Return to Transcripts main page
Quest Means Business
Preview of Davos Forum; Iran Sanctions Lifted; World Markets Still Volatile; Income Inequality Growing; Whatsapp Business Model; Tennis Match Fixing Scandal; Disappearance of Chinese Book Publishers; Chinese Stock Market Problems
Aired January 18, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
(MUSIC PLAYING)
RICHARD QUEST, HOST: No trading in New York. The markets are closed. Here in Davos, we're just getting started. The snow has been falling. It's
wickedly dangerous. And it's only Monday, January the 18th.
Tonight, revving up and raring to go. Iran looks to sell and pump more oil. It's billionaires against the rest of the world. Wealth inequality now at
staggering levels. And of course change from a dollar, Whatsapp cancels all fees.
I'm Richard Quest live in Davos with my new bigger and better friend, Jeff, the global economic snowman, where we mean business.
(MUSIC PLAYING)
QUEST: Good evening. Welcome to Davos, home of the world economic forum. When delegates arrive here later this week, they intend to set the world to
right. The very phrase is improving the state of the world. They'll be met with an economic picture that's fraught with uncertainty.
(BEGIN VIDEO CLIP)
QUEST: Markets from Switzerland to Shanghai pounded by volatility and uncertain economic prospects. Inequality rising to levels never before seen
in history. On this program, the head of Oxfam will talk about that with us tonight.
And most significant of all, the cataclysmic fall in the price of oil; an earthquake sending ripples through every corner of the globe.
(END VIDEO CLIP)
QUEST: All week we'll bring you the biggest names and best coverage of these three core issues live from Davos. Tonight, one day after the world
lifts sanctions; Iran has turned on the taps.
(BEGIN VIDEO CLIP)
QUEST: The Iranian government is heralding a return to the global oil market with a bang. And it's doing so by ordering its output raised by half
a million barrels a day. As the era of economic isolation comes to an end, Iran can now begin selling its massive stockpile. Just look at the proven
reserves. It unlocks its potential as one of the world's biggest oil players. Iran has more proven reserves than Russia and the U.S. combined as
you can see from those numbers.
(END VIDEO CLIP)
QUEST: This new stream of Iranian oil only stands to flood the market, drowning a supply glut already.
(BEGIN VIDEO CLIP)
QUEST: Crude prices fell once again, 13-year low. Look at the numbers. Brent and WTI both under $30, comfortably under $30. With me now are
emerging markets editor John Defterios.
(END VIDEO CLIP)
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Always a pleasure to be back with you.
QUEST: Good to see you.
DEFTERIOS: Thank you.
QUEST: What is happening? I mean, the Iranians are not stupid. They know if they suddenly put a million and a half into the market that's already got a
million and a half too much; we'll all be in trouble.
DEFTERIOS: It's a big-stakes game. You know Iran's time has come Richard. It's amazing Hassan Rouhani, the President of Iran, was here two years ago
kind of laying out the future - the potential of Iran. You talked about the proven reserves of 157 billion barrels, that time has come. The handcuffs
have come off Iran. Now a key figure here, they've been limited to only a million barrels a day of exports. They want to prove to the world they can
get that up to 2 1/2 million barrels a day. I visited the fields back in November and National Iranian oil officials told me they've already tested
they can get another million barrels a day on to the market.
(BEGIN VIDEO CLIP)
QUEST: But are they - I'm going to jump in here because the core question is, are they prepared to pump and sell even if it drives the price lower?
Is this about market share?
(END VIDEO CLIP)
DEFTERIOS: It's about market share first and foremost. They want to earn that market share back. Saudi Arabia is the one that took it away as you
remember during the last 5 years of sanctions by adding another 1.5 million barrels a day. They're not going to give up that production, but Iran says
we need to come back and capture that market share and prove to the world we have that capacity.
(BEGIN VIDEO CLIP)
DEFTERIOS: We're going to have a Davos moment on Wednesday, by the way. It's going to be interesting. The foreign minister of Iran, Mohammed Javad
Zarif is going to take the stage at the same time as the foreign minister, his basic rival in the region, Adel al-Jubeir.
(END VIDEO CLIP)
DEFTERIOS: They're not going to share the stage, but one after another. This is a real threat Richard at tearing OPEC apart. Saudi Arabia not
wanting to give up market share, Iran fighting to hold on to come back into the market.
QUEST: But John, John, John, the ramifications of oil at $28 a barrel go further than just, say, Qatar not being able to support its various
projects or Saudi Arabia having a budget deficit. OPEC members like Nigeria Venezuela are absolutely hurting.
[16:05:00]
DEFTERIOS: Absolutely. In fact, we saw $400 billion in contracts canceled in the last week its falling on Angola, Kazakhstan, Nigeria, Venezuela.
(BEGIN VIDEO CLIP)
DEFTERIOS: The deep water projects. Now what's at stake here, the Saudi Arabian project supported by the other gulf producers is under threat
today, of course but it's taken a year. It could take another year for this to unwind. Where's the need for Iran?
(END VIDEO CLIP)
DEFTERIOS: Iran produces oil at $9 or less in the fields. Saudi Arabia, $2 to $4. So Iran, and Saudi Arabia, and Iraq will go head to head here in the
future.
QUEST: Only if they keep their budget deficits or their budget expenditures in moderation. And that's a problem with Saudi Arabia.
DEFTERIOS: It certainly is, yes. They've had to try to cut spending. They were late to the game.
(BEGIN VIDEO CLIP)
DEFTERIOS: The other Gulf producers already did so. Iran has now cut its budget to be only 35% from petroleum. They're gunning for a fight Richard,
they want the market share and the game has changed today, actually, tonight. Good to see you.
(END VIDEO CLIP)
QUEST: Good to see you, sir. All week, busy week ahead.
DEFTERIOS: yes, I think so.
QUEST: Excellent, John Defterios, Jonny D. who will be doing good duty for us during the course of the week.
European businesses have wasted no time moving into the Iranian market. Daimler announced plans to get its truck business back up and running.
(BEGIN VIDEO CLIP)
QUEST: The Iranian Transport Minister says a deal has been reached to buy more than 100 aircraft from Airbus. The Slovakian Finance Minister is in
Tehran right now, he's engaging in three days of meetings with Iranian business leaders. And the IMF is predicting an economic bonanza. It says
that with sanctions easing, Iran's GDP could get a 5% boost over the next year.
(END VIDEO CLIP)
QUEST: You've got to be careful, though. All this talk about increased business and lifting of sanctions is not as straight forward as it sounds.
Juan Zarate was the U.S. Deputy National Security Advisor under George W. Bush, and now chairman of the Financial Integrity Network. He told me U.S.
Companies are now at risk of missing out because their sanctions haven't been lifted.
JUAN ZARATE, CHAIRMAN FINANCIAL INTEGRITY NETWORK: There's no question that U.S. Companies are disadvantaged with how this delisting and unwinding of
sanctions has been choreographed. That said, there are particular categories where the U.S. government is making clear that U.S. companies
can do business. For example, Boeing will be able to sell aircraft parts and aircraft equipment to Iran.
U.S. companies will be able to establish foreign subsidiaries to begin to explore doing business. But the reality is, they're going to have to
contend with existing sanctions that do place them potentially at risk for doing business illegally with Iran. And so the flexibility for European
companies, Asian company, others, will be much greater certainly than the U.S.
QUEST: And that's exactly what we've seen in the last few days, the number of delegations going to Iran. Sir, would you expect basically a massive
gold rush if you like, even though at the moment the Iranians may not have the wherewithal and wealth to do business. But many countries will now be
on the plane to Tehran.
ZARATE: Richard, I think there will be many delegations on the planes to Iran, but I'm not sure you're going to see a lot of direct foreign
investment in massive forms initially. There's two reasons for that. One, the state of the negotiations and sanctions unwinding still remains at
play. We have to see how they'll be implemented. The U.S. and the European Union have promised snapback sanctions if the Iranians don't continue to
comply. And so there's still that uncertainty in the marketplace.
Secondly, you have the capacity of the Iranians themselves as well as immaturity in terms of dealing with massive foreign investment. And so I
think there's going to be a lot of trepidation to moving in relatively quickly on all fronts. That said, I think in certain sectors like oil as
you said, aviation, you're going to see a lot more activity up front. On the back end, you're going to see banks very cautious and conservative and
not wanting to move in quickly at all. And so there's going to be a spectrum of risk applied by the marketplace. And I think this is going to
be -- have the feel of a gold rush, but the reality is going to be something different.
QUEST: And as this takes place, the longer this goes away from implementation day and the agreement, the more difficult it will be for the
U.N. or the E.U. or the U.S. perhaps to re-impose other sanctions. Now the U.S. did it on Sunday in a very specific anti-ballistic missile category
over 11 persons and entities. But wider scale re-imposing sanctions won't be easy, and that's something the Iranians have banked on.
[16:10:05]
ZARATE: Absolutely, Richard. And I think one of the things the Iranians are going to do rather cleverly is create this sense of a gold rush, the sense
of inevitability of the lifting of all sanctions and frankly the idea of an open marketplace in Iran. The Iranians wanted to negotiate the reinjection
of the Iranian economy into the global system. That's what they tried to achieve. That's what's on paper in the joint comprehensive plan of action.
And that's what implementation day begins to give them.
And so you're absolutely right that it will be more difficult over time, and the bar will be higher and higher to impose significant and meaningful
sanctions against Iran, even though you're going to see the U.S., perhaps even the E.U. impose sanctions on things like human rights, ballistic
missile issues, and sanctions violations as well as terrorism. But you're not going to see the massive sanctions regime and campaign that began back
in 2005 and escalated and amplified over time. That's difficult to put in place. It takes time, and you certainly need international consensus.
QUEST: That, of course, is the sanctions issue as it will progress. Well, European markets managed to stop the giant selloff that's been brewing at
the end of last week and is transmitting itself to global markets.
(BEGIN VIDEO CLIP)
QUEST: The major indices still managed to close lower. They were hurt by the falling oil price. Bank stocks were down. The European Central Bank
says it's concerned with the high level of bad loans. You can see -- I would say what you're looking at in the European markets there is a bit of
disgruntlement and unease rather than serious worry and uncertainty.
Markets in the United States are closed. It's Martin Luther King day.
(END VIDEO CLIP)
QUEST: As we continue tonight, inequality is rising. That much we know. But the latest statistics are absolutely staggering. The world's wealthiest and
most powerful are now absolutely roaring ahead. "Quest Means Business," we'll talk about that next.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Bitterly cold here in Davos. Minus 13 in this Swiss mountain resort. And as the week moves on, I'll be rubbing elbows with the world's richest
and most influential people. It's the ideal place to tackle income inequality. And there's no better time to do it.
(BEGIN VIDEO CLIP)
QUEST: Oxfam International is warning the problem is getting much worse. The statistics are frightening. Over the past five years, the world's
richest 62 people, just 62, have seen their net worth rise by half a trillion dollars. You can fit them all on a double-decker bus. They now
control $1.8 trillion. That's the same amount as owned by the poorest half of the world's population. And that includes some 3.5 billion. Look at the
mountain. 62 at the top, 3.5 billion at the bottom. And the two are the same.
The bottom half has gone down over the last five years. And then you get the top 1% of the world's population. They own more than the other 99%
combined. All in all, it's an unwelcome milestone, and it's a milestone that the world has reached a year earlier than expected.
(END VIDEO CLIP)
[16:15:04]
QUEST: Joining me to put this into perspective, Winnie Byanyima, the Executive Director of Oxfam International. Winnie, the statistics, when
they came out, everybody makes a great fuss about them. We're talking about them tonight. But I suspect you're going to tell me nothing's been done to
actually address the issue.
WINNIE BYANYIMA, EXECUTIVE DIRECTOR, OXFAM INTERNATIONAL: Well, Richard, you're quite right. That -- you're quite right that extreme inequality is
really spiraling out of control. You remember two years ago when I came on your show, I said it was 85 people who owned as much as half of all of the
bottom half of humanity. It's down to 62. In 2010, it was 388. Now it's down to 62.
So the pace -- our report shows the frightening pace at which wealth is being concentrated in a few hands. And yes, not much has been done. I do
acknowledge that last year, a few steps were taken. For example, the United Nations government agreed global goals, including one goal on income
inequality, tackling income inequality. But that's just a statement of intent. We want to see action. Then last year again, the g-20 agreed a set
of measures to reduce tax avoidance, but they didn't go far enough.
QUEST: OK. Let me jump in here and say -- so the policymakers are making the right noise, and the situation is getting worse. What is the long-term
risk if we do not reverse this trend?
BYANYIMA: There are huge risks. First, we know that extreme inequality hurts or undermines growth. In fact, we are seeing weak recovery, economic
recovery, and part of the reason is that it's undermined by extreme inequality.
(BEGIN VIDEO CLIP)
BYANYIMA: Secondly, extreme inequality puts a brake on poverty reduction. It traps poor people in a vicious cycle of poverty. So all our efforts to
eradicate extreme poverty will not be achieved. Then thirdly, it sparks social unrest. And that is also witnessed by -- see what's happening in the
world. Right now you can see that many people are rejecting mainstream politics because they see that politicians are in a cozy bed - a cozy bed
with companies and giving ordinary people a raw deal.
(END VIDEO CLIP)
QUEST: Okay. So in that sense, do you see any form of hypocrisy in the world, not just the 1%. I mean, here at Davos, and you'll be here along
with me and everybody else who's probably part of the 1%, is there a hypocrisy of people here talking about it with an air of something must be
done, dear-dear, tut-tut-tut?
BYANYIMA: Honestly, at the end of the day, the rich leaders here and the leaders of government understand that we all need a society that is not
extremely unequal. They all know that business needs healthy, well-educated workers and needs good infrastructure for business to thrive. And these are
not going to be there unless we tax production, we tax those who earn huge incomes. So it's quite clear to the business people here and to the
politicians that tackling extreme inequality is important in their own self-interest. If not for moral and social justice issues.
QUEST: Finally, Klaus Schwab, the founding chairman has written this book "The Fourth Industrial Revolution" and he says that the changes taking
place with computerization, with digitization, artificial intelligence and the like, they risk making a situation worse. More people will end up in
poverty. That must be an even greater concern for you.
[16:20:03]
BYANYIMA: Yes, Klaus Schwab is quite right. Technology is neutral, inherently, but its uses, it's how it is going to be used that can be
devastating for the lives of people around the world. If technology displaces people from jobs, if it is pushing wages down, if it is
disrupting the work forces in such a way that not enough new jobs are being created, definitely it will widen inequality. But it can be used in ways
that empower and spar inclusive growth. For example, today the technology that is being used for vaccines in the Ebola countries is technology that
came through public funding, not private funding. So there are ways to make this a win-win for both people and business, but governments have to step
up and play their role.
QUEST: Winnie Byanyima from Oxfam international, thank you for joining us. We were talking there about Klaus Schwab, and the book is called "The
Fourth Industrial Revolution." Mastering the fourth industrial revolution is what Klaus Schwab wants us to talk about here in Davos. He's the founder
and executive chairman. I spoke to him earlier and he said this fourth revolution would make inequality worse.
(BEGIN VIDEO CLIP)
KLAUS SCHWAB, FOUNDER AND EXECUTIVE CHAIRMAN, WORLD ECONOMIC FORUM: I'm really concerned, personally, because if you take the fourth industrial
revolution it will have a tendency to increase even the gap and to force the social exclusion because the profits will go to souls that have the
talents, the inventors, the entrepreneurs, so as well as the capital, but not necessarily those who do the work.
QUEST: And you talk about the fourth industrial revolution, but the point about your fourth revolution is it's happening and we can't stop it. So
it's a question of how we manage it.
SCHWAB: Exactly. And such a reason why I tried to provide a framework in the form of a book for each participant and why I hope such private-public
interaction will create the necessary rules, norms, and so on to master this revolution.
QUEST: But hang on a second. We mastered the first industrial revolution and the second and the third, but we did it without having big meetings to
master it. Why do we have to do it differently this time?
SCHWAB: Because the speed is so fast. And the impact and the disruptive force. Just look at Uber. Look at Air BNB. And I could quote many other
examples. This will happen to banking, this will happen to each individual sector, and we have to prepare for it.
QUEST: What about the fact that it's merely men and women of our age that are having more difficulty? The younger generation will have grown up with
this and will become used to it.
SCHWAB: Yes, but you have to make a difference between adopting the new revolution and mastering it at the end. We need regulations. We need
policies and so on and that's still the older generation.
QUEST: You create a distinction between adopting and mastering. And that suggests that you believe we can master it.
SCHWAB: If we understand it -- and what we want to do here is to make decision makers understand what is at stake. We are all absorbed by crisis
management. We look at all the different hot spots in the world and who is preparing for tomorrow. That's why we are here.
QUEST: This is the worry wall.
SCHWAB: Yes. Why don't you have an opportunity wall?
QUEST: On the worry wall, here's the line. This is ten. This is not very worried. This is your -- You're really worried.
SCHWAB: I'm really worried because we have the consequence of so many challenges at the same time. It's not only one worry. It's so many worries
at the same time.
QUEST: That's serious.
SCHWAB: Yes, it's serious. Look at Europe. Look at the world.
QUEST: So give me one that I can write as it is. The one worry that you're most worried about now.
SCHWAB: Social inclusion or the lack of social inclusion.
QUEST: Social inclusion.
And there you have the worry wall that we will be using throughout the course of the week. This is not particularly worried. This is extremely
worried. And Klaus, of course, has gone way over to ten-plus.
[16:25:07]
As the week moves on, you'll get an idea because January this year has been completely different to anything we've seen before in terms of worry,
concern, and distress. Over the course of the week, you're going to see just how worried people are here at Davos and crucially what they are
worried about. The worry wall here on "Quest Means Business." As we continue, well you can go from almost free to entirely free. Whatsapp is
scrapping its fees.
(BEGIN VIDEO CLIP)
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Picture-perfect. There's been so much snow since the beginning of the year. The ski resort that thought it was in deep trouble is suddenly
managing to dig itself out of huge amounts of snow. And the temperatures are blisteringly cold, minus 13 Celsius. It's about 12 Fahrenheit for those
of you on the old scale.
Whatsapp says it's better for business to be completely free. It's the messaging service. We all know what it is. It's owned by Facebook.
(BEGIN VIDEO CLIP)
QUEST: And it did charge $1 annual fee after a customer's first use. Whatsapp explained this approach didn't work well, it said users didn't
have credit cards or debit cards. The charges phase out over the next few weeks.
Samuel Burke is with me from New York. Is this going to have a material difference? I mean, it's only a dollar. Yes, they've got a billion people,
but it is only a dollar.
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: They're going to completely change their business model. And Richard, I have to eat some crow here.
Because about two years ago, I was sitting here. You weren't in the cold. You were sitting right there and you were questioning Facebook paying
nearly $22 billion for Whatsapp. And I said, Richard, just do the math. If they charge $1 per person and they have hundreds of millions of users, it
will pay for itself over the years. And now they're completely scrapping the business model that I said would make them profitable.
(BEGIN VIDEO CLIP)
BURKE: But what they're going to try to do, very interestingly, they say they're not going to go with third-party ads the way that so many websites
have. Instead, this application is going to go with a different type of model where they charge businesses to interact with their clients. So let's
say you're late for your flight or the flight is late, hasn't arrived on time. The airline might send you a message via Whatsapp and Facebook, the
owner of this app is convinced that businesses will pay to interact with their clients in this new, different, and unproved way, Richard.
(END VIDEO CLIP)
QUEST: The problem, of course, is that 22 billion that they paid, it was 19 plus debt that the paid. Is the general view - I mean look, I use Whatsapp,
I know everybody else uses Whatsapp, but so far they've never made a penny directly except for the dollar a year or whatever. So the question Samuel
is the market's view generally that the Whatsapp purchase was overpaid?
BURKE: When I speak to analysts, they still think it was a good move but a defensive move. They think that it was good that Facebook paid that money
to keep other companies, mainly twitter's, hands off of it, if they could even afford it quite frankly. But most people still seem to be optimistic.
And the reason why they say look at Facebook and how they've made money doing these organic type of ads and taking different approaches instead of
just using banner ads or charging people. And all along the way -
[16:30:30] SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Most people still seem to be optimistic, and the reason why they say look at Facebook and how
they've made money doing these organic type of ads and taking different approaches instead of just using banner ads or charging people.
And all along the way they've proven the market wrong each time when people were so skeptical.
I just want to remind people of how well Facebook has done numbers-wise. This is a great chance just to remind people.
Facebook has 1 billion users, WhatsApp 900 million users, Facebook Messenger - its sister messaging app 800 million, Instagram 400 million -
they're starting to make money off of Instagram. But now they have to try this new business model.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: Samuel Burke with the numbers in New York. Samuel, thank
you. "Quest Means Business" live from Davos. We'll be talking to a former prime minister of Australia after the break. China's market volatility and how
the Australian economy is managing to weather the storm.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest in Davos. There's more "Quest Means Business" in a moment when the former Australian Prime Minister Kevin Rudd
joins me as Chinese regulators admit they're having problems with the markets.
The sporting world has another corruption scandal to contend with. Anyone for tennis? We'll talk about that with Don Riddell.
Before that of course, this is CNN and on this network the news always comes first.
Five soldiers have been killed in an avalanche while on a training exercise in the French Alps. Four more were injured and two have been treated for
hypothermia. They were among 50 French Foreign Legionnaires training off -piste when the
avalanche came down close to Valfrejus just a few kilometers from the Italian border.
A Belgian man's been arrested in Morocco in connection with the coordinated terrorist attacks on Paris. Twenty-six-year-old Gelel Attar is from
Molenbeek and allegedly knew the Paris attackers well, traveling to Syria with one of them.
Burkina Faso is observing three days of mourning in the aftermath of Friday's deadly attack in the capital. Twenty-nine people were killed in
the raid of a luxury hotel. The siege appeared well planned with some of the attackers going to the
hotel during the day and mingling with guests. A Swedish doctor has been charged with drugging, raping and kidnapping a
woman he allegedly imprisoned for six days in a cement bunker. The 38-year-old told police he built a sound-proof bunker because he wanted
to have a girlfriend. He's admitted drugging, kidnapping and depriving the victim of liberty but he denies the rape allegation.
[16:35:06] Iran has ordered an immediate increase in oil production to take advantage of access to international markets.
Sanctions were lifted over the weekend. Oil prices have now slumped $28 a barrel.
The world's 62 richest billionaires have as much wealth as the bottom half of the world's population according to Oxfam.
Speaking to me a few moments ago on "Quest Means Business," Oxfam's executive director warns inequality is spiraling out of control.
(BEGIN VIDEOCLIP)
WINNIE BYANYIMA, EXECUTIVE DIRECTOR, OXFAM INTERNATIONAL: We know that extreme inequality hurts or undermines growth.
In fact, we are seeing weak recovery - economic recovery - and part of the reason is that it's undermined by extreme inequality.
(END VIDEOCLIP)
QUEST: Good evening from Davos. We'll be here all week. Chinese stocks survived another dramatic fall. They closed higher on Monday.
The Shanghai Composite is up around half a percent after big losses at the open.
The top Chinese regulator described the market system as immature and incomplete. Rumors have spread that he has offered to resign. The
regulators are denying that. To talk about this and other aspects, Kevin Rudd is the former Australian
prime minister and president of the Asia Society Policy Institute. He joins me now from Paris. Mr. Rudd, thank you for joining us. Good to see you, sir. The situation with the Chinese economy, some describe it as
murky, others say there's a lack of transparency. How concerned are you?
KEVIN RUDD, FORMER PRIME MINISTER OF AUSTRALIA: On balance, Richard, I think there is a reasonable basis - a reasonable basis - to sustain
fundamental optimism about China's economic future. There's a great danger at the present that we resort to cataclysmic talk about the sky falling in on the basis of several events happening.
China's economic fundamentals are in reasonable order, and give them some credit - they're in the midst of a huge transformation.
You know, it's three levels, from manufacturing to services, from investment to consumption and from a public trading enterprise - trading
enterprise sector --
QUEST: Right.
RUDD: -- to one which is distributing increasingly by private businesses. It's a rocky transformation but I think it's underway and frankly, there's
no alternative for the Chinese.
QUEST: But as that transformation takes place and the ripple effects - I mean your own country Australia of course has borne a certain brunt on the
commodities side but other countries - emerging markets in Southeast Asia and in the region - are also going to feel the effect. The IMF warned
about it, the world's banks warned about it.
RUDD: Yes, but if I go to the IMF report you see Christine Lagarde saying that China's transformation of the economic model is in fact a normal
process of the country's long-term economic development. Yes, it is very rough on the way through. We've seen equities markets on the one hand and at a more fundamental level, because of a slowing Chinese
growth rate you've seen a decrease in demand for Chinese energy supplies and certain raw materials supplies.
But to be blunt, that's been in the wind for quite some years. Perhaps some people have been quite recent in their adaptation and adjustment to
it.
QUEST: Mr. Rudd, let's talk about Taiwan and the recent election. President Tsai Ing-wen who wins pro-independence, the pro-China party loses
support in Parliament, it loses control. How dangerous a situation for Taiwan in its relations with China now do you
fear?
RUDD: Historically it's at this time when you have a big change in Taiwanese politics that most people would become super anxious.
I think for those who are watching this relationship closely as I've done for 25 or 35 years, this transition has actually seemed to be so far
relatively smooth. A few things have changed since the last time this happened, Richard. One is the Chinese Communist Party has made point of engaging Madam Tsai
Ing-wen's DPP -- or Democratic Progress Party -- a lot behind the scenes over the last eight years or so.
[16:40:10] And as a result, there's been a little bit of deep demonization on both sides of the equation.
The second thing is if you look at the language used by President Tsai- elect, she's been talking about the need for maintaining the status quo and stability in cross-Strait relations.
That's a fundamental contrast to her Democratic Progress Party predecessors some eight years plus back -
QUEST: Right.
RUDD: -- Trenchma Bien (ph). They spoke about the need to move toward Taiwanese independence. And that's the red line as far as Beijing is
concerned.
QUEST: As we pull the strands together here, Mr. Rudd, we're asking people here in Davos this week just how worried they are.
The 2016 has got off to a very ugly, messy start in the financial world and in many other areas of geopolitical strains. How worried are you?
RUDD: Well look, let's be very blunt about this, Richard. If you could write a better script for the first two or three weeks of the year as far
as the global economy concerned, it wouldn't be too hard to write one. But the bottom line is it is what it is. Number one, however, I think it's important that we do not succumb in terms of the global economy and
financial analysts to some sort of faddish pessimism about China. The transformation's under way, growth will be somewhere between six and
seven in the year ahead, at least six in my judgment because they need that in order to maintain basic social stability in the country.
And two, when everyone is talking the collapse in oil prices, remember there is some benefit to that in terms of what happens in terms of consumer
confidence over time as prices come down. Certainly in countries like mine but most particularly those who are
exclusively commodity dependent, there will be an impact. But the bottom line is I think it's important not to resort to sort of extremist language
we've seen from the IBS recently which says throw your hands in the air, say the sky's falling in and sell everything you have.
That's just irresponsible.
QUEST: Kevin Rudd, good to have you, sir, on the program. Thank you for taking time to join us tonight from Paris.
As we continue now, the murky world of match-fixing is rearing its ugly head at the Australian Open after claims of a cover up.
A whistleblower's report has tennis authorities hitting back. Is tennis fixed? We'll talk about it after the break.
(COMMERCIAL BREAK)
QUEST: I promise you you'll hear more yodeling than you know what to do with by the time we finish on Friday. The weather is going to remain
extremely cold. I think we've probably had the worst of the snow. It's absolutely been
chucking it down for the last couple of days. But when the delegates arrived - delegates, participants, whatever you want to call them - the
concerns about the global economy are as abundant as the falling snow that we've seen.
And that means sometimes you can barely tell what's in front of your face. [16:45:04] I set out in a blizzard to learn from the mountain experts.
Never mind the economy, we can learn from the men and women up there how to navigate uncertain conditions.
(BEGIN VIDEOCLIP)
(MUSIC PLAYING)
QUEST: Total white out! Inability to see two feet in front of your face. The mountain is in a dreadful condition and arguably the global economy is
exactly the same. Why? Because we simply can't see what's ahead. On the mountain it's time to call in the experts, the snow groomers who will clear a path.
NUOT LIETHA, DESTINATION DAVOS KLOSTERS: There we have the shovel in front pushing the snow away and the smoothing there in the back's smoothing
everything down.
QUEST: Think of these as the policymakers of the mountain - getting rid of the bumps, looking for solutions.
Now, this is what you call snow clearing equipment except you can't even see where the door is. Inside, the view is even bleaker. You can't see a
thing out of the window. And every now and again, a sudden large pole suddenly comes into your vision. For decision=makers in Davos this week, this is what it must feel
like. Up ahead, the risk of oil prices plunging further, slowing growth in China and emerging markets with the stock markets going backwards and forwards.
All the warning signs are there to see. The storm is getting worse. The temperature, it's dropping. The team at the top are rushing to make sure
they're ready for the night ahead.
LIETHA: They're out there every night grooming all the slopes, about 85 percent of all the slopes on the mountain, for the next day.
QUEST: The message? Persevere right to the end. It's why the world leaders keep coming back. Whether it's the falling price of oil, the
slowdown in China or weakness in emerging economies, the challenge in Davos is to find a clear way forward.
If the policymakers fail, well frankly we're all left out in the cold flying blind.
(END VIDEOCLIP)
(LAUGHTER)
QUEST: You really don't want to know what happened to the camera and that it was blisteringly cold, the wind was howling and bits of me were freezing
that shouldn't have done. "Quest Means Business" after the break.
(COMMERCIAL BREAK)
QUEST: Extraordinary events. The opening day of the Australian Open has been shaken by a report (AUDIO GAP) a match fixing cover up at the sport's
highest level. [16:50:07] Documents reportedly handed over to the BBC and BuzzFeed by a
whistleblower alleged that for some years, players -- some players -- have thrown games for money.
The World tennis authorities are fiercely denying any cover up.
(BEGIN VIDEOCLIP)
CHRIS KERMODE, ATP EXECUTIVE CHAIRMAN: All of us here in tennis are absolutely committed to stamp out any form of corrupt conduct in our sport.
There is a zero tolerance policy on this, we are not complacent.
(END VIDEOCLIP)
QUEST: Don Riddell is with us at the CNN Center to make some sense of it for us. Don, I'm going to tell you a couple of questions quite quickly so
that we can just get the overview if we may. First of all, do the tennis authorities pretty much accept that there have been cases of price fixing?
DON RIDDELL, CNN "WORLD SPORT": Yes they do and they have suspended several players. In fact, banned for life several players and an umpire in
the last few years. So, yes, they very much accept that it is - that it exists - and they would point to that as an illustration of the fact that they do take it
seriously.
QUEST: And so is there fundamental objection to this latest revelation about the cover up or about the extent of the players who are supposedly
allegedly involved?
RIDDELL: Well I think it's a bit of both. I mean, you'd have to assume that's why the whistleblower has submitted these documents to the media.
It's because that individual or individuals don't think that enough is being done about it.
And when you look at the figures that are being reported, 16 of the world's top 50 players in the last decade alleged to have thrown matches and been
allowed to have continued playing and these individuals are believed to include or reported to include grand slam singles and doubles champions and
some of these matches are alleged to have been thrown at Wimbledon, the spiritual home of the game, Richard.
QUEST: And what about people who are alleged to have done this who may be playing and still playing at the highest levels today?
RIDDELL: Well no names have been revealed by either the BBC or BuzzFeed, and that's going to be very interesting to see where this goes next.
Are we going to learn more about these individuals? Are their names going to be made public? Are anybody - will more whistleblowers come forward?
Because there is no doubt that tennis has been absolutely shaken by this revelation.
We did first hear about this in 2007/2008 but it all kind of seemed to go away and we haven't heard anything about it for some time.
But those that cover the game closely are very concerned that there is something that needs to be investigated here, Richard.
QUEST: Don Riddell. Don, keep watching and come back when there's more to report on this as we follow it closely.
A Hong Kong bookseller whose mysterious disappearance caused international uproar has suddenly reappeared. It's not the first time this sort of thing
has taken place. CNN's Ivan Watson reports from Hong Kong.
(BEGIN VIDEOCLIP)
IVAN WATSON, SENIOR INTERNATIONAL CORRESPONDENT BASED IN HONG KONG: Lawmakers in Hong Kong exercise a freedom denied in the rest of China.
They demonstrate outside the Chinese Central government's liaison office in this former British colony demanding information about at least four Hong
Kong book publishers who've gone missing in just the last two months.
What we are worried about is not only the personal safety of Hong Kong citizens, but also such acts could be threats to the freedom of expression
and freedom of publication that we are supposed to enjoy and we have been promised by the basic law.
WATSON: This is the entry to the Causeway Bay Bookshop, closed after one of its owners - 65-year-old Lee Bo (ph) - disappeared last week.
The shop specializes in books that criticize the Chinese central government.
Lee's ph wife told local TV she thinks he was abducted. She says he made a call under duress from a phone in Mainland China.
The Hong Kong police say they're investigating these case as well as the disappearance of three executives of the Mighty Current Publishing House
who went missing last November. The city's top official denied speculation that police from Mainland China
may have arrested the booksellers. Who do you think could be behind the possible kidnapping?
C.Y. LEUNG, CHIEF EXECUTIVE, HONG KONG: Only law enforcement agencies in Hong Kong have the legal authority to enforce laws and to take necessary
actions in Hong Kong.
WATSON: He also pledged to defend freedoms of speech and expression enjoyed in Hong Kong.
[16:55:01] At the People's Bookstore in Hong Kong, the shop's owner tells me half of the books he sells are banned in Mainland China.
WATSON: Where are most of your customers from?
PAUL TANG, OWNER, PEOPLE'S BOOKSTORE: I can say like 80 to 90 percent are from Mainland - Mainland Mid Center (ph), yes.
WATSON: So what happens? They come to Hong Kong -
TANG: -- Yes.
WATSON: -- and buy your books and then take them back illegally?
TANG: Yes, they try. They try to like hide in the luggage or handbags, whatever and then they're smuggling and then taking it back to China.
WATSON: This is the dividing line between Hong Kong and the rest of China -- officially one country with two very different systems.
The authorities on that side of the border don't have jurisdiction here in Hong Kong and that that's why the mysterious disappearance of critics of
the Chinese central government has triggered such worry on this much freer side of the border.
Ivan Watson, CNN Hong Kong.
(END VIDEOCLIP)
QUEST: And we will have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." Klaus Schwab wants people here to talk about the fourth industrial revolution - robotics, AI, how
digitization how it's going to change the way we live and work and the entire structure of society.
He's got the right point and he's got the right agenda. The challenge here will be getting the leaders to avoid the issue du jour and concentrate on
the big pictures. And that's "Quest Means Business" for tonight. I'm Richard Quest in Davos.
As always, whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable.
I'll see you in Davos tomorrow.
END
