Comments on the new Foreign Relations Law- why its called a one party-state

There are several good American lawyer blogs on Chinese law. Most prominent in my mind is Harris Bricken, which contains information on current and past cases dealing with businesses and law in China. The China collection features posts by several academic attorneys with China experience, including Donald Clarke, Ling Li, and Carl Minzner.

Don Clarke has some comments on the new Foreign Relations Law. I’m not a lawyer – I don’t even play one on tv – but three comments on Don Clarke’s comments.

(1) Most important – and this is something I’ve thought about for years, but never seen made explicit – is the intentional vagueness of law. Clarke –

Overall, the FRL doesn’t really do very much in terms of actual law. In a country like the United States, with a constitutionally divided government, you need a concept of foreign relations law and a set of associated doctrines in order to sort out which branch of government has the authority to do what. In a unitary Leninist state such as China, that kind of law is unnecessary and indeed makes no sense. There is a single party-state, and it has the inherent authority to do whatever it wants.

The FRL basically says that the state shall do this and that, and is empowered to do this and that, but pretty much all of that would have been the case without a FRL.

Laws of the United States are pretty general also, and require clarification and interpretation by administrative agencies and the court system. What is different in China is the ability of different ministries or agencies, both government and CCP, to administer a single law or regulation. You never know who might be watching and for what purpose. Vague law allows the leader to do as he wishes.

(2) Also of interest is CCP writing itself into the law, when usually in the past it has been the ghost in the machine rather than an operating agency. Clarke –

Article 5 writes into law the leading position of the Communist Party in China’s foreign policy. The reality of this is of course nothing new or unusual, but explicitly writing it into law, in realms both minor and major, is part of a pattern we have increasingly seen in the Xi era. For example, the 2022 revisions to the 1986 Regulations on the Administration of Geographic Names added a requirement that some names must be approved by the Party Center. Article 44 of the State Security Law, enacted in 2015, grants an unnamed  “central state security leading organ” (中央国家安全领导机构)—by which is meant the Party’s State Security Commission, established in 2014—the power to establish and coordinate a national security system, and Article 63 gives it the power to deploy state resources in emergencies. And of course the 2018 revision to the Constitution wrote the Party’s role into the main text (Article 1) whereas previously it had been only in the preamble.

I suppose if CCP is defacto “leading the people” it might as well take a bit of credit ….

(3) One more element of interest (to some of us, anyway) – The new Foreign Relations Law writes that any treaty or foreign agreement that impinges on Chinese security or social welfare is inherently unconstitutional. Interpretation of “security” or “social welfare” is what lawyers are for in the US, and any number of administrative agencies in China are able to do. They don’t need to agree on definitions. Clarke, again –

… (A)rticle 31 states that the implementation and application of treaties and agreements may not harm state sovereignty, security, or social welfare. Let’s take these one by one.

First of all, the whole point of many treaties is precisely to limit the sovereignty of the parties. They used to be able to do as they liked in some realm, and now they have promised not to do whatever they like, but instead to comply with some promise. Thus, to say that treaty promises don’t have to be implemented where they infringe on sovereignty is to make those promises meaningless.

One might say, “Oh, they don’t mean that.” But China’s recent practice has made it clear that they do mean that.

Second, what does “security” or “social welfare” mean? These go beyond the straightforward idea that a government simply lacks the power to agree to violate its own constitution or law. We are now in the realm of judgment calls about vague terms. China is reserving to itself the power to renege on its promises essentially whenever it finds it inconvenient to keep them. China would not of course be the first or only state to do this, but as far as I know it’s pretty unusual to write this justification openly into domestic law. It should be taken seriously by any state thinking of entering into treaty relations with China about anything. Don’t say you weren’t warned.

Of course this gives China an out on any treaty or agreement, whether with businesses or governments or international organizations, when someone in CCP decides that security or social welfare are now being harmed by agreements formerly agreed to. You see this working in the raids earlier this year on three international consulting businesses in Beijing and Shanghai. Of particular interest to businesses and writers is the extraterritorial element of this new law. China intends to apply its laws to actions by businesses or word or deed done outside Chinese jurisdiction (Article 32 of the new law). China may arrest foreigners for what they have said or done when outside China. This is in line with the kidnappings in prior years of Chinese in foreign countries, and returning them to China for adjudication, but now that law will apply to … well, everyone in the world. CCP, uber alles.

What we also see is further writing of CCP into its leading role in Chinese law. Everyone knows that CCP is in charge, but it is becoming more explicit under Xi. And further evidence for my contention that the best way to look at CCP is to see it as an occupier, occupying the Chinese people. Not a foreign occupier, but an elite that gathers special benefits and all power to itself without much reference to the wishes of the general population. CCP almost starts to look like the GOP occupying state legislatures on legislative districting and voting and law.

A translation of the Foreign Security Law from China Law Translate is available here.

You can check out anytime you like … but you can never leave

A short note on CCP fear of CCP members in Hubei Province –

From several sources comes information that Hubei Provincial CCP is demanding to hold passports from midlevel CCP members and above, even long after retirement. Current retirement age for men is 60; 55 for women. Lots of CCP members have family or kids in the US. If they cannot get approval to seek a visa, they can never see their families. That’s a long time to be barred from direct family contact.

An 80 year-old CCP member was recently denied his passport to see his son in Hong Kong, presumably for fear that the man would then leave China permanently once in Hong Kong.

It has been customary for more than a decade now for the human resources department to hold passports for midlevel CCP members, and the zuzhibu organization department to hold passports for higher level leaders. Any relevant department could object to giving a passport back to the individual, but generally that has not been a problem. Hubei right now is different.

Related is a story, also from Hubei, of a CCP member whose daughter just had a baby in the US. The grandmother has been in Florida for a few weeks to take care of her daughter and granddaughter, and would like to spend another six or eight weeks here. She had approval from her danwei, her work unit; but the provincial jiwei, the discipline inspection group, cancelled the permission at the last moment. Now, the new grandmother must return to China immediately – of course, at much higher plane fare for a short notice reservation, and with no guarantee of when she can go back to see her granddaughter.

I don’t have any information that these heavily restrictive policies are operating in Hangzhou or Shanghai. Hubei officials have generally been particularly rabid supporters of whatever the center wants. All officials will seek to go beyond what the center wants if they think it will benefit them personally. The current Hubei party leader, Wang Menghui, seems poised for a promotion. He has had lots of increasingly prominent positions, moving every few years to a higher status. He is 63 years old, which means he has four or five years to climb the ladder before forced retirement (if that still pertains, now that Xi has circumvented that policy).

Hotel California has a certain decadent appeal, even if suggesting hopelessness. No such decadent appeal to staying in Hubei Province.

On passing the academic intellectual torch

William Kirby is a renowned China scholar at Harvard. He has written a dozen books on Chinese history and our relations with China. He has a long list of accomplishments at the highest levels of international academia and professional societies.

When he writes about superior universities in Germany and the US and China, I can only marvel at the scope of his erudition. So I feel a bit out of my element commenting on his latest book Empires of Ideas: Creating the Modern University from Germany to America to China.

Kirby writes that on academic engagement with China the educational resurgence is much less a threat than an opportunity for American and other international universities…. American research universities have been strengthened enormously by recruiting Chinese doctoral students, themselves largely graduates of Chinese universities, who are admitted exclusively on the basis of merit. Our faculty ranks, too, are augmented by extraordinary Chinese scholars. We restrict these students and colleagues at our own peril. Today, any research university that is not open to talent from around the globe is on a glide path to decline. 

True enough. Kirby is familiar with the finest research universities and students in China and the world. Some Chinese students go on to excel in academia and business, scientific and professional worlds in the US and China – fewer right now in the US, and that is an issue for American xenophobia.

Kirby is talking about intellectual leadership. In his historical progression, the 19th century German university model of openness and serious intellectual pursuit passed to the US in the 20th. He says the leading research, learning and education model for the 21st century is now being passed on to Chinese universities. No nation has greater ambition than China, or ability to devote resources to higher education.

Kirby’s approach to international cooperation is what one would expect from a man with so many interconnections – diplomatic and deflecting on sensitive issues and no one can fault that. It is sophisticated and mature. In Empires of Ideas, one is reminded of the marketplace of ideas, the informal, collegial and multinational networks that were part and parcel of the Enlightenment. Free exchange of information and ideas advanced science and engineering and freedom. True then, and true now.

I want to push back a little, though, basically to report on what I’ve seen at schools not in the top ten of universities in China. Kirby sees engagement with Chinese universities as an opportunity, not a threat. I agree. More exposure to the world is a good thing. But we should not fool ourselves into thinking that (1) there are always good intentions behind the dinners and smiles; and (2) most Chinese students are international work-force caliber.

On (1), no one should assume that exchanges are all collegial. CCP has weaponized exchanges within the academy and between businesses. For evidence, one need look no further than the hundreds of cases brought by the FBI against researchers, Chinese and American, seeking to steal IP from university labs and from businesses. FBI director Christopher Wray’s “whole of state” threat from China is not hyperbole.

On (2), no one should fault Kirby for addressing the university environment with which he is familiar. But most schools, faculty, and students are not in that top 5% internationally. We know the myriad stories of cheating and plagiarism in schools in China, and students who come to the US with the same attitudes toward doing the work. I’ve seen myself how lack of respect for honest work tends to bring down the performance of an entire class, including that of domestic students. We know the Yale-Peking University program was cancelled in 2012, partly attributable to allegations of widespread plagiarism and cheating.

Dishonesty in academic work is not unknown among American students. But I know of many instances in which faculty at schools in China simply turn their backs on cheating in exams. And they get little administration support when they try to restrain the dishonest behavior. 

We know cheating on the college entrance exam – the gaokao – is controlled more now than a decade ago, when attempts to control cheating resulted in an angry mob of 2000 parents yelling at test administrators. “We want fairness. It’s not fair if you won’t let us cheat.

The national push in China to control cheating resulted in some odd experiments. At our school in Hangzhou the new president decided to promote an honor code in final exams, as is the case at nearby Zhejiang University (Zheda), one of those top schools in China. This is not to take anything away from Zheda. There is an honors option in the Global Engagement Program, designed to cultivate Chinese students for work in international organizations. The program is conducted in English. Professor Kirby would be happy to engage with these students, some of the best and brightest in China.

But at our provincial-level school an exam honor code was DOA among both students and faculty – no one thought it could work. The only faculty member who could give voice or pen to objection, though, was me. Everyone else had careers on the line. I didn’t have to care. But what the president wanted, the president got.

Before the honor code was to be implemented, I did my own experiment. In one economics course I had plenty of scores from homework, quizzes, and a midterm to provide final grades. I had noticed years before that a final exam with a significant weight – 30% or 50% of a final grade – almost never changed a grade from that going into the final exam.

In class we had some discussion of the honor code. I proposed an experiment. The final exam would only count 10% of the final grade. But I would hand out the exams and leave the room for two hours and we would see what result. No monitors in the room. If students cheated, others were supposed to report them to the instructor for consideration, as the university president proposed.

I also arranged with six of my very good students, three foreigners and three Chinese, to take the final exam a day earlier and then take it again during the whole class exam. In the whole class exam they were to very obviously cheat in any way they wished, but so that other students could see. Open textbooks, read from notes, use phones, copy from other students. Make it obvious. And oh, yes – the whole class exam was different from the one I gave my star students.

You can guess the result – my good students cheated as best they could, and no one reported them to me. When my six finished the exam, they hung around outside the exam room and took pictures of students getting up from desks to look at other exam papers and using phones with abandon.

I don’t know if you call the experiment a success or a failure. But no one told me I had to use the honor code in subsequent semesters.

There is little sense of honor built in to these students. Lots of American students are no different. But an honor code needs good intentions. What good intentions do exist can get waylaid by pressures from family, culture, and particularly CCP.

Kirby is impressed by the earnestness, even in the current days of trauma and contestation, with which Chinese academics pursue joint arrangements with American schools. On one hand, that is understandable. Chinese academics are desirous of contacts for academic and personal reasons (including the ability to publish in western journals and to get their own kids into American schools). Kirby alludes to the CCP corporate overlords that can work to encourage or discourage such arrangements. For a few years before 2012, university joint ventures of all kinds were the rage. CCP pushed for engagements and wanted measurable results. A couple of my Chinese government students from Chicago were responsible for those foreign outreach programs. The pressure to get some agreement was palpable – one-way semester exchange, two-way, with or without American faculty in China, some sort of joint program, and even in some cases a joint degree with an American school. My school had a joint civil engineering degree program with San Francisco State University. A couple of years in China and then to the US for the last two or three years. The American degree was worth something. The Chinese degree – not so much. Until recently there was no international accreditation for most Chinese engineering degrees.

We need the Chinese students, undergrad and PhD candidates, for our own development. But we should not lose sight of the ill-preparedness and ill will that still lurks.

Plenty of Chinese, students and families, come to the US for education and business and – dare I say it – the freedoms that accompany a green card. There are tens of thousands of Chinese immigrants to the US each year – 150,000 in 2018. I know several student immigrants personally- come for the advanced degree, stay for the high-paying job. Quite often, their parents tell them not to come back to live, but to stay in America. 

Not so many Americans go the other way.

Kirby is right to promote engagement for the good of American schools and students and faculty. Some Chinese universities may well join the upper ranks of international schools in the next ten years. But I hope he – and other administrators and scholars – can go into the engagements with a  bit of the skepticism and hard evidence-seeking that led to dismissal of Confucius Institutes at the University of Chicago, Penn State, William and Mary, SUNY, Oklahoma, Texas A & M and others and cancellation of the Yale-Peking U program and consideration of the continual warnings of Chinese deception and theft from attorneys experienced in Chinese business arrangements. Harris Bricken is a good example.

We can take a hint from Ronald Reagan’s treaty policy with the Soviet Union – trust but verify. The expensive dinners and gifts and warm smiles are enticing. Its easy to become enamoured under the influence the velvet-gloved fist. I keep thinking of Sergeant Phil Esterhaus’ warning to street cops before going out on patrol in Hill Street Blues –“Let’s be careful out there.” It can be hard to do that, especially after the wining and dining and graciousness of their potential partners. But Kumbaya this ain’t.

I don’t have hard recommendations for administrators of great American universities. But they should jealously guard the reason they became great in the first place – freedoms of expression, dissent, and honesty in relationships. Too often we have let the Chinese camel’s nose into the academic tent to the detriment of American academic quality standards, research and innovation. A little caveat emptor is always a good idea.

Red Imports in the Red States

Governor DeSantis is quite clearly fond of CCP policies and regulations. Many of his GOP fellow travelers are in thrall as well. Ridiculous? To prove this, let facts be submitted to a candid world.

He has signed legislation encouraging students to record and report teachers who espouse views unacceptable to DeSantis and the GOP. Just like CCP – see Monkey See, Monkey Do and more.

He acknowledges higher goals than simply “grow GDP,” now pushing Disney out of a billion dollar Florida investment. CCP apparently taught DeSantis how to do that, with its recent crackdowns on tech, tutoring, and real estate – China’s Economic Needs May Take a Back Seat to Security – The New York Times. The only fundamental truth is power.

DeSantis has worked hard to identify enemies of the people. He takes a hint from CCP and identifies whole industries or groups of people as class enemies – not just Disney. This from the DeSantis May, 2021 law that prohibits censoring of hate speech or fever-swamp lunacy online –

This session, we took action to ensure that ‘We the People’ — real Floridians across the Sunshine State — are guaranteed protection against the Silicon Valley elites. Many in our state have experienced censorship and other tyrannical behavior firsthand in Cuba and Venezuela. If Big Tech censors enforce rules inconsistently, to discriminate in favor of the dominant Silicon Valley ideology, they will now be held accountable.

CCP claims the right to speak for “We, the Chinese people” when it actively censors speech. Other than the twist in non-censoring v censoring, one would be hard pressed to distinguish DeSantis’ voice from that of CCP in fostering hatred of the Other. In both cases, GOP and CCP vow they are acting to protect people from the evil outsiders. It is what authoritarian demagogues do.

He seeks to defund or cheapen public education. This is a long-standing GOP goal. My school in Hangzhou – admittedly, a science and engineering school not on par with Tsinghua or Beida – has no majors in history, literature, philosophy, psychology, international relations, logic or communications. Based on DeSantis’ proposals, I think he would approve of such a limited program for Florida schools.

He promotes book banning – not quite as vociferously as does Texas, but nevertheless. From the LA Times Texas school districts had the highest number of bans in PEN America’s report, with 438 removals. Florida had 357 bans, followed by Missouri, with 315 bans. In Utah and South Carolina, there were more than 100 bans. … A law in Florida, which has more book bans than any state but Texas, requires that books be reviewed by certified media specialists, leading some districts to clear out or hide books in their libraries and classrooms.

Books, particularly those from outside, are heavily vetted before being allowed in Chinese classrooms. I’m not sure if the reviewers are called certified media specialists, but the function is the same.

DeSantis – along with the Republican legislatures in nine other states – has still refused Medicaid expansion, which would provide health care for millions of poor Americans. CCP claims to have improved health care in rural areas across China, but the realities are still that a poor person in Mississippi or Guizhou might just do better trying to get health care in India than in their respective state or province. Other states that haven’t expanded include Wyoming, Mississippi, Alabama, Georgia, Kansas, South Carolina, Tennessee, Texas and Wisconsin.

Red State legislatures may rant about Deep State overspending, but it remains that most or all them receive more money from Washington than they contribute. Red states are the most dependent on the federal government, which provides from 1/4 to 1/2 of state revenues. Eight of the 10 states most dependent on the federal government traditionally vote Republican. New Mexico (No. 2) is the only state in the top 10 to vote for the Democratic candidate in any of the last six presidential elections. Maine (No. 8), which splits its delegates, has voted for both Democrats and Republicans in the recent elections.

This is not so unlike China, in which six cities are “profitable” and net out sending tax money to Beijing. The other provinces and autonomous regions are net recipients of tax money from Beijing. See this and this.

The anti-gay measures in Florida are of a piece with those of CCP – Being gay in China has gotten harder under Xi Jinping. Until about a two decades ago, there were no gay people in China, per CCP. DeSantis is trying to replicate that now in Florida. “Don’t say gay” might as well have originated in China.

Texas lawmakers want to post the Ten Commandments in every classroom in the state. Now CCP won’t be doing that. But it does require all CCP members – all 100,000,000 of them – to read and be tested on Xi Jinping Thought, which is roughly equivalent.

Hypocrisy in politics is pretty universal. But GOP and CCP consistently establish new low bars. There are so many examples. But one each – the Texas state legislator-Christian pastor who raped his 19-year old intern; and CCP protestations about respecting individual sovereignty of other countries, but then goes about  seeking to influence or threaten politicians in several countries, including the US, Australia, and Canada.

Chinese village elections in the first decade of the century were hailed as precursors to democratic transition. Village elections then became … aahhh… difficult … for Xi Jinping. Those elections have now been sidelined or eliminated as inconsistent with the goals of CCP. Elections now have greater … supervision, let us say, from party central, with the intent of eroding local autonomy. So too, for the GOP.

You’d never get GOP operatives to admit to such bald copying of CCP. After all, you’d hear, they are Communists, and we are Republicans. But perhaps the distinctions are not quite so sharp.

In a parallel move to control election outcomes, the GOP is seeking to go beyond unconscionable gerrymandering of districts to simply cancelling the results of local elections. In 2021 Republican-controlled legislatures passed 24 laws across 14 states to increase their control over how elections are run, stripping secretaries of state of their power and making it easier to overturn results.

Of course you know about the “independent legislature” Supreme Court case in which GOP state legislatures seek the power to overturn national election results for President or Congress in favor of legislatively appointed GOP flunkies. And we experienced plenty of vigilante action to prevent voting or interfere with ballot counting in the 2020 election. If allowed by the Supreme Court, such a development would spell the end of democratic processes in the US and put the US roughly on the same plane of electoral politics as CCP. Plenty of pundits in the US have already outlined how democracies die. We apparently don’t need CCP help, but China is always happy to oblige.

In the largest sense, GOP seeks not a multiparty democracy with the give and take of democratic debate, but totalitarian occupation of the country by its own version of an elite. Just like CCP, as I wrote about in Chinese People Under Occupation.

Anyway, one of the GOP clowns is going to need some stirring music for the entry of the candidate to rallies around the country. I have an idea that might work very well with some changes to the lyrics – The East is Red. It is martial and stirring and in line with recent GOP policy imports. I know – its mostly the American south that is red, but you can’t have everything when you are doing cultural appropriation. The spirit of the song can easily be adapted to Make America Great Again. After all, the song celebrates the people’s great savior. Somebody ought to be able to superimpose the Orange One’s face in the video. Would work great!

For any candidate, the song will go well with renditions of USA! USA! USA! The Red States maintain a clear lead over Red China in the number of guns per person, and the use of those to kill people. China is no match for the US in that category. Many GOP representatives sent Christmas cards posing with guns. And Red States lead the way in gun murders. GOP wins!

Whoops! Just slipped right past me! …

From the Daily Beast, a wowser of a scoop – Berkeley’s $220M Mistake Exposed in Massive Deal With China
 
from the article – “U.C. Berkeley takes the matter of undue foreign government influence seriously,” he said.
 
That much is quite clear. Berkeley can clearly undercut the businessman in selling CCP the rope. Go Golden Bears!
 
And as with lots of scandals, the flaw may not be in the deal but in the avoidance of reporting. Again and again, whatever happened to avoiding the hint of impropriety?  Answer – when you lose civil society or public morality, all that is left is the finely parsed letter of the law.
 
 

Berkeley’s $220M Mistake Exposed in Massive Deal With China

 
OOPS!

U.C. Berkeley repeatedly neglected to disclose its deal with China to the U.S. government.

Yuichiro Kakutani

Updated May. 22, 2023 7:18AM ET Published May. 22, 2023 4:59AM ET 
 

U.C. Berkeley has failed to disclose to the U.S. government massive Chinese state funding for a highly sensitive $240 million joint tech venture in China that has been running for the last eight years.

The Californian university has not registered with the U.S. government that it received huge financial support from the city of Shenzhen for a tech project inside China, which also included partnerships with Chinese companies that have since been sanctioned by the U.S. or accused of complicity in human rights abuses.

The university has failed to declare a $220 million investment from the municipal government of Shenzhen to build a research campus in China. A Berkeley spokesperson told The Daily Beast that the university had yet to declare the investment—announced in 2018—because the campus is still under construction. However, a former Department of Education official who used to help manage the department’s foreign gifts and contracts disclosure program said that investment agreements must be disclosed within six months of signing, not when they are fully executed.

Berkeley admitted that it had also failed to disclose to the U.S. government a $19 million contract in 2016 with Tsinghua University, which is controlled by the Chinese government’s Ministry of Education.

The project’s Chinese backers promised lavish funding, state-of-the-art equipment, and smart Ph.D. students for Berkeley academics researching national security-sensitive technologies, according to contract documents exclusively obtained by The Daily Beast. After the project got underway, Berkeley researchers granted Chinese officials private tours of their cutting-edge U.S. semiconductor facilities and gave “priority commercialization rights” for intellectual properties (IP) they produced to Chinese government-backed funds.

A Berkeley spokesman said that Berkeley only pursued fundamental research through TBSI, meaning that all research projects were eventually publicly published and accessible to all; it did not conduct any proprietary research that exclusively benefited a Chinese entity.

Still, Berkeley’s ties to the Chinese government and sanctioned Chinese companies are sure to raise eyebrows in Washington, where U.S. policymakers are increasingly concerned about the outflow of U.S. technology to China, especially those with military applications.

Under the radar

The project is called the Tsinghua-Berkeley Shenzhen Institute (TBSI), a joint research initiative backed by Berkeley and Tsinghua University, a top science school often called “China’s MIT.” The institute’s website shows that dozens of Chinese companies, including Huawei and others sanctioned by the U.S. government, also supported the institute as industrial advisers.

Through TBSI, Berkeley built an unusually close partnership with the Chinese government. Berkeley’s then-vice-chancellor, Patrick Schlesinger, said in 2015 that the “active participation of the Shenzhen municipal government” is an “unusual feature” of TBSI that sets it apart from other U.S. universities, according to meeting minutes obtained by The Daily Beast.

And yet, Berkeley never disclosed a single cent of the financial support it received from Chinese sources to the federal government for TBSI, possibly not complying with a U.S. disclosure law that requires universities to report large donations from foreign sources.

“If the facts are as Berkeley’s documents seem to assert, this is exactly what universities must report,” Dan Currell, a former deputy under secretary at the Department of Education—who has also worked on policy related to foreign influence in U.S. universities—told The Daily Beast. He later added that “the school isn’t complying with a clearly applicable federal statute.”

Memorandum of Agreement between China and UC Berkeley.
Photo Illustration by Luis G. Rendon/The Daily Beast

To this day, TBSI remains one of the most fully realized examples of U.S.-China research collaboration. In the 2021 fiscal year, the institute hosted 586 students from across the world and pumped out more than 130 science and engineering articles. According to its website, at least 20 Berkeley academics participated in TBSI, working alongside dozens of Chinese and international colleagues. At its peak, the institute hosted 18 laboratories located within three research centers, each focused on a research area relevant to national security: data science and IT; environmental science and new energy production; and public health and precision medicine.

Since the early days of the institute, the Chinese government has occupied three out of 11 seats on the governing board, according to a 2015 Berkeley document. Shenzhen’s then-mayor, Xu Qin, attended the 2014 signing ceremony that launched the institute. Tsinghua University President Chen Jining, another attendee of the signing ceremony, explicitly positioned TBSI as a “university-government-industry partnership.” TBSI also has a Party committee, which in 2018 held a seminar to study a speech by Xi Jinping.

While both Berkeley and Tsinghua contributed faculties to TBSI, the Shenzhen government was responsible for the lion’s share of the program’s funding, promising to provide the “necessary financial support” for the institute, according to 2014 contracting documents obtained by The Daily Beast. In the documents, the government said it would cover a wide range of initial expenses, including “costs of equipment, settlement allowances for newly recruited [principal investigators], as well as the cost of all day-to-day operations (ie. salaries of staff, research subsidies, and student scholarships, etc.)”

As part of the promised financial support, the Shenzhen municipal government first promised in 2014 to pitch in $52 million to support the “initial phase of work” for TBSI, according to a 2015 Berkeley document. More than half of the funding was to finance the purchase of new equipment in China “in consultation with Berkeley faculty… effectively adding facilities and equipment to Berkeley’s research capacity.”

In 2018, the Shenzhen government drastically scaled up their monetary support for the project, agreeing to spend at least $220 million to build a massive research campus in Shenzhen with nearly 1.7 million square feet of classroom space and cutting-edge research facilities. Tsinghua University also chipped in $19 million to fund TBSI.

Berkeley has repeatedly failed to disclose any of the above donations to the Department of Education. According to Currell, U.S. law requires all annual foreign donations exceeding $250,000 to be reported to the department, which in turn publicizes the donations to the general public.

A Berkeley spokesman acknowledged that it failed to report to the U.S. government the $19 million contract with Tsinghua University, but said the rules at the time were less clear.

“Like many universities across the country, UC Berkeley did not have a reporting process in place… in 2016, thus the initial sponsored research agreement was not reported. In 2018, due to national security concerns with China and countries of interest, the Department of Education’s reporting process was recertified and all universities were required to start reporting,” he said.

The $19 million—which was spread over five years from 2016—was thus never reported.

He said Berkeley also failed to report a renewal of the TBSI agreement in January 2022, an omission that he blamed on “an issue in the query pulling the data.” The spokesman said Berkeley corrected the error on Feb. 14, 2023, five days after The Daily Beast first reached out for comment for this story.

On the $220-million investment from the Chinese municipal government, the spokesman initially said: “UC Berkeley does not have any ownership of property at Tsinghua, therefore, is not required to report investments made in, or for, the Tsinghua University campus.” He later admitted that “the provision of a facility and/or equipment could qualify as an in-kind contribution and thus require disclosure.”

Still, Berkeley has not declared the foreign investment because the campus is still under construction, according to the spokesman.

However, according to a 2019 Department of Education guidance, universities must report foreign contracts “at the time that the institution ‘enters into’” them. Currell, the former official, noted that the universities must in practice disclose the foreign investments within six months of the research partnership being signed, not when it is implemented.

“Under the rule, whenever they signed the contract is when they had a reporting obligation within six months,” Currell said.


Perks
The Chinese government funding directly benefited Berkeley faculty members, according to a 2015 Berkeley document obtained by The Daily Beast. The government funding benefited them as researchers, as they used the construction of the new campus as an opportunity to “procure equipment that is not presently available at Berkeley, thus extending [their] research capabilities.” It also benefited them as private individuals, as faculty members earned “consulting fees” for working as research advisors.

After the donations from the Chinese state, TBSI and Berkeley researchers gave access to their government patrons.

Throughout the late 2010s, Berkeley officials frequently gave exclusive tours of the Marvell nanofabrication laboratory, a cutting-edge facility used for semiconductor research, to Chinese delegations connected to TBSI. According to a press release, the Chinese visitors “hoped to learn information” from the lab to “build a better lab abroad”—they did not explicitly say their knowledge would be deployed back in China.

These Chinese delegations to the lab went beyond normal academic exchanges between researchers. Multiple senior Chinese officials, including the vice mayor of Shenzhen and the party secretary of Shenzhen, visited the lab, surveying one of the most advanced semiconductor fabrication facilities in the United States.

There is no evidence that Berkeley or its staff broke U.S. export-control laws by organizing private tours to help Chinese individuals build their own cutting-edge semiconductor labs. However, Robert Shaw, an export-control expert at the Middlebury Institute, said the trip would have had to be organized with the utmost care to ensure that China does not get access to controlled U.S. technology.

“That’s a tough thing, a facility tour like that,” Shaw said. “That’s something that has to be organized very carefully. They need to be extremely careful about what’s visible in there [to the visitors].”

The Chinese government also gained access to some IPs created through research at Berkeley. Shenzhen Waranty Asset Management, a state-owned enterprise controlled by the Chinese government, served as an industrial sponsor for the $19 million grant from Tsinghua University, according to Berkeley’s spokesman. In exchange for the financial support, a Waranty-owned angel investment fund received “priority commercialization rights” for intellectual properties produced by TBSI, according to its LinkedIn page.

The Berkeley spokesman explained that Waranty as the industrial sponsor got “first right to negotiate a license to IP arising under the sponsored research agreement,” an arrangement that he said was the same as those given to other industrial sponsors at American universities. The spokesman said that Waranty did not exercise their licensing rights and the three inventions that came out of the sponsored research were “dedicated to the public.”

The Berkeley spokesman emphasized to The Daily Beast that all TBSI-related research projects were “fundamental research that is openly and publicly published for the benefit of the entire scientific community,” rather than proprietary research that exclusively benefited Chinese entities. He also added that the university does not license IPs to foreign entities that are under sanctions or export control by the U.S. government.

“U.C. Berkeley takes the matter of undue foreign government influence seriously,” he said.

Tsinghua Uni prez shakes hand with a Berkeley dean.
Photo Illustration by Luis G. Rendon/The Daily Beast/Berkeley Press Release

 
Shaw said that while it is possible for TBSI to work with Chinese government-backed funds in a legally above-board way, the language about priority commercialization rights is a “red flag in an export-control compliance sense.”

“That sort of language sounds like the purpose of the research is IP generation versus the sharing of knowledge globally in an academic context,” he said.

In addition to its funding from the Chinese government, TBSI also courted support from dozens of Chinese companies. Executives from 21 Chinese companies sat on TBSI’s industrial advisory board, supporting the “creation of joint laboratories, collaborative research projects and visiting industry fellows” at TBSI and enjoying access to Berkeley researchers.

Companies later sanctioned or put under export control by the U.S. government—including telecom giants Huawei and ZTE and the drone company DJI—sat on the industrial advisory board; so too did Chinese firms accused of complicity in human rights abuses, such as internet company Tencent and automobile firm BYD.

Some of these companies that participated in TBSI benefited from Berkeley’s innovation. Take for example Shenzhen Waveguider, a Chinese biotech company that built a joint laboratory with TBSI. Waveguider Chairman and CEO Yu Dongfang reportedly said that by leveraging Berkeley’s “best-in-the-world” biosensor technology, Waveguider was able to achieve multiple innovations in the field of diabetes medicine through its partnership with TBSI.

Berkeley’s comments regarding its Chinese corporate sponsors have also been inconsistent. A Berkeley spokesman initially told The Daily Beast that no Berkeley faculty members ever participated in TBSI’s big data research laboratory. The statement contradicted Berkeley’s own websites, which listed three Berkeley academics as participants in the lab. (The spokesman later acknowledged that one of the researchers conducted some work with the big data research lab, but said that the other two left the project in its early stages.)

For the time being, Berkeley appears intent on continuing the TBSI, albeit on a narrower scale; in 2022, Berkeley administrators announced a “phase II” for the institute, committing to support the partnership for another five years.

However, some Berkeley officials may be having second thoughts about its relationship with China. In 2018, Berkeley submitted a complaint to the U.S. Trade of Representatives, saying that Beijing’s tech regulations unduly restrict the university’s ability to license IPs in China.

And even as far back as in 2015, a member of the U.C. Board of Regents expressed reservations about Berkeley’s participation in TBSI.

“Who would decide what research directions to take or what ethical rights they should follow?” Regent Hadi Makarechian said in 2015 at a board meeting about TBSI. “Because we hear all that stuff that in China, they do all this research that’s not ethical.”
 
 

Change Management 3/3

Links to Related Articles
Change Management 1/3
Change Management 2/3
Change Management 3/3

China has changed dramatically in the last forty years. Business writer and thought leader Bob Yovovich tells us that China urbanized in half the time it took the US and with ten times the number of relocations. Such rapid change must have induced complex interlocking social shifts and costs – customs broken, institutions abandoned, social ties destroyed. Now, wither China? Wither CCP?

Three questions in three posts. This is post #3.

Thesis #3  Will Mr. Democracy eventually overpower Mr. Science in Chinese culture? A democratic future must come with modernization

Below –

     Evidence for the coming of Mr. Democracy

      Antithesis #3   No evidence for democracy anytime soon

            What holds Chinese back?

            We few … we unhappy few …

            But maybe really … self-harm

            Trusting in leadership by the best

            Democracy and capitalism united

            Hear as the people hear

            What do we want

            The artistry of power

            Locally …

            Adaptation

Science is about a search for truth. It is logical and precise. But science – as reflected in logic and precision – can only take society so far. Democracies and freedoms are much more complex than science, but people need that complexity to live meaningful lives.

Democracies and freedoms come in many flavors. As much as CCP tries to keep China pure – free of western influence – that is really a losing proposition. Young Chinese returning from school abroad bring back ideas as well as technical skills. One cannot really separate ideas about science from ideas about freedom. The arc of history points toward freedom.

China is certainly capitalistic in some ways; so is the US. Both are socialist and corporatist in some ways as well. For decades American political scientists and politicians have put faith in the argument that once China has capitalism some form of democracy cannot be far behind. American China policy from the time of Clinton has been predicated on a path of opening up-GDP growth-capitalism-democracy.

Evidence for the coming of Mr. Democracy

Modernization theory has been a staple of foreign policy and international relations theory for more  than fifty years. There are variations, but generally the concept is that because capitalism and democracy are intimately related, and both of them, along with science, are fundamentally searches for truth, then a country that values science and economic development will naturally evolve to having democratic features. Ipso facto.

The US was a model for Chinese democracy for a long time. The first quarter of the 20th century is when Mr. Science and Mr. Democracy became models, directly from lived experience of Chinese in the US.

No modern country can be autarkic or completely isolationist. North Korea is perhaps the closest approximation. And among the many flavors of democracy are democratic models in the Confucian societies of Japan and South Korea and Taiwan. Clearly Confucian precepts and east Asian heritage are no barrier to democracy. But perhaps the most appealing to both Chinese citizens and CCP is the government in Singapore. Singapore is sort of democratic – there is a very limited sort of voting – but government is squeaky clean along with the streets and freedom to walk around freely is everywhere. Crime is punished. Singapore rejects liberal democratic values, limits free speech and public participation in government without significant voting rights. The US is not an attractive model for China. But  Singapore … perhaps.

Tu Weiming, a premier new Confucian scholar, says Confucian principles of benevolence and tolerance are best achieved in a democratic system. These ancient Chinese ideas are ideas about individual freedom. CCP will be overthrown, as has every dynasty for more than two thousand years. 

Antithesis #3   No evidence for democracy anytime soon

One doesn’t get to write or say what one thinks in the civilization-state that is CCP, but mostly no one thinks about it. Businesses work for the state. CCP is the new dynasty, and they are looking out for the welfare of all CCP. Might be good to remember one of those Christian fundamentalist bumper stickers one sees – slightly modified. CCP reminds everyone that they are leading the people. “Xi said it. I believe it. That settles it.”

I wrote a bit about this four years ago Must China have Democracy or Die?  The arguments against the modernization view are detailed and convincing. Suffice it to say that China does not have now, has never, and is unlikely any decade soon to have the prerequisites for democracy. Robert Dahl laid out seven or eight requirements in his 1972 Polyarchy.

Dahl’s requirements for a democracy –

  1. Have preferences weighted equally in conduct of government
  2. Freedom of expression
  3. Right to vote
  4. Eligibility for public office
  5. Right of political leaders to compete for support and votes
  6. Alternative sources of information
  7. Free and fair elections
  8. Institutions for making government policies depend on votes and other expressions of preference

We have learned that a functioning democracy has some form of civil society as a prerequisite. Civil society can propose alternatives to government policy, organize people in opposition to policy, sponsor think tanks and colloquia and free speech and free thinking. This cannot be tolerated by any communist regime. To allow for free speech and thinking is to promote disintegration of the Party.

Some other reasons for democracy not to evolve, from culture and demographics.  

What holds Chinese back?

We saw thousands of people in the streets in Beijing and Shanghai in fall of 2022 protesting the zero-covid restrictions. This frightened Xi, and the bans on movement were removed. People then went back to work, back to school, back to shopping. Even though we saw the signs on the bridge in Beijing …  

 Source: Helen Davidson in Taipei and Verna Yu. Guardian at https://www.theguardian.com/world/2022/oct/13/shanghai-covid-restrictions-fuel-fears-of-another-lockdown

“Go on strike at school and work, remove dictator and national traitor Xi Jinping! We want to eat, we want freedom, we want to vote!”

… there has been no follow-on. No residual of protests related to Xi, CCP, or the occupation of Chinese people by CCP.

Tanner Greer at The Scholar’s Stage lists reasons for Chinese elites, including college educated young Chinese, to keep their heads down and mouths closed – fear of the state; pragmatism from a sense that nothing they say can change the situation; as well as resentment against western voices for invalidating some of the positive aspects of the country. At the same time, the propaganda authorities have weaponized the public sphere to wring out dissent. A critical comment posted to Weibo or WeChat might prompt the platform to delete one’s account. If that doesn’t happen, then the internet mob will pounce. And of course, a negative comment from a Chinese overseas can result in retribution against one’s family in China.

Possibly even stronger than CCP are ancient Chinese ideas about governing. The Chinese state has a very different relationship with the population than does any western state. For more than two thousand years, the Chinese state has had much greater natural authority, legitimacy and respect. The Chinese state is the guardian of the people. James Fredericks reminds us that the dominant idea in China is that of the harmonious society, not the autonomy of the individual. Daniel Bell compares harmony and freedom, meritocracy and democracy and hierarchy and equality in the US and China in his 2017 Comparing Political Values in China and the West. Meritocracy and hierarchy are valued in China. Chinese want leaders to be the best. Voting quite clearly does not give us the best leaders. In the US we do honor hierarchies in permanent government administration (the “Deep State” of educated and experienced public servants) but we don’t think about that too much. Harmony in China is as much a cultural meme as “freedom” is in the US. You can call this part of Confucian values if you wish. In any case, modern Chinese do carry stronger concepts of deference to authority and confidence that the government will act in the best interests of all.  

CCP is authoritarian and can be unbelievably cruel. But to most Chinese, it is simply the government. Sometimes overly paranoid, sometimes intrusive and stupid. But mostly, people get their driver’s licenses renewed, they go to the mall and buy the same products they could buy in New York, they complain about the traffic jams and weather and they read the newspapers about the local official arrested for corruption. They go to the movies and buy books and choose to start businesses and go on vacations. This is not different from the experience of many Americans.

No question that political and moral freedoms are unavailable. CCP has its vision of the future. Mr. Xi’s “Chinese Dream” is not like the American Dream, which is a celebration of the individual and the family. The CCP Dream is a dream of a powerful CCP and a powerful Chinese state. Still, some Chinese chafe under the iron fist of CCP. They write and protest and seek change. In the west, we hear of their arrests and disappearances and think revolutionary change is in the air.

We few … we unhappy few …

So who are the CCP who need fear persecution, arrest, and disappearance? They are mostly (not entirely) people with an ability to influence others or challenge CCP – journalists, writers, attorneys, artists. The US Bureau of Labor Statistics (BLS) says there are just under 50,000 journalists, reporters and news analysts in the US and just over 7,200 criminal justice lawyers.

I have no idea how to scale the number of journalists and rights lawyers in China, except to assume that the number of journalists who could or would write stories that would offend CCP couldn’t be more than 50,000. There are attorneys who take civil rights cases in CCP for a while before they end up in jail themselves, but the number cannot be significantly different from zero.

Let’s take 50,000 as the number of potentially offensive writers and speakers and artists in CCP. That is a vanishingly small share of the population – 50,000/1,400,000,000 = 3.57 x 10-5. Double the number if you wish. Triple it. That, I submit, is small enough to ignore in China, even if we in the west give those detained and arrested and disappeared a lot of attention. This is the point at which lots of Chinese start to ask, “why do these people want to cause trouble?”

There have been experiments with elections in China. There was an election for provincial representatives in 1909 as part of the move toward constitutional monarchy. In 1912, the new Republic of China held a national election for representatives in the new National Assembly, but the outcome was made irrelevant when Yuan Shikai tried to make himself the new emperor.

Starting in 1988 and continuing under Hu Jintao there were experiments with village elections for Party chief and village president, but the candidates were still pre-selected by CCP.

There is support for a concept called democracy among many Chinese, although they have a tough time describing just what that means. It seems to have something to do with voting, but it is by no means clear how candidates should be proposed or what powers an elected official should have. Other than casting ballots, the concepts of rule of law, equal treatment under law, providing evidence in court, cross examination, freedoms of speech and assembly, alternative voices to government – these are all quite … foreign, even for some western educated Chinese.

There is voting within CCP for leaders and voting for membership in the National People’s Congress and the Chinese People’s Political Consultative Congress. There is no campaigning for elections. There is more uncertainty in an election for high school student body president in the US.

The political system in China is described by CCP as democratic centralism. The meaning of this is a bit of word salad. From the General Program of the  CCP Constitution, the Party must  resolve in upholding democratic centralism. Democratic centralism combines centralism built on the basis of democracy with democracy under centralized guidance. It is both the Party’s fundamental organizational principle and the application of the mass line in everyday Party activities.

Confusing? Following language doesn’t clarify –

The Party must fully encourage intraparty democracy, respect the principal position of its members, safeguard their democratic rights, and give play to the initiative and creativity of Party organizations at every level and all Party members. Correct centralism must be practiced; all Party members must keep firmly in mind the need to maintain political integrity, think in big-picture terms, uphold the leadership core, and keep in alignment, and firmly uphold the authority and centralized, unified leadership of the Central Committee with Comrade Xi Jinping at the core, so as to ensure the solidarity, unity, and concerted action of the whole Party and guarantee the prompt and effective implementation of the Party’s decisions.

So … you are permitted to vote, as long as you vote for whatever Xi wants.

The current fad in CCP is promotion of “whole-process people’s democracy” which is the attempt to paint democratic lipstick on the CCP pig. Xi Jinping has determined that whole process democracy is composed of pairings of four elements-

1) “process democracy” and “achievement democracy”                                               

2) “procedural democracy” and “substantive democracy”

3) “direct democracy” and “indirect democracy”

4) “people’s democracy” and the “will of the state.”

Xi says the combination of these results in “real and effective socialist democracy” as required in the Chinese Constitution.   

Charitably, the Constitution language comes down to, “we in CCP are going to experiment with this voting thing until we understand it, and when we do, in a hundred years or so, we will provide the people with a proper version.” In the Chinese Constitution the form of government is referred to as a “People’s Democratic Dictatorship.” The preamble to the Chinese Constitution puts CCP as the prime mover, making CCP the visible hand behind the state.

But maybe really – self-harm

As I write this in April of 2023, CCP has invaded another western consulting company in China, seeking information on auditors, management consultants, and law firms that could influence views on China. The headlines so far are about invasions of Bain, Micron Technology, and Mintz Group. Mintz is a due-diligence firm. These raids are not isolated, but part of CCP plans to control information. There can’t be a worse way to influence western businesses. To the extent such raids are really about controlling ability to think write and speak as one wishes, this is clearly harming the Chinese ability to gain cooperation on innovation and secure foreign investment in China. One can think of the raids as a war on thinking. The Wall Street Journal has more detail – China Ratchets Up Pressure on Foreign Companies.

So … probably fair to say democracy is not coming anytime soon, foreign investment is clearly at risk, and innovation will take on a made-in-China caste, unless stolen, of course.

CCP, J’accuse!

Trusting in leadership by the best

The argument made above is that technicians – engineers and finance people particularly – are bound by their  training to seek rigorous or well-crafted mechanisms for solving social problems, and that these solutions are always or usually going to be second-best politically. This is Isaiah Berlin’s argument in Political Judgment as well – that good political judgment is at least an art, not a science, it is not learned in school and there is no textbook. Political judgment most certainly cannot come out of the sort of language in the CCP Constitution. In Berlin’s article there is a bit of a magical quality to good political judgment –

And we are rightly apt to put more trust in the equally bold empiricists, Henry IV of France, Peter the Great, Frederick of Prussia, Napoleon, Cavour, Lincoln, Lloyd George, Masaryk, Franklin Roosevelt … because we see that they understand their material. Is this not what is meant by political genius? Or genius in other provinces of human activity? This is not a contrast between conservatism and radicalism, or between caution and audacity, but between types of gift.

Ok to bold empiricists. But empiricists have trials … and tribulations. They test, and are tested. In fact, experience-based testing is what CCP officials get as they are promoted through the ranks.

This is not to agree with William F. Buckley about better trusting the wisdom coming from the first two thousand names in the Boston phone book, rather than trusting two thousand tenured faculty at Harvard. Buckley’s view comes closer to what we actually do in the US with regard to selecting leaders – no political vetting, no experience needed, no technical training to guide thinking, no necessary knowledge of history or psychology or human affairs. Money is needed. Nothing else. Buckley’s view is really that of the mariners on Plato’s ship of fools. It is the “my ignorance is just as good as your expertise” view. In other words, no explicit models at all of how the world works. Just feeling.

I don’t think either of Buckley’s proposed leader groups would work well. Berlin is not arguing for politicians coming into a job tabula rasa but to trust people with practical experience. Neither the phone book people nor the Harvard faculty are necessarily – perhaps ever – endowed with what Aristotle called practical wisdom.

Young Chinese are aware of other perspectives on governing and values. That topic alone is worth much discussion. In the days of the May 4th movement the clarion call was for “Dr. Science and Mr. Democracy” when the old ways of Chinese culture were to be jettisoned in favor of western ideas. Then later came “look west for science, China for culture” when political and moral freedoms began to seep in with the science and engineering.

Many of them have spent time in the US. Now, not so many of them are desirous to stay in the US.

Numbers games are too often false flags. But let’s try one – for some years (not so many anymore) there were about 300,000 Chinese students in the US, most of them in college or graduate school. Just for ease, let’s say there were about 100,000 graduates returning to China each year. In ten years, that would be a million students. Within China there are about four million graduates of four-year schools each year now, and another four million graduates of certificate and diploma schools. In ten years, that would be eighty million. Of course ideas are a common resource, a public good if you will. But along with some understanding of free speech, Chinese are now returning from the US with a large dose of exposure to violence, gun murders, racism and poorly functioning institutions. It used to be that Chinese students would try to stay in the US. Some still do. But more and more they return home for better job prospects and a safer life. By no means do all returning Chinese students carry a rosy picture of life in the US. For many of them, the US looks rather barbaric when compared with their life in China. American soft power in terms of lived experience is a bust.

Democracy and capitalism united

Martin Wolf in his new book The Crisis of Democratic Capitalism  argues that capitalism works best when it works with democracy – but also that democracy works best with a capitalist system. The two are inextricably linked in terms of promoting equality – one an equality of persons and the other equality of a volume of money. Either fails if the other becomes too powerful. One can see the Acemoglu and Robinson “extractive v inclusive” dichotomy from Why Nations Fail. Obviously capitalism can become oligarchic and extractive. Rather than serving customers, employees, or even stockholders, it serves senior management. Democracy too can become extractive, when too much power devolves to one group or one party in a plural society. Excessive regulation is the obvious example. Remember that in 2023 the legislature in Florida is seeking to ban Chinese from buying property in the state. And homelessness and “housing failure” is at least a regulatory failure as much as a failure of health or education or social service policies.

Wolf summarizes – The enemy today is not without. Even China is not that potent. The enemy is within. Democracy will survive only if it gives opportunity, security and dignity to the great majority of its people…. If elites are only in it for themselves, a dark age of autocracy will return.

We apply the word freedom to things we find desirable in both capitalism and democracy, but they require freedoms of very different kinds. The distinction is often not noticed. I think the word freedom is the link that many people have in mind when we discuss innovation and GDP and democracy. The freedoms of speech and association in democracy provide for human dignity, but these are distinct from economic freedoms. Chinese people have as much economic freedom as Americans do, but no one would call Chinese people “free.” The distinction we should make in capitalism is that the path of success for a society is in competitive markets, not free markets.

The important point for us here is that capitalism and democracy can work together, but need not. There are plenty of countries that make efforts at democracy, but fail to encourage much of a capitalism with generally competitive markets. And we have China, with lots of competitive sectors of the economy but no moral freedoms, and no particular desire to alter the mix. The extractive elites in China – mostly CCP – will work hard to keep their relative position as occupiers. If Martin Wolf is right, a dark age of autocracy may still emerge in both the US and China. We may be seeing the beginnings right now.

Hear as the people hear

Some see the engineering, economic and finance backgrounds of many leaders, including Xi, and see lack of humane feeling in governance – that these technocrats are best at working with the physical rather than the human. And by its nature CCP wants rational solutions. At some point their ability to hear as the people hear, see as the people see will fail.

But leaders at every level of government are by no means all technocrats. As leaders rise in authority, they gain more and more of that practical experience Isaiah Berlin touted to accompany any technical training they might have obtained in school. And they pay attention to what the people are saying.

To hear and see, leaders are adept at using technology to measure citizen attitudes. Censorship does not imply ignoring what was posted and who posted it. Close monitoring of people’s posts and comments and attitudes is itself an industry in China. CCP does hear as the people hear, sees as the people see, as heaven is supposed to do in the mandate of heaven. Just the CCP response is always … measured. And to be fair, it sometimes took heaven a decade or two to respond as well. But if CCP provides voice to Chinese people, it is providing a sense of human dignity that can make “democracy” unnecessary – as it has in Singapore.

Let me point out that Chinese leaders – certainly those I know in special economic zones and districts of cities and counties and provinces – go through training and vetting processes with which Americans are absolutely unfamiliar. Not only do college students have to pass the standard government entry exam, held once each year. The exam has two parts: an aptitude test with 135 multiple-choice questions on math, world affairs, language, and logic that lasts two hours. Test-takers have another three hours to write an essay. About 1% or 2% of test takers pass. For those who pass, there are additional special or technical exams. Once ensconced in a government position, training is not over. Anyone being promoted to a new job receives training for that job. Sometimes the training is at the city or provincial School of Administration, which doubles as CCP party school. People in many mid-level administrative positions are exposed constantly to others in similar positions via two or three day meetups, in the same or other provinces, by way of getting seasoning and exposure. And there is not the rather extreme division one sees in American politics versus administration. One can mature from a lower level government administrative position into a higher and more political position, which does happen in the US as well but I think to a far lesser degree. Certainly no one comes from private business in China to government service with the threat to “run government like a business.” There are no ignorant buffoons in higher positions in Chinese government. They are vetted out long before. There are people who are corrupt. But for most the good of the Party and the country comes before personal aggrandizement. And ability to control popular dissent is one evaluative measure by which to judge readiness for promotions. That ability does not come from any technical training. There can be voice without democracy, and that is what CCP provides. (See post #1 in this thread).

The central government zuzhibu organization department controls the top 5,000 positions in the party and government. This includes all ministerial and vice-ministerial positions, provincial governorships and First Party Secretary appointments, as well as appointments of university chancellors, presidents of the Academy of Science and Academy of Social Sciences, etc. Provincial, city, county and university organization departments vet people at their levels as well. The vetting is not proforma. The Chinese attitude is why, oh why, would you let someone ignorant of the requirements of a job be a leader in that department or ministry? Those 5,000 or so senior positions are filled by people who have the Chinese IBM experience – I’ve been moved – to different cities and provinces across China to provide experience and ability for the zu zhi bu to judge ability under stress.

What do we want?

Sometimes we have the idea that the way we do democracy in the US is  the only real way. But other countries do democracy also, with a wide variety of means. And all countries use a mix of openness and control to get to governance. People generally can be satisfied, even happy, with a wide variety of governance systems.

Perhaps we would be better off if we understood democracy as simply a way to provide voice, and thereby express human dignity. We don’t have to win every time we vote, but we want to know that we are heard. And we could understand capitalism as allowing people to make their own economic choices. Democracy and capitalism must defer to the other at times and to what people decide they want. There cannot be a normative democracy or a normative capitalism.

Modern economies are complex. Modern social problems are complex. Successful governance requires more than technical expertise or book learning and more than paying attention to profit and the bottom line. So tell me – on the ship of fools, who do you want as navigator? The pure innocent, the ignorant noble savage, or the sailor who knows how to use a sextant, has sailed before and can communicate his findings to the crew? It is not just technical knowledge and it is not being glib. In the US we do rely on technical staff with deep experience to advise leaders. We don’t expect experience, expertise or wisdom in our leaders. Chinese do expect those traits, and rather often, they get them.

 The artistry of power

It is a mistake to see “China v US” as a contest between -isms – “democracy v authoritarianism” struggle or Slater’s “control culture v integrative culture.” These terms are too ill-defined and far too broad. For most people the government is just … government. They don’t want to interact with it. They want it to be procedurally fair and understandable and they want human dignity. Otherwise, they mostly don’t wish to deal with government at all.

All governments consider what they have to do to remain in power. They take what actions are necessary and otherwise work to please their funders, supporters, friends. For China that means CCP can be quite flexible locally. Remember that in 2002 Jiang Zemin invited capitalists and business owners into CCP after killing hundreds of thousands of them fifty years earlier. A provincial or municipal party chief in some east China province has to be attuned to what the people want. This is the artistry of power that Robert Hariman discussed in his Political Style – The Artistry of Power – how matters of style – diction, manners, sensibility, decor, and charisma influence politics. That can certainly describe the machinations of power within CCP. This is part of the practical reasoning that Isaiah Berlin and Aristotle proposed.

Matters of style carry on even when away from home. A very minor example. At IIT in Chicago, we held an end of year party for our Chinese government students. One year, we had the leader from each of the three groups deliver some short remarks. We had government officials from cities around Liaoning Province. Liaoning has a deserved reputation as home to heavy industry – coal mining, oil, steelmaking and chemicals. We had officials from Dalian, also in Liaoning but sophisticated and international in a way that the rest of the province was not. And we had officials from Hangzhou, the wealthiest city in one of the wealthiest provinces, and very cosmopolitan. The Liaoning leader was nicely dressed for his remarks, with a light black leather jacket over a dress shirt, no tie. The Dalian leader wore a dress suit and tie. The Hangzhou leader wore a sport jacket over a light sweater. To me, each style of dress reflected the socio-economic status of their home base, from less cosmopolitan to more so, whether by intention or not.

Life for middle class Chinese is … at least ok. It is pressure filled and there are worries about jobs and spouses and the kid. Not different from life in the US. Rural poverty in China is bad. It is bad in the US, too. Health care is poor for many in China. US medical system, heal thyself. Schools, ditto.

Chinese can and do complain online about local problems – potholes and noise and air quality. Metaphorically, as long as the garbage gets picked up it does not matter who runs the government. Freedoms of speech and press and religion and association are fairly existential worries.

Locally …

There are benefits to not having to worry about politics. Chinese do not walk around with a fear of being attacked on the street or their kids being murdered in school. There are poor people begging on the street in some places, but they are not to be feared. There are thefts and robberies and arguments on the street and killings. But nothing like the threat of daily violence we have learned to live with in USA.

Short of wars and natural disasters, people … well, cope. Lying flat (tang ping)     is coping, but it is not going to be a life-long practice for most. Maybe a few weeks.

Sometimes we get distracted by the simplicity of econ 101 and supply must equal demand and Newton’s third law and every change ostensibly for the better has its attendant, if subtle, costs.

Sometimes we get distracted by the authoritarian stories coming out of China and think that the people are uniting in opposition. We remember “The People … United … Will Never Be Defeated!” But that assumes that the people are really uniting against anything. It probably is worthwhile to point out that the authoritarian horror stories are of most interest to those of us in the US for whom free speech and association are most directly relevant. And perhaps it is worthwhile to remember the old adage about Chinese – “no people more discontent and no people less revolutionary.”

James Fredericks again, in Confucianism, Catholic Social Teachings, and Human Rights –

The Chinese state enjoys a very different kind of relationship with society compared with the Western state. It enjoys much greater natural authority, legitimacy and respect, even though not a single vote is cast for the government. The reason is that the state is seen by the Chinese as the guardian, custodian and embodiment of their civilization. The duty of the state is to protect its unity. The legitimacy of the state therefore lies deep in Chinese history. This is utterly different from how the state is seen in Western societies.

The US has its own problems with uncaring government and political officials. The rest of the world looks at our obsession with guns and our lack of obsession with poverty and health care  and abysmal schools and moronic public officials and they now look elsewhere for spiritual encouragement. I don’t have any data, but I would be there are few immigrants to the US from anywhere in the developed world.

When it comes down to it, we always need to find a balance. In the American system, as destructive and heartless as it is, most of us find a way to balance need for stability and change. Chinese do similar things, starting from a different social place. It is, frankly, a toss up as to which society manages change better. If one thinks Chinese don’t manage change well, how did they do what they did in the last forty years?

When we too closely link democracy and capitalism, or innovation and political freedoms, we make a category error. Capitalism and democracy do need each other, but only at the margin. Both have an infinite variety of expressions in customs and institutions. All governments, however, need to provide for expression of human dignity.

Ci Jiwei analyzed the modern Chinese moral problem in his 2014 Moral China in the Age of Reform. He sees the lack of empathy, the corruption, the obsession with conspicuous consumption as symptomatic of an inability to express oneself, to express human dignity. There is almost complete lack of moral freedom, to express oneself in speaking, writing, reading, association. Ci sees democracy as a way for people to express human dignity, but there are other ways as well. I wrote a series of posts about moral freedom three years ago at What is this Moral Freedom Business?

Ci notes that modern human societies need to provide for individual human dignity, and dignity is expressed through agency – how do we interact with others to achieve our position in the world? He sees agency expressed in two ways – through freedom or through identification with a superordinate idea. Agency  expressed through freedom leads us to thoughts of democracy. Agency expressed through identification with a cause or charismatic leader leads us to thoughts of authoritarianism. But if agency either way is expressed in customs and institutions and laws and regulations, how many different varieties can there be? There just isn’t one form of any -ism that is normative or definitive.

This discussion is getting a bit past my pay grade. I want to make the point that China doesn’t have a system that we would call capitalist, but capitalist it most certainly is in many ways. China doesn’t have a system that we would call democratic but it provides a certain amount of voice for its people. If we look at governments in the US and China, they have many similar responses to social needs and many similar problems going forward in the next decades. Both will need to spend more money on people and less on things. Both will need to do more to provide dignity for their people. China has come as far as it has in the last forty years with a system that we think of as unworkable, but work it has. To say that suddenly now it is unworkable is an unwarranted conceit. To say that the US has the only workable system of democracy and capitalism is also a mistake. My contention is that human dignity is satisfied in many forms. There is no reason to think China – even CCP – cannot find a way that allows it to prosper, even innovate.

Its tricky to use cities as examples of democracy or innovation. Cities are complex beyond anything we can easily write about. Hong Kong has been cited as an example of capitalism par excellence; it was really more corporatist than capitalist. Its version of democracy was not one that Americans would find appealing. But what moral freedoms did exist are now being erased quickly. In the new school books, Britain never governed Hong Kong and newsrooms are empty. Thousands of people have fled, and lots of businesses have decamped for Singapore or Bangkok.

We can see the capitalist-corporatist system working even as the democratic one is erased.

Hong Kong is being remade almost faster than the changes can be reported, as if the whole city had suddenly been unzipped to reveal a shadow society lurking beneath.

Many key institutions — civil society organizationspolitical parties and trade unions — have dismantled themselves in the ultimate act of debasement. In 2016 elections, pro-democracy or other nonestablishment figures won about one-third of Hong Kong’s legislature. After a drastic overhaul of election rules and a resulting boycott by democratic parties, a 2021 vote returned just one nonestablishment lawmaker out of 90 seats. Hong Kong’s population shrank for three years in a row because of emigration and a falling birthrate.

Friends who are still there tell me they no longer talk politics, even with family or close friends — this in a city that was once defiantly political. One friend spoke of wanting to like a Facebook post of mine but not daring to. In that tiny nonaction, a failure to click, the individual becomes complicit, accelerating the degradation of memory.

CCP is working as fast and as hard as it can to erase memories of moral freedoms. Democracy is not coming to Hong Kong.

I said in previous posts that my Chinese undergrads did not recognize the famous “tank man” photo from Tian’anmen in 1989. They were born in 1990 and after. Few people would talk about that time and there were no images of value. Erasing that part of history from social experience took less than a decade. Some of my curious students did ask me what happened in June of 1989. I gave them copies of the two-part Gate of Heavenly Peace movie –

https://www.youtube.com/watch?v=1Gtt2JxmQtg   and https://www.youtube.com/watch?v=o0lgc4fWkWI&t=4163s

The Chinese language version – https://www.youtube.com/watch?v=RA-UQyCZskA

The videos on my thumb drive were a very small contribution to historical memory and being able to see and think for oneself. CCP was able to declare victory after Tian’anmen and it will do so after Hong Kong. Memories of Tian’anmen and Hong Kong are preserved outside China; but what matter that?

If anything, financial capitalism sees democracy as irrelevant. Chinese companies and corporatist foreign companies will do just fine, thank you, without a democratic polity. How easy would it be to get big American companies to restrict themselves from the Chinese market?

Many American companies have left the Russian market; but that was marginal. There’s too much money to be made in China for political freedoms to be of concern. We are at “what’s good for (insert name of major international company here) is good for America.” That wasn’t what Charles Wilson said in 1953 but it seems quite relevant now.  

Adaptation

Going deeper, American culture of individualism has told us, forced us, to be good at adaptation. We don’t have resources upon which to fall back – extended families, the neighbors, clans or the church. Now, even unions and schools and local governments are less available to pick us up when needed. We get counseling but we don’t get much help. One wonders, with Christopher Lasch in The Culture of Narcissism how a society of sovereign individuals, not paying attention to the needs of others, can long survive. I liked this comment from a recent post: “Americans do not agree about the duty to protect others, whether it’s from a virus or gun violence.”

That is not the cultural Chinese view, regardless of how closely it might not be followed in practice. 

China has similar modernism adaptation problems but is starting from a different place. Jobs and social services and society were always available in the family, the clan, or the lineage group. Even the most modern and upwardly mobile Shanghainese financial advisor has a family home back in some village somewhere. It might be a supreme embarrassment to move back in with grandma, but it is a safety net. Family remains the locus of support, from pitching in to fund college education abroad to buying that first apartment. Grandparents and uncles are regularly involved in education donations. We just don’t have nearly the level of family support that one regularly finds in China.

We also don’t have nearly the willingness to let government have the benefit of the doubt in enacting policy. That is partially due to fear of retribution, true. But the government is not ignorant of the wishes of the population, as we saw with the sudden relaxation of covid restrictions last fall.

China has big problems, some of them looming natural disasters like climate change and water scarcity and some manufactured by CCP modernism and policy – hukou restrictions and poor education and health care and fevered promotion of spending and buying. The US has big problems too, some of them looming natural disasters like climate change and water scarcity and some manufactured by racial enmity and financial capitalism – restrictions from zoning laws – the American hukou – and poor education and health care and fevered promotion of spending and buying.

If Chinese look at America now, not the shining city on a hill from fifty or a hundred years ago, they mostly see a social system they do not want for themselves. Sure, there are some good things about America, but the risks are high.

This democracy thing isn’t quite as attractive as once thought, back in the  early 20th century when Mr. Science and Mr. Democracy were all the intellectual rage, promoted by none other than Chen Duxiu, one of the founders of Chinese communism. How times change.

Every country has its own understanding of capitalism and its own understanding of democracy. This is to say, every country has its own ways of letting people find agency for themselves and express human dignity. In these posts I tried to suggest that notions of freedom – economic and moral – exist on a wide spectrum. China is an easy place in which to live if one is only concerned about economic freedom; not possible if one is concerned about moral freedoms. Nevertheless, people cope. Some want significant change, and will take risks to accomplish that. Mostly they love their homeland and don’t want to see too much change. People do that in the US, too.

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China has changed dramatically in the last forty years. Business writer and thought leader Bob Yovovich tells us that China urbanized in half the time it took the US and with ten times the number of relocations. Such rapid change must have induced complex interlocking social shifts and costs – customs broken, institutions abandoned, social ties destroyed. Now, wither China? Wither CCP?

Three questions in three posts. This is post #2.

Thesis #2   Can a communist regime support innovation in the long term? Will innovation in China fade with lack of political and moral freedoms? And #2a –  a follow-on – if innovation slows, what of it?

To follow –

Antithesis #2 – China need not fail at innovation

            Education

            CCP members are the bourgeoisie

            Culture 

            Culture below the radar 

            Patents and innovation experts

            Move Along- Nothing to See Here … la la la

            A bit of history

Refuting #2a – If innovation slows, so what?

            pearl clutching

            Catching up

            Sea turtles and finance

           Free to speak, associate, write, form groups as you wish – not

The operating assumption is that communist ideology is totalizing. It must exercise control over all elements of society, including science and technology. To move away from total control is to invite dissension, which leads to disruption, and eventual disintegration. Scientific communism must be rational and scientific. Marxism should be a discipline as precise and objective as mathematics.

This is in fact the political argument. Stalin and Mao and now Xi demand dominance over media, arts, cultural works, and thought. At the 19th Party Congress in 2017 Xi told the world “Party, government, military, civilian, and academic, east, west, south, north, and center, the party leads everything.” This is not a surprising statement. Communist theory has always demanded complete control. Thus it is possible under CCP to think incorrectly. Could the US government ever tell someone they were thinking incorrectly?

At some point the insults to human dignity will become too much for even CCP to hold back. There is plenty of history of large scale protests, not only Tian’anmen in 1989 and Shanghai and Beijing in 2022. When CCP members begin to join the protests – as some did in 1989 – it will be too hard for CCP to hold back the arc of human history bending toward freedom.

This argument is that innovation requires democracy. Without democracy, innovation must fade.  There are plenty of arguments that democracy is inevitable.

In a 1964 Harvard Business Review article called, “Democracy is Inevitable,” sociologist Philip Slater and business analyst Warren Bennis predicted the fall of the Soviet bloc and the rise of democracy: “Democracy… is the only system that can successfully cope with the changing demands of contemporary civilization.” Pretty tough to argue with the likes of Slater and Bennis.

There is a sophisticated argument from philosophy. Ci Jiwei in Moral China in the Age of Reform sees moral decline in China as a result of lack of freedom to express oneself openly. When one cannot express human dignity through freedom, one must find other ways to assert individuality. Ci sees corruption, moral decline, and excessive consumption as part and parcel of the Chinese economic miracle when political and moral freedoms are unavailable. The question of freedom, he says, is unavoidable. Inevitably, whether as an outcome of Xi’s anti-corruption and purification campaigns or some other way, China must get past the corruption, excessive consumption and moral decline that has characterized the last two decades. The other way to express oneself is through freedom, freedom to speak and write as one wishes. Freedom, he says, is the only way to act and to be in a modern society. By implication, China must get there.

Xi Jinping was brought into power to combat the moral decline within CCP and within society. He has succeeded reasonably well on the anti-corruption front. But two caveats – first, success in anti-corruption has been achieved without China moving a whit closer to openness or democracy; if anything, it has retreated substantially.

And second, corruption and heavy use of connections from family and colleagues has been the Way in China for two thousand years. Xi is not going to change deep culture. In a deep way, a successful democracy depends on ability to trust strangers. That is not a cultural value in China.

Antithesis #2 – China need not fail at innovation

I wrote a series of posts three years ago that addressed many of these issues. The arguments there are more detailed.

Whither China’s Economic Development with no Democracy?

But how about innovation – can you have that without democracy?

Briefly –

education

We’ve heard about the sterility of the education system. Huang Yasheng, who wrote Capitalism with Chinese Characteristics, on students in China in Educated and Fearing the Future in China –

The Chinese educational system is terrible at producing workers with innovative skills for Chinese economy. It produces people who memorize existing facts rather than discovering new facts; who fish for existing solutions rather than coming up with new ones; who execute orders rather than inventing new ways of doing things. In other words they do not solve problems for their employers.

For decades now, Chinese have prepared themselves to go to college – sometimes even high school – in the US. The understanding is that the education is better and students will be better prepared when they come back. Many choose to stay in the US when their education is completed. Why would they do that unless something greater than money, a fancy car, and a spouse were their only goals?

Recent events make the negation a bit tougher. Lack of moral freedom is not really at issue – it doesn’t exist. But let’s get the easy responses out of the way first. The Huang Yasheng quote above is from 2010, close to a generation ago. Education in China is generally poor to fair, but there are places of excellence. Education systems don’t change overnight, or even in a decade, but one has to ask how all these Chinese students are getting in to MIT and Caltech and doing well. If they remain in the US for any period of time, one thing they must learn is how to ask questions and how to think in new ways. Many of them return to China.

And on education in the US (and Germany and Australia and other western countries) –

It has been true for decades that some Chinese parents encourage their kid to stay outside. I know of several young Chinese in the US now whose parents pushed them to stay. Now, more of the 300,000 or so Chinese students do return, thinking their prospects for a wealthy and happy future might be better in China. If future economic prospects are roughly equivalent in the US and in China, why would young Chinese choose to stay? Immigration numbers are far greater coming to the US than coming to China. Over a period of eight years my foreign students in China were nearly all from Africa, the middle east, or Indonesia. One student from Finland, no others from a western country. There are the Schwartzman Scholars and short term semester abroad students, mostly from Europe. If any of them choose to stay, they do so purely for business reasons. They start businesses or join an existing business in China and make a contribution. Some of my civil engineering students have worked for Chinese construction companies doing work in the middle east or Africa. Their two or three languages give the Chinese companies a big leg up in foreign countries. You need not call that innovation. Call it development, if you wish.

There are many joint programs between Chinese universities and American and German schools. Harvard and Yale among them. Some of these allow for joint degrees in engineering and require two years or more attendance in the US. It is true that academic standards can slip in such programs. But the basic requirement to “think differently” does come up time and time again. (N.B. – I failed two-thirds of a class of student engineers at my school in China for plagiarism in writing a short paper. I had a frank exchange of views with the school administration, but in this one case, honesty won out).

In the midst of the current cold war, Hainan Island has taken advantage of new regulations from the Education Ministry permitting foreign universities to open independent branches in STEM subject areas. Up to now, all foreign schools were required to have a Chinese university partner. It is certainly unclear how well this will work. But this, I think you do need to call innovation.

Beginning in 2003 – admittedly, a different era – we accepted scores of Chinese government officials to our graduate public administration program at Illinois Institute of Technology in Chicago. The students – all midlevel, midcareer professionals from a wide variety of disciplines in Liaoning, Zhejiang, and Yunnan provinces – took a full load of courses for a year to learn about government management. None of our students were researchers or scientists or engineers. But this is the key point – when Scott Peters, our program director, went to China to sign one of the next year’s contracts with the Chinese Ministry of Education, he asked what the program was really for. “What is it that you want the government students to learn?” the answer surprised us – “We want them to learn to think differently.” Perhaps that is less valued right now under Xi, but people in government recognize the problem. One can think differently without being able to vote or protest in the streets, particularly when one is focused on career.

So a key question – Political and moral freedoms have been absent for more than seventy years now. The first thirty of those years were brutal. The next forty years showed all the fabulous economic development we know about, but political and moral freedoms were not any part of that. Just when is the moral-values-based decline supposed to kick in?

Culture

There are plenty of sad, wistful or angry posts about CCP destroying Chinese culture. Dan Wang in his 2021 Letter says China under CCP is culturally stunted – the deadening hand of the state has ground down the country’s creative capacity. A decade of tightening has strangled cultural production.

Restrictions on art, poetry, fiction, sculpture are essentially restrictions on speech. While there was some greater openness in the Hu Jintao era, CCP has never promoted political or moral freedoms. It cannot do so without jeopardizing its role as sole voice of authority and morality. No communist or authoritarian state can allow such openness.

Wang on innovation – It’s too early to tell if in a decade China will have fewer founders of Jack Ma’s daring. So far at least, entrepreneurial types around me have found his example too removed to be worth bother. He remains, after all, one of the wealthiest people in the world, while he spends his time playing golf, doing calligraphy, or examining agricultural technologies in the Netherlands. My view is that it’s going to take more than this regulatory campaign to defeat dynamism in China.

There are plenty of accounts from young Chinese about the hopelessness, the lack of faith in the future for their lives in China. The web site Sixth Tone often contains such stories. In early 2023 there came a fad for kong yiji literature. Kong Yiji was a character created by author Lu Xun in 1919. Kong was a pedantic man of letters who stubbornly clung to tradition and failed to adapt to the times. Now, many young Chinese, struggling to find a good job despite their degrees, have come to feel a certain kinship with him. Contrary to what they’d been led to believe, not only has higher education not translated into professional success, but it’s even become a burden….

Hence we get the idea of lying flat, or doing only what is necessary rather than working 996 for the benefit of their employer. Of course kong yiji and 996 are censored terms in China. China Digital Times is also an excellent source for stories that escape CCP. 

Young Chinese writer Lin Mengyin mourns loss of ability to express itself –

My Chinese Generation Is Losing the Ability to Express Itself

The Communist Party’s monopoly on all channels of expression has helped prevent the development of any resistance language in Mandarin, especially since 1989, when the brutal military suppression of the Tiananmen Square student movement demonstrated what happens to those who speak out. If language shapes the way we think, and most people think only in their own language, how can China’s youth conjure up an effective and lasting resistance movement with words that they don’t have?

The problem isn’t the Chinese language itself. “Freedom,” “rights,” “democracy” — these exist in Mandarin, as they do in nearly every language. They are universal values. Both the May Fourth Movement in 1919 — a student-led uprising against Western colonial encroachment on China and the incompetence of Chinese leaders — and the student movement in 1989 weaponized Mandarin in both long-form writing and short slogans. But decades of censorship and fear of violating it have made Chinese people scared to even think with such words, let alone speak or write with them….

 Source: https://www.nytimes.com/2023/02/10/opinion/china-politics-language.html?campaign_id=2&emc=edit_th_20230211&instance_id=85132&nl=todaysheadlines&regi_id=37887820&segment_id=125054&user_id=23803089b69362f978e6a11f5eda6d96

Author Lin Mengyin is a Chinese writer living in the United States. Dan Wang is a visiting scholar at Yale. Its easy to write when one is not physically in China. People learn to self-censor. No one would equate self-censorship currently on campus and in businesses in the US with that in China. But unwillingness to say what one thinks is common in the US as well.

Culture below the radar 

If innovation slows, it won’t be because the culture is stunted or moral freedoms are unavailable. This following section is perhaps a digression, but useful to a discussion of CCP rigidity and what it misses. 

It is important to recognize the vibrancy of Chinese culture beneath what CCP permits. The dead hand of CCP still obtains, but beneath the ham-handed fist are vibrant music, dance, painting and sculpture industries. We know of literary critic and Nobel Prize winner Liu Xiaobo who died in prison and whose name is still censored in China; and Ai Weiwei, who is still alive and living in the US. Within China, Inna Art Space is a wonderful example. Inna is herself not an artist, but she sponsors Chinese artists with studios in Hangzhou and New York. One of her artists in Chen Dongfan whose modern works have been in international shows and who (in a very small way) I helped gain some recognition in Hangzhou in 2009.

Chen Dongfan. A Dance. At http://www.innart.org/en/artist/work/7b6eww.html

Tanner Greer at the Scholar’s Stage – Why Chinese Culture has not Conquered Us All –

Most observers place fault exactly where Dan Wang does: the claustrophobic cultural environment of enforced political orthodoxy. A common ancillary argument is that party-state calls for innovative cultural production are themselves the problem. Cultural innovation happens at the level of the individual artist, this argument goes. Steven Spielbergs cannot be produced on demand…. This gets to heart of China’s problems—and these are not problems of cultural sterility. In my experience, Chinese intellectual life is often more vital and vibrant than what I see in the West. Back in 2017 I did a stint of copy editing work for China News Service. Many of the articles were boiler plate propaganda, but the most interesting covered controversies and happenings in Chinese literature, history, and social life. I was constantly surprised, even amazed, at the vast number of fascinating thinkers never making their way into English language reporting on China. Something similar happened when I discussed political theory with Chinese of my generation. They would relate Zhihu debates between anons belonging to the “industrial party,” the “ruguanists,” the “auntologists,” and so forth. These debates were far more interesting—and intellectually serious—than America’s own anon flame wars.  Even the teenagers and weebs posting on Bilibili seemed to be doing more intellectually compelling things than the long, reblogged whines emanating from Tumblr!

Dan Wang again –

This gets to heart of China’s problems—and these are not problems of cultural sterility. In my experience, Chinese intellectual life is often more vital and vibrant than what I see in the West. Back in 2017 I did a stint of copy editing work for China News Service. Many of the articles were boiler plate propaganda, but the most interesting covered controversies and happenings in Chinese literature, history, and social life. I was constantly surprised, even amazed, at the vast number of fascinating thinkers never making their way into English language reporting on China. Something similar happened when I discussed political theory with Chinese of my generation. They would relate Zhihu debates between anons belonging to the “industrial party,” the “ruguanists,” the “auntologists,” and so forth. These debates were far more interesting—and intellectually serious—than America’s own anon flame wars.  Even the teenagers and weebs posting on Bilibili seemed to be doing more intellectually compelling things than the long, reblogged whines emanating from Tumblr!

Only a slice of this is ever available in English. Wang suggests the websites Chaoyang Trap House and Reading the China Dream for a tiny view into the vitality of Chinese internet culture and high intellectual life, respectively.

Music fests are expected to show explosive growth this year. These are not quite below the radar, but popular culture is not dead.

That is true for Chinese companies as well. Below the radar, Chinese companies make product improvements and share ideas and compete all the while CCP is hammering on the big tech and big real estate and big tutoring companies. CCP is not interested in stifling innovation. It is interested in stifling alternative sources of power.

Just a cultural comparison – How much of American popular culture – or literary culture, for that matter – could no longer find a popular audience due to shrieking from the left or direct government regulation? How about Blazing Saddles? How about Huckleberry Finn? China certainly restricts cultural production. But censorship is not unknown in the US, either.

Patents and innovation experts

The journal Nature prepares occasional indices of innovation, grant recipients, commercialization of inventions and  the like. At the end of 2022 it published Is China Open to Adopting a Culture of Innovation? Their conclusion – Beset by regulatory issues and barriers to international collaboration, the country still faces challenges in commercializing basic research.

… China is still some way behind other leading research nations when it comes to widely used measures of innovation. It is still outside the top 10 in the World Intellectual Property Organization’s Global Innovation Index (GII), which ranks economies on a basket of metrics, behind Asian powers such as South Korea and Singapore. According to the report accompanying the 2022 GII, China leads in patents by origin, trademarks, industrial design and the size of its domestic market. However, the report identifies as “weaknesses” China’s regulatory environment, which includes the rule of law and environmental performance. China is also ranked well below the top 50 for GII metrics related to international relations, such as student numbers from abroad, joint ventures and foreign direct investment.

Nor do Chinese institutions appear in this Nature Index supplement’s list of the leading 50 organizations for innovation, based on how often they are cited by patents, although factors such as the time lag in patent-citation analyses and lack of local language coverage could be potential reasons. Outside the top 50, the highest ranked institution, the Hong Kong University of Science and Technology (HKUST) at 53, is based in the special administrative region of Hong Kong, outside China’s main higher-education and research system.

In a 2020 Foreign Affairs article Carl Benedikt Frey and Michael Osborne make the case for continued American dominance, even in artificial intelligence – China Won’t Win the Race for AI Dominance. Their point is that even with great advantages in scale and timing, China can’t or won’t innovate in AI. Patent filings are not enough –

Decentralized experimentation and decision-making will likewise be critical if the world is to harness the benefits of artificial intelligence. China is at a disadvantage in this regard. The country’s recent surge in patent filings is often cited as evidence of its innovativeness, but simply counting patents isn’t a good way to measure innovation: studies show that ten percent of patents account for roughly 90 percent of total patent value, meaning that the vast majority are of little value. Patent citations offer a more useful indicator, and if we look at the 100 most cited patents since 2003, not a single one comes from China. Moreover, China’s leading artificial intelligence companies, including Tencent, Alibaba, and Baidu, are merely copies of Facebook, Amazon, and Google, tailored to the Chinese market.

Innovation requires collaboration. Voluntary international cooperation is likely to be better for all involved. But CCP takes the corrective plea of its cultural conservatives to heart – “look west for science, China for culture.” In other words, take what can be taken from western science and technology, but preserve the solitary excellence and institutions of Chinese culture. It is tough to take the science but not the freedoms. The government has worked very hard to follow this dictum, actually with quite a lot of success. We should also remember the flexibility of CCP to respond to situations at hand. If some greater openness to western investment or technology is needed, CCP can and will adjust. The only fundamental goal is CCP survival.

The role of the government in both fostering and stifling innovation is key. With the recent crackdowns on internet companies, real estate companies and tutoring companies, any Chinese has to wonder whether starting a company is worth the risk of a government taking, as was done post-1949. Pointedly, in 2023 Xi is seeking to reassure Chinese and foreign businesses that CCP will not swoop in, take them over and arrest the president. He is having to say this way too often now.

Of course, government plays an important role in the US as well. Government funding in – well, railroads going back to the 19th century – and semiconductors and solar and now AI is key. We remember that it was the Defense Department and its DARPA that created the internet. And we remember that Trump-era racism made life for Chinese researchers in the US much more difficult.

No one disputes the necessity for international cooperation in science and technology. There is a big But though. International cooperation right now is tough, due to political actions on both sides of the Pacific. But those restrictions can be lessened almost instantly, and to whatever degree Xi (on his end) decides is acceptable. And depending on the politics, restrictions can be lifted in one scientific discipline and not in others. There have been no crackdowns on more science-oriented industries like semiconductors or pharma.

More to the point of the question above, none of this has much to do with freedom of speech. Political and moral freedoms are about as relevant for most scientists as they are for most small businesspeople – which is to say, not much. Ability to read journal articles and submit articles  and attend conferences is much more important.

China can’t innovate?

A well known Harvard business Review article from 2014 Why China Can’t Innovate runs through the list – too much government money being thrown at science and technology, government picking tech industry winners, adaptation for its own huge market rather than going global, too much emphasis on state-owned businesses, too much use of partnerships with foreign companies, university governance structure, and a hide-bound memorization culture in college.  After most of the article extolls Chinese advances in all those elements of success, the authors conclude that CCP interference is the problem – The problem, we think, is not the innovative or intellectual capacity of the Chinese people, which is boundless, but the political world in which their schools, universities, and businesses need to operate, which is very much bounded.

It seems that the political world need not impede at all. Dan Wang again in China’s Hidden Tech Revolution – How Beijing Threatens U.S. Dominance (Foreign Affairs, April 2023).

In 2007, the year Apple first started making iPhones in China, the country was better known for cheap labor than for technological sophistication. At the time, Chinese firms were unable to produce almost any of the iPhone’s internal components, which were imported from Germany, Japan, and the United States. China’s overall contribution to the devices was limited to the labor of assembling these components at Foxconn’s factories in Shenzhen—what amounted to less than four percent of the value-added costs.

By the time the iPhone X was released, in 2018, the situation had dramatically changed. Not only were Chinese workers continuing to assemble most iPhones, but Chinese firms were producing many of the sophisticated components inside them, including acoustic parts, charging modules, and battery packs. Having mastered complex technologies, these firms could produce better products than their Asian and European competitors. With the latest generation of iPhones, this pattern has only accelerated. Today, Chinese tech firms account for more than 25 percent of the device’s value-added costs.

Although the iPhone is a special case—as one of the most intricate pieces of hardware in existence, it relies on an exceptional range of technologies—its expanding footprint in China captures a broader trend. In a majority of manufactured goods, Chinese firms have moved beyond assembling foreign-made components to producing their own cutting-edge technologies. Along with its dominance of renewable power equipment, China is now at the forefront of emerging technologies such as artificial intelligence and quantum computing. These successes challenge the notion that scientific leadership inevitably translates into industrial leadership. Despite relatively modest contributions to pathbreaking research and scientific innovation, China has leveraged its process knowledge—the capacity to scale up whole new industries—to outcompete the United States in a widening array of strategic technologies.

Wang describes the “communities of engineering practice” (a Brad DeLong term) that translate ideas into designs, designs into prototypes and prototypes into products – all the while seeking improvements and advantages. This is nothing new. Alfred Marshall asked why firms in the same industry were often geographically near each other. Proximity, he said, created something “in the air”: “…if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas.” Manufacturing clusters are well-understood. We’ve have furniture in the American south, Silicon Valley in the west, steel in the Midwest. No country has consciously developed manufacturing clusters better than China and that is now a major advantage. Sharing and competing happen at the same time. Process engineering and process improvements lead to new designs and new products and … well, innovation and GDP.

 

CCP members are the bourgeoisie

Part of the answer about innovation lies in the middle class. The middle class in China is … roughly … 300,000,000 people, or more. These are people who have steady jobs, can send their kid(s) to decent schools, can go on vacations and buy cars and maybe more than one apartment. They have some disposable income. The number of CCP members is about 100,000,000. With some overlap in two CCP-member families, but toss in a kid and a couple of grandparents … well, you can do the math about who is the middle class in China. Not all CCP members are middle class, many are retired, and not all middle class people are CCP. But the overlap is significant. None of these people see themselves as proletarians needing to be led. Nor do most of them see themselves as a vanguard of anything but a solid future for their kid. The CCP are the bourgeoisie. Many of them are comfortable in intellectual and political discussions, if done one to one. They know what they give up. They make the fully informed tradeoff. Knowing what they give up is quite possibly sufficient to give them peace of mind.

I can attest that many of the CCP officials I have met or had in class are able to conduct sophisticated intellectual discussions on philosophical or cultural topics – in English – with anyone. They are culturally adept and not technocrats. And I can attest to a vibrant life of art and music running right below the censors.

Employment and innovation scholar Carl Benedikt Frey reminds us that in the 1980s we all thought Japan would overtake the US in GDP and technology. That didn’t happen. Frey argues that data alone – which gives China a big advantage – is not sufficient for tech leadership. The argument has been that because data is centralizing, authoritarian governments are better able to encourage AI innovation than democratic ones. He notes that decentralized decision-making and experimentation are key to innovation, and China’s top-down management will make that difficult. CCP wants to pick winners, and that does not lend itself to creativity. “But radical innovation is a different matter, and historically, the most innovative societies have always been those that allowed people to pursue controversial ideas…. Under Xi, the Chinese Communist Party has stepped up efforts to penetrate private-sector businesses and consolidate political power. A surveillance state with a censored Internet, together with a social credit system that promotes conformity and obedience, seems unlikely to foster creativity: innovation is about breaking the rules, not abiding by them.”

Frey cites economic historian Joel Mokyr that the industrial revolution happened in the west rather than in China because European governments were more open to new and competitive ideas. Mokyr sees the evolution of a “republic of letters” – informal networks of tinkerers, inventors, thinkers, philosophers – as critical to European development success.

I think Mokyr makes an excellent point. I also think such networks are readily available now, with a couple of clicks – if Xi wishes. The networks were available in the Hu Jintao era. They can be again.

Frey is a serious and oft-cited scholar of innovation. I think he is not sufficiently caught up on Chinese business or academic research, and puts too much emphasis on CCP domination of big businesses. CCP survival is the only fundamental goal. For forty years that has translated to “grow GDP.” The means with which to grow GDP must change, but change it will. It is critical to survival.

Move Along- Nothing to See Here … la la la

Back to the 2014 HBR article Why China Can’t Innovate – The authors actually made a convincing case for emergence of Chinese excellence, and then, fearful of saying yes, said no to Chinese innovation. They already admitted to the inventiveness of the Chinese people – see the quote above. They did not understand ability of CCP to adapt. An American lawyer would have a field day in cross examination.

In 2021 Zak Dychtwald wrote an HBR update to the “can’t innovate” article – China’s New Innovation Advantage. The bottom line – China is achieving a new level of global competitiveness, thanks to its hyper-adaptive population.

China now has at its disposal a resource that no other country has: a vast population that has lived through unprecedented amounts of change and, consequently, has developed an astonishing propensity for adopting and adapting to innovations, at a speed and scale that is unmatched elsewhere on earth.

It’s that aspect of China’s innovation ecosystem—its hundreds of millions of hyper-adoptive and hyper-adaptive consumers—that makes China so globally competitive today. In the end, innovations must be judged by people’s willingness to use them. And on that front China has no peer.

Chinese have lived through extraordinary change in the last forty years – even more in the last seventy. From the Dychtwald article – you might ask yourself how living through that sort of change would shape your expectations for progress and your sense of what government, technology, and commerce can do…. The point here is not that any one culture is better at innovation but, rather, that certain developmental ecosystems create naturally different attitudes toward change, adoption, and newness. More than any other population in the world, the Chinese in recent years have had to adapt to radical change—and they have learned that innovative technologies can be key to their survival.

Compare that with what we perceive as an American inability to do anything now. Fear of lawsuits. Hamstrung government. Lack of money. Oligarchy. Guns. Preoccupation with trivia. Above all – forgive me – there is very little “can-do” attitude.

We think of American businesses as intensely focused on consumer desires. If anything, that is even more the case for internet and finance companies in China. From the 2021 Harvard Business Review – China’s New Innovation Advantage. A couple of Chinese adaptations, demonstrating willingness of companies and CCP to adapt –

Item 1 –

Chinese regulators did the unprecedented by granting banking licenses to two nongovernmental tech giants, Alibaba and Tencent, at the expense of state-owned lenders. Without that support the Chinese mobile-payment rocket wouldn’t have left the ground.

Item 2 –

Similarly, the online and offline retail ecosystems in China are merging in ways that are years ahead of what’s happening in the United States. In Chinese grocery and convenience stores, it is now commonplace to see rows of QR codes below meat and produce. Scanning a QR code with a smartphone will reveal the product’s entire story, from, say, where a cut of salmon was sourced to how far it was shipped. Similarly, scanning a tech product in a store can bring up the brand video and user ratings. This is what Alibaba calls New Retail, and it could well become the global norm, because it allows brands to deepen their relationships with customers directly. Nearly all multinationals operating in China have adopted this sort of digital-first, China-forward strategy. (U.S. companies operating there have rolled out far more advanced versions of this strategy than the ones they currently use at home.)

Dychtwald from above – … its hundreds of millions of hyper-adoptive and hyper-adaptive consumers ….   Market scale is one advantage mentioned by Michael Porter in his 1990 The Competitive Advantage of Nations (link is to the HBR article, not the book). Porter examines the conditions under which an industry and a nation become competitive.

The Porter book deserves a little more note here. He developed a diamond of four interrelated attributes of a nation that individually and together work in favor of national competitive advantage. These determinants create the national environment in which companies are born and learn how to compete. Each point on the diamond—and the diamond as a system—affects essential ingredients for achieving international competitive success. The four attributes are –

1. Factor Conditions. The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry.

2. Demand Conditions. The nature of home-market demand for the industry’s product or service.

3. Related and Supporting Industries. The presence or absence in the nation of supplier industries and other related industries that are internationally competitive.

4. Firm Strategy, Structure, and Rivalry. The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.

China has assembled a manufacturing system that is unrivaled in all four of these attributes. With a government – including funding of science – that sees development as a key national goal, there is no reason to expect China to lose its position. The exception would be the national demographic decline, in which the working age population is now falling by 5 to 7 million per year, with attendant rising national costs for health care and pensions. I can’t make the call on that factor. But science and technology will always be available from outside if needed. Capitalism doesn’t much care about political and moral freedoms, either.

Shan Weijian summarizes Chinese development now in another 2021 Harvard Business Review piece – “Americans Don’t Know How Capitalist China Is” –

What is it that Americans don’t understand about China?

They don’t know how capitalist China is. China’s rapid economic growth is the result of its embrace of a market economy and private enterprise. China is among the most open markets in the world: It is the largest trading nation and also the largest recipient of foreign direct investment, surpassing the United States in 2020. The major focus of government expenditure is domestic infrastructure. China now has better highways, rail systems, bridges, and airports than the United States does. For example, over the past 15 years it has built the longest high-speed rail system in the world. At 22,000 miles, it is twice as long as the rest of the world’s combined. China’s high-speed rail could cover the distance between Boston and Chicago in about four hours, whereas Amtrak’s fastest service takes 22 hours….

A final point – Alibaba, Huawei, Tencent and Baidu are privately built companies that emerged under CCP. The thousands – thousands – of small shops tinkering, adapting, cooperating and also looking for advantage in Shenzhen, Guangzhou, Beijing, and Shanghai are completely under the radar of CCP. The world acknowledges that supply chains are nowhere deeper and more diversified. (Supply chains are part of the Michael Porter analysis as well). Those businesses are no more bothered by government than a small business is in the US. They are no not bothered by lack of political and moral freedoms in China. No question but that the big tech companies need to pay obeisance to CCP. But they were all once small. How did they get to be so big?

A bit of history

Many economic historians see the first industrial revolution starting in the Song dynasty, around 900 CE. Chinese were tinkerers, inventors, copiers, adapters extraordinaire.

You might know part of the Song dynasty story. In 1078, China produced 125,000 tons of cast iron, more than the rest of the planet put together. This would not be surpassed until the 1790s in Britain. A whole range of technological breakthroughs and improvements were made. These included movable type printing (1000), the blast furnace (1050), mechanical water clocks (1090), paddlewheel ships (1130), the magnetic compass (1150), water-powered textile machinery (1200), and most dramatically, huge oceangoing junks with watertight bulkheads, a carrying capacity of 200 to 600 tons, and a crew of about 1,000 (1200).China had the world’s largest GDP until the Ming.

The Yuan, Ming and Qing did bring the hammer down on change. You know the adage – guoxin, mintui the state advances, the private retreats. CCP is the dynasty now, but in a decade or less Xi will be gone.

Prohibitions on free speech and writing and thinking and heavy censorship of  foreign work can have regime-challenging impacts, and affect ability to innovate. One can make an argument that authoritarian regimes can eventually collapse because of misadventures with neighbors and adversaries, spurred in part by failure to get accurate or truthful information from outside. Wars and military buildups draw resources from more productive work, and lack of moral freedoms makes the misadventures that end in war more likely. This could be the case for China, with its aggressive posture toward all its neighbors except Russia. (The USSR drained its own resources with a war in Afghanistan). Russian Siberia, though, could be an enormous long lasting gift to China in the next decade when resource development begins.

Refuting #2a – If innovation slows, so what?

The follow-on question – even if indigenous innovation were to flag, what of it? Of course the quickfire answer for China and the US is greater exposure to military risks, whether within the country or for allies. You remember –  “… We must not allow … a mine shaft gap!” Fear is always a great motivator.

Another fear comes from monopolistic domination by leading companies, wherever their loyalties lie. The largest companies in the highest tech industries are able to act like monopolists, particularly if their supply chains are loyal only to them. The current fear is over rare earth metals, used in all computers and cell phones and electric vehicle batteries. Chinese companies, loyal to CCP, have a distinct advantage in this regard. This is the civilization state concept that China observers from Lucian Pye to Christopher Wray have warned us about. All individuals, all businesses are expected to work for CCP.

It is acknowledged that much of China’s technological savvy is due to purchase or IP theft from western companies. A good example is that of designs for military planes and ground vehicles. The exterior physical similarities are surprising. Pictures are available at the US Naval Institute.  But IP consists less and less of individual technique and more cooperative effort, whether at a bench, in a lab or shop. That cooperative effort must be documented. Given that documentation is always available online somewhere, one wonders how long any western advantage could be maintained when tech transfer happens with a couple of clicks. Most researchers and scientists are honest. But threats to family back home can elicit surprising cooperation. The surreptitious Chinese police stations located in cities in the US and Europe work pretty hard to obtain cooperation with CCP, voluntary or not.

Innovation in any industry is not a smooth process over time. There are fits and starts, attributable to scientific knowledge frontiers or sometimes government meddling. Right now, China is experiencing a problem with meddling. National tax or regulatory policies can freeze development, and Xi has done that. Real estate and construction, after-school tutoring, social media and online purchasing have been directly affected. The Xi era has been particularly bad for assessing risk, contrary to the Hu Jintao era.

Francis Fukuyama suggests that lack of any respected succession mechanism in China gives rise to a “bad emperor” problem. A stupid or misguided leader who cannot be removed spells the end of a dynasty. In the US we now see that a democracy is able to recover, however tentatively and wounded, from bad emperors. In the current Chinese case, Xi will have to die or be replaced in some dangerously confused way. Its quite clear that Xi will not be good for innovation. He may slow China development substantially, unless IP theft can replace it.

But there is far more to research and innovation than these high profile industries. In advanced materials, composites and nanoscale materials, AI algorithms, electric batteries and fuel sources, hypersonic engines, photovoltaics, biotech and gene technology, critical metal processing – among other industries – China is said to have a significant advantage over the US, per a 2023 detailed analysis from the Australia Strategic Policy Institute. Much of the work in these fields is still in the basic science stage. CCP does not really intrude there.

(N.B. – the ASPI report is worth exploring in some detail. Available at https://www.aspi.org.au/report/critical-technology-tracker)

pearl clutching

The pace of innovation can become a totalizing scare concept in the US, much like GDP. For some of us, all other elements of the economy, all values, must bow to innovation and furtherance of GDP. This is a version of the McKinsey “you-must-do-everything now, now, now” screech. Nothing must be permitted to diminish innovation or GDP. A more astute thinker than I suggests that we have become accustomed to placing value only on those things we can measure.  CCP is not immune to that sort of feverish pressure.

Even though CCP promotes a rational, measurable approach to governing – everything should be scored numerically and GDP growth is still the most honored goal – China takes a more holistic perspective in practice. CCP allows for values greater than innovation or GDP growth, as we see with the recent crackdowns on several of the largest industries in China – online tech, tutoring, and real estate. The greatest goal is to remain in power.

Crackdowns in those industries address CCP fears of alternative sources of power and fears of excessive debt. Others parts of the economy can remain unaffected directly. If CCP wants to restrict the flow of ideas from outside the country, that is a government preference. Restrictions help maintain internal stability, perhaps at the cost of less or slower innovation or GDP growth.

Let us suppose that China begins to fail at innovation. What can this mean? Will investment in medicine or technology cease? No. Perhaps patents will not come as quickly, or patents in China will not be honored so much outside China. This latter is already true. Most patents are of no commercial value.

We know GDP and pace of innovation are poor proxies for societal health. Paul Krugman makes the critical argument in a short NYT piece High GDP is great, but a vacation might be nice, too. He considers Japanese GDP growth since 1990, when we all thought Japan was going to outperform the US.

He notes that neither Japan nor France feel “behind” even though US GDP has grown much faster. And, pointedly, neither Japanese nor European societies feel as if they are in decline, while American society certainly feels that way. Productivity per worker is higher in the US, but not by that much. The French take vacations, he notes, and work-life balance is important as well. The European social democracies spend much more on people-oriented policies than do the US or China. Government spending in the US – and in China – on education and health care and pension reform would help people, even at the short term cost in GDP.

Catching up

Most observers see the China miracle as studious copying of inventions made elsewhere. This has happened rather too often with IP theft, as with development of the high speed trains and its first commercial airplane. Even the big tech companies, Alibaba, Baidu and Tencent are modeled closely on the original American counterparts. China has been superb at taking inventions made elsewhere and adapting and improving them for the Chinese market. A critical idea – at some point, the ability to adapt and improve becomes the basis for indigenous innovation. In a different context, that is what Japan did about 115 years ago. It took bicycle technology and developed a motor bike and then automobiles. It is what the young US did, copying British methods and adapting them, and then innovating from there.

The book on Chinese development is that China is a catching-up economy, based on adaptation of  thing invented elsewhere. What is needed next, it is argued, is long term thinking based on “academic curiosity and freedom” (Marina Yue Zhang in Demystifying China’s Innovation Machine. Cited in Nature, Is China Open to Adopting a Culture of Innovation? December 21, 2022).

Once you become adept at adapting, future invention becomes much easier. No country has deeper tech supply chains than China, thousands of small businesses looking for a break or a new thing. To suggest that these thousands of small businesses or scientists in labs are incapable of thinking outside somebody else’s box is to ignore the long Chinese history of tech dominance and ignore the PhDs and methods learned by thousands of Chinese researchers in the US.

Sea turtles and finance

China has a major success story in getting researchers once in the US or elsewhere in the west to return to China. The anti-China rhetoric from our former dear leader and the “China Initiative” of the Department of Justice served as a push to get researchers out of the US. Now the Organization for Economic Cooperation and Development (OECD) has published data show the US losing scientific talent to China and other countries, reported in Modern Diplomacy. In 2021, the US lost research scientists to other countries, mostly China, which gained more than 2,408 scientific authors. This was a remarkable turnaround from as recently as 2017 when the United States picked up 4,292 scientists and China picked up just 116. The trend began before the pandemic.

It is not just the push from the US. For more than a decade, a few Chinese cities have been building rather fabulous office and lab complexes to attract “sea turtles” – Chinese researchers living and working overseas – back to China. Offers are tantalizing – very large salaries, promises of lab assistants, fully equipped labs. This is good long term thinking. There have been quite a few successes with this policy, particularly as Chinese in the US come under suspicion of surreptitious cooperation with CCP.

In 2015, plans were being made in Ningbo and its nearby island of Zhoushan for back-office finance buildings, to be used when Shanghai replaced Hong Kong as a global financial center. This was following the 2014 Hong Kong protests. In Hangzhou, there are at least two new office high-rises built to accommodate startups or research related to Alibaba.

Real estate development does not imply scientific or tech breakthroughs. But China is willing to invest in people and their research needs. The Thousand Talents Program is the term for these “reverse brain-drain” efforts in China.

There is, of course, plenty of writing about China tech and innovation. For me, it is telling that none – none – of the research I have read sees moral or political freedom as a constraint. Censorship and political influence are sometimes cited. But within China censorship does not extend to colleagues discussing ways to improve a product, or a different way to isolate a protein or a molecule. True, they can’t get so much information directly from the west. But it can always be stolen or obtained via a Thousand Talents researcher. CCP doesn’t mind those ways of getting around the censorship.

Free to speak, associate, write, form groups as you wish – not

It seems to me Xi’s crackdowns have little to do necessarily with free speech, etc. The current environment is particularly hostile. But tech people, inventors, small business owners are intensely focused on their work, not on freedom to criticize the government. In 2016, my Chinese government friends likened the Xi regime to the early Cultural Revolution. Successful businessmen are at personal risk if they fail to pay sufficient homage to CCP – once they get large enough to matter to CCP.  Wang Jianlin, founder of Dalian Wanda, and Jack Ma, founder of Alibaba are two prominent examples.

But at a much lower level of public visibility Chinese researchers and academics could get outside access if Xi wanted to allow that. Censorship can be as localized as a part of a university campus, leaving access free for particular buildings. When the crackdowns were beginning, Xi’s baby – the Wenzhou-Kean University in Wenzhou – had access to Youtube and Google and the NYT. I used them myself.

Censorship has always been as particular, or not, as senior leaders wish. For about two months in 2010, internet access at the foreign student dorms and the foreign teacher dorm was severely restricted at my school in Hangzhou. There was no problem at all anywhere else on campus. In 2014 and 2015 one of my computers in China was blocked from any internet access at all. My other computer worked fine. Censorship can be fine-tuned.

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Change Management 1/3

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China has changed dramatically in the last forty years. Business writer and thought leader Bob Yovovich tells us that China urbanized in half the time it took the US and with ten times the number of relocations. Such rapid change must have induced complex interlocking social shifts and costs – customs broken, institutions abandoned, social ties destroyed. Now, wither China? Wither CCP?

Three questions in three posts –

Thesis #1  The Central Committee is composed mostly of technocrats, mostly engineers and finance people at the top. Will CCP have problems mitigating social change problems that arise as China modernizes?

Thesis #2   Can a communist regime support innovation in the long term? CCP is doomed because ability to innovate will fade with lack of political and moral freedoms.  And #2a –  a follow-on – if innovation slows, what of it?

Thesis #3  Will Mr. Democracy eventually overpower Mr. Science in Chinese culture? A democratic future must come with modernization.

Post #1 – The Central Committee is composed mostly of technocrats, mostly engineers and finance people at the top. Will CCP have problems mitigating social change problems that arise as China modernizes?

To follow –

     Evidence?

      Antithesis #1 – not American-style politicians, but politicians nevertheless

There are many millions of Chinese who remember the 1950s as a time of famine, persecution, starvation and misery and are now sophisticated world travelers with command of at least one other language and family and contacts around the world. By that measure, change seems to have been managed pretty well.

All those terrible outcomes did happen in the first thirty years of CCP. Confucian thinking was destroyed as a model for family and social relations. Families were destroyed. Many millions murdered or starved. The Four Olds to be eliminated – Old Ideas, Old Culture, Old Customs, and Old Habits were to be replaced by loyalty to CCP.

Chinese lived through plenty of complex social shifts and costs by the time they got to the second thirty years of CCP. I’ve seen intricate wood carvings and sculptures that were once hidden in mud or cement as a way of preserving them from the madness of Red Guards during the Cultural Revolution. Perhaps adaptation to change for the positive is just easier.

But questions remain. China is run by communists. There is no god but CCP. There can be no opposition and free expression is not allowed. Communism wants rationality, the science of science and economics. In particular, CCP is run by technocrats not politicians. We remember what Isaiah Berlin told us about Political Judgment – that good judgment is an art, not a science. Aristotle said the same thing – that political judgment is phronesis – practical wisdom.  Can communism – almost always run by technocrats who want to find technical solutions to social problems – thrive in a modern world?

There is plenty written on these questions, in journals from science to sociology. Too often I think the questions get muddled and answers default to some version of emotivism – that our expressions of truth really amount to little more than personal preferences. With apologies to Alasdair MacIntyre, we get Hooray for the US! or Hooray for democracy! and Boo on communism! without much concrete analysis. Each question is worthy of book-length answers, which I will not provide here. I do want to separate the questions and point toward answers.

The argument is that CCP has no politicians, only cadres. CCP is sclerotic, run by leaders trained in engineering or finance, not public administration. No leader is ever subject to a vote of the people. Leaders have been able to keep their fingers in the dyke holding fast against freedom of expression and human rights, but the pressure on the great firewall is building and leaks continue to spring up anywhere. The western rights movements – civil, women, minority, LBGT – that have been disrupting politics and governments in the west are noticed by the people of China. The arc of history points toward freedom and we can now see … if not the beginning of the end, perhaps as Churchill said, the end of the beginning. CCP has had a good run – the oldest communist party-state and oldest authoritarian regime still living. But this latest Chinese dynasty will come to an end, like all the others in the last two thousand years, sooner rather than later for its blind spots about human nature.

Evidence?

CCP has always had a relatively large share of engineers in top leadership positions. Today’s leaders are mostly trained in finance or economics, but either way they have sophisticated models to provide ways of looking at real world problems. (I’ve always said that social problems could be easily modeled with a variation on a heat transfer model).

Engineers, it is said, want engineering solutions, even to non-engineering problems. That can be true. When I look at big old trees lining my street, I wonder how many 2×4 and 2×6 I could get from each one …. Finance people want to reduce social problems to a rate of return analysis. You can put faith in things you can measure. Its easier to find technical solutions if you just ignore people.

It was an overly rational mindset driven by ideology that created the Great Famine in 1958-62. The South-North Water Transfer Project  and the Three Gorges Dam could be built without much concern for relocation of hundreds of thousands of people and environmental damage. Any “rights” that farmers might have to their land can be easily swept aside when a big real estate project is in the offing.

“Build, build, build” has been the mantra for forty years and is nearly the only Chinese government response to faltering GDP or increased unemployment. This economic and finance model is called “supply-side” stimulus rather than demand-side, which would entail getting more money into the hands of ordinary citizens. In 2023, even as net exports decline, the government response is to build. Engineers and finance people Understand real estate and infrastructure in a deep way. Inputs are eminently measurable. Its bright and shiny. It can last for decades. You can have grand openings. Its – in a word – manly. Stimulating consumption – fixing pension systems, health care, education and social services – not so much.

There are environmental impact statements required for construction of any major public facility. But these reports are of no value, consisting of a few pages of comments from experts and often completed after construction has already begun. Again, the argument goes, an engineering mindset driven by ideology.

My own university in Hangzhou – admittedly, not at the same level as top schools in China – is a science and engineering school. The largest major is business, but the school offers no majors in history, psychology, philosophy (other than the required Marxist philosophy), logic or world affairs. What need would engineers or business people have for such courses?

More evidence is in wealthy Chinese moving money, families and themselves abroad, protests and increasing difficulty controlling social media and young Chinese who no longer believe the government when it says “trust me.” Business owners worry that their investments are at risk not from the economy but from CCP. Dynasties could get away with imperial power dynamics but now the power of the people is both too diffuse and too insistent. In philosophical terms, the looming natural crises – global warming, the melting of Himalayan ice that supplies the Yellow and the Yangtze, the demographic bust – portend that CCP has lost the mandate of heaven.

There are myriad CCP miscalculations on the will of the people. In 2015 five young women were arrested in Beijing for “picking quarrels and provoking trouble”  protesting harassment on the subway in Beijing and Hangzhou. It took an international outcry – international, mind you, not domestic – and the five were released more than a month after arrest.

No question but that there are daily stories of threats and arrests of people making what we would consider innocuous comments online. No question about rule of law or proper representation in court. Courts and judges work for CCP. CCP is the god, and Xi is the prophet.

For policy guidance from CCP, we need look no further than John Garnaut’s 2017 Engineers of the Soul – Ideology in Xi Jinping’s China. Quoting Xi Jinping in 2014 quoting Mao quoting Stalin – “Art and literature are the engineering that molds the human soul; art and literary workers are the engineers of the human soul.”

Fundamentally, CCP is doomed because it only wants to respond in technical ways to social problems. Excess concentration on engineering, finance or economics models – things that can be quantified – doesn’t help.

Antithesis #1 – not American-style politicians, but politicians nevertheless

I contend the thesis grossly misunderstands China and CCP. Academic training has value; and it can be used inappropriately. But the demands of CCP internal politics makes academic training as valuable as it is for any senior executive of a major American company – which is to say, not at all.

As to fears about too many engineers – The easy answer is that good engineers think about all the consequences of their designs. The mad-scientist-cum-engineer is really a fiction, even in China. In the 19th Politburo Standing Committee, Xi Jinping was the only one of the seven with an engineering degree. Only two of  the 25 members of the Politburo could be considered technocrats. James Palmer in 2019 on China’s Overrated Technocrats  – The current crop of leaders is distinctly lacking in engineers; Xi is the only member of the party’s seven-person standing committee with an engineering or science degree. That is in line with a steady trend: Among high-ranking officials born before 1948, who made up the majority of the leadership before this current generation, around one-third had engineering degrees. But for those born after 1948, including China’s so-called “fifth generation” of leadership, only 1 in 7 were trained as engineers. The ratio continues to fall; legal or economic training has become far more common.

While some senior leaders in decades past actually worked as engineers before assuming leadership positions, few of today’s leaders have engineering work experience. Mr. Xi never worked as an engineer. In some (many?) cases advanced degrees in engineering, sciences or law were obtained while the student was also working full time for CCP. That is impossible in a serious academic program. I have personal experience of a couple of my Chinese government students from Illinois Institute of Technology who told me they were obtaining a PhD a couple of years after returning to China. Again, while working full-time. In many cases, these degrees are purchased, someone else attends class as a proxy, and dissertations are plagiarized or ghosted. The point is that these are not technocrats by academic training.

The focus on measurable outputs is a relic of a communist system in which all should be rational and scientific. James Palmer –

… advocates for China’s supposed technocracy are not only wrong about the background of Beijing’s current leadership. They are also fundamentally mistaken about how their training shapes policymaking. China’s leaders today—including President Xi Jinping himself—have been molded less by their education and more by the need to consolidate control and prevail in the brutal internal power struggles of the Chinese Communist Party.

The 20th Party Congress does include five new members (of 13 new members in the 24 member body) on the Politburo who have engineering training. Wu Guoguang at the Asia Society – Aerospace Engineers to Communist Party Leaders: The Rise of Military-Industrial Technocrats at China’s 20th Party Congress. And these five have serious experience as managers in engineering or technology SOE. They come in as experienced business managers rather than as hide-bound engineers, more as business school graduates than as engineers. In any case their first loyalty is to CCP, not to any professional organization or even engineering models of the world. (As an aside, my business school students in Hangzhou had no technical training at all before or during college. I wanted to make a point in my econ 101 course. I told students we were learning the equivalent of  E = ½mv2, but much later they could learn the economics equivalent of E = mc2. The model was lost on them, since they had heard of neither).  

About a third of the new Central Committee members could be considered technocrats, meaning they had work experience in engineering, sciences, or economics. This is a much higher percentage than in recent years. But again, these men come in as experienced business managers, some of international SOE. Some differences with old and new technocrats in the Central Committee –

Source: Cheng Li, Director, John L. Thornton China Center, The Brookings Institution. Chinese Technocrats 2.0: How Technocrats Differ between the Xi Era and Jiang-Hu Eras. At https://www.chinausfocus.com/2022-CPC-congress/chinese-technocrats-20-how-technocrats-differ-between-the-xi-era-and-jiang-hu-eras

In any case, a decade or two of reckoning are in store for leaders and the Chinese people, as excessive investment must necessarily give way to greater attention to consumption and social services in the economy. Michael Pettis has been laying out the necessary policies for a decade at China Financial Markets. The engineers and finance people will adjust, as will the Chinese people. Adjustment is likely to be painful for some leading sectors, but China will adjust as the US has at times over its economic life.

At the highest university levels, students now are exposed to more than just technical courses.

Today all Peking University students, even in its Guanghua School of Management, take multiple courses in the liberal arts, including literature, philosophy, and history. The university also boasts an elite liberal arts curriculum in the Yuanpei Program, named for Peking University’s famous German-educated chancellor of the early 20th century, the philosopher Cai Yuanpei. Across the street, Tsinghua’s School of Economics and Management has implemented what is perhaps the most imaginative program in liberal arts and general education in any Chinese university.

This is from, curiously enough, the 2014 HBR article Why China Can’t Innovate. Nevertheless, that article closes with language reflecting the frantic horse race concerns for GDP and innovation – But can China lead? Will the Chinese state have the wisdom to lighten up and the patience to allow the full emergence of what Schumpeter called the true spirit of entrepreneurship? On this we have our doubts.

Perhaps this is a bit too much, but current CCP engineer/managers-as-political-leaders are closer in temperament to Jimmy Carter than to the evil mad scientist or engineer. CCP still wants to measure output of social work in many way we would find silly. But local stability – the satisfaction of the people – again, partly evidenced by their lack of filing of xinfang – complaints and letters – is a key element in determining promotion of cadres to higher posts.

We cannot ignore the politics of promotion and relationship and guanxi within CCP. We may think of it as social relations or comradery, but it is far more than that. Competition for positions and in-fighting are standard, as are the evenings of drinking and shmoozing that create and cement bonds. The internal politics can be brutal. At the highest level, it is characterized as all or nothing – “I live, you die.”

One’s future can be tied to the future of a leader and cultivation of relationships is part of the politics of jobs at almost every level. Successful cadres have to be politically astute, perhaps not of the wishes of the people but of the extraordinary intricacies of CCP politics. In other writing I have compared politics within CCP to a hotly contested high school election for homecoming queen or social chairman. Friendships can be fickle and enemies can turn into friends. It is a tough and uncertain road. Quite honestly, it is not clear to me which is more difficult – being a politician in the US or in China.

Some more discussion is part of Thesis #3.

Links to Related Articles
Change Management 1/3
Change Management 2/3
Change Management 3/3

You’d do it if you loved CCP ….

The demographic decline is way old news. Some of us were writing about it ten years ago. But the implications are still fuzzy to me. Spoiler – key to the future is consumer spending. Consumer spending depends on there being (1) enough people with (2) enough disposable income. Therein lies the complex Chinese tale.

Michael Pettis has written for years about the implications of excessive debt in China. Good examples are China’s Overextended Real Estate Sector is a Systemic Problem and How China Trapped Itself. But now the demographic changes will start to affect the micro and macro economy. Pettis is one of the few who can write reasonably about this topic, but to my knowledge he hasn’t addressed it. Daniel Rosen has an excellent beginning in his Foreign Affairs article The Age of Slow Growth in China.

Yi Fuxian, a senior scientist at the University of Wisconsin-Madison has written on some of these topics. An example is  https://www.project-syndicate.org/commentary/china-population-decline-will-mean-economic-geopolitical-decline-by-yi-fuxian-2023-02 and https://www.project-syndicate.org/commentary/china-population-aging-lowering-economic-growth-by-yi-fuxian-2023-04  A hat tip to the ChinaCharts guys for the citation.

I’ve long been waiting for some serious analysis of demographic change, requirements for pension and health care spending as people retire, and contributions to the social welfare funds. Smaller population means fewer babies (starting about ten years ago) so in ten years fewer people paying into the welfare funds. People aren’t dying faster, so the age bulge is woefully out of favor for China. The working age population is decreasing about 5 or 6 million per year right now, but I don’t know how many of those are retirees and how many are young people who aren’t there. The demographic impacts on government revenues and spending are of critical importance.

China had something of a baby boom post-famine, let us say from 1962 to 1978, when the one-child policy went into effect. Most of those kids had siblings, but the boomlet lasted less than twenty years. And few of them had more than one child. Now that boomlet cohort is aging, and they get older every year. They are starting to retire now. The US had a demographic dividend from the baby boom generation – those born, let us say, 1945 to 1965. The difference with China is that boomers generally had more than one child of their own, so the boom created at least one minor boomlet from, let us say, 1965 to 1990. The dividend in the US lasted much longer and did not result in a later collapse of births.

Let’s summarize – China’s “pig in the python” demographic model was a great dividend for Chinese GDP, but is now becoming a great burden, a result of the one-child policy. The current “two or three child” policy is a complete bust. Total fertility rates have been below replacement since about 1990, are unlikely to reverse, and foretell with some certainty the demographic conditions six or eight decades ahead. The severe population decline is baked in, regardless of how much stimulus Xi wants to give to the economy or to Chinese men.

So now what? There are a bunch of questions –

My contention is the world is saturated with Chinese goods. There just can’t be great future increases in demand for Chinese-made phones, clothes, cars, tvs or washing machines. Replacements, of course. Development in Africa will arrive too late to help. If anything, Xi has managed to create a wellspring of BALAP – buy as little as possible – from China. Or maybe BANC – buy absolutely nothing from China. Regardless of acronyms, Chinese exports are unlikely to grow much in the next decade.

The infrastructure age is over – has been for more at least fifteen years. Economists see the extraordinary waste in more rail lines, more airports, more expressways, more ports. The real demand has long been met. Current debt problems for local governments are a result of a CCP edifice complex and an attitude of “if you build it they will come.” That worked in baseball. Not so much for people to ride trains. The point is that government no longer gets growth from more construction. It only gets more debt and short-term jobs. It is pushing on a string. Related, demand for steel and concrete will remain steady or fall. OBOR projects helped support Chinese construction exports and jobs, but even that era is mostly over. CCP is learning it will have to reduce interest rates and extend maturities on lots of OBOR loans.

With steady or only slowing increasing exports, there will not be much new demand for farmers to move to cities to work in factories or do construction. Of course these industries will not disappear, and farmers who get tired, hurt or old will be replaced. But new demand for apartments will slow dramatically even with hukou changes.

Real estate and its related purchases – beds and washing machines and air conditioners – currently constitute about 25% of total GDP investment, which itself is still about 40% of total GDP, far too high a percentage for a developed economy. Given falling population demand for new apartments and the severe crackdown on the real estate industry, these percentages must fall, with nothing to replace it.

Related, sale of land for real estate development became a major source of revenue for local governments in the last fifteen years. In some cities – Hangzhou is reported to be one of those – real estate revenues account for more than 50% of total revenues. The problem is severe enough that a major restructuring of central-local finances is in order. But in the meantime, local governments are cutting staff and cutting wages even for long term employees.

Real estate in the form of one or two or five apartments constitutes about 80% of family wealth. Extra apartments are usually not finished inside and are left vacant – they produce no income. What impact on family finances when the +/-65 million empty apartments cannot be sold for a high profit … or maybe sold at any profit at all? (NB – 65 million is about the population of Germany).

Pension systems have long been a source of corruption and mismanagement. Systems are being rationalized, but the demographic pig is going to swamp systems nationally. There will be a lot less money coming in than going out. (Think big American companies that had generous pension schemes dating from the 1950s and then people began living longer and at the same time the companies began streamlining the workforce …) This will require a large central government fix, as already happened years ago in Liaoning Province.

The reason why GDP could grow so fast in China is that metaphorically, it took a farmer picking rice and overnight put him in a factory where he was immediately more productive. Some training was required, but not too much. Training now is much better, but a lot of those unskilled factory jobs are disappearing. Fewer workers means fewer workers per job. That could be ok if rural schools can step up to train replacements for the urban retirees. But I’m not so sure, even with increased attention to rural schools. The generations still on the farm didn’t want to/couldn’t make it in the factory. (See Scott Rozelle’s Invisible China). What impact on wage scales?

Of course, what prospects for American companies selling at retail in China but with fewer people to buy or manufacturing in China as wages continue to go up and international pressures fester.  

Nothing said so far here about pollution, water availability and quality and energy generation. These are each enormous problems of their own. Nothing said here about promoting conflicts with neighbors, including Taiwan and Japan and Philippines and Vietnam and India.

Its pretty easy to point with alarm and ruminate over the impossibilities of the future. I used to worry about tea leaf harvesting on steep hillsides. That work is done by hand, tea leaf by tea leaf. You can’t run a big John Deere harvester through the tea bushes on the steep hillsides. As peasant incomes and opportunities increase in China, who is going to pick tea leaves in the enormous quantities needed? Then I discovered the hand-held trimmer, like a gigantic hair trimmer, that trims and blows leaves into a long plastic bag (one model of many https://www.alibaba.com/product-detail/139F-4-Stroke-Tea-Leaf-Harvesting_62043574397.html?spm=a2700.details.0.0.6e9239ddM3K92l , $330 for one). I can’t vouch for functionality, but perhaps I should just trust my engineering background and let the tea leaves fall where they may. Perhaps I should just trust in CCP to lead.

Yet unease remains. Years ago, a few economists – Barry Eichengreen for one – and demographers wrote about China getting stuck in the middle-income trap and getting old before it gets rich. The middle income trap reminds us that economic systems spawn tough organizational political supporters that don’t want to give up power. That now seems more likely, regardless of what Xi promises re: common prosperity and a “moderately prosperous society.

Yi Fuxian produced articles like Leaked Data Show China’s Population is Shrinking Fast from which the ChinaCharts guys derived a future disposable income figure. The concept in the figure below is to show a chart using data similar to that provided by BLS for the US, although China does not provide such data.

From ChinaCharts https://substack.com/profile/51042600-china-charts

Neither the derivation nor the assumptions are provided. One can see where they are going, but I’m not sure how they got there. What they are trying to show is that younger Chinese have far less lifetime purchasing potential than their parents.

Their conclusions –

–  The feasibility of consumption-led growth in China is gone. The ship has sailed, and the window has closed for any potential reforms. China’s demographics, even adjusted by lifetime earnings, are stepping off the cliff literally this year (2023). It’s an inflection point.

– To compensate for the demographic cliff, China would have to achieve sustained wage growth of ~9% year-on-year to maintain consumer earning and spending power levels.

–  Historical data from Bloomberg shows the most recent print for median wage growth at ~4.7% and falling.

Their Remaining Lifetime Earnings by Age Group figure above seems unnecessarily vague but the conclusion – that significant growth in consumption may not be possible – seems right. That fits with the demographic changes, accompanied by a middle income trap, the necessary decline in GDP growth, the end of infrastructure, the end of great export growth, the need to address debt overhangs, the need for government to spend more on education, health, pensions and welfare, and a world that is less awed by CCP propaganda about hurting the feelings of the Chinese people. If this is such a great civilization, how come everyone is so fragile? And how come they don’t want to make more Chinese to be a part of it?

Notes –

Bureau of Labor Statistics – Consumer expenditures vary by age –

https://www.bls.gov/opub/btn/volume-4/consumer-expenditures-vary-by-age.htm

Barry Eichengreen on the middle income trap and China –

https://www.nber.org/papers/w18673  and

https://eml.berkeley.edu/~webfac/eichengreen/e191_sp12/econ191_conclusion_4-23-12.pdf

More on Monkey See, Monkey Do

Two years ago I wrote a bit about the governor of Florida enlisting students to record and spy on college teachers to ascertain whether instructors were deviating from the permitted DeSantis script on American history and morals. DeSantis (and his GOP ilk) were clearly borrowing policy from CCP, which encourages students to report teachers to CCP discipline inspection organizations for punishment if they mentioned support for … well, anything of which CCP does not approve. Of course the boundaries of such limits are left vague, in accord with CCP practice – no way to tell when a red line is crossed, so self-censorship becomes the norm. See Monkey See, Monkey Do. I warned DeSantis against his choice of Chinese imports, but apparently my entreaty fell on deaf ears.

Now from William Spivey at The Polis comes news of the free expression crisis at East Florida State College – Eastern Florida State College Shuts Down Class Over Civil Rights Discussion. From the Spivey post –

It should come as no surprise that a US government class was canceled on March 9th before it started in Ron DeSantis’s Florida because a single student filled out a complaint form saying they were “uncomfortable with the subject.” Josh Humphries, a political science instructor, sent home the class of twenty students to “avoid a disruptive situation,” according to an EFSC spokesman.

“There’s a climate of fear, an atmosphere created by Gov. Ron DeSantis, that has blurred the lines between scared and opportunistic. The victims of this censorship are history and the truth.”

In DeSantis’s Florida, teachers don’t know what to teach, and administrators don’t know what is allowed. The penalty is severe; they could either lose their jobs, be charged with a third-degree felony, or both. Welcome to Florida! Should this man become President, people will look back fondly on Betsy DeVos, Donald Trump’s Secretary of Education, until she resigned after he tried to overturn an election. We won’t learn from our history because people will be afraid to teach it.

Not only welcome to Florida. Welcome to education under the Xi Jinping Communist Party. Who would have guessed that GOP and CCP would have so much in common?

(Actually, I did. See my series Xi, CCP, DJT, GOP from almost five years ago)