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00:00Hello, Telesur English presents a new episode of China Now, a Wave Media's production that
00:15showcases the culture, technology and politics of the Asian giant.
00:19In this first segment, China Currents dives into the top stories of the week, including
00:23China's rocket that launched Pakistani satellites into space, and also Shanghai's new World
00:29Record, among other topics.
00:31Let's see.
00:32China Currents is a weekly news talk show from China to the world.
00:39We cover viral news about China every week and also give you the newest updates on China's
00:45cutting-edge technologies.
00:46Let's get started.
00:48Welcome to China Currents, your weekly news report on the latest developments in China.
00:54I'm Lisa.
00:55In this episode, Biden's sanction against China's role-maker, DJI, troubles Trump.
01:00China's rocket launched Pakistani satellites into space.
01:04Shanghai sets a new world record.
01:07First, let's start with Trump's big day.
01:10On the 20th of January, Trump delivered his inaugural speech indoors at the U.S. Capitol,
01:17breaking a long-standing tradition of hosting the ceremony outdoors.
01:21This choice typically results in a 60% reduction in live audience size, which is why no U.S.
01:28president has opted for this in the past 40 years.
01:32So why would Trump, who is known for his love for the spotlight, make such a decision?
01:37CNN suggested it was because of cold weather.
01:40But the real reason might be tied to concerns about DJI, the Chinese role-maker.
01:46Trump had previously survived two assassination attempts, which led the Secret Service to ramp
01:51up security for the inauguration.
01:54According to NBC, Special Agent Matt McCaul, who was in charge of the president's safety
01:59that day, noted they were preparing for potential drone threats.
02:04Given what we've seen in the Ukraine war, avoiding exposure to the sky is often the
02:08safest route when it comes to drones.
02:11And it looks like Trump's security team took that to heart.
02:15But why wasn't Biden concerned about drone threats during his inauguration?
02:19The answer lies in DJI's geofencing technology.
02:23Since 2015, after a DJI drone inadvertently entered White House airspace, the company
02:29has installed geofencing at the U.S. government's request.
02:33This technology uses GPS to prevent drones from flying over restricted areas such as
02:38White House, airports, and military bases, effectively preventing drone-related terrorist
02:44incidents in the U.S. for years.
02:46However, just before Trump's inauguration, on the 13th of January, DJI announced it would
02:52unlock its geofencing in the U.S., replacing non-fly zones with enhanced warming zones.
03:00This meant that if a DJI drone flew over restricted areas, the system would only notify the operator,
03:07leaving it up to them to decide what to do.
03:09Foreign policy raised alarms about this, especially since a month earlier, unidentified drones
03:15had caused panic in New Jersey, and FBI was still trying to figure out what happened.
03:22For U.S. law enforcement, which doesn't have many ways to counter drones, this change
03:26could be a big problem.
03:28But really, the U.S. government has to look in the mirror here.
03:32Keeping drones out of the restricted airspace is its job, not DJI's.
03:38The FAA even admitted that it doesn't require drone manufacturers to include geofencing.
03:44Other American companies, like Skydio, sell drones without this feature, meaning DJI has
03:50been voluntarily maintaining a protective geofencing system at its own cost for years.
03:56Instead of being thankful for this, the U.S. government added DJI to the list of Chinese
04:00military companies in October 2024, slapping on sanctions under the guise of national security
04:07threats.
04:08Given this treatment, why would DJI want to keep helping the U.S.?
04:12It makes sense that they stopped providing geofencing service in the U.S.
04:16According to Politico, the day after DJI removed its geofencing on January 14th, several U.S.
04:23intelligence and law enforcement agencies issued a joint warning that Trump inauguration
04:28was a potential target.
04:30This was due to over 700,000 users on Telegram threatening to assassinate Trump the day after
04:37the election, following a video from a media outlet linked to the Islamic Revolutionary
04:42Guard Corps.
04:44Maybe if Trump hadn't used a drone to take out Soleimani in 2020, he wouldn't have faced
04:49such intense security concerns, regardless of DJI's geofencing status.
04:55He might have been able to hold his inauguration outdoors instead of staging a tough guy under
05:00the capital's Iron Dome.
05:02Moving on, on the 17th of January, China's Long March 2D rocket successfully launched
05:08Pakistan's PRSCE-01 satellite into orbit.
05:12This is a big win for China's space program and marks the 556th flight of the Long March
05:18series.
05:19The PRSCE-01 satellite, developed by Pakistan Space Agency, is going to help Pakistan keep
05:25a close eye on environmental changes.
05:28It will help provide important data that can support sustainable development projects in
05:33the country.
05:34But China isn't just working with its neighbours.
05:37Back in December 2023, the Long March 2C rocket launched the satellite for Egypt.
05:42Plus, China has teamed up with Brazil to develop six satellites, two of which are already in
05:48action.
05:49These satellites are crucial for monitoring flooding, extreme rainfall, and even deforestation
05:55in the Amazon rainforest.
05:57Interestingly, while China is making these advancements, SpaceX's Starship had had
06:03a tough day on the same date.
06:05It exploded during its seventh test flight and debris scattered over a wide area, reportedly
06:11reaching parts of the Caribbean.
06:14This caused some major disruption in air traffic with multiple flight delays and rerouting.
06:19There are also environmental worries about this debris, especially since it would impact
06:24habitats for endangered species.
06:26After another explosion in 2023, debris ended up in crucial nesting areas for endangering
06:32piping plovers.
06:33George Starr, a sustainability scientist at the University of Massachusetts, summed
06:39it up well.
06:40Musk is a complicated figure.
06:42On the one hand, he's played a crucial role in popularizing EV and battery storage with
06:47Tesla.
06:48On the other, he's flying space tourists on missions that create a huge amount of pollution.
06:55Next up, let's move to Shanghai, where over half of Tesla's EVs are made.
06:59On the 15th of January, Shanghai released its government work report and there are some
07:03impressive highlights.
07:05First off, China's port has hit a major milestone, achieving a container throughput of 51.5 million
07:11standard containers.
07:13That makes it the first major port in the world to surpass the 15 million marks in a
07:18year, and also making the 15th consecutive year that Shanghai port has been recognized
07:23as the world's busiest port.
07:25Just to put this into perspective, back in 1994, the throughput was only 1 million containers,
07:31which means there's been an incredible 50-fold increase in international trade over the 30
07:38years.
07:39But it's not just price that's thriving.
07:41The passenger transport sector is also making waves in Shanghai.
07:45In 2024, the city's airport recorded over 800,000 flights, with passengers' numbers
07:51exceeding 124 million, thereby setting a new historical record.
07:57And there's more good news on the horizon.
08:00Starting in December 2024, the National Immigration Administration of China is relaxing visa-free
08:06policies.
08:07This means that foreign transit passengers can now stay for up to 10 days without a visa.
08:13With all these developments, experts believe Shanghai's airport are set to break even more
08:17records in 2025.
08:19And that is all for today.
08:21Thank you for watching this episode of China Currents.
08:23If you have any thoughts or comments about our show, please reach us at the email address
08:27below.
08:28We look forward to hearing from you and see you next time.
08:31And also, happy Chinese New Year!
08:50Welcome back to China Now.
08:56Today's Thinkers Forum welcomes economist John Ross and theoretical physicist Ron Guntz.
09:02Let's have a look.
09:03They say, ah, China is different to the West, which is absolutely true.
09:12Therefore it must be China which is wrong.
09:14But this is ridiculous because it's the Chinese economy which is growing faster.
09:19So what they should say is, yeah, China is different to the West, and it's the West which
09:23is less successful.
09:32Well, the challenge is there are external challenges and there are domestic challenges.
09:36The external challenge is obviously the attempt by the United States to slow down the Chinese
09:40economy, and the fact that is through tariffs and sanctions and so on, and that's the policy
09:47by the United States.
09:49The other is that the global North economies are growing very slowly.
09:51The United States is growing on average about slightly over 2% a year, and the European
09:57economy is growing at 1% a year.
09:59So these are objective problems which confront China.
10:05The biggest challenge inside is some confusions created by wrong ideas which exist in Western
10:13economics in which people are trying to persuade China's economy to adopt basically the same
10:19structure as the United States.
10:21China's economy grows at about 5% a year.
10:24The U.S. economy grows at slightly over 2% a year.
10:28If China's economy were to adopt the same basic structure as the United States, then
10:31it would slow down and grow at 2% a year.
10:35Then the United States would be very pleased with the situation because in that case China
10:39would never overtake the U.S. economy.
10:43This is therefore a huge international debate.
10:46The most important economic debate in the world is the attempt of the United States
10:53to persuade China to adopt the same economic structure as the United States, in which case
10:58China's economy won't grow at 5% a year.
11:01It will grow at 2% a year, and this leads to various technical discussions about things
11:08like the percentage of consumption and the percentage of investment in GDP.
11:12Each of these has very, very big social forces behind it.
11:18If you look at it rather simply, China invests about 40% of GDP and grows at 5% a year.
11:26The U.S. economy invests about 20% of GDP and grows at about slightly over 2% a year.
11:32Obviously, if China were to reduce its level of investment down to the level of the United
11:36States, that's to 20%, well then China's economy would also slow down to 2%.
11:42So therefore you have this weird debate whereby people say, look, China's economy doesn't
11:47look like the United States, or it doesn't look like the Western economy.
11:50No, of course it doesn't, because it's more successful.
11:53It's growing faster.
11:55If the Chinese economy looked like the United States, it would grow at the same much slower
12:00speed than the United States.
12:03So it's a sort of bizarre discussion of sort of Western arrogance.
12:07They say, ah, China is different to the West, which is absolutely true, therefore it must
12:13be China which is wrong.
12:15But it's ridiculous, because it's the Chinese economy which is growing faster.
12:20Therefore what they should say is, yeah, China is different to the West, and it's the West
12:24which is less successful.
12:26Let me take a comparison, because Goldman Sachs recently produced a report which made
12:32exactly this type of argument.
12:34Supposing a company went to Goldman Sachs and said, we want to enter a new industry.
12:40Goldman Sachs, please come give us some advice.
12:43And what Goldman Sachs said, well, look, this is the industry.
12:46These are the companies which is most successful, and these are the companies which are less
12:51successful.
12:52You shouldn't copy the company which is the most successful.
12:56You shouldn't learn from the most successful company.
12:58You should learn from the less successful companies.
13:02Well, everybody would laugh at this, just before they cancelled their contract with
13:05Goldman Sachs for giving them idiotic advice.
13:09But that's exactly what is happening with this Western argument, which is, China is
13:16growing much faster than the West, or than the United States and Europe.
13:20Therefore they argue that China must adopt the economic structure of the United States
13:25and Europe, in which case China will slow down.
13:28This is absolutely a bizarre argument.
13:32But nevertheless, the Wall Street Journal, the Financial Times, the Economist put out
13:36this type of stuff all the time.
13:39And therefore this leads to some, unfortunately, some people in China copy this nonsense.
13:45And therefore this leads to internal discussion in China.
13:48So those are the internal main ideological issues.
13:52There are then objective problems, which can't be overcome quickly, in which China has the
13:59correct policies, but they simply can't be solved quickly.
14:03For example, research and development.
14:05China has by far the highest level of research and development percentage of GDP of any global
14:11South country.
14:12It's about 2.4% of GDP.
14:16It's almost twice that of the second one, which is Turkey.
14:20And it's ahead of some of the G7 economies.
14:24But it's still behind as a percentage of GDP the United States, Japan, Germany.
14:31And China can't solve this problem quickly, because it's not a question of money.
14:35The fundamental thing that you need for research and development is you need trained people.
14:40And it takes 20 years from somebody entering primary school to coming out at the other
14:45end with an engineering PhD, which is the type of thing which you need for research
14:51and development.
14:52So the increase in China's expenditure on R&D is held back not simply by money.
14:59If it was money, it could be solved immediately.
15:01It takes a long time to train such people.
15:03So these are real objective problems.
15:06So we may say there's three levels of problem.
15:10One is the slow growth of the United States and Europe and its attempts to slow down China.
15:19The second is foolish arguments, which have no intellectual validity, which are put in
15:24forward by the West to try to slow down China.
15:27And then there are real objective issues, which is due to China's level of development.
15:32Only about around 15% of China's population has higher education compared to 50% in the
15:40United States or 70% in South Korea.
15:43And it will take a very long time, in that case decades, to train it.
15:47So there's sort of three sets of problems.
15:54Can they copy?
15:55No.
15:56But every single country in the world is specific.
16:00And therefore, if you copy mechanically another country, you will inevitably be adopting the
16:06wrong policy.
16:08But can you learn lessons from it?
16:11Yeah, the answer to that is yes, you certainly can.
16:15And therefore, what is the big lessons for China?
16:18You have to have a very high level of investment to grow fast.
16:22All the Asian economies, which are growing rapidly, and there are, you know, India grows
16:27rapidly, South Korea grew rapidly, Indonesia grows rapidly, Vietnam grows rapidly, India
16:33grows rapidly.
16:34They all have very high level of investment in the economy.
16:37Then you also need an open economy.
16:39That is, you need to participate in international trade.
16:44The attempt to create a self-contained economy won't work properly.
16:49Those countries which did it, what used to be called the import substitution strategy,
16:54it won't work.
16:55You need a high level of research and development.
16:59This is where, for example, South Korea is still ahead of China.
17:03Japan is still ahead of China.
17:05Not because of wrong policies by China, but because it takes a long, long time to train
17:10people and, you know, to give them PhDs in engineering or PhDs in science or PhDs in
17:15mathematics and things like that, which is what is the really important things for that.
17:22So you need high investment, you need an open economy, you need skilled labour, you need
17:28high levels of research and development.
17:30These are common in all these countries.
17:34How they actually combine in each country, that's completely specific.
17:39So, yes, China has great lessons for other countries, but it can't be mechanically copied by other countries.
17:51American media outlets, to some extent, follow a propaganda line and have become more and
17:58more propagandistic over the last 10 or 20 years.
18:02I mean, it's really getting so that you can't trust almost anything you see in the New York
18:07Times or even the Wall Street Journal or these other leading publications.
18:11For a policy of that enormous magnitude to be based entirely on lies, and lies that were
18:17universal across our entire mainstream media, just made me very, very suspicious of other
18:23things moving forward.
18:25One thing that really was a turning point, in my perspective, was the Iraq War from about
18:37a decade earlier, because there had been absolutely universal coverage in the American mainstream
18:44media that Saddam Hussein had weapons of mass destruction, that he was developing nuclear
18:49weapons, that he had biological weapons.
18:51And it was just unquestioned.
18:53In other words, every media outlet had that perspective.
18:57And it was just absolutely shocking to discover that none of it was true, and that many of
19:02the key figures in the American government had been aware that it was false, and probably
19:08many members of the media had been aware as well.
19:11But they still reported complete falsehoods, which led us to the Iraq War.
19:16And I mean, the Iraq War was a huge shift in our Middle Eastern policy.
19:21It basically has led to now two decades of wars in the Middle East, destroyed numerous
19:27countries, killed or displaced many, many millions of Middle Easterners, and cost the
19:33American public probably something like $7 trillion in spending.
19:37So for a policy of that enormous magnitude to be based entirely on lies, and lies that
19:45were universal across our entire mainstream media, just made me very, very suspicious
19:52of other things moving forward.
19:54So I mean, it, you know, basically, the aftermath of the 9-11 attacks and the Iraq War was,
20:00you know, a huge turning point in my perspective.
20:02And then, you know, as I sort of started looking into other matters, and you know, the internet
20:07at that point was becoming more and more developed, in other words, there were more and more websites
20:12and resources available.
20:14I began becoming very suspicious of many things in the past as well, because, you know,
20:19if something so dramatic as a decision to go to war against Saddam Hussein, invade Iraq,
20:26you know, basically try to occupy the country, could be based on entire misrepresentations,
20:34then you know, I wondered whether things from 40 years ago, or 50 years ago, or 80 years
20:38ago might be distorted in the same way.
20:44Well, I mean, that's really sort of nonsense.
20:46In other words, the whole thing about is, you know, when I decided to launch the website,
20:51I decided to launch a website that would provide a convenient venue for perspectives that were
20:58excluded from the mainstream media, and, you know, perspectives from all across the ideological
21:03spectrum, in other words, left wing, right wing, libertarian, you know, those views that
21:08simply could not find a place in the mainstream media were very welcome on our website.
21:14So you know, that certainly includes a lot of very right wing individuals, but also includes
21:19a lot of very left wing individuals or people whose views don't really fit into one perspective
21:25or the other, in other words, who are sort of off to one side.
21:30And the whole thing about is, you know, as I started, another aspect to my sort of changing
21:35viewpoint on these things was around 2000 or 2001, I'd begun a new software project
21:42involved in trying to digitize the archives of America's leading intellectual publications
21:49of the last 100 or 150 years.
21:52In other words, you may have heard, you know, obviously, there's the Atlantic Monthly, which
21:56is about 200 years old.
21:59There's the Nation, the New Republic, Harper's, but there were also many, many dozens of other
22:04publications, I mean, probably well over 150 of them, that at one time or another were
22:10America's leading intellectual magazines.
22:13In other words, these were the mainstream, very respectful publications.
22:19And I ended up basically just digitizing them and making them available on a website.
22:23And as I went through and did the digitization process, every now and then I would look through
22:28some of the articles they had or the table of contents.
22:31And I gradually discovered that so many of the things in America's past of 50 years ago
22:37or 100 years ago, or 150 years ago, were very different than I'd always assumed.
22:43In other words, you know, based on my college classes, based on the newspapers and magazines
22:48that I read, I'd always had a certain perspective on America's history and Western history.
22:55And when you actually read the publications, the leading publications of that era, you
23:00gained a very different perspective.
23:03And in fact, some of the most influential figures in American intellectual life of 100
23:09years ago had been so totally disappeared and forgotten that I'd never even heard of
23:15their names.
23:16So it's just a very strange thing when you come across so many hundreds of articles written
23:22in these leading American publications by one of America's most prominent intellectual
23:27figures, and you've never heard of the individual.
23:31So you know, things like that made me more and more suspicious of the sort of establishment
23:36narrative that I'd really, you know, gained from all the classes I took and all the textbooks
23:42I read.
23:43So I mean, the whole thing about is, you know, as I saw that the past of America was so different
23:49than what I really thought it was, I realized that, you know, in the same way that for example,
23:55what I was seeing in the newspapers, on a day to day basis, about the Iraq War about
24:00so many of the things nowadays, were different, but I mean, that had also been true in the
24:04past.
24:05So, you know, the whole thing about is, when you're talking about, for example, American
24:09publications of 60 or 70 years ago, the most establishment mainstream respectable publications
24:17from that were saying things and writing things that these days would be considered ultra
24:24fringe lunacy.
24:26So I mean, you know, even for example, that would apply to the New York Times.
24:29In other words, if you look at what the New York Times was writing 50 years ago, or 100
24:33years ago, those would be the views that today's New York Times would regard as ultra fringe
24:39lunacy.
24:40And so, you know, they obviously can't both be correct.
24:42In other words, the New York Times of 100 years ago, and the New York Times today are
24:46saying such different things.
24:48They can't both be correct.
24:49And, you know, probably neither of them are entirely correct.
24:52But I mean, the whole thing about is, you know, the range of ideological perspectives
24:57that are allowed in today's mainstream media is so incredibly narrow, compared to what
25:03had been in the past, that I just thought it was important to provide a much broader
25:08range of ideas, which is basically what I did by, you know, allowing the publication
25:13or republication of all these controversial things from individuals all across the ideological
25:19spectrum.
25:20So, you know, when you have organizations like the ADL, or the SPLC, or some of these
25:26other groups, denouncing what I'm publishing, what they're basically saying is that the
25:31only ideas that should be permitted in American mainstream discourse, are those considered
25:37respectable and acceptable today, and not from 20 or 30 years ago, let alone 100 years
25:44ago.
25:45So I mean, they basically, and the other funny thing about it is, you know, as I started
25:48looking into the past of some of these organizations, for example, the past of the ADL, what are
25:55the views that was founded on, were extremely different than I'd been aware of, and probably
26:01extremely different than most leaders of the ADL are aware of today.
26:05So, you know, it's the sort of thing, what happened in the past is very, very different
26:10than what Americans assume was the case.
26:16America had been generally in very friendly terms with China for decades, you know, after,
26:21for example, you know, Nixon's opening to China, in other words, we viewed China back
26:26then as a counterweight against the Soviet Union.
26:29And so China and the United States, in a sense, were quasi allies in the last stage of the
26:33Cold War.
26:34And then when the Cold War ended, America stayed, you know, reasonably friendly with
26:39China for the years that went forward.
26:40I mean, really, you know, China was regarded just as another country in the world.
26:44I mean, you know, ideological wars were over, the situation was very different.
26:48And then China, as it grew economically, became very important for American corporations.
26:54So many of the leading American corporations ended up investing in China, building their
26:59products in China, selling their goods in China.
27:02I mean, General Motors, so, so earned most of its profits in China.
27:06I mean, Apple built most of its iPhones in China, and Chinese bought the iPhone.
27:12So in other words, America had a very close economic relationship with China.
27:17And even though in some ways, America sometimes was pulling back from China on the political
27:23level, on the strategic level, on, you know, the military level, I mean, with America's,
27:27for example, shift more towards, you know, going back on what we'd said towards Taiwan,
27:33you know, under the Obama administration, under the Bush administration, I mean, still
27:37economically, America was very close to China.
27:40But it was really probably about 10 years ago, when America saw when many of the American
27:45geopolitical figures in, in DC, realized that China's economic growth was continuing.
27:54And the China basically was on the verge of surpassing America, economically, in purchasing
28:00power parity in terms of the real size of its economy, and it was continuing to grow
28:04so rapidly, and was not, for example, following the financialization route that America followed
28:12really following more industrial capitalism, as someone like, for example, Michael Hudson
28:17is advocated rather than financial capitalism, there was a sense that there might be a clash
28:22with China down the road.
28:24And that's actually when the talk of the Thucydides trap, that there might be an inevitable conflict
28:30between a rising China and a reigning the United States for geopolitical control over
28:35the world.
28:36And so that point, the American media started just being much more hostile towards China.
28:41And the way it works is, you know, more and more negative things about China were emphasized
28:46every year, fewer and fewer positive things.
28:49So for example, most Americans really developed a view of the Chinese economy having all sorts
28:54of problems doing very badly.
28:55In other words, I would bet if you ask most Americans, even most well educated Americans,
29:01whether the American economy or the Western economy as a whole, or the Chinese economy
29:07was growing more rapidly, they would all agree that the American economy and the West
29:12was growing more rapidly than China, even though the truth is exactly on the other side.
29:17In other words, you know, again, American media outlets, to some extent, follow a propaganda
29:22line, and to become more and more propagandistic over the last 10 or 20 years, I mean, it's
29:30really getting so that you can't trust almost anything you see in the New York Times or
29:34even the Wall Street Journal, or these other leading publication.
29:38They're just not as reliable as they used to be sometimes in the past.
29:42And so by playing up all sorts of negative things towards China, they really caused more
29:48and more Americans to develop hostility over China.
29:51And since America's media dominates the entire world, it's the global media, that obviously
29:57caused much more hostility towards China, not only among American allies, you know,
30:03the Western countries that are in the America block, but also many third world countries
30:08as well.
30:09And that obviously was accentuated during, you know, the COVID outbreak, because America,
30:15you know, very falsely blamed COVID on China, you know, claimed that it leaked out of a
30:20Chinese lab, it might be a Chinese bioweapon.
30:23And because America dominates the world of propaganda, those propagandistic tools did
30:30a lot of damage to Chinese reputation around the world.
30:34And you know, that takes a while, obviously, to recover.
30:38And it certainly injured America, injured China's reputation tremendously among the
30:44ordinary American public, because I mean, the truth is, China coped extremely well with
30:51the sudden outbreak of COVID, I mean, probably better than almost any country in the world.
30:54I mean, lockdowns were very unpopular, but until Omicron came along, they were successful
30:59in stamping out the virus, while America had really the worst of both possible worlds,
31:05because we had the highest death rate of any developed country in the world, higher than
31:10any of the European countries.
31:12And we had a year or two of continuing lockdowns.
31:15So while ordinary Chinese were going about their business in a very normal sort of way,
31:21Americans were confined to their homes for a year or even two years, with the intermittent
31:26lockdowns being both very ineffective, and also very problematic for ordinary American
31:32daily life.
31:33So so many of our businesses went under, so much of our economy was really severely damaged
31:39by the COVID lockdowns.
31:44Industrial policy is not just subsidy.
31:46It's not about just throwing money at the problem.
31:48That's not what the industrial policy in China have done.
31:50One usually characterizes a country like China without a Western-style democracy as
31:56more prone to having a grabbing hand.
31:58Instead, the local government officials had a helping hand.
32:01The local governments often bend over heads over heels for the promising companies.
32:14You look at EVs, China became the largest producing EV country and EV patent producing
32:20country within 10 years.
32:22What China's inherent advantage is, I do think that the state plays a critical role when
32:27it comes to new strategic emerging sectors, new sectors which needs a boost, a jumpstart.
32:34Who's going to do that?
32:35If you wait for the private market to do that, either it'll be too slow or it will not be
32:40enough.
32:41Private investment will not be enough where there are market failures.
32:45China's success lies in the mobilization aspect of the state, the coordination, combination
32:50of the mayor economy with industrial policy and the private entrepreneurialism have created
32:57these new emerging strategic industries that no one else in the world was able to do within
33:04a short spate of time.
33:08Most people think that China is an extremely centralized system, as if all decisions are
33:13made from the top down, and that's a misconception.
33:18The more accurate way to describe it is political centralization coupled with economic decentralization,
33:25where the majority of economic policies, economic decision-makings, making economic outcomes
33:32are implemented at the very local level.
33:35I want to give you an example which really highlights the power of the mayor economy
33:41and its uniqueness.
33:42Well, first of all, why are mayors or party secretaries or provincial governors and local
33:49government officials so motivated to do the right thing for the economy?
33:54You think that one usually characterizes a country like China without a Western-style
33:59democracy as more prone to having a grabbing hand, instead, the local government officials
34:05had a helping hand.
34:06I'm actually sitting in China right now and I'm looking at these companies and how much
34:10the local government is coming out to help coordinate between lenders and debtors, between
34:17a banking system, the companies setting up shop to attract talent, helping them, you
34:24know, their one-stop shop to these companies.
34:27Why do they have this incentive to offer a lending hand, a helping hand, rather than
34:31grabbing hand as most people think?
34:33Well, for a few reasons.
34:35One most important reason is that if they do a good job with the local economy, they
34:39get promoted.
34:40Of course, they have other personal gains, glory, you know, sense of accomplishment,
34:44envy from other neighboring competing governors or party secretaries and so forth, but they
34:50are motivated by and large to do the right thing.
34:54And so that's what people don't understand about China as if the state is always opposing
34:59the private.
35:00In fact, no, it's the state enabling the private.
35:03Yes, certainly there are aspects in which the state crowds out the private sector and
35:07the state monopolizes in certain things, but by and large, China's rapid economic
35:13growth depended greatly on this mayor economy, on this decentralization with the local governments
35:19play a big role.
35:20Why?
35:21Because they need the local governments.
35:22Not everything is mature in this Chinese system.
35:24Not always, you know, the rules, the permits, everything, the business environment requires
35:31a certain amount of government intervention.
35:35But I want to give you an example that I think very strongly illustrates the mayor
35:39economy in addition to the power of industrial policy when it is implemented right.
35:45And that is the case of either solar panels or EVs or many, many other examples, including
35:51robotics.
35:52So in 2005, if you look at a map of China, if you look at where in the country there
35:56were solar patents or productions, it's a desert.
36:00It's a desert in 2005.
36:01And of course, from 2005, the Chinese government decided to implement industrial policy supporting
36:06solar panels, but at the local level, at the city level.
36:11Maybe first four cities, maybe then 10, rolling out to 20, and then eventually 40, some cities
36:17over time, over a stretched period of time, implemented these industrial policies.
36:23And then 10 years later, 2015, you look at a map of China and look at solar panel production
36:28or solar panel innovation or patents, you see it has blossomed all over China, with
36:34exception of the Western Central Provinces, but really spread over China.
36:38And most of these cities had industrial policy implemented at some point.
36:43I think these are really incontrovertible examples where this could be very powerful.
36:48Now, that said, the mayor economy has its dark sides as well, right?
36:53Consuming has a cost and a benefit, and one has to decide what the overall outcome is.
36:59If you look at the debt levels now at the local government level, the misallocation
37:05of resources, the huge capacity of the solar panels, that has a lot to do with the mayor
37:11economy because the incentives is not at demand, on the demand side, consuming, it's on the
37:17supply side.
37:18And for companies that can become global is the mayor economy's ultimate objective.
37:23But I want to clarify that industrial policy is not just subsidy.
37:27It is much broader than that.
37:29And this is where countries get it wrong as if it's just as if you can subsidize a country
37:34and a sector to success.
37:36It's not the case.
37:37It's not about just throwing money at the problem.
37:40The local government created many, first of all, a good business environment, but coordinated
37:45supply chains.
37:46They jump-started a new ecosystem, right?
37:49If the government says, look, you know, let's procure this new technology.
37:52Let's start with SOEs, the state-owned enterprises.
37:55They will do that.
37:56They'll create that demand.
37:57Lots of these local governments just make sure that this industry is going to at least
38:03have a good environment with the right players involved.
38:06A lot of this mobilization, coordination, and allocation, it's not really just the hard
38:11financial policy.
38:12It's a lot of the soft policies that matter.
38:14And ultimately, whether industrial policies can be successful or not depends on whether
38:18they ultimately lead to more competition.
38:21In China, all of these industries, EVs, solar panels, or what have you, are experiencing
38:27the most ferocious competition within China.
38:29It has not created a few winners with huge monopoly powers.
38:34That's not what the industrial policy in China have done.
38:36They have created ultimately more market competition.
38:39And then you withdraw these policies and let the market determine who is the winner.
38:48There's a lot of misunderstanding about China, but yes, competition in the Chinese political
38:53system is a very important restrictive, restriction, constriction, checks and balance mechanism.
39:01Competition at the local level among provinces, even among, you know, regions or cities create
39:09inherent checks and balance on the system.
39:13If you think about it this way, if you're a promising company and you go to set up shop
39:19in a city and either that city or that provincial government is not friendly, let's say, or
39:28is corrupt or extractive, as many famous economists claim China to be an extractive country, then
39:36what do they do?
39:38They simply flock away to the neighboring province or city and contribute to their GDP
39:43and their investment and their employment.
39:45Ultimately, the local government cares about these three things, GDP and employment and
39:51how much you can contribute to the overall economy.
39:54So that would be killing the goose that lays the golden eggs.
39:59Now if you have nowhere to flock because there's no competition, then that becomes a problem.
40:04So the local governments often bend over heads over heels for the promising companies.
40:11You know, we mentioned about NIO and some other EV companies.
40:16There was huge competition among the local governments who can bid for NIO.
40:21In fact, I'm just talking to a startup, not even a startup, an idea that has been very
40:28promising.
40:30The Beijing government said, look, whatever the Shanghai news government will offer you,
40:35we're going to match and we're going to actually increase that.
40:37This is not even on something that has already succeeded.
40:40What does it mean that local government, this competition creates this constraint of local
40:46government behavior?
40:48And again, another misunderstanding is that these government officials almost, it's not
40:53the case that they have no checks and balances and no monitoring going on.
40:57In fact, monitoring surveillance is everywhere.
41:00It's even coming from the civil society itself.
41:02There's actually a dynamic debate on social media on these things.
41:06There are lots of criticisms about local governments.
41:08In fact, a Kennedy School study have shown that a third, maybe a third or even more of
41:15a lots of these social media posts is about monitoring local government officials, right?
41:19So there's a lot of, actually, I would argue that there's too much monitoring surveillance
41:23going on and not enough on focusing on creating more wealth today.
41:28China has thousands of years of history.
41:30Actually China created one of the first modern bureaucracies.
41:35There are vestiges of the tradition and the historical elements in the Chinese system,
41:42including the horizontal and the vertical stretches and expansions to every stratum
41:49society in every place around the country, and including the relationship, very, very
41:55a nuanced relationship between the central and local governments, the emperor and how
42:00it can implement some of his policies at the local level.
42:05How can he monitor what's going on in this vast nation?
42:10That kind of central local tussle has been a millennial condition that is still very
42:15much a part of the future of the Chinese economy today.
42:18And even if you look at the very topical aspects in the Chinese economy, like the local government
42:25debt, how to resolve the local government debt, again, it comes back to this very nuanced
42:29central local relationship, how much responsibility, how much resources to give the local government,
42:35how much monitoring, are they concerned about moral hazard where the central government
42:39bails out the local government?
42:42Other local governments will be very unhappy if they behave responsibly because you bailed
42:46out the less responsible ones.
42:48These are such important features in the thinking that they actually shape the most important
42:54economic outcomes of the Chinese situation today.
42:58So we have to understand these kind of dynamics to appreciate what is happening in China today.
43:06But speaking about history, bureaucracy, these inherited traits of the system, yes, they're
43:13very strong and including its relationship with people, the relations between authority
43:18and the Chinese people.
43:19The West thinks that it's just the Chinese government and people's relationship today
43:24that is sometimes tense because of the supposedly authoritarian nature of certain things, but
43:28actually the relationship with authority, that quiet deference, but not blind submission
43:33to authority is not only a permanent feature throughout history, but also a pervasive feature
43:40throughout society, whether it's between teacher and student or children and parents, that
43:46kind of relationship or authority is something that is very different in China from where
43:51it is in the West.
43:53And I think that people should just have a much more open-minded view about different
43:58perspectives.
43:59And this was another episode of China Now, a show that opens a window to the present
44:10and future of the Asian giant.
44:12Hope you enjoyed it.
44:13See you next time.