Keyu Jin: observation

Transcript context

…So maybe can you speak to that? What are some important things to understand about the structure of the Chinese state? Well, the central leadership politically is extremely powerful and it’s very consolidated. But they hold a very crucial key to the local governments, which is that they decide their fate. Am I going to promote them? Am I going to put them in jail? Am I going to fire them? Am I going to reward them? Am I going to punish them? They hold that crucial key. And I think what was very surprising for most of the Western audience is that when I mentioned about the mayor economy, they say, “Why don’t our American mayors in each city do these very radical things and then push for GDP growth and technology innovation? ” It’s quite different. I think this is where China’s very unique in the world, is that political centralization, economic decentralization, and the yardstick to measure local mayors’ competence through, in the first stage, it was GDP growth. So I am a mayor of the city of Nanjing in Jiangsu province. I’m going to peak at my neighbor mayor’s city’s GDP growth and I’m going to be very, very competitive. By the way, I forgot about that. Competition is extremely competitive among the local government officials because you are competing with other mayor for a top job. So you need to do better than them. And whether that was an efficient structure or not, I cannot comment. But it certainly just fueled this massive and rapid economic expansion. First it was industrialization. Everybody wanted to do exports. Then they discovered, oh my gosh, we can have so much fiscal revenues coming from land, selling land and real estate. Let’s build real estate and let’s urbanize. And then the money kept coming into these local governments and that they can spend it on nurturing more companies or supporting real estate or supporting investment and they can do a better job. So then it was geared towards real estate. And that’s how the property cycle became the big thing. Everything was at double speed because of what the local government’s incentives were designed to do. I say now that China’s biggest challenge is consumption, it’s not production. We know that China’s very, very competitive in production and supply. China needs to be a consuming country to be a rich country. Why don’t you put consumption as part of the yardstick for measuring local governments? For a while it was environmental protection. Guess what? Very few of them really want to do it seriously because it goes against the incentives of driving growth. They would suffer on GDP growth if they were very serious about environmental protection. So for a couple of years, nothing happened in China on that front. And then the central government got really concerned and even angry and frustrated, so they decided to put that as a penalizing factor. And then guess what happened? Well, actually environmental protection sped up and in a matter of a short few years, I see blue skies every day in Beijing. That’s how it works. So GDP is a measure of success in production. What’s the measure or what does it mean to be successful on the consumer side? You said it’s important to improve that. What does it mean to be a successful consumer nation?…

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