Following is a transcript of a television interview ASPI President Kevin Rudd gave to Bloomberg News. (Watch the full interview.) 

Haidi Lun for Bloomberg: The idea here is gathering together some of the best and brightest to have these conversations across trade, technology, business, the economy, climate change…

ASPI President Kevin Rudd: I’m still working out why I’m here.

Bloomberg: I was going to ask you: why are you here?  What’s paramount for you, out of those issues?

Kevin Rudd: I was going on the ‘Best and Brightest’ question. Look, the wisdom of having a forum like this is to go the economic underpinnings, not just of the future of business activity in the world, but frankly, how the economy is actually shaping, deeply now, in different ways, domestic politics around the world, but frankly, profoundly, international politics as well. 

I’ve just spent the last five days in China: the state of China’s domestic economy is clearly hugely influencing the domestic political debate. So this is the right time to look at it—a time of deep structural shift in the global economy through the arrival of the new technologies, big time artificial intelligence and the rest…all the opportunities that brings, and the disruptions, the big disruptions in trade and underlying geopolitics—that’s a pretty potent cocktail.

Bloomberg: Is the West losing an ideological battle against China? We had this Asia Society event just last week and one of the panelists said, “We need to stop talking about a rising China. It has risen and we need to get real about how to engage with it.”

Kevin Rudd: Well, I think yes, talk of a Rising China is a little nineties and naughties. I think that reality has occurred. Anyone who looks clearly through the lens of all the metrics of global economic power: trade flows, investment flows, what’s happening in technology, the Belt and Road, etcetera, this is not a country thinking about its future, it’s actually realizing its future, now. And similarly, militarily, you see action, as well.

But on your core question, “Is the ‘West,’ fighting a losing a battle against China?” Look, on the question of ideology, there is an overwhelming empowering virtue to the idea of free peoples in pursuit of open markets, open societies and open politics. It doesn’t matter what country you go to, these things are very animating. Even in China, if you look at the 12 virtues of Chinese socialism, Democracy is listed there because they know the notion of min zhu, government by the people, is so, as it were, inherently correct. So the idea that we have, in the West, lost the ideological battle is wrong. The question for us is more of a practical one, or shall I say, political strategy about how we engage with the China of the future, and how we don’t allow that relationship with China to degenerate into Cold War, or then hot war.

Bloomberg: That was going to be my next question. Depending on who you ask, we’re already in the early stages of a cold war between Washington and Beijing. Do you agree with that?

Kevin Rudd:  No. I fundamentally disagree with that, because people are being very sloppy these days in their use of terminology. A quick flick to what we mean by the term Cold War: Number one: Soviet Union and the United States; number two, Intercontinental Ballistic Missiles Pointed at each other’s throats on a daily basis; number three, about 20 or so proxy wars in third countries, like, shoot-em-up wars; four, zero economic engagement; and five, zero people-to-people contact. If I look at the U.S.-China relationship, maybe it ticks one of those five boxes, but that’s the classic definition of a cold war. We’re a long way from that yet. But the danger is the new definition of this relationship—end of strategic engagement and beginning of strategic competition—if there are no rules for this period of strategic competition, you can slide in the direction of confrontation, containment and cold war. That’s a risk.

Bloomberg: There’s a lot of countries trapped in the middle, not least of which is, obviously, Australia. Just news out this morning: the Foreign Minister is headed to Beijing for what will be the first official talks in about three years. Has Australia lost its way in having a strategy to deal with its largest trading partner?

Kevin Rudd: I’ve written extensively about this in the Australian context. As a former Prime Minister I have some views on it. I think most Australian governments, through until about 2013, both Conservative and Labour, had a relatively coherent China strategy, one which sought to be balanced. Two elements: 100-year-old security alliance with the United States, this year, going back to 1918—not likely to change anytime soon; and secondly, now, a Chinese reality whereby China is overwhelmingly our major economic partner. And what successive governments, including my own, was to find a balance through that, which didn’t apologize for our Western democratic traditions, maintained our alliance with the United States, and maximized our economic relationship with China.

I think, unfortunately, in the Abbott-Turnbull period in Australia, it frankly lurched wildly in different directions and most spectacularly Mr. Turnbill’s statement of last December when he proclaimed to the world at large that the Australian people and finally risen up spontaneously against the Chinese hordes. I mean it was just nonsense. And since then the government has been in damage control. For Australia’s sake, I’m glad that Foreign Minister Marise Payne, is on her way back to Beijing.

Bloomberg: You talk about the traditional alliance with Washington — President Trump won't be attending summit season. He's not going to be at ASEAN, he won't be at APEC. Is that the elephant in the room suggesting that the U.S. is pivoting away from Asian engagement, and do Australia and some of the other Asia-Pacific nations — will they eventually have to choose?

Kevin Rudd: No, I don’t believe this idea of the bold binary choice between China and the United States is a realistic framing of the debate for a country like Australia — or even for that matter, for a small country like Singapore, where we are at the moment. The statecraft of both those countries, for example, is, I think, much more intelligent than that, fundamentally. It seeks this balanced relationship up the middle. Now I do believe we can carve out a future with China and still maintain our security alliance with the United States. The warning for America, though, is a bit like this. Number one: The global center of, let's call it, economic gravity, for now a decade and a half has been moving decisively from the Atlantic to the Pacific against most of the measures. First, trade; increasingly, investment flows; lately, capital flows; and now, the huge new competition on technology. That's what's happening. And secondly, you see the change in the global military balance as well. For example, three years ago, Asia for the first time spent more on military hardware than Europe. As an indication of the shifting ground and terrain, these things are quite profoundly shaping the firmament. America's problem is this: not fully recognizing those realities at all levels of its leadership, but secondly, assuming that whatever happens after Trump, and whatever Trump does in terms of nationalism, isolationism, and the rest, that somehow the game is just automatically resumed by America, and the caravan hasn't moved on somewhere more complex in the meantime. It will have moved on somewhere, not irretrievably so. And if America wants to be an integral part of this region in the future, you can't just say to regional summit season, "we're not interested in coming to your meetings" or "we're not interested in sitting down and having one-to-ones with the heads of government from Southeast Asia." It's part of the turf of being President of the United States of America. If you want global leadership, you've got to work for it too. 

Bloomberg: Just before we go — no doubt China will be top of mind and top of conversations over the next couple of days. Is there an opportunity to talk about what Xi Jinping actually wants, in terms of — China's being viewed as increasingly strategically aggressive against the backdrop of the trade war as well. What does China want?

Kevin Rudd: Well this is, I think, one of the two deep questions challenging the world today. I think the reality of Xi Jinping's worldview is that he is not status quo. He wants to change things. And as a result of that, reaction is incurring. He wants, obviously, a wealthy China — no problems with that. He wants a China comfortable in its own national skin — nothing wrong with that. He wants a China where the party remains dominant — others around the world react to that. He has abolished term limits for the presidency — people have reacted against that. China wants to assert its own territorial claims militarily in the South China Sea — people are really reacting to that. And with the Belt and Road Initiative as a geo-economic concept, it's unfolding. And so the reality is that Xi Jinping's worldview is not a status quo China. It's a changing China. And so therefore, understanding clearly the scope of that, but also its internal constraints — vis-à-vis, for example, the current state of the Chinese economy, which is slowing quite rapidly — that's part of the wisdom of understanding how the rest of the region, and how the rest of the West, including the United States, then deals with China in the future.  

Watch the full interview.