Yao Yang on three shifts he saw in the U.S. and in China-U.S. relations

The top economist's reflections after a trip to California and a conference in Hawaii.

Mar 24, 2026

Yao Yang, dean of the Dishuihu Lake Advanced Finance Institute (DAFI), Shanghai University of Finance and Economics, is among the earliest well-known Chinese scholars to embrace short video as a way of reaching general audiences. He has since built a sizeable following on his account “Yao Yang Speaks 姚洋说”, where he discusses daily life as well as politics, economics, and current affairs. We have previously translated and published transcripts from the channel.

Below are transcripts of two recent videos. The first, posted on 6 March, followed his visit to the University of California, Irvine (UCI) and the University of California, San Diego(UCSD). A transcript of his lecture at UCI’s Long U.S.–China Institute has also been published on Pekingnology. The second was posted on 19 March, after Yao took part in a conference on China-U.S. relations in Honolulu, Hawaii. (Zichen Wang also joined the Hawaii conference.)

The translation of the first transcript is based on the version published on DAFI’s official WeChat blog on 17 March. The second is based on a manuscript provided by Yao himself and has been lightly edited from the spoken version of the video.

—Yuxuan Jia

姚洋：美国正在发生的三个变化

Yao Yang: Three Changes Now Under Way in the United States

Screenshot from Yao Yang’s video channel Yao Ynag Speaks 姚洋说

I recently visited the University of California, Irvine (UCI) and the University of California, San Diego (UCSD). During my interactions there, a few thoughts stayed with me, and I’d like to share them with you. I came away with three main observations.

1. Fewer Chinese students are starting to affect funding at U.S. universities

First, public universities in the United States are generally facing financial pressures, and one important reason is the sharp decline in the number of Chinese students.

In the past, many American universities offered a large number of master’s programs, which were, to a significant extent, “tailored” for Chinese students. Chinese students have strong financial resources, and master’s programmes generally require less investment from universities than undergraduate education. As a result, these programmes were often treated as “cash cows” that provided a vital source of revenue.

When I visited the University of Chicago in January, I learned that some programmes had been cancelled because they were unable to recruit enough Chinese master’s students, and simply did not have sufficient funding to continue. Many universities share the same concern: as fewer Chinese students come to the U.S. for postgraduate study, their financial situations are being significantly impacted.

Why are fewer Chinese students choosing to study in the United States? One key reason is the shift in immigration policy since the Trump era.

On the one hand, visa policies have become stricter. In particular, numerous enforcement activities by U.S. Immigration and Customs Enforcement have contributed to a more tense social atmosphere and caused many to worry about their safety and stability after arriving in the United States. On the other hand, and more importantly, work visa policies for international students after graduation have changed. It has become harder for international students to stay and work in the U.S. after graduation. Many families invest substantial funds to send their children to study in the U.S., often hoping they will be able to work there for a period after graduation, at least to offset tuition costs. However, such opportunities are becoming increasingly scarce.

At the same time, the job market back in China has also changed. In the past, students who returned from overseas often benefited from a certain prestige in the labour market and could more easily access better opportunities. That advantage has weakened significantly, and in many sectors it has largely disappeared. Taken together, these factors have significantly reduced Chinese students’ enthusiasm for studying in the United States.

2. There is a generational shift in how Americans view China

My second observation concerns changing attitudes towards China in the United States.

During this trip, I took part in two public events, one in Irvine and one in San Diego. The audience included not only Chinese students, but also many local residents and faculty members. At the San Diego event alone, more than 100 people attended in person, and over 300 joined online. The vast majority were local Americans. This shows that American society continues to pay close attention to China.

What stood out to me even more was the clear generational difference among American China scholars. Older scholars who began studying China decades ago tend to have strong emotional ties to the country, and they genuinely hope the U.S. and China can maintain a cooperative relationship. In San Diego, for example, I met the well-known China expert Susan Shirk. She first went to China around the time of Nixon’s visit, when she was still a student doing research. Since then, she has devoted nearly her entire career to studying China-U.S. relations and holds deep affection for China.

At the same time, however, I also met many younger American China specialists, and their approach is noticeably different. They have less emotional attachment and are more likely to analyse China through the lens of U.S. national interests. Their perspective is more rational and more sober.

The reality is that future U.S. policy toward China will be shaped to a large extent by this generation of researchers and policymakers. Therefore, if the Chinese side continues to rely too heavily on emotional appeals, that approach may no longer work as well as it once did. Managing China-U.S. relations in the future will probably require a more rational and hard-headed approach.

3. The capital logic behind AI anxiety

My third observation is about artificial intelligence (AI).

In the United States, I met quite a few former students who are already using AI very deeply to assist their research. They asked me: How is AI developing in China?

From what I observed, AI is not yet embedded in everyday American life to the same extent as it is in China. Take payments as one example. In many parts of the U.S., people still rely mainly on bank cards; even cash remains common. In China, by contrast, internet-based payment systems and digital applications are highly integrated into daily life, and AI is becoming more and more widespread. In some ways, it is starting to feel almost everywhere. And yet, interestingly, public anxiety about AI seems stronger in the United States.

One important reason, I think, is that AI companies in Silicon Valley depend on a constant flow of investment from the capital markets. Because of that, they have every incentive to emphasise AI’s enormous potential and to push narratives such as the imminent arrival of AGI. These stories give the public the impression that AI will soon transform the world completely.

But when technological change reshapes society, it usually does so over a long period of time—ten years, twenty years, or even longer. If one looks at world history, especially since the nineteenth century, it is clear that society usually adapts gradually to new technologies, rather than being instantly remade by them.

There was an economic theory that suggests new technologies emerge in response to demand and price signals. But in reality, many groundbreaking technological advances are unpredictable. They are often driven by curiosity and a spirit of adventure. Before Apple introduced the smartphone, for example, there was no clearly articulated mass demand for one. It was only after the technology appeared that people realised how profoundly it could reshape everyday life.

AI may well follow a similar path. Some AI companies in Silicon Valley are amplifying public anxiety in order to attract more capital, and that may not be a healthy practice. In the end, society will most likely adapt gradually to the changes AI brings.

Those are some of my observations and reflections from my recent visit to the United States.

姚洋：脱钩表象之下，中美关系的三个新变化

Yao Yang: Three New Shifts in China-U.S. Relations Beneath the Surface of “Decoupling”

This meeting left me with three reflections that I would like to share.

I. Structural complementarity beneath the surface of “decoupling”

First, in the economic and trade sphere, subtle yet somewhat encouraging changes are taking place within the United States. For some time now, the prevailing view in the U.S. has emphasised the need to minimise economic ties with China—the so-called “decoupling” or “de-risking”. The argument is that if the U.S. and Chinese economies become too deeply intertwined, the United States could find itself at a disadvantage in terms of economic security. To a certain extent, this assessment reflects a recognition in the U.S. of the strength of the Chinese economy.

The data do show a decline in the share of China-U.S. bilateral trade. China’s share of U.S. imports has fallen from around 20 per cent to less than 10 per cent, while the U.S. share of China’s exports has dropped from nearly 20 per cent to below 8 per cent. But this surface-level “decoupling” masks a more important reality. On a value-added basis, China’s actual share of U.S. imports may not have fallen, as many Chinese firms have “gone global” by establishing factories in third countries and then exporting to the United States. In other words, economic ties between China and the United States have not truly weakened; rather, the channels through which they are expressed have shifted.

At a deeper level, genuine decoupling between China and the U.S. remains difficult because it is clear that the two economies are structurally complementary. The U.S. economy is centred on services, especially finance, and places greater emphasis on innovation from 0 to 1. China’s economy is centred on manufacturing and is stronger in scaling and application, moving from 1 to N. In that sense, the two systems display a kind of mirror-image symmetry. This is also evident in trade balances: the U.S. has long run a large trade deficit, while China has maintained a corresponding surplus. The two are broadly symmetrical. This suggests that the global division of labour has not fundamentally changed over the past two decades.

Against this backdrop, a growing view within the United States is that full decoupling from China is not realistic. At the same time, however, the U.S. is unwilling to continue importing large volumes of Chinese goods directly. This has given rise to a new tendency: greater openness to Chinese firms investing and setting up production in the United States. The focus on security concerns alone is beginning to soften, and the advantages Chinese firms hold in medium-technology sectors are gradually gaining recognition in the U.S.

This openness, of course, will not be across the board. In sectors such as electric vehicles and solar power, openness is still likely to remain limited because of industrial interests and policy preferences. But in most other sectors, the United States may gradually open space for investment by Chinese companies.

II. Internal adjustment in U.S. strategic thinking

My second point is about shifts in U.S. strategic thinking, especially on security and foreign policy. At the conference, some U.S. scholars described changes within the Republican Party. For many years, neoconservatism was the dominant strand, built on the idea that U.S. interests should be defended and American values advanced through an assertive, offensive strategy. That is now changing.

One camp, often called the “restrainers”, argues that the United States has limited capacity and cannot pursue its interests everywhere at once, and should scale back and focus more on domestic priorities. Another camp, called the “prioritisers”, sits between neoconservatism and restraint: it favours some strategic retrenchment, but still wants to maintain an offensive posture in key areas, including on China. This suggests that U.S. foreign strategy is moving away from broad-based expansion towards a more selective and focused approach.

III. Policy change and the “misalignment” of the think tank system

My third point is about a phenomenon worth watching. At this conference, the American participants largely avoided discussing whether Trump might visit China. Their stated reason was that Trump’s policies are too fluid to support stable expectations or serious discussion. But there is, I think, a deeper reason: U.S. think tanks, academia, and policy research circles are, to some extent, struggling to keep up with the pace of policy change.

Back in 2018, when Trump launched the tariff war against China, many U.S. scholars opposed it on the grounds that it would accelerate decoupling. Over the past seven or eight years, however, the broader mood in U.S. think tanks, policy circles, and academia gradually shifted towards a stronger emphasis on economic and national security, meaning it has sort of caught up with the policy logic of that period. Now Trump is moving again, showing interest in easing tensions with China to some extent and addressing long-term trade issues. Those same communities are once again lagging behind.

My sense is that if China-U.S. relations were to ease temporarily, some movement in the economic and trade sphere could follow. For example, existing tariff arrangements might be turned into a longer-term mechanism; some understanding might emerge on export controls; the U.S. might further open space for Chinese investment; and China might widen access for U.S. firms in services. However, precisely because the policy direction remains in flux, U.S. academic and policy circles have found it difficult to form stable expectations. That is an important reason why they avoided this discussion at this conference.

These are my three observations from the meeting.