Beijing Rules: How China Weaponized Its Economy to Confront the World, with Bethany Allen

Nov 15, 2023 62 min listen

All eyes are on San Francisco today as U.S. President Joe Biden and Chinese leader Xi Jinping meet in a highly anticipated session during the Asia-Pacific Economic Cooperation summit being held in the U.S. for the first time in 12 years. The tightly choreographed discussions are expected to lead to announcements on a diverse array of topics from re-starting climate talks to improving military to military communications and combating the fentanyl trade.

Bethany Allen, China reporter for Axios and author of Beijing Rules, joins Doorstep co-hosts Tatiana Serafin and Nikolas Gvosdev to discuss what motivates Xi and how China continues to wield its authoritarian economic statecraft to expand its illiberal influence worldwide. What can governments do to counter this influence? And what can businesses expect as Xi sits down to a $2,000-a-plate dinner with executives, including Microsoft's Satya Nadella, Citigroup's Jane Fraser, and Tesla and SpaceX's Elon Musk?

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NIKOLAS GVOSDEV: Welcome, everyone, to this edition of The Doorstep Book Talks. I am your co-host, senior fellow at Carnegie Council Nick Gvosdev.

TATIANA SERAFIN: And I am Tatiana Serafin, also a senior fellow here at Carnegie Council, in a very sunny New York, welcoming author Bethany Allen, an Axios China reporter from Taipei, to speak about her book, Beijing Rules: How China Weaponized Its Economy to Confront the World. It is a fabulous book. I have read it diligently twice because it was so good and because I had to reread it before today’s fortuitous events, Biden and Xi meeting right on the day we are talking about Beijing Rules.

I am so excited to see your coverage of the summit, Bethany, and to talk about the book today. Thank you so much for joining us.

I would like to dive right in and tell our audience that we are going to accept their questions in the second half of our chat, so please tee them up. We will grab them when we can.

Let’s jump right in because this is a historic day. There are so many aspects of your book that I think are so important for our audience and for people to start talking about, but number one, because we have had this love/hate relationship and it has been very negative recently, but all of a sudden—this is your latest piece—China state media has turned on the charm offensive. Even bloggers in China are asking, “Do we love America now?”

I would like to start off with that because a great section of your book, which is a learning for all of us here in America—it is something we talk about at The Doorstep—is how much China is actually doing at the doorstep and doing on the local level through its sister city program, through working with mayors and local and student organizations, and I would like to start off because it seems like Xi has written so many love letters in the last week or so ahead of this summit.

BETHANY ALLEN: Isn’t that amazing? He has been very busy.

What we are seeing from the Chinese side ahead of the summit is quite extraordinary. There has been wall-to-wall positive coverage, if you will, of people-to-people ties in the U.S.-China relationship, whether historically or to today. An example is that Xi wrote a letter to a 103-year-old World War II veteran who was a member of the Flying Tigers, which was a squadron of American pilots who helped fight the Japanese together with China, very symbolic there of the solidarity between the United States and China and that regular American soldiers and Chinese soldiers once had in their fight against the Japanese during World War II.

We have seen, for example, the Chinese state media once again bring up Xi Jinping’s relationship with Muscatine, Iowa, where he stayed for a number of weeks in 1985 with a host family, and he has maintained some ties with the people he met there over the years, so once again bringing up his “old friends in Iowa,” which was the phrase they used. Also, the Philadelphia Orchestra was in Beijing last week to give a performance in celebration of the 50th anniversary of their first-ever performance in China.

This has been wall-to-wall across Chinese state media, and I want to emphasize how unusual this is now. The last time I saw this kind of positive coverage of the United States in Chinese state media was in 2015, when Xi Jinping had a meeting with President Obama and when the U.S.-China relationship was still on a pretty good footing. The last time that Xi was in the United States for the Mar-a-Lago summit with Donald Trump in 2017 we did not see this kind of positive emphasis on Americans and American society, and certainly not last year when Xi Jinping and Joe Biden met for the first time as leaders of their respective countries on the sidelines of the G20 summit. It seems that what we are seeing is a good-faith effort or the strong desire to appear as though China is putting in a good-faith effort to not only improve their state-to-state ties but to help ameliorate the image of the United States among Chinese people.

NIKOLAS GVOSDEV: Bethany, can I ask you the motivation behind this uptick of positive coverage? Is this directed because China wants some things from the United States that this is a, “Let’s be friends, and here is our list of things we would like?” Is this coming from a position of confidence that China can afford now to be more positive in its coverage of the United States because of China’s rise? What is the motivation about why, particularly prior to this meeting, given what we have seen in U.S.-China relations certainly over the last number of months or even over the last number of years—competition, sanctions, we are checking you, you are checking us, we talk about decoupling, de-risking, and the like—what is motivating the leadership to decide that now is the time to accentuate the positive in the relationship?

BETHANY ALLEN: There are several factors. First is that China’s leaders, the same as American leaders, understand that the stakes are high. We are talking about the world’s two superpowers, both nuclear-armed superpowers, and the U.S.-China relationship has taken a nosedive in the past year and a half. That is clearly dangerous, and the Chinese side knows that as well.

We saw an interesting admission of this from Xi Jinping in fact a year ago when he met with Biden, and when he said something to the effect of, “We have not met the world’s expectations in terms of how we are managing this important bilateral relationship.” This is something that Xi Jinping also recognizes, that the world expects and needs these two countries at a very bare minimum not go to war, get along, and preferably work toward some crucial common goals, such as combatting climate change.

That is not the only thing that is going on. What is also happening is that Xi Jinping realizes that China’s economy now is truly slowing. It is not experiencing the rapid economic growth that China has enjoyed for decades, but there has been a true slowdown, a real estate crisis, and a debt crisis. China needs trade partners. It needs to have more robust business and trade ties with more countries.

That is exacerbated by efforts, spearheaded by the United States but now increasingly widely adopted across Europe and democratic partners and allies in Asia, of diversifying supply chains and business partners away from China because of the risks that investment in China now poses. Let’s be clear. Those risks have been created by the Chinese Communist Party (CCP) because of the way they weaponize ties to their economy. Xi Jinping realizes that he needs to do something different than he has been doing for the past four or five years.

What is also in the cards here is that the United States is not alone in this the way the Trump administration was in 2018 when they began their pivot to a much tougher Chinese policy. Now European nations are absolutely coming along, along with Japan, India, and other nations. I think Xi recognizes that he cannot continue to allow “wolf warrior” diplomacy and the same kind of hard edge he adopted in recent years.

TATIANA SERAFIN: Although saying that, a lot of your book talks about his economic statecraft and the levers that he can pull with corporations because of our four-decade pivot toward government helping regulate business to this more deregulated, go-for-it market economy, where companies seeking profits will make concessions to be in the Chinese market. There are a couple of examples here in the book. I would like to talk about Zoom because I admit I did not know the background of how deeply Zoom was tied to China, and I think maybe some of our audience might not. I would like to talk about that as an example of companies acceding to belong to the Chinese market.

The other example you had was Meta or Facebook not being in China, although I just recently read they made a deal to sell their virtual reality equipment there. Everybody still wants a piece of that pie.

BETHANY ALLEN: Absolutely. We have seen headlines for the past few months now proclaiming the end of the Chinese economic miracle or saying that the Chinese economy is doomed. That is an exaggeration, and it is important to note that the Chinese economy is still the second-largest economy in the world and is still growing. It is not even in recession. It is still an appealing market for many, many businesses around the world.

To get into the issue with Zoom, Zoom is an American company founded in California by a Chinese-American in 2011, but what sets it apart from its counterparts like Google Meet and Webex is that not only was it selling its platform in China, but it actually had most of its research and development team based in China. We will come back to that in a minute, but before we do, what happened initially to Zoom is very similar to what we have seen happen to other companies.

In September of 2019 the Chinese government blocked Zoom as a platform in China, so Chinese consumers did not have access to the video-conferencing software Zoom. Chinese law enforcement and security officials came to Zoom’s headquarters in Hangzhou and said, if you want to be able to sell your product in the Chinese market again, you need to basically submit what they called a “rectification plan,” which is, you need to show us how you are going to better implement the censorship that we demand, more actively surveil your users, and respond immediately to requests from our security services to hand over information about your users upon demand.

Zoom hopped to attention and put together a rectification plan. This was not public. Zoom being blocked in China was public, but the fact that Zoom was required to submit this rectification plan was not public at the time. Two months later the block was lifted, and Zoom was once again allowed to sell its platform to Chinese users.

As part of this rectification plan, however, Zoom was also required to appoint one of their employees as a liaison with China’s security services, its Ministry of State Security, which is its intelligence arm, and the Ministry of Public Security, its law enforcement arm. This is where the fact that it had around 700 employees based in China matters. It is interesting. In Zoom’s public disclosures in the United States it acknowledged that having these employees based in China was a reputational and security risk, but in that public disclosure the company said it was worth it to them because it made the company more profitable. The operating costs were lower, and it was good for their bottom line. So they decided to keep these employees there.

Well, one of those employees then was appointed as the liaison to the public security services, but what happened when the pandemic hit—of course that was great for Zoom. What a windfall. They went from 10 million daily users to 300 million daily users by April of 2022.

That was also a windfall for China’s security services, who realized now that they had access to hundreds of millions of global users, so they started making demands of this liaison to send information and provide personal information about users who were based outside of China. This liaison employee also began trying to shut down meetings that were happening out of China. One of these meetings he was able to successfully shut down, for example, was a Tiananmen memorial, and he did it in a pretty interesting way. In some cases this employee, whose name was Xinjiang Jin, had to subvert some of Zoom’s own internal safety protocols, but in some cases what he was doing was known to other Zoom employees.

This is an example of him subverting Zoom’s policies. He created a set of email accounts and fabricated evidence that one of these Tiananmen memorials that was happening in New York was breaking Zoom user guidelines, and some of the evidence that he submitted through these various different email accounts were screenshots showing that some of the users at this meeting were Islamic State of Iraq and Syria supporters, some accounts were Basque separatists, some accounts were porn accounts, and some accounts were gambling accounts.

If Zoom had done even the slightest bit of due diligence on these supposed complaints, they would have realized that it made zero narrative sense for all these different accounts to be in this pro-democracy meeting that was being held in New York. In any case, it worked, the meeting was shut down, and this was one of several meetings that were affected.

This is an example of how, in order to please Chinese security services and thus be granted ongoing access to the Chinese market and in order to support their bottom line, Zoom essentially let the enemy in through the front door, since it was an official Zoom employee, and this Zoom employee became in fact an embedded agent of the Chinese government in the company itself.

TATIANA SERAFIN: I think this is an example that people at our doorstep or all Americans can understand. Most people here know of Zoom and use Zoom every day. It is a great example of the tech interconnections that are so important, which you then go into in terms of further surveillance, the opportunities that China has to create this network of surveillance outside of China, so not only surveillance that impacts citizens of China but also people outside of China.

It also impacts the operations of a U.S.-based company in the United States. I think that is important to parse out. I want to talk more about surveillance, but I do want to say that one of the justifications that you mention in the book for Zoom and for other companies to accede to these demands to be in the market is: “Well, you know, that is the cost of business. Of course we have to appreciate their laws and abide by them. That is just what all businesses do.” It is very interesting to me the ways that companies justify the things that they do, that people, investors and regular people in the United States, might not understand.

Before we go to surveillance, can you talk about any other examples of companies that are doing this? You mentioned Hollywood. We did have a podcast about Hollywood as well and what it does to China. I think it is worth repeating how other sectors accede to the demands that the Chinese market asks for.

BETHANY ALLEN: Absolutely. There are so many examples from so many of our most popular and famous brands and companies. If you want to go to the Hollywood example, I would like to go back to that one over and over again because it was such a success from the Chinese government’s perspective.

When did this start? It started in 1997, when there were two Hollywood movies that showed Tibet in a very compassionate light and showed Tibet and the Tibetan people as victims of Chinese military aggression. One of them was Brad Pitt’s Seven Years in Tibet and the other one was Kundun, a Martin Scorsese and Disney film. What happened was that both of those production companies, Columbia TriStar and Disney, were blocked from the Chinese market after that. Columbia TriStar was essentially permanently blacklisted. That hit the whole Hollywood industry like an earthquake. It shocked everyone.

For the next 26 years, up to the present day, there has not been one single major Hollywood film that has crossed any major Chinese Communist Party red lines—no movies about Tibet, no movies about Xianjiang, no movies about Chinese human rights violations, no movies about Tiananmen, none of that.

What is especially extraordinary about this is that in 1997 the Chinese economy was about one-tenth the size of the U.S. economy. It did not have the massive pull that it does now. Even more amazing, the Chinese box office at the time was negligible. Those production companies did not lose money in the Chinese market for years, even if they had been blocked for years, because there was no money to be made. That level of control and censorship was effective merely on the promise of future wealth. I would like to emphasize that.

We see this these days because now there is money to be made. There are fortunes to be made and lost in the Chinese market across pretty much any sector you can imagine, so we see this kind of mechanism being used with hotel chains like Marriott and fast fashion and clothing retail companies like Zara. We have seen it with the National Basketball Association (NBA). I think we are all familiar with this example as well. During the Hong Kong pro-democracy protests in 2019 Daryl Morey, who was at the time manager of the Houston Rockets, tweeted in support of those protests, and the doors to the Chinese market essentially slammed shut to the NBA at that time, and it was estimated that the NBA lost $200 million in revenue from that, so there are lots of examples. It does not just affect U.S. companies, of course. It also affects companies from any country in the world.

TATIANA SERAFIN: Speaking of companies, a bunch of business leaders are sitting down with Xi today. Tonight I think they are having a big dinner. What are you expecting from that? I know Musk is going to be there, Musk the person who operates outside of any diplomatic system. Do you think he is going to pull any levers himself with Xi? Does he have any levers to pull with Xi, or is all the economic statecraft that you talk about in your book and is all that power in Beijing?

BETHANY ALLEN: This is very interesting. According to some reporting that I have seen, Xi Jinping actually made this a demand. He said, “If I am going to come, if I am going to have this meeting with Biden, I insist that I have a meeting with U.S. business leaders.” That meeting is happening. It is $2,000 a plate, $40,000 to sit at Xi’s own table.

I think the clearest way to understand this is that Beijing has long viewed business leaders in any country in the world as a de facto pro-Beijing lobby. It is kind of a back door to U.S. politics. China gets that the U.S. political system is heavily influenced by corporations and heavily influenced by corporate campaign contributions and that that is a great way to get the attention of politicians and to get people with loud voices in Washington D.C. and in our national debate to speak up for “softer on China” policies.

This has worked extremely well for China for a long time. In fact, just a few years after the Tiananmen massacre, President Clinton campaigned in 1992 on a platform talking about the “butchers of Beijing” and how he was going to be tough on China, but within two years he was the one who de-linked trade and human rights in the relationship with China, and we now know that he did that in significant part because of extensive lobbying by business leaders in the United States who wanted access to Chinese markets and who wanted money.

Certainly China has benefited greatly from foreign direct investment and from having access and partnerships with U.S. companies and with U.S. markets, so it is a win-win for American business leaders and Chinese leaders as long as you don’t care about human rights or political values, which speaks to the main point that I try to make in my book, that we should not leave this up to business leaders, that political values are within the realm of governments and should not be left up to the market to decide.

NIKOLAS GVOSDEV: I want to pick up on your last point there about the business leaders and the motivation, which is profit. Are there things that China has been doing in the last number of years that for business leaders, they may not care as much about the human rights or political values question, but they will care about things that may impact the effectiveness of their business operations.

I had some students ask about this. They wanted to know more about the increased demand for Western, foreign companies to create the Party cells. You talk about the liaison at Zoom with the public security bureau, but the idea that the Chinese employees organizing Party cells and the sense before that that might have been seen as pro forma—“Fine, we have a Party cell”—but the idea now that that Party cell wants to vet candidates for promotion and it wants to be able to dictate corporate policy and business policy. What is happening with that, and is there a point at which a Western business leader who says, “Fine, I am not interested as much on the value side,” is going to say, “This is too much interference in my bottom line?” What is happening there with these demands for Western firms to be much more integrated into the Party’s command-and-control structure?

BETHANY ALLEN: There are two parts to your question. To the first, are there practices in China where there are government demands that have been harming the bottom lines of U.S. companies, and the answer is yes. There are numerous longstanding practices, including, for example, forced technology transfer. There are laws in China that require in many situations that foreign companies find a local joint venture partner if they want to engage in investment in China, and what has happened over and over and over again is that the joint venture Chinese partner requires that the U.S. company hand over their technology in order to form this partnership in the first place. So the U.S. company does, thinking they will still make a lot of money from it, and then the Chinese partner ends up absconding with that technology and making a ton of the money, and the U.S. partner gets shut out of the market. This has happened over and over and over again.

There was a report a few years ago from the U.S. Trade Representative’s Office about this and the complaints they had heard from U.S. businesses, but it took a long time for that practice to finally upset enough U.S. businesses and to hollow out enough of them and force enough of them into bankruptcy for this to be raised to the level of something that the U.S. government was interested in pushing back against.

In addition, there are many barriers to U.S. companies in China, but what we have seen in the past couple of years with growing intensity is this scrutiny of U.S. businesses in China and especially companies such as auditing firms or due diligence firms, in part as a result of China’s data laws and recent amendments to its cybersecurity law, which basically casts all information as belonging to China. So any company that finds information and then transmits that data across borders, that act of transmission of data could potentially fall under the remit of this law, which has been very chilling for business.

We have also seen Chinese authorities launch raids on big accounting firms including Bain and others, ratcheting up the pressure over the past year and a half. Another thing is targeting American and other foreign business executives with exit bans, which means they are not in prison, they are not detained, but their passports have been taken away and they cannot leave China due to an investigation or some kind of dispute or something like that.

As a result of years of this, this year in fact, just a few weeks ago, maybe last week, new data from China showed that for the first time in decades foreign direct investment actually fell. It has been rising without stop for decades. That does not mean it has dropped down to zero—it is just a little tick down—but it is the first time in decades that it has gone down.

I want to go back a few years. I mentioned earlier the Trump administration pivot to a tougher policy on China. These trends were already apparent by 2015, 2016, and 2017 within the U.S. business community. The U.S. business community has never been and probably will never be the loudest critics of Beijing. They are not. But there was a sea change where they went from always pressuring the U.S. government to make trade with China easy to walking back from that, saying: “You know what? Some things aren’t so great here.” They have stopped pressuring the U.S. government to have softer policies on China, and that was a prerequisite for the Trump administration being able to adopt some of the policies that they did.

NIKOLAS GVOSDEV: The question of the Party being enmeshed.

BETHANY ALLEN: Yes, political controls. Overall, Xi Jinping has revived the Party and brought it back to the center of economic, political, and even social governance in China over the past ten years as he has been China’s leader, and in the past five years he has targeted both Chinese businesses and foreign private businesses with Party control, whether that is expanding Party branches outside of just state-owned enterprises and to plain old private businesses but also elevating those Party branches to include people who are on the boards of companies and then using those Party branches to make demands.

This is part of a larger push. Also, for example, Xi Jinping has elevated the status of the United Front Work Department and has explicitly put private businesses under the supervision of the United Front Work Department. The United Front Work Department is a bureau of the Chinese Communist Party that is tasked with amplifying voices that are friendly to the Party and marginalizing dissent, so trying to bring all the different and disparate actors within Chinese society and economy under the larger umbrella of Party control. We have seen that also now being targeted to foreign businesses on Chinese soil.

TATIANA SERAFIN: I would like to open up the chat to your questions. We are here for you. Bethany’s book is robust with so many great examples that we could go on forever, but we want to give you an opportunity, so please put your questions in the chat.

Since you mentioned the United Front I would like to continue with that trend in terms of influencing what you mentioned—and this is a number I had not known—the 60 million Chinese in the diaspora, who are in business, who are students, who are in education, and who are active in their communities and using these local connections, going back to the top of our conversation, to create goodwill but also maybe to—and I like how you put it in the book—meet people when they are local councilmen, before they become mayors, before they go to Congress, and before they become senators. That is so interesting because it is the long game. I don’t think the United States plays the long game very well. China does, and this is one way.

You have a great example in the book about an operative who ended up doing a little bit of damage in the San Francisco area actually. Maybe we can talk about that a little bit since we are all in San Francisco today.

BETHANY ALLEN: One of the best/worst examples I know of of China’s attempts to influence U.S. politics on a subnational level is someone named Christine Fang, who was a suspected Chinese intelligence operative operating in the San Francisco and larger Bay Area from 2012 to 2015. She was under the direction of the Ministry of State Security, and what she tried to do—and was very successful at—was identifying up-and-coming political leaders, so mayors and city councilmen, who would later become representatives, senators, or whatever, becoming close to them, establishing close and trusted relationships with them and being useful to them. From an espionage perspective, if you are a high-ranking U.S. official and there is someone you have known for ten years, a trusted friend, that is espionage gold.

She was very good at cultivating these kinds of relationships, and in her case she used a sister city relationship—speaking of subnational engagement—that she helped form between the city she was in in California and a city in China as a kind of launching pad for some of her outreach. She used that as a platform to attend U.S. Mayor’s Conferences around the United States and made close connections with U.S. mayors.

You mentioned that that kind of thing does damage. I completely agree with that because it takes legitimate organizations and legitimate grassroots people-to-people exchanges like sister city relationships or like the Asian-American political action groups that she was part of, totally legitimate relationships, and casts a pall of suspicion over them, so I think it is wrong of the Chinese government to abuse this kind of genuine grassroots engagement in that way.

NIKOLAS GVOSDEV: Can I just put a finger on that because I am fascinated. You are talking about an operative working in the Bay Area, one of the oldest American Chinese communities in San Francisco, and it has been a big center of Chinese immigration, but it has also been a big center in the past both for Taiwan—there are a lot of ties in the Bay Area Chinese community to Taiwan—and more recently to Hong Kong with support for the Hong Kong activists. How does China look at that? It is not simply influencing vis-à-vis the United States but trying then to influence or decrease support for the Guomindang traditionally for Taiwan and then to try to prevent or blunt diaspora Chinese communities, particularly in the United States, from supporting and sustaining the Hong Kong democracy movement.

BETHANY ALLEN: To answer your question most thoroughly I will have to go back more than a hundred years to the fall of the Qing dynasty. The Qing dynasty, the last imperial dynasty of China, also pursued its critics. There were people who were pro-democracy intellectuals during that time, and the Qing dynasty tried to execute them, so they fled into exile in Japan, Hawaii, and the United States. They organized and did a lot of fundraising from exile, including Sun Yat-sen, who spent quite a bit of time in the United States and later went on to found the Republic of China in 1911.

One thing the Chinese Communist Party does well is they try to learn from history, so they look back at the fall of the Qing dynasty and say, “These Chinese exile communities are very dangerous,” and the CCP knows that firsthand because early CCP members were also basically in exile from China, and they also organized and did fundraising in the 1920s and 1930s in Japan and were able to come back to China and eventually overthrow the Republic of China.

The CCP knows firsthand that pro-democracy sentiment in overseas Chinese communities is an existential threat to them, or they view it as an existential threat, so the United Front Work Department’s original goal in terms of its international work was to essentially minimize support and minimize the voice of the Guomindang, which was ruling from Taiwan.

After Tiananmen in 1989, when China let a lot of young, pro-democracy, idealistic Chinese people leave China—they flooded into overseas Chinese communities in the 1990s—the Chinese Communist Party’s United Front Work Department went into overdrive and set up a lot of organizations in dozens of countries around the world to try to coopt organizing in these communities and worked very hard to coopt the existing organizations.

Overseas Chinese communities, like all communities, form organizations to help support their lives. They have cultural organizations, business organizations, and professional organizations. This is totally normal. The United Front Work Department tried to come in and coopt them, to try to make it so that there is no way for pro-democracy or anti-CCP Chinese people to effectively organize abroad.

One result of this and one thing I would like to emphasize here is that the most important result of that is that this is an erosion of the rights and freedoms that people in Chinese communities in America and other democracies deserve to have. When it is harder for them to organize freely on U.S. soil, to have their own Chinese-language community newspapers that can publish freely whatever they want, it is an abrogation of their own rights living in the United States, and that is what the CCP is able to do.

An approach to try to fight this is not to look at Chinese communities in the United States and try to find the spies but rather to view it as: “How can we help restore the political and civil rights that these communities deserve?” What do they want from us to help them be able to organize freely?

TATIANA SERAFIN: I think that is so important if you look at our First Amendment here, freedom of press, speech, and assembly. I do think there is much more to talk about on that in terms of how China’s surveillance operation is able to promote disinformation and to get at these communities.

Before I go there, you do have some recommendations at the end of your book that are super-strong, and one of our questions here is: “It looks like government controls business in China and business controls government in the United States. What is the right way to go forward?”

You do have some recommendations on changes that we can make here in the United States for business-government relations. I think it is probably about time for us to start looking at some of those.

BETHANY ALLEN: One of the biggest points that I want to make is that I refer to the way that the Chinese government uses the power of its economy to shape the decision-making of governments, companies, and individuals around the world to bring them more in line with the Chinese Communist Party’s core interests. I call this “authoritarian economic statecraft.” One major point in my book is that the way to push back against this is through building a democratic economic statecraft because prior to a few years ago the way that we thought about this was that there was not a role for government to push back against this. If a company decides to censor its own employees or decides to adhere to Chinese government censorship directives, there is nothing that the U.S. government can do about that. Governments cannot act on that. It has to be civil society action. All we can do is a consumer boycott, or we can have a hashtag. We can name and shame, but it has been proven time and time again that naming and shaming and consumer boycotts are not nearly enough to change the behavior of companies because the massive monetary incentives they get from the Chinese market vastly make up for whatever kind of reputational harm they might suffer temporarily in the U.S. market.

More importantly I think, even from a pragmatic standpoint, is that it is not the job of CEOs to uphold our political principles. That is the job of a government. I think with the embrace of what I would call neoliberalism, this idea that free markets are the same as democracy, not just that free markets lead to democracy; it is that they are in fact the same thing. What we have learned in the past 30 years is that that is simply not true. You can have a capitalist country that is very authoritarian.

I think what we have to do is restore the idea that it is a government’s job to defend political principles. It is putting CEOs on a kind of moral pedestal to say that they should willingly sacrifice hundreds of millions of dollars in revenue for free speech when we do not make those demands upon ourselves. So, functionally speaking, what should we do?

I have 14 recommendations in my book on how to address this issue domestically and then more recommendations about how to address this in a multilateral way. I will just highlight a few from each.

Multilaterally a suggestion—I did not come up with it, but I do support it very much—is the idea of creating something like an economic North Atlantic Treaty Organization. You can call it a Mutual Economic Defense Pact, you can call it an Economic Article 5, whatever, the idea that a group of like-minded countries agree in advance that if one of them, one of their sectors, or their country overall is targeted by China’s economic coercion, they will spring into action to help each other, to open their markets to products from the affected sector and perhaps to issue retaliatory tariffs or some kind of punitive measure against China for this, as a form of deterrence. This over time could help push back against the way China exports its authoritarianism.

Domestically in the U.S. case it is very difficult to address this in some cases because we do have very polarized politics at this time, but I strongly recommend that the United States adopt campaign finance reform to reduce the power of corporate donations in our politics. I think that would be healthy for our society in many ways, but also very specifically on this issue, or even introduce a public finance option as many developed democracies have. That is not a particularly realistic goal at this time, but I think in the long term that is something we should absolutely work toward.

Something that is a little bit easier that I think would have bipartisan support is adopting FARA registries on the state level. FARA is the Foreign Agents Registration Act, adopted in 1937, that requires people or companies who are operating on behalf of a foreign government or entity to try to influence the U.S. national narrative to file mandatory public disclosures. It does not forbid that activity; it just brings transparency to it, so we know who is lobbying on behalf of a foreign power. But that only exists at the federal level. There are no state FARA registries.

So we get back to the question of subnational engagement. There are no registries for lobbying by foreign government-affiliated entities on the state level. There is no transparency around that, and I think that adopting FARA registries on a state-by-state level is a win-win all around. It is transparency, it does not actually prohibit anything, and it just makes American citizens and voters more informed.

TATIANA SERAFIN: Speaking of being informed, a couple of times in the book you say that the information was not published by the government and did not get out, so there is a disconnect between what is going on, what the government might be looking at and investigating, and what the public knows. How can we engage the public more in this conversation?

BETHANY ALLEN: Some of what I was talking about has gotten a lot better or is starting to get better. One example that I bring up is—let’s look at the period from 2012 to 2016. During that period the Department of Justice (DOJ) and its various counterintelligence units was doing a number of investigations and doing their work related to the Chinese government-related espionage, Chinese government-backed espionage and industrial theft in the United States and also cases of political interference from China in the United States. In the Department of Justice they were seeing these cases rising exponentially of what the Chinese government was secretly doing in the United States, but at the time the modus operandi was for the DOJ to disrupt this behavior rather than to pursue indictments and arrests.

Why does that matter? Because when the DOJ counterintelligence team disrupts a foreign operation they eliminate the threat, but no one knows about it. There is no mechanism for that to become public. It is classified, but when the DOJ pursues indictments, those are public indictments and in some cases very long and very detailed with lots of information about what was actually happening. Within the DOJ they were seeing that what they knew and what was available behind the classified firewall about what the Chinese government was doing in the United States was getting more and more alarming, but the U.S. national narrative about China was staying the same because people did not know about what the Chinese government was doing.

During the Trump administration and continuing now into the Biden administration there was a very conscious decision to stop simply disrupting operations and pursue indictments in order to get some of this information out there in the public space for people to know about and for the policymakers to be able to debate and thus to be able to form policies to better protect the American people, American society, and American businesses from the Chinese government’s actions.

This is something that, like I said, we are continuing to see into the Biden administration. Something I have been particularly glad to see is that now the DOJ has an Office of Transnational Repression that pursues cases of surveillance, harassment, and threats against namely Chinese people in the United States that the Chinese government does not like. It pursues those cases using the powers of government to investigate them and then pursues indictments, arrests, and trials of people who were complicit in that. That has done so much to get some of what has been done in secret for decades out into the light of day so that we are now much clearer about the role of these, for example, United Front-backed organizations in transnational repression and trying to disrupt freedom of assembly and free speech, harassment, and issues like that. I have been very glad to see that.

NIKOLAS GVOSDEV: In bringing that up and taking a question that has come in from the audience on this, transnational operations, restricting speech, controlling narratives, working at the subnational and local levels, where does the whole Confucius Institute project fit into this? Questions have been raised, and it is just, “Oh, it’s just about learning the language,” but then there definitely seems to be an ideological component, the off-limit topics that you cannot discuss, and so on. How does that fit into this transnational strategy?

BETHANY ALLEN: There are two separate concerns with Confucius Institutes. The first is what you mentioned, the issue of censorship. Confucius Institutes are under the Ministry of Education in China, so they are a government ministry, and that means that the curriculum that is taught there is going to be a Chinese government-approved curriculum. That means that they are going to talk about Taiwan as a rightful part of China, they are going to talk about the happy-dancing minorities in Tibet, they are not going to talk about the real challenges of the Chinese political system, et cetera.

NIKOLAS GVOSDEV: Nothing happened on June 4th.

BETHANY ALLEN: Right, right. What famous South Park, Family Guy, or The Simpsons episode has, “On this site on June 4th, 1989, nothing happened”? That is baked in.

In practice on the ground, what Confucius Institutes do or do not do or how proactive they are about trying to go around and censor things depends on local leadership, sort of on a case-by-case basis. Structurally they are designed to censor. That does not have any place on an American university campus. That is I think what is problematic about it.

Now of course, language instruction is so important, and a real issue here is that many colleges and universities do not have the funds to have their own Chinese language departments, and many of them do not have the kinds of resources that would make them appealing as a place to get funding from the U.S. government to form a Critical Language program or something like that, so there is a shortfall of funding for Chinese language education. I think that is why Confucius Institutes have received such a warm welcome in the United States. At their peak there were more than a hundred of them.

As concerns about Confucius Institutes grew, there was a change in how the U.S. Department of Defense gives money for Critical Language funding. There was a change that said, “If you have a Confucius Institute, you cannot receive this funding.” As a result mainly of that but also just overall pressure most of the Confucius Institutes have been closed within the past six years and now there are only around nine left.

The other issue that is I think a little more complex and a little more subtle than pure censorship is that there have been instances when the Confucius Institute has pressured a school beyond the walls of the classroom to stop behavior on that campus or to not let things happen on that campus because it will threaten the relationship. That is a little bit different. What that is that the very presence of the Confucius Institutes in some cases can be used as a kind of hook: “We have hooked you, you have this relationship with us, now you need to maintain this relationship.” It can be used as kind of a threat: “If you do this”—if you allow the Dalai Lama to come or whatever—“maybe we will pull out, we will leave the school.” That is a little different than direct censorship.

TATIANA SERAFIN: I am so excited to keep talking about Beijing Rules. We only have a few minutes left. I want to ask you, what are you working on today? What are you looking for as these leaders meet? What stance is Xi making? Is he going to go friendly? Is he going to be threatening? You mentioned some of these words. There is this back-and-forth tension. What are you working on today as we look into this summit of leaders on a national level and subnationally? Is there going to be a major announcement? What can we expect?

BETHANY ALLEN: I think Xi Jinping is making a real effort to appear friendly and accommodating while still appearing strong. This is going to be different than how we have seen Xi in several years. There is every sign that the Chinese side is wanting to come to several agreements, have real deliverables, and have the U.S.-China relationship be on a sturdier and more stable footing going forward.

What I am expecting is that the two leaders will announce the resumption of military-to-military communications. The Chinese side cut military-to-military communications after Nancy Pelosi visited Taiwan last year, which the Chinese side saw as a major provocation.

That matters a lot because there have been a growing number of military incidences in which the United States and China absolutely need to talk to each other. We saw that in February with the Chinese spy balloon incident. It went over the United States and created a huge hullabaloo. The U.S. military shot it down once it was over the ocean. The Chinese side was very upset by that. At the time, the U.S. Defense Secretary Lloyd Austin tried to make a call to his Chinese counterpart, and they refused to pick up the phone at this very sensitive moment.

One of the other channels of communication that the Chinese cut off last year was the Military Maritime Consultative Agreement. It is a regularly scheduled channel for operator-level people—people who operate ships, people who operate aircraft—to get together in a room or virtually and talk to each other about rules of the road and just to get to know each other a little bit and understand each other, so when there are encounters over the South China Sea or in the Taiwan Strait that the risks of miscalculation are lowered.

If you want to talk about risk mitigation, what is the biggest risk that everyone agrees that we want to mitigate? The risk of an unintentional military conflict. If a country wants to go to war, they go to war, but a collision, or something that results in catastrophic consequences that no one wanted. This is totally preventable, and military-to-military communications are one key way to prevent it, and we are expecting—and Axios reported last week—those communications to be resumed, and that is huge.

We are also looking at an agreement that the Chinese side will work to crack down on the production and export of fentanyl. This is something that the U.S. side has been demanding for a while, and the Chinese side again cut off their participation in a fentanyl-related working group last year. We just saw this week after the U.S. and Chinese counterparts met a climate cooperation announcement, and I do expect Xi and Biden to talk about that.

They will also spend a lot of time talking about Taiwan. We are not expecting any kind of announcement or any new public assurances on the issue of Taiwan. It is already very tense. I live in Taiwan. Ever since Pelosi visited last year, the Chinese military has made almost daily and sometimes very large incursions into Taiwan’s airspace and across the median line in the Taiwan straight, very aggressive.

The Chinese side views the United States and its increasingly warm unofficial relations with Taiwan again as a major provocation. The relationship here, the concerns about Taiwan and risks of a U.S.-China conflict over Taiwan are very real and very serious, but it could always get worse, so having top-level talks to try to prevent it from getting worse is also key, so we are looking for that.

Finally, we do expect Xi and Biden to talk about the Israel-Hamas war, the Russia-Ukraine war, and other serious conflicts that are happening right now on the world stage.

TATIANA SERAFIN: Bethany, we will be looking forward to your reporting on the issues. Bethany Allen, author of Beijing Rules: How China Weaponized Its Economy to Confront the World. Go get it. It is super-important, especially on a day like today, when big news is happening. Thank you, Bethany.

BETHANY ALLEN: Thank you so much for having me for this great discussion.

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Carnegie Council for Ethics in International Affairs is an independent and nonpartisan nonprofit. The views expressed within this virtual event are those of the speakers and do not necessarily reflect the position of Carnegie Council.

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