One On One with Robert Hormats, Vice Chairman of Goldman Sachs International
Wednesday, April 19, 2006
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SUSIE GHARIB: Joining us now to talk more about what to expect from President Hu`s visit with President Bush tomorrow, Robert Hormats, vice chairman of Goldman Sachs International. Hi, Bob.
ROBERT HORMATS, VICE CHMN., GOLDMAN SACHS INTERNATIONAL: Hi, Susie.
GHARIB: You heard our report, President Hu making speeches, meeting with businessmen on the west coast. What is your analysis of the message that President Hu is delivering on this trip?
HORMATS: His message is we are a big market for your exports. We`re going to be a bigger market down the road. There for good trade relations are important. And from our point of view, we`re going to go out of our way to try to buy more American goods and we`re going to try to protect American intellectual property by cracking down hard on piracy, a point he made in Seattle.
GHARIB: As you know, Bob, there have been so many complaints about from businessmen about China, particularly about the Chinese currency. Today Hu said and we had in our package just now, that his goal is to keep the currency stable at adaptive and equilibrium levels. What`s your analysis of what he was -- what did he mean by that statement?
HORMATS: Well, it`s very hard, perhaps he`s taking some lines from Alan Greenspan who was very hard to actually figure out what he is saying. But I think the word "adaptive" is important. That`s a new word in the vocabulary Chinese leaders have used about their currency. They talked about equilibrium and stability before, but not the adaptive point. And I think that means that they`re going to allow the currency to rise gradually over a period of time. I think that`s how you have to take the word "adaptive because they are under pressure. President Bush is going to raise this. There are a lot of concerns in the business community about it. On the other hand, the Chinese are not going to allow the currency to move up abruptly and they`re probably not going to allow it to float against the market. So they will continue to control it, but allow it to grow gradually.
GHARIB: He did also make some positive comments about trade and he said that he takes the trade imbalance seriously. In his meeting with President Bush tomorrow, what more do you think the president of the United States is going to ask of the president of China?
HORMATS: Well, I think President Bush will want to be able to demonstrate to Americans that he`s taking a firm line on this. And I think he will ask for such things as real efforts to deal with piracy and intellectual property. It is a big problem for a lot of companies. I think he will continue to push the Chinese for further appreciation of the currency. I don`t think he`ll hammer them on it, but I think he`ll make the point firmly that it`s part of the overall process of reducing the imbalance. I think he`ll also talk about the need to open up further markets for manufactured goods, for agricultural goods, for a range of other things because I think he`s under a lot of pressure to deal with this big imbalance and he has to be able to demonstrate that he`s taking a firm line to Americans.
GHARIB: Bob, I met with President Bush last, about 10 days ago at the White House. One of the points that he brought up on this is that he would like to see China become more of a consumer-oriented society and less of an export- oriented country. Now isn`t this something that sort of evolves? I mean how can you ask a country to become consumer oriented?
HORMATS: Well, you`re right, it`s very hard to do. The Chinese in fact for their own domestic reasons are in the process of doing this. Because the Chinese have concluded that too much of their growth has been based on exports and they want to balance it off a little bit with additional growth and domestic consumption. At the same time, they need rebalancing internally. A lot of the prosperity in China has been on coastal china. They want to improve prosperity in central and western China, the rural areas they want to improve purchasing power there and that will help to increase general consumption in China.
GHARIB: Sorry, we`re going to have to leave it there. But I guess we`re going to have to see what happens at the White House meeting tomorrow. Thank you very much for the preview tonight.
HORMATS: Thanks for having me Susie.
GHARIB: My guest tonight, Robert Hormats, vice chairman of Goldman Sachs International.
