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Elaine Chao Learned From the Best

The transportation secretary is part of a long line of individuals who’ve bridged China and the United States—and done well for themselves in the process.

U.S. Secretary of Transportation Elaine Chao speaks at the Fortune Most Powerful Women Summit in Laguna Niguel, California, on Oct. 2, 2018.
U.S. Secretary of Transportation Elaine Chao speaks at the Fortune Most Powerful Women Summit in Laguna Niguel, California, on Oct. 2, 2018. Phillip Faraone/Getty Images for Fortune

For 40 years, thickening chains of economic interdependence have bound the United States to the People’s Republic of China. But recently they’ve started to show signs of rust. The Dow Jones lurches whenever U.S. President Donald Trump fires off another tweet in his tempestuous trade war with President Xi Jinping’s China. Strategists speak of a “new cold war” between the world’s richest and most populous countries. From the Obama administration’s much-ballyhooed pivot to Asia to the Defense Department’s proclamation of a return of “great power competition” in January 2018, the commercial engine that has generated wealth and suppressed tensions across the Pacific Ocean since 1979 is in danger of breaking down entirely.

Yet relations between nations and peoples comprise more than Olympian statecraft. Analysis of the U.S.-China relationship often overlooks a critical set of actors in this vital drama: the political entrepreneurs, always hustling, sometimes corrupt, who have helped drive this process of economic convergence and been well compensated in return. Those relationships are often intensely personal—even as they shape hundreds of millions of lives—and hopscotch across the private and public squares in ways that blur the lines between the individual and the nation, between public service and feeding at the public trough.

That’s why it’s worth taking a close look at exactly how they’re shaped. In the summer of 1983, the President’s Commission on White House Fellowships selected Elaine Chao from among 1,112 applicants to join its 19th class. The announcement that named her and her 12 fellow honorees listed her hometown as Harrison, New York, from where she commuted to the ship financing department at Citibank headquarters in Manhattan. The position suited her. Before she graduated from Harvard Business School in 1979, she had worked for the shipping company her father had founded after relocating his family from Taiwan to Long Island, when Elaine, the oldest of six sisters, was 8 years old.

When she arrived in D.C. the next year to take up her prestigious fellowship, ambitious and alone in an unfamiliar city, Chao reached out through the White House network to a fellow Chinese American, whose business dealings and political contacts had made her a household name on both sides of the Pacific.

Though she held no formal title save chairwoman of the Republican National Heritage Foundation, Anna Chennault embodied the struggle against communism in Asia for many Americans. She had arrived in the United States in 1947 as Lt. Gen. Claire Chennault’s prepossessing young bride after the two met during World War II. She had been called Chen Xiangmei then, and she worked as a cub reporter for Hong Kong’s Central News Agency. He led the famed Flying Tigers, an all-volunteer air force whose mission was to deny the Japanese war machine control of China’s skies.

More than 30 years her senior and already married, Claire Chennault divorced his first wife and then prevailed on Anna to marry him in 1947. When the Chinese Communist Party emerged triumphant in the civil war two years later, the Chennaults became vocal champions of Gen. Chiang Kai-Shek, whom Claire had served as chief air advisor after 1937, and his quest to retake the mainland from his island base on Taiwan. The newlyweds had a vested interest in the dispute. Anna had grown up in a Beijing mansion, the daughter of a well-heeled family of cosmopolitan diplomats, scholars, and editors. Claire had founded Civil Air Transport, the Kuomintang’s airline, which the Central Intelligence Agency later acquired. The revolution left their extended family much poorer than before.

Chennault emerged as a prominent cheerleader of U.S. involvement in Southeast Asia after her husband’s death in 1958, while directing funds from Nationalist sources on Taiwan to the U.S. Republican Party. She entered Washington lore when she helped Richard Nixon sabotage President Lyndon B. Johnson’s October push for peace that might have buoyed Vice President Hubert Humphrey in the weeks before the 1968 election. In passing messages to South Vietnamese President Nguyen Van Thieu that he would fare better with Nixon at the helm, she flirted with illegality and helped elect a U.S. president.

Chennault never forgave Nixon for allowing Saigon to fall or going to China. Most of all, she resented he never offered her a position in his administration. She sided with congressional Republican efforts to affirm Taiwan’s future amid U.S.-China rapprochement and harangued President Jimmy Carter for normalizing relations in 1979. By 1980, however, even the Taiwan lobby’s most charming face could no longer deny the prevailing winds had shifted in directions that could well prove richly rewarding to her and her family.

Reagan’s presidential victory on Nov. 4, 1980 started alarm bells ringing in Beijing and Washington. After all, the former California governor had spent the 1970s lambasting both Democrats and Republicans for appeasing communist powers in the name of Cold War detente. Chinese Vice Premier Deng Xiaoping worried his quest to modernize his country with Western technology was in jeopardy. Congressional Republicans stressed that Reagan would close the China market in which corporate America was finally making inroads. Nearly a decade of efforts to forge ties between the two nations risked coming to naught.

Sensing an opportunity, Chennault volunteered to act “as a bridge for future negotiations” in a letter to Vice President-elect George H.W. Bush. The importance accorded to her mission to China in 1981 was such that Senate Majority Leader Howard Baker was all set to lead it himself before his wife took ill. Fresh off his own marriage, Senate Majority Whip Ted Stevens went in his stead, informing his new wife, Catherine, that they would be honeymooning in Beijing.

For Taiwan’s most prominent champion to drink tea in the Fujian room of the Great Hall signaled that harmonious U.S.-Chinese relations would survive Reagan’s election. Deng feted Chennault, who enjoyed celebrity status on both sides of the Taiwan Strait thanks to her voluminous writings. What the two Mandarin speakers said that day remains mysterious. Stevens would joke he knew “everything that was talked about in English,” but only Anna knew “what was talked about in Chinese.” She later claimed to have encouraged Deng to seek a uniquely Chinese path toward modernity rather than simply emulate the West.

When they returned to Washington, Chennault filed a report with the Senate Foreign Relations Committee and the White House, as well as some corporate clients for good measure. In the early 1970s, she had worked as a vice president at Flying Tiger Line—the air freight company her husband’s former pilots had founded and crewed—cultivating the government contacts throughout Asia that would make it the world’s largest air cargo carrier by the early 1980s. She launched her own consulting firm in 1976, which counted among its clients Flying Tiger Line in addition to defense and aerospace firms—General Electric, Norden Systems, Northrop Corporation, and Grumman Corporation. In her personal papers at Harvard University, there are coversheets to Northrop and Grumman to which copies of the report had been attached. Grumman’s referenced an “ongoing business opportunity … on the mainland.”

As for Flying Tigers, she assured its leadership that even though it had not been “a business trip … it is the general opinion that Tiger has been benefitted by my visit to both Peking and Taipei. Since Washington, the People’s Republic and Taiwan are happy with my trip, I presume we can say we have another breakthrough.” The freight carrier would limp through the 1980s hemorrhaging cash, but its Asian assets were its saving grace. To acquire them, Fred Thompson’s FedEx would purchase the struggling airline for $880 million in December 1988. (Claire Chennault had left all his shares in the airline to Anna and their two daughters.)

For the rest of the 1980s, these firms reaped dividends from their business relationships with Chennault. Asian powerbrokers, Republican officials, and American defense contractors would gather in her Watergate apartment and the surrounding neighborhoods. At one 1985 luncheon in Georgetown, Northrop Corporation Vice President John Alison (a former U.S. Air Force general) and Grumman Corporation Vice Chairman John Carr (a former U.S. Navy fight pilot) rubbed shoulders with Wang Guangying, the founder of China Everbright Group, a powerhouse state-backed enterprise that had been incorporated in Hong Kong just two years before.

All this made Chennault an ideal mentor for an up-and-coming Taiwanese American with drive and ambition to spare. Under the auspices of the White House fellowship network, she lunched with Elaine Chao in January 1984. Two weeks later, on Chinese New Year, Chao thanked “Auntie Anna” for her “candid advice and guidance.” “Washington is still quite new to me,” she confided to Chennault, “and your expert perspective is very much treasured.”

We don’t know exactly what made up that “candid advice.” But Chao certainly seems to have learned something from Chennault’s methods. The New York Times broke the news this month that U.S. Embassy officials in Beijing had flagged request from Chao, now the U.S. secretary of transportation, to “help coordinate travel arrangements for at least one family member and include relatives in meetings with government officials.” The impression was of a U.S. government official operating on behalf of her family’s firm, some of whose profits (mostly from business interests in China) had found their way in the form of personal gifts and campaign donations worth tens of millions of dollars to her and her husband, Republican Senate Majority Leader Mitch McConnell.

In obtaining high government positions in Republican administrations, Chao achieved what Chennault had failed to do. In promoting her father and her youngest sister’s company whenever possible, she emulated Chennault’s talent for equating what was good for the United States with what was good for China and Taiwan, and for herself. Just two weeks after she received Chao’s letter in 1984, Chennault sent checks totaling $6,000 to the election campaigns of eight Republican senators, including Ted Stevens, who had been instrumental in her inclusion in the Beijing mission in January 1981.

Elaine’s younger sister and the deputy chairman of the Foremost Group, Angela Chao, explained in a 2015 interview with the China Daily how their “parents believe that in order for the world to be more harmonious and peaceful—dialogue, exchange, trade, interaction—are all important facilitators.” Such free-market views have dominated U.S.-China relations for 40 years, enriching some even as the U.S. economy has worked badly for most.

Voices across the foreign-policy spectrum have called attention to how self-dealing, fraud, and corruption threaten U.S. national and international security, eroding faith in private and public institutions, diverting resources from productive to unproductive ends, and undermining the trust needed for markets to work and governments to work together.

But at the same time, figures like Anna Chennault, while helping themselves, also helped usher in a more peaceful, globalized world, in which international disputes have mostly been subordinated to business as usual and hundreds of millions of people have left poverty behind—even as inequality has grown to staggering heights in both China and the United States. Whether they have done more good than bad depends on partisan filters and ideological priors. Liberals have long believed that the pursuit of material interests, however vulgar, serves to dampen the prejudicial passions that can yield conflict. Yet as the Western and Chinese elites have socialized in corporate settings like McKinsey & Company, Harvard Business School, and the Brookings Institution, where Xi Jinping’s nephew served as an intern, a chasm has opened up between nationalist rhetoric and international business.

Whether you want to re-up George Kennan’s containment for the 21st century or work with Beijing to address climate change, how to bridge that chasm requires serious thought. The increasingly flagrant abuses of laws against the use of public office for private gain, the Hatch Act, and the emoluments clause of the Constitution are national security threats of the first degree. The normalization of financial ties between the elites of both the United States and China is not just a moral challenge, but a security issue.

Jonathan Hunt is a Lecturer in Modern Global History at the University of Southampton.

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