I read a couple of really good books on China’s economic system this year that I can recommend for those who want to know the country better (from a distance).
The New China Playbook: Beyond Socialism and Capitalism by Keyu Jin taught me about mayor economies, and how China’s centrally planned economy is actually executed in an almost completely decentralised way through alignment of incentive systems rather than micromanagement by Beijing. I am almost inclined to call this socialistic economic design with capitalistic (market-economy) execution, which seems to have some explanatory power on a range of issues we are seeing in China.
The book Breakneck: China’s Quest to Engineer the Future by Dan Wang put forward a thesis on the key differences between a nation run by engineers (China) and a nation run by lawyers (US), a thesis which, among other things, explains how China’s one-child policy, an improbable idea to most other countries, came to be birthed and implemented, and how NIMBYism and self-interest continue to cripple many western countries’ inability to build what they need (housing, public infrastructure, etc) and tackle long-term threats like climate change.
Finally, the book Apple in China: The Capture of the World’s Greatest Company by Patrick McGee taught me how process power, as articulated in learning curve theory, are built up over time in complex supply chains in a way that (i) separates the number one from the rest of the pack in increasingly large gaps once escape velocity is achieved, and (ii) defies rapid replication in another country / region. This is reminiscent of the story of how TSMC came to dominate semiconductor manufacturing by mobilising and strengthening vast parts of the Taiwanese economy and, in fact, the stories of TSMC and Apple in China are connected in important ways as described in the book. The story of Apple in China is sometimes presented as the canonical example of how things turn out because western countries play chess whereas China plays Go. There is probably an element of truth to that geopolitical story telling, but I personally prefer the simpler learning-curve theory explanation from business and economics.
PS: I also read House of Huawei: The Secret History of China’s Most Powerful Company by Eva Dou. Rightly or wrongly, I don’t think I learned much about China from this book. For me, what I learned from the story of Huawei is really about the power of a long-serving founder that consistently adopts counter-positioning strategies against incumbents to achieve unexpected results. This is similar to the story of many founder-led companies across many different parts of the world.
PPS: I spent the last few weeks of December reading the English translation of Hu Anyan’s I Deliver Parcels in Beijing that went viral mid year. It’s an easy-to-read book filled with the simple stories of a journey man who took up a variety of regular jobs in different parts of China. It provides, I suppose, the ultimate commoner’s perspective on China’s economic system.
Mental Models 4 Life 