What can China and the U.S. learn during President Hu’s visit?

Marketplace Staff Jan 18, 2011


STEVE CHIOTAKIS: President Obama today will meet with the Chinese president Hu Jintao at the White House. China’s a huge trading partner, obviously. And it holds hundreds of billions of dollars in U.S. debt. The Chinese president doesn’t visit the states very often, and there are some big economic quandaries to discuss.

Frank Fukuyama is a senior fellow in International Studies at Stanford University in California. He wrote an op-ed this week in the Financial Times about how the U.S. democracy has little to teach China. He’s with us live from Palo Alto. Good morning.

FRANK FUKUYAMA: Good morning.

CHIOTAKIS: I don’t think anyone can dispute that China is weathering the financial downturn quite well, even thriving in it to some extent. Why?

FUKUYAMA: Well I think the big advantage that the Chinese government has is its ability to make big, complex decisions very quickly. And they did this with the financial stimulus in proportion to their overall economy; their stimulus was actually a lot larger than our stimulus. They implemented it quickly, and it got there after just one quarter of downturn, they were back to close to 10 percent growth. And so I think that’s an example of the government’s ability to manage macroeconomic policy in a really remarkable way.

CHIOTAKIS: With little resistance right?

FUKUYAMA: That’s right.

CHIOTAKIS: What lessons can the U.S. learn from the Chinese economy? Is there anything there?

FUKUYAMA: Well, I think that our problem is really that our political system faces these major long term fiscal challenges — the debt — that everyone’s been talking about. But it is so polarized that it is really not able to confront those issues. And I don’t think China has something to teach us. We don’t want to go to that sort of authoritarianism. But we have to realize that we have to get our act together. That’s the really important lesson I think from this.

CHIOTAKIS: Who needs the other more from an economic standpoint?

FUKUYAMA: Well, we’ve both benefited from our mutual co-dependence so to speak, but I would really much rather be a creditor than a debtor. We’ve basically enjoyed the benefits of the relationship in the past, and the bills are going to come due to the tune of almost $2 trillion. And the Chinese as a result, have quite a lot of savings and leverage in future interactions with us.

CHIOTAKIS: What do they go back with? What do they learn from this business do you think?

FUKUYAMA: Well, I think hopefully that they’ll get a message about foreign policy — that they’ve been acting very self-confidently and in some cases quite aggressively and I hope the Obama administration will indicate that we’re watching this and we’re quite concerned.

CHIOTAKIS: Frank Fukuyama, senior fellow at Stanford University in Palo Alto. Thank you Frank.

FUKUYAMA: Thank you very much.

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