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CNN Live Sunday

Insiders Warn of China's Need for Internal Reform

Aired April 08, 2001 - 17:27   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
STEPHEN FRAZIER, CNN ANCHOR: China was granted permanent normal trade relations status by the United States last year, a necessary step in its effort to join the World Trade Organization. Lawmakers may now have to sign off on an extension of those trade benefits, which is a scenario now complicated by this ongoing standoff.

So, joining us now with a little bit of insight into all of this is Betty Liu, the Southeast correspondent and Atlanta bureau chief for the "Financial Times" of England.

Welcome, thanks for joining us this afternoon. The numbers are huge.

BETTY LIU, "FINANCIAL TIMES": They are huge. And obviously, the one way that the U.S. can really hurt China would be to target trade. As your report mentioned, almost $100 billion that the Chinese export to the U.S., so Americans, in a large extent, help drive economic growth in China.

FRAZIER: What has been China's economic growth lately? Are we the biggest partner in this country, for example, and what is that doing to their overall economic status?

LIU: Well, we're one of the top three trading partners with China, but unfortunately for China, economic growth has not been that great for the past eight years. So they are at a point where they really need to reform internally, but also look to export to help boost growth.

FRAZIER: This is a stage where they're not hearing it from the population at large that there is an impatience, that capitalism is moving quickly enough, and it's not creating the dislocations that they saw for example in Russia.

LIU: No, that is true. You do have, of course, millions of millions of people who are out of jobs, because the reforms going on right now in China. I think the Chinese government is very weary of not angering their public and not turning the public against their government.

I think the most important thing the Chinese need to worry about is stability, so they are taking the reforms quite slowly.

FRAZIER: Some American companies are very heavily invested there. I have seen the Buick plant that GM has in Shanghai. There's a Corning glassware plant that makes TV tubes. These are big operations; some American companies must be worrying to death about this.

LIU: Sure. Also, in Beijing, one the biggest landmarks is a McDonald's on Wangfujing Road right across Tiananmen Square. So, there's a lot of American companies that are in China and they're certainly concerned about the situation right now. Almost any consumer products company is very interested in entering the Chinese market, as well as telemarketing companies, auto companies, you name it, they want to get into China.

FRAZIER: One of our colleagues, Thomas Friedman says that companies that share McDonald's will never go to war with each another.

LIU: That's to some extent true. I mean, China and the U.S. are linked in terms of trade more than ever before. There's $115 billion going between the two countries. So, I think for the Bush administration right now with the situation, they're certainly thinking about U.S. corporations and not wanting to damage the relationship U.S. businesses have with Chinese businesses.

FRAZIER: Some of the Chinese business that are exporting are run by the military or are closely associated with the military. And it's my understanding they have been slow to respond to call for modernization. So, will they try to exploit this in some way?

LIU: I'm not sure they will try to exploit this, but it's true that the People's Liberation Army does have major stakes in almost every industry, from everything from consumer products to aerospace. But I think at this point, the military mirror the Chinese government in terms of wanting to take reform slowly; and certainly, this situation does add pressure on this.

FRAZIER: Final question would be for American politics. We are at the stage now where some members of Congress are rattling sabers a little bit, making harsh pronouncements. Are we soon to see the stage where their constituents -- corporations in their jurisdictions -- might call up and say, hey, let's go easy on these guys; that's my factory over there?

LIU: I think certainly that is a consideration. The Bush administration -- the campaign was run in large part by funds from big business and I think certainly that these businesses, the heads of those corporations are picking up the phone wanting to ask Bush exactly what's going on? And I think at the very least, he probably owes them an explanation.

FRAZIER: Betty Liu from the "Financial Times," thanks for joining us on a Sunday afternoon.

LIU: Thank you.

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