Dr. Keyu Jin on Lex Fridman: Why Mayors Drive China Growth

1. 0:00 – 0:47

   Introduction

   1. LFLex Fridman0:00

      The following is a conversation with Keyu Jin, an economist at the London School of Economics specializing in China's economy, international macroeconomics, global trade imbalances, and financial policy. She wrote the highly lauded book on China titled The New China Playbook: Beyond Socialism and Capitalism that details China's economic transformation since 1978 to today, and it dispels a lot of misconceptions about China's economy that people in the West have. This is the Lex Fridman podcast. To support it, please check out our sponsors in the description and consider subscribing to this channel. And now, dear friends, here's Keyu Jin.

2. 0:47 – 5:17

   Misconceptions about China

   1. LFLex Fridman0:47

      What is the single biggest misconception the West has about China's economy today?

   2. KJKeyu Jin0:52

      The biggest misunderstanding is somehow that a group of people, or even just one person, runs the entire Chinese economy. It is far from the v- reality. It is a very complex, large economy and even if there is an extreme form of political centralization, the economy is totally decentralized. The role that the local mayors, I call this the mayor economy, plays in reforms but also driving the technological innovation that we're seeing right now, it is actually not run by just a handful of people. It's more decentralized than the US is. And I think more broadly, a big misunderstanding is really the r- relationship between Chinese people and authority.

   3. LFLex Fridman1:36

      Can you elaborate on that?

   4. KJKeyu Jin1:37

      Well, you know, people think that somehow there's almost blind submission to authority in China. We have a very nuanced relationship, uh, with authority, whether it is, you know, between kids and parents or, um, students and their teachers or with your bosses and the Chinese government. It's kind of the same thing. There's paternalism, uh, they think that they're responsible for you, um, but, uh, deference, a certain amount of deference to authority is not blind submission. It's been written implicitly in our contract, uh, for thousands of years that in exchange for some deference, uh, we are given stability, security, and peace, and hopefully prosperity.

   5. LFLex Fridman2:20

      So there is some element that we have in the West of freedom of the individual, so that a little bit of the rebel is allowed, uh, in balance with the deference to authority?

   6. KJKeyu Jin2:30

      Yeah, absolutely. Without that, how can you have this radical, dynamic entrepreneurialism you see in China? If you don't have a sense of self, a sense of, uh, the fact that you can find opportunities, you look for opportunities, you, you, you drive opportunities, um, it's all self-motivated.

   7. LFLex Fridman2:50

      Is there still a young kid in China that's able to dream to be sort of the, the stereotypical Steve Jobs in the garage, start a business, and change the world by doing so?

   8. KJKeyu Jin3:02

      There are millions of young kids like that in China. They might not be thinking about changing the world, and this is where the Chinese approach to innovation is very different from the Silicon Valley one, I'd say, um, but they see opportunity. They see a country with a billion consumers, they see scale, they see speed, they see that with their dreams and the team that you have in China with engineers and the digital transformation, you can do so many things and this generation of young people think about transforming their local economy. I, I think we're gonna get into this, but it's no longer gonna just be manufacturing. The young kids are entrepreneurs.

   9. LFLex Fridman3:41

      Let's, uh, stay in the big picture a bit, there's a, a perception that China is a, uh, communist country. So to what degree is China a capitalist country and to what degree is it a communist country?

   10. KJKeyu Jin3:54

       I've rarely seen a more capitalist, uh, society than China, from the pure economic, uh, uh, side. I've rarely seen companies that are as competitive as Chinese companies, uh, people as ambitious and obsessed with making money as Chinese people, uh, kind of ruthless actually. Uh, and, look, you know, consumers shop, firms invest, if you invest well financially, you'll get great returns. What is not capitalistic about the Chinese economy? At the same time, the social fabric is highly socialist. First of all, the state-owned enterprises dominate in many of the sectors, the state banks control the financial system, uh, we often talk about common prosperity, about equal opportunity, just and fair society, but even, you know, daily stories, a, a walk in the park behind my, my parents' apartment, you're gonna find at least 50 organized social groups on a daily level singing, dancing, exercising, doing whatever these fantastic idiosyncratic hobbies they have, getting together every single day, and free courses for the elderly and retired, right? That sense of communalism, that sense of belonging, uh, that strive for harmony at the societal level is there.

3. 5:17 – 14:34

   Education in China

   1. KJKeyu Jin5:17

   2. LFLex Fridman5:18

      So, uh, just to go back to something you said, there is a value for competition culturally? So, a- on the business side, on the economic side, there is sort of a cultural value of people competing in a meritocratic way?

   3. KJKeyu Jin5:33

      Competition is ferocious in China, especially when it comes to Chinese companies, but also in education. I should be thankful that I'm not, you know, born later than I am because I thought China was pretty competitive already, uh, going to the schools and studying for the exams. It is a different level today. Competition is not necessarily in the culture I'd say, it's driven really by the changing economic and social circumstances of the day. The Chinese companies are all hardworking, they're all going after the market share, they all kind of want to do the same thing, you know? It's not quite like in the US where you open a coffee shop, well, next door I'm gonna, you know, open...... a bagel shop, right? In China, if the coffee shop does well, everybody wants to open the same coffee shop, and I think, again, I'm sure we're going to get to this, but there's a lot of that kind of competition which really drives the world sometimes crazy, um, of replication. But it's because it's not easy, right? It's not easy to make money. In the education system, there are not enough jobs for the young people, so how do you get ahead? Uh, how as... let's say, if you're part of the lower stratum society, how are you going to make sure that your children are going to have a better life than you? You invest in education. So everything is about competition in a country with 1.3 billion people. That's, uh, somewhat to be expected.

   4. LFLex Fridman6:53

      Let's go back to the roots of that. So you described that China's economy model, uh, is rooted in its history. So can we talk about Confucianism?

   5. KJKeyu Jin7:02

      (laughs)

   6. LFLex Fridman7:03

      (laughs) Can you explain to what degree those roots run back to Confucianism, and in general, to other parts of Chinese history?

   7. KJKeyu Jin7:10

      Yeah. Confucianism is more of a moral philosophy, uh, than, let's say, religion or a belief system. It prioritizes, um, social harmony above anything else. It's not about metaphysics, but more about ethics, and at the individual level, the responsibility, the duties are all meant to preserve that social order. So it's filial piety, um, it is loyalty, it is how to be a Chinese gentleman. Um, but things like saving, frugality is part of the moral discipline. Education is part of the moral cultivation. So there's a very strong emphasis that you as a citizen have a responsibility to contribute to society as a whole.

   8. LFLex Fridman8:02

      On the education side, a part of Confucianism is a, is a value for meritocracy. So how does that permeate the education system in China? You've already spoken to it a little bit, the value of competition and that it's already getting more and more intense, but it would be very interesting to get your understanding of the education system, its history and as, as it stands today.

   9. KJKeyu Jin8:23

      If China were relatively successful economically, a huge part of the reason is by and large it's been meritocratic. That is changing somewhat now, but the only way that you have still that many poor people, especially a couple decades back, still be in harmony with society seeing all these rich people, you know, make tons of money and you're still belonging to that lower stratum. The only reason is that you believe that your c- children have a future through meritocracy, and even though it's imperfect, it's highly imperfect, standardized testing, all this competition, all of the, the, the hours and the tutorials to studying for standardized exams. Well, that is a very realistic, um, scenario in China because there's that many people. You know, when I was growing up, in school, we had 60 people per class and there were 10 classes in one grade. Now imagine that many people applying for colleges, uh, in the, in the American way. How many essays would have been written and need to be scrutinized, but also that gives room for total corruption if you, you know, if you know what I mean, just connection-based and actually standardized exams, as imperfect as it is to select talent, is still by and large fair. And, um, that's how that whole generation of, you know, entrepreneurs, but bureaucrats, government officials were selected. You look at the Chinese premiers, uh, the presidents of the past, they, they all went to great schools. You know, a lot of them were engineers and, uh, same thing for civil servants. It has changed somewhat. You know, the meritocracy I think is, is eroding in China. I'm worried about that because it is fine that you get into a good university based on your own merit, but finding a job now becomes much less meritocratic. People with connections get jobs more easily than, than others. Of course, this is not just a unique Chinese phenomena. It's actually everywhere, but I guess what I'm saying is that that meritocracy, which was so fundamental to the Chinese, ancient Chinese education system... By the way, civil servants were selected based on standardized exams in the past. That's always been throughout Chinese history and that relates to Confucianism. Now the opportunities, and coming back to the comp, uh, competition point, is that the opportunity is getting slimmer and slimmer. And again, this is not a unique Chinese phenomenon. Jobs, where are the jobs going to be? Right? So, um, meritocracy has become more of a problem.

   10. LFLex Fridman10:58

       Uh, do you have any memories of your own experience in terms of competition? The good and the bad of it? Maybe, uh, from that can you, uh, pull out the thread of, of the value of that kind of competition? Basically, you know, uh, I grew up in the Soviet Union so there's a kind of brutality (laughs) to the competition, um, but I think it ultimately molds really interesting people.

   11. KJKeyu Jin11:22

       There is a good and bad part of competition. I remember when I was going to middle school, every single midterm exam, final exam, you are ranked from number one to number 800 in your entire grade and publicly displayed.

   12. LFLex Fridman11:37

       Nice.

   13. KJKeyu Jin11:38

       Nice, right?

   14. LFLex Fridman11:38

       Very nice.

   15. KJKeyu Jin11:39

       (laughs) Um, imagine, you know, the majority of people and how they feel. Um, but it, it does drive ambition in part and you don't take anything for granted. Uh, and you work hard. You keep, you know, you keep the spirit up. But, you know, going to the US I finally realized that Americans are totally competitive, it's just that they don't display it. It's not as apparent and I, I remember I'd go... I went to a very competitive high school, but everyone's like so chill, "Oh, I'm not studying. Oh," you know, they're, they're studying. They are secretly studying. Um, when I was doing my PhD at Harvard people were like, "Oh, you know, my parents said don't work so hard," you know people say...... don't say you work ... They're working hard, right? Just you don't show it. In China, it's, it's kind of, um, a noble thing to show that you're working hard and that you're number one or that you're top of the class and you want to display it, you want, uh, to let everybody know. But in the US, everybody's, like, secretly doing it.

   16. LFLex Fridman12:41

       (laughs)

   17. KJKeyu Jin12:42

       (laughs)

   18. LFLex Fridman12:42

       Yeah. Some of it is the c- uh, is the signaling. The culture emphasizes the signaling of is it better to be kind of ... for everything to come easily, thereby showing that you're a genius, it comes naturally? Or is it better to show that you worked h- extremely hard for the thing, but the ultimate result is there's still competition? But I don't know, when you're visually displaying and, uh, explicitly stating that it's good to be number one and it's bad to be number 800, I think that permeates throughout the culture to where-

   19. KJKeyu Jin13:15

       Mm-hmm. Yeah.

   20. LFLex Fridman13:16

       ... you understand ... Uh, first of all, you understand that hard work is the only way to, uh, improve to, to, to succeed in life, and second of all, you just create this framework of, uh, early on understanding what it means to live a good life. And a part of that is to, uh, to find the thing you're damn good at and get even better at it, master it, become hopefully the best person in the world at that thing. I don't know, that's a ex- extremely important lesson for society to teach.

   21. KJKeyu Jin13:51

       Yeah. That's the right, I would say, the right kind of competition or the efficient kind of competition. I feel that in the Chinese education system, it was not necessarily efficient because it kind of frames you and molds you to be thinking in a certain way, uh, what's been taught to you. You don't have the bandwidth or the time or creativi- freedom to be more creative and to think outside the box. There, it's just the box.

   22. LFLex Fridman14:14

       Yeah.

   23. KJKeyu Jin14:14

       You maximize the box and that's it. You don't actually know what's outside of the box, and you never actually go there. That's the bad part of Chinese competition. And when I got to the US, uh, the high school teachers were asking us to question authority, to question text.

   24. LFLex Fridman14:30

       (laughs)

   25. KJKeyu Jin14:30

       I'm like, "Wow, really?"

   26. LFLex Fridman14:31

       (laughs)

   27. KJKeyu Jin14:31

       "You can do that?" So I started asking why.

4. 14:34 – 19:53

   Economic reforms of Deng Xiaoping

   1. KJKeyu Jin14:34

   2. LFLex Fridman14:34

      All right. So there, there has been this miracle in the Chinese economy from, um, after Mao under, uh, Deng Xiaoping where the Chinese economy got transformed and grew incredibly. So can you explain what happened, the different transformations that happened, uh, the different reforms that happened under Deng Xiaoping?

   3. KJKeyu Jin14:56

      Deng Xiaoping was by far our most pragmatic leader, and I think everybody's grateful to Deng Xiaoping. My father's generation would not have seen that amount of prosperity and peace and opportunity without Deng Xiaoping. Uh, it started in the late 1970s when Deng Xiaoping came out with this open up and reform mandate, and it was very tough. Again, coming back to the big misunderstanding of China, it's not as if one leader decides that that's what we're gonna do and then everybody follows order and does that. No. There are tons of political barriers, tons of incentive, compatibility problems at the local level. In the end, you need the local provincial governors, the mayors to do the job, and how many prefectures are there in China, right? A lot. And, um, they have their own interests, right? We, we know this. Around the world, politically it's the most difficult thing to do. Um, but somehow Deng Xiaoping was able to break tradition, break convention, um, come out with this completely new way of thinking about society, life, and the economy, and it was so transformative. I remember people of that generation told me one time that, you know, society was gonna focus on the economy. Really? Why would they do that? Wasn't it politics? Wasn't it everything about politics and struggle and ideology? So for them, that the whole country and the government is gonna focus on the economy was just so shocking, uh, even though we take it for granted now, that, that, that shows you that breaking that, that mold was incredibly difficult. Um, but, um, I think opening up was a really momentous thing that China did, and it wasn't just joining the WTO. I mean, they were doing a decade of work in preparation leading up to that. Um, uh, what, what's called, you know, special economic zone is really to turn Shenzhen from a fishing village to an export platform, now to a Chinese-style Silicon Valley, right? And there was the agriculture reforms in the 1980s that meant that farmers could decide what they were gonna grow and keep the surplus, whereas it was a collective system before. You, you know that very well. And then, of course, the ultimate transformation was when China actually joined the WTO in 2001, and the rest was history, right? We're still talking about the aftermath. But reforms was the single biggest impetus to Chinese growth, and every time there was a major reform, it was followed by a good decade-long growth. Every time growth went down, there was a new series of major reforms rolled out and then, oops, that, you know, led to another wave of good growth. But I'd say that reform pace has slowed in the last 15 years, but are there reforms to be done? Yeah, absolutely. You know, has China reached even close to its potential? Not at all. Um, but again, it comes back to politics, right? Now it's less about economics. It's more about national security, it's more about politics, and I think that is probably the single biggest barrier to continued good economic growth.

   4. LFLex Fridman18:20

      Maybe can you speak to what it takes in such a large system, in many ways, it's such a successful economy to do reform? So you mentioned pragmatism. Deng Xiaoping famously said that it doesn't matter whether the cat is black or white as long as it catches mice. So there's that pragmatism.

   5. KJKeyu Jin18:37

      Yeah.

   6. LFLex Fridman18:37

      ... that I think underlies a lot of great reforms.

   7. KJKeyu Jin18:40

      As a contrast to Soviet Union, uh, the Chinese economy, as I mentioned, was extremely decentralized. You know, in Soviet Union the ministries were in charge of the central bureaucracy, but a lot of the power were given to these provincial governors, party secretaries, mayors of different sorts, and they were incentivized, that's the key, is that these mayors were incentivized to do a good job. If I were successful on a radical reform, if I were successful, I'd be a national hero and then that reform would be rolled out in every single city in, in the country over time, and I would be promoted to the higher rung of the central government and, who knows, I might even become vice premier, premier, president one day. That was how the individual was motivated to carry out these really tough reforms. Now China has changed a bit, right? It's not about being radical and radically successful, it's being, it's about being safe, right? So when you shift from, uh, basically an entrepreneurial state to a safe state, then the objective function changes and you see it in different economic, uh, outcomes.

5. 19:53 – 33:40

   Mayor economy and GDP growth race

   1. KJKeyu Jin19:54

   2. LFLex Fridman19:54

      So maybe can you speak to that? What, w- what are some important things to understand about the structure of the Chinese state?

   3. KJKeyu Jin20:00

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

   4. LFLex Fridman23:03

      So GDP is a measure of success and production. What's, uh, the measure or what does it mean to be successful on the consumer side? You said it's important to improve that. What does it mean (laughs) to be a successful consumer nation?

   5. KJKeyu Jin23:18

      Uh, the metrics shouldn't be geared just towards growth alone, GDP growth alone. It was just singular GDP growth and you can borrow, uh, heavily and just spend on infrastructure. That's not a productive way to drive the economy. That's what the local governments were doing for a long period of time. You know, in the last few years innovation, unicorns have kind of been an implicit yardstick for local governments. That's kind of how we've seen these great, you know, EV companies, 80 cities doing EVs, I mean, do we really need 80 cities to do their own EVs, right? Solar panels now DeepSeek has become, you know, a, a star. Uh, semiconductor companies, you know, each local government wants to have their own national champion. So implicitly technology was part of the yardstick competition as well, but if you can more accurately have a metric for consumption measures, really focus on, you know, making p- sure that it's coming from consumption, this GDP growth, rather than from investment or infrastructure, then I think that it might focus the government's objective a bit more on, uh, thinking about how to make people feel more secure, uh, so that they want to save more. For instance, creating more jobs. For instance, more on social security spending, on healthcare, uh, on elderly care, uh, because for the longest period of time this political economy model was brilliant at scaling up supply, but it was extremely weak at raising personal consumption because the incentive does not lie in consumption, it lies in production. So you shift the objectives a little bit and maybe local government will do more to stimulate consumption.

   6. LFLex Fridman24:56

      Okay. You mentioned the mayor economy. That seems like an incredibly powerful idea. And you also mentioned that perhaps, uh, you're not sure exactly how perfectly efficient it is and what efficiency there means, how good are you at quickly figuring out the best ideas. That's what an efficient market does. There's a kind of component to what you're saying where you're a little bit critical of, do you really need 80 EV companies? But maybe you do. It seems like an incredible thing to do, right? So what are the pros and cons of this? Maybe you could speak to it a little bit more.

   7. KJKeyu Jin25:29

      I think it depends on the timing. If you're starting something, starting a new emerging strategic sector like EVs or batteries or solar panels, you need the local governments to be involved, to mobilize, right? The big push to coordinate the supply chains. If you wait for the markets to develop over time, it's gonna take a long time, maybe they don't even want to do it, right? Look at the U.S. The U.S. is very, very behind on some of the new strategic sectors. But once you've reached a certain level of market competition, I think the state needs to, to withdraw or to retreat because ultimately the state is not the best at allocating resources, picking winners. You want the private actors, whether it's the venture firms or the, you know, through market competition to ultimately decide who gets the most resources. But in the beginning, that big push is not, not really in any of the canonical models that I've studied in economics in the Western school of thought, state push, state mobilization, state initiation. That's not there. But I think if you look at EVs, solar panels, even just thinking about the idea of reforms in the first place, um, that initial st- state push was vitally important. Uh, the other negative, although I think by and large positive aspect is, I don't think that we need 80 cities to do their own EV brands, but to get started, maybe that's what it would have taken to drive that incentive and then ultimately it's up to the market to decide who are the last five remaining EV companies, right, through market mechanisms. That's Chinese style industrial policy. Um, industrial policy was heavily criticized, and again, if I talk to my Harvard professors, they will be very, very, very skeptical about the s- the role of the state, especially in such a major way, but if you look at the Chinese experience, the evidence for success is all there. The, the cities that have pushed the most on supporting that particular sector ultimately did the best in terms of production, but also in terms of innovation, measured by patents. It's all in the data. Um, but the downside is that a lot of the capital is wasted, and this is what I also discuss in my book, is that it is inefficient, although maybe it's necessary. Uh, the amount of waste of investment, you know, plowed into these, uh, companies that will ultimately just go under, um, but also the misallocation of resources because it's led by the state are some of the downsides. But I gue- I guess on balance it's been positive because look at China's internal combustion engine effort. Nothing, right? Semiconductors. Thanks to Biden, thanks to Trump, it's improved dramatically, but all these things that they tried to do before, they couldn't do, but when it's a new thing, like something that there's no incumbent, no particular advantage in any country, actually China's really spearheading these sectors.

   8. LFLex Fridman28:34

      Can we linger a little bit more on this mayor economy? It just seems like such a powerful thing where one mayor looks over to the next-

   9. KJKeyu Jin28:42

      (laughs)

   10. LFLex Fridman28:42

       ... and looks even just a trivially simple number like the GD- GDP. Why don't we do that in the United States or in the West more, just compete on GDP?

   11. KJKeyu Jin28:52

       Well, you, you need to be elected and reelected, right? Is that what your electoral base cares about, right? In China, it's what the central government, your boss cares about. If you ask the consumers, they'd rather... you spend on social spending, right, the things we talked about that stimulates consumption, on education, on healthcare, things that stimulate demand. So-

   12. LFLex Fridman29:14

       Yeah.

   13. KJKeyu Jin29:14

       ... that's the political... It's the difference of political system.

   14. LFLex Fridman29:18

       So maybe can you speak to the difference, another difference is the long-term, multi-generational thinking, uh, that permeates Chinese culture. So how does that differ from the West's sort of, the Western style capitalism of, uh, quarterly focused thinking?

   15. KJKeyu Jin29:35

       The Chinese are both the most patient and the most short-termist, um, economic actors I met. The patience I don't need to explain because I think the political continuity means that they can make plans for two decades ahead, right? Even longer. Um, uh, the investment of Chinese parents in their children is a multi-decade long project, uh, and they, they save. You know, Chinese people love to save because they think that they'll have even more money, uh, if they save that money rather than spend it on a ski vacation. So that, I, I think it's patently obvious to, uh, uh, most people a- around the world, but I think that most of them would not have known that there's a, a very popular motto in China which is called, "Short, flat, fast," that's the impatient part of the Chinese culture, especially with respect to the economy. Short, flat, fast was used to describe a winning volleyball strategy that eventually became adapted to describing the society as a whole and economic decision-making.

   16. LFLex Fridman30:45

       Nice.

   17. KJKeyu Jin30:46

       If you're an investor, you only want to invest in things that you can quickly turn around, make a lot of money, and don't need to do much work. Uh, it also applies to marriages, so a short courtship, a very flat emotional relationship, and a fast divorce. Um, that-

   18. LFLex Fridman31:01

       (laughs)

   19. KJKeyu Jin31:02

       (laughs) That is, uh, how, uh-

   20. LFLex Fridman31:04

       Uh-huh.

   21. KJKeyu Jin31:04

       ... y- you see these, um, companies rise, you know, within a very short period of time. Of course, investors are only interested in those companies that can, uh, turn around and exit in a very short period of time, making many, many multiples. And, um, so in that sense, people are very, very impatient, right? Uh, I, I sit on some boards of these-... long-standing companies and the values are just so different, uh, even though a lot of these public companies are constrained by the quarterly results and so forth. But the values are about sustaining something, a company for a long time, thinking about organic growth, thinking about investments for the future, sustainability. Um, maybe it's that competition, maybe it's the speed that we're used to in China, people think about short. Um, so you know, this dichotomy is very, very interesting.

   22. LFLex Fridman31:59

       That's surprising to me.

   23. KJKeyu Jin32:00

       Yeah, well this is-

   24. LFLex Fridman32:00

       It's a surprising idea, right? So that there is a kind of, uh, in the West conception of Chinese culture, Chinese economy that everything is usually 50, 100, 200 years out you'd have this long vision. But you're basically saying that there's a deep, uh, in the business sector, uh, impatience about everything.

   25. KJKeyu Jin32:20

       That's, it's a transitory phenomenon I'd say, but if you look at the cheaper stuff, poor quality, that's a reflection of the copping, it's the same kind of mentality, just get ahead quickly. But again, that is all shifting. That is all shifting because China's now in a different stage of development. If you ask the younger generation, they really care about quality, they care about values. Uh, and these companies, these very successful companies, successful in five years, 10 years, found themselves in a very difficult position after a longer period of time. So that short, flat, fast attitude which was so popular, especially before the pandemic, that's actually somewhat disappearing. So in some sense, this economic downturn is not that bad for China because it make- it made the Chinese realize that it's not always gonna go up. And, uh, it made them really look down deeper into what they really should be focused on, uh, that there will be cycles, there will be up and downs, and so these very short-termist thinking and opportunistic way of driving business will ultimately fail. Um, it is, it's bad for China that we're having a sustained economic, uh, uh, softness, res- uh, sustained economic softness, but I think it's also a very, very important lesson for the Chinese people to go through.

6. 33:40 – 39:18

   Growing up in China

   1. KJKeyu Jin33:41

   2. LFLex Fridman33:41

      Let's go, if we can, a bit to the personal. So you grew up in China. What are some moments from childhood that were maybe defining to your understanding of Chinese culture and Chinese economy?

   3. KJKeyu Jin33:55

      You know, we look back at those moments when everybody in China was very poor with a bit of nostalgia. (laughs) I remember, um, no doors were locked. I was, I was in Beijing and I remember every day in the summer everybody just went downstairs and chatted with everybody else.

   4. LFLex Fridman34:13

      Mm.

   5. KJKeyu Jin34:14

      Um, uh, it was very social, it was very community-based, uh, the neighbors help each other. Uh, we had very, very little, uh, small apartments, very limited access to certain goods. When I was born there were, even in Beijing there were, there were, you know, these, these vouchers for how many eggs you can buy, and even Beijing there were three or four blackouts per week typically. There was a sense of community, there was a very strong bond between people and within the family because they were going after a common goal, making your life better, right? Struggling, striving to make your life better. And I remember being on the back of my father's bike, uh, getting up, you know, 6:00 AM every day and going to nursery and, you know, that's, that's the typical day. Uh, not a lot of material goods, but people had a sense of purpose and, uh, s- that's radically (laughs) a different, uh, it's completely different now in China.

   6. LFLex Fridman35:13

      Do you think that if we go to the human condition, do you think that, that nostalgia has some truth to it or is it just nostalgia like any other? Is there some aspect of an intense competitive vibrant economy that loses some element-

   7. KJKeyu Jin35:29

      Absolutely.

   8. LFLex Fridman35:29

      ... of, of everybody being poor together? (laughs)

   9. KJKeyu Jin35:33

      (laughs) Well, everybody having a, a common goal and a sense of community, right? That, that is what's missing in these extremely individual-based capitalist societies. And I think what the Chinese government is striving to do with Chinese socialistic characteristics is to somehow try to preserve a bit of that socialist character while still relying on markets, market-based incentives. But if you're an extremely in- individual-based society, I think you do s- you do lose a lot of that, and I think some of the backlash that we're seeing, uh, from society is a reflection of that, right? People being alone more and more. Uh, the, the death of despair in the, in the US. Uh, the addiction, you know, that, um, it's, they're lonely, right? And competition means that you kind of have to be somewhat badass and, uh, you sometimes put down values and you forsake harmony in order to get ahead. That's certainly the Chinese society now. That was not the case before.

   10. LFLex Fridman36:34

       Do you think that's a natural consequence of, uh, of capitalism almost always that you become more individualized, you become lonelier, y- you feel lesser if you're not winning and thereby (laughs) uh, somehow that, uh, breaks down society, community more and more?

   11. KJKeyu Jin36:54

       I think it's a spectrum, right? And, uh, Europe is somewhere in between I'd say, uh, but Europe also is not as technologically and innovative as the US, but on a social level there is more social protection for the people, there is a, a stronger sense of community I- I'd argue. It's not perfect. Ultimately it is a choice and this is what I think the- China has to decide, right? Do you want technological supremacy and radical breakthroughs? Well, yes, if you do then you have to tolerate that there are gonna be some people who are gonna be-... it's just gonna be, um, uncomfortably rich, right, like in the United States. You can't say that you detest the financial system for its greed, uh, but then not accept the fact that it is what fuels innovation, right? Um, risky capital fuels, uh, uh, uncertain investments which allows for countries like the United States to be making these breakthroughs. That's what China wants, but at the same time China can't tolerate these extremely rich people around and the power that they, is accrued to them. They want to, to be a leader in technology but then the financial system is not liberalized. Uh, it's highly, uh, regulated but it's al- uh, you know, there's also intervention. Even if we look back at the French civil law versus the English, uh, common law, well the former protects, uh, creditors and the latter is more friendly towards debtors which gives them more breathing space to innovate but also to fail and to innovate again. Uh, and that makes a big difference. So it's all about a spectrum, right? But you can't have it both ways.

   12. LFLex Fridman38:41

       We don't often enough have that nationwide conversation about what we want to be as a country. There's just a group of people yelling, "We don't want billionaires."

   13. KJKeyu Jin38:51

       (laughs)

   14. LFLex Fridman38:52

       And another group saying, "We don't want communists." Or whatever, it's a very trivialized kind of chanting, but there is a balance, there is a spectrum and you get to decide, uh, do you like the nice things?

   15. KJKeyu Jin39:05

       Yeah.

   16. LFLex Fridman39:05

       The nice toys?

   17. KJKeyu Jin39:07

       And the power that the US has.

   18. LFLex Fridman39:09

       And the power, the geopolitical power, the military power, cultural power, influence on the rest of the world. Yeah, you get to choose which, which do you want.

7. 39:18 – 43:32

   First time in the US

   1. LFLex Fridman39:18

      Um, so the first time you went to US what was that like? You mentioned Harvard. How did that change your understanding of the world?

   2. KJKeyu Jin39:27

      Um, well it's funny that we're talking about this now because I was able to go to the US on a scholarship to an American high school because the US at that time wa- was open arms, all open arms towards international students. (laughs) They kind of wanted to be the, the country that was going to educate, uh, the future leaders of the world and their elitist in, uh, institutions, like Harvard was really gonna be, you know, they're the center of the world. So, they welcomed students like me and many, many others, uh, to be exchange students to study in the US, um, and w- we thought, "Wow. We've never seen a more generous country." (laughs) Um, and I was able to, uh, go to high school, an American high school, and live with an American family which was, wow, can I say, a big change, uh, from, from China not only because I was plucked from the Communist Youth League, uh, Party and then straight to supporting their Democratic campaign because the host family was running for state attorney general in New York.

   3. LFLex Fridman40:31

      Wow.

   4. KJKeyu Jin40:31

      So I was kind of going to these conventions and handing out flyers and trying to get votes in, I don't know, in China, Chinatown or something. But, um, but it was, it was so interesting to see that's how the system worked, um, but in the course of doing that I realized that people had a very simplistic understanding about China, and that's probably, um... Even when I was 14 I decided that one thing I wanted to do was to dispel some of these deep myths about China because the China that they knew, and again it was all the three Ts back in the late 1990s, Taiwan, Tibet, and Tiananmen Square. That's, that's they thought about China, they thought about these three things. And I was like, well this is strange because that's not how I'm feeling in China with all this, you know, bidding for the Olympics before 2000 and all these buildings going up and down, all this excitement about, you know, joining the WTO, all these radical reforms that are, that are, that are taking place and then all this effervescence that you feel in the air, you... It's not GDP growth as numbers, you actually see it. I said this is really, you know, and they're describing China as if it was a place shredded with white terror. And so I thought, hmm, that- that's interesting. Uh, there's a big gap, big gap of understanding. And even today, that many years later, um, people know China a little bit more but the sentiment hasn't profoundly changed.

   5. LFLex Fridman42:05

      It's still the three Ts I feel like. (laughs)

   6. KJKeyu Jin42:08

      (laughs) Some variation of that.

   7. LFLex Fridman42:10

      Uh, so what, what about the level of misunderstanding of Chinese people of the West? Is there a similar level of misunderstanding the other direction as well?

   8. KJKeyu Jin42:20

      I don't think to the same extent because there's Hollywood, uh, that you can see daily American life although it might not be totally realistic. Um, there was a huge amount of admiration of US, um, technology innovation but also the American dream. Uh, I think our newspapers even though there's bias everywhere is not focused only on reporting the really bad stuff and portraying a negative side. I, I think these few years have been a little bit different but so many students went to the US, right? Um, so many people travel to the US and this is the interesting thing, I've rarely met an American who has been to China and who still goes on about how bad China is. I think that-

   9. LFLex Fridman43:13

      (laughs) Yeah.

   10. KJKeyu Jin43:13

       ... going to China makes all the difference.

   11. LFLex Fridman43:16

       I feel that's like one of the big gaps of my life that I need to, uh, uh, alleviate is to travel in a real way for a long time to really experience the people and the cultures. And China's a big place.

   12. KJKeyu Jin43:27

       (laughs) Go, go dig deep and don't just go to Beijing and Shanghai.

   13. LFLex Fridman43:31

       (laughs) .

8. 43:32 – 47:06

   China's government vs business sector

   1. LFLex Fridman43:32

      Um, let's go back to the economics. So can you just...... uh, dig a little deeper on the relationship in, uh, China between the government and the companies in the private sector. So how much freedom do companies have?

   2. KJKeyu Jin43:48

      Another big misunderstanding, and a fundamental one, is that people somehow think that the state suppresses the private sector. It's not at all as simple as that. Um, for the most part, if we look at the local government's incentive system, they wanna help the best private companies which are the most promising because it makes them look good. It adds to their GDP, it adds to the jobs, investment. They are so helpful to these private companies. Actually, I- I- I know many of these local government officials working tirelessly day and night, especially in bad times, uh, to coordinate between debtors and creditors and to kind of smooth out and define relationships with banks. They wanna help these private companies because again, their incentives are aligned. Uh, DeepSeek is a private company by the way, so it has done the country proud, and why would the state wanna go and suppress these private companies which ultimately is kind of a beacon, represents a beacon success for China? Um, now on how much freedom they have, it's really ranged from too much freedom, that's part of the problem, where you have defense companies buying art auction houses, real estate companies like Evergrande buying soccer clubs, doing EVs, uh, uh, uh, companies, uh, uh, investing in real estate that has nothing to do with their core business. That's how much latitude we're giving to private companies and there were consequences. Uh, they were not reined in. And then you go to the other extreme to where they're scolded, they're reprimanded, they're reined in, and they're kind of folded into submission. So that- that is the whole spectrum. You have the whole range. But I guess what we're really getting at is, it is a country that is moving from a no rule of law or very little rule of law, very immature markets, to something that is being gradually, um, uh, uh, uh, established bankruptcy laws, you know, corruption laws, uh, rules and regulations on what's possible. Uh, one interesting point is that, uh, in China, you- you ask the companies to innovate first and then you re- regulate after, right?

   3. LFLex Fridman46:09

      Mm-hmm.

   4. KJKeyu Jin46:09

      So that has led to things like P2P platforms, the- you know, it's led to lots of kind of financial innovations, some of which has actually been very helpful and good, some of which have been disastrous. But the intention to regulate after the fact is to really not, um, slow down or hinder the innovation. This is a very different approach from Europe. You regulate first and then, you know, c- companies have to work around that. Um, so the- this is why Chinese economy is so complex. Uh, you cannot reduce it to simply a statement saying the state is unhelpful for the private or- or- or something like that. Um, there are certain sectors where these SOEs dominate, right? Uh, when it comes to national security in terms of energy. But let's not focus on these few sectors. By and large, most of the economy, if you actually admit to the fact that China's highly innovative and high- highly entrepreneurial means that it must be the private sector that is driving

9. 47:06 – 50:45

   Communism and capitalism

   1. KJKeyu Jin47:06

      the show.

   2. LFLex Fridman47:06

      Innovate first, regulate after, really interesting. Uh, I also, in my mind, am contrasting it with the way the Soviet Union and Russia since operated. It doesn't sound at all like this model, and it's interesting that countries that at least on the surface had a similar cultural communist problems, you know, the bureaucracies that form inside the communist state, it just seems that, um, China broke away from that somehow.

   3. KJKeyu Jin47:36

      Yeah.

   4. LFLex Fridman47:36

      That- don't understand exactly what happened.

   5. KJKeyu Jin47:39

      In the West, they group these economies together as if they're the same thing. No, it's not the same at all. There's so many differences, uh, so much more flexibility. You can have dynamic entrepreneurialism, at the same time have socialist characteristics, and I think this is what China has been able to shape and mold, a unique model that balances between government industry, between state coordination and market mechanisms, and between individualism and communalism. It's not necessarily black and white. You can have all these things at the same time.

   6. LFLex Fridman48:12

      So what are the pros and cons of being an entrepreneur in China versus the West? Like if you get a choice, you have a dream, you wanna build epic things, what- and you get to choose where to start that business. What are the pros and cons of each path?

   7. KJKeyu Jin48:26

      In China, the speed is just awe-inspiring. You have a good idea, you implement it, you realize your dream very fast because there's also the support system, right? The infrastructure there, the digital infrastructure there, the engineers are there, the talent is there and they're cheap. And the market competition is there to keep y- to keep you going. The consumers give you a very, very fast feedback, you know. Look at Xiaomi who was making phones and now it makes one of the world's best EVs. 270,000 cars sold in one day a few days ago with their new model. They were-

   8. LFLex Fridman48:59

      Wow.

   9. KJKeyu Jin48:59

      ... phone makers. So there's an advantage to that, okay? But I would not feel safe, um, not because of danger of expropriation or nothing like that, but the bankrup- bankruptcy laws are not there, right? It's not necessarily always fair competition. Things don't happen necessarily in an orderly manner. If you have a competitor, you can have a very evil competitor and evil competitors are there everywhere in China. They would, you know, call the police on you, put you in jail, uh, spread false rumors about you. Maybe that happens also in the US but there's a different- it's a different level, uh, in China. Um, and also-... the mold that you can have to protect yourself, the IP protection, right, that's much weaker in China because the legal system is not very effective. You have a good idea, you'll be copied. And there's a lot of work, you have to, you have to dine and wine with the local governments. I mean, that's not allowed anymore by the way, but you dine and wine, you know, figuratively speaking, you have to have a very good relationship with them. That's a different kind of work.

   10. LFLex Fridman50:03

       The wine and dine and the evil competitors is an interesting challenge that in some maybe distant ways akin to the problems of the Soviet Union. Uh, I think-

   11. KJKeyu Jin50:13

       Mm-hmm. Yeah.

   12. LFLex Fridman50:13

       ... I guess in the United States there's less of that and I don't even know if that's based on laws, 'cause there's a lot of lawyers in the US that could do the same kind of evil competitor stuff technically. It's just-

   13. KJKeyu Jin50:26

       That's true. The potential negative, um, ramifications are there. But I, I, I think personal protection is a big difference. If you make a mistake, if you, your company's not run well, you know, you go to jail. I think that the US is much, much more tolerant of entrepreneurship, entrepreneurs on failure.

10. 50:45 – 56:58

    Jack Ma

    1. KJKeyu Jin50:45

    2. LFLex Fridman50:45

       Since we're talking about it, there was a, uh, a lot of controversy around Jack Ma disappearing, quote unquote, and, uh, reappearing a bit later, and there's been sort of rumors of some tense relationships that he has with the Chinese government. What is important to understand about that whole situation? Uh, like to what degree is it reflective of the issues entrepreneurs face in China?

    3. KJKeyu Jin51:11

       In the US capital controls politics, one could argue. In China it has to be the other way around. Capital must be reined in by politics, as part of the capitalist class do not have the ambition to exceed the powers of the political class, is really at the core of it, I'd say, and the biggest difference between US and China. Um, there are important details that I think the West has not fully provided to the public. Um, for instance, Ant Financial, as innovative as it was, um, was doing banking jobs without being regulated like a bank, right? So that obviously poses a host of financial stability questions and, um, and rules and regulations and so forth. So the fact that IPO was halted, uh, you could say that there were strong economic regulatory grounds, uh, for that. But I think more broadly speaking, if you're an entrepreneur, part of the capitalist class, keep your head down, make money, and that's fine, right? Uh, do some philanthropy. There are also many, many other billionaires that are just fine, that are actually very much in favor, uh, of the political leadership and, um, they do their thing. Now I'm not saying what's right, what's wrong, it's just very, very different culture and different country. In the US it's great to be colorful. I mean, you have a very, very colorful president, he would never have been able to make it in China. Uh, you have the likes of Elon Musk. It's great to be different, it's great to stand out. You do not want to stand out in China. So the moral of the story is that the top leadership understands that it needs these top entrepreneurs, the likes of Jack Ma, and, um, they have done so many great things for the country, even for the world, but in China garnering too much influence and power even through social media, uh, doesn't make you look that great. It's not a good thing for you personally. And, and there's a saying in China that you just don't want to be the tallest tree, right? The tallest tree gets the most wind. So I don't agree at all with the Western conclusion that this anecdote, this story has meant that entrepreneurs don't want to be entrepreneurs anymore, the young kids don't aspire to be people like Jack Ma. That's not true at all. The- the incentives are still there. It's a different kind of rich elite class in China.

    4. LFLex Fridman53:59

       So on, on what dimensions do you think that the height of the tree is measured? (laughs) Uh, is it, is it more about just mouthing off in public? So can you still be the richest person in China and actually not, uh, clash with the state?

    5. KJKeyu Jin54:19

       Absolutely. Don't be too outspoken, don't try to get too much attention and too much influence, and just, you know, again, it's a cultural thing, but just keep your head down, be humble. Uh, you know, contribute to society, do philanthropy, uh, work, collaborate with the government and you're kind of okay.

    6. LFLex Fridman54:39

       So the signal the Jack Ma situation sends to the entrepreneurs in China is, is, is not don't be an entrepreneur-

    7. KJKeyu Jin54:47

       Yeah.

    8. LFLex Fridman54:47

       ... it's more like, "Don't-"

    9. KJKeyu Jin54:49

       Don't be too colorful.

    10. LFLex Fridman54:50

        Don't be too colorful, and colorful means you can be colorful about the technical details of, of your technology, but don't be colorful about Xi Jinping and, and, and politics and just stay out.

    11. KJKeyu Jin55:04

        Yeah. Stay out of politics, but I just want to say, that said, Jack Ma was really an emblem, um, of extreme success, right, for China and the Chinese entrepreneurs look up to him. That's really important. It was a signal that unfortunately was misconstrued by this side and by also outside world, um, but it's laid a different path for what these entrepreneurs should be doing.

    12. LFLex Fridman55:32

        What do you think happened to him?

    13. KJKeyu Jin55:33

        (laughs)

    14. LFLex Fridman55:34

        So he's now I think living in Japan.

    15. KJKeyu Jin55:36

        That's by choice.

    16. LFLex Fridman55:37

        By choice.

    17. KJKeyu Jin55:38

        No, he's, look, he's an extremely fascinating character which, you know, and if he were in the US he'd-... thrive. Funny, witty, smart, wise, uh, creative, uh, loves a good life, and I think it's by choice that he's roaming around the world, um, given that he has more free time.

    18. LFLex Fridman55:59

        You think he loves China?

    19. KJKeyu Jin56:01

        All of them do. All of them do because their lives, their, their destinies were totally changed because of China, because of the government, because of , because of everything.

    20. LFLex Fridman56:14

        So, um, you know, I know a lot of people from the, the former Soviet Union and there's a deep resentment of broken promises, broken dreams. So, that is not-

    21. KJKeyu Jin56:24

        No.

    22. LFLex Fridman56:24

        ... something you see-

    23. KJKeyu Jin56:25

        That's not how I would describe that generation and their feelings towards China. Of course, you always get exceptions, right? The ones who have-

    24. LFLex Fridman56:32

        Sure.

    25. KJKeyu Jin56:32

        ... moved to the US and who, who, who wants a democracy, but by and large people are deeply grateful to China, the Chinese government, the Communist Party, if you want to label it as that, because they've seen their lives be totally transformed. I mean, Jack Ma went from being a school teacher to becoming one of the most powerful people in the world. I mean, if you didn't have China, what, what... how could that have happened, right?

11. 56:58 – 1:03:35

    China's view on innovation and copying ideas

    1. KJKeyu Jin56:58

    2. LFLex Fridman56:58

       Uh, can you speak to the thing you mentioned a few times, which is the difference in, um, American versus Chinese or maybe Western versus Chinese, um, approach to entrepreneurship? Uh, zero to one versus one to n? Uh, maybe can you explain that and, uh, what will it take for China to become a consistent zero to one innovator for the individual entrepreneurs to create totally new things versus doing the things you mentioned about speed and scale?

    3. KJKeyu Jin57:28

       The US will lead for some time on breakthroughs, on disruptive technologies, the zero to one technologies, um, that ultimately change the world. But innovation is a process. It goes from invention to production and commercialization and diffusion. Diffusing technology throughout all parts of economy and on those two stages, I think that China has a unique advantage, even if it still can't do the zero to one breakthroughs. Because in the end how much this technology is adopted by the countries and by the various parts of the economy is fundamentally crucial to how much productivity will be unleashed. And China's innovation currently, the Deep Seek is really one example and I think it's really the beginning of the scale based leading edge technology, cost cutting driven kind of innovation model could be just as powerful, maybe even more effective and powerful than the breakthroughs. Um, and it's a very different approach to innovation. The Chinese companies focus on solutions, problem solving. Again, that comes back to the education system, right? You're giving a problem, I'm gonna find the answer, the Chinese students can do it. You want them to write their own question, they can't do it, right? I'm exaggerating a little bit but it's a little like that, right? They see a problem, they're gonna go after it and they're gonna find the best solution. Um, and that's really, really useful, right, because we don't need, or developing countries especially don't need these frontier technologies that they can't use. And China currently has this AI+ program which is about pushing AI into every single plausible sector with the help of the state. So, adoption diffusion is very important. Why China can't do breakthroughs or can't do zero to one technologies, I think at the root of it, and there are some deeper, uh, uh... we talked about the, the, the proximate, uh, reasons, the short, flat, fast, for instance.

    4. LFLex Fridman59:36

       Mm-hmm.

    5. KJKeyu Jin59:37

       Right? You don't want to spend too much time on investigating something that you don't even know if it's commercially viable. So, basic research is still weaker than in the US universities, but also this kind of intrinsic motivation. It's very different, right? In China, it's driven by extrinsic motivation. You are rewarded by, you know, compensation, financial compensation. All these kind of extrinsic motivation is what drives you, but intrinsic motivation, pursuit of knowledge for knowledge sake, right, that was deep in the Confucius philosophies but of course, you know, poverty has changed all that. The profound commitment to scholarship, to research which we know is very much true in the US universities, that's... it's starting, it's starting but it's not there. Um, so, I think these two approaches are actually quite compatible with each other. I don't know what all this fuss is about, right? Uh, China uses technology very well, it can scale up and reduce costs and then it can spread it around and the US, you know, has... makes the highest value added by inventing these technologies, um, but, you know, again diffusion matters.

    6. LFLex Fridman1:00:48

       Well, yeah. The things you mentioned, the, the scale, the manufacturing, the diffusion, from a sort of economics perspective, you wonder which is the more important skill to have and it seems like, uh, the cost cutting, the efficient large scale fast manufacture, the diffusion is much more important for the success and the growth of the economy.

    7. KJKeyu Jin1:01:11

       I think where it ultimately leads to an impact on the economy that's more important. I- it's this persistent question we have, why don't we see the productivity in the numbers, right? You're in AI. AI we had long periods of investment, right? You just don't... you haven't... you hadn't seen it in the numbers until maybe even recently and it's still very slow. But China's pushing that.... in the sectors, you know, robotics, um, AI, cloud, industrial internet of things. And even companies like Huawei, I think i- it's gotten a little bit of t- too bad of a rep, uh, in, in the US but American engineers working for Huawei said that it's, you know, they're so happy working for Huawei. The intent focus on innovation but also on solution-driven innovations in Africa, in rural areas really changes people's lives. It doesn't change the world but it changes individuals' lives.

    8. LFLex Fridman1:02:04

       What's the feeling that Chinese entrepreneurs have about copying technology? Because I think one of the cultural things in the US is just really not respected if you copy.

    9. KJKeyu Jin1:02:16

       Yeah, yeah.

    10. LFLex Fridman1:02:17

        So like that's not seen, that's seen as a big problem and is there some degree to where in China it's not?

    11. KJKeyu Jin1:02:25

        No, unfortunately, um, this is a big cultural difference. Our, our sense of property, uh, rights is actually quite different from the US. I think that will change over time but absolutely you're right, um, they are, they have no qualms about copying as long as it leads to success, right? That's the difference in values. Uh, as we mentioned in the beginning you asked why, why the level of competition is so fierce, well, they all do the same thing once they've seen one successful thing, everybody does the same thing. You'd have no respect for doing that in the US, right? But in China it's all fine but I think that over time it will change, just give it a little bit of time.

    12. LFLex Fridman1:03:04

        So to you fundamentally it's a bad thing?

    13. KJKeyu Jin1:03:07

        In the end if China's all about innovation technology, you cannot not have very strict IP protection.

    14. LFLex Fridman1:03:15

        True.

    15. KJKeyu Jin1:03:15

        Right? And ultimately, again, we're still in the short flat-

    16. LFLex Fridman1:03:20

        (laughs)

    17. KJKeyu Jin1:03:20

        ... fast-

    18. LFLex Fridman1:03:21

        Yeah.

    19. KJKeyu Jin1:03:21

        ... stage, right?

    20. LFLex Fridman1:03:22

        Yeah.

    21. KJKeyu Jin1:03:22

        When we graduate from that stage you're gonna have very different views about these things and you're gonna try to diversify and do different things but again it's a stage. Chinese people were hungry, they're still a little bit hungry, they're not gonna be as hungry in the

12. 1:03:35 – 1:07:29

    DeepSeek moment

    1. KJKeyu Jin1:03:35

       future.

    2. LFLex Fridman1:03:36

       So can you describe the Deep Seek moment and, uh, Deep Seek as it represents what China's thinking about in the space of AI and, uh, does China have a chance at outrunning US in the AI race?

    3. KJKeyu Jin1:03:50

       Deep Seek was a surprise to the world but I don't think it was that much of a surprise to the same degree to the Chinese. Um, and remember that Deep Seek happened in times of crisis, urgency, not in times of comfort. A lot of these technological breakthroughs and leapfrogging happens in times of crisis, this is called crisis innovation and you gotta thank the US for that, right? When the Chinese were comfortably importing chips from the US, the whole industry stalled for 20 years. I mean, why would you plow in billions, tens of billions and even more when you can just import the best, right? You don't want to do your own innov- innovation. It's because of these export controls, these sanctions on these companies that Chinese companies and the Chinese state felt an existential crisis a few years ago on being, by being cut off from these critical components and guess what happened? In a short amount of time the, uh, degree of domestic capacity ramping up and catch-up has been nothing short of remarkable. Again, thanks to, uh, US truculence on technology. Now, I'm sure there are many aspects of hypo- hyperbole related to Deep Seek but it just shows you that the gap is much smaller between the China and the US on leading edge technologies than what was expected, that these export controls were not effective, they may have even backfired and it shows you that China has this relentless focus on taking some of the existing technologies and using scale, um, and, um, the, the advantages to cut cost and to diffuse. And this is just the beginning, I think it will happen in many other industries as well including in semiconductors. Um, and that's the Chinese approach. Now, there's an interesting dilemma here which is that this is happening at a, in a time of extreme economic softness, slowdown, um, amidst uncertainty, trade wars, uh, uh, a lack of confidence, uh, a slowdown in private investment and consumption, a withdrawal of foreign investment from China, especially the US venture, um, funding. Imagine what China had, would have been like, let's say, if the economy was doing better, right? But you could also argue that it's because people feel threatened that they make more leaps. Now, I wish the world is not, we don't have to, you know, drive each other to the corners to do something great but that is the reality and, uh, I don't think that there's an easy say between who wins because I think the winning idea is part of the old playbook, right? You're all pa- kind of part of a network, different countries, different players have different choke points on each other, I don't think it's just about the US and China and what's more you use your leverage once and that leverage has a half-life. It becomes a lot less effective the second time around because uh, other countries, other companies are gonna try to substitute it away. You know, if China uses the rare earth leverage, which I think it is now a little bit, um, there will be alternatives and substitutes. Gotta be very, very careful of what coercion leverage means, same thing with the US, right? So I think this is all the old thinking of who wins, who dominates, I think we need a new, new playbook.

13. 1:07:29 – 1:09:16

    CHIPS Act

    1. KJKeyu Jin1:07:29

    2. LFLex Fridman1:07:29

       So y- to you maybe wh- when you refer to Biden and Trump, if we go back to Biden it would be the CHIPS Act, so the export controls created unintended, unexpected effect where it had the reverse...... geopolitical effect?

    3. KJKeyu Jin1:07:43

       I hope it was unintentional, otherwise I, you'd be questioning (laughs) the level of intelligence of the US administration, right? (laughs) But, um, I think that the things they laid out did the opposite of what was intended. It sped up, um, domestic capacity, it, uh, uh, motivated the whole country to do this whole of a nation program to go after technology. It's kind of like the way they go after Olympics, right? Olympic gold medals, they wanted to maximize Olympic gold medals, and they put the whole nation at work and all the resources, and that's what China did. Huawei, another example, they were sanctioned. Guess what? They have come back to life stronger than ever before. And this is not unique to this episode. If we look at throughout history, these blockades don't work. The continental system actually indirectly led to industrial revolution, uh, in the UK, uh, when the, the Spanish, uh, kind of blockaded the, the Portuguese, they came up with a very ferocious, forceful naval power. Um, and you're talking about China here, they just don't lie down and lie flat and say, "Oh, we give up." Right? They're more motivated than ever before. (laughs)

    4. LFLex Fridman1:08:59

       So the lesson is, (laughs) uh, don't force people or nations into a corner.

    5. KJKeyu Jin1:09:06

       Yeah. You make them have a very comfortable situation and they tend to become complacent and, uh, and they, they stagnate.

14. 1:09:16 – 1:21:41

    Tariffs and Trade

    1. LFLex Fridman1:09:16

       All right. So, uh, so can you talk through the whole saga of the Trump's tariffs that's still going on, uh, especially tariffs on China, from your perspective as an economist? To what degree was it justified, to what degree was it effective, to what degree is it bad policy for, for US, for the West, for the world, also for China?

    2. KJKeyu Jin1:09:38

       You know, China has been preparing for this for the last five years, and for the return of Trump, and for-

    3. LFLex Fridman1:09:44

       (laughs)

    4. KJKeyu Jin1:09:45

       (laughs) And for Trump's, uh, maniac trade policies. You'd think that Trump also had five years to prepare for this battle with China. It didn't show. Um, you can say that the Chinese, at least this time around, have played their hand pretty well when dealing with Trump's tariff threats and the trade war. Uh, with a level of calibrated assertiveness, they have really thought through everything very elaborately. Um, and, um, look, you know, this is not good for either country, let's just be clear. It's bad for, for US and China, and it's bad for the world, and every country has a stake in the US-China trade war because whether you trade directly or indirectly with China, you're gonna be affected. They are one of the largest intermediate exporters in the world, and Chinese manufacturing goods anchor global manufacturing prices. The cumulative tariff burdens, when you get to Canada, when you get to Mexico, when you get to any other final destination, these tariffs will affect you, right? So it's clearly very, very bad for the world. Um, China's core principles, and I, I think that this is not well-understood, uh, from the rest of the world towards the US, and something that they have kept up, is equivalence, reciprocity, and realism. China's not gonna lower tariffs unless the US does, right? Uh, you kind of stand up to Trump like a man, that's the only way, you know, to deal with Trump. That's its view. Um, you... The deal has to be realistic. The phase one deal the last time wasn't realistic, and China thinks, "Look, uh, the US is gonna use this as leverage." Right? That's not possible. This can't be seen as political concession, the deal has to be seen as mutual commerce. So where China can have room to negotiate is opening up things like services, you know, ch- American banks, American financial institutions have a lot of business to do in China. They can buy a limited number of more goods, they can discuss about transparency around rules and regulations on e-commerce, on data. All of that is fine, but don't confound economic issues with political issues. Hong Kong, Taiwan is not part of the deal, by the way, in case anyone was wondering. Um, trying to change China's state hybrid private sector model, don't go there. Uh, anything that challenges China's technology, security, that's not really part of the discussion. So I think that people have to be clear about also what China thinks, uh, and wants, and also the Chinese need to be clear about what Trump wants, although I, I, I don't know anybody, even Trump himself, knows exactly what he wants, um, in order for, for these very complex negotiations to actually succeed.

    5. LFLex Fridman1:12:47

       Okay, so China has a few red lines, so don't mention Hong Kong or Taiwan.

    6. KJKeyu Jin1:12:54

       (laughs) Don't mix the political issues with the trade deal.

    7. LFLex Fridman1:12:57

       Right. And then is there some degree, maybe you can speak to culturally, where stylistically there's red lines, meaning don't bully China, like language-wise?

    8. KJKeyu Jin1:13:11

       Mm-hmm.

    9. LFLex Fridman1:13:11

       Or does that not matter? Because there's a kind of way of speaking in the United States-

    10. KJKeyu Jin1:13:17

        Mm. Yeah, yeah.

    11. LFLex Fridman1:13:17

        ... that, you know, I, I feel like, um, in diplomacy in general, neither side wants to be humiliated, and in great deals, even when one side on paper wins, you wanna make the other side, especially the side that gets the short end of the stick, feel like they've won and show the rest of the world that they're the winner.

    12. KJKeyu Jin1:13:42

        Well, that's diplomacy.

    13. LFLex Fridman1:13:43

        That's diplomacy.

    14. KJKeyu Jin1:13:44

        We, we have an absence of diplomacy. But you're absolutely right, there, there needs to be respect.... the Chinese at least really care about respect. And I wish there was, uh, just a bit more cultural fluency and I think a lot of things would be so much easier, um, between the two countries, just understanding that, because you can actually push China to do a lot of things, right, all within reason, that would work in favor of the US but understand that respect is vitally important, face saving is very, very, very important.

    15. LFLex Fridman1:14:16

        To what degree what Xi Jinping says and what they're putting out there in the world represents the truth? So he has a whole way of being of like let's deescalate, let's all make good deals together, let's, almost like, let's be friend, like, uh, Modi a little bit has a similar way of being, like let's just, and the implied thing is like, uh, forgive the French, but if you fuck with us, we'll, won't be nice, but let's just all be nice together.

    16. KJKeyu Jin1:14:46

        (laughs)

    17. LFLex Fridman1:14:46

        What, is he speaking the truth?

    18. KJKeyu Jin1:14:48

        Xi Jinping is not Putin, right?

    19. LFLex Fridman1:14:50

        Sure.

    20. KJKeyu Jin1:14:50

        Um, (laughs) and, uh, there's a genuine desire on China's part to deescalate. Again, coming back to the level of pragmatism, uh, under economic strain in China, you don't really want to be picking fights. Um, they don't agree at all with Trump's economic views, (laughs) and world vision, let's just put it simply. So, eh, understanding that a lot of this is also driven by American internal politics, which they are aware of, helps a bit, but there's a genuine desire to take the temperature down with the US, even if the weather doesn't fundamentally change.

    21. LFLex Fridman1:15:34

        What is a good diplomacy look like here for both sides? What is the best possible on the, just strictly on the economics, on the, on the, on the trade, the tariffs, what's the best possible outcome for the world?

    22. KJKeyu Jin1:15:48

        I think that Trump can show to the American consumers that he has gotten some sort of a deal, right, that the Chinese have bought more American goods or promised to buy American goods and then that American companies can come into China and then a lot of the previously restricted investment opportunities are now not restricted and American banks can make in, make money in China. He can say that and, and I think that, that is, that could be part of a really realistic deal, uh, that somehow American companies will be better protected through IP protection, and, again, that's in China's interest as well. So I don't see a fundamental conflict here. And, at the same time, they lower the tariffs, right, not to the rates where they were before, but lower and you don't prohibit trade and then for China that would also be a success. So you can actually have success for both, both places, but being realistic is, is part of the game.

    23. LFLex Fridman1:16:43

        Is tariffs, question to you as an economist, is tariffs a useful, uh, effective tool for, uh, uh, global trade?

    24. KJKeyu Jin1:16:55

        No. I think that there is a real problem in global trading system and globalization in general, that is not gonna be resolved by tariffs. We do need to think about more harmony, um, between countries, uh, where, let's say, not one country dominates, and here I would, I'd, I'd push back on China and say, "Yes, you have amazing companies and competitive companies, but you just can't dominate everything. That would not be good for global harmony. You need to give other countries an opportunity." Uh, you need to develop your own internal economy, right? Rely on your consumers as part of the deal. Tariffs, this kind of highly protectionist method, is very distortionary and it's gonna be bad for the US. I'd actually argue that both China and the US have totally taken advantage and also enjoyed, uh, uh, the global economic realm under the US liberal order. I think that China quite likes it actually, you know. US kept, uh, peace and during those peaceful times things were working very well economically, technologically, um, they kept the sea lanes open, they did their part to preserve peace to the extent they, they can, I guess. But China wants peace, right? Only with peace can they do what they can. And actually US, despite saying they've been victimized, no, look, they've had a very, very good time, right? Never have quality of life, standards of living, technology risen as much as the US did under its own liberal order than it has ever before and the amount of influence and power. Yes, of course, um, you can blame the US for lots of things that happened, but it actually had a really good time, and China as well. So now they're gonna take this apart. They think that they're gonna be somehow better off, that American people and Chinese people are gonna be better off under more disorderly, fragmented rule of a jungle kind of world. That's an illusion. That's what politicians tell their people, but that's not the truth.

    25. LFLex Fridman1:19:05

        So what are, if not tariffs, ways to incentivize countries like the United States to build internally? So to build semiconductor chips internally, for example.

    26. KJKeyu Jin1:19:17

        Well, exactly. Tariffs is a way to punish foreigners, but what you really want to do is to strengthen your own domestic competitiveness, and I want draw, um, a- an analogy to the US-Japan competition in the 1980s. Uh, Japan actually took over many parts of the semiconductors industry even though the microchip was invented in the US but guess what happened? Well, it actually drove more competition and more mobilization in the US, actually creating this innovation system, changed a few really critical laws that helped with US innovation, and the consumers benefited. The US took over again as the leader of the semiconductors industry. There's no better way than to strengthen yourself to be competitive because ultimately tariffs have not done anything to help the US.... the trade deficits have, have widened since Trump, right? They haven't closed, uh, the imbalance with, with China, with the rest of the world, uh, because ultimately the US saves less than it invests. And that's a macro phenomenon, it's not a trade phenomenon. But I- I- I fear that the US, by kind of dropping off of this global, um, trading network and system, it will lose more and more of its power. You have power when you're deeply engaged and embedded with a country. Once you've left it, you actually lose any sort of leverage.

    27. LFLex Fridman1:20:47

        So there, there's gotta be ways to in- incentivize industrial policy, building more stuff in- internally without tariffs, right? So you just invest from a federal perspective, you've invest in companies. Uh, maybe like car- more carrot than... Carrot towards the domestic versus stick versus the foreigner.

    28. KJKeyu Jin1:21:05

        All kinds of subsidies that are justified for the green transition, for innovation, R&D, support for the university system. You know, the, the US is the world leader in terms of attracting talent, has everything going for it. But it was a little bit complacent, um, and by dropping off of that global network, uh, it's gonna do itself more disservice.

    29. LFLex Fridman1:21:30

        Yeah, tariffs don't quite make sense to me.

    30. KJKeyu Jin1:21:31

        (laughs)
15. 1:21:41 – 1:26:28

    Immigration

    1. LFLex Fridman1:21:41

       you did mention immigration a little bit, so I- I think that's a component of it also. You said w- your own experience was that, uh, US was much more open to immigration in the past. What do you think about this on the human side, the protectionism, the, uh, the closing of the borders that the US is doing? Um, is that... What are the pros and cons of that from an economics perspective?

    2. KJKeyu Jin1:22:07

       On US immigration, well, you see, I- I understand both sides of the story, to be very honest. And I also understand a bit of the protectionist streak, not only coming from the US but also from Europe and various parts of the world, which is gonna be a trend. I understand that before you care about people in the rural villages in Indonesia, you really care about, you know, the Northern Brits in this country, and they have not fared well. I understand that your jobs may be under threat because of this uncontrolled, uh, influx of, of, you know, illegal immigrants. Uh, from a purely economic and rational level, you'd say immigration is very important because it keeps the prices down, keeps inflation down. Uh, it keeps up the supply, uh, which is very important when you have that much demand. And look, you know, the standards of living have also improved for many people who can afford it, right? The, the low-cost workers being able to, um, sustain the service economy. So I understand both sides of the story. I think that in the end, it is a balance, and I do believe, even as an economist, that social harmony, and I come back to this word harmony repeatedly, even though as an economist this thing doesn't even exist-

    3. LFLex Fridman1:23:26

       (laughs) Yeah.

    4. KJKeyu Jin1:23:27

       ... um, is becoming ever more important. Um, and as a, as a nation, uh, you know, some kinds of skilled immigration is actually what makes the US the most technologically, um, advanced country in the world. At the same time, you do have to think about your own citizens, the ones that have had generations and been around, and you have to think about their livelihoods.

    5. LFLex Fridman1:23:52

       Yeah, the puzzle of social harmony is a fascinating one, 'cause you spoke to the, the long history of China, how they-

    6. KJKeyu Jin1:23:57

       Yeah, that was Confucius.

    7. LFLex Fridman1:23:59

       Yeah, that's Confucius, and then there is a kind of social harmony, a very different set of ideologies in the United States and, and in the West broadly, and s- it's all a puzzle. And you do want to have some cohesion, but in the United States one of its beautiful aspects is the diversity of humans. And so the continued influx of diversity is, you know, feeds the machine that makes America great also, but too much breaks the fabric of that society. So this has, such an interesting puzzle and some of it is like we humans can't balance, so you go one extreme, the other.

    8. KJKeyu Jin1:24:42

       Yeah.

    9. LFLex Fridman1:24:42

       You just oscillate back and forth, and then, um, also politics, especially in the United States, there's a red team and, and a blue team, and they, th- when, when the red team is at the top, the blue team just pulls all the way to the other direction and vice versa, and we just kind of oscillate back and forth in this way and hopefully make progress over time.

    10. KJKeyu Jin1:25:03

        But I wanna come back to the point of choice, right? What makes America so great is that it tolerates instability, it tolerates clashes, it tolerates volatility. Think about the financial crisis, right? The financial volati- but again, the US dollar is where it is because of this deep liquid financial system in the US that no other country has b- managed to build. Um, there are clashes everywhere in society, but it is a very diverse country with all the benefits to that. Uh, it is a highly, highly unequal, uh, country economically speaking. Uh, these, the CEO pays, right? The, the, the businessmen being able to be in top political positions. You, you kind of balk at that, that level of, um, uh, uh, cronyism, if you will. But, you know, the US is the technological leadership, and it kinda is a- able to stomach that volatility and clash without breaking apart.And other countries don't have the capacity, the institutions, the culture to be able to tolerate and still maintain, uh, you know, to keep the society together. So I think it is a very interesting, um... But, um, yeah, it's a puzzle.

16. 1:26:28 – 1:32:14

    Taiwan

    1. KJKeyu Jin1:26:28

    2. LFLex Fridman1:26:29

       So we talked about the economic side of tariffs, and you mentioned the other red line and the three Ts. Can we talk about Taiwan? So how important is Taiwan to the Chinese economy and the, and the global economy?

    3. KJKeyu Jin1:26:44

       Taiwan has, among other things, TSMC, which is vitally important for the global economy. It's also very important for the Chinese leadership and the Chinese people. Uh, you don't wanna ask what I think. Ask the Chinese young generation. They would one day like to see unification. It's part of the patriotic, the dream, if you will. So... And it's, it's a chip, right, between the US and China. So everybody is watching Taiwan, but I'd say that this attention is not necessarily good for Taiwan because all this uncertainty on the political risk has meant that investment there has dramatically been curtailed. And, um, mainland China is a very, very important economic partner to the Taiwanese economy. I think that... I don't have a lot of views about, around this, but I'll just say this. I think there's more political wisdom of the Chinese government side than we assume outside of China, and that strategic ambiguity, but also strategic patience, especially given China's economic situation currently, means that more likely or not, I think that if China does really well economically, and Taiwan is not doing as well economically as we've seen, that over time, this is still the best strategy, from China's point of view, um, to resolve these differences. I think any military use and action would be actually quite detrimental to China.

    4. LFLex Fridman1:28:31

       So what's a way to o- avoid military conflict here? It seems like a red line, unification is a red line for, um, the United States, and it just feels like a very tense situation. S- so is there a path forward here that avoids any mi- military conflict where everybody's happy from an economics perspective, from a semiconductor manufacture perspective also?

    5. KJKeyu Jin1:28:58

       Well, first of all, you have to keep the communication channel open, right? There was a risk of that being shut off during the Biden administration. That's highly, highly dangerous.

    6. LFLex Fridman1:29:06

       You're meaning US-China communication?

    7. KJKeyu Jin1:29:08

       Yeah. There's also something that I think people miss, um, which is that the, the soldiers in mainland China, that's part of the one-child policy generation, right? There's only one son. Families have only one son. And I think to assume that the Chinese people desire and would be able to forsake that generation for unification purposes or be able to tolerate lost lives for this, I think is also a bit of, of an exaggeration and stretch. And I think Chinese people also really, um... They really care about peace and stability. Chaos is just not part of what they think is good for them. Um, the role that TSMC plays is so critical given the chokepoint they have on the rest of the world, um, in the semiconductors industry, which we know is one of the most important industries, uh, sustaining the economy. Not to mention things like AI and, um, technologies. Uh, look, you know, the US has been trying to, to build another, uh, TSMC outside of Taiwan. It's very, very, very slow, right? Um, there are a lot of cumulative, uh, uh, knowledge, experience, and skills that are involved. It's not that easy. The Chinese don't wanna see an eruption of TSMC either, um, because, again, it's vitally important for everybody. Uh, whilst I don't think that this is really necessarily a bargaining chip, because if you really see what the Chinese thinks about Taiwan, it goes beyond economics, it goes beyond the logical. It is about, um, you know, realizing a dream which even I, I, I tended to, um, not place enough importance. But when I talk to the young people in China, I realize that it's still their dream.

    8. LFLex Fridman1:31:19

       It's just unfortunate that this dream is mixed up in the fact that Taiwan with TSMC has been incredibly good at manufacturing. Yeah, it's just like a interesting puzzle of why it's so difficult at low cost, at scale to manufacture chips, and it's just in- i- incredible that they were able to do it, and it's a interesting puzzle for how China can do it domestically and how US can do it domestically.

    9. KJKeyu Jin1:31:43

       Yeah.

    10. LFLex Fridman1:31:44

        And it seems like there's increasing urgency on that, and I think if we look out in the next 100 years, uh, the urgency is good because it's probably good for each individual country to be manufacturing majority of their chips. Right? It just... It- it's less likely to lead to conflict.

    11. KJKeyu Jin1:32:03

        Well, this is the trend that you need to manufacturing things that are important for national security. Uh, it's not efficient, but it's so-called strategically

17. 1:32:14 – 1:40:11

    One-child policy

    1. KJKeyu Jin1:32:14

       safer.

    2. LFLex Fridman1:32:15

       You mentioned one-child policy. So can we speak a little bit more to that? Like what broadly...What impact has it had on the Chinese society? On culture you already mentioned some of it, uh, uh, some of the impact. On the economics, on the culture, on the demographics of China.

    3. KJKeyu Jin1:32:33

       It's probably one of the most radical policies that China has enacted thr- in its history. And the enforcement was very strict. In my class, nobody had a sibling except my friend who was a Uighur. Uh, 98% of urban households had only one child, the other 2% are twins, which you're allowed to keep, thank goodness, um, if you had the good fortune of giving birth to twins. It had lots of unintended consequences on the economy and society as well. Uh, maybe on the good side, it's actually a golden age for Chinese women because the Chinese girls never had as much education investment apportioned to them as they've had after being the only child in the family. You raised a daughter like a son, and if we look at all the skill gaps and, uh, the education gaps, and the returns to education, actually girls fared better. Apart from the top, top, top leadership in the Chinese political class, um, you look at the CEOs of major companies, uh, the, in the ministries, civil servants, there are a lot of Chinese women. And actually recently if you look at the surveys, the Chinese families would prefer to have a daughter than a son because they've seen how much bargaining power (laughs) , um, you as a Chinese woman and as a rare bride, uh, or a scarce supply of brides goes, you have raised your bargaining power and you can command high amounts of dowry. That was an unintended good thing about, uh, the one-child policy. And, uh, uh, to the opposite, the recent relaxation of the one-child policy, actually women are now encouraged to have many, as many kids as they possibly can. The flip side of the one-child policy has not necessarily been good f- to women in the job mar- dar- market, because they think, "Oh, well, you've only had one child. Oh, guess what? You can have another child." So that's not necessarily good for long-term employability. Um, but, uh, on the economic side, I've written about this in my academic papers, it's been one of the very important causes of high saving rate. You know, I always tell people, "You want to stimulate consumption, well, have more kids." You know how much one of those costs, right?

Episode duration: 1:49:29