After Beijing set its lowest growth target in decades — 4.5 to 5 percent for 2026 — the familiar question resurfaced: what has gone wrong with China?Yasheng Huang (黃亞生), a leading authority on China's political economy and professor at the MIT Sloan School of Management, has a precise answer — and it implicates both Beijing and its Western observers equally. In an exclusive interview with The Storm Media, Huang argued that more than four decades of received wisdom about China's rise rests on a fundamental misreading: the belief that China's success was built on state power. It was not. What actually drove China's growth, he said, was a specific combination that Xi Jinping is now systematically dismantling — tight political control paired with genuine economic and intellectual openness. As that combination unravels, Huang warned, stability is curdling into stagnation, and Beijing is applying the wrong remedy.
The "Strong State" Myth Beijing and the West Built Together
To understand the misreading, Huang points to the analytical framework at the center of his book《The Rise and Fall of the EAST: How Exams, Autocracy, Stability, and Technology Brought China Success, and Why They Might Lead to Its Decline》. He uses two concepts to explain how China's authoritarian system sustained long-term stability: Scale and Scope.
Scale refers to uniformity and execution — the capacity to replicate output at volume without loss of quality. In political terms, it corresponds to centralized authority and unified command. Scope refers to diversity and openness — the space in which different forms of ownership, competing voices, and heterodox ideas can coexist.
"If you only have scale, you will stagnate," Huang said. "If you only have scope and no scale, you will have chaos. The real challenge is how to balance the two."
That balance, he argues, is precisely what has been misread — by Beijing and by much of the Western analytical community alike. Since 2008, a growing consensus has attributed China's rise to the scale side of the ledger: the state's capacity to build infrastructure at speed, direct capital toward strategic industries, and mobilize resources through centralized decision-making.
"Since 2008, more and more people have come to believe that China's success was due to the scale and power of the government — because the government was able to build infrastructure on a massive scale and invest in technology," Huang said. "But I don't think that's the correct interpretation. If you push those policies to the extreme, you run into problems. I believe China is now running into those problems."
The Actual Formula: Political Control Plus Economic and Intellectual Openness
Huang's account runs in near-direct opposition to Beijing's official narrative. What drove China's rapid growth after 1978, he argues, was not a powerful state acting alone, but a specific asymmetric combination: high scale on the political dimension — one-party rule, centralized authority — alongside substantial scope in the economic and intellectual domains, including foreign investment, diversified ownership, and academic mobility.
"The Chinese Communist Party is an authoritarian system — it lacks political freedom and freedom of thought," Huang said. "But on the economic side, it was quite decentralized and quite open to the outside world — open to investors from Taiwan, to capital from Hong Kong, the United States, and Europe. And academically, the country was very open. I myself benefited from that openness to study in the United States."
In his assessment, what actually propelled China's rise was this combination of political scale and economic and intellectual scope — not some abstract, exportable "China model." "It was precisely this combination that produced rapid economic growth and raised the incomes of the Chinese people," he said. "That is the true story of China."
The Hong Kong Lesson: China's Most Successful Firms Were Built on Rule of Law, Not Party Wisdom
To understand how scope functioned in practice, Huang points to Hong Kong — a role that is indispensable to his analysis, and one that Beijing's official account has consistently minimized.
"Hong Kong provided functions for the Chinese economy that China itself did not have," Huang said. In the early decades of reform, that meant marketing and intermediation — connecting Chinese manufacturers with Western buyers. But the more fundamental contribution was rule of law.
"China itself did not have sound rule of law, but Hong Kong did," Huang said. "Look at many of China's most dynamic high-technology companies — a large number of them were actually incorporated in Hong Kong, including Alibaba and nearly all of the most dynamic biotech firms. For Chinese companies, the most effective strategy was to borrow Hong Kong's common law system while leveraging the Chinese market. That combination is what made those companies successful."
China's most successful enterprises, in other words, were those that circumvented China's institutional deficits by routing through Hong Kong to access external legal protections — not those that placed full confidence in the judgment of the party and the state. "Those who say China doesn't need rule of law at all, that government wisdom is sufficient — they simply have not looked clearly at the facts," he said.
Today, Hong Kong's autonomy has been sharply curtailed and its common law protections have progressively thinned. The space that once provided China with an external source of institutional scope is rapidly disappearing.
Under Xi, Both Political and Economic Scope Are Contracting
Huang frames modern Chinese history in roughly three phases, with the decisive break coming not at the start of reform, but after Xi Jinping's consolidation of power.
After Tiananmen, political scope contracted sharply — but economic scope expanded. China joined the World Trade Organization, foreign capital poured in, and the private sector grew rapidly. It was an asymmetric arrangement, but one that retained sufficient dynamism to sustain growth.
"Under Xi Jinping, what happened is that political scope continued to contract — and now economic scope has also begun to contract," Huang said. What has expanded in its place is scale across the board: the scale of industrial policy, the scale of capital investment, and even the scale of Communist Party membership itself. When he was writing his book three years ago, party membership stood at around 96 million; it has since surpassed 100 million.
"Scale is expanding, scope is shrinking," Huang said. "This is not a healthy equilibrium. The system becomes hyper-stable — but without dynamism, and without any capacity for self-correction."
The consequences of that hyper-stability are beginning to register in the data. Fixed asset investment posted its first annual decline since 1998. Real estate investment fell by nearly 16 percent. Retail sales growth dropped to a post-pandemic low. And Beijing's official growth target for this year — 4.5 to 5 percent — is the lowest in decades. In Huang's framework, these are not simply economic indicators. They are symptoms of a deepening political and institutional imbalance.
Getting the Story Wrong Produces the Wrong Policies
For Huang, the stakes of this misreading extend well beyond academic dispute. A flawed account of how China succeeded leads directly to flawed policy choices — both in Beijing and among those seeking to understand or respond to China from the outside.
"What I care about is getting the China story right, so that policy conclusions can be built on correct understanding," he said. "Because many people — including many in the West — have not seen it clearly. They assume the China model means a strong government, technocratic governance, no need for rule of law, no need for Western capital. That is simply not the truth."
When Beijing itself internalizes that false story, the consequences are compounded. Mistakenly attributing past success to the scale of state power creates its own momentum: compress the private sector further, strengthen party control, substitute industrial policy for market pluralism — all while believing the direction is correct.
The risk, Huang's analysis implies, is not only that China is moving in the wrong direction. It is that a government that has misdiagnosed its own history is accelerating confidently down the wrong path — and sees no reason to stop.
