WHEN: Today, Wednesday, April 29th
WHERE: CNBC's "Street Signs"
Following is an unofficial transcript of a CNBC US EXCLUSIVE interview with Chinese Commerce Minister Chen Deming today, Wednesday, April 29th during CNBC's "Street Signs" (2PM-3PM ET).
All references must be sourced to CNBC.
DEMING: I'm also very happy to be interviewed by you.
BURNETT: Well-- your time is very valuable, sir. So-- I will-- I will-- we'll go ahead and get started here right away. And-- I wanted to start off first, though, with the reason why you're here in the United States. Mr. Chen, I know there were about $10.6 billion worth of DLs (PH) announced between American and Chinese companies as part of your visit. And-- we know these visits are-- that's when these announcements get made. But-- given that we've seen such a drop in trade ties and deals, do you think that these-- that this dollar figure lived up to your expectations?
DEMING: The main objective of my visit is to implement the consensus reached by President Obama and President Hu Jintao during their visit-- during their meeting in the London G20 Summit, and their consensus, which is-- to build a positive, cooperative, and comprehensive relationship between China and the United States in the 21st century. We are here to have discussions with the Department of Commerce of the United States, the National Economic Council, and the USTR to try to work together to cope with the financial crisis and resist trade protectionism and enhance trade and economic cooperation. During my stay, or during the stay of my delegation, which is a government official delegation in the United States, I've been told that there are also three business delegations organized by respective chambers of-- of commerce of China in the United States. One delegation is for trade promotion relating to tra--economic-- electronic and mechanic products. One is for the promotion of trade in light industry products and foodstuffs, and one delegation is for investment promotion. They have been staying here in the United States for many days visiting 16 cities in 14 states. The figures about the deals that they have signed that I've got are greater than what you have just cited. I've been told that a total of 15 billion U.S. dollars of Chinese purchase have been signed and also a bit more than $1 billion of Chinese export deals to the United States were signed, and $1.8 billion of Chinese investment in the United States were signed.
These are purely business activities. And the-- deals were signed based on the decisions of the businesses themselves. However, I feel also very delighted to hear about those deals. Because this shows that in this critical juncture of the times, it is not the Americans themselves who are buying American, but the Chinese people also buying American.
This also shows that the two countries are working together to resist trade protectionism and also send a positive signal to the outside world that in these difficulty times, or difficult times, of financial crisis, only through cooperation between countries can we weather the difficulties.
BURNETT: Minister Chen, you said that-- trade measures-- when you wrote-- an op-ed in the Wall Street Journal yesterday-- you did say, quote, "Trade measures by the United States against China are on the rise." What specifically are you talking about?
DEMING: Over the past few months, we have seen that the number of-- trade defense cases of the United States towards China have-- has been on the rise. These measures include NT (?) dumping and countervailing investigations, as well as cases currently under the consultation mechanism of the World Trade Organization. Especially that-- in recent times, the United States has been making preparations for accepting petitions from the U.S. industries relating to Chinese oil well pipes and tires.
BURNETT: And so, in-- in terms of the-- the-- what this has done to trade between the U.S. and China, you also noted in that op-ed in the Wall Street Journal that American investment in China is down more than 19 percent. Obviously, exports from China to the United States are down anywhere from 20 to 30 percent. How much of that drop do you believe is due to the economic crisis? And how much of it, in your opinion, is due to-- potential American protectionism such as the provisions in the American stimulus bill for American companies to buy American-made goods?
DEMING: In my article, I said there has been a decline in U.S. investment in China as well as, I know (?), American bilateral trade. And it is mainly caused by the financial crisis. And of course, the drop in the price of commodities is another reason for the decline.
I can tell you that-- in March as well as the early half of April, we have seen that the decline in China/U.S. trade has slowed down. So, this can be some good news for you. And I think that as long as the two countries deal well-- when it comes to trade frictions and trade protectionism, and also exercise caution and restraint and resist protectionism, then the trade between the two countries will begin to pick up.
And I think that the two governments have both launched government-led economic stimulus plans. And I think that the companies from both countries should be given access to each other's economic packages, stimulus packages.
BURNETT: Is there great frustration in-- in China that-- and-- and-- and as part of your mission to the United States, that the United States stimulus plan-- did have explicit references-- to buying American, especially when it comes to big infrastructure projects?
DEMING: Of course, I don't endorse such an expression. And however, as that provision was finally passed, there was a qualifier added to it, which is that-- their measures of buying American should also comply with existing, prevailing international rules and regulations. So, this shows then a-- in a formulation of the provision, there actually has been a balancing between different forces. And it shows a progress.
However, China is not a member or signing party to the government procurement agreement. China's currently applying for admission into that agreement. So, China is-- so, the-- provision of buying American of the United States certainly is not of positive meaning or help to China. But China is still willing to participate in those projects under the stimulus package, and no subject (?) to the buying-American clause.
However, in China's economic stimulus package-- we have-- contents relating to-- the technology of telecommunications or wireless telece-- telecommunications. We are now transitioning into the 3G (?) technology for mobile phones. And we have allow (SIC) companies to choose freely from different standards, mainly from TDS-CDMA (?) to CDMA-2000, which is a standard applied here in the United States. In fact, in the buying mission that we are now here seeing and announced (?) today, there is a company which is, or which has, sourced-- some telecommunication equipment from the United States to try to build the 3G network in China. So, we do not exclude American companies from participating in China's stimulus package.
BURNETT: Mr. Chen, the stimulus packages in the United States are two of the-- and China are two of the biggest in the world by any measure, numbers that were staggering just a few months ago when they were announced. I spoke to a couple of CEOs who operated the U.S. and China this week. And I asked them, have they seen any stimulus money yet? Their answer, not in the United States, but yes they have in China.
And we have done-- quite a bit of coverage about how China's stimulus plan is different than the United States. For example, you gave coupons to individuals that they could only use to buy certain things like a washer or a dryer to prevent people from just saving that money and to force it to be spent in the economy. What would you say-- in your honest opinion, that the Chinese stimulus plan has specifically done better than the American one?
DEMING: I will say that the U.S. economic stimulus package is different from that of China's. But there is also-- there are also something in common. I would like to share with you what is in common first. In first point, is that both countries have adopted proactive fiscal policies and a moderately flexible monetary policy. So, they all fall into the category of-- an expansive or-- expansionary macroeconomic policy.
The second commonality is that-- both countries have-- included the investment in-- in infrastructure as part of their stimulus package. These inves-- investments include-- the building of bridges, roads, as well as investment in health care. However, the differences are the following. First, the conditions that both countries face when they adopt such economic stimulus packages are different. In last September and October, when the financial tsunami first hit China, the chine-- Chinese financial sector actually had not seen any problem. So, in China's stimulus package, our focus mainly is to stimulus-- stimulate domestic consumption and also increase investment on domestic infrastructure. Also, our efforts are to help medium and small-sized enterprises to restructure their own-- they le-- to change their structure and improve their technologies.
However, in the United States, the difficulties are more complex. First, the government need to spend money to bail out the banks, to help them digest the bad banks (?) and to increase liquidity. Secondly, the real economy enterprises, for example, the automobile makers in the United States, are also seriously hit. And therefore, the government needs to spend money to bail them out. So, that makes the stimulus packages between the U.S. and China-- different. However, the financial crisis is still spreading and worsening. And both countries need to intensify their efforts when it comes to economic stimulus packages. Our goal is the same. That is to say that we need to use-- government-- stimulus packages to drive-- private-sector investment. And only when private-sector investment picks up can the economy-- really picks up. So, we hope that the-- American economic stimulus package could take effect as soon as possible. And so, that the world economy could recover as soon as possible.
BURNETT: Is China currently considering-- making its stimulus package bigger? I see (?) right now, it's been reported at about 600 billion. Is China currently thinking that they may make it significantly bigger?
I'd like to first explain to you that in the total package of 600 billion of China's-- package, only one quarter of that is actually government fiscal money. And we hope to-- use that one quarter of-- 600 billion to-- trigger, or to drive-- private-sector investment.
China will, of course, continue its efforts to-- enhance-- economic stimulus. However-- it may not necessarily through the expansion of-- fiscal-- investment from the central government. Rather, we can resort to other means. For example-- to further open the investment market to welcome private-sector investment, and at the same time-- we can also encourage consumers to spend more.
At the same time, we will stee-- speed up the recycling of used-home appliances and other consumer good in house-hoods (?), so that on the one hand, we can contribute environmental protection, but-- at the same time, we can also stimulus com-- stimulate consumption.
And of course-- in addition to the policy that we have already implemented, which is to subsidize rural house-hoods to buy home appliances, we will consider expanding the coverage of those home appliances that are included in that scheme. And we are also considering rolling out that scheme to-- into cities.
We don't know-- when the current crisis will hit bottom. And we don't know how long-- will the economy really pick-- begin to pick up. So, we will continue to-- substantiate and improve the economic stimulus plans.
BURNETT: And so, just to confirm, to make sure I-- I understand-- when you say you're considering rolling out some of those-- I guess we use the word "coupon," but certificates to-- buy more home appliances and perhaps-- spread that from-- from rural availability into the cities-- if you were to do that, is that a number that the Chinese government would announce-- as part of a quote, unquote, "stimulus package?" Or is that just a program you would announce, not necessarily with a number attached to it?
DEMING: We are not that far yet when it comes to the formulation of that policy. But first, we think that we are going to-- encourage and also-- improve the-- income of low-income families in cities, and encourage them to spend more. And at the same time, we will speed up the recycling of old home appliances in houses in the cities. Because in ma-- many houses in the cities, they have-- two to three old TV sets. So, we need to have these TV sets recycle (SIC) so that these families will start to purchase new ones.
ERIN BURNETT: One-- this does raise a question, one very interesting analysis that I had seen about the demographics in China and the impact of the one-child policy-- is that some of the reported savings rates are significantly higher-- in provinces where there are more boys than girls-- I guess the theory being that families are saving so that their-- their sons are more attractive for marriage. A real question from this though, is do you believe that you can stimulate a fundamental and long-term change in the Chinese savings rate given the demographic concerns in China?
DEMING: I've been staying in China all my life. And I've-- serving as mayor or governor in different municipalities and provinces in China. And I haven't noticed such a phenomenon where-- families or house-hoods save more for boys than for girls. In fact, in cities-- girls sometimes-- spend more money than boys do. However, in some remote areas in the countryside, we do see-- that some families save more money-- for be-- for boys-- who will-- who are going to be-- marrying.
However, these people in the remote countryside still are a minority. And-- coming back to the question of savings, I think that-- we would like to set (?)-- a group-- savings rate in the two categories. The first category is savings by residents, both living in the countryside and in the cities.
And a second group is savings-- by enterprises or businesses. Some foreign economists critics try-- cri-- sometimes critis-- criticize China-- as-- not being balanced in terms of its savings and spending, and complain that China saves too much and spends too little. I think that I am trained in economist (SIC). And I've been dealing with economic use (?) for a long time. And according to statistics, over the past ten years-- we do-- have witnessed a rise in Chinese savings and also a decline in spending. But the rise in saving is more in the-- mainly because of the rise in savings by businesses, rather than residents. This is because-- enterprises-- who are monopolizing on resources-- have accumulated a rise in profits. And therefore, they save more. And the ri-- the savings rate-- for residents over the past ten years actually has been growing approximately at a same space-- pace as the economy has been growing.
In addition, the culture of the Chinese people as well as the Asian peoples, are different-- is different from that of the west. Asian people tend to be more frugal and think for the long term. And also-- also, China and-- the Asian countries are at different development stages-- from-- western countries. And-- they have to-- spend more money on their children's education, spend more money on medical-- services and more money-- for their retirement life, a life after retirement.
BURNETT: Do-- do you--
DEMING: And-- and the-- the-
BURNETT: Oh, sorry.
DEMING: --the Medicare-- the health care-- level as well as pension-- or social security level of China-- is still less developed than that in the United States. So-- in order to encourage people to spend more, Chi-- the Chinese government-- has-- been trying to reform its health care system as well as pension and social security system.
BURNETT: Do you have a target savings rate that you are-- that over the longer term that is your goal-- a ten percent, 15 percent, five percent? Is that something that you've talked about in the Chinese government?
DEMING: I think that-- the money belongs to the Chinese people. So, it's up to the public to decide how much of their money is to be put in a bank and how much of their money they're gonna spend.
BURNETT: It-- one of the main topics everyone around the world is talking about right now of course is the-- swine-flu situation, and a potential pandemic there. Obviously, this is something China had to deal with firsthand when it came to SARS, and how the Chinese government-- ended up handling that. Some that I have spoken to-- say China must be concerned with 800 million people potentially living on farms, living near livestock, in particular pigs and chickens. Does China have a specific plan to deal with a potential swine-flu outbreak?
DEMING: The time that the swine flu broke out-- actually was a time that I am actually in the United States. However, I'm indeed concerned about a situation back home in my motherland. So far, there is no reported case of swine flu in the Chinese mainland. However, both governments at central and local levels in China have adopted timely measures-- to ma-- take preventions for the epidemic. And also, we have a response mechanism for any emergent cases. Chi-- as you have rightly pointed out, China has some good-- good experience dealing with the SARS. So, we think, or I think, we'll be coping with the current epidemic pretty well. However, in-- the Hong Kong SAR (PH), there has been one suspected case. However, it's up to the experts to finally determine whether or not it's a confirmed case. And when it comes to Mexico-- we are now trying to establish contact-- or we are contacting-- the Mexican authorities to try to provide assistance to them.
BURNETT: Minister Chen, thank you. I appreciate your being-- willing to do this.
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