There are at least two hot trends in today's China research: security studies and economic studies. When written from the outsider’s perspective, the former bends to a more hawkish look at China’s role in the Pacific. Economic studies on China, however, give the world’s second largest economy mixed reviews. Voices like Dr. Kerry Brown (British Diplomat) and Keyu Jin’s latest book encourage analysts, policy-makers and investors to strongly consider China’s cultural, historical and social context enriched with a linguistic lens that most China hands simply lack.
Keyu was born in China, schooled in the United States and now lives in London as a sought-after China financial analyst. Her new book, “The New China Playbook” is a fair look at China and the Chinese Communist Party’s (CCP) strengths, weaknesses, challenges and future prospects as a global financial leader. Keyu dissects various stages of China’s economic growth since the late 1970’s arguing that CCP leaders opened China’s financial system up gradually, stimulating the economy from one decade to the next with consecutive top-level state-directed and manipulated reforms. Rural land ownership and private investment, WTO entrance and State-Owned Enterprise (SOE) privatizations, one-child policies, housing cost controls and private tutor bans etc. are each single examples of massive economic shifts; CCP levers and attempts to regulate what Keyu calls the Mayor+Market Economy or China’s Hybrid Economy.
What makes each very readable, and thoughtfully organized chapter so impactful is how Keyu connects various economic phases and societal reactions to the important cultural context. Keyu shows how Confucian thought, visions of China’s past empire, scales of government trust or the embedded meritocracy all influence economic and development conditions. Keyu admits that China’s financial system is immature, lacking solid institutions, which is why the most successful businesses have learned to read and adapt to the specific demands and cultural perceptions of China’s consumer millions.
Chinese citizens, as a result of the one child policy (1980), had 30% average savings; spending an average of 25% of income on education for their children regarded as the pathway to financial stability and success. Keyu’s earliest economic research revolved around the continuing impacts of China’s one-child policy and related new contemporary social and economic challenges. Even with the CCP encouraging more child births and banning nation-wide school-aged tutoring in the last two years (with billions of dollars-worth of losses to tutoring companies) other and unexpected global shifts continue to keep Chinese families small.
Keyu provides dozens of examples to argue against the stereotype that the CCP top-down authoritarian management of China’s economic system is inflexible and shuts down innovation. Private companies, when given the opportunity, ran over the SOEs. Chinese savvy entrepreneurship took advantage of the new legal economic spaces, intentional loop holes, shadow banking and in some cases outrightly challenged inconvenient regulations (at the local level) which all contributed to millions of new capitalists founding thousands of companies and launching China into what will likely be the world’s largest economy in another ten years.
But Keyu also provides some honest balance to China’s dragon economy. While the system is flexible, it is not efficient (pgs. 146-157). There is zero correlation between China’s GDP growth and its stock market values meaning that 100 RMB invested in 2000 was still 100 RMB in 2020. China is a long-way off on currency strength and currency proliferation, stock and bond investments. According to Keyu, China needs to work on its soft power indicators like transparency, predictability and reliable financial mechanisms before it is ready to offer its market as an alternative to the US system and dollar. The required reforms equate to a “complete overhaul”, China’s impressive growth and success since 1978 not-with-standing.
In short, the CCP has not been willing to release its control on the Chinese market which on the one hand has likely guarded the system from any instance of financial collapse common to almost every other large free-market economy. On the other hand, were more predictable policies and transparency to be applied to this economic experiment, to what extent would it maintain its “Chinese characteristics”?
China has other power influences besides its economy to include its tech and Artificial Intelligence research and application. Keyu’s book artfully interweaves a discussion on China’s innovative vs. revolutionary tech market. Indeed, it is a common argument to accuse China’s state-directed system of unfairly funding tech production and propping up otherwise failing industries. But unlike its superiority in revolutionary technology during the 14th century, in the 21st century, China’s edge is in adapting things like solar energy, electric vehicles, space vehicles, facial recognition and smarts phones to a more profitable, creative, high-quality and consumer-guided product.
Turning to China's global influence, what of China’s financial system can be replicated elsewhere? China offers its model as an example to the developing world and has been active in building the economic connections through the Belt and Road Initiative (BRI) along with trillions of dollars-worth of infrastructure and development loans. How much of China’s economic outreach is more a political self-interested gambit demonstrating competition with Western sources of assistance instead of a model worthy of replication? How much of China’s Mayor + Market Economy depends on traditional cultural concepts, mercantile strategies, familial loyalties, guanxi and longstanding Chinese imperial dependency and pride? What exactly are Zambia, Algeria, Pakistan, Angola, Indonesia, Nigeria, Kenya and Sri Lanka learning about the Chinese model that can be applied to their specific contexts for long-term sustainable development?
On the one hand, Keyu would like would-be investors to believe that China is not a “difficult market” as long as one understands how to navigate the cultural landscape, shadow-banking network and can comply with the government’s eyes and ears in every corner of daily life and business activities. The above, by definition, sounds exactly like a difficult market if still replete with opportunity and promise.
Overall, Keyu’s book is a breath of fresh air in the way that it provides necessary critique and praise without supercharged geo-political inflammatory statements. To be sure, Keyu has an agenda as the daughter of the President of the Asian International Investment Bank, Jin Liqun. Keyu is a proud Chinese national, sharing her critique of China’s economic condition and a criticism of at least America’s shallow understanding of the same. If there was a Keyu alter-ego would he or she be able to provide similar honest feedback living in China and still receive the same positive reception without threats to their livelhood?
Keyu’s thesis does not provide extensive comments on the South China Sea claims, Uighur controversy, espionage laws or economic calculations in relation to Russia’s Ukraine invasion. There is enough in the “new playbook” to tackle in direct relation to the economy and development. On the one hand, the majority of Chinese citizens care more about finances than global politics. On the other hand, ignoring tough security questions is exactly why the various main streams of Chinese culture studies, Chinese security studies and Chinese economic studies, often come to three very different conclusions on China’s overall system, vision and purpose.
Finally, the book offered plenty on China’s past and current playbook but only minor prescription and general comments for what could be “new”. The “new playbook” seems to put all its hope in the young generation of big spending luxury-seeking Chinese nationals, which, ironically, is what the old generation claims is everything wrong with China. It would seem that in the near future China will continue an internal battle on the definition of traditional identity while at the same time balancing the desire for outsized external influence on the world’s economy.
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It gave me a better idea about China's economy
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Must read for those interested in China's economics and politics
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