now we’ve got a strong reformist leader like Deng Xiaoping, and we’re going to see another wave of market reform of investors, both international and domestic. We’re quite excited about that. In the end, Xi Jinping concentrated instead on military reform.

He spent a huge amount of time on that and on shoring up the loyalty of Communist Party members to the party and to him personally. This anti-corruption campaign was also a purge. A purge of rivals, real and imagined, to Xi Jinping. According to a recent statistics from the party discipline commission, almost 5 million officials have been investigated and disciplined since the start of the campaign in 2013.

This purge continues up until the present date. It’s become what Zbigniew Brzezinski called, in talking about the Soviet Union, a permanent purge. The purge is now going after the internal security officials and the discipline commission officials who had been so trusted by Xi Jinping that they did the investigations and the prosecutions of the first rounds of purge against senior officials.

Now they themselves have been put in prison for life with suspended death sentences, because ultimately Xi loses confidence in the loyalty of these people who proclaim themselves to be completely loyal to him. Mao said to Ho Chi Minh, in the 1960s, “When your followers praise you, you know that you cannot believe them.”

Obviously Xi Jinping also feels that same suspicion when you put so much pressure on other political officials to show how loyal they are and express that loyalty through praising you, and through their actions, and carrying out your policies (bandwagoning on your policies), then of course you suspect that they’re not sincere.

They’re doing it to save their own skin. 

[00:30:52] Kevin

It’s fascinating. There’s so many directions we could take this conversation. In terms of how Overreach developed, it started with logrolling between different power bases. Now you have, like you said, this what you call bandwagoning, or over compliance, this desperation to Xi utters something and then people say, “Okay, we’ve gotta do that, but we’ve gotta do even more.” You get policies enacted that maybe he didn’t even want to enact in the first place, but it’s a result of this desperation to show this over compliance or bandwagoning. 

Could you give us a couple examples, specific examples of policies you think where overreach might not even represent what Xi had originally wanted?

[00:31:47] Susan

I think that’s a matter of degree. I think most Chinese officials are really good at trying to figure out what the leader wants. There’s this esoteric language of ideological language, of slogans, much of it Marxist, now. As Kevin Rudd has reminded us, Xi Jinping is immersed in Marxist ideology.

Other officials figure out what direction Xi Jing is heading in, and then as you say, they overdue the way they carry it out. They first of all want to be first on the bandwagon, and then they take it to an extreme degree. I’d say two examples. One, This so-called “Wolf Warrior Diplomacy,” which is Chinese diplomats going right up to the foreign minister, state counselor, National Security Advisor themselves, who gush praise for Xi Jinping and then rudely attack other countries in a way that is not at all diplomatic, because it’s a performance for the leader.

They’re really performing for Beijing. They’re not trying to communicate with the people in the other country that they are visiting or based in. We know that Xi Jinping expressed approval and encouraged this. By the way, a lot of this is done on Twitter, a social media, which is blocked inside China.

Still there are many people who manage to get to it by using VPN. I think Wolf Warrior Diplomacy, especially during Covid when China was giving masks and other medical supplies to other countries to help them in the early stages of the pandemic, and their Ambassador in that country insisted that the leaders of that country come out with television cameras to say how much they appreciated China’s help, how great China was, and if possible to endorse Chinese policies regarding Taiwan or Xinjiang or some other essentially domestic issues.

I’d say Wolf Warrior Diplomacy is an example of that over compliance. The other one that’s just a textbook case of what Deng Xiaoping, in criticizing the Mao era, talked about the over concentration of authority and arbitrary decision making, and then leading to tragedies like the Great Leap Forward and the Cultural Revolution.

Now we have the tragedy of zero Covid. Local officials, during this period in which Xi Jinping made support for zero Covid a totem of loyalty to him. He made all the other leaders in the standing committee stand up and declare their support of this arm in arm with him.

Then other local officials, they were the ones who were under pressure to carry it out. What that meant, of course, was so costly. All of this regular testing, and quarantining, and the lockdowns, and local governments have gone broke doing this. The local officials, of course, have become very unpopular with local citizens because of it.

It looks, unfortunately, all these guys in their hazmat suits rounding up people into lockdowns doesn’t look that different than the greatly forward in the Mao era in 1958, ‘59, when people were rounded up to go into collective Farms. 

[00:37:20] Kevin

That’s an episode where, what, 35 million people were estimated to have died.

Protests in China are not rare. You said there’s thousands each year, and there’s a playbook for dealing with them, which is, express sympathy for the protestors, satisfy some of their demands, blame the local authorities, and then throw the ring leaders of the protests in jail.

Was that playbook initially tried with the Covid protests and then failed? Or did they emerge in a different way? 

[00:38:07] Susan

No, actually, it’s been followed to a certain extent with the Covid protests in the sense that people will be imprisoned for their activities for sure – the ringleaders, or the people who appear to have emerged as informal leaders. What hasn’t happened, other than one thing that Xi Jinping said at a meeting with some European leaders about the protests, he did mention the protests as being caused by the frustrations of young people about the epidemic, so he acknowledged they occurred.

So far, that’s the only time Xi Jinping or any senior leader has really acknowledged the protests. That is very different.

[00:39:19] Kevin

Can you explain that? That’s very different in the sense that, how is that possible?

[00:39:25] Susan

Earlier protests were smaller. They were not nationwide.

These protests against the Extreme Zero Covid Lockdowns were in, I think, 30 some odd cities. That’s still not that many compared to Tiananmen, which was 130 or 150 cities. It was the first time, since Tiananmen, that you had nationwide protests against a policy of the central government. Previous ones in the preceding decades have been local issues, a chemical plant being built and leading to environmental damage, or some actions by local officials that people didn’t like.

This is a broader protest than the ones we’ve had up until now. 

[00:40:39] Kevin

You say that (I found this fascinating) that the public under, Xi has been “trained” (and this is my wording), that because there’s no rule of law, the public knows that unless they stir up trouble, their grievances aren’t going to be addressed.

It’s another one of those ironies that run through the book that there’s this domestic control regime that wants to stamp down on protests. Yet by not having rule of law you create a situation where protests are the only way to get your voice heard.

[00:41:21] Susan

Absolutely. We see that in spades with these protests against Zero Covid, because there had been a lot of rumblings, a lot of criticism by public health professionals, and a lot of discussion, sub rosa discussion in China about the problems with Xi Jinping’s Zero Covid. 

For one thing, all the resources, the human resources and the money, were going into constant testing and quarantining and not into vaccinations.

[00:42:12] Kevin

What I’ve read is that there’s a cultural resistance to vaccinations. 

[00:42:20] Susan

It’s a puzzle. I don’t think we know the answer to this. There’s resistance to vaccinations everywhere.

People were being coerced to stand in long lines in all types of weather to get tested almost every day, and were forced into collective quarantine. I’ve seen, recently, a graph of the collective quarantine numbers going into the millions. The vast majority of those people, almost all of them were simply contacts of people who had tested positive, and tested positive, most of the time, with no symptoms.

These were people being rounded up just because there were contacts or even secondary contacts. It was crazy. The lack of pressure to be vaccinated. Why not make a really big push to get everybody vaccinated, especially the older population? 

[00:43:46] Kevin

Presumably if the testing was a a bandwagoning or overreaction to Xi’s saying Zero Covid, presumably if he said, “Hey, everyone should be vaccinated,” then you would get the same effect manifesting there that all of a sudden, we’d be rounding up people and vaccinating them.

[00:44:05] Susan

Which would’ve been much better because they would’ve been prepared for the transition.

It’s obvious, from the disarray that China is in now, that they didn’t take the time to actually make a plan for the transition, which is shocking. When you combine this with a lot of other mismanagement of the economy over the past decade, it really makes us all question the much vaunted competence of decision making in China.

There’s no longer this aura of this highly competent leadership in China. 

[00:45:03] Kevin

Yeah, it’s funny because I’m sure you’ve been in this position way more times than me, but I think if you roll back the clock 10 or 15 years ago, everyone’s been at a dinner party where someone says, “If we just had a little bit of benign dictatorship, we could get bridges built, schools sorted, look what China does.” 

There was this envy in the West of their ability to get things done, and contrasted with a seeming inability, particularly here in America to get things done. Now, we’re 10 years later, that’s utterly reversed. I think. No one looks at China and says, “Gee, we want to emulate their model.” Which is ironic because you said Xi Jinping entered office wanting to tell China’s story well.

What I kept thinking to myself is the story was told best when they didn’t tell the story. In other words, in the early days where they just went about their business of integrating into the global economy and not really being overly sensitive about criticism of their domestic policy.

People maybe didn’t see them as entirely benign, but they thought, “Hey, maybe this can be Japan or Korea, that over time they could become a more open society, and folded into the international community.” Now, ironically, my sense was that the more Xi wanted people to respect China, the less people have.

Do you agree with that?

[00:46:44] Susan

I think that’s a really very astute observation and it’s what makes me really frustrated and sad about the trajectory that China and US China relations are on right now. For so much of my whole career studying China, China has been rising peacefully. That’s why the subtitle is: How China Derailed Its Peaceful Rise. 

For one thing, I want people to remember that China hasn’t always been the way it is now, and that it was rising peacefully, and that there’s this possibility for China if its decision makers exercised restraint, and tried to create a system of governance, that was responsive to its population, which is now a very large middle class that travels abroad, that sends their children to study abroad.

What they want is a modern life, not a totalitarian dictatorship.

[00:48:18] Kevin

How can China demonstrate to the world that if it wanted to, and it clearly it doesn’t at the moment, but at some point if it wanted to, how could it demonstrate to the world that it’s back to a peaceful rise? It strikes me that once Xi has eliminated these institutional constraints on say turnover of power, he centralized control, you would have to go one step further than where they were already at to say we’re serious about this. 

Ironically, they would have to take deeper steps toward democracy than they would’ve had to have taken now, I think, to demonstrate to the world that they were serious about a peaceful rise.

Is there a path in your mind that China can demonstrate to the rest of the world that its intentions are peaceful?

[00:49:11] Susan

In my last chapter, that’s where I get to policy recommendations, to Beijing as well as to Washington. I make some suggestions to Beijing, that people may think are naïve and impossible. 

I have seen, over the many years I’ve been studying China, some pretty dramatic turnaround. They’re certainly not impossible. Xi Jinping holds a lot of power in his hand, so he has the ability to make these turnarounds. I’ll just mention a couple.

One is close the camps in Xinjiang. That would be huge. Let people, the International Committee of the Red Cross, and other international observers come in and confirm that, yes, they’re still trying to sinicize the Muslim population in Xinjiang, but they’re not forcing them into thought reform camps.

That would be big. Another one is to resume dialogue with Taiwan’s leaders to try to preserve the interdependence, the economic interdependence of Taiwan, and the mainland, and from their perspective, try to prevent the Taiwan authorities from declaring independence.

Hu Jintao did that. They had a lot of dialogue with Taiwan leaders, and they strengthened the direct links in transport and commerce between the two sides. They tried to win the hearts and minds of the Taiwan people. That will be extremely difficult, especially after Beijing’s takeover of Hong Kong.

It’s something that certainly they could do. 

[00:51:51] Kevin

You say in the book that over time, as the control regime has strengthened, that fewer and fewer people are willing to essentially give feedback to Xi, to give him any bad news. If he was going to pivot like that, what would trigger it?

[00:42:10] Susan

Yeah. Does he know how people in the country view him? That’s one of the greatest benefits of elections. Elections are a good indicator of how the public views the government. They try to do surveys. They have all sorts of internal methods, none of which I think are really very reliable.

That was the interesting question after the 20th party Congress, that occurred in October, when Xi Jinping got his third term. Some people thought, okay, this is it. This is the high point. Xi Jinping is riding high. He’s so confident and he’s going to continue in the same direction that he was heading in before.

I felt, in some sense, that he needed to restore confidence after the 20th party Congress, because he had broken all the rules, fired anybody who might question his judgment. He had embarrassed Hu Jintao by leading him out of the meeting, and now with Zero Covid and having to turn on a dime to reverse the policy that just weeks before he and others were saying was the symbol of his leadership because of protests. 

I think he and the economy are in such bad shape because of his own actions as well as other secular trends. I think he does feel a need to restore international confidence and domestic confidence, which could be a motivating factor in a course correction and some moderation in Xi’s policies.

It’s hard to know, very hard to predict, and I’ll be very interested to see. Actually they just had the big National Economic Conference, and they’re trying to persuade private business people to have confidence in the government again, which will be very difficult given the way that Beijing and Xi Jinping has pummeled them beginning in 2020, 2021. 

[00:55:11] Kevin

Yeah. We didn’t get to talk about that, but it really struck me that there’s no precedent for trying to have an open capitalist economy with also a domestic control regime. I don’t know how you pull that off. I don’t know how you encourage entrepreneurs to start businesses when they know, as soon as they become powerful, they’re in danger.

I know we’re coming up at the end of time here and I want to maybe just ask a couple personal questions to you if you’re comfortable with them? I know you’re teaching a course in China that you have been for a while, do you remain comfortable doing that? If the country opened up, would you go back over and teach in person?

Would you feel at risk in any way? Given that the book is quite openly critical of China, and they’ve been very sensitive to those things. 

[00:56:13] Susan

I’m pretty optimistic that they won’t try to prevent me from returning to China. I think there are many people in China, including some senior officials whom I have known for a long time, who know that my my views of China and my hopes for US-China relations are basically that I’m hoping for the best for the Chinese people, and for Chinese society, and for America’s ability to benefit by cooperation with China and interdependence with China.

I’ve been rather outspoken criticizing US policy for overreacting to China’s overreach. Especially in the tech restrictions, and economic restrictions, and human capital visas for Chinese students and visiting scholars. I think people know me, because I’ve been going to China for so long.

I’m so old, so I’m not really too worried about them shutting me out. If they do, they do. I’m not interested in self-censoring myself at this stage in my life. 

[00:58:04] Kevin

Will the senior people in China read your book, do you think? 

[00:58:10] Susan

I don’t know. It’s, of course, not going to be translated into Chinese and published on the mainland. It’s much too sensitive for that. My book, Fragile Superpower was published in Taiwan, so there was a Chinese edition with different characters, and published in Japan and other countries.

I don’t know, I think they’ll probably learn what’s in the book even if they don’t read it. I have to say that, so far, what I’ve heard from people in China is that people are aware of the book and interested in it, so I’ll have to go and find out. Yes, I’m very keen to go.

I’ve been invited to give a talk in Hong Kong in February, and I’m going to try to go to the mainland if there’s no quarantine requirement. 

[00:59:24] Kevin

Yeah, I certainly hope you are able to go back again. I think the book is not only an interesting read, but really just a service to people here who, we all struggle to really understand what’s going on in China. To have someone with such an intimate knowledge of the culture and the politics, write about it and write about, like you say, in a way ultimately with the best interest of both countries in mind.

I think that’s a real service to everyone. I wanted to thank you for writing the book, and I wanted to thank you for taking the time to come and talk about it with us. I really appreciate it, and I wish you all the best. 

[01:00:00] Susan

Thanks so much Kevin, and thanks for giving me this opportunity. 

[01:00:09] Kevin

Okay, and with that, I’ll pass it back over to Niels.

[01:00:13] Niels

Thank you so much, Susan and Kevin for an amazing look into the evolution of China in the past couple of decades, and essentially how they got to where they are today and the derailing of their peaceful rise. Susan had some extraordinary insights to share, which are very important because I think that if we don’t understand China and where it’s heading, it’s hard to predict the future of the rest of the world. 

To me, it was frightening to hear how centralized the control in China is now, and how in the past 10 years or so, 5 million people have been purged under President Xi. That’s the size of the Danish population. The whole concept of logrolling and how the nine or so portfolios of power are now operating without any checks and balances, was fascinating to learn about, but also to hear that President Xi, essentially, was popular with the people until recently when Covid restrictions simply started to overreach.

Finally, it was interesting to hear some of Susan’s proposals to China as to how they could move back to a path that the rest of the world could start to trust again. Make sure you go and follow Susan’s and Kevin’s work, as well as getting  a copy of their books, because as you can tell from today’s conversation, some of these ideas and topics are not being discussed enough on mainstream media. 

From Kevin and me, thanks so much for listening, and we look forward to being back with you on the next episode. In the meantime, take care of yourself and take care of each other. 

[01:01:49] Ending

Thanks for listening to Top Traders Unplugged. If you feel you learned something of value from today’s episode, the best way to stay updated is to go on over to iTunes and subscribe to the show so that you’ll be sure to get all the new episodes as they’re released.

We have some amazing guests lined up for you and to ensure our show continues to grow, please leave us an honest rating and review in iTunes. It only takes a minute and it’s the best way to show us you love the podcast. We’ll see you next time on Top Traders Unplugged.