"Reforms start with breaking rules"

A writer challenges the standard American view of China.

The internet didn’t work on a flight back from Indiana yesterday, and this was so helpful in allowing me to focus that I’m thinking of how to replicate it. Maybe just put the phone in airplane mode for an hour a day.

I spent the time reading a book in preparation for an interview. The New China Playbook: Beyond Socialism and Capitalism is by Keyu Jin, who offers her perspective on the world’s second-largest economy.

The author was born in China and educated in the United States. She later worked for a Chinese bank regulator as well as the World Bank—and she doesn’t take the standard American view of China. Setting aside hot-button issues such as the future of Taiwan, she instead studies China’s economic growth with some understanding of how many Chinese citizens see it. Whether you agree with her analysis or not, her different perspective is bracing and challenging.

Jin takes a nuanced view of China’s state-directed capitalism. The state functions, she argues, because the Communist Party bureaucracy builds on a centuries-old tradition of centralized power. Chinese emperors relied on a well-educated bureaucracy whom the people learned to respect and obey; that tradition carries over, and sometimes the system has worked more effectively than Americans might suppose.

Yet when it comes to starting businesses or making money, the populace is known for strategic disobedience. She quotes a Chinese saying, “Reforms start with breaking rules.” She traces the way that Chinese entrepreneurs grew alongside the state form the 1970’s onward, sometimes defying the laws that limited private businesses and even risking jail in order to grow their businesses. Slowly the state realized the benefits of private enterprise and embraced them.

The state’s immense power over the economy makes China vastly different than the United States, yet competition sometimes flourishes under state control. Chinese mayors compete to lure private companies to their cities, just as American cities do. When their local economies thrive, the mayors take political credit and advance their careers toward higher positions in the Communist Party. They may also simply profit personally.

When this symbiosis fails, local governments fake it, spending massively on roads or bridges whether they are needed or not, or just making up rosy economic numbers. Apparently if you add up the GDP as reported by China’s individual provinces, it is greater than the national GDP, which suggests padded numbers.

Of course much of the growth is real. Jin maintains the economy improved—lifting hundreds of millions of people out of poverty—only partly due to state direction. A bigger factor is that Chinese workers became far more productive, moving from farms to urban businesses. If workers can continue that productivity growth, China may pass the United States as the world’s largest economy—and if not, not. She says it will be hard. China’s growth rates have been leveling off somewhat. I’ll be interested in learning more when we talk.

I’m glad you’ve read this far in Differ We Must. That’s the title of my forthcoming book on Lincoln’s life, as told through his meetings with people who differed with him. This Substack aims to explore our modern-day differences and disagreements.

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