Anne Stevenson-Yang is originally from Washington DC. She moved to Beijing in 1993 to work for the US-China Business Council. In the next quarter century, she became one of the best-known foreigners in China, starting businesses in publishing, software and online media. Now back in the US, she runs J Capital Research USA and found time to publish not one, but two books – Wild Ride: A Short History of the Opening and Closing of the Chinese Economy and a collection of short stories, Hello, Kitty (both published by Bui Jones Books, 2024).
Anne passed through London in March to launch her books at Hatchard’s Piccadilly, an occasion that brought a plethora of the UK’s Old China Hands out the woodwork. Paul French caught up with her between a glass of wine and a book signing queue to talk about some of the current economic flashpoints in China – property, ghost cities, where power resides and top-down control, among other issues.
After looking back at China over the last 30 or 40 years, you tackle some of the big issues facing the economy now. Looking at the issues of property and local government debt, you argue that, though debt in and of itself is not necessarily a problem, the lack of a control valve in China is a big issue. Can you explain what you mean by that?
That’s a complicated issue. I think local debt in China is the economic expression of a deep structural schism between central and local authorities, and expresses the fundamental nature of the CCP, which is that of an occupation force in an empire. Central authorities collect almost all tax revenues and then give back a bunch of the money, which drops through four levels of government before it reaches the hands of local authorities, who are mandated to provide infrastructure and services.
Central authorities also hold the keys to personal advancement and mobility, and local officials follow mandates in order to achieve those things. Those mandates fulfil central-level objectives of visible growth and so focus on productive capacity, not on services. Local party reps build unneeded “industrial parks” and neglect education and welfare. The natural result has been borrowing, with the unstated assumption that the money might not be paid back.
Central government vs local government is a long-running debate in China. You seem to suggest that too much capital investment was entrusted to local governments, ill-equipped to direct that money sensibly. Is this still a big problem, and how does China solve it – train the local guys or overrule them from the centre?
Well, when you mandate certain types of growth and throw money into the air for people to catch, obviously, it’s not put to best use. That certainly does not mean that central authorities should do it because they’ve been to the Kennedy School. It means localities need the autonomy to raise their own funds and allocate them as local people see fit, and the allocators need to be accountable to the local population, not to the Kennedy School guys 3,000 miles away.
You note the ‘advance of the state’ policy beginning around 2000, the desire to renationalise parts of the economy deemed essential to growth or vital to a perceived sense of national security. You use the example of coal. How is that policy working out in today’s China?
Hey, I have not been able to go there for over 4 years. These things tend not to work well, though. There are certain advantages – national standards, better working conditions, and higher entry barriers – which generally mean more profitability for existing players. But these things come at the cost of incentives, innovative energy, and fiscal responsibility.
You say that in China ‘lack of social mobility is more politically toxic than inequality of wealth’. Can you explain that a bit more?
People need to feel that they have options. The history of China is one of hopes raised and slashed – the emergence of international trade in the Qing Dynasty followed by fragmentation/warlordism and occupation, the idealism of the Chinese Communist Party’s early years followed by repression and famine in the late fifties, the reform and opening of 1979 followed by the re-centralisation of the 1990s, and so on. The hukou system (internal passport) turns the great majority of Chinese people into labourers serving the Tier 1 metropolises, with no hope of gaining the social mobility of those metropolises for themselves and their children. This has created a sense of hopelessness that I suspect will eventually erupt as anger.
As well as Wild Ride, you’ve also published a collection of short fiction, Hello, Kitty. These stories appear as almost a more personalised history of the same period – the economic consequences of Dengism through hypergrowth to the Xi clampdown as seen through the eyes of ordinary citizens. Should we think of the two books as intricately complementary?
Thank you for noticing that! Yes, I think that is quite accurate. Hello, Kitty looks at the lives of people I know that have been turned dark by the perverse incentive system created during the era of “anything for growth”.
