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Examining U.S. Concerns on Trade, Security as China Welcomes New President

China officially installed Xi Jinping, already the Communist Party leader, as president for the next 10 years. Judy Woodruff talks to Kenneth Lieberthal of the Brookings Institution and Gordon Chang, an author and a contributor to Forbes, about contentious issues of trade, defense, and cyber security for China and the U.S.

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    China officially installed its new leader today. Xi Jinping took the final step in affirming his status, adding the post of president to his other positions of power.

    The delegates arriving at Beijing's Great Hall of the People had been carefully selected. And once inside, they did just as expected, formally electing Xi Jinping as president.

    He was the only candidate, and won 2,952 votes. A lone delegate voted no, and three abstained.

  • QU JIA, National People’s Congress:

    It meets the popular expectations, and it meets the expectations of the Chinese people and the nation. It is a happy ending.


    The 59-year-old Xi had already been named military and Communist Party chief in November. Now he will officially lead the most populous country on Earth with more than 1.3 billion people.

    China also boasts the world's second largest economy, after the United States. It is also the second largest foreign holder of U.S. debt, about 7.5 percent of the total. But the two nations' economic relationship has been marred recently by allegations of widespread cyber-attacks on American targets.

  • TOM DONILON, U.S. National Security Adviser:

    Increasingly, U.S. businesses are speaking out about their serious concerns about sophisticated targeted theft of confidential business information and proprietary technologies through cyber-intrusions emanating from China on a very large scale.


    China's foreign minister initially dismissed the allegations, but on Tuesday a spokeswoman took a different tone.

  • HUA CHUNYING, Chinese Foreign Ministry Spokeswoman:

    What the Internet needs is not war, but rules and cooperation. China is willing, on the basis of the principles of mutual respect and mutual trust, to have constructive dialogue and cooperation on this issue.


    U.S. officials welcomed that statement, and today, White House Press Secretary Jay Carney said President Obama telephoned Xi to congratulate him on his election.

    As for the cyber-attack issue:

  • JAY CARNEY, White House Press Secretary:

    I can tell you that, at every level, when we engage with our counterparts in the Chinese government, we talk about all the range of issues that are important between us.


    Another friction point with the United States is China's growing military reach and its confrontations lately with Japan and other neighbors over territory, disputed islands.

    On the home front, Xi's arrival has raised hopes for reforms, to stop corruption, environmental damage and a growing gap between rich and poor. The people of China and the rest of the world will have the next decade to size up Xi. He's expected to serve two five-year terms.

    For more on China's new president and what it means for the United States, I'm joined by Ken Lieberthal. He was senior director for Asia on the National Security Council in the Clinton administration. He's now a senior fellow at the Brookings Institution. And Gordon Chang, he was an attorney in Hong Kong for 20 years. Now he's an author and contributor to Forbes.com.

    Welcome to both of you.

    And let me start with you, Ken Lieberthal. What do we need to know about Xi Jinping? Tell us something about him.

  • KENNETH LIEBERTHAL, Brookings Institution:

    The most important thing we need to know is that he's going to govern China for the next decade.

    And the next decade is going to be enormously important for U.S. interests, for China, for Asia and globally. He's worked his way up through every level of the Chinese political system, so he's a very experienced politician and administrator.

    He's come in on a program of saying he's going to clean up corruption, he's going to revitalize the Communist Party and keep it in power and use his capabilities to reform the Chinese economic system while maintaining and building military strength.


    Gordon Chang, is there something about his background, though, that we should know?

  • GORDON CHANG, Author:

    Well, his father was a comrade of Mao Zedong, which makes him a princeling.

    He's the first Chinese leader to be born after the Communist Party came to power. But I think we focus too much on Xi Jinping, because we have got to remember that he's in a collective political system and the Politburo Standing Committee, which is the apex of political power in China, at least four, maybe five of those seven-member bodies are so-called conservatives, the hard line anti-reformers.

    Xi Jinping, whatever he thinks, has got to work with those people.


    Ken Lieberthal, what do we look for from him that will be different? What will change from China?


    Well, he's already tried to change the style by being much more of a kind of lively politician than his predecessor was.

    But I think Gordon is right. We have to look to see whether he can forge the kind of consensus to make deep structural reforms in China that the country deeply needs if it's going to move forward.


    For example?


    For example, they need to shift from an export-oriented and investment-focused economy to one that's much more focused on domestic consumption as a driver of economic development, which requires expanding the services sector, increasing incomes and so forth.

    That runs against huge vested interests in China. So the question is whether he's going to be able to really rework incentives through this system so that he can build the services sector, build incomes, reduce huge capital-intensive infrastructure projects and reduce dependence on exports.


    So, looking at him, Gordon Chang, from the United States, what will we see that looks different, do you think?


    I think the one thing we have been concerned about is all that, although he's been in power for only a few months, since last November, when he became general-secretary of the party, China has engaged on some very provocative maneuvers against the Japanese, because the Chinese claim sovereignty over the Senkaku islands in the East China Sea.

    People say that Xi Jinping is actually leading China's foreign policy on this issue, and if so, we're in trouble, because this is a very troubled area.


    And do you believe, Ken Lieberthal, that that's a primary priority of his?


    I think his real priority is domestic.

    What he needs is stability abroad in order to undertake reform domestically. But his big problem is that he — that the Communist Party has really nurtured very ardent nationalism domestically, and he can't allow himself to get on the wrong side of that or he won't have the political capital to carry out reforms.

    So he's trying to walk a tightrope. He has to be seen as strong in international affairs. But I don't think he's looking for trouble internationally. He'd rather avoid if it if he can.


    Do you see that the same way?


    Well, I think that he would like to avoid trouble.

    But, on the other hand, China is doing things which is causing trouble not only with its neighbors, from the arc of India in the south to South Korea in the north, but also with the United States. It's not just a question of cyber-hacking. It's all these questions of sovereignty, closing off the South China Sea, support of North Korea.

    These are things that deeply trouble the international community and the United States. And if China really wants better relations with us, they know what to do. They can stop doing what they have been doing for the last three or four years.


    And what about the cyber-hacking, cyber-espionage? Is that something that it's believed the Chinese leadership wants to pursue or is it something that has just happened?


    Well, clearly, the People's Liberation Army, the security services, even the Communist Party itself have been involved in hacking.

    This is the most extensive effort in history. They're going not only after secrets in the military establishment of ours, but they're also going after our corporates and trying to get information to use for commercial purposes, but most important, they're attacking the institutions of a free society, New York Times, Wall Street Journal, Washington Post.

    This really goes the core of what America is, and so this is very serious for us.


    And how much does that, Ken Lieberthal, interfere with everything else that Xi Jinping wants to do?


    Well, I think the cyber-security issue is moving to the center of the U.S.-China agenda. And so it's likely to be an issue that's enormously troublesome.

    The Chinese are engaging in a huge amount of cyber-espionage. By the way, so is everyone else. So do we. We don't use it for the same purposes, to support our private sector enterprises, that the Chinese use to support their commercial enterprises. But I think that this is an area that requires a lot of very careful thinking about how best to handle it.

    We can't ask the Chinese to stop doing something that we're doing. We can't ask them to obey rules that we don't ask France and others to obey. So, this is an area that really is going to have be very troublesome. And I think it is going to take a while to figure out even what we want, with rules that we would like everyone to adhere to that we're prepared to adhere to ourselves.


    What about the huge role, Gordon Chang, that China plays in the U.S. economy, holding so much debt, a trillion dollars of American debt?


    I don't think that's really a big issue or should be a big issue for us., because China acquires our debt because they have to.

    They have an economy that is geared to selling things to us. Last year, China's merchandise trade surplus against the United States was 136.3 percent of its overall merchandise trade surplus. That means they're running deficits with the rest of the world so they can run a surplus against us. That gives us enormous leverage if we care to use it on issues that Ken's been talking about, like cyber-attacks.


    And, finally to both of you, Ken Lieberthal, as you look at the next 10 years of leadership under Xi Jinping, what can Americans — do they look for constant internal struggle in China or what?


    I think, if you really understand the Chinese system, you will see that this is a place that is in serious trouble, where there's going to be a real struggle to try to revamp the economy and revamp the relationship and the system to the population.

    I would, frankly, much rather have Barack Obama's problems looking ahead than I would to have Xi Jinping's problems looking ahead. We will see over the course of 10 years whether China has managed to make the changes necessary to be a dynamic, wealthy economy 10 to 20 years from now and beyond. If not, they are going to be in serious trouble within a decade.


    Quick final word?


    Yes, I think the Chinese political system is in disarray. The Communist Party I don't think has got itself consolidated.

    But you have to military breaking free of civilian control, really setting the tone for Chinese foreign policy. This is a real problem for us.


    Gordon Chang.

    Ken Lieberthal shaking his head. We will come back and …


    I will disagree that …


    All right.


    I disagree with a lot of what you say, too. So …


    We will get you back soon to finish this conversation.

    We thank you both, Gordon Chang, Ken Lieberthal.

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