The Xi-Biden virtual summit was an important step to make progress to improve the US-China relations

Wang Huiyao: Thank you David for joining us today to discuss the most interesting latest developments, such as President Xi and President Biden’s virtual summit, the US-China relations, and your latest book Rivers of Irons: Railroads and the Chinese Power in Southeast Asia. You can also share your views on the future of the Belt and Road Initiative and what has been proposed by G7’s Build Back Better World (B3W). Before we get into the detail, I would like to introduce our distinguished guest today. Prof. David Lampton is a famous China hand and has actually a distinguished career spanning nearly five decades in the study of Chinese politics and foreign policy and Sino-US relations. Currently, he is a senior research fellow at the Foreign Policy Institute of the School of Advanced International Studies (SAIS), Johns Hopkins University and the former dean of the faculty at the SAIS and Hyman Professor and Director of China Studies. He was most recently an Oksenberg-Rohlen Fellow at the Stanford University’s Asia-Pacific Research Center from 2019 to 2020.

I’ve known Prof. Lampton for a long time. I remember very well that you invited me to SAIS to give a talk around the Year of 2010 when I was at the Brookings, and also you visited the CCG and gave a talk here. So it’s really a great memory that you had with us. In addition to the academic titles, Prof. Lampton is the former Chairman and now member of the Board of the Directors of the Asia Foundation, and also former president and current board member of the National Committee on United States-China Relations. So you have many academic and social titles and you have been really playing a very significant role in maintaining and promoting the understanding between the US and China. So we want to extend a great welcome to you to join our dialogue. Perhaps before we get started, maybe you can give some initial analysis on the latest development of the China-US relations, particularly how you view this recent President Xi and President Biden’s virtual summit, and what’s your general take of this current US-China relationship, since you are such a great expert on this issue. Perhaps you can also have a little opening remark.

David Lampton: I think the first thing to say is that in a way, we’re in the most unprecedented time in the US-China relations, perhaps since President Nixon went to China in 1972, and the mere fact that our relationship right now is in an unprecedented situation means there are no experts. This is a situation that we haven’t confronted in a long time. So to borrow a phrase from Deng Xiaoping, I think both sides are feeling their way across the river by feeling the stones. So I think we are engaged in a kind of incremental step-by-step attempt to understand how we can manage this relationship in a far different environment. That environment is different from what we dealt with for the last 40 years in several respects. One is that China has made enormous strides in its economic power and its capacity to shape the regional economic architecture and infrastructure, and its military power relationship has fundamentally changed. So it’s quite natural to say we are really confronting in an unprecedented situation.

I think President Xi and President Biden would both agree that our principal need at the current time is to avoid what was called, which I think President Xi said, catastrophic mistakes. So if we ask, “is the big danger, catastrophic mistake (coming)?” and then talk about the Xi-Biden virtual meeting last week, I think that meeting, somewhat, gives me more confidence that there is a will to manage this relationship on both sides. So I think I’m a little more confident of our ability to manage things for the next period of time than I was. But I would want to emphasize that I think we have not fundamentally addressed the major issues much less resolve them that are creating the problems. If you think about it, for the last 40 years, our growing economic relationship was a positive factor in the relationship. Now, economics is a very contentious part. Although we had an agreement between the United States and China under President Trump in 2020, quite frankly, that trade and economic agreement was not lived up to. We still have tariffs that were resulted after. There had been hope with the new administration here in Washington that we might ease up on tariffs. So I would say there has been no fundamental progress on the economic side. On the military and security side, they talked a little about arms control. From an American point of view, I think, without speaking for our government, that for the first time now, we might be able to talk meaningfully about arms control, at least in a limited sense. I take that to be positive. The sense I got from the virtual summit that our military to military may engage more seriously with each other in dialogue. If that happens, I think that’s good. But fundamentally, we’re in an arms race and this virtual summit did not stop it. And it has quite a momentum in both our societies because a lot of budgets are involved, perceptions of threat on both sides are involved, and technology has a logic of its own. So I would say the two big drivers of US-China relations – economics and strategic security issues, as far as I can see, were not really addressed at the virtual Summit. So just to summarize, I think it’s better to talk than not to talk. I’m glad we’re talking. I think that is certainly the first step to make progress. But frankly, I didn’t see very much progress.

Wang Huiyao: Thank you, David. I think you made quite a unique analysis. You mentioned this dialogue is important and also that act helped create some atmosphere for further dialogue. I noticed that President Xi referred to President Biden as an “old friend”, since they had a lot of exchanges and dialogues in the past. One thing is that President Xi mentioned we tried to avoid catastrophe mistakes; and President Biden also said something quite interesting to Chinese that he does not seek to change China or build alliances against China. He also said he recognizes the One-China policy. That is in line with what he has said when he pulled out the trip from Afghanistan. During that announcement, he said he is no longer seeking nation-building for Afghanistan or maybe I think  to that matter in Iraq, Syria, Libya or the Middle East. So there are some changes there. One of the complaints from the US we hear very often is that we have helped support you to join the WTO, support you to reform, but you didn’t become one of us, you didn’t converge, and you didn’t become a lot more similar like us. So I think when President Biden said the US does not seek nation-changing, it probably signaled a change that the US is now starting to recognize that China is what it is, given its 5,000-year history, its development and all those aspects. Perhaps the two countries can really think about the framework under which they can peacefully live together, respect each other, peacefully coexist and try to be in a win-win situation. So, what do you think about that? Do you think President Biden sounds a little different from the previous administration? During the Trump era, there were always sayings on how CPC is bad and 100 million party members cannot come to the US. This sounds like a shift towards recognizing the reality and thinking about how we can work towards the future. What do you think about this framework that we’re trying to reshape a bit?

David Lampton: First of all, I agree with the words that you highlighted – old Friend, a friendly word and a set of words or concepts. Certainly, I think there was some recognition that an attempt to change the internal values or operations of another political system is difficult. On Taiwan, I would say, you’re right. He reiterated the One-China policy. But on the other hand, he’s been reiterating the One-China policy all along while at the same time, there have been some changes you might say in the implementation Of that policy. I don’t think I heard him say that he was going to change implementation that much, maybe I missed that. So I would say: yes, those are positive words, but I don’t think they represent much change. I certainly don’t represent the US government or the Biden administration but we have the summit of democracies coming up, that’s a high priority for President Biden. And has talked about the global situation being, in a sense, in a struggle between autocracies and democracies. Usually he mentions that China is a principal concern in that regard. So I see a bit more ideological content to the Biden administration certainly than the Obama Administration that he was Vice President in. Trump, frankly, was all over the lot and wasn’t consistent, I took a grain of salt in a lot of things he had to say. You’re right that he tried to implement a policy of not permitting the 98 million members of the Communist Party to come here. Frankly, I never understood how we would even know the many cases of the status of individuals coming. So I didn’t take what President Trump had to say terribly serious. But he was the president and he did have levers of power, and occasionally he did do things that had a real impact. So, the long and the short of it is, I don’t think any of the friendly statements I heard there fundamentally changed the relationship. I think it provided avenues to talk about the real problems. I hope we will seize this opportunity. I don’t want to say it might be able to stabilize our relationship, but I think it can in a way at least make it less fragile and give us a little time to operate. But the question is: what are we really going to do to change the calculations of the other side? I did note that in the course of the virtual summit, there was a talk about red lines on Taiwan. Even in the wake of the meeting between Xi and Biden virtually, the tensions continue in the Taiwan Straits, and the movement of naval and other assets by both sides continues. So I don’t see a big change in the security situation in the Taiwan Straits, certainly over the long run.

China and the US have differences in history, geography and economics which they both have to take into account

Wang Huiyao: Thank you, David. I think that you’re right. The tension in the Taiwan Strait is still there, even though the US has repeatedly said they respect One-China policy. But recent years we’ve seen even Trump has sent his undersecretary to Taiwan, and we have seen several planeloads of Congressmen visit Taiwan in recent months. The Taiwan authority leader said there was US military personnel based in Taiwan. On top of that, we have seen a parade of warships, navies sailing through the Taiwan Strait as well. So I think China has to respond. But basically, I think we should really come back to the Three Communiqués and come back to this One-China principle that has been agreed upon and not to irritate the status quo. If that is done, we can stabilize the situation, at least stop the downward spiral of the bilateral relations.

Also, even though President Biden has said at the UN General Assembly that we are not seeking to build up two camps, and we don’t want to ask people to take sides, yet they are having this democracy summit, which I think is kind of ironic to divide the world into democracy and non-democracy or autocracy. That is another way of setting up the camps, basically. These days, China might not have this exactly same style of Western democracy, but we do have, which you’re probably aware of, this consultative democracy. China has a lot of consultation. For example, for the 14th Five-Year Plan, they solicited about over 1 million comments and suggestions. They have this whole process in which there are always experts, delegates, and CPPCC members involved all year round to give the government recommendations, critics and all kind of plans to be compared. So that is why I was thinking that President Biden, who has said he would not change China, can give some credit to the system. Because if everything in China was a bad decision, how would China have lifted 800 million people out of poverty or built perhaps the best infrastructure in the world? The KPI doesn’t really substantiate that. So, this kind of two-camp (theory) on democracy or non-democracy is another way that US is still trying to use. I think it makes a lot of Chinese people really confused.

David Lampton: You use the phrase “Will President Biden give credit for consultative democracy?” I think the short answer to that question, in terms of what I would anticipate him to do, would be “no”, he’s not going to do that. You would ask why, and I think this gets to the fundamental dilemma of our relationship. It’s equally true in Beijing or China more broadly and in Washington or the United States. That is the political calendar in both of our countries does not make being reasonable, conciliatory and flexible very easy to do for either leader. Xi Jinping just had the sixth plenum and by my reading from his point of view is he has achieved what he wanted to achieve but there is no reward in Chinese politics for being very flexible with the Americans. If you look ahead to the 20th Party Congress coming up next year, it’s going to be very difficult for any Chinese leader to be flexible in the documents of the sixth party plenum. There was a lot of concern about subversion from the US and its activities in Hong Kong and elsewhere. So I would say the level of suspicion in China of the US has not been diminished, and the domestic political situation in China does not reward leaders for being flexible and accommodating to the United States. And by the same token, it’s at least as true in the United States next year. We have congressional elections, the results of which will dictate who controls both houses of Congress. That’s why Biden is so desperate or anxious to get his legislation passed now because he can’t be sure he’ll have a Congress that will pass it after the elections next year. Frankly, he either has to use his capital to pass legislation on infrastructure or build more social equity in the US. He doesn’t want to spend his capital saying nice things about China that are going to be criticized. Then, when we pass the 2022 elections for Congress, we’re going to be into a campaign for the next President. Leaving aside whether Mr. Trump will be a major force in the US politics and maybe be a candidate, which I think both are possible, the spirit of populism and what you might call Trumpism is very strong here in the United States. So all I’m saying is that the domestic political environment in both of our countries does not encourage either leader to be seen as weak by their respective publics. So there is a concatenation of domestic inflexibility and nationalism in both of our countries, exaggeration, and rumor. And then the power relationship and the economic relationship is changing. As one observer said long time ago, it’s an enigma wrapped up in a question.

Wang Huiyao: I think your analysis really brought up this question about de-globalization and nationalism. Populism is running high, probably in the United States and also in China. This is really not good for the leaders to have a deep dialogue and face its own challenge. For example, you are right that President Biden is having this midterm election coming up in the Congress. On the Senate, they have barely won with only one more seat with Vice President Harris there. The dynamic is also changing. They already lost a seat in the Virginia governor race recently to the Republicans. That’s exactly the dilemma we are facing. I’m thinking that the US and China have their own paths of development. China basically is living in the world of democracy. The US is probably the largest opposition party. China also has a domestic market democracy or technology democracy. One billion smartphone users actually can decide what they do on a daily basis. They’re voting every day. Somehow I think this internal energy and synergy will continue.

David Lampton: I was just going to say that you have mentioned a couple of times technology. I thought part of the problem we have got is a technological race. Part of that technology race is over economic dominance and control or at least success within the future industries. To just give one example – artificial intelligence. Now we have the capacity to delegate decisions within militaries and to machines essentially. We have machines now with algorithms to determine what phrases will be selected for political advertisements or propaganda. The purpose of many of these mechanisms to select sought and exaggerated conflict. They exaggerate conflict within our own societies and between societies. So I think one of the new elements in our relationship is this technological race. It’s partly for economic dominance, but technology has its own logic. And part of that logic seems to be to increase conflict. Also, the delegation of military decisions to machines is a very dangerous trend that we have to be mindful of. So I think one of the new aspects here is technology. How are we going to come together as two countries to cooperate to make sure that it’s men running the machines and not the machines running men.

Wang Huiyao: Absolutely. As I recall, it started from President Trump to decouple and ban the use of companies like Huawei or ZTE, and now we see a host of companies being put on the list during the Trump administration. That kind of a decoupling in technology actually already happened. That forced China to develop its own now. It’s really not healthy. I think we should use the technology to conquer the universe, but not to start an arms race or military competition.

David Lampton: I’m not sure most Americans would agree with that. But the way I would put it is that because there is this decoupling going on and then in China, just like in the sense as the US, there is a talk of self-reliance, because you have security problems with a country you want to depend on them for strategic items, whether it’s food or machinery, high tech machinery or whatever. But I think the United States sees China is increasing the state enterprise sector because that’s where some but not all of your most advanced firms are. So I think the American storyline is that China is increasing state control of key aspects of the economy, particularly in the security area. Therefore, the United States uses that as a justification to clamp down on export and exports of certain goods to China. It’s working with Taiwan for a big investment in computer chips in the American Southwest. In other words, we’re each responding by creating our own independent economic and technological subsystems. When one side does it, the other side reacts. In a way, I don’t find it very productive to say who started this. What I find it productive to say is we now are in a problem. So what are we jointly going to do to solve the problem?

Wang Huiyao: I think, David, you are right that we do have a huge problem. I would probably interpret that as the mistrust and also a misunderstanding to some extent. For example, China has always been a highly centralized country and have thousands of years of history, with big irrigation projects across the country geographically. So SOEs or gigantic projects are always tackled by the state. And that really helped lift 800 million people out of poverty or have these big infrastructure projects across the country – Three Gorges’ Dams or Hong Kong-Guangdong-Macao ocean bridges. So, SOEs play a unique role in China, but somehow this is not really understood well outside China. Also, for example, in the rural area, the Wi-Fi rate by China Telecom and China Unicom has to be low so that they can help villagers.

David Lampton: I think you’re right in terms of China’s history, in terms of its rice culture that always needed to have big water projects, that had to be almost initiated by government or very large government entities. You have a different history, a different geography. You have to deal with a much bigger population. But in the same token that I think we should better or at least Americans should better understand China’s particular circumstances, I think China needs to recognize our particular circumstances. And our particular circumstances are: small and medium business is the backbone of the American economy and even our biggest corporations for the most part have little or no direct ownership by our government. And so in our politics, the private sector or small business looks at China and they say, how can we compete with state-financed corporations that have more centralized decision making? So while it’s understandable where China’s economic and organization came from and why you do it; on the other hand, it’s just precisely the kind of economic management and philosophy that scares our private sector, small and medium business-sized companies. So we’re not going to solve this problem. But I think for the last 40 years in the process of trying to get into WTO, and I hope we, along with China in its application to the CPTPP, the new version of TPP, I hope we can move towards both trying to join that and once again try to develop common, at least more common economic practices that will reduce the tension. So my basic feeling is that in the last few years, when we didn’t join AIIB, we didn’t join TPP, and you set up RCEP – we have been growing apart. And it seems to me that we have to get back in trying to grow a little more together. We’ve got to take account of your needs for centralization and scale, but you need to take into account our demand by our private sector.

WTO, CPTPP and RCEP are important trade mechanisms for countries to find common ground

Wang Huiyao: You’re right. We all have special circumstances of course, China has its characteristics and the US has its characteristics. How can we really minimize that gap and understand each other better? I think that a multilateral mechanism like a WTO is really the answer for that. I’m glad that you mention about RCEP and CPTPP – China joined one of them and is trying to join the other one. That is all very important mechanism for minimizing the differences and enhancing the understanding. Amid CPTPP was largely designed by the US, China is willing to join that. The Minister of Commerce has put the CPTPP agreement on the MOFCOM website. Here’s the target to shoot for. Let’s do it. So that’s probably the way to find much more common ground and talk to each other through those multilateral arrangements.

David Lampton: Of course, I agree with that, but it’s not going to be easy since CPTPP has relatively high market-style standards, and so it will take work for China to comply. Frankly, in the United States, there are forces in the Democratic Party, not to mention the Republican Party, that don’t like international economic regimes which they think would constrain the United States too much. So the point is: I think that’s the desirable way to go, but once again, particularly in this case in the United States, neither political party, at least for the last few years, seems very comfortable with the idea, even though Japan took the lead after the US pulled out of the TPP discussions.

Wang Huiyao: Yes, even UK now wants to join CPTPP. For China, actually, last year, Premier Li actually announced that the National People’s Congress and President Xi actually announced that at APEC Summit that China is very interested in joining that, and also MOFCOM Minister Wang Wentao officially applied for that just two months ago through New Zealand, where the document is deposited. What I think now is that, if you talk about 10 years ago when CPTPP just started, maybe they thought China still followed the WTO and the TPP has high standard, not compatible to what China has been doing. But now, after eight or nine years later, China is catching up. For example, the TPP is concerned about IPR. China is the largest patent applicant in the world now. Also, TPP has a high environmental standard. In China, President Xi’s “Green mountains and clear water are equal to mountains of gold and silver” is already deeply embedded in the Chinese concept. Also, you have these labor rights that need to be respected. Now China calls for common prosperity which exactly is trying to raise the benefit to the migrant workers in the cities. In terms of digital economy, China is now one of the largest digital economies. Digital economy already accounts for about 38% of China’s GDP now. You also mentioned SOE, which I think is a big worry overseas. But why can’t we follow some competitive neutrality? In China, SOE is more needed, but when they perform overseas, they could do a follow-up competitive neutrality, which is internationally recognized. So there could be ways to talk right now.

David Lampton: I agree with most of what you said. I think the Americans would respond, or at least many Americans would respond that they’re reluctant to make new agreements with China on the economics when we didn’t get satisfaction on the phase-one trade deal. So one thing I was hoping might come out of the Xi-Biden talk was some movement forward that would allow American politicians to say: We negotiated with China. We didn’t get everything we wanted. But when we did agree, China lived up to it. Now, of course, the Covid virus came along. Our bilateral relationship had many problems. So objectively speaking, you can understand why there have been problems. But the average American realizes there were agreements to purchase large amounts of US exports, and basically that has not happened. Of course, Chinese would say: you Americans threw tariffs on us and not only on us, but even American allies. So in any case, I think we have to find a way to restore trust in previous agreements before there’s too much appetite for new agreements. You said one thing I thought was very insightful. Actually, European countries have expressed some interest in the TPP or CPTPP, although I’m not sure how much. I would say that the  more Europeans express interest and the more interest China expresses in getting in that organization, you’ll find that the Americans will not want to be left out. So, I think in some sense, let’s try to repair past agreements as best we can, or at least live up to them going forward and restore credibility to the idea of negotiation. Then I think if China and others move towards multilateralism, the CPTPP, you’ll find that the Americans will get more interested. That’s my prediction.

Wang Huiyao: You’re right. I was at a virtual webinar yesterday with Körber Foundation of Germany. Actually there were people suggesting the EU should be in the CPTPP as well. So, you know, this kind of multilateral arrangement does help world prosperity. For example, since China joined the WTO 20 years ago, China’s import from the world has gone up six times, and its export has gone up seven times.

David Lampton: Europe is a complicated place. Generally speaking, the Germans are pretty forward leaning on the relations with China, particularly economic relations. I would just say as a piece of friendly advice: Once again remember Chairman Mao had the three-worlds theory? Essentially there was the Soviet world, there was the American world, and then there were the intermediate zones – the middle-sized powers. I always thought it was a great strength of Chinese foreign policy to consolidate or to focus its energy on the middle powers in the intermediate zone. Now, we didn’t like the way China focused on those, but the idea of keeping the middle powers at least friendly to China. I think it is an important idea. Frankly, it seems to me China’s relations with several very important middle powers could use some repair.

Wang Huiyao: That’s a good suggestion. I think because the trade war, the tariff war launched by the Trump administration, actually impacted many things. Now Biden and Blinken come up. They are seeking allies, Aukus, or the Quad, all coming up against China. So I think you’re right, we need to unite or maybe have friendly relations with as many countries as possible. That certainly is the way I think China should go.

Now I would like to talk about something different. It’s very interesting. I noticed that last time you come to see CCG, I remember you were doing some exploratory, investigative research and academic studies, talking to two professors. Now your new book is has come out already, River of Iron: Railroads and the Chinese Power in the Southeast Asia, co-authored with Selina Ho and Cheng-Chwee Kuik. I know you are very productive and have authored many books before. Could you give a bit of highlight of what’s special about this most recent book? What is it about?

BRI’s railway project in Southeast Asia is an intelligent effort to build the infrastructure for economic modernization and integration of the region

David Lampton: I think the first thing to say is that the book is about how China itself built a high-speed rail industry. To make a very complicated story short, in about the Year 2000, China didn’t have a high-speed rail industry or a high-speed rail system. So the first part of the book describes how did China build the technology and the infrastructure for a high-speed rail system, and it’s quite a story. If I was a Chinese trying to make the best case, I would say this is an example of how industrial policy and planning can work. Because you moved very rapidly to develop the technology and then lay down the infrastructure. I would think outside of a wartime circumstance, no major country besides China could do something so big, so fast. Now, of course, when you do things big and fast, mistakes happen. That happened in China. But basically, you developed very rapidly a what-you-might-call “technology forcing industry”. In the United States, Boeing aircraft not only built airplanes, but it also developed metallurgy, instrumentation, navigation, all of the things that surround these systems. So in building your high-speed rail system, you built a driver for many other high-tech parts of your economy. So the first part of this story is how you built this industry. Now, once you had it, particularly once you built your own system, you then had an industry that was an export industry, like Boeing is for the United States or Airbus for Europe. So the second part of the story – as we were discussing before the show, I believe next month your rail line from Kunming to Vientiane, the capital of Laos, will open up. So the first part of this export system to Southeast Asia will open up soon. The second part of the book, therefore, is about how China is negotiating with seven Southeast Asian countries on the continent (not to include Indonesia) to build a system that will possibly connect them to the south of China and hook into China’s domestic system.

Now, in describing how you’re doing this, I want to make a very important point that we made in the book. This idea of an interconnected Southeast Asia was not particularly a Chinese idea. This wasn’t Hu Jintao’s idea. This wasn’t Jiang Zemin’s idea. It wasn’t Xi Jinping’s idea. In this particular case, the Southeast Asians are going back to the colonial powers. The French, the British in Southeast Asia wanted to connect by rail to China to penetrate inland China. But what China did do is build the industry, then got the capital, and now it’s helping Southeast Asia build out this plan. So this isn’t a case of China forcing infrastructure plan on reluctant Southeast Asians. In fact, the Southeast Asians came to (former Vice) Premier Zhu Rongji around 1995 and asked whether China would help finance railroad development in the Southeast Asia. And Zhu Rongji said, “No, we don’t have the money here, technology. It is not the time for us”. Well, a few years later, China did have the money and technology, and now it’s been pushing forward. So the bulk of the book deals with China in negotiation with the Southeast Asian countries to gradually, yi bu yi bu (step-by-step), build this system. Ultimately it’ll go from Kunming probably within 20-or-so years. It is a little uncertain, but I believe there will be a system of connectivity of high speed rails, and I think it’ll probably eventually in the next 20 or so years reach Singapore (If not Singapore, certainly Kuala Lumpur). So this book is that story.

Now, I just I don’t want to talk too long but just to say one other thing. Some people ask: is this a strategy? is this China’s strategy to take over the Southeast Asia? And I would say no, it’s a strategy to make China central to what you might call the East and Southeast Asian economic system, and you’re building connectivity just like we knitted together our continent with a transcontinental railroad here. Leaving it aside each specific project may be better or worse, overall, but the concept is strong that China is going to get rich if its neighbors get rich. If the neighbors are going to get rich, they need to be connected to China, and they need to be connected with each other. I think this is building the infrastructure for economic modernization and integration in Asia, and this isn’t a plot by China to take over the world or that region. It’s an intelligent effort to create economic interactions that will be beneficial to everyone. Now, of course, there’s going to be corruption and all of the things that go along with such a vast vision. But I think the United States in 2018 began to wake up to the power of this vision. So now you see the US is negotiating with the Australians and the Japanese, talking to the Koreans and the Europeans about how we might cooperate to help build up infrastructure in the Southeast Asia and elsewhere in the world. I think a little competition in this area will be OK. But the basic pattern is that the United States is waking up to the need for infrastructure in much of the world, not to mention ourselves. We’ve got our own infrastructure problem too.

Wang Huiyao: Thank you for the highlight of this great book. Actually, I remember, you know how seriously you’ve done the study. I still remember you were here in 2016. We actually introduced a professor from Beijing Jiaotong University, who is specialized on the high-speed railway, to talk to you.

David Lampton: We’re very grateful for your help. I would just say, as we were talking about the US-China relations – we should not let the problems that our two governments have obstruct our academic and intellectual exchange. Frankly, I’m afraid that both our governments are making it more difficult.

Wang Huiyao: One of the positive outcome of this President Xi and Biden summit is that on the same day they announced to resume journalist visa and exchanges, so there is something positive going on. Last time, when they talked in September, we had the release of Madam Meng Wanzhou. This time, on the same day they talked we heard the news that the journalist visa has been relaxed. So I hope there will be more positive news on the trade and many other fronts.

Coming back to this infrastructure project, you’re absolutely right. Around year 2000, China really had not much on the speed railway. You know, I myself grew up in a railway family. My father actually went to Africa to build the Tanzania Zambia Railway. So that was the first time China was trying to develop its international railway business. Now, it’s incredible that China has two thirds of the lines of the speed railway in the world and total number of the lines of China’s speed railway is equal to that of the next 10 countries combined. Whereas the US military budget is equal to that of the next 10 countries combined. So I think using these infrastructure as a connectivity is really great and you’re right that now the US is wake up to that. President Biden, on the same day he was talking to President Xi, signed this USD 1.2 trillion infrastructure bill. At the G7 summit, the US and other G7 countries proposed B3W – Build Back Better World. We talked about a lot of differences, a lot of disputes and a lot of different values and things like that, but in the exactly the case that you study – this infrastructure connectivity, is not only going to help your neighbors but also help yourself. If the world is in that mentality – let’s help each other, or let’s build infrastructure for the next half a century, that would be probably the biggest pie for all countries to work on. Maybe we could even upgrade AIIB to GIIB (Global Infrastructure Investment Bank) and maybe the US and Japan should also join. So what do you think about the prospect of having a global alliance or bank for infrastructure? B3W and BRI should be combined in some fashion.

David Lampton: This is my personal view: I think the US and others should say the world needs infrastructure. In many cases, we the United States, the Germans, French, Italians, or Canadians, have certain talents and we should work together to build infrastructure now. I think in the case of the Southeast Asia, it’s close to China. China’s the biggest trading partner for almost all Southeast Asian countries now. So I think it’s natural that China will have a leading role in that set of infrastructure. But if we were talking about the Americas knitting together even more, with perhaps Canada, US and Mexico, I presume the United States would play a bigger role because it’s closer to home. And of course, the Europeans will play a bigger role in the further integration of Europe. So my point is that China, the United States, the Europeans have their backyards or their natural economic communities, and therefore you’ll see more activity by China in Asia, more perhaps by the US in our own country initially and then in our region and the same in Europe. But I think also this gets back to the point I made: China with the big role of its SOEs, particularly in this industry. I mean, frankly, Beijing can tell the railroad corporation what you want to happen and they can finance it. In the US, the government can’t tell the companies what to do, so it has to be attractive to them. So in the US, for instance, maybe we provide investment insurance, maybe we provide certain benefits to encourage companies. In the end, this difference between a publicly oriented economy versus a more centralized economy. I think it means that the US will probably not play as big a role as China in building infrastructure all over the world. That would just be my guess.

But I think the US should try. We ought to work with our friends, in that sense, with China too, if there is an opportunity. We certainly can work with the South Koreans; we can work with the Canadians that are quite advanced in this area. The French and Italians all have something to contribute. So my guess is that the US will be somewhat less involved in terms of the amount of money. It’ll be more private-oriented than a Chinese approach would be. But with that on balance, we’re going to do more of this in more places in the world. Because, frankly, in the same way China benefits from this integration and connectivity, if the US is going to achieve economies of scale, we need to benefit from closer connection to bigger markets. And so I think we’re going in the same connectivity direction. And I don’t think globalization is dead. You don’t have to take the word “globalization” out of your center’s name. It’s a reality. So, I think the US is getting into the game.

Wang Huiyao: Thank you. Globalization of course is not dead, and I’m sure our center’s name will have “globalization” in it for a long time to come. I can see there’s the infrastructure as the biggest common denominator for the whole world, for developing countries and for countries like those in Africa, Latin America, Central Asia, ASEAN and everywhere, and even in the United States and in Europe. According to the G20, there’s a center named GIH (Global Infrastructure Hub) that has issued the Global Infrastructure Outlook report basically saying that from 2016 to 2040, the global infrastructure investment needs will increase to USD 94 trillion. And every year the growth will be USD 3.7 trillion. It’s such a big demand actually. Also the World Bank has actually issued a report on the Belt and Road economics saying that the BRI’s aoad construction will let the countries along the routes increase their income from 1.2% to 3.4% and global real income will increase from 0.7% to 2.9%. So there will be common prosperity, not just for China, but for the whole world. So what do you think about the BRI? China is building railways in the Southeast Asian countries, which is kind of a maritime silk road if you’re using the Chinese term. They are trying to help build this connectivity. But BRI is the scheme that China has been launching for eight years now. So what do you think of BRI’s prospect and how we can really work together? I mean, China doesn’t want to work on it by itself, the principle of that is to jointly build and mutually benefit. So, what’s your take on BRI?

David Lampton: Of course, I would defer to you in particular and Chinese people in general, but it’s my impression that BRI itself is evolving over time as China gets involved in more places around the world, more different kinds of infrastructure. Some places where China is operating are not very politically stable, others are much more secure. China’s learning lessons and also how to deal with different political systems because it’s very sensitive to build infrastructure in another political system, because they’re organized differently and you face indigenous groups of various sorts that might not like what’s happening. So I think China’s learning, and on balance I think China’s becoming a little more cautious. As China’s growth slows, which I think generally speaking over time, it will, other needs for China domestically are big. So, looking at the discussion in China, I think Chinese are themselves asking, how much of our national talent and resource and technology should we devote to outside of China versus inside of China? And even inside of China, how much does the domestic needs versus military needs? So what I try to tell Western observers, at least it is my understanding, is that China debates about all these issues and you’re feeling your way towards sounder policy and not becoming overly committed financially.

It’s always been my understanding that one reason China wanted the Asia Infrastructure Investment Bank was to have others beside China finance a lot of this infrastructure. Frankly, I thought that was a pretty good idea. I think the United States made, I would say, a strategic error under the Obama Administration not to join this. And in fact, when China drew up the charter for the Asia Infrastructure Investment Bank, it was an American lawyer that helped the Chinese do it. So all I would say is, yes, I think China will become more involved over time, but it will be increasingly careful. It will want to spread the risk to other countries beyond itself, and that will see China more constrained by competing demands for budget. So yes, it’s going to go on. I think it will continue to be very important, but it’s still only going to be a small part of what the world needs.

Working together for infrastructure transformation over the next half century

Wang Huiyao: Yes, so that’s why we are thinking if we can find a mechanism to have this B3W and BRI work together. Basically, China already has investment, some technology, and infrastructure capacity; B3W might be, on the legal and other aspects, more familiar with local competition, because the US, Western multinationals are really interested in BRI and want to work together. We have this AIIB, Asian infrastructure Investment Bank already. Can we really set up a Belt and Road International Bank Alliance that should be led by World Bank, AIIB, ADB, AfDB, and Latin America Development Bank… Let all the development banks work together for the infrastructure revolution and transformation for the next half century so we don’t have a lot of geopolitical competition.

David Lampton: These are the things I’d like to be talking about, but instead we’re talking about red lines and we’re talking about bad faith agreements and so forth. So we’ve got to get our dialogue to the point where we can, but instead we’re talking about the red lines. They are very important, but I should, as realism says, I think the security frictions between our two countries right at the moment are growing. And as long as our security relationship is sort of more threat-oriented rather than opportunity-oriented, you’re then going to find people probably in China but certainly in the US say: how can we help China increase its connectivity to the rest of the world if we face a sort of security threat? So I think the precondition to moving ahead on these good economic ideas is to get our security relationship under control. And frankly, it’s not under control. I mean, it’s not out of control yet, but it’s certainly not under control.

Wang Huiyao: I think that the trust and mutual understanding we have to build up is very important. I hope this high-level head-of-the-state diplomacy can stabilize the relations and even put the guardrails against those potential risks. Then we start those constructive dialogues among the people in the commerce, treasury and economic (departments) and probably the banks like AIIB, which is already a good internationally acceptable model with 104 members, including all of the Western member except the US and Japan. So maybe we could work on that. I think your book, Rivers of Iron, on the railway infrastructure in Southeast Asia is really a case in point. There is such a strong demand for this infrastructure connectivity. So I really think that development banks, the USAID, China International Development Cooperation Agency and many other international agencies should work together, also with the development banks and through the UN somehow, maybe we can find a way to connect the world with the massive infrastructure and gradually build it up, so that we can avoid the risk of hot war, because if we keep the geopolitical tension, we may end up destroying the world. So, I think you’re right. The efforts in your research in this aspect really brings the understanding of what China is doing in the Southeast Asia to the world and how we can really work together.

David Lampton: In that regard, there are small steps we can take. The first small step is actually going to be a pretty big step – getting our people going back and forth, talking to each other again in person on a sustainable basis. I think one of our top priorities in the US-China relations ought to be, how can we sooner rather than later restore our person-to-person contact?

Wang Huiyao: Absolutely, that’s very important. We really need to restore the people-to-people exchanges. I think it’s great that the US has admitted over 100,000 Chinese students going back to the United States during this pandemic summer. I hope that we have US students coming to China as well. To that matter, next year, hopefully we can contain the situation and start finding the optimal point where we can maintain the minimum cases but maximize people-to-people exchanges. We hope you can come back. We have to see each other rather than just talking virtually. And that’s very, very important.

David Lampton: When I get the chance to come back to China, I hope we can talk in person.

The Sino-Laos Railway will create incentives for others in Southeast Asia to join the network

Wang Huiyao: Absolutely. So we have almost come to the end of our dialogue. Really appreciate your stay-up-late. My staff told me that there was over almost a quarter million people watching us online. We also have some media questions. So there’s one question from China Daily – what’s your take on the BRI’s contribution to the world and how can we work towards a good direction? And another question from Guancha, a media agency based in Shanghai – among the trans-Asia railway network outside China, the China-Laos railway is to be very first to open. What do we think about the demonstration effect it will bring? So you have probably covered some of that already. Another question is that, this year marks the 30th anniversary of the establishment of China-ASEAN dialogue relationship. Actually, yesterday, President Xi and ASEAN leaders just had a summit, and RCEP will come into effect on January 1st next year. It will cover 1/3 of global economy and 90% of the goods. We achieved a zero tariff for that agreement. So on the other hand, the trade war is still going on and with the US and China and the tariff. What do you think of the possibility of the tariff coming down between China and the US? They also mentioned about China and ASEAN formally announced the establishment of a comprehensive strategic partnership between China and ASEAN but also the US is trying to do this Indo-Pacific strategy. And so what do you think of this economic ties as a great direction to work for rather than forming Aukus or Quad-like security alliance. So it’s a host of questions, maybe you can give some answers.

David Lampton: As we mentioned, the Vientiane-Kunming line should open up in December. I think the question was, what kinds of effects will this have in Laos? I would say in the region, more broadly, first of all, the Laos link is really the first link on the continent of Southeast Asia that will have been completed. All the surrounding states, whether we’re looking at Malaysia or particularly Thailand which is next to Laos, and Vietnam, are looking at how the project goes with Laos. Once it’s completed, I think that will create more incentives for others in the Southeast Asia to join. So I would say the success of the Laos situation is very important and all of the states will be looking at the results of that project, asking themselves “Now, does this make it more preferable for us to join the system sooner or later? So I think to Laos, the completion is very important. It is not just Laos. It will trigger the calculations of all the countries around it, particularly Thailand, because now Thailand knows there’s going to be a connection to China through Laos. Thailand wants to run the railroad from the Thai border with Laos at Nong Khai down to Bangkok. So the next big question will be, what Thais will do? Also, the Vietnamese and the Burmese on the left and the right, or the East and the West are looking to see whether they want to join the system. So I would say the Laos is a big advertisement for the system.

Also, with respect to Laos, I think it’s very important on a theoretical level. You might ask, where did the title for my book come from: Rivers of Iron? Well, actually, that was a phrase that was used in an interview by a Laotian planner who said the great countries of Europe and indeed China and many other countries developed their cities and their commerce by rivers. Now it’s true Laos sits next to the Mekong, but much of the Mekong is not very navigable. So he said we don’t really have access to the sea. We’re the only Southeast Asian country with no access to the sea. So he said, we need to build our “Iron Rivers”. We need to make up through infrastructure what nature did not provide us in terms of rivers and easy transportation. So I think the completion of the Laos link is very important. It’s much bigger effect on the about seven million people who live in Laos than, frankly, economically, as Laos and the train will probably lose money. But in terms of its effects on the decisions of others and facilitating the development of this network over time, I think it’s very important.

Now one of your questioners asked about RCEP. All I would say is that I’m not an expert on free trade areas, but I would know that the United States is really not a member pursuing free trade agreements very actively with anybody in Asia. I’ve always thought that free trade, or at least freer trade is on balance, if there are fair rules through comparative advantage, everybody can be better off. So I’m almost alarmed that the United States is allowing everybody else to build the free trade structure. And yet, we seem not to be pursuing free trade agreements very rigorously.

You asked what were the prospects for the tariffs? I can’t speak for the US government. I have no special information, but I would certainly note they didn’t seem to be very prominent in the discussion between our two presidents. There is nothing that I have heard publicly encouraging about tariffs. Frankly, going into elections in the United States and considering the importance of congressional support, I think right now there is very little support for tariff reduction here. Certainly, some industries and economists would like tariff reductions, but I don’t think that’s the prevailing sentiment in the Democrat Party. So, I think we ought to move ahead on improving our own economic policy, we ought to negotiate with China to the phase one trade deal and reducing tariffs. But once again, the domestic environment is not very conducive to that at the moment.

Wang Huiyao:  Great, thank you, David. We almost came to the end and it’s really a fascinating discussion. I think your book really serves as a very good case study of this connectivity of this maritime silk road, by researching Laos’ first railway connecting with China, which matters as a demonstrating case to the other ASEAN countries and will really change the future infrastructure landscape of ASEAN and the connectivity in Southeast Asia. I’m really admiring your work of thorough and deep research and discussion on this great subject and coming up with such a great book. Also, I would like to also recommend another book that I edited with Alistair Michie. It is called Consensus or Conflict: China and Globalization in the 21st Century, in which many issues we talked about were touched upon. In this book, we had contributors including Joseph Nye, Pascal Lamy, Lord Jim O’Neill, Wendy Cutler and also Edmund Phelps, a Nobel laureate, and many others. So I’ll send you a book, so we can keep the dialogue. Once again, I think this is a fascinating discussion. We covered quite a number of issues, talked about China, US bilateral relations, the recent President Xi and President Biden’s summit. Particularly, we talked about your new book Rivers of Iron in Laos, which is extended to other ASEAN countries. And also on the matter of connectivity and infrastructure – how we can have BRI and B3W and China and AIIB and World Bank, everybody, work together. That is the dialogue discussion that we need rather than all those geopolitical and military alliance. So, thank you so much and appreciate your time in the late evening and we hope to see you again when you come to China.

David Lampton: Thank you and happy holidays.

Wang Huiyao: Thank you, David. We’ll see you again. Also thanks to our audience.