John Donvan:

Hi everybody. I'm John Donvan. Welcome to Intelligence Squared with the debate that kind of goes along with that balloon game that has America's military scrambling to figure out what China's up to in the skies above North America, and how much of a threat that first Chinese balloon the U.S. shot down actually was. Now, assessing China as a threat and otherwise has been something of a full-time occupation for people involved in our national security. It's long been posited that China is on a course to overtake the U.S. someday in global influence, but in this debate, we're going to test that premise.

Here's what we're asking. Has China's power peaked? So let's meet our debaters. Arguing yes to that question, formerly of the Harvard Kennedy School, the U.S. Department of Defense, and the Rand Corporation, author of the book, "Unrivaled: Why America Will Remain the World's Sole Superpower", current associate professor of political science at Tufts, Michael Beckley. And answering no, that China's power has not peaked, president and founder of Eurasia Group, founder of the digital media firm GZERO Media, and editor at large at Time, Ian Bremmer. Ian, thanks for joining us. So let's get to our opening statements. Michael, tell us why you argue that China's power has peaked.

Michael Beckley:

Well, I know that Ian is the 10-time returning champion of this show, but in this case, I actually feel a little bit bad for him because the evidence for China's peaking power is simply overwhelming. In fact, it's not even really debatable. It's more of a statistical fact. By almost every metric, things have stopped getting better for China and are starting to get worse. At home, you've got a shrinking population and a slowing economy. And abroad, China faces a growing gang of hostile rivals. And just given how badly China's government flubbed its COVID response, among some other recent fiascos, we shouldn't really have much faith that it's going to handle these headwinds well.
Let's start by talking about demographics. China's population is starting to age and die off in unprecedented numbers. By the end of this century, it'll be half its current size, and one out of every three Chinese citizens will be over the age of 65.

At the same time, the economy is slowing, so growth rates have fallen every year for a decade. But I think more important is that the quality of China's growth has deteriorated. At this point, most of it is coming from what is essentially government stimulus spending, whereas productivity is declining. There's some successes that, Ian will probably highlight, like the auto industry. But on average, Chinese companies are spending more and more to produce less and less, and some are just straight up destroying value. They're building ghost cities of empty apartments and bridges to nowhere, and the result of this system is that debt has exploded. So Chinas credit card bill has been growing faster than its income for years, and now its pile of debt is three times the size of its economy and rising. That's even worse than the U.S. debt to GDP ratio, which is nothing to brag about. Resource scarcity, China has plowed through its water and farmland and energy resources, and now it's the largest importer in the world of food and energy. That not only makes growth more expensive because now China has to pay more for raw materials, it also gives foreign rivals lots of pressure points to squeeze in a time of crisis.

Speaking of those foreign rivals, China faces more and more of them around the world, so anti-China sentiment has soared to levels we haven't seen since the Tiananmen Square massacre. China faces hundreds of new trade and investment barriers every year. You have an emerging Cold War with the United States. The recent export controls the U.S. just put on China's access to computer chips threatens to cripple its entire tech sector. Taiwan is more defiant than ever. Japan is doubling its defense spending. India is massing forces on its border with China. Even the Europeans are sending token warships into the South China Sea, and you have these anti-China alliances that are popping up all over the place, AUKUS and The Quad. Meanwhile, China's allies are imploding, so Russia has thrown itself into a meat grinder in Ukraine and united the West. Iran has been engulfed in popular protests. Pakistan's economy is collapsing despite billions in Chinese loans.

And North Korea has essentially gone rogue and is scaring the South Koreans to tighten their alliance with the United States. So across the board, China faces these growing headwinds, and you don't have to take my word for it. You can just ask the Chinese people. So the rich and the highly educated are fleeing the country in droves. They're taking their money and their kids with them. The poor and the middle class are protesting. They're demanding unpaid salaries, and they're refusing to pay mortgages to state banks for half-built apartments. And China's youth I worry are becoming a lost generation. Twenty percent of the youth are unemployed. They refer to themselves as the lying flat generation. So there's a palpable malaise in China, and we saw it come together just in December with the most sweeping popular protests against the regime since 1989. So none of this to me looks promising. It looks much more like what Xi Jinping himself recently called stormy seas ahead.

John Donvan:

Thanks very much, Michael. So that was the answer, yes to the question, and our no is coming from Ian. Ian, it's your turn.

Ian Bremmer:

Sure. And I certainly disagree with a lot of what Michael just brought up, and I'll respond to it, I think, more over Q&A because I think that they have time to address demographics. It's not imminent. The stimulus, it's not what it was after the global financial crisis. That's not the way the economy is actually growing right now. India's defense spending is actually decreasing over the last 10 years. It's not increasing. There's not a Cold War between the U.S. and China. Biden and Xi Jinping have said that for a long time. There are definitely problems for the Chinese from a defense perspective, but economically, all of those countries want to do more with the Chinese, not less. Over time, that includes most of the U.S. private sector. It includes countries like Japan and South Korea. It also includes the Europeans. But those are longer term discussions we should have. Let's start just with the basic premise here, which is that China's power has peaked because I'm sympathetic to the idea that there are bigger headwinds and that it's quite possible that China will never become a superpower. But that's not we're debating.

We're debating whether China's power has peaked, meaning they've already hit the maximum power they'll have on the global stage. Now, that's a much harder thing to debate, and that's just not the case. Economically is how we've been thinking about China's rise for decades now. Their GDP globally right now is about 73 percent as large as that of the United States a little over 19 trillion compared to 26 trillion in the United States. The IMF projects that that ratio is going to increase to roughly 87 percent by 2027. That's not a decline. That's not China's powers peaked. That is, it's still growing. It just has greater headwinds. Their total goods trade reached a record high in 2022, and that's before the post zero COVID opening that's going to lead to much higher growth for China. So you got to give at least another 12 months, I mean, come on, before they peak, never mind another 5, another 10 years.

China's trade centrality within Asia is increasing. Their technology investment, which you've seen now announced in 2020 at some 1.4 trillion to 2025 to cement their leadership in next-generation technologies. They are already at parity or ahead of the Americans in a lot of core AI technologies, in digital commerce. They're close on quantum. Clean energy, they're well ahead in many key areas. These are new technologies that are game-changing for the coming generation. In military, the Chinese are only a regional power. They're the second largest defense budget in the world to the United States, but they are rapidly modernizing and reforming with the target of 2035. And that's going to matter immensely for what they can and can't do in Taiwan, in the South China Sea, in the East China Sea. And we see that in terms of the responses from the Americans and Europeans and Asians. Why is it that we have things like AUKUS? It's not because they think China's power is peaked, but because they know their military spending is going to increase, and so with it, their military power.

Also diplomacy, where the Chinese have a robust diplomatic infrastructure, the largest diplomatic network in the world, slightly bigger in terms of total diplomatic posts than the United States. They are continuing to invest in that, all of these soft power issues, also places where the Chinese are just getting started. They're going to do more. Again, my point overall is not that China doesn't face massive headwinds, demographics, indebtedness, challenges with state-owned investment. Those are all real things that's going to make China's continued growth more challenging. But to argue that China's power has peaked, well, I'm looking forward to number 11.

John Donvan:

All right, thank you. So I hear a little bit of a semantic discussion, but not terribly much so. I think there are two ways in which we could have talked about China's power peaking. One would be ballistic. If a rocket goes up, then it has to come down. But there's also the metaphor of a balloon, that it gets up to a certain height, and it kind of stays there or goes up and down and higher. And I think we are able to work around both of those potential definitions.

I don't think anybody is saying right now China's going down. But Michael, you are arguing that maybe they're at their balloon point. Maybe they've reached maximum altitude in certain categories. And I want to go into that, but what I heard from each of you was three large categories of metrics here. One would be the economy, one would be military, and the third one, which you only briefly touched on, would be the internal cohesion of the body politic of China. I'd like to take those in turn, break those out, and start right now with more on the economic question and leave military. Let's get to it. I know there's overlap. And let's leave internal cohesion, get to that. There's also overlap. But starting with the economy, Michael, to come back to you, you talked about a nation that is in some ways turning resource poor, losing water, needing to import its food. And Ian was pushing back with the fact that there's still enormous trade going on, but you were making the case that nations are wanting to disengage, particularly when it comes to the supply chain. And I want to ask you to go deeper into your argument that the economy, it's a little bit stuck, that Ian's arguing that your claims that it's got nowhere to go much higher is out of the ballpark. So take that on.

Michael Beckley:

So it's not just about economic access. The fundamental problem is that Chinas growth model, which they've just doubled down on by the way, by opening up, you know, for more loans and essentially stimulus spending, is fundamentally broken. That growth model is based on transferring money from the Chinese people to the government so they can use it to invest. And that worked really well at the lower stages of economic development because you needed to build lots of roads and bridges and factories. But as you enter middle income status, a lot of those low-hanging fruit have already been picked, and so growth starts to slow. You see this in multiple countries that have had a speedy economic rise, and then they stall out unless they can make this leap. And only a few have because to speed up the economy again, China would need to, you know, educate factory workers to become office workers and entrepreneurs.

And now that you've paved the roads, you need to start innovating. And there's a number of reasons I worry China could get stuck. One is just political blocking because if you're going to reform and transfer money back to households and open up space for entrepreneurs and allow for creative destruction, that's going to disrupt a lot of patronage networks, and the elites who have built their fortunes on this property-heavy, investment-driven economy aren't going to like that. And historically, they blocked those reforms. In 2013, China worked with the World Bank to come up with a giant list of liberal reforms, and then they only implemented less than 10% of them. Another reason China might get stuck here is of its systematic failure to invest in lower levels of education. So the few countries that have blown through this middle-income track, 75 percent of their workforce had high school degree. China today, only 30% of its workforce, has gone to high school. That's dead last among middle income countries.

Most of China's children are in rural areas where, you know, medical care, education are abysmal. Kids drop out of school at middle school and researchers at Stanford have found that about a third of these kids have IQs under 90, and they estimate there's probably 200,000,000 to 300,000,000 unemployable workers in a modern economy. And so it just doesn't look like China is poised to push through this very difficult economic transition in a way that would allow it to sustain the growth rates to keep up with its competitors.

John Donvan:

More from intelligence squared us when we return. Welcome back. I'm John Donvan, and this is Intelligence Squared U.S. Let's jump right back into our discussion. Michael, Ian argued or acknowledged that China may be facing headwinds, but those headwinds don't necessarily stop its impetus. You've also argued in the past that China enjoyed tailwinds that are now gone or largely removed. Can you talk a little bit about that?

Michael Beckley:

Sure. So, you know, I think if I can make one point in this entire debate, it's that China's rise didn't just happen. It was an exceptional, explosive thing that happened for exceptional and now fleeting reasons. Essentially, you had four factors come together starting in the 1970s that have allowed for China's rise. You had the opening to the United States, which allowed China to get unprecedented access to technology and Western markets and security. You had the greatest demographic dividend in history, 10 to 15 workers per retiree in the population. You had an abundance of natural resources, which made raw materials very cheap. And you had a Chinese government that was committed to some semblance of reform and creating more space for the Chinese people to harness their energies. All four of those tailwinds are now rapidly turning into headwinds. You have the United States trying to crimp China's access to Western markets and capital. You have the demographic dividend, that 10-to-1 ratio is going to collapse to two workers available to support every retiree by the 2030s. This is not just a long-term thing. China, you know, as I mentioned before, has already plowed through its resources. And now, under Xi Jinping, the state is inserting itself and trampling down on robust economic growth and really taking China back to a lot of policies that killed its growth in the past.

John Donvan:

Okay, Ian, you've been very patient because I put a question to Michael before you got a chance to respond. But I wanted to get that part of his argument out there, that in fact what happened over the last 40 years was incredibly special, unique, not repeatable. It's where it got China to where it is and without those things, there's not much lift.

Ian Bremmer:

Look, Michael's points are well taken. The last 40 years have been exceptional, and he hasn't even talked about the fact that we now have this, you know, AI incredible breakthrough in robotics and automation that means that relatively low-cost labor just doesn't matter as much to the capital model, which I think is a far more important strategic and structural change against China and other emerging markets than anything, frankly, that he's mentioned. But so it's not that I disagree with him. It's more that there's a difference between rocket ship taking off and ability to continue to grow. And China has the ability to continue to grow in part because some of the factors that Michael mentions I think are just overstated, overstated in terms of how much they will stop China, overstated in terms of how much they actually exist, and overstated in terms of how much running room they still have.

Let me give you an example. On the demographic front, Michael's now mentioned a couple of times they just don't have, you know, the ability to continue to put people into their model. And I think it's true that China's population has maxed out as of last year, and the contraction they're going to face over the next several generations are going to be very challenging to deal with. But that is not a problem that they have suddenly to deal with in the next year. For example, they can very easily increase labor force participation and productivity without boosting births for the next 10 to 15 years. Their pension age right now is very low by international standards. It's 60 for men. It's 55 for women. Hasn't changed in decades, despite massive increases in life expectancy for China.

And that would half the demographic tax by 2035 and introduce 40 more people into the workforce. Xi has already flagged those reforms in his most recent party congress report. It's true that China is underperforming in education. They only started really plowing significant resources in education in the 1990s. Unlike Michael saying that's a disaster, no, that's actual space for growth for China. As they start investing more in human capital, you're going to pay off with a demographic return with more productivity. The fact that you can move more of those workers into higher skilled labor, the fact that you can improve the demographics that you have in terms of their productivity and what they do is actually important. That allows you to move people out of low productivity agriculture, which is 25 percent of China's economy right now, compared to 3 percent in industrial countries, to manufacturing and services. Urbanization is only 65 percent in China right now. It's 80 percent in developed economies. So the fact is that there's still a lot of room for the Chinese before they get smashed by these demographic challenges. I'll give you one more, but we can talk a lot of these, but one more to respond to Michael's.

John Donvan:

Ian -- Okay, go ahead.

Ian Bremmer:

He's now on a couple of occasions, talked about how the Americans and all allies are starting to really hit the Chinese hard. Now, it's absolutely true that on semiconductors, advanced semiconductors that are dual use for military purposes, that the Americans together with, just in the last few days, Japanese and the Netherlands announcing they're on board too, are going to start hitting the Chinese with export controls. Means the Chinese have to invest a lot more in semiconductors or they're going to stay behind. That's why TSMC is so important in Taiwan. This doesn't affect other non-strategic parts of the global economy and of the Chinese economy. It's why U.S.-China trade is so robust. That's why trade between China and other countries is so robust.

And when you talk to those other leaders, you go and talk to P.M. Kishida in Japan, who is doubling defense spending, and you'd say, "Oh my God, that means that China is in serious trouble." At the same moment, Kishida will tell you, and I've sat down with him, that he also wants a much stronger economic relationship with China at the same time as he wants to be closer to the security umbrella with the U.S.

John Donvan:

All right, let me let Michael respond to that. So I want to keep the Japan military part of it out right now.

Ian Bremmer:

Sure.

John Donvan:

But Michael, Ian's saying that Japan actually wants to do way more business with China. Can you take that on?

Michael Beckley:

Yeah, so, I mean, there's no doubt that nobody wants full-scale decoupling from China. But I think -- I mean, it's been a sea change. This conversation we're having right now, I couldn't have even imagined five years ago. And the fact that we're talking about, as Ian mentioned, the Netherlands and Japan at enormous economic cost to themselves are cutting China off from high end computer chips and the ability to make them. And I do want to focus on this issue because it would be wrong to dismiss it as just one among many different industries, and that it's somehow comparable to anything else that Ian mentioned.

I mean, we could not be having this conversation without these kind of computer chips, right? The entire global economy depends on them. China spends more importing these computer chips than it does importing oil. That's how strategic of a commodity is. And so if China can't get access to these chips or the machines to make them, its entire economy is going to fall into laggard status because it won't be able to compete at the technological cutting edge, and it certainly won't be able to have the robotics revolution, the artificial intelligence revolution that is so important for all those productivity improvements that Ian just mentioned.

The one other point I'd make is simply that, you know, I have no doubt that if Ian were the dictator of China, that China could make a whole bunch of reforms that would ease a lot of the pressures that I've talked about. But so far, I haven't heard any response to the point that the political system in China does not allow for these types of reforms. Xi Jinping has made it his mantra to avoid a Soviet-style collapse.

He's forced all of his compatriots to study why that happened and he will never -- his policy is essentially the anti-Gorbachev policy. Whatever Gorbachev did, they are going to do the opposite. Gorbachev loosened the reins on the economy. Xi clearly has shown he's going to tighten them, which does not allow for opening up space for consumers, for doing things like giving households more money so that you can empower a consumption-driven economy, the political process itself stymies these reforms.

Ian Bremmer:

So I disagree with both of those points. First of all, we would be having this conversation without those semiconductors because we're not talking about cutting off all or the majority semiconductors. We're talking about only the most advanced that are also used for military purposes. This is why Huawei got a hit on 5G because they were so involved in the People's Liberation Army. This is not talking about cutting off semiconductors more broadly, which would indeed be an act of war between the United States and China, and which American allies would not in any way support.

When German Ch. Olaf Scholz went to China just a couple of months ago, he brought a large delegation of German CEOs, top industrialists, all saying we want to work much more closely with China. This is increasing in investment in high areas of technology from Germany into China. It's more integration of those two economies. Germany, of course, one of the largest economies in the world. The Japanese feel the same way. The South Koreans feel the same way. The French feel the same way.

And by the way, most of the American private sector feels the same way. You said in your opening that the United States is moving towards Cold War with China. Pres. Biden has on no fewer than five public occasions explicitly said that you're wrong. So the United States and China are not in a Cold War and are not heading into a Cold War. Jinping has said the same thing. So I think that's a place where I see hyperbole in the argument. It is important that after 20 years of the Americans ignoring the fact that they hollowed out U.S. industry and exported its semiconductor industry to 100 miles away from mainland China, now the Americans are finally starting to invest again in it and bring it back home. And with its friends, that makes sense. The Americans are way behind in doing that. The Americans will catch up. I have no doubt. That's very different than the point that you just made. On Gorbachev --

John Donvan:

Ian, I want to break in so that we can move on to the military question, and again, look at whether China is sort of being tapped out in terms of momentum also applies in the military sphere, would you say?

Michael Beckley:

So here is somewhere where, you know, China could ramp up defense spending and continue to rise as a military power, even as its latent power, you know, all of its total sum of resources, its economic wealth starts to stagnate relative to its competitors. I do think that the pace of China's military development has to slow, though, most likely because, for one thing, it's just been very high. So you know, over the last decade, there's just no doubt that China has been churning out warships and ammunition at a rate we haven't seen since World War Two. I just think that's fundamentally unsustainable because now China has to pay to maintain all of these fancy warships and aircraft carriers that it's been building. And, you know, sailors will tell you you pay for the ship three times. It costs twice as much to maintain as to buy it.

In addition, all of these, you know, the demographic, the fiscal issues, the debt problems that we've already talked about, that's obviously going to put some kind of pressure on the ability of Xi Jinping to allocate money towards the military. But frankly, I do expect China to continue to invest heavily in its military power. In fact, that's what past peaking powers did. They made-up for their lack of economic wherewithal by getting much more aggressive militarily, and I certainly worry about that in China's case today. The one thing that I think counteracts that from -- well, two things. One is just that other countries are not standing still and you're seeing countries around China's borders, and in conjunction with the United States, beefing up their militaries and banding together to try to defend themselves against Chinese territorial expansion. And the fact that China is just in a very rough neighborhood surrounded by 19 countries means that each one of these little things -- China might be able to handle Japan by itself, or the Taiwanese by themselves, or the Indians, but the fact that all of these things are coming at the same time puts enormous pressure on a military that is already overstretched with just basic border security and internal security.

John Donvan:

Would you say rather than the argument being strictly that China's military power is peaking, that it's being checked, that it's being significantly checked in important ways that will slow its potential increase in power.

Michael Beckley:

Yeah, there's definitely pushback. I mean, frankly, as someone who, you know, works closely with the U.S. government on these issues, I would like to have seen, you know, faster responses on behalf of the Taiwanese, the United States, Japan. But certainly now, these countries seem to be getting their act in gear and are creating all kinds of problems with China. And they're really looking to, you know, the Ukraine model for just kind of a basic idea of, okay, China has to mass forces to conquer Taiwan. Well, modern, precision-guided munitions are really great at destroying massed forces, so let's get a lot of them and put them all over the place around China's near shores, and hopefully that will deter the Chinese from flexing their military muscles.

John Donvan:

Ian?

Ian Bremmer:

Well, look, I, first of all, agree that China is going to be checked militarily by many countries in the region as well as by the United States paying more attention. And the Chinese are aware of that, and they don't want to get into a direct fight militarily. We've seen that publicly when the Biden administration told the Chinese do not provide military support to the Russians or else, despite this friendship without limits, you've seen the Chinese haven't been providing any military support to the Russians, and they've not fallen afoul of direct sanctions. None of their SOEs, for example, are engaged in that, something the Americans have been, you know, pleased about in the context of most developing countries around the world, very happy to keep doing lots of business with Russia, like the Indians, America's friends strategically, and all the rest. So first of all, the Chinese aren't being stupid about trying to engage in a military confrontation with the Americans or their allies.

Secondly, China's ambition in the region is not to affect territorial conquest of Asia the way Japan's was in the 1930s and the 40s. So saying, as Michael has in writings, that Eurasia, broadly, is a death trap for China is making an argument that I think is about a century out of date. I mean, China's definitely facing geopolitical headwinds because you see Australia, Japan, and Korea spending more as a consequence of China's rise. But none of these countries, not one, are close to being where the Americans are in terms of their willingness to sacrifice economic ties with China. They'll abide by U.S. sanctions, but all have expressed strong opposition to broader decoupling from Beijing. So I just think that the military argument, yes, China has more asymmetric capabilities. They have near cyber parity with the United States and the ability to engage in attacks. They have disinformation capabilities, all of those things. But the Chinese want to avoid a Cold War with the Americans about as much as the Americans want to avoid a Cold War with the Chinese, and none of the allies want it. So yeah, China is going to have to spend more on defense. Their military capabilities will increase. But I don't think that that is a make-or-break issue for China's ability to continue to become more powerful on the global stage.

John Donvan:
Michael.

Michael Beckley:

Well, I wish, again, that Ian was setting the objectives for Xi Jinping, but I worry that Xi cares a lot more about, for example, reunifying Taiwan than perhaps Ian does. It's very easy to say, well, there's probably not going to be a war when we're sitting here in New York. But if I was sitting in Taipei, I'd be a lot more nervous. And the fundamental fact is that, you know, the Taiwanese have become more and more determined to maintain their de facto sovereignty. They increasingly identify as Taiwanese, and their international stature and links with the United States are growing, and so the peaceful reunification options are disappearing very quickly for Beijing. And I think most China scholars would tell you that Chinese leaders, for decades, have been determined to squelch out and snuff out Taiwan one way or another. When their economy was booming, they could maybe try to use manifest destiny, you know, building deep economic linkages to bring them back.

But now that that strategy clearly has not worked, I think we do have to be concerned that what China has been doing over the last few months with the largest and most sustained and aggressive show of force in the Taiwan Strait in generations is not just for fun and games, that this is actual preparations for a potential conflict that we need to take seriously. It doesn't mean it's going to happen. I don't think it's super likely, but I worry we're being a little too dismissive that China's run by a bunch of technocrats that just care about the economy as opposed to these are nationalists who see this as making China whole again, recovering from the century of humiliation. That's the CCP's whole claim to fame. They're the ones that put China together, and Xi Jinping has said that the Taiwan issue is not an issue that can be passed down generation to generation.

John Donvan:

I know you're both saying that the war is unlikely, but obviously in the Pentagon, they need to be thinking about the potential. And if you're in the Pentagon, are you thinking actually, this is a China that could defeat us in a war in terms, again, bringing this back to where China's power is and going, Michael?

Michael Beckley:

I think it all depends on what you mean by defeat. Can they unload on American bases in East Asia and cripple America's striking power in the region? Absolutely. They've stocked up on the missiles to be able to do that, and the United States has been slow about spreading its forces out and diversifying away from these big vulnerable aircraft carriers. But does that then mean they can go and carry out a D-Day style invasion of Taiwan? War games suggest it would be a really hard slog and they'd probably fail. But the problem is like that does not reassure me at all because a failed Chinese invasion of Taiwan is still going to kill a lot of people and probably plunge the global economy into a depression, at minimum, even if it doesn't escalate. So that does not give me confidence. So can they win it overall? Probably not. But can they deal the Americans a devastating blow at the outset? Absolutely.

John Donvan:

Ian.

Ian Bremmer:

And look, I agree with Michael that Taiwan is the big proximate concern. If there's going to be a direct military dust up between the US and the Chinese that nobody wants to see, this is the place that's likely to happen. It is not very likely to happen in the next few years, in part because of the strategic importance of TSMC, The Semiconductor Production Company, and the fact that it would be destroyed or crippled in any military confrontation. That would be incredibly damaging to both the Americans, the Chinese. Both sides know that. And also because the Americans have responded very effectively to Ukraine with all the allies, and the Chinese are sharpening their pencils around that, they understand that they need to have a plan, but that their plans aren't necessarily going to win right now. They see that too.

In the war gaming that I've been involved in between the United States and China on Taiwan, the Chinese have done well in part because they have a lot more levers to pull than direct military. Like their ability to get Taiwanese businesspeople who do so much of their business in mainland China to change their orientation politically because or else they'll be cut down, that is a lever that the Chinese really have. The Chinese economy is so much bigger than Taiwan's. So I'm more concerned about what an increasingly asymmetrical power balance in China's favor vis-à-vis Taiwan, economically and politically, for their ability to ratchet up tensions in a way that American military dominance globally doesn't really get you very far. I do think that it does deserve our strategic concern as we look out 5 and 10 years in the future.

John Donvan:

I'm John Donvan. This is Intelligence Squared U.S. More of our conversation when we return. Welcome back. I'm John Donvan, and this is Intelligence Squared U.S. Let's jump right back into our discussion. All right, let's move on to our third large heading of topics here, and that would be the internal political situation in China. And again, there's a lot of overlap on this, especially with the economy and especially the question I want to ask. But China grew a middle class over the last 40 years that probably nobody saw coming 40 years ago. There's a little bit of a social compact there that the Chinese regime gets to run affairs, and you don't challenge it, and you get to have a pretty decent life.

But we're now seeing protests. We're seeing, you know, a population that has become restive. We see a population that's a little bit challenged by some economic decline and taking on the enormous debt problems happening in China. And my question is whether, again, this goes to, I think, to your argument, Michael, whether these developments suggest that the regime, which is trying always to be in more control than ever is going to lose control. And to lose that cohesion that has been part of the deal of being in China during these years of prosperity.

Michael Beckley:

So I don't think the CCP will lose control and the regime will collapse I think because they built up the most sophisticated Orwellian police state that I think the world has ever seen with hundreds of millions of cameras all over the place. And they've merged that with their traditional security services, which are massive. I mean, they have an entire military called the People's Armed Police that is directed at the Chinese people. In addition to tasking the Chinese military, they're prime directive before they turn on foreigners is to make sure that there's internal security. We've seen China be willing to roll in tanks into the street. Not just in 1989, but in 2008, in Tibet in 2009, in Xinjiang, which now has basically been put under martial law.

So I don't foresee some popular revolution toppling the regime, but what I do see and what I think is detrimental for China's potential future rise is that the regime will respond to this by tightening control throughout every aspect of society. And you've certainly seen that the party has basically thrust itself into every social organization. Every company has to have a political commissar on staff to make sure you're abiding by the ideological guidance of Xi Jinping. If you fly too close to the sun, even if you're a big-name entrepreneur like Jack Ma, you can have your entire empire dismantled and you're seeing the state just insert itself in ways that will drag down growth.

John Donvan:

And the consequences of that are what? Well you were about to --

Michael Beckley:

It's just slower economic growth because you obviously don't have space for entrepreneurship or for innovation. When everyone is looking to the state and their number one priority is just, "I don't want to do anything that's going to get me prosecuted with an anti-corruption probe," that's not a great environment for doing business off into the future. And it also is causing capital flight. I mean, you're seeing lots of Chinese people try to get out of the country, or at least try to move their money and their children outside of the country. So that also compounds the demographic and the debt problems that China faces going forward.

John Donvan:

Ian?

Ian Bremmer:

I'm very sympathetic to Michael's concern here. The idea that Xi Jinping has consolidated an extraordinary amount of power in his hands makes me think that he is getting less good information from competing technocrats around him. And that of course means the greater potential to make mistakes. But I disagree that we know that that is moving in a negative direction for China's near-term development. And I want to give you a couple of examples.

First of all, when Michael said that anything that is Gorbachev, Xi Jinping wants to be exactly the opposite. We have just seen that really not be the case. We've seen relatively small demonstrations across China opposed to zero COVID. And the Gorbachev response, of course, would have been, "Oh my God, we got to give these people more liberties, more freedom." That's exactly what Xi Jinping did. He jettisoned two years of zero COVID policy and said, "That's it. We're just going to open up. We're not going to lock these people down anymore." And as a consequence, Goldman Sachs, the IMF, everyone else is redoing their estimates for how quickly the Chinese economy will be open, how quickly Chinese consumer spending will pick up again after being compressed for all these people being stuck in their homes in quarantine for a couple of years.

Now, they didn't affect or execute on that policy as effectively as I would have liked them to, or if I were running China as Michael wants me to. But they did do it, and that's a really significant counter data point, maybe the most, the most dramatic one that we've seen out of China since Xi Jinping has taken control. The second point I want to make, we've talked about the chilling effect that Xi has had political control over the economy. Actually, we've recently seen significant moves in the other direction. He wants political control, and he wants the Communist Party to have regulatory visibility into cutting-edge fields. He wants to ensure that he can direct capital to priority sectors, and he wants to ensure that tycoons do not become a political threat, and that's the Jack Ma issue. Those were the goals of his whole rectification of consumer tech firms that he talked about.

But they've just announced that that has concluded its active phase. Xi Jinping knows, and he's not opposed to the idea that the private sector is the main engine of Chinese growth. That's also very similar to what Gorbachev kind of understood, and that hasn't changed under his watch. In fact at the Central Economic Work Conference last December, Xi Jinping explicitly instructed local officials to proactively solve problems for the private sector, and he pledged to provide the greatest degree of convenience for foreign businesspeople to come to China. That's a message that he delivered again to the French, to the Germans, and I just saw the vice chair deliver at Davos a couple of weeks ago to 2,700 CEOs and business types. So I mean, the jury is out, but to say conclusively that Xi Jinping is moving towards state control of the economy irrespective, and that means political stability and he's going to crush everything else, I just think that you can't have certainty there.

John Donvan:

I want to bring in some guest questioners in a moment, but Michael, I wanted to give you a chance, if you want to, to respond to what Ian just said.

Michael Beckley:

Yeah, just really quickly, I think on the zero COVID reversal, I mean, it's notable that they are hunting down the people that participated in those protests, and frankly, I don't think we should give the Chinese government much credit for abandoning what was clearly an idiotic policy that was well past its sell-by date. That does not suggest that the regime is liberalizing in any sense. And on the economy, you know, I agree that there's a lot of talk about stepping back, pulling the state back, but if you actually look at what the Chinese state is doing right now, it's about four steps forward into the heart of the economy. Like I can give lots of examples. You know, DiDi, the ride hailing share app, you know, people are saying, "Oh, they put it back on the App Store," but they only did that after they created a state controlled alternative where they said we're going to capture 90 percent of the market share with that. Or they're also taking these so-called golden shares in companies where it's like 1 percent stake, but they get veto and management power.

And if you just look at the people that they've put in charge to manage all of these private companies, these supposedly private companies, like the guy who they just put in charge to manage ByteDance, his old Weibo tweets have resurfaced. And he says things like, and I actually have it here, "I have a dream that one day I can cut off the dog head of liberal Chinese people with Western values. Let the Chinese traitors preaching so-called human rights and freedom go to hell," with multiple exclamation points. So I mean, this is the person who is overseeing ByteDance, this major tech firm in China. And so to me, that does not suggest the state stepping back and having an easier hand on these firms. It's subtly inserting itself and controlling what they do.

John Donvan:

All right, I want to bring in, and I'm delighted to do this, to join us in asking some questions, Orville Schell. And Orville is director of the Center on U.S. China Relations at the Asia Society and has previously debated with us a while back. We did the question does China does capitalism better than America or not? So Orville, why don't you jump in? It is really, really great to see you and to have you back on our program, and the floor is yours.

Orville Schell:

Of course, there are two realms here that have to intersect. One is internally what happens in China, a very dynamic economy. The other, of course, is what happens externally outside of China. You've brushed on this, but it seems to me that very few people in the corporate world, and often in the political world, have really factored the question of geopolitical risk into the equation and analyzing the future prospects of the Chinese economy. And here we have before us, a living Petri dish example of another grievance-besieged tyrant in Russia invading the Ukraine. And I think if I were you, Ian, I wouldn't be quite so dismissive of the prospects of some kind of conflict in Asia precipitated by Xi Jinping because I think he shares with Putin that grievance coulter, and I'm wondering how you two think we should factor that into the economic equation if we look towards the future.

John Donvan:

Thanks, Orville. Ian, you were mentioned by name, so why don't you go first?

Ian Bremmer:

Well, I don't see how the Putin equation makes it more likely that we're going to get into a fight with China. I think what we've seen is it makes it much more likely that we're going to invade Iran. Why is that? Because Iran has decided that they're going to be the friends without global limits to Russia. They're going to buy an Air Force, the first they would have had since 1979 revolution from Russia, and they're providing drones and ballistic missiles, and as a consequence, major drone strikes against their own capacity. The Chinese have been very careful not to do that. I mean, what I see is Putin is a leader that is making massive misjudgments on the global stage. And I don't see Xi Jinping doing that. I see internationally, I actually see much more caution, much more incrementalism, much more willingness to step in when they see a vacuum like the Belt and Road, like XI Jinping's recent trip to Saudi Arabia after the Americans basically decide they don't want much to do with that country. No, I see the Chinese taking advantage of geopolitical opportunities. But I don't actually see internationally a Chinese government or Chinese leader who is itching for a global fight, the major exception being the potential of reunification of Taiwan, as Michael brought up.

John Donvan:

Michael, you want to take that question on as well?

Michael Beckley:

Yeah. I mean to me, you know, Taiwan is head and shoulders above all these other scenarios. And the reason I worry is partially, you know, the disappearing of the peaceful reunification options just given the direction that Taiwan is going, but that combined with a potential military window of opportunity for Beijing because, as we've noted, they're coming off of, you know, a decade of really ramping up their military capabilities. And the United States and Taiwan have been slow to react, and so, you know, you have Xi Jinping who's sitting there. You know, he's probably not getting the best information, you know, as Ian mentioned, and he could have commanders are saying, you know, this would be relatively easy.

I hope that Russia's experience in Ukraine has induced caution, but just having read Chinese strategic documents, they often are very dismissive of the Russians. They say, "We'd never do anything, you know, so stupid as that. We're not going to stumble into a country on four axes, and we're going to learn lessons from Russia's failures, namely, hit the target hard. Be big and brutal from the start. Don't stumble in. Second, sever them from the outside world."

So I think that's why they show they can potentially blockade Taiwan after Nancy Pelosi's visit. So like you will not be able to resupply the Taiwanese if there is a conflict. And one thing Putin did do effectively was rattle the nuclear saber, so I would expect Xi Jinping, if there is a conflict to do that. I mean who knows what Xi Jinping is thinking? Hopefully he has, you know, enough humility in his place in history not to feel like he has to be the one that reunites the mainland with Taiwan on his watch. But with a dictator, you just never know when there's just other factors, military factors as well as diplomatic factors that could bring the situation to a head very quickly.

John Donvan:

Michael, you have made the argument that China's saber rattling is an indication that China thinks its power is peaking.

Michael Beckley:

I think it's if carrots aren't going to work. So for example, if carrots don't work to bring the Hong Kongers back willingly to the mainland, we'll use sticks. We'll use our security forces, and we'll pass a bunch of national security laws that basically, you know, throw the dissidents in jail. And I just worry that same model could be applied to the Taiwan situation. In fact, I think the fact that China crushed Hong Kong is ominous for Taiwan because it suggests that one-country, two-systems approach, that offer they were making to both Hong Kong and Taiwan, is no longer on the table and that they're going to start using all manner of coercive actions. It may not be a full-scale invasion. It could be the things that Ian was talking about, you know, using political meddling and economic coercion. But given that they've already been doing that and things don't seem to be going their way, the Taiwanese are even more determined to stay away from the mainland, and so you just have to worry that if push comes to shove, Xi Jinping might pull the trigger.

John Donvan:

All right, we're moving down to the home stretch in our final round, which is comprised of each of you making a two-minute or so closing statement in which you get a chance to not only say what you have been wanting to say, but also perhaps respond to some of what you heard from your opponent. Michael, you went first in the beginning, and you go first for this one as well.

Michael Beckley:

Okay, thanks. Well, you know Ian and I have been sort of wonking out on all kinds of statistics and facts, but you know I think you know folks listening at home could actually just trust their gut on a lot of this and honestly ask themself, you know, does China seem like a country headed in a happy direction? You know, would you be willing to invest more of your life savings in Chinese stocks and real estate right now? Or if your kids came home today and said they were going to move to China potentially indefinitely, would you be really excited about that prospect? And you know, if Xi Jinping was your dictator for life, and you had no chance to vote him out, would you feel good about that? And, you know, in international surveys when these kind of questions are asked, people are increasingly answering no. And I think that just reflects what we can all see, whether it's in newspaper headlines about the problems in China's economy, or the photos of overrun hospitals where the regime is reporting, you know, just thousands of deaths as opposed to millions, you know, the ghost cities, these mortgage boycotts, or just in reports about the Chinese government setting up this massive surveillance and repression system to deal with people in a world where it can no longer just buy them off with rapid growth.

So there's these and many other data points I think add up to a basic fact that the rise of China that we've gotten so used to over the last 40 years is coming to an end, and the wealth, power, and status of China are at an inflection point and they're starting to peak. And the regime is feeling like, "Hey, if we don't get moving and do some very ambitious things, we could be headed for future decline." And I understand why Ian disagrees with a lot of my points because, you know, China has been rising for so long that most of us just think of it as like this constant of the international system, that it will just continue forever. But as I said before, I think the key overarching point is that China's exceptional rise really was exceptional. It depended on a few fleeting circumstances, all of which are rapidly disappearing, and I haven't seen the regime be able to replace it with anything that could approach even sustainable, solid growth, let alone the kind of gangbusters growth that we've gotten used to over the last 30, 40 years.

John Donvan:

And, Ian, your final thoughts.

Ian Bremmer:

Well, look, I get this question, would you be excited if you found out your kids would be going to China, you'd say no, of course. We've been asking those questions for decades now and the answer is no different. Now we can go back. This is not a new debate, Nick, Kristof, New York Times, China, "The End of the Golden Road," back in '91. Jack Goldstone, '95, "The Coming Chinese Collapse", "Will China Be Next?" the cover story in The Economist in 1998. Gordon Chang, "The Coming Collapse of China" 2001. Isabel Hilton, "Will China Implode?" back in 2009. Dan Blumenthal, "China's Great Stagnation" 2016. Could Mike be right this time? I guess it's possible right?

And look, it's an attractive thing to argue because they're poor. Politically we don't like them. We worry about a world where the Chinese would actually take over. We don't want it, so we want -- our cognitive dissonance is like we want China's power to have already peaked. And I'm going to give Michael some points here. I don't think there's going to be a Chinese century. We're already a quarter of the way in, and, you know, it don't look like that's happening. They're not a superpower, right? They're still a regional military power. The American economy's bigger, and it's even possible that China won't become the largest economy in the world. They should. They'll should overtake the U.S. around 2030. That's the baseline expectation. There's probably a 20 percent chance they don't quite make it. And even if they do, it's not going to be a rocket ship. They'll make it. They'll be the largest, but India's going to catch up, and it's going to be multipolar. And Europe's going to matter. And America's still going to be really important. So all of those things are really true, but what we're debating today is whether China's power has peaked, and I don't think you want to make that bet. I'm still on Team Ian.

John Donvan:

Thanks very much, Ian. And I want to say that concludes our debate. And I want to say to both of you, Michael and Ian, thanks so much for doing this, for doing it the way that you did it, with humor and actually mutual respect for one another, which is the thing that we aim for in Intelligence Squared. So we really appreciate having you do it and having you do it this way. Also thanks especially to Orville Schell. So basically, this is what I want to say.

Thank you everybody for joining into this episode of Intelligence Squared, and I want to let you know that as a nonprofit, we work to combat extreme polarization through civil and respectful debate, and that we are generously funded by listeners like you, by the Rosenkranz Foundation, and by friends of Intelligence Squared. Intelligence Squared is also made possible by a generous grant from the Laura and Gary Lauder's Venture Philanthropy Fund. Robert Rosenkranz is our chairman. Clea Conner is our CEO. Lia Matthow is our chief content officer. David Ariosto is our managing editor. Julia Melfi and Marlette Sandoval are our producers. Gabrielle Iannucelli is our social media and digital platforms coordinator. Andrew Lipson is head of production. Damon Whittemore is our radio producer. Raven Baker is events and operations manager. And I'm your host, John Donvan. We'll see you next time.

[end of transcript]

This transcript has been lightly edited for clarity. Please excuse any errors.