Below is the complete transcript of Fareed Zakaria’s interview with Chinese Premier Wen Jiabao. The interview was taped September 23, and portions were shown on “Fareed Zakaria GPS” on September 28.
Zakaria: We are now beginning the formal interview, just so everyone realizes.
Wen Jiabao: Before we begin, I would like to let you know that I will use the words from the bottom of my heart to answer your questions, which means that I will tell the truth to all your questions.
I always tell people that sometimes I may not tell what is on my mind, that as long as I speak out what is on my mind, the words are true.
I think you are now interviewing a statesman, and at the same time you are interviewing a statesman in his capacity as a common people.
I prefer dialogue to long-winded speeches, so you can always interrupt me and raise your questions. That would certainly make our dialogue more lively.
Zakaria: I look forward to the chance for this dialogue, and I begin by thanking you for giving us the opportunity and the honor. The first thing I have to ask you, I think is on many people’s minds. What do you think of the current financial crisis affecting the United States, and does it make you think that the American model has many flaws in it that we are just recognizing now?
Wen Jiabao: I took office as the Chinese premier six years ago, and before then I was serving as the vice premier of the country. When I was the vice premier, I experienced another financial crisis but in Asia. And in wake of the Asian financial crisis, China adopted a proactive fiscal policy and decided not to devalue the RMB, the Chinese currency, but doing so we managed to overcome the difficulties. But now the problems in the United States started with the subprime crisis and later on, Fannie Mae and Freddie Mac were involved in the problems, and the Lehman Brothers was in trouble, Merrill Lynch was in trouble, the AIG was in trouble, and such large investment banking companies and insurance companies all encountered systematic problems.
And this has made me feel that this time the crisis that occurred in the United States may have an impact that will affect the whole world. Nonetheless, in face of such a crisis, we must also be aware that today’s world is different from the world that people lived in back in the 1930s.
So this time we should join hands and meet the crisis together. If the financial and economic system in the United States go wrong, then the impact will be felt, not only in this country but also in China, in Asia and in the world at large.
I have noted a host of policies and measures adopted by the U.S. government to prevent an isolated crisis from becoming a systematic one, and I hope that measures and steps they have adopted will pay off. I also hope that these measures and steps will not only save some major U.S. financial companies but also help stabilize the U.S. economy and ensure that the U.S. economy will grow on a balanced course.
Zakaria: When you look at your own economy, as you know, there are many people who now say there will be a significant slowdown of the Chinese economy. There are people predicting that Chinese growth rates may slow to as much as 7 percent. Do you think that will happen? And if it does, I wonder, what do you think the consequences will be in China?
Wen Jiabao: Yes, indeed. China’s economy has been growing at an annual average rate of 9.6 percent for 30 years running. This is a miracle.
Particularly between the year 2003 and 2007, China had enjoyed a double-digit growth for its economy, and at the same time the CPI grew in for less than 2 percent a year. It is fair to say that China has achieved a fairly fast and steady economic growth.
This time, China has been proactive in adopting regulatory measures. Our previous considerations were to prevent a fast-growing economy from becoming overheated and to prevent the faster soaring prices from becoming obvious inflation. But things have changed very fast, and I refer to the sub-prime crisis in the United States and the serious financial turbulences that follow the sub-prime crisis.
And as a result, we have seen a decline in external demand, and China’s domestic demand can hardly be increased in a very significant manner in a short period of time. In this case, it is true that we do have this risk of a slowdown in the Chinese economy.
In this context, we must re-adjust the macroeconomic policy in China in order to adapt ourselves to external changes. What is most important is for us to strike a balance between economic growth, dampening the price rises and bringing inflation under control. And to strike a balance between job creation and dampening inflation and I know it’s very, very difficult to strike a balance in all those areas.
We need to adopt a flexible and prudent macroeconomic policy to adapt to external changes in order to ensure very fast and steady economic growth and at the same time keeping inflation down.
Zakaria: Do you think you can continue to grow if the United States goes into a major recession?
Wen Jiabao: In the first half of this year, or given the statistics for the first eight months of this year, we can see that we have managed to do that.
A possible U.S. economic recession will certainly have an impact on the China economy. As we know that 10 years ago, the China-U.S. trade volume stood at only $102.6 billion U.S., while today the figures soar to $302 billion U.S., actually representing an increase of 1.5-fold. A shrinking of U.S. demand will certainly have an impact on China’s export.
And the U.S. finance is closely connected with the Chinese finance. If anything goes wrong in the U.S. financial sector, we are anxious about the safety and security of Chinese capital.
That’s why in the very beginning I have made it clear that the financial problems in this country not only concerns the interests of the United States but also that of China and the world at large.
Zakaria: There is another sense in which we are interdependent. China is the largest holder of U.S. Treasury bills. By some accounts, they’re worth almost $1 trillion. It makes some Americans uneasy. Can you reassure them that China would never use this status as a weapon in some way?
Wen Jiabao: As I said, we believe that the U.S. real economy is still solidly based. Particularly the high-tech industries and the basic industries. Now, something has gone wrong in the virtual economy, but if this problem is properly addressed, then it is still possible to stabilize the economy in this country.
The Chinese government hopes very much that the U.S. side will be able to stabilize its economy and finance as quickly as possible, and we also hope to see sustained development in the United States as that will benefit China.
Of course, we are concerned about the safety and security of Chinese money here. But we believe that the United States is a credible country and particularly at such difficult times, China has reached out to the United States.
And actually we believe such a helping hand will help stabilize the entire global economy and finance and to prevent a major chaos from occurring in the global economic and financial system. I believe now cooperation is everything.
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