Charlie Rose Talks to Lee Kwan Yew

What does the world want from the U.S. in 2011?
Leadership, because you're the only mover and shaker. Take China. She's the second-largest economy, but she hasn't got a worldwide interest. She only concentrates on those areas where she needs oil and other resources.

But you have said in the past that China's intent is to be the greatest power in the world?
There's no doubt about that. But it will take them more than 10 years. And that won't make them the world's technological power in 20 years. They are still behind the U.S. They have to put up a stealth fighter, put a man into space. That's a prodigious effort on their part.

Is there a face-off coming between China and the U.S.?
I don't think there will be a face-off in the sense of a conflict. A struggle for influence, yes. I think it will be subdued because the Chinese need the U.S. The Chinese need U.S. markets, need U.S. technology, and need to have students go to the U.S. and study, then start doing business so that they can improve their lot. All that information and all the technological capabilities will be cut off from them.

China's had a phenomenal run in terms of growth. Do you think state capitalism could become the model for the future?
State capitalism is not as effective as private capitalism. Would you stay up until 2 or 3 in the morning if it's not your company at stake?

So you wake up tomorrow morning knowing your salary is intact. [In a private company,] it's about capital and your share in it. There are real stakes involved. And the other stakeholders also make sure you're on the ball. You've got to stay focused. So I believe very strongly that private capitalism easily outdoes state capitalism.

How would you characterize Singapore's current economy?
More and more, private capitalism. We started off with state capitalism because we did not have the entrepreneurs. Our entrepreneurs were traders, and traders have no capital and don't have the foresight or capability to sink in capital for many years before a return comes. So the state sent out its best officers, who were entrepreneurial, and started Neptune Orient Lines, Singapore Airlines. But we have privatized them.

Would you say that most Asian nations are scared of China?
Wary, I would say, is the right word, not scared. Wary of taking a step that hurts their core interests.

Because they'll shut off access to their market for your goods?
That's the least they can do. They'll cut off your businessmen from doing business there.

So that economic stick is always hanging there?
Absolutely. Let's not pretend. There's 1.3 billion customers there with growing incomes, attractive, and they're going to have a growing middle class. So if you're out of it, you've lost something.

Does India respond to China the same way?
I'm not so sure, because they're scared of the competition. The Chinese have offered the Indians a free-trade agreement. The Indians have not snapped it up because then Chinese goods will go to India and compete, and the Chinese car will knock out the [India-made] Maruti.

What's China afraid of?
Well, there are enormous economic problems—a disparity in income between the rich coastal cities and the inland provinces, and in income within the coastal cities. They've got to watch that carefully or they might get severe discontent and civil disorder.

So could an Arab spring come to China?
Not likely. Public security is so comprehensive and tight. They call this another Velvet Revolution that took place in the Arab world. In China, if you put it on Facebook and say, "Let's get together," it will be put down before anybody could arrive. They're not interested in what the world thinks. They're interested in their internal stability and success. There's no evangelical urge to change things.

Do you think of America as a proselytizing country?
It always has been and it always will be. The world would be a bigger and better place if everybody was like America—though I don't think they can be—but if you want to try, go ahead.

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