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Lew's Mission to China a Big Mistake?

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    'The Coming Collapse of China' author Gordon Chang on Jack Lew's trip to Beijing.

  • Duration 4:04
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This transcript is automatically generated

We will let you know but right now Jack -- is heading to Beijing.

Where he will meet with Chinese officials to discuss everything from cyber attacks to North Korea our next guest says the trip to China.

Is the treasury secretary's first big mistake joining us is China expert Gordon Chang author of that coming collapse of China and it's good to see mister Chang first question to you.

Why is secretary of the treasury -- going to China why are the Chinese not coming to the United States.

Well administration officials believe it's important to get to know the new Chinese officials and to establish relationships with them.

But it's not because the Chinese don't like friendship what they do if they respect strength.

And -- ruthlessly pragmatic you know we've seen this in the number of different things for instance first term of the Obama administration.

Secretary Clinton tries to signal friendship February 2009 the second month of the administration.

They go on a Bender for more than a year and so I think that what we're doing by going there first is we're feeding their already inflated sense of self importance I don't think -- -- gonna work.

There have been I don't -- -- say military skirmishes but incidents where they have cut off US side navy vessels in international waters that happened three or four years ago.

There's the incident of the cyber attacks which have been traced to China.

On the United States and that secretary will be discussing this with Chinese leaders why would he be discussing that and not perhaps mr.

hagel or even secretary -- secretary of state.

There -- secretary -- will discuss it in a couple weeks time when he goes -- Beijing.

And hagel will discuss -- I think every administration -- doing this and the reason is that last Tuesday Director of National Intelligence James clapper identified cyber attacks as the number one security threat to the United States.

We all know where they're coming from that's China and so I think that every administration official is gonna have -- -- on his brief to talk about cyber.

I would admit that I have a somewhat myopic view of China I mean the United States I'm not in Asia watching this incredible economy -- there.

But in the -- there's this perception that we have more to lose then China has to lose with us and and you actually point out that it's the other way around.

That it is the other way around last year China's merchandise trade surplus against the United States was a 136.

Point 3% of its overall trade surplus.

That's enormous and when you think about it.

We worry about the Chinese but we don't have to they have an economy that is geared to selling things to us we do not have an economy that is -- to them.

-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- But how do -- either make money.

-- in regards to China or avoid China in order to make money.

Well you know you can make money in the Chinese stock markets if you know what -- Chinese Government is gonna do with regard to stimulus because that market moves on government policy.

The thing about China right now is that the markets are not giving investors a sufficient premium for the risk -- a lot of risk there because the economic recovery which is now in its second quarter is pretty fragile.

Are you paying attention to that the constant discussion in the United States about the pressure to get the Chinese to allow their currency to to rise in value.

Yeah I mean we've been talking about bad for more than a half decade now and the Chinese have been intransigent.

The Chinese renminbi is still undervalued and it's undervalued not because of market forces -- -- -- undervalued because of Chinese Government policy so if I'm making my investment decisions based on that.

Scenario should I be changing them is that about to change in anyway.

-- I don't think so because the Chinese Government is really worried about their exports their export numbers are being inflated by fictitious transactions people in Beijing know about that they're worried about their export industries along the coast.

Which are becoming uncompetitive all right mister -- you're heading to Shanghai tomorrow I understand for a quick trip he will be back we hope you have a safe trip thank you Gordon Chang author of the coming collapse of China thank you very much.

Thank you -- And -- -- -- talking and now.

Barely got itself in deposits -- up we -- in it could have dragged you called.

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