Many of us comment on China by reading second-hand literature published in English. Yasheng Huang is a professor of global economics and management at MIT’s Sloan Business School, who came to the United States from China in the 1980s and thus had the freedom and a front row seat to study the evolution of China since then. Tyler Cowen has one of his “Conversations with Tyler” with Huang “about the development of the Chinese state” (March 8, 2023, audio and transcript available). Much of the discussion revolves around how China’s civil service examination tradition has evolved over the centuries and the effects on literacy, creativity and commerce. Here, I’ll focus on some of Huang’s more topical comments:
What’s a big misconception about the Chinese economy?
[O]One of them is that they look at Chinese spending on R&D, and they look at, for example, some of the impressive technological advancements that the country has made, and then they come to the conclusion that the Chinese economy is driven by productivity and innovation. In fact, studies show that the contributions of total productivity to GDP have declined in the last decade and more. As China began to invest more in R&D, the economic contributions from technology, from productivity, actually declined. In an economic sense, it is not a productivity-driven economy. It’s an overwhelming majority investment-driven economy.
I think this is one of the biggest misunderstandings of the Chinese economy. This has implications for the country’s future prospects, whether or not you can sustain this level of economic growth solely on the basis of massive investment.
Huang also offers some thoughts on the nature of political protest in China and how the Communist Party shapes the shape of protests in a way that helps the Party retain power.
There is a difference between a civil society made up of isolated individual actions and a civil society made up of organized activities which have a programme, which have financial support, which have the capacity to operate autonomously. According to the second criterion, China has none of this.
If you look at recent protests against Zero-COVID checks, let’s keep a number in perspective. By various estimates, in 2022 there were probably 400 million people under some sort of long-term quarantine. And let me make this word concrete quarantine. This means you’re basically locked in your home, sometimes for weeks and in some cases for two months. This is the level of suffering, and sometimes you cannot get food. Sometimes you can’t get patients into the ER because hospitals have also closed, refused to admit patients who tested positive, or who cannot show a negative test for COVID. Some people have died. There are suicides, there are fires, and all that collateral damage of Zero-COVID control.
In relation to this, China has seen a wave of protests – by one estimate, in 17 cities. I don’t really have a good idea of the number of people involved, but we’re not talking about millions of people. We may be talking about 10,000 people, or tens of thousands of people.
Compare that with Iran. In the case of Iran, a woman died at the hands of the moral police. There were other grievances, but that was the trigger. The protests are still continuing. Millions of people took to the streets. … If you look at the color revolution in Tunisia, it started with a peddler whose property was confiscated by the government official and then he committed suicide. This sparked the color revolution.
This kind of brutality towards petty peddlers happens almost daily in China. It is very important to specify, in relation to grievances and the level of misery. . . We are not talking here about large-scale social movements. These are individual actions. …
If you look at what the CCP has done, it’s actually quite smart. It is not the case that they do not receive input from society. They create portals, they create websites, and they create phone numbers that citizens can call. They also do surveys. What they want to do is solicit opinions and information from citizens without creating the conditions for citizens to organize themselves. If you think about all these opinions expressed to the government through the government control portals, you do it as an individual. You don’t do it as part of a larger group. The CCP has no problem with this, and sometimes these opinions can be quite negative. The CCP has no problem with this. …
Yes, China has had a lot of protests, but those protests tend to be in rural areas, in less urban settings, in isolated situations, and over single issues. Usually in the 1990s it was the land that the government took away from them. And then it was about the salary, that the employers were late to pay my salary, so there were protests about that – a very unique, very focused issue.
This time you are talking about people asking the CCP to quit, demanding that Xi Jinping quit. It’s just something completely different from what we’ve seen before. …
The reason is, I think – although it’s a bit difficult to generalize because we don’t really have a lot of data points – one of the reasons is the charismatic power of the individual leaders, Mao and Xiaoping. They were the founding fathers of the PRC, of the PCC, and they had the prestige and – to use Max Weber’s term – the charisma, that they could do whatever they wanted and still be able to contain the fallout from their errors. The big uncertain question now is whether Xi Jinping has that kind of charisma to contain the future ripple effects of failed succession.
This is a remarkable statistic: since 1976, there have been six CCP leaders. Of these six leaders, five of them were led by either Mao or Deng Xiaoping. Essentially, the vast majority of estates have been managed by these two giants with oversized charisma, oversized prestige and unwavering political capital.
Now we have a leader who doesn’t really have that. He relies above all on formal power, and this is why he accumulates so many titles, while he makes the same mistakes of succession as the two previous leaders. Obviously, we don’t know — because he hasn’t chosen a successor — we don’t really know what will happen if he chooses a successor. But my bet is that the ability to contain the ripple effect will be less, rather than more, down the road, because Xi Jinping does not even remotely match the charisma and prestige of Mao Zedong and Deng Xiaoping. . There is no match there.
I always gain a useful additional perspective by reading Huang’s work. In 2012 he wrote “How did China take off?” for the Economic Outlook Journal, where I work as an editor. He argued convincingly that most of us tend to view China’s economic take-off as a matter of foreign trade and exports. However, he argues that the early stages of China’s economic growth explosion, during the 1980s and 1990s, were in fact driven by rural industry in the form of “township and village enterprises”. which were led by private entrepreneurs under a high degree of growth. of financial liberalisation. At that time, China’s economic growth was mainly driven by an increase in Chinese domestic consumption, not export sales. However, in the early to mid-1990s, according to Huang, Chinese leadership shifted from a rural to an urban approach, took control of the financial sector, and essentially drove rural businesses in townships and villages out of business. for the expansion of the state. funded and controlled urban enterprises.