Understanding the Beijing Rules: Bethany Allen on how China weaponizes its economy and how the West can push back

This episode of Hub Dialogues features host Sean Speer in conversation with Bethany Allen, a leading American journalist and the China reporter for Axios, and the author of the new book, Beijing Rules: How China Weaponized Its Economy to Confront the World, which documents how the Chinese government has used economic and political tools to project its power and influence around the world.

You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, and Spotify. The episodes are generously supported by The Ira Gluskin And Maxine Granovsky Gluskin Charitable Foundation and The Linda Frum & Howard Sokolowski Charitable Foundation.

SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Bethany Allen, a leading American journalist who serves as the China reporter for the outlet Axios. She’s also the author of the must-read new book, Beijing Rules: How China Weaponized Its Economy to Confront the World, which documents how the Chinese government has used economic and political tools to project its power and influence around the world. I’m grateful to speak with her about the book, including its consequences for Western policy-making, the future of the West’s relationship with China, and how she ended up in Taiwan. Bethany, thanks for joining us at Hub Dialogues, and congratulations on the book.

BETHANY ALLEN: Thank you so much. It’s great to be here.

SEAN SPEER: You spent quite a while living and reporting in Asia, including China, but I’m now speaking to you from Taiwan. Why? What caused you to relocate to Taiwan?

BETHANY ALLEN: Sure. Well, I came to Taiwan from Washington, D.C., where I had been living for about eight years. But during that time, I published an investigative series for Foreign Policy magazine that actually served as the precursor to my book, and it’s very likely that series ended up getting me banned from China in 2019. So I’m in Taiwan. I love Taiwan. I’m very happy to be here, but if it were up to me, I would be in China, but I can’t. So I came as close as I could.

SEAN SPEER: That’s a great segue into the book, which makes the case that China has had something of a sustained strategy to use political and economic tools domestically and globally to ultimately expand its global influence. Let me just start with a basic question, Bethany: What are the origins of this strategy? How did it come to take shape? Was this something in the minds of the Chinese leaders in the 1990s when we started to see economic liberalization and global integration? In effect, were they starting to launch this strategy at the same time that Western business and political leaders were opening up their arms?

BETHANY ALLEN: Yes, actually. The earliest examples that I know of the Chinese government’s very effective use of this strategy dates to as early as 1997. There’s a well-known anecdote there relating to Hollywood movies. There were two movies that came out that year that talked about Tibet in a positive and sympathetic way. One of them was Kundun, which was a Hollywood movie—sorry, a Disney movie that was the story of a Tibetan leader. And then there was Seven Years in Tibet with Brad Pitt. The Chinese government was very unhappy with these movies and banned Disney’s Mulan from playing in Chinese theatres and also put a years-long ban on the studio that produced Seven Years in Tibet from being able to show its movies in China.

What’s really extraordinary about this is that even though the Chinese box office at the time was relatively small compared to today, even though China’s economy was relatively small compared to today, these were both extremely effective. Since 1997, there has been no major American film from a Hollywood studio that has shown Tibet in a positive light or that has presented the Chinese Communist Party as the bad, scary villain in a movie. It was an incredibly powerful censorship tool. And this was even before China joined the WTO before they became the powerhouse that they were today.

SEAN SPEER: As the book subtitle alludes, one of the key pillars of the strategy is to effectively weaponize the Chinese economy by blocking or impeding Western exports as a matter of geopolitics and relying on state-owned enterprises to advance their geopolitical interests abroad. Why don’t you talk a bit about some of the tactics that have come to manifest this tendency to weaponize economic tools?

BETHANY ALLEN: Sure. So what I talk about in my book, essentially is economic statecraft. Up to today, mostly when people talk about economic statecraft, they’re talking about formal sanctions. But economic statecraft is the use of economic tools to accomplish political or geopolitical purposes, not to accomplish purely economic purposes. We think of very de jour tools like sanctions. But sanctions only work if, like the U.S., you have dominance of the international financial system, you have the world’s reserve currency, the dollar. The U.S. has the ability to enforce sanctions that are very biting. And they’ve done that on a number of primarily multilateral goals—to accomplish primarily multilateral goals. Nuclear non-proliferation, fighting terrorist financing, fighting corruption and money laundering, and increasingly to punish human rights violators.

The Chinese government does not have that; it does not have anything close to dominance of the international financial system. The RMB is not a reserve currency, and certainly not the world’s most important reserve currency. So what we see is actually a set of very innovative trial-and-error attempts over the past 25 years to find an alternate way to use China’s economy in a similar way. What we’ve seen are various different levers of control that the Chinese government has carefully set up around the borders of its economy, both physically at borders and digitally on the internet, to use access to its economy as either a carrot or a stick to encourage companies, individuals, and governments to take actions that are in line with the Chinese Communist Party’s bottom lines.

SEAN SPEER: I’ll just say that explanation will resonate with Canadian listeners who are familiar with several instances over the years where Canadian exports have been suddenly subjected to additional scrutiny along health and safety lines and other rationales.

Bethany, why do you think Western business and political leaders took so long to realize what was happening? Was it wilful blindness, or false idealism, or more basic corruption, or some combination of factors?

BETHANY ALLEN: It is extraordinary. I mean, it’s been pretty obvious for a while. I mean, there was the movies incident in 1997, but there was also, in the early 2010s, there was this very obvious punishment of Norway because—and that wasn’t even something the Norwegian government had done. It was because the Nobel Peace Prize Committee gave the Nobel Peace Prize to Liu Xiaobo, who is a Chinese pro-democracy activist. The Chinese government or whoever—let’s just talk about what happened. What happened was imports of Norwegian salmon to China, which was Norway’s single most important market for Norwegian salmon just were stopped at the border, were stopped at customs, and the salmon rotted. But there was no formal announcement; no Chinese government official said, “We are doing this because of this Nobel Peace Prize.” It just stopped.

If you look at charts, the imports that went to China, that successfully entered China before this, were really high, and then there’s this dramatic drop down to almost zero. It stayed that way until, I believe, 2016. I might have to double-check that year off the top of my head, but I believe it was 2016 when Norway and China normalized diplomatic relations. And the Norwegian side, in their public statement, said something along the lines of, “We will be careful in the future to not do anything to damage China’s core interests.” It was really stunning. And after that, Norwegian salmon imports went up again. This was a very early example. And also another one that was very significant was around the same time. So around—I’m going to get the year wrong again, but around 2016 or so when South Korea agreed to deploy a U.S.-made missile defence system called THAAD in order to strengthen South Korea’s defence against North Korea. But this THAAD missile system could, at least on paper, be used to defend against Chinese missiles. And so the Chinese government was opposed to it.

And again, without making any official statement, used a lot of different kinds of economic levers to punish South Korea, including not letting K-pop stars come and do their concerts in China, stopping K-pop music from being streamed on a number of digital platforms in China, punishing Lotte, which was the South Korean retail chain that had given up, that had agreed to do a land swap so that the missile defence system could be put onto preplan that was previously owned by Lotte. So they stopped this major construction project in China. There were other major economic troubles that Lotte faced in China after that. Again, with no official statement.

So your question is: Why were we not talking in 2001 or 2012, or 2017 about China’s economic coercion? I think because, first of all, there really wasn’t a term, there wasn’t a concept, because our concept of what economic statecraft is has been quite limited to, I would say, a Western mindset that is very law-focused, very institution-focused, and the Chinese government was not presenting an organization or an institution, or an office that issued official edicts or official sanctions on these companies. These were things that all just happened.

I also think that people didn’t want to deal with it. It’s like climate change. People didn’t want to accept the reality that the Chinese economy now was being used to support China’s illiberal and narrow-minded national interests in this way because the implications of that were so vast. What would that mean for the global economic system? What would that mean for the liberal, rules-based order such that it exists? What would that mean for the WTO which doesn’t have a very effective mechanism to even address this kind of thing. It was such a difficult and looming issue that I think people prefer to pretend that it wasn’t real. And I would also say that there is an element of, if you want to call it ethnocentrism, that I think it’s been very difficult for Western countries and Western societies to accept that a non-Western government can have so much power that they can actually affect this kind of change. It’s difficult, I think, in a Western-run world to accept that we’re at this new place where the West cannot simply issue edicts and dominate things in the way that we used to be able to.

SEAN SPEER: Let’s stay on the economy. China’s initial gains basically followed conventional economic development theory. It relied on a low-cost advantage to outcompete Western manufacturing. But, as you outline in the book, it was never the intention of Chinese policymakers to stop there. The ultimate goal, which Chinese leaders increasingly express openly, is to compete and dominate in higher-value production, including technologies that have dual-use purposes. Do you want to talk about China’s strategy to dominate high-tech sectors, and where do you think it stands relative to the West as we speak?

BETHANY ALLEN: I think there’s nothing inherently nefarious about any government wanting to employ various means to achieve dominance in high-tech industry. So that’s fine. And I think it’s fine for the Chinese government to achieve that.

I think what we’ve seen is, and I really get quite deep into this in my book, is after—you can pinpoint whatever year, 1979 with the rise of Margaret Thatcher or 1980, the election of Ronald Reagan, there was this big shift in how Western economists, but more importantly, politicians and society, viewed how we govern the economy and the relationship between economy and policy. So after the 1980s, we get this U.S.-led global embrace of neoliberalism, which it’s kind of a—that word is a bit controversial. But simply what I mean by that is an economy that has been, to a large extent, decoupled from regulation. So deregulation, privatization, austerity. I’m channelling a legal scholar named Ganesh Sitaraman in his book, The Great Democracy, where he defines neoliberalism in this way. But in essence, it’s a very lightly regulated economy.

SEAN SPEER: A deference to markets in effect.

BETHANY ALLEN: Yeah. A deference to markets and coupled with the belief that free markets are inherently liberalizing, right? That they will bring states closer to a political form of openness, not just an economic form of openness. Now, nowadays, with China’s rise, I think a lot of people are now realizing that that was just really not the thing, that was really not right in any case. Something else that comes along with that is this idea that state subsidies and industrial policy, and a state-directed guidance of industrial sectors or of these various sectors of the economy to develop in a certain direction are always going to fail. They’re just going to fail. Of course, they’re going to fail. That’s neoliberal orthodoxy, and thus we don’t have to worry about it. And so when you have the Chinese government coming out with these slogans like “Made in China 2025” about dominating all this, I think initially there was a ton of skepticism in the U.S. that this was something to be worried about, that this was something that we would have to start considering and be concerned about in terms of losing our own competitive edge.

Now again, we’re really questioning that, and you see in the U.S. a realization that maybe too much government decoupling from funding scientific research and development, that that is actually probably detrimental to the U.S. competitive edge. And so we’ve seen bills passed in the U.S. to increase funding for scientific research and development. Even a turning of the Titanic towards some sense of industrial policy that maybe there is a role for government.

So for the Chinese government, I would say—I did say just now that it’s not nefarious for the Chinese government to want to dominate in these sectors, and that’s true. However, given the context, given how I write in my book about how the Chinese government has learned how to turn economic power into political power on the global stage, I am concerned about this because what are they very, very likely going to do once they achieve dominance in some of these fields? They’re going to make a precondition of other countries accessing those technologies, buying those technologies, being able to learn from those technologies, they’re going to couple that to China’s political goals.

I find that concerning because we have seen over and over and over again that the Chinese government isn’t promoting multilateral political objectives. They are promoting their narrow authoritarian geopolitical interests, such as not being able to even talk about a genocide in Xinjiang, not being able to criticize the Chinese government’s, Hong Kong government’s, authoritarian takeover of Hong Kong, not being able to meet with Taiwanese government officials, or even have the Taiwanese government or Taiwanese reporters attend the World Health Assembly.

These are not multilateral goals. These do not benefit anybody except the Chinese Communist Party. I want to make a really clear distinction here between what we have known as traditional Western economic statecraft sanctions, which have largely not entirely been to promote multilateral goals with the Chinese government’s very narrow focused authoritarian statecraft, which is used to promote its narrow geopolitical goals. I find this very concerning from a perspective of someone who really likes democracy. I really like freedoms. And I really enjoy being able to try to create a system in which government surveillance is not the norm, in which putting dissidents in prison, putting people in prison for what they say is not the norm. And the Chinese government wants to create a world and to use its economy and its dominance of these emerging technologies in order to make the world safe for that kind of worldview, for that kind of political paradigm, but also to even extend it around the world.

SEAN SPEER: Let’s take up that point, Bethany, because, as you say, the strategy and tactics that the Chinese Communist Party has used aren’t limited narrowly to economic tools. We’re speaking in the middle of an election interference scandal in Canada in which Chinese officials are accused of trying to target and influence members of the Chinese diaspora community, as well as using disinformation campaigns to nudge Canadian political outcomes in a direction favourable to Beijing. Do you want to talk about how China’s approach has extended beyond economics to politics, corporate espionage, and even its diaspora communities across advanced countries?

BETHANY ALLEN: Absolutely. So economic statecraft is one tool that China uses for political influence, and I would say probably its most powerful one, but it has a whole range of others that you’ve touched upon. One of them is, as you said, it’s increasing the use of online disinformation campaigns. I think after 2016 Russian interference in the U.S. election, Beijing saw how effective that can be. We have seen them very clearly studying Russia’s playbook for that and deploying it beyond their own borders around the rest of the world.

We’ve seen—now, this is longstanding, so the Chinese government’s, I would say, abuse of the Chinese diaspora, that started on in a very clear and intense way after 1989 when there was a mass exodus of young people from China. The Chinese government was very afraid that these people would go into places around the world and form their own pro-democracy or democracy and exile communities.

Why is the Chinese government afraid of that? Because that’s how the Qing dynasty fell. You had Sun Yat-sen, who was in exile, and lots of other important people. In fact, that’s even how the Chinese Communist Party got strong when it was not welcome in its early years in China. It also had a diaspora where these Chinese communist ideas were developed and strengthened. They brought them later back to China. So the Chinese Communist Party itself knows how powerful these pro-democracy communities abroad can be. They’re very afraid of them. So in the past 30 years, we’ve seen the Chinese government’s very successful attempts to harass, surveil, and co-opt organizations that are in Chinese diaspora communities to, at the very least, ensure that they are not engaging in anti-aging organizing. And at best, from Beijing’s perspective, that they can be used as ways to proactively amplify pro-Beijing narratives.

Now, I want to be super clear here that most Chinese people outside of China are not involved in this. This is a minority of people, and it’s also I want to make super clear that some of the most powerful pro-Beijing influencers outside of China are not Chinese. It’s more often a case of elite co-optation of elites in any country of any ethnicity. So there’s no reason to focus exclusively on these people. But that aside, this is something that’s real, and what I think the best thing that democratic governments can do to help prevent this is not so much to place really intense controls or surveillance on Chinese diaspora communities; that would be the worst thing. But rather to try to sever Beijing’s control of them, to try to free them, and to try to give them a free space for true free speech and true free organizing, meaning that Beijing itself gets punished for this very abusive behaviour.

I’ve been watching this influence scandal unfold in Canada, and it just shows how deeply disturbing and disruptive this can be to democracies because it causes democracies to almost go to war within themselves, fighting over these issues of, “Is this racism? Is this interference?” It’s very disruptive.

SEAN SPEER: Yes. Yeah, well said, Bethany. And of course, as you say, oftentimes the people who face the most threats, harassment and, in some cases, even violence, particularly family members back home, are Chinese-Canadians or Chinese-Americans, or whomever, who, as a result, aren’t realizing that the freedoms and benefits of our country.

BETHANY ALLEN: If I can just talk a little bit more about this point, I want to add two more points.

SEAN SPEER: Please, please.

BETHANY ALLEN: There’s an amazing Canadian journalist named Joanna Chiu. I’m sure you’re familiar with her work, who has been very outspoken about this for years, saying that China’s—sorry, saying that Canada’s security services have ignored Chinese Canadians when they have said, “Please help us; we are facing pressure from China that we do not want. Please help us.” They said they’ve been ignored.

Now, there’s a positive development in the U.S. in the past few years, which is that the Department of Justice has a new office of transnational repression, a new focus on transnational repression. And they have been doing what many Chinese-Americans have been wanting for a long time, which is actually going and investigating these incidences where people are themselves being harassed, surveilled, and they have said, “Please help us.” And so there have been a growing number of indictments by the Department of Justice. In fact, there’s an ongoing trial right now where a Chinese woman and her family, there were Chinese government agents that flew in under the radar illegally and harassed them on New York soil, including an American former police officer, a guy named Michael McMahon, who had allegedly participated in this and he’s on trial right now.

The more transparency we can have about how do Chinese government agents do this—who are they harassing? And then punishing them for that, I think, is a great, great way to go because it’s drawing a clear distinction between the victims of this, who are so often members of the diaspora, and pointing a clear finger at Beijing.

SEAN SPEER: We’re having this conversation a few weeks after G7 leaders committed themselves to protecting against the weaponization of the economy. How might that manifest itself? What are the opportunities and risks here? Do you think decoupling in certain economic areas is possible and even desirable?

BETHANY ALLEN: So there’s a number of terms that are getting tossed around here. “Selective decoupling” is one that we’ve seen. Europeans now are talking about “de-risking.” I would certainly not support total economic decoupling. It’s not possible, in fact, and it would be incredibly disruptive in any scenario other than full-out war, which obviously would be the worst-case scenario of all. Selective decoupling or de-risking, I think, is useful in very targeted ways. We’ve seen that in a very targeted way with 5G, which is keeping Huawei and ZTE out of 5G networks in democratic nations. I think that’s a great example of very targeted de-risking, making sure that Chinese government-linked companies don’t have access, aren’t the ones building this critical information infrastructure.

In my book, what I propose is something that I call “democratic economic statecraft” as the best way to push back against authoritarian economic statecraft. I’ll distinguish that from what we have seen so far, which is a focus on national security, which is fine and important. We’re seeing a lot more use of, for example, the Department of Commerce’s entities list; lots now of Chinese companies and entities have been put on this list and that prohibits U.S. companies from transacting with them. It’s not a sanction, but it limits some of these economic interactions and some of these business deals. These kinds of mechanisms are very useful and help reduce the national security risks of dealing with some Chinese companies that don’t really have a choice. Now, under the Chinese government, Chinese companies are required by law to assist Chinese intelligence agencies, no matter what they ask. So it puts an inherent risk. So there’s this national security aspect of de-risking that I think is important.

What we have not seen or done though much at all is again this democratic economic statecraft. What is that? That is re-linking markets and economic ties with liberal democratic principles of free speech, free organization, and so on, in order to push back against China’s extraterritorial censorship and control of behaviour through its weaponization of its economy. So what would that look like? Well, let me give you an example. One thing that could possibly be done would be to put Chinese companies that actively implement Chinese government censorship onto the entities list and prohibit transactions between them and U.S. companies. So that would help provide U.S. companies with an incentive to not also implement Chinese government censorship because they don’t have that, they would have fewer of these joint ventures in which they would feel compelled to do so. So we have not done this.

Here’s what everyone will think as soon as I say this: Either one, that’s not possible, or two, that’s not something the government can do. Of course, it’s something the government can do. And of course, it’s possible because the Chinese government is doing it already. They are doing their own version of this. They are already controlling the narrative space outside of China through blending their economy with these kinds of controls. If the U.S. government doesn’t do this, if European governments don’t do this, we are ceding this space to authoritarian economic statecraft. So what I really want people to start thinking about is the idea that, “Yes, this is something the government can and should do to push back against what the Chinese government has done with its own economy.” It’s not a perfect solution, and it’s hard, but it’s a beginning to push back against it.

SEAN SPEER: It prompts the question, Bethany, what’s stopping it? Is it ideology? Is it resistance from the Western business community? What explains the apprehension on the part of Western policymakers to insist that firms domiciled in our countries conform to small “l” liberal principles, not just when they’re operating here but when they’re operating elsewhere around the world?

BETHANY ALLEN: Well, I mean, the very first one would just be money. There’s a lot of money to be made in the Chinese market, and I think it’s actually a little bit funny that we have in for the past three years talking about the dangers of decoupling when decoupling is just not happening. If you look at FDI and even in the heights of the pandemic, when it seemed as though there was so much political rhetoric in the U.S. about separating from China’s economy during the Trump Administration. So much rhetoric. It seemed as though our economies were just rapidly decoupling.

In reality, in 2021, U.S. FDI in China went up. We’re just not decoupling, right? So the idea that we’re already doing that is just not there. So what’s stopping it? So there’s so much money to be made, even with all that political pressure, even with the extremes now we’re seeing in the Chinese economy with scrutiny and investigations of due diligence firms of other companies, the pressure to comply and participate in Chinese security measures, we’re still seeing companies just—there’s nothing in the world like the shine of riches. People want that.

So that’s stopping people because the first question is: Well, don’t all Chinese companies comply with Chinese government censorship? And the answer is, “Yes, no, they do.” Which gets to my second point, which is that we are very late on this. It would’ve been much, much, much easier to try to create and implement a democratic economic statecraft in 2005 or in 1995, when these laws and systems had not yet been built up in China and when Chinese companies were desperate. And when the Chinese government was desperate for joint ventures and ties with the U.S. If we had been able to go in first and establish this as the international norm, it would’ve been much, much easier. However, it is never too late. It is never too late to start. It is never too late to give up. And as climate scientists say when they’re asked, “Is it too late to fight climate change?” It is never too late to stop punching yourself in the face. It’s important to try. So I think those are the two main obstacles. It’s too late or it’s impossible.

The third one is, again, this neoliberal reflex we have of, “That’s not something the government can do. That’s not something the government can do,” when, in fact, of course, it is.

SEAN SPEER: Well, I should just say, for what it’s worth, I think your case is overwhelmingly persuasive. It seems to me that at minimum, Western governments ought to say to Western companies, that if they want to participate in public procurement in those countries, they have to conform, as you say, to small “l” liberal principles and values, not just within our borders but when they’re operating abroad. And if not, that’s, I suppose, fine as a choice, but the national security risks and consequences associated with that means that they can’t then participate in government procurement. That ought to be, it seems to me, the lowest hanging fruit here.

BETHANY ALLEN: Exactly. That’s exactly the right phrase: that the lowest hanging fruit. We’re not even doing that. I want to emphasize here that free speech is an internationally protected human right. And we view censorship—and of course, I’m talking about far more than censorship. But again, just this ability to be able to say the word Uyghur or Xinjiang—this very, very basic thing—that’s an international human right protected by human rights conventions. And we are in the U.S. seeing a greater move towards using our economic power to try to protect human rights or at least punish human rights violators. We’ve seen that with the implementation of the Global Magnitsky Act in the U.S., which now makes it easier to implement sanctions on human rights violators. The best move I’ve seen towards this is the Uyghur Forced Labour Prevention Act which if you had told me three years ago that we would get an act like that, I just would not have believed you. It bans all products from Xinjiang from being imported into the U.S. until they can prove beyond a shadow of a doubt that they’re not tainted by forced labour. If we can do something like that with forced labour, can’t we do something like that that gets at this issue of China’s attempt to control behaviour beyond its borders? And I think the answer is yes.

SEAN SPEER: One thing, Bethany, that’s hard for people in the West to understand is if the Chinese government’s vision is shared by the Chinese population. What’s your sense? How powerful should we understand the place of nationalism in the Chinese psyche, including among ordinary citizens?

BETHANY ALLEN: That is a great question. And I will say that I have been banned from China for a number of years now. So I haven’t been to China since 2016, however, I read about it a lot. I do speak to people there. I speak to many people who go there often. And so my sense of it is nationalism in China is a genuine and grassroots sentiment that has also been purposefully fanned by the Chinese government to help it accomplish its goals. This is another quite interesting element, in fact, of its economic statecraft that it uses.

So the Chinese government can help fan these consumer boycotts of foreign companies and even Chinese celebrities who don’t tow the party line, and it puts economic pressure on them, but it’s a lever that the government can to some extent control. So what is the effect of that, and how genuine is that? I’d say it’s really important to understand, and I did live in China for four years, and I went there on back and forth for a period of about 12 years. Many Chinese people are supportive to some extent of the Chinese Communist Party and of Xi Jinping because what has happened under the rule of the Chinese Communist Party in the past 35 or 40 years , China’s economy has really grown dramatically. It is obvious that the standard of living of people in China, especially in cities, has risen dramatically. That is simply a fact, and that is something that the Chinese Communist Party has made possible.

So many people have trusted the party and have trusted Xi Jinping to continue to guide the economy in a direction that improves people’s lives. And that Xi Jinping can continue to enforce on the world stage the fact that China is a country that needs to be respected and that deserves a degree of deference. I would say that that sentiment peaked in the middle of the COVID pandemic, which is why my book uses the pandemic as a frame. Because it seemed like when the U.S. and Europe were just totally flailing, hundreds of thousands of people were dying in the U.S., our political system entered its most severe crisis in decades, if not centuries. We had an actual attempted coup. I was in D.C. for that. That was related to some of this chaos that was unleashed by the pandemic. The West really looked like we were in some serious trouble. And it was clear that Xi Jinping took this as a moment for—the Chinese moment had come. Chinese people, many of them in China, were living the best lives of anyone in the world because of China’s zero COVID strategy, which was made possible by the extreme controls that the Chinese Communist Party had been able to implement because of its authoritarian, even totalitarian nature. They were able to not die.

I mean, what’s the first right in the U.S.? Life, liberty, and the pursuit of happiness—life. And people in China were not dying; that’s pretty great. But not only that, they were able to live without masks. They were able to go and have parties. They were able to lead normal lives while contagion was wreaking havoc on Western democratic societies; not every one of them, but a lot of them. That was the peak. That was when Chinese people feel like, “We did it; we created a better system.”

The story didn’t end there, as we know. Because of China’s political system and because Xi Jinping had wed his political legitimacy to an extent to the zero COVID policy and because the Chinese government refused to allow the use of Western-made mRNA vaccines, which were more effective against some of these newer and more transmissive variants than Chinese-made vaccines, which were using an older technology. The Chinese population remained undervaccinated, and their vaccines were less effective. And so it boxed the Chinese government into this COVID strategy that got less and less and less realistic and more and more and more constrictive, especially with the Delta and Omicron variants.

So we saw these incredibly extreme and difficult, and even tragic scenarios unfolding in China. We saw the six-week long lockdown in Shanghai, where people in one of the world’s richest and most advanced, and most prosperous cities were in danger of starving, where neighbours in these fancy high rises were trading potatoes for rice and things like that, worrying about what they were going to eat every day. It took China from this height, the height of its power, the height of its rhetorical power, the height of its soft power domestically, down to this depth, this great low point, where the world viewed Chinese people with this sense of pity again. And that, I think it’s very important to keep in mind that for many Chinese people now, that was a shock, especially in places like Shanghai and Beijing, where rich Chinese people were used to getting the best of this political model. For the first time, many of them got the worst of it, and they realized they were totally trapped. There was no way out. That they were locked into this total surveillance system, and they had no power and no control and no say over their lives. That was a real shock.

I’ve had friends now who’ve been able to go back to Shanghai. Well, I have friends from Shanghai who left and felt months of trauma. I have friends who’ve been back to Shanghai, and they said, “Even though life there looks fancy and looks convenient, that people walk around there with a sense of trauma that is palpable.” And that really, I would say it, if you could put it this way, disempowered the trust that people felt in the party. I think that will take years to recover from.

SEAN SPEER: I want to ask a follow-up question about the COVID-19 pandemic and the bigger question it raises about China’s influence with global institutions like the UN, WTO, and, of course, the World Health Organization. How has the Chinese Communist Party pursued a strategy to influence these organizations, and what are the implications?

BETHANY ALLEN: Yeah, I think at a most fundamental level, the Chinese government has taken advantage of Western disinterest in these organizations. A kind of atrophy. These systems and organizations originated in the Bretton Woods system, which came out of World War II, in this sense that we need to have a better global system to make sure that there can’t be war again, a way to ensure common prosperity and the promotion of liberal values. And I think maybe starting in the ’90s and certainly by the 2000s, I think there was a sense that these organizations were out of date; they weren’t necessary anymore—

SEAN SPEER: Expensive.

BETHANY ALLEN: —expensive. I mean, see how the U.S. has defunded the UN and just a belief—and I think, again, you could look to this sense of neoliberalism is, “We just don’t want to fund things like this anymore. We don’t think they’re necessary. We think markets are all that we need.”

The Chinese government took advantage of that to become very, very involved on a very, very micro-detailed level. The UN is a great example of that. If you know anything about the UN, you know that it’s like government bureaucracy at its worst, where there’s a bazillion alphabet agencies. I mean, there are dozens, hundreds, thousands of offices that have these acronyms for their names that do things. I mean, talk about a lack of interest in this in the U.S. I mean, nobody writes interesting articles about that.

So the Chinese government took advantage of that to start making a huge effort to get their people in these offices, to staff up these offices. They focused that in certain parts of the UN, including human rights mechanisms and also ECOSOC, so that’s economy in society, anything having to do with sustainable development.

Now, I want to be clear that it’s totally great and fine for Chinese nationals to work at the UN, but the problem here is that the Chinese government views its nationals working at the UN in a different way to some extent than many other nations do. When Americans work at the UN in these bureaucratic positions, when democratic people from other democracies have their people there, they’re not viewed as extensions of the state. They’re viewed as just individuals who are working there who happen to be Americans, right? But that’s not how the Chinese government uses it. They view these people as an extension of the party-state to some extent—not always—but as a lever that can be used, that these people should be pursuing Chinese government goals.

And so what we’ve seen is just from a bureaucratic sense, it’s much easier for Chinese government prerogatives, Chinese government supportive initiatives or values, to get passed, some resolutions to make it through the bureaucracy, to come to consensus about this is what we want. For example, China’s Belt and Road Initiative, which is a huge, more traditional form of economic statecraft using development loans to try to pretty influence in developing nations. That’s gotten the stamp of approval from the UN. It’s viewed as a positive way to achieve the UN Sustainable Development Goals, this kind of stuff.

And also in human rights organizations, the same story. The thing about is that it’s not one thing. You can’t just adopt one measure to try to fix it. You can’t because it’s such a multifaceted thing. I’ll give you just one of many examples of how human rights mechanisms in the UN have been basically broken. It’s hard for them to accomplish their foundational purpose anymore. When there are hearings, in Geneva or in New York, on an issue related to human rights in China, there are now many, many UN-accredited organizations, nonprofit organizations—China has something called a GONGO, a government-organized non-governmental organization. What is that? That now have official ECOSOC status or have a—they’re accredited through the UN, which means they have the right to go and attend these things. So what happens is people from these GONGOs, these Chinese government-organized NGOs, will mass register for these hearings. So the audience is full of people who will disrupt it, who, when some Chinese dissident or some Uyghur is speaking, all these people will stand up and disrupt and say, “I disagree, you’re wrong, blah, blah, blah.” And it’s hard for even adhering to happen. This is just one of many examples.

SEAN SPEER: I’d be remiss, especially speaking to you from Taiwan, if I didn’t ask about Chinese intentions vis-à-vis Taiwan. What signs should we be looking for to get a better sense of the state of play and whether a movement of aggression might be anticipated?

BETHANY ALLEN: I think it’s useful to view the Chinese government’s very clearly stated desire to annex Taiwan in one way or another as through the lens of “slicing the salami.” That’s a metaphor that’s been used more often with the South China Sea, that they do one little thing and one little thing. Each thing is, it’s just it’s not a big enough deal for any country to say, “This is worth dying over or going to war over.” And so, in the end, the Chinese government gets what it wants.

In the South China Sea that was building these weaponized artificial islands so that they can establish air access denial of the South China Sea, which they have perhaps established. With Taiwan, it’s the same. We have been seeing constant aggression from China almost every day.

I’m in a Line group— it’s a chat app messaging group for the Ministry of Defence. They send out daily updates about the number of PLA aircraft and vessels that crossed the median line in the Taiwan Strait, which for a long time, for years, was a de facto dividing line between where the Taiwanese Navy sailed and where the Chinese Navy sailed. Almost every day now since last year, since Nancy Pelosi’s visit, the Chinese military has crossed the median line, sometimes with dozens of vessels. A few weeks ago, they flew a drone, a weapons-capable drone, all the way around Taiwan. Last year, after Nancy Pelosi came, the Chinese government held the largest military exercises they had in decades. I was here for that. They sent a missile right over Taipei into the waters to the east of Taiwan. I was here for that.

So there’s constant aggression, and that aggression is getting worse and worse. And so far the Chinese government has not suffered any ill effects from that. We also see a form of diplomatic, aggression’s not the right word, but again, this constant slicing of the salami. So back a number of years ago, let’s say early 2010s, the Taiwanese government still had more than 20 remaining diplomatic partners. That’s countries that formally have diplomatic relations with Taiwan. Now, it’s down to about 13, and they keep slicing them off. What will happen when the Taiwanese government has zero left? What will that mean for Taiwan’s status? Well, it’s not very clear.

But if your question is: Is there going to be a moment where we see Chinese government and the Chinese military forces accumulating across the Strait or in Fujian Province? Is there going to be a moment like we had with Russia where the U.S. government is trying to be like, “Okay, guys, our intelligence is showing that there’s going to be an invasion?” I have no idea. What I can say is that these tactics I talk about in my book and that you have experienced now in Canada of covert political interference or of economic coercion, Taiwan is ground zero for that. Taiwan is where those methods were tried out for the first time and where they had been used relentlessly for decades. Somehow, almost, I would say magically, the Taiwanese government has stood up under that pressure. How long can they continue to do that? I don’t know.

SEAN SPEER: What does this all mean for Western countries and Western businesses? If you were advising Canadian business leaders at this point, Bethany, how should they be thinking about engaging the Chinese market? Would you discourage it, or is it contingent? How should we think about that question?

BETHANY ALLEN: I would do two things, and this is happening. This really started happening a couple of years ago. When I first started writing my book, there was much less. The U.S. had not started really implementing an industrial policy. There wasn’t much in the way of a national security de-risking. Things changed a lot as I was writing this book. That’s definitely a positive development.

I would say that Western companies need to focus on what is now called “friend-shoring”, “reshoring,” or what is essentially moving or diversifying supply chains. This is something that really the Biden Administration is now very wholeheartedly promoting, and the Trump Administration promoted as well. That means not removing, not getting rid of all your operations in China, but moving some of them to other countries, especially friends and partners, democratic nations that share liberal values, that share U.S. values, and are less likely to fall under political pressure from China.

So friend-shoring, diversifying in that way. That’s a great thing to do. I think it’s a good compromise position because it’s not realistic to ask all companies to leave China.

The other thing that does happen, and I think needs to happen more is that I think that U.S. companies and the U.S. government need to work more closely together. That the U.S. government needs to more proactively act not on behalf of but act in support of U.S. companies. A phenomenon that I write about in my book is that what neoliberalism or neoliberal structures set us all up for is a situation in which an individual U.S. company or an individual Western company is up against the entire Chinese Communist Party, the entire Chinese government, because the Chinese government doesn’t implement neoliberalism.

Of course not. They’re actually going towards the literal opposite of that, which is this, what some people call “party-state capitalism.” It’s not a collectivized economy. There is an element of capitalism there, but it’s where the party-state has the ability at crucial moments to reach in and direct economic activities in a certain political direction to achieve political outcomes. So a U.S. company is up against the entire Chinese party-state. Who’s going to win every single time? The Chinese party-state.

The U.S. government needs to have the back of U.S. companies, and there’s a number of mechanisms by which to do that. So I think we need to see more of that so that the Chinese government knows that if they’re requiring, for example, U.S. companies to force technology transfer or they are requiring U.S. companies in the U.S. to hand over sensitive data, that the U.S. government is there with a law or a regulation or something like this that’s already been spoken, saying, “We will not allow this. This goes against U.S. law.” That’s a form of—it doesn’t just protect U.S. companies if these threats or demands have already been made. It can serve as a form of deterrence that can help the Chinese government change its behaviour a little bit. That’s the ideal.

SEAN SPEER: Let me put a penultimate question to you. There are a lot of questions these days: if China is on the rise or if it’s reached something of its apogee? What future do you envision for the country?

BETHANY ALLEN: I would be totally shocked if China has yet reached its apogee. Just look at the U.S.—how long have we been talking about U.S. decline? People were talking about U.S. decline in the 1970s. I think even in the 1960s. Has the U.S. declined? I mean, I don’t know. We’re still the world’s most powerful superpower and still have the world’s largest economy for decades after this became popular to talk about.

I think it is way too early to be talking about that. Is the Chinese government facing some headwinds in some areas? Yes. Have they demonstrated, have Chinese government officials and bureaucrats, and the party demonstrated, time and time again that they are adept at navigating through these difficult times and coming out on the other side in a strong position? Yes.

So whether that’s—is China going to fall into the middle-income trap that a lot of developing countries have? Well, the Chinese government is very, very, very proactively trying not to. I think that we have seen significant signs in the Chinese economy that they’re navigating out of that. So I would be surprised if they do fall into that trap.

Are falling birth rates, is that going to push China into an economic decline? Oh, maybe in about 40 years. What’s going to happen in those intervening 40 years? That’s still a lot of time for the Chinese government to achieve whatever objectives it wants on the world stage. Sometimes I hear people talk about that. It’s like, “Oh, well, we’re done. We’re good. We don’t have to worry anymore. This year, the Chinese birth rate started falling for the first time ever.” I mean, that’s ridiculous, guys. That’s just totally absurd.

From what I have seen over and over and over again is that Western observers underestimate the ability of Chinese policymakers and leaders to successfully navigate through these challenges. I think that that is because of our lack of imagination because they have not gone the route that the West has, both in terms of, for example, in the 1990s, pushing “shock therapy” onto former communist states. The Chinese government did not use shock therapy, and then they turned out much better for it. They also never implemented neoliberalism, despite basically told to by every single Western economist reformer for the past 40 years. And they turned out better for it. They just have not, in many ways, wholeheartedly adopted the thinking that many Western economists have. So I would say the Chinese economy is going to continue growing at a reasonable rate, and I think that they’re going to continue to be able to successfully navigate these challenges.

SEAN SPEER: Final question. Do you want to go back, and do you think you will?

BETHANY ALLEN: I would love to go back. I miss China so much. I made amazing friends there. It is important to make a distinction between the Chinese people and their authoritarian government, and how can you generalize about 1.4 billion people? But as with people anywhere, there are so many who are funny and smart and kind, and all they want is to create a good world and a good life for their families.

I love Chinese culture and history. My original plan for life was to get a PhD in early modern Chinese history. It’s an incredible place. It’s an innovative place.

The world needs China. The world needs the Chinese people for the challenges that all of us are facing. Climate change, so many issues in the world. We need them, and they need us. I really hope that we can come to a place in the world where this talk of economic statecraft, de-risking, and decoupling becomes much less necessary.

SEAN SPEER: Well, listeners want to understand these issues. Including Chinese history, they ought to read Beijing Rules: How China Weaponized Its Economy to Confront the World. Bethany Allen, thank you so much for joining us at Hub Dialogues.

BETHANY ALLEN: Thank you for having me.