China’s Post-Reform Trajectory: An Interview with Yasheng Huang

welcome everyone my name is ilaria Moko and I'm a senior fellow with the trusty chair in Chinese business and economics at csis today um I'm here to conduct an interview for a big data China project this is an initiative that the trustee chair has with Sanford's Center on China's economics and institutions um where we try and Bridge uh Academia and the policy making world and today I have the pleasure to of having with us uh Professor yashang Wang who is epic Foundation professor of global economics and management at MIT Sloan School of Management Professor hang is the author of 11 books in Chinese and English uh and two more books on the way as well many as many academic papers and for those who studied China's politics and economics like I did uh I'm sure you have read many of his books and articles over the years so it's a real pleasure to have you here Professor thank you so much for inviting me here um well this is the question I always ask all the scholars we um engage with through Big Data China because we worry about um uh you know about research and uh making academic research accessible um I also wonder about how you conduct research right and so you've been doing research on China's politics uh and the political economy for for decades now how has this changed over time and of course I'm thinking about tensions between the US and China zero Co the political environment in China but also you know new Technologies and access to different things and I will note that your latest book um is um you know largely um um you know a historical analysis and realize on historical data yeah so the change is in one way from easy to difficult in terms of doing fi research it was quite easy before 10 years ago 20 years ago you could just go and you could through your own connections or through the uh collaborators that you had in China gain access to business people officials local officials central government officials very easy that has basically become extremely difficult and almost impossible right so now to do that kind of research especially talking to officials and even business people if you want to get their kind of honest opinion of what's going it's almost impossible now in the other way it's become easier in the sense that data are more available data not only in the sense of release data by the government or survey data now we have the ability to construct data sets websites and documentary data um so increasingly we are pivoting from the kind of underground research to this kind of a data approach for necessity as well as uh data research gives you kind of different insights as compar with the field research um ideally the two should complement with each other they should go together but now given the geopolitic political situation we just have to settle for for data yes yes um well and speaking about research and um and data and and collecting data and uh fieldwork you know you were one of the authors of the landmark MIT report on uh engaging with China as a university um this was uh you know a report that was widely read within academic Fields but also in the think think world and and you know we we looked at it very closely here um and so I been wondering how how is that going right is that has the university adopted those recommendations and how is how has have things been playing out uh and with the end of zero Co how has engagement with China at the University level sort of uh proceeded yeah so the report was written at the time when the US government was actively targeting professors and many of them but not exclusively of Chinese ethnic backgrounds targeting them for performing and doing standard routine academic research with Chinese colleagues or having Connections in China and I have to say that um the report played a very important role in highlighting that issue and and highlighting the importance of open science fundamental research and the need to continue to collaborate with our Chinese colleagues in this new geopolitical environment on critical issues such as climate change public health food safety and whole range of issues but in the report we also recognize that geopolitics has changed there are extraordinarily complex issues between the US and China National Security human rights economic competitiveness so the report tries to char a course where we can continue with the kind of productive research we have been doing with Chinese colleagues before but being mindful of these difficulties and challenges I think we're now in the stage where we're working on implementation and one of the key components of that is to raise the awareness of Faculty of graduate students of the University administrators about these complicated issues and I think we are doing a fairly good job with the report like that report has been cited and has been emulated by other universities and I think another purpose of the report is to send a message to the government that Academia and MIT in particular is proactively thinking about this issue and we don't want the heavy hand of the federal government to regulate academic research um well that's great to hear because um you know obviously it was a big issue and even uh on our website Big Data China we published some of the research uh that was done on the impact on on uh actual academic output um of these tensions uh and of course actually one of the things that I I heard repeatedly was that both professors and government wanted universities to take a more proactive stance of regulating uh itself on this front so it's good to hear that that the that the U the impressive report that you put out has had a positive effect uh but let's move on to actual research and the research you've done and you know your your book um the rise and the fall of the East uh which is your last book and of course we'll talk a little more about your upcoming books um is um you know in in political science there's always the people lament that there's no big idea books anymore and I would say this is a big idea book right it's a bold it's sweeping it covers uh hundreds of years in terms of history and it makes some really interesting um uh you know uh you know it links the very differently different different issues and makes very interesting conclusions um and I just I wanted to bring up a sentence that that really struck me in the book is Chinese history is stacked against democracy um I thought this was uh really a really striking sentence I was wondering if you could speak a little bit about it and what you mean uh by this and and how it ties to the argument so one way can we can think about democracy the standard way is separation power election press freedom and all of that um another way to think about democracy is that it has heterogenity diversity of views diversity of party affiliations and even diversity of personal choices in terms of gender in terms of all these things at the personal level autocracy has the homogeneity sometimes constructed sometimes enforced but a sharp difference between autocracy and democracy is the difference between that I said that in the sense that Chinese history is all about homogeneity and they are building institutions they're building mental habits they are building Traditions that are designed or have the effect of enforcing homogeneity and that makes adoption or migration to a democratic system more difficult by saying that I'm not arguing against democracy at all all I'm saying is that it requires more efforts more Investments more engagements to make sure that democracy can also develop and flourish in that environment in East Asia we have successful examples of democracy Japan South Korea and Taiwan so there's nothing about the culture in that region that says you cannot adopt democracy what I'm trying to say in the book is that given how the culture is given how the history is it is unlikely that democracy is going to emerge organically and spontaneously therefore it requires actra efforts and extra uh extra Investments um yeah and and you make also this argument that this tension between heterogeneity and and homogeneity within States also shapes the in Innovation and sort of the human capital uh within a country um can you speak a little more about that yeah sure so so I talk about democracy and autocracy in terms of heterogeneity Vis homogene homogeneity but one thing at least I have observed is not just of China but also of other countries is that successful Economic Development successful technological development requires a balance between these two forces you can't just have one at the expense of the other I think China scaled to I would argue and you could argue that there are other countries that scoped too much and when you look at these countries when they're most successful they tend to be at the moment when they balance these two forces successfully I would argue that between 1978 and 2018 China handled the balance of these two forces effectively and productively and that's why the country had economic Miracle had a degree of technological and scientific achievements had globalization Innovations prosperity and that was a rare moment in Chinese history because Chinese history tends to stack against that it tends to go overboard on scale rather than on scope and now my view is that China is moving back back to its old formula of EMP emphasizing scale at the expense of scope and there's a view among Chinese policy Elites and by the way this is not just C ping it is actually a very pervasive view that Chinese success is a result of government power is the result of the industrial policy it is result of the organizational capacity of the government to construct big projects to scale Technologies to launch big projects I'm not saying that's completely wrong all I'm saying is that that took place in the middle of evolving diversity of economic conditions political conditions and social conditions that's not the single Factor driving the success it is also the diversity that was driving the success well that really resonates with me because I have spent a lot of time uh the past few yearsing at industrial policy in the context of clean Tech Supply chains and in many cases these are very creative Innovative private companies it's just that they've received an extra boost by the government right and and so um I think that's sometimes not even well understood outside of China uh I think increasingly in the US maybe um there's this sense that these are sort of engineered companies that the governments are decided to create and that's just not the case right um certainly there's been like you know pervasive subsidies and help on the part of the government but you needed this other ingredient which was sort of company entrepreneurship and uh and Global Supply chains eventually so there is already diversity embedded in your observation these are private sector companies I cannot name a successful global global globally competitive stay owned Enterprise that Enterprise can have all the support it wants to and the government wants to Lavish on such an Enterprise but because it's state-owned it has not been successful Tik Tok is not state owned right in a traditional sense byd is not state owned Huawei is not state owned government operations now influence these companies for sure but in terms of ownership they're private ownership right and I think that raises the question for um policy makers outside of China the fact that now there is this creeping sort of influence or or blurring of the line between exactly what is private and what is public makes a little harder to then sort of um decide how to consider these companies as they become multinationals corre it's in some ways it may not be to the benefit of these companies that there are such Blurred Lines within uh Chinese corporate ownership I I agree with with that I I actually think that these subsidies and the government support today are doing more harm to these companies than they were doing uh benefit than than benefiting these companies I believe that the competitiveness of these companies is sufficient enough to propel them to the global stage and the subsidies are a extra um push but I don't think without those subsidies those will be total failures um yes and maybe the ones that wouldn't succeed would be the companies with the less uh uh attractive or or good products right yes I completely agree with that and I mean let's let's shift gears a little bit and talk a little bit about your next upcoming book which is an update on your uh previous book capitalism with the Chinese characteristics and the new book will be called um St statism with Chinese characteristics correct um so I was wondering um you know I think the the topic will will be this right the the sort of statism in China and and opening and reform um is opening reform over in a very real sense yes the way I Define the open era the reform era is that it was a movement moving from maon it was a official act to uh move away from the era of maon and shaing engineered that shift in 1978 if you go back to 19 1978 and read the party document on cultural Evolution on maon it was a very honest and straightforward critique of Ma so it was official act to move away from Mazon one of the things that happened in 2018 was the revision of the Chinese Constitution that got rid of the term limits mandatory retirement age instituted by J shaing and J shaing instituted those changes specifically to move away from the Mazon era so the way I Define the reform era is from 1978 when the Chinese Communist Party officially moved itself away from Mazon and then 2018 when officially the Chinese Communist Party decided to go back to the live tenure of the mozon era that doesn't mean to say that economically speaking China now is exactly the same as China in 1976 clearly there are some substantial differences but I Define the reform era first and foremost as a political act in that sense reform era is over and you know actually picking up on that you've argued that politics have shaped economics very very deeply in China right youve you sort of um I would say rejected the idea that you have these economic reforms in a vacuum with no political reform in China and the ten and men has been really a watershed moment in Chinese history uh is that right yeah so that's the key argument both in my 2008 book as well as in my fourth coming revised version of that of that book but in this version I make it even more clear that the pivotal moment was 198 9 and the biggest change was politics economic changes there were also economic changes especially in rural China but there were also economic reforms in the urban area that to some extent compensated for the reversions of the reforms in the rural area so it came out as a wash so you don't really observe that change very very clearly but because of the political changes these political changes that the leaders instituted after 1989 lay down the foundation for future political changes in a way that were quite damaging to economic reforms in particular uh the um the changes that jaang proposed in the 1980s to separate the function of the party from the state to separate the political management of the government from the economic management of the government transparency reforms a degree of media freedom and and depoliticization of the Chinese bureaucracy all these reforms were reversed immediately after 1989 so those were Jan reforms what I argue in the book is that once you weakened or reversed these Jan reforms you Expos right so the bigger uh reforms introduced by Dena ping term limits mandatory retirement and government objective should be about Economic Development so these are the three biggest things that think shall be introduced as political changes you expose these three changes to a act by by a future strong leader and that's exactly what has happened since 2018 and so what is this new era well I think this era is going to be this tension between economics and politics Chinese economy moved away from Central planning from socialism far away enough so that that reversing them will not be something very easy unlike politics right so if the leaders after 1989 didn't reverse Jan reforms it will be much more difficult for them to reverse D Shin reforms in 20 2018 but economics that's more difficult because it's more distributed because of the Global Connections and and also very importantly because Chinese economy in a very strange way is extremely dependent on Western rich countries I mean we can talk about Russia we can talk about global sub all the way we want the simple fact is that the biggest customer the richest customer and the customer that observes contracts and sales contracts is the Western countries right and China now has created this situation in which the final demand is weak but the production capacity is incredible right over overc capacitate the the the issue that Washington now is talking to Beijing about right that kind of situation forces China to be more dependent on on the west so we are seeing this kind of a curious situation in which politics and economics are moving in the opposite direction geopolitics China is moving closer to Russia economically speaking China is actually still quite dependent on the US in terms of product Market uh to a lesser extent factor market but technology I think we're going to see technology whether or not China is still quite dependent on the US I believe it is although Chinese leaders would disagree right but economically speaking China is still quite dependent on the west but politically it is moving opposite from that so within China you also going to see these tensions the current government talks about big projects industrial policies science semiconductor big city developments infrastructure okay you can talk about these things all the way you want these things require resources who is going to generate resources it's going to be the private sector right so there are tensions domestically between the political policy of quacking down on private sector and the financial and economic dependency on the private sector these are the tensions that didn't exist before sing ping and now these tensions are coming to the Forefront of the Chinese economy Forefront of the Chinese politics they really have to resolve these tensions either they just go all the way to Crackdown and private sector then forget about these big things you want to do or they have to revise their private sector policy to accommodate these big expenditure requirements and I think this framework is actually quite helpful in understanding some of the inconsistencies in policym in China today where you see this big push to attract uh foreign uh capital and at the same time you know the security State continues to expand and you have actions that are actually quite threatening to to foreign companies um and the same goes for private Chinese companies as well and you actually see all these Chinese companies that are setting up um you know a headquarters in Singapore for example uh which you know I think C as a reaction to Der risking the you know in the west but I think potentially also a drisking from China themselves right um but I wanted to to talk a little you know I was hoping this was going to be the one conversation today where we didn't talk about overc capacity but it seems like it's unescapable uh as a topic but I think it actually ties into something else I wanted to ask you about which is which you've written about over the years and I think continues to be important which is um you know the the sharpen equality between rural and and uh you know Urban uh living standards and also Economic Policy which you've argued are sort of a feature rather than a bug in the Chinese system um can you talk a little bit about how that ties into consumption uh imbalances and um uh inequality and Etc yeah so currently in Washington the the policy discussion is on EVs and solar over capacity is actually a macroeconomic concept not a microeconomic concept the bigger issue for Chinese economy is this macroeconomic imbalance between supply side and the demand side for a continental economy the size of China second GDP in the world uh the largest country in the world in terms of population it is actually not so obvious it should be so dependent on overseas Market in the first place right the GDP has been growing 8 n% a year for 30 years and in the last 10 years it's growing 6% but still that's pretty fast so think about all these elements together right fast GDP growth big population big Continental size big GDP one would think you would have this huge domestic consumption capacity to absorb the ction that has been created right and and it shouldn't be so dependent on the rest of the world and in fact one of the arguments for the rise of China is that the rise of China is going to bring about this huge demand for goods coming from other countries right from America from Europe and from other countries that has not happened Chinese economy the way that the the Chinese economic strategy is geared toward the production side supply side of the economy rather than to the final demand side and the fundamental reason for that there there are many reasons but let me just name one is that the rural Chinese are essentially uh the missing picture here the whole property boom and much of the GDP growth did not benefit proportionally the rural Chinese even today by the hooko standard the rural Chinese still constitute 60% of the population by residency standard it is constituting about 40% of the population if 40 to 60% of the population are now gaining as much from 8% GDP growth rate 10% of GDP growth rate and from this massive property boom then you're going to losing they're going to lose that purchasing power from a significant portion of the population right so that's actually the fundamental problem with the Chinese economy today it is not narrowly about subsidizing EVs and subsidizing solar it has fundamentally to do with factor market the land reforms are not happening and the hooko reforms are not happening the labor market reforms are designed to benefit the capital at the expense of the labor and Scot Roselle wrote this uh together with Natalie hell wrote this excellent book about lack of investments in rural China in terms of education and public health those are actually the fundamental reasons driving up Chinese over dependency and I don't see any evidence of first of all even awareness of that problem among Chinese policy makers and let Al any concrete step to deal with that situation um and I'll note that we had uh both an event in a feature uh highlighting the work of Scott Roselle and in this area um one final question to this is what what would you think would be necessary to change this and and fix this problem yeah so if I were if you were shiin ping Okay so that's a that's a big task um I would deemphasize GDP I would Implement some of the reforms that have been happening experimentally at the local level the hooko reforms were experimented in changu land reforms were experimented under coulding tell so there was a blueprint and they actually quite successful in terms of experiments I will scale up and nationalize these reforms you may not get a immediate bump of the GDP but fundamentally what you care about is not the GDP growth per se it is the ability of the GDP growth to deliver tangible gains to the Chinese people land reforms you know I would argue land reforms and hooku reforms are 20 years later than they should be but you know it's better than never and if they Implement these reforms you don't necessarily get a big bump of the GDP growth you probably have to sacrifice a few percentage points of GDP growth because those reforms are not going to give you Bridges and airports and new new cities that are in over Supply in any in any case right but those reforms are going to make sure that for each percentage point of the GDP growth the rural Chinese are going to benefit more from the GDP growth so even if you have 3% points of GDP growth 4 percentage points of the GDP growth then you still benefit the Chinese people so that would be the first thing I will do the second thing I will do is I will scale down the operations of of the Chinese government Chinese government is actually extraordinarily expensive to operate when the economy is growing at 8% 9% a year you don't notice how expensive the government sector is when it is growing at 5% 4% you're going to notice how expensive the uh the government operations are and this is a perfect time to cut down on the size of the government in order to make sure that the households still get decent Returns on their labor on their Investments private sector still gets decent returns and the third thing I will do is to repair the relationship with the West right so I will do these three things rather quickly well I think that's a great agenda and we'll we'll see if uh anybody in Beijing is listening to our program and uh find out if they decide to do anything but I actually agree and actually been arguing that the best thing that China could do right now to to solve some of these tensions on on on the trade front is to signal that there's they're willing to take into consideration uh or or even look at the the the kinds of reforms that might be necessary right that might actually be the least painful uh approach rather than sort of trying to deal with specific over capacity in one Factory versus another which I think is um probably less um uh in the long-term but less less useful so let me just add one observation to that which is that I think the fundamental issue now between China and the US is lack of trust and the way to reestablish that trust is not really meeting with CEOs and and those people it's really to decentralized government operations gave benefit beneficial rights to the Chinese people in addition to repairing relationship with the West once you show that you're willing to delegate your power you're willing to give up some of your power I think the trust will come back just as uh it did after tmen uh when China signal that it was going to continue on economic reforms on some uh on some some issue areas I uh I agree with you unfortunately I I I fear that's going to be politically very challenging but uh you know let's let's hope that uh that there's there's a pathway to improving trust again between the the two countries I think with that we're going to wrap it up uh thank you so much for joining us um as always our website Big Data China um has many features uh events uh and data uh that that and resources uh that help uh Bridge the the gap between Academia and policymaking and the broader public uh so continue to follow us on social media and online thank you [Music]

Channel: Center for Strategic & International Studies

Views: 5,456

Keywords: Center for Strategic and International Studies, CSIS, bipartisan, policy, foreign relations, national security, think tank, politics

Id: n9x7hdcgRng

Length: 34min 43sec (2083 seconds)

Published: Thu May 30 2024