

The economic future of the U.S. is bound up with China. So how should the government manage that relationship—not only to boost the U.S. economy but win over Chinese leaders on key issues like human rights and intellectual property?

The Wall Street Journal's Alan Murray spoke with Jon Huntsman, former U.S. ambassador to China and governor of Utah, and currently a candidate for the Republican presidential nomination. Joining the discussion were Chinese entrepreneur Zhang Xin and Oleg Deripaska, a Russian businessman with extensive experience in China.

Here are edited excerpts of their discussion.

No Need for a Fight

ALAN MURRAY: Henry Kissinger's book on China raises the prospect of an epic rivalry between the U.S. and China that parallels the rivalry between England and Germany in the 20th century. Do you think that's realistic?

JON HUNTSMAN: I think it's totally avoidable. As I heard repeatedly serving as U.S. ambassador in Beijing, "We have politics in China, too." To be successful in Chinese politics, you have to have certain key constituencies behind you, and you've got to say certain things in the run-up to the Party Congress that is going to put you in office, just like politics here.

Next year holds elections for the United States. It also holds sweeping changes for China in terms of leadership in the 18th Party Congress. So what do you expect to hear in the run-up? Not that the United States is a reliable, friendly partner, but that we don't like the military presence. We don't like the trading relationship. We don't like the unilateralism, the moralistic attitudes of the Americans, they're hemming us in.

After the 18th Party Congress, Xi Jinping will rise up. After a year of consolidating power, which will put us in 2013 or early 2014, I believe Xi Jinping is going to have three years of run room where we have an opportunity, if we have the right leadership here, that would allow us to begin embarking upon a strategic dialogue with the Chinese.

JON HUNTSMAN: 'Our job is to infuse shared values into the relationship that will make it successful.' Ralph Alswang for The Wall Street Journal

MR. MURRAY: But that's a long time to wait.

MR. HUNTSMAN: That's just the reality of where we are. It means you'll have certain political realities on the trade side. On the security side, getting China's cooperation on Iran or North Korea will become that much more difficult, particularly when you've got candidates in the race who are talking about slapping a unilateral tariff on China for currency manipulation.

MR. MURRAY: You're referring to Gov. Romney.

MR. HUNTSMAN: I'm referring to Gov. Romney. There are certain things that could make the situation really bad for this country at a time when we can least afford it. I say the currency issue's going to take care of itself.

MR. MURRAY: Is currency manipulation a real problem?

MR. HUNTSMAN: Of course. It's gone on for a long time. The renminbi has appreciated 30% in the last several years. It will continue to at a rate of maybe 5% to 8%. Because China is driven by its own interests to revalue the renminbi based upon market realities, they will arrive at a point in the years to come where they'll have more of a market-based currency. Whether we tell them to do it or not, they will arrive at that point.

You certainly don't impose tariffs. As a former trade ambassador, I'm not sure how you do it through the World Trade Organization. There's no provision that allows one to do it through the WTO. It's unprecedented. And then what happens? The Chinese will then take the case to the WTO. Two years are wasted on nonsense. And you've blown through bandwidth that otherwise should've been used on intellectual-property protection, expanding market access for financial services and insurance, and working on regional security issues.

MR. MURRAY: Do you think anyone will cast their vote based on the candidates' views about China?

MR. HUNTSMAN: In those town-hall meetings we have, we talk about rebuilding the manufacturing muscle in America. How is that going to happen? We talk about the tax reform that will be necessary, the regulatory fixes to create a more transparent and predictable environment. You talk to folks about rebuilding our manufacturing muscle by taking advantage of the investment that flows in a knee-jerk fashion into the China market and has for a long time.

That's changing. Unemployment's going to spike in China. With unemployment you've got a larger itinerant work force roaming the countryside. That puts pressures on the large eastern cities, and that results in political instability and uncertainty.

And I think the investment dollar that always just lands in China is going to be looking for an alternative. This country would be absolutely nuts if we didn't position ourselves to be that alternative. It's not going to happen overnight, but we can start taking the steps to manufacture here.

MR. MURRAY: But then you need a strong Chinese market as the recipient.

MR. HUNTSMAN: Of course. The Chinese market, with the largest consumer class in recent history, is going to be a vacuum for our products.

MR. MURRAY: How can we do what you're talking about if companies don't feel their intellectual property is safe overseas?

MR. HUNTSMAN: We can make a more aggressive outreach to the emerging entrepreneurial class of China, saying, "This is not America's issue. This is yours. This is your intellectual property that increasingly you're developing that is viable on the global economic stage." Then you couple that with selective outreach to the municipalities and the provinces that actually want to work with you on it.

MR. MURRAY: What about human rights?

MR. HUNTSMAN: I think there is an opening here. Xi Jinping, who's a fairly pragmatic guy, is going to consolidate power. He's going to have two or three, maybe four years, of run room. Our job then in our U.S.-China relationship is to infuse shared values into the relationship to give it the glue and the staying power that will make it successful in the decades to come.

MR. MURRAY: On the scale of challenges that the next president of the United States will face, how high is this one?

MR. HUNTSMAN: I would argue that Iran is the most transcendent foreign-policy challenge, which could take a lot of bandwidth out of the Oval Office. But on a day-to-day management basis, when it comes to economics, security, trade and investment, there's only one relationship that matters in the world. The United States and China are now on the world stage.

Losing Trust?

MR. MURRAY: Xin, please respond to the governor's vision about where we're headed.

ZHANG XIN: I think that China will face major challenges in the near term. With every generation of leaders, the power base has become weaker and weaker. When you go on the Chinese blogs, you will see how little credibility the Chinese government has among the Chinese people. I think that will be the major challenge. How do you address a country where the governing power is losing the trust of the people?

MR. MURRAY: Oleg, we've seen some things in the last couple of years that might suggest the beginnings of a new Russia/China axis.

OLEG DERIPASKA: Russia definitely would like to benefit from China's growth and Chinese economic development. We have a huge economy hungry for resources. We have a new opportunity with components developed in China and which are very beneficial for our enterprise. It will be an economic partnership. It wouldn't be a political partnership, just because we're quite different animals.

MR. MURRAY: Is it possible, given the problems in Europe and the relative stagnation in the U.S., for China to continue to grow at 8%, 9%, 10% or higher?

MS. ZHANG: If you leave it to the market, yes, no problem. The potential problem is the government. Right now, the government is moving backward from really loving the market to not trusting the market.