betty: welcome to the bloomberg tv special, "china: behind the wall." i travel to beijing to visit china's historic statehouse. there, i spoke with one of the country's highest rating officials. a former ambassador to the united states, a leader in the powerful state council, and china's negotiator on foreign policy. we talked about the most pressing issues between the two countries from cyber spying to the most recent market turmoil. but first, we begin on chinese

president xi jingping's visit to the united states. what does he hope to accomplish in the u.s.? >> i think a lot can be accomplished. i believe the following three areas are very important. first, it is for the two leaders to have in-depth discussions following the discussion in california and in beijing about the international situation, about our respective country's policies. to chart a way forward further in our relationship. we expect that there will be quite a few positive practical cooperation results flowing from

the visit. what people called "deliverables." i believe that the president will reach out to the american society to build the friendship between our two people. betty: people have said for this visit could be compared to the visit in 1979. is that important to the relationship between the u.s. and china. is that accurate? how critical is this visit to china? >> his visit to the united states was a historic visit, opening up the relationship between our two countries. i think this visit is also vitally important. the united states has actually emphasized that they hope that this relationship and this visit will be a milestone, putting our relationship firmly on a positive trajectory.

betty: the american public still have a mistrust of the chinese. a pew center poll recently said 54% of americans view china unfavorably. how does the president plan to change that perception? >> poll results very from time to time and from place to place. my understanding of american society is that there is a deep awareness of the importance of nurturing better relationship between our two countries. so i believe that the american people attach a great deal of importance to the visit. we have had some early harvest of this new model of the relationship between us. for instance, the trade between the two countries has grown quite a bit, and there are more

student exchanges between us. and on the international scene, there has been good coordination between china and the united states, from the middle east to some parts of africa. from afghanistan to the korean peninsula. so a better relationship is in the interest of both of our peoples and the world. of course, a relationship cannot be free from any problems. even people sometimes do not see things in a common way, and i think for countries sometimes they might have some divergence of views. that is not that important so long as we put the differences in proper perspective. betty: let's talk about the economy. recently, the chinese government devalued the renminbi and the stock markets around the world reacted quite violently. is he going to talk about the

economy and how would he describe the state of the chinese economy? >> during the course of the visit the two presidents will cover much ground. they will talk about the world economic situation, the economic developers, the respective economies and the economic policies. it is very important on the macro level that the two countries have more coordination of their policies. but let me point out that since the outbreak of the financial crisis seven years ago people have all worked very hard to revive the world economy. it is not as far as people have expected, but that does not mean that we should not continue our good efforts and china has done its part. we are no longer having

double-digit growth rates. it's just like a high jumper, the higher you go, the more difficult to raise the level. on the other hand, we still have a handsome 7% growth rate here in china. of course, china is not free from its own set of challenges and problems on the economic front. of course, there have been some ups and downs in the stock exchange market, but given china's economic development, given the fact that china is a developing country, some movements on the stock exchange in china should not equal the whole picture of the chinese economy. betty: why devalue the value of the renminbi now? especially close to this visit? mr. yang: we let supply and

demand determine the value of the remnibi. i think generally speaking it is quite steady in value. and we will, of course, continue to do reform in china. in various sectors, including the financial sector. and when people look back 10 years or 15 years from now, we see that the market reform is really good. not only for china, but for the rest of the world. betty: let's see, 12 months from now, will the rmb be lower in value? mr. yang: it is normal for the currency to move either way. but it is a reliable currency, and more and more people actually do their trades in renminbi. and i am sure it will continue to play a healthy role not only in the chinese community but in

the international trade and investment and so on and so forth. betty: were you surprised by how the markets reacted to the devaluation of the renminbi? mr. yang: let me say this. every country has its challenges and their problems, and every country should do a better job of their own economy. betty: they should mind their own business, right? mr. yang: i do not mean that. what i mean is that the chinese economy is a big one, but it is not that big. there are many players in the field. so their economic performance fundamentally has an impact on the behavior of the financial market and so and so forth. and the difference between the chinese stock exchange and the stock exchange of many western

countries is there are far more institutional investors in the west. and, of course, there is always room for improvement for anybody, so i do hope that people will take an appropriate and calibrated approach to what happens in the financial markets, wherever it might be. in china or in other countries, so people should be respectful to facts and to be fair. and china is a positive force for good economic growth and will continue to be. betty: our bloomberg growth index pegs the chinese economy growing at a slower 6.6% gdp. so is, in fact, growth in china slower than what the statistics suggest? mr. yang: i think our statistics

are quite reliable. it is about 7% growth rate. that is our projection. of course, we have to do our level best to make sure the economy will go forward. betty: coming up, china faces accusations of cyber spying on american companies. how do you account for the white house? they say they can trace those cyberattacks back to origins in china. stay tuned for more on my interview with china's top foreign-policy official. ♪

♪ betty: hello, and welcome back. i am betty liu in beijing. you are watching our special report, "china: behind the

wall." while china wants to make nice with the americans when the president makes a trip to the u.s., there are some serious issues hanging over the two sides. one that is about to boil over, accusations that china is spying on american companies. i asked counselor yang. mr. yang: china believes that china and united states and other countries should really try to work together and work out the rules for cyber security in the spirit of the equality, mutual benefit, and mutual respect. china itself is a victim of hacking activities, and the chinese government is firmly against hacking of any kind. and i think every country should take a responsible, prudent attitude and should proceed on factual ground. betty: then how do you account for the white house?

they say they have evidence that recent cyberattacks on the office of personnel management, for instance, the insurance company, they can trace those cyberattacks back to origins in china? how do you account for that? mr. yang: i think it is better to let the american side tell people their position, but the two sides stay in close touch on this issue. and i believe it is important for any government in the world to adopt a prudent and responsible attitude. and let me say that china is a responsible country. we are firmly against any kind of hacking activities. we are against cyber theft and china and the united states can work very closely on this issue. that is to make the cyberspace

secure, transparent for all. betty: foreign policy is likely to figure very prominently in the presidential elections in the u.s. mrs. hillary clinton is running for the democratic nomination. recently, we have heard a lot of news around the south china sea and mrs. clinton, as you know, has made several comments about the dispute. in 2010, she took a harder stance against china and said it was in the american interest to have stability in that area, and i believe she said at the time, "there is a concern that we all abide by the international rules." she was speaking about china at that time. so why has china recently begun reclaiming so much land in the south china sea? mr. yang: we are not reclaiming land in the south china sea.

there has been some construction on islands and reefs. so china has a solid, legal ground and historical facts to back up our position. betty: but america says about 2000 acres of reclaimed land has been added to the island. mr. yang: china has completed land reclamation on some of these islands and reefs, which are part of chinese territory. but the very purpose of some construction on these islands and reefs is mainly to serve public international interests. of course, given the fact that some of our territory is surrounded by military

installments of other countries, so there is reasonable ground to have some defense facilities on these islands. we're trying to -- betty: there is a military airport being built on there, right? mr. yang: well, let me say. lots of it, even for aviation, is for civilian purpose mainly. let me say that people should take a reasonable stand on it. about the disputes between china and some individual countries in south east asia, we believe that the parties directly concerned should handle and try to solve these differences through friendly consultation and negotiation. and this is exactly stipulated in the declaration of conduct to parties in the south

china sea. betty: it is my understanding, mr. yang, the philippines filed their opposition to what is going on in the south china sea with the hague, and the chinese have refused to engage in that complaint. mr. yang: because the philippines signed on to it, and china made it very clear that such disputes or similar disputes should be solved by the parties concerned. we would not participate in any kind of adjudication, as you have mentioned. china made this very clear. not this year or last year. actually about 10 years ago. china made its position very clear. so i believe it would be good for everybody to keep its word and to do what they have promised. betty: when you look at the

disputes in the south china sea, the chinese sending navy ships off the coast of alaska when president obama was visiting. the military parade commemorating the 70th anniversary of the ending of world war ii, some look upon that as increasing military aggression by the chinese. mr. yang: first of all, let me say that the commemoration of the 70th anniversary of the chinese people's war of resistance against japanese aggression and against fascism has been welcomed by the world. the purpose of the celebration is to bear in mind history, to respect the fallen heroes, and to cherish peace and to open up a better future. so this kind of celebration is not directed at any government.

in his address at the commemorative event, the president actually mentioned peace in a very emphatic way 18 times. and let me say that the military of any country should move according to international law and that has always been china's position. of course, we have certain complaints about what other countries have done but facts are facts. facts speak louder than words. betty: when people look at the military parade, with all due respect, mr. yang, we saw medium-range ballistic missiles and nuclear capable warheads, and they saw the df 21-d, the so-called "aircraft carrier killer." is that a sign of peace? mr. yang: china is a big developing country.

we need the necessary defensive forces to make sure that our country is secure. there is nothing wrong about that. if you look around the world, you know that it is a very complicated place. and china's military force is for national defense, period. i hope that people will not ascribe some other motives to china's defense establishment and its efforts in the right direction. betty: much more ahead with my conversation with yang, including china's view of our presidential race. mr. yang: there might be some twist and turns and ups and downs but the general relationship is developing. betty: "china: behind the wall" continues after the break. ♪

♪ betty: welcome back to the bloomberg tv special, "china: behind the wall." i am betty liu. in the race for the white house, china has emerged as a hot topic among presidential candidates and almost none of it is good. donald trump: what they're doing is china is a bubble waiting to explode. betty: i asked about u.s.-china relations.

mr. yang: there might be ups and downs, but the general direction of the relationship is development. in this run-up to the president's visit, what i've heard from the general public in both countries is that this is very important and we have to make sure the visit will be a great success. i think that is the true feeling of the two peoples. betty: when the dow plunged a thousand points, donald trump, who is the leading candidate to win the republican nomination, he came out very forcefully and said this is china's fault. that china made this mess because they devalued the renminbi. so is the chinese government prepared to deal with a president trump? mr. yang: well, i have just expressed my views on the financial markets of various

countries, and i think that any country should look at the facts and then come to the right conclusion. i am not going to comment -- betty: including mr. trump? mr. yang: i am not going to comment on any particular person's views. when you look at the u.s. stock exchange, sometimes it goes down. sometimes it bounces back. we wish america well and they are having quite a recovery of the american economy. we wish the american economy getting better and better, and i say that is not good for anybody to point an accusing finger at somebody else. betty: so in 12 months what would you like to see accomplished between the u.s. and china?

mr. yang: in 12 months' time? of course, let's work hard to make the president's visit and the heads of state meeting a success. let the message be out and that china and the united states will continue to build this new model of the major country relationship between china and the united states. i think it is also very important for people to view things from a new perspective. that is we are in the 21st century. the 20th century is a great century, but there are lessons to be learned as well. so people should adopt a more forward-looking attitude. betty: on a final note, mr. yang, i have spoken a lot about the concerns of the americans, but i am curious from you. what deeply concerns you the most? what keeps you up at night?

mr. yang: well, now in this information age, diplomacy is going on somewhere while you are asleep or awake. so i have to make sure that things are functioning in a "normal fashion." it is my view that people of the world aspire to a better tomorrow and it is the responsibility of diplomats both to bridge the gap between various countries and to promote more good interaction among the peoples. in the face of climate change, energy problems, terrorism, and many other things. i think china and the united states and many other countries should work together. if we all pitch in and do our best, i think the world will be a better place.

betty: for more on my interview with state counselor yang, go to bloomberg.com. thank you for watching this bloomberg tv special report. i am betty liu from beijing. ♪ we live in a pick and choose world.

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