China’s economic trajectory has become one of the most contested subjects in contemporary policy debate. Yet discussions of China’s rise and potential decline often converge on the same binary: either China is poised to overtake the West, or its economy is on the verge of collapse. In the West, these debates tend to center on GDP growth, debt, and comparisons to idealized Western institutions, reducing a complex, evolving economy to a single verdict. What they often miss is a messier reality: a system that has succeeded and struggled simultaneously through methods that fit neither Western nor authoritarian templates.
Yuen Yuen Ang reveals the logic behind that complexity. She is the Alfred Chandler Chair Professor of Political Economy at Johns Hopkins University, where she is appointed at the SNF Agora Institute. Her award-winning books, How China Escaped the Poverty Trap (2016) and China’s Gilded Age (2020), have reshaped debates on political economy, development, and China’s place in the world. This year marks the 10th anniversary of How China Escaped the Poverty Trap, which is now available open access.
Across her scholarship, Ang challenges the assumption that development requires copying a fixed model. Instead, she argues that China’s growth emerged through what she calls “directed improvisation”: a blend of centralized direction and local adaptation, in which markets, governance, and even corruption co-evolved rather than following a linear path toward prosperity. Her comparative work extends this analysis beyond China, identifying similar patterns of coevolutionary development in Africa and nineteenth-century American public finance. The result is a body of work that resists easy headlines in favor of a harder question: not whether China will rise or fall, but what its paradoxes reveal about how development truly happens.
Vimi Wang: In the West, we regularly hear predictions of China’s impending economic collapse. Some of these predictions seem based on real issues. Some sound like wishful thinking. How would you assess the biggest threats to China’s current economy?
Yuen Yuen Ang: Any major economy will always face serious challenges, and these challenges evolve over time. Today, in China, some of the key challenges include dealing with the baggage of an old growth model that has expired: local government debt, a real estate market that has declined and likely will not pick up for a long time, and increasing unemployment, particularly youth unemployment.
We must be wary of claims that China is going to collapse, just because it has problems. This is what we hear in the “peak China” narrative, which became especially influential in 2023 and 2024. It spread across major media outlets and was even on the cover of The Economist right after the pandemic, when the Chinese economy was at a particularly low point. The argument of “peak China” was that China’s rise is over, and the evidence was… a list of China’s problems. That is a flawed, one-sided conclusion.
The counter-term I coin is “China’s economic paradox”—what we see in China today is an impressive state-led tech boom alongside a structural growth slump. These are two sides of the same coin.
This paradox is rooted in China’s transition away from its old growth model, heavily driven by real estate and construction. One estimate is that 70% of household wealth in China comes from real estate. Many people used their savings to purchase property, expecting prices to keep rising. Now that prices are falling, it is significantly reducing household wealth and confidence, affecting families across China.
As consumers of ideas, we should be mindful about narratives that are appealing precisely because they are simple. It is easy to declare either that China is going to take over the world or that it is going to collapse—these headlines are loud, they grab attention, or don’t require much thinking. You might even say they are entertaining even though they appear serious. Paradoxes don’t make attractive headlines, but to be informed, we have to make the effort to look for what is true rather than what is popular.
VW: In your book, How China Escaped the Poverty Trap, you argue against the prevailing idea that poor countries need to build strong institutions with reliable governance before they can build markets. What is the dominant narrative getting wrong? How does China’s recent history challenge it?
YYA: The dominant narrative is that if China did not have the right institutions, why did it nevertheless develop? But step back and ask, “what do right institutions mean?”, which have been variously called good, strong, inclusive, or non-extractive institutions. What “right institutions” really means is: looking like the West—specifically, idealized forms of Western institutions. And China didn’t have those.
But if you take American history seriously and look at what happened during the Gilded Age—when America was also a fast-growing developing country—did America have the right institutions? That was the subject of my second book, China’s Gilded Age.I picked that title precisely to remind people: Is China exceptional? Or is it only exceptional because we have erased the real Western and American history?
The idealized story portrays a group of men who founded America based on the Constitution, with rule of law and secure private property, and then—boom—prosperity followed. But if you look at the real American history, the Gilded Age was a time of corruption, robber barons, and inequality. It was a messy, sometimes ugly process, not to mention the dark histories of slavery and seizing Native American lands. The real story of Western development is not as clean as the dominant narrative makes it out to be.
If we are willing to recognize that, then when we turn to China, it is not as exceptional or as strange as it seems. For sure, China is different in one key way: it developed under one political party. Thus, a lot of my work explains how Deng Xiaoping—when he took leadership and opened markets—enabled decentralization and adaptation within the parameters of an autocratic system, in short, directed improvisation. Many people assume China succeeded economically because of a strong authoritarian government, that “autocracy makes China great again.” But if that were true, Mao would have made China great. Instead, Mao brought tremendous suffering. So autocracy itself is not the answer.
That is why How China Escaped the Poverty Trap is a story of adaptive development under one-party rule. It is not a story that concludes the West grew with good institutions while China is exceptional. My argument is that the Chinese and Western paths are more similar than most people realize, even though the political systems were very different.
I should add: I cherish democratic values. Indeed, I work at the Agora Institute, which is established to strengthen global democracy. I believe it is a mistake to promote democracy by selling empirically false narratives—namely, that replicating Western-style democracy will bring economic wealth. We should value democracy for its intrinsic benefits, including diversity, pluralism, and individual rights, not because it promises to make you rich. That pitch is precisely why some “liberals” today feel a great deal of insecurity: their narrative of democracy leading to material outcomes seems to be falling apart.
If you justify democracy primarily on material outcomes, then when those outcomes fall short, democracy itself appears to be in crisis. But democracy is not under threat if, from the start, you evaluate it by what it delivers intrinsically. I want to emphasize this because people often misuse China’s experience to argue that democracy is not valuable or important—that is not my point.
I also stress that we must distinguish between the function and the form of democracy. What we usually think of as democracy is its form: do you look like America? Do you have multiple parties, elections, and a constitution? But the function of democracy is something different. It asks whether you actually deliver the benefits of democracy, such as accountability, competition, and responsiveness. I’d argue that in Deng Xiaoping’s context, he did not prove that autocracy is superior. He proved that an autocracy needed democratic characteristics in order to thrive. The Chinese political system was a hybrid, incorporating accountability, competition, and partial limits on power. Without those qualities, China would simply have remained like it was under Mao, and we know those results were disastrous.
VW: That distinction between democratic values and the narrative used to sell them is fascinating. In China’s Gilded Age, you argue that corruption and development can evolve together rather than simply being opposites. What do you think the dominant narrative gets wrong about corruption? How does China’s experience complicate the relationship between corruption and economic development?
YYA: One common assumption is that corruption is exclusively a poor-country problem. This perception is reinforced by global indices like the Corruption Perceptions Index (CPI). Rich, mostly Western countries consistently rank near the top as the cleanest, while poorer countries rank near the bottom. So when we look at China, it seems puzzling: it clearly has a corruption problem, so why did it nevertheless have an economic boom? My second book, China’s Gilded Age, uses China’s paradox as a disguise to burst the myth that rich countries and mostly Western democracies are free of corruption, by arguing that China is a newcomer on an evolutionary path that advanced economies have taken before.
The usual narrative is simple: as a country becomes richer, corruption disappears. It graduates with the rule of law, citizens are no longer extorted by police officers, and everything becomes accountable and transparent—happily ever after. But the real story I tell in China’s Gilded Age is that as an economy becomes more prosperous and advanced, corruption doesn’t necessarily disappear. Instead, it changes in form and structure, evolving from crude forms of extraction, petty bribery, and thuggery into sophisticated exchanges of money and power among elites. In its most advanced form, corruption becomes legalized, institutionalized, and invisible—what I term “access money.”
Since the 1980s, the type of corruption in China has evolved over time. In the beginning, like many other developing countries, China was plagued by embezzlement, petty bribery, and plain extortion of businesses. Over time, China began to control the growth-damaging kinds of corruption, but it also saw more high-stakes transactional corruption—access money, meaning businesses pay for access. Comparing China to the U.S., China is a newcomer in this evolutionary history. The U.S. is a much more advanced case: access money comes in a highly legalized and institutionalized form. It is ambiguous because you cannot say definitively that a practice like lobbying is wrong. In China, by contrast, access money remains clearly illegal: a mayor takes millions in bribes, and when he is caught, he goes to jail.
It was my modest effort at equalizing categories, placing developing and developed countries on an equal plane. It was decolonizing corruption without using the term “decolonize.” Over time, I came to appreciate the importance of understanding how power shapes ideas and categories, and I hope more students would learn that. Categories such as what corruption means, who is ranked as corrupt, how corruption is measured, don’t fall from the sky. They are not objective in the sense that there is one single truth. Corruption indices are created by human organizations and carry biases within them. That doesn’t mean we reject them entirely—it means we need to be mindful of potential biases before consuming them. Whether it is headlines about corruption or China’s collapse, we have to ask: who has the power to shape these narratives and frame these categories? I call that “moral political economy” —not in the sense of being nice or ethical, but in the sense of recognizing that ideas and categories are shaped by power.
VW: The idea that categories are shaped by power is important to keep in mind when we think about China’s development model. Improvisation is another important concept in your work, one that challenges the view that the Chinese government hampers economic development through too much state intervention. What is the historical relationship between improvisation and centralized directives in terms of economic policy? Is this relationship still highly active and structurally important?
YYA: As a one-party political system, China definitely has top-down control and repression. But if it were purely that, China would be no different from China under Mao. That is not the China we are dealing with today. China today is a hybrid: it obviously has top-down, repressive elements, but when it succeeds, it is because it has been able to inject bottom-up, adaptive elements.
In the Deng Xiaoping era, that is what I call “directed improvisation.” What it means is that Beijing transformed its role from a dictator to a director. Rather than trying to come up with a comprehensive plan the way it did during the planned-economy days, it focused more on setting directions, defining incentives, and scaling up what works.
However, there is an additional complication: when Xi Jinping took over as the top leader, it represented a structural break in contemporary Chinese history because his policies and leadership style departed from Deng across economic, political, and foreign affairs dimensions. That said, there are still decentralized and adaptive elements even in Xi’s China. In tech, you see direct improvisation alive and well: the central government says, “this is our number one priority,” but it doesn’t know which technology will work. Thus, people are encouraged to do whatever it takes to catch up on cutting-edge technology. In that realm, you still see directed improvisation. But in other sensitive areas, like maintaining stability—think zero-COVID—the repressive side plays out strongly again. When we see these different sides of China, they are not contradictory; they are part of the same hybrid political structure.
VW: For years, policymakers around the world have asked, “can we copy what China did?” Your book argues that development isn’t about copying policies. What lessons can countries learn from China without trying to become China?
YYA: We have mistaken copying for learning for a long time. When people look at the Chinese experience, they either try to copy something directly or assume that, if they cannot copy it, the entire experience is worthless. Neither makes sense. We should apply the same reasoning to the American experience: when other developing countries look to America, should they simply try to copy it?
If you ask yourself where this fixation with copying comes from, I believe it comes from the colonial experience. Colonial administrations ruled by essentially making colonies replicate themselves—their values and structures. It was a policy of assimilation, not a policy of respecting local cultures and traditions. Which explains the fixation: are you copying or not, do you look like the dominant power or not?
I am not sure that, in a counterfactual world where we hadn’t lived through this long history of colonialism, people would necessarily think that learning means copying. Maybe not. If you think about daily life interactions, when you say, “I want to learn from someone,” some instinctively think that means mimicking: if they wear certain clothing, you wear the same; if they walk a certain way, you walk the same. But when wise people want to learn from someone, they don’t try to erase themselves and become that person. Instead, they see values, qualities, or work styles they can adapt to their own life or career.
If we recognize that copying might come from the colonial experience, we can think about learning from China in a non-colonial, adaptive way: asking what parts of the Chinese experience can be adapted to my country. It is not about copying China’s political structure or particular policies from particular moments, which may not even work for China today. It is about asking: how did Deng Xiaoping create an adaptive government? How did he practice pragmatism? How did he articulate clear goals and mobilize a massive bureaucracy toward a national direction? Those are the things to learn and adapt without copying. Countries should do the same when they look to America. Instead of trying to become American or look American, they should ask what parts of the American experience can be useful for their society.
VW: That tension between imposed systems and organic growth speaks to something bigger happening right now—there’s no shortage of national industrial policy currently being discussed in the West. It isn’t just about poorer countries learning from China’s rise. Are there different lessons to be drawn from China based on a country’s location in the international economic hierarchy?
YYA: You are right that there has been a revival of industrial policy in the West, with both the U.S. and Western Europe making a 180-degree turn from neoliberalism and limited market intervention to embracing “big government.” We hear about industrial policy constantly. One facet missing from this revival of Western interest in industrial policy is that today’s policies take place in a context of much higher uncertainty. By uncertainty, I don’t mean unpredictability—I mean unknowns. We have geopolitical friction, AI, and old growth models dying while new ones are being born. Compare that to the 1990s. If you were a planner in China, you knew the growth model: export-led industrialization. The game was known; the challenge was implementation. Today, the game itself is increasingly unknown.
Many African countries, for instance, cannot simply copy China’s growth path because we are no longer in a world where globalization is taken for granted. The conditions that enabled export-driven industrialization are no longer available. That doesn’t mean they are doomed; it means they face more unknowns. For instance, African economies have seen more leapfrogging success in the services sector, and that’s not a Chinese or Western experience—it is something entirely new.
When you make industrial policy today, you have to center it around uncertainty. If you try to copy China, or even Western experiences from the last century, you risk the mistake of pre-selecting winners. Industrial policy, by definition, is about selecting winners: you decide up front to pour resources into one or a few strategic sectors and turn them into national champions. The challenge today is that you don’t actually know who “one, two, three” is. In the U.S. and European context, because policy is driven by economic security rather than competitiveness, everything becomes a priority. When your priorities are thirty or forty things instead of one through three, it is not really industrial policy anymore.
This is a long way of saying we can no longer do industrial policy the way we did last century. Twenty-first-century industrial policy has to operate under uncertainty. Some of China’s most successful sectors, such as e-commerce and fintech, were not actually picked by the government. They were discovered later, or the government worked to support them after the fact. It is a completely different game.
I think your generation, what people call Gen Z, is often described as anxious. I am not sure if you would agree, but in a sense your generation is special: you are living through the transition from the old world to the new, even while you are still being trained on the canons and assumptions of the old one, such as concepts like “good institutions,” without much said about what they actually mean. And at the same time, you are surrounded by disruptions to globalization, to geopolitics, to technology.
VW: I believe our generation can be strangely unserious in the face of serious things. Online, we make memes about very grave situations, and it shocks other generations. But this is also partly a coping mechanism, given how much we are facing at once. That same inversion—something that looks unserious turning out to carry real weight—is there in your book too, maybe most vividly in your final chapter. You end the book by highlighting Nollywood, the vibrant Nigerian film industry, which emerged in a country often associated with poverty and state failure. What does Nollywood tell us about development that GDP statistics don’t? (Read the chapter open access)
YYA: I use Nollywood as an example of state and economy co-evolution happening in a sequence similar to China’s. It started with people on the ground, driven by survival and using what they had. It was a real miracle: in the 1990s, Nigeria was in terrible economic shape, and its cities were so violent and unsafe that people wouldn’t go out to cinemas. So how could you possibly have, two decades later, a massive homegrown film industry that became the third largest in the world by volume of film production?
If you read my chapter, you will find many parallels with the Chinese experience. Local Nigerian filmmakers, in a sense, collaborated with pirates who were both pirating their films and acting as informal distribution channels. This is a story that defies Western prescriptions of how development is supposed to happen. I added it in anticipation of the response I expected: that people would say, “Ah, but this is just an exceptional China story that cannot happen anywhere else.” Nollywood shows that, if you really open your eyes, you can see parallels elsewhere.
I should also point out that my last chapter covers the co-evolution of public finance in the 19th-century United States—a similar process that began with using what you have, but in a very different time and context. The point is: different contexts, different actors, but similar dynamics. It is about drawing inspiration from entrepreneurialism, innovating from your own strengths, and recognizing patterns of structural transformation. That was the purpose of the comparison.
On the topic of Nollywood, I recently received a review of my first book from a Nigerian perspective. What I found inspiring was that the message of “using what you have” resonated most with the reader. In the first world, that message is often dismissed as “too simple.” But from a Nigerian perspective, it is empowering, because African countries have long been told they can only develop with what they do not have.
VW: This year marks the 10th anniversary of How China Escaped the Poverty Trap. Looking back, what arguments from the book have aged the best, and what would you revise today?
YYA: I am not sure I could be the right person to answer what has aged the best. As for what I would change, I don’t think I would change the core of it, but I will say the book’s biggest strength was, at the same time, its fatal weakness. It is a strength because having China in the title always draws reader attention—it is an important, fascinating economy, so people are more inclined to read the book. It travels particularly well across developing countries, from Nigeria to Cambodia to Brazil, because people want to know what they can learn from China. But that strength became a flaw, because everyone then assumes what I was saying in the book is just a China story.
If you actually read the book, the concepts, theories, sequences, and methods I lay out aren’t specific to China. China was a demonstration site, not a limitation, not even a case that inspired my concepts but the other way around: I invented concepts and applied them to China. If I had written a book called How Britain Became Rich, I don’t think I would have had that problem nearly as much, because we are programmed to believe Western experiences are universal. Take one of the most influential cases in development studies: the 1688 Glorious Revolution in England. This is the case used in Why Nations Fail, which built on the earlier work of Nobel Prize–winning economist Douglas North. The basic argument was that the 1688 revolution established parliament, which then enabled the Industrial Revolution to take off, representing the conventional “democracy leads to prosperity” argument.
One of the inequalities I notice is that everyone asks me how my theory could possibly apply outside China. But nobody asks these classical economists, whose arguments are based on England three centuries ago, how their theories could apply outside 17th-century England. Those theories are automatically taught in classrooms and used to justify policy prescriptions across the developing world, including Africa today. Power not only shapes theories and categories; it shapes our assumptions about what is universal and what is not. The most powerful aspect is that these assumptions become invisible and unquestioned. Everyone participates in them, often without realizing it.
So, to answer your question about what I would revise, I am currently in the process of writing new books that present updated versions of these theories, but without China on the cover (for a preview, see my essays on Adaptive Political Economy and AIM). We will see how people react. Some people are uncomfortable because, before, I was perceived as writing within the “China studies” niche, the ethnic aisle in the supermarket of ideas, offering exotic condiments but not staple foods. Now I am saying: no, I am and have always been approaching these questions the way other economists do. China is one application of the theory, not the boundary of it. In these books, I apply the same ideas to America, Western Europe, and other parts of the world. Ultimately, that is how power shapes categories: it does not just shape ideas; it shapes who is allowed to produce knowledge and whose ideas are treated as universal.