????Henry Kissinger, who played a dominant role in U.S. foreign policy during the Nixon and Ford administrations, is the author of a new book, On China. He spoke with Fortune managing editor Andy Serwer.
????Q: Dr. Kissinger, can you talk about the nature of the relationship between the United States and China today?
????A: We are the two major economic engines in the world that interact with each other all over the world. So economic progress and peace of the world depend on the nature of that relationship. At this particular moment, both governments understand the importance of the relationship but have not succeeded yet in translating it into a common project for the future. They have been better in writing communiqués for the meetings of heads of government than in filling in this gap. Both countries are moving into a new and somewhat undefined future and need to work on whether they can define it in a parallel way. It doesn't have to be identical, but it has, at a minimum, to avoid strategies of confrontation.
????Did you ever anticipate, Dr. Kissinger, how much China would change from your first visit in 1971?
?? When I first came to China, there were practically no automobiles, very limited consumer goods, and no high-rise buildings. The technology was fairly backward. When President Nixon came to China, we had to bring a ground station with us in order to communicate effectively and for our media to communicate. It was typical of Chinese pride that they bought the ground station from us so that they were not operating an American ground station. As late as 1976, five years after the opening, trade with China was less than the trade with Honduras. This whole process we are talking about now didn't get conceived until 1979 and didn't really get momentum until the late '80s. So this is a 20-year phenomenon.
????Are you concerned that the Chinese economy could overheat, and are you confident that the Chinese government leaders are able to handle a market-driven economy?
????They already are running a kind of market economy. Now, what they are trying to do and what I think will happen is the emergence of a system that is somewhat in between. They will have the challenge of developing an economy where the coastal regions are at the level of advanced economies, and the interior is at the level of some of the least developed countries in the world. That's a huge challenge. And whether that can all be done by market principles remains to be seen, but I don't think that is the major problem. There is a danger of overheating. There is a danger of a housing bubble in matching all the structures and even cities being built with demand that could get difficult.
????But the key problem will be how to relate these emerging economic structures to political structures that are being adapted. Internationally, China will undoubtedly attempt to translate its economic performance into political influence. In that sense, there will always be a kind of competition. But it does not have to take the form of a zero sum game.
????It seems inevitable that China will become the largest economy in the world soon. Is that something that should concern the United States?
????It's going to happen, but one has to see it in the right perspective. Per capita, it still will be about only a fifth of the United States because it has to be distributed over a much larger population. There exists a huge demographic problem. A shrinking percentage of the population has to take place to take care of a rapidly growing older generation after 2025 or 2030. Finally, we should act not because we want to outdo China, but because of what we think is essential for our society and for the peace of the world. But it is an unprecedented situation. For cooperation to work, both sides have to have the view that I described. It's not something America can do unilaterally. And -- but I think it is necessary for peace and progress ...
