for joining us, for the latest news any time head to aljazeera.com. luis suarez is next with inside story. prrn . >> there were warnings for months about a softening chinese economy. real state people looked ready to burst. country evalued. when china teetered, so did a lot of other things, including stock markets. commodity and investor confidence. is the world economy intertwined. if the chinese have a bad year, we all do. a sag and drag.

that's the inside story welcome to "inside story". i'm ray suarez. when the small group of old men who ran china set a new course for the enormous country in the 1980s, it was unimaginable that the chinese economy would quickly become the world's largest. or nip at the heels at the number one, the united states. here we are. in 30 years, china became the world's factory, vacuuming in raw materials from every corner of the planet and sending finished goods to the world, not just socks and gloves, but sell phones, computers and giant flat screen tvs. the economy grew nine, 10, 11 a

year. millions moved from farms and cities. bicycles disappeared. the world, apparently got used to that and after years of warnings, the party couldn't last forever, it's been surprised by what may be a gathering slump. here is al jazeera's patricia sabga. >> reporter: 5 million in value wiped off the shares. a financial blood bath that doesn't dovetail with the narrative put forward. >> the extraordinary economic growth, they take credit for that. that beans in the economy falters, their foundation for legitimacy may be called into question. >> china's leaders, talked up the stock market at its peak. when outsiders were warning share prices were too expensive. >> when bubbles burst, the government spent more than 200

billion to prop up the market. when that failed, the communist party produced escape goats, pinning the route on regulators, investors and... ..this journalist that apologised on china state television for using false information to induce panic. a concession that the bloggos fear didn't buy. >> when widely repeated comment was well, it looks like you finally found the sacrificial land. >> it's not just the stock market that is faltering, the economy is slowing down more than many expected. it's why some believe the chinese leadership will have to stop shifting blame and embrace political chain if the economic growth is going to get back on track. >> we may see that moment where china needs to loosen up politically if it wants the economic miracle to continue. david dollar is a leading china

economist. >> free flow of information, confidence in the media, independence of the media to go after it. all of these are important if you want to make the transition from middle income to high income. a transition that could be painful if china's leadership shifts blame when things don't go according to script. >> what the pressures and challenges gathering inside china mean for the chinese. for the rest of the world and us in the united states. we'll start tonight with an entrepreneur. the founder and president of wade beauty, a large traditional medicine skin care line. welcome to the programme. thank you. happy to share my street view. >> what do you see happening with china.

if you source and sell here, does that mean where the beauty will have a great year? >> actually, i'm selling global me now, and the china is the fastest growing area. i see china u.s. economy almost like the twin ng airplane. they need to work, everyone gets it right. one engine work. and it can work. however, we need to both work together. so my business is same way. both side of the u.s. market and china market. both working. it's benefit of both sides of consumer. >> if you wanted to expand. can you be confident that the cost of a building, a warehouse. is really representative of what that thing is worth. or are there problems pricing things like assets inside china? >> yes, i think the real state

now - it's over heated. to do with a lot of chinese people's tradition. they are like hard assets. they buy the real state. they will have a problem. and china economy - it will continue to grow. it will become the largest economy in the world. i'm confident with chinese economy. i feel the way now is necessary correction. it's like a stage come to teenage, you get a pump. over the next 5-10 years, the chinese government, politically is right, firming control. china has ha culture. it's hard driving, hard work. still t 1.4 billion, they are able to do something in china. next 5-10 years. this is - i think this is

necessary correction. you mentioned that the government is in strong control. is that part of the problem. chinese shareholders didn't know the state of what was going on in the chang high change, because they couldn't find out from a controlled media, and the leaders weren't being straight with them. yes. that is one of the things, very you feek about china -- unique about china, i never thought i would say something like this. i left china when i was 22 years old. and here was a democratic system. i love both country. but what i've been doing this in china for 22 years. and what is jaw dropping is this system, the unique system of it

democratic and economy, creating the power of china, in a way, i don't know the system, if it's bad or good. it's worked. >> you mentioned that you grew up in china, you have been here 30 years, can you imagine when you were a kid, that what was happening in the chinese economy had the power to make the rest of the world go faster or go slower when you were growing up, did china matter to the rest of the world. i grew up in china, it was north korean now. i've been doing business for years. every time i go back. my jaw drops. in that sense, that's why they

say i don't know, system good or bad, it works for china, for any government to feed 1.4 billion, and create almost 400 million. it's not an easy task. the found ir of a skin care line, great to have you with us. one of the promises during china's charge into the standings frt world's largest economies is a richer or productive china was good for the american economy and good for american workers, because a richer china would buy more of what the country sells, did that come true, was a rich ever china going to be important for the u.s. a sag and dragon, it's "inside story".

. >> people are pushing shopping carts full of things made in

china. power tools, bath tauls, tea kettles, pyjamas, and dinner dishes. in a generation, they didn't just target one category and seek to dominate it. it seems like it decided to go after everything all at once. at the same time, productive workers were nod paid well. so domestic consumption is relatively smaller percentage of national income. so china could sell cheep, and by finished products not from us, but from itself. >> joining us to look at the fortunes of a saggon dragon are derek, a resident scholar at the american enterprise institute, and robert manning, a senior fellow at the center on international security of the atlantic council. derek, depending on what year it is, you pick up the business pages, and a supercharged hard charging china is a problem for the united

states, or a sagging china is a problem for the united states. and it's hard to figure out how to - how this economy is reliant. >> the fact is we are not that reliant. the united states doesn't ex-mort much. 2-way invest: what we are responding to is china is big, every time something happens, we look. whether it's going well or it's the incredible country. when things are going poorly, it's a total disaster. it you look around the world, there's a number of economies. how did it come to pass that china went from being a place that made low complications

easy, injection plastic, moulded products, to things that are really tough to make, and tough to make well. starting from a low base, that's why they advance so quickly. they had trouble moving up the ladder of sophisticated equipment. and innovation. it's hard to name a lot of chinese brands, if you think about it. it's easy to find a lot of chinese products. >> that is starting to slow down. investments going elsewhere like in south-west asia, they have lost cheep labour. they are running into a labour shortage, so that's part of the reason the chinese leadership is shifting the economic mileage from one of investment and export driven to one that is consunks and eternally. they haven't. there's so much res assistance.

there's opening. it isn't in a measured way. 27 points off the do you. >> it's worth. >> are there still other shoes to drop in china. people talk about a real estate bubble. people talk about a lot of common every day chinese owning shares in corporations that it's hard to knew the value of. >> it's true. there's a lot of chinese buy shares in numbers. they by 1647, rather than the name of the company or research available. it's a strange stock market in that way. you have a lot of vulnerability to stocks and you have a problem with what is the next chinese

policy move. there has been a bastion of stability on policy for years. that's not popular within the united states, but globally it's true. they surprised everyone with a small devaluation, and surprised at the market reaction. it's unsettling. i think we have to worry with xi jinping coming to washington. is there another issue, can you tellize what is going on in china, you have shaken the world's confidence. >> if you are an account and dallas texas, working in a factory, go on the weekend shopping with the family, do china's problems matter to you as a consumer, as a citizen. >> probability not mmed, but don't forget, china has been driving a lot of global economic growth, and to the extent that they slow down, and we have a slow growing global economy as it is, that is going to affect the economy here to some extent. you know, as derek said, we are

not as dependent on china as everyone thinks, but i think it will have an impact on - in the pocket book of americans, if china continues to go in the wrong direction. >> same question. >> i think of it more as the future. we are not good on china, if you look at a correlation with the f&p, it's very weak. a lot of companies sold for some reason a vision of china growing in the future. chinese consumption is huge, a rich company. they'll by tonnes of goods. if only it comes to an agreement with them. i don't think the impact on the pocket book next month or year is the problem. i think when people are looking for where global consumption will come from in the future. they are hoping for something, and it is in question. >> that's where we'll two next. >> there were challenging years ahead. the one child policy promises

democrato graphing policies, rising wages undermining the advantages. does that present an opening for american manufacturers, or do china's problems present american worker or consumers. unable to take advantage, and vital supplier. stay with us. it's "inside story".

you're watching "inside story". i'm ray suarez. this time on the programme we are looking at china's problems and prospects, what they mean pore the united states. maybe they don't look too closely on the labels. take a closer look. you may be surprised by how much comes from china, the cell phone in your pocket. socks on the feet and christmas decorations waiting in the basement. to china's current and future problems, allowing for an

opening for american manufacturers, labour losses, geography, speed in response, china's manufacturing power is not necessarily a permanent state of play. and from the pew research center suggesting americans are more afraid of china's economic power than military muscle or computer attacks on american targets. 54% of americans have an unfavourable view of china, and eight out of 10 respondents see america having serious problems with china on fairs fronts. der derek scissors and roberts manning are with me. can any of these be turned to america's advantage? >> we have a polo problem, it could be us. we need to fix infrastructure, and we have a dysfunctional

political system. a lot of these problems are things we can fix. if you ask would xi jinping rather trade his box for president obama, he'd do if in a heart beat. china's problems are larger than ours. it might make sense to make it here than hire chinese workers. >> that is starting to happen in a lot of areas, partly because of shale revolution. companies that are energy intensive. cement, steel. chemicals, petrochemicals, you have seen a flood of foreign investment into the u.s. they take advantage of the gas. they are dependent on the cost competitiveness of the gas price. so that is what happened. if you look at the numbers it's impressive.

and i think you'll see the investment slowing down in china and a lot of these areas, there's a huge strategic mistake by - going after american companies and making it difficult for american firms to do business in china. >> what about the demographic problems. inside china, outside china, people are talking about a sudden lapse over time in the number of people who can get up and go to work every day. >> look, they have - the problem with demographics is it comes at you slowly, you can't fix it. if it's going to last a generation, multiple generations. >> you can't give birth to 20-year-olds in other words. >> exactly. the one-child policy doesn't change the labour force. china handled the demo graphic expansion better than many countries that faced periods of instability, they couldn't find the jobs. now they face a challenge that no one solved.

japan hasn't been able to solve it. european countries have not solved it. it's how do you make the workers more productive. this will not cause a calamity overnight or next year. it's a 25 year challenge. it will get worse and worse. >> we have babies here, is it an advantage. >> chinese data is not precise to say the least. we are a younger country or soon will be. the trajectory is sharply getting over, along the lines of what happened to japan. ours is to remain the same. i don't want to get into politics, immigration is good for the country's labour force, and china doesn't attract that much immigration, as robert refers to, it's not nearly as rich as the u.s. it has more problems for immigrants to overcome. >> robert manning, to close. when we are watching china, are there things that regular

americans should be concerned about, keeping an eye on as it catches the country develop. the question is whether they can muster the political will. when they have had a stock market crisis, they moved in the wrong direction to increase the role of state than the market. their own party said the market is supposed to play a decisive role in the economy, but it's going in the wrong direction. they are the metrics looked for. they have a bit of a trim in the 401k. is that something that has a blow black. i think that they'll recover. as derek made the point earlier. our stock market doesn't correlate with the chinese markets. >> same question - i think the problem here is not the direct impact of china, it's how china

responds to challenges. robert suggested it. i agree. if the chinese panic and feels it's under threat and needs to do something radical, and they get an election in taiwan or another development. that's a threat to global development. it's not deteriorating performance, if we handle our own house, it's fine. lashing out in an unpredictable way. because china is so big. it's dangerous for the world. >> robert manning, senior resident fellow at the center of international security of the atlantic counsel, and derek scissors is an american scholar. thank you for joining us. i'll be back with a final thought an china, stuff and o world where affordability may be all that, stay with us.

>> when i was in china, i spent time at the weight watchers meeting and weigh in. the manager with a b.a. from chicago fold me million of chinese were gaining weight because having to work hard on portion control was something the country hadn't had to worry about before. this was a place where periodic famins were more of a worry than obesity. it was a reminder that the chinese were rethinking everyone. they had to do it on the fly. that same year i passed a soccer stadium built by the chinese,

watching as boats bound for china were loaded in the port. metal oars heading for refineries and factories, countries boom, bust, slow down. 19th century america lived through cycles of fortunes and swoons. china was such an entwined part of the economy so quickly, as ab intention player, it meant we have yet to take the measure, after all the years of eye popping growth, what it would mean to have china reval u its assets. the fact that it would be considered scary, from washington to berlin, london to johannesburg, to mexico city should tell you plenty. i'm ray suarez, that's "inside

story". >> action is what is needed for the time buying a plea from the top of the european union for reluctant nations to take in thousands of refugees. hillo, i'm also coming up. the head of n.a.t.o. says he is concern the about reports of the build up in syria china's premier reassures the world about the health of