Another excellent post. I have been looking for a book about China for the last few weeks. If I had to read one of the five books you mentioned, which would you recommend?
My thoughts below are based on personal readings and observations as a non-economist. The key question remains: Can China sustain its growth and navigate the challenges ahead?
Here are some critical considerations:
Challenges and Uncertainties:
1. Building Robust Internal Demand: China’s economy relies heavily on exports, making it vulnerable to global economic fluctuations. It must develop a stronger and more sustainable internal demand for goods and services to ensure long-term stability.
2. Demographic Crisis: China's population is projected to decline significantly, potentially reaching 1.313 billion by 2050 and falling below 800 million by 2100. This isn’t just about workforce concerns, which automation can address, but also about sustaining internal consumption. A shrinking population poses risks to domestic demand, economic growth, and social stability.
3. Aging Population: By mid-century, an estimated 26% will be 65 or older, reducing consumption and increasing the financial burden on healthcare and pension systems.
4. Trust on the Global Stage: Can China build and maintain trust with other nations? Trust is essential for trade, foreign investments, and long-term partnerships.
5. Competing Economies in Asia: Countries like India, Vietnam, Thailand, and Indonesia are building their economies and infrastructure, challenging China’s dominance in manufacturing and exports.
6. Economic Transformation: How has China transitioned from a state-driven to a more industry-driven economy? More importantly, can this transformation continue sustainably?
7. Political System Evolution: Will China remain a unitary communist state or eventually transition to a more democratic society as its economy and global influence expand? This question also affects how the rest of the world perceives China.
8. Opening Up to Foreign Competition: Can China further open its economy to foreign competition, or will it prioritize protectionist policies to safeguard its industries?
9. Alliances with Key Nations: As global geopolitics evolve, what will happen to its alliances with countries like Russia, Iran, and North Korea? These relationships could have long-term implications for its economic and political strategy.
10. Addressing Current Crises: In the short to mid-term, China faces significant challenges, including slowing growth, an aging population, the real estate/debt crisis, and currency manipulation. How it handles these issues will shape its trajectory.
11. Relations with Neighbors: Building positive and stable relationships with neighboring countries, particularly in the South and East, will ensure long-term growth and regional stability.
12. Attracting Global Talent: Can China attract top global talent like the US? Alternatively, can it convince the talented Chinese diaspora to return and contribute to its growth? This will be critical for innovation and technological advancement.
13. Advancing Technology: How quickly can China move to the next level of developing advanced technologies, such as semiconductors? While progress has been made in recent years, this remains a key area of focus, especially in light of Western restrictions on tech exports.
14. Role of Rare Minerals: Rare minerals, crucial for the global economy, is a significant aspect of China’s strategic play. How China leverages its dominance in this space will influence its role in international trade and politics.
15. Military and Political Goals: What are China’s long-term military and political ambitions? While Taiwan is often in focus, does its strategy go beyond regional dominance to establishing global influence?
16. Western Strategies and China's Response: How will Western tariffs, sanctions, and restrictions impact China in the short term? How will China respond to these challenges while maintaining its growth momentum?
17. Urban-Rural Divide: Based on my reading, it seems China still struggles with a significant urban-rural divide despite its success in urbanization. Rural areas often lack access to quality healthcare, education, and infrastructure, limiting economic growth and social cohesion. Bridging this gap is essential for creating a more balanced and inclusive economy.
18. Digital Surveillance and Control: China’s extensive use of digital surveillance and social control mechanisms (e.g., the Social Credit System) have implications for citizens' freedom and innovation. Can China maintain this authoritarian model while fostering innovation?
Positive Factors Supporting China’s Growth:
1. Remarkable Economic Growth: Over the past 40 years, China has demonstrated phenomenal economic growth, lifting hundreds of millions out of poverty and transforming into the world’s second-largest economy.
2. Manufacturing Powerhouse: China's manufacturing capabilities are unparalleled and will remain difficult for other nations to replicate in the near term. As long as it retains its position as the world’s manufacturing hub, it will likely sustain better GDP growth than most developed economies.
3. Leadership in Emerging Technologies: China is a global leader in sectors like electric vehicles (EVs), solar energy, artificial intelligence (AI), and robotics, though the US is strongly competing in AI and seems to be ahead so far.
4. Motivated Youth: China's younger generation is highly driven and, at least for now, appears patriotic and optimistic about the country’s future—an essential factor for sustained growth.
5. Rapid Rise to Superpower Status: Becoming a global superpower in such a short time is a truly remarkable achievement. Few nations have ever scaled their global influence as rapidly as China.
6. World-Class Universities: China's universities now rival top Western institutions and produce scientists and engineers in more significant numbers than any other country. This ensures a steady supply of talent to drive future innovation and development.
China’s recent history of rapid growth and technological advancement is extraordinary. However, its future hinges on how it addresses the complex interplay of demographic, economic, political, and global challenges. The balance between maintaining internal stability and navigating external pressures will define whether it can sustain its position as a global superpower in the decades to come.
Those are all excellent points thank you. Each one could be part of a series of posts. I'm finalizing one on energy transformation now, followed by the younger generation and then cultural norms. Your number 12 is spot on - no I do not think they can attract the talent, although for a while their universities were successful at attracting top professors, but as to young talent the way the US does, no I think they cannot! You have suggested great article points here.
For the most up to date on China economics I would recommend The New China Playbook, here is a talk by the author Keyu Jin in very non-economic language https://www.youtube.com/watch?v=HHpnceEki30
She is an accomplished professor, Harvard educated and now at LSE - her father was vice minister of finance of China and is now the current and the founding president of the Asian Infrastructure Investment Bank (AIIB). I think she gives a solid overview in this talk and her book is very readable with good anecdotes and stories. Pro's and cons throughout.
For economic history the book on Deng by Ezra Vogel is excellent. I'm re-reading for the second time in 12 months.
Thank you. I will read both then. I was asking the people a book(s) that could tell me what caused China to grow so fast (a China perspective) and why the US picked China as the country for manufacturing (us perspective). Since I was not born in the US and did not study here, which you can probably notice the way I write, my knowledge about the US view is very limited.
2025 is my year to learn more about the world and the US, especially the last 50 years, and refresh my knowledge of world history from ancient times.
For China then certainly Deng. For the US take a look at Robert Caro, he is such a fascinating author and person. Highly intelligent and sublime writing. His project on LBJ is magnificent. I have read 3 of the books - the series has 5 and each adds a new perspective - it is quite something that such a number of books could be written by 1 person about 1 person - but fundamentally he captures the times, not just the person.
That's a great read. Dwarkesh had a good podcast with Jung Chang, and I especially liked his with Sarah Payne. It is interesting in the post about the economy - clearly not to everyone's liking, of course it is also city dependent. But clearly a lot of overindulgent government subsidized buildings. Noteworthy is the lack of Xi images. I was intrigued about tourists, I read yesterday that tourism from neighboring countries is up considerably to pre Covid levels, maybe Dwarkesh did not notice because it seems many tourists are from Asian countries.
This is an interesting post, and while I’ve never been to China, my thoughts below are based on my reading and, to some extent, influenced by two visits to India over the past decade. I acknowledge that my perspective might be limited or incorrect, but here are my reflections:
1. Two Weeks is Insufficient: I agree that two weeks is not enough to truly understand a small country, let alone one as vast and complex as China. The observations shared in the article naturally reflect the limited scope of interactions during such a short trip. Inevitably, the opinions of the people he met during that time would disproportionately shape his impressions. I imagine I’d have a similar experience if I were there for such a brief period.
2. Signs of Change: The absence of Xi Jinping’s portraits and the willingness of some people to discuss sensitive topics like Tiananmen are intriguing. It does suggest a subtle shift, even if gradual, in public discourse. As education and global connectivity increase, we may see a more open and dynamic political landscape in China.
3. Cameras and Surveillance: Cameras everywhere are likely tied to China's social credit system and broader surveillance efforts. While the article mentions the lack of visible crime, the emphasis on control and monitoring seems to be a defining feature of the state’s strategy.
4. Internet Speed Issues: I was genuinely surprised to read about the poor internet speeds in China, especially in major cities like Beijing and Shanghai. It sounds worse than even India, and that’s not something I would have expected from a country that heavily invests in technology and infrastructure.
5. Startup Ecosystem Struggles: The challenges faced by China’s startup ecosystem also surprised me, as it contradicts much of what I have read in U.S. media. Reports here often highlight China’s advancements in technology and innovation, raising the question of who is reporting inaccurately or whether both perspectives are partially true in different contexts.
6. Misinformation and Perception: Misinformation exists everywhere, including in the U.S., especially when highlighting the weaknesses of competitors like China; the same is true with China. It reminds us how narratives can shape our understanding of other nations and their challenges.
7. Missed Topics on Technology: I hoped to see more discussion of China’s leadership in electric vehicles and other cutting-edge technologies, often touted as examples of its global competitiveness. These sectors might have provided additional insights into the country's innovation landscape.
8. Work-Life Balance for Youth: The pressures younger generations face in China resonate with trends I’ve seen in other countries, including India and the U.S. The intense competition, long working hours, and rising anxiety among youth are universal challenges in the modern world.
9. Urban vs. Rural Divide: The article briefly mentions the countryside, as seen from the train, with small paddy farms next to seemingly abandoned skyscrapers. Does this stark contrast between urban and rural development reflect an imbalance in economic progress, a desire to build more and more to keep the economy going, or a combination of both? Considering how this divide might impact China’s long-term growth and stability is worth considering.
This article provides a very different snapshot of China, but I need more data and perspectives to validate or challenge my thoughts about the country. China is a complex country that has rapidly changed in the last few decades, and I think deeper exploration is necessary to understand its nuances fully. It is probably just growing pains and our desire to compare with a developed country where we live and find gaps rather than comparing China with the US when it was a developing country and started growing fast.
I've studied international economics and chinese politics, and have spent about 2 years in China. I think that the general advice of "whatever you think about China, think again" is probably valid for both critics and supporters.
The critics decry, and supporters ignore, the fact that an enormous amount of Chinese growth is fueled by unsustainable debt and a slowly collapsing property bubble. But to respond to the critics, that doesn't mean it isn't real growth. It makes me want to turn on the head the Keynes quote that "the market can stay irrational longer than you can stay solvent" and posit that perhaps "the Chinese market can stay irrational longer than China can stay undeveloped". Someday (perhaps ongoing today) investors will realize the unsustainable nature of the Chinese economy and pull out, perhaps the international elements of the economy will shrivel. But the development will persist, if you see my meaning? The factories, the supply chains, the infrastructure, the human capital, the universities are there and they aren't going anywhere anytime soon. It's an idea I attempted to articulate in a post here (https://whitherthewest.com/2024/04/23/chinas-coral-reef-economy/) but I had trouble finding the words then for what I've said here: GDP and formal economy ebbs and flows, intangible development will remain.
Thank you Scott. I like that pint a lot - even when living there you still have uncertainty. Your points are strong, I think they are at a crossing the chasm stage, solid early phase (gov subsidies and debt), now how to get over the chasm? As your post shows, through EV, tech.
I'm less convinced about corporate taxes. Tax free incentives for corporations lead to employment boosts, which lead to consumption and taxes for governments from consumption tax (VAT, Sales Tax), import taxes, and personal income tax. Corporate tax is generally low in a governments coffers. You are right the development will persist, and they will become self-sufficient in energy soon which is incredible.
Unfortunately the self-sufficiency seems at odds with the green initiatives as China is constructing a large number of coal power plants to reach its self-sufficiency goals. The EVs are only as clean as the electricity that powers them and in China, that's not very clean. It's just removing emissions from wealthy urban areas and shunting it over to other areas of the country (which is still a good step, as air pollution has lots of knock-on effects on health, productivity, mental acuity, etc).
Plus China indicated, green sufficiency first then get off the fossil fuel reliance - almost as if the coal investments are a safety net. In fairness they are doing well with the growth of cleaner energy, by some reports better than the rest of the world combined. I have a critical analysis on that. Very good point on air pollution.
Another excellent post. I have been looking for a book about China for the last few weeks. If I had to read one of the five books you mentioned, which would you recommend?
My thoughts below are based on personal readings and observations as a non-economist. The key question remains: Can China sustain its growth and navigate the challenges ahead?
Here are some critical considerations:
Challenges and Uncertainties:
1. Building Robust Internal Demand: China’s economy relies heavily on exports, making it vulnerable to global economic fluctuations. It must develop a stronger and more sustainable internal demand for goods and services to ensure long-term stability.
2. Demographic Crisis: China's population is projected to decline significantly, potentially reaching 1.313 billion by 2050 and falling below 800 million by 2100. This isn’t just about workforce concerns, which automation can address, but also about sustaining internal consumption. A shrinking population poses risks to domestic demand, economic growth, and social stability.
3. Aging Population: By mid-century, an estimated 26% will be 65 or older, reducing consumption and increasing the financial burden on healthcare and pension systems.
4. Trust on the Global Stage: Can China build and maintain trust with other nations? Trust is essential for trade, foreign investments, and long-term partnerships.
5. Competing Economies in Asia: Countries like India, Vietnam, Thailand, and Indonesia are building their economies and infrastructure, challenging China’s dominance in manufacturing and exports.
6. Economic Transformation: How has China transitioned from a state-driven to a more industry-driven economy? More importantly, can this transformation continue sustainably?
7. Political System Evolution: Will China remain a unitary communist state or eventually transition to a more democratic society as its economy and global influence expand? This question also affects how the rest of the world perceives China.
8. Opening Up to Foreign Competition: Can China further open its economy to foreign competition, or will it prioritize protectionist policies to safeguard its industries?
9. Alliances with Key Nations: As global geopolitics evolve, what will happen to its alliances with countries like Russia, Iran, and North Korea? These relationships could have long-term implications for its economic and political strategy.
10. Addressing Current Crises: In the short to mid-term, China faces significant challenges, including slowing growth, an aging population, the real estate/debt crisis, and currency manipulation. How it handles these issues will shape its trajectory.
11. Relations with Neighbors: Building positive and stable relationships with neighboring countries, particularly in the South and East, will ensure long-term growth and regional stability.
12. Attracting Global Talent: Can China attract top global talent like the US? Alternatively, can it convince the talented Chinese diaspora to return and contribute to its growth? This will be critical for innovation and technological advancement.
13. Advancing Technology: How quickly can China move to the next level of developing advanced technologies, such as semiconductors? While progress has been made in recent years, this remains a key area of focus, especially in light of Western restrictions on tech exports.
14. Role of Rare Minerals: Rare minerals, crucial for the global economy, is a significant aspect of China’s strategic play. How China leverages its dominance in this space will influence its role in international trade and politics.
15. Military and Political Goals: What are China’s long-term military and political ambitions? While Taiwan is often in focus, does its strategy go beyond regional dominance to establishing global influence?
16. Western Strategies and China's Response: How will Western tariffs, sanctions, and restrictions impact China in the short term? How will China respond to these challenges while maintaining its growth momentum?
17. Urban-Rural Divide: Based on my reading, it seems China still struggles with a significant urban-rural divide despite its success in urbanization. Rural areas often lack access to quality healthcare, education, and infrastructure, limiting economic growth and social cohesion. Bridging this gap is essential for creating a more balanced and inclusive economy.
18. Digital Surveillance and Control: China’s extensive use of digital surveillance and social control mechanisms (e.g., the Social Credit System) have implications for citizens' freedom and innovation. Can China maintain this authoritarian model while fostering innovation?
Positive Factors Supporting China’s Growth:
1. Remarkable Economic Growth: Over the past 40 years, China has demonstrated phenomenal economic growth, lifting hundreds of millions out of poverty and transforming into the world’s second-largest economy.
2. Manufacturing Powerhouse: China's manufacturing capabilities are unparalleled and will remain difficult for other nations to replicate in the near term. As long as it retains its position as the world’s manufacturing hub, it will likely sustain better GDP growth than most developed economies.
3. Leadership in Emerging Technologies: China is a global leader in sectors like electric vehicles (EVs), solar energy, artificial intelligence (AI), and robotics, though the US is strongly competing in AI and seems to be ahead so far.
4. Motivated Youth: China's younger generation is highly driven and, at least for now, appears patriotic and optimistic about the country’s future—an essential factor for sustained growth.
5. Rapid Rise to Superpower Status: Becoming a global superpower in such a short time is a truly remarkable achievement. Few nations have ever scaled their global influence as rapidly as China.
6. World-Class Universities: China's universities now rival top Western institutions and produce scientists and engineers in more significant numbers than any other country. This ensures a steady supply of talent to drive future innovation and development.
China’s recent history of rapid growth and technological advancement is extraordinary. However, its future hinges on how it addresses the complex interplay of demographic, economic, political, and global challenges. The balance between maintaining internal stability and navigating external pressures will define whether it can sustain its position as a global superpower in the decades to come.
Those are all excellent points thank you. Each one could be part of a series of posts. I'm finalizing one on energy transformation now, followed by the younger generation and then cultural norms. Your number 12 is spot on - no I do not think they can attract the talent, although for a while their universities were successful at attracting top professors, but as to young talent the way the US does, no I think they cannot! You have suggested great article points here.
For the most up to date on China economics I would recommend The New China Playbook, here is a talk by the author Keyu Jin in very non-economic language https://www.youtube.com/watch?v=HHpnceEki30
She is an accomplished professor, Harvard educated and now at LSE - her father was vice minister of finance of China and is now the current and the founding president of the Asian Infrastructure Investment Bank (AIIB). I think she gives a solid overview in this talk and her book is very readable with good anecdotes and stories. Pro's and cons throughout.
For economic history the book on Deng by Ezra Vogel is excellent. I'm re-reading for the second time in 12 months.
Thank you. I will read both then. I was asking the people a book(s) that could tell me what caused China to grow so fast (a China perspective) and why the US picked China as the country for manufacturing (us perspective). Since I was not born in the US and did not study here, which you can probably notice the way I write, my knowledge about the US view is very limited.
2025 is my year to learn more about the world and the US, especially the last 50 years, and refresh my knowledge of world history from ancient times.
For China then certainly Deng. For the US take a look at Robert Caro, he is such a fascinating author and person. Highly intelligent and sublime writing. His project on LBJ is magnificent. I have read 3 of the books - the series has 5 and each adds a new perspective - it is quite something that such a number of books could be written by 1 person about 1 person - but fundamentally he captures the times, not just the person.
Thank you
Your thoughts about the following post when you get a chance, as it is very long:
https://www.dwarkeshpatel.com/p/notes-on-china
That's a great read. Dwarkesh had a good podcast with Jung Chang, and I especially liked his with Sarah Payne. It is interesting in the post about the economy - clearly not to everyone's liking, of course it is also city dependent. But clearly a lot of overindulgent government subsidized buildings. Noteworthy is the lack of Xi images. I was intrigued about tourists, I read yesterday that tourism from neighboring countries is up considerably to pre Covid levels, maybe Dwarkesh did not notice because it seems many tourists are from Asian countries.
This is an interesting post, and while I’ve never been to China, my thoughts below are based on my reading and, to some extent, influenced by two visits to India over the past decade. I acknowledge that my perspective might be limited or incorrect, but here are my reflections:
1. Two Weeks is Insufficient: I agree that two weeks is not enough to truly understand a small country, let alone one as vast and complex as China. The observations shared in the article naturally reflect the limited scope of interactions during such a short trip. Inevitably, the opinions of the people he met during that time would disproportionately shape his impressions. I imagine I’d have a similar experience if I were there for such a brief period.
2. Signs of Change: The absence of Xi Jinping’s portraits and the willingness of some people to discuss sensitive topics like Tiananmen are intriguing. It does suggest a subtle shift, even if gradual, in public discourse. As education and global connectivity increase, we may see a more open and dynamic political landscape in China.
3. Cameras and Surveillance: Cameras everywhere are likely tied to China's social credit system and broader surveillance efforts. While the article mentions the lack of visible crime, the emphasis on control and monitoring seems to be a defining feature of the state’s strategy.
4. Internet Speed Issues: I was genuinely surprised to read about the poor internet speeds in China, especially in major cities like Beijing and Shanghai. It sounds worse than even India, and that’s not something I would have expected from a country that heavily invests in technology and infrastructure.
5. Startup Ecosystem Struggles: The challenges faced by China’s startup ecosystem also surprised me, as it contradicts much of what I have read in U.S. media. Reports here often highlight China’s advancements in technology and innovation, raising the question of who is reporting inaccurately or whether both perspectives are partially true in different contexts.
6. Misinformation and Perception: Misinformation exists everywhere, including in the U.S., especially when highlighting the weaknesses of competitors like China; the same is true with China. It reminds us how narratives can shape our understanding of other nations and their challenges.
7. Missed Topics on Technology: I hoped to see more discussion of China’s leadership in electric vehicles and other cutting-edge technologies, often touted as examples of its global competitiveness. These sectors might have provided additional insights into the country's innovation landscape.
8. Work-Life Balance for Youth: The pressures younger generations face in China resonate with trends I’ve seen in other countries, including India and the U.S. The intense competition, long working hours, and rising anxiety among youth are universal challenges in the modern world.
9. Urban vs. Rural Divide: The article briefly mentions the countryside, as seen from the train, with small paddy farms next to seemingly abandoned skyscrapers. Does this stark contrast between urban and rural development reflect an imbalance in economic progress, a desire to build more and more to keep the economy going, or a combination of both? Considering how this divide might impact China’s long-term growth and stability is worth considering.
This article provides a very different snapshot of China, but I need more data and perspectives to validate or challenge my thoughts about the country. China is a complex country that has rapidly changed in the last few decades, and I think deeper exploration is necessary to understand its nuances fully. It is probably just growing pains and our desire to compare with a developed country where we live and find gaps rather than comparing China with the US when it was a developing country and started growing fast.
I've studied international economics and chinese politics, and have spent about 2 years in China. I think that the general advice of "whatever you think about China, think again" is probably valid for both critics and supporters.
The critics decry, and supporters ignore, the fact that an enormous amount of Chinese growth is fueled by unsustainable debt and a slowly collapsing property bubble. But to respond to the critics, that doesn't mean it isn't real growth. It makes me want to turn on the head the Keynes quote that "the market can stay irrational longer than you can stay solvent" and posit that perhaps "the Chinese market can stay irrational longer than China can stay undeveloped". Someday (perhaps ongoing today) investors will realize the unsustainable nature of the Chinese economy and pull out, perhaps the international elements of the economy will shrivel. But the development will persist, if you see my meaning? The factories, the supply chains, the infrastructure, the human capital, the universities are there and they aren't going anywhere anytime soon. It's an idea I attempted to articulate in a post here (https://whitherthewest.com/2024/04/23/chinas-coral-reef-economy/) but I had trouble finding the words then for what I've said here: GDP and formal economy ebbs and flows, intangible development will remain.
Thank you Scott. I like that pint a lot - even when living there you still have uncertainty. Your points are strong, I think they are at a crossing the chasm stage, solid early phase (gov subsidies and debt), now how to get over the chasm? As your post shows, through EV, tech.
I'm less convinced about corporate taxes. Tax free incentives for corporations lead to employment boosts, which lead to consumption and taxes for governments from consumption tax (VAT, Sales Tax), import taxes, and personal income tax. Corporate tax is generally low in a governments coffers. You are right the development will persist, and they will become self-sufficient in energy soon which is incredible.
Unfortunately the self-sufficiency seems at odds with the green initiatives as China is constructing a large number of coal power plants to reach its self-sufficiency goals. The EVs are only as clean as the electricity that powers them and in China, that's not very clean. It's just removing emissions from wealthy urban areas and shunting it over to other areas of the country (which is still a good step, as air pollution has lots of knock-on effects on health, productivity, mental acuity, etc).
Yes, I was thinking of that contradiction - but the IEA have a good point on it - https://www.iea.org/reports/world-energy-investment-2024/china
Plus China indicated, green sufficiency first then get off the fossil fuel reliance - almost as if the coal investments are a safety net. In fairness they are doing well with the growth of cleaner energy, by some reports better than the rest of the world combined. I have a critical analysis on that. Very good point on air pollution.
I should add that oil prices after the Russian invasion of Ukraine and a drought for hydro, also led to their increase in coal mining.