We don’t do a ton of econ coverage on ChinaTalk, but had to make an exception for this truly epic piece of independent research by Jon Sine on LGFVs. He writes the Cogitations substack.

Cogitations

Writing that excavates the social scaffolding.

By Jonathon P Sine

In this essay we will tell the story of China’s LGFVs: that special type of state-owned enterprise (SOE) behind China’s infrastructure building bonanza. Along the way, we will look at the political and economic processes in China that facilitated their rise, and assess what we know and what we don’t know about them.

Data Before Narratives: The Lay of the LGFV Land

Let us begin with data. Today, there are nearly 12,000 LGFVs in China, 3,000 of which publicly disclose financials.1 Collectively, they are gargantuan. As of 2020, according to bottom-up surveys of LGFV financials, aggregated assets and liabilities equal 120% and 75% of China’s GDP, respectively.

LGFV Assets and Liabilities

LGFV’s financial situation is, to put it frankly, very bad. In aggregate, earnings (before interest, taxes, and depreciation, i.e., EBITDA) do not cover even their interest payments. Including government subsidies only occasionally pushes the interest coverage ratio above one. Moreover, the average borrowing cost for LGFVs, 5% or so, far outpaces their 1% return on assets, posing obvious sustainability problems. 2

Interest Coverage (LHS) and Borrowing Rates (RHS)

Cash flows paint an equally troubling portrait. Every year 80 to 90 percent of LGFV spending is funded by new debt. On the whole, LGFVs operating inflows do not come close to covering operating expenses. New debt is routinely added simply to make up the gap and sustain current operations.3

LGFVs Cash Flows

As is predictable from the above financials, the stock of interest-bearing LGFV debt has just about unceasingly expanded.4According to statistics from the IMF, LGFV’s interest-bearing debt has grown from 13% of GDP, or RMB 8.7 trillion, in 2014 to 48% of GDP, or RMB 60.4 trillion, in 2023.5

China’s Interest-Bearing LGFV Debt

LGFV interest-bearing debt is even larger than the IMF data above suggests. An unavoidable limitation of assessing LGFVs via bottom up data, as all of the above sources do, is that it only captures the 2-3,000 LGFVs that have issued bonds and published associated financials. Another 9-10,000 smaller LGFVs have never accessed the bond market and are therefore simply missing from the data.6 A simple way of trying to estimate the rest of the interest-bearing LGFV debt is to assume LGFVs follow a Pareto distribution.7 Doing so suggests IMF estimates probably understate debt by 25%. A more reasonable, if still likely conservative, estimate of interest bearing LGFV debt is probably 60% of GDP, or RMB 75 trillion, in 2023.8

Things Data Can’t Say

While the data tells a story of its own, there is also much it cannot tell us about LGFVs.9 Staring at data and getting proscriptive according to normative neo-classical doctrine risks turning us into IYIs.10 Understanding how we got here and the likely path forward requires other inputs.

What happens if we bring in the complexities of political economy? The incentives of organizational and social systems? The complexities of the past may shed light on the road ahead.

A Single LGFV Can Start a Prairie Fire

The protagonist of our story was born in a little known city in central Anhui province called Wuhu. The city, situated on the bank of the Yangtze, is just three hours south from another little known place with an important legacy: Anhui’s Xiaogang county, the place credited with pioneering China’s household responsibility system in 1978. Twenty years later, Wuhu would join its Anhui brethren in pioneering another defining feature of “socialism with Chinese characteristics”: the LGFV.11

If the household responsibility system unleashed market forces into China’s economy, then the LGFV brought the state surging back in—something Party-state leaders would likely have been keen on following destabilizing bouts of inflation in the late 80s and early 90s.12 But the direct desires of leadership were not the proximate cause for this novel feature of socialism with Chinese characteristics.

The LGFV, as we will see below, rather arose as an indirect result of three conjoined and systemic issues: fiscal centralization and decentralized local developmentalism, the Party-state’s organizational and incentive system, and the weakly institutionalized nature of China’s political system.

A spark only starts a fire in a flammable environment.

The Confederated States of China

In 1781, the United States was governed under the Articles of Confederation. That system had a glaring flaw: an utter lack of centralized fiscal revenue, which neutered central governance capacity. Within eight years a constitutional convention was called to forge a new system, which I would argue turned out better.

When China began allowing markets after Mao, the economic structure shifted beneath Beijing’s feet. SOEs crumbled, the tax base eroded, and tax evasion increased. Total government revenue and the center’s revenue share massively declined.13 Though one imagines the Soviet Union’s recent dissolution was top of mind, one could have also seen parallels between Beijing’s situation in the early 1990s and America under the Articles of Confederation.

The Partial Red-Herring of Beijing’s Fiscal Re-Centralization

In the early 1990s Beijing sought to re-affirm central authority. One of the more reliable ways to do so is to take control of the purse. Of this view were General Secretary Jiang Zemin and his Premier Zhu Rongji, who pushed forward a major fiscal and tax restructuring in 1994. Two big changes were wrought. First, Beijing decisively centralized revenues while keeping expenditures decentralized. Second, Beijing barred local governments from running deficits, and from borrowing.14 China, the most fiscally decentralized country in the world in terms of local expenditure share, overnight developed a stark vertical fiscal imbalance, with unfunded mandates at the local level.15 Nearly an inversion of the original problem. But Beijing was happy and that’s what mattered (to Beijing).

Ultimately, Beijing wanted revenues routed through its own coffers for purposes of control, most importantly over subordinate levels of government, and redistribution. That becomes evident once you realize the central government simply transfers back just about all the money. Indeed, once transfers are accounted for the oft-cited central-local fiscal gap disappears.16Unfunded mandates did materialize following the 1994 budget reform, but in a more nuanced way.

The problem was (and still is) in the nature of the intergovernmental transfer system. Beijing bureaucrats apportion funds to the provinces, who are in charge of apportioning funds to prefectural cities, who are in charge of apportioning among county level units, who are in charge of apportioning among townships.17 But sometimes the provinces send funds directly to the counties, by passing the cities. Each level also needs their own funds. And each level can take months before passing on the funds it received. By the time funds get from top to bottom, a year or more can pass.18

An Example of Intergovernmental Transfers

It’s fairly easy to understand how funds may also leak, be misappropriated, or miss their mark. The severity of funding problems ends up being highly geographically variable. The resource gap for many local governments is real, if overstated at the macro-level if transfers are not considered.

When we talk about China’s fiscal revenue, what is likely more important to understanding the evolution of China’s political and economic trajectory is the production bias baked into the system: 60% of taxes are on goods and services, just 6.5% on income.19

Share of major taxes in total tax revenue

Local government’s fiscal structure highly incentivized them to figure out how to boost production. So they turned to the task with their highly decentralized expenditure capacity and, more importantly, decentralized powers of off-budget liability-creation.20

The Decentralized Developmental State Gets a New Tool

The expenditure portion of the government income statement is more important than revenue in understanding the rise of LGFVs.21 This owes to the pervasive and multi-faceted role of local governments in economic activity, mobilizing for development.22

Local officials in China have long competed intensively within a hierarchical system that is both decentralized and weakly institutionalized. A combination of top-down and bottom-up incentives attracting them to or diverting them from enacting the center’s ambitions. This developmental modality post-Mao evolved into what is colloquially called the “mayor economy.”23 It is in large part an institutional outgrowth from China’s decentralized Maoist-Leninist system, and arguably traces even further back to imperial-institutional legacies.24 Along with previously noted fiscal incentives, a particularly noteworthy top-down feature has been the Party’s Organization Department and its control and influence over local cadres promotion.25 Mao’s death enabled the re-direction of the Party-state’s high-powered incentive systems to a new goal of production-oriented tournament style competition.26 Arriving at a period of burgeoning hyper-globalization, localities soon began to fight tooth and nail to lure FDI.27 A period of post-Mao capital deepening, urbanization, and transition beyond agriculture occurred at unprecedented speed and scale.

Local officials hunted within this incentive ecosystem for ways to increase their economic role.28 One seemingly win-win way for local governments to deepen their involvement was infrastructure—a role that arguably became their most important.29 To fully step into this infrastructure supplying role, however, local governments needed a new financing tool. Given the enormity of the task, no typical fiscal revenue stream would suffice. That’s where a little ingenuity from financial big whigs at China Development Bank (CBD) came in to play. Chen Yuan, son of famed Chen Yun and then head of CBD, helped local officials in Anhui and Wuhu concoct a simple but brilliant way to expand their economic footprint: create a corporate entity owned by, though at arms length from, local governments that could borrow unconstrained by the 1994 budget and regulatory regime. The entity’s raison d'etre was simple: (1) raise money and (2) build infrastructure. This was the “Wuhu model,” and in 1998 it birthed China’s very first LGFV: Wuhu Construction Investment Company.30

Over the next twenty years the Wuhu spark would engulf the country.

Land, Meet Finance

Leveraging land was Wuhu Constuction Investment Company’s distinguishing characteristic. Indeed, it was land finance that made the rise of LGFVs possible.

Local governments began selling land-usage rights in the 1990s, around the same time as Wuhu’s LGFV popped into existence. Once the land auction system was approved centrally and rolled out in the early 2000s, local government sales of land-use rights exploded.31

Proportion of state-owned land transfer revenue relative to local public budget revenue

For good and for ill local governments, uniquely empowered to requisition and sell land-use rights, used all means at their disposal to get land and ready it for sale, including mass evictions of those currently occupying it.32 The sordid history of local government land theft from China’s rural populace (re-zoning the land and selling it property developers) manifested in many cases as a Georgist’s worst nightmare, with self-immolation a not infrequent form of protest in the countryside.33 CPC led land reform in the early 1950s gave peasants their land, communization in the late 50s took it back. Marketization in the 1980s let the peasants work their land again, local governments began stealing much of it away in the 1990s. Such are the ebbs and flows in China’s countryside.34

By the late 90s, the local government revenue split began to take its contemporary shape, roughly equally divided into three parts: (1) central government transfers, (2) locally generated revenue, and (3) land sales.35

Land sales and locally generated revenue are highly intertwined. In the late 1990s, local governments began selling industrially-zoned land cheaply to attract companies that they could tax harvest. Selling land low seems counterintuitive until you realize locally derived revenue mostly comes from value-added and corporate income tax. Thus local governments became ever more perfect price discriminating monopolists: they sold residentially zoned land (居住用地) high to maximize one off revenue, but sold industrially zoned land (工业用地) low to maximize recurring revenue.

LGFVs took on two very important roles in the burgeoning land finance system. First, the pivotal role of preparing land for sale. Such preparation not only involves evicting rural residents and coordinating with the local governments on compensation (or lack thereof), but also requires multiple land development steps, known as the “seven connections and one level” (七通一平). LGFVs were used to build (1) road connections, (2) water supply connections, (3) electricity connections, (4) drainage connections, (5) heating connections, (6) telecommunications connections , and (7) gas connections. They also leveled the land in preparation for development. The extensive requirements of land development meant that often local governments were losing money on the land use sale (a problem that has only gotten worse in more recent years).36

Second, to finance these land-prepping activities, LGFVs ramped up use of the Wuhu land finance model. Local governments transferred more and more land use rights to these proliferating vehicles, who would in turn go to banks for loans using the land rights as collateral. And thus the land-industrial-complex began. Re-zone land. Transfer land. Develop land. Sell land. Buy land. Collateralize land.37

One need not be a Georgist to understand the unmatched power of land. Tax revenue would never have been capable of resourcing LGFVs the way land-finance did.

LGFVs, Property Developers, and Beijing’s Banking Balloon

No story on the rise of LGFVs could be told without a discussion of property developers and China’s banking system. If LGFVs are Batman, then property developers are Robin, and the banks are Wayne Enterprises (mileage may vary with this analogy).

The Wuhu model LGFV could take land from local governments and develop it for sale, but who would buy? Well, property developers. By the early 2000s, thousands of property developers had been established, eager to participate in China’s epic-scale urbanization process. Both sides of the would-be transaction, however, needed credit—particularly prior to the heyday of pre-sales in the 2010s. The LGFV-Property Developer crime fighting duo therefore needed their Wayne Enterprises.

Banks are the cornerstone of China’s financial system and were really the only game in town capable of facilitating a burgeoning land finance system. Most know about the big banks, but the stories slightly more complicated. To get localities on board with the 1994 fiscal overhaul, Zhu Rongji made a “grand bargain” with localities: in exchange for acquiescing to fiscal centralization, localities would get the right to establish their own locally controlled banks.38 As Adam Liu, whose research focuses on this topic, puts it: what is “rarely discussed is the most vital component of Beijing’s compensation package [for the 1994 budget reform]: local governments were offered the privilege of entering the banking sector.”39 When Beijing closed the front door with its budgetary restriction on lending in 1994, it opened a window.40

One can see the results: city commercial banks and other types of locally controlled banks proliferated. In 1995 the first city commercial bank was set up, and two decades later over 130 were in existence. The loan share of the big six banks collapsed from nearly 100% in the 1980s to roughly 25% today as a result of rising competition from locally controlled banks, e.g., city commercial banks, for deposits (as well as the 12 joint stock banks). The proliferation of state-owned local banks is an overlooked but consequential feature of China’s political economy, and core to the LGFV story.41

In the early 2000s banks were the primary funding source for the land finance system, on both the supply and demand side. Approximately 50-60% of real estate developers’ funding, for example, come from bank loans by 2004.42 That money, in turn, paid for land-use rights that funded local governments and, in part, their LGFVs. Meanwhile, LGFVs used their land-use holdings as collateral for loans (though in China’s weakly institutionalized system sometimes banks would lend without collateral).43 Bank loans made up about 90% of LGFV liabilities in that same period.44 China Development Bank and the big six state owned banks were core lenders, but locally controlled banks were players too, and their role would only grow more prominent.

LGFVs, property developers, and the banking system co-evolved.

Pouring Gasoline On a Fire: The 2008-10 Stimulus

Structural fiscal and developmental incentives likely would have continued to steadily drive LGFVs into ever greater positions of prominence within China’s economy.45 But it was the Great Financial Crisis of 2008 and China’s response to it that sent LGFV growth into steroidal overdrive.

No longer simply acquiescing to their use, Beijing began directing local governments to deploy LGFVs for countercyclical infrastructural stimulus and tasked the banking system with funding them.46 The People’s Bank of China explicitly called on local governments to use LGFVs to borrow, the banking regulator (CBRC) explicitly encouraged LGFV use, as did the Ministry of Finance.47 Buyer of narratives therefore beware, lest you fall victim to the woe is me central government fairy tale. This puts a bit of a lie to the notion that Beijing is effectively a responsible parent figure always trying to constrain misbehaving local officials.

When the center boldly announced its RMB 4 trillion stimulus plan to ward off recession, it did not intend to fund the stimulus directly but instead turned to local governments, now replete with bank licenses and financing vehicle. To this day we don’t know exactly how much China actually spent on its stimulus, though its clear the vast majority came off-budget via LGFVs. Only a trillion yuan shows up on the central government balance sheet.48 Beijing’s calculation of “official debt” accrual to LGFVs in 2009 and 2010 was RMB 3.6 trillion. But this number leaves out a substantial and non-transparent amount of LGFV debt.49 Some estimate LGFVs took on roughly a third of all new bank loans issued in 2009, and continued on in 2010 to account for 40 percent.50

As one example of what funds were used for, LGFVs mobilized to double-down on the build out of industrial parks and development zones. Parks and zones are used by local governments to attract companies, and thus revenue, jobs, and pad cadre evaluation, while from the central government perspective they are suppose to catalyze industrial clustering effects. From 2006 to 2018, officially recognized national and provincial level zones alone increased by 1,180, from 1,363 to 2,543.51 These numbers, large though they are, understate the extent of the build-out: they only include officially recognized zones above the city-level and do not reflect ongoing consolidation, merging, and cancellation of zones.52

One analysis of the post-2008 expansion stated that it “demonstrates that local governments are responsive to central commands.”53 Such a statement must be severely qualified. Local governments could not have been more eager to oblige Beijing in this instance, they tend only to respond with alacrity when doing so also corresponds with their interests. The host of epithets—from foot dragging, to bureaucratism, to formalism—is testament to the legion examples of local government non-compliance. But unleashing the LGFVs was also a boon for local cadres, their promotion metrics, and arguably for local development overall. It also made a fair amount of sense: local governments are closest to the ground and best understand what projects might work. And so China’s counter cyclical stimulus ran through local governments and their LGFVs.

Predictably, Beijing quickly lost what little control it had of the LGFV expansion process. Not only was the credit expansion much greater than Beijing intended, but LGFVs institutional role expanded and embedded deeper into the sinews of China’s economy. The analogy of LGFVs as Sorcerer’s apprentice is imperfect but apt.

Bend it Like Huarong

As they expanded, LGFVs moved out well beyond their initial infrastructural and land development remit. One analogy is that LGFVs have become akin to twelve thousand little Huarongs. Huarong, the country’s largest asset management company, was established just a year after the first LGFV in 1999. Colloquially referred to as a “bad bank” because it was set up to take non-performing loans off the Industrial and Commercial Bank of China’s balance sheet.54 Initially an asset recovery firm, Huarong metastasized into a massive conglomerate with dozens of subsidiaries involved as many different industries. The crazed expansion got so crazed under former Chairman Lai Xiaomin that the CPC decided to execute him.55 LGFVs have similarly spread out well beyond their original mission under increasingly complex corporate structures.

One categorization schema for LGFVs, offered by analyst Glenn Luk, divides LGFVs as follows: (1) The Infrastructure LGFV, (2) The Real Estate Asset Management LGFV, (3) The Structured Asset-Backed Warehousing LGFV, (4) The Financial Intermediary and Investment Holding LGFV, and (5) The Conglomerate “All-of-the-Above” LGFV. If the names don't immediately make senes to you, I invite you to read his post (see footnote).56 Suffice to say that after the 2008 explosion, NAO’s first audit in 2011 discovered that only half of LGFVs were strictly focused on government infrastructure projects, with 18% partly focused on them and a full third entirely focused on market-oriented projects.57 The issue has only exacerbated since.58

A recent Bank for International Settlement paper on the post-stimulus transformation of LGFVs shows just how far they have meandered beyond infrastructure. Between 2004 and 2018, only 20% of the investments made by the 4,432 they analyzed were into public goods sectors. They focus on Guizhou’s Dushan County as a concrete example. This LGFV operates across as many public goods sectors (e.g., electricity, heat production & supply, health, social security) as it does market sectors (e.g., software and IT services, retail, wholesale and real estate). The authors argue there is a U-shaped return to this sort of diversification, with some amount potentially helpful to growth but too much being harmful.59 Others, however, are much less sanguine, and see this expansion as potentially at the core of capital misallocation in China and the country’s overall productivity slowdown.60

LGFVs fed off a mix of moral hazard, unfettered access to credit, and indeterminant state responsibility for liabilities—that is, substantial state involvement under conditions of weak institutionalization. On their expansionary march LGFVs, from a more macro perspective, have cultivated an impressive web of investment linkages:

Red LGFV Over China: The Case of Zunyi Road and Bridge

Zunyi, a small city located in China’s southwestern province of Guizhou, does not often make the news. The city’s claim to fame dates back to the Long March in 1935, when it played host to a meeting that, according to Chinese Communist Party (CPC) lore, decisively established Mao Zedong’s leadership over the Party. Other than that, Zunyi is relatively unremarkable, a city of middling population and economic development, firmly in the 3rd tier of China’s unofficial city ranking system. One recent development, however, has once again brought attention to the city: the increasingly urgent Party-state effort to deal with LGFV debt. Zunyi Road and Bridge Construction (遵义道桥建设) is the star of the show. A snapshot of Zunyi’s corporate structure offers hints at some of the poblems.61

Zunyi Road and Bridge, like most LGFVs, is fully-owned by the local, in this case city-level, State Asset Supervision and Administrative Commission (SASAC).62 Established in 1993 and with registered capital of RMB3.6 billion, it is the second largest of of Zunyi SASAC’s 40+ holdings, many of which also appear to be LGFVs. Zunyi Road and Bridge is itself a holding company with at least 10 companies under its umbrella. Many of these firms are also LGFVs. Its largest holdings include: Zunyi Daoqiao Agricultural Expo Park Co., Ltd., Zunyi Daoqiao Hotel Management Co., Ltd., Zunyi New District Construction Investment Group Co., Ltd., and Zheng'an County Urban and Rural Construction Investment Co., Ltd.

Zunyi Road and Bridge Holdings

Road and Bridge’s subsidiaries also have subsidiaries. Take for example, its largest subsidiary: Zunyi City Baozhou District Urban Construction and Investment (遵义市播州区城市建设投资经营), with registered capital of RMB 1.6 billion. Baozhou Urban Construction itself fully-owns a diverse array of 10+ businesses, ranging from a funeral service company, to a financial leasing company seemingly focused on industrial equipment, to a water services management company, as well as a 49% stake in a property management company and a 5% stake in another diversified LGFV holding company.

Holdings of Road and Bridge Largest Subdiariy, Baozhou Urban Construction

The financing practices to go along with such a web of holdings have been similarly convoluted. One company may acquire loans or go to the bond market only to on-lend to its affiliated entities. There are hundreds, perhaps thousands, of LGFVs like Zunyi Road and Bridge and like the one in Dashan County mentioned earlier. These conglomerate LGFVs undertake what economist David Daokui Li describes as a “nested layering approach” to levergae. Companies at one level borrow funds, use that borrowed capital to secure additional loans at the next subsidiary level, and amplify debt layer by layer.63 All the while moving into more and more lines of business.

Evolving Liabilities: Bonds and Shadow Finance

Beginning almost immediately after their massive GFC-era expansion, Beijing turned from hot to cold on LGFVs. The center unleashed the National Audit Office (NAO) twice upon localities to try and scrape together the extent of the LGFV bonanza, first in 2011 and then again in 2013.64 The then bank regulator, CBRC (which then became the CBIRC and, as of 2023, the NFRA) also began keeping a comprehensive list of all LGFVs around that time, dividing them into “good” and “bad” and ostensibly demanding banks refrain from many types of lending to those on the naughty list.65

Constraints on bank lending, combined with the need to rollover short-term (~4 year) loans post-08, created huge incentives for LGFVs, local officials, and many other actors to devise alternative financing methods for these increasingly systemically important vehicles.66 A cat and mouse game had begun between Beijing regulators and localities.

LGFVs and China’s financial system proceeded to co-evolve.67 As LGFVs moved beyond plain vanilla bank loans, they played a huge part in spurring two other major financing channels: municipal corporate bonds and shadow banking.

Municipal Corporate Bonds

Municipal corporate bonds (MCBs) are bonds specifically issued by LGFVs (they are sometimes called chengtou). One informed analysis of them wryly describes them as the quintessence of socialism with Chinese characteristics: “MCBs are a perfect example of how planning and the market mix in the contemporary Chinese economy: They are implicitly backed by local government (hence “municipal”), but legally speaking they are issued by LGFV entities just like other regular corporations (hence “corporate”).”68

In 2006 only 17 LGFVs had issued a bond. By 2010 it was 1200. By 2013, 1700.69

The rapid growth owes to the central government’s stimulus-era decision to allow and encourage LGFVs to begin issuing bonds (enterprise bonds, a subset of corporate bonds, which at the time were regulated by NDRC, but as of 2023 are now regulated by CSRC).70 Data compiled by Fitch cuts a striking image:

The municipal corporate bond market really exploded in size, though, as 1-to-2 year short-term bank loans to LGFVs needed to be rolled over and re-financed.71 While the stimulus was the spark, the real acceleration came when it was time to rollover short-term debt.72 One study combed through bond prospectus of MCB issuers and disaggregated issuance according to stated purpose (prospectuses require issuers to state the purpose for the funds). The data clearly indicate a rapid rise beginning in 2013, precisely when the average short-term bank loan would have been coming due.73

Municipal corporate bond (MCB) Issuance by Purpose (2004-2016)

Rather than close, most “bond buyers preferred LGFV bonds because they offered higher yields than corporate debt, but were considered government guaranteed, even though they funded projects that typically had no capacity to repay the debt.”74

Most significant to the story, though, is who bought the bonds and how.

Shadow Finance: The Banks Shadow

Shadow banking is financial activity outside regulated channels. But in China, shadow banking takes on a double entendre of literally being the shadow side of banks. China’s shadow banking mirrors the rest of the financial system in being massively bank dominated. LGFV municipal corporate bond issuance was, as it turns out, mostly bought up by banks via shadow banking products.

Wealth Management Products (WMPs), or special funds set up to skirt regulations on deposit rates, are the most important shadow banking product. WMPs invested heavily in municipal corporate bonds. Chen and He et al calculate that 62% of all MCB proceeds came from WMPs. And it was banks that created those WMPs, of course with money that ultimately belongs to household depositors/lenders.75 Shadow banking and WMPs, much like MCBs, may not have precisely arose via LGFV stimulus, but massive pressure to rollover debt and refinance short-term stimulus loans created an extreme accelerant.76

Systemic incentives aligned to shift a substantial share of banking into the shade. Banks already engaged in regulatory arbitrage to get around the deposit rate ceiling and intermediate funds they otherwise wouldn’t have been able to.77 LGFVs got funds they wouldn’t have otherwise had access to. And households got higher returns via WMPs, which they viewed as fail-safe investments (owing to rampant moral hazard).78 Competition among banks to issue WMPs and compete for deposits, specifically between the big four and small and medium sized banks (SMBs), also intensified, going from luring deposits via offers of cooking oil, gold bars and cash to issuing higher-interest WMPs.79 As the figure below shows, WMP issuance as a share of all bank assets takes off in 2011, precisely when LGFV rollover needs are emerging.

Entrusted loans, meanwhile, were the second most prominent category of shadow banking, making up roughly 20 percent of shadow lending relative to WMPs 52 percent.80 Entrusted loans are loans between two non-bank entities that are facilitated by banks, a service for which the bank takes a fee but no exposure. The main characterstics of entrusted loans is firms with privileged access to China’s banking system, such as SOEs and larger LGFVs, channeling capital to those with less access.81 Most such transactions occur between affiliated parties, as between parent and subsidiary, such as in the case of Zunyi. This type of lending increases when credit conditions tighten, precisely as happened when Beijing tried to limit the credit deluge following its GFC-stimulus.82 Entrusted loans, a marginal part of total social financing relative to bank loans, clearly take off with LGFV refinancing.

Post-Stimulus Rise of Entrusted Loans (2002-2020)

Beyond WMPs and entrusted loans, trust companies also came onto the scene. Trust companies are “conduits that connect financial and non-financial institutions with asset classes that their licenses would otherwise prohibit.”83 Many trusts served as yet another mechanism to intermediate bank financing, in large part to LGFVs. The quintessentially convoluted process goes something like this: a bank makes a loan then sells it to a trust, the trust packages multiple such loans into a “trust plan,” then another bank’s WMP invests in that trust plan—investment banks would later serve as an additional layer, intermediating the second bank’s WMP investment into the trust plan.84 Such is the financial cat and mouse game.

Thus, all told, MCBs and shadow banking explode together around 2012 when LGFVs needed post-stimulus refinancing. The stimulus-through-LGFVs and follow-on regulatory tightening had the incidental effect of hastening development of China’s bond and shadow banking markets. LGFVs and the financial system co-evolved.85

Growth of shadow banking in China (2010-2020)

The evolution of LGFV liabilities reflects the tale. Based on a bottom-up estimates, Zhang and Xiong estimate loans fell from 79% of LGFV liabilities to 60% by 2015. That ratio has remained roughly stable up to today. In 2023, for example, global asset manager PIMCO estimated that the composition of LGFV debt was 60% bank loans, 30% bonds, and 10% other financing sources.86 Clearly bank loans still dominate, but given the extent of resources in play, the compositional shift was pivotal.

Evolving LGFVs Liability Composition

Beijing’s effort to conjure then control LGFV borrowing contributed to a sort of diversification of the financial system, including the massive expansion of the bond market. Many called for just this sort of change to Beijing’s bank dominated financial system. It’s a bit like a simulacrum of diversification, though, as banks remained the ultimate buyers, just with additional steps. But, at least when it comes to bonds, much debt was refinanced in substantially more sustainable manner. What’s more most of the ultimate lenders, via WMPs, were rich coastal Chinese folks. A potential avenue for common prosperity, and partial resolution to LGFV debt, could be defaulting on those bonds. That, however, could also risk seismic upheaval in a system laden with moral hazard and wherein not a single LGFV bond has yet to default.

The question of how to resolve the seemingly unstoppable freight train of LGFV borrowing lingered on.

Fiscal Reform Round 2: “Solving” The LGFV Debt Problem

As with property developers, the central government has been aware of problems with LGFVs for a long time and has been moving to resolve what they call LGFV’s “hidden debt.” As mentioned, regulations were first put in place in 2010 to impede bank lending to LGFVs. But the most important effort to try and resolve LGFVs debt and financing problems came with the country’s second big change to its budget framework in 2014, precisely two decades on from the last one. This time, a core purpose of the change was to deal with off balance sheet LGFV debt.

Most pertinent to resolving the LGFV situation, local governments were given a mandate and resources to swap off-balance sheet “hidden” LGFV debt with on-balance sheet bonds. Local governments were now given a clearer path to issuing debt themselves via bonds, and being actively encouraged to do so. The goal was to recognize contingent debt, refinance it with longer duration, lower interest rate bonds, and eliminate LGFVs within three years. Beijing’s “new budget law prohibits local government and their branches from borrowing in any other form, and unless otherwise specified by law, from offering any credit guarantee to any organization or individual.” Then the State Council issued Document Number 43 in September 2014 which aimed “to make these rules explicit” by stating LGFVs did not have “the authorization to borrow on behalf of the local government. If the only business of an [LGFV] is to borrow on behalf of the government, it should be shut down.” The goal, according to economists Chong-En Bai, Chang-Tai Hsieh, and Zheng Michael Song, “was to entirely eliminate [LGFVs] by replacing the debt of the [LGFVs] with local government bonds within three years.”87 If this was indeed the goal, then the reforms clearly failed.

China’s Interest-Bearing LGFV Debt

The failure has several causes. From the start, there remained debt classification issues with regard to what Beijing and local governments considered contingent liabilities. As a result, and the first big cause of the failure, is that a sizable amount of LGFV debt—equivalent to at least 13.4% of GDP, which the IMF’s 2018 Article IV derived from NAO estimates—was likely never transferred.88 Officially recognized local debt did shoot up as part of major bond swap program, and LGFV debt in turn fell from an estimated 32.1% of GDP in 2013 to 13.4% in 2014. But then LGFV debt as percent of GDP shot back to its original levels within three years.

Second, the new bond financing mechanism remained basically the same as the old one. The only difference was that Beijing actively used it. As before, all bond issuance has to be approved by the central government, via the State Council (and approved by National People’s Congress). In turn, provinces are in charge of issuing the debt and distributing the proceeds to all lower level governments. While controlling potential wanton lower-level behavior, it also creates an immense coordination problem lower levels and upper levels. Not only might upper levels not know what lower levels really need, lower levels may have incentive not to fully disclose how much they need. Low-level local governments would thus clearly find it easier to continue relying on channels they control (their banks) rather than official channels like special purpose bonds that are highly onerous, take a long time to get funds, and subject local officials to greater scrutiny.

Third and most important: nothing was changed with regard to local developmental incentives. Local officials were still highly involved in the economy, still controlled local banks and shadow institutions, and still stood to benefit in a variety of ways from credit finding its way to LGFVs. Predictably, new lending did not stop and LGFV debt continued to pile up.

Policies and Counter Policies (上有政策，下有对策）

The center’s hands have been far from clean in the LGFV clean up process. Throughout the winding road of LGFV growth the center has repeatedly stoked the LGFV fire only to then play fireman. The 2009 LGFV stimulus followed by crackdown is one example, but the same dynamic happened just prior to 2014 and again just after. In 2013 the State Council called upon local governments to increase infrastructural investment once more.89 Then, just after the big 2014 Budget Law change, “the State Council issued a new decree in May 2015 (document 40) that reversed its attempts to crack down on [LGFV] borrowing,” urging “financial institutions to continue to lend to [LGFVs].”90 Not only do local governments counter Beijing’s policies, Beijing often counters Beijing’s policies.

In more recent years, however, Beijing has gotten more focused and the drum beat of regulatory restrictions has intensified. Interestingly, though, they have also become more secretive.91 In 2018 the State Council made explicit the PRC government’s ambition to wipe out all local government hidden debt, calculated per 2017 numbers, within 5 to 10 years.92

In the ten years from 2014 to 2023, amid the LGFV diversification process we discussed earlier, local SOEs began to be classified and regulated according to three categories: competitive, functional and public welfare.93 The center is trying to rationalize the operations of LGFVs, limiting state subsidization and backstopping of those oriented toward the market while phasing out the weakest performers. In practice, the policy efficacy is dubious at best. LGFVs have mixed and matched assets not only to create conglomerates that might stand on their own feet in the market, but also as part of a cat and mouse game with regulators with the ultimate goal of keeping credit flowing and their operating capacity in tact. Conglomerates with diversified holdings (from pure public-welfare to pure market) become too big to fail for local governments. LGFV complexity and debt burdens have only grown.

Since 2018 an increasing number of regulatory documents have ceased to be made public. Some speculate there is fear and hesitation within China’s bureaucracy of taking ownership over this massive problem. Amid increasing clamor to better address the LGFV issue, the PRC government issued and circulated two guiding documents within its bureaucracy in 2023. Neither Document 37 or 47, as they are shorthanded, have been made public. But substantial information has leaked within China, and discussion on WeChat is ample.

One organization, an asset management and consulting company that focuses on local governments and their SOEs, has put together a helpful guide on how struggling LGFVs might “transform and develop in the context of today’s debt package.” The firm, Nanjing based Zhuoyuan, suggests:“If an urban investment platform in a region has weak qualifications and declining financing capabilities” it might want to consider “injecting more high-quality assets and integrating weak platform assets.” Alternatively, it might try acquiring high-quality listed companies so as to “broaden investment and financing channels for urban investment companies.”94

A new round of audits is apparently under way to re-assess the scope of the LGFV debt situation. A number of other steps have also been announced, including $1 trillion worth of bonds to bring LGFV debt on-budget and refinance at lower rates, to be handled by provincial governments in the 12 most struggling provinces. More policies and announcements are expected. But what will their efficacy be?

Conclusion: The Most Complex Economic Problem?

Having arrived at the end of our story on the rise of LGFVs, the fall remains untold. The winds of change have been blowing. But a precipice remains elusive. Metaphorical cliffs do exist in China’s weakly institutionalized, moral hazard laden system. And Beijing has shown a willingness to push things off. Need we discuss the rapid fall of China’s property developers?95 With the land market contracting, local officials and LGFVs will be hard-pressed to keep a land-financed based LGFV system intact.

Why though, one wonders, has there been no LGFV policy equivalent of the Three Red Lines? Is it because they are more embedded in “the system”? Consider how much greater the on-balance sheet exposure to LGFVs is than to property developers.

Or maybe it’s because, despite escalating central regulatory action against them, LGFVs remain useful to Beijing in a variety of ways. Beijing, as we have seen, often counters Beijing (上有政策，上也有对策). LGFVs are handy not just as shock absorbers against economic recession, nor just as levers to buttress growth and employment, but also as vehicles for carrying out country-wide goals such as extreme poverty elimination and shanty-town revitalization. But the costs of using LGFVs mounts.96

Whether or not shock therapy comes for LGFVs, the incentive ecosystem is shifting. Beijing has decided its bureaucracy must mobilize not principally to rectify backwards productive forces, but rather to remedy the “contradiction between people’s ever-growing need for a better life and China’s unbalanced and inadequate development.”97 At least one implication is clear: the land-finance system that for the last two decades has been the lynchpin for much of China’s development is being directed toward the dustbin of history. High-powered top-down incentives to boost growth are no longer so high-powered. Property developers have taken their hit, but LGFVs remain at large.

Ambiguous mandates render the future of LGFVs difficult to divine. What constitutes a better life, precisely? Growth is still important, but must be balanced with security and needs to be “high-quality.”98 Local experimentation is still encouraged, even demanded, but must comport with stricter top-down preferences.

Despite the diversification we have seen in the holding schemes, asset structures, and liability composition of LGFVs, there remains a lack of diversification where it matters. Local Party-state officials continue to control LGFVs and the local banks, and possess immense influence over many other facets of their local economy. In a remarkably concise passage from his book 置身事内, Lan Xiaohuan argues that “the root cause of the government’s debt problem,” and by extension of low-quality growth, “is not insufficient revenue, but rather excessive spending, as the government has taken on too many roles in developing the economy. Therefore, the debt problem is not simply a ‘soft budget constraint’ issue or a problem solved by modifying the government’s budget framework. Instead, it is fundamentally a problem of the government’s role.”99 LGFVs are the crux of this problem. And it is why property developers, most of which were private companies, have not posed nearly as vexatious a problem for Beijing.

A decade ago Beijing not only set out to constrain LGFVs, but to eliminate them. Fiscal restructuring proved insufficient. Today, localities still have dauntingly expansive roles and mandates, will new sources of financing materialize or will they be forced to abdicate? In this evolving context, will local officials face new incentives to keep their all-purpose handy man, the LGFV, alive and kicking? Will LGFVs whither away, as Lenin once promised the Soviet state would? Who will make them? With a new round of audits sweeping the nation alongside top-down inspection tours and the ongoing anti-corruption campaign, what might become of China’s 12,000 LGFVs?

A common saying in the Party these days holds that it is sometimes necessary to “turn the knife inward and scrape poison off the bone.” A fundamental solution to the LGFV problem, it seems, requires a deeper cut into the system.

References and Endnotes

3

You can also assess the weakness of LGFV financial performance relative to other firms, as the IMF did in its most recent Article IV for China (2023):

4

Multiple organizations exploit the spec of transparency offered by bond-issuances to estimate the LGFV debt problem. Estimates differ seemingly based on how many bond-issuing LGFVs get included in their bottom-up estimates.

At the upper bound of comparables, Rhodium Group, collated and analyzed annual reports from 2,892 LGFVs that have issued bonds.

A 2022 study by the IMF, presumably using very similar methodology as the Article IV consultations, used CapitalIQ’s more limited database to analyze 2200 such LGFVs. PIMCO used Wind Financial and perhaps some proprietary information to come up with its own bottom-up estimate of LGFV and other government debt.

6

The only data sources that include LGFVs beyond those issuing bonds are China’s official audits, conduced in 2011 and 2013, by the National Audit Office (NAO). See: National Audit Office, “2013 Announcement 32: Nation-wide governmental debt audit results,” (2013年第32号公告：全国政府性债务审计结果), 2013. https://web.archive.org/web/20140104011301/http://www.audit.gov.cn/n1992130/n1992150/n1992500/n3432077.files/n3432112.pdf

We have no more recent bottom-up estimates of the entire galaxy of LGFVs. Prior to 2020, the IMF appears to have simply projected forward those estimates.

Those data, however, are limited. As Bai et al (2016) describe: “the data on the Audit Office only covers "official" debt of the LGVs, which the Audit Office defines as "the debt that government has responsibility to repay or the debt to which the government would fulfill the responsibility of guarantee or for bailout when the debtor encounters difficulty in repayment.”” Thus Party-state data may tell us how much LGFV debt was used on infrastructure, but it does not give us the whole picture. As Bai et el (2016) note, the total debt in their smaller sample of bond issuing LGFVs is larger than the total given by the NAO See: Chong-En Bai, Chang-Tai Hsieh, and Zheng Michael Song, “The Long Shadow of a Fiscal Expansion,” Becker Friedman Institute, November 2016, page 11.

Here is an overview of the data accumulated in the NAO audits:

12

Inflation was 18% in 1988 and 1989, and after calming spiked back to 24.1% in 1994:

The high inflation of this period was perceived as a major problem among China’s leadership, considered one of Zhao Ziyang’s failings, and even a root cause of Tiananmen protests. See Julian Gerwirtz, “Never Turn Back,” Harvard University Press, 2022, pages 212, 214, 281.

21

This is also the argument Lan Xiaohuan makes in 置身事内

Also see Tsinghua ACCEPT’s very good paper on China’s post reform and opening development, which has a good explanation of how over-eager officials getting involved in the economy and stimulating excess production, among other maladies, is at the root of the economic problem as much, if not more, than fiscal imbalances. See “Summing Up 40 Years of Economic Reform and Opening,” 改革开放四十年经济总结, 清华大学中国经济思想与实践研究院 Academic Center for Chinese Economic Practice and Thinking, December 2018, page 17, http://www.accept.tsinghua.edu.cn/_upload/article/files/7a/3c/976c22ff48cfb1860f7288f6bd05/612c2ab9-2527-4237-b28e-7ce36ee2b379.pdf;

Local government spending favors production and growth oriented infrastructure rather than service oriented public goods, clearly shown via date from 1999 to 2006: Chengri Ding, Yi Niu, Erik Lichtenberg, “Spending preferences of local officials with off-budget land revenues of Chinese cities,” China Economic Review, 2014, https://www.sciencedirect.com/science/article/abs/pii/S1043951X1400131X

27

The crazed race to lure production resulted in intensive expenditure. Keyu Jin states that between 1998-2007 foreign manufacturing companies were the most subsidized type of firm in China, on average getting multiples more than SOEs. See Keyu Jin, “The New China Playbook,” 2023, page 101.

On strategies used see:

High Capacity

How China uses foreign firms to turbocharge its industry

(This piece builds on part of another piece I wrote on India’s EV strategy.) China uses foreign firms selectively to bring in technology and know-how, to build up its domestic suppliers, and to ultimately sow the seeds for homegrown Chinese companies to compete on the world stage…

Read more

6 months ago · 37 likes · 2 comments · Kyle Chan

31

“As Figure 1.1, taken directly from a CDB presentation, shows, land expropriation and the transfer of land rights are central to making the machine work, used for paying back the loan. “The city had land but no way to turn it into cash, so the government couldn’t get money,” researcher Yu says. “At that time, no one realized what Chen Yuan knew: that once the land price goes up, you have a second source of income.”” Henry Sanderson and Michael Forsythe, “China's Superbank: Debt, Oil and Influence—How China Development Bank Is Rewriting the Rules of Finance,” Wiley, 2012, page 8.

The role of Chen Yun, economic czar for decades, in creating the LGFV model is also noteworthy.

55

Huarong Financial Leasing (2006), Huarong Securities (2007), Huarong Trust (2008), and Huarong Real Estate (2009) were already licensed by the time of Lai’s arrival, but many more segments—particularly investment management related—were to come. Growth in assets in the years from 2014 to 2017 were 47%, 44%, 62%, and 32% respectively before decreasing in 2018, the year Lai Xiaomin was placed under investigation. From RMB315 billion in 2012, by 2017 assets peaked at RMB1.7 trillion, increasing by nearly 6x in only five years. Huarong’s assets based on its corporate filings:

Wang Zhanfeng, Lai’s replacement as Huarong Chairman, stated in the long delayed 2020 annual report: “Due to the aggressive operation and disorderly expansion of former Party Secretary and Chairman Lai Xiaomin, the Company has badly deviated from its main responsibilities and core business.”

56

reading, writing & investing

LGFVs: the Good, the Bad, and the Mierda, Part I

Last week, I started looking closely at the local government financing vehicles (LGFVs) that sit at the heart of many of the current economic concerns in the Chinese economy. Over the week, I continu…

Read more

a year ago · 5 likes · Glenn Luk

63

The East is Read

Part II: David Daokui Li's meticulous breakdown of "nested" dimensions of local govt & its debt

In a post on Friday, Dec. 22, we shared that Professor David Daokui Li of Tsinghua University recently unveiled a study - together with Zhang He at the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) - that found China’s local government debt in 2020 was around 90 trillion yuan, 50% higher than…

Read more

9 months ago · 30 likes · 2 comments · Yuxuan JIA and Shangjun Yang

72

Provincial-level LGFVs accounted for 38% of total issuance in RMB value, prefectural cities 34%, and county-levels 29% (cities and counties issue far more bonds, but the average value of provincial bond issuances is far higher).

Based on above data, as of 2015, provincials accounted for 38% of total issuance in RMB value, prefectural cities 34%, and county-levels 29%.

Yongheng Deng, Understanding the Risk of China’s Local Government Debts and Its Linkage with Property Markets, IMF & National University of Singapore, 2015, https://www.imf.org/external/np/seminars/eng/2015/housingchina/pdf/Session%203_YDeng.pdf

96

MacroPolo has compiled information on the likely provincial-level debt drag stemming from LGFVs.

At a more disaggregated level, Rhodium looks at the county-level burden.

在世界游荡的过程中，我们一直在尝试女性共居，两个人，三个人，甚至四个人。在我们看了韩国女性书写的《拼团人生》后，我们在旅途一直在畅想我们仨（莫不谷，霸王花和游荡者平台产品经理粽子）以后拼团共居的可能性：几年后我们各自拿到欧洲的永居身份，在加纳利群岛找到一个依山傍海的小房子，前期先租，等后期有合适的时机也可以合伙买，领养一只小猫和一只小狗，构成W3C1D1（三位女性，一猫一狗）的女性生活。分工协作，共同创造，开一个vintage小店或者一个小餐馆，有热爱的事情可做，每天出门散步看海工作探索，在家煮火锅吃烧烤和一些健康的地中海饮食，以及看电影打扫房子晒晒太阳照顾猫狗写作录播客。

我们在不断往这个畅想里增加细节，每天享受当下生活的时候也在对未来充满向往。所以一起在芬兰录一期这样的播客，来为我们自身和所有女性朋友带来一些生活形式的崭新的可能。这是莫不谷、霸王花木兰和粽子第一次实现线下全女录制播客，也是放学以后和思前想后的一次串台。希望这一期也能为你带来对未来生活的想象和一种可能。

【Timeline】

04:09 听友ALex：正在实践女性共居，给我们带来了无比的自由和幸福

15:26 主播三人女性共居的一大前提：不会把男性纳入自己的生活

20:39 如何选择你的共居人？参考纽约时报《结婚前必须要问的13个问题》

23:40 霸王花和粽子：我们为什么会响应莫不谷女性共居的计划？

28:04 莫不谷：为什么我要提议女性共居这件事情？

45:22 女性共居创造的可能性：游荡路上两首音乐MV的诞生

50:11 主播三人发疯喊话：欢迎新西兰、加拿大、英国、马达加斯加旅游局联系

51:37 主播三人定向招商：欢迎迪卡侬、招商银行、Splitwise联络

53:40 全女团队发起面向女性的独立游戏，欢迎有游戏开发经验女性加入团队！

01:00:00 莫不谷、霸王花和粽子关于女性共居的财务、技能、身份、身体准备计划

01:28:00 为什么要互助运动：老了以后的自信从哪里来？从肌肉中来。

01:39:12 如何找到想做的事情？如何消解被人驱使产生的抵触和厌恶？

01:49:00 女性共居如何面临消费观念和消费水平的差异？为一辆车或一双鞋，你最多愿意花多少钱？

01:54:00 来自纽约的听友橘子：分享我对女性共居的体验和憧憬

01:57:00 莫不谷：与橘子一样，我对自己的定义也是同性浪漫无性恋

01:59:00 霸王花对综艺式日常生活的解释：J人微P、洁癖微脏

02:19:00 女性共居不仅需要签署共居协议，还需要配套社会制度支持（法国、荷兰为例）

02:25:00 不仅婚姻制度在全球范围内趋于消亡，异性恋关系也不再流行

02:29:00 听友Iris：关于女性共居，我的第一反应是抗拒

02:41:00 莫不谷：宿舍生活并不是女性共居，是东亚集体性被安排的生活

02:45:00 为什么选择认同的环境很重要？不要在即将沉没的泰坦尼克号里升舱

03:04:00 如何处理摩擦与争吵？对真实自我不接纳，女性共居中暴露出来冲突会更大

03:39:00 莫不谷：我跟女性朋友们的关系，与我和创作的关系是一样的

03:50:00 霸王花：为什么我常把自己逼进绝境和困境，还想躲起来不愿被看见

04:08:00 主播三人：女性共居中觉得最美好的部分

04:08:00 主播三人：女性共居生活中理想的一天是怎样的？

04:28:00 女性之间不一定共居，但可以多多gathering，建立一些connection

04:33:00 主播三人合唱游荡者平台主题曲《东亚女游荡之歌》（欢迎二创）

【一则说明】

游荡者网址www.youdangzhewander.com因网站维护原因暂时停用（9月底预计可以），大家可通过www.youdangzhe.com访问，这个网址目前无需科学上网，国内外用户都能访问，之后万一出现任何问题可科学上网打开。手机端用户可把新网址添加桌面，便于日常使用。使用新网址期间如果有任何注册、支付、退款等需求，欢迎给我们客服邮箱wanderservice2024@outlook.com发送邮件，由此给大家造成不便敬请谅解。

【一则喊话】

倘若你是擅长游戏前后端开发的女性，想要在这个遍地飘0的时代，找到自己的那个1，参与从无到有的build，欢迎加入我们这个名叫female builders的厂牌，我们一起合伙来通过游戏改变一下自身和这个世界！通过这个当下可能最有意思和沉浸感的媒介进行表达自己和女性互动，让女性一起通过游戏改变这个被设计得相当糟糕的现实。

感兴趣的女性游戏开发的朋友可以给我们发一下邮件，希望是践行女性主义和自由主义，生理心理和精神都是女性的朋友！我们将一起共担投入，共享收益。我们的邮箱是：Femalebuilders2024@outlook.com

相关文章：《在遍地飘0的时代，人有个1太重要了！》

【文章&书籍】

《拼团人生》[韩]金荷娜 黄善宇 / 2022 / 中信出版社

《游戏改变世界》[美]简•麦戈尼格尔（Jane McGonigal） / 2012 / 浙江人民出版社

《如何找到想做的事情》[日]八木仁平 / 徐艺菊 / 机械工业出版社 / 2023

《斑马》傅真 / 人民文学出版社 / 2022

《结婚前必须要问的13个问题》纽约时报

《纽约，她的性别为女》放学以后Newsletter莫不谷轮值

《女性浪漫，往复信笺1：别做那个最恨自己的人》放学以后Newsletter

解锁放学以后《创作者手册：从播客开始说起》：https://afdian.com/item/ffcd59481b9411ee882652540025c377

解锁莫不谷《做一个“蓄意”的游荡者》口袋书：

爱发电：https://afdian.com/item/62244492ae8611ee91185254001e7c00微信公众号：《放学以后After school》（提示安卓用户可下载“爱发电”app，苹果用户可把爱发电主页添加至手机桌面来使用，目前爱发电未上线苹果商店）

【影视视频】

《东亚忍者之歌 Song of East Asian Ninja》

莫路狂花出道曲！

《他乡的童年》纪录片 芬兰篇

《机智的医生生活》韩剧

《海贼王》动漫

《朗读者》电影

《游荡夏威夷 莫不谷今日历劫》小红书“游荡者的日常” 视频

【延伸信息】

片头曲:《寄生兽》Bliss

片尾曲:《东亚女游荡之歌》（词曲：莫不谷，演唱：莫不谷、霸王花木兰、粽子）采样remix 《我和上官燕》（作词：文雅，作曲：Benny，演唱：赵薇，侵删）

播客封面：萝卜特创作并获得其授权

Newsletter订阅链接：https://afterschool2021.substack.com/（需科 学/上 网）

联系邮箱：afterschool2021@126.com （投稿来信及合作洽谈）

为全球华人游荡者提供解决方案的平台：游荡者（www.youdangzhe.com）

小红书：游荡者的日常

同名YouTube：https://www.youtube.com/@afterschool2021

同名微信公众号：放学以后after school

欢迎并感谢大家在爱发电平台为我们的创作发电：https://afdian.com/a/afterschool

播客收听平台：

【国内】苹果播客（请科学/上网）、爱发电、汽水儿、荔枝、网易云、小宇宙、喜马拉雅、QQ音乐；

【海外】Spotify、Apple podcast、Google podcast、Snipd、Overcast、Castbox、Amazon Music、Pocket Casts、Stitcher、Radio Public、Wordpress

To discuss America’s comparative advantages in national competition and the structural forces that drive (and limit) innovation, ChinaTalk interviewed Kumar Garg. 

Formerly an Obama official in the Office of Science and Technology Policy, Kumar spent several years at Schmidt Futures focusing on science and technology philanthropy. He has been a mentor and cheerleader for ChinaTalk over the years, and he is the president of the newly established Renaissance Philanthropy.

We discuss:

• The inspiration behind Renaissance Philanthropy and its focus on mid-scale, field-transforming ideas

• Strategies for identifying underexplored, high-impact projects — including weather forecasting, carbon sequestration, and datasets on neurocognition

• Structural challenges for R&D funding at the level of government and universities

• The role of focused research organizations like OpenAI in accelerating progress and understanding long-term drivers of productivity

• A wide angle-view of US-China competition and strategic innovation

• The underresearched importance of alliance management.

Spotify:

Apple Podcasts:

The Classical Innovation Model

Jordan Schneider: Tell us about Renaissance philanthropy — what’s the backstory and thesis?

Kumar Garg: Renaissance is a young organization. Our name and thesis harken back to the Italian Renaissance. We’re inspired by how wealthy Italian families played an outsized role in supporting innovators, scientists, and thinkers like da Vinci. We’re exploring the role wealthy patrons can play today in driving a 21st-century renaissance.

There’s enormous untapped giving potential among today’s wealthy families. A study of 2,000 families with large fortunes showed they’re giving less than 2% philanthropically.

When asked why, they often cite two reasons: they’re still actively working and plan to give later, or they haven’t come across exciting ideas. These reasons stem from the same issue — they’re busy and not encountering compelling opportunities.

Rather than waiting for donors to reach a later life stage like Bill Gates, who exited his career to focus on philanthropy, we want to engage them earlier. In science and tech, it’s challenging to be strategic by just interviewing individual researchers, who are trained to pitch their next project rather than discuss field-wide challenges.

Earlier today, I was talking to somebody who was explaining the advances in neurotechnology. We have new methods and tools which should allow us to understand the way the brain works. At a technical level, these tools didn’t even exist three to five years ago. Now, we could actually build high-dimensional data sets that could allow us to understand the whole brain in a model organism.

The dataset they want to build is just too big for individual research projects, but it’s also too small for a major university capital campaign. These ideas often struggle to get funding from research agencies like NIH because they fall outside the scope of individual investigator awards.

Renaissance aims to identify these big mid-scale ideas — three to five-year efforts that could unlock a field — and match them with donors excited about the thesis. We want to draw more people into strategic giving by presenting them with exciting hypotheses and teams to support.

Jordan Schneider: How do you source these ideas and find CEOs who can execute $10-30 million projects? What should potential applicants from the ChinaTalk audience know?

Kumar Garg: Interested individuals can reach out through our website (or email info@renphil.org). We’re looking for ideas that go beyond incremental research steps to strategies that could accelerate entire fields.

We start with a field-level view, asking what strategies could help us progress faster. This requires identifying roadblocks, bottlenecks, and areas that are less incentivized for individual researchers but highly beneficial for the field.

When interviewing researchers, we often start by discussing datasets. Creating high-quality, multidimensional datasets is valuable for the community but not always rewarded in the current system. We ask researchers to describe dream datasets that could accelerate progress in their field, then work backward to determine what’s needed to create them.

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We also look for projects requiring close collaboration between researchers from different disciplines, which can be challenging to fund through traditional channels.

Another approach to locating gaps is working backward from important problems. For example, famed UChicago economist Michael Kremer made a general observation that AI is improving weather prediction.

Michael spends a lot of time working on sophisticated economic models, and one of his research areas is smallholder farmers. [Ed: Professor Kremer won a Nobel Prize for his contributions to development economics in 2019]

He considered how AI could benefit smallholder farmers by more accurately predicting monsoons. If you can predict monsoons farther in advance, that could potentially increase crop yields significantly in a whole bunch of countries, such as India. Farmers could figure out when they need to harvest their crops before the rains come. Because as an economist, he could estimate the economic value for that increase in the accuracy of monsoon prediction.

Once the value is written down, then it’s clear that somebody should fund this. It’s not just general improvement in weather prediction — this particular use case has really high social value. But those individual farmers left on their own will not finance that AI improvement. Somebody has to step in and say that aggregate value is really valuable.

To find a donor for projects like these, sometimes the gap is on the demand side — the demand is latent, and you need to define it to pull people in. Sometimes the gap is on the supply side, where certain types of organizational behaviors are undervalued, like data sets.

We are often just asking good questions — “How would we go faster, bigger, better in your field? Are those big ideas hard to fit in the current funding landscape, and if so, why?”

Writing down those details makes for a very strong application.

Jordan Schneider: This seems like a lot of work for you. Is there a way to do this besides just talking to many people? What’s the non-artisanal version of coming up with these ideas?

Kumar Garg: Creating archetypes for this way of thinking is essential. I was partly inspired the work I did with Eric Schmidt creating an organization called Convergent Research, which works with focused research organizations (FROs).

With Convergent Research and the FRO model, Adam Marblestone initially received meta-feedback on his paper about focused research organizations. Once we got some FROs funded and scoped, researchers could see concrete examples and generate ideas that fit the model.

Adam now has a list of 300 FRO ideas, not because he had 6,000 conversations, but because people are coming forward with ideas that fit this model. Our job is to assess funder demand for these ideas and potentially share them with agencies like ARPA-H.

Building out the right set of questions and showing replicable examples will be crucial as we launch various funds, enabling people to envision applications in their fields.

Jordan Schneider: Focused research organizations may sound nebulous, but OpenAI is a prime example. They started with Sam Altman declaring no clear path to profitability, focusing solely on making models smarter. With limited initial funding, they took risks that weren’t being made in academia, DeepMind, or Microsoft Research. It’s a great case study of what scientists can achieve under different institutional structures and incentives, freed from mainstream corporate R&D or traditional academic funding constraints.

Kumar Garg: It’s challenging in the modern university system. While individual researchers build labs with various related projects, the idea of collaboratively solving one mega problem requires both a structure and funding that accommodates it. This approach can have a huge impact, but it’s difficult to implement within traditional academic frameworks.

Jordan Schneider: Let’s consider the individual level. Does this require leaving the tenure track or a comfortable position? Who are the people who go from having a good idea to actually implementing it, potentially taking a lateral step in their career?

Kumar Garg: You find people at different levels of the spectrum, but a common trait is the ambition to move their entire field forward. There are several ways to approach this:

1. Agenda setting: Researchers can take a step back, identify transformative ideas for their field, and share them compellingly with private or public funders.

2. Government rotations: Top researchers can spend time at agencies like DARPA or ARPA-H, bringing their orientation to find the next generation of bets.

3. Alternative roles: Some researchers enjoy running labs but also want to push coordinated research programs with key results. They might become DARPA performers, FRO CEOs, fund managers, or startup founders.

The challenge is that these alternate models often feel invisible or difficult to pursue. We try to make these paths more legible by providing clear examples and explanations of different roles, such as running a focused research organization or becoming a DARPA program manager.

By making these alternate paths more visible and understandable, we can encourage more innovation in career paths, similar to how the concept of being a startup founder has been popularized and made accessible to more people.

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Jordan Schneider: It’s interesting because most of the time, you still need the person to get a PhD first. That process socializes you in a very particular direction. In early science, in the late 1800s and early 1900s, not everyone in the field had to go through this seven-year process where they couldn’t see the forest for the trees due to living under all these constraints. It takes an unusual person to be in that environment for 5, 10, or 20 years and still be able to recognize that everyone’s doing X, but if someone did Y for a while, it could have an incredible multiplier effect.

Kumar Garg: You raise a fair point. The computer science community is having an outsized impact partly because of AI’s rapid development, but also because of the field’s inclination. Not everyone gets a PhD, yet they can still do cutting-edge work. These individuals are now filtering through the broader science ecosystem, bringing down the average age of researchers.

Erika DeBenedictis figured out the importance of peer networks among young researchers when working on research automation. These networks can be leveraged to promote new ideas and tools. For example, to encourage more young biotech founders, engaging with the research networks of young biotech researchers and introducing the idea of founding a company can be effective.

These emergent talent networks are probably underexplored. This relates to the Renaissance point about the social networks that drive progress. In Leonardo da Vinci’s era, many interesting people were illegitimate sons of nobility who had access to resources but lacked predetermined social obligations, allowing them to forge their own paths.

The science community will always benefit from attracting people who want to go off the beaten path, but we also need to build more paths to make it less challenging for them.

Jordan Schneider: Let’s discuss the donor side. What range of net worth is worth 30 minutes of your time? Why do you think this approach resonates more than other options available today?

Kumar Garg: My involvement in philanthropy was somewhat serendipitous. While working in the Obama White House on science and tech policy, I realized that while the government brings enormous scale to its initiatives, the early work of identifying opportunities and organizing workshops is often too early for major federal agencies to get involved. This is where funders can play an outsized role.

Philanthropy and donors play a crucial part in an ecosystem where most R&D funding comes from the government. However, donors can contribute significantly to agenda-setting, identifying major opportunities, fostering interesting collaborations, and addressing overlooked areas.

Catalytic capital can have an outsized impact when used effectively. We’re at the beginning of unlocking this capital, and most of the giving that will happen hasn’t occurred yet. We have a huge opportunity to capture imaginations and harness resources for big public goods and ideas that solve problems.

When talking to donors, donor advisors, or staff members, I often help them understand that there is important work to be done. Many people feel paralyzed when faced with large-scale issues like climate change, where the government is already spending huge sums. The key is to provide them with a mental model at a more micro level of what’s not being done that could make a significant difference.

For example, we provided early funding for enhanced rock weathering, a climate solution that wasn’t widely known two years ago. 

Basically you can break up certain types of rock and actually use it as fertilizer and it actually functions as a carbon sink and as a fertilizer. I remember having this conversation with Eli Dorado a few years back where he recommended we look at enhanced rock weathering.

Those early grants from a small set of folks helped get that subfield going. Now, through the work that Stripe is supporting, this is considered a pretty important technology that might help with carbon approval. There are donors who work on smallholder farmers in Africa who feel this might be a core part of their strategy and increase farmer income. 

Giving people examples — and a sense of confidence that their ideas didn’t just miss the boat entirely — shifts their mental model. 

“We are figuring out new things. They’re going to be important to solving big problems, and you can help figure those things out.”

It pulls them in. My hope is that they get addicted to it, and their core motivation becomes making the world a better place. We all benefit from that.

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Jordan Schneider: It’s fascinating how your career experiences have led you to this point. You needed to be part of a behemoth organization to see its blind spots. The same goes for PhDs who become frustrated when they enter government.

Your background, including working for one of America’s wealthiest individuals, presumably helps when pitching to donors. What you’re proposing is fundamentally a high-variance, unconventional idea that isn’t typical philanthropy, like donating to Massachusetts General Hospital. It’s something that other philanthropists, such as those at the Hewlett Foundation, have overlooked when it comes to climate issues. It’s an interesting combination of factors that brought you here today.

Kumar Garg: Indeed. I benefit from seeing the system from various perspectives. This is why I recommend people enter government or move between different sectors, becoming “tri-sector athletes.” It broadens your understanding of what’s possible and what’s missing. 

One of the real blind spots in science and tech funding is that people often start from basic first principles, asking if an idea is good. However, if you’ve spent time in government, you’d ask why the government isn’t funding this idea if it’s so promising. There’s usually an entire agency dedicated to funding good ideas in a specific field. This line of questioning leads to interesting insights.

For example, I spoke with a venture capitalist in early healthcare who wasn’t familiar with NIH’s Small Business Innovation Research (SBIR) program. When I mentioned that SBIR’s funding matches the VC investment in early-stage healthcare (about $2 billion each), it raised questions about potential disconnects between government funding and commercialization efforts.

Being curious about why systems work the way they do and why certain opportunities are missed can lead to significant breakthroughs. You’re dealing with substantial funding flows, so understanding these dynamics is crucial.

Jordan Schneider: We’ve discussed the structural issues in government funding. Regarding established philanthropies involved in climate or science and technology, where do you see structural oversights in their programs and among their program officers?

Kumar Garg: Looking at both the public and private sectors, one significant gap becomes apparent when you step back: we allocate R&D money to some societal problems but not others. Once you realize this, it’s impossible to unsee.

As a society, we invest heavily in defense R&D, we allocate a decent amount to health and new therapies, and we spend smaller amounts on energy and space. After that, the spending drops off significantly. However, if we consider the major aspects of human flourishing — food, housing, work, learning, building strong relationships with friends, family, and community — we see a discrepancy in R&D investment.

We spend very little on R&D for criminal justice, education, workforce development, and housing. Midway through the Obama administration, around 2012, I read a paper suggesting agriculture would be a significant driver of future climate emissions. When I inquired about the R&D component for agriculture in our climate strategy, people were puzzled about what that might entail. Alternate sources of protein sounded completely random back then.

The same happened with transportation R&D early in the Obama administration. How could we make roads better? What do we need to do to prepare for the emergence of automated vehicles? What does the budget look like for impactful projects in these areas?

Of course we should have R&D in these fields, but we’re significantly underinvesting in R&D for social sector aspects.

This oversight leads us to discover innovations accidentally through national security spending. For instance, the Department of Defense has been a major funder of alternative medicine to ensure the health of returning warfighters, which is a prety roundabout way to fund that research. Similarly, some of the most interesting education and workforce experiments have been funded by the DoD because we allocate almost no R&D dollars to the Departments of Education and Labor.

If you’re a funder working on mental health, the environment, or homelessness, consider the R&D component of your strategy.

If you can’t identify one, don’t dismiss it—this might indicate a huge opportunity to develop that component. Otherwise, you’re simply waiting for accidental positive outcomes rather than actively investing in shaping the future.

Our view used to be that R&D should be the third bullet point of any plan. If you can’t articulate what the R&D would entail, you’re in an even worse position—people haven’t even conceived of that component of the strategy. This blind spot leads people to treat science and technology as a sector rather than a crucial component of any problem-solving strategy.

R&D on Strategic Competition Mechanics

Jordan Schneider: Let’s talk about China. What are the big picture questions you’re interested in regarding how the US should compete? 

Kumar Garg: Here’s my question for you, or at least the hypothesis I want you to reason out with me: If the US and China are engaging in strategic competition, to what extent should they emulate each other’s strategies? To what extent, especially on the US side, which I know more about, should we play to our advantages?

I’ll throw out a few key points:

First, talent. The US is a global magnet for talent. People, especially science and tech talent, want to move here. How much should the US lean into that?

Second, the US has deep capital markets, which have created substantial room for entrepreneurship and building emerging industries on top of our university system. How can the US leverage that?

Third, the US has been home to many platform technologies in biotech, such as mRNA and CRISPR, as well as the early computing revolution, mobile technology, and now AI. To what extent should the US frame itself as a place where platform technologies thrive? What are these platform technologies?

There’s also an interesting question regarding drones.

Finally, to what extent is the healthy relationship between research in universities, formal government research agencies, and the private sector an advantage or disadvantage for the US?

I often wonder about the IRA, which is partly treated as a set of subsidies for key industries, whether in clean tech or chips. To what extent will subsidies be a major part of the future picture versus these core US advantages?

So, what do we need to improve? What should we double down on? What should we copy?

Jordan Schneider: I’m going to approach this from a different angle. I’ve been reading a lot of Paul Kennedy recently, one of the greatest living historians. His 600-page tome, The Rise of the Anglo-German Antagonism, 1860-1914, has been particularly enlightening. It’s a deep exploration of diplomatic history, culture, religion, science, and media, examining how England and Germany interacted and ultimately became enemies, leading to World War I.

This book has challenged my thinking because many dynamics in the US-China context today are scrambled when considering Germany and England. For instance, England was the dominant power and Germany the rising power, yet Germany was the scientific powerhouse. Every consequential English inventor spent time in Germany to engage with their university system.

At the same time, Germany, despite being more advanced in some ways, still aspired to English culture. Their wealthiest children were sent to Oxford and Cambridge because that represented a life of luxury.

My takeaway, echoing Paul Kennedy, is that we need to zoom out further when considering a multi-decadal national competition strategy. It’s less about specific policies like subsidies or green cards, and more about the bigger picture. If you’re the larger economic power and you’re not mismanaging the transition from economic power into military power, you’re generally in a good position.

The US has a significant advantage: allies who comprise two-thirds of global GDP. If we don’t squander that, we can afford to make mistakes elsewhere and still be okay.

America’s growth, technology, and universities make us an attractive partner. There are enough repellent aspects of the CCP’s worldview and foreign policy choices that Japan, the EU, South Korea, and Taiwan probably won’t go align with China — even if the US doesn’t get everything right.

Kumar Garg: Wearing my policymaker hat, it’s clear that some of this won’t be under US control due to the two-sided dynamic. If other countries feel pushed by China, they might be drawn closer to the US. But it’s interesting to consider what US policymakers could proactively do to be better allies or to think about these longer-term trends.

Jordan Schneider: Absolutely. While we often focus on specific, tactical issues in ChinaTalk episodes, it’s important not to dismiss the broader view. If we’re risking 20% of global GDP going in a different direction, perhaps we need to increase our research tenfold to better understand what’s happening in areas like maintaining NATO and our alliance with Japan.

Kumar Garg: One reason I’ve been a huge fan of ChinaTalk is its focus on public goods — things that are valuable overall but often underfunded. While some aspects of foreign policy, like Middle East policy, are well-funded [Jordan: by Arab governments...Korea and Japan weirdly stingy both for think tankers and when it comes to influence operations and intel…], others that will matter significantly are not. We used to track this on the philanthropic side: how many people can actually speak the language and track work happening in key countries the US cares about? How much fresh analysis is happening?

My current view is that we’re moving in the wrong direction. The number of people I interact with who have active working relationships in China has been dropping for the past five years. This will impact our ability to understand how things are working.

Jordan Schneider: The structural problems you identified in the science and technology space absolutely apply to Asian studies. What I’m doing isn’t easily understood by government grants or even traditional US-China funders. There’s plenty of potential in both humanities and hard sciences, but it’s challenging to find support.

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Regarding tactical advantages, the cleanest heuristic is to focus on long-term productivity and economic growth. If you can tie your initiative to that over a 10-15 year horizon and it outperforms other options, that’s the policy or donor idea to focus on.

Kumar Garg: One area where we need more activity in DC is understanding the long-term drivers of productivity. When I was in the White House, I noticed that while senior folks in the National Economic Council (NEC) and the Council of Economic Advisers (CEA) recognized the importance of R&D, immigration, and commercialization for long-term productivity, often one person was responsible for all of these areas plus four others. Meanwhile, substantial resources were allocated to issues like marginal tax rate debates.

If we’re going to succeed by identifying and focusing on long-term economic growth drivers, we still have room for improvement in how we staff and prioritize these areas in government.

Jordan Schneider: It’s understandable that in a democracy, politicians focus on issues that are more immediate to voters, like marginal tax rates. However, if we’re talking about long-term competition, we need to think beyond presidential cycles. The gains from high-skilled immigration, for example, may not be immediately apparent but can lead to significant innovations. For example, Elon Musk founded Tesla in America as opposed to anywhere else in the world. 

This long-term perspective makes the challenges with NSF and NIH funding so frustrating. These institutions operate on longer timescales, and we would hope they can maintain their focus on long-term goals.

Kumar Garg: Indeed, politics is about balancing the important and the urgent. Policymakers must build systems to effectively balance these competing priorities.

Renaissance Book Recommendations and ChinaTalk Parent Corner

Jordan Schneider: How does coaching your children’s entrepreneurial ideas compare to advising me and ChinaTalk?

Kumar Garg: The challenge is that in the real world, people appreciate my advice. However, for my kids, it’s like an anti-signal. If I think something is good, they assume it must be outdated. This applies to fashion advice as well. Sometimes my daughters are in the car when I’m on the phone, and afterward, they question why I said certain things. I have to remind them that they only heard one side of the conversation.

Jordan Schneider: I hear your kids are trying to start an Etsy store, and you’ve been coaching them to find a comparative advantage as creative eleven-year-olds.

Kumar Garg: They signed up for a summer camp that promised to help them make art and sell it on Etsy. On the first day, they were disappointed to learn that the camp would only help with art creation, not selling on Etsy. They proposed selling slime, but I cautioned them that it might be challenging since every kid is into slime.

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Jordan Schneider: What’s their annual Etsy purchasing budget?

Kumar Garg: They spend all the money they can get — from grandparents or elsewhere —  on various types and textures of slime. They spend considerable time explaining to me how each type is different. We visited the Sloomoo Institute in New York, which is essentially a slime museum. Every eleven-year-old seems to know about it. I suggested they should open one in DC, as it would be an instant pop-up success.

It’s fascinating to observe future trends through my children. They recently mentioned that all their friends are into boba tea, which I now see everywhere among young people. Fifth-graders appear to be early trendsetters.

Jordan Schneider: To close, let me tell you about my favorite Renaissance books. Lauro Martines is one of the more entertaining historians I’ve encountered. He has a three book series on political history during the Medici era. I’ve read extensive Chinese, ancient Greek, and Roman history, but Florence offers a wealth of juicy sources. There are numerous diaries and letters detailing the conniving and intrigue, including murders in churches. It’s captivating because, unlike a monarchy, Florence had competing families and factions. With the Pope nearby and the French making appearances, it’s more thrilling than Game of Thrones. Martines’ work is essentially a historical beach read.

For primary sources, I recommend The Decameron. Written during a plague year, it’s framed as a dinner party in the hills where 15 young people attempt to outdo each other with stories while fleeing the plague. It’s incredibly relatable and alive, despite being 600 years old. It’s a funny, entertaining, and at times profound piece of literature that transported me back to that era more vividly than anything else I’ve encountered. While reading Machiavelli is one thing, imagining people having fun in the Renaissance was a unique experience.

How’s this for something deeply un-antisemitic from 600 years ago!

And lastly, some 1400s Venetian parenting advice:

Mood Music

临近大选，无数人密集发声。有的是明星，有的是政客和家人，有的是默默无闻的众人。凉爽了一周，南风从墨西哥湾区吹回来，得克萨斯又回到夏天，太阳一晒，游泳池水都是热的。跟朋友去林中徒步十英里，回来打个盹，看看新闻，第一次听Tim Walz太太Gwen Whipple演讲，她是中学英语老师。她的语言像她的经历一样朴实，但传递的信息却是最宝贵的：America is a country of opportunities for all Americans。正是这一点让这个国家经历了248年跌宕起伏，仍然是世界上最有吸引力的国家，成为无数移民的家，包括我自己。

前天，旅行作家和节目主持人Rick Steves发声，说出他今年大选的抉择，让世界听到我们人性中的“良善天使”的声音。多年前，看他的节目曾经激励我去走世界，现在我成了半个traveler，仍然受他道德力量的感召。我们各自的精神底色决定了周围的人怎么看我们，我们的孩子怎么看我们。

我们听别人说话，头脑接受言语传递的信息。好的信息让我们意识到自己天性中好的一面，就是林肯说的我们天性中的“善良天使”（“the better angels”）。坏的信息激发我们天性中见不得人的那一面，就像川普、万斯和拥趸宣扬的怨恨、排外、霸凌。基于人生经验：你想做一个什么样的人，你想生活在一个什么样的国家，决定了你去接受什么样的信息，而你接受什么样的信息决定了你成为一个什么样的人。

为什么那些能激发我们天性中“善良天使”的信息是我们的精神食粮？作为一个正常人，我们多少要对自己有点自豪感吧；如果有孩子，我们想让孩子为我们的言行感到自豪，在他们的同学面前为自己的父母感到自豪。这都需要好的信息“激活”我们天性中好的一面，去影响我们的孩子天性中好的一面。从反面讲，这也是我厌恶川普和拥趸的主要原因——他们传递的信息激发人性中见不得人的那一面。

有人为川普辩护，说即使目标是好的，也是要穿越地狱才能到达。但是，如果连善良都没有，就已经是在地狱里面了，谈不上“穿越地狱”。即使用“穿越地狱”这种说辞，也得先有个良善的目标，才不至于陷到地狱出不来。川普这伙人的问题就出在这个地方。而且，美国已经穿越了奴隶制、禁止女性投票、禁止有色人种自由婚恋、禁止华人小孩跟白人小孩同校等地狱，用不着再回头“穿越”一遍。更扯蛋的是，川普这伙人正在制造剥夺女性堕胎权等地狱。概念跟历史和现实对不上号的时候，肯定不是历史和现实错了。

在美国历史上，林肯是最讲“政治现实主义”的总统之一，但他的政治遗产之所以宝贵，不是因为他打内战——是南方挑起内战，作为总统他不得不打——而是因为他即使在不得不经历生灵涂炭的致暗时刻，也始终不放弃天性中的“善良天使”。这是理解美国历史遗产的一条关键线索。这也是美国主流历史观跟极右历史观的一个重要区别，也是正常美国选民（包括投共和党票的正常美国选民）跟川普及MAGA川粉的区别。中文川粉没有自己的历史观，只是些捡美国MAGA川粉垃圾的bottom feeders。

美国不少史学家、理论家，甚至神学家，像莱因霍尔德·尼布尔，都不厌其烦地讲解过林肯这种坚守人性中善良天使的“政治现实主义”。用中文世界劳动人民能听懂的语言讲，就是政治从业人员要面对现实，但不能是个没心没肺的杂种。MAGA川粉的问题不在于政治观点，而在于他们崇拜的是这种“没心没肺的政治杂种”。这不是美国政治的主流传统，一点都不American, 而是anti-American。

这几年，一直在想为什么那么多中文知识分子整体上在这半个多世纪政治上没干多少好事，不是自高奋勇当帮凶，就是半推半就当帮闲，当完山寨布尔什维克帮凶-帮闲，一转脸又成了有法西斯色彩的极右势力帮凶-帮闲。当知识分子，哪怕专业技能差点，但至少头脑应该清楚一些吧。比如说，像文革，它跟ISIS是同一种玩意儿，就是一种自相残杀的歇斯底里，有些中文知识分子竟然能说那是“理想主义”、理想是好的，只是手段不对，都是“激进主义”的错。这些活宝再去用他们的奇葩认知去套美国的两党政治，为美国指明方向。

中国的灾难很大程度上是中文知识分子的灾难，说的更具体一点，就是很多中文知识分子的政治智力灾难。

漫画《如果我消失了》细腻地描绘了克拉拉和周围朋友的生活群像，反映了当代青年女性普遍的生存困境。就和在父权社会中生存的每一个普通女性一样，克拉拉尽力地维持着工作和社交，过着简单且重复的日子。一切看起来都那么正常，然而克拉拉却感到自己的内心正无可避免地一寸寸解体、破碎、甚至消失......

“我半闭的双眼无法睁开，我的眼泪像一条小溪，无可避免地向下流淌。我是一枚小小的躯壳，正一点点破碎，内里逐渐消失......”

在抑郁的日子里，克拉拉在日记本中写下了这段话。

透过克拉拉的内心世界，我们看见了一个个平凡女性的绝望和无奈：辛苦乏味的工作、勉强糊口的工资、擅长PUA的男上司、艰苦的住房条件、如影随形的社交压力、被性侵性骚扰留下的创伤，以及来自父权社会的种种打压和规训...这些郁结于心的伤痛一点点吞噬我们的快乐、蚕食我们的希望，让我们逐渐失去了爱和被爱的能力和勇气。当我们每天含泪带笑、疲于奔命时，或许每个人都有想过，“如果我消失了会怎样？”

据世界卫生组织统计，女性患抑郁症的概率是男性的1.2至2倍。而这其中，职场青年女性的心理健康问题常常会被低估和忽视。研究表明，自2020年 2 月以来，职业女性的抑郁情绪水平增加了83%，比职业男性高出47%。在经济下行的时代，为了维持资本的运作，男权社会全方位地挤占职场女性的生存空间，意图榨干她们的精力和时间。然而，当我们感到窒息想要呼救的时候，却只换来冰冷的漠视和嘲讽：“女人就是多愁善感”......

在效率和理性至上的父权制资本主义社会，生产力成为了衡量一个人价值的重要标准。如今盛行的“强女叙事”不断强调着“大女人一切靠自己”，却无时无刻不在拥护着男权社会的“恐弱”思想，对不够坚强的女人口诛笔伐。公共空间里没有了“软弱之人”的一席之地，向她人展露自己的脆弱也变成了一件可耻的事情。我们就如同书中的克拉拉，每天像陀螺一样机械性地辗转于家、公司和各种聚会场合的三点一线，戴着“微笑面具”扮演起温柔和善的“好好小姐”。

作为父权社会中的“廉价劳工”，女性既因职场性别歧视而受到排挤和边缘化，又要服从传统性别规训、为整个社会提供无偿的情绪劳动——微笑着回应不讲道理的老板、耐心地安慰倒苦水的同事、在不熟悉的“朋友聚会”中强颜欢笑.....不知从何时开始，悲痛、愤怒、恐惧、厌倦、无助这些再常见不过的情绪被贴上了“负面”的标签，平静、乐观、贴心、松弛感、共情力强成为了“合格女性”的标准。父权社会贪得无厌地索取着女性的情绪价值，以不平等的资源和低廉的回报要挟她们源源不断地为他人供血，却丝毫不关心她们的能量是否已经消耗殆尽。

其实，克拉拉不是没有求救过，然而另一个残酷的现实却摆在眼前：我们根本没有为自己疗伤的资本！统计数据显示，2023年中国职场女性平均月薪为8689元/月（以一线城市为主），比男性低了约13%。而国内单次心理咨询的价格通常在400-2000元之间，这样的高消费对于需要长期接受心理治疗的女性来说无异于天方夜谭。

实际上，爱和关怀（care）早已被父权制资本主义打造成了一种“产业”，它们被垄断、打包、出售，变成了高位者把控的奢侈品——一种被不平均分配的稀缺资源。父权社会剥夺了女性的权力和资本，以低廉的报酬换取她们日复一日的辛苦付出，而女性能得到的“补偿”却只有心理咨询室里的倒计时钟和收款单上的天文数字。

在享受了男权社会的资源倾斜和女性无偿提供的情绪价值之后，蛤蟆先生*尚且有充足的时间和财力去看病，而被全方压位榨的“蛤蟆小姐”却根本看不起心理医生。当关怀和疗愈变成了明码标价的商品，“治愈创伤”也随之成为了普通女性不敢奢望的特权......

*蛤蟆先生是心理学著作《蛤蟆先生去看心理医生》的主人公。该书以男性视角描绘当代青年人的心理问题并广受好评。

在书的结尾，不堪重负的克拉拉终于在朋友面前情绪失控、崩溃大哭，她袒露了内心深处那道早已溃烂的创伤，开始直面自己难以启齿的伤痛。这一次，朋友们为克拉拉提供了“免费”的关怀，她们谈话、喝茶、平复心情，排毒和疗愈过后，克拉拉终于感到自己的心舒展了一些。

然而，在世界的每个角落、每一个沉寂的夜晚，还有数不尽的“克拉拉”在抑郁的深渊里痛苦挣扎，艰难求生。那么，我们要如何自救呢？

尽管父权社会试图垄断“关怀”的供给，却无法割断女性之间深厚绵长的连结和情感共振。我们要做的不仅仅是觉醒与抗争，更要凝聚在一起创造一个互相关心、彼此疗愈的支持网络——希望在这里，终有一天，脆弱将不再难以启齿，爱也因充盈而枝繁叶茂，关怀和包容会像阳光、空气和水一样源源不断地流向世界的每个角落。

Spies in Albany

Peter Mattis is the president of The Jamestown Foundation, served on the House CCP Select Committee, and co-authored “Chinese Communist Espionage: An Intelligence Primer.”

Today, Peter is here to discuss last week’s arrest of Albany operator Linda Sun.

[Linda] Sun in the Gears: The Unknown Casualties of Influence

On September 4, the US Department of Justice unveiled a criminal indictment of former New York state government staffer Linda Sun and her husband Chris Hu. The couple was indicted for acting as unregistered agents of a foreign power, fraud, money laundering, and other offenses stemming from Sun’s relationship with PRC officials at the New York consulate. If Sun and Hu are found guilty, the authorities will make public the details, methods, and consequences of their activities. As the debate about how to address Beijing’s interference in democratic societies reignites, such information is essential for gauging the appropriate response to this aspect of the China challenge.

The indictment describes numerous incidents in which Sun stripped out mention of Taiwan or prevented state officials from participating in Taiwan-related events. In one particularly egregious breach of trust, she also forged the governor’s signature in support of a visa application for visiting PRC officials coming to the United States. In appreciation of her efforts, Hu’s business received several contracts with PRC entities. The money “earned” from those ventures allowed the couple to purchase a 2024 Ferrari and multi-million dollar properties in Long Island and Hawaii. (To put that in perspective, Beijing paid General Lo Hsien-chi 罗贤哲 — the head of telecommunications and electronic information for the Taiwanese army — only six figures for classified information on Taiwan’s military and attempts to block US arms sales to Taiwan.)

Indictments and other court documents preceding a trial never tell the full story. The Sun indictment contains only the minimum information required to show that Sun had taken actions — sometimes on her own, sometimes at the urging of PRC officials — to further Beijing’s interests.

The millions of dollars in benefits that accrued to Sun and Hu, however, suggest that her impact went beyond changing a few lines in a speech or keeping the governor of New York away from Taiwanese officials.

If Sun was willing to scrub references to Taiwan and Uyghurs from a speech or block meetings with Taiwanese officials, what might she have done if a Taiwanese business reached out to the governor’s office? Would she have blocked potential investment in New York? Or, given recent cases where Chinese-American activists were spying for Beijing, how would Sun have handled complaints or concerns expressed by Chinese diaspora communities about CCP harassment and intimidation? Those communications could be buried just as easily as words could be struck from a speech. The distrust that has stemmed from local authorities’ lack of responsiveness to such harassment may, in fact, be a deliberate byproduct of the Party’s influence through proxies like Sun.

The view we have into Sun’s activities is limited by the scope of the federal charges against her — here, that she was acting as an agent, receiving and acting upon foreign direction. But Sun has a fifteen-year history of working in New York politics. With her experience, connections, and — as is evident from the indictment — awareness of her potential influence, Sun is likely to have informally advised others in New York politics outside of her official duties.

These activities almost certainly will not be a part of the trial — but uncovering the full story will be necessary to assess the extent of the damage.

Learning the full truth about Sun’s activities would require a long forensic investigation of Sun’s files, communications, and activities with the public, with companies, and with other New York officials. Such an investigation would also probably necessitate federal involvement — because the limited resources and potential embarrassment of New York may prevent the state from effectively conducting its own investigation. The rub, of course, is that the DOJ is investigating thousands of other cases involving Beijing’s espionage, technology theft, influence, and transnational repression — the DOJ doesn’t need to investigate Sun’s activities any more than is necessary to gain a conviction.

But identifying consequences is an important exercise for the authorities. The consequences of Linda Sun’s influence are still unknown as of yet. New York Governor Kathy Hochul called Sun’s activities “a betrayal of trust”; there may be others, especially in Chinese-American communities, who also had their trust in their state government betrayed. They need an opportunity for their stories to be included in our understanding of the case.

The debate rages on — how should the US counter Beijing’s foreign influence activities and diaspora policies? How can we ensure the crackdown is consistent with democratic values and doesn’t stoop to racial profiling?

This is not a simple challenge. Investigations are hard. Resources and qualified people are rarer than one would think. And in a democratic society, law enforcement should stay focused on illegality, not poking into every potential entanglement with the Party. 

But knowing the real cost of Sun’s activities will be incredibly valuable — the facts of this case will frame our options for response. Beijing is engaging in a campaign of covert, corrupting, and coercive interference in our democratic society. Without a concrete impact assessment, it will be impossible to determine what kind of efforts are needed to counter this activity, and how aggressive those efforts should be.

We did a show a few years back on Peter’s book on Chinese spies with his coauthor. Have a listen!

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Tech Chokepoint History: China and Ballpoint Pens

The following is a cross-post from Mary Hui’s excellent a/symmetric Substack.

The idea of technological “chokepoints” lurched to the forefront of the Chinese collective imagination half a decade ago when Washington slapped sanctions on two Chinese tech giants, cutting their access to US technology overnight.

The “ZTE incident” and “Huawei incident,” as the 2018 and 2019 episodes are known, forced a reckoning across Chinese industry and government: dependence on a geopolitical rival had grown so acute that a flick of a pen from halfway around the world could, at least temporarily, cripple two domestic technological crown jewels.

China has gone into overdrive to uncover and dismantle latent chokepoints and prevent new ones from forming. Beijing set up a national technology security system to better protect its high-tech firms. The government’s main science funding body launched an emergency project to study and solve the “chokepoint problem.” And state media published a list of 35 chokepoint technologies on which China urgently needed to reduce its foreign dependence.

Ballpoints and chokepoints

The humble ballpoint pen is a cautionary tale.

There is what’s regarded in China as a “classic” question of manufacturing: why can’t China make a ballpoint pen?

As it turns out, the ballpoint of the ballpoint pen — a tiny metal ball bearing that “mimics the action of roll-on deodorant,” rotating freely in a small socket to dispense a smooth stream of ink — is fiendishly difficult to make, requiring super precise machinery and high-quality steel made to very specific standards.

While China claimed a breakthrough in 2017, manufacturing a ballpoint pen all by itself and “ending a long-term reliance on imported [ballpoint pen tips],” as of 2021 the country was still reportedly 80% dependent on imported pens.

In fact, Chinese imports of ballpoints pens (comprising the ballpoint and ink reservoir) have more than doubled since 2017, from US$12 million to nearly $28 million last year.

As Lin Xueping 林雪萍, an expert on manufacturing technology, wrote in an article last year, it was one thing for a single Chinese company to make a technical breakthrough, and another to get the rest of the market to adopt it.

“Taiyuan Iron & Steel [太钢] finally decided to overcome the difficulties and finally made steel ball materials,” Lin wrote, referring to the Chinese steelmaker that made the pen tip breakthrough. “But domestic ballpoint pen manufacturers are unwilling to use it at all.”

There’s a larger point to all of this: China’s struggles with the ballpoint run in tandem with its efforts to make high-end machine tools.

Machine tools: a technical challenge or an economic one?

Machine tools are machines that make other machines. China is a leading producer of machine tools, accounting for about 31% the world’s output in 2021 (p.10, fig. 12) — ahead of Germany (13%), Japan (12%), the US (9%), and Italy (8%). But China is heavily reliant on foreign technology for high-end machine tools: in 2021, it was 91% dependent on foreign firms for the most advanced machine tools.

That’s in spite of a national-level initiative, dubbed “Special Project 04,” launched in 2009 to boost China’s capabilities in high-end machine tools. But still China has not quite cracked it.

Perhaps the problem is less technical and more economic. That’s the assessment from Lin, the manufacturing expert who’s also affiliated with a think tank run by China’s Ministry of Industry and Information Technology.

Top-notch machine tool beds, Lin reckons, demand very specific kinds of cast iron, with strict requirements for things like smelting method, casting temperature, and presence of trace elements. The problem is that demand from Chinese machine tool makers for this kind of cast iron is too small to make economic sense for iron foundries to work on developing the specialized materials.

“Made in China has two weaknesses: one is ‘can’t be made,’ which is a real technical chokehold; the other is ‘can’t be used,’ which is often stuck on non-technical barriers,” Lin wrote. “Ballpoint pens and cast-iron machine beds — both have stumbled for this reason.”

Implications for industrial policy

What lessons can we draw from China’s ballpoint pen travails?

Perhaps one is that just as the free market alone can’t solve certain problems — industrial policy may be more suited for tackling certain challenges than others.

In the case of China, it seems that its brand of top-down industrial policy has worked well for electric vehicles, batteries, critical minerals, shipbuilding, high-speed rail, and solar panels — but less so for semiconductors, machine tools, and ballpoint pens. One hypothesis is that the latter group of technologies requires a far more complex coordination of the industrial ecosystem. As such, the sheer force of the state’s will is more likely to run up against the fundamentals of market economics.

The upshot, for the US and the West, is not to parrot Chinese industrial policy, but to play to existing strengths. That means using government intervention to shape incentives, trigger certain behavior, and target market failures and distortions — but then stepping back to let the market solve for things.

China has long been dependent on imports of the tiny steel ball bearings that dispense ink from pen to paper. Beijing didn’t like that. In 2011, its science and technology ministry launched a national research project aimed at developing and industrializing “key materials and preparation technologies for the pen manufacturing industry.”

State-owned steelmaker Taiyuan Iron and Steel (TISCO) got the memo and got to work. Five years and 60 million yuan in state funding later, it declared success. Domestically made 2.3mm ballpoint pen tips began rolling off factory lines. TISCO’s shares jumped nearly 30%.

Chokepoint unblocked and chokehold broken? Not quite.

Today, China is still reportedly 80% dependent on imported ballpoints. Though TISCO did notch a technical breakthrough, domestic ballpoint pen manufacturers were reluctant to use the China-made ballpoint pen tips. The new steel balls didn’t work well with existing Swiss precision machine tools. They were not readily compatible with imported Japanese and German ink. And it made little economic sense for domestic steel mills to set up a new production line for such a tiny output of ballpoint tips.

In short, China made an isolated technical breakthrough on ballpoint tips that was of little use to the broader Chinese industrial system.

Pinpointing a systemic problem

Semantically, chokepoint implies a single point of dependence and failure.

But as the ballpoint pen story above illustrates, fixing a chokepoint requires far more than making a single breakthrough. Any solution has to be congruent with the existing network of suppliers and manufacturers, and their incentives, cost structures, and business models.

“The chokepoint problem involves the intersection of multiple supply chains and multiple nodes. It is extremely difficult to exhaust the problems simply from one industry or one industrial category,” writes Lin in his book, Supply Chain Attack and Defense 供应链攻防战.

“To tackle the problem, it is far from enough to just list the chokepoints,” he adds. “Chokepoint products are just the tip of the iceberg. Their underlying related factors below water can only be detected if there is a systemic understanding.”

There’s a larger industrial policy lesson here. Certain strategic and emerging industries require government prodding to kickstart, attain viability, or retain. But there are also lots of technologies where the market will always know far more than technocrats; just look at China’s wasteful ballpoint pen foray. The first step to breaking chokeholds is sorting out the real ones from the fake outs.

Chinese vs. Western Horror Movies

A translation from our friends at Weibo Doom Scroll.

A discussion on the difference between Chinese horror and western horror:

Western horror: You come home to see that your three-year-old son is dead, his guts are all over the floor, and your cat is licking up the blood. Chinese horror: You come home to find your cat is dead, its guts are all over the floor, and your 3-year-old son is meowing.

When you mention Chinese horror, the first thought that comes to mind is Grave Robbers’ Chronicles 盗墓笔记, where Wu Xie 吴邪 was in the cave, and he found Lao Yang’s 老痒 corpse and photo ID. But Lao Yang is outside the cave staring at him.

One is a sensory shock, one is a psychological shock. Chinese horror is better at leaving you with PTSD. Here’s an example. Western horror is like: you walk into a pizza store in a bad part of town, and just as you’re about to pay, you find the owner has a knife in hand, with a bloody piece of pizza in his mouth, staring at you with a furious expression before he leaps at you. You run and hide and finally manage to escape from him. Are you going to be scared of pizza stores from now on? Sure. But you’ll stop and check outside the store to see if the owner is a tiny, cute girl or a muscular guy before you decide whether or not you go in.

Chinese horror is more like: you go buy bread, and a kind old grandma hands you the bread and tells you with a smile, “Go on and eat it.”

You don’t think anything of it in the moment, but when you return to the street, everyone on the street turns to look at you with the exact same smile and tells you, “Go on and eat it.”

When you get home, your parents stare at you, smile, and say, “Go on and eat it.”

You’re freaked out and go to the bathroom to wash your face, and the you in the mirror smiles at you and says, “Go on and eat it.”

Even if nothing happens in the end, I think you’ll never go buy bread again, whether it’s a cute little girl selling it or an old grandma.

It’s really simple. Western horror makes sense, and Chinese horror is all about things not making sense. When things don’t make sense, you get a strong sense of dissonance and feel uneasy.

Here’s an example. Five people enter a haunted house and get attacked by a ghost. In the end, three people survive and get out, and two people die.

That’s very logical: go into a haunted house → get attacked → two people die → three people survive is a very complete line of logic. Everything makes sense, and it’s how Western horror stories work.

But if five people go into a haunted house and get attacked by a ghost, and six people walk out in the end, and everyone is really happy that they all survived and skip on toward home — that’s Chinese horror.

Right? Isn’t that freaky?

Because it doesn’t make sense.

It doesn’t make any sense that five people walked in and six people walked out.

Why does Chinese horror feel oppressive? Because your imagination goes wild when things don’t make sense. It’s basically you scaring yourself.

Does the movie director know what scares you? Probably not. But if you’re in charge of scaring yourself, of course you’re gonna get scared, because you know exactly what you’re afraid of.

Your imagination goes to your precise fears and you get freaked out.

Have you seen the classic horror movie Nightmare on Elm Street? Freddy kills people in their dreams, and people die when they are killed.

That’s very logical. Whether you have money or not, you die if you’re cut into pieces with a chainsaw.

It’s very bloody, but it’s not that freaky.

But in the classic Chinese horror movie A Wicked Ghost 山村老尸, does Aunt Mei 楚人美 walk around with a chainsaw? Does she cackle in people’s ear?

No.

They even play a piece of Yue Opera at the end, and that high-pitched singing sets your hair on end.

But as a piece of traditional Chinese opera, why would Yue Opera make you feel so freaked out? Why would it cover you in goosebumps?

Because it doesn’t make any sense.

When a lot of things that don’t make any sense come together, the conflict in logic makes you doubt yourself. And when you start scaring yourself, Chinese horror has won.

I saw a ghost story once that there’s a superstition that you can’t leave your shoes pointing at the bed, or ghosts will crawl into bed using the shoes. One night, the wife couldn’t sleep late at night, and while the husband got up to go to the bathroom, she kicked his shoes all over the room and then waited to see how he would react. But after the husband was done, he came back and started wandering around the bed muttering, “Where did the bed go?” When I read that, I literally felt a chill go down my spine.

A single line in Chinese horror can give me goosebumps for half a month. I remember a short story where a girl came home to find the power was out and the elevator wasn’t working, so she called her mom to come downstairs with a flashlight and help her up the stairs. Along the way, she chatted with her mom about her day at school like normal, and when they reached her door, her mom suddenly smiled at her and asked, “Do I look that similar to your mom?”

Alexa Pan — Chinese Song of the Week

This week’s song is Goalkeeper 守门员, by Chinese Football.

Chinese Football is a habit that’s hard to kick. Formed in 2011, the band tends to make light of their origin: guitarists Xu Bo 徐波 and Wang Bo 王博 met as fellow fans in Wuhan when there was “still a bit of punk feeling left” in the city. Their band name is as much a tribute to Illinois indie rockers American Football as it is a silly publicity stunt.

Self-described as “emo,” their style evokes equal parts nostalgia, apprehension, and hope. (For those who see music: sunlight dancing off shattered glass and dew.) The emotional songs come playfully packaged: the soccer motif pervades their first, eponymous, album, while later works borrow video game aesthetics and metaphors.

“Goalkeeper” hails from the first album. In a way, the song is as straightforward as the goalkeeper’s job, opening with a two-chord progression, melodies running back and forth in the penalty box. The guitars weave a net of sound, both more orderly and elastic than the typical wall, catching every kick of the drum. The lyrics, rich with soccer allegory and puns pairing Pelé (贝利) with paradox (悖理), describe a goalkeeper lost on the field, eventually leaving their post and moving forward. One could interpret this story as the band’s own: they’ve long aspired to “break out of Asia, step into the world, give it our all, leaving nothing behind.”

If you liked this song, catch Chinese Football on their upcoming North American tour.