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Premier Zhu's Interview with Peter Kann, 1999

Chinese Premier Zhu Rongji had an interview with Mr. Peter Kann, Publisher of The Wall Street Journal Asia, and Mrs. Kann on the evening of April 2, 1999. The following is a full text of the interview.
April 2, 1999

Premier Zhu: I have been thinking of sending my greetings to the American people through the media before my visit to the United States. At the same time, I hope to see a good atmosphere created to help me achieve the purpose of my visit, i.e. to enhance the friendly relations and cooperation between China and the United States. However, before you raise your questions, I'd like to share with you some of my recent thoughts about my upcoming visit to the U.S. I think this might be a bit more newsworthy for you.

As I said at a press conference on March 15, I predicted that I would meet with many difficulties on this visit to the United States. I might be an unwelcome visitor, and some people might even be hostile to me, but I was still willing to make the trip. I thought I could make some explanations about certain issues to the American people and tell them the truth so as to enhance mutual understanding. At the time of the press conference, I was fully confident about this. But after that, things developed very quickly and many unpredicted events took place, thus complicating the situation.

First of all, the issue of the military action taken against Kosovo cropped up. President Jiang has already made remarks on many occasions, clearly outlining our position on this issue. However, the Chinese people feel very strongly about this issue. I received many telephone calls and letters, all expressing opposition to my visit to the United States.

Then, the US decided to table a draft human rights resolution condemning China at the UN Human Rights Commission session in Geneva. This also caused quite a lot of indignation in China.

And still another issue is related to the WTO negotiations. Originally, the negotiations were proceeding fairly smoothly, but recently, we assume, due to pressure from the U.S. Congress, the U.S. Government has shown a change in attitude in the negotiations.

In fact, on the part of the U.S. government, they should agree among themselves that China has already made major concessions on the issues related to its accession to the WTO. Such concessions were unimaginable even to the Americans three or five years ago. If these concessions can help us reach an agreement, it will facilitate the development of trade and cooperation between China and the U.S. and also be conducive to reducing the China-U.S. trade deficit, and it will be in the interests of the U.S.

From my meetings with U.S. business people, I fully understand that if this agreement is made public, it will surely be welcomed and supported by the American business community.

However, it was due to opposition from members of the U.S. Congress, the U.S. negotiators have so far not shown a positive attitude on this issue. On the morning of the day before yesterday, I met with two congressional delegations from the U.S., including both senators and representatives. Altogether there were 20 people. One group was led by Senator Roth and the other by Senator Thomas. I spent the whole morning talking with them. I said to them that they should not have the misconception that China cannot but accede to the WTO. Of course, we hope to enter the WTO. For this goal, we have negotiated for 13 years. Nevertheless, we are not unable to survive without the WTO. The past 13 years of history has proven that we can survive without it, and that we have been, in fact, doing better and better.

I also said to them that I am more of an expert than many of them in this area, because I know more about the whole process of the negotiations. I know all the details of the 13-year process. I know better than them how big are the concessions China has made, and, in fact, these concessions are to the United States' advantage. I believe that once this agreement is announced, it will definitely receive the support of the U.S. business community.

But some U.S. congressional members are accusing the Clinton Administration and Ms. Barshefsky of trading in principles. I don't think that's fair. Actually, Ms. Barshefsky has been very tough during the whole negotiation process. I "offered" her a word in our talks -- I said, "If I give you an inch, you ask for a foot". I told her that I had never met with such a tough negotiator before. I said that once the agreement is announced, perhaps the Americans will not accuse the U.S. Government of trading in principles. I am very worried that the Chinese people may accuse me of trading in principles.

Q: You spoke as if an agreement had been reached. Is it right?

A: I think there is only a little way to go before we reach an agreement. But as the USTR has been under all kinds of pressure, she is afraid of covering this little bit of distance.

Q: You also seem to be saying, when you say China has made the utmost concessions, that you are now drawing a line and saying, no more concessions, this is it?

A: Just about right. You may ask me why China has made such big concessions. Well, I say, make no mistake about it and don't misunderstand it. China is not begging for accession to the WTO.

Isn't China doing quite well without WTO membership? We have made such big concessions for the sake of the overall interests of the friendly relations and cooperation between China and the U.S. We are doing so in order to build towards a constructive strategic partnership, a goal set by President Jiang and President Clinton.

We hope this positive momentum will move forward, and it will not be in danger of going backwards as it is now. Therefore, I said to those gentlemen from the Congress, if they oppose reaching an agreement between China and the U.S. as they do now, it will not serve the interests of the United States. China does not have to conclude this agreement, nor does China have to conclude this agreement before my visit to the U.S.

Our main purpose is to serve the overall interests of the friendly relations between China and the U.S. We may not be able to get an agreement, and China may not be able to join the WTO at this stage. Nevertheless, without WTO membership we can still develop bilateral relations with countries all over the world on the basis of our concessions. Should this happen, only the U.S. will be left out of this game.

Just now, Mr. Peter Khan, you also asked me if we would make no further concessions. That's not the problem. To put it accurately, the problem is not that we cannot make any further concessions, but rather, that the concessions that the American side is asking for are unreasonable.

For example, let's look at the opening up of the telecom industry. In China, this industry was completely closed to the outside world in the past. Now we've undertaken to open up the telecom industry. We can allow foreign investors to hold an equity ratio of 25 percent to 30 percent for the few years to come. After this transitional period of a few years, we can further ease restrictions on the equity ratio of foreign investment allowed. However, we do have one condition, which is that China must hold the controlling proportion of equity. But the U.S. side demands that U.S. investors should be able to hold controlling equity.

I argue that in many industries in the U.S. you do not let foreigners control equity. For instance, your civil aviation industry only allows a foreign investment ratio of 25 percent.

All countries including South Korea as well as the region of Taiwan have imposed ceilings on the foreign investment equity ratio. Not that only China has.

In other sectors, such as banking and insurance, our level of openness has in fact exceeded what the U.S. had originally asked for. As for securities, we've learned a lesson from the financial crisis in some Southeast Asian countries. China must not be too hasty in opening up the securities sector. The U.S. is very clear about this position of ours. Yet, we can still open up B shares to foreign investors, though not A shares. Even if the U.S. insists on this demand, China cannot do it. Moreover, if we were to do this, we would follow in the footsteps of the crisis-stricken Southeast Asian countries.

Q: What do you mean by the opening up of A and B Shares?

A : I'm afraid this is a question of a specialized subject which I don't have time to explain now.

In short, I feel that an economic question -- the WTO negotiations are an economic issue -- has now been turned into a political issue altogether. This makes the problem much more complex.

The day before yesterday when I met with some members of the U. S. Congress, one of them said very bluntly that the WTO negotiations should be directly linked with such issues as the human rights and nuclear non-proliferation. I told him then and there that I did not agree. Should all China-US economic issues be linked to other issues like the human rights or nuclear non-proliferation or should any economic issues be linked to political issues, I am afraid that it would be impossible for the U.S. and China to develop friendly relations and cooperation.

As for the negotiation on agriculture such as TCK of wheat, citrus and meat quarantine, we have made full concessions. The U.S. side feels that the two sides can very well reach agreement on these issues. So I proposed that the two sides could make public the agreement on these issues so as to win public support which will facilitate our efforts to reach agreement on other issues.

But I did say that the announcement of this agreement did not signify that the entire package of WTO issues had been agreed upon. Such an agreement would come into effect only when the package of WTO issues were agreed upon. A prompt announcement would help improve the atmosphere and also facilitate the reaching of agreement on other issues. But the United States did not agree, saying "It's impossible".

Under such circumstances, I asked myself, what's the point of making a trip to the U.S.? What could I accomplish there? However, after repeated consideration, we still think we should set store by the overall interests of China-US relations. Obviously, the U.S. is the sole superpower, and China is the most populous nation in the world. The development of the friendly relations and cooperation between our two countries will have an impact on world peace and the pattern of international cooperation. President Jiang Zemin and the Chinese leadership still decided that I should accept President Clinton's invitation and go to the United States. We hope to do our part to promote communication between our two countries and our two peoples, to discuss certain issues, and to see if we can find a way to promote the forward movement of the overall friendly and cooperative relations between China and the United States.

Q: Are you ruling out an agreement on WTO during this trip? Are you saying that you believe it's impossible?

A: When I just said "It's impossible" a moment ago, I was referring to the reply of the U.S. side to my suggestion that we make an announcement that we have reached agreement on a certain number of the issues. It was the United States representative, not us, who said "It's impossible".

Q: If you give us the details of what's agreed on, we'll be happy to tell the business community what your proposals are.

A: Then Madame Barshefsky will become even tougher, won't she? I think that this visit won't be very easy for me. As a Chinese saying goes, "Neither side will be pleased". On one side, some Americans are not particularly welcoming me, and on the other side, some Chinese don't want me to go. So I think that I will have a very difficult task.

Q: We have roughly 10 or 20 other questions we'd like to ask you. We wonder whether that'll be all right.

A: I will have another interview with some Canadian reporters shortly.

Q: You clearly view the American business community as supportive of better US-China relations, at the same time it would appear that foreign investment in China is actually declining. Is that the case, and what are reasons for that, and what can be done to reverse that?

A: In fact, foreign investment, including US investment in China, has been increasing every year. Last year there was a growth over the previous year. It's not true to say that foreign investment in China is decreasing. That's not the case at all.

Last year foreign direct investment in China was 45.9 billion U.S. dollars, surpassing the 45 billion dollars of the previous year. In January and February of this year, there was a slight decrease in comparison with that of the same period last year, but it was basically at the same level.

But one cannot read much into a period of only one or two months. We expect that there will be an even more marked increase this year in foreign investment in China, because the investment environment in China is obviously much better than that in certain Southeast Asian countries.

When we open up the sectors and industries I have just mentioned, telecommunications in particular, foreign investment will come into China in even larger amounts.

Q: I'd like to ask you a somewhat more philosophical question. Is greater political pluralism an inevitable result of the increasing economic liberalization that you're undertaking, or is political pluralism actually a precondition for successful economic liberalization? I wonder how you view the connection between these two.

A: Politics and economics are interactive. It is true that economics determines the direction of political movement, but politics has an impact on economic matters. As regards how you and I understand and interpret the definition of so-called economic liberalization and political pluralism, this is another matter.

Q: You've just referred to the goal of a constructive strategic partnership towards which our two countries are going to build, a goal which President Clinton and President Jiang set together. But some people think that in fact it is still a long way from this kind of relationship at this point. Are there some specific things other than the WTO issue that the United States could do to make this more likely to become what is called a strategic partnership?

A: On our part, we are determined and have made persistent efforts to build towards a constructive strategic partnership as President Jiang and President Clinton have promoted. We have felt all along that China is not a potential rival of the U.S., let alone an enemy of the U.S., but rather, is a reliable friend of the U.S. Commitment to establishing this kind of a constructive strategic partnership does not mean that we approve of every foreign or domestic policy of the U.S. The converse is also true.

I believe that even the closest of U.S. allies won't necessarily agree with all U.S. policies or policy actions.

Q: Given that the US is, at this point in history, the sole superpower, what kind of grade would you give the U.S. in exercising that unique sole superpower role?

A: It is appropriate to say that the U.S. is a superpower in the world of today. However, a review of the human history shows that it is not easy and not without risks to serve as a superpower. History shows that no superpower remains a superpower forever. Therefore, I feel that as a superpower, the U.S. should act responsibly. In dealing with other countries, the United States should pay attention to democracy, freedom and equality as it advocates.

Q: Are you saying that we don't do that? That there's room for improvement in the way the U.S. is handling itself?

A: No one can claim infallibility or perfection.

Q: On one issue there seems to be controversy between our two governments at this point, the theater defense missile systems in Asia. Why does China seem to feel threatened by defensive missile systems for a country like Japan? Why is this seen as threatening here?

A: We feel that building TMD contravenes the existing international anti-missile treaties. Development of a TMD system is not conducive to world peace. This is how we feel. What we are opposed to is including Taiwan in this system. This constitutes interference in China's sovereignty and internal affairs. This also violates the three principles of the three Sino-U.S. Joint Communiques and the Joint Statement by the two presidents.

Q: Okay, the concern is purely about Taiwan being covered by such a defense system, and not about other countries?

A: I'm not sure you've heard clearly what I just said. I divided my comments into two parts. The first comment was my view of TMD, which is that it goes against international regulations of missile agreements and treaties and is not conducive to world peace. That was my first comment. My second comment was that China is opposed to the inclusion of Taiwan in this system.

Q: I'd like to ask a few more questions that might help Americans know you better as you arrive in the U.S. You are often described as a pragmatist, a reformer, or a moderate -- I realize all these labels can be overly simplistic, but how would you succinctly describe yourself?

A: I can only say that I am an ordinary Chinese and at the same time the Premier of China.

Q: You know, you were once labeled a rightist, and you obviously suffered for almost 20 years, I think, as a result of that, could you tell us or tell Americans through us, anything about that period of your life and perhaps most importantly how that experience might affect your government of China today?

A: At a press conference last year, I answered a reporter's question about this. At that time, I said that I didn't want to, I was not willing to - and I didn't think it necessary to-once again talk about this unhappy experience.

Q: I have taken note of that. We only thought we could try again. Please give us a useful answer.

A: I could add one comment to this. Though that period of my life was a painful experience for me, it was also a useful one. It taught me more and allowed me a wider range of exposure to social strata. Speaking about it today, I should say that the Chinese Communist Party and Government have learned enough lessons from the past.

Q: Would it be fair to say that the experience has made you more tolerant of different points of view and made your views more diversified?

A: Perhaps so.

Q: One of the main images Americans would have of China, and perhaps one of the lasting images of the latter part of this century is that photograph of a young man standing in front of a tank in 1989. In retrospect, can I ask you what you think of that man? Was he being brave? Was he being foolish? Was he misguided?

A: That photograph appears frequently on television in the U.S. and in other countries. Lately it seems to appear less frequently. There's another photograph that left a deep impression on me. It's a photo of a young naked girl in Vietnam, running on a road in a bombed area. That girl is still in the U.S. now. We all hope not to see the recurrence of such things. But there's one thing entirely different that everyone should think about: The man who faced the tank, but the tank did not crush him. It avoided him. Everyone should think over what this was really about.

Q: You have, I think, several times in the past, expressed some degree of frustration at your ability to get accurate information, or at least statistical information on the Chinese economy. How big of a problem is this for you, particularly in trying to set up economic policy?

A: This question comes from the fact that the Chinese economic growth rate last year reached 7.8 percent, while many Southeast Asian nations experienced a negative growth. Many people doubt the accuracy of the figure. To be honest, as I said before, I admit that this figure is somewhat inflated. But this kind of inflation did not begin from last year, and the figure for last year was not more inflated than in the past. Because we paid greater attention to checking the accuracy of the figure, and we repeatedly enjoined lower level governments not to provide false statistics. As we have often stressed this, the statistics were far less inflated than before.

The statistical system was initially learned from the USSR in the 1950s. After reform and opening up to the outside world began in 1979, we made some revisions in accord with U.S. and international statistical practice. Now, we've had approximately 50 years of experience in statistical work.

I believe that it is improper and also unfair to say that all the figures are inaccurate, or all of them are inflated. Perhaps there are now millions of people doing statistical work in China.

I cannot say that the statistics are very accurate, but I think it is fair to say that our industrial and business figures are quite accurate. Some statistics from rural areas may not be as accurate, because they cover too wide a range. However, these statistics are collected every year and can be used for comparison from year to year.

Q: When I spoke to you in 1993, inflation was 25 percent, economic growth had been over 10 percent for 12 or 13 years, and you were given the job of making a soft landing. There was great speculation that you wouldn't be able to do it. But you obviously succeeded. Now the challenge seems to be how you keep the economy grow at a satisfactory rate, 7 percent or 8 percent for example. Is this challenge harder than that one or was that challenge harder than this one?

A: I believe that the difficulty I faced in 1993 was inflation. The difficulty I now face is deflation, the continual dropping of prices.

Experience over the past few centuries has taught the Chinese to fear inflation more than anything else. China almost has never experienced a period of deflation before. The overwhelming majority of the Chinese people are not aware of the dangers of deflation. But a few of us see the danger.

Therefore, my task is now much easier than that of controlling inflation, because the general public don't need to worry about inflation. They are quite at ease.

Q: What is the danger of deflation?

A: Now the people are saving greater part of their money in our banks. The savings rate now is 40 percent or 50 percent, I'm not very clear.

But the banks cannot loan the money out, because they can't find appropriate projects to lend the money to.

Therefore, the national economy faces risk of a slowdown of the growth rate. The oversupply of products and the drop in prices have made it difficult for enterprises in terms of operations.

So now we have begun to implement a pro-active fiscal policy, building infrastructure projects and stimulating consumer demand, to increase the purchasing power of the people and galvanize the development of production.

I would like to make one more remark. Many foreigners, including Americans, believe that, due to the adverse effects of the Southeast Asian financial crisis and the floods, China's reforms were not carried out according to the original plan, and were slowed down greatly. This is a far cry from the truth.

In fact, great progress was made last year in the reforms planned by the current Chinese government. They were carried out in compliance with the original plan and even by surpassing it. I don't have time to go into detail on this issue, and perhaps we'll see each other again in the U.S.!

Q: We'd like to make one modest request, that you and your colleagues would consider at some point soon letting us at least print our Asian Wall Street Journal in China, we print it almost everywhere else in Asia now, in about 10 countries, and We think it does inform business people and others about economic and business and financial issues, so we would hope to be able to print in China and one day also to be able to print a Chinese language version of the Wall Street Journal, so we hope that can be considered at least.

A: I will consult with people responsible for this matter. I myself am a devoted reader of the Asia Wall Street Journal.