He is also an especially effective communicator. In both audible and written discussion, a tendency today is hold too many ideas at one time and use an abundance of commas. Appreciated Mr. Wang's ability to pick up one item and finish with a period. And then go to the next item. I didn't have to re-read paragraphs as is too often the case. Just a side-note that became obvious early in the interview.
Truly excellent of course (Dan is excellent, your questions the right ones). One key theme emerges: that growth in both inventions and ideas that come from the 'fringes' ("its scientific establishment is unused to puttering around the fringes of new fields," "It would be good, I think, if the Chinese state can one day learn to leave people alone") won't happen when the idea of being 'left alone' is not a state or cultural value. I once met a philosophy grad student in Hangzhou working on Rawls who said his research was frowned upon because the very idea of the single individual standing behind the veil of ignorance looking out at his possible life was anathema to the Party. It is very good to consider, as you both are doing here, the economic and social trajectory of a nation that does not particularly value puttering around the edges of things.
I do wonder, as successful as China has been at catching up and even surpassing the West, if they are about to do their own version of 90s Japan bubble bursting followed by stagnation.
A little-known fact, btw, is that Japan's economy actually slowed down in the mid-70s! In the late 80s it grew a little faster than the U.S. (due to a bubble which then burst), but really its catch-up was largely done by the 70s.
Excellent interview, Dan Wang is consistently insightful & much needed voice in the conversation about China, tech/politics and economics.
Dan’s point about how “the US has not gone out of its way to rhetorically welcome Chinese entrepreneurs” is worth considering further.
The US used to welcome the best and brightest from around the world, and immigrants to the US have founded a huge share of Fortune 500 companies.
Dan’s anecdotal point about Singapore attracting wealthy Chinese immigrants echoes my own anecdotal experiences in speaking to dozens of successful Chinese entrepreneurs and investor friends who are no fans of China’s new direction & stifling of entrepreneurship, and who would love to immigrate to the US. Our broken immigration system, country quotas and green card/O-1 visa caps makes this extremely difficult.
Now countries like Singapore and Canada seem to be doing much better in attracting disaffected Chinese entrepreneurs and talented/wealthy folks to immigrate while the US’s rhetorical excesses and growing xenophobia towards China seems to tell these potential Chinese immigrants they are not wanted in the US. In some US states, recent laws passed would not allow most Chinese immigrants to even purchase property, and echo the worst periods of past US xenophobic excess like the Chinese Exclusion act of 1882.
Can you blame a talented Chinese entrepreneur or engineer tired of living in China for wanting to look to other places to immigrate?
Seems to me that attracting these disaffected and successful Chinese entrepreneurs, engineers & investors to the US would serve multiple purposes - filling important STEM-field jobs fast, weakening the progress of Chinese innovation by welcoming their top talents to our shores & industries, and demonstrating once again that America attracts the best & brightest to stay here to contribute to our country’s success and enjoy its freedoms.
Love the reference to taisu’s paper on neighbourhood level local government structures, w the balance between central ideology and grassroot governance being key still in the power they have. Also very interested to see how this plays out in urban and rural areas
Also enjoying the emphasis on the scale up aspect in manufacturing. In certain intersections btw material engineering + pharmaceuticals you can also see this at play in china. Stability is so key (@high intricacy + high volume!) when you move from the lab into commercial manufacturing. Cool to see it pointed out!
I'm not an economist, and this interview seems to focus more on economics, but I do feel that demographic decline is more serious than was talked about. China is losing 1-2% of its working age population every year, and the fertility rate is falling extremely fast. What kind of timeline are we focused on here? Extrapolate out 20 years and you have only half the current number of 20 year olds. Huge drag on future consumption and innovation if your youth population is halved.
We'll see, but so far Japan's economy has only fallen slightly behind those of European countries whose population has risen over the last 20 years. Remember that what really holds the country back here isn't population *loss*, it's *aging* -- an increase in the old-age dependency ratio means that there are fewer workers to take care of each old person.
Japan ,is quite vulnerable to exchange rate volatility. A much softer currency last year drastically sent their GDP nearly US$1 trillion lower. What is more pronounced is apparent loss of risk appetite and confidence in their deserved achievements and overall national stature, past and present. The vicious cycle begins when the young may both feel happy (for they know the future holds no promises, so why not splurge on the now) and disenfranchised, also about the future. I do think Dan Wang (still very much a Chinese) overlooks his country's demographic snowball: it's not "gently plateauing", for China's population will drop well below 1.3 billion by 2050, or losing Guangdong and Shanghai combined. It is Japan whose population gently plateaus, losing roughly 2% over the last two decades, thus their success in not falling too far behind the west. China's other aging parameters, from median age to elderly share of the overall population, are much worse than Japan's, even considering the perennially rosy forecast by the UN.
PRC and JP has completely different projected workforce and income compositions. PRC is proportionately shedding 500M+ old/poor/unskilled first and replace them with new gen of skilled talent. PRC skilled workforce is still around 25% (many old/rural simply left behind), meanwhile JP at 80+% - their net decline in population will be strongly associated with decline in productivity that needs to be plugged with immigration and automation. Meanwhile PRC moving 25% to 60/70/80% skilled workforce to replace unskilled in next 10/20/30 years has potential of 3-5 extra Japan's worth of growth. Also consider that a huge % of PRC elderly are "old before rich", they have high home ownership and household savings because culturally, these cohorts have little expectation of state support / welfare unlike "rich before old" developed states with onerous social security.
Now factor in reduction in import dependency and how shedding 100Ms of low productive workforce that has been dragging down PRC per capita income improves PRC geostrategic posture and kicks her into high income by... just letting things be. Age out out the 600M on 1000rmb/month and per capita GDP of other 800M is currently 24K USD/year. It's not abou losing Guongdong + Shanghai, it's about losing tier 4-10 drains like Gansu and Guizhou while elevating future of country to tier 1-3 even if it's less people. Bluntly PRC has too many useless people (100s millions of make shift agriculture jobs when really only need 5).. Reality is that the current population size in the PRC is still a source of vast problems from domestic to geopolitical. PRC settling at 800M (per "rosy" UN forecast by 2100) with 60-80% high skilled workforce that state bias towards scitech/productivity (i.e. still roughly OECD combined) , with likely energy and agri autarky is a great place to be. That’s likely enough talent to specialize in every sector with still surplus… hence vicious cycle need not apply, fact is workers willing to eat shit will do so to stay in the game. Those burned out by competition can lie flat or waste their savings on consumption. Youth disenfranchisement in SKR/JP/TW is an issue because these are advanced economies with limited/maxedout skilled workforce headroom that will have pressures maintaining competitiveness medium/long term with labour shortages for their prestige strategic industries, PRC just by virtue of having multitudes more bodies will likely mitigate the issue, i.e. long term PRC can still prioritize churning out 100,000 new semi engineers to stay globally competitive in lieu of nurses, because 100,000 nurses might reduce health welfare by single digit percentages in PRC, but completely break or collapse medical systems in places with 10-50x less people.
These PRC demographic snowball narrative analysis overlooks that PRC’s high skilled demographic dividend in coming decades is going increase her competitive baseline relative to pre 2020s PRC with a greater aggregate population. We’re looking at 2020 PRC with 20M, with (just napkin math illustration) PRC conceivably peaking at 50-80M STEM by 2050s followed by multi decade PRC productive decline where by 2100s. For reference PRC STEM <10M most of 2000s. It competitive terms it's like PRC being 1/4-1/2 as competitive as US pre 2010s, maybe 1X+ in by 2030s, peaking at 2-4X by 2050-60, and then declining to merely 2X+ by 2100. Yes this is all a bit video game mathy, but the broad point is PRC =/= JP, it's has a lot more room to peak even with net population decline that doesn't "gently plateau", because 2050s PRC is coordinating the greatests demographic divident in recorded history, 600-700M workforce with 70%+ skilled labour is (vs 1B @ 10% in 2010s).
Some big caveats here. Provided that those highly skilled workers can really find a suitable job, otherwise the "up and up" mentality of humans will continue to drown them in tangping, bailan or "special forces spending". The notion that tertiary graduates = highly skilled workers is quite archaic since AI can do a lion's share of jobs requiring "high, but not diversified" skills. One needs not look further than the spiking youth unemployment rate of 20.4% last month, and the widely agreed-upon solution of the Party is to channel youths into services (hawkers, shippers, gig eco, to name a few), not fancy tech/competitive/well-paid jobs of the future. Not to mention that it's not guaranteed the best and brightest of China will opt for way back home., as migrant flow from PRC will keep stabilizing throughout this century. Furthermore, skilled and educated as they may be, Chinese youths will forever be burdened with insane pension and 4-2-1 care for their parents and (fewer and fewer) children - truly sandwich generations, as even the "rosy" UN views the elderly of China will make up one third at best and 41.5% on average by the end of this century, unlike JP/SK/TW/SG that were sparsed the burden for decades while the young have time to accumulate needed skills.
By the way, although China has lots of "useless" agrarian people, it's the generation that triggered and sustained a lasting property boom that buffed the economy and never returns. Show me any industry that can fully make up for the permanent drag of ever downsizing real estates. And to think that fancy tech will replace those "useless" people glosses over the fact that tech needs numerous "useless" people to do tedious menial jobs, train machines and consume. Last but not least, what country may stay competitive with their population falling more than 1% a year (a prospect from the 2050s onward).
On Youth unemployment rate. This is western analysis only looking at lemons not the lemonade. Recontexualize: PRC state over capacity post academic reforms is now creating 8M+ undergraduates with ~5M STEM and finding opportunities for 80%... that's ~6M+ entering the work force this year - many of which are skilled technical roles. For global competition that's AN ABSURD amount. Last few years of PRC rapidly moving up innovation, scitech indexes (controlled for quality), value chains was the lag effect of PRC spamming a fraction of that amount of talent 5-10 years ago as result of academic reforms 15-20 years ago. PRC only having 20% youth unemployment for the scale of talent that’s currently being generated should scare west more than it scares CCP.
Besides plenty of low-end manufacturing jobs left for the other 20% if they're willing to debase themselves. But fundamentally having surplus talent that can do lower tier work but won't is still better than having a lack of talent and allowing skilled roles go unfulfilled. Like there's a reason 20% of youth can even afford to fuckaround, it's because PRC household savings enables many to wait and be picky. If things get desperate, they'll settle for lower prestige jobs, i.e. talent going to bureaucracy in the last few years. Youth unemployment has been an issue for many years as the state over produces talent, but they get filled eventually. It's not a non-issue, but it's overhyping the negative symptom of a massive structural workforce boon. Yes, there's more to the workforce than spamming tertiary diplomas, but historically and until AI displacement occurs on a massive scale, it's a good proxy for projecting development/growth. The state trying to redirect towards vocational training due to excess higher-ed production is talent production recalibration, hence why I said PRC even reaching 60/70% skilled workforce vs 80+ in JP/SKR/DE is still several Japan's worth of extra development.
As for talent retention, Chinese academics are flocking back to PRC at an unprecedented rate. Meanwhile this isn't the pre 00s-10s where PRC was sending their best abroad, now most of the students are middle class kids with some resources who can't hack gaokao, aka PRC isn't sending their best anymore and hasn't been for years - and these frankly B tier talent going abroad enmasse are still enough to saturate research assistant positions in western institutions. Even less as the education system de-prioritize English in future gen that's started over the last few years. Reality is, if you are the best and brightest, opportunities in PRC have never been better and are only improving. There’s a reason US and TW literally have to ban semi talent from working in PRC.
On a 421 dependency ratio, the flip side of 421 and 4/2 generations with high home ownership rate and massive household savings is 4x2 generational wealth transfers that trickles down to the 1 in due time. This will mostly affect already talent heavy and affluent tier 1/2 regions. (Incidentally expect and consumption boom as we shift towards that transition in 40s-50s).Like there's plenty of old folks doing fine in PRC on their savings and meager pensions, and as JP demonstrates, eventually old people will, to be blunt, rot and die unceremoniously while many youth go off to do their own thing. Very few are sticking around to care for the elderly in great numbers, youth serious about career will accumulate skills over extremely burdensome filial duties like everywhere else in contemporary societies. Yeah, a significant portion of rural/poor will have a harder time, but again their expectations are different. Again, PRC isn't going to have a stupendously unsustainable safety net - common prosperity not "welfare" afterall - PRC simply won't set expectations for an onerous social contract that’s projected to cripple advanced nations unless they keep importing people. We’re going to (continue) seeing way more riots in the streets in western countries due to unmet/declining social protection than PRC not delivering on unpromised obligations in the first place. Folks dying in PRC in the next 30 years are generally going to merely die 10-100 times richer than their parents, meanwhile advanced economies are going to deal with tangible generational QoL loss. These are different populations/psychology/scenarios to address.
On population X property boom, recalibrating away from real estate as the primary engine of growth is good long term. I think instead of focusing on juicing up GDP stats with ever increasing rent extraction (i.e. US high health care), focusing on developing the real economy and moving up all sectors to global parity or leadership is a better goal and actually a useful reflection of comprehensive national power - hence move to “quality growth”. PRC real estate is comparable to the US health sector as % of GDP, it's stupid high for what is delivered and a net drain on developing more important/strategic/critical things.
On numerous "useless" people to do tedious menial jobs. There's a difference between needing 5M skilled farmers using mechanized equipment like in advanced agri economies with maybe another 5M menial farm hands vs having 200M+ low productive make-work farm jobs because there are simply that many excess bodies.The 600M, many of whom are trapped in informal economy on 1000 RMB per month constitutes 5% of PRC GDP. They're not significant consumers. If anything, they're being subsidized via massive poverty reduction and labour transfer programs. For reference, the US as agri export power has to deal with ~3M migrant farm hands, ~half of which undocumented. 10s of millions of surplus cheap labour might be a net benefit to arbitrage… 100s of millions is a drain. And again, it's important to note the cohorts aging out first are going to be predominantly above those left behind by development. Impact on growth will be minimal vs developed economies like JP losing high productive talent that can’t replace at parity. That recipe for stagnation/decline.
On staying competitive post 2050. Post 2050 peak, PRC falling population will indeed start converging with growing population countries like the US. But at the PRC baseline in 2050, the skilled workforce composition that is being accumulated over the next 30 years is such a massive pool at PRC denominator scale, such a potent workforce can weather bleeding talent for decades still to come out ahead in the human capital game. Demographic collapsists portray PRC productive potential falling from medium level fast, but IMO it will be falling from high level slowly, enough to maintain comfortable lead it's in process of building. Unless AI/some sort of disruption makes human capital moot. In the meanwhile, there's also a trend of more net automation than the next several major economies combined. The PRC demographic collapse narrative is not grasping the sheer headroom in talent lead and capital accumulation that PRC is on trend of generating. I like to conceptualize 2020 PRC as having productive potential (not GDP) of ~2 Japans and ~5 Nigerias, by 2050 it will trend towards ~6 Japans and ~3 Nigerias, by 2100 it will be ~6 Japans. Is ~6 Japans as competitive as ~6 Japans and ~3 Nigerias? Hard to say, but both are better than ~2 Japans being brought down by ~5 Nigerias. No offense to Nigerians. TLDR is the gargantuan 1.4B country declining to become merely a 800M massive country while being more net productive can absolutely stay globally competitive, especially if contenders are 200-400M large countries. It would be hard not to.
You have it insanely long, and still full of simplistic presumptions that can't be more divorced from reality:
1. The century-long glide from 1.4B to 800M is already too rosy, given the PRC's stabilizing birth rate shooting up to 1.3. In fact, it's going in East Asian orbit around/below 1. So population by 2100 is much more likely to be 587M (forecast by Yuwa) or 488M (Shanghai Science Academy), or collapsing to one-third the current level. There are no collapsists, only real collapse in population. No AI or tech would offset such a catastrophic fall in pop.
2. You repeatedly mention "talent", implying that China has a vast pool of talents. It seems people today are too mistaken between highly skilled vs. highly qualified. The Chinese young are the latter, but the former? Not so sure. The education system's mismatches are so apparent in the youth unemployment rate today. And who can guarantee China may in the future absorp the "pool of talents". Capitalism may definitely operate without humans, but at the time China is exactly Cyna, a cyborg nation that has no physical Chinese face.
3. Real estate crisis: Little princes are rightly heirs to their parents' property. Their wealth is guaranteed. However, it also means THEY HAVE NO DEMANDS FOR MORE HOUSING, especially once the state imposes heavy property tax (a no-brainer, given PRC's overburdened safety net). It's the reason I say highly qualified Chinese generations in the future will also be sandwich ones, trapped between tiresome obligations to their parents and children.
In a nutshell, I never set much store by those who feverishly hold tech to extreme regards. It's far from a magic wand, while we the mortals will always be ensnared in the most mundane of things in life.
> And yes, a still-greater share of younger people are upset... It's worth pointing out, however, that there are many pro-regime young people. In surveys, young Chinese report being more patriotic than the previous generation. So I feel that their views are polarized: both more young people are happy and more young people are upset.
It's worth appreciating when a commentator avoids painting an entire generation (or two) with a single trend.
>I think that one of China's essential problem is one of state overcapacity. Since imperial times, state officials would rarely hesitate to entirely restructure a peasant's relationship to her land.
Japanese, Korean, and Vietnamese governments were all influenced by the Chinese example. Did any of them show this level of state overcapacity?
American tech companies willingly sold-out their futures to China, et alia in exchange for cheap labor. That works for the short term but not the long term. Just one example, Texas Instruments fails to promote a certain executive, who then goes to Taiwan to start TSMC. Intel’s culture was we’re the sophisticated chip designers and the chip-fab business is low margin, not sexy, etc. Intel invented a lot of EUV technology, but again it wasn’t interested in anything related to the chip-fab sector. ASML took over the pursuit and development of EUV chip lithography. I think these will rank as two of the worst business decisions in the new Millennium.
Intel can build a 3nm or 5nm chip fab with government money, but it can buy the corporate culture it takes to manufacture chips 24/7 with 99.9% success. TSMC has the culture and the know-how to work with their client’s new chip designs (e.g., Apple’s M1 and M2 chips) and solve the inevitable bugs when production begins. Already, TSMC is flying over its engineers from Taiwan because the U.S. workers in its new Arizona fab are so disappointing in re work ethic, expertise, etc.
China threw $200 billion at the chip-fab sector and ended up with hundreds of small fabs that can’t produce at world-class scale. As Qualcomm’s CEO stated last week: “Computer chip production will need to double some time in the next 5-10 years. It isn’t going to happen in China. I think the money will flow into the proven high-tech economies of South Korea, Malaysia, Mexico, Poland, etc. Qualcomm’s CEO also stressed that chip production needs to become more geographically distributed, if for no other reason than the potential of natural disasters. I think this will also be the pattern in other high-tech manufacturing products. I think long-term stability trumps price in the long term.
As for China leading the world in Li-ion battery design and production, I think they will get serious competition coming from Li-ion batteries with 100% more energy density via a silicon anode and 3D architecture, half the charge time, and longer battery life. And most important: leading-edge technology that mitigates thermal runway (short-circuit fires). These batteries have begun production in California, will begin production in Malaysia in another 18 month to two years. If a corporation such as Samsung decides to ink a co-manufacturing agreement, the speed at which it can retro-fit and scale-up production in its existing battery manufacturing plants would be impressive. Elon Musk has stated that the “silicon anodes is the way to go forward with lithium-ion batteries.
A lot is going to change in the coming 5-10 years: more diversification of high-end technology facilities and geographic locations. This is the West’s response to China 2025.
Basically, the West needs a thick web of alliances. It doesn’t really matter if ASML took the lead in a technology. The Dutch aren’t going to invade other countries or throw people in concentration camps any time soon.
I agree. The point I was trying to make, though I wasn’t clear enough, is that INTL, et alia, which seek to become chip fabs overnight, isn’t likely with their corporate cultures. New chip fabs would be more readily adaptive and successful at scale in cultures such as Malaysia, Mexico, South Korea, Vietnam, and Indonesia. What better way to increase the West’s influence in the PAC-Rim as a challenge to China? The U.S. is very good at designing/producing the parts and softwares for chip fabs.
Wonderful interview with comparison and contrast between China’s vs. USA approach and ability to control and implement industrial policies, especially considering each country’s respective strengths and weaknesses. In my mind these two countries given those industrial factors are more complementary, rather than substitutive. It would be sad to have a global conflict between the two.
2) The last years saw increased state control and reduction of liberty and free speech, together with sudden crackdowns on economic sectors. This should reduce China's ability to innovate. It looks like the government is afraid of sudden change->can't allow too much creative destruction and creative chaos.
The pace of technological development in China is truly impressive. It's clear to see that the Chinese are deeply committed to learning and are incredibly diligent and intelligent. This has allowed them to make rapid strides in various fields of technology, illustrating the remarkable capacity and potential of the nation.
However, despite these advances in technology, the realm of scientific development in China still faces significant hurdles. One major obstacle is the pressure of daily life, which can often be overwhelming and distracting. This makes it challenging to dedicate the necessary time and effort into scientific research, particularly when the fruits of labor are not immediately apparent.
Science, by nature, requires sustained and long-term commitment, often in the face of uncertain outcomes. This can be a hard path to tread when societal and personal pressures take precedence. Thus, the difficulty lies not in the lack of intelligence or diligence, but in the ability to balance life's pressures while maintaining the perseverance required in scientific endeavors.
Nevertheless, China's remarkable progress thus far gives us reason to be optimistic about the future. With supportive policies and frameworks that alleviate some of these pressures, there's no doubt that the country can overcome these challenges and continue to grow in both the technological and scientific domains.
State overcapacity is a symptom of the solution of maximizing state capacity. Sure, it’s a problem, but better than the alternative, at least for now. For catchup development and now near peer competition, state overcapacity is better than state none/under capacity. GLF left PRC significantly more industrialized relative to developing peers in immediate years following (see national production share stats of era, PRC had relatively high share of industry vs service & agri compared to states with comparable starting points), meanwhile PRC life expectancy in 70s reached middle income levels. CR and OCP (broadly family planning) is why PRC had a mass of largely fungible bodies to exploit manufacturing led growth as resources get directed to 1-2 offsprings to build up cohorts of high skilled talent that's moving up the value chain now. Not too different from other East Asian Tigers, except PRC still has about 3-5 Japan’s worth of growth productivity left to squeeze as it moves from 25% skilled talent to the 60-85% of advanced countries in the next few decades, aka the greatest skilled demographic dividend in recorded history. Decline TFR due to overzealous state overcapacity, yes, 20% youth unemployment because state over capacity pumping out talent, also yes, but also closer to PRC demographers best lightcone projections.
PRC's success is precisely because state overreach wasn't afraid to treat human (resources) like capital, because the state did not leave "people alone". Neighbouring India unable to launch "famine policies" is why they suffered 100s of millions of avoidable infant deaths over decades, and still have food security stats comparable to North Korea. India is still a fragmented shitshow because their red guards didn't denounce caste away, while traditional values now absurdly squeezing women workforce participation rates down. Their lack of family planning (which they’ve tried and failed), is how India is going to end up with 1B+ stuck in subsistence agriculture and informal economy vs PRC’s 600M. They’re basically trending towards the PRC demographers nightmare scenario. State overcapacity in the PRC front loaded 10s of millions of deaths ("catastrophes that did not seem to be necessary") to avoid 100s of millions. Of course better to… not over overreach with millions of death, but the alternative of under capacity is darkest timeline material.
TLDR the temporary shambles of PRC state over capacity was vastly more performant than lack of meaningful state capacity over medium/long term. Youth unemployment is the fallout of state overproduction roughly OECD combined in STEM talent. It’s not good, but there are worse problems to have, like not having enough talent at all. Just like PRC indy policy, where DW acknowledged PRC has caught up in most regards except the… checks note, two most complex and difficult integration industries. If progress in PRC military aviation is a sign, it’s more a matter of institution coordination problems than raw engineering, software stuff that’s harder to spam but comes with time. It’s not about indy policy resembling failure vs success, but success through failure. In many ways, PRC industrial policy has close to 100% success rate because alternatives to inefficiently pursuing indigenization is simply ceding to incumbents as they build moats higher on critical tech. Being 1-2 gen, 5/10 years behind is better than being dependent or without. CCP/state will eventually need to slow down, but probably not short medium term. System still working well while risk of instability/upheaval manageable.
Lots of assumptions, here. Main one being that excess _authoritarian_ state capacity won’t majorly eff up China again (which has already happened multiple times in loving memory). I’m not willing to bet on that.
India is definitely more chaotic but it’s also much less likely to make massive policy errors like authoritarian China already has committed multiple times. And you need to get with the times. India’s per capita GDP is rising and attitudes (about both caste and gender/patriarchy) are liberalizing/Westernizing rapidly among the younger generation.
I argue state over capacity hasn't messed up PRC more than it helped. Whereas Indian under capacity has, because it is measured against relative performance of PRC. In PRC, a condition starts off at 0.5, state targets 1, state zealously over-corrects to 1.1 (but that 0.1 destroys a bunch of people, 10s of millions at PRC scale), then quickly readjusts down to 1. In comparison, Indian under capacity has in aggregate harmed more than it helped. In India, a condition starts off at 0.5, state slowly improves to 0.6, but that's 0.4 off from benchmark of 1. That lack of capacity gets compound over decades/generations and "indirectly" leads to much worse aggregate outcomes, i.e. excess avoidable deaths (100s of millions at Indian scale) far exceeding alternative of initially overcorrecting by 0.1. Past 60 years of Indian development has been a continuous MASSIVE POLICY ERROR in comparison. It's hard to argue starting in the same place as PRC but having 5x worse outcomes, and generations more of crippling poverty. Only for attitudes towards major social roadblocks to maybe change, when over capacity could have solved that in a bloody generation… 40 years ago. I would bet on PRC continuing to state over capacity and excess, but also understand that excess is a symptom of reaching “sufficiency” in the first place vs worst alternative of not meaninguflly getting there at all. Which is India in a nutshell.
We have seen often in history that autocratic countries can be relatively impressive for a few decades (for instance, N Korea was outperforming S Korea economically for decades after the Korean War, Germany actually had the most impressive scientific research unis in the world before WWI, Japan jumped out way ahead of the rest of Asia after they opened up, and the USSR also improved a bunch economically in it's first several decades from where Imperial Russia was). But they also often make major mistakes that doom them over the long-term (often times but not always, it was launching a catastrophic invasion that leads to the destruction of their government/country).
Democracies may seem to bumble about for a long time, but because they are freer and less coordinated, they also are less likely to launch in to major catastrophic mistakes. In fact, I can't think of a single instance of a democracy launching an invasion that led to the downfall of itself.
Note that the USSR also produced an impressive amount of engineering/technical/math/scientific talent. But that didn't keep them from falling.
I'm basically reiterating Acemoglu's thesis here.
You have a fairly simplistic view where you think that just because China will produce a ton of engineers, they will work super hard and can pivot adeptly even though they are fundamentally not free and exist at the whims of 1 capricious human.
If you're so sure of your theory, you have to explain why the USSR failed to catch on in the computing revolution and finally failed. I'm pretty certain that at one point, the USSR had as many (I think even more) engineers as the US.
NKR was literally bombed to stone age and forever sanctioned by the US at the height of postwar hyperpower hegemony, while SKR was actively supported. Ditto with postwar JP. Yes it’s hard to develop when you can be trivially contained by the preeminent world power multiple times your size. Conversely easy to develop and maintain continuity even as an autocracy when your interests align with hyperpower. It's not about democracy vs autocracy, it's about being a protectorate of the global hegemon, who has no problem making democratic or autocratic partners thrive and adversaries fail.
With respect to the USSR, a huge % of her existence was also in a state of destruction/reconstruction, and did fairly well trying to keep up in scitech, but really only a fraction of republics were in position to contribute quality talent. They're a large 280M bloc on paper where really 180M were barely developed to the point of contributing competitiveness, nothing like the stable conditions 250M in the US had. They failed in several sectors including computing because they were closer to a JP sized country in productive potential than the US and stretched too thin. It’s not surprising they managed to do alright across the spectrum but also failed in some sectors like computing compounded by political shenanigans and internal dysfunction. The fact that they could compete on a broad spectrum at all is a sign that the PRC's much greater state capacity and talent base would have less problems today. For reference, however big shitshow PRC semi big fund efforts have been, it’s a few nodes behind. That’s better than the USSR managed. Performance of PRC indy policy in general should be an indicator that PRC is not the USSR. It’s kind of baffling why the west keeps trying to compare the two. Or that Xi is some abhorrent godking when his policies have been in continuity with past politburo's priorities who put not insignificant effort to not to repeat a USSR.
On USSR collapse + bad invasions, PRC is now more unified polity than USSR ever was, even fringe restive frontiers are like 5% of population easily suppressed vs the shit show mish mash that was managing the republics. It’s not just soviet ideology but the entire union was inherently a much more difficult/brittle construct to manage vs PRC provinces and the autonomous zones that by now are comprehensively securitized. Compared to the USSR, keeping the PRC together is easy mode. In terms of dumb self-destructive wars, there's a reason PRC has limited skirmishes and ratified 12/14 land borders with land neighbours (most on earth), majority with concessions, and even dropped 11 dash to 9 dash. That level of territorial concessions is unprecedented for a rising power. PRC hasn’t gotten into stupid protracted wars since her founding vs USSR did so repeatedly. Sovietologists and Sinologists trying their hardest to conflate the USSR conditions with PRC because communist autocratics are all the same. Except they’re not.
To conclude I'm not "so sure" of my theory as I'm more unsure of current trending theories against PRC.
> D.W.: The first is that there have been a lot of failures. China is achingly aware of its deficiencies in two strategic sectors in particular: semiconductors and aviation. So it has showered these sectors with bountiful money and stern policy attention. Where has that gotten them? Not far.
Calling these sectors a failure is not very fair. Although Chinese semi and aviation hasn't caught up to the leaders, they have made huge advances in the past 30 years from basically nothing. China industrial policy is very patient and are willing to be misunderstood by western critics like EVs 5-10 years ago.
For aviation, China has figured out jet engines with the latest WS-15 and developing one for commercial usage. China made much more progress than Japan in producing commercial jets.
Semi is also impressive in that China needs to build the entire supply chain by itself to avoid sanctions, and has achieved that in mature nodes, something no other country can claim.
That was a very good article. Very insightful.
He is also an especially effective communicator. In both audible and written discussion, a tendency today is hold too many ideas at one time and use an abundance of commas. Appreciated Mr. Wang's ability to pick up one item and finish with a period. And then go to the next item. I didn't have to re-read paragraphs as is too often the case. Just a side-note that became obvious early in the interview.
Truly excellent of course (Dan is excellent, your questions the right ones). One key theme emerges: that growth in both inventions and ideas that come from the 'fringes' ("its scientific establishment is unused to puttering around the fringes of new fields," "It would be good, I think, if the Chinese state can one day learn to leave people alone") won't happen when the idea of being 'left alone' is not a state or cultural value. I once met a philosophy grad student in Hangzhou working on Rawls who said his research was frowned upon because the very idea of the single individual standing behind the veil of ignorance looking out at his possible life was anathema to the Party. It is very good to consider, as you both are doing here, the economic and social trajectory of a nation that does not particularly value puttering around the edges of things.
I do wonder, as successful as China has been at catching up and even surpassing the West, if they are about to do their own version of 90s Japan bubble bursting followed by stagnation.
A little-known fact, btw, is that Japan's economy actually slowed down in the mid-70s! In the late 80s it grew a little faster than the U.S. (due to a bubble which then burst), but really its catch-up was largely done by the 70s.
Excellent interview, Dan Wang is consistently insightful & much needed voice in the conversation about China, tech/politics and economics.
Dan’s point about how “the US has not gone out of its way to rhetorically welcome Chinese entrepreneurs” is worth considering further.
The US used to welcome the best and brightest from around the world, and immigrants to the US have founded a huge share of Fortune 500 companies.
Dan’s anecdotal point about Singapore attracting wealthy Chinese immigrants echoes my own anecdotal experiences in speaking to dozens of successful Chinese entrepreneurs and investor friends who are no fans of China’s new direction & stifling of entrepreneurship, and who would love to immigrate to the US. Our broken immigration system, country quotas and green card/O-1 visa caps makes this extremely difficult.
Now countries like Singapore and Canada seem to be doing much better in attracting disaffected Chinese entrepreneurs and talented/wealthy folks to immigrate while the US’s rhetorical excesses and growing xenophobia towards China seems to tell these potential Chinese immigrants they are not wanted in the US. In some US states, recent laws passed would not allow most Chinese immigrants to even purchase property, and echo the worst periods of past US xenophobic excess like the Chinese Exclusion act of 1882.
Can you blame a talented Chinese entrepreneur or engineer tired of living in China for wanting to look to other places to immigrate?
Seems to me that attracting these disaffected and successful Chinese entrepreneurs, engineers & investors to the US would serve multiple purposes - filling important STEM-field jobs fast, weakening the progress of Chinese innovation by welcoming their top talents to our shores & industries, and demonstrating once again that America attracts the best & brightest to stay here to contribute to our country’s success and enjoy its freedoms.
On the other hand, them ending up in Canada isn’t bad either.
We should allow freedom of movement between the US and Canada.
Heck, the UK, Australia, NZ, and Singapore too.
Oh also big fan of dan wang’s work too^ super excited to see this piece!
Love the reference to taisu’s paper on neighbourhood level local government structures, w the balance between central ideology and grassroot governance being key still in the power they have. Also very interested to see how this plays out in urban and rural areas
Also enjoying the emphasis on the scale up aspect in manufacturing. In certain intersections btw material engineering + pharmaceuticals you can also see this at play in china. Stability is so key (@high intricacy + high volume!) when you move from the lab into commercial manufacturing. Cool to see it pointed out!
I'm not an economist, and this interview seems to focus more on economics, but I do feel that demographic decline is more serious than was talked about. China is losing 1-2% of its working age population every year, and the fertility rate is falling extremely fast. What kind of timeline are we focused on here? Extrapolate out 20 years and you have only half the current number of 20 year olds. Huge drag on future consumption and innovation if your youth population is halved.
We'll see, but so far Japan's economy has only fallen slightly behind those of European countries whose population has risen over the last 20 years. Remember that what really holds the country back here isn't population *loss*, it's *aging* -- an increase in the old-age dependency ratio means that there are fewer workers to take care of each old person.
Japan ,is quite vulnerable to exchange rate volatility. A much softer currency last year drastically sent their GDP nearly US$1 trillion lower. What is more pronounced is apparent loss of risk appetite and confidence in their deserved achievements and overall national stature, past and present. The vicious cycle begins when the young may both feel happy (for they know the future holds no promises, so why not splurge on the now) and disenfranchised, also about the future. I do think Dan Wang (still very much a Chinese) overlooks his country's demographic snowball: it's not "gently plateauing", for China's population will drop well below 1.3 billion by 2050, or losing Guangdong and Shanghai combined. It is Japan whose population gently plateaus, losing roughly 2% over the last two decades, thus their success in not falling too far behind the west. China's other aging parameters, from median age to elderly share of the overall population, are much worse than Japan's, even considering the perennially rosy forecast by the UN.
PRC and JP has completely different projected workforce and income compositions. PRC is proportionately shedding 500M+ old/poor/unskilled first and replace them with new gen of skilled talent. PRC skilled workforce is still around 25% (many old/rural simply left behind), meanwhile JP at 80+% - their net decline in population will be strongly associated with decline in productivity that needs to be plugged with immigration and automation. Meanwhile PRC moving 25% to 60/70/80% skilled workforce to replace unskilled in next 10/20/30 years has potential of 3-5 extra Japan's worth of growth. Also consider that a huge % of PRC elderly are "old before rich", they have high home ownership and household savings because culturally, these cohorts have little expectation of state support / welfare unlike "rich before old" developed states with onerous social security.
Now factor in reduction in import dependency and how shedding 100Ms of low productive workforce that has been dragging down PRC per capita income improves PRC geostrategic posture and kicks her into high income by... just letting things be. Age out out the 600M on 1000rmb/month and per capita GDP of other 800M is currently 24K USD/year. It's not abou losing Guongdong + Shanghai, it's about losing tier 4-10 drains like Gansu and Guizhou while elevating future of country to tier 1-3 even if it's less people. Bluntly PRC has too many useless people (100s millions of make shift agriculture jobs when really only need 5).. Reality is that the current population size in the PRC is still a source of vast problems from domestic to geopolitical. PRC settling at 800M (per "rosy" UN forecast by 2100) with 60-80% high skilled workforce that state bias towards scitech/productivity (i.e. still roughly OECD combined) , with likely energy and agri autarky is a great place to be. That’s likely enough talent to specialize in every sector with still surplus… hence vicious cycle need not apply, fact is workers willing to eat shit will do so to stay in the game. Those burned out by competition can lie flat or waste their savings on consumption. Youth disenfranchisement in SKR/JP/TW is an issue because these are advanced economies with limited/maxedout skilled workforce headroom that will have pressures maintaining competitiveness medium/long term with labour shortages for their prestige strategic industries, PRC just by virtue of having multitudes more bodies will likely mitigate the issue, i.e. long term PRC can still prioritize churning out 100,000 new semi engineers to stay globally competitive in lieu of nurses, because 100,000 nurses might reduce health welfare by single digit percentages in PRC, but completely break or collapse medical systems in places with 10-50x less people.
These PRC demographic snowball narrative analysis overlooks that PRC’s high skilled demographic dividend in coming decades is going increase her competitive baseline relative to pre 2020s PRC with a greater aggregate population. We’re looking at 2020 PRC with 20M, with (just napkin math illustration) PRC conceivably peaking at 50-80M STEM by 2050s followed by multi decade PRC productive decline where by 2100s. For reference PRC STEM <10M most of 2000s. It competitive terms it's like PRC being 1/4-1/2 as competitive as US pre 2010s, maybe 1X+ in by 2030s, peaking at 2-4X by 2050-60, and then declining to merely 2X+ by 2100. Yes this is all a bit video game mathy, but the broad point is PRC =/= JP, it's has a lot more room to peak even with net population decline that doesn't "gently plateau", because 2050s PRC is coordinating the greatests demographic divident in recorded history, 600-700M workforce with 70%+ skilled labour is (vs 1B @ 10% in 2010s).
Some big caveats here. Provided that those highly skilled workers can really find a suitable job, otherwise the "up and up" mentality of humans will continue to drown them in tangping, bailan or "special forces spending". The notion that tertiary graduates = highly skilled workers is quite archaic since AI can do a lion's share of jobs requiring "high, but not diversified" skills. One needs not look further than the spiking youth unemployment rate of 20.4% last month, and the widely agreed-upon solution of the Party is to channel youths into services (hawkers, shippers, gig eco, to name a few), not fancy tech/competitive/well-paid jobs of the future. Not to mention that it's not guaranteed the best and brightest of China will opt for way back home., as migrant flow from PRC will keep stabilizing throughout this century. Furthermore, skilled and educated as they may be, Chinese youths will forever be burdened with insane pension and 4-2-1 care for their parents and (fewer and fewer) children - truly sandwich generations, as even the "rosy" UN views the elderly of China will make up one third at best and 41.5% on average by the end of this century, unlike JP/SK/TW/SG that were sparsed the burden for decades while the young have time to accumulate needed skills.
By the way, although China has lots of "useless" agrarian people, it's the generation that triggered and sustained a lasting property boom that buffed the economy and never returns. Show me any industry that can fully make up for the permanent drag of ever downsizing real estates. And to think that fancy tech will replace those "useless" people glosses over the fact that tech needs numerous "useless" people to do tedious menial jobs, train machines and consume. Last but not least, what country may stay competitive with their population falling more than 1% a year (a prospect from the 2050s onward).
Apology for wall of text:
On Youth unemployment rate. This is western analysis only looking at lemons not the lemonade. Recontexualize: PRC state over capacity post academic reforms is now creating 8M+ undergraduates with ~5M STEM and finding opportunities for 80%... that's ~6M+ entering the work force this year - many of which are skilled technical roles. For global competition that's AN ABSURD amount. Last few years of PRC rapidly moving up innovation, scitech indexes (controlled for quality), value chains was the lag effect of PRC spamming a fraction of that amount of talent 5-10 years ago as result of academic reforms 15-20 years ago. PRC only having 20% youth unemployment for the scale of talent that’s currently being generated should scare west more than it scares CCP.
Besides plenty of low-end manufacturing jobs left for the other 20% if they're willing to debase themselves. But fundamentally having surplus talent that can do lower tier work but won't is still better than having a lack of talent and allowing skilled roles go unfulfilled. Like there's a reason 20% of youth can even afford to fuckaround, it's because PRC household savings enables many to wait and be picky. If things get desperate, they'll settle for lower prestige jobs, i.e. talent going to bureaucracy in the last few years. Youth unemployment has been an issue for many years as the state over produces talent, but they get filled eventually. It's not a non-issue, but it's overhyping the negative symptom of a massive structural workforce boon. Yes, there's more to the workforce than spamming tertiary diplomas, but historically and until AI displacement occurs on a massive scale, it's a good proxy for projecting development/growth. The state trying to redirect towards vocational training due to excess higher-ed production is talent production recalibration, hence why I said PRC even reaching 60/70% skilled workforce vs 80+ in JP/SKR/DE is still several Japan's worth of extra development.
As for talent retention, Chinese academics are flocking back to PRC at an unprecedented rate. Meanwhile this isn't the pre 00s-10s where PRC was sending their best abroad, now most of the students are middle class kids with some resources who can't hack gaokao, aka PRC isn't sending their best anymore and hasn't been for years - and these frankly B tier talent going abroad enmasse are still enough to saturate research assistant positions in western institutions. Even less as the education system de-prioritize English in future gen that's started over the last few years. Reality is, if you are the best and brightest, opportunities in PRC have never been better and are only improving. There’s a reason US and TW literally have to ban semi talent from working in PRC.
On a 421 dependency ratio, the flip side of 421 and 4/2 generations with high home ownership rate and massive household savings is 4x2 generational wealth transfers that trickles down to the 1 in due time. This will mostly affect already talent heavy and affluent tier 1/2 regions. (Incidentally expect and consumption boom as we shift towards that transition in 40s-50s).Like there's plenty of old folks doing fine in PRC on their savings and meager pensions, and as JP demonstrates, eventually old people will, to be blunt, rot and die unceremoniously while many youth go off to do their own thing. Very few are sticking around to care for the elderly in great numbers, youth serious about career will accumulate skills over extremely burdensome filial duties like everywhere else in contemporary societies. Yeah, a significant portion of rural/poor will have a harder time, but again their expectations are different. Again, PRC isn't going to have a stupendously unsustainable safety net - common prosperity not "welfare" afterall - PRC simply won't set expectations for an onerous social contract that’s projected to cripple advanced nations unless they keep importing people. We’re going to (continue) seeing way more riots in the streets in western countries due to unmet/declining social protection than PRC not delivering on unpromised obligations in the first place. Folks dying in PRC in the next 30 years are generally going to merely die 10-100 times richer than their parents, meanwhile advanced economies are going to deal with tangible generational QoL loss. These are different populations/psychology/scenarios to address.
On population X property boom, recalibrating away from real estate as the primary engine of growth is good long term. I think instead of focusing on juicing up GDP stats with ever increasing rent extraction (i.e. US high health care), focusing on developing the real economy and moving up all sectors to global parity or leadership is a better goal and actually a useful reflection of comprehensive national power - hence move to “quality growth”. PRC real estate is comparable to the US health sector as % of GDP, it's stupid high for what is delivered and a net drain on developing more important/strategic/critical things.
On numerous "useless" people to do tedious menial jobs. There's a difference between needing 5M skilled farmers using mechanized equipment like in advanced agri economies with maybe another 5M menial farm hands vs having 200M+ low productive make-work farm jobs because there are simply that many excess bodies.The 600M, many of whom are trapped in informal economy on 1000 RMB per month constitutes 5% of PRC GDP. They're not significant consumers. If anything, they're being subsidized via massive poverty reduction and labour transfer programs. For reference, the US as agri export power has to deal with ~3M migrant farm hands, ~half of which undocumented. 10s of millions of surplus cheap labour might be a net benefit to arbitrage… 100s of millions is a drain. And again, it's important to note the cohorts aging out first are going to be predominantly above those left behind by development. Impact on growth will be minimal vs developed economies like JP losing high productive talent that can’t replace at parity. That recipe for stagnation/decline.
On staying competitive post 2050. Post 2050 peak, PRC falling population will indeed start converging with growing population countries like the US. But at the PRC baseline in 2050, the skilled workforce composition that is being accumulated over the next 30 years is such a massive pool at PRC denominator scale, such a potent workforce can weather bleeding talent for decades still to come out ahead in the human capital game. Demographic collapsists portray PRC productive potential falling from medium level fast, but IMO it will be falling from high level slowly, enough to maintain comfortable lead it's in process of building. Unless AI/some sort of disruption makes human capital moot. In the meanwhile, there's also a trend of more net automation than the next several major economies combined. The PRC demographic collapse narrative is not grasping the sheer headroom in talent lead and capital accumulation that PRC is on trend of generating. I like to conceptualize 2020 PRC as having productive potential (not GDP) of ~2 Japans and ~5 Nigerias, by 2050 it will trend towards ~6 Japans and ~3 Nigerias, by 2100 it will be ~6 Japans. Is ~6 Japans as competitive as ~6 Japans and ~3 Nigerias? Hard to say, but both are better than ~2 Japans being brought down by ~5 Nigerias. No offense to Nigerians. TLDR is the gargantuan 1.4B country declining to become merely a 800M massive country while being more net productive can absolutely stay globally competitive, especially if contenders are 200-400M large countries. It would be hard not to.
You have it insanely long, and still full of simplistic presumptions that can't be more divorced from reality:
1. The century-long glide from 1.4B to 800M is already too rosy, given the PRC's stabilizing birth rate shooting up to 1.3. In fact, it's going in East Asian orbit around/below 1. So population by 2100 is much more likely to be 587M (forecast by Yuwa) or 488M (Shanghai Science Academy), or collapsing to one-third the current level. There are no collapsists, only real collapse in population. No AI or tech would offset such a catastrophic fall in pop.
2. You repeatedly mention "talent", implying that China has a vast pool of talents. It seems people today are too mistaken between highly skilled vs. highly qualified. The Chinese young are the latter, but the former? Not so sure. The education system's mismatches are so apparent in the youth unemployment rate today. And who can guarantee China may in the future absorp the "pool of talents". Capitalism may definitely operate without humans, but at the time China is exactly Cyna, a cyborg nation that has no physical Chinese face.
3. Real estate crisis: Little princes are rightly heirs to their parents' property. Their wealth is guaranteed. However, it also means THEY HAVE NO DEMANDS FOR MORE HOUSING, especially once the state imposes heavy property tax (a no-brainer, given PRC's overburdened safety net). It's the reason I say highly qualified Chinese generations in the future will also be sandwich ones, trapped between tiresome obligations to their parents and children.
In a nutshell, I never set much store by those who feverishly hold tech to extreme regards. It's far from a magic wand, while we the mortals will always be ensnared in the most mundane of things in life.
Dan Wang needs to write a postcard deciphering which of Bar, Modern, Sally's or Pepe's shines supreme over the New Haven culinary firmament.
This is a great interview.
> And yes, a still-greater share of younger people are upset... It's worth pointing out, however, that there are many pro-regime young people. In surveys, young Chinese report being more patriotic than the previous generation. So I feel that their views are polarized: both more young people are happy and more young people are upset.
It's worth appreciating when a commentator avoids painting an entire generation (or two) with a single trend.
>I think that one of China's essential problem is one of state overcapacity. Since imperial times, state officials would rarely hesitate to entirely restructure a peasant's relationship to her land.
Japanese, Korean, and Vietnamese governments were all influenced by the Chinese example. Did any of them show this level of state overcapacity?
American tech companies willingly sold-out their futures to China, et alia in exchange for cheap labor. That works for the short term but not the long term. Just one example, Texas Instruments fails to promote a certain executive, who then goes to Taiwan to start TSMC. Intel’s culture was we’re the sophisticated chip designers and the chip-fab business is low margin, not sexy, etc. Intel invented a lot of EUV technology, but again it wasn’t interested in anything related to the chip-fab sector. ASML took over the pursuit and development of EUV chip lithography. I think these will rank as two of the worst business decisions in the new Millennium.
Intel can build a 3nm or 5nm chip fab with government money, but it can buy the corporate culture it takes to manufacture chips 24/7 with 99.9% success. TSMC has the culture and the know-how to work with their client’s new chip designs (e.g., Apple’s M1 and M2 chips) and solve the inevitable bugs when production begins. Already, TSMC is flying over its engineers from Taiwan because the U.S. workers in its new Arizona fab are so disappointing in re work ethic, expertise, etc.
China threw $200 billion at the chip-fab sector and ended up with hundreds of small fabs that can’t produce at world-class scale. As Qualcomm’s CEO stated last week: “Computer chip production will need to double some time in the next 5-10 years. It isn’t going to happen in China. I think the money will flow into the proven high-tech economies of South Korea, Malaysia, Mexico, Poland, etc. Qualcomm’s CEO also stressed that chip production needs to become more geographically distributed, if for no other reason than the potential of natural disasters. I think this will also be the pattern in other high-tech manufacturing products. I think long-term stability trumps price in the long term.
As for China leading the world in Li-ion battery design and production, I think they will get serious competition coming from Li-ion batteries with 100% more energy density via a silicon anode and 3D architecture, half the charge time, and longer battery life. And most important: leading-edge technology that mitigates thermal runway (short-circuit fires). These batteries have begun production in California, will begin production in Malaysia in another 18 month to two years. If a corporation such as Samsung decides to ink a co-manufacturing agreement, the speed at which it can retro-fit and scale-up production in its existing battery manufacturing plants would be impressive. Elon Musk has stated that the “silicon anodes is the way to go forward with lithium-ion batteries.
A lot is going to change in the coming 5-10 years: more diversification of high-end technology facilities and geographic locations. This is the West’s response to China 2025.
Basically, the West needs a thick web of alliances. It doesn’t really matter if ASML took the lead in a technology. The Dutch aren’t going to invade other countries or throw people in concentration camps any time soon.
I agree. The point I was trying to make, though I wasn’t clear enough, is that INTL, et alia, which seek to become chip fabs overnight, isn’t likely with their corporate cultures. New chip fabs would be more readily adaptive and successful at scale in cultures such as Malaysia, Mexico, South Korea, Vietnam, and Indonesia. What better way to increase the West’s influence in the PAC-Rim as a challenge to China? The U.S. is very good at designing/producing the parts and softwares for chip fabs.
Dan Wang is awesome. That is all.
Wonderful interview with comparison and contrast between China’s vs. USA approach and ability to control and implement industrial policies, especially considering each country’s respective strengths and weaknesses. In my mind these two countries given those industrial factors are more complementary, rather than substitutive. It would be sad to have a global conflict between the two.
Very good interview!
1) The demographic effect will be significant imho. Both absolute population numbers and dependency ratio's matter, and the latter will raise soon. China has one of its biggest generation's crossing the 60 year mark now: https://en.wikipedia.org/wiki/Demographics_of_China#/media/File:China_population_sex_by_age_on_Nov,_1st,_2020.png
2) The last years saw increased state control and reduction of liberty and free speech, together with sudden crackdowns on economic sectors. This should reduce China's ability to innovate. It looks like the government is afraid of sudden change->can't allow too much creative destruction and creative chaos.
The pace of technological development in China is truly impressive. It's clear to see that the Chinese are deeply committed to learning and are incredibly diligent and intelligent. This has allowed them to make rapid strides in various fields of technology, illustrating the remarkable capacity and potential of the nation.
However, despite these advances in technology, the realm of scientific development in China still faces significant hurdles. One major obstacle is the pressure of daily life, which can often be overwhelming and distracting. This makes it challenging to dedicate the necessary time and effort into scientific research, particularly when the fruits of labor are not immediately apparent.
Science, by nature, requires sustained and long-term commitment, often in the face of uncertain outcomes. This can be a hard path to tread when societal and personal pressures take precedence. Thus, the difficulty lies not in the lack of intelligence or diligence, but in the ability to balance life's pressures while maintaining the perseverance required in scientific endeavors.
Nevertheless, China's remarkable progress thus far gives us reason to be optimistic about the future. With supportive policies and frameworks that alleviate some of these pressures, there's no doubt that the country can overcome these challenges and continue to grow in both the technological and scientific domains.
Is this a chatGPT written reply?
Sad to see DW joining the horde.
>catastrophes that did not seem to be necessary
...
>problem is one of state overcapacity
State overcapacity is a symptom of the solution of maximizing state capacity. Sure, it’s a problem, but better than the alternative, at least for now. For catchup development and now near peer competition, state overcapacity is better than state none/under capacity. GLF left PRC significantly more industrialized relative to developing peers in immediate years following (see national production share stats of era, PRC had relatively high share of industry vs service & agri compared to states with comparable starting points), meanwhile PRC life expectancy in 70s reached middle income levels. CR and OCP (broadly family planning) is why PRC had a mass of largely fungible bodies to exploit manufacturing led growth as resources get directed to 1-2 offsprings to build up cohorts of high skilled talent that's moving up the value chain now. Not too different from other East Asian Tigers, except PRC still has about 3-5 Japan’s worth of growth productivity left to squeeze as it moves from 25% skilled talent to the 60-85% of advanced countries in the next few decades, aka the greatest skilled demographic dividend in recorded history. Decline TFR due to overzealous state overcapacity, yes, 20% youth unemployment because state over capacity pumping out talent, also yes, but also closer to PRC demographers best lightcone projections.
PRC's success is precisely because state overreach wasn't afraid to treat human (resources) like capital, because the state did not leave "people alone". Neighbouring India unable to launch "famine policies" is why they suffered 100s of millions of avoidable infant deaths over decades, and still have food security stats comparable to North Korea. India is still a fragmented shitshow because their red guards didn't denounce caste away, while traditional values now absurdly squeezing women workforce participation rates down. Their lack of family planning (which they’ve tried and failed), is how India is going to end up with 1B+ stuck in subsistence agriculture and informal economy vs PRC’s 600M. They’re basically trending towards the PRC demographers nightmare scenario. State overcapacity in the PRC front loaded 10s of millions of deaths ("catastrophes that did not seem to be necessary") to avoid 100s of millions. Of course better to… not over overreach with millions of death, but the alternative of under capacity is darkest timeline material.
TLDR the temporary shambles of PRC state over capacity was vastly more performant than lack of meaningful state capacity over medium/long term. Youth unemployment is the fallout of state overproduction roughly OECD combined in STEM talent. It’s not good, but there are worse problems to have, like not having enough talent at all. Just like PRC indy policy, where DW acknowledged PRC has caught up in most regards except the… checks note, two most complex and difficult integration industries. If progress in PRC military aviation is a sign, it’s more a matter of institution coordination problems than raw engineering, software stuff that’s harder to spam but comes with time. It’s not about indy policy resembling failure vs success, but success through failure. In many ways, PRC industrial policy has close to 100% success rate because alternatives to inefficiently pursuing indigenization is simply ceding to incumbents as they build moats higher on critical tech. Being 1-2 gen, 5/10 years behind is better than being dependent or without. CCP/state will eventually need to slow down, but probably not short medium term. System still working well while risk of instability/upheaval manageable.
So you’re saying the Great Leap Forward and Cultural Revolution were good? Gotta crack a few eggs to make an omelette, right?
Never mind that the actual omelette making happened when the government wasn’t in its manic authoritarian phases.
Lots of assumptions, here. Main one being that excess _authoritarian_ state capacity won’t majorly eff up China again (which has already happened multiple times in loving memory). I’m not willing to bet on that.
India is definitely more chaotic but it’s also much less likely to make massive policy errors like authoritarian China already has committed multiple times. And you need to get with the times. India’s per capita GDP is rising and attitudes (about both caste and gender/patriarchy) are liberalizing/Westernizing rapidly among the younger generation.
I argue state over capacity hasn't messed up PRC more than it helped. Whereas Indian under capacity has, because it is measured against relative performance of PRC. In PRC, a condition starts off at 0.5, state targets 1, state zealously over-corrects to 1.1 (but that 0.1 destroys a bunch of people, 10s of millions at PRC scale), then quickly readjusts down to 1. In comparison, Indian under capacity has in aggregate harmed more than it helped. In India, a condition starts off at 0.5, state slowly improves to 0.6, but that's 0.4 off from benchmark of 1. That lack of capacity gets compound over decades/generations and "indirectly" leads to much worse aggregate outcomes, i.e. excess avoidable deaths (100s of millions at Indian scale) far exceeding alternative of initially overcorrecting by 0.1. Past 60 years of Indian development has been a continuous MASSIVE POLICY ERROR in comparison. It's hard to argue starting in the same place as PRC but having 5x worse outcomes, and generations more of crippling poverty. Only for attitudes towards major social roadblocks to maybe change, when over capacity could have solved that in a bloody generation… 40 years ago. I would bet on PRC continuing to state over capacity and excess, but also understand that excess is a symptom of reaching “sufficiency” in the first place vs worst alternative of not meaninguflly getting there at all. Which is India in a nutshell.
We have seen often in history that autocratic countries can be relatively impressive for a few decades (for instance, N Korea was outperforming S Korea economically for decades after the Korean War, Germany actually had the most impressive scientific research unis in the world before WWI, Japan jumped out way ahead of the rest of Asia after they opened up, and the USSR also improved a bunch economically in it's first several decades from where Imperial Russia was). But they also often make major mistakes that doom them over the long-term (often times but not always, it was launching a catastrophic invasion that leads to the destruction of their government/country).
Democracies may seem to bumble about for a long time, but because they are freer and less coordinated, they also are less likely to launch in to major catastrophic mistakes. In fact, I can't think of a single instance of a democracy launching an invasion that led to the downfall of itself.
Note that the USSR also produced an impressive amount of engineering/technical/math/scientific talent. But that didn't keep them from falling.
I'm basically reiterating Acemoglu's thesis here.
You have a fairly simplistic view where you think that just because China will produce a ton of engineers, they will work super hard and can pivot adeptly even though they are fundamentally not free and exist at the whims of 1 capricious human.
If you're so sure of your theory, you have to explain why the USSR failed to catch on in the computing revolution and finally failed. I'm pretty certain that at one point, the USSR had as many (I think even more) engineers as the US.
NKR was literally bombed to stone age and forever sanctioned by the US at the height of postwar hyperpower hegemony, while SKR was actively supported. Ditto with postwar JP. Yes it’s hard to develop when you can be trivially contained by the preeminent world power multiple times your size. Conversely easy to develop and maintain continuity even as an autocracy when your interests align with hyperpower. It's not about democracy vs autocracy, it's about being a protectorate of the global hegemon, who has no problem making democratic or autocratic partners thrive and adversaries fail.
With respect to the USSR, a huge % of her existence was also in a state of destruction/reconstruction, and did fairly well trying to keep up in scitech, but really only a fraction of republics were in position to contribute quality talent. They're a large 280M bloc on paper where really 180M were barely developed to the point of contributing competitiveness, nothing like the stable conditions 250M in the US had. They failed in several sectors including computing because they were closer to a JP sized country in productive potential than the US and stretched too thin. It’s not surprising they managed to do alright across the spectrum but also failed in some sectors like computing compounded by political shenanigans and internal dysfunction. The fact that they could compete on a broad spectrum at all is a sign that the PRC's much greater state capacity and talent base would have less problems today. For reference, however big shitshow PRC semi big fund efforts have been, it’s a few nodes behind. That’s better than the USSR managed. Performance of PRC indy policy in general should be an indicator that PRC is not the USSR. It’s kind of baffling why the west keeps trying to compare the two. Or that Xi is some abhorrent godking when his policies have been in continuity with past politburo's priorities who put not insignificant effort to not to repeat a USSR.
On USSR collapse + bad invasions, PRC is now more unified polity than USSR ever was, even fringe restive frontiers are like 5% of population easily suppressed vs the shit show mish mash that was managing the republics. It’s not just soviet ideology but the entire union was inherently a much more difficult/brittle construct to manage vs PRC provinces and the autonomous zones that by now are comprehensively securitized. Compared to the USSR, keeping the PRC together is easy mode. In terms of dumb self-destructive wars, there's a reason PRC has limited skirmishes and ratified 12/14 land borders with land neighbours (most on earth), majority with concessions, and even dropped 11 dash to 9 dash. That level of territorial concessions is unprecedented for a rising power. PRC hasn’t gotten into stupid protracted wars since her founding vs USSR did so repeatedly. Sovietologists and Sinologists trying their hardest to conflate the USSR conditions with PRC because communist autocratics are all the same. Except they’re not.
To conclude I'm not "so sure" of my theory as I'm more unsure of current trending theories against PRC.
I mean, if the US is as so friggin powerful as you make it out to be, then surely the US supporting India would give it the upperhand over China, yes?
> D.W.: The first is that there have been a lot of failures. China is achingly aware of its deficiencies in two strategic sectors in particular: semiconductors and aviation. So it has showered these sectors with bountiful money and stern policy attention. Where has that gotten them? Not far.
Calling these sectors a failure is not very fair. Although Chinese semi and aviation hasn't caught up to the leaders, they have made huge advances in the past 30 years from basically nothing. China industrial policy is very patient and are willing to be misunderstood by western critics like EVs 5-10 years ago.
For aviation, China has figured out jet engines with the latest WS-15 and developing one for commercial usage. China made much more progress than Japan in producing commercial jets.
Semi is also impressive in that China needs to build the entire supply chain by itself to avoid sanctions, and has achieved that in mature nodes, something no other country can claim.