1 CHINA’S NEW DIRECTION: Challenges and Opportunities for U.S. Policy

iii
ABOUT THE TASK FORCE
The Task Force on U.S.-China Policy is a group of China specialists from around the U.S., convened
by Asia Society’s Center on U.S.-China Relations and the UC San Diego School of Global Policy and
Strategy’s 21st Century China Center. It was established in Fall 2015, during an increasingly uncertain
time surrounding the U.S.-China relationship.
The Task Force offered a set of recommendations to the incoming Trump Administration in its 2017
report, “U.S. Policy Toward China: Recommendations for a New Administration.” A mid-term report in
2019 followed, entitled “Course Correction: Toward an Effective and Sustainable China Policy.”
In addition to the above, the Task Force formed “working groups” with other organizations to produce
three topical reports. In 2018, it published “China’s Influence & American Interests: Promoting
Constructive Vigilance.” that detailed the CCP’s efforts to influence American institutions in improper
ways. In 2020, it issued a report, “Dealing with the Dragon: China as a Transatlantic Challenge,” that
examined changing European attitudes towards relations with China. A second report, “Meeting the
China Challenge: A New American Strategy for Technology Competition,” followed in November 2020
and examined science and technology in the U.S.-China competition.
This project was made possible by a grant from the Carnegie Corporation of New York, with additional
support from The Annenberg Foundation Trust at Sunnylands, and The Janet and Arthur Ross
Foundation.
The Center on U.S.-China Relations was founded in 2006 and is based at Asia Society’s New York
headquarters. The center undertakes projects and events which explore areas of common interest
and divergent views between the two countries, focusing on policy, culture, business, media,
economics, energy, and the environment.
The mission of the 21st Century China Center is to produce and disseminate impactful evidence-
based research about China, and to enhance U.S.-China relations by advancing scholarly
collaboration, convening policy discussions, and actively communicating with policy makers and the
general public in both countries.
© 2021 UC San Diego School of Global Policy and Strategy. All rights reserved.
School of Global Policy and Strategy
University of California San Diego
9500 Gilman Drive # 0519
La Jolla, CA 92093-0519
https://china.ucsd.edu/
The UC San Diego School of Global Policy and Strategy’s 21st Century China Center take no
institutional positions on matters of public policy and other issues addressed in the reports and
publications they sponsor. All statements of fact and expressions of opinion contained in this report
are the sole responsibility of its authors and may not reflect the views of the organization and its
board, staff, and supporters.

NTRODUCTION
Orville Schell, Susan Shirk and Evan Medeiros
The year 2021 has proven to be a major
inflection point in U.S.-China relations, and
especially U.S. policy toward China. As China’s
domestic and foreign policies have become
more autocratic at home and confrontational
abroad, America and other countries are
revising their strategies toward China.
Externally, Xi Jinping is not only more
comfortable using power to advance China’s
interests, but also is expressing a vision that
is increasingly antagonistic to U.S. interests.
Meanwhile, the Biden Administration has
embraced “strategic competition” as the frame
for the relationship. Based on that concept, it
has sought to build a coherent approach to
long-term competition by enhancing America’s
vitality and its international partnerships.
Many countries, especially liberal democratic
states, have hardened their postures against
China. This has opened new space for closer
U.S.-led international coordination on China
policy, much to China’s dismay. While most
countries, including the U.S., seek to avoid a
new “Cold War,” they are struggling to find the
best ways to respond to myriad new challenges
in an international order that is more fluid and
unstable than before even while it remains
interdependence as a key feature.
In this world, the defining challenge facing the
U.S., its allies and its partners is understanding
how China under Xi is evolving in the face
of changing domestic needs and external
pressures. Accordingly, a major policy risk is that
the U.S. will misread or misinterpret what is
happening in China and will either overestimate
or underestimate the threat China now poses.
Such misjudgments could be disastrous and
could even lead to war.
These concerns motivated this third report by
the Task Force on U.S.-China Policy. Formed
in 2015, the Task Force was convened by Asia
Society’s Center on U.S.-China Relations and the
University of California San Diego’s 21st Century
China Center. It brought together a group of
China specialists with different backgrounds
from across the United States. Earlier Task
Force reports in 2017 and 2019 reviewed U.S.
China policy. In addition, it has issued three
working group reports on China’s influence
operation, science and technology in the U.S.-
China relations, and China as a trans-Atlantic
1 This report is not a consensus document, but rather an effort to allow a variety of views represented by Task Force members to be
expressed. With this conceit in mind, we have asked different small groups to draft different sections: each “memo” reflects their
views alone, and in no way is membership in the Task Force an endorsement of any section or the thrust of the report as a whole.
challenge. But the present moment may be
the most challenging time in decades, making
now a critically important time for the U.S. to
understand what is going on within China in
order to respond effectively. The old U.S.-China
policy playbook urgently needs rewriting. To do
that, we need a clearer understanding of the
forces behind the actions by Xi, the Chinese
Communist Party (CCP) and the Chinese
government.
Why, for instance, did the Chinese leader not
seek to ease tensions with the U.S. when the
Biden Administration first took office? Why,
instead, was there a ramping up of military
pressure on Taiwan, Japan and India, economic
pressure on Australia, cyber-attacks on the U.S.
and other Western powers, and intensified
repressive control over Xinjiang and Hong
Kong that are bound to have international
repercussions? In Xi’s recent speech celebrating
the centennial of the Chinese Communist Party
(CCP), he stressed the “historical inevitability” of
China’s rise and warned that those who imagine
they can continue to bully, oppress or subjugate
China will “find their heads bashed bloody
against a great wall of steel forged by over 1.4
billion Chinese people.” Such violent rhetoric,
along with autocratic governance at home and
bellicose “Wolf Warrior diplomacy” abroad has
plunged public opinion toward China in the
U.S. and other liberal democratic countries to
historic lows. It has also made engaging with
China more difficult than at any time since 1989.
That said, any approach aimed at influencing
China’s behavior must recognize that China is
not monolithic. China has many social groups,
with diverse interests and disparate political
views that, given the nature of China’s political
system, are sometimes forced to fall silent.
While Xi Jinping’s voice may be dominant, he
is not the only voice or player in the Chinese
system.
The members of our Task Force have been
researching Chinese economics, politics, society,
military, and foreign policy, and interacting with
Chinese counterparts, for many years. Peter
Cowhey is not a formal member of the Task
Force, but as a technology policy expert, he
has led our effort on science and technology
in U.S.-China relations. In these pages, the
authors of each memo highlight some of the
most significant trends underway within China
and suggest how they think this “inside-out”
understanding of China might guide us toward
more effective U.S. foreign policy prescriptions
and proscriptions.1
INTRODUCTION2
EXECUTIVE SUMMARY
The report is divided into eight sections. Each
includes a thumbnail analysis of the evolving
trends inside China, and recommendations
for how the Biden Administration might
incorporate such understandings into the next
phase of its China strategy. Below are some of
the most significant insights identified by Task
Force members:
1. POLITICS
China’s effective control of the pandemic and
nationalistic rallying of popular opinion against
Western powers’ blaming of China for its
outbreak have strengthened Xi’s position in the
Party and his popularity among the public. We
can expect rules and norms to be finessed to
extend Xi’s tenure for a third term at the 20th
Party Congress next year. Xi’s dictatorial system
creates pressures for officials to show loyalty and
distorts information feedback loops, two kinds
of policymaking dynamics that lead to domestic
and international overreaching.
2. SOCIETY
The CCP has tightened supervision over
universities, curtailed press freedom and placed
civil society groups under strict control. Still,
there is great dynamism and diversity in China’s
economic and social life. That said, Chinese
people rarely make explicit political demands,
and their support for the Chinese Communist
Party appears to have grown in recent years
alongside targeted retribution by the Party
against certain groups.
3. HUMAN RIGHTS
The CCP has intensified its crackdown not just
on opposition and dissent, but also on perceived
disloyalty, disaffection, policy disagreements
and ideological nonconformity. Repression
and social control have reached their highest
levels in the post-Tiananmen period, especially
in China’s peripheral regions such as Xinjiang
and Tibet. In Hong Kong, Beijing has crushed
autonomous political activity, academic
and journalistic freedoms. All this reflects a
surprising sense of siege on the part of the
Chinese government, despite the popular
support it receives inside China.
4. ECONOMY
China is using large-scale state intervention
to increase national economic power and
technological independence. The state is
mobilizing significant financial support for
favored sectors and companies, distorting
capital allocation and corroding fair competition
and market-determined outcomes in China
and the rest of the world. Still, China is expected
to remain open to foreign investment and
financial institutions so long as that serves the
government’s goals.
5. TECHNOLOGY
China’s technology drive is massive in scale,
led by the state but also enabled by an
increasingly state-influenced private sector.
Chinese policymakers have doubled down on
their commitment to become technologically
independent, especially in strategically essential
sectors like semiconductors. In fact, Beijing has
done more to “decouple” its supply chain from
dependence on the U.S., than the other way
around.
6. MILITARY
China has developed a robust capability to fight
effectively within the first island chain that runs
north to south from Japan and Taiwan to the
Philippines. These expanding capabilities are
aimed at deterring and defeating U.S. military
intervention in East Asia, especially in defense of
Taiwan.
7. DIPLOMACY
China has abandoned its Deng Xiaoping-era
low-profile, risk-averse diplomacy. China’s
current forceful foreign policy aims to protect
its interests, ensure access to global markets,
capital and technologies, and demand
international respect for China’s achievements.
Economic instruments are its preferred tool of
statecraft, with active efforts directed toward
shaping the global order regarding human
rights, internet governance, technology
standards and development finance. China’s
leaders seek respect and even admiration for
their Party-centered political system, though
they stop short of evangelizing or trying to
export a complete model of governance.
8. CLIMATE CHANGE
U.S.-China cooperation, coordination and
healthy competition will be essential if the
world is to achieve the 2015 Paris Climate
Agreement objectives, and if China is to achieve
its 2060 carbon neutrality goals. China’s leaders
have focused on developing clean technologies
and created financial incentives for climate
action within China. Yet, the government has
been reluctant to aggressively curtail coal
use at home and to reduce support for fossil-
fuel energy projects abroad if it means acting
against the interests of state-owned enterprises.
EXECUTIVE SUMMARY

3MEMO NO. 1 • CHINA’S DOMESTIC POLITICS
There are several defining features of China’s
political system under Xi Jinping:
◆ The system has regressed from collective
leadership with limited checks on power
holders to a highly centralized and
personalistic dictatorship.
◆ Xi has defeated all his potential rivals
by means of a massive anti-corruption
campaign, is popular with the public and
now appears set to rule China indefinitely.
◆ Xi has empowered the CCP’s organs to
lead on policy making, and in doing so,
degraded the authority of the State Council
in policy formulation and implementation.
◆ Xi has molded the CCP into an instrument
of his will that requires a high degree of
ideological commitment from its members,
and is a ubiquitous presence in Chinese life.
◆ Xi has uniquely expanded the use of
technology for the purposes of surveillance,
grid management, and social and political
control.
◆ Xi has become obsessed with political
stability and threats to it; in response, he
has shifted the CCP’s national priorities
from economic reform and development to
national and regime security regardless of
the costs.
◆ Xi has carried out heavy-handed repression
of individuals, groups and media that are
even mildly critical of government policies
and performance.
1. The COVID-19 pandemic has strengthened
Xi Jinping’s position within the Chinese
Communist Party and his popularity with
the public, making his mandate for a third
term at the Fall 2022 Party Congress a virtual
certainty. The COVID-19 crisis initially stirred
popular anger against the CCP and its “core
leader” Xi Jinping. But Xi’s quick and deft
recasting of the pandemic as a win for China’s
centralized system, coupled with the Western
blame of China for mishandling the initial
outbreak and allowing the virus to spread so
rapidly, has strengthened Xi’s support among
the Chinese public.
In effectively tackling COVID-19, Xi has
enhanced his iron grip on the military, the Party,
the government apparatus, state enterprises
and, increasingly, on private enterprises. As
China emerges from the COVID-19 pandemic
and towards the epochal 20th Party Congress
in Fall 2022, we assess that—barring health
problems or “black swan” events—rules and
norms will be finessed or ignored so as to
facilitate Xi’s extended tenure for a third term.
The CCP’s 100th anniversary featured various
grand events with Xi Jinping at center stage,
allowing him to project the image of an all-
powerful ruler.
Although some in the Party are unhappy with
Xi’s personalistic, centralized rule, which has
eliminated power sharing, patronage and
regular turnover of leadership from the system,
his critics have been so completely silenced
that there is little sign of any overt opposition
to his continued rule. Still Xi and his security
apparatus surely want to avoid unpleasant
surprises in the lead-up to the Party Congress.
For this reason, they are likely to continue the
COVID-19-related restrictions on foreign travel
until the Congress.
China’s one-party political system, long
composed of multiple contending factions, is
now dominated by one faction. Xi is advised by a
narrow circle of trusted senior leaders, including
Wang Qishan, Wang Huning, Li Zhanshu, Zhao
Leji, Ding Xuexiang, Cai Qi, Chen Xi, Liu He
and Huang Kunming. Party leadership bodies
as well as key provinces are packed with Xi’s
MEMO NO. 1
CHINA’S DOMESTIC POLITICS
Susan Shirk, David Shambaugh and Jessica Chen Weiss
Xi has defeated all his potential rivals … and now appears set to rule
China indefinitely.4 MEMO NO. 1 • CHINA’S DOMESTIC POLITICS
political allies, who exhibit no deviation from his
dictates. Xi is positioned to further consolidate
his power among the key CCP organs, in Beijing
and the localities, during the upcoming Party
Congress.
2. The overly centralized political system
distorts incentives and impedes information
flows for policymaking, which leads to policy
unpredictability and overreaching.
Xi’s fixation on potential disloyalty among Party
cadres and his fierce anti-corruption campaign
have created a tense political environment.
Intimidated officials compete to display their
deference (biaotai) to Xi rather than to provide
objective information about the consequences
of policies, creating a propaganda echo
chamber. Lower-level officials also rush to
bandwagon on Xi’s wishes, carrying them out
to an extreme that may exceed what Xi himself
would desire. These dynamics may contribute
to China’s domestic as well as international
overreach, including China’s brutal crackdown
on the Uyghurs in Xinjiang, its precipitous
stripping of Hong Kong’s autonomy and its
confrontational “Wolf Warrior” diplomacy.
The internal dynamics in the CCP’s current
dictatorial system are a recipe for more policy
missteps, which risk further damaging China’s
international reputation and generating even
more international pushback.
One recent example of overreach is Beijing’s
extreme resistance to a scientific investigation
and disinformation about the origins of
COVID-19. Xi may be wary of a resurgence of
the kind of public anger that swept the country
after the Party’s early 2020 COVID-19 cover-up
and Xi’s inadequate attention at the beginning
of the pandemic. Despite growing international
pressure, Beijing is likely to continue to
stonewall international efforts to determine the
origin of the COVID-19 pandemic, increasing the
costs for China’s international image.
3. Nationalism is high and intensifying in the
face of foreign criticisms.
CCP propaganda touting the superiority of the
Chinese system resonates with many Chinese,
who are proud of China’s achievements and
resent foreign criticism. Surveys indicate that
public approval of the government has been
enhanced by its successful control of the spread
of COVID-19, despite initial missteps. Images
of heroic CCP members on the frontlines of
the pandemic have coincided with increased
applications for Party membership. The CCP’s
centenary celebration on July 1, 2021, and
particularly Xi’s Tiananmen speech, played to
national pride and the Party’s indispensable role
in what Xi calls “national rejuvenation.”
Meanwhile, U.S. sanctions, technology
embargos, supply chain decoupling, delisting
of Chinese companies on U.S. stock exchanges,
restrictions on student visas, counterespionage
investigations and anti-Asian violence have
increased distrust and acrimony towards the
U.S. among the Chinese public. The power of
U.S. democracy as an inspiration for Chinese
liberals has also diminished.
With the CCP selectively mobilizing Chinese
nationalism against foreign “interference in
China’s internal affairs,” sensitive issues that
could in the past be discussed, and even.

overreach, including China’s brutal crackdown
on the Uyghurs in Xinjiang, its precipitous
stripping of Hong Kong’s autonomy and its
confrontational “Wolf Warrior” diplomacy.
The internal dynamics in the CCP’s current
dictatorial system are a recipe for more policy
missteps, which risk further damaging China’s
international reputation and generating even
more international pushback.
One recent example of overreach is Beijing’s
extreme resistance to a scientific investigation
and disinformation about the origins of
COVID-19. Xi may be wary of a resurgence of
the kind of public anger that swept the country
after the Party’s early 2020 COVID-19 cover-up
and Xi’s inadequate attention at the beginning
of the pandemic. Despite growing international
pressure, Beijing is likely to continue to
stonewall international efforts to determine the
origin of the COVID-19 pandemic, increasing the
costs for China’s international image.
3. Nationalism is high and intensifying in the
face of foreign criticisms.
CCP propaganda touting the superiority of the
Chinese system resonates with many Chinese,
who are proud of China’s achievements and
resent foreign criticism. Surveys indicate that
public approval of the government has been
enhanced by its successful control of the spread
of COVID-19, despite initial missteps. Images
of heroic CCP members on the frontlines of
the pandemic have coincided with increased
applications for Party membership. The CCP’s
centenary celebration on July 1, 2021, and
particularly Xi’s Tiananmen speech, played to
national pride and the Party’s indispensable role
in what Xi calls “national rejuvenation.”
Meanwhile, U.S. sanctions, technology
embargos, supply chain decoupling, delisting
of Chinese companies on U.S. stock exchanges,
restrictions on student visas, counterespionage
investigations and anti-Asian violence have
increased distrust and acrimony towards the
U.S. among the Chinese public. The power of
U.S. democracy as an inspiration for Chinese
liberals has also diminished.
With the CCP selectively mobilizing Chinese
nationalism against foreign “interference in
China’s internal affairs,” sensitive issues that
could in the past be discussed, and even
accommodated, are now routinely rebuffed.
The days when the Party tolerated some forms
of critical expression from abroad appear to be
over.
The Winter Olympics in February 2022 offer
another occasion for the CCP to bolster its
brand of patriotism at home. Any Western
boycotts, whether by corporate sponsors,
governments or foreign tourists, may only
further inflame China’s already supercharged
nationalism.
RECOMMENDATIONS FOR U.S. POLICY IN
THE POLITICAL REALM
1. Revive civil society and cultural interactions
with China. International non-governmental
and civil society organizations have worked
productively and collaboratively in China
for more than 40 years. These people-to-
people interactions help temper the dangers
of adversarial competition by humanizing
relations, and state and local government ties
can also be valuable. However, Chinese-U.S. civil
society ties have been greatly compromised
by Chinese restrictions on such interactions,
especially due to the adoption of the NGO Law
in 2017, the ongoing crackdown on Hong Kong
civil society and media, and U.S. policy decisions
under the Trump Administration.

5MEMO NO. 1 • CHINA’S DOMESTIC POLITICS
Despite this downturn, the U.S. government should support more societal, educational and cultural
exchanges with China, and communicate a desire for closer people-to-people ties between the
American and Chinese publics. To this end, the U.S. government should work with Beijing to reopen
the Houston and Chengdu consulates and negotiate a balanced and reciprocal restoration of
journalistic access and scholarly exchanges.
2. Improve U.S. intelligence about China, particularly concerning the policy process and decision-
making in Xi’s inner circle. The Director of National Intelligence and all U.S. intelligence agencies
have already identified China as a high priority, which should lead to better knowledge about
many facets of Chinese realities, including the inner workings of China’s political system. We also
recommend improving China-related interactions between the U.S. policy community and non-
governmental scholars and experts, domestically and worldwide. The U.S. intelligence community
should more clearly recognize and draw from the enormous reservoir of knowledge that exists
outside the government to better understand the dynamics driving China’s increasingly autocratic
internal and aggressive external behavior.
3. Bolster American public diplomacy aimed at the Chinese public. American public diplomacy has
traditionally communicated goodwill and respect toward the Chinese public. While being forthright
in criticism of negative Chinese government behavior, U.S. public statements have taken care not to
unnecessarily insult or inflame nationalistic sensitivities among Chinese citizens.
It’s time to give renewed attention to American public diplomacy because growing resentment of
hostile U.S. rhetoric and actions could become a long-term liability. Washington should articulate a
positive vision for a productive relationship that includes welcoming Chinese students, tourists and
businesses that do not violate U.S. laws or compromise legitimate national security concerns. U.S.
public diplomacy should also acknowledge what China has accomplished since 1978, especially in
economic development and poverty reduction. Clumsily vilifying the Communist Party, or attempting
to create a wedge between it and the Chinese people, will be counterproductive at a time when the
public increasingly seems to support the Party.
A major U.S. policy speech, expressing both concern and affirmation, would help clarify American
objectives vis-a-vis China, including how the U.S. views China’s role in the world, what “competition”
means to the U.S., and what type of regional and global order the American government supports.
Such a high-level statement could become the anchor of a reenergized public diplomacy effort.

MEMO NO. 2
CHINESE SOCIETY: MEDIA ,
EDUCATION AND CIVIL SOCIETY
Robert Daly, Paul Gewirtz and Paul Haenle

6
CONTINUITY AND CHANGE IN CHINESE
SOCIETY
Chinese society is neither static nor
unidimensional. In the media, business,
education and civil society domains, Chinese
citizens navigate both a top-down system of
governance and a bottom-up process of social
change. Since 2012, even as the Party’s political
control tightened under Xi Jinping, Chinese
citizens have shown a high level of approval of
the government’s focus on poverty alleviation
and quality of life issues. But they have also
found ways to advocate and organize for better
living conditions, enhanced opportunity and
increased individual dignity. As individual
expectations rise, Chinese society continues
to evolve. The country’s dynamic business
environment, consumer goods marketplace,
social relationships, cultural life and travel
options were unimaginable to previous
generations, even if they have been curtailed
by COVID-19. The U.S. must understand this
ongoing social change in order to deal with
China effectively.
Xi’s declaration that “in political, military, civil,
and academic affairs—north, south, east, west
and center—the Party leads everything” echoes
the Maoist approach to social control, and
reverses many of the practices and attitudes
developed over three decades of reform and
opening. While the CCP under Xi asserts greater
influence over the media, education and civil
society, the institutional rigidity of the Party
is confronted daily with the dynamism and
diversity of Chinese social life.
With the outbreak of COVID-19, Chinese
social media erupted with criticism of the
government’s initial response. Later in 2020,
feminists publicly supported Zhou Xiaoxuan’s
allegations of workplace sexual assault and
female rock stars and stand-up comedians
called for better treatment of women in their
lyrics and jokes. In today’s China, elderly citizens
oppose raising the retirement age, delivery
workers call for greater occupational safeguards,
veterans protest denial of benefits, couples
marry later and defer or opt out of parenthood
despite government calls for higher fertility,
members of the LGBTQ community live openly
and are more accepted, high tech “gladiators”
challenge inhumane work schedules, the young
people of the Lie Flat (tangping) movement
opt out of the rat race altogether and a growing
number of Chinese advocate for more online
privacy and less use of facial recognition
technology. In all of these ways, they are calling
for relief from the relentless pressures of work,
family and political control of daily life. They are
asking for a more humane society.
Still, China is not ripe for revolution. Its people
rarely make explicit political demands, and the
divide between China’s ordinary people and the
government should not be overstated. Xi has
become more autocratic, but Chinese in recent
decades have become more affluent, better
educated and internationalized. Support for
the Party has ebbed and flowed, but appears
in surveys to remain substantial or appears to
have grown during the pandemic. The CCP’s
responsiveness to public concern over issues
like sexual harassment and consumer privacy
has allayed some opposition to the Party’s
authoritarian rule.
1. The Communist Party is asserting greater
control over the media. Censorship has long
been a key tool of the CCP’s societal controls,
but the degree to which the Xi government
now controls China’s vast media landscape has
shocked both Chinese and foreign observers.
China ranked 176th out of 180 countries on
Reporters Without Borders’ 2021 World Press
Freedom Index. While China’s social media
environment still allows for some discussion of
controversial topics, the CCP has curtailed press
freedoms that had been expanding since the
1980s in both traditional and digital journalistic
outlets. Today, no journalistic organization
in China operates outside of Party strictures.
As Xi proclaimed in a Party conference on
news media in 2016, “media organs owned by
the Party and government are propaganda
platforms. They must be surnamed Party.”
Not only do algorithms and state overseers
censor any social media posts critical of the
government, but bots, volunteer nationalists
and paid influencers flood the online space with
organized posts that create the impression of
unquestioned support for Xi and the Party.
MEMO NO. 2 • CHINESE SOCIETY: MEDIA, EDUCATION AND CIVIL SOCIETY
MEMO NO. 2
CHINESE SOCIETY: MEDIA ,
EDUCATION AND CIVIL SOCIETY
Robert Daly, Paul Gewirtz and Paul Haenle

7
Increased censorship of domestic media
has coincided with growing oversight and
expulsion of foreign journalists. In March 2020,
13 journalists from The New York Times, The
Washington Post and The Wall Street Journal
were expelled after the Trump Administration
decided to limit the number of Chinese
nationals allowed to work for five state-
controlled Chinese news organizations in the
U.S. When Washington designated Chinese
state media operations in the U.S. as “foreign
missions and agents,” China froze visas for
CNN, The Wall Street Journal, Bloomberg News,
and Getty Images journalists. The Foreign
Correspondents Club of China reported in
April 2021 that at least 20 foreign journalists,
including Americans, had been forced to leave
China since 2020.
2. The Communist Party is tightening its
supervision of higher education. In China,
higher education has been guided since 2015
by the Double First-Class Plan, which seeks to
develop world-class universities and academic
disciplines. Chinese universities are moving
up in global rankings, thanks to their work
in the natural and applied sciences. They
now graduate at least nine times more STEM
students annually than the U.S. But China’s
social sciences and humanities, which are
deemed by the CCP as politically sensitive, have
not enjoyed corresponding expansion. Rather,
in recent decades, universities all over China
have set up specialized Schools of Marxism
to promote the Party’s ideological work on
campuses, and to encourage Confucian studies
to counter Westernization.
Educational institutions throughout China
face growing pressure to align their research
and curricula with Communist Party priorities.
Chinese leaders require that Party committees
play a major role in managing all Chinese
educational institutions, including U.S.-affiliated
schools in China. The CCP’s calls for students
to report on faculty who make improper
statements strike many Chinese as a return
to Cultural Revolution-style politicization of
education. In 2020, a prominent Tsinghua
University professor was detained and fired
for publicly criticizing the Communist Party. In
2019, Fudan University deleted a commitment
to promoting “freedom of thought” from its
charter. Other major Chinese universities made
similar moves. Chinese students abroad face
extraterritorial monitoring of their statements
on foreign campuses via a network of students
reporting fellow students to Chinese embassies
and consulates, which may limit free speech in
American classrooms.
In sum, the Chinese educational system in 2021
is, at all levels, more completely managed by
the Communist Party than at any time since
the 1980s.
3. The Chinese government is increasing
restrictions on civil society organizations.
Because most Chinese civil society
organizations are politically weak GONGOs,
or “government operated non-governmental
organizations,” China’s civil society ranks
as one of the most closed in the world. The
government’s loosening of restrictions on
domestic and foreign NGOs that began in
1978 was reversed by the overseas NGO law,
implemented in 2017. It constrains the activities
of both foreign NGOs and domestic “social
organizations” whose activities the Party
sometimes associates with “color revolutions”
and other pro-democracy uprisings in Europe
and the Middle East. The 2016 law moved
oversight of NGOs from the Ministry of Civil
Affairs to the Ministry of Public Security, making
clear that an independent civil society was
viewed as a security threat.
And yet, according to Chinese government
statistics, the number of domestic “social
organizations” has increased by 80% since Xi
took office in 2012, totaling more than 894,000
by the end of 2020. Only a fraction of those
“social organizations” are non-profit public-
interest entities, however, and most focus
on poverty alleviation, education and other
charitable activities that align with government
policy. Since 2017, the number of registered
foreign NGOs in China has steadily declined,
and the scope for domestic environmental,
women’s rights and civic engagement advocacy
has narrowed drastically. Thus, despite an
upsurge in concern for social issues, China’s
civil society remains politically weak—a force for
good, but rarely for change.
POLICY RECOMMENDATIONS FOR
ENGAGING CHINESE SOCIETY
Informed by a sophisticated understanding of
Chinese society, the Biden Administration can
MEMO NO. 2 • CHINESE SOCIETY: MEDIA, EDUCATION AND CIVIL SOCIETY
… despite an upsurge in concern for social issues, China’s civil society
remains politically weak—a force for good, but rarely for change.

craft policies that protect U.S. interests, promote
Sino-American collaboration and reduce the
potential for conflict. Even as it pushes back
against Chinese illiberalism, the White House
should ensure that America remains open
and attractive to Chinese talent, and should
encourage corresponding openness in China.
It should be wary of enacting policies that
Beijing and the Chinese public can construe as
attempts to alter or undermine Chinese society.
The focus of policymaking in this sphere should
be on providing opportunities for Chinese to
engage with Americans through educational,
media and civil society channels that have no
national security sensitivities for the U.S.
To achieve these goals, the Biden
Administration should:
1. Issue a presidential statement encouraging
academic and cultural exchange between
the two countries. A public statement should
proclaim that Chinese students and scholars
are welcome to study and work in the U.S.,
in accordance with American laws. It should
make clear that Chinese scholars in American
institutions, and the many Chinese who
have remained in the U.S. as citizens, have
made valuable contributions to the country’s
innovation system and well-being since the
early 1980s. Collaborations between scholars
and experts in the basic sciences, public health,
law, business, environment, economics, arts and
culture remain beneficial for both countries.
2. Give American educators a voice in policy.
While American university presidents are
concerned about national security, they are also
concerned about the integrity of our knowledge
system, which benefits from the inflow of
Chinese talent and from Sino-U.S. university
collaboration in fundamental research. The
Biden Administration should consult with
the Association of American Universities
(AAU), American Council on Education (ACE)
and Association of Public and Land-grant
Universities (APLU) before curtailing joint
research or educational exchanges.
3. Restore visa access for Chinese students.
The U.S. must maintain constructive vigilance
of Chinese government-affiliated scholars
who conduct illegal activities within the U.S.
However, it should also be our policy to re-
establish easy visa access for Chinese students
in non-sensitive areas of study, and to reinstate
programs that permit them to remain in the
U.S. for research, training and work after they
attain their decrees.
4. Clarify security concerns for U.S.
universities. The Biden Administration should
more clearly define research sub-disciplines
that are too sensitive to be pursued by senior
scholars from nations of high strategic
concern. This includes completing the work of
committees at the National Academies and
White House Office of Science and Technology
Policy, established by the 2019 National Defense
Authorization Act.
5. Support Chinese-language study. The U.S.
cannot compete effectively with China unless
it trains far more leaders in all professions to
speak Chinese, have familiarity with China’s
history, and better understand China’s domestic
and foreign policies. Rather than rely on Beijing-
funded Confucius Institutes to teach Chinese
in U.S. schools, the Biden Administration
should significantly expand support for
Chinese-language and area studies programs
in American public schools, colleges and
universities.
6. Reinstate the Fulbright and Peace Corps
programs in China. These exchanges have
long promoted a positive U.S. image abroad
while serving as a training ground for American
academics and other professionals who
promote secure, constructive relations with
the People’s Republic of China (PRC) over the
course of their careers.
7. Negotiate reciprocal visa agreements for
journalists. U.S. policymakers should demand
that American journalists in China be permitted
to report as freely as Chinese journalists do in
the United States, and a corresponding number
of journalists should be admitted to each
country. State-run Chinese media bureaus in
the U.S. should continue to be designated as
“foreign missions.”
8. Make public diplomacy a pillar of U.S.
China policy. Because public diplomacy invites
China’s middle classes into discussions of global
governance, technology and values, the Biden
Administration should modernize Voice of
America’s China Branch and other Chinese-
language social media platforms to reach a
broader Chinese audience. Programs should
be well-produced, intellectually absorbing
and politically informative, rather than simply
amplifying criticism of the CCP.
9. Build more civil society exchanges in
non-sensitive areas. U.S.-China civil society
collaborations foster trust and transparency
and promote best practices. The Biden
Administration should make the promotion of
NGO and university exchanges a regular talking
point in discussions with Chinese leaders,
emphasizing to the Chinese government and
public that people-to-people exchanges of all
forms can improve nation-to-nation relations
and provide guardrails against ever-worsening
relations.

HUMAN RIGHTS, VALUES AND
IDEOLOGY IN CHINA
Winston Lord, Andrew J. Nathan and Orville Schell

9MEMO NO. 3 • HUMAN RIGHTS, VALUES AND IDEOLOGY IN CHINA
THE STATE OF HUMAN RIGHTS IN CHINA
China’s crackdown continues to intensify, not
just on opposition and dissent, but also on
perceived disloyalty, disaffection and ideological
nonconformity. The most striking examples,
beyond ongoing crackdowns on journalists,
intellectuals, civil rights lawyers and social
media influencers perceived as critical of the
Party, are the crimes against humanity—rising
to the level of genocide according to the U.S.
government—taking place against Uyghurs
and other Muslim ethnic minorities in Xinjiang.
Then, there is the imposition of the draconian
National Security Law in Hong Kong that
immediately crushed all autonomous political
activity, eliminated independent media and
curtailed academic freedom.
Repression also continues in Tibet against those
who venerate the Dalai Lama, as well as among
the Han population against rights-defense
lawyers, feminist activists, Christians who
worship outside the government-controlled
Catholic and Protestant hierarchies and people
who speak out critically in the academic world
on traditional media, the internet and over
social media.
In the administration of justice, the CCP
has advanced a new theory for an existing
practice, “socialist rule of law with Chinese
characteristics,” which emphasizes the
subordination of the legal system, including
the courts, to Party control. As the domestic
administration of justice remains arbitrary
and harsh, practices such as extralegal
detention, torture during investigations and
imprisonments, and violations of the right to a
fair trial have become more common. Within
the CCP, members are being exposed to ever
higher demands for political conformity on the
basis of being purged for “corruption.”
In another worrisome trend, the Party has
recently also extended its control efforts beyond
China’s borders. Chinese diplomatic missions
now regularly surveil the activities of Chinese
students and scholars in other countries with
ever more thoroughness. Chinese police order
the families of dissidents, or even exiles living
overseas, to refrain from any disloyal activity.
Without the permission of host governments,
the Party has dispatched agents to pressure
alleged fugitives from the anti-corruption
campaign in China to return home to face
prosecution. Furthermore, China’s “Wolf
Warrior” diplomatic corps has been reacting
with increasing belligerence to criticisms of
Chinese policies and behavior, evincing a special
sensitivity to any mention of Chinese human
rights violations. Meanwhile, the government
is taking punitive actions against foreign
businesses that offend its political sensibilities,
using visa denials to punish foreign academics
and journalists who speak or write critically
about China. It has even taken foreign citizens
living or working in China hostage to pressure
their governments in diplomatic disputes.
This “new Maoism,” as some call it, reflects
a surprising sense of siege on the part of a
government that has been so successful in
sustaining economic growth, building its
military, and extending its economic and
diplomatic influence abroad. Multiple reliable
academic surveys confirm that the regime
enjoys a high level of public support because of
its successful economic performance, control of
the COVID-19 pandemic and ability to generate
nationalistic pride in the country’s growing
influence.
Such increased repression, despite all of China’s
developmental success, raises the question:
What is the Party afraid of?
MEMO NO. 3
HUMAN RIGHTS, VALUES AND
IDEOLOGY IN CHINA
Winston Lord, Andrew J. Nathan and Orville Schell
Such increased repression, despite all of China’s developmental success,
raises the question: What is the Party afraid of?

10
China’s 2015 National Security Law defines
national security in terms of three core priorities:
economic prosperity, territorial integrity and
regime stability. The regime fears challenges
to all three. Because prosperity requires access
to global supply lines, capital and technology,
which the U.S. and its allies still have the ability
to interrupt despite the narrowing power
gap between the two countries, China is still
inescapably dependent. Territorial integrity
depends on maintaining control of the vast,
strategically important areas inhabited by
Tibetans, Mongolians and Turkic Muslim
minorities, making Hong Kong a subordinate
part of China and eventually consummating
the unification of Taiwan with the “motherland.”
Yet, in all these regions, the more Beijing has
insisted on loyalty to the People’s Republic, the
more alienated these populations have become,
and the more the Party has had to turn to
repression to maintain control.
While regime stability still depends largely
on the continuing loyalty of the majority Han
population, the Party often acts as if it thinks
even this loyalty is fragile, perhaps because,
as the CCP succeeds in modernizing China,
it is also building a larger middle class whose
members increasingly want to think more
for themselves. Their loyalty to the regime is
conditional not just on China’s prosperity, but on
that prosperity being fairly shared, and coming
with quality of life rather than the prevailing
996 work schedule—9 a.m. to 9 p.m., six days a
week. This compact is complicated by the fact
that few citizens may truly believe in the Party’s
sterile promotion of a “big leader” centered
around the myth of an infallible Xi Jinping. With
economic growth slowing, the population aging
and some young Chinese feeling so frustrated
with the hand they’ve been dealt that they’ve
started the “Lie Down” movement—just opting
out of the rat race—there are already signs that
the “we’ll make you prosperous if you don’t
challenge us” deal that held for a couple of
decades after the 1989 Tiananmen crackdown
seems to face more skepticism in this new
generation.
The Party’s anxiety grows out of its fear
that students, intellectuals, media workers,
entrepreneurs and even Party members
themselves are susceptible to the cultural and
ideological influence of what it calls Western
“hostile forces” dedicated to destabilizing
Party rule. The regime’s belligerent responses
to foreign criticism and its harsh crackdowns
on even the mildest forms of dissent at home
all suggest that it regards any expression
of skepticism as a serious challenge to its
rule. Perhaps the Party is overly sensitive. Or,
perhaps, it understands its vulnerability better
than outsiders do.
POLICY RECOMMENDATIONS IN THE
AREA OF HUMAN RIGHTS
Human rights should remain an important
component of U.S.-China policy for five reasons:
1. Most American political leaders and
government professionals are personally
committed to the integrity of international
human rights norms.
2. Supporting human rights abroad is
a powerful way to sustain public and
Congressional support for an active foreign
policy in Asia and around the world. The
public understands the necessarily complex
policies in Asia as a fundamental clash of
values, in which what is ultimately at stake
is whether democracy or authoritarianism
will prevail as the most successful form of
government.
3. The U.S. and its allies agree most fully on
the human rights issue. In the complex and
sometimes contentious alliance and quasi-
alliance system centered around the U.S.,
human rights provides a shared foundation
for working together toward consensus on
more difficult issues.
4. Human rights is a Chinese weak point in
its active competition for international
influence. China is popular among other
authoritarian rulers, but citizens in most
countries do not admire its political system
or esteem it as a general political model.
Their distrust is deepened by China’s willful
and expansive human rights violations.
5. The drama of China’s political evolution
is ongoing. Although foreign criticism of
China’s human rights abuses may not be
able to immediately change the behavior
of the Chinese regime, an active and
consistent policy of calling attention to its
abuses gives moral support to domestic
liberals and reformers whose actions will
help shape China’s future.
Some fear that the kind of assertive human
rights policy that has characterized the Biden
Administration’s approach will endanger
cooperation on other key issues like climate
change and global public health. We do not
think so. We believe that China will pursue
its own objectives on climate change, public
health and other issues depending on their
own interests, regardless of friction over human
rights.
However, to effectively promote universal
values of human rights in the face of Chinese
competition and interference, the U.S. must
set a better model, by enhancing its own
MEMO NO. 3 • HUMAN RIGHTS, VALUES AND IDEOLOGY IN CHINA11MEMO NO. 3 • HUMAN RIGHTS, VALUES AND IDEOLOGY IN CHINA
compliance with the same international
standards it urges China to respect. With
respect to China, we propose six policy
recommendations:
1. The U.S. must consistently call out China
on rights violations, both in public diplomacy
and in relevant UN settings. As it does so,
its reference point should not be American
values, but universal values, to which China
has committed itself via international law by
obligating itself through formal accedence
to most of the major human rights treaties.
High-level public expressions of concern are
an important governmental tool, because they
make violations visible to the outside world and
inflict reputational costs on the senior officials
responsible. Although sanctions that are merely
symbolic give an impression of weakness,
the selective use of sanctions that have real
consequences, especially when carried out
in coordination with other governments, are
essential tools.
2. The U.S. government, foundations, NGOs,
universities and the legal community must
support Chinese legal reformers, academic
freedom advocates, independent journalists,
human rights defenders and pro-democracy
activists in China and in exile, both verbally
and financially. The U.S. Congress should
increase support for the National Endowment
for Democracy, Voice of America and Radio Free
Asia; support the development of technology
enabling more Chinese citizens to circumvent
the Great Firewall and award asylum readily to
those who face a credible risk of persecution
inside China because of their human rights
advocacy.
3. The U.S. government should rejoin or
devote more resources to international
bodies that set and monitor human rights
standards, such as the UN Human Rights
Council, the World Health Organization, the
International Telecommunication Union, the
World Intellectual Property Organization,
Interpol and other agencies where diplomacy
takes place and international norms relevant to
human rights are set. Sustained work in these
bodies is an essential antidote to China’s intense
diplomatic efforts to bend them to their own
purposes.
4. Wherever possible, the U.S. should
collaborate as closely as possible with like-
minded democratic countries to coordinate
collective positions relevant to human rights.
Such activities should include convening
Democracy summits aimed at developing
concrete joint programs, and pushing such
multilateral gatherings as the G-7 and the
G-20 to engage actively on human rights and
democracy issues.
5. Even if relations grow more fraught, the

11MEMO NO. 3 • HUMAN RIGHTS, VALUES AND IDEOLOGY IN CHINA
compliance with the same international
standards it urges China to respect. With
respect to China, we propose six policy
recommendations:
1. The U.S. must consistently call out China
on rights violations, both in public diplomacy
and in relevant UN settings. As it does so,
its reference point should not be American
values, but universal values, to which China
has committed itself via international law by
obligating itself through formal accedence
to most of the major human rights treaties.
High-level public expressions of concern are
an important governmental tool, because they
make violations visible to the outside world and
inflict reputational costs on the senior officials
responsible. Although sanctions that are merely
symbolic give an impression of weakness,
the selective use of sanctions that have real
consequences, especially when carried out
in coordination with other governments, are
essential tools.
2. The U.S. government, foundations, NGOs,
universities and the legal community must
support Chinese legal reformers, academic
freedom advocates, independent journalists,
human rights defenders and pro-democracy
activists in China and in exile, both verbally
and financially. The U.S. Congress should
increase support for the National Endowment
for Democracy, Voice of America and Radio Free
Asia; support the development of technology
enabling more Chinese citizens to circumvent
the Great Firewall and award asylum readily to
those who face a credible risk of persecution
inside China because of their human rights
advocacy.
3. The U.S. government should rejoin or
devote more resources to international
bodies that set and monitor human rights
standards, such as the UN Human Rights
Council, the World Health Organization, the
International Telecommunication Union, the
World Intellectual Property Organization,
Interpol and other agencies where diplomacy
takes place and international norms relevant to
human rights are set. Sustained work in these
bodies is an essential antidote to China’s intense
diplomatic efforts to bend them to their own
purposes.
4. Wherever possible, the U.S. should
collaborate as closely as possible with like-
minded democratic countries to coordinate
collective positions relevant to human rights.
Such activities should include convening
Democracy summits aimed at developing
concrete joint programs, and pushing such
multilateral gatherings as the G-7 and the
G-20 to engage actively on human rights and
democracy issues.
5. Even if relations grow more fraught, the
U.S. should continue to nurture people-to-
people engagement. Since the ties between
the two societies—especially in cultural,
business and educational exchanges—can help
promote better understanding of human rights,
the U.S. government and American academic
institutions should continue supporting
educational exchanges between the two
countries, except in those areas of science and
technology that are sensitive for military and
national security reasons. Otherwise, Chinese
students and scholars who wish to study in the
U.S. in non-sensitive fields should be made to
feel welcome and should receive student or
visiting scholar visas without undo hassle.
6. The U.S. government should work with
U.S. businesses to help raise human rights
awareness and avoid human rights violations.
CEOs should be encouraged to comply with the
UN Guiding Principles on Business and Human
Rights, which among other things, require
due diligence to avoid human rights violations
in supply chains. Investors in China should
become more aware of the consequences
of their investments and should speak more
frankly with their Chinese counterparts about
the ways in which human rights violations
create financial risks and brand damage for
Chinese enterprises, and everyone else, in the
global marketplace.

12
KEY FEATURES OF CHINA’S ECONOMY
UNDER XI’S SECOND TERM
Three major features of China’s economy
are relevant for American officials as they
develop concepts for the new era of strategic
competition between the U.S. and China:
◆ An economic growth strategy stressing
large-scale state intervention to achieve
rapid technological progress. So far, this
strategy has delivered strong growth and
given China global economic credibility.
◆ Increased openness to foreign investments
and financial institutions, conditional on
them serving China’s developmental goals,
one of which is to create an increasing
foreign dependence on China’s supply
chains and markets.
◆ A highly leveraged financial system that
requires constant risk management
but is not fragile enough to derail the
government’s long-term development
strategy.
STATE-DRIVEN ECONOMIC STRATEGY
Under Xi Jinping, China has adopted an
“innovation-driven development strategy.”
China’s strategy involves large-scale state
interventions in the economy to achieve
rapid technological progress, increased self-
sufficiency in critical technology supply chains
and global leadership in many key tech sectors.
Crucial to this strategy is the mobilization of
finance on an unprecedented scale—through,
for instance, “industrial guidance funds” that
combine capital from the state budget, state-
owned and private enterprises and capital
markets for investment in strategic industries
such as semiconductors, artificial intelligence
(AI), new energy vehicles and biotech. As a
result, large pools of capital have been made
available to state and private companies,
regardless of their creditworthiness. The
aggregate value of this state-organized financial
support to favored industries runs into the
hundreds of billions of dollars.
Other interventions include the increased
use of Communist Party committees in
private companies to influence commercial
decision-making and gain access to proprietary
information alongside the use of so-called
anti-monopoly enforcement and other
regulatory tools—both to facilitate the transfer
of technology to favored firms and to limit the
need to have IPOs on foreign exchanges.
Over the past few decades, market forces
have played an ever-larger role in day-to-day
economic activity in China, which is one reason
why the economy continues to perform well.
Yet Beijing’s recent development strategy has
worsened the distortion of capital allocation,
not only in China but in the rest of the world,
by subsidizing and keeping afloat many
companies that would otherwise not have
survived in viable form. This creates excess
capacity in many industries and corrodes fair
competition and market-determined outcomes,
both in China and elsewhere in the global
marketplace. These market-distorting policies
are paired with an increase in China’s efforts to
convert economic strength into regional and
global political influence.
Beijing’s policy of “military-civil fusion” also
implies intent to convert technology developed
for civilian aims to military uses. China’s goals of
attaining self-sufficiency and global leadership
in many tech sectors, combined with the
government’s continued gatekeeper role for
foreign investment, leads to coercive transfers
of intellectual property from U.S. and other
foreign companies. There is also a long-run risk
that through such government intervention,
Chinese firms could displace American
counterparts in certain high-value industries.
CONDITIONAL OPENNESS TO FOREIGN
INVESTMENT
In the past five years, Beijing has substantially
relaxed restrictions on foreign investment in
many sectors, notably finance, pharmaceutical
and automobiles. These market openings
are generally in sectors where China lags but
hopes to catch up to or overtake competitor
countries. Thus, this opening is driven by the
Chinese state’s own industrial policy aims.
Even so, this new access is a reason why,
despite new political challenges, multinational
companies see China as more integral than
ever to their global strategies. China is a large
and fast-growing market for many high-
value products and services, an efficient and
MEMO NO. 4 • CHINA’S ECONOMY
MEMO NO. 4
CHINA’S ECONOMY
Arthur Kroeber, Charlene B

resilient production base, and now, along with
the U.S., has become one of the two main
centers for global innovation. U.S. policymakers
must reckon with the reality that despite
all the friction and tension, most American
multinationals still view participation in China’s
economy not as optional, but as critical for their
continued global growth and competitiveness.
FINANCIAL RISK
China’s economic system faces persistent
financial risk. The ratio of gross debt to GDP,
already high for a developing country at
around 250% in 2019, rose by about another 25
percentage points during 2020 thanks to the
COVID-induced recession and the government’s
subsequent credit-fueled stimulus response.
The authorities are now imposing tighter credit
policies to stabilize the debt level, resuming
efforts that began in late 2016 when financial
risk was identified as one of the country’s top
three governance challenges.
Much of this debt has been taken on, not by the
central government, but by local jurisdictions to
finance infrastructure and by both state-owned
and private companies in favored industrial
sectors. The continued use of subsidized finance
to drive technological progress and growth
will inevitably create a significant number of
bad debts from failed projects, such that high
leverage and piles of new non-performing
assets will continue to be a headache for
financial regulators in Beijing for many years to
come.
Efforts to contain leverage will require harder
budget constraints on local governments and
state enterprises. This could hamper China’s
development plans and economic growth. Yet
the political will to achieve China’s development
goals is very strong, and thanks to its huge
pool of domestic savings and tight controls on
capital outflows, China is unlikely to be derailed
by a financial crisis any time soon. While
financial problems may make China’s drive
for technological progress bumpier, they are
unlikely to stop it.
U.S. ECONOMIC POLICY TOWARD CHINA:
A NEW FRAMEWORK AND POLICY
RECOMMENDATIONS
China’s drive to achieve greater economic
power and technological independence
through massive state intervention is a major
challenge for the U.S. The American response
should not assume that the U.S. policies will
have much ability to shift China from its course
of state-driven economic and technological
development, at least not so long as Xi Jinping
is in charge. Instead, a realistic U.S. policy should
be driven by the following considerations.
First, although China has vaulting ambitions,
ample financial resources, and demonstrated
technological prowess, its capacities in most
areas are still behind those of the U.S. and
other Organisation for Economic Co-Operation
and Development (OECD) countries. The
U.S. can and should be able to maintain
leadership in many critical sectors by stepping
up government funding for R&D, rebuilding
relevant infrastructure and increasing its
participation in international technology
standards bodies to influence the future rules of
the road.
Second, many other countries share—to
varying but growing degrees—U.S. concerns
about China’s coercive technology transfers,
the displacement of international companies
and challenges to their national security. The
U.S. should work in concert with coalitions of
concerned countries on measures to constrain
China’s predatory practices. However, since
every country balances economic and security
interests differently and many will place a
higher priority on maintaining access to China’s
markets than the U.S., new coalitions will have
different memberships depending on the issue
and will need to be flexible. The U.S. should seek
to fortify and work with as many such coalitions
as is feasible.
Third, some policy tools must be used sparingly
and with caution by the U.S., because of their
potentially toxic side effects. These include:
MEMO NO. 4 • CHINA’S ECONOMY
China’s drive to achieve greater economic power and technological
independence through massive state intervention is a major challenge
for the U.S.

14
◆ Unilateral punitive actions such as tariffs,
sanctions and export controls, whose
indiscriminate use risks undermining the
credibility of U.S. leadership in a multilateral,
rules-based, market-oriented global
economic system with many different
kinds of stakeholders. Tariffs are usually
counterproductive, since their ultimate
costs are borne by host companies
and consumers rather than the target
country. Other sanction instruments,
too, should be deployed only selectively
and proportionately, in response to harm
that can be reasonably demonstrated or
anticipated.
◆ An emphasis on state-directed industrial
development in the U.S. would undermine
competition and it is not an effective
response to state-directed industrial
development in China.
◆ Rhetoric implying that any economic
or technological success of China’s is
necessarily a defeat for the U.S. Economics
is not a zero-sum game. The aim of U.S.
policy should not be to thwart China’s
development, but to constrain the negative
impacts of China’s policies on other
economies, preserve the rules-based global
market and protect vital national security
interests.
Given this framework, we propose seven
specific economic policies for the U.S. to take
toward China:
1. Ramp up domestic investment in R&D,
infrastructure, innovation-promoting
standards (such as for clean energy and
decarbonization) and technological
education. The purpose should be to foster a
national ecosystem for innovation that enables
the creation of new technologies, companies
and industries. The Innovation and Competition
Act is a good start. More directed policies may
be required in a handful of sectors critical to
national security—notably telecommunications
equipment, semiconductors and
pharmaceuticals—to foster U.S. technology
development and manufacturing capacity.
But such direct industry support should
remain limited, since there is significant risk of
regulatory capture and diversion of resources
into low-productivity projects.
2. Enact immigration policies that cement
the U.S. position as the most attractive
destination for global talent. Such policies
will include measures to make it easier for
international students with advanced degrees
to work in the U.S.
3. Join the Comprehensive and Progressive
Agreement on Trans-Pacific Partnership
(CPTPP), which the U.S. initiated as the TPP and
then exited during the Trump Administration,
and in which China is now actively pursuing
membership. Domestic political opposition in
the U.S. will make rejoining difficult, yet this
agreement is the single most effective way for
the U.S. to keep up with China’s rising regional
and global economic influence.
4. Develop a multilateral agreement
specifically on digital economy issues, using
as foundation rules already set forth in the
CPTPP, the U.S.-Japan Digital Trade agreement
and the U.S.-Mexico-Canada Agreement.
5. Establish a broader trade compact among
major industrialized nations based on the
principles of market-based economics, rule
of law and transparency. Its aim should be the
development of high-standard rules for trade
and investment areas not covered by the World
Trade Organization (WTO), in such areas as the
digital economy, climate change, labor equity,
subsidies, and state-owned enterprises.
6. Create a more closely-knit coalition of
nations willing to push for major WTO
reforms, including revision of the WTO’s dispute
settlement mechanism and rules relating to
state subsidies and state-owned enterprises.
China would likely seek to block or water down
such reforms, but the effort would still be
worth undertaking, to highlight that the U.S.
and a large bloc of nations are committed to
a more open, rules-based, market-oriented
international economic order even if China is
not.
7. Reopen negotiations with China on
specific issues, including market access,
regulatory transparency, national treatment
and intellectual property protection. These
initiatives could take the form of restructured
“Phase II” trade negotiations, or be limited to
a small set of negotiations on discrete topics.
Additional dialogues in areas of common or
parallel interest, notably climate change and
financial risk management, would also be
helpful. We should be under no illusions about
our capacity to compel China to undertake
large-scale structural changes. Nonetheless,
the continued presence of U.S. companies in
China means that we need better mechanisms
for resolving problems and pressuring China to
adhere to prior commitments, with the goal of
assuring that the benefit U.S. firms derive from
China’s economy are equitable and reciproc.

CHINA’S TECHNOLOGY
Barry Naughton and Peter Cowhey

KEY FEATURES OF CHINA’S
TECHNOLOGY DRIVE
The basic patterns of China’s technology
drive—state-led, massive and seeking to end
dependence on foreign suppliers—along with
its competition with the U.S., have become
more deeply confirmed over the past few years.
Some particular new developments relating
to China’s drive for greater technological self-
reliance need to be highlighted because of their
importance for American policy responses:
1. Chinese policymakers have doubled down
on a massive commitment to become more
technologically independent, partly because
of fears about being sanctioned or otherwise
cut off. China’s Outline of 14th Five-Year Plan
(2021-25) represents a clear intensification
of this drive for independence. For the first
time, Beijing calls “science and technology
self-sufficiency” a pillar of strategic support for
national development, and commits itself to
massive subsidies for commercial technology
applications. The plan builds on Beijing’s
earlier commitment to “new infrastructure”
investment as a key driver of both growth and
technological development through such
initiatives as “Smart Cities.” The highest priority
remains on the cluster of technologies centered
on semiconductors, telecommunications,
artificial intelligence, quantum information
and new materials. China’s technology drive is,
if anything, less targeted than in the past, as
support for high tech expands to cover more of
the industry.
Meanwhile, China is actively “decoupling” its
supply chain from dependence on the U.S.
China is insulating its supply chain, reducing or
eliminating bottlenecks and chokepoints, and
investing in redundancy. This is an expensive
undertaking, but China wants to keep many
of its cross-border networks in place, so other
countries remain dependent on Chinese
suppliers and markets. Remarkably, the Chinese
government has explicitly said that this policy
will allow China to retaliate if and when it faces
technological sanctions.
2. Chinese government-led tech projects
have given policymakers successes that have
generated real popular pride, despite a mixed
record. External factors, like U.S. sanctions,
have led Chinese leaders to intensify
technology and industrial policies. China
has celebrated projects like the Mars rover
and the probe of the far side of the moon. In
applied technology, China’s accomplishments
in fintech, 5G telecom and quick deployment
of COVID-safety phone apps are also notable
accomplishments.
China has been less successful in the advanced
semiconductor sector, despite considerable
efforts and investment over the past decade.
But China wants to be a global leader in
cutting-edge technology, and much of that
technology depends on having access to the
most advanced semiconductors. This has
reinforced the conviction of policymakers in
Beijing that they need to be able to make their
own advanced semiconductors, as soon as
possible. Meanwhile, both China and the United
States rely heavily on Taiwan’s semiconductor
industry, and especially on TSMC—the Taiwan
Semiconductor Manufacturing Company,
which has developed a commanding presence
at the cutting edge. A global scarcity of
semiconductors has developed because
suppliers could not quickly enough respond
to shifting demands for chips. Semiconductor
shortages have emerged even in many types of
“legacy” microprocessors, such as those higher
nanometer chips not on the extreme cutting
edge that are used in every form of industrial
product. These shortages have underlined the
massive ongoing economic importance of the
semiconductor sector in the new “Internet of
Things.”
3. U.S. policies toward China’s technology
drive have changed little under the Biden
Administration. Although the administration
has sought to rationalize policies and give
markets time for orderly adjustment, it has not
broadly relaxed Trump’s policies. His placing
of Chinese firms on the U.S. “entity list” has
hurt China’s tech aspirations significantly, and
caused it to spend significantly more on R&D
while also stockpiling large inventories of chips.
Such U.S. actions are unlikely to change the
Chinese government’s support for China’s tech
sector. They may instead spur Beijing to speed
up its quest for self-reliance, and more actively
move toward decoupling.
MEMO NO. 5
CHINA’S TECHNOLOGY
Barry Naughton and Peter Cowhey

16
U.S. POLICY RESPONSE: A
FRAMEWORK AND SPECIFIC POLICY
RECOMMENDATIONS
China’s technology drive presents a major
challenge to the U.S. We must protect ourselves,
our friends, allies and companies, by making
major adjustments of our own that strengthen
a global rules-based system of free and fair
competition. At the heart of such an effort
must be an American-backed move towards a
stable, sustainable and open innovation system
that relies on allies, partners and countries of
common interests.
China has, over the past two decades, invested
heavily in increasing innovation, with the goal
of becoming a global leader in cutting-edge
technologies. The effort has and will continue to
achieve some goals, while also at times being
wasteful, or even counterproductive. The odds
of that increase if China’s industrial policy loses
its focus on export-oriented innovation.
However, the United States should not and
cannot wait for China to slow down. For three
decades, the U.S. has developed myriad and
varied kinds of collaboration with China, which
have contributed enormously to the creation
of knowledge globally and the expansion of
low-cost production networks. But leaders in
Beijing have long demonstrated a willingness
to subordinate economic efficiency to security
imperatives, which appears to be a factor now
behind China’s steps to decouple its supply
chain from the U.S., and even from the OECD.
That does not mean China is decoupling
from the world. Its Digital Silk Road, part of its
global Belt and Road infrastructure initiative
(BRI), includes building out 5G networks, and
exporting surveillance equipment and other
technology to dozens of countries around the
world. Beijing also seeks to set technological
standards in a way that will favor China.
China’s economic scale, mid-level technological
achievements, and competitive pricing mean
that ties with middle-income and developing
countries will likely continue, and could even
grow. The U.S. really doesn’t have a decoupling
option from these same markets. The U.S.
faces a long-term challenge in deciding how to
pursue U.S. core security and economic goals
in a world of ambiguity, where a growing share
of the global market is in places where the U.S.
and Chinese interests constantly intersect and
sometimes collide. The U.S. must determine
which of these areas of intersection should
decouple for national security reasons without
disturbing the others, and which should not.
The U.S. needs to articulate a more coherent
policy about which advanced technologies it
can, and cannot, share with China. It makes
little sense to ban a company like TikTok simply
because it is Chinese. Instead, there need to be
explicit U.S. guidelines and rationales set for
such things as the collection of private user data
and the application of sophisticated behavioral
algorithms. National security concerns that
justify bans, sanctions or decoupling from
Chinese companies must be made more
explicit, and be very selective.
A point that can hardly be overemphasized
is that the U.S. response to China’s actions
should be premised on maintaining our lead in
scientific research, discovery and application.
Here we want to echo the previous memo on
China’s economy: “The U.S. can and should
maintain leadership in many sectors by
stepping up government funding for R&D
and relevant infrastructure and increasing
participation in international technology
standards bodies.”
As the U.S. selectively decouples from certain
China-dependent supply chains, it should
remain open to the flow of students and talent
from China. It is in the U.S. national interest
to continue encouraging the participation of
Chinese students and scholars in the research
commons of our country, where they have
been playing an inordinately productive role.
Not every Chinese student will stay in the
U.S. or leave with a favorable attitude toward
the U.S., but the substantial number of
Chinese graduates who do stay in the country
contribute immeasurably to U.S. scientific and
technological creativity.
In sum, even as we move to protect areas of
research deemed essential to national security,
our response to China should always be to foster
rather than diminish the open, attractive and
powerful innovative environment that is the
beating heart of America’s singular scientific
dynamism.
MEMO NO. 5 • CHINA’S TECHNOLOGY
… our response to China should always be to foster rather
than diminish the open, attractive and powerful innovative
environment that is the beating heart of America’s singular
scientific dynamism.

17MEMO NO. 5 • CHINA’S TECHNOLOGY
We recommend the following specific policy
measures:
1. Develop clearer rationales and guidelines
for measures needed to protect the U.S.
against harmful Chinese behavior. Money will
have to be spent to bring some manufacturing
and production back to the U.S., including
advanced semiconductors, some capabilities
for 5G networks and more advanced networks
to come, some pharmaceuticals and perhaps
rare earths. We will also have to refurbish
long-standing security measures that help
guarantee diverse and selective stockpiles
of critical raw materials. In the process, we
will need to distinguish between long-term
critical vulnerabilities that need government
intervention, and situations where normal
market forces will correct imbalances naturally.
We should guard against mimicking China
and falling prey to an overly broad and hastily
assembled industrial policy, both for production
of goods and the mining of raw materials.
Indeed, it may be worth establishing two
competing teams to investigate each of these
issues and make counterproposals to get the
balance right.
2. A smart strategy will require much more
U.S. government funding, especially for basic
research and advanced production facilities.
We agree with the recommendations made in
the memo on China’s economy, to “ramp up
domestic investment in R&D, infrastructure,
innovation-promoting standards (in such
fields as clean energy and decarbonization),
and technological education” and “enact
immigration policies that cement the U.S.
position as the most attractive destination for
global talent.” However, we should be aware
that government spending is only one part of
the rapidly changing research and innovation
system landscape. Government funding should
stay focused on those parts of the innovation
system that are especially responsive to
government action, namely those with strong
public goods properties and long-term, hard-to-
predict but potentially large benefits.
3. We should not assume that the U.S. and
its close allies need to be dominant in every
field of emerging technology. Prioritization
is essential if we are to effectively focus our
efforts. We must be mindful that there can
also be benefits to interdependence, especially
with friendly global partners, that can often
outweigh specific risks of dependence. A careful
delineation of which technologies should be
based in the United States for security or other
reasons, and which would be just as useful
and accessible based elsewhere, is a crucial
step in sustaining innovation and overall U.S.
technological leadership.
4. It is important that U.S. spending be
matched to big, medium and long-term
risks, not short-term hiccups. As we focus
on the big picture for key technologies that
relate to national interest, it is important not
to be discouraged by occasional failures (e.g.
Solyndra, a failed solar company) that are an
inescapable, even necessary byproduct of
innovation. We should also recognize that
extensive U.S. government funding for applied
innovation, including semiconductor fabs, may
be subject to short-term thinking, and it is too
often influenced by industry lobbying. The U.S.
Innovation and Competition Act, passed with
bipartisan support in June 2021, allocates $250
billion to help improve R&D and innovation to
better compete with China. This is a step in the
right direction.
5. The U.S. should focus on smart
infrastructure as an important area for
government policy support and collaboration.
Both China and the EU are using next-
generation infrastructure to gain competitive
advantage. Because we desperately need to
repair and modernize our own infrastructure,
we should learn from the efforts of others in
creating smart grids, high-speed transport
networks and smart cities. Because smart
infrastructure is also crucial to meeting climate
policy goals, the federal government should
provide similar kinds of flexible support for
innovative local infrastructure experiments,
after monitoring developments in China and
Europe. “First movers” have some advantages,
but so do responsive “fast followers,” as some
Chinese tech firms have shown over time, by
learning from the mistakes of “first movers.” In
many fields, decentralized experiments that
optimize for local conditions may prove superior
to centralized master plans. In the long run,
the flexible U.S. federal system has important
advantages over more rigid hierarchical
systems, but better national policy support is
needed to bring those advantages into full play.
6. We should move rapidly and proactively
to establish new broad agreements
with our allies and friends on baseline
protocols for data privacy, cybersecurity
and data management that allow for
easier collaboration, while respecting
differences—including national preferences.
This will encourage and facilitate collaborative
multilateral research, as a preferable alternative
to China’s more sovereign-based, even
nationalist, approach to research.
7. The U.S. should develop policies specifically
designed to attract and keep foreign talent.
A new U.S. visa policy should protect national
security, while also welcoming the foreign
talent that has been a key building block in the
edifice of America’s scientific and technological
preeminence.

CHINA’S MILITARY CHALLENGE
Thomas Christensen, Zack Cooper, Karl Eikenberry, M. Taylor Fravel and Bonnie Glase

18
THE CHALLENGE OF CHINA’S
MODERNIZING MILITARY
For U.S. defense planners, China’s modernizing
military—the People’s Liberation Army (PLA)—
poses the greatest challenge in the world.
China is not a global military peer competitor
of the U.S. and will not be for decades, but
it has developed a robust capability to fight
effectively in the areas within the first island
chain, which runs north to south from Japan in
the East China Sea, to Taiwan, to the Philippines
in the South China Sea. These areas are of vital
importance to global trade and U.S. security.
They include U.S. allies Japan, South Korea and
the Philippines, and the key security partner of
Taiwan. The U.S. military presence in East Asia
is also an essential link in the global network
of bases that allows the U.S. to project power
around the world.
The PLA, as part of its effort to prevail in regional
conflicts, is focused on deterring and defeating
U.S. military intervention in East Asia. It is
developing longer range kinetic and electronic
warfare systems, as well as cyber and anti-
satellite capabilities which can complicate and
delay efforts to resupply and reinforce American
military units operating near China from
more distant bases in Guam, Hawaii and the
Continental United States (CONUS). The PLA
is also expanding and diversifying its nuclear
arsenal, including in ways that overlap with
some of its conventional missiles, amplifying the
dangers of crisis escalation.
This short memo examines the challenges
posed by these new and expanding capabilities,
and focuses on the possibility of a U.S.-PRC
conflict over Taiwan, which we believe is
the most likely and dangerous scenario for
armed combat between the two sides in the
foreseeable future. It also addresses China’s
“grey zone activities”—coercive actions involving
assets like the Coast Guard or paramilitary
units such as the Chinese Maritime Militia. Due
to space constraints, it does not discuss the
militarily relevant issue of competition in 5G, AI,
micro-processors and other technologies that
will have profound implications for the next
generation of weapons and future deterrence,
or the real possibility of a U.S.-PRC clash on
the Korean peninsula, which are also potential
military threats.
China’s rapid military development in the
following areas is most concerning to the U.S.:
1. Long-Range Strike Weapons, including Anti-
Ship Cruise and Ballistic Missiles
New generations of precision-strike ballistic
missiles, land-attack cruise missiles and anti-
ship cruise missiles launched from surface
ships, submarines and aircraft put at risk U.S.
bases as far away as Guam and U.S. surface
ships, including aircraft carriers, operating
within 2,000 kilometers (and perhaps beyond)
of China’s coastline.
2. Integrated Air Defenses (IADs)
A mix of imported and reverse-engineered
Russian technologies, coupled with new
indigenously produced systems, now provide
China with long-range air power that threatens
Taiwan’s entire air force and U.S. air assets
in the region, should Washington decide to
intervene in Taiwan’s defense. Placing such
systems on surface ships and artificial islands
in the South China Sea has greatly expanded
the PLA’s defense umbrella. The reach of these
systems has the potential to outstrip those of
many current U.S. air-launched strike weapons.
Moreover, the sheer quantity of these new
Chinese systems might exhaust U.S. munitions
during a protracted conflict.
MEMO NO. 6 • CHINA’S MILITARY CHALLENGE
MEMO NO. 6
CHINA’S MILITARY CHALLENGE
Thomas Christensen, Zack Cooper, Karl Eikenberry, M. Taylor Fravel and Bonnie Glaser
The PLA is emphasizing the need to establish information
dominance in the Asian theater, making it difficult for U.S. forces
to communicate with each other or target Chinese forces.