On "Forbes Newsroom," author and U.S.-China relations expert Gordon Chang discussed why President Xi wants consumption to make up a small percentage of the Chinese economy.
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00:00I want to get into exactly what Treasury Secretary Scott Besson said during his remarks at the
00:05Institute of International Finance on Wednesday. This is what he said regarding China. Quote,
00:10China's current economic model is built on exporting its way out of its economic troubles.
00:14It's an unsustainable model that is not only harming China, but the entire world.
00:19China needs to change. The country knows it needs to change. Everyone knows it needs to change. And
00:23we want to help it change because we need rebalancing too. What is overall your impression
00:29of Besson's messaging when it comes to China? Well, those comments, you know, we have heard
00:34from the administration officials for decades because it's been clear that the Chinese economy
00:40has been unbalanced. And as the Treasury Secretary said today, China has actually been moving in the
00:46wrong direction in the last couple of years. Consumption accounts for something like 38,
00:5139 percent of China's gross domestic product, which is abnormally low. And that's because
00:58Xi Jinping wants it to be low. He does not want the consumer to be empowered. That goes against
01:05Communist Party ideology. It also undermines his ability to develop a war economy. And he also
01:13wants to keep incentives that help the Chinese banking system and core constituencies in the Communist
01:18Party. So I don't know if there's anything that the US can do to get Xi Jinping to change his mind
01:25on those issues, which I think he holds very close to his heart, which means that I don't think that
01:32if a trade deal is going to be based upon a rebalancing of the Chinese economy, I just don't see how that
01:41happens.