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CNN – Quest Means Business
U.S. and China Agree to Pause Trade War
Robert Lawrence Kuhn, December 3, 2018
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Host
Richard Quest:
Robert Lawrence
Kuhn is a longtime
advisor to
Chinese leaders
and the author of
How China’s
Leaders Think.
How will they be
interpreting the
deal that was done
on Friday?
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Robert Lawrence Kuhn / RLK:
Everybody is pleased that there is
the pause; 90 days is very short,
of course. We have to look at the
short-term, mid-term, and longterm.
Let’s look at the
background to understand where
China is today. This is the 40 th
year, the anniversary, of China’s
reform and opening up. On
December 18 th , 1978, Deng
Xiaoping made his famous
speech, which transformed China
from ideologically driven class
struggle into economic
development. It’s a big deal in
China; there’s a big celebration
coming up.
RLK: President Xi Jinping has said
that the first big goal for China, in
2020, is to have a moderately
prosperous society, specifically to
eliminate all extreme poverty in
China. That means they will have
taken 800 million people out of
poverty. So that’s their overview,
and so they look at the status quo
that they’ve had with America as
something that’s good for both
sides.
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RLK: As for America, we have
critical issues that we have to
deal with: Open markets, IP
protection, forced technology
transfer, cyber security / cyber
theft — there are a lot of issues
on the table.
Quest: The two sides are seeing
Friday’s deal in very different
ways.
RLK: That always happens —
Quest: But the Chinese —
RLK: That’s diplomacy. That’s the
definition — we saw that in the
spy plane collision in 2001; we
saw that in the bombing of the
Yugoslavian embassy in 1999.
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RLK: Both sides had
different
interpretations to suit
their domestic
markets.
Quest: But they’re not
even admitting, or at
least acknowledging,
a 90 days. Let alone
all this business of,
“we’re going to buy
more cars.”
RLK: Well, look. In
China, there is a
debate among
Chinese economists,
what’s good for
China? Many
economists tell me
privately, personally,
one-on-one, like I’m
talking to you right
now, that China
needs to open its
markets, it needs to
have IP protection, it
shouldn’t support
state-owned
enterprises as much.
But they have
internal debate.
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RLK: Those Chinese
economists are pleased to
see this pressure going on,
but China cannot admit
that publicly, because that
undermines the
rejuvenation of China, the
strength of the
government, the national
pride.
RLK: We have to
understand both sides are
speaking to their domestic
audiences, but hopefully,
when they get together
privately, they’ll talk
business.
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Quest: Do you believe that
they can and or will make
the structural changes
necessary to get a longterm
deal, because it seems
as if President Trump is not
going to be satisfied longterm
with agreeing to buy a
few extra bits of this or
that of agriculture.
RLK: I totally agree with
that, and I think that’s
right. We’re going to have
to see. I mean, it’s easy to
predict 10 years in the
future, but not 10 days. So
we’ll see where we go.
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RLK: But the people in
China whom I talk with say
they recognize that this
time is different. And what
they’re going to do is
they’re going to focus on
the changes that they
believe are good for China.
You actually saw that in
some of the
announcements today.
We’re going to do the kinds
of things that help our
domestic economy as well.
That sounds like it’s a play
for their own domestic
audiences — to show
they’re not conceding — but
in fact it is really the case.
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Quest: The U.S.
president talked
about selling
large amounts of
agriculture to the
Chinese, and
tariffs on
automobiles
down from 40%
maybe to 0%.
This is
mercantilist stuff.
This isn’t “trade
deal.”
RLK: Totally
agree with that.
And those are
superficial things,
they make
headlines, they’re
easy to
understand, but
they’re not the
substance of
what’s happening
here.
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Quest: Do you
believe that
there’s a shift in
perspective in this,
this dinner shifted
things?
RLK: I believe
there has been a
shift; I wouldn’t
tell you the dinner
did it, but over
time, there is
recognition that
this time is
different.
Quest: Thank you,
sir. Next time,
when it’s different,
you’ll come back
and tell us.
RLK: Absolutely.
Quest: Okay, good.
Good to see you;
thank you.
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