Hello, Steponomics here, and this week a special insight on China from someone who has a quite different perspective on the country than many of the economists and policymakers we've had pontificating about it on this show. K Eu Jin, a professor at the London School of Economics who's lived some time in London but grew up in China and still spend part of the year there. That she's in Beijing now, but she's kindly joined me for a conversation about her new book, The New China Playbook. K Eujin,
thank you so much for being with us. As I said, it's sort of relatively rare to have someone with both feet so firmly planted in both China and the West. And I think the other sort of particular thing about you is that you have personally experienced, you and your family the extraordinary transformation of China's society and economy over the past thirty or forty years. And you start and
you end the book with that. So I think, before we talk about some of the themes in your book, tell us a little bit about your personal story of your family and how different things might have been for them if you hadn't had the kind of changes in China that we've seen.
Well, first of all, great to be with you, Stephanie. Thanks, thanks for this opportunity. Yes, I think me my family, but it's only really one of so many Chinese families who have gone through this incredible economic transformation in China. My parents worked in the fields during the Cultural Revolution.
They were able to move to Beijing and create this life for me because of the amazing meritocracy and the Donzhelping's reform and opening up since the late nineteen seventies that afford us so many Chinese really an economic opportunity, and so my parents would be the first, again among many in their generation, to have really seen their future and their fate go from you know, just from the farms to the city and even to the West. I grew up in China, but I was an exchange student
in high school in the US. And when I went to the US, it was very interesting because everyone knew I was from China in high school and they could only talk about or ask me about I want that human rights. But by the time I got to college a few years later, people were learning Mandarin and a few years later when we were graduating, people moved to China even to look for jobs. So that was a personal experience, but again so typical among so many Chinese.
You start the book to sort of talking about the house that you were first born into, and also you mentioned I think it and that it was really sort of luck or and I guess the good performance of your father in his exams that meant that you left the countryside at all.
Yes, I was born in an eleven square a meter apartment, which at that time was really a luxury, and we had communal kitchens. And my father had absolutely no family background. He was the son of factory workers, you know, in down in South and he had he was among the first generation to take the Graduate examine examination National Graduate Examination, which Denselping reinstalled and got himself into Beijing. And then you know, the rest is history.
And we're all used to our own sort of parents or grandparents saying I remember when. But it's the drama that when you're talking about the pace of change in China, is it something that that you talk about around the dinner table or is it just passed without comment this point?
What we do talk about often that my parents like to remind me is how grateful I should be and we should all be to Don't helping's policies and economic and opening up, and how difficult it was for the Chinese, and really how grateful they should be to the country and to the great leaders that have given everybody an opportunity. And I think that is a very you know, kind of a common feature in the discussion of all Chinese families.
And it's interesting even in the way you say that, you have pointed up one of the great things that people outside China find so hard to understand. That sort of deep sense of deference and gratitude that is so widely shared by people across China is kind of one of those you know, we don't spend on We don't spend very much of our time giving thanks for our leaders and their great decision. And just in terms of the numbers, you had a great stat it was just
a good way of summer rising. You mentioned that over the years of the Industrial Revolution were considered to be amazing because they improved the standard of living by seventy five percent within a single lifetime. But the growth rates in China, as you point out, mean that many Chinese will see living standards rise seventy five fold, so seven five hundred percent. I thought that just really kind of
put it into perspective. Okay, So your book, you mentioned the phrase several times reading China in the original that what do we miss by not doing that, by not seeing China through Chinese eyes?
You know, you know, culturally, historically, China comes from a very different place, and we keep on judging China for what it is through the Western lens, will get China wrong, will predict China wrong, as we have many times, We
will not see their view of the Chinese people. And so, whether you're a policy maker or a student learning about China or business is wanting to engage or disengage with China, just having that bit of a cultural and historical nuance and understanding how that really vastly different economic model political economy model works would be just so important.
So what's an example of a misunderstanding of China that is potentially dangerous at the current time.
Well, I think it starts from the misunderstanding of China's ambitions and goals in the world. There is a view that China is trying to displace the US, for example, but it is actually trying to overcome a middle income trap. We're talking about its economic goal in the next fifteen years or so to be reaching twenty three thousand dollars of per capita income. We're talking about six hundred million people who's living under three hundred dollars of monthly income,
still needing to reach international standards middle income. And I think for the Chinese, they believe, well, first of all, if the Chinese people have a right to prosperity, have a right to attain the technolog technological prowess that all developing countries and emerging countries, emerging markets want to have some day. I don't think it's stupid enough to want to displace the US for some reason, because it's not really currently feasible. But also, you know, I'm less dangerous,
but just so important and interesting. And every time I mentioned this, I think people are just so surprised, even extremely cosmopolitan while educated people. Is how the political economy works in China. People think about China as a centralized state with you know, with almighty control, but actually the
economic model is a very decentralized model. I call this the Mayor economy in my book, and it just goes to show that all the economic transformation reforms we talked about, the innovation, controlling pollution and really just building these amazing unicorns, so many unicorns, hundreds of unicorns a year in China are scattered all throughout China rather than just focused on Beijing and Shanjin and Shagha all because of the mayors, so to speak, that economic decentralization is so far none
of you know, my friends have have understood.
Of course, what people look at and what they think of when they're sort of focused on the control of the power of the state is the control over political activity and to some extent, the power control of individual thought. When you think of all the surveillance the Great Fire will preventing people in China from from seeing everything on the on the internet from outside China, I mean, it's it's hard to argue that it isn't a strong central.
State politically, it's a very strong central state. But I think the question that you've raised here there's also a bit of misunderstanding. There's actually a very very dynamic, more than we believe dynamic, civic debate on social media in China, and apart from a few Tiboo issues. There are things ranging from organizing protests around China. You know, as an example, there was something like more than eleven thousand protests just over land use rights, not to mention so many other protests,
and they allow that there is criticism. One of the top key hot issues is criticisms of local officials calling them out in corruption or if they had a mistress that was found somewhere, that was spotted somewhere, or expensive watches. There's a huge amount of pushback. Again, these stories don't get reported. But for instance, in the city of Hungo down south, you know, people complained about the data collection and data privacy issues from a public park and then
they canceled the whole thing. They canceled the facial recognition ticket system. So you're actually able to push the local officials to change and relatively rapidly if there's wide discontent. Now, of course there's some things that you don't hear, and there is a censorship on the social media platform the highly highly sensitive political issues which not every single Chinese
citizen talks about. But again there are also loopholes. You know, some of them would post during the midnight and then by the time the officials in charge will wake up. It was already you know, everywhere on the internet, so it's not that easy to implement. But I agree with you, Stephanie. There has been tighter control and more surveillance in the years,
that's for sure true. But to see the complete picture, we have to recognize that it's not a bunch of just one point four billion people having no voice at all.
We've had a situation where over thirty or forty years, China has made itself, as we discovered recently, indispensable to global manufacturing production. Even people who don't think they're dependent on China have found, you know, actually there's you know, some number of parts that come through China or are made in China, and that's obviously animated President Biden's push
to diversify production globally and to some extent decouple. I'm sort of fascinating when China obviously would be proud of what it's achieved, is it does it think that the rest of the world was a bit foolish to allow themselves so easily to become hooked on Chinese production? Does it inculcate a sort of lack of respect? It sort of sometimes feels we sort of wonder whether China's kind of laughing at us behind our backs, but having got ourselves in this situation.
Oh no, no, absolutely not. I think globalization was the best thing that happened to China and allowing China to embrace it unless we really kind of believe that somehow we ought to have three quarters of the people in the world living in an abject poverty. I just don't see any rationale against this view of deglobalization and decoupling. And we can't forget about the eighty percent of the people still living and developing world.
In today's world thinking about China right now, and obviously people are looking at China's economy being feeling a bit concerned about the slowdown we've seen in the last few months, and some of the very deep seated challenges that the government fail is, for example, that the real estate trying to reduce the amount of investment in real estate without seriously undermining the economy given that the property has been such a big play puts a big part in growth.
How do you judge the way Si Jinping and his new administration are sort of handling those challenges facing the economy.
Well, First of all the overarching mood is a return of pragmatism. Pragmatism just the basic principle for Chinese people all these years and still not regarten. It's still most important. Despite everything we think about security and nationalism, pragmatism is actually what the Chinese people want the most. So it's kind of ironic that the economy has to suffer that
much before the return of pragmaticals. Once again, keep your head down, make GDP great jobs, and that's what the government is focused on.
Sorry, just to interrupt when you say the return of practice, and so what was it returning from what have we've seen?
Well, we had a lot of yeah, we especially in the last year or so during COVID and during the Party Congress, there was a lot of mention of security. There was a lot of mention of the threats that have encircled China, external, internal pandemic, and how security was
really the most important thing for China. And we're going to see security being continued to be important, but it will be a pendulum swing between the economy and security, and sometimes economics wares and as you mentioned, Stephanie could correctly pointed out the real economics difficulty right now is to find something to replace the property sector, which broadly
accounted for a third of China's GDP. And even though recent ursus are directed towards now hard tech, now the high tech, now towards you know, things like evs and renewables, that's just not enough in the short term to get the GDP numbers to create the kind of jobs that are required for social stability, but to reduce youth unemployment, which is north of twenty percent currently, So what could that be. They're still finding the way. So the short
term we really might see a slow economy. I don't think there's going to be a collapse or at any sort. I think the government will do enough to reach the goal of reaching twothout and twenty three thousand dollars per capita income in twenty thirty five, but I wouldn't my hopes up for really spectacular performance.
Well, it's interesting you mentioned that our chief economist Tom Morlig was saying, you know, just a few years ago, it was very difficult to imagine China not rapidly overtaking the US as the world's biggest economy. But we're now seeing as we update our new forecasts and think about downside and upside scenarios, and there's there's lots of scenarios under which that great moment of China overtaking the US is delayed a long time and somewhere it doesn't happen at all.
Well, Stephanie, I think it's true with these scenarios, but China needs to only only needs to grow one point five percentage points faster than the US to overtake it in a little more than ten years. And I think is actually pretty plausible given that it's all about relative performance.
But I think it really depends on how how you get there, right, So, just in terms of nominally achieving a size that's larger than the US, I'm actually more optimistic than those projections, but I don't think it necessarily means all that much unless you really raise the standards of living and less China really really is able to come up with its own, you know, high tech independence again, I think is going to be the story of the next decade, and that you know they can't economic growth
is actually real rather than just the macro numbers.
You talk quite a lot about the crucial importance for the continued support for the government and for the party is that it delivers stability, that it deliver rising prosperity is the government, and as is China ready for a situation in which we don't see the kind of dramatic economic growth we've seen, or indeed we may see, you know, quite meager growth over the next few years.
I think one one group to watch is the younger generation. You know. Imagine that you've done everything in your life, and your family has spent every penny of their savings on your education, and you get a bachelor's degree and you're in trentees and you don't even have a first job. I mean, that's seriously concerning, uh, for the Chinese families and therefore for the government. Uh. And so how do
you solve that high youth unemployment problem? I think comes before and many other things because remember that Chinese family is Another cultural misunderstanding that I highlight in my book
is that it's a dynastic you know family. It's not about maximizing one's individual consumption, as the Western canonical economic model always assumes, but it's about you know, intergenerational altruism, household maximizing household consumption or saving for your children or saving so that you can support your parents in an older age. None of that, very little of that is featured uh in the in the in these basic workhorse frameworks in the in the Western economics. But that is
just the basic foundation. So when the Chinese families are unhappy collectively, then I think it's a potential threat to social stability. Now, we saw how rapid things changed at the end of last year during the pandemic, when China opened up so much earlier than expected as of resistance. I mean that just goes to show the people has enormous power, and the sea of the people is really what keeps the float of leadership, keeps that boat of
leadership afloat. We're not seeing necessary signs of social instability because of the economy. Yet it really depends on whether that pragmatic attitude will hold in the coming years. There is a gap of twenty five million jobs in manufacturing the next three years needing to be filled. There is a three hundred thousand talent gap just in semiconductor sectors alone.
But the real chasm is that there's you know, there's difference between expectations and reality in the Chinese students and getting this bachelors degree, who wants to have a high earning job in finance and real estate, except that they're not that many jobs in finance and real estate.
You talk about the new generation and them having different expectations and potentially just very different individual experiences from their family. One of the things, the basic things that the West has been surprised about, rightly or wrongly, is that there hasn't been more of a move towards more democratic, more individualistic society as a market economy has taken hold in China.
At the bottom of that is a sort of continued belief that as you move to a more service oriented, so service sector based economy, which structurally they have to do, and as they move to having more of the growth of the economy driven by consumption not investment, which I think the government also recognizes a country, and certainly as you try and develop more and more technological innovation and you are more on the kind of frontier of technology
rather than catching up to the rest of the world, that to us spells a need for a more individualistic society, one where people will feel I'm more likely to feel oppressed by a very strong single party government, So do not recognize that as a possibility that some of those cultural traditions will come right up against just the economy as it is today and will be in the next ten twenty years.
The relationship with authority is something that is very different from the West, and it's kind of ingrained in the Chinese people since we were young. The relationship with our parents and our Confucian family, the relationship with our teachers, you know, and of course the relationship with authorities, the government.
The Chinese people have always had to learn to balance at a desire of exerting one's individual free will and behaving in a community deference in collaboration and cooperation with the government or with your authorities. But I think, Stephanie, at the bottom line, if you're asking, you know, if the question is if the Chinese people want to have a more free and open society, I think the answer
is a resounding yes. And I think whether it's the new generation and even much more so the older generation like those in the nineteen sixties, they aspire democratic values. But I also have to say they're not that inspired by its Western incarnation, Western incarnation of democracy, because they would be, you know, observing the fact that there's so much bickering. And for the US, they'd be wondering why a society that champions rights don't give all the women
rights to end unwanted pregnancies. And they would be, you know, looking at the gun violence and the potholes on the streets in the US, and they would be they're be wondering. Now, that was not necessarily cased. In the eighties and nineties, when the Chinese people was more mesmerized by the US, people were very deeply impressed. So at that point you saw many Chinese people asparring to that society and that
openness and that freedom, et cetera. But I think less and less so, and this is very clear from the surveys, international surveys of the different generations. The new generations has no appetite to have overhauled their own system. And yes, I think things have become difficult in the last few years, the last two years, especially by the end of the pandemic.
But over the last decade the Chinese people have been more proud, not less proud, and more sure of their system the power of their system, than compared to many years ago. Again, I'm not saying what is good and wrong, right or wrong. But this is understating the facts of how the Chinese people feel and when they look at democracies for inspiration outside of China.
I mean, you say in your book that understanding Chinese thinking doesn't mean endorsing it in its entirety. I have to admit kind of, as you read it, it sort of feels like you do pretty much endorse it its entirety. I mean you even the mistakes that you identify, all the economic problems that you identify, you know, you then sort of later in the book explain how they have been reversed or remedied by a very agile and flexible
response by the state. So I guess I'm just wondering, do you what do you think that the other countries have done better than China? Where do you think China should needs to learn lessons?
I think if you felt a sense of endorsement, it was an endorsement. It was certain kind to model in the early stages of developments, not eternally. And if there's one thing I think there, it is important. It is important and proved to be repeatedly crucial for countries to jump out of poverty and slowly tread on the middle income path towards rich to rich income. It's high quality
state capacity. And China's model was a form one form of delivering high quality state capacity, not the only and unique form, but I think it does have certain developmental lessons. And just take a solid example. Recently, China became the largest producer and consumer of evs within a decade. How was it able to do that? Well, it wasn't able to It wasn't. It wouldn't have been able to do that without the government installing four million EV charging stations
around the country. Compared to China, the US is one hundred and forty thousand. And it wouldn't have been able to do it so quickly if the local government officials were not so avidly working on coordinating supply chains all around China, you know, gathering battery makers, control systems, manufacturers, et cetera all together. That requires high quality state capacity.
But can you think of anything that China got wrong that America's got right?
Oh? Yes, and you mentioned the other countries done well, you know there there there are many countries that you know, we always talk about getting to Denmark, even in the West. You know, the kind of the the you know, the lower levels of inequality, the social goods and public goods that have been delivered to the people, the general level happiness. I think we should all aspire to get to Denmark. But Denmark is also kind of tiny, if I may
say so. So it's obviously more difficult for bigger countries like the US and China. And eventually we're going to see what's going to happen to India, right, And so I think all of these large economies have their their their challenges because the complexity of society. I will say that. But you know, you know, if we observe South Korea or Japan closer as neighbors, you know they are they are good models of relatively good liberal democracies that have worked.
But I think that the real issue, it really is China is going to become much more complex social even more than now, and that's going to be the real challenge for the country and for the government. Because in the last forty years, people were centered on one goal, and that was economic growth and senior income grow up up and up, and that was what that was the focal point of the nation. Everybody was rallied around that goal. Now as you reach middle income, as you reach you know,
a richer income, country level income. Yeah, people are going to want different things. They're going to want their preferences to be reflected ultimately in political decisions, and so I think that will be a challenge. And how can you manage if going to be much more difficult to manage a complex society with a wide range of needs and desires rather than just the economies. I think that would really be the challenge for China.
I'm so sorry to talk to you, but I just find it kind of interesting that you can't I mean, as you say, there's the two big countries, and there's lots of things that are different about them, but I just it seems like you can't think of something that China's got wrong.
I've been I've been digressing. No, Look, the Chinese are absolutely mesborized by entrepreneurs like Elon Musk and the technological innovation is like chat, GPT. They are obsessed with them. The new generation are obsessed with them. And how do you have a society that can allow these great things to happen? Is what absolutely I think the US would be ahead of China for a very very long time and if we're talking about basically breakthrough technologies, it's in America,
it's not in China. Yet that comes down to so many things, so many factors, and not least civil society and its openness and its relationship between the universities and and and industries, and that free flow of ideas absolutely crucial. And that's that's for sure something that the US has gone right. Thank you.
So my final question, do you find the students LC very different from students who teach? It's an obvious question, but I'm just fascinated. I mean, when you talk about this sort of tradition, the way people deal with their teachers and everything else, do you find the British students terribly insubordinate and cheeky?
No? No, no, I think no, not at all. I think you yeah, actually, you know, each student is different. But I think the Chinese students come into my office and often start with what their parents think, which is you know, sur writing, especially when it comes to their future. But look, you know, good students are always great students because of their ability to think out of the box.
And we see that whether you're Chinese or Grits. And I think the new generation as I mentioned, they're much more so to speak, individualistic and selfish and eyes of the authorities. But that's a good thing. You know. They want to consume more, they want to borrow more, so they're going to change the economy. But I still think their roots are culturally deeply rooted in China, that local,
the relationship with the local culture. You know, in the last decade or so, eighty percent of the students who have studied abroad have returned to China. And if really China wasn't a really great place, how could these people who had jobs in Microsoft and Google and Facebook give them up to go back to pursue their future in China. So it can't be as bad as we think. In fact, they had been rather optimistic about their nation's future.
Okay, Jan, thank you so much.
Thank you, Stephanie.
That's it for this episode of Stephenomics. Next week we will have more. In the meantime, you can get a lot more economic insight and news from the Bloomberg Terminal website or app. This episode was produced by Mangnus, Hendrickson, Yang Yang and Samasadi, with special thanks to Professor k Yu Jin, the executive producer of Stephanomics is Molly Smith, and the head of Bloomberg Podcast is Sage Bowmen.