Hank Paulson Discusses "Dealing With China" At World Affairs Council

Maria Johansson, for GPA -- Henry “Hank” Paulson, formerly the United States Secretary of the Treasury and CEO of Goldman Sachs, is a man who wears many hats. He is probably best known for the role he played in the 2008 financial crisis, but he also happens to be a passionate international traveller, especially to Asia.

A significant portion of Paulson’s life has been dedicated to working with China and strengthening the relationship it has with the United States, a topic on which he recently published a book, Dealing With China: An Insider Unmasks the New Economic Superpower.

On April 15, Paulson appeared at the World Affairs Council (WAC) of Philadelphia (1 S. Broad St.) to speak about his experiences in China during an event moderated by Michael Smerconish, host at Sirius Radio and CNN.

When Paulson first started at Goldman Sachs - eventually becoming head of the Chicago office and then co-head of the New York office - relatively little business was being conducted between China and the U.S. He floated the idea of working more closely with China to the Goldman Sachs board and hit a wall of resistance.

The boards’ reaction was not completely unexpected. Historically, Paulson explained, any talk about international relations with China was looked upon with suspicion.

“The less said about China, the better,” Paulson said.

By Paulson’s recollection, the overwhelming advantages of working with China eventually became clear to his colleagues.

“It took a while, but it turns out our timing was right,” he said. As a result, in 1991 Paulson travelled to Hong Kong for the first time and has visited China over 100 times since.

When Smerconish asked about the culture shocks Paulson found on his first visit, the banker chose to highlight the similarities instead.

“The Chinese have a similar sense of humor and can be quite direct when you get to know them,” Paulson said. He also spoke about procedures during meetings and how initially, things were very formal. Over time Paulson was able to forge personal relationships with many of his business acquaintances and network the same way he would at home.

One big difference between China and the United States lies in their respective forms of government. In China, the ruling Communist Party has long been a source of stability for their people, Paulson said. However, the country is rife with corruption, an issue that the Chinese government is now coming down hard on. Paulson told the audience that a quarter of a million members of the Communist Party have been punished as a result of corruption convictions.

One of the reasons why China is suffering from such massive corruption could be its explosive growth over the last decade. Paulson also pointed to the fact that the current government inherited an economy with severe problems, the solution to which Paulson believes is a reboot of the economy as a whole.

“Opening up the system is key to stability,” he said of the county’s current system. However, Paulson noted that for now the Communist Party is trying to focus on the things that are the most pressing for its people, including corruption, the environment, property rights, food safety and income disparity.

The relationship between China and the U.S. is, according to Paulson, “the most important bilateral relationship we have.” To him, it is of critical importance that the government foster a positive relationship with China.

“China already looks at itself as a major power,” Paulson explained, as he pointed out that the country has 1.4 billion inhabitants and that half of all new buildings going up around the world are being built in China.

Working positively with the growing superpower would be in the interest of the United States and something that Paulson said the Chinese would welcome.

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