American Thought Leaders - These Are the Signs Xi Is Losing Power in China | Gordon Chang

Episode Date: August 16, 2025

As the Trump administration gives China another 90-day extension on elevated tariffs, I’m sitting down with China analyst Gordon Chang to get his read on U.S.–China trade talks, signs of infighting in Beijing and trouble for Xi Jinping, and the recent destruction of a Chinese coast guard vessel by a Chinese navy warship.Chang is the author of “Plan Red: China’s Project to Destroy America.”Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

I think that Xi Jinping has lost control of the Chinese military, and I think that he has lost some influence among civilian CCP leaders. We have seen a number of unexplained disappearances. As rumors grow that Xi Jinping is losing power, I'm sitting down with China analyst Gordon Cheng to get his read on what's going on. Producer prices, in July, we're down for the 34th straight month. And that shows you the state of the Chinese economy. In this episode, we dive into infighting in Beijing, U.S.-China tariff talks, and the recent stunning destruction of a Chinese Coast Guard vessel by a Chinese Navy worship.

You can't have an accommodation with a regime that believes it must destroy it. And China's regime believes it must destroy us. This is American Thought Leaders, and I'm Yanya Kellick. leaders. Thank you so much, Jan. We're going to talk about communist China. Of course, we're going to talk about, you know, the realities of the economy, some big changes, kind of leadership struggles and things like this within the CCP. But before we go there, this bizarre event where a Chinese Navy ship basically destroyed a Chinese Coast Guard ship and the U.S. is sending ships into the region. What's going on there?

destroyer actually cut the bow off a Chinese Coast Guard cutter. Both of those Chinese vessels were chasing a Philippine Coast Guard cutter near Scarborough Shoal in the South China Sea. Scarborough is really important. It's very close to the main Philippine island of Luzon. It guards the mouths to both Manila and Subic Bays, very strategic. The Chinese want it, and they are trying to chase the Filipinos out. Due to some really very clever seamanship on the part of the Philippines, they maneuvered the Chinese ship so that they collided. And right now, China is out for blood.

They've been humiliated. One thing about this incident is important, and it's not getting that much attention. And that is that four Chinese coast guardmen were thrown into the sea after that collision. The Chinese destroyer did not render assistance. The Philippine Coast Guard Cutter actually came back to look for the Chinese sailors, but nobody was found in the water. This shows you the nature of the Chinese regime, that they're leaving their own people in the water. And the Filipinos, who have every reason to be agreed, were the ones to render assistance. That just shows you what we're up against with regard to Beijing.

But it's just bizarre, though, like, I mean, those seamen are presumably valuable, right, to the crew and so forth. I mean, it just doesn't make a lot of sense. Well, human life doesn't mean very much to the regime. And we know that because the flag of the People's Republic of China is red. It's red for blood. They are willing to spill blood. And as people have pointed out, the person who was killed the most Chinese in history is Mao Zedong. The Mao who is still revered.

by the Communist Party. That tells us almost everything that we need to know about the People's Republic of China and the Communist Party. So there's been this new development, of course. There's a U.S. destroyer that was sent into the region. There might even be more going in as we speak. And just frame for me very briefly, like what has actually happened in that region, like how these islands have been changed by the Chinese regime? We need a little history here because this is Scarborough. In the first part of 2012, both Chinese and Philippine craft were crowding around that feature.

The Obama administration brokered an agreement for both sides to withdraw their craft. Only the Philippines complied. And that left China in control of Scarborough since then. Now, the Chinese have not reclaimed Scarborough. In other words, they have not trying to turn it into a permanent outpost. like they did in the South China Sea, in the Spratling chain. But we got to remember what the Obama administration tried to do in 2012 was to make this go away.

And the problem was that emboldened the worst aspects in the Chinese political system by showing everybody else that aggression worked. And so right after the incident at Scarborough, the Chinese ramped up pressure at another Philippine feature, second Thomas Scholl also in the South China Sea. They then started the reclamation of those features in the Spratly, and they ramped up pressure in Japan at the Senkakakus in the East China Sea, which the Chinese claim is the Dalaius.

So the Chinese are pretty aggressive. They're pretty bold. They think they're in control of the situation. And the United States, and this is to the great credit of the Trump administration, has stationed two U.S. Navy vessels, the Higgins, which is an Arley-Birk destroyer, and the Cincinnati, which is a littoral combat chip. They are now about 30 nautical miles away from Scarborough. Just about 24, 36 hours ago,

the Higgins did a pass by Scarborough within 12 nautical miles of that feature. That is important from a technical point of view. The Chinese were enraged. This is, even though the Trump administration so far has acted perfectly in terms of trying to establish deterrence, this could really go very badly. We could see region-wide war sparked by what the Chinese plan to do at Scarborough. Because although the Trump administration has handled this

correctly, we're not driving events. The Chinese are. And that means they get to decide whether the world goes to war at Scarborough. Well, and over the past, you know, decade 15 years or so, they've actually, you know, the bottom line is they've built military bases across all these islands in the South China Sea, and presumably there's the same intention. I mean, basically taking land, which is not theirs, building on it, expanding it, building on it, building military bases and saying, hey, this is us. We've been here all along. Yes. And at some point, the rest of the world's got to push back. Because China's made it very clear. You know, Xi Jinping talks about him as being the only legitimate rule.

rule around the world. And since 2017, Chinese officials have been talking about the moon and Mars as sovereign Chinese territory. So what's at stake here is this is not just a feature in the South China Sea. We're talking about Xi Jinping's ambitions to rule the universe. And I know that people will think that that's ludicrous, but we've got to actually start to listen to what this guy is saying and his officials. And they've made it very clear. They believe that they are the world's only legitimate ruler. And that means that the United States, in their view, is at best, at best, on a colony. So at some point, we're going, unless we want to decide that we are going to get down on our knees to the Chinese literally and figuratively, at some point,

we're going to have to stop them. And I believe that we need to stop them at Scarborough. You know, people can disagree, but clearly the accommodative approach in 2012 at Scarborough has just open the door to more Chinese aggression across the region. That approach doesn't work. We are going to have to be more robust. And yes, this is incredibly dangerous. But that's because through choices we've made in the past, we have left ourselves with only incredibly dangerous options at this point. So let's talk about Xi Jinping and his approach. Of course, he's sort of taken this more Maoist approach to governance in communist China. But at the same time, His leadership is fraught increasingly, and this is something we've been following at Epak Times quite a bit.

But I would love to hear what you think about it. I mean, just recently, there's examples of people being removed on the one hand. You know, in the military, then in the Central Commission as well, there's, you know, someone that seems to be, you know, basically out of favor all of a sudden on the Xi Jinping side. How does that all look? Like, how does this internal turmoil play out right now within the... Chinese Communist Party and what does it mean for us? I think that Xi Jinping has lost control of the Chinese military. And I think that he has lost some influence among civilian CCP leaders. Start with the military. His number one guy in the military, his number one loyalist,

his hatchet man, General Huo Wei Dong, has not been seen in public since March 11th and after the two sessions. And the New York Times article three, four days ago, and just about everybody says, well, Xi Jinping has been sacking his own loyalists. And that's possible. But I don't think that it is right. And the reason is that from July 9th of last year, there have been a series of articles in PLA Daily, the main propaganda organ of the Chinese military, that have praised collective leadership, quote unquote. That's a direct challenge to Xi Jinping's one-man rule style. And so these articles were written by people who are aligned with General Joe Yang Shah, who is the number one uniformed officer in the military, who is known to not be

on particularly good terms with Xi Jinping. Now, General Zhang is, he's the number one vice chairman of the Communist Party's Central Military Commission, and I believe that he was responsible for getting rid of General Hu Wei Dong and some other Xi Jinping loyalists recently. This indicates the balance of information that we have, and by the way, we're guessing here, of course, but the balance of information is that Xi Jinping no longer controls the Chinese military because General Zhang does. On the civilian side of things, it's less clear. Or, basically five weeks, Xi Jinping just dropped out of propaganda. He dropped out of sight for the most part. Those times he did appear in media. He was appeared in roles which showed that he had

been diminished in stature. Beginning about, let's say, the second week in June, he has had a more prominent role in media. We also saw the disappearance of a senior Chinese diplomat, Liu Zhao Chao. And we don't know what's going on there. This follows, of course, the disappearances of other civilian leaders. Again, this is really murky. Not all of it points to Xi Jinping losing influence, but some of it does. We will know a lot more after the fourth plenum in October, because I think we will see a number of things occur. So it's sort of like stay tuned.

But I think that there is intense infighting in this regime. And that has all sorts of consequences for our dealing with China and how we can work with Beijing. In other words, I think we can't because the regime is not in a position to deal constructively with anybody at this point. Going back to this incident at the Scarborough Shore near the Philippines, does this impact how that situation will be viewed? because, of course, as you mentioned, this is extremely embarrassing to the Chinese regime, their own Navy ship basically destroying one of their Coast Guard gutters. And they're going to be looking for someone to blame, presumably, as they do, because the Communist Party can never be wrong or in error.

Yeah. If you give me a little time for background here, I have not been worried about the Chinese starting hostilities by launching an invasion of the Main Island. of Taiwan. And that is for a number of internal Communist Party reasons. I just don't think it's in the cards. But that's not to say that Taiwan is safe or that the region is safe, because we have seen belligerent Chinese activity on a continual basis from South Korea to Japan, to Taiwan, to Philippines, to far away Australia. And I've always worried that one of those incidents can spiral out of control. And if they do, the regime cannot de-escalate because of what we've just been talking about, the political problems.

There's something else that could cause problems, and that is somebody in the regime, could be Xi Jinping, could be General Zhao Yao Shao, could very well decide that it's in his interest to let an event spiral out of control or to pour fuel on the fire. And it's not because they want to start a war, but because I think that a political figure could decide that a conflict would be in his political interest. Because, for instance, with Xi Jinping, it could prevent others from moving against him, from challenging or deposing him if there is a conflict with, for instance, the Philippines or the United States.

And that's why I'm really concerned about what's happening at Scarborough right now, because the Chinese, in general, even if things were calm in Beijing, would be looking for blood, somebody else's blood. And now things are much worse because of the political turmoil. So I think that this is an exceedingly, this is a very dangerous time right now. Well, so given this reality, and I think there's a number of people in this current administration who understand these various elements, and also just in general in America, there's been a shift where people kind of understand the realities of the Chinese Communist Party and its ambitions at a greater level, at least than in the past. How is it that we are funding, you know, our investment banks, giant investment banks are funding IPOs like cattle?

And of course, I'm not talking about cows here. I'm talking about this giant, well, now, you know, apparently extremely successful battery manufacturer, where the batteries are used in Chinese military submarines. I mean, this is a military company. Why are we funding these things? This is where I get really angry. It is strategically wrong for us to deal with these Chinese companies for the reasons you suggest. But it's morally wrong.

It's morally wrong to help an enemy. China has declared the United States to be its enemy. They did that in May 2019, for instance, when People's Daily ran a landmark editorial that declared a quote-unquote people's war on us. PLA daily in March of 2023 defined people's war. We didn't need a definition of people's war. We know what that phrase means. It goes back to the Maoist era.

It carries great resonance in Communist Party thought. But in case anybody needed clarification, in March 2023, PLA daily defined people's war as total war. So we know what's going on here, and yet we maintain reliance. with Beijing. And Gordon, if I may jump in, and I think total war means, you know, this unrestricted war, basically using all means to wage warfare to diminish the enemy in all sorts of ways. Yes, absolutely. You're absolutely right about that. Unrestricted warfare is that title of that slim 1999 book by two Chinese Air Force colonels that argued that China could use any tactic

to take down the U.S., and two years before 9-11, they even wrote about bin Laden attacking the United States. Bin Laden, who China had a relationship with in 1999. So let's understand what the stakes are here. So we should have no business, no commercial, no investment ties with China. This is wrong. And future generations are going to look back at us and say, who were these Americans? So, yeah, this is just morally wrong. kind of bizarre because I was just listening to Roger Robinson speaking about this, of course, this Cadillow IPO was in Hong Kong. And the reality is that it's actually paving the way for several other, maybe even in the kind of teens IPOs of this nature. And which is just

kind of bizarre because Hong Kong's, you know, financial independence has been shattered, right, by the CCP's encroachment. It just something, again, it kind of boggles my mind. Yeah, well, since June 2020, when China imposed its national security law on Hong Kong, Hong Kong no longer is the one country, two systems, high degree of autonomy that was promised in the sign on British Joint Declaration for 50 years, starting from July 1st, 1997. So we know what's going on. And here is that we're also, I get angry, you know, we've given Hong Kong special treatment for instance, on our sanctions and stuff like that, on the assumption that it's autonomous?

Well, of course it's not. It hasn't been since 1997. So we just fail to understand. And it's sort of like we're determined to fail to understand. But we're going to lose people. We have lost people because of this. We've lost Americans, you know, tens of thousands of American lives from fentanyl. 1.7 million American lives from COVID.

I mean, how many Americans does China have to kill before we finally wake up? So again, it's kind of a bizarre development with the ascendance of the current Intel CEO. Of course, President Trump has been advocating for him to remove himself because of his involvement with a number of Chinese Communist Party related entities. And I just want to get you to speak on that a little bit for me here. Yeah, Lip Bhutan is one of the most capable American executives. He's got the right vision for Intel, and he's also got the strength to take on Intel's chairman,

Frank Uri, who has misguided ideas about what Intel should be doing. But I believe Intel must fire Lip-Botan. And President Trump was right two Thursdays ago when he demanded that TAN be removed. The reason is that TAN was chief executive of Cadence from the period 2008 to 2021. And from 2015 to 2021, Cadence engaged in 56 sales of design, software,

hardware, and other tech products to a Chinese Defense University. the National University of Defense Technology, which is essentially the Chinese military. These sales were illegal because that university was on the Commerce Department's entity list. So Caden's two weeks ago pled guilty to one count of conspiracy to violate U.S. export controls and agreed to pay a fine of more than $140 million. But that's not where the matter should drop. Caden's CEO, Lipp Bhutan, should be investigated for his role in this.

So I don't care how capable Lipputon is. He put the life of every American at risk. This is one of the basically very difficult realities we have in frankly every Western liberal democracy that works with China that has been doing engagement with China in Canada. This is maybe even a level up from here in the U.S. there's been this deep engagement and there's, you know, a lot of people that have been touched by it and some in very, very, you know, serious ways, compromised ways. And this is just something we have to deal with as a society in general. You have thoughts on how to approach that

because, you know, a lot of people entered with presumably good intentions and just kind of ended up in this situation, or do you view it differently? Well, we're a democracy. And democracies are very bad at defending themselves until a lot of people get killed. So let's go back and look at Al-Qaeda, which I think sets the pattern. I mean, actually, if you want to look at the pattern, you go back to Tocqueville in the 1800s. But let's look at something recent, something that Americans still may remember. That is, in 1993, Al-Qaeda killed six Americans

with the bombing of the North Tower of the World Trade Center. And we couldn't care less. And so we couldn't care less until one day when Osama bin Laden reached out and killed 2,977 Americans. And then we said, how did that happen? Well, it happened because we were determined

not to look at what was going on with al-Qaeda and what Osama bin Laden was saying. We had a feeble response from President Clinton to al-Qaeda. We had Republicans who were criticizing Clinton for being too tough on al-Qaeda. So this was bipartisan failure. Now, China is so much more powerful than al-Qaeda ever was, and so we could very well lose our country over this. And so this is a time when we Americans are going to decide whether we are just going to surrender to China or whether we're going to fight for our society because we're going to have to fight for it if we want to keep it.

Well, and one way this is manifesting actually come to think of it is, you know, the State Department recently released its human rights report, which China features very prominently in, and especially in this realm of transnational repression, basically the Chinese Communist Party, targeting Americans and targeting people on American soil. And of course, this is a pattern that happens elsewhere. So I guess I'm just trying to add a little bit of color. Maybe you can speak to that a little bit. This isn't something that's isolated. There's basically direct action on people here. In our country right now, there are networks of Chinese agents, operatives, and soldiers. We know this for a number of different indicators. and we can run through all of them, but just to give you one example, and that is, it was great that the FBI closed that secret Chinese police station in Chinatown, New York City, but according to the Daily Caller and the New York Post, there are at least seven to nine more of them spread throughout this country. And no administration, either the Biden administration or the current Trump administration has taken the effort to close these down. I think that the number one priority of Tom Holman, the borders are, shouldn't be people at Home Depot's in Los Angeles.

It should be these Chinese networks. We know that they are extremely dangerous. With the increase in the flood of Chinese migrants during the Biden years, we saw a change in the composition of those Chinese migrants. So if you go to the beginning of the flood, we were seeing primarily family groups come across. In other words, people who were desperate to live in a free society. Towards the last year of the Biden administration, the composition had changed. At least two-thirds, and in some border crossings, 85% of the Chinese migrants were single males of military age, traveling without family members, often pretending not to speak English.

Border Patrol knew that some of them had links to the Chinese military. And by the way, towards the end of the Biden years, we saw these packs of males come across with, identical kit. This occurred while there was an increase in tempo of Chinese nationals trying to gain entry into our military bases, either by sneaking in, barging in, or by tempting to enter through false, under false pretenses. There's been illicit surveillance of our bases and our infrastructure by the Chinese. They're preparing for attack. They're looking at our patterns. They're studying our vulnerabilities. And the only reason why we have not been attacked, on our own soil is because Xi Jinping or whoever is in charge in China right now has thought

it not to be in China's interest to give the go signal. But once they give the go signal, we will be fighting a foreign enemy on our soil for the first time since the oar of 1812. You know, it's an incredibly good point. And it's something I think we don't kind of cover enough, like this this is an actual reality. And it's even unclear, you know, how many we're in this this Godaways group, people that weren't even sort of assessed at all, known to have come in in the first place? Yeah, well, to give you an example, in February of last year, we always talked about our southern border, but the northern border has been a problem as well, because in February

of last year, we had CNN reporting that Border Patrol apprehended three Chinese migrants who were trying to sneak into Maine undercover of darkness. What made this ominous was that there was a fourth Chinese migrant on our side of the border, who was there, obviously, by prearrangement, helping the other three to get in. Now, if you're coming into our country because you want to live in a free society, I mean, the first thing you did was you surrendered to border patrol to put yourself into the asylum queue and to get generous benefits from cities like New York. If you're coming in here trying to sneak in, you're coming in for some nefarious purpose.

I don't know what it is. Maybe it's to attack the United States. Maybe it's just to be a criminal. I don't know. But the point is, you're here for no good. And let's remember what we have seen in the no good category. Let's talk about that secret Chinese biological weapons lab in Reedley, California, which had at least 20 pathogens, including the one for Ebola, and almost a thousand mice that had been, genetically engineered to spread disease. I talk about Ebola because we know that the Wuhan Institute

of Virology, they are now studying Ebola. In other words, they're studying to make it more lethal or even worse, more transmissible. Ebola in nature has a 50% fatality rate. I mean, I keep thinking about, you know, we have a Hong Konger who is in an asylee in America who has a bounty, a literal bounty on our head for being in protest movements in Hong Kong, right? We have, you know, Chinese agents sitting in jail for trying to, you know, bribe IRS agents to remove the Shen Yun dance performance groups, 501c3 status to prevent them from being able to function. We have all these examples of basically the long arm of the CCP kind of coming into America, including, for example, this or the cheng peming the organ harvesting survivor trying to threaten him trying to lure him back

into china to shut him up there's all these examples of this whole phenomenon of uh you know let's see these chinese police stations and that type of work that the people and those might be doing yes and you know here yes the chinese are malicious um but i save my great great anger for Americans, American officials. Because, look, we know what the Chinese are doing. We know what their networks are doing. We know what their consular officials are doing. This is our country. So, for instance, the Chinese students who have gotten so much attention, we know that Chinese consular officials and Ministry of State Security agents, monitor, surveil, and coerce them. They've been doing that for more than a decade in the

United States. And yet we have permitted this to occur. This is our country. So, yes, the Chinese are going to do all these things because we let them do it. And we have got to start saying, no, this is impermissible. We need to roll up these networks. We need to send these people to prison or expel them if they're diplomats, but in any way get them out of our society. So what can I say, Jan? This is on us. This is a failure of the United States to defend itself from a known threat. I think the American people should be outraged at China, but they should be even more angry at the people that they elected to defend them and protect them, because those officials and those leaders haven't been doing that.

Gordon, when we last interviewed, it was just the beginning of these trade, U.S. trade policies that looked, I think we discussed this, that looked to us like they were specific, specifically looking at countering the Chinese Communist Party, of course, other countries as well, but with a particular interest, we talked about transshipment and trying to stop that phenomenon. Now we're many months into this policy. We're kind of in, I think the CCP has just been given kind of an extension on kind of coming up with a deal before, you know, those tariffs numbers will increase. Where do you think things stand right now? And by the way, I just might mention this is at the same time when Apple, for example, is promising to invest massively in U.S. manufacturing

and start building iPhones here. That's interesting. So anyway, there's all these dimensions. How do you see that element? Well, the Trump administration this month has given China a second 90-day extension on those elevated tariffs. Normally delay helps China because it gives them more time to steal our intellectual property and engage in predatory trade practices. Also, this is 90-day extension covers both the Halloween and Christmas shipments. So, you know, normally this would help China. This time might be a little bit different, Yon, and the reason, two reasons.

First of all, our tariffs are general tariff rate is 30%, their general tariff rate is 10. So that's somewhat advantageous. And the 20% difference is because of fentanyl. The other thing and more important reason why this might actually, this delay might actually help us is because President Trump is signing up these framework trade deals with other countries. And these deals tend to redirect trade away from China. So for instance, the UK deal in May actually has provisions which say that the reduced tariff rates for British goods coming into the U.S. apply only if they don't have components from countries of concern, which is China. So that redirects British trade and away from China. But also, you know, we're seeing the EU deal,

which was incredibly important, a big defeat for China. And, you know, then there's Japan, South Korea, Indonesia. So these things are moving in the right direction. But the problem here, though, and it's a propaganda one. But propaganda is important. The China is making the case that it holds the whip hand over the United States, that they're winning the trade war. And from an objective point of view, one could argue that they're right. But that view is now predominant, not only in the United States, but around the world. So Trump is in the short end, of this. And what's, what is really concerned is that Trump holds the high cards, most of the high cards here. And he's still playing a very strong hand in a very weak manner. Now, I think

Trump is just trying to be generous. But the point is until Trump changes the dynamics by imposing costs on China, the United States looks like it's finished, which is the Chinese argument. So Trump needs to do something about it because propaganda is real and it's important and has real life effects. As far as I can tell, the president is aware that, you know, the virus from Wuhan played a very significant role in him not being elected back in 2020. And, you know, from multiple sources, you know, basically saw the, I guess the hardball that the CCP played. by, as we've discussed a number of times on this show, weaponizing the spread of the virus and things like that, very, very aware of these things. So, you know, how does this comport with what you're telling me here? Well, we know that China's been messing in elections. And you're

right. Trump was, as they say, if you go back to January, February of 2020, people were saying that Trump was a shoe in for reelection. But then the virus happened. And that we know that in the 2020 election, China was using text messages to spread disinformation to undermine Trump. It was using its bots on Facebook, Twitter, Instagram to attack the president. TikTok was against him. So that was very clear. China had the vote, no one vote, that was decisive in 2020. Fast forward, you know, we looked at this 2024 election. We know the Chinese propaganda held terrorists in the general election. So we know what China has been doing, and yet we have not taken steps to get China out

of our elections. I guess what I'm saying is it looks to you like, you know, China kind of has the upper hand in this trade scenario because of the propaganda. because of the way the hand is being played, at the same time, it doesn't seem to make sense that the president would be blind to that. How does this comport? Well, I think Trump has a very generous view of the world. We saw this in his first term with regard to his sanctions on ZTE.

I mean, he was worried about Chinese workers. I wouldn't have been. I worry about American workers. I worry about American national security. But this is a consistent theme. And Trump was very clear in an interview with Brett Baer, when Trump in May was on his golf tour, the Gulf region and the Persian Gulf region,

Trump actually said, look, if I had pressed China, China could break apart. And, you know, we can argue about whether Trump's assessment was correct. I think he probably was correct, but the point is Trump actually does not want to take down the Communist Party because he's worried about the instability. So he is not using American leverage in the trade war to the extent that he should because he's concerned about the stability of China. Unfortunately, the Chinese are not reciprocating the gesture. They are maliciously attacking him. And this is something that we Americans have got to understand.

You can't have an accommodation with a regime that believes it must destroy you. And China's regime believes it must destroy us. And I know Americans don't want to hear that. But the point is, if we don't understand the nature of the Chinese regime and what is doing, we will lose our country, despite the fact that we're a far stronger society than China. So Trump is just totally misguided on this. And he has opened the – he's got most of the high cards, and he's not playing them. Now, that's my assessment. Maybe something else. I don't know what's going on. I'm not in his mind. But the point is that he is allowing the Chinese, at least at this point, to look like they're winning.

So I think Trump needs to go and bring the hammer down on China and shows who's boss. What do you think would happen if the Chinese Communist Party were to fall? I mean, I think there's very real concern about this, given, for example, the economic reality, which we haven't talked about yet. For example, we have, you know, bank loans going to negative, right? Well, let's talk about that briefly, again, about the reality of the Chinese economy briefly. You know, basically the one pillar left seems to be the export, the tariffs are, you know, obviously affect that pretty massively. What's the status? China reported 5.2% growth in the second quarter of this year. It's probably about zero.

And we know this, for instance, from price data, which shows that the country is stuck in deflation. There's mild consumer deflation, but more important, there is producer price deflation. Producer prices in July were down for the 34th straight month. And that shows you basically the state of the Chinese economy. Xi Jinping has turned us back on consumption as the fundamental basis of the economy. which means that his only way out of this is to export more. And so that means more production, more factories, and that means more deflation. This is terrible economics.

Almost everybody inside and outside of China recognize it. But the Communist Party is not going to change it for a lot of reasons, which are really important. One of them is that production is key to communist economics, not just Chinese communist economics, but communist economics overall. And also, it doesn't help that Xi Jinping is preparing for wars. So these things tend to make it more difficult for him to switch to a consumption-based economy. You mentioned bank loans. Bank loans are an important tell.

And the reason is that although the Chinese government has made a lot of money available to the Chinese banks, Chinese banks don't want to lend it. They don't see any good lending opportunities. And that's because companies in China don't see good. investment opportunities. Now, China is trying to increase money supply through more bonds, but it's really not working. So these bank loan declines in bank loan volume, really important indication of where the Chinese economy is. Well, so here's the question, right, is communist China too big to fail? And de facto by not, you know,

using all the cards or whatever, because I think you're right that the U.S. absolutely does have the economic cards and through tariffs and other means and so forth. And this fear, I think there's legitimate fear of what might happen if it were to collapse. But, you know, so let's talk about these two dimensions. Is China too big to fail? And what might, what do you think would be the reality if the Chinese Communist Party were to collapse? Well, people think that China is too important to fail, but nobody is immune to failure, big or small. And the Chinese regime could fail. As a matter of fact, the Chinese regime is worried about failing, and we see this from a number of things that it's been doing.

What happens when it fails? I mean, there are any number of different scenarios. One of them is people who said that they were a member of the Communist Party. on Monday could say that they're a member of the Chinese Socialist Party on Tuesday. And we can see essentially the regime reconstitute itself. I mean, that pretty much happened in the Soviet Union when it became the Russian Federation. So that's possible. I tend to think that the military will be running the country effectively.

I think General John Yoshow is the most powerful figure in China right now. So we could see essentially military rule, maybe not formal military rule, but we can see that. Or there can be just unrestrained chaos. In October 2022, despite all the social control mechanisms that the Communist Party has put in place, Chinese people just went on a rage. I mean, for any number of different reasons, for about three and a half months, we saw protests across China. China. Some of them in places like Shanghai and Beijing, some of them where people were demanding the Communist Party stepped down and Xi Jinping stepped down. But what we saw was just volatility in Chinese society. And people just were no longer afraid of the regime. They were out

on the streets. They were marching. They were angry. And that's entirely possible for what happens when the Communist Party fails, that there is nobody able to instill and to enforce government order. So there could be complete chaos. The country can split apart. Everything is on the menu, gone, everything. Well, and presumably also what happened, you know, in Poland after 89, which is, you know, there's a lot of debate about, you know, whether there were too many concessions to the communists early on, but ultimately, Poland was able to build itself into a very robust, free, arguably the best economy in Europe right now. Entirely possible. China could be successful without Communist Party audiology.

And Taiwan and Taiwan is the model, isn't it, in a lot of ways? I mean, it's a good, this is... Taiwan is a model, but the Taiwanese don't think they're... Chinese. So that's a complicating factor. You know, but essentially, Yon, there's anything that can happen. Given that it's China, when we have seen political change and radical political change, usually things don't work out very well. So, you know, anything can happen. The third Chinese revolution probably going to look very different from the first two. Well, and we have this situation where, you know, I think it's upwards of, you know, 450 million people have actually quit the

Communist Party as part of the Tui Dang, quit the CCP movement. So I mean, I think there's there's positive, there's sort of, you know, positive reasons to think that good things could happen. I mean, here's the bottom line, right? Is it correct, right, in your mind? And it sounded like you don't think it is to basically, in effect, keep propping up the regime through the engagement. I mean, American presidents on three occasions have propped up the Communist Party.

Richard Nixon did that in 1972 when he went to Beijing, rescued Mao Zedong. George H.W. Bush did that in 1989 after the Tiananmen massacre. And I think that Bill Clinton did that in 1999 with his deal that paved the way for China's accession into the World Trade Organization in 2001. on. You know, one could argue that Nixon did the right thing. It's a Cold War when most people thought the United States was losing the struggle, but there was no justification for 1989, and there was no justification for 1999 for Bill Clinton. So, yeah, when we rescue the Communist Party, it's had disastrous results for us. So I'd say, let's not do this again.

Let's work with our friends and allies and partners, and let's not try to rescue a regime in Beijing that is determined to kill Americans, and in fact, has killed a lot of Americans. This is, you know, forget the strategy. This is morality. This is morally wrong. It is morally wrong to support a regime that has resulted in the debts of millions of Americans. Well, and, you know, 100 million at least of its own people. and its own people. Gordon, this has been an absolutely fascinating conversation.

A final thought as we finish? We're at a point where we are going to have to fight to defend our country. Communist Party is falling apart. We don't know how far the disintegration process will go, but we need to have robust measures to protect the United States. our friends and our partners. This is one of the most consequential moments in history, and we had better get this right because if we don't get this right, I fear that the future of humanity is going to be a lot darker than we envision now.

Well, Gordon Chang, it's such a pleasure to have had you on. It is such a pleasure to be here, Yon, and I very much appreciate the opportunity, so thank you. Thank you all for joining Gordon Chang and me on this episode of American and thought leaders, I'm your host, Janja Kellick.