Why Only Great Unity Can Save China

---How to turn latecomer disadvantage into latecomer advantage

Ma Siwei (马四维)

In October 2022, Daron Acemoglu (阿西莫格鲁) offered a blunt diagnosis in an essay titled “China’s Economy Rotting from the Head” (《从头部腐烂的中国经济》): when economic policy is driven by the political judgments of a small elite, and when institutional checks and transparent correction mechanisms are absent, the engine of growth “rots from the head.” Policy uncertainty, estrangement from—if not hostility toward—the private sector, and a regulatory instinct toward technology governance, he argued, will ultimately undermine long-term prosperity. Three years later, in 2024, Acemoglu, together with Simon Johnson (西蒙·约翰逊) and James Robinson (詹姆斯·罗宾逊), received the Nobel Prize in recognition of their work on institutions and prosperity; the citation again underscored that “inclusive institutions” are the cornerstone of durable growth. In retrospect, that “physical exam” of China was not doom-mongering but an early warning about institutional risk.

Back in the real world, the symptoms of the past three years are plain to see: a sharp, leveraged unwind across the property chain, with Evergrande ordered into liquidation by a Hong Kong court in 2024 and Country Garden mired in a debt crisis; hidden liabilities amassed by local-government financing vehicles, estimated by international institutions in the tens of trillions of yuan, straining the credit structure; the youth unemployment rate, paused from publication in the summer of 2023 and resumed under a new methodology in 2024, exposing twin problems of statistics and governance; private-sector confidence wavering, with a marked slowdown in private fixed-asset investment growth in 2023–2024; households hedging uncertainty through higher savings, as consumption stratifies and “trades down”; and, against tightening fiscal conditions, stricter social-insurance collection and the inclusion of platform workers in coverage, further squeezing the survival space of low-margin firms and low-income groups. None of this needs embellishment; each has been repeatedly recorded in public reporting—from developer defaults and court-ordered liquidations to the scale of local debt and LGFVs, from the “pause and resumption” of youth unemployment statistics to the slide in private investment and entrepreneurial sentiment, to households’ caution in “hoarding cash and spending less,” and a policy turn that folds platform labor into social insurance.

In Why Nations Fail (《国家为什么会失败》), Acemoglu and Robinson distilled these dynamics into a simple, powerful divide: inclusive institutions versus extractive institutions. The former, through predictable property rights, broad market access, and accountable political process, diffuse the returns to innovation across as many actors as possible; the latter, in a structure where a few can rewrite rules at will, concentrate the fruits of growth at “the head,” suppress creative destruction, and dampen incentives for broad participation. Short bursts of growth can occur under extractive regimes, but they rarely endure, because the institutional circuit for “correction—innovation—diffusion” is missing from the outset. China’s multiplex symptoms today fit this logic all too well: when policy boundaries for the private economy, platform firms, foreign investment, and research are frequently revised, the most rational choice for entrepreneurs is not to invest but to wait; when local finances prop up a façade of prosperity through “land finance plus LGFV borrowing,” the endgame is “rolling over principal while squeezing rigid outlays,” which forces up the costs of public services and social protection—and pushes households toward precautionary savings.

To explain how we arrived here, widen the lens to the “latecomer disadvantage.” The late economist Yang Xiaokai (杨小凯) long ago argued that in the early catch-up phase, high growth can be achieved through factor accumulation and “partial reforms” born of institutional forbearance; but unless “deep-water institutionalization” is completed in property rights, rule of law, and political accountability, latecomer economies, once they scale up, will encounter “institutional backsliding” and a path-dependent ceiling—the very latecomer disadvantage. “Rot at the head” is the contemporary manifestation of this mechanism: when power enjoys expanding discretion over resource allocation, innovation is discounted by uncertainty, and industry and capital choose “risk aversion—offshoring—lying flat.”

What, then, is the remedy? To borrow an old phrase: only by returning to the ideal of Great Unity—datong (大同), the polity “under Heaven for the common good”—can we cross the latecomer bottleneck. Datong is not a sloganized utopia but an institutional vision that centers the public good and weaves together procedural justice, social trust, and universal welfare. The “Liyun” chapter of the Book of Rites (《礼记·礼运》) sketches it in plain language: selecting the worthy and the able; honoring trust and amity; ensuring the aged are cared for and the young nurtured; guaranteeing succor for the widowed, orphaned, solitary, and disabled; and creating conditions where plots and theft do not arise and doors need not be barred. Translated into modern political economy, the pillars are three: politically, accountability and restraint on arbitrary power; economically, broad access and the safeguard of property rights; socially, universality and a safety net. Acemoglu–Robinson’s “inclusive institutions” do not conflict with the “under Heaven for the common good” of Liyun datong: a corrigible institutional order is the hardware of the common good; a trustworthy social ethic is its software.

If we seek a verifiable, measurable template within the Sinosphere, Taiwan’s experience offers a serious point of reference. In politics and rule of law, Taiwan ranks among global leaders in the World Justice Project’s 2024 Rule of Law Index, with steady performance across “constraints on government powers,” government transparency, and order and security; in civil liberties, Freedom House’s 2025 report again rates Taiwan “Free,” with high scores; in governmental and economic governance, the IMD World Competitiveness Yearbook 2025 shows Taiwan’s overall competitiveness and governmental efficiency remaining high for years; in social welfare and public services, Taiwan’s universal National Health Insurance is noted for low administrative costs and high accessibility; in innovation and industry, the semiconductor cluster represented by TSMC is global infrastructure, with rare alignment of technology, capital, and governance. None of these are abstract “value claims”; they are public-goods capabilities that can be tabulated and compared, item by item.

Viewed through the lens of Great-Unity constitutionalism, Taiwan’s experience reveals its replicable features. First, the procedural “selection of the worthy and able”—stable alternation in power and a vibrant civil society normalize mechanisms that restrain “the head.” Second, the rule-based “honoring of trust and amity”—law and transparency serve as generators of trust, lowering transaction costs. Third, the universal “all shall be cared for”—balancing efficiency and equity through NHI, basic education, and social assistance to knit a floor where “the weak can live and the strong can create.” Fourth, the industrial “enrich the people through technology”—by supplying keystone goods to global governance structures (semiconductors, biomedicine, green tech), Taiwan harvests technological, institutional, and cultural spillovers. On these four fronts, Taiwan has, in practice, coupled the Protestant ethic of “vocation, individual calling, and civic self-discipline” with the Confucian virtues of “li, xin, yi, chi” (礼、信、义、耻), forming a gradient of publicness marked by high trust, high organization, and high transparency. Which brings us back to mainland China: “Only Great Unity can save China” is not a lyrical flourish but a set of actionable reform sequences.

First, in politics, rebuild the institutional gates that restrain “the head.” Restore “campaign-style governance and window guidance” to the rightful channels of “statutory authorization, open procedure, and ex-post audit,” so that significant economic regulations come with clear impact assessments and avenues of appeal. Recast the “security versus development” tradeoff into a boundary-defined complementarity, expanding the zone of market predictability outside a clearly specified national-security list. This is not abstraction; it is the institutional hardware that directly maps onto entrepreneurial expectations and social trust. As Acemoglu and colleagues have long shown, without accountable political order, inclusive economic institutions lack self-consistency.

Second, in the economy, restore the bottom lines of broad access, stable property rights, and fair competition. Policy toward the private economy must align legislation, enforcement, and adjudication, so that “the nonpublic economy is an important component of the system and an indispensable force for development” moves from declaration to practice. The governance of platform and digital economies should rapidly transition from “campaign-style crackdowns” to normalized regulation, integrating competition policy, data governance, and labor protection within a framework of transparent rules and predictable enforcement. The workout of local debt and property must “see through the cycle,” absorb risk over time, and retire “land finance” from the growth storyline—so that local tax bases and expenditure mandates return to sustainable tracks. Otherwise the fiscal–financial contagion chain of “rot from the head” will recur.

Third, in society, complete a redesign of “all shall be cared for.” Under the constraints of fiscal truthfulness and social-insurance sustainability, prioritize the triad of “nurturing the young, caring for the old, and treating the sick,” steadily replacing low-efficiency, project-type investment with high-multiplier public-services investment. Any expansion of social-insurance coverage should be tiered and phased—allowing deferrals and partial contributions—so that low-margin firms and flexible workers have gradients and time to survive and transition, rather than suffering “collection as control.” Youth employment and family policy should bundle reforms in education, housing, childcare, and taxation to deliver tangible benefits—turning “expectations” into a genuine public asset.

Fourth, in civilization, brace the market with the ethical sinews of li, xin, yi, and chi. This is not to legislate morality but to translate ethics into institutional elements of compliance, transparency, and trust: traceable government–business interactions; auditable public data; explainable AI and algorithms; and open public debate in media and academia. Making “mutual visibility” and “accountability” the shared baseline of technical and institutional systems is precisely the common sense of the “possible world of 2049” outlined by Kevin Kelly (凯文·凯利) and others. Rejecting AI and transparency only amplifies uncertainty; embracing AI and transparency is governance’s way of reducing entropy.

Of course, any real advance toward Great Unity ultimately depends on attitude: do we treat markets, society, and technology as risks to be controlled—or as capacities to be activated? A security that dwells solely on “safety” while neglecting “growth” is static security; a security that lets society grow within institutional bounds is dynamic security. On this point, Taiwan’s experience is not a pageant but a mirror: it shows how freedom, innovation, and inclusion can be braided together without sacrificing order. That mirror is instructive not only for mainland China but for latecomer economies everywhere.

If Acemoglu’s essay three years ago provided the pathology, then Why Nations Fail supplies the institutional science; the Liyun vision of Great Unity reminds us that any institutional science, stripped of the value of the common good, risks degenerating into technocracy. Overlay the three, and a plain conclusion suggests itself: only with Great Unity as purpose, inclusion as method, and the rule of law as boundary can China’s growth machine move from patchwork fixes to a self-correcting, normalized prosperity. This is not the mythologizing of history but a pragmatism about the future: when we turn “under Heaven for the common good” from a textbook quotation into the shared language of budgets, regulations, court decisions, and community life, the metaphor of “rot from the head” will lose its force.

China’s economic fate has never hinged on whether it has resources or can “work hard,” but on whether it will lock power in the cage of institutions and return growth to a myriad of actors. That is the scholarly insight of Acemoglu and Robinson, and the political original intent of Liyun datong. Ask why only Great Unity can save China, and the answer is unadorned: because it alone can satisfy three conditions at once—curbing the head’s arbitrariness, unleashing society’s creativity, and safeguarding the dignity of the vulnerable through ethics. When these three occur together, latecomer disadvantage will turn into latecomer advantage. The model is not far: “hewing ax handles with an ax handle”—the right measure is close at hand. Let Taiwan’s stone correct the mainland’s defect. Taiwan’s high marks in rule of law, freedom, competitiveness, health insurance, and semiconductors are not ideological debating points but facts that can be verified. If we are willing to follow the facts, the mainland’s road to Great Unity is not far.