Who Will Dominate the 21st Century: America or China?

>> Audience 1: How you think the US is responding to current stealing of technology information from the US? What is the US doing to prevent our technology and our information from going elsewhere? What are some of those strategies? What are those methods?

>> Elizabeth Economy: So, good thing I'm at the commerce department, which is like a fair central focus of some of our work right now.

So one of the things that we're doing is modernizing our investment regimes and thinking about both in terms of inbound investment and outbound investment, to make it more difficult for China to either undermine or to work around our regulations and restrictions. Because even as we put in new sort of lines of control and we tell businesses, okay, like XYZ technologies can't be sold, or we find China, certain big mergers and acquisitions might have to go through the Committee on Foreign Investment in the US.

But a lot of venture capital efforts didn't, okay? So that's one modernization effort, right? To make sure that we're capturing the full range of Chinese investment that's coming in. Then you find out that, well, actually it's Chinese investment through US vehicles, right? New financial, Us is developing new financial vehicles.

Well, now we have to address that like spacs, for example. Now we have to think about how can China use those to get access to US technology. I think a big challenge that we face right now, in fact, is deciding the line between what constitutes economic security and national security, and what is it we're going to try to prevent China from accessing, right?

Is it simply technology that can be used as part of China's sort of civil military fusion program? And that's another element of something that we work on very hard, is trying to determine that when a civilian actor in China wants to purchase technology, how do we ensure that that technology then doesn't actually get transferred to a military actor?

That's a very hard and painstaking process. So we are putting more people on that process and resisting, I would say, pressures to do it more quickly, but really trying to ensure that we get it right. So there are a number of, and then we have our patent and trademark office that has ongoing work with China on intellectual property rights protection.

And that's just trying to bolster people in China that wanna do the right thing. Agencies in China that wanna do the right thing. The court system has become gradually stronger when it comes to this. I would say, a whole raft of efforts underway in the first instance to figure out what is it that we're trying to protect what is core to US national economic security.

And then what are not only the sort of ways in which China tries to access these technologies today, right? But what's coming around the bend that we need to prepare for, and how do we develop and harden our defenses? And so it's not enough to have one reform effort of an institution like CFIUS, which I think the Trump administration and Congress did a really good job, we have to keep doing it, right?

And for the first time, we're thinking about these outbound investment restrictions in pretty significant ways. So these are some of the ways that we're going about this, but it's a very challenging effort.

>> Audience 2: Yeah, hi there, I'm Daniel. So you mentioned some.

>> Elizabeth Economy: I don't choose, okay, fine.

I'll let you guys choose. Go ahead, go ahead.

>> Audience 2: Yeah, so you mentioned some very interesting point on domestic challenges that China is facing. Do you know, are there any studies into domestic social movements within China that in some way challenge the existing regime? The way, for example, there have been multiple on social movement and anti government movements within Russia.

>> Elizabeth Economy: Yeah, so if you go back to 2010, 2011, and before that, through the two thousands, you could find a lot of writings by Chinese, by American scholars. Talking about things like the potential for the environmental movement in China to transform into something that would push for broader political change.

You had salons in China that were made up of billionaires and intellectuals and activists that would meet on a weekly basis, have dinner, and talk about political change in China. You had a billionaire who took a bunch of other billionaires to Taiwan on a trip to show them what Chinese democracy could look like.

So there was a lot of work swirling around, a lot of. And writing on the Internet, also, because the Internet, Pre Xi Jinping, was actually a very vibrant political space on which you could find calls for political reform. You had Chinese citizens hunting down corrupt officials themselves and operating across provinces.

You had environmental protests that would cross provinces. So it did look, at that point in time as though there was a potential for various sources of political agitation, of political protests to mobilize across issues and across geographic boundaries and, frankly, across socioeconomic levels as well. You had environmental protests where young people, young educated people in Beijing or Shanghai would find out about villagers protesting in southern China and would go to offer their support.

So it was a pretty, dare I say, exciting time in China now. No, so the answer to your question is no. But I couldn't resist sharing what used to be, cuz it was actually a really dynamic period. And also, I think, important because there's a tendency, I think, in Washington, but also more broadly, for us to forget that China is not a monolithic actor.

And that even if we're not seeing the same kind of protest, the same kind of dissent, mobilizing, being vocalized, it doesn't mean that it doesn't exist. And we have had feminists, for example, so, feminists, the LGBTQ community, those are two communities that have been active during the Xi period, but they're now repressing them.

And Xi Jinping is very active in repressing the LGBTQ community, in fact, himself.

>> Audience 3: So the US and China both, obviously, have a lot of internal problems. So which country is better suited to sort of address these issues? And either, in China's case, become the global superpower or the US staying the global superpower?

>> Elizabeth Economy: Okay, really? So, I mean, okay, I As an American and someone who's working in the US government, and I think clearly that I would say the fundamental values that the US holds, even though we may not do a good job of acting on them all the time.

Basic freedoms, individual rights, these are better values to underpin the international order than the ones that China brings to the table. So, and I think and I'm guilty of this as well, it's not just the United States versus China here, right? I mean, many countries share the same values as the United States and are standing up to try to bolster the current rules based order as China attempts to challenge it.

Having said that, other countries are also now banding together with China in ways to challenge that rules based order. And so, for example, when China brings things to the UN on human rights, sometimes it will use members of the Shanghai Cooperation Organization, various Central Asian countries, to make the first ping.

It always works with Russia in the United Nations, so we are deeply flawed, but I think fundamentally speak to the ideals and values that a much greater majority of the people in the world would share. But I would welcome other views on that.

>> Audience 4: Hello back here, I previously was a co-owner of a private English language institution in China.

And over the last several years, specifically this last year, China's employed laws that prohibit private English language learning in China, so we ended up shutting our schools down. And even when we continued our school a little bit past the deadline, they put our international teacher in jail. And then also we also try to go around the loophole, sending our teachers out to the individual school homes to teach in that way.

But then they set up kind of programs where, kind of tattletale program, hey, you find someone teaching in your house or near your house will incentivize you by giving you some type of cash. I kind of want to get your thoughts on that, I thought it was kind of going backwards, but I think my assumption is they wanna control what's being taught and educated in the country, but kind of see what your thoughts.

>> Elizabeth Economy: No, 100%, I think that's a really a perfect example of the way in which China has transformed under Xi Jinping and the domestic stage. And that sort of constraining the range of ideas and ability to access ideas for the Chinese people, it's not just controls over the Internet, right?

But it's shutting down all of the not just English language teaching, but all of the sort of private tutoring, online tutoring efforts. Nominally, they again took these actions for regulatory reasons, they said, we wanna make it fair, because only some people can afford this kind of tutoring, etc.

But they could have gone a different way, which is then to provide access to this kind of tutoring and education and support for it instead of closing it down. And to me, that just signals, again, whether we're talking about any form of media in China and the educational system, the Internet companies.

Xi Jinping is all about controlling ideas, controlling the range of ideas that can be expressed and the ideas to which the Chinese people can have access. And I think the other part of that, of course, is that there's pretty significant outcry from a lot of middle-class Chinese about the effort to try to diminish the opportunities and the attraction of studying English.

Because a lot of Chinese still want their children to go study in the United States or the UK or Australia or elsewhere, ultimately, and not having access to that will make it challenging for them. But, yeah, hunting people down like that, having people tell on each other, is a big part of the way that the Chinese system has evolved, actually, not just under Xi Jinping, but for decades, it's been that way.

>> Audience 5: As a non American, I think there's a lot of talk abroad about the US kind of stepping back from its legitimate role in international organizations. Like rejecting the ICC by putting sanctions on people for investigating war crimes or stepping back from Paris climate agreements and things like that.

Do you think in this competition with China, the US has made adequate space to re legitimize itself and those international institutions? Especially considering China has been working on that and trying to embed itself further in the institutional qualities of those institutions.

>> Elizabeth Economy: Yeah, good question, so, look, I mean, I'm working in an administration that is 110% committed to not only getting back into international institutions and agreements and creating new ones, but also to trying to lead them.

And so, is it gonna take time for the United States to, as you say, relegitimize itself? Absolutely, you can't undo damage that's been done, and we've never been perfect anyway. I mean, Trump administration wasn't extreme when it comes to this kind of thing, but we're not a member of the UN convention, the law of the Sea, right?

Or the ICC, as you point out, and that predated President Trump, but there is a lot of concern in the international community. That, in fact, even though they like what they see now with the Biden administration, is this going to last, right? Or will the next US president decide that the US should not bear a greater part of the burden of leading these organizations.

I guess I would point out, too, that I don't actually believe that China is necessarily the best participant in many of these organizations. Again, if we look back to that period when the US was withdrawing, China did not actually step up and say, yes, let's forge a new climate agreement on methane.

That wasn't China, that was the United States that did that when it came back, it was exporting 150, 200 coal fired power plants through its Belt and Road initiative. So, there's a big gap between what China says in many instances when it comes to these institutions and agreements and what it actually does.

>> Audience 6: Hi, I'm Julia Campbell, a student at Iowa State University, would you share any thoughts on the Chinese investment in US real estate markets and where you think this will go moving forward?

>> Elizabeth Economy: I mean, to be honest, there was certainly a huge flurry of Chinese investment.

I lived in New York City for most of my career, and I remember when the Chinese bought the Waldorf Astoria, and it was a little bit reminiscent, I think, of when the Japanese bought Rockefeller center. It's like this iconic sort of landmark in New York and what's happening and what are they going to do?

And a lot of Chinese billionaires certainly have been investing in the us real estate market as a means of getting their capital out right and safe, I think- China has tried to limit, the government has tried to limit this kind of thing. And again, certainly it started with the high flying companies, many of which were making investments that they had no business making.

They became overleveraged, and then the companies basically collapsed. The private individuals, I think, who still want to do that, it's more difficult now. I mean, the wealthiest among them certainly can find ways, but China has pretty strict capital controls on individuals. So I haven't looked, I don't know what the trend line is.

I would guess that it's declined since a peak from several years ago. But I think there's probably still interest, again, among the wealthiest in China to get their money out and put it into us real estate.

>> Audience 7: I had a question about, you talked about how China was trying to embed itself in various institutions to pressure individuals and states to sort of toe the line on certain topics.

And I was gonna ask you, do you think that there's a risk, if there's not enough moral courage, little concessions by various organizations, individuals. And states, and particularly institutions could sort of result in an environment where the international community ends up almost creating a self censorship environment? Do you think that that's something, that's a potential risk if there's too much of this kind of concession?

>> Elizabeth Economy: Absolutely. I mean, I think it's partly in institutions and arrangements and it's partly, again, just China trying to whether it's with the hotel industry or whatever. Or the movie industry saying, if you show Taiwan as a separate entity, that you're not gonna be able to have access to the Chinese market.

You may have seen most recently that Sony had in the most recent Spider man movie, the end has the big denouement takes place at the Statue of Liberty. And China told Sony that if you don't diminish the size, first they said, you have to get rid of the Statue of Liberty.

Then they said, if you don't make it smaller, right, you can't have the Spider man movie in China. And Sony said, okay, we're not gonna have it in China. So, absolutely, this is a huge concern. And I think the one thing that began to turn the tide was, I think China's behavior during COVID was essential.

So when it started to use the PPE, right? The personal protective equipment as a kind of saying, if you don't thank us enough or if you don't do Huawei, you maybe are not gonna have access to our PPE or if you criticize us, right, you're not gonna have access to our PPE.

I think China became unmasked a little bit, right? And that I think wasn't one important inflection point. I think the other important inflection point was just the transparency in attention that began to be paid. And for this I give a lot of credit to the Trump administration, to China's efforts, right, to use the leverage of its market to coerce actors and saying to American companies and others, you should not do this, right?

It's embarrassing that you will sacrifice values, American values for access to this market. And so I think, there's a kind of a shaming element that has now taken hold not only in the United States but in other places as well. So yes, I think the danger exists, it continues to exist.

But I think we've at least turned one corner on it and are headed maybe in a better direction.