Welcome to Radio Davos, the podcast from

the World Economic Forum that looks at

the biggest challenges and how we might

solve them. I'm Robin Pomeroy.

>> And I'm Olivia Yang, senior China editor

and [music] senior correspondent with

CNA. We are based out of Singapore, an

Asian news network, but with a global

footprint [music] with correspondents

in major cities all around Asia and in

key Western ones [music] as well. I'm

really hoping to tell stories to help

our audience understand Asia.

>> Great. It's wonderful to be co-hosting

this conversation with you, Olivia.

>> Before we get to that, we also want to

mention that this [music] is a special

CNA correspondent podcast that we are

doing together with you, Robin, here at

the World Economic Forum in Dalian. And

yes, [music] we should introduce our

guest.

>> Please do.

>> We have with us Professor Keyu Jin Ang,

who is the Alfred Chandler Chair

Professor of Political Economy [music]

at Johns Hopkins University. She's also

the author of several books, How China

[music] Escaped the Poverty Trap, named

one of the best books of 2017 by Foreign

Affairs, and China's [music] Gilded Age.

Welcome to this special episode.

>> Thank you very much for having me. It's

a real pleasure to be here with you and

with Robin and Olivia.

>> We're recording this at the World

Economic Forum's annual meeting of the

New Champions, sometimes called the

Summer Davos in Dalian, China. And you

just came straight here from a session

where you were speaking, and we'd like

to cover some of those issues you were

talking about there.

I was researching some of the things

you've said in the past, and you've

adopted this word we used to talk about

the polycrisis. If you're able to remind

us what that was, but you've said you've

kind of evolved that into the

poly-tunity.

Tell us what those two words mean.

>> Sure. The term polycrisis

was actually popularized at this very

uh this very forum. It was uh by Adam

Tooze at the World Economic Forum in

2023.

That was the time when world leaders

felt a great deal of anxiety about world

affairs. So, the term polycrisis, which

means that we have this entanglement of

global threats around us, resonated with

uh world leaders and and and it took off

and and it stuck. And I am proposing

that we should flip that term. Because

the idea of a polycrisis is, frankly,

fear-driven, paralyzing. So, yes, you

have a name for fear. Uh that's a good

start, but you need to go beyond that.

But more importantly, the idea of a poly

tunity comes from a sudden realism. And

and maybe because I'm a Singaporean,

Singaporeans are sort of proud to be

realist.

And

practical.

>> And and the realist in me tells me that

at a time of global breakdown,

it can be scary for some, but it

actually is also a rare opportunity for

deep reflection and transformation.

And if you think about this,

in normal times, we don't like to make

big changes.

It's hard.

It's risky. So, we'll continue with

business as usual, no matter how broken

things are. And sometimes we actually

need to be forced to change.

So, this moment when multiple things

seem to be breaking down at once, from

the Western-led global order to

deglobalization

to climate change, that gives us an

opportunity to actually carry out deep

transformation.

And that deep transformation, in

particular, is going to come from the

global majority, the rest of the world.

In the past, solutions,

memes, agendas, were set by a small

number of countries, right? Who ruled in

the last two centuries. And one of the

realities of our times is that that has

drastically changed. Power has shifted,

not only to China, but to Africa,

Asia, Latin America. We have more

voices, uh which is a good thing. And

so, in many ways, I think the term

polycrisis is more of a polycrisis of

Western decline.

Not a critique of the West, just a

statement of observation. But for the

rest of the world, yes,

there's a great deal of uncertainty

about where we are going, but the time

of global breakdown is also a time for

radical shifts. And we can see that in

the context of China itself. For China,

the breakdown of

the globalization order that has allowed

China to do export-led manufacturing and

prosper, that was a great thing for

China.

In a sense, it also trapped China

because it became so good at making

consumer goods,

the the the shoes,

the toys,

the toasters, that it kind of got stuck

playing that role.

And despite state efforts to

uh compel, pressure Chinese companies to

climb up the value-added chain, to do

joint ventures, to do uh fundamental

R&D, those efforts never really worked.

Because why would you really do the hard

thing when you make so much profit from

doing consumer manufacturing.

So, in a sense, when China and the US

had this head-on competition

starting around 2016,

it was from China's perspective,

must have felt quite dangerous,

threatening, but it was also an

opportunity for China

to say, "You know what? Oh, maybe it's

time to fundamentally rethink China's

role in in the global economy." And

that's where you began to see many of

the changes that I just discussed at the

last panel, the 14th 5-year Plan, where

China thinks, "Okay, we we we are good

at making shoes, toys, toasters,

but we really would also like to make

advanced materials,

airplanes,

quantum computers,

and given that the state of the world is

in disorder anyway, let's take advantage

of that and do the hard thing."

>> You're speaking of this change that

we're seeing from China also its

approach, and we heard from the Chinese

Premier at the opening plenary in his

speech in which he pushed against that

characterization.

He said Western narrative, specifically

of the China shock 2.0, instead

recasting it as China opportunity

2.0. What do you make

of that reframing from the country's

second highest ranking official?

>> You know, like I said, we tend to see

sort of production and consumption

as two separate buckets.

The point that I was trying to make at

the panel is that they are completely

intertwined together. The real challenge

of China today is not just a growth

slowdown, it's not just geopolitical

tensions,

it's in particular what I call China's

economic paradox,

which is that the high-tech advances are

real, and they are impressive, but they

are coexisting with a broad economic

slowdown.

Right?

And so China is making these EVs, right?

Advanced materials. And if you don't

have a domestic consumption power,

then they have to go out.

They have to go to Southeast Asia. They

go to South Africa, as one of the, you

know, audiences, right? Asked a question

about these very high quality and cheap

Chinese EVs

uh in South Africa. For other countries

around the world, it's legitimate for

them to ask,

"Well, if your products are so good,

good for you, what are we going to

make?"

Right? And And other countries also want

to manufacture. They want to have some

measure of self-sufficiency. They want

to climb the value-added chain, but

China's just so good at manufacturing.

Used to be just consumer manufacturing,

now it's all parts of the supply chain.

So, that is the shock. And the shock is

is real. It has to be acknowledged.

And so, how do you turn the China shock

into a China opportunity? Then that key

to that is consumption. That's why

boosting Chinese domestic consumption is

no longer a domestic issue.

It actually is an international issue,

because without Chinese domestic

consumption, then all of the things

being made in China just has to go out

to the rest of the world.

And for us, we'll buy On the one hand, I

love to buy high-quality, affordable

Chinese products. But, on the other

hand, from the perspective of each

nation's interest, what are we going to

make?

>> Could I just pick up on that because you

mentioned that there is a real need to

boost domestic consumption, but the

statistic we saw last year last month

rather was that retail sales fell by

0.6% and that was for the first time in

more than 3 years.

That being an indicator of consumption,

but at the same time we also saw

the CCTV report saying that the Chinese

eight central government departments are

talking about uh

accelerating the development of AI plus

consumption. Is that going to work

because the numbers don't seem to

paint a picture of the current measures

actually working.

>> Yeah, you know, one of the panelists,

Minister Guo, he made a point in in in

Chinese that um why is it really

difficult for the Chinese central

government to boost consumption? Because

consumption is slow.

It's not something like I I press a

button, I introduce a new policy, and

then boom, you see results 3 months

later.

With investments, you know, the

government can say I'm going to pump X,

you know,

gazillion billions, and then you see an

effect in GDP, in the economy. With

consumption, it's it's it's really hard.

It's it's almost like dealing with AI.

You know, you you thought you put in all

the right inputs, why am I not getting

the right outputs? So, he made that

point. So, why has consumption been

persistently weak in China? Because of

the fundamentals. China is rapidly

trying to pull off this structural

transformation that I spoke about from

the old growth model to the new growth

model. The new growth model, impressive

advances, you know, AI, quantum, you

know, EVs,

aeronautics,

but um these are not

employment-producing

industries.

If anything in the short term, they

might even cut employment. So, when I go

to one of these impressive automated

factories in China, I'm like, "Wow, this

is so sleek. There is nobody in this

factory. They're all robots." So, where

are the jobs? And in China, you have

hundreds of millions of people who need

jobs. Not to mention every year China

keeps crunching out more college

graduates who need

good jobs. So, the fundamental issue

with consumption

is that you have a weak old growth model

that is no longer producing these jobs

for a large number of people, whereas

the new growth model is impressive,

but it's not mass employment-producing.

That's That's the fundamental issue.

>> That's the problem. What's the solution?

>> The solution will not be a quick fix.

The Chinese government has tried some

quick fixes. So, periodically, they

would have um these uh programs to um if

you switch to an EV, you know, you have

you have a grant, right? So, that's a

temporary boost, but it doesn't

fundamentally fix the consumption

problem because the fundamental fix of

consumption is employment.

Right? I have a good job, I feel safe in

my job, I feel confident, I spend.

So, I think that so one of the key

solutions is that too much emphasis

is being placed on the cutting-edge

technologies right now.

Right? They're impressive, they're

marketable,

right?

Um and too little emphasis is being

placed on everything else. The

traditional industries, even things like

e-commerce, which is more application

innovation, but not cutting-edge

innovation. Because those are the

sectors of the economy ultimately that

produces mass employment

and that is relatively easy for people

from all walks of life to participate in

that innovation.

I mean, if you think about things like

quantum computing,

it's not just how many people can

participate in that. Not even me, right?

Not Not even most PhDs, you know, can

participate in those kinds of

industries. So, they are geopolitically

um very important, you know, they have a

they have they they are dazzling,

glamorous,

um but in the end, the real solution to

boosting consumption in China has to be

in the non-glamorous parts of the

economy. Things like modular

manufacturing. You see, nobody talks

about that, right? I mean, you like most

people would act like, "What is that?"

right?

>> What is it?

>> [laughter]

>> Exactly, exactly.

>> What is modular manufacturing?

>> Yeah, China is very good at modular

manufacturing, which means that in the

past, manufacturing had to be done on a

gigantic scale. You have MNCs, they

build gigantic factories, and you

produce one thing, you know, in in

millions of parts. Now, because China

has such a comprehensive supply chain

and it's so nimble, an entrepreneur from

any part of the world, Switzerland,

Singapore, can go to Shenzhen and say,

"I want to prototype a new product and

can I make a small batch of it?"

And and in China, you can do that. It's

relatively fast, it's cheap, and it

allows a lot of people to participate in

that manufacturing activity. But you

see, we don't talk about that, right?

Because it's not fancy, it's not

glamorous, it doesn't win China

geopolitical chips. Right? We We much

prefer the headline, you know, AI,

quantum, dancing robots. Right? So So

that's that's that's a divide, you know?

In the end, the real solution to

consumption in China has to come from

humble innovation. Humble. Humble in the

sense that everyone can participate, the

barriers of entry are low, we can

integrate that easily into our lives.

Glamorous innovation also important, but

but but only for a very particular

context.

>> I wonder if that's the case in the West

as well, though. Everyone's very

excited. Not really?

>> I I agree. No, I agree. It is It is.

>> There's so much money being poured into

AI without potentially knowing exactly

what the applications for some of these

things are. Yeah. Maybe governments and

companies are neglecting some of the

more humble

>> I I I cannot agree more. You know, in

coming from Washington, D.C., a lot of

people talk about the K-shaped economy

in the US. K in the sense that it's

increasingly divided. The rich are

richer and the poor are feeling more

desperate with inflation, employment

pressures, and and and so on. And and in

the US, you see the tech companies are

becoming ever more powerful, while

ordinary Americans are

fed up with data centers being built

around them and using up their water.

And so you have this polarization within

the US. Coming here over

to to some of Davos, I was surprised

that the Chinese are use using the

language of the K-shaped economy.

So, despite seeming to be rivals, this

is one of the themes I've always

stressed. Uh China and America have a

lot more in common than most people

realize.

>> I wonder though, what I'm hearing is

that you're saying that this consumption

drive is going to take time

for us to see the results.

>> Yes.

>> So, then I want to ask you about China's

new 15th 5-year plan that begins from

this year.

Are you seeing signals that it is

preparing for this long-term

transformation when you compare it with

previous 5-year plans?

>> Yes. As I said, if you look at the 14th

5-year plan, the focus was singular.

We're going to do cutting-edge

technology, right? Uh it's called uh new

productive forces at the time, right?

So, that was the singular goal. If you

look at the 15th 5-year plan,

consumption has been added on top of it.

And and as I tried to explain, it's not

it's not a trivial add-on. It's a it's a

necessary, right? Uh add-on. And if you

look at um more recently,

um

the um uh central government's uh

economic work conference, again, these

these two themes

uh are brought together again. So, at

the highest level, I believe that it is

a recognition, right? That production

and consumption are not separate.

Uh and and if China continues to

dominate in manufacturing,

then other countries will feel the

shock.

Right? And when they feel the shock,

then the Chinese production

cannot be sustained.

All right. So, this is where the

consumption part becomes necessary

for enabling the production to continue.

>> I think you had an interesting analogy

for how big a shift um this is for

China. Could you help us put that into

perspective?

>> Sure.

>> [laughter]

>> The analogy that I used was that

five-year plans have always been, of

course, a key policy guiding document in

China.

But in the past 13th five-year plan and

before,

it was as if you were driving straight

ahead,

autopilot, with some adjustments every

five years, of course, right? And the

reason for that was because those

five-year plans were operating under the

old growth model, where the paradigms

have already been defined, right? Global

integration, FDI, exports, uh real

estate, construction. So, within these

parameters, you know, you you you tweak

every now and then, but you know the

destination. Just keep going ahead,

right?

Now, why is it that from the 14th and

15th five-year plan onward, all of a

sudden it's getting a lot more

attention? And in fact, the central

party leadership is now personally

supervising,

drafting the five-year plan. It has, in

China's political system, been elevated,

you know, as as a signaling tool. And

the reason for that, to use the analogy

of driving, is because from the 14th

five-year plan onward, it's as if China

put its hand firmly on the steering

wheel. It's a very heavy steering wheel,

because we are not talking about we're

not talking about a light sedan, not

even an SUV. It's a gigantic tanker, and

China is trying to make a right turn.

All right, it's a structural

transformation

of the of the growth drivers, right? Not

just GDP in terms of quantity, but GDP

coming from the most high-value add

innovation sectors, which China has put

off for many years because it was it had

benefited from the old game

globalization.

So, that is why we all of a sudden

everyone is talking like the 5-year plan

is cool again, right? Everyone's talking

about it, right? Uh and and and that's

and and because it captures, right? It

captures this

right turn that that China has been

trying to make since the 14th 5-year

plan.

>> Explain what that right turn involves

and it's it's this more high-value super

high-tech thing. Is it also the

concentration on domestic consumption as

well? Is that part of the the right

turn?

>> There are two levels. The first the

first transformation is from quantity of

GDP to quality of GDP. Hence the term

new quality productive forces. So, in

the past China had and it was normal for

China to have 7% even 12% GDP growth,

but a lot of it just came from

low-hanging fruits. All right, just

low-end manufacturing,

overcapacity in real estate, you know,

build and then demolish again, a lot of

environmental

pollution as a result. So, there was

little regard for the quality of growth.

From the 14th 5-year plan onwards, there

was a very clear signal from the central

party leadership, we don't want that

kind of growth anymore. We want to have

high-quality growth. So, that's level

one. The level two is in in addition to

that, we want to have a structural

transformation in the kinds of

innovation we are good at. And like I

said, China used to be really good at

two kinds of innovation. One to 10, we

which means application innovation.

Somebody invents AI and China applies

it.

Or China is also very good at 10 to 100.

In fact, China is singularly good at

that because of its massive market. So

green energy, China can massively scale

it and and make it cheap.

From the 14th 5-year plan onward, China

had a new ambition, which is in addition

to being at

1 to 10 and 10 to 100, we want to do

zero to one.

So if you look at the social media and

the WeChat, now now the popular term is

zero to one. And if you don't know the

context, it might feel a little strange.

Like why is everyone now, you know,

talking in sort of binary digits? And

what they mean by that is

that from 2000 onward No, actually maybe

a bit earlier than that, starting from

when

trade tensions with uh the US, right?

intensify, China realized that oh, we

are good at manufacturing everything

except everything that's upstream.

And so when the US cuts off supply to

chips,

China finds that it was helpless.

And so it realized that um it has to

move upstream. So zero to one is really

that sort of upstream innovation. That's

where the new ambitions lie.

>> I know this is a bit of crystal ball

gazing.

>> Okay.

>> A sharp right turn

for the 14th and 15th 5-year plan.

16th 5-year plan,

what's the direction?

>> Mhm. All right, that's is a good point.

I my own my if it my own, you know, uh I

I hate to say it recommendation because

it feels like so arrogant. Um but the

point I was trying to make is that you

can only solve the consumption problem

by making sure that you are doing all

kinds of innovation. And not just

pouring every cent you have

into zero to one innovation. Because

that

doesn't produce jobs.

Yeah. And and that means having to also

alter

bureaucratic incentives in China, which

is very important.

Right now, try to imagine being a

Chinese official.

You read the five-year plan and it's

pretty clear to you what's important.

So, why would you try to

revive real estate

or some traditional,

you know, economy? That's not going to

make yourself look particularly

marketable. Right? Right, you want to

stand out by saying,

"I have a flying taxi."

>> [laughter]

>> Right? Or I I have dancing robots,

right? So, you have you have this issue

of you also have to deal with this

issue, particularly in China because the

implementation is done at the local

levels,

that has to be incentives

for the local officials to balance the

economy across all types of innovation

and in particular focus on employment

boosting innovation.

>> You know, it might be hoped that some of

that um, lower quality mass-produced

manufacturing might migrate from China

to less developed countries.

>> Yes.

>> There's not much indication that will

happen, particularly as it's automated,

particularly because you've got a lot of

unemployment here. We still need these

jobs in China.

What How do you see China's role, either

good or bad, in developing countries

that need

manufacturing, need jobs, need new

technologies?

>> You know, in fact that migration is

happening. Uh, There are many Chinese

companies moving overseas. Just spoke to

one entrepreneur who specializes in

connecting Chinese companies who want to

move to Southeast Asia. So, that

migration

is happening. It's also an essential

part of um

diversification and risk management for

Chinese companies.

But, for countries in Southeast Asia,

perhaps certain countries might be

content

taking over the low-end consumer

manufacturing.

But, you have countries like

Malaysia has aspirations in doing some

semiconductor manufacturing, right?

Other economies are also wanting to make

their own cars. Even Vietnam wants to

make its own EVs.

And so, the question for them is the one

being asked by the audience from South

Africa in in the previous um session.

But, he's like, with all of these

high-quality, affordable Chinese cars,

you know, why why and or how

can our country make our own cars or or

other, you know, high-value, desirable

products?

>> Is there an answer to that? Maybe it's

the joint ventures or Chinese investment

in those places?

>> I think that the the ideal answer would

be that Chinese consumers also buy from

them.

>> Right.

>> Robin, I given also can't let Professor

Ang go

given her unique position researching

China but being based in the US.

China-US relations

always comes up. The two

superpower rival that rivalry, but

somewhat

relationship has stabilized following

President Trump's visit to Beijing, and

we're expecting more meetings in the

year ahead.

>> Yeah.

>> How do you expect that to play out in

relation to China's trajectory, its 15th

5-year plan? How much of that

relationship is weighing on how China is

navigating its next chapter?

>> It's a very encouraging sign. I think

the the the the last visit that

uh that at least the relationship feels

much more

amiable, but the competition will will

go on and on, right? Everyone knows

that. I think the difference, if we

compare it I think the the trap um that

often happens, particularly in

Washington, D.C., is the Cold War

mindset.

And as my colleagues um as my American

colleagues often remind me,

the the people making decisions in

America today, they lived through the

Cold War.

So, that's the mindset that they were

that that they're familiar with, right?

So, so they think in terms of zero-sum

competition.

They also have this expectation that,

like in the Cold War, the end game is

that one side will fall.

And then you have complete victory,

you have a big party, and then yay,

right? It's like a sports competition.

But but that's just not the reality

anymore. The two big powers are in a

competition where I think it's possible

that there will be no end game, no clear

victor for for the for a long time to

come. It's also a new world where the

rest of the world is no longer just

passive, you know, and weak, and sort of

pressured into picking sides. So, every

single, you know, Singapore in

particular, but also everyone else is

saying, "We're not going to pick sides.

We're going to do business with both

great powers, you know, however, you

know, it fits our interests. And for the

US, that's also a new reality to adapt

to.

All right. So, so this is a very

different international context in which

in which um US-China competition is

playing out.

At Johns Hopkins,

uh I run a forum called the Multipolar

World and US-China Forum, where we

invite experts from across sectors to

discuss uh US-China relations, but I

deliberately put the multipolar world in

front

because I think too often, when we have

discussions about US-China, it's so

centered on Washington and Beijing.

And we need to step back and realize

we're kind of in a different world,

where everyone else matters as well.

Everyone else wants to have a voice, and

they have more agency today than they

ever did in the 20th century. So, that's

the new world that we are living in. And

so, that's why if you, you know, sit

here and moan about the polycrisis, it

doesn't resonate with the rest of the

world. For the rest of the world, the

reality is mixed, risks, dangers, but

also tremendous opportunity that they

never had in the last century.

>> Professor Yuan Yuan Ang, thanks very

much for joining us.

>> Thank you very much.

>> Radio Davos is available wherever you

get podcasts or wef.ch/podcasts.

Also on the World Economic Forum's

website, you can see all the sessions

from the AMNC 26, [music]

including the one with Professor Ang

that we've talked about. I'll put a link

to that in the show notes this episode.

>> And this has also been a special episode

of the CNA Correspondent podcast, where

you can get it on wherever you find your

podcast [music] on, whichever platform

that may be. This was fun.

>> Great. Thanks from Olivia and from me.

Thank you, Professor Ang.

>> Thank you very much.

>> for listening and watching, and we'll

see you next time.

>> Mhm.