Transcript: Lizzi Lee on China's Economy and the Trump Presidency

Below is a complete transcript of the episode. Thanks to CadreScripts for their great work, to Lili Shoup for checking and formatting, and to Zhou Keya for the image! Listen in the embedded player above.

Kaiser Kuo: Welcome to the Sinica Podcast, a weekly discussion of current affairs in China. In this program, we’ll look at books, ideas, new research, intellectual currents, and cultural trends that can help us better understand what’s happening in China’s politics, foreign relations, economics, and society. Join me each week for in-depth conversations that shed more light and bring less heat to how we think and talk about China. I’m Kaiser Kuo, coming to you from Chapel Hill, North Carolina.

Sinica is supported this year by the Center for East Asian Studies at the University of Wisconsin-Madison, a national resource center for the study of East Asia. The Sinica Podcast will remain free, but if you work for an organization that believes in what I’m doing with the podcast, please consider lending your support. You can get me at sinicapod@gmail.com.

And listeners, please support my work at www.sinicapodcast.com. Become a subscriber and enjoy, in addition to the podcast, the complete transcript of the show, essays from me, as well as writings and podcasts from some of your favorite China-focused columnists and commentators. Be sure to check out the latest series from our friends at Johns Hopkins SAIS, Studying China in the Absence of Access, which will run across the next few months.

This week on Sinica, I am delighted to welcome back my friend and former colleague Lizzi Lee, with whom I’m sure Sinica listeners are all very familiar. Lizzi is now a Fellow on Chinese Economy at the Asian Society Policy Institute’s Center for China Analysis. Her doctorate is from MIT in economics, but to the great benefit of the U.S. discourse on China, she turned away from the world of finance and reinvented herself as a journalist, first with the New York-based independent Chinese media outlet, Wall St TV, 今日華爾街 Jīnrì huá'ěrjiē, and, of course, with The China Project, where we were colleagues for a brief but very happy moment. For my money, she is just about the best-informed analyst looking at the big important issues. She has well-honed instincts and fantastic intuitions about China and the way that things work, the way that people think, as well as this really rare ability to put her thinking into clear, very sensible language, whether it’s in prose or in her presentation on screen. She’s recently been extremely prolific with pieces just in the last few months in The Wire China, South China Morning Post, Nikkei, Foreign Policy, The Diplomat, World Policy Review; Lizzi Lee, welcome back to Sinica.

Lizzi Lee: Great to be here.

Kaiser: So, Lizzi, when it comes to you, it’s always hard for me to know what topic to focus on because you just always have so many smart things to say on, well, pretty much anything China-related that there is. But today I’m going to try to narrow it down to the Chinese macroeconomy, and, because he takes office in less than a week from when this episode drops, the Trump presidency and how Beijing appears to be preparing for it. These two things are, of course, very much intertwined, and it’s impossible to talk about either without talking about the Chinese leadership itself as well so we will certainly do that too. I’m also keen to get you to zoom out a bit and connect what is happening now to a conversation that we had a few years ago during the pandemic when folks on the old China Project team used to speak of Xi Jinping’s project of refashioning the Chinese economy and its very foundations as a “Red New Deal” because I don’t think that that’s all irrelevant given the way things may appear to have departed from that.

But let’s start with Trump’s return to the White House. You’ve written at least three pieces that I can count directly addressing this from different angles. First, I want to talk about an op-ed that you wrote for Nikkei about a month ago, which was titled, “Counting the Hawks in the Trump 2.0 Administration is Pointless.” In that piece, just for listeners who haven’t read it yet, you argue that what really matters when it comes to how U.S.-China relations will develop in this incoming administration isn’t about Marco Rubio, or Elon Musk, or Pete Hegseth, if he gets confirmed, or Tulsi Gabbard, and how they variously come down on China. Instead, you argue that it’s really about which side, Beijing or Washington, is actually going to be able to get its act together and carry out the kinds of structural transformations that the times really demand and about the perception on that score, so, that’s going to determine, in your thinking, the balance between American and Chinese power in the coming years. And by that measure, you argue Beijing is pretty confident despite the many challenges it faces. It comes down ultimately to adaptability. You argue, I mean, Xi Jinping, as you noted in one of your pieces, I’m not sure it’s that one, is fond of quoting from the Discourses on Salt and Iron, “知者因时而变，明者随事而制 zhì zhě yīn shí'ér biàn, míng zhě suí shì ér zhì.”

Lizzi: Right.

Kaiser: I guess translating that is, “The wise adapt to the times and the astute respond to circumstance.” Lizzi, when I was reading that piece, I wasn’t entirely sure, though, whether this idea that it’s all about being able to adapt to fast-changing geopolitics or economic circumstances, or especially technological changes, is that what China thinks, or what you think, or perhaps both? So, maybe you can make that clear and flesh out that argument a little bit.

Lizzi: Right. So, I have to say, Kaiser, after all the flattery at the beginning, and then you immediately call me a dilettante, right? Writing about a variety of different topics, not sure which one is my focus, but that’s precisely what I am, a dilettante.

Kaiser: That’s completely wrong. If you’re a dilettante, we should all try to be dilettantes.

Lizzi: No, but I guess the point I’m trying to make is after a few years as a journalist and now more into the research and policy space, I am actually interrogating myself quite a bit more. As a journalist, you know this, we basically come with questions and we ask the experts, but as a researcher in a policy space, I actually have to direct those questions directly back to me, which comes down to what you were talking about. So, what really matters when it comes to U.S.-China relations? I guess, as journalists, we have this tendency to focus on the immediate, right?

Kaiser: Right.

Lizzi: Who’s nominated, who’s going to make the biggest wave during the initial phase of Trump 2.0, etc., etc. But let me just take a step back and take a look back at Trump 1.0. Looking back, it’s kind of funny how much of what seemed really urgent or dramatic in U.S.-China relations back then turned out to be just noise, or not too much more than noise. Like, you still remember the frenzy over how many soybeans China was supposed to buy in their trading. What’s the number? How many soybeans China was supposed to buy? I honestly don’t remember at all.

Kaiser: No.

Lizzi: Well, we sort of have this sort of very vague recollection of Beijing designing its retaliation strategy targeting Trump’s agricultural base.

Kaiser: Yeah, vulnerable districts in the Midwest that grew things that were exported to China, right?

Lizzi: Right. Because that was supposed to be the way to, you know, hurt Trump supporters the most, and Beijing thought that that’s going to deliver a really heavy geopolitical blow to Trump. At that time, that all felt logical and that felt like a big deal, but honestly, none of that really made a lasting impact, which brought me to think more thoroughly about what actually matter. And I think, sort of reflecting on that, the real turning point, as we now have the benefit of hindsight, was actually the Huawei ban, and perhaps before that, the sanctions on ZTE. From Beijing’s perspective, those moves sent a very clear signal: the United States was willing to go to extreme length to shut down a Chinese company. I mean, that’s sort of their thinking. And the decision that came after that wasn’t just a policy pivot, it was basically a series of steps prompted by that wake-up call. It sparked a huge push in China for tech self-reliance, and we see the effects of that are still playing out today. So, I think it’s not just a wake-up call to Beijing, but also, sort of my reflection on this matter, I think there’s a broader recognition, based on my conversation with people in China, that what’s going to make the headlines in the short term, no matter how much wave it’s going to make in the market, it’s fundamentally just noise.

Kaiser: Yeah, so you’re talking about tariffs essentially, right? I mean, that’s noise.

Lizzi: Right. So, we can talk a little more about tariffs, what they are or what they are not. But I think there’s a broader recognition that we need to focus, we need to get our act together and focus on what really matters. And unfortunately, you have to say, I think that recognition is more clear and in consensus in China than in the United States. We know that the U.S. need to clean its house first. Smart people talk about it, basically everyone who has witnessed what happened in the past years talk about the importance of its own strength, restore the U.S.’s own strength rather than, basically, diverting attention to other matters. But I think I’m yet to see that kind of clarity from U.S. policy-makers. That’s sort of the brief thinking. It sounds like a really lengthy way to introduce a motivation behind the article. But yeah, hopefully that answer your question, at least in some way.

Kaiser: Yeah. I mean, you’ve written there, I mean, in Foreign Policy, you talk about how China has actually prepared for Trump 2.0, and that Beijing views Trump’s policies really as part of a broader trajectory, I mean, that there was a lot of continuity between the Trump 1.0 and, of course, the Biden administration. Ultimately, they think Trump is more of a symptom of a chaotic world than one of its principal causes, as you say. So, you make the point that Beijing was indeed preparing for these Trump-like disruptions long before Trump’s electoral victory in November. So, how does it see it? What is this broader historical trajectory that Beijing sees? And what do you think that this reveals about China’s or about Xi Jinping’s long-term strategic thinking and his priorities? What does the world look like?

Lizzi: Great. So, let me just make one point clear. I guess like by preparing for Trump’s return and not talking about, “Oh, Beijing sees Trump as the likely candidate,” actually what I mean is I think they’ve studied Trump’s playbook, including tariffs, tech restrictions, and this whole reshoring push. It’s all about managing the known knowns, what they know will happen while still leaving space to brace for unpredictability of Trump and the abrupt change in direction Trump could embody, and we’ll probably see something happening online.

But fundamentally, China sees U.S.-China competition as a long game. So, over the past few years, what we saw was basically China rewiring its entire global trade relationship, building more resilience in supply chains, especially boosting Southeast Asia investment. We’re going to talk more about why that’s particularly important. And also pushing forward on domestic self-reliance. Those strategies are going to work in China’s favor no matter who occupies, which party occupies the White House. I think that’s what I mean by Beijing has been preparing this for long. And I think Beijing is also pretty clear-eyed about their trajectory of U.S.-China relations. A group of statistics I usually hear from China strategist is the relative size of GDP compared to the United States. In early ’80s, China’s GDP was 6% of the U.S. By 2000, it’s doubled to about 12% or 13%, depending on which metric you use. And in 2010 or 2011, it just shot up to half. Eventually, by 2021, it reached over 75%, I think. So that kind of growth from 6% to 74%, or 75% in 40 years is pretty staggering.

And from Beijing’s point of view, it’s not about China’s growth, how great China is. They see this as sort of the fundamental reason behind the U.S.-China tension we see nowadays. They see that kind of rise as being bound to create more structural tensions and conflicts between the two countries. And China is not going to deliberately slow down just to avoid that tension. So, China sees that kind of structural tension as unavoidable, and it has to brace for the impact of that economic shift. So, I think that’s what I mean by long game and what they’re sort of digging in and prepare for even worse outcomes of this administration.

Kaiser: Yeah, so I’ve heard that also from many, many Chinese analysts who I’ve spoken to, that they see this as primarily a structural change, that just in comprehensive national power, there’s been a shift in that’s probably most obviously measured, as you say, by the relative sizes of the total economies. But there’s also another piece of this, which is when Beijing looks at American governance, when Beijing looks at American political culture, it also has a sense for where it’s headed. It’s not just that China is catching up, but it senses that America is, in some ways, really, really challenged. Is this now seen as a permanent feature of American politics, the kind of sclerosis, the kind of division, the polarization? Or do you think that they recognize that there are still very deep wells of American resilience that can be drawn upon and that there are still significant differences between and among both individual politicians and between the two main political parties, and that things in America still could take a turn for the better?

Lizzi: Right. So that’s a great question. I think I’m going to take the second view here. Well, I mean, so if we limit to Chinese thinkers we respect, I think it’s definitely the second point of view. There’s a deep appreciation among those serious China strategists and analysts that America has its unique strength, and that strength is not likely to be surpassed by China or other country in the world. America has a deep, mature financial system, which China deeply admires and wanted to borrow and learn from. We can talk more about capital market later.

Kaiser: We will.

Lizzi: But also, America has a hugely deep and productive innovation system that China still struggles to replicate, let alone surpass. And let me just share one anecdote with you and the audience. I recently came across this fascinating speech by Mei Yonghong. So, Meiyong Hong was a former administrative science, 科技部 kējì bù official. And he talked about… So when he was in charge of the discussions on China’s major national science and technology initiative back in the 2000s, so 20 years ago, there was a proposal for new energy vehicles, and it was immediately rejected by all the officials in the ministry. At that time, people just didn’t believe China had the chance of making any real progress in all of the automobile industry. And the thinking back then was, “Oh, all we can do is basically CKD assembly.”

Kaiser: CKD assembly means “completely knocked-down assembly.”

Lizzi: And for a decade, that was exactly what China did, state-owned automakers, they had policy support and didn’t really accomplish much, essentially just coasting. That kind of humbleness, “there’s a lot of limitation of what we can do,” I think, is still very pervasive among many Chinese officials and Chinese strategists. But of course, we know the outcome of that story, so China did make tremendous progress in energy vehicles, and no one back then could predict that the tide would turn so dramatically. But now, as we talk about chip restrictions, AI, whether China has a capability to catch up, whether China can actually nurture its own version of Nvidia, I think I still remember that anecdote or story Mei Yonghong hared because lots of Chinese officials are probably the most-

Kaiser: Pessimistic. Yeah.

Lizzi: Pessimistic when it comes to the kind of timeline China need to catch up to the United States. We see a lot of nationalists’ fervor on Chinese media, but, paradoxically, it’s the Chinese business community, the entrepreneur community, and also strategists and officials who seem to be very cautious. I just wanted to point that out. It’s not something that I expected without actually talking to them.

Kaiser: Yeah. And I think it would come as a big surprise to a lot of people, but I’ve definitely found the same thing, that you probably get the most cautious and yeah, it’s that underpromise, overdeliver kind of idea that’s very pervasive in China.

So, Lizzi, in that Foreign Policy piece, you also talk about risks and opportunities that Trump’s return presents for China. Let’s break that down, if you could. What are the main risks? I mean, I think some of them are pretty obvious, but also, what are the main opportunities? I’m especially interested in your analysis which you share in that piece of how, again, these more sophisticated foreign policy thinkers in China are resisting the simplistic idea that Trump, with this America First approach, is just going to blow up alliances and that erstwhile American allies and clients are going to flee into the arms of China. What are the more sober and seasoned analysts, who you are apparently talking to in China, saying instead? These are the same people who are a little less sanguine about technology development.

Lizzi: Right. As you know, when we talk about sort of analysis of Trump 2.0, we immediately see a lot of repeats, people basically talk about the same things. But let me address the first part, the risk part. I think, you know, we talk about tariff, I think tariff itself is not too much a problem. As I said, Beijing has basically rewired its entire supply chain, trade route, etc., etc. But if we see the export data that just came out this month, this record level of export data, that just speaks to how much external disturbance can still affect China’s growth trajectory, especially in the short term. And I think what the real risk here is, tariff might hit when China’s economy is already experiencing a perfect storm, when its domestic economy is already kind of wobbly. So, China really doesn’t have much space to deal with too many disturbances coming from multiple fronts. China want to focus on its domestics. And if Trump just blows everything up in a very abrupt way, that just adds extra risks and uncertainty to China’s already very wobbly recovery path. So, I think that’s riskier. And as we saw in the last few years, recovery is not path independent. If you get your economy recovered in a relatively short period of time, say within a year, it’s very different from, say, recovery when recovery is prolonged or L-shaped — that extends into multiple years or even a decade, or multiple decades as in Japan’s case. So, I think that’s a real risk here. China doesn’t want its external environment to be too turbulent as it wanted to be laser-focused on getting its own economy back on track in the next year or so.

On opportunity… So let me just be clear, I’m not in a camp that, “Oh, Trump can actually accelerate reforms in China.” I’m very skeptical of the whole idea or 倒逼改革 daòbiì gǎigé, the notion that some kind of external pressure could somehow force China to change its direction or empower certain reformists and factions within the Communist Party. That just sound too far-fetched to me. But I think there is an argument that external pressures can push China to get its act together more quickly. I would just use the example that I talk about in the recent piece, which is capital market reform. China talked about its capital market reform for over a decade, or over two decades, and if we look at the documents when Xi Jinping first became the General Party Secretary of China, when Xi Jinping first came to office, there was already a lot of talk about capital market reform. But I’ve never seen this level of urgency as we are seeing now. China really need to get its equity market in shape. So that’s the kind of accelerating reform that I’m talking about, I think, in the piece.

Kaiser: There’s also a piece of that in that piece where you argue that Trump’s erratic and unpredictable bare-knuckles, mercantilist style of governing is actually going to make investors more interested in Chinese securities, that it will look sort of like a more stable haven for investment, not just capital market reforms, but also just a more attractive sort of target for investment.

Lizzi: Right. I guess an example of that, well, we can talk more about Hong Kong, but I hear there might be a push in Hong Kong as a regional or a Global South wealth management center because Hong Kong already has pretty mature wealth management services. And if China wanted to support Hong Kong’s market, it might actually try to use Hong Kong as anchor point to serve the Middle East, Southeast Asia, and use that basically as a stabilizer for China’s external capital environment, or Global South. But I guess the point I’m also making is that I think China actually realized that a deeper and more integrated capital market make China more secure. The more mature and integrated China’s capital market becomes, the more embedded it is with global stakeholders. So, if decoupling is costly for everyone involved, that actually reduces the state. And that actually created a force of stabilization for China as it navigates sort of a potentially more turbulent Trump 2.0.

Kaiser: Right. So, you’ve talked a little bit about the opportunities for maybe, and I, again, just to repeat, you’re not in the camp that says this is going to really juice reforms across the board in the Chinese economy, but there are some opportunities. They’re also looking at opportunities in sort of the geopolitical realm. We’ve seen them taking steps to improve relations with the Europeans, with the UK, that, very, conspicuously just in the last few days, and at least that one seems to be reciprocal. Japan — Japan ties are warming quite a bit. I mean, Beijing has been on something of a global charm offensive not only in the Global south where it’s enjoyed some windfalls, you might even say October 7th has been a real windfall, it’s helped to burnish China’s image, but it’s also really continued to engage really proactively elsewhere in the developed world. So, how is it fairing in that regard with the Europeans? I mean, I, especially, am curious about, China has had this sort of arm’s length alignment with Russia, it’s been a really major aggravating factor in the Biden administration — I’m wondering whether it’s going to be the same kind of stumbling block in either the Trump administration or in its efforts to sort of woo the Europeans and realize the real kind of strategic autonomy for Europe. So yeah, let’s talk a little bit about the geopolitical chess board.

Lizzi: Right. I have to say I’m not the most informed person on this front. And to be honest, I’m still sort of trying to organize my thinking surrounding the Russo-Ukrainian war and trying to figure out and trying to think about how Beijing is actually going to approach this. But one thing that caught my attention was I think outgoing Ambassador Burns’ recent interview. He actually reviewed that he has a sense that Beijing is actually really concerned about its relationship with EU, as you pointed out. So, how that is actually going to fan out — is Beijing going to make more concession to EU in terms of its sort of new energy sector, potentially accepting, basically, as we see in the case of the tech transfer agreement, doing more of that, doing more investment in EU. What are some of the charm offensives that China can reasonably roll out to regain some heart and minds in Europe? I think that’s really interesting to be on the watch out for.

And China realizes that the U.S. and EU markets are still hugely critical to China, especially when there doesn’t seem to be much room for improvement in terms of U.S.-China bilateral relationship. EU is certainly crucial for China’s diplomatic push, but how is that going to translate into action, and how does the Russo-Ukrainian war actually feature in this piece? I guess I’m still a little uncertain on the specifics, but I do think that we are going to see a lot of serious thinkings especially as Trump return to the White House because the EU piece just become much more critical.

Kaiser: In play. Yeah, it’s more in play for sure. Lizzi, I want to shift now to talk about something that you are very comfortable talking about, which is, of course, China’s domestic economy. I guess it was about a week ago, Jane Hayward, who was on the show recently, had a new post on her excellent YouTube channel describing what she called “Sino-phrenia,” as in “schizophrenia,” which is a condition in which China is seen somehow as both collapsing and taking over the whole world simultaneously. This idea of a Chinese economic collapse is… it’s pretty pervasive. But I gotta say, in my recent trips back at street level, and from conversations I’ve had with more informed people, it seems, at least to my untrained eye, like a bit of an exaggeration, to say the least, that China’s on the brink of collapse. Wobbly, for sure. Are Chinese economic conditions as bad as has been widely reported in American and other English-language outlets?

Lizzi: This is back to this point of very polar views on where China stands in terms of its economic conditions. I mean, that’s just like a classic trait of narcissists. And I think it’s not just the United States, China is also… You also see similar narratives about the United States in certain Chinese circles. The idea of “he either loves me or he’s trying to kill me,” that kind of self-absorption, “everything centers around me,” and I think, as you correctly pointed out, if I recall correctly, I think that mindset is not unique to American policy circles.

Kaiser: No, not at all. Yeah.

Lizzi: I also see echoes of that in China. And I think that’s something that both countries need to do a little more self-reflection on. But on the state of China’s economy, I think, if you ask reasonable people, it’s pretty nuanced. The numbers are fine, in a sense. Well, manufacturing is strong, China will see more innovations in its new quality productive sector, as Xi Jinping pointed out, China will see more innovations, its STEM pipeline is strong, its role as a global manufacturing hub is not replaceable, not in the short run, not even in the mid term.

But there are certainly weak points. We talk about domestic demand is certainly something, we talk about youth unemployment. We talk about property market downturn, which has multiple ripple effects on local government revenues, consumer confidence, etc., etc. So, those problems are also real. And those problems are what we call “slow burn problems.” So, these problems have no miracle solutions. The make of this problem took multiple years, and the defusing of those problems will probably take multiple years as well. We’ll probably see some bottoming out of the property market in 2025 and 2026. But I fully expect this whole process, this whole adjustment process to take more than a few years. It’ll probably take three to five years. So, is that a serious problem? Of course, it’s a serious problem. It’s probably the fundamental malaise of China’s economy at this stage. But is it going to collapse China’s economy somehow? Just everything’s going to just burst into ruins overnight? I don’t think that collapse story has any validity to it.

Similarly for youth unemployment, because of COVID, because of this multiple years of economic slowdown, because of China’s sort of labor market is still not back in shape, youth unemployment is going to be a huge problem, a huge headache for China for multiple years. There’s no miracle solution to that. And then we can talk about pension reform and Hukou reform, China’s labor mobility problem. Those ones are going to take even longer periods of time as China rebalance original development levels, as China sort of relaxes its registration system step by step. Some regions might do pilot programs, those pilot program might succeed or not. And I think we need to appreciate the complexity, the variety of China’s problem, and just appreciate the timescale that China needs to figure out solutions to those problems. And there will be many turns and mistakes and missteps and just misdirected policies along the way, but I think that speaks to the vastness of the country and also the deep-rootedness of its problem. But I don’t think slowdown is the same as a certain collapse.

And we should also appreciate that when China’s slowing down, and that’s kind of a fundamental trend that we see within a lot of economies of scale of China after two decades of growth fueled by investing and property market, but China is also quickly advancing other fronts. And I think U.S. policy-makers and U.S. business community need to be clear-eyed about what’s growing, what’s not, what’s accelerating, and what’s decelerating.

Kaiser: But instead, we hear a lot of talk about solar bullets. I mean, there’s this notion somehow that if China were to deploy an enormous stimulus package and suddenly abolish the Hukou system, everything would miraculously improve. Obviously, you don’t agree, and, of course, neither do I. But there are a lot of people, very sensible people, inside and outside of China, who wonder why the leadership has been so cautious in deploying large-scale stimulus. Back in October, the PVOC announced some pretty substantial policies, cut in the reserve ratio requirement, some key interest rate reductions, and that sparked a bit of a rally on China’s stock markets. And you wrote about that with guarded optimism back then.

But I guess today, I think a lot of people look at the sort of drip feed of stimulus, and they say, “Look, there’s relatively apple fiscal space. Why don’t they do more?” This could address problems of weak consumer demand. This could address maybe even youth unemployment or help out with the embattled property sector. And a lot of people at the same time have been very, very critical about that kind of supply side and infrastructure-focused approach that the leadership has been taking. What are the counterarguments to these critiques that you’ve heard or read from these economists we keep talking about who you esteem and who you… Well, what are the arguments that they make that you regard as quite valid or at least worthy of consideration?

Lizzi: Right. So, I’m going to start with the easy part and get that out of the way. Why doesn’t China just do some broad-based cash transfers, as we saw is the case with the United States? Well, first thing, there’s a logistics problem. It just isn’t practical in China. And people probably don’t recognize this, but a significant portion of Chinese population still don’t have bank accounts, and those people tend to be the people who need cash transfer the most. These are the migrant workers, these are the people in rural communities. So, you might think direct cash stimulus is the most direct way to support those people, but if they don’t have a bank account, how are you going to actually write them a check? That’s just a basic logistical problem. So, that’s the easy part.

And then we can talk about this cultural preference, which strongly favors saving over spending. So, if you just took broad-based cash handout, yes, that’s going to inject liquidity in the market, this is going to inject consumption power in the economy. But the immediate impact of that cash handout, it would just likely fizzle out. It’s going to help, but it’s not what the Chinese call 把钱刀儿使在刀刃上 (bǎ qián dāo ér shǐ zài dāo rèn shàng” So, “use your money, use your tool when it’s going to deliver the greatest leverage.” And I think the bond market sort of illustrates this dynamic. The extra savings, actual liquidity, it’s just not flowing into risky assets, not flowing into equity market. It’s going into government bonds and WPMS invested in bonds. So, we say, who’s actually buying the bonds? Those are the wealth management products and also institution ETFs. So, that’s driven by institutions and savers looking for safety. And that created a bond bubble. If China can redirect some of the liquidity into equity market, that could definitely revitalize its stock market. But there’s just not that taste. There’s not that appetite for risky asset at this point.

And another point I want to point out is I think China, especially Chinese policy-makers, recognized weak domestic demand as a core issue, but they differ from American economists in terms of what solution is needed to restore domestic demand. They don’t think stimulus is a solution. Chinese policy-makers, they are preparing for fiscal measures. But those fiscal measures are more, I would say, sort of tackling the structure of the problem of weak domestic demand. So, they’re talking about, “Oh, we should increase affordable housing supplies because that’s going to give low-income people more spending power. We should really clean up the debt chains by injecting liquidity into developers by sort of buying housing stocks from them at a discount, or actually enable them to pay off creditors, creditors can sell their debt, and then the circular flow of funds can help resolve what we call ‘triangle debt problems’ and stabilize the broader financial system.” But, of course, China has a huge overstock of its housing supply. That’s going to take three to five years. Yes, that addresses the root of the problem, but it’s the structure of the problem, and it’s going to be a long-term thing.

So, I think that’s what’s fundamentally different. It’s not like Chinese policy makers only think about investment and infrastructure and think of that as a solution to everything. They do recognize that the lack of domestic demand is crucial, but they would rather address the structure or the cause of that problem within the symptom. I think there’s a argument that it might not be the best approach at this point. When your economic recovery is so sluggish and has been over multiple years, there is an argument to act faster and to provide more direct support to the economy. But at least, based on what I see and hear, China is still sort of prioritizing the structure before the symptom.

Kaiser: So where do you fall on this? I mean, are you somebody who thinks that more aggressive measures need to be taken? Or do you essentially agree with this argument that more structural and longer-term solutions are what’s really called for, or both?

Lizzi: Right. I am still a little ambiguous on this front. But I think one thing is clear — so, China needs to provide much more clear guidance and signal to the market to restore confidence because I think the lack of confidence in terms of Beijing’s ability to manage its economy is actually taking a real toll on its economy at this point. And if China is just continuing on this path of, “Oh, we’re only going to address a long-term problem short term,” “Well, that’s not so important for us, we’re going to 固本培元 gù běn péi yuán,” right, per Premier Li Qiang’s words.

Kaiser: 固本培元 gù běn péi yuánmeans something like “consolidate the foundation and cultivate the essence.”

Lizzi: The market is not going to see any real actions. And when the market doesn’t see real action, they don’t get any signals on how this is going, whether more fiscal, more substantial fiscal support is actually coming. That’s going to drain off a lot of the initial optimism that we saw after the September pivot. And then comes a problem — why is China so bad at managing market expectation? Why is confidence not coming back despite Beijing’s pledge of more fiscal support coming its way? And I think there’s a more substantial conversation to have. We probably don’t have all the time we need to address that problem today. But even if you are not sort of pulling out all stops to immediate, you know, inject more liquid in the market and roll out all your fiscal policies, you need to…

Kaiser: Signal.

Lizzi: Signal to the market that those are coming and those are going to actually make a difference. Restoring confidence in investor community, in business community, and also among Chinese people, I think, is hugely important. Speaking of which, so I recently… I didn’t return to China after COVID, but I recently talked with a broad sample of people representing students, businesspeople and other people — they all report back to me that the economic data probably looks fine, but everyone is saying how bad economy is doing, the vibe is just not there. I think that’s a real issue that Beijing needs to take seriously, not just among overseas investors, not just among the so-called 反华势力 fánhuá shìlì (anti-China forces) who are trying to bet against China’s recovery and China’s ailing path, also among its own citizens. Where is it all going? Is there going to be more substantial support to the economy? Is economy actually the primary issue that policymakers worry about? So yeah, I just wanted to put it out here. And Kaiser, you visited China recently.

Kaiser: Yeah, I was back there in October.

Lizzi: Did you also get the sense that everyone is disappointed, everyone have this general loss of direction feel of where the economy is actually going?

Kaiser: Not really. I mean, I got it from some people, but I felt like… I mean, I’ve written about this before. I felt like, depending on how I asked or in what context, you could get whatever answer you were really looking for when you talked to them. I always feel like Chinese people have so many different ways of responding. They’ll say one thing to their boss or to a party official, another thing when drinking among friends. I don’t feel like there’s an easy way to gauge that. But no, I understand that psychology is super important in this, obviously.

And there are people who worry about this, but I hear other people say, like, for example, I read something recently about deflation, right? This really interesting post by this woman who’s an executive at a multinational company,I think she’s in the cosmetics and beauty space. And she had, well, I thought it was a really interesting perspective, couched, I should say, in a very modest way. She didn’t pretend to be a macroeconomist, she didn’t say that she believed this was applicable across the entire Chinese economy, but, anecdotally, in her industry, she was talking about how domestic Chinese competitors to foreign cosmetics and beauty brands, like the one she works for, were really improving rapidly in quality, in their ability to package and market, they were finding new channels to market through, and really appealing very successfully to consumers who were ordinarily buying imported brands from South Korea, from Japan, or from France or what have you. And they were enjoying higher quality goods at lower prices, which, to Chinese people is… After all, value is just a function of price and quality, for most Chinese people, they don’t believe in brand. Ultimately, at the end of the day, they’re going to spend as little as they can for as good as they can get. So, there was a kind of no-lose import substitution effect that is going on, which resulted, she says, in less spending, but in improved quality of life. I wonder if she’s onto something because I look at how my friends live in China, and I look at… Their simple material quality of life is immeasurably better than even it was just 10 years ago.

I think about like my own purchases made both in China and here in the United States. I play guitar. I buy a lot of guitar-related gear. These days, because of China, because of Chinese manufacturing, because of the high-quality productive forces, right, I can have more and better things for much, much less. I mean, I can’t think of one category of guitar gear that I buy that isn’t not only much, much better than it was a decade ago, but also much, much cheaper. And it’s at my door in a couple of days, it’s kind of astonishing. So, I don’t know. I mean, I feel like it’s really easy to get people to grouse. I mean, it’s sort of the national sport in China to complain, right? I mean, these are Chinese people. We all know what they’re like. I mean, we know what… Nobody’s going to say, “Oh, yeah, I’ve got plenty of money. Everything is good.” No, I mean, when have you ever heard a Chinese person say that? Anyway, what do you think of this whole… sort of, that explanation for deflation? I mean, is there anything to that?

Lizzi: So, I see your argument and I agree with it. I think probably the most surprising thing I witnessed among my Chinese friends over the past few years is, previously, they were very much after the global premium brands, right? So, everyone want a LV bag, everyone wants a Gucci bag. But now there seems to be this appreciation for the private, the niche, the unique, the personal stuff, the domestic, this 国货风 guóhuò fēng right?

Kaiser: “Guóhuò fēng”, literally “national commodities wind,” a craze for things made domestically.

Lizzi: This whole idea of “it’s more niche, it speaks to my personality, my culture, what I prefer,” I think that’s very real. And I do agree that if you compare with some of the global brand’s offerings with the domestic competitors’ offerings, frequently what we see is domestic competitors are more tailored to local taste, local consumer preferences, and offering same quality product, if not better product at a lower price. I think that’s very real.

But there is also something very dangerous about deflation or the lack of inflation, which is its impact on the corporate sector. I think one really, I would say, sort of toxic aspect of deflation is depressing corporate profits. And when corporates are getting lower profit, that depresses investment and that depresses employment. So, deflation can still sort of cycle through economy in ways that’s not favorable to China’s economic recovery. And in terms of domestic overproduction, I mean, overcapacity is kind of a really poorly defined term, but China consistently manufactures more than it can produce. In and of itself, it’s not a problem. But when it’s sort of new energy sector facing all kinds of trade headwinds, that’s still going to be a huge drag on China’s economy. So, I see both sides of the argument. The low price itself is not a huge problem, but how that problems recycles through both internal economy and external economy, I think, it’s still a headache.

Kaiser: Yeah, no, that makes…

Lizzi: And I don’t think we sort of need a unified answer whether low prices are good or not. I think there are sort of both sides of that argument.

Kaiser: Yeah. No, that makes a lot of sense too. So, Lizzi, a few years back, I mean, I said at the top of the hour, we spoke about a “Red New Deal,” this was a phrase that one of our then colleagues at The China Project coined, partially because it was a bit like a Green New Deal with this idea that the clean energy transition could be the foundation for a lot of economic growth, for job creation, for innovation. But this was also during the time when common prosperity was widely discussed in the upper echelons of the party. There were big crackdowns happening, for different reasons, I should add, but happening all around the same time, so they tended to be conflated or explained by the same, “Oh, the Party hates the private sector” or something. And financial, of course, having its IPO pulled, but also, big crackdown out on afterschool tutoring sector, on DiDi over data, and lots more.

You advanced the idea back then, I thought it was brilliant, that China’s V-shaped COVID recovery in 2020, and people always forget that there was such a very, very steep recovery, had convinced, somehow, the leadership that accepting some short-term pain, ripping off the band-aids, breaking eggs to make the omelet, whatever your metaphor, was something that China not only could endure, but should endure in the interest of long-term gain. You said back then that it was also a really good time to start doing these things because it was at the beginning of a five-year plan cycle, and for many other reasons as well. The timing was right. So, Lizzi, in your mind, how much of that thinking remains post-COVID? I mean, some of this stuff, the energy transition, obviously, emphasis on innovation, more resilience in the face of external uncertainties, which we’ve already talked about, and the whole sort of quality over quantity approach, that goes back to 2017, at least, but it seems to be pretty much intact, no? I mean, what are the big changes that have taken place?

Lizzi: Let me just say, I think the one thing that we probably missed when talking about “Red New Deal” was defining what “short term” and “long term” actually mean. I think I myself didn’t give enough thought to the mechanics of the transition itself. The COVID year, the first year of COVID was sort of a easy version of it because the transition from short term to long term itself didn’t take much time, and the V-shaped recovery was kind of automatic, if you just look at the graph. But as it turned out, sometimes transition can take years, much longer than expected, and as economists often say, recovery is path dependent. So, if your economy is recovered in a relatively short period of time, that transition cost is unnoticeable. But if it’s vastly different, if recovering takes more than five years, and the implications will be huge and sometimes those implications are irreversible.

So, now I guess the official term for what I just said is 新旧动能转换 xīnjiù dòngnéng zhuǎnhuàn”, or “the shift from old to new growth drivers.” And that process itself can take a lot of thinking, a lot of engineering, and this is a risky process. And I think now when we talk about trade-off between short-term gain, long-term pain, or the other way around is to think more about that transition program. It’s not as straightforward as I initially envisioned. But I think that broad philosophy that in the short term we need to endure, but in the long term, that pain we endure can deliver more substantial results and the economy is going to be on a more solid footing; the path of growth in the future is going to be healthier; finally, we’re going to deal with the property market, which has been in the brewing for more than 20 years; finally, if the economy can find progress on new quality product forces or innovate, or what Xi Jinping calls a “Fourth Industrial Revolution” results, that’s going to benefit the Chinese economy in the long term. But there are plenty of potential pitfalls along the way. That’s just sort of my sort of update or footnote on that idea. But again, I think the broad thinking is still valid.

Kaiser: Yeah. I mean, just to wrap up, I mean, if we had to offer kind of a summary of Xi Jinping’s big-picture, normative vision for the proper direction of Chinese economic life, what the Chinese economy in his mind is going to look like 20 years from now, how would you describe that? What is his big-picture ideal vision?

Lizzi: Right. If you actually listen to what Xi Jinping says and see what he writes, or his ghostwriter writes, he basically wants everything, right? China is rich, China is strong, China is peaceful, everyone’s happy, everyone’s content. And the Party delivers everything citizen want, the Party is clean, the Party is not as incorruptible. Early signs of corruptions are rooted out. Everything’s fine. Everything’s great. And China is going to be the global beacon for her prosperity and peace. I think, if you just look at his words, that’s a thing.

But more seriously, I think he has this idea that, so reform now is in deep water, “深水区 shēnshuǐ qū.” The idea is, all the easy problems, low-hanging fruits are already picked up by his previous administrations, and now he has to tackle something really hard, or in his words, “to bite or chew on the hardest bones.” So, what are those problems? Property market, pension reform, aging society, Hukou system, all the previous problems that were delayed and delayed in pursuit of short-term gain, which only serve to aggregate those problems and make that a ticking bomb more urgent to be defused.

Kaiser: Well, there he is not wrong, right? I mean, I think we certainly agree that these are difficult problems, that they are sort of… They’ve persisted for the reasons that he says.

Lizzi: Right. So, what he really envisions, I think, is what comes after the 新旧动能转换阶段 xīnjiù dòngnéng zhuǎnhuàn jiēduàn, “the shift from old to new growth drivers’ phase.” So, what he wants, again, like no promise, this is going to happen in short or long term, but first, China is going to escape, fundamentally escape the middle-income trap, which has not been achieved, sadly, by other countries except for a few exceptional cases, but basically in a much smaller-scale economy. It has not been achieved by an economy of a scale of China. China is going to be on much more solid footing in terms of its growth path. Its speed is, I mean, GDP growth speed is no longer that important. China is going to be on this path of balanced growth. Growth is going to be sort of more focused on its domestic demand. Investment is going to be less wasteful health, more healthy. And China is going to lead sectors, certain sectors, important, crucial sectors in terms of global innovation.

And the Chinese society is going to be more equal. The rural community is going to catch up to its sort of urban community in terms of their income and their access to welfare and health and other social services. Inland regions are going to catch up to its sort of coastal rich regions, but they’re going to be focusing or specializing in different sectors. So, more regional balance, different classes, occupations, sectors in China are going to have a, not necessarily flatter, but more balanced income structure. And the society itself is going to be more equitable in terms of their access to opportunities and employment. Property is going to be less of a financial burden on Chinese households. People are going to have more disposable income in terms of investing in their education, entertainment, health, and also being more productive in terms of Chinese workers’ efficiency and their labor market outcome. So, I think that’s sort of broadly what he wants. Again, no promise that’s going to not come to fruition in the short term. No promise it’s going to eventually come to fruition as we talk about this xīnjiù dòngnéng zhuǎnhuàn period. This transition period is going to be crucial.

Kaiser: As you say, though, he wants everything, right? And part of the problem is that this sort of both/and approach that he… that that’s not how real life is. You often have to prioritize and you have to make decisions, pursuing one thing at the expense of advancement toward the other. And you make this argument in a very interesting piece that you just published in The Wire China about how the ideological language in which he couches these ideas, it can be a real source of paralysis. He creates challenges for officials and for markets by saying these are these two diametrically opposed things that you must pursue simultaneously. Who gets paralyzed by this? I mean, are we talking about party officials, SOE managers, Chinese fund managers, entrepreneurs? I mean, where is this playing out?

Lizzi: Right. Let me just sort of come back to the piece I wrote. I mean, as you know, there’s almost kind of a rite of passage for every Chinese watcher to pour over the latest issue of Qiushi to dissect Xi Jinping’s new expressions and figure out what they mean. But honestly, let’s just take a moment to appreciate just how absurd this is. You know how stilted, ideology-laden, dense and full of contradictions, the kind of language into Xi is.

Kaiser: Yes, I do. (laughs)

Lizzi: I mean, so let me just be clear — I think ideology is important and it matters and serves a purpose. For any political party, as Kevin Rudd aptly puts in this new book, it’s a way for the party to speak to itself. It’s almost like a code system. It’s important. But I think the problem is, that kind of language is completely ill-suited for managing market expectations. And complicating the problem is China doesn’t really have an efficient message transmission system outside of that kind of language, right? China doesn’t have a free media; it doesn’t really hold sort of impromptu press conferences as we see in the United States. There’s no real way for Chinese policymakers to engage proactively in a more natural manner with the market, with investors. And that’s a huge issue as China needs to convey clearly to the market what it wants. So, that’s the first piece, I think that’s quite clear. That system, that language is just dragging China down in terms of managing market expectation and restoring confidence in this economy.

The second piece is probably more controversial. Does that actually paralyze bureaucrats? My answer, again, not everyone agree on this part, my answer is that yes, it confuses even China’s own party officials, own bureaucrats.

Kaiser: Who understand the language, presumably, or who should understand it.

Lizzi: They understand the language. But because of that, policies couched in such contradictory terms with so many both/and, 既要, 也要 jì yào, yě yào, they frequently don’t know which one is the real priority, at least at the very local execution level. It confuses more than clarify. Like, if Xi Jinping says, “Well, we must both support growth and we also need to control risk,” am I supposed to rein in debt or am I supposed to invest further to support growth? It doesn’t really translate into any actionable steps. And the further down the transmission line, I mean, the further down then that message is conveyed to the local level, the more confusing it seems. I guess, when Xi Jinping talked to Politburo members, he probably doesn’t use that kind of language. But when that message is conveyed through multiple tiers of systems down at the local execution level, which, by the way, is the most important level, it’s just really confusing. And people are already scared of making mistakes because of all the anti-corruption initiatives you roll out. So, the default action is the safety…

Kaiser: Right. Sit on your hands.

Lizzi: “I’d rather just stay with the status quo. If I don’t do anything, then I don’t risk making mistakes.” And I think that’s a huge problem. Yeah.

Kaiser: It’s an interesting piece. I mean, because you point out that it’s just sort of the ideological foundations are in sort of Hegelian or Marxist dialectic, which is inherently about resolution of contradictions. And so, yeah, there’s a lot of that, “Not only should we do this, but we should also do that.” But hey, I think Chinese people are also very accustomed to contradictions, so maybe this is something they’ll manage. I don’t think there’s anything mysterious about some of this language, all this talk about transformation of old growth drivers into new ones. This is stuff people understand what he’s talking about.

One intriguing factor that you raise though in that piece is about the political calendar and how that’s also been a hindrance for the execution of policy. Can you quickly explain why that is the case?

Lizzi: Right. I think that’s probably the… like I would call the number one issue here. China’s policymaking relies really heavily on a certain set of meetings, convenings. We already know the Politburo meeting four times a year, it talks about economic policy. Once a month, usually at the final week of the month, the Politburo convenes and usually talk about important matters. And the Standing Committee convenes also on the set calendar, more or less. There were certainly exceptions, especially during the second term of Xi Jinping, but that’s broadly, that political calendar is still broadly followed.

I think a case in point of the stuff we’re trying to say was a somewhat amusing comment from Xi Jinping’s financial deputy, I think it’s Vice Finance Minister Liao Min, we were talking during a presser about fiscal policy to come. And his message was basically, “Oh, rest assured, the fiscal support package you’re going to see will be very impressive.” But then he was like, “I can’t tell the number now because there’s a whole legal process,” which we know means for the NPC meetings in March. But the problem is the market kind of need to know now. They’re not going to sit around patiently for another two months for you to announce what you mean by “impressive, substantial fiscal support.”

Kaiser: They’re not just going to take his word for it that it’s going to be impressive. I mean, it’s supposed to be front-loaded into Q1 of this year.

Lizzi: Right. Well, there’s that, but what are we actually talking about when… is it 10? Or five? Or three? What’s a rollout schedule is going to be like? So, that lag between political process and market expectation really creates a real disconnect. And I think that’s something Beijing hasn’t quite figured out how to bridge effectively. Is Beijing going to convene this NBC meeting two months in advance just to get that approved? No, obviously not.

Kaiser: No, it’s got to be in March. Sure.

Lizzi: There’s definitely more to do between now and then to provide more substantial signal to the market. So, how should we actually do this? And I think that’s sort of a challenge that Beijing needs to figure out some concrete actionable solution in the short term.

Kaiser: Well, I’ll be there in March, in Beijing, so we’ll see how things play out. But let’s wrap things up here. And let me just ask you one kind of enormously large question. What would you say are the one or two things that the Chinese leadership really ought to prioritize if it wants to hit growth targets, if it wants to keep popular discontent to a minimum, if it wants to weather the storm coming from the Trump administration? What do you prioritize right now? You’ve talked about clarity of signaling — is that what would be top of your list?

Lizzi: Yes. And more broadly, it’s not just talking to the investors and foreign market and global stakeholders. I think Chinese leadership need to figure out a productive way to talk to its own citizen. The thing that I’m really worried about is there’s this increasing secrecy and vagueness and murkiness to what the leadership is trying to do. Is Xi Jinping going to sort of overcome the constraints of the institution and just totally talk to free media? No, but there are things, I think, that the leadership in Beijing can do to convey more understandable message to the citizen, where this is all going. And I think that’s fundamental. And it’s not just important, critical for its economy. I think it’s also critical for Chinese citizens to get a sense of where this is all going, because I do sense there is this disconnectedness between sort of Chinese citizen, their daily life, and what they see as a direction of the country.

In previous administrations, in the two administrations, especially, prior to Xi Jinping, there’s that understanding that, “Oh, we are just going to make money, right? Growth is going to be fabulous. We give off certain things, but we all earn money, we get rich and we have a better life.” But now, with economic slowdown, with all kinds of external headwinds, where is this all going? What’s the path the country envisioned itself to take? I think that message is not super clear. And that confusion is creating a lot of anxieties among Chinese citizens, not just people who experience the ’80s and ’90s, sort of a more free and sort of wild, wild west type of Chinese growth, but also among this new generation of Chinese youth. I’m sensing a little bit of drift among people of my age or younger of this general sense of “where is this all going?” I think that’s quite important. But again, I see that as critical, but I don’t really have a ready solution, what is the right way to do this.

Kaiser: Well, one way they could communicate not only with their domestic young people but also now with an increasing number of TikTok refugees from America and ultimately with… is through Xiaohongshu. (laughs)

Lizzi: Oh yeah. Well, I mean, I have to say that’s like the black swan that I didn’t see coming out of this TikTok thing.

Kaiser: Yeah, it’s marvelous. I think I have to do a show about that whole phenomenon. It’s a funny… yeah.

Lizzi: Definitely. Definitely. Yeah.

Kaiser: I’m starting to look for the right people. I joined up the other day and just want to make sure that I find good people to talk to for that. Alright, Lizzi, thank you so much for taking the time to join. I mean, I know you’re always super busy and it’s always appreciated.

Lizzi: My pleasure as always.

Kaiser: Okay. Well, let’s move to this next segment that we’ve got now called Paying It Forward. So, tell us about a younger analyst or scholar, I mean, they can be in China or not, and they can be at a think tank or in academia or the private sector, somebody who you think listeners should be aware of and following.

Lizzi: Okay, so I’m going to recommend Barclay Bram.

Kaiser: Oh yeah, I’ve talked to him. He’s in the UK. He’s great. He’s great, yeah.

Lizzi: Yes. So, you recognize the name, but if you haven’t, but if you’ve listened to The Economist podcast series of Prince…

Kaiser: He was producer.

Lizzi: … Barclay was one of the main producers behind it. I think what’s really inspiring and really amazing about Barclay is he’s actually an anthropologist by training. He’s not a China analyst or international relations expert by training. Well, actually, speaking of that, I’m not quite sure if he’s younger or older than me because he has a PhD in anthropology, so maybe he’s already ancient, I don’t know how long it takes to complete a PhD in anthropology in the UK.

Kaiser: Not long. No PhD…

Lizzi: Not that long, right?

Kaiser: A DPhil in the UK doesn’t take long.

Lizzi: Okay. So, yeah, so he’s probably…

Kaiser: Oh, he’s very young.

Lizzi: He’s very young. Yes. Okay, great. So, the project that I highly recommend from Barclay is called “19 Percent,” which is named after the youth unemployment rate in China a few years ago. And now we know the number is probably more than 19%. What’s really fascinating is-

Kaiser: That’s on the Asia Society, right?

Lizzi: Yes, yes.

Kaiser: Yeah, right.

Lizzi: But it’s an ongoing project, I believe. The project basically explores the mindset and ethos of this generation of Chinese young people, especially in the wake of COVID, the economic slowdown, shifting career expectations, etc., etc. And I think it’s really fascinating because, as Barclay told me, as a journalist, we sort of come to our interviewees with questions, right? Sometimes we already have answers in mind. But as an anthropologist, he didn’t really approach Chinese young people or this younger generation of Chinese people with any questions. Those questions sort of naturally arise during his conversation and communication with them. And I think that’s a very different approach to understand China, especially this younger generation of Chinese people. The project dives into not just COVID and slowdown and unemployment, those kind of big-ticket topics we economists usually think about; it also dives into topics like their psychological well-being, mental health crisis, a private space. Why are so many Chinese people picking up on coffee culture, for example? I think it’s a super interesting angle, and I think that really adds value to our broader conversations about Chinese economy, so, highly recommend.

I think Barclay is actually doing some field work at this point in India. Believe it or not, India is a fast-growing economy, might overtake China in the next two decades. India also has a huge youth unemployment problem, but it’s sort of the other side of the puzzle. And just a self-promotion, Barclay and I are actually hosting a video series called “China Remix” focusing on Chinese youth. And we are going to unpack that unemployment puzzle a little bit more after he comes back. So, stay tuned.

Kaiser: Wow. I can’t wait to see that. That’ll be great. And my ulterior motive for having this paying it forward is to get good guest recommendations. Barclay and I had talked about doing the show together. I was in London briefly, but got caught up in a whole bunch of other stuff, and I wasn’t able to go out to The Economist to tape with him as we had originally scheduled, so we had to postpone, but that will happen, I promise.

Lizzi: Fascinating. And please try to figure out some diplomatic way to actually ask for his age because, as I think about him, I’m actually not quite sure if he’s younger generation or older generation than me.

Kaiser: Young enough, young enough. You’re young enough too, so, hey.

Lizzi: I am already ancient.

Kaiser: All right. Let’s go down to the next section, which is recommendations. You got a good book or a movie or something you want to recommend first?

Lizzi: Okay, so this is a little more lighthearted than my usual recommendation. It’s actually a book called Chinese Espresso. It just came out in 2024, I think...

Kaiser: Oh, Chinese Espresso, coffee culture.

Lizzi: …Also from an anthropologist. Sorry, yeah, anthropologist. I think her name is, I apologize if I’m pronouncing it wrong, Grazia Ting Deng. I think Grazia is her Italian name. So, she is a native Chinese language speaker, I believe. She was trained in Hong Kong and then came to the United States and studied at Brown. But she did her postdoctoral fellowship in University of Venice in Italy, and during her trip in Italy, she discovered something fascinating, which is coffee bars in Italy, or many of them and a growing number of them are actually managed by Chinese baristas. And those are not just like trendy young Chinese people catching up to the trend, to the espresso culture. Many of them are actually first-generation Chinese immigrants, and that-

Kaiser: They’re all from Wenzhou, I bet.

Lizzi: Right. And that actually happened after the 2008 recession, and as you can probably anticipate a reason behind it, as Italian coffee shops sold out their businesses to Chinese buyers at that time, at least China was in relatively good shape even during that recession. And Chinese baristas actually… I mean, those Chinese immigrants actually leaned heavily into the Italian coffee culture. So, they’re actually producing authentic or even better Italian coffee in those purchased small local Italian shops. And the book is fascinating. I think it’s a book on both Chinese espresso culture, but also China’s immigration community and what that actually means from the lens of coffee culture.

Kaiser: Fascinating. I’m looking at the Amazon page right now. What a great recommendation. I definitely am going to get this book. What a fantastic and offbeat topic.

Lizzi: This is fascinating. Also, I think the writer is back in the United States and currently is an assistant professor in Brandeis, if I’m not mistaken.

Kaiser: Oh, yay.

Lizzi: I think she has a second follow-up project looking at Chinese fashion taking over Milan, taking over Italy, which I haven’t really, you know, looked deeply into that, but if it’s anything comparable to the first book, I have full anticipation for it to be equally fascinating.

Kaiser: What a great recommendation. Yeah. Okay. So, Grazia Ting Deng, Chinese Espresso, I’ll definitely check it out. The full title of the book is Chinese Espresso: Contested Race and Convivial Space in Contemporary Italy. Oh, great. Before I do my recommendation, let me say a quick thank you to the University of Wisconsin-Madison’s Center for East Asian Studies for their generous support for Sinica this year. Hi guys!

All right. Here’s my recommendation. My fixation with the author Robert Harris continues undiminished. I blew through his series on Cicero, which I recommended a few episodes ago, and then I went on to read An Officer and a Spy, which is about the Dreyfus affair which consumed France in the period roughly from like 1893 to 1906. It was an amazing book. A historical fiction, when it’s done well, can impress upon you details about historical events, a grasp of like the story, the textures, the mentality of individuals, the personalities that real historical studies sometimes don’t actually manage to convey. I now feel like this event, which I read about so often in various European history classes, has finally really come to life for me. I’m now reading another book by Robert Harris called Munich, which takes place on the eve of and during Hitler’s would-be invasion of the Sudetenland, and focuses on Neville Chamberlain, a group of officers in Germany who are opposed to Hitler who come together for the Munich Conference. And it’s thrilling and kind of terribly scary but written so wonderfully well. So, Robert Harris and his whole oeuvre, I highly recommend.

Before I say goodbye, just a quick note to say that there is not going to be a regular episode next week because I’m going to be in Switzerland, but I will release the first of this new series from Johns Hopkins SAIS, which China studies people are certainly going to appreciate. So, Lizzi, thank you so much once again, it’s just been such a delight talking to you as always.

Lizzi: Great to be back on Sinica. Always a pleasure to talk to you.

Kaiser: You’ll be back soon, I hope. You’ve been listening to the Sinica Podcast. The show is produced, recorded, engineered, edited, and mastered by me, Kaiser Kuo. Support the show through Substack at www.sinicapodcast.com, where there is a growing offering of terrific, original China-related writing and audio. Or email me at sinicapod@gmail.com if you’ve got some ideas on how you can help out. Don’t forget to leave a review on Apple Podcasts. Enormous gratitude to the University of Wisconsin-Madison’s Center for East Asian Studies for supporting the show this year. And, of course, huge thanks to my wonderful guest, Lizzi Lee of the Asia Society Policy Institute. Thank you so much for listening. We will see you next week. Take care.