 All right, good afternoon everybody. You having a good time here in Tianjin this year? Let's give them let's give the weft people a big hand Yeah, we're doing a really great job I'm sure a lot of you have been to a lot of these panels and they're very interesting very colorful and You know there's a lot of variety in them We're gonna offer you a little bit of a different experience today because you're all gonna be on TV Okay, we're gonna do our discussion, but we're actually going to edit it and rebroadcast it on CNBC Asia Following weekend and if you're interested you can tune in find out when you can see yourself We will do some close-ups of you like they do at sporting events and game shows and that sort of thing How many of you have been part of a TV? Audience before have maybe half of you. Yeah quite a few of you very experienced a lot of you haven't so I'm just gonna give you a 30 second primer here We need your we need your help to sort of make it really really Organized tidy and look really neat on television. Okay, so It's going to be an hour program and it'll have three breaks So we'll do like a few of 15 minutes take a break 15 minutes more like 13 But whatever and then do a final segment on the program before we wrap it up So each break what I do to get some advertisements or promos in is we kind of End the discussion and then I'll turn to you and I'll go We'll be right back with more of this great program from Tin Jin And when you hear me do something like that and go kind of nuts then that's when you need to clap Okay, because on the TV they pull out and they see all of you going Like that like the price is right. Okay, so we're gonna practice that just once here. 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All right, we're gonna roll some tape as we say in TV even though we haven't used tape for 15 years We're gonna introduce our topic and our panelists and we're gonna jump right into it. Okay. Enjoy yourselves Call them the re-emerging markets Just over a year ago the Federal Reserve's taper tantrum and concerns of a slowdown in China pushed investors to exit emerging markets Brazil, India, Indonesia, South Africa and Turkey were dubbed the fragile five But these economies took heed to implement reforms and confidence has since returned Positive sentiment in the global markets has also helped but just how sustainable is this rebound? Over the next hour we discuss and debate the prospects of these re-emerging markets with our panel of experts Arcady Diver Kovic, Deputy Prime Minister of Russia Ashraf Selman Egyptian Investment Minister Zhu Min, Deputy Managing Director of the International Monetary Fund Harvard University Professor Kenneth Rogoff and Victor Chu, Chairman and CEO of China focused private equity firm First Eastern Investment Group This is the CNBC debate Re-emerging markets with your host Bernie Lowe And welcome to the CNBC debate on the sidelines of the world economic forum summer Davos 2014 here in Tianjin China I heard something In that introduction I heard Russia I think I'm pretty sure Russia has been in the news for some reason. I can't quite place it, but I'm sure they've been in the news So why don't we start there and then take a journey through the emerging markets deputy prime minister? Welcome to the forum and welcome to the debate. Thank you. Thank you your portfolio. Your job is to manage and guide the economy right oil Gas balls at the real economy. Yeah But with a boss like mr. Putin kind of changed you his mind all the time. He's like making your life really difficult, isn't he? Yes life is much more difficult than before, but I'm sure the news were about olympic games in sochi And those were the great olympic games. I think in in february this year, but now life is more difficult As external environment is not really good for economic development And what is happening now is that? after the situation in ukraine Got into real mess sanctions have been introduced without any ground but have been introduced by United States and european countries those sanctions work as a counterproductive mean to achieve some Results, we don't know which results and sanctions cannot produce any results But what what happens the harm is being done to european economy To global economy and torus's economy as a part of global economy And that Creates huge challenges for us Challenges to find new more reliable partners Then we have in europe and united states challenges to find Technologies that we need to Have sustainable investment process and sustainable growth rates But most importantly the challenge is to stabilize the station at our borders and to stop violence stop fire And get back to normal you say you say that more reliable partners I think you've added an s because essentially you're talking about china everybody else was reliable until this all Until this all came to blows Well partners that stop even coming to russia after Some people from some administration calls them Not to go Well, it's difficult to call them reliable unfortunately, but we are open to Continuing cooperation with all our friends and partners. We have an open economy with relatively low taxes with low import tariffs with decreasing administrative barriers, we have some progress even in the World bank ratings and other informal ratings And we do want our partners to work in russia with russia And this is a message that we are trying to bring here. Okay. I don't want it Of course dwell too much on politics. That's maybe for another panel and other Debate since we're talking about reemerging markets But I do just want to address this before we get right into that With the minister investment from Egypt. Thank you for being here. Thank you Middle east that's another big news topic these days. I mean it must make your life much more challenging You know, you know in terms of attracting investment into Egypt at a time when we don't know what the new middle east landscape is going to look like I think we should the the middle east the whole middle east should be focusing on serious reform because We've seen a lot of reform programs that Had been taking place for the past 10 years, but It lacks a lot of things. It lacks international standards. It lacks Transparency and disclosure on the programs itself. It lacks also Social impacts and it lacks social measures So I think what happens in the in the middle east for the past five years was due to Non-proper reform program that took place in the past ten years And I think the middle east now a lot of countries in the middle east Are undertaking a serious economic reform programs That has to do with social impact and social measures also Which was totally neglected and neglected totally in the past As we have seen a lot of revolution that took place in Tunisia in Egypt and in different part of the world That was due to Reform that took place was not considering at all the social aspects and the social reform So it is important in the middle east to have a serious economic reform parallel with the social reform program And this is very important to be important part of the world as this area has Major consumption and Also, it is important to be a good market for other Advanced part of the world So I think the the key point here is transparency and disclosure and the key point also is The reform of social impacts beside the economic reform. Okay, and the third leg of course to all this victor Is china and there's a reason we're here and we all you know heard You know the premier yesterday talk about the challenges of lie ahead um you know their Opinions about where china is going to end up run the gamut, but I think one thing we've established consensus on is that the You know the the the the go crazy, you know happy days are over I mean the hard work starts now in many ways. Where do you think where is china as a consummate china insider yourself? I think there's still a huge potential in china You know the slower growth but going for more quality Recurrent growth is very consistent with chinese policy and I think they're really you know Putting steps to the to the right direction And if you look around the world, I mean the the scale of uh emerging middle class Is in china is real and it's huge and if one focus on what really drives that middle class no services um healthcare, you know infrastructure Outbound chinese tourists into egypt russia europe is just now amazing. And so I think for for investors Although it's second or third wave, but we are now looking at more and more attractive opportunities Okay, we've laid out some of the issues there before us Ken and ben i'm gonna leave it to you too as uh as economists to draw straws and decide who wants to weigh in On where we're going to take this discussion with what we've said as a as a backstop so far You want to debate among yourselves? Well, I thought for that role I can sleep But let me start with Charging your question the issues about reemerging I would say emerging market has emerged Compared with 30 years ago Emerging market global GDP shares from roughly 28 to today 50 percent In terms of their contribution to global growth from roughly 22 to today 70 percent In terms of a trade From roughly 21 to today 50 percent In terms of investments for 26 percent to 65 percent today So emerging market obviously Together is the most important economic group in the world today And they will continue Being the emerging economic strengths for the decade to come for the whole world So I don't see why your title is reemerging They are on upside Yes The growth is slowing down We're observing 90 percent's emerging market growth has been slowed down And almost sort of a synchronized growth has slowed down But this is very much related to the business cycle issues Because if you see right after financial crisis The emerging market because they were not ahead by the financial crisis they Go through the stimulus they picked up so they had upside the business cycles with the capital flow in And they really overheated in different degrees Now they are gradually on the down cycle side But we observe they'll be working hard to sort of stabilize themselves We we see the situation has been improved Right Yeah, but obviously they're not advancing economy yet challenge it remains right I feel a lot more comfortable in having heard the Statistics and min is a numbers cruncher without peer. I mean obviously numbers are impressive, but why why do we Why do I find myself always talking daily day in and day out about what the feds going to do? And when they're going to finally raise rates a year out or Five quarters, what is it my problem? Well, first I'll say it is a little strange that in this world We're geopolitical uncertainty seems to have increased and we've talked about russia the middle east And yet, you know the oil price doesn't move. It's like a dead body and the you know volatility in general is very low So I think and yet if people just think there's a chance that Interest rates will go up in march instead of in june. That's a crisis in the markets. That's that's a Something I want to start what zhumin said. I mean, I don't Know that it's all a business cycle. I know you've given a lot of speeches and made the points I'm about to make but let me make them here You know, there's been some backsliding and reform in some countries And maybe that's part of the business cycle where things are going really well and you backtrack But you could look at brazil. You could look at india. You could look at turkey around the world Where I would say, you know as things got better partly on the back of chinese growth bidding up commodity prices and exports as things got better They, you know did more populist policies That's really a deeper concern about emerging markets because they also need to reequilibrate that I think there's important change in what is happening in emerging market society I don't think jim onil could imagine that he introduced the bricks Concept that we'll have the bank of bricks At some point and I don't think anyone could imagine that but now we do have Bricks bank already what but this is just a sign the more important thing is that While initially Emerging markets were developing Based on their relationships with Developed countries now more and more ties trading investment ties in between the site Within the site of emerging markets between russia and china Within china and africa brazil and africa and and and other ties like like that and this what drives further growth of of those countries not just Relationships with developed markets. Okay, we've set the stage here. Then we're going to take our first break We'll be back in about just a little less than a minute. We'll continue the chat We'll actually kind of bear down and make a differentiation between Emerging economies, but we'll try not to ask the question. Are they reemerging otherwise? We'll get scolded by dr. Jew again. We'll be right back with more of the cnbc debate Good crowd very very good. They're pros already. Look at that now. We can book them for every tv debate Exactly, okay, do we actually have to wait or can we Oh, okay Who wants to pick it up here? We've that was sort of a stage setter victor do you want to Kick it off. Sure. Okay. I'll come to you. Okay And welcome back to the cnbc debate. We're kind of trying to determine, you know after the uh, the hyper cycle or the mega cycle In commodities is over and maybe the hyper growth rates of the Past maybe just that thing of the past in the annals of history. Where do we head next with the e m emerging Market space and we set the stage in the previous segment Uh, victor and we've everybody kind of weighed in which you know, we know that emerging markets are not gone Don't write them off right and we've actually seen that, you know that Middle latter part of last year market money started to sort of sweep out They're worried about excesses forming once again They were gone money was gone for half a year and then it started trickle back and then hence we sort of coined that term reemerging so We're what's the next thing to watch out for what's the next big thing that occupies Your mind. I think we have to look at what are the possibilities that something think may go wrong now, obviously there are the geopolitical risks, but more than that. I think we have Different type of social risks in different types of societies We have the difficulty with infectious disease I mean the ebolas of the world and different strain of SARS may really, you know, um, put us back Many steps these are things which are not really think through and I don't think Globally, we're ready for another major attack of Of a serious strength of SARS And we also I think need to work aggressively on the governance of brain clinical trials of these drugs are much more advanced than our existing timetable And the other thing which I think my learning frame from russia has just mentioned Is very interesting now different blocks are now emerging within the emerging markets I think you have china in russia now working a lot more closer And we are now trying to bring a lot more european SMEs into asia to take advantage of the rising middle class I'm trying to bring A lot more chinese companies into japan and japanese companies into china again despite the Sometimes difficulties in the politics, but people to people exchange Business business. I think that's a huge opportunity to mean, you know what you said earlier Soothed a lot of people's minds, you know about where we are in the world You like to use the oil prices example, you know if geo politics is so bad that why are things so stable in many ways And I started to get worried I started to get worried when victor was talking about we can't handle another SARS like You know outbreak, but then he ended on how people to people versus government to government can maybe save the way Can you weigh in? Yeah, I would say we probably want to divide the risk into two type of things When it's a tail risk geopolitical risk like ebola is type of risk and isis is type of thing So it's one thing I think everybody gotta be very careful to deal with that Another issue is particularly for emerging markets As I say when emerging markets on the way to the advanced economy status There's a many challenges hurdles in the short term It's obviously clearly how all that manager the soft landing to go smoothly and On their gross path Which a few things very important the first issue rebuild the fiscal and a policy buffer Record 2008 the emerging market dealing well because they had a lot of buffer at that time All the buffer is gone. I think this is the most important thing So because that I think the most important challenge for emerging market is Don't overuse monetary policy or fiscal policy on stimulating sites Because we forecast the global the emerging market Grows for this year is roughly 4.6 percent, which is very much closer. It's a potential growth rate So you want to push the growth the sustainability? You need to do the surprise side. You need the structure reforms If you overuse the demand side policies, you will run into another hot landing I think this is very important Obviously one concern for the emerging market in their mind is a whole fed access to the non-conventionary monetary policy There are a few things a whole fed operate is this whole market response to it because The repress issues liquidity issues interest volatility issues But the key issue for emerging markets is still you have to build a macro buffer to prepare yourself For the things to come. I think those are the most important things Ken who has who's got the mix perfect In terms of you know being an ace in the hole when it comes to structural and using fiscal Policy with prudence and responsibility If I give an answer that I will curse that country to have a financial crisis the next year So, I mean it's I think coming out of the financial crisis There are very few countries that really are in imbalance because many of the advanced countries have very low super low interest rates And it's absolutely true that now in some of the emerging markets Inflation has actually gotten way above what they're aiming for that's a big trend movement in emerging markets because they stimulated We're reluctant to to pull it out So give me a little longer and maybe I'll think of you know some specific island country that's got it quite right But there's a sort of a tough moment Nobody's talking about you know having the golden touch at the moment Nobody's talking about that. You know you just raised the word that nobody it's not in vogue It's not in fashion to talk about anymore and that's inflation. I mean if it was You wouldn't have central banks, you know throwing money around like there was no tomorrow minister I think you you you you're fidgeting you you must be you must have something to weigh in on this issue Inflation is it with us actually? I agree with him totally but the Middle East has an inflation problem and managing inflation is Something scary in the reform programs of these countries and I think most of the Middle East countries now Hating a double-digit inflation figure which is which means that We are acting on a negative interest rate all the time So it is something that hinder gross and hinder Definitely the reform program And I think that's why a lot of people now Especially the the advanced economy and the big economies like the states China and Big economies in the far east are looking and focusing on Africa a lot because the coming development phase is Africa because People are trying to help Africa in in in a mode of development in order to have Big market there in order to have these are more of a pre-emerging markets And they need that just a push to be other markets to absorb more products and to absorb More services from the big economies. So I I totally agree that inflation is A cornerstone that should should be managed very proper within these reforms of the Middle East now Right. Victor is inflation something that can really come back Come up on our you know behind us and catch us Well, I think the longer The QE stays obviously the biggest the risk down the road. I think the difficulty is now The reemergence is still quite fragile In in in many parts of the world you can't really take QE away quickly But I I am I am worried but I I think the You know the other risks we are really talking about is is regional conflicts, too I think you know when when one travels around the region the emerging markets It seems to me that the leaders are very much aware of the kind of challenges and the policy Initiative they need to implement I mean, but they can only do it in a backdrop of peace stability and prosperity And I think that is something which is lacking in the near-term horizon We can't say for sure an investor that you know five years down There's there's no good me any trouble. I just want to make a facetious comment apropos of that You feel like in Europe they can only do a policy if there's a crisis instead of if it's calm, but but not we've come Well, I'm talking about you know, I know I know I I'm looking at the contrast with uh here One of the things that dominate The international policy now is the prevalence of domestic policy interests European governments, the US government now Any government is looking at its own society and thinking about elections and unfortunately, uh, that creates A negative environment for international politics and for international agreements at this point at least this this year and we hope that politicians can be more responsible around the world and Look also at the ways to create more stable international environment In turn This will have a positive effect on the domestic environment, but not vice versa. You're you're fantasizing No, you're completely There's no government in the world that's going to ignore elections and do what's really right for the country But people should understand that if they will not have good external environment Then they will not achieve domestic results the positive domestic results And sometimes people forget about this. I think Many of our governments made mistakes in international politics. The United States. I think made mistakes in the Middle East Creating house in countries like Egypt or Libya or Syria is not a good way to To establish democracy and good economic environment In the region and we can count mistakes from all the sides. I'm not excluding our countries. Well, maybe we also made some mistakes, but again, this is about prioritizing international stability over short term domestic policy interests Minister you're nodding there Your country's in a very very tough role, you know, it's a 90 million people and you're always being asked to broker peace agreements and sort of be a Doe between sort of a middle part and you've got problems of your own. I mean, why should you have to deal with their But we we have conducted actually a serious reform program Since the last revolution on 30s of June and I think People started to understand that there is no way out to be isolated from the international market People started to believe that If they want to improve quality of life and if they want to decrease poverty and if they want to work on Unemployment rates, which is now hitting 14 percent in Egypt, which is very high for the first time People started to understand that we have to be part of the global economy And I think with by the new president elected soon three months ago, they started to have Some sort of dream that reform is a must and they started to join hands And we have example a very good example of that Financing the new swiss canal corridor by local money from egyptian saving. So that was a good example of joining hands To see reform and to see higher quality of life Now, I think the coming area in the coming period in egypt will be more stable and will be targeting more Reform and better quality of life. Okay minister. Thank you for that on that No, take another break that be back very very quickly. We're going to really bring it down to the people level When we come across we talk a lot about structural reforms as if it's some sort of a you know, sort of an ether or a conceptual thing That's floating out there in cyberspace, but it is very very real We're going to talk about empowering people and actually encouraging domestic consumption and balancing economies when the cnbc debate continues right after this Hey Halfway there Let's talk about like approachable things next. Okay, we'll do the Consumption sort of what we'll translate structure Structural reform into actual models You know something Okay, are you all enjoying this? Are you learning something? I hope so. Don't everybody speak at once All right, we good. Okay Thanks for staying with us one of the sort of the Subjects or subtopics that we we were tasked with addressing Today as in we talked we've talked about it in some in sort of overarching academic terms, but that is How do you boost the ability of people to participate in the economy? How do you enfranchise? You know people who might be disenfranchised or haven't really boarded The train yet. Let's take that up and sort of bring it to the people level We haven't heard from our two economists in a little while particularly Men you you know, you gave the numbers which make it sound like the emerging markets on a Statistical basis They should be just jumping in piles of cash right now, but the people you know the bulk of the people aren't there yet So how how can we do it? Well, I think you raise the very important issues on the people level So the first issue is a job I think an employment rate In average in the emerging markets still way high in the particularly in quite a few countries in latin americans You know or others So create a job for the people is still the most important issues But then you come to the reform on the pension systems on the labor market issues on the health care on the education Systems to enable people to find the job. I think those are also important issues But things you talk about people talk about sort of for Money and the wealth income distribution obviously is another most important issues because in the past to grow An income inequality is really the major killer for the emerging market move way ahead to the advanced economy So have the proper policy ensure the growth The fruit of economic activity to be shared by all the peoples I think that this is the most important policy and the big lessons we've ever learned in the past 30 years What's that model? What's that model professor? I mean, what is what what what we we're guessing we're human beings, you know Nobody's ever gotten it right Well, I mean, let's say a couple things first of all in the broad picture if we looked at it as a world as opposed to individual country This has been a fantastic period for having Inequality reduced there are hundreds of millions of people in russian india who've come out of poverty And so I think you know, it's within countries That it's not as true and part of that's from globalization that if you're in europe It is just not easy because the asians are doing very well. They work very hard They don't have you know the short work weeks in some of the european countries So that's that's certainly that's certainly a factor that that overstates it I I don't think in the rich countries, there's much way around some change in the tax system to try to try to put right Do we text text policy obviously helps for example The vat Which is heavily laid on the ordinary people Because the consumer pay more and the poor people obviously spend more money on the food on the daily living things So they pay more tax So aggressively aggressive income tax obviously will helps on those issues and expenditure fiscal policy is also important The money is spent on You know helping that poor people to get an education to get them on the job or training education medical All those things that helps a lot But the the macro policy do help On on this incoming and distribution issues as well Minister, yeah, please I just want to just please weigh in we don't hear we don't even talk these days about You know what the play the the role of the russian people the play to the russian people or in terms of domestic policy Empowering the people is because you know the the media and the news is dominated by external Factors it must it must bother you it must be quite disturbing disappointing in many ways Simple and standard answers to to that question If you want to empower people you need to have lower taxes not substituting vat with Progressive income tax but to have lower taxes and lower government spending you should leave More money to people and let them decide what to do with their own money how to save for pensions how to ensure themselves In terms of medical insurance and things like that What you need to spend on is education if you want to empower people and education that spends During the whole life cycle not just Not just one sort of education all ahs need exactly and if you want to empower people You should Create facilities where people choose what to do rather than decide for people so the Conceptual answer is to move from paternalistic society with a high government intervention into people decision-making to Society where people decide more what to do rather than government decide And this is what we are trying to do in russia. It's difficult, right? We are always thinking about risks what will happen during the transition period from the current model to the Better model transition period is the most difficult period since there are some downside risks in any transformation any structural transformation, but We do have uniform income tax for instance 13 percent income tax and we believe it's good for Job creation to create incentives for people to work more Not to be afraid that extra income will be taken by the state right and We believe that this decision brought very positive results for the russian economy. Are you a tea party or a republican? I'm russian. Uh-huh. Wow You know paul ryan quite well, don't you? Fascinating what what if we just he fall south youth It's not like we follow his youth. Uh-huh. He falls south. Yeah, that's a nice tax rate. Can I move there? Do you do you accept? Yeah. Do you accept immigration? Min, yes, it sounds like a model. I mean at least on paper, doesn't it? Look at that kind of a tax rate that kind of a burden on people should work. Yeah, people leaving that A lot of Practically meaning for fiscal and the monetary policy and to help people as well I think we do see all the country of these cases in the various countries as well. Yeah, yeah minister, how do you Your country has gone through so much. I mean the uprising has created legions more that are technically classified as poverty You know with the new president, you know with the new leader, hopefully things will will turn around But I mean it's lurching in so many different directions in such a short In in such a short time frame I think before I focus on on the country itself I just want to highlight on the emerging market structural adjustments and the structural reforms It has to do more than tax reform Subsidy in the in the budget of the emerging market is a major component And I think this is eliminating the competitive advantage of competing in the international market And I think it is time for serious reform in such a matter It is time to to start removing subsidy in a way that does not affect social Public but to but emerging market should act very serious on subsidy. It is a very important part of the structural reform Going back to Egypt itself We've undertaken now a structural adjustment program and a tax reform program Our tax rate was unified 20 percent and we increased the tax rate to 25 Progressively to 30 maximum and I think also we've we've done Reform on the area of real estate tax and also in the value added tax Which is important to increase the the budget resources on the other side of being touching The subsidy and we've removed 40 percent of the subsidy of oil and and natural gas Because we need to reflect the real prices in the market and by reflecting the real prices We'll be able to give The industry itself The market liberalized mechanisms in order to face and compete internationally and locally So I think also for emerging market not only tax reform is part of the budget Of the of the physical consolidation, but it is Subsidy is a major component also in the physical consolidation of the emerging markets Victor, you know we whenever we talk about China we always talk from macro right like government led On down but in terms of how the people are faring, you know, I mean the statistics might be lie What's actually happening in the country as somebody with you know, uh, you know fingers in so many different pies We you know property investment, uh, you know transport the whole consumer theme are things I mean do they need to work on that side a little bit. I think What makes a society successful really depend on the context of that particular society I think China is moving really in the right direction because now the buzzword is You know try to battle inequality and the you know anti-corruption campaign is all part and parcel of that I think the I look at some studies in America that if we just look at income level alone is really we're missing the point if tomorrow Income doubles in America. I mean the the happiness of society have no change at all because of the inequality, you know There's a correlation between inequality And and public health for example, right? So if you just have income going up, but the gaps are still there. It doesn't help with the general happiness So I think there are many stakeholders in this different society in china We're moving from a lower income to hopefully a middle income And I think the infrastructure helping the rule to come to urban area But also building safety nets nationwide. That's very important In a high income society like hong kong and singapore, obviously the culture of philanthropy And the private sector willing to chip in is very important But most importantly, I think participatory politics Is important in whatever form. All right, I mean different society manifests different challenges But that's very important people need to feel that they are participating in a whole whole game Okay on that note another quick break and we'll come back and we'll get some final thoughts from all our participants as the Great cnbc debate winds up after this. We'll be right back Okay, bear with us folks. We all have some audio issues which we need to sort out here Did you say something wrong again? As soon as I started saying that income inequality is not necessarily rising worldwide My my shut off which I must be you know vestiges of being at harvard that I wasn't politically correct Okay, welcome back. This is the final segment of the cnbc debate here at the world economic forum And we some of the things we broach today and some of the discussion topics I mean seemingly a little bit academic, but you know, we we agree that you know, there's no perfect example No poster kid or child or whatever There's no You know people or people governments or governments. So we talked about structural forms versus central banks bank policies You know the the politics of it all as long as we're around they're always going to be with us and then we veered toward domestic consumption in abling people and I thought it was quite interesting Um men that A word which at the beginning of the year seemed to be the buzzword because I remember the world economic forum In davos at the start of the year in the winter And so many people sit inequality is going to be a very defining factor and talking point This year and here we are you know getting into the fourth quarter of the year and it's still An issue but then again, we never thought things would be fixed in nine months. Did we doctor? Well, inequality is a serious issues not only for advancing economy, but also for emerging market, uh, particularly on Is a concern on the And I would say fighting for inequality probably is much more tougher better to fight for growth And or even for fighter for poverty alleviation Yeah, because if you move into the the way on the market driven the economy, right the market Create inequality by the market mechanism So you do need the macro policies and you do need things to try to Ensure there's a proper distribution of things going on to come up with the market mechanism, which Is a no clear model so far I think in the different stage in the in the different countries they try different things for example In us particularly in roseville in after a great finish of great Depressions uses all place policies to improve the inequality in a dramatic way Which paved the way for the quite long term growth for the us, you know for the quite periods And different countries in the differences do need a different policy to do these things I would say the good news is in today, particularly in emerging market. All the people understand If you're looking for the latin american case Why will you call the middle class trap? I mean fundamental issue is a Productivity issues, but in the political issue is income inequality issue, right The starting thing we found is in the latin american countries Today the per capita GDP ratio in term of a us per capita GDP ratio Is a bit lower their share in term of us per capita GDP ratio 50 years ago So in 50 years they had a lot of growth that created a lot of wealth But in terms of the catch up to the us per capita GDP They move backwards And there are many things institutional capacity is a key issue income Inequality is a big issue I think the emerging market needs to particularly pay attention on those issues on the way to move ahead Speaking of what you say You say middle income trap Is that is that the same concept as the as middle income gap or the You know suggestion that you know super growth is slowing down so dramatically that you have a big Proportion of society that can't even make it into Into into middle income. I mean that's been debated in turn in the china context, right professor I mean it's sort of famously when countries reach a level of eight or 10,000 level per capita They look like they're going to take over the world Even if they're small, they look like they're going to do really well Very few countries come out of that and china is you know moving towards it And it's a question and some of the things you see in china, which can be a problem You know, you get in pollution, for example, you get increasing urbanization Political changes and also just as you get richer the simpler things you've done and you have to do other things So it's it's a big question mark whether china can you know go past that That the chinese government over the past 30 years has just been amazing and managing the economy Every time it looks impossible. They managed to do it But then the challenges are just stunning especially right now when Things really do need to slow down the growth needs to come down from where it was Pollution needs to come down Credit growth needs to come down electricity consumption needs to come down everything It's not easy to manage that very few countries have done that smoothly Victor since we're right in the I know you asked me Does everything need to slow down at the same time I I think I agree that china has a great potential but the challenge are immense right, I think the we're seeing a case where the leadership is consolidating their the ability to deliver right and Once they reach that decision There's a huge potential if it get it right And in the last 30 years the track record has been very impressive If with the ability to execute They can take china to a next stage now that includes many things we talk about, you know structure, but also Maybe social and political changes, you know, which fits into chinese own Characteristics in the china may not have to go the same way as Russia or america china may have to find the way that That is suits china, but there has to be changes that take us to another leap from Now my short answer is that my my I'm very cautiously optimistic that at least some parts of china We'll get to that from the lower income to middle income to a high income Now china Whether is lucky or unfortunate we have first second and third world's combined in one So some part of the country will get there faster But we we are Seeing today a huge opportunity that lies ahead in the next 10 years if the leadership Stay the course with the political world to get it right right minister Well, first, I think that eliminating poverty is more important than eliminating inequality than fighting inequality And the second thing and I think it's it's a more universal answer We need to support technological development technological breakthroughs that make Things cheaper and more accessible to people like Mobile telecommunications and internet might Think much more accessible to people information is Now universal goods that can be used by almost anyone And the role of the government is to make sure that technologies are being disseminated Around the world and within the countries like we are trying to provide Access to broadband internet across russia as a whole not just in mosco and san pittesburg And I think it's it's true around the world Governments should work on Making sure that goods and services are accessible to people Independent or almost independent on the income level at least those things that are basic Like health primary education information Not saying about water electricity and things like that And by doing that, I think we can bring Countries as a whole to the next level and minister Working on poverty is much more important because We've seen that the level of poverty anywhere, especially in emerging market is becoming very high and Most of the government that are working on the reform programs Do not really put such measure into consideration unless they have very high figure and then when we have a crisis We start to think about quality and then we started to think about upheavalling and improving the level of poverty And I think poverty is a big threat specifically in africa and some of the emerging market It is big spread for other revolutions in the in the area and it is big also risk for governments to manage the economy and To go through a reform program properly Um, we're actually talking about the same thing. Aren't we when you talk about technological innovation and enabling people to you know, enjoy What is in the world and not Go without we're actually talking about poverty alleviation of the same thing. Correct. Yes. And again, that's a universal way to do that We we all need to stimulate innovations to get the world out of poverty We have no other choice And this is the real priority education science education and innovation and going this way we can Do much more than Redistributing income that is already created by somebody else. Right. Yeah, I think you you raise absolutely important issues I think the all the emerging market beyond the china beyond the russian beyond the egypt Have to change that growth model. I mean the cheap labor Growth model no longer valid the commodity x for model no longer valid today, right? And they can still do it, but now you cannot heavily on those issues As well So for the emerging market, it's really the key issues when you move the ladder You need to focus on the people I think invest in the people Founder people job Make the people more Innovational and ensure the productivity of the people increase constantly I think that's really the key models to move forward How do you but man what you're saying there is In some in some cases at odds with reality, you know, you know this whole I mean, I know it's been repeated again and again I'll just say it one more time But this whole china equals the world's factory theme has gone away Right because they're you know that we've seen a hollowing out of the lowest end of manufacturing the skill sets haven't kept pace I mean is that the people's fault is as the government given them ample opportunity that they haven't taken China still have a ample labor force and has a huge market But the moving along Obviously, you will see the further china moving the low-tech labor intensive industry out to the other country Compared to China have a have more than $6,000 per capita GDP today with a few Decades ago or of a few hundred obvious the labor cost is very different Right, you have to have a different strategy and you have to use the Labor force in a very different way I think in that sense focus on the service sectors or focus on the high-tech industries focus on More technology in border industries will fit the Chinese need better But I would only caution that obviously every country wants to do that They look at the globalizing world and if actually china were hyper successful at that and I wish it is It would have a huge effect on the advanced countries and a different set of people would be complaining about You know what was happening. It's uh, there's there's a sense in which we live in a world Which overall uh as angus deedon has said it's better to be alive than any other time in history And we're getting progressively richer and it is sort of inequality and one country moving above above the other I mean clearly education is not just important for what you produce I'm in the business but we think that for quality of life for how people feel about themselves and you know Sort of sort of changing notions of what productivity is But it's I mean it's not necessarily so easy to have one prescription that everybody can do because if we all do it It doesn't accomplish as much, right? I'm going to finish up our discussion today Uh, if you don't mind gentlemen back With dr. Jue because he kind of started this going remember I asked we you know, he took issue With the theme today and that's reemerging markets be questioned mark, you know, is it sustainable? He said well, I you know, that's a that's a dumb topic bernie. Why you shouldn't it wasn't that in the first place okay, dr. Jue Look how many people there are in the world and we talk in a certain utopian sense About, you know, everybody doing well focusing on services and and all that but ultimately Is it something of a zero-sum game? I mean can everybody be happy at the same time considering the fact that We've got demographics in polar opposites. We've got developed markets where the net the end demand is strongest Getting older and older the u.s. Is an exception I know that and then the emerging markets with birth rates that are higher than what their income or wage increases couldn't I don't think it's a zero-sum game I think that the past a few decades emerging market produced good quality low cost products commodities for the whole world Which is lower the price in rich people's daily life, which is fantastic But if you're looking for the the the futures and they also have to move So for example, they will lead the global Consumption as well So bring all the more aggregate demand to the whole world, which will help Emerging market as well I think you will see the dynamics between the emerging market and the advancing economy and among emerging Emerging markets themselves in the next decade to come. Okay, dr. Jue on that. No, thank you very much for your thoughts gentlemen, dr Jumin dr. Rogoff from harvard minister ashraf selman from Egypt. Thank you very much and minister It's arcadie, right? arcadie For a govage Did I get that right? Not too bad, right? Very good. Yeah. I had a warm-up session on the t on the t on t with you today And victor, thank you very much for your participation and thank you for being with us for the cnbc debate until next time We'll see you again. Bye. Bye Thanks folks for being with us for the hour We are going to clear out right away. There's a 30 minute session with a very famous way of wall Micro blogger. I think most of you might know who she is. So we ask that as many of you as possible stay put. Okay. Thanks again Mr. Thank you very much. Okay