“I’m a tiny bit envious that I didn’t write this book..."
Back in the day, I remember finding Peter Hessler's first book really hard to get through, because he was just writing my experience, almost diary-style.
On the cultural differences: I find Shenzhen a really strange experience, completely unlike anywhere else in China. There are many situations in which people say directly what they mean, with no euphemisms, no subtext, no holding back. Often there's zero pressure around drinking, and many people choose not to. It feels to me like an American soap opera: everything explicit, everything clean and spacious and wealthy; immense comfort; a bit humourless as a result. I may have to move there (again) for work next year, and I'm a bit nervous. My Brit inclination to mock everything doesn't play in that town.
You said: "Back in the day, I remember finding Peter Hessler's first book really hard to get through, because he was just writing my experience, almost diary-style."
At a certain level it seems that way, but look closer and you'll find a great deal of wisdom. His newest book is great.
I've never been to Shenzhen--hope to get there someday. One can compare Shenzhen culture to Europe or America, but a far more interesting comparison is with the China of the 20th century. Chinese culture is changing much faster than I previously thought possible. Parts of China are becoming more like Japan.
" I frequently argue that despite its name, the Chinese Communist Party is actually a right-wing organization"
I agree 100%. I like to say China is ruled by Conservative authoritarians, ( I think a case could be made that they are fascist.) but the official religion is communism.
A whole book could be written about names in politics. Terms like socialism, capitalism liberalism, conservatism, fascism, communism, etc., keep evolving over time, with no fixed meaning.
And yet people attach vast importance to these terms, passionately debating whether they apply in various situations.
General semantics strikes again... the words people use don't have the same meanings depending on person and time period, but people use them anyway, more as labels than as accurate descriptors.
Besides that - isn't it sobering that when taken in its original meaning, Mussolini's definition of fascism as "Everything in the State, nothing outside the State, nothing against the State" (“Tutto nello Stato, niente al di fuori dello Stato, nulla contro lo Stato”) is winning world-wide?
Nice review. I have not been to China, so what do I know.
The CCP has thrown Hong Kong publisher Jimmy Lai into prison for printing news, and Lai was and is a hero of mine.
South Koreans have even less babies than Chinese.
How are house prices in China doing? The CCP once issued the only accurate assessment of the Hong Kong housing market I have ever read, and that is developers work with the Hong Kong government to keep supplies tight.
I do not know if China will liberalize in the future or not. It was a lie that the CCP was generally liberalizing 1989-to-present.
I can't figure out if the US will liberalize in coming decades, or Thailand either.
My bet is life will be better in China and Thailand in coming decades, than in the US. Mostly because of the way people behave.
I hope Japanese begin to have more babies. Even Thailand is below replacement level.
Currently China is 151st in Heritage's 2025 Index of economic freedom. It would be a surprise if China was ever in top 100 in last four decades.
So, given that, according to free market types, China is not and has not been economically free, its rapid prosperity must be a puzzle to economic orthodoxy.
I have been reading about imminent collapse of Chinese economy for last couple of decades, indeed the same two decades I have been reading about imminent hyperinflation in America due to govt spending.
Heritage is simply wrong, at least regarding the economic freedom that actually matters. There is a large role for the government, but the huge private sector is one of the most capitalist places on earth. A huge market and very few rules protecting workers, very low taxes, etc.
Admittedly, even an accurate rating of economic freedom would mark down China well below most other developed economies. But don't forget that even today China is much poorer than other East Asian economies with similar cultures. (Close to Mexican GDP/person) Much of what they've achieved is catch-up growth after the horrific Mao years.
I've consistently criticized people who predicted the collapse of China, so I totally agree with you there.
The people who "cried wolf" about the budget deficit were wrong until about the mid-2010s, when it actually became unsustainable. Now it really is a problem, but I suspect the price we pay will be slower growth due to higher taxes, not hyperinflation.
This is a very silly nitpick but large train stations are a terrible idea (and the weakest part of both Chinese and American infrastructure). Partly because cost rises with station size but mostly because the size makes them unusable. A big station can easily add fifteen minutes longer trip at each end of your commute (which you spend uncomfortably walking around a crowded station), and that's if you know where to go and don't get lost in the station.
The thing I most dislike is the excessive security, which slows things down. I don't find the size itself to be much of a problem. But yes, I much prefer the Japanese and European stations, which have less security.
Don't they need big stations for cities of 15 to 20 million where many people rely on trains?
Another problem is the stations are too far out from the city center.
So Chinese HSR mega-stations actually handle fewer daily passengers than Central stations in Paris/NYC/Tokyo, since they're not really used by daily commuters (measuring by number of tracks instead of daily passengers, they have about equal). It's the downside of building them so far out of the city center again, they're just useful to fewer people.
Going by GPT estimates the new Chongqing station about ten times the size of e.g. Paris Gare du Nord despite handling fewer passengers (and even the relatively small Shenzhen Futian station is larger despite handling far fewer passengers and platforms).
I think these places are set up more like airport terminals, with a lot of sitting around waiting for a scheduled train, not just people hoping on the next available train. The stations I've been in often seem fairly crowded, at least in big cities. (The smaller cities are overbuilt.) I don't think I'd want the Beijing stations to be smaller, given the large number of people there at any time.
But I don't really disagree with you--I often prefer stations in Europe or Japan.
I finally feel like I have a framework for thinking it through. Before, I was stuck on "UBI? Seems like a cultural disaster." Now it seems like an option play. Upside is literally incalculable. No telling when.
Both CCP China and Bubble Economy Japan used centrally organised financial repression. There seem to be some similarities in results in both countries. One wonders if the CCP can/will learn from the example.
I listened to Dan Wang on the ChinaTalk podcast, he was very impressive.
Also, every rising industrial power is accused of “cheating”. German economists (e.g. List) accused it of Britain. British commentators accused it of the US. US commentators accused it of Japan and now of China.
The social conservatism of the CCP is obvious in its live-dramas censorship regime and the recent persecution of (mostly female) authors of Danmei (boy love) web novels. At the same time, Chinese production houses are producing BL (Boy Love) dramas via Taiwan or Thailand, as they are hugely popular among East Asian (female) audiences.
Commentary on China is all over the place. People who actually go there are very impressed with how everything works. Other folk point to the debt, the waste, the repression, the demographics. It seems to be a more extreme pattern of what one saw about Japan in the late 1980s.
The One Child policy was horrible, but seems to have mainly accelerated a pattern that was going to happen anyway. (South Korea, Hong Kong and Taiwan have even more disastrous fertility rates.)
The main effect was the “girl child cull” in that the other East Asian societies do not have the young-male-surplus that China does. If it was not for falling testosterone and online distractions, China would have greater social stability problems from all those excess young males: but that is also true for Western countries, if not for quite the same reasons (alienated, rather than excess, young males).
The CCP is absolutely a Leninist Party: but that is about organisational structure. How quickly it is Sinifying (given that Marxism is a disastrous Western import) is a fascinating question. The CCP in general, and Xi in particular, are obsessed by the collapse of the Soviet Union and the fall of the CPSU. That is part of the reason for the repression of the Uighurs. It is also why the insistence on ideological commitment: but that can still be a commitment to the evolving ideology of the CCP, to the “China Dream”.
The rise of national populism is about the costs of globalisation and how the Western (and other) “unaccountable” classes (those paid for turning up) have mounted various sorts of social aggression against their own working classes. What those with institutional power do almost always matters more than what the working class does.
OT, not in the ballpark, but maybe in the parking lot:
The $100k H-1B visa idea?
Yes, it is from the Trump Administration, and Trump is a very regrettable character.
OK, toss out current politics.
But one idea now and then floated about is that people should be able to buy US citizenship. (People can actually so this in a way, by investing in business, but set that aside).
I like the idea of selling citizenships, or even auctioning off a certain number, so that taxpayers can learn what the market will bear. (Side note: This would also allow people, who are worried about someone's rights or fate overseas (or in Britain's or Canada's leftist regimes), to pay for that person to enter the US, through online fundraising campaigns, etc.)
(Another interesting idea is allowing people to sell their citizenships. Via con dios!).
OK, to the point: Why not auction off H-1B's? Let the market set the clearing price. $100k may be too low.
If business are willing to pay, say, $200k for a certain types of work visas...why not charge for it?
If businesses are not willing to pay, say, $50k per visa...then we know the workers are not that needed. Or the market does not think they are needed.
Egads, Trump may have a good idea, or the start of one anyway.
% spent on social services seems such a woefully inadequate measure. Communal and state ownership structures are vastly different from the US. That means comparatively many more benefits accrue to people *before* taxation and redistribution. Inequality is rising in China but properly taking into account such factors could well put China above an equivalent 25% social spend rate, not 10%.
That's a valid point, but I believe it remains true that public provisions of things like unemployment compensation, health care, and education remains well below US levels.
China has a high level of inequality, certainly far more than Europe.
"China is still just an upper middle-income country, but it won’t be for long."
Sumner, when do you expect the World Bank to declare China to be a high income country? For comparison, Romania, Russia, and Chile are high income countries, and China flipped from being a lower middle income to upper middle income country in 2010.
I suppose China might catch up to Chile in a decade or so. But these distinctions don't seem all that important to me--borderline places like Chile and Malaysia seem sort of half high income and half middle income.
I'd add that in terms of welfare, moving from low income to middle income is vastly more important than moving from middle income to high income. China's already earned 90% of the gains that it will ever get from economic development, just moving from rural poverty and extreme hunger to smart phones, modern homes and plenty of food.
"Europeans and East Asians are high savers, which leads to trade surpluses."
Which came first, the chicken or the egg? There must be some interrelation between high saving rates and trade surpluses. I would love to read a post by you examining that relationship if you are ever so inclined.
What is the difference between the best book of the year, and the best book of the year "flat-out"?
I'm sorry, but do people like Tyler Cowen understand how stupid he sounds?
It's difficult to take people like you and tyler cowen seriously. People walking around saying "flat-out", "little bit" and the overused adjective "comical" are not serious intellectuals.
The only reason you use the adjective "comical" is because you hear pundits on television using that word. You never took the time to analyze your own statements. Neither of you.
Is your vocabulary so poor that you can only think of one adjective, which you use for nearly everything.
"It's difficult to take people like you and tyler cowen seriously."
When people make this sort of comment about Tyler Cowen, it's hard to take them seriously.
As for me, yes "comical" is the only adjective I use because it's the only adjective I know of. Teach me a few more adjectives and I promise I'll start using them.
I will read this book. I've been reading Other Rivers over the past months and have been liking it a lot. It's made me appreciate the Chinese culture a lot more.
I like how you started this piece, mentioning Tyler Cowen’s review. My take on the book will likely be very different than yours and Cowen’s. For example here are my thoughts on its opening paragraph…
Why Mirrors Are Illegal in Silicon Valley: How Lawyers Cripple the Future of Technology
Very good observation. FDR misdiagnosed deflation as excess capacity and too much competition. The same is true in China, at least to some extent. In fairness, subsidies have created overcapacity in some industries, but the deflation problem is actually a separate issue (related to monetary policy). So-called "overproduction" is actually the misallocation of resources described by Austrian economists (and also by people like Michael Pettis.)
But, as with the US fiscal deficit, will the Chinese stated and hidden debt (disguised by fantasy bank balance sheet "assets") eventually come home to roost?
Eg is this EV "overproduction" a symptom of success or failure? Or both?
I suspect that some of the overproduction represents wasteful subsidies at the local level.
One thing I don't see people discuss very much is how pro-consumer the Chinese economy is in terms of pricing. China's criticized for investing too much and spending too little on consumption, which is probably correct, but their consumers have access to things like EVs at very competitive prices. China is one country that probably doesn't even need antitrust laws.
“I’m a tiny bit envious that I didn’t write this book..."
Back in the day, I remember finding Peter Hessler's first book really hard to get through, because he was just writing my experience, almost diary-style.
On the cultural differences: I find Shenzhen a really strange experience, completely unlike anywhere else in China. There are many situations in which people say directly what they mean, with no euphemisms, no subtext, no holding back. Often there's zero pressure around drinking, and many people choose not to. It feels to me like an American soap opera: everything explicit, everything clean and spacious and wealthy; immense comfort; a bit humourless as a result. I may have to move there (again) for work next year, and I'm a bit nervous. My Brit inclination to mock everything doesn't play in that town.
You said: "Back in the day, I remember finding Peter Hessler's first book really hard to get through, because he was just writing my experience, almost diary-style."
At a certain level it seems that way, but look closer and you'll find a great deal of wisdom. His newest book is great.
I've never been to Shenzhen--hope to get there someday. One can compare Shenzhen culture to Europe or America, but a far more interesting comparison is with the China of the 20th century. Chinese culture is changing much faster than I previously thought possible. Parts of China are becoming more like Japan.
" I frequently argue that despite its name, the Chinese Communist Party is actually a right-wing organization"
I agree 100%. I like to say China is ruled by Conservative authoritarians, ( I think a case could be made that they are fascist.) but the official religion is communism.
A whole book could be written about names in politics. Terms like socialism, capitalism liberalism, conservatism, fascism, communism, etc., keep evolving over time, with no fixed meaning.
And yet people attach vast importance to these terms, passionately debating whether they apply in various situations.
General semantics strikes again... the words people use don't have the same meanings depending on person and time period, but people use them anyway, more as labels than as accurate descriptors.
Besides that - isn't it sobering that when taken in its original meaning, Mussolini's definition of fascism as "Everything in the State, nothing outside the State, nothing against the State" (“Tutto nello Stato, niente al di fuori dello Stato, nulla contro lo Stato”) is winning world-wide?
Nice review. I have not been to China, so what do I know.
The CCP has thrown Hong Kong publisher Jimmy Lai into prison for printing news, and Lai was and is a hero of mine.
South Koreans have even less babies than Chinese.
How are house prices in China doing? The CCP once issued the only accurate assessment of the Hong Kong housing market I have ever read, and that is developers work with the Hong Kong government to keep supplies tight.
I do not know if China will liberalize in the future or not. It was a lie that the CCP was generally liberalizing 1989-to-present.
I can't figure out if the US will liberalize in coming decades, or Thailand either.
My bet is life will be better in China and Thailand in coming decades, than in the US. Mostly because of the way people behave.
I hope Japanese begin to have more babies. Even Thailand is below replacement level.
Another worthless comment.
Currently China is 151st in Heritage's 2025 Index of economic freedom. It would be a surprise if China was ever in top 100 in last four decades.
So, given that, according to free market types, China is not and has not been economically free, its rapid prosperity must be a puzzle to economic orthodoxy.
I have been reading about imminent collapse of Chinese economy for last couple of decades, indeed the same two decades I have been reading about imminent hyperinflation in America due to govt spending.
Good question. I'd give several answers here:
Heritage is simply wrong, at least regarding the economic freedom that actually matters. There is a large role for the government, but the huge private sector is one of the most capitalist places on earth. A huge market and very few rules protecting workers, very low taxes, etc.
Admittedly, even an accurate rating of economic freedom would mark down China well below most other developed economies. But don't forget that even today China is much poorer than other East Asian economies with similar cultures. (Close to Mexican GDP/person) Much of what they've achieved is catch-up growth after the horrific Mao years.
I've consistently criticized people who predicted the collapse of China, so I totally agree with you there.
The people who "cried wolf" about the budget deficit were wrong until about the mid-2010s, when it actually became unsustainable. Now it really is a problem, but I suspect the price we pay will be slower growth due to higher taxes, not hyperinflation.
Slower growth via higher taxes is one result. Like the way UK is definitely "choosing".
France and Germany may just head to some sort of crisis.
https://www.thetimes.com/world/europe/article/germany-faces-ruin-without-reform-of-welfare-state-warns-economist-qtqf9ghrd
This is a very silly nitpick but large train stations are a terrible idea (and the weakest part of both Chinese and American infrastructure). Partly because cost rises with station size but mostly because the size makes them unusable. A big station can easily add fifteen minutes longer trip at each end of your commute (which you spend uncomfortably walking around a crowded station), and that's if you know where to go and don't get lost in the station.
The thing I most dislike is the excessive security, which slows things down. I don't find the size itself to be much of a problem. But yes, I much prefer the Japanese and European stations, which have less security.
Don't they need big stations for cities of 15 to 20 million where many people rely on trains?
Another problem is the stations are too far out from the city center.
So Chinese HSR mega-stations actually handle fewer daily passengers than Central stations in Paris/NYC/Tokyo, since they're not really used by daily commuters (measuring by number of tracks instead of daily passengers, they have about equal). It's the downside of building them so far out of the city center again, they're just useful to fewer people.
Going by GPT estimates the new Chongqing station about ten times the size of e.g. Paris Gare du Nord despite handling fewer passengers (and even the relatively small Shenzhen Futian station is larger despite handling far fewer passengers and platforms).
I think these places are set up more like airport terminals, with a lot of sitting around waiting for a scheduled train, not just people hoping on the next available train. The stations I've been in often seem fairly crowded, at least in big cities. (The smaller cities are overbuilt.) I don't think I'd want the Beijing stations to be smaller, given the large number of people there at any time.
But I don't really disagree with you--I often prefer stations in Europe or Japan.
Great bit of post-work "thinking" from GPT Pro: https://x.com/DaveShapi/status/1970276783367839805
Interesting stuff, although I'd say we are still a long way from having to think about implementing those ideas.
I finally feel like I have a framework for thinking it through. Before, I was stuck on "UBI? Seems like a cultural disaster." Now it seems like an option play. Upside is literally incalculable. No telling when.
Both CCP China and Bubble Economy Japan used centrally organised financial repression. There seem to be some similarities in results in both countries. One wonders if the CCP can/will learn from the example.
I listened to Dan Wang on the ChinaTalk podcast, he was very impressive.
Also, every rising industrial power is accused of “cheating”. German economists (e.g. List) accused it of Britain. British commentators accused it of the US. US commentators accused it of Japan and now of China.
The social conservatism of the CCP is obvious in its live-dramas censorship regime and the recent persecution of (mostly female) authors of Danmei (boy love) web novels. At the same time, Chinese production houses are producing BL (Boy Love) dramas via Taiwan or Thailand, as they are hugely popular among East Asian (female) audiences.
Commentary on China is all over the place. People who actually go there are very impressed with how everything works. Other folk point to the debt, the waste, the repression, the demographics. It seems to be a more extreme pattern of what one saw about Japan in the late 1980s.
The One Child policy was horrible, but seems to have mainly accelerated a pattern that was going to happen anyway. (South Korea, Hong Kong and Taiwan have even more disastrous fertility rates.)
The main effect was the “girl child cull” in that the other East Asian societies do not have the young-male-surplus that China does. If it was not for falling testosterone and online distractions, China would have greater social stability problems from all those excess young males: but that is also true for Western countries, if not for quite the same reasons (alienated, rather than excess, young males).
The CCP is absolutely a Leninist Party: but that is about organisational structure. How quickly it is Sinifying (given that Marxism is a disastrous Western import) is a fascinating question. The CCP in general, and Xi in particular, are obsessed by the collapse of the Soviet Union and the fall of the CPSU. That is part of the reason for the repression of the Uighurs. It is also why the insistence on ideological commitment: but that can still be a commitment to the evolving ideology of the CCP, to the “China Dream”.
The rise of national populism is about the costs of globalisation and how the Western (and other) “unaccountable” classes (those paid for turning up) have mounted various sorts of social aggression against their own working classes. What those with institutional power do almost always matters more than what the working class does.
https://www.lorenzofromoz.net/p/the-struggles-of-states-the-contentions
OT, not in the ballpark, but maybe in the parking lot:
The $100k H-1B visa idea?
Yes, it is from the Trump Administration, and Trump is a very regrettable character.
OK, toss out current politics.
But one idea now and then floated about is that people should be able to buy US citizenship. (People can actually so this in a way, by investing in business, but set that aside).
I like the idea of selling citizenships, or even auctioning off a certain number, so that taxpayers can learn what the market will bear. (Side note: This would also allow people, who are worried about someone's rights or fate overseas (or in Britain's or Canada's leftist regimes), to pay for that person to enter the US, through online fundraising campaigns, etc.)
(Another interesting idea is allowing people to sell their citizenships. Via con dios!).
OK, to the point: Why not auction off H-1B's? Let the market set the clearing price. $100k may be too low.
If business are willing to pay, say, $200k for a certain types of work visas...why not charge for it?
If businesses are not willing to pay, say, $50k per visa...then we know the workers are not that needed. Or the market does not think they are needed.
Egads, Trump may have a good idea, or the start of one anyway.
% spent on social services seems such a woefully inadequate measure. Communal and state ownership structures are vastly different from the US. That means comparatively many more benefits accrue to people *before* taxation and redistribution. Inequality is rising in China but properly taking into account such factors could well put China above an equivalent 25% social spend rate, not 10%.
That's a valid point, but I believe it remains true that public provisions of things like unemployment compensation, health care, and education remains well below US levels.
China has a high level of inequality, certainly far more than Europe.
Yes, I can agree with that.
"China is still just an upper middle-income country, but it won’t be for long."
Sumner, when do you expect the World Bank to declare China to be a high income country? For comparison, Romania, Russia, and Chile are high income countries, and China flipped from being a lower middle income to upper middle income country in 2010.
I suppose China might catch up to Chile in a decade or so. But these distinctions don't seem all that important to me--borderline places like Chile and Malaysia seem sort of half high income and half middle income.
I'd add that in terms of welfare, moving from low income to middle income is vastly more important than moving from middle income to high income. China's already earned 90% of the gains that it will ever get from economic development, just moving from rural poverty and extreme hunger to smart phones, modern homes and plenty of food.
Thanks, Sumner.
"Europeans and East Asians are high savers, which leads to trade surpluses."
Which came first, the chicken or the egg? There must be some interrelation between high saving rates and trade surpluses. I would love to read a post by you examining that relationship if you are ever so inclined.
I believe that causation mostly runs from savings rates to trade balances, but obviously there might be some causation in the other direction.
What is the difference between the best book of the year, and the best book of the year "flat-out"?
I'm sorry, but do people like Tyler Cowen understand how stupid he sounds?
It's difficult to take people like you and tyler cowen seriously. People walking around saying "flat-out", "little bit" and the overused adjective "comical" are not serious intellectuals.
The only reason you use the adjective "comical" is because you hear pundits on television using that word. You never took the time to analyze your own statements. Neither of you.
Is your vocabulary so poor that you can only think of one adjective, which you use for nearly everything.
I don't think you're that smart. At best, 120.
"It's difficult to take people like you and tyler cowen seriously."
When people make this sort of comment about Tyler Cowen, it's hard to take them seriously.
As for me, yes "comical" is the only adjective I use because it's the only adjective I know of. Teach me a few more adjectives and I promise I'll start using them.
I will read this book. I've been reading Other Rivers over the past months and have been liking it a lot. It's made me appreciate the Chinese culture a lot more.
This is a very different book, more focused on economics and politics.
Yeah. This is what I’m expecting based on the review but thanks for the heads up!
I like how you started this piece, mentioning Tyler Cowen’s review. My take on the book will likely be very different than yours and Cowen’s. For example here are my thoughts on its opening paragraph…
Why Mirrors Are Illegal in Silicon Valley: How Lawyers Cripple the Future of Technology
https://scoutbooks.substack.com/p/why-mirrors-are-illegal-in-silicon
Will likely write more on the book after I finish reading it.
Great post. I frequently criticize our IP laws as being too restrictive, and I worry less than most people about IP theft.
Let me know when you do a full review.
Scott,
do you see any similarities between recent anti-involution talk in China and FDR's supply side policies in his first term?
Very good observation. FDR misdiagnosed deflation as excess capacity and too much competition. The same is true in China, at least to some extent. In fairness, subsidies have created overcapacity in some industries, but the deflation problem is actually a separate issue (related to monetary policy). So-called "overproduction" is actually the misallocation of resources described by Austrian economists (and also by people like Michael Pettis.)
Great review.
But, as with the US fiscal deficit, will the Chinese stated and hidden debt (disguised by fantasy bank balance sheet "assets") eventually come home to roost?
Eg is this EV "overproduction" a symptom of success or failure? Or both?
https://www.reuters.com/investigations/china-is-sending-its-world-beating-auto-industry-into-tailspin-2025-09-17/
I suspect that some of the overproduction represents wasteful subsidies at the local level.
One thing I don't see people discuss very much is how pro-consumer the Chinese economy is in terms of pricing. China's criticized for investing too much and spending too little on consumption, which is probably correct, but their consumers have access to things like EVs at very competitive prices. China is one country that probably doesn't even need antitrust laws.