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International Macroeconomics; International Finance and Trade; The Chinese Economy
London School of Economics and Political Science
The New China Playbook: Beyond Socialism and Capitalism
新的中國劇本：超越社會主義和資本主義
by Keyu Jin (Author) May 16 2023
“Keyu Jin is a brilliant thinker.”
—Tony Blair, former prime minster of the United Kingdom
A myth-dispelling, comprehensive guide to the Chinese economy and its path to ascendancy.
China's economy has been booming for decades now. A formidable and emerging power on the world stage, the China that most Americans picture is only a rough sketch, based on American news coverage, policy, and ways of understanding.
Enter Keyu Jin: a world-renowned economist who was born in China, educated in the U.S., and is now a tenured professor at the London School of Economics. A person fluent in both Eastern and Western cultures, and a voice of the new generation of Chinese who represent a radical break from the past, Jin is uniquely poised to explain how China became the most successful economic story of our time, as it has shifted from primarily state-owned enterprise to an economy that is thriving in entrepreneurship, and participation in the global economy.
China’s economic realm is colorful and lively, filled with paradoxes and conundrums, and Jin believes that by understanding the Chinese model, the people, the culture and history in its true perspective, one can reconcile what may appear to be contradictions to the Western eye.
What follows is an illuminating account of a burgeoning world power, its past, and its potential future.
Keyu Jin is in the West but not entirely of it. She's fluent in English and French, studied at Harvard and teaches at the London School of Economics. She knows her way around Goldman Sachs and the World Bank. But she is still a proud Chinese. She lived with her parents in Beijing during two recent maternity leaves. And she has just written a book about what she calls “reading China in the original.” Unfiltered, that is, by a Western perspective.
It sometimes comes as a surprise to Europeans and Americans that Chinese people who have seen and enjoyed the best of the West nevertheless prefer China. What about the lack of democracy and the repression of minorities such as the Uyghurs and Tibetans? The pollution? The threats against Taiwan and incursions in the South China Sea?
Jin doesn't ignore China's faults and failings in “The New China Playbook: Beyond Socialism and Capitalism,” which was published on Tuesday. But she tells a nuanced story that deserves attention at a time of extreme tension between China and the United States.
Consider this, for example: The United States is a democracy, and China isn't, of course. But the latest World Values Survey, conducted from 2017 to 2020, indicates that 95 percent of Chinese participants had significant confidence in their government, compared to 33 percent in the United States. Similarly, 93 percent of Chinese participants valued security over freedom; only 28 percent of Americans did so.
“Chinese citizens expect the government to take on larger roles in social and economic issues and do not see interventions as infringements on liberty,” Jin wrote.
Wrapping your mind around those stark cultural differences is the first step toward “reading China in the original,” just as you get more out of reading Baudelaire in the original French or Mad magazine in the original English.
In her opening chapter, Jin described her collision-of-cultures experiences as an exchange student in the 1990s at the Horace Mann School, an elite private school in the Bronx. Outside of class, she was asked, “Do you feel oppressed?” She quickly got involved in local politics. “That a proud Youth League member of the Communist Party could find herself immersed in an American family actively involved in democratic campaigns, conventions and fund-raising seemed utterly surreal,” she wrote.
Much of the book recounts China's economic miracle. In her final chapter, “Toward a New Paradigm,” she wrote that China’s leadership “fervently wishes” to avoid vast inequality that breeds distrust and extremism. “China seeks an olive-shaped income distribution for its people, ample in the middle and narrow at the extremes.”
China, she wrote, requires that its companies be hefa, heli and heqing — that is, lawful, reasonable and empathetic. Chinese government at all levels “will need to recede to the background while letting markets and entrepreneurs do the work” — but the mechanisms for making that happen “are not yet part of the new playbook.”
When I interviewed Jin a couple of weeks ago I asked whether she had pulled punches to avoid offending China's leadership. “I don’t talk about political issues,” she said. “To be frank, this is an economics work.” She added: “Perhaps it would be helpful for Americans to be aware that in China, the problems are overwhelmingly domestic. Chinese are not always thinking about America.”
To me, her freshest chapter is about China's “mayor economy.” China aspires to have a meritocratic bureaucracy (although corruption remains serious). Officials who excel at one level are moved up or transferred laterally to gain experience. For comparison, imagine if Ron DeSantis tried to please President Biden so Biden would promote him to governor of California from governor of Florida.
Political leaders at the township, municipal and provincial levels used to focus on raw output, relying on state-owned enterprise to churn out more steel, cement and so on. But now, in Jin’s view, these “mayors” are focused on harnessing the creativity of the private sector.
But, I asked Jin, isn't President Xi Jinping trying to reassert government control over the “commanding heights” of the economy? “Don't read too much into grandiose messages,” she responded. “The reality today is that the private sector is fully in the driver's seat.” The best evidence of that is the Chinese economy's slow rebound from its Covid shutdown, she said. “The reason it's sluggish is precisely that there's a lack of confidence in the private sector,” she said. “The old playbook of calling on Team China to do large infrastructure, that is no longer working.”
I asked her about Chinese leaders' fears of a disengaged “lying flat” generation. It's real, she said: “Lying flat is associated with few marriages and reduced expectations.” On the other hand, she said, young Chinese aren’t exactly giving up; they just don't want to do manual labor or other unappealing work: “They're interested in innovating to solve society's problems, not just survival of the fittest.”
Young Chinese “are more open-minded, more socially conscious, more tolerant, more accepting of diversity,” she said. But that does not make them pro-American. “They like Hollywood and the N.B.A. and they like their experience in the West,” she said. “But it’s not contradictory with the fact that they choose to be close to home and invent local culture.”
For the Chinese, “the bottom line is to avoid an American-style capitalism,” Jin said, coming back to the metaphor of an olive-shaped income distribution. Essentially, she said, “China wants to be a bigger and smarter Germany. More managed capitalism.”
Elsewhere: A Surprising Trend in College Costs
When people talk about the exorbitant cost of college, they tend to focus on rising sticker prices. But that's wrong in two ways, as this chart based on a report by the College Board shows.
First, sticker prices haven't risen as rapidly as the Consumer Price Index for the past two years. Second, most students don’t pay full freight because they get grants. Average net prices, adjusted for inflation, are back to 2006-2007 levels. But college is still too expensive for low-income students, Phillip Levine, a Wellesley College economist and nonresident fellow of the Brookings Institution, wrote in a report for Brookings last month. “This lack of college affordability for lower-income students, not the dramatic rise in sticker prices which only higher-income students pay, is what should capture our attention,” Levine wrote.
Quote of the Day
“Everything, everyone, anywhere, anytime — all is open to challenge and criticism.”
— James M. Buchanan, autobiographical essay collected in “Lives of the Laureates: Twenty-Three Nobel Economists,” sixth edition, edited by Roger W. Spencer and David A. Macpherson (2014)
金刻羽：美國真的能理解中國嗎？
DAVID MARCHESE
就像人與人之間的關係那樣，國家之間的關係也很容易建立在無意的誤解、錯誤的假設，以及過於簡化的事實基礎上。倫敦政治經濟學院教授、瑞士信貸董事會成員金刻羽即將出版新書《新的中國戰略手冊》(The New China Playbook)，在這本有時具有煽動性、有時令人不安的書中，她試圖重建西方與中國關係的基礎，她認為西方對中國經濟、中國的經濟野心，以及中國如何看待全球競爭的理解存在嚴重缺陷。金刻羽希望通過這種重建來幫助改善中國與其假定的地緣政治對手之間的冷淡關係。金刻羽在北京出生，在哈佛大學獲得了經濟學博士學位，她的父親金立群曾任中國財政部副部長。“我們正處在一個極其危險的世界中，”她說。“如果不做出更大努力來了解彼此的觀點，和平共處恐怕是不可能的。”（金刻羽2022年加入瑞士信貸董事會，之後不久，這家銀行因一係列醜聞和虧損瀕臨崩潰。瑞士信貸已在這次采訪之後被另一家瑞士銀行瑞銀收購。金刻羽通過一名發言人拒絕對瑞士信貸的情況置評。）
Just like relationships between people, relationships between countries can all too easily be built on a foundation of unintentional misunderstandings, faulty assumptions and predigested truths. In her forthcoming, at times provocative and disquieting book, “The New China Playbook,” Keyu Jin, a professor at the London School of Economics and a board member at Credit Suisse, is trying to rework the foundation of what she sees as the West’s deeply flawed understanding of China’s economy, its economic ambitions and its attitude toward global competition. And through that work, Jin wants to help improve the frosty relationship between the country and its presumed geo-political opponents. “We’re in an incredibly dangerous world right now,” says Jin, who was born in Beijing and earned her Ph.D. in economics from Harvard and whose father, Jin Liqun, served as a vice minister of finance for China. “Without more effort made to understand each other’s perspectives, peaceful coexistence may not be possible.” (Jin joined the Credit Suisse board in 2022, not long after the bank was shaken by a series of scandals and losses. After this interview was conducted, the bank was sold to UBS, another Swiss bank. Through a spokes-person, Jin declined to comment on Credit Suisse’s situation.)
1 The term for when wages rise in a country but then stall as a result of higher costs and declining competitiveness.
What do U.S. policymakers just not get about China’s economy and the Communist Party leadership’s thinking about competition with America? China’s current economic challenge is to overcome its middle-income trap,something that the United States might not relate to. It’s not all about displacing the United States as global hegemon, which would come with a huge amount of burdens and responsibilities. And I don’t think China is ready or willing to do that. To see China solely as trying to displace the United States is only going to stoke more fears. The United States can come up with better policies regarding real national-security concerns, but the government is doing things that to us are so un-American, like reducing
2 Under both Presidents Trump and Biden, the United States has reduced the number of student visas issued to Chinese nationals.
3 For example, restrictions on the sale of semiconductor technology to China enacted by the Biden administration.
That doesn’t seem to be the spirit of collaboration. But understanding where China is coming from would be a step forward.
Keyu Jin at a conference in Munich in 2018.Gandalf Hammerbacher/Picture-Alliance
4 China’s electric-vehicle market and infrastructure is far and away the world’s largest.
Do you see large-scale Chinese industrial espionage as inhibiting that understanding? There are thorny issues between the two countries, and the more they trade, the more issues there are. But we want to see China as dynamic. It has changed a great deal. China liked to take the shortcuts in the beginning. It wanted to become an innovator, and it wanted to become great. But there was not a complete legal framework or rules and laws in place. China changed so it could join the World Trade Organization. Interestingly enough, these so-called technology transfers, or the misappropriation you mentioned — lots of industry studies show that they don’t work as effectively as they were supposed to. Instead, for example, in the electric-vehicle sector,where everybody started from the same place, China was able to leapfrog. Lots of companies say that even at the risk of technological misappropriation, China is too lucrative a market to pass over. They would rather take the risk.
It seems pretty apparent that President Xi Jinping is moving away from the United States and the European Union and toward other countries with politically similar systems, like Russia or Iran. But those countries are unlikely to be economic partners for China on the level of the U.S. or the E.U. What are the implications of that shift for China’s longer-term economic growth? China has a slightly different world vision from the U.S. and maybe from Europe, which is coexistence of different political systems, different economic systems, a multipolar world — I think that’s one of China’s global agendas. Of course, intereconomically, there is much more trade. China still upholds this view of globalization, but geopolitics is making this increasingly difficult. So I would argue that at the same time it seeks this multipolar balance, it is slightly pushed to become closer to some of these countries that you mentioned.
But what’s pushing China toward more closely aligning with Russia if not political affinity? To be very frank, it’s hard to say, “Let’s hold hands with Europe and the United States,” after the increasing tension, the export controls, the view that somehow the United States wants to limit China’s development and advancement in technology innovation. People believe that there was demonization of China early in the pandemic; there was aggressive rhetoric during Donald Trump’s presidency. It’s more difficult after that happens to say, “OK, let’s work on things like Russia and Ukraine.” Russia — and I’m not an expert on these issues — presents some security concerns for China. The Chinese people believe that a substantially weakened Russia might not be in the interest of China, because if there were the sense that the United States needed to seek out an opponent, China would be next. Not an easy answer there.
5 China has been heavily criticized for detaining more than a million Uyghurs and other Muslim minorities in what its government has referred to as “vocational education and training centers.”
But to be honest, one of the things that I found most interesting — or perplexing — about your book was what felt like an elision of moral questions about how China operates. For example, you say there’s room for a vibrant debate on Chinese social media. But China is consistently ranked near the bottom when it comes to media freedom. Or you write that the Chinese people are generally willing to trade security for freedom. Were the Uyghurs willing to make that trade? The book also doesn’t mention the human rights questions raised by the hukou system and the
6 A classification system that has been used to determine what social services, including education and healthcare, are made available to rural residents. Critics have equated it with apartheid.
I’m trying to understand your perspective on these issues, because to me they seem connected to economics. I appreciate these questions. One reason it’s probably not thoroughly addressed is because my book is about economics and political economy. I wanted to touch upon points where there were surveys and data. These other subjects require more expertise and more thorough research, which I haven’t done. For sure, there’s much more control over media than in the past. I was pointing out in the book, though, that
7 I.e., a way for citizens to monitor their government and vice versa.
There was a lot of criticism about government; there were protests last year over land seizures. These were not hidden. But the Chinese government does exhibit a great deal of paternalism. Officials think that a public narrative that is uncontrolled can lead to instability or more divisiveness. I’m not saying that the people prefer it that way, but when they’re asked about a trade-off between security and freedom, surveys show a vast
8 According to a 2020 World Values Survey, 93 percent of Chinese participants value security over freedom. Only 28 percent of Americans responded similarly.
Then you touched upon the huge issues of the migrant workers, the minorities in China. There are hundreds of millions people who could be in a better position, but things are changing. These are enduring challenges. On the one hand, yes, there’s more control, less liberty. On the other hand, there is an improving situation for people with more dire situations.
Jin (second from right) at the World Economic Forum in Davos, Switzerland, 2020.Greg Beadle/World Economic Forum
The treatment of the Uyghurs doesn’t quite fit the framework of an improving situation. David, I understand. This particular subject is something where I have so little information and I don’t know what’s going on and there’s so many different accounts. I prefer not to comment on this and be irresponsible. But it is open for visits now.
9 Tourism travel to the Xinjiang region, home to many of China’s Uyghurs, had previously been subject to restrictions, and Uyghurs were prevented from leaving the region. Foreign visitors also had surveillance apps installed on their cellphones.
I think people should go take a look, then make a judgment on their own. It’s a complex situation. There are improvements, there are deteriorations, and we have to recognize that.
Do you feel inhibited in your ability to be critical of China? I’m an economist at the end of the day, and the way I’m trained, we like to say, “OK, where is the evidence?” That’s how I like to focus my analysis. Where there are policy mistakes, I’d be more than happy to share my views. There are more courageous people and more experts who can do that. What I’m trying to accomplish is using a different lens to focus on economic issues.
You mentioned the trade-offs that people are willing to make within different political systems, which you also write about in the book: “Despite the limits China imposes on free-market forces, the absence of a free press, independent judicial system and the individual right to vote, we see there are other mechanisms in place to respond to the needs of its citizens and to address the threats posed by inequality.” That “despite” is doing a lot of work. It reminds me of that line, “Other than that, how was the play, Mrs. Lincoln?” I was trying to say that those are all things that we believe to be essential for sustained economic growth. I was saying that despite all that, China still performed well. I wasn’t necessarily suggesting that the things you mentioned weren’t important. I was more framing it as the puzzle of China’s economic growth. I was trying to say that those are all things that we believe to be essential for sustained economic growth. I was saying that despite all that, China still performed well. But I will say that the model that worked for China when it was building factories is not going to be the system that would work for innovation, where you need people to be able to get rich, where you need solid intellectual-property protection, where you have to have clear and transparent policies and rule of law. That worked in the last era. Doesn’t necessarily work in the new era.
Let’s turn the lens of your book around: What are the biggest blind spots the Chinese leadership has when it comes to understanding American policies toward the country? I think the Chinese leaders have this notion that the United States is doing everything it can to try to stop China from growing. Or they believe that whatever China does is not going to elicit more trust. So I think this blind spot is that the leadership is convinced that there’s no way out of this. I’m not sure that is the case. And then also, the United States thinks that China wants to displace it.
Doesn’t it? No. China thinks that its economy should be the largest in the world, not because it’s rich but because it’s large: 1.4 billion people! But that’s very different from overtaking the United States in terms of innovative power and military power and real economic power. I don’t think anybody believes that is a realistic goal for China. Again, we have very different understandings of how we see each other.
10 China’s CATL company, for example, is the world’s largest manufacturer of lithium-ion batteries, which are used for electric vehicles.
What specific things, besides stopping industrial espionage, could China do to increase trust? Giving American companies, financial institutions, more opportunities to make money, opening up its various sectors more aggressively — that will allow more dialogue, more cooperation. That’s one thing. Second, it’s understandable for the United States to push back on some of the industrial espionage. But China’s best technologies, the ones that are really successful right now, artificial intelligence or batteriesor its
— all of that is based on domestic competition. The industrial espionage stems from a lack of appreciation from the start of intellectual property, and the United States, by pushing China to do more intellectual-property protection, is actually good for China. I think it’s on a substantial downward trend, this misappropriation of technologies, because it’s actually not good for China’s own goals.
11 China’s retail-payment system is largely run through QR codes and digital wallets and is operated by tech companies. Banks are cut out of the process.
The next question is more of an epistemological one.The animating idea of your book is that people see the same situation from different perspectives. So when you hear my skepticism about things like Chinese labor policy or media freedom being treated benignly, do you hear it as my being stuck in a particular ideological paradigm? Or maybe that my thinking is itself an example of the misunderstandings that the book is trying to address? I totally understand, because the first time I came to the United States in 1997, my classmates were asking me about human rights in Tibet. In China, meanwhile, we were busy building and developing and reforming. The focal points have been different. That’s not to say that the economic means justify the unfortunate circumstances. But China is a country that has done the most economically for the most number of people in the shortest amount of time. If you look at the new generation, they are open-minded on a whole range of issues, so much more than their parents. They care about animal rights, worker rights, social inequity. That shift gives us hope that China will progress.
12 Jin came to the United States to study at New York City’s Horace Mann School as part of an exchange-student program.
Opening illustration: Source photograph from Keyu Jin.
This interview has been edited and condensed for clarity from two conversations.
