Shane Leary joins Miles Yu to discuss Xi Jinping's recent meeting with Western business leaders and academics, the first high-profile meeting of this nature since his meeting with American executives in San Francisco in November of 2023. Shane and Miles then discuss the decreasing relevance of the annual Boao Forum, and China's recent cyber espionage and hacking attempts on Western nations.
China Insider is a weekly podcast project from 91ÆÞÓÑ Institute's China Center, hosted by Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world¡¯s future.
Episode Transcript
This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.
Miles Yu:
Welcome to China Insider, a podcast from the 91ÆÞÓÑ Institute's China Center. I am Miles Yu, senior fellow and director of the China Center. Join me each week along with my colleague, Shane Leary, for our analysis of the major events concerning China, China threat and their implications to the US and beyond.
Shane Leary:
It's Tuesday, April 2nd and we have three topics this week. The first is a major meeting that took place this past week between Xi Jinping and Western business leaders and academics, which signals a greater effort on behalf of the CCP to court investors back to China. Second, we turn to the Boao Forum and its decline in interest in influence in Asia. Finally, we discussed the latest backlash against the PRC¡¯S cyber espionage and hacking efforts. Miles, how are you?
Miles Yu:
Very good, Shane. Nice to be with you again.
Shane Leary:
Yeah, same here. So for our first topic, this past Wednesday, Xi Jinping held a major meeting with US and other western business leaders, academics and trade associations in an effort to court investors back to China. This is his first high profile attempt at courting investors since his meeting with US executives in San Francisco this past November. And as observers have noted, the fact that Xi Jinping himself was present made this invitation is a signal that the CCP is quite eager to call back international investors, which it lost in an unpredictable and unfriendly business environment. So Miles, could you talk a bit about this meeting and perhaps more broadly, why have Xi's assurances thus far failed to court international investors back to China?
Miles Yu:
Well, basically it's China's own doing. Xi Jinping's meeting with this high profile delegation really didn't go anywhere. People ask very provocative questions. He gave this hardline answers, and immediately after the meeting, members of the delegation talked to the American media with some kind of anonymity and say, Hey, listen, nothing really worked. The business is still terrible in China. That's the conclusion. So you're absolutely right. She's assurance failed to convince everybody. Fundamentally, that's because China is a planned economy, not a market economy. What really matters in China is not market forces of supply and demand, but what the CCP wants, what the Chinese Communist Party wants. Well, what the CCP wants are basically two things. One is they want to create the dominance of the state-owned enterprises. In other words, the government run business must dominate. And secondly, they want to have a global economic and technological dominance.
Those are two things that CCP want, that's the reasons why the foreign investments are gone. Now, in order to reach those two goals, in other words, to create a preeminence of the SOEs, the state-owned enterprises, and to realize China's global dominance and you have to do a whole bunch of things. Number one, you really have to make a major policy reprioritization favoring SOEs over non-state sector and foreign enterprises in critical sectors. So Chinese economy basically consists of three major portions. One is SOE state-owned enterprise, which is pretty big. And then this is a non-state sectors, the Alibabas, the Tencent, those are privately run, but of course in the environment of China, they're controlled by the government. So it's not really private. There's no private ownership per se, constitution guaranteed private ownership. You only have non-state sector. And then of course the third part of that is foreign enterprises in China. In the last several decades, those sector is huge, and now Xi Jinping driving them away.
So in this new policy under Xi, SOE absolutely has a favored treatment and this basically led to competitive disadvantage for non-State Act sectors and discouraging foreign investment. Secondly, China has this major industrial policy called Made in China 2025, that aims to make China dominant in global high-tech industries. The focus on domestic companies and the technologies in strategic sectors have led to concerns about reduced market access and unfair competition for foreign firms. And the government has enacted a whole bunch of really bad policies that basically scare every foreign investor away. Now, those policies and actions include the following. Number one, they strengthened their regulatory crackdowns. Technology education, and the finance sectors in particular are levied heavy fines. Their operations are restricted. And so Chinese government has overhauled regulatory framework against those companies, most of them foreign. And of course, China also has enacted and enforced with the much more vigor, new data security and the privacy laws.
There are basically the draconian cybersecurity law. The other one is called the data security law. Those laws have imposed stringent requirements on data collection, storage and transfer. These laws have made it the more challenging for foreign companies to operate, especially those in tech and data-driven sectors. And also overall in the name of national security. China has expanded the definition national security to include economic, technological and data elements. The CCP has used national security as the basis to scrutinize and sometimes obstruct foreign investments, particularly in sectors deemed sensitive. Of course, China has this overall approach called the dual circulation strategy. This strategy emphasizes strengthening domestic markets and reducing reliance on international markets while aiming to make China's economy more self-reliant. It has raised concerns among foreign investors about reduced opportunities in the Chinese market. So that's another factor. Of course. Each year China issued this a comprehensive list of areas where the foreign investment were not allowed to go.
Normally the list is issued by China's Commission on Development and Reform ·¢¸Äί. It's called a negative list ¸ºÃæÇåµ¥. So negative list issued each year aimed at improving the control of the party. They actually stifle foreign investment and restricted to or prohibited in major areas, particularly in cultural and educational and the technological area. Those were basically restricted to many foreigners. So foreigners basically lost interest in doing that. On top of that, you have this perennial problem of the very weak or even not at all of intellectual property rights enforcement. The IPR is a major issue. There's some improvements, but the enforcement of intellectual property rights and concerns overall is very weak. No foreign company is willing to give up their trade secrets, and that's the problem with China. So overall, you have this driven policy to strengthen the state sector and to make China the global dominant economic and technological sector and with all kinds of new laws that make China's investment environment very bad. And to quote former Secretary of Commerce remark, China is basically uninvestible. That's why Xi Jinping's sweet talker really failed to convince anybody.
Shane Leary:
So who exactly was Xi Jinping meeting with here, and I guess how were these meetings coordinated?
Miles Yu:
This meetings coordinated by this major China lobby institution in the United States led by this gentleman called Stephen Orlins, the institutions called National Committee for US China Relations. The CEOs are not many. There are only about six of them in this delegation. They were the CEOs of FedEx, Qualcomm, Blackstone, MGM Resorts ¡ªthose are casinos in Macau ¡ªand Broadcom and Citadel Securities. That's it. They're handpicked by this US National Committee on US-China Relations with the N-C-U-S-C-R. The rest of the people in the committee, in the delegation that Xi Jinping made, they were real China brokers. They were the China lobbyist. You look at those people, particularly Steve Orlin and the Harvard professor Graham Allison, they were basically, they were for the audition to be chosen to be the next Henry Kissinger. Kissinger was cultivated to be China's primary proxy in the United States with the exclusive access to senior leadership. So that's why Kissinger was very powerful. He passed away. So China needs another one.
Shane Leary:
Graham Allison is famous for in particular a book he wrote on China, the Thucydides Trap, and he has sort of a peculiar view of US-China relations. Could you talk a bit about sort of his view and that argument?
Miles Yu:
You mentioned you used the word peculiar. He is very peculiar. He is a peculiar old man from Harvard. His views were so out of date and so sort of old fashioned sometimes I almost reluctant to comment on him. Thucydides Trap is based upon a couple of assumptions. Number one, the United States is a power in decline. China is a power that's rising. This is basically the typical Communist party propaganda line. So Graham Allison use this and to fit into his similar scholarly formula called Thucidydes Trap. Number two is Graham Allison¡¯s assumption is that the world's predominantly problem is just that: is a problem between China and the United States. So both of them were actually false, which I will explain a little bit later. But overall, this Mr. Allison¡¯s views and particular views of Mr. Orlins lined up very well with Mr. Kissinger's predominant tone and theme throughout the decades.
That is they want to hype the importance of the bilateral relationship between United States and China. The used phrase like this is the most important strategic relationship, and the whole way to say this is to promote US-China dichotomy. That is the world is just the Chinese versus the American government. That's why summit is very important. Those China lobbyists, their job is to promote this kind of a senior leadership dialogue they called engagement. Secondly, after hyping the supreme importance of the bilateral relationship as the relationship most important, more important about anything else, they hype the consequences of confronting China. In other words, you cannot really confront China. You got to really be conciliatory to China. They're scared of the United States. So that's the whole thing. Mr. Kissinger constantly talk about the catastrophe of the US-China confrontation and you read the tweets after the meeting with Xi, Mr. Orlins said the same thing.
The United States and China must cooperate. We must engage. We must be nice to each other. Otherwise consequences will be unbelievable. To promote this kind of the hype, the dichotomy of China versus the United States, serves basically four goals in my view. One is to moralize the Chinese people. You have Xi Jinping meeting with the leading figures from the United States, the leading democracy of the world to basically elevate the prestige of the CCP leader. You can see they are on equal with the most formidable power of the world. Secondly, but I think more importantly, this kind of hype aims to demoralize the US allies, particularly China's neighbors who were basically bullied by China on a regular basis by neutralizing the United States, by the leader of this group. And then they basically try to demoralize the US allies over there. Three, they serve to isolate the US as the bad guy if the bilateral relationship goes wrong, because US is the only one to blame.
That's basically China's narrative. If you put this two superpower together, if something goes wrong, of course it's always the US to blame. We are too hawkish. China basically rely on the United States to change its tone, its attitude toward China. China demands respect despite the fact that it has done very little to deserve the respect. Number four. Lastly, I think this kind of hype really serves to create a permanent class of China lobby at the highest echelons of US government and the US society. Many of those guys in this delegation, and this people preceded them they were important people, but they're really not that important in the United States, in the US context. But then when they go to China, they are granted the exclusive access to the Chinese leaders. They were like a lottery winners. They were like, they have this probable glee of triumph every time they showed up in the us.
An ordinary professor from Harvard who doesn't speak Chinese, who doesn't understand the Chinese people, will be the people's commissary dispatched to the United States to do the Chinese government's bidding, and they were giving enormous facade of important preeminence. That's a problem. The fact is the US China bilateral relationship, yes, it's very important, but it's not really that the most important. China needs the United States more than the US needs China. We have to understand the basic reality. The China US dichotomy is also a false assumption. It's not about China versus United States alone. It's about China versus the rest of the world. So China not only has a problem with the United States, it has with most of the democracies in the world. So this is basically a false assumption. The CCP is not invincible. CCP is not infallible. Quite contrary, the CCP has weaknesses and vulnerabilities. Now I said it has weakness and vulnerability.
I'm not saying the CCP is weak and is vulnerable. CCP has some very, very formidable capabilities, but also they do not have some other capabilities that were also very critical. Even within their capabilities, they have vulnerabilities. In many ways, it's structural. Chinese government is a government without much credibility. Its corruption is just absolutely mind boggling and stupefying. And most importantly, people in China were fed up with CCP. You don't see that on surface. But if you really sort of get in touch with the ethos of Chinese society, you know that Chinese people, they're really, really up to the neck with the CCP. So that's basically they're very, very vulnerable and weak as well. United States is not really intrinsically tied to China. Those people, those lobbyists make you feel like as if without China were doomed and China had the noose on our neck. That's not necessarily the case.
Chinese treasury holds debt, it's about $800 billion. That's a very small fraction of our debt overall. So even if China basically sold all of them, it would have not any major impact on the US economy at all. As a matter of fact, the Chinese economy is in serious trouble, is dire condition right now for the last couple of years. It has a very low impact on the United States, despite China's holding, hold on many of the critical supply chain. So there's two economies will operate on totally different systems. So this systemic differences make United States relatively immune to the China factor. So they have some hold on us, but we have much more impact on them. So having said that, however, I have to say that the harm of China is not the actual strength of the CCP regime, but the destructive virus, the pernicious model of governance the CCP represents and the CCP is capable of spreading it to the rest of the world.
The model of governance that CCP represents is something that's based on complete elimination of freedoms, total subjugation of the governed and with unlimited tyranny of a totalitarian state, enriched and empowered by the benefits of the modern technology and enriched and empowered by free market and free market system that the CCP does not really deserve. A gentleman like Mr. Allison and Mr. Orlins, I don't know their motives, but exactly what they have been doing is the consequence is that to spread defeatism in the United States by assuming that CCP is rising, the US is in decline. The US has a lot of problems, but we cannot ignore the inner logic of the nation's power, which rest on freedom, free market innovation and limited government. So US is not really in decline in the long term. We're rising through transformation and constant technological and social innovations. On the contrary, China is in decline. It has international isolation. The economy is imploding and people are fleeing. The corruption is insurmountable, and in essence, CCP is not only a pariah, but also a joke.
Shane Leary:
That's very well said. And related to that, our next story, the Boao Forum for the Asia Annual Conference took place in southern China's Hainan province this past week. Chinese legislator Zhao Leji delivered a keynote speech attempting to highlight the way forward for investment in China, as well as the country's commitments to environmentalism and the PRC¡¯s foreign policy strategy. Miles, could you give us the major takeaways from this forum? But before you do, I think for our listeners who may not be familiar, what is the Boao forum?
Miles Yu:
Well, the Boao forum basically is China's idea of the Monroe Doctrine for Asia. China wants to be the hegemon of Asia. So they created this Boao Forum for Asia, BFA for short, more than 20 some years ago. It is totally controlled by the Chinese Communist Party. What it did is it says even though the chair of the Boao can be anybody, currently it's the South Korean diplomat, former UN secretary general Ban Ki-Moon, but the Boal constitution says, the general secretary must be a Chinese official. In other words, the guy who is actually in charge must be a Chinese Communist Party official, and the headquarter of Boao must be inside China permanently. In other words, the chair of Boao board, Mr. Ban Ki-Moon, is just a figurehead. And the Boao served four major missions. Number one, the predominant one is to keep US interference out of Asia. Number two is to isolate the three key US treaty allies, mostly Japan, South Korea and the Philippines in Asia. Number three is to play other key US partners in Asia, particularly Australia and New Zealand against the US. And number four is to keep India, a very major country in Asia, out of the leadership role in Asia. So those are basically Boao. And on top of that, of course, Bo has become the major forum, major venue for the CCP to announce its global initiatives.
Shane Leary:
What has the role of this forum been in past decades? Has it been Successful?
Miles Yu:
Well, more or less, I think it has been unnoticed, I would say by the US mainstream media and also main policy circles because most of the policies were announced to the world first. But there is a particular angle that is, I think we have not paid enough attention to what Boao has done in the past, that is it actually served to consolidate the China-centered sort of orbit in Asia. That is that Asia is for Asians, that kind of thing. China always tried to focus on that. So they announced this global initiative to a group of Asian countries over there, and deals sometimes were made over there. But I think right now in the last several years with the CCP having lost its credibility due to its Covid behavior, it's stance on Ukraine war¡ª China's totally on side of Russia, and its original bullying of its neighbors, you name it. Most of the countries, China bully Asian countries, and of course China's Global Initiative were not all benign. China's hacking every country. So that kind of thing obviously is not really that positive.
So Boao's role has been diminished gradually over the years. This year, for example, 2024, virtually no heads of state of any significance attended. There are only four minor states sent their head of state there, Kazakhstan, Nauru, Dominica, and Sri Lanka, and that's it. Those four countries were tiny, except Kazakhstan, and they were heavily in China's pockets. Even the CCP leadership knows this. Knowing Boaos growing irrelevance, Xi Jinping chose China Development Forum, a new sort of competitive forum in Beijing, this China development forum was held about the same time that Boao conference is going on, but in Beijing. And Xi Jinping himself doesn't even bother to show up. Normally he would show up this year, he's not there.
He sent this. Nor was China's premier Li Qiang, the China guy who's in charge of economy, anywhere to be found in Boao. So the gentleman you mentioned earlier, Zhao Leji, he is basically head of a rubber stamp. National people's Congress has no real power. He showed up. His message was very blunt and not surprising. His messages include global security. China wants to play a major role in global security, and basically another one is anti-United States hegemony. The United States is hegemon, of course, Asia for Asians. He also warned the danger of decoupling from China without saying who's actually responsible for the companies leaving China decoupling from China. So all in all, I think the Boao¡¯s heydays are over, but nevertheless, it's an accurate indication of China's overall situation.
Shane Leary:
And is it just merely China's overall situation, or why do you think it is that this forum has lost its relevance?
Miles Yu:
Well, first of all, because it's become less effective, so Xi Jinping almost abandoned it. And if the leader Supreme Leader say that's not important, and it's not important anymore.
Shane Leary:
For our last story, the Finnish National Bureau of Investigation has claimed that Chinese state sponsored hackers are responsible for hacking Finland¡¯s parliament information system pointing to the group, APT 31, a group of hackers connected with China's Ministry of state Security. And this comes alongside US and British officials filing charges and imposing sanctions under the allegation that Beijing has coordinated a massive cyber espionage campaign targeting millions of political actors, journalists, and private companies over the past 14 years. So Miles, I'd like to get your thoughts on this, but more broadly, I mean, why is China so intent on cyber espionage and hacking, and how successful are they in these endeavors?
Miles Yu:
Okay, so this testified to actually two things. One we talked about earlier that is this shows that China's aim is not just to subjugate the United States, its aim is to become global hegemon. So United States is not only the target, it's a target of Chinese global assault in many, many fronts, right? So the false assumption that the world's predominant problem is China versus the United States. That's just false. Secondly, you ask a very good question, but sensitive question that is, why does China collect all this data? Some of them sensitive, some of them are kind of mundane: hotel registrations and hospital patient's information. Those are critical, but they know overall, why does the country need this? Well, that has something to do with China's ambition to have a dominance in global technology. Technology is data driven. It's artificial intelligence driven.
Every new platform of high technology nowadays is based around the collection of data as complete as possible. Chat has been doing this for pretty much like over 20 years. You can go back, the main incidents that I could document in the last 15 years, for example, you can say in European Union, China hacked into the European Union headquarters, stole a lot of documents, member states, key economic data, personal data, security clearance. That's in 2011. And then China built an African union headquarters in Addis Ababa, Ethiopia for African Union. And that headquarters was hacked from the beginning. So 2012 to 2017, at least that can be documented. This is through the release of Wikipedia, the Julian Assange, not Wikipedia, the WikiLeaks, right? That's basically, we knew that in minute detail. China also hacked Canada into the National Research Council in 2014. And then in the United Kingdom, the Chinese hackers were accused of adopting a cyber attack on the British telecom giants and some of the key industry corporations.
In 2015, the Chinese hackers attacked German Chancellor, Angela Merkel's office, and other German government entities. In India, during the height of the border clash in Ladakh, China hacked India's main frame servers, and that stole a lot of information. 2020, the same year, China also hacked into key offices and entities of Australian government. And of course, nowadays, you just mentioned in the beginning of this section that Belgium also reported that China has been hacking the Belgium system. And Finland, of course, the newest member, one of the two newest members of NATO, their system was hacked. So this is systemic. The reason why China wants to collect all the data for its technological dominance, because as I say, the information collected completely as possible and you can build a more accurate, more efficient, more powerful artificial intelligence system.
Shane Leary:
Well, Miles, I think that's all the time we have for this week. Thanks so much for taking the time and look forward to doing this again next week.
Miles Yu:
Thank you very much and looking forward to seeing you again. Thank you for listening to this episode of China Insider. I'd like to thank my colleague, Shane Leary for taking part in this undertaking every week. I'd also like to thank our executive producer, Philip Hegseth, who works tirelessly and professionally behind the scenes for every episode. To make sure we deliver the best quality podcast to you, the listeners, if you enjoy the show, please spread the word. For Chinese listeners, please check our monthly review and analysis episode in Chinese. We'll see you next time.