5 November 2026
Thank you, Michael, for the reference to Churchill having spoken from this pulpit.
That’s intimidating, not least because Churchill used to drink a lot, and I haven’t had a chance to drink anything this evening.
Churchill, as you know, was an extraordinary wartime leader of the United Kingdom. Having delivered victory for the British and, in part, the Allies in the Second World War, he went through the ignominy of being voted out of office. Then he came here and spoke.
His career trajectory after that was five more years as leader of the opposition before being re-elected as prime minister of the United Kingdom. I’m sure that was because of his time here in Zurich.
Churchill’s career was one of a continuing trajectory towards greatness. Mine is a different trajectory. I began as prime minister, then became foreign minister, then ambassador to the United States. I’m now head of a think tank, and my next job will be where I began as first secretary at our embassy in Beijing, where I’ll be in charge of the photocopying — which is where I began more than four decades ago.
In China, they have circular views of history, and I think my career traces a similar trajectory.
This evening, I was going to do two or three things, and then we’ll open it to a conversation with the rest of you.
First, given that I’ve most recently been an ambassador in the court of King Donald the First, I thought it might be useful to begin with some reflections on where to now for the United States. According to my newspaper this morning, there have been events in America overnight, otherwise called the midterms. What does that mean for America and the world for the next two years? What does it mean beyond that?
Second, having spoken about Donald Trump’s America, let me speak about Xi Jinping’s China: its economy, its politics, and where it’s headed in the region and the world. Finally, let me reflect on the future trajectory of US–China relations.
Of course, Asia is much bigger than that triangle. There are so many other countries of deep relevance to the region’s future and to the world’s future.
It’s good to welcome Taro Kono here this evening from Japan, a distinguished member of the Japanese Diet, and KJ, who’s here from Malaysia. Nice to have you here as well, along with other colleagues who have fought the good fight in our respective democracies across the region.
Whether it’s Japan, Korea, Indonesia and Southeast Asia, India and South Asia, Malaysia or other countries, we are all proud to be members of this extraordinarily dynamic region, which will shape so much of the world’s future in the 21st century.
Donald Trump’s America
When people have been despairing about America’s future, I have often reminded them — as someone who’s lived in the country for 10 years, not just as ambassador but also running a think tank in New York, and prior to that at the Harvard Kennedy School — that America’s capacity for rolling reinvention of itself has few bounds.
In the last 24 hours, we’ve seen further evidence of that. Despite all the doomsayers who said that the elections would be flawed and would fail, and that the American people would not be able to express a free and independent voice, Americans went out in droves and did so.
You see the tide of politics change in America again. The American people, in their choices for both the House of Representatives and the Senate, have registered a decisive voice about the country’s future.
Of course, what happens in the House and the Senate, where voters have elected resounding Democratic majorities, is not of itself a prediction about where the presidential race will go by the end of 2028.
But it does indicate that if you push the American body politic too far in one direction, the automatic political stabilisers of the US system click into gear. Through a process of equilibrium creation, they bring you back towards the centre. That is what we see unfolding.
The open question for those of us concerned about America’s future in the region and the world — in the Asia-Pacific, the Indo-Pacific and the Euro-Atlantic — is whether this set of elections resolves the grand question: what sort of America does America want in the region and the world in the future?
Underneath it all, that has been the subject of discussion within the body politic. Has America overreached and overextended? Have the cumulative experiences of Afghanistan, Iraq and, most recently, Iran caused the American system to say: enough is enough? We have been extended too far and for too long, and it’s time to repair the bridges back home.
It doesn’t matter where you travel in the United States — as I have, in rural Montana, Iowa, Idaho, Utah, New England, the South, Mississippi and Louisiana — you pick up these questions all around the place. Why do we need to be so big in the world?
That’s the underlying question shaping so much of the political conversation in the United States during this most recent election season.
I think what the body politic has said to the political class is as follows: with Iran, you have gone far too far. You have said that this is more important to you than attending to the basic cost-of-living challenges faced by working families right across middle- and working-class America.
When I’ve spoken to voters across the United States, that’s what they’ve said to me: people who have religiously voted for Trump in the last one, two, three elections. They have changed because they have seen America once again extending beyond what it needs to do, and detracting from the priorities these good people feel should be paramount at home.
This debate has not yet been resolved. But there is a very strong signpost coming out of these elections that America in the future needs to be moderate and considered in its posture in the world.
That is the mainstream of the Democratic Party you see elected to both the House and the Senate: moderate, considered and active in the world; moderate, considered and active in engagement with European and Indo-Pacific allies, and with friends and partners around the world as well.
The open question, however, is how President Trump, in the next two years, will respond to this clarion call from the American people to rein it in.
Anyone standing at a podium such as this who pretends they could predict the behaviour of the president of the United States tomorrow is deluding themselves.
I served three years in Washington as ambassador to the United States. I’ve been in the White House on many occasions, in the Oval Office on some occasions, and with the president on a number of occasions.
The president prides himself on his unpredictability. Surprisingly, in the last 24 hours, you have seen him signal that he is prepared to work with a Democratic-controlled Congress and does not want to spend two years vetoing everything. The Democrats fought a good campaign and they won. Who was expecting that response 24 hours ago? Not many people.
The president’s predisposition to deliver political surprises remains constant and continuing.
The dangers of further escalation
What, therefore, are the theatres on which we need to focus assiduously in the immediate weeks and months ahead?
The first is Iran itself. There has been sufficient reporting in the international media, including by The New York Times, about preparations for a large-scale military strike by the United States against Tehran, or against Iran and its nuclear programme, in the days immediately following the midterms.
We are now in that zone. The midterms are done, and the results are clear. Why would the United States wish to do that? Why would the president wish to do that? Is there anything the rest of the political command structure of the United States — either in the administration or in the House or the Senate — can do about it?
The only logic I can deduce as to why the president may wish to do that is that he believes all his other options for bringing Iran to the negotiating table have been exhausted.
It is now more than six months since the original attack on Iran. Until now, we have seen no sustained negotiating effort between the two sides with a view to bringing this to a close, let alone a restoration of normal oil and natural gas trade through the Strait of Hormuz.
I would say, on behalf of those who have followed this region closely for many decades, that it would be unwise in the extreme for the president of the United States to calculate that this is the best way forward if he wishes to bring this conflict to a close.
Iran’s chief negotiator said last night that the American people have spoken, and have spoken resoundingly against the war. Let him defend his own remarks. But I think what the American people are saying to the president of the United States is: enough is enough is enough.
It is impossible to predict where a further military strike would land the international community. Any use of tactical nuclear weapons would make that danger graver still.
You go from the frying pan into the fire. You accelerate, intensify and escalate to a point where the result being sought — bringing the conflict to a close and restoring stability to the Strait of Hormuz — disappears into the distance as you become engaged in a much more general war.
Let us never forget the Iranians’ capacity for retaliation around the world through an extensive and funded terrorist network.
I would strongly caution the president of the United States against ever considering such an option. Its consequences would be dark and bleak for us all, not least the civilian population of Iran, who do not deserve the regime imposed upon them.
The second theatre on which we must focus is Cuba. If you look carefully at the unfolding political language from the Trump administration about Cuba, and the effective economic blockade imposed against it over the better part of the last nine months, the evidence begins to point towards the United States preparing for one form of action or another against Havana with a view to bringing about regime change.
Much of America’s political appetite was whetted in the first instance by the extraction of Maduro from Caracas in Venezuela.
I am not a specialist in the Western Hemisphere. I am even less a specialist in the affairs of the Caribbean, let alone Cuba. But I would say this again: I would caution the United States against lifting the hand of military action against Cuba, whatever you may think of that regime, in pursuit of a military conclusion.
American presidents have tried this before in history. It did not turn out well.
Whatever the views of the nature of the regime in Havana, whatever the human rights abuses occurring within Cuba — particularly towards those in political opposition to the current regime — armed force is not going to advance the realisation of those objectives.
The reason I say these things about the dangers ahead on Iran and Cuba is that there is a long literature in the United States about what happens when you end up with a lame-duck president.
In the last two years of an administration, when you lose control of Congress, you effectively lose your ability to legislate for the domestic body politic. You lose your ability to deliver landmark legislation on tax, economic policy, social policy or any other domain, because you’ve lost control of the numbers.
But you all know, as members of this university and intelligent members of the Zurich community, that under America’s constitutional arrangements, the president’s powers as commander-in-chief and his foreign policy powers through the secretary of state are formidable, although subject to constitutional and statutory constraints.
That gives the presidency considerable latitude in foreign and security policy decisions for the next two years.
I have spoken at some length about the dangers of overreach on Iran and Cuba because there will be those in the president’s ear saying that the way to leave his mark on the future is to act now and act decisively.
In these two theatres, this would be precisely the wrong way for the president to conclude his remaining two years in political office.
So much for Donald Trump’s America, the events of the last 24 hours, and what they mean for the next 24 months.
Xi Jinping’s China
Xi Jinping’s China is not complicated by the prospect of a competitive national election. They haven’t had one of those for a very long time. You have to go back to the Republican era for a very different electoral system. It’s been a while.
Xi Jinping has just convened a plenum of the Chinese Communist Party’s Central Committee, and they are now in full preparatory mode for the 21st Party Congress, which will be held next year.
This will be a landmark congress. Party congresses are held every five years, and Xi Jinping is already serving his third consecutive term as general secretary. The state constitution was amended in 2018 to remove the two-term limit on the presidency.
Xi Jinping is now 73 years old. His mum’s still alive. She’s 100. The genes are pretty good in the family.
Anyone who suggests that Xi Jinping is thinking about who should replace him next, I think, has been smoking something.
If I know anything about Chinese politics, paramount leaders do not readily retire. They remain in power, not least because if they retire, effective power begins drifting away from their hands.
As I’ve said to friends and colleagues around Europe, the United States and Asia over the last couple of months, we should all buckle up and get ready for Xi Jinping to remain in power, not just for another five years, but another 10 or 15. That would take him into his late eighties.
Why do I say that? Look at recent Chinese history. Mao remained in power until his death at 82. Deng Xiaoping remained politically influential into his late eighties. These are the two pre-eminent examples of paramount Chinese leaders retaining power and influence late in life.
Xi Jinping, both in his self-perception and in the perception of the rest of the Communist Party, is a leader of similar calibre.
Those who say that Xi Jinping will not be with us for much longer — he has already been in power for nearly 15 years — fundamentally misread the nature of Chinese politics.
There’s a second reason Xi Jinping wants to remain in power. He sees himself as essential to the long-term reform of the Communist Party itself.
The Communist Party has more than 100 million members — depending on who’s been purged this week. Millions of people have been purged or punished through the series of punitive measures taken under the anti-corruption campaign Xi launched back in 2013.
It’s the single longest political campaign in party history. No campaign has gone this long since the party was established in Shanghai in 1921.
He’s doing this for a purpose. Xi Jinping is terrified by the long-playing home video called “What Happened to the CPSU, the Communist Party of the Soviet Union”.
He saw what happened to the Communist Party of the Soviet Union, and then the collapse of the Soviet Union itself, as a horror movie about what could happen to the Chinese Communist Party unless he cleaned up its act.
Xi Jinping, in his DNA, is a Leninist. As a Leninist wanting to ensure that the party remains active and vibrant in China’s long-term political future, dealing with corruption within its ranks is his first order of priority.
The most recently concluded party plenum, which finished only a week or so ago, focused on that subject. It was attended by 162 full members of the Central Committee and 117 alternate members. It also confirmed a series of expulsions from the party. These purges are a reminder of what happens if Xi Jinping regards you as having misbehaved and the party’s investigatory processes establish that.
Another reason he has chosen longevity in his political career is his lack of confidence in those peers brought up, educated and promoted during the long period of reform and opening under Deng Xiaoping, Jiang Zemin and Hu Jintao.
He believes those generations of Chinese leaders have been softened by excessive accommodation to Western norms: political norms, economic norms, social norms and norms of regular discourse.
In the back of his mind, he is asking: how do I bring forward a generation with ideological steel in its backbone? How do I ensure that the party’s red genes have been transmitted to the next generation, and empower that generation with the responsibilities of leadership when they are old enough to obtain those positions?
Then you do the maths. If you spend 15 years in power and have another 15 to run, that means 30 years in political office.
If you were a university student aged 20 at the beginning, you’ll be turning 50 by the time Xi Jinping is thinking of finally moving on in one form or another. In the Chinese hierarchy of age, that is about when you’re allowed to assume significant central leadership positions.
There is a method in Xi Jinping’s approach. In effect: I, Xi Jinping, want to ensure that the Communist Party survives because I’m a Leninist. I also believe that only the party can hold this country together, deliver its long-term modernisation and secure its rise to global greatness.
The only generation I’m prepared to entrust fully with that task is the one I’ve brought up under the ideological rigour I have nurtured over these years, and prospectively over the next 15.
A tale of two economies
Since becoming general secretary, Xi Jinping has decisively moved the centre of gravity of Chinese domestic politics to the Leninist left.
The party’s power is now much stronger in the economy, in society and in people’s individual lives than it was before. That is not an accident. It is by deliberate stratagem.
In parallel, over the last decade, Xi Jinping has deliberately moved the centre of gravity of Chinese economic policy to the Marxist left.
How do we see that? In a much greater emphasis on central planning rather than the role of the market; on the reinvention of state-owned enterprises rather than reliance on the private sector; and on Xi Jinping’s own techno-industrial strategy driving China’s long-term modernisation, rather than leaving it to the marketplace.
Within his ideological framework, you also see a parallel emphasis on the need for greater gòngtóng fùyù, or common prosperity, rather than a continuation of the income inequality we’ve had in China over the last 35 or 40 years.
If you are in China — and I’ve been there on several occasions since leaving the job in Washington — you can see evidence of this change in the centre of gravity of economic policy relative to what it was before, say, 2017.
How does that manifest on the ground? China’s growth model is a tale of two cities. Its domestic growth drivers are performing poorly. Its external growth drivers are performing positively — in fact, super-positively.
In any economy, whether Switzerland’s, Australia’s, the United Kingdom’s or the United States’, we look at the standard drivers of final demand.
Private fixed capital investment: in China’s case, flat. Private domestic consumption: still too weak to rebalance the economy. China’s personal savings ratio: rising, as consumers are uncertain about their future and their jobs, and therefore feel they need to save more.
Private residential construction is into its sixth year of recession. People have lost enormous personal wealth through the implosion of a property market grossly oversupplied in both the residential and commercial sectors.
For those of you who travel to China, do as I did most recently: go back and have a cup of tea in the room at the top of a hotel tower somewhere in the middle of Beijing.
I first went to China in 1984, in the early Mesolithic period, when I was first secretary in the embassy, warming up the photocopying machine. I went back every year until COVID, either living there, working there or visiting.
Prime minister, foreign minister, member of parliament, businessman, think tanker — you name it, I’ve been there.
This was the first visit when I looked out over the Beijing skyline, under a perfectly clear blue sky in October, and saw not a single crane on the entire skyline of the city. Not one.
If you want an outward, visible sign that this sector is performing poorly within the Chinese economy, that is it.
I said it was a tale of two cities because, on the other side, you’ve got two enormous growth engines.
One is Xi Jinping’s techno-industrial strategy, driven partly by state investment, partly by the direction of private investment, and by leaning heavily on the banking sector to provide soft credit to these firms.
The second piston in the Chinese economic engine is net exports. China, on my assessment, is heading towards a US$1.5 trillion goods trade surplus with the rest of the world this year.
For students of economic history, in absolute terms that would be a record. The scale is extraordinary, even when you look back through the economic history that David Ricardo helped us understand.
When Adam Smith wrote The Wealth of Nations 250 years ago, observing the forces of supply and demand, price formation and the allocation of resources, he was laying the foundations of what became neoclassical economics.
We’ve all, in one form or another — sometimes enthusiastically, other times less so — accepted the essential nostrums of neoclassical economic theory.
The challenge today is a party-state able to act at enormous scale on global markets: as a monopolistic supplier or a monopsonistic purchaser. That poses a profound challenge for the market framework we have inherited.
You might ask: what do you mean by that?
Take manufacturing alone. China already accounts for more than a third of global gross manufacturing production. UNIDO has projected that its share of global manufacturing value added could reach 45% by 2030. Those are different measures, but both point to the scale of China’s industrial weight.
That sector is performing spectacularly well for China: a combination of state subsidy, soft credit and other factors, including the inherent efficiency and effectiveness of the Chinese manufacturing model and its capacity for autonomous innovation.
On the other hand, you see the reverberations of this model in Germany, across Europe, around the world and in Southeast Asia: the displacement of manufacturing in countries such as Indonesia and Malaysia.
It is what the Americans, and increasingly others in the analytical community, call an unbalanced development model.
The theory was that China would lift domestic consumption and absorb its surplus manufacturing output. Domestic consumption has not grown sufficiently to rebalance the model. But because of the economic significance of production, supply has not adjusted sufficiently either. Companies have not collapsed. They continue to produce more than the domestic market can absorb.
That is what’s finding its way onto the global market.
The future of US–China relations
So much for the Chinese economy. Before we go to the conversation, let me conclude with US–China relations.
There have been the most recent summits in Beijing and, about a month or so ago, in Washington. There are the meetings coming up again this year, we think in Shenzhen, China’s IT capital in the south, on the back of the APEC summit.
Then, finally, fasten your seatbelts: what happens at the G20 summit in Doral, Miami, when Xi Jinping and Trump are again scheduled to meet for a fourth time this year?
Three quick points, and then I’ll close.
Both sides, notwithstanding the different challenges they face domestically, have decided that their interests at this stage lie in stabilising the bilateral relationship through this year and next. Beyond that, we can’t predict.
Why does China want that? Given what I’ve just described about its acute dependence on net exports as a growth driver, the last thing it can afford is for Trump to pull the tariff lever one more time, as he has done on multiple occasions since discovering it in the first place.
America now stands as China’s third-largest export destination. If America did that, would Europe follow, given its current circumstances and the impact on German manufacturing in particular? If those things happened, it would be catastrophic for China’s domestic growth model.
What’s in it for the United States? Why does Trump want a stabilisation pact?
I think it’s along these lines. Donald Trump’s fundamental requirement is: I won’t pull the tariff lever, President Xi, on condition that by Christmas you finally normalise the sale of critical minerals and rare earths to the United States, Japan and elsewhere.
The United States and Japan are the two countries where sales have not been normalised. These materials are foundational to so many lines of production and sectors of those two economies, and globally.
The Chinese, in turn, are saying: we won’t stabilise and normalise the supply of critical minerals and rare earths unless you, President Trump, draw down the restrictions you have imposed through export controls on the most advanced semiconductor exports from US companies to China.
Those restrictions are impeding and undermining our effort to develop our compute, our large language models, and our ability to advance rapidly our frontier models in the global AI race.
My friends, I do not know where those three vectors will land. There is presently a stability pact, but it’s conditional.
One vector is the tariff card. Another is the critical minerals and rare earths card. The third is export controls on the most advanced semiconductors being sold to China.
This could go either way between now and the end of December. Stability so far, but very tenuous stability as well.
I thank you for your attention.
Q&A
KR: Kevin Rudd. RT: Remko Tanis, Managing Editor at Asia Society Switzerland.
RT: A few weeks ago, maybe a month, you had a conversation at Asia Society headquarters with Singapore’s foreign minister, Vivian Balakrishnan. He challenged Europe’s focus on Chinese subsidies and the frustration Europe feels about them.
His argument was that China is a real technological and competitive economic power, and Europe simply has to come to terms with that rather than focus on the unfairness of subsidies.
How much of Europe’s industrial predicament comes from Chinese policy, and how much from Europe’s own failure to adapt or act?
KR: Why I disagreed with the Singaporean foreign minister, Vivian Balakrishnan — who’s a close friend and colleague, and whom I know well, so you can disagree with such people and not be arrested — is that both propositions can be true.
In my experience of China domestically, and knowing quite a number of what I call the “Red Seven”, the equivalent of the “Mag Seven” — China’s leading AI companies, whether Alibaba, DeepSeek or the others — the level of indigenous innovation is remarkable.
At the same time, I know from the analytical work done by multiple agencies, including the OECD and the World Bank, that the effective subsidy rate applied to Chinese manufacturing firms is somewhere between three and nine times the OECD average, depending on the particular good being manufactured and sold, whether to Europe or elsewhere.
These two truths are self-evident and not mutually exclusive.
The problem is that under Xi Jinping’s techno-industrial strategy, they cannot afford for these firms to fail domestically. The employment consequences would be too large in a country which already has high youth unemployment.
My response to Vivian is: yes, you’re right, and so am I. The sooner we recognise the dual nature of the reality, the sooner we can have a solid conversation about how we resolve this with the Chinese.
Far be it from me to tell the Europeans what to do. So let me tell the Europeans what to do. I’m just an Australian, and I’m here to help.
My knowledge of the Chinese system — and I’ve had so many great debates, great negotiations, tough negotiations and the occasional shouting match with it over the last 30 or 40 years — is that they respect strength and are contemptuous of weakness.
They respect strength and are contemptuous of weakness.
Europe has a phenomenal negotiating card. What is it? You are critically relevant to China’s growth because of the size of your market. You are its number two export market. Number one, by the way, is Southeast Asia. Number three is the United States.
My simple advice to the folks in Brussels is: use it, leverage it, deploy it, be unapologetic about it.
You’re dealing with a tough bunch of cookies in the Chinese system. I know them. I’ve had many a firm exchange with these guys over a long period.
The measures you adopt would need to be enough to arrest their attention. You may choose to implement them over a fixed timeframe to give them time to back off voluntarily.
The final point is that the debate in China itself is about this thing called nèijuǎn, technically translated as “involution”.
What does involution mean in the Chinese domestic economic context? Firms selling their products at prices below the cost of production on a regular basis.
In other words, they should have been liquidated, but they haven’t been, because no local authority can allow these companies to be liquidated. It would upset their local growth numbers and the performance criteria by which local political functionaries are judged by the party.
As a result, you have zombie companies which need to be put out of their misery.
European resolve is necessary to force the Chinese to reach that conclusion. That debate is in the balance in China right now.
At present, China’s unbalanced domestic economic model is being exported to the world. That’s why the consequences are being felt.
What we need is for China to unleash a domestic consumption explosion. That’s what we thought would happen 10 or 15 years ago. There have been a dozen World Bank reports on this, and a dozen reports by every private consultancy in the world. Even I’ve delivered a report to the Chinese saying: this is your pathway to the future.
Look at the history of the 19th-century continental American economy, when America ceased to be chronically dependent on exports to Europe and the rest of the world.
Around the 1880s and 1890s, private domestic consumption went through the roof. That began the great modern American economic miracle. That’s where China needs to be.
Instead, Xi Jinping has concluded that his available financial and other resources should be targeted exclusively at this techno-industrial strategy, so that he wins the ultimate technological race and arms wrestle with the United States across all the leading technology categories.
If it’s a choice between consumption and investment in technology, Xi Jinping would say right now that it’s a no-brainer. We have to make it more painful for China so that they conclude it is a brainer.
RT: In recent appearances, you’ve identified three major crises unfolding simultaneously. I think you’ve even said that you haven’t seen crises of these proportions unfold at the same time in your living memory.
Those crises were great-power competition in every field between China and the United States; the risks of AI if it isn’t properly managed; and, ironically getting snowed under a bit, climate change.
Regarding AI, you describe a vision in both capitals, Washington and Beijing, driven by the idea that whoever wins in AI wins, period — wins everything.
When you talk to senior people on both sides, are they more afraid of losing control of the technology or losing the race to the other guy?
KR: It’s a bit like my answer to Vivian Balakrishnan: both. These two propositions are not mutually exclusive.
At Asia Society, where we run the Asia Society Policy Institute and its Center for China Analysis, which over 10 years we’ve built into becoming America’s largest think tank on Asia and China, we are also actively engaged in Track 1.5 negotiating exercises between China and the United States: on the bilateral relationship in general, but on AI in particular.
Here’s my best summary of where it’s up to. Those of you who are technologists, or who invest in frontier technologies including artificial intelligence, will know how rapidly this field moves — every month, probably every week if you’re in the Valley.
When we started this exercise with the Chinese in May, during the Trump visit to Beijing, this was frankly a semi-peripheral issue. There was enough concern to begin discussing whether there needed to be a negotiating track, but there was no enthusiasm on either side, just an intellectual recognition that it might be useful.
Somewhere between May and late September, there was a major “come to Jesus, come to Marx” moment between the Chinese and the Americans.
They recognised how difficult and potentially dangerous frontier models could be: agentic AI acting autonomously through recursive self-improvement, compounded by swarming, against anybody’s infrastructure — Chinese, American, Swiss, Australian, wherever.
What we observed across several American and Chinese models was sufficient risk of these agentic AIs acting autonomously to cause damage at scale. That seems to have had an effect.
The parallel concern, given China’s predisposition towards open-source, open-weight dissemination of these models, was the risk of them getting into the hands of rogue countries or rogue non-state actors.
In other words, the national security apparatus in both countries began to reach an analytical conclusion: we have a problem. That’s the positive development.
On the Chinese side of these negotiations, they say this is all America’s fault, which is not helpful. But I think that’s a temporary stage, because it’s not all America’s fault. It’s a responsibility to be shared more directly.
What could guardrails actually look like? Here’s my approach, as someone with all the expertise of a graduate in Tang poetry — that’s me. It’s a while since I’ve done my AI completion course at a Swiss finishing school.
First, do you have a common vocabulary of AI-generated risk between the two sides?
Second, do you have a common taxonomy of risk to infrastructure, including biorisk, which is a legitimate focus of concern for all countries right now?
Third, what are your preventive measures? Can you have a mutually agreed testing protocol around the so-called alignment of a model before it is released, so that it is tested against the normal concerns we all have about the responsible use of AI?
That goes back to whether you have common values to inject into the alignment process.
And, by the way, have you tested it against existing cyber defences before going out and conducting a real-world experiment?
We saw the seriousness of this with an OpenAI model gaining unauthorised access to an Australian government Medicare statistics portal. The activity took place in June and came to public attention in September. Individual medical records were not accessed. But the delay in notification was itself a serious concern.
Sam took a while to ring us up and tell us.
So: preventing incidents through that sort of alignment-testing protocol.
The next question is verification. How would you verify that the Chinese aren’t cheating, or that the Americans aren’t cheating?
With nuclear weapons, it’s relatively straightforward: tracking uranium-235 and plutonium, spies in the sky, missile silos. There are ways of doing it.
AI agents are everywhere, and they’re pretty hard to spot through effective surveillance.
Then there’s attribution. If an incident occurs, what’s the attribution mechanism?
If the Chinese financial system is penetrated tomorrow by rogue AI acting autonomously, and it crashes for a month, why wouldn’t they blame the United States? That would be the automatic impulse.
And the reverse: if the public health system of Massachusetts, including Mass General, goes down, why wouldn’t you blame the Chinese or someone like that? What is the attribution mechanism?
Finally, if an incident occurs, prevention has failed, and you’ve established attribution, how the bloody hell do you collaborate to return the system to normality, depending on the origin of the original agent — yours or theirs?
Those are the categories that would fall within a set of guardrails.
That track is now underway between Scott Bessent and He Lifeng, his Chinese counterpart. I’ve been out of America for the last week or so, so I don’t know the pace of progress.
RT: I’ve seen you describe yourself at an event at Oxford last year as a realistic optimist.
KR: A realistic optimist. That’s me.
RT: Okay. Optimistic when—
KR: I’ve had a good glass of Australian cabernet.
RT: Right. I don’t know what they serve here. But amidst all these major challenges, we see people around the world take to the streets more intensely and more frequently, dissatisfied with the way their governments are delivering for them.
We’ve seen it in Asia — Nepal, Bangladesh, India — and we’re seeing it frequently in Europe, sometimes very violently.
At Oxford, I recently heard you tell the students that it’s not their generation’s fault; it’s your generation which has seen this slowly crack.
As a former head of government, where is the optimist in your realistic optimist character?
KR: The diagnosis you described is the one I gave. I spoke to the Oxford Union, a group of about 500 bright young things, all of whom want to be prime minister of the United Kingdom or president of the United States.
Those who want to be president of the United States haven’t worked out that you need to be a natural-born American citizen.
I said a couple of things about the wicked problem, the wicked challenge, of this generation.
How many of you are under 35 in this room? How many under 30? Okay, good.
What I mean is this: the two challenges you have simultaneously are fixing the good ship democracy and deploying that democracy to fix the structural challenges washing over our shores at the same time.
That means wrestling to the ground our response to geopolitical competition between China and the United States in all domains, including AI. Where do we all position ourselves on that?
It means AI governance in general, for the upside and the downside.
Third, it means the great creeping, silent challenge of climate.
Look at Bhutan. I was just talking to Adrian about his recent visit. The glacier imploded. If you want an early talisman of what happens through our failure to act soon enough to keep global temperatures within 1.5 degrees Celsius above pre-industrial levels, the glaciers in the Himalayas are sending us a very clear message.
Here are the grounds for my optimism. I would describe the first challenge, repairing democracy, as the cracking of the political centre, whether centre-left or centre-right, and the consequent migration of younger and older voters towards the far right and, in some cases, the far left.
The far-right script is very well known to you all: I have a cost-of-living problem. I can’t afford to provide my family and my kids, or even myself, with a decent place to live. Rents are too high. I can’t enter the housing market.
I heard a politician say the other day that the reason is foreigners have taken those houses. By the way, they’ve taken the best jobs, with the best salaries, which enable you to afford those houses.
Then I heard another politician say that the only way to stop this is to stop foreigners coming in: no more migration of any description, possibly kick some out, and then kick out the politicians who let them in — the centre-left and the centre-right.
That’s the message.
Whether it’s Reform in the UK with Mr Farage — he’s particular about how you pronounce his name, by the way; I use the pronunciation he hates — Le Pen, Alternative für Deutschland, Vox in Spain, the equivalents in Australia, or the MAGA phenomenon in the United States, the message is familiar.
I can’t comment on Confoederatio Helvetica. That’s beyond my pay grade.
My basis for reasoned optimism is this: if governments of the centre-left and centre-right wrestled one core social provision question to the ground — this great market failure called the housing sector — they would address its failure to deliver to working-class and middle-class people in the democracies of the world.
Housing takes the largest slice of a family’s disposable income, through either rent or a mortgage.
If that is dealt with fundamentally, most of the other — not all the other — legitimate complaints about the political and economic system go away or are reduced.
What’s my case study? Let’s invoke Vivian Balakrishnan again, in Singapore, one of the most notoriously capitalist economies in the world.
I’ve been there a lot over the years. I’ve known every Singaporean prime minister since Lee Kuan Yew, way back when.
What did Harry Lee do from the beginning? He ensured that in knock-’em-down, drag-’em-out, über-capitalist Singapore, everyone would be provided for in terms of housing.
The dustman would have affordable, accessible, decent housing. The cab driver would have the same. The company executive would obviously have the opportunity for something better. But Harry Lee imposed a floor in housing provision.
Singapore has not eliminated every housing pressure. But in capitalist Singapore, it is regarded as a foundational responsibility of the state to ensure that people are accommodated with a level of decency.
In my own country, if we manage to fix that, most of the problems of resorting to the periphery — the far left and far right, which ultimately converge in the great horseshoe of politics — begin to be dealt with effectively.
That’s my basis for optimism.
Audience questions
My question is about ideology, or ideological contrast. In recent years, travelling and speaking with people around the world, I get the sense that people feel democratic capitalism is getting old, out of ideas, and perhaps even unjust.
In contrast, China’s Marxist-Leninist model, which is nonetheless market-facing, perhaps seems full of vigour and solutions to the world’s problems.
What would you say to people who feel that China’s system is not just a viable alternative to democratic capitalism, but perhaps a superior one?
KR: Two or three quick things.
First, I started studying Chinese 50 years ago, as a university student. I’ve been in and out of China 100 times, lived and worked there in multiple capacities over decades, and I love the country.
All the Chinese people I’ve known over the years, whatever their profession, are no different from anybody else in one essential respect: they all have a yearning for what we would quaintly call, in our part of the world, freedom.
It means something. It means that if I say to Vivian Balakrishnan, “Vivian, I think your point of view stinks,” I’m not going to be arrested — or the reverse.
The Indonesian ambassador is here. I’ve known Indonesia both before and after Reformasi: when it was a military dictatorship under Suharto, and when it wasn’t afterwards.
I was an election monitor in Surabaya when you cast your votes in the democratic elections of 1999. There you have Indonesia, with a population heading towards 300 million, the largest Muslim-majority country in the world, and successive peaceful changes of administration over many years.
Is your democracy a bit rough and tumble sometimes? Of course it is. The Australian one can be too. I can give you a case study.
But it doesn’t matter where I am — Korea, Japan, Indonesia, India or elsewhere — people have a yearning for freedom.
Second, China was on a journey. Bit by bit, reform by reform, the economy, the private sector, universities, society at large and gay culture were moving in this direction, until Xi Jinping decided to put up the fence and say no, around 2013, 2014.
It’s not just a bunch of Peace Corps members from Milwaukee who have this view about peace, freedom and the American way.
It is something I’ve discovered in my many conversations with individual Chinese: private entrepreneurs who just want to make a buck and turn their company into a great global brand, but now face all sorts of constraints.
Will the state take equity in my firm? Do I now have a party secretary within my firm telling me whom I can appoint?
I’m gay. Can I comfortably be out there, loud and proud, like I used to be? Maybe not.
I’m a Buddhist, or a Catholic. Can I go to church without getting into trouble? Maybe not.
My response is: yes, I see all the upside of what the state model has delivered through China’s enormous success in the techno-industrial stack. For Made in China 2025, you’d give China seven out of 10.
The most recent priorities — semiconductors, quantum and nuclear fusion — are the three big ones for the next 10 years. Knowing the Chinese, they’ll get two or three of those too, because they are so determined and focused.
But the associated costs to society and the economy — look at my earlier remarks about private domestic consumption and consumer confidence — are also huge.
I’ve got a simple question. Can you comment on the hypothesis that the future is Asian?
KR: Yes, but the future is also global.
Here are some numbers to give you a quick rendering.
On the IMF’s latest projections for 2026, the combined GDP of the European Union’s 27 member states is about US$22.8 trillion. The economies of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership together are around US$18.2 trillion. If you add India and South Korea, the total is about US$24.5 trillion — comparable in scale to Europe.
Of course, there will be bigger population growth in Asia, driven largely by India, but elsewhere as well, including Indonesia.
If you then set the Chinese economy alongside those European and Asian comparators, it is about US$21.5 trillion. The American economy is about US$32.6 trillion.
Those are projected GDP figures measured at market exchange rates.
So is the future Asia’s? If so, which Asia’s? Is it Europe’s?
I’m a bit of an old-fashioned globalist, my friend. I actually like to see all boats rise. I certainly want to see the boats rise in our part of the world, Asia, where I’m from. But I also don’t think Europe is yesterday.
That bloke Churchill delivered a speech here 80 years ago, after a drink, saying: “Let Europe arise.” He was absolutely right.
When I go around Europe — Oxford, Cambridge, Paris, speaking to students and staff, or Brussels; I’ve just been in Finland, Sweden and Hungary, talking to them all about China — I see the enormous potential of this continent.
Your collective imagination, your entrepreneurial spirit, your combined capital reserves, your venture capital and the rest: you simply need a bit more self-belief about this continent’s future.
It’s fantastic, extraordinary, remarkable. You have so many world-class universities here as well.
I don’t see this as a zero-sum game.
At the same time, I have a big passion for Africa. There will be two billion people on that continent. The Chinese take it seriously as a new source of both supply and consumer demand.
We need a global vision for the future. Asia will have a huge part in it. But Europe — the idea that you guys have finished, I think, is just so much crap.
RT: There’s that optimist. Thank you very much, Kevin, for your insights and your time here tonight. Thank you all for coming.
KR: I’ve got to finish my remarks with the word “crap”, is that right?
RT: We have it on tape, so that’s good.
KR: At least you know you heard an Australian politician. Thanks, folks. I appreciate it.