In this week’s episode of China Insider, Miles Yu analyzes the global reciprocal tariffs and the role China plays in the current global economy. Next, we look into the latest round of purges, including of top People’s Liberation Army General He Weidong, and what this means for Xi Jinping’s political cadre and the Central Military Commission going forward. Finally, Miles unpacks the PLA’s two-day military exercise around Taiwan and the impact on cross-strait relations.
China Insider is a weekly podcast project from Hudson Institute’s China Center, hosted by China Center Director and Senior Fellow, Dr. Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world’s future.
Episode Transcript
This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.
Miles Yu:
Welcome to China Insider, a podcast from the Hudson Institute's China Center. I am Miles Yu, Senior Fellow and Director of the China Center. Join me each week for our analysis of the major events concerning China, China threat and their implications to the US and beyond.
Colin Tessier-Kay:
It is Tuesday, April 8th and we have three topics this week. First, we track the latest updates regarding global reciprocal tariffs and China's response to US trade policy. Second, we look to unpack Xi Jinping's latest purge from the People's Liberation Army in China's Central Military Commission. And lastly, we discussed the PLA’s two-day military exercise around Taiwan last week and what this means for the evolving dynamic in cross-strait relations. Miles, how are you doing today?
Miles Yu:
Very good, Colin.
Colin Tessier-Kay:
So we start things off this week with a familiar topic from the last few weeks on the show and revisit the latest round of global reciprocal tariffs. Last Wednesday, President Trump announced an additional 34% tariff on all Chinese goods imported into the US in addition to a slate of tariffs against almost every other foreign country and territory. No less than 48 hours later, China responded with their own tariffs matching the US’s 34% on all US imports starting from April 10th. Miles, what should we know about this latest round of reciprocal tariffs and where exactly does China factor into the equation?
Miles Yu:
Very good question. Obviously this is the story of the 21st century so far because it is changing the global free trading system. Everybody's talking about it. Some people are happy, most are not happy because US is imposing tariffs on every country involved in trade with the United States. So this new policy, reciprocal tariffs were actually brainchild of two people, two individuals. One is obviously the president himself. President Donald Trump, 40 years ago, started talking about how United States has been unfairly treated by friends and allies altogether and foes as well in terms of global trade. He talked about, of course in the eighties it was about Japan, and then the Europeans and lately China. So that is basically the overall mentality of President Trump for, as I said, decades.
Now, specifically on China, it's another person which is his top trade advisor, that is a professor Peter Navarro of UC Irvine. He was the trade czar for President Trump the first term. Right now he's a special advisor on trade for President Trump the second term. He played a very crucial role. Peter wrote a book in 2011. The title of the book should tell all, Death by China: Confronting the Dragon – A Global Call to Action. Now think about this, the title of the book, which Peter made it into a TV series, a highly, highly popular TV series. It's called Death by China. That is, China is exploiting the international free trade system and is basically killing America in terms of economic, in terms of trade, and that's the title, Death by China. And confronting the dragon means the methodology, we’ve got to punch back. So this is basically the second part of that thinking. And of course third part of this embodied in this title is called a global call to action. In other words, Peter Navarro realized dealing with China is not just about a singular selected targeting approach. It has to be global because China is integrated into the global free trade system. So that's why the whole title of that book in 2011, it's called Death by China Confronting the Dragon – A Global Call to Action. So you combine this thought by two individuals, President Donald Trump and Peter Navarro, you got global reciprocal tariffs.
So that's where we have it. China is at the center of this global reciprocal tariffs because it reflects a failure of selected targeting on economic and trade policy, specifically on China. Tariffs are the last resort in a free trade system. The global free trade system was completely sabotaged by China being a full member in it. So that's why this is all about China. Of course, there's also the overall unfair trading system that is the Americans tariff is historically much, much lower than everybody else and coming into the United States. So trading condition, trading terms, on zero tariff ground is very, very rare. Extremely rare. You can count it with your ten fingers. So overall, everybody should be charged by a 10% base tariff. And then on China, of course is a country, China is a country with which United States holds the largest trade deficit. So that's why 34% tariff really is important. Everywhere else is just as a part of the China centric trade policy because China has been using the global free trading system to use in third countries to dump its good to America. That's why everybody involved is targeted, particularly those countries who are used by China as what we call white gloves. And that's why they targeted the most severely Vietnam, Cambodia. All the countries that were used by China as a conduit to dump China's goods into America. Those were ones that targeted the most severely.
Colin Tessier-Kay:
In its own announcement of 34% reciprocal tariffs, China's State Council Tariff Commission issued a statement saying, “this practice of the US is not in line with international trade rules, seriously undermines China's legitimate rights and interests, and is a typical unilateral bullying practice”. The Trump administration has repeatedly stated these tariffs are to address the current trade deficit and imbalances like you just mentioned Miles, as well as for national security reasons to stem the flow of illicit substances into the US, among other concerns. Miles, what exactly are the existing World Trade Organization rules that might govern these trade policies and what can we expect from future reciprocal tariffs with China moving forward from here?
Miles Yu:
WTO, to which China was admitted in 2001, is a total hollow shell. It is being completely sabotaged by the Chinese government, and let me explain why. In 2001, when China was accepted into WTO, China promised 45 key changes to be compliant with the international trading system. Of the 45, China fulfilled not even half of it, and almost the most critical part of those 45 promises were unfulfilled. For example, among those unfulfilled by China is lower the tariff to almost zero, number one. Number two, get rid of any connection between Chinese currency, the yuan, and the Chinese government. In other words, there is no currency manipulation. Number three, to treat the state-owned enterprises and the non-state enterprises totally equally, this is a total joke in China. And of course you also have all other kind of open market, open the market completely abolish tariff barriers, and that basically is not happening.
So in other words, China has never fulfilled the key promise to WTO as it promised in 2001. So if you strictly interpret the WTO condition, by now 25 some years later, China is not qualified to be a member of the WTO. But it's too late because China pretty much control the functioning body of the WTO. Of the key bodies in the WTO institutions, particularly dispute settlement bodies, normally any dispute would involve something like three judges. But right now, since 2019, all the major institutions that involves disputes trade dispute, there will only one judge. That judge is always the Chinese one. So there's no way US could win. And of course, China is a membership in the WTO right now it's still as a developing country, this is a total joke. China is world's second largest economy. It has several trillion dollars in currency reserve. It has enough money to basically bribe half of the countries in the world.
Yet China is given a developing country status in WTO. That means China now has longer timelines to comply with trade rules and it has the ability to offer more state subsidies legally under the WTO framework. And China has a looser transparency and notification requirements if you are a developing country. So this is basically totally not fair. And China also has made its industrial subsidies and support for state-owned enterprise SOEs a core part of its economic model. So WTO rules are often very weak or even outdated to address the SOE issues that would include hidden or indirect subsidies, non-transparent lending by state banks and the favoritism in procurement or licensing. So this is basically is not right, and WTO is particularly weak on intellectual property enforcement. So China can get away with forced technology transfer as a condition for market access. China can also get away under WTO framework, the IP theft by firms all through state sponsored cyber activities. So it's like that, WTO is not, cannot do anything about that. And as I say, the weaponization of dispute settlement system in WTO was also China's expertise. Every time you have this challenge in the WTO framework against Chinese dumping, China always win because China controls the court basically. And also it has the ability to block WTO reform efforts that might restrict the subsidies or transparency loopholes.
So I mean it's really, really a joke in my view. And WTO, many countries, including United States, try to change for the better on transparency rules, new disciplines on subsidies, e-commerce or data governance. None of them has been successful. And as a result, what you have here is under the WTO framework, China could leverage WTO rules and China's own massive industrial policy and to capture key segments of global supply chains such as rare earth, EV batteries, solar panels, and it has created a dependency, a global dependency that makes it hard for countries to retaliate without self-harm. So I mean, I use the word sabotage very carefully and other people say China particularly say, oh, this is just a strategy. It's not a sabotage. Nevertheless, the aims is the same, the result is the same as well. China is gaming the system, hollowing out industries and refuse to play fair. And that's why you have this global reciprocal tariffs. It's not ideal measure, not ideal approach, but it has to be done.
Colin Tessier-Kay:
So let me follow up there then and ask, given that kind of takeover of the established international trade system and certainly China's role in supplanting it over the past 10 to 15 years, what exactly can the rest of the world do in response to these coercion tactics? And what is unique really about China's response to the ongoing tariffs that the US has levied to tackle this issue?
Miles Yu:
United States, being the largest economy in the free trading system, is the primary victim of China's strategy or sabotage efforts in the global system, but not alone. Virtually every country in a free trading system has fall victim into China's practice. European Union is protected because it has their own trading block of which China is not a member, it’s European Union, its trading block. The rest of the world is forming their own trading block to basically get away from WTO framework where China has dominance. The biggest one of course is CPTPP. That is the one that mostly by Asia Pacific country, I mean including the UK for example, also. That is one that's specifically set up to exclude China's membership, which is the probably right thing to do, but it's not a global in nature. So that's why every country is taking their own measure to make sure that the fair trade is carried out.
But again, China has the capability to bribe to threaten the world. That's why I think it's a long haul. The reciprocal tariff system, a policy announced by Trump administration is just a wake up call. So it is not really the objective itself. It's a way to force people to negotiate a much more fair and a much more sustainable trading system. I think a lot of countries have responded to the reciprocal tariff policies, and dozens of scores of countries have indicated that they're going to basically talk to the Trump administration to negotiate on a fair term basis.
Colin Tessier-Kay:
So given that, Miles, how does the world respond and how is China's response to this scenario principally unique?
Miles Yu:
Of course, overall the global response to the reciprocal tariffs were basically anger, disbelief. But mostly no one has challenged the main argument of the Trump administration’s call for this reciprocal tariff that is, America has been treated unfairly in terms of tariffs because it's not reciprocal. And most countries are willing to negotiate and admit this is the case. For example, the United Kingdom, EU and Vietnam and Singapore, Taiwan, they all want to negotiate with the United States and to start with the call for zero tariffs, mutually zero tariffs. And the India indicated same thing. Taiwan’s President Lai went on TV two days ago saying, yes, Taiwan would like to negotiate with the United States on the basis of zero tariffs starting from that. So Israeli government is the first country in the world to announce that they're going to get rid of all the tariffs against the US import. So those were basically the major response. And I think countries like Canada where there is an election coming up, so they have to act tough so that somebody can get elected, but in the end they have no choice but to negotiate with the United States because the Canadian government economy is totally dependent on the United States.
So overall, I think after the initial wave of shock, and I think a lot of countries would have to come to the United States, that's basically what's going on right now. I think the White House Chief of Staff, went on TV over the weekend saying that over 50 countries have already indicated to negotiate with the United States. Negotiation, that's the way. China response very unique. China has basically never admitted it’s wrong, never admitted it’s willing to make any compromise. So China announced 34% tariffs on all American imports in retaliation. So the word retaliation is very unique in China's case. They have to do that because China's entire, Chinese Communist Party entire legitimacy to rule is dependent upon its sanctimony that somehow it's invincible. It can never be wrong, and that's why it has to act tough and talk tough. So I think eventually the real victim of that kind of approach is a Chinese people.
Colin Tessier-Kay:
Certainly, and as much as we talk about China being integrated into the global economy, it's still important to remember that the US very much is as well in several sectors and industries. Moving to our next topic today, senior Chinese military official General He Weidong is reportedly the latest purge target from the People's Liberation Army and Central Military Commission. After several weeks of rumors regarding his disappearance from public forums, the same source also reported that the Minister of the General Logistics Department, Zhao Keshi, was also taken into custody. At least for General He, his association with President Xi Jinping dates back to his tenure in Fujian before continuing on as the head of the PLA’s Eastern Theater Command. Miles, what is the significance of General He’s and Minister Zhao’s removals? And is there anything unique about this round of purges?
Miles Yu:
Well, purges inside the Chinese military is pretty much like a cyclical. It happened more or less every 15 year or so. I mean, the first wave of purge in China took place around early 1960s, and 50s. This is in the aftermath of the downfall, the purge of China's Defense Minister, Marshal Peng Dehuai. About 15 years later, early 1970s, you got another major purge that occurred because Mao's right-hand man, his chosen heir apparent, Marshal Lin Biao, allegedly decided to assassinate Mao and defected to the Soviet Union. After that failed coup and another round of purge took place. Hundreds, hundreds, hundreds of senior military leaders were purged. Of course, in the mid 1980s, some 15 years later, China offered this sort of very humiliating fight with Vietnam in 1979 where China basically couldn't really carry out a full scale war and China was shocked to see their debilitated military capabilities. So Deng Xiaoping started this round level of military purge in 1980s and that lasted until Tiananmen Massacre. And then of course after the first Gulf War, and China was shocked to see they were so far behind this high tech war. So Jiang Zemin initiated another round of purges in the mid 1990s.
So let's carry on to 2020s. When Xi Jinping ascended to supremacy in 2013, he decided, alright, I got to purge a whole bunch of people because they're not politically loyal. So Xi Jinping’s purging had a lot to do with the fact that he was not really deeply rooted in the PLA heritage and PLA sort of lineage. So he had to purge all those guys that he's not really personally promoted. And that means he purged the two most senior Chinese military leader who had been long time bosses of Chinese military for the entire 1990s and, early 2020s, that is, General Guo Boxiong and General Xu Caihou. Those were two guys. One is in charge of the military development, other one is the China's top political commissary, that's General Xu Caihou. Those guys were the vice chair of the highest military command authority. That is a Chinese Central Military Commission, CMC. Once you purge these two, you got a one problem. That is you have virtually every senior military leader were promoted by these two gentlemen whom Xi Jinping purged. That means you got to purge a whole bunch of people. That explains why during Xi Jinping's tenure, now almost 12 years, he purged over a hundred senior military leaders who have anything to do with the former Vice Chairmen of Guo Boxiong and Xu Caihou, which means by about five years ago, he has purged pretty much everyone promoted by those two guys. Those two guys were in charge of PLA for about 10 to 12 years.
So now he got a problem with people promoted by Xi Jinping himself. So that's why you see in recent years, couple years, most of the people who were purged by him were his own proteges, that is very weird. You can see General Wei Fenghe, the Rocket Force commander and his successors, two of them were purged. And He Weidong by all count was Xi Jinping's loyalist. He was promoted by several ranks and we call it in Chinese politics he rode the helicopter rides, anyway basically is a vertical rise to the top and he is now the number two, actually number three, in the CMC only after General Zhang Youxia. Now I have to point out that Zhang Youxia, who is the Vice Chair, number one, of the CMC was the only survivor of the previous regime under General Guo Boxiong and General Xu Caihou. So this is all very complicated, kind of byzantine, but bear with me, this is a very big story.
Xi Jinping promoted the General He Weidong who is apparently being purged right now. But the problem is General Zhang Youxia, the number one vice chair and general He Weidong number two vice chair, they have pretty much overlapping of their core competencies because unlike all previous two vice chairs of the CMC, one is definitely going to be the military affairs expert another one is the political commissary. The problem here is that both General Zhong and General He, they are both operation kind of guy. They have overlapping core competencies in other words, and that's why you got enormous internal struggle and fight against each other for favor. So it's basically a turf war and that's why Xi Jinping had to sacrifice one of them. That's my reading and I think I'm right.
Colin Tessier-Kay:
Yeah, like you mentioned, it's significant to see that not even Xi's number two general and number three in the CMC and longtime member of his political cadre is safe from further moves to centralized power. I should also point out that General He oversaw the Eastern Theater Command, which is the branch of the PLA that would ultimately be responsible for any planned operations against Taiwan and is significant in that way. And I want to kind of build off of, Miles, what you mentioned in terms of historical patterns that emerge here because there seems, at least to me, to be a historical parallel to the PLA purges of Lin Biao and others under Mao when he shifted from a cadre model to further centralize PLA loyalty and control under himself. So Miles, let me ask you, do you see a similar development with the PLA under Xi Jinping? And where does this eventually lead regarding the future of PLA command structure?
Miles Yu:
Well, Xi Jinping actually did something very dramatic. He changed the, well, if your previous ones about politic purge, about strengthening Chinese military’s fighting capability. Xi Jinping in 2016 actually did something kind of dramatic. He changed not only the personnel, he changed the command structure altogether. Field designation, for example, traditionally they have seven military regions. He get rid of them and combine them into basically four theaters. Eastern Theater is one of them. And also he get rid of the general departments. There are four general departments, right, political logistics, you name it, right? But then he got rid of that and merged the functions of all the military high command organizations into 15 agencies of which he is chairman of all of them. So that's why he has something that's very, very interesting and very dramatic I might say. Now the aftermath of that is still felt today. That is, once you put all these organizations with completely different functions, and many of them actually have developed their operational independence over the decades, together, you've got to have enormous inter-service rivalry and turf fight. And that's why I think right now you got purges going on because they are fighting amongst each other. Xi Jinping finally step in and say, okay, shut up kids, I'm going to get rid of some of you. That's basically what happened.
Now if you look at all the purges since the beginning of the PRC in 1949, you have pretty much three distinct features. Number one, all of the purges occurred when the supreme leader, their despotic position was threatened or in need of consolidation. It's a power struggle. So they get rid of people who they consider as disloyal or potentially not good for them. Secondly, all the purges have this objective of centralizing command authority. Every time you got a purge and Chinese command authority gets centralized. Right now, Xi Jinping is the commander in chief, obviously, but he's also commander in chief of all these managerial functions in the CMC. The Chinese Central Military Commission is not only the commander authority it is also general manager of everything. Xi Jinping is general manager of everything. Thirdly, all the purges are accompanied by strengthening the role of political commissars. So right now, even though Xi Jinping, in order to fight the United States, to fight the world, he has to promote people who are technically professionally competent. But that contradict with his number one priority. That is political loyalty to himself, to the party. And oftentimes you got these people who are very really good, loyal to him, but once they reach the position of leadership and Xi Jinping suspected they're not really ideologically correctly enough, so they get rid of them one by one. You look at this, of all the Chinese military branches, the one that most technologically rich, technologically advanced is the Rocket Force. And look at what happened to Rocket Force leadership. Every one of them in the last 10 years has been purged. So in other words, it's like you are promoted to the position of a Commander of the Rocket Force is like a temporary job on probational base. Sooner or later you can be purged. And so is his defense minister, by the way.
Colin Tessier-Kay:
Yeah, and we'll have to keep an eye on who seems to be next up on this list. The purge list certainly continues as even the highest level officials don't seem to be untouchable. Continuing with the PLA related news, we move to our final topic for today and return to cross-strait affairs where last week China staged a two day military exercise involving drills off the north, south and east coasts of Taiwan with deployed ships and aircraft maneuvers as well as long range live fire drills in the East China Sea to test PLA integrated joint operations capabilities. These “war games”, as China tends to term them, come after Defense Secretary Hegseth’s Indo-Pacific tour and were supplemented by a stern warning as the Chinese spokesperson quoted against separatism labeling President Lai Ching-te a parasite. Taiwan's government of course condemned the exercises and reaffirmed confidence in Taiwanese resilience. But Miles, what can we make of the joint exercise from last week? And what does this mean for the current state of cross-strait relations?
Miles Yu:
By the way, this exercise is more about a propaganda moral operation than it is real. Let me explain why. China says involves 27 ships, aircraft, and the patrolling around Taiwan. But you look at it, it is an air defense, ADIZ patrol. It's farther away from Taiwanese Island itself. And also they said that we conduct a live firing into Eastern China Sea. Do you know Colin, how many of the Chinese batteries were involved in this live firing during this round of exercise?
Colin Tessier-Kay:
No, I actually don't. How many?
Miles Yu:
It's about two companies worth of batteries. That's about 400 to 500 people. They're firing a bunch of cannons, fires into the open sea. That's it. So that's why the Taiwanese are used to this. Every time China does this kind of Taiwanese military drills, stock market went up and the people basically go about doing their own business. Now, I'm not saying that's a good thing because Chinese military threat is real. What I'm saying is from Chinese point of view, all these things is about psychological intimidation of Taiwanese people, about sending the message. And if you look at this unique situation right now, in this round of military exercises, which is distributed from your previous ones, China said, oh, we deploy our aircraft carrier, Shandong.
The Shandong ship is China's, I believe, third military, sort of, aircraft carrier. It's not really that a menace to Taiwan at all, because if you look at the Shandong, it cannot really sail that far because it has a power propulsion problem. It has a lot of technical challenges. Most importantly, it's offensive air operational wing is not really that up to standard. Plus, Taiwan has one of the world’s, the best, anti-ship missiles, the Hsiung Feng III series. So what I'm saying is Taiwan is not belligerent, not as bellicose as the Chinese Communist Party, but I say this, that the Chinese Communist Party is very good at creating this overwhelming dominance of a narrative that somehow Taiwan is isolated, it's hapless, it forced Taiwanese to surrender. This is what they're trying to do. And I think the efficacy is less and less obvious right now to the people in Taiwan.
Colin Tessier-Kay:
Yeah, and I think that's a very important distinction to make. And I would like to call out that while these drills do not escalate to kinetic conflict, or at least haven't yet, they apply significant pressure on Taiwan's material resources and systems fatigue, having to constantly issue alerts, ready air defense systems, and deploy aircraft, et cetera, in case the drills do turn into a coordinated attack. But I think additionally, as we saw here in this joint military exercise, Reuters among other media outlets reported that the Chinese military released a series of propaganda videos in rapid succession following the exercise that depicted warships and aircraft and circling Taiwan and land-based missile salvos. The videos were titled “Closing In” and “Shell”, and the latter was the one that depicted President Lai as a green cartoon bug, calling him a parasite. Altogether there were, I think, roughly three videos and a poster that was released in conjunction with these military exercises, and really demonstrate what we've been talking about here on China Insider as a shift in China's approach to integrated gray zone tactics. Miles, I'd like to ask you, we've talked about the importance of China's shift in these coercion tactics, incorporating social media propaganda and other soft power influence. Do you believe these strategies will work at the end of the day? And what does Taiwan need to focus on to ensure continued security against China's aggression?
Miles Yu:
Taiwan is an open society, so is the United States. There are always people who take different views. There are always people say, oh, this Chinese tactic is going to work, China is going to invade Taiwan tomorrow. And there's also other people say, hey listen, this is not really what's happening. So you have different views. I'm not saying which is wrong, which one is correct. What I'm saying is that Chinese propaganda is consistent. It's been going on for decades. So everything China is saying we're going to do that. And a lot of people who's true believer of Chinese military threat, I think they might be right to point out China is increasingly belligerent. But if you study history, you'll see this is nothing new. Chinese barrage against the Quemoy and Matsu since 1950s going on until 1980s. Every day they say this kind of stuff. We're going to shift, we're going to liberate Taiwan, we’re going to unify with Taiwan tomorrow.
So what I'm saying here is that do not be overly panic. Not everything that China does marks a shift to anything new. But should we be worried about it? Of course. That's why our military does not believe in any timeline. The idea of talking about timeline is totally silly because timeline is not determined by Xi Jinping himself unilaterally. It also is determined by us, by the outside forces. Think about this. If China say we're going to have aircraft carrier, which is the pride of their navy. What if China lost one carrier in the initial day of the conflict? That's going to be psychologically so devastating to China. So they have to consider those kind of things. In other words, cost and chances of total winning, and they might be dragged into a war that they don't want to see for a prolonged period of time. China cannot afford that. Of course, the international response is one of the most important factors of determining timeline. It's how United States is going to do. And that's why the current military leaders doesn't believe any timeline. 2027, 2025, it's all nonsense. They believe that Taiwan crisis, military invasion of Taiwan by China could happen any moment, any time, either today or five years from now. All we have to do is. we're getting ready for the worst scenario. We're getting ready to fight against Chinese military invasion as if it's going to happen tonight. So that's why always ready is our approach. And any talk about timeline is based upon any kind of illusion or unproven evidence. Nobody can really give us a short timeline as to when China's going to launch the military action. And we cannot really prevent China from doing anything risky, but we can definitely modify their behavior, make them think twice before they take any provocative and unnecessary military moves.
Colin Tessier-Kay:
Well, we've unfortunately reached our time for today. Miles as always, thank you for an excellent conversation and your insight into these issues and we'll check in with you again next week.
Miles Yu:
Okay, I'll see you next week, Colin.