On Oct. 24, United States Vice President Mike Pence delivered his second policy speech on China at the Wilson Center in Washington D.C.

Key points in Pence’s speech, which focused on the Sino-U.S. bilateral relationship, include:
1. “The United States now recognizes China as a strategic and economic rival,” Pence said early in his speech, referencing the 2017 National Security Strategy. Near the end of his speech, however, Pence noted that “America will continue to seek a fundamental restructuring of our relationship with China,” and “we fervently believe the United States and China can and must work to share a peaceful and prosperous future together. But only honest dialogue and good-faith negotiations can make that future a reality.”

2. Pence noted that America no longer hopes that “economic engagement alone will transform Communist China’s authoritarian state into a free and open society that respects private property, the rule of law, and international rules of commerce.”

However, Pence makes it clear later in his speech that the U.S. is not calling for the end of engagement with China “The United States seeks engagement with China and China’s engagement with the wider world, but engagement in a manner consistent with fairness, mutual respect, and the international rules of commerce,” he said.

3. Pence said that America does not seek to “contain China’s development” nor is it seeking to “de-couple” from China.

However, Pence noted that “the Chinese Communist Party continues to resist a true opening or a convergence with global norms,” and that “all that Beijing is doing today, from the Party’s great firewall in cyberspace or to that great wall of sand in the South China Sea, from their distrust of Hong Kong’s autonomy, or their repression of people of faith all demonstrate that it’s the Chinese Communist Party that has been ‘de-coupling’ from the wider world for decades.”

4. Pence said that the U.S. “is treating China’s leaders exactly how the leaders of any great world power should be treated — with respect, yes, but also with consistency and candor.” To that regard, he did not mention Xi Jinping by name when pointing out that China continued to carry out intellectual property theft and militarize the South China Sea despite promises by the “China’s leader” and “China’s leaders” not to do so in the White House Rose Garden in 2015.

“We want a constructive relationship with China’s leaders, like we have enjoyed for generations with China’s people,” Pence said. “And if China will step forward and seize this unique moment in history to start anew by ending the trade practices that have taken advantage of the American people for far too long, I know President Donald Trump is ready and willing to begin that new future just as America has done in the past.”

5. Pence listed China’s many economic, military, intellectual property, human rights, and other abuses and transgressions, as well as what the Trump administration has done to address some of the issues. “Beijing has still not taken significant action to improve our economic relationship. And on many other issues we’ve raised, Beijing’s behavior has become even more aggressive and destabilizing,” Pence said.

6. On the Hong Kong issues, Pence said that “nothing in the past year has put on display the Chinese Communist Party’s antipathy to liberty so much as the unrest in Hong Kong.” He added that since “President Trump has repeatedly made it clear it would be much harder for us to make a trade deal if the authorities resort to the use of violence against protestors in Hong Kong,” the “Hong Kong authorities have withdrawn the extradition bill that sparked the protests in the first place, and Beijing has shown some restraint.”

“In the days ahead, I can assure you, the United States will continue to urge China to show restraint, to honor its commitments, and respect the people of Hong Kong. And to the millions in Hong Kong who have been peacefully demonstrating to protect your rights these past months, we stand with you. We are inspired by you, and we urge you to stay on the path of nonviolent protest,” Pence said.

7. Pence strongly criticized American companies for bowing to China. “Far too many American multinational corporations have kowtowed to the lure of China’s money and markets by muzzling not only criticism of the Chinese Communist Party, but even affirmative expressions of American values,” he said.

“Nike promotes itself as a so called ‘social justice champion,’ but when it comes to Hong Kong, it prefers checking its social conscience at the door,” he added.

Meanwhile, “NBA’s biggest players and owners, who routinely exercise their freedom to criticize this country, lose their voices when it comes to the freedom and rights of the people of China. In siding with the Chinese Communist Party and silencing free speech, the NBA is acting like a wholly owned subsidiary of the authoritarian regime.”

Our take:
1. Despite calling out the CCP’s pernicious behavior and abuses, Vice President Mike Pence generally adopted a more conciliatory tone towards China in his Wilson Center speech as compared with his fiery, hard-hitting Hudson Institute speech in October 2018. If the Hudson Institute speech signaled that the Trump administration was preparing for confrontation and a new “Cold War” with the Chinese communist regime, the Wilson Center speech suggested that the United States was ready to begin a rapprochement with the PRC—provided that Beijing continues to negotiate in good faith on the trade front.

Pence also appeared to have taken Trump’s 2020 re-election bid into consideration by devoting several segments of his speech to promoting the Trump administration’s tough stance and actions on China as compared to past administrations.

Per news reports in the first half of 2019, Pence was originally supposed to deliver his second China policy speech, which focused on the CCP’s human rights abuses, on May 29. The speech, however, was later postponed to the anniversary of the Tiananmen Square Massacre, then again repeatedly rescheduled as the U.S. and China sought to mend relations after Trump raised tariffs on Chinese goods in May. It is unclear if Pence’s Wilson Center speech is a heavily modified version of what he was supposed to give earlier in the year, or if it was always meant to be a separate speech with a different theme.

2. Both the CCP and the Xi Jinping leadership would take away ample positives from Pence’s floating of rapprochement in his Wilson Center speech.

From the CCP’s perspective, the Trump administration’s willingness to engage in rapprochement for good-faith trade negotiations would be a vindication of its delaying tactics and other strategies for lowering Sino-U.S. tensions. The CCP would likely strive to stay in the “sweet spot” to avoid further U.S. tariffs, work to undermine the Trump administration and prevent his re-election in 2020 without drawing attention to itself until it is too late for Trump, and take action to put itself beyond defeat in long-term rivalry with the United States.

For Xi Jinping, Pence’s Wilson Center speech can be used to defend his leadership’s handling of the Sino-U.S. relationship in the face of criticism from political rivals and give himself some political leverage to convene the long-delayed CCP Fourth Plenum meeting. And if Xi is able to emerge from the Fourth Plenum in a stronger position, then he might be able to sign a “phase one” trade deal with President Trump with lesser resistance from factional rivals and other “hardliners” (we looked briefly at why Xi needs a trade deal here).

3. We do not rule out the possibility that the Trump administration moderated Pence’s second China policy speech after considering Xi’s domestic political situation. After all, Trump’s top external China advisor Michael Pillsbury has said in several media interviews that “hardliners” in Xi’s administration were responsible for the PRC reneging on a 150-page draft trade deal in May.

In an Oct. 24 interview with Fox News, Pillsbury noted that the CCP, which is in a “dilemma,” was due to have a meeting “over the next four to five days” (a clear reference to the Fourth Plenum) where they have to “take a vote on what to do.” Pillsbury added, “that’s why the Vice President’s [Mike Pence] speech is so important.” The fact that the announcement of the Fourth Plenum dates came on the same day as Pence’s speech also hints that both sides have likely reached a mutual understanding on how to proceed with trade negotiations while coping with sensitive political situations at home.

4. Based on our analysis, the CCP is facing an unprecedented political crisis (see here and here). The “you die, I live” nature of the factional struggle in the CCP’s elite ranks means that even the best-laid plans by any side to outmaneuver the others are not Black Swan-proof; put another way, the different factions can go to any lengths to triumph over or snatch away victory from their rivals.

Xi and Trump could sign a “phase one” deal in November and further trade negotiations may proceed in a positive direction. However, the CCP’s problems with factional struggle, nationalism, Hong Kong, intellectual property theft, and other issues all threaten to derail the trade talks at any given moment.

Xi could possibly extend the longevity of the trade deals which he signs with the U.S. by striking hard at the Jiang Zemin faction and gaining a decisive edge in the CCP factional struggle. Yet any agreement will not last so long as the Communist Party rules China.

5. The CCP will seize upon Pence’s comments on Hong Kong, especially his urging the protesters to take the “path of nonviolent protest” and claim that “Beijing has shown some restraint,” to carry on and even escalate their current strategies and tactics to incite the protesters, turn the international community against the protest movement, and ultimately defeat the anti-extradition bill demonstrations (see herehere, and here).

Source: https://sinoinsider.com/2019/10/geopolitics-watch-early-analysis-of-pences-speech-the-trade-war-and-hong-kong/