Dr. Robert Lawrence Kuhn is an American author, investment banker and China specialist. He is one of only two Americans to have received the China Reform Friendship Medal in December 2018 from Chinese President Xi Jinping.
When talking to ShanghaiEye, Kuhn shared his views on the recent "black swan" balloon incident and what’s behind the rhetoric of both sides amid soaring tensions over bilateral tech.
ShanghaiEye: What are the deeper and underlying reasons for the United States' position on the Chinese balloon incident?
Robert Kuhn: The balloon incident in the United States is a fairly deep probe of US-China relations in terms of attitudes on both sides. It was kind of humorous at first.
It is said that some of the other concerns that Americans have had at high levels in the United States, in terms of different strategic interests in the South China Sea or Taiwan region, or issues of human rights, or cyber security breaches, and have been advanced, but they weren't visible to people. Here was something that was directly visible, that certainly was used by certain politicians to stir up activity.
An anti-China position has been increasingly sown in the United States, but it does probe the bipartisan nature of the US concerns about China. I think the vote in Congress in my lifetime, I never remember a unanimous vote that strongly, where there was no dissent whatsoever, like 419 to zero in terms of condemning the incident. And so between the political side and the personal side, it had sort of an emotional effect.
And there is a similarity in both countries, which to me, is very unfortunate to be heading in that wrong direction.
If you analyze US-China relations now, in an age of intense social media and news all the time, and everybody has access, and where patriotism is strong and nationalism has become very strong in both countries, and indeed in most countries around the world.
Outrage, the public, uncompromising nature is to be expected, which was why at the beginning of the balloon incident, when China expressed regret, that was a very significant statement. As soon as the US politicians became very aggressive after that, China then had to change their position from one of regret to one of toughness and not going to change.
And that's again, a natural result of today's world, where all societies, no matter how, whether they call themselves democratic or authoritarian or whatever, they have to be sensitive to public opinion in today's world.
ShanghaiEye: The United States has introduced a series of chip bills and export control measures. So how does the US view the risk of losing China, the world's largest semiconductor market?
Robert Kuhn: I couldn't say today that the US is not trying to contain China. I can't say that anymore. Because in fact, it is. And the whole narrative around semiconductors and the whole story, really relates to that.
The way economics has run is now being altered because of the strategic interests. The fact that the US has now created an industrial policy to support a US semiconductor industry, manufacturing, is a radical change because semiconductor manufacturing is not optimally economic in the US.
Moreover, by not selling to China, it's forcing China to develop its own indigenous innovation and its indigenous market in semiconductors. It's not easy to do. China's put a lot of money into trying to do that. It's probably the single highest priority of the Chinese government in terms of long-term strategy.
And one thing we can say for sure that it is non-economic for everybody. Everybody loses in terms of the economic structure by this. But security interests, national pride interests take precedent over the economics. I mean, that's the one conclusion that we can have.
ShanghaiEye: What is the key to maintain stability in US-China relations as the world's two largest economies? How important is the peace and stability of China-US relations?
Robert Kuhn: The only route for a solution to this is more communication. I mean, that sounds simple, but President Biden and President Xi need to be talking more. Because that, even if they're putting on an act together that puts public pressure on the diplomats and the people working below them.
There's always going to be something, we hope it will never happen again. But the 2001 Spy Plane Collision over, near Hainan Island was a severe problem at the time. I covered that very well and spent a lot of time studying all the activities related to it. I can tell you this, that if that type of thing happened today, the consequences would be far worse than it was then. And it was pretty severe at that point as well. So the problem is that we have to be ready for incidents to occur.
ShanghaiEye: In terms of global development, Xi Jinping has put forward the Global Development Initiative and Global Security Initiative. How do you view these two initiatives and the global governance concept China embodies?
Robert Kuhn: China's involvement in every issue of international importance is both a fact and a potential benefit to the entire world. China has grown from something like 1.5% of world GDP after the Cultural Revolution to 2022. It was like 18.5 or 6%, now getting close to approaching 20% of the world GDP.
And it needs to counter a US, and, increasingly, a developed world containment attitude. So all of those things push China to become more proactive, which under President Xi Jinping, China has very strongly, in terms of reaching out to developing world.
So China has been working with countries to, on top of the Belt and Road, with the infrastructure to build special economic zones, cheap manufacturing, basically, the route that China took in the 1980s, to begin building itself up from extreme poverty.
Some developing countries couldn't do the Global Development Initiative unless you had at least the beginnings of the infrastructure through the Belt and Road Initiative. So that is a very logical and very long-term commitment, many multiple decades of work to do there.
The BRICS with Brazil, Russia, India, China, South Africa is the BRICS program. And China is looking to develop various kinds of different organizational structures, which can balance the so-called hegemony, or the US's control. So it's part of China's national interests.
China has not been perfect, and there's been a lot of mistakes, but China has learned, so nobody knows the problems as well as the opportunities better than China, in terms of constructing infrastructure and building special economic zones and rural healthcare and anti-poverty.
If you look at the three initiatives that China has put out under President Xi, the Belt and Road Initiative to build infrastructure, the Global Development Initiative to build on the infrastructure in terms of specific programs like anti-poverty. And then the Global Security Initiative to give a sense of the importance of talk, rather than fight, you know, China is making an important contribution to the world, then should be recognized for it.
ShanghaiEye: China is constructing its own Chinese-style modernization. How do you understand the concept of Chinese-style modernization?
Robert Kuhn: Common prosperity has been a term that has been used in China for a long time, but came into prominence a couple of years ago. It has been controversial both in China as well as internationally, in terms of some of the policies that are reproached into it, and in terms of control of private business or various platform companies and technology, and various other aspects of society.
Therefore, there could be some economic disincentives for some of the common prosperity. So as the economy has suffered through COVID, there might be a rebalancing between private sector and what it needs to do and common prosperity.
But let no one doubt that common prosperity is a core vision that President Xi and the leadership have of what Chinese modernization is, and there will always be modifications based on local conditions. Common prosperity will be a key goal of Chinese modernization that will benefit the country.
To say that the Chinese system works everywhere is both an exaggeration and a distraction from reality. The principles are important. How China worked for its own success, and all the problems along the way that have occurred, and why they occurred, we see the big problems of development, including pollution and corruption.
Just to pick two. If we pick three, social inequality. So China's developed modernization approach over the decades, four and a half decades since it began, has certainly succeeded. We see from the data that's obvious. The greatest economic transformation success story in human history. But it also had at least three big problems: pollution, corruption and severe disparities in income. And each of those, particularly under President Xi are being addressed.