tv [untitled] April 11, 2012 7:30am-8:00am EDT
before material is war he was on we. we wanted to visit. something of. the hour here in the russian capital time for your headlines the british prime minister powers ahead with his arms sales pitch in asia opening up the u.k.'s war arsenal to the nations of surrounding china. there is still a chance of a truce so says the special envoy to syria while u.s. congress hawks cozy up with syrian rebels and step up calls to supply them with our . plus critics say spanish plans for a vegas style gambling empire to make money and jobs could actually end up. more
than the economy. talking economics here and i'll teach china's high powered industrial machine as such to displace the u.s. from the top of the global economic podium just how quickly will this happen right now crosstalk. can. start. to build. a low in welcome across the uk i.q. rising and surpassing this is one way to describe china's truly amazing ascent on the international stage but when success comes challenges is the u.s. ready to be second best in china and as china becomes number one put in man to change the rules that have benefited the west for decades even centuries.
to. live. to cross china is number one i'm joined by you and alan in our lando he is director of the china center at roland's college and author of chinese international investments in hong kong we go to martin henniker he is an associate director at the tight group and in chicago we have joshua lipman he's an associate with the boston consulting group and has done prior research on the chinese currency i german this is cross-eyed it means you can jump in anytime you want martin if i go to you in hong kong first the international monetary fund says that china will equal the u.s. economy in two thousand and sixteen but others are even saying that the chinese economy is already surpassed the american one how do you look at it. yes so you're saying that the most optimistic viewpoint is there a chinese economy may already be traders and large as in the united states once or who i'm entirely sure where it is but certainly from our point of view the
perspective of your point on the united states and europe is generally still china is letting far behind and we think that's clearly not true apart from the i.m.f. we even had a study by the economist really stress now saying was a lie the i.m.f. red china will be surpassing the u.s. as the number one economy in two thousand and sixteen in the purchasing power parity terms and two thousand and eighteen in nominal g.d.p. terms so we would think if they have not already overtaken the u.s. which is quite possible then two hundred sixteen to the nation that's probably the latest date so clearly from an investor's perspective you are you all should better look at china gaining some exposure in some way form or geopolitical perspective clearly it's gaining influence quite strongly and it's probably a good thing that this is happening you know a trend and russia can criticize a lot in the u.s. but then as we all know there are different perspectives on this and some countries often say that the western interests are stabilizing the world and not the other
way around so generally yes china will be probably number one soon and we think it's a good say ok josh when you your priorities are you not disagreeing ok but you react to what martin just said. yeah martin i mean i think no one can deny the rapid growth the try to see in the last few years but the fact of the matter is that just in nominal g.d.p. terms the u.s. has more than double china now just around fifteen trillion u.s. dollars with china around six trillion u.s. dollars i don't see i don't see that imbalance changing anytime soon my firm has done some research on a product t.v. and you know there are a lot of factors contributing to manufacturing in jobs and we back to the u.s. from china i think this is all contribute to you know a slowing the growth of china and my research i want to make clear that my research is a separate i'm not here representing my firm but the the research that i've seen of
the evidence i've seen all point to you know china's growth slowing and so i mean just you know maybe maybe even a seventy percent of that seven percent that's that sterling growth isn't it at seven percent for economy that size. and even if a meltdown then again there is only an astronaut is going ok mark you want to jump in there i want to go to were allowed to go ahead marty when we are here just you know there so just wherever there's so much about shriners or police know in your time i mean just looking at the most recent indicators that p.m.i. index is strong fifty three point one. three point three the economy still is requests strong and as you say it's you know many multiples of what's the restless doing and it's it's not a theory i mean just on the present projected growth even in the nominee figures if anything like figures that we have seen allows need it is going to continue then subtract china real whatever united states into an eighteen it's not an opinion as
if somebody else is saying in the us right china's economy is just about to collapse there would be you know one thing that will stop it but if nothing fundamentally changes the fact that china really all are taking the united states so if you're saying is the right time so i was in like some hedge fund managers their property is going to collapse and that may be different but otherwise i'm sorry that's just not the reality of the way the way things are going on the property just briefly are we one this the prices are quite high but that's one sector and other sectors are very very strong in china and beating really. being a great challenge for the rest economies manufacturing there which is going down quite rapidly ok and frankly you and i wonder what accounts for the differences here because i mean i came across a report it's been a decade it's possible the chinese are going to be twice the size of the u.s. and we hear from joshua i'm not going to disagree with them i'm going to kind of it's not china but saying it's much smaller i mean why the different numbers so i actually think our focus has been misdirected because looking.
g.d.p. or purchasing power parity g.d.p. simply means that the overall economy is larger in china and with a billion people a billion plus people of course the economy's going to be large. in a country with three hundred million people such as the united states but i think what we really need to focus on is the ability of china to sustain it for a prolonged period of time and to achieve the quality of life their people and united states have if you look at the g.d.p. per capita in the united states it's significantly higher than that of china and will continue to be saw for years to come furthermore if we look at other quality of life indicators such as pollution political risk control of the corruption those are all the issues there china still struggling with in this simply focus on g.d.p. i think is misdirected well i'm joshua if i go to you i mean it's this not just
focusing on g.d.p. i mean we're looking at different sectors of the economy in china that are excel meanwhile they're dying in the united states we just don't have to look at g.d.p. . yeah i agree with that one hundred percent i really don't know how it's going to just we're going to capita g.d.p. per capita in the u.s. is ten times greater than g.d.p. per capita in china and even my point is that even if you look at g.d.p. overall i still think the china has a long way to go no i'm not denying that china is growing a lot it is but it has a long way to go before it can get close to even thinking about passing the u.s. ok mark. let me think ok one thing here is going to. go ahead yeah i would say six years isn't deadline without even if you are saying you know i mean even if you're saying the property market may slow down if you actually know for sure that that's the former comptroller of the united states the
guy who is in charge of the books of the u.s. government david walker has been saying earlier this year that the u.s. is now where greece was two years ago in terms of instead crisis so even you know if you're saying that some property slowdown in china you know the u.s. debt problem is the also just the road to explode they will probably order grow as big as somewhat or so again you know that this is some of the world control that time with all of us i find it quite funny because again just under present numbers it is six years it's not really there find a future even if i got if i didn't bring our. i don't even bring out the fact of the property situation in china but that's definitely one factor contributing to a decrease in the rate of growth in china i think additionally you have to think about the pressures on trying use currency and the advantage the cost of labor that china has had is going to be decreasing with the appreciation of the currency and with the increase in demand for wages by chinese workers my firm came out with
statistics that says you know by two thousand and sixteen chinese coastal workers may only have a ten to fifteen percent cost advantage of. leiber against us workers and with that kind of energy and factoring in things like transportation costs and inventory costs and almost not seen any benefit to producing things in china it's one of. the i defy anybody you know you're right if i go to jail i mean that's one of the reasons why the chinese are going to start investing more in their own domestic economy because they have domestic consumption i mean we may not have the cutting edge for exports in the near future whatever that means but they have a huge domestic market to begin work on that's a huge advantage yeah i mean that i think there's no question about it but i think also when we look at the growth numbers we have to be very careful because if we grow from one to two we grow by one hundred percent if we grow from one hundred to one hundred and one we grow by one percent in both cases we've added one unit of
value but in one case we've grown one hundred percent and the other to the other place we're growing one percent so i think we have to take that into account that china is starting at a much lower place now in terms of china's investment china is now looking to invest not only in china itself but really throughout the world in africa and in latin america in areas that were traditionally the backyard of the united states and they're seeking resources and technologies to continue to fuel the economic growth ok so i mean for the kind of jumped ahead of me i want to do the second part of the program but martin and i don't need to go to you i mean they try to with three trillion dollars in hard currency reserves they're turning into the lender of the most favored lender right now because trying to can loan money without conditionality and the i.m.f. is criticized for. yeah that's really one of the reason as of us just mentioned that china is so successful in other countries because you know they're willing to
lend and they're dead on our way as far as the countries lobby and i.m.f. before as close as hospitals and schools before the money is flowing in and as a condition that it just goes back to repay loans from a very international banks who have you know lend money or purpose and of fifteen percent or twenty percent rate but don't want to take the risks but that's a bit of a political story but basically if you're looking at their faith that china has had enough of crime that have elements there since they really moved in there quite substantially. to put it well of infrastructure there and in addition to obviously getting the wrong materials of it has had really quite a significant development in god i don't think anybody can deny this and that's really also i hope we would sing for china the asian economies in general their peers the exports to the emerging markets and the integration with other million markets are growing because the us and also as we see in the yard is going deeper into a debt crisis but on one other point that what you have just mentioned you are saying well the g.d.p. per capita in the us is good ten times higher than china on the other end china
supposed to so on only have a cost advantage of ten to fifteen percent that doesn't really seem to have thought out only perhaps if you assume that i was exports go back to the us a very far away but in the future that's going to be less and less the case as there was a prior call to other emerging markets ok joining the jumping you're going to short break an avalanche everything if you do you are disgusted and china is number one state department. thank you. willow if you only just. begun. a nation of free accreditation free transfer judges free. arrangement free is free. to tide free.
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he can. still. welcome back to crossfire thank you to remind you we're talking about the continued rise of china. and he came. before we wanted to break you want to respond to martin's rapid fire comments about the chinese economy go right ahead. yeah i think we're we were talking about china being able to lend countries some of their foreign reserves actually some of the reason that china is actually able to lend money to other countries is because
the u.s. has allowed it to export. under strict third under most favored nation status and allowed the currency to continue to be low china was able to accumulate trillions of dollars of reserves as a result of this. trade policy one of the things that we have to realize is we're talking about the chinese and american economy is that we really can the carport these two economies these two economies are sharing a bed and the success of one will affect the success of the other ok but if we could you know if i could say what you want to mean but the ills of the united states and its economy in the euro zone that's something that china does not want to get itself installed in come on let's you know it's the international order has been established by washington the washington consensus and europe and it's been that way for centuries the chinese don't like it and they want to move away from it and why not go ahead. well in fact i'm not so sure
they want to move away from and i think that the the current system in place to trade system that we have in place is there actually the one that has allowed china to prosper because it has allowed china to export sometimes at the expense of western europe and american companies who couldn't compete. to sell or reason couldn't compete on cheap labor who couldn't compete on the cheap currency frankly so the united states and europe have had policies that allow developing countries to explore unrestricted with limited i mean that's appearance very made and that is a very make i'm going to see i mean martin if i can go to you it sounds that we humans are good you know china is doing well because the americans allow them to do well. well it's a tricky question i mean for some extent it is true i would say that the currency has been undervalued i mean it's appreciating slowly but it's still a valid which is also why probably the going to be number one for us in purchasing
power i just and then follow follow it. it's tricky to say. how to interpret history here if the americans and europeans just were so generous and of goodwill to all the neighbors to allow this to happen or what exactly was the reason i mean i would just say today look at today what is a reality in there. is that china has become more powerful whatever exactly the reasons would have been maybe they just use the short a way as they did this the. so-called you know that's the reason why china is controlling the us not because they only have their own ones who have them but they were the only ones to be bothered to give up those talks and all this hard you know poisoning polluting nobody else wanted to do it so you can also argue that way but clearly now china is the major economy or soon to be the remnant is also on the valley and from investors perspective that means you will find good investment opportunities also there and since your grief you talk about the property and they
also want to touch on banks because that's one thing the china dramas are often saying the banking system is about to completely collapse because of property but one single crime is banks have the highest reserve requirement ratio in the world almost only lebannon it's still above the pride of eleven and they do pretty well and it wasn't any reason to is now trying to cry for the reason you can't really have a reason to enter the. market was always encyclopedic of this program. so no because i mean one of the things i want to get on the river is if you think the us i would say you want to settle into second place ok i mean i'm an american you're an american you and also i mean we've been brought up it's always number one but in our lifetime that's going to change. so yeah i think there are a few points here first on one's point about the chinese currency undervaluation i
think that's certainly the case on their own agrees the order of magnitude is a question but i think most people would agree in the order of thirty and forty percent that you know the chinese renminbi is undervalued and that's something that actually has changed in the last few years so i wouldn't say that the u.s. and europe have just been stagnant on those policies i mean since two thousand and five when china decoupled its currency from a fixed peg to the u.s. dollar china's been steadily appreciating its currency over twenty percent in the last few years so i think this is going to be one factor that contributes to the decline in china's exports and slows the rate of growth in two peter your point about how the u.s. will deal i mean i think the u.s. is coming to terms of coming to grips with the fact that it is no longer the only superpower in the world and it will have to share that power but i think there are a lot of i just i mean i'm sure you've been really following the republican campaign that you've been following the republican campaign i don't get any sense from the republican party that you know that anyone should be more the number one
the united states is always going to be the place particularly matelot military spending even if i'm going to you is one of the interesting things that analogy i came across in researching this program is that you know right now the united states is kind of like britain after the first world war the us had was the largest economy in the world but britain was still the policeman of the world and fought all these ridiculous wars spend so much money on defense spending wow it sounds kind of like the united states to me in the present i mean the chinese are watching the united states tear itself to pieces ok and the chinese just keep slowly going up and now i mean it's remarkable to watch from a distance. yeah i think the chinese are going through an industrial revolution of sorts in a similar way that the united states has gone through it in the twentieth century taking over the power of europe and europe in in the nineteenth century so i think you're right that there is a lot of parallels to be drawn here between the declining power of the united states and the declining powers of europe but let us remember that even after the
decline in european quality of live g.d.p. per capita air quality. education level control of the corruption are still much much better than then most emerging markets so to say that china. only needs the united states to grow is also i think an extreme point of view i believe that china i think there's now i'm just simply by growing internally in the same way that the united states grew internally in the twentieth century ok joshua jump in go ahead. i think there's an important point to make here when making this parallel if you look at post world war two me the us had about forty percent of the mean fracturing experts in the world and so to say that you know. that the u.s. is in britain's place today i mean the u.s. economy today is relatively strong compared to that and china only has twenty percent of world exports economy that's largely driven by exports say that you know
the u.s. is headed towards decline in the same way that europe may have been after world war two and i think you one made a good point that there are a lot of other factors quality of life and. of living. that are favorable for developed countries or vs is going to maintain or improve ok martin you know i think you could fair to say over the last thirty over the last thirty years we're going to martin and the quality of life for the chinese is improved immensely i mean i think we tend to forget what it was like thirty years ago thirty five years ago had one. that's absolutely right a lot of people have come out of poverty by person x. and there were three if you go to china you know the living space there and then compare that to you know what kind of housing living standard you can buy in the u.s. but it's because they have more lending doesn't mean they're better education in fact if you have you know educated people you know supposedly talking about elderly patients much better in america then then in asia for example that's that's a drop because i'm just looking at the international report. coming out and
obviously is education seems to be considerably better in asia and then to say that this is not the case you know shows maybe there's something wrong because they think asian americans a lot of americans see the world still you know we're very very u.s. centric and that's mentioned last thing the republican party isn't waking up to this but one part of the republican party is those ron paul supporters actually a lot more modest and realizing that their best days and out of their crisis for the u.s. the best place maybe very much tenants and other countries you know. stronger and stronger by the united states going to go back to you in orlando i mean if china grows in other emerging markets they're going to want to see a change of the way the world is run at least economically financially speaking because they want to have a greater stake ok and we look at these in certain situations like the world bank the i.m.f. i mean this is all post world war two ok we're now we're in post cold war ok we're in the twenty first century now i mean one of those institutions are going to
balance out more to represent the majority of the people in the world not the americans not the europeans there are small small minority in the world right now in their economies are shrinking relative to the bric countries for example yes i think you're right but the system that is emerged after world war two is the current system of economic order political order so the chinese really in the russians and the brazilians in other emerging markets really have two choices or do they want to participate in the current systems to yield more influence in the systems that we currently have or do they want to create new systems based on a wider area and occasions i have i think the chinese are going to try to influence the current system. to create some new systems for example creating a monetary fund will be able to bail out developing countries and be able to give foreign aid but to simply say that we will shove aside all the systems that we've
developed in the you know. if i guess what about replacing the dollar with a fair currency unit for the world i mean that just benefits the united states at the detriment of everyone else in the world everyone. yes well you have to remember that immediately after world war two we did develop an instrument play that was called special drawing rights as the r.'s and the reason we don't have as the us today is because nobody wanted to use them the dollar has become as good as gold central gravitated good is we've all been a little busy to figure you guys are figure of speech ok ok josh i'm going to be the last word of the prose is going to change my point go ahead joshua well yeah i think he's make an important point that bretton woods taught us that you can't make an artificial currency and at the end of the day people trade what they have and in this economy people have dollars people trillion dollars and that means good news for the u.s. in the short term yeah ok we'll see if the chinese can get rid of them one way or