Bloomberg: US-China Relations Worsen

E&OE TRANSCRIPTBLOOMBERG23 JULY 2020TOM MACKENZIE: Let's start with your reaction to this latest sequence of events.KEVIN RUDD: Well, structurally, the US-China relationship is in the worst state it's been in about 50 years. It's 50 years next year since Henry Kissinger undertook his secret diplomacy in Beijing. So, this relationship is in trouble strategically, militarily, diplomatically, politically, economically, trade, investment technology, and of course, in the wonderful world of espionage as well. And so, whereas this is a surprising move against a Chinese consulate general of the United States, it certainly fits within the fabric of a structural deterioration relationship underway now for quite a number of years.MACKENZIE: So far, China, Beijing has taken what many would argue would be a proportionate response to actions by the US, at least in the last few months. Is there an argument now that this kind of action, calling for the closure of this consulate in Houston, will strengthen the hands of the hardliners here in Beijing, and it will force them to take a stronger response? What do you think ultimately will be the material reaction then from BeijingRUDD: Well, on this particular consulate general closure, I think, as night follows day, you'll see a Chinese decision to close an American consulate general in China. There are a number already within China. I think you would look to see what would happen with the future of the US Consulate General in say Shenyang up in the northeast, or in Chengdu in the west, because this tit-for-tat is alive very much in the way in which China views the necessity politically, to respond in like form to what the Americans have done. But overall, the Chinese leadership are a very hard-bitten, deeply experienced Marxist-Leninist leadership, who look at the broad view of the US-China relationship. They see it as structurally deteriorating. They see it in part as an inevitable reaction to China's rise. And if you look carefully at some of the internal statements by Xi Jinping in recent months, the Chinese system is gearing up for what it describes internally as 20 to 30 years of growing friction in the US-China relationship, and that will make life difficult for all countries who have deep relationships with both countries.MACKENZIE: Mike Pompeo, the US Secretary of State was in London talking to his counterparts there, and he called for a coalition with allies. Presumably, that will include at some point Australia, though we have yet to hear from their leaders about the sense of a coalition against China. Do you think this is significant? Do you think this is a shift in US policy? How much traction do you think Mike Pompeo and the Trump administration will get in forming a coalition to push back against China?RUDD: Well, the truth is, most friends and allies of the United States, are waiting to see what happens in the US presidential election. There was a general expectation that President Trump will not be re-elected. Therefore, the attitude of friends and allies of the United States: well, what will be the policy cost here of an incoming Biden administration, in relation to China, and in critical areas like the economy, trade, investment technology and the rest? Bear in mind, however, that what has happened under Xi Jinping’s leadership, since he became leader of the Chinese Communist Party the end of 2012, is that China has progressively become more assertive in the promotion of its international interests, whether it's in the South China Sea, the East China Sea, whether it's in Europe, whether it’s the United States, whether its countries like Australia. And therefore, what is happening is that countries who are now experiencing this for the first time - the real impact of an assertive Chinese foreign policy - are themselves beginning to push back. And so whether it's with American leadership or not, the bottom line is that what I now observe is that countries in Europe, democracies in Europe, democracies in Asia, are increasingly in discussion with one another about how do you deal with the emerging China challenge to the international rules based system. That I think is happening as a matter of course, whether or not Mike Pompeo seeks to lead it or not.DAVID INGLES: Mr Rudd I’d like to pick it up there. David here, by the way, in Hong Kong. In terms of what do you think is the proper way to engage an emerging China? You've dealt with them at many levels. You understand how sensitive their past is to their leadership, and how that shapes where they think their country should be, their ambitions. How should the world - let alone the US, let’s set that aside - how should the rest of the world engage an emerging China?RUDD: Well you’re right. In one capacity or another, I've been dealing with China for the last 35 years, since I first went to work there as an Australian embassy official way back in the 1980s. It's almost the Mesolithic period now. And I've seen the evolution of China's international posture over that period of time. And certainly, there is a clear dividing line with the emergence of Xi Jinping’s leadership, where China has ceased to hide its strength, bide its time, never to take the lead - that was Deng Xiaoping’s axiom for the past. And instead, we see a China under this new leadership, which is infinitely more assertive. And so my advice to governments when they asked me about this, is that governments need to have a coordinated China strategy themselves - just as China has a strategy for dealing with the rest of the world including the major countries and economies within it. But the principles of those strategies should be pretty basic. Number one, those of us who are democracies, we simply make it plain to the Chinese leadership that that's our nature, our identity, and we're not about change as far as our belief in universal human rights and values are concerned. Number two, most of us are allies with the United States for historical reasons, and current reasons as well. And that's not going to change either. Number three, we would like to however, prosecute a mutually beneficial trade and investment and capital markets relationship with you in China, that works for both of us on the basis of reciprocity in each other's markets. And four, there are so many global challenges out there at the moment - from the pandemic, through to global climate change action, and onto financial markets stability - which require us and China to work together in the major forums of the world like the G20. I think those principles should govern everyone's approach to how you deal with this emerging and different China.