Economist Lan Xiaohuan on the balancing act needed to boost China’s consumption

Lan Xiaohuan is a professor of economics at China Europe International Business School. His book, How China Works: An Introduction to China’s State-led Economic Development, has sold millions of copies in China and has been translated into multiple languages.

Here, he discusses the economic realities behind China’s record trade surplus, the case for a stronger social safety net, and how public data infrastructure shapes the artificial intelligence race with the United States.

Since you wrote How China Works, the global and domestic environments have both evolved. What are the most critical shifts and developments for China? If you were to add a new chapter to the book to reflect these changes, what would be its central theme?

I would not add a new chapter; I would write an entirely new book. It’s not that there aren’t new issues, but rather addressing them requires a new framework.

Domestically, the decline of the real estate market and the rapid rise of manufacturing and technology are significant shifts. My new book would likely focus on China’s industry and technology.

But actually, I think the most consequential changes are external: the impact of the pandemic, the Russia-Ukraine war, the energy shocks regarding Iran, and shifting political dynamics in the United States. In comparison, China’s domestic baseline has remained relatively stable.