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Following is the full transcript of CNBC's interview with Fu Chengyu, former Chairman of Sinopec at the 2017 Singapore Summit. This interview broadcasted in Asia on Tuesday, 19 September.
All references must be sourced to a "CNBC Interview".
Interviewed by Amanda Drury, Contributor, CNBC.
Amanda Drury (AD): Has the North Korean crisis affected the business strategy of companies like Sinopec or CNOOC or other companies that have great significance to the Chinese economy?
Fu Chengyu: The North Korea issue has become an international challenge. This is not just business as every other people have concerns about what's happening there. And I believe that international efforts led by UN should be enforced so the issue be solved peacefully.
AD: China supplies most of North Korea's fuel needs, energy needs. Do you think that the UN should have imposed a full oil embargo?
Fu Chengyu: I think that was in the past not recently. And since the UN solution on the North Korea issues Chinese government has extremely implemented those solutions. And currently you see that the China worries strictly stick to the UN's solution.
AD: So you are part of an organization that advises the government on business and political matters. What would you advise the government now to do towards North Korea to make them stick to these sanctions?
Fu Chengyu: The organizations that are immediately impacted in China lack political adviser to the government. However that we are focusing more, as a member of this organization, we are advising more on the policy implementation in the country, on economics than other areas. And North Korea issue is not very heavily hot discussions there. But people do concern about this. I think the government repeatedly make announcement about the Chinese position towards North Korea issue. But I see in this representing the Chinese people.
AD: There is uncertainty about the upcoming party congress. What can international investors expect?
Fu Chengyu: International - I'm asking the same question. However I do understand some of the friends, the former partners coming to China when we're talking about that they have very high expectations to come watch from China after 19th Party Congress, that's mainly on how China can continue to pushing globalization, free trade and openness to international investors. I think all those areas will be addressed by the 19th Party Congress.
AD: It's interesting that you said this will be globalization and openness. When I say the United States you have a president Trump who's been more protectionist. Just this past week, Mr. Trump blocked the purchase by a Chinese private equity company of Lattice Semiconductor. What do you think about the trade tensions between the U.S. and China?
Fu Chengyu: I think if you look back in the last 20 years, China's progress was because we are open for foreign investment and we are supporting the globalization and free trade. So for those of the countries are supporting this they are benefited. So I believe whatever the countries when they have close their doors when all trade wars they themselves will be harmed. So this will take time. I believe this when people are being hurt and then they were thinking whether or not we are not doing it right. So I don't believe that the U.S. led by President Trump and so will be really benefit the U.S. but this will take time. And I think eventually they will find out cooperation is a way to lead the whole global economy going forward.
AD: In the meantime do you think Beijing will retaliate against the U.S.?
Fu Chengyu: I don't think that the U.S. and China will take trade war. They certainly have reactions but they will not be like retaliations or trade wars none of them will be benefited.
AD: Let's talk about oil prices because with oil WTI below $50 for an extended period it's been like a global tax cut. It's benefited many countries especially net oil importers like China. What is your outlook with your vast experience for oil prices?
Fu Chengyu: If you look at the last four-five years of oil price we understand the price around $40-$50 or even $60 per barrel will be the sustainable price for the oil industry. Which I mean that this price if higher than $60 say $80 some people already expected. Yes it might be just short period of time. If you want this industry to be sustainable, the price will not be as high as most people expected in the past because one – the supply capacity is a lot much more that the current economic demands. And second the cost because of the technology drew it down very much in the past years. And we knew that the shale oil, shale gas came out but maybe not far some other things that might come out that are a lot cheaper than we expected. This is not just including wind and solar energy. There is something else that will come out especially what I'm very encouraged the clean coal technologies if we come out – a lot cheaper more clean very high energy efficiencies than what we know before. So those if you consider those replace, not renewable, but this is what they say that's replicable energy comes out will push oil, fossil fuel, oil and energy price will continue to go down. So there may be if you look long-term say there's other 20 billion populations might need industrialization in the long run. And then they may have a higher requirement on the energy sector. Even with this as energy I mean from a resources point of view energy is not an issue anymore.
AD: So if I can pin you down just 12 months' time from now where do you expect oil price to be?
Fu Chengyu: I was asked repeatedly in the past when I was in the states and either by the media or by our investors. But I told them I make full calls but none of them are correct. So but based on our understanding about the current supply and dollar in the future we see there're major forces and that is push oil price up or drag down not much changes. So for next years will I believe prices still continue to remain low somewhere at 40-50. And this is not just the price for today and this price will be for quite some time not just for next year.
AD: You mentioned Mr. Fu, the government's push for cleaner energy, hoping to reduce pollution. Where does that leave companies like SINOPEC and CNOOC?
Fu Chengyu: This is making it conventional, traditional oil industry or and chemicals industry to transform to a new state where you need to consider not just environmental issues and but also climate issues and the company really need you thinking of how sustainable growth over the next 20 or 30 years. You have to transform what you are doing to a future state. This you have to consider if you consume the energy – More energy efficiency, less discharge, less CO2. Not just discharge it also you include concluded in your products. So CO2 management is also one of the ways for the energy company or the chemical company. So there's a transition even not easy but you have to face for your future sustainable growth.
AD: Companies like SINOPEC, state owned enterprises in China do need to streamline which could potentially be mean many job losses. Can the Chinese economy grow fast enough to absorb potential job losses of that scale especially as the party can't afford to have high joblessness?
Fu Chengyu: I think we might look into two areas. One when you streamline our operation and that does not mean you have to lay out a lot more employees and in certain industries or companies they have to lay off some of the employees. If you put them in a society or community that does not mean they will not have other jobs. So in China as a whole if you consider people always are able to create value. The question was, is the, either a company, business or the government you need to set either platform that let people to create value. People or not like any material things if you don't use them they have they don't have value. But the people always say they are most important value part they can create value. So in China we see in the past years China transitioning for quite some time already and the industries, all the businesses are streamlining every year. But the jobs creation is also very strong. You see considering the overcapacity in China. You see the different industries, different vendors they need to cut a number of their employees. But you'll see the creation of new jobs in China. Every year there's over 10 million. So this is the most important part that when there is a new technology which need less people to work on that same piece of a job. However there's other jobs need to be done by some new either laborers or workers. So always thinking people are the most important elements that create value.
AD: What is your outlook for Chinese economic growth?
Fu Chengyu: I think a lot people were worrying about the slowdown of the economic growth in the past years. But I'm quite optimistic. I'm not optimistic because of say six or seven or eight is good but six even five is much good speed for China because the size of the economy is pretty large already. Second, we have a lot of problems that we need to release. I mean problems we need to raise the bubble. So this is something we need today to be done. And with a quality growth is the most important part that when we talking about the growth in China. We are not just pursuing just a figure six, seven, eight, might not be good. Five is well enough if we have a good quality.
AD: Quality not quantity if you want sustainability. Mr. Fu my last question pertains to Qatar because as you know there is an ongoing dispute which is affecting the LNG exports from this is a major customer and is China thinking about or even actively trying to renegotiate contracts? Are they using that as leverage to get a better deal from Qatar?
Fu Chengyu: We have a long term cooperation with Qatar energy sector and we buy a lot of LNG from Qatar in the past especially when I was in CNOOC we buy LNG from Qatar. So this is not something new and I believe they have certain potential of supply more LNG to the world. And this is not just talking about because of the issue between Qatar and the Islamic world. But I think as a common business partner we will continue to do our business and this is not as a business leader impulse I do not want to use this dispute among them as a leverage for us to get a better deal in our deals with them or with other partners in the past are always the fair deal because everybody is a winner. We don't want that any loser to be a partner.