What Defines Success for Xi Jinping’s US Visit?
Bloomberg TV
22nd September 2015
INTERVIEWER: Matt I just learned that the Prime Minister is also a former rodeo rider, his event was young cows, but we’re not here to talk about that – we’re here of course to talk about Xi Jinping’s visit to Seattle.KEVIN RUDD: I rode once and fell off.INTERVIEWER: You rode once and fell off? Alright, well he got back on the horse which is the most important thing to do. Let’s talk about this visit. What is the definition of success for Xi Jinping?KEVIN RUDD: Xi Jinping has a huge interest in making sure the strategic relationship between America and China stays on track and is not fundamentally torpedoed by some of the problems which have emerged in the last twelve months, whether it’s cyber or the rest. For them, they want peace and stability in the region. Why? Because they’ve got a huge economic growth task still ahead of them.INTERVIEWER: You know Xi Jinping well, he’s someone whose tenure overlapped with yours. You also speak Mandarin. Our impression of him from the US is that he has really solidified control of the Communist Party in China. What kind of a person is he?KEVIN RUDD: Xi Jinping is intensely intelligent. His grasp on political power is as complete as it can be within that system. He reads history, he reads his own country’s history. And, I think, has his own sense of mission of where he wants to take China and that is a dream he described as the ‘China Dream’ – wealth and power, a Chinese nation strong enough not to be pushed around by anybody else anymore after 100 years of what they describe as foreign humiliation through until about ’45.INTERVIEWER: When he says the ‘Chinese Dream’, I’ve always wondered about this, is this a direct response to the ‘American Dream’? Is he defining it in opposition to what America is?KEVIN RUDD: That’s a great question. I’ve often asked myself that but I haven’t asked him. It’s an unusual term to use in Chinese. If you ask political leaders, ‘Do you talk about your vision as being a dream for something?’ it doesn’t fall off the tongue as easily as it does in this country. So I think there is subtle twist there. If you look at the way the ‘dream’ is expressed in China with public billboards and the rest. It’s about your personal dreams for your future but it’s about the country’s dreams as well. And that’s the qualitative difference and, therefore, qualitatively different from America.INTERVIEWER: He’s meeting right now today with tech leaders from Seattle. What is the best that he can hope to get out of that specific meeting? What is he hoping from US CEOs?KEVIN RUDD: This is a huge economic relationship and therefore, from China’s growth perspective, it is critical for the future as well. And, frankly, there are big American interests involved: jobs and investment. A key sector for him for growth is what happens in IT. We all know Alibaba’s success, we know Jack Ma – I’ve seen his operations in China – and the others as well. This is a huge potential growth driver for the Chinese economy for the future if they can get innovation right and adapt it to the financial services industry and adapt it to the way in which consumer products operate. So he wants that sector in China to grow, mutual investment to occur and, at present, it is a product leader in China because there is no State Owned Enterprise competing against it – the technology is too new.INTERVIEWER: But, I mean, the definition of success for him is competing against those companies and Chinese IT companies have not had to compete at home. Can they thrive abroad in the way that US companies – Facebook, Twitter – have thrived abroad?KEVIN RUDD: Open question because, as you rightly say, the competitive market within China varies enormously depending on the product or service. For some it’s still pretty closed and others it’s increasingly open. What the big Chinese firms are discovering, however, to operate internationally – to operate as global firms – they need partnerships which means they need to work with American firms in a way in which they haven’t done so before. It’s a step beyond traditional comfort zones but the smart folks, like Jack Ma and the rest, know this is the next step and that it’s no longer just an insulated Chinese market – big though that is – to grow they’ve also got to go global.INTERVIEWER: What’s the Chinese growth rate right now?KEVIN RUDD: Well, you know the official numbers and it’s 7[%]. My own take on that, after travelling to China a lot, is that it’s somewhere in the vicinity of around 6[%]. And 6[%] is important from a Chinese perspective because it’s the internal definition of that which is necessary to sustain social stability.INTERVIEWER: When you say ‘social stability’ that could be a euphemism for ‘control of the Communist Party’. Is the Communist Party in danger looking at the growth rate right now, of losing control of the country?KEVIN RUDD: Absolutely not. I think sometimes there’s a bit of wishful thinking in various parts of the West that that might happen. People should also think through what happens if the Chinese Communist Party fell and China actually fell into immediate chaos. The consequences globally for refugees, for the stability of the global economy would be huge so I think that is not the case. What is the case through is legitimacy of the Communist Party is partly an expression of their role in history, partly an expression, however, of their continued performance in the economy. So when I talk about social stability it is: continuing to grow living standards, continuing to bring people out of poverty and, critically, still generating enough jobs for the 20 million or so entering the workforce each year.INTERVIEWER: One part of that development, an explicit goal of the Chinese government, has been to get consumers into the equity markets. That has not worked out very well at all, over the course of the summer, as you well know. How do you link the volatility in the equity markets to the actual underlying Chinese economy?KEVIN RUDD: I don’t really, and I’ve looked at this quite closely and I’ve asked many of my Chinese interlocutors about this as I’ve been there. I think the first point on the equities market itself, massive instability, state intervention, ongoing uncertainty and there is a great degree of soul-searching in China at the moment about what went wrong and how to fix it. But on the real economy, let’s bear in mind that as a source of corporate finance, it’s probably about 2% of public finance in China and as a reflection of other sentiment within the Chinese economy I don’t think it actually holds a lot in terms being a real barometer. The growth challenges within the Chinese economy are of a different nature. Net exports are contributing much less to the economy because of the softness of global demand – traditionally net exports has driven Chinese growth, now it is actually a lag factor in pulling down on growth. And as net exports have come down this way [gestures down], private domestic consumption hasn’t gone up rapidly enough to offset the difference, hence, the growth difficulty.INTERVIEWER: Kevin Rudd, thank you very much. Kevin Rudd, former Prime Minister, current President of the Asia Society Policy Institute and, let’s not forget former rodeo rider. Back to you.