Post-Covid, is the U.S. falling behind China?

I don’t think so, as I argue in my latest Bloomberg column, here is one bit:

If you are wondering whether China or the U.S. with its allies is more likely to make a big breakthrough, in, say, quantum computing, ask yourself a simple question: Which network will better attract talented immigrants? The more that talent and innovation are found around the world, the more that helps the U.S.


Perhaps most important, the European Union has evolved from seeing China primarily as a customer to seeing China primarily as a rival. Even Germany, a longstanding advocate for closer ties with China, has become more skeptical. Furthermore, most European nations have ended up agreeing with the U.S. that Chinese telecom giant Huawei be kept out of the critical parts of their communications infrastructure.

It is also worth noting that GPT-3 came out of the Anglosphere, not China, even though we have been hearing for years that China may be ahead in AI.

UAE China fact of the day

Rochelle Crossley has been working as a flight attendant in the UAE and received a COVID-19 vaccination after thousands of injections were rolled out to frontline workers.

“The fear of getting the virus outweighed the fear of having the vaccination,” Ms Crossley told 9News.

I am glad to see somebody computing expected value. By the way, that is Sinopharm, not Sinovac.  And:

More than 30,000 people in the UAE have received injections as part of phase three trials.

Here is the article, via Air Genius Gary Leff.

Is research productivity declining in China and Germany?

In a recent paper, Bloom et al. (2020) find evidence for a substantial decline in research productivity in the U.S. economy during the last 40 years. In this paper, we replicate their findings for China and Germany, using detailed firm-level data spanning three decades. Our results indicate that diminishing returns in idea production are a global phenomenon, not just confined to the U.S.

Here is the full paper by Phillip Boeing and Paul Hünermund.  Via the excellent Kevin Lewis.

Solve for the China equilibrium

Chinese government officials are warning their American counterparts they may detain U.S. nationals in China in response to the Justice Department’s prosecution of Chinese military-affiliated scholars, according to people familiar with the matter.

The Chinese officials have issued the warnings to U.S. government representatives repeatedly and through multiple channels, the people said, including through the U.S. Embassy in Beijing.

The Chinese message, the people said, has been blunt: The U.S. should drop prosecutions of the Chinese scholars in American courts, or Americans in China might find themselves in violation of Chinese law.

Here is more from the WSJ.  Three to four years ago I used to explain to friends and family that I needed to visit China as much as possible very quickly, because soon enough my opportunities would be over.  And it seems that now — even without the Covid factor — we have reached that point.

No, China did not win the trade war

This paper studies the heterogeneous impacts of the US-China trade war through linkages in global value chains. By building a two-stage, multi-country, multi-sector general equilibrium model, this paper discusses how imports tariffs effect domestic producers through internal linkage within industry and external linkage across industries. The model validates that imports tariffs on Chinese upstream intermediate goods negatively affects US downstream exports, outputs and employment. Effects are strong in the US industries that rely much on targeted Chinese intermediate goods. In addition, this paper differentiates the impacts of the two rounds of the trade war by comparing tariffs on intermediate goods and consumption goods. This paper estimates that the trade war increases US CPI by 0.09% in the first round and 0.22% in the second round. Finally, this paper studies the welfare effects of the trade war. This paper estimates that the trade war costs China $35.2 billion, or 0.29% GDP, costs US $15.6 billion, or 0.08% GDP, and benefits Vietnam by $402.8 million, or 0.18% GDP.

That is by Yang Zhou of the University of Minnesota, via the excellent Kevin Lewis.  Those numbers should not come as a surprise, they do indicate that both countries are worse off, but they also show that a lot of the bargaining power does in fact reside on the side of the United States.

What is the single best volume to read on China?

I do not know!  But this is one of the questions I receive most often, after “Can we have more of Tyrone?”, and “What do you mean by “Straussian”?”

I do find that Michael Wood’s new The Story of China: A Portrait of a Civilization and its People is a plausible contender for this designation.  Consistently interesting, substantive, and conceptual, but without over-interpreting for the sake of imposing a narrative straitjacket.

Due out November 17, I am pleased I paid the extra shipping costs to get it from the UK.

Might you all have alternative suggestions for a single best book on China?

China fact of the day

A Chinese pharmaceutical company has injected hundreds of thousands of people with experimental Covid-19 vaccines, as its Western counterparts warn against administering mass vaccinations before rigorous scientific studies are complete.

China National Biotec Group Co., a subsidiary of state-owned Sinopharm, has given two experimental vaccine candidates to hundreds of thousands of people under an emergency-use condition approved by Beijing in July, the company said this week. Separately, Chinese drugmaker Sinovac Biotech Ltd. said it has inoculated around 3,000 of its employees and their family members, including the firm’s chief executive, with its experimental coronavirus vaccine.

The three vaccine candidates are still undergoing Phase 3 clinical trials, which involve testing a vaccine’s safety and effectiveness on thousands of people. Six other leading Covid-19 vaccine candidates are also in this final phase, according to the World Health Organization.

I am agnostic on this!  Of course we will see how it goes, and you should note that if the Chinese vaccines turn out to be “good enough,” they will spread to poorer countries rather quickly.

I see so much not so high quality moralizing from public health figures on Twitter, backed only by adjectives or appeals to authority.  Until they “show their work” with actual numbers and probabilities, my current view is to think this Chinese policy stands a reasonable (but by no means certain) chance of passing the Benthamite test.

Please note: this does not mean America should do the same!  In fact, China rushing may well lower the benefits from an American rush, because the major gains at stake here are the easing of non-Covid deaths and deprivations in South Asia and other poor parts of the world.  Maybe the optimal portfolio is indeed a “China + Russia rush,” followed by some good’ ol American patience.  (Is that what we do?  Who said that!?)

Here is the underlying WSJ piece.

Why China prospered with corruption

In her new book China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption, Yuen Yuen Ang presents four reasons:

1. Access money dominates.

More concretely, politicians prosper by getting things built, not by preventing things from getting built.

2. China’s political system operates on a profit-sharing model.

3. Capacity-building reforms have curtailed damaging forms of corruption.

4. Regional competition checks predatory corruption, spurs on developmental efforts, and ratchets up deals.

The book in fact presents serious data and argumentation in favor of those propositions, and thus it is significantly more useful than most of the China books you will read.

What did the China hawks get right and wrong about China?

That is the topic of my latest Bloomberg column, here is part of the closing bit:

Where does all this leave U.S. China policy? As a rule of thumb: If it is of clear and limited scope and can be conducted technocratically, and can avoid both excess media coverage and political polarization — and, crucially, if it requires no obvious sacrifices from American citizens — then a policy stands a pretty good chance of succeeding. But that is not enough to justify a new global crusade. Over the last year or so, no matter what you might think of the government in Beijing, it has become clear that the government in Washington faces some real limits in responding to it.

I would stress that predictively, in their analysis of China, the hawks got almost everything right and the accommodationists got almost everything wrong.  There is just not so much we can do about that…

Megan McArdle on Patrick Collison on China

By the time someone gets to be chief executive of a successful firm, they have generally been trained out of saying anything surprising in public. So I was positively astonished Monday when I saw Patrick Collison, the CEO of payments firm Stripe, tweet that “As a US business (and tech) community I think we should be significantly clearer about our horror at, and opposition to, the atrocities being committed by the Chinese government against its own people.”

On first read, that sentiment might seem banal. Of course we should clearly oppose China’s intensifying political repression. But is easier to list American business leaders who have cravenly excused the inexcusable than to name those such as Collison, who have been brave enough to state the obvious. When it comes to China’s human rights abuses, the position of the American business community is prone…

“It must be possible,” Collison tells me, “to acknowledge the basic facts — for example, that concentration camps and forced sterilization programs are reprehensible evils. If it becomes de facto unacceptable to do so, as part of some kind of self-perpetuating silence, it really seems to me that that’s a positive feedback loop that we should hurry to break.”

There is much more at the link, definitely recommended.

China update of the day

Chinese authorities are carrying out forced sterilisations of women in an apparent campaign to curb the growth of ethnic minority populations in the western Xinjiang region, according to research published on Monday.

The report, based on a combination of official regional data, policy documents and interviews with ethnic minority women, has prompted an international group of lawmakers to call for a United Nations investigation into China’s policies in the region.

The move is likely to enrage Beijing, which has denied trampling on the rights of ethnic groups in Xinjiang, and which on Monday called the allegations “baseless”.

Here is the full story from The Guardian.

China-U.S. fact of the day

Some 54 scientists have resigned or been fired as a result of an ongoing investigation by the National Institutes of Health into the failure of NIH grantees to disclose financial ties to foreign governments. In 93% of those cases, the hidden funding came from a Chinese institution.

The new numbers come from Michael Lauer, NIH’s head of extramural research. Lauer had previously provided some information on the scope of NIH’s investigation, which had targeted 189 scientists at 87 institutions. But his presentation today to a senior advisory panel offered by far the most detailed breakout of an effort NIH launched in August 2018 that has roiled the U.S. biomedical community, and resulted in criminal charges against some prominent researchers, including Charles Lieber, chair of Harvard University’s department of chemistry and chemical biology.

“It’s not what we had hoped, and it’s not a fun task,” NIH Director Francis Collins said in characterizing the ongoing investigation. He called the data “sobering.”

Here is the full story, and there are further points of interest at the link.

China fact of the day

The U.S. higher education sector will also be hard hit, with U.S. universities increasingly dependent on tuition from Chinese students. According to the Institute of International Education, China has remained the largest source of international students for ten years running,44 with 369,548 Chinese students enrolled in U.S. higher education programs in 2018 and contributing $15 billion in tuition payments.45 The postponement or cancellation of U.S. college entrance examinations in China, indefinite travel restrictions, and continued uncertainty surrounding when U.S. college campuses will reopen are expected to reduce Chinese demand for U.S. higher education in the 2020-2021 academic year.46 University administrators report that cancelled recruitment events in China and inability to work with local recruitment agencies could further depress Chinese student enrollment in U.S. university programs.

Here is the full document, on cascading economic impacts from China more generally.  For the pointer I thank a loyal MR reader.

China estimate of the day

“The SpaceKnow data suggest a continued slowing in China’s economy, despite official data saying otherwise,” says Jeremy Fand, SpaceKnow’s chief executive.

Pollution data from SpaceKnow, collected via satellite by measuring things like methane and ozone over China, also suggest that activity remains depressed compared with previrus levels. That index, last updated on March 30, is unchanged from the end of February…

Regardless of why China’s activity remains lower than officially reported—whether it’s the virus, frozen demand, or a combination of factors—the point is that the country hasn’t yet begun to rebound.

Here is the full story by Lisa Beilfuss.  Given this data, as I have been arguing, we should not expect a V-shaped U.S. recovery.

China sentences of the day maybe it is what God intended

Tinder Has Become A News Service About Coronavirus, Which Is Not What God Intended…Setting my tinder to Wuhan so I can get the real scoop on what’s going on,” one user wrote…US-based Twitter user @drethelin tweeted “Setting my tinder to Wuhan so I can get the real scoop on what’s going on” on Jan. 28 — just before the World Health Organization declared COVID-19 was a public health emergency.

Here is the story, via Michael Rosenwald.