On this week’s “Political Capital with Al Hunt,” airing tonight at 9:00PM/ET, Bloomberg Television anchor and Bloomberg View columnist Al Hunt, interviews United States Department of Treasury Secretary Jack Lew.  Sec. Lew said to Hunt, China must avoid postponing long-term economic measures, “they obviously have to worry about their short-term economic situation. What they can’t do is treat the long-term reforms as something they can just put off. They need to be serious about it.”

Jack Lew

Sec. Lew also said to Hunt:

–          China must move toward market-determined prices.

–          China needs to be serious about economic reform.

–          Seen ‘very negative movements’ in Yuan recently.

–          Russia risks more sanctions if behavior doesn’t change.

–          “Unacceptable for Russia to violate Ukraine’s sovereignty.”

–          Steps U.S. has taken on Russia ‘are being effective.’

–          U.S. goal is to get Putin ‘to change Russia’s policy’

–          Russia’s economy is heading in a bad direction.

“Political Capital with Al Hunt” airs Friday evenings at 9pm/ET and midnight with repeats throughout the weekend, including 9:30am, 1:30pm and 9pm on Saturday and Sunday at 9:30am and 1:30pm/ET.

Full transcript below.

AL HUNT, HOST:  We begin the program with the United States Treasury secretary, Jack Lew.

Thank you for being with us, Mr. Secretary.

You’re taking off for China on Sunday, an important trip.  Chinese growth was 10 percent.  It slowed to 7.4 and may slow more

How likely is it the Chinese will introduce new stimulus measures even at the expense of their economic reforms and what advice would you give them?

JACK LEW, TREASURY SECRETARY:  Al, good to be with you today.

Um, I think, you know, China and China’s economy is obviously of great into to the world, to us, to — it’s profoundly of interest to the Chinese.

Um, I think that they have a lot of tools that they have to — to continue to — to grow.  But they have to make the right policy decisions.

Um, the challenge they have is the trade-offs between reform and — and short-term growth.  And I’m certainly going to encourage them to stay on a reform agenda.  They need to open their markets.  They need to have a level playing field so that their markets determine prices and the — there can be competition between domestic and international goods and services.

Uh, and that…

HUNT:  (INAUDIBLE) likely they’ll stick with that reform…

LEW:  Well…

HUNT:  — rather than a short-term stimulus?

LEW:  You know, I — I think — I think that it’s — it — they obviously have to worry about their short-term economic, uh, situation.  We all have to balance short- and long-term decisions we make.

What they can’t do is treat the long-term reforms as something that they can just put off.

HUNT:  Right.

LEW:  And they need to be serious about it.  They know they need to be serious about it.  They know that their economy, if it doesn’t move more toward market-determined prices and — and signals is not going to give them the medium- and long-term growth they need.

HUNT:  Some worry…

LEW:  So that they…

HUNT:  — that (INAUDIBLE) their property prices are falling.  And I see some experts say that there’s the prospect that China is in a bubble that’s about to burst and that it will affect the global economy.

Is that a real danger now?

LEW:  Look, I — I think that, you know, there are a lot of challenges that China has to deal with.  China has a lot of capacity to deal with its challenges internally.  So I — I think that the question is whether they manage some of the things going on in their — in their economy, whether it’s some price fluctuations in housing or whether it’s shadow banking or state and local — their local provincial finance.

They have the capacity to deal with it.  They — they need to — to deal with it.  (INAUDIBLE)…

HUNT:  You don’t see them in a bubble right now?

LEW:  Look, I — I think that they have challenges that they have to deal with to, you know, they focus on jobs.

They — are they creating enough jobs?

And I think that if they’re staying on a path where they’re creating jobs, they have more license to do the reforms that they need to do, which is what is needed for China to grow and for it to be a level playing field so that U.S. companies can compete in China.

HUNT:  Mr. Secretary…

LEW:  Look, my — my focus in China, from a U.S. perspective, is very clear.  We want there to be a market that U.S. firms, financial firms and manufacturing firms, service firms, can compete in.  And we bring that to the table every time we engage with China.

We also look at exchange rates.  Exchange rates is an extremely important issue.  You know, we have encouraged them (INAUDIBLE)…

HUNT:  Are they living up to their currency commitment?

LEW:  Well, you know, they have, uh, made some moves that are consistent with a — with moving toward more market-determined rates.  They widened their trading band.  But we’ve seen some very negative movement in the exchange rate in recent months.  One of the issues that I’m going to bring to them is if your policy says that the exchange rate can go up and down, you need to have market signals determining whether it’s going up or down.

HUNT:  That’s also going to be a topic (INAUDIBLE)…

LEW:  And that’s going to — that’s a serious conversation, because it has to do with the competitiveness of U.S. good in China.

HUNT:  Mr. Secretary, I suspect another topic, Russia plans to turn to China for money or ask China for money investments to compensate for what they’re losing with the sanctions from the U.S. and the EU.

Are you going to pressure, urge your — your Chinese counterparts not to go along?

LEW:  You know, Al, we talk about a wide range of topics with them that — when we meet.  I’m going to bring the topics that are central to the U.S. agenda and they will raise topics of concern to them.

I think that, you know…

HUNT:  This would certainly be…

LEW:  Yes…

HUNT:  — be central to us, wouldn’t it, if they’re going to compensate for the loss of — of — of money in Russia because of the (INAUDIBLE)…

LEW:  We…

HUNT:  — (INAUDIBLE).

LEW:  — we have — we have been making the case consistently wherever we go that, um, that it is unacceptable for Russia to violate Ukraine’s sovereignty and that when we take actions and other countries in the world take action, um, it is important for there not to be back fill.

HUNT:  And we would not be happy, then, if the Chinese were to…

LEW:  Well, it…

HUNT:  — (INAUDIBLE).

LEW:  — it is an argument I make wherever I go.

HUNT:  And you’ll make it in Beijing?

LEW:  Well, it — you know, we’re — we’re going to talk about a whole range of topics.

HUNT:  How about let’s talk about Putin and Ukraine.  Why not impose tougher sectorial sanctions now rather than wait?

And if so, would they apply to a wide swath of financial and energy initiatives or be more targeted specific to (INAUDIBLE)…

LEW:  You know, Al, I think that the steps we’ve taken with regard to Russia have been very carefully determined and they’ve been quite effective.  We have acted to target people in the Russian

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