Louis Kuijs: The Contradictions in China's Economic and Foreign Policies

Transcript

Rob Johnson:

(Singing) Welcome to Economics & Beyond I’m Rob Johnson, President of the Institute for New Economic Thinking. (Singing) I’m here’s today with an old friend, Louis Kuijs the head of Asian Economics at Oxford Economics. He’s based in Hong Kong, he spent many years working with the World Bank and the IMF, or essentially between 1997 and 2011. He’s someone in many contexts that I’ve relied on for insight into what’s happening in China and in the Asian region. He’s an outstanding economist, he was also a fellow at The Fung Global Institute as many may recall around the time that INET did a series of meetings in conjunction with them. And actually co-hosted a plenary in Hong Kong. Louis, thanks for joining me today.

Louis Kuijs:

Pleasure Rob.

Rob Johnson:

So right now, every place I go, people are very anxious or concerned and curious about the role of China. In the light of the pandemic, in the light of recent tensions in the international negotiations. Tell me a little bit, what are you seeing? What’s at the cutting edge of your concern as it pertains to China?

Louis Kuijs:

Right. So maybe let’s first spend a little bit of time on how we think things in China have evolved since they plunged into a crisis early this year, as a result of this COVID 19 virus and the pandemic. So China was of course, the first country to be hit by this, it also was the first country that recovered and that is now on a path to economic recovery. I think that within China there was a time February, March where everybody, both government also the public business was extremely concerned about whether we are even able to overcome this crisis. People in the beginning also felt very much that local governments had made very big mistakes. Also, had been slow, had been covering up in the initial phase of it.

Louis Kuijs:

So there was a lot of soul searching, a lot of concern about how things were going within China. And that was, of course, the time that the rest of the world was not really even… Very much on the ball on this issue. It was very much a China issue at that time, then we started to see already towards the end of February, into March a phase where the Chinese government, and I think also Chinese people started to consider, to feel or to know that they were getting in control of that virus. They were starting to make progress in containing it, even though at that time, the rest of the world didn’t really buy that very much. I remember many conversations that I had, where from our point of view we were making that point, China is starting to be able to contain this virus.

Louis Kuijs:

And that is also why they are switching their policy stance. In the beginning, it was all about… It was completely 100% about containing that virus. They engaged in what I still think must be the world’s largest lockdown ever, where they pretty much locked down the economy of a province Hubei, province of almost 60 million people. But as I mentioned, as they themselves started to feel that they were starting to get a handle on that COVID 19 situation. And they were starting to put more emphasis on the economy. That was a time that was for me as an economist, very important. I needed to signal that to the outside world, but I noticed a lot of pushback at that time, because it was initially met with a lot of skepticism because a lot of things that come out of China unfortunately are facing skepticism, also information, right?

Louis Kuijs:

And so, it took a while for the rest of the world to actually buy into that. And in the beginning, a lot of the questions that we got were really impregnated with this skepticism about the data must be wrong and things like that. I think it took the rest of the world sometime to realize that there are things that China’s government can do that would be unacceptable in most other countries, like pretty much locking up people in their compound, telling them that they cannot leave even in quite extraordinary circumstances. Mass testing, forcing people to use codes on their apps, which basically give them a green light or a yellow light in terms of are they allowed to enter a building or take a train.

Louis Kuijs:

So a lot of what we would call invasions in the privacy and inhabitations of personal freedoms that I think China’s population is more used and somehow accept more that allowed them to get… As I mentioned, to get a handle on this crisis, even though this is still overall, a fairly poor country with a pretty creaky health system. And I think that has been one of the surprising aspects of this pandemic. China is not the only country there have been others like Vietnam, people have also been very surprised how well Vietnam has been handling it, but things work differently in those systems.

Louis Kuijs:

Those systems where the role of the individual versus the role of the whole of the society is different. And I think because of the different role of the government, also, they started to get a handle and they started to move towards getting the economy going. And then even as they start to get the economy going, we noticed that there were aspects about how China’s government operates and how China’s model operates. That would be hard to replicate in other economies.

Louis Kuijs:

And I want to highlight two. One is that, February, March, there was a lot of anxiety within China and also globally about we’re all reliant on this country for our stuff. It seems that their factories are not working, is there going to be a huge supply chain crisis? So the government and China’s companies working together basically had a campaign on defending our role in global supply chains, which meant that governments went out of their way… Local government, central government went out of their way to basically mobilize resources like up to actually busing people, migrants back to their factories, lowering taxes, making sure that products can move from the factory to the port in order to ship them to other countries, many ways in which the government in that aspect was helping the economy that we just wouldn’t see so quickly in other countries.

Louis Kuijs:

And that is one important aspect. There is then of course, another aspect of government policy in China that we just don’t see so soon and so fast in other countries, and that is how they decided… And this is a difference between the policy response, say between what we saw in the West and in China. In China, they tend to be very frugal in terms of welfare policies and so that whole idea of subsidizing households while they are idle, didn’t sit very well in China’s mindset. But what did sit very well in the mindset was to boost infrastructure investment, to get the property market going again. So that age old recipe of a investment led boom or an investment led stimulus package was rolled out. And that seems to have helped quite a bit in getting the economy going again.

Louis Kuijs:

But as I said, there are a lot of people also domestically who say, this is all nice that we have our factories running and that we have massive investment, but isn’t this in contradiction to our aim to rebalance the pattern of growth towards a larger role for consumption and to have a larger role for the service sectors? Shouldn’t we use a little bit? So there are quite a few people within China who say we should have used, and we still should use some of those measures that Western countries have used in terms of helping especially people at the lower end of the income ladder. So I think China’s approach definitely has had pluses in terms of getting the economy going, but there are also a lot of questions being asked as we are still in that phase of recovery towards normality.

Rob Johnson:

And so, when you look at the intersection between… Let’s just start with China and the United States. How do you see where China’s going? I mean, I remember clearly even around places like the council and foreign relations, which have a very… What I’ll call multilateral spirit. When China 2025 came out to put it into economic parlance, leaders at the CFR were saying, “Okay, so what’s America’s comparative advantage going to be?”

Louis Kuijs:

Yeah.

Rob Johnson:

They had no sense. In other words, it looked as if China could be almost a world economy at scale within itself, just because of its sheer size that it would move to the higher value added sectors and play a very different role than it had at the inception of Chinese development in the phase perhaps with… That started with [inaudible 00:12:06]. But you can really see now that the world is balking, there’s a lot of distress about diffusion of intellectual property, there’s a lot of distress about what you might call the cyber platforms for commerce head, how that aggregated information pertains to national security. So as you look on the horizon… Like I said, there’s also a role for Europe here, India and others. How are you seeing which you might call, the sources of turbulence and the resolution to the role of China in a world economy?

Louis Kuijs:

Yeah. So I think… There are a lot of things you can say about Xi Jinping, but you cannot accuse him of beating around the bush. I think, if you look at the actual implementation and technicality of policies, I don’t think that he has made very large changes in the economic realm. I’m not talking here about politics and there are other aspects where he has put China on a different [inaudible 00:13:34]. I think in terms of the economy, economic reforms, I don’t think that he necessarily has put China on a different course, but he wants much sharper language and much sharper messages compared to his predecessors. And what he did when he took over… I honestly, I don’t think that it was anything drastically different from the course that China was on. But he said two things, there are lots of issues with regard to the domestic economy, but since we look here at the international aspect, he said that…

Louis Kuijs:

Actually, I do want to just mention one thing on the domestic front, the reform blueprint that was released in 2013, basically talked about, there are a lot of market oriented reforms that we need to take. And these are very much Washington consensus kind of reforms and here’s the snag, we do this to preserve, to strengthen our existing system of socialism with Chinese characteristic. And that of course is a big sentence, people might wonder what does that mean? Or if you ask Chinese policy makers, what does socialism with Chinese characteristic mean? It means an economic system where you have a large role of state owned enterprises. You have a large role… A mandate for the government to intervene in various ways, like for instance, in terms of research. So thinking about the Made in China 2025, there is quite a large role for the government in leading and steering research over there.

Louis Kuijs:

And thirdly, very importantly, that was already there, a very strong role for the party that basically every aspect of the economy and of the country is subjugated to the party. That was on the domestic front which in terms of what it meant on the economic front then did not really lead to surprises. For instance, I was not very surprised by what we have seen in the last eight years or so, because they had already told us what they wanted to do. Market reform’s? Fine, opening up? Fine, but at the end of the day, we the party want to remain in absolute control. And that is of course, where you have the link with the politics and the political system.

Louis Kuijs:

Now, what this meant for China’s relations with the rest of the world it’s quite important because when Xi Jinping goes out to the rest of the world, or when he sends one of his colleagues out to the rest of the world, they would say two things. And the first thing, which has been a mainstay of the Chinese message, and I personally believe it is a genuine one that is that China is continuing to be interested in integrating with the rest of the world. China knows that it has been a beneficiary of globalization. It wants to see globalization continue, it also wants to be seen as a responsible stakeholder in the international multi-literal system.

Louis Kuijs:

So I think that is in principle, a genuine message, a genuine principle of China’s policies. However, there is a bit of a problem because the second thing that Xi Jinping and his colleagues then tell the rest of the world. Is that we want to maintain our existing system, which is very different from the Western system and which is where we as a government, give ourselves the mandate to intervene heavily in the economy. The SOEs will remain strong and dominant in various sectors. And of course, this creates tension as you think about China’s relations with the rest of the world. The reason why it creates tension is that if you think about why has trade liberalization worked over the last… What is it? Seven decades or so. It is because when two countries open up their markets to each other, as long as there is a level playing field, and as long as both countries trust that the other government maintains a level playing field, and that there is not a huge amount of interaction of collusion between that other countries companies and its government, then I’m okay with opening up my market.

Louis Kuijs:

But China has that genuine wish to integrate with the rest of the world, but it wants to do so with a model that I personally would say, it’s problematic in this aspect. And so, how do we trust China to stick to rules about competitiveness and about level playing field? And there is this OECD term of competitive neutrality. How do we trust that China will stick to those principles if we know that China’s government and its state owned companies have that special role? I think that is a big challenge for many of China’s economic partners. It is a challenge in Europe, it is a challenge in India.

Louis Kuijs:

I think, of course, if you think about China’s relations with the US, it goes one step further, because I would say most US people, definitely it’s government has that national security aspect in mind, more so than say the Europeans. The Europeans are always complaining and making a point of, “How can we have reciprocity in terms of market access? How can we have a level playing field for our companies?” But in the US of course, we have that additional aspect of the national security angle, which then leads to many additional areas of tension of friction and of US policies to be tough on China.

Louis Kuijs:

And maybe one last thing, Rob, you mentioned this Made in China 2025 and what it would mean for other countries. I think sometimes maybe us foreigners think a little too highly of what China can pull off. I know that the Made in China 2025 program or initiative, it looks intimidating if you see targets that are being set in terms of how much China wants to produce in terms of covering its own market, global markets, things like that. But we need to recognize that China has some nice internet companies. China has a very impressive manufacturing sector for a developing country. But if you look at the sectors that really matter like high end semiconductors, aerospace, even something like chemicals China is quite far removed still from the frontier.

Louis Kuijs:

And so, I would say we need to not get too worried about China taking over the world and producing everything because they are not there in many areas, in many sectors. So I think China is an ambitious country, it’s a big country and these ambitions will always lead to ambitious targets. And China is also quite good in setting long term targets. And so, that’s an aspect of policy making that has helped, it has served them well. And I think they will continue to do that, but we also shouldn’t always get too worried because many of the targets are not met. And that will continue to be the case.

Rob Johnson:

One of the things that has surprised me, in echo some of what you’re talking about. Is that in the United States, there was this sense that as China rises, the world will gravitate away from the United States and toward them. But in the period, I would say leading up to, and following the onset of the pandemic, it almost feels like the intensity and clarity of Xi Jinping’s declaration and purpose, and which you might call the nationalistic sensibility of it has pushed Europe, India, Australia, and the United States somewhat closer together and further away from China. Is that a… How do I say? What is your sense? Is that a false notion? Or do you sense that is part of the dynamic currently?

Louis Kuijs:

No, I think that’s absolutely right. I agree with that, I have observed that. And this is really like… I talked about it before, right? And more in the economic realm, this is really something where… Xi Jinping he puts things in a sharper way as you said, he has more clarity. He’s clearer. He puts things in more [inaudible 00:24:11]. And of course, I think there is that… I mean, I know from talking to US diplomats, I do know that the domestic situation in terms of suppressing the freedom of speech and suppressing dissidents, I know that domestic, these domestic aspects also influenced the way that foreigners think about China. And indeed, putting in sharper [inaudible 00:24:45] by China itself of the model that it is trying to achieve combined with these domestic issues in terms of suppression. I think, has made the rest of the world more concerned than would then would’ve been the case if say his predecessor Hu Jintao had stayed for another eight years.

Louis Kuijs:

Personally, I think that in substance, there is a huge amount of overlap between how Europeans think about this and how Americans think about that. If the US government had chosen a more multilateral approach to its dealing with China, than the Trump government had decided to do. I think there would have been by now quite a bit more obvious international Alliance. I wouldn’t call it an anti-China Alliance, but at least a club of countries that would engage with China and would talk with China, but would have something to say about what are the international rules of engagement that we really want to see from everybody so that we can continue with that evolution of the international of the multilateral system, as opposed to this very bilateral agenda that the Trump administration has pushed for.

Louis Kuijs:

I do think that we will eventually see more of that multilateral approach. And I think at the end of the day… Personally, I think it would be good for everybody involved because it would… If you think about it, two big dogs trying to settle things and trying to arrange things can never really be very good for the rest of the world. It would be much better if we can set some clear multilateral understandings and it’s all about these principles… If you think about in the economy, it’s about these principles like competitive neutrality, leveling the playing field, you cannot really expect us to open our borders to your companies if we know that these companies are highly prioritized and subsidized and helped by your banks, by your governments. And so, these are in principle, quite very understandable principles that would have a higher likelihood of making a point of actually being effective.

Louis Kuijs:

If they were to be told by a large Alliance of countries rather than just one country. And again, I want to emphasize this does not have to be an anti-China Alliance, but it would just be a large group of countries that repeat and emphasize what are the international economic rules of engagement that allow us to further integrate China in the global economy and in its financial system. So I do think indeed that this is an area where… I personally think it would be great if China’s own leaders could recognize this and could see the tension that there is between their genuine willingness to integrate in the rest of the world on the one hand, and their quite sharp emphasis on maintaining the existing model. I think if the rest of the world were to be able to say, “Look, we would love to do business with you, but you’ve got to change certain aspects of your model.” Then I think that would be a huge benefit for all of us in terms of moving further on this agenda of integrating

Rob Johnson:

Yeah. I’m reminded about five years ago, Orville Schell and John Delury, co-authored a book called Wealth and Power. And Orville and I made a video for the INET website around the release of the book. And one of the themes that was at the center of that book was that, with the history of the opium wars and the Japanese invasion in the… What you might call humiliation of what they called the middle kingdom, which was China.

Louis Kuijs:

Yeah.

Rob Johnson:

There was planted a seed of what I would call a national element of identity, a determination to regain preeminence and eradicate the echoes of that humiliation. Some hawkish American authors, like Michael Pillsbury, The Hundred-Year Marathon from 1949 to 2049 from the advent of Mao resonates with the same themes. But the other side of it that Orville and John put forward was that the United States has… Which I might call [inaudible 00:30:30] into its dignity, that it is the leader of the world. And it expects people to conform or embed themselves in a US led world, not to challenge the US, not to surpass it. And given the velocity of Chinese development, their movement into highly sophisticated technical areas, the amount of money they spend on research and development, which is even attracting Western scholars in the natural sciences and engineering to set up laboratories in China or outposts from American universities.

Louis Kuijs:

Yeah.

Rob Johnson:

The anxiety at the Pentagon, National Security Agency and other places that spawned years ago. What’s come to be called Silicon Valley and how Chinese participation in that region is potentially threatening national security. So you can sort of see this. Like you, I’m echoing your thought, the military world leader that’s very prideful about maintaining its leadership, intersecting with the wounded middle kingdom seeking to regain its prominence. And I just paint this picture because that energy probably does require multilateral participation where people that are not… Which you might call compulsively immersed in either of those force fields can see a way to design mediation, compromise and implementation that the two big fish could not do themselves.

Louis Kuijs:

Yeah, I think that’s right. There is clearly… As we established, there are concerns that foreign people can rightly have about how China operates its model. However, clearly at least from where I stand a lot of the steps that the US government is taking go way beyond worrying about China sticking to international rules, it’s really about the US feeling, the pressure from an upcoming power. And clearly the fact that this upcoming power is run on a different political and economic model. I think amplifies the lack of understanding and lack of understanding… Both analytically, but also in terms of empathy, lack of understanding about what is this country about?

Louis Kuijs:

And so, I think indeed, that is why the pre-occupations of the average American politician do seem different from those of say European ones or say Indian ones. Although of course, India and China are two very large powers with if you were to zoom in on Asia. But let’s keep it global for the moment. Yeah, indeed, also this role that the US sees for itself as… At least used to, I don’t know if it still does, but at least the US used to see itself as a defender of certain rules about democracy and things like that.

Louis Kuijs:

If you then deal with a system that is not a democracy, then how do you deal with that? Do you insist that this country needs to become a democracy in the way that we define it? Or should you worry about the relationship between the government and its people? And should you be concerned about more fundamental things like voice and accountability? Like at the world bank, when they tried to rank governments in terms of all the kind of dimensions that the government is supposed to be good at? There is nothing… I don’t think there is a dimension called democracy because I don’t really know what democracy means but I do know what voice means. Do people have a voice in changing… Is people’s voice being picked up, being absorbed by the government and is a government accountable to its people.

Louis Kuijs:

I think those are more universal kind of principles. I think, there is a scenario where Western countries would look at China from that perspective and would look forward to China doing better on voice and accountability as opposed to insisting that you have to be democracy otherwise we won’t deal with you. I think there are similar dimensions, similar considerations if you think about the economic model, it’s quite interesting to look at the phase one deal between the US and China, because we’ve said it so many times in this discussion China’s model is very different from the US but China has actually been quite comfortable in agreeing to a lot of that language that Robert Lighthouse or annex colleagues imposed in that deal about we need to do better in protecting intellectual property, we are happy to commit to all these conditions on technology transfer, because these kind of reforms are very much reforms that China is undertaking anyway at the moment for its own good.

Louis Kuijs:

Even though we are still facing a model that in terms of these fundamental relations between the party, the government, SOEs and the rest of the economy will remain quite different from the rest of the world. So is it not possible for the West, say to insist on these things. I mentioned it before, like competitive neutrality and leveling the playing field, making sure that there is a clear separation between this China state and its businesses. Wouldn’t that be good enough? And wouldn’t that be a basis on which to engage further with China and allow it to integrate in the world economy and its financial system? Wouldn’t that be better than decoupling ourselves from China because we don’t like that system? I think it would be in everybody’s favor and everybody’s benefit if that first scenario were taken rather than the decoupling one.

Rob Johnson:

One thing that does concern me in meeting with many Chinese leaders myself, as well as American and Canadian leaders and intelligence community members, there does seem to be a concern about what you might call the side-by-side nature of cyber security on one hand and digital platforms on the other. And I know the Obama administration tried to kind of create which [inaudible 00:38:35], call collaborative rules. And yet people like John Mallory at MIT, who’s very sophisticated in this realm and has done some work with INET. He points out that a hacker in Calgary, Canada can pretend he’s located in New York and attacking Shanghai and a hacker in Armenia can pretend that he’s in Beijing attacking Washington DC.

Louis Kuijs:

Yeah.

Rob Johnson:

So the ability, what you might call to put together rules of a collaborative game around digital platforms and cyber security may be noble, but it’s almost impossible to enforce. And given the suspicion that exists between the two major countries, there are many people who are quite doubtful, who are quite a bit more sophisticated than I am vis-a-vis how this technology manifests. That we can’t get to a place where we trust each other. Because like I said, the hackers cannot be identified as either violators from another place or as people who need to be disciplined by their home country in order to enforce the agreement. So I don’t know how you feel about this, but it does portend that what technological change is doing is creating the system that leans towards vulcanization and which you might call side-by-side rather than multilaterally integrated systems.

Louis Kuijs:

Yeah. It would be a pity. I mean, it does look like the world is heading that way. In terms of that development of two spheres. Cybersecurity is one issue and I agree, you mentioned suspicion, lack of trust will make it very difficult for the two sides to actually make progress on this. And without trust, it’s going to be really hard. But I think even abstracting from that cybersecurity issue, it looks like there is a risk or a tendency to move to this little bit of a technological cold war and a division of the world in two spheres, it would be a pity, it’s economically clearly suboptimal, it would also not be good for relations and for trust.

Louis Kuijs:

I don’t have very smart insights on this, I’m just indeed, as you are worried that it looks like we’re moving into this direction of a cyber space that is divided in two and where in a few years, or maybe even earlier what kind of phone you have and what kind of app you have on your phone and which apps you use depend on where you live. It’s a pity, but it does look like we’re moving in that direction.

Rob Johnson:

Yeah. Let me… As we tour world, a scenario where INET has done a good deal of work. And a couple of years ago with Justin Lin at Beijing University, we held a conference on the Chinese role in the development of Africa. I remember watching a film that has made the Top 100 Box-office on planet earth of all time called Wolf Warrior 2.

Louis Kuijs:

Yeah.

Rob Johnson:

It was a moral tale, the closing sequence involved reading from the Chinese passport. And it envisioned a very noble China playing a role that many think the West, whether Europe or the United States has not done in facilitating the development of Africa. I’ve also heard a lot about the role of technology in enlarging markets, both in South Asia and in India. I know the Luohan Academy that was founded by Jack Ma from Alibaba is exploring that I’ve seen presentations at lunches at the World Economic Forum. But I’m curious as to your thoughts about the role of Africa in the future of China and vice versa, what do you see on the horizon there?

Louis Kuijs:

Yeah. So it’s clear to me that China’s leadership put Africa on the map. Africa matters to China and China has been engaging with Africa in various ways, infrastructure development, encouraging its companies to set up shop there. There is of course the resource element, but I think sometimes people exaggerate that a little bit. There are quite a few countries in Asia without resources like Ethiopia where you still have a strong presence of China. So it’s not just a resource grab, it’s clearly more of a long term project. To be completely honest, I don’t know exactly why China committed to that, even though it itself at that time was still a fairly poor country. There are definitely benefits from that engagement in Africa for China.

Louis Kuijs:

Overall, I’m not sure that this is… If you look at this purely from an economic point of view, I’m not sure that this is a profitable exercise, there must be something more to it. Increasing global soft power must play some role over there. Clearly of course, it fits into the thinking that we also have in the Belt and Road Initiative that, “We are good in infrastructure.” And that’s also sometimes actually what I’ve heard people saying in Africa, Chinese diplomats saying that look, “You Europeans should still work on institutional reform and stuff, but let us deal with the hardware. Let us build the bridges.” And things like that.

Louis Kuijs:

So I don’t know some of the… But what I don’t know is the motivations that underlie this project in Africa, but it is obviously a long term one. You see similar ones with Pakistan where China wants to be seen as an all weather friend. I’m sure that if you think about this from a very broad picture, China realizes that it will always be hard to be really good friends with the US. The US is good friends with Europe so it may also be hard to be quite good friends with Europe, probably if anywhere China stands a chance of finding friends and establishing relations, it must be in the emerging market world.

Louis Kuijs:

And that is probably a motivation that underlies China’s engagement in Africa, but also in Latin America and closer to where we have China itself in the rest of Asia. I do think that matters. And we can even see that a little bit… I don’t want to get too much into the financial aspect of this, but if you think about the fact that China tends to be a capital surplus country, it needs to do something with its capital. It is increasingly hard for China to invest in the US and in Europe. So where should this go? It would again be the emerging market universe where of course is also still quite some appetite for Chinese capital. So I think there are obvious… There is a logic, there is a rationale for this relationship between China on the one hand and these developing and emerging market regions like Africa, Latin America, and others.

Rob Johnson:

Yeah. Well, we’ve… How do I say we’ve toured around to many different places in its relationship to your insights in relation to China and as we come towards the end of this conversation, I’m interested in how it is to be living in Hong Kong, looking at the change in that relationship that’s been underway for some time, and also what it portents for Hong Kong’s relationship vis-à-vis the world economy, which has been quite vibrant in years past? How do you see what’s what’s unfolding in Hong Kong these days?

Louis Kuijs:

Yes. So there’s a lot going on in Hong Kong at the moment. Last year was a year of protests, protests that were kicked off by a extradition treaty that Hong Kong government had planned to implement, it didn’t happen because of massive protests. These protests then morphed into broader protest movements looking for more democracy and many people even looking for independence from China that worried China quite a bit. And that is why China asked Hong Kong government, like, “How does it work again?” at the handover from Britain in 1997 in the basic law, there is this stipulation that you’re supposed to have a national security law. You never formulated and implemented one, we’re going to formulate and implement one for you. So that’s what Beijing did.

Louis Kuijs:

A lot of people here in Hong Kong are very anxious about that, a lot of people are very upset and worried there are people leaving. And there is also a lot of concern and anxiety in the business community. I think personally, we need to see how this national security law is actually implemented. If you read the law by itself, it’s not necessarily the end of the world. It’s not necessarily very different from national security legislation in other countries, it’ll all depend on how this is implemented. To what extent can Hong Kong’s independent judicial system deal with this national security legislation in a way that shows to Hong Kong’s public and to the wider world that Hong Kong’s system remains quite different from that in China. As you know Rob, both China and Hong Kong’s government always emphasize that one country, two systems arrangement. For China, the one country aspect is as important as the two systems one.

Louis Kuijs:

And that’s why China gets very iffy, it gets very nervous and angry when it sees that people seem to be interested in becoming independent separating from China, but the rest of the world and Hong Kong people are very interested and very concerned about will the two systems aspect to survive. I think we need to give Hong Kong a little bit of time to show how it will implement that national security law. I personally tend to be a little bit optimistic on these kind of things. And that is why I personally think that Hong Kong… Sorry, I, again, mix up the two. Beijing has an interest in having the one country two systems arrangements survive. In my opinion, I think it has an interest because it wants the rest of the world to feel that China by and large, more or less sticks to the rules and that Hong Kong remains this separate entity. Separate in terms of how the legal system works, how politics function and how also how open it is.

Louis Kuijs:

I think as long as the rest of the world will think that by and large, more or less Hong Kong does continue to be separate as an entity from Beijing, from China. I think that Hong Kong would stand a chance to maintain its role as an important gateway in and out of China. Of course, Hong Kong is more than that. Hong Kong is also an international financial center. Will it be able to maintain that role? We have to see, this is an interplay between China, the US and other countries. Of course, we have seen US legislation responding to the imposition of the national security law. I think that these US sanctions and other measures by themselves also affect how the international community is thinking about this. I think we are not yet done with the dynamics of this. We need to see how this plays out.

Louis Kuijs:

As I said, I personally think that China maintains a strong interest in maintaining that one country, two systems arrangement. There are people who say that, “Look, if you think about this gigantic country of 1.4 billion people, does Hong Kong really matter very much? Isn’t a domestic stability, much more important than this one city of 7 million people?” And if there were ever to be the risk of what is happening in Hong Kong, posing risks to China’s domestic, political and social fabric, wouldn’t China be happy to do whatever is necessary with Hong Kong to maintain that domestic stability. I know that that argument exists.

Louis Kuijs:

I personally tend to emphasize a little bit more that other one that I think it remains… And we’ve talked about it before in this in discussion. It remains very important for China to be seen as a party that can basically be trusted as a responsible stakeholder internationally. And I think that aspect will weigh heavily. And I think we should give China and Hong Kong’s government and Hong Kong’s judicial system a chance to see how they will deal with that national security law. Before we jump to hasty conclusions that everything is over for Hong Kong.

Rob Johnson:

Well, thank you, Louis. How do I say? We’ve explored many dimensions past and future, many dimensions around the world and the relationship of China. And I want to thank you on behalf of myself and our audience. You’ve always given me a lift, you’ve always given me insight, and today is no exception. I look forward to staying in touch with you. I look forward to the… How about I say the next time we can… How I say, perhaps just after the presidential election, when we see who is elected in the United States, maybe we can talk a little bit about how the possibilities evolve based on the outcome of that election, but I would encourage everyone to stay in touch with your writing and your work. And I know everyone at INET is very appreciative of the contributions you make and have always made to illuminating what’s happening in China and what’s happening around the world in relation. So thanks very much.

Louis Kuijs:

Well-

Rob Johnson:

We will see you again soon.

Louis Kuijs:

It was a great pleasure to discuss this with you, Rob. Thanks very much. And I look forward to doing it again.

Rob Johnson:

Thank you. We will. Thanks bye-bye.

Louis Kuijs:

Bye-bye.

Rob Johnson:

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