‘Two sessions’: China’s economic and diplomatic challenges
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Hello and welcome to this special episode of Inside China. I'm Yonden Laatu, managing editor of content here at the South China Morning Post and host of Talking Post, our signature interview series. China has just wrapped up its biggest annual plenary event in Beijing, the two sessions of the national legislature and the country's top political advisory body.

This is the go-to source for clarity and clues to understanding what China's leaders have in mind for the recovery of the world's second largest economy and managing escalating tensions with a US-led Western alliance. How bad is the state of China's economy? Who will prevail in the tech war the US is waging against China? What are the chances of a real war over Taiwan or the South China Sea?

To answer these questions and more, we have our executive editor and resident China expert, Chao Cheng-Yan, on this episode of Talking Post.

Chun-Yan, thanks for joining us. It's that time of the year again. We have a major event in Beijing, the end of the two sessions. And this is a time of the year when everyone is watching China to get signals as to where the world's second largest economy is going. It's also a time, you know, that everyone is watching China for signs to validate their belief that this will essentially be

President Xi Jinping and the CCP exerting further control, taking total control. And the narrative, if you read from all the experts overseas on television and newspapers, is that generally

All this implies that China will be dictated by national security and full party control going forward. Now, of course, in many ways, this is a very simplistic view of it, even a simpleton's view of it. That is why I turned to you to give us a reality check, right? Now, feeding right into that narrative, of course, what you've seen from the two sessions is that China's parliament, the National People's Congress, has just passed a law that effectively gives the CCP tighter control over the cabinet.

So that feeds into this whole total control narrative. What exactly is it actually? Well, I think the Communist Party has been unapologetically saying that China is a one-party dictatorship. I mean, they are not going to apologize for that. They are not denying it. They are actually seeing this as a strength of China's political system.

Mind you that they are talking about a dictatorship of the party, meaning that the party will always be the ruling party. The argument is that the party, because of it, does not have to face all this kind of election pressure and all that.

So it can focus on the long view. It can focus on planning China's future 10 years in advance, 20 years in advance. That doesn't mean that the party itself won't have to face the public pressure because the party's mission is always that it needs to deliver. Its mandate comes from the fact that it can deliver what it promised to the Chinese people.

So in other words, it is the results or the governance of the party that gave it the mandate. It's not through the election, which they think is chaotic. It's a lot of time focused on the short term, and then a lot of time is focused on the show. So you can argue which system is better to the end of the time. But this has always been in a sense chaotic.

part of the Chinese political legacy for at least 2,000 years. But why is it happening now? For so many years, this was not the system, right? But now, isn't there also a danger that everything gets bottlenecked up at the party in terms of making practical decisions on the ground by the state council? Yes, I think that's a big misunderstanding. In fact, in China, the party is always in control.

There's never been any doubt about that. People talking about the State Council, the party, but you have to remember

Every senior member of the State Council, they are communist members themselves. So they first of all have to obey and follow the party rules and the party regulations and the party instructions. Now there was a time when China tried to experiment different sort of set up or arrangements. There was a time immediately after the Cultural Revolution, there was a sort of separation of the state.

and the party. This is a part of the political reform effort. But then they quickly realized that this can also cause problems. I think particularly the two things. One is that the study of the collapse of the Soviet Union

One of the lessons you can take from that is that when you have an ambiguous power structure, when the party center whose authority and power is not clearly defined, and then it will open a lot of gaps and create a lot of issues.

The other thing is the rapid corruption problem. The factors that contributed to the corruption, of course, are very complicated. But one big part is that the breakdown of the party discipline. So when Xi Jinping came to power, one of the biggest political promises he made to the party and to the people is to clean the house to solve China's corruption problem, which

Back then, if you ask the Chinese people, this was the number one political issue for them. Everyone complained about corruption.

People hold different views, people come from different backgrounds, but they all talk about the evil of corruption. So for Xi, his answer to that is to reintroduce a sense of purpose and also discipline to the Communist Party. So this is a process of re-centralization of power within the Party, to make the Party's power structure clear,

Leave no room for ambiguity because all these are required when you want to strengthen the party discipline. Now, some people, of course, are very critical of such move, but then you have to bear in mind that at the same time, there are also a lot of people within the party actually see this as a necessary step.

What we're seeing today is actually, I will call it the concluding chapter of this centralization of power. So centralization of power, is this also related to one of the biggest talking points that the international media in particular focused on a lot, which was

The premier of China, for 30 years, it has always been a tradition at the end of the two sessions after delivering their work report that they face the international media and they field all kinds of questions. Of course, this is the Communist Party, this is China, and press conferences of this nature are, of course, controlled. But at the same time, there is some kind of openness where the man in charge

faces a hostile media, especially in international media, and then answers every question, blow for blow, right? And they stopped that.

So all the speculation here again is on this consolidation of power, Xi Jinping as one individual power source, that kind of stuff. Is it that simple? Li Cheng not holding his press conference this year. I think it's totally understandable the fact that they cancelled the premier's annual press conference become the one topic that dominated the two sessions. Because we have to bear in mind, not only to foreign media, but it's also a big shock

to a lot of the Chinese people here. Because the thing is that the premier's annual press conference has been a tradition for 30 years. So this is always one of the highlight of the two sessions.

And because, you know, the policies can be very complicated, can be boring, can be hard to understand for the public. But this is one occasion. They see that the face, the man behind this policy, come out and talk to the public and

and explain. So this is actually a very important channel for communication. But why they canceled the premier's press conference? I think that maybe we will only have the official answer or the final answer years from now. But then there are some clues to this. One is that, as I said, China has been on the path to decentralize the power and to reform its power structure. So

So ever since 10 years ago, and particularly after the 20th Party Congress, that's a deliberate effort to make sure that, first of all, party is the ultimate source of power and the decision maker in China. The second thing is that to really crystallize the relationship between the party and the State Council, which is the government.

In the past, in China, there's this phase of the South Coast and the North Coast. It's referring that as the power center, the Zhongnanhai. So the party organ by and large occupy one side, and then the government, the state council occupy the other side. And the people see it as like two almost equal power center, check and balance each other.

But this kind of concept in today, of course, has become no longer relevant because Xi made it very clear. He thinks that this kind of structure actually creates a lot of gaps, creates a lot of ambiguity, and that is not good for the country's stability. So that's an effort to

redefine the relationship. So this year, one of the highlights is also the so-called organic law, which basically is a law to redefine the State Council's mandate. It's a reporting structure and it's a relationship with the party. So this press conference cancellation is not happening in isolation. You have to

connect it with other events happening, then it's not really a surprise. So the aim is very simple. The aim is to make it sure to everyone who is the ultimate decision maker.

Then it's also to send out the message is that for China, the government increasingly is going to be the key decision implementation and that the party will be the decision maker. Then also people question the real value of the premier's press conference because as you say, you say that the premier every year come out and face the hostile media, but it's actually not the case.

We know that the questions are submitted beforehand, has been carefully screened, and then the whole thing is actually quite scripted. And then the thing about the premier's conference is that every year you have media from all over the world. So they will select different media from different countries. A lot of these questions become related to foreign policy.

But today, China's premier's job duty and portfolio become very different from 10 years ago. The premier's job is largely on economic policymaking, on public welfare, on people's livelihood. The so-called grand strategy, the foreign policy part, everyone knows the ultimate decision, the ultimate grand strategy decision maker is Xi Jinping.

So, the previous press conference in this sense become really losing its purpose. And then people also say that for Li Qian, he wanted also to send a message that

He, as a premier, is very much focused on the so-called real stuff, the real work. It's not so much about creating a public persona, creating an image for himself, or doing the so-called showmanship, because his government is going to face one of the most difficult periods as China's economy is now at a very critical conjuncture of restructuring.

So the message is that less talk, more work. And he also thinks that a lot of these questions asked should be better explained by the ministers who are actually handling the actual policy implementation. They are the people who are closer to the front line. Maybe they will be in a better position to answer. And then the premier's work rather is to set the more general direction for the economic development.

Now, one thing we can notice is that the announcement is a bit peculiar in the sense it says that for this term, there will be no more premiers present. It means that throughout Li Qiang's term. Why I think this is interesting, it suggests that the idea comes from Li Qiang. So he's saying that during my term as the premier,

There will be no annual press conference. He's not making the decision for the next term, whoever will be the premier. Maybe that will be up for that person to decide and to talk to President Xi Jinping. Of course, ultimately, the decision to cancel the premier annual press conference must be approved by Xi Jinping himself.

I talked about the reason, but I also wanted to talk a bit about the problems of this decision. So you can say that the questions are pre-arranged and you can say this is a show or whatever, but we also need to remember that this is still the only opportunity for top Chinese leaders

to come out, face the public, face the world media to answer the question regardless whether the questions are spontaneous or prearranged. This is still the one opportunity for them to engage.

Now, the perception about China is China becoming increasingly less transparent, and the people don't actually understand the policy. China itself has been talking about it, it has been misunderstood by the West. There's this narrative against China, but this is really a missed opportunity for China to engage the public, to really send out your message.

I think that they really need to think about how to manage, how to mitigate this impact. You can have all the justification you like, but if you cannot resolve this problem, it is going to become something that will come back and hold China, it might be.

That's exactly the point I wanted to raise with you as well, the opacity. So it's one thing to explain China as this is the system. It's very distant from the Western system and it's very different from their expectations. But at the same time, the fact remains that there's a whole world out there that does not understand China properly.

so hence this kind of thing is important we still don't have an explanation for what happened to uh... chingang the former foreign minister concrete explanation and why one years now in charge right so this is like is that the danger here is that people don't understand china and then there's no attempt to explain

themselves. You've been covering the two sessions for two weeks. You've been managing our coverage. You've been overseeing how we do everything. And it must be tough because everything is in a black box, right? There's so little information that's coming out to you, apart from officially what they deign is worth disseminating. Yes. It's not just for SNP. I think it's for all the journalists, including the mainland journalists.

The thing is that the access to information in China becomes more difficult. And then the policy interpretation becomes more difficult. And this adds to the overall perception that China has become more hard to figure out.

This actually can be a problem for China in the sense that if you want to trust a country, you have to at least be able to understand it. So the moment that you can't really figure out what's going on, if there is no any kind of convincing and easy to understand explanation from China itself, then it also creates room for all sorts of people to come up with alternative explanation.

So this is in a sense, in my view, in terms of the public image, China is creating problem for itself.

Also, the thing is that the two sessions have been cut short from before the pandemic, before COVID. It's usually the longest day is almost three weeks, and even the shortest day is like two weeks. Now, ever since the pandemic, it has been reduced to just one week. So this year is also just seven days. It looks like this has become the new normal.

Now, the risk of this is that this is one occasion where you have the international media all sending their reporters to Beijing. And then after the event, a lot of them will leave China. Now, in the past, when you have more reporters gathering in Beijing, they actually get a better sense of what's going on, what's the bearing of the country is going, they get more time to talk to delegates and meet various sources.

So you can argue, say that these are not important in the eye of the Chinese government, but I will argue that this is actually very important for China's public image. So among all the speculation about the lack of Li Chang's press conference, one of the theories put forward is, oh, they want to hide information about the state of China's economy and avoid awkward questions about that. But then if you look at his work report and if you look at everything that came out of the two sessions,

It's pretty clear they've set out the economic direction and what are their plans, what their strategy is. Can you break that down for us? The state of China's economy, is it as good as Beijing says or is it as bad as it's made out to be by the foreign media in particular? Yeah, I understand that there are a lot of skeptics to China's economy and people question whether

The 5.2% growth reported last year, is that credible? Is that transversy? And a lot of people also question the target of around 5% growth this year, whether that is achievable. I don't think the reason behind the cancellation of the premier annual press conference is to do with this. One theory says that maybe the leadership

is not aware of on the ground situation. Maybe they live in their own information bubble. So they will only feed with positive news. And then they actually really believe that the China's economy is not in dire shape. But by talking to various people,

I think that the likelihood of this theory, I would think it's quite low. I think that all the Chinese leaders, this current group of Chinese leaders, they experienced the Cultural Revolution.

They understand the danger of losing connection with the grassroots and become isolated in the information bubble. They take extra steps to send a lot of people out to do the fact-finding. Actually, the fact-finding becomes a very central part of the policymaking.

Every time before they make a policy, they send, really, I'm talking about tens of thousands of people to go to different sectors, different corners of the country to gather information for them. So I really don't believe this is a case of them not knowing what's happening on the ground.

Now, the second possible theory is that they, in process of information, that is more than we, the media people, we have. And you have to bear in mind that China is so big and is also very complex.

Now, if you can look for evidence to support your theory, you can find almost any kind of evidence. If you believe China is going to collapse and then you go out and just selectively choose evidence to support your theory, you probably can come up with enough evidence to say that you are right.

Or you can say that the China's economy is actually in great shape. And then you can go out and collect evidence as well. Our job is actually, we need to collect information

from as many sources as possible and then evaluate and verify them and try to come up with a more balanced view. So what's your take based on that, from that perspective where it's more balanced and you're looking at all sides and here is probably what the reality is for China now in terms of the economy? Okay.

I questioned the Chinese officials whether the 5.2% growth is credible. The answer is that they have tried to make it as solid as possible. They say that it's true.

Throughout the world, no matter which government, cannot say that the statistics are 100%. But China is not making any kind of deliberate effort to hide that number. So from the local, of course, there are some kind of problems, but I don't think it's a very serious problem.

or systematic fabrication going on. So last year, by and large, I think if you look at, there are areas that China are struggling.

property sector, the financial market, the consumption, domestic consumption, not as strong as expected or true. But you also need to see that China has a lot of bright spot as well. So you have the EV industry booming, you have the new energy, solar energy, wind energy, etc. And then you also have the advanced manufacturing. So the argument is that what you are seeing in China

It's not a recession. It's a restructuring of the economy. The economy is moving from one model to another model. And in this process, of course, you will see winners and losers, and it depends on where you are

standing, your picture becomes very different. My assessment is that by talking to a lot of people, I think the Chinese public, particularly for the middle class, they are a bit disillusioned or a bit let down by last year because the expectation is that there will be a V-shaped rebound.

But a lot of people are not seeing that. They are seeing that poverty becomes worth less money than before. Their stock portfolio suffered losses. Their assets are shrinking. So that's triggered some kind of very negative sentiment.

But then most of these people, they still have that job. Very few people I talked to told me they lost their job or they have to take a very huge pay cut, etc. So because of the shrinking of their asset, they become less willing to spend for the middle class.

But then at the same time, now in Beijing, I will go out and meet the sauce and go to dinner and go to lunch place. Actually, I will say that a lot of these restaurants are full and sometimes you have to wait in the long queue. So I also get the sense that there are bright spots and there are issues. So on the balance, I would describe this as an economy in transition.

And it's just the same as any other economy in transition during such a similar stage. So from what you're saying, it's essentially a problem of expectation because it didn't happen like everyone expected. And the other one is obviously a problem of confidence now, right? How confident is the general public in China's economy and its recovery?

On an interesting note, there was a lot of focus on technological innovation. And one particular buzzword was this new quality productive forces. Now, you wrote a very interesting column on it, very well explained and quite incisive.

If you could explain that to our audiovisual audience as well. This new quality productive forces, why that's so important and why that's so significant. Right. This buzzword was first used by Sun Yung-Ping in September.

And then now it's suddenly become like the buzzword on every official's lips. But to a lot of people, even to a lot of Chinese people, they don't really understand what it means. The whole concept can be quite complicated, but the long story short, the theory is like this. So in classic economics, so you have these essential factors of production.

You have the labor, you have the land, you have the capital, and then you have the entrepreneurship. Now, if you look at the so-called China miracle over the past four decades, it's largely a result of the

quantitative growth of all these four factors. Because if you look at the foreign capital going into China, so over the past four decades, it's grown more than 90 times. It's making China by far the top recipient of foreign investment. And as China becomes richer itself, it's also starting to invest more.

on its infrastructure and all that. So the capital side, there's really a phenomenal growth in capital. And in terms of labor, when China first started the reform policy back in 1977, the population is below 1 billion, just slightly below 1 billion. Today it's 1.4 billion.

So they are adding a lot of yang, labor, to the population. So over the past four decades, China is benefiting from what they call the labor dividend. But this, of course, is coming to an end because China's population, as we all know, are fastly aging and young people are less willing to get married and have kids. So a lot of people are talking about this labor advantage may disappear very soon.

And then for land, China is a vast country. And over the past four decades, the government has liberalized the use of land. So created a lot of cheap land for housing, for industrial use and for all that. But all this quantitative growth

cannot just go on like this forever and forever. They are all hitting their bottlenecks. So the question is where China can find the source of growth to power it for the next, say, two or three decades.

Now, in Marxist theory, technology is considered as the primary, most important qualitative factor in production. So technology is not just about the tools you use, but also talk about the various aspects.

So if you imagine a team of the same number of people using the same office building with the same manager in charge and even with the same level of investment, if they use computers to do their work,

the productivity will be very different from say using pen and paper. And it's not just the two as well, it's all about the labor in question, the relationship between the product and the customer. So this kind of so-called relationship of production will also be changed. So the argument is that

China cannot hope to just grow quantitatively all these important factors of production. What it needs is to prepare its workforce for the technology jump and then build the infrastructure, have the right policy to really push for this qualitative jump.

and with the technology as the multiplier, then China's economy can go on and grow at a relatively high speed for another one or two decades. So all this is well and good, Jungian, but then let's not forget the massive elephant in the room, which is the most powerful country in the world, the United States, and its determination to stop China's

technological advancement. Everything that China is trying to do in terms of its economy and its technology and its strategy, a lot of it, or most of it you would say, is based on the fortunes of one and a half billion people.

But that is not what the U.S. is looking at. The U.S. is looking at containing China. So therefore, you have this ridiculous nonsense going on right now about this concerted effort to ban TikTok, which is the biggest joke going on. But then we're living in times where it's beyond the twilight zone, where this harmless little app where children slap each other with tortillas is suddenly a weapon of mass destruction that China is unleashing on the world. So you're up against that. China is up against that.

How is it going to fare in this battle? Well, I will say that all these technology restrictions and containment policies actually

become the fuel to really make the Chinese leadership determined, they are actually seeing it as a justification why China really needs to push for technology renovation and all that. Because short of your own effort, then China will be forever confined to the low end of the production chain. That means that the country

will always be stuck at this stage. Now, people talk about China becoming an affluent society, but you have to bear in mind, this is a 1.4 billion population country, and the middle class is roughly 400 to 500 million. That means the vast majority of the population is still in the low-income basket.

For China's government to realize the dream of returning China to become a developed country, for the Communist Party to really deliver its promise to its people and to stay in power, they have to restructure the economy, have to move China up in the value production chain. But they are facing a very different environment.

Because for the so-called other Asian tigers, Japan, Korea, Singapore, you name it, they didn't face this kind of technology restriction from the West. Even for Japan, at some stage, US saw Japan as a potential threat. But then I will argue the kind of restriction on Japan has never been so extensive.

So the Chinese elite here, they have no illusion that the U.S. is going to change its course. So that is why today it's even more important for China to become really focused on developing its tech.

The other thing I will say, the one unintended impact from the U.S. tax restriction is it actually feeds to the nationalistic sentiment here in China. Because particularly for a lot of the young people,

they think this is grossly unfair. They think that this is just an effort to hold them down and that they become even more supportive of the government. So in a sense, this is not weakening the Communist Party's political standing in China. It's become something that is strengthening their hold on power. So, Chengen, you know, when you're talking about TikTok, when you're talking about curbing the rise of China,

You always hear this phrase bandied about all the time. I hear this all the time. I read this in the Western media, the foreign press all the time. The China threat, China threat, China threat, China threat. So I want to ask you, what is the China threat, if it even exists at all? And related to that, what can we expect in the year ahead regarding cross-trade tensions and also China's problems in the South China Sea with its neighbors, the risk of war?

I know that so far good sense has prevailed, but these two flashpoints are very much there. And in this clash between China and the West, especially led by the U.S., whether it's curbing technological advancement or punishing it in this way or the other,

the risk of a war breaking out based on these multiple factors and not just the current tensions in these flashpoints? Right. I will say that the China threat is both propaganda but also real. Let me explain. So there are different versions of China's threat. So one version is to paint China as this revisionist power.

a country that is not satisfied with the world status quo and want to change the world order to its favor. And not only that, but they're willing to do so

by using violence, by using all sorts of ways to achieve that goal. So China is painted as a sinister power, as an aggressor, as a troublemaker, and a lot of the time is mentioned in the same breath as Russia, and they're trying to paint both countries as this revisionist power, a threat to the global order. Now,

To Beijing, they very much resent and reject this portrayal because they argue that it's not based on fact. Now, if you look at the so-called five major powers, so the five permanent UN Security Council members, China is the only member who hasn't fought a foreign war.

for the past three or four decades. Now China had border disputes with Philippines, with India, with a lot of its neighbors. But so far China has always tried to use the diplomatic means to resolve this conflict. There are clashes, there are clashes over the China-India border, but these are very

controlled clash, never break into full conflict. We're still seeing it on TV almost every week, the kind of clash between Philippine maritime police and the ship with the Chinese coast guards and all that.

But there's no kind of open conflict we see in Gaza or in Ukraine. But if you think about a lot of the great powers, how they react to this kind of border dispute, if you look at India, how India handles its border issue with Pakistan, if you look even at the U.S., how many wars the U.S. has fought, the U.K. over the war with Argentina, over an island that is thousands of miles from Britain,

So all this for Chinese people is very hard for them to accept that you pinned them as this revisionist power. Where's the evidence? And they also can argue, if you look at just over the past two years, if you look at what China has been doing, no matter it's over Ukraine or over Gaza, people accuse China of siding with Russia.

But to China, China actually thinks this acquisition is problematic because China is not arming Russia. China is actually trying very carefully to stay out of that conflict. And what China has been trying to do is to argue that this war is rooted in the political problems and it needs to have a political solution to that.

Now, over Gaza, the same. So China has been very much trying to talk about a peace resolution to the issue. You can say that these are just gestures, but at least they are not trying to aggravate the conflict. They are not adding fuel to the fire.

Whether the peace solution is effective or not, at least they are the ones who are making the attempt. So for them to be accused of being the revisionist power today, that's very hard to accept. And then China can point to the fact that it has helped to broker a peace deal between Saudi and Iran.

It has been trying to help negotiate deals with a lot of neighboring countries on free trade, on issues that will promote mutual beneficial development. So on that one, I think the China threat theory, I don't think is justified. But I would also say that there are

Another version of China's threat theory, this is that China, when it puts so much focus on technology, on moving up the production ladder, on upgrading its manufacturing, and etc., it inevitably will have a structural conflict.

with the West. Because if you look at the global economy for our lifetime, the West, basically, they occupy the tip of the pyramid. So they basically occupy the most high value added part of the production chain. They are the one who come up with all this new technology. They take the most profit from a product because they are the one who provides the technology, provides the tool, provides the capital.

Now, you have a country of China's size now trying to move up that ladder. Now, when one thing moves up, then the one who occupies that space will face competition. This is why even if you talk to people who are not holding such critical view of China, they are worried about overcapacity. Now, overcapacity

In other words, it's that people are fighting for the market. It's competition.

And in this kind of competition, you're bound to face the threat from China to disreplace you. So that's, in a sense, I will say is real and is something that will require China and the West. It's going to be a very difficult negotiation process for them to eventually find a position where both sides can accept.

and accommodate each other. It will take a while for that to happen. And at the end of the day, in a lot of ways, this is a clash of cultures, a clash of civilizations, isn't it? You and I talked about the approaches, the way China plays this game and the way the West plays this game. The West plays chess and checkmate. You defeat your opponent and you kill him there, whereas China plays go.

which is not about defeat, which is about taking away stuff from your opponent and eventually getting him to surrender, right? Yeah. So the goal game is not about the checkmate your opponent. It's all about building up your position of advantage and then reduce your opponent's space and reduce his position of advantage.

Until you come to a point, your opponent realizes there's no point to continue and concedes to you. Now the chess is very different. The chess is all about capturing the king. You have to make the most drastic move. You sometimes need to sacrifice your pieces in order to create that one opening that you can make the killer's move.

Now, earlier, Yonan, you asked about China's position in Taiwan and the South China Sea, etc. I don't believe the Chinese government is preparing for the imminent conflict because precisely as in the Gokeng. Now, if you want to just storm Taiwan and take it by force,

the consequences, even in the scenario of China winning the war, will be very disastrous. Because Taiwan, if you look at the map, Taiwan sits at the heartland of China's economic zone. Shanghai is close to Taiwan. Hong Kong is close to Taiwan. Fujian is close to Taiwan. All these are China's economic heartland.

And Taiwan itself is very important for the global semiconductor industry, but also for the global economy. And China's leader also sees that the Taiwanese people

They are Chinese people. So a war over Taiwan Strait will be Chinese fighting Chinese. It will run counter to the Chinese leadership's dream of returning China to the front row of great power and restore the glory. So I think the war will only happen when they feel there's no other option left.

They will not let Taiwan go. No government in China can survive losing Taiwan. So that is really the bottom line.

But if they still have options, they will try not to do that. But that doesn't mean that they will just fold their arms and do nothing. They will gradually build up the advantage, both in terms of the military advantage, economic advantage, and using every means to gradually erode Taiwan's position and also the U.S. presence here.

Chinese believe that the time is on our side because of China's economy. If China can remain politically stable, the social stability

Given the sheer size of China, if China even grows in value at 4% to 5% for the next 10 years and 20 years, the overall strength of China will become very different. The overwhelming advantage they build up over the Taiwan Strait will eventually compel

the people in Taiwan, all very smart people, to rethink what will be the best political solution for Taiwan, what will be the best political settlement for Taiwan. So I still believe that China is making preparation for the worst, but then doing everything they can for the peaceful unification. This will be what we call a "salami slicing tactic."

not aiming for one killer move, but by gradually building up the advantage over your opponent. And of course, for the Taiwanese people, if there are any elements there who are in favor of a war or conflict with China, you can always look at Ukraine as an example to see how much a country can suffer when it has the U.S. overseeing everything and then you land in the middle of a war there.

So I think that there's a lesson to be learned there by everyone looking at it in the Taiwan context. But one more thing, Zhao Xinyan, where is Hong Kong in all this? Let's talk about that for a bit. In the context of how China has its back against the wall, there is a danger that China is retreating from international engagement in that sense when everything is against it. And then Hong Kong's role is

I remember right from the time since 1997, this slogan had almost become a trope and people would roll their eyes at it saying, oh, here we go again. Hong Kong as the gateway to mainland China. But hasn't that become more relevant and more important than ever that Hong Kong can play this role because of its international nature? Definitely. Not only Hong Kong is the gateway to China, Hong Kong is also China's gateway to the world.

So I think because of the Article 23 and all this dominating the international press, and I also have to say, I find a lot of the coverage to be very biased.

And this created a very bad sentiment about Hong Kong. But if you look realistically, if you look rationally at what's going on, right? So Beijing's argument is that the Article 23, this is not something that dropped from the sky. This is something that's written in the basic law.

the Hong Kong's Mid-Lake Constitution. This is the constitutional duty Hong Kong needs to carry out. The fact that it takes 26 years for Hong Kong to draft that law to China, that's long overdue. And they can argue, look at what happened in 2019. Can you imagine any country, any major country in the world,

In the aftermath of something like that, we're not trying to see how they can tighten up their security loophole, but that doesn't mean that they only see Hong Kong through the lens of security. That's absolutely not correct.

Hong Kong means a lot to China still this day. It's not just a place where the foreign investors go through Hong Kong to China. It's important in the sense that this is the most international city in China. It has a lot of talent from different parts of the country. And then it has a very attractive investment environment. It has the basic law, which is a very different legal system.

from what is practiced in China. It's more easier for the foreigners to understand and to accept.

People talk about the rule of law and all that. Now, I will say is that the fact none of the people arrested in the 2019 protests will want themselves to be tried in China. Every single of them insists that they need to be tried in Hong Kong. Tells you, even for people who hold a very critical view of the current situation in Hong Kong, they still trust the legal system of the city.

And the fact is that ever since the Hong Kong government started this talent scheme, you can see how many mainland talents are raising their hand and want to come to Hong Kong. So Hong Kong will continue to be the place where the elite in China will want to come here to develop their business, develop their career. And if we can continue to attract the top green from China,

I cannot see how such the world second largest economy at your back and the cream of the population wants to come here to do business. How you can feel?

And Hong Kong's importance is going to increasingly become a very important center for China's science and technology upgrade. Because next to us is Shenzhen, China's one of the most important tech centers, the so-called China Silicon Valley. Hong Kong has a very vibrant research environment. You have at least three world-class universities

you still have a lot of foreign talents who want to come to Hong Kong because of all these good factors. So Hong Kong is well positioned really to seize on this opportunity of China's effort to develop itself as a science and technology power to restructure its economy. If Hong Kong, we can play smartly

I think that there will be a lot of opportunities there for Hong Kong. Chung-Yen, I fully share your optimism about Hong Kong, your hometown, my hometown, despite what the naysayers and the doomsayers say, gaslighting, virtue-signalling people like our US Consul General, for example, talking about the need to use burner phones when foreigners come into Hong Kong. It's utter nonsense like that. That's what we're up against, and that's why it's so important for us journalists

Hong Kong journalists on the ground to tell the real story, to explain the truth to people around the world. So anyway, that brings us to the end of the show. Thank you so much for helping us understand China just a little bit better. I think understanding is so important, understanding the world in these really toxic times, more important than ever. So thank you very much, Chung-Yan. Thank you. Thank you.

Thanks for listening to this edition of Inside China. Don't forget the Talking Post video version of this interview is available on scmp.com. Take care and bye for now.

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