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Hey, Cynica listeners, a very happy Chinese New Year to you. I am just back from Switzerland, so no regular show this week, plus it’s Chinese New Year and all. But I have a very special treat for you, courtesy of my good friends at the Asia Society of Switzerland. I was just in Zurich, and I gave a little talk there, which was lots of fun, and I sat for an interview for their podcast, which you can hear in a week or so. They also graciously offered me a recent podcast of theirs to share with you Cynica listeners.
Just after the U.S. election, they held their annual State of Asia event, and that’s what I’ve got for you this week: the State of China. You will hear a quick introduction from Remco Tannis, editor of the Asia Society of Switzerland’s podcast, and he’s going to introduce the three guests as well as the moderator, the South China Morning Post’s Europe correspondent, Finbar Birmingham. Two of the guests will be very well-known to listeners of this show, as they’ve both been on before, and quite recently, in fact.
It’s a Xinwang of the Center for China and Globalization, who is now pursuing graduate studies at Princeton University. He was on the show last summer, I hope you remember. And Adam Tooze, who I rate as one of the truly towering intellects of our time. The third is somebody Adam introduced to me and whom I got to know a couple of years ago, and is now a friend, I dare say. Her name is Wang Qing, and she is the host of the popular podcast. It’s called The Weirdo in English, and was really instrumental in getting Adam’s fantastic chart book newsletter published in Chinese last year.
Special thanks to Nico Lukzinger, who heads the Asia Society Switzerland. A dear friend, he’s had me there many times now, and I hope there will be many more. Let me quickly add that Jeremy Goldkorn will be coming back to join me one Chinese lunasolar year after the last time he was on, to talk about a very interesting topic, I think. Are we on the cusp of, or indeed in the midst of, a narrative shift on China? What with the whole TikTok refugee thing, which, you know, many young so-called refugees have described as an eye-opening experience over there on Xiaohongshu, with a very disruptive advent of deep seek.
And, of course, all of this happening at a moment of growing awareness of China’s green transition, its robust EV sector, and frankly, in light of the comps to what the U.S. is going through, I mean, I sense something changing. We’ll see whether Jeremy agrees, but I’m also curious to see whether you do. So record yourself on your voice memo app, or whatever you want to record on. Send me that file at cinecapod at gmail.com. A minute or so is fine. Let me know what you think, and I’ll put some of the good ones into that show.
Now, here’s Remco Tanis, and I hope you enjoy the show. From Asia Society Switzerland, this is State of Asia. I’m Remco Tanis. China is undergoing unprecedented changes, both in its economic growth model, as well as, for example, in the rise of pragmatism among younger generations, who are no longer driven by aspirations to become billionaires in Shanghai, but seem perfectly happy to settle for a less stressful existence in Kunming, Zhengzhou, or other second and third tier cities.
And then there are the looming tariffs, which incoming U.S. President Donald Trump promised to impose. We discussed the state of China, touching all these points and many more at our third State of Asia conference, which we hosted last November in Zurich. I’m happy to bring you that conversation here on the podcast today. You’ll hear from Czijian Wang, research fellow at the Center for China and Globalization, a non-governmental think tank in Beijing. From Adam Tooze, economic historian and professor at Columbia University in New York. And from Qing Wang, host of the immensely popular Chinese language podcast The Weirdo, where global Chinese discuss everything from geopolitics to shared anxieties, things that seem to be joined at the hip nowadays.
The discussion is moderated by Finbar Birmingham, the Europe correspondent for Hong Kong newspaper South China Morning Post. We want to talk about narratives in this session, and I want to lead with some of the narratives that we hear about how China views the U.S. election. I mean, speaking to my colleagues at SCMP in advance of things, the consensus was, when I spoke to them, that China wants Trump. That was broadly what I heard from my colleagues because whereas he will bring chaos and unpredictability, perhaps the Chinese can hold their nose for four years and batten down the hatches and hope that he will burn bridges with the U.S.’s allies, that maybe the U.S. will be in a less powerful, less structured, it’ll just be in a worse state by the time he leaves office.
So I want to, first of all, ask Zichen. I mean, I know this is, China’s not monolithic. There are many views in Beijing and among government officials. Can you explain, perhaps, how this argument is seen among the policymakers that you know, and what are the dividing lines? Well, thanks for the question. That’s a really big one. And I think the election is over and we now have a president-elect who everyone knows is quite unpredictable. I’m not sure there is a consensus in China’s policy community on who China prefers to be the next president of the United States.
And I’m actually not very convinced that, you know, China would prefer Donald Trump because he would wreak havoc or, you know, create a lot of instability or chaos within the U.S. or among its allies. I think that view is fundamentally rooted in the understanding that China-U.S. relations is a zero-sum game. And I don’t think China believes that, you know, the U.S. becomes weaker than China benefits because I think China benefits from stability, from peace, from a mutually beneficial relationship with not just the United States but also the rest of the world.
And Donald Trump is simply unpredictable and nobody knows. I’m sorry, but maybe we will have to get up in the morning and check out X, formerly Twitter, and see what he tweeted out at 5 a.m. just now. And we’re going to repeat that sort of history. But on the other hand, I think Donald Trump is not very ideological. You can describe it in a way of pragmatism. And, for example, the current Joe Biden administration has put 100% tariffs on Chinese EV exports to the United States.
And I think there are rules at the Commerce Department which basically bans any Chinese EVs. But President-elect Trump has said that he would welcome Chinese EV investment in the U.S., you know, which would contribute to the local economy, to job creation. And, you know, his very close partner, Elon Musk, basically turned around the company with his giga factory in Shanghai. And Shanghai’s giga factory is like the turning point for Tesla. And Elon Musk has visited China quite a few times.
He has met senior Chinese leadership. And his mother visited China. So I think that’s, you know, what we are going to have is a very interesting four years ahead. But also, I think, you know, China would want, you know, President Xi Jinping sent a congratulatory message just a few hours ago where I think the Chinese leader laid out his vision for China-U.S. relations, which he hopes. And China is quite consistent in that aspect, that it wants a mutually beneficial, consistent, constructive relationship.
You know, when Donald Trump was in office, the first time before he took office, he took a phone call from then-Taiwanese leader. And that was quite a surprise. I think, you know, the Taiwan issue is the fundamental, you know, the Chinese political foundation of China-U.S. relations. So Beijing would hope that, you know, he would send, he would no longer send any wrong signals on this issue, which would be of paramount significance.
Yeah. Well, the Musk issue is the wild card. I agree with you. I mean, I’ve seen a few stories over the last few days about Musk’s very close economic relationship with China is sort of what policymakers in Beijing will be looking at as perhaps some leverage. Jing, can I turn to you and ask you about how Chinese society, how do your listeners view this situation? I mean, is there any sort of preference or, I mean, you know, Trump, I mean, in Hong Kong, for example, you know, you see these opinion polls and Trump was actually far more popular than the Biden or Harris administration.
And that’s a legacy thing from the sort of era in which I think Hong Kongers thought that Trump would stand up to the Chinese state more than the Democrats. But on mainland China, how do you see that issue? Yeah, maybe two points. One is to add to Sichuan’s point. I think this is not a zero-sum game. And from what I have observed from the Chinese social media platform and also the interactions I have with my audiences through the podcasting, I think surprisingly, there is a sense of indifference towards this U.S. election compared to the previous one.
So I’ve covered in national affairs for Chinese audiences for the last 10 years, including the one in 2016 and 2020. And I felt this from the election, the general enthusiasm from the Chinese public to talk about this election is sort of a plan in a way. Sure, there are discussions. It’s important in national news. But I think the mentality of the general Chinese public since 2020 was there was a sense of disappointment.
Because around that time, there was the hope that Biden administration would pursue a different approach, a different China approach compared to Trump. But I think then it turns out to be a sort of continuity or even an expansion of what was already there. So then it became for Chinese public, if you look at it from the bilateral relationship perspective, there is no, you know, no preferred scenario for China, particularly because I think you wouldn’t say none of them are China’s friends. So it doesn’t matter.
Yeah, so it doesn’t matter. It’s sort of apathy. One more thing I want to add, which is from the gender perspective. And of course, like China is a large country. So we get the front perspective, different group. And I think for the type of audiences I am dealing with, I think there is a deep disappointment in terms of how this, you know, reflect, reveals what kind of gender politics is right now in the US.
And I think it’s a tragic day for women’s race, it’s a tragedy for American women, but also for women around the whole world in the trunk is a figure with well-documented history of misogynist and even sex crimes. And I think that’s really hard to process for a lot of my listeners who are mostly young women in China, who are the Chinese version of Charlie’s cat lady. And so I see this result of American election as a crisis of global masculinity and it’s a global gender crisis.
It’s not just about, you know, China, US is about, I mean, a global calculation that has been wanting to make some changes. But this is definitely an upsetting moment for women across the whole world. For sure. Adam, look, this is about China, but I have to ask you about Europe here. The German government’s on the brink of collapse. Just this morning, in fact, I saw the EU correspondent for Der Spiegel saying that the leader of the free world is now Ursula von der Leyen.
So what a time to be alive. I want to ask you about where Europe fits in here. Are we sort of adrift in the middle of, you know, Trump on one side who hates Europe, who hates the EU, perhaps is a more accurate way of describing it. But then China, with which ties are incredibly testy, Europe, the EU is rudderless, I think, leadership wise, there’s no real sort of inspiring figures on the horizon. Where do we stand? Is this just disaster for Europe?
We will get back to China really quickly. I’m going to make this super brief and we agree we have to speak to it. But I want to get back to the points of my co-panelists made as quickly as possible. I mean, I think there’s no coincidence about the fall of the German government. I mean, you didn’t even call it fall is, I think, misappropriate. This is a controlled demolition. This is a building that needs to come down. They’ve been waiting months to find the right opportunity. They needed something that was significant enough to make this look less trivial than in some senses it is.
And the Trump election provides that occasion. I actually do think if one was regarding this from the position of European statecraft, we need a solid government in Berlin. We don’t have it currently. The sooner they get to the Kenya coalition of the three big forces in modern German politics, which are not the liberals, but the Christian Democrats, the SPD, and the Greens, the better because that actually provides a platform.
I was just really struck. Actually, I wanted to come out to this gender crisis point. I think Ching’s analysis is spot on for the United States and China, and there’s some sort of mirror images of each other.
And I think it’s really powerful and analytic as she was saying that. And you didn’t ask me about Europe. I wonder whether it really does buy in quite the same way in Europe. And I think then the answer is when you pause over and linger over it, it does to a degree. Right. And the AFD, if you look at the profile of its voting or if you look at the profile of the voting for whatever Farage’s party is now called in the UK reform or you look at the voting of the far right in France.
I think it confirms Ching’s thesis that there is a because all of those show a predominance of young men. If you look at South Korea’s political profile, you see the same phenomenon there with a very marked difference between young Korean women and young Korean men. Men are female leaders in the European far right. Yes, exactly. And so it’s this weird, I think this is a really fundamentally important analytic through which to view this very strong shift for Latino men in the United States.
So it’s generally some cross hatching of gender with class and then maybe in the American case, ethnicity or race that produces this extraordinarily powerful effect. And it’s certainly when I was speaking to I’ll just end with this anecdote, I had a series of meetings with a central committee member in Beijing in the summer, a long, protracted conversation. I mean, he was quizzing me about Trump and how to read it.
I was like struggling to think, what a central committee has a staff that tells him everything he needs to know. But when I said the single most decisive difference on this is gender, all of his staff went, oh, my God, what an interesting question we not thought about. And he literally staffed, so a central committee, top 204 people in the Chinese leadership. He dedicated this question to a bunch of his staffers to go away and analyse it, because I don’t think they’d even thought about it.
So I think it’s a really central question to organise our thinking around. Yeah, very interesting. Zichen, look, Alethea was talking this morning on their discussion about how perhaps events in America will have overtaken slightly discussions in Beijing about stimulus and how do they, what do they do here.
So let’s pivot a little bit to that. I mean, do you agree with that? I mean, can you explain from your very much in the weeds perspective of how the sausage is made in China? I mean, from the outside, it looks as though this has been very slow. Why are they not moving more quickly?
And again, it feeds into this narrative that we perhaps have as Westerners or outsiders that Xi Jinping can flip a switch and all of a sudden the stimulus flows. Yeah, I was here when Alethea was on stage and she’s a very good friend. I’m very privileged to have gone on to her podcast.
Yeah, she mentioned, for example, there is an ongoing standing committee session of the National People’s Congress where the Chinese government is basically adding to the central government deficit by an unspecific amount of trillions of yuan of fiscal deficit. So the idea is for the central government to raise money through the new national debt and swap them with local government debt because basically the local government cannot pay for its debt any longer.
I think the stimulus effect from this debt swap by the central government from incurring more debt is that perhaps contrary to popular perception, you know, China is led by the Communist Party of China. It is a highly unitary, centralized state. But in terms of fiscal spending, it is very, very decentralized. Local government spending accounts for something between 83 or 85 percent of the overall government spending in China because the local governments have been running short of money.
So the fiscal expenditure in China has been very low for this year and the year before last. So the net effect of, you know, basically for the central government to raise money and give it to the local government is a form of fiscal stimulus in China. And the reason for that is, of course, you know, the local government have a lot of spending responsibilities and in the past they relied on the sales of land to the real estate developers.
That’s like a very big revenue for them, but the real assets are not selling and the prices have been falling. So that’s put the local government finances on a very, very different level. I think coming back to the question, you know, with regard to China’s domestic economic policy and, you know, its relations with the United States and the rest of the world, I think it’s sometimes perceived that Chinese domestic policies are aimed for elevating China to a bigger stage, to a higher role internationally, to rival, if not to displace or replace the United States.
That’s more or less I think in many people’s minds, but I think the fact or the Chinese perception is the other way around: the foreign policies, the external policies are first and foremost aimed at facilitating a conducive environment for domestic development because it is a huge country. 1.4 billion people. And as Alicia said, its GDP per capita is 30,000 US dollars, which is very low, it’s lower than Bulgaria, I think the lowest in the EU member states.
So China still has a lot to do domestically. I mean, if you observe Chinese diplomacy, its relations with various countries for the past year or two, you come to see, for example, the Chinese troops and Indian troops disengage on the border very recently. The ties between China and Australia are now better than two or three years ago; there are no additional tariffs by China on Australian goods. The British foreign ministry’s foreign secretary was recently in China, and China seems to have turned a corner with Japan. Additionally, China tries, although it is definitely unhappy with all the export controls, but it tries itself to maintain the China-U.S. relations on a stabilized track, although we don’t know, you know, what would happen now that the White House has a new host at its house.
So I think the Chinese are trying to stabilize their external environment to provide a better atmosphere for domestic economic development.
Adam, you wanted to come in on a point there.
Yeah, it’s three really quick points. First of all, to get in the woods position, you’ve got to read his blog, Pekingology, it’s absolutely essential reading, indispensable source translation of the running commentary and debate within the Chinese elite, indispensable.
The second point is that to pick up on the point Sishan was making about local government: when we say local government in China, the units are the size of large European nation-states because it’s 1.4 billion people. So to me, the most powerful and useful analogy here is the EU analogy. When we’re talking about fiscal policy rebalancing between local and central government, we’re talking about something as protean and undecided as the fiscal compact within the EU.
In a sense, and this goes to the bigger point that Professor Lan at Fudan makes very powerfully, that China’s recent economic growth, as much as anything, is about making the Chinese national economy as a coherent unit. When you start with China in the 80s, it wasn’t just poor; it was incredibly regionalized, right? Because it had very little infrastructure, very little connection, it’s 1.4 billion poor people in a society that’s not tightly integrated.
The growth of the last 30 to 40 years is about making the Chinese nation in a material way. And part of that is finding a fiscal structure that works. These are questions that go back in Chinese Republicism to the 1920s when the federal option was very much on the table. And this question is now coming to the fore in a very dramatic way. It’s as open-ended, protean, and creative as that.
There’s quite a lot of scope there for dealing with balance sheet issues as there is in the EU. And the challenge they have to address is no less historic in its significance. Although it’s useful to apply a macroeconomic lens that says China had a credit boom and a real estate boom, and now the bubble has burst, it’s an absurd understatement of what actually happened, which is that 500 million people were urbanized and several hundred million people were moved within China’s cities.
They’re not pricking a real estate bubble. They’re totally shifting gear at the mid-phase of national development from a heavy industrial and construction-led growth model to a new phase. In other words, we ain’t seen nothing yet. We don’t know what China looks like when it transitions from that infrastructure-led growth to manufacturing-led growth.
And so in both these ways, it seems to me we need to sort of escape the superficially illuminating and analytic that macroeconomics provides and actually think more seriously about the scale of the institutional change that’s going on in this huge complex.
If I may add a point that Adam also mentioned, it is about manufacturing-led growth. This is something Alicia also touched on. I came across a quote by Bob Lighthizer, who probably gets another senior position. He said in an interview with the Wild China a year back, there was a quote, “No country got great by consuming. They all got great by producing.”
And I think China believes that. If you go back to Alexander Hamilton’s report on manufacture, that’s like the Chinese playbook. It is intended to, you know, China is now a leading producer of EVs, solar panels, and batteries. I think the Chinese leadership has determined that this is the path to stay on, to upgrade its manufacturing capacity.
You know, when we grew up in China, I think this is something we were all taught at school. It’s like China was churning out eight billion T-shirts a year in exchange for a Boeing 747 plane. And that’s just in the Chinese mind, and China didn’t like it. Now it is in the process of producing its own jetliner, which is, I don’t know, it may become a competitor with Airbus and Boeing in a few years.
And, yeah, I think China is indeed targeted at making the most of manufacturing.
Yeah, I want to bring Jing in here, and we will get back to manufacturing. There’s a lot I want to talk about on industrial to manufacturing and so on. But the consumption is where I want to go with you, Jing. Can you talk to this? Is it a struggle that they, we look at it from the outside and they say China can’t increase or isn’t increasing consumption? People aren’t spending more money.
Is it that this is a struggle, or is it a political decision? They’re not struggling; they just don’t want to. Can you talk from the perspective of the regular folks in China? I mean, what’s the mindset there? Why aren’t they, you know, when we look at it with our Western tinted spectacles, we’re thinking, why aren’t they spending more money?
So I can only speak from my own experience and observation. I think it is not like Chinese ordinary people don’t spend money anymore. It is that they want to spend money in a smarter way compared to before, in a more rational way. You know, I spent the last 10 years in Europe, and every time I return to China, I’m always a little bit surprised or even overwhelmed by how people actually consume there.
They have all sorts of like, you know, social media platforms that enable you to spend more and more money. Like live streaming buying is super popular in China, and it’s like, it creates a huge growth number for the economy. But I think there was also a lot of irrational thinking or behavior. For instance, my mom was one of the quote-unquote victims, because she often buys a lot of things she doesn’t really need.
And so I think right now with this economic downturn and second on this economic policy from the government and also, I think there is a traditional thinking from the Chinese side is like, oh, when I see it, it is probably going to like in the coming period, we probably going to experience an economic downturn, then we want to plan like from now.
For instance, some of my friends and listeners have decided to have this consumption downgrade. For example, if you live in Beijing or Shanghai University, you see and own a part in there. If you manage to sell the property and move to cities like Chengdu or Dali, which are now becoming like really hotspots for young Chinese people to have an, you know, alternative, kind of a slowing down or even degrowth type of lifestyle, it’s also getting popular.
So I think with the current dynamic, I think it’s also a good opportunity for ordinary Chinese people to think about not just, you know, spending to buy more but also to do it in a smarter, more rational, and well-thought-out way.
Yeah, it’s a bit like the slow movement after the GFC in Italy.
And look, again, on narrative series, it’s sort of the overarching theme of the discussion. Can I ask maybe Adam and Zichen or Jing, if you want to come in on this as well, what do you think of the sort of argument or the narrative that we hear that the Chinese Communist Party distrusts consumption as a lever, that it does give too much power to the people?
I mean, how does that fit with the historical implications of that and what you see from the current state of governance in China?
Yeah, it’s really been an emerging theme, Zichen should say much more about this than me. But, you know, from the outside looking in at the data, what you see is a hard-faced version of common prosperity. It’s a tough love kind of regime management.
It’s like a phrase you just can’t imagine being uttered in Western politics. Though during the Eurozone crisis, I guess there were aspects of this. If you were in Greece, Italy, Portugal, Spain, or Ireland, exactly, you felt you were very much on the end of that kind of structural adjustment kind of strategy.
For someone with a Western growth-oriented Keynesian mindset, of course, it’s profoundly frustrating that this should be the logic. But it goes hand in hand in China, unlike in Europe, with a huge emphasis on investment. So it isn’t lower demand overall, but it’s focused on growth-oriented investment rather than immediate consumption.
But it does seem to me a slightly undigested look at the history of the Chinese welfare state. It’s an undigested legacy, I think, of the reform period, where you move from a corporate-based work production unit-based welfare model that was wholly comprehensive iron rice bowl. That kind of model to the fracturing of that model in the 90s and the 2000s and the early efforts to build a national social insurance type system, which has lagged behind.
I think the modest but nevertheless highly significant affluence that China has now obtained demonstrates this. One way of describing it is the need to catch up on the social insurance and public health insurance side to raise provision levels to levels more adequate to the demands of aging and also increasing the affluent society.
I think that will be the way maybe of historicizing this weird gap. It’s also presumably intergenerational, with the older generation remembering the really hard times, the middle generations being the profiteers of the boom, and the younger generation running into the slow growth and the unaffordability of housing.
So you have like three generations overlapping in a model that right now isn’t responding to people’s needs in the way it needs to. But Sushant will have a much clearer idea.
Before I go to Sushant, I want to bring Ting on that last point that you made, the sort of the generational differences and perhaps the movements that we saw evolve over the last number of years. My colleagues wrote about this all the time. I loved the coverage of involution, and laying flat, and so on.
I mean, is that still very much du jour in China among a certain generation of people, this sort of, you know, frustration with the 996, with the lack of opportunities, and with the lack of employment opportunities for recent graduates? Can you talk to that a little bit?
Yeah, I think it’s definitely a phenomenon in the last few years. I think ever since maybe the pandemic, it has had its up moments and down moments.
So for young graduates nowadays, if you ask them, what’s your dream? If this were like, for instance, 10 or 15 years ago, I think a lot of people would say, oh, my dream is to become the next Jack Ma or the next Zhang Yiming.
And to, you know, through your personal hard work and effort to achieve some sort of China dream, to upgrade the social class, and to do great things to make change. But I think nowadays, people are more pragmatic and realistic.
I see this “lying flat” and the 996 working culture as a way of resistance from the young generation of Chinese people. But I think we should also differentiate between the discussions that are going on on the internet and what people are really doing in real life.
So on the one hand, it’s not just a Chinese problem. Yeah, it’s a universal problem. It’s a social media problem. And so by creating that label of lying flat, it feels like you create some sort of solidarity with people who are also critical about the working culture and who are dissatisfied with what is going on and the lack of opportunity.
But on the other hand, I also often hear people, especially young Chinese people, saying that, you know, being able to lie flat is a privilege.
Yeah, you need a lot of infrastructure to be able to do so. Seeing it much, much, much easier, but being able to do so is a different story. So I will say the Chinese way of lying flat, the Chinese version of lying flat, is still quite hardworking.
Yeah, it’s a hard day’s work here. It’s different from European lying flat. European lying flat is the real deal.
Actually, on the ground, Ching has a very good podcast where millions of people listen to it. She also has, I think, seven-figure followers on the Chinese version of Twitter. So she takes the pulse of what the young middle-class Chinese people are thinking quite accurately.
And I think Adam really summed it up very well from a historic perspective. He’s one of the best historians. I just want to add the transition from the work production unit to a national, centralized social insurance model that is practiced in the European Union. If you really look at it, the history in China on that is still very, very brief compared to what you have got here in Switzerland and on the European continent.
This sort of thing takes time. And, uh, China is still a relatively poor country by GDP per capita. And, uh, I mean, it has already got a basically universal healthcare. Whereas, uh, I really can’t figure out why Bernie Sanders’ proposal for universal healthcare in the United States is a radical idea. I just can’t get my head around it. Hmm. But, uh, in China, every European in the room is sort of nodding their head.
And in China, there is still, you know, the foundation has been laid, but it takes time. And the level of protection that is afforded to the Chinese citizens is not sufficient. So in this ongoing policy debate, I’m sure you have read that, you know, this advisor, that former vice minister wants to say, we should give two trillion yuan more to the medical insurance or to the pension fund. And, uh, this is an ongoing debate. And, uh, you know, with all these proposals out there, I’m sure, you know, basically strengthening the social safety net is, uh, actually well beyond the agenda.
Um, if not this year, maybe, uh, in the near, uh, in the near future. On the other hand, there is indeed this cultural thinking in China where, you know, you need to enter bitterness because a lot of people, I think people at the leadership age, when they were little, they suffered a lot and they thought we got to where we are today by eating bitterness. So, uh, it’s, it’s, it’s sort of a spirit that the young people should live with. I mean, uh, like it or not, that’s the thinking in their head.
And also, uh, there is this what I believe to be a biased view of the, you know, you need to be a biased view of the social safety nets, policies practiced, especially in, in Northern Europe. You know, in China, there is this narrative that basically Sweden, uh, Norway, and Finland have spoiled their citizens so they don’t work anymore. And, uh, that’s not true. And, uh, but, you know, yeah, but I think that’s a big stereotype now in China.
Yeah. It sounds like the Chinese version of the Monty Python sketch, the four Yorkshiremen. Adam, you wanted to really briefly. Just 600 million people in China live on very, very modest income still. That’s the essential reality. If you’re talking about national health, national social security, this is a society which in Shanghai exhibits global levels of wealth, but 600 plus million Chinese are out of absolute poverty and in the zone of very low incomes.
And to manage a state of that scale with that baseline of actual poverty—it’s real poverty in any meaningful sense of the word—is a huge, huge challenge. Yeah. It’s a dualist system to an extent. To China. I have to cut you off though because we’ve got 10 minutes and we have to solve the rest of China. One more minute. It’s I think because there is this assumption that China is led by one political party. It is a unitary state. It’s a very centralized leadership.
So if you can convince one or a very few number of people, then the whole country will fall in line. And why don’t do this? Why don’t do that? That’s the sort of perception that people typically have. I’d say that is actually one way of looking at it in China. Yes, it has a different political system than what is practiced here, but still there are different ministries. They fight each other. There is a lot of bureaucracy.
Basically, what you have in a Western political system, the sort of different responsibilities, different bureaucrats clash with each other—that also exists in the Chinese system. So I think this is also something people need to maybe take more into consideration. China is different, but it has more similarities than people realize. Yeah. Very good point.
Look, we’ll move quickly onto a very quick topic, and that is industrial overcapacity. It should take about a minute. Look, Adam, you’ve been really among the leading critics of this Western push to push back against overcapacity. I mean, look, I was in Brussels this week. On Monday, I sat in on the commissioner for trade, I wouldn’t say elect, delegate, Morris Shevkovic, and he kept industrial overcapacity, overcapacity, overcapacity. There were some French MEPs asking him, would you consider coming up with an instrument specifically to deal with overcapacity? So it’s not going anywhere.
You see not just in the European Union and the United States, but also in emerging markets like Brazil, Turkey, and India, also taking measures to counter what they claim to be the distortionary impact of subsidies and overcapacity. Talk a little bit about why you refute that or why you disagree with the very concept of that. Well, I don’t want to go do a microeconomics lecture. We don’t need to do that. I mean, I think there’s a level of which it’s absurd.
I mean, like, is there a global overcapacity of photovoltaics or batteries or cheap EVs? Are we serious about climate transition or not? That’s a simple answer. If you are, there’s no such thing as an excess capacity of green energy. Full stop. It might be uncomfortable for us, but it’s absurd. There’s an argument where it has a certain historical legitimacy, like the massive overbuild of heavy industry in China. Is there huge amounts of overhang of aluminium capacity in China? Yes, clearly there is. The same with steel.
But then I would just go Zishan all the way along the line. The whole story that he’s telling you is absolutely spot on. China doesn’t export because it sets out to export steel. It makes half of the world’s steel capacity, discovers that in a bad year, Chinese uptake of that is not adequate. And then it dumps or doesn’t even dump. It finds more lucrative markets outside China for the steel it’s produced than inside China. And hey, presto, it swamps whatever Western market it enters because China produces ten times more steel than the United States.
So a marginal variation in Chinese domestic demand for steel is a huge wave in the American bathtub. It’s the whale in the bathtub of heavy industry right now. And why? Because of the local politics that Zishan’s pointing to. This expansion towards massive capacity in China was, as much as anything, local government. Which is, again, to emphasize the size of a European nation-state racing another European nation-sized province for the most rapid GDP growth to attract the best workers to become the hub of global growth and meet your targets.
And turning that around is the challenge of the moment for Beijing. And it’s a huge political problem. Because they have lobbies, they have ministries that represent steel, coal, and whatever, and they need to be shifted within the party structure and realigned. So I see this as some of it is just really bad lobbyism on the part of the West. Some of it reflects these overgrowth symptoms. But no one should ever imagine in the West that we’re the principal target of this. This is an overspill from a domestic growth story that is shifting gear.
Yeah, so Zishan, let me ask you about, so if you listen to anyone listening in the European Commission, they would be pulling out their hair about the lack of consumption and everything. But Zishan, when Ursula von der Leyen talks about this, she quotes Xi Jinping and she concludes that China is making the rest of the world more dependent on China while becoming less dependent. China is becoming less dependent on the rest of the world.
I think people are looking at dual circulation and so on. Can you explain a little bit about how Chinese policymakers and officialdom would receive what the likes of von der Leyen and other politicians in the West are saying? I mean, Adam, it sounds as if you would dispute that fact or that statement rather from von der Leyen that it’s intentionally manufacturing dependency. It’s a different phase. The overcapacity is in the sectors. The sectors she’s talking about, the new sectors where there’s actually, right, green tech, but then chips, microelectronics.
The overcapacity argument is strongest in the sectors that my account fits best. In other words, steel, aluminium—they’re not key to Xi’s growth strategy. The dual circulation model and the new quality productive forces is all in the new tech space, which is where it’s really hard to point to excess capacity. The other thing is that we need more of this stuff in order to achieve our transition.
Yeah. Do we have enough green energy capacity? But what do you say about local industry then? Maybe if those jobs are being lost. Who’s confusing the targets here? Yeah. Like if you all of a sudden want to make this about jobs, well then that’s fine, but you’ve just shifted the goalposts. What is it? So is it the argument that nobody has clearly defined what success is or what they want to achieve? That would be one way of thinking about it and under the impact of populism.
This is a part of the liberal, I want to, but like under the impact of populism, the centrist’s best explanation is deindustrialization. Whoops, China did it. And so if you want to counter populism, you feel you need an industrial strategy and your best bet is green. And oh God, the Chinese are already there. Yeah. Whoops. You know, that’s the beauty of appearing at the same panel with Adam Tooze. You can just leave all the answers to him. He has all the wonderful answers.
Yeah, you asked me. You took the words out of your mouth, right? I think one thing he said was very important. And I think sometimes it’s exaggerated. China didn’t set out to hollow out, you know, the manufacturing capacities of other countries. It is not weaponized. It’s not the domestic development of manufacturing capacity is not sort of as a weapon. It is a, you know, outflow out of the domestic situation.
And I think a helpful way looking forward for the European Union and perhaps for the United States is how to take advantage of China’s manufacturing capacity. You know, there is now a great debate about—well, it’s not a debate. The EU has already slapped the tariffs on Chinese EV exports. And Finbar is the best source on that information. And maybe, you know, try to create incentives for Chinese EV companies to set up shop in France, in Germany, in Spain, in the EU member states.
You know, China had this joint venture requirements back two decades ago. And I’m not sure, you know, you could not take a page of the playbook from the Chinese to, you know, that would be a more peaceful and more mutually beneficial way of progressing forward. You know, Chinese technology, Chinese funds, Chinese human talent could be of use to Europe from that perspective. And as far as we can see now, you know, a lot of Chinese companies have gone abroad this past few years.
I mean, CATL set up battery plants in Germany and Chinese companies are going global. Crucially, Beijing didn’t stop them. So Beijing is not against Chinese companies moving their production across the globe. And I think that Europe should take advantage of that. Maybe negotiate some favorable terms for Europe instead of just imposing very antagonizing tariffs on Chinese EVs.
Well, I mean, I have lots to say on that, but we don’t have any time. But Jing, I want to give you the final word here. I mean, these Chinese companies are, say if you’re a Chinese consumer or Chinese citizen and you see successful Chinese companies being harangued in the West. I mean, how does that translate online? I mean, do you see a lot of sort of national pride and people being insulted by how the West sort of describes these companies?
I mean, what’s the vibe in your community? Yes, I think in terms of the perception of, you know, Chinese capital and companies going global, I think there were also different phases. I think at the very beginning, whenever a Chinese company makes a national appearance, it was considered a success and some kind of national pride. But I think as the process continues, it became more and more common. And I also realize a lot of the Chinese companies that actually have successful overseas businesses stopped wanting to get a lot of publicity among the Chinese general public because they want to look—it’s a bad look to be international.
Yeah, but I think nowadays Chinese people are, I think it’s kind of like a new stage. I want to take the example of the recent popular radio game called Hei Wukong, and it’s about the monkey king. And I think it was a very well-produced one. Of course, there was some kind of controversy, but I think that was, if I tried to find a, you know, this kind of like new trend of a Chinese brand that Chinese people can feel proud of, I think that was probably a recent example of not just for the quantity, but also for the quality of the things they actually enjoy and I think that they can actually be proud of.
You’ve been listening to the State of China, a discussion recorded at our State of Asia conference last November here in Zurich. More information on all the speakers as well as videos and summaries for the entire conference are available on our website. A link is in the show notes. We’ll share several sessions here on the podcast as well. So be sure to subscribe and sign up for our weekly newsletter to be the first to learn about the 2025 edition of State of Asia and the many other events and activities from Asia Society Switzerland. That link also in the show notes.
For now, I’m Rem Cotanis. Thanks very much for listening.