welcome to the program, tonight we look at the global economy from the perspective of mohammed al arian, former harvard investment officer and former ce okay of pi m.c. o. >> we are losing three anchors right now, the first is the anchor fundamentals. the global economy has a terrible problem growing an even the good parts of the global economy that were growing, china-- second the confidence of central banks has come down. why, first the fed is going a different direction from the other central banks and secondly, people realize there is a limit to the power of central banks. third, the dynamics of the market have changed so every time you get a small thing happening, it gets amplified by the lack of liquidity. so people are very surpriseed by

the enormous volatility, they shouldn't be. that is what our future looks like. >> for a look at the chinese economy and the chinese position around the world. >> some american people think china is going to take over america as the leading power in the world. blet me tell you, you are so fortunate. you have two wonderful neighbors in can darks in the south you have mexico. and you are separated by the rest of theworld, the pacific ocean and the atlantic. in china we have 14 neighbors. >> two views on the global economy when we continue. funding to for charlie rose is provided by the following:

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> mohammed al arian is here, chief economic advisor from all yant, the corporate pert of pi m.c. o where he was previous the c.e.o. and a colleague for bloomberg view and contributing edit for "the new york times." his latest book-- is called the only game in town, central banks, instability and avoiding the next collapse. i'm pleased to have him back at this table. welcome. >> thank you. >> so why the title? , the only game in town. >> because that's what has been happening in the policy meeting side. there has only been one entity around the world, strat banks. that they are taking a huge

burden, well in excess of what they can deliver and politicians have stood on the sideline leaving it all up. >> basically are you saying it is left to monetary policy, and fiscal policy was not affected because nobody could make it happen. >> correct. >> and now we're going to live with the consequences of having pursued too many objectives with an imperfect policy tool. >> what is left for central banks to do? >> i think what they need to do more than anything else is get out of being the only game in town. if they don't, they will go from being part of the solution to being part of the problem. and then this generation of future generations are going to have an economic outlook that is much more dire than what we have now. >> you explained this concept, tell me what that is. >> it is what the british call a tea, where the road are you on will en. there is no doubt that the road that we are on now which has been artificially supported by central banks, where we have borrowed growth from the future and borrowed financial adjustment for the future, that is going to end within the next three years.

>> three. >> three year, the exact timing is very hard but i can't see it last for more than three years. and there is from someone who believes in the new normal, the concept that we could have a low growth world forever. i don't think we can any more. the tea junction is there is nothing predes tinned as to how we come out it is up to choices that we make over the next. >> is it simply the choice to use fiscal policy. >> it is much more. so i say there are four things that most economists will agree on. they will disagree when which is most important but they agree you need all four. part of it is structural reforms, making sure we grow on the basis on real interests of growth and not finance. that is the biggest mistake we made a decade ago. >> what is the biggest example. >> infrastructure sphending, a tax system that promotes economic growth. being more serious about labor retooling and retraining in a world that is channing very quickly. education reform. there is a whole set of things that we need to do to create

engines of growth. that is one of them. the second element is fiscal policy. we have a fiscal policy-- . >> there is an extra element of fiscal policy that the people have the wallet to spend, don't have the will to spend. and people have the will to spend, don't have the wallet to spend. and what fiscal policy has been doing is making that course. so we need a fiscal policy that recognizes that it is in everybody's interest to match better-- then we have the problem of student loans here. too much debt in greeses. when you have so much debt that it cripples you, and we have to deal with that. and finally. >> people with the debt burden over their head. >> correct. >> impacts their choices in everything else. >> and if it is a country, nobody will put in new capital because they don't kant to be con tam nature by the old debt and we have virt aisle-- virtually no global coordination going on. you see china doing its own thing. and it disruchts the systemment have i been around for a long time looking at this, and this

is probably the lowest level of global coordination since the '80s. >> but this influence, is there none? haven't the chinese changed a little bit or at least have they attempt to change currency issues. >> so think of an orchestra. >> so the chinese basically when the instability gets too large, they put global responsibilities before the domestic responsibilities. so they don't appreciate the currency. then when financial markets calm down, they say well, we have to pursue domestic stability and then weaken the currency. that has been the cycle. so in august they surprised everybody with the debt depreesh yaition, that caused a lot of global instability. they did nothing after that. when calm returned, in october, november, they went back to pursuing a currency depreesh yaition until we had another shock in december, january. and that shows you that china is trying to balance their domestic

responsibilities of a weaker currency with the global responsibility to say you know what, we have the second largest economy in the world and you have to act responsiblably on the global stage. >> there is no koord nation but there is interdependence. >> so think of the orchestra. you have different elements of the orchestra. they are interdepend ent but they don't have the same sheet of music to play with. and they don't have a conductor to look up to. you don't want to listen what that orchestra comes up with. once in a while the strings will do well. the drums may do well. but over time, the whole organize stla. >> who would be responsible for doing that? who is the engine for a global coordination? >> so in a perfect world. >> what institution. >> is the imf it has 188 members. it has incredible people. but for the imf to be powerful, a couple things have to happen. first congress has to buy into the notion that the imf is important. it has to enable the imf

reforms. and second, the imf itself has to reflect the world of today, not the world of 50 years ago. >> how do they do that? >> it would change, for example, the voting system. if you are china, you are looking at this, you have less voting power than belgium, luxembourg. >> my understanding is they are interested in those reforms. >> they are interested but they need congress. they need the political system. the ones who will lose the most out of this is not the u.s., it's europe. europe is the most overrepresented. they are in fact the hardest people to convince to give up power. no one wants to give up power but it is in the interest of the whole system for us to have a proper reform of the institutions. >> what will the chinese do if they are not part of it. if they don't have voting to reflect their strength? >> so the good news is we know what they are going to do. they are going to build little pipes around the system. so they are going to say the system that is dominated by the west no longer serves the global economy. we can't replace it so let's build the system. so for example. >> the dollar may be the reserve

policy but. >> but we will have by lateral agreements with different countries. >> they already do that. >> they created the asian infrastructure bank. that was a complete chinese. >> they i think. >> we make a mistake. and it was only after britain and other countries say yes that we finally. >> yeah, i think we didn't quite understand the extent to which all of our allies with the exception of two would rush in and actually join this initiative. we overestimated the. >> what why-- why wouldn't we understand that. central bankers talk to each other all the time. >> because in 1998 asia tried the same thing. they tried to create an asian monetary fund. the u.s. realized that would undermine the power of the imf and the u.s. said no, and it didn't happen. we had a his tor kal example where we were able to stop it. >> so if i was president of the united states and i-- somebody would tell me that there is a debate going on at least in the downing, at downing street about

what to do about the asian infrastructure bank an i would pick up the phone and call david cameron and i would say what about this. and he would say to me, we made sure to do this, so you are warned and you know. why doesn't that happen. >> you probably know the answer to that better than i do. i don't have enough of an insight as to how the white house works. but it came as a surprise, i can tell you, to policy makers in the u.s. that so many people were willing to join. >> well, it came to a surprise. >> i think it did. >> let me just come back to the notion, so the imf has to be the engine of coordination. >> correct. >> and for it to be the engine of coordination it has to have more strength and it has to be more balanced and it has to have more weighted participation and power by the larger economies of the world. and europe has to give up something. >> sure. >> and people aren't interested in giving up power, so far. >> yeah. >> so let's talk about the economy task is today. we'll come back to central banks

and fiscal policy, and do you think we'll come to this tea junction within three years. >> i do. >> so the three years is 2019, 20, correct?háujzi market and people are scratching their head. maybe they are trying to make a few mistakes on the policy front. but does it really warrant what happened? no, it doesn't. the reason why it's happening is there's something much bigger going on. there's what this book is. >> rose: is it a bigger thing, oil prices or something else. >> so again it's fascinating me. you talk to the oil trader and say what's going wrong with your market. is it because of the equity market and say what's going on. it's because of the oil market. >> rose: is it less about the market than about supply and

demand. >> we're losing anchors right now. the global economy is having a terrible problem growing and even the part of the global economy that's growing a lot china has been contaminated. second, the coffers of the central banks has come down. why? first the fed is going in a different direction from the central banks and people realize there's the limit to the power of central banks. third the dynamic of the market have changed. so every time things happen you have liquidity. so people are very surprised by the enormous volatility they get. they shouldn't be. that's what our future looks like and at a certain point it will hit where bad markets become bad fundamentalists. >> rose: let's go back for one second. why isn't the price of oil the result of so much supply that's

out there that exceeds demand so the price goes down. it's not even the economic reality, what is going on beyond that to effect the price of oil. >> so first there was no doubt that there was less growth and demand because of china. and there's a multiply. so they demand less and they are very inefficient users of energy so they use a lot more energy to produce one unit than we do. on the supply side there's a dramatic change but it doesn't justify oil in the 20's and 30's. something else has happened that people have talked about. the paradigm, the operating modalities. in the old days you could count on them to cut production. they realized that's a terrible idea for them. >> rose: they also realize they needed the money now. they have economic they need to spend money on and the way to generate revenue is to sell their oil. >> yes but they realize

something much more important. which is every time they rules the output they lost their market share in iran. so anyone else would gain -- >> rose: what would be the impact of iranian oil coming to the market. >> it makes oil knowing the market more volatile and more uncertain because of the supply coming up. having said that you have massive supply destruction. i think the biggest irony in the old days if i had come in here and told you oil prices had come down you say that's great for the economy. today you tell people oil prices have come down and they start getting worried about what's going to happen with the economy. >> rose: oil prices going down. that means i can buy gas, gasoline places below $2, $1.50 and maybe even $1 in some places. why doesn't that give me more consumable income, where i can buy more products, more consumer demand and accelerate the profit

of corporate america. >> so first it does unambiguously. we are better off if we are consumers of energy. you are not spending that windfall. now the reason why you're not doing that. one is that you realize this time around the u.s. is not just a consumer energy but it's a producer of energy. so the net impact for the economy as a whole is not going to be as good. second, you're seeing the market being very unstable so you want to be more risk averse. you want to have more precautionary favors. you're not going out and spending it because the world has become more uncertain. third if you're in europe you're worried about deflation, you're worried prices will come down any place. so you can buy the same goods cheaper in the future. >> rose: what does it for like a country like russia. >> there are a few countries

that are going to have huge difficulties managing this because they don't have high reserves because of too much theft in nigeria russia -- the oldest trick in the book is charlie if you have problems at home. >> rose: create problems overseas. >> because that unifies. >> rose: and it detracts attentions from the problems at home. >> so those three countries we have to keep an eye on because they're going to find it difficult to cope with more lower volatile oil prices. >> rose: who are the best economies in the world today. if you are the u.s. >> so the u.s. is -- >> rose: compare it to china where they are trying to go through this huge transformation from an exporting economy to consumer demand economy. >> yes. so the jowz has a few advantages that other countries don't have starting with on you

entrepreneurial. they are out growing faster than china. >> rose: you see a lot of american multinationals what they can do to pick up the slack for china in india. >> you see a lot of indians going back from india than the united states. >> rose: that's been happening for a while. >> people believe there's some around. this is more true. i wouldn't give up on china. i think people mistook uncharacteristic policies for something much bigger. the reality is china is navigating a very difficult transition. it's going from being a teenager to an adult called a middle income transition. few countries have done it and no country has done it without the occasional slippage. we shouldn't extrapolate this is the end of the chinese miracle because i think they would continue growing but at 5 to 6%. >> rose: how much does you're owe to european central bank.

>> a lot. >> rose: he said -- >> the minute he said i'll do whatever it takes and believe me it will work. >> rose: he signaled to the rest of you're we're not going to let greece go -- >> i was in the room in 2012. i was listening to him and he said that. i wanted to define it because he put the whole prestige of a central bank with a printing press in the basement and said to the markets, don't bet against me because i will do whatever it takes, and it's going to work. i thought that was critical in saving the euro zone. >> rose: it saved there's no doubt about it. >> it saved but think of it as seeking the euro zone out of the intensive care and moved it to a hospital room. it feels better. there's no longer the fever, no longer the threat that it will

die. it cannot go out as yet. >> rose: you wrote a piece on friday in the "new york times" outlining the economic challenges for the presidential the next president.ver might be part of the conversation you have now. how do you look and face the economic future and the challenges of making a fiscal policy work. >> right. >> rose: what else. >> i think that's actually a sad thing that the debate on what is needed has been overwhelmed by national security issue and lots of other things. as important as they are, they shouldn't cry about the discussion on the economy. >> rose: is there a lot of difference in the republican candidates what they say they want to do about taxes other than whether you like a flat tax or not. >> that's a tragedy, we don't know enough what they will do and we certainly don't know enough how they're going to deal with congress. it's really important for us as citizens to have some feel as to howe're going to navigate the pot. right now we are basically

relying on the fed. we believe the fed is going to save us over and over again. if you talk to officials they're not comfortable. >> rose: was it wrong to raise interest rates. >> no. had i been there i would have done it. i would have done it earlier to tell you the truth. i would have done it in the spring when both domestic indicators and global indicators were flashing. >> rose: back to the rates have been raised, does that have an impact on the global economy today. whatever we're going through, does that policy have any negative impact. >> there has been a short term negative impact but it's inevitable and we need to get it out of the way. when you deal with financial markets the last thing you want with financial markets to do is dictate what the federal reserve should do and that's what financial markets have been doing. believing that the fed is their best friend forever, their bff. every time we've had some instability, the market put enormous pressure on the fed to

be more accommodating. that is not good for the system and i think it's important for the fed to conduct economic policy based on a much broader set of indicators and not just markets. >> rose: here's what i think you would do. suppose you were advising the presidential candidate, you have to figure out a way to articulate a pro growth economic policy. you have to figure out how you can make the institutions that you can influence work. and so we figure out what it is that will create growth in america. whether it's education, whether it's technology or whether it's encouraging entrepreneurship, in terms of being able to make the economy to have an incentive to be innovative, all of that is what you would be urge a candidate to do. >> i would but i would call it

inclusive growth. >> rose: what does inclusive mean. >> inclusive growth means that the benefits of growth don't go to smart parts of society, it's an income and equality issue. >> rose: 99% issue. >> correct. if you look at the numbers. >> rose: absolutely. you just saw a report about the extraordinary fact the people have as much money as the bottom half of the population. it's stunning. >> it's getting worse. >> rose: what can we do about that. >> delivering growth is the most important thing. >> rose: period. >> inclusive growth. >> rose: inclusive means what in this case. growth across the population. >> first of all we have a tax system for example that benefits hedge funds and private equity firms because it taxes carried interest. >> rose: okay. >> if you look at the tax system there's lot of stuff that's actually not just anti-growth but anti-growth and anti-income

stream. we can fix that. secondly, investing in what helps production as opposed to what helps finance helps income distribution in a big way. thirdly, we have to deal with certain issues that are difficult. if we don't deal with them today it will be a lot worse. student loans. we have a major problem coming down the pike. if we don't do something about it today. >> rose: what about other entitlement issues? >> i also put that. the one thing i would say to the presidential candidate, it's about the quest for growth, inclusive growth and it's about being comprehensive in a policy approach. right. you don't need to know every single step for your first four years or even eight years but what you do need to know is what you're going to do for the first 200 days. there's a lot of clarity what needs to be done. >> rose: do you think that you see economics for the prism

of investing. your whole life had been for the most part investment officers at harvard. >> i have the advantage and disadvantage of having come to this world late. i was 40 years old when i moved from the public sector for 15 years to the finance. so i came, i didn't grow up, i grew up in the policy world and academia and then i came to the investment world. so i've always -- >> rose: most influencing. >> i think all three. i think the intersection of policy, economics and markets is really important. and what's interesting is most people are comfortable in one or two of these circles. it's the circles that dictate what happens on a daily basis. >> rose: market policy private. >> and economics. >> rose: economics. >> right. what economics tells you, what policy makers can do. >> rose: let's hope so. let's take market. the stock market since the

beginning of the age down by what, 50% from the middle of 2018. >> so far this year. >> rose: so if you look at that, 8% from the highest point last year, 8% from january 1st. >> from the 1st. >> rose: is that a reflection of our economy or is that a reflection of something else. >> it's a reflection of something else. it's a reflection of the fact that we started out having borrowed finance returns from the future. we've been borrowing from the future waiting for us to validate it. so we decoupled between fundamentals that are down here and financial parts that are up here. for good reason. the bet was if your 401(k) goes up, your investment goes up, you can go spend it. when companies see you spend it, they'll invest more. the next thing you know -- >> rose: they'll hire more. >> hire more. you generate more income. but people aren't that silly.

they realize this is just a financial engineering and they want to see policies that really deal with the economy. >> rose: but look at china's market. the financial markets in china reflect their economy or not. or is it. more about the number of people who came to the market and how they handle their investments. >> so china made the same mistake we made with housing. we decided that homeownership was a social benefit. so with homeownership -- >> rose: and value never went down. >> value went up and up and we created a whole industry that facilitated people. >> rose: china. they had enough in the market -- >> but the government before that believed the more people get involved in the stock market, the more they have a9£ direct stake in a market-based economy, the more, the easier it will be. and just like we went too far with housing, they went too far

with the stock market and they've got a bubble on their hands. >> rose: how is your life now. >> i love it. i think i'm very privileged to be able to combine both family and professional issues and i'm just, you know, i feel very lucky. i realize that's not something that many other people can do and i feel every single day i feel very grateful i'm able to do that. >> rose: i'm glad to have you. the only game in 20u7b, central bank and avoiding the next slaps. mohamed a. el-erian. back in a moment. stay with us. >> rose: tung chee-hwa is here, the executive council of hong kong. he was the first to hold the role after the transfer of sovereignty from hong kong to the people's people's republic. john kerry is traveling to china on tuesday. he will be meeting president xi

jinping for the nuclear test in north korea as well as the increasing touches in the south china sea. i am pleased to have tung chee-hwa back at this table to talk about china. welcome. it's great to have you here. >> thank you. thank you for having me. >> rose: let's talk first about the chinese economy and then talk about chinese american relationships and china, as we just know, relationship with iran with a nuclear deal now, china is there meeting with president rouhani and they're having conversations and clearly china is the player on the world stage. but first the economy because everybody's concerned about the economy. how bad is it, how good is it. what's changed and will they be able to implement the vision of changing china's economy from an export economy to a domestic demand economy. >> well, charlie, you know, it

needs to be looked at this way. after 30 odd years of growing at 10% it is clearly understood it cannot go on like this. they devise a new normal and they start to follow new normal and this is what's happening today. the economy is now being transformed from being overly export on investment and on cheap labor to one that is relying on innovation, technology to one that's relying on consumption and on the service sector industry. >> rose: bubbles in the chinese economy, real estate for example. >> there is serious bubble economy in the real estate in the second and third tiers but not in plays like shanghai and beijing. >> rose: they developed

places outside of beijing and shanghai. >> that's right. you need economy to grow in a healthy way in order for the surplus capacity. of course china's challenges as it goes through this new normal which by the way is doing quite well. >> rose: the new normal is going to grow between -- >> 7%. that's a new normal. and the figures came out last year for the end of last year. it was really what we expected 6 to 7%. the important is for instance job creation. the government budgeted for 10 million jobs a year growth, it turned out to be 12 million jobs. and the other thing which is very interesting, very important is the household income still growing. it's about seven and-a-half per year for quite a number of years. and hence that maybe it is being created which is driving the

consumption. so you see the service sector economy now for the first time gone beyond 50% of the gdp of the economic development, the industry, architecture and service sector now is at the top. >> rose: china house a saving economy. does it have more of a consumption economy. >> it's beginning to have more consumption economy. china's savings rate continues to be very high. about 50% of gdp about which 20% is corporate and the other 30%. >> rose: is part of that because there's no social safety net. >> to start with, chinese people like saving. in hong kong savings rate is 30%. so we like to save generally but of course that is the other reason why the savings rate tends to be higher each time. >> rose: chinese government, because of the way it's run, i mean the president can pretty much say this is our policy. you got a standing committee and

they can make decisions as to how much stimulus they ought to be for the economy. and almost any other major move. the economy is so big now it has to be the right policy to move the economy. but they pretty much do what they want, yes? i think it will be done tomorrow. >> let me put it this way. the one thing i'm very impressed for the last 30 or 40 years following china's development. is the really incredible ability for the chinese leadership to craft complicated economic or geopolitical policies. and then having crafted it, make it happen, make it happen step by step by step. so over the last 30 odd years of reform and opening up, you see them doing these things. of course they are, there were

mistakes made. but by and large it was really very very successful. >> rose: do you agree with those who say primarily what the leadership does wants to achiever and make sure they protect the power of the party. >> no, no. they want to create, they want to build a new modern nation, you know. >> rose: with a long history. >> they would like very much by 2049 which is the funding of national, the people's republic of china hundred year anniversary centennial, they will hope by then china will be, china would have entered the ranks of the developed nations. >> rose: so 2049 is the target date? >> yes. >> rose: 2049. china will be a full fledged member with all the rights and privileges of being there.

>> no. just having the conditions and everything. >> rose: here's the question. >> yes. >> rose: what are the impediments to that? >> well, there are many rose: i'll give you two,t. environmental and corruption. those are high priorities on the part of the president. >> yes. well, on these points, on the question on environment. of course china has made a major commitment, major international commitment in the paris climate change meeting december last year. and to turn the reliance of energy based on the renewable energy, that is now being done. it's a huge huge effort by china to do this. it's not only a commitment to the international community but people in china demands it because it is important to

health, to environmental protection. and there's a huge effort now going on. in fact, climate change and the investment and the study on renewable energy is one of the huge economy, you see. and so it will benefit china as china moves on. and on the corruption side which you just mentioned earlier on, i never seen determination as i see right now in fighting corruption. and many times -- >> rose: there are high level officials being put on trial and put in jail. >> that's right. >> rose: came from a huge power base especially in the national security field. >> the depth and width of which is enormous. and i think china, the leadership is termed to --

determined to clear out the country to a rule base law base. >> rose: rule of law base. >> rule of law base country. >> rose: does xi jinping have support of the standing committee and the people who are in charge of china and the policies he enacted in which in many cases more authoritarian. i mean, he has judgment from outsiders and more power into the presidency. >> i think you need to look at it this way. the western press often speculate on this power with his accumulation power. the fact is that, you know, he has leadership style which is very persuasive, very reasonable and understand what people are concerned about.

people are concerned about their livelihood, about corruption. >> rose: freedom. >> of course freedom. and democracy. but you know, china -- today china is enjoying more democracy and more freedom than they ever did before. it needs to be measured. >> rose: how far it's come. >> not only how far to come but the need for the importance of the stable environment for the country to develop very happenedly. >> rose: well your president and others in china frequently make the point that no democracy's created over night. >> that's right. >> rose: including this one. on the other hand you need to see clear progress. >> and i think the most important thing that democracy means a whole lot of things to different people but the most important are the people who is

being government. are they happy and poll after poll it shows -- >> rose: because they are more prosperous. >> because they are prosperous and have more hope for the future and things are moving very well. >> rose: it's true in the west we can't simply assume our definition of democracy is a definition that should be adhered to by different cultures and different places around the world. >> exactly. because we have different culture, different history, you know. but many things are similar. for instance accountability of the government officials, the transparency. it's being done. you can look at this, it's improving all the time coming through very well very nice. >> rose: if you don't do that there's a weakness at the core. >> that's right. you just have to do it. you just have to do it. >> rose: so you think he's more popular today than he was when he assumed the presidency. >> definitely. >> rose: when you look at

china and its relationship, what is china doing in the south china sea. certainly causing a lot of concern among the neighbors. >> i think the neighbors, i think the history of the south china sea, we look at the islands. go back to president roosevelt's activities. he called for cairo meeting just before the end of the second world war and out lined what the nations should do on territory. the point was made that all the territories taken away from the nations that japan or germany had occupied should be given back. and in that decoration south china sea islands were defined as territory of china. it was clearly defined as that. so from chinese point of view, it is not only from long history

of china. >> rose: from the american point of view and point of view of your neighbors. they see it very differently as you know. >> they see it somewhat differently. what china has done is despite the strong feelings of historic rights, china have not been assertive, they have not been aggressive. because of the 50 eyelets or whatever you call them, over 30 of them, only chinese have eight, and filipinos have eight and the rest are the other countries in the south china sea. if china was very assertive they would have taken the islands back but they haven't done that. all they have said is let's find a peaceful way out. >> rose: what would be a definition of a way out. on the part of china. >> on the part of china is. >> rose: definition of on the way out would be what.

>> there's an ongoing discussion within china, you know. and there's some code of conduct of the freedom of the delegation. there's also some ways china has suggested as to how these disputes may be managed and settled. you see. there are these discussions ongoing. >> rose: let's talk about two countries, north korea and iran. what is the chinese attitude about north korea. you have a long border. you worry about people coming across the border and destabling china clearly not to worry. on the other hand you're not thrilled to see the north korean government and the claim they have about missiles and nuclear weapons. so what are you going to do about it? >> well, you know it's very frustrating, okay. it's very frustrating. i think we all want to see a new

korean peninsula. we want to see a korean peninsula at peace. >> rose: the only country that had influence with north korea, you're the only one. when are you going to exercise that influence. >> charlie we have to exercise the influence if we can produce a result. to produce a result we need all the six parties to act. all the six parties must be there to act. charlie there's a back written by bill peri recently. >> rose: the second of defense. >> that's right. he was talking about how close it was almost going to be made in the final month of the clinton administration. and i think we should be visiting all these things. visiting all these things to see whether we can really get everybody together if possible. i think at that time, the deal

was about no more nuclear weapons in north korea. there was two separate korea's and the two separate korea's were quite happy. not quite happy but they were doing all right at that time with that sort of solution. but unfortunately it didn't work out for some reason. >> rose: do you worry about north korean leader? does he seem stable to you? >> well obviously we are concerned because the actions of hydrogen bomb is not very conducive. >> rose: no, it's not conducive. that's a nice word. it's not conducive. to say you're developing the hydrogen bomb is not conducive. you're right.

tehran. the first people is the chinese. what kind of relationship do they want with iran. do they approve of their behavior in the region. >> i think what china would like to do globally. china feels that to the extent it can, china want to be a forceful good in the world. and that china has no specific big agenda other than trying to create win/win situations with tehran, with saudi arabia, with egypt and to create win/win situations for these countries. >> rose: what can china do for these win/win situations. you have a major competition between saudi arabia and iran for maximizing influence in that

region. >> what china is saying is that, you know, solutions will come through the high lock only. this is the only one. and then in relation with tehran, china and saudi arabia, they all have things in common. they produce oil, china needs the oil. china has the ability to develop and build infrastructure. they need infrastructure. it's part of the one bell one road initiative. this is all talked through how we can do it together. infrastructure to help the economy to grow. >> rose: is china using its economic might and economic resources as a wedge of

influence in the middle east. >> i can't stop you looking at it this way. >> rose: i'm asking questions. >> i would say this. china is looking at it. it's a win/win situation. we work together. i can help you, you can help me, you know. and then the second thing most importantly for china is that china in the long run, we had many years of building to go. we need a peaceful world to do this. so china is trying to be forceful good in the world. not take sides but just usher people together. knock heads together and say come on let's find some way because there's always a better way than to war. >> rose: with respect to you, my friend, you know, we all look at the number of occasions in

which china exercises its veto in the security council. >> not that many. not that many. >> rose: what's the status of the u.s. chinese relationship today? is it better today than it was say seven years ago when president obama took office. >> i think it is better. >> rose: you think it is better. >> i think it is better. >> rose: the two presidents get along well. >> the two presidents as far as i can see get along well. as well as what i read. but what i want to say to you china, you know, is this. if you look at the, if you look at the things they have done together, okay, climate change. nobody thought possible that we get away from paris with a climate change agreement. >> rose: even before paris there was some bilateral relationship. >> yes. they work together.

for two years they work together. eventually two of them got together and everybody else followed. because both country recognizes and china recognizes working together with america much better chance of a solution which china also wants. >> rose: you're telling me that is in fact the view of the chinese government. >> yes. >> rose: that when they can work together with the united states to find solutions that works, that's a win/win and it works very well. >> and china as i was saying early on, if you look at america, some person people think china is going to take over america as the leading power in the world or something like that. let me tell you this, okay. you are so fortunate. you have two wonderful neighbors. in the north you have canada and the south you have mexico. you are separated by the rest of the world, the pacific ocean and the atlantic. in china, we have 14 neighbors.

>> rose: in any other place there should be 300,000 students in china. >> we would like you to come. but then you have innovation, science technology. you are leading everywhere. so for china 20% of the world population but only 7% of the arab land. and america is pressed by the natural resources you have. so you have to remember, we've

been very successful in the last 30 years but we have to keep on in order to stay still. >> rose: remember it is not a zero sum world. china, for china to grow should be in our interest. >> yes. if we work together, we can always come, if we work together we will benefit, america will benefit. and it is for that reason we need to work very hard for good u.s. china relations. and i hope america will respond to that. in many of the areas, for instance right now china is now sitting in the afghan reconstruction, okay. we participate in that for self reasons, self interest but also because we want to work together with the united states of america in this very important areas. so you can see the two countries coming together more. the only thing i say to you it's not enough. we got to do a lot more including have 300,000 students

of america to visit china. >> rose: even a proposal by perry and others, therion much more coordination between the two countries so all cultural contradictions are understood. so they understand each other's culture. and that comes from former secretaries of defense saying that. another issue that's of concern to both countries, especially the united states. it is at the top of the list of dialogue which takes police. it's cyber espionage. the u.s. believes it comes from china. the united states believes that the chinese government helps chinese companies. >> well, i think firstly, china

herself is a victim of cyber attacks all the time. >> rose: i wouldn't be surprised. but so is the united states. >> yes. so number two -- >> rose: they don't all come from china. >> yeah. there were some very good meeting last few months ago in washington where special representative came and discussed these issues very comprehensively. and i believe they were agreements, you know, whereby if there were evidences that there were individuals in china that was attacking and taking hacking the americans, the evidence should be let known. and we go after these people. there has always been exchanges

but never been anything very specifically okay let's go after them. and we expect of course. >> rose: are you suggesting that anything that's being done is not coming from the government with the consent of the government? >> well, there are dinchesz. because government to government espionage has been going on from time immemoriam. it's illegal in china and it can be pursued. so it's up to the two to sit down heart to heart with each other trying to find out where it is, how it is and go after it. >> rose: do you think that's happening. >> i think dialogue is going on working on the final details of this thing. i hope it will go on soon. >> rose: this is an economic question.

what is the status of the government's attitude to making sure that state enterprises don't dominate everything. to make more of a level playing field between private and state. >> well china, you know, chinese people they are very entrepreneurial. like the americans okay. you give them just a bit of space they start doing things. and in china today, because of the digital economy, because of the internet economy, the private citizens are just everywhere in the economy, okay. today 60% of gdp of the country is already being produced by the private sector. and the number is going very rapidly because of the digital economy. and you will see this grow more and more as time goes on.

it's what's happening is really incredible, you know. i wish, i wish you come to china once every six months or so and see what's happening. it's not just ali baba, it's a whole other company. >> rose: it's a pleasure to have you at the table again. thank you for joining us. see you next time. captioning sponsored by rose communications captioned by media access group at wgbh cess.wgbh.org

on tomorrow's pbs newshour democrats square off

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