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Good morning and thanks for joining us today. I am Claudia Johnson with DHL, and it has been our honor and pleasure to be part of the Aspen Aspen Ideas Festival and sponsor the China track over the last few days. I would actually like to take a moment to thank all of the notable speakers who have shared their thoughts and ideas about modern day China and historic China and the wide variety of subjects including the arts and culture, the environment, politics, society, the economy and the future of this fascinating country. I would like to thank Melissa Chiu, Yan Lei, Heidi Jacobson Zuckerman, Roderick MacFarquhar, - excuse me; Tu Weiming, Cheng Li, James Fallows, Orville Schell, Bruce Babbitt, David Dollar, Peter Gleick, James Steinberg, Minxin Pei, Clive Crook and David Bradley, whom I have the pleasure of introducing to you this morning. David is the Chairman and Owner of a number of publishing, news, and media properties including the Atlantic and National Journal. Throughout his career, David has been and continues to be a force of big ideas. He founded the Advisory Board of the Company and the Corporate Executive Board, the largest employers of young professional talent in the Washington area and has worked with the White House and the White House Conference on Children and Youth. Please help me welcome David Bradley this morning. Good morning. Wow. It's a commune too strong for you. That was very nice introduction, Claudia, thank you very much. Let me intern thank DHL DHL, has been a sponsor of this whole track; DHL is the sponsor of this whole program. I don't know that I know of a company that is more committed to China or more engaged by the intellectual issues which we are going to be discussing this morning than DHL. Thank you for your company's generosity. Purely as a matter of coincidence I am just returned from a 19 day family trip to six different regions of China. I don't want to pretend that that makes me an authority on all U.S-Sino relations. But I come back an authority at least as to these two things. The first is that 19 days is way at the outer limit of how long you should travel with your family. Even when you really love you family, 18 days 17 days, nature did not in intend 19, and I hope this doesn't detract in any way from the magnitude or scale of Mao's accomplishment in the 1934 great march. But Mao did not travel for 19 days in a van with five children across the country. Second insight, if you had to identify if you were to tour the world, and you had to choose the people who by their nature or their wiring or their soul or their inner zeitgeist were most perfectly tuned to Marxism. You couldn't choose worse than the Chinese people. I was at a vendor fair what they call the antiquities market in Shanghai. It's an antiquities antiquities, it's just sort of a term of art there. It means the Cultural Revolution. So you have seen stall after stall after stall of mugs and cups and plates and swords and knick- knacks with Mao or Chairman Lai's some photo on it. And as I was walking through this I was approached by a a very insistent shoeshine man who reached the view that I had agreed to a shoeshine before I reached the view that I agreed to a shoeshine. But he won and there he was standing up with him shining my shoes. And when he saw that I was settled in, he took out a folder and in it was a new paper clipping and there was a photograph of him you could recognize him, - shining the shoes of Bill Gates. And you could recognize Bill Gates. And he said Bill Gates Bill Gates, and may be eight or ten Chinese came around circled around, wanted to see the photograph. Everybody started saying, Bill Gates Bill Gates. And there was a happiness and an excitement and an enormous welling upholding of good feeling about it that can possibly be with those sullen mugs of Chairman Lai and Mao Zedong had in in mind for their proletarian its that Bill Gates that brings us to to this conversation today. We are met to describe - to discuss an international debate that is been joined in International Economy. And that is whether this extraordinary Chinese economic miracle is sustainable. And for road map what I thought I would do is introduce the three panelists, and see if they would make an opening statement. I will put out enough questions to jump start a conversation, but I would love to then shift the burden to you to be engaged in the paneling conversation for what I take to be around that goes to 10.15. So let me introduce the panelists if I may I have Minxin Pei directly to my right. Minxin is the director of the China Program at the Carnegie Endowment. He is one of the hot young public intellectuals in the China field. When we got his bio, it had a list of the major public speaking events that he has appeared at since 2001, it goes on page after page after page. Minxin told me at breakfast today, that he was out speaking a 120 days of last year. He is a great itinerant preacher. Breaking bread and delivering them he is a Billy Graham of our panel today. To his right is David Dollar, in an old Henry Lucien phrase, David is "an old China hand". His studies are in Chinese and Economics, BEd at Dartmouth College and Chinese history in Chinese language and then PhD at NYU. He is the country director for the World Bank for China and Magnolia, and he is posted in Beijing. I don't know David's views deeply on the subject of the Chinese economic miracle, but as to free market generally and especially as to the free market's ability to lift all boats to actually address poverty. David is interestingly optimistic, economist. And then to his right is one of my favorite Atlantic colleagues ever. This is Clive Crook - Clive is a 20 year writer and editor for the economist, he rose to the number two spot - the deputy editor. He was the keeper of the intellectual faith and he was the one who created the economist world view if you like the economist, world take on issues that is Clive. If you don't like the economist we will take or I don't want you reading other magazines anyway so just as well. Took a long time to recruit Clive and he is now ready for the national journal and for the Atlantic and his discipline international economics. My staff preparing for this gave me part of the serious literature on this debate of wither goes the international - of the Chinese economic miracle. I haven't seen such a deep serious literature; I don't have to read it for a long time. It reminds me of those huge black note books I used to begin in when there is a number of us in the health care field, we were trying to master the Hillary Clinton health care plans in the 1990s. I know a number of you in the room are China experts or are economists, so this isn't for you. but there is some laymen here and I thought what I do is do a sort of monarch notes primer on this debate about the Chinese economy and levels of playing field for the - those who are auditing the scores. So let me start with the keys for continuing success. What we are now seen is an economic miracle that is simply unprecedented. China has been growing it's GDP at 10 percent or more year after year after year after year. It had 10.7 percent GDP growth last year, only 1.7 percent inflation. It's the fourth largest economy in the world. Its likely to be the second largest economy by the year 2020. There is some chance it could surpass the United States and become the first largest economy by the year 2050. The whole of this is powered by a one piston engine is this remarkable 30 year manufacturing export machine that has been developed. China now has a trillion dollars in central bank reserves. The trade surplus with the United States alone last year was 233 billion dollars. China represented 30 percent of our US trade deficit. Since 1980 it said that 300 million people had been brought into the Chinese middle class that as many as 400 million had been lifted up out of desperate poverty. I had done an email exchange with Clive last week and he wrote me this paragraph in an e-mail China is realizing the most remarkable economic transformation in human history in terms both of scale and speed, the world has seen nothing remotely like it. On present trends it will achieve in this century, a degree of global and economic dominance that no other country including the United States has previously achieved. So let's go to the other side, let's go to the doubts. China is a nation that utterly derailed in the twentieth century. In 1820, China had 30 percent of the world's population and roughly 30 percent of the world's GDP. As this 21st century began, China still had the large population, 20 percent of the world's population but did only had five percent of the world's GDP. Yes, there are three hundred million Chinese middle class as a global hedge fund analyst puts it. But there are one billion people still left in the 7th century. The scale of what china has to do just to stay even is beyond reasonable expectation. It has to add about 20 million people per year to the modern work force it's like taking two-thirds of Canada and adding it to the economy. This at least in their belief is the reason they need to do this 10 percent growth. But not just this year, next year and next year and next year until they get to this demographic term which I know our t panel is going to discuss. So what could derail this 10 percent growth run? The two problems that I will site are that they are just myriad in the literature. One is the problem of rural unrest. China has the greatest income inequality of all of Asia. The cities are gaining; the coast is gaining, central China western China, rural China is stagnating or you know at least being left behind. The top wealthiest of one percent of the Chinese own 60 percent of the private assets in the country. The question, this rural question is what's it become of a billion people left behind? Number two problem I put forward is china's mega cities and the mega crisis that attends to it. Between 1980 and 2005 a 100 million Chinese moved from the rural areas into the cities. It's the largest human migration in the history of our species. Between the years 2005 and 2025, it is expected that another 400 to 600 million will move into he cities. So what's to become of the cities? One manifestation of the problem is pollution, air pollution, china is expected next year to surpass the United States and become the largest emitter of carbon dioxide in the world and here it is at the beginning of its energy search. Now, third problem is the ancien regime that it actually served better just to the English, the ancient regime, the old creaky authoritarian Chinese communist party CCP. The CCP is reasonably opaque to most westerners. We don't a lot about it. It is thought at least by one analyst to have that it's centre is some where between 12 and a 120 people who really have almost all of the power, political power in the country. Whatever that number is, this is not a talent meritocracy. This is an older group of people, its political party full of political careerists, beaurocrats, military officers. So one shot of, up shot of this undemocratic centralized power is that with the gaining wealth, you end up with a plutocratic class and an enormous amount of corruption. The state in China continues to have almost monopoly position in some of the hugest industries. In financial services, telecom, steel, energy, auto and this is the centre of and also lot of this financial corruption. But probably the larger problem for this CCP is what happens when you have an older authoritative state come face to face with its own burgeoning middle class with rise in sophistication, rise in wealth and rise in exposure to the west. So what I thought I do in starting this conversation is see if I could get guess we will go in the order of the panels. I will got to Minxin, then to David then to Clive. Starting with Minxin I am going to ask him if he would give the skeptics view no matter what your own view is, take the skeptics position. David, would you come back and say no, no, no. Here is some reason for optimism and as Clive was in Washington on all over the US debate, I thought I might ask him to open up about US-Chinese relations and what is the think in political circles about China. Minxin would you start? Thank you sir! Thank you. I would give the skeptics view not because I am assigned to do this but because I also believe in this perspective. I would call myself a cautious pessimist. I am not predicting a doom or collapse or forecasting, a more complex scenario. I will say in the next seven to ten years you are going to see the peaking of the China miracle or China's economic rise and then after that there will be a period of erosion of economic momentum, rising tensions. Then what will happen I really do not know. That's the where my predicting power fails. Of course I can't conjure up different outcomes. For the next seven to ten year time frame there are several very positive factors for China. Savings will remain very high and economic growth relies primarily on savings rate which provides investment and the Chinese economic gross model is heavily dependent on high investment. China saves around 40 to 43 percent of its GDP and invests about as much and with that kind of investment you are going to have enormous expansion of capital and creating a capacity for production in exports. So for the next 7-10 years savings will constitute the most powerful engine of the economic growth. The second positive factor is urban rural labor migration which creates to favorable conditions for growth. One thing is urbanization, urbanization in China is very and has a domestic growth engine, infra structure, housing services just enormous momentum. The other is the flow of low cost labor young, younger relatively healthy, reasonably well, educate Chinese rural residence flowing to urban areas doing constructions, service jobs, manufacturing jobs. That will continue for another seven to ten or maybe fifteen years and then the third thing is China's deep integration into the global economy, China's - another gross engine for China is export gross - ten, fifteen, twenty percent a year, China today is already the third largest exporter in the world and would soon be the world's largest and that will continue for another seven to ten years. Unless as we will explain later on, China runs in to problems abroad in terms of foreign back clash against Chinese exports and - but these positive factors would disappear. Well gradually disappear around 2015 to 2020. Then what will happen. What will happen is that at the same time while these positive factors are driving the Chinese economy, there are several very negative trends in the Chinese economy that will progressively become more severe. In and probably will be very very severe in ten to fifteen years. Let me just list them. First one is the imbalances in the economy because the Chinese economy is dependent on investment and China needs ever more investment in order to sustain the current level of economic growth. 40 percent of GDP year in year out investment clearly in ten fifteen years you are talking about huge base, that is not sustainable and investment also creates over capacity and that will have consequences on the financial system. And third is the demographic trends in china are clearly unfavorable. Ten, fifteen years from now, China will become an ageing society, low cost, cheap cost, low cost labor will be much less abundant. China probably will have labor shortage by 2020. Then that will impact China's savings rate because older folks save consume rather than saves of, savings rate will come down as well and then the current model of growth in China produces two deficits, one is the environmental deficit, enormous environmental degradation in China. Even if the Chinese government is taking measures to deal with that, in the area of water shortage, air pollution and the soil contamination, soil erosion, the current trends are very very unfavorable and we do know how the economy can absorb the every rising cost of environmental degradation. The other deficit is what I call social deficit is that by over investing in physical assets, the current government policies discourage investment in human capital, access to healthcare, access to education and then that because even though China has experienced very rapid rise in wealth, investment in these two areas in relative terms has been easily stagnating or declining. And that is an indirect contributed to rising inequality in China, because if you go to China you will find this paradox. Economy is growing high but people's complaints are very, very intense. What are they complaining about? They are not complaining about lack of democracy, human rights. They are complaining about expensive housing, expensive healthcare, expensive education. So the social consensus for the current economic growth if nothing is done will erode. Today I think it's already eroding, because the Chinese Economic Reform is based on so called implicit social contract, is that let some people get rich first and then the entire society will get rich together later on. But the second part of the bargain has not yet been delivered. And what we have seen is an explosive growth in economic and social inequality. So the final question here is can the current government deal this problem? I am very doubtful because of the paradoxical effect of good times on reform. No government takes tough reform measures when times are good. So the next seven two year time frame, well we are talking about continue economic growth because the raw momentum is strong as these positive factors are present. They actually act against reform in China. So the current government will simply let the good times roll even though they are aware of the rising risks. So by the time unfavorable trends converge in China around 2015, 2020, then I think we are going to see a much more difficult time for the Chinese government. That's why I always say that by the time I would no longer I almost absolutely sure myself that you are not going to see China growing at 10 percent. China will be very lucky to grow at seven percent. Okay so I am asked to be some thing of the optimist on the panel. I can see our DHL hosts are already a little bit alarmed after listening to Minxin; but I think the good news is I think that the most likely scenario is that China will continue to grow well for at least another 15 years. I would like to call myself a cautious optimist because I think there is a good chance this optimistic scenario will play out. But I am cautious because I basically agree with Minxin about the diagnostic of the problem. So I think the fundamentals are in place for China to continue to grow well, you know it has this large rural-urban migration that's creating a large urban labor force. It's a very open economy that's well connected to the global market. And many Chinese cites have created good investment climate where Chinese entrepreneurship is generating a lot of private investment in innovation and development. All those fundamentals remain in place for about 15 years. But I agree with Minxin that there are some very serious risks. I see the three biggest risks to be the environment, the social deficit and also the trade imbalance. The reason I can be a cautious optimist is that I think that the government is moving in each of these three areas. So let me just say a few words about each area. starting with environment. I really do think natural resource scarcity and environmental degradation is the single biggest challenge that China faces. It's a natural resource scarce country. The whole country has a pretty serious water shortage. And the northern half of the country has really acute water shortage. And almost half of the people live in the northern half of the country. So you have got water shortage, you got serious pollution of water all around China, you also have serious air pollution, China has 20 of the 30 most air polluted cities in the world; and we have just worked together with the environmental agency in China to do the first careful estimate of the health cost of air and water pollution in China. And the health costs are really quite alarming. So I think the environmental issues of serious; you read about them all the time in The New York Times and other western outlets. What you may not be aware of is that in most environmental areas there is progress in China. So air pollution has improved in a majority of Chinese cites, particularly in the southern part of the country there's been pretty dramatic declines in air pollution. Water pollution; in the southern part of the country in the early 1990s almost no river system had drinkable water and now more than 60 percent of the rivers in the south have drinkable water. So there have been clear measures that have been taken to try to improve and address some of these environmental issues. So I am somewhat optimistic that that trend will continue. I would say; I think a key part of that is pricing natural resources appropriately. China has tended to have low energy and water prices and they have been gradually raising the price of water and price of energy and that's one factor this led the conservation into better use. But I would like to paint balanced picture of a pretty serious environmental crisis, but progress in some parts of the country. It's interesting that it is in some parts of the country. I think Chinese cities compete with each other, they used to compete just to attract investment; they used to want to attract the big polluting industries. Now I see a lot of Chinese cities competing to try to create a greener environment because they realize that a good living environment is part of being competitive. So have got cities like Hangzhou and Suzhou that are working very hard to create a better living environment because they want to attract engineers and top flight talent to compete with Silicon Valley. Second key issue for China is the social deficit. China has developed a very high degree of inequality; similar to the level of inequality in the United States. But the way you think about this is that urban incomes in China are going up at 10 to 12 percent per year, rural real incomes are going up with five to six percent per year. So that generates a lot of inequality. But I emphasize that urban that rural real incomes are going up; much more rapidly than anywhere else in the world. So there continues to be very rapid poverty reduction. Just between 2001 and 2004 China cut its poverty by one third in three years. So it is true that this rapid growth is benefiting everyone in the country; materially it's just benefiting the people in the cities much more so than people on the country side. In China the income inequality is a particularly serious issue because the country has a much decentralized fiscal system where local governments generally have to pay for health and education. So you have poor rural communities; they are supposed to pay to educate their own children and provide health and they are at a very serious disadvantage. So China is at risk of having this inequality perpetuated self because the poor areas cannot provide good social services. So I think that is a very serious issue for the country. There is a lot of social unrest around some of the inequality issues. Again though I do see some areas of progress. In the most recent budget the government made a very significant increase in the amount of money going to rural education and rural health and I think that the budget is you know taking quite seriously the issue of putting more money into rural health, rural education, rural development more generally. I guess an economist would say the obvious solution of the inequality problem is to speed up the migration of people from the country side to cities. For a long time the Chinese government resisted migration, restricted it through a registration system; that registration system is slowly breaking down. The best hope for dealing with the inequality is to make it easy for the people to leave the country side and move to the cities and we are beginning to see some evidence of that. Now the third issue I had mentioned briefly is the trade imbalance. I actually think the trade deficit, from the US side is not a particularly big issue; not that important and happy to discuss that. But I think from the Chinese side the trade imbalance really is a problem. You know Chinese trade surpluses reached 10 percent of GDP. Quite a bit of Chinese growth comes from increasing the trade surplus every year. Now that China is a big player in the world market there just are not going to be markets; even without political interference, with protectionism, there are just not going to be markets that can absorb a big increase year after year. China is still a developing country. So the 10 percent trade surplus, 10 percent in GDP trade surplus means that China is exporting capital of 10 percent every year which frankly just doesn't make sense for a poor country. You know I like to joke that every Chinese peasant implicitly owns a $1000 of US Treasury Bonds. So they are nice low return instrument that you can be sure you will get a capital loss on that; you may not have a tractor, you may not be able to send your kids to school, but the government is holding a $1000 of Treasury Bonds in your behalf. It just simply doesn't make economic sense. So I think addressing the trade imbalance is an important short run challenge for China. Now I want to end by saying there is a very obvious policy package to address all three of this challenges simultaneously. If the government would more aggressively raise the price of energy and water and enforce environmental standards that can address the environmental issue more forcefully that by itself would tend to make Chinese people poor. You know all of a sudden the price of gasoline doubles and the price of water doubles; that would tend to make Chinese people poor. But if you let the exchange rate appreciate ten percent or so, that by itself tends to make Chinese people richer and also that by itself tends to be deflationary and would mitigate the effective rise in the price of energy and water. And then, there that would of course slow down the export machine, which is something the government is concerned about. But ironically, if you ask the government now, "Why don't you spend the lot more on health and education?" They you know, they made some increases. But if you say, "Why don't you spend dramatically more on health and education?" They will say, "We are worried about over heating of the economy." So, if you allowed some exchange rate appreciation to cool off the manufacturing sector, you could actually pump a lot of public money in the health and education which would meet real needs and stimulate the macro-economy. So there is an obvious policy package that would keep China growing at a very healthy rate but address the environmental and social deficits much more forcefully than it's occurring. And then the obvious question to ask is, why aren't they doing it? And there I would say that the senior leadership is gradually doing this. So you do see increases in energy and water prices, we have see a little bit of appreciation of the exchange rate, we have seen a 20 percent increase in the Government's spending on rural health and education. And from my point of view, I would like to see more rapid movement on this policy package. But I do see movement on the policy package. And if China continues down that path, I think they can grow successfully in a more balanced way, meet their needs, take some of the pressure off the international imbalances, and DHL can make a lot of money by investing successfully in China. So that's that's the optimistic scenario. How much do we love China these days? Well, let me just preface the answer to that by saying my credentials don't allow me to be anything except to cautious agnostic on China. I am not a I am not a China watcher, I am a, U.S. economic policy watcher. But that dimension of the issue leans I think to the pessimistic and of the scale and you know, I am not qualified to comment on where the balance lies. But I think there is a hardening of attitudes in in the U.S. in general and in Washington in particular against Chinese Trade Policies and its been recently particularly severe rise in sentiment that says, the China's currency policy is harming the U.S. Obviously China is such a huge economy such a massive force in the world that its relationship with other countries and with the with the U.S. in particularly is a is a critical dimension of its prospects. I mean, one way to think of it say, - is the rest of the world is the U.S. going to let this export miracle continue. And I think the balance of sentiment in Washington at the moment is that if if the U.S. could stop it, it would might been very struck by how many as as I think of them. You know, by how many moderate - pragmatic economist economic thinkers and you know the think tank circuit in D.C. have switched over from a position of applauding and celebrating China's economic miracle to a focus on the harm that China's economic miracle is doing to the U.S. Institutions that previously defended you know, a very gentle as you were a gentle accommodation to China's polices and now, rattling the saber and saying, enough is enough. This legislation in congress at the moment that would designate China as a currency manipulator which I think is a very sort of inflammatory term. I mean, in in one sense it's correct. China pegs its exchange right. Okay. Its it's manipulating the currency. So far as I am aware, there is no rule in the world economy that makes that illegal. But the vocabulary now in Washington is moving very strongly in the direction of saying that this is cheating this is unfair, your growth is at our expense. And the legislation in congress as I say would designate China as a currency manipulate and set in train a series of steps that would end with the the U.S. imposing various kinds of import protection against China, countervailing duties and the rest of it. This is a path that leads to a a, I think, possibly quite bitter trade conflict between the U.S. and China. You know, I would I want to express my own view on whether the U.S. is right to take this position? And I think it's wrong. It's wrong in every respect. It's a false diagnosis of the problem. I don't think China's trades and, David indicated that he agreed wit this. I don't think China's trades surplus is a particularly significant problem for the U.S. I think its much more of a problem for China. I think if China did every thing that people in Congress who are militating against China's policy wanted and let the RMB appreciate very substantially. And even if the rest of the Asia followed that appreciation with currency appreciations of their own; the affect on America's current account deficit would be modest of the main force behind America's current account deficit is domestic spending in the U.S., the lack of domestic savings and the U.S. Budget deficit. And until those problems are addressed, America is going to continue to have a colossal trade deficit. And if it isn't principally with China on the other end, it will be with other countries instead on the other side of that deficit. So I think the diagnosis is false. And tactically, I think it's a mistake to press China to appreciate faster than the Chinese leadership feels its in its own interest to do so. I do think, again, David touched on this. China will be better off if it let the RMB appreciate gradually. I have some sympathy for the view that once they let the RMB begin to appreciate, that process might run out of control and there are dangers if it does run out of control for China and actually for the world economy. So I don't think it's absolutely obvious of what they are doing now is crazy. But I think on balance, it would make sense for China to select the RMB appreciate to stop accumulating our reserves and to let its trade surplus fall. But if China doesn't see that, I I would be very surprised if it if it bends to American insistence that it do that. And in fact, that I think that again American pressure on China to select the RMB appreciate may even be counter productive because it makes the leadership seen as though its cowtowing to out side pressure. And I think the record on that in China is not encouraging. I think this this stands that the U.S. and other countries should take to China is one based more on equal partnership; which I think is something that the the U.S. finds difficult to do with other countries in the trade area. There is a there is a common interest and I gradually appreciate its RMB; and I may say in fiscal control in the U.S. which would also take pressure of these imbalances in the World economy. And I think America's approach to China should be based more on a search for consensus of that kind. I think actually that's where the administration is. The administration is already locked in to a process that requires it to come to a view each year about whether China is a currency manipulator? And just before this new legislation surfaced in congress, the treasury department ruled that China was not a currency manipulator. And therefore, you know the subsequent steps that would put pressure on China, it did not begin. Well, that was not of popular stands. A lot of most democrats in Congress and great many republicans think that this approach is mistaken. And I think it's only a matter of time before the U.S. begins to put more pressure on China to let the currency appreciate. And I think that does cause risk, supposed to Chinese economy and and for the U.S. So I do think this you know this question, "Where China fits into the World economy and how we bring Chinese economic decision making into a global frame work along side of America's economic decision making is a is a very big question, a very big risk going forward. Clive and David, the literature is replete with concerned about an asset bubble bursting in comparisons to the Japanese melt down from the beginning of the 90's. Clive would you do a 30 second thumbnail of what happened in Japan and how long it lasted? And then David, would you address is there the prospect of a China crush coming soon? Well I think you know, there is a there is a parallel here, I mean. Japan suffered a Japan had a asset price inflation across the economy, house prices is massively out of line and hugely over valued, stock market and so forth? And the well clear bubble elements in it, you know, speculative further drove this thing. And once the bubble burst in Japan, the results were much more devastating than I could think people had expected. The problem was not so such that the bubble burst, but the remedies available to revive the economy did not work. You know, they were trapped in a very low inflation de- inflation environment. So, the conventional instruments for restoring economic growth didn't kick in. You know you can't cut interest rates to less than zero for instance. And Japan was in that problem in state, you know for years. I don't think, I will let David say more because he knows so much more about China, but I would be surprised, if China follow that path, because its asset price inflation is not as wide into the rest of the economy as was the case in Japan, I mean the Asset price collapse in Japan, affected every segment of the economy in a very dramatic way, I think the results of an asset price collapse in China which could happen because they do have they do have over valued asset prices, but is it would be more confined, it would be more focused and I would be amaze actually. If the results when asset price short in China were as bad as they were in Japan, but David you say. Yeah, so a couple of points in this so, first I think - I am glad you brought this up because, I do think that Chinese are looking at that Japanese experience and one of the reasons why China is so reluctant to have a large appreciation of the exchange rate is they think that that you know was one of the key factors precipitating the crisis, so and I also want to say, I have some sympathy for the leadership in China not wanting a large sharp appreciation, and then - so I think and it's not an easy thing to manage, but I do think kind of gradual, more moderate appreciation is more sensible. Now in the financial crisis, financial issues, there is some evidence of asset bubble starting to develop in the stock market in China and in certain housing markets though not in all Chinese cities. If I were a Chinese policy maker, I would be concerned about this, because I do think the stock prices are getting at a line with the underlying fundamentals, and I think some of the the housing prices were getting at line. Some correction would be a healthy thing, even that's not an easy thing to engineer. I don't see any potential with this point for a big crisis, because if there were a sharp drop in the stock market and in say Shanghai and Beijing housing prices, it would hurt some people, most of whom are relatively wealthy people, but I don't think it has much connection to the real problem. You know most of the Chinese firms are not financing themselves of the stock market, the stock market is little bit of a side show there, so I don't see it being that connected to the real economy, some of the - what's happening in stocks and houses of course, some of that's financed by the banking system, if there is a contraction we will suddenly discover there are a lot more bad loans than we thought but because China has those $1.3 trillion in reserves, they have a great insurance policy, so even if there were pretty significant losses in the financial system, it's hard to see how it can turn into a more general macro economic crisis, because they have that that great physical strength behind them. One more question and then if I can, I would love to engage all of you in questions, what keeps the CCP awake at night? Are they at all at risk of loosing control and if they were to happen what's the thing they could do? Two things, one is the emergence of an organized opposition, the so called color revolutions in the form of Soviet - Block, gave the Chinese leadership and I mean they some how believe that all of this was a conspiracy between unhappy groups within those countries and western governments and NGOs. So they have done a great deal to contain western NGOs and Chinese NGOs, so this is one political, the other is - and I expect economic shock, asset bubble, foreign trade destruction, energy shock, because when the economy is growing at 10 to 11 percent you have so many unhappy people. Just imagine in the after mass of a shock, the kind of social discontent and more importantly that will create an opportunity for suiting elements within the leadership to mount a bid for power. So they are really really worried about the convergence of several trends of forces, at a time of maxim - of unpleasant surprise.