The U.S. Alone Can’t Compete with China. Here’s What Absolutely Can. (#250)

21m
China is on the march, is very determined, and has some significant advantages over the U.S. What are they and how should we respond? Two esteemed China experts, former U.S. Deputy Secretary of State Kurt Campbell and National Security Council Deputy Senior Director for China Rush Doshi, say the key is to counter China’s enormous scale by finding common cause with allies. Listen, and learn a lot.

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Transcript

I'm going to start today's episode by asking one of my guests to read aloud from his recent Foreign Affairs article.

Kurt, please go ahead.

On critical metrics, China has already outmatched the United States.

Economically, it boasts twice the manufacturing capacity.

Technologically, it dominates everything from electric vehicles to fourth-generation nuclear reactors and now produces more active patents and top-sighted scientific publications annually.

Militarily, it features the world's largest navy, bolstered by shipbuilding capacity 200 times as large as that of the United States, vastly greater missile stocks, and the world's most advanced hypersonic capabilities, all results of the fastest military modernization in history.

Even if China's growth slows and its system falters, it will remain formidable strategically.

So even if China's growth slows, it will remain formidable.

That raises two questions.

Are we underestimating China?

And what would a smart U.S.

strategy toward China be?

Hi, everyone.

I'm Lynn Toman, and this is Three Takeaways.

On Three Takeaways, I talk with some of the world's best thinkers, business leaders, writers, politicians, newsmakers, and scientists.

Each episode ends with three key takeaways to help us understand the world and maybe even ourselves a little better.

Today I'm excited to be with Kurt Campbell and Rush Doshi.

Kurt served as the United States Deputy Secretary of State and before that as Assistant Secretary of State for East Asian and Pacific Affairs.

He is currently chairman and CEO of the Asia Group.

Rush Doshi served at the National Security Council as Deputy Senior Director for China and Taiwan.

He is currently director of the China Strategy Initiative at the Council on Foreign Relations.

Kurt and Rush are the co-authors of the recent article, Underestimating China in Foreign Affairs magazine.

I'm looking forward to finding out how we are underestimating China and what a smart and effective U.S.

strategy toward China would be.

Welcome, Kurt and Rush, and thank you both so much for joining three takeaways today.

Real pleasure.

Thank you very much, Lynn.

Thank you, Lynn.

The pleasure is mine.

Kurt and Rush, your arguments on China are fundamentally based on China's scale.

So before we talk about the U.S.

and China, can you put the power of nations and the importance of scale in a historical perspective?

Rush, when you lead on that.

We basically think that scale is one of those factors that affects the rise and fall of great powers.

Not all large countries are able to achieve scale.

A lot of large countries don't become true great powers, but some do.

And when they're able to essentially take the efficiency models that smaller countries have sometimes developed first, think Great Britain, for example, during the first Industrial Revolution, and apply it on a larger foundation, they can be truly world-shaking.

No one really expected that an island in the northwest corner of Europe would grow to dominate much of the world.

And Great Britain did it on the basis of a first mover advantage in the Industrial Revolution.

But once those industrial methods proliferated out to other countries, especially larger countries, the British knew that essentially they would get outscaled.

And in 1883, a top British nobleman, a guy named Lord Seeley, wrote, essentially, that Great Britain might go the same way that Florence was outscaled by the great country states of Europe in the 16th century.

So too could Great Britain be outscaled by the great powers of the U.S., Russia, and Germany in the 19th and 20th centuries.

And that's essentially exactly what happened.

And the question today is, does the U.S.

have sufficient scale vis-a-vis China?

And I'll end by just noting China has twice the U.S.

manufacturing capability.

It's on track to achieve four times the U.S.

manufacturing capability by 2030, according to the United Nations.

It's four times the U.S.

population.

It's investing heavily in the industries of the future.

On a lot of different metrics, it actually outscales the U.S.

And the only path for the U.S.

to achieve the kind of scale that eluded Great Britain is in common cause with allies through a kind of new capacity-centric statecraft that Kurt and I lay out in the piece.

Can you talk more about how important scale is now and the different dimensions of scale?

Let's just take China for a moment.

I mentioned their manufacturing capability being twice the U.S.

That's a value-added share of global manufacturing.

But if you look at just raw productive capacity and you don't think about the value-added component, China's scale scale there is almost three times the U.S.

That ability to manufacture has a lot of advantages for an economy.

First, it has advantages in wartime.

It can lead to enormous production.

But manufacturing also matters in a second dimension, which is for technological advancement.

A lot of innovation comes from the factory floor.

It's incremental.

A lot of process knowledge and tacit knowledge comes from manufacturing.

And even financial advantages can sometimes emerge from being the world's manufacturer.

That was certainly what happened to the U.S.

And today that prowess is held by China.

And if you look at the statistics, Lynn, it's really shocking.

I mean, China is twice U.S.

power generation, three times U.S.

car production, 11 times U.S.

steel production, 20 times U.S.

cement production.

In global market share, it's two-thirds of all electric vehicles, 80% of electric vehicle batteries, 80% of drones, 90% of uncrewed systems or UAVs or unmanned systems, as some call them, and more than 90% of solar panels and critical minerals.

And if you look to the future, manufacturing is going to be dominated by robotics.

Well, China is responsible for seven times more installations of industrial machine robotic technology than the United States.

And half of all the world's robot installations occurred in China in 2023.

So they're betting on the ability to convert that into even greater manufacturing capability.

And again, that is just one of the many metrics of scale.

China is number one in top-sided academic publications in science.

It's also number one in active patents.

You can quibble with those statistics.

You should.

They have problems.

But quantity is a quality its own.

And we think that matters for global politics.

So the four pillars of scale, if you will, and you've talked about a couple of them, are demographics, economics, science, and the military.

What about the demographics and the military?

On the demographic side, there's two dimensions here.

One is the sheer size of China.

four times the U.S.

population, which means there's a large base of talent that they can draw from domestically if they can educate their population properly.

And we do see that in sheer numbers, China produces a significant cohort of top-flight scientific talent, including in some of the arcane fields we might only have a few dozen experts in.

So there's a demographic advantage that comes from that.

But there's also a disadvantage that China has, right?

It's a fast-aging society.

In the next 75 years, China's population will drop by half from the number it's in today.

That's a significant drop.

The question, though, isn't is China graying?

The question is,

what timeframe matters for American geopolitical advantage or for Chinese geopolitical advantage?

If I could just add to that, Lynn, just one quick thing.

I really like the way Rush put it.

And I think the one pillar that, frankly, is more open to interpretation and

questioning in this particular arena is the one associated with population dynamics.

The truth is we do not know how both the the combination of AI and robotics will have an impact on the economy in ways that perhaps reduces the ultimate premium put on younger workers historically that has driven dynamics associated with growth and productivity.

And so what Russia and I have seen in the debate, China is demonstrating some weakness in either growth or structural challenges.

But in reality, we tend to overestimate and put too much emphasis on a few dynamics.

And so I would say that the focus on China as an aging society tends to get more focus and critical consideration than other dynamics of the kind that Rush just listed, which are investments that have been made that are going to have long-standing significance on the military, manufacturing, and technological frontiers.

Kurt, could you elaborate more on a comparison of the U.S.

and Chinese military?

Let me just say that the U.S.

military remains the gold standard.

We have tremendous operational capacity.

The United States over the course of the last 40 years has been in conflict in many domains on a number of occasions.

And there is nothing like, frankly, in the operational military realm, nothing like experience to ensure that best practices and evolution more generally, where China really has not fought in any fundamental way and seen shots fired in anger since really along the Vietnamese border in 1979, 1980.

That's a long time.

And so there are clear advantages that come with being forward deployed and engaged.

We have areas of remarkable, I would say close to dominance, the quieting of our submarines, our submarine capacity.

We have some aerospace, satellite, other arenas of information, dominance that continue to be decisive.

But in terms of the size of the military, the size of what we would describe as expeditionary forces and capabilities, air and naval forces, China's made incredible investments here, here, and they are being manifested in the air and waters of Asia more generally.

And so China still remains in many critical vectors behind us, but their size pose long-term looming challenges to the United States.

Rush, you published a book titled The Long Game shortly before you were tapped to become the China director for the National Security Council.

Can you summarize how you see China and their long game?

The basic point is that China has a grand strategy that's evolved over time to displace the U.S.

from its order, first at the regional level within the Indo-Pacific, and then at the global level.

And really, if you look at how China's approach has shifted across time, the biggest variable that has always affected China's strategy is its perception of the relative power gap between the U.S.

and China.

Back in the Cold War, the U.S.

and China were almost quasi-allies against the Soviet Union.

It all changed because of a traumatic trifecta of events from Beijing's perspective.

The Gulf War showed American military dominance.

The end of the Cold War took away the glue that held the U.S.

and China together.

And then, of course, there was the reality of the Tiananmen Square massacre in 1989, which revealed to China an ideological threat from the U.S.

And after that, the Chinese Communist Party's Central Committee sort of determined that the U.S.

was the chief adversary of China.

And that led them to start a strategy strategy that they called hiding capabilities and biding time to quietly blunt America's power while continuing to benefit from the economic trade with the United States that built China into superpower today.

And all that continues until 2008, when the global financial crisis scrambles China's perception again of America.

And this time they saw the United States as weakening, still threatening, but weakening.

And that led them to a new strategy, not hide capabilities and bide time, not blunting American power, but actively accomplishing something, building Chinese power, specifically Chinese order within Asia.

They invest in power projection capabilities within the region so they can tell their neighbors more what to do.

They build economic institutions within the region so they can demonstrate leadership.

They also build political institutions, et cetera.

Beginning in 2016, 2017, China's perception of the U.S.

changed one more time.

There was a perception that the U.S.

and the West were sort of riddled with populism that was eroding the capability of government to function.

And they have a new phrase, the Chinese in this period, under Xi Jinping, which is great changes unseen in a century.

The world is undergoing great changes unseen in a century.

And that's what brings us to a global period of Chinese grand strategy focused on global military bases, making the world more dependent on China's supply chains than China is on the world, leading in technology, what they call the fourth industrial revolution, not just for prosperity, but for power, and resetting the foundational baseline assumptions of the international system to be more conducive to China's authoritarian system of government than the democratic one that we have.

Rush, what is China doing now in its relations with other countries?

We're right now a few months into a new U.S.

administration, the Trump administration, which is pursuing a different approach on a variety of fronts, including with allies.

What China is doing right now is it's seeing a degree of opportunity and pulling away some of the countries that might be wary of the U.S.

approach or disaffected.

And it's trying to drive a wedge between the U.S.

and those countries.

That's not new.

China has sought to do this and Kurt knows it better than I have, having been involved in just about every major effort in the post-Cold War era on Asia.

China has been trying this game for a long time.

It's not clear that they're going to succeed now either, but that's a critical focus of their foreign policy.

Separately from that, they're also aligning with countries that share their perspective or their sense of aggrievement relative to the U.S.

order.

And we know those countries.

It's Russia, Iran, and North Korea.

I would just say, Lynn, on the nature of sort of China's relations with these group of nations that are challenging global order, Russia, North Korea, and Iran.

It is one of the most troubling developments we've seen in recent years.

But the thing that Rush pointed to in Europe is the one that should trouble us the most.

If you look historically at some of the guiding principles of Chinese foreign policy, one of the most important, which they have championed for decades, is the notion of the critical importance of national territory and existing territorial lines of jurisdiction.

And they have been resolute about that in various crises in Africa and Southeast Asia over decades.

I think what Rush points to is that this is on the part of Russia, a full-on assault, not just at Ukraine, but the existing existing drawn boundaries that have animated decades of stability in Europe.

And what essentially has happened is that China has allied itself in ways, you know, they've tried to do some of this secretly, but has enabled Russia to go directly at those lines that have been broadly accepted by all global powers, except perhaps for Russia.

Now, China, I think, explains it to itself.

You saw inadvertently the remarks of the Chinese ambassador to France in 2023, in which he basically indicated that the territorial lines that were drawn or accepted during the confusion of the post-Cold War environment do not have the same clarity or historical significance than other territorial lines.

And of course, he was quickly, you know, kind of not reprimanded, but sort of like he speaking so clearly on these matters can sometimes be good for your career and sometimes not so much.

For him, not so much.

But this is the birthplace in many respects of American strategic purpose.

Our commitment to peace and stability in Central Europe is what first brought us to being a global power.

And for them to do this, we have to interpret it not just as a threat to Europe, but frankly, a threat to the United States as well.

Rush, you mentioned that the U.S.

needs a new approach to alliances and partnerships.

Can you explain?

What Kurt and I have offered is a sense that our alliances can't simply be what they've been for a long time.

You know, we can't look at alliances in the purely hierarchical sense that we had.

We can't fall into past habits.

We can't see them in purely military terms either.

We have to see them now at a time where China has scale across just about every dimension as ways of pooling capacity or as being the foundation for a capacity-centric statecraft.

There's a bit of humility in this for the United States as well.

What we're doing is we're saying there are areas where the U.S.

has lost a capability that its allies have gained or maintained.

And those allies can bring it back to the U.S.

and we can work on that together.

What we offer are several practical solutions.

On the security side, we talk about Japan and Korea being able to help build American ships, or relatedly, the U.S.

providing some of its most advanced military capability to its allies.

Kurt was the father in many ways of the AUKUS Agreement, which is essentially an effort by the U.S.

and the U.K.

to provide Australia the capability of a nuclear-powered submarine, which would give Australia great capability in the region.

That's some of our most sensitive technology, but it's a kind of example of capacity-centric statecraft.

So too, in the economic and tech dimension, do you need this kind of new approach?

What that means in practical terms is understanding that China, that is maybe four times more than the U.S.

in global manufacturing in a few years, it has capacity that simply will put other countries' industries out of business.

It will de-industrialize the rest of those countries just by being able to compete, maybe with some government help, of course.

And the only solution to that isn't just to protect the American market, because if American firms have their markets safe, but they can't sell into third country markets, then they'll never achieve scale in the global system.

Those markets have to be available to American companies and vice versa.

Those countries have to be able to access the American market.

So what we have to do is collectively put up more barriers against China's capacity.

You know, these can be trade barriers, they can be regulatory barriers, but then reduce barriers within that family of allied countries, essentially, that are free world.

And that will require a different approach to how America conducts itself and its alliances.

It will require greater humility, but if we're able to pull it off, it'll give us the ability to maintain a system that has essentially brought prosperity to Americans, to our allies, and to the world.

Kurt, what are the three takeaways you would like to leave the audience with today?

I'll do one and let Rush do the other two.

I think the most important argument here is not to underestimate China in this highly dynamic period.

Rush, over to you for the last two.

I think first is that scale matters in the rise and fall of great powers, that scale is important.

And this gets to Kurt's point about hegemonic prophecy.

You don't want to underestimate others.

If you take into account their scale, where that is a strength, where they have weaknesses, but scale matters.

China has scale right now relative to the United States in critical metrics relevant for the generation of strategic advantage and technological advantage.

And the U.S.

on its own lacks that sense of scale.

The U.S.

can find scale.

It has a great repository of scale in its allies.

And together with those allies and partners, that group of countries vastly outscales China.

So to kind of sum it up, scale matters and you have to get your hegemonic prophecy right.

China has scale.

The U.S.

alone does not.

The U.S.

can get it with allies.

Thank you both.

Thank you for your service in government and I really enjoyed this conversation.

Thank you very much, Lynn.

Thank you.

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I'm Lynn Toman, and this is Three Takeaways.

Thanks for listening.