Can China’s Economic Might Overcome G7 Effort to Curb CCP? | Zooming In China | Simone Gao Analysis

Welcome to Zooming In China Tea Time, I am Simone Gao. At the G7, member countries formed an alliance against China. Leaders from these seven countries criticized China for its human rights abuses and unfair economic practices — creating the strongest collective warning the group has sent to Beijing since Xi Jinping rose to power. However, despite America, Europe and Japan’s criticism, China still attracts the largest investments in the world. Who is pouring money into China? And will China form a powerful alliance of its own? Let’s get started. 

The G7 final statement, issued on Sunday, directly mentions a number of contentious issues involving Beijing — from the crackdown in Hong Kong to harassment of Taiwan to the use of forced labor in Xinjiang. The communique also calls for another international study into the origin of the coronavirus and goes after China’s Belt and Road initiative. And, to counter China’s loan policies with developing countries, the G7 will offer a $100 billion alternative.

The communique also pledges to strengthen rules that protect against unfair practices, such as forced technology transfer, intellectual property theft, lowering of labor and environmental standards to gain competitive advantage, market-distorting actions of state-owned enterprises, and harmful industrial subsidies.

The daily beast reported that President Biden tried to persuade his colleagues to sign a joint statement calling out China directly for forced labor practices in Xinjiang province but failed.

The final communique did call out China’s name in some occasions involving Hong Kong, Taiwan and general human rights problems in Xin Jiang, but it did not name China when describing details.

Nevertheless, this is a historic convergence between America, Europe and Japan on their attitude toward Communist China. 

As we know G7 accounts for close to 60% of global net wealth, 39% of global GDP and 10% of the world’s population. Most members are Great powers in global affairs and maintain close economic, military and diplomatic relations. All of them are democratic countries. 

So, if such a cluster of powerful nations consider China a strategic rival rather than a partner, will the rest of the world lose confidence in China’s economic prospects? 

Not very likely. In fact, as of today, China is still the hottest target for institutional investors. There are companies leaving China, but there are also companies trying to enter the Chinese market.

As an example, for the first time Apple used more suppliers from China than from Taiwan in 2020, and Apple’s Chinese suppliers increased to 51 compared to 42 last year.  

Apple is the biggest tech company in the world and sold more than 300m devices in 2020. Apple needs a huge manufacturing base and skills pool, and the best place to find each is still China.

It is also still the case that Chinese suppliers offer prices that competitors find it difficult to compete with. 

It is a familiar strategy from China: “They are willing to take low-margin businesses that other suppliers are reluctant to pick up,”  “This way, they could gradually level-up by working with Apple and can later bid for more business the next time.”

Chinese suppliers don’t do this for every foreign company anymore, but Apple is still worth the temporary sacrifice because being an Apple contract manufacturer greatly boosts the Chinese company’s image. 

Apple’s biggest manufacturer in China was Foxconn, a Taiwanese company. 

But because of the uncertainty that both the trade war and the impact of the pandemic have put on the future of China’s economy, Foxconn decided to leave China and move its manufacturing facilities for Apple to India, Vietnam and America. 

Apple CEO Tim Cook wanted Foxconn to be responsible for manufacturing Apple products for the non-Chinese market and to let Chinese manufacturers produce those products for the Chinese market. 

But recent reports indicate that Foxconn has encountered problems in the new locations. In India, workers’ salaries are lower than that of the Chinese, but they are not willing to work overtime, a big contrast to the workers in China. The manufacturing base in Vietnam is significantly less sophisticated than that in China. And Foxconn is struggling to bring the supply chain from China to Vietnam. 

The Apple example gives us a clear understanding that it is hard for these mega-corporations to leave China, let alone create a made-only-in-America manufacturing line. Not only will the production costs double or triple, America simply doesn’t have the manufacturing capabilities anymore. That is not exclusive to America. No one else in the world has the industrial manufacturing capabilities of China. 

According to the World Bank, in 2010, China surpassed the United States to become the largest manufacturing country. Among the more than 500 major industrial products, the output of more than 220 of them by China ranks first in the world.

 

China is the only country that has all 41 major industrial categories, 207 medium industrial categories, and 666 industrial sub-categories as defined by the United Nations Industrial Classification.

China can basically make anything. No other country has that capability.

This is why it may seem hard for some mega-corporations to leave China. But we have also observed that other companies did leave China. 

Since the start of the U.S.-China trade war in 2018, a large number of Japanese companies have withdrawn from China, including century-old camera giant Olympus, Omron Precision Electronics, Mitsubishi Heavy Industries, Toshiba Machinery, and more. 

At the end of 2020, the Japanese government introduced a subsidy policy to compensate companies that withdraw from China. The first batch of companies that applied for relocation subsidies was nearly 90, but the second batch had nearly 1,700 as of the end of July, indicating that Japan is withdrawing its entire industrial chain from China.

American and European companies are leaving China as well. America’s Nike and Germany’s Adidas have both decided to close their only directly operated factories in China. Philips Lighting and Samsung also closed their factories in China.

Why did these companies leave China? 

First, the pandemic made the world realize the danger of overreliance on Made in China products. Governments around the world are trying to move essential manufacturing, such as medical supplies, back to their own countries. 

Second, China’s manufacturing, labor, property and raw material costs are all increasing, making it hard for these companies to make a profit in China. 

Third, China’s favored-status policies for foreign companies are disappearing. 

To sum it all up, some companies are leaving China, some companies are staying in China and some companies are trying to enter China. 

What’s the ratio? I may bore you with quite a few numbers for a minute, but please bear with me. These numbers are important. 

According to the Chinese official data, in 2020, foreign direct investment in China totaled $144.3 billion, marking a 4.5% increase from the previous year. Please note that in 2020, global foreign direct investment decreased 38% from the previous year, but investment in China increased 4.5%.

So, despite the trade war and the pandemic, countries are still pouring money into China.

Who are these countries and companies? 

In 2019, the top ten foreign direct inventors to China were: Hong Kong, Singapore, South Korea, Taiwan, Japan, U.S., UK, Macao, Germany and Holland. 

In 2020, U.S. foreign direct investment in China dropped by roughly a third, while Holland’s investment in China increased by 47.6% and the U.K.’s increased by 30.7%. 

So, some European countries were much cozier to China than the U.S. in 2020. But just a few weeks ago, the EU suspended their EU-China Comprehensive Agreement on Investment that took seven years of negotiations and was finally agreed to in principle at the end of last year. The wind in Europe shifted. 

Nevertheless, China is still attracting more investment than any other country in the world. This is especially true with foreign indirect investment where the money goes to the capital market. 

In 2020, China attracted $254.7 billion in investment in the bond and stock markets, an increase of 72% from 2019. This is a very large investment increase compared to foreign direct investment in China. That increase was only 4.5%. 

Who are those that pour money into China’s stock and bond market?

Wall Street giants are definitely expanding their China businesses as Beijing has pressed ahead in the last three years with efforts to increase foreign investment in the country’s capital markets, as well as allow foreign firms greater control of their local operations.

BlackRock announced on May 12th that it had received regulatory approval to begin asset management in China through a joint venture with a subsidiary of China Construction Bank and Singapore’s Temasek. BlackRock will own 50.1%, while Temasek will hold a 9.9% stake.

Separately, Bloomberg reported this week, citing a source, that Goldman Sachs is hiring 320 staff in mainland China and Hong Kong. There are plans for 100 more positions later this year, the report said. 

The biggest move will potentially come from Citi who expects $300 billion to enter the bond market as a result of FTSE Russell officially adding China to its World Government Bond Index in October.

That said, the share of foreign investment in China’s capital market is relatively small, especially for American and European countries. 

Because China doesn’t publish transparent data about its bond market, there is a myth about which companies are actually investing in China’s bond market.

Last year, China’s famous internet portal Sina Finance published a research paper that gave out the geographical composition of Chinese US dollar bond investors. Among those investors, the Asia-Pacific region accounts for about 85%, Europe and the Middle East account for about 10%, and North America accounts for just about 5%. 

Although small now, Wall Street giants are definitely trying to hold a bigger share in China’s capital market. 

In fact, if you look at the 600 foreign investment companies that China allows in the country, you can spot quite a few American institutions including JP Morgan, Morgan Stanley, Goldman Sachs, Black Rock, CITI Group, Yale, Harvard, Stanford, Princeton and others. 

So, the institutional investors that manage your retirement money are investing those hard-earned dollars in Chinese companies that could pose a national security threat to America. At the very least, the money will boost the overall economic might of China who is the number one rival of our country.

Yet, you can hardly blame your investment manager. Next to the need to make money themselves, their biggest fiduciary duty is to make your wealth grow. And China is the world’s bright spot for investment return, at least for now.

So, despite the trade war, the pandemic, and the very real national security concerns, money is still pouring into China.

A few days ago, President Biden expanded the ban on US investment into Chinese companies that have ties to the Chinese military or help build a surveillance state. No doubt this is a step in the right direction. The U.S. government is finally casting their eyes firmly on the money. But does this strategy have real teeth, and more importantly, does it hit the real target? We will reveal those answers in upcoming episodes.  

Thanks for watching Zooming In China Tea Time. Please like, share, subscribe and donate to this program if you like my content. I am also on Rumble, Gab, Parler, Locals, Safe Chat, Facebook and Instagram. I will launch my membership website very soon as well. Stay tuned, and I will see you on Friday.

America’s Fate| Conversation between Simone Gao and Sec.Pompeo |Olympics| Wuhan Lab|Zooming In

China’s rise is changing the world.

Stay with me, as I search for the truth about
China that matters to us all.
Mike Pompeo, former Secretary of State of
the United States and former director of the

CIA, served in the U.S. Army, and is the number
one sanctioned U.S. official by the Chinese

Communist Party.

We sat down to discuss the trajectory of the
US China relations that might reshape the

world order.

You are very strong in pushing for seeking
the truth of the origin of the virus.

What’s your theory?
The coverup is complete.

It is thorough.

It is deep.

The single biggest threat to the way of life
for the American people is the Chinese Communist

Party.

Period, full stop.

The Republic is almost certain to fall only
when Americans lose their virtue.
What is the role of a good political order
in the journey of us to fulfill the human

soul?

Okay, thank you, Mr. Secretary for joining
Zooming In China today.

It’s great to be with you.

Thank you so much for having me on the program.

I’m looking forward very much to our conversation.

I think the sad truth about the Chinese Communist
Party is that they effectively control 1.4

billion Chinese people, and they have a strong
economy.

And I think to them, if you have those things,
you can basically do whatever in the world,

and the world cannot do much about it because
you hold the 1.4 billion people hostages.

And what’s even worse is that you hold those
people hostages probably not totally against

their will.

So, how do American and the free world deal
with a situation like that?

This is not new in the annals of civilizational
history.

We have seen nations who had the capacity
to control the information that their people

receive to dominate them.

It’s even more exaggerated today because the
surveillance state is so deeply buried inside

of China.

The ability for Xi Jinping and the leaders
of the MSS and the People’s Liberation Army

to all know what individual transactions look
like.

The digital currency is another step in the
same surveillance-state direction.

So it’s an enormous amount of power, but
we’ve seen this before.

We saw in the Soviet Union.

We saw in Eastern Europe.

We’ve seen this where people at some point
understand that they’re being denied the capacity

to raise their family the way they want to,
and they are just not going to take it anymore.

What can others do?

What can others externally do?

We should do the things that we have done
all along.

When we found nation states that were trying
to export that model around the world.

We said no.

We said we are not going to accept it.

We’re not going to let you have favored status
at the World Trade Organization.

We’re not going to let you continue to take
science out of the World Health Organization.

We’re not going to allow you to trade in the
United States on terms that are deeply disconnected.

I mean you know this Simone.

An American business that wants to invest
in China has one set of rules, and a Chinese

business that wants to invest in America,
gets to benefit from all the greatness of

our nation here.

That’s crazy.

And for the first time, an administration,
President Trump and my team, for the first

time, we pushed back against what the Chinese
Communist Party has been taking advantage

of here in the United States.

It’s unfair.

Millions of American jobs destroyed; billions
of dollars in American wealth transferred

to China.

It’s unacceptable.

I’m confident that the rest of the world can
now see this.

And we’re starting to see nations all across
the world push back against this very real

threat.

We slept on it for a long time here in the
United States as well.

For decades, we thought selling more trinkets
would bring the Chinese Communist Party into

alignment with a Western vision of basic human
rights and the rule of law.

That failed.

It didn’t happen.

And I think the United States now understands
that.

I think the American people now understand
that.

We’re going to get this right.

I think the Trump administration and the State
Department have achieved a lot in this regard

but I’m concerned with the people in China.

Because they’re so heavily influenced and
controlled by the Party.

I think if you let the Chinese Communist Party
to choose what they fear the most, is it the

1.4 billion Chinese people to go against them
or the rest of the world?

I think they will choose the former.

So how does the American leadership deal with
this problem?

I think you have it right.

But when a government is more scared of its
own people than anything else, that tells

you all you need to know about the real authority
that that government has.

When they are afraid, when the truth destroys
the regime, you know this is a weak leadership.

You’re spot on.

I could talk about the South China Sea, or
I could talk about what the Chinese were doing

in Africa.

And there’d be a little squawk from Global
Times.

When I talked about the Chinese Communist
Party having only fewer than a couple hundred

million people out of 1.4 billion people,
and I made a clear distinction between the

Chinese leadership that wants an authoritarian
top-down surveillance state and people who

want to live their lives, you could see how
fragile the Chinese leadership was.

This is a country that is desperately trying
to hold on to power.

A leadership that is desperately trying to
hold onto power and will use every tool in

their kitbag to maintain it.

Your question was what can the rest of the
world do?

The rest of the world needs to shine a light
on this.

We need to be unequivocally clear about the
things that the Chinese Communist Party is

doing to people all across the world.

There’s going to be an Olympics scheduled
in just a few months inside of China.

The genocide Olympics will be held inside
of China if the International Olympic Committee

doesn’t get its head on straight and say,
“No, we’re not going to have athletes from

across the world travel to make Xi JInping
proud.”

This is fundamentally unacceptable.

I hope that the International Olympic Committee
will see the error in their way.

You know, in the United States, we moved an
all-star game in about 12 hours, the baseball

all-star game.

The world can move an Olympics in the time
that it takes.

We can do this.

I want those athletes to have the chance to
demonstrate their skills and all that they’ve

given their whole life to become excellent
in their sport.

Not only American athletes, but athletes from
across the world.

To force them to go to China, to a place where,
if they said what was on their mind.

Imagine an athlete that goes there and says,
“I think that conducting forced sterilizations

on Uyghur women is bad.”

Simone, what would happen to that athlete?

They’d be a permanent resident in China.

They wouldn’t get to go home to their family.

This is deeply concerning.

And the world needs to use the tools that
it has.

China needs recognition from outside.

It can’t hold power If the world will come
to demand that China simply behave like a

normal nation.

Those are the things we can do for every citizen
of the world including the people in China.

Talking about the whole of government approach.

I think the challenge for the U.S. government
is you have such a short-term policy period

compared to China.

So how do you deal with China, deal with the
CCP challenge using a whole of government

long-term strategy?

Yeah, your point is right.

So it is a challenge, but it’s also an enormous
opportunity.

It means when America gets it wrong, we can
course correct.

So our elections and our election cycle…I
get how the world says, “well, we may have

a new policy in a couple years, or in four
years.”

I’m convinced that the challenge that the
Chinese Communist Party poses to the world

will be broadly bi-partisan here inside the
United States.

I think Democrats understand that.

I’ll give you a good example.

When we passed the Uyghur legislation imposing
real sanctions on the Chinese leadership for

what they’re doing to the Uighurs in the West,
it got near unanimous support.

Almost every Democrat and I think every Republican
voted for that.

This is not a policy that’s going to flip
going back and forth.

Different administrations will take different
views on how to prosecute this.

But Secretary Blinken made clear he, too,
believes genocide is taking place as it’s

ongoing in the West.

The leadership in this administration has
made clear that they understand the threat

to the American economy.

I hope that they will build on what we did
in the Trump administration.

It will provide a lasting benefit to the people
of the United States if we get this right.

I think that I agree with you.

The two parties have reached an initial consensus
on the Chinese Communist Party.

And that’s probably the only unifying factor
for the two parties right now.

Do you think eventually the two parties will
reach a true consensus?

Because I think there’s still a little bit
of a difference because the Democrats, they

emphasize human rights.

You emphasize human rights as well, but the
Republicans, they put more emphasis on economic

fairness and free trade and stuff like that.

You think the two sides will converge eventually?

My sense is that this challenge from the Chinese
Communist Party requires every element of

American power to be used diplomatic and economic.

You talked about the work that we do to protect
religious freedom inside of China and to protect

human rights.

I actually think there’s a pretty broad consensus
already today.

Clearly different individuals, not even just
parties, different individuals will have different

judgments about the priorities, and how we
should push back.

But I don’t see there being any opposition
to America confronting the Chinese Communist

Party simply to demand that they behave like
a normal nation.

You have experience dealing with the Chinese
leaders and Chinese diplomats.

China and the U.S. had a meeting in Alaska
this year, and Yang Jiechi lectured the American

team for 20 minutes on Xinjiang and Taiwan.

With your experience dealing with them, if
you were sitting across the table from Yang

Jiechi, if he does that, what would you do?

Well, it’s always hard to know what one would
do in the moment, but it didn’t happen to

me.

I don’t think Yang Jiechi would have approached
the Trump administration in the same way.

I think it was partly that they were at the
very beginning of the administration.

I think the Chinese Communist Party wanted
to send a message to the Biden administration.

I don’t think this was about Secretary Blinken
in particular or Jake Sullivan, the National

Security Advisor who was there.

I think this was the Chinese Communist Party
sending a message.

It was a corollary to the message they sent
to us on January 21st when they sanctioned

me, when they sanctioned senior American leaders.

That message wasn’t about denying me the ability
to travel to China.

The message was Leaders in America, if you
do what’s right for your country, if you do

the things that matter to American democracy,
if you push back against the Chinese Communist

Party, there will be personal costs imposed
on you.

This was a threat.

And I think what you saw happen in China that
day or in Anchorage that day was a threat.

This is how Xi Jinping operates.

You’ve seen this.

He operates this way, not only as to the United
States but to countries all across the world.

When the Taiwanese are selling dried pineapple,
when the Australians are selling wine, when

African countries simply want to live their
lives and build power plants, they threaten;

they coerce.

They use their tools of power in ways that
increase political capacity for the Chinese

Communist Party to dominate these countries.

That’s their mission set.

It’s deeply inconsistent with how democracies
in the world operate.

These are the things that the United States
needs to respond to.

And when someone like Yang Jiechi goes on
a tirade like that, it is the responsibility

of American leaders to push back against it
and make the claim, the claim that we know

that America is a force for good in the world,
and that we’re going to stand with people

all across the world who are simply demanding
their most fundamental human rights.

Right.

And that’s why…the way they behave is the
reason why people in the world don’t trust

them.

Sure.

They lie.

They’re bullies.

They demand that they get to have the debates
on their terms.

We’ve all seen this.

Just watch their Twitter accounts, right?

Where they made a claim that says that the
Wuhan virus came from the United States of

America.

When they deliver PPE across the world that
doesn’t work.

They now have a vaccine that they’re attempting
to ship all across the world.

I’ll leave to professionals to determine how
effective that is.

If I were a citizen of the world, I’d want
a vaccine that came from the west.

That would be something that if I wanted to
protect myself and my family, I would prefer

a Western vaccine.

I hope, I pray, that every vaccine that is
delivered across the world delivers a good

health outcome for whoever takes that vaccine.

I truly do.

Whether it’s the Russian vaccine or the Chinese
vaccine, it’s important.

We need to get the globe vaccinated, but it
is very difficult to trust a regime who continues

to deny the world the ability to understand
how the heck this virus killed millions of

people across the world.

And the Chinese Communist Party says, “Nope,
we’re not going to let you know who patient

zero is.

We’re not going to let you know how this got
out of our country.

We’re not going to let your scientists in
to help us make sure that something like this

never happens again from one of our poorly
run, unsafe bio laboratories.”

The Chinese Communist Party continues to threaten
the world by their incapacity to understand

the risk of what they’re actually doing in
these biolabs.

And so, your point is well taken.

When the world sees the Chinese Communist
Party show up, they don’t trust them.

They don’t believe that they’re telling them
the truth and they are loathe to work with

them, except in the conditions which they’re
required to.

You are very strong in pushing for seeking
the truth of the origin of the virus.

What’s your theory right now?

Well, I mean assessment of such.

We don’t know the answer.

The cover-up is complete.

It is thorough.

It is deep.

They disappeared journalists.

They disappeared doctors, but this is how
authoritarian regimes operate.

We saw this right?

Think about Chernobyl.

Think about what happened there.

This is the same kind of cover up.

Authoritarian regimes reflexively deny the
world access when they get it wrong.

Every piece of evidence that we have seen
to date suggests this came from the Wuhan

Institute of Virology.

That it was likely a leak from that laboratory
and that they were unable to control the work

that they were performing, the gain of function
research that they were likely performing

in that laboratory, somehow escaped from that
lab.

I can’t prove it to you.

I can’t lay out the facts for you today, but
I can certainly give you an enormous amount

of evidence, a circumstantial case that suggests
that that is the most likely place where this

virus originated.

Media reports indicate that the American government
has indirectly funded the gain of function

research in the Wuhan Virology Institute.

Do you think that project will be defunded
by the American government altogether in the

future?

Goodness gracious I hope so.

But you are not sure?

Well, we certainly shouldn’t take American
taxpayer money to support Chinese activity

that has been performed in a way that is unsafe.

We have an obligation to get it right when
we do work here in our laboratories in the

United States, just like every other country
does.

The Chinese Communist Party has demonstrated
not just with the Wuhan virus, but multiple

times that their biosafety expertise is not
up to global standards.

I wish Dr. Tedros and the WHO cared about
this as much as the American people must.

We certainly shouldn’t be underwriting unsafe
laboratories.

When you and President Trump reordered the
China policy, what was the resistance you

met and why?

President Trump began by recognizing that
the trade that was taking place was fundamentally

unfair.

That’s how the policy set began.

Although you can see in our national security
strategy that was released in the fall of

the president’s first year in office…took
us about seven months…you can see the footprints

of how we proceeded on China in that strategy
document.

The first place you saw policy was on trade.

Well, what was the resistance?

When you impose tariffs, there are always
certain costs that come alongside that.

It impacted farmers here in the United States
of America.

We were able to ameliorate most of that cost,
but make no mistake, there are those with

deep vested interests in doing commercial
business with the Chinese Communist Party.

I don’t have any problem with someone doing
business there so long as the rules of that

trade…so long as the conduct that is being
engaged in is reciprocal and fair.

This is unproblematic.

In February 2019, Under Secretary of State
Keith Krach, a Silicon Valley veteran, invited

Secretary Pompeo on a 4-day trip to Silicon
Valley to meet with the country’s top tech

industry leaders.

I know you went to San Francisco with Keith
Krach to meet 36 Silicon Valley CEOs last

year.

What was the goal of that meeting and, what
did you learn from them?

We spent an awful lot of time listening to
technology leaders, to leaders in the finance

sector to help us understand how they experienced
their relations with the Chinese Communist

Party and what they saw inside of that country.

They were doing big business with them.

They had high-end technology.

They were both buying and selling.

They’re often distributing their products
there as well, just as our entertainment industry

does out of Hollywood.

We wanted to understand what they were seeing
and facing.

So we went there to listen.

We also went there to educate, and we spent
an awful lot of time doing that.

We know that they don’t have access to the
same level of information that the United

States government has.

We wanted to take that information that we
could, that was unclassified, and just explain

to them…give them the bigger-picture understanding.

If you’re a startup company in Silicon Valley,
and you found a Chinese entrepreneur doing

business with you and that all looks good.

We wanted to make sure that they understood
that it could well be the case that that person

had every intention of ripping you off, of
stealing your stuff, and that you needed to

be careful about that.

They all know, but we wanted to give them
examples.

We wanted to give them cases that we knew
about where things had gone badly so that

they could make good decisions based on real
information, not in a tunnel without access

to information that we possessed.

So they were great conversations.

We had similar conversations with financial
leaders in New York and in Los Angeles, making

them aware of the Chinese Communist Party
threat as well and how it could impact the

lives of them and their families.

How do you compare Silicon Valley with Wall
Street in terms of their attitudes towards

the CCP?

You can’t paint with that broad a brush to
two locations.

There are people on Wall Street who understand
the challenge and are prepared to support

freedom loving people across the world, and
there are those who just are there and want

to make a buck.

I’d say the same in Silicon Valley and in
Austin and all the places where we have great

technology here in the United States.

All the Trump Administration ever asked was
to make sure that we could secure our intellectual

property, that we could trade on a fair and
reciprocal basis.

If someone is investing in the United States,
we need to know who they are We need to make

sure they are not connected to United Front
operations here in the United States.

You saw, Simone, we had failed at that.

And ultimately, we had to close down the Chinese
consulate in Houston, where there was a sophisticated

den of spies operating.

They were stealing intellectual property from
American energy companies.

They were conducting activities at our research
institutions that are inconsistent with their

diplomatic requirements.

And we shut it down.

These are the kinds of things that the United
States must do if we’re going to confront

the challenge that Xi JInping presents to
us.

Out of all the 36 CEOs that you met with in
Silicon Valley, what percentage are just for

money?

They all love America, right?

They all know how much they have benefit from
operating in a place where there’s the rule

of law and property rights and a legal system
that gives them recourse and an educational

system that provides them with the most innovative
talent and engineers.

They get it.

They want to make sure they preserve it.

I take them all to be deeply patriotic and
trying to work alongside.

They have interests.

They have shareholders.

They have Boards of Directors.

They have real responsibilities.

We need to work alongside them, not in an
adversarial way.

To work alongside them, to help them understand
and to help them work within the confines

that make sense.

I think a big proportion of the American population
has concerns with Silicon Valley people and

Wall Street people, but you’re still confident
that they can turn around.

They are mostly people of the Left inside
of our democratic institutions, right?

These big tech companies are mostly populated
in the states that we have that are heavily

liberal.

That means that they have a view of things
that is different.

The policies that they propose are radically
different from the ones that someone like

me, a conservative Republican, would provide
for.

We have to deliver on American national security.

This can’t become a partisan issue.

And that’s one of the things we went to share
with them, that there is real risk to their

business.

I can tell you about stories of some of America’s
biggest companies, where their product is

on every laptop inside of China and their
revenue is near zero…stolen intellectual

property sitting in the hands of the Chinese
Communist Party being used in an adversarial

way against the United States of America.

That is reckless.

These companies need to understand this risk.

And I think when they do, they’ll begin to
conform their behavior in a way that makes

sense for their business and for the country.

Israel and Palestine.

Last week, the Israeli and Palestinian conflict
exploded.

That’s not the only thing.

Recently, China, Iran and North Korea, all
have problems, aggressive movements.

Are these all just coincidences or they happen
altogether at this moment for a reason?

Well, it’s hard to know.

It’s hard to try and link these things up,
but it’s clear that the world respected what

we did in the Trump administration.

They understood we were serious.

We understood.

We would listen to their concerns.

They understood that if they crossed a line
that we laid out for them, that we would respond

exactly as we had told them we would.

I give you Iran.

We made clear to the Iranian regime that there
were lines they couldn’t cross.

And when they crossed one of them, we took
down their most senior military leader Qassem

Soleimani.

This was a serious deterrence model that said
to the Iranians, “This far, and no further.”

We put pressure on the Iranians.

We denied them massive amounts of resources
to conduct terror campaigns.

This administration came in and flipped the
switch and went a different direction.

I immediately went and sat down in Vienna
and said, “we want to go back into this old

tired, failed nuclear deal?”

This is going to allow your regime to have
access to literally billions of dollars?

And what do you see?

You see Iranian-backed Hamas terrorists launching
missiles into Israel today.

Look, tyrants and authoritarians respect power
reasonably used.

And they understand governments who tell the
truth and are prepared to deliver on the things

that they say.

I’m proud that that’s what we did in the Trump
administration.

It was a very restrained foreign policy.

We didn’t send thousands and thousands of
our soldiers all around the world.

It wasn’t our model.

Our model was one that said, speak clearly,
speak in a restrained way, lead coalitions,

whether that’s the quad or the Abraham Accords
or all the…to build NATO, right?

We improved these coalitions and their capacity
to deter aggression.

When you undermine that, when you walk away
from that, and the world doesn’t see you as

serious or determined, you get responses from
these authoritarians that will test and test

and test and take a mile when one gives them
an inch.

How do you balance?

I mean in the past administrations, U.S. spent
a lot of energy on the Middle East and leaving

very little energy for China, and now China
becomes ever more powerful.

Now the Middle East is descending into chaos.

How do you balance the threat of China and
the Middle East today?

Simone, that’s a good question.

You start with America first.

In the end, we were always very clear that
wherever we were working, wherever the president

sent me, whether that was to Europe to build
up NATO, whether it was to Asia to talk about

how the quad and countries around the region
could work together, we were preserving the

things that matter to Americans our security,
our freedom, and our prosperity.

When we get that right, the world is safer.

The world is a better place.

I’m convinced of this.

As for allocation of resources, the single
biggest threat to the way of life for the

American people is the Chinese Communist Party.

Period.

Full stop.

That’s just the reality of what we’ll all
experience over the next five, 10 and 25 years.

We can still deliver coalition support in
the Middle East while we’re confronting the

Chinese Communist Party.

They are not exclusive.

Last thought.

They’re not disconnected.

The Chinese know this, too.

The Chinese Communist Party is incredibly
active working to build rail lines that extend

from Western China into Pakistan so they can
have access to the Gulf of Oman and the Indian

Ocean.

And they have built a military facility in
Djibouti.

That is a strategically important location.

The Chinese Communist Party is very active
in the Middle East as well.

And the United States must do the things to
help our allies and friends there to be successful

at preserving their security interests and
thereby preserving America’s security as well.

The great Roman poet Virgil said that whatever
was good in the Roman empire lies in three

words labor, pietas, and fatum.
By labor, Virgil meant the dignity of labor,
agricultural occupations in particular for

the person and the state.
By pietas, Virgil meant humility before the
gods, a love of one’s country, and a sense

of duties that are particular to the Roman
citizens.
By fatum, Virgil meant Rome’s destiny and
duty, imposed by transcendent powers, to bring

peace to the world, to maintain the cause
of order and justice and freedom, and to withstand

barbarism.
When these three things dissipate, Rome is
in ruins.

America’s founding also reflected the spirit
of these principles and more.

When America’s founding principles are upheld,
the country is the shining city upon a hill.

If they disappear, will America’s ruin also
be inevitable?
The CCP problem is not an isolated problem.

It has a lot to do with how America views
the world, and how America defines good and

bad.

I want to get your perspective on the state
of the American Republic today.

As Lincoln said, America would not die, would
only die by suicide.

So I think, to a lot of American people, we
can see the road to ruins very clearly, but

how do we go back to the founding principles?

What is the most essential thing that can
set us on the right path?

Yes.

President Lincoln had it right.

Even our founders, a couple of generations
before that understood that the Republic is

almost certain to fall only when Americans
lose their virtue, the capacity to govern

themselves in the way that the constitution
sets out.

It is a nation that can only be governed by
a virtuous people.

So we have to be very focused on that.

Indeed Simone, if you go back and look…I’ve
been asked many times, what’s the biggest

threat?

Far and away the biggest threat to the United
States of America comes from within…comes

from our capacity to govern ourselves.

What does that mean?

It means our founders understood that we are
a Judeo-Christian nation.

And we had a set of understandings that was
built out from that, whether that is at PTA

meetings or city council meetings or county
commission meetings, these small places where

Americans stand up for the things they care
about their family, their capacity to worship

in the way that they want, the right to pick
and choose amongst the jobs that they choose

to take, employers that treat their people
right.

And, well, these are the things that are the
engines of American democracy, and we have

to get it right.

When we start to see what the Chinese call
“American decline,” right?

The Chinese Communist Party wants you and
me both to believe that China is on the rise,

and America is in decline.

That’s false.

I don’t buy that storyline for a minute.

It is propaganda coming from the very top
of the CCP establishment.

But it’s only false because the American people
are prepared to stand up and say, we’re not

going to take it.

We’re not going to let critical race theory
come into our schools and scream and say,

“everybody’s a racist” because they want simple,
basic fairness for every citizen of our country.

We’re not going to take it when they say we’re
going to want to eliminate your second amendment

rights, all the fundamental foundings, these
things that America depends on to propagate

its goodness in the world.

These are the things the world is watching
to see if we get right.

I’m convinced we will.

And I’m going to work really hard to make
sure that we don’t lose our way.

We can’t.

To your point and to Abraham Lincoln’s point,
the Chinese Communist Party presents a challenge.

American decline would be the end of our nation.

We can’t let that happen.

You know I was reading St. Augustine, and
he said our salvation cannot be achieved through

a political order.

And in a sense, I think all of us are pilgrims.

We’re travelers trying to accomplish some
kind of transcendence in our life.

So to you, what does a good political order
do to us?

What is the role of a good political order
in the journey of us to fulfill the human

soul?

Everybody gets to define their own success
in the way that they would desire.

That’s what’s so special about this nation,
you know, the contrast between a citizen who

lives in western America and rural parts of
a place like Kansas that I’m from.

One can choose a life in agriculture, can
choose a life in the aerospace industry, can

choose to marry whomever they choose, gets
to worship in the way that they want to.

Contrast that with a citizen who grows up
in a rural part of China, who, if they managed

to escape destitute poverty, will live in
a place where the Chinese Communist Party

dictates every element of their being, how
many children they can have, whether they’re

permitted to worship and, if so, how and almost
certainly not.

These are fundamental differences about humankind.

As a Christian and as an American, I believe
that every human being is built out, created

in the image of God and that these rights,
these transcendent rights that St. Augustine

would have spoken about and what you read,
accrue to each individual.

The United States recognizes that.

And that’s what keeps our country special.

There are other places in the world that recognize
this, too, but there’s no place like the United

States that has taken this to heart in such
a serious way, and upon which the very foundations

of our democracy depend.

How many of you leaders still believe America
would once again become the shining city upon

the hill?

I think most of us.

I think most all of us.

I’m counting on it.

And I’m counting on those of us who believe
that to continue to work, to convince every

American that that’s the case.

I am long on America.

I think the American success story will continue.

I believe that you and I could be wheeled
into these chairs 50 years from now, and that

we will still have a Republic that is an exceptional
nation that is leading around the world and

doing things to make sure that Americans can
have great lives here at home.

Thank you, Mr. Secretary, for join Zooming
In China today.

Thank you very much for your time and thoughtful
questions.

Thank you so much Sir.