Full transcript: Dr. Yasheng Huang on London Real
3:04 Brian Rose: This is London Real. I am Brian Rose. My guest today is Dr. Yasheng Huang, the economist, MIT professor, and one of the world’s leading authorities on China’s political economy, technological ambitions, and global power strategy. For more than 20 years, you have studied how China’s political institutions shape economic outcomes and why authoritarian control ultimately suffocates entrepreneurship, innovation, and long-term stability.
3:32 You have challenged the Western narrative of China’s, quote unquote, unstoppable rise, arguing instead that demographic collapse, information control, and a deteriorating human capital system are pushing the country into structural decline. Today, I want to go deep into your latest warnings about China’s slowdown, the myth of state-driven innovation, the future of US-China relations, and how this power struggle will redefine markets, technology, and freedom around the world. Dr.
4:02 Huang, welcome to London Real.
4:04 Yasheng Huang: Thank you, Brian. I look forward to our discussion.
4:08 Brian Rose: Me, too. I’m super excited and I’m a little jealous that you’re at my former alma mater of MIT.
4:15 I have fond memories. I’ll ask you more about that later. I wonder if we could just jump right into it and say, what would you say is the biggest misconception in the West and promoted in Western media about China?
4:34 Yasheng Huang: Okay. So let me start maybe with two misconceptions, and they are at the opposite ends of that spectrum.
4:43 One is that China is rising as an unstoppable economic superpower, technological superpower, overtaking the United States, overtaking the West, and much of that is a result of the fact that China has defied the Western economic rule book, playbook, right? Rather than market economy, private entrepreneurship, it has grown without these things. The other narrative is that there’s going to be an imminent collapse of the economy because of the high debt and because of a lot of the tensions that you have described in your introduction.
5:29 Now, I agree with the fact that there are many, many tensions and contradictions in the Chinese economy, but the scenario that I see is a gradual slowdown, stagnation, rather than a sudden stop and sudden collapse. So I’m sort of ending up somewhere in between between these two extreme predictions. The issue is a lot of it really depends on what the Chinese leadership is going to do next, whether or not they are going to reform the economy, reform the political system, or are they going to persist in the current policy trajectory, which I believe is bad for the Chinese economy.
6:14 Brian Rose: Okay. You know, one of the biggest arguments that I hear, or at least that resonates with me, and I hear this kind of by the Silicon Valley elite guys like Marc Andreessen and a few others, that just say that ultimately capitalism is an incredible feedback loop for information because it kind of says what’s working and what’s not working by, of course, compensating the winners and destroying the losers. And that information feedback is probably maybe the most important thing to guide the growth of a nation.
6:50 Whereas, I guess in a communist or socialist system where maybe those capital expenditures are decreed by a central government, you don’t always have that. And fingers are pointed to kind of Russia back in the socialist days in the ’80s and how ultimately they didn’t really know what they needed to do. And that is what kind of killed that growth. Is that too simplistic a way of looking at this, or is that ultimately the root of the problem when it comes to growing an economy that isn’t based on that capitalistic feedback?
7:26 Yasheng Huang: Well, I think I agree with that view. The issue is whether or not that view applies to to China today. I mean, the economic success to a large extent depends on generation, utilization, application of information. Companies need to rely on correct information to make business decisions. Policy makers need to rely on correct data to make policy decisions and judgments, and politicians need the right information about the voters and about the political political situation in their country.
8:13 In the classical centrally planned economy, information is distorted, truth is suppressed. So very often policy makers have the wrong information or they have no information at all, but they have so much power. So the power relative to the information ratio is extremely high. That often leads to wrong policy decisions and wrong policy choices. The issue gets a little bit complicated when we talk about today’s China, because today’s China is not a classical centrally planned economy.
8:54 It is also not a classical capitalist economy. There is correct information. There is reliable information in the system generated by, for example, by exports markets, by the signals that the Chinese companies receive from the rest of the world, by the signals about technology, the AI future, the EVs and solar panels. But on the other hand, the policy makers are making decisions on the basis of very, very distorted information. So this is where the tension is in today’s China.
9:32 The businesses are largely market driven. They rely on market-generated information. The policy makers rely on information and data generated by local governments. And a lot of that information, for example, about the true state of the Chinese economy, and then during the COVID years, about what was going on in the country in terms of the public health situation, a lot of that information is hugely distorted. That bankers, who basically in the Chinese system are working for the government, very often don’t have reliable financial information from the companies.
10:14 I think this is where China is, and it explains some of their successes, but it also is an indication of where the problems are.
10:23 Brian Rose: Yeah, it’s interesting because I think it was Steve Bannon that actually said on his War Room show in the morning, I think a couple months ago, he said China’s not communist. He said China’s more capitalist than America. He said the only communists are the, you know, thousand thugs at the top that make all the decisions. Now, look, I’m not saying he’s right on any of those terms that he said.
10:50 But it was an interesting insight that in fact it is a country that is very good at receiving that feedback. And it isn’t classical socialist or communist like, you know, we might have thought of regimes in the past in the West, but also there is that group at the top that’s making some of those decisions. I’m kind of curious what you think about that. And also, I’m curious what it would be like if I was in China right now and what I would see as some of the country’s problems.
11:19 You know, if you’re in America right now, you might look around and say, “Okay, wow. All of these young people are going into debt with their education and they can’t buy a house like they used to be able to, doctor, 30, 40 years ago.” We’ve got a growing gap between the wealthy and the poor. And we’ve got, you know, some other issues on the horizon like AI that make everybody nervous. I’m curious if you had to go to China and talk about the problems there.
11:48 Are they similar? Are they not? I’m hearing there is this kind of youth generation in China now that are feeling like they want to check out. I saw this whole kind of lying flat movement where it had these young people just maybe even opting out of the society and also facing some repercussions on the back. So I know that’s quite a few questions, but I really want to get your thoughts.
12:14 Yasheng Huang: Okay. So let’s separate these two issues. One is Steve Bannon’s view on China and the other is what is going on in the Chinese economy today. I disagree with Steve Bannon on many, many issues and I disagree with him on this issue as well. Let’s just be very specific in terms of his view that the policy makers in China act on kind of market-driven information.
12:43 Look at the one-child policy program that they have implemented at the beginning. You could argue that the one-child policy program was designed to moderate the population growth in a country that was struggling with agriculture, with economy, with feeding its people. But over time it became increasingly clear to everybody that the one-child policy was going to be extremely destructive of the economy and of the society, of the basic social contract, marriage and fertility, and also in a Confucian society you need the younger generation to take care of the older generation.
13:35 Yet the policy persisted way beyond the usefulness and the utility of the policy program, to a devastating effect. Today the Chinese birth rate is falling, you know, somewhere, something like the replacement rate ratio is two, right? So you need two children to replace their parents, and China’s ratio today is somewhere, you know, 1 point 1.3, falling rapidly, and it is creating huge problems in terms of the economy and economic growth. And by the time, the information about how wrong that policy was was available for many, many years.
14:24 Academics wrote about it and I wrote about it, and yet all of that was dismissed, and then they acted to reverse the policy, by 2015. It was already too late. So this is related to the second question that you asked about what is going on in the Chinese economy today. It is actually remarkable for a country that is now having very low replacement ratio and low fertility rate. They are struggling to find job opportunities for the young people.
15:04 And the visual indicator of that is that if you go to China today, you order a meal, often the meal is delivered to you. A lot of these delivery people, young people went to fancy colleges, and then they graduate, they cannot find jobs in companies, in businesses, in technology, and they have to settle for being delivery people. I mean, to me this is a massive underutilization of the talents and the capabilities of the Chinese young people, and this is a signal and symptom of the lying flat phenomenon that you described, because the economic prospects are not very bright.
16:03 People are writing off work as a way to make continuous improvements. And for years and years, the Chinese economy experienced many strains and problems and issues. But for many, many years, the young people in China were optimistic. They believed in themselves. They believed in their ability to uplift themselves, to improve their livelihood by working hard, by studying hard.
16:36 That began to change three years ago, four years ago, after, during the pandemic and then after the pandemic. That pivot was extremely risky for the Chinese economy when so much of the society converted from optimism to pessimism. And that has a huge effect across the board, not just in terms of the work, but also in terms of the ability of the middle class to consume. Whereas the Chinese economy has this massive production capacity without a comparable level of consumption, and that spells implications for the rest of the world, for the United States, for Europe, and for other parts of the global economy, because the export is really the only way for the Chinese economy to generate revenue growth.
17:32 Brian Rose: Wow. Okay. That’s fascinating. And I guess then we’ll take that and tie it right now into the trade negotiations. You know, it’s interesting because it’s really hard to get a read on China when it comes to these negotiations with Trump.
17:50 And of course, Trump is this classic bigger-than-life, you know, real estate negotiator who, you know, has a certain style, all right, that’s unlike any we’ve ever seen in an American president. And I was debating Anthony Scaramucci a week ago Friday, who spent some time in his cabinet and who actually campaigned against Trump but is now coming around, and we were talking about this style that he uses, and Anthony was saying it’s not practical and it’s not based in economics, but I said, well, it’s actually quite effective because it seems to get people to blink and it gets people to show their hand, and there’s evidence of that. You know, we saw the EU sign what I even think they admitted wasn’t the greatest deal.
18:35 You saw the UK sign what probably wasn’t the greatest deal. And they all seem to kind of blink when they get this kind of pressure from Trump. I haven’t seen that from China. And I was wondering what you can see when you see the behaviors coming from that country. And do you think that they are in moments of pain when it comes to this negotiation?
18:58 Because from what you’re saying, these exports are going to be very important for them, and of course the US as a trading partner is very important. So what do you see when you see the pressure that Trump puts on and their reactions? What do you think is going on there?
19:16 Yasheng Huang: So I think what we have observed are three categories of responses to Trump. One is the European, Canadian, to some extent Mexican response, and that response is, and to some extent Ukraine, right?
19:29 So that response is to try to accommodate as much as possible to Trump’s really, really outrageous demands. The reason is that these are the politicians who operate in a democratic country and they have to think about the voters’ interest, the interest of their economies and their society. A full-blown trade war is going to be devastating for their economies. So they kind of swallow their pride and cater to Trump. And I believe that they act responsibly given the position they’re in.
20:12 They are democratically elected. They have to pay attention to the economy and to the society and welfare of their people. This is what democratic leaders do. See you in the Investment Club. The other response is through corruption and bribes, right?
21:26 So we see that in the case of Saudi Arabia. We see that in the case of Qatar. Their calculation is let’s just provide business opportunities, business opportunities for the Trump family, and then we secure some sort of a truce with the American government that way. This is not something that the Canadian government can do. This is not something the British government can do.
21:54 They may give him, you know, little gifts here and there, but I don’t think they can give him a whole airplane worth $400 million in order to secure a trade deal. The third response is by countries such as China, which is using whatever weapons that they have to go after specifically everything that Trump is trying to do. Look at what China did just a few months ago in the rare earth strategy that they deployed. They escalated the rare earth strategy, export ban, export control, export approval.
22:41 And look at what the United States did. They immediately began to negotiate with China, right? The reason why they can go to adopt this high-wire strategy is precisely because they are an autocracy. They don’t have to suffer politically from the economic consequences of a full-blown trade war. That means they can take more risks.
23:12 And by taking more risks, in fact, the Trump administration caved. And if you look at the recent trade deal between China and the United States, I think China got a good deal by and large, and China needs the soybeans anyway. So before they were buying from the United States, before the Trump trade war, and then they switched to Brazil and they switched to Argentina, they need soybeans anyway. So now they just switch back to the United States. They don’t have to pay extra for that strategy.
23:51 In terms of fentanyl, I mean, that’s very easy for them to control. It is not something really, really that critical to their economy. And I think they got two things that are not being discussed publicly a lot. And I have to say I don’t have direct evidence that this happened, but I suspect two things happened. One is that the Chinese side got a better deal on technology than they would otherwise during that negotiation.
24:30 And the other is they probably got some sort of under-the-table deal or promise from the Trump administration about Taiwan. So that’s a huge win for China, and precisely because they don’t have to suffer immediately the political consequences of a slow economy. The trade war, let me be very, very straightforward. A trade war between China and the United States is extremely bad for the Chinese economy. Jobs lost, export revenue would go down dramatically.
25:11 In an economy that is slowing down, in an economy that has problems generating employment opportunities, there’s no question the trade war is bad for China. But the Chinese leadership values technology more than the trade war. They can hold on to a trade war as a way to extract concessions from the Trump administration on technology. And I think by and large they succeeded.
25:40 Brian Rose: How is Xi doing right now?
25:42 And is he going to be there much longer? I think over the last 5 years or 10 years it seems like he’s consolidated power. But I’m curious what you see that he has to do in the next few years, and is he going to be struggling with the property sector? Is he going to be struggling with this youth sector not being able to contribute to the economy? What do you see are the big things he has to worry about?
26:11 Yasheng Huang: I think we should separate the political discussion from the economic discussion. The economic discussion is super clear. The economic picture is super clear. Despite the fact that China is producing EVs and solar panels and impressive AI models, the Chinese economy is suffering in terms of the GDP, in terms of property sector, in terms of the consumption, in terms of the employment, income generation.
26:43 Brian Rose: And really quickly, can you see that from the numbers or can you trust the government numbers?
26:51 Of course, I don’t even know if we can trust the US government numbers sometimes.
26:58 Yasheng Huang: Well, I think now we have more reason not to trust the US numbers now because of the political intervention in the bureaucracy, for the Chinese numbers. So if you just look at the official numbers, before 2015, the Chinese economy grew roughly 8, 9% a year, year in and year out since the late 1970s. Wow. Many academics like myself don’t believe that’s the true number.
27:27 But even if you just take off, you know, one percentage point, two percentage points, there’s no question. This is still one of the most impressive economic growth records in the history of humankind. To be able to grow at five, six, 7% for 30 years and 40 years is extremely impressive. The issue now is, okay, so let me not leave the official number too quickly. Since then the GDP growth by official numbers has slowed down to 5%, below 5%.
28:08 Okay. So if you just look at the official numbers without thinking twice about the reliability, accuracy of the official numbers, there’s no question that the economy is slowing down. The real estate sector, which accounted for at one point in time about 30% of the Chinese economy, wow, is slowing down dramatically. Bankruptcies of the real estate companies, big cities, even big cities like Beijing and Shanghai have seen real estate prices fall by, you know, 20%, 30%, something like that.
28:49 Just to give you some benchmark, during the 2008 financial crisis across the United States, the real estate prices fell about 30%. So the Chinese real estate sector, technically speaking, is in a similar situation as the US was in 2008. Right? So this is how severe the situation is. Unemployment.
29:21 Two years ago, three years ago, the official number indicated that the youth unemployment reached something like between 16 to 20%. Right? And some Chinese academics estimated it was more like 50%. And then they stopped publishing the number. They revised the number, and now even by the official number the unemployment rate for the youth sector of the economy is still incredibly high.
29:55 China, you know, we in the Western media, they talk about EVs and solar panels and AI. Let’s just be very realistic. Chinese economy, Chinese society still has more than 600 million farmers. Rural sector is still incredibly large for this economy. In fact, there are different accountings of what constitutes a rural population, and the lowest is, you know, something like 45%, the highest can be 60% of the population.
30:34 It is still fundamentally rural, right? And how do you generate this incredible employment, income generation for this incredibly large sector of the economy, move them from low-productivity agriculture to higher-productivity urban service and industrial development? It is still a living issue for China. So let’s just not pretend that such a thing doesn’t exist for that economy. And the Chinese rural population has very low income level as compared with the urban population.
31:22 So in economics we talk about, you know, technology, but there is a branch of economics known as development economics, and many people forget this brutal fundamental fact. China fundamentally is still a developing country facing all the challenges that developing economies face. Rural sector, agricultural sector, poverty, income generation, employment, and let’s just not pretend these things don’t exist, rather than thinking, oh, this is an economy that is going to dominate the world in terms of technology.
32:05 So I think for me, I don’t worry about technology in China. This is a highly capable society, and a lot of the college graduates who are extremely smart, intelligent, and capable. I don’t worry about technology, but I do worry about how you generate continuous incomes and welfare improvement for something like 45, 50, 60% of the Chinese population. Okay. Okay.
32:39 Brian Rose: Besides the real estate sector, I mean, that’s a huge drop in prices. That’s a huge potential crisis. Are there any other factors that you’re very concerned about with the economy? I mean, obviously besides the birth rate dropping and some of those other issues, but is there anything else that is front of mind for you? Yeah.
33:00 Yasheng Huang: So, let’s face another reality. China’s manufacturing capacity accounts for about 35% of the global capacity. Its consumption accounts for about 11% of the global consumption. You know, you went to MIT, so you can do the quick math. What do you do with that gap?
33:31 Okay, and Chinese population is about, you know, 17, 18% of the global population. So, how do you resolve this gap between the consumption, the Chinese consumption and the Chinese production? Well, one way to resolve that gap is that every country on earth buys nothing but from China. You tell me whether or not in the current geopolitical environment this is going to be a viable option going forward. Look at the trade war.
34:13 Look at, and also let’s just be clear, the trade war or protectionism is not just rising in Europe and in the United States. It is also rising among developing countries. Indonesia, India, Brazil and other countries are also erecting trade barriers against Chinese products. Okay. So now you have this huge capacity, and relative to that capacity quite modest consumption, and the difference is also going to be difficult for the rest of the world even in the best case scenario, even if we ignore all the geopolitical complications that we have today.
35:05 Let’s just say that the world is a benign world and everybody loves each other. Even if you have that world, let’s just say the world immediately after the collapse of the Berlin Wall, you’re going to still have this huge absorption problem on the part of the rest of the world. You’re going to have trade barriers and protectionism no matter what. Okay. So now you cannot export at a level that you were able to do before, and the domestic consumption is not coming up.
35:42 You know, what do you do, right? The technical description of that is that you have to write down the capacity. Every time you write down the capacity, that is an economic slowdown. And more worryingly, once you write down the capacity, how do you generate the revenue that will pay back all these loans that the companies have taken out? That’s going to spell troubles for the financial sector, for the banking sector, right?
36:16 So in economics everything is related with everything else. Once you have that process going on, companies write down their assets, write down their capacity, they’re not going to increase employment. If they don’t increase employment, you’re not going to increase income. If you’re not going to increase your income, where does the saving come from? So, if you look at the bank, the bank has a lending side.
36:44 The bank has a borrowing side. The bank borrows from you and me in order to lend to the companies. If the bank is no longer able to borrow as much as it could before from the rest of the society, it is going to limit their capacity to lend to the rest of the economy, to the rest of the society. I tremendously worry about getting into that spiral. Once you get into that spiral, anything can happen.
37:20 Brian Rose: And so, fast forward 5 years from now, what do you think are going to be some of the cracks that start to form? How will China’s overall behavior change? And how many of these issues do you think will come to the surface and cause real structural problems for China?
37:42 Yasheng Huang: So let me just not minimize the difficulties and the challenges that the Chinese policy makers face in resolving these issues. These issues, Rome was not built in one day, and these issues are not built in one day.
37:59 In my forthcoming book, I go back to the late 1980s and early 1990s to trace the beginning of this problem. And I think the problem accelerated after the pandemic, because the pandemic depressed the Chinese consumption, depressed the income generation without depressing the production capacity. So that gap increased even more than the usual trajectory before the pandemic. I think in terms of the policy solutions, policy ideas, there are sort of two buckets of solutions.
38:46 One is really acting very quickly to increase the income of the average Chinese people. And by the way, the way to do that is not going so directionally, going so hard on technology, on industrial policy, because the technological projects don’t generate a lot of employment opportunities. So that’s one side of the issue. The other side of the issue is to resolve the trade disputes, to resolve the geopolitical disputes with the rest of the world, especially with the developed part of the rest of the world.
39:37 And by the way, Europe is the biggest trading partner with China in terms of the trade surplus that China generates. The biggest is from Europe. The second biggest is from the United States. You know, Trump does whatever he wants to do. He’s just in love with the trade war.
39:56 So maybe there’s not much you can do about that. But in terms of Europe, I think it will be good for the Chinese leadership to restore, to repair relationship with the European countries. And the first thing they need to do is to change their policy on Russia. Right? So I just don’t see how you can have, you know, free trade and free investment activities with Europe while not siding with Europe on Ukraine.
40:33 You know, Ukraine is on the doorstep of Europe. Russia is invading the doorstep of Europe. I mean, how can you sort of advocate free trade with Europe on the one hand and tacitly support Russia on the other? So, the first step, and I think it’s actually a golden opportunity for China if they make that switch, because Europe has issues with the United States. They need an ally vis-a-vis the United States, and China naturally provides some of the balancing support for Europe.
41:12 But the necessary condition for that is that China has to change its policy on Russia. Peter have to have the financial education and the deal flow. That’s it.
41:59 Brian Rose: Why do you think they choose Russia over Europe? Because you make a great point.
42:22 I never thought about that. But that’s clearly gonna make everyone in Europe very nervous. But they could just as easily not overtly support Putin and support Europe and probably not have too much fallout. I mean, what do the Chinese really need from Russia? Okay, I guess they need their oil and gas, but Russia doesn’t have a lot more they bring to the table, do they?
42:47 Yasheng Huang: I think, I think this kind of, sometimes the Chinese sometimes talk about that rationale. They need the oil, gas from Russia. You can get oil and gas from lots of other countries. And in fact, I think they get oil and gas at a higher market prices than they can find from other countries. It is definitely not for economic reasons.
43:14 Look at the size of the Russian economy. It is actually pitiful. It’s about GDP is about $1.7 trillion. 1.7 trillion is the size of a Chinese province, Guangdong province. It’s about 1.7, 1.8.
43:35 It’s about the size of Texas. Okay, let’s just say for the sake of the argument, you get all of that. That’s just one Chinese province. That’s just one state in the United States. The total size of the US import market is roughly three, $3 trillion, almost twice the Russian economy.
43:59 The European size is probably bigger than the US import market. So you sacrifice the European market and the US market by pursuing a smaller market. And by the way, the size of the market is just one factor. The other factor is the margin. Russia is a very poor country, poor economy.
44:30 So you can sell all the stuff that you produce, but at a lower margin. You are not making as much money as you would if you would sell to Europeans and the Americans. There’s absolutely zero economic reason to go with Russia at the expense of relationship with Europe, at the expense of the relationship with the United States. Although these days relationship between Russia and the United States now is getting really interesting and complicated. So let me not talk about that relationship.
45:10 Let’s just talk about the European relationship. Right? So there’s really no economic rationale. It is for ideology and politics. There’s something very curious about Chinese kind of a political mentality, which is that this is the second largest economy in the world.
45:31 It has been able to grow at very high rate for all these years. It has EVs and solar panels and AI, and yet it feels politically insecure about its legitimacy and authority. Therefore, I think the political leadership believes that they borrow legitimacy and authority from the Russian autocracy. Right? So after all, it was the Soviet Union that transferred the ideology, the communist ideology, and supported the Communist Party in the 1930s, and then in the 1950s supported China economically, and also not just in terms of money and resources but also transferred the central planned model to China.
46:32 So they have this kind of a historical allegiance to the source of their political legitimacy. I think, you know, I may be totally wrong because doing that kind of research is impossible. You don’t really know what the political elites in China really think about. But I cannot think of any other reason. And let’s just also mention some other brutal facts.
46:59 Of all the Western imperialist powers in the 19th century, and by the way, Britain was one of them, Russia brutalized China the most. They took about 11% of the Chinese territories, and after the Second World War they raided the northeastern part of China, the northeast of China. They took over the Chinese territory, raped the Chinese women. They did exactly the same thing that they did in Germany, which is that they pillaged the Chinese factories and equipment, took them away.
47:39 Russia, of all the countries I can think of in the world, has been the most brutal to China, and yet the Chinese political leadership has this softness for Russia which is really, really unbelievable.
47:59 Brian Rose: That’s a fascinating observation. Very fascinating. Has the Chinese Belt and Road Initiative worked?
48:09 Yasheng Huang: So I think it has worked in one way and it is probably experiencing some strains in the other.
48:18 It has worked in the following way, which is, as we talked about before, China has this overcapacity, and also let’s also be fair to China, because of this incredible economic expansion, the building programs, building railways, building shipyards and airports and all of that, Chinese companies have accumulated this incredible building capability, right? In the United States today, we have lost that capability. Even if you have the money to build things like nuclear power plants, we may not have the requisite skill and capability to build these power plants quickly.
49:11 So when you build you also accumulate skill, but when you build up within the country you want to export that skill to other countries, and the natural place to go is other developing countries because they have this level of the buildup capacity. So in that sense it is an economically clever way of utilizing the skills and capability you have accumulated. The way that I think it is not delivering is that, and this is something that I go into great detail in my forthcoming book, there’s a myth that you create infrastructure and then you create economic growth.
50:01 The Chinese pattern, and many people say that this is how China has grown. They look at high-speed rails and airports, and there’s a recent book about sort of Chinese state engineers building all these roads and bridges and airports. These people got the direction of causality exactly backward. China grew first and then they began to build. Not that they started with building and then they got economic growth.
50:36 It was actually exactly the opposite. The reason they can build is because they were able to grow, and because they were able to grow they were able to accumulate resources that can be deployed for building. It’s exactly the opposite scenario from the one that many people believe has happened in China. The problem with the Belt and Road program is that it is based on this false narrative that you build first and then you get economic growth. China has built a lot in these developing countries, but there’s no evidence that building has translated into long-run organic, indigenous, or endogenous, to use a fancy economic term, economic growth in these countries.
51:33 So when you build, because you put in capital, then you experience growth, but once that building project is completed that project has not translated into sustained economic growth down the road. Okay. Now the problem is that if you don’t have this sustained economic growth down the road, where do you get the revenue to pay back the loans that have been lent to these countries to generate economic growth? And, you know, some people are more severe than I am to describe this phenomenon as a debt trap.
52:11 The reason why, because I’m not comfortable with that phrase because it implies that China set up the debt trap for these developing countries. I don’t think that was really the case. But it is a trap in the sense that the growth didn’t come from the debt that they incurred, the buildings that they built, the project that they built. So it became a trap. Now the issue for these developing countries is how do we get out of that trap?
52:49 And especially now Chinese economy is slowing down. One growth engine has been the real estate sector. Real estate sector is very energy intensive. So you need the resources, you need minerals, you need energy to power that growth. But because the economy is slowing down, you don’t need as much resource, energy as before.
53:15 That can be a drag on the developing economies. I think this is where we are in terms of the Belt and Road.
53:24 Brian Rose: Okay. Treasury Secretary Scott Bessent was on, I think it was CNBC the other day, and he kind of made a very important or clear point to the interviewer. He said, you know, never in modern history have we seen two, you know, two forces or two countries that are opposed militarily also be the top two trading partners.
53:49 And he said that currently exists with China. Obviously in the past it was kind of US, Soviet Union, but we weren’t trading partners with them, or at least massive trading partners. But what kind of problems does that introduce, or is that a problem? And how is China expanding militarily that might affect that? We obviously see what seems like encroachment on certain territories in the Philippines and in the South China Sea, obviously, you know, the nuclear buildup, but I’m curious what you see in the future, and does that create tension with that trading partner?
54:27 Yasheng Huang: So I definitely agree with Secretary Bessent on his observation. So that’s why I’m very uncomfortable with applying Cold War concepts to what is going on between US and China, and it is far more complicated than the relationship between Soviet Union and United States during the Cold War. And, you know, let’s just be very specific. I was born in China, I studied in the United States, and now I’m a professor at MIT. During the Cold War you didn’t have a lot of Soviet citizens studying in the United States and a lot of Americans studying in Soviet universities, and that level of human interaction was simply absent.
55:22 Right? So the trade is one dimension, capital is another dimension, academic exchange is another dimension, students, and there’s a far deeper interconnectedness between the United States and China than there was between Soviet Union and America. And I think to understand that phenomenon, we have to go back to the 1990s when the decisions made by policy makers in both countries were made about deepening their relationship with each other. On the US side, there was a belief that if you increase commercial relationship, academic relationship with China, Chinese politics was going to change over time.
56:16 It doesn’t mean that it was going to become democratic, you know, one night and overnight, but gradually it was going to moderate its political system. And by the way, it’s called the engagement theory. By the way, a lot of people now criticize that view. But by the way, the Chinese policy makers also bought into that narrative. The Chinese policy makers at that time argued that yes, we are not a democracy, but the reason is that we have too low per capita GDP.
56:53 So the idea is that once the per capita GDP rises, we are going to become more like a global member of the global community and global economy. That obviously didn’t happen. I think the fundamental cause is why that theory failed to deliver, why that theory failed to happen, rather than that there has always been this geopolitical tensions between the two countries. You know, definitely 10 years ago, before the current leadership in China, there were tensions between China and the United States.
57:42 But the Chinese leadership then valued the relationship with the United States as a source of technology, as a source of market, as a source of many, many other things, in a way that the current leadership in China does not. And the current leadership believes that China is already very strong, the second largest economy in the world, and therefore it should have comparable power over the global order, over geopolitics. And I personally speaking don’t have a problem with a general idea of that way of looking at the world.
58:29 And, you know, as a second largest economy you are entitled to certain things. Look at Trump, right? United States is the most powerful economy in the world and he believes that therefore we’re entitled to certain things. So that sentiment is sort of a result of the economic development, economic growth. The issue for me is whether or not that is actually good for China.
58:58 Right? As I said before, you know, you have some 35% of the global capacity, but you only have about 11% of the consumption. That gap still requires access to Europe, access to America. So yeah, yes, you are entitled to some sort of geopolitical bandwidth, but on the other hand, if you exercise that power too much and in a way that is detrimental to your trading partners, you know, I teach at business school, right? I’m a professor of global economics and management at Sloan, MIT Sloan School of Management.
59:43 In the business school, in any marketing class, the first lesson is to be nice to your customers, right? So you have a, unlike suv economy, you design your economy to have this incredible gap between production and consumption. That means you have to develop this incredible dependency on the rest of the world. So, why would you want to challenge that situation? So that’s my question, right?
1:00:13 So, my own view is If your priority is economic development, as I argued at the very beginning of our interview, when you have 600 million rural residents in China struggling daily for, you know, economic livelihood, the priority ought to be economic development rather than some sort of bragging power, you know, over South China Sea, over Taiwan, and some sort of bragging power vis-a-vis the United States. But that’s just me, right? So, who am I to say what they ought to value?
1:01:52 But that would be my way of prioritizing different action items. And to develop the economy, to increase the welfare of the Chinese people, you need peace, you need stability, and above all, you need a working stable relationship with some of your best customers such as Europe, Japan, South Korea, Taiwan, and the United States. But that’s not the priority the Chinese leadership has.
1:02:23 Brian Rose: No, that’s really well said. And when you look at that gap, that 35% versus 11%, and then you can see, I mean, they are beholden to their customers like any great shopkeeper, and that ultimately has to be on their mind.
1:02:41 I think it was Bill Clinton that said in the ’90s, it’s the economy, stupid, and I think it was Gordon Gekko said in the movie Wall Street, it’s all about bucks and the rest is conversation. And so you have to keep your eye on that prize or there’s nothing to talk about. Right? You could have all the military might in the world, but if you cannot satisfy your citizens at home, if you can’t, you know, balance your books, then in the long term, you’re dead.
1:03:07 So, it’s an interesting point because China doesn’t really act like they care about their customers. I mean, they create the great products, but from a PR standpoint, I don’t always get that vibe. But that’s a brilliant observation. This is why I’m so glad we had you here today. Doctor, tell me about Taiwan, because I think it’s something that’s very misunderstood by the West, misunderstood by most people that read the news in terrible news sources like the New York Times and the Wall Street Journal and the British publications that always seem to, I don’t know, be skewing things one way or the other.
1:03:45 I hear some people that say Xi must invade Taiwan in the next 5 years if he wants to remain in power. I’ve heard other people say it’s completely impractical to make that traverse across the water and invade that island. It’s just not an impossibility but a military improbability. I’ve heard so many arguments for and against. I’m curious what do you think will happen, and maybe more importantly, what what are the realities of the situation on the ground, and then the economics and even the politics of it?
1:04:19 Yasheng Huang: Yeah. So this is where all these speculations are all over the place for good reason, right? Unlike the issues we talk about, trade, technology, consumption, real estate market, there we have data, we have observations. Sometimes the data are wrong, you know, are not trustworthy, but at least we have something to go by to formulate our views and formulate our observations. On something like this, we just have zero data.
1:04:54 We have zero reliable facts to make up our mind. I definitely don’t have anything more or less than what you just talked about. You know, I’m an American professor. I don’t really observe how the policy makers work and think about this issue. All I can talk about has to do with the kind of the scenarios if something were to happen.
1:05:30 One scenario, for example now, and this is something we know, it’s reported in the press, it’s just in the last few months there seems to be an unnatural level of purges in the Chinese military, and it is really something very striking and unprecedented, and, you know, this is all in the official newspaper. So we don’t have to speculate. We just know for a fact that high-ranking military officers have been sacked from left to right. So I think that it is hard for me to imagine for a government to go to war when you have so many of your high-ranking military officers being purged and taken down.
1:06:34 So I have to say that I become a little bit more cautiously optimistic about not having to witness an invasion of Taiwan than I was before. Right? So there’s a date that sometimes attached to that, you know, 2027, something like that. I have no idea where that date came from, but I believe that if you have this level of military purges, it’s just hard for me to imagine that you go to a war with this. But on the other hand, what do we know, right?
1:07:20 So, was there any rational reason for Putin to invade Ukraine? What was he thinking about when he made that decision? But at least there we could sort of understand his arrogance, right? So Russia historically speaking was an empire. Ukraine was a subordinate territory and it was a land war, and Russia at one point possessed Ukraine, and then they invaded Crimea with no complications, and they had Russian population living within the border of Ukraine.
1:07:58 So we could kind of understand that decision. But to invade Taiwan, you know, across the Taiwan Strait, wow, that’s a different category decision altogether. And a country, as we pointed out before, that is probably the history’s greatest trading power in the world. You know, even if you have a blockade, under the international law a blockade is an act of war. I cannot imagine Europe, United States, Japan would continue to do any business with China if you do that, if the country does that.
1:08:49 So that’s going to spell disaster. You know, we talk about the trade war and rise of protectionism, but at least trade war is it’s a little bit of a misnomer. It’s not a trade war, which is one to between one and zero. It is really escalation of tariffs, right, from 10%, 30%, 50%. At 50% you still can trade.
1:09:17 A trade war is that you cannot trade, a total trade blockade. So just imagine when you have 35% of the production capacity, you have 11% of the consumption, and now you have a trade blockade, global trade blockade. What does that mean for the Chinese economy? Right. Right.
1:09:39 So with a weakened military, political lineup, with this dependency on the rest of the world, I think it’s a sheer disaster if they go down that path. So, you know, you never really can assume rationality, but I just don’t think that they will go that far.
1:10:02 Brian Rose: Also, would it not cause the United States and Europe to have those semiconductors cut off? I mean, would it make it to where they would almost have to or be forced to intervene somehow?
1:10:20 Yasheng Huang: Well, so the Taiwanese company TSMC is producing in the United States, a little, starting to.
1:10:28 Yeah. And they are still producing the most advanced chips in China. Sorry, in Taiwan. And Nvidia has, I mean, this is not CPU but GPU, Nvidia has, I think as far as I know, most of the production outside of China, but I think it’s important to make this point, which is that yes, it is going to degrade the capability of semiconductor capability of the West, of the United States, but it’s going to do the same to China, right? It’s not like China is going to have like incredible semiconductor capability and whereas the rest of the world is going to depend on Taiwan, then Taiwan cannot produce those chips.
1:11:16 It’s going to degrade that capability everywhere. So that’s going to have some interesting scenario about who is going to win and who is going to lose. I mean, it’s the topic is so gigantic, and I have to say I purposely shut myself out from thinking about this because it’s really, really uncomfortable.
1:11:36 Brian Rose: And do you think that Xi is purging those generals as just a power struggle? Do you think he’s just doing that so he can consolidate power?
1:11:45 And I know you kind of demurred on comment on the politics earlier, but you know, the politics do make a big difference when it comes to the future of China, as we saw with the politics of America, a very different place with Trump at the helm versus Biden. So I’m curious, if you, your thoughts on Xi and some of the decisions that he has to make and if he’s even running the country in the next 5 years.
1:12:12 Yasheng Huang: Yeah, I just, Brian, I know you want me to talk about this issue because I’m sort of naturally constrained by data and facts.
1:12:20 So I feel very uncomfortable to kind of launch into wild speculation. But let me try a modest version of that. I think if you observe autocrats worldwide, you do observe this cycle. At the beginning it was, you know, ambition and some desire to do great things, transformation of the society, right, and transform the society, the Great Leap Forward, the Cultural Revolution, much of that was disastrous, but let’s put that aside. So at the beginning you observe that, and then you move on and you begin to observe a very different behavior.
1:13:14 You feel paranoid about everything. Mao felt paranoid. Maybe some of it for good reason. And there was an attempt to even assassinate him in 1971, I believe, right? By his chosen successor.
1:13:33 Although there, you know, whether or not it was because that Mao wanted to purge him even though he had chosen him as the successor and therefore it was more a reaction to that, or he wanted to assassinate Mao anyway, but I think more is more about the former, which is that Mao felt paranoid even about his own chosen successor, and therefore his chosen successor decided to attempt to assassinate Mao. So this paranoia, paranoia is beginning to surface at some point in the life cycle of an autocrat. You know, Putin has experienced that.
1:14:20 And Mao definitely experienced that. You look at almost all the other autocrats in the world, they experience that transition. So one explanation is simply that, because it is hard for me to understand this behavior in part because many of these, it’s easier to understand if you purge the people that you yourself didn’t promote. It’s a little bit more difficult to understand when you purge the people that you yourself promoted. A lot of the recent purges have happened to the people that he himself promoted.
1:15:04 So I just, you know, again, maybe there’s really a solid reason, and this is where our limitations are coming in, because we really don’t, unlike unlike the White House, even though now it’s run by an aspirational autocrat, we still know far more about him than we do about China, because in the US we have an autocrat operates in a democratic environment. In China is an autocrat operating in an autocratic environment. We just have no idea what is going on.
1:15:44 And so I think the issue for us to think about is which scenario is more consequential, paranoia or rationality, in terms of Chinese economy and Chinese relationship with the rest of the world.
1:16:01 Brian Rose: Okay. We briefly mentioned it before and you talked about Jensen and Nvidia. Where are we now with the AI race between the United States and China? And do you believe that open societies like, say, the US ultimately will out-innovate authoritarian ones like China?
1:16:24 Yasheng Huang: Open societies, democratic societies are very good at coming up with breakthrough innovations in a way that an autocracy is not. So let’s just be very, very frontal about that. But some open societies, some democratic societies have problems scaling the innovations that they have created, developing the innovations they have created into commercial development, into technologies that companies and societies can use as compared with an autocratic society.
1:17:13 An autocratic society has this incredible capacity to concentrate resources to build capacity. It is not very good at coming up with new things, but it is incredibly good at scaling things that have been created. I think in AI, this is where we are between China and the United States. China didn’t come up with the fundamental algorithms, the foundational models. China didn’t come up with the large language models.
1:17:52 China didn’t come up with the origination of the AI that, the origination of that was going back to the 1960s in the United States. You know, Minsky and others, a lot of it is connected to MIT, right? And China was nowhere near that. China didn’t come up with the EVs. China didn’t come up with the solar panels.
1:18:17 Remember, President Carter in the late 1970s put solar panels on the rooftop of the White House. China in 1979 was nowhere near the solar panels and that. But China has become incredibly efficient and incredibly capable of scaling the science into technologies, into commercial products, into applications. I think this is where we ought to think very hard about our system. How come we are good at innovations but we’re not good at scaling?
1:19:07 And I think one answer to that is that we have prioritized the Silicon Valley free capitalism and all of that. But scaling is hard, and scaling often is extremely expensive and very risky. And without the government involvement, without government taking up some of the risks of the scaling, we often leave the innovations on the table without being able to scale them, right? So this is where the industrial policy debate comes in. And but if you look at the current administration, they are curtailing industrial policy.
1:19:48 They’re curtailing the Inflation Reduction Act. They’re curtailing the CHIPS Act. They’re doing exactly the opposite of what a democratic society ought to be doing, which is a hard-nosed look at where our deficiency is in terms of scaling. We should acknowledge our incredible strength in coming up with new science and new breakthroughs, but we should be very humble to recognize where we have fallen short. And this administration is not doing that.
1:20:21 Investment Club today. I considered the best investment that without question.
1:20:40 Brian Rose: Well, he’s got the AIAR in Washington and they’re pumping trillions of dollars of investment. Maybe they are actually helping scale now.
1:21:13 Yasheng Huang: Well, only in AI, right?
1:21:19 But let’s just be very realistic. AI is also built on some of the hard assets, on energy, on energy generation, on and then in the end if you want to protect the environment and the climate, you want to do it with new materials and new material science and new material technology. They’re not doing any of that. They’re cutting the research funding of the National Science Foundation. And then we’re talking about the life science.
1:21:50 They are cutting the research budget of the National Institute of Health. Yes, they go on the AI full steam, but I actually believe that it is incredibly reckless for them not to think about the regulation. You know, AI raises all kinds of issues about the dangers and the risks of kind of unregulated AI. I disagree with that view. I think they’re extremely reckless in their AI, unregulated AI pursuit while undermining all these other critical aspects of American technology and American science.
1:22:36 Brian Rose: Doctor, you said that for you one of the bigger moments for you, the bigger moments of realization is when you began studying, I think it’s called the Keju, which is Chinese civil service examination system invented in the sixth century. I’ve never heard of this before. And it was a real intellectual turning point for you, because I think it helped you to start really connect with the Chinese historical political development and also kind of what they’re doing from this modern governance standpoint.
1:23:07 I wondered if you could really educate us on that or explain that, because I’m probably talking about things that nobody watching us has ever heard of.
1:23:20 Yasheng Huang: Yeah. So it is a term that few people have heard of, but you being British know about the civil service exam in the British system, and the British got that system, Americans got that system from the Brits. The Brits got that system from the Prussians, and the Prussians got that system from the Chinese. Okay.
1:23:46 So this is the kind of the trajectory and the migration of the civil service exam. Chinese invented the civil service exam in the sixth century. It is usually said that China, the Asian Chinese civilization, invented four great inventions: gunpowder, printing, compass, and paper. I would actually add that there is a fifth great invention created by the ancient Chinese, and that is the civil service exam. Why is it so great?
1:24:24 The civil service exam, or the Chinese invented exam and then they applied it to the government service. So this idea of indicating and assessing capabilities through an exam system on the basis of constructed metrics is an incredible invention. Look at the Roman Empire. Look at the Greek civilization. A lot of that competition was based on athletic competition, military competition, battles, right?
1:25:04 Caesar and all of that. So in my 2023 book, I said that if I have to name one difference between Western civilization and Chinese civilization, I will name the exam system. The Chinese civilization invented this exam system. Whereas the Western civilization has organized itself on the basis of military and the conflicts. The reason why this is consequential is because the civil service exam system allowed the Chinese state to monopolize the best and the brightest of the society.
1:25:51 That made the Chinese state incredibly powerful because they had this ready channel to the best and the brightest of the society. Imagine every graduate of MIT, and you were one of them, ended up working for the government and doesn’t end up in the corporate sector, doesn’t end up in the university sector. The government is going to be incredibly powerful because it has the possession of all these incredibly smart human capital. Another function of this exam system is, unlike the SAT, the contemporary college examination system, you can take it multiple times throughout your life.
1:26:43 So the state monopolizes your time as well. Monopolizes your mental energy. So it’s a tax on your time, it’s a tax on your mental energy, and that increases the power of the state. So this is the way I explain why in the West and in China there’s this dramatic difference in terms of the power of the state vis-a-vis the society, vis-a-vis the economy. Chinese civilization has produced this incredibly powerful state in a way that the Western civilization has never been able to produce.
1:27:24 Right? The difference goes back to the sixth century. Now I’m working with another academic looking at the data before sixth century and after sixth century. Before the invention of the exam and after the invention of the exam, in fact there were some really incredible similarities between the West and China before 6th century. But over time those differences disappeared.
1:27:47 We believe it was because of the exam system. And now if I translate this way of looking at things to contemporary China, the exam system, the rote memorization system is not very good at creativity but it is very good at replication. What is replication? It is scaling. If you want to understand why Chinese workers and Chinese engineers and Chinese society as a whole are so capable of scaling, you have to go and understand that exam system.
1:28:24 This is where I disagree with many observers who argue, oh, China is able to scale because they have low cost. Yes, they do have low cost, but Africa has low cost, India has low cost, Brazil has low cost. How come they cannot scale? Right? So, China is able to scale because of the homogenizing effect of the exam system on human capital.
1:28:51 When you scale, better make sure that product quality is the same when you multiply the production from one to 100 to 1 million to 100 million. That replication is not that easy, and Chinese economy is able to do that because they have this incredible uniformity of the human capital. So I do believe that way of looking at the Chinese civilization also helps us understand what is going on in China today.
1:29:22 Brian Rose: Wow, that’s a fascinating observation. I’m gonna be thinking about that one on the way home.
1:29:29 And I really appreciate that intellectual property that’s very unique to you and a really excellent way of looking at the differences between these two types of government. I wanted to ask you about Sloan and of course your former alma mater, Harvard. What is it like now to be a student in these places and to teach at these places? I’ve seen some recent headlines at Harvard where they were saying that they were going to maybe try to taper back some of the grade inflation going on there.
1:30:01 And I was wondering if you think sometimes the students at some of these institutions are too pampered, because I think that accusation has been made. I remember undergrad at MIT, and we got our butts kicked is what I remember. And I know guys, I lived at a fraternity on Massachusetts Avenue and I had guys in my fraternity who literally dropped out and went home and became bike messengers. Went home and worked at a Mexican restaurant. And these are guys that had their whole career ahead of them, but they just couldn’t keep it together at the demanding pace at MIT.
1:30:39 And I remember being in the Hayden Library at 4 in the morning, and I used to go to that library because it was open 24/7, and I had my caffeine tablets, you know, because we didn’t have all these modern modern drugs, and I just remember just trying to pound all this stuff into my head, and it was an incredible time. I felt privileged to be there every day. I actually applied and was accepted to get to Sloan and to actually do a 5-year undergrad and MBA, but I decided I’d go straight to Wall Street, so I kind of skipped out on that.
1:31:13 But I took a lot of classes at Sloan. I don’t know if they still do this, but they actually allowed the undergrads to take classes there, something I don’t think Harvard Business does. And so, I was taking, you know, futures and options theory and accounting with all the B school kids. And it was incredible. Also, since I had just taken thermodynamics and vector calculus, you know, I could smoke them all with the math.
1:31:36 And so, it gave me a little bit of an advantage even though they had just come off of a two-year stint at Goldman. It just meant that I had a few more skills. So, I’m just kind of curious what you think about some of those issues and what’s it like there now at Sloan.
1:31:52 Yasheng Huang: So, I think there are two separate issues. One is a generational issue and the other is the cultural differences between different universities.
1:32:01 In terms of the generational issue, I went to undergraduate education earlier than you did. But I think at that time working hard, you know, I work in a dining hall, you know, earning money that way. You know, no sleep and spending time in the libraries and all of that. We just couldn’t get information so easily, and I really didn’t do anything other than just studying and working to earn some spare change. It cultivated a work ethic, and also, you know, I chose a career of academic academic career.
1:32:44 You have to tolerate loneliness. In social science, unlike natural science, in natural science you work in a lab. In social science you work with books and papers and you write things on your own. You write papers, you write books. You just have to tolerate and sometimes enjoy that level of aloofness, and whereas the current culture of the young people is, you know, everything is about social connection, and, you know, if you are left off from the social media and you feel very bad about yourself, that’s just not the culture that I think we experienced, right?
1:33:31 So we cherished working hard and cherished being productive in the libraries and in the dormitories. I think that’s a generational change and maybe as a result of social media, result of the technologies and how just how easy now it is to get information. So you skip all this hardship by directly going to the research, and that is good because it may not take you as long as it did before to get the data that you want, but it does have an effect on the work ethics.
1:34:10 I think the other difference is I went to Harvard, you went to MIT, and when I was a student at Harvard, we always viewed MIT as an incredibly hard place for students, you know, and my impression was that the MIT students work all the time. Harvard students go to the party all the time. I just had no money and then when I didn’t study, I worked in the dining hall. Actually at one point I worked as a security guard for Harvard University. So, you know, MIT kids, they work all the time, and the curriculum was incredibly demanding.
1:34:52 Every undergraduate student has to take the same curriculum in the first year, right? No matter what your major is. Whereas at Harvard you can pick and choose, you know, you can pick the courses that you feel comfortable with and not choose the ones you don’t feel comfortable with. So, you can kind of match your capability and expertise with the courses you teach. Whereas at MIT, you cannot do that.
1:35:22 So, that’s one big difference. And the other big difference is that, you know, I have a lot of fond memories of my own. I’m a martyr, but I just think that by leaps and bounds MIT is a far more meritocratic institution as compared with Harvard. There’s just no comparison. And in terms of the faculty culture, in terms of the engineering culture, in terms of the institutional culture of the place, it is about your research, it’s about your productivity, it’s about your ideas.
1:35:59 People are extremely frank with each other. They exchange ideas with each other in a very direct, sometimes confrontational way. And, you know, for me, I grew up in China. It’s a very kind of a polite society. That took some getting used to.
1:36:19 But now I really enjoy that, you know, being pushed back by my colleagues, and, you know, my colleagues would tell me, what’s this idea? This is stupid, and the burden is on you to prove that he or she is not correct, whereas I didn’t experience that at Harvard, and this kind of frank scientific culture of exchange, unafraid of authority, unafraid of establishment, existing idea, you know, MIT is famous for students playing pranks on authority figures, right? It just, for me, you know, I grew up in China as authority- induced and deferential culture.
1:37:13 I find it exhilarating. It’s just incredible. Sometimes it goes too far, you know. So that’s true. You know, you can never have a moment of ease, you know.
1:37:25 Every time I open my mouth, I have to think, “Oh god, somebody is going to think I’m so stupid.” And that burden is always there. Whereas I didn’t feel like that when I was, you know, I was a I have to say I enjoy being a student at Harvard tremendously. Harvard gave me a liberal education and gave me a totally new horizon of looking at things. But I was also a faculty member at Harvard.
1:37:56 I didn’t enjoy that part of my experience as much as I did when I was a student, and not as much as as a faculty member at MIT.
1:38:06 Brian Rose: Fantastic observations. I guess at the end of the day MIT was built on numbers, right? And built on, you know, on scientific proofs. And so maybe at the end of the day, you know, it’s a place that judges maybe reality, you know, maybe more than reputations or, you know, or other things.
1:38:29 Again, it is an institute at the end of the day. So maybe where that’s some of that culture comes. I don’t know.
1:38:35 Yasheng Huang: Yeah, I think that culture comes from that. And so it is built on numbers and it’s built on science.
1:38:40 Numbers and science are a universal language. Right? So I also, and this is the institutional culture that I feel about MIT. MIT is about communicating with the rest of the world in your academic work. It really doesn’t matter whether you’re an MIT professor or MIT student.
1:39:02 You communicate with people at Stanford. You communicate with people at Harvard. Whereas a lot of my interactions at Harvard were about communicating among themselves, and it’s really in part because of that humanity culture, you know, kind of old New England culture, kind of almost intellectual, intellectual elites, kind of more of a writer’s culture, right? A few people got together in a cafe, you know, communicating, debating with a smaller circle of people, whereas MIT is about universal language and communication.
1:39:52 So I really think that the second culture, that universal culture is more conducive to academic progress. Hey, I know investing in crypto is scary. It takes a real leap of faith Club. Pull the trigger. Let’s do this.
1:40:59 Brian Rose: Yeah, I’m having flashbacks. I mean, I flew six hours from San Diego and landed in this city that was cold that I didn’t know anything about. And I just fell right into that culture of MIT that, you know, there’s a famous meme before memes were even a thing of a student taking a fire hose into his mouth, and he’s drinking out of the fire hose. And that’s apparently the analogy for when you go to study at MIT, because it’s like trying to drink from a fire hose.
1:41:28 But I remember, doctor, you know, I had in my peer group, guys in my fraternity, nobody cared what your last name was, nobody cared who your dad was. I had guys that, you know, were from families that were on food stamps and yet they were so smart that they could just kind of wipe the floor with people at the classes, and all that mattered was can you cut the mustard? That’s it. Are you smart enough to prove yourself at this institution? Nobody cared about what club you were getting into.
1:42:02 We didn’t have the eating clubs. Not that I got any hate for that. That’s all good. We didn’t have any of that stuff. It was just like, can you deliver?
1:42:08 And that’s all that we cared about. And I think that’s something that the Institute always promoted. And look, by my senior year, I was a little cynical about everything from my living establishment to everything. But I still felt honored to be in that place every single day. Yeah.
1:42:23 Yasheng Huang: So that’s the very definition of meritocracy, right? But I think there’s a legitimate debate once you operate beyond science, engineering, and technology. What does that kind of meritocracy look like? Right? So I do believe that there is a legitimate issue about that.
1:42:46 And the second issue is that I do believe that modern engineers and modern technologists need to be more exposed to ideas in humanities, in history, in values, precisely because science and technology now have acquired this amount of power. Yeah. So you don’t want people without roots in values to have this level of power. And I believe that MIT ought to do more to educate the next generation of technologists and engineers in the values, that societal values and human universal values and knowledge about the real world.
1:43:39 Right? So the stuff that we have been talking about, about economy, geopolitics and things like that, I do believe that MIT ought to increase its social science investments in these topics, and sometimes I feel that this is not something that the Institute values, and I believe that’s not right. So you know, I’m self-interested, right, by saying that, because I’m a social scientist, because I’m not an engineer, but I do believe sincerely that to produce responsible engineers and technologists we do need to equip them with broader knowledge about the world.
1:44:23 Brian Rose: Yeah, I agree with you now that I’m a little older in my 50s. And if you look at some of the greatest technologists in the world, say in Elon Musk for example, one of the reasons he’s so great at what he does is because he has an extensive knowledge of history. He has an extensive knowledge of politics and economics and economic systems, and he’s constantly drawing on that when coming up with ideas and coming up with plans. And even if you look at Michael Saylor, who’s a graduate of MIT who went on to form MicroStrategy, now Strategy, and he owns about $80 billion worth of Bitcoin, he again is constantly referencing history and the history of money, and I know he didn’t learn that at MIT.
1:45:04 So I agree with you. I think, I mean, I guess there’s only so much time in the day, but I think it would be a great thing to add for sure. Doctor, I want to finish with one question, and it’s something I was thinking about since the minute I heard about you and I started learning more about you. Are you worried about your safety, because you were born in China and you’re, you know, you’re from this land, and yet you’re constantly critical of this place, and I’m curious, are you worried about your safety?
1:45:34 Are you able to travel there? Tell me.
1:45:38 Yasheng Huang: There was no problem before just before the pandemic. And I did similar interviews like this in Chinese with Chinese media, and, you know, some of them were quite critical of the government policies and government programs. There was a degree of tolerance of differences of points of views and criticisms that we no longer have today.
1:46:16 Sadly speaking, and I worry about the country not because it is not a democracy but because it is moving backward. Even as an autocracy, you can have a more open autocracy or you can have a more closed autocracy. If you look at the economic progress, economic achievements and even technological achievements, much of that happened under the Chinese autocracy when that autocracy was actually more tolerant, more open. So, do I worry about myself? Well, anyway, I, to be honest, I, you know, I live and do work in the United States, so there’s not that kind of a threat, but I just don’t know what to do, right?
1:47:05 Do I censor myself? And I have acquired this habit of speaking very directly and frankly, and also I’m totally prepared to accept that I can be completely wrong and then have an engagement, have a debate why I’m wrong, you know, on social media sometimes. Mostly the sort of the Chinese nationalists attack me for you being critical of Chinese economy. Well, so I have no problem with their criticism if you show me the data that contradicts the data that I provide.
1:47:46 Right? So I’m perfectly okay with, I actually cherish that debate and engagement, and yet the problem is that now the attack is it’s almost incredible, because now you get attacked for not just saying that Chinese economy has problems but for saying that Chinese economy is not immaculate. You have to say that the economy is immaculate, almost in the traditional Catholic sense, in order to avoid being attacked. Well, I don’t think I can go there. I’m an academic and what the heck?
1:48:29 I just have to, you know, it comes with the territory and there’s really not much you can do about it. But I think I believe in the bottom of my heart majority of the Chinese people, majority of the Chinese intellectual elites, business people, technologists don’t have that attitude. If you gave them some freedom of speech, they are much more reasonable than some of the nationalist rhetoric that is visible and covered by the social media. I think the center of the gravity of the country is not that nihilistic and nationalistic.
1:49:21 And this is precisely my hope that at some point the country is going to come back to a more rational, more deliberate exploration of these very, very consequential issues rather than always engaging in nationalistic attack.
1:49:39 Brian Rose: Well, let’s hope so. And never censor yourself. Speaking from my experience over the last 14 years, yeah, it’s not a good plan. Dr.
1:49:50 Huang, how can people get your new book coming out? When is that dropping? And what’s the best place for them to follow you on social media or website?
1:50:04 Yasheng Huang: Well, I have a cond even though I don’t post often. I post periodically.
1:50:10 In terms of a lot of the views we talk about, I covered these issues and topics in my 2023 book, The Rise and Fall of the EAST, and EAST here is E is exam, A is autocracy, S is stability, T is technology. And I have a forthcoming book in January 2026 coming from Cambridge University Press, Statism with Chinese Characteristics. All these are available on Amazon and people are free to buy them and read them.
1:50:43 Brian Rose: Excellent. Well, congratulations on that.
1:50:46 Really enjoyed this discussion. I’d love to check back in with you next year and go a little bit deeper on some of these things and even get your thoughts on kind of where we are as this all constantly changes and emerges. But I don’t think there’s anybody like you out there, and I really appreciate your insights, and I miss the Institute as well. So thank you, Dr. Huang, really appreciate your time.
1:51:10 Yasheng Huang: Well, Brian, anytime you come back, look me up.
1:51:13 Brian Rose: So, I will. My daughter’s in Boston now, too. So, next time I’m there, I’ll come look you up and we can have a debate over dinner. Okay, great.
1:51:21 Yasheng Huang: Thank you, Brian. I enjoyed the conversation.
1:51:23 Brian Rose: Thank you so much. Thanks to everybody for watching on London Real. We’ll see you next time.
1:51:26 Bye.
