since this is actually being filmed for television.

Please don't be upset if the prime minister looks more at me than at you.

The conversation is going to be recorded

for, what we at CNN like to call hundreds of millions of people.

The second point, if you can just turn off your cell phones, BlackBerrys, iPhones,

whatever you may have.

There was an incident recently in the New York Philharmonic,

where a gentleman kept his new iPhone on

and the conductor stopped the concert midway through,

and waited till the iPhone was turned off.

I will not do that. I promise you I won't embarrass you,

but if you can just take a moment. -I'll turn mine off too.

Do you know Prime Minister, I once asked,

this was many years ago when the BlackBerry had just been invented,

I asked Richard Holbrook, I said have you ever tried these, they are amazing,

they can keep all your contacts, all your calendars

and he said, I have something much better than this.

I said what? And he said, it's called staff.

I assumed that you had the same, so I assumed you didnג€™t have one.

All right, so we'll start.

It is a great pleasure to have with us Lee Hsien-Loong, the Prime Minister of Singapore.

Welcome Prime Minister. -Hello.

You have always been a very careful watcher of the Chinese economy,

so I want to start by asking you, one of the great concerns people have,

looking out this year, is that the Chinese economy is going to slow down,

that it has built in certain excesses, that in order to get out of the financial crisis

the government over-spent, over-lent and that these excesses

are now going to bring some kind of a tough landing if not a hard landing in China,

what do you think?

I'm an optimist on this fundamentally.

I can't say that they'll be no bumps in the short-term,

but I think in the long-term the trend will be up. They've built a lot of infrastructure,

they have built a lot of capacity in many industries, autos,

some of electronic industries, but it's an economy which is growing very rapidly,

urbanizing very rapidly, needing a lot of facilities whether it's roads, hospitals,

schools, houses, by the millions, and every year one percent of the population

is moving into cities, which means 13 million people needing all this infrastructure.

So I think that there may be a rough landing, but they will get through it.

Do you get the sense that they are trying to shift from a model that is more oriented

towards exports to one where their own consumers spend more money and if so,

are they taking the measures needed to raise consumption in China?

I think they get it. They saw what happened to their exports in '08-'09,

when there was a global crisis and the exports plummeted.

They saw how vulnerable they were then and the mantra

that they must stimulate domestic demand is quite pervasive.

I'm not sure whether they've taken all the measures they need to do, that which has to do

with restructuring their social safety nets so people have confidence to spend.

It has to do with restructuring and tidying up their state own enterprises,

so that the profits are distributed and properly utilized.

Has to do with having the right balance between investment,

which they've done a lot of and consumption, which is a different thing,

which you have to have quite fundamental changes in order to cause happen.

So this will be work for the years to come.

And for the next leadership in China,

You have probably met many of these people, what do you think of this new generation

and do you think that we can see some bold new moves that people have long been predicting

or hoping for in China, either economic or even political?

The prospects of political change in China have been dangled before everybody

by people like premier Wen Jiabao.

I think there will be continuity between the present generation of leaders and the next.

Similar molds, the next generation came of age during the cultural revolution

some were sent down.

Some of them belong to the first vintage year of the university intake.

After universities re-opened when the cultural revolution ended.

In 1975, right?

'77, something around that. So very capable people, but I think they will be cautious,

I think it will be a collective leadership, rather than any single dominant personality,

which means that they will act cautiously.

They will need some time to find their feet, but I hope that they will address the problems

which some of which have been put off for over the last couple of years,

which are not easy to solve, they are both economic ones as well as political ones

and the present leadership, Hu Jintao, for example, has acknowledged these issues

and when they celebrated the 90th anniversary of the party last year,

he listed fundamental problems, including moral lassitude, including corruption,

including disconnect from the people

which really goes to the heart of the Communist Party to govern in China.

So they know these problems, they need to find the solutions.

But do you think the Communist Party can engage in serious political reform

without threatening its monopoly on power?

We will try very hard, nobody can say that they will succeed.

It's a society which is changing just like every other society in the world,

it's opening up. It's not a monolithic society at all.

The internet is pervasive. I think they have 400 million internet users or something,

more than America has.

It's a very diverse society. They speak up and when there public incidents now

you get mobilization rapidly and angst and unhappiness expressed,

even by people in the establishment, even the television news viewer shows her disapproval

of what she is reading. So that's a new world.

Let's talk about the other super power in the Pacific, the United States.

The United States went through a flurry of diplomatic activity,

political activity over the last three months.

The East Asia Summit , ASEAN, the proposal for this new trade area.

The Trans-Pacific Partnership.

The Trans-Pacific Partnership, and a kind of military cooperation arrangement

that could be described as a military base in Australia.

Now, the Philippines are talking about perhaps having American troops back.

Do you think these moves are stabilizing the Asia-Pacific region?

We fundamentally think its good that America is interested in Asia

and in the Asia-Pacific region.

And their presence since the Second World War tremendous benign influence.

It's generated peace, stability, predictability and enable other countries

to prosper, including China and I think it's good that America

continues to take a close interest in the region, not just on security issues,

but also economic issues and cultural and on a broad range of areas.

But it cannot be for a few months at a time in a spasmodic style.

It has to be sustained over a long period of time, really over many administrations

and decades and America has got many preoccupations around the world,

so we hope on your busy plate Asia doesn't fall off the edge.

But we are naturally very happy that President Obama and Hillary Clinton have made the effort

and have put Asia quite high on the agenda. We hope it will be sustained.

Is there any prospect of American troops in Singapore?

We actually host facilities in Singapore and American ships and aircrafts

stop by from time to time and use those facilities.

That's different from having a naval base.

And a naval base would be a bridge too far?

A naval base would be twice as big as Singapore. It can't be done.

You've reclaimed lots of land to build casinos,

you could probably build a naval base.

But let me ask you about the Chinese reaction.

The Chinese reaction to this same flurry of diplomacy and these new agreements

has been somewhat cautious and in some cases hostile.

Their official position is that they are very happy to have more members

join the East Asia Summit and America is welcome to join and Russia is welcome to join

and Europe is welcome to join as well and the more the merrier.

That's the official position.

The private position probably is a weariness, they are watching,

they think that there will be people in America who are not quite happy

that China is prospering and would like to hinder that process.

And they will not want to let those people succeed.

So I think that there is cooperation, but there is also watchfulness on both sides.

Do you think that Barack Obama has pursued a successful foreign policy

in the part of the world you care about?

I think he has put a lot of attention on it and the outcome has been constructive.

These are issues which need long-term management,

and the most important item to be managed is America's relationship with China

and it hasn't come to blows, although there has been tension and that's a positive.

Do you worry about the rise of protectionism?

If you listen to the United States, President Obama's state of the union,

he had a few tough things to say about China,

but if you listen to Mitt Romney, who until yesterday was the punitive republican nominee,

he has some very tough things to say about China,

particularly unusual coming from a republican.

Does listening to all that for a place like Singapore,

which so depends on free trade, scare you?

Some of it is election year rhetoric in America,

but I think the general mood in America on free trade has been negative for some time

because of uncertainties brought on by globalization,

because workers haven't seen an upside in terms of their wages,

they're worried that their jobs are insecure and they could get retrenched

because industries may move off-shore and jobs are not being created in America

in the same way in a very large scale as they used to.

When you make an Apple I-phone for example,

the pieces come from all over the world, they are not made in America.

So that's an underlying mood which worries us and which,

I think, constrains the administration when it comes to free trade

and one of the reasons why we are not getting anywhere with the Doha Round under the WTO.

It's perhaps also the reason why the administration

has decided to proceed on this Trans-Pacific Partnership

as the one significant trade initiative.

We hope they persevere and they don't take too hard a line

and are able to come up with a constructive outcome.

When you look at the outlook for the next few years,

do you feel that you will be able to continue to grow and prosper in a booming Asia?

What keeps you up at night?

Well, I think Asia will boom. There will be ups and downs.

We will be affected by Europe, if Europe goes bump in the night,

but if it doesn't, well there's a certain momentum and the countries in China,

in India, in South-East Asia, which will help to carry us forward.

What worries us in Singapore is not that the world will not prosper,

in the ups and downs of the world, a small boat like Singapore with not very much room

to maneuver, can you make sure that every time you catch a wave head on

and you are not flipped over. Because once we are flipped over that's it.

When you look at the American debate, one of the things that is often talked about

is this issue of out-sourcing, moving factories off-shore,

and if you look through the specifics, you often find companies

that are trying to figure out where to locate and Asian governments will often offer

very rich inducements to these companies to move their factories to Asia

including the Singapore government.

So do American State governments.

So you think you're just playing the same game that Americans...

We are trying not to play the same game. My attitude is,

I am prepared to forgive you taxes if you come,

but I won't give you money if you lose money.

So I'm prepared, if you have powerful, if you are in such great demand,

I may not be able to levy my full pound of flesh on you,

but I see no reason why I should give you money to come to Singapore,

through some grant or subsidy or some other scheme

when in fact you're not creating economic value for Singapore.

What would you advise...

So some projects we'd like to have, but we have decided how generous we are able to be

and they've gone elsewhere and our people pursuing investments,

the Economic Development Board, are sometimes disappointed,

but I think there has to be a limit otherwise you are taken to the cleaners.

What would you advise President Obama, if he's trying to revive manufacturing.

One of the things Asian countries have done very successfully

has been to adopt industrial policies where the state in some way or the other

provides help, incentives, tax subsidies of various kinds to industries,

and has been quite successful.

Should America have a more kind of nationally planned industrial policy?

No, I don't think I would describe it as industrial policy.