There’s only one storyline that matters geopolitically right now, and that’s the ongoing war between the U.S. and Israel and Iran.
Now in its third week, the war increasingly looks likely to be a protracted engagement, and as the conflict grinds on, the implications — both political and economic — for the many countries not involved in the fighting will become clearer.
China, of course, has a wide-range of interests — both short- and long-term — that will be impacted by the situation.
To unpack the thinking around all of this in Beijing, Trivium China Podcast host Andrew Polk is joined on this week’s episode by two of Trivium’s lead analysts on all things geopolitics, trade, and commodities — Joe Mazur and Even Pay.
The trio gets into:
China’s most immediate concerns — largely revolving around resource security
How Beijing’s patient buildup of commodity reserves over the past decade has now been vindicated
Whether Xi Jinping and company see any strategic upside from the confrontation
What, if anything, Beijing can do to influence the outcome
And what it all means — in China’s view — for the longer-term evolution of the geopolitical system
It’s another banger folks — you won’t want to miss it.
Transcript
Andrew Polk: Hi, everybody. Welcome to the latest Trivium of China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium Co-Founder, Andrew Polk. And I’m joined today by our Head of Geopolitical Research, Joe Mazur, and our head of, well, I always introduce her as a Jack of all trades, but head of Ag Research, Head of Trade Research, head of sort of minerals and all other manner of things that other people don’t cover research, Even Pay. Even, welcome to the podcast. How are you doing?
Even Pay: I’m doing well. Always fun to try to explain what I do at work.
Andrew: Yeah, we got nailed out of your title. But yeah, a jack of all trades is good. Well, welcome. Good to have you on. And Joe, how are you doing, man?
Joe Mazur: Yeah, doing good. Looking like spring finally in Beijing, which always makes me happy.
Andrew: Yeah, that makes a big difference for the psyche. Well, we are going to talk today about China’s view on the whole Iran situation. I’m sure listeners will be aware that there is a war in the Middle East between the U.S., Israel, and Iran. And so, we’re going to talk about China’s perspective on all of that. We’re not going to get into our views on the war or how it’s going or any of that stuff. Well, we’ll touch on it only insofar as we need to, to explain kind of how China might be reacting to various stuff. But we’re really going to focus on the China piece of it, of course, because this is Trivium China.
But before we jump into the conversation of the day, we got to start with the customary vibe check. Even, I’ll start with you. How’s your vibe today?
Even: Great. Yeah. Well, the vibe on my end of things is that it’s been very full on. I think it’s been nonstop since coming back from the Chinese New Year holiday from, you know, straight into the Two Sessions, and then around that, dealing with the conflict and the implications across a whole bunch of different sectors. So, I feel like I haven’t logged off. I haven’t looked up from my screen for like three straight weeks now, and I don’t really see any end in sight. Not sure about you guys.
Joe: Yeah, I’m going to say that my vibe or the vibe, I think, in the Beijing policy community is jaded just because, you know, we just finished up with the Two Sessions and then we kind of turn to the war in Iran and go, “Oh, God, what now?” Especially in the context of Trump now having postponed his trip to China. So, just, I would say, maybe resigned acceptance that it’s going to continue to be crazy all the time. So, that’s the vibe I’m getting from people.
Andrew: Yeah, that’s kind of not sad, but it’s a, I don’t know, bit of a depressing way to live your professional life. But I mean, I kind of feel like since the first trade war and then the pandemic, so since 2018, basically, it’s just been one major geopolitical shock after another. And I keep thinking, well, maybe this year we’ll have sort of a “normal,” whatever that means, or more of a chill year. And it just hasn’t happened now for eight or nine years running. So, I guess this is just the new normal. So, we should get used to it.
Although, as everyone often points out, it does help a bit with job security. I think I’ve said it before in the pod, mild chaos is what one of our clients told me we need. You don’t want too much chaos because people then start to become conservative. Companies become conservative, and they don’t want outside consulting and counsel. But mild chaos is good. So, anyway, we are going to analyze what I think is slightly more than mild chaos today. I will say, I got to do my vibe check, I’m in Barcelona this week on my way to Beijing. And Barcelona is amazing. It’s great to be traveling on the road again. So, my vibe is very upbeat. So, I’m going to bring that personal energy at least to the pod, even if our professional energy is a little bit more suspect.
Joe: We’ll take it.
Andrew: All right, good. Well, hopefully that brings a little bit of levity to what we’re doing here, since we’re talking about some very serious stuff. But before we do talk about that, we also, of course, have to do the quick housekeeping. First, a quick reminder, we’re not just a podcast here. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape. That, of course, includes domestic policy in China on a range of issues, as well as policy towards China out of Western capitals like D.C., London, Brussels, and others.
So, if you need any help on those fronts, please reach out to us at hq@triviumchina.com. We’d love to have a conversation about how we can support your business or your fund. Otherwise, check out our website, again, triviumchina.com to check out more of our content. You can find a range of options in terms of China policy analysis, China policy intelligence on our website. These are subscription-based products that you can check out, either purchase, or there are free options as well. So, you’ll definitely find the China policy option that you need on our website.
And then, finally, please do tell your friends and colleagues about the podcast. Those word of mouth recommendations really help us to grow both the listenership and the business. All right guys, let’s get into it. I think let’s start with just sort of China’s immediate reaction once everything kicked off with the U.S. and Israel sort of first kind of preemptively attacking Iran. Obviously, for many of us, it sort of came out of nowhere. I’m sure for the Chinese it came out of nowhere. So, Joe, I’m going to start with you if you’re sitting in in Zhongnanhai, which for those who don’t know, is the leadership compound where all the Chinese leaders stay.
In the first sort of day or two of the escalation or the initial military action, what would you say would be the single most immediate concern that Chinese leaders had at the outset? Would it be oil security, regional stability, U.S. military distraction, or something else?
Joe: Yeah. So, I mean, I think when it comes to China’s response, we break down kind of the public facing response versus what people were privately probably worried about among China’s leadership. So, publicly, China’s whole foreign policy is predicated on sovereignty and that no country has the right to intervene in the affairs of any other country, let alone try to affect regime change sort of on a whim or really just ever. So, some of the initial statements that China put out were to that effect, saying we condemn this gross violation of Iran’s sovereignty. Realistically, though, yeah, I think overwhelmingly the number one concern in practical terms is energy security, is the disruption to global energy systems that was going to happen and now has happened as a result of the conflict.
And I think we can get more into the specifics of that later. But China’s always been very preoccupied with its energy security for reasons like this and scenarios that they’ve gamed out, which are similar to this. And then probably secondary practical concern is regional stability.
China’s footprint in the Middle East, like its footprint in a lot of places, is kind of based on a strictly business approach where it seeks economic partnership sort of above any kind of other factor in its relations. So, the extent to which American and Israeli intervention makes business difficult, it brings business uncertainty, provokes Iran to retaliate against other Gulf states, that’s also a broader concern. So, yeah, I would say that despite the kind of high-minded concern for Iran’s sovereignty in the official statement, the two primary concerns are very practical ones — energy security and regional stability.
Andrew: Yeah, I think that’s right. Even let’s get your take on kind of the same question. And, insofar as energy security ranks on the list, I’d also like you to weigh in on kind of how that’s fared so far as China seems like it’s done well through the early stages of this crisis, at least in terms of energy security. So, talk to us about, if you could, their concerns, how they’ve managed those concerns, both on kind of a short-term basis, and then what they might be increasingly worried about in the medium-term, if that makes sense.
Even: Yeah, absolutely. So first off, I tend to agree with Joe’s assessment that really early on in the aftermath of understanding that there had been strikes and retaliation in the Gulf, what top leaders were almost certainly talking about in Zhongnanhai was that economic security piece. And I use economic security as a wider frame because it’s not just energy security, although, of course, so petrochemicals is a huge part of this equation, but it’s also access to the other raw materials that come out of the Gulf.
And that includes, I mean, really crucially for China, it includes certain fertilizers. And it also includes a whole bunch of other raw materials that feed into metals and plastic supply chains, not just in China, but around the world. So, immediately, there would be questions about, okay, what is this going to mean if it lasts a day, a week, a month, a year for Beijing’s ability to manage the economy in a way that delivers sort of a sustainable, stable domestic environment? Which we know is something that top leaders are very, very concerned about. There’s almost an obsession with the kind of gray rhino supply crises and how they can be managed among party leadership.
And we’ve seen that repeatedly. It comes from somewhere. It comes out of sort of historical supply shocks with the vast majority of China’s leadership class having personal experience of famine. And we see that reflected in food security policy, you know, a huge focus on self-sufficiency. We see that focus in energy policy with a very substantial self-sufficiency direction in energy policy as well, including relying on coal for as long as necessary because that’s something China can self-supply, including the efforts towards electrification because that is both technology that China supplies, at renewable energy technology and also a way of generating power without needing to rely on an external input.
And we also see that obsession reflected in the very large strategic reserves that China maintains. Over and over again, we hear from Western economists about the drag or inefficiency or even kind of unfair price management that might happen as a result of these massive strategic stockpiles that China likes to maintain and hang on to, whether that’s in rice and wheat or whether it’s in pork or whether it’s in fertilizers or nickel or crude. But repeatedly, over certainly the past decade, I can name four or five different examples of circumstances in which top leadership felt extremely vindicated for the strategy of holding on to really, really sizable reserves.
And this is another one of those where the fact that China is sitting on very substantial oil reserves, very substantial minerals and metals reserves and very substantial fertilizer reserves, as well as food reserves, you know, grain reserves, are going to insulate the domestic economy to some degree, less as time goes on, but to some degree against the worst of a crisis that is having pretty significant effects on global prices. China’s price management tools and its ability to access state reserves are already insulating it from some of the worst of those effects.
Joe: Yeah, I’ll really just piggyback off of what Even said. I think the word vindication is absolutely correct. I mean, if you’ll indulge me, I’m reminded of that episode of The Simpsons where there’s an elephant rampaging around and it’s headed straight towards a peanut factory. And the foreman says to the workers, “I told you this day would come. You said it was insane to practice elephant drills every day for 20 years.” And I really kind of feel like that’s sort of where China feels that it’s at. And so, when I hear people talk about, “Oh, this is going to turbocharge China’s energy diversification push, and it’s going to turbocharge its green energy push, it’s almost like, I don’t even know, because those were already kind of going full steam ahead for reasons that-
Even: Yeah, there’s no more turbo here.
Joe: Exactly. So, I mean, certainly it’s a vindication. It’s a massive argument against ever changing that strategy. But really, they were already completely all in on these risk management and built-in energy cushions that are now, again, making China better able than most, not fully immune, but better able than many other major economies to weather these shocks.
Andrew: Yeah, I totally agree with you both. I think that’s a great observation, Joe. And I was going to say that it kind of, just to tie this to a broader theme that I often think about, is, you know, the West currently, and over the past decades, often the West, broadly speaking, Western economists, Western observers, tend to criticize China for the inefficiencies in its economy, right? China has always opted for sort of greater inefficiency with the trade-off of lower volatility, right? That’s the same in its banking system. Basically, the entire way the economy allocates resources is not towards maximum efficiency.
It’s towards sort of maximum stability. And we, people from the West often look and say, “Well, that’s inefficient and that’s China’s not growing as much as it could or this or that.” But it seems to me the world is moving more and more towards China’s point of view on that, especially when you think about how the U.S. and other Western countries are reacting on the critical minerals front now that we know that Beijing has this very strong chokehold and weaponized chokehold on that stuff. And now, of course, we’re trying to create our own critical minerals supply chain, which is totally inefficient and wasteful, but we need to for economic security reasons. And so, I think vindication is the right word that both of you used. Go ahead, Even.
Even: I mean, that raises a great point, which is that there is reason why there’s been so much energy and resources and policy development focused on this strategic reserves management and price management and sort of pursuit of a certain kind of stability. And for lack of a better way of putting it, it’s, in many ways, because Beijing really struggles to respond to or to deal with extreme uncertainty and extreme volatility. And so, the flip side of this conversation where, you know, we’re saying that in the first 48 hours, there would have been a lot of focus on, okay, how is economic security going to go? The flip side of that equation is economic security might be well seen to, but that doesn’t mean that top leaders are breathing a sigh of relief. Right?
If anything, the extreme uncertainty coming out of an active conflict that is still escalating, you know, it’s not what the system would prefer to be dealing with. Even if China is better positioned at the moment in a number of respects to navigate it than many, many other places, I think on balance, nobody’s celebrating, nobody’s taking a victory lap in Beijing.
Andrew: Yeah, well, Joe, I want to bring you in on that point. And maybe this is good pushback a little bit, controversy here. I think that’s right, Even. But at the same time, we all know that like Beijing’s number one priority is stability, stability, stability, you know, top three priorities. But they have no control over the geopolitical hand that they are dealt, really, in terms of external events that don’t involve them. Obviously, they play a role in managing their own geopolitical presence. But something like this, they really have very little, I think, immediate influence on.
And the question is, so yes, short term, they’d prefer for this not to be happening. They prefer stability. But Joe, is there a longer-term strategic thinking in China? And this kind of gets back to this sort of public line versus private assessment that you spoke about earlier. Is there a thinking about what the longer term benefits or lack thereof might be for China from this action from the U.S.? Because my thinking, it’s a leading question, I’ll just go ahead and say it. I agree with your general point, Even, but is there a part of Beijing that says actually some level of chaos is good because it makes the U.S. increasingly look like an unreliable actor and that moves more and more towards putting Beijing on the map as a stable, reliable partner for many of the rest of the world?
So, sort of a short-term problem, but a strategic win. I don’t know. Joe, react to everything I just said.
Joe: Yeah, yeah. I think there’s going to be a pros and cons column here from Beijing’s perspective, right? So, cons, we’ve kind of been over a little bit already, the immediate impact of the energy shock, right? And a lot of these, what these end up being pros or cons depend on how long the conflict drags on and how, to what extent the Iranian regime emerges intact or does not, right? I mean, I think that let’s say that Trump with the midterms coming up decides, okay, this was a mistake, and he does a taco. He ends up talking to the regime. And yes, there was a big disruption, and yes, there was loss of life.
But he ends up basically kind of bailing on it because, as we all know, Americans are incredibly sensitive to the price of gas as an economic indicator. And given the unpopularity of the war in Iran among the American public and including his base to whom he promised no more wars. So, let’s say all of that combines and Trump says, “Okay, we’re going to declare victory and status quo ante,” basically. I mean, I think that that, from Beijing’s perspective, is kind of the best possible outcome, because then the U.S. will have appeared ineffectual on the world stage. It was very publicly not backed up by its allies after the Trump administration having berated them for months and months, and then kind of calling them in for help makes them look faintly ridiculous, or maybe more than faintly ridiculous.
And, you know, it’s just another kind of indication that the U.S. is a feckless power in the eyes of the world. I mean, I think that Beijing wouldn’t necessarily be unhappy with that outcome. But on the other hand, let’s say that Trump doubles down, the war intensifies, there’s more disruption in the Gulf. Iran itself potentially loses its central command and then kind of breaks into a series of Islamic Revolutionary Guard Corps command structures kind of around the country. The term that they use is the mosaic defense, which I think by its very nature is meant to be a destabilizing war of attrition.
That’s obviously a very bad outcome, right? And possibly there’s going to be more energy disruption that goes along with that. So, I think to what extent this ends up making China look good by comparison and to what extent that’s worth it to China depends on the future trajectory of this conflict. It’s not fully clear yet.
Andrew: That’s a great point, Joe. And I think it’s in a way a simple one, meaning we’re not going to know what the outcomes are until we know more of what the outcomes are. But it’s so important because I feel like the snap or the reaction, the snap reaction is to make an immediate judgment. We saw this in the wake of the Venezuela action by the U.S. People saying, “Oh, China has lost an ally in Latin America.” That was the immediate reaction in the China world, right? And my reaction was, well, we don’t know. We don’t know who’s going to end up ultimately in power in the long term.
It’s Delcy Rodriguez for now. And the Venezuelan regime is mostly still in place, which China still has ties to. So, maybe it’s just like they lost their guy, but they still have plenty of other guys. But then in Venezuela, but then what does the U.S. action in Venezuela say about the larger sort of U.S. strategy towards the Western Hemisphere? And if it’s part of sort of a much more aggressive ongoing stance by the U.S. in the Western Hemisphere, then yes, that could impact China’s presence in the Western Hemisphere. But everyone wants to make a snap judgment on winners, losers.
We’re doing the same for this Iran situation. But actually, we don’t know. It could go a bunch of different ways. So, I don’t know. Do you have further thoughts on that?
Joe: And if I can add one more point, I mean, you know, I got asked about regime change, and I think this is an unlikely outcome. But let’s say, for example, the U.S. ends up effectively conducting regime change and the next government in Tehran is pro-U.S. or at least neutral, then China, in theory, has a party it can do business with without the risk of U.S. sanctions. Again, I don’t think that’s a likely outcome. And it’s tempting to say, “Oh, well, they lost their allies in Tehran and now that’s definitely a bad thing.” But like, is it? And not to be too like, oh, Joe, it’s too soon to tell. But I think that because China is more a business-oriented partner than it is an ideological partner, any outcome that restores stability is probably going to be the preferred outcome.
Andrew: Yeah. Yeah. I think that’s a great point. Even, I want to throw this over to you now, kind of comment, A, on everything we’ve just talked about, if you have a different perspective on it. But also wanted to ask you, you brought up before the pod kind of what other countries in the Asia region in particular may be thinking about sort of this action. Obviously, China’s looking at it and trying to game out where it stands, strategically, if it stands to gain or lose. We’ve already said sort of time will tell. But what are other countries in the region? I will point out, you know, I’m in Europe and at my meetings this week, people have very notably said the Europeans are standing up to Trump on this one.
It took them a while, but they’re finally standing up. They are not backing him in this war. They’re not sending military support. And so that must be kind of raising eyebrows among both U.S. allies and non-allies in the Asia region. Talk to us about all of it.
Even: Yeah, absolutely. I actually want to jump off from what Joe was just discussing, which is that it’s very difficult to understand what China’s exposure is and what might be in the pros or cons column until we understand how the conflict is resolving. But at the same time, there is this chance that if we return to a stable Iran and under any kind of leadership, that that will always be good news for China, who will find a way to be a development partner, as China consistently has with all kinds of regimes all over the world. Just to sort of double down on that thesis, repeatedly, we’ve seen sort of circumstances where the U.S. has paid lip service toward a certain kind of development aid, but ultimately developing countries have kind of felt like what the U.S. has had to offer in terms of actually building infrastructure, actually helping get commerce and trade going, actually helping the financial system achieve sort of a base level of stability hasn’t kind of been sufficient to move the needle from like least developed to developing or emerging economies, right?
And over and over again, we’ve seen sort of a different story where developing countries have been interested in constructive partnerships with China, even in cases where China’s ideological or political positioning has been quite far from the national government of the third country because China shows up with a massive market, a whole bunch of infrastructure investments, the technical know-how and the companies to sort of bring financing and bring technical know-how to build out that infrastructure. And looking at what’s happening in Iran, and not just in Iran, but around the Gulf, if there’s been a whole bunch of destabilization and a whole bunch of critical infrastructure that’s been impacted, a whole bunch of industrial facilities that have been impacted, if and when there’s an opening for China to go in and acquire assets and invest in the reconstruction effort, I think that’s something we’re likely to see Beijing first in line to do that.
And you’re kind of thinking about the sort of long-term outcomes or directions, depending on how things go, there is a world in which even a totally regime-changed Iran that has been rebuilt in the U.S. image, or what-have-you, would still end up in an economic partnership with China. So, I think that’s absolutely right. And I guess pivoting a bit to how the conflict is being viewed across Asia, to the extent that it’s reasonable for anyone to speak about, the strikes in Iran and the war that’s resulted has a real like painful impact across all of Asia. There’s fuel rationing across Southeast Asia.
There was fuel rationing immediately day one in Myanmar. Now across both Thailand and Cambodia and also Vietnam is, depending on where you are in the country, you might have to line up to fill up your motorbike. You certainly would have to line up to fill up… you know, industrial facilities are kind of clamoring for making sure that they can keep their fuel supplies stable. That’s also true in places like Australia, where there were significant export dependencies on China for certain types of jet fuel, for example, on both the Middle East and a number of economies in Asia for fertilizers. And so, you have all of these national economies across Asia that are suddenly dealing with real supply disruptions with very significant price spikes and not a great deal of consultation or answers from the U.S. about what’s happening here.
What’s the timeline for getting this resolved? Forget like the lack of notice that it was even going to happen in the first place, right?
Andrew: Well, to be fair, it’s hard to answer the timeline question when you don’t know the answer to the timeline question.
Joe: Yeah, yeah, yeah, absolutely. Absolutely. But I mean, there certainly isn’t an answer for the timeline question, but there could at least be some kind of like firm commitment to a specific off-ramp or something like that. And in public, we hear Trump sort of talking about like, oh, we’ve won it, but only about another week or maybe a month or now it’s five weeks till the Xi meeting can happen. So, we know the timeline’s all over the place. We know that whatever is actually being discussed is probably no longer credible behind closed doors. And into that, you have China, which has these stockpiles of all kinds of strategic materials, right? And also has this massive industrial base where it can produce a lot of things. And in the short term, China has clamped down a bit on certain kinds of exports.
It’s restricting exports of a whole bunch of fuels. It’s restricting exports of a whole bunch of fertilizers in the interest of making sure supply and price can stay stable at home. But if this conflict continues for a while and once Beijing feels like it has a handle on the domestic supply and price situation, what I think is likely to eventuate is that that will actually as a strategic tool. China has an interest in its neighbors not having massive economic collapse as a result of fuel shortage or a complete sort of lack of supply. China also has an interest in global food prices not going to the moon because China imports a great deal of stable crops from everywhere in the world, right?
So, once conditions get back to sort of a relative level of stability, there will be an opportunity for countries to approach China basically and say, like, “Hey, can we get some fertilizers?” And we’ve already seen India do that. We’ve already seen the Philippines do that. That’s been made public, that government officials have approached Beijing to discuss keeping fertilizer supplies moving. I would expect that something similar will be happening across fuels in fairly short order. That might not be public, but I bet the conversation is already starting. So, then the question becomes, does this become yet another example that Beijing can point to and say, “Here’s Washington, you’re out there acting alone to decapitate a sovereign nation’s government without discussing with you, and it’s upturned your economic conditions this year. Meanwhile, here we are, we’re going to offer you fuel and fertilizers at state-controlled prices, we’re not even going to gouge that bad,” right?
They’ll gouge a little bit. They’ve got to do something because the SOEs are going to be bleeding to keep the prices low domestically, right? So, they’ll get a little back. They’ll get a little back. But there’s a strategic opportunity here for Beijing to look after its own interests, you know, in neighborly stability and food security and to burnish its reputation as a peacemaker and as a collaborator and as a force for good and a force for sort of multilateral managed markets, etc. So, it really plays into that narrative that we’ve seen across Chinese diplomacy and has the potential to become a really salient and concrete example of Beijing showing up in a crisis that Washington created, right?
Andrew: Yeah. I mean, I feel like that could be on a bumper sticker in Beijing. Beijing shows up to fix the crises that Washington created. That’s well put, I think. Joe, let me bring you in. any thoughts on kind of the wider regional perspective based on what Even said?? And then also want to bring in a very timely point about the fact that, you know, the Xi Jinping-Donald Trump meeting, which was supposed to take place at the end of this month, early next month, so end of March, early April in Beijing has now been postponed. Double barrel question. Talk to us about both of those issues.
Joe: Yeah, I mean, I generally agree with Even that Beijing will take any chance it can get to portray itself as kind of not just an anchor of stability for its own reasons, but kind of, you know, the term we always use is adult in the room, but just sort of the constructive partner. But one thing I will say, though, is that China’s response to the war in Iran has also kind of cemented a trend that we’ve seen a lot in recent years in terms of China’s response to international crises, which is that China kind of releases a statement, calls on all parties to exercise restraint, maybe dispatches an envoy to talk to various kind of interested parties, but then really doesn’t do much beyond that. I see some takes on X and elsewhere, which is already a mistake to be looking at takes there. But, you know, “Oh, well, China has failed to defend its allies in Venezuela and Iran.” I think that’s a complete kind of misreading of how China views these partnerships.
As I’ve said before, they’re primarily transactional, and they’re primarily strictly business. And so, on the one hand, there’s no meddling, right? China’s not going to say, “We don’t like your form of government, and therefore we demand that you change it to get development aid from us.” But equally, they’re not going to certainly not going to respond with military force to support these countries. And really, they’re not even going to do that much, I think, diplomatically to throw their weight around. So, I think that’s probably fairly well understood by most of China’s partners by now. But anyone who’s expecting China to do anything more than write a strongly worded letter to try to calm tensions, maybe you don’t need more than that from China. Maybe you know that going in if you’re a Chinese trade partner. But certainly, you’re not going to expect China to kind of go to bat for you in really concrete sort of ways.
Andrew: Yeah, actually, before you move on to the U.S.-China, I just want to follow up on one thing there because this is also something I wanted to throw in later, which I’m glad you brought it up. So, someone asked me yesterday, why isn’t or will China use its influence in Tehran to try to sort of tamp things down? And my thinking was like, I think that’s the wrong question because I actually don’t think Tehran’s driving the train here. I mean, in my kind of strategic view of the situation, like the Iranian leaders have to just kind of fight it out. As I understand it, like the smartest minds say, this is just a sort of a survival situation.
If Iranian leaders can sort of ride out the storm, then basically wait for the U.S. to get exhausted, then maybe the two can start a dialogue. But Tehran, like if they start to dial things, they have no interest in dialing things down because that’s like basically full capitulation. There’s really no strategic calculus that would say they would do that. And to the extent that China has influence, it could potentially maybe convince Iran to do some de-escalation, but that just isn’t on the table, right? So, I guess how much influence does China even have in this situation is my question.
I think people think Beijing can ride it, much like with Russia, Ukraine. I think Beijing has influence over Russia or influence on Russia, but I don’t think Vladimir Putin is going to stop the war at the request of Xi Jinping. So, I guess, what’s your thinking on that?
Joe: Yeah. So, I’ll caveat this by saying I am not an Iran expert nor a Middle East expert in general. So, kind of take everything I say with a grain of salt as far as that goes. But I think, yeah, first of all, it seems to me that for the Iranian regime, the worst has kind of already happened. I think that maybe if there had been space for China to do some back-channeling between the U.S. and Iran prior to the war breaking out, that would have been one thing. But I mean, the U.S. and Iran were already negotiating. So, that probably wasn’t even the issue. I’m not really even sure what the role would have been for China there.
And now that sort of the war is ongoing, yeah, I don’t really think that China is, A, going to be interested in intervening and kind of putting itself in the crosshairs if something goes wrong. And B, I’m really not sure, given that hostilities have already broken out, how much leverage it realistically has.
Andrew: Yeah. The framing we often see, and this is actually in my notes, so it’s on me for having it in there, but it’s often put out as the limits of strategic partnership with China, right? Like, oh, China’s not going to show up when push comes to shove. But I think you made the right point, which is I don’t think these countries expect China to. That’s not the type of relationship they have. It’s not a NATO-style relationship. It’s more of a business alignment sort of relationship.
Joe: I mean, that’s also why China refers to them as strategic partnerships and very much not alliances, because alliance implies a certain sense of military solidarity that China has not agreed to and will not agree to.
Andrew: Yeah, totally. All right. Talk to us about implications for U.S. China and the moving of the Xi Jinping-Donald Trump meeting.
Joe: Yeah. So, I think that it could go either way. And again, not to say again, it’s too soon to tell, but here’s the two ways that I’m thinking about it. On the one hand, we know that in the run-up to this meeting, which was originally scheduled for the very end of this month and beginning of April, that expectations were pretty low, partially because the U.S. side was not receptive to planning overtures. They really hadn’t done a lot of planning by all reports and including insider sources. And so, I think China was very disappointed with that because they had hoped this could be sort of a grand meeting that could really help to extend the life of the trade truce that was agreed to by the two leaders in October in South Korea. That was the goal, I think.
People ask, what was the primary outcome, the baseline outcome that China was looking for? And it would be codifying those understandings from the Busan meeting and putting U.S.-China trade relations and relations in general on a more even keel. And so, you won’t see the kinds of ups and downs, peaks and valleys that we saw all through 2025. And so, I think that hopes there were kind of diminishing from the Chinese side. So, maybe now, maybe the planning, the lack of planning was partially due to the administration being preoccupied with plans to go to war with Iran. I don’t know. That’s speculative.
So, an optimist might say that now, when it finally happens, assuming that there’s a little bit more clarity on the timeline for Iran, then maybe that will allow the Trump team to focus more on putting together a more kind of robust set of outcomes for the China visit. Maybe. The pessimist would say that the longer this trip is pushed off, first of all, the whiplash in planning, I think, undermines whatever trust that China still has in the U.S. in terms of that dialogue. But equally, it creates more space for something to go wrong, for a blowup to happen. We’ve got to remember that the last big blowup in U.S.-China relations happened because commerce imposed a 50% rule at the Bureau level, at a relatively lower level, which seems to kind of flew under the radar of senior U.S. officials until China responded very angrily to that.
So, that’s not to recapitulate the whole course of the trade war last year. But it’s very possible that sort of as U.S. government organs are kind of left to their own devices to devise trade policy, that there can be a misstep like this, especially given the Trump administration is trying to reimpose the tariffs that were struck down by the U.S. Supreme Court, right?
So, for those who maybe weren’t following that story, the U.S. Supreme Court ruled that Trump had overstepped his power by imposing the Liberation Day tariffs, so-called. And so now we’ve got the U.S. trade representative and other bodies trying to find other legal channels to reimpose those tariffs. And while their stated goal is continuity, getting tariff levels back to where they were before the Supreme Court made that ruling, you know, the question is, is China going to see it that way? If USTR is launching a bunch of new probes into China with this explicit goal of reimposing tariffs, will China view that as a violation of the spirit of the Busan Agreement, right?
Maybe China’s incentivized to not react too strongly, especially if the overall effective tariff rate is down or the same as it was before. But I mean, frankly, I think that if they were so inclined, that would be, I think, in their mind, a reason to retaliate against the U.S., whether or not that’s strategically smart from China’s point of view is maybe another question. But my point is, it’s kind of a long-winded way of saying the longer that we go without this dialogue, the more we’re creating space for something bad to happen.
Andrew: Yeah. I’ll just briefly say, and this is probably an unhelpful thing, but I’m just going to throw it out there, that if Xi Jinping is anything like me, I had, a couple of weeks ago, it was a Friday afternoon, I had a meeting on the books that was supposed to be a negotiation with a potential client. We were going to talk about price, all this stuff. But at the last minute, the client emailed and said, let’s kick this to Monday or Wednesday the next week. And I was relieved because it was a Friday afternoon and I didn’t want to go into a big negotiation. So, maybe Xi Jinping is just happy that the Zoom meeting was pushed back a month if he’s anything like me.
Joe: Yeah.
Andrew: He’s probably less conflict-averse than I am. So, I don’t know, Even, what are your thoughts to the back of that unhelpful observation.
Even: Yeah, you know, I tend to agree. I think that I can only imagine that for these senior leadership folks are always operating right on the edge of burnout and getting just a little bit of a break is always going to come as a relief. But I want to throw some more kind of outside scenarios onto the table off the back of Joe’s discussion of whether China could have a role somehow in persuading Iran to sort of chill and come back to the table. I’m actually pretty interested in how that could unfold, particularly watching how the U.S. and how Trump in particular have been reacting as the conflict intensifies, like seemingly beyond his plan or control.
So, we know some things about Trump, right? He’s a vocal guy. We know he likes the G2 concept. He likes power. We know he’s been asking for help. He’s been asking for China to send ships, help ensure trade can move smoothly through the Strait of Hormuz. That’s not exactly happening, but he’s certainly open to the idea that China would intercede in some way, which is pretty neat, right? We also know that the U.S. and Iran were negotiating right up until just hours before these strikes. And as a result in part of that, Iran has said that it won’t come back to the table without third-party guarantees, right? And in Iran’s, I believe, foreign minister referenced specifically China and/or Russia as countries with seats on the UN Security Council as a potential sort of third-party guarantor that only with the participation of a third party would Tehran think that it could get someplace, right? That there would be actual security guarantees.
There’s no longer trust that the U.S. will negotiate in good faith and will not just use it to stand up another strike. And we also know that China has some leverage, right? China buys most of Iran’s oil. They’re not likely to sort of cut that off. It’s totally outside China’s playbook and it’s really not in their interest either. But that kind of an economic relationship creates a certain sort of pull. And so, there are some reasons to believe that China could, with Trump’s blessing and potentially also with support from Tehran, insert itself into a negotiation process that did actually turn down the temperature in the conflict.
And if you ask me, that could be kind of interesting in the context of what’s happening between the U.S. and China. It would lay some groundwork for maybe what a G2 relationship would look like and why there would be some benefit to collaboration, sort of a strategic conversation there. But I also agree with Joe that as much as the delay of the Trump-Xi meeting and Trump’s China state visit, as much as it buys time maybe for some more progress around how the two countries might frame out some agreements, that it also buys time for a lot more risk of a blowup. And whether that’s new Section 301 investigations or weapon sales to Taiwan or whether it’s just additional weakness and uncertainty that’s emanating out of the conflict in Iran, I think everybody’s pretty jittery.
And the U.S. has spent tons of military resources. It’s moved key components of its missile defense system out of South Korea. It’s moving military equipment out of Asia to relocate over into the Gulf. And all of that means, in theory, if this conflict comes to an end, there will be a moment when Washington likely tries to move that stuff back, which is also, again, going to bring up a defense conversation with China that I think has a potential to raise some risks as it happens as well.
Andrew: Yeah, obviously, it’s hard to know the ultimate outcome benefits or costs for Beijing before we know the ultimate outcome of the action, right? What ends up happening in Iran itself. So, I mean, that’s plainly evident. And like I said, we’ve said it many times, but it’s worth repeating simply because so many people are just trying to put their stamp on, well, these are the implications. But what you just said, Even, I think certainly, as Joe pointed out, there’s a pros and cons list in Beijing. And under the pros list for certain is the fact that the U.S. is focused elsewhere other than China. And it is, I don’t know if distracted is the right word, but at least putting its attention elsewhere. And not only its attention, but its actual military hardware, moving it out of the Indo-Pacific and into the Middle East.
And that’s, I think, from Beijing’s perspective, kind of an unqualified positive in their thinking. I do want to wrap up, though, by stepping back a little bit further and just asking both of you, I’ll start with Joe, how all of this kind of plays into China’s broader geopolitical thinking of how sort of the geopolitical system is evolving. I think they’ve thought for many years that the system is sort of moving more in their favor. It’s moving more towards real politic, might meets right, kind of a transactional, or might makes right, kind of a transactional perspective where countries act in solely their hardcore national security interests as opposed to some larger ideological kind of framework or allied network.
And we talked on the pod a lot about how Xi Jinping talks about this whole notion of changes unseen in a century, which I talked with Jude Blanchette on the pod about before. But my kind of back-of-the-envelope way of explaining it is that it’s kind of the rise of the East and the demise of the West. There’s a lot more involved in that. But I guess two things. One is, Joe, do I have all that right? And is what’s happening in Iran feeding into that perspective in your view? And then a specific one, I noted that Wang Yi, the top Chinese diplomat, talked about, “the accelerated evolution” of changes unseen in a century when he was talking about the Iran situation. And I was just wondering, like that really struck a chord with me. This does seem like an accelerated evolution. So, maybe, again, a leading question, but is that a phrase you’ve seen before, the accelerated evolution? So, kind of a very specific question and a bigger one.
Joe: Yeah, I’m trying to remember. I feel like I may have seen it elsewhere at some point in time. But I mean, certainly, even if I hadn’t seen it before, even if it’s not something that the Chinese sort of diplomatic machine has said before, it’s certainly something they must believe.
Because it is. I mean, really, I think Trump, in a lot of ways, is, not to put too fine a point on it, speed running the end of American hegemony, right? He’s sort of not quite at the stage of dismantling NATO, but pretty close in terms of threats to Greenland. He’s revived the so-called Don Roe doctrine. And it’s interesting because now the Trump administration is effectively echoing this sort of the, not the inverse, but like, whereas China’s saying, “Oh, the world is becoming more anarchic and that’s a bad thing.”
I think a lot of the signals we’ve got coming out of Washington now is like, “Oh, well, the world is anarchic and we’re going to be sort of the dominant player in this anarchic world.” So, in some ways, the official U.S. line, or at least the official Trump administration line, is becoming slightly more aligned with the Chinese view of an anarchic world, right? And so, I think there’s two points. On the one hand, I think, again, to use the word vindicated, it does sort of vindicate China’s view of the world and the precautions that a country needs to take to ensure that it’s not on the menu, so to speak.
But equally, you can bleep this out if you want, but I think there must have been kind of an oh shit moment in China where you see the intensity and the number of US interventions that have happened in the past few months, right? So, first, Venezuela, then Iran, now threats to Cuba, and who knows, maybe after what’s going on in Iran, maybe Trump will have gotten his fill and there won’t be any more. So, I mean, it’s one thing to be able to say, ha-ha, we’re rhetorically correct in the U.S. is… You know, it was always just about hegemony and naked power politics.
That’s fine as far as it goes rhetorically. But if you’re any ideological or geopolitical rival of the U.S., part of you must be like, “Uh-oh, this isn’t good,” especially when a lot of the policies seem kind of reckless and ill-conceived. So, you can talk about, oh, well, it wouldn’t be in the U.S. national interest to begin a conflict with China, but arguably, a lot of this is not in the U.S. national interest if you think more than a step or two ahead. And so, I think that while China might be grateful for the rhetorical victory and to look like the good guy, they’re certainly probably also concerned that like, well, all right, does this mean that the U.S. is going to be more bold about intervening in areas that are much closer to our interests, right?
What about Southeast Asia? What about Taiwan? What about Korea, right? And so obviously right now there’s a focus on the Middle East. And if the U.S. gets bogged down there, I think that’s a strategic positive for China. But who knows who’s going to be next?
Andrew: Great points. Even. What are your thoughts on the broader implications from China’s point of view?
Even: Yeah. So first, I mean, completely agree with Joe, like from Beijing’s perspective, being right about this is cold comfort because you now have to live in the world where there is extreme instability and sort of rising geopolitical chaos and challenge. And nobody likes that, right? Nobody’s having a good time, or at least very, very few people are having a good time operating in this context. It’s a big shift from the international rules-based order of just a few short years ago. But when I think about how I will, as a China analyst, will look back on this moment, I think what I expect, one of the things I expect that’s fairly concrete and discreet that will come out of this conflict is in the wake of a crisis, Beijing always brings out as many lessons and takeaways as possible.
And I think that one of the takeaways from this is going to be that developing China’s “strategic hinterland” is absolutely the right course of action here. And that strategic hinterland is a line from the decisions that came out of the 3rd Plenum back in summer 2024. And it jumped out to us because it felt like a revival of Mao’s third front, right? The effort to shift a whole bunch of industries into, you know, out of China’s coastal regions and further westward and into the mountains and into areas where capitalist invaders would have a harder time getting at them, right?
And when we first saw that back in 2024, it was kind of like, okay, well, yeah, it makes sense that China wants to develop its central and western regions more. That’s been a long-term priority. But like this rings as a very security-oriented to us. And in the intervening time period, now looking at a crisis like this, a part of what we’re doing, sadly, is the old analyst trick of looking at a map. And what you can see is that all of those industries that are reliant on seaborne imports coming through the Persian Gulf to eastern China are going to hit some bumps, and are already hitting some bumps in these weeks and months, because their primary source of supply has been disrupted.
But those industries that are situated in central and western regions, along the extensive pipeline networks that are energy pipelines coming out of Central Asia and out of Russia, and sitting along rail lines that are linking to these areas, or in not so distant future that could be served by pipelines and rail networks coming through Pakistan, there are these signs of why it might make strategic sense in an increasingly geocomplex world for China to be able to have these overland routes to see to its energy and raw materials security.
So, I think when we look back at this moment, we’ll talk about it as sort of a watershed, an effort that was already ongoing to move industries further west for all kinds of reasons. More land, cheaper labor, common prosperity, and better sort of development prospects for less developed regions of China. We’ll also get this, we’ll say, why go? And that’s what supercharged them is because these industries were able to locate along energy pipelines and not need to rely on seaboard and cargoes and crude.
Andrew: Yeah, that’s an interesting observation. And that would be, yeah, not a big shift, but certainly an accelerant in terms of a certain strain of thinking in terms of Beijing’s economic security goals.
Even: Yeah, exactly.
Andrew: I think you guys both made really great points that I just wanted to sort of reemphasize one last time, which is, you know, just for some reason had never occurred to me that this is sort of a careful what you wish for kind of thing for Beijing, which is Beijing thinks the world is moving in its, I don’t know, in its favor, which is slightly more chaos. Like I said, more real politics might makes right world. But that is in an inherently more volatile world, an inherently more volatile geopolitical environment. And arguably, China has been, maybe not even arguably, China has been one of the biggest beneficiaries of the past several decades of U.S.-led global system with relative stability, emphasis on rule of law and kind of an agreed trading system.
Now people will say China gamed the system. But I don’t know. I just never really thought about it. China might end up in a world where it kind of gets exactly what it wants, but then realizes, oh, but we just lost all the stability that we also loved. Is there an irony there? I mean, there’s obviously, in my view, an irony there. Does either of you have thoughts on that? I mean, you guys both made the point that I just wanted to kind of foot stomp that and see if there are any more thoughts on that particular observation before we wrap up.
Joe: I think of kind of one specific episode, which has to do with the American withdrawal from Afghanistan in, what? Was it, 2023? Am I remembering that right?
Andrew: Somewhere in there. Yeah.
Joe: Yeah. Time is really just kind of blurring together for me. Anyway, whenever that happened, China had for years and years kind of railed against American interventionism and lack of respect for sovereignty and kind of crowed about the American retreat from Afghanistan. But then had to deal with the Taliban on its doorstep. And there’s no specific love for the Taliban either as kind of a fundamentalist regime and one that maybe doesn’t have the chops to tamp down on security threats on China’s border. And so, there was kind of an uncomfortable several months up to maybe a year or more of silence where China didn’t really know how to...
It got kind of what it wanted in the sense that it got to be right about the Americans having gone into Afghanistan and having messed it up. But then what came next was also not great from China’s perspective. So, I do think there is an element of that where just China being reaffirmed in its view of the world doesn’t mean that that’s a world it necessarily aspires to live in. I mean, obviously, the strictly business approach that China does take with its partners, it does keep it free from entanglement. But I do think it also reflects the fact that China’s not, you know, it would say it does not seek to be a hegemon, but also it doesn’t really have the chops to be a hegemon in the same way that the U.S. has been.
We can argue whether or not that’s morally right or wrong or good for the world or whatever, but there is a certain, yeah, I mean, this is a very kind of rambling, a long winded way to say I think you’re right. I think that China can criticize U.S. hegemony, but what comes next is at the very least uncertain and possibly even less in China’s interests.
Andrew: Yeah.
Even: Yeah, I think China might actually be leaning into that challenge in certain kinds of ways. And it’s easy to not pick up on this stuff because the way that discussion of sort of multilateral initiatives is framed sort of broadly, particularly in the U.S. media is that the U.N. system is horribly corrupt and ineffectual and no one cares about it do anything or what have you. But China has invested very significant resources in developing its relationships and its ability to operate within the UN framework. It’s becoming one of the largest funders of the UN framework. Meanwhile, Beijing is also investing in its own initiatives.
I mean, Joe, you can speak to this maybe better than I can, but the Global Governance Initiative, the Global Security Initiative, the Global Development Initiative, this slew of kind of frameworks for conversation that appear to kind of point toward what could be stood up as a replacement international rules-based order. So, it seems like there’s at least some kind of an interest in these frameworks and institutions and rules continuing to exist in some format.
The question is just like, without the U.S. sort of economic heft and military backing, who’s going to show up and who’s going to follow these rules, or who’s going to get involved in these initiatives? And I don’t know the answer to that.
Joe: Yeah, I think that’s exactly correct, Even, is that there’s these initiatives, they put out kind of a way of viewing the world. But I think there’s two problems, you know, if you want to think of them as an alternative to post-war economic and security architecture. The first is that they’re kind of predicated on the idea that everybody should do what they want and leave everybody else alone. Which say what you want about NATO and the post-war system, it was a lot more, I mean, robust in the sense that this is what we believe in. This is what we support. Everybody do what they want is not really a global governance strategy.
And I’m being maybe a little bit glib, but I think that’s sort of the foundation of Chinese foreign policy is that sovereignty to the max. And if you, again, yeah, just like you were saying, if you don’t have the institutional backing, either in economic or defense terms, there’s really only so far that those are a system as opposed to a series of kind of aspirational statements.
Andrew: Great observations. I think we could probably do a whole nother podcast on this. So, we won’t do that now. But maybe in the future, I will say, well, first I will say, Joe, I looked it up — the withdrawal from Afghanistan was 2021. So, for those...
Joe: I looked it up as well. Yeah, sorry.
Andrew: Well, no, yeah, I’m just putting that out there so that the listeners who were typing that email to you can stop because we’ve already acknowledged, trying to save your inbox.
Joe: Thank you.
Andrew: No, I’m kidding. We really appreciate our listeners engaging with us on all this content and pointing out when we make silly mistakes. But I just wanted to get that on the record. But I also wanted to say, I love these conversations. These debates around these big picture issues, again, for listeners a little bit behind the curtain, in Trivium, we don’t always get to debate these big picture issues, but Trivium always has these internal kind of dialogues and discussions and back and forth on how we think China views various things, how we think the world is evolving.
And that’s one thing for me, at least, that makes this job so much fun is to have those debates and discussions. And we try to bring a flavor of that to the podcast each week so that the listeners get the benefit as well. So, just want to say, Joe and Even, thanks so much for the interesting conversation today. As always, I really appreciate both of your time.
Joe: Yeah, it’s our pleasure. Thanks, Andrew.
Even: Yeah, it’s a pleasure to be here. Please have us back sometime when there’s not a war on.
Andrew: Well, that might be a while, but yeah, I’ll do my best. Really appreciate it. Yeah, and we’ll see you guys again soon. Thanks, everybody, for listening. Bye, everybody.
