>> charlie: welcome to our program. tonight, the crisis in syria with rob malley. >> the army, per se, i suspect where we might see the first cracks, the first signs of people refusing to shoot, perhaps people laying down their arms. again, that may be happening as we speak but because there is a dearth of credible information we just don't know, but that's one of those questions the regime itself must be asking. can we count on the loyalty of these troops if we're asking them to shoot their brethren? >> charlie: the tribeca film festival in new york with actor robert de niro and producer jane rosenthal. >> we touched on doing a film festival, and then after 9/11 we talked about it more seriously and thought why not?

it would be something good for the city, the neighborhood. >> what we wanted to do was to bring people back downtown after 9/11 and to give the community a new memory, so we just persevered. we asked all our friends and neighbors, and we actually talked to a lot of the studios and said, "we've all fallen in love with new york through the movies, and now new york needs the movies, so come and help." and it was a great turnout that first year. >> charlie: and all about china and its consumer demand with professor karl gerth whose new book is, "as china goes, so goes the world." >> the same way we salivate over the chinese market and wonder how long it will be before those who can't afford stuff can afford starbucks, trips to fifth avenue to buy luxury goods and so on, they see that market as untapped and as their own

savior. that's why it's not just us pushing them since 2008 to start consuming more, it's also the chinese leadership themselves. >> charlie: syria, phil mickelson, and china when we continue. funding for "charlie rose" was provided by the following. >> every story needs a hero we can all root for, who beats the odds and comes out on top, but this isn't just a hollywood story line. 's happening every day, all across america. every time a store front opens, or the midnight oil is burned, or when someone chases a dream, not just a dollar, they are small-business owrs. if you want to root for a real hero, support small business. shop small. >> charlie: additional funding provided by these funders. >> and by bloomberg, a provider of multimedia news and information services worldwide.

♪ ♪ >> from our studios in captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: the focus of rebellions in the middle east and north africa shifted for a moment to syria. earlier the army stormed dara'a. 400 people have been killed since the protests began in march. president obama is considering other options including increased sanctions. joining me rob malley, middle east and program director of the international crisis group. he is just back from syria. he and i went to syria together at an earlier time. i am pleased to have him back on the program. welcome. >> thanks for having me. >> charlie: tell me what you think is happening on the ground at the moment. >> charlie, the first thing i would say is we really don't know what's happening partly

because the regime itself is denying access to the international media and partly because the best information we have comes from twitter, comes from youtube which are fragmentary. we don't really know who is taking the pictures, where they're coming from. we have a sense, one thing we know for sure, the regime has opted for a brutal, repressive response. beyond that, how many people have died and where they've died, under what conditions, that becomes murkier but i think there is one conclusion that is inescapable at this point. faced with several options, the regime appears to have chosen what i would consider one of the worst, which is going out and trying to really subdue the rebellion, the uprising, through violent means. >> charlie: as you might say, the die is cast and assad has crossed the rubicon? >> it's what it appears. it's going to be very hard. for one basic reason there are two conversations taking place in syria that are completely disconnected, a conversation the regime is having almost with itself about reform and lifting

martial law and they promise other things but the real conversation, the real engagement is the one the syrian people are witnessing every day, which is this pattern of demonstrations and violent repression anding in at this point the regime can say in my view is able to break that cycle of demonstrations, violence, deaths, funerals, demonstrations and so on and so forth, so it's not even as if the regime now or president assad could say something that would suddenly change the direction of events because things have become so bloody, because the rebellion has gained ground and not just in numbers but in geographic spread, it's become very hard for the regime to cope with this, and again, every time it kills people, it discredits whatever it might say the next day. >> charlie: where is the army? are they totally loyal to assad? or are some of them less willing to shoot their fellow syrians? >> you know, i'm not sure we know. i'm not sure that president assad knows.

back in the 1980's, they were able to call on the more loyal elements of the army to go suppress the muslim brotherhood uprising that led to 10's of thousands of deths. now, it's not so sure. recall, a -- thousands of deaths. now, it's not so sure. conscripts are rank and file, they are sunnis. he can count on some of them most of the time. can he count on all of them all of the time? that's a very different question. we'll have to see whether the army -- the army is much more representative of the people than some of the security services which are much more loyal to the regime but the army per se, that's wring we might see the first cracks, the first signs of people refusing to shoot, perhaps laying down their arms. that may be happening as we speak but because there is this dearth of credible information we just don't know but that's one of those questions that i think the regime itself must be asking. can we really count on the loyalty of these troops if we're

asking them to shoot their brethren? >> charlie: the question, is assad in control? >> i think there is every indication that he is. again, we're speculating to a large extent. this is an opaque regime. it's an opaque country to a large extent. and so to start divining these things, the best we can do is base ourselves on some analysis, president assad has over the years since he came to power in the year 2000 he seems to have gradually exercised more control over the instruments of power including the security instruments of power so there is no reason to believe that what is happening is not being done because he wants it to be done. he may be under pressure from other elements of the regime, of his family, but i'm not getting the sense that other people are taking charge and sidelining him. there seems to be a decision that he has taken because he feels that the regime is under threat and because he feels that no other course of action could guarantee the survival of the regime. the question being whether the

course of action he has chosen will guarantee it. >> charlie: if assad goes, the rebellion wins? who takes power? >> all we're going to do tonight i guess is ask those questions the answers to which are going to be very hard to come by. first of all, there is no such thing as the rebellion. there seems to be a number of local uprisings. they seem to also be connecting more and more but there is no sense that there is a unified command, that there is a unified political line, that we know who the political forces behind this are. certainly there is a strong islamist element but that doesn't mean that these are jihadis, talking about people that are sunni muslims, sympathetic to the muslim brotherhood but it is not even clear that the muslim brotherhood has the organizational capacity to bring this number of people out, so this seems to be much more diffuse. we saw the same thing in egypt and tunisia. there is no central command.

this is largely leaderless. it doesn't really have a program, an organization or a leader which makes it very strong in some ways because it's very hard to suppress something that you can neither coopt nor fully suppress because it doesn't have -- because it doesn't have leaders that you could put behind bars, it seems to be growing from the ground up so to figure out who would come if and when president assad were to fall, he may fall as a result of elements within the regime that decide that they want to take over. he may fall simply because the protests become too big. or, he may find a way to stay on. but if he does stay on, the nature, the character of the regime would have changed in quite fundamental ways because of the actions it has taken against its people over the last several weeks. >> charlie: what does it mean? that it will become -- what kind of regime? >> one that would have lost at least for the time being and probably for the foreseeable future whatever legitimacy it's had, as you know from having traveled to syria president

assad had a different relationship to his people than president mubarak had to the egyptian people -- he had more credibility, he had more support, he had more legitimacy. that he has certainly lost, if not completely to a large extent because of the actions that have been taken, the regime has shown a much more repressive face and has relied on instruments of control and power that are going to change the way it governs, assuming it survives this, and it may survive it, it will be a different animal all together because its relationship with the people will be different, because it will have chosen means that will be different and because it will have cut its ties to a number of international actors that it had tried to improve its relations with over the last several years. i'm talking about the europeans, i'm talking about certain arab countries, i'm talking about turkey. some of these countries are likely to shift their relationship toward syria if this repressive pattern continues. >> charlie: there was always some hope that assad could

somehow be a bridge to something else, whether it was between the turks -- somehow he and the turks could make a relationship with israel. there was always -- and some say that the united states, while it's condemning violence, worries about what the options would be if he falls. >> i think that's true. i think one of the ironies is that a number of the countries that have had very -- very tense relationship with syria over the last several years are among the most worried about the alternative to assad, whether it is israel, whether it is the united states, whether it is saudi arabia, each of them at one point has had a quite hostile or conflictual relationship with the assad regime and yet they are afraid of chaos. they are afraid of mass atrocities. you may see a civil war in syria that would lead to 10's of thousands of dead because of the sectarian and ethnic make-up of the country -- a number of

minorities who today, even though some of whom may not feel very fondly about the baathist assad regime but fear if he falls it could unleash a wave of civil attacks, of war between ethnic and sectarian groups either because of the way he's going to fall or after his collapse and i think that's one of the concerns that the obama administration has had. they didn't want to be too out in front of what was happening for tear that it could precipitate not -- -- for fear that it could precipitate -- not because of u.s. actions but one of the factors that pushes this toward a kind of internal action that would leave minorities, christian, alawite, jews, kurds, and that's something that the administration doesn't want to see because there was not much they could do if that situation were to occur. there is worry outside syria and within syria, as i said shared between people who don't have

much affection for president assad or for his regime but who fear the unknown, who fear chaos and who fear violence. >> charlie: even his neighbors viewed him as a kind of bulwark against islamist extremism, so if he goes -- >> it's possible. to some extent president assad, like so many of the other leaders in the region, president mubarak is another who has come to mind has tried to justify his iron fist and the monopoly that they and their colleagues have exercised on power by saying that if it's not them it's going to be the islamic fundamentalists and we don't want to see them, do we -- and i think it's been a scarecrow -- maybe a legitimate scarecrow but something that these regimes from egypt in the past to libya and saying if you don't like us wait to see who might come in the aftermath. we don't know the nature of syrian society well enough to guess what will come afterwards.

it could be a very islamist regime. it might not be. let's look at what's happening throughout the region. we're surprised every day by how different elements of civil society come together, and the most extreme don't always prevail, so in the case of syria, i think it's something to think about -- it's certainly something that i'm sure in washington and elsewhere people worry about, but it's not a foregone conclusion. much of it will depend on, again, whether the regime is to fall now, and if it falls, under what conditions, how violent it is or whether it could be done in some relatively peaceful manner. again, what we're seeing now -- the trends we're seag now are worrisome not just because -- we're seeing now are worrisome not just because we're see people killed but because we're seeing a revival of sectarian instincts that the regime seems to be playing very much on this -- circling the wagons, the

alawites, the 10-12% of the country that's allawi te and the regime has benefited from that sect, what would happen to them if the regime were to fall and fueling a sectiar dynamic -- fueling a sectarian dynamic. it's a dangerous game the regime is playing now -- dangerous because if you really think you're going to survive by holding onto the 10-12% of the population that you identify with, that's a very -- that's a very tricky game to play. >> charlie: i want to talk about the neighbors. what are the turks doing? >> turkey, under the lordship of the islamist movement the a.t.p. and prime minister erdowan in particular has invested a huge amount of diplomatic and political capital in trying to build a better relationship with

syria, a close relationship with syria. they share a very long border, i heard the foreign minister say not long ago when i was in turkey that syrian survival is vital -- both these countries depend upon one another and both had done an extraordinary job of improving their relationship to the point that i think it's fair to say that for a long time president bashar considered president erdowan his closest ally, his bridge the west and to the possibility of syria maybe changing to some extent its path. we're hearing now -- there is some ambivalence in what turkey is saying. certainly prime minister erdowan has been trying to encourage or impress president assad to reform and not to resort to violence and to resort more to the kind of political reforms that would change the nature of the syrian regime. it's pretty clear that whether assad has wanted to listen to erdowan or not it hasn't worked and at this point what i'm

detecting from the turks is a pretty heavy dose of frkz but also of -- dose of frustration but also worry and anxiety at the fact that the administration heads not been able to take care of the concerns by a reform agenda and i'm hearing from the syrian regime that turkey has given up on them too soon. and again, it's part of this pattern -- maybe this paranoid feeling that the regime has that everyone is against them, which is why they're circling the wagons, why they seem to be much more focused on elements of the regime that are closer to them in terms of their sectarian identity, and the one advice that they seem to be listening to is the advice given by those who they should be least receptive to, and that's the iranians. >> charlie: that's exactly what i was coming to. what do you think they have -- >> i suspect, again, we don't know, all we know is what the obama administration has been saying which is not just that syria has been seeking advice and support from iran but that aircraft iran has been giving

it, iran had to deal with its own uprising, it was much less bloody but they managed to subdue mass protest movements and by crowd control and simply telling them, i suspect that the iranians are telling them you have to take control of this, you've got to subdue it quickly before it spreads out of control. and at this point, again, we're speculating as to what the conversation between tehran and damascus might be but at least looking at the evidence it appears that they're listening to those who are telling them the best course of action now is to hit hard. and i'll say this. they really -- syria faces dilemma and this may be why they're listening to this advice. if the regime were to let the protest spread and not repress them, one is likely to see these protests which right now are in the 10's of thousands of people which is not of an egyptian size grow to hundreds of thousands. at that point they really do lose control over the plot -- they lose control over the situation. so to let the people protest

freely could present a real risk for the regime. so the alternative is to shoot them, but of course, that presents its own very real risks of further polarizing the situation, further setting the people up against the regime, further isolating the regime, but i guess -- and again, we're just trying to read through the actions that the regime is taking -- what is their logic -- they may still think that they could frighten the population, subdue them enough and get over this period by hitting very hard in a few cities like you mentioned, dara'a or perhaps banas, and say "here we're going to hit hard, send the message to others that we're prepared to reform but first you need to understand the time for protest is over." i have very strong doubts that that's going to work for the reason i said earlier which i think the protests have taken on a life of their own and i doubt very much that by killing more syrians the regime is going to be able to keep the syrians at home. >> charlie: rob malley, thank you so much.

>> thank you. >> charlie: pleasure to have you here. the tribeca film festival turns 10 this year. it was founded in the wake of september 11th and showcases movies and celebrates new york city. this year the festival runs through sunday, may 1st and here is a look at some of the movies. >> tyler lee long, april 25, 1992, october 17, 2009, age 17. we had heard that some ki had told him the day prior to go hang his self, that he was worthless. >> it's a shame he had to do this for anybody to notice it. >> as i told the school board, my voice is not going to be silent. i will go to my grave until a difference is made. >> you're not like everyone else. you're special. >> you mean i'm a freak. >> you're not a freak. >> you said yoursf,a freak is

someone who is very special. >> i don't remember saying that. >> i do. i remember. i rememberverying. >> he sat there and he lets this bird, "oh magic trick, is that real?" >> snap, somewhere of me of the actual event happening. ♪ ♪ >> picked it up and ripped its head off and bashed it out on the -- and she went absolutely insane. >> charlie: joining me now the cofounder of the tribeca film festival robert de niro and jape rosenthal. pleased to have them both at this table at this time. bob, let me start with you. how did this get started? why the tribeca film festival? >> we had thought about it -- sort of really kind of touched

on it lightly -- you know, what if -- doing a film festival and so on, da da, and then after 9/11 we talked about it more seriously and thought, well, why not? it would be something good for the city, the neighborhood and so on so that's more or less it. >> charlie: how did you put it together? >> it was with a lot of inspiration, passion and just determination that first year. we did it in 120 days. our goal was really -- you don't stop your day job to do a film festival, and it was really that the world didn't need another film festival but tribeca did, and what we wanted to do was to bring people back downtown after 9/11 and to really give the community a new memory, so we just persevered, we asked all our friends and neighbors and we actually talked to a lot of the studios and said, "we've all fallen in love with new york through the movies, and now new york needs the movies, so come and help." and it was a great turnout, that

first year. >> charlie: how has it changed, bob, in terms of the kind of films, in terms of the number of submissions? in terms of the impact it has? >> i'm happy that it's -- that it's lasted this long -- i mean, i'm -- that's great. we're doing something right. but that question you can answer better than i could. >> a thing you always say -- one of the things bob always says, "if you can't doing it they know you're serious and they're going to expect you." you have always said that. our submissions have gone up. we had well over 5,000 submissions. our attendance is up. we still do a number of free events, even this year, our opening-night event which was the cameron trail movie was open free to the public and we screened his movie outside and 7500 people showed up and elton

john who was the star of the movie played afterwards, so it's -- our mission remains true to downtown but we also have curated more. we have -- we still have world narratives and a lot of very strong documentaries but i think we're more focused just in terms of the number of films that we actually screen. >> charlie: are you still focused on independent films rather than big-budget, commercial -- >> it depends. if there is a big-budget commercial picture that wants to come, why not? >> charlie: you have also become director of the cannes film festival this year? >> head of the jury. >> charlie: the jury. >> yeah. >> charlie: are these festivals different? cannes different than tribeca, different from toronto, different from sundance? >> they all have their character and characteristics. cannes is, i guess, the -- >> charlie: granddaddy? >> granddaddy, grandmother of them all, the glamour festival

and it is great. and so i'm looking forward to it. it will be fun. >> charlie: how many documentaries do you have this year? >> i think there are about six music documentaries. there is a great one on harry belafonte that screens actually this friday. elton's documentary. there was another one -- >> charlie: the osbornes. >> that was terrific. if you think you know everything about ozzie, you don't until you see this documentary. his son, jack, produced it and did a spectacular job. >> charlie: you are doing much more online stuff. >> yes. >> charlie: so you can watch the films online? most of them? >> you can watch a lot of films online free, you have to make a reservation in our streaming room and you can be part of the conversations afterwards, you can watch the red carpet and what we're really trying to do is to give independent film audiences and audiences in general an opportunity to see more films, more diverse films that they wouldn't normally see

at their local movie theater. >> charlie: if you look back over 10 years, what is the biggest highlight? >> i think it was that first year. >> charlie: the fact that you got it done? >> the fact that we got it done and the fact that bob and our -- our friend richard holbrooke helped invite nelson mandela, and he came that first year and he spoke about how when he was on robin's island, the one night they would look forward to ault time was the movie night because it was the one time that both the jailers and the captors were all one and they could laugh at the same thing and cry at the same thing, and to hear mandela say that on the steps of city hall with bob and mayor bloomberg and governor pataki and president clinton was there -- it was just like oh, my god, we -- we did this, it felt very real. >> charlie: movies remain our most popular export. >> yeah. >> charlie: when you look back at all the things you have done, what's given you the most

satisfaction? >> certain projects -- movie projects i have worked on. as an actor. as a director. the two movies i directed. the festival. my kids. i have a million things to be thankful for that i -- >> charlie: any mountain top you want to go to that you haven't been to? >> we have a bunch of projects. i'm enthusiastic about all of them. trying to get them lined up. one on lombardi. >> charlie: that's right. >> sequel to "midnight run." i think that will be fun. we have -- >> "the better shepherd." >> charlie: the good shepherd, this is the better shepherd? you came here to talk about that. >> where you want to start it from, it's different. >> charlie: it's still about the c.i.a.? >> yes, absolutely. >> at this point it's 1961, the bay of pigs, the berlin wall going up and then going down in 1989 -- that period. it could change, but that was my

initial idea. and i'm working on it. that's something i do want to do. >> charlie: and you want to direct it. >> yeah. >> charlie: and will you act in it as well? >> i could. i don't think so, because my character really -- unless he would come back -- i don't know. >> charlie: and you are producing all the time? >> yes. a lost the time. spending a lot of our time right now focusing on the initiatives we're doing at tribeca, and a lot of them are innovative initiatives that we're doing both with our b.o.d. platform, we have a -- our v.o.d. platform. >> charlie: video on demand. >> video on demand, on any of your transactional v.o.d. channels, you can have a little bit of tribeca all year long, so we're spending a lot of time doing that. >> charlie: most of us think of tribeca as something that happens every year, but for a significant number of people it's a year-long project. >> yes.

yes. it takes a year -- it takes a year to plan 10 days. >> charlie: this is the 10th anniversary. go ahead. >> i want to say one thing. the other project i'm doing is with scorsese, al pacino. >> charlie: tell me what it is. >> based on a book "i heard you paint houses" by a guy named charles brandt, and it's about hoffa -- basically, it's the guy confesses that he had killed hoffa, who -- worked with him, was very close with him and the book is really -- very good. very simple. very direct. >> charlie: the guy who picked him up at the restaurant? >> yeah, he met him -- he met him with some -- i mean, the whole thing is very -- in the book it describes how it was done -- so yeah, it's so simple and -- powerful. >> charlie: and marty directs? >> marty directs. i'm with joe. >> charlie: i think that has a fair chance of succeeding.

wouldn't you? >> i hope so. >> charlie: to work with marty for you is as good as it gets. >> yeah. absolutely. >> charlie: and you is and al have worked together for -- >> we have worked together a couple of times though we never really -- we had one scene -- >> charlie: everybody thinks that was a movie and you had one scene together. >> yeah, yeah, yeah. so i'm looking forward to that. >> charlie: when will that start? >> marty has one other project he will either do before or after it. we're still figuring that out. >> charlie: it's amazing in movies lining everybody up when the actors are free, when the director is fry, when the photographer is free. >> it's putting together a jigsaw puzzle. you pray sometimes -- it's the easiest way. >> charlie: al goes back to the theater. do you ever want to go to the theater? >> yeah, i just -- i mean, i was thinking about it recently because i have seen people in plays -- friends of mine, ben stiller is in a play, robin williams in a play, al, i have seen his play, i have thought of it, i don't know what at this point and it's a commitment of time and so on and so on --

yeah, i'm looking for stuff, maybe. if it's right. >> charlie: did you inherit any of your father's artistic -- painting instincts? >> no, i was never interested in art, really -- not that much. that was his thing since he was five. i wish i was more -- when you look back, i tell my kids now you should be more interested. they don't care about my stuff, they do, they don't, they act, i want to take them to a movie at the festival, so it's harder to -- and i say i wish i had done certain things with my parents. i regret it now. i'm trying to make you aware of that. so -- you know. think twice before you say "i don't want to do it, i want to be with my friends," so on and so forth. >> charlie: what's their interest in acting? >> one of my kids is interested. not necessarily in acting. in music and so on. but the other guy is not. not that much, really. my oldest son is in real estate.

very successful, by the way -- i mean, there are profiles on him all around town in terms of his success as a real estate person. >> i'm proud of him. >> charlie: you have done well in things outside of acting too. >> things here and there, yeah. >> charlie: is it easy to build a -- easier to build a great restaurant or make a good movie? >> they're all hard. >> charlie: hotels? >>ing in is easy. it sounds easy, you think it's easy, and you -- >> noth is easy. it sounds easy. you think it's easy. when you're trying to get money for a movie, people are enthusiastic, when it comes to actually putting the money up or having access to the money that you can spend -- that's not so easy. they talk a good game. they really believe it. when it comes down to it, it's another story. >> charlie: "no, i had second thoughts." . >> yes. >> charlie: what makes a movie good and a movie work? >> i think if any of us had the crystal ball or the formula for that there would be a lot of

very successful -- a lot more success -- >> charlie: there is no formula? >> i don't think it's a formula. it's a business about instincts and i think it's about putting your best instincts forward and you believe in it 100%, you work on it, you do your best and hopefully by putting the right people together magic is created and it works. i know one producer once said, "if i said yes to all the movies i said no to and no toula the movies i said yes to i would have the same track record." >> charlie: what is it that you think that you and al and joe and people you admire share as actors? >> well, we're all very different. we have some similarities but we're all different. >> charlie: different in training? different in how you view the craft? >> i think approach, everything -- life, everything. marty too. when marty and i do a movie, i

do it for my reasons, he does it for his. we come together t. i always joke about it but -- the only thing we have in common is that we're actors and we perform if you will in front of people and joe is a wonderful singer, by the way -- and the former -- >> charlie: when young actors come to you, looking for advice, what do you tell them? >> i tell them just to keep at it and not be -- you know, discouraged by -- if you're going for, say, readings and stuff like that, you have to always try your best and not really -- just follow your instincts more than -- so you can be free and easy about it as opposed -- assume that you are not going to get it so you have more of a devil-may-care attitude about it. i think that helps a lot. >> charlie: do you still have a devil-may-care attitude? >> yeah. >> charlie: jane? he does? >> absolutely. >> charlie: thank you both. >> thank you. >> charlie: tribeca film

festival has been a remarkable success, celebrating its 10th year. karl gerth teaches history at oxford university. his new book "as china goes, so goes the world" it exam examines how china's booming market is transforming the country. as chine goes, so goes the world you suggest that a development of american-style consumer demand will be more transformative than a lot of other things which we pay pay more attention tochlt >> that's right. i don't think there is a -- >> that's right. i don't think this is a book of predictions. the subtitle is "how chinese consumers are transforming everything" and i don't think "everything" is publisher's hyperbole, everything from the biosphere, the world we inhabit to our objective experience of

the world through brands, clinea is going to try to compete as the number one producer of brands not just the number one producer of disney stuffed animals. >> charlie: why have they been slow in doing that? >> i think it's a different transition to make from manufacturing things to having the research capacity to make those inventions and own those technologies requires a lot more capital so i don't think this is going to happen overnight. >> charlie: you also suggest, i think, that in fact over the long run china wants to move as the united states moved from a manufacturing economy to a service economy. >> that's right. the key tension in the book is on the one hand we, the global community as well as chinese leaders themselves want to push the chinese to become more like us, to become a consumer driven rather than export-oriented economy on the one hand as as avoiding the down sides, china, on carbon emissions, china sees the transition from manufacturing and burning lots of carbon to run those plants to moving toward a service economy as a critical way of moving away

from a carbon-intensive g.d.p. to one less so, so it fits into everything that they want to move up the value chain by moving away from just stuffing, again, disney toys to owning a disney or an equivalent. >> charlie: i hear that, and primarily to serve their own market in the beginning, and then serve a global market? >> whichever way they can do it. i think the same way we salivate over the chinese consumer market and wonder how long it will be before hundreds of millions of chinese in addition to the hundreds of millions who already can afford stuff, how long before the rest of the country can afford all of these sorts of things -- can afford starbucks, trips to fifth eve to buy luxury goods and so on, they see that market as untapped and as their own savior, that's why it's not just us pushing them since 2008 to start consuming more, it's the chinese leadership themselves, they see that as their own ace in the hole, their own way of not just relying

overspent, overleveraged americans or the equivalence in europe but to tap their own market. >> charlie: take one specific economic arena. the automobile market. they're now the largest market for automobiles in the world. >> that's right, 2009. >> charlie: what is their ambition in terms of manufacturing automobiles not of the known international brands but of their own brand? >> one of the critical things that i discovered researching this book was the pivotal role that their decision to join w.t.o. had on the chinese auto industry. in the early 1990's when they finally signed on and agree that in 2001 they'll become virtually full members, they saw themselves as having a very small window in which they could develop a domestic car industry and plenty of other industries and if they developed that in time, before w.t.o. kicked in, they would actually be able to compete against the big boys when they arrived -- when they weren't fettered by all of the protectionist measures that were in place, so china saw themselves as having a very small window, first to develop a

domestic car industry and move up the value chain away from just, again, making stuffed animals, as well as beginning to own the brands that would compete against american, japanese and german brands internationally. >> charlie: wal-mart buys $20 billion of goods annually from china? >> sounds about right. >> charlie: if they develop the domestic demand, the consumer demand with a rising middle class, will it also produce markets for american manufacturers? cars, other project -- other products? >> that's the great hope and, of course, we've already seen this. we ask how is it changing everything? it's changing my 401(k), the value of it because i assume i am invested in american multinationals like mcdonald's or starbucks or g.m. and so on but they're already tapping that market so again, this isn't a book of predictions 10-20 years from now, this is already what's unfolding. >> charlie: and what kind of world will exist in china? will it be a two-tier society? or will it, in fact, be a huge

and developing middle class as we have here? >> i'm not sure we have it here. there are arguments that for the last 30 or 40 years that we have begun to have these poles develop and we might see the same thing develop in china. >> charlie: china might have the precedent? >> the conventional wisdom is that they will have this class of elite consumers and that because it's china it will still be a very large number and it will lead them to pass the japanese as the number one market for luxury goods, so that will have all sorts of impacts but it will still be a country where there are hundreds of millions of desperately poor people. >> charlie: what will they do -- what will they do in terms of wages as the demand on the part of their employment and part of their labor market continues to make increasing demands for change? >> i think this is one of the most interesting things going on in china now, is they want to make this transition to a consumer-driven economy and the only way you can do that is making sure people have money to spend, so having spent the previous few decades dismantling

the social safety net that had been established during the mao era, they now find themselves trying to put it back together again. why? because the chinese people have high savings rates partially for cultural reasons but also for very practical reasons. they need to send their kids to school. they need to buy increasingly expensive housing. they need to send their parents to live in a retirement home and they need to take care of their health care. all of those things which the state used to provide in cities they don't provide anymore, so the chinese government is looking at how they can establish minimum incomes, how they can establish a health care safety net -- all of these measures designed to free up capital so people can begin spending more. >> charlie: what's the biggest social tension in china? >> i would say it's this growing inequality that not everyone is getting to participate. i remember driving around shanghai with a friend of mine and being in awe at the thousands and thousands of new buildings -- i think the statistic is something like 5,000 buildings that they've built in the last couple of decades -- up from one

skyscraper that they had when i started going there in 1986. i pointed to all those and i saw them as a triumph of chinese capitalism and he saw it as a triumph of international capitalist speculation that he couldn't afford to -- moreover, it was more as he imagined it rubbed in his face that he got to see this wonderful new life but didn't get to experience it. i think that's one of the interesting drivers in china -- that people both emulate the life styles of the rich and famous but feel like they can't have them. one difference in the united states -- and i think this is an important difference -- is we don't think that most people who got wealthy got wealthy because of their family connections, but i think people in china believe that a lot of the reasons why the wealthiest are so wealthy is because they had better connections. they had better opportunities. >> charlie: is that true? >> without a doubt. the most powerful people in the building industry, for instance, are all connected to party elites. there are, of course, exceptions

to this, and in the entertainment industry, online gaming -- there are exceptions to this but i think the exceptions otherwise prove the rule that you need to have party connections. they're trying to figure out ways of getting around this. executing corrupt elite officials, all of these sort of things but it's a tough problem to resolve. >> charlie: is the consumer demand for things like cell phones extending beyond shanghai and beijing, beyond all those other cities of a million or more even into rural areas? >> first of all, to point out an interesting fact the number of cities over a million or more is nine or 10. in china, 150-plus. when we are just talking about urban china, of course, we're talking about a gigantic population but like you, i wondered how much of the sort of things i was talking about affected these hundreds of millions of desperately poor people, so i did a little bit of market research the last time i was in yunan province, which is

near tibet, and vietnam. i was traveling between two cities that had previously been at the very, very end of the lonely planet trail. you had to go over some pretty rough roads to get there 25 years ago whifirst went, i wanted to see what had happened in the inter-- when i first went, i wanted to see what had happened in the intervening time. they had become big destinations for chinese traveling around. i went further off the beaten path to a city between the two and i asked him if he had ever heard of mcdonald's, kentucky fried chicken, coca-cola, and he looked at me like i was an idiot and pointed to his brand new liquid plasma tv set which he thought thanks to a government subsidy which is part of their way of getting people to spend more, the government gave a rebate of 13% in 2008, "not only

have i heard of it, i successfully convinced our only child to move six hours away to the provincial capital of kunming by promising her that after all these years of watching these commercials she could taste the earthly delights of kentucky pride chicken." even before people could consume these things, the desire to lead these kinds of lives was already being put in place. long before you can own a car or own a rolex or own all of the good things, you rn begin to learn about these things and begin to learn to want them. >> charlie: you suggested by 2020 china will have the largest advertising budget? >> that's right. have you seen the ccct, the main chinese -- that building? >> charlie: amazing. >> that wasn't paid for by donations. that was paid for in advertising dollars. yeah. >> charlie: the world's largest ad market. >> that's right. >> charlie: does china have the

innovative and the kind of creative instincts that have been part of the fabric of american life for so long? >> yeah, i hear that quite a bit. i toured china with a group of business school professors that weren't experts in china but did say, "20 of their engineers don't equal one of ours." what about 100 of their engineers? what about 100 of their engineers in 10 or 20 years?" china is doing what we said we were going to do when we shut all our manufacturing jobs. move up the value chain by investing in education. they're investing extremely heavily in education now. you probably say that they are overpaying for things. overpaying for american academics to go and teach there. expanding too quickly. what's that going to be like in 10 or 20 years as the 126,000 chinese who are now studying in america begin to have very well paying opportunities there? i wouldn't rest on my laurels if i were an american engineer. i would expect that we're going to be challenged quite intensely in the coming decades. >> charlie: will they become a different kind of country if

they focus on china's role in the world not simply building china's economy? >> are you suggesting that they're just biding their time, charlie? >> charlie: i'm asking. >> i don't know the answer to that, but i do look at our own -- >> charlie: is it a question we ought to ask? >> of course, it's a question we ought to ask but i also think it's a question we ask of our own history. if we've done all sort of things in ouren own interest that we look back on with some -- in our own interest that we look back on with regret, maybe china will find themselves needing to go to war to gain access to those resources or those markets in order to make sure they preserve the best interests of their own country so yes, i think we should be worried because it seems inevitably we'll be competing for the same things. >> charlie: what happens to the political evolution? >> that's an open question. i think the assumption back in the 1990's, back when we -- remember the debate about most favored nation and i think the clinton administration persuaded us that we should separate human rights issues from trade and that if we started to trade with

them very heavily that eventually people who grew accustomed to choosing brands of underwear or beer would say "hang on a minute, why can't i choose these relatively insignificant things?" "why can't i choose my political leadership?" naturally it would evolve towards, that there would be more demands from the grassroots up. but i think that as long as they keep delivering these 10% growth rates and as long as they follow-through on some of that rhetoric that you spoke of earlier, some of that rhetoric about addressing this huge inequality, perhaps they will buy some more time. >> charlie: when you look at the quality of their intellectual property rights, what -- do you find it wanting? >> i get nervous every time i go to a drug store, for example, to buy things. not only when i'm in china. because they're beginning to corrupt international supply chains with counterfeit goods.

remember these sort of recent examples of tainted chinese products showing up here, whether it was lead paint in toys or whether it was drywall in florida. imagine those two cases multiplied a thousand or 2,000 times as you would when you're in china. i think that situation -- we assume that as they have more intellectual property to protect, that situation will disappear, but i think we should also contemplate the other possibility -- that our own situation might get worse. there might be some point of convergence, perhaps, in which brands -- that we communicate and create our identity will be undermined. >> charlie: could they have done it if they had a more open, more free society? made a commitment to free-market capitalism and at the same time made a -- it's a bit like, you know, in russia, they looked at political freedom first before they looked at economic freedom. correct? >> right. well -- >> charlie: here, they looked at economic freedom before they looked at political freedom --

or have not yet made that many strides in terms of their own form of democracy, not in terms of a western form. what if they had done both? what might have happened? >> one of the things you hear when you travel around india, when you tell them you're a chine specialist, they say, "oh, if only -- you're a china specialist, they say "oh, if only we didn't have this democracy we would have high growth rates" they believe it's a necessary evil to have authoritarian government -- i'm not making that argument. i'm looking at cars. there used to be packed, mixed-use froms of city, now they're all gleaming office towers. what percentage of those moved of their own free will? likewise, they used to have relatively narrow striets. not so good for cars. now they have wide streets. >> charlie: do you think they looked at their own history and

said we couldn't have done this without the kind of political structure we have, with the kind of top-down political structure and therefore that's what got us here and therefore that's what we've got to maintain in order to go where we want to go? >> i suspect that success breeds some confidence that if you have 10% growth rates that are the envy of the developing world that you believe in your model. >> charlie: and they could only have done them with the kind of command economy they have? >> i can't say that. i wouldn't say that. in fact, i doubt that's the case. i suspect they could have grown even quicker -- >> charlie: with political freedoms? >> if they hadn't squashed a lot of the capitalism that was developing in the 1980's, during that time, capitalism first developed on a very small scale unlike now where you have state-owned enterprises commanding the heights, there was a time when it seemed that china would continue to loosen its control over the economy and individual entrepreneurs would fill the space. the people who look at that period suggest if they had kept

going that route they would have had faster growth rates and more balanced at that. >> charlie: we talked about tensions that might exist between the society between rural and urban and poor and well to do. what other kinds of economic bubbles might rise their head in china? >> real estate. >> charlie: commercial real estate mostly? >> everything. everything. answer is "c, all of the above." >> charlie: they recognize that, don't they? in other words, they understand that's the danger to growth. >> a tricky bit about real estate bubbles is that you don't know you're in one until it's over, or you don't know it's popped until it's over. they are extremely fearful. they put in place regulations to make it more difficult to own multiple places. you have to pay a higher percentage of the flat up front. make it harder to get loans to buy a second place. there are all kinds of measures that they'll take in order to

slow these things down. in cities like chongsing, the leader is building low and affordable housing not only attacking it from driving to regulate the market point of view but trying to increase the supply of affordable housing at the other end, so that's probably the lightning rod. >> charlie: is the leadership that's coming on after hugint different than the generation of leadership in -- coming on after hu jintao different than the generation today? >> what's different is the national leaders, the well educated cosmopolitan types and the local leaders. when i ask how they're going to crack down on copyright infringements, the national government may want to do one thing but the local cadres getting their own income based on illegal industries have a different set of interests. i think there is an assumption left over from the cold war that whatever mao or whatever the

leader says is unproblematically channelled down the chain of command and implemented. no. >> charlie: what does the arab world think? what do they do? >> i think they probably do all the things they're doing now -- figuring out things that they can control to make sure that inflation doesn't get out of hand. >> charlie: why do they feel it necessary to arrest artists? >> i think -- you have segued perfectly from one to the other and perhaps answered your own question. because maybe if you nip these things in the bud they don't grow very quickly. maybe they see them as threats. china has a long history of worrying about small, heterodox thinkers gaining large followings and moving from one realm of criticism, maybe in the artistic world more narrowly construed to a broader platform. >> charlie: what would be the smart thing for the united states to do as it looks at the reality we're talking about? >> i have a hard time suggesting

what theiz should do vis-a-vis china because the things -- suggesting what we should do vis-a-vis china. >> charlie: take care of our own debt issues and we would be better able to compete -- >> debt issues, environmental issues, copenhagen, pick your issue, in all of those issues i'm not sure that we're leading anymore as much as we should be. >> charlie: do you think china is interested in a g-ii viewpoint of the world? >> i would sense it's all of the above. why not collaborate when you can find collaborators? why not go it alone or build alternative structures of power to make sure that you haven't put all your eggs in the american basket. snoot book is called "as china goes, so goes the world, how chinese consumers are transforming everything."

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