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tv   [untitled]    April 11, 2012 8:30pm-9:00pm EDT

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the end of the lead story. in the sun to listen to the sound. below a welcome to cross talk on people of rising and surpassing this is one way to describe china's truly amazing ascent on the international stage but when success comes challenges is the u.s. ready to be second best to china and as china becomes number one pullet demanded a change of the rules that have benefited the west for decades even centuries. the change in the sand. across china is number one i'm joined by even alone in orlando he is director of the china center at roland's college and author of chinese international investments in hong kong we go to martin henniker he is an associate director at the tight group and in chicago we have joshua lipman he's an associate with the boston consulting group
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and has done prior research on the chinese currency i gentlemen this is cross-eyed it means you can jump in anytime you want martin if i go to you in hong kong first the international monetary fund says that china will equal the u.s. economy in two thousand and sixteen but others are even saying that the chinese economy is already surpassed the american one how do you look at it. yes so you're saying that the most optimistic viewpoint is there are bad the chinese economy may already be traders and lies and the united states won so the i'm entirely sure where it is but certainly from our point of view the perspective of europe and from the united states and europe is generally that still china is lacking far behind and we think that's clearly not true and apart from the i.m.f. we had a study by the economist released just now saying was a lie the i.m.f. bad china really surpassing the u.s. as the number one economy including sixteen in the purchasing power parity terms in two thousand and eighteen in nominal g.d.p.
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too and so we would think if they have not already overtaken the u.s. which is quite possible then to the and sixteen for those nations that's probably the latest date so clearly from an investor's perspective you better look at china gaining some exposure in some way from a geo political perspective clearly it's. gaining influence quite strongly and it's probably a good saying that this is happening you know a train in russia can criticize a lot in the west but then as we all know there are different perspectives on this and. countries often say that the western interests are stabilizing the world and not the other way around so generally yes china really probably number one so and we think it's a good step ok joshua new york are you nodding your disagreeing ok so. you can react to what mara just got. yeah martin i mean i think no one can deny the rapid growth the china sea in the last few years but the fact of the matter is that just
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in nominal g.d.p. terms the u.s. has more than double china now just around fifteen trillion u.s. dollars with china around six trillion u.s. dollars i don't see i don't see that imbalance changing anytime soon my firm has done some research on a product to me and you know there are a lot of factors contributing to manufacturing and jobs and we back to the u.s. from china i think this is all contribute to you know a slowing the growth of china and my research i want to make clear that my research is separate i'm not here representing my firm but the the research that i've seen and the evidence i've seen all point to you know china's growth slowing and so i mean just a bit even if seven u.s. and then even seven percent that's that sterling growth isn't it seven percent or economy that size. and even if i met i mean again there is only an astronaut is going ok mark you want to jump in there i want to go to allow go ahead mark you
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want to hear just you know the so just wherever there's so much of what shine as opposed to snow in your time i mean just looking at the most recent indicators that p.m.i. index is strong fifty three point one. fifty three point three the economy still is really quite strong and as you say it's going to many multiples of what's a restless doing and it's it's not a theory i mean just on the present projected growth even in the nominee figures if anything like it. is going to continue then said fred china real whatever united states in two thousand and eighteen it's not an opinion stressed if somebody has a saying in a yes well china's economy is just about to collapse there would be you know one thing that will stop it but if nothing fundamentally changes the fact that china really all are taking the united states so if you're saying is the right time so i was in like some hedge fund manager their property is going to collapse and that may be different but otherwise i'm sorry that's just not the reality of the way the way things are going on the property just briefly are we why this the prices are
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quite high but that's one sector and other sectors are very very strong in china and beating really. being a great challenge for the rest economies manufacturing which is going down quite rapidly ok and frankly you know i wonder what accounts for the differences here because i mean i came across a report that said within a decade it's possible the chinese economy be twice the size of the u.s. and we hear from joshua michael you disagree with my money on china but saying it's much smaller i mean why the different numbers so i actually think our focus has been misdirected because looking. g.d.p. or purchasing power parity g.d.p. simply means that the overall economy is larger in china and with a billion people a billion plus people of course the economy's going to be large. in a country with three hundred million people such as the united states but i think what we really need to focus on is the ability of china to sustain it for
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a prolonged period of time and to achieve the quality of life their people and the united states have if you look at the g.d.p. per capita in the united states it's significantly higher than that of china and will continue to be saw for years to come furthermore if we look at other quality of life indicators such as pollution political risk control of corruption those are all the issues there china still struggling with in this simply focus on g.d.p. i think is misdirected well i'm joshua if i go to you i mean this not just focusing on g.d.p. i mean we're looking at different sectors the economy in china that are excel meanwhile they're dying in the united states you just don't have to look at g.d.p. . yeah. one hundred percent you don't know what it's going to be capita g.d.p. per capita in the us is ten times greater than g.d.p.
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per capita in china and if even my point is that even if you look at g.d.p. overall i still think the trying to has a long way to go no no denying that china is growing a lot it is but it has a long way to go before it can get close to even think you are passing the us ok cliff at martley. let me think ok here it's going to. go ahead yeah i would say six years isn't deadline you know even if you are saying you know i mean even if you are saying the property market may slow down if you actually know for sure that there is the former comptroller of the united states the guy who is in charge of auditing the books of the u.s. government david walker has been saying earlier this year that the u.s. is now where greece was two years ago in terms of instead crisis or even you know if you're saying that some property slowdown in china you know the u.s. debt problem is also just the dollar to explode that will probably all grow as big as somewhat or so again you know that this is
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a model of the world control that china will all of the west i find it quite funny because again just on the present number six here there's not really their products which are. going to. bring up. so i don't even bring up the fact of the property situation in china but that's definitely one factor contributing to a decrease in the rate of growth in china i think additionally you have to think about the pressures on trying to use currency and the advantage the cost advantage of leverage that china has had is going to be decreasing with the appreciation of the currency and with the increase in demand for wages by chinese workers my firm came out with statistics that says you know by two thousand and sixteen chinese coastal workers may only have a ten to fifteen percent cost advantage of. labor against us workers and with that kind of advantage in factoring in things like transportation costs and inventory costs you're almost not seeing any benefit to producing things in china it's.
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like if i go to jail i mean that's one of the reasons why the chinese are going to start getting more of their own domestic economy because they have domestic consumption i mean we may not have the cutting edge for exports in the in the near future whatever that means but they have a huge domestic market if they can work on that's a huge advantage yeah i mean that i think there's no question about it but i think also when we look at the growth numbers we have to be very careful because if we grow from one to two we grow by one hundred percent if we grow from one hundred to one hundred one we grow by one percent in both cases we've added one unit of value but in one case we've grown one hundred percent and the other to the other place we're growing one percent so i think we have to take that into account on the china is starting at a much lower place now in terms of china's investment china is now looking to invest not only in china but really throughout the world in africa and in latin america in areas that were traditionally the backyard of the united states and
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they're seeking resources and technologies to continue to fuel the economic growth ok it's a range of new kind of jumped ahead of me i want to do the second part of the program but martin i think i'd go to you i mean try to with three trillion dollars in hard currency reserves they're turning into the lender of the most favored lender right now because trying to can loan money without conditionality the i.m.f. is criticized for. yeah and that's really one of the reason as of us just mentioned that china is so successful in other countries because you know where they're willing to lend their don't always force the countries lebanon i.m.f. or for as close as hospitals and schools before the money is flowing and then as a condition that just goes back to repay loans from a very international banks way of you know lend money or purpose and of fifteen percent to twenty percent rate but don't want to take the risk but that's a bit of a political story but basically if you're looking at the effect that china has had enough of a damn good of elements there since it really moved in there quite substantially to
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or to put a bill of infrastructure there i am in addition to obviously getting the raw materials of it has had really quite a significant development in fact i don't think anybody can deny this and that's really also i hope we would sing for china the asian economies in general they're the exports to the emerging markets and the integration with other emerging markets are growing because the us and also as we see if you are is going deeper into a better crisis but on one other point it will just mention you are saying well the g.d.p. per capita in the u.s. is good ten times higher than china on the other end china supposed to still money have a cost of wind out of ten to fifteen percent that doesn't really seem to have thought out only perhaps if you assume there was exports go back to see you as a very far away but in the future that's going to be less and less the case as that of our supplier to go to other emerging markets ok joining a jump in here we're going to short break after lunch break we continue our discussion and china is number one state department.
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you. will. if you want to go over will. thank you. elaine. wealthy british scientists are. sometimes the tireless. market prajna. around. find out what's really happening to the global economy with mike's cause or there are no holds barred look at the global financial
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headlines tune into cars a report. you know sometimes you see a story and it seems so you think you understand it and then something else and you hear or see some other part of it and realize that everything is ok. i'm charging welcome to the big picture.
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the emission free the good imitation three per cent store charges free the arrangement free. free. free the old free blog loaded video for your media projects a free media. can still. plenty. plenty of profit we're talking about the continued rise of china. led to a slump the end. ok when before we went to the break you wanted to respond to martin's rapid fire comments about the chinese economy go right ahead
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. yeah i think we're we were talking about china being able to lend countries some of their foreign reserves actually some of the reason the chinese are actually able to lend money to other countries is because the u.s. has allowed it to explore. under strict under most favored nation status and allowed the currency to continue to be low so china was able to accumulate trillions of dollars of reserves as a result of this. trade policy one of the things that we have to realize is we're talking about the chinese american economy is that we really cannot the carport these two economies these two economies are sharing a bed and the success of one will affect the success of the other ok but if we could you know if i could say what you want to mean but the ills of the united states and its economy in the euro zone that's something that china doesn't want to get itself installed in come on let's you know it's the international order has
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been established by washington the washington consensus in europe and it's been that way for centuries the chinese don't like it and they want to move away from it and why not go ahead well in fact i'm not so sure they want to move away from and i think the the current system in place to trade system that we have in place as they're actually the one that has allowed china to cross because it has allowed china to export sometimes at the expense of western europe and american companies who couldn't compete. to sell or reason couldn't compete on cheap labor who couldn't compete on the cheap currency frankly . the united states and europe have had policies that allow developing countries to export unrestricted with limited me on spirits very made. very make one hundred dollars see i mean martin if i can go to you it sounds like we might even social that you know china is doing well because the americans allow them to do well. very
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it's a tricky question i mean to some extent it is true i would say that the currency has been undervalued i mean it's appreciating slowly but it's still under value which is also why probably that they're going to be number one for us in purchasing power adjusted terms and then followed. by a buys a nominal one and. it's tricky to say the iraq war how to interpret history here if the americans and europeans just were so generous and of good will to all the neighbors to allow this to happen what exactly were the reason i mean i would just say today look at today what is a reality. is that china has become more powerful whatever exactly the reasons would have been maybe they just use the shore as they did is the. so-called red you know that's the reason why china is controlling their us not because they only have the only ones who have them but they were the only ones to be bothered to give up those talks and all this hard you know poisoning polluting nobody else wanted to do
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it so you can also argue that way by clearly now china is the major economy or soon to be the remnant is also in the valley and from an investor's perspective that means you you find good investment opportunity is also there and since you briefly talk about the property and they also want to touch on banks because that's one thing they china and saying the banking system is about to completely collapse because of property for one thing to bear in mind that the chinese banks are the highest reserve requirement ratio in the world almost only levanon it's still above relevant and they do pretty well and it was a very good reason for his later enterprise what the reason is because they really have very rigid interest. martin is always encyclopedic of this program josh respond. because i mean what it means when you get on the reverse if you think the u.s. house to you is going to settle into second place ok i mean i'm an american you're an american we have you and also i mean we've been brought up it's always number
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one but in our lifetime that's going to change. so yeah i think there are a few points here first on mearns point about the chinese currency undervaluation i think that's certainly a case on so everyone agrees that order of magnitude is a question but i think most people would agree in the order of thirty to forty percent that you know the chinese renminbi is undervalued and that's something that actually has changed in the last few years so i wouldn't say that the u.s. and europe have just been stagnant on those policies i mean since two thousand and five when china decoupled its currency from fixed page to the u.s. dollar china's been steadily appreciating its currency over twenty percent in the last few years so i think this is going to be one factor that contributes to the decline in china's exports and slows the rate of growth and to peter your point about how the u.s. will deal i mean i think the u.s. is coming to terms of coming to grips with the fact that it is no longer the only
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superpower in the world and it will have to share that power but i think there are a lot of i just i mean every time sure you can read the following the republicans say ok and that you've been following the republican campaign i don't get any sense from the republican party that you know that anyone should be more than number one the united states is always going to be that place and particularly matelot military spending even if i go to you is one of the interesting things that analogy i came across in researching this program is that you know right now the united states is kind of like britain after the first world war the u.s. had was the largest economy in the world but britain was still the policeman of the world and fought all these ridiculous wars spend so much money on defense spending wow it sounds kind of like the united states to me in the present i mean the chinese are watching the united states tear itself to pieces ok and the chinese just keep slowly going up and up i mean it's remarkable to watch from a distance. yeah i think the chinese are going through an industrial revolution of sorts in a similar way that the united states has gone through it in the twentieth century taking over the power of europe and europe in in the nineteenth century so i think
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you're right that there is a lot of parallels to be drawn here between the declining power of the united states and the declining powers of europe but let us remember that even after the decline european quality of lives g.d.p. per capita air quality. education level control over corruption are still much much better than most emerging markets so to say that china. only needs the united states to grow is also i think an extreme point of view i believe that china i think there's no i'm just simply by growing internally in the same way that the united states grew internally in the twentieth century ok joshua jump in go ahead. i think there's an important point to make here with meekness peril if you look at. me the us had about forty percent of the factoring exports in the world and so to say that you know that the u.s.
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is in britain's place today i mean the u.s. economy today is relatively strong compared to that and china only has twenty percent of world exports to me that's largely driven by exports so i wouldn't say that you know the u.s. is headed towards decline in the same way that europe may have been after world war two and i think you one made a good point that there are a lot of other factors quality of life and standard of living. that are favorable for developed countries of us is going to maintain or improve ok martin but you know i think you we could spare to say of the last thirty over the last thirty years we're going to martin and the quality of life for the chinese is improved immensely i mean i think we tend to forget what it was like thirty years ago thirty five years ago go ahead martin. that's absolutely right a lot of people have come out of already five percent max and there were three if you go to china you know the living space there and then compare that to you know what kind of housing living standard you can buy in the u.s. but that's because they have more lending doesn't need better education in fact if
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you have you know educated people you know supposedly talking about how the education is much better in america and then in asia for example that's that's a job because they're just looking at the international part they always coming out and proper business education seems to be considerably better in asia and to say that this is not the case you know shows maybe that there's something wrong based education america is a lot of american c. there is still you know we are very very u.s. centric and you just mentioned last thing that republican party isn't raking up to this but one part of the republican party is those ron paul supporters are actually a lot more modest and realizing that their best days and out of their crisis for the u.s. the best case may be very much tenants and other countries you know. stronger and stronger by the united states but if i go back to you in orlando i mean this china grows in other emerging markets they're going to want to see a change of the way the world is run at least economically financially speaking
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because they want to a greater stake ok and we look at these in certain situations like the world bank the i.m.f. i mean this was all post world war two ok we're now we're in post cold war ok we're in the twenty first century now i mean when are those institutions going to balance out more to represent the majority of the people in the world not the americans not the europeans there are small small minority in the world right now in their economies are shrinking relative to the bric countries for example yes i think you're right but the system that is emerge after world war two is the current system of economic order political order so the chinese really in the russians and the brazilians and other emerging markets really have two choices or do they want to participate in the current systems to yield more influence in the system that we currently have or do they want to create new systems based on what. i have i think the chinese are going to try to influence the current system and create
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some new systems for example creating a monetary fund will be able to bail out developing countries and be able to give foreign aid but to simply say that we will shove aside all the systems that we've developed in that you know it seems to me if i get into that and we realize what about replacing the dollar with a fair currency unit for the world i mean that just benefits the united states at the detriment of everyone else in the world everyone. yes well you have to remember that immediately after world war two we did develop an instrumental a that was called special drawing rights as the r.'s and the reason we don't have as the us today is because nobody wanted to use them the dollar has become as good as gold central pated good is we all going to let you go figure you figure of speech ok ok joshua the last word of the group is going to change my point go ahead joshua yeah i think he's made an important point that bretton woods taught us that you
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can't make an artificial currency and at the end of the day people trade what they have and in this economy people have dollars people trade in dollars and that means good news for the u.s. in the short term ok we'll see if the chinese can get rid of them one way or another you guys go way over a lot of time a bank some i guess a day in orlando hong kong and in chicago and base your viewers for watching us here are to see you next time member rostock. ok. download the official auntie how to make a ship join a phone online pod touch from the i choose ops to. launch on sea life on the go. video on demand copies in mind bold calls and r.s.s.
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