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Sizing up a competitor: How “tall” is China?

Amid signs of trouble for China’s economy, two veteran diplomats at the 2024 SIEPR Economic Summit discussed the country’s future and the role of U.S. policy.
Kevin Rudd, Australia's Ambassor to the U.S., discusses China with former Secretary of State Condoleezza Rice during his keynote at the 2024 SIEPR Economic Summit.

In any high-stakes standoff, it always helps to have an outsider’s perspective.

Kevin Rudd, a former prime minister of Australia and longtime expert on China, has some advice for the U.S.: Your see-sawing views of the world’s second-largest economy is complicating foreign policy — for yourself and for your allies.

To Americans, “China is either 10-feet tall or it’s 2-feet tall, depending on the season,” Rudd said at the 2024 SIEPR Economic Summit. “Either it’s going gangbusters, there are no problems, they’re going to take over the world [or it’s] going down the gurgler, it’s gone, and nothing will save it.”

Rudd, who is now Australia’s ambassador to the United States, suggested a more measured outlook: “You are 6-foot-2, the Chinese are 5-foot-9. I’m not sure how much taller they’ll get, but they’re still growing.”

That assessment underscored Rudd’s keynote appearance capping the daylong March 1 event. Rudd responded to a broad range of questions about China and its role in the world from Condoleezza Rice, the director of the Hoover Institution and the 66th U.S. Secretary of State under former President George W. Bush.

On the country’s teetering economy, Rudd said that recent deflation and the highest rate of capital flowing out of the country in 25 years are “remarkable facts.” But they don’t mean that China’s economy is on the verge of collapse.

“Never underestimate the power of the Chinese consumer,” said Rudd, pointing to unprecedented rates of household savings. “Keep your eyes focused on what happens with the Chinese consumer.”

Kevin Rudd, a former prime minister of Australia and longtime expert on China, says a “consistent” U.S. approach toward China would be beneficial.

Taiwan: 2027 is the time to worry

And while China is clearly playing catch-up to the U.S. on generative artificial intelligence, Rudd said the country’s leaders are more than willing to spend whatever they need to stay competitive.

“The Chinese industrial approach,” Rudd said, “is pretty simple: What you can’t obtain qualitatively, we will seek to secure quantitatively.” If the price of competitiveness is a 10 percent return on investment on $1 trillion worth of investment, Rudd said the Chinese government is willing to make that tradeoff.

As for the likelihood of a Taiwan invasion, and the war with the U.S. that could follow, Rudd said he doesn’t expect China to make a move against the island in the short term. China’s president, Xi Jinping, is “a calculated risk taker,” he said, and the calculus for him doesn’t make sense right now. Russia’s setbacks in the Ukraine war, for one thing, are giving him pause. Xi also wants to see if the U.S. sustains its political will to defend Taiwan if China invades.

“I am more concerned about 2027 and 2032, [when the Chinese might think] things would begin to align” to try to seize Taiwan.

Rudd also had a warning for the U.S. to not underestimate China’s commitment to its Belt and Road Initiative, which aims to spread its influence through the financing of infrastructure projects across the “global South.”

Overall, Rudd called for a steadier U.S. approach toward China — for its own benefit and that of its allies.

“Consistency is, I think, a key element,” he said.