Prof Zhang JunandTomas Casas-Klett

Opinion | How China’s unique value system underpins its prosperity and innovation

A new book by MIT professor Yasheng Huang suggests China’s political economy has long operated under a mix of autonomy and control

The nation’s development strategy has largely reached its limits and Beijing must now harness its innovative potential to spur its ‘animal spirits’ while pursuing greater liberalisation

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President Xi Jinping inspects an exhibition highlighting Shanghai’s science and technology innovations, on November 28, 2023. Photo: Xinhua

Prof Zhang JunandTomas Casas-Klett

Published: 5:30pm, 12 Mar 2024Updated: 1:15pm, 20 Mar 2024

As China grapples with enormous challenges – including an imploding property sector, unfavourable demographics and slowing growth – doubts about the future of the world’s largest growth engine are intensifying. Add to that China’s geopolitical rise, together with deepening tensions with the United States, and the need to understand China’s political economy is becoming more urgent than ever.

A recent book by MIT’s Yasheng Huang – The Rise and Fall of the EAST: How Exams, Autocracy, Stability, and Technology Brought China Success, and Why They Might Lead to Its Decline – can help. Huang unpacks the “East” heuristic from the historical record to arrive at a clear conclusion: China must make radical changes if it is going to realise its full development potential. Huang argues that the seeds of China’s decline were planted with the implementation of the stifling keju civil service exam system.

Before the keju system was introduced, China was producing some of history’s most transformative inventions such as gunpowder, the compass and paper. Huang’s empirical research suggests Chinese creativity peaked between 220 and 581, during the rather chaotic Han-Sui interregnum. “The first wave of technological stagnation in China,” Huang observes, “coincides with the end of China’s political fragmentation.”

The book does seem to overstate some aspects of the historical record to offer a “cleaner” narrative than might be warranted. A data set of prime ministerial resignations forms the basis of Huang’s conclusion that, with the introduction of keju, checks and balances between emperors and their bureaucrats disappeared in favour of a “symbiotic relationship”.

The result is an almost linear narrative of decline. But that is difficult to square with the Qing dynasty’s “industrious revolution”, during which China’s population more than doubled and its share of global gross domestic product reached one-third.

Huang can also be extremely perceptive such as when he challenges David Landes’ judgment that the state kills technological progress. Huang argues that “China’s early lead in technology was derived critically – and possibly exclusively – from the role of the state.” Quoting the Nobel laureate economist Douglass North, he writes: “If you want to realise the potential of modern technology, you cannot do it with the state, but you cannot do without [the state], either.”