Why China built so much: the party-state, promotion incentives, and land financing behind the infrastructure boom

The video opens with a series of viral clips showing huge buildings, a city that looks like 4K footage, and train stations, which many Americans in the videos describe as far ahead of their own country. The narrator says these videos made him wonder what he was actually looking at and how China built so much.

The narrator says he always assumed the answer was dictatorship, meaning the leader's word goes. He frames the answer he and the host set out to test in that way.

The narrator says the question he most wants answered is whether China is communist. He acknowledges that the videos show only a slice of China, namely rich coastal cities that do not represent most of the country or most Chinese people's experiences. Even so, he says the common explanation is that China builds quickly because it has one leader who calls all the shots.

He says the truth they found turned out to be more interesting and surprising than that dictatorship answer, and that it says more about what modern China is.

Looking only at the economy gives a strange answer about whether China is communist, according to the host. The narrator asks where communism shows up in everyday life. The host explains the flag: the large star is the Communist Party, and the four small stars, which in the 1940s represented four social classes, point toward it.

The host says the Chinese Communist Party is not just in charge of China; China is built around it. The narrator says the Chinese Communist Party seems different from Western parties like the Democrats and Republicans. The host says the party has about 100 million members, roughly 7% of a population of 1.5 billion, and describes membership as belonging to a club rather than holding a job.

The host explains that China's government exists at many levels, from state level down to county and township governments, which is familiar. What is unique is a parallel Communist Party structure: for every government office there is a corresponding party committee, all the way up the ladder.

According to the host, the key point is that the power sits with the party. In the example of a city mayor and a city party leader, the party leader makes the big decisions and the mayor mostly carries them out. Anyone with significant power in government is also a Communist Party member, so the party is woven into the government itself.

The host then describes the top of the system: a Central Committee of around 200 decision-makers, a Politburo of 24, and a Standing Committee of 7, led by the general secretary. The host says the general secretary post is more powerful than the presidency, which is where Xi Jinping's power comes from.

The host explains that the party-state system is a Leninist idea: a vanguard party leads a revolution and then runs the state. The Chinese Communist Party still states as its goal reaching communism, a society without classes in which wealth-producing things are collectively owned.

The host concludes that China is not communist merely because it calls itself the Communist Party. The governing machinery it has, the party-state, comes from the communist tradition.

The host says that when Mao died in 1976, China was poor and in chaos both economically and politically. A power struggle followed, and Deng Xiaoping emerged as leader. The host describes Deng as a pragmatist rather than a hardliner, and says he saw China's poverty as a threat to the party.

The host argues that the Communist Party's future was tied to the economy. The people needed to eat if they were going to keep letting the party rule them, so Deng began changes intended to transform China, starting with a change in how officials were judged.

Deng decentralized power away from the central government and made loyalty to a single leader less important. He wanted younger, better educated, more technically competent officials to rise through the ranks, with more emphasis on practical knowledge than on straightforward adherence to Mao Zedong Thought and Marxist-Leninist thought.

The host says Deng changed how officials were graded and what they were judged by. For county and city leaders, the key task became making the economy grow, and officials were graded on a sheet with many items, but economic development sat at the top. Promotion became predictable based on GDP growth, tax revenue growth, and investment, which gave local officials a strong motive to find creative ways to stimulate growth.

Local officials in rural areas began running businesses, starting factories owned by towns and villages, known as Township and Village Enterprises, or TVEs. The local government could own a factory, choose its managers, obtain bank loans, acquire the land, and collect revenue when the factory succeeded. The host says TVEs were hugely profitable and that China, which had been mostly agricultural, began to industrialize.

Farmers became trained factory workers, a shift the host summarizes with a phrase meaning leaving the land but not the countryside. Later, in the 1990s, Beijing changed the arrangement so that local governments kept far less of their tax revenue, which made the TVEs, which generated large tax revenue, an important part of this system.

The host explains that urban land in China is state-owned, while rural land is owned by village collectives rather than the government. The state requisitions some rural land and compensates residents without buying it, which the narrator describes as forcibly taking the land. The government then develops the land and builds infrastructure on it, so its value rises.

Instead of selling the land, the government leases development rights to a developer for a much higher price than the cost of acquiring and developing it, and keeps the money locally. The developer's building raises the value of the land and surrounding parcels. The government can then borrow from banks using the land as collateral. The host says this, after a 1994 change in China's finances, became a huge new engine of economic growth called land financing.

The host says that across China local officials are competing to boost the economy, and building became one of the most important tools. When a boss arrives from Beijing or a provincial capital, officials show them high-rise buildings and five-star hotels as evidence of their achievements.

These visible projects are sold to superiors and look good on a record, which the host says gets officials promoted quickly. The narrator then notes that this competition alone cannot explain nationally coordinated projects such as the Three Gorges Dam and the high-speed rail network. The host responds that each city along the rail route benefited from having a station, since land values and economic activity would rise, and those were the measures officials were scored on.

The host cites Kangbashi in Inner Mongolia and Zhengdong as ghost cities and bridges to nowhere, but says people eventually moved into many of these places and began using those bridges. So such places do not necessarily prove that China built too much or wastefully. Sometimes, the host says, a ghost city shows that building outpaced demand.

The host argues that the whole operation depends on unlimited demand, the assumption that more people will always move into cities or ride trains. He says that has been a reasonable bet for a country of 1.5 billion people, but unlimited demand is not real. The narrator says China is in some ways a victim of its own success.

The host interviewed Vivian, a Newpress member who has lived much of her life in Shanghai and has many close friends who are Chinese citizens. According to the host, Vivian's friends find it funny that Americans react with admiration to the way China looks. Her parents, who lived in the UK, have retired to a city in mainland China.

The host says that outsiders often see the best in China, but among citizens, especially young people, a malaise has spread in recent years. He cites the phrase lying flat, which describes disengaging from a rat race that may no longer guarantee wealth, and says the handling of COVID was unpopular and alienated many people. The host concludes that the era of dramatic generational increases in living standards is over.

The host says that by the late 1980s and early 1990s, Deng Xiaoping and the Chinese Communist Party faced threats they regarded as existential. The Soviet Union, the original model for their political system, was declining; Mikhail Gorbachev announced he was quitting. For the party, this showed that a communist regime could rule for 70 years and then collapse.

Inside China, a growing middle class with aspirations beyond economic growth joined student-led and worker-led protests, especially in Tiananmen Square in Beijing. The host says Deng was the force behind sending in the military, an act that he says killed what is probably a few thousand citizens. He describes the decision as driven by seeing communist countries fall in Europe and elsewhere, and by Deng's view that this would not happen in China.

Before the beautiful buildings were constructed, people had lived on the land. Some were adequately compensated, but many received compensation below the land's worth. Residents who refused to leave because they knew the land would become more valuable were forcibly removed, which the host says happened often and was the source of much societal tension.

The host explains the dilemma for local officials: the GDP imperative requires building, but building can make people angry, and local leaders who cause unrest can be fired. He then describes repression tactics discussed with the researcher Lynette Ong, including hiring gangsters or unemployed youths for intimidation, and recruiting older retirees who believed in party values to pressure neighbors to sign.

The host says a visitor or a foreigner living in an expensive city would have no reason to encounter forced evictions or intimidation. Many visitors do not see heavy repression on street corners and leave with a positive impression. Chinese citizens, however, know that this happens and are fully aware of it.

The host says this affects not everyone but enough people that everyone knows someone who has encountered it, comparing it to how most Americans know someone ruined by medical debt. He notes that Xi Jinping has been in power for nearly 15 years, during which the security state has expanded greatly; the number of surveillance cameras was estimated at around 30 million when he took power around 2013 and was over 200 million by 2019.

The host argues that dictatorship or authoritarianism does not fully explain China's achievements. Many democracies, including ones other than the US, have excellent trains, and many autocracies do not. So the lesson is not necessarily that people should lose their rights.

The host concludes that the story has been about incentives: what people in charge are rewarded for and what they are encouraged to do with their power. In China, those incentives come from the top, through a party system; in a democracy, they come from the bottom, when citizens keep leaders accountable. The question he leaves is what we choose to reward.