>>Jon Huntsman: What we don't get about China
is that they are playing the long game and
we're playing the short game.
>>Eric Schmidt: Okay.
>>Jon Huntsman: They're in it for the long-term
and decisions that they make, we sometimes
analyze and scrutinize through a shorter-term
prism: The quarterly returns, the annual results.
They're in it for the long-term.
And while some of their decisions may be a
little baffling in terms of where their economic
policies might take them or where their military
spending might lead them in terms of a geopolitical
strategy, they are playing for the long-term.
And we rarely stop to think about what that
means for the United States going forward.
So imagine this, you sit at the negotiating
table, as I have year after year, either as
a trade negotiator or as a diplomat or in
business, as many of you have in China.
And on the Chinese side of the table, you
have some of the best long-term strategic
thinkers in the world.
And on the American side, you have some of
the best short-term tactical thinkers in the
world.
And there's a gap like this.
That today remains the challenge in the U.S.-China
relationship.
How do you bridge that chasm between the way
the Chinese see problem solving and their
position in the world and how we see ours?
So we've had the rise now.
We're almost at the very end of the complete
transitional cycle of the fifth generation
coming to the forefront.
They're all pretty much in their late 50s,
early 60s led by a man named Xi Jinping who
just turned 60 years old in June.
He will lead for ten years.
We don't quite get that part either.
He is bringing up a group of -- in most senses,
like-minded decision makers.
So if you look at the rungs of power in Chinese
politics, it starts at the board of directors,
as I would call it, the standing committee
of the politburo, in which you have seven
members led by Xi Jinping.
Now, China has two basic factions in the communist
party: One, the elitist faction and the other,
more of the populist faction.
The elitist faction is tied into the princeling
community, which are the sons and daughters,
grandsons and granddaughters of the revolutionary
elite.
The populist faction is dominated primarily
by those who grew up in the rural areas and
came up through the communist Youth League.
Tuanpai is what it is called in Chinese.
You look at the standing committee of the
politburo, it is totally dominated by the
elitists with the exception of one, Lee Kuan
Chung, who is now the Premier.
So I suspect that Xi Jinping will be able
to shoulder some major reforms through that
we might not be anticipating.
But below the standing committee of seven
people, the board of directors, is the politburo
where you have 25 members.
And then below that, the central committee
where you have 375 members, half of whom are
alternating members.
And you start disaggregating who occupies
those seats within particularly the central
committee.
And you come to a pretty rapid conclusion,
if you know anything about those who are there,
this generation, and will be for the next
ten years, that there's some very able,, capable,
and smart people on the economic policy-making
side, even some on the national security defense
side.
People like Zhou Xiaochuan, the head of the
central bank, and one of the most able central
bankers I think I have ever met.
Lou Jiwei who until recently ran the China
Investment Corporation, now is the minister
of finance.
And people like Leo Hu (phonetic) who is a
graduate of Seton Hall, graduate of the Harvard
Kennedy School, probably one of the open-minded
reform thinkers on the economic side.
He stands now at the right hand of Xi Jinping
through all of these decisions that are being
contemplated.
And here's now what's going to happen.
And I hope the eyes of the United States and
the western world are on it because I fully
suspect that the events that will play out
over the next month or two may be some of
the most important in the history of China
and, therefore, the world, since Deng Xiaoping
launched the open-door policies of 1977 and
'78, shortly after the end of the Gang of
Four, upon the death of Mao in 1976.
We're going to hear now -- they've kicked
what they call the Third Plenum from October
to November, which means they're still thinking
through exactly what content to put forward.
This Third Plenum event that we will read
about in November will represent a year's
worth of work starting last November at the
18th Party Congress -- so China has party
congresses every five years, and they have
since the death of Mao Zedong.
They have People's Congresses every year in
spring.
But the Party Congresses are when the leaders
are brought to the forefront.
So the 18th Party Congress in November.
The new leadership, the fifth generation,
took over.
People's Congress in March.
And now, as we approach November, we are about
to hear an articulation and a putting forward
of what I think will be some far-reaching
policies that will hit on fiscal reform, financial
reforms, economic rebalancing, the movement
away from an export sector to more of a consumption
sector and this broad, rather amorphous category
called urbanization.
So what do you do as Liu Xiaobo told us upon
President Obama's first meeting to China where
I was with him as U.S. ambassador -- his first
meeting to China.
I also went with Ronald Reagan on his first
trip to China, which was my first trip to
China in the early 1980s when I was an advance
man.
And Liu Xiaobo, then the Premier, turned to
President Obama right at the very top of the
meeting after President Obama is going on
about our economic challenges and so on and
so forth.
He said: How would you like to have this as
a challenge, Mr. President?
How would you like to be a country of 800
million farmers where today we only need 200
million farmers?
He said, I'm left with 600 million redundant
farmers, by the way.
And, yet, look at why these mega cities are
being built and why they are so obsessed with
job creation.
Why?
Well, if you have an itinerant workforce of
100 or 150 million strong which is what you
have today, it creates political instability
which is the end of the party if they can't
manage it.
So the warning lights start going off when
unemployment gets above a certain level, when
inflation spikes beyond a certain level and
when you have a roaming group of itinerant
workers with nothing to do.
>>Eric Schmidt: So, I came to a view in Asia
that you could model some of these countries
by other institutions.
So my view of North Korea is, is that it is
essentially a military, right?
It is run like the military.
And militaries are always in some form of
conflict, which is roughly what's true of
North Korea today.
I came to the view of China that China is
essentially a corporation, right?
It is run like a corporation.
It has net cash flow.
Net cash flow is positive.
It has a series of strategic goals.
It understands trading partners.
It is very clear as to what its mission is.
What will cause or what could cause that corporate
model of China that you're describing?
You know, tenure aboard, tenure succession.
You know, "we are in charge, you're not" kind
of a structure.
Is it this issue of a rural revolt that ultimately
propelled Mao into place?
Is it the environmental set of issues which,
of course, are terrible?
Is it the Internet?
Or all?
>>Jon Huntsman: Two things.
All of those are absolutely trend setters.
But I would say that it starts with corruption.
We're reading a lot about it and you are going
to read a whole lot more in the months ahead.
And second would be economic inequality.
So if you look at it from a Gini coefficient
standpoint, zero being perfect equality and
one being perfect inequality, and if you stop
at .44 as being the kind of threshold where
instability begins to occur, I would say that
recent numbers have put China somewhere in
the .60 to .62 category, which means you have
a rest of population that ain't going to take
corruption without putting up a fight.
So what does Xi Jinping wake up to every morning?
Every morning he wakes up to, first, what
is the unemployment outlook.
What do the leading indicators like inflation
look like?
What does the blogosphere has to say about
me?
And what can I do to send a signal to the
masses about my ability to root out corruption?
So you have the Bo Xilai case.
You have the --
>>Eric Schmidt: Which they televised and put
on the Internet and live streamed everywhere
which actually took the Chinese Internet down
which is amazing.
>>Jon Huntsman: But it is interesting to note
that the content of what they did broadcast
-- it was a totally scripted affair -- was
much different than what was broadcast.
My first view of China was 1979 when the Gang
of Four was broadcast.
Days and days of trials, if many of you will
remember if you are old enough, pretty much
unscripted.
This was -- this was fairly scripted.
So, the corruption side will have to be dealt
with.
We're not yet to where the full story has
been told.
Will you be able to root it out completely
from society?
Of course not.
But can you cut off a few chicken heads to
scare the monkeys, as they say in an old Chinese
saying?
Of course you can.
That's exactly what Xi Jinping will endeavor
to do as he consolidates his power.
So the goal for him will be by the end of
this year, which is typical for any Chinese
transition, you want to make sure that you
fully consolidated power after a year in office
among the People's Liberation Army, the largest
standing Army in the world, among the Communist
Party of China, which is about 80 million
members strong and 4,500 outposts around the
country, still the central organizing group
of the country.
And, three, you have to hit a home run with
the so-called princeling population which
still populates a lot of the state-owned enterprises
and a lot of the key positions of power in
the individual ministries.
The SOEs will have to be dealt with.
If you look at the economic return performance
of the top 500 private companies in China
and compared to the return of, say, just two
state-owned enterprises, Sinopec being one
of them, doesn't come anywhere close.
The state-owned enterprise is so dominant
right now in China, one of the reasons being
is that they have been able to write their
rules for the last ten years.
I would argue that under Hu Jintao and Liu
Xiaobo and the last ten years of Chinese leadership,
they have squandered their capital.
They were unable to basically do the hard
work to reign in the state-owned enterprises.
They failed and, consequently, the state-owned
enterprises are even more powerful today than
ever before.
There is only one person who can begin to
reign that in, and that is Xi Jinping.
He knows what's ahead.
He knows what must be done.
And he knows what the cost of failure will
be as well.
>>Eric Schmidt: I wanted to switch completely
to talk a little bit about U.S. politics and
in particular the Republican Party.
You are truly an expert in the machinations
of running for President and the various political
factions.
>>Jon Huntsman: Look where it got me.
[ Laughter ]
Third in New Hampshire didn't quite cut it.
>>Eric Schmidt: Can you describe the state
of the Republican Party today?
Obviously, President Obama won re-election
in a relatively strong set of votes.
What is the Republican Party going to do to
try to win in 2016?
There are some people who believe that the
Senate will turn Republican to have a House
Republican -- basically have an all-Republican
Congress in 2014.
I'm not sure, but some people model it that
way.
Give us a little bit of a map of what's going
to happen.
Any political party has disagreements over
various things.
>>Jon Huntsman: I'm totally over my head on
this one.
But let me give it a try.
First of all, if you are going to win, as
a Republican, it's helpful for people to know
what you're for and not what you're against.
And I think the Republican job has done -- the
Republican Party has done a horrible job articulating
what we're for.
So you have all of these ads saturating the
airwaves about defunding ObamaCare.
Well, what on earth does that mean?
>>Eric Schmidt: What are you going to replace
it by?
>>Jon Huntsman: What are you going to do to
replace it?
Well, as governor, I had to do something about
it.
We had to get right to the heart and soul
of those aspects driving healthcare costs
at double-digit paces.
We have not done a very good job of putting
on the table alternatives.
And I think in large part the messaging coming
out of immigration reform, our failure to
do anything about it, has frightened key demographics,
now, for two election cycles.
So if you look at the turnout results, if
you lose the youth vote and women and Hispanic/Latino
voters who, I remember the election of 1984
when Reagan used to go all around the country
and all those signs, "Viva Reagan, Viva Reagan,"
he carried a large majority of the Hispanic-Latino
population.
We lost probably 60/40.
And then even deeper, you lose the Asian-American
population 75/25.
You have to work pretty hard to lose a group
that naturally is inclined to want to support
the Republican Party platform.
>>Eric Schmidt: You have been identified with
a group of people -- and I'm not trying to
put words in your mouth -- that believe that
there's a set of Republican values that are
not being expressed that goes something like
this: Small business, entrepreneurship, self-reliance,
these sorts of American values.
The current Republican Party doesn't seem
to be leading with those, except maybe in
a little bit of advertising but their actions
are inconsistent with some of that, if you
look at bias towards large businesses, et
cetera.
Is there a way -- can you characterize that
as a different movement within the Republican
Party that you see, or is that just normal
criticism of the political process?
>>Jon Huntsman: Well, the Republican Party
doesn't exist today in the sense that there
is an organized Republican Party.
You have factions of the Republican Party.
And until such time as there's something that
begins to coalesce the various factions, there
won't be a Republican Party.
I mean, you can imagine another loss in 2016.
And again, we're 25% of the way to 2016.
Then presumably the Republican Party is out
until, what, 2024?
How do you maintain any viability as an alternative
governing party during a length of years where
the lights have been completely out and you
haven't been seen as governing, and the last
time you governed we had wars and we had economic
failure?
I don't know what happens at that point, but
probably the rise of alternative political
movements, maybe even third-party movements
of some kind.
But the Republican Party, to survive, is going
to have to speak to the goals and aspirations
of the people in this country in the sense
that it rebuilds the opportunity ladder for
all people.
That the rules of the game are made the same;
that the marketplace is fair; and that people
can see a way out of their current circumstances.
That's what the party has always been about,
yet today we're caught up in a lot of fringy
issues right now that just don't make a whole
lot of sense.
>>Eric Schmidt: What's interesting is you've
put, to some degree, your money why where
your mouth is.
You're working on this no labels campaign
with democratic, I think, friends on this
issue.
Can you sort of describe what might happen
as a result of that work?
In other words, presumably you're trying to
fix this.
>>Jon Huntsman: Here's what -- here's the
big thing that I think we'll see in politics
in the years ahead, because we can't keep
doing what we're doing today.
It's not yielding any progress, any results,
any problem-solving, anything that represents
progress for the people.
The next big thing in politics, I do believe
-- and this is right within the Republican
wheelhouse when you look back at Teddy Roosevelt.
I mean, you look at the election, for example,
of 1912, although Roosevelt didn't win -- he
kind of ran as an alternative third party
-- it was about reform.
I think the road forward for Republicans,
quite frankly, is embracing reform.
You've got to fix a broken system.
And there's no party better situated than
the Republican Party to talk about what needs
to be reformed.
Now, what are some of those elements?
You're going to have to talk -- something
the Republican Party doesn't, I think, talk
very naturally about -- and that's about campaign
finance reform.
Nobody wants to mention it but the system
we have today is an abomination.
It's a embarrassment.
When you can get a casino owner --
[ Applause ]
>>Jon Huntsman: -- who can put $50 million
behind one person, we call that good for the
people?
I mean, who are we fooling?
Number two, we now have created a situation
where 70% of the House of Representatives
seats in this country are predictably red
or blue; Republican or Democrat; MSNBC, Fox
News.
And all these people in the middle say, "What
about us?
Who is representing our interests?"
And we've created this pattern throughout
this country through redistricting.
I tried as governor to get an independent
redistricting commission in our state -- I
know how hard this is -- and the legislature
wouldn't have anything to do with it, and
so it's used for politics.
But this is what we've done to ourselves.
I mean, just take a look at the landscape.
Reversing that is going to take some real
doing.
Number three, I think term limits are about
right for this country.
I look at the folks who have served forever
in the Senate, one of them from my home state
who just won reelection.
He was elected initially the year I got my
driver's license, and I think he ran on a
platform of change, and yet these folks, they
run to the right to capture re- -- they sell
all of their principles so they can get reelected
and they come back as if nothing happened,
as if we're supposed to believe them going
forward.
I think term limits would be a really good
thing for this country on Capitol Hill.
There are some elements of reform that need
to be discussed in this country that need
to be driven by the will of the people.
They want to speak out about it and part of
this no labels movement that I am cochairing
is ultimately to get to the point where we
can have these conversations.
So right now, we have created what I would
call a new governing coalition.
At the beginning of the year, when we talked
about it, people made fun of it.
You know, the stories in the newspapers sort
of cut it to shreds.
"Houses, no labels, who are these people?
Are they a bunch of mushy moderates?
Is it a third-party movement?"
No.
Our purpose is to bring Republicans and Democrats
together in one room and to talk about not
that which divides them but that which brings
them together, where they have overlapping
and common interests.
We started with zero in our problem-solvers
caucus at the beginning of the year.
Today, we are knocking on a hundred members.
Republicans and Democrats in equal numbers,
Tea Party members like Dean Heller from Nevada
on one end, Angus King from Maine on the other,
a progressive senator, and people are now
meeting every other week.
It's the only thing on Capitol Hill that's
yielding anything right now.
And we have 17 bills to prove the concept,
Eric, 17 bills that are headed to the floor.
>>Eric Schmidt: That would be more bills than
have been passed this year, by the way.
>>Jon Huntsman: This is incredible.
Now, admittedly what they're working on now
-- and you'll hear more about it in the next
month or two -- is low-hanging fruit.
They're all working on government efficiencies.
How do you purchase better, how do you manage
energy efficiencies a little better, stuff
that is just kind of a no-brainer for anybody
in politics.
But now we're going to be moving toward how
you handle the debt ceiling, for example,
without having a complete cataclysmic disaster
again for the private sector.
All they want is some sense that the marketplace
is going to be consistent and predictable
going forward, and our political class can't
seem to deliver that.
>>Eric Schmidt: So my final question: Are
you going to run again?
>>Jon Huntsman: I might look crazy, but I'm
not insane.
>>Eric Schmidt: That's a yes, you're going
to run again?
>>Jon Huntsman: No, let me --
[ Laughter ]
>>Jon Huntsman: I'm a big -- we've given the
best years of our lives to politics and I've
had the most unbelievable career in public
service.
You win some, you lose some, but serving three
times as an ambassador for my country, being
elected governor twice, running for the presidency,
which was an incredible journey --
>>Eric Schmidt: You spent, what, 15, 20 years
in public service?
>>Jon Huntsman: Half of our professional career,
at least, the other half in private life.
I believe that there is a season for all things,
as the saying goes, and I think our season
now is probably to reconnect with private
life, to recharge and see where things go,
but we need to encourage --
I guess my last comment to all of you here,
the one thing that really strikes you as you're
standing on the debate stage, which I did
over and over again in things that became
something more akin to game shows than a presidential
debate, and you look at the five or six or
seven people sanding on the stage, you look
at all the folks in the audience, you look
at all the networks in the back of the room
broadcasting this stuff to 10 million viewers,
and you think for a country of 320 million
people, some of the most innovative, creative,
courageous folks in the world, this is the
best we can do?
[ Laughter ]
>>Jon Huntsman: This is it?
[ Laughter ]
>>Jon Huntsman: And it struck me throughout
that we're not able to get folks into the
arena who are willing to take the risk from
private life, take the risk, do what's right
for their country, and leave the world a better
place, and I hate the thought that we might
end up in a siloed country, the politicians
and the business class.
>>Eric Schmidt: I have a feeling that Governor
Huntsman's role in politics is not over, but
thank you very much.
