Stephen Kotkin

And Deng Xiaoping looks this over and he says, you know what the answer is?

Japan is partners with America, not with the Soviet Union.

And so Deng Xiaoping is going to divorce the Soviet Union, economically, and he's going to marry the U.S.

And so Deng gets most favored nation status in 1980, thanks to Jimmy Carter.

Communist regime in Beijing gets most favored nation status, which has to be renewed every year and is renewed every single year until 2000, 2001, when they're admitted to the WTO.

Now, that's a Clinton initiative that happens right when Bush is going to come to office.

And so the secret sauce is you have to manufacture and export to the American domestic market.

Because the American middle class is insatiable.

They will buy anything as long as the quality is high and the price is low.

Japan did this.

Japan's two former colonies, Taiwan and South Korea, followed in Japan's footsteps.

China's going to do this too.

We're going to use this Japanese model and the American middle class and their insatiable overconsumption

is going to create the Chinese middle class.

So this is what the party does, this geopolitical reorientation from a Soviet economic model to a Japan-style export-led partnership with the U.S.

domestic market and middle class.

They have a couple of tricks that are really important.

They have Hong Kong.

Hong Kong is a British-controlled, rule of law, international financial order that allocates capital based upon risk and return, not Communist Party dictates.

Gorbachev, Soviet Union, they have nothing like Hong Kong.