Another PRC Sharp Power: Foreign “Friends”

Another PRC Sharp Power: Foreign “Friends”

Another PRC Sharp Power: Foreign “Friends”

At Long Last, A US Policy Shift toward China

After more than 40 years, US policy toward China is finally changing in recognition of the reality of China as it is, rather than the China we wish it to be. A strong and still growing consensus has emerged among US government officials, the US Congress, and American elite, media, and public opinion, and even among many business people, that the US relationship with the People’s Republic of China (PRC) is unbalanced and does not serve US interests.   

Although many China experts had been saying this for many years, the public acknowledgment of how badly US policy toward China had failed was perhaps most prominently announced earlier this year in an essay from the March/April issue of Foreign Affairs titled “The China Reckoning: How Beijing Defied American Expectations” by Kurt Campbell and Ely Ratner. They wrote:  

“Nearly half a century since Nixon’s first steps toward rapprochement, the record is increasingly clear that Washington once again put too much faith in its power to shape China’s trajectory. All sides of the policy debate erred: […] free traders and financiers, […] integrationists, […] and hawks. [….] Neither carrots nor sticks have swayed China as predicted. Diplomatic and commercial engagement have not brought political and economic openness. Neither US military power nor regional balancing has stopped Beijing from seeking to displace core components of the US-led system. And the liberal international order has failed to lure or bind China as powerfully as expected.”

Predictably, some stalwart defenders of the status quo like Ambassador Stapleton Roy, who helped create US policy toward China, sharply objected. Nonetheless, the surprise is not that the US policy toward the PRC is finally being revised. The wonder is that it took so long.   

After all, US policies toward the PRC have been remarkably consistent since the February 27, 1972 Shanghai Communiqué, but consistency does not mean correct or successful. US policies have repeatedly been proven wrong, and consistently failed to promote US interests, and to achieve US goals. The original geostrategic justification for US relations with China was short-sighted and ultimately foolish, and died with the collapse of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991. China and Russia today are closely aligned if not allied, both militarily and politically.  

The concrete benefits of supposed US-PRC cooperation on key issues have been few to none, whether the issues have been ending the Vietnam War sooner, non-proliferation (whether Pakistan, Iran, and North Korea), the Russian invasion of Crimea and eastern Ukraine, or human rights.  

The argument that economic cooperation and trade with China would positively transform China proved to be wrong. And while bilateral trade with China may have benefitted some US business sectors, such as investment banks, it did not benefit the US economy overall, especially if IPR theft and job losses are taken into account.

Meanwhile, while investing so much hope in the PRC, US administrations consistently underestimated and often ignored Taiwan, a modern miracle that over the same period of time transformed itself into a vibrant and prosperous democracy and a technological powerhouse.

The irony of our overly solicitous approach to China would have been even more apparent if US administrations had paid more attention to what the Chinese were themselves saying about relations with the United States. For example, Tsing Hua University Beijing academic Yan Xuetong (閻学通), a foreign policy adviser to whom the PRC government pays attention, wrote as long ago as 2010: “The global importance today of China–US relations is similar to that of US–Soviet relations during the cold war in being based on conflicting interests rather than common ones. […] There are more mutually unfavorable interests than mutually favorable ones between China and the United States.” It is all the more strange then that fearful critics of any shift in US policy toward China declare we run the risk of creating a Cold War with China.

American Friends Enabling China

In trying to understand why Washington has persisted so long with policies that have not served US interests, we should not overlook the continuing enormous influence of US officials, both in office and after retiring, on US policy. Beijing has consistently used these “American friends” as enablers to promote Chinese interests and Chinese goals, and has richly rewarded them for doing so.

The most famous example of this is Henry Kissinger, former national security adviser and secretary of State to both Presidents Richard Nixon and Gerald Ford. During a visit to China on June 28, 2011 commemorating the 40th anniversary of his secret mission to Beijing, Kissinger admitted, according to China Daily, that “when he first came to China, he knew little about the country, but now he admires the Chinese people and Chinese history.” He also stated that “[t]he US’ primary interest is a good relationship with China, not provoking difficulties with it. […]”   

Kissinger’s view that the Sino-American relationship is of surpassing importance in its own right has, in fact, been his guiding policy principle toward China. The relationship itself, according to this view, outweighs all individual issues, disputes, and differences.  In contrast, we should contrast Secretary of State George Shultz’s view as described in his memoir Turmoil and Triumph: My Years as Secretary of State (1993). Shultz specifically rejected the geostrategic importance of China as the “conceptual prism through which Sino-American relations were viewed,” arguing that when that was the case, “it was almost inevitable that American policymakers became overly solicitous of Chinese interests, concerns, and sensitivities.” In implicit contrast to Kissinger, Shultz advised “that it would be a mistake to place too much emphasis on a relationship for its own sake.” Instead, he said, “[a] good relationship should emerge from the ability to solve substantive problems of interest to both countries.” He added:

“We [President Reagan and I] viewed China as a giant crippled by its own ideology. So long as China pursued that ideology, there would necessarily be restraints on the kind of relationship it could have with the United States. There would always be a gap between what we expected from one another and what we would be willing to deliver. We would continue to do what we could to maintain and, whenever possible, improve relations, but we would not abandon our fundamental values or principles in dealing with the Chinese.”

In this regard, Secretary Shultz and President Reagan stood apart from most of the other US policy makers who followed in the footsteps of President Nixon and Secretary Kissinger. Ever since leaving government, in fact, Kissinger has continued to serve as a loyal supporter and continuing advocate of the appeasing policies toward China he initiated. Every time there was a fissure in US-China relations, Kissinger could be counted on to rush into the breach.  

Thus, it was on November 7-10, 1989, when US-China relations were still roiled by the Tiananmen Massacre that Kissinger visited Beijing to meet with Supreme Leader Deng Xiaoping, Chinese Premier Li Peng, General Secretary Jiang Zemin, President Yang Shangkun, and Foreign Minister Qian Qichen. They all warmly received Kissinger as an “old friend” who, moreover, had spoken up in defense of the Tiananmen crackdown:  “[n]o government in the world,” he wrote, ”would have tolerated having the main square of its capital occupied for eight weeks by tens of thousands of demonstrators who blocked the authorities from approaching the area in front of the main Government building.” Kissinger had criticized US sanctions imposed in response to the Tiananmen massacre, and repeatedly called for preserving a special Sino-American relationship despite differences. Kissinger’s visit followed a visit a week earlier by former President Richard M. Nixon, who had strongly criticized the military massacre, and would itself be followed in December with a visit by Brent Scowcroft.   

Another of the more than 50 visits Kissinger made to Beijing was on December 2, 2016 where he met with President Xi Jinping in an apparent effort to assure the PRC leader that, following the election of President Trump, he hoped and expected Sino-US relations would move ahead in a “sustained and stable manner.”

More recently, on November 8 of this year, in a clear sign that the orthodox Sino-US relationship he helped create was in trouble, we saw Kissinger – now 95-years old – once again rushing to one of the key architects of that policy, rushing once more to Beijing to try to assuage Sino-US tensions. PRC Foreign Minister Wang Yi reportedly told Kissinger “[a]s the last 40 years have shown, the common interests of the United States and China far outweigh the conflicts, and the cooperation between the two countries is the only right choice.” Kissinger, according to the Foreign Ministry, said the two countries should view bilateral ties from a big-picture perspective and establish basic rules for the stable development of relations.  

The Financial Connections of Foreign Friends

While there can be no doubt of Kissinger’s personal conviction about the strategic importance of Sino-US ties and how best to foster them, it is also true that the consulting firm he founded, Kissinger Associates, had earned millions of dollars over the years arranging access in Beijing and meeting even with senior leaders for US corporations. In a telephone interview with The New York Times on December 13, 1989, Kissinger described as “McCarthyism” any linking of his views on China to his business interests. Although Kissinger has always maintained this position, his business interests in China have certainly created the impression that there might be a conflict of interest.  

This is an issue that goes well beyond Henry Kissinger. In China Fantasy: Why Capitalism Will Not Bring Democracy to China (2007), James Mann describes how China in effect “bought” retired US officials to influence US policies in China’s favor. He names the many American political leaders – Democrats as well as Republicans – who left office and went on Beijing’s payroll as “consultants” to introduce Americans seeking to do business in China to Chinese officials, including – besides Kissinger – former Secretaries of State Alexander Haig and Madeleine Albright, former National Security Advisers Brent Scowcroft and Sandy Berger, former Secretary of Defense William Cohen, and former US Trade Representative Carla Hills.   

In this context, it is important to note the remarks on November 9 by White House National Trade Council Director Peter Navarro who accused Wall Street “globalist billionaires” of trying to sabotage President Trump’s handling of trade relations with China. In a speech at the Center for Strategic and International Studies, Navarro said:

“Consider the shuttle diplomacy that is now going on by a self-appointed group of Wall Street bankers and hedge fund managers between the US and China. […] As part of the Chinese government influence operations, globalist billionaires are putting a full-court press on the White House in advance of the G-20 in Argentina (where a meeting is planned between Trump and Xi Jinping later this month). […] The mission of these unregistered foreign agents […] is to pressure this President into some kind of a deal. […]If Wall Street continues to insinuate itself into these negotiations, there will be a stench, a stench around any deal that is consummated.”

Navarro did not name names in his speech, but according to Doug Palmer in Politico on November 9, Navarro mentioned US financial services giant Goldman Sachs several times. Palmer also noted that in a recent talk in Singapore, Henry Paulson, a former Treasury secretary who once led Goldman Sachs, referred to his “friend” Chinese Vice President Wang Qishan and raised fears of an “economic iron curtain” being raised between the US and China. “Nobody wins a trade war,” he said. “And China can agree to enough of what President Trump seeks to enable a deal that he can be proud of — if it also marks the beginning of the negotiation of a high-ambition trade or investment agreement.” Palmer also noted that “[s]ome analysts regard Navarro’s comments as a dig at Treasury Secretary Steven Mnuchin, who worked at Goldman Sachs from 1985 to 2002 and later helped establish several hedge funds. Mnuchin is generally viewed as less of a hardliner on China than Navarro or US Trade Representative Robert Lighthizer.”  

The mention of Goldman Sachs is especially interesting because Kissinger Associates was established in 1982 partly with loans from Goldman Sachs. John Thornton, who retired as chairman of Goldman Sachs in 2003, took up an academic position as professor and director of the Global Leadership Program at Tsinghua University in Beijing, but continued to advise Goldman Sachs on China matters. At the time of his retirement, Goldman had become the lead underwriter for major Chinese state-owned companies, a relationship he helped build over the previous two decades. In 2006 Thornton funded the establishment of the John L. Thornton China Center at the Brookings Institution. In 2009, he also became a member of the International Advisory Council of the Chinese sovereign wealth fund China Investment Corporation.

Another American corporate booster of Sino-US ties is Stephen Schwarzman, Chairman and CEO of the Blackstone Group. In 2013 he announced a $100 million personal gift to establish and endow a scholarship program in China, Schwarzman Scholars, modeled after the Rhodes scholarship program. Schwarzman simultaneously announced a fundraising campaign with a goal of $200 million. In 2008, he was awarded the Friendship Award of the People’s Republic of China, the highest honor accorded to a non-Chinese citizen. The Chinese government also named him as one of fifteen ‘foreign experts’ who have made the most significant contribution to China’s development over the past three decades. John Thornton also supported the launch of the Schwarzman Scholarship in 2013, attending its launch at Tsinghua University, and serving as an advisory board member. It is evident in both cases that their philanthropy is closely tied to their business interests in China.

Foreign “Friends” as a Tool of Sharp Power

Since there is much debate about the definition of “sharp” power but it is also commonly agreed that it a form of “hard” power, I would argue that providing financial incentives to foreign friends to support certain policies toward China is certainly not soft power. It therefore also meets the original November 2017 definition of “sharp power” by the National Endowment for Democracy as “aggressive and subversive policies employed by authoritarian governments as a projection of state power in democratic countries, policies that cannot be described as either hard power or soft power.” It is certainly true that the PRC government would never allow any its own current and former officials and businesspeople to advocate policies in China that would be more favorable to the United States. In the case of foreign “friends” of China, “sharp power” also meets Joseph Nye’s definition of “coerced or purchased loyalty.”

A recent book by conservative American author Peter Schweizer – Secret Empires: How the American Political Class Hides Corruption and Enriches Family and Friends (2018) – documents a number of troubling cases involving both Democrats and Republicans that illustrate how “China employs a strategy with other countries to make friends with foreign officials and politicians to advance their interests [… and] to score favorable policies.” To cite just three examples:

  • The son of Vice President Joe Biden and the stepson of Secretary of State John Kerry profited immensely from secretive deals involving billions of dollars that they struck with companies connected to the Chinese government. These deals occurred as Biden and Kerry were negotiating sensitive issues with the Chinese government, and may have influenced the relatively “soft” positions they adopted on such issues as the Defense Identification Zone in the East China Sea and the South China Sea dispute.
  • Senate Majority Leader Mitch McConnell and his wife, Secretary of Transportation Elaine Chao, who also previously served as secretary of Labor, have enormously profited from close family ties to the Chinese military-industrial complex. The Senator’s father-in-law and sister-in-law have served on the board of directors of a Chinese–owned military contractor, and another sister-in-law has been appointed to the government-controlled Bank of China, only the second foreign national to serve on that board. While the father-in-law James Chao’s shipping company is based in the United States, their ships have been constructed by Chinese government shipyards, some of the construction has been financed by the Chinese government, the ships’ crews are largely Chinese, and the ships largely operate out of Chinese ports carrying large amounts of materials in and out of China. James Chao was a classmate of Jiang Zemin at Jiao Tung University in China decades ago. Senator McConnell and his wife Secretary Chao have increasingly refrained from any criticism of China as the family’s business ties expanded.
  • The Trump family also has extensive business ties in China. In March 2017 the Chinese government finally granted the family 37 trademarks for various Trump projects after more than a decade of refusing to approve them. On the day of Trump’s Mar-a Lago dinner with Xi Jinping, the Chinese government approved Ivanka’s company’s request to sell handbags, jewelry, and spa services in China. Until media coverage scotched the deal, son-in-law Jared Kushner had negotiated a tentative deal with Anbang Insurance Group to invest in Jared’s financially troubled showcase building “666.” Meanwhile, the Trump Organization owes hundreds of millions of dollars to the Bank of China for real estate projects.

Lest it be thought that I am only picking on the United States, former Australian leaders and officials have also had their share of issues:

  • After former Foreign Minister and New South Wales Premier Bob Carr was appointed as the head of the Australia China Relations Institute at the University of Technology in Sydney in 2014, media reports indicate he has “come to personify the lobby he once attacked, lauding the achievements of Xi Jinping and condemning his critics.”
  • Former Prime Minister Paul Keating, who now serves on the International Advisory Council of the China Development Bank, has criticized the Australian government for having a “containment strategy” against China.
  • Former Prime Minister Kevin Rudd: A friend of mine in a position to know tells me that Kevin Rudd is on the boards of several major Chinese corporations. Rudd takes an increasingly very moderate line on China. His daughter has a lucrative business selling baby formula and other organic Aussie goods to the Chinese market, and also serves as the Australian ambassador for Chinese e-commerce giant Alibaba.

How to Counter China’s Foreign Friends Among Us

I don’t know enough about the linkages some Taiwanese may have with China, but I think the basic strategy in any country facing this kind of sharp power threat should include these three essential measures:

  1. Support media and police efforts to unmask hidden profitable or corrupt connections.
  2. Create legislation to make it more difficult for family members to do back-door deals. For example, US law prevents US corporations from hiring or doing special business deals with the children of foreign officials, but it does not prevent foreign entities from hiring or doing special deals with children of US officials.
  3. Ensure that China receives reciprocal treatment to the greatest extent possible,   whether the issue is numbers of journalists, numbers of Confucius Institutes, or restrictions on travel or business, etc.

In recent years, AACo has moved away from the bulk business of live cattle exports to focus on exports of its branded beef such as premium Wagyu steaks to cash in on the next wave of the China boom.

“Ms. Rudd’s extensive marketing and digital experience will enhance the board’s skill base and bring an added dimension to board discussions given her generational perspective and deep understanding of markets, especially Asian markets,” said chairman Donald McGauchie – the man who recruited Sol Trujillo to run Telstra all those years ago.

The main point: China in effect “bought” retired US officials to influence US policies in China’s favor. China’s financial incentives to foreign friends to support certain policies toward China is a type of sharp power.