The Hon. Dr Kevin Rudd AC on 'The Evolution of Chinese Economic Strategy Under Xi Jinping'

Good evening everyone. My name is Ben Hillman and I am the director of the Australian Center on China in the world at A&U. It's my great pleasure to welcome you here tonight for the 2026 CIW annual lecture. Before we begin tonight's proceedings, uh please allow me a minute uh for some obligatory housekeeping. The building has a one-tonone evacuation alarm. If this alarm sounds, please leave the building quickly and safely through the emergency exits and meet at the assembly area which is on the ANU South Oval uh just in front of the uh cricket nets. We have two fire wardens um on site today and we have a first aer uh at the event. Should you require any first aid or assistance uh please inform one of our cent's uh admin team. Please also note uh this is a note there is no filming. We ask you if you haven't done so already to please turn your phones to silent. Uh the uh lecture this evening will be professionally uh filmed uh and it will be uh made available online. We also invite you uh for Q&A to please submit any questions that you have via the Slido app. We acknowledge the Ganowal and Gambry Cambry people who are the traditional owners of the land upon which this campus is located. We acknowledge and respect their continuing culture and the contribution they make to the life of this city and this region. We would also like to welcome other Aboriginal and toouristrate islander people attending today's event. I would now like to welcome to the stage senior gaming Yanowal custodian Paul Yura House [applause] Mandangui and thank you Ben and uh Yarang. Good evening everyone. It's wonderful. It's beautiful to be here on country to share with you this uh welcome with you all. So yuang yu Paul Gowa House. My name is Paul Geroa House. Nadu Maradu Maring Guji Gang Yamry Camry Nur Noodle Bangalore. I was born here at the center of my ancestral country at the old CRA hospital. God bless it. Anyone born in the old CRA hospital here? Great to see hospital alumni. No matter who we are and where we come from, we all have gang a belonging which is our identity. So walawan mayang uh healthy people, healthy country. So ladies and gentlemen, young men, young women, distinguished guests, uh Dr. the honorable uh Kevin Rudd, wonderful to see you again and interim vice chancellor uh Rebecca Brown, Bill, wonderful uh Ben. So with that Jamali Nambbury Cambbury our respects to Nambbury Cambburya elders past and present. Bango in the world. Nambry Camry Walua Nambry Camry Walu Walabaloa people welcome you all to country. Uh our welcome to country is always made in the spirit of peace, harmony and justice for all people of modern Australia. Our main aim as local custodians always to establish an atmosphere of mutual respect through the acknowledgement of our ancestors and the recognition of our rights to declare our special place in the pre and post history of the CBER region. The name Camber is derived from the name of our people and country, the Nambbury Camry Camber and we've carved for mother earth since the dawn of time and our signature uh is in the is in the land. uh our signature is is in our DNA and right across all the country in everything we do. Living a respectful way of life cares for a country. Respect is taking responsibility for the now, the past, the present and the future. winning gala barley, looking to see, listening to hear, and learning to understand. And we want to see our children grow up in a society that acknowledges, respects, and honors first nation people in our own country. And speaking of economics, we're entitled to a greater share in the wealth and prosperity of our country. And with respect to our old people, our ancestors, uh they never gave our country up. They never gave our land up. Our land was stolen without consentual treaty. And we've never been compensated for these losses in our own country. And we thank the people who backed us uh to be recognized in our own country a few years ago. And what we're asking for was about acceptance. And that acceptance spoke about the love, respect, the safety, the belonging, the morals, the values, uh the sacrifice, the security, the caring and sharing and nurturing and sheltering. And we still ask this country for acceptance in our own country. Unfortunately, we experience rejection. But we we get up every day and we fight for justice for our people. And we do it with yamara. We do it with a a concept, an ideology. Uh a powerful word. It talks about many things. Yadri word, a good nutrient word to go slow, be patient, be polite, be gentle, take responsibility, uphold yila wuruan. Camry julang. Respect is in the Camry Creek and the breeze quietly moving through country. Respect is in how our matriarchs dig for yams in mother earth. Ya mabala nama Dr. Matilda Williams house my respects to my mother Dr. Matilda Williams house OM because of her we I can we can and many of our people can here on country. So with that uh we talk about be brave uh make change we get up we stand up and we show up. So everyone respect shapes us and lifts up the people respect creates people who care for each other. So it's wonderful yinja marabala buaang nurang burrian murmill my respects to uh the people of China their language law people and country so with that uh guan everyone welcome Kevin wonderful to see you I'd like to acknowledge Kevin was our first prime minister in this country to give an apology to our stolen generation to our people and our people right across this country thank you for that Kevin [applause] Because when the dust when the dust is settled in all of us, all we get to keep and take with us is our dignity and our integrity and the love and respect we have for our people, our family and country. So Kevin, uh, last week and the week before I was, uh, I was able to do the welcome to country for the 80th anniversary of the AU. And I know you're an alumni, uh, Bergman College as well. We like to acknowledge Bergman College. Um, and I was able to share the welcome to country with the the chief minister of the ACT, but also the current uh, treasurer of Australia. But I'd like to invite you to come up and play the tapesticks with me Kev to this welcome country song on the Yiddiki. So Mandangu everyone welcome everyone. Thank you very much. [applause] Ninja Angel. [music] Heat. Too deadly. >> [applause] [applause] >> Um, good evening everyone and Paul. Thank you for welcoming us to your country. Um, I also acknowledge that we are meeting on the traditional lands of the Nalawal and Nambry Cambri's peoples. I pay my respect to all Aboriginal and toourist rate islander and indeed all first peoples that are joining us here this evening. It's my absolute pleasure to welcome you all to the Australian National University for the 2026 Australian Center on China in the world annual lecture. And I'd like to acknowledge a number of our distinguished guests this evening. Of course, our guest speaker and A&U alumnist, the honorable Dr. Kevin Rod AC. The Honorable Tim Watts, MP, chair of the Standing Committee on Education. Nancy Gordon, Chief Executive Officer of the National Foundation for Australia China Relations, and the former Council General in Shendu. Um, and the China and the World Advisory Board members, Graeme Fletcher, who's the former Australian ambassador to China. Michael Growder, first assistant secretary, East Asia division of DEFAT. Our new chancellor, Dr. Gordon De Brower, AO, very busy, just only commenced uh last week. Um I also acknowledge our senior colleagues from the public service and colleagues and students from A&U. Uh you're all very welcome here this evening. I have an apology from Professor Helen Sullivan, our dean of the College of Asia and the Pacific. She's also a member of our cent's advisory board. She wanted to be here this evening but couldn't be here. For just for a very short bit of history, in 2010 during um Dr. Rudd's first term as prime minister, he came to A&U to deliver the George E. Morrison lecture. Dr. Rudd announced the establishment of the Australian Center on China in the world and the Commonwealth funding to establish it. It was a very big moment for us. Dr. Rudd spoke that day about the scholars who had built China studies at this university over numerous decades. He referred to the depth of expertise here at A&U and what a new center could do to really bring that to life. He announced that this was a particular way, a very special way that we could draw that together. a place where scholars of history, literature and philosophy could work alongside economists, policy specialists and strategists and they could work together on same questions and rather rather than doing that in separate disciplines. So in 2010 we're only just starting to talk about interdisciplinary studies. So this really was ahead of its time. The announcement set out what it would be a hub for scholars from Australia and abroad. a place that would mentor new generations of researchers with deep expertise on China and one that would contribute to a well-informed public debate engaging not only on government but also with academics and the broader Australian community. So at its heart was an investment in building Australia's understanding of China for the future. So Dr. Rudd I believe 16 years on we are fulfilling that mission. Um the center is a leading national center for building Australia's China capability. Our scholars work across the Chinese world. We teach supervised students who go on to careers where that understanding really matters and really matters to Australians. Dr. Rudd, thank you for your significant role you played in establishing our center. what it's become. You can see in this room this evening and later on um our scholars, our students that work, this work continues. Thank you for your ongoing connection to A&U and for coming back again and again to see what it has become. I want to thank the team at the center for the work that you do to make China and the world the success that it is and your work of making this evening happening happen. Evenings like this is one that matters to us very much at A&U. We just launched our new strategy A&U by 2030. And we describe convening as a really important part of what we do at the university. Convening across sectors, bringing people from our community and different communities together as a core part of our purpose alongside our research and education. We bring people together on questions that matter for this country and the region and we are committed to holding that space open for very careful and honest discussion of those key questions. This university as you all know we were founded to serve the nation and this is one of the ways we do it. We aim to convene for consequence. I don't intend to say anything about tonight's subject. There's no one obviously better place to do that than our special speaker. I'm very much looking forward to hearing from Dr. Rudd shortly. I will now hand to Professor Hillman who will formally introduce the honorable Dr. Kevin Rudd AC. Thank you. [applause] Thank you very much, Vice Chancellor. Ladies and gentlemen, tonight's speaker means a great deal to the Australian Center on China and the world. As our vice chancellor has already noted, Dr. Rudd founded this center in 2010 when he was prime minister, and we are very grateful to him for that. Dr. Rudd matters to us in another important way. He's an inspiration for the work that we do at CIW. Australia needs more Kevins and our mission at CIW is to produce them. Kevin Rudd has been a leading authority on China throughout his career as a diplomat, foreign minister, prime minister, ambassador to Washington, and as global president and CEO of the Asia Society. His China expertise is in no small measure a product of ANU's investment in China and Asian studies. Dr. Rudd majored in Chinese language and East Asian history at AU as part of which he studied Chinese language at National Taiwan University and completed an honors thesis before going to work in China as a diplomat. Dr. Rudd's pathways through undergraduate programs, advanced studies, and incountry experience is what it takes to build China capability. We need more Australians to develop this capability, a deep understanding of China and the ability to engage with China and the Chinese world effectively. China is investing in its understanding of Australia and the region and we need to do the same. CIW is building the pathways needed to build Australia's China capability from high school through undergraduate post-graduate studies to the workplace and academia. With support from the National Foundation for Australia China Relations, we've established the China Studies Futures Initiative, which includes our National Honors and Masters Preparation Program, and a China Studies Fellowship Program that is enabling 50 Australian graduates to sharpen their language skills and gain knowledge and experience during a year in China. Since 2023, our study abroad programs have enabled more than 200 students to experience China firsthand and to study Chinese language in country. We are investing in the China capabilities of the next generation of diplomats, public servants, business leaders, academics, journalists, and community leaders who will shape Australia's engagement with gi with China over the coming decades. Our ambition is to make a ANU a national leader in rebuilding Australia's China capability. Australia needs more Kevins and at CIW we are working hard to produce them. On that note, I'm very proud to welcome to the stage the honorable Dr. Kevin Rudd AC global president of the Asia Society. Dr. Rudd, thank you for your long-standing leadership on Australia's China capability and for joining us tonight to present the 2026 CIW annual lecture. >> [applause] [applause] >> I too acknowledge the first Australians on whose lands we meet and whose cultures we celebrate as the oldest continuing cultures in human history. Thanks mate for giving me a turn on the sticks. Um, I hope I achieved at least a past degree or a 2B honors. Um, not a post-graduate degree, but I think basically keep keeping rhythm would be the essential requirement for ALP pre-selection. Anyway, so the um to all of our other friends and colleagues who are here this evening, Gordon Dra, Chancellor of the Australian National University, I could think of no better person to be the leader of this university. Well done, mate. >> [applause] >> Uh Gordon has remarkable resilience. He had to survive me as prime minister. Uh he was a senior official in the department of prime minister and cabinet. The Australian National University is dead easy after that mate. So you'll be fine. To the acting uh vice chancellor, uh can I simply say it's good to be back on campus. Ben Hillman, thank you for the generous introduction. Uh where's Tim Watts? I can't see him. Hi mate. Good. Don't you have anything better to do this evening? the uh nice to see you. Um and thanks for your contribution to the parliament. Uh and where's Graeme Fletcher? Hi Graeme. Uh Graeme and I served in the Australian embassy together in Beijing, which we then called P King back in the early Mesolithic period. Um I was first secretary, very important. Uh Graham was a mere third secretary, much less important. And between us we managed the photocopying. [clears throat] So Graeme had the good sense to stick to a normal career and end up as ambassador. Uh I pursued a different route. In fact, my own preferred method of career planning is to do it in reverse uh as prime minister, foreign minister, ambassador and now I'm running a think tank in the world. And so I intend to go back to Beijing as first secretary anytime soon. That's the way in which I plan things. Anyway, the um uh thank you Ben for the suggestion that the world needs more Kevins. Those of that opinion say I. There's not a big round of support here, mate. Those not of that opinion say no. I I think they're very diplomatic here. There's a great article recently in the Economist about the problems of Kevin. It's a phenomenon in France where all these French kids have been called Kevin because their parents have been watching English and American sitcoms. [snorts] Um, and then there's a German chime in about the problems of Kevin Isismos. Uh, as in fact you have far too many German young fellows now being called Kevin. Uh, can I simply suggest that I think yours, Ben, is a minority view. Good to be back in Australia. Um, I've uh lived abroad for most of the time since I left uh prime ministerial office uh primarily in the United States and I was in America just last week. I was in Beijing as of last night and I've flown in here today and uh so it's good to be back home in Australia. It's particularly good to be back home here at the Australian National University where uh I was uh shaped and honed from being a kid from the Queensland country uh to at least having some aptitude for beginning to understand the vast countries and civilizations of that which we haphazardly call Asia. uh and so much of my formation is a product of this university for which I remain thankful as I do remain thankful to the folks from Bergman College for having put up with me as well. [clears throat] Um this is a good university. It is a great institution. It is the only university established by national statute. And the reason we established it under the Labor government in the post-war period under national statute was to provide the nation with the expertise it needed to build the nation in the post-war period. And part of nation building was determined to be in that statute, enabling the next generation of Australians to have a familiarity with the languages and cultures of our region. Chiffley and Curtain were men of great vision as reflected in the text of the A&U Act. So when all of you nerds here this evening go home and can't think of anything better to do, Google the A&U act and read what our forebears planned with this great institution. And therefore I look forward very much the institution continuing to give effect to that vision laid out in the immediate post-war period. Um those of you who have seen the topic uh for this evening's uh lecture may have died of fright. It's entitled It's meant to be a genuine rib tickler. The evolution of Chinese economic strategy under Xiinping subtitle on becoming a technoindustrial superpower by 2035. The ideology of AI and she's new quality productive forces. Now I can see that's resonating already with this crowd. There [clears throat] is a certain shimmer of excitement at least on the part of one or two people that I can see here if not the rest. How many of you are students of China? How many of you are economists? And so the vast majority of you are neither. So therefore here's the deal. Uh having walked in here this evening and looked at the crowd. Um those of you who wish to study carefully the text which I prepared for this evening, it will be online tomorrow. Um and it will deal with the nerdier subcomponents of the ideology of new quality productive forces within China's China's new Marxist approach to economic management. What I propose to do in the time available here so that we have time also for discussion uh is to provide a summary version and where this subject of China's embrace of AI uh fits within the overall framework of China's economic strategy and where it fits more broadly within China's national and global strategy. So why don't we take it in those terms and then let's move to question and answer a little later into the evening. Xigin Ping for those of you who have read his stuff and I made it my business to read all of his stuff uh when I at the tender age of 59 decided to do a defill at Oxford and produced a book called on Xiinping having studied for four years uh his ideological framework and if you read Xiinping's ideological framework carefully in a country which takes ideology seriously my threeline summary of the ideological changes he's brought about in the Chinese system are as follows. Number one, Xiinping deliberately set about to move the center of gravity of Chinese politics towards the Leninist left more power for the party. [clears throat] Two, he also took a deliberate decision probably from the 19th Party Congress in 2017 to move the center of gravity of Chinese economic policy towards the Marxist left. And three, throughout this period, we see a parallel shift in China's approach uh to uh its foreign policy and national security policy by moving its center of gravity towards the nationalist right. And if we are to make sense of the Xiinping ideological project, it actually is reflected in these three dimensions. People often say to me, here we are in the 21st century, why does ideology matter? Um, in a Marxist Leninist system, and certainly in the Chinese political system of which I have been a student for now 50 years since I arrived here as a 17year-old, which makes me about 49 now. I didn't do maths. um is that this system in China uh both from the inception of the Chinese Communist Party in 1921 through to the success of the Chinese revolution in 1949 through the rigors of the great leap forward in the cultural revolution and the self-inflicted damage which was occasioned by both those disasters in modern Chinese history through to the rise of Dang Xiaoing uh in the postm period and the heralding of the beginning of the period of reform and opening through to Xiinping today. Each of these epochs within the Communist Party history and policy and performance has been heralded by shifts in ideology. Ideology, if I could put it into these terms, constitutes the headwaters of change in a Marxist Leninist system, which is then in turn translated into policy over time and which in turn is changed into forms of behavioral change within the various instruments of the Chinese party state and the broader Chinese society. I think it's useful before we begin to look therefore in detail at what's evolving within Chinese economic policy and technology policy to understand the ide ide ideological frame within which all this rests as part of the nationalist vision for China. Xiinping uh upon taking power at the end of 2012 as general secretary of the party and then as president of the country in March of 13 took his colleagues across Teneamman Square from the great hall to the National Historical Museum or what used to be called the Museum of Revolutionary History and then took them to an exhibition of China's humiliation at the hands of the British and the French in the Opium Wars And that is where he pronounced for the first time to the Chinese nation his vision for what is called the great rejuvenation of the Chinese nation. And this has been his galvanizing nationalist ideological project now for the better part of a decade or more. And in its subsets it is about this. How does China now move from being a country and an economy which is a middle-income economy by some measures an upper middle income economy by others a lower middle- inome economy depending on where you're looking at the geography of the country and how do we bring China to advanced economic status by the time of the centenery the founding of the people's republic in 2049 that is his galvanizing mission And if you look therefore at the various instruments of policy which have unfolded since then uh each relates back to that fundamental nationalist purpose. When you look at China's concept of its own national power in order to give effect to the great rejuvenation of the Chinese nation power itself is defined by a Chinese concept called comprehensive national power. And if you look at it carefully, it is a concept or a macro concept of power which builds within it many many subdivisions. It is not just classic military power as in a 19th century realist view of the state. It is also about economic power, trade power, the power of capital as well as the power of technology. It is also about the fundamental underlying resources of the country. It is about how that power is deployed in the world and comprehensive national power is invariably measured in relative terms against China's assessment of the power of other states as well principally the United States of America but also American allies in the region and the world as well. So the Chinese approach to the implementation of this national vision for national re uh uh rejuvenation is driven by this broad concept of national power within which the economy looms large. It is not an exclusive measure of power but it is a dominant measure of power. This brings us to how China's economic policy has then unfolded in the period since Xiinping took office when Dang Xiaoing decided to change China's economic course um at what is usually called the third plenum of the 11th central committee in 1978. Um he did so in a deliberate and ideological fashion. Under Maadong, the principal ideological challenge of the Chinese party and people was to continue class struggle at home and abroad. This gave rise ultimately in the most extreme form in the cultural revolution. But it placed at an absolute premium an equality of classes and therefore Mao's determination never to allow the emergence of a bourgeois class in China which would supplant either the proletariat or the ruling working class or their designated self-desated representatives the Chinese Communist Party as the Leninist party for Mao growing the economy while it may have been a real concept within classical Marxist economics frankly did not occupy the first priority in his list of priorities. It was always about class struggle. It was always about ensuring that the purity of the revolution which they had won through blood and effort in 49 after 28 years of civil war was to be preserved as an ideological project. The problem was by the time Mao died in 76 the country was broke. If you speak to Chinese ministers and leaders at the time about how they financed in hard currency their first travels to the United States, it's a searing tale in fact of how empty the coffers had become by that stage. And so Dang Xiaoing looked at this and by the time we reach uh the 12th Party Congress in 1982, he takes Mao's definition of the core mission of the party about class struggle and turns it on its head. He says that in the party's ideological definition, the fundamental challenge of the party at this stage in history, this is 1982, is to unleash the factors of production in order to give rise to national wealth and in order to therefore afford the Chinese people a better living standard and to release them from poverty. If you want to therefore trace the ideological wellspring from which the period of what we loosely call reform and opening came, it is that Congress of the party, the 12th Party Congress and the resolution it adopted formally changing the party's central mission or to use Marxist language the core central contradiction Maldun around which the party would organize its future efforts and From 1982 to 2017 that remained the central galvanizing ideological project of the Chinese party state. As a consequence over that period of time you would have seen with some interruptions uh average doubledigit growth through the 80s the 90s the naughties and into the most recent decade as well. And China moving from an economy which as of the end of the cultural revolution was an economy of the same GDP in aggregate size as the Australian economy to then become the second largest economy in the world. When Xiinping became leader he initially embraced this vision. If you look carefully at the party uh congress uh which brought him to power uh in 2012 um the resolutions which followed that embrace this reformist uh vision and that is a greater role for markets both at home and abroad in unleashing the factors of production and unleashing wealth for the Chinese people and to raise living standards and also to grow the economic power of the nation. Dang Xiaoping saw these and said we need to ensure that these in fact continue to deliver wealth into the future. But when Xiinping looked at these by the time we got to 2012 2013 he said yes let's double down further on the market. But then something difficult happened within uh Chinese financial and economic system management around about 2015. For those of you who studied it closely in 2015 there was a significant domestic financial crisis within China. There was a run on the stock market. There was a there was a panic in the property market and as a consequence people's uh shareholdings lost much of their value. It was around about that time and remember we're also existing in the long after wash of the response to the global financial crisis and financial markets globally out of control that you see a deep de reappraisal by Xiinping on the economic pathway forward and as a consequence of that what Xiinping then did by the time he got to the 19th party congress in 2017 was to look back at the origins of the dung reform and opening period and then readjust the party's ideological mission. This never makes it into the newspapers. It's dull ideological news. It's what theoretical nerds like yours truly trace um and examine in order to see where the origins of policy ch change lie. And if you look carefully at the text and the resolution of the 19th party congress 35 years after the 12th party congress back in 1982, what Xiinping said was Dang Xiaoing said that the central challenge for the party in the future was to unleash the factors of production to grow wealth for the Chinese people. What Xiinping said is that this model of economic growth has become unbalanced and it is producing inadequate results. And we might say what does that mean in real language. What Xiinping was signaling was that the time for the supremacy of the market in the way in which the Chinese socialist market economy by that stage had been conducted had come to a close and it was time for the party state through a rejuvenated Leninist party to resume direct intervention into the running of the economy and you begin to see from that stage the dial shifting fundamentally. If you look at the barometers of change, you see for example a rise once again of the centrality of central planning and a relative decline on the significance attached to market disciplines in themselves. You see the rehabilitation of stateowned enterprises as juxtaposed against private sector corporations which by that stage were already being deemed to have become too big and therefore too large for the party to control. And in terms of the income disparities which have been generated over 35 years through the period of reform and opening when Dung said it is glorious to be rich when Dung said it's fine for people to get rich first others will then get rich later Xiinping instead his response to that was to say we are now heralding a new era of common prosperity fu. So the juxtaposition between these parameters of economic policy then became clear. That is why I've said in my opening remarks that Xiinping deliberately ideologically at that congress chose to move the center of gravity of the party's economic policy towards the Marxist left. And right now here we are almost 10 years on from that. We are in the long economic shadow of that ideological decision taken back then. I'll leave to one side the relative impact of CO which disrupted everybody's economy and most particularly the Chinese given that's where CO came from in the first place in Wuhan. But if we were to extract the co factor uh from China's economic performance and ask ourselves what has growth been like in the period since the ideological change even on the official numbers average growth has reduced to around about 5% from double digits and independent economic an analysts would say that in the last 5 to six years despite the nominal figures uh the official figures I should say being registered around 5%. The real figures are in fact closer to 2 or 3%. We might say why is that the case? The core reason uh why that is the case uh is that you had a fundamental recognition on the part of the private sector that they had to begin to trim their sales that the private sector was no longer going to be allowed to run triumphant across the Chinese economy. as Xiinping feared that these companies had become too large for the party itself to control. You will recall that it was not long after that that you'd saw the largest platform uh uh companies called Pingtai Jingi or the Ping a number of their chief executives being hauled in and reprimanded, disciplined and in some cases temporarily disappeared as happened for example with Jack Mah from Alibaba. And the message to the body politic and the message to the corporate body politic was this. Understand now my friends in the private sector you are now working within the remit of party control as opposed to the previous 35 years where it was indeed glorious to be rich. The impact this has therefore had on private sector behavior in the period uh since CO and there was evidence of this even prior to CO in the period 18 and 19 before CO broke out in 20 u and certainly once CO restrictions were li were lifted by the time we get to 22 and 23. this long after wash of the effect of this deep ideological change in the way in which the party views uh the role of the private sector. How do we best diagnose it today in terms of the data? If you were to look today at the most recent data produced on the Chinese economy both from the official numbers and from the unofficial analyses which looked at different matrices through which you analyze growth. Point one, uh, private domestic consumption within the Chinese economy is flat and representing such a huge slice of GDP if you have a flat performance from your domestic consumers. Let me tell you, it's very hard to reconstitute the growth numbers from the other drivers of growth. And the reason for that is consumers having been through co but consumers also having seen other things happen in the economy and becoming more cautious about their futures have now begun saving again at record levels. Savings ratios in the Chinese economy have gone up like this as private domestic consumption numbers have headed in the reverse direction. So private domestic consumption a major contributor to economic growth in any economy either emerging or developed has been now for the better part of a half a decade plus flat. Second private fixed capital investment a second big driver of growth in most economies also flat. The reason there is self-explanatory because the private sector, the individuals I referred to before who are investing big in their corporate futures in the past, we're now receiving different signals from the party center about their future. A third driver of growth normally in any GDP matrix is private residential construction. The residential construction sector in China in the last six years has imploded completely and continues to be in recession. This has had profound roll on effects for the rest of the economy. First of all, back to the good old consumer. Most consumers had put their savings into investing in residential construction, buying their classic investment property, only to see the value of those investment properties collapse often to zero. The second consequence of the collapse of private residential construction sector has been through local government finance raising and local government taxes and local government revenue raising. This was the sector which generated most local income growth for the state. And therefore you found in recent years Chinese local government often not capable of paying the salaries of their workers. So the profound implications of a private residential construction uh sector collapse uh continue to work their way through the Chinese economy today. So what therefore against those measures is working in order to keep growth north of zero. There are two answers to that. The first is net exports. And if you look at China's export performance around the world, in the United States, though that is now declining because of the tariff wall which has been constructed defensively in response to it, in Europe where at present a tariff wall has been contemplated but not yet executed. And in Southeast Asia, China in the last 12 months has generated a 1.2 trillion US trade surplus with the rest of the world. This is the most powerful engine room today remaining in the Chinese economy and that is net exports. And therefore the critique of it that you hear in the United States and in Europe and in elsewhere is that China because of suppressed or depressed domestic demand is maintaining its production levels and in fact exporting that at subsidized prices to the rest of the world thereby disrupting global supply chains and global production and causing the reverberations we see today in German manufacturing and uh the loss of jobs in that sector and across industrial Europe. >> [clears throat] >> This however is a single driving force in China's current economic performance. The other one is investment by the state public investment in Xiinping's technoindustrial vision for the country's future. This brings me to the question of how Xiinping views his technoindustrial vision for the future. Artificial intelligence uh in the Chinese context [clears throat] and looking at carefully the way in which it's reviewed in their ideological and policy literature is seen as an overwhelming positive for China's aggregate economic competitiveness and future in the world. Whereas in this country and around the democratic world there is an emerging parallel debate about the risks presented across the spectrum by artificial intelligence. Risks to individuals, psychosocial risks, employment risks, the security risks which arise uh from agents escaping from the sandbox of the type that we have seen most recently. This is not prominent in the Chinese literature. What is prominent in the Chinese literature describing the AI revolution is how this will turbocharge China's economic growth into the future. In Marxist economic theory, the view is we have four factors of production. Land, labor, capital, technology, and now a fifth as of 2019, data. There's an early recognition that data of itself becomes a new latent force to drive the economy forward. With the arrival of artificial intelligence, of course, there is an ability now to harness data for extraordinary u economic applications across all industrial sectors. And if you read carefully how Xiinping conceives of this, he sees artificial intelligence and the algorithms alive within it together with other new advanced technologies as now providing this turbocharging device to lift total factor productivity across the entire economy in every field of endeavor. And that is why in large part they are doubling down on this so hard through this massive campaign of public and publicly directed investment in this sector. In fact, if you read the literature, they fully recognize as Marxist economists that the traditional advantage of liberal capitalist economies in the past has been their relative efficiency in the allocation of resources. However, they believe they now pres possess a unique opportunity as a centralized state to deploy the new algorithmic powers available within artificial intelligence across the total production spectrum and not just in goods but prospectively in services as well. This brings me to a broader point of why she's literature on what he calls new quality productive forces driven by artificial intelligence and other advanced technologies [clears throat] represents for them not just a means by which to catch up with the United States across the AI stack. not just to keep pace with the US and the collective west in terms of where artificial intelligence is reached but to now leapfrog the west which is the term now used in the literature and to achieve what is also described as a paradigm shift against western economic models. [clears throat] The conundrum faced by Marxist economists since the relatively humilous Adam Smith sat uh on the docks of Glasgow to observe merchants loading and unloading uh goods from the [clears throat] North American market from which he ultimately devised the wealth of nations. His theory of price being determined in a marketplace by supply and demand. Marxist economists have long recognized, including in China, that this has been a remarkably efficient allocative mechanism for scarce resources within an economy. In large part, that explained also why why Dang Xiaoing opened the door to price-based market economics in the period of reform and opening that I've described before between 1982 and 2017. The invisible hand as described [clears throat] by Adam Smith uh working mysteriously uh in an economy allocating resources where there was an accentuation of de demand or a problem of a depreciation of supply and so price is the most efficient price being set and this has presented a conundrum for Marxist economists uh from the very beginning and Chinese Marxist economists as Well, but this is where the literature becomes sharp and real in the current debate. If I read it carefully, what the party is now saying in its theoretical literature is that quite apart from increasing total factor productivity within the Chinese economy as a consequence of AI and other advanced technologies, what we are looking at much more broadly across the entire economic paradigm is a superior macro allocation mechanism for resources within the economy which will be algorithmically driven. No more invisible hand of the market. The explicit term now used in the literature, the Chinese Marxist literature, the Chinese ideological literature is the visible hand of the state. And therefore the paradigm shift which is now emerging in the literature at least uh is we in socialist China believe that through the arrival of this enormous change generating set of forces of which artificial intelligence is the core. now have at our disposal for the first time in economic history an alternative to the free market for the efficient allocation of resources. This is one of the reasons why I believe we should take ideology seriously because all this is in the ideological literature not yet in the policy literature and not yet frankly as adopted by firms or corporations or state entities in the real marketplace. But as I said before, my observation of ideological change in China over the last 50 years is that ideological changes occur at the headquarters and they feed into policy changes and behavioral changes later on. [clears throat] And that my friends is where Xiinping's definition of new quality productive forces including artificial intelligence now stands. a catching up with the United States and surpassing it in terms of total factor productivity growth thereby turbocharging China's current low growth levels into a new level of high growth and then secondly engineering parallel to that a game change a paradigm shift in terms of the ultimate economic orthodoxy which distributes resources efficiently within an economy there's one conundrum however which even the ideological literature of the Chinese Communist Party recognizes and that is that AI and innovation at large across the advanced technologies is primarily but not exclusively happening in the Chinese private sector and so therefore how are we going to square the circle we need the innovation and the enterprise and the expertise and the cutting edge uh technological skills of this sector on the one hand but on the other hand we don't want to return to the ideology I have just put into the past which allowed this class of individuals within the country to become ever so powerful and if I read the literature carefully that is where the debate right now within the party now stands seeking to square that circle between these competing tensions Lehura in the last term Xiinping administration famously said that the Chinese private sector represents 90% of innovation. It represents 80% of employment growth. It represents also uh 70% of contribution to overall Chinese taxes. The ideological and political and policy dilemma therefore faced by the current administration is how to reconcile those tensions. Ideology in one corner and in the other corner the self-interest of a private sector wishing wish wishing to maximize profits who will not necessarily find their daily inspiration to get out of bed and to invent new things through having read another volume of Xiinping thought. To conclude, the reason why this debate is important and why I thought of making it the centerpiece of what I said in this lecture this evening uh is because where the Chinese economy goes now fundamentally determines the future of Chinese power in the region and the world. And Xiinping has made an enormous bet on his technoindustrial strategy. He has said that this will transform China's economic paradigm. He has said that it will also lift in time China's at present languishing private uh domestic consumption within the economy and that when the private sector gets on board it will also contribute to a further generation of fresh levels of growth in private fixed capital investment and thereby the growth conundrum that he's confronted over the last decade is changed and solved as a consequence of his betting big on a techno-industrial strategy. Final point is this, how do you pay for it? Always an important question in politics, always an important question in government wherever you are. >> [clears throat] >> And the answer so far is we in China can navigate uh this period ahead on the condition that we are continuing to harvest uh a trillion dollar plus surplus in our export relations with the rest of the world in the hope that the rest of the world doesn't construct tariff walls in response to our subsidized industrial strategy. So that is vulnerability number one. Vulnerability number two is the Chinese consumer who remember I said before is saving more and more and more so that the Chinese savings ratio is now uh reaching levels which we didn't think were possible anymore because Chinese savers are not investing in the property market anymore because fingers have been burnt comprehensively and because the stock market does not seem to be sufficiently stable or predictable in terms of providing a earn these are staying in very low interest earning deposits in the Chinese banking system and it's that enormous volume of individual Chinese citizens bank deposits which are being drawn upon by the Chinese state through a series of loan instruments local provincial and national in order to give effect to the techno-industrial strategy that I referred to before is that sustainable over time perhaps but that's part part of the big bet which Xiinping has made. So how will this turn out? I'm not sure. But I think the beginning of wisdom in our analysis of these things in Australia and elsewhere in the world is to understand clearly what China's strategy is. I thank you for your time. [applause] Thank you very much Dr. Rudd uh for your remarks this evening. We have a few minutes uh for questions and I have received a great many uh questions uh from the audience uh via the app. Do you think Xiinping's clipping the wings of the private sector is sustainable given that technology is now the key driver of national power and geopolitical primacy? Will he inevitably uh be forced to change policy, change course on this? >> I think until 2024 he thought that that was not necessary. That is to rembrace the private sector. But as the domestic economic data continued to head south, what you see in 24 culminating in an important meeting in the great hall of the people, I think from memory in January or February of 25 when he brought all the private sector heads into meet the party leadership, and you may recall the uh the footage with Jack Mah from Alibaba sitting uh tactically uh to the far right of the screen, not in the center. Um that was the first recognition uh that we despite our ideological resolution of 2017 about the need for the state and the party to re uh engage and to intervene in the market and to take what Xiinping has described as a position of top level designing that by the time we get to 2024 effectively some seven years later and again quarantining out the co period there is I think a come to Jesus come to marks moment in the middle of all of that which is this isn't quite working and so the re-mbbrace of the private sector begins in January of 25 it is ma matched by the passage through the national people's congress either last year or early this year of the so-called private enterprise law in order to provide more robust legal underpinning ings for the rights of the private sector in the economy. [clears throat] And most recently, there's been a further meeting uh of the Chinese party leadership with the uh private corporate leadership of the country. So I think there is a change in Xiinping's sentiment. You can see that reflected by the meetings I've just referred to, by the legislative initiatives which have been taken. The open question however is does the private sector yet believe it? You provided us with a historical perspective on the CCP's major ideological shifts from class struggle the Mao era uh to the unleashing of market forces under Deng and later return to the visible hand of the state under she now these shifts as you noted have been accompanied were accompanied by top leadership change. Can we expect another ideological turn or course correction post Xi? Or is Xi Jinping thought on socialism with Chinese characteristics for a new era firmly entrenched in the system for decades to come? >> Certainly more entrenched than the thoughts of Kevin. Um the uh mind will not sell nearly as well. [clears throat] Um the the difficulty of answering that question is to be honest about our assessment of how long will Xiinping remain leader. [clears throat] Xiinping is 73 years old. Um uh he's in good health. Um and he will come up for reappointment at the 21st party congress in October next year at which stage you'd be 74 or thereabouts. I would think health factors not intervening that Xiinping will see no grounds to remove himself from the central political scene and as the party's paramount leader uh until well into his 80s and there's precedent for that. Mao was active as a political leader until his death and he was 86. Uh Dong Xiaoing had his last major outing as a national political leader when he was 88 uh when he undertook his nunchin his southern expedition uh to reconstitute the embers of reform and opening following the implosions which came with tenement in 1989. So the idea of a paramount leader being actively in harness until your mid to late 80s is well within precedent range. So therefore the question becomes more difficult to answer if we are therefore projecting uh and what will China be like by the time we get to say [clears throat] 2042. Um I can't predict that. Um but I think Xiinping's plan uh would be to stay in power as long as possible uh and to bring on a new generation of um of party leaders who in the main have had their ideological nurture period in the period since Xiinping first took office back in 2012. And so therefore what then becomes the action and the reaction at that point uh difficult to predict. >> Turning to Australia China relations now what are your views on the relationship and where it's heading? Do you think that we've found the right balance between engagement and securitization? Well, the beginning of wisdom is always to know what China's own strategy is. I mean, this is not the sound of one hand clapping. I mean, I mean, international relations is the sound of at least two hands clapping or multiple hands clapping. Um, [clears throat] China is not a static power. It is a dynamic power. China is becoming objectively more powerful and projecting its influence into the region and the world through all the instruments of power that I referred to earlier in my remarks. So, that is a reality. So it's not as if we are here acting in isolation to that reality and nor are we acting in isolation to what other friends partners and allies the United States are doing elsewhere in the region. Uh look at Japan, look at Korea, look at the Philippines and look at other economic uh and strategic partners such as India. Second point is where I think the current government in Australia, the Albani government has got it right has been its conscious decision to put the megaphone away. Um the megaphone got a lot of use um in the period that Scott Morrison was prime minister. I'm not sure that that actually produced any sensible outcome for anybody. Um I've never been a fan of using the megaphone. uh if you want to actually uh bring about material change in a given relationship including that with China and so therefore I think that has been useful as uh a starting point. Uh secondly, if you look at the fact that the government succeeded in removing the various levels of trade embargo which the Chinese had imposed that required a lot of deft work on the part of Penny Wong in particular uh to ensure that that was properly executed and it was thirdly we've done all that at a time when including my own period just concluded in Washington as Australian ambassador to the United States when we have uh legislated through the United States Congress and executed the Orcus agreement for the investment in a new flatillaa of nuclearpowered attack submarines for our own national security purposes which China does not like or support despite the fact that China itself has a formidable fleet of nuclearpowered attack submarines itself as well as ballistic missile submarines as I said sound of two hands clapping not just one so if you put all those factors together in terms of some of the harder decisions which have been taken on the national security front where the economic IC relationship has stabilized too and the fact that the megaphone in both capitals has by and large been put away against most national measures of of countries around the world managing their relationships with Washington and managing their relationships with Beijing. I think the government here deserves some considerable recognition for its its positive achievement and effort and uh it stands in positive contrast I think with many other countries around the world. And on that note, on that note, uh please join me in thanking Dr. Rudd for the 2026 [applause] GW annual lecture. [applause] Folks, you're all friends of the Australian National University. Um I am too, even though I'm from Queensland. And uh [clears throat] I just got here by accident. uh the um you don't have to be a road scholar to work out there have been a few problems at mill here recently at the A&U. This is a fantastic university. This is a firstass worldclass university. So it's time I think just for everyone just to put all the away and just get on with the business. Um and that's why I'm delighted that we've got Gordon at the helm. uh and this university anchored in its statute, anchored in its mission and anchored now in its leadership is going to surge ahead. Let's get behind the new leadership. Thank you very much. [applause]