In this week’s episode of China Insider, Miles Yu reviews the Chinese Communist Party’s fourth plenum, including the newly announced five-year development plan and appointment of Zhang Shengmin as the new vice chair of the Central Military Commission. Next, Miles covers the latest developments from the Association of Southeast Asian Nations (ASEAN) summit in Malaysia, including the US-China trade deal framework, and previews the upcoming Asia-Pacific Economic Cooperation (APEC) summit as President Donald Trump plans to meet with Xi Jinping in South Korea. Finally, Miles circles back on Japan’s elections for prime minister, and outlines the potential impact PM-elect Sanae Takaichi will have on China-Japan relations and the Indo-Pacific landscape.
China Insider is a weekly podcast project from Hudson Institute’s China Center, hosted by China Center Director and Senior Fellow, Dr. Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world’s future.
Episode Transcript
This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.
Miles Yu:
Welcome to China Insider, a podcast from the Hudson Institute's China Center. I am Miles Yu, Senior Fellow and Director of the China Center. Join me each week for our analysis of the major events concerning China, China threats, and their implications to the US and beyond.
Colin Tessier-Kay:
It is Tuesday, October 28th, and we have three topics this week. First, we review the CCP’s Fourth Plenum, and the new five-year development plan approved during the multi-day event. Next we cover the latest developments from the ASEAN Summit, including a potential US-China framework trade deal and what to expect at the upcoming APEC Summit later this week and next. Finally, we follow up on Japan's election of new Prime Minister Sanae Takaichi, and look ahead to the future of China-Japan relations. Miles, great to be with you again this week.
Miles Yu:
Thank you very much, Colin. Very nice to be with you again. I have to say at the top of the podcast that we have been receiving quite a few listeners’ feedback and they've been very positive and also provide very good suggestions. We thank them and hopefully more people will [listen] to this podcast.
Colin Tessier-Kay:
Love to hear it and keep them coming definitely if you have more. Lots to cover today, so let's jump right in. First up, the Chinese Communist Party held its Fourth Party Plenum last week amidst a backdrop of, let's say, fluid political shifts in high level PLA officials leading up to the multi-day event. While the annual plenum isn't necessarily always the most eventful meeting of the many CCP congresses, this year's plenum provided some news with a new five-year development plan and announced replacements for recently purged PLA military officials. Miles, why don't you start us off here with an overview of the events and highlight some of the key takeaways from this year's party plenum.
Miles Yu:
Normally this kind of Fourth Plenum is not really as big of a deal as [the] third, right? Normally, the third plan usually decides [key] personnel change as well as major economic strategies. This year's Fourth Plenum is very significant because of timing. China’s economy is in terrible shape and there was an intensified [internecine] fight within the CCP. I think this is very similar to what happened in the CCP in the early 1960s, right after the Great Leap Forward and the catastrophic devastation of human life. Mao was forced to convene a 7,000 person conference in which [he] sort of addressed the issue of this catastrophe. But then after that [the 7,000 person conference], Mao's power became more consolidated gradually, which led to the outbreak of a Cultural Revolution in 1966 because he believed that his authority was challenged by other comrades of his, [while in fact] he was [responsible himself].
Xi Jinping is doing the same thing right now. If you look at the Fourth Plenum of the 20th Communist Party, it's overwhelmingly devoted to economic issues–consumption, investment, high tech independence, high quality of production. That’s basically the main thing. But throughout all these very long documents of the Fourth Plenum communique, there are some major threats. The key, the central ethos of that, is political loyalty to Xi Jinping himself. He emphasized a lot of things, but every single thing talked about the importance of party unity, ideological purity, and that has to be carried out in all areas of government, including economy, science and technology, military, culture, and diplomacy. And they all have to be done around the core leadership of comrade Xi Jinping (习近平同志为核心的党中央).
This [is] somebody whose power is consolidated rather than weakened, contrary to many wishful thinkers, China watchers mostly. Number one, of course, Xi Jinping also redefines [slightly] China's defense posture in a very subtle way. He says one very important phrase: 边斗争，边备战，边建设. That [is a] new defense policy, which translated into English is something like: “Be combative, be ready for war, and be vigorous in military buildup simultaneously.” So that's basically a new line. And which basically stresses the vigilance and readiness of the military fighting force. But also, he stressed the buildup, [and that is the] problem, which brings us to the purges.
Nine four-star generals and admirals were sacked just before the plenum, which means the core leadership of the operational leaders of the People's Liberation Army are gone. Xi Jinping’s Central Military Commission (CMC) is the highest commanding authority of the CCP [and] consists of himself as chairman, and six other members of the CMC. Three of them have been purged during this first plenum. You can talk about Vice Chair General He Weidong (何卫东) and also Li Shangfu (李尚福), [who] was purged three months ago, and also Admiral Miao Hua (苗华), the guy who [was] in charge of political purity. This, obviously, does not work very well, [and] does not speak very well to his [Xi Jinping’s] immediate military support group. And he promotes this guy who is one of the two survivors in the CMC, General Zhang Shengmin (张升民), to replace General He Weidong as the new Vice Chair. But Zhang Shengmin Min was not even admitted to the Central Committee of the party, so he's pretty much powerless. Now He Weidong, the one who just [got purged and the former] Vice Chairman of the CMC, was not just a very capable military leader, he's also a member of the Politburo of the Communist Party. The Politburo of the Communist Party has about 20 people [and] the Standing Committee of the Politburo has seven people and then the Central Committee has 200.
So this guy is really senior but he's gone and Xi Jinping further consolidates his power. So here, I think Xi Jinping is making a vital mistake. Like Hitler, like Stalin, who not only believe they're a leader of the party [and] the military, but also they're the operational commander of the China[‘s] People’s Liberation Army. That's where the problem is. Xi Jinping is going to decide the campaign's plans, the tactical maneuver issues, and joint fighting. Power is all in his hands. I think that's going to be very, very difficult for the PLA to win future warfare with adversaries like the United States and its allies.
Colin Tessier-Kay:
I'd like to stick with that for a moment here because as a follow up to our prior discussions last week on the latest mass purge [that], like you mentioned, included General He Weidong, [and appointed] Zhang Shengmin as the new Vice Chair of the Central Military Commission. Prior to this, [Zhang Shengmin] was a key member of the CMC, but like you mentioned, probably in the periphery as a ranking general of the PLA Rocket Force. What we kind of talked about last week, Miles, was in what sense would He Weidong’s replacement impact the PLA’s military doctrine and eventual potential operational capacities in the event of an invasion of Taiwan. And it seems like [the PLA is being] further consolidated under Xi Jinping who doesn't have the military background [and is] not a military mind. So how does this change the calculus from the PLA’s perspective?
Miles Yu:
Each of the People’s Liberation Army’s senior military leaders has a core competency. Zhang Youxia (张又侠) is an operations guy. He Weidong was the Eastern Theater Commander before he moved to the CMC as Vice Chair. [His replacement, Zhang Shengmin,] core competence is military discipline. He's the guy who brings charges [of corruption] to other people. [For example, if someone is] in violation of party rules, particularly if he (Zhang) found [a] guy [who is] being disloyal to Xi, he would bring charges against that guy. Of course, [Xi Jinping] also used this powerful tool of anti-corruption as an excuse to get rid of all these people. It turned out every one of the hundreds, even thousands of the senior leaders [who] were purged by Xi, [every] one of them was corrupt, [it’s] systemic. That basically is the ruse to get rid of [Xi’s] political rivals and also people who are disloyal. [I believe] the reason why Zhang Shengmin survived [and] was promoted is because he probably played a very key role in the ousting of He Weidong, Li Shangfu, and Miao Hua because he's in charge of all this prosecution, military law [and] justice, that kind of thing. I don't think that he's going to make a major contribution in building up the PLA’s fighting capabilities, but he's going to be given the added task of weeding out disloyal generals and admirals and, of course, anti-corruption.
Colin Tessier-Kay:
Yeah, it'll be interesting to see how that dynamic unfolds going forward from here. But like you mentioned, I'd like to focus on the other aspect of the plenum party and communique, and that's kind of on the economic side of things here. Announced last Thursday as part of this communique, the CCP said it will prioritize self-reliance measures in all sectors, but primarily science and technology, especially in response to US controls in the semiconductor and high-tech markets. And you alluded to the current economic struggles with China's annual GDP growth slowing to I think 4.8% at the end of September, now that we’ve tracked it. Even with a potential trade deal on the horizon, the CCP faces significant economic challenges ahead. So Miles, I'd like to get your impression, what's there to know about this new five-year plan from the economic side, and will the CCPs shifted focus to self-sufficiency really help to address the current decline in economic growth and consumer confidence?
Miles Yu:
Self-reliance, self-sufficiency is a pipe dream. Xi Jinping keeps talking about it. It is basically a very clear indicator that the Chinese economy is in big trouble [and] is facing international isolation [and] trade barriers against [them], who make all these difficulties for themselves in the first place. China is fundamentally an anti-market economy, not just non-market, it’s anti-market, it's a massive state subsidy. It's a strategic prioritization of Chinese state-owned enterprises to kill the international competitors by artificially driving down the prices. China's over-capacity is astonishing. It can make a lot of things. The reason why China's over-capacity is able to sustain [itself] is because China is not a market economy. In a true market economy, over-capacity will kill a lot of business because they cannot really endure the financial consequences of that. When they say China is going to develop self-reliance through simulating domestic consumption, domestic innovation, it's difficult. The Chinese people, the entire domestic market, has lost confidence in the Communist party's economic policies.
That's why there is a severe shortage of consumptive power. That's why China has deflation. People don't buy stuff. Number one, they don't have money. For those who do have money, their first instinct is to get out of China. That's why you have the enormous capital flight out of China in the last several years under Xi Jinping. People spend money buying properties in Portugal, in Singapore, in Japan, and [in] the United States of course. People have lost confidence. Secondly is trade. Trade is facing headwinds right now because of the global response to China's over-capacity, [resulting in trade talks and tariffs]. Most importantly is investment. China does not receive any significant foreign direct investment at all right now. Most of the global corporations are trying to get out of China. So Google, Microsoft, and Amazon, everybody's trying to get out of China.
I don't know how long Elon Musk and Apple can really stay in China without being completely strangled by the Chinese Communist Party. What I'm saying here is that the Chinese economy is in big trouble. That's why every time you have a big problem, the Chinese leadership always stresses self-reliance (自力更生). This happened during Mao’s time. This happened after the Tiananmen massacre of the students in 1989. But ultimately, China also knows its fatal weakness. That is, its economy is critically dependent on the international trading system. So when you say you cut off [the] international system and [shift to] self-reliance, that's suicide, it's a strategic dilemma. China cannot [figure] it out.
Colin Tessier-Kay:
Yeah, that's kind of damned if you do, damned if you don't. That's a great segway actually into our next topic today because it's summit season, once again. We'll start this one off with a focus on the ASEAN conference in particular, which has similarly provided some eventful headlines from over the weekend. This year Malaysia plays host to the ASEAN meeting with several leaders in attendance and some key absences for the part of the meetings as well, including India's Prime Minister Narendra Modi. But perhaps the biggest headline so far has been the announced proposed framework in the ongoing US-China trade talks that may indicate a deal is on the way. So Miles, I'll let you decide where to start here, but take us through the latest from the ASEAN meetings so far and what to know about the list of bilateral agreements between the US and other Southeast Asian leaders.
Miles Yu:
The bilateral agreements are obviously very important, but far more important [and] significant is the fact that the United States president took a personal interest in that area. This is very different from the first term. In [Trump’s first] term, we have to deal with a lot of issues, domestic and international. So we had to extract ourselves from Europe and therefore had to deal with NATO allies, which is not an easy task. And also [we have to extract ourselves from] the Middle East. That's why we [founded the] Abraham Accords to [help] stabilize Israel so that the United States can get out of Europe and get out of the Middle East [and] responsibly focus on China. Now that part is done, not completely, but it's still ongoing. But we were able to basically extract ourselves from the troubled European security framework and the troubled security framework in the Middle East to focus on China. And if you focus on China, what do you do?
This sort of a new economic containment in my view, not necessarily the Cold War military kind of containment because China's economic outreach is global. That's why we begin to sort of focus on our backyard, the Latin America area, and that's why we go really tough on Chinese interests in Latin America, [specifically the] Panama Canal and Canada [and] Mexico through trade. Because Mexico and Canada have been allowing China to set up factories to do transshipping through Canada [and] Mexico using the mechanism of the tariff-free USMCA treaty. That's basically what we're doing. We are very tough on Venezuela right now because Venezuela is China’s number one fellow trader in Latin America. In the meantime, we go to China's backyard, which is Southeast Asia and East Asia. Southeast Asia is particularly important because China has been able to penetrate that part of the world through coercion and manipulation and, of course, economic carry.
They create a dependence of those countries on China, even though most of the countries do not like China, but they cannot openly say so. All they have to do is gradually divest themselves from the Chinese market. Taiwan, for example, several years ago, 80% of their investment was in China. Now Taiwanese investment going to China is less than 8%, [instead going to] Southeast Asia. Japan is the same thing–they divest from the Chinese market. South Korea, they're divesting from the Chinese market. Where do they go? Southeast Asia. That's why you see an economic and technological boom in Southeast Asia, [particularly] ASEAN countries. Countries like Vietnam, Singapore, Indonesia, those countries in particular, are thriving. Partly because of a strategic shift globally, partly also because those countries realize China's problem is a problem. The only thing left is how much America is going to be invested in their effort to counter China.
So that's why the ASEAN summit is really, really important right now. When I was in Trump's first term, we heard constant complaints from ASEAN country leaders that the United States did not send high enough officials to the ASEAN summit. China sent all their prime ministers, premiers, and president [to go there] to do [their] pedaling. [ASEAN countries] wanted us to have a higher priority for them. This time around, we do pay attention to that. Not only that, it is not just a presidential prioritization of ASEAN countries in American foreign policy, Defense Secretary Hegseth just [traveled] to Southeast Asia, talked with all the leaders regionally to build up this kind of defense alliance against Chinese misbehavior, military provocations, at least in South China Sea. Everybody likes that. And, of course, you have Marco Rubio.
We have a really full-frontal effort to deal with this problem in China's backyard. And that I think is very important. Now emerging from all this is a new strategic partner, a strong partner, a partner without any ambiguity about [America’s] role in that region, [and] that is the new prime minister of Japan, Sanae Takaichi. I think we're going to talk about later because she is unambiguous about the China threat. And when she was at the [ASEAN] summit, everybody paid respect to her. I even heard a report that the prime minister of Malaysia, Mr. Anwar openly said to her, thank God your anti-China, we’re with you. For a leader in that region to say such a thing is actually amazing. That's why I'm very hopeful in the next few years that southeast Asian countries, ASEAN countries in particular, [will form] a much stronger alliance with the United States. After all, we're heavily invested in [the region]. President Trump just brokered a peace between Thailand and Cambodia, China did not play any role. China is a troublemaker and the US is a peacemaker.
Colin Tessier-Kay:
Let's build on that optimism if we can for a moment and talk about the landscape here because there is quite a shift, at least as we've kind of seen develop so far from the ASEAN conference. The initial developments, namely the US-China framework for a trade deal, but also like you mentioned, [the] negotiated peace declaration between Thailand and Cambodia, and even BRICS, like we were talking about with targeting China's partners, Trump meeting with Brazil's Lula. So a lot in a short amount of time. But to zoom out for a minute and comment on US regional influence, in contrast to China's influence, there's been much debate over which nation currently holds the most sway among ASEAN countries. And the primary concern was that China had gained a foothold in most areas in the Indo-Pacific over the past couple of years. So Miles, in your assessment, do these developments over the past couple days here indicate or reaffirm a strengthened US presence in Southeast Asia and what impact did these have on the landscape of the US-China competition?
Miles Yu:
Southeast Asian countries have been alleged to be hedging between China and the United States. I think the only reason they're hedging is not because they're dependent on China [or because] they have some warm feelings toward China. There are hedging because they are totally unsure about how much America is deeply resolved to counter China in that region. Once we show that resolve, they're going to fall into our military [and] political orbit very quickly. You mentioned these ASEAN countries. Remember several weeks ago when President Trump was in Egypt signing the deal between Hamas and Israel, there was a big mic drop moment when the Indonesian president said, we're in danger, we're in terrible trouble, we need to get closer to you. He spoke the minds of all the leaders over there. I mean, Indonesia is a big country, the biggest country in the ASEAN countries. So when they feel insecure because of China, you know [how the] other smaller countries feel. Vietnam, the Philippines, in particular, because the Philippines is the only treaty ally [with the United States] of the ASEAN countries, [the United States and the Philippines] have mutual defense obligations. When the Philippines are attacked by China, the USA is obligated by treaty, by law, to defend the Philippines. So that's how serious it is. That's why our resolve to deter Chinese aggression is unquestioned and should not be questioned.
Colin Tessier-Kay:
In the interest of time, to round out this topic for today, let's look ahead briefly to the upcoming APEC Summit slated to begin on October 31st in South Korea. This year's APEC Summit was shaping up to be an eventful occasion and now likely more so given the flurry of updates from ASEAN. So Miles, just looking ahead and speculating, what should we look out for heading into this year's APEC summit and even the planned meeting potentially between President Trump and Xi Jinping?
Miles Yu:
Well, the summit meeting doesn't mean much. Summit meetings in the past have been used by China to pose this forced narrative that somehow the world is ruled by the US and China, and also to promote China's international status. Number two is to demoralize American allies to say, Hey listen, no matter how pesky you might be toward Beijing, but listen, I'm listening to the master of yours. That's their propaganda. So this time, Trump uses [the summit] for a slightly different purpose, that is he wants to use China's desire to have the summit as a condition for reaching a [trade] deal with the United States. If [China] does not have positive and identifiable deliverables before the summit, maybe the summit will be called off. So maybe I'm (President Trump) not going to meet you (Xi). He wants to put that kind of international embarrassment potential on Xi Jinping. I think he's using that pretty well.
Also, he has said that he might go to Beijing next year, but the precondition is that we would have to resolve all the trade problems first. And Xi Jinping obviously will always inevitably bring up the issue of Taiwan. And that's basically a scapegoat, a diversion tactic used by China. They always bring up the question of Taiwan whenever they don't want to talk about some real issues. This is their approach. So Trump said, okay, I’ll talk about Taiwan, but if you're obsessed with Taiwan, [then] I want to develop good relations with Taiwan, I respect Taiwan a lot. That's why Xi Jinping shuts up when we say we want to be closer to Taiwan because that's their strength, to be obsessed with Taiwan. But it is also [China’s] weakness, because if [the United States] says we want to be closer to Taiwan, [or] even recognize Taiwan as a sovereign [and] independent country, that’s [China’s] worst nightmare. That's why when we are tough on our own stand, when we are clear about the strategic importance of Taiwan in America's national interest, China will retreat. That's always the pattern historically.
Colin Tessier-Kay:
So we'll continue to track that as the APEC Summit kicks off later this week. But turning to our final topic for today, last week, speculation became reality as Sanae Takaichi was elected as Japan's first ever female prime minister. We covered her party election a couple of weeks ago on the show and spoke then about the impact she would have on LDP leadership in Japan's government and foreign policy. And while she doesn't come from a political family or background, which is something of note in Japanese politics, she had close ties to former PM Shinzo Abe and was a spotlight under his administration. So Miles, now that it's official, what can we expect from Japan's government now turning the page under Takaichi?
Miles Yu:
It's very significant because again, there is continuity and there's changes, right? Continuity, obviously, is that [Takaichi] is from the Shinzo Abe line, who was a very realistic [and] fantastic former prime minister who was unfortunately assassinated a few years ago. She was a protege of Shinzo Abe, and now she leads a very, I would say conservative government, but conservative with realism. It is not ideologically charged. When she talks about China, when she talks about the Japanese domestic policies, you feel that she knows the pulse of Japanese society, she knows the real politics of the region. And also she's very pro-America. When she grew up, she was a big fan of heavy metal, mostly American music, and also she rode a motorcycle. This is a very sort of American style, very much like former Prime Minister Koizumi, who grew up listening to music from California.
This is a very, very important [and a] good thing. She is going to continue the Abe-Kishida line of strengthening Japanese self-defense and continuing on the abandonment of the defensive-only National Defense policy, focusing on [the] development of counterstrike and preemptive capabilities. And that's really important. She said she's going to increase the Japanese self-defense budget beyond 2%. Remember, there's a Japanese peace constitution that says the Japanese military budget should not exceed 1%. For Japan to overcome that hurdle in the last several years, it was tremendous, right? Gradually, I believe Premier Kishida also [wanted to] raise spending by 2030, I believe to 5% of GDP [in that year]. That's basically a NATO standard. I think she will continue that.
The difference here is this, I think she's been in politics for a long time. In the [previous] conservative cabinets under Kishida and also under Ishiba, the Japanese Liberal Democratic party ruled with a very questionable coalition. That is, the LDP coupled with Komeito, that’s the left-leaning party. Their cabinets were normally very careful. This time Komeito, the longtime left-leaning party, bought it out. So she had to [appeal] to the very conservative party, [the] innovation party. Those are hardcore against the communist, those are hardcore social conservatives. Now her government is very, very free of the left wing opposition and obstruction I should say. Her job is to consolidate, strengthen that base, to do something that's both ideologically consensual but also realistically practical. I think that's what she's going to do. In particular, you have a Japanese prime minister who's openly vigilant about China. I mean, that's something very important. Japan always should take the lead and has taken the lead in countering China in that region. And then Japan is not a normal country. Japan is a very powerful country in terms of technology, innovation, and economy, to say the least. That's why you see the, I would say, extravagant way in which she was treated in the ASEAN summit.
Colin Tessier-Kay:
And to bring us home today, it seems the US has gained a strong strategic partner in Takaichi. She said she is, “truly hoping to work together with President Trump to make our alliance even stronger and more prosperous and to advance a free and open Indo-Pacific.” And while this may seem ceremonial in some sense, and to pick on what we were talking about just now in what you mentioned in terms of the Indo-Pacific Partnership, that 2% threshold of spending is pretty significant in the context of the Indo-Pacific deterrent strategy. And with that emphasis, Indo-Pacific interests are still very much important here. So Miles, what can we expect now from Japan in terms of our collective Indo-Pacific strategy and deterrence against an increased Chinese aggression?
Miles Yu:
Japan has been leading the diplomatic efforts of forming an alliance to counter China’s influence. Keep in mind, “free and open Indo-Pacific", this very phrase was authored by Prime Minister Shinzo Abe, [but the] United States almost took it entirely as our own. We're not ashamed of that because Japan and the US are actually strategically totally aligned. Secondly, Japan has been initiating some kind of a new defense alliance system to counter China. The QUAD was a Japanese idea. We were willing participants in that. I myself, with Secretary Pompeo, attended some of the QUAD meetings and one of the most memorable ones was held in Tokyo. That was a very, very good thing. So the Japanese have been leading the way, and hopefully they're going to [continue to do] this. Japan also is expanding this kind of coalition, not against [the] Chinese people, but against Chinese behavior because China has been sort of misbehaving toward many of its neighbors [in the Indo Pacific].
South Korea, Taiwan, Philippines, Vietnam, and Indonesia even. And now of course, India. So the Japan-India relationship [in] defense, economic, even culture, has been expanding dramatically. That's a good thing because India also is a heavyweight country in the region. I think a lot of things that the US wants to do but cannot do against China [is] because of the weight of the two superpowers (US and China) and the consequences could be very adverse. We want to avoid a direct kinetic fight, but our friends and allies in the region could definitely [accomplish some of the things we want]. Japan is one of the countries that could do that, very much like Israel in [the Middle East]. They can do a lot of things that we want to do, but we will be very cautious doing [these things]. Japan, India, Vietnam, Philippines, Taiwan obviously, should be really working together [on] at least some of the joint tasks, particularly like border disputes [and building a] maritime law enforcement coalition.
One simple example, the global anti -IUU (Illegal, Unreported, and Unregulated fishing). China has been a major perpetrator of IUU. China has been sort of a global perpetrator of that problem. So that's why I think those consequences work together. And I might also add that for any new formations of international agreements or coalitions, Taiwan must be one of the founding members. Otherwise, to really need Taiwan is going to cause more trouble and [an] unnecessary problem. Taiwan faces a similar problem [to] Japan in maritime misbehavior by China.
Colin Tessier-Kay:
Boy, isn't that the case. Well, I think that's a great place to leave it off for this week's conversation. Thank you to our listeners for joining us again this week, thank you Miles, as always, for lending us your expert insight and analysis on these critical issues. Looking forward to next week's discussion.
Miles Yu:
Thank you very much and see you next week.