October 24, 2020, on the 2nd Bund Summit hosted by the China Finance 40 Forum, Robert Rubin, The 70th Secretary of the Treasury of the United States, and Co-Chairman Emeritus of the Council on Foreign Relations had a dialogue with Professor Huang Yiping, Chairman of CF40 Academic Committee, Vice-Dean of National School of Development of Peking University and Director of Institute of Digital Finance of Peking University. Please see below the content of their dialogue.

Huang Yiping：Bob, my first question is about the pandemic. We are here now having a conference but everybody is wearing a mask. I understand that the situation is more difficult in the US and in Europe. What is your take about the so-called second wave? Do we have an effective vaccination so that things could improve from here, or should we expect the second replay of what happened earlier this year?

Robert Rubin：Yiping, I'll give you my view, which is based on discussions I’ve had with quite a number of people who are healthcare professionals. They are leaders in the American healthcare system, which I'm obviously not, but I had the opportunity to draw on their expertise.

I think we've got tough road ahead. We're clearly getting significant numbers up in both Europe and the United States today. I don't know when there will be a vaccine. But first, you have to get a vaccine. And then you have to get it widely used and widely distributed. That's probably sometime in the middle to late middle of next year. And even then, I was with a former senior health official in the United States government the other day, and she said that even once the vaccine is in place, it may be only 60%-70% effective. So I think we've got a long way to go, in terms of the pandemic, and moving past it.

And furthermore, even after we get the vaccine effort finally in place, and after we finally pass the point when the pandemic is significantly affecting our economies, which maybe more than a year from now, because they've been so substantial and significant in both magnitude and type, so I think it's going to be lasting well beyond the adoption of a vaccine. So we're gonna be living with all these difficulties, and we have to take extra care for quite a long time.

Huang Yiping：So it looks like the uncertainty will be with us, and we have to take extra caution for some time. Thanks.

But one of the questions I guess related to that is, how is the government going to cope with the situation like this, particularly with regard to the fiscal burdens? Mr. Chairman just mentioned, one of your greatest achievement during your tenure at the Treasury was to balance the budget. You once said that President Bush Jr. quickly widened the deficit again, because of the Iraq war and so on. After the global financial crisis and after this great pandemic, the US government, and in fact the governments around the world, all have a lot more debt burdens. How are we going to cope with that, and can the US actually get out of this situation by printing more US dollars as some suggest?

Robert Rubin：I think you've got it right, Yiping, I think we face a very complicated situation. Let me focus just on the United States. Europe obviously faces similar problems, though, I think in some ways they've been less responsive to doing what needed to be done in regard to the pandemic. We need to have very rapid and very large fiscal stimulus, at least in my opinion, and that's what we did. I think we did the right thing. We need now another major stimulus bill. I was hoping it will get done before the election. But it now looks extremely unlikely. And in fact, if Mr. Biden is elected, it may not get done until after he takes office.

If you look at Mr. Biden's program, I think he's got it about right. What he says is, we need to have another very large stimulus as quickly as possible. And I agree with that. He also said we need to invest, engage in public investment for the long term, which we have, unfortunately, underdone for quite some time. I agree with that. And he says that we need to pay for the investment. Not the stimulus should be deficit funded, as you know, but the investment we need to pay for with increased revenues. And that should be increased taxes on a very progressive basis. So I think the plan that Mr. Biden's laid out in the campaign, I don't agree with every single piece of it, but I think at least conceptually it's right.

At the same time, I think we do have another question: what should our long term fiscal policy be? In other words, we should have a massive stimulus now, and meanwhile we should have public investment that's fully paid for with the progressive taxes, but then, thirdly, what should our long term fiscal policy be?

There's a tremendous amount of debate about that in the United States today, including people who you know very well, we have very different views. There are those who say that since the interest rates are so low, and the US dollar is the reserve currency for the world, that we can afford to have relatively high deficits for a long time to come, and a relatively high debt to GDP ratio. There are others like me, who say that we should do the stimulus, and we should do the public investment fully paid for. But then we need to really focus on how do we get our debt trajectory? How do we get our debt to GDP ratio? How do we get our debt position over the long run down to what I consider a sounder deposition? And I think that will be a very big debate that will go on for quite some time in the United States. But I think for now, Biden's program is, if he gets elected, about where we should be.

Huang Yiping：Great. So there is a question of tradeoff between fiscal spending for the short term stability, but also long term growth. That's something we all have to balance. You just mentioned about the benefit, the advantage of the US dollar as the reserve currency, which buys the US a lot of time dealing with the debt problem. However, one of the things that now we're looking at and people outside of the US thinking, maybe the US is giving up the so-called strong dollar policy, which you helped to create when you were in the Treasury. Do you agree with that assessment? And what do you think the implications will be?

Robert Rubin：No, I don t think so. I think mainstream economic policy thinkers in the United States, for the most part, believe that a strong dollar has served us very well, and will continue to serve us very well. Having said that, in the shorter run, the dollar or any other currency will fluctuate, as you well know, dependent on all kinds of variables and factors. And in the short run, markets tend to be psychological. But I think in the long run, the dollar will reflect the fundamentals of the United States economy. And in the long run, I think we're well positioned to have a strong economy.

I was told that some in China think that the United States is now in an economic decline. I don't agree with that. I think we have very great strengths. We have the rule of law, a deeply embedded market economy, vast natural resources, great university systems, dynamic society and culture, and much else. We have a lot of policy challenges that we need to meet, and that requires our political system to function more effectively going forward than it was in the recent past. I think the probabilities of that are very high. At other periods in our history, we’ve had a similar kind of malaise in our political system, and then we've had political resilience. Politics can change rapidly in America.

And I said a moment ago, we're a dynamic society. So I think the odds are very high that we will have a strong economy going forward, and if so, I think we will have a strong bell reflecting that. I might add that I think China and United States both are strong economies, and will be the two leading economies in the world for a long time to come. I think that puts a tremendous premium on the two countries. Looking to develop a constructive relationship over time to get the benefits that could come from that kind of relationship.

Huang Yiping：So we shouldn't read that too much out of a short-term momentums of the FX market. And if you're right, that certainly will have a significant implications on the exchange rate of RMB. The other thing I'd like to press you for your insights is that the likely outcome of the election which is coming within the next two weeks. The interesting thing here is I often read reports with very different conclusions. And one set says, it's for sure Biden is going to win. The other says Trump is definitely going to win. What is your take Bob?

Robert Rubin：I think anything is almost certain that both of those things aren’t going to happen. We'll find out on November 12th. The election is November 3rd but so far, the early voting by mail or in person represents about 40% of the total voting in 2016.So there seems to have been an enormous increase in early voting and that may suggest that we're going to have an extraordinarily high level of turnout in this election which I think would be a very good thing. There's a very highly respect political analyst named Charlie Cook, who puts out the Cook Report, which I think is the best perspective political report in America. I did an interview with him at The Economic Club two days ago rather. And he said that the odds will be quite high that Biden will win. It doesn't mean that Trump can't win; he may win. And that we will only know once it's all over.

Huang Yiping：My final question is, if Biden wins, will we see significant changes in American policy? And in particular, if you would like to share with us your insights about the future outlook of the Sino-US relations? Are we going to see a different world or are we going to see just continuation of what we saw last 3 to 4 years?

Robert Rubin：I am absolutely confident that if Biden wins, we'll see a dramatic change in American policy for us. I've already mentioned that he will have a large immediate stimulus assuming for the moment that he gets the Senate and he can legislate as he sees fit. If he doesn't get the Senate, then he's going to have to figure out how to work with Republicans in the Senate. He can still do it right by executive action. I think he will pursue having very substantial public investment funded by tax increases that are progressive bases.

Climate change will be a very high priority for the Biden administration. He's laid out a whole agenda for dealing with climate change that will be 180 degrees different from where we are today.

We have an increase in inequality in our country. And I think there are a number of ways that he will try to address reducing that, well reversing the increasing inequality and get a reduction in inequality, part of it through as I said funding public investment with progressive taxes.

I think internationally, he will reach out to work with other countries. I've known him for over 30 or 35 years. He's built in the way that he relates to people and he tries to reach out and work with others. He'll reach across the aisle to work with Republicans in order to effectuate his policies. And he'll reach out around the world to work with our allies and to work with all the countries that we interact with.  I think we also have a lot of issues with respect to our social fabric and I think he will be a uniter of people as opposed to be a divider. He will bring people together. I have a very good feeling about his presidency. I'll tell you another thing, as long as he's been in public office, as long as has been in public office, he had very good and very strong people around. If you look at the people in the campaign right now, they are very strong people. They're thoughtful, bright, balanced and pragmatic. I think you'll see that manifested in the people he appoints and in the policies that he has as president of the United States, if he gets elected, which I think is a high probability but certainly not a certainty.

Huang Yiping：Thank you very much. Unfortunately, given the time, we'll probably have to end here. But I just want to summarize the four key messages that we heard from Mr. Rubin.

First one, it looks like the pandemic risk will be with us for some time, so just be patient.

Second, the fiscal situation in the US is very difficult to deal with. But hopefully, if they spend more money on long term investment supporting growth, it will be easier for the US to get out of that high debt problem.

Third one, the strong US dollar is going to stay according to Bob, and that will have a significant implications for the global FX market, obviously.

Fourth, if Mr Biden wins, the whole world will be different and we should all be prepared for that.

Robert Rubin：I think the only other comment I'd like to make and I said this about a year ago when your Foreign Minister Mr. Wang Yi was in New York. There are enormous complexities and uncertainties around the relationship with the United States and China. But I think, one thing is certain and it's not at all complex is that the 21st century will be enormously effective whether the United States and China can have constructive relationship built around climate change, economic norms, dealing effectively with nuclear weaponry, and so much else which is in our mutual self-interest or whether we have an adversarial relationship. And I sincerely and powerfully hope that leaders in both of our countries will recognize the mutual self-interest in having a constructive relationship, while acknowledging that there will be some issues on which we will disagree.

Huang Yiping：I think that's a very good summing up message for the two countries to work together. Bob, thanks very much for sharing with us your insights and hopefully you can join us in person next year. Thank you.