Wang Huiyao in dialogue with Lawrence Summers on Global Economy
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As we enter into the new year, one cannot help but wonder where the global economy is headed in 2022. How are economists interpreting the warning signs for the post-pandemic global economic recovery, including soaring inflation, still-raging pandemic, uneven vaccination rates, intensified inequalities within and among countries? As attention is drawn to expected global impact of Fed's monetary policy, and the world undergoes profound restructuring in numerous areas such as supply chains, digitalization and decarbonization, what trends will be shaping economic development in 2022 and beyond?
In the midst of incessant and escalated conflicts between the US and China, this so-called world’s most important bilateral relationship has been put under extreme pressure. What can be done to deter this important bilateral relationship from further deteriorating? How can the world’s two largest economies and carbon emitters partner up through multilateral actions in the realms of infrastructure and climate?
On Jan 26, CCG hosted a dialogue between former US Treasury Secretary and President Emeritus of Harvard University, Prof. Lawrence H. Summers, and CCG President Dr. Wang Huiyao, which touched upon issues in the US and Chinese economies, global development cooperation, and views on what can be done to better the Sino-US relationship.
Wang Huiyao: Hello to our audience here in China and elsewhere and also, good evening to Professor Lawrence Summers in America. Welcome to CCG Global Dialogue, live from CCG head office here in Beijing. Thank you for tuning in with today’s fascinating guest that we're having from the US, to talk about the trends of global economy and key issues in Sino-US relations. Let me quickly introduce our key guest today. Professor Lawrence Summers has enjoyed a distinguished career spanning over 4 decades as one of America’s leading economists in both academia and government. In addition to serving as the 71st Secretary of the Treasury in the Clinton Administration, Dr. Summers served as Director of the White House National Economic Council in the Obama Administration, as the President of Harvard University, and as the chief Economist of the World Bank. Dr. Summers has played a key role in addressing every major financial crisis in the last two decades.
For example, as one of President Obama’s chief economic advisors, Dr. Summers’ thinking helped shape the US response to the 2008 financial crisis. Currently, Dr. Summers is the President Emeritus and the Charles W. Eliot University Professor at Harvard University, where he became a full professor at age 28, one of the youngest in Harvard’s recent history. He was elected to the National Academy of Sciences in 2002 and has been recognized as one of the world’s most influential thinkers by Time, The Economist magazines among many others.
In 2011, I visited Prof. Summers when I was a Senior Fellow at Harvard Kennedy School and he wrote a recommendation for my book Experiences of Harvard Kennedy School and the Revelation of Its Talents Training Success: The Path of Public Management Elite at Harvard. I was very grateful that you wrote “with public management as important as any field, with China as important as any country, best wishes from Harvard for public management in China.” Thank you again. Also, in 2019, Professor Summers visited the CCG Beijing office and gave a speech here. It's good to see you again, Professor Summers, and let's begin our discussion.
Lawrence H. Summers: It's a real privilege to be here with you, I have followed the work of CCG for a long time and I think the kind of dialogues that you sponsor may not always result in agreement but they do produce greater understanding between China and the rest of the world. I think that's immensely important at a moment like this.
Necessary for the US interest rates to rise significantly more to reduce the overheating of the US economy
Wang Huiyao: Thank you, Larry. I think you really are a global opinion leader, taking the world through many assessments. We are at a critical time of pandemic fighting and the global economy. You re-introduced the idea of “secular stagnation” in 2013 to explain the combination of a long period of easy, or ultra-easy monetary policy with weak demand and disappointing growth, in favor of less resilience on monetary policy and more active fiscal policy. We know that the US inflation is hitting probably a new high now. As the largest economy in the world, how do you see the US economy in general? And then we would talk a bit about the global economy. But since you are so familiar with the US and global economy. In response to this pandemic, the Fed and the US government were actually trying to avoid this “secular stagnation” problem that you pointed out in 2013. So what's your general overview of the US economy and how we can avoid this stagnation problem?
Lawrence H. Summers: So let me describe my view prior to the pandemic, my view during the pandemic, and then my view after the pandemic. What I foresaw in 2013 was that the world economy had changed quite profoundly. Instead of the issue being too much demand colliding with insufficient supply, there was so much desire to save for retirement, so much wealth going to very affluent people, so much reduction in the price of capital goods, particularly those involved with information and technology, and such profound demographic change towards much slower labor force growth. I felt that the challenge was going to be a chronic excess of saving, and I felt that the traditional mechanism of adjustment, based on interest rates, was going to be problematic. I wasn't sure that reducing interest rates from low to extremely low would actually stimulate that much more demand. I worried that excessively low-interest rates would actually lead to more financial instability and financial bubbles. I felt that what we are likely to see was low-interest rates, sluggish growth, and very limited inflation, reflecting the sluggish growth. And I think that's a pretty good description of the industrial world from the period after the financial crisis up until Covid.
When Covid hit, I had a strong recommendation. That strong recommendation was that we do everything we can to contain the spread of Covid, and that we very substantially support incomes and demand. That's what the United States did in 2020, very very successfully. By the time we got to 2021, it was pretty clear that the US economy, anyway, was recovering and recovering at a fairly rapid rate. And so I looked and I saw that our level of income was perhaps $30 to $50 billion short of the economy's potential. I felt that it was important to close that gap. What we actually did was not $50 billion a month of stimulus, but more like $200 billion a month of stimulus. And at the same time, we ran extremely expansionary monetary policy and had the Federal Reserve grow its balance sheet very, very rapidly. The result I predicted at the beginning of 2021 was that we would have substantial inflation, because the bathtub would overflow. There was more water flowing in, in the form of demand, than there was the capacity of the economy to produce, especially given the various distortions, destructions and implications of the pandemic. And that's in fact, what has happened. You can debate exactly what the role of supply is and what the role of demand has been. But what's clear when you get to 7% inflation is that demand is running very, very strong, relative to supply. And then unless an effort is made successfully to balance supply and demand, we will have continuing high inflation and possibly even accelerating inflation.
And therefore it was my view, going back to last spring, that monetary policy needed to start adjusting its path to recognize that overheating was our economic problem. And the fiscal policy needed to be conducted in ways that would reduce stimulus rather than increase stimulus. Unfortunately, my advice was a minority opinion. Policy makers followed what was a majority consensus opinion that inflation would be entirely transitory and wouldn't be a serious problem. So we now find ourselves with much more rapid wage growth, much more rapid price growth, and a great deal of anxiety about inflation. That's the situation in the United States, something similar obtains in Britain and in Canada. The priority now in my view, has to be on reducing the overheating of the economy. That's going to make a set of substantial challenges for the Federal Reserve, because historical experience suggests that it is very difficult to slow the economy down gradually in a way that causes meaningful disinflation. That's why my suspicion is that the consensus forecasts that we will enjoy inflation below 3% with unemployment significantly below 4%, I don't think is likely to obtain. I do think that is one of the puzzles in the marketplace right now is that even though the government has borrowed on a very substantial scale, markets expect that this whole episode will end with interest rates below 2%. And maybe that will be what works out, but my own best guess would be that it will be necessary for interest rates to rise significantly more if we're going to have the economy avoid protracted inflation well above the 2% target.
I do think that the fact that real interest rates for 10 years, even for 30 years are negative is telling us something quite profound, which is that secular stagnation is something that is in remission, not something that has been ultimately cured. And I think that we're going to have to think very hard about the right kinds of policy approaches for the medium term. But if we don't deal with the inflation that we have right now, I think we're likely to have even larger problems in the future.
3 major challenges the Chinese economy faces over the next 2 years
Wang Huiyao: Thank you. I think you outlined it very well. You can see now the US consumer price has been increasing at a fast pace, which also is resulting in the high cost of living. Actually, the annual inflation rate in the US has grown to 40-year new high in the last months of 2021, accelerating to 7%. That will probably impact the world and also of course US economy-every country is watching that. Now let's talk a bit about the world economy. About 10 days ago, we had an event with the World Bank, the new Global Economic Prospects report was released by CCG and World Bank as the first and only event outside Washington D.C. Basically, the World Bank’s forecast on the economic growth will be at 4.1% in 2022 and 3.2% in 2023. And China's forecast is to be 5.1% in 2022 and 5.3% in 2023. This pandemic really hurt all of us. How do you see the world economy can get out of this? The manufacturing activity and performance in China were actually pretty strong. China's foreign trade in 2021 have grown almost 30% compared with the previous year. The world probably is still recovering from manufacturing, but China is supplying the world with import and export, which has gone up 30% - a historic record high. So how can the world economy get out of this stagnation and the inflation in the US? The World Bank has actually lowered the forecast on growth for all the economies.
Lawrence H. Summers: Let me say, Henry, that I have learned to have enormous respect for China and for Chinese policymakers. People from the West who see problems and then think that China is going to run into all kinds of difficulties have a history of not turning out to be right. So it's very difficult to judge what's going to happen in China.
That said, I think that China faces 3 major challenges over the next 2 years that is going to take enormous skill to deal with. The first is the exit to normal from Covid. In the United States, we have a population where half the people in the United States have had Covid. I have Covid as I'm speaking to you, fortunately a very mild case so I'm having no difficulty participating in the conversation by Zoom. But that fact and our use of mRNA vaccines mean that we have the capacity to manage Covid moving from pandemic to endemic, for it becoming a relatively normal part of life in the same way that the flu is a relatively normal part of life. I think the challenges for China, given that China hasn't had mRNA vaccines on a very large scale, and given that China has had this remarkable success, so far, with its lockdown policies, making a transition back to normality is going to be a very important challenge for China.
I think the second very important challenge for China is going to be, where is the demand going to come from? China is an extraordinarily high saving country. If you look at personal consumption relative to GDP, China’s number on some indicators is below 40%. That's less than the United States was when we were fully mobilized for World War II. The question is where is all that saving going to go? There have been periods when all that saving went into exports but I think the rest of the world is going to have limits on its willingness to accept large-scale Chinese trade surpluses. There have been periods when it has gone into infrastructure - but China having laid more concrete, between 2010 and 2014, than America did in the whole 20th century. It's got a pretty splendid infrastructure and there's a limited capacity for new infrastructure projects. For a significant time, it's going into real estate. But we're seeing substantial financial excess in the Chinese real estate sector, with Evergrande. So the question of “how is China going to manage its saving” is I think a very substantial uncertainty going forward.
I think the third uncertainty and it's the one that an outsider like me can speak to with the least confidence is that the extraordinary uniqueness of the Chinese economic system has much to do with the very special role of the party and the very large role of state enterprises. On the one hand that has led to a very great capacity for coordination. On the other hand, it has led to substantial political elements in the economy and the question of balancing state and market. Going forward, in a period where it appears that the state is wanting to assert a greater control both through more channeling of capital to state enterprises and more extensive regulation of private enterprises - what that will mean for initiative, entrepreneurship, and growth is I think not entirely clear.
I think that just as we have substantial challenges in the years ahead, China has substantial challenges. I was interested when President Xi a couple of days ago in a speech made reference to the challenges for the world economy of significantly increasing interest rates. And I think we're likely to have significantly increasing interest rates, if growth continues, if we want that growth not to translate into excessive inflation. We're going to have to think about the consequences of all of that for some of the poorest countries in the world that have taken on very substantial debt, both because of the low-interest rate and because of the challenges associated with Covid. My hope would be that just as we did during the Asian financial crisis, and just as we did in 2008, there can be substantial cooperation between the United States and China in international financial policy, and especially in the issues facing debtor countries.
Renewing development banks: objective of sustainability, re-capitalize the development banking system, use the power of modern finance and greater cooperation with the private sector
Wang Huiyao: Excellent. You talked about the challenges that the US faces, and now we can talk about China as well. You pointed out 3 points, including how we can strike a balance between this “zero tolerance” policy and opening up the economy to the world, such as international traffic, so people can start to come. China is now having the Beijing Winter Olympic now. I think we are experimenting with some of those openings and hopefully, we will get into the international pattern more as time goes on. Second, you mentioned these potential risks of the Chinese economy. I think that China now, the digital economy and its the synergy, infrastructure, all those things play a lot of roles, particularly the SMEs are still quite active. I think you're right, but we know in China, it’s a unique model where SOEs play an important role, which has been regarded as one of China's strengths now. For example, during the Wuhan crisis. We have a 40,000 medical staff parachuted to Wuhan, it's all from SOE sectors. And China built two-thirds of the global high-speed railways because of the SOE sectors. China Telecom or China Unicom has to give lower rates for the rural areas. But of course, there is a challenge on how can we really stimulate entrepreneurship and strike a balance. You're absolutely right, we need to find that balance.
You talk about infrastructure, and you also talk about the World Bank. Since you were the chief economist of World Bank, and World Bank and other development banks have played a lot of roles in terms of changing the world, World Bank’s many projects in China were very successful. What do you think of the challenge now the world is facing? Infrastructures seem to be probably one of the biggest common consensus now. US is proposing a infrastructure plan, EU has launched the €300 billion Global Gateway. We know that the Second World War, when there's a crisis, catastrophe, the reinvention of the Bretton Woods System, you are very familiar with the World Bank, IMF, WTO, GATT, that supported the world going for 77 years. But at that time, the world population was 2.5 billion. Today is 7.8 billion. There are 500 development banks, which maybe account for 10% of global investment. China has AIIB, US has World Bank, Japan has ADB. Let's get all of them and AFDB, Inter-American Development Bank, Europe Construction Bank... Every bank maybe can work together for global infrastructure demends so that we can survive the next half century for prosperity for the developing countries, and so that we have a big pie to work on among China, EU and US. We can probably set up an international development bank alliance, tackling this issue through joint project co-financing. And as you said, get all those international activities of global governance to improve or enhance, so that we can really avoid this geopolitical conflict. What do you think about those things that we can do together, as you are an authority on the World Bank as well?
Lawrence H. Summers: I very much like to tell the story of the meeting that President Reagan had with Soviet Premier Mikhail Gorbachev in 1985, they went for a walk together, just the two of them, with only their interpreters. And at one point, out of nowhere, President Reagan said to Mikhail Gorbachev, if the Martians came and attacked the United States, would you help defend us? And Premier Gorbachev looked very surprised, laughed, and said, “Of course, we would. If Martians came and attacked the USSR, would you come to defend us? ”And President Reagan laughed, and said that of course, he would. And after that moment, their relationship was a much better one. Well, I don't expect that there will be any attack on the United States or China or anyone else on earth from Mars. But I do think that humanity in our planet is existentially challenged in a way that it never has been before, by climate change, by pandemic, disease, by threats of nuclear proliferation and terrorism. So I think that we do have common adversaries. And I think that international relations for thousands of years has been about balancing power in a stable way, and that continues to be very important. But it is also about achieving cooperation with respect to threats that endanger all.
That's why I think there needs to be a rethinking, a replenishing and a renewing of the development of banking system. And I believe that responsibility for that rethinking, replenishing and renewing has to rest with the two great economic powers in the world, China and the United States. And I believe that cooperation in the development banks can be an important part of what President Xi has called “a different kind of great power relationship”. What does that mean? I believe that the World Bank should no longer be named the international bank for reconstruction and development. The most important investments that need to be made our investments in sustainability, in green infrastructure and architecture, and in global public goods. And it needs to be much more engaged in financing them - not just on its own, but with partners from the private sector, partners from national development banks. And it needs to pursue a common agenda of all nations and be a place where nations cooperate together.
The World Bank I believe should be at the tip of the armada. But it certainly should not be the only ship in the armada. I look forward to the day when the United States will be able to join the AIIB, which I think under President Jin has done a splendid job in its early years. If you look at the scale of the world's development banks, relative to the scale of the world economy, particularly the World Bank - it has lost ground very, very substantial. And so I believe that the decision taken during the Trump years that the World Bank would receive a capital increase, that was its last capital increase was a grave error. And then it should be a major priority to re-capitalize the development banking system, and to use the power of modern finance, to make sure we're getting maximum development bang for the buck, from all of the development banks.
I also believe that if we can agree on the objective of sustainability, substantial replenishing of funds, much greater cooperation with the private sector, we can renew the development banks for a very different era than the one that has come before. There was a time when the development banks were very much in the business for example of financing tourist hotels. The world now has very strong capital markets, and we don't need development banks to finance tourist hotels. We need development banks to finance the investments that are central for global challenges and I believe that can be an enormously important project on which China and the United States can cooperate, even if they do have major differences on technology, major differences on the geopolitics of the Pacific Region. I don't think there's anybody who is in favor of more evolution of Covid and more people left unvaccinated. I don't think there's anyone who's in favor of a higher rather than a lower global temperature. So my hope would be that this could become an important amber of cooperation between our two nations.
Future of Sino-US relations: “it's in both of our interests for us both to conduct our relationship in the next years, in ways that allow us each to renew our societies domestically.”
Wang Huiyao: Thank you Larry, excellent point. We are now experiencing the Covid crisis. We haven’t experienced the Third World War, but we have experienced the world virus war. We were trying to get out of that crisis, but what going to revive, replenish and reinvigorate the world economy, we need new players. You're absolutely right. We can have the development banks, particularly the World Bank, AIIB, ADB, AFDB and all those development banks, taking alliance together and work together, have a summit of the development banks, and as you said, also having the private sector and capital markets join that, which probably can be a new force, a new model for the post-pandemic era. Absolutely, I think this is really a great idea. I think China and US are the two key players, plus EU - we should really all work together.
Now I’d like to shift the subject now to US-China Relation. During your visit to CCG in 2019, you talked about the changes that are taking place in China and the history of first half century of the 21st century evolution is likely to be substantially a history of what happens in China, and how that affects this fifth of humanity. And China's transformation and rise are likely to impact the balance of power, resulting to the Thucydides Trap. So I had also Professor Graham Allison here at my dialogue. He talked about the Thucydides Trap and also I talked with Joseph Nye and Tony Saich – a number of my Harvard professors, so basically they don't see the need for decouple and they don't think a Cold War is appropriate. They all agree that there's probably China ans US are getting to some kind of a competition cooperation, but still you know cooperation we hope can be maintained, and some kind of partnership. So what do you think about the US-China relation in the post-pandemic era? How can we get along and while managing the risk, as Martin Wolf mentioned in my dialouge? How can we get US-China relation forward in a manageable manner？
Lawrence H. Summers: Henry, I've compared the US-China relationship to two individuals who have relatively little in common, and who have substantial feelings of discomfort and distrust with respect to each other, who share a lifeboat with tools, in a turbulent sea, a long way from the shore. And they may be right in their grievances with respect to each other, they may be right in their aspirations as to who should be in charge. But the reality is that unless they row, relatively in unison, for quite a long time, without the distractions of anger and conflict, they're not going to make it to the shore. And that is how I think the United States and China need to understand each other.
I find that much of the discussion - should we have coopetition, should we have engagement with competition, should we have strategic engagement, should we have cooperation, selective cooperation... There's a war on to define a phrase that captures what we're going to have. But I think ultimately, we need to decide what it is that we want, that is realistic to have. I don't think it is realistic for China to aspire to displace the United States as the world's leading economic power. I don't think it is realistic for China to aspire to a vision of the Asian continent, in which the United States is not an active economic, political and security participant. At the same time, I don't think it is realistic for the United States to aspire to the kind of unipolar hegemonic world that many in the United States talked about after the Berlin Wall fell. I think China has too many achievements and has done, too much for that to be a realistic American aspiration. And I think we in the United States, after almost a century, when it was otherwise, need to accommodate ourselves to the fact that we are not going to be the world's largest and completely dominant economy forever.
And so we need to define a vision in which we both prosper, we both respect each other's ability to run our systems internally as so we see a fit. But we both agree on international rules of the world where there is interaction, whether it is competition between companies, whether it is rules with respect to the deployment of troops and weapons, whether it is understandings with respect to external countries. That is what we need, to try to work out together, and it will be an immense diplomatic challenge. But I think that it is important that we start from a sense of what we ultimately want to achieve and go from there to a range of specific approaches, rather than - as is too often the case, a strategy is conflated with a wish list. And there's a listing of what this to be different about trade and we want that to be different in some other way.
I think both of our countries, and I guess this would be perhaps my last point - it seems to me that we in the United States face very profound internal challenges, too many of our middle-class people, our ordinary citizens, feel that our society doesn't work well for them. At the same time, China faces the profound challenges that I described a few minutes ago. And it seems to me that it's in both of our interests for us both to conduct our relationship in the next years, in ways that allow us each to renew our societies domestically. You know there are some in China, let me be frank, there are articles in the Global Times, suggesting that the United States is in decline and that this is China's moment when China has to move and take advantage of the situation. If the United States perceives that that is the broad strategy China is following, we will have no choice but to respond in very strong and vigorous ways. Equally, if China perceives that the United States has an objective of containment or of regime change or of bringing about fundamental changes in the nature of internal Chinese society, that is something that you're not going to be able to accept. So it seems to me that the provision of strategic reassurance, not just in words, but in deeds, needs to be an important aspect of the dialogues that take place between our leaders.
Wang Huiyao: Thanks Larry, good point. You're right. Sino-US relation is really complicated, and being the two largest economies, we have a moral responsibility to really work together and I think we should not be hijacked by the populism and nationalism in both countries. You are also very correct to point out that the US domestic issues like the middle class was stagnated for the last 30 years with probably zero increase, and then now, even the wealth of the top 1%, their wealthy is equal to 40% of the mass population and even the top 1% of the richest - their wealth has gone up tremendously during the pandemic time. China also has issues like population decline, regional disparity and how we can really handle this gigantic country with 1.4 billion people. They are all challenges to the Chinese government and I think to US government as well for the domestic issues. So I'm glad to see G20 has proposed the global minimum corporate tax. You know the multinationals, if they made money, then they may better help by repatriating profits back to their home country. And then in rust belt states or western states, because those groups that do not benefit from globalization, are voting on the anti-globalization and anti-China politicians that the Congress is filled with to pass all kind of bills bashing China. For example, there are already 650 Chinese companies now on American entity list. For Chinese government, even it has passed the new entity law regulation, China hasn't sanctioned any US companies. So there are a lot of things China was basically responding. China was trying to lift 800 million people out of poverty, to increase the middle class, rather than shrinking or stagnating the middle class. So maybe the two countries should concentrate on solving their domestic issues, rather than putting nationalism, populism on each other, blame each other. And China becomes a scapegoat sometimes. So how do you think we can work on that?
Lawrence H. Summers: I agree with you, but in all honesty, Henry, I found you a bit selective in the way you framed the issue. You emphasized ways in which the United States might scapegoat or demonize China. And I think I recognize that there were those risks. But I think it would be helpful for you and my Chinese friends to recognize that there have also been occasions on which China has engaged in attempts to subvert democratic countries in their homelands, not in China, in which China has used ostensibly private companies as tools of statecraft to pursue security of objectives. There have been rhetoric from China. You've never said anything that sounds like a Wolf Warrior, but many in China, including people at very senior levels have engaged in Wolf Warrior Diplomacy and it's a little bit hard for us to look past that. China is a place that is very capable of disciplining those who speak inappropriately, and Wolf Warrior diplomats have often spoken at very substantial length, and being able to repeat their positions on multiple occasions in ways that make it seem like those are the real positions of the Chinese government. I am happy to join you in the belief that populist nationalism is a toxin that both of our countries need to work hard to contain, but I'm not prepared to accept your statement where your implication that somehow this is an American problem without being a Chinese problem.
Negotiating trade between US and China requires economic diplomacy and find a more sensible framework
Wang Huiyao: I think we need to really look at both of our domestic situations. But I think, from trade point of view, maybe we should talk about trade, we still haven't seen the lifting of the sanction posed by President Trump – it’s still on. Now one year after President Biden in the office, this tariff is still on and recently we saw another 140 congressman asking to get more exemption for the tariff that applied to the American companies so that they can expand the scope of exempts of those tariffs. So what do you think about that?
Lawrence H. Summers: Henry you follow things very closely. China made a variety of promises with respect to its level of purchases. Have those commitments been met? You know they have not been met. So I think when we think about the tariffs and I'm someone who believes that we need to engage in economic diplomacy and find a new and much more sensible framework, than the one that was negotiated several years ago. But I'm not going to sit here and let you suggest somehow that the United States is doing wrong by maintaining the tariffs without acknowledging that China has completely failed to keep the agreement. Now I don't think that agreement is a very sensible agreement in the current context, so I'd like to see something new negotiated, but in all honesty, I don't think it's reasonable for you to suggest that the United States should simply unilaterally remove the tariffs without China making any change in a variety of its businesses that are subjects of complaint. Let me say something candidly to you and to my Chinese friends. When I was in government and I would meet with business officials. They would say it's completely unfair when we try to do business in China. And I would say I'm happy to pursue that issue with the Chinese government, can you explain it to me? And they would say no, I can't explain it to you because if you raise the issue with the Chinese government, they will retaliate against us and our situation will get much worse. I've had that experience with many, many American businesses. Now I understand and I'm sure that there are Chinese businesses that experience unfairness in the United States, but I am going to insist that if we are serious about trying to find solutions together and trying to find a basis for cooperation, that I won't allow any sense that somehow, the United States has been the one that's broken the agreements, or broken the rules, or done the wrong thing and China is an aggrieved innocent. I am not gonna allow that idea to stand.
And I think I would say to my Chinese friends that when I visited China for the first time as a tourist in 1979, China was a very poor country. When I visited China in 1991 as the chief economist of the World Bank, China was a developing but still poor country. When I had the great privilege of meeting for 5 hours with Premier Zhu Rongji, at a very delicate moment in the discussions with respect to China's joining the WTO in 1999, China was an emerging market that could rely on the rest of the world to understand its special problems. I think China needs to recognize that now with an economy that has grown tenfolds since the year 2000 that the situation is very different. And China can't just be asking for what others do. But it needs to be responsive to the needs of others. I'm not sure that that idea, I know you understand it very well Henry, but I'm not sure that idea is always present in all of the discussions of economic diplomacy that we have.
Wang Huiyao: ok, thank you Larry. I think we need to think on both sides. I was actually talking to Terry Branstad, the former US ambassador to China just about 2 weeks ago at a closed door meeting with the Heritage Foundation. He was telling me that actually at the agriculture purchase for phase one agreement, on agriculture commodities purchase from China like soy beans, poultry, pork has all hit a record high. I understand maybe during the pandemic, the phase one wasn't really a complete satisfactory one, but it still made a historical high.
Lawrence H. Summers: Yes a historical high, but no, not agreement with what was committed. So I understand that the world has changed and when those commitments were made, nobody understood the pandemic, but I think we have to enter into the conversation from the perspective of compromise and win-win, and not from the perspective of vilification.
Wang Huiyao: Now, my last question is that you were the president of Harvard very famously and you were the youngest Harvard professor at age of 28, a full professor, really making a history there. I remember I went to your lecture at Harvard campus. So how do you see the student exchanges between China and the US? Now China has actually, even though we have a lot of disputes and differences, China is now the largest student sending country to the United States. We have 400,000 students currently studying in the US and actually the US Embassy’s chargé d'affaires told me that just in 3 months of June, July and August last year, the US. Embassy has issued 85,000 visas for the Chinese student to go to the United States .
So you see, China of course, still sees US universities as a magnetic for the talent attraction. Also recently the US government has relaxed visas for the students to stay also. What do you see the exchanges, talent student exchanges for both countries? We also see, for example, the MIT professor, Gang Chen who had been charged by FBI was recently discharged by the court. So this kind of “China Initiative” that has made this atmosphere really tight. It's not good for the scientific community, professors, academic exchanges, even for think tanks. So how do you see these continuing people-to-people exchange, especially among the young people and students, and academic exchanges, and also this kind of “China Initiative” which is really not helping, from what we can see here?
Lawrence H. Summers: Thank you for asking that question. During my time as president of Harvard, I worked very hard to promote more exchange between the United States and China. I was very eager to see us welcome more Chinese students, both as undergraduate students at Harvard, as visiting students at Harvard and for more Chinese citizens to come to our graduate schools. I tried to lay the foundation that has moved forward overtime towards more distance education from Harvard, so that people could benefit from the Harvard experience, even when they couldn't come. And I tried to open Harvard offices and encourage as many students as possible to study in China. I have, each year, before Covid, made a visit to Beijing for the purpose of speaking to the Schwarzman Scholars Program at Tsinghua University. Because I have thought that that kind of exchange is enormously valuable in promoting understanding between the United States and China. I have welcomed post-docs from China and pre-docs from China to work in my research group. I have a very fine one who has graduated from Beijing University this year. So I'm a huge believer in these positive exchanges. But there do have to be some ground rules, and there have been excesses on our side that I think took the form of racial prejudice. Really, I think that's deplorable. But I think there also have been activities of Confucius Institutes. There have also been activities in which students functioned as spies in ways that were quite problematic, and occasions in which Chinese students have said they don't feel like they can fully participate in the dialogue in the Harvard classroom, because others from China will be in that classroom as well, and if they say things that are inappropriate, it will be reported back to the authorities and there might be consequences for their families. So I very much want to see much more interaction and exchange, but I think we do need to have some common understandings that surround that kind of exchange. Yes, there have been problematic things that have happened in the in the United States, you mentioned one with respect to the MIT Professor. But in the United States, in Australia, in other countries, there have also been things that were done that were problematic by Chinese visitors. And so I think we need in a spirit of cooperation to make this work because ultimately both countries should do better if there's more exchange.
The key word for US-China relations is co-opetition, to which commitment to the notion of reciprocity is essential
Wang Huiyao: Great, thank you Larry. So we announced that you are speaking with CCG today and we actually received some questions from media as well. We selected one from the China News Service, which is one of the biggest media here. They posed 2 questions. The first is that US-China trade volume hit a record high in 2021. Despite trade war, trade between China and United States has become more frequent. So what's your view on this? Second, the keyword that the US side over used for the current US. China relationship is competition. Do you agree with it and what's your keyword for the future development of US-China Relationship?
Lawrence H. Summers: If I had to use one word. I think the word I would use co-opetition to capture the idea that there's both going to be competition, and there's going to need to be areas of cooperation. I'm glad to see that the level of trade has expanded but we need to make sure that that trade takes place on an appropriate level playing field and we need to make sure that commitments are met in a reciprocal way. That doesn't mean that agreements don't need to be renegotiated as unexpected circumstances take place, but there does need to be a notion of reciprocity.
Wang Huiyao: Great, thank you so much Dr. Summers. My staff mentioned to me we had about 150,000 people from our network watching this online. We had actually covered quite a quite a lot of fields and it was a very constructive, but also frank discussion. You have analyzed the global economy, what are the areas of multilateralism to be strengthened and what are the key improvements that China and the US can make, and of course, also how we can really confront the global challenges like climate change and all those pandemic issues. I think you gave us again excellent points that are as good as you had done 3 years ago at CCG. Of course, we have differences and we need to have more dialogues. That's why we have set up this dialogue. Last year, we had already 20 prominent experts, opinion leaders on dialogue with me. So it's really a great learning exchange process to dialogue with you. So perhaps, in the end, what's your closing remarks? And maybe what’s your hope for the future? We really hope you can come to visit China again and visit CCG and so your final remarks, Prof. Summers, please.
Lawrence H. Summers: Henry, my first remark is to thank you for a very constructive, generous, and sharp, yet warm dialogue that we've been able to have. I am very much enjoyed it and learned from it, and will very much want to keep engaged with the CCG as we go forward. Second, I would say that almost always communication is better than non-communication and I hope that the extent of communication between our two countries can be increased. I think that one crucial aspect of successful diplomacy is what might be called strategic empathy. And too often in discussions between the United States and China, Americans make their points about what's wrong in China and China makes their points about what's wrong in America and nobody really tries to think about how a more constructive relationship can develop. My hope would be that that can be a greater focus going forward. I hope that my center at Harvard, think tanks that I'm associated with in Washington - The Center for Global Development can have more cooperation with you going forward so that in these areas, we can have a stronger relationship.
Wang Huiyao: Thank you Larry, actually you put a very good keyword - strategic empathy. We really need to understand each other, communicate, dialogue, exvhange and that's also the spirit of CCG. We want to be a platform of dialogue and we hope that we can have a better understanding so can avoid misunderstanding as much as we can. So, Professor Larry Summers, thank you again for speaking to us in your late evening, we really appreciate it and we hope you see you again.
Lawrence H. Summers: Thank you very much, Henry, bye bye.
Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.
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