The Decypher SenseMaker Interview with Prof. Yasheng Huang on The Rise & Fall of The East, and Future of China

Prof. Yasheng Huang is Epoch Foundation professor of global economics and management at MIT's Sloan School of Management . From 2013 to 2017, he served as an associate dean in charge of MIT Sloan's global Partnership Programs and its action learning initiatives. His previous appointments include faculty positions at the university of Michigan and at Harvard Business School. Professor Huang is the author of 11 books in both English and Chinese and of many academic papers and news commentaries.

Amogh Rai: Congratulations on writing a fantastic book which goes deep but also goes wide. There are many things that the book covers, and I’ll be unpacking the East, that is exam, autocracy, stability and technology. But before we begin, I would like to ask a question that in the Eon piece that you had written, a lot of Indian comments were about asking you to compare between the Gaokao, the KJU, and the Indian Administrative Services exams in the IIT and the JEE.

I’m not going to ask you to do that, that would not be the right question. But I have another question. Since 2021, President Xi Jinping has been going after education technology companies in China.

And one of the most important things, the largest scope of the book, is examination in the Chinese system. If exams have been able to create for the CCP a country or a citizenry which is so easy to control, why would a president who is insistent on creating a legacy for himself as perhaps the great henchman, as Mao Zedong was called, why would he go after the cramming factories?

Yasheng Huang: Thank you so much. First of all, I’m very happy and honored to be invited to this panel, to this discussion. That was an excellent question and observation, very sharp observation. Let me put it this way. I’ll be happy to come back to the Indian civil service exam, by the way, but we can see it together later. There’s a very important piece about the Chinese civil service exam that was established in the 6th century, and that has to do with meritocracy and equality of opportunity. And the imperial system funded the preparation schools, and you can think about it as a 6th century version of universal basic education. So, not only did they establish the exam, they also made sure that the exam was open to all the members of the society.

When I say all the members, I should be careful. It was only open to the male segment of the population, but they wanted to draw from the rich families as well as from the poor families. So in that sense, there’s no inconsistency between this tradition of meritocracy and what Xi Jinping did in 2021.

The primary concern, at least the official primary concern expressed by his government, was that the private education industry play into the advantage of the rich and privileged families. I disagree with that view, but at least that was the official rationale why they went after the private education system. So, notice in doing that, they didn’t get rid of the exam system.

So, they preserved the exam system, but they wanted to minimise the levels of preparation, the discrepancy in terms of the levels of preparation between the rich and the poor families. So that’s sort of observation number one. Observation number two is, in the communist period, the exam system was the equivalent of the exam system, is much more than college exam.

It is the way that the Communist Party evaluates local officials, promotes officials, and uses kind of systematic metrics to promote, demote these local officials. So, it is not just narrowly the college exam. And the traditional civil service exam system that was established in the 6th century was also not about getting into college.

There was no college in 6th century China. It is all about recruiting human capital into the bureaucracy. So, in that sense, Xi Jinping did something about the preparations for the college exam, but he hasn’t done anything to undermine the communist bureaucracy itself.

Amogh Rai: Right. We are going to get back to Kiju, because I think the amount of information that I’ve been able to get about it has been fascinating from the book. But now let’s get to the East. (Exams, Autocracy, Stability, and Technology). And I think one of the most important features of the book has been the paradigm that you’ve used to get the book into a narrative structure, but definite critical way that you look at it. Because you’re talking about exam, autocracy, stability, and technology. And these are the sort of the four frames. But what is the general narrative unity that you want to present when you talk about this?

Yasheng Huang: Thank you. Very good question again. The general narrative is about a country. I’m actually working on a new book on this theme. The Needham question for sure, but then there’s something else I’m working on. A company or even an individual. So essentially what I think about how an economy, a society can succeed, they succeed by balancing two opposing forces in the right way. What I call in the book, scale and scope.

And we can sort of use that to look at India and China. Scale basically means homogeneity, right? Scale economy. You produce the same products at a very high level.

Scope means heterogeneity. Different products, different ideas, and different ideologies, and different political parties. And my argument is that a society, an economy succeeds by having an optimal combination of both of these factors, rather than going extreme on one.

And so that’s the kind of the general narrative that binds these four forces. And what I argue in the book is that the exam is a very successful scaling instrument. It excels at scale by eliminating alternative ideas, alternative ideologies, by preventing new ideas from coming forward.

And that scaling was incredibly successful in terms of creating political stability. So that’s the S component of the East, and preserving the autocracy of the system, a component of the East. But then it was terribly bad at technology.

So, the T, right? So, because technology requires both scale and scope, and the exam system basically got rid of the scope, all of it. So what we show in the book is that when China had heterogeneities before 6th century, before the exam system, it was very inventive, very creative. And then our data showed that once the ideology space began to shrink, the inventiveness declined substantially. So that’s the kind of the framework behind these four forces of history, and also the four forces today.

Amogh Rai: That’s a sort of a fascinating intro to this. I’m not going to be quoting from the book. It’s a slightly large passage. So please bear with me. Kiju penalised collective actions, and its norms impede apart toward Chinese democracy. A paradox is that democratisation is often advocated on individual values, but is actuated through collective actions. Protestant reformation, women’s suffrage and civil rights movement, church, political parties, even bowling leagues. Voting is a tool to coordinate preferences and aggregate collaborative acts.

“By contrast, Keju celebrated hyper-individualism, not individual agency. Candidates were pitched against each other in a fierce zero-sum tournament, where collaboration was severely punished. They were locked in a small, isolated cells, waging competition that is lonely, atomistic, brutal, and on terms entirely dictated by a remote and mythical state.

A society so individualised ceases to be a society. You could be talking about China and many other countries, especially the Keju nations, as you call them, at any point of time in history. But this is the context in the book where you are talking about how an educated state like China did not let go of its autocracy and how this education was largely responsible for the autocracy that we now see in the Chinese state.

From there to the CCP now, from 1949 to 2024, and possibly beyond, how has CCP been able to use this characteristic of history, considering that for the longest period of time, the first man to lead it for the longest time was a person who prided himself on a very revisionist reading of Chinese history. But as you show chapter after chapter, passage after passage, going towards the end of the book, that this system of scaling and scope has survived thousands of years of Chinese history. How and why?

Yasheng Huang: Yeah. So, the communist China also should be characterised by substantial stability. Not that the duration is long, but we don’t know that yet, because in the past, the Chinese dynasties could last hundreds of years. The Chinese system is about 74 years old. The Chinese communist system is 74 years old. It has already surpassed Soviet Union, the first communist country in the world. I say stable, especially relative to its performance. And the performance here is defined in two ways. One is bad performance, greatly forward, cultural revolution. The great Indian philosopher, economist Amartya Sen, argues very convincingly that, yes, India didn’t achieve poverty alleviation at a fast rate, and China did but India would never have committed the kind of calamities such as the Great Leap Forward and the Cultural Revolution, because it is a democracy. So, in my book, I define democracy as a political system that has more scope. So, it survived that. Great Leap Forward happened in 1957. Cultural Revolution happened in 1966 to 1976. It also survived good performance.

So, I think many people would be familiar with a theory called modernisation theory. The idea of modernisation theory is, as a country grows its economy, as the living standard improves, as the size of the middle class gets bigger, then the country transitions from autocracy to democracy. That happened in Taiwan. That happened in Korea. It didn’t happen in China. It may have happened, but at least so far, it didn’t happen. So, it is a very interesting system. It survived both the bad performance and it survives the good performance. So, the way I explain it is, so let me first say that most people explain a piece of this puzzle. So, they will say, oh, the Communist Party survived the Great Leap Forward and Cultural Revolution, because it’s a very oppressive regime. And then they will say they survived the good performance because the good performance gave the Communist Party legitimacy. But if you put all these explanations together, they don’t make any sense. So yes, the good performance gave them the good legitimacy, but the bad performance should give them bad legitimacy. So, it doesn’t really make any sense when you put the entire history of the Communist Party together. So, I use, again, the exam system as an explanation. And that exam system effectively prevented collective action. Collective action means horizontal coordination between people without going through a top-down process. Maybe we organised a protest, I send you a WhatsApp message, and so that happened in the Arabic countries. I remember very vividly, many years ago, an Indian academic, a conversation with an Indian academic about 1989 when China had the Tiananmen protest. He went to China, he looked at the protest, and then he said to me, well, I mean, why do you Chinese make a big deal of this? This kind of protest happened in India almost on a daily basis. He was probably exaggerating, but maybe there was some truth to that. So, protests happen in India all the time. Those protests require some sort of organisation, require some sort of coordination. You cannot possibly have so many people coming out to the streets simultaneously without any organisation.

What the curfew system did is that it eliminated any possibility for that type of organisation and coordination. So, it is incredibly effective because it is not because the Chinese people are not unhappy about the situation, the COVID controls in 2022, the lockdown affected hundreds of millions of people, but everybody knows if I come out and protest, I’ll be the only one. So, what I said in the book is that even if you have a high degree of anxiety and anger, if you act alone, by definition, you are the weaker party relative to the state.

So, suppose 25 million came out, suppose 30 million came out, then the situation would have been very, very different. So, a lot of it is actually psychological, is cognitive. So, you kind of get stuck in this cognitive situation.

And you can actually say that it is a cognitive coordination among the people that prevented them from organizing a collective protest.

Amogh Rai: Right. So, there’s a lot there that I mean, to answer your comment about the protests in India, perhaps we have protests in India on the same scope, but not the same scale. Yes, protests definitely keep on happening. And I’m going to stick to the scale and scope, because one of the things that you sort of a thesis that you developed, which comes from two other economists, and I found it very interesting in how the bureaucratic control is exerted in scale and scope, you talk about the M form economy, and the Horseshoe or the U form economy. For a lot of people who are not aware about this, because I think the argument in the book is that the M form and the U form economy, they are better at distributing the conflicts much better. So, I think USSR, is an example of the U form. And China is the example of the M form, which kind of takes away a lot of pressure. How has this organisational inventiveness or innovation helped perpetuate the CCP rule, while maintaining sort of a disproportionate control over the minds and ideas of its citizenry?

Yasheng Huang: Yeah. So now we are talking about sort of this M vis-a-vis U forms of organisation. And thinking back, what I should have said probably is the following. China has a M form economy, but a U form political system.

Amogh Rai: So, can I stop you there for a minute? Are you saying this, like it’s an M form economy and U form political system now? Or would you say that it has existed since the founding of the CCP?

Yasheng Huang: I think today, say 2024, the economy is much less of a M form under Xi Jinping. The politics is much more of a U form than before. So, I should always stipulate that when I discuss the reform era, I kind of don’t include the current period as reform era. And we can come back to that later. I think Xi Jinping has reversed many economic reforms, including the system that the reformers came up with in terms of economy and in terms of politics. Whether or not China had an M form economy before the reform.

And for the readers, the Communist China PRC was founded in 1949. And usually, we divide the period into before reform, which is 1949 to 1978. And then after reform in my book, 1978 to 2018, 2018 to now, basically kind of reversal of reform. So, these are kind of a three time periods. The M form economy began in China before reform, and partially as a result of the Great Leap Forward. Great Leap Forward created such an economic disaster, and then destroyed the economy. And Mao and his other leaders wanted to restore the economy, and they instituted economic decentralisation. But then the Cultural Revolution happened, so that also kind of destroyed the economic normalcy. The systematic form of the M form economy began to take shape after 1978.

So, in that type of system, so going back to kind of basic idea of central planning, in a centrally planned economy, the central government is responsible for allocating products, both to the companies as well as to the consumers. China had a planning system. But the difference between China and Soviet Union is that the planning level in the Soviet Union was much higher at the federal level, whereas in China, the planning level is at a much lower level.

The local governments, the provincial governments, that is the fundamental difference. So, there’s one planning agency in Soviet Union, whereas there are multiple planning agencies kind of parallel with each other in the Chinese economy. What I argue in the book is that the reason why these kind of decentralised planning system can work economically is because of the incentives and information.

So, the local officials have stronger incentives for performance. They also have better and more accurate information as compared with the planning officials in Beijing. So, on the economic side, that’s how the system operates.

But there’s a precondition for that because if you just have decentralisation, economic decentralisation, fiscal decentralisation, then different provinces are going to go in all sorts of different directions and the country may destabilise and they do their own things. So, there’s also a centralising mechanism, and that centralising mechanism is the meritocracy. The central government has never decentralised personnel control.

So, even if you’re a local official, your performance is reviewed by an agency in the central government. But that still is not the end of the story because a local official does so many things. How do you evaluate the local official? And this is where the reform era really, really is different from the previous era, as well as from the era under Xi Jinping. From 1978 to 2018, the only thing that mattered was GDP. Nothing else mattered. So, now you have one metric that you can compare an official from one province with another official from a different province.

So, that became very systematic. That system only works when you have one centralising metric. It didn’t work before the reform era because they had multiple objectives. It is not working now because Xi Jinping has downgraded the GDP. He has elevated other political objectives. In a system like this, as soon as you introduce different objectives, the system doesn’t work very well. And this is common sense. This is why companies have to pursue one objective, profitability, shareholder value. Once you introduce different goals and different objectives, typically the system is not going to work as well. So, I use that to analyse why the system performed between 1978 and 2018, and why the system today is struggling.

Amogh Rai: Thank you. I think in the book, for those who are going to read it, it’s a recommendation that they should get the book and read it. You lay down the table. You also talk about the table with the points where GDP has a higher percentage, but incidentally, environmental conservation has been there for some time, but clearly, it’s not really paying off that well. You also mentioned, I mean, that’s an interesting fact, that for the last, the average time spent in the provinces has come down by half a year. I found that a very interesting statistic because it used to be almost, it could be as much as a decade at the start. Then it came down to three years, now it’s two and a half years. And the president of China has no limit anymore. So, that’s an interesting correlation. Professor, I’m going to go back to Keju, because one of the interesting scaling points in the book, and it comes right at the start of it, not exactly at the start, but start-ish, is you talk about the three sort of counterintuitive emperors or three, call them rebels, if you will, who helped scale up this examination and made it a perfect tool for autocracy. And this is where we move away from the E part to the A part. Of course, Wu Zhetian, the first and the only female emperor of China is there. Sui Wendi, the founder of the very short-lived, but perhaps one of the most important dynasties in China, the Sui dynasty, and the founder of the Ming dynasty. A, and this is a sort of a longer question, but would Xi Jinping be the fourth one who adds to the innovativeness of examination and autocracy?

Yasheng Huang: I don’t think so.I think those three emperors were path-breaking creators and perpetuators of this system that has shaped Chinese ideas, ideology. For, you know, 1,600 years, didn’t it? Xi is more of a, I don’t think of him as a systematiser. Those three were systematisers. They created systems, long-lasting systems. Xi’s rule is far more personalistic than his predecessors. Now, I would put him maybe at some level together with Mao in that sense. Mao was very personalistic, and Mao destroyed bureaucracy, right, the cultural revolution, the Great Leap Forward. Also, he abandoned economic bureaucracy. He created PRC. He founded PRC, but he actually also destroyed much of the system that came with PRC. Xi has not gone that far. I mean, he hasn’t launched a cultural revolution type of campaign, but the thing that we need to keep in mind is the Chinese economy now is the second largest in the world.

It is a technologically complex economy, very globalised. A lot of the Chinese are studying abroad, residing in other countries, going back and forth between China and other countries, trade with India, trade with Japan, with Korea, and with the U.S. China is no longer as isolated as it was during the Mao era. For Xi to reverse that complex economy, he hasn’t completely done it, so let me be very, very clear about that, but he has done quite a bit of a reversal.

That takes a lot of energy and power, and I think you can argue that he has that, but the net result of all of that is that he has weakened the system. Look at what he has done recently. The foreign minister just disappeared, the defense minister. It’s just not imaginable. In any other normal country, you can have a foreign minister, and a defense minister disappear just like that. The large-scale purge of the officials, look at the stock market, the chaos and the psychological lack of confidence, and the COVID controls decimated the Chinese economy. There’s a lot of the damage that has been inflicted on the Chinese economy, but more importantly, on the system that has come to to characterise China after 1978 that has delivered the success. When I talk about the system, I also include globalisation, collaborations with Western countries. Huawei, the 5G company, the Chinese 5G company, before 2018, Huawei collaborated with hundreds of foreign companies, with American companies, Japanese companies.

Huawei tried to get into India. It has constructed this very complex web of global connections and networks. All of that is gone. China today is in a very very precarious situation. After this intricate web of connections, after the system that has been established, after all these things have been damaged this far, it’s a good question. I don’t think I have the answer to how it is going to do next. What is going to happen next? So, there’s a lot of uncertainty, and this is where I ended my book. There’s a lot of uncertainty going into the future.

Amogh Rai: Thank you. The reason I asked that question is because reading this book, and I have read other pieces that you’ve written, a piece that I recently re-read is something that you’d written almost 11, 12 years ago. It came out as the response to the venture capitalist Eric Lee’s argument about the party in 2011 to 2012. You conclude, and this is how you conclude the book as well, it is now time to give democracy a try. As the scholars David Lake and Matthew Baum have shown, democracies simply do a better job than authoritarian governments of providing public services. And countries that make the transition to democracy experience an immediate improvement. I’m going to be connecting this statement, because then you talk about Nancy Kean’s work that she was doing at that point of time about some amount of village elections. All of that now is no longer as fair and transparent, let’s put it like that, when you were writing about it. But there’s something very interesting you write in this book. Responding to the Global Times editor, no longer, but at that point of time, he was the Global Times editor. You made a comment that, based on his comment, that had the COVID-19 number of deaths that happened in the US under President Donald J. Trump, had they happened in China, there would have been civil unrest and so on and so forth. And you make a point about what he thought was a bad thing, was actually one of the sustainable features of democracies. The people of China have made amazing strides in the last fifty – sixty years. The academicians, the innovators, the technology people, and anybody who argues that the Chinese innovation will be stifled because it is an autocracy, as President Joseph R. Biden argued in 2012, when he was vice president. I don’t think he argues that anymore, looking at all the restrictions he’s putting on China. But this idea of putting and questioning the state, considering the number of non-resident Chinese who are in positions in United Nations, institutional bodies, where they constantly talk about democracy, but you can’t make the needle go anywhere in democracy. Is this the contradiction of the long history of Keju, or is it CCP’s amazing marshalling of resources at its command?

Yasheng Huang: So, there’s definitely, we should credit the CCP with resource mobilisation, marshalling ability. You know, when you launch a big project, satellite and infrastructure, you need scaling. And India, as a democracy, has struggled with that, and China doesn’t struggle as much. So, I gave ample credit to this marshalling power. But here’s the critical issue. You can use that marshalling power to do good things. You can also use that marshalling power to do bad things. And then it becomes a random tool, whether or not that marshalling power delivers in the end, in the long run. So, here’s the problem that we have to think about. Yes, China has produced this kind of amazing economic growth in the last 30 years and 40 years. They have built highways and all of that. By the way, India is beginning to do that. So, there’s evidence that a democracy can do, maybe not at the level that autocracy does, but if you get certain things right, you can still do it. Okay, so for sure, China can do these things. But going back to what I said before, and when I quoted Amartya Sen, China can also scale to such a level as to produce the Great Leap Forward and the Cultural Revolution.

So, as a neutral analyst, you kind of have to pick and choose, right? Do you choose a system that has the capacity to do incredibly good and also incredibly bad? Or you choose a system that struggles to do good and bad? I think this is a fundamental question that all of us have to think about. I’m not saying one is necessarily better than the other. But what I’m saying is that a lot of people don’t think about that issue that way.

A lot of people think, oh, India cannot build highway, therefore India is bad. China can build highway, China is good, right? If you put it that way, well, yeah, that sounds reasonable. But if you put it in the way that I put it, which is, yeah, India cannot build the highway the way, by the way, I should say China has built too much highway.

They have overinvested. Look at the debt to GDP ratio. Look at the empty city. But putting that issue aside, if you put it the way I put it, yes, China can produce highway, but it can also produce Great Leap Forward. Yes, India cannot produce that many highways, but it also cannot produce Great Leap Forward. Then the choices become a little bit trickier. You may still choose the Chinese system. That’s up to you. You may choose the Indian system. It’s also up to you. But what is not right is not to think about this issue in the way that I described it. A lot of people say I’m a basher of China. That’s just not right. I’m just framing the choices more logically and more clearly. It is up to you. It’s up to everybody to say, okay, which system is better. What I want to do is to provide the full information for people to think about their choices. I can put myself in that situation. I would choose a system that minimises really, really bad things, even though that system also cannot perform on some—that’s my personal choice, but that’s just me.

Amogh Rai: I’m going to come to a very interesting—there are a few funny anecdotes throughout the book, but this one has stayed with me. In fact, I’ve made multiple notes. This is the one that I wrote down, Fan Jin, and Fan Jin is a novel, if you can put it like that, and the creator Wu Xingjie, 1701 to 1754. It’s a very interesting thing. This person goes through a level of academic success after a long, long time, and then when he finally makes it, he goes mad, and this is a great sort of a comparative to A, the ability to control that was given to the state, because if you wanted to be a candidate—one of my favorite novels growing up was the Tang Dynasty detective, Judge Dee, and in Judge Dee the minute there is a candidate who comes up, so the candidate is treated much better by Judge Di’s lieutenants, Tao Gan, and I’m forgetting the other name, but so this was the thing. If you were a candidate, you got an automatic respect. So, in this novel, the father-in-law beats the candidate, but then the minute he becomes an officer, a minor official, and others tell him to beat him, to get him back to his senses, he refuses to do that because he’s now a minor bureaucrat. Would you say that this comparative tool that the CCP has used in using GDP as a benchmark has kept all the possibly intelligent people who could have misbehaved against the system? Is it a tool for keeping them in check? And now that GDP has outlived its usefulness because you just said, where do you build the next city? Where do you build the next bridge? What do we do? Because you can’t clean the air as a competition. So, what happens after this? And I would also want your perspective on this from the technology point of view, the much-vaunted Needham question.

Yasheng Huang: So, when we say GDP, we’re talking about a very specific way to perform. And in the Chinese context, it is really about pursuing that number. And you can sort of perform in a very antisocial way by polluting the air, by over-investments, by doing all these things. So, I don’t think it’s the end of economic development, per se, for China. China is still a middle-income country. There’s a long way to go from the Chinese level per capita GDP to Japanese level, to the US level. So, there’s a lot of room for China to catch up with the most developed countries in the world. So, I’m not going to say that’s the end of the economics. What I do believe is to go next, China needs to invest in its people, education, public health, retirement, pensions, old age, things like that. And China needs to take care of or reallocate resources more in the direction of the rural area, rather than concentrate its resources in Shanghai and Beijing, the big cities. I’m a professor at MIT, so I’m a fan of technology.

But on the other hand, does it really make sense for China at its current per capita GDP level to invest more than 2% of its GDP in technology? And especially, does it make any sense for China to try to recreate the semiconductor global supply chain that can cost trillions of dollars? You can just buy it on the international market, provided that you get along with the Western countries. So, if I’m an economically rational leader of China, I look at the country as a middle income country, still trying to catch up with the developed countries. I’m resource constrained. There are a lot of issues in the rural area that I need to take care of. My first priority is not going to be, oh, let me take over Taiwan tomorrow. Let me take care of the South China Sea. Let me challenge the United States. But that’s not going to be my priority. My priority is going to be economic development. And my priority is going to participate in the global order, international global order, so that I can buy the chips rather than spending money to produce those chips, so I can save the money to do these other things. So as an economic thinker, that will be my approach. I would lower the geopolitical tensions. China has geopolitical tensions not only with the United States, with Japan, with the Philippines, with India. I mean, why with India? I just don’t get it. And this is what China did in the 1990s. China pursued rapprochement with Soviet Union in the 1980s, with Russia, with India, with everybody, because economic development was the priority. So, I’m going to still keep emphasising economic development, but do it in a different way. The problem is that the current leadership has a different set of priorities. And there’s some evidence now that they are rethinking about their priorities. So, I have some cautious hope that they may return to the economic development imperatives before 2018, although that’s going to take time.

Amogh Rai: I’m also racing through time. I wanted to ask you just one question, but I’m going to be slightly greedy, if you allow me, and ask you two questions. I actually have a lot of questions that have already come in. Do I have your permission to ask two questions? So, one of the things that keeps on coming up in the book, when you think about China, Deng Xiaoping comes across as a transformative leader. But in your book, he comes across slightly not that great. I mean, okay, he did economic transformation, but there was a lot there. Specifically, around the 1980s time, your book sets the tone that it was very pluralistic between 78 and 89. And to a lot of the things that we are seeing now, the answer is that Tiananmen Square Massacre, or Tiananmen Square protest, changed the course of Chinese history in a big way. The scale and the scope model, how far does it help us explain the transformation of China post 1989, especially post 1992, when you come in with a leader who does not really have that pedigree that Mao and Deng had?

Yasheng Huang: Yeah. So, if we sort of use the scale and scope language. So, by the way, on Deng Xiaoping, I do have some reservations about him. You’re right about that. But I think, he was instrumental and historical in terms of what he did for China. A lot of people sort of remember him on the economic side. I think his political legacy is mixed rather than, as some people would argue, his political legacy was all bad. I think his legacy politically is mixed. Mixed in the sense that he introduced, sometimes not intentionally, political scope in the 1980s. Even though he came with almost the solid credential as Mao, he was one of the founding fathers of the PRC. He downplayed personal rule, personal leadership. He actually forbid personal power, leadership power. He was very concerned about cultural revolution from coming back because he suffered. Deng’s son was pushed out of the window, became crippled, and lost both legs. He suffered terribly. His generation suffered terribly in the hands of Mao.

So, they devised a political system in the late 1970s that would distribute power among several positions. All the positions still belonged to the Communist Party, for sure. There’s no multi-party system. He was fiercely opposed to a multi-party system. But within the Communist Party, he did democratise decision-making and the leadership structure. So, I have to say, before I wrote this book, I wasn’t paying a lot of attention to that particular historical fact.

But more and more, I thought that was incredibly important, in part because we learned from Xi Jinping how the one-person rule could damage the economy. So that triggered my thinking. What was it that the China system was like before? So, I gave him a lot of credit, not just introducing economic reforms, but also a limited degree of political reforms.

I do have reservations about him in the way that he handled the Tiananmen. And also, his probably historical limitation of not being willing to go beyond intraparty pluralism. He didn’t go far enough, in my view. So, I just want to be clear on what I think about him. And also, the famous statement he made, no matter the color of the cat, as long as the cat catches the mouse, it is a good cat. For us, we say, what’s the big deal? Of course, that’s true. But put yourself in the position of an autocrat. You say, I’m not going to tell you whether a white cat or black cat is a good cat. Wait till you see the result. That is a profound statement coming from an autocrat. That would not come from Stalin. That would not come from Hitler. That would not come from Lenin. That would not come from Xi Jinping. For an autocrat to be able to say, let’s wait for the evidence and do what evidence tells us to do, that’s a remarkable, profound idea.

So, I didn’t think about him that way before, but now I do. So, the basic difference between pre-Tiananmen and post-Tiananmen is that China had more political scope before Tiananmen and less political scope after Tiananmen. But on the economic side, you could argue that China had more economic scope after Tiananmen and less political scope before Tiananmen. And simply as time passes on, Chinese leadership introduced more reform, such as globalisation, which is a very key piece of reforms. When you globalise, you instantaneously introduce the country to multiple channels of information, multiple ideas in a way that a pure domestic reform cannot do. So that’s the way I differentiate between pre-Tiananmen and post-Tiananmen.

And as I said before, now you have less political scope and you have less economic scope today. So, I would argue today is the least open era in the last 40 years of Chinese history. It is not quite yet cultural evolution, but as I said in my book, the Chinese economy is like the South Korean economy, but Chinese politics is like North Korean politics. That’s not going to be a durable situation.

Amogh Rai: Right. A very quick comment, and then we can close it. One of the most important things that you’ve argued in the book is about East and examination. I’m going to come back to it. Technology plays a part, but the demography. There are estimates the Shanghai Academy of Social Sciences posits that the Chinese authorities might have been overcounting people for some time. The women are no longer holding half the sky (A reference to an old Mao emphasising the role of women in China). So, in all of this, if the country gets old, the grey economy sets in. How does the Chinese Communist Party continue to exercise its hold over the country by using one of the most important things in its arsenal: examination? Because at the median age of 37, perhaps for the next 20 years, but after that, not a lot of people will be taking exams. So, what happens then? Is it sunset of, or to quote Gabriel Garcia Marquez, the autumn of the patriarch?

Yasheng Huang: So, let’s also remember the history of this. Many people, many international observers and economists praised China for its ability to control population. Trashed India for its inability to control population. It turns out that, so going back to the Amartya Sen’s observation, I’m not against population control per se, but the degree that China did it, forced abortion, one child policy for so long, and there were a lot of criticisms of that policy before.

Chinese economists have been arguing for years that this was damaging the Chinese economy, damaging the prospects of Chinese economy for years and years. But because of the autocratic nature of the system, they never listened. So, one piece of interesting history here is, in the late 1950s, a Chinese economist proposed moderate control of population. And Mao, who believed in big population, fired him from a Peking University professor. He ignored his advice. Just imagine if China put in moderate population control in the 1950s, 1960s.
They would have avoided this draconian population control they put in in the late 1970s. They would have avoided this incredible length of control. The reason why it was so draconian, it was so lengthy, was because they believed that they made a mistake of overpopulation before. So, you have to kind of correctly pass mistake. This goes back to the point that I was making earlier. Yes, an autocracy can do things very effectively in both directions. Population control is an example of that. So, on your point about what to do next, I honestly don’t know. This is an unprecedented situation for a country to have this level of demographic decline at this low level of per capita GDP. Japan, Germany, South Korea, they all have demographic challenges, but they are much richer than China. So, India now has a higher population growth rate, which is sort of what you expect for a country, the level of Indian per capita GDP. So, China should be producing more children than it does now, given its level of per capita GDP.

The only hopeful thing I want to say is that this demographic decline is happening in the era of robotic technology and AI. So that may cushion the blow in a way that it wouldn’t if this demographic decline happened 10, 20 years ago. So that’s issue number one. Issue number two is that compared with India, I think China still has an edge, although that edge is shrinking in terms of education, of its labor force. One thing I have consistently criticised India for is its failure to invest in basic education. And I think, correct me if I’m wrong, I think Prime Minister Modi has stepped up on this issue maybe more than the previous prime ministers. I think India Gandhi did the worst in terms of this particular issue. And she over-invested in tertiary education, under-invested in basic education.

Amogh Rai: I think it started with the first prime minister, her father Jawaharlal Nehru, our first prime minister, and I think it continued to her regime.

Yasheng Huang: I see. So, I have always pointed out the right China model was investing in basic education rather than looking at the roads, looking at the highways, looking at the airports. And unfortunately, that argument has fallen on dead ears, both on the Chinese and also, to some extent, maybe on the Indians, because they always look at China as an example of infrastructure success. But for a poor country, the more you invest in infrastructure, the less money you have in basic education. India, to its credit, has stepped up. In part because of the push by the Indian people, Indian NGOs, and maybe international researchers.

So, I gave credit for India for doing that. That’s the right economic development model. But the gap between India and China was so big before. Even though it’s closing, there’s still a gap. So, if you look at women’s labor participation, China still does better than India. If you look at the basic education level, China is still better than India.

So even if India has a population edge, it doesn’t necessarily have a human capital edge. So, I worry about the demographic situation in China, but I don’t worry about it to the extent that a lot of other people worry about it. Right.

Amogh Rai: And on that note, Professor, this has been one of the most informative conversations on development pathway of China, India, and thoughtful reflection on the role bureaucracy plays in statecraft.

Yasheng Huang: Thank you so much.