Highlighted Notes:

Part V: The Future of the East Model 9. The CCP of Xi Jinping > Page 286 · Location 5278 his simultaneous crackdowns on real estate, gaming, private educational services, and fintech wiped out trillions of dollars in wealth and hundreds of thousands of jobs in the real economy. 9. The CCP of Xi Jinping > Page 286 · Location 5284 Economically, China is trending in the direction of a South Korea, but politically it is embracing the North Korean model, minus one advantage that North Korea still has: hereditary rule. 9. The CCP of Xi Jinping > Page 288 · Location 5318 This is the era of Xi Jinping, defined in this book as commencing in 2018, the year the term limit was abolished. It will be a consequential era, an era of drama, surprises, and convulsions. 9. The CCP of Xi Jinping > Page 290 · Location 5361 Scholars have long suspected that Xi’s anti-corruption campaign is political, targeting his rivals who are incidentally corrupt. 9. The CCP of Xi Jinping > Page 292 · Location 5385 political instrumentalization of corruption creates a self-perpetuating dynamic. Targeting political rivals itself sparks political rivalries, and so can have a rebound effect. 9. The CCP of Xi Jinping > Page 293 · Location 5413 A hallmark of an unaccountable leader is his ability to be wildly inconsistent. When the values are subjective, amorphous, and contradictory, we need a final arbiter to settle any resultant disputes. 9. The CCP of Xi Jinping > Page 293 · Location 5416 Compounding the problem is that Xi, unlike Mao, is a micro-manager and insists on making all the decisions himself. This is a prescription for policy mishaps and paralysis. 9. The CCP of Xi Jinping > Page 293 · Location 5419 The CCP of Xi Jinping runs a massive bureaucracy but increasingly with an instrument better suited for a boutique operation. A likely scenario is that the system will produce results that are inconsistent over time and will make many mistakes in policy and personnel. 9. The CCP of Xi Jinping > Page 294 · Location 5429 Throughout the era of Xi Jinping, GDP targeting has slipped in importance, a shift in priorities that is evident not only in the CCP’s pronouncement on merit evaluation of officials but also in policy actions. 9. The CCP of Xi Jinping > Page 294 · Location 5431 An unfortunate aspect of statism is that growth is corruption-dependent, so targeting corruption is anti-growth. 9. The CCP of Xi Jinping > Page 294 · Location 5437 A top-down political system needs to target something. The more top-down an organization is, the more necessary it is to specify a clear, objective function. 9. The CCP of Xi Jinping > Page 295 · Location 5443 An optimistic—but slim—scenario in the future is ascension of a strong premier who is willing and able to check and balance Xi Jinping on economic policy. 9. The CCP of Xi Jinping > Page 295 · Location 5459 Targeting GDP rewards an official’s ability to coordinate activities as well as people, including with private and foreign businesses. It is a scope-opening move that rewards a broad set of capabilities and skills. 9. The CCP of Xi Jinping > Page 296 · Location 5474 GDP targeting has another upside. It orients the CCP away from its well-worn path of endless class struggles, destructive power rivalries, ideological brainwashing, aggressive foreign policies, and red terror. 9. The CCP of Xi Jinping > Page 298 · Location 5502 Deng stated, “Had it not been for the achievements of the reform and the open policy, we could not have weathered June 4th. And if we had failed that test, there would have been chaos and civil war.” 9. The CCP of Xi Jinping > Page 298 · Location 5517 By the end of 2020, 92 percent of the top five hundred private companies had a CCP branch, putting them under the direct tentacles of CCP control. 9. The CCP of Xi Jinping > Page 298 · Location 5520 Xi has also nationalized private enterprises, through outright nationalization but also through an indirect mechanism known as “pressured liquidations.” 9. The CCP of Xi Jinping > Page 299 · Location 5531 The fusion of the CCP and the state has reverted to a level that prevailed during the Cultural Revolution, at the expense of professionalism and expertise. 9. The CCP of Xi Jinping > Page 300 · Location 5546 Mao is famous for his hands-off approach to daily affairs. He often spent time reading and writing classical poems in his residence and routinely skipped Politburo meetings. Xi is much more hands-on. 9. The CCP of Xi Jinping > Page 300 · Location 5548 The “chairman of everything” has solved the villager’s conundrum about chairs. 9. The CCP of Xi Jinping > Page 300 · Location 5552 Wang Qishan, is older than Xi Jinping and is not a member of the Politburo. 9. The CCP of Xi Jinping > Page 301 · Location 5568 “With due respect, there is no reason why private firms cannot also do technology. Microsoft and GE are all private companies.” I further ventured, “Could it be that private entrepreneurs in Shanghai sell hot tea and watermelons on the street because these are the only things you allow them to do?” 9. The CCP of Xi Jinping > Page 301 · Location 5579 Chinese leaders may not view the private sector as a crown jewel. Just like that Shanghai official I interviewed, they have an entirely different take on how and why China has grown over the past forty years. They genuinely believe that China has grown because of their own design wisdom rather than because China has given space and freedom to entrepreneurs and the private sector. 9. The CCP of Xi Jinping > Page 303 · Location 5603 The foreign press often singled out his criticism of the Chinese financial system, but far more interesting is how frequently Jack Ma has defended the CCP. 9. The CCP of Xi Jinping > Page 303 · Location 5607 Academic research has not uncovered any evidence that the Chinese private sector is demanding political openness, or even wants it. 9. The CCP of Xi Jinping > Page 303 · Location 5617 The costs of zero-COVID measures—both actual and opportunity costs—are astronomical. 9. The CCP of Xi Jinping > Page 303 · Location 5618 China also spends liberally abroad in developing countries, using its hard power to make up for its deficits in soft power. 9. The CCP of Xi Jinping > Page 304 · Location 5625 The crony capitalists’ cultivations of political ties, and their pre-IPO sweetheart deals with venture capital funds run by the powerful political families (one run by a son of Jiang Zemin), are viewed as an alarming threat to the power base of Xi Jinping. 9. The CCP of Xi Jinping > Page 304 · Location 5636 China’s private sector has been dealt a terrible blow. 9. The CCP of Xi Jinping > Page 305 · Location 5656 The IT products developed by the Chinese government are notoriously unreliable. 9. The CCP of Xi Jinping > Page 305 · Location 5657 The history of China’s industrial policy is littered with failures of technologies developed by state-owned enterprises. 9. The CCP of Xi Jinping > Page 306 · Location 5663 China’s technological success stories are overwhelmingly ones of the private sector. One of the undisputed success stories of China’s high tech is Huawei, a Chinese telecommunication equipment company and a leading Chinese firm in 5G. 9. The CCP of Xi Jinping > Page 306 · Location 5667 Huawei and ZTE, which was privatized from a state-owned enterprise, operated in the more free-market environment of Shenzhen. 9. The CCP of Xi Jinping > Page 306 · Location 5675 A tolerant business environment that nurtures private-sector startups has been a crucial factor in China’s technological development. 9. The CCP of Xi Jinping > Page 306 · Location 5678 mobilized the entire Chinese society in an almost warlike movement against his perceived threats from the West. 9. The CCP of Xi Jinping > Page 307 · Location 5680 His anti-private-sector policy will prevent future Huaweis from emerging and his escalation of tensions with the United States will damage a pillar of China’s technological development—international collaborations. 9. The CCP of Xi Jinping > Page 307 · Location 5682 These laws blurred any distinction between a private and a public entity in terms of the rights of government and the obligations of citizens and organizations. 9. The CCP of Xi Jinping > Page 307 · Location 5687 “any organization or citizen shall support, assist, and cooperate with state intelligence work according to law.” The intelligence agencies “may demand that concerned organs, organizations, or citizens provide needed support, assistance, and cooperation.” They have “the right to enter otherwise restricted facilities, examine private records, investigate and question personnel, and access or even requisition communications or transport equipment owned by companies or individuals.” 9. The CCP of Xi Jinping > Page 308 · Location 5710 Huawei had over 130 suppliers from the United States and its highly rated triple-lens camera was developed in collaboration with the German company Leica. 9. The CCP of Xi Jinping > Page 308 · Location 5715 Huawei now operates in a homogenous domestic environment, forsaking a key factor for its success—diversity of global competition and synergistic collaborations. 9. The CCP of Xi Jinping > Page 309 · Location 5722 In AI, a field in which Eric Schmidt describes China as “a full-spectrum competitor,” the Chinese advances are built on international collaborations. According to Tsinghua University, 60 percent of the papers on AI were coauthored with American scientists, easily eclipsing coauthorship with scholars from Singapore (7.8 percent), Australia (7.3 percent), England (5.8 percent), and Canada (5.8 percent). 43 9. The CCP of Xi Jinping > Page 309 · Location 5725 One might try to use this data to argue that the U.S. researchers in AI depend on collaborations with Chinese researchers, not the other way around. According to a report by Tsinghua. the United States has six times the number of top scholars in AI as China does. The research capabilities are lopsided in favor of the United States. 9. The CCP of Xi Jinping > Page 309 · Location 5729 For example, the R& D expenditures of the United States are more heavily weighted toward basic research than Chinese R& D expenditures, which are oriented toward applications and experimentation. 9. The CCP of Xi Jinping > Page 309 · Location 5731 (U.S. R& D expenditures are overweighted toward the life sciences, whereas the Chinese spend more on hard technologies.) 9. The CCP of Xi Jinping > Page 309 · Location 5736 Which side will lose more in the long run from a high-tech decoupling between China and the United States? There are two ways to approach this question. One is to distinguish between a financial hit and a technological hit. In industries such as semiconductors, the damage to the U.S. companies is mainly financial, whereas that to China is technological. 9. The CCP of Xi Jinping > Page 310 · Location 5743 Second, how one predicts China’s future technological trajectory depends on how one explains the rise of China as a technological power. The research reports by the China Strategy Group and by Harvard’s Kennedy School of Government, cited earlier, lean heavily toward scale as an explanation. 9. The CCP of Xi Jinping > Page 310 · Location 5751 A report by a group at Peking University is more pointed on the implications of a technological decoupling for China: “in both technological and industrial development, both China and the United States face damages from ‘decoupling,’ but based on current information the damages to China are probably greater.” 9. The CCP of Xi Jinping > Page 311 · Location 5763 The ability to bring COVID-19 under control in 2020 owed a lot to an ancient source of Chinese strength—the regime’s ability to control population movements. 9. The CCP of Xi Jinping > Page 311 · Location 5776 resting a triumphant assertion of a rising East on a primitive method of population control is factually tenuous and conceptually problematic. 9. The CCP of Xi Jinping > Page 311 · Location 5779 China appears poised to enter into its most uncertain and complex period since 1978 and possibly since 1949. Uncertainties abound on the economic front—bad debt, unfavorable demographics, low productivity growth, an economic slowdown, and a middle-income trap. 9. The CCP of Xi Jinping > Page 312 · Location 5787 Many of the mega projects, including CCP’s ambitious industrial policy initiatives, are funded by the proceeds from land sales. 9. The CCP of Xi Jinping > Page 312 · Location 5794 China was on the cusp of a social volcano of unrests and instabilities because of the widening income gap between the rich and the poor. 9. The CCP of Xi Jinping > Page 312 · Location 5796 Chinese respondents have a higher tolerance for income inequality than many scholars assumed. 9. The CCP of Xi Jinping > Page 312 · Location 5797 The social volcano did not erupt because the effect of the absolute income gains bested the effect of the relative income losses. 9. The CCP of Xi Jinping > Page 312 · Location 5802 The single biggest threat to Xi’s stewardship of his third term is a mishandling of the economy and the associated political ramifications of an economic slowdown. 9. The CCP of Xi Jinping > Page 313 · Location 5816 Unless there was a coincidental rise of conscience among Chinese high-tech billionaires, the simultaneity of their charity pledges indicates coercion in the background. 9. The CCP of Xi Jinping > Page 313 · Location 5817 A coerced redistribution undermines private incentives and wealth accumulation not only by the ultra-rich, but also by China’s middle-class shareholders. 9. The CCP of Xi Jinping > Page 315 · Location 5856 Historically, the CCP’s succession conflicts have not escalated to a systemic crisis. 9. The CCP of Xi Jinping > Page 316 · Location 5880 The conservative estimate by Professor Michael Song of Chinese University of Hong Kong puts the complete lockdown of Shanghai alone as costing China 4 percent in lost GDP. 9. The CCP of Xi Jinping > Page 317 · Location 5889 barring extraordinary events and developments, the Chinese system gravitates toward stability rather than to sudden convulsions, ceteris paribus. 9. The CCP of Xi Jinping > Page 317 · Location 5901 Under Xi Jinping, political rivalries have again become “nasty, brutish, and short.” 9. The CCP of Xi Jinping > Page 318 · Location 5910 After forty years of robust growth, a moderation of the growth rate is neither surprising nor alarming on its own, but it does raise the question of whether the existing political arrangements can withstand this change. 10. Breaking Out of the EAST Model? > Page 320 · Location 5945 Early detection requires free information flows and professional and non-political surveillance of virus outbreaks. 10. Breaking Out of the EAST Model? > Page 321 · Location 5948 We need to tell this broader truth: the CCP excels at solving problems, but these problems are often created by itself. 10. Breaking Out of the EAST Model? > Page 321 · Location 5955 Left to its own devices, ever since the Sui dynasty, the Chinese system instinctually inclines toward political singularity and a monopoly of power and ideas. 10. Breaking Out of the EAST Model? > Page 321 · Location 5963 Chinese history is stacked against democracy. 10. Breaking Out of the EAST Model? > Page 322 · Location 5976 The Taiwan issue, which Deng Xiaoping set aside wisely in deference to economic priorities, is now threatening to unravel the peace and stability of East Asia. 10. Breaking Out of the EAST Model? > Page 323 · Location 5999 Technology itself does not produce a liberalizing effect. 10. Breaking Out of the EAST Model? > Page 324 · Location 6019 (This brings up another topic. Despite legions of China scholars in U.S. academia who know the country really well, very few of them are ever consulted by U.S. policymakers. It takes some effort to maintain this level of ignorance about China.) 10. Breaking Out of the EAST Model? > Page 331 · Location 6146 China refused to comply, and for twenty years, inexplicably, the U.S. government simply looked away and permitted Chinese firms unimpeded access to the American capital market. The Chinese argument against the rule—that the inspection might lead to exposure of national security information—is self-defeating. 10. Breaking Out of the EAST Model? > Page 331 · Location 6160 Reciprocity, which happens to be the most effective way to achieve cooperation, has been largely missing from U.S.-China relations. 10. Breaking Out of the EAST Model? > Page 331 · Location 6162 Google’s search engine is blocked in China, whereas Baidu operates freely in the United States. The New York Times has been banned from China since 2012, whereas one can pick up a copy of China Daily and People’s Daily in the United States with ease (and often free of charge). Chinese companies such as Alibaba operate cloud-computing services in the United States without restrictions, whereas Amazon and Apple face many regulatory hurdles in China. There are legions of similar asymmetries. 10. Breaking Out of the EAST Model? > Page 332 · Location 6167 The United States clamored on behalf of Wall Street to get into China’s lucrative investment markets, but not on behalf of Google and the New York Times, who could open up China’s information space. 10. Breaking Out of the EAST Model? > Page 332 · Location 6171 U.S. government has pressured American universities to close Confucius Institutes on their campuses. (Confucius Institutes are funded by the Chinese government to propagate Chinese culture and values.) 10. Breaking Out of the EAST Model? > Page 332 · Location 6177 The United States is now trying to unwind the extensive scientific collaborations with China, even going as far as fabricating charges of economic espionage against Chinese American scientists under the “China Initiative.” 10. Breaking Out of the EAST Model? > Page 332 · Location 6179 During his visit to China in 1978, Frank Press, science adviser to President Jimmy Carter, relayed a request by Deng Xiaoping to send seven hundred Chinese students to the United States to study science and technology. 10. Breaking Out of the EAST Model? > Page 333 · Location 6182 Acquiring foreign science and technology was of the highest priority to Deng Xiaoping, as we can see by the unusually extensive coverage that People’s Daily gave to Press’s visit. 10. Breaking Out of the EAST Model? > Page 334 · Location 6209 Democracy is not the disease; the problem is that America is not democratic enough. 10. Breaking Out of the EAST Model? > Page 334 · Location 6210 After listing Chinese actions in Xinjiang, Hong Kong, South China Seas, and cyberattacks at the Anchorage meeting, Blinken said, “Each of these actions threatens the rules-based order that maintains global stability.” To the uninitiated, Blinken is defending a global order created by and for the United States and its allies. An ordinary Chinese may legitimately react in the following way, “You have your order, and we have our order. You challenge mine, and I challenge yours.” In fact, this global order has delivered immense benefits to China and it is against China’s self-interest to undermine it. 10. Breaking Out of the EAST Model? > Page 336 · Location 6246 The CCP excels at capitalizing on wedge issues. 10. Breaking Out of the EAST Model? > Page 336 · Location 6258 Chinese have a utilitarian concept of “rights”—rights that advance the greatest good for the greatest number. 10. Breaking Out of the EAST Model? > Page 337 · Location 6260 In an ethnically homogenous society and in a political culture that celebrates convergence, the thinking that a subgroup of the population has immutable, distinctive characteristics is not easily accepted. 10. Breaking Out of the EAST Model? > Page 337 · Location 6275 researcher armed with this kind of logic and social science skills is unlikely to survive for five minutes at an MIT seminar. 10. Breaking Out of the EAST Model? > Page 338 · Location 6279 Democracies may not command a decisive edge over autocracies when it comes to economic growth, but there is no compelling evidence that autocracies command a compelling edge over democracies. 10. Breaking Out of the EAST Model? > Page 339 · Location 6300 Evolution, not revolution, should be celebrated and encouraged, and any steps to restore decentralization policies and reinvigorate private-sector autonomy would be welcome developments. 10. Breaking Out of the EAST Model? > Page 339 · Location 6307 Voting and criticisms of government operate as an open valve that periodically vents anger and frustration so the pressures do not build up to a breaking point. 10. Breaking Out of the EAST Model? > Page 339 · Location 6309 The January 6 insurrection is on a more extreme end of democratic instability, but this insurrection, cheered on by a sitting president no less, does not remotely compare to the mayhem of the Cultural Revolution and the enormity of Tiananmen. The shock is that it happened at all in the United States. 10. Breaking Out of the EAST Model? > Page 339 · Location 6314 Thomas Friedman once wished that the United States could be China for a day. He wanted the United States to emulate China’s efficiency in rolling out infrastructure improvements and sustainable energy solutions. 10. Breaking Out of the EAST Model? > Page 340 · Location 6326 The CCP system is efficient in rolling out high-speed rail systems, but it is also efficient at exiling intellectuals as part of its anti-rightist campaign. These two types of efficiencies cancel out each other, and in the long run, at best they produce a draw in economic development. 10. Breaking Out of the EAST Model? > Page 341 · Location 6336 they differ, crucially, in their economic systems and partially in their political systems. 10. Breaking Out of the EAST Model? > Page 341 · Location 6351 In its totality, the East Asian experience does not offer supporting evidence of an autocratic edge. 10. Breaking Out of the EAST Model? > Page 344 · Location 6399 An even bigger contrast is in learning curves and capacity for self-correction. South Korea learned from its mishandling of the 2015 MERS in a way that China never did from its response to the SARS of 2003.43 Both SARS and COVID-19 are believed to have originated from live animal markets, but the Chinese government only temporarily suspended these markets in response to the outbreaks. 44 Today, many wet animal markets still operate in China, setting the stage for another potential zoonotic disease outbreak in the future. 10. Breaking Out of the EAST Model? > Page 344 · Location 6412 From a design perspective, a system that prevents a crisis from breaking out is superior to one that mitigates and controls a crisis. 10. Breaking Out of the EAST Model? > Page 345 · Location 6425 there is a fundamental difference between a delay caused by technical uncertainty and a delay caused by systemic opacity. 10. Breaking Out of the EAST Model? > Page 345 · Location 6432 Yes, the CCP did build out an impressive network of infrastructure, but let’s be clear: its infrastructural power is based in part on forcibly taking land from Chinese peasants. Its control of people comes into play again. 10. Breaking Out of the EAST Model? > Page 347 · Location 6465 By being adopters rather than inventors, we learn from the pioneers’ mistakes and avoid startup costs. 10. Breaking Out of the EAST Model? > Page 351 · Location 6535 When you do not know whether you will have an accident, a smart thing to do is to take out insurance