KYLE BASS: I'm here with General Spalding,
who's just written the book, "Stealth War,
How China Took Over While America's Elite
Slept."
General, it's a pleasure to be here with you
today.
ROBERT SPALDING: Great to be here.
KYLE BASS: Very few books have been written,
I think, unvarnished on what China's really
doing, what their grand plan is, what their
grand strategy might be and your journey through
China is one that I think people need to hear
about.
That starts with the embrace and the hope,
and the beauty of the people of China, all
the way back to I guess 2002 with you taking
Mandarin, learning Mandarin, and basically
embedding yourself into China.
Then over time, your view of that country
and their leadership has changed.
I'd love for you to walk our audience through
your time in China.
Now, first of all, give the audience a little
background.
You're an Air Force General, you were a B-2
pilot, I guess our B-2 pilot, and became the
US DoD Attaché to China in Shanghai.
Tell us about, just walk us through a little
bit of your journey into China, taking their
language, being immersive.
Then when did you start to understand what
China's grand strategy really was?
ROBERT SPALDING: Yeah.
I was selected back in 2001 to be an Olmstead
scholar in China, it's really a wonderful
program where three military officers in each
branch gets selected each year to go live
and study abroad in a foreign country for
two years, and at the time, you have to say,
"Hey, what country do you want to go to?"
I thought first of all, number one, I wasn't
going to be accepted, it's a very prestigious
program.
Number two, what country would I pick, and
as I looked around the world in 2001, the
most strategic country that I can think of
where there's going to be a cooperative relationship,
or an antagonistic relationship with the United
States that was still yet to be seen, it would
be China.
KYLE BASS: It happened to be the year China
was ascending to the WTO.
ROBERT SPALDING: It was.
I applied for the program, got selected unbeknownst
to me and went home, told my wife, not only
are we not getting out of the Air Force, like
I said I was, we're going to go live in Shanghai.
We moved to Monterey, California.
I learned Chinese over the next year, 2001,
2002 at the Defense Language Institute.
We moved into Shanghai, Pudong, which is the
eastern side, which is the more modern side
of Shanghai.
It's a new side that the Communist Party built
up in the '90s, and got to experience China
for two years.
I studied at Tongji University, which is the
premier civil engineering school in China,
and traveled all over the country.
It was the most incredible experience.
My kids loved it.
My wife loved it, I loved it, we got to know
the Chinese people.
They were some of the most hardworking, resilient,
friendly people that you'll ever meet.
At the time, I was like, this place is incredible.
All of my neighbors were building factories,
the Fortune 100 companies were building factories
in the Shanghai Special Economic Zone.
Everybody was doing well economically, not
just the foreign companies, but also the Chinese
people themselves.
They were happy, they seemed to love what
was going on.
The thing that was interesting, but I didn't
challenge was that all the people told me,
"Hey, we could never have democracy here in
China, because the Chinese people really can't
handle democracy.
It would be too chaotic here."
At the time, I never thought about it.
You never thought to challenge that, particularly
since Taiwan was across the street, and they
were a very vibrant economy, but nevertheless,
I thought when I left in 2004, after that
two-year experience, I told my wife, I said,
"I'm going to retire from the Air Force.
I'm going to come back here and start-- move
back to Shanghai."
KYLE BASS: What changed?
How did you start to see what their grand
strategy is as a government, as the Communist
Party's grand strategy?
ROBERT SPALDING: It actually started at the
Council on Foreign Relations.
Over 10 years later, the Air Force decided
this experience, this language, this culture
that you understand China a lot better than
most and we want to push you to be the Air
Force's nominee at some point to be the Defense
Attaché in Beijing.
There's a process.
It's a process to develop you to have the
right understanding, knowledge, diplomacy,
and other things to be able to do that.
The first step of that process was to be a
military fellow at the Council on Foreign
Relations.
That was the first time I was really exposed
to the business community, the business to
financial community.
I had a really fateful lunch there with a
gentleman that ran a hedge fund in China.
He started-- we had a conversation about what's
the future of China, and I believed at the
time that their economy was going to stagnate,
they had reached the end of their growth model
and they were going to have a hard time establishing
a high value added economy going forward.
He said, "No, you're wrong, they're going
to plateau for a bit, and then they're going
to take off and then become the most powerful
economy and the most powerful country in the
world."
I said, "That really doesn't make sense."
There's still had a lot of hubris about the
United States.
We have the best system.
We have the best model.
We're going to come out of this, and that
there's no way that this is going to be the
case, but that began my education on another
part of China that, quite frankly, I didn't
realize.
I moved from there to be the advisor to the
chairman of joint chiefs on China.
It was at that time that I began to learn
what it was to be a military diplomat, I began
to learn about the Chinese government and
more importantly, I began to learn about the
Chinese Communist Party, I read documents
like the Chinese Communist Party constitution.
KYLE BASS: You weren't coached, let's say
per se, by the US military at the time, they
just gave you a plethora of resources for
you to figure this out on your own.
ROBERT SPALDING: Actually, no.
I was taught in the standard line of diplomats
to have the same point of view that the last
40 years had been taking us.
I was taught that if you want to tell the
Chinese about something that's bad, like concentration
camps or forced organ harvesting, always do
it in private, never do it in public.
In fact, the Chinese would tell us the same
things.
Yes, we understand that you guys believe in
human rights and democracy and freedom and
everything, just don't talk to us about that
in public, please do it in private, it'll
be much better for both of us.
If you do it in public, then we have to be
a little bit more [indiscernible] in our going
against that, but we can certainly listen
to your pleas in private.
We were taught, essentially not to air dirty
laundry in public.
It really became, as I watch this back and
forth, what I was supposed to say to my counterparts
at the People's Liberation Army, and what
they were telling me, we were saying the same
things.
In other words, they had co-opted the diplomatic
language between the two countries, to the
point where all of our talking points were,
essentially, they're talking.
They embedded their talking points within
ours.
KYLE BASS: It's interesting, you're saying
that not only can they control their own narrative
within China, and they can use the Global
Times and Gangwa and Taichen, all over the
world, they try to control the world narrative
about China, you're telling me that they can
control the US military diplomatic language,
and control even that narrative when you're
over there?
ROBERT SPALDING: Right.
One of the things that they'll say and what
Xi Jinping frequently says, he says to Davos
all the time is that globalization, we need
globalization.
We need to have open markets, we need to have--
everybody should be getting along.
We should all be trading with each other.
KYLE BASS: What he means is he wants global
open markets everywhere.
He wants to participate, but not at home.
ROBERT SPALDING: I didn't understand that
until-- so this fateful meeting that I-- and
with all people I met while I was in New York,
actually began to play into my learning about
what was going on.
In the fall of 2014, as I'm sitting in the
Pentagon, reading the Chinese-- so there's
a Chinese Communist Party constitution, and
there's a People's Republic of China constitution.
Most people don't know there's two constitutions.
Now, when you think about-- KYLE BASS: Why
is that?
ROBERT SPALDING: If you think about a country,
and you think about the sovereign of the country,
so our sovereign, our State Department acts
as a sovereign for diplomatic purposes.
Another one, it goes across, it represents
the Sovereign of the United States when it
interacts.
When you talk to the MFA, or when I as-- KYLE
BASS: What's the MFA?
ROBERT SPALDING: The Ministry of Foreign Affairs
in China, or when you talk to the People's
Liberation Army, which is like the Department
of Defense in China, you're not interfacing--
at the government level, you're not interfacing
with the sovereign.
Now, in the case of the People's Liberation
Army, they are actually not a member of the
government, per se, they are the armed party,
or armed component of the Chinese Communist
Party.
When you think about a sovereign, what do
they do?
They control money?
They control the police force.
They control the military.
Essentially, all of those components are completely
controlled by the Chinese Communist Party,
as is everything else.
When you go across, and you meet with Xi Jinping
as the President, in reality, the component
where he says, decides what happens in the
country is actually as the chairman of the
Chinese Communist Party.
He's really the chairman.
When you interface when our State Department
Pompeo meets with the Minister of Foreign
Affairs, he's not meeting with the sovereign.
You only meet with the sovereign if you go
to the Chinese Communist Party headquarters,
or some privileged people have been able to
go to Zhongnanhai, but of course, that's only
if you're a special friend to the Chinese
Communist Party.
KYLE BASS: Haven't you been there?
ROBERT SPALDING: I have actually been to the
Chinese Communist Party headquarters once
and I was taken there by Michael Pillsbury.
I'm probably the only Defense Attaché that's
ever stepped foot in the Chinese Communist
Party headquarters.
KYLE BASS: What went on in that meeting?
This is a-- I'm not really a non-sequitur,
but I'm very interested in total evidence.
ROBERT SPALDING: What I found out in that
meeting, I was actually quite surprised, the
Chinese Communist Party since the fall of
the Berlin Wall and the end of the Cold War,
they realized that, "Hey, Chinese, or Communist
Parties are going away."
They used to interface on the internet on
an international basis and on bilateral basis
with communist parties all over the place,
particularly when the Soviet Union still existed.
Now that all the communist parties are going
away, who are they interfacing with?
Well, I was surprised to know that our Democratic
Party and our Republican Party were going
over on junkets to meet with the Chinese Communist
Party in the Chinese Communist Party headquarters.
That's one of the things that I learned.
I was actually quite shocked about that.
KYLE BASS: You saw congressmen and senators
on Chinese cultural exchanges being invited
into the Chinese Communist Party headquarters?
ROBERT SPALDING: Well, I didn't see them but
that's what they said, "Yes, we're doing outreach
with your Republican Party.
They come over and meet with us, and we're
doing outreach with your Democratic Party.
They come over and meet."
I was actually quite shocked, I did not know
that that behavior was taking place.
What I was getting in addition to getting
trained as a military diplomat, I was also
had another education going on.
I was reading these documents, the documents
of the Chinese Communist Party, and understanding
what actually was going on.
I started to realize that, in essence, if
you look at the way the Communist Party works,
it is about controlling the narrative.
It is about controlling what you think and
how you speak about the word China and the
Chinese people.
Now, even in the United States, or in China,
when you say China, dot, dot, dot, what comes
after that is a Chinese Communist Party talking
point.
The narrative that says, for example, if you
bring up things like concentration camps for
Uighurs or forced organ harvesting, or the
fact that Confucius Institutes do censorship
of speech, and suppression of religion on
university campuses in the United States,
you are being racist.
That is a Chinese Communist Party talking
point.
I've experienced it many times.
Another Chinese Communist Party talking point
is if you say something about Uighurs in concentration
camps, or the force organ harvesting, then
you just angered 1.4 billion Chinese people.
They wrap-- the Communist Party wraps themselves
into this wonderful people and culture in
history that I got to know and love in 2002
and 2004, and really takes that mantle and
says, "When you're talking about the evil
nature of the Chinese Communist Party, you're
investing that in the Chinese people."
It's actually quite effective because it shields
the Chinese Communist Party from scrutiny,
because people really can't accept that 1.4
billion people would be that evil to want
to have forced organ harvesting.
In fact, what I began to tell my People's
Liberation Army counterparts is, "Look, most
people in China don't care what you're saying,
stop saying I've angered one point 4 billion
Chinese."
I remember all my friends, when I'm walking
around in Shanghai, I guarantee you, they
were worried about living their life, they
could care less what you thought as the People's
Liberation Army.
KYLE BASS: You're saying that the Communist
Party creates its own safe harbor, and it's
safe harbor is any criticism of any of the
evil that the government is engaging in gives
them that safe harbor to just say you're just
a racist?
Don't worry about what we're doing over here.
You're just a racist.
That's typical call it associate pathological
behavior.
ROBERT SPALDING: Because they're burying themselves
inside the Chinese people.
Because they've hijacked China and the Chinese
people, only they get to speak for China and
the Chinese people.
The Chinese people don't get to speak for
themselves.
KYLE BASS: I want to go somewhere that you
and I've talked about before, because I think
the listeners are going to find this to be
fascinating, but you've told me something
that I actually can't believe happened behind
the scenes.
You've been in the US Embassy in Beijing and
in Shanghai and when you meet with the Chinese
counterparts, whether they're PLA or whether
they're embassy staff, you told me something
that I still can't believe.
What did they tell you?
What did they say to you about US-China competition
when you would meet with them behind closed
doors?
ROBERT SPALDING: Well, what they'll say to
you is that-- KYLE BASS: Again, in private.
ROBERT SPALDING: In private, what they'll
say to you is, it's our time.
For 5000 years, we ruled the world.
We had a bad hundred years.
Most of it because of your fault, because
you were-- KYLE BASS: Their century of humiliation.
ROBERT SPALDING: Their century of humiliation--
but we're back and we are going to be on top
and you, you are going to be responding to
us.
KYLE BASS: You meaning the United States,
and you said they said, "We're going to clean
you out."
ROBERT SPALDING: We're going to dominate,
we're basically going to dominate.
KYLE BASS: The Chinese are telling the United
States that they are going to dominate us.
This is behind closed doors in the US Embassy
or the Chinese embassies.
ROBERT SPALDING: This is pervasive around
not just within diplomatic circles, it's also
in financial and corporate circles.
In private, they'll say, "Look, you better
figure out who is going to be running this
world, and put yourself on the right side
of that if you want to be profitable."
I've had very wealthy billionaires in this
country tell me democracy's dead, China has
a far better model.
If we want to be on the side of history, not
only do we need to adopt that model, but we
need to get on their side.
KYLE BASS: That's fascinating to me.
China is so good at using our own greed against
us.
You say these billionaires are telling you
democracy is dead, we need to adopt their
model.
Those are the billionaires that China has
given special access to and made them wealthier
to become evangelical about the Chinese system
with a complete disregard for US national
security.
There's the idea finance and the super billionaires
and the people that run these companies that
have big businesses in China and can't wait
for more shackles to be invested over there.
Then there's the national security apparatus
here that realizes that China is our biggest
competition.
In fact, they're one of our "hard targets"
in our defense intelligence analysis.
There's this huge gap between the-- call it
gap in perceptions of the billionaires that
have special access and our national security
apparatus.
One of the things if we go back to-- let's
go unpack a few things you said real quick
first.
Our audience, I'd imagine has heard something
about the Uighurs in the concentration camps
in Xinjiang up in the Northwest.
Let's get into more about what's happening.
I recently read, the UK had a tribunal and
the tribunal was presided over by the QC that
handled Slobodan Milosevic's war crimes trial.
They interviewed hundreds of witnesses that
had escaped from Xinjiang, that have been
released from Xinjiang, and even doctors that
were part of the live organ harvesting program
there.
When you read chinatribunal.com, and you go
through the summary of what happened, China
and the CCP are actually taking organs out
of humans while they're still alive and they're
just paralyzed.
Why is this something that the world doesn't
know about?
Why is this something that the press hasn't
carried?
We talk about it because we follow these things
daily, but how does this get out into the
open so that these billionaires that say,
democracy is dead, we need to adopt their
way-- and does that mean we need to put two
or 3 million people in concentration camps
and rip their organs out of them while they're
alive?
What exactly are they saying to us?
How do we bridge this gap?
ROBERT SPALDING: Well, what you're talking
about is so horrific, like when you're confronted
with it, it is so bad that you really can't
absorb it.
Particularly, remember, as I said that they've
taken the words China and the Chinese people,
and you say, people couldn't be like this,
but organizations, regimes can.
We know the Nazi regime, we know the Stalin
regime, and now, we know the Chinese Communist
Party regime.
KYLE BASS: Even now.
ROBERT SPALDING: Killed millions, 10s of millions
of people.
You hear it for the first time, you're like
it has to be-- KYLE BASS: It can't be true.
ROBERT SPALDING: It cannot be true.
KYLE BASS: Even you've read the horror that
these people are going through, it can't be
true.
ROBERT SPALDING: Yet, we have one country
to date that has banned traveling to China
to do a transplant.
KYLE BASS: To get an organ.
ROBERT SPALDING: To get an organ.
KYLE BASS: Who is that?
ROBERT SPALDING: That is Israel.
The reason Israel banned it is because a heart
surgeon who happened also be the head of the
Organ Transplant Association within Israel
at the time, heard from his patient that he
was going next month to get a heart transplant.
KYLE BASS: He was making an appointment to
get a heart transplant.
ROBERT SPALDING: He had made an appointment.
KYLE BASS: It was a month out.
ROBERT SPALDING: It was a month out.
KYLE BASS: Normally, if you're on the heart
transplant waiting list, you get a call, and
you have to fly somewhere within 12 hours
to get a heart transplant.
ROBERT SPALDING: You have to be in China,
you can-- KYLE BASS: You can make an appointment
to get a heart transplant.
ROBERT SPALDING: You can get an appointment.
The heart surgeon said, "What do you mean
you've made an appointment?"
He began to investigate.
What he found was the Chinese Communist Party,
in their People's Liberation Army hospitals,
were essentially taking the Falun Gong and
in some cases-- and the Uighurs and in some
case, dissident Christians.
It all depends on if you're a match.
The reason that they know that this is going
on, because some people leave that and they
say, "Hey, my DNA was checked and they did
an ultrasound on me."
KYLE BASS: When China brings in what they
call prisoners of conscience, which are various
religious groups and dissident groups, they
tissue type them, they blood tests and they
ultrasound them.
ROBERT SPALDING: They ultrasound them.
KYLE BASS: They do it with every prisoner.
They have a buffet line of organs to choose
from.
ROBERT SPALDING: What that heart surgeon found
out is that this was going on.
He also happened to be a survivor-- he came
from survivors of the Holocaust.
You clearly recognized the same conditions
that existed under the Nazis with going on
within the Chinese Communist Party.
I think it just it goes to show you that there
is no morals invested or human dignity or
human rights invested in the Chinese Communist
Party, it is really about as evil an organization,
not because the Chinese people are evil, but
because it seeks only power and control.
Essentially, these are the things that-- so
he got Israel to say, we're going to ban this.
Now, you can't go from Israel to get an organ
transplant, you can go get it from anywhere
else.
KYLE BASS: To be clear, if you're in the US
or Europe, and you want to make an appointment
to go get an organ transplant in China, you
just-- ROBERT SPALDING: You can do it.
KYLE BASS: You figure out who to call, you
just call them up, make an appointment.
ROBERT SPALDING: Right.
It can cost you some money or a lot of money.
By the way, the interesting thing about how
Deng Xiaoping morphed communism in order to
unlock the potential that China's experience
was really to tie the human profit motive
to the Communist Party's national interest.
That's a very powerful formula for development
and economic growth and social development.
We have owned a patent on that, we had owned
the patent on that.
What they did is say, "Okay, we're going to
in a very narrow area, we're going to allow
you to get rich, but in all these other areas,
we're going to dictate what it is.
The Communist Party is going to dictate."
KYLE BASS: I would say more importantly, we'll
choose the people that we want to make rich.
They'll become evangelists, and more importantly,
lobbyists for the Chinese way, the CCP way
of life and business in the US.
Some of China's top lobbyists are US billionaires.
ROBERT SPALDING: When you look at the end
of World War II, and the world that we tried
to create, this idea of democratic principles,
civil liberties, human rights, rule of law,
went hand in hand with the idea of free trade.
There wasn't just free trade or globalization,
there were principles built into that.
Then selfdetermination.
All of these things, it's in the land of charter,
one page, you can read it, and you can see,
"Hey, this is a template for what we wanted
to build."
Well, China took that and said, "Hey, throw
all that other stuff away.
We're going to go with globalization."
KYLE BASS: We're go with a free trade, and
forget about those other things.
ROBERT SPALDING: We're going to create a culture
that only is about getting rich, and then
we're going to control that.
When you do that, when you take morality out,
when you take human rights and civil liberties
out, and you turn people that the Chinese
counsel [indiscernible] said, "Destroy the
Falun Gong, literally destroy the people that
practice Falun Gong."
When he did that, he created an opportunity
for the People's Liberation Army to make a
profit.
They created these things and said, "Hey,
he said, destroy these people.
He didn't say that we couldn't make a buck
on it," and so they did, they created business.
In China, if you want to create a business,
as long as it doesn't challenge the Communist
Party, everything's okay.
Fentanyl.
Fentanyl is a good example of this.
It comes out of the pharmaceutical factories,
the same factories that are producing-- the
core factories that are producing all the
drugs, generic drugs that come across from
China, that's where they're producing the
fentanyl, and just another business for them.
KYLE BASS: What's interesting about the fentanyl?
We've gone-- let me go back to cover one more
item on the concentration camps, the Uighurs,
the US intelligence believes it's up to 3
million people now.
3 million people in concentration camps and
we have satellite images, Israel has satellite
images, Europe has satellite images of what's
happening in Xinjiang.
It's one of the benefits of global technology.
When they started building the crematoria
there, that should have been an interesting,
aha red flag moment, that you're building
concentration camps and cremation facilities
in the same place.
I don't think that they're vertically integrating
because they think it's a good idea over time
to be able to dispose of bodies.
Why hasn't the US banned, call it, organ travel?
Why hasn't the West decided to do what Israel's
done?
Again, why are we not making this front page
news all the time?
The New York Times did a really interesting
multi-day writeup on the Uighurs and the concentration
camps, and then it just went away.
Why aren't we talking about it more?
ROBERT SPALDING: In addition to controlling
the narrative on China and the Chinese people,
they also are experts of this case.
When you look across the world, and you look
at the two biggest nations creating influence
around the world, there's the Russians who
do atomization.
They basically break up populations, they
create division between neighbor.
The Chinese come in, and in that, underneath
that, they hide everything they do, and the
Communist Party is one of the best organizations
ever in history of keeping a secret about
everything it does.
KYLE BASS: You mean a secret about its grand
strategy.
ROBERT SPALDING: A secret about everything.
Us, even though our intelligence community
has an almost impossible time trying to piece
together what's going on because they have
a great system of essentially hiding everything
they do, everything's built in to how they
operate the Communist Party, because it operates
over as a veneer over the society.
When you control the narrative on China and
the Chinese people, and you hide everything
you're doing, it's not exposed.
We need facts.
KYLE BASS: The secret of Xinjiang is none
of our cameras are rolling inside there.
The nightmare for the Communist Party has
been Hong Kong, because in Hong Kong, they
want to squash the rebellion.
They want to basically annex Hong Kong-- ROBERT
SPALDING: The cameras are there.
KYLE BASS: The cameras are everywhere.
ROBERT SPALDING: Rolling.
KYLE BASS: No matter how they try to change
the narrative, the West has been able to say,
"You guys are foolish [indiscernible]."
ROBERT SPALDING: They dress people in the
uniforms of Hong Kong and whatever.
KYLE BASS: In Xinjiang, they closed roads.
The CNN tries to get in there.
[Indiscernible] tries to get in there.
They won't let you in.
That's it.
Basically, they're able to just hide 3 million
people in political prisons and getting organs
ripped out.
ROBERT SPALDING: Right.
Of course, if you land there, they'll put
an app on your phone so that they're making
sure that they know what you're doing with
your phone.
They basically locked everything down, both
physically and electronically.
Think about what the US Army soldiers experience
when they walked in the Dachau.
The horror that they witnessed and yet, this
was known by people, and it was talked about,
but even at the time, people could not imagine
the Nazis could be so evil.
It's very similar situations that's going
on today.
KYLE BASS: Let's move to fentanyl generic
drug.
When I look at fentanyl, and what's happening,
and again, I'm not an expert in this space,
but I've talked to experts, we lost like 75,000
lives to opioids last year alone, we think
48,000 to 50,000 of them were fentanyl deaths,
90% plus of the fentanyl that comes into the
US comes from China.
Just using deductive logic, the Chinese government
is killing 40,000 Americans a year on purpose,
i.e., just shipping us our own death drugs.
We went to war in the Middle East over September
11th, which was a horrible day in the lives
of our country, and the life of our country,
and they killed about 3000 people.
They're killing 40,000 a year, and what are
we doing about it?
ROBERT SPALDING: Well, not just killing 40,000
people a year, you have to go back to those
same communities and say what happened first?
What happened first is when they go in the
WTO in 2001, we lost over 70,000 factories,
3.4 million manufacturing jobs, add four support
jobs for each one of those so over 13 million
jobs.
They took away America's factories, took away
their jobs and because those jobs were long-term
jobs with healthcare, they took away their
healthcare, and they took away their retirement
funds.
They left those communities destitute.
Then they started sending in the drugs and
killing them.
Yes, it's not because Xi Jinping said, "Sell
Americans fentanyl."
What they said was, "We don't care what you
do as long as it employs Chinese and makes
money."
I can tell you that the profit motive in China
is alive and strong and those guys that run
pharmaceutical companies are making a ton
of money, they're cranking out fentanyl and
shipping it to the United States.
Now, the interesting thing is when you go
and talk to our drug enforcement officials,
like I have, they'll tell you, the Chinese
are cooperating with us.
I almost fell out of my chair.
I said, they're shipping in 100% of the fentanyl
that comes in the United States, either through
the southern border, through the precursors,
or directly shipped to you in the mail through
the postal service, or coming as press pills
from Canada.
It's all coming from China.
They said, "Well, yeah, but when we go over
and we say hey they've changed the chemical
composition of fentanyl, just to make it--
now, it's legal.
Can you make that illegal and stop it?"
They'll say, "Well, it usually takes us a
year to get that through the process but for
you, we'll do it in six months.
We'll roll up a couple of these guys and we'll
put them in jail."
Of course two weeks later, they're out.
Then certainly six months later, they say,
"Hey, this thing's no longer legal," and then
just change it formulation again, but we feel
because of that, because they say that, those
words to us, oh, they must be cooperating
with us when in fact, they're not.
The flow hasn't changed one bit.
KYLE BASS: Yes, it has.
It's gotten more, it's gotten greater.
The flow continues to increase.
It feels to me like a reverse opium war.
ROBERT SPALDING: It is very much a reverse
opium war.
If you talk to them in private, I'm sure that
they would giggle about it.
To them, it's humorous.
KYLE BASS: The story that I just read is they've
genetically modified the poppy plant so that
it can grow year round instead of just half
the year.
ROBERT SPALDING: I have heard of that.
KYLE BASS: This is a story that just came
out in one of the medical journals a week
ago, where they said their poppy crop is now
up 40% because they can grow plants around
and why it hasn't doubled, I'm not sure.
Maybe it's harder to grow in the wintertime.
Point being is we have gross human rights
violations, we have one could deem to be an
attack on the United States, and then when
we get out of fentanyl, we get into the generic
drugs and what they're doing there with the
residuals being carcinogenic, and they own
that business, again, every time you look
under a rock in our relationship with China,
it just seems to get worse and worse.
It gets worse everywhere I look.
Why do you think we, as a country, why do
you think we even engage with them?
Is it only because our profit motive, because
of our greed and our desire to chase Eldorado
and then 1.4 billion Chinese?
Why don't we open our eyes and say we're not
going to interface with an evil regime?
What's your view?
How do we fix this?
ROBERT SPALDING: I'll tell you why we don't
recognize it.
We don't understand China, or the Chinese
Communist Party.
Now, when I went over in 2002, and had my
first meal in a Chinese restaurant, and I
got the check, and I didn't get a fortune
cookie, I was like, "Where's my fortune cookie?"
I didn't know until I realized till that moment
that fortune cookies don't come from China.
They actually come from the United States.
It was made by Japanese guy in San Francisco.
Then all of a sudden, it caught on as a thing
for Chinese restaurants in the United States,
but it's not actually-- What we know about
the Chinese people and the Chinese Communist
Party, well, who was supposed to warn us about
this?
We're the experts on China.
Now, why didn't the experts on China warn
us about the Chinese Communist Party?
They were going over on junkets.
Paid for by the Chinese Communist Party, granted
visas by the Chinese Communist Party.
Bloomberg did a fantastic article on Xi Jinping's
family when he took power, and how wealthy
they had become, and Michael Bloomberg was
warned, "If you don't stop this, your Bloomberg
terminals will not work in China anymore."
KYLE BASS: In fact, they turned them off for
a while.
This is the [indiscernible] story.
ROBERT SPALDING: Then all of a sudden, all
of a sudden, Bloomberg's self-censoring when
it comes to reporting about the Chinese counterpart.
KYLE BASS: It's actually worse than that.
I think Bloomberg is gone on the offensive
against China hawks.
ROBERT SPALDING: Well, I think so, because
if you think about it, globalization actually
helps Wall Street.
Because they earn a fee on equities or bonds.
KYLE BASS: Bloomberg wants to sell more terminals.
ROBERT SPALDING: Bloomberg wants to sell--
KYLE BASS: Blackrock wants more money.
ROBERT SPALDING: Right, exactly.
KYLE BASS: The casinos want more gambling.
They want this financial integration [indiscernible].
ROBERT SPALDING: My point about tying the
profit incentive to Chinese Communist Party
national interest, it doesn't just work in
China.
It works here, too.
It your works in Europe.
It works in Africa.
It works in Asia.
All you have to do is figure out how do I
get you incentivize financially or economically
and then you'll do what I want?
How do we fix it?
You asked how do we fix it?
Well, one of the ways that you could fix it--
and that I'm specifically talking about fentanyl,
find what's-- we just recently in Philadelphia,
at the port there, or might have been Baltimore
found something like 100 million dollars'
worth of fentanyl on a ship.
Now, the first time that the US government
says if we find one bit of fentanyl on any
ship, we're turning every single ship back,
and you won't get a ship in the port for a
month.
Not only that, we're going to charge you for
everything that was offloaded a $1,000, fine.
The next time it comes in, it's going be doubled.
KYLE BASS: Why not charge them for the full
value of the shipment?
Why not say the shipping company is going
to owe $100 million for this?
ROBERT SPALDING: Then when you do, ICBC has
got a great building in New York City.
[Indiscernible] has a number of assets-- KYLE
BASS: Bank of China has [indiscernible] in
New York.
ROBERT SPALDING: You say, okay, definitely,
we're going to take that as compensation.
When you start levering penalties on the Communist
Party and on their assets and on the nation
itself, because the Communist Party is a sovereign,
then you get behavior to change.
Until you do that, if you go after companies
or individuals, which is what we tend to do
in a country that's about the rule of law,
they're going to say we don't care just like
they can harvest your organs as a Falun Gong.
If you're a fentanyl producer in China, and
you happen to be rolled up by a US indictment,
doesn't matter.
KYLE BASS: The1.399 billion-- ROBERT SPALDING:
We got more.
Go have at it.
KYLE BASS: Yeah.
Okay.
In your book, which your book is, I found
your book, I hope this isn't a negative, but
I found it to be a series of amazing short
stories.
It is telling a greater narrative but I found
each chapter to be fascinating because it
was a start and a finish at every chapter.
In one of the chapters, you talked about how
China's actually censoring and coming after
voices of opposition in the United States.
Talk to me about how they do that.
ROBERT SPALDING: The first time I've experienced
this firsthand, I actually came over with
General Fang Fenghui, who was the Chief of
the General Staff for the People's Liberation
Army.
KYLE BASS: Came over meaning from China to
the US.
You escorted the Chinese general here.
ROBERT SPALDING: I escorted him to Mar-a-Lago
for the first bilateral meeting between Xi
Jinping and President Trump and on the way
back, so we flew out of Miami, flew to New
York, got transferred from New York, flew
back to Beijing.
From Miami to New York, I get in the plane,
I'm in the back of the plane, all the POAs
in the front of the plane.
In the back of the plane, I noticed that--
KYLE BASS: Is this a commercial flight?
ROBERT SPALDING: It's commercial flight.
In the back to the plane, I noticed that there's
all these Chinese people and they're speaking
Chinese-- KYLE BASS: Which you speak.
ROBERT SPALDING: Which I speak, so I started
speaking to them, "Hey, how's it going?
What's going on?"
Then I noticed they had bandages and scraped
up, I'm like, "Hey, what's going on?"
KYLE BASS: What happened to you guys?
ROBERT SPALDING: They said, "Oh, we're Falun
Gong.
The embassy sent some people down to beat
us up.
We were protesting Xi."
KYLE BASS: The embassy sent-- the Chinese
Embassy sent thugs to beat up protesters in
the United States?
ROBERT SPALDING: In the United States.
What happens whenever you have a head of state,
so Xi Jinping come to the United States, this
happened in September of 2015, when he came
to meet President Obama in Washington, D.C.,
is the embassy will make a call out to all
the visa holders, students, business- - KYLE
BASS: Any ethnic China in the US.
ROBERT SPALDING: Anybody that's a Chinese
national in the US, in the region come out,
will line the streets of the approach.
KYLE BASS: They're instructed to line the
streets.
ROBERT SPALDING: They're instructed to line
the streets of the approach to ensure that
no protests happen.
If a protester shows up, what they're trained
to do is essentially surround the protester
and then beat them so that you can't notice.
They are essentially establishing sovereignty
in the United States, sovereignty over the
territory where the Communist Party leaders,
they were doing the same thing-- KYLE BASS:
Did we arrest any of the people that beat
these Falun Gong?
ROBERT SPALDING: No, we didn't.
In fact-- KYLE BASS: Why is that?
ROBERT SPALDING: Well, primarily, the reason
we haven't done any enforcement whatsoever,
ZT [indiscernible], could have been done during
the Obama administration, and the State Department
said, "No, we're not going to do enforcement
on them, because we want their-- we want the
Communist Party to agree with us on North
Korea and climate change."
KYLE BASS: I see.
We were willing to let many wrongs happen
in the interest of maybe achieving some foreign
policy goal.
ROBERT SPALDING: Every wrong, every wrong.
KYLE BASS: Execute all the wrongs.
ROBERT SPALDING: All the wrongs, because it
was more important that we had this what we
viewed to be mutually beneficial, cooperative
relationship with the Chinese Communist Party.
Nobody went over to the Communist Party side
and said, "Do you guys want a mutually beneficial
cooperative relationship," because they would
have said, "Hell, no, you are an enemy.
You were the ones who forced us through the
century of humiliation."
KYLE BASS: That's important.
Because the people that believe that we should
just prostrate ourselves once again, and just
get a deal done and deal with China and make
another paycheck and earns more money for
the billionaires, those people believe there's
a symbiotic relationship when it's truly parasitic.
ROBERT SPALDING: Yeah, and it's interesting,
because they'll say what I just said now is
not true, because there are reformers in the
Chinese Communist Party.
What they don't understand is the reformers
still believe in what I'm saying.
They're just willing to go a different way
at.
Rather than being in your face, like the hawks
are-- KYLE BASS: They're not as arrogant.
ROBERT SPALDING: --we want to be more subdued.
We want to hide our capability and buy our
time, and slowly, eventually, the Americans
would go broke.
That's what they're trying to do.
What we did to the Soviets is to basically
bankrupt them.
KYLE BASS: That takes me to a point that we've
discussed before, is Xi a Stalinist?
Because it sure looks like that, to me.
They believe their Communist Party is the
greatest Communist Party and every other communist
party should be below them, but should follow
their lead.
I guess the entire construct of that of the
Stalinist era.
If he is that person, can we ever really come
to an agreement with him that is measurable,
enforceable, and let's say mutually beneficial?
Can we ever get there?
ROBERT SPALDING: Okay, so set Xi aside, just
as one person, because that would everybody
would say, well, we will get another leader,
and it'll be fine.
KYLE BASS: Can we get somewhere with the Chinese
Communist Party.
ROBERT SPALDING: In addition to reading the
Communist Party constitution back in 2014
and 2016, I read thousands of pages, one of
the documents I read was an internal Communist
Party document that was created in 2013, smuggled
out translated, it's called Document No. 9.
Now, if you look at the Bill of Rights, this
would be the opposite of the Bill of Rights.
KYLE BASS: The Bill of No Rights.
ROBERT SPALDING: The Bill of No Rights.
In Document No. 9, they say the Bill of Rights
was basically created to destroy the Chinese
Communist Party, and we must, at all instances--
KYLE BASS: Refuse all of those rights?
ROBERT SPALDING: Not just refuse them, counteract
them forcefully, not just within our own borders,
but externally.
When we talk about, and I talked about it
in the book, what is 5G about?
What is the Baidu, Alibaba, Tencent business
model about?
It's about creating the architecture, both
technologically and business wise, that allows
commerce to flow out of China along with the
values that are built into Document No. 9.
Getting you voluntarily to give up free speech
for money, to voluntarily giving up freedom
of religion for more money.
Of course, eventually, there's going to be
an end to it, because what's going to happen
is the same thing that happened to the Soviets
is we're going to be essentially bankrupt.
That's where we're headed to.
KYLE BASS: You say that and/or, one would
think that the United States does have a moral
compass at some point in time and at some
point in time, money will not trump our moral
compass pointing north or at least some version
of north, so maybe that stops.
ROBERT SPALDING: Well, I would actually say
that that's what's going on in Hong Kong right
now.
They draw a direct line from 1997 which when
they-- KYLE BASS: When the handover happened.
ROBERT SPALDING: --to 2047 and you say, "Okay,
what they believed in 1997 is that by 2047,
certainly, the Communist Party is not going
to be the same Communist Party."
If you draw that straight line that you could
almost predicted that once the Chinese people
within Hong Kong realize, "Okay, they're not
going to change," there is no way in hell
that they want to live in that dystopian place
in the Mainland.
KYLE BASS: Just be another state in China.
ROBERT SPALDING: They are not.
People look at why can't you just get over
this?
KYLE BASS: Why can't they get over the democracy,
the liberty and the freedoms that they've
had for the last nine years?
Why can't they just mortgage that and say
you know what, we're going to go the Chinese
way.
ROBERT SPALDING: When we go over there, and
even I lived there for two years, I lived
two years in the country and it's so easy
to not actually look under the covers and
look behind the scenes and see what's going
on.
KYLE BASS: That's by design.
ROBERT SPALDING: It's by design, and it's
our inability to actually understand because,
again, they're very-- they obfuscate everything
they do.
What the Chinese Communist Party is, and how
it is, it built itself within that society.
KYLE BASS: I'm going to finish our talk here
with if you don't mind, talk about-- you were
also one of the experts in telecommunications
and in the need for the West and more importantly,
United States to have a 5G network and talk
to me about China's ascendancy in 5G and what
their plan is with Belt and Road and comms,
telecom, and owning the data versus what the
US is doing, and what the US has got to do
to compete on the 5G playing field and why
it's so important, because I think a lot of
people don't understand why that's, call it,
vitally important to the United States national
security.
ROBERT SPALDING: We developed telecommunications.
The Bell Labs, which was within AT&T, was
the state of the art telecommunications.
Then we got out of the business, we stopped
investing, so back in the '60s, during the
Cold War, we were spending 2% of our GDP on
research and development and basic science
research that was going into companies like
Bell Labs.
That technology is what drove our tremendous
economic growth after the end of the Cold
War.
We stopped doing that.
We basically said, we're not going to do R&D
anymore.
We're going to make private sector do R&D.
We're not going to do federal grants for STEM
education.
The guys that helped put Americans on the
moon, they were educated on federal grants,
paid for by Uncle Sam.
STEM education, we were paying for that, we
stopped paying for that.
We stopped investing in infrastructures, so
now, the highway, the national highway system
that we built-- the Eisenhower National Highway
System, we're now $5 trillion in arrears on
that.
It's falling apart.
Along all these areas, we just stopped investing
in our country.
What happened was, because we said the private
sector should do investment, and you know
what the private sector did?
They invested in China.
They built cities, they built roads, they
built telecommunications, they built companies,
they built high speed rail, and now, they're
building the belt and road initiative all
with our money.
Huawei got to be what it is today by first
of all, being able to steal all of Bell Labs
technology and then having us money investment
to help grow, and then they just worked out
and started selling.
Now, if you fast forward from the world that
existed when Alexander Hamilton was basically
coming up with the ideas that are in the Constitution.
Then you say, "Okay, what is the purpose of
the Second Amendment in the Constitution?"
First of all, he went through and looked at
any government on record to see what worked,
what didn't work and his goal was to create
a fashion of government where no person, party,
organization or group could gain ultimate
power.
He said, "If we fail, we're going to give
the citizens the means to resist that."
That is the Second Amendment.
If you look at what's going on today, you
look at the elections in 2016 where the Russians
used big data analysis, artificial intelligence
bots, and social media to create protests
within the United States, during the elections,
right after the elections, you'll realize
that we reach the point where in our world,
and it's particularly the world that we're
coming to in 5G, the ability to influence
you as an individual, or another words to
oppress you, without either knowing one, that
you're being oppressed or two, who's doing
the oppressing really means that our world
in terms of how society functions has gone
beyond the point where a gun didn't actually
has any relevance in keeping you free anymore.
Because who are you going to shoot?
You're just as likely, say, the Russians for
them to encourage you to shoot your neighbor,
because you've been led to believe that your
neighbor is your adversary.
In that world and the world, this is the world
by the way, we designed because we're the
second country in the world to build a 4G
network that's applied the platform, Android
and Apple, built by two American companies
were built actually to be private data devices.
All the apps, services and business models
that were built on top of that platform, all
accrued to us because we were the second country
to build a 4G network and the first country
to build a smartphone.
If you go back to 2007, when the iPhone came
out, the top five in market cap, AT&T, General
Electric, Exxon Mobil, Shell, and Microsoft.
Fast forward 10 years, it's the Fangs, Facebook,
Amazon, Netflix, Google and Microsoft.
If you fast forward another 10 years from
now, and you build the 5G network, well, what
happens in 5G is smartphone goes away.
You no longer need a phone, because the world's
wired around you.
You walk out the hotel today and you say,
I want an Uber.
A camera picks up your face, knows who you
are, has facial recognition, reads your lips
or a microphone picks up your voice, Uber
shows up, you get in and it bills you.
All of that data, right now, is accessible
to the Chinese Communist Party.
Then all of a sudden you decide, Kyle Bass,
I'm going to point out something that the
Communist Party did, so I'm going to tweet
about it.
All of a sudden, the next time you walk outside
your door and ask for an Uber, Uber doesn't
show up.
This is the world.
This is a world-- KYLE BASS: That's a world
no one wants to live in.
ROBERT SPALDING: It is a world that currently
exists in China and actually if you go and
live there as a digital citizen, as I have,
they are so far advanced in front of us.
KYLE BASS: It will make George Orwell blush.
ROBERT SPALDING: It is literally incredible.
You walk into a restaurant, and a camera picks
you up and says, hey, and then the server
says, "Hey, Kyle, here's your food."
That's what's going on.
It's like between a 4G and 5G world-- KYLE
BASS: Why is 5G so important?
ROBERT SPALDING: Because it is a platform.
The mobile phone goes away so computing and
networking will go down the pipe in the platform
for building the app services and business
models, that are currently being built in
China.
Baidu, Alibaba, and Tencent, just like Facebook,
Amazon, Netflix, Google became dominant.
You had AT&T and General Electric and Microsoft,
now you want Facebook, Amazon, Netflix, Google,
what's happening because China is building
the first 5G network, the platform in China,
and around the world, they've got 90 countries
signed up now, their companies, Baidu, Alibaba,
Tencent will build the app services business
models on top of that, and they will become
dominant over Facebook-- KYLE BASS: China
will own the data, they own the data for 90
of their companies, and therefore, they'll
be able to control the data.
ROBERT SPALDING: The other thing that they're
putting in there is electronic payments.
They'll not only control the data, they control
the financial flows.
KYLE BASS: Whoa, that's their way out of their
crazy money printing.
If they can somehow get these African nations
to start accepting their monopoly money, which
so far hasn't happened.
ROBERT SPALDING: Because as you know, as you
said, the fact that they don't have dollars
really precludes their growth unless they
figure out some scheme.
KYLE BASS: The world still hasn't accepted
their currency.
Less than nine tenths of 1% of global commerce
happens in their currency.
ROBERT SPALDING: Yeah.
In the end, global commerce, finance is all
about trust and nobody trust-- KYLE BASS:
No one trust them.
We need to work as a country with the whole
of government approach to exposing let's say
all the wrongs and the grand strategy of our
biggest competitor, and stop letting the Wall
Street elite and the Wall Street billionaires,
evangelicalize-- or evangelize the potential
profits of the Eldorado somewhere hiding in
China.
ROBERT SPALDING: FDR and Winston Churchill
showed the way.
Two countries leaders coming together saying
democratic principles, rule of law, free trade,
self-determination, this is a system, international
system we want to build.
What Secretary Pompeo's State Department officials
are going around on a bilateral basis talking
to our allies, either you need to get on board
economically, trade wise, financial, internet,
and work with us to fix to ride this ship
or we can no longer be a military ally of
yours, because you're essentially undermining
our ability to protect ourselves.
Because far more than playing ships and tanks
today, protecting our data and protecting
our economic and trade and financial systems
really drives geopolitics today.
Greece, and the Port-au-Prince really has
more to say about how Greece responds to China
than how many aircraft carriers we have.
In fact, Greece doesn't care.
Greece doesn't care about what-- KYLE BASS:
They already sold the port.
ROBERT SPALDING: They already sold the port.
KYLE BASS: To sum things up, basically what
you're telling me and telling the world here
is China's already fighting being on three
fronts.
They're fighting on the information war side.
They're fighting on the cyber war side, which
is different.
They're controlling the narrative, and then
infiltrating networks and spying and doing
whatever they do offensively with cyber.
They're also fighting an economic war on a
large scale against us today.
The only thing they haven't done yet is launcher
conventional weapon against us.
To your point, the war, the next world war
is going to be one of those three, or combination
of the three and maybe not even have that
fourth one happen.
China wants world domination without ever
firing a shot.
We've just figured this out.
Would you say that we've just as a country
become woke in the last few years?
ROBERT SPALDING: Yeah.
We just become woke, worst, actually, the
war has been going worse.
I believe the way you characterize war has
changed.
It's fundamentally changed, and it's primarily
about finance and economics and information.
That information piece being so important
is why we said in the national security strategy,
we need to build a nationwide secure 5G network.
In other words, not only does the government
need to protect its own data, which we become
very adept at, DoD and the intelligence community.
We need to protect your data, because that's
what guarantees your rights as a citizen to
be free in a 21st century context, and until
we figure that out, we can have the greatest
Air Force in the world, greatest Navy, the
greatest army, the greatest Marines, but if
we're not protecting your data, we're not
protecting your freedom in the world the way
we need to today.
KYLE BASS: General, thanks very much for spending
the time.
It was an honor and a privilege.
ROBERT SPALDING: Thank you.
KYLE BASS: Thank you.
