Chris Johnson on the implications of Xi Jinping's hold on power — "Intelligence Matters"
This week on "Intelligence Matters," host Michael Morell talks with former senior CIA China analyst Chris Johnson, now president and CEO of the China Strategies Group, to discuss Xi Jinping increased consolidation of his power at the Communist Party Congress this week, the line-up of the all-powerful Politburo, and what it means for the state of U.S.-China relations. Morell and Johnson discuss the implications for foreign policy of the new Politburo and the keeping of China's foreign minister.
HIGHLIGHTS:
- Xi Jinping exercises power at Party Congress: "At the Asia Society, we also put out a couple of papers in August saying that it was likely that Xi would break these norms, like the age restrictions for the Politburo that had been followed in previous Congresses, and that really the exercise of raw power was going to be a better framing for understanding the outcomes than adherence to these norms. But in my mind, Xi Jinping himself made it pretty clear to us early on that this was what he intended to do. From my perspective, through his actions and statements since coming to power, he's shown himself to be a person who tends to reject the cautious, stepwise approach to personnel and policy that dominated under his two predecessors, Jiang Zemin and then Hu Jintao."
- Politburo changes and Taiwan: "I don't think it moves the dial much in terms of Taiwan. And let's address for a moment this even more advanced timeline. In my view, this is absurd. There are certain signs that if the Chinese were looking to take military action this year or even next, we would be seeing."
- Retaining China's foreign minister: "The retention of Wang Yi to me is a move towards stability. Which suggests that you think there's a lot of chaos in the international system as a result of the war between Russia and Ukraine. And what they perceive to be unremitting hostility from the U.S. So all of that put together doesn't paint a very hopeful picture for the forward trajectory of U.S.-China relations, at least for the foreseeable future."
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INTELLIGENCE MATTERS WITH CHRIS JOHNSON
PRODUCER: PAULINA SMOLINSKI
MICHAEL MORELL: Chris, welcome back again to Intelligence Matters. It's great to have you on the show, of course, but also thank you for taking the time today to talk about the Party Congress in China. I know you're extremely busy talking to your clients about this, what this means for them. So thank you so much for taking the time. And welcome back.
CHRIS JOHNSON: Absolutely. My pleasure. Always happy to be here, Michael.
MICHAEL MORELL: Let's start with the basics here for those who might not fully understand what a Party Congress is. What is a party Congress in China? How often is it held and what is it supposed to accomplish?
CHRIS JOHNSON: A party Congress is basically the opportunity for the Chinese leadership to telegraph not only its policy priorities, but also who are the individuals who are going to be running this very important and dynamic country, certainly the second largest economy in the world, and increasingly seen as a peer to the United States. Obviously, they're very important. They happen every five years, or at least they have since the end of the Cultural Revolution. And I think they're important basically on both a mechanical and a substantive level. Mechanically, by holding them consistently every five years, it telegraphs to both the domestic and really the international audiences that China is stable and that the Chinese Communist Party is unified and fully in charge of the country. And those are important optics, right? In a regime where their legitimacy is not rooted in constitutional norms or shared values as they are in other polities.
Substantively, they are meant really in my mind to do two things. The first is to lay out the leadership's current ideological framing of both the domestic opportunities and challenges the country is facing, but also its perception or analysis of the geopolitical environment. And that's accomplished through the speech that the sitting party secretary delivers at the opening of each Congress. And that's called the Political Work report or just the political report oftentimes. So at the 20th party Congress, for example, Xi Jinping sketched out a fairly dark picture of both of those elements, I think, in his political report. For example, long standing catchphrases that signaled that the Politburo not only saw peace and economic development as the dominant theme of the global order, but that that would be an enduring trend. Those were both gone in the report this time, and they were replaced with what Xi Jinping in the speech called a spirit of struggle, which in my mind was a clear throwback to the Mao period when arguably the PRC faced its period of maximum danger in the aftermath of the split with the Soviet Union and facing persistent hostility from the U.S. and the West following the Korean War.
The other substantive aspect, of course, is the reshuffling of the top leadership in the Politburo and its standing committee. Again, in this case, those seven men, and they're all men, which is at the apex of power in China, as you know well Michael, personnel is the coin of the realm in any political system, but it is particularly so, I think in a system like China's, where a top leaders power is directly proportional to his control over the key levers of power and their party's control bureaucracies. So we're talking about propaganda, the security services, the military and the party bureaucracy. Xi now dominates all of those areas in the wake of the party Congress. So that's very important.
MICHAEL MORELL: Let's dig into the substantive side of what you just talked about. It appears to me, Chris, that this was a comprehensive sweep by Xi Jinping in terms of the new leadership lineup. But most of the media and the analysis that I've read in the last 24, 48 hours seems to have seen this as a surprise. Did it surprise you?
CHRIS JOHNSON: It didn't really. Certainly at China Strategies Group, we've been telling our clients for at least the last year really to expect exactly this sort of a disruptive outcome and that we saw, you know, no real signs of serious opposition to Xi Jinping. You may recall, I think we talked about it on a previous podcast episode, in the spring there was a lot of speculation that push back from Xi Jinping's supposed factional rivals over his policy mistakes, like supporting Putin in the war in Ukraine, the retention, obviously the COVID zero policy and the crackdowns on the tech and the property sector, that that would mean that he would have to compromise on personnel appointments. At that time in June, I wrote a piece in the Financial Times refuting that sort of logic. And then at the Asia Society, we also put out a couple of papers in August saying that it was likely that Xi would break these norms, like the age restrictions for the Politburo that had been followed in previous Congresses, and that really the exercise of raw power was going to be a better framing for understanding the outcomes than adherence to these norms.
But in my mind, Xi Jinping himself made it pretty clear to us early on that this was what he intended to do. From my perspective, through his actions and statements since coming to power, he's shown himself to be a person who tends to reject the cautious, stepwise approach to personnel and policy that dominated under his two predecessors, Jiang Zemin and then Hu Jintao. I think, in fact, he believes that approach contributed to the corruption and what he calls laxity that were dominating the party that his peers actually hired him to take on when he came to power. And so along those lines, from my perspective, the biggest tell about his intentions here was a line from the party history resolution that was passed at the Sixth Plenum of the previous Central Committee in November of last year, where it sort of stated rather mockingly, big problems that needed to be solved for a long time have not been solved. And many big things that have wanted to be done have not been done in the past. That clear indictment of his predecessors to me was a very strong signal that he intended to wipe the last vestiges of their rule from his new era. And that meant dumping their supporters in the existing leadership.
MICHAEL MORELL: You talked about getting rid of the norms, right? The violation of the norms, the notional rules. Age restrictions, some sense of meritocracy in terms of who gets ahead, that seems to be gone. There was also a hope. I think that we talked about that. That some leaders who were not close to Xi would be retained in the top leadership as a check on power. That clearly didn't happen. So what does all this mean? What's the implications of all of this for how the country is going to be ruled going forward?
CHRIS JOHNSON: I think it's fair to say that the new leadership line up tells us clearly that in Xi Jinping's political ecosystem, loyalty certainly, and what we might call virtueocracy, have trumped meritocracy. Clearly the choice of Xi acolytes to run the key economic portfolios and the appointment of the current party boss of Beijing, Cai Qi, another really close to Xi Jinping ally, to run the party affairs portfolio on the standing committee. They seem to underscore the loyalty piece in my mind, and many observers believe there were more competent candidates to run those portfolios, and I would agree with that with that comment. I'm sure we'll talk more later about the economic appointments and their implications. I think for now, suffice to say that in my mind, the choices make sense in light of the framing that Xi delivered in his political work report about a more inward looking economy.
Coming back to what I mean by virtueocracy, the official explainer that the party released discussing the criteria that were used for the selections to the Central Committee, which of course, you have to be a member of the Central Committee to be on the Politburo, hammered away on this idea that officials needed to be upright ideologically in supporting Xi Jinping in the leading role of his thought in the system, the so-called two establishes, but also free from corruption. And that's, I think, a really important point. All of the people that Xi appointed to the Politburo have, from what we can tell, clean backgrounds or at least largely clean and certainly support these ideological goals and Xi's power. By contrast, one could argue that another strong candidate for the premiership, for example, Wang Yung, who was in the previous Politburo Standing Committee, did not pass that test, perhaps because his daughter had worked for a foreign private equity firm for five years before suddenly leaving last year. Things like that in Xi Jinping's eyes reflect an insufficient commitment to the purity and uprightness that he's trying to have the party reflect to the Chinese people.
MICHAEL MORELL: Chris, there's been a lot of attention paid to the very awkward departure of Xi's predecessor, former President Hu Jintao from the floor of the Congress on its closing day, with some speculation that he was forcibly removed. I know you've watched the video, and you've looked at it hard. The official regime explanation is that he was ill and so had to depart. But I'm seeing reports that his name is now being censored in China. What do you think happened here?
CHRIS JOHNSON: It was certainly dramatic. You and I both had looked at the video quite a bit and sought some views from some of our former friends in the CIA about how to think about it and so on. My bottom line is we don't really know. Because it's such an opaque system, we may never know. But I think we can say a few things. For myself, the first few times I watched the video of his departure, he did look frail to me and somewhat confused, sort of shuffling around for papers and so on. So it seemed plausible that perhaps he'd had some kind of a health episode. But then watching it more times, once he decided to leave, he did seem to walk out pretty quickly with assistance and didn't seem to be struggling. So there's also the fact, as we were just discussing, that all of his people were dropped from the new lineup, despite some pretty clear indications that they were still in the mix, perhaps even as late as the Congress was opening. In other words, this could have been a last minute move by Xi Jinping.
So on that score, the fact that even his youngest protege, Hu Chunhua, who had been in the previous Politburo, had every reason to stay. Not only was he not promoted to the standing committee, perhaps as premier or vice premier in the future, but was dropped from even the Politburo. So that's a stunning humiliation for both what they call in the system big Hu, Hu Jintao and little Hu, Hu Chunhua. So it's possible in my mind that the elder was making some sort of a fuss. And then Xi decided to have him removed. I guess what I would underscore is it did not seem to be a coincidence to me that the media cameras were allowed back into the hall just as Hu Jintao was being escorted out.
Whatever their true reasons, the visual in my mind was a vivid display of Xi's power and perhaps we can say his ruthlessness. As the rest of the leadership sat nervously, sweating and stone faced while all of that scene was playing out. That said, we should also say this is not a good look, right, for leadership unity and could make Xi Jinping look like a tyrant. Maybe Xi doesn't care. But I think even for Xi, it's regrettable. And that may explain the censoring you highlighted, although I think it's important to underscore that leadership names are only sensitive. So, for example, for years, searches on Jiang Zemin sometimes get censored. So I don't think that alone means that Hu Jintao would be formally punished. And that Xi probably thinks the humiliation was plenty.
MICHAEL MORELL: Chris, when you've been on the show before, you've really emphasized the importance of ideology that still matters to the Chinese Communist Party and especially so under Xi. And I'm wondering whether there were any new developments in this area that tell us anything about Xi's power in addition to the huge win he had on personnel.
CHRIS JOHNSON: That's an area where perhaps Xi did not actually get everything he wanted. I think as we've discussed previously on the podcast, one of his goals seemed to be this desire on his part to truncate his current clunky 12 word ideological framework. I call it Xi Jinping thought for horribly long name, because it is so clunky down to just Xi Jinping thought, which of course, would have put him on a par with Mao Zedong alone. From the party Congress resolution on the revisions that are going to be made to the party constitution where that likely would have shown up, it did not appear that that had happened, at least for now.
That said, the revisions that are being made, though, I think basically endorse every favorite buzzword, all of the policy platforms. So things like the new development concept and common prosperity and so on. And so I believe it also amounts to probably the most extensive revisions to the Constitution ever made outside of the several times in their history where they've just rewritten it entirely. So we don't really know whether Xi felt that was good enough or there was resistance to giving him that ultimate brass ring, an audacious step of putting himself on par with Mao. But it may be a distinction, I think, without a difference, given that all of his meaningful priorities will now be in the Constitution. And so I guess his theoretical genius score is as close to Mao's as perhaps is possible. Also Xi Jinping has demonstrated himself over time to be somebody who never gives up. So he establishes a plan and then he works very assiduously, even if it takes years. He's telling us he's going to be around for quite a long time. So he may get there at some point in the future. And this was enough for now when in conjunction with the massive sweep on personnel, which obviously was a very important goal for him.
MICHAEL MORELL: So what does this mean for the rule for life?
CHRIS JOHNSON: I think what we can say is that there's no obvious successor anywhere in the Politburo or in the full Central Committee. Most of the Politburo members are of an age where they could not serve as Xi Jinping's successor. I think it has become a foregone assumption in most media and commentary takes that he intends to rule for life. I personally have always been somewhat doubtful of that, or at least open to the possibility that he won't want to do that. I think, this is an interesting aspect of this sort of episode with Hu Jintao as well. We're always looking for signs.
Xi is often compared in media or general conversation as comparable to Mao or to Stalin. These people who did stay, obviously, for life. My view is that he's not those people. He's not the whimsical people that both Mao and Stalin were, but rather given his difficult upbringing, where he went from the heights of being the son of a very powerful official early in the regime. And then when his father was purged during the Cultural Revolution, he undertook great hardship as someone who is more cautious, actually, and not inclined to that. So my sense is he does see himself, though, as a man of history. I think that's fair to say, maybe not a messianic leader, but certainly someone who's out to accomplish a cause. And that's all over his political report to this Congress.
With that being the case, he's going to stay in office as long as he thinks it will take him to do so. Again, coming back to this idea that big problems that should have been resolved weren't and so on. This is a long term project. And so I expect him to stay at least obviously this term, probably another 5, 2027 to 2032. And then we'll see after that. And of course, now that all of the rival groupings, if you will, have been eliminated from the Politburo. It will be interesting to see if Xi's own lieutenants begin to fight amongst themselves over power and influence going forward in the run up to whatever will ultimately be that succession.
MICHAEL MORELL: Let's turn to some policy implications of all this. And one is economics. It really seems that the new economic team, although loyal to Xi, is less experienced than some of the other candidates who he could have chosen. And as you know, Chinese markets crashed today. And I should tell people were taping this on the Monday after the Congress and two days before this is going to run as a podcast. So the markets crashed today. So it seems like domestic sentiment shares the assessment I just gave you. What's your take? And are we looking at a much more statist economic policy approach going forward?
CHRIS JOHNSON: I think in my own view, there's a lot of noise around Xi Jinping's economic team being sufficiently competent, but in my sense, it's too soon to tell. And it may be that in the end that it is ultimately noise. For example, the likely new premier, Li Qiang, who currently is the Shanghai Party secretary, is painted in the media it seems as having no credentials at all, really for the post of premier and maybe being very statist in orientation and so on. I got to say, that seems a bit silly to me. The facts are that Li Qiang has served as either the governor or the party secretary of all of the major economic powerhouses on China's east coast, Zhejiang and Jiangsu provinces, and also Shanghai municipality, where the private sector is the dominant force in the local economy. And in fact, my understanding from talking to contacts over there is that in Shanghai anyway, foreign business in particular has seen him as pretty welcoming. Obviously, he was the guy who presided over this terrible lockdown in Shanghai. And that was terribly embarrassing and suggested some concerns about competence. But I think we should remember, too, that these provinces and municipalities where he's been serving, they have GDPs as large as major European countries. So they're very complex.
By contrast, you know, the current premier, Li Keqiang, he had served in a economic backwater Rust Belt province of Liaoning before going to the center to serve as a vice premier ahead of getting the top job. I think maybe this is overdone a bit. It's also important to remember that the state council, China's cabinet, is no longer really the designer of economic policy in Xi Jinping's revamped policy ecosystem world. It's the implementer of those policies that get formulated in the new party leading groups that Xi formed in the last five or ten years that touch on the economy. So in other words, a premier no longer has the kind of power and therefore responsibility that maybe Zhu Rongji or or even Wen Jiabao had had when they were premier. And then there's also what we spoke about earlier about the political report, framing the ideological context for policy. So in his report, Xi Jinping highlighted, I think, an economic approach that I would describe as a fortress economy. Whether they will stress self-sufficiency in technology, food, energy and supply chain security, these sort of things.
The new Politburo contains three former defense industry experts, four people with science backgrounds in state firms and state agencies. So more than a quarter of the new lineup is what we might call techno nationalists. So in the context of what Xi Jinping laid out about large national efforts to have needed breakthroughs on these critical technologies like semiconductors, these people are actually logical choices, I think, for those jobs in the context of the frame that has been set. I'm not suggesting by any means that I agree this is the right approach or that it's likely to be successful, but only that the logic makes some sense.
For the outgoing leadership, a key framing from Xi in his last work report was the importance of de-risking and deleveraging the finance system. So we saw officials well-suited to that task, like the outgoing vice premier in charge of the day to day economy. Now Xi has laid out these new priorities and the new leaders seem kind of aligned to that agenda. So just in closing, I mean, what might be a fair point, though, is whether the likes of Li Qiang and Ding Xeuxiang who will likely be number two on the economy, currently, Xi's chief of staff, are just pawns of Xi Jinping. And will not be able to stand up to him to offer truth to power, as people often say. But that presumes that this was happening in the last leadership group. And in my assessment, it really wasn't. As we discussed earlier, despite all the talk of pushback from Li Keqiang, the current premier, there was never any evidence in my mind that he actually was altering, really, even at the margins of Xi Jinping's desired economic policy course. So bottom line, I think the whole suggestion of incompetence and instability is a bit hyped and we'll just have to wait and see how the new group performs in office.
MICHAEL MORELL: One of the things I was interested in is when do these changes take effect, right? When does one guy move out of an office and another guy move in? How does that work in China?
CHRIS JOHNSON: It's complex unfortunately. On the party side, of course, the jobs are immediate. So the new members of the Politburo are obviously in their posts as members of the Politburo. And in the coming weeks. And it won't be many weeks, you know, just the next couple of weeks. For all of those kind of positions, the new head of the party's personnel arm, the organization department, the new head of the propaganda department and so on, that will be rolled out very, very quickly. And then we will see a musical chairs in the key provincial assignments. These big cities like Shanghai and Guangdong Province, Chongqing in the west. That will all happen as well. So the new guys will be realigned there. Where it will take longer is on those state government posts in the cabinet that I described earlier. So mainly the economic post. So that would be the Premier, the executive vice premier, the number two, and also that critical vice premier who oversees sort of the day to day operations of the economy, the job that Liu He currently has, we won't see the turnover there until next spring when they have the big meeting of their legislature that rubber stamps all those decisions. But we can see from at least in the Politburo Standing Committee for the lineup by rank order roughly who's going to get what job. So that's why we know thatLi Qiang is almost certain to be the premier and in stature.
MICHAEL MORELL: Let's talk about Taiwan. Obviously, a critically important issue. Much of what I read over the weekend suggested that Xi signaled a slightly more belligerent tone on Taiwan in his speech to the Congress. Some of the stuff I read also suggested that his personnel changes at the top of the Chinese military mean that the Chinese are preparing for war. And by the way, we also had the U.S. chief of naval operations, Admiral Mike Gilday, say last week that China could invade Taiwan as early as this year or next. How about that. Which is even earlier than the 2027 timetable that is often talked about in policy circles here in Washington.
When you and John Culver were on the show just a while ago talking about Taiwan in the aftermath of the visit of Speaker Pelosi, John said the Chinese still see an attack on Taiwan as a crisis to be avoided rather than an opportunity to be seized. And I'm wondering if you still see that as the right assessment, given what just happened in the Congress. How do you think about the Taiwan issue in the context of the Congress.
CHRIS JOHNSON: I don't think it moves the dial much in terms of Taiwan. And let's address for a moment this even more advanced timeline. In my view, this is absurd. There are certain signs that if the Chinese were looking to take military action this year or even next, we would be seeing. In fact, you mentioned, John, he's written very eloquently about some of the very obvious signs that we would see, such as a stop in conscription, demobilization, putting the economy on a war footing, all these sort of things. None of these things are happening. I'm not suggesting that that makes it impossible, but just that it seems very unlikely. In my assessment, it seems that what I would call Taiwan invasion hysteria seems to gripped Washington. It's my sense that there is no compelling intelligence reason to believe this. David Sanger of The New York Times had a piece some time ago also talking about this that it could be sooner than even 2027, maybe 2024. But that seems to be an assessment, for the Biden administration based on the calendar I think perhaps more than any sense or understanding of Chinese leadership intentions.
Let's look at the calendar quickly. We've got our own midterms, obviously, where it looks increasingly likely that the Republicans will control at least one house, maybe two. That could mean that things like the Taiwan Policy Act, which are very controversial, could be back on the table pretty quickly in a new Congress. I would expect Speaker McCarthy to follow up Speaker Pelosi's visit very, very quickly. Likewise, Taiwan is having these municipal elections roughly at the same time as our midterms, where the KMT, China's favored party on Taiwan, could suffer an electoral wipeout and effectively become no longer viable. And then we have our own presidential election in 2024 and also a Taiwan presidential election in 2024, where whoever succeeds President Tsai, the current leader of Taiwan, is likely to be more independence oriented. So when we put all these pieces together, I can sort of see why some elements of the administration are ringing the bell. Obviously, this suits budgets and and fights going on inside the Pentagon about whether we're doing enough. And I think that's a fair point to respond to this emerging challenge after a lot of distraction for 20 years in the Middle East and elsewhere and Afghanistan. So these are all real things.
But in terms of the Congress, my read of the timeline and content of Xi Jinping's political report on the subject was actually that it was pretty calming. Basically he did for the first time, it was not in his last report and I don't think it was in the previous one either, have this line about we refuse to renounce our promise to renounce the use of force. And that was new. And that sounds very menacing. But if you read the words that came right after that, he said that the threat of military force is directed only at external forces who are interfering. I wonder who that is. And Taiwan separatist forces. So basically, he seemed to be saying, Dear United States, Dear President Biden, if you stop pushing the envelope on the one-China policy. Eroding these commitments, talking about defense of Taiwan publicly, I've got no reason to undertake military action. On the personnel appointments, it's not surprising, this one gentlemen, very close to breaking those age norms. He's 72 years old already. He's now the top general. And the he is very close to Xi Jinping. He's also one of the few senior PLA officials that actually has combat experience. He fought in the Sino Vietnamese conflict in 1979, because that went so well for them, the PLA. But the second ranking military officer and vice chairman of the military commission used to run the Eastern Theater command. This is what they call it now, the area opposite Taiwan after their forced restructuring. So it looks a bit like they're preparing for Taiwan conflict. My sense is they do still see it as a crisis to be avoided rather than an opportunity to be seized. And a lot of it's going to be dependent upon what we in the United States and the authorities on Taiwan do.
MICHAEL MORELL: I would point out, too, that both the DNI, Avril Haines and the director of CIA, Bill Burns, have said publicly that it's not the short term they're worried about it's the longer term later this decade and early into the next decade.
CHRIS JOHNSON: Yes, and I agree with that. And I think that underscores the fact that we don't have, at least right now, any compelling intelligence in that critical plans and intentions area as opposed to, say, capabilities analysis, where obviously the Chinese are building a very formidable military enterprise.
MICHAEL MORELL: Along the same lines that we've been talking about in terms of policy implications, an even more powerful Xi is probably not a welcome development in Washington. What do you think his speech and the personnel choices that he has made tell us about how he's thinking about the U.S.-China relationship.
CHRIS JOHNSON: I definitely think the speech, as I pointed out earlier, paints a pretty dark picture of his assessment of the threat, as he would put it, that China is under from a hostile West. And I think this goes back to what we've discussed previously on the podcast about this ideological framing of the global state of affairs. Where in China's increasing dialectical sense, the U.S. is an implacable enemy out to subvert China's rise. They look at the Biden administration and they've had two years now to take the measure and they basically see the Trump administration and some Chinese I speak to say it's worse. And we see, for example, the very stern technology restrictions that the administration put out two weeks ago now on semiconductors. This is in effect, to some degree a declaration of economic war on China. So they're very, very strong. So, therefore, Russia is the natural partner in that enterprise, which does explain why Xi Jinping is so buddy-buddy with Putin despite the challenges they faced with that decision. And Europe is the swing internationally.
So as long as that's the case, I think Xi Jinping's view is the U.S. is out to get me. And I want to show a couple of things. One, through this sort of spirit of struggle. Riddled throughout the speech are references to struggle and standing up to bullying from the U.S. and pressure from the U.S., U.S. sanctions, what they call long arm jurisdiction, which is things like the SWIFT episode with Russia. It's riddled all throughout the report. So it's a pretty dark picture, I think, of what he's saying about the U.S. China relations. The personnel side sort of backs this up. So once again, violating these age restrictions. Wang Yi, the current foreign minister is being retained. He's been promoted to the Politburo. So he certainly will replace Yang Jiechi, a long U.S. expert, by the way, in the Politburo and as sort of the chief person running the foreign affairs bureaucracy inside China. Wang is an interesting character. He's very cosmopolitan and suave. But in the ecosystem that Xi Jinping has created, he himself has been something of a what they call a wolf warrior diplomat in recent years.
But I think it's also a sign of some of their nervousness. In other words, the meme that's generally painted is, well, this is all a sign of swagger and confidence and so on. The retention of Wang Yi to me is a move towards stability. Which suggests that you think there's a lot of chaos in the international system as a result of the war between Russia and Ukraine. And what they perceive to be unremitting hostility from the U.S. So all of that put together doesn't paint a very hopeful picture for the forward trajectory of US-China relations, at least for the foreseeable future. That said there is something called political agency. And people can choose to go down a different path. As you know I'm not someone who feels that we're locked into a course of inevitable conflict or stuck in a Thucydides Trap or something like this. My view is that these things can change. But both leaders need to decide they want to change it. And for their own domestic reasons, to some degree, and perhaps just the nature of how the relationship is being portrayed in both countries, that looks increasingly hard to think will happen.
MICHAEL MORELL: Speaking of leaders, there's also, Chris, as you know, been some press speculation that she's dragging his feet on agreeing to a meeting between himself and President Biden at the G20 meeting in Bali. Do you think that is accurate? And if so, what would that signal? What signal would that show that she's trying to send here?
CHRIS JOHNSON: My sense is it probably isn't accurate. I don't know. Obviously, I'm not sure. I think what has been true is that we've seen from Xi Jinping a lot of intransigence. So, for example, as you know well, in previous interactions between the two presidents, the video conferences that they've been having. A strong push from President Biden and his administration to engage the Chinese on discussions of what the administration rightly calls guardrails. I think this has been a very innovative and useful sort of effort by the administration. Guardrails, meaning the avoidance of conflict, obviously, and even the avoidance of the potential for accidents, having some discussions in the nuclear space, for example, or how we interact with each other at sea, these sort of critical areas. And the Chinese have completely stonewalled on all of this. So there is some suggesting that Xi Jinping has been playing this game.
My own sense, what I caught in the article that discussed this that was very interesting to me was the administration flatly denied that that was happening. From what little I read, I'm not obviously a U.S. expert, but it seems to me the administration rarely goes on the record with formal denials like that. And so that suggested to me that they felt confident anyway that at least discussions are taking place. It is certainly possible that Xi Jinping could want to show his peak over things like the semiconductor restrictions I just mentioned. That's a big deal by not having the meeting with Biden, but I don't think it helps him. One thing that's interesting, a critical test of a leader in China for decades now for the top leader is I have to show I can handle the number one. The United States. And so newly minted in his third term, which is, as we know, an aberration. I think he's going to have a strong instinct. And I think it also suits both leaders' interests, really. It'd be the first opportunity for them to sit down in person. Countries in the region, certainly in Asia and other U.S. allies and partners, I think, also are pressuring the administration to sit down with Xi Jinping because we don't want this adversarial downward spiral in the relationship and so on. So there's a lot of incentives for both sides to go ahead with the meeting.
MICHAEL MORELL: Chris, one last question. A couple of the people, a couple of the commentators who I've read this weekend have suggested that if you look at the semiconductor decision by the United States, if you look at Xi's she speech and all the things that you that you pointed out, these folks have said, there's no doubt that we're in a Cold War now.It's not that one's coming. We're in one now. How do you react to that?
CHRIS JOHNSON: It's feeling increasingly that way, I guess. Obviously, a big chunk of that depends on how you define a Cold War. If we decide we're going to follow the same playbook we did in the original Cold War, China is not the Soviet Union, right? They're integrated into the global economy. We have a deep economic relationship with them. We didn't have with the Soviet Union. And that lack of an economic relationship facilitated the U.S. effort to go full throated competition with the Soviet Union across all domains. That's not the case with China because of the economic relationship, because of the relationships economically our allies and partners have with China. So whereas it seems to me the relationship is in trouble, there's no question. I don't think we're in a Cold War. My framing of it has been the administration describes where we are now as strategic competition. And China responds, that's inappropriate and we're not going to sign on to that and so on. I do believe we've left strategic competition in the dust, especially in the wake of the release of the national security strategy by the Biden administration. And we're probably now in full up strategic rivalry. But in my mind, there's another step, which would be what I would call strategic amnesty. In other words, I know X policy is bad for me, but it's 2% worse for you. So I'm going to do it anyway. That's the kind of rivalry that we saw in the Cold War. And I just don't think we're quite there yet, but we're heading in that direction, and I think that's deeply troubling.
MICHAEL MORELL: What advice do you give to U.S. companies who have to do business in China to be able to sustain themselves right as a business? What advice do you give to them in terms of how do they manage this relationship between the United States and China going forward?
CHRIS JOHNSON: Sure. No, I think it's an incredibly difficult situation for companies. They really are becoming the proverbial meat in the sandwich these days between trying to do what they need to do for those companies who do derive a lot of their profits from the China market or just want to be there for supply chain and other reasons and concerns of an increasingly hawkish U.S. government. And how do they avoid getting around that? My sense has been, and this started I think in the Trump administration. And the advice I have given them is that increasingly you have to focus on what makes sense for your interests as a company, not fearing what the Chinese side or the United States might do to you. And therefore, it's important for companies to perhaps do as much as they can to be as quiet as they can. Don't make missteps in terms of condemning the Chinese approach to Xinjiang. Which is blowing up in the face of a couple of companies and also doing what you can in terms of investment and so on, while staying clear of those challenges. It's an incredibly difficult situation. But what we see, I think very strongly is that while decoupling in the technology space seems to be happening and perhaps at an accelerated rate in other areas like the financial relationship between the U.S. and China, that's not happening.
So, for example, why is the only area that we've seen any cooperation between the two sides in the last 5 to 10 years was this controversy over the delisting of Chinese companies on the American stock exchanges over these accounting challenges and so on. Why did the Chinese fully capitulate in that area when they never capitulated on anything. It's because we have a $5 trillion financial relationship between the two countries. China knows as long as they have a non-convertible currency and even after that, they need those investment flows coming in. So I don't think we're doomed. And so there's still room for companies. The other piece of advice I give them is recognize, though full throated, that the goal of the Chinese is to come up with their own what they call domestic champions, in other words, their own Apples, their own Microsofts, these sort of things. And therefore, the long term goal is to replace your firm in the China market. So the question then becomes, how do I operate in such a way that extends my timeline before that event ultimately happens? And that's the advice I give to companies.
MICHAEL MORELL: Yeah. Chris, thank you so much for joining us. Great topic and great timing and thank you so much.
CHRIS JOHNSON: My pleasure, Michael. Always a pleasure.
