Stephen Roach is the former Chief Economist at Morgan Stanley and a current Senior Fellow at Yale University's Jackson Institute for Global Affairs. He says the U.S. depends on China as a low-cost source of foreign goods, funding of chronic budget deficits, and opportunities for American exporters. In this interview with James Chau, he also talks about his work in teaching the 'Next China' course at Yale University for almost a decade - a way of informing America's educational elite on the future ahead.

This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019. 

JC: Stephen Roach, thank you very much for your time. As we sat down, you noticed this headline over here, "Back on Track." So the President says after he met with Xi Jinping on the sidelines in Osaka, you said, "off-track, maybe." What does that mean?

SR: Well, what is the track? If we're going back to the prior framework before the negotiations broke down in early May, that's a track to nowhere. It features a focus on a reduction of the bilateral trade deficit between the US and China, which any economist, except those who work for the Trump administration, will tell you gets the United States nowhere. And then it has a framework to talk about structural issues that involve major one-sided capitulations from the standpoint of China, but very little in the way of compromise offerings from the US. So, if that's the track, it's a track to nowhere.

JC: There is this thinking amongst some people in China who subscribed to this theory that all was good pre-Trump, and now it's all changed. But in fact, there were clear signs before that, that it wasn't all brilliant. It wasn't all rosy, so to speak. So, how would you describe that track and what is the track that you would want to see established?

SR: There's been a growing, ominous shift in the US-China relationship I'd say over the last 10 years, which predates Donald Trump by a long shot. The view is that American manufacturing, both companies and workers, had been put under enormous pressure since China's accession to the WTO, and that is a key reason that many politicians and their advisors, Republican and Democrat alike, feel that China needs to be held accountable for the pressures bearing down on American middle class workers and families. And then a whole, what I call a false narrative, has been constructed to rationalize that. From focusing on the trade deficit, to intellectual property theft, to forced technology transfer. To cyber hacking, to state sponsored, industrial policy. All of these, arguments had been blown way out of proportion, relative to the actual facts, that have laid the responsibility for these pressures on the American middle class on China. And it sells well in political circles, and it's going to be very difficult for the next president, whether it's second term Donald Trump, or a Democrat who defeats him, to reverse that course in a short period of time.

JC: As you said, it sells well in political circles to those who vote for you, obviously. But as an economist, we know that economic stability leads to social progress, which leads to peace as well. What's the opportunity cost here, right or wrong, if they don't get this fixed?

SR: Look, there's no doubt in my mind that the rise of China has played an enormously beneficial role in influencing the global economy in general and the US economy in particular. In the United States, for example, we depend on China to provide American consumers with low cost source of foreign goods that helps income constrained American consumers make ends meet. We depend on China to help us fund chronic budget deficits. China owns the largest share of foreign holdings of Treasury securities. We depend on China to provide opportunities for American exporters. China is our third largest and most rapidly growing export market. So to say that, you know, we don't need China, is sort of missing the opportunities that have fallen our way in a significant fashion over the the last 10 to 20 years.

JC: You are not just one of the most influential economists of our times, but you extend that to the youngest generation of brilliant minds. You teach over at Yale, you're part of that process of this generation. What are you teaching them and what are they informing you in return in your classrooms?

SR: I teach a course and I've taught it now for nine years. Next year, it'll be the 10th year, called "The Next China." And it's a course about basically the modern Chinese economy, starting off with the origins of the Reform and Opening Up of Deng Xiaoping post-Mao in the late 1970s. And then I talk about the pivotal realization that occurred right around 2007 when a former premier, Wen Jiabao, spoke of a Chinese economy that was unstable, unbalanced, uncoordinated, and ultimately unsustainable. And how that ushered in a debate for the structural rebalancing of China, from exports and investment, to internal private consumption. From manufacturing the services from surplus saving to saving absorption, and finally from imported to indigenous innovation. So I teach the students about these transitional imperatives of China and where they're going to take China over the next 20 to 30 years. And then how that fits into the challenges that China faces in the broader global economy in general, and with respect to the US right now, in particular. So it's a course in the transition of China and it's the most popular economics class at Yale on China, and the students are fully engaged. I teach all between 150 to 200 students a year are in that class, a large number of them, maybe a quarter of them are Chinese students who want to learn about China from the Western perspective. I put a lot of time and effort into changing the course every year. I'm in the middle of doing that right now this summer.

JC: You've had this incredible career. We haven't even touched on the banking and financial sectors as well. I would like to ask you in closing: if you could bring the knowledge that you share with your students at Yale and transport it to a mass number of students in China today, what are the two things that you would tell them in how they can secure global future, and that process is inclusive of Americans and other people.

SR: Well, there's no real silver bullet. The realization by the Chinese leadership that the model that worked for 30 years is not a sustainable model for the next 30 years is a powerful realization. And so, if I were teaching my class in China, I would make the same point that I make at Yale, that the pivotal change that began in 2007 that is very much in evidence today is a strategic adjustment that needs to be sustained at all costs. And that the focus on that change should not be reduced because of trade tensions on the United States, or others. I would stress that point emphatically. And the second point I would stress is that the same pivotal change that really underscores my view of "The Next China" is in China's best interest. It's in China's best interest to have a broader economic model that moves out from manufacturing as the factory of the world, to providing services and goods for its own people, for a system that put too much emphasis on rapid growth and not enough emphasis on the quality of growth to deal with environmental [issues] and income inequality. These changes are all in China's best interest and a stronger China that stays the course of this transformation is in a much better position to deal with pressures that are being brought to bear on it by the rest of the world. If you're stronger from within, you're much better equipped to deal with pressures from the outside. If you're weak inside, then the outside pressures strike you when you are most vulnerable.

JC: That's a very, very powerful thought to finish up on— with the strength from within and this ability to negotiate the pressures from the outside. Stephen Roach, thank you very much.

SR: Thank you. Good to talk to you.

Professor Vali Nasr was Dean of the Johns Hopkins School of Advanced International Studies from 2012-2019. He says the fundamental issue for the the U.S. and China is how both countries view China's changing place in a changing global landscape. In this interview with James Chau, he says he is encouraged that trade negotiations are ongoing, but warns that concrete solutions must be created for that dialogue to count. This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019.

James Chau: Professor Nasr, we heard at G20 Osaka, President, Donald Trump saying that the trade relationship with China is now back on track. Is it back on track?

Professor Nasr: Well, at least the conversation about how the two sides may get out of the current impasse is back on track or they haven't actually arrived yet at a solution that would suggest that we can see a pathway down the road.

JC: So, let's just say you're not sitting here with me, but you're sitting here with Donald Trump and Xi Jinping and you're in the middle facilitating this discussion. What would be some of the solutions that you would provide?

PN: Well, I think there are some very concrete issues that they have a disagreement over, whether it's trade numbers, how to calculate the trade numbers, how to see innovation, transfer of technology, that they ought to actually come up with some kind of a solution that both sides would be happy with. But I think the larger issue is how does the United States see the future of China in the world and how does it see it as a competitor, as a rival, as a collaborator. And also, how does China see its own role in the world? I mean, it's very clear that China is not the developing country [it once was] when Deng Xiaoping started the process of integrating into the world order. Now it's a behemoth. Now it's a giant economically and if it moves slightly. It can create massive waves in the global economy. So, I think also it's important for China to think about what kind of a relationship it wants with the United States and the global economy.

JC: If we look at the economy, second biggest economy in the world, biggest population with the biggest consumer market at hand. Yet China would say in conversation that it's per capita income is still very small- about a sixth of that in United States, $10,000 versus roughly $60,000. What does America have to be afraid of?

PN: Well, both sides keep calculating strength and rivalry in their own terms. So just like China says that America's calculation of trade discrepancy is not quite accurate, Americans think that when it benefits China, China becomes like a poor developing country. But, in the case of China, it's not so much individuals that are driving the economy or private sector companies. It's the wealth of the state, it's the wealth of the overall economy. I mean China is driven much more by state-owned enterprises, by the overall numbers. China, however you calculate its per capita income, has enormous amount of global purchasing power. It has enormous amount of global investment power. Countries in Africa or Asia don't look at poor Chinese consumers and think, "Oh, they're the same level as me and you." They look at China as a major source of investment in their economy, as a big lender, as a big market, as a big investor. So the perception of China around the world is not of a developing country, it's of an economic giant. And I think there's a discrepancy between the way China may see itself and the way that the rest of the world sees China.

JC: What would you like that giant, as you describe, it to do? If it's to take its place in the world in a way that's not just self-serving but genuinely inclusive of others, including the Americans.

PN: Well the rules of the economic order in which China has risen up through and joined the process in the 1970s, late 1980s, and 1989 was a normative, world order that was written by the United States and its European allies after Bretton Woods, after World War Two. Now, China is such a big player that ultimately it has to find a way to play within those rules. It may want some of the rules changed and that has to be the basis of the negotiation. But China now is too big. It's too powerful. It's too consequential to basically either play outside of the rules or to pretend that it's a poor third world country that is merely moving up the ladder. It has really gone up too far up the ladder for it not to be taken seriously. So I think we're at the point that if the world economy is going to work, the United States and China have to come to terms about the rules of the game, that they both can live with and both are willing to support these rules going forward.

JC: When I listen to you, I think of that round hole and maybe that square peg as well. Professor Nasr, thank you very, very much.

PN: Thank you very much.

Dr Ed Feulner is the Founder of The Heritage Foundation, the Washington-based think tank where he was also Present from 1977 to 2013.

In this interview with James Chau, he says it is in the best interests of the U.S. and China to understand their mutual interests, but also encourages them to break from their traditional narrative by talking "concretely" and creating solutions.

This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019.

James Chau: Ed Feulner, strong words, but honest words as well. What do you tell China at this stage?

Ed Feulner: I tell them that it's in both countries' interests, in the interest of the people in both countries, to come together to figure out what specific issues still are there. Don't rehash the same old arguments from 10 or 15 years ago. Let's deal with where we are now. Let's both sides realize that we have to work together because for the next 50 years, these are going to be the two controlling economies in the whole world and we have to get along together.

JC: Is there a way to break that cycle of that rehash narrative? How do you reach out beyond yourself?

EF: That's the big challenge of course. And that's why this particular conference is so important because you have real candor coming from both sides. That's the interesting thing to me– our Chinese counterparts are speaking very frankly, Americans are giving fairly tough indicators of where some of our particular concerns are, and if we can at least define the problem, then we're part of the way toward getting it settled. And I'm a congenital optimist. I believe it can be settled, but let's figure out what the full dimension of the problem is first and agree on those problems. Then say, "Okay, let's deal with them."

JC: You use the word 'tough.' That makes me think of course of that phrase, 'tough love." Is there love still in this relationship?

EF: Oh, I think there should be. Jeremy from the US Chamber of Commerce just pointed out, though, that for the last several years there's been distrust from the American side in terms of what's going on with the US-Chinese relationship. Yes, we all depend on Chinese imports in our own individual homes and all the rest. But the way it's been portrayed by both political parties, by leaders in both the Senate as well as in this administration and the last administration, it's not a pretty picture that's being painted about the US-China relationship. So again, let's get back together, talk concretely and solve some of it so we can move ahead.

JC: Last question here, President Trump, whom of course you proudly support as an American says we're back on track in terms of the US-China trade relationship. Is it back on track?

EF: I think it's back on track for further discussions, but, as he has said, and as I quoted this morning, a bad deal is worse than no deal. So he's not going to settle for a bad deal. And that's why we've got to make sure that when we get together, we talk about specifics and we figure out what those are and how we can actually deal with them concretely.

JC: Ed Feulner, thank you very much.

EF: Thank you.
 

Goh Chok Tong is one of only three people to have served as Singapore's Prime Minister since 1959, succeeding Lee Kuan Yew on his election in 1990 and remaining in that office till 2004.

He is currently Emeritus Senior Minister and Member of Parliament. Stories from his distinguished leadership are captured in the new biography Tall Order, a biography that recounts his journey and challenges as a politician, and the formative experiences that inform his global leadership today. In this interview with James Chau, he anticipates the major trends in a rapidly changing world, and how attitudes towards globalization and opportunities around technology will present new challenges. He also discusses the "misunderstandings" between the two largest economies.

This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019.

James Chau:
Minister Goh, you were prime minister during challenging times and arguably in this particular period of modern history, we live in even more divisive times. What do you anticipate in terms of global trends and how can we best anticipate that and prepare ourselves for it?

Goh Chok Tong:
Well, I think the challenge for us is the changing attitude. There was globalization and I can see signs of some countries moving towards selective protectionism. So there's one train we could watch unfold. The other of course is technological change that's going to have an impact on all of us. And not all countries can cope with the changes in technology, because technology may replace some job. And when people are out of jobs, what do they do? I mean, it is a real problem looking after your livelihood. The most pressing problem now in a sense the misunderstanding or not adequate understanding between the two big countries, the US and China. China is now seen by the US as a potential strategic threat to national security. But, this is based on maybe prejudice, there's misunderstanding. The consequences could be quite worrying for us.

James Chau:
I just wanted to leverage off your two roles both in Singapore and as a global states figure. Singapore could also be perceived to be a threat given its enormous economic and social progress, yet it manages to strike a balance of being friends and partners. How do you negotiate those waters and what would you say are the essential skills to take them that no matter how big or small your country is?

Goh Chok Tong:
That is perceptive because in our part of the world, Singapore thrives on adding value to other people. So we have to be, for example, a very efficient port. But, when we became successful as a port, our neighbors, of course, did not quite like it. Without Singapore, maybe they are supposed to flourish. So we were seen as a threat. The idea of prosperity, but it's the question of a greater pie. When the world grows, more cargoes come to the area, to Singapore. Our port is the biggest in the area, but the airports have also grown. But very importantly, one minister from Indonesia told me, he said thank you very much for your efficient port. Otherwise our goods through Indonesia would have difficulties in being shipped out to the rest of the world. Because as I said, the airports are not so efficient. Indonesia is a very big country, sprawling country, many islands, so the goods have to be transported to Singapore and shipped out. So it's getting people to understand. So we add value to others, that's the key. You've got to add value to the others. you don't take away the idea. The idea, the ability to grow, add value and they also grow. So that's one way I think to get countries accepted. A treat became, in fact, a partner for them.

James Chau:
There is a temptation to look at one of the biggest global challenges today, the trade dispute between the United States and China, two of the biggest economies in the world, and to be limited to that one narrow area where in fact it's much wider and deeper than that. What should we be thinking about in terms of functional thinking and approaches? Not just the trade dispute.

Goh Chok Tong:
There are some differences which can be addressed. In the case of China, for example, China, joined the WTO some years ago as a developing country. They would give China more time, they implemented certain policies, but China is now so competitive in many areas, and so the developed countries we see this as unfair to them. They say they can't compete. So then the term they use now is not free and open trade, but fair trade. What does fair trade mean? It means to give them a chance. So where there are rules that can be changed, the Chinese are on the forefront working with the other members. They say, okay, let's update the rules. And this is important in the area of digital economy, that's a new area, there are no rules there. So I think China should move into that area to say let’s set up some rules on digital economy, competition, what are the rules? And if the Chinese lead and get others to join and the rules should be fair to all. I think these are things that China can do. And to the question of intellectual property, I think China should take the lead. I can tell you this, in the old days Singapore was poor. we were actually copying a lot of our stuff from other people. We were in fact photocopying books and arguing that this is good for the students. I mean they couldn't afford books, but we were actually stealing private property of others. Then, within ourselves argued, we are going to be producing intellectual property. That must be the aspiration of Singapore, not just copying others. So when we started to have innovative products with intellectual property, we started to argue to better have intellectual property. So China is in that position now where China must protect this intellectual property. So again, China can move forward, through the WTO and through the intellectual property organization in the world, then move forward. So that phase should be all over for China. So move forward and then by moving forward you are showing to the others that I'm cooperating with you. I'm not going to steal your intellectual property, but please don't steal mine when mine is there in the future.

James Chau:
In reality is there a way forward in a setting where on top of all the challenges that you negotiated when you were Prime Minister, we have digital eras, we've got the emergence of five G, the good and the bad. We've got fake news. Is it possible for our young people to skillfully have the required set of tools to handle that?

Goh Chok Tong:
Well, I think we have to learn as you go along, there's not really a solution at this stage. So when this comes along, the leaders and the people have got to work on the solution to fake news. The Internet when it came about, I was at one of the early meetings at APAC talking about Internet and the leaders are talking about the positive aspects of the Internet. I warned them, I said that we should also look at the negative side because Internet could be abused by people.

James Chau: You saw it even then. What did you see then?

Goh Chok Tong: I did not see all the reasons for using the Internet. I did not know about fake news and so on, but I know that a road, is meant for good as much as it is for robbers to get away too. So, I just said, Internet, look at the negative part, but I did not foresee fake news, money laundering through the Internet, Bitcoin is a cryptocurrency, and so I didn't see all those. But every positive part has caused a negative. Globalization has caused these negative daily effects. So therefore, for the young people, have a balance. When we look at a positive side and control the negative side, that allows the negative side to inhibit progress, to restrain you. So move forward first and then decide what we do with the negative side.

James Chau:
One of your great values as a facilitator is that you're able to see things from around and beyond your independent platform. What would you tell the US and China? They've got very different systems. Does democracy in the Western sense work for China?

Goh Chok Tong:
Well I will say, both systems work for the respective country. Your organization, the society, the way it’s organized, and going forward, they're different. But, what are they for? What are these two organizations for? It is not for the good of the people in charge. It is for the welfare of the people. Then yours is this way historically and culturally and mine is this way, are we advancing the interests of the people? And that's when common norms comes in. I mean human rights. I think both sides would agree on human rights. Of course, one side can accuse the other side of not living up to human rights, and says if I'm not, then I aspire to that kind of human rights. But in China's case, the greatest human rights Xi has given to the people is relief from poverty. There’s about 400 million people in the middle class, but maybe 800 million people now enjoying a good life. In India in 1971, I could see poverty. So that's the greatest human right gift given to the people of China. Poverty, education, health, and so on. Transportation, the ability to move around China. Now that's freedom for the people. One day, maybe, the people here will enjoy this other kind of a freedom which the West talks about, but let China progressi at its own pace. But you must have stability, security in order to have a good economy. I think China is moving in the right direction.

James Chau:
Millions of people have lent and depended on your experience and your leadership, and I trust that millions more will learn how to walk on the road and beyond.

Goh Chok Tong:
No. My experience is that of governing a very small country, that's all it is.

James Chau:
Minister Goah, Thank you very, very much.

Goh Chok Tong:
Thank you. Thank you.
 

Yasuo Fukuda served as Japan's 58th Prime Minister and was also the longest Chief Cabinet Secretary in history.

Under his leadership, he earned a reputation for his foresight in creating eco cities, that in some respects pre-empted the global environmental movement. In this interview with James Chau, he draws on Japan's historical trade relationship with the U.S., the significant pressures it was placed under in the post-war climate, and how both countries identified a way forward. Can a same or similar approach be applied to the contemporary global challenges?

This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019.

Dr Fu Yuning is the Chairman of China Resources Holding and a member of the National Committee of the 12th Chinese People's Political Consultative Conference (CCPPCC).

In this interview with James Chau, he talks about the transformed role of state-owned enterprises in China, and lends his insight on how foreign-owned businesses can continue to leverage opportunities in China, especially around healthcare.

This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019.

Neil Bush is the Founder and Chairman of the George HW Bush Foundation - named for his father, the 41st President of the United States.

In this interview with James Chau, Bush recounts the stories from his own interactions with China, beginning with his first visit to Beijing in 1975. He also reflects on the modern development of China and advocates for "deeper dialogue" between the U.S. and China - a dialogue that must be globally inclusive, he says.

This interview was recorded at the US-China Trade and Economic Relations Forum in Hong Kong on 9-10 July, 2019.

Americans are generally in favor of trade - 56% of U.S. adults said that free trade agreements have been good for the country as a whole, according to a 2018 Pew Research Center poll. Trade lowers consumer prices, leads to a greater selection of products, and opens new markets for Americans to sell their products. 

However, 62% of Americans believe trade with China is unfair, and that America has drawn the short end of the stick.

Since January 2018, China and the United States have been embroiled in a trade war, as President Trump has argued that China has unfairly tilted the playing field against U.S. businesses and encouraged a harmful U.S. trade deficit. 

Now, President Trump has once again hiked tariffs on $200 billion worth of Chinese products from 10% to 25%. He has also threatened to slap that amount onto another $325 billion worth of goods. 

So, what will this mean for U.S.-China trade, and who will end up paying these tariffs?

According to Trump, the tariffs will be paid by the Chinese and the revenue will be used to help American farmers who have lost their lucrative export market for soybeans, pork, and other products due to retaliatory tariffs imposed by China. Already, the U.S. government is handing out billions of dollars of aid to soften the economic blow on farmers.

But studies show that the opposite of Trump’s sales pitch is true. 

Rather than China footing the bill, Trump’s tariffs are actually paid by U.S. import companies, who often pass the tax on to U.S. consumers and manufacturers by increasing prices. In fact, tariffs on Chinese products, ranging from diapers to iPhones, could end up costing the average American family more than $2,000-- far more than the average tax benefits received from Trump’s 2017 tax reform.

The pain will be felt most acutely by lower-income voters and farmers – the core of Trump supporters.

As the 2020 Presidential election nears, Trump is doubling down on tariffs as a success strategy, making the case to Americans, particularly farmers selling their agriculture to China, that the long-term goal of the trade war far transcends the short-term pain.

If the tariffs do go into effect and the U.S.-China trade war drags on, Wall Street will brace for impact, and the global economy will likely suffer until the two nations reach a deal to end the war. 

I. M. Pei, one of the most revered architects in the world, died in New York on May 16, 2019. He was 102.
Pei’s best known designs are the East Building of the National Gallery of Art in Washington and the glass pyramid at the entrance to the Louvre in Paris.

While in his ancestral country of China, he is also known for designing the Fragrance Hill resort in Beijing, the iconic Hong Kong landmark of the Bank of China tower, as well as the Suzhou Museum in Jiangsu.

What he valued the most in architecture, he said, was that it “stands the test of time.”

Pei was born in Guangdong in 1917 and brought up in a well-to-do household that was steeped in Chinese tradition.

His father, Tsuyee Pei, was one of China’s leading bankers. The junior Pei spent summers in a country village, where his father’s father had lived for more than 500 years, learning the rites of ancestor worship — and Western sophistication.

Pei moved to the U.S. at the age of 18 to study at Pennsylvania, MIT and Harvard.

Mr. Pei never played down his connections to China. His children were all given Chinese names, and when he won the Pritzker Prize in 1983, widely viewed as the highest honor a living architect can receive, he used the $100,000 award to establish a scholarship fund for Chinese architecture students.

Pei did not go back to China until 1974, and he didn’t hesitate to criticize the banal, Soviet-influenced architecture that he saw. He urged the Chinese to look back at their own traditions.
The Chinese government offered him a rural site outside the city and asked him to design a resort hotel there.

The end result is the Fragrant Hill, a group of resort buildings combining the geometric modernism with traditional Chinese architecture elements.

In 1982, Pei would have a very different kind of opportunity in China when the governors of the Bank of China in Hong Kong, the bank his father had once run, travelled to New York to meet with Tsuyee Pei, who had long since left China and was living in Manhattan. Their mission was to ask the senior Pei, in a demonstration of traditional Chinese etiquette, if he would agree to allow them to invite his son to design a new skyscraper headquarters for the bank in Hong Kong. Senior Pei said yes.

It would turn out to be one of Pei’s most notable towers.

The Chinese Embassy building located in the northwest of Washington DC is also a design work by I.M. Pei.

After his death, Jame C. Jao, a co-founder of the I.M.Pei Foundation, wrote:

“Whereby I.M. Pei has been a renowned world architect who always cared about the preservation of art, culture and local heritage by integrating every element thus to inspire world architecture in modern design.”

(The above text is based on the I.M.Pei obituary The New York Times published on May 17, 2019 and a commemorative article by James Jao The China Daily published on May 17, 2019.)