 Well, first of all, I would like to welcome everybody to this session on China, US, and Europe. My name is Rich Hangang of China Central Television. You're all on TV, and I was on the phone with one of China's top economic advisors earlier today, and we were talking about this subject matter as well. And he was telling me that Europe as a whole is still the largest economy in the whole world, and US is second and China the third largest economy of the world. If the three of them can get together and be on good terms, then we can basically secure global growth. That's on the economic and trade front. If the three of us can get together on good terms on security issues, then from Syria-related to Iran-related issues, we can basically guarantee world peace. So the top three economies really matter. To kick-start the conversation, I would like to mention the possibility of a new global trade structure. In China, there's very strong indication that China would like to be part of the more advanced trade framework, i.e. the TPP, and we understand that there's a lot of conversation going on between the US and Europe in setting up a free trade agreement between the two. And I think China is open to the possibility of a China-US free trade agreement and possibly a China-Europe free trade agreement. And on that note, if I may invite Deputy Prime Minister of the UK, Mr. Nick Clarke, to share with us his thoughts on this new global trade structure. Sure. First, thank you very much for inviting me onto your panel. I think it's worth just spending 10 seconds reflecting on quite how dramatically the international trade system has changed since the GATT was formed in the aftermath of the Second World War. At that time, the international architecture embodied in the GATT, of course, was entirely dominated by Europe and the United States. And, of course, now we live in a much, much more complex world where power is shifting very dramatically, most dramatically exemplified by the rise of Chinese economic clout. Power has shifted dramatically from the West to the East, and that old order that was reflected in the GATT has become much more dispersed. So I think that's then, in the intervening years, been reflected in a move away from sort of global rules, which were sort of equally binding on everybody, to an ever-accelerating proliferation of bilateral and regional arrangements. So the European Union is a regional arrangement itself. NAFTA, ASEAN, Mercosur, and this has been a huge proliferation of both regional and bilateral agreements. The European Union has just over the last few months signed agreements with Canada, Korea, Japan. So I think we have got two big challenges as you put it moving forward. First, how do we ensure in this increasingly complex web of rules and overlapping agreements, multilateral, plural, bilateral, regional, how do we make sure that the disciplines are there to ensure that everybody abides by the rules they've entered into? Because I think with complexity comes a danger that people live by the rules only by in name, but not in practice. And then I guess the second thing really is this old debate, which has been around for ages, which is, can we make the continuing impulse to big bilateral or regional trade agreements? The European Union and the United States have launched negotiations on what will be by far the biggest bilateral trade agreement ever, the so-called transatlantic trade and investment partnership, which covers about, would cover about half of global GDP. How do we make sure all of that happens without undermining the global multilateral disciplines, which are as important as they are? So I think kind of implementation, doing what we say in the trade system and making sure that regionalism and bilateralism doesn't entirely undermine multilateral disciplines is, I think, a challenge for all of us, but a particular challenge for the United States, the European Union, and for China itself. Mr. Wang Jinlin, chairman of Wanda Group, who is hailed by many magazines and newspapers as the richest men of China, is one of the four most, one of the four runners of Chinese investors overseas who has a lot of investment both in the U.S. and in Europe. So Mr. Wang, are you encouraged by the fact that China might become a beneficiary of the new global trade order as well, having been one of the biggest beneficiaries of the WTO structure over the last 10 years? Well, there's an old Chinese saying, ideal is rich, reality is lacking. I think trade agreements tend to be of that sort. WTO feels like early yesterday we are already talking about new agreements to replace them, TVT or PPT, this and all that. My own view is that as long as there are economically stronger countries and weaker countries, there will be no real equality between economies. The real equal trade relationship does not exist. Because countries are stronger or weaker, therefore trade will be better for some countries than others. So whatever agreements you have, there will be no absolute equality. The second thing is after signing, what if you do not follow? Will there be arbitration? Will that work? Let's look at the EU. You have a fiscal agreement, but many of your member countries fail to implement what do you do? There are disputes at WTO. What about the effect of the decisions of the WTO? I think the issue of equality in trade relations is perhaps an ideal for countries like China. We need to have a clear mind. Whether it's the US agreement or EU agreement, we need to have a clear mind ourselves. We need to focus on our own domestic economy to make sure it's good to reduce the export of primary products, to reduce the imbalance. So that's the most important thing for China. Mr. Blankfein, part of the reason we raise this issue was because we all know that the US has a lot of forward momentum with the economic recovery. The Europe is temporarily away from the deflationary pressures. So while the European American economy are recovering, China has a rich appetite for American and European products. And in turn, the recovery of the American US economy is good for Chinese exports as well. It's a typical women's situation. It always is in trade. Everybody has a stake in the success of the other. So are you encouraged by the scenario? Well, I am. We've come out through a difficult period. I'd say in Europe, you said temporarily out of recession, I think Europe has certainly stabilized when we were here a couple of years ago, and there were even glimmers of this a year ago, the issues about Europe were borderline existential a couple of years ago, and they were very severely pessimistic a year ago. And Europe has stabilized. And I think a lot of terrific work was done by regulators and central bankers. I mean, we did an issue for Spain yesterday and raised $10 billion at 385 for 10 years and could have done $40 billion. So that's something that a year ago would have been astonishing. So I think Europe has stabilized and is poised for growth, although there's a lot of problems to chew through. And you talk about Europe in a bilat as if that were one of the two sides. And Europe, of course, is itself fractured to some extent. And it has governance issues that make things difficult with Brussels versus the national powers. So things aren't easy. But I think a lot of work has been done. And I think people have a lot to do. And people are very focused on that. But people would be well to remember what they thought a year ago, we'd be a year from now. And it's not so bad. So I think that's a sign of support for the world. The US is going to contribute to the world probably at or above trend growth. And again, that's growth that will aid demand in China. But China is also going to contribute. Now a lot of eyes are on China, given the uncertainties at China, whether or not China is up or down 2% around its number has more consequence to global GDP than whether the US is a half a percent either way from its growth. So China, the, you know, China, and the issue surrounding China and the opportunities China and where that comes out is appropriately a very, very big focus on everyone in the world. And if China continues to grow, I get even more optimistic for the US. Listen, the way you think about GDP and growth is the way I sometimes think about when oil is discovered. If oil is discovered anywhere in the world, it's most beneficial for the country that has it. But it's beneficial for everybody because that goes into the supply and the market clearing price of oil for everybody is lowered from what it otherwise would be. The same thing for growth. If China grows, it's great for China and that'll be the principal beneficiary. But those Chinese will buy some goods that originate in America and it'll be good for America too. Any growth in the world is good for everybody in the world. Are you still bullish about China? I thought Goldman Sachs was advising his clients to manage their expectations of the emerging markets. Well, I think both are true. I think, I think we're bullish on China and I think people should manage their expectations of the emerging markets as a reason why people have high returns. If high returns came with the same risks, guess what we'd all be doing? High returns usually accompanied with higher risks and the higher risks are manifest. I think one could think very well that the 21st century may be maybe analogized to the American century or the 20th century. This could be China's century and it would be China's century and they wouldn't own every year. And we've gone through a period of very rapid growth in China and a transition in government. A recognition in China that sustainable growth has to be somewhat lower because if you didn't care about the environment, certain issues, certain sustainability issues, it's much easier to keep those factories going full time and have a 10 percent number. If you want sustainable growth, environmentally safe, producing high jobs and with that focus you're going to have to accept low growth and that's a quite an execution. The plan is in place, I don't know the whole of it, but I know it's an ambitious plan and I think the execution issues are going to be very, very critical and everything won't go well. Mr. Secretary General, the China-Swiss free-feed agreement is already a reality. Are you optimistic that China will end up having a lot of free-feed agreements with the world's most advanced economies? Yes, this can only help. You see, the fact that we haven't been able to put together a multilateral trade agreement in what 12 years by now has been substituted by the fact that you have these rather gigantic trade packages that are being attempted now. Europe and the United States at, you know, 50 percent the world's GDP and 30 percent of the trade and 20 percent of the investment, et cetera. Then you have the TPP and then you did not mention this is going on, this alliance of the Pacific in the Americas where all the countries that have a coast of the Pacific are getting together and they're bringing down protection and they're bringing down, you know, that they're even allowing for the free movement of people that they're going a lot faster than all the other trade negotiations are going. That's also very important. So you do what you can in the sense that if the big, you know, the big bazooka is not possible because of political or timing reasons or because there are too many elections in the horizon, whatever, then you go for these blocks, but these blocks you've got to build them in the way like Lego, you know, they have these little sticking points where they can plug into a bigger edifice and that they have to be consistent with the bigger building of a larger trading agreement. I have to say that, first of all, the more the merrier, second, the more countries commit to the disciplines of an agreement. It is appropriate. And also because we're not just getting free trade agreements, we're getting agreements on procurement, we're getting agreements on technology, we're getting agreements as a byproduct of these others. We're getting agreement on the protection of intellectual property rights, an issue that often comes up when you're talking about China. And you're also talking, I think, a very, very important issue that is going to be taking a lot of our attention going forward, the so-called competitive neutrality, which is a very elegant way of describing state-owned enterprises. And when they go abroad, you know, do they have the same rules that they have the same conditions? So all these things are happening as we speak. All of them are very exciting. All of them are very encouraging. And the more we see China plugged into these processes, the better off we will be. You know, China is or will be very soon the largest economy, whether PPP or no PPP, whatever you do, it has to be a very important part of the solution. It has to be a very important part of the future prosperity of the world. Professor Na, you are one of the world's top experts on international relations. Strategically, how would you see the China, US, Europe idea should we have a summit, annual summit of China, US and Europe and address some of the key challenges of the world? Well, I think the point that you made in introducing our session is correct, that if you have the three largest economies in the world working together, you're going to be much better placed not only to generate growth, but also to deal with problems like financial stability, which we saw can spread and be painful for everybody. Let me push back on one point, though. Why not include the fourth largest economy, Japan? No, there's if you really want to get a mass enough capacity to make sure that you really generate growth and handle financial stability problems, we shouldn't let the politics of relations between China and Japan or other countries interfere with this. We ought to, I'd say yes, yet for women. Well, obviously China and Japan are going through some difficult times or some tension going on, but America is inherently a key to the solution. Isn't it? Well, that's true. I mean, right now we have the problems that have risen out of the Da'iu Senkaku dispute. In October 2012, Secretary of State Clinton sent me and three other former government officials to call on the Prime Ministers of China and of Japan to say that from the American point of view, we wanted to have this put back into the status that was agreed upon by Tanaka and Joe Enlai in the 72 when normalization occurred, which is you don't have to agree where sovereignty is. Just get it off the front burner. Put it on the back of the stove. Let it simmer. And that wisdom of those earlier leaders, which is instead of letting relations between the two largest economies other than Europe be disrupted, the two largest economies in Asia be disrupted by a dispute over five barren islands. For heaven sakes, learn what they learned in 72. Get it off the front of the stove where it might boil over. Put it on the back of the stove. Let it simmer for another generation. That was the message that Hillary Clinton asked us to deliver to both Prime Ministers. I think both sides understood this. The danger is miscalculation. That somebody makes a mistake. The mistake then escalates. And before you know it, both Beijing and Tokyo are caught up beyond where they really intended to be. If Hillary should Hillary become the next U.S. President, since she was the one who came up with the idea of pivot, will the U.S. government be accelerating accelerating his pace in the so-called rebalancing of Asia? Well, rebalancing is not just a military position, as some people think. It really is looking at Asia as the center of growth in the world economy. And frankly, I think the United States wasted the first decade of the 21st century in some of the poorest parts of the world. We should have been focusing on the center of the world's growth, which is in East Asia. And I think Hillary understood that. I think she devoted a great deal of time and attention to that. So I would expect that if you had a Clinton presidency or a Hillary Clinton presidency, you would probably find a good deal of attention to East Asia. And there seems to be a lot of fear, phobia building up once again towards China, against China. There was a recent article on the Economist comparing China to the 1914 Germany. Should we worry about that? There's always worry. I mean, after all, in 1914, if we were sitting here in Davos or any European spa on January 23, 24, and somebody said, what's going to happen this year? We would have said great economic growth, trade relations between Germany and Britain are increasing. Is there a chance of war? Possibly there might be a third Balkan war that will be short. Nothing really big to worry about. Of course, what we wound up with is a war that destroyed Europe's centrality and the whole balance of policy. The world power. So I don't want to say that there's no prospect that an accident or miscalculation could escalate. But I've just written an article on Project Syndicate, say, are we going to visit 1914? And I've said that though I'm a loyal reader of the Economist, I think in this case they're wrong. Now let's go back to China-Europe relations. David Cameron paid a very important visit to Beijing last year and during which he mentioned that the Chinese investment to the UK in the last 18 months has exceeded the total sum of the last 30 years. Exactly how much does the UK need China? Mr. Clark. Oh, I think any open economy such as the United Kingdom and the United Kingdom is is is nothing if it is not and does not remain open, which is why I strongly feel that it's it remains massively in the United Kingdom's interest to remain a full and committed member of the of the European Union, because it is only through the collective clout of the European Union that we can successfully negotiate with economic superpowers such as China. I think United Kingdom, however much I am a proud Brit, we are nonetheless a country of 60 million. And I think we probably speak with greater authority on trade issues when we speak as part of a block of 500 million and consumers and what remains the world's largest borderless single market and the fact that last year talks on a new EU China investment agreement were launched, I think is a very important step forward and I hope it's successful. You're quite right. There's been a complete transformation in the investment levels. They're still quite low though. They're still quite low, but your government was already criticised by the UK media as being overly open to Chinese investment. As I remember there was an article suggesting that the Cameron administration is surrendering sovereignty to China. Look, I think you have to hold these things in balance. There is no future in protectionism, but equally there's no future in not being open about where your values may conflict and clearly there's ongoing discussions about political reform, human rights and so on. And as I said earlier, I think it's really important with each step in this journey that as I think many of us have said is that we don't just sign up to new agreements, but we really do make sure that we adhere to them and that there are disciplines with teeth that make sure that where they're not being applied, you know, people, countries pay a penalty because otherwise I think very quickly this increasing, increasingly complex web of bilateral regional agreements will indeed, as you suggested earlier, become a plaything for the most powerful members of the world trade system. And while of course you can never have complete equality in a trade system, I don't think we should overlook the extraordinary radicalism of the idea of multilateral rules, because it does actually legally at least put the weak on the same footing as the strong. And that's a remarkable thing and I think we discard that principle at all. Mr. Secretary, would you like to comment? Yes, I was going to comment on the US-China discussion, the fact that exactly the opposite seems to be happening because these yearly or, you know, recurrent sessions that started at Halk, et cetera, now are very structured, they're giving rise to very structured agreements, to binding agreements, you know, where there's monitoring and there's their disciplines, et cetera. And I would also say that in the case of very specific procurement agreements, for example, between the United States and China, why do they go to procurement agreements? Well, because the investors in the United States and in Europe were told that if they went to China and established productive capacity there, they would be treated as domestic. That then something called indigenous innovation appeared, which meant that Chinese were being given an edge, okay, especially, and they say, well, this is at the national level, at the federal level, but cities have a different treatment, regions have a different, you have cities of 35 million, you know, so that are larger than some of the European countries. So in a sense, the whole thing about the leveling of the playing field takes time, but these discussions are taking place. I find them increasingly concrete and specific. I think that there's a lot of speechifying because there's a very polarized atmosphere in the United States that's very well known. By the way, the Economist is a British magazine. It's not a U.S. magazine, but that's another matter. It's not written by the British government. Not written by the British government, certainly not. But in terms of the EU and China cooperation, I would say today that China's biggest trading partner, EU's biggest trading partner is China today, because in 10 years, they more than doubled the size of the trade. And so now formalizing, getting into a more structured, more disciplined, it can only help. Why? Because, let's say, it's rough around the edges, okay? But the fundamentals are there. The structure is there. The strength is there. I would say now let's make the edges a little smoother and let's get it over, because everybody is gaining. This is typically a win-win situation. So I would, in that sense, be extremely, you know, pro incorporation of China. And I would move forward. On the other hand, I'm Mexican. It's not a year that has passed. We promoted the NAFTA that we were not being told that we were selling our soul to the Americans. So, you know, being accused that you're giving the sovereignty away is not a new argument. It doesn't happen. We benefited enormously from the free trade agreement that we signed with Canada and the United States. And so will anybody who signs agreements, either regional or and typically, the smaller country has more to gain than the larger country. This is because you get access to a bigger deal. So I take this into consideration when, you know, accusations fly around of saying that you're selling your soul to anybody, I'd say, for heaven's sake. You know, this is only the benefit of the people of any country that signs these agreements. Mr. Wang, if my memory is correct, we had some 64 heads of states and heads of governments visiting China last year in 2013, each bringing with them unprecedented delegations of businessmen. They're all trying to attract Chinese investment in their home countries. I know you have investment. You took over AMC movie theaters in the United States and you bought property hotels and other businesses in the U.K. Between Europe and U.S., which one is more open to you? Which market is more attractive to you? If we compare those two blocks, the U.S. is more open than the EU, but in terms of countries, the U.K. is the most open. The U.S. is very open. However, there is a foreign investors committee. We need their approval. In the U.K., you don't need any approval. So in the U.K., in the last year, we invested about one billion pounds each in over the two we've done. So we... I met Prime Minister Cameron and I said that would increase our investment. I think capital is like that. Wherever it's more open, it goes there. We never get enough nice hotels in Davos. For your information, I'm staying at a hostel, which used to be what the Americans call a psych ward. And I've got colleagues who are staying at former hospitals where they used to treat people with infectious or contagious diseases as well, which is even worse. Would you ever consider building hotels in Davos for us? Davos is perhaps well known for lack of hotels. Four years ago, after returning from Davos, I wrote an article, just one sentence. Coming to Davos is a pain to suffer. Indeed, you pay a lot of money to come to sleep in a very narrow bed. So last year, when Dr Schwab said to me in Dalian, would you be coming again in the winter? I said no. He said what? I said I can't put up with accommodation. He said I guarantee you will give you a good room. I'm in the intercontinental. Indeed, he kept his promise. So I think it's pretty good. But overall, indeed, we need improvement in Davos. To be frank, I did think about a five-star hotel in Davos so that there would be more Chinese coming to Davos. So it might be within this year, in fact, I did think about it. Mr. Wang was pretty lucky. Actually, we were anticipating some difficulties when he was trying to take over the AMC movie theaters because there was some sensitivity about movie theaters. But he was lucky. But there are currently some concerns about a Chinese company who is trying to buy into a U.S. company that makes pork and sausages. So if you were to testify on Capitol Hill in favor of greater openness between China and U.S., what would you say? Well, let's start with the theme that trade is good. Chinese are good owners. Their capital is good. Their investment in the United States brings jobs, just like U.S. dollars invested in the United States brings jobs. And that the benefit of the doubt should be granted. And then anything that's not a risk to the U.S. security or any other consideration that's being guarded through these rules like CFIUS, if it's not otherwise bad then it's good. You shouldn't look for, the United States shouldn't be a validation that you need. You just need to avoid certain areas that all countries would have a security interest in. I'm sure China has the same thing. I'm sure if I wanted to build a big tall hotel next to big radio antennas emanating from the security agencies of China probably wouldn't be able to do that. And if I wanted to take over a strategic business or something that, and I may have a different opinion about what strategic then China would. And you have to abide by those rules. And over time with more trust comes more, transparency comes trust. With trust comes more opportunity. And I think that that's a process. So I think this was looked into. And people, I think some people in China were put off by the fact that there was this process in connection with the Shang Wei acquisition of Smithfield. But I just point out there is a process. The wheels grind exceedingly small and at the end of the day it was approved. So what's the experience on this? Was the experience negative or positive? I think the experience was positive. Over time these things will become easier and not harder. We're still in the blush and it will take a while. Professor Nye, would you like to comment on that? Are we suffering from a trust deficit between China and U.S.? There is a certain degree of trust deficit. But I agree very strongly with what Lloyd Blankfein just said. Chinese direct foreign investment in the U.S. is a plus. There are a few exceptions which relate to security. Just as in China there are exceptions in terms of limits on American direct foreign investment. But in general, CFIUS, the Committee on Foreign Investment in the United States has been pretty good. And in that sense I think the good thing about bringing American investment, I mean Chinese investment in America is if you look back at the 1980s when there was a great mistrust of Japan and trade and what it would do, Japanese factories in the U.S. developed a constituency among American workers for Japanese factories and Japanese companies. Chinese factories in the U.S. can make that same sort of constituency. The more contact we have, the better it's going to be to restore or develop that kind of trust. Thank you. And now I think it's a little bit more complicated than that. And it's not just about security. I think security plays a big role. But the question is, it was difficult enough about doing business in China because it was offered that they would have a level playing field in China. Then it became a contentious matter and that's being sorted out. But the question is when the Chinese invest in the United States or in the U.K. or in Europe, whatever, the question is do they have the same tax treatment? Do the United States they will? By definition, they would have to abide by the local law. But what about the company, the mother company, who is feeding them with the funding, who is feeding them with the technology, who is feeding them with, do they over there do the taxes? Is it a level playing field on taxes? Is there a level playing field on dividends? Do they pay dividends to anybody? You know, shareholders, do they pay dividends to the Ministry of Finance? Well, that's a big issue if they are state-owned. It's not just about state-owned, but state-owned, particularly I would say, the governance of these companies, the regulations are so tough and complex, they are part of the costs doing business in the West. Are the regulations the same so that it generates a level playing field or not, the labor rules? Is this being fed by a company that does not necessarily play by the same labor rules, the same environmental issues? Are they playing by the same environmental rules over there and therefore feeding raw materials or feeding semi-finished products to end consumers in the West, et cetera? What about the disclosure rules, for example? What about, what is an arms-length relationship? How do you define the arms-length relationship between a company in the United States and a company in the UK and a company in China? These issues are more complex. This is why I say that this question of competitive neutrality, which is an elegant way of describing the phenomenon, is going to continue to be an issue because it's not just about the investor physically present in the Western market, but the way in which it connects with the mother company in China that may or may not be subject to the same rules. Can I just add a point on that? I agree with what Anil Kharia said about differences in the trade field, but what I was addressing was direct investment. I think you're right that we need to be able to discuss what is a level playing field in trade and there are real differences which create problems. That's why we're going ahead with TPP with a higher set of standards which we hope someday China will be able to join, but right now the state-owned enterprises make that difficult, as well as the other things you mentioned. But when it comes to direct foreign investment, I think it's largely on a positive side. I'd agree with that distinction. I think one of the reasons why this issue of how do you compare like with like economies which are, in one sense, quite different, particularly the relationship between the state and commercial, semi-commercial operations is because if you look at what's happening in trade policy and trade negotiations generally, we've moved well beyond the old-fashioned haggling over tariffs. We're now talking much more about norms and standards and regulation. In other words, the nitty-gritty by which certain sectors and certain activities are regulated, and that goes to the heart of the relationship between commercial activity and the role of the state. And when you have economies which are composed so differently, it's really important, and we'll need the help of the OECD and other bodies to give us tools to work out how to compare. I mean, you already have this in some parts of policy, the whole issue of anti-dumping and so on. You try and make comparisons of costs in economies which are very different, and it's often a fairly imprecise science. But we're going to have to do more of that with state-run or state-directed companies in the world trade system. You're just somehow going to have to make sure that we compare them on a level playing field with operations that are composed of quite differently. I think we're going to have more and more of that in the future. I would like to open the discussion to the floor now and questions, observations, and the gentleman in the front row. May I ask you to use the microphone as well? We'll probably take a few questions and then we'll ask the panelists to answer all together. My name is Yuva Naidu. I'm a young global leader. I also sit on the U.S. Global Agenda Council at WEF. Professor Naid, few students pass through the halls of Harvard without coming across your paradigm of soft power, hard power, and smart power. And using that framework to the panel, this interplay between economic and military might with the U.S. being a dominant military power, Europe having the legacy of being a significant military power, and China having the resources to develop that. How is that interplay going to impact the rest of the world and link to that being from South Africa? Africa seems to be an interesting playground with one of the highest growth rates. It seems to epitomize the kind of battle between the ideologies with Europe having strong ties going back many years, China with its state-driven model having close ties, and America with multinationals driving it. How is all of this coming to play and who's going to win that race? And I would like to, because when we're talking about China-Europe relations, it's not just about China-U.K. or China-France. As a matter of fact, China is building even stronger ties with more than a dozen central and Eastern European countries as well. Mr. Jerry Schmace, may I ask you to tell us a little bit about what's going on between China and that part of Europe? Hello, I'm from Czech Republic, so from a small country. I think that in our country, I will speak about business more than about the politics because I'm a businessman. I believe that we are more predisposed to do the business in China because we are more adaptive as a small country and behaving humble and be patient in China, which is, I believe, important in China. On the other hand, these reservations that are here mentioned, I believe that they are more like, they are felt more strongly in the small countries because a small country companion with big China is even feeling bigger scarcity than, for example, the U.K. or other things. But I feel that it's changing slightly in the last moments. Mejin? We are connected by the air we breathe, by the dwindling fishing stock, agricultural land, drinking water, resources, the heating planet. After the success of the WTO Bali Accord, whether the members, the WTO members should start thinking about picking up some from the Doha round, perhaps the APAC 2012, where Obama was prioritizing also the liberalization of trade on environmental goods and services. I'm interested to hear from the panelists. Thank you. Thank you. I think this is a very interesting conversation. But if you look at the mega trends as to where the economy is evolving, developing countries and emerging economies have already reached about 50 percent of the world GDP. And all projections for the future show that there will be a shift in equilibrium from the advanced countries to the developing countries. And the demographics also do not support the sustained growth in the advanced countries. So China being the leader of the bunch of the developing and emerging countries, would it like to associate itself with a group which is not a sunrise group, but something else, or would it be better for you to be associated with the countries which are on a secular upward moving curve? Roger Barnett, you got a comment? I would like to ask Mr. Wang if I could have a reservation at his hotel. I think the interdependence of trade and the interdependence between China and the U.S. is critical. As a medium-sized business doing business in China, we just hope the reforms that have been elaborated which are incredibly ambitious occur and like to know the panelists' view on the progress and the execution of that. Any more questions, comments, observations? I'm going to take a question from the iPad, from the Internet as well, while the panelists may choose to answer one or some of the questions that they just raised. Mr. Naim, would you like to start? Let me address two questions that relate to power. One was the question is, should China cast its future with the bricks in the other emerging countries or not? And the argument was that the West is in decline economically and demographically. I think that's a profoundly short-sighted analysis. If you look at demography, the United States is the one rich country which will still have the same ranking in world demographic tables in 2050 that it has today, number three. Number one, which is now China, will no longer be number one. India will be number one. So don't sell short the United States on demography. Also, when China's economy is larger than the United States in total GDP, it will take another 40 or 50 years before China's economy will be equal to the United States in per capita income, whether you use PPP or currency rates. And that is a measure of the sophistication of an economy. So don't assume that Chinese growth, much as I applaud it and welcome it, means that China is passing the United States in overall power, particularly when you then add military power and soft power. And that goes to the other question, which was how does the country use its soft power? Soft power is the ability to get what you want through attraction rather than coercion or payment. And there, the key to the use of soft power for Europe, China, or the United States is to be able to combine hard and soft power in a way that they don't cancel each other out. When the United States invaded Iraq, our use of hard power toppled Saddam Hussein in a matter of weeks. It also was terribly destructive of American soft power. That's an example of how not to combine hard and soft power. I would argue that China faces a similar dilemma in the South China Sea and the East China Sea. If it wants to prevail in Scarborough Shoal and chases the Philippine boats out because it says it's a Chinese sovereign area, it winds up with a shoal with some fish, but it's lost soft power in Manila, which is worth more. So the key to power for all three is going to be to figure out smart power strategies so that your hard and soft power reinforce each other. Right now, if you ask who's doing best on this, I have to think the Europeans are. Indeed, it's a little bit embarrassing for me to say so, but recent public opinion polls show that Britain exceeded the United States in latest soft power rankings by Monaco Magazine and others. Hu Jintao said that China needed to increase its soft power. Xi Jinping has repeated that. They're absolutely right. If your hard power, your economics and military are increasing, you want to become more attractive to your neighbors, not frighten them. So China's right to try to increase its soft power. They're still working on the problem. Let me first say on the demographics that the Mexicans are helping the U.S. get the demographics up there. And this is why the future looks so good. We need more. You're probably going to get it. Let me say a comment on the small countries feeling more scared, but slowly getting more used to it. I think this is what's happening with it, practically everybody. Lloyd Blankfein said, we are in the early stages of puppy love. It's kind of that. If it scares the U.S., why wouldn't it scare a smaller country? And because people ask all sorts of questions, but let me comment on the question of the sunrace and the sunset. I was quite intrigued by the statement. If you just look at the technology, the number of patents, simply the standard of living, whatever, I think it's quite obvious why there's a lot to say for any country in the world trying to partner more and more and more with a country like the United States or the European Union. But specifically, let me mention the question of the environment, which was alluded by our young lady commentator here. I think that's an area, just like this question of the competitive neutrality, where we are going to have to sit down and do a lot better. We are in a collision course with nature. We have to correct the course. We haven't been able to do a lot. Every time we're spending more on attenuation rather than on mitigation. Why? Because more and more the consequences of not having done what we had to do 10 years ago, 15 years ago, 20 years ago. And what is the problem with China? China is multiplying enormously its demands of energy. China is putting online, on a weekly basis, more and more energy plants to satisfy its gargantuan appetite. And what does China have in enormous abundance? It has coal, which happens to be the one very, very tough, you know, fuel for the environment. We believe that in the second half of this century we're going to have to move towards zero emissions based on fossil fuels. So, and today what we're doing is we're moving in practically the opposite direction. Now there's still a couple of generations to undo that or to amortize the cost of investments that we're doing now. But I see that, I don't think that it's easy to say, let's follow Bali with a great Doha agreement. Bali was about trade facilitation. Bali was about saying, don't shoot yourself in the foot and everybody looking at their feet and saying, yeah, yeah, we shouldn't. But that's it. I'm sorry to interrupt you. We didn't make any more progress on, so I think this issue of the environment is going to be a big issue and that the conversion there is going to be a lot more difficult. We have 10 minutes left and I just picked a question from the internet. One of the bloggers from China was asking if China needs to shoulder the same amount of responsibilities as the other world powers do. We'll start from Mr. Klack and the other two gentlemen. I mean, I strongly agree with Joe Nye's assertion that soft power has always been important, but in many ways it becomes increasingly important. It's certainly indispensable for a medium-sized European country such as the United Kingdom. In my view, you cannot exercise soft power other than in cooperation with other countries. That's one of the big divisions, in my view, certainly in the European political debate. We used to divide politicians according to right and left, state and market. Actually, in many ways, the bigger division these days is do you believe in openness and getting your way by working with other countries? Or do you basically think you can somehow turn your back on the outside world and unilaterally impose your will on it? I think the latter is condemned to failure. There is no place where that is more dramatically illustrated than the environmental issue, which is an issue which by definition states and countries, however large and powerful, simply cannot deal with on their own. It is the epitome of a global problem which requires a global response. Of course, we have a very immature institutional framework to deal with these issues. If you compare the institutional frameworks we use to deal with the negotiations which we need to settle globally on the liberalisation of environmental services but also on new environmental disciplines across the world, compared to what we have in the trade field, it's like apples and pear. I think there is a case. I don't want to suggest we spend a huge amount of time staring at our navels and institutions, but I think we have a very immature set of institutions. That's where China could play a very powerful role in actually creating new disciplines, new institutions, because as far as I can make out, there is a very powerful sort of move within the Chinese debate and discussion amongst top decision makers which recognises that China's own prosperity depends on sustainability in the long, the sustainability of resources, the sustainability of the use of resources. So I think if China were to take a greater leadership role on that, that would be a very powerful exercise of soft power in a positive direction. Thank you. Mr Wang, I have a question for you as well. The question goes something like, if you truly believe the Chinese economy will continue to grow at a very high growth rate for another 10, 20 years at 7%, why do you invest so heavily overseas? If you are still bullish about the Chinese property market, why are you buying so much property in Europe and the United States? Before I answer your question, I would like to put forward a question as a Chinese and I'm not very happy at hearing what has been said by the professor. I think that today's debate is an economic debate in nature. We shouldn't really deviate it to politics, but you shouldn't really, in public, to accuse China, and I think this is not a polite. And if you go to China actually listening to what has been said by the 1.3 billion, you would have a different opinion. Well, on your question of whether we should invest in China or abroad, but I would like to say to be frank that we'll have several times over if we invest it inside China, but we have a new target to become a transnational enterprise. So we wouldn't aim at a very high return and so that's why we are going out and invest abroad. If I want to earn the Chinese currency, I would not really come out. And so what, you are not very happy about what has been said by the professor. These sayings about the fleet and the South China Sea question, I think this shouldn't be the topic for today's discussion. I'll tell you, one of the themes that are coming out here, we have to distinguish between outward investment by state-owned enterprises and obviously the chairman here is a private enterprise. He invested in AMC quite successfully. When you're dealing with state-owned enterprises, the question of for a regulating authority is, and we said is obviously security, but it goes beyond security because when you're dealing with state-owned enterprises, you're dealing with, you'd like to know that a competitor in your home country has a commercial motive, not a national motive, and motives are sometimes questioned when the ownership is the state. And by the way, that's not just for China, or European or national companies as well and others. And the other thing that's interesting that comes up, if one enterprise is owned by the state and another enterprise is owned by the state, they have common ownership and have common control. How should we view, even for antitrust rules or even for who controls it, if an energy company buys something in the United States and another energy company, a different SOE, buys it in the United States? For purposes of U.S. regulation, where those U.S. companies, that would be viewed as one enterprise if they're under common control. So this issue of state-owned enterprises is what is the enterprise? If the state-owned oil company is a state-owned bank, does that include every enterprise controlled by the common control, which is the state, and will they act for each other's benefit? Can they deal at arm's length? That's a set of issues also, which is why you have to almost make a mark in line between the activities of private enterprise and state-owned enterprise, which I think is a good segue into another issue based upon regulation. Very hard and goes into also the responsibility of China as well. The responsibility of China obviously extends to participation in environmental issues, things where the expertise and the wealth of China can be supportive, but also there's an issue about exceeding certain national norms in some cases. So for example, where the exceptionality of China creates difficulty. So China, the second largest economy in the world, going on to being the first largest economy in the world, has a managed currency. The largest currency in the world, the largest trader in the world has a managed currency. Now that's appropriate to the needs of China, and the question, the statement will come back, is it anybody's business that China's currency is managed? Well, it's the business of those to whose currencies it's managed against. And so those things have to, things like that have to be sorted out in response to it. Is China wrong for doing that? No. Are the other countries wrong to object? No. They're just hard to reconcile. And so the reconciliation and throwing in with a global system where China's not wrong and doesn't need to be brow-beaten and shouldn't be criticized because it's clearly done what's in its national interest, but at some point China becomes so big that its national interest becomes consistent with the global interest when you're that big. And the global interest may require a kind of a integrated system where an aberrational player that has so much national intervention in its businesses may not fit. So China, of course, is going through reforms and a march towards privatization. We're all excited and enthusiastic about that and the Chinese recognize that that's a way and it's a question of what stage of development they're on. So I'm not suggesting anything that the Chinese don't know themselves. I'm just saying these reforms are very, very key and execution is very important. We pretty much reached the end of the session, but I think we probably have one or two minutes left for a final comment from the panelists. Do you have a final comment to sum up the session? I just want to make sure that Mr. Wang realizes that I was not trying to say anything offensive to China. I was trying to offer useful advice to China when the question was asked to me, how can China increase its soft power? And if you say there's no relationship between politics and economics, unfortunately there is. Economics works within a larger political framework. So please do not feel offended. My advice was intended to be helpful to China and to China's economy. Mr. Secretary General. The reforms announced in the third plan together with the new leadership in place with their backgrounds, with what they've shown so far. I think it's pregnant with promise and also pregnant with the possibilities of a greater, further, broader, deeper level of integration with a world economy that we've had, you know, ever. So I'd say let's all go for it. Let's use the opportunity. There's an opening here. There's a clear opening. Let's use the opening. Let's use all the tools available. And I think the type of dialogue that Lloyd was suggesting that should be had is critical because it's not that anybody is wrong or anybody is deliberately trying to hurt the other party. Everybody is thinking of their own best interest. That in the end is the ultimate mandate of governments. But that has to be mitigated by the fact that the limit of that is the global, the systemic interest. And I think we got a good chance. We should go for it. I think the only thing I would say is that clearly if China, the European Union, and the United States, and maybe, as I think others have suggested, other major powers were to be able to align their strategic interests in the global system as it's termed rather breezily. That would be a very, very good thing. And we just talked about the environment. That's a classic example where if only we could align our interests, we could get a lot done. But I think Lloyd made a very powerful intervention at the end. You can't do that unless you're speaking the same language. You've got to share an idiom first. And that does require to stretch the metaphor a bit. That does require a bit of hard work on the semantics first. So we know what we're all talking about the same kind of thing. And that doesn't mean that the fact that we don't have, that our adjectives and adverbs don't quite fit at the moment, that that's somehow an illegitimate tension. We've just got to be open about the fact that there is a tension there. When you've got different societies and different systems, which have evolved in very different ways, we do, I think, need to be open and tough if we need to be, but civilized with each other about trying to reconcile those things. Otherwise, we won't achieve those strategic goals together, which we can. I think first, whatever economy, U.S., Europe, or China, they're different in culture, systems, and language. But I think differences aren't the most important thing. Cooperation is the most important. Whether it's politicians or business people, we need to leave aside the differences, focus on the well-being of the mankind, increasing income, increasing employment. Let's work together. If we can do that, then that's what Davos has contributed to the world. That's my view.