Dollar, on the misunderstandings that get in the way.

David Dollar: I think on the Chinese side, there is a skepticism that the United States will accept the rise of China to a kind of coequal status. I think just kind of common sense that you wouldnwant to see another country emerge as the sole superpower; but I . . . From an economic point of view, there no reason for Americans to fear China rising to a similar economic status as the United States. I think in China, there a lot of skepticism that the American people and the American government will accept this. On the American side, I think there a lack of understanding that on the economic side China now really is a capitalist system with a tremendous amount of economic freedom. And this has generated a lot of prosperity. I produced a middle class, and Chinese people are pretty happy with this system. So I do think on the economic side there s a lot of potential for the countries to cooperate harmoniously. So I think on the American side there  a little bit of misunderstanding about the extent to which China is reformed, partly because Americans tend to equate capitalism with democracy. And personally, I think in the long run, there a pretty close relationship between capitalism and democracy; but the long run is pretty long. And over 20, 30 years I think you can develop a pretty well-functioning capitalist system under a one party system, and  not sure Americans fully appreciate that.

Recorded on: 7/3/07