185 Comments
Jul 25, 2021Liked by Noah Smith

This is not new for China. China led Europe in many respects in the 16th century, but the Emperor recognized (correctly) that the rising merchant class was a threat to his power and reined it in. This kept the Emperor the supreme power while European monarchies lost relative ground to the bourgeois. Of course, it was detrimental in the long run to technological and economic development which meant Europe conquered China rather than vice versa—but in the long run….

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I find this POV fascinating as it tracks closely to what many of my other well educated, liberalish, western friends hold and I find myself arguing with when it comes to China.

Your main thesis is that the predominant influence on any decision made by the Chinese government is their desire for power - both over their citizens and over the world.

Would this change if you approached the question with the assumption that, like many people who enter government globally, they are trying to do what they believe is best for their citizens and their nation. Yes, there are some influenced by power and influence etc, but I still believe most people entering government have an underlying patriotism. This is not something unique to the US.

If you start from that basis - which seems relatively fair given the incredible benefits that the Chinese citizens have obtained over the past thirty years (yes I’m starting from the cultural revolution onwards) and the corners they could have cut for much larger personal gain - then you can argue that rather than “they are doing it for power” that they are doing it to ensure a less divided nation, a more prosperous nation, a nation controlled by itself rather than outside interests, a nation responding to climate change.

Then you get to a more interesting argument of is this the correct way, do we see free market capitalism as better or is there something else.

If you read Joe Studwells book “How Asia works” you’ll see that they are just following the same playbook as Japan, Korea, Taiwan in reaching advanced economy stage - though with the large difference of also having a foreign policy independent to that of the US. And these all saw the tight linkage of government and business, with business often being reminded that it exists for the service of the nation (similar to US industry in the 50s and 60s).

It is hard for westerners to understand that a government may only be operating to protect its citizens and build its nation and that this doesn’t automatically doesn’t lead to conquest. Difficult because western nations have always turned to expansion and colonialisation when they have had the power.

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Jul 25, 2021Liked by Noah Smith

Great post. Early on there were valuable tech infrastructure and scaling innovations that came out of FB and Google, and web development libraries that came out of Twitter. You don't hear so much about that anymore. I always wonder what keeps top engineers at these places anymore. What drives them? Ad optimization? What a thing to base your career, and blood sweat and tears on.

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A well-balanced, reasonable article. Almost had to check whose Substack I was on...

I'd add 1 small note which neither Noah or Dan Wang mentioned: the notion that what Tencent/Facebook/Alibaba/Amazon do isnt 'real' Tech, has got significant support from many in the Chinese tech industry. When assessing the angst of young Chinese tech engineers, too much attention has been placed on the terrible work-life balance encapsulated by '996' and yet the frustration that these bright young minds have towards their work/taskflow has been relatively ignored.

There is a restlessness amongst Chinese tech workers in their 20s and 30s: a fear that the low-hanging fruit has been picked, that the giants who picked it are now in a position to squash any little guy with a bright idea and most importantly, that nothing they do on a day-to-day basis is truly 'innovative'.

These people love Elon Musk. Elon Musk is a hero to young Chinese scientists who view him as inspiring/employing people to do 'important' work that helps push boundaries, not simply some Jack Ma-sh*t where employees are locked in a dark basement and forced to write code simplifying client-facing delivery timetable interfaces for his glorified online warehouse business.

50% of these people will experience burnout. 30% will become jaded and compromise with the system. The remaining 20% will shake the world. As Noah points out, the 'tech' they want to work on, is exactly the tech China / the CCP needs. Of course, this has more to do with the economic/industrial component of the 'Comprehensive National Power' equation rather than the military element that Noah spotlights (because he obviously would!). Personally, if I was experiencing the early-stages of a Tech blockade which in 1 stroke legitimized all of my preexisting fears of externally-sourced economic debasement, I would damn well be doing the same thing.

I would also be extremely hesitant to claim or imply that consumer-facing tech has a short lifespan now that the government has arrived at its own, hard-edged, definition of 'tech'.

1) Such a view neglects the symbiosis between the two and the fact that the Chinese government's hard-tech strategy already reaps substantial synergies from consumer tech like WeChat. I also would reject the idea of Ant being in any way classed as frivolous consumer tech. Nor will the CCP crack down on FinTech when it readily acknowledges that it needs a healthy financial system and is actually borrowing from the neoclassical playbook to reform it (competition, liberalization, etc).

2) And no, the CCP isnt waging a war against 'fun' because it needs everybody 'focused' and 'committed' to an overall goal of national rejuvenation - fearful that any lull in activity would invite revolution. That's a terrible take by Brooker/Booker. The CCP thought process more recently has been to give people more time and reduce the rat-race at certain levels of society. It wants more babies, fewer 6-year olds with spectacles, etc etc. I'm sure there are a bunch of weirdos in Zhongnanhai who would rather this free-time was spent 'productively' with the boys doing push-ups and the girls sowing, but even they know the nature of the times they live in.

3) Its tempting to string a pattern together. Its also time-saving and very convenient. Didi, Ant, Tencent....what do these cases have in common? The CCP! Duh. Control, Leninism, Military tech, etc etc. Let's welcome the same tired cliches and shibboleths! In fairness, Noah does highlight some other justifications/rationales behind the tech crackdown but he makes the same mistake the others do: He bunches all cases/firms/examples under 1 roof. It could be that there are different reasons why the above 3 were cracked down on and/or that in each case multiple factors came into play. For eg: Ant truly was a regulatory nightmare that had to be put in line sooner or later but Jack Ma's public intransigence made sure it would come with a healthy dose of CCP vindictiveness.

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Jul 25, 2021Liked by Noah Smith

Excellent post and I’ve shared it to several people. Thanks very much.

One additional aspect is the sociological one: what benefits do these companies produce for the hundreds of millions of Chinese with rural hukou (over 60% of the population,) many of which are presently workers without a high-school education or children unlikely to complete high school? Perhaps the CCP has decided that high-margin businesses that produce few working-class jobs and create wealth only for the highest-skilled workers — like FB — are “not what China needs right now.” I don’t know if that’s good judgment by CCP but it seems to me like a plausible model of their reasoning.

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China is literally the only country that can successfully pull off a Conspiracy theory.

My company (Siemens Energy) has recently partnered with a local Chinese company...which involves tech sharing and an innovation center.

Hydrogen is going to be a big focus with development along the normal Wind and Gas Turbines.

Hydrogen technology is one of those things where it would be nice to China really invest in. They have the capital and political will to bring down costs and solve various issues.

And... hydrogen tech is exactly the sort of big payoff that China might be eyeing. If it works (yes their are issues), being a world leader will be worth something.

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Jul 25, 2021Liked by Noah Smith

Excellent, with Ma I wondered if it was because he became too rich and powerful, and thus a threat. If they really are going to crush the consumer/network sector, that's a lot of profit to forego. One wonders if their humanness, jealousy, revenge, perceived threats are showing.

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Jul 27, 2021Liked by Noah Smith

Great article and provides refreshingly new perspectives. However, I disagree with the central theme.

Why would China go around destroying something if their goal is to build a military industry complex or whatever? It's not as if these are sucking up capital that's in short supply. The recent crackdown on tutoring companies is another outlier that's not explained by this logic either.

The attacks on Bitcoin mining provides a clue IMHO. It is the good old "if we can't control it, and if it gets too big, it's not good" thing. While it was under radar and confined to fringes, it is no big deal.

This is a common issue even in democracies and for communist regimes it basically decides their survival.

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Jul 25, 2021Liked by Noah Smith

Double Plus Good!!!

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Jul 28, 2021Liked by Noah Smith

China looks at the stock market as a means to raise a lot of money the easy way. Now that the max has been raised (primarily from western investors including pension funds), now it is time to scoot before the trade sanctions arrive. This could also be a way for China to pull back from the US financial system and allow the market to implode on its own - the equivalent of a WMD. As you say, making "real things" is the key to long term sustainability. Everything else is a derivative based on these "real things". And who controls the production of "real things", controls the gold - and the man with the gold makes the rules.

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Jul 25, 2021Liked by Noah Smith

This is an article I enthusiastically endorse. Recall the importance of "Wealthy Country, Strong Military" (fukoku kyohei) that was a prime ideological principle of Japan during the Meiji Era and even into the 1930s. There was a back and forth swing between political leaders encouraging the zaibatsu in their efforts to gain commercial muscle on the global stage and those who wanted to focus on building a military-led effort to create a "Greater East Asian Co-Prosperity Sphere" driving out the Western powers and in particular keeping the United States and the League of Nations at bay. That there is a kind of contradiction built into this two-pronged approach is pretty evident. The problem for China is that it has increasingly alienated most of its immediate neighbors something Japan managed to avoid until it bombed Pearl Harbor in 1941,

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Jul 25, 2021Liked by Noah Smith

What utter balls

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Jul 25, 2021Liked by Noah Smith

Thank you for this. I don't know if you're right or not, but it's the most rational explanation I've heard so far.

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The flaw in your logic is that surplus (aka, profit) is what allows societies to invest in soldiers and weapons. China has be able to expand its military capabilities in the last two decades because its economy produces a surplus that it can be invested in soldiers and weapons. The industries that produce the greatest surplus are in tech and finance. Smashing them will kill the goose that lays the golden egg. That golden egg is necessary to China's to plan to build a military to challenge the US.

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I think there is a very fundamental difference in the worldview which is not really caught in the comments below.

Politicians in the west look things in election term cycles, which is the main reason the west does not any more invest in long term projects and cannot solve hard problems (Climate Change, migration from hydrocarbons, global food security, global security, etc).

The Party is in the game for the really long run, and their agenda has an inter-generational perspective (can be seen with the Senkaku / Diaoyu islands, or Taiwan for instance).

They want to rule perpetually and rule the most powerful country, which means it has both to have the element of military power as it has been written below (albeit in a very American, military-only view imho), but also food security, energy, resource, IP and R&D independence, exclusion of foreign influences and influence on countries that can be useful strategically and resource-wise.

In order to achieve this, you need people focusing on solving big problems (semiconductors, renewable energy, food production) instead of ad delivery optimization.

What they are doing is removing sections of the economy which benefit from rent and generate enterprises that don't add any value to the economy and the country (similar to Facebook in the west), and divert the public opinion.

If someone sees things from this view, the Party's moves do make sense; it is just perceived and executed in a way which is alien to Western practices and views.

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The heart of the matter seems to be a difference in core economic philosophy. Americans tend to see the economy's primary goal as fulfilling personal consumption desires. The Chinese government see the economy as a vehicle to fulfill its domestic and international political goals. As an Indian, I am reminded of Nehru's (in)famous commanding heights comment. I wonder what the Chinese public think.

An aside, there seems to be a notion that writing production/library level code is somehow easier than making microchips. This is an extremely limited view. The question always is what is the level of performance you expect from your work. Google is maintaining or even improving your search speed even as the demands from their systems grow rapidly every single day. Playing chess looks easy but playing chess against Gary Kasparov is very, very hard.

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