Josherich's Blog

Sinica Live at Columbia University, with Yawei Liu and Yukon Zhang

Welcome to this special live edition of the Cynical Podcast. Coming to you from the 2025 Columbia China Summit at Columbia University. Hello, New York. Let’s hear you make a little noise. Thank you so much to Aidan, to Zhang Yu, to Annie Cui for taking such good care of us. All of the good folks here at the Columbia Greater China Society for having me and my two esteemed guests here.

This summit is taking place at a pivotal moment, not only for Columbia University but also for U.S.-China relations. Both the university and the bilateral relationship, the most important in the world, find themselves buffeted and embattled by the capricious whims of a certain U.S. president. I worry a lot about the future of both of them and of students like Mahmoud Khalil. When Annie Cui and her colleagues at the business school reached out to me to moderate this conversation, we were all living then, not so long ago, in a very different world.

It was possible to title a session like this in the way that this one was actually framed, which is, as you can see, Bridging the Divide: how the U.S. and China can find common ground. This week, in the midst of this awful trade war, the idea seems positively quaint. Fortunately, though, we have two guests who bring not only decades of experience, deep insight and clear-eyed analysis to the topic at hand, but also quite original thinking about China’s evolving role in the world and how we in the United States might better understand it.

First up, Dr. Yukon Huang, senior fellow at the Carnegie Endowment for International Peace, someone who I have long admired for his ability to cut through prevailing narratives about China’s economy with rigor and reason. I think we first met about 15 years ago or 16 years ago in, of all places, Sao Paulo, Brazil. He was, of course, the World Bank’s former country director for China. He has had a front row seat to the country’s most consequential period of economic reform. His book, Cracking the China Conundrum: Why Conventional Economic Wisdom is Wrong, remains one of the most lucid and empirically grounded treatments of China’s development that I have read. I had the pleasure of interviewing him on stage about it several years ago. His voice remains one of the rare ones in the field that is both deeply informed and refreshingly independent. That is to say, quite contrarian at times. He has something of a deserved reputation for being a contrarian.

I am also delighted to be joined by my very good friend, Dr. Yawe Liu, who serves as senior advisor for China at the Karcher Center in Atlanta and is also the founding editor of the U.S.-China Perception Monitor. Few people, I honestly say, have done more to foster constructive dialogue and mutual understanding between the U.S. and China than Yawe. Through his work at the Karcher Center, which is an institution with a unique legacy in U.S.-China engagement, he has helped to create platforms for civil society exchange, to track perception in both countries and champion truly more empathic approaches to bilateral relations.

Yawe brings not only academic expertise but a lifelong commitment to dialogue, public diplomacy, and the difficult work of bridge building. Together, Yukon and Yawe offer us an invaluable combination of perspectives, one grounded in economics and policy, the other in civil society and in political culture. I can’t think of two better people to help guide us through this complex moment in U.S.-China relations. So please join me in welcoming Yukon Fong and Yawe Liu. Thank you.

On this topic, it’s really hard to even know where to begin, given the state of things. But earlier, Yawe, you told me a bit about Columbia University’s history with China and its deep connection to China. Maybe we could get into the current situation by first talking a little bit about this institution and its relationship with China, hoping, of course, that in the current climate, such discussion doesn’t get the university into even deeper Danpu than it is already with the White House.

I’ll start with a recent history. In 1989, I was admitted by the political science department as a student in the Ph.D. program. Unfortunately, not like Nipi, who got a scholarship, they basically said I could come to study, but I had to pay my own tuition. Of course, I was not able to come to Columbia. Instead, I went to Emory because Coca-Cola has a Wuzhou fellowship, so I was able to study over there. And since then, there’s no Pepsi. All my students, the first thing I told them is, in my class, don’t let me see you drink Pepsi because my whole doctoral study was sponsored by Coca-Cola, which is, of course, one of the most popular drinks in China.

This podcast is not sponsored by the Coca-Cola Company. And, of course, President Carter always said he helped introduce Coca-Cola, even though Coca-Cola was in China in the 1930s. But we know what happened from the 30s all the way to the 1970s. Now, Columbia, I’m so happy to be here at Columbia because Columbia is the place to the divide that Kaiser talked about, the fact that you are all here. The China studies program at Columbia started in the early years of the 20th century, and one of the donations came from a Chinese-American who was a servant to a general. His name is Ding Long. There is a play, I think maybe you can find it on YouTube, called Ding Long de Yi Zi, the chair of Columbia. He was a servant, but he donated $50,000, and then his boss donated even more money. That’s where it started.

Now, of course, we have Professor Duwe, who influenced Hu Shi, who later on became China’s ambassador. There’s also Wellington Koo, who came here and studied, and of course, later on, we have Yang Lan, who studied here. We also have Fangang, whom Yukong probably knew, a prominent economist. Today we have Thomas Christensen and Andy Nathan, two of the most eminent China scholars. This is the right place, and I’m so happy to see so many Chinese students. According to DeepSeq, there are 3,000 Chinese students currently enrolled at Columbia. You are going to be the future.

I just saw one tweet by Laura Loomer urging President Trump to cancel all visas for this debate. I hope President Trump is not going to listen to her, but President Trump does listen to her all the time. Let’s hear a rousing boo for Laura Loomer. Boo!

My grandfather was a very eminent historian, Guo Tingyi, who was the founding director of the Modern History Bureau of the Academia Seneca. He was here in the last years of his life. This is where he finished his final magnum opus, his book, an outline of modern China’s history. I have some ties to Columbia. I used to visit him here, right on Riverside Drive, and walk with him in Grant’s tomb in the park there.

But let’s turn to this. In this age of such difficulty, I want to turn to you first, Yukon, to get a perspective from Beijing. What do things look like from Beijing? When you look at the bigger context of the bilateral relationship, what is it that shapes Beijing’s views on the trade war? And then I’d love, Yawe, for you to jump in as soon as Yukon is done talking about that because I know you have some very interesting perspectives on some of the fundamental aspects that you think are driving the problems that have led to this trade war.

But Yukon, let’s begin. How does Beijing see what’s happening right now? I would think that there are two questions in the minds of Chinese leaders. First is, is the United States really serious? What is it that the Trump administration wants? Is it about the conflict between two growing dynamic powers? Is it about technology wars? Is it about security? Is it about influence? Is it about power? If Trump is in favor of negotiating, what does he want to really negotiate about?

Does he want China to invest more in the United States to build up manufacturing in the U.S.? But if that is the case, why is it that U.S. policies discourage Chinese companies from investing in the United States? If the United States wants China to buy more from the United States, why does the United States consistently restrict the exports of high-tech equipment to China? After all, there’s only so much soybeans that China can buy or Boeing aircraft. They can’t buy high-tech; they don’t buy defense expenditures. It’s therefore almost impossible for China to buy enough to close the deficit. So is it really about deficits? Is it about technology? Superiority in terms of technological innovation?

That’s the big question in China. What is it that America really wants? Therefore, if Beijing understood that, what could Beijing offer back? Is it about 5G security? Is it about TikTok? Is it about green technologies? Now, later on, I’m sure we’re going to get into this because if it is about green technology, if it is about TikTok, if it is about 5G, then there is a potential for a collaboration which has not been explored. But I think the real problem from a Beijing perspective is, we will respond, Beijing says. But really, you need to know what you really want.

Is there an operating thesis, though? Well, the problem from a Beijing perspective is they see two broad forces in the United States. Hardline U.S. policy advisors favor disengaging with China, breaking down, and no longer trading. I don’t think that’s President Trump’s idea. Trump still wants to negotiate. He wants to interact. He actually has admiration for the Chinese system. But then who actually makes the decision? The hard-minded policy advisors who are in favor of a trade war or high tariffs? Or is it really Trump looking for some way to negotiate with China and to find a middle ground?

I think that’s the problem we face today. Okay, Yawe, let’s zoom out a bit and frame this current dispute in terms of, like I suggested, perception, which is something we both talk about an awful lot. I’m often on about cognitive or strategic empathy. I think we’re both fans of the late Robert Jervis, who was at UC Berkeley, where I studied, and the importance he placed on understanding perception on the other side. You’ve talked a lot about major foundational perceptions from each side and what’s wrong with them. Can you maybe do your best to unpack these while trying to do it succinctly?

Yeah, I wrote my dissertation on Mao Zedong himself and called the United States according to Mao Zedong because Mao’s perception of the U.S. and his shifting perception of the U.S. drove his policy toward the United States. Now, here today, you know, more and more, I see there is the Huntington book called the Clash of Civilizations. I think there is a clash of perceptions, or I prefer to call it a clash of misperceptions. Americans see China one way, and China sees the U.S. another way, and these perceptions clash.

The sound and fury we have experienced, starting with Trump in 2017, continued with Biden. I called the Biden four years Trump two, and now we’re starting Trump three. The misperceptions from the China side are that the U.S. is a pacing threat, that the U.S. is actually trying to engage in regime change in China. For Trump, it’s using economic leverage; for Biden, using ideological and high-tech restrictions.

That’s number one. And number two is the Chinese elite also believe the U.S. is in decline. So, one, the U.S. is trying to undermine us, and two, the U.S. is in decline. They’re going to triple, quadruple their effort to contain China. Now, I think what Trump did in the last few weeks has further deepened the Chinese perception that America, by whatever means that is available to them, wants to overthrow China. They want to overthrow the system.

Now, the American perception of China is even more interesting, as China poses a threat. China is doing everything to undermine the American way of life. That’s one. Two, I think it has borders of racism. When Vance said, “We Americans are buying a body from the Chinese peasants who are manufacturing the products that we buy.” Early on in Trump 1, 2017, the State Department policy planning lady said, “This new Cold War with China is different from the first Cold War. The first Cold War was about white people, Russians and Americans. This one is white people versus the yellow people.” That’s different.

At the bottom of some American thinkers and policy elite, they still have this sense of yellow peril that China poses. Even though Russia is fighting a war, China is seen as a bigger threat. These two misperceptions, eventually lead to miscalculations. That’s what keeps me awake in the evening. Maybe one day, by design or by accident, the two countries might be driven into a conflict by these misperceptions.

I understand the two American misperceptions that you identified, and I agree with your characterization of them as misperceptions. But China’s perceptions that, A, the United States seeks regime change ultimately, seems, when I look at the way that political legitimacy is never afforded, they refer to it as a regime, which is an inherently pejorative term.

When they talk about this assumption that America is in decline, the evidence before my eyes doesn’t exactly contradict that right now, either. So, are these misperceptions even, I mean, is China misperceiving American intention? Is China misperceiving America’s trajectory? Well, to a certain extent, these misperceptions are transformed into real perceptions because of all the evidence. But I still think, you know, maybe the Chinese are correct that the U.S. does want China to change its system.

You know, that’s actually when Americans realize there’s no way the market economy is going to change China’s political system. That led to the disillusionment, disappointment, and desperation that the U.S. wants to contain China because China is a free rider. The U.S. provided all the access to the market, which has strengthened China. China is now posing a threat.

So, on that part, I think maybe to a certain extent, it’s right. But I really don’t believe that organizations like the Carter Center are being perceived by China as the vanguard of the American effort to undermine the Chinese political system and promote a color revolution. I think on the second misperception of China is that the U.S., because of what we witnessed—because of the race relationship, because of the 2008 financial tsunami, and all the other things that happened— is in decline.

I think on that part, China probably is more erroneous, saying the days of America are numbered, and we are going to take over. There’s no way China is going to take over, and China really has no desire. That’s my conviction. China has no desire to supplant the U.S. as the superpower. China has no alternative to offer to other countries that our system is better than the American system.

Okay, Yukon, turning to you on the subject of assumptions and perceptions. I think it’s fair to say that a very widespread, maybe even foundational assumption of the Trump administration and probably a lot of Americans is that China’s trade surpluses have fueled American trade deficits. I think that most people take that on faith. You have noted, though, that, in fact, America’s trade deficits spiked long before China was a major player. In the 1990s, we started to see major deficits. So what was the catalyst, in fact, for those deficits?

Well, it’s kind of interesting. Trump launched the trade war because he believed that our trade deficits in the United States are largely due to China’s large trade surpluses, and therefore tariffs could perhaps reverse this trend. Go back to when U.S. trade deficits really became significant. It was in the late 90s, early 2000s. The U.S. began to run huge trade deficits.

Then look at China during that period; China didn’t even have a trade surplus of any significance. So how could America’s trade deficits be caused by China when China wasn’t even driving any trade surpluses at that period of time? Now, when China’s trade surpluses began to get really large, around 2005 to 2007, America’s trade deficits actually got smaller. They actually ran in the opposite direction.

So for most of the past two decades, China’s trade surpluses and America’s trade deficits ran in exactly the opposite direction that you would predict if you thought they were related. The great irony is that China’s trade surpluses became really large, and America’s deficits became really large precisely when Trump started the trade war. Before that, they were not linked.

In 2018, China did not have any trade surpluses until the trade war was launched, and then China’s trade surpluses soared, and America’s deficits started to get really large. So, in great irony, this tension between the two was launched or caused by the trade war.

Now, how do you explain this? Well, the answer is that trade balances are not due to trade tariff rates or exchange rates. They’re essentially due to fiscal imbalances on both sides. So how did America’s trade deficits emerge in the late 90s? Huge budget deficits, the war on terrorism, tax cuts in the United States. America generates a huge trade deficit that has nothing to do with China.

How did China’s tremendous surpluses emerge over the last 20 years? They emerged over the last 20 years precisely when China became more urbanized. So how does urbanization in China generate trade surpluses? It doesn’t have anything to do with exchange rates, it doesn’t have anything to do with interest rates, it doesn’t have anything to do with tariffs.

Five hundred million Chinese moved to the cities from rural areas because of growth and development. Most of them are migrant workers. Migrant workers in China save 50% more than normal Chinese because they can’t spend their money. So they’re earning high incomes in the big cities in Shanghai, Chongqing, Beijing, and Tendu, but they can’t spend it.

So China’s savings rate surges, and this leads to a trade surplus in China. So here’s what’s happening. China’s trade balances are largely driven, ironically, by the extraordinary savings of Chinese migrants. America’s deficits are largely driven by America’s budgetary deficits. They’re completely unrelated. Yet we think globally that China’s trade balances and America’s trade balances are somehow linked. They’re not.

And now we have a tariff war. As an economist, my basic problem is we’re launching a trade war on the assumption that China and America’s trade imbalances are somehow caused by the same factors, and that tariffs will resolve the problem when they’re fundamentally driven by two incredibly different issues: urbanization in China and budget deficits in the United States. And that’s why we really can’t solve this problem through tariffs.

It’s funny that only just a couple of weeks ago, people were still speaking about the possibility, the distinct possibility of some kind of grand bargain between Washington and Beijing, between Donald Trump and Xi Jinping. Do either of you hold out any hope for something like that still happening?

In light maybe of what happened this last night, I don’t know if you’ve all seen the news. But Customs and Border Patrol put out very quietly an announcement that many categories of trade goods would be exempted from the onerous tariffs, the reciprocal tariffs that he supposedly put in. In other words, everything except for things like toys and textiles are still going to be exempted from tariffs.

So it represents a pretty substantial percentage of the total trade goods, and it’s all the important stuff. But anyway, given these circumstances, I know we all have whiplash now from swinging our heads so wildly watching trade policy change so abruptly. But I’m curious, at some point, Trump and Xi Jinping will talk. It’s inevitable.

From our knowledge of these two individuals, their temperament, their respective agendas, their sense of their own strengths and vulnerabilities, what is the likely outcome of such an encounter? I want to start with you, Yukon, because you’ve suggested to me privately that there are certain similarities between the beliefs and aspirations of, on the one hand, Donald Trump and Xi Jinping, on the other, that might either exacerbate or, and I think this is the more intriguing part and the less intuitive part, actually mitigate bilateral tensions.

So I want to start with you and then turn to Yahweh and talk about the personalities and the temperaments and maybe the fuzzier cultural elements of the relationship. You hit on an interesting point. We think U.S.-China tensions are the consequence of differences between the United States and China. They’re actually the consequences of growing similarities between the U.S. and China.

Trump has “Make America Great Again.” Xi Jinping has the “China Dream.” Both have cultural wars. The United States is against diversity, education, inequalities, etc. In China, it’s a stronger movement toward the Communist Party ideology. Both sides favor manufacturing, technological development. Both sides have regional aspirations. Trump wants to link Canada, Greenland, and Mexico into a North American influence. China has the Belt and Road Initiative and Asia view.

Both are becoming what I call more authoritarian. Each of these tendencies can either exacerbate or moderate tensions between the U.S. and China. So if we are going to find a solution, we have to turn the growing similarities between the United States leadership and America’s leadership into issues in which they may find commonality. One of them is industrialization, security, and technology.

Where can you find harmony out of conflict? TikTok is going to be the example. We have a solution to TikTok. The security aspects that worry Americans will be handled by Oracle. China will be able to retain its intellectual technological algorithms and maintain that. But more of the control of TikTok will be in the United States. I think eventually that’s going to happen.

But that’s such an example. Let’s go to how you extend that example. Go to 5G communications where America is worried about security. The solution lies in providing a security comfort blanket to America or to Europe that merges China’s manufacturing prowess. The same thing in green technologies and batteries. How do you get, and you will see it, you will see Chinese manufacturing automobiles in the United States 10 years from now. Today, there’s none of that.

But there will be a compromise which merges China’s tremendous advancements in green technologies and manufacturing capacity and Trump’s desire to create a new manufacturing capacity of automobiles in the United States. Here’s the issue: they both share this common interest in promoting manufacturing technology. You have to find a way where both sides feel they can benefit from that relationship.

And as an economist, that’s what I focus upon. So the grand bargain may end up looking something like what Mitch Presnick was talking about this morning with having joint ventures, where there’s technology transfer to American manufacturers. I think the test cases will be in Europe first. That’s how you get around what I call the hardline policymakers in the U.S. system who are against integration or collaboration.

I don’t think Trump is actually in favor of that. Trump wants some kind of a collaborative relationship, but he has to show that collaborative relationship benefits America to make America great again. This is the key trend line. If China responds in a certain way to assure President Trump that there are ways in which both sides can gain, then I think President Trump can actually override what I would call the hardline views of many of his advisors.

That, I think, is the trickiest issue here in the United States. The hardline views of those advisors are, of course, mostly predicated on national security concerns, legitimate or otherwise. So, Yahweh, do you see that as being an insurmountable obstacle to the sorts of collaborations that we see?

Then maybe you could speak to this idea. Do you see the temperaments of these two leaders as being in some way compatible in a way we can, within the duration of this administration, see our way to some kind of a grand bargain? I do. I think there is a special relationship between President Trump and President Xi.

If you go back to April 2017, President Xi flew into Mar-a-Lago and spent two days talking to Trump. Trump’s family, the granddaughter who can sing and speak Chinese, and then Trump went to China in November 2017. President Xi hosted him in the Forbidden City. That’s when the grand bargain was actually talked about, and then there is the first phase trade agreement.

Now, of course, Americans are saying, particularly Trump’s Secretary of Treasury and Commerce, that there is the first phase trade agreement that China failed to deliver because of COVID and all the other things. Of course, China has its own explanations to do. Before the tariff showdown, they were all talking about maybe we’ll renegotiate that. So I think that’s still going to happen.

Trump is different from all the other American presidents. He engages in personal diplomacy. He engages with the leaders of other countries in a special kind of language. I really like his message on his True Social Account saying, “Xi and I, if we work together, we can resolve so many problems and we can make this world peaceful and prosper again.”

So I think there are things there. The thing that is missing is the mechanics. We need to get the two to talk to each other. Now, if you look at China’s three pillars of the U.S.-China relationship, the first one is mutual respect. For now, I think the China side believes Trump is not serious. Trump doesn’t respect the Chinese leader, doesn’t respect the Chinese perspective.

So if that difficulty is overcome, and then the two leaders, starting with the working level, eventually if the two leaders met in person, just think about Trump meeting King III to try to resolve the North Korean nuclear crisis. No American president would have ever done that until Trump came along and almost resolved it. So I’m still hopeful, I’m not totally depressed, that some sort of grand bargain can be negotiated and even realized, hopefully, in the next three years.

Trump’s obsession with trade deficits, with re-industrialization, resonates not just with his populist base. I think there’s some interesting combination of pure xenophobia, racism, and a general kind of moral panic that was, I think, ginned up largely by the Trump administration during the COVID pandemic, but that predates that, I think, arising simply out of the psychological discomfort at seeing this multidimensional peer competitor rising so quickly.

This is deep-rooted. Is this something that one president, whatever his personal relationship is, can reverse? And I want to ask you, do you sense that things are changing in the American view about China? We’ve seen the TikTok refugees at Xiaohongshu. We’ve seen this phenomenon of deep-seek causing both panic and admiration within the American intelligentsia.

But also we’ve seen things like iShowSpeed, a 37 million follower YouTube celebrity traveling around China for three weeks and just finishing his trip there, glowing, saying very, very positive things. My sense is that, and I’m really looking forward to seeing the research that comes out of the Carter Center soon, is that within younger people, Gen Z people especially, attitudes toward China and America are changing. Are you seeing any evidence of that?

I’m hopeful whenever I see young Chinese students at American universities and colleges. I think, you know, the days you’re going to spend here, eventually, either you’re going to work here or you’re going to go back to China. You will be able to present a more objective view of what the U.S. is all about. At the same time, you can convey to the Americans what China is all about.

I don’t think, despite the differences in history, in political system, and in political legitimacy you mentioned, the two countries will be able to find a way to peacefully coexist. That’s the second pillar of the U.S.-China relationship. Because I just cannot imagine that these misperceptions will drive the two countries to conflict, although we see people on both sides pushing toward that direction.

Pegasus traveled to Japan and other parts of Asia, basically saying they would do everything to stop China from taking over Taiwan. What’s so important to the U.S. about Taiwan? Can’t you just say the Taiwan issue is an issue between people on both sides of the street? They can eventually reconcile and come to a decision.

So, no president during his four years or eight years can change the perception. But Trump being president is different because of his unique characteristics, personality, and the position that the Chinese leader is in. Hopefully, something can be worked out. There may be more than three and a half years left if he gets his way.

Of course, all of this is happening, Yukon, in a time when, as I said, Americans are increasingly aware of China’s technological prowess. We’ve had the deep-seek moments and all of that, but also in a time when there is a big rethink happening about the Biden administration’s policy trying to basically starve China of key technology inputs.

We’ve seen some reversals already. H20 chips now, after the meeting with Jensen Huang and Mar-a-Lago, are now going to be exportable to China. These were very key in deep-seek and other things. There’s a lot of debate happening on this. I’ve often said that what these Biden-era policies have done is forced the frog to leap. Now it’s just done another leapfrog.

So let’s talk about this. What is the relationship between innovation in China and the trade war that’s happening right now? You have some really interesting ideas on this. The trade war is largely focused upon the exchange of products. The tension comes from the fact that China is a key manufacturer of a whole range of products and largely exports to Europe and the United States.

There’s a concern in the United States that we are losing our capacity to manufacture and to be self-sufficient, and we worry about security. Technology is becoming a large part of the debate because the issue in the future is who’s going to be the technological leader. I think technology wars are actually going to be more important than trade wars in the future. That’s the key issue here.

Now, as an economist, technology benefits everybody if knowledge can be shared. That’s what the world has been doing for 30, 40, 50 years. Knowledge flows back and forth and everyone grows much faster. Now we’re trying to establish barriers. We’re trying to restrict it. Everyone’s trying to become independent and self-sufficient. That consequence is quite negative.

We all believe that the more innovative we are as a country, the faster we will grow. We believe that in the United States, and they believe that in China and South Korea. Every country believes that the more innovative you are, the faster you will grow. The reality is actually the opposite. The more innovative you are, the more technologically advanced you are, the slower you will grow.

For example, South Korea over the last 20 years became much more innovative and technologically self-sufficient than anyone would have predicted. At a much lower income level, it became as innovative as Japan, but South Korea’s growth rate was cut in half.

How do you establish causality there, though? We have ways of measuring how innovative countries are by indices. Every year, there are institutions, intellectual property rights institutions, which rank all the countries of the world. If you rank all the countries of the world in terms of how innovative they are, you can see that it is mostly determined by how rich they are.

Richer countries are more innovative than poor ones. So, if you plot per capita income along one line and how innovative they are on another line, the correlation is incredible. It’s 90%. Except for three countries. Only three countries are more innovative than you would predict. That is, they’re above the line. They’re more innovative than their income level would predict. And those three countries, only three out of 100, are China, South Korea, and India.

Here’s the irony. They’re trying to leapfrog ahead, and all of them are growing slower because of that. So the interesting question is, why is it when you try to become more innovative than you should be in some ways that you actually grow slower? The answer is, you’re pouring resources into activities which have high risk, and before they are logically competitive, this is costly.

So why is China doing this? Security, tension, competition. It has no choice. The big problem in China is, the big problem or challenge for Xi Jinping, who is trying to promote highly productive sectors and technology, is how to maintain significantly high growth rates when I have no money to support this. The answer to something I’ve been writing about is that China can actually grow much faster without spending any money at all. And that’s the big challenge in China: costless growth.

Most countries don’t have this. Most countries that grow faster have to invest more. China is the only country that could grow faster without investing more. But they haven’t been able to. They haven’t basically recognized this. I know your answer to that, and it has to do with the hukou system.

Here’s the big issue here. What is everyone complaining about? That China doesn’t consume enough. It saves too much. So why is consumption in China so low compared to other countries? You have 400 million households in China who don’t have hukou. They’re migrant workers. They account for 40%, 50% of the labor force in Shanghai, Beijing, Guangzhou, Shenzhen.

Here’s the problem. Those 400 million households save 50% more than normal Chinese. That explains why Chinese savings rates are so high and consumption rates are so low. Suppose you abolish hukou. You say to all these households, you can now live, buy, and spend just like normal Chinese. You can buy houses, you can buy cars, you can do everything else. China’s consumption rate would be the same as other countries. At no cost to the government, China would no longer be a trade surplus country. It would actually become a trade deficit country. Global trade tensions would disappear because China would no longer be generating surpluses.

So the great irony is, if you just abolished hukou, you wouldn’t have trade wars anymore. From your lips to Xi Jinping’s ears, let us hope. China does have a trump card, whether you’re going to deploy it or not, to remove the hukou. I mean, no country in the world, I may be exaggerating, divides its citizens into two categories. So there’s the urban resident and there’s the rural resident. Rural resident, migrant worker, 400 million of them, they’re discriminated against because they don’t have the same rights and privileges.

Unless you remove the hukou and then start consuming, China will be able to be in a much better position to deal with what may come in the wake of this trade war. Because China needs to increase domestic consumption, which is very small in terms of China’s GDP growth. So really, I think, Dr. Huang, you should try to call someone who is close to China and say, you know, play the trump card, and you will be able to resolve a lot of the card difficulties.

But Kaiser, maybe I can interject here because what are we debating globally here in China? We’re all focused on tariffs. We’re all focused on manufacturing. We’re all focused on trade issues here. Think about it. In the United States, only 9% of the population is employed in manufacturing. 91% of Americans are employed in services.

But even in China, the service sector is now much larger than the manufacturing sector and it will become larger. The actual big issue facing both China and the U.S. is how to generate high-paying jobs in services and not low-paying jobs in services. Because as incomes grow, our graduates want jobs that will pay $50,000, $60,000, $70,000, $80,000, $90,000, and these have to be in services.

So rather than worrying about manufacturing, tariffs, and trade, the big issue in China and both the United States is how do I collaborate so that both sides can foster better jobs and services? And actually, there is a path to this because there are restrictive policies in China, and services are retarding China’s growth. America is really strong in services, whether it’s education, health, lawyers, the arts, media, journalism, everywhere.

Education is actually the big issue between China and the United States. How can I draw on America’s strengths so that China can prosper and that America is able to earn more income and export services, and therefore generate more jobs for Americans? And that’s a cooperative path, not a conflicting path. Yet the entire debate is about manufacturing, and it’s hopeless. Even if you double the number of manufacturing jobs in America, it will only increase America’s employment by three percentage points.

Yeah. It doesn’t matter at all. Yet that’s what everyone is debating. Absolutely. And I think in that positive direction, I want to talk to you about something. You have long advocated, Yahweh, waging peace, the proactive effort to build peace constructively. This is something that President Carter dedicated his life to, somebody who you worked with very closely and that your center is dedicated to.

I really worry right now in this present atmosphere that trade and the concern over manufacturing jobs and all this, this is just the tip of an iceberg that is much more profound and much deeper that has really deep, sinophobic roots. It’s especially now that the administration has decided to sort of seek the cover of it was always about China all along in the way that it’s explained its reversal on tariffs, right, with every country except for China.

So I feel like they’re going to lean even more into the side of phobia, and I worry about that. So how does one now in this atmosphere effectively go and wage peace? What can people in this very room do? Well, waging peace, I think, as I said, the three pillars of U.S.-China relations, from the cliché of the Chinese leadership and the elite, the second one is peaceful coexistence.

Peaceful coexistence, indeed, right now, is being threatened. I mean, if you look at the trade war, both sides are going to be confrontational and they’re not going to back down. Imagine China’s economy; 5% growth is going to go down, and there are 12 million graduate students, undergrad students, coming out of school, and there’s no jobs.

So when the economy is so bad, how do you rally the nation? Think about what may happen there. And then you look at the Pentagon, you look at the defense minister, you look at the military. Even though Russia is at war now, they’re all talking about 2027. That’s when the U.S. and China are going to engage each other, because that’s the year when China is going to seize Taiwan. You know, you think about this, this is, you know, everything is connected.

So how do we wage peace? I think a grand bargain, you know, not just sort of reduce the deficit; there’s also the Taiwan issue. You know, when Nixon went to China in 1972, they negotiated the Shanghai community case. So that’s Tom Friedman, saying it’s time to have another Shanghai community case. Americans and the Chinese, Trump and Xi, need to come into one room, they need to sit down, they need to negotiate, they need to say, we need to have each other’s red lines clearly defined.

And we need to make sure that AI does not control all the weapons. We need to make sure that we have a clear understanding of how to prevent this kind of conflict between the two countries. Of course, we can tell all the Chinese, we can tell all the Americans, you know, we can work together. Basically, we can all say to each other what President Trump said in his messages: U.S., China, we work together.

We can do so much to resolve the problem. I mean, look at Ebola in West Africa. Right now, there’s another outbreak. Actually, in 2014, the U.S. and China worked together to contain Ebola. You know, look at Sudan, civil war. U.S. and China can work together to stop that. I mean, U.S.-China can work together to ensure a peaceful transition for Syria. U.S.-China can work together to get the Russians to end the war.

But right now, of course, China has no inclination to negotiate because China doesn’t want to drive Russia away to the other side when the U.S. is putting so much pressure on China. So all these things, I think, are negotiable, and they’re all interconnected. They’re all connected.

And so President Carter, of course, you know, he’d probably say, during my four years in the White House, the American military never fired shots. Many Americans think President Carter was weak; he’s one of the worst presidents. I think as time goes by, you’ll see. I mean, including the Panama Canal, Trump said it’s a very bad deal because President Carter negotiated the Panama Canal. But overnight, American standing in the entire Americas changed because of it. Because at that time, it was unsustainable for Americans to keep the canal.

Yeah. Well, I certainly appreciate everything that President Carter did. May he rest in power, and you’ll be sorely missed, as I’m sure you must miss him deeply at a personal level. I want to thank you both. It’s just been so wonderful to talk to you, both Yukon and Yahweh.

Before we wrap up, we do have this recommendation section. I also have a section that I added to the show at the beginning of the year called Paying It Forward, where I ask if either of you have somebody top of mind to name-check, a young colleague or someone who’s in our field doing really admirable work that you think should deserve more attention. So, maybe you can start with that and then go straight to your recommendation.

So, Yahweh, why don’t you begin? I’m going to recommend, of course, my colleague, his name is Nicholas Zeller, the editor of the rising, more popular Substack called the U.S.-China Perception Monitor. It’s just called the Monitor. If you go to uscmpm.substack.com, you’ll see why I say he’s a rising star, because he updates that newsletter on a daily basis. It’s fantastic. I really love it.

So go there, or you can Google Nicholas Zeller. I’ll be talking to Nicholas about this new research that you have. Exactly. He’s also leading a public opinion survey that we conducted in China. So, we’re now the only American-based organization that got the approval from Emory University to conduct a public opinion survey in China about how Chinese people see the U.S. We’re talking about perception.

So, we’re going to launch the results of that on April 30th in Washington, D.C., at the Princeton School of International and Public Affairs. Nick is leading that. In terms of recommendations, I have two fantastic books to recommend for you to read. The first one is edited by Harry Lautz, who was the former vice president of the Luce Foundation, which has done so much in bringing the two countries together.

This first book, which came out last year by Oxford University Press, is called Americans in China: Encounters with the People’s Republic. So these are the Americans who saw the emergence of China, who studied America, who were diplomats. For example, Jerry Cohen is one of the 10 Americans that appeared in the book. Jerry Cohen. Legendary legal scholar.

Exactly. He will be 95 years old on July the 1st this year, so he’s still around. Even a year ago, he was still engaging in China. So, right. So, he’s one. Elizabeth Perry is also one of those Americans. These are the Americans that shape the American view of China. These are the Americans that give advice. Stapleton Roy is also one of them.

The second book will come out. It’s actually going to be published by this university press. It’s called Chinese in America: Journeys that Shape the Future of China. So, you see, the angles are different. Who’s the author of this? This is, again, Terry Lotz and Deborah Davis. They edited it, and there are many authors.

So, who are the Chinese that shape the view of America? So, we’re talking about Zizong Yun. We’re talking about Wang Jisi. We’re talking about Xie Xie De, the Fudan University president who actually got the Center for American Studies. It’s actually that Center was paid for by American taxpayers, over $10 million. And we’re talking about Lang Ping, the volleyball coach.

So, this book will come out in June of this year. Fantastic recommendations. That’s great. Thank you so much. What about you, Yukon? What do you have to recommend? I’m going to divert from your question a bit because last time I was rereading an article that David Brooks wrote in the New York Times exactly three years ago, in 1922. The title was The End of Globalization: The Dominance of Global Cultural Wars.

We think of globalization as basically trade and goods and services. But he was writing about globalization as basically the main force for convergence: cultural convergence. Cultural convergence. Ideology becoming closer. People of discussion. Interaction among people. And that’s been essentially weakened over the last three or four years.

In the United States, we talk a lot about cultural wars. We think about it in terms of Democrats versus Republicans, rural and urban, progressive conservatives, elites, the working class. How much stress that puts on the system. But in terms of the world, it’s a global cultural war. The North and the South, autocracies versus democracies, regions against each other, individualism against collective action.

These are all becoming stronger forces that pull us apart, create differences. The question I read, I read it because I was thinking to myself, we have a really hard time in the United States dealing with cultural wars. Now we have it on a global basis, and it seems to be getting worse. How do you actually try to turn the tide in a world in which globalization is no longer favored, and it’s going to actually become less and less important?

And the answer, of course, is you’re out there. You’re going to have to be the bridge of actually trying to link the world together in a different way. Because by itself, we’re actually pulling ourselves apart. Let me just stop there. Fantastic. Great recommendation. David Brooks is often a very, very thoughtful writer, and he’s worth reading even if you disagree with him, as I so often do.

I am going to recommend a book called The Weimar Years: Rise and Fall, 1918 and 1933 by Frank McDonough. Frank McDonough has written this; this is the third book in his trilogy about the war years in Germany. This is actually going back in time because the other two were really about Hitler’s rise and about the war itself.

So this one on Weimar, the Weimar Republic, is really a warning in America, and I highly recommend that we all read it to understand and draw lessons from how things went so terribly, terribly wrong in those years. They had such bright promise. It’s really quite an incredible book, and it just came out in September of last year, so it’s still quite new and current.

All right. I want to thank everybody for coming tonight. Thank you to my two fantastic guests. Thank you to the University of Wisconsin, Center for East Asian Studies for their tireless support of my program. And thank you so much to Columbia University, to the Columbia China Summit.

And best of luck to you for the rest of the event. Thank you. Take care. Take care.

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Welcome to this special live edition of the Cynical Podcast, coming to you from the 2025 Columbia China Summit at Columbia University. Hello, New York! Let’s hear a little noise from the crowd. Thank you to Aidan, Zhang Yu, and Annie Cui for taking such good care of us, as well as to everyone here at the Columbia Greater China Society for hosting me and my two esteemed guests.

This summit takes place at a pivotal moment, not only for Columbia University but also for U.S.-China relations. Both the university and the bilateral relationship, the most significant in the world, are influenced by the unpredictable actions of a particular U.S. president. I have strong concerns about the future of both the university and students like Mahmoud Khalil. When Annie Cui and her colleagues at the business school approached me to moderate this conversation, we were all living in what felt like a very different world not so long ago.

Back then, it was possible to label a session like this, focusing on “Bridging the Divide: How the U.S. and China Can Find Common Ground.” In the midst of this troubling trade war, that idea now seems almost quaint. Fortunately, we have two guests today who bring not only decades of experience and deep insight but also original thinking about China’s evolving role in the world, and how we in the United States might better understand it.

First up is Dr. Yukon Huang, a senior fellow at the Carnegie Endowment for International Peace. I’ve long admired his ability to clear the fog surrounding popular narratives about China’s economy with rigor and reason. We met about 15 or 16 years ago in São Paulo, Brazil. He was the World Bank’s former country director for China and witnessed the most significant period of economic reform in the country. His book, Cracking the China Conundrum: Why Conventional Economic Wisdom is Wrong, remains one of the most clear and empirically grounded discussions of China’s development that I’ve encountered. I had the pleasure of interviewing him on stage about it several years ago. His voice is one of the rare, deeply informed, and refreshingly independent ones in the field; he often takes contrarian views.

I’m also delighted to be joined by my very good friend, Dr. Yawe Liu, senior advisor for China at the Karcher Center in Atlanta, and the founding editor of the U.S.-China Perception Monitor. Few people have done more to foster constructive dialogue and mutual understanding between the U.S. and China than Yawe. Through his work at the Karcher Center, an institution with a unique legacy in U.S.-China engagement, he has created platforms for civil society exchange, tracked perceptions in both countries, and championed empathetic approaches to bilateral relations.

Yawe brings not only academic expertise but also a lifelong commitment to dialogue, public diplomacy, and the complex work of bridge building. Together, Yukon and Yawe provide us with invaluable perspectives—one rooted in economics and policy, the other in civil society and political culture. I couldn’t think of two better people to help guide us through this complicated moment in U.S.-China relations. So please join me in welcoming Dr. Yukon Huang and Dr. Yawe Liu!

On this topic, it’s hard to know where to begin, given the state of affairs. Earlier, Yawe, you mentioned a bit about Columbia University’s history with China and its deep connection. Maybe we could start the discussion by diving into this institution and its relationship with China, hoping, of course, that this discussion doesn’t put the university in hotter water with the White House than it already is.

Yawe Liu: I’ll start with some recent history. In 1989, I was admitted to the political science department as a Ph.D. student. Unfortunately, unlike Nipi, who secured a scholarship, I was told I could come to study but had to pay my own tuition. Naturally, I couldn’t afford to attend Columbia. Instead, I went to Emory, thanks to a Wuzhou fellowship from Coca-Cola. Since then, I jokingly tell my students not to show up to my class with a Pepsi, considering my entire doctoral study was sponsored by Coca-Cola, which is, of course, one of the most popular drinks in China.

This podcast is not sponsored by the Coca-Cola Company. Of course, President Carter has always claimed he helped introduce Coca-Cola to China, even though the drink was there as early as the 1930s. But we know the circumstances from the 30s to the 70s. Now, I’m so happy to be here at Columbia, which is pivotal to the divide mentioned by Kaiser—you’re all here! The China studies program at Columbia began in the early 20th century, and one of the program’s initial donations came from a Chinese-American who served a general named Ding Long. There’s even a play titled Ding Long de Yi Zi, which you might find on YouTube, featuring his story. He was a servant who donated $50,000, and his employer matched that donation. That’s how it all began.

Today, we also honor figures like Professor Duwe, who influenced Hu Shi, later China’s ambassador. There are others, like Wellington Koo, who studied here, and more recently, Yang Lan, along with Fangang, a prominent economist that Yukon probably knows. Today, we’re fortunate to have Thomas Christensen and Andy Nathan, two of the most eminent China scholars. This is indeed the right place, and I’m thrilled to see so many Chinese students here. According to DeepSeq, there are 3,000 Chinese students currently enrolled at Columbia. You all are the future!

I recently saw a tweet from Laura Loomer urging President Trump to cancel all visas for this debate. I sincerely hope he doesn’t heed her call, but we know he tends to listen to her often. Let’s give a good round of applause—and maybe a boo—for Laura Loomer. Boo!

My grandfather, Guo Tingyi, was an eminent historian and the founding director of the Modern History Bureau of the Academia Seneca. He spent his final years here, completing his magnum opus, an outline of modern China’s history. I have ties to Columbia, having visited him here on Riverside Drive and walked with him in Grant’s Tomb and the park nearby.

But let’s transition back to the topic at hand. In this age of difficulty, I want to turn to you first, Yukon, for perspective from Beijing. What does the current situation look like from that vantage point? When considering the broader context of the bilateral relationship, what influences Beijing’s views on the trade war? Then, I’d love for you, Yawe, to chime in right after Yukon, as I know you have fascinating insights into the fundamental aspects driving the issues leading to this trade war.

Yukon Huang: Let’s start by addressing what Beijing sees currently. I believe there are two key questions on the minds of Chinese leaders. First, they ponder whether the United States is genuinely serious. What does the Trump administration actually want? Is it about the rivalry between two rising powers, technology wars, security, influence, or power? If Trump seeks to negotiate, what exactly is he looking to negotiate?

Does he want China to invest more in the United States to bolster manufacturing? But if that’s the case, why do U.S. policies discourage Chinese companies from investing here? If the U.S. desires China to buy more American goods, why does it consistently restrict high-tech exports to China? There’s only so much soybeans or Boeing aircraft China can purchase. They won’t invest in high-tech or defense. It becomes nearly impossible for China to buy enough to close the trade deficit. So, is the deficit really the concern, or is it about technological superiority?

That’s a significant question for China: What does America genuinely desire? If Beijing could understand that, what could it offer in return? Is it about 5G security, TikTok, or green technologies? We’ll undoubtedly explore those issues later, as there could be unexplored opportunities for collaboration in those areas. However, the core problem from Beijing’s perspective is, as they say, “we will respond.” But you need to know what you genuinely want.

Is there an overarching thesis here? The problem, from Beijing’s standpoint, is that they perceive two broad forces at play in the U.S. There are hardline U.S. policymakers advocating for disengagement with China, breaking down trade relations altogether. I don’t think this aligns with President Trump’s views. Trump appears to still seek negotiation; he seems to have a certain admiration for the Chinese system. But who truly makes the decisions? The hardline advisors favoring a trade war with high tariffs, or is it Trump who wants to find common ground?

That’s the dilemma we face today.

Yawe Liu: Let’s broaden our perspective and frame this current dispute in terms of perception, which is a topic we often discuss. I’m a big believer in cognitive or strategic empathy. We both respect the late Robert Jervis from UC Berkeley, who emphasized the importance of understanding the opposing side’s perceptions. You’ve talked extensively about foundational perceptions from each side and the problems that arise from them. Could you succinctly unpack these misperceptions?

Yukon Huang: Absolutely! I wrote my dissertation focused on Mao Zedong’s views on the United States. His shifting perceptions of the U.S. significantly influenced his policies towards the country. Nowadays, it seems we are encountering a clash of perceptions, which I prefer to call a clash of misperceptions. Americans view China in one way, while China perceives the U.S. from another angle, and these perceptions are at odds.

The noise we’ve been hearing since Trump took office in 2017 has continued under Biden. I often refer to it as “Biden four years equals Trump two,” and now it feels like we’re entering “Trump three.” From the Chinese perspective, there’s a belief that the U.S. represents a pacing threat—it’s perceived as attempting regime change. For Trump, this is achieved through economic leverage; for Biden, it’s through ideological and high-tech restrictions.

There’s also a prevalent notion among the Chinese elite that the U.S. is in decline. They believe that the U.S. is leveraging all means to contain China, leading them to intensify their efforts to counteract it. Recent actions by Trump have fueled Chinese perceptions that America is trying to undermine the system.

The American viewpoint of China is equally fascinating. Many view China as a direct threat, believing it undermines the American way of life. This perspective often drifts into territory that borders on racism. For instance, when Vance said, “We Americans are purchasing products from Chinese peasants manufacturing our goods,” it highlights underlying biases.

Early in Trump’s first term, a State Department policy planner remarked that this new Cold War with China differs from the former one; it’s not just a battle of white Russians and Americans, but rather a struggle featuring white people against yellow people. This perception endures among some policymakers, contributing to the idea of China as a larger threat, especially as Russia engages in warfare.

Such misperceptions can lead to significant miscalculations, which concern me greatly. We risk stumbling into conflict driven by these misunderstandings, either by design or by accident.

Yukon Huang: While I understand the misperceptions you’ve identified and accept your characterization of them, I must point out that China’s belief the U.S. seeks regime change appears pejorative. When they label it a “regime,” it underscores a negative viewpoint on political legitimacy.

Regarding China’s belief that America is in decline, contemporary evidence indeed seems to support that assertion. So, I wonder: Are these misperceptions? Is it possible that China misjudges American intentions as well as its trajectory?

To some extent, these misperceptions do morph into genuine perceptions due to the evidence available. But I still posit that the Chinese may be correct in inferring that the U.S. desires a change in their political system.

When Americans acknowledge that the market economy will not impact China’s political structure, it leads to disillusionment and the notion that the U.S. aims to contain China. The U.S. provided access to shared markets that have bolstered China’s economy, but now that China poses a threat, it fosters apprehension.

In that light, I believe it’s partially valid. However, I don’t think organizations like the Carter Center are seen by China as the forefront of American efforts to undermine their political system or promote a color revolution.

As for the second misperception, regarding the belief that the U.S. is in decline, shaped by events like racial tensions, the 2008 financial crisis, and many other factors, I think it’s erroneous for China to assume that America is on the verge of collapse and that they will inevitably supersede it. It’s clear to me that China has no real desire to replace the U.S. as the global superpower or to present an alternative system as superior to ours.

Yukon Huang: Shifting back to assumptions and perceptions, it’s widely held—perhaps even foundationally assumed within the Trump administration and prevalent among Americans—that China’s trade surpluses have been the driving force behind American trade deficits. Most people seem to accept this notion as fact. However, you’ve pointed out that America’s trade deficits began to spike well before China became a major player. What catalyzed those deficits?

Yukon Huang: That’s an interesting inquiry! Trump initiated the trade war under the belief that America’s trade deficits stemmed largely from China’s surplus. The logic was that imposing tariffs could reverse this trend. However, if we look back at when U.S. trade deficits truly began to escalate, it was in the late 90s and early 2000s—during a time when China had no significant trade surplus.

So, how could China’s trade surpluses be the cause when they weren’t even present at that stage? Conversely, when China’s trade surpluses became substantial between 2005 and 2007, surprisingly, America’s trade deficits diminished. They moved in completely opposite directions.

Ironically, China’s trade surpluses surged and America’s deficits inflated precisely as the trade war commenced. Before that point, there was no correlation.

In 2018, China had no trade surpluses before the trade war kicked off, yet those surpluses skyrocketed afterward, while American deficits expanded significantly. Ironically, the trade war itself created the tension we currently see.

How do I explain this? Trade balances aren’t the product of tariff rates or currency values; they fundamentally arise from fiscal imbalances on both sides.

So, what sparked America’s trade deficits in the late 90s? Major budget deficits, the war on terrorism, and tax cuts in the U.S. generated considerable trade deficits independent of China’s influence.

Conversely, China’s significant surpluses coincided with urbanization that unfolded over the past 20 years. This urban migration, involving 500 million Chinese moving from rural areas to cities for economic opportunities, didn’t hinge on currency values, interest rates, or tariffs.

These migrant workers tend to save significantly more because they have limited opportunities to spend their earnings. Yukon Huang: So, China’s savings rate surges, leading to a trade surplus for China. Here’s what’s happening: China’s trade balances are largely driven, ironically, by the extraordinary savings of Chinese migrants. In contrast, America’s deficits are fundamentally tied to America’s budgetary deficits. These two are completely unrelated; yet, we generally think that China’s trade balances and America’s trade balances are somehow linked. They are not.

Now, we have a tariff war. As an economist, my primary concern is that we’re launching a trade war based on the assumption that China’s and America’s trade imbalances are caused by the same factors. We believe that tariffs will resolve the problem, but they are fundamentally driven by two incredibly different issues: urbanization in China and budget deficits in the United States. That’s why tariffs won’t truly resolve this issue.

It’s amusing that just a couple of weeks ago, many were still discussing the possibility of a grand bargain between Washington and Beijing, between Donald Trump and Xi Jinping. Do either of you still hold out hope for something like that?

Given the current climate—like the recent announcement from Customs and Border Patrol that many categories of trade goods would be exempt from tariffs, except for items like toys and textiles—it represents a significant percentage of total trade goods. But given these developments, I understand we all feel a bit whiplashed from the rapid changes in trade policy. At some point, Trump and Xi Jinping will talk; that seems inevitable.

Considering the temperaments and agendas of these two leaders, what do you think is the likely outcome of such an encounter? Yukon, I remember you mentioning that there are certain similarities between Donald Trump and Xi Jinping that could either exacerbate or potentially mitigate bilateral tensions.

Yukon Huang: You raise an interesting point. The U.S.-China tensions are often viewed as a result of fundamental differences between the two nations, but they might actually be stemming from growing similarities. Trump promotes “Make America Great Again,” while Xi pursues the “China Dream.” Each has cultural wars on their respective grounds; the U.S. faces internal debates on diversity and inequality, whereas China sees a resurgence of Communist Party ideology.

Both countries emphasize manufacturing and technological development, with Trump looking to enhance North American influence through connections with Canada, Greenland, and Mexico. Simultaneously, China is advancing its Belt and Road Initiative.

Both nations are trending toward more authoritarian governance. These tendencies can either exacerbate or moderate tensions between the two. To find a solution, we must identify these similarities between leadership and transform them into opportunities for collaboration—such as industrialization and technology.

Take TikTok as an example. We could address the American security concerns through Oracle, while allowing China to keep its technological innovations. Eventually, I believe we’d see that arrangement. Moreover, consider 5G communications; America and Europe need a security solution combined with China’s manufacturing capabilities. This could extend to green technologies and batteries as well.

In ten years, we might see Chinese-made automobiles in the U.S. This indicates a willingness on both sides to leverage manufacturing technology to create mutual benefits. The grand bargain could revolve around joint ventures that incorporate technology transfer to American manufacturers, beginning in Europe to navigate around the hardline perspectives prevalent in the U.S. administration. Trump, however, needs to present collaborative relationships that align with his “Make America Great Again” narrative.

Ultimately, if China can assure Trump that collaborative avenues exist that benefit both sides, he may overlook the hardline advice of his advisors.

Yawe Liu: Do you see this as an insurmountable obstacle to collaboration? Furthermore, can you comment on how the temperaments of these two leaders might play into potential agreements during this administration?

Yawe Liu: I think there exists a special rapport between Presidents Trump and Xi. In April 2017, President Xi visited Mar-a-Lago, spending two days engaged in discussions with Trump. They shared a personal connection, with Trump’s granddaughter even singing in Chinese. When Trump visited China in November 2017, he was welcomed by Xi in the Forbidden City. During these interactions, the idea of a grand bargain was explicitly discussed, which eventually led to the first phase of the trade agreement.

However, Americans are now saying that China failed to deliver on its commitments due to COVID-19 and other factors. Of course, China has its own perspective to share. Before the tariff disputes escalated, both parties were exploring renegotiation options.

Trump is a unique figure in diplomacy; he engages in personal diplomacy with other nations, conveying a special language and tone. Recently, he hinted via social media that, if he and Xi could collaborate, they could resolve numerous global issues and foster prosperity.

Yawe Liu: Nonetheless, for meaningful progress, we need to facilitate direct communication between the two leaders. In terms of China’s three pillars for the U.S.-China relationship, the first pillar is mutual respect. Presently, the Chinese side perceives Trump as lacking respect for both the Chinese leader and their perspective.

If they can overcome this perception, and if meetings begin at lower levels leading up to a potential direct encounter, we might see positive changes. Just consider how Trump approached dialogue with Kim Jong-un regarding the North Korean nuclear crisis—a move unprecedented for any American president until then.

I remain hopeful that we might see a grand bargain negotiated and possibly realized in the next few years.

Trump’s fixation on trade deficits and re-industrialization resonates with his populist supporters. It’s intertwined with complex feelings of xenophobia and racism, which have intensified during the COVID-19 pandemic chronicling the rapid ascent of a formidable peer competitor.

Yawe Liu: Changing public perceptions is a substantial challenge. Reflecting on the attitudes of Gen Z, indications suggest their views on China and America may be shifting. We’ve seen both negative and positive representations of China in popular culture, as well as the seemingly positive experiences of figures like iShowSpeed, a YouTube celebrity who traveled across China.

Moreover, I feel optimistic when I see young Chinese students at American universities; in their time here, they can either work in the U.S. or return to China, presenting a more informed perspective about both countries.

Yet, despite historical, political, and systemic differences, I believe peaceful coexistence between the two nations is possible. While some individuals are indeed pushing for conflict, I think a balanced perception can help mitigate that.

Yawe Liu: For instance, what’s the significance of Taiwan to the U.S.? Why can’t it simply be viewed as an issue to be resolved between both sides of the strait?

However, I think no president can single-handedly change deeply rooted perceptions about China. Trump’s unique personality and the situational constraints that Xi Jinping faces might allow for some room for negotiation and resolution, even with a bit more than three years left in office.

Amid this all, Americans are becoming increasingly cognizant of China’s technological capabilities. There’s ongoing debate regarding the Biden administration’s policy about limiting key technological inputs to China, which has already seen some reversals.

Considering this context, what do you think is the relationship between innovation in China and the current trade war? The trade war primarily revolves around the exchange of products, and tensions arise from China’s significant manufacturing capacity, largely directed at exports to the U.S. and Europe.

Yukon Huang: This concern stems from a desire to regain self-sufficiency in manufacturing. The emerging debate centers around which country will lead technologically in the future. I believe that technology wars will outweigh trade wars going forward.

As an economist, I see value in knowledge sharing—it’s been the norm for decades. However, the current direction of establishing barriers threatens this, leading to a negative outcome.

Every country, including the U.S. and China, holds the belief that greater innovation translates to accelerated growth. Yet, interestingly, the most innovative nations often experience slower growth rates.

For example, South Korea has become more innovative than anticipated over the past two decades but has seen its growth rate halved.

Causation here can be complex, as indices measure innovation levels globally. Most rankings demonstrate a 90% correlation between a country’s affluence and its innovation levels. However, three exceptions exist: China, South Korea, and India, all of which outperform predictive measures of innovation relative to their income levels. Yukon Huang: Here’s the irony: countries are trying to leapfrog their way to progress, yet they are growing slower because of that pursuit. So the interesting question is, why does attempting to innovate exceed what one is capable of actually result in slower growth? The answer lies in pouring resources into high-risk activities that are not logically competitive yet, which can be costly.

So why is China pursuing this path? The answer is security, tension, and competition. Xi Jinping faces a significant challenge: promoting highly productive sectors and advanced technology while maintaining high growth rates without the financial resources to support it. My thesis is that China could actually achieve much faster growth without additional spending. This is the substantial challenge of achieving costless growth in China.

Most countries do not enjoy this advantage; those that grow faster typically need to invest more. China, however, is uniquely positioned to grow without increasing its investments, although it has yet to fully recognize this potential. And I know your thoughts on that relate to the hukou system.

Yukon Huang: Here’s the key issue everyone is concerned about: China does not consume enough and saves too much. Why is China’s consumption so low compared to other countries? Around 400 million households in China lack hukou, which makes them migrant workers. They represent approximately 40% to 50% of the labor force in major cities like Shanghai, Beijing, Guangzhou, and Shenzhen.

These 400 million households save 50% more than typical Chinese citizens, which explains the high savings and correspondingly low consumption rates in China. If hukou were abolished and these households gained the same rights as regular citizens, enabling them to purchase homes and cars, China’s consumption rate would align more closely with other countries. At no cost to the government, China would likely transition from being a trade surplus nation to a trade deficit one, effectively eliminating global trade tensions.

The great irony is that simply removing the hukou system could resolve trade wars. If only those in power, like Xi Jinping, would recognize this. No other country in the world, and I might be exaggerating slightly, divides its citizens into two categories—urban residents and rural residents, with rural migrant workers facing discrimination due to the lack of rights and privileges.

Unless the hukou system is abolished, China will struggle in its position amid the trade war, as domestic consumption plays a small role in GDP growth. Therefore, Dr. Huang, it would be beneficial for you to reach out to someone close to the Chinese leadership and advocate for using this “trump card” to mitigate some of the challenges they face.

Kaiser Kuo: But let me interject here, as we’re currently debating global trade issues, especially tariffs and manufacturing. Think about it: only 9% of the U.S. population is employed in manufacturing, leaving 91% in services. Even in China, the service sector has expanded beyond manufacturing and will continue to grow.

The critical issue for both nations is creating high-paying jobs in the service sector, rather than low-wage roles. As income levels rise, graduates desire better-paying jobs, typically in services that offer salaries ranging from $50,000 to $90,000.

Thus, the focus should shift from manufacturing and tariffs to collaborating in ways that generate quality jobs in services for both countries. There is indeed a pathway to this collaboration, as restrictive policies in China hinder service sector growth. The U.S. excels in areas such as education, healthcare, law, the arts, media, and journalism.

Education stands out as a major factor influencing U.S.-China relations. Finding ways to leverage America’s strengths could lead to mutual benefits, allowing China to thrive while providing Americans with more income through service exports and creating jobs. This is a cooperative route rather than a confrontational one. Yet the ongoing discourse fixates on manufacturing, which is fundamentally flawed. Even doubling U.S. manufacturing jobs would only improve employment by three percentage points—laughable in the grand scheme of things.

Kaiser Kuo: In light of that, I want to discuss a concept you’ve championed, Yahweh. You’ve advocated for “waging peace,” a proactive effort to constructively build peace. This is a principle that President Carter dedicated his life to—a person you worked with closely.

Given the current atmosphere, with trade, manufacturing jobs, and related concerns serving as mere surface-level issues, there’s a far deeper agenda rooted in sinophobia. The administration has found cover in blaming China as the primary issue, as evidenced by its policy reversals on tariffs, excluding everyone else.

In this context, how can individuals here effectively wage peace?

Yawe Liu: Waging peace, I believe, hinges on three key pillars in U.S.-China relations, one of which is mutual respect. Currently, the Chinese perspective is that Trump lacks respect for both their leadership and viewpoint.

If they can transcend this perception, and if meetings initiate at lower levels leading to a potential direct encounter, there may be positive developments. Just look at how Trump engaged in dialogue with Kim Jong-un regarding North Korea—a groundbreaking move for any U.S. president until then.

I still hope we might witness a grand bargain between the two nations in the coming years.

Trump’s focus on trade deficits and reindustrialization resonates deeply with his populist base. It taps into complicated emotions involving xenophobia and racism, particularly as the COVID-19 pandemic has accelerated the narrative of a rising peer competitor.

Yawe Liu: Altering public perceptions presents a formidable challenge. However, considering Gen Z’s attitudes, it seems their perspectives on China and America are evolving. We’ve seen both negative and positive portrayals of China in popular culture, alongside the favorable experiences of figures like iShowSpeed, a YouTube influencer who traveled across China.

Moreover, I feel optimistic when I observe young Chinese students studying at American universities; they can utilize their experiences to contribute informed insights about both nations.

Despite historical, political, and systemic differences, I maintain that peaceful coexistence between China and the U.S. is achievable. While some forces advocate for conflict, I believe that a balanced understanding can help mitigate those tensions.

Yawe Liu: For instance, what significance does Taiwan hold for the U.S.? Why can’t this issue simply be seen as one to be resolved between both sides of the strait?

However, it remains clear that no president can single-handedly shift deeply entrenched American perceptions of China. The unique personalities and situational challenges faced by both Trump and Xi Jinping may allow for some negotiation and resolution opportunities, even with three years left in office.

Amidst all this, Americans are becoming increasingly aware of China’s technological capabilities. Ongoing debates regarding the Biden administration’s policies limiting key technology inputs to China have already seen some reversals.

Considering this landscape, what do you think the relationship between innovation in China and the current trade war is? The trade war is primarily focused on product exchanges, with tensions arising from China’s significant manufacturing capacity aimed at exports to the U.S. and Europe.

Yukon Huang: This concern arises from a desire to regain self-sufficiency in manufacturing. The emerging debate centers around which country will lead technologically moving forward. I believe that technology wars will overshadow trade wars in the future.

As an economist, I value knowledge sharing—it’s been a norm for decades. However, the current trend of creating barriers presents a risk to this practice, leading to adverse outcomes.

Every nation, including the U.S. and China, harbors the belief that increased innovation results in accelerated growth. Yet, intriguingly, the most innovative countries often experience slower growth rates.

For example, South Korea has recently become more innovative than anticipated over the past two decades but has simultaneously seen its growth rate halved.

Causation in this scenario can be complicated, as indices evaluate global innovation levels. Most rankings show a 90% correlation between a country’s affluence and its innovation levels. Nevertheless, there are three notable exceptions: China, South Korea, and India, which outperform predictive measures of innovation relative to their income levels. Yukon Huang: And best of luck to you for the rest of the event. Thank you. Take care.

Kaiser Kuo: Take care!