Lingling Wei on Beyond the Headlines in China (Transcript)

Editor’s Notes: In this episode of the Hoover Institution’s China Considered podcast, host Liz Economy sits down with Lingling Wei, the chief China correspondent for the Wall Street Journal, to delve into the complex internal dynamics of the Chinese Communist Party. They begin by discussing Wei’s recent blockbuster reporting on the investigation of high-ranking military official Zhang Youxia, exploring what this high-profile purge signals about Xi Jinping’s consolidation of power. The conversation also provides a candid look at Wei’s own career and expulsion from China, while offering expert analysis on the “managed separation” of US-China relations and the structural challenges facing the Chinese economy. (Feb 5, 2026)

TRANSCRIPT:

Welcome to China Considered

DR. ELIZABETH ECONOMY: Welcome to China Considered, a podcast that brings informed insight and discussion to one of the most consequential issues of our time: how China’s changing and changing the world. I’m Liz Economy, Hargrove Senior Fellow and Co-Director of the program on the U.S., China and the World at the Hoover Institution at Stanford University. Today I’m delighted to welcome Lingling Wei.

She’s the chief China correspondent for the Wall Street Journal, the author of the award-winning Wall Street Journal China Newsletter, and co-author with Bob Davis of Superpower Showdown. Welcome Lingling.

LINGLING WEI: It’s great to be here, Liz. Truly my honor.

The Zhang Youxia Story

DR. ELIZABETH ECONOMY: So Lingling, you are known for breaking big China stories and most recently you had a blockbuster story on the ouster of Zhang Youxia, who is or who was second in command only to Xi Jinping on the Central Military Commission, which is the top party body that oversees the People’s Liberation Army. For those who don’t know the story, can you walk us through what happened and what you think the implications are and start with how this first came to your attention?

LINGLING WEI: Sure, Liz. Before we dive in, I’d like to say that in Chinese politics, silence is often as loud as words because of the internal workings of the party, usually so guarded. We’re often reading tea leaves and doing the kind of reporting that not commonly known to a lot of our readers. But I’m very happy to share my reporting and my perspective with you on the current event evolving Zhang Youxia. But I do so with the humility that comes from really studying, researching and reporting on a system that is intentionally built to keep the outside world guessing.

So what really happened was in the past couple weeks there have been a lot of rumors about Zhang Youxia being put under investigation. Zhang is someone that really stands out in the pack because he’s not just some random high-ranking official. This guy is a longtime friend of Xi Jinping’s ally, and he really, over the past few years, over a decade actually, he has been a key architect in Xi Jinping’s effort to modernize the People’s Liberation Army. So his importance cannot be exaggerated both in terms of his political ties to Xi Jinping, his importance in Chinese army and Chinese politics.

So the rumor really started among the overseas China-watching community and a couple of well-known social media accounts. They were the first one actually to break some sort of story on Zhang Youxia’s disappearance and likely detention by Xi Jinping. We really started digging right after a study session held in mid-January that study session was presided over by Xi Jinping. That’s one, that’s the kind of meeting that you do not miss. And for someone like Zhang Youxia to miss that meeting, that was a huge sign that we shouldn’t ignore. That’s the important sign we shouldn’t ignore.

So we really started digging and here’s a little bit scoop for you, Liz. We actually got the story nailed down as recently as Friday, basically a day before the official announcement. But just because of the significance of Zhang Youxia, we decided to be really more cautious than usual. I told my editors, let’s wait for one more signal. That signal would be the upcoming Politburo meeting. And I told him, if Zhang Youxia were to miss that meeting again, let’s file away the story because we just wanted to exercise the maximum caution when it comes to story like this.

However, my caution didn’t really pay off for us because we sent our request for comment to the Defense Ministry and other relevant Chinese authorities for comment Friday night. Little did we know that the next day, Saturday afternoon, Beijing officially announced the investigation of Zhang Youxia along with the Chief of the Joint Staff Department, Liu Zhengli. And I was, of course, you can imagine my reaction. I said, damn, damn, damn. S, s so many times that even my son thought I was totally disgusting. So that’s really how, why.

DR. ELIZABETH ECONOMY: But why you were the first to break the story.

Breaking the Internal Briefing Story

LINGLING WEI: No, we didn’t break the story about the investigation. We broke a story about the internal briefing attended by senior military officials. So what happened was, Liz, the official announcement involving Zhang Youxia’s investigation came out in the afternoon of Saturday. In the morning of Saturday, the top leadership had internal briefing with senior officials of the PLA.

During the internal briefing, a number of very, quote, “serious allegations” were laid out against Zhang Youxia. That’s the story that we wrote, the story you were referring to. So of those allegations included decade-long scheme by Zhang Youxia to form so-called “political cliques” to garner influence in the system and also taking bribery from people like the former Defense Minister Li Shangfu. And of course the most shocking of all was the allegation that he somehow leaked nuclear secrets to the United States.

So those are allegations that were made during the internal briefing. The internal messaging to basically the elite party military and party elite.

Those allegations were not, so far haven’t been publicly announced by the government or any kind of authorities. So we felt like we should report on that internal messaging. We do not know whether or not any of those allegations are real for sure. And in the story, we also mentioned that oftentimes such internal messaging doesn’t really reflect the true or complete motivations for a political action.

So that’s a grain of thought we really try to instill into our readers. When you read the story, please take it as one data point when you are trying to figure out exactly what’s going on involving Zhang Youxia. So we haven’t had our independent reporting verifying any of those allegations.

Analyzing the Motivations

DR. ELIZABETH ECONOMY: I mean, since then, of course, the official announcement has included language that seems to suggest that somehow Zhang Youxia was undermining Xi Jinping’s authority. And that there were differences also of opinion, it sounds like potentially around how they viewed the military, even possibly. People have speculated around whether or not the PLA would be ready to meet Xi Jinping’s deadline of 2027 to be ready to be able to take military action against Taiwan.

I mean, taking off your reporter hat and putting on your analytical hat, what do you think is most likely behind the ouster or the investigation at this point in time?

LINGLING WEI: Yeah, and thank you for saying that. Now I’m really wearing analytical hat, not reporter hat. Because for a reporter to say what I’m about to say, I would have to have do way more reporting and verify it. But just based on what I have read so far, the conversations I have had with contacts both in China and here, who have talked to Chinese officials, the feeling that I got is that the political purge, no question.

And the timing is really interesting. It happens as Xi Jinping is starting to prepare for next year’s party 21st party congress that expects to be held in Beijing later next year, probably late October or November again. As you know well, a hugely important political event in China. And Xi definitely has the desire to make sure that he calls a shot in terms of personnel decisions, in terms of the overall strategic decisions. He is the only thing. He’s not just the chairman of everything. He wants to make sure he is the only thing.

So Zhang Youxia, based on our understanding, he has been highly respected in the PLA. The guy has combat experience. And he played a crucial role helping Xi modernize the army. So after, especially after Xi Jinping had purged other senior-ranking military officers like He Weidong and Miao Hua, he based it up until recently, Zhang Youxia had been the last man standing in the military and arguably the only man who could theoretically say no to Xi on matters both strategic and personnel-related, and arguably only person who can sort of pose any sort of perceived or real challenge to Xi.

As you know well, strongmen leaders like Xi, they do not like that. They want to be able to completely call the shots. So ahead of the very important party leadership transition next year, Xi probably felt like he should start making the move now to clear all the obstacles in his way to next year, and those obstacles could be real and could be totally perceived by him. So I felt like that is a crucial context we should bear in mind when we analyze the whole thing. What was China’s own political calendar?

And I’ve seen really thought-provoking reports from analysts like those from Jamestown Foundation about the policy disagreement over when to attack Taiwan. I think the analyst really laid out pretty thoughtfully his analysis of the official records. And I don’t disagree with that. I do feel like if there indeed is a policy disagreement that, at least that wouldn’t have put Zhang Youxia in Xi Jinping’s favor in any way. Probably another data point Xi would consider. Oh, gosh, not only I don’t want this obstacle in my path, he also disagrees with me over crucial policy matters.

And I did talk to the Jamestown analyst, Tristan Tang, very smart young analyst. He made a really good point. He said that kind of policy matter is politics, too. I do agree that, but it’s hard for me to definitely confirm or verify such a disagreement existed. But I wouldn’t be surprised. Look, the PLA, when you decide to invade Taiwan, the PLA would be on the front line doing the battle. I mean, if there were disagreements between those two, I wouldn’t be surprised.

Alternative Sources of Authority

DR. ELIZABETH ECONOMY: Yeah, yeah, I tended to be persuaded. I thought that was a very good piece as well. I think the idea that he’s an alternative, potentially an alternative source of authority is also compelling to me. Actually, when I was reading that, I thought back to Jack Ma and Alibaba and the fact that he, in his own way, was also an alternative source of authority, being so popular within the country, among so many of the young people and the sort of the tech world and everything, that that was also probably put him in the crosshairs of Xi Jinping.

You know, the one thing about removing him ahead of the next party congress is he could have just retired him. Zhang is 75, and Xi kept him in 2022. He kept him on right past the point that he should have been retired, past the point of retirement age. And so that, to me, suggests there’s some real point here that made it necessary to do this now, among the many different sort reasons that you laid out, something around a policy decision. The secrets, we’ll put that aside. If it’s true, it would be certainly blockbuster. But really, there must have been some actual issue, I believe, that signaled this needed to happen now.

But in any case, it’s a fascinating story and moment. And as you know, this leaves the Central Military Commission at this point, I think, with only two people, right?

LINGLING WEI: Absolutely.

DR. ELIZABETH ECONOMY: That usual six or seven that they have. And I mean, it is astonishing at this point.

LINGLING WEI: Absolutely. And Liz, I wanted to just follow up on the two very good points you made. You saw the parallel between what’s happening now to Jack Ma’s downfall, for lack of better words, many years ago. Absolutely. And we also saw the disagreement between Xi and Li Keqiang, the former premier. They had fundamentally different visions for how China’s economy should be run. It’s not rare at all that Xi, this is not the first time that Xi has taken down people who disagreed, dared disagree with him. So I definitely agree with that.

And another thing is I totally get your point about, he should have, he could have retired him as opposed to just totally taking him down. I guess one plausible explanation would be if he were to allow, retire peacefully, he would still remain as sort of like a potential troublemaker for Xi. He would be out there because of the respect he’s garnered from the senior ranks of the PLA. He would have been, would still have been a force. So that would be the…

DR. ELIZABETH ECONOMY: That’s a good point. I mean, it’s a good point. Especially we think some of the finance pieces, people that have been retired out continue to weigh in at certain moments on policy in ways that seem to be at odds with what Xi Jinping is doing. And so having those senior people out there to sometimes offer perspectives, I’m sure that’s not appreciated.

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Rumors and Arrest

LINGLING WEI: Right. And as you know, there have been rumors about a coup by Zhang Youxia. I guess that probably is the least plausible explanation. I mean, at least so far, I haven’t found anyone who could give any kind of evidence that a coup actually happened. So, yeah, what we understood was Zhang Youxia was arrested on his way to the Central Party School where Xi Jinping was holding that major study session, the meeting. So that was one version we had heard.

Early Career and Education

DR. ELIZABETH ECONOMY: So I want to get your thoughts on you’ve done a lot of writing on the US China relationship as well as the Chinese economy. And I want to get your thoughts on all of those things. But first I do want to get a little bit of your own story because you’ve been at the Wall Street Journal for most of your career, before that at the Dow Jones wire service. But before that you were educated at Fudan and you decided to become a journalist, right? This was the 1990s. Why did you decide to become a journalist? Not an easy thing to do. And you started off, I think at a state run newspaper. What made you decide to study journalism, pursue that path?

LINGLING WEI: Oh, thanks to my mom. Always listen to your mom. She always, you know, my mom was a doctor in the military, but her dream job had always been a journalist. But her idea of a journalist, you know, she always stayed in China her entire time. So in her thinking that journalists, you know, such a glamorous job, you know, and she also, she’s a very good writer. You get to write. So she picked the major and profession for me. I didn’t have any input.

DR. ELIZABETH ECONOMY: No. Wow. Lucky you. Because I think most Chinese parents would not pick journalism, right? They would pick engineering or something, some science or something, or something business that would make it safe, a safe career for their child.

LINGLING WEI: Journalism is totally different, Liz, because I sucked at math. I’m very un-Chinese in that regard. I was so terrible then. My mom really, really like very embarrassed, you know, but I always, I did well at you know, in high school with English and Chinese and writing and I love to talk, you know, do journalism, do journalism.

DR. ELIZABETH ECONOMY: She was right. She was right for sure.

LINGLING WEI: But thank you so much. But I just want to say that I benefited so much from a golden era in China. It was the time when China was really opening up as you know, thanks to Deng Xiaoping. I really, you know, people, my generation, we call Deng Xiaoping, you know, it’s like very endearing term, respectful. And he really, not obviously we never interacted with him, but he really changed China for the better and paved, created opportunities for people like me.

So I benefited so much from that golden era of opening and reforming, opening and from a very good, at least stable and positive relationship between China and the United States. Had it not because of, you know, that era, I wouldn’t have come here, you know, have had the kind of career I’m having now. I probably would be a typist in Beijing for newspaper.

DR. ELIZABETH ECONOMY: I’m sure you did something more. More, you know, using your mind more. But, but in any case. So you studied journalism at Fudan?

The Fudan Years

LINGLING WEI: Yes, yes. At that time we had Fulbright scholars. They were either practicing journalists or retired journalists, you know, coming over teach us. I remember at Fudan that I think that the mid-90s had a brand new American study center that was funded by the American government. And we would often go there, you know, because they’re like newspapers, the American newspapers, the Wall Street Journal, the New York Times. It would be like weeks late.

But however, we’re like reading like voraciously. Oh, that’s beautiful. Writing and storytelling. Oh my gosh. That was just like. Yeah, it just always got a thrill whenever me and my classmates, we sit down at the American Study Center. That was the mood and the sentiment back then.

DR. ELIZABETH ECONOMY: So were you inspired then to come to the United States and you spent a couple of years, right, still in China as a journalist?

LINGLING WEI: Yes, I worked in Shanghai. I covered the development of the Pudong, the Pudong new area and their version. Aspiring to be China’s version of Wall Street. Right. So I covered Pudong for subsidiary of the China Daily. But I was based in Shanghai and it was really during that time that made me feel like, you know, what I was doing was not journalism.

It was very, you know, I mean it was still open era, but relatively to today. But you are only journalist to the extent the government allows you to be. I got stories killed just because I wrote stories about laid off textile workers having trouble finding jobs. And editors didn’t like that kind of reporting.

And I also interacted with some foreign correspondents in Shanghai at the time. And I saw their work. They were able to do story not just about China’s rising power, the great greatness. And they often went behind the policy and found out, you know, they’re actually the other side that people didn’t know, but also important for people to know. So that’s the kind of journalist I really want to be.

And my editor also felt like I’m a troublemaker of sort of that time because my story was always, always like always had problems. Yeah, always had problems. And she’s like, why don’t you apply for graduate programs outside the country then.

DR. ELIZABETH ECONOMY: Why don’t you stay there?

LINGLING WEI: Yeah, stay there. Don’t ever come back.

DR. ELIZABETH ECONOMY: Don’t come back.

LINGLING WEI: Yes, yes, yes. So it was a period of really struggle. A lot of learning, for sure, a lot of learning, but a lot of also struggling in trying to really figure out what is it that I really want, you know, as a journalist. Do I want to be a journalist for People’s Daily, or do I want to be a journalist that can really write things of real interest to the public?

And I felt like it’s really great that I got opportunities to apply for graduate programs in the United States, and I was rewarded a scholarship at New York University. That how I was able to come here in 1999. Gosh, I’m showing my age this.

DR. ELIZABETH ECONOMY: Oh, I mean, you’re not. You’re not that old. So.

LINGLING WEI: Older, but not old. So.

Coming to America

DR. ELIZABETH ECONOMY: So, okay, so you ended up at NYU, and then obviously, you decided to stay in the United States.

LINGLING WEI: Right? I wanted to learn the craft, to really practice journalism before I earned my right to go back to work for the Journal. That’s really the very, very goal that I had in mind at the time.

DR. ELIZABETH ECONOMY: So you always wanted to go back and be a journalist for an American or a foreign newspaper, but in China, that was the objective.

LINGLING WEI: China correspondent for the Wall Street Journal. That was my dream job.

DR. ELIZABETH ECONOMY: And you got it, right? And you got it. So when you returned to China, you know, then you were an American citizen at that point.

LINGLING WEI: Right, right.

DR. ELIZABETH ECONOMY: So what was that like going back, being, you know, Chinese native, now an American citizen, going back to be a journalist for an American newspaper? How did the people in China react to that? How did government officials react to that?

LINGLING WEI: They didn’t know.

DR. ELIZABETH ECONOMY: Easier or more difficult?

LINGLING WEI: Well, first of all, they didn’t know how to react because they never dealt with someone, oh, you’re Chinese. Oh, but you’re working for the Wall Street Journal. Are you sure you’re not a researcher? That’s always the first question I got. I’m like, damn it, I’m a Chinese. I still can write for the Wall Street Journal. Just believe it, all right?

But I underestimated, I have to say, I underestimated the reporting challenge. When I first got back, you know, before I got back, I was full of excitement, full of hope. Oh, my God, you know, China’s opening up. You know, my first assignment actually was to write the globalization of the renminbi, because at the time, our editor, some editors at least had this vision that China would open up the financial account and really be more like the US. Some of us did have that vision.

And my job was just write about renminbi. Just go back and write about renminbi, it’s going to be really important, blah blah, blah. And I really believed that. And as soon as I found I have nothing to write about. And my China bureau chief at the time, Andy Brown, you know, just gave me really good lessons that, you know, helped me understand to actually loosen control over cross border capital flows, you know, would have meant, you know, the whole party turning its hat. Basically it turned its old model to its head. Right. Completely changing the control centered model.

So I was so naive, I didn’t know. But it’s really learning by doing. And gradually a move from just covering the currency, which I probably produced one or two stories a year, to gradually writing about the financial sector, the overall economy and to later on the intersection politics and business and then US China relations.

A Story of Pride

DR. ELIZABETH ECONOMY: Do you have a story from that time that you are particularly proud of, one that you look back and just think, I’m so glad I was able to write this story at this time. It really sort of opened up the aperture or the lens of understanding. Sure.

LINGLING WEI: I do have one actually and I still remember it was, I think that one was right after Xi Jinping came to power. So at the time a lot of tension was on who was moving up, right, who was getting promoted, blah blah, blah. And that story I did jointly with my mentor and good friend Bob Davis. We focused on a guy who didn’t get promoted, who got passed over.

And that guy was the head of the Industrial and Commercial Bank of China, Jiang Jianqing. As you know, Liz, is the biggest bank in China. And Jiang Jianqing was well regarded in the industry. He ran ICBC really well. ICBC had highest profitability, the lowest, you know, just default ratios. So you know, by all Western standards he should have been moving.

DR. ELIZABETH ECONOMY: Great candidate.

LINGLING WEI: Exactly. However, the story was both a scoop of insight and scoop of news. The story basically said no, he was not going to get the central banker job, the top central bank governor job because even though he ran ICBC well commercially, he didn’t do X and Y and Z politically.

So I mean reporting on that story Liz was eye opening for me as a reporter because it gave me a chance to really, really understand how the Chinese system works. It doesn’t matter, you know, how well you run the corporation based on profits and blah blah blah. Ultimately what decide your fate and your career trajectory was the political connection and whether or not you accomplished what you were told by your party boss.

DR. ELIZABETH ECONOMY: Yeah, I mean it’s the triumph of politics, right?

LINGLING WEI: Exactly.

DR. ELIZABETH ECONOMY: Over in some ways over competence or expertise. The Red versus the expert. And I think for many people, Xi Jinping represents the reddest of the red.

LINGLING WEI: Perfectly said. Just look at the people he promoted over the past few years. You know, the technocrats are almost gone from the very high level decision making level. Right. But the mid level, you can still argue there are technocrats, competent technocrats, but those people don’t matter. They make recommendations. Ultimately, who calls the shots are the people who have the political currency Tushi, as well as Xi himself. Right.

The Expulsion

DR. ELIZABETH ECONOMY: So in March 2020, Beijing expelled you, along with, you know, many other American journalists from, from the Wall Street Journal and the New York Times and the Washington Post. What, what precipitated that? You know, did you anticipate it and, you know, what did it mean for your career? And are you and other, you know, previously expelled journalists, can you go back? Do you have a hope that some point in the future you’ll be able to go back to China?

LINGLING WEI: Thank you for asking that question, Liz. I have to say that was the most difficult time in my life. Not just in my career, but in my life as well. I didn’t see that coming. I have to say. Even though there were signs that they were increasingly cracking down on journalists, not just foreign journalists, but independent Chinese journalists.

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And the official reason given was the Chinese were retaliating against American expulsions of Chinese journalists. That’s the official reason. But of course, I was also told later on I was singled out because of the critical coverage I had written about China’s economy, the debt problems, and in particular also the US China trade negotiations. We got a lot scoops and, you know, obviously people were worried about someone like me who actually could get inside of the system.

So I thought about quitting, Liz. I wouldn’t lie. I thought about quitting because my family, my parents, they were, you know, coming, going up in age, and I felt like the right thing to do as a daughter was to quit and stay. But my mom and my dad, both of them said, you know, be disastrous for us if you were to stay, because they knew how.

DR. ELIZABETH ECONOMY: Seriously, nobody wants you there.

LINGLING WEI: I know, I know. Nobody. Not even my parents. No. Well, yeah, you know what I mean, right? I know where my heart is. And they didn’t want me to think that I had to stay for them. I should just go pursuing where my heart is. So that’s always the principle my parents have given me.

The State of US-China Relations

DR. ELIZABETH ECONOMY: So just to be clear, Lingling, you could have resigned your position and stayed in China.

LINGLING WEI: I don’t know. Actually, I didn’t know at the time. But I thought maybe. I was thinking. But at the same time, I also got tremendous support from the Wall Street Journal. Everyone reached out, and not only Journal, but also some people at our competitor in the New York Times.

So everybody was reaching out and just like, trying to really, like, you have to keep going. If you were to resign, the regime wouldn’t have liked anything better than that. So once I got the talk from my parents, as well as the editor in chief of the Journal at the time, and my colleagues and people like Bob and Charles Hustler, my former boss, and some other really good friends and editors, I decided to just keep going and I decided to come back to New York.

But I had no idea if I could keep doing what I do. It’s just really feeling, crossing the river by feeling the stones.

DR. ELIZABETH ECONOMY: And obviously you’ve made it work. I mean, I think you’re really one of a few of the sort of elite China journalists who’ve had just great exposure inside China and can write compellingly about domestic internal issues and at the same time talk about China on the global stage and US-China relations. So let’s talk a little bit about both of those.

LINGLING WEI: Thank you.

DR. ELIZABETH ECONOMY: And I want to get your sort of sense again as an analyst, not necessarily as a reporter, about the state of the US-China relationship. You’ve written a lot, actually about the relationship over the past year. When you look back, what do you see? First, you know, how would you define the relationship at this point? And what do you see as the major inflection points over the first year that have kind of shaped where it is today?

A Tactical Pause and Strategic Decoupling

LINGLING WEI: Thank you, Liz. That’s a great question. And, you know, many really smart experts like yourself have talked about the state of the US-China relationship. You know, I think I agree with a lot of people right now. We’re in a tactical pause, right. Both sides have the desire to keep the status quo.

Meaning, you know, let’s not, you know, getting to this escalate to de-escalate cycle anymore. Let’s, you know, for both sides have the desire to build up their own capabilities for the purpose of strategic decoupling. I think both sides have accepted strategic decoupling. Not full decoupled, which is impossible to do.

From China’s perspective, and you know this better than I do, I mean, look at how much money they’re spending on semiconductors, on energy, on agriculture, basically everything to fortress the Chinese economy. And to, you know, I talked to a senior Chinese policy advisor just a few weeks ago. He used the term “war footing.” China is trying to build economy, make it on a war footing in the sense of not just China, you know, proactively seeking a war, but they’re preparing for war, a potential conflict, you know, especially in light of the situation over Taiwan.

So that’s very pretty obvious. And from the US side, you’re seeing the initiatives really getting beefed up in terms of getting alternative sources of rare earth and other supplies, critical mineral supplies, and also making sure to ring fence the US own supply chains, not make it too dependent on China.

So effort, I mean, in the past there was a lot of talk seemingly, but it seems like in recent months a lot of extra efforts are really being increased in that front. So, you know, we have seen that both sides have the desire to strategically decouple and especially on China side, they’re doing concrete, taking concrete actions for that purpose.

But at the same time they want to let’s manage divorce, let’s not make it too messy for either of us. So that’s where the trade truce comes in. Right. Let’s not fight for now. Both sides are buying time.

DR. ELIZABETH ECONOMY: Maybe it’s like a separation as opposed to the actual divorce.

LINGLING WEI: Yes, absolutely, separation.

The Semiconductor Question

DR. ELIZABETH ECONOMY: So in that context though, how do you understand the White House’s decision to reverse basically the decision on the H20s, the H200s and allow Nvidia and also AMD to sell fairly advanced semiconductors to China?

LINGLING WEI: Oh, that’s such a great question. A lot of analysts have analyzed that and we have done stories mainly looking into the huge lobbying efforts by people like Jensen Huang from Nvidia. It does look like the tech industry overall has had quite a sway with President Trump.

And you know, he really listened to them. And I haven’t got a sense that President Trump is someone who’s tech savvy, who actually also even interested in knowing the ins and outs that make, you know, export controls essential for the US national security. So one can argue he might be easily persuaded on something like that when his billionaire tech bros friends are doing so much to try to persuade him.

So that’s really interesting. But on the other hand, you see the action in Congress, right? And also, you know, within, even within the administration, there’s still different voices. So it’s really still, so far hasn’t been smooth sailing for Nvidia in terms of its desire to sell H200 to China. Right.

DR. ELIZABETH ECONOMY: And it’s partly not been smooth sailing for Nvidia because of the Chinese reaction.

LINGLING WEI: Yes, absolutely.

DR. ELIZABETH ECONOMY: I mean, I think that probably came as a big surprise to, you know, people in the White House and maybe to Nvidia as well. You know, when Xi Jinping and, you know, many people in China were just like, well, we don’t actually want the H20. And I think that was a wake up call, of course, after Secretary Lutnick said, you know, we’re trying to make China dependent on our tech stack.

LINGLING WEI: And by the way, like the fourth.

DR. ELIZABETH ECONOMY: Best chip, one would imagine the Chinese would be less than interested in those chips. That’s not a huge selling, you know, effort, I think, on the part of the administration.

But how do you think China is looking at the United States these days? And, you know, maybe you can define China, either Xi Jinping or more broadly, the people that you speak with who are, you know, somehow in the Chinese government or are senior foreign policy or domestic policy analysts. What do you think is their outlook on the United States these days and what’s going on with the Trump administration and the administration’s China policy?

China’s View of America

LINGLING WEI: Right. So purely based on their statements, and it does have a feeling that China thinks the US is in chaos, not as strong as it used to be. You know, there’s some truth to that. However, I also do think China still thinks the United States as a very formidable competitor.

You know, the recent capture of the Venezuela president certainly is not lost on Zhongnanhai. Right. And how Trump has been doing in Middle East, the Western Hemisphere overall. The hard power, the projection of hard power from this administration is not lost on the Chinese leadership.

The sense is that the US, you know, can make, still can make hard decisions. I think that’s an important realization for the Chinese. It can rein them in from being, in their view, needlessly aggressive, especially when it comes to the Taiwan Strait and other hotly debated territorial areas. So that’s one thing I would say.

And then the other thing I would say is that compared to the Xi Jinping leadership that dealt with the first Trump administration, this current government, current Xi leadership is feeling way more confident than 10 years ago, because the first time around they were very tentative. They didn’t really know what to do.

And as you know, talk to people like Liu He, he still had a desire to mend the fences, get the relationship back on track. And this time around, you mentioned the inflection point. I would say one inflection point would be April last year when China decided to hit back at the United States with such strong export control measures on rare earth.

That’s an inflection point and that’s a reflection of how much more confident Beijing has become when dealing with Trump 2.0. They felt like they appear equal to the United States now and they’re not afraid of using the most lethal weapon, trade weapon, to hit back.

DR. ELIZABETH ECONOMY: Yeah, I mean, I do think that was a miscalculation on the part of the Trump administration, which I think believed erroneously, obviously, that just because, you know, we imported so much more from China than China imported from us, that somehow that gave us greater leverage over China.

Failing to think through the fact that when it comes to, you know, sort of more single source dependency, we have much greater single source dependency on China for things like rare earth elements or active pharmaceutical ingredients than China does on us. So I think that’s really the, you know, the lever that China’s been able to pull and something that I think if the Trump administration had had probably a more robust policy process leading up to the decision making around the tariffs, they might not have made the choices that they made.

But in any case, we are where we are, and where we are is just a couple of months presumably away from a Xi-Trump summit. Everybody wants to know what’s going to happen. Is there going to be some big breakthrough, some new Nixon-Mao moment, or is it going to be just a series of one off sort of small deals or maybe not so small deals?

LINGLING WEI: What’s your sense?

DR. ELIZABETH ECONOMY: Are you hearing anything from the Chinese side or the US side about what they’re putting forth or what they’d like to get out of this meeting?

Planning for the Summit

LINGLING WEI: Sure, that’s a very timely question. As recently as a couple days ago, you know, my sense is that no official planning has started for the summit. In particular, the Chinese side is quite anxious because, you know, as you know, the Chinese love to plan months ahead of time.

DR. ELIZABETH ECONOMY: And I guess for a summit there should be planning months ahead of. This is not, I have to say, on this side, I’m kind of with the Chinese. You know, a summit is not something that should just be tried, you know, try to put together, you know, a few weeks ahead of time.

LINGLING WEI: That does take, if you want to.

DR. ELIZABETH ECONOMY: Have real substantive outcomes. It does take a lot of engagement up front.

LINGLING WEI: Right, right. I mean, we know that Secretary Bessent met with in Davos, but didn’t sound like that was a substantial discussion about planning for the summit. But the Chinese side again has been complaining that you know, they had tried to engage with their US counterparts, but so far haven’t got much luck. And they thought, you know, probably because President Trump has been very distracted by Venezuela and other matters.

So, but anyway, that’s aside. On the other hand, in terms of informal channels, you know, things are happening, you know, the business side, you know, they probably have already given both sides some recommendations in terms of deliverables, you know, what’s on China’s table, you know, Boeing planes, potentially more energy purchases, agriculture.

And, you know, some people also talked about the reopening of US consulate in China and vice versa. And also, so, you know, obviously Xi, President Xi will use upcoming meetings, whether or not the first one in April or the ones down the road this year, to try to get, you know, some transactional statements from President Trump that could, you know, shake the confidence in Taipei.

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So, absolutely. I mean, my sense is that the scope for a real deal, it’s quite narrow. You know, Liz, you were involved in those negotiations in the past. The US-China will talk about market access. Who’s talking about that anymore? Right. And getting China to reform, you know, its economic model. I mean, it’s crazy.

I mean, these days, just to show how much the relationship has changed, though, we talked about, oh, it’s more like managed trade, like I’ll buy more with fixed amount within certain time frame. And you do this, it’s very managed, very managed, as we discussed earlier, to make sure it’s not too messy a separation.

Limited Ambitions

DR. ELIZABETH ECONOMY: Right. The ambition is not there to strike, for example, a new investment agreement. I mean, there is a lot of talk in the US in the China circles about whether or not there’s an opportunity to sort of structure some kind of framework for encouraging Chinese investment in the United States.

I mean, certainly it’s tricky given all of the restrictions that, you know, administrations, one after the other since the first Trump administration have been putting on that kind of investment. And I think the overall landscape, political landscape among governors, etc., they’re very wary of certain kinds of Chinese investment.

But nonetheless, that’s something that if people were interested in having a slightly more ambitious, you know, discussion set of negotiations, I think that could be, you know, on the table along with dealing with China’s export of its overcapacity. But for that discussion, I think it requires, you know, much more than just the United States and, you know, working with a lot of other countries.

And I don’t think that’s probably a place that we’re in right now to try to lead those kinds of discussions among our allies and partners.

LINGLING WEI: Right, absolutely. That’s a great point you just made on investment. I’ll look into that as well.

DR. ELIZABETH ECONOMY: Okay, you look into that. Okay, so let me finish up with coming back inside China. Even though you’re not there, you still do a lot of very excellent reporting on what’s going on inside China. And one of your areas of expertise that you’ve developed over the past decades really is on the Chinese economy.

And it is an area where a lot is said, but somehow the more that’s being said, the less clear things seem to be. And there does not seem to be a consensus. I would say certainly in the United States, among all the experts, whether they’re business or economists or China specialists, can’t seem to get their arms around the real state of the Chinese economy.

What, how do you think about it? Like, if you were just going to advise our viewers, like how they should be thinking about the Chinese economy, what two or three sort of recommendations would you make if you were kind of design your own framework for understanding what’s going on?

Understanding China’s Economic Transformation

LINGLING WEI: Right, yeah, absolutely. Those are such excellent questions and I’ll try my best to give coherent answers. So, first of all, obviously we have established that the only one that matters when it comes to China and how China’s economy is being run is one guy who is Xi Jinping.

And his vision for China’s economy is that he wants a total reset. The old model that’s driven by real estate is done. He wants to replace that with a new model driven by AI, semiconductors, quantum computing, you name it. However, the problem is the new sectors not enough, nearly enough to replace the hole left open by the real estate collapse.

So I definitely would look at not just how much progress China has made in certain sectors like AI and semiconductors, but also the overall economic picture. The economic malaise, as some of us have written about. Just a few days ago, a well known Chinese economist told me a stunning figure, Liz. He told me that now every year there are 1 million Chinese families who are losing their homes to default. Wow. Right?

So that just shows the strain on the Chinese households, Chinese middle class. I mean, talk about the people who left their hometown to big cities and made living and saved enough to buy a house. And now they have to give that all away. And I’ve heard stories about banks selling foreclosed homes at really low prices because they just needed the money. Not too much loss to record on their book.

So the economy is rotting. The real estate sector, because of the real estate sector and the collapse and local government, they’re running out of money. Xi Jinping, one of the Xi Jinping dogma is that money must be repaid. So that lead to local governments keep buying, keep borrowing new debt to repay old debt. That has led to further acceleration in China’s debt levels. And the same time they’re struggling to really bolster local economies.

So all the macro indicators, I mean, the real indicators are pointing to really deep slowdown in China’s growth. But at the same time, we definitely have seen enormous, impressive progress being made in EV cars. Our tech columnist today just wrote a really fun column about how she loved driving Xiaomi car versus her Ford car. It was hilarious. But the Chinese have got a lot better with that kind of stuff. Right.

However, an economy that’s built on that kind of stuff and a lot of people making the same products but not making really money, I don’t know. That does call into question how sustainable this is. You cannot expect everybody to be high tech. Right. You cannot expect everybody to make trips or EVs or batteries. People need other stuff to live. So I’m very concerned about the economic malaise getting even worse over time.

The Challenge of Economic Inequality

DR. ELIZABETH ECONOMY: Yeah, I mean, I will say, since you mentioned the Xiaomi EV, when I was last in China at the end of November, one of the things on a small delegation, we visited Xiaomi EV factory inside Beijing. And wow, was it impressive. 750,000 square feet, only a couple hundred people working on the floor because everything is automated. They’re going to be producing up to 300,000 EVs a year. I mean, the colors of the cars are spectacular. It’s a really smooth ride. And I mean, the factory is so clean you could literally eat off the floor. So I have to say it was very, very impressive.

But to your point, not everybody can be part of this 21st century economy. Just like in the United States. You need the training and the education. And my sense is that China, a little bit like the United States, is not doing a very good job of ensuring that the majority of its people are actually getting the skills and training that they need to participate in that 21st century economy.

And I think a huge portion of China at this point in time, you mentioned Li Keqiang and his statement about half of the population basically at that point, living on $150 or less a month, I mean, that was shocking. That was a wake up call. And I think now it’s up to like $300 a month. But still that’s not enough. Right.

And so I think it is, it’s hard to sort of square what you see in these factories and that technological progress. And it’s just extraordinary. And then at the same time, you have this vast portion of the populace that really can’t either enjoy the fruits of that because of the way that the resources are distributed. Right. And the absolutely lack of a social welfare net, nor can they participate in advancing it.

LINGLING WEI: Right, right.

DR. ELIZABETH ECONOMY: So I think that’s, it’s hard, it’s really, I think hard to figure out how those two things move forward and what that looks like in 10 years.

LINGLING WEI: Exactly, exactly. Sometimes I try to think of those well performing tech sectors as sort of like states within a state. Right. So of course for a state, it’s not all great. There are certain areas that really still doing well and those are the tech sectors. But the question is, when the rest of the state is rotting, how much stronger can you continue to be going forward? So, yeah.

Book Recommendations and Final Thoughts

DR. ELIZABETH ECONOMY: Okay, so now I always end with a couple of really just quick questions for you to share your advice with our viewers. So if you had to recommend a book or an article that you think people should read that you think gives a particularly important insight into China, what would you suggest?

LINGLING WEI: The first book and person that came to mind is our friend Minxin Pei. Yes, his new book, “The Broken China Dream.” Basically he’s arguing that Xi Jinping’s rise is inevitable. The China’s embrace of capitalism or state capitalism in the previous decades actually had helped harden the country and give the rise of someone like Xi Jinping. So very thought provoking book.

DR. ELIZABETH ECONOMY: It is, it is. And actually it’s good. I just reviewed it for Foreign Affairs. So let me talk about the next issue of Foreign Affairs. I agree with you. I think it’s a terrific book. So good, good, good suggestion.

LINGLING WEI: Thank you.

DR. ELIZABETH ECONOMY: And what issue do you think that we don’t understand or even if we don’t understand, but for the larger American public, what don’t we know or what should we know more about when it comes to China?

LINGLING WEI: I think it speaks more to things I wish I could report on these days, just about what’s happening within China. Obviously, the societal change, the struggle of everyday Chinese. I felt like that’s a topic that because various reasons and hard constraints on reporting power, I wish we could have more people and reporters and time to dig into that, because it’s also important.

China is not just Xi Jinping. Right. And China has gained a bad name over the past decade or so because various things the government’s done, but as Chinese people like that. No, and that’s also. Here are their stories, their struggles under the regime, not just what the government is doing.

DR. ELIZABETH ECONOMY: Yeah, I think that’s a really important point. And there have been a number of books that have come out that have looked at individuals within the Chinese system. In fact, I just was finishing one called “Wall Dancers” that deals with a set of Chinese young people and how they sort of came of age through the Internet and their lives were transformed in different ways. And it’s a great book.

I’ll say about these books, first is that they focus on individuals, which is you get these in depth portraits, which are great. You don’t necessarily get a sense of the whole of Chinese society like you’re talking about, but also inevitably the stories end in a sad, in a sad way. And I’m not sure why that is.

But you finish these books and they’re fascinating books, but each one of the people that’s been sort of tracked their lives, and it’s true whether they stayed in China or where they’ve ended up living abroad, there’s just this melancholy somehow about where their lives have ultimately taken them to this point. I think I should recommend that the next people, they interview you, I think maybe they get a different sense of a trajectory of somebody from China, offer a different kind of story with a happier midpoint ending. Yeah, yeah, yeah.

LINGLING WEI: Also, hope for more happiness, lives in the world, for sure.

DR. ELIZABETH ECONOMY: Yeah. So, Lingling, I want to thank you. I’ve taken too much of your time and we’ve gone well over my usual podcast time, but just, you offered so many fascinating insights and thoughts and really just your expansive knowledge, I think, is very difficult to replicate and really appreciate your taking the time to share it with us.

LINGLING WEI: Entirely my pleasure, Liz. Always learn so much just by talking to you and your work has been tremendous and really, really thank you for the opportunity.

DR. ELIZABETH ECONOMY: All right, well, we’ll have to do it again, and maybe six months or certainly by the time of the next party Congress and get your thoughts about what that’s going to look like. So if you enjoyed this podcast and like to hear more recent discourse and debate on China, I encourage you to subscribe to China Considered via the Hoover Institution YouTube channel or the podcast platform of your choice.