zhang65_HECTOR RETAMALAFP via Getty Images_shanghai Hector Retamal/AFP via Getty Images

Understanding China’s Political Economy

Whatever comes next in China will be based on the country's traditional value system, which, as MIT's Yasheng Huang emphasizes in his new book, has underpinned high levels of prosperity and innovation in the past. And it will reflect the grit – not rigidity – that lies at the core of China’s political economy.

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

A recent book by MIT’s Yasheng Huang – The Rise and Fall of the EAST: How Exams, Autocracy, Stability, and Technology Brought China Success, and Why They Might Lead to Its Decline – can help. Huang unpacks the “EAST” heuristic from the historical record of the last two and a half millennia, especially the last 40 years, to arrive at a clear conclusion: China must make radical changes if it is going to realize its full development potential.

Huang argues that the seeds of China’s decline were planted as far back as the sixth century, with the implementation of the stifling Keju civil-service examination system. In his view, this system provides an answer to the historian Joseph Needham’s “grand question”: Why did imperial China, with its profound scientific and technological advantages, fail to launch its own Industrial Revolution long before Europe did?