Cotton complications in Xinjiang: William Overholt on the case of Esquel

Foreign Affairs

A year after its Xinjiang-based subsidiary was sanctioned by the U.S. government, textile giant Esquel Group recently successfully got the Department of Commerce to reverse its decision. Harvard researcher Bill Overholt appeared on the Sinica Podcast to discuss the case.

Esquel cotton textiles
Illustration by Derek Zheng

“It’s quite possible,” my guest on this week’s Sinica Podcast recently wrote, “that the U.S. government has imposed sanctions on the world’s most socially responsible company, and one that has been particularly beneficial to the Uyghurs.”

The company in question is Esquel, the world’s largest manufacturer of woven shirts, which found its Xinjiang-based subsidiary, Changji Esquel Textile Co. Ltd., on a U.S. entity list a little over a year ago. At the time, it strongly denied that it was using forced labor, Uyghur or otherwise, in its supply chain.

The potential damage to the company went beyond the loss of its biggest export market, the U.S., as it also suffered immediate reputational damage, as Katrina Northrop reported for The Wire China. That piece is titled “Hemmed In,” and while Esquel declined to be interviewed for it, it is nonetheless a terrific story that focuses on the remarkable woman who heads the company, Marjorie Yang. She’s an MIT-educated, self-described math nerd who left Wall Street to take the reins of her father’s textile company, and built it into a real behemoth, largely on the strength of operations in Xinjiang. I highly recommend that you read the piece, or since it’s paywalled, listen to the audio version of it read by yours truly on our China Stories podcast.

In any case, happily for the company, Esquel managed to have its subsidiary, Changji, removed from the entity list last month after it sued the Department of Commerce. [Correction: Esquel’s efforts to be removed from the Entity List are ongoing. According to the company, “On August 27, 2021, Esquel Group filed a motion to re-set a hearing date with the United States District Court for the District of Columbia, resuming its lawsuit against the U.S. Department of Commerce to remove the erroneous inclusion of Changji Esquel Textile Co. Ltd. (CJE) on the U.S. Entity List.”] Many other companies, though, remain on the list, and concerns over forced labor are obviously not to be dismissed so lightly, but as US-China Business Council (USCBC) President Craig Allen talked about recently on our sister podcast, China Corner Office, it’s left many American importers with the vexing, if not indeed impossible, task of proving a negative about their very complex supply chains if they want to get shipments out of limbo.

To dive deeper into the case of Esquel and the dilemmas that companies like it face, I’m delighted to be joined by William Overholt. Bill has had a long career in China and Asia-related fields, and has spent the last dozen or so years at Harvard, where he’s now a senior research fellow at the Harvard Kennedy School. Bill is the author of China’s Crisis of Success, 2018, and of several other titles, but one that really stands out was he wrote what was one of the first major books to look at the consequences of reform and opening, all the way back in 1994, with the very prescient title, The Rise of China: How Economic Reform is Creating a New Superpower.

Listen to the podcast episode with Bill or read a lightly edited transcript of the podcast below:

Kaiser Kuo: Bill Overholt, welcome to Sinica. It’s such an honor to finally have you on our program.

Bill Overholt: Thanks. It’s a honor to be here. You have a great program.

Kaiser: Well, thank you, Bill. Did you know that you and I share a birthday? I was doing a little bit of background. March 7th, an auspicious day. Bill, the quote that I read at the start of the show was from a letter to the editor published by The Wire. It was in response to, but not critical of, Katrina Northrop’s piece, which I think you also agreed was an excellent article. What I love about that note that you wrote was the actual story of how you got to know Marjorie Yang. That was 20-some-odd years ago. It’s very unexpected. It’s very personal. I’d love for you to tell that story to our listeners, and tell us about her commitment to corporate social responsibility and some of the programs that Esquel has undertaken that you’re aware of.

Bill: Well, I first met Marjorie in a series of standard business meetings, but one day I got an invitation from probably two of the three leading ladies of Hong Kong, Lydia Dunn and Marjorie Yang, to go to a ballroom dance, and I didn’t know why, but it sounded like fun, so I went. It was a gala affair. And somehow afterwards, I found myself at a dancing lesson with Marjorie Yang, and they were teaching us how to waltz, and I had done basic dances back in cotillion when I was 12 years old, so I thought I knew how to do one-two-three, one-two-three, one-two-three. It pretty quickly became clear that trudging around wasn’t what either the instructor or Marjorie had in mind, so I then found myself taking two double lessons a week. That meant an hour twice a week, trying to become a decent dancer friend of Marjorie, and I never got to the point where I felt I belonged on the floor with Marjorie. But she was an international champion. She’d fly off to Hawaii with some other partner and win a championship, but for some reason she kept inviting me, and we were fairly regular dance partners.

Kaiser: Yeah. I imagine you must have improved a bit under her tutelage.

Bill: That led to Marjorie and her sister inviting me at one point to visit the operation of their company, Esquel, up in Turfan in Xinjiang. It was a place I’d visited briefly before. I knew something about the difficult conditions of the Uyghurs, and the fact that the Han Chinese people were getting most of the benefits of this extraordinary economic takeoff that was going on, and I’d been exposed to the gentle way at that time in which the Uyghurs were asserting their Turkish rather than Han Chinese background. They’d take me to an elementary school where the kids were all singing Turkish songs.

I was amazed to go to the Esquel factory and find that they had the most sophisticated cotton machines in the world, made by Toyota Machinery. Nobody else in the world could afford them, and they were run by highly trained Uyghur women, two of them standing in a little air-conditioned glass booth at the corner of a football-sized factory with these giant spinning machines, and Uyghur women were in other key positions, like all the quality control jobs. And it turned out also that Marjorie was helping the people — the farmers — by giving them a little grant in return for a promise by them that they would deliver their cotton to her, and a promise by her that she would pay next year a bit higher than the cotton price for this year.

If you’re a subsistence farmer with a volatile commodity like cotton, that’s a life and death benefit. That was the business and analytical part. And then, afterwards, after all the meetings and the factory tours, the Uyghur community invited Marjorie and her sister and me and a few others to one of their houses, and they had this gala celebration of their success, and of what Marjorie was doing for the Uyghur people, and they tried to teach us all how to do Uyghur dances. Marjorie, of course, picked it up right away, even though you had these intricate hand and finger movements. I had to do my thing, flailing my arms around kind of foolishly. But the point was that there was this total harmony, because Marjorie was a great benefactor of these Uyghur people.

There was one subsequent chapter that didn’t involve Marjorie directly. Years later, I was president of something called the Fung Global Institute in Hong Kong, and a big German company approached us. They had been involved in cleaning up Germany’s horrible pollution of its waterways in the generation after World War II, and they thought, “Oh, maybe we could do something for China very profitably.” They were looking at cleaning out all the waterways around the city of Foshan, which is North of Hong Kong, and so I found myself visiting the most sophisticated water treatment facility just outside Foshan, which happened to be run by Esquel, and so I went there, and expected this rippling pond that one usually sees outside U.S. cities to clean up water. Instead, there was this city block sized facility, four stories tall, that had 15 different stages of water cleanup, and they first cleaned up the local water so they could make bright colored shirts, and then that made the water horribly polluted.

Kaiser: Right.

Bill: After you put dyes in the water, it smells like an outhouse, so there were these 15 stages of cleanup, and at the other end, you could drink the water, and I drank some.

Kaiser: Wow.

Bill: This was an enormously impressive, enormously expensive effort to do what was right, not just for making the shirts, but for the local community. And so at opposite ends of China, I was so impressed that Esquel was doing things that nobody else was doing.

Kaiser: Let me note quickly for the record that your observations of the colorful dress and mentions of dancing in connection with Uyghurs, both of which appear in your letter and in your account just now, do not represent an endorsement on part of certain persistent stereotypes of China’s shǎoshù mínzú [少数民族] represented with regrettable frequency in PRC media, but anyway.

It struck me, Bill, that reading that Wire article, many of the individuals interviewed, from your colleague at Harvard, Bill Kirby, to my colleague and follow podcast host at the Sinica Network, Chris Marquis at Cornell, to cotton supply chain and labor experts like Terry Townsend, that there is really quite uniform praise for their labor practices and the way that they have worked to keep their supply chain very clean, in both the sense of not using forced labor and clean in the sense of being green and environmentally conscientious.

To me, it’s terribly sad when we see companies like this being caught in the crossfire. They are, I think, the embodiment, in many ways, of the hopes that many of us had for what engagement was supposed to look like, in that they would create wealth, that they would spread relatively enlightened business practices, that they would meanwhile keep the shirts from Brooks Brothers relatively affordable for the American consumer. They are not alone, either. I think that it’s probably fair to say that a lot of companies that are operating in China and often come under legitimate criticism, though, on balance they are improving the standards of, again, in large part because of oversight by consumers and by NGOs at home, but companies like Nike or Apple, other major consumer brands, they are doing a lot to raise standards when it comes to labor practices. I think that’s fair to say. Would you broadly agree with that? I mean, do you think that this is one of the potential casualties of decoupling — is that we will lose that ability, I think, as manufacturing leaves China, to bring to bear those forces to see improvement?

Bill: I would very much agree about how American and western companies, particularly American companies, have upgraded standards in China. Basic things, like not exposing workers to dangerous pollution, having reasonable hours and working conditions — these were initiated by western companies, often under some pressure. But standards became institutionalized, and they spread first to other foreign companies. The South Koreans and the Taiwanese were particularly ruthless in the way they treated labor, and they got shamed, and then the local companies also found themselves under pressure.

If you go to Xinjiang or Foshan today, you can find very acceptable working conditions. These confident, happy women assembling computers and doing other things, and they are earning a multiple of what they would have earned if they stayed in the villages. These women often travel 500 to 1000 miles away from their villages and their families to get these jobs, particularly the ones with the foreign factories. There are always problems that come up, and companies like Nike and Apple have had to take strong measures, sometimes under pressure, to upgrade aspects of their operations. But they’ve done that, and the upgrades, the improvements, are most noteworthy in the relatively distant areas, like Xinjiang, so it remains important for NGOs and the government to keep the pressure. You’re not allowed to use slave labor and you have to actively check. You’re not allowed to say, “Well, that’s our subsidiary. We didn’t know anything about it.” But the kind of blanket sanctions that have been done, where you’re guilty until proven innocent, and that’s been the rule. It’s not just been the government rule, the media have basically denounced any use of Xinjiang cotton.

The first thing that it does is to ensure that every poverty-stricken farmer in Xinjiang will suffer. And the second thing it does is ensnare the companies with the absolute best practices. We could spend a couple hours on when sanctions work and why they usually don’t work. But they have to be carefully targeted, and they aren’t.

Kaiser: In your piece, at the very end of your piece, you say, “When a fisherman casts a big net to catch tuna, it occasionally ensnares a porpoise. That’s inevitable. Catching the porpoise doesn’t make the fisherman bad. He is judged on whether he frees the porpoise.” This one porpoise, the one with the mad ballroom dancing skills, does now seem to be off the hook. As I said, Esquel has managed to be thrown back. It’s been freed from the net. But the other dolphins are being asked to prove that they are not tuna, or that their diets are entirely free of tuna. Couldn’t one make the case that maybe fishing with big nets to begin with is the problem, I mean, rather than say pole and line fishing, which is now being advocated for catching of tuna in deep seas?

I mean, I think of parallels to the DOJ’s so-called China initiative, again, where it’s meant to catch these non-traditional collectors of intelligence or whatever, but it’s also this sort of big net approach that’s ended up catching a lot of dolphins, and very few, it would seem, if any, actual tuna. The trauma, I think, also, of being caught in one of these nets is absolutely enormous, I mean, and so they’re freed, but they’ve endured an awful lot of suffering, as I’m sure the former University of Tennessee professor Hu Anming could probably tell us.

Yeah, I mean, I think you’re right, and we could spend a lot of time talking about what sanctions do and don’t work, but these clearly are problematic in so many ways. This idea that you have to prove this negative — prove that your supply chains are clean are especially problematic when we’re seeing what happened just yesterday. The Wall Street Journal reported that there was a Chinese partner organization of the NGO Verite. Verite does labor auditing, and while it’s a relatively small player, it has worked with some of these really big multinationals in doing auditing on labor practices in their supply chains. The Journal article makes clear that the shuttering of Verite’s Chinese partners was all about China’s resistance to forced labor allegations. This hardly seems like it would allay suspicions of that, but it also makes it really, really difficult, I think, for what was already quite difficult. It now seems like, if your supply chain touches Xinjiang at all, there’s an assumption that it’s tainted with forced labor. Or, if you’ve ever employed, whether it’s in the Pearl River Delta or the Yangtze Delta, or anywhere else in China, if you’ve employed ethnically Uyghur people, they are assumed to be — if they’re on some kind of labor transport program — it’s assumed that they were coerced.

What is a better approach to this? Because, look, I hope we all recognize that we do not want our supply chains to involve forced labor from Xinjiang. There is now this Xinjiang Forced Labor Prevention Act which is before the senate, and there’s a house version as well, and they’re looking likely to pass, but it seems like they haven’t really made any improvements on the situation.

Bill: The sanctions that work are highly targeted. Take the case of Huawei. Now, Huawei was about to take over 5G for the whole world because it has access to all the markets of the world, whereas the western competitors, Nokia and Erickson, are shut out of the China market, which happens to be the biggest and fastest-growing, and so Huawei could have R&D budgets that were substantially larger than Erickson’s and Nokia’s combined. Huawei was a very good company, but its success was because of a totally unfair China policy, which was going to totally destroy the western competitors. They were simply going to be put out of business, out of the 5G business. You say, “Okay, we’re not going to allow Huawei to have the semiconductors it needs to build its equipment.” That works. It’s an absolutely legitimate target, and it works. Now, what doesn’t work, blanket sanctions intended to change policies that local governments think are core policies. And U.S. sanctions on Cuba are the ultimate example of that. You go for more than half a century, and the sanctions have the effect of strengthening the dictatorial government that you don’t like, because they can blame their problems on foreigners.

Kaiser: Right.

Bill: If they were to say, in Xinjiang, “Forced labor is absolutely unacceptable, and if we find you actually employing forced labor, you’ll be sanctioned,” and then let the NGOs help enforce that, the U.S. government has extraordinary ability to find out what’s actually going on. When you look at the allegations against Esquel, they got right down to fewer than a handful of workers, or they said Esquel had interviewed people who were part of a group suggested by the Chinese government, and it came down to three workers. Two of them were Uyghurs, one of them was Kazakh, and the conditions under which they had been hired, and they’re paid good market wages, not slave labor wage. Everybody agrees on that. Esquel was basically put on sanctions because of a disputed minor technicality, and we don’t have to do that. We can say, if Nike has a big operation in Xinjiang, employing hundreds of slave labor workers, we’re going to nail it, and we can find out. But this black and white, mass approach of you’re guilty until proven innocent, and as I mentioned earlier, it’s not just the U.S. government. It’s our media. All these articles denouncing companies who use Xinjiang cotton, so we should put every farmer in Xinjiang out of business? It’s horrible.

Kaiser: But at the same time, do you see it at all problematic that Esquel was working with the Xinjiang Production and Construction Corps, better known to us in the China-watching world as the Bingtuan? I mean, Esquel, it does have a relationship with the Bingtuan. That seems to be part of the original basis of the entity listing, and as Jim Millward from Georgetown points out in Katrina Northrop’s piece, there is a carceral component to the Bingtuan. I have no reason to doubt that it has had a hand or continues to have a hand in the operation or at least in the construction of the camps.

Bill: The problem with dealing with China is there is an evolution.

Kaiser: Right.

Bill: In the early days, and even a little later on, if you were a foreign company wanting to do business in China, dealing through the PLA was basically the only efficient way to get going. If you wanted logistics that worked, if you wanted proper infrastructure, if you wanted good communications, the PLA was it, and let me take an example of Seagram’s. Every substantial borrower in China has Seagram’s liquor behind the counter. I don’t know how it is now, but as long as I lived in Hong Kong, the record showed that Seagram’s had never exported a single bottle of anything to China. It had a deal with the PLA so that bottles sort of showed up in the back of every bar in China, and if they’d gone through the regular system, there would have been 15 sheets that they would have had to get signed, and they wouldn’t be signed until you paid bribes, and it would take so long that nothing would ever happen. You’d never get permission to do anything, and then, if you got the bottles into China, you couldn’t get them distributed anywhere without the PLA, and that was a situation that virtually every company faced, and that was a situation that a company like Esquel faced in the early days, trying to get large-scale farm operations, and then things evolved, and you constantly upgrade. You make sure that all your workers are treated the best. You form direct relationships, as Esquel did, where you’re saying, “Okay, I’m not only going to pay you market prices this year and not squeeze you. Every year I’m going to promise you that next year I will give you a higher price.”

So yes, everybody has a history that can be criticized, and the question is, are you doing anything today that harms workers? Are you doing better than 100% of your competitors in the way you treat workers, train workers, give prestige to your workers? That’s the question to ask, not the history.

Kaiser: Right.

Bill: Every American company has some kind of a history, but in almost all cases, that history is one that improved situations in China.

Kaiser: Let’s get back to Marjorie, and your association, your friendship with her, really started to blossom in the late 1990s. This was at a time when I think the norm was still very much the sweatshop narrative, and there was still quite a bit of that kind of Taiwan and Hong Kong lǎobǎn [老板] exploitation of factories in Dongguan and things like that. It sounds like Marjorie was very much ahead of her time with Esquel, and I’m sure this is something that you talked about. Can you kind of recall for our listeners what her thinking was, how she talked to you about their revision for operating in China more responsibly.

Bill: Well, there was just a constant emphasis on ethical behavior, on treating people well, on treating the environment well. It just pervaded everything, and after I wrote that piece for The Wire China, a Harvard Business School professor, James Sebenius, got in touch with me and sent me two of his case studies of how Esquel worked on this system of promising the cotton farmers a better price next year than they get this year, but he also forward me a business school case study, which unfortunately is paywalled, from years earlier, by Warren McFarlan and several colleagues, on specifically the question of can you run a business to the highest ethical standards? Warren McFarlan and two of his Harvard Business School colleagues wrote about the efforts of Esquel to just set a higher standard than everybody else, and it’s hard and it’s unusual, and that’s why it was worth a Harvard Business School case study that the students are told to read.

Kaiser: Do we know anything about how Esquel got itself off of the entity list? [Ed’s Note: See correction near the top of this article.] I mean, Katrina Northrop’s piece made it clear that it’s a whole lot easier to find yourself on the list than to get yourself removed from it. You have to actually appeal to an inter-agency committee that’s chaired by the Department of Commerce, and the vote to remove you has to be unanimous to take you off. Her piece made it clear that they’ve been quite proactive in trying to get off the list. They hired K Street firms, some very high power ones. What do you know about their efforts to get themselves removed and how this transpired?

Bill: I don’t know the details of those efforts. I think that one entity was taken off the list, but my understanding is that Esquel as an umbrella organization still has problems, and they were very worried about what this is going to do to the company. They hired lawyers, they have a reputation, they’re known to all the big American companies, and everybody has the same impression of them.

Kaiser: Right.

Bill: There’s nobody out there saying, “Oh, this is a terrible company. It’s the kind of company that would hire slave labor.” That creates an environment in which it’s not just a legal process. What Washington is finding is that, if you sanction Esquel, you discredit the whole process of trying to use sanctions to make an appropriate ethical statement about Xinjiang. It’s one aspect that tends to discredit the whole process. The other is these blanket efforts that tend to harm every poor farmer in Xinjiang.

Kaiser: Right.

Bill: There’s a… call it a political angle as well as a legal angle.

Kaiser: Bill, I would be remiss, and I think this would be a squandered opportunity if I didn’t ask you to talk about some of the other bigger picture issues in the bilateral relationship that you’ve been really passionate about. One piece that you’ve published recently was an op-ed for The Hill, and it criticized the lack of China expertise in the Biden administration’s current foreign policy team as it’s shaping up. I mean, the Biden foreign policy team has been criticized enough a lot over another foreign policy issue, of course Afghanistan, but this particular piece, from I guess a few months back, I suppose, it reminded me of a Bloomberg piece back during the Obama administration that said pretty much the same thing about the Obama team, reporting that the Chinese side was really lamenting the fact that it didn’t have a go-to guy who really had the President’s ear, and this was especially the case after Jeff Bader left government.

Bill: Blinken’s expertise is the Middle East and Europe. Sullivan’s expertise is very similar, with a little bit of Burma thrown in. Secretary of Defense Austin, for whom I have the greatest respect, experiences the Iraq war, and then being the general overseeing our Middle East operations. None of them have any experience of China, and that’s a problem, because when a crisis occurs, the communications around the decision pretty much stay at the top. Even assistant secretaries just get closed out.

I have a particular worry about this pattern of saying everything about India’s good and everything about China’s bad, because what happened in the early Obama administration? You remember that they worked up an absolute fervor about China doing business in the oil business in Sudan. It just was terrible. It was immoral. It showed that China had no standards, and then of course, at the same time, India was the world’s biggest democracy. Everything said about India was wonderful. Never mentioned was the fact that the oil company in Sudan is a Sino-Indian joint venture, and this makes for bad policy. It makes us look like idiots in the face of the world, because the experts on these things in the world know this, and it was the same. We made this terrible fuss about Chinese relationships with the oil business in Iran. Meanwhile, India is this wonderful supporter of our foreign policy. Well, India’s dealings and laws toward Iran were essentially identical to those of China. And if you’re German, you think these Americans are some combination of hypocritical and ignorant. If you’re Chinese, your reaction is, “These Americans don’t care about the ethics of these situations. They’re just trying to keep China down,” and so it has horrible consequences for our foreign policy, and not just in the direct relations with China. We don’t need to reinforce this layer after layer, with State and Defense, and National Security Adviser and the ambassador. People mention that there are very good China experts further down. The problem with that is, in a crunch, it doesn’t matter. Secretary Blinken goes off on the Chinese for getting countries indebted and seizing their assets, something that’s never happened, never once in the whole world. It just creates unnecessary hostility.

The other thing that happens, when they’re dealing with Taiwan, and Taiwan could be the hinge issue of modern history. It can be the issue that leads us to lose Los Angeles and Washington, and the Chinese to lose Shanghai and Beijing, and this is a really big deal. What looks easy to somebody who doesn’t know China — oh, let’s just upgrade our official exchanges of cabinet members. Let’s just refer to Taiwan as a strategic partner in our military documents. Let’s just send an American military aircraft. Then we show how much we appreciate Taiwan, but we don’t do any of the hard stuff of upgrading their military, teaching them how you’d fight in an actual conflict, things that cost money and might cost blood. But those things that seem easy are the things we promised not to do in 1972, and if we repudiate them, we can put Xi Jinping in a position where he has to take decisive military action in order to keep this job. This is dangerous. There needs to be somebody close to the President, and the Bush administration, the W. Bush administration, which I didn’t like domestically and I didn’t like for most of its foreign policy, but you had Hank Paulson in the cabinet.

Kaiser: That’s right.

Bill: You had Sandy Randt as the ambassador, and when things were going off the rails, they had the era of the President. And by the way, they had Dennis Wilder in the National Security Council. And so in the W. administration, you have one big success, and that’s relationships with China and Taiwan. We need to learn that lesson. It’s a lesson that Obama didn’t understand, it’s a lesson that Trump certainly didn’t understand, and it’s a lesson that Biden hasn’t figured out.

Kaiser: That’s right. Yeah. I couldn’t agree with you more about the W. administration. That was their one big thing. I mean, a lot of it was just sort of because we were so very distracted after September 11th. I mean, it didn’t start off very auspiciously. I mean, just months into his administration, we had the EP-3 incident in April of 2001. But yeah, after September 11th, things changed quite a bit, and it’s really — yeah, you’d put hard put to find anything that really roiled the waters significantly in U.S.-China relations across the whole W. administration, all the way up until March of ’08, with Tibet.

In any case, this whole framing of the relationship right now in strategic competition at the same time that we see coming into such common usage, and this didn’t start, of course, with the Biden administration, but Indo-Pacific and the revival of the Quad, it really does send very strong signals about India and about China. This Indo-Pacific framing is quite deliberate. And I think it’s kind of a shibboleth, that you can sort of hear how somebody comes down, and whether they use Asia-Pacific or Indo-Pacific in their ordinary language.

Any case, you also contributed this article to a journal called Prism, which is a journal put out by the National Defense University. That came out just this year, only a few months ago, but my sense was that the piece was written before the pandemic, I mean, perhaps in 2019. I think the last footnote in there that refers to any article was one from 2019, so I’m guessing you wrote this before this very consequential last year and a half. Is that correct?

Bill: That is correct. I had a series of military briefings over a period of time that led to me — very controversial, by the way, that led to me being invited to write that article for Prism, and because of COVID, the process of production and publication took considerably longer than usual.

Kaiser: What would you have written differently now if you were to revisit it, in light of — well, really in light of two things. In light of our kind of ignominious departure from Afghanistan, and also in light of COVID. I mean, I think that we’ll end up looking back years from now at the years 2020 and 2021, and this pair of events in kind of the same way, that we’ll look back at 2008 and 2009, at China’s Olympic moment and then the financial crisis, as this pair of things that marked an inflection point in the fate of great powers.

Bill: I can’t think of a word in that article that I would change.

Kaiser: Ah, okay.

Bill: The emphasis in that article is, yes, we have serious conflicts with China, but we have potentially planet-saving mutual interests, and we have common interests in things like North Korea. Something I think this administration has forgotten almost more than any in the past half-century. Traditionally, presidents come to office with lots of anti-China rhetoric, and then one of the things they discover, and it’s kind of a wake-up call, is how cooperative the Chinese have been on North Korea, and how much our interests overlap, and it leads to a whole different perspective. We need that now even more.

Another emphasis is that, in the post-war era, post World War II era, who wins and who loses is an economic game. We beat the Soviets by winning economically. They went bankrupt. When I was starting my career, North Korea was superior in every way to South Korea, and the south got in a general who decided to focus on economy above all, and now the South Korean economy is 50 times the size of the north. Japan and Germany became big powers again by really focusing on economics. Indonesia went from being the sick man of Asia to being the undisputed leader of Southeast Asia, when they shifted from a military ideological presidency before 1966 to one focused on the economy afterwards. And China. China became a big power because of its economy before the military buildup started. You read the title of my book, from ‘93, The Rise of China: How Economic Reform is Creating a New Superpower.

Kaiser: That’s right.

Bill: The U.S. has — having won the Cold War with an economic strategy — become almost entirely focused on the military. It sees everything in military terms. And China, with Belt and Road, has basically taken what we call the Bretton Woods System, what won the Cold War for us. A world bank financing infrastructure. IMF and WTO setting common standards. That’s what BRI is, but with Chinese characteristics, and it’s a winning game. I use the example in Africa of sending a special forces team to each country and maintaining an offshore naval presence, and China’s in there building roads and railroads, and they win every time. In fact, the president of Nigeria just published an article saying that. You never know it from reading our newspapers or listening to preachers in Washington, but economics is the game, and we’re better at it. We’re the originators of the game, but what we’re doing is pretty feeble compared with what we used to do, and compare it with what China is doing.

Kaiser: Do you think that in this administration there’s at least some increased cognizance of the importance of the economic component? I mean, at G7, president Biden announced, at least, I don’t know how much has been done toward it, but this so-called B3W, Build Back Better World, and it was framed very much as a counter to the Belt and Road Initiative. This is the thing that you hear all the time if you’re talking to people in the Global South. It’s like, what is your counter? If you don’t want us to take Chinese investment and Chinese help in infrastructure construction, what’s your counter? Does the United States and its western allies finally have something that you think is remotely comparable?

Bill: We’re finally doing something, yes, and that’s very good. But it’s still a second-rate reaction to what the Chinese are doing. It’s not the core of our strategy in the world. It was the core of our strategy in the world through the Cold War, and we didn’t articulate that very well, but Truman focused on the economic rebuilding, the Marshall Plan, and the military essentially protected an economic strategy, and Eisenhower kept the military budget under control, despite tremendous contrary pressures, because he saw the importance of the economic strategy.

Yes, the improvements Biden have made are tremendously valuable. But if you are the president of Nigeria, or Zambia, what you see is China building roads, building railroads, building ports, constructing systems, and it’s constructing them in a globally networked way. It’s the top priority and it’s an integrated vision. For us, it’s a secondary reactive thing, and it’s not part of an integrated vision.

Kaiser: Indeed.

Bill: This is the U.S. peacetime pattern. Budgets are driven by interest groups, and the Pentagon has the biggest interest groups in world history backing its budget, and USAID and the State Department and those things have no interest groups. We have a problem, and it’s a problem both of strategic thinking and of our political process for setting priorities.

Kaiser: Right. We’re back to Eisenhower’s warning.

Bill: And we’re back to the issue you raised earlier about foreign policy leadership. Where is the Kissinger, the Scowcroft, the Brzezinski, the Jim Baker, who has got a global vision, who’s got an integrated vision? Even if they’re aspects of the vision that one wants to criticize, they had a global vision. And they were focused on the big issue, which, at the time, was the Soviet Union.

Kaiser: Well, I wonder whether this most recent crisis may not provoke a big rethink in American grand strategy. I wonder. I mean, that’s the most optimistic possible gloss to put on our debacle, that maybe we will maybe come to some appreciation for how viewing everything through this national security lens — I mean, especially since part of the rationale draw down there is to kind of fulfill this “pivot to Asia” idea, which was intended to be more than just a security pivot, it was intended to be an economic pivot when it was originally cast by Danny Russel and Kurt Campbell back in the early 2010s.

Bill: I think strategically, both Trump and Biden had the right idea, that if you fought for 20 years against a group of primitively-armed tribes, and you’re either stalemated or losing, and basically we’re doing the same thing in Iraq and we’re doing the same thing in Syria, and your main interest in the world is elsewhere, you got to cut your losses, and when I sell a stock that I bet on as going down, it’s very painful. And when you pull out of a military mistake, retreat is the most difficult maneuver for any military man or woman. And this was tactically completely incompetent. Strategically, it’s the right thing to do, and we as a nation will benefit from it, but tactically you just didn’t have the kind of leadership. You don’t have anybody who can even articulate to themselves the real issue. The real issue in Afghanistan is the same one we had in Vietnam. These people thought they just had to get rid of the foreigner. It was nationalism in Vietnam. It was nationalism in Afghanistan. And when very primitive groups fight successfully for 20 years against the biggest power in world history, it means they have the support of most of the people. We have the support of the people like us, and I couldn’t identify more with those educated men and those recently-liberated women. It’s heartbreaking, but we were fighting the people of Afghanistan, just as unfortunately, when I was a kid, we were fighting the people of Vietnam.

The other thing we didn’t understand, tribalism. We were backing the wrong tribe and the tribe that didn’t have the support of Pakistan. In a previous incarnation, I had to review a strategy paper by a mid-ranking military officer, and he said, “Well, to create a national army, we have a few sessions in a rather short training course for Afghan officers. We educate them that you have to fight for the country, not for the tribe,” and I wrote in the margin, “If your officers believe that that will achieve that goal, we’re headed for catastrophe.”

Kaiser: Yeah, yeah.

Bill: Our foreign policy leaders just don’t get that. We’re fighting nationalism, we’re fighting tribalism.

Kaiser: We’re stuck there.

Bill: Unfortunately I think that means we’re going to fail to learn the lessons once again. Same problem we have backing the good guys in Myanmar. Aung Sun Suu Kyi is a tribal leader. She only cares about the lowland Buddhist Burmans. She never wanted to be president of the whole country. And so it would never work. We’re bound to be disappointed. Hopefully at some point somebody will articulate what the real issues are in these places, but it’s certainly not happening now. Find the op-ed or the State Department speech that articulates those real issues.

Kaiser: Instead what I see right now, The New Yorker just published — Benjamin Wallace-Wells did an interview with this former Trump administration Pentagon guy named, Elbridge Colby, I’m sure you’re familiar with him, who is now trying to rally conservatives for the next war, which he believes is of course with China, and over Taiwan, as we’ve warned about, and it’s really disturbing. He says, “Look, if you’re in the Pentagon and you have a job that’s not about China,” he says, “it’s time to get yourself another job.” It’s a pretty terrifying piece.

Bill: It is. And it typifies the total focus on the military, and it typifies the totally blind approach to China. Everything China’s doing is aggressive, and everything we’re doing is defensive and wonderful.

Kaiser: In defense of freedom, right, right.

Bill: If you read Jessica Matthews in The New York Review of Books, as a centrist, solid, American, democratic figure, it says, well, you know, each of these big overflights, Chinese aggressions over Taiwan, respond to a particular Biden administration diplomatic provocation of upgrading the degree of official relationship. There’s a wonderful article, back to The Wire China, about how Pompeo inspired China’s wolf warriors, and once you say it, all of a sudden it’s obvious. Pompeo was totally provocative on things like the debt trap, and the port in Sri Lanka. He just lied. That’s what the wolf warriors do, and the Chinese saw, “Well, this is the way the big power does it, and this is something we have to respond to.” There’s no interactive perspective. There’s just this Manichean, “We’re good, they’re evil.” And when I say that, it doesn’t mean that I —

Kaiser: …believe the inverse or anything. Right?

Bill: — approve of Xi Jinping’s domestic policies, his aggressive foreign policies, his wolf warriors, what he’s done in Hong Kong and Xinjiang, and the aggressive diplomacy elsewhere. I think what he’s doing is wrong. I think we have to oppose it. I think much of what he’s doing is bad for China, but we need to be the analysts, the good managers who see the complexities and don’t just become tribal “we’re good, they’re evil.” Because that’s what makes it impossible to deal with the positive things about the economy, about the environment, about climate change, about North Korea, that moderate and balance a very difficult relationship.

Kaiser: I’m reluctant to want to wind down on that note, but I’ve kept you very long. Thank you so much for taking the time to join me to talk about Esquel and about some of your recent work and your musings on U.S.-China relations. Bill, let’s move on to recommendations.

Kaiser: First I want to remind everyone that the Sinica podcast is powered by SupChina. If you like what we’re doing with Sinica or with any of the great shows on the Sinica network, like China Corner Office, which we’ve talked about, or NüVoices — great new episode of NüVoices you should check out with Lotus Ruan talking about Chinese tech policy. You Can Learn Chinese, some really other good shows on our network. The very best thing you can do to show your support is to subscribe to SupChina Access, our daily email newsletter. It is a fantastic resource, and the easiest way to really stay clued into what’s actually happening in China today.

All right. Now, onto recommendations. Bill, whatcha got for us?

Bill: Well, first I’ll make myself look syrupy by saying I’d recommend people get the SupChina publications and podcasts, because you’re providing points of view that are deeply rooted in reality and complexity. I would also recommend The Wire China, which we’ve talked about.

Kaiser: Yeah.

Bill: David Barboza provides regularly some of the most interesting, in-depth, balanced articles about China, but every day he says, “Here are all the articles you want to be reading about China,” and that’s just invaluable. And finally I’d focus in on one thing, and that’s an article in The Atlantic Magazine by Deborah Brautigam of SAIS and Meg Rithmire of Harvard.

Kaiser: That’s a great piece. Yeah.

Bill: Looking at the controversy over the Sri Lankan port of Hambantota. The story became, and Vice President Pence and Secretary Pompeo pushed this. And their assistant secretary pushed it every week that China was deliberately getting countries in over-indebted situations, then seizing the collateral. And The New York Times had a major article pushing that story, which had some of the same effects as their article years earlier about how there were all these dangerous weapons of mass destruction in Iraq. Professor Rithmire and Professor Brautigam go through in detail what actually happened, and show how this wave of understanding affected Americans’ images of what China was doing in the world in the most fundamental way. And by the way, Secretary Blinken picked this up from Secretary Pompeo. It was just totally wrong. And elsewhere they looked at more than a thousand cases of Chinese loans in Africa and elsewhere and found that China’s never done this kind of thing even once. It typifies the kind of manic McCarthyite attitude that has been created in many areas, and they puncture it. And we can’t do anything more useful than puncturing that these days.

Kaiser: Yeah. There have been a slew of really good papers and articles that all set out to sort of debunk the myth of debt trap diplomacy. One that I would point people to was from Chatham House as well. The authors were Lee Jones and Shahar Hameiri. Check out that piece as well. The one by Meg Rithmire and Debora Brautigam really stands out. That one was fantastic. That one is called “The Chinese Debt Trap is a Myth,” and I second that recommendation heartily. Thanks, Bill. Those are fantastic. And thank you for your kind words about us.

Let me just say something about The Wire China, too. I have the privilege, I think, of reading their cover story every week as an audio recording, and I find that they have engaged some of the finest writers out there writing on China. Not all of them are based in China. There are some who specialize in writing on technology and do such a good job. Tim De Chant, for example. Just fantastic, really deep dive stuff into technology-related things. He did one on lithium, and lithium ion batteries, and how important that is. He did one on EUV lithography and how important that is, how it’s dominated by one Dutch company called ASML. He’s a fantastic writer. But the article on nationalism in China by Alec Ash, I think it was about two weeks ago, that one was a real standout. It was a really fantastic piece. Yeah, so yeah, kudos to David Barboza, who I think has just — they work so hard. They have a very, very small team, and they put out so much stuff, so we see them very much as comrades in the struggle.

Great. Well, let me do my recommendation. It’s for a novel. It’s called The Lions of Al-Rassan. It’s by Guy Gavriel Kay, who is a very well-known fantasy and historical fiction writer. His stuff straddles historical fiction, and that’s his shtick. He takes what’s obviously a historical setting from a familiar history, and he changes some things, place names and names of important personages, but they’re still mostly recognizable if you know the history, and he gives himself, I think, in so doing, some license for the departures that he takes from the strict, actual history. I think that I may have plugged one of his novels on this show before that was actually set in a fictionalized eighth century Tang dynasty China, especially the western marches of Tang China, in the aftermath of what’s clearly the Battle of Talas, where Arab and Tang Chinese forces clashed in a fairly small skirmish. He makes more of it, and through the eve of and all through the An Lushan Rebellion, 755, and the fall of Tang Minghuang and so it’s peopled with all the characters you’d expect, An Lushan himself, and Yang Guifei and Yang Guozhong, and Tang Minghuang himself, and of course the poet Li Bai. They all have their names slightly changed, but it’s fairly faithful. I liked that one, and it was very good, but this book, The Lions of Al-Rassan, it’s set in the 11th century, on the Iberian Peninsula, and it’s clear it’s the time of El Cid, right? King Ferdinand has died. He’s left his kingdom divided among these three feckless sons. They’re not all entirely feckless, but it’s full of historical characters like El Cid himself, and somebody who’s clearly based on Rebecca of York, this Jewish physician.

But he does something really interesting with the three major religions. The Christian become the Jaddites, the Muslims become Asharites, worshiping Ashar, and the Jews become the Kindath, and he does this cool thing where the Jaddites worship the sun, the Asharites worship the stars, and just to remind you that this is a different world, the Kindath, the Jews, worship the two moons. There are two moons in this world. But it’s otherwise the Iberian Peninsula in geography and historical outlines.

But it’s a fantastic story, and what he does better I think in this one is the characters are much more fleshed-out. They’re much more recognizable. I think that when he was writing in an unfamiliar historical setting, he tended not to — they’re a little less fully dimensional. Anyway, really great stuff. I think it’s a well-constructed story. Tons of intrigue in battles, but it has a lot of heart. It has that gooey middle. There’s a real strong emotional component to it. It’s from the mid-nineties. It was recommended to me by my fantasy-loving older brother, who says that this is the best thing that Guy Gavriel Kay has ever written, and I tend to agree. So yeah, check it out. It’s called The Lions of Al-Rassan.

Thanks, Bill, once again, for joining me. It was such a pleasure to talk to you, and I’m so glad I could finally have you on the program.

Bill: Thank you.

Kaiser: Looking forward to seeing you again.

The Sinica Podcast is powered by SupChina and is a proud part of the Sinica Network. Our show is produced and edited by me, Kaiser Kuo. Drop us an email at, follow us on Twitter or on Facebook at @supchinanews, and be sure to check out all the other shows in the Sinica Network. Thanks for listening, and we’ll see you next week. Take care.