>> rose: welcome to the program. there is much talk about a new movie call the "the revenant." the director is all ro leonardo dicaprio. >> you do so much preparation before hand learning about the time period, reading fur trappers' journals, meeting men that were nostalgic about this period that look at the mountainman as almost a spirit allity. you do all this research. but once you are get there and are put in these conditions, it's just about trust. and it's about trusting the director you are working with, and saying, you know, how are we going to persevere, what are we going to do day to day. and you just kind of rely on instinct as an actor, and all that stuff, all that preparation, all the things you have thought about sort of dissolve away. that is what this experience, i think, was for the entire cast, was a trust within one another that we're going to do

something, you know, completely different sin matically. >> rose: we conclude this evening with a look at china, its economy and its financial market and its impact on the global economy. we talk to gillian tet of "the financial times" and henry mcvey of kkr. >> if you think about the chinese currency, it typically had an annualized volatility of 2% which is nothing. and right now it's four times that. we have never as investors dealt with that type of volatility in the capital markets. to me what is going on is china is going and trying to liberalize. but as they go forward, they are always taking steps back. it is hard to liberalize your interest rates, liberalize your currencies and liberalize your flows all in one fell swoop. so they are trying to manage that process. >> rose: the movie "the revenant" and china and its impact on the glon all economy when we continue. funding for charlie rose is provided bid following following:

>> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: "the revenant" is a new film based on a 2002 novel by michael punke. it explores the brult all existence of fur trappers working on the missouri river during the 1820s. leonardo dicaprio plays hugh glad, the legendary frontiersman who suffered a bear attack, was left for dead by his companions and crawled 200 miles to safety. here is a look at the trailer for "the revenant."

>> when you say track a new course. >> sit out there like a bunch of ducks, and you get to walk on out? i'm talking to you. >> the proper thing to do would be to finish him off quick. >> he should be cared for as long as necessary.

>> i understand. >> do it! help. what happened? >> we did what we had to do. he was buried, right? >> all i had was my boy and he took him from me. you understand? he's afraid. he knows i'll find him.

i ain't afraid to die any more. i done it already. >> rose: joining me now is the film's director alejandro inarritu. he won three academy awards in 2013 for the movie birdman and the star leonardo dicaprio. the writer describes his performance as a ferocious 200% commitment. more about that later. i am pleased to have both of them at this table at this time. welcome. >> thank you for having us. >> thank you for having us. >> rose: pleasure. i love this quote. so this is you in the hollywood review. with willo, i said-- leo i said i would love to see you fragile, vulnerable, to see the man that can be broken. and he was very excited by that. >> true. >> rose: is that how he described hugh glass for you? >> hugh glass is an interesting story for all of us, it is sort

of a camp fire legend. it represents the iconic american frontiersman, a man's struggle against nature, and i think his ability to also conquer nature as well. so it's been told from generation to generation. but it's a very interesting time period. first off you have this oregon territory which was very much like te amazon and you had the first sort of capital statistics move out west to extract the natural resources. and you have the clash of the indigenous populations with french and english fur trappers. and here is this man that is-- you know, mawled by a bear, left for dead, buried alive and has to sum monday something within his will to persevere and move on and revenge is the thing that sort of fuels him from the onset. but we knew that we wanted to make a movie where we sub merged ourselves in these actual elements. and we wanted to see what sort of poetry came about. what sort of questions that

arose in us-- . >> rose: as filmmakers. >> as filmmakers. and that's what we did i said this before, but alejandro almost had a tough time explaining to me why exactly he wanted to go on this meca, so to speak. but i just saw something in his eyes. he wanted to sub merge himself in these environments and see what came out. and so it was-- it was almost like a large portion of our lives together in nature, asking ourselves these questions. >> rose: here is what you said. i decided to embark on what i would characterize as more of a chapter of my life. >> then a film commitment. >> yeah, absolutely. and i think it was that for a lot of us. absolutely. >> rose: a chapter of your life. >> yeah. >> rose: i mean did you come out of this experience with a different sense of how you and what was important? >> yeah, i mean, we looked at this-- all the actors involved. we were there for nine months in

subzero temperatures in kal gary, real locations, far off locations, we looked at this as a grand experiment 6789 we had never been a part of something like. this we rehearsed metic lusly all day long to pull off some very crucial and hard to do shots. and then we would have an hour and a half of natural light and it became like live theater at the end of the day. this friend etic pace, this intensity that we needed to, you know, keep up with. but worse than that for all of us, it was just about allowing ourselves to put our trust in somebody else's unique process. and that's what this was for us as actors. because a lot of this was thought about before hand in great detail. but we needed to give ourselves over completely to something entirely new. and you know, it created a great camaraderie between the entire cast and crew and director. >> rose: but also the most demanding and toughest

experience you've had as an actor? >> well. >> rose: by nature of. >> by nature of doing a movie, yeah, this was certainly the toughest film i have ever been a part of. >> rose: this had been around for awhile, hadn't it? >> yes, i read the first draft written by marcus submit five years ago. and i was really, you know, intrigued by the story of this man who actually was-- the real story about this character that 200 years ago almost was attacked by a bear and then in the full winter, he survived 200 miles to find revenge. and i thought what this guy has in mind, what happened, this guy's life. because anything that is known of hugh glass before and after is pure legend. so that there is no actual-- . >> rose: no one could have done what he did. >> no one was writing stories at that time. these men were alone by themselves in these very, very difficult times. it was with unchartered ter

tone, unknown. but what i love was that these fact of being attacked by a bear and then surviving, it is so improbable. that it requires a willing suspension of disbelief, right, which is basically the foundation of the cinematic phase as-- said of poetry. i said you need to suspend the disbelief to make this-- you need to stop judgement, or prejudice to believe that a man can do that. and to attempt that in a cinematic experience is what really art is about, to make probable the improbable. and those elements were there, silently, to then put some ideas-- . >> rose: how long cinematically does the scene of the bear attacking-- how. >> how many minutes? >> rose: first of all, how men minutes does it last in the film. >> ten minutes. >> rose: and how long did it take you to shoot that? >> well, it was a lot of

research of the bear. you say well, you know, it is one of those events that nobody will like to see in the real life. but to understand how it happened, you have to see it in realtime, not in a chopped cinematic thing. even when people say why. >> rose: not with editing. it is look like the birdman kind of shooting. >> yes, yes, many, many things that i learned from birdman i applied here because i thought that to be in the point of view of hugh glass, of leo's character, will be the way that people really can understand inside-- the sight, the sound, the point of view of the character that they are living, and if i will have the thought to cut the bear attack in a cinematic way, fragmented way, to standardized it in the way that people is used to, then we will lose the nuances and how he survived. because that's what is really incredible. and survival is in the details. so i wanted people to experience the whole thing, you know. >> rose: but he literally throws you around, the bear

does, like a doll. >> i remember having the conversation with alejandro, because you read in the script, okay, hugh glass fights the bear. i'm like so how am i going to fight this bear. what am i going to do? like what kind of movements? what would a man do and then you realize, oh yeah, it is not a fight. are you basically like a cat with a ball of yarn. are you being thrown around. >> rose: you are the yarn. >> so i essentially was the yarn. but what was-- what is growndz breaking, i think, about that sequence and why i think so many people are talking about it is it almost becomes virtual reality in a lot of ways. you feel very voiture statistics, like you are watching something you shouldn't be witnessing, and that is a testament to alejandro and jifo's work. they have a way of making you almost feel the tension, the uncomfort, a lot of what is so powerful about that sequence is the moments of silence that they create. you know, the silence between man and beast and what is going

to happen next. and i think that, you know, as the history of cinema unfolds, people are going to be talking about that sequence for a long period of time. >> rose: the interesting thing about the performance, your performance, is that you probably have said less in this movie than most other movies you've done. >> right. >> rose: i mean it is about expression, it is about pain, it is about all the things that you do with your eyes and your body. >> well, that was what was interesting for me as an actor from the onset. is how to push a narrative along without words. that is what was attractive, i think, from the onset. but if it came about something different, when are you there he set up a landscape for us that was so incredibly authentic, the people around us, the costumes, the actual locations that we were in, you do so much preparation before hand learning about the time period, reading fur trappers' journals.

you know, meeting men that were nostalgic about this period that look at the mountainman as almost a spirit allity. you do all this research but once you get there and are put in these conditions, it is just about trust, and trusting the director you are working with. and saying, you know, how are we going to persevere, what will we do day to day. and you just kind of rely on instinct as an actor. and all that stuff, all that preparation, all the things you thought about sort of dissolve away. and that is what this experience was for the entire cast. was, you know, a trusting within one another that we're going to do something, you know, completely different cinematically. >> rose: that's exactly what you want, isn't it? >> in other words all the preparation is there but but when the battle starts, when the action starts, you want them relying on instinct. >> yeah, the physicality of it. as leo said, you have to surrender and you have to be very humble with that. because it is one thing to kind of have a conception, how in

bull fighting, how to stand in front of the bull. once you are in front of that bull, you are like those guys in the tri beun with the is i gar, don't be a could you ad, get claws, once you are there, you have to know that because there is no negotiation. you are really, really at the mercy of that. and this is a rogue are movie. and yes, i didn't want this film to get into the stz identifies or generalized kind of again erich kind of thing. i was looking to, not only in form and substance, in predictable way, which that is the way i like, sometimes not to frame things. but sometimes the substance starts to get into unpredictable things that we couldn't have thought, that we learn sometimes. sometimes those things defeat us. but that was the battle. and that was what the film was about. so at the end,ed improbable is the x-ray of the process we went through. with all that maybe weakness and

strengths, but it's a work in process. because we never stop working with nature. you know? >> rose: you shot this in natural light. >> yes. >> rose: wow. so you had to wait for two hours for available light. >> yeah, always when the sun came down is when we were shooting. and the reason, there were several reasons but one of the reasons, obviously, visually, we wanted this to be a painting, like a son et painting. i wanted people to sub merge, in a caravagio thing. and the landscape. but i think that is-- the people will experience this film, those scenarios, we are not allowed to see it any more because we have, in a way, po lawsuited planet earth with so many advertising and cables and dams and things, that to look to those scenarios in the times of the day is when god speaks, is when really things reveal themselves. and that's part of the cinematic experience. and the landscapes is what heals hugh glass or kills him or

threatens him. so to shoot it in the right time was not onlyas thet kal decision but a wise decision. because in those long takes, if we would have shot at different times of the day which would thefer have been allowed because we traveled two hours every day to get there, we will never finish and it will never match. >> rose: you had a hard time finding a location. >> yeah, you know, we planned more than a hundred locations in three states, three different parts of the world. but every time we arrived you prepare three, four months in advance, you rehearse, cor yogee, you do everything for those things to be there. and suddenly you arrive and they are destroyed by-- or it is not as you wanted. so it is all the time, again, you have to be moving around. we struggled. >> rose: there is also cold. >> uh-huh. >> rose: the river had to be cold. they didn't heat that river for you. >> the entire production was cold. >> rose: all the time. >> new york is like ahmad poll

conow. >> i hadn't been in the cold in a while. i got to new york yesterday and i was like wow, we did this every day for nine months. >> my core temperature dropped. i had like flashbacks to the movie, almost. >> rose: what was the most challenging part of this for you other than the elements? >> the challenging part was the endurance, just the endurance. i mean the endurance that everyone had to have every single day. because he sets the bar so high from the onset. our opening sequence in this movie, i didn't even really understand what all land ro was doing from the onset but he wanted to put the audience in the mindset of each one of the lead characters in this long 15 minute tracking shot, that is quite masterful and almost took three to four weeks of rehearsal because what they-- what chifo and he achieved in that sequence is something, i mean, i keep on talking about the movies that

they must have drawn upon, whether it be i am cuba, treasure, the sierra mad res, tarcoughsky films, you know, like solarist, but they achieved this-- they have this ability to get incredibly intimate with the characters. and then pan off to i-- to a landscape that is like an unbelievable david lean shot and weave you this cinematic snake in and out of the forest and into the mindsets of each one of these characters. i didn't really understand what was going on until i saw the final product. and then i realized, well, you know, that is why we prepared for these things in such great detail, that is why if takes weeks and weeks. >> what was it about him that made you give yourself over to him and trust him? >> i have been a fan of his work for a long period of time. but it's the passion. it's the look-- it was the look in his eyes from the onset of saying that he wanted to go down

to the-- go floo the heart of darkness, so to speak. he wanted to have that moment in nailt. it was almost like he wanted to give himself over to something higher than him. it was almost a sort of spirit all voyage that i think he wanted to go on. and i knew, look, there are only so many times in your life you can be on a journey like that. and you want to put yourself in the hands of somebody that is going to strife for incredible authenticity. and that's what he did. i think that there is no sequence in this movie that i don't remember alejandro looking at every single detail of what was in that frame. and that's what you want when you are working with a director, is to have them think of all of these things so you can concentrate on your job, you know. and he created this incredibly authentic atmosphere for us each and every day. >> rose: because some people have raised the idea that how could an actor in those circumstances concentrate on his acting. >> uh-huh. you reasons you mean because of

the reasons. >> rose: it forces you to. >> it forces to you concentrate on your acting. and be in the moment, you know. granted, you have the sin mattographer sometimes coming with the lens like this in your face. you have to sort of, you know, edit that out. but it forces you into almost this primal state of being when are you out there for that long of a period of time it just becomes about the basics. it's really strange. all the esoteric existential things you are thinking about comes about just moving forward. >> leo is forgetting one detail. the first time that i met him to offer the role, i just put the gun between us and then i-- the mexican style, and said do you accept this role? and he did. but it's true. what you were asking is true. it's all the rehearsal, charlie. all the rehearsals, once we were there, we knew that we have just one take. and the conditions were so thin. and i saw leo, as you said, with no words, with every body part,

and every single little nuance in his eyes. no words. just show and tell film. no words. >> rose: this say bit like, you know, the hangmans into concentrates focus is on-- you know. >> yeah. >> rose: makes you concentrate. >> you have to be aware. you have to be present. and i saw leo doing things with nuances and rehearsed movements, mill meterrically there. but reacting to birds or mofers or things that were happening there. and i think it's because honestlied awareness technique, is the awareness you will be making it in front of millions of people. because it's what actors feel in the opening broadway showing. that they are exposed, live, for the first time and only. and that's it. >> what was interesting for us as ackers because i think a lot of us had to adjust to the process of finding our performance within very specific shot structures. from the onset, but it became

something entirely different. it became a completely unique process for all of us. because it was like live theater every single day. and that tension of having to achieve that hour and a half every single day is infused into the actual movie. you feel that tension. i mean it was-- i mean we were on high octane every day that we were making this movie because if not we would have to show up the next day and keep being in these far off locations that were hours and hours and hours away. >> next time new a greenscreen, you will be asking for your snow to be-- please, freeze the set. >> rose: just a note about the cinemat oz graphy someone you liked and worked with you on bird mb. >> c hiv o, i don't like him,-- no, he's a true artist. really one of those guys that not only sa head of his time,

techically, he is the craft, just a master of light. he's just a partner and partner in crime. and a visionary and sensitive artist like nobody else. and we shared this kind of excitement, of this period. and you know, you renovate or die, that is my therry as an artist. and always he likes to be renovating and trying things. even knowing that we can fail horribly. but to fail and try again, we are trying all the time, knowing, laughing, that we can fail. but even mistakes that we found in the way, we love it because he said well maybe there's something nice about-- there is no losses without-- there is no beauty without-- there is no light without darkness. so when we found those kind of territories we love, we shared that enthusiastic thing, you know, to try those things. >> rose: in the end, what is it about a hugh glass, this true story, made into a book, that

enabled him to persevere? what is that x factor? >> that's a thuf thing to answer. but certainly seeing this movie and seeing these characters up on screen, you just-- you're amazed at the persevereance of life, the adaptability of life on earth. you know? i done know, this movie took on a whole bunch of other meanings for me as we were making it. i think things that i couldn't have even fore seen from the onset. so many of the conversations that we had about, you know, this time period, the first surge out west, this capital statistics surge to extract the resources and the from the lands kill these animals and send them off to europe. and here you have these native american populations, their culture is decimated in the process. it became-- it was an environmental undertone to all of it there for me too. i think it-- hugh glass' story is about man surviving the

savagery of nature, being able to conquer nature or adapt to it and the will to live. but it took on all these other meanings. and then especially going to places like the canadian tar sands. and you know, some of the environmental work that i did seeing how we're systemically doing-- destroying these places, indigenous cultures, forest lands, our planet, in an unprecedented scale in human history and we think we have learned so much from the past. we think we have learned so much from the mistakes of people in history. but here we are at this day and age doing things on a grander scale than ever before. not to mention the fact that we were shooting a film where we felt with the onset of climate change hit, 2015 being one of the hottest years in recorded history, we're seeing first hand so many climb ahmad particular changes that we had to change locations to the southern tip of arg dina just to find snow. and here we are today seeing unprecedented weather events all

over the world. so this movie kind of, i was simultaneously doing a documentary about climate change. i have been interviewing dozens and dozens of scientists and thinkers and politicians all over the world. and i was dock a film about climate change while i was doing this movie. and to see it first hand like this, was-- it's going to be an unforgettable moment in our life, in my life because this is the turning point. >> rose: it made you know what the battle is about. >> there is a turning point. >> rose: this is you speaking at the climate change conference in paris in december. >> good segue. >> in a year which has been the hottest in recorded history, it is hard to understand how some still refuse to accept the reality of climate change. every year that we allow the refusal to hold the world back from making progress is another year gone. precious days, weeks, months and years wasted on inaction.

but today is different. across the globe people of all communities are demanding change. marching and raising their voices to say enough is enough. we must act. and we must all act now. our world leaders have come to paris, con stricted bipolar particulars, the individual needs of their constituencies. but we need to leave here liberated by their humanity and emboldened by their sense of stewardship to our planet. they have a choice. be tim i had and stop at an agreement that merely allows them to save face or they can lead. they can return to their own towns and cities with a real plan to save the planet. and it is these cities that the change must start. >> rose: you suggested and you have in that sweech, we can meet the energy demands with clean, renewable energy by to 50. >> yeah. >> rose: if we start now.

>> but the united states needs to lead the way. >> rose: did they in paris? >> well, look, i mean this-- these agreements are for all future emissions, okay. we're talking about a scale of carbon that has been emitted into the atmosphere that is again unprecedented in the human history and the climate is reacting accordingly. there has been carbon emissions and temperatures throughout recorded history, and now we are here, okay. so it's been this grand puzzle that has been incredibly difficult to figure out. but one thing is crystal clear, and that is that the united states plays one of the most major roles in the entire world. and had they not come to the table, had the world community not come to the table at this conference, the environmental movement and the climate movement would be dead. there needed to be some sort of progress because each one of these climate summits has failed miserably. and for the first time the world community is taking it seriously. the big question is are we too late? that's been the pondering question for every one.

i know we should all remain optimistic. and i want to remain optimistic. >> rose: but you were worried that we are too late. that show we've done so much damage we can never. >> the answer to that is in somebody else's hands. but we do know that the scientific community has been screaming outloud for decades. and other interests have stief eled their voice and manipulated this conversation. and it's a real shame. but one thing i'm proud of, that for the first time, we've seen the world community take this issue seriously. and if they hadn't, there would be absolutely no hope. we can't wait another four years for people to start to listen to 99% of the scientific community. i mean it's an absurdity. and it's not about the individual any more. it's about we. it's about we as a species, as a world community, finally coming together to make some sort of progress forward. whether we're too late or not, remains to be seen. but you know, i'm just very happy as an environmentalist to

see something happen in the right direction. >> you know something that i was laughing, when i was reading the news in this climate thing, that the politicians were discussing about, negotiating with nailt, right. two degrees, no two degrees and a half, well, we will be two degrees, as if they can control the planet earth's system. and we saw, we experienced the difference between one degree and the difference between eyes and water. and when that degree failed. >> rose: and sea level. >> yes, but we were supposed to be shooting in one location, that suddenly shooting "the revenant," the difference between one degree and another is ice or water. and when the ice becomes water, it des troid the whole thing. and i saw that and when they say well two degrees is acceptable. i said really? it's acceptable. two degrees, take a look, experience one degree of change and will you then talk about that. if you negotiate two degrees or not. so what i am saying is the

notion of the climate change is one, but to experience it, and the people that leo or obama or the people that scientists are traveling to these places to experience that, it is a very different thing that really made the news or just having the statistics. >> rose: you engaged in this investment too. >> yeah. >> rose: in recommending. >> yeah, it's very-- it's very important. you know, like i said, simultaneously, i was doing a documentary about chiem at change and i hope to have it released next year. but i mean look, we could talk about this until we're blue in the face it is the most existential human krieses that the world has ever known, in my opinion. i think it is the biggest problem that man kind has ever had to face. we're not talking about something that is going to change in a decade or not. >> rose: and is a threat to our national security. >> yeah, and it's going to change-- it's something that will quite possibly change this planet for tense of thousands if not millions of years. and you know, we're all at this point hoping for some sort of

miracle. >> rose: each generation will say why didn't do you more. >> absolutely. >> people should go to the rev nantd and read that onliee climb and that will change everything. >> thering thing, you are doing a lot of documentaries. >> uh-huh. >> rose: the last time were you here we talked about a documentary. >> uh-huh. >> rose: i have forgot enthe subject. >> i have a-- veru nga we talked about. and i have another one called-- i'm just kind of focusing on environmental documentaries at this point. that's it. >> rose: thank you for coming. >> thank you, sir, always great talking to you. >> rose: thank you so much. >> thank you, my friend. >> rose: great to see you again. >> thank you very much. >> rose: the film open this weekend on friday. >> yes. >> rose: much success. >> thank you very much. >> rose: always good. >> thank you. >> rose: back in a moment. were stay with us. #r. market turmoil in chinese financial markets sphred across the world this week. the shanghai composite dropped by more than 7% on thursday, triggering a circuit breaker

which ended trading for the day. they announced they would suspended mechanism going forward. the effects were felt on the u.s. markets as well. the dow jones clotioned down nearly 400 points. investors were partly reacting to the chinese central bank moving to weaken the yuan for the 8th day in a row. joining me is financial times u.s. managerring editor gillian tet and henry mcvey, a partner at kkr and head of the global macro and asset allocation team. has long experience in china. i'm pleased to have both of them on this program at this time. i begin with you, my friend, gillian. what is going on? >> well, it's a dramatic moment it is not a good start to a happy new year at all. the issue is not just the fact that china is slowing down, because that is-- or rather the pace of growth is slowing down, because that is worrying people. what is really worries people right now is politics and policy uncertainty. we're seeing the chinese government do some pretty unpredictable things whether it

is having another billionaire disappear, whether it is essentially coming too markets and coming out. and there is a real sense that actually a country that we thought was the bed rock of the global economy and whose leadership was really well in control of events, is losing control. >> rose: and i will come back to you, same analysis. same question. >> i would say to me it's about the currency. if you think about the chinese currency, it typically had an annualized volatility of two percent which is nothing. and right now it's four times that. we have never as investors dealt with that type of volatility in the capital market. so to me what is going on is china is going and trying to liberalize, but as they go forward, they are also taking steps back. it's hard to liberalize your interest rates, liberalize your currencies and liberalize your flows all in one fell swoop. so they're trying to manage that process as gillian said, it is going to come with volatility. so right now to me the number one point though is that if the currency is moving more than

what people thought. and if china's currency moves, they've got three and a half trillion of reserves to support it but the rest of the world, particularly the emerging markets that trade with china don't have that type of base. so i think one of the conclusions of what is going on is that there is much more of a knockdown effect outside of china than fuelly what is going on in china. >> rose: is it about. >> his interesting point, because you are absolutely right in terms of saying that it is actually not just about the chinese currency. it is about a raise of emerging market currency. we were looking on "the financial times" and what is fascinate sght emerging market currency excluding the chinese krnsee are now lower than where they were in the autumn when janet yellin and the rest of the fed decided not to raise rates because of concern about global economic turmoil. so in many ways we really are seeing an increasingly unstable situation as a tet to the-- tech tonic plates shift. >> some say the economy is fine, this is only about the markets.

>> well, that is what people are certainly saying. and it is important to remember that actually the chinese economy is still growing. a country that is still growing at five percent, six percent is actually doing in many ways quite well on the global stage. the issue is, though, that what we are seeing from these dramatic market swings, is potentially a loss of confidence. and that could be very damaging. not just in china but more widely as well. >> i was just there a couple of weeks ago. we at kkr, 16 businesses in china. most of our businesses are actually doing quite fine mentdz so i think that what you are seeing now is more of a capital markets phenomenon than an economics phenomenon. no question, the is fundamental premission-- premise, china was an export story from 2 thousand to 20136789 it's shifting to a consumer story. but the consumer story is slowing too. but more importantly, it's really to me about the capital markets and this change. they're trying to liberalize but they want to control the liberalization process. and so right now you have a

command and control economy, facing off against capitalism. and it's the intersection of those two that are creating the volatility. >> there is another issue which you as an american are very familiar with, which there are pockets of china's economy that have run up quite a lot of debt in the last few years and that has not got a lot of attention. but as we start to see more capitol markets turmoil, as we start to see people questioning the chinese economic growth miracle, one of the things people should watch for is what happens to some of those debts. >> when you see the world bank, for example, changing its forcast for 2016, from 3.3 to 2.9, reevaluating what he thinks is going to happen s that all connected to china? is the observations on the glon all market, we have other factors. we have instability in the middle east. we have oil prices, and those two things are connected. we have other things going on around the world other than the chinese economy. >> absolutely. i mean there are a number of

things going on. look at south africa right now. which used to be one of the darlings of emerging markets world. we're seeing a lot of political uncertainty there and concern about that look at brazil which was one of the great bricks, emerging market darlings people wanted to invest in. where things are really looking more concerning right now. >> rose: is that about unrest, uncertainty about political cor rungs or about the drying up of the chinese mar kelt and the chinese demand for that economy which was so to us canned on expert-- exports to china. >> it is a combination. and the commodity psych sell very significant right now. commodity price keeps falling and falling for most major commodity market sectors. trade is definitely sputtering. something people don't normally look at is the shipping index. one of the key shipping indexes which reflect trade hag faulten to its lowest. we don't need to panic yet but certainly the type of growth rates that people were expecting to see this year are are likely

to be under threat. >> rose: george sorros said, i think he soo in vee lanka or somewhere, said something like it reminded him of 2008, that china has a crisis and it will challenge financial markets. >> to me, if you look right now, if you look at global gdp, the u.s. is about a third, china is about a third it is a two-engine thattive droos the global economy. i actually don't see-- china's economy has been slowing for sm time. if you look right now, fixed investment growth which was 50% of the economy was growing 35%. today it's growing ten and it's stabilizing. that's not new news what is new news is this move towards the liberalization of the currency and the capital markets. so i think you have to separate economic growth from capital markets. we've been in a period with all this quantitative easing around the world, where central banks have essentially created a great environment for wall street, but it hasn't been great for main street. what i think is shifting is we're probably going to see an

okay environment for main street but it will be tougher for wall street. >> but just jump in there and say there is one lesson we leshed in 2008, is that you knts always separate out capital markets and the real economy. and some thing that has not gotten enough attention recently is the fact that as other western central banks have eased policy, those trillions of dollars of quantity tattive easing have gone to the emerging markets world. that created debt bibles in the emerging market world. so just as in 2007, 2008 we're beginning to see those gigantic debt bubbles begin to teulgly, if not implode, then deflate. and that is the kind of parallel that people like george soros are concerned about. >> rose: what is the status of the balance of payments in china? >> essentially right now china runs a very song current account surplus. they export more than they import. the fiscal balance is actually in good shaivment it's really, to me, again, i don't worrying a much about chinas to allly unraveling. through our 16 businesses we can

see the consumer still groag, household income is growing. i would say eight to 10% per year. it's really what gillian hit on which is this phenomenon of global trait is something that we all take for granted. we think the globalization say one way trade. and what you have seen since 2 about 2014 is global trade as a percentage of gdp is coming down. people are not focused on this. i think it is a key issue. and when that slows down, what happens is people try to devalue their currency to create competitive-- what has happened this time is it only raised the price of poim the-- imports. there is no pickup in imports, that is what different about this cycle than any other time. >> i was going to say, go home and look at the baltic drive rate index bus that say pretty terrifying, these are the geeky things that no one watches very much. but a signal of global trade. >> rose: explain it. >> essentially it indicates what is the price of having a chunk of space on a ship to move your

goods around the world. >> rose: right. >> and when you have lower levels of trade, falling demand, you tend to have prices collapse. >> rose: because there is a lot of space on the ships. >> exactly. >> you billed what you did with lower rates as you build excess capacity. and you haven't created enough excess demand. what is difference about the recovery right now is there is not a lot of demand but because scierms aren't levering up, they are being more ju di shus in how they spend but we have created a lot of supply. the second thing is china is trying to build a domestic consumption economy by definition f they are doing that, that means they are doing less trading with others. and sowf's got what i would say is the biggest part, the number one or number two in the glon all economy in terms of growth depending by year is now more inward focus that is what gl jinping wants, over time it makes them more of a defensive comple. the u.s., we are 70% consumption. if we don't shoot ourselves in the foot, we can have a pretty good economy. china has been largely fixed

investment and trade. they have had to depend on exporting things to others. what they are trying to do is make more of a domestic economy. >> rose: because of a rising middle class. >> exactly. but as they do that, many of their partners are still betting on its old model which was this global trade. and that's where you are seeing the friks. >> rose: those two modz els can't exist side-by-side. >> they can on a long-term basis but we are in the here and now right now. and it's also occurring at a time when the u.s. federal reserve after many, many years is changing its monetary policy. so you've got two things going on. >> rose: you mean raising interest rates. >> it's raising its interest rates at a time where china is trying to liberalize its currency. and that's going to create volg tillity. >> was it a mistake to try to liberalize its currency. >> they have to. to get where they want to go which is to be more of a market-based economy, they need to liberalize. i would say-- . >> rose: liberalize means. >> to allow in three areas, interest rates, currency and

flows in and out of the krir. that would be techically in the u.s., interest rates mofer up and down independently for the central bank. the currency can move and flows can come in and out. they are struggling right now with doing that in a smooth fashion. tting these moments are youe are saying that we're going to liberalize but then you intervene. and the stong market intervention that we saw over its past couple of months is a perfect example. and to your point earlier t creates-- it hurts the confidence of the domestics. >> we've seen this play book bmplet japan in the 19 '80s was in exactly the same position. and the problem is you take an economy like china or post war japan and build it up almost on a wall footing, where you have intense state control, all the money in the economy directed towards industry, and bureaucrats control that and run that quite effectively. the prok today like japan and like-- is that when an economy outgrows that state controlled model, movek too a brave new world of market-driven finance

is hard. they should have started this several years ago and had a gradual transition. but by delaying a lot of the reforms, unfortunately china just like japan before it, is suddenly seeing a nasty shock. and we all know how the japanese bubble ended. >> rose: go ahead. >> i think you have to separate the chinese economy into three buckets. one is experts where we do think there is stress. two is traditional con shump shun, and the third is what i would say are value-added cket number two is what people said oh, more tooth brushes, more combs, that, even some of that is becoming more mature. but this bucket number three, the value-added services, health care, wellness, financial services, that is booming. i can tell you, we were just there. environmental protection, people want to make sure that their kids have the right health care, that they are not being hurt by the smog, that the motders have clean milk. those businesses, we see t our businesses are growing 20 to 25% year over year. >> rose: what can the

government do. we saw them at a time when the u.s. gooft was trying to create stim luseses, joafer night to create stimuluses. they have enormous reserves. what can they do to restructure their economy, or what can they do to create a stimulus that might boost thrair economy? >> i think their number one thing right now is you need to create more transparenty. -- transparency. i think people internally and external want to know what the game plan is. >> rose: speak to that. both of you know this, people well, i think it's more thehe anticorruption initiative is wide spread. and we see it, we have a liquor distribution business where sales have fallen off by 30%. because people used to grab gifts and do giflts, that business has fall eb off. people don't know whether they can give a gift or not. >> because of corruption issues. so what happens is you extend that fear beyond just traditional corruption. so to me creating more transparency about that.

the second is if you go back to the interest rates and the currency, in august we had a shock overnight. and that created a very unsettled environment. similarly, you mentioned we had had eight days of the currency going down. i think nobody expected that china was going to get into the the global currency protection zone and then move their currency down eight days in a row. so those types of messages in terms of communicating, think about what has happened. we've gone from having a government in china that communicated very well, and ben bernanke that communicated, i would say very well on a difficult period to right now we have janet yellin where some people question whether she fully understands proper communication with the market. and i think in the chinese leadership we have very strong officials who know how to consolidate power and they know where they want to go. but in erm its of their capital markets experience, they're still learning. >> i mean i would put it more simply. there are three areas, one is you need to have policy transparency. one day they say they're trying to-- the currency markets.

next day they vanished. that disunt help investor kf disens. they need political transparency. we had today another billionaire suddenly vanish. there say real clampdown that is making business people quite nervous. and data transparency. i mean the statistics are terrible. nevsky capital, a $1.5 billion hedge fund, a very successful hedge fund based in london announced this week they have pretty much shutting down its fund because the markets in china are now so untransparent it's very hard to actually invest in a rationalway. it was an emerging market fund, india and china that is really knocking on investor confidence. >> i think where we're going to move is that investors that are moving into the emerging markets are going to need to be able to move away from a hedge fund model and be able to lock up their money for a longer period of time. because just if you think about it, the volatility that we're seeing is going to be higher going forward. by definition. and so. >> i hate, i kind of agreement i

understand right now anyone hoping to make short-term games out of markets like china might as well take thawr money and stick it on the black jack table. >> rose: because nobody knows. >> it's a gamble. you may be lucky, you know. you know, but actually-- . >> rose: i assume, let's say, i assume you mean by that, you might as well put it on the black jack table is simply because no one-- things are so volatile that the factors that in the end will determine the success, you have no capacity to predict what way they will go. >> you have three factors that are making it very hard for anyone to invest. one, complete data uncertainty in china and india as well, i would say. two, big changes in the way that financial markets work today, which means that i won't go into this now but robo trading, algorithm mick trading means markets can behave in peculiar ways but that good old-fashioned issue of political risk, security concerns, all manner of potential military con flicts. we haven't seen this on this scale for a number of years.

and that makes life pretty unpredictable. >> rose: do you have any confidence of what the global growth rate will be in 2016. >> it's interesting. the imf has had a growth rate 36.6% or higher for the past three years and we've never hit that. we again, at kkr we look for lower-- . >> rose: there's also been. >> it's been like a new year dive, a new year, the imf says we will hit 3.6 in growth this year and everyone goes well, maybe in your dreams, if you are very, very good. >> can i tell you an interesting statistic. if you look at global growth in u.s. dollar terms, the u.s. grew and china grew, and every other country in the world sha rank last year. >> rose: including britain. >> yes, everybody sha rank. what is happening is that-- . >> rose: sha rank in terms of their total. >> their total economy growth in u.s. dollar terms, which is i don't know if it has happened before, but it certainly hasn't happened very often. >> rose: only two economies grew. >> and if you look now there are only two comples in dollar terms

that have growth in exports, vietnam and ireland. everybody else is shrinking. and that is why her point earlier on the global trade one, i want to reiterate, which is i think most people are focused on the headlines and the noise. but what is happening is we're seeing glbalization, particularly as it relates to global trade, reverse. which is something for anybody that ever entered the stock market or was in commerce, starting in 1983 through 2014, it went straight up. it was one of the few things you d that right now is turng. and so capital is starting to figure that out. whether you are a geek and watch the baltic trade index or just a person who runs a business. day to day, things are changing. and i think as we look back on 2016, that will end up being one of the big themes. >> rose: a slowdown in global trade. >> i'm just will phrase that another way. there are two things that descroaf optimism in the global economy at the turn of the century. a belief that you would have more globalization and more and more free market capitalism that

was the washington consensus. what we know right now is that sometimes trends can really go into reverse. >> rose: so you are pessimism. >> no i'm not poissments i actually think we are going to see a level of growth this year which is actually not going to be disastrous. but i do think we are entering a pretty bumpy phase. and one thing is crystal clear right now is that trying to think about economics purely in terms of numbers simply doesn't work. >> rose: you have to think about it in terms of? >> policy uncertainty, politics, you know. >> rose: so is there a lessening of confidence in the xi jinping government? >> i think there is certainly a lessening of confidence in the efficacy of the xi jinping government and the ability of them to control events. >> rose: do you agree with that? >> i would say that overall, our base view is we're-- you know, we are an invest firm, that is what we do. we are finding things to do. there was a huge growth, right, look. but. >> back to the original comment, when there is blood in the

street, get out and invest because that is where fortunes are made. they are not quite investing in blood in the streets. >> the bottom is that quantitative easing lead to too much debt in the system. and that debt is going to have to become unwound. and from our standpoint, we are finding lots of firms that need to rethink about their-- how their debt and equity and capital structure work. and they are coming and talking to us. >> rose: you are a private equity firm meaning they are coming in and talking to you about whether they need to you buy them. >> buy them, partner with them, do something with them. but i think in general, you know, when you say am i pessimism about the chinese government. i think xi jinping has a play book which is he is going to consolidate power. >> rose: they've been doing that. >> there were excesses that needed to get wrung out of the system. the second thing is i don't want to discredit-- chien has has an incredible central banker in governor ji-wei. is he one the top central bankers in the world.

and i think he's got a pretty thoughtful plan. taking a billion people, integrating them from a command and control economy into a markets based economy, there are going to be bumps in the road. >> rose: it is a five year plan. >> at a minimum. >> rose: thank you, great to you have, great to sigh. thank you for joining us, see you next time. >> for more about this program and earlier episodes visit us online at pbs.org and charlie rose.com.

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♪ ovider of multimedia news and >> announcer: this is "nightly business report," with tyler mathisen and sue herera. the selling intensifies. the dow and nasdaq are now in correction territory, off 10% from their recent highs. and the dow has never fallen so far so fast at the start of a year ever. china chaos. that country suspends its new stock market rules, leaving investors on edge ahead of shanghai's open. costly pitfalls. the common mistakes investors make in a volatile market and how you can avoid them. all that and more tonight on "nightly business report" for thursday january 7th. good evening, everyone, and welcome. a body blow to the stock market as another wave of selling hit wall street and kno