Kevin Rudd on US-China “Decoupling”

On November 4th, the 21st Century China Center at UC San Diego hosted the Eighth Robert F. Ellsworth Memorial Lecture. This year’s speaker was the Honorable Kevin Rudd, former Australian Prime Minister (2007-2010, 2013). In addition to serving as Prime Minister, Rudd was previously Australian Foreign Minister and the inaugural President of the Asia Society Policy Institute in New York. Rudd is a fluent Mandarin speaker and has conducted major research on US-China relations at both Harvard University and the University of Chicago. 

At this talk, Rudd commented on the possibility of China and America decoupling— creating two distinct, rival economic, technological and political systems with their own spheres of influence. Rudd examined the arguments by both American and Chinese hawks and outlined the situation as a whole, explaining the many domains of competition and the possibility of decoupling in each. 

A video of his speech is available here and a full transcript of his remarks can also be read here. Two students of UC San Diego School of Global Policy and Strategy attended the talk and offer their analysis and perspective below.

Rachel Finerman,
GPS MIA 2020

My ultimate conclusion from Rudd’s lecture is that the US-China relationship is too intertwined for the two countries to decouple completely, especially in terms of technology and trade.

Rudd discussed five different aspects of US-China relations—the trade war, foreign direct investment (FDI), technology, capital markets, and currency. Although FDI, capital markets, currency are important factors in US-China relations, the trade war and technology are at the forefront of the American political, economic, and social discussion on China.

If the US and China were to decouple in terms of trade, the entire world economy would be drastically affected. Rudd emphasized the importance of both countries avoiding a decouple from trade relations that would shatter world trade. The economies of both the US and China have been hit hard by the ongoing trade war. If the two countries were to cut ties completely, their economies would be even more damaged. 

With two of the largest economies in the world feeling negative impacts, the rest of the world is bound to feel the effects as well. Along with this sentiment, Rudd acknowledged that one area where we will most likely see the impact of the trade war is technology. China’s reasoning for putting more restrictions on technological trade is in large part due to Chinese leaders’ push for “indigenous innovation.” They are working on developing their technologies from the ground up within their borders by Chinese companies and they hope to become self-reliant in the technology arena. 

This brings me to the argument of technology decoupling. Rudd asserted that the technology arena is where we see the most decoupling between the US and China. This may be a possibility for both China and the US, primarily because of China’s desire for technological self-reliance as well as the US’s homegrown success in terms of technological development and innovation. However, I argue that this will be harmful to both countries as well as the world because the US and China complement each other in the world of technology. A major shortcoming of Chinese technological innovation is the research and development necessary for independently developing useful technology. The US’s shortcoming lies in the application of technologies. 

For example, China can develop a technology to enhance mobility in a city, such as intelligent traffic lights, and implement it within a relatively short amount of time. Conversely, the US can develop life-changing technologies but struggle to implement those ideas within a reasonable amount of time. Therefore, the US has a lot to learn from China’s implementation, despite differences in government structure and public opinion, meanwhile China has a lot to learn from the US’s research and development process.

With all of these factors combined, I draw two conclusions from Rudd’s lecture. First, the US and China decoupling from each other in any aspect would be detrimental to the rest of the world, economically and technologically. Second, US and Chinese leaders must truly understand the amount of interconnection between the two countries in terms of trade and technology. With this understanding, they will realize that decoupling in these two aspects will have an immense negative impact on the two countries, US-China relations, and the rest of the world, both politically and economically. 

Mark Witzke,
GPS MIA 2020
China Focus, Editor in Chief

Rudd did a fantastic job in outlining the contours of US-China decoupling as well as US-China relations more broadly. In his speech he smartly emphasized the domestic political considerations of both the US and China in their international decision making. He then took us through several areas of potential decoupling—trade, foreign direct investment, technology, capital markets, and currency. For each, Rudd examined the extent to which decoupling had occurred as well as the potential for future decoupling. His findings are well summarized by Rachel Finerman above and by AXIOS here. I will instead focus on Rudd’s appraisal of Chairman Xi Jinping. 

Rudd has made much of his reputation as a China watcher as being an expert on Xi specifically. Unlike most of those who comment on China, he has met Xi personally and unlike every other Western leader who has, he is capable of conversing with him fluently in Mandarin. He is also currently writing a dissertation on Xi Jinping’s worldview at Jesus College, Oxford. Therefore, his comments on Xi carry particular weight.

There is a growing body of articles and even a book on elite and popular resistance to Xi’s authoritarian rule and economic missteps. Rudd, however, moved to quash the notion that Xi faces any formidable opposition. While Rudd noted that there are complaints, especially in the private sector, he sees Xi as several steps ahead of any of his critics. In his view, a third term for Xi and even continuing on into the 2030s is by far the most probable outcome. 

The evidence he presented for this is convincing. First, the results of the 4th Plenum of the Communist Party Central Committee which placed politics over economics and clearly reaffirmed Xi’s supremacy. Second, an analysis of Xi’s “intellectual software”. Rudd described Xi as a Marxist dialectician “from central casting” and someone who is “capable of handling internal contradictions and able to tactically adjust to emerging pressures”. Xi has the skill to hold on to power even as the economy declines and the signals so far indicate that he will do so. 

To Rudd, Xi is a historical materialist at heart and sees China as a rising power that will soon surpass a declining United States. In this context it is noteworthy to examine what Xi may do next. His options include encouraging the private sector, returning to old stimulus driven growth, or pushing self-reliance and international diversification. Since Xi does not trust Trump in the trade negotiations or nor does he offer much authentic support to the private sector, it will likely be the latter. While the US debates the idea of decoupling, in China it has already begun. “Self-Reliance” (zili gengsheng 自力更生) has become an increasingly popular catchphrase in official propaganda. This, coupled with internationalizing beyond the US, will form the core of Xi’s next moves. 

Throughout his speech Rudd warned of the dangers of decoupling and that mutually reinforcing actions could spiral out of control. It’s clear that a complete decoupling is not in the best interests of the US or China. However, in my estimation, if Rudd is right and Xi holds on to power tightly and continues his authoritarian and repressive bent, China and the US just may be headed down the path of separation. 


Rachel Finerman

Rachel is completing her last year of the Bachelor of Arts/Master of International Affairs (BA/MIA) program at the School of Global Policy and Strategy focusing on International Economics and China. She recently completed an undergraduate thesis about surveillance mechanisms in smart cities around the world. After graduating from GPS, she plans to return to China for one year to improve her language and conduct research. Rachel’s career goals include national security, smart cities, and global education.

Mark Witzke

Mark is a Master of International Affairs student at UC San Diego School of Global Policy and Strategy studying international politics with an emphasis on China. He graduated from Tulane University with a BA in History and Asian Studies in 2014 and then spent three years working and traveling in China. His research interests include US-China technological and business competition as well as the intersection of business strategy and government policy. 

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