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CNBC Transcript: Former U.S. Treasury Secretary Hank Paulson Speaks with CNBC’s Michelle Caruso-Cabrera Today on “Closing Bell”


WHEN: Today, Tuesday, September 22nd

WHERE: CNBC's "Closing Bell"

Following is the unofficial transcript of a CNBC interview with former U.S. Treasury Secretary Hank Paulson on CNBC's "Closing Bell" (M-F, 3PM-5PM ET) today. Video of the interview will be available on

All references must be sourced to CNBC.

MICHELLE CARUSO CABRERA: Thanks so much for doing this. Have you spoken with President Xi? Can you give us any insight into what he's going to tell these CEOs that he's meeting with here?

HANK PAULSON: I have not spoken to President Xi in advance of the meeting. This is a very important meeting for the CEOs that are there, both the U.S. and the Chinese CEOs, because there are questions in each of our economies and of course business leaders have really provided the balance for a U.S./China relationship for many years. And China is very important to the multi-national companies. And their voices haven't been quite as loud in support of U.S./China relations because the business climate is becoming more difficult, they have concerns not just about the economy, but concerns about the pace of reform in opening up. And concerns about whether some of these new laws and regulations are, you know, which are limiting access the concerns about the intent behind that. So what they're really interested in hearing is a message that this is about reform and opening up to competition.

MICHELLE CARUSO CABRERA: Just this morning, in fact, your successor Jack Lew published an op-ed where he raised a lot of those very concerns. We talked about the way they've recently handled the currency, the-- efforts to prop up the stock market. Whether it's a half-hearted reform of state-owned enterprises. He raises a key question. Is President Xi committed to market reforms, deep market reforms in China or not? What do you think?

HANK PAULSON: Well I think that President Xi is very serious about market reforms. He inherited-- an economy of reforms that stalled. He laid out a very expansive blueprint for the economy, where the market was going to be decisive. But sometimes, people make the mistake of assuming that in a country like China, with an authoritarian government, where a leader has so much-- control in terms of-- political control, that it's going to be easy to get things done. Because in China, there has always been policy plurality, a lot of different views on policy. And there are strong, vested interests-- that-- are—going to be difficult to overcome. So I think-- I think it's going to-- it's going to take a while. And-- as you alluded, the key thing is competition. That is what is very much in China's interest. Because they have-- an economic model where-- that is-- running out of steam. And they need to place much more reliance on domestic-like growth, domestic consumption, higher value-added manufacturing, services, and how do you get that? The way you get that is opening up sectors in the economy that have been closed to the private sector, to private-sector competition. And that's how you get, you know, the kinds of efficiencies you need, and that's how you get the kind of job growth they're going to need. And the only way they have real competition that's going to benefit the Chinese economy is to open up to foreign competition. So you have-- the best businesses and the most efficient businesses compete-- competing there. So that is the key. That is what the-- U.S. businesses will be pressing for. They will be-- they will be making that case. And-- one other thing that's-- I think interested in one lever for that would be a bilateral investment treaty between our two countries. And this is something that-- Paulson Institute got a hundred CEOs to actually sign letters expressing support for that. Because what you often find is the reformers in China use agreements like this as a lever to open up to competition, just like this-- the legendary premier Zhu Rongji did at--the time of the WTO. So again-- I think this is all about competition and opening up-- you know, opportunities for U.S.-- and other foreign companies to compete, with I think is going to be very necessary for China if they're going to make the transition they need to make as-- they reboot their economy.

MICHELLE CARUSO CABRERA: You alluded to the other big issue, besides this-- the- pace of reform. The impositions of the Chinese government is talking about when it comes to technology companies doing business there, keeping their data there, should U.S. companies agree to those in exchange for market access?



HANK PAULSON: Well first of all, when you say technology companies, there's a lot of technology issues that are conflated. So let's unbundle them a bit. Okay. So there is a-- first of all, there is a national security law in the U.S. Let's begin with the U.S., we have an economy that I think it has benefited greatly by being open to foreign investment and competition. That's been one of the hallmarks. We-- we do have-- a CFIUS law, which is a committee on foreign investment in the U.S. Which-- limits foreign investment if it can undermine national security. And so we, you know, we use that. I think we use it appropriately. A number of Chinese companies believe that it's-- being used-- in ways which disadvantage them. China has-- put forward a new national security law. So there's big questions about how that is going to be implemented. I believe and, you know, it-- many U.S. companies believe that it-- is very important that we not use national security-- countries not use national security as a excuse to cordon off-- big sections of their economy for competition. So-- companies like IBM, and Microsoft and others that have been providing very important technology to help China manage their supply chains or-- you know, banking systems-- believe that this is very important. And I think it's very much in China's best interest to continue to use U.S. technology. And so that's an issue. I think it's gonna be an issue-- in China and really all over the world, which is going to be how much, as countries balance national security, with economic security after Snowden, how this is done. So that's an issue-- I- believe reformers in China understand how important it is to continue to keep big parts of that market open. There's another set of issues which have to do with the internet and have to do with privacy. In the U.S., those issues center around, you know, the debate about the extent to which-- law enforcement, either for domestic security or international security, are gonna use technology. And you know, companies-- all major governments-- agree in espionage or one sort or another where they gather information. So again, there's a whole series of issues around that. And—around data collection-- you know, around the internet, you know? The extent to which we're going to continue to have a global internet, or whether we're gonna have segmented national internets joined by one internet, which I think would be a real shame in today's information age. So this is a complicated-- it's a very complicated area for the U.S.-- technology companies right now, because we're a leader in this-- this area, and I think it's-- not only to the advantage of the-- to the advantage of the United States, but the whole rest of the world-- we continue to have-- innovation and that U.S. companies be allowed to compete around the world.

MICHELLE CARUSO-CABRERA: So part of that then, I can imagine as an American CEO, it's a major dilemma. How much do you give into China's rules, knowing it helps them stay authoritarian, in exchange for market access?

HANK PAULSON: Well, that's an issue clearly, it's a complicated issue for U.S. CEOs operating in China. And I would say in today's world, not just China.


HANK PAULSON: I just think it's going to be an issue everywhere. Because there are national laws virtually everywhere. And some, you know, are a lot tougher than others. And one of the interesting paradoxes, when you look at China today, is you have a country that on the one hand is moving to have more flexibility and more competition in the economy. And let the market be decisive. At the same time, they're tightening up with a political system. And with the press. And we look at that and say, "Those two things don't go together." There's a conflict there. To Xi Jinping, who is trying to drive reform, he views the party as being the key. And he takes a very dim view of anything that undermines the party. Now, I look at the world, in today's world, and the age of information and you know, and as someone who's run a global company and know that when you run a global company and you're innovating, you need to be connected, you need to know what's going on everywhere. And I don't know how you do that if you don't have, you know, an open flow of information. So I think ultimately those two are in conflict with each other. But I think that the CEO session today, or tomorrow is going to be I think really focused on the important role each of our two countries have in driving global growth. And because there's a fair amount of differences, and you have pointed to some of the differences we have, and there's differences, a good number of differences, but the common interests far outnumber the differences. And I'll tell you, we turn our back, or ignore this economic relationship we have with China at our own peril. Because you know, all of our challenges become much greater when there's turbulence in the Chinese economy. If our two countries can work in complementary ways and do some things to thicken this relationship and increase bilateral cross border investment, increase trade, and I'll tell you, that has been something to celebrate, the way that has grown over a long period of time. There are always bumps in the road. And I tend to focus on the fact that this is a real opportunity. And it's an opportunity for a head of state who is very comfortable talking with business leaders, that's had a long history in China of working with the private sector to hear about the opportunities and to hear about the challenges. And so that's one of the things I'm looking forward to. And a very candid conversation.

MICHELLE CARUSO-CABRERA: President Obama recently raised the possibility of sanctions against China related to cyber espionage. Do you think that's a good idea? What – if you were still at the White House, what would the advice you give and what advice would you give to China?

HANK PAULSON: I would say this. I don't – all my advice I give privately now. And so when I was there at Treasury, I liked it when people gave me advice privately. And it didn't give it to me on television. But what I'd say about cyber is cyber security is a very big issue. And I would say when you look at our economic relations, the most troublesome and economic issue is corporate or commercial cyber theft. And that puts a – and I think it's the biggest risk when we look at U.S./China relations. And ultimately I think it's just very, very important for our two countries to come together, because we need a global regime, a global economic regime that's going to be able to be enforceable and to curb and to punish cyber theft. And I think you're only going to that can only be done on a multilateral basis. It's going to be a lot easier to do that if we're working with China. And ultimately, China has a need to do something here too, because I don't see how the global economic system can function if you ever have a cyber theft.

MICHELLE CARUSO-CABRERA: You're a successor of Goldman Sachs. Lloyd Blankfein announced this morning he has what is a highly-curable form of lymphoma. Have you spoken with him? Reached out to him at all?

HANK PAULSON: I will just say, I think Lloyd has got great support from so many friends, you know, all over the world, from people at Goldman Sachs. You know, his whole life, you know, he was a – you know, his father was a postal delivery man in Brooklyn. His whole life has been about overcoming obstacles. That's what he does. And he's going to overcome this.

MICHELLE CARUSO-CABRERA: What should I have asked you? Or do you expect me to ask you, or anything you wanted to say?

HANK PAULSON: I think you've asked the right questions.


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