Former Treasury Secretary Henry Paulson discusses the harsh rhetoric from political candidates on China’s trading behavior and says that during a political season heavy criticism on China plays well. Paulson adds, while there is a lot of work that needs to be done in China, he sees the nation as the largest and fastest growing export market.
let’s get to andrew who is in new york this morning. bringing us a very special interview. excellent, andrew, well done and it’s good to see you. and the secretary. thanks, joe, appreciate it very much. i am here with the former secretary of treasury, hank paulson. he just had a very interesting dinner in washington, d.c., with the vice president of china, xi engine jinping. he was just at the white house yesterday. i want to get your thoughts on europe and what’s going on in the u.s. i do want to talk about china since it is in the news. you have started the paulson institute and you’re writing a book about china. given all of the political rhetoric going on around china right now. you think about some of the things that romney has said, he has called china a quote-unquote cheater. he said if he was in office on day one i think he says that he would call them a currency manipulator. i’m curious, when you talk to the chinese and you talk to xi jinping in particular, how they see this developing. well, andrew, first of all, i think the chinese understand the same thing you and i do and all americans understand. or many americans understand. is this is a political season. and harsh language on china plays well at a time like this what i emphasize to the chinese and to others, that what you see our leaders talking about, is enforcing the trade rules. and we’ve got a rules-based system. how can you question the need to enforce the trade laws. and fortunately, we’ve got dispute resolution procedures in the wto that really, that keep us out of a trade war. do you see china as cheaters? do i see them? let me tell you, china has got, i fought as hard as anyone to create a level playing field in china. and so there’s a lot of work that needs to be done. but i tend to take a more positive approach and take an affirmative agenda. and i look at china as largest export market, or fastest-growing export market. and so the things i’m emphasizing are things that going to grow the pie. for instance, a big effort i have right now with the paulson institute is to advocate for more chinese investment in the united states. because that will help the economy. it will create jobs. and so for instance, when i was in beijing in december, i was there, the mayor of los angeles, mayor villaraigosa, who chairs the mayors association, was there with me, we were doing programs on sustainable urbanization, we pushed hard for chinese investment. i’m going to be working with the mayor of l.a. and the u.s. mayors association and the chinese mayors association are putting together an event in los angeles in may, emphasizing investment to create jobs in the u.s. how politically palatable is that, given what’s going on. you read in the pains about some of the labor practices in china. i’m thinking about fox com and apple and the perception of what americans think what’s happening in china and to think of them as investors here. well let me say that when you get to the sub national levels, when you get to mayors and governors, trust me, they understand capitalism. it doesn’t matter what party they’re from and they understand jobs and they understand growth and investment. and so that’s what we need to get our economies going. and they understand that the investment in the u.s. economy is great vote of confidence in the u.s. economy. when talked to xi jinping, the news recently about nortel that was hacked. google left google left china. how are they thinking about those issues? well first of all, let me say with regard to xi jinping, you have someone who is a strong, confident leader and that’s good for china and it’s good for the united states. because the chinese leadership is going to be tested, really tested over the next ten years. because the demands, they can be tested domestically and globally. and domestically, the demands of the chinese people growing all the time as is the leadership challenge of managing the kinds of change they need to manage. you know on a massive scale. and to emphasize, place a big emphasis on consumption rather than exports. they need to increase income across the entire population and keep that growing, that’s a huge challenge. you mentioned fox con and labor relations in china. china is a huge economy. and wages are going, they’re pressing wages up quickly. wages went up 23% last year. and so they’ve got a lot of work to do. they know that their country is, is too big and too complex right now in terms of its economy to be as dependant as they are on exports. so they’ve got a lot of work to do to rebalance. you worry some of the social issues? when you go to china for instance, would you make a sensitive phone call? do you worry about being bugged, for example? in terms of cyber security and in terms of breaking into computers, that’s a crime. we need to do everything we can to enforce the law. and the point i make and i think the point that the chinese understand and all of us understand is every big economy and particularly china, have a lot to gain from having international economic system work smoothly, be stable. and so they’ve got the same interest in cyber security that we have. and i make that point. china’s economy, how much do you worry about it. we had a guest on who is a bear about china, worries a lot about the real estate market there. worries a lot about a major hiccup coming. how do you see it? i’m not a bear on china. china has got some real challenges. we have china is a $6 trillion economy. the u.s. is roughly $14 trillion. europe is 16 trillion. with the issues we have in $30 trillion away from china, that has to have an impact on china. so china is going to have more pressure to maintain their growth rate. i think they’re going to be able to maintain it at an acceptable. at an acceptable level for them for a while. but remember, that this, this job is tremendous, in order to keep, manage the change, maintain growth, rebalance the economy, and the point that i make to them all the time, is they are so large and complex, and increasingly integrated into the global system, that it’s going to become more and more difficult to manage that economy with a combination of market means and administrative measures. and that they need to speed up the process of reform. and that’s there actually more risk to them if they go too slow than in going too fast. mr. secretary, joe has a question for you. great to see you, mr. secretary. and you know, for i don’t know how many thousands of years, we’ve pointed out the differences between the culture of the west and the culture in china. more recently, neil ferguson has pointed out, the ascendency of the west 500 years ago, he’s identified six of the killer annapolis, he says china has effectively downloaded five of them. he says there’s still one that’s hasn’t been downloaded, that’s the human issue, the property rights issue. is it sufficiently different enough culturally over there that they never have a day of reckoning. or the internet, the desire for all people to have just basic freedoms, does that eventually present a huge challenge for china? and how many years down the road do you see that, you know, coming to where they have to reckon with that? joe, first of all, good to see you, if only through a camera. and the question i get asked is one i get asked a lot. the way i answer it is, i believe that you’re going to see ultimately, more political freedom, more perm freedoms. because they will inevidently follow the economic freedom as china gets more and more economic freedom. so i see that as inevitable. when you talk about political reform and more political freedom, i don’t think any of us, have got the exact timing or the, the precise path it will take. but the one thing that i believe, and i believe this very strongly, that more political freedom is going to be a very important tool to help maintain stability. it doesn’t have to be destabilizing. and to step back a bit, i’ve been going to china for a long time. and let me tell you, the, the living conditions and the personal freedoms and the lives of the chinese people have improved dramatically over a 20-year period, ten-year period. so i think there’s, there’s, there’s room for a lot of encouragement there. when you go it a fox con facility, i’ve been reading all of these stories in the new york times about what seemed like rather horrible conditions. are they as horrible as they sound? and is the government trying to cover it up? i have never been to a fox con facility. so i’ve read the same stories you’ve raed. but to put it in perspective, andrew. this is a developing nation. you know, gdp per capita of $4,000, there’s a lot that’s being done in terms of wages increasing. and u.s. companies operating in china have done a lot to raise the bar and improve conditions. now there’s a ways to go, obviously. but the country has come a long ways and u.s. companies have added to that. mr. secretary, michelle has a quick question for you. thanks so much for joining us. the chinese investment corporation as a member of their advisory board who has been put forth to talk to media around the world. recently made comments about europe that if he thelt the system there had bred slothfulness, et cetera. how do the chinese behind closed doors look at the situation in europe and about how they’re going to invest there, if they are at all? chinese have been investors all around the world and they very much to invest more. as you look at china today, that they’ve got some, a good of companies that are very, very successful, operating in china. but they have few, if any, of the best global companies. so i think the next, the next iteration for chinese companies are to learn how to become greats global companies and how to have, have outstanding technology and governance and how to give back to the communities in which they invest and so on. so they’ve got a long ways to go. i think they’re looking to invest in europe. they’re looking to invest in the united states. they’re looking to invest all over the world. now i think what your question is getting at is how do they look at what’s going on in europe. and they’ve got to look at it with a good deal of concern, as i said. they understand that they, they’ve got a $6 trillion economy and they lack at what’s going on around them. their job isn’t becoming any easier to continue to grow and meet the demands of a chinese people, chinese people want the income to grow throughout the population and throughout all the regions. they realize they’re going to have to rebalance their economy.