‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’

• ‘At the heart of this story is Shanghai. Nowhere in China has this new socioeconomic force been more transformative — and more intriguing — than in this pace-setting city.’

This from Cheng Li, Director of the John L. Thornton Center at Brookings.

• Dr. Li is the author of the important new book, Middle Class Shanghai: Reshaping U.S.-China Engagement,.
• And today's issue recaps our recent interview about his insights not just about the middle-class in China with a focus on Shanghai but also about its broader implications for U.S.-China relations.

Dr. Li: 'A growing number of Chinese citizens - currently estimated between 400 and 500 million - enjoy a middle-class lifestyle with private property, personal automobiles, improved health care, accumulation of financial assets, and the ability to afford overseas travel and foreign education for their children.’

• ‘They live like the middle-class, consume like middle-class, feel like middle-class, and they are middle-class.’
• ‘They have already transformed China's socioeconomic structure and the world economy.’

‘With trillions of dollars to spend, the Chinese middle-class is a huge market for foreign businesses.’

• ‘In fact, Western business groups earlier than anyone else – whether academics, journalists, or policy makers - identified the Chinese middle-class.’

As for Shanghai: ‘As of 2018, over 5 million households shared this lifestyle and could be considered middle-class families, constituting 91 percent of the total registered households of the city.’

• ‘In 2020, per capita GDP in Shanghai already exceeded U.S.$23,000.’
• ‘According to a 2019 report by the People’s Bank of China, almost all registered families in Shanghai owned residential property, with a significant number of families owning two or three properties.’
• ‘The average value of household assets among Shanghai residents was 8.07 million yuan (U.S.$1.2 million).

Beyond his explanation of the Chinese middle-class, Dr. Li discusses the implications for U.S.-China engagement:

• ‘My fear is that Washington and Beijing are heading toward a dangerous pass, increasingly shaped by a zero-sum game mindset on both sides.’
• ‘In the United States today, the ongoing policy and political discourse on China in the United States today disproportionately focuses on Beijing, on the Chinese authoritarian system, on the so-called China threat, and on the fatalistic view that often treats the most populous country in the world in a monolithic way.’

‘My book, Middle Class Shanghai, is a humble effort to provide a different angle, based the cultural and the educational fronts, from the perspective of shared middle-class lifestyles, aspirations, concerns, and values.’

• ‘These are quite similar between China and United States, and I use the Shanghai middle-class as an example of this.’

‘By looking at Shanghai, we can really see the marked contrast to Beijing in the ways the two cities approach things – and begin to see that China is in no way monolithic.’

• ‘The dynamism and diversity of middle-class Shanghai challenge the caricature of the People’s Republic of China as a burgeoning hegemon with a Communist apparatus set on disseminating its singular ideology and development model.’

‘Still, in the past few years, both Chinese nationalism and anti-American sentiment have indeed skyrocketed at an alarming speed and scope. I'm actually quite worried about this trend.’

• ‘But this is largely a reaction not only to Washington hawks who have labelled China as a “whole-of-society threat,” but also to a new McCarthyism targeting Chinese and Chinese-American scientists, as well as growing anti-Asian hate crimes and racism in the U.S.’
• ‘Washington should neither underestimate the role and strength of the Chinese middle class nor ostracize and alienate this force with policies that push it towards jingoistic nationalism and anti-American authoritarianism to the detriment of both countries and the global community.’

‘Middle-class exposure to foreign influences and the cosmopolitan culture could provide a force for a new mechanism for reshaping U.S.-China engagement.’

• ‘We should remember that U.S.-China relations are not just state-to-state relations, but also shared people-to-people relations.’
• ‘We should also remember that Beijing is not China.’

But perhaps the most important parts of a very important book are Dr. Li’s arguments supporting his view that:

• ‘It is premature to conclude that the U.S. engagement policy with China under the eight presidents prior to the Trump administration has failed.’
• There’s a lot to cover today so I will let you read, below, how Dr. Li explains and provides convincing evidence to support his contention.

Better still, read Cheng Li’s Middle Class Shanghai: Reshaping U.S.-China Engagement.

• It covers far more than we discussed here, and I can't recommend it more highly.

Cheng Li is one of the leading experts on China – and, as I have mentioned often, my go-to when I want to know what the leadership in Beijing is thinking.

• He knows because he has been friend, advisor, and confidante to them for decades.

Dr. Li grew up in Shanghai during the Cultural Revolution.

• In 1985 he came to the United States, where he received an M.A. in Asian Studies from the University of California, Berkeley and a Ph.D. in Political Science from Princeton University.
• Dr. Li’s CV has more activities and honors than I have room for here.

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BIG IDEA | ‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’

Malcolm Riddell: ‘Cheng, why is it important to understand China’s growing middle-class?’

Cheng Li: ‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’

‘A growing number of Chinese citizens - currently estimated between 400 and 500 million - enjoy a middle-class lifestyle with private property, personal automobiles, improved health care, accumulation of financial assets, and the ability to afford overseas travel and foreign education for their children.’

• ‘They live like the middle-class, consume like middle-class, feel like middle-class, and they are middle-class.’
• ‘They have already transformed China's socioeconomic structure and the world economy.’

‘In Shanghai, as of 2018, over 5 million households shared this lifestyle and could be considered middle-class families, constituting 91 percent of the total registered households of the city.’

• ‘In 2020, per capita GDP in Shanghai already exceeded U.S.$23,000.’
• ‘According to a 2019 report by the People’s Bank of China, almost all registered families in Shanghai owned residential property,, with a significant number of families owning two or three properties.’
• ‘The average value of household assets among Shanghai residents was 8.07 million yuan (U.S.$1.2 million).'

‘In 2002, 40% of China's middle-class live in four cities; Beijing, Shanghai, Shenzhen and Guangzhou. The rapid expansion of the middle-class has gradually extended beyond these megacities.’

• ‘According to McKinsey, by 2022, the proportion of China’s middle-class that resides in second- and third-tier cities will reach 76%.’

‘With trillions of dollars to spend, the Chinese middle-class is a huge market for foreign businesses.’

• ‘In fact, Western business groups earlier than anyone else – whether academics, journalists, or policy makers - identified the Chinese middle-class.’
• ‘They saw how profoundly the middle-class changed China's economic structure and the global economy.’

‘China's the middle-class development has a wide range of implications for every domain of a Chinese society: economic roles, political stability, social cohesion, environment protection, and the culture changes.’

• ‘On the international front, the emerging Chinese middle-class has already begun changing the ways in which the PRC interacts with the outside world, for better or worse, by expanding Chinese socioeconomic outreach and soft-power influence.’

‘I hope that the people in the United States will have a thoughtful intellectual and policy debate about the role and the implication of the Chinese middle-class as you and your signature platform, CHINADebate, wisely call for.’

BIG IDEA | ‘My book, Middle Class Shanghai, is a humble effort to provide a different angle, based the cultural and the educational fronts, from the perspective of shared middle-class lifestyles, aspirations, concerns, and values.’

Malcolm Riddell: ‘Would please tell us your overriding reason for your book, Middle-Class Shanghai.’

Cheng Li: ‘I have message to share by emphasizing Shanghai.’

‘My fear is that Washington and Beijing are heading toward a dangerous pass, increasingly shaped by a zero-sum game mindset on both sides.’

• ‘In the United States today, the ongoing policy and political discourse on China in the United States today disproportionately focuses on Beijing, on the Chinese authoritarian system, on the so-called China threat, and on the fatalistic view that often treats the most populous country in the world in a monolithic way.’

‘My book, Middle Class Shanghai, is a humble effort to provide a different angle, based the cultural and the educational fronts, from the perspective of shared middle-class lifestyles, aspirations, concerns, and values.’

• ‘These are quite similar between China and United States, and I want to use the Shanghai middle-class as an example of this.’
• ‘But looking at Shanghai, we can really see the marked contrast to Beijing in the ways two cities approach some things – and begin to see that China is in no way monolithic.’

‘Middle-class exposure to foreign influences and the cosmopolitan culture could provide a force for new mechanism for reshaping U.S.-China engagement.’

• ‘For that reason, more broadly, my book emphasizes the similarities rather than differences between Americans and Chinese people.’

‘Neither country should be driven by ultra-nationalistic sentiments to demonize each other.’

• ‘We should remember that U.S.-China relations are not just state-to-state relations, but also shared people-to-people relations.’

‘We should also remember that Beijing is not China.’

• ‘Nothing illustrates that quite as well the contrast between and Beijing’s jingpai culture and Shanghai’s haipai.’

BIG IDEA | ‘Just as New York and Washington are profoundly different from each other, the same can be said about Shanghai and Beijing.’

Malcolm Riddell: ‘In your book, you distinguish between Shanghai as haipai culture and Beijing as jingpai culture. Could you explain that and how is it important in our understanding of China's middle-class overall?’

Cheng Li: ‘You earlier made a comparison between Shanghai and New York.’

• ‘Indeed, Shanghai is to China what New York City is to the United States.’
• ‘And just as New York and Washington are profoundly different from each other, the same can be said about Shanghai and Beijing.’

‘The Chinese have illuminated the differences between jingpai and haipai for over a century, ever since the 1919 May 4th movement, if not earlier.’

• ‘Beijing culture, jingpai, is characterized as aristocratic, conservative, elitist and bureaucratic.’
• ‘Shanghai culture, haipai, as pragmatic, entrepreneurial, innovative, leisurely, holistic, and forward-looking.’
• ‘Malcolm, you and our viewers can tell I come from Shanghai with all these terrible biases.’

‘Chinese scholar, Yang Dongping, has described politics as the salt in Beijing, without which life has no taste, no flavor.’

• ‘People in Shanghai don't bother to discuss politics so much. They love to talk about doing business and entrepreneurship.’
• ‘Even during times of tensions with Taiwan, for example, in 1996, and also more recently, Shanghai's leaders reached out to the Taiwanese - actually there's huge Taiwanese community living in Shanghai - and said, "Don't leave. Shanghai will continue to do business with you." ’
• ‘That’s haipai in contrast to jingpai.’

‘Shanghai’s distinct entrepreneurial spirit and cultural identity (haipai culture) quickly gained prominence after Deng Xiaoping’s economic reform and opening up took root in the 1980s and 1990s.’

• ‘Many of the important changes that have taken place over recent decades — the establishment of a stock market, foreign investment, the rise of private firms, land leasing, property booms, and expansion of higher education — either began in Shanghai or have otherwise affected this born-again city in a deep and enduring way.’

‘These developments have contributed to the birth and growth of a new socioeconomic stratum, the members of which enjoy a middle-class lifestyle with private property, cars, accumulated financial assets, and the financial freedom to travel overseas and educate their children abroad.’

BIG IDEA | ‘Middle-Class Shanghai actually reveals China's unsettled future because Shanghai embodies what I call two tales of a city. Now in my view, Shanghai was, is, and will be paradoxical.’

Malcolm Riddell: ‘Your book is Middle-Class Shanghai, but that's a lot like saying middle-class New York. Why did you choose Shanghai as the focal point of your analysis for China’s middle-class?’

Cheng Li: ‘The rapid emergence and explosive growth of the Chinese middle-class is one of the world’s most stunning developments.’

• ‘At the heart of this story is Shanghai.’
• ‘Nowhere in China has this new socioeconomic force been more transformative — and more intriguing — than in this pace-setting city.’

‘The dynamism and diversity of middle-class Shanghai challenge the caricature of the People’s Republic of China as a burgeoning hegemon with a Communist apparatus set on disseminating its singular ideology and development model.’

• ‘China today, as exemplified and led by Shanghai, is also a crucible of change driven by a growing middle-class.’

‘Middle-Class Shanghai also reveals China's unsettled future because Shanghai embodies what I call two tales of a city.’

• ‘Now in my view, Shanghai was, is, and will be paradoxical. Consider these three paradoxes:

First, the 'was' paradox: 'Historically, Shanghai was the most westernized Chinese city.’

• ‘But it was also the birthplace of the CCP, the Chinese Communist Party, and the center of Maoist radicalism during the Cultural Revolution (during which myself, as a young boy and also my family suffered a great deal).’

Second, the 'is' paradox: 'Today, Shanghai is often regarded as the frontier city of market reform, opening up, and indeed cosmopolitanism.’

• ‘But, at the same time, the city is also what the Chinese call the head of a dragon in China's industrial policy and also state capitalism.’

Third, the 'will be' paradox: 'In the future, Shanghai can serve as the vanguard of a middle-class of worldly voices, views, and the values.’

• ‘But the city may increasingly become the showcase of China's growing nationalism and the mercantilist global outreach, driven by a growing middle-class.’

‘My point here is that we should place Shanghai's future and China's future in an ever-changing domestic and international context.’

• ‘It is neither predetermined nor stagnant.’
• ‘Shanghai is not a monolithic entity, and certainly China is not either.’

‘China today, as exemplified and led by Shanghai, is also a crucible of change driven by a growing middle-class.’

BIG IDEA | ‘It is premature to conclude that the U.S. engagement policy with China under the eight presidents prior to the Trump administration has failed.’

Malcolm Riddell: 'One of your most interesting and important points is your contention that it is premature to say the engagement policy toward has failed. Would you please explain?

Cheng Li: ‘Many believe that America’s long-standing engagement policy towards China has failed on two major grounds.’

‘First, the premise that global integration would lead China to a sort of free-market capitalism.'

• Instead, China has retained much of what Chinese Communist Party leaders call “socialism with Chinese characteristics” or what critics describe as “state capitalism.” ’

‘And second, the premise that four decades-long, multi-dimensional American-Chinese cultural and educational exchanges would make China more democratic.'

• 'This has turned out to be just the opposite. Members of China's middle class are often seen as political allies rather than challengers to authoritarian rule.’

‘I contend, as you say, that it is premature to conclude that the U.S. engagement policy with China under the eight presidents prior to the Trump administration has failed.’

‘That's because the two pessimistic views, just noted, overlook the complexities and contradictions of China’s ongoing transformation.’

• ‘Let me focus on the Chinese middle-class to challenge a few of the underlying assumptions of these views.’

‘First is the so-called “whole of society threat” championed by some U.S. policy makers.

• 'This assumes that China is a monolithic entity with no distinction between state and society.’
• 'But there is an actual – and very real – distinction that exists.’

‘True, China’s nascent middle class tends to emphasize the status quo and is risk-averse in political views and behavior.'

• 'But this may be only a transitory phase.’

‘We saw, for example, the nationwide criticism of the government response to the tragic death of Dr. Li Wenliang, a whistle-blower who exposed the coronavirus at the outset of the outbreak, displayed in part the middle class’ intriguing political role.’

• ‘In this case, Chinese citizens succeeded in pressuring authorities to change course from official vilification to valorization of Dr. Li.’

'So, the relationship between the middle-class and the Chinese communist government is, in fact, not stagnant but ever-changing.'

• 'Rather than seeing a "whole of society threat," U.S. policy makers should be aware that China's middle-class is not necessarily in step with the state on any given issue - and never to the extent that the middle-class constitutes a part of a seamless alignment between it and the state that endangers America.'

‘Second is the belief that the Chinese middle-class is the political ally of the party state.'

• 'This belief arose, I believe, because, in the past few years, both Chinese nationalism and anti-American sentiment have indeed skyrocketed at an alarming speed and scope.'
• 'But both nationalism and anti-American sentiment are largely reactions, not only to Washington hawks who have labeled China as a “whole-of-society threat”, but also to a new McCarthyism targeting Chinese and Chinese-American scientists, as well as growing anti-Asian hate crimes and racism in the US.

‘’As for nationalism: Yes, a high degree of nationalistic sentiment certainly exists among members of the Chinese middle-class, including foreign-educated returnees who studied in the U.S. or west.'

• 'But remember, these views among the Chinese middle-class co-exist with cosmopolitan perspectives on various important issues, such as climate change, public health, food and drug safety, and the non-proliferation of weapons of mass destruction, as well as middle-class values such as the protection of property rights, entrepreneurship, government transparency and accountability, and consciousness of taxpayer rights.’
• ‘These are universal aims and values shared by the middle-classes of both China and America - and are at odds with nationalistic fervor.'

'As for anti-American sentiment: This is largely a reaction, as I said, to the U.S.'

• ‘U.S. policy makers should recognize that Chinese middle-class views of America are neither homogeneous nor fixed.’
• 'And those views could change with changes in U.S. attitudes and actions - and this perceived alliance between the middle-class and the state would diminish accordingly.'

‘Third is the belief that paints the large number of PRC students and scholars in the U.S. as spies, who are being weaponized by Beijing, and therefore, assuming bilateral educational exchanges benefit only China and may even undermine American supremacy and American security.’

• ‘National security and the intellectual property rights should be vigorously protected on the part of the United States.'
• 'But racial profiling of PRC-born scientists, Chinese-American researchers, and young Chinese students fails to serve the interests of America and also does not align with American values.’
• 'And, as mentioned, this stokes both nationalistic and anti-American sentiments.

‘In sum, unlike the view of foreign business that China's middle-class presents an opportunity, the pervasive view in Washington about middle-class development in China is no longer one of hope for positive change but rather one of fear that this development may undermine American supremacy and security.’

• ‘But I say again, U.S. policy makers should neither underestimate the role of the Chinese middle-class nor alienate this force with policies that push it toward ultra-nationalism and anti-American authoritarianism.’

'Then perhaps they will come to agree that it is premature to conclude that the U.S. engagement policy with China has failed.’‍