Dr. Yasheng Huang - MIT Economist Warns: China's Miracle Is Finished — The Collapse No One Wants to Admit

Summary

London Real Podcast Summary

Episode: Dr. Yasheng Huang – MIT Economist Warns: China's Miracle Is Finished — The Collapse No One Wants to Admit
Host: Brian Rose
Guest: Dr. Yasheng Huang, Economist, MIT Professor
Date: February 4, 2026

---

Episode Overview

In this engaging conversation, Brian Rose speaks with Dr. Yasheng Huang, renowned MIT economist and expert in China’s political economy. The discussion centers on Huang’s controversial thesis: that China’s much-lauded economic “miracle” is coming to an end, with structural decline masked by state control, distorted information, and deteriorating human capital. Dr. Huang challenges both Western narratives—of China’s unstoppable rise and imminent collapse—and instead forecasts a long, stagnating slowdown unless major reforms are enacted. The episode explores the myths of state-driven innovation, the political logic of China’s alliances, the real state of the Chinese economy and society, and why authoritarian systems ultimately trap themselves.

---

Key Discussion Points & Insights

1. The Risks and Reality of a China-Taiwan Conflict

• [00:00] Dr. Huang: Asserts that a Chinese invasion of Taiwan would be a “sheer disaster,” cutting China off from the West economically and inducing unprecedented paranoia and insecurity within China’s leadership.
  • Quote: “For China to invade Taiwan is a sheer disaster. I cannot imagine Europe, United States would continue to do any business with China. There is something very curious about Chinese political mentality. It feels insecure. Paranoia is beginning to surface. There seems to be a unnatural level of purges in the Chinese military.” (Dr. Huang, 00:00)

2. Why China Aligns with Russia over Europe

• [00:38] Dr. Huang: Dismisses economic reasons for China’s closeness to Russia, calling it “unbelievable” and rooted in politics/ideology.
  • Quote: “There’s absolutely zero economic reason to go with Russia at the expense of relationship with Europe… Russia, of all the countries I can think of in the world, has been the most brutal to China. And yet the Chinese political leadership has this softness for Russia, which is really, really unbelievable.” (Dr. Huang, 00:38, 42:47)
• China’s leadership, he argues, “borrows legitimacy” from Russian autocracy, born of a historic and ideological allegiance.

3. China and the Global AI Race

• [01:10] Dr. Huang: China didn’t originate large language models but excels at commercializing AI technologies—an area where the US could be “humbler.”
  • Quote: “China didn’t come up with large language models, but China has become incredibly efficient, scaling the signs into commercial products. I think this is where we should be very humble to recognize where we have fallen short." (Dr. Huang, 01:10)

4. Personal Risks for Critics of China

• [01:35] Dr. Huang: Notes a shift toward intolerance of dissent in China post-pandemic; he feels physically safe as a US-based academic but views China as “moving backward.”

5. Western Myths About China’s Economy

• [04:33] Dr. Huang: Identifies two “opposite” Western misconceptions:
  1. China as an unstoppable economic superpower that rises despite not following the Western “playbook.”
  2. An imminent economic collapse due to high debt and social tension.
• He proposes a middle ground: stagnation and slow decline unless meaningful reforms happen.
  • Quote: “The scenario that I see is a gradual slowdown, stagnation rather than a sudden stop and sudden collapse… The issue is a lot of it really depends on what the Chinese leadership is going to do next.” (Dr. Huang, 04:33)

6. The Dangers of Distorted Information in Policy Making

• [07:26] Dr. Huang: Emphasizes the critical role of accurate information in economic success vs. the pitfalls of state distortion:
  • Businesses get useful market feedback; policymakers receive filtered, often incorrect data—especially from local officials.
  • Example: The COVID pandemic and public health statistics.
  • Quote: “In the classical centrally planned economy, information is distorted, truth is suppressed… The power relative to the information ratio is extremely high. That often leads to wrong policy decisions and wrong policy choices. The issue gets a little bit complicated when we talk about today’s China…” (Dr. Huang, 07:26)

7. China’s Demographic Trap and Youth Disillusionment

• [12:14] Dr. Huang: Defends the view that policymakers disregard negative market signals; cites the one-child policy’s long-lasting damage.
• The “lying flat” generation:
  • Large numbers of young, highly educated Chinese must take up menial work (e.g., food delivery) due to economic stagnation and lack of opportunity.
  • Rising pessimism among youth; the “contract” of self-improvement through work and study has frayed.
  • Quote: “For years and years, the Chinese economy experienced many strains and problems and issues. But for many, many years, the young people…were optimistic. That began to change…during the pandemic and then after. That pivot was extremely risky for the Chinese economy when so much of the society converted from optimism to pessimism.” (Dr. Huang, 12:14)

8. Trade Negotiations Under Trump – China’s Strategic Responses

• [19:12] Dr. Huang: China, as an autocracy, endures much greater economic pain in a trade war than democracies, but can play hardball because its leaders aren’t held to account by voters.
  • Uses rare earth export controls as leverage, gets better technology deals, possible tacit agreements on Taiwan.
  • Quote: “The Chinese leadership values technology more than the trade war. They can hold down on the trade war as a way to extract concessions from the Trump administration on technology. And I think by and large, they succeeded.” (Dr. Huang, 22:17)

9. Economic Slowdown: The Reality Behind the Numbers

• [26:11] Dr. Huang: GDP growth has declined even by official figures, real estate is in crisis (property prices down 20-30% in big cities), and youth joblessness remains staggeringly high.
  • Points out that China remains fundamentally “a developing country facing all the challenges that developing economies face.”
  • Quote: “Is slowing down dramatically. Bankruptcies of the real estate companies. Big cities, even big cities like Beijing and Shanghai have seen real estate prices fall by 20%. 30%, something like that… The Chinese real estate sector, technically speaking, is in a similar situation as the US was in 2008.” (Dr. Huang, 28:32)

10. Overcapacity and the Consumption Gap

• [32:59] Dr. Huang: China produces 35% of global manufacturing output, but domestic consumption is only 11% of global levels.
  • Export-led growth can’t continue: gratitude worldwide protectionism, trade wars, and limited global demand.
  • Overcapacity means excess loans go unpaid, spurring financial sector instability—a dangerous economic spiral.
  • Quote: “Once you get into that spiral, anything can happen.” (Dr. Huang, 36:35)

11. Paths Forward: Reform and International Relations

• [37:38] Dr. Huang: Recommends two-pronged reforms:
  1. Fast action to boost average Chinese incomes, not just high-end tech or industrial policy.
  2. Repairing geopolitical ties, especially with Europe, and rethinking support for Russia.
  • China’s refusal to side with Europe over Ukraine hinders trade and investment, despite Europe being its most important trading partner.

12. The Belt and Road: Skill Export or Debt Trap?

• [48:08] Dr. Huang: While BRI helps utilize China’s construction overcapacity, it’s based on a faulty “infrastructure first, growth follows” theory. Real growth followed, not preceded, infrastructure build-out domestically.
  • No evidence BRI projects deliver sustained, organic economic growth abroad; for many countries, BRI created more debt than benefit.

13. The Depth of US-China Interconnectedness

• [54:27] Dr. Huang: The US-China rivalry is unlike the Cold War, given deep trade, capital, and academic ties. The hope that economic integration would “moderate” China hasn’t played out, especially under Xi Jinping’s nationalist policies.

---

Notable Quotes & Memorable Moments

• “For China to invade Taiwan is a sheer disaster.” (Dr. Huang, 00:00)
• “There’s absolutely zero economic reason to go with Russia at the expense of relationship with Europe... Yet the Chinese political leadership has this softness for Russia, which is really, really unbelievable.” (Dr. Huang, 00:38, 42:47)
• “The scenario that I see is a gradual slowdown, stagnation rather than a sudden stop and sudden collapse.” (Dr. Huang, 04:33)
• “The economic success to a large extent depends on generation, utilization, application of information... policymakers are making decisions on the basis of very, very distorted information.” (Dr. Huang, 07:26)
• “Today, the Chinese birth rate is... 1.2, 1.3, falling rapidly. And it is creating huge problems in terms of the economy and economic growth.” (Dr. Huang, 12:14)
• “If you go to China today, you order a meal, often the meal is delivered to you. A lot of these delivery young people went to fancy colleges and then they graduate. They cannot find jobs in companies, in businesses, in technology, and they have to settle for being delivery people.” (Dr. Huang, 12:14)
• “The Chinese real estate sector, technically speaking, is in a similar situation as the US was in 2008. So this is how severe the situation is.” (Dr. Huang, 28:32)
• “China fundamentally is still a developing country facing all the challenges that developing economies face: rural sector, agricultural sector, poverty, income generation, employment.” (Dr. Huang, 31:11)
• “Once you get into that spiral, anything can happen.” (Dr. Huang, 36:35)
• “It is for ideology and politics [that China aligns with Russia]. There’s something very curious about Chinese kind of political mentality... it feels politically insecure about its legitimacy and authority. Therefore, I think the political leadership believes that they borrow legitimacy and authority from the Russian autocracy.” (Dr. Huang, 42:47)
• “There’s a myth that you create infrastructure and then you create economic growth. The Chinese pattern… is exactly the opposite.” (Dr. Huang, 48:08)

---

Key Timestamps

• 00:00–01:10 – China’s political insecurity, military purges, alliance with Russia, and ideological rationale
• 04:33–07:26 – Western misconceptions about China’s economy and the role of distorted information
• 12:14–17:33 – One-child policy failures, youth unemployment, and “lying flat” phenomenon
• 19:12–25:40 – Autocracies versus democracies in trade wars, Trump’s negotiation tactics, China’s strategic use of exports
• 26:11–32:40 – Economic slowdown, real estate crisis, rural/urban divide, and unemployment
• 32:59–37:19 – Overcapacity, consumption gap, and potential financial spiral
• 37:19–42:47 – Policy reform, international relations, and China-Europe-Russia triangle
• 48:08–53:25 – Belt and Road outcomes and the flawed “build first, grow later” logic
• 54:27–55:32 – Deep US-China interconnection versus the Cold War analogy

---

Conclusion

Dr. Yasheng Huang offers sobering, nuanced insights into China’s uncertain future, challenging both triumphalist and catastrophic narratives. He highlights the pivotal role of accurate information, the dangers of overreliance on top-down directive, and the mounting dilemma of a society with misaligned production and consumption. True reform—boosting household incomes and repairing external relations—remains China’s only pathway to escape stagnation. This episode is essential listening for anyone seeking a clear-eyed, expert analysis of China’s next chapter and its consequences for the world.

---

Transcript

[Dr. Yasheng Huang]

For China to invade Taiwan is a sheer disaster. I cannot imagine Europe, United States would continue to do any business with China. There is something very curious about Chinese political mentality. It feels insecure. Paranoia is beginning to surface. There seems to be a unnatural level of purges in the Chinese military. And it is really something very striking and unprecedented.

[Brian Rose]

Why do you think China choose Russia over Europe?

[Dr. Yasheng Huang]

It is for ideology and politics. There's absolutely zero economic reason to go with Russia at the expense of relationship with Europe. Russia, of all the countries I can think of in the world, has been the most brutal to China. And yet the Chinese political leadership has this softness for Russia, which is really, really unbelievable.

[Brian Rose]

Where are we with the AI race between the United States and China?

[Dr. Yasheng Huang]

China didn't come up with large language models, but China has become incredibly efficient, scaling the signs into commercial products. I think this is where we should be very humble to recognize where we have fallen short. And the Trump administration is not doing that.

[Brian Rose]

You were born in China and yet you are constantly critical of this place. Are you worried about your safety?

[Dr. Yasheng Huang]

Just before the pandemic, there was a degree of tolerance of points of views and criticisms that we no longer have. Today, sadly speaking, do I worry about myself? Well, I live and work in the United States, so there's not that kind of threat. Worry about China not because it is not a democracy, but because it is moving backward.

[Brian Rose]

Hi, it's Brian Rose from London Real. You probably know that we've just recently been replatformed on YouTube after 25 months, completely in the dark. The truth is, I really need your help. What I really need you to do is click on that subscribe button right now, like this video, and maybe even leave a comment or share the link with friends. We're really fighting against an algorithm that's tried to keep us quiet for so long. And the more subscribers we have, the more people watch our content, the better guests we can bring you the better content, and we can continue transforming lives. We've been doing this for 14 years now. I want to do this for another 14 years, but I really need your help. So click on that subscribe button. Like the video, leave a comment, share this. And we're going to continue to bring you more and more great content. Thank you. This is London Real. I am Brian Rose. My guest today is Dr. Yasheng Huang, the economist, MIT professor, and one of the world's leading authorities on China's political economy, technological ambitions, global power strategy. For more than 20 years, you have studied how China's political institutions shape economic Outcomes and why authoritarian control ultimately suffocates entrepreneurship, innovation and long term stability. You have challenged the Western narrative of China's quote unquote unstoppable rise, arguing instead that demographic collapse, information control and a deteriorating human capital system are pushing the country into structural decline today. I want to go deep into your latest warnings about China's slowdown, the myth of state driven innovation, the future of U S China relations, and how this power struggle will redefine markets, technology and freedom around the world. Dr. Huang, welcome to London. Real.

[Dr. Yasheng Huang]

Thank you, Brian. I look forward to our discussion.

[Brian Rose]

Me too. I'm super excited and I'm a little jealous that you're at my former alma mater of mit. I have fond memories. I'll ask you more about that later. I wonder if we could just jump right into it and say, what would you say is the biggest misconception in the west and promoted in Western media about China?

[Dr. Yasheng Huang]

Okay, so let me start maybe with two misconceptions and they are at the opposite ends of that spectrum. One is that China is rising as a unstoppable economic superpower, technological superpower, overtaking the United States, overtaking the West. And much of that is a result of the fact that China has defied Western economic rulebook playbook rather than market economy, private entrepreneurship. It has grown without these things. The other narrative is that there's going to be an imminent collapse of the economy because of the high debt and because of a lot of the tensions that you have described in your introduction. Now I agree with the fact that there are many, many tensions and contradictions in the Chinese economy. But the scenario that I see is a gradual slowdown, stagnation rather than a sudden stop and sudden collapse. So I'm sort of end up somewhere in between these two extreme predictions. The issue is a lot of it really depends on what the Chinese leadership is going to do next. Whether or not they are going to reform the economy, reform the political system, or are they going to persist in the current policy trajectory, which I believe is bad for the Chinese economy. Okay.

[Brian Rose]

You know, one of the biggest arguments that I hear, or at least that resonates with me, and I hear this kind of by the Silicon Valley elite, guys like Marc Andreessen and a few others that just say that ultimately capitalism is an incredible feedback loop for information because it kind of says what's working and what's not working by of course compensating the winners and destroying the losers. And that information feedback is probably maybe the most important thing to guide the growth of a nation. Whereas I guess in a communist or socialist system where maybe those capital expenditures are decreed by a central government, you don't always have that. And fingers are pointed to kind of Russia back in the socialist days in the 80s, and how ultimately they didn't really know what they needed to do and that is what kind of killed that growth. Is that too of a simplistic way of looking at this, or is that ultimately the root of the problem when it comes to growing an economy that isn't based on that capitalistic feedback?

[Dr. Yasheng Huang]

Well, I think I agree with that view. The issue is whether or not that view applies to, to, to China today. I mean, the economic success to a large extent depends on generation, utilization, application of information. Companies need to rely on correct information to make business decisions. Policymakers need to rely on correct data to make policy decisions and judgments. And politicians need the right information about the voters and about the political situation in their country. In the classical centrally planned economy, information is distorted, truth is suppressed. So very often policymakers have the wrong information or they have no information at all. But they have so much power. So the power relative to the information ratio is extremely high. That often leads to wrong policy decisions and wrong policy choices. The issue gets a little bit complicated when we talk about today's China because today's China is not a classical centrally planned economy. It is also not a classical capitalist economy. There is correct information. There is reliable information in the system generated by, for example, by exports, markets, by the signals that the Chinese companies receive from the rest of the world, by the signals about technology, the AI future, the EVs and solar panels. But on the other hand, the policymakers are making decisions on the basis of very, very distorted information. So this is where the tension is in today's China. The businesses are largely market driven. They rely on market generated information. The policymakers rely on information and data generated by local governments. And a lot of that information, for example, about the true state of the Chinese economy and then during the COVID years about what was going on in the country in terms of the public health situation. A lot of that information is hugely distorted. The bankers who basically in the Chinese system are working for the government, very often don't have reliable financial information from the companies. I think this is where China is and explains some of their successes. But it also is an indication of where the problems are.

[Brian Rose]

It's interesting because I think it was Steve Bannon that actually said on his war room show in the morning, I think a couple months ago, he said, he said China is not communist. He said China's more capitalist than America. He said the only communists are the, you know, thousand thugs at the top that, that make all the decisions. Now look, I'm not saying he's right on any of those terms that he said, but it was an interesting insight that in fact it is a country that is very good at receiving that feedback. And it isn't classical socialist or communist like, you know, we might have thought of regimes in the past in the west. But also there is that group at the top that's making some of those decisions. I'm kind of curious what you think about that. And also I'm curious what it would be like if I was in China right now and what I would see as some of the country's problems. You know, if you're in America right now, you might look around and say, okay, wow, all of these young people are going into debt with their education and they can't buy a house like they used to be able to. Dr. 30, 40 years ago. We've got a growing gap between the wealthy and the poor. And we've got some other issues on the horizon, like AI, that make everybody nervous. I'm curious if you had to go to China and talk about the problems there. Are they similar, are they not? I'm hearing there is this kind of youth generation in China now that are feeling like they want to check out. I saw this whole kind of lying flat movement where it had these young people just maybe even opting out of this society and also facing some repercussions on the back. So I know that's quite a few questions, but I really want to get your thoughts.

[Dr. Yasheng Huang]

Okay, so let's separate these two issues. One is Steve Bannon's view on China and the other is what is going on in the Chinese economy today. I disagree with Steve Bannon on many, many issues and I disagree with him on this issue as well. Let's just be very specific in terms of his view that the policymakers in China act on kind of market driven information. Look at the one child policy program that they have implemented. At the beginning, you could argue that the one Child policy program was designed to moderate the population growth in a country that was struggling with agriculture, with the economy, with feeding its people. But over time, it became increasingly clear to everybody that the one child policy was going to be extremely destructive of the economy and of the society, of the basic social contract marriage and fertility. Also, in a Confucian society, you need the younger generation to take care of the older generation. Yet the policy persisted way beyond the usefulness and the utility of the policy program to a devastating effect. Today, the Chinese birth rate is falling somewhere. Something like the replacement ratio is true. You need two children to replace their parents. China's ratio today is somewhere 1.2, 1.3, falling rapidly. And it is creating huge problems in terms of the economy and economic growth. By the way, the information about how wrong that policy was was available for many, many years. Academics wrote about it and I wrote about it. Yet all of that was dismissed. And then they acted to reverse the policy. By 2015, it was already too late. This is related to the second question that you asked about what is going on in Chinese economy today. It is actually remarkable for a country that is now having very low replacement ratio and low fertility rate. They are struggling to find job opportunities for the young people. The visual indicator of that is that if you go to China today, you order a meal, often the meal is delivered to you. A lot of these delivery young people went to fancy colleges and then they graduate. They cannot find jobs in companies, in businesses, in technology, and they have to settle for being delivery people. To me, this is a massive underutilization of the talents and the capabilities of the Chinese young people. This is a signal and symptom of the lying flat phenomenon that you described because the economic prospects are not very bright. People are writing off work as a way to make continuous improvements. For years and years, the Chinese economy experienced many strains and problems and issues. But for many, many years, the young people in China were optimistic. They believed in themselves. They believed in their ability to uplift themselves, to improve their livelihood by working hard, by studying hard. That began to change three years ago, four years ago, during the pandemic and then after the pandemic. That pivot was extremely risky for the Chinese economy when so much of the society converted from optimism to pessimism. That has a huge effect across the board, not just in terms of the work, but also in terms of the ability of the middle class to consume. Whereas the Chinese economy has this massive production capacity without comparable level of the consumption. And that spells implications for the rest of the world, for the United States, for Europe, and for other parts of the global economy. Because the export is really the only way for the Chinese economy to generate revenue growth. Wow.

[Brian Rose]

Okay, that's fascinating. And I guess then we'll take that and tie it right now into the trade negotiations. You know, it's. It's interesting because it's really hard to get a read on China when it comes to these negotiations with Trump. And of course, Trump is this classic bigger than life, you know, real estate negotiator who, you know, has a certain style, all right, that's unlike any we've ever seen in an American president. And I was debating Anthony Scaramucci a week ago Friday, who spent some time in his cabinet and when actually campaigned against Trump, but is now coming around. And we were talking about this style that he uses and Anthony was saying it's not practical and it's not based in economics. But I said, well, it's actually quite effective because it seems to get people to blink and it gets people to show their hand. And there's evidence of that. You know, we saw the EU sign what I even think they admitted wasn't the greatest deal. You saw the UK sign what probably wasn't the greatest deal. And they all seem to kind of blink when they get this kind of pressure from Trump. I haven't seen that from China. And I was wondering what you can see when you see the behaviors coming from that country. And do you think that they are in moments of pain when it comes to this negotiation? Because from what you're saying, these exports are going to be very important for them. And of course the US As a trading partner is very important. So what do you see when you see the pressure that Trump puts on and their reactions? What do you think is going on there?

[Dr. Yasheng Huang]

So I think what we have observed are three categories of responses to Trump. One is the European, Canadian, to some extent Mexican response. And that response is and to some extent Ukraine. So that response is to trying to accommodate as much as possible to Trump's really, really outrageous demands. The reason is that these are the politicians who operate in a democratic country and they have to think about the voters interests, the interests of their economies and their society. A full blown trade war is going to be devastating for their economies. So they kind of swallow their pride and cater to Trump. And I believe that they act responsibly given the position they're in. They are democratically elected. They have to pay attention to the economy and to the society and welfare of their people. This is what democratic leaders do. How do you get out of a rat race? How do you create wealth not only for yourself, but also for the generations to come after?

[Brian Rose]

I am absolutely amazed with the quality of companies that we're getting exposure to.

[Dr. Yasheng Huang]

We go on to zoom calls with

[Brian Rose]

the innovators and the folks who are

[Dr. Yasheng Huang]

building new applications in Metaverse, blockchain, artificial intelligence, decentralized finance.

[Brian Rose]

What's going on Everybody, thumbs up, up if you can see me. We are focusing on early stage investment and the quality of people that we're getting exposure to, whether it be Dan Tapiero with one RT Jason Ma from Open, Yatsu from Animoca.

[Dr. Yasheng Huang]

It's been a phenomenal experience thus far. It has far exceeded my expectations.

[Brian Rose]

We are focusing on cutting edge technologies.

[Dr. Yasheng Huang]

I view it now as the best investment I have ever made. The upside side I view is unlimited.

[Brian Rose]

And as a retail investor, I would never get this exposure anywhere else outside of investment club. See you in the investment club.

[Dr. Yasheng Huang]

The other response is through corruption and bribe. Right? So we see that in the case of Saudi Arabia, we see that in the case of Qatar. Their calculation is, let's just provide business opportunities, business opportunities for the Trump families and then we secure some sort of a truth with the American government that way. This is not something that the Canadian government can do. This is not something the British government can do. They may give him little gifts here and there, but I don't think they can give him a whole airplane worth $400 million in order to secure a trade deal. The third response is by countries such as China, which is using whatever weapons that they have to go after, specifically after everything that Trump is trying to do. Look at what China did just a few months ago in the rare earth strategy that they deployed. They escalated the rare earth strategy, export ban, export control, export approval. And look at what the United States did. They immediately began to negotiate with China. The reason why they can go to adopt this high wired strategy is precisely because they are an autocracy. They don't have to suffer politically from the economic consequences of a full blown trade war. That means they can take more risks by taking more risks. In fact, the Trump administration caved. If you look at the recent trade deal between China and the United States, I think China got a good deal by and large. And China needs the soybean anyway. So before they were buying from the United States before the Trump trade war and then they switched to Brazil and they switched to Argentina, they need soybean anyway. So now they just switch back to the United States. They don't have to pay extra for that strategy in terms of fentanyl, I mean, that's very easy for them to control. It is not something really, really that critical to their economy. And I think they got two things that are not being discussed publicly a lot. And I have to say I don't have direct evidence that this happened, but I suspect two things happened. One is that the Chinese side got A better deal on technology than they would otherwise during that negotiation. And the other is they probably got some sort of under the table deal or promise from the Trump administration about Taiwan. So that's a huge win for China. And precisely because they don't have to suffer immediately the political consequences of a slow economy. The trade war, let me be very, very straightforward. A trade war between China and the United States is extremely bad for the Chinese economy. Jobs lost, export revenue would go down dramatically in the economy that is slowing down in an economy that has problems generating employment opportunities. There's no question the trade war is bad for China, but the Chinese leadership values technology more than the trade war. They can hold down on the trade war as a way to extract concessions from the Trump administration on technology. And I think by and large, they succeeded.

[Brian Rose]

How is Xi doing right now and is he going to be there much longer? I think over the last five years or 10 years, it seems that is he consolidated power. But I'm curious what you see that he has to do in the next few years. And is he going to be struggling with the property sector? Is he going to be struggling with this youth sector not being able to contribute to the economy? What do you see are the big things he has to worry about?

[Dr. Yasheng Huang]

I think we should separate the political discussion from the economic discussion. The economic discussion is super clear. The economic picture is super clear. Despite the fact that China is producing EVs and solar panels and impressive AI models, the Chinese economy is suffering in terms of the GDP in terms of property sector, in terms of the consumption, in terms of the employment income generation.

[Brian Rose]

And really quickly. Can you see that from the numbers or can you trust the government numbers? Of course, I don't even know if we can trust the US Government numbers sometimes.

[Dr. Yasheng Huang]

Well, I think now we have more reason not to trust the US Numbers now because of the political intervention in the bureaucracy for the Chinese numbers. If you just look at the official numbers, before 2015, the Chinese economy grew roughly 8, 9% a year, year in and year out, since the late 1970s.

[Brian Rose]

Wow.

[Dr. Yasheng Huang]

Many academics like myself, don't believe that's the true number. But even if you just take off, you know, 1 percentage point, 2 percentage point, there's no question this is still one of the most impressive economic growth records in the, in the history of humankind. To be able to grow at 5, 6, 7% for 30 years and 40 years is extremely impressive. The issue now is, okay, so let me not leave the official number too quickly. Since then, the GDP growth by official numbers has slowed down to 5% below 5%. Okay, so if you just look at the official numbers without thinking twice about the reliability accuracy of the official numbers, there's no question that the economy is slowing down. The real estate sector, which accounted for at one point in time about 30% of the Chinese economy.

[Brian Rose]

Wow.

[Dr. Yasheng Huang]

Is slowing down dramatically. Bankruptcies of the real estate companies. Big cities, even big cities like Beijing and Shanghai have seen real estate Prices fall by 20%. 30%, something like that. Just to give you some benchmark, during the 2008 financial crisis across the United States, the real estate prices fell about 30%. The Chinese real estate sector, technically speaking, is in a similar situation as the US was in 2008. So this is how severe the situation is. Employment two years ago, three years ago, the official number indicated that the youth unemployment reached something like between 16 to 20%. And some Chinese academic estimated it was more like 50%. Then they stopped publishing the number, they revised the number, and now even by the official number, the unemployment rate for the youth sector of the economy is still incredibly high. China, in the Western media, they talk about EVs and solar panels and AI. Let's just be very realistic. Chinese economy. Chinese society still has more than 600 million farmers. Rural sector is still incredibly large for this economy. In fact, there are different accountings of what constitutes a rural population. The lowest is something like 45%. The highest can be 60% of the population is still fundamentally rural. How do you generate this incredible generate employment income generation for this incredibly large sector of the economy? Move them from low productivity agriculture to higher productivity urban service industrial development. It is still a living issue for China. Let's just not pretend that such a thing doesn't exist for that economy. The Chinese rural population has a very low income level as compared with the urban population. So economics, we talk about technology, but there is a branch of the economics known as development economics. Many people forget this brutal fundamental fact. China fundamentally is still a developing country facing all the challenges that developing economies face. Rural sector, agricultural sector, poverty, income generation, employment, and let's just not pretend these things don't exist. Rather than thinking, oh, this is economy that is going to dominate the world. In terms of technology, I think for me, I don't worry about technology in China. This is a highly capable society and lot of the college graduates who are extremely smart, intelligent and capable. I don't worry about technology, but I do worry about how you generate continuous incomes and welfare improvement for something like 45, 50, 60% of the Chinese population. Okay, okay.

[Brian Rose]

Besides the Real estate sector, I mean, that's a huge drop in prices. That's a huge potential crisis. Are there any, any other factors that you're very concerned about with the economy? I mean, obviously, besides the birth rate dropping and some of those other issues. But is there anything else that is front of mind for you?

[Dr. Yasheng Huang]

Yeah. So let's face another reality. China's manufacturing capacity accounts for about 35% of the global capacity. Its consumption accounts for about 11% of the global consumption. You went to MIT, so you can do the quick math. What do you do with that gap? Chinese population is about 17, 18% of the global population. How do you resolve this gap between the consumption, the Chinese consumption, and the Chinese production? Well, one way to resolve that gap is that every country on earth buys nothing but from China. You tell me whether or not in the current geopolitical environment this is going to be a viable option going forward. Look at the trade war. And also, let's just be clear. The trade war or protectionism is not just rising in Europe and in the United States. It is also rising among developing countries. Indonesia, India, Brazil and other countries are also erecting trade barriers against Chinese products. So now you have this huge capacity and relative to that capacity, quite modest consumption. And the difference is also going to be difficult for the rest of the world. Even in the best case scenario, even if we ignore all the geopolitical complications that we have today, let's just say that the world is a benign world and everybody loves each other. Even if you have that world, let's just say the world immediately after the collapse of the Berlin Wall, you're going to still have this huge absorption problem on the part of the rest of the world. You're going to have trade barriers and protectionism no matter what. Okay, so now you cannot export at the level that you were able to do before. And the domestic consumption is not coming up. What do you do? The technical description of that is that you have to write down the capacity. Every time you write down the capacity, that is an economic slowdown. And more worryingly, once you write down the capacity, how do you generate the revenue that will pay back all these loans that the companies have taken out? That's going to spell troubles for the financial sector, for the banking sector. In economics, everything is related with everything else. Once you have that process going on, companies write down their asset, write down their capacity. They're going to not going to increase employment if they don't increase employment, you're not going to increase income if you're not going to increase your income. Where does the saving come from? So if you look at the bank, the bank has a lending side, the bank has a borrowing side. The bank borrows from you and me in order to lend to the companies. If the bank is no longer able to borrow as much as it could before from the rest of the society, it is going to limit their capacity to lend to the rest of the economy, to the rest of the society. I think I tremendously worry about getting into that sparrow. Once you get into that spiral, anything can happen.

[Brian Rose]

And so fast forward five years from now, what do you think are going to be some of the cracks that start to form? How will China's overall behavior change? And how many of these issues do you think will come to the surface and, and cause. Cause real structural problems for China?

[Dr. Yasheng Huang]

So let me just not minimize the difficulties and the challenges that the Chinese policymakers face in resolving these issues. These issues. The room was not built in one day, and these issues are not built in one day. In my forthcoming book, I go back to the late 1980s and early 1990s, the, to trace the beginning of this problem. And I think the problem accelerated after the pandemic because the pandemic depressed the Chinese consumption, depressed the income generation without depressing the production capacity. So that gap increases even more than the usual trajectory before the pandemic. I think in terms of the policy solutions, policy ideas, there are sort of two buckets of solutions. One is really acting very quickly to increase the income of the average Chinese people. And by the way, the way to do that is not going so directionally going so hard on technology, on industrial policy, because the technological projects don't generate lot of employment opportunities. So that's one side of the issue. The other side of the issue is to resolve the trade disputes, to resolve the geopolitical disputes with the rest of the world, especially with the developed part of the rest of the world. And by the way, Europe is the biggest trading partner with China. In terms of the trade surplus that China generates, the biggest is from Europe. The second biggest is from the United States. Trump does whatever he wants to do. He's just in love with the trade war. So maybe there's not much you can do about that. But in terms of Europe, I think it will be good for the Chinese leadership to restore, to repair relationship with the European countries. And the first thing they need to do is to change their policy on Russia. I just don't see how you can

[Brian Rose]

have

[Dr. Yasheng Huang]

free trade and free investment activities with Europe while not siding with Europe. On Ukraine. Ukraine is on the doorstep of Europe. Russia is invading the doorstep of Europe. I mean, how can you sort of advocate free trade where Europe on the one hand and tacitly supporting Russia on the other. So the first step, and I think it's actually a golden opportunity for China if they make that switch because Europe has issues with the United States, they need a ally vis a vis the United States. And China naturally provides some of the balancing support for Europe. But the necessary condition for that is that China has to change its policy on Russia.

[Brian Rose]

Peter Thiel took a half million dollars and turned it into $1 billion using the exact same techniques we're using inside the investment club. He met a CEO. His name was Zuckerberg. He pitched him the deal and he said, okay, I'll give you half a million dollars. Mark went public and sold the shares to people like you. Well, what happened to Peter? Well, he exited and got a 20, 20, 300x return. The wealthy invest in early stage companies, folks. The public markets are for suckers. It's a rigged game. By the way, this happens in crypto as well. It's called pre sale tokens. This is Solana. Does anybody know this chain? They sold pre sale tokens for $0.04. And you can see the date on there. April 5, 2018. Look at Solana today, folks. That thing's up over a thousand x. The media and Wall street and all these hype people get you to buy the top. Meanwhile they put their clients in at the bottom and they use you for liquidity to make their clients rich. You can play this same game. You just have to have the financial education and the deal flow.

[Dr. Yasheng Huang]

That's it.

[Brian Rose]

Why do you think they choose Russia over Europe? Because you make a great point. I never thought about that, but that's clearly going to make everyone in Europe very nervous. But they could just as easily not overtly support Putin and, and, and support Europe and probably not have too much fallout. I mean, what does the Chinese really need from Russia? Okay, I guess they need their, their oil and gas. But Russia doesn't have a lot more they bring to the table, do they?

[Dr. Yasheng Huang]

I think, I think this, this kind of sometimes. The Chinese sometimes talk about that. Russia. Now they need the oil gas from Russia. You can get oil and gas from lots of other countries. In fact, I think they get oil and gas at higher market prices than they can find from other countries. It is definitely not for economic reason. Look at the size of the Russian economy. It is actually pitiful. GDP is about $1.7 trillion. 1.7 trillion is the size of a Chinese province, Guangdong province. It's about 1.7, 1.8. It's about the size of Texas. Let's just say for the sake of the argument, you get all of that. That's just one Chinese province. That's just one state in the United States. The total size of the US import market is roughly $3 trillion, almost twice of the Russian economy. The European size is probably bigger than the US Import market. So you sacrifice the European market and the US Market by pursuing a smaller market. And by the way, the size of the market is just one factor. The other factor is the margin. Russia is a very poor country, poor economy, so you can sell all the stuff that you produce, but at the lower margin, you are not making as much money as you would if you would sell to Europeans and the Americans. There's absolutely zero economic reason to go with Russia at the expense of relationship with Europe at the expense of the relationship with the United States. Although these days, relationship between Russia and the United States now is getting really interesting and complicated. So. So let me not talk about that relationship. Let's just talk about the European relationship. Right. So there's really no economic rationale. It is for ideology and politics. There is something very curious about Chinese kind of a political mentality, which is that this is the second largest economy in the world. It has been able to grow at very high rate for all these years. It has EVs and solar panels and AI. And yet it feels politically insecure about its legitimacy and authority. Therefore, I think the political leadership believes that they borrows legitimacy and authority from the Russian autocracy. Right. So after all, it was the Soviet Union that transferred the ideology, the Communist ideology, and supported the Communist party in the 1930s. And then in the 1950s, supported China economically and also not just in terms of money and resources, but also transfer the central planned model to China. So they have this kind of a historical allegiance to the source of their political legitimacy. I think I may be totally wrong because doing that kind of research is impossible. You don't really know what the political elites in China really think about. But I cannot think of any other reason. And let's just also mention some other brutal facts. Of all the Western imperialist powers in the 19th century, and by the way, Britain was one of them, Russia brutalized China the most. They took about 11% of the Chinese territories. After the Second World War, they raided the northeastern part of China, the northeast of China. They took over the Chinese territory, raped the Chinese women. They did exactly the same thing that they did in Germany, which is that they pillared the Chinese factories and equipment, took them away. Russia, of all the countries I can think of in the world, has been the most brutal to China. And yet the Chinese political leadership has this softness for Russia, which is really, really unbelievable.

[Brian Rose]

That's a fascinating observation. Very fascinating. Has the Chinese Belt and Road initiative worked?

[Dr. Yasheng Huang]

I think it has worked in one way and it is probably experiencing some strains in the other. It has worked in the following way, which is as we talked about before, China has this over capacity. And also, let's also be be fair to China. Because of this incredible economic expansion, the building programs, building railways, building shipyards and, and airports and all of that, Chinese companies have accumulated this incredible building capability. In the United States today, we have lost that capability. Even if you have the money to build things like nuclear power plants, we may not have the requisite skill and capability to build these power plants quickly. So when you build, you also accumulate skill. But when you are built up within the country, you want to export that skill to other countries. The natural place to go is other developing countries because they haven't this level of the buildup capacity. So in that sense it is economically clever way of utilizing the skills and capability you have accumulated. The way that I think it is not delivering is that, and this is something that I go into great detail in my forthcoming book. There's a myth that you create infrastructure and then you create economic growth. The Chinese pattern. Many people say that this is how China has grown. They look at high speed rails and airports and there's a recent book about Chinese state engineers building all these roads and bridges and airports. These people got the direction of causality exactly backward. China grew first and then they began to build. Not that they started rebuilding and then they got economic growth. It was actually exactly the opposite. The reason they can build is because they were able to grow and they were able to. Because they were able to grow, they were able to accumulate resources that can be deployed for building. It's exactly the opposite scenario from the one that many people believe. What has happened in China, the problem with the Belt and Road program is that it is based on this false narrative that you build first and then you get economic growth. China has built a lot in these developing countries, but there's no evidence that building has translated into long run organic, indigenous or indigenous, to use a fancy economic term, economic growth in these countries. When you build because you're putting capital, then you experience growth. But once that building project is completed that project has not translated into sustained economic growth down the road. Okay? Now the problem is that if you don't have this sustained economic growth down the road, where do you get the revenue to pay back the loans that have been lent to these countries to generate economic growth? And some people are more severe than I am to describe this phenomenon as a debt trap. The reason why there's a. Because I'm not comfortable with that phrase, because it implies that China set up the debt trap for these developing countries. I don't think that was really the case, but it is a trap in the sense that the growth didn't come from the debt that they incurred, the buildings that they built, the project that they built. So it became a trap. Now the issue for these developing countries is how do you get out of that trap? Especially now, Chinese economy is slowing down. One growth engine has been the real estate sector. Real estate sector is very energy intensive. So you need the resources, you need minerals, you need energy to power that growth. But because the economy is slowing down, you don't need as much resource energy as before. That can be a drag on the developing economies. I think this is where we are in terms of the belt and road. Okay.

[Brian Rose]

Treasury Secretary Scott Besant was on, I think it was CNBC the other day, and he, he kind of made a very important or clear point to the interviewer. He said, you know, never in modern history have we seen two, you know, to two forces or two countries that are opposed militarily also be the top two trading partners. And he said that's what currently exists with China. Obviously in the past it was kind of US Soviet Union, but we weren't trading partners with that, or at least massive trading partners. What kind of problems does that introduce? Or is that a problem? And how is China expanding militarily that might affect that. We obviously see what seems like encroachment on certain territories in the Philippines and in the South China Sea, obviously, you know, the nuclear buildup. But I'm curious what you see in the future and, and does that create tension with that trading partner?

[Dr. Yasheng Huang]

So I definitely agree with Secretary Benson on his observation. So that's why I very uncomfortable with applying Cold War concept to what is going on between us and China. And it is far more complicated than the relationship between Soviet Union and United States during the Cold War. Let's just be very specific. I was born in China. I studied in the United States, and now I'm a professor at mit. During the Cold War, you didn't have a lot of Soviet citizens studying in the United States and a lot of Americans studying in Soviet universities. And that level of human interaction was simply absent. Right. So the trade is one dimension, capital is another dimension, academic exchange is another dimension.

[Brian Rose]

Students.

[Dr. Yasheng Huang]

And there's a far deeper interconnectedness between the United States and China than there was between Soviet Union and America. And I think to understand that phenomenon, we have to go back to the 1990s, when the decisions made by policymakers in both countries were made about deepening their relationship with each other. On the US Side, there was a belief that if you increase commercial relationship, academic relationship with China, Chinese politics was going to change over time. It doesn't mean that it was going to become democratic one night and overnight, but gradually it was going to moderate its political system. By the way, it's called the engagement theory. By the way, a lot of people now criticize that view. But by the way, the Chinese policymakers also bought into that narrative. The Chinese policymakers at that time argued that, yes, we are not a democracy, but the reason is that we have too low per capita gdp. The idea is that once the per capita GDP rises, we are going to become more like a global member of the global community and global, global economy. That obviously didn't happen. I think the fundamental cause is why that theory failed to deliver, why that theory failed to happen, rather than that there has always been this geopolitical tensions between the two countries. Definitely 10 years ago, before the current leadership in China, there were tensions between China and the United States. But the Chinese leadership then valued the relationship with the United States as a source of technology, as a source of market, as a source of many, many other things in a way that the current leadership in China does not. And the current leadership believes that China is already very strong. It is second largest economy in the world, and therefore it should have comparable power over the global order, over geopolitics. And I, personally speaking, don't have a problem with a general idea of that way of looking at the world as a second largest economy. You are entitled to certain things. Look at Trump. United States is the most powerful economy in the world. And he believes that therefore we're entitled to certain things. So that sentiment is sort of a result of the economic development, economic growth. The issue for me is whether or not that is actually good for China. Right. As I said before, you know, you have some 35% of the global capacity, but you only have about 11% of the consumption. That gap still requires.