Despite a reputation for abstruse thought, the French intellectual Michel Foucault once explained his research in a straightforward manner: “I set out from a problem expressed in the terms current today and I try to work out its genealogy. Genealogy means that I begin my analysis from a question posed in the present.” Keyu Jin took that approach to heart in The New China Playbook, a work that explains China’s present by tracing its economic genealogy since 1978.
Jin attributes China’s sustained growth not to some master plan but to a series of responses to contingent circumstances. In her telling, “Reform and Opening” covers four distinct phases of partial liberalization. First, the “household responsibility” system introduced market prices and incentives to families working in agriculture. Then came the Special Economic Zones, which by 1984 had created enclaves of profit and exports in fourteen cities. In the early 1990s, China’s state-owned enterprises entered the marketplace, finding accountability and opportunity in equal measure. Finally, ascension to the World Trade Organization in 2001 unleashed Chinese exports into the world, while also reducing domestic tariffs and allowing foreigners greater access to Chinese consumers. This brief genealogy of reform allows Jin to make her case that Chinese leaders today can address contemporary issues in the same pragmatic, incremental manner.
Macroeconomic models typically assume three agents: consumers, firms, and governments. Jin explores China’s economy along these conventional lines, only to arrive at unexpected conclusions. The chapter on consumers rebuts forecasts that China’s slowing rate of population growth will inevitably lead to economic decline.
If factors like urbanization, private markets, and imported technology contributed far more to raising the standard of living than the fertility rate, then so long as China continues to increase worker productivity an aging or even declining population will not presage disaster. The chapter dedicated to firms highlights the context and benefits of Xi’s anti-corruption campaign. When markets first emerged in a nominally Marxist state, businesses inevitably found themselves in legal gray areas. The occasional bribe purchased government acquiescence for these new and disruptive ventures. Moreover, at that stage few Chinese had any qualms about the infringement of foreign patents.
But this arrangement could not withstand two forces demanding a better legal system: innovative domestic firms began to register patents of their own, just as scandals related to tainted consumer goods brought calls for new consumer protections. At some point, the government could no longer write off corruption as the cost of doing business. On that note, the book’s description of the Chinese government also offers an optimistic take on the future. True, political power remains centralized, but the execution is highly distributed. Ambitious mayors and governors eyeing their next promotion behave much like their counterparts anywhere else: they compete for private firms, wooing them with tax breaks, infrastructure, and industrial parks. Jin avoids ideology and instead frames basic economic agents in the same manner as any other country. As a result, English-language readers will come away with a more informed and empathetic picture of this still-developing country.
Economists are trained to think critically about causality, to test their assumptions by looking for omitted variables, alternative explanations and counterexamples. This mindset pays off in her comparison of innovation in the United States and China. The US leads the world in “Zero to One” breakthroughs. Education, finance, and government combine to produce major advances in energy, technology, and medicine. But groundbreaking firms can hold on too tightly to their business models, inhibiting successful expansion to other countries. On the other hand, China excels at taking Western business models, like smart-phones and ridesharing, and optimizing them for China’s domestic market. To Jin, this advantage in “One to N” innovation, and not simply protectionism, allowed JD.com, Alibaba, and Didi to triumph over Amazon, eBay, and Uber, respectively. That experience then enables Chinese firms to dominate their US competitors in third countries: think of Xiaomi’s smartphones or CATL’s cobalt-free batteries. Contrary to the allegations of Western protectionists, Chinese entrepreneurs do not simply copy their way to growth. Rather, they exploit new opportunities in a manner consistent with their level of development.
Jin saves her most direct criticism for the area where the US still dominates: finance. For all the success of Chinese firms, stock market returns have shown no correlation to the wider economy. This occurs because the Regulatory Securities Commission requires stringent asset, income, and profit thresholds before going public. This practice encouraged successful start-ups like Baidu and Tencent to list abroad instead. China’s response to the financial crisis in 2008 allowed local governments to stimulate the economy, but they often did so using highly leveraged off-balance sheet entities known as “local government financing vehicles.” Readers with a background in accounting will hear echoes of the “special purpose vehicles” that hid Enron’s fraud for years. Lastly, she addresses the hard reality that the renminbi poses no threat to the dollar’s position as a global currency so long as the CCP’s desire for stability demands rigid capital controls. Over all these subjects, Jin’s skill as a communicator pays dividends as she explains the enormous consequences of seemingly arcane regulations.
For all that criticism, the book still elides contentious topics. Readers learn that grain output declined from 1959 to 1961, but it remains unclear if anyone actually died. A discussion of China’s lopsided sex ratio manages to avoid using the word “abortion”. According to Jin, the ubiquitous surveillance that accompanied the “Zero-COVID” lockdowns simply embodies a benign and welcome legacy of state paternalism dating back to Confucius.
Jin’s reticence makes sense in light of her background: she grew up in Beijing before attending an elite prep school in New York City. From there she earned a PhD at Harvard and tenure at the London School of Economics. Many academics struggle to write serious yet accessible prose, but Jin succeeds. This book reads like a series of engaging lectures for smart undergraduates; folksy Mandarin aphorisms lighten the discussion of research from top peer-reviewed journals.
In his book The Order of Things, Foucault explained what he hoped to achieve: “In attempting to uncover the deepest strata of Western culture, I am restoring to our silent and apparently immobile soil its rifts, its instability, its flaws, and it is this same ground that is once more stirring under our feet.” As Xi Jinping extends and consolidates his rule, one senses the ground stirring under all of our feet. Anyone interested in discerning the emerging landscape would do well to consider Jin’s work.
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