Does Asia think America’s best days are behind it? Q&A with Andrew Sheng

Foreign Affairs

One of Time magazine’s “top 100 influential people in the world,” Andrew Sheng is a Malaysian-born banker, financial regulator, and scholar, and one of the most interesting people in the world to talk to.

Illustration by Nadya Yeh

At the end of July, as I recovered from jet lag and COVID-19, I had the bracing pleasure of doing a live video interview with Andrew Sheng (​​沈聯濤 Shěn Liántāo). He was at his home in Penang, Malaysia, and I was at mine in Nashville, Tennessee.

Sheng grew up in British North Borneo (today, Sabah, Malaysia). In 1965, he began studying economics at the University of Bristol in England. He went on to have a globe-spanning career, including chairing the Hong Kong Securities and Futures Commission, and senior positions at the World Bank, the sovereign wealth fund of Malaysia, and the Securities and Exchange Board of India, among many other roles.

We had a wide-ranging chat that included the international monetary system, the future of Hong Kong as an international financial center, Rudyard Kipling, human rights abuses in Xinjiang and Iraq, and much more.

You can watch the video recording of our chat on YouTube, or read on for a lightly edited transcript of our conversation.

Jeremy Goldkorn

I want to start with a piece that you recently wrote with Xiào Gěng 肖耿, the president of the Hong Kong Institution for International Finance. The two of you argue that the international monetary system is unsustainable and that we can either reform it now, or wait for a catastrophic crisis to force our hand. Can you explain what the problem is with the international monetary system? And is this a problem for which China has any kind of solution?

Well, the international monetary system, as it stands now, was basically designed and put into place at the Bretton Woods Conference in 1946, ‘47. And it’s basically a dollar-based system. The debate was between the British, John Maynard Keynes and Harry Dexter White of the United States Treasury, and the White version won, in which the dollar became the key currency for the world. He was quite right because the United States was roughly half of world GDP at that time, the basic winner of the second World War, and the rest of the world was in shambles. So, the international monetary system served it very well until ‘71, ‘72 when the United States went into large current account and fiscal deficits, and the dollar had to be delinked with gold. That produced what was called a Triffin dilemma, which is that a national based currency for the world has a problem. It’s called an exorbitant privilege for the United States, but also you can call it an exorbitant burden.

It’s called the Triffin dilemma because Robert Triffin, who was the advisor of President Kennedy, pointed out that if the dollar actually is issued for the rest of the world, and there’s greater demand for the dollar outside America, then America, by definition, runs a current account deficit to provide dollars for the rest of the world. And the result is that the United States would go further and further into deficit, which is exactly what has happened. Debt today, global debt today is $469 trillion, which is 4.7 times world GDP. It was only at one times GDP in 1980. And when the U.S. starts raising interest rates and 80% of global trade transactions are financed in dollars, those who borrow dollars are in deep trouble. And if the Fed does not continue to provide dollars, you have a debt crisis, which was exactly what happened during the Asian financial crisis. When the dollar is strong, the world contracts because of liquidity shortages. When the dollar is weak and it’s expansionary, the world tends to boom.

But this does not necessarily fit the U.S. Now, where it has gone problematic, and the dollar has been kind of unchallenged in its aspect, because it used to be 60 plus percent of foreign exchange reserves, and 80% of foreign exchange transactions. So, the key problem now is that, since the war on terror, the United States has [been] using the dollar as a sanctioning tool. So, if country A is sanctioned by the United States, no global financial institution can deal with it. Now, you then have, fast forward to 2021, ’22, you get Afghanistan, where America was, you can call it invaded, or occupied, or was present in Afghanistan for nearly 20 years.

And when it withdrew, the foreign exchange reserves of the Central Bank of Afghanistan were frozen or seized, and there is no appeal. And then, this year, February, the Russian foreign exchange reserves were frozen, not quite seized yet, but at least frozen. What does that tell you? That tells you that we now have a banking system in which those people who use that currency, who bank with that bank can have their assets frozen or seized or confiscated, and there is no court of appeal. That makes that financial system very, very unstable and unsustainable. Now, the supporters of the dollar, and to a large extent, I’ve always been a supporter of the dollar, say that, “Well, there’s no replacement. The dollar is in a monopoly position and you can’t get out of it.”

Well, nothing is forever, as we all know. And if the Chinese feel that they are the next target of such sanctions, and by the way, every other non-dollar market would be in that position if, hopefully if you’re an ally, you will not be put in that position. But today, who is an ally? India, the largest country by population very soon, has already said, “I am on nobody’s side. I am only on my side.” So, no permanent friends, no permanent enemies, only permanent interests. In that case, who is going to look out for the global interest? The financial system has to serve the real sector. In the last 40 years, the financial system has served the elite. The rich have got richer. The planet has got warmer because of excess consumption and excess debt.

And we seem to be running on a system that seems to have gone past its shelf life. So, where is that conversation to discuss this? And the answer is there is no conversation. The latest G20 meeting of central bankers and finance ministers in Bali, in which I attended on the sidelines because I was only at the seminars, could not have a joint communiqué. That means the top 20 economies of the world cannot even agree on a polite communiqué that papers over differences.

So, is it rudderless, the global economy? Because you don’t seem to be suggesting that China or anybody else has an alternative at this point. We’re just looking at an outdated system and nobody has actually figured out a viable alternative.

Well, when the world is in a divorce situation and both parties or friends of both parties are smashing up the family furniture and the crockery and burning up the heritage, who wins? And where are things going? The answer is, nobody’s quite sure.

Let’s go from there into another area where two parties are fighting and smashing up the crockery. It’s actually one of the most difficult questions for people involved with China and the United States, or the West more broadly. I’m speaking of Xinjiang and the treatment of the Uyghurs. Xí Jìnpíng 习近平 just visited Xinjiang, where he affirmed very strong support for his party’s policies there. And he talked of guiding all officials and people to have a correct understanding of Xinjiang’s history, especially that of its ethnic groups, so as to uphold the right perspective on the Chinese nation’s history.

I am asking about this, recognizing you’re not a Xinjiang expert, you understand a lot about the global financial system and much else, but I’m trying to ask about the way we talk to each other in the East and West. At the moment, we have many people in the West talking of concentration camps and cultural or actual genocide, whereas the Communist Party of China talks about a beneficial social engineering project to ensure stability and ethnic harmony. So, I have two specific questions about all of this.

Is this one of those issues that in the words of the old imperialist Rudyard Kipling, “East is East and West is West, and never the twain shall meet?”

And then, particularly relevant to where you are, the Chinese government is quite fond of pointing out how few Muslim countries have criticized China for its Uyghur policies. How does this situation look to you from your position in Malaysia, which is a Muslim-majority country?

On Rudyard Kipling: I think he’s outdated!


East is East and West is West. What is the East? Where does the East end? Where does the West end?

The issue is that the West, the North Atlantic, America plus Western Europe, including the United Kingdom, Australasia and Canada, plus Japan is roughly 1 billion people. And the rest of the world, as you know, is reaching 7 billion. So, 7 billion has been de facto influenced very strongly. I mean intellectual hegemony. No question, science and technology, the West has ruled. The rules-based order was basically a Western-rules-based order for roughly 500 years, since basically 1500 when America was discovered.

And that’s a very linear either-or thinking. The Pope gave the Portuguese and the Spaniards the Discovery Doctrine. When you discover anything owned by non-Christians, it is terra nullius, which means that empty land. You can occupy it, you can enslave the people. That doctrine still lies even within the American interpretation by the Supreme Court over whether indigenous Americans own title relative to the sovereign state. So,Western thinking is very different from the Asian, older civilizational thinking. I’m saying Western civilization was similar until this was changed after 1500. The old idea was that we are entangled in quantum terms. Life is a recursive loop.

What happens to me happens to you. We’re all both on the same planet. Bad things we do to each other, hurt each other, but also hurt the planet. When Rudyard Kipling says, “The twain shall never meet,” it’s wrong. The East and West are entangled. There is no clear dividing line. The whole idea of Lucretius, going back to the early Greek that the world is divided…Well, the world can be broken down into inseparable particles called atoms, so that there’s something called absolute, called an atom, right? Comes back to this very Christian belief that you can separate between good and evil. Now, if you go to the Indian beliefs, the Chinese beliefs, even Greek beliefs, good gods become bad gods, or do evil things.

It’s never so clear that there is a clear split between good and evil. And so, therefore, the entanglement of each other really means about living that life. And we need to understand each other better. And that life, historically, has been more about cooperation than fighting each other. Now, that’s entangled again, people fight but people also cooperate. The question is, can we all live with each other?

Now let’s go down to the second question, which is the Uyghur issues. Now, let me make it very clear, I do not like mistreatment of any minorities. I do not like what’s happening in Palestine. I do not like what’s happening in Ukraine. I do not like what happens to minorities in any country, which are not treated as equals.

The complication, and I’ve never been to Xinjiang, so I cannot claim any authority in that area, but the issue that arose was how the Chinese government reacted to was the so-called terrorist actions that did happen across China. It wasn’t just in Xinjiang, but it was across China, including a very famous, if I recall correctly, a railway attack, and quite a number of people…

The mass knife attack in Kunming in 2014…

So, organizations were banned, treated as terrorist organizations, and the Chinese treated it in one manner. Those are the facts of the case. Now, whether it’s right or wrong, that I will not get into. What then happened, as we all know, at that time was the U.S. war on terror, and even Uyghur institutions were treated as terrorist organizations. And quite a number of Uyghur terrorists were actually sequestered in Guantanamo Bay. Some of them are now what are considered Crown’s witnesses. As you know, later the United States removed some of these Uyghur institutions from the list of terrorist organizations.

The issue then becomes…seems to come from very limited sources and satellite pictures, since there are no on-the-ground meetings, assessments…The issue that now comes is, why is it that the United States and the West seem to condemn the Xinjiang issues, and yet, very few, and I cannot remember any specific country in the Muslim-majority countries, have officially condemned China on this?

You would’ve thought the Muslims themselves would be in this. Now, the interpretation I get is that the Muslims themselves see the West as the major oppressor of the Muslim people with what happened to Iraq, what happened in Afghanistan. You can throw in Syria and some of the other issues in Libya particularly. So, the West does not come into an accusation with clean hands. And if you don’t come into this with clean hands, by the way, genocide, that term was done within the West. Now, it may have actually happened. The genocide, that term was used to apply for what the German Nazis did to the Jewish people. And today, it’s become such a broad term. One wonders, who defines that? How do you get that sorted out? But it’s an area in Malaysia that is of great concern. The Malaysian government, I do not know because I’m not inside: an insider, would have probably given personal views, quiet views to the Chinese government, but they’ve never taken a…

Public stand?

Right. No public stance on this… What Malaysia does, being a relatively small country, would be done within the organization of Islamic countries, or IC, or others. And there, that official stance has been to be silent on this issue, even though individuals may have extremely strong views.

Let’s move on to another contentious issue that, at the moment, I feel very much divides all kinds of debates that tend to fall on pretty obvious lines between Anglophone Western countries, and at least in China, supporters of the Chinese government. And that’s just about Hong Kong. We’ve had protests, the implementation of the National Security Law, and then subsequent crackdowns on civil society actors, protesters, in the words of the government, “rioters,” but it’s been a very broad-based kind of crackdown.

And now there are COVID policies in Hong Kong, which are much closer to mainland Chinese methods of dealing with the pandemic than the way Western countries are now dealing with this phase of the pandemic.

For this question, I don’t so much want to ask you about the moral or philosophical background to this, but how do you feel this is affecting the business and financial community in Hong Kong, which you know very well? Do you see the same kind of uncertainties expressed by businesspeople in Hong Kong that you see in the Anglophone media? And can Hong Kong continue to be a global business city under the more authoritarian environment of the National Security Law?

Those are very pertinent questions and they are complex questions. But let me first start on Hong Kong as an international financial center. Hong Kong’s status as an international financial center is, no question, based on firstly, its proximity to China, and now as part of China. The second is the link to the U.S. dollar, and the third is the common law framework, for which China never had democracy when it was colonized. And it was given back to China on the understanding that the “one country, two systems” would be preserved. Now, the contention lies in the definition between “one country, two systems,” but it’s still one country. And you could practice the two systems but, like everything else, nothing is absolute.

And the key question, therefore, for the new democrats in Hong Kong was… They demanded what unfortunately the last governor said: “You are ready for full freedom.” If you live within China, how do you give a full one person, one vote to Hong Kong without giving it to 1.4 billion immediately? And the answer is, it will take time. And so, the key question, will the Hong Kong people be willing to wait and let it phased in? If you study very carefully, the phased system that the Hong Kong current rules are encouraging, which the West claims is undemocratic, well, look at how democratic the election of the Conservative Party [in the U.K.] is. Is a Conservative Party leader elected by all its members? No, it’s an indirect system.

You select the parliamentarians, and then the parliamentarians select the leader…There’s a very complex system. So, to a large extent, there was, very unfortunately, an unwillingness within the politicians within Hong Kong, having found a new freedom, to be willing to compromise. And the inability to compromise created situations of dysfunctionality in the Hong Kong government, because it was neither a totally autocratic situation in which the governor, under the British, literally had all say, except that he (or she) has an Executive Council that rubber stamps what the governor said, or a situation where a chief executive, after 1997, had to refer things to the legislative council, which can then reject or filibuster, or whatever.

And so, you can’t deliver because of the vested interest over the housing and everything. So, the result was, over 20 years, the inequality in Hong Kong has risen, giving rise to the protests…And then the riots which happened. Now, why is this important for Hong Kong? And then people will say, well, that’s autocratic China imposing its will on Hong Kong. Let me ask this fundamental question, which international financial center does not have a national security law? If you go to London, there are more security cameras than people on the streets. I’m exaggerating a little bit, but every movement will be tracked. There are very rigid, very draconian national security laws applying against terrorism, dating back from the IRA, the Irish Republican unrest days, where they were bombing…

The same thing happens in New York. The same thing happens in Frankfurt, or in Paris, or in Tokyo, right? Hong Kong never could get that law passed by the Hong Kong Legislative Council. And so, the result was Hong Kong became exposed to initially very peaceful protests, and then, unfortunately, riots in which people were well-armed, throwing bricks and disrupting the airport, disrupting the subway, and then invading the Legislative Council chambers, very much like the January 6 situation in Washington, D.C. In Washington, D.C., this was treated as a riot. In Hong Kong, it was treated as a fight for freedom, fight for democracy.

What opened my eyes was that I had thought that the BBC would be much more neutral, since some of the policemen in charge of those anti-riot contingents were actually former British subjects, right? They were British. They were British policemen who were doxed, whose children were subject to abuse. They were never given an interview, nor given a chance to answer why they did what they did. They had to preserve law and order. And the two sides of the picture were not given at all, which to me was not a credit to the BBC, which really meant that the issue now is Hong Kong is now painted completely as part of China. And then when you are “one country, two systems,” and China had to take its zero-COVID policy in, how do you allow the freedom of entry between Hong Kong and China without a very stringent COVID policy?

Now, I personally am on the side of [the way the pandemic is being treated] outside China, where we believe that the COVID has become endemic, and you just suffer it, but there are reasons why the Chinese government has decided that they are very worried about a resurgence of a new variant, which could be even more devastating. Therefore, they are willing to trade off a temporary slow opening up with managing one fifth of mankind. And you mustn’t forget it’s one-fifth of mankind that you’re dealing with. The cautiousness for China has an impact on Hong Kong.

Will Hong Kong continue to perform as an international financial center? I say, yes.

And the reason is the international financial system itself is undergoing change. And we have no clear picture where that future international financial system is happening.

Former colleagues of mine, those in Hong Kong, are very determined to maintain that international financial center role. The bankers, the investment banks and the asset managers, some of them may be leaving, but others realize the wealth of Hong Kong is such that Hong Kong will always be a major player: Hong Kong as an international financial center has $2.5 trillion net assets. That means the rest of the world owes Hong Kong $2.5 trillion, something of that order. $2.3 trillion, according to the latest IMF numbers. That’s not chicken feed.

A lot of the U.S. dollar trading is done in Hong Kong, which is one of the third- or fourth-largest foreign exchange trading centers. So, to dismiss Hong Kong like that, and for whatever reasons, would probably be overstating it.

Now, whether Hong Kong remains an international financial center would be subject to a lot of considerations. First, whether Hong Kong people will actually get their act right.

Secondly, whether there are other geopolitical issues that could be accidents. But never underestimate Hong Kong. Hong Kong has gone through several crises in the past and has managed to come back pretty well.

It’s bounced back!

We have a question from an audience member who asks, with “one country, two systems” converging into one system, do you think Hong Kong will have little to offer that’s different from the mainland? As a result, would Shanghai succeed Hong Kong as the financial center of Greater China?

As long as the renminbi is not fully convertible, Shanghai’s role as an international financial center [will be limited]. Shanghai is already a giant domestic financial center. No question about that, right? It’s not just Shanghai. Shenzhen is also increasingly a very important financial center. Its market cap is not quite Shanghai’s yet, but it’s already larger than Hong Kong in stock market terms. The number of innovative companies, tech companies, fintech firms etc. in Shenzhen is amazing. Right? It’s amazing. China being roughly, somewhere between 15% to 20% of world GDP, depending on what measure you use, and being a net lender to the world, will always have several financial centers. Whether they will be international financial centers is going to be difficult to predict, but there’s no doubt in my mind that Hong Kong will be amongst them.

I’d like to move on to a question about perceptions in China and East Asia generally about the United States.

I’d like to just read a tweet from an American lawyer, an expatriate lawyer in Shanghai who is planning to go back to the U.S. for a holiday this summer, after a few years [stuck in China].

He says, “All of my Chinese friends are incredulous, warning me that the U.S. has completely given up on mass shootings, COVID homelessness, climate change, rampant crime, protection of basic human rights, especially for women, racism, and others in a very long list.”

How common do you think this type of perception is in East Asia that the United States is on a serious path of decline?

Well, the fact that the crown prince of Saudi Arabia [recently] refused to take the call from the president of the United States…says a lot about America’s position. And the fact that, after saying loudly that the other side is a killer, the president of the United States has to go to Saudi Arabia and be lectured on human rights…the rest of the world can see for themselves what that American position has become. That’s a perception issue.

Now, on what the American lawyer has said, if you watch Fox News, if you watch the CNN, and all the news outlets, what is happening in the United States for the people in China reminds them of what happened during the Cultural Revolution, where people who disagreed were being canceled.

Now, that may or may not be the right interpretation, I’m just giving you a one reaction of how some people who have gone through the Cultural Revolution recognizes that internal turmoil that was what the Chinese call all hell breaks loose under heaven, right? 天下大乱 tiānxià dàluàn.

From the rest of the world, I think there are two ways of looking at this. For myself, who was educated in Britain during the period when Britain was going through the imperial decline and trying to find itself, if you read the newspapers [at that time], you’d be totally depressed. I came to America in 1989, when the economy was in a downturn. There were a lot of core problems with street crime in New York, downtown DC, etc.

And you felt, wow, is this the leader of the world? And yet America bounced back. To me, it is too easy to say that America is going through a period of great change. The question is America is a very rich country, it is a very lucky country, protected by two oceans. It is still welcoming of global talent, although less so than previously. And the demographic position is still pretty good compared to Europe, or even China, Japan, etc., which are aging. America has reinvented herself.

The question is, I do not recall [a time when] the two primary parties [were so divided]. They’re United on the China front, but on everything else, they’re absolutely polarized. And that polarization cannot be helpful to change because what we now need today is not polarization, but coming together, at least in a conversation in which we work together for the greater challenge of the world.

The greater challenge at the present moment is how to stop alphas fighting over a burning planet. That’s a great challenge. Everybody’s beating their chest and saying, “I’m number one, I’m number two,” or whatever it is. Who cares if the whole world burns up, and that burning up is accelerated through nuclear destruction? What we really should be concerned about — if we do care about our future generations, the existence of mankind and planet Earth — is how do we work together to do this? And those of us who are able to be more objective in the sense that if you stand on Mars and look down on Earth, wonder why the people are now ready to go to war when the real war is on climate change, should be on climate change. Right?

To me, there is a greater morality involved, a moral issue involved, and that is: let’s work together. Let’s agree to disagree, though there are certain things we cannot change overnight. And I think that’s a difference between older civilizations and newer powers in which America feels that it has the power to change, and it is the power to change it very quickly, but it’s discovering, exactly like ancient Rome, that once the Roman empire goes through a different cycle, that change gets more and more difficult. Not that you cannot change. We have seen how Rome has always reinvented itself also. And as you know, also moved eastward, from Western Rome to Constantinople.

There are issues that are too early for us to predict. But we hope that America will do better and it will work with the rest of the world, rather than being part of that name-calling, which I don’t think is helpful for anybody.

I started that question with a view from China of America as this dystopian landscape, but the typical view you have here — and I myself am talking to you from the heart of red state America in Tennessee — is a very dystopian view of China: reports about lockdowns in Shanghai, people not having enough food to eat in their apartments, and economic, political, and cultural life that is apparently being choked by Xi Jinping, who is increasingly portrayed as a megalomaniac set on being ruler for life with a COVID-zero policy that appears to be destroying, or at least damaging very seriously the economy.

How do you think those news consumers in the United States and elsewhere outside of China should think about all of these issues in order to maintain some kind of perspective on what’s really going on in China?

When I came back…Let me say this:

I have always watched BBC, CNN, read The Economist, the Financial Times. But I only glance through them these days because they’re saying the same thing, “The other side is evil, they’re megalomaniacs. They’re bad guys. We’re the good guys.” I mean, hey, the whole idea of being commercial or economic [media] is to actually give factual balance and then let the reader decide, for himself or herself, how they would interpret this. Today, just to give you an illustration, I may not be normal, but during the pandemic, for nearly three years, YouTube was my major source of information.

I selected all kinds of — some bordering on crazy, way off the chart — websites, just to understand how they think. And I suddenly realized, watching a recent discussion about Italy’s view on the Ukraine war, an opinion surveyor was very good. He said, “Look, the media represents the elite. The media has represented the Ukraine war about Italy’s view that is not exactly the same as those of the Italian citizen,” according to his survey. And he said that, while these Italian citizens are not…They’re pro-NATO, but they’re not as pro-NATO as people think, they’re not that against Russia as people think, et cetera. What it basically shows is that the elite is biased. The media is now biased.

And the media is speaking on its own terms for its own interest and not quite reading what the population is thinking. I mean, if you really ask 90% of the world, “Does anybody want war?” The answer is no. Then you ask them, what is their priority at this stage? And the answer must be, “Food on my table that’s not going to be subject to 10 plus percent inflation every year. If my government can’t even deliver food on my table and jobs for my children, then I don’t care whether they support or don’t support something that is 10,000 miles away. I’m not for it.” So, the result is actually you have to be very practical. There are people who who think that the media in the West is now going on a crusade: It’s semi-religious: we, the good guys, against the enemy, the white towers standing before the dark forces that are coming across the borders, the barbarians on the other side.

Is that the right way to think about these issues? Even Tolkien, said, no, even the good wizards can become bad wizards. It was the small people that had the wisdom.

The media should become hobbits?

Exactly, exactly. Because a lot of the media are intellectual people whose intellectual framework, their paradigms are obsolete because they are now saying, exactly like Antoinette, saying, “Let them eat cake.” Nowadays, the Western intellectuals, including the elite in emerging markets, say “Let them eat tiramisu” when they can’t even get basic rice on their table.

They have forgotten that the masses, the 99% is what matters, not the 1%. And as we know, Joe Stiglitz and all others have written about it, it’s not just the 1% for the 1%. The problem is that the 9%, which is part of the top 10%, which includes most of the media, are basically working for the 1%, and reflecting the 1% views.

Somebody in the Amazon [rain forest] today, if he has access to the internet, is beginning to see what the world is like. And a lot of them…are saying, “Why are we destroying nature? Why is the media encouraging us to destroy nature?” And all for money. And what is money? Money is just pieces of paper. It’s a social construct. It’s to make you feel good, to pretend that you’re okay when the reality is telling you otherwise.

We’ve just got a few minutes left, so I’d like to change the subject again, and just ask about your current outlook for China. Obviously, the economy has slowed down quite a lot. On July 19, Premier Lǐ Kèqiáng 李克强 held a world economic forum video session. And he said that China would not introduce any large-scale stimulus measures, or over-issue the currency, or “overdraft the future in order to achieve an overly higher growth.”

How do you see China’s economic story playing out in the next year or two, as it seeks to do something that is really quite new? I mean, since I’ve been involved with China since the 1990s, it’s been growth — incredibly fast growth. And that has, at least this year, definitely changed. How should we be thinking about where China is going in the next year or two?

You must remember China is one fifth of mankind. It’s large, and it’s very difficult to manage…When we talk about China, think about a country like France. The province of Guangdong is the size of France and has almost the GDP of France. I mean, not quite there yet, but almost. China is so large that whatever it does would have impact on the rest of the world whether you like it or not. Whether China is becoming number one, number two, number three, number four, only history will tell. But Chinese philosophy has always been about moderation…the golden mean, never do things in extremes. When you swing too far to the right, you will swing back to the left. When you swing too far to the left, you will swing back to the center.

Finding that middle road is where the difficult part is, because China itself, herself, is now part of a greater world. And the world affects China and China affects the world. The Chinese have been more concerned with their own affairs. As another former premier said, the Chinese economy is imbalanced. And trying to get back to balance is never easy. In 2009, [China’s] 4 trillion renminbi stimulus package turned out to be something like a turbo charge. It brought the world back. Nobody thanked China. China built the superfast railways etc. And then had more debt, had more fiscal stimulus than necessary.

Getting things back to balance is really where things are going. On the whole, I would expect the Chinese authorities to maintain a slow and steady stable path, rather than try something new just for the sake of being new. The more unpredictable part is how international events and accidents happen to change the course of that thinking. Those are events…you can call them black swans or gray rhinos, would include the wars like Ukraine, etc.

We have two minutes left. Let me take one last question from the audience: “Given the Kipling references, what suggestions could you make for Australia to better position itself between these competing major powers?” Meaning China and the United States, I presume.

This is a great question — I just came back from New Zealand, where this is very much a question that is being asked. And I think Andrew, as a Malaysian, you probably have a particularly useful viewpoint on this because Malaysia is, in many ways, faced with the same issues. But we only have a minute or two!

We’re closer to China than Australia is. Australia is so far away that one tends to forget that it takes nine hours to fly from Kuala Lumpur just to get to Sydney or Melbourne. It’s only three hours more before I get to London. The issue is, why am I flying nine hours to a country that looks like Europe?

But it’s not quite Europe. What advice for Australia? I’m very fond of Australians. I think Australians are great thinkers, straight thinking. But on some of the recent government’s reactions, I begin to wonder whether they are thinking rationally, or are they just reacting back to their whiteness. The issue here is really this: I think my late Indonesian friend who was a great international relations guy said that Australia always stands out as the deputy sheriff. And, as you know, from Hollywood movies, the deputy sheriff always gets shot first.

The key question then is, what does Australia want to do to play a role in a very complex world? Are you going to be Rohan riding to the rescue, or would you be like New Zealand? Which I think is playing a much more sensible stance, and just say, “Look, we just want peace. Let’s tone down the temperature. Let’s just talk.” I think Australia is a very important neigbor. It must remember that its nearest neighbor is ASEAN. And that relations with ASEAN are probably more important than its relationships with the rest of the world. And ASEAN is for neutrality and peace, and for trade, and for economic development. So, if Australia can be that good partner, I hope that the region will be for peace rather than stirring up memories of war, which has never benefited anybody.

Invited to Tea with Jeremy Goldkorn is a weekly interview series. Previously: 

China is very active in Afghanistan one year after the U.S. withdrawal — Q&A with Niva Yau