From Horses To High-Rises: An Insider 'Unmasks' China's Economic Rise
When Henry Paulson first visited Beijing in 1991 as a banker, cars still shared major roads with horses.
"I remember getting into a taxi that drove too fast on a two-lane highway ... [that was] clogged with bicycles and horses pulling carts," says the former secretary of treasury under George W. Bush. "You still saw the hutongs — the old neighborhoods [with narrow streets] — which were very, very colorful and an important part of life."
A 2006 photo of former U.S. Treasury Secretary Henry Paulson meeting with Xi Jinping in Hangzhou, China. Jinping became president of China in 2013.
Since the early '90s, Paulson has returned to China more than 100 times, as the head of Goldman Sachs and U.S. Treasury Secretary. Along the way, he has watched China become the world's second biggest economy.
"Now the country puts up half of all new buildings on Earth. It consumes and produces 50 percent of the cement in the world, 50 percent of the steel, the coal," he says. Most of the old hutongs have been replaced by glass and steel skyscrapers.
Eventually, China will likely surpass the U.S. and become the largest economy in the world, Paulson says. "But it's also a country with monumental challenges. There's as much danger in overemphasizing China's strength as in underestimating its potential."
In his new book, Dealing With China: An Insider Unmasks the New Economic Superpower, Paulson describes some of the major challenges China faces as its people become richer.
At the top of that list is government censorship. China has the fastest-growing urban population in the world, with nearly 650 million people living in cities. At the same time, the government continues to severely limit political freedom.
Paulson says that approach isn't sustainable.
"Today you have the president of the country emphasizing the party being tougher on certain human rights, and on the media and internet — toughening up censorship," he says. "I look at this and I tell them, 'You live in an information economy, and you're not going to succeed if you close people off from information and innovation.' "
Both publicly and privately, China's president — Xi Jinping — is very direct about his own views on this topic, and his colleagues' views.
"They don't aspire to have a Western-style, multiple-party democracy," Paulson says. "They don't aspire to have Western values. Jinping believes that the future of the country, the stability, is dependent on a strong Chinese Communist Party.
"I feel quite strongly that won't work long term," Paulson says. As more people prosper, they'll demand information and rights.
But Paulson does give the government credit for listening — and responding — to its people.
"The Chinese leadership over time has been pretty pragmatic in terms of understanding the mood of the people," he says. "Today they are focused on the things people care about the most: fighting corruption; restoring property rights to peasants; working to clean up the environment; working to ameliorate some of the income inequality."
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Transcript
STEVE INSKEEP, HOST:
Henry Paulson - Hank to some - first visited China as an up-and-coming executive at Goldman Sachs. He's since returned more than 100 times, eventually as Goldman's CEO and later as U.S. treasury secretary. Paulson is now the author of a new book, "Dealing With China: An Insider Unmasks The New Economic Superpower." And he's in a unique position to talk about the changes in China since that first visit almost a quarter-century ago.
What was the country like back then?
HENRY PAULSON: In '91, development had already started. But I remember getting out of the airport and getting in a taxi that drove too fast on a two lane highway. And on the same road, it was clogged with bicycles and horses pulling carts and so on. And I - you still saw the old hutongs, the old neighborhoods, which were really very, very colorful and an important part of life in the markets. So it was a very different country in many ways than it is today. But it was on the way to becoming the country that it is today.
INSKEEP: We should explain for people, when you say a hutong, that's a neighborhood with very narrow street or maybe, really, no streets at all - more of a sidewalk between.
PAULSON: Yeah. You've got it. And I remember one of the adventures I had trying to ride a bicycle and just narrowly missing cars and parked cars and other bikes. And then, at the same time, in Shanghai looking down the Bund and looking at all these edifices of these important Western banks, U.S. banks, British banks, that had all prospered prior to the revolution.
INSKEEP: The Shanghai Bund - help me out here. That's an area of Shanghai with a lot of impressive buildings from the early 20th century, which I guess is now overshadowed, in a sense, by much larger, glassy towers, right?
PAULSON: Oh, absolutely. The Pudong area in Shanghai is just all sorts of huge buildings. And it just reminded you of sort of a stark image for a banker looking to get started here, remembering that once before you had all these banks and, of course, the revolution had come and they folded.
INSKEEP: Is the China that you knew in the '90s often on your mind when you think of the China of today?
PAULSON: It is sometimes on my mind. That's for sure because as I look at the China of today, it's about 1.4 billion people. This is a country that is the second-largest economy in the world. This is a country that puts up half of all new buildings on earth. It consumes and produces 50 percent of the cement in the world, 50 percent of the steel, the coal. It's also a country with monumental challenges. So I explain to people all the time that there's as much a danger in overemphasizing China's strength and exaggerating it as there is in underestimating the potential.
INSKEEP: Just about every time you're going to China, you're going to meet somebody. You write that the point of many meetings with Chinese officials is not anything that is actually said, but just the fact that you met the official. Is this how it works? You'd meet the top guy, and the fact that you'd met the top guy conveyed you a certain authority when you went to the people further down to try to get things from them?
PAULSON: It definitely helped. People all the time say to me, well, you know Xi Jinping, who's the president of China so well. Next time, would you please ask him to do A, B or C.
INSKEEP: (Laughter).
PAULSON: It's not just as simple as go ask the emperor, but that helps.
INSKEEP: So you've known Xi Jinping for how many years?
PAULSON: It's gone back a ways. When I made my first trip to China as treasury secretary, I stopped first in Hangzhou and then Xi Jinping arranged to have me meet at West Lake with him - talk about symbols. It took my breath away. This was the historic meeting place of President Nixon and Zhou Enlai. But symbols are very important in China, but the substance is also very important.
INSKEEP: Well, let's talk just a little bit about the substance if we can. China has this system that is both inspiring and disturbing to many people in the world because they've had such economic growth while continuing to limit severely political freedoms. Having observed this system so much over the years, do you believe that system works?
PAULSON: I think the question is, is it sustainable? And I don't think it is. I think they'll have to change. So you have, today, the president of the country emphasizing the party and being tougher on certain human rights and on the media and Internet and really toughening up censorship. And I look at this and I tell them, you live in an information economy. You're not going to succeed economically when you close people off from information and innovation.
INSKEEP: What has Xi Jinping or other Chinese leaders said to you when you have said to them that their political system is not sustainable?
PAULSON: Well, he's a very direct about this. He's been direct publicly and privately. They do not aspire to have a Western-style multiparty democracy. They don't aspire to have Western values. He believes that the future of the country is dependent - the stability is dependent on a strong Chinese Communist Party. Again, I feel quite strongly that that won't work long-term. And as more and more people in China become prosperous and go to the cities, they will demand more rights.
The Chinese leadership, over time, has been pretty pragmatic in terms of understanding the mood of the people. And today, they are focused on the things that people care about the most - fighting corruption, restoring some property rights to peasants, working to clean up the environment, working to ameliorate some of the income inequalities. They have effectively ended the one-child policy. They've ended these forced labor re-education camps. So they're responding to the people. And I believe, whether it comes from below or from above, that this system will have to change over time.
INSKEEP: Henry M. Paulson Jr., the former treasury secretary, is the author of "Dealing With China." Thanks very much, Secretary Paulson.
PAULSON: Thank you very much. Transcript provided by NPR, Copyright NPR.
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