China’s Rise and the Indo-Pacific

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EVENT TRANSCRIPT: China’s Rise and the Indo-Pacific

DATE: 1:00pm – 2:00pm, 3rd July 2019

VENUE: Committee Room 12, House of Commons

SPEAKER: Matthew Sussex, Dr. John Hemmings

EVENT CHAIR: Phil Wilson MP

 

Philip Wilson MP: Alright, can I just say, my name’s Phil Wilson. I’m a member of Parliament for Sedgefield in the north-east of England. I’m also a member of the Defence Select Committee and these are issues that all people who have an interest in defence should find fascinating. I’ve been spending part of the morning reading some of the reports the gentlemen have produced and it is a fascinating subject. We’ve got two very good experts with this. We’ve got Matthew Sussex, who’s the Academic Director at the National Security College in Australia. His research specialisations revolve around security studies, cyber security and information warfare, with a particular focus on Russia, Eurasia and the Indo-Pacific. We’ve also got John Hemmings who’s the Director of the Asia Studies Centre and Deputy Research Director at the Henry Jackson Society. He is also a Fellow at the Centre for Strategic and International Studies in Washington. So I’m looking forward to hearing them both today and I would just ask Matthew to make a few remarks

Matthew Sussex: Thank you very much Phil, and thank you also to John, and to the Henry Jackson Society for inviting me today. It’s a real, real privilege to be here all the way from the Antipodes, where the weather is worse, miles worse than it is here. You heard it first, an Australian saying nice things about English weather. Said the same thing at Chatham House a couple of days ago and it hasn’t rained so… Look, I’m here… I’ll give you about 15 minutes or so I think of throat-clearing on China and the Belt and Road Initiative. It is a broad project which is going to affect all of us frankly. Any liberal democracy will face the need to deal with China and the Belt and Road Initiative to some extent, and being an Australian, we’ve had to deal with it for quite some time. It doesn’t mean that we’re necessarily more sophisticated than anyone else, but we certainly have had relative wealth of experience I think. Let me thank you very much Phil. Let me try and share that with you.

I’ll start off with the issue of exactly what is Belt and Road Initiative. Now – thanks a lot – now that’s a question that actually doesn’t necessarily have an easy answer. To some extent I’m not sure that even Beijing knows exactly what Belt and Road Initiative is. There are a couple of ways typically that you could try and understand it. One way is to go down the economic path, and to say that Belt and Road is a sort of trade and connectivity bonanza. It’s a wonderful, wonderful thing for the Indo-Pacific region because it’s between three trillion and seven trillion US dollars – depending on how you count it – worth of investment that’s going to create not just new physical trade routes, but new digital trade routes as well. I’m speaking of course here about 5G and Huawei, which I’m more than happy to take questions on, since we have plenty of experience in that respect. So that’s one way to look at it. Another way to look at it is focusing on values, or perhaps a discord, a divergence between the values that we have here in the West in liberal democracies, and values in China, and that view would say well, this is an effort by an authoritarian nation with a horrendous human rights record seeking to export Leninism and dominate the Indo-Pacific with a kind of neo-feudal type of structure for regional dominance. I think both those views are dangerously cartoonish. They are both fundamentally wrong. Focusing too much on the economic and investment angle without I think understanding well enough many of the potential strings attached to that investment leads to the fairly naive assumption that Belt and Road is a sort of tap that you turn on and money comes out. This is a mistake that’s been made in Australia by our state and territory governments on several occasions. First of all, by deciding to sell the port of Darwin in 2016 to the Chinese and second, when the state of Victoria decided to sign a memorandum of understanding with Belt and Road Initiative before Australia itself had done so, raising all sorts of interesting constitutional questions. However, I think also focusing too much on the threats to liberal values not only misreads China’s intentions, but also to an extent produces some pretty unhelpful narratives. Now in Australia, often that narrative has been said this way, has been framed around the sort of old ___ (12:21) which is bad on two accounts. One, because we’re stereotyping on the basis of the fact that the Chinese are yellow, and the other is that we’re stereotyping on the basis that they are communists. Neither of which frankly is particularly useful. So for nations like Australia, particularly that have hitched their economic horse to China – for want of a better term – whereas we hitch our security horse to the United States, it’s not necessarily clear at the moment that should Australia not want to take part at least to some extent in some aspect of Belt and Road, that we would have an easy and ready alternative. So whereas we in Australia – and our foreign affairs white paper says this very clearly – would like effectively a rules-based order of the kind that we’ve witnessed over the last 50 or 60 years, it’s basically the last 50 or 60 years minus the last 10 or so. So to some extent I think, the desire that we can put everything back together again is frankly ten years too late. So there is going to be something that we are going to need to do with respect to Belt and Road Initiative – and when I say we, I mean not just Australia, but Australia and other liberal democratic states too. So if it’s not those two things – if it’s not just the economics and it’s not just the values, what is it? Now I’m an old-fashioned geo-politician. So I would say Belt and Road is basically a combination of geo-economics and geo-strategy. Put simply, never in history has there been an episode where a nation that has sought to invest deeply in another nation has not, as a result, sought significant political leverage in return. Just hasn’t happened. It is I think, Belt and Road, also a deliberate challenge to the existing rules-based order. It is fundamentally bilateral rather than multilateral in its aspect. It is closed regionalism as opposed to open regionalism. It’s already led to significant military, security games whether it’s in Djibouti, or whether it’s in the South China Sea, or via some very important strategic corridors like CPEC with Pakistan. Of course, also, it is an attempt, to some extent, to externalise China’s own economic problems, particularly when it comes to over-supply in the construction industry. What, therefore, are its prospects?

Now I don’t often refer to Clint Eastwood movies, but I’m going to do so on this occasion. I’m going to refer to ‘The Good, The Bad and The Ugly’, three scenarios for China – where I say good, of course I mean good for China, bad for China and so on. Here’s the dream scenario for Xi Jinping. It is basically that Belt and Road succeeds, China becomes the unchallenged hub for globalisation within the region both in terms of trade but also in things like technological innovation. It means that the United States is more or less displaced as the framework security actor in the region and the PRC establishes its own rules-based order, but this one a very hegemonic rules-based order with a sort of tributary system that says to other nations, ‘okay you can develop with no problems, we will aid and assist you, we’ll trade with you, but you must respect our leading role and you must not challenge it’. The alternative to that is that it all falls apart completely. This is ‘The Bad’ if you like, and that is that BRI completely fails. It effectively constructs bridges to nowhere. There are no massive successes that come from it. The US pushes back on issues like trade liberalisation. China as a result turns inward; it becomes prickly and it becomes hostile. To an extent, this is a form of ‘Back to the Future’ scenario – to use yet another film metaphor, my apologies – for China with the added problem that it would face also a rising India and a reinvigorated Japan that would complete for influence with it within the Western sphere of the Indo-Pacific and the Eastern one as well. A bit like the first two examples I gave of ways to understand Belt and Road Initiative, I don’t think either of those are particularly likely, and I’ll tell you why. First of all, in terms of total success for BRI, we’ve now had the second summit or the second BRI forum, and there haven’t really been any great successes to report. Its been a message from Xi Jinping, slight disappointment I think, in terms of where BRI has shaken out. I think also Western nations in particular are now much more sophisticated in the way that they understand the intentions behind Belt and Road Initiative, not just when it comes to warnings about things like debt traps, but also where it comes to the obvious strategic linkage of investment projects. In Australia of course, the desire to invest has been very much in raw materials in iron ore, and of course if you can get 50 to 51% dominance over iron ore companies, you can price fix. You can in fact set the maximum price that you are prepared to pay for those vital resources. But if you’re somewhere like Sweden for instance, the impetus has all been towards things like semi-conductors. If you’re in Japan, it’s been AI companies and textile that have been preferenced. All of these are very strategic types of investment. I’ve just recently come back from Stockholm where I was horrified to learn that they have no equivalent of a foreign investment review board. In Australia, I think we’ve done relatively well in doing some messaging to Beijing by appointing our top spook, both domestic and external. This is David Irvine, former head of ASIS and ASIO, as head of our foreign investment review board which reviews decisions, or at least attempted merges and acquisitions, particularly from Chinese firms but also globally as well. But that is deliberate messaging on our part. Swedes don’t have that. I think that however, all that being said and done, although we are more sophisticated, although Belt and Road hasn’t necessarily generated any great winds so far, it’s also unlikely to fail completely for a couple of reasons. One, is that a variety of nations remain very interested in continuing to take part, particularly in ASEAN, particularly in Central Asia, and also I might say in Europe as well as we’ve seen recently from the Italian example. I think also the PRC has invested too much for it to fail completely. Its been written into its constitution. Xi Jinping has staked his political career frankly, on the success of Belt and Road. But also, there are structural reasons too. I think it is less clear, particularly from an Australian perspective – and this is an Australian perspective in many respects – it’s less clear where an alternative, in terms of a big vision for Indo-Pacific order is necessarily going to come from. So the most likely result therefore, back to Clint Eastwood, is that for China it’s going to be ugly, which means it’s also going to be ugly for us too. We’re going to see narrow development corridors in Central Asia, in Southeast Asia, in Africa, and also in Europe. That might be enough for China to be able to establish some degree of sort of continental dominance, and I think probably it will almost definitely lead on things like AI and tech for the foreseeable future. But the maritime space will predominantly I think be dominated by the United States and its allies. What does that mean? Well, it means that instead of one rules-based order, we’re going to have lots of different rules-based orders. Some are going to be China-centric, some are going to be open in terms of trade regionalism, some are going to be closed. All of them will claim that they have international law on their side, and all of them will probably claim they have history on their side as well, which is going to make for some very interesting diplomacy in the next 20 years or so.

So continuing the Belt and Road and China communism theme, let me ask the famous question asked by Vladimir Lenin: what is to be done? What do we do about it? There are a number of things I think in general, and certainly things specifically that I’d be more than happy to touch on in Q&A. But let me just say a few things. First of all, I think liberal nations need a clearer understanding and a clearer sense of where they are going to choose to uphold their principles. In other words, I think we need clearer red lines on how much misbehaviour we’re going to tolerate from the PRC, because when it comes to the South China Sea for instance, possession is not just 9/10th of the law, frankly it’s 10/10th of the law. It’s been a while since the code of arbitration ruling, and there is no way that values alone are going to remove China from contested territories, or at least contested islands in the South China Sea. The other observation I’d make is that you can’t counter BRI on values alone. You need to make a clear case that there are interests involved, and that there are benefits involved in sometimes pushing back. That means that while some recent developments – I think particularly the Japan-US-Australia investment initiatives are a very good start – we need to do a hell of a lot more, because currently if you weigh up the ledger of how much China was prepared to invest versus how much the rest are prepared to invest, the rest is currently pretty miniscule in scope. A good example of that is what’s happening at the moment in the South Pacific which Australia recognises as its own backyard, and where a number of nations in fact have said ‘Well thank you but no thank you, we’re not particularity interested in good governance outcomes from aid and development. We’d be much more interested in the fact that the PRC will build us a port and a stadium and give us fast streaming broadband’, and that’s fine. No matter how much we argue about the problems involved in storing your data in China, therefore giving Beijing holus bolus access to it, the response has been ‘no that’s alright, they’re investing more’. So we’re in trouble in that sense. I think we also need to ensure that we continue to engage positively with Beijing, because frankly the benefits potentially of BRI are huge. But we need to do so very much on a case by case basis, and I think with an appreciation of what our national interests are, and what our national security costs might be for participating especially when it comes to those key strategic assets, as well as particularly in things like connectivity – and here I’m referring of course to 5G. It’s all very well to say that we’re going to sign on to 5G on a case by case basis, but if in fact there is no difference between the core and the edge of 5G, and frankly when there is 6G and when there is 7G and when there is G-max, that will all be built on Huawei tech as the base to be honest, without any rival at the moment to rival product to potentially challenge it. Fundamentally, I think we need to – wrapping all this up – do more heavy lifting I think, on both the security as well as the trade investment side of the equation. I think the elephant in the room here of course is what role will the United States play, and I appreciate that we have representatives from the US embassy here, so I’m going to be fairly careful in what I say. But that would be that no matter what we think about current US administrations, or past US administrations, that there has been a debate in Washington for some time that has preceded the current President and will succeed the current President – and that’s all about primacy. It’s all about ‘is it really worth the candle?’, and there is very much a sense I think in Australia that the side of the argument that says it’s perhaps not worth the candle and we should encourage our allies to do much, much more is winning that debate, and it will probably continue to win after the end of the current administration. Put simply, it is very difficult for middle powers like Australia to encourage major states to do more when they’ve already decided to do less, or perhaps do the same, and that’s going to be one of the most profound, I think, challenges for us to ensure the continued attention of the United States within that region. So to sum up completely, from my perspective anyway, ultimately I think how we shape our futures is something that we all have significant, still, control over. But given that the aim of the BRI is fundamentally to fragment, the best form of push back I think we can employ is to try and face these challenges together and to be prepared to make sacrifices accordingly. If anything, that is I think the hub, core of what liberal values are, and we would ignore those at our peril. Thank you very much folks. Let me hand over to John.

Philip Wilson MP: Well thanks Matthew. John?

Dr. John Hemmings: Yeah, thank you very much Matthew. I’ll seek to keep this a lot shorter and act more as a discussant and tease out some ideas and some thoughts that have been, I guess I’ve been working with over the past few years. I remember when the CSIS annual report – I think it was 2013 – where John Hamre was one of the first American thought leaders to talk about Belt and Road Initiative, and I’d never heard of it. I’d never heard of this idea and it was quite exciting actually. To be honest, it wasn’t very critical. I think the American response to it, particularly amongst foreign policy elites like myself, was to some extent, you know, coming from a US that had just come out of Afghanistan, coming from a US that wanted to see more Chinese involvement in security in Central Asia, it was kind of tepid to warm actually. Over time, we’ve seen that massive swing that occurred when there was a Washington report maybe two or three years ago that essentially highlighted a number of countries that were at risk of debt, high debt over projects that they were doing with the PRC, and so you had that swing, and then also the resurrection of what people in the 2000s had always called the ‘string of pearls’ strategy which was for the PRC to have a string of bases and ports going from the Middle East energy supply that’s so valuable and important and strategically vital to PRC growth and thus to its continued social stability and its legitimacy amongst __(27:26). That ‘string of pearls’ strategy became kind of revived and absorbed under two new trends and one of those trends was the growth of Chinese naval capacity. Its blue water navy started to show up in the Indian Ocean region and kind of initially welcomed into anti-piracy operations but gradually in a more, kind of, war-fighting capacity, although much of it was still at the defence diplomacy level. You could see some furrowed brows in Delhi and some concern, you know, particularly those who view it as a backyard-type thing. But generally welcoming from the West. But the debt diplomacy issue became extremely pushed to the forefront over Hambantota Port and that one, it remains to this day the kind of case study because… remember it was the twentieth anniversary of the Hong Kong handover and here was China taking control over a foreign asset in a sovereign nation for 99-years lease, and to all of us who critique China because of its regime type, it was a kind of, especially after the 100 years of affiliation narrative its been so much a part of the PRC brand, you know this Mahanianism, it looked like what the British were doing 150 years ago. I’m not sure that it was, if you, you know, I’ve been in conversations with people from Sri Lanka who were much closer to the ground, and they say to some extent, ‘we did it ourselves’, ‘it was domestically driven’, you know ‘the president wanted a port’, ‘it was election time’, and ‘the Chinese were more than happy to give him one’, and didn’t worry too much about the, you know, the debt that they would lend(?). Certainly, they also do say about Hambantota – and I haven’t followed this up, so please don’t take my word on it – is that while it’s not profitable now, it may be down the road because it is after all, closer by 3 hours sailing time to the main sea lanes, and also there’s some sense that the PRC has welcomed other countries to provide services inside the actual port itself, including I think, there’s been tenders from the Japanese on running the airport. I haven’t got all the facts to hand in(?) immediately but there’s a sense like ‘okay it’s a bit more of a complex picture’ and so there’s this, you know, back and forth, is it strategic or is it economic is it trade, and to some extent I think it is both. One of the things that’s most interesting about the ports part of the Belt and Road Initiative is that all of the loans are bilateral. The Asian Infrastructure Investment Bank which China and Britain joined, created to great publicity, these multilateral banks have not been used on ports. Ports, I think are a very deeply strategic part of the infrastructure game, have remained between China and the host nation. And so to some extent, I think I discern in that strategic intention. Of course it’s a huge problem for people like us trying to understand the intention of any state, of any actor in politics – it’s one of the great riddles. So when we say, ‘they were thinking this’, it is really a kind of chimera. You can only try to, you know, uncover as much evidence as you can, and even then you’re still taking a big giant guess. So where does that leave us in terms of the resolution? I think I agree with you, Matthew, values are not alone going to do it. You know there is a massive infrastructure gap. The PRC didn’t invent this. The ADB bank, the Asia Development Bank, report – if you haven’t heard of it, it’s like one of those reports that everyone always mentions – the 1.5 trillion dollars a year must be spent in Asia if they’re just to stand still on infrastructure. Anything below that, and growth rates start to go down. That’s because you have population growth, you have 50% of the global middle class growth in the region, particularly amongst Indian and Chinese cities. In order to not start to slide on GDP growth, you need to have this infrastructure, and there’s the gap. The famous infrastructure gap of about 459 billion a year in spending. So the PRC didn’t invent that need, but they recognised it and I think they took advantage of it, and we now have a Western alliance that hasn’t really done big infrastructure since the 60s and 70s. We’ve done a lot software. There was a real shift away from stadiums and highways towards free media centres, you know, teaching what we thought would be responsible civil service, accounting and governance, and there were lots of strings attached to spending. We had to self-regulate our own use of that money. So we’ve kind of lost the capability. The only ones who really can play the game very well are the Japanese. Another great state that has got that ability to look at a project 20 years down the line and say ‘we want to build this, we need this this this this and the other’, and they can do it. So states like Australia have been very quick off the mark to pair up with the Japanese. The UK is starting to look that way as well, and so we’re attempting to also offer alternatives to just ‘made in PRC infrastructure’ for those states that might be most wobbly and close to, you know, debt crisis, and why? Because we don’t want to see all the sea lanes that stretch between Europe and Asia dominated by the PRC. Why don’t we want to see that? Well, because of regime type. Once again, if it was a republic democratic PRC, if it was a China that was democratic, I think we’d probably all be going ‘oh, brilliant’. You know, there’ll be a lot of competition. Good old-fashioned capitalist companies muscling in with each other. But the PRC companies themselves would not have so much centralised control, funding, and direction, and therefore we would view them far more benignly than we do. I think we view them as a threat because we don’t know how to compete with them. How do you compete with a telecoms company that gives you twenty years of 0% financing? How do you compete with that? I mean we’re going to go out of business. We’re going to only be able to buy Chinese goods unless we’re able to compete, and no one wants to turn Western economic models into a Chinese model because that’s

Audience Member: (inaudible – 34:14)

Dr. John Hemmings: So just wrapping up, to resolve the final thing and so we can open for a good discussion. I suppose the things where I can see the differences between the Western model and the PRC model as such… as seems to be emerging…so on the economic side, you have capitalism with all its good and evils – not saying its been perfect. Its definitely created vast differences in wealth and its been you know, pretty bad for some people. But it’s not frozen. It’s a constantly evolving thing. If you just think of, in the US, the rise of anti-trust. The way really rough capitalism became modified in the West by, you know, the weekends. Legally, you had weekends, you had child labour laws. You know, capitalism has been this kind of rough mean beast. We’ve kind of tamed it, but then you see after the Cold War, the financial sector has been a bit … But then you have state capitalism, which I would say is the Chinese PRC version. It’s a bit like the 1800s one. It’s regulated some ways, but in other ways it’s horrific. If you, for example have toxins in the river, the ability to readdress legal wrongs vis-a-vis state companies is very difficult. It’s very hard to compete with, and as we see under Xi Jinping, there’s a series of policies from the 13th Five Year Plan, Made in China 2025, civil-military fusion doctrine, where private companies are not just being encouraged, but really are being pushed into state-driven strategic objectives and you know, we’ve seen a series of arrests for corruption and other things. You know, Anbang insurance, he was investing abroad badly. Well, in the West, we’d allow him to fail. In Beijing, do you arrest him after having a big show-trial about how he was corrupt. He wasn’t anymore corrupt than anyone else, but he was not listening to direction. So that’s an interesting difference between… on the ideological level. And then of course, there’s the what kind of order will we see built by the PRC, and what kind of order will we see under the West. I think democratic China, it would probably be still part of the hodgepodge system that we saw developing after the end of the Cold War. But now with its infusion of centralised you know, revival of Marxism and Leninism under Xi, I think you are seeing the revival of a very hierarchical approach towards foreign policy with other states. You do what you’re told. The Philippines are discovering this week as Duterte is essentially signed over fishing rights in his country because of the threat of war. When was the last time we had a bigger nation telling a little nation ‘I’m going to fish in your waters and you’re going to take it because if not, something bad is going to happen’. You know, for all of us, that was the 17 1800s, and we’ve struggled, not just democracies – although we’ve been at the forefront of it – but also European monarchies have struggled to create a set of loose rules that govern behaviour so that we wouldn’t be constantly at each other’s necks. World War 1 and World War 2 compounded that feeling and you saw a real push for all these institutions. Now Beijing says they weren’t in the room. I happen to know that’s rubbish. They were in the room and they signed everything at the time. They just changed their minds now that they’re big and powerful. So with that, I also would like to end on the same note. In any competition, the obvious response is to look to the kinetic(?), but one of the great miracles of the 20th century – a very bloody century, one that could’ve been disastrous for us all – the great miracle is that the Soviet empire, which had done both good and evil, but at the stage it was in, it was failing to provide the communist utopia it promised. Its fault did not come about because of Western invasion or Western army or military forces, but because of its bankruptcy of its values and principles and economic principles. So to some extent, I do think we forget these values at our peril. I hope as we go forward, there is a new bill put into Congress today in the US which essentially requires the US intelligence community to monitor the Uighur situation in Xinjiang. I never thought I would see concentration camps or re-education camps in a Permanent Five nation. Now that they’re back, we are going to have to start using our values in the way that we did during the Cold War, if only to try to persuade the PRC and its leaders to hold back on this direction that they’re going, to persuade them to soften their direction. Thank you so much Matthew and thank you to Philip for a wonderful introduction.

Philip Wilson MP: Okay we’ve got until 2 o’clock. So if anybody wants to ask questions, please feel free. If you can tell us who you are and where you’re from, that’d be great as well.

Audience Member: Nicholas, (inaudible – 39:43). Mind if I ask a bigger question and a small question. Bigger question is, John Hemmings has already mentioned corruption, which brings one directly into global values. Xi Jinping has been very keen to stress how much he’s doing to fight corruption at home. What is the reputation of Belt and Road in terms of corruption abroad? Both in getting concessions and in the simple principle of transparency. Because the Chinese at the moment haven’t agreed to join the International Transparency Code, might be helpful for them as well for everyone else. The little question is Huawei. Has the press misreported that Donald Trump has had second thoughts? Is it that he’s just saying ‘yes, US companies can sell to Huawei’. He hasn’t actually said Huawei can sell to the US. What’s Australia going to do about that…what the hegemon has said?

Matthew Sussex: That’s a good question. I’ll start with the micro one. What’s Australia going to do? I think absolutely nothing. I think we’ve made up our mind that we are going to say no to Huawei for the foreseeable future. There will be some degree of Huawei tech within base stations for the new mobile networks, but according at least to our security agencies, those aren’t ones that necessarily compromise critical infrastructure, and that’s where we’ve been focused basically. In fact, on critical infrastructure, we’re having much broader discussion about that, that brings in Chinese influence, whether it’s hardware and software, but even bringing… taking into account wetware, you know, humans. We’ve had episodes where our politicians have had legal bills paid for them by Chinese business people. They’ve been ushered out of the Parliament as a result. So when we see the notion of influence, or Chinese influence, I think we need to think a bit more broadly than simply just the narrow tech side and the connectivity side. There is significant influence elsewhere. On corruption, I’m not the right person to ask about this, although I can tell you the book to read that is the right one – and I know that because I’ve edited it, and it’s about to come out. It’s called ‘Belt and Road Initiative and the Future of Regional Order’. The chapter in there is by Brooke Wilmsen, which is all about corruption in particularly Belt and Road initiatives in Africa around construction of dams and so forth. Now the interesting thing here is that it depends how we define corruption. If we’re talking about the external dimension of BRI corruption. Often what happens is that Chinese companies will set up in countries where the law is relatively lax around things like environmental standards, around things like hiring of domestic workforce, around things like the safeguards that you need to put in place, around the health and safety of those workers and so forth. So I would say that in terms of corruption, a lot of it is technically legal. Whether it is ethical is another question entirely. Also, on sort of accountability and good standards and so forth, it’s interesting to note that Australia’s little cousin, New Zealand, is in fact within, signed up to Belt and Road Initiative and is steering that accountability and transparency process from inside the tent if you like. Frankly, and this is where I’m a little bit more dovish when it comes to Belt and Road is that, I would’ve liked to see Australia performing the same role to be honest. I think it would’ve made sense for us to do so. But we have decided to keep our powder dry.

Philip Wilson MP: Anybody else? Surely there must be questions.

Dr. John Hemmings: They must think everything we said was true.

Matthew Sussex: Well, it was.

Dr. John Hemmings: Unchallengeable.

Matthew Sussex: It was.

Audience Member: I have a couple of questions as well. The AIIB, is that a… I was talking to someone yesterday that said it’s not a BRI bank, it doesn’t have anything to do with BRI. But yet it is a China-influenced bank in some ways. So maybe if you could give us some idea of what exactly this institution is. Second one, is that you were talking about values. If Huawei is providing surveillance equipment that is imprisoning the people in Xinjiang, is that crossing a red line from any Western liberal democracy from trading with that company?

Matthew Sussex: That’s an excellent question, and let me – simply because I know a little bit about this – one of my closest colleagues works on the Uighur question and is often in D.C., talking about what can be done with respect to that sort of human rights, ethical push back around the number of people in camps. His view is not particularly palatable in many respects in Washington D.C. That is that you need to do three things. One, you need to stop inflating the number of people who are imprisoned there. The official line has been that there are 3 million people incarcerated in Xinjiang province. That’s not true. It’s probably more like 1 to 1 and a half. The problem is when we inflate numbers like that because they sound nice, it is very easy for Beijing to say, ‘Oh look at this fake news. We are in fact being treated very poorly. How disgraceful’. Second thing you can stop doing, is stop US tech firms selling surveillance equipment to the camps that are around Xinjiang. The third thing you can do is black list firms, clothing companies, which will sell clothing that’s produced in that area from basically slave labour. So I think when we talk about values, all nations are always going to be hypocritical to some extent. When it comes to values, we need to be very, very careful that we don’t compromise our own too much. On the AIIB, not very much has come of the AIIB interestingly enough, because I think really, it’s been overtaken by Belt and Road. I think its also been overtaken in the sense that bilateral, as John mentioned, bilateral deals particularly when it comes to strategic things like ports are much, much more useful that multilateral ones. If I was wanting to disrupt the liberal order, that’s precisely the way I’d do it. Bilaterally. AIIB is at least multilateral in intent, and that was the carrot that got many nations signing up, including the United Kingdom, including Australia as well, and we faced a lot of push back from the United States for signing up. But we thought, ‘okay it’s got relative checks and balances built into it, because it’s simply a bank with money that is effectively a multilateral bank’. What’s interesting is that it hasn’t been activated so much within those Belt and Road projects, mainly because it’s not as much use, I think. Johns probably got much more to say on AIIB than I do.

Dr. John Hemmings: Not actually true. Except for the little bit of scurrilous gossip that the person who helped make it an unfortunate embarrassment between the UK and the US and at the Obama administration. The national security council staffer in the US is actually a Brit. Criticising the UK government from inside. Anyway, take with that what you will. I’d rather if I may, come in on the kind of, what to do in terms of Xinjiang and add to some of the remarks that were just made by Matthew. So we had a wonderful round-table recently where we talked about how do you shape authoritarian powers’ behaviours that begin to intrude particularly into our domestic sphere and try to find our various political parties and put fake news on our websites, and you know, starting to up their game. How do we respond in a way that’s non-kinetic but is effective? One of the things that came up, of course, was the Magnitsky Act. The global Magnitsky Act which is used by the West to essentially punish any officials who are associated with human rights abuses. You know, that could actually be quite powerful because if you think of the number of Chinese officials who are running these camps, they all have children who want to go to Harvard and Yale. They all have money overseas parked in probably some of Britain’s…

Matthew Sussex: I can test that. They all want to come to the ANU, which is where I’m from.

Dr. John Hemmings: … one of the countries with the largest off-shore banking sectors. So you know, you just start to hit the foreign policy elites where they least would like it, given the high respect and value for it. Higher education, you know, we know exactly who the governor Xinjiang is. Well, surprise, surprise, your son and daughters don’t get to go to Harvard because you have been a part of this process of doing this thing to people. Now you may call it counter-terrorism, but we call it indiscriminate mass-incarceration. Certainly not legal in any stretch. The last time a regime did this, we know which one it was. So that’s number one. Of course number two – and it’s a shame that actually, particularly recently, we’ve actually gone the opposite direction in this – is that we would put more pressure on Chinese firms in terms of listing. So if they want to list in the Western financial market, at the moment, we’re very easy on them. We tend to kind of look the other way. First of all, those firms that perhaps built the cameras or built the AR software, just say they couldn’t list at all. You just say ‘fine, you’re a big company but you can’t be listed on Western markets’. That’s extremely powerful but not particularly damaging for them. They’d still operate, they still can export large numbers of surveillance equipment to the countries. The recent countries where China has been exporting this stuff – Zimbabwe, Uzbekistan, UAE, Pakistan, Angola, Ecuador, Venezuela, Bolivia – they’ll be putting dictators in business for a while to come, but they won’t be getting it from Western capital and it’s a beginning of a process that could start. At the moment, unfortunately this country has just gone exactly the reverse direction. We had essentially, we’ve tied the Shanghai Index to the London Stock Exchange which means that we can coalesce with each other. Essentially as the Chinese economic accordion begins to deflate a little bit as the economy slows down, Britain is going to be pumping more capital into the Chinese state capitalist system, and I think it was probably a policy ten years too late. If we’d done something like this in the 2000s, it would’ve made a reasonable sense now as China begins to stall its economic reforms and no longer allows its own, you know, it has not cleaned up the Shanghai Index. The 2015 to 2017 slump of Shanghai Index was basically because they wouldn’t take their hand off the till. They wouldn’t let the market govern itself. Of course, I’m not saying they should completely de-regulate it, but just in a normal market sense, and so unfortunately they’ve connected the pipeline to the city down here, so things like that could be undone as well.

Philip Wilson MP: Thanks very much.

Audience Member: Hi, my name is (inaudible 51:45) Mason. I actually used to be at the Australian (inaudible 51:49) civil military centre (inaudible 51:52) research programme there, and I advised on the confluence of influence and security essentially. My question is about propaganda…. on the act of Huawei. I was sitting in a cinema with my children and one of the trailers was about the wonderful programme that Huawei had developed to help deaf children learn to read. I don’t know whether you’ve seen that. But I was so struck. It’s very unusual of course to see a trailer without industrial concern. It’s not a consumer product. It wasn’t advertised as a consumer product. It was just talking about its humanitarian contribution. And of course, it was happening in the midst of debate about whether to limit its access from Western markets. So if it were allowed to continue doing that I would think that would undermine the scope for Western powers to limit its access. I wondered whether there was any conversation about limiting that.

Matthew Sussex: Alright, it’s a good question. I actually teach a master’s level course on propaganda and information operations, and I think you’ve actually hit on one of the core problems in regulating in that space, or over-regulating. Because particularly when you come from a security background – and here I’m arguing against my own constituency – one of the first leavers you reach for is the one that’s reliable, and that is to regulate and to say ‘okay no, you can’t advertise about the wonderful benefits that your product is contributing because you know in many respects you’re not ethical, you’re not nice, or you’re corrupt’. Problem is, however, propaganda effectively is just messaging. It’s messaging that tends to be didactic. It’s messaging that tends to be fairly simplistic. It relies on myths or symbols, you know, project a positive image of the entity that’s originating it, and/or a negative image of someone you want to target. In that respect, it’s very, very hard I think, to be able to specifically pull out Huawei and say ‘okay you are behaving in a bad way’ when we have so many agencies, companies and so forth which could be castigated for doing similar things. I have a very good example: manufacturers of children’s’ breakfast cereal, you know, who will always advertise when it’s cartoon time or kiddie’s TV time right after school or after playgroup because they recognise that while children aren’t economic actors, their parents are, and they can go and be pressured to spend lots of money on some sugary confection that I ate a hell of a lot too much of about 30 years ago, and so I blame them. But so you see the point, if it’s a commercial entity and it’s advertising a product – even if it’s not advertising a product – it’s advertising itself in a way that it wants to generate a positive image. It’s very hard to regulate in a way that’s consistent and doesn’t look as though you’re pointing the finger. I mean I know in Australia, we have lots of ads for BHP, you know, which is our big iron ore producer and steel producer, and a lot of people in Australia would say that ‘well, in fact you’re raping the environment in order to generate that wealth for Australians’, and they would say ‘look how much we’ve invested in the community’. There’s certainly no push to regulate against those companies, so I think it’d be really, really difficult to do it consistently.

Dr. John Hemmings: Can I come in a little bit on the propaganda side? Off the back of the round-table that we had in which we were talking about interference inside the West. Because I think it’s something that we need to be transparent and I think informing the public more about, even though I think I agree with Matthew, it’s very hard to regulate against. So you know, what’s really been interesting since the end of the Cold War is that a number of states have set up media organisations that look like media organisations but are actually state-subsidised and pretty much state-centralised in terms of what the messaging should be. Some were kind of a little bit private and then got subsumed into the process. Others have always been public, you know, CCTV was always public it was always subsidised by the PRC state, and China Daily, Global Times – Global Times was a bit private I think, it had party affiliation – Russia Today… and it was interesting. It was basically in response to the Western domination of the media narrative, and you even had of course, Al Jazeera in Qatar. They’re not all specifically bad. Like any media organisation, they have an agenda, but I think with them it’s much more easy to see what the state agenda is behind them. Whereas CNN and all those other ones that dominate (inaudible 56:40) critical of Western states’ foreign policies. They’re not, you know, they don’t have one lead. They kind of, like any Western media organisation, they’re multi-critical. I noticed we have in Chiswick, we’re going to have a CGTN which is what CCTV has become. CGTN is going to open a new centre with about 300 journalists and they’ll be on your television, and I think you should always watch them to see what they think and how they…what they’d like you to think. RT’s message basically is ‘yeah, we may be bad but the West is worse. Really is there any such thing as good?’ You know, story after story we’re just kind of overwhelmed by the moral relativism of the world. CGTN, a bit more sophisticated, a bit more win-win, ‘everything is going to be fine, just don’t resist’. But you know, to some extent, we may get to a stage where we have to start thinking about the public and public safety. I think there’s been some push back on CGTN because they had helped broadcast a… basically a forced interrogation of a British national and then they played it on Chinese television, and quite rightfully so he took it to… OfCom. I don’t know if they actually blocked it or not, but technically they should, because like with press TV which is run by the Iranian state security services, you can’t have essentially people who collaborate with on-air torture briefings, play it in their country, and then operate in our country. That’s beyond the pale. So when it comes to those ones, I think we have to stick to our standards and not just give in because it’s the second largest economic power. We also have to look at the large newspaper war that’s taking place, not just at the broadsheet level. Essentially you have policies in the PRC which is called ‘going out’ – ‘the media is going out’. So they’re given large amounts of money to have mergers or deals with Western newspapers, which is why when you read The Telegraph – who I write for – it’ll have a China Daily embedded and all those articles are written by people in Beijing, and they’re often like, ‘”the PRC has given me two homes” says farmer in Tibet with joy in his face’ or ‘Xi continues to __ (59:05) region with his far-sighted leadership’. You know these are obvious to most Westerners. We see where it’s coming from. As we’re all saturated with news, I think we are becoming more sophisticated, but still it’s good for us to have a discussion about propaganda because it is becoming much more a feature of our lives.

Matthew Sussex: I might just jump in, just to add a little more to that if I can. One of the interesting things… I do some specialisation in cyber-enabled information operations and just got back from Estonia where they just had their big cyber security conference, where there was a really interesting observation made there by a NATO general. And that was that in the West, we’ve been investing largely in media criticism and in media engagement for the last 20 or 30 years. Other states have been investing in digital advertising, and we don’t do counter digital advertising very well, particularly when it’s used for potentially nefarious purposes. Good example of that are the numbers of Chinese students in Australia where the PRC has effectively adopted, I’d say a fairly defensive approach but not a very nice one. Now if you’re a Chinese student who comes to a liberal democracy, you might at some point decide, ‘Well hang on, it’s quite nice to be able to talk to my colleagues and peers about the nature of politics’ and you know, ‘This is something that perhaps is worth exploring.’ The moment that hits WeChat, that’s a fundamental threat of course. So those people tend to get black-listed. You get black PR used, you have students who get robo-calls from the Chinese embassy saying ‘remember where you are from, remember your family wants you to succeed’ – reminding them that their families are back home in China as well, and reminding them effectively that there’s a particular line that needs to be toed. That’s very, very effective. That’s fundamentally defensive. Where it becomes more offensive, is where you see nations, particularly Russia and less so China but China is learning off Russia, utilising diaspora populations for activation for political purposes, especially around election integrity, especially around voting. Now interestingly in the recent Australian election, we didn’t see so much of that. What we saw more of was our main political parties, the liberal party and the labour party trying to persuade the 1 million ethnic Chinese that we have out of our population of 22 million, that the correct way to vote is one liberal, or one labour and so forth. So there was the manipulation of that community by our own political parties. But nonetheless WeChat is where it’s all at. So amongst the Chinese diasporic community, these people are not reading broadsheets. They are fundamentally online. They’re social media active. They want to make use of connectivity tools, and monitoring that is quite difficult and doing counter messaging in decent Mandarin or Cantonese is also difficult.

Philip Wilson MP: We’ve got 5 minutes. Anymore questions?

Audience Member: (inaudible – 1:02:05). A previous… this is a little bit off the subject, but at a previous Henry Jackson Society talk, the speaker mentioned that Japan is starting to develop a counter to BRI, something much more transparent, much more (inaudible – 1:02:26). Can you give us any information on that?

Matthew Sussex: Japan certainly is splashing some cash around, yeah. I mean like Australia, Australia is throwing a billion dollars into the Pacific. Japan is throwing … I don’t mean that they’re just throwing bank notes into the water. Sometimes it might feel like that to be honest. But no, they have infrastructure… targeted infrastructure investment programs, particularly now with the US as well. It’s a sort of trilateral mechanism for investment – an alternative to the BRI. The trouble is of course that a lot of this will be tied to good governance outcomes. It’s not about building stadiums, and when you want to get good governance outcomes in places that are semi-democratic or just authoritarian, it’s rather difficult to sell(?) This is why we are competing very much, or it’s difficult to compete with BRI tied loans, because they’ll be at 0 interest. Ours might be at 0 interest so effectively their aid(?) and no expectation for them to be paid back. But we do have that expectation that there’s transparency around accounting, that the task of constructing a port or task of constructing a rail line doesn’t go to the cousin of the Prime Minister, alright? Or there isn’t a new presidential palace that’s suddenly built. So yeah, I mean I think Japan is doing really good work. Japan has stood up frankly when it comes to that sort of regional alternative to the United States. Because frankly what we were left with was TPP minus 1, and the minus 1 was the most important thing. However, it didn’t matter whether Trump had won, or whether Sanders had won, or whether Clinton had won, they would’ve backed out of the TPP too. So when we’re talking about rivals(?) and alternatives, it really was going to fall on Japan and sort of coalitions of like-mindeds as we sometimes put it. So yes, more power to it. It depends how effective it’s going to be. And remember of course in history, China was once accused of economic imperialism itself. When I was a student of East Asian security affairs, it was all ‘Japan is using ODAs as economic imperialism’. You know, since, China is doing a similar thing. So we need to be careful how critical we are.

Dr. John Hemmings: Quickly come in and say, because and I’m more an observer than an expert on Japanese ODA investment, there’s a East African industrial corridor that you can look into, that I know the UK is very keen on. The Japanese are super busy in India of course and Southeast Asia. If you want those figures, you can’t do it much better than follow CSIS’s website, ‘Re-connecting Asia’. Who’s the chap on that? I think we’ve had him at Henry Jackson Society. But I’m getting so old, my brain doesn’t remember him. But he did come, and he did an amazing power point. I think you can look at it, and you can go in on project to project, and it has a little bit of data: how much was spent on a port, who was the key funder – and not just Japanese, Indian, American, Chinese. It’s really fascinating. They’ve done a lot of great work so, ‘Reconnecting Asia’.

Matthew Sussex: It tends to be trilateral as well, tripartite in terms of funders. Not just Japanese, not just recipient state, so…

Audience Member: When you say trilateral you mean, Japan…

Matthew Sussex: Many other players. Japan plus, and partly that’s for prestige reasons too, because the Japanese don’t want to be seen as seen as just doing it alone, and that’s sensible. They will partner with other nations who are willing to invest in niche capabilities.

Philip Wilson MP: Thanks everyone. Thanks to Matthew and John. It’s been very informative. I know I’ve learned a few things this afternoon. Thanks everyone for coming and I’m sure we’ll be having other Henry Jackson events in the future. So thanks very much.

HJS



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