John Garnaut woke up in Melbourne on an early November morning to urgent messages from his business partner, Matthew Pottinger.

It was 2022; Pottinger, the former U.S. deputy national security advisor, and Garnaut, a former journalist-cum-Australian government official, were in the early stages of launching Garnaut Global, a consulting firm that bills itself as a Chinese politics interpreter for financial firms. They only had a few dozen clients at the time, but Pottinger, who serves as chief executive, had just got a tip that would help them gain a lot more. 

At a Nov. 2 meeting in Austin, Texas, a Chinese businessman had told Pottinger about a Chinese state media article with unusual messaging. It quoted an Inner Mongolia official warning that Covid-19 lockdowns needed to be put in place more “accurately” and “the entire community cannot be sealed off because of one or two cases.”

It was exactly what Garnaut and Pottinger had been hunting for in recent months: a potential hint that the Chinese government was shifting away from its strict zero-Covid policy, which had transformed Chinese people’s lives and shattered the Chinese economy for the better part of three years. 

By the time Garnaut woke up at home in Australia, Pottinger — alongside a team of the firm’s analysts — had already gathered information on the background of the Inner Mongolia official and found another example of similar language: An article from the municipal health commission in Zhengzhou, a city in Henan province, declared that “Covid is not scary.” 

The two men ran through the options. 

“Either these guys are acting on their understanding of a central decision that’s been authorized, or they’re freelancing,” Garnaut remembers thinking. “We didn’t think they were freelancing. One of them? Maybe. But two? This sounds to us like there’s a central decision that’s been made behind closed doors.” 

In the next several hours — the window when both men were awake — they put together a report on the comments for their clients. “We don’t know yet how to interpret them on balance,” they wrote. “What happens next, in these provinces and to the leaders who spoke out, will be important clues as to whether this is another false promise of economic re-opening or the first signs of a real and seismic shift in policy.” 

From the back of an Uber to San Antonio that same day, Pottinger and a colleague called clients individually to make sure they were tracking the development and understood its consequences. If China reversed its zero-Covid policy, they said, it would mean the end of rippling lockdowns and the beginning of a long-sought economic bounceback.

The next few days were a flurry of intense activity — or as Garnaut puts it, “full court, full team press.” Based on his understanding of Chinese politics, Garnaut reasoned that Xi Jinping wasn’t going to publicly announce a reversal on zero-Covid; the Chinese leader was too personally associated with the policy. Instead, Garnaut was looking for evidence that a decision had been made at the top and was slowly filtering down through dense layers of Chinese bureaucracy. One important data point was the ‘KPI’s,’ or key performance indicators, of Chinese cadres, which are set by Chinese leaders and define success. 

On Saturday, Nov. 5, just three days after the initial tip, Garnaut found what he was looking for at a State Council press conference in Beijing.

Most of the Western media covered the press conference with headlines like “China to ‘Unswervingly’ Keep to Covid Zero Policy, Dashing Hopes,” but Garnaut, reading between the lines of dry government language, saw something completely different. He noticed that officials repeatedly mentioned the importance of restraint in implementing lockdowns — even naming and shaming several officials who were overzealously enacting Covid restrictions. Crucially, no one criticized the statements from the Inner Mongolia and Henan officials. The KPIs were changing. 

The very next day, Garnaut Global sent out a note to its clients concluding that a dramatic policy U-turn was underway: zero-Covid was ending. 

Garnaut Global made the call an entire month before the Chinese government publicly announced the policy shift, and three weeks before the ‘white-paper protests,’ when Chinese people’s frustration with the callous, and often illogical, lockdown policy spilled onto the streets in major cities.

The timing was crucial, especially for the firm’s financial sector clients who quickly wagered that the Chinese market would rally on the exciting news.

“We were a week or two earlier than most regarding China’s reopening. That was because of [Garnaut],” says one financial sector client who asked not to be named. “Many analysts afterwards who were predicting the end of zero-Covid, said, ‘Oh, look I am right.’ But they had been saying that for months. John got the timing exactly right. That was amazing.”

Indeed, when it comes to China, Garnaut has been getting the timing right for much of his career. 

In the 2000s, during the ‘golden age’ of journalism in China, he moved to Beijing as a foreign correspondent and gained remarkable access to the political elite. Then, in 2015, just as a fierce national debate was breaking out about Chinese interference in Australia, he joined the government as an advisor to the prime minister and penned a report that some trace as the origin point of the West’s more hawkish stance toward China. Over the last five years, at a time when the global business community is radically rethinking its relationship with China, Garnaut has reinvented himself yet again as a China whisperer for financial firms.

Garnaut Global is, in many ways, a typical “strategic consultancy” firm: For decades, former government officials like Pottinger and Garnaut have cashed in by serving as political or regulatory advisors for the private sector. Attempting to read the tea leaves of open-source Chinese Communist Party (CCP) texts, meanwhile, is commonplace in think tanks and academia. But Garnaut has married the two approaches in a kind of Moneyball style, and his clients praise his unique ability to translate deep readings of Marxist ideology into actionable advice. 

Garnaut also enjoys special status in the current moment of Western-China relations, because he is one of the men most responsible for bringing the current moment about. Although he was very much a child of the “engagement” era, Garnaut, 49, was one of the first “China watchers” to call foul and argue that a new era was upon us.

In a 2017 speech called “Engineers of the Soul,” Garnaut warned that the world needed to see China through the ideological lens that its leaders were using. Informed in part by his experience reporting on the Chinese princeling families — the group of descendents of the original Chinese communist revolutionaries, which includes Xi Jinping himself — Garnaut said that Chinese leaders’ decisions on the economy, security or foreign relations are often made with Marxist-Leninist logic. “If we are ever going to map the Communist Party genome,” he wrote in the speech, “then we need to read the ideological DNA.”

In light of Beijing’s various crackdowns of the past few years, this may not seem like much of an insight to today’s audience, but Bill Bishop, who runs the Sinocism newsletter and has known Garnaut since his days as a correspondent in Beijing, notes it was revolutionary at the time.

“For too long, people were too quick to dismiss ideology in the PRC,” says Bishop, who published Garnaut’s speech in his newsletter in 2019. “It was easy to do so in the go-go years. People would say, ‘They aren’t really communist; they are capitalist.’”

Garnaut, however, thought otherwise, and the reckoning he helped force Australia to have on China was the first domino to fall in what would be a global shift.

Ivan Kanapathy, who served as a director for China at the National Security Council (NSC) during the Trump and Biden administrations, says that Garnaut’s speech “helped define how our team thought about China.” It was so useful in explaining the ideological underpinnings of Chinese politics that he routinely sent the speech to colleagues at U.S. embassies across the world. 

Indeed, the speech has become a kind of bible for Garnaut followers. Representative Mike Gallagher (R-WI), perhaps the loudest voice on China in Washington and the chairman of the Select Committee on the Chinese Communist Party in Congress, says that the speech was “the single best thing to explain Xi and the Marxist-Leninist regime.” 

“I consider him part of my kitchen cabinet,” he says, referring to Garnaut. “In my own journey in Congress, and in the work of the Select Committee, he’s been an invaluable resource.” 

U.S. lawmakers and Biden administration officials routinely read Garnaut Global reports, and Garnaut says he has had conversations with Ursula von der Leyen, the European Commission president. Now he is also becoming a source for some of the largest financial institutions in the world. Jason Bedford, who until recently was a China analyst at Bridgewater Associates (the hedge fund founded by Ray Dalio) where he was a client of Garnaut Global, says that despite spending a decade living in Beijing, China’s moves over the past several years have been disorienting. 

Beginning with the drastic crackdown on private education companies, he says, “the predictability of China suddenly changed.” But Garnaut Global, he adds, “perfectly timed the zero-Covid ending. That deeply influenced my actions, and impacted their credibility. I thought, ‘Geez, I don’t have to just pay attention to their reports, I have to pay attention to their calls.’”

Somewhere in the Chinese system was a presumption that I myself would have some inside influence in the Australian government, which, to be honest, I didn’t imagine for a moment to be true.

John Garnaut

Garnaut Global was originally founded in 2019, though it re-launched when Pottinger joined in 2021. Today, it has offices in Melbourne and Washington and has grown to employ around 20 people who serve more than 60 clients. In addition to its reports on the breakdown of zero-Covid, the firm was early to predict the broad implementation of lockdowns in China at the outset of the pandemic in 2020. Garnaut Global also produces detailed research into specific companies. In 2021, for instance, Garnaut Global correctly predicted that Didi Chuxing, the Chinese ride hailing firm, would be allowed to go public, but would face a post-IPO reckoning. Recently, the firm has once again found itself on the bullish side of Chinese market predictions — using deep analysis of emerging government taglines, like “new productive forces,” to predict that Xi Jinping is looking to stabilize the market amid economic woes.

Garnaut Global’s clients also rely on the firm to predict the likelihood of a potential invasion of Taiwan. (Pottinger has a book on Taiwan deterrence strategies coming out this summer.) “They are my tripwire on Taiwan,” says the financial sector client. “I am going to ignore the issue until they tell me not to.”

You won’t find these emphatic testimonials, however, on Garnaut Global’s website — in fact, you won’t find much at all. Many of Garnaut Global’s employees do not publicly affiliate themselves with the firm in order to protect their connections in China. And the firm doesn’t publicly disclose its clients.

The mystery surrounding the firm reflects its founder’s sensibility. While Pottinger is widely known in the U.S. and seen as the architect of the Trump administration’s hard-line China policy, Garnaut himself has stayed out of the public eye since leaving government; he rarely gives interviews, writes op-eds, or publicly comments on China. Indeed, as China hawks have raised their voice over the last several years — shouting down any opposition with sheer volume — Garnaut has preferred to whisper, albeit in the ears of the world’s most powerful people.

PRINCELING POLITICS

I first met Garnaut on a foggy Sunday afternoon in early December in Washington. He was coming off a week of meetings, and we decided to walk around the National Mall, where the top of the Washington Monument wasn’t visible in the mist. Wearing dark jeans, a peacoat over a T-shirt, and leather boots, Garnaut moves with the casual confidence of a man who is not just handsome, but who is privy to information and insights the rest of us aren’t. He often starts his sentences with “Look” — a verbal tick that gives the impression he is willing you to grasp what he so clearly sees.

In a way, Garnaut is a ‘princeling’ himself. His father, Ross Garnaut, is a prominent economist who served as Australia’s ambassador to Beijing from 1985 to 1988, smack in the middle of Deng Xiaoping’s grand reform experiment. The whole family moved to Beijing for those years, and as we walked alongside the glassy reflecting pool in front of the Lincoln Memorial, Garnaut described disembarking from the plane in Beijing when he was 12 years old — the smell of coal and cooking oil made a lasting impression, as did the donkeys and carts on the road from the airport. 

The year the family returned to Australia, Ross was commissioned to write a landmark study — nicknamed the “Garnaut report” — on the Australia-China economic relationship, in which he laid out the blueprint for a radical opening of Australia’s economy to take advantage of China’s economic growth. In 1990, China was Australia’s tenth largest trading partner — with $3 billion in two-way trade. By 2010, that number surged by over 3,000 percent, and China became the country’s largest trading partner by a wide margin.

Garnaut’s younger brother, Anthony, was the first to follow in his father’s China footsteps. After studying physics in Chinese as an undergraduate at Peking University — “he wanted to challenge himself,” Garnaut says, by way of explanation — Anthony became a social and economic historian focusing on Muslims and peasants in China, with positions at the University of Oxford and the University of Melbourne. He completed a doctorate under Geremie Barmé, a famous Australian China scholar, about a Muslim religious leader who lived in China at the turn of the twentieth century. (Anthony has since changed careers and now runs a clean energy company in Melbourne.)

Garnaut, however, initially took a very different path. After graduating in 1998 with a law degree from Monash University — where he met his wife, Tara, in his first week — he practiced financial services law at a Melbourne firm for three years. He decided to ditch his legal career when he took time off to travel in Indonesia, and he soon accepted a job as a reporter for Fairfax Media, which owned The Sydney Morning Herald. He covered Australian economics for four years, before moving to Beijing in 2007 as an economics correspondent. 

The decision to move to China, Garnaut says, was actually his wife’s choice — it was a good place for their kids to grow up, she reasoned, and the family already had a robust network in the city.

“I arrived in China, having lived there for a couple of years as a school kid, having felt connected with the country for most of my life in one way or the other,” Garnaut says. “I had broadly accepted the narrative that stories of individual oppression and human rights challenges shouldn’t overshadow the bigger story of societal and human progress in China — that was my starting point.”

His first feature article from China, which he published three months into his tenure there, told the improbable story of two cousins who were stuck in a coal mine for six days before painstakingly digging their way out. Because he focused on economics, the story detailed how China’s breakneck growth was fueling the coal industry, including illegal mining operations, which were rife with accidents. 

But even as early as that story, he began to realize that he didn’t understand the political backdrop that could enable such a tragedy. The miners were left underground by a “corrupt alliance of mine owners, police and district government officials,” he wrote, who did not try to save the two men’s lives and even stopped a rescue effort.

“I was talking about these stories of economic development, of migrant workers making better futures for their children, in construction sites in Beijing, in coal mines, in the western hills,” Garnaut says. “All of those individual stories of economic progress were true and important. But I was missing a fundamentally important piece. I didn’t understand the political machine.”

In May, 2008, a massive earthquake hit Sichuan and killed nearly 90,000 people, including thousands of children who were crushed by badly built school buildings. In the aftermath, many parents accused local officials of cutting corners and failing to regulate construction. Garnaut, along with much of the Beijing press corp, rushed to the southwestern province to cover the tragedy. 

“That was where the callousness of the political machine became really impossible to ignore,” he says. “It forces you to ask the question: How?”

He started shifting his focus towards politics, and in particular, the elite group of families that make up China’s ruling class. Initially building on his father’s network of reformist officials and economists, he enjoyed access that is almost unimaginable in today’s China. Princelings invited him to their New Years celebrations and gatherings held in military barracks — parts of Beijing that foreigners are rarely allowed to see — and it wasn’t long before Garnaut began to break big stories on the business entanglements and political activities of Beijing’s elite.

“He wrote very well-sourced stories,” says Chris Buckley, an Australian China correspondent for The New York Times who lived in the same housing compound in Beijing as Garnaut. “He had higher up contacts than I did, and he was giving people who followed his work a close look at tensions in the party and the role of the princelings.”

Sophie Richardson, who was working at Human Rights Watch at the time and spoke to Garnaut frequently, says his reporting style stuck out from other correspondents: “John would never just ask what I thought. He wanted to know how we knew what we knew,” she says. “The first few times it happened, I was a bit surprised. I didn’t get asked that all that often. I took it as a sign of curiosity, but also, I think he is a very careful thinker. He builds arguments block by block.”

One of the scholars who helped him put together those blocks was Warren Sun, a Taiwanese historian of Chinese politics, who also helped Garnaut make inroads in the circle of prominent reformers. In 2012, for example, Sun brought Garnaut to meet Li Rui, Mao Zedong’s former personal secretary who became a prominent party critic, at his Beijing home. ¹Sun told The Wire he remembers Li showing them a poem he had written for a military leader who refused to be involved in the Tiananmen Massacre. The poem read: “傲骨虚心真力量，热肠冷眼大慈悲” (True strength lies in proud bones but humble heart; Great compassion comes with warmheartedness yet cold-eyed detachment.)

Sun specializes in debunking Western assumptions about the party as well as CCP-sanctioned narratives. In the late 1990s, Sun co-wrote a book about Lin Biao, a Chinese military leader who had been tapped as Mao’s successor but died in a mysterious plane crash in 1971. While the official Chinese government narrative claims that Lin launched a coup against Mao right before dying in the plane crash, Sun’s book controversially argued that there is no evidence of Lin’s political ambition, and that instead, Lin had tried to please Mao throughout his career.

Garnaut credits Sun with helping him view both Western academic consensus and CCP narratives more critically, whether about the Mao era or today. “There is an instrumental reason for peddling the story of two-line struggle or other varieties of power struggle,” he says. “One, it’s much easier for a leader to explain why he keeps crushing people, if he can say ‘they came at me first.’ But there can also be an interest in seeding the idea with external stakeholders that maybe there is division in China — maybe there are reformers and [we in the West] have got to just give them some space to do the right thing.” The story of power struggles in China, he says, has sometimes “fed the myth of reformers versus hardliners and serves the instrumental purpose of giving Chinese leaders more strategic decision-making space.”

In 2010, Garnaut began spending time in Chongqing, reporting on a politician who would later flame out in similarly dramatic fashion to Lin: Bo Xilai, a daring, charismatic princeling who was the city’s party chief. Bo was considered one of Xi Jinping’s main competitors — until his wife was accused of killing a British businessman and Bo was sentenced to life in prison for corruption in 2013. Garnaut wrote a book about Bo’s political career and fall from grace in 2012, and says the experience instilled in him an appreciation for the princelings’ commitment to their parents’ ideological project.

Bo and Xi Jinping, he says, didn’t just have extraordinary family histories; he also saw how “in their own different ways, they were fighting for the future of China.” 

“They were self-appointed custodians of the revolution,” he told me as we approached the U.S. Capitol building, seeming almost nostalgic for the time when he was immersed in the world of elite Chinese politics. “They adhered to a kind of socialist morality, which was real. And it was their commitment to this ideology that defined them in their minds as the rightful heirs of China.”

The princelings, Garnaut posits, granted him access to their world because they recognized something familiar in him. “Somewhere in the Chinese system was a presumption that I myself would have some inside influence in the Australian government, which, to be honest, I didn’t imagine for a moment to be true,” he says. 

Yet after moving back to Melbourne in 2013 — largely because he wanted his kids to have cleaner air — he proved the princelings right.

“Maybe,” Garnaut says laughing, “they knew our system better than I did.” 

THE PARADIGM SHIFT

Few expected Malcolm Turnbull to take a hard line against China when he was elected prime minister of Australia in 2015. The former Rhodes Scholar had enjoyed a successful career in business before joining the Liberal Party as a politician, and one of his first tasks as prime minister was to complete negotiations for the China-Australia Free Trade Agreement, which deepened the trade relationship between the two countries. In a speech about the agreement, Turnbull said, “We could not imagine modern Australia without China’s contribution to our people, our culture, our prosperity.”

But shortly after taking office, Turnbull called up Garnaut, who had been aggressively reporting on CCP interference activities in Australia since moving back from Beijing. Turnbull had been following Garnaut’s journalism, and he was interested in having Garnaut join his team as senior media advisor. 

“When I got the call, I said, ‘Well, you’ve caught me at a vulnerable moment,’” Garnaut remembers.

Weeks before Turnbull’s call, he had published a piece alleging that Chau Chak Wing, a Chinese-Australian billionaire businessman, was linked to a U.S. bribery case, which involved another woman bribing the former United Nations general assembly president. Garnaut was sued for defamation by Chau and lost the case — the judgment against Garnaut described the article as having a “sneering and deprecating tone” as well as using “imprecise, ambiguous and loose” language. 

An Australian politician later stated that Chau had indeed been involved in the bribery scandal. But Turnbull reached out at a time when Garnaut was beginning to question whether media organizations could support the sensitive and high-stakes stories that he was pursuing. He reported to Canberra mere weeks after Turnbull’s invitation.

Around this time, another Chinese influence controversy broke out: Sam Dastyari, an Australian senator, was accused of accepting extensive financial support from a Chinese billionaire who was living in Australia. Dastyari, who reportedly came out in support of China’s position on the South China Sea, was eventually forced to resign. 

Just as the Dastyari scandal was heating up, in September, 2016, Turnbull asked Garnaut to further dig into the question of foreign interference — this time with access to classified sources.

[Garnaut’s] particular talent is his ability to understand and describe what the Chinese leadership is trying to do, and how history, personal interests and ideology shape the approaches of the party and government policy.

Michael Thawley, the former Australian ambassador to the U.S. who later was one of Garnaut Global’s early clients when he worked for Capital Group

“There’s a lot of material to bring together from a lot of different sources and agencies. I thought he was a good person to bring that together and hold the pen, as it were,” says Turnbull, who describes Garnaut as a “hugely intelligent man, and also very tall and handsome.”

When Garnaut started gathering materials, he quickly realized that what he was finding would redefine the relationship between Australia and its largest trading partner — not unlike his father’s famous ‘Garnaut report.’

“When we got interagency buy-in,” he says, “and it became clear that what I could see in the open-source world was fully supported by hard intelligence, that’s when I knew that this project had grown from a piece of academic analysis to potentially a paradigm shift in the way that Australia understood its place in the world.”

He finished the report in April 2017 and submitted it into the Australian cabinet process the next month. Although the report remains classified, it included recommendations for anti-foreign interference legislation, which spilled into the public discourse. As John Lee, who was an advisor to the Australian Foreign Minister at the time and is now a senior fellow at the Hudson Institute, says, the report “changed the national conversation.”

“Most Australians aren’t interested in foreign policy; they are interested in their own country,” he says. “And John’s report was about what a foreign hostile power was doing to our country — inside our own country. There started to be a deeper appreciation of the workings of the Chinese Communist Party. Most Australians didn’t really think of the CCP as a hostile entity or as a malicious entity [before John’s report].” 

Garnaut promptly left government service after submitting the report, and in August, he gave the now famous “Engineers of the Soul” speech to a room full of Australian government officials.

Joseph Stalin called writers “engineers of the human soul,” and Garnaut describes in the speech how Chinese leaders, including Mao and Xi, have adopted this “great totalitarian metaphor” to use art, literature, and any national discourse to serve the broader political mission.

“The challenge for us is that Xi’s project of total ideological control does not stop at China’s borders,” he warned. “It is packaged to travel with Chinese students, tourists, migrants and especially money. It flows through the channels of the Chinese language internet, pushes into all the world’s major media and cultural spaces and generally keeps pace with and even anticipates China’s increasingly global interests.”

His message resonated with Australian politicians. Turnbull’s sweeping package of anti-foreign interference legislation — which added 38 new crimes, put in place foreign lobbying registrations and broadened the definition of espionage — was approved in June, 2018. Just two months later, Turnbull banned Huawei and ZTE from providing equipment to build the country’s telecommunications network — a full year before Donald Trump did so in the United States.

“The reality is that we were responding to a change in posture by the Chinese Communist Party,” says Turnbull. “Xi Jinping’s foreign policy…became much more assertive, more bellicose, and there was increasing coercion…If you allow yourself to be intimidated by bullies, the only thing you get is more bullying.”

Although the new legislation targeted all foreign interference, not just from China, the Chinese government was not pleased. The Chinese embassy in Canberra put out a statement saying the accusations of foreign interference were “made up out of thin air and filled with Cold War mentality.”

An op-ed in the Australian Financial Review coined the term “the Garnaut effect” to describe this new era of “rising tensions between both countries.” And, indeed, Garnaut took much of the backlash. 

Garnaut and his family were stalked and harassed during this time by individuals hired by the Chinese government, according to Sydney Morning Herald reporting. His friends also got into trouble in China: Feng Chongyi, a professor of China studies at the University of Technology Sydney, was detained for several days in Guangzhou in 2017. “They spent an entire day asking about my connection to John Garnaut,” says Feng. (With the help of Garnaut and some backroom diplomatic maneuvering, Feng says he was eventually released and allowed to leave China.)

Australian critics of the new laws, meanwhile, argued they were overly broad and would lead to diminished democratic rights as well as bias against Australia’s ethnically Chinese population. (Australians of Chinese descent comprise over 5 percent of the population.) Bob Carr, an Australian politician who served as Foreign Minister from 2012 to 2013, later tweeted that “Nobody fed the 2017 China Panic like journalist and public servant John Garnaut.” 

“One of the things that happens in policy is that, when you’re out in front, you get whacked,” says Alex Joske, a prominent Australian China analyst who worked with Garnaut after he left government. “It was really intense at the time [for Garnaut]. You had a lot of scholars and people in government trying to sink this idea that foreign interference was a serious problem. A lot of people tried to cast this sort of analysis of the Chinese Communist Party as Sinophobic.”

When asked how he feels about having been ‘out in front,’ Garnaut simply says that he doesn’t care for conflict. “Sometimes it seems to seek me out,” he adds, but “it’s not my choice. I’d rather have an interesting quiet conversation than engage in a shouting match with anybody.”

Despite the shouting match he unleashed, “the Garnaut effect” endured even after Turnbull left office in 2018. John Fitzgerald, an Emeritus Professor at Swinburne University of Technology who studies Australia-China relations and who is a friend of Garnaut’s, says this is largely because of China’s response. 

“Malcolm Turnbull, as far as I can tell, had no intention of shifting Australia’s foreign policy or defense policy in any meaningful way initially,” he says. “It was really just about foreign interference. Had China managed it better, we may not have seen in Australia the radical shift on some of the other fronts.”

For instance, when Turnbull’s successor, Scott Morrison, called for an independent inquiry into the origins of Covid-19 in 2020, China responded with economic retaliation, imposing tariffs and banning imports of many Australian goods. It was more proof that Garnaut — who warned about Xi Jinping’s coercive efforts to get other governments in line — was on to something.

“Back then, the assessments that John arrived at were extremely controversial,” says Joske. “But nowadays, they’re foundational to China policy both in Australia and in a lot of countries.” 

Perhaps no country more so than the United States. 

ESTABLISHING THE NEW

On a trip to Washington in July 2017, just after he left his government job, Garnaut was scheduled for a 30-minute meeting at the White House with Matthew Pottinger at the very end of a Friday. Three hours later, the two men, who had never met, were still talking. When they called it quits for the night, Pottinger invited Garnaut over to his home for breakfast the next morning, where they continued their conversation over blueberry pancakes. 

They immediately recognized kindred spirits in one another. Pottinger, 50, is himself the son of a government official (his father, John Stanley Pottinger, ran the Justice Department’s civil rights division during the Nixon and Ford administrations), and he had also worked as a journalist in Beijing and Hong Kong.

Pottinger’s turn to government service started with a stint in the Marines, where he completed three combat deployments to Iraq and Afghanistan during five years of active duty. During his last deployment, he worked under then-Maj. Gen. Michael Flynn, who pulled Pottinger into the Trump administration when Flynn was named national security advisor.

As Pottinger describes it, he and Garnaut bonded over “the things that we’d collectively learned gradually, from our experiences in China and from acquiring more knowledge from access to classified sources and from more careful scrutiny of open sources. We compared notes about [Xi Jinping] and his ambitions, and then the techniques he charged his system with using to advance [China’s] influence politically.”

The two men kept in touch, and over the next few years, the U.S. began a series of increasingly hostile policy changes towards China. After launching a trade war with China, the Trump administration unleashed a blitz of sanctions on Chinese companies, blamed China for the Covid-19 pandemic, and forced the Chinese consulate in Houston to close. On Trump’s last day in office, Secretary of State Michael Pompeo stated that the Chinese government was committing genocide in Xinjiang.

“There’s a narrative of ‘the U.S. leads, Australia follows.’ But that obviously was not the case here,” says James Carouso, a former American diplomat who served as chargé d’affaires at the U.S. Embassy in Canberra while Garnaut was in government. “It was an exchange, and in some cases, was Australia-led. Turnbull, for example, focused on the risks that Chinese 5G technology posed to the world and brought that to U.S. attention. And, as we know now from John and Matt working together, they had a relationship where they could talk to each other.” 

In 2019, Garnaut started pursuing consultant work, and he sent Pottinger his reports, which covered topics like China’s push for a digital currency. He also floated the idea of Pottinger joining Garnaut Global after he left government, which became a reality when Trump lost his reelection bid. (Pottinger resigned after rioters stormed the Capitol on January 6th, 2021, and joined Garnaut weeks later.) 

Pottinger, a more savvy manager, assumed the role of CEO and works remotely when he’s not traveling to see clients, the majority of whom are hedge funds and asset managers. Garnaut Global clients pay a retainer fee, which Garnaut declined to disclose, for both short reports responding to the issue of the day, as well as in-depth investigations, some of which are produced bespoke for individual clients. Garnaut says the firm is also doing an increasing amount of work for multinational corporations, particularly technology companies, which is tailored to the individual company or sector. 

The two men are good partners, in part because they are very different. Garnaut is quietly charming, and as Pottinger points out, has “the manner of a professor lost in thought.” But he is not at his happiest, or most effective, when he is managing other people. 

Pottinger, by contrast, brings an extroverted, military-trained leadership style that effectively rallies a group behind him. He also has expertise in an area that clients are increasingly interested in: U.S. policy on China. While Garnaut spends more time analyzing thinking in Beijing, Pottinger focuses on helping clients think through geopolitical issues and policy choices coming out of Washington.

We’re not doctrinaire about his framework, we just think that it’s a starting point… [Xi] can deviate from his own framework, but if you don’t understand the framework, you’re just adrift in stormy seas.

Matthew Pottinger, former U.S. deputy national security advisor

“The demand to understand, for example, what the next presidential administration — whether it’s Biden 2.0 or Trump 2.0 — could look like has become a bigger question in the minds of clients,” says Pottinger. “People are interested in Trump’s trade approach, and they want to know about tariffs and whether he would move to block Chinese EV exports to the United States and so forth.”

Bedford, the former Bridgewater analyst, says that the knowledge of U.S. policy on China is hugely useful. In one conversation with Pottinger, for example, he asked what it meant when the U.S. government announced that a Chinese company was “under threat” of sanctions. Some investors, for example, might take that as a sign to “short,” or bet against, that company. But Pottinger replied that the U.S. doesn’t usually tell a company it is going to be sanctioned ahead of time; when it does, it probably means that the government doesn’t want to put those sanctions in place and is instead attempting to change the company’s behavior. (Bridgewater did not respond to requests for comment.)

“They cover China politics, they do regulatory interpretation…They highlight the value of KPIs, which is not really understood in the Western market,” Bedford says. “They do stuff no one else does.” 

Garnaut Global’s research director, and very first hire, is Matthew Johnson, a CCP historian who Garnaut initially met because he shared an office with Garnaut’s brother at Oxford. Other core members of the team include David Feith, who was an editorial writer for The Wall Street Journal in Hong Kong before joining the Trump administration as a State Department appointee. (Feith is also the son of Doug Feith, who was a Pentagon official under George W. Bush and has been described as an architect of the Iraq war.) 

In January 2023, Ami Bagia, a former U.S. intelligence officer who worked in Biden’s NSC, joined to instill “gentle discipline,” as she puts it, into the organization, including modeling the editorial process after the president’s “daily brief,” the summary of highly classified material U.S. presidents receive every day. 

Bagia, who first started reading Garnaut Global’s reports while in government, has also helped put in place enhanced security measures for the organization, including cyber security processes, to protect Garnaut Global and its staff members. “I am completely paranoid at all times,” she says. “As a team, we are as careful as we can be.”

Despite the all-star team, many of Garnaut Global’s clients insisted it is Garnaut himself who is worth the subscription fee. The financial sector client says that while “lots of other shops do saturation bombs” of analysis, “John is like a smart bomb.”

Michael Thawley, the former Australian ambassador to the U.S. who later was one of Garnaut Global’s early clients when he worked for Capital Group, one of the largest asset managers in the world, agrees. “His particular talent is his ability to understand and describe what the Chinese leadership is trying to do, and how history, personal interests and ideology shape the approaches of the party and government policy,” he says. “It’s something that often people in business and in finance neglect or underestimate…People [in the business community] would say, ‘Oh, well, there’s a period of tighter control on China, but the pendulum always swings in China, it will swing back.’ There was this idea that there was a normal, which the Chinese government would return to.”

(Capital Group did not respond to requests for comment.)

When I met with Garnaut again, on St. Patrick’s Day, there were signs that the Chinese government was indeed letting the pendulum swing back ever so slightly — if only to stem mounting economic challenges. It was late afternoon, and we sat outside a Foggy Bottom pub decked out in green flags. In between sips of beer, Garnaut launched into a discussion of ‘xianli houpo,’²先立后破 a phrase translated as ‘establish the new before breaking the old.’ His firm, he says, has been debating the extent to which the emphasis on this phrase in Chinese political statements in recent months means that Xi wants to establish the new economy, like electric vehicles and semiconductors, before destroying old sources of economic growth, like the property sector and traditional manufacturing. 

“He’s pivoting,” says Garnaut. “He’s moving to moderate the regulatory assaults of the past three years and is opening up greater policy space in order to stabilize the economy. The trick is to see how this translates to action on the ground.”

Garnaut Global insists it can discern this subtlety by sticking to its close readings of CCP texts and using its understanding of Xi Jinping’s ideological architecture. “We’re not doctrinaire about his framework, we just think that it’s a starting point,” Pottinger says. “In other words, [Xi] can deviate from his own framework, but if you don’t understand the framework, you’re just adrift in stormy seas.” 

Some warn, however, that the type of textual analysis that Garnaut Global does risks minimizing the messiness, as well as the push-and-pull nature, of Chinese bureaucratic policy making. Bishop, who calls this debate “among the holy wars of China watching,” says that “it is a trap to rely too much on textual analysis. You can take it too far. Chinese government officials say something and then they may not follow through — bureaucracy intervenes.” 

Still, he notes, “it is also a trap not to look at it. It is more right than not to focus on it.”

Buckley, the New York Times reporter, credits Garnaut for seeing “earlier than most that there was a purposefulness and ruthlessness to Xi — that he wasn’t just putting on a tough pose to establish his credentials.”

But, he adds, “the challenge is that Xi can also be ambiguous and tactically pragmatic. Tracing how his ideas translate into policy is not easy. Xi’s pronouncements about common prosperity, for example, could take policy in different directions, radical or incremental.”

As U.S. politicians turn the dial up on their China rhetoric, the same could be said about U.S. policy. When Garnaut and I met in March, the House had just passed a bill, sponsored by Gallagher, to force ByteDance, TikTok’s owner, to sell the social media app or face a ban in the United States. Although critics argue that the dangers of TikTok remain hypothetical and that TikTok’s American competitors, like Facebook, similarly fail to protect user data, Gallagher declared in a press release about the bill that “America’s foremost adversary has no business controlling a dominant media platform in the United States.”

Garnaut seemed invigorated by the bill’s outcome. In December, he testified at a Select Committee hearing partly focused on TikTok. “I think what’s been missed is the intent that the party has communicated to use platforms like TikTok to shape the international discourse as part of what Xi Jinping calls ‘discourse power,’” Garnaut said in his testimony, which he called “Engineers of the Soul, Part 2.”

It was a kind of full-circle moment: vindication for Garnaut’s argument that Chinese influence campaigns and interference, which he covered as a journalist a decade ago, are both omnipresent and worth countering. 

“The question was whether the [U.S.] political system would: A) find the political will, and then B) find a way to do it,” he told me. “For much of the last year, the answers looked like no. And so it was amazing to see this bill get wings.” 

In previous conversations, Garnaut had expressed a desire to slow down — building both a company and an analytical paradigm at the same time “takes a lot of energy,” he says. 

But as he drank his second beer and talked about what slowing down would mean, it became clear that he was envisioning his next reinvention, his own version of ‘breaking the old and establishing the new.’

“Look, there are inputs and there are outputs,” he explains. “And I’ve been doing a lot of outputs for the last few years. I’m now finally ready to open up to more lateral pursuits because that is going to feed the next round of outputs, whether it is to spend more time thinking about developments in technology, or about the politics and geopolitics of the developing world. It’s time for me to widen the aperture again.”

---