Why The USA Cannot Stop China | Keyu Jin | Wealth Office
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Why The USA Cannot Stop China

Economist Keyu Jin argues that the West misreads China through a security lens, while China's hybrid model, private competition and young consumers reshape global capital.

Keyu Jin with Michael Macfarlane104,036 views on YouTube54 min

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Episode overview

Keyu Jin, economist, professor and author of The New China Playbook, joins Michael Macfarlane in London to examine why so much of the Western world struggles to read China. Jin identifies three common misunderstandings. The first concerns the economic model, since the Western macroeconomics she was trained in left little role for the state. The second concerns the Chinese people and their relationship with authority, which she describes as an implicit contract involving deference without blind submission. The third is the habit of viewing the country only through cultural, geopolitical or national security lenses.

Much of the conversation turns on how China's system works in practice. Jin describes a hybrid of political centralisation and economic decentralisation, in which local governments carry out central direction, coordinate talent and capital, and help seed industrial clusters. She calls the result an innovation flywheel, built on scale, manufacturing and learning by doing, and points to Shenzhen as its clearest example. She is equally clear about its costs, including wasteful investment, overcapacity, debt and the hyper-competition now described as involution.

The final section widens to capital and culture. Jin argues that the fragmentation many predicted after recent shocks did not materialise, that smaller economies now cushion geopolitical pressure, and that attempts to suppress a competitor have historically failed. She believes opportunity is what draws talent and wealth, and that the most adaptable companies now spread their functions across regions. Macfarlane and Jin close on soft power. Jin suggests that a creative, consumption-minded Chinese Gen Z may make the country easier to understand, and that concerns shared by young people worldwide could help soften today's rivalry.

Key ideas

Three misunderstandings about China

Jin identifies three recurring errors in Western views of China. The first is the economic model, which Western macroeconomics treated without a meaningful role for the state. The second is the relationship between people and authority, which she describes as an implicit contract of deference that stops short of blind submission. The third is looking at China through a single cultural, geopolitical or security lens, which she says misses a complex and important country.

Political centralisation, economic decentralisation

Jin rejects both the state capitalism and market economy labels. In her account, China balances market mechanisms with state coordination. Since the reforms of the late 1970s and 1980s, local mayors and provincial governors have been incentivised, through promotion and recognition, to take bold projects forward. Beijing still sets strategic direction in areas such as AI and renewables, and local governments implement it because they understand local conditions.

The innovation flywheel

Jin describes a district of Shenzhen where, within roughly a kilometre, thousands of design firms, around 4,000 drone companies and some 2,000 research and development firms operate alongside manufacturers. Electric vehicles, she notes, grew out of consumer electronics through battery expertise. In this model, innovation is embedded in production and improves through scale and learning by doing, with local government helping to start the process.

Competition does the selecting

The state may seed a sector, but Jin argues the model leans heavily on private competition, which she regards as the fiercest anywhere. Hundreds of companies may enter a market and be reduced to a handful. She is candid about the costs, including wasteful investment, overcapacity and debt, and says the model is strong on delivery, scale and supply while weaker at generating demand and raising personal welfare.

A globalisation with more options

After COVID, the war in Ukraine, Trumpism and an energy crisis, many predicted fragmentation. Jin says that did not happen. Smaller economies and middle powers now cushion shocks through rerouted manufacturing, parallel payment systems and new sources of critical inputs. Vietnam, in her example, is building its own industry with Chinese investment. As a result, she argues, choke points have lost much of their former bite.

Why containment rarely works

Jin treats much anti-China rhetoric as distraction by governments struggling at home. Embargoes, blockades and export controls have historically failed to stop competitors, she argues. Her example is the United States and Japan, where competition in chips eventually prompted American reforms that helped innovation thrive. She hopes that if Washington recognises it cannot stop China, the rivalry narrative will soften and attention will turn inward.

Organic soft power and Gen Z

Jin sees China entering the phase Japan and Korea passed through, as wealth turns creativity towards making life more enjoyable. She describes a young generation that is creative, consumption-minded and willing to borrow. Labubu, in her reading, reflects that psyche. She calls this organic soft power, distinct from state-led efforts, and believes the commonality among Gen Z worldwide could make China easier to understand.

In their words

And as most people who have been to China will know, there's no market more competitive than China. So today, if you make it in China, you can make it in the world.

— Keyu Jin, Wealth Office

It's really not about trying to stop a competitor, right? It's always been trying to harness your own strength and build your own strength.

— Keyu Jin, Wealth Office

The local government plays a specific role. Coordination. We way underestimate the role of coordination.

— Keyu Jin, Wealth Office

Choke points just don't have the kind of bite they used to have.

— Keyu Jin, Wealth Office

And the new generation, there's just so much more commonality between the Gen Zs around the world than there is across the older generations. They care about animal rights, social inequity, the planet.

— Keyu Jin, Wealth Office

Quotes are taken word for word from the episode transcript.

Questions this conversation answers

What does Keyu Jin think the West misunderstands about China?

Jin points to three misunderstandings. Western economics has tended to ignore the role of the state in China's model. Western observers often misread the relationship between Chinese people and authority, which she describes as deference without blind submission. Many also view China only through a security or geopolitical lens, which she says misses a complex country.

How does Keyu Jin describe China's economic model?

Jin describes a hybrid that combines political centralisation with economic decentralisation. Beijing sets long-term priorities, local governments implement and coordinate them, and intense private competition selects the winners. She calls the result an innovation flywheel, while acknowledging costs such as wasteful investment, overcapacity, debt and weak domestic demand.

Does Keyu Jin think China could use its holdings of US debt as leverage?

Jin does not believe so. She says dumping US debt would be a double-edged sword that would inflict economic losses on China. She argues that technology now holds most of the power that finance once did, and that a world with more trade routes and payment options makes choke points far less effective.