Speaker: Henry Tang, Managing Director of Carnegie Towers Strategic Investment Advisory and Governor of Committee of 100
Date: November 16 2011
Interviewer: Hello, I’m Fred Teng of China-US Focus. Today we have Mr. Henry Tang with us. Mr. Tang is the managing director of the Carnegie Towers Strategic Investment Advisory and governor of the Committee of 100. Mr. Tang has spent decades on Wall Street advising financial institutions as well as individuals. He is also very active in civic and community organizations. Welcome Henry.
Henry Tang: Thank you for having me Fred, pleasure to be here.
Interviewer: As you know, 2012 could mean leadership changes in both the United States and China. How might the new leadership in Beijing, and potential new administration in Washington affect the future of their bilateral relationship?
Tang: Well I think it will sort of be a continuation of what has been going for quite a few years now. We’re actually in a period of both sides [trying to seek] common ground and become aware of each other’s differences. As we go towards 2012, it is an opportunity perhaps, to have a fresh look and begin to engage in an ever-changing paradigm or maybe even a new paradigm with regard to US-China relations, more towards a partnership rather than ‘relationship’. It’s now been about 40 years since President Nixon went to China. This began a new chapter that took about 22 years from 1949 to 1971 to happen. It’s now been 40 years and maybe it’s about time for another new chapter, perhaps some new thinking and maybe even some interesting new bold deeds, this time more in the arena of US-China economic cooperation and partnership. I really stress the word partnership. Back in 1971-72, we broke ground to establish a new global relationship in the geopolitical area. But now [it will be] economic-political.
Interviewer: Before we get to that, we’re going to have a transition period, a campaign period, etc. How can we assure that we can have a positive and healthy relationship during this period?
Tang: Well, this is where I suggest there be some new thinking. Even during the 2012 campaign period, we and other people in various organizations that I am active in, were monitoring the 2010 campaign period. Some campaigns stressed the tensions between US and China, I think, to see that perhaps, at hands, would not be very constructive. That’s why there needs to be the introduction of some new thinking. ‘New thinking’ being China’s goal and purpose as it always has been. Right now, for instance, there are about 150 million people in China who earn less than $1 per day. That is China’s purpose now. China’s purpose is not to be expansionist, not to be acquisitive or acquiring. In fact, if anything, in their new paradigm, they are paying market price for everything. And certainly America practices the same thing. We are really actually two countries armed with the same goals and the same paths looking for global social stability. I would suggest the campaign to look at China that way. Because as we have learned from history, no one is going away – everybody will still be here in 2013. We will all have to come back to the table and have economic and diplomatic relationships with one another. I always say, China’s government is run more like a gigantic multinational corporation where selected people who are candidates for the new CEO are brought in 10 or 15 years before to headquarters, namely Beijing, and then one or two eventually get to be CEO, COO, maybe even CFO. If we look at it that way, it is the way China is administered. To get into a dialogue along the lines of elections and other types of procedures, these are right now, not China’s administrative practices Interviewer: You have mentioned expansionism as well as diplomacy. Secretary Hilary Clinton has called for a “greater presence” in Asia. Is it necessary for the US to increase its military force in Asia? And how should Americans understand China’s growing military capacity? Tang: Well, to answer the second part of the question first, I would like to share with everyone something that might be common knowledge elsewhere but some places I go to, people are not aware of. It is that China shares borders with 14 different countries. They include countries like Russia, India, Vietnam and so forth. It’s a very challenging situation. China’s military budget today is about US$110 billion. The American military budget is somewhere around US$800 billion or maybe even more. We can see the difference and you mentioned secretary Clinton suggesting that perhaps this is an opportunity to redeploy resources and assets to the South China Sea. Once again I go back to ‘new paradigm thinking’. There are many common problems in the South China Sea that the US and China as well as other countries share. Primary among them might be this whole question about piracy that’s going on, on the high seas. I have read recently that there may be between 800-900 hostages that are outstanding at any one time that have not been rescued or redeemed. These are some very common problems that we all share. Looking at the South China Sea that way, rather than as an opportunity for so-called ‘protective defenses’, I don’t think there is that much expansionist activity going on anywhere. The other suggestion I would like to perhaps bring out is about many of the countries around the South China area, for these countries that have had huge surpluses, it may be time to suggest that they engage more proactively in their own defenses and underwriting more of the costs of it. Clearly everyone knows, American budgets are very, very stretched.
Interviewer: Many in Congress have blamed China’s currency as holding back America’s growth. And in Europe, leaders have asked China to bail out its failing economy. As the world continues to struggle economically, what advice would you give on how the West should work with China?
Tang: [Regarding] the whole question of China’s currency and potential revaluation, since 2005, China’s currency the Renminbi (RMB), has been revalued approximately 30%. As we sit here in the year 2011, it has been revalued upwards of 6%. Clearly, most other countries have not had this experience. So China is moving along and meeting the rebalancing demands out there. To deal with it at a quicker rate would also destabilize China and once again, the overall goal of trying to help enhance the wellbeing of the 150 million people. China right now, on the world stage, may appear to be extremely affluent with their automobiles, designer clothing and all that sort of thing, but the Chinese leadership focuses very closely regarding that challenge. Many years ago, I had the opportunity and privilege to sit down with Jiang Zemin and members of our party asked him what was the first thing he thought of every morning when he woke up. This was over ten years ago but he said, “I am burdened by the fact that we have over 10% of our population unemployed” which translates to about 130 million people, not to mention 150 million people who are below the poverty line. More recently, president George W. Bush, I had read, asked president Hu Jintao the same question. He said, “I have to worry about creating 25 million new jobs a year”. These are the fundamental challenges that China and its leadership face. It is not to be concerned about their positioning with regard to the global economy, who’s selling more cars, who’s GDP is higher and all. I think the leadership thinks with their responsibilities from their point of view.
Interviewer: There are many Chinese business investors looking to invest in the US and again many American businesses are looking to tap into the consumers in China. For some, they feel there are certain hurdles and challenges. What would your advice be to deal with some of these hurdles on both sides, and how can we create more trade and investment opportunities between these two countries?
Tang: I would like to bring out two examples, fairly dramatic, and a couple of good examples from the American side. Starwood Hotels recently announced they were moving their global world headquarters to China from America, mainly because they expect to expand their current base of 60,000 rooms in China to 600,000 rooms, mainly because China has about 110 cities with an over 1 million population. America has only nine cities in that category. So obviously, those opportunities are very, very abundant and Starwood Hotels is a good example of that. General Motors, going back 15 or 20 years ago, agreed to go into a 50-50 joint venture. That’s probably, once again talking about different paradigms, a fairly good example of how to perhaps, approach China. American companies should the see the advantages and resources that it has such as in patents, in innovation, intellectual power and look for the opportunities to establish absolute 50-50 joint ventures because I think both sides will learn from that. On the other side, as for the US, the question about Chinese companies investing in America, there are two very good examples of that right now; a company called Wangshan, who president Hu visited in July when he was here in Illinois. It’s an auto parts manufacturer that was acquired by a company called Wangshan from China, a major, partially state-owned conglomerate. It will retain and employ 6,000 Americans paying American wage rates. There is another company called Pacific Century Motors that did something similar and is employing 3,600. Once again, looking at things from a new paradigm, we, here in the US should take a new approach in understanding why those acquirers saw opportunities acquiring our American assets, paying American wages, leaving the facilities in America. And I think once again, on our own soil, would be an opportunity to have 50-50 joint ventures with Chinese companies. I think having mutual 50-50 joint ventures will open opportunities that haven’t been seen.
Interviewer: Some of these Chinese companies, they come in, you have mentioned a few successful cases, I also remember recently there was a Chinese soda company, which acquired IBM’s former buildings and created a thousand jobs locally. But for some of Chinese companies, they feel there are local regulations and other hurdles. It’s not as easy as just registering your company in Delaware then you start your business. How would you advise these companies from China before coming to the US? What are some of things they should look at it terms of these challenges they might face?
Tang: Once again, a two sided answer. The feeling is mutual is the short answer. When Americans go to China there are exceedingly major hurdles [too]. So what we’re really talking about is to understand each other’s business, corporate, economic and maybe even social, culture and norms such as human resource (HR) practices and all that to make a successful enterprise. One point I’d like to add here for both American companies trying to go to China and for Chinese companies trying to come to America is that the US has a very interesting hidden resource that both entities can utilize. That is; a very, very knowledgeable, talented, bicultural and bilingual population of Chinese in America. There are approximately 5 million Chinese in America. I would say 10 to 20% qualify in the bicultural, bilingual experience and are able to help in this arena for both sides, American companies going into China and Chinese companies trying to come to America. Look into those people. One of the interesting aspects of the Chinese in America with over a hundred year history is that Chinese-Americans have permeated into almost every area of economic as well as professional activity. So if they look hard, they will find some very, very interesting talents. It may, as I tell some American executives, be someone sitting in the controller’s office who can actually help you with manufacturing because they are familiar with either friends or relatives who are engaged in that back in China and vice-versa for the Chinese companies coming to America.
Interviewer: With that, Henry, thank you very much for sharing your insights with us. We hope your audience will enjoy this as well.
Tang: Thank you.