The Hale Podcast Episode 3 - with Dali Yang on China July 19, 2019

  
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It was a great honor and pleasure to interview renowned political scientist Professor Dali Yang of the University of Chicago for our most recent Hale Report. His thoughtful and well-researched views on modern China’s political economy are a welcome summertime antidote to current turbulence in the US-China relationship. His books are all classics in their field, and you can find his papers as well on his website, daliyang.org. If you have never read anything he has written about China’s governance transformation, as well as the future of its youngest citizens, you are missing a critical guidepost to understanding the world’s second largest economy.

Some key points Prof Yang made during our podcast: China’s opening up and reform was not driven by outsiders, or a thirst for global power, but by forces for change within China itself. A paradox of the recent trade tensions-- “the pain is palpable”-- is that the companies that are suffering the most are the innovation-driven private firms without resources to withstand a long downturn. The trade war is strengthening the old state-owned enterprises, delaying needed reforms.

We discussed many additional issues. China has reached a new stage in its development which I call peak urbanization and faces limits on future growth. The environment is a contentious issue, as is healthcare, and in both cases “crisis is the midwife of reform.” Yang’s paper on the infant formula tragedy in 2008, and the ensuing transformation of China’s FDA, is a case in point. The balance of power between central and local government authorities continues to evolve. Chairman Xi Jinping’s fight against corruption is a fight for the survival of the Chinese Communist Party itself.

In contrast to their parents and grandparents, the youngest generation has only known increasing prosperity, and will find it difficult to deal with slowing growth. The future of rural youth is especially concerning, which he explores in his new book, Child and Youth Well-Being in China (2019). Yang is cautious about the recent events in Hong Kong, and thinks that a lot could go wrong. But he still believes that the US and China are the two most innovative countries on earth.

Fifty years ago on Saturday, the US landed a manned space vehicle on the moon. Now many countries are aiming to do the same, including China. In the meantime, I predict US-China relations will remain in indefinite orbit with no landing in sight because the current state of affairs suits both sides, at least until 2020. 

China

Why China Still Needs Hong Kong
Tianlei Huang 7/15/2019 Peterson Institute for International Economics

As long as China has capital controls and requires international funding for its private and public companies, China will need Hong Kong and Hong Kong will need China.

'Expect craziness' as China readies debut of Nasdaq-style board
Samuel Shen and John Ruwitch 7/17/2019 Reuters

Looking ahead to Monday, is three times the charm? After two similar exchange failures, will the Star Market succeed? '

China’s office vacancy surges amid economic downturn, surging supplies
Yuan Talks 7/16/2019

To compare these figures with other cities, New York office vacancy rates are about 9.4%, Chicago's about 12.8%. London, 5.4% and Tokyo, below 2% --and all are trending lower. In China, they are headed in the opposite direction.

China's Global Business Footprint Shrinks
Derek Scissors 7/2019 AEI

China’s foreign investment has plunged in 2019, not because of political resistance, but due to the rationing of hard currency in order to support the balance of payments and prevent weakness of the yuan. 

China’s War on Coal in Seven Charts: Peak Coal is Not a Blip but a Trend
Damien Ma 6/24/2019 Macro Polo

“Enduring changes in China’s energy profile” —Peak coal in China is a hugely positive trend, independent of its slowing economy. 

China Sets Commodities Records in Good Sign for Growth
Bloomberg 7/17/2019

Although the rate of growth has slowed, actual production rather than consumption, is at an all time high this summer.

Google shuts down Chinese censorship project but won’t rule out working with China
Jerry Dunleavy 7/16/2019 Washington Examiner

To remind- Google is unable to operate its core business in China. It is inaccessible on the Chinese web, as are Facebook & Twitter. It does sell advertising to Chinese companies on its websites outside of China, but basically they have nothing to lose in the domestic Chinese market.

US, China & Free Trade
Rahul Prakash Deodhar 4/8/2019 SSRN

Intriguing look at China's trade policy from an Indian perspective.

U.S.

As U.S. expansion notches record, recovery may have only just begun
Howard Schneider 7/1/2019 Reuters

People worrying about a boom-bust cycle forget that this 10-year expansion has been agonizingly slow. “We’re only now making up ground,” even though the economy has been growing since June 2009 said Vincent Reinhart, chief economist at Mellon.

Who Gives and Who Gets? - Explore the Balance of Payments between States and the Federal Government
Rockefeller Institute of Government 7/2019

This is a fascinating map of the balance of payments between the federal government and the states. Illinois has the biggest deficit in the Midwest-it contributes more revenue than it receives.

What Happens After America Graduates From High School?
Byron Auguste 6/26/2019 Forbes

As is true with all innovations, high schools need to be re-examined and re-invented. My take: end high school at 16, then off to college, vocational school, or the work force.

World

Everyone’s going back to the moon. But why?
Robin McKie 7/6/2019 the Observer

As the 50th anniversary of the first Apollo landing approaches, a host of countries are undertaking lunar missions. What’s behind the new space race?

The State of the Food Security and Nutrition in the World 2019
Food and Agriculture Organization of the United Nation 7/2019

The United Nations released their annual report on nutrition and food safety & security. One in every nine people in the world will go to bed hungry tonight.

Growing Global Alcohol Use
Bridget Kuehn and Bridget Kuehn 7/16/2019 JAMA Network

An unintended consequence of the growing global middle class is increased alcohol use. Since 1990 global consumption has increased by 70%, driven by middle income countries India, China, and Vietnam. Huge worldwide disease burden.

The ‘biggest change in oil market history’ is less than six months away
Sam Meredith 7/15/2019 CNBC

Higher fuel and freight prices are coming.

It isn't just sovereign bonds that offer negative yields. There are $600bn in negative-yielding corporate bonds (mainly in the eurozone)
Adam Tooze 7/17/2019  Twitter threads

Trying to wrap my mind around the idea of negative yielding corporate bonds.

Mysteries of Monetary Policy
Robert J. Barro 7/4/2019 Project Syndicate

Is the threat of doing something just as effective as actually doing it?

Why Cheerfulness Mattered in the Antarctica Expedition of 1912
Matthew Wills 6/30/2019 JSTOR Daily

The explorers played board games and had formal dinners together. Some didn’t survive, but their collective positive outlook resulted in a successful mission in 1912.

Ending on a cool note from a very, very warm Chicago!