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Oriana Skylar Mastro
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This commentary first appeared as part of the Center for Strategic and International Studies (CSIS) Interpret:China series. 



Tensions at the Taiwan Strait are at an all-time high. Speaker of the House Nancy Pelosi’s recent visit marked the highest level of exchange between U.S. and Taiwanese officials since 1997. China used the visit as a pretext to conduct large-scale military exercises encircling the island, coupled with rhetoric about how it could successfully use force to unify if it decided to do so.

The dynamics between China and the United States over Taiwan are eerily like those laid out in Zuo Xiying’s balanced, informative article. Zuo accurately captures the U.S. deterrence strategy toward Russia before its invasion of Ukraine—highlighting key components such as threatening economic sanctions and international isolation, as well as providing training and equipment to Ukraine to enhance its ability to defend itself. But deterrence failed, the reasons (according to Zuo) being that the United States did not do more to reassure Russia of its peaceful intentions and that ultimately costs are difficult to calculate ahead of time. Once war broke out, as Zuo also points out, the United States escalated its involvement by providing military aid to Ukraine, which increased the costs of the war to Russia.

What does all this mean for U.S. deterrence strategy with respect to Taiwan? Zuo recognizes that “for China, the Russia-Ukraine conflict acts as a mirror. . . . China needs to not only study in depth how the United States deters and how it punishes Russia, but also to carefully analyze how Russia perceives the United States’ threats and to derive experience and lessons from therein.” But he leaves the reader wondering what those lessons are. He hints in his discussion on Ukraine that a U.S. strategy to build up Taiwan’s defenses is unlikely to deter China; however, he also indirectly suggests that China may be underestimating the costs of war. Successful deterrence, Zuo notes, “requires not only that the United States itself has powerful forces and strong resolve but that it can make the other side accurately feel the threat and have an accurate calculation of the costs and benefits. But the real world is complicated, and it is difficult to have both conditions present at once.” In other words, he thinks there is an intermediate step needed in a deterrence strategy. The United States has to not only issue a credible threat, but also make the other side accurately assess the costs and benefits of certain actions.

Zuo does not seem optimistic. He implies the United States needs to increase efforts to paint a more specific picture of what it would do if war broke out—but that, even if it did, the message still might not get through. The reader is left with an acute understanding that if there is war over Taiwan, failures in both Beijing and Washington will be to blame.

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The Cost of the "Taiwan Contingency" and Japan's Preparedness

The ultimate choice that must be made.
The Cost of the "Taiwan Contingency" and Japan's Preparedness
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7th fleet cruisers transit Taiwan strait.
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In the wake of Putin’s invasion of Ukraine, how are Chinese strategists and scholars assessing U.S. deterrence strategy? What are the implications for Taiwan? Leading foreign affairs expert Oriana Skylar Mastro analyzes a newly translated article by a senior Chinese scholar which concludes that while the United States failed to deter Putin’s aggression, its actions in Ukraine are nonetheless impacting Beijing’s foreign policy calculations.

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mastro testimony

Chairman Gallagher, Ranking Member Krishnamoorthi, and members of the Select Committee:

Thank you for the opportunity to present my views on how to enhance near-term deterrence and our our own resilience against the PRC’s attempts to take Taiwan by force. The growth in Chinese military capabilities is well-documented, so I will not take time to summarize it in this testimony. Moreover, this committee has demonstrated an understanding that there is a possibility that China will attempt to take Taiwan by force. My article, “The Taiwan Temptation,” provides more concrete evidence to that fact if it is of interest. Instead, in this testimony, I want to focus on the challenges we face in countering (and thus deterring) China, including some fallacies; my recommendations for how to mitigate US defense challenges in deterring China from attempting a fait accompli; and my four rules for deterrence.

China does not want to fight a protracted war against the United States at this stage of development. The only situation in which it will initiate a war over Taiwan is if the leadership believes it can move quickly and take the island before the United States has time to respond (I’ll address some caveats to this later on).

The main vulnerabilities the United States experiences in its military power in Asia stem from the fact that it is not a resident power in Asia and thus is attempting to project power across vast distances. The emerging U.S. way of war exhibits several dependencies that China’s A2AD strategy targets. First and foremost, the United States relies on other countries for base access, while China can rely on home bases. This is problematic for several reasons. The number of bases the United States has access to in the first island chain has atrophied since the end of the Cold War, while China has infinite possibilities for basing options on its massive soil. In practice, the result is that the United States has one air base, Kadena Air Base in Okinawa, within combat range of Taiwan, while China has thirty-nine. Each air base can only support so many aircraft (Kadena can house about eighty aircraft, only fifty-four of which are fighters. And even here, the U.S. Air Force has also started to pull many of these aging aircraft out of the base, replacing them only with a temporary unit of more modern F-22s), which translates into China being able to generate far more sorties than the United States.

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2023 Dr. Sam-Chung Hsieh Memorial Lecture
Date & Time: Thursday, September 28, 2023     |    4:30 - 6:30 PM PT 
Location: Green Library, Bing Wing, 5th floor, Bender Room



Lessons of History: The Rise and Fall of Technology in Chinese History 

Stanford Libraries and the Stanford Center on China’s Economy and Institutions are pleased to present the 2023 Dr. Sam-Chung Hsieh Memorial Lecture featuring Professor Yasheng Huang who will be speaking on Lessons of History: The Rise and Fall of Technology in Chinese History.



China was once the most technologically advanced civilization in the world. Ancient Chinese achievements in technology are simply staggering. China led Europe in metallurgy, ship construction, navigation techniques, and many other fields, often by several centuries. The Chinese also invented gunpowder, paper, the water clock, the moveable printing press, and other consequential technologies way ahead of the West. For example, the Chinese invented the seismograph 1,700 years before the French.

But China’s technological development stalled, stagnated, and eventually collapsed and its early technological leadership did not set the country on a modernization path. This lecture examines the factors behind the rise and the fall of Chinese historical technology and draws lessons for today’s China.
 


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About the Speaker 
 

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Yasheng Huang headshot.

Professor Yasheng Huang is the International Program Professor in Chinese Economy and Business and a professor of global economics and management at the MIT Sloan School of Management.

Huang founded and runs China Lab and India Lab, which aim to help entrepreneurs in these countries improve their management skills. He is an expert source on international business, political economy, and international management. In collaboration with other scholars, Dr. Huang is conducting research on human capital formation in China and India, entrepreneurship, and ethnic and labor-intensive foreign direct investment (FDI). Prior to MIT Sloan, he held faculty positions at the University of Michigan and at Harvard Business School. Huang also served as a consultant to the World Bank.



The family of Dr. Sam-Chung Hsieh donated his personal archive to the Stanford Libraries' Special Collections and endowed the Dr. Sam-Chung Hsieh Memorial Lecture series to honor his legacy and to inspire future generations. Dr. Sam-Chung Hsieh (1919-2004) was former Governor of the Central Bank in Taiwan. During his tenure, he was responsible for the world's largest foreign exchange reserves, and was widely recognized for achieving stability and economic growth. In his long and distinguished career as economist and development specialist, he held key positions in multilateral institutions including the Asian Development Bank, where as founding Director, he was instrumental in advancing the green revolution and in the transformation of rural Asia. Read more about Dr. Hsieh.



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Green Library, Bing Wing, 5th floor, Bender Room

Yasheng Huang, Massachusetts Institute of Technology
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The Belt and Road Initiative (BRI), launched by China in 2013, is a sweeping and ambitious development strategy aimed at enhancing global connectivity through the construction of extensive infrastructure networks across Asia, Europe, Africa, and beyond. While heralded as a potential catalyst for economic growth and cooperation, the BRI has also attracted a spectrum of criticisms. Concerns range from worries about the debt burdens placed on participating countries due to large-scale infrastructure investments to questions about transparency in project agreements and financing terms. Additionally, the initiative's geopolitical implications, potential environmental impacts, and uneven distribution of benefits have sparked debates about its long-term viability and impact on recipient nations.

CDDRL researchers Francis Fukuyama, the Olivier Nomellini Senior Fellow at the Freeman Spogli Institute for International Studies (FSI), and Michael Bennon, a research scholar and program manager for CDDRL’s Global Infrastructure Policy Research Initiative, have written widely about BRI’s challenges. Their latest essay, “China’s Road to Ruin: The Real Toll of Beijing’s Belt and Road,” published today in the September/October issue of Foreign Affairs, explores the current state of the BRI, the challenges it has created, and the reforms needed to protect the World Bank and International Monetary Fund (IMF) from the fallout of the BRI debt crisis.

Below, Fukuyama and Bennon share their insights on the potential implications of the BRI on global development finance, as well as suggestions for reforms that could bolster the ability of international financial institutions to manage any potential debt crises arising from these projects.

What are the key factors contributing to the risk of debt crises stemming from the Belt and Road Initiative? How significant is this risk in your assessment?


It is clear that fears from a few years ago about China using “debt trap diplomacy” to gain access to strategic assets were overblown. The real problem is that poorly conceived Chinese projects have created a new round of sovereign debt crises for developing countries and put the burden of resolving them on international institutions like the IMF. This diverts time and resources away from activities that would contribute to the long-term development of many poor countries.

Assessments of the current emerging markets debt crisis have tended to focus on the amount of BRI debt that exists in aggregate or for a particular country since it is such a large initiative. A much more important factor is transparency regarding the debts associated with BRI projects and the key terms of those debts. Without considerable transparency efforts, loans to large infrastructure projects are naturally opaque. They include many contingent liabilities for borrowing governments. These are liabilities that may be the responsibility of the borrowing government if they materialize. A lack of transparency over BRI debt also undermines the trust needed when a restructuring is necessary if other lenders become concerned that other “hidden” bilateral debts are not participating. So a key difference is not simply the debt crisis itself but the lack of trust among key bilateral lenders.

The real problem is that poorly conceived Chinese projects have created a new round of sovereign debt crises for developing countries and put the burden of resolving them on international institutions like the IMF.
Francis Fukuyama and Michael Bennon

How have the dynamics of global development finance changed with the emergence of large-scale initiatives like the BRI? What challenges does this pose to established financial institutions such as the World Bank and the IMF?


The BRI has impacted the World Bank and the IMF in very different ways. For the World Bank, it simply represents a very viable alternative for countries in need of bilateral loans for large infrastructure projects. For decades, the World Bank has developed and improved its Environmental and Social safeguards for infrastructure projects. These are intended to improve project outcomes, but they also clearly impose costs in funding and project delays for borrowers. With the emergence of the BRI, borrowers had an alternative source of financing without the World Bank’s same safeguards.

For the IMF, the challenge is clearly on assisting countries in credit distress and managing the restructuring process, and this has been playing out over the last few years. The IMF has developed programs to lend into and then “referee” debt restructurings in the past, but the present situation is very unique both financially and geopolitically.

Are there lessons that can be drawn from historical cases of emerging market debt crises that could inform strategies to prevent or manage such crises in the context of the BRI?


Historically the best “solution” for an emerging market debt crisis is a fast, deep restructuring that gives the distressed borrower the headroom to resume economic growth. That is the opposite of what is happening for the initial restructurings in the current emerging market debt crisis. There is very little trust among lenders, and those restructurings that have been negotiated have been underwhelming. Geopolitically speaking, the emerging market debt crisis currently underway is a bit unique.

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COLOMBO, SRI LANKA - NOVEMBER 13: Construction is underway for the Ritz Carlton and the JW Marriott hotels, which is a Chinese-managed project seen on November 13, 2018, in Colombo, Sri Lanka.
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Francis Fukuyama and Michael Bennon share their insights on the potential implications of the Belt and Road Initiative (BRI) on global development finance, as well as suggestions for reforms that could bolster international stakeholders’ ability to manage any potential debt crises arising from BRI projects.

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The Stanford Center on China’s Economy and Institutions and Asia Society Policy Institute’s Center for China Analysis co-organized a closed-door roundtable on the extent, causes, and implications of China’s current property sector slowdown. The roundtable focused on China’s property sector, which has been a major engine of economic growth in China for over three decades. Through its large impact on local government revenues, the financial sector, household wealth, and employment, the property sector plays an outsized role in China’s economy – far more than in most other countries. 

By 2021, however, there were signs that China’s property sector may be reaching a peak, and even beginning to contract, potentially signifying wider distress in the economy. The property sector exemplifies an investment-driven growth model that China has pursued for the past few decades, and the policy responses to the current property downturn also has implications for how and whether China can transition toward an alternative, high-quality growth model less reliant on the property sector.  

The summary report of the roundtable, conducted under the Chatham House Rule, details the in-depth discussion that centered on four key questions:

  1. How sharp and sustained will the slowdown in China’s property sector be?
  2. What are the most important determinants of this slowdown: government policy or structural factors? 
  3. What are the implications of China’s property slowdown for other areas of China’s economy? 
  4. What can China do to offset risks and negative consequences associated with the property slowdown?

     


 

In partnership with Asia Society Policy Institute's Center for China Analysis

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2023 China Business Conference: Washington’s View of China

SCCEI’s Impact Team attended the 13th Annual China Business Conference held in Washington, D.C. in May 2023. The team shares insights from the conference on issues raised surrounding the troubled U.S.-China relationship.
2023 China Business Conference: Washington’s View of China
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The Stanford Center on China’s Economy and Institutions and Asia Society Policy Institute’s Center for China Analysis co-organized a closed-door roundtable on the extent, causes, and implications of China’s current property sector slowdown and produced a summary report of the discussion.

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Silicon Triangle

Taiwan is a close, trusted partner in the global semiconductor supply chain. The United States and Taiwan should seek to use the semiconductor industry to promote Taiwan’s prosperity and stability by creating an environment that fosters deeper business-to-business, research, academic, individual, and civil ties with Taiwan and other global partners in the semiconductor arena. This strategy includes the active promotion of Taiwan semiconductor firm activities, including manufacturing, design, and joint research and development (R&D) in the United States; income tax abatement for cross-border workers; two-way semiconductor internship programs and academic exchange; semiconductor supply chain information sharing and resiliency planning; and defense industry coproduction in Taiwan. With Taiwan’s particular strengths in semiconductors, and continued longterm US interests there, this is an attractive foundation for broader shared civil and business ties that helps to deepen US commitments to Taiwan’s democracy—and deters efforts to end it.

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 The United States, Taiwan, China, and Global Semiconductor Security

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Hoover Institution, Asia Society Center on U.S.-China Relations
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Oriana Skylar Mastro
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Chapter 5
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China's higher education system has undergone a rapid expansion over the last two decades. By drawing on hand-collected data, we explore students' experiences in college and in the labor market post-graduation in the wake of this expansion. According to our data, the largest employer of college graduates in the labor market was the state sector, followed by the domestic private sector. To explain the returns to college education in China, we explore three mechanisms: human capital, social networks, and signaling. We find that human capital measures, apart from a student's college English test scores, cannot explain the college wage premium, whereas both social networks (for example, membership of the Communist Party) and signaling matter significantly. This seems to indicate that in China, connections are crucial for student success in the labor market, whereas the higher education system itself is more a system for selecting talented individuals than it is for educating them. Finally, students allocate their time accordingly, for example, by spending more time studying English in college than any other subject.

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Asian Economic Policy Review
Authors
Hongbin Li
Huan Wang
Claire Cousineau
Matthew Boswell
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SCCEI Seminar Series (Spring 2024)


Friday, May 10, 2024 | 12:00 pm -1:20 pm Pacific Time
Goldman Room E409, Encina Hall, 616 Jane Stanford Way



The US-China Trade War: Quantify the Negative Shocks to Local Housing Markets and Land-Based Finance in Chinese Cities


China’s real estate market has experienced two decades of “golden age” with soaring housing prices ever since the housing marketization. Tax-sharing and land reforms eventually made city governments heavily rely on land sales (state-land use-right transfers) to generate fiscal revenues for expenditures; the so-called “land-based finance” or “land finance” sustained through self-fulfilling prophecy of housing price and land value appreciations supported by fast urbanization and economic growth. However, the US-China trade war started in 2018 and caused a drastically negative and exogenous shock to this feedback loop in Chinese cities, however. This research studies the trade war’s impacts on local housing markets and land-based finance. It constructs a shift-share measure transmitting the macro tariff changes to city-specific heterogeneous negative shocks. Analyses apply prefecture-city data spanning 2016-2019 and show that the tariffs were destructive to local housing markets and land finance besides hitting production. When cities experienced an extra percentage point (pp) of the weighted average tariff rate, transacted housing dropped by 3% and the prices fell by 1.2%, all else equal. The housing market tumbles deterred developers from buying state lands. The extra pp of the tariffs thus decreased the city government’s land-sale revenues by 7.6%. As Chinese cities faced, on average, a 1.62 pp increase in the average tariffs and, at the extreme, a 10.4 pp change within a year upon the trade war, impacts were substantial in hitting local housing markets and draining local public finance. Land-sale revenue declines between 12% to 79% were not uncommon. Further analysis reveals the more resilient cities in this trade-war were those with less severe overbuilding aka ghost-town phenomenon, a more diversified industrial base or export destinations, or a stronger tertiary sector. Overall, the US-China trade war could have more adversely impacted housing markets and local public finance in smaller cities than in big cities.

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About the Speaker 
 

Siqi Zheng headshot

Dr. Siqi Zheng is the STL Champion Professor of Urban and Real Estate Sustainability at the Center for Real Estate, and Department of Urban Studies and Planning at Massachusetts Institute of Technology (MIT). She is the faculty director of the MIT Center for Real Estate. She established MIT Sustainable Urbanization Lab in 2019, and MIT China Future City Lab in 2017, and is the faculty director of her Lab.Prof. Zheng was the former President of Asian Real Estate Society (2018-2019) and is on its Board now, and she is also on the Board of American Real Estate and Urban Economics Association (AREUEA). She is the Co-Editor of Journal of Regional Science, and Environmental and Resource Economics. She is also the Associated Editor of China Economic Review, and Journal of Economic Surveys, and is on the editorial board of Real Estate Economics, Journal of Housing Economics and Journal of Real Estate Finance and Economics. 

Prof. Zheng’s field of specialization is urban and environmental economics and policy, including sustainable urbanization, sustainable real estate, and urbanization in emerging economies. She published in many peer reviewed international journals including the Proceedings of the National Academy of Sciences, Nature Human Behaviour, and the Journal of Economic Literature, Journal of Economic Perspectives, Journal of Economic Geography, European Economic Review, Journal of Urban Economics, Regional Science and Urban Economics, Transportation Research Part A, Environment and Planning A, Ecological Economics, Journal of Regional Science, Real Estate Economics, Journal of Real Estate Finance and Economics. A book she has co-authored with Matthew Kahn, Blue Skies over Beijing: Economic Growth and the Environment in China (Princeton University Press) was published in 2016. Dr. Zheng has completed or been undertaking research projects granted or entrusted by the World Bank, the MassCPR, MITEI, MIT Portugal, MIT MCSC,  the Asian Development Bank, the Lincoln Institute of Land Policy, among others. She won the MIT Frank E. Perkins Award for Excellence in Graduate Advising in 2022. She received her Ph.D. in urban development and real estate from Tsinghua University in 2005, and did her post-doc research at the Graduate School of Design at Harvard University. Prior to coming to MIT, she was a professor and the director of Hang Lung Center for Real Estate at Tsinghua University, China.
 


A NOTE ON LOCATION

Please join us in-person in the Goldman Conference Room located within Encina Hall on the 4th floor of the East wing.



Questions? Contact Xinmin Zhao at xinminzhao@stanford.edu
 


Goldman Room E409, Encina Hall

Siqi Zheng, Professor of Urban and Real Estate Sustainability, Massachusetts Institute of Technology
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SCCEI Seminar Series (Winter 2024)



Friday, February 9, 2024 | 12:00 pm -1:20 pm Pacific Time
Goldman Room E409, Encina Hall, 616 Jane Stanford Way


What Makes a Desirable Spouse in China? New Evidence from a National Survey Experiment

 

Drawing on national survey experiment data from the 2021 Chinese General Social Survey, this research examines never-married people’s spouse preferences. The findings show how multiple characteristics of fictional marriage candidates – age, appearance, parents’ rural/urban status, education, income, and homeownership – shape men’s and women’s evaluation of the candidates’ desirability. They underscore a need to comprehensively assess the relative importance of multiple characteristics of a marriage candidate in shaping individuals’ spouse preferences. In addition, both men and women prefer a better-looking spouse with higher socioeconomic status and more resources. The findings suggest that widely observed hypergamous and homogamous unions do not reflect the preferences of both spouses, thereby cautioning against inferring individual preferences from assortative mating outcomes. Last, the findings show that individuals’ spouse preferences are embedded in and differ between China’s rural and urban marriage markets. This research demonstrates the importance of directly examining spouse preferences in clarifying the mechanisms of marital sorting.

Please register for the event to receive email updates and add it to your calendar. Lunch will be provided.



About the Speaker 
 

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Yue Qian is an Associate Professor of Sociology at the University of British Columbia, Canada. She received her PhD in Sociology from the Ohio State University. Her research concerns inequality at the intersection of gender, family, and work in East Asia (China in particular) and North America. Currently, this work follows two lines of inquiry: (1) how mate selection and couple dynamics in intimate relationships reflect and shape gender inequality in the broader society; and (2) how social and mental health inequalities manifest and evolve in the COVID-19 pandemic. Dr. Qian has published over 50 peer-reviewed journal articles since 2014. Her work has appeared in top journals, such as Nature Human Behaviour, American Sociological Review, Social Forces, Journal of Marriage and Family, Journal of Health and Social Behavior, and Gender & Society.
 


A NOTE ON LOCATION

Please join us in-person in the Goldman Conference Room located within Encina Hall on the 4th floor of the East wing.



Questions? Contact Xinmin Zhao at xinminzhao@stanford.edu
 


Goldman Room E409, Encina Hall

Yue Qian, Associate Professor of Sociology, University of British Columbia, Canada
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SCCEI Seminar Series (Winter 2024)



Friday, January 19, 2024 | 12:00 pm -1:20 pm Pacific Time
Goldman Room E409, Encina Hall, 616 Jane Stanford Way


The Law and Economics of Lawyers: Evidence from the Revolving Door in China’s Judicial System
 

This paper studies the roles of lawyers in shaping judicial and economic outcomes, exploiting the unique setting of “revolving-door” lawyers in China’s judicial system. By compiling the first comprehensive dataset covering the universes of judges, lawyers, law firms, litigants, and lawsuits in China from 2014 to 2022, we identify over 14,000 judges who left their positions and joined private law firms as lawyers, which accounts for 6.5% of all judges (2.6% of all lawyers) nationwide. We document four main empirical patterns. First, in both criminal and commercial lawsuits, these revolving-door lawyers enjoy significant advantages in securing favorable court decisions for their clients. Second, leveraging intra-lawyer variation in performances at home vs. away courts, we show that the premium of revolving door lawyers comes from both “know who” and “know how.” Third, revolving-door lawyers add significant values to their firms beyond their roles as frontline lawyers, by mentoring junior colleagues and attracting larger clients. Fourth, the revolving door lawyers, by joining larger law firms that disproportionately serve rich individuals and large corporates, could exacerbate existing socio-economic inequalities in China.

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About the Speaker 
 

Shaoda Wang headshot

Shaoda Wang is an Assistant Professor at the University of Chicago Harris School of Public Policy, and a Faculty Research Fellow at the National Bureau of Economic Research (NBER). He also serves as the Deputy Faculty Director at the Energy Policy Institute at UChicago, China center (EPIC-China). He is an applied economist with research interests in development economics, environmental economics, and political economy. His main research agenda aims at understanding the political economy of public policy, with a regional focus on China.

He holds a BA from Peking University, and a PhD from the University of California, Berkeley. Prior to joining Harris, he was a Postdoctoral Scholar in the Department of Economics and Energy Policy Institute (EPIC) at the University of Chicago.
 


A NOTE ON LOCATION

Please join us in-person in the Goldman Conference Room located within Encina Hall on the 4th floor of the East wing.



Questions? Contact Xinmin Zhao at xinminzhao@stanford.edu
 


Goldman Room E409, Encina Hall

Shaoda Wang, Assistant Professor at the Harris School of Public Policy, University of Chicago
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