Podcast: Isaac Stone Fish, Where Do U.S.-China Relations Go Next?

For business and public policy leaders, the question remains: How did we get here – and where do China and Chinese-U.S. relations go next?
Isaac Stone Fish

October 1st marks the 70th anniversary of the founding of the People’s Republic of China – the name given by Chinese Communist Party Chairman Mao Zedong in 1949.

To understate the reality, a lot has happened in China over the last 70 years. The fact is, a lot has happened in China over the last 70 days – much of it unexpected, confusing, and on-going – politically and economically.

Politically, of course, pro-democracy protests in Hong Kong capture global attention and concern. But so, too, does China’s economic situation, in particular, its continuing – sometimes escalating – battle with the U.S. over tariffs, intellectual property, market access, currency valuation and more… all fitting somewhat neatly under the “Great Power Competition” with the United States.

For business and public policy leaders, the question remains: How did we get here – and where do China and Chinese-U.S. relations go next?

To find out, I talked with Isaac Stone Fish – a senior fellow at the Asia Society’s Center on U.S.-China Relations, as well as a visiting fellow at the German Marshall Fund, Washington Post Global Opinions contributing columnist, and more. Stone Fish has studied China from the inside, having spent seven years living there. Today he continues to analyze China’s place in the world as a Truman National Security Project fellow, a non-resident senior fellow at the University of Nottingham’s China Policy Institute, and an alum of the World Economic Forum Global Shaper’s program.


Transcript: Isaac Stone Fish, Where Do U.S.-China Relations Go Next?

Chris Riback: Isaac, thanks for joining me. I appreciate your time.

Isaac Stone Fish: Thanks for having me.

Chris Riback: So an incredible amount to talk about regarding China. And I’d love to start way in the future, and wondering about what the history books will say about this extraordinary period of China in the world, and in particular China-U.S. relations. So if I could ask you just briefly as an overview, maybe go back a little bit. How in the heck did we get here? And looking ahead, if you want to frame it that way, what’s history going to say about this period?

Isaac Stone Fish: It’s such an important question. I think we got to where we are today after several accommodations in the U.S.-China relationship that brought us to this really uncertain, really hazy period of the present. So in the 70s and 80s, U.S. strategy towards China was, how do we work with China to counter and balance against our enemies, the Soviet Union? And then ’89, ’90, ’91 Soviet Union collapses, Beijing massacres unarmed protesters in Tiananmen Square. And there’s this sense that China’s not the ally that the U.S. once thought.

So the policy shifts and the idea is that, okay, we’re going to trade with China because by doing that we’re going to bring democracy to China. And that was really U.S. policy up until around 9/11 when everything global got subsumed under the idea of how do we work with countries to fight terrorism? So 2001 to 2005 that was basically the U.S. relationship with China.

And then there started to be this realization that the relationship was a lot more broad and that besides fighting terrorism, China was not going to democratize. So we needed to fit them into a different framework. And the idea then in this pretentious speech by the Deputy Secretary of State at the time, Bob Zoellick was, how do we make China into a responsible stakeholder of the international system that the U.S. built?

And that basically directed U.S. policy until roughly 2016 with the Obama administration trying to figure out, okay, if China’s not going to play with us by our rules, then what? And it’d be fascinating to see how that would have evolved under Hillary Clinton. But instead, we had the chaos agent, Donald Trump come in and throw a lot of what happened in the past, out the window so that we’re sitting here at September, 2019 and really hard to know where U.S. policy is. To answer your other [crosstalk 00:02:54], sorry, go ahead.

For business and public policy leaders, the question remains: How did we get here – and where do China and Chinese-U.S. relations go next?Chris Riback: Yes, please go ahead. No, no, go ahead. And then I’ll come back to what’s striking me about what you’re saying right now, or actually particularly about what you’re not saying right now, but go ahead. Tell me about how the future’s going to look back on this.

Isaac Stone Fish: So with the huge caveat that the honest answer is I have absolutely no idea how the future is going to look, I think the biggest question here is what happens to the communist party? So it’s certainly possible that five, 10, 20, 50 years into the future, the party still rules China and we still have a similar authoritarian, brutal system at the top of Beijing, which still allows for a surprising amount of freedom and flourishing at the margins. Or it’s possible that we have something entirely different. So Chinese leaders love to talk about China’s 5,000 years of history. And it’s important to remember that the communist party has only ruled China for 69 of those years.

Chris Riback: And so what strikes me of all the things that you mentioned, you mentioned the Nixon detente and how things changed, coming out of the 70s and trying to integrate China as a counterbalance to Russia. You talked about what happened then through the 80s and into the 90s and then up and how there was a shift with the human rights, let’s call it, out of Tiananmen Square. And then in the early 2000s how terrorism was at the center of our foreign policy, international affairs plight. And then going through the zone.

What you didn’t mentioned in the whole thing is economics. And so why is economics and the WTO, the World Trade Organization, and the rules around access to China’s markets versus the rules that China has been able to play by. Why has that become, I believe, the defining, almost singular aspect of what’s driving U.S.-China relations? Or am I wrong? Is that what’s getting the headlines? But there’s a whole heck of a lot more underneath it that’s driving U.S.-China relationship right now?

Isaac Stone Fish: I think that’s a great question, Chris. So I came up in this studying from China, and a lesson I learned really early on was that in Beijing, politics always trumps economics. And I think in this case, and then the relationship between the two countries, while the U.S. business community did really push hard for further opening in the 90s and the 80s, in the 2000s, why we’re seeing what we’re seeing today is because of anxiety among American policy makers, American elected officials, and individual Americans about, are we ready, willing, and able to live in a world where China is the most powerful country? And if not, are we ready, willing and able to make the sacrifices and do what we need to do to deal with that?

So I think the trade war, and I don’t love the term trade war, but it’s the best description of the moment we find ourselves in. I think the trade war is nominally about business. It’s about American business frustration with Chinese economic policies, and it’s about Trump’s frustration somewhat bizarrely with the trade deficit, but it’s really about American anxiety.

Chris Riback: And American anxiety about China’s place in the world, about China’s place regionally, about U.S. influence? Do you see it more as a geopolitical struggle than as opposed to a geo-economic struggle?

Isaac Stone Fish: I see it more as a geopolitical struggle. Now, geopolitical and geo-economic are really tightly tied together. I think one of the things that I would fault the Trump administration in doing as they’re trying to sell this policy is that the problem is not with China or the Chinese people or China becoming a more powerful country than America. But the problem is with the communist party and a communist party ruled China doing those things.

I think it’s very important for everyone who talks about this, to make it very clear that the problem is not with Chinese people and Chinese things and Chinese ideas. The problem is that the communist party, which is a deeply problematic regime and that’s a long, long story there. But the problem is the party is ruling China today and that’s the problem that we need to solve.

Chris Riback: If you’re just saying that about the deep problems, and I think I’ve got this right, wasn’t it just yesterday or the day before, and we’re recording this early-ish September, that it was just Mao Zedong, the anniversary of his death. And there was something I read about the New York Times obit on that, and about the number of killings, about how that takeover occurred. And so yes, there is, while there is 5,000 years of history or so, as you point out, it’s only, what did you say, 69 of communist rule? Was that the number you gave me earlier?

Isaac Stone Fish: Exactly. We are three weeks away from the big party in Tiananmen Square, that 70th anniversary of the founding of the People’s Republic of China, where Mao Zedong famously stood up and said to a huge crowd of cheering Chinese that the Chinese people have finally stood up.

Chris Riback: That leads me to the Chinese Communist Party versus Xi himself. And to what extent then given the thesis that you’re putting forward, and a lot of emphasis in your analysis I would say, on the function of the party itself? To what extent do you see Chinese assertiveness today, if you would characterize it as assertiveness because of Xi personally, versus the nature of the Chinese Communist Party as the ruling party? Would China be acting the way it is today regardless of who was leading it?

Isaac Stone Fish: You know, it’s such an important question and we really don’t have any way to have a good counterfactual to that. In the 2010s or thereabouts, there was the possibility of a coup with two top Chinese leaders. We still know very few details about it and it’s hard to know that if they were running the country, if it would be more gentle, both to its own people and to citizens abroad. It’s just, it’s an impossible question to answer. But Xi Jinping, China’s Chairman today is very much a creation of the communist party. He’s from the Red Aristocracy. His father was a leading party official. He grew up in the compounds in Beijing, and while we might’ve seen a softer touch, if his rival at the time Premier Li Keqiang was on top.

It really feels that the way things could have been radically different, were in the lead up to the June, 1989 massacre when the party leader Zhao Ziyang was basically taken and put under house arrest for sympathizing with the students. And he represented a more sympathetic, a kinder, a gentler version of the communist party that has since been mostly suppressed.

Chris Riback: Fascinating. So you think that in the last call at 69 almost 70 years, that the optionality around a turning point was June of ’89. And subsequent to then maybe it’s Xi, maybe it’s today, maybe it was somebody else who would’ve come up through, although your description of Xi makes him sound almost like a walking manifestation of the Chinese Communist Party if such a thing were possible. But really the opportunity for the turning point, if you want to bring it down to just one frame of one picture, was the person in front of the tank, and whatever that was, I think June 4th, 1989.

Isaac Stone Fish: And the lovely thing about that is that the tank stood stop. It was sort of a pause in history so to speak. I think two responses to that. It’s easy for me to say with the benefit of 30 years of hindsight that ’89 was the turning point. It could be that today is the turning point, and that there is a liberal who ends up taking power, who ends up not taking power and that the seeds are being sown as we speak, and we just don’t know about it. Or it could be that ’89 does linger on as the moment when the hopes of Chinese liberals were crushed.

I would also say that Xi is certainly a more complex, rich figure than I make him out to be. And one of the problems with Chinese propaganda and the opacity of the Chinese party system is that we are allowed to see so little of Xi Jinping’s actual personality. And his fears and his foibles, the things that make him a human. And we just get to see this very sanitized image of a somewhat charismatic, somewhat wooden party apparatchik as opposed to a living, breathing person who could be the embodiment of China’s dreams.

Chris Riback: So I’ve got some further economics questions for you and questions about the tariffs and questions about the business community. But one more current affairs, current events, and that’s what’s going on in Hong Kong. How do you frame what’s going on in Hong Kong and the Chinese Communist Party response, and the tensions that we’re all seeing?

Isaac Stone Fish: I think the biggest worry among Beijing with Hong Kong is that democracy could be a virus that spreads to other part of China. And I think the real issue with Hong Kong being allowed to elect its own leaders, which is what a lot of people in Hong Kong want, is that that desire could transmit to other regions of China and create real challenges to the communist party. Because when you think about it on the face of it, it’s not a crazy idea. There are plenty of regions around the world that are these separate regions that are still allowed to elect their own leaders. Puerto Rico and Hawaii are easy ones to think about. But I think the fear is that Hong Kong will do that and possibly they’ll elect a leader who wants to declare independence from China. But I think more importantly, more likely is that they do that and you’ve got a group of students in Beijing or Shanghai who start to wonder why they can’t do that.

And I think one of the interesting things about recording this podcast in early September is that a lot of people that I spoke with in Beijing and Shanghai expect this to be cleared up so that it doesn’t embarrass the 70th anniversary of the party, sorry, the 70th anniversary of the founding of China, the founding of People’s Republic of China. And I think this is one of those issues that we have this fascinating snapshot in time of the protests that we’ve seen rocking this major financial city over the last several months. And it’s certainly possible in a few weeks, those are just memories.

Chris Riback: Very, very interesting. Okay. So we’ll keep an eye out for that pending anniversary. And yes, a financial city, Hong Kong, and so let’s talk about the financial components. And you tried not to call it a trade war, a tariff back and forth, whatever it is that’s going on. First I guess, from the U.S. side, would you agree that the U.S. government is a common thing that folks say that the U.S. government has the right diagnosis to the problem but doesn’t have the right prescription?

Isaac Stone Fish: I think the issue is that a lot of what the U.S. accuses Beijing of doing, wouldn’t be that important if Beijing were say Vietnam or Saudi Arabia or United Arab Emirates. And so the stealing of American technology, the trade imbalance, the fact that Beijing prefers local Chinese companies to foreign companies matters really because of the scale and not because of the occurrences.

So I would say that it certainly doesn’t have the right solutions. And again, easy to say now, we’ll see what hindsight tells us. But I think in terms of its diagnosis, I do think there’s certainly an over-reliance from Trump on this idea of a trade deficit, and on this fantasy that if Chinese manufacturers are hurt, then manufacturing jobs will suddenly spring up again like the mushrooms after a warm rain. I mean that era is done, and it’s just sad and cruel I think for Trump and American politicians to pretend that manufacturing jobs will come back en masse to the United States.

Chris Riback: And how about U.S. business leaders? How should they consider China as a market or perhaps even as a supply chain partner? What are you hearing from U.S. business leaders, and what do you say to them when you talk with them?

Isaac Stone Fish: So I think the funny thing about where we are today is that there is increased political costs on both the American side and on the Chinese side for American companies doing business in China. For the U.S. side, there’s the unpredictable tariffs. There is the possibility that an American company or, well let’s say a mutual fund for example, is investing in a promising Chinese fund. But then the national security community uncovers that this Chinese fund has actually invested in a Chinese company that makes nuclear submarines, which are then viewed to be potentially threatening to the United States. And so they have to pull out their investments.

On the Chinese side, there are a lot of boycotts and not a lot, but significant number of boycotts of American or Western products when they’re seen as offending the feelings of the Chinese people. There are surprised inspections of factories and stores when a company or the company’s home government runs afoul of Chinese government laws or norms. And there is this sense that some of what they’re doing is not welcome there.

And, as you can see, I’m coming back to the politics here over the economics because economically China remains one of the best stories in the world despite slowdown, despite the trade war. Despite difficulty in getting a sense of what the real numbers are, I think especially for a company that’s not just looking for, okay, we need to grow at X percent a year, but long-term investment, Chinese fundamentals, et cetera. The issue is the way that the politics, both the international politics and the domestic politics curdles those outlooks.

Chris Riback: Do you believe that foreign companies will ever play on an even playing field in China? I mean you talk about the fundamentals and the positive components. And I guess relatedly, should people who do business with Chinese companies assume to some extent that they’re doing business with the Chinese government?

Isaac Stone Fish: I think it really depends on the size of the Chinese company and the specifics. Certainly anything in any remotely sensitive field, you have to expect a lot of party oversight or at least a lot of awareness of where the communist party sits on these issues.

I think in terms of a level playing field, some of the companies that are most successful in China are food and beverage companies where politics is a lot less important. Companies like Starbucks, companies like Yum! Brands. And that’s true on a smaller level too. A lot of the ex-pat community in Beijing now, a lot of the most successful business owners are those who own restaurants or own shops that deliver pizzas, or high-end juice bars, things like that. Education is another safe area because Americans can better act as the gatekeepers to getting Chinese into schools like Harvard and Yale, which is maybe also the longstanding dream of the Chinese nation to have their kids go to Harvard and Yale.

I think in terms of a fair playing field, the more localized that American companies can come, and the more Chinese executives they have, that tends to correlate with how well they do. But that can then also complicate how they play in other markets. So I think there is still a huge demand for savvy bicultural, bilingual Chinese or American executives who can climb up the chain there.

This has a sort of pundit, the okay, what’s going to happen next piece of this is always the most fraught and difficult. I don’t know where we’ll be in a couple of months with American businesses in China, but I mean, we are looking at a little bit dicey times.

Chris Riback: Yes, no doubt. And, it’s the ability to flawlessly predict the future without any error at any time, that that’s where we all depend on people like you for. You understand.

Isaac Stone Fish: Exactly, 100% ratings.

Chris Riback: 100% every single time. Thinking about the region then, in thinking about it both from a maybe foreign investment, foreign engagement versus China’s role. On the one hand, obviously U.S. pulled out of the Trans-Pacific Partnership, the TPP, and at the at the same time of course, that China continues to advance the Belt and Road Initiative, how do you feel first of all, the Belt and Road Initiative, is that an economic versus security approach? Is that an economic versus security approach, and how do you view the China role in the region versus the ability for foreign governments to get in there?

Isaac Stone Fish: I think BRI is really a catch-all for China’s global trade strategy. And I think the idea is to have China’s return, one could say, to the center of the global trading system as something that sounds really mild and doesn’t allow for a great fear of some sort of grand conquering strategy. I think at the same time, a really important aspect of BRI is what Beijing does with local governments and local journalists and local opinion leaders to try to tamp down criticism of Beijing and traditionalism of Chinese global strategy.

I just remembered being in Beijing, gosh, it’s maybe a decade ago, and going to a press conference with the Rwandan ambassador who said that if China colonizes Africa, it’s Africa’s fault. And you can just not imagine him saying something like that about what Europe or the U.S. is doing or has done. I think that Beijing does a really good job of enforcing norms about how people are allowed to talk about certain issues that Beijing deems is sensitive. And it really does make it harder for local governments and local communities to say, Hey, we don’t like this BRI plan, or that BRI plan and we want to talk about it in different terms.

Chris Riback: And Isaac, to close out the conversation, you’ve effectively taken away my go-to close question, which what’s next? You’ve made clear that it’s very hard to tell even what’s going to happen in the next few weeks, in time for the 70th anniversary.

So instead, I’m wondering about, let’s say we got a trade deal tomorrow, U.S., China, Trump, Xi, somehow they figure out the whole tariff thing and they’re like, sorry about that, bygones. Let’s do the trade deal. Would we go back to the status quo, anti or has the China-U.S. relationship forever changed?

Isaac Stone Fish: I don’t know if there ever was a status quo on U.S.-China relationship. And one of the fun things about this book that I’m researching now is to look at how people talked about the relationship in a lot of different periods between now and the 30s, and it’s just constantly evolving. And I think where we go next, we’ll certainly have elements of where we’ve been, but we are facing, for those who believe in American exceptionalism. And I don’t know if I count myself as one of those, but for those who believe that America is the world’s most powerful, important country, China is belying that and is going to continue to belie that. And I think where we are today is in strong need of a national debate about what we want as Americans and what we’re willing to do.

Chris Riback: Do you see that debate occurring? Because as you say that and your use of the word debate, obviously it makes me think we’re in the beginning of the middle of U.S. elections, the presidential elections, it almost doesn’t feel like there’s a real debate, I’ve got to say. There’s kind of a general acceptance that yes, somehow China has done really badly, got certain breaks and rules on the WTO. They’ve acted really badly. And now we’ve got a tariff war and tariffs are bad, but I’m not necessarily seeing in the popular culture, a lot of discussion, but would you say that there’s an active debate?

Isaac Stone Fish: You know, I don’t think there is. I feel the problem is that the Trump administration has so many racist policies and we have so little faith in their ability to deal with questions of Chinese influence without resorting to racist tropes or discriminatory behavior against Chinese American scientists or academics or students, that those issues are submerging the more important issues, which is how do we deal with Beijing and the communist party. So I think in order to respectfully, responsibly have this debate, it would be lovely, though unlikely. But it would be lovely if the national security apparatuses and the Trump administration just treated Chinese Americans better.

And the issue is not about them. I mean the issue is what they want for this country, but it’s not about any questions of divided loyalty or spies. It’s way beyond that. And I think we’re, as a community, the community that I’m in whose trying to have this debate, is way too much getting bogged down in those issues as opposed to the bigger issues of what to do about Beijing and the party.

Chris Riback: Isaac, thank you. Thank you for your time and the analysis.

Isaac Stone Fish: Thank you, Chris.

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