The World Turned Upside Down: America, China, and Struggle for Global Leadership

The World Turned Upside Down
(Clyde Prestowitz, November 5, 2022)

Transcript available below

About the speaker

Clyde Prestowitz is a leading analyst and commentator on foreign affairs, globalization, the Asia-Pacific region, Europe, Mexico, technology, and international economics. He has spent many years living and working abroad as a sales, marketing, and corporate planning manager for companies like Scott Paper and American Can Company in Switzerland, The Netherlands, Belgium, Japan, Mexico, Brazil, Venezuela, Hong Kong.

He was a White House adviser in the Obama administration and served as Vice Chairman of President Clinton’s Commission on Trade and Investment in the Asia-Pacific region. He was also a director of the Export Import Bank of the United States under Clinton and served at the same time as the President of the Pacific Basin Economic Council. Earlier, during the Reagan Administration he served as Counselor to the Secretary of Commerce with a special focus on Japan with which he was the lead U.S. negotiator. He was a leader of the first U.S. Trade Mission to China in 1982 and helped to arrive at agreements that enabled U.S. companies to establish operations in China.

Clyde Prestowitz writes frequently for the New York Times, Washington Post, Boston Globe, Wall Street Journal, L.A. Times, The Washington Monthly, Foreign Affairs, Foreign Policy, The American Prospect, The Spectator, and other leading journals and newspapers.  

Aside from writing, he has served as a member of the Policy Advisory Board of Intel under Andy Grove, as an advisor to FedEx Chairman Fred Smith, as an advisor to former AIG Chairman Hang Greenberg, member of the Board of Lanxide Corporation, and advisor to Form Factor Inc.

His major books are: Trading Places: How We Are Giving Our Future to Japan (1988), Rogue Nation (2003), Five Billion New Capitalists: How Wealth and Power are Flowing to the East (2005), The Betrayal of American Prosperity (2010) and Japan Restored (2016). His new book is The World Turned Upside Down: America, China, and the Struggle for Global Leadership.


Robert R. Reilly:

Hello and welcome to the Westminster Institute. I am Robert Reilly, its director. Today, we are very pleased to welcome a gentleman who is very well known for his trade experience and his experience in Asia, and I am speaking of our guest, Clyde Prestowitz, who is the founder and president of the Economic Strategy Institute. He is a veteran U.S. trade negotiator and presidential adviser to presidents Ronald Reagan, George H. W. Bush, Bill Clinton, and Barack Obama. Mr. Prestowitz has worked on Asia and globalization for 50 years. He was a leader of the first U.S. trade mission to China in 1982 and helped to arrive at agreements that enabled U.S. companies to establish operations in China.

He is the author of many books, including Rogue Nation, Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, The Betrayal of American Prosperity, and Japan Restored. His most recent book is The World Turned Upside Down: America, China, and the Struggle for Global Leadership. Mr. Prestowitz has a B.A. with honors from Swarthmore College, and an M.A in East-West Policies and Economics from the East-West Center of the University of Hawaii, and an MBA from the Wharton Graduate School of Business. He also studied at Keio University in Tokyo. Mr. Prestowitz is fluent in Japanese, Dutch, German, and French.

So, today we are going to discuss: The World Turned Upside Down: America, China, and the Struggle for Global Leadership. Clyde, welcome to the Westminster Institute.

Clyde Prestowitz:

Thank you very much. It is nice to be with you.

A Greater Challenge than the Civil War

Robert R. Reilly:

Let me start toward the end of your book to the statement you make that is sure to get everybody’s attention, and perhaps you could expand upon this for a moment. You say this: this struggle with China is “the greatest challenge the United States has ever faced short of the Civil War.” That is saying a lot. That is saying it is a greater challenge than the two world wars, it is a greater challenge than the Cold War.

Clyde Prestowitz:

Yes, I think so. You know, if you think of the two world wars, they were really a slam dunk for the U.S. There was no question that we were going to win both of them, and the Cold War is more similar to the challenge that China presents, but Russia, the Soviet Union, was weak by comparison to China today. It did not have advanced manufacturing that China has or that the U.S. had. It did not have the scientific and technological capability. I am sure it had nuclear weapons, but we are seeing today in Ukraine really how badly equipped the Russian or the Soviet Army was at that time.

And the economy of the Soviet Union was never linked. I mean there were some links, but it was never strongly linked with the economies of the Free World, and it did not provide the kind of wages, the kind of consumer welfare, and the kind of technological advance that the Free World economies did. The size of the Soviet Union’s economy was never more than about half that of the U.S., leaving the EU out of it.

Today, depending on how you count, China’s economy is bigger than the U.S. And if you use normal exchange rates, the U.S. economy is still 25 percent bigger than the Chinese economy, but if you use purchasing power parity, the Chinese economy is about 25 percent bigger than the U.S. economy, so we are talking about an economy that is a real economy, of our scale.

And it has developed a very good high-tech sector. In some sectors like semiconductors or aircraft, it is not quite as good as the U.S., but it is catching up fast. And in other areas like shipbuilding or high-speed rail, it is way ahead of the U.S. And it has a linkage to the rest of the world through the Belt and Road and those programs in which China is building high-speed rail for countries like Thailand and in Africa, making big inroads.


In fact, if you look at the Panama Canal – this is really striking – look at this country of Panama and the Panama Canal, which we think of as kind of an extension of America, virtually everything in Panama except the canal is owned by China. It is striking. If you get a map, and you look down at Panama and look at the industries and the real estate and the canal, they do not own the canal, but China owns almost everything else. And of course, China is working with Nicaragua to build an alternative canal through Nicaragua. As I said, I believe China represents the biggest challenge to us since the Civil War.

Robert R. Reilly:

When reading through your book, one word kept coming to mind, and that is naiveté, the naiveté on the part of the United States and other Western countries in its dealings with China based upon a very faulty assumption of what was actually in play and what the nature of the Chinese regime was and is, that becoming far clearer today.

But one of the most impressive things about your book is the detailed history you give of this. And one keeps shaking one’s head as you go into those details of how we could have so deluded ourselves. And you give chapter and verse, and you quote a lot of U.S. trade officials, presidents, and so forth in statements which they should be quite embarrassed today at having been made, and that of course includes Henry Kissinger.

I want to just offer one statement, and then hear you comment upon that. I was a foot soldier in the Cold War with the Soviet Union. I served in several different government agencies to engage in that of the U.S. side of that Cold War. Today the general opinion is in the United States, we won the Cold War. Well, who was we? Because during that time, as you well know, there was quite a division of opinion in the United States as to the nature of the Soviet Union and how to deal with it, most particularly how seriously to take its Marxist-Leninist ideology.

And a great part of the foreign policy establishment, many think tanks, said no, no, that is just a front for traditional Russian geopolitical interests. You look at those. Do not take the ideology seriously. Some of that seemed to be a carryover from having the Soviet Union as an ally in World War II, and the United States seems incapable of having an ally or even a solid relationship with a country without presenting that country to itself is a friend. Joseph Stalin was Uncle Joe until we were finally disabused of that. Is it accurate to say that that sort of indigenous incapability in the United States played into the misunderstanding and the relationship with China? ‘It must be our friendly competitor and not an adversary.’

Clyde Prestowitz:

Yeah, I think, you know, we kind of wanted China to be friendly, and open, and kind of like us. And what we really missed, and I really blame this on our China scholars and China experts, what we really missed was an understanding of the true nature of the Chinese Communist Party. We did not grasp that the Chinese Communist Party is not only a communist party but a Leninist party, that what it seeks above all else is power, and that it is diametrically opposed, and has always been diametrically opposed, to the values that we as Americans and as citizens of the Free World feel are fundamental.

And I think that on the one hand, we had a long Cold War with the Soviet Union, and during that time, of course, for the first part of that period, China under Mao Zedong was with the Soviets. And then Kissinger and Nixon did the kind of realignment with China in 1972, 1978, ’79. Then when the Soviet Union collapsed, and Deng Xiaoping had taken over, and Deng said to get rich is glorious, we really wanted [an end to the Cold War], you know. We were tired of the Cold War. We were tired of constant conflict with the Soviet Union, and we really wanted China to be fuzzy and nice and develop its economy. And we had faith that the economic interaction would stimulate it shift, not only in China’s economic policies, but also in its broader human rights and political policies.

I think there is another factor. One was wishful thinking. I think a big factor, honestly, was George H.W. Bush, whom I loved and admired. I worked for him for a while, and I thought he was a great guy. But after Tiananmen Square when the Chinese – we do not really know how many students they killed, but the low number is five or six hundred. And when that happened, you know, you might have imagined that Bush would have been shocked and that he would have really cracked down on further American investment in China or trade with China, or that he would have set some conditions for China, that if it wanted to continue trading with the U.S. and taking advantage of the economies of the Free World, it had to dramatically change its human rights policies.

But instead of that, Bush sent Brent Scowcroft, his National Security Advisor, immediately the next day to Beijing. And the message basically was do not worry, George Bush is your best friend, and he will keep the boats from rocking. Now, I have scratched my head, I cannot tell you how much. Why did Bush react that way? And I really do not know, but I suspect it was because Bush had been ambassador to China before he became president, and he seemed to have fallen in love with the Chinese staff that staffed his home and the embassy, and he had a soft spot in his heart for China.

And he may have had other strategic considerations, but in any case, Bush was not alone in this. If you remember, Frank Fukuyama famously wrote a book called The End of History when the Soviet Union collapsed, and obviously Frank was not paying any attention to China, or if he was, he thought China was going to become democratic, and free trading, and capitalist. You know, our top leaders and our top scholars, I think they wished for China to become what they wanted it to become, and it was presented that way.

It was not like there were no warning signals. I mean in 1992, I can tell you China was really poor. I went to China. I [participated in] the first trade mission to China in 1982, and I have never seen such poverty. 1992 was better than ’82, but it was still a poor country, and yet it decided to develop its own geo strategic satellite positioning system like the U.S. or like the Galileo system in Europe.

But the real signal in my mind that should have shaken Western leaders was the creation of the great firewall. This was in 1997. China separated the internet, the Chinese internet, from the World Wide Web. That was a clear, you know, declaration of war. It was a clear declaration by the Chinese Communist Party that they were going to control information. They were not going to let anything from the West seep into the garden they had created in China.

Bill Clinton’s reaction was ha ha ha, let them try. It will be like trying to nail Jell-O to the wall. They will not be able to control the internet. Well, ha ha ha, they did, and they do. And then, you know, in 2012, document 9, number nine on the ideological sphere, was released. And in this document, the Chinese Communist Party clearly, directly spells out that it rejects the notion of human rights. It rejects the notion of universal rights. It rejects free speech. It rejects the notion of fair elections. I mean everything that the West stands for, the Chinese Communist Party clearly spelled out they object to it, they do not agree with it, they oppose it. Nobody paid attention to that.

In 2015, China announces Made in China 2025 and they published a list of all the high-tech industries, semiconductors, telecommunications, biotech, etc. So, all of the leading cutting edge technologies of the future, China said publicly to everybody, we are going to make this stuff in China, and we are going to do it all by 2025, and so that was a clear declaration that China did not really believe in free trade, that it was going to subsidize its own Industries, try to obtain technology by hook or by crook in the West, and effectively squeeze Western companies out of those industries, in China at least.

So you know, it was not like we did not have warning. It was just that our leaders, our economists were in love with globalization, [and so were] our journalists, people like Tom Friedman of The New York Times, who famously wrote a book called The World is Flat. Our journalists joined with our economists in promoting globalization, interdependence, the notion being that through globalization – I mean George W. Bush made this comment that that free trade would automatically plant the seeds of democracy.

So there was just a lot of self-deception in American policy, and it was on the part of the elite of the U.S. These were not stupid people. These were the people in the Ivy League and in the Washington intellectual world, bright, smart, well-educated people, fooling themselves.

Robert R. Reilly:

It seems that that statement you just made, about how the free market will transform China politically into a free society and regime, is a form of free market economic determinism.

Clyde Prestowitz:


Robert R. Reilly:

That parallels Marxist economic determinism.

Clyde Prestowitz:


Robert R. Reilly:

I also want our viewers to be sure to know that you trace the terrible consequences of these illusions or delusions regarding the nature of the Chinese Communist Party back to the end of World War II and the behavior of General George Marshall, who everyone agrees was a great American hero in many respects, but made that fatal mistake in buying Mao Zedong’s portrayal of himself as an agrarian reformer, and forcing Chiang Kai-shek into both an alliance with him, and then to stop him from a military action, which most likely would have spelled the end of the Chinese Communist Party as well as the Soviet Union’s behavior of its continuing incursion into China after the war was over, getting, I think you said, down to within 50 miles of Beijing, and then turning over those territories to the Communists. And still, we did not seem to catch on.

Clyde Prestowitz:

Yeah, as you said, we revered George Marshall as a great man, and the Marshall Plan that resurrected Europe certainly was a giant stroke, but Marshall totally blew it on China. But I would say that, you know, a lot of other people were also involved. I mean during World War II, the president of China was Chiang Kai-shek, who governed having won elections under the nationalist party, Guomindang. And Chiang made this interesting comment once. He said that, “The Japanese were like a disease of the skin, but that the Communists were a disease of the heart.”

Before World War II, before the Japanese invaded, there was conflict between the communists and the nationalists, and by 1933, Chiang Kai-shek had pretty much defeated the Communist Party in most of China. And in fact, the Communists were forced to make what they call the great March. And you remember that Mao began with like 85,000 of his followers in Southwest China, and in the course of a year they moved, they marched, they walked to Northeast China.

What I find interesting about that walk is that Mao did not walk. He was carried on a caravan chair. But when he arrived at Yanan, his final destination, the 85,000 had shrunk to ten thousand, so Chiang Kai-shek was in pretty good control of China, but then in 1935 the Japanese began their invasion, and Chiang was forced to deal with the Japanese. And they were, of course, much better armed and much better organized than the Chinese.

We think of the war beginning in 1941, but for the Chinese it began in 1935. And during that period, the Japanese pushed Chiang Kai-shek into the far west of China. What we do not think about too much is that after Pearl Harbor, we, of course, went fully to war with Japan, but we were not in any kind of direct contact with the Chinese. Japan was occupying most of China, so for us to get to Chiang Kai-shek and to get supplies to Chiang Kai-shek, we had to fly over what is called the Hump over the Himalaya Mountains just to supply him.

We sent General Stillwell to be an advisor to Chiang Kai-shek. Stilwell was known as Vinegar Joe. I mean even American soldiers found him a very difficult guy. He had the advantage that he spoke Chinese, which is I guess why he was sent to work with Chiang Kai-shek, but he detested Chiang Kai-shek, and Chiang came to detest him, also, so it was not a happy relationship. But during the war, Chiang Kai-shek tied down two to three million Japanese soldiers who otherwise would have been available to fight against the U.S. in the Pacific Campaign.

Anyhow, we won the war, the Japanese surrendered. The communists had really not done much fighting against the Japanese. Their strategy was to lay low and let the Japanese decimate Chiang Kai-shek’s army. They were supported by the Russians. And then once the Japanese surrendered, the big race came. Who was going to take the surrender of the Japanese? And the Russians under Uncle Joe Stalin rushed weapons, and trucks, and everything to Mao to enable him to take [the Japanese] surrender in the northwest of China near Beijing.

We delayed. Somehow, we could not seem to get the airplanes and the ships to Chiang Kai-shek to enable him in time to get to northern China. Anyhow, long story short, we never really gave Chiang Kai-shek the support that he needed in my view. But then we get to 1947-48, and George Marshall, who had been Secretary of State, was asked by President Truman to go to China.

A great man though he was, George Marshall knew nothing about China, and certainly nothing about the animosity between the Chinese Communists and the Chinese nationalists. And his idea was to have a coalition government, to get Mao and Chiang Kai-shek to work together in a coalition government to rule China, and it just was not going to happen.

But Marshall had a strong weapon to force Chiang to do what he wanted because we were supplying Chiang’s army, substantially. The Russians were supplying Mao, and Marshall threatened he would cut off supplies to Chiang Kai-shek if Chiang did not agree to a coalition government, so Chiang did agree, under pressure of course, but it did not work. It totally did not work. And the fighting continued, and we sent other generals to China to study the situation. But the bottom line is we did not really support Chiang Kai-shek in his contest with Mao Zedong, and Mao won, and so here we are.

Robert R. Reilly:

One thing that at first puzzled me was why in so many chapters of the book, you have chapter headings which are quotes from scripture, and then I reached the statement you made that helped me understand exactly why you did that, and it made complete sense. I am quoting you here. “One may think of Xi as the Pope of the Chinese anti-church, and of the Party as a theocracy with the goal of creating a hegemonic China that will become a kind of Heaven on Earth.” So, I think you very acutely diagnosed the nature of the Chinese Communist Party as a pseudo-religion.

Clyde Prestowitz:

Yeah, well, I think it is absolutely essential to understand what the Chinese Communist party is really all about. Unfortunately, in the West we no longer take religion very seriously, but I do not think you can properly understand the Chinese Communist Party under Xi Jinping [without understanding religion].

You know, if you think of the Inquisition, the Spanish Inquisition, or think of the orders of the Roman Catholic Church, the Jesuit order of the Roman Catholic Church, and you know, the deep commitment to a particular faith or way of thought, that is how you have to see Xi Jinping and the Chinese Communist Party. You know, the U.S. idea that okay, if we get engaged in free trade, free markets will loosen this system and cause it to change, well, no, they will not because the system is not going to allow free markets to get in the way of what the system was, what the faith insists upon.

And you know, if you think about, well, maybe through closer ties and coupling with China, economic coupling with China, that will moderate and loosen up, it will not because above all, above all, the Chinese Communist Party aims to maintain power. It is all about power. Everything else is second. So if you do not understand that, I do not think you can adequately deal with China. It is an anti-religion.

Robert R. Reilly:

Which helps explain the reason for religious persecution in China.

Clyde Prestowitz:

Yeah, I mean there is another element here involved as well. When we think of China, we do not even think about this, but what we mean is we mean Han Chinese. There are a lot of different minorities in Chinese. You have got the Uyghurs, the Mongolians, the Han. Over centuries, the Han have expanded so that today probably 90 percent of [Chinese citizens] are Han Chinese. Tibetans are not Han Chinese. Uyghurs are not Han Chinese.

But what you have seen over centuries, and particularly what we are seeing since the communists gained control of China, is suppression of the minority ethnic groups in China, and so we are aware today of the suppression of the Uyghurs because of the extreme measures the Chinese have taken, but if you look at Tibet, it has been Hanified. The Chinese not only gain control of Tibet, but they began sending Han Chinese as immigrants, or emigrants, to Tibet, so the population of Tibet today is probably less than half Tibetan.

Mongolia is very interesting. You have Inner and Outer Mongolia, so Inner Mongolia is part of China, [while] Outer Mongolia is an independent country. But in Inner Mongolia just in the last few years, the government of China has required that the schools teach in Mandarin, so the Mongolian language is being suppressed in Inner Mongolia because the kids are all being taught in Mandarin. And the same kind of colonization is taking place in Inner Mongolia of putting Han Chinese there.

So not only is China a dictatorship, and as I said, committed to a kind of an anti-religion, but it is racist. And this is something that is funny, but it is sad. We in America are tearing ourselves apart because we are talking about inequality and racism in America. The United States is like the least racist country that I have dealt with in my life, and China is a hugely racist country, but nobody ever talks about it. It is just ironic.

Robert R. Reilly:

Let us get back to the Marxist side of the Marxism Leninism evident in the Chinese Communist Party. Kevin Rudd, the former Australian Prime Minister and the president of the Asia Society, I think is one of the most insightful thinkers on China, a Mandarin speaker, as you know, and he makes this observation about the recently concluded 20th Party Congress in China. In referring to the report on the Party Congress, he says, “The term “Marxism” itself is referred to 26 times in the work report — double the number that we saw in the already ideologized report of 2017. The Marxist-Leninist concept of “struggle” (violent or non-violent) as the means by which to realize domestic or international progress against the Party’s stated objectives, has 22 references,” and so forth.

Now, in your book you quote a Communist Party leader, Chen Yun, as saying this, “We are the Communist Party, and we will decide what communism is,” so that is the intriguing question. Anyone who has been to China looks around, and if one compares it to one’s experiences in the Soviet Union, you clearly, immediately think to yourself, well, this is not Marxism Leninism as we knew it there, so something is different here. So how is the Party defining communism for itself today?

Clyde Prestowitz:

Well, as you know, whenever they discuss this, they talk about Marxism Leninism with Chinese characteristics, and so I think the quote you made is very apropos. Chinese communism is what the Chinese Communists say it is. And Xi is the biggest Chinese Communist with the biggest stick, and he is telling everybody what it is.

What I find fascinating is that I think now most experts, analysts and leaders in the Free World, have concluded that Xi Jinping is a true believer. He takes Marxism seriously. He analyzes issues in Marxist terms and framework, but it took people a long time to understand that. You know, when Xi first came into office, there was a feeling in the Free World that, hey, he is a younger guy and somebody that we can really work with. They had no idea that he was going to be another Mao, but he is, and so I think, you know, communism with Chinese characteristics is what Xi Jinping says it is.

Robert R. Reilly:

You imply that the fall of the Soviet Union sent tremendous shock waves through the Communist Party of China.

Clyde Prestowitz:

It did, and Xi has spent a lot of time, and a lot of effort, and money to try and understand what happened to the Soviet Communist Party because I think his greatest fear is that the same thing could happen for the Chinese Communist Party, and he has really tried very, very hard to understand what happened to Soviet communism. Why did they suddenly fall apart? I am not sure he understands it, but to the extent that he does, he will take all measures to prevent it.

Robert R. Reilly:

Which primarily seems to have included a reinvigoration of the ideology and ensuring that Party members are thoroughly indoctrinated in it and engaged in the doublespeak that is necessary with this ideological worldview, which also, Clyde, you point out very presciently contains the idea of a continuous state of struggle. Complete that thought.

[If] not for the existence of the United States, or something similar, the Communist Party of China would have no reason to exist, so they have to think of themselves as Marxist Leninists as being in this continuous state of struggle, is that right?

Clyde Prestowitz:

I think that is right, yeah. I mean I think a Leninist party is always scared to death of losing power, so everything has to be, you know, watched carefully. Cadres have to be tested and retested to prove that they are true believers. And we have seen it in the Soviet Union, and we see it in China, that factions arise because, obviously, some people are beginning to think a little bit differently, and then there is conflict. And the leaders do their best to cut it off, tap it down, surveil it.

I mean it is a brutal [system]. I myself wonder, why does anyone want to join this Party? Why does anyone want to be a Communist Party leader? Because, man, it is brutal and unforgiving. Just think about the number of people that Xi Jinping has thrown in jail or killed. I mean it is just unbelievable.

You know, I have a friend, Jimmy Lai, who was a publisher in Hong Kong. He is in jail. He is going to die in jail. Xi Jinping basically put him there. Why? Well, because he did not believe in the Communist Party, and so, you know, it is really a very unforgiving system.

Robert R. Reilly:

And Cardinal Zen is in jail, too.

Clyde Prestowitz:

Yeah, Cardinal Zen is in jail. You are probably aware that right now a number of Wall Street kingpins are in Hong Kong, celebrating the opening of Hong Kong from COVID, and talking about how great the Hong Kong market is going to be and the recovery of Hong Kong. And they are all speaking next to this guy, John Lee [Ka-chiu], who is the guy who put Jimmy Lai in jail. He is a puppet for Xi Jinping.

It just really, really gets me upset to see influential American leaders paying homage to that kind of thing, but they do, or you know, let us take a company like Apple. We call it an American company. It is not. It is chartered in the United States, but I can tell you that Tim Cook in Washington is a powerful player. He has instant entrée to anybody in Washington. Apple spends millions, maybe billions, of dollars every year on lobbyists influencing Washington.

In China, Tim is on his knees. He has no clout. He does what the Chinese want. And I will give you just a good contrast. In 2015, there was a shooting in Bakersfield, California, and the shooter dropped his iPhone. The FBI got the iPhone and asked Apple to open it. They wanted to get the information, and Apple absolutely refused. It went to court, but before the court settled, the FBI found an expert who could open the iPhone, so the court case was left unsettled.

Fast forward to 2019 and students are demonstrating in Hong Kong. There is an app in the Apple App Store called Hong Kong Map Live. With that app you can see Hong Kong in real time. The kids were using it, and they were looking at the map and said, oh, the police are over here, oh well, we will go over here. Well, this was driving Beijing crazy. The People’s Daily began running a huge publicity campaign against that app and against Apple, and within two days that app was out of the App Store, so that tells you where Tim Cook sits.

It is not just Tim, you know, American businesses, General Electric, FedEx, lots of the of the high-tech companies have put big investment in China. They have transferred big technology to China. The U.S. Chamber of Commerce, the U.S. China Business Council, we call them American lobbying groups. They are not. They are Beijing lobbying groups. My feeling is that the United States needs to recognize that its own business leaders are captive. They are hostage. They are not really acting in the best interests of the United States.

Robert R. Reilly:

You point out that Hollywood has fallen victim to this as well. And we know that Disney releases different versions of movies than they release in the United States so as not to offend the Chinese Communists.

Clyde Prestowitz:

Or, you know, take the basketball coach. Remember last year or so, the basketball coach [of] the Houston Rockets tweeted on behalf of the demonstrators in Hong Kong, and immediately NBA games stopped being televised in China. The NBA warned its coaches to not tweet. And we are supposed to be the country of free speech, but the NBA cannot have free speech because it might cost them a billion dollars in the China market. It is really corrupt.

China’s Surveillance at Home

Robert R. Reilly:

The extent of surveillance within China of its own citizens seems to have reached an Orwellian state.

Clyde Prestowitz:

China spends more money on internal security than it does on its Army and Navy. It has two defense budgets. One defense budget is aimed at the outside world, and the other defense budget is aimed at inside China.

Robert R. Reilly:

So the Chinese people are even a bigger enemy than the United States, to the Party?

Clyde Prestowitz:

Potentially, they are.

China’s Surveillance Abroad

Robert R. Reilly:

I note in the news, also, Clyde, remarks about what are called the Chinese service stations in various countries. The Dutch government recently ordered China to remove so-called service stations that China represents as being present there to help Chinese citizens renew driver’s license and other things, but what in fact they are doing is threatening those citizens to fall in line with the Communist Party line by saying your relatives in China will be in danger if you continue doing or saying these things, so it is an exercise of control even in Western countries. And perhaps in the United States, too?

Clyde Prestowitz:

Yeah, this is not widely recognized, but in the United States, take an example, in the not very distant past there were a lot of Chinese language newspapers in New York, in San Francisco, around the United States. Those newspapers are all owned now by China’s communist organs. Australia, [had] a similar thing. There were a number of Chinese language Australian newspapers. They also were independent. They have all been captured by the Party.

And interestingly, this gets back again to this issue of racism. The Chinese Communist Party does not understand, you know, the notion of a Chinese American. If you are Chinese, you cannot be anything except Chinese in their view, and so on the one hand, they look to the immigrant Chinese community as a mechanism through which they can observe the West, the U.S., Australia, other countries, but also, they look upon those people as – they try to make them captive, so I mean everything in China is about coercion.

And you know, there has been a lot of talk in the U.S. about – because of some of the measures that President Biden and President Trump have taken, some people feel that Chinese students in the U.S. are less welcome, or that they are being discriminated against. What is not well understood is that the Chinese government, the Chinese Communist Party, watches those students. And sure, most of the students are innocent and are just here to get an education, but they are being watched. They are being disciplined, and some of them are being used. It is just a fact. It is not a matter of being prejudiced. We just have to wake up to reality.

The United Front Work Department

Robert R. Reilly:

Which brings up the subject of the Confucius Institutes and the role they play.

Clyde Prestowitz:

Oh, yeah. Confucius would gag if he knew what they were, but again, the Party attempts to politicize and control everything, and the institutes are just another [form of] outreach. You know, one of the major elements of the Chinese Communist Party is the United Front. I mean from the beginning of communism, even Lenin, the strategies have a united front.

So, find all of the other political elements out there, and to the extent that you can, try to use them and make them part of your front so that you may look much bigger, more powerful than maybe you really are. And the United Front part of the Communist Party is big and heavily funded, and it particularly watches overseas Chinese. It tries to coerce them and use them in various ways.

And I mean take an example here in Washington, D.C. I am sure you have seen it. The Washington Post periodically will carry an insert of The China Daily. That insert is being paid for by the United Front Working Commission of the Chinese Communist Party. I have written letter after letter to The Washington Post, asking them why they want to become a propaganda outlet for the Chinese Communist Party.

And you know, obviously, The Post is not doing well financially, and it wants to make money, and that is one way they do, but it is dishonest, and it is lending themselves to the Chinese Communist Party.

Robert R. Reilly:

One could almost say that generally about media, can you not? I mean they are allowed to do things within the United States and Western countries that they would not allow Western media to do inside of China.

Clyde Prestowitz:

Absolutely, I mean there is a lot of Chinese media in America. Right now, in China, Keith Bradsher of The New York Times, I think, is like the last reporter for a major American, maybe even a major Western, newspaper in China. Financial Times does not have anybody. The Washington Post does not have anybody. The Wall Street Journal does not have anybody, so yeah, it is pretty sad.

Chinese Infiltration of Australian Society

Robert R. Reilly:

You give examples of Chinese infiltration into various countries and societies. And one of the most compelling are the details you give on Australia, the extent to which financial corruption or money was used to infiltrate the society and the political order through payments, and gifts, and trips, and all the other things we have been discussing, to the point that Australia eventually woke up and said that these foreign payments, meaning mainly China, were creating, and I am quoting, “a threat to our sovereignty, the integrity of our national institutions, and the exercise of our citizens’ rights,” unquote.

Clyde Prestowitz:

Yeah, no, the Aussies have begun to wake up, but it took them a long time. China, go back ten, maybe more, maybe 15 years, the Chinese targeted both Australia and Canada as societies that they could easily infiltrate and use to kind of undercut or turn against the U.S. And of course, both of those societies, both those countries are part of the so-called Five Eyes intelligence collaboration of the Anglo countries.

And you know, Australia was wide open, relatively small, big physically, but [it has] 27, 28 million people, you know, about the size of Shanghai in population, with a big Chinese community, and so the Party, the Chinese government, put together an extensive plan, which is still being pursued, to infiltrate and penetrate Australia. They have begun to wake up, but it took the Australians a long time to catch on. And to be honest, I think Canada is in similar shape. I am not sure the Canadians have recognized it as much as the Aussies have.

Robert R. Reilly:

Well, at least they just recently ordered China to divest itself of several Canadian mining companies.

Clyde Prestowitz:

They have, that is a very good point. But take Australia, I mean half of the infrastructure, the communications infrastructure in Australia, is owned by Chinese state-owned companies. Several of the ports are owned by Chinese state-owned corporations, so the penetration is enormous. And Kevin Rudd certainly gets it. And other Aussie leaders have begun to get it as well, but it is very dangerous.

Scholz’s Visit to China

Robert R. Reilly:

And Germany has just agreed to sell a large minority share in its port facilities in Hamburg, so not everyone appears to get it.

Clyde Prestowitz:

Right, I do not know what Scholz thinks he is doing. You know, Angela Merkel really made big mistakes in her dealings with the Russians and the Chinese. And Scholz seems to be kind of caught in between. I am glad, frankly, to see that Scholz is getting a lot of criticism in Germany over that Costco decision. And I am hoping that the Germans will become more aware of how vulnerable they are.

But what is going to happen I think is this. So the big German auto companies, BMW and Mercedes, VW, have put a lot into China. What is going to happen, I believe, is that they increasingly will lose market share in China, or they may maintain the German name, but the production, and all of the work, and value is going to be done by Chinese. And the German companies will find that they are on the short end of the stick. They have not woken up to that yet, but they will, maybe late in the game. So I think already a lot of German companies are seeing the writing on the wall. The auto companies not yet.

Reason for Optimism

Robert R. Reilly:

Your book is a startling wake-up call. Does the general situation leave you as a pessimist or an optimist in this?

Clyde Prestowitz:

I am in-between, I guess. I think that the U.S. has certainly begun to wake up. And the Biden administration, particularly with its semiconductor policy, I think, is moving in the right direction. And I think that I even saw an article by Joe Nye this morning kind of apologizing for past innocence about China, so I am beginning to feel that the U.S. is getting it.

It is hard for the U.S. to be organized, though. As I said, we have got these Wall Street giants who are in Hong Kong today. We are a free country, and it is very hard to organize the United States, and so I think we are moving in the right direction, but we still have quite some way to go. Interestingly, the Japanese and the Aussies, and certainly the Taiwanese and the South Koreans, have become much more unified with the U.S., so I am somewhat encouraged, but you know, this is not the time to declare victory. We have a long fight, road ahead.


Robert R. Reilly:

Clyde, we want to thank you for joining us at the Westminster Institute today. And I want to encourage our audience to go to the Westminster Institute website where you will see our other speakers on the subject of China and other topics such as Ukraine, Russia, the Middle East, where you will see our offerings on our own YouTube channel and our publications. Thank you for joining us today on the subject of Clyde Prestowitz’s new book, The World Turned Upside Down: America China and the Struggle for Global Leadership. I am Robert Reilly.