TRANSCRIPT: Keyu Jin on China: Beyond Socialism and Capitalism

Read the full transcript of Economist and China scholar Keyu Jin’s talk at the Westminster Town Hall Forum in Minneapolis.

Listen to the audio version here:

TRANSCRIPT:

KEYU JIN: Thank you, thank you, thank you, thank you so much. I am so happy and so thrilled to be here.

Moving to America

In 1997, I moved to America. I was 14. I was alone. I arrived at the doorsteps of an American family who actually took me in. They thought I was only staying for a week during an exchange program, and I stayed for three years.

Just months before I arrived, I was a proud member of the Party Youth League in China. I was studying Marxist economic and political thought in school, and it never occurred to me nor to my friends that there was something called fun plans on a Friday night. And of course, that all changed when I got here to this country.

I was genuinely mesmerized by the openness, by the free thinking, and I was a little shocked to be encouraged by my history teacher to question authority, textbooks, teacher, and even facts. Ooh, what a foreign concept. And I was surprised to learn that in school life, there was something actually more important than grades.

And the China I knew from back home, exuberant, dynamic, ever-changing, so fast, was so different from the China that Americans had in mind when they asked me questions when I got there, as if it was kind of a dark place of terror. And that contrast in perspective really stuck with me ever since.

Now thinking back, this little story of mine, I think, really embodies a lot of the differences, the misunderstandings, potentially the cultural gaps that we have between the two countries, U.S. and China. And that’s why I wanted to share it with you today.

The New China Playbook

Now I wrote this book that was published last year, “The New China Playbook,” and trying to explain how China actually works, how it has come to foster a really unique model that goes beyond conventional socialism or capitalism, and also how China has a new generation of Chinese radically different from the older generations. And they’re going to change the face of China.

So my goal was to hopefully give a perspective from the inside, based on data, facts, and a huge amount of wonderful, serious scholarly work that has been done on the Chinese economy by international scholars over the years. And most of all, rise above the emotions and sensationalism and the news cycle. And so I wanted to tell a different side of the story. And there is always a different side of the story. And given how tense things have become between the two countries, U.S. and China, I think it is important to tell that story.

So allow me to offer you a different perspective and lens to look through in the next hour.

Misunderstandings About China’s Economic Model

So people ask me often, what are the biggest misunderstandings about China? One of it is actually how the model works. Now 30 million private companies sprung out from nowhere, like mushrooms spring up from a desert in so little time, 20 years. In the beginning stages, in the beginning ages of the 1980s, China was a thoroughly anti-capitalistic economy, and suddenly 30 million out of nowhere.

We tend to think of China’s system as being extremely centralized, as if everything is decisions made on the top by a few people, maybe even one person, but that’s not quite accurate. Politically, it’s very centralized, but economically, it’s extremely decentralized. Decisions, implementation, are all made on the ground, decided by local officials, who actually go about helping private entrepreneurs to succeed. In my book, I call this the “mayor economy.”

Local provincial leaders, I mean, they could be mayors, they could be party secretaries, in charge of turning backward fishing villages into global technology hubs, like Shenzhen. And that’s what they did. I don’t know what we expect our mayors to do for us in this country, but in China, that was their mandate. It was to help growth, it was to implement these radical reforms, it was to help protect the environment, to really encourage the private entrepreneurs to build something new.

And so currently, even fast forward many years, today, they’re running around all over the country building mini Silicon Valleys, helping private entrepreneurs find talent, coordinate financing, build a whole industrial clutter around key companies, like EVs, or semiconductors. The Shanghainese government actually gave money and cheap land to Tesla, hoping that they would build factories and sell cars there. Chinese local governments giving subsidizing American companies in China, people were fine with that, they liked it. They bought Tesla cars, they’re all over the streets of China today.

And so a lot of people don’t understand, what are the incentives behind these mayors, you know, the decentralized economy, that they would want to do this for the private entrepreneurs and help the economy? Well, that comes back to some pretty unique institutional features in China. So to be promoted to the higher runs of the political hierarchy, and everybody wanted to be promoted, you needed to do a good job for the local economy.

And on top of that, by doing that, you got more jobs, filled your fiscal coffers, and the land you own, which the local governments own, are actually worth more. And most of all, you needed the private entrepreneurs to help you. We usually think about China as if the state kind of suppresses the private, or, no, actually it’s quite the opposite. They need the private entrepreneurs, because they’re the most productive, and they’re the most innovative.

So there were huge incentives. And on top of that, there was a lot of competition across the regions in China. It was like a beauty contest, you know, contesting for the best and promising entrepreneurs, and you have to be friendly to them.

You have to be nice to them. You have to be helpful. So in the data, we see that the cleanest, friendliest local governments saw the fastest growth and the rise of the largest companies. And those that were more corrupt, more extractive, they lost out.

So there’s an incentive to behave, to actually lend a helping hand, rather than a grabbing hand, which some might expect in a country with a poor rule of law, or too much political power concentrated in the hands of too few, would have been very difficult. But that was what the mayors did. And you didn’t need every mayor to be like that. You know, China’s a big country. There are tens of thousands of local governments, and many of them were corrupt, and money went into their pockets, but the majority were incentivized. And that was enough to lead to this seismic change at breakneck pace.

Now leaving aside what we think about China and their problems, their challenges, the challenges with the model, we’re seeing the economy slow down at a significant pace today. But it is still a fact that it is the country that has been growing the fastest for the longest period of time in all of human history. And that is a fact. So something must have gone right.

Now this comes to a broader point, and a more contested point, which is, what do we actually think about the role of the state? Now I’m a Western-trained economist. I can tell you in our models, in our intellectual thinking framework, there’s very little room for the state, except for maybe regulations, maybe stepping in when there are market failures. But I can also understand culturally and historically why we feel so uneasy about state interventions. And we’ve also seen the state overreaching and being too heavy-handed, of course, and these are problems.

But sitting around many of these meetings with politicians, leaders, experts, talking about development and developing countries, a perennial thing that comes up is not enough state capacity. Emerging markets need to double their infrastructure in the next few years. Not enough state coordination. Not enough investment. That’s a fact as well. And China didn’t have that problem. China actually had the opposite problem, too much infrastructure, which was also wasteful. It was inefficient. But it was still a better problem to have than to not have enough connectivity to unleash people’s productivity on balance.

Now for all of its expedience, the model has serious challenges. It’s being tested. It’s much less effective now. Growth is slowing down. Huge amounts of debt, 140 million vacant homes to be filled in who knows how many years. There’s too much capacity, too much supply, not enough demand. The financial system is really a living dinosaur. Too little credit for the small and medium-sized enterprises. And that’s the other side of this high-growth, high-cost model. It was costly. There were wastes. But to the Chinese, on net, the benefits still outweighed the cost because a billion people were lifted out of poverty.

And even today, it’s the first time that you have a developing country being able to do things like cutting-edge technology. And despite the problems, and I’m sure there’ll be many questions about Chinese economies today and I’ll share with you my news, I still think it’s too early to write China off. In this country, this very country, the U.S., we’ve had 12 recessions in the last century. It took more than 10 years to recover from the Great Recession of 2009. China is currently experiencing its first serious economic recession in the last 40 years. The potential is still there.

There’s a vast majority of people underemployed, undereducated in the rural areas. And even just between China where China is today and its potential, whether it’s in terms of urbanization, tertiary education, the service sector, productivity, there’s a big gap still yet to be filled. And again, even in this country, we’ve seen over time that poor states converged to the richer states. It’s in the data. And it’s also going to happen to China. So there’s still room for growth.

Misunderstandings About Chinese Aspirations

Now the second misunderstanding is about Chinese aspirations. Some in this country may think that China’s sole goal is to overtake the U.S. Geez, that’s a lot of responsibilities in the world. No thank you. And no, not feasible. The daily preoccupation of the vast majority of Chinese today is still about putting food on their table and keeping their kids in school, not really having a dangerous obsession about America, really. It doesn’t believe that worrying about America is actually going to solve its own problems.

And the government needs to keep its own house in order. There’s a lot of domestic challenges. And by the way, talking about aspirations, and we have an ethical theme in this series of talks, we’re going to have to accept that there will be similar aspirations from India, Indonesia, Vietnam, the entire African continent. They are rising. They have huge aspirations to peddle their way to prosperity. And we’ll have to need to deal with that too. They’re going to start selling cheap goods to China, use its technology. And by the way, some of that is already happening as factories are moving to Southeast Asia en masse. The Chinese don’t really have much time to talk about the Vietnamese stealing their jobs. We don’t really hear about it in the newspapers.

Instead, what they hear about is they should invest more in smart manufacturing, in up-tooling, up-skilling their workers, climbing up the value chain so they’re not forever stuck and condemned to producing cheap goods. Climbing up the global value chain is what they’re focused on.

And maybe it’s also another cultural thing to do. And again, culture and history is something, it’s a theme in my book. I like to talk about it a little bit because I do think we kind of sometimes underestimate how important they are, and that contributes to some of the misunderstandings. But it’s a cultural thing to do in China to turn a crisis into motivation.

Now speaking of President Biden’s export controls on semiconductors or kind of asking companies to break off ties with China to stop selling to them, well, initially it didn’t go down that well in China. But then they kind of just turned it into a positive attitude. It totally mobilized everybody. They whipped companies into shape. For the longest time, they were actually comfortably importing American chips, and now all of a sudden they have to start buying Chinese chips. And not because the Chinese government forced them to, but rather it’s because of these policies from America.

So in fact, they said, “Well, thank you, thank you for keeping us on our toes.” There were huge accelerations in these domestic industries, and there was almost a national euphoria when they made breakthroughs in the chip industry, small victories but still small triumphs. And the Chinese people were pretty happy. They turned this around and said, “Oh, this is pretty positive.” And by the way, President Biden, would you mind also sanctioning our national men’s soccer team, too? But thank you.

Jokes aside, to look at to the rise of African India, does China want to see that as a threat or opportunity? I actually really think they see it as an opportunity. And that rest of the world is coming.

Ninety percent of the people in the world still live in the developing countries, and they too have that kind of aspirations.

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New Generation, New Hope

And third, finally, the Chinese people, the misunderstandings and the new generation. That’s actually what I enjoy talking about the most. It’s what gives me the most hope that we are going to do much better with a new generation and that we’re not actually headed on a collision course.

The new generation, born after the one child policy in the 1980s, I was among the first generation. I have lots of thoughts about it. I’ve done lots of research about it. It’s a fascinating topic. They are radically different from my parents’ age, going through huge vicissitudes, economic, psychological hardships in China during these turbulent times.

The new generation, they love leisure, consuming, spending money on clothes, traveling, entertainment, all of that. They even like to borrow to spend. We used to think about China as a big saver, you know, saving so much and then flooding the world with capital and products. Well, this generation is different. They borrow, they spend. Eighty-five percent of the consumer credit is actually accounted for by people under 35. One click on Alibaba’s e-commerce website, you can borrow to buy lipstick. That’s what college students do. I don’t know who pays them back, maybe their parents. But anyway, they still love to borrow. The mentality has totally shifted.

And despite what we think about the one child policy, the dark sides, there were also some unintended consequences. For one, it seriously raised the status of Chinese women. Why? Because you used to educate your sons first before your daughters. And everybody now, with a daughter, pour all the resources into her, the modern Mulan of every family. And we see in the data that the gender gap completely closed in my generation for attainment in higher education.

And in the data, among the business leaders, those born in the 1990s, 45% of the business leaders are women, compared to only 6% of those born in the 1970s, 60, sorry, or 10% for those born in the 1970s. So it really accelerated the closing of the gender gap for China in this formerly very traditional Confucian society, way above what economic growth would have predicted in other countries.

And moreover, this is a really open-minded generation. I’ve looked at lots of international surveys about them. They care about things like diversity, animal rights, social inequity. They feel more confident. You know, the kind of factory workers that opted for three shifts a night back in those days, that’s not in their generation. They’re more relaxed, more chill, you know, it’s not a bad thing. They’re not going to be working as hard, as tenacious, but they have a broader perspective about life in general.

And also, they communicate better. Many of them have been educated in this country. A third of international students in this country are Chinese students. And 5 million visitors before the pandemic come to this country. They are fluent with the Western culture, the language, and they would be great ambassadors for China. And they connect much better with the Gen Zs around the world. And they are that bridge.

And they’re also very innovative. Now, this is again a fact, despite what’s happening between the two countries, I don’t know if you noticed, but four out of the five, the most downloaded apps today are actually Chinese. I don’t know if it will stay this way, but, you know, the new generation, they have much more, they have much less of a culture divide and gap.

And so, let me leave with this thought. Our great leader, Deng Xiaoping, who really pushed the country for reforms and opening up and really was the forefather of this miracle success, used to say about intractable problems, and we had many back in those days as well, “Let’s leave it to the smarter, younger generation to figure it out. They’re going to sort it out.”

But at the same time, we still need to hold the world together for them to actually give them that chance. I don’t think that on top of all the debt that we’re going to throw at them or the dirtier planet that we really want to add a more dangerous world on the cusp of collapse to the mix.

So it’s where places like this, forums like this, to offer this exchange, to get to know each better, each other better, to reduce these misgivings that I think is so, so important. And it’s really in this kind of country that such curiosity and openness for different views can actually take place.

So I really thank you for listening. Thank you for giving me this opportunity. And thank you for giving me and so many other students from China, from India, from Africa, to learn from this country. And we can also expect that when the next global financial crisis comes around the corner, and I’m certainly sure it will, the two central banks in US and China, they’re going to have to call each other up, right? That if there’s ever a hope of realizing the green transition, we are going to need the cheapest, cleanest energy and technology and a whole lot of investment and collaboration to make it happen.

And everybody here is here to stay. Nobody’s really going anywhere. We’re here. So let’s keep the people-to-people connection, keep the dialogues open, have some goodwill, and maybe even just start from small victories. And I believe over time, even more can be achieved. Thank you. Thank you so much.

Q&A

TANE DANGER: Thank you so much. This is the Westminster Town Hall Forum coming to you from Westminster Presbyterian Church in downtown Minneapolis, Minnesota. My name is Tane Danger. Our guest this afternoon is economist Dr. Kei Yu-Jin. She is the author of the new China playbook, Beyond Socialism and Capitalism. This is the part of the program, a lot of enthusiasm for the book, this is the part of the program where we open it up for you all to ask questions.

If you’re here in the room, you’ve got cards, you’ve got a card in your program to write your question down and hand it forward. And you can hold it up and ushers will come around and grab your cards and we will bring those to our table over here and we’ll bring as many of them as we can.

While folks are starting to do that, write your questions and we’ll collect them, I’m going to take a minute to say thank you to some of our sponsors who made this program and many of others happen. Thanks, as I said at the top, to Mortenson Companies for sponsoring our entire spring season. Thanks to our longtime media partners, Minnesota Public Radio, for recording and broadcasting all Westminster Town Hall forums.

Thanks as well to MinnPost, a non-profit, community-supported newsroom. You can see their coverage of critical issues and challenges and opportunities facing Minnesota at MinnPost.com. Thanks as well to Sahan Journal. Their mission is to provide reliable, high-quality journalism for immigrants and communities of color in Minnesota. Learn more about them at SahanJournal.com.

Now, as I promised at the top, Dr. Jin will be signing copies of the New China Playbook immediately after the program. Those are for sale from Next Chapter Books in the lobby. So please join us back out there. We will also have our traditional Breads and Spreads over in Westminster Hall, which you’re invited to. And if you want to continue the conversation, there is a moderated program with Global Minnesota in the Meisel Room, and you can join other attendees in having a small group where you talk more about what we’ve heard today and reflect and converse about that.

So with that, I see people waving cards. We’re already starting to collect some cards up here. So I am going to welcome back to the podium Dr. Jin and start bringing the questions from the audience.

China’s Economic Model

TANE DANGER: All right. So you started to allude to this a little bit in your remarks, but the book came out last year. A lot has happened in the last year in the world and in the Chinese economy in particular. We have a real estate sort of crisis, I think it’s fair to say, in China that’s been happening. There’s been a lot of questions about the slowdown in growth, and there have been some numbers that came out this week that suggest that some of that maybe is coming back.

But I guess maybe just a way to frame this is, if you were to write one more chapter of the book today reflecting on sort of what’s been happening over the last year or so since the book came out, what would you say about the model and how it is holding up now and maybe how it has to change going forward?

KEYU JIN: Thank you, Tane. And that’s a really excellent question, really important question. The model is being tested. In my book, I really argue that state coordination, state mobilization was really important for a certain stage of development. China has reached the stage of development where there needs to be a lot more markets and a lot less states. And so that has to change, but there’s some signs that things are changing over time.

But we also have to wonder, as I alluded to this as well, the ups and downs are part of the features of economic cycles. And one big difference is that this country had something like a $5 trillion stimulus package over the pandemic. Chinese households had nothing. And there is a serious loss of confidence and also loss of opportunities, so it’s going to take time for the economy to recover.

And by the way, China’s already massive. It’s already big. So to keep on growing that fast is going to be very difficult. India, everybody talks about India, and India’s definitely an exciting place. But even if India grows, let’s say, four to five percentage points faster than China until 2030, China’s still going to contribute $130 trillion more of GDP to the world than India. So it has to have a slowdown anyways.

But look, I think a broader question is, can we have more expertise in the system? Can the people’s preferences be reflected more in the leadership’s decisions? That all requires a huge amount of reforms. I’m worried, what I’m worried about most is when countries get to a certain income level and they drop the pro-growth agenda. And that would be really, really sad for China and for the rest of the world too.

China and the U.S. Dollar

TANE DANGER: There’s a question here about China potentially trying to, a strategy to take the place or at least compete with the U.S. as the world’s monetary exchange. And this could probably get very technical, but I’m wondering if you can help kind of orient us around what that space is in that conversation.

KEYU JIN: China has, among its other ambitions or aspirations, wants to internationalize the RMB. Dollar’s very powerful. Dollar’s very, very dominant. And so I think it has the plans, but realistically it is still very, very far from coming close to that goal of being even really an international currency.

Why? Very, very simply and very briefly, you need a financial system like the U.S. Breadth, liquidity, size, just look at the U.S. Treasuries. It’s not just trade denominated in dollars, but the lending is also denominated in dollars. And it’s very, very hard to replace that. That said, again, we cannot forget the other part of the world, the massive emerging developing world. They have a desire for a parallel movement of maybe a common currency, maybe an alternative to the dollar, albeit being very difficult. That is a desire in the financial system, but it’s also very difficult to achieve.

Hong Kong’s Future

TANE DANGER: There’s a couple of different questions about Hong Kong and about Hong Kong’s ability to self-determine, but also at least one about Hong Kong as a global financial center and whether that changes as it’s in a different world now where it’s become part of mainland China in this way. So I’m wondering if you can talk about both of those, both the relationship that we’ve seen over the last years with China and Hong Kong, and then also the financial center implications of that.

KEYU JIN: The fate of Hong Kong and mainland China are inextricably linked. If Hong Kong does well, it makes China look good. And if China’s economy does well, it would be good for Hong Kong’s economy because Hong Kong is the financial center, the conduit through which a lot of the capital investment flows.

And so I recently went to Hong Kong last week, two weeks ago, and they were still pretty optimistic because even though a lot of people left, new people are coming back and they’re reinventing themselves. I’m not an expert on Hong Kong, but I do just want to mention one thing. And in the spirit of just giving you another side of the story, because we’re all familiar with one side of the story, the Hong Kong people told me that in 2003, SARS arrived in Hong Kong, and the Hong Kong economy was completely going under.

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At that time, Hong Kong asked mainland China, can you lift the restrictions so that you can help us with our economy? They actually took the initiative so that there could be more economic integration between the two countries. Many of you have been to Hong Kong. Most people from most countries will never need a visa to go to Hong Kong. Guess who needs a visa? Chinese. Mainland Chinese need to go get a visa. And just in the spirit of a broader audience, the cultural aspects. They put up two beautiful museums, and geez, the artists, politically opposite the Chinese government, are all hanging there. I was very, very surprised.

So I think the complexity of the issue is not something I have the expertise or the time to talk about, but anyways, they are kind of really linked together, and I still believe the Hong Kong people have some hope that they’ll be able to reinvigorate their economy and their livelihoods.

Belt and Road Initiative

TANE DANGER: There’s a question here that ties together, too. So you talked about the younger generation, and this person is wondering what this younger generation thinks of the Belt and Road initiatives, and that will probably require a little bit of explanation as to the Belt and Road initiatives.

KEYU JIN: Thank you. China also had a vision, or you can say the leadership had a vision in China of building infrastructure around the world. And as we mentioned, emerging markets need infrastructure. There’s a $1 trillion infrastructure gap every year in the world. And I just came from the World Bank. They were talking about, we need infrastructure investment.

So China came up with this Belt and Road initiative. China wanted to put in money. They wanted to send construction workers. They wanted to do these development projects. That was a good idea in design. It was probably not well implemented, huge amount of problems, emerging market debt.

But there’s also a lot of misunderstanding, and that is also changing. By the way, just one statistic, 90% of the developing countries’ debt is held by Western financial institutions, and that’s just the data. It’s not really just the Chinese infrastructure that has kind of cast them into debt. So I have issues. I have issues with the plan and implementation, but it was an idea. I don’t know what the younger generation thinks about it. The younger generation, obviously, uber-connected. They think about innovation. They don’t think about hard power as much. That’s the older generation, the infrastructure, the money, and all this hard politics. They think about softer links and softer power, and that’s also why I’m more hopeful for them.

TANE DANGER: I mean, I think it’s fair to say that there is a growing skepticism in certain parts, in certain sectors of this country, in the United States, of going out into the globe and trying to set terms for other countries, right? And we have a long history of doing that, but you hear a lot more of people saying, is that really our role? And I guess maybe that’s part of the question. Do you hear those kinds of debates right now in China about what is our role, not just in how we take care of ourselves, but what values do we potentially impose or ask of other countries that we work with?

KEYU JIN: That is a really, really great question. Thank you, Tane, for that. It reminds me to say that people in China talk about really different issues, and they worry about different issues, partly because they’re still a developing country, they have a different set of challenges. They want to stay engaged. I think it would be a mistake to think about China as wanting to kind of recede from the globe. They want to be, you know, it’s all about openness and sending their kids to school internationally and, if they can, merging the businesses.

And by the way, Starbucks is everywhere, you know, as I said, yes, McDonald’s, that was my gift when I did well in school, a Happy Meal, that was luxury, and, you know, Estee Lauder. I think American business have, or potentially can do really well in China, and they like that. They like to be internationally integrated.

Now, just to be serious for a little bit and to be completely honest, I do think that Chinese government feels somewhat of an existential threat of not being able to control their core components like chips or core competencies. And in that sense, they’re trying to strive for greater independence, as, by the way, Japan is spending $500 million on indigenous innovation. We haven’t talked about the Chips Act, Science Act, Inflation Reduction Act. Europe is doing the same. The UK is feeling it’s, you know, falling behind and spending a lot more on compute.

So we’re getting that kind of, you know, a return of, you know, more needs to be done. And I’m not sure it’s all that bad, because if it does mean lots more cleaner energy and a faster transition, it has to be managed. It’s a complex relationship that has to be managed, but it’s not inconsistent with globalization. Maybe protection on some areas, but more open on other areas. These are not irreconcilable paradoxes.

TANE DANGER: There’s a question here. Can you say more about China and intellectual property and particularly the use of potentially of U.S. intellectual property?

KEYU JIN: Yeah, intellectual property protection was very weak for a long period of time. And the government has really tried to at least start the process of cutting down, you know, theft and putting in a very comprehensive system. Why? Because it’s not just with American companies or German companies. Chinese companies are stealing from each other. And in order to get innovation, you need to have intellectual property protection. And now there are many, many things that are going into the courts.

I’ve also met with lots of, you know, as I mentioned, mayors, and they were talking about German multinationals in their city, and when there was an IP leak, how much they, you know, really tried to change things and manage things. So I think it is also in the process of becoming more serious. By the way, maybe this is part of Confucian culture, but apparently to Chinese, stealing books is not a crime. So they started teaching people in middle school and elementary school the importance of respecting other people’s intellectual property. So I think they’re serious, but it’s going to take some time to make it really happen. But it’s also actually good for China, too.

TANE DANGER: We have several questions here about Taiwan, and I understand you’re an economist. This is an ethics-based forum, so I guess, I don’t know, maybe one way to frame this is trying to take a summary of a bunch of these. Is there an ethical way to think about frame China and Taiwan and the rest of the world?

KEYU JIN: That, I think, is a critical question that concerns China, that concerns people in this part of the world as well. For all of the things that we read about in headline news about this assertiveness towards Taiwan, I think there’s not been enough reporting about, let’s say, the premier, Chinese premier in Davos, in the world, you know, facing the international audience, announcing that China will not tolerate conflict and chaos in the region. And I think it’s as much of a signal as the Chinese government potentially can give.

I really wouldn’t underestimate how peace, you know, how much peace means to this generation of Chinese. Again, the one-child policy, you know, everybody has only one child. Think about what that would mean if there was really a conflict.

On a more practical level, first of all, I believe that dialogue, exchange, you know, President Xi recently said there’s nothing we can’t talk over, you know, between the mainland and Taiwan, talk things over on a practical level. I think that would, you know, conflict is really the very, very bottom of a long list of other options to deal with this. And I can appreciate and understand some of the uncertainties. And certainly for me as well, for everybody, it is on our mind.

But I think that, you know, again, just taking a data point, this is Taiwanese university law citations, many different surveys, among the Taiwanese, 90% of the people prefer status quo, 5% prefer independence, and 5% prefer siding with China. And so I think that, you know, what I’m a little bit also worried about is a lot of these tensions, misunderstandings, miscalculations could also, you know, push things in a little bit in the wrong direction. But let’s hope not.

TANE DANGER: Well, isn’t even though then you have to define what the status quo is, which seems like kind of part of the debate that we’re having, like China has one notion of what the status quo is that in certain ways, the US and other parts of the world disagree with whether Taiwan is part of mainland China or not.

KEYU JIN: I think the status quo is just kind of what’s going on now, implicit understanding that let’s just keep us separate and but not really too separate, and not much changing. I think that’s, yeah.

TANE DANGER: So there’s a related question here about the geopolitics. And I promise we’ll get back to some economics questions. But there’s a question here about how we account for China’s support of Russia and North Korea, and what China’s goals would be in those relationships?

KEYU JIN: Again, a, you know, very difficult question to engage with an answer. Again, let me just give you a different perspective. It’s not necessarily something I personally agree or not agree, but just give you a kind of an angle from China.

First of all, China shares a border with Russia. Any country that shares a border with Russia, you know, needs to manage the relationship. China also doesn’t see that a substantially weakened China, sorry, a substantially weakened Russia is good for China from a real politic point of view, you know, because of the rising tensions between US and China. Triangular relationship, Russia, China, America, you know, for years for history, throughout history has always been short term based. I don’t believe there’s a long term commitment or real friendship.

But it is very much about, you know, a multipolar world, a different coalitions. And whether right or wrong, some Chinese believe that a substantially weakened China would mean that all the attention and focus would be on China. And at the same time, it is very clear, and it’s part of this five principles, that foreign invasion is not something they support. And so I think on the other hand, you know, the Ukrainian issue is something that they also openly acknowledge as being very difficult, but so I think it’s that that thing that they have to grapple with that I know, obviously, also confuses other parts of the world.

TANE DANGER: Okay, a promise in economics question, I give it this is a good question, I think. So given your description of China as a market driven economy, in what ways is it still communist?

KEYU JIN: Thank you for that question. I don’t really know if there’s any communist part of aspect of it. But you know, when I say beyond socialism and capitalism conventionally defined, I’m talking about a pretty unique balance between industry and state, state coordination and market mechanisms, individualism and communalism. And so China has decided that it’s going to be on one part of that spectrum.

Now America might be totally, you know, on the one end of free markets, trying to be might be some somewhere in between, but there’s not just one model. And so I don’t think it’s necessary communism, but you know, how much state coordination, state role, state intervention is allowed. As I mentioned to you before, personally, I think that China has come to an age where it needs a lot more markets and a lot less state.

TANE DANGER: There’s a couple questions here about Xi, President Xi Jinping, about his extended presidential terms about some of his work in the world. And I would love for you to comment on those. And I might also ask with that, should we think about Xi Jinping’s economic, like understanding of the world, what he’s trying to do as something new and different? Is he trying to do something different as the leader of China than previous leaders have done? Are we in a different chapter under Xi Jinping?

KEYU JIN: Certainly things feel like they have changed. And if you ask, you know, the younger generation, do we want a freer and more open society? I’m sure the answer would be yes, I’m sure that people would want that. But you know, they look at Western democracies and what’s been happening around the world, democracies that’s been introduced to some of the native soil. You know, and honestly, I don’t think they’re that convinced that that is actually the answer to some of their own problems as well. In other words, they’re not also seeing that much inspiration in some of these things.

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But certainly the society has become more controlled. And yes, the leadership has a somewhat different agenda. Now, again, not all of this is new. We have the same arguments here in this country, in Europe about big tech, about monopolies, about, you know, consumer protection of data.

I think that the leaderships in China, they are skeptical of this deeply entrenched link between politics and capital. They don’t think that politics should be singed to the tunes of capital. They think capital should be singed to the tunes of politics. And so invariably, there is a somewhat different agenda.

And you know, while some of it is understandable, you know, we talked about the one-child policy generation, the parents are so anxious about the education system, the competition, and all these tutorial companies. And so the leadership did something, and it wasn’t great. It didn’t do good for the stock market and investment. But it’s not that difficult to understand that there are things to be concerned.

But my own view, you know, China can’t give up the pro-growth agenda. It’s way too early. There are things to be considered, to think about. But you need experts. You need to rely on experts to give you the sound counsel and advice on how to do things, how to bring about more growth and more inclusive growth. It’s not just by going after companies or regulations that are erratic that’s going to deliver that. But I think the broader agenda of more equity is not uniquely a Chinese thing.

TANE DANGER: Switching to leaders in this country, just this week, President Biden has recommended that if he were reelected, he would increase steel tariffs on steel coming from China. Former President Trump has offered to raise tariffs on almost everything. This is almost like an economics 101. Can you just sort of talk about tariff policy? And like, if those came to pass, what would happen in this country? What would happen in China? What would that actually mean?

KEYU JIN: There’s been a lot of studies in America, serious studies that show that the last round of tariffs were paid by Americans. And that was a fact. And that increased the prices, that’s going to add to inflationary pressure. But still, leaving those studies aside, and there’s a really broad consensus among the economists that’s been the case, you know, we’re going to see this because of a political issue.

You know, I think about Chinese roads, German cars, Japanese cars, American cars, the predominantly foreign cars running on the streets of China. And China can now do EVs, it can’t do its own combustion engine vehicles, but it can do pretty good EVs, pretty cheap, pretty high quality. But they’re going to meet it with a lot of resistance if they try to go into Europe. And certainly, I highly doubt they will be able to come here.

So then I think about, okay, what happens if Chinese start to say, well, if you’re going to slap on tariffs on EVs, shouldn’t we slap on even more tariffs on German cars and American cars? And I think this is not, we’re not heading in the right direction. It’s a lot of protectionism under the guise of national security. But it’s just, you know, not the really the good direction that we should all head. So it’s going to raise some retaliatory efforts. But the Chinese thinking is, look, you know, we’re expecting this anyways, it doesn’t matter if it’s Trump, it doesn’t matter if it’s Biden. It’s kind of all just going to be like that.

So they’re just going to have to keep going it, maybe they’ll work with more global partners. And by the way, in the data, what do we see about trade? Yes, there’s less direct trade between China and the US. But they’re all going through Mexico and Vietnam. It’s just taking longer. And it’s more expensive. And Chinese money, you know, guess who’s funding the factories in Vietnam, Chinese capital, Chinese investment in Mexico has risen eight times. It’s just taking a longer route.

Why? Because ultimately, the ultimate supply and demand are still coming from the two largest countries, largest economies in the world. And even if they try to, you know, kind of break up in direct terms, they’re still deeply embedded indirectly through these links through other countries.

TANE DANGER: One more audience question here, at least it says, could you discuss the potential effects of the Chinese demographic transition? And how that might affect the Chinese economy and political development over the next generation?

KEYU JIN: Thank you. And that’s a really excellent question, because people are really worried about China’s aging. And it’s because the one child policy, people don’t really want to have kids anymore. And that is seen to be a serious challenge for the Chinese government.

My own view is there’s something actually even more urgent than that. And that is the big, deep skill and education mismatch. And by the way, this is not a uniquely Chinese problem as well. There have been 100 million additional college graduates in the last 10 to 15 years. There’s massive youth unemployment right now. But in manufacturing, there’s 25 million vacant jobs still needing to be filled. There’s like a 300,000 talent gap in semiconductors and so many more.

It’s not just being educated that’s important, right? We’re pouring so much into education, but it’s about the right kind of education, giving them the right kind of skills, the tools to adapt to this new age where AI and supercomputing and all that new crop of technology, you need technical workers, you need vocational workers. And so that is a much more urgent problem than the potential reduction in labor force in so many years. And by the way, China is one of the biggest exports of industrial robots. If they wanted to substitute robots for the labor force, that is something they can do. So I think before the aging problem, they need to take care of their young people.

TANE DANGER: Actually, as long as we’re talking about young people, there’s another question here about the educational system. And this is sort of just, can you talk a little bit about how it works? How much of it is state funded? How much of it is individual families? How much of it — is higher education available to all?

KEYU JIN: Excellent. So education used to be free, or at least come at a very, very low cost. But that all changed after the one child policy. Why? Because you have only one child, dragon or phoenix. You really wanted to invest in that one child that you have. And so they started paying huge exorbitant sums for tutorials, outside tutorials. And I can’t say, thanks to the capitalist system, a lot of these companies actually exploited that angst from parents. And so it was really exorbitant. On average, in the data, people spent a quarter of their income on educating one child.

So that was really causing all that anxiety in the country, and hence our leaders came in to step in. And again, maybe potentially wreaking havoc in the economy, but it was for social reasons that it happened.

The education system, I believe, is a challenge. It’s a challenge for China’s goal of becoming a real innovator, a real kind of doing ground break in innovation, because we are judged based on standardized testing. But I’ve been thinking, well, with a country of that many people, you can’t have an American system, applications. Think about how much corruption there will be. This is actually the standard testing is really the only way that the very bottom run of society, those in the poor areas, actually had a chance for a better life. And that’s all, and it’s not perfect. So I think it is a big problem, and it’s very hard to change.

TANE DANGER: Our last speaker who is here, Kara Swisher, is a tech journalist, and she talked a little bit about TikTok ban that’s in front of Congress, and about some of these social media pieces. I am just curious, if you were called to testify and talk about whether the U.S. should be concerned about something like TikTok or social media ownership by a Chinese company, or whether that’s overblown, just what would you say?

KEYU JIN: Wow, geez, tough questions, by the way. I got a really warm welcome yesterday, so I need to answer some of these questions, I guess. Data is becoming a national security concern all around the world, and so I understand that. But at the same time, from what I know and I don’t know, that much TikTok has done everything it can in terms of having Oracle manage some of its data and putting the data and keeping in the U.S. I don’t know if there’s more that can be done.

But look, this is America, right? It’s not China. Why does America want to look more and more like China? And so, you know, the kind of principles we uphold in this economy, the free markets, I understand their national security issues, but it’s also really difficult to compare what would happen between the two countries.

You know, Tesla also, some people are saying EVs are of national security concerns because of the data, right? I don’t think we should ban Tesla. That would be a huge disappointment for Chinese people. I don’t think we’re going to do that. So I do think, though, that more and more countries are going to use this national security as an excuse to do lots of protectionist things. We just got to keep it really pretty narrow. Otherwise it’s going to spread out throughout all kinds of goods. And then this can kind of go out of hand.

TANE DANGER: So we’ve talked about a lot of things, geopolitics, a lot of big economics things, things that are in front of Congress and different governments around the world. And I can imagine people being like, this is all very interesting, but like, what do I do with this? And so I am curious, maybe just as a way to end, if you would have anything that you would want people to take home or an invitation for what sort of folks who are just watching today, listening or on the radio later, that you would want them to sort of take from what you’re talking about in the book or talked about here today that you think would move us in a positive direction.

KEYU JIN: Thank you. Well, I think, you know, let’s keep our communications channel open, people to people connection, business to business, but also at the leadership level, the military level. How important is that? Right. Leaders not talking twice a year, I mean, maybe once a month would help. And I don’t know, keeping you know, there are lots of Chinese students who really still want to come here and lots of universities that want to work together, lots of scientists, data scientists, AI scientists that still want to see the collaboration. So I think that to the extent that we can to keep those exchanges open, that would be great.

And recently, Anthony Blinken mentioned about I remember, you know, sitting in this meeting and pretty surprised to say that he said something positive about China and said talked about the fentanyl, fentanyl crisis in this country and how China really did — the Chinese government really took action and seriously implemented all these, you know, restrictions or cutting down in China. And that is an instance of collaboration. And so that might be a small victory. That might be a small victory, but I think it would help build trust over time, little by little.

TANE DANGER: On that note, can you all please help me do a big, warm thank you, Dr. KEYU JIN for speaking here at the Westminster Town Hall Forum. Again, the book is “The New China Playbook Beyond Socialism and Capitalism.” Thank you so much, Dr. KEYU JIN. She will be outside signing books after this. Thank you all so much for being here at the Westminster Town Hall Forum. Please join us for our reception. Join us for our post-forum discussion. Get a copy of the book. It’s really good. And we will see you again at the Westminster Town Hall Forum. Thank you so much. I hope I wasn’t too hard on you.