QUEST MEANS BUSINESS, CNN
22 JULY 2020
Kevin Rudd, very good to see you. The strategy that China is now employing to put pressure — you’ve already seen the result of what the US sanctions on China has done — so now what happens with Australia?
Well, it’s important, Richard, to understand what’s driving I think Chinese government decision making, not just on the Hong Kong question, but more broadly what’s happening with a number of other significant relationships which China has in the world. Since COVID-19 has hit, what many of us have observed is China actually doubling down hard in a nationalist direction in terms of a whole range of its external relationships, whether it’s with Canada, Australia, United Kingdom, but also over questions like Hong Kong, the South China Sea, Taiwan, and look at what most recently has happened on the China-India border. And so, therefore, we see a much more hardening Chinese response across the board. And it’s inevitable in my judgment, this is going to generate reactions of the type that we’ve seen in governments from Canberra to London to other points in between.
But is China in danger of fighting on too many fronts? It’s got its enormous trade war with the United States. It’s now, of course, got the problems over Hong Kong, which will add more potential sanctions and tariffs to China. Now it’s got its row with the UK and of course its recent now with Australia. So what point in your view does China have to start rowing back?
Well, it’s an important question for the Chinese leadership now in August, Richard, because in August they retreat east of Beijing for a month of high-level meetings amongst the extended central leadership. And a central question on the agenda for this upcoming set of meetings will be a) the state of the US-China relationship, which for them is central to everything, and b) the relationship with other principal countries like the UK and c) the unstated topic will be: has China gone too far? In Chinese strategic literature, there’s an expression just like you mentioned before, Richard, that is, it’s not sensible to fight on multiple fronts simultaneously. So there’s an internal debate in China at the moment about whether, in fact, the current strategy is the right one. And therefore the impact of this decision including the British decision most recently both the impending decision on Huawei and on Hong Kong will feed into that.
But Kevin, whether it’s wise or not, and bearing in mind that China has enormous problems at home, it’s not as if President Xi has, by any means, an electorate or populace, I should say, more likely, that that’s entirely behind him. But he seems determined to prosecute these disagreements with other nations, whatever the cost, and I suggest to you that because he doesn’t have to face an electorate, like all the rest of them have to.
But the bottom line is, however, Richard, is that you then see the economic impact of China being progressively, as it were, imperilled and its principal economic relationships abroad. The big debate in Beijing, for example, with the US-China trade war in the last two years has been: has China pushed too far in order to generate the magnitude of this American reaction? Parallel logic on Huawei, parallel logic in terms of the Hong Kong national security law. So your point goes to whether Xi Jinping is domestically immune from pressure? Well, yes, China is not a liberal democracy. We all know that. It never has been, at least since 1949 and for a long time before that, as well. But there are pressures within the Communist Party at a level of sheer pragmatism, which is: is this sustainable in terms of China’s economic interests? Remember 38% of the Chinese gross domestic product is generated through the traded sector of its economy. It has an unfolding balance of payments challenge and therefore, in terms of any potential financial sanctions coming out of the Hong Kong national security law from Washington in particular. China, therefore, experiences the economic impact, which then feeds into its domestic political debate within the Communist Party.
Kevin Rudd joining us.