The Economics of China

How can we understand the bright and dark sides of China’s gilded rise? Through the lens of American history.


From the collection: Education

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From the collection Education

In this seven-episode series, Yuen Yuen Ang explains how China escaped poverty and became the second largest economy in the world. Rejecting popular assumptions of Chinese exceptionalism, she shows that China’s path to a mixture of wealth and capitalist excesses is more like the American experience than most people think.


EPISODE 1

Three Chinas: Mao, Deng, and Xi

Professor Ang introduces the differences in Chinese development under Mao, Deng, and Xi

After Class

Takeaways

China’s rise has two sides: rapid, sustained growth + corruption, inequality, and financial bubbles

  • The American analogy of a “Gilded Age” usefully captures the bright and dark side of China’s rise.
  • It also reminds us that China is not unique.
  • Growth is not absolute triumph & running into problems is not tantamount to collapse.

There is not one, but at least three different Chinas since 1949—Mao, Deng, and Xi.

    • Deng’s capitalist revolution delivered the first Chinese Gilded Age.
    • Xi inherited the Gilded Age, and Ang characterizes the last 10 years of his tenure as a “Red Progressive” platform—socially progressive policies carried out through commands and campaigns combined with increased political control.

    Main References

    • 2022. “Has China’s Economic Success Proven that Autocracy is Superior to Democracy?” In China Questions II: Critical Insights into US-China Relationship, Harvard University Press.

    Secondary references

    Economic take-off under Deng

    • 2016. How China Escaped the Poverty Trap. Cornell University Press.

    Xi takes over the Gilded Age

    • 2020. China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption. Cambridge University Press.

    Xi’s Red Progressive Platform

    • 2022. “The Clash of Two Gilded Ages,” Noema, 31 August 2022.
    SUBJECTREFERENCELINKTIME STAMP

    Intro

    0-1:26

    Gilded Age

    HW Brands

    Google Books

    1:30-3:21

    Mark Twain &

    Charles Warner

    Penguin

    2:33

    U.S. Progressive Era 1890-1920

    Library of Congress

    State Department

    LOC

    USDS

    3:22-3:50

    Three China’s: Mao, Deng, Xi

    3:51-4:25

    Mark Twain Quote

    4:21

    Mao Zedong 1949-1976

    4:52-5:39

    Bio

    Centrally Planned Economy

    The Cultural Revolution 1966-1976


    Famine, Poverty, and Mass Violence

    Reform-era China mirrors America’s Gilded Age

    The Clash of Two Gilded Ages

    Ang 2023

    Deng Xiaoping

    5:40-8:20

    Chairman of the Central Military Commission 1981-1989

    Bio

    No Formal Recognition of Succession

    Deng Xiaoping and the Transformation of China

    Ezra F. Vogel 2013

    6:06

    Tiananmen Square 1989

    History.gov

    7:40

    Southern Tour

    1992

    8:02

    Deng’s Successors

    Jiang Zemin 1993-2003

    Hu Jintao 2003-2013

    Bio

    Bio

    8:20-11:08

    Robber Barons

    Hui Ka Yan

    Hui Ka Yan - Founder of Evergrande

    Tiffany May 2023, NYT

    9:36

    Reform Era

    1978-2012

    How China Escaped the Poverty Trap

    Ang 2016

    10:02

    China Per Capita GDP

    WB - China

    WB - Malawi

    10:09

    China’s Gilded Age

    The Paradox of Economic Boom and Vast Corruption

    Ang 2020

    10:58

    Xi Jinping

    2012-Present

    General Secretary 2012

    11:07-15:30

    Red Progressive Platform

    12:13

    Authoritarian Revival

    12:45

    1. Anti-Corruption Drive
    2. Poverty Eradication
    3. Crackdown on Tech & Decadence

    2012

    2015

    2020

    13:11

    China Misses Out of Market Boom

    FT

    14:00

    Decoding Xi Jinping

    Ang 2021

    14:14


    EPISODE 2

    Deng’s Hidden Political Revolution

    Professor Ang rejects the popular impression that China undertook economic reforms without political reforms. In reality, she reveals, Deng launched a hidden political revolution in the manner of bureaucratic reforms rather than Western-style democracy.

    After Class

    Takeaways

    • In reality, Deng launched political reforms with economic reforms, except his political reforms took the manner of bureaucratic reforms, rather than Western-style democracy.
    • Through these bureaucratic reforms, Deng injected “democratic characteristics” of accountability, competition, and partial limits on power into a single-party autocracy.
    • Thus, the real political foundation of China’s economic takeoff was “autocracy with democratic characteristics”—not simply authoritarianism.
    • But Deng’s model was fragile and reversible. When Xi came to power in 2012, he steadily demolished many of Deng’s norms and checks, and concentrated personal power.
    • We should not think of political liberalization or reforms narrowly as only elections. Profound political changes can happen without any changes in regime type.

    Main reference

    • 2018. “Autocracy with Chinese Characteristics: Beijing’s Behind-the-Scenes Reforms,” Foreign Affairs, May/June issue on “Is Democracy Dying?”, invited essay in a print issue.

    “Since opening its markets in 1978, China has in fact pursued significant political reforms—just not in the manner that Western observers expected” (p. 39).

    Secondary references

    • 2022. “How Resilient Is the CCP?” Journal of Democracy, vol. 33 no. 3, 2022, p. 77-91.

    “Xi’s authoritarian turn has shown that [Deng’s] process of partial liberalization is fragile and reversible” (p. 89).

    • 2023. The Ezra Klein Show, The New York Times. (Interview with Ezra Klein) “There’s Been A Revolution in How China is Governed.” 24 Jan 2023. Link.

    2019. Lecture at Camden Conference. “How the West (and Beijing) Got China Wrong.” Posted on Youtube, 16 April 2019. Link.

    Subject

    Reference

    Link

    Timestamp

    Intro

    0-0:07

    China Defies Western Logic

    Fastest expansion in history

    WB

    0:40

    China’s economy overtakes Japan

    FT

    CNN

    0:47

    Xi

    1:00-2:37

    Worried West

    How the West got China wrong

    The Economist 2018

    1. More authoritarian under Xi
    1. China became more ambitious

    Belt and Road Initiative

    cfr

    1:16

    4 Reforms at the Top

    2:38-4:14

    Collective Leadership

    2:40

    Culture of pragmatism

    3:09

    Institutionalized succession

    3:38

    Mandatory Retirement

    4:00

    Cadre Evaluation System

    Key Performance Indicator (KPI)

    Leng et al. 2022

    4:14-5:36

    Incentives & Competition

    5:37-6:49

    Hidden Political Revolution

    6:36-8:02

    Bureaucracy Reform

    1. Partial limits on power
    2. Accountability
    3. Competition

    Pockets of Freedom

    1. Investigative journalism
    2. Non-profit organizations
    3. Citizens can petition or sue the government

    Led to Policy Feedback

    Xi inherits Deng’s Success

    8:03-9:30

    Xi Abandoned Deng’s Reforms

    1. Removes partial checks of power
    2. Centralizing person power
    3. Sidelining premiere
    4. Personality Cult

    8:26

    “The Chairman of Everything”

    An Era Just Ended in China

    Ang 2022

    8:39

    Three China’s

    9:37-10:37

    Political Pendulum

    1. Personalist Dictatorship
    2. Partially liberated rule-based dictatorship

    Emperor Problem

    Francis Fukuyama

    WP 2018

    10:38-11:28

    China-America rivalry

    12:11-End

    1. Interdependent not zero-sum
    2. Gilded Age of capital excesses
    3. Political regressions


    EPISODE 3

    Let Many China Models Bloom

    In Episode 3, Professor Ang explains that China can fit any “China model” depending on where and when you look within the country, given its large size and rapid changes. The one consistent feature since market opening is an adaptive model that she calls “directed improvisation”--a blend of top-down direction and bottom-up improvisation that produces diverse solutions.

    After Class

    Takeaways

    • What the “China Model is not:
      • The “China model” is not top-down planning and authoritarian control.
      • It is not a blueprint pre-planned and executed by leaders in Beijing.
      • China can seem to fit any particular model, depending on where and when you look.
    • What the “China Model” really is:
      • If there is a model, it is best understood as “directed improvisation” (an adaptive system of governance that produces localized solutions)
      • Direction from top + improvisation from below = numerous “models” across China and over time
    • China under Xi:
      • But, in the recent decade, as China has entered into a Gilded Age and faces policy trade-offs, It is harder for Xi’s leadership to give clear directions than before, when China was poor—and the only goal that mattered was GDP growth.

    Main reference

    • 2016. How China Escaped the Poverty Trap, Chapters 5 & 6

    “China escaped the poverty trap by constructing a set of underlying conditions that fostered an adaptive, bottom-up search within the state for localized solutions” (17).

    Secondary references

    • 2018. “The Real China Model: It’s Not What You Think It is,” Foreign Affairs, June 29, 2018 (online).

    “it is inaccurate—and indeed misleading—to equate the China model with conventional authoritarianism”

    • 2020. “The Myth of the Tech Race,” Project Syndicate, Special Edition: Beyond the Tech Lash. April 21, 2020.

    “… the bottom-up emergence of what I would describe as “modular manufacturing” in Shenzhen… upending the traditional model of global mass manufacturing… This creative movement emerged with scant attention, let alone support, from grand strategists in Beijing.”

    • 2021. “Decoding Xi Jinping: How Will China’s Bureaucrats Interpret His Call for Common Prosperity?” Foreign Affairs (web edition), 8 December 2021.

    “The party [under Xi] has no clear answers when it comes to resolving the conundrum of how to tame the excesses of capitalism without stifling its creative potential.” 2018. Keynote Lecture, United Nations and UNDP Cambodia. “The Real China Model: What Other Developing Countries Should Learn from China.” 13 Sep 2018. Link.

    SUBJECTREFERENCELINKTIME STAMP

    Intro

    0-0:10

    The China Model

    Mentions of China Model in 5 Influential Western outlets.

    Source: Proquest, including Foreign Affairs, The Economist, The New York Times, The Wall Street Journal, The Washington Post

    1:17

    Beijing Consensus

    Joshua Cooper Ramo

    FPC 2004

    1:37

    Hu Jintao & Wen Jiabao

    2:22

    Hu-Wen

    2:32

    1. China’s Development is a threat to the world

    Is China’s growth model a threat to free-market economics?

    Zhu Ning 2018

    2:33-3:06

    1. “The Model is Dead,” and it is crumbling

    The China Model is Dead

    Michael Shuman 2023

    China Passes Japan

    David Barboza

    NYT 2010

    3:07

    19th CPC National Congress

    Xi Jinping

    CPC 2017

    3:39

    China is the model ‘blazing a new trail’ for the world

    Simon Denyer

    WP 2017

    4:04

    Not “exporting” Chinese model

    Xi’s 2017 speech

    China Daily 2017

    4:17

    Many Different China Models

    4:33

    1. State,

    Authoritarian capitalism

    Single-party rule, state ownership & control over the economy

    The Economist, NYT

    4:45

    1. Above + export-led growth

    John Williamson

    4:52

    1. Gradual Reforms, not big bang

    Zhang Wei Wei;

    Naughton;

    Rawski

    4:59

    1. Meritocracy, selecting elites by merit

    Daniel Bell;

    Eric Li

    5:08

    Blessed County

    Zhejiang Province

    Ang 2016

    5:53-6:25

    Snapshot 1

    Good enough governance model

    6:26-7:20

    Snapshot 2

    Washington Consensus

    7:21-8:39

    Snapshot 3

    Developmental State Model

    8:40-9:37

    Directed Improvisation

    9:38

    Hidden Political Revolution

    9:43

    Dictator to Director

    10:09

    Socialist Market Economy

    Jiang Zemin & Zhu Rongji

    11:00-11:48

    1. Shutting down bloated state-owned enterprises
    1. Centralizing tax collection
    1. Creating new regulatory services

    Top-Down + Bottom-Up

    11:49

    Xi Zhongxun

    12:30

    Deng to Xi

    Liang Qiao

    Routledge 2018

    12:55

    Shenzhen

    China’s Silicon Valley

    WIKO

    14:25

    Modular Manufacturing

    14:50

    Zhejiang

    Hub of private capitalism - Alibaba

    15:40

    Jiangsu

    State-owned companies

    15:50

    Xi’s Use of Experimentation

    Ang 2016

    17:00

    Xi’ Speech

    Central Finance Committee

    August, 2021

    17:45


    EPISODE 4

    Using What You Have

    Professor Ang explains why conventional linear theories of “growth first,” “good institutions first,” or “fortunate histories first” have all failed to explain how development actually happened, not only in China, but also elsewhere. Development is a three-step coevolutionary process, and the first step, she shows, is “using what you have”--local actors using indigenous resources and local knowledge to kick-start entrepreneurial activities.

    After Class

    Takeaways

    • Political economists have long struggled with a vexing problem: Which comes first in development–growth or good institutions? All three schools of thought (“growth first,” “good institutions first,” or “fortunate histories first”) run into dead ends.
    • In fact, development is not a linear process, but a three-step coevolutionary process.
      • Harness normatively weak institutions to build new markets
      • Emerging markets stimulate and enable strong (modern) institutions
      • Strong (modern) institutions preserve markets
    • The first step of local actors harnessing normatively weak institutions to build new markets can be simply termed, “using what you have.”
    • This three-step, coevolutionary process of development can be found not only in China, but also in Europe, the United States, and Nigeria.

    Main Reference

    • 2016. How China Escaped the Poverty Trap, Chapter 2

    “Conventionally good institutions… are institutions that preserve markets after markets have already been built. Building markets, however, calls for drastically different institutions.” (24)

    Secondary references

    • 2021. “Beyond Elite Innovation.” Boston Review, Forum on “Making Prosperity Local.” In Public Purpose: Government’s Role in Shared Prosperity. MIT Press. Link.

    “using what you have—local actors using indigenous resources and local knowledge to kick-start entrepreneurial activities or solve problems”

    • 2018. “Normatively Weak Institutions Can be Functionally Strong: A Surprising Lesson from China.” OECD Development Matters Blog. April 4, 2018. Link.

    “Normatively weak institutions can be functionally strong, meaning institutions that look weak or wrong by first-world standards may function effectively in developing contexts.”

    SUBJECTREFERENCELINKTIME STAMP

    Intro

    0-0:08

    The Problem of Development

    0:58

    Chicken and the Egg Problem

    Economic growth or good, strong (1st world) institutions

    1:26

    School 1 - First Economic Growth

    The End of Poverty

    Jeffrey Sachs 2006

    2:13

    Jeffrey Sach’s Failed Experiment in Africa

    Erika Fry 2013

    2:26

    The Idealist

    Nina Munk 2014

    Same

    School 2- First, Good/strong Institutions

    2:56

    What is Governance?

    World Bank

    3:11

    School 3 - A Fortunate Past

    3:43-5:10

    Why Nations Fail

    Daron Acemoglu & James A. Robinson 2013

    3:46

    Stefan Dercon

    Springer 2023

    5:02

    Use What You Have - Forest Hill City

    6:26-16:03

    The Protagonist: Forest Hill City

    Ang 2016

    7:35

    Part 1: Partial Property Rights

    7:48-10:40

    1. Private ownership was taboo
    2. Implemented market reform
    3. What type of property rights?

    Wore Red Hats - Some private enterprises disguised as township and village enterprises (TVEs)

    Part 2: From Partial to Informal Property Rights

    10:41-12:46

    1993

    Socialist Market Economy

    Post-1993

    Restructuring

    11:27

    Speed Money

    12:07

    Part 3: More formal (but still incomplete) private property rights + cut bureaucratic predation

    12:47-14:30

    Part 4: From “Speed Money” to “Access Money”

    14:31-15:16

    Access Money

    Ang 2020

    14:48

    Forest City Hill Summary

    15:18

    Building Markets is not the same as sustaining markets

    16:42

    Harnessing normatively weak institutions to build new markets

    17:41

    Examples Beyond China

    1. Late Medieval Europe
    2. 19th Century America
    3. Nigeria’s Nollywood

    18:20

    19th Century America

    18:28

    Process of Development Changes

    1. “Weak” institutions for building markets
    2. “Using what you have”
    3. “Strong” institutions for preserving markets

    18:38

    Late Medival Europe Contract Enforcement

    18:45

    Communal Responsibility System (CRS)

    19:14

    Market growth alters preferences

    20:02

    Modern institutions sustain markets

    20:25

    19th Century USA

    20:38

    Taxless Financing

    21:05

    Market growth altern preferences:

    Banking Crisis of 1837

    Harvard Business School

    21:45

    Modern institutions sustain markets -

    Get rid of taxless finance & uniform tax codes

    22:17

    Nigeria’s Nollywood

    22:38

    “Use what you have” to build new markets -

    Filmmakers leverage piracy

    24:01

    Market growth alters preferences and resources -

    Industry growth increased the demand for quality production

    24:45

    Modern institutions sustain markets -

    Professionalizing the industry and protecting IP

    25:21


    EPISODE 5

    China’s Gilded Age

    June 26, 2024 at 12:00PM ET


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    After Class

    We have gathered a set of online supplementary resources for those who wish to dig deeper into the references Professor Ang presents in the lectures. Click on the “After Class” button beneath each episode to learn more.

    To give you a head start on exploring the economics of China and Professor Ang’s brilliant research, we have also compiled a reading list and reference page on Zotero.

    Reading List

    About Your Instructor

    Yuen Yuen Ang is the Alfred Chandler Chair of Political Economy at Johns Hopkins University. She is the first-named professor at the Center for Economy & Society and a faculty member at the SNF Agora Institute and Department of Political Science. Ang is a cross-disciplinary scholar of political economy, focusing on China and the themes of development and innovation. Her work has been recognized for both its scholarly and public impact. She is the inaugural recipient of the Theda Skocpol Prize, awarded by the American Political Science Association for “impactful contributions to comparative politics.” Her two books, How China Escaped the Poverty Trap (2016) and China’s Gilded Age (2020), won the Peter Katzenstein Prize (political economy), Viviana Zelizer Prize (economic sociology), Douglass North Award (institutional economics), and Alice Amsden Award (socio-economics). She also writes regularly for major outlets like Foreign Affairs, Project Syndicate, and The New York Times.

    Learn more