For decades, China's spectacular economic growth was powered by land finance, a fiscal model whereby local governments relied on selling land-use rights and land-backed borrowing as a major source of revenue. To fund development, localities created special-purpose entities, called local government financing vehicles (LGFVs), to borrow off-the-books from banks and bond markets for infrastructure financing and construction – a practice Beijing quietly backed to stimulate growth. By summer 2020, however, the COVID-19 pandemic’s skyrocketing containment costs, combined with the central government’s move to severely limit real estate firm borrowing, ultimately pushed local governments to the brink. With their land finance revenue stream all but gone, they were mired in hidden debt of at least $8 trillion by 2022.

Yet despite China’s economic slump and their massive fiscal shortfalls, localities remain responsible for development and continue to drive growth. What strategies are they using to compensate for the loss of land finance revenue?

Fieldwork conducted in Shandong and Jiangsu provinces in 2024 by Jean Oi, the William Haas Professor in Chinese Politics at the Department of Political Science and a senior fellow at the Freeman Spogli Institute, indicates that localities are pioneering new industries by developing integrated industrial parks and transforming their heavily indebted borrowing arms into venture capital instruments that invest in private startups.

Oi, the director of the China Program at Shorenstein APARC, outlines her observations in a study published in the August 2026 issue of the Journal of Asian Studies. The interviews she conducted in the two developed provinces come after a period of almost four years when few, if any, foreigners were allowed to conduct fieldwork in China, and “provide firsthand details of what is happening at the local levels, in cities and counties,” she writes.

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The Rise of Integrated Production Parks

In Shandong, Oi finds that authorities are directing resources toward new industries that address growing needs: not merely high tech but also elder care and health care, as well as advanced production to meet these ends. Some firms that were previously engaged in traditional manufacturing forms are the ones pursuing the new sectors.

And in both Shandong and Jiangsu, a major new development is the proliferation of integrated production parks built to accelerate the growth of these new industries. Unlike older forms of industrial parks that served as designated areas for individual factories, and unlike industrial clusters, these parks are complete ecosystems. Organized around a core product with guaranteed proximity to the raw materials needed in production, they ensure localized supply chains and dramatically cut transportation and storage costs.

“Integrated production parks are typically organized around one key input that links the activity of all firms within a park,” explains Oi. “The ideal scenario is to attract a major producer (a dragon head firm) that relies on this key input. That big-name firm, in turn, would draw in upstream and downstream suppliers, ultimately growing a whole production ecosystem.”

For example, an aluminum production park in Shandong took shape after a county-level firm secured a stable supply of bauxite, the raw material for aluminum, from a mine in Guinea. The local county government then built a self-contained ecosystem around high-value aluminum products on a site left by a bankrupt enterprise, attracting firms along the production process. The development of this park had a ripple effect, spurring the growth of integrated industrial parks in other parts of the province.

Crucially, such parks attest to “Beijing’s desire to reduce reliance on imports in China’s supply chains: a need that no doubt stems from security concerns after the disruptions during COVID and that have only been intensified post-COVID, with the rise in geopolitical tensions,” Oi emphasizes.

Increasingly, privately owned firms are the ones to populate the production parks, and many of them are recruited from outside of the locality. This dynamic, however, is shaped by the complex relationship between the state and private firms and poses risks for local officials, she notes.

From Land Finance to Venture Capital

The term “local state corporatism” (LSC) has been used to describe local governments acting as entrepreneurs to spearhead local state development. Oi’s fieldwork reveals that localities have adapted this model: instead of helping firms secure loans by acting as guarantors – which has been a defining feature of LSC during the market reforms of the 1980s and 1990s, or what Oi labels LSC 1.0 – local governments now directly buy equity in promising startups within their industrial parks, at times acting alone and sometimes cooperating with private venture capitalists (VCs).

“Local governments have become VCs who provide ‘patient capital’ (naixin ziben 耐心资本)” – officially described as ‘investment that generates healthy returns over the long run rather than taking quick profits,’” she says. She coins this new development model LSC 2.0.

Perhaps her most surprising finding is that those doing the investing for local governments are none other than LGFVs. “In Shandong and especially in Jiangsu, local governments are repurposing their LGFVs, transforming them from instruments of land finance into VCs,” Oi explains. “This finding is particularly noteworthy given the heavy debt and problems that many LGFVs faced in the wake of the COVID pandemic.”

To make this transition possible, local governments are executing a clever financial maneuver: injecting profitable state-owned enterprises (SOEs) directly into failing LGFVs, which, in turn, are acting as holding companies, each with SOEs as subsidiaries. This asset injection boosts the LGFVs’ balance sheets, raises their credit ratings, and allows them to issue new bonds and secure bank loans to fund local startups. Notably, this reorganization is done with the blessing of the central government.

Adapting Foreign Policy for Domestic Growth

To finance expensive industrial parks under tight borrowing limits, revenue-starved, entrepreneurial localities have found a creative loophole: the Belt and Road Initiative (BRI). BRI is widely viewed as a grand foreign policy aimed at building infrastructure overseas. Yet Oi’s analysis shows that between 2013 and 2022, China accounted for the largest number of BRI projects, with 263 out of 2,254.

In 2015, Beijing assigned BRI-related roles to certain designated provinces and municipalities, with the rest being considered non-designated provinces or cities. Oi's analysis of publicly available data, however, reveals that domestic Chinese localities are strategically using the BRI label to secure funds and loan approvals to build new industrial parks, address continuing development needs, and bypass infrastructure spending bans.

Oi also finds that most BRI-designated provinces incorporated projects that fell outside the mandate envisioned by Beijing; that non-designated provinces, too, took advantage of opportunities within China under the BRI label; and that Shandong and Jiangsu are among some of the non-designated provinces that have been particularly active in pursuing BRI projects.

“The popularity of industrial parks might seem contrary to common perceptions of the BRI centered on infrastructure and international connectivity,” Oi writes. “While one might wonder how industrial parks would serve that goal, for some more ambitious localities, integrated production parks may represent a way to foster cross-border trade and business cooperation. This also reflects the growing importance of the international market in local state development plans.”

Challenges for Local State Corporatism 2.0

Can the new integrated production parks fully replace land finance? And what is the future of the evolving local state-led development model? Oi enumerates several steep obstacles ahead of this emerging local state corporatism 2.0.

First is a critical structural hurdle: under China’s fiscal system, local governments cannot keep the tax revenues generated by the industrial parks. Localities can only retain nontax revenues, such as factory leasing fees and rents, which are unlikely to bridge the massive fiscal gaps left by the collapse of land finance. Ultimately, it remains unclear to what extent and how quickly the new industries developed in integrated production parks can become substantial revenue generators for struggling localities.

Another hurdle for the new development model is manufacturing overcapacity stemming from deep investment in industrial expansion paired with weak domestic consumer demand, which triggers intense domestic competition and a race to the bottom in product prices. 

Furthermore, in the era of geopolitical competition, trade and manufacturing have become security concerns, and geopolitical tensions are closing off export markets that the new industries desperately need. Finally, it is neither yet clear if cadre incentives will be effective in catalyzing the new development model, nor whether LGFVs will succeed as venture capital investors.

Shein, the fast-fashion online retailer, launched its Hong Kong IPO on Monday, August 24, 2026, and is set to start trading on September 1. The much-anticipated IPO follows Shein’s decision to abandon plans for listings in New York and London after both attempts failed to secure approval from Chinese authorities. The move to a Hong Kong IPO reflects the long journey Shein has made to embrace its identity as a Chinese company, Reuters reports in a story published August 28, How Shein Had to Make Peace with China to Finally Go Public.

Before deciding to debut in Hong Kong, Shein had spent four years trying to present itself as a global player. "Shein tried to portray itself as cosmopolitan, and it engaged in what is today known as Singapore-washing to try to distance itself from its Chinese roots – but I think that failed because it is so closely linked to its Chinese supply chain," says Curtis Milhaupt, the William F. Baxter-Visa International Professor of Law and APARC faculty affiliate.

"Having failed in the cosmopolitan strategy, I think they saw no choice but to embrace their Chinese roots," Milhaupt tells Reuters.

China’s strong political leadership often drives the perception that its governance is monolithic and highly centralised. In this episode of East Asia Pulse, a podcast produced by the East Asian Institute (EAI) at the National University of Singapore, Jean Oi, the William Haas Professor in Chinese Politics, a senior fellow at the Freeman Spogli Institute for International Studies, and director of the China Program at APARC, speaks to EAI Director Alfred Schipke about the complexities of China’s local governments and the role they play in China’s economic landscape. Over the past year, while on academic leave from Stanford, Oi has served as EAI’s Goh Keng Swee Professor in China Studies.

While they have played an outsized role in China’s economic development by spurring innovation and experimentation, local governments have also in recent years been associated with debt and the misallocation of resources. Among other issues, Oi weighs in on the need for fiscal reform to address the inconsistencies in local governments’ responsibilities and revenue sources and examines the role of local government financing vehicles (LGFVs) in generating revenue.

Key Highlights: 

00:00 Defining the central-local government relationship and key challenges faced in this dynamic 

08:10 Challenges in balancing growth with the management of local government debt   

15:10 How incentive structures for local governments lead to overcapacity and misallocation of resources 

23:40 Local government financing vehicles (LGFVs) and their role in generating revenue through land sales and equity investments. 

27:10 The need for fiscal reform to address inconsistencies in local governments' responsibilities and revenue sources

Chinese President Xi Jinping is embarking on his biggest push to recover corporate tax revenue in a shift after a decade of supporting businesses through tax cuts. Now, many companies are being hit with clawback bills that far exceed their first-half earnings, Bloomberg reports in an article titled Xi’s Unprecedented Tax Clawback Hammers Chinese Listed Firms, published August 25, 2026. Moreover, the crackdown signals a break from a decades-old growth model built on provinces using generous tax subsidies to hit economic targets, forcing local provinces to rely more on the national government to meet their day-to-day spending needs. 

In the absence of tax subsidies to spur growth, local governments are “in a difficult bind” as they search for new revenue sources, explains Stanford political scientist Jean Oi, the director of the China Program at APARC. While Beijing understands fiscal reforms are needed to boost local governments' revenue-earning potential, little progress has been made, she notes.

“Both the central and local governments have an interest in getting more taxes,” says Oi. “They’re trying to get everybody to pay up and follow the rules, but is it enough? I really worry," she tells Bloomberg.

Stanford University's Walter H. Shorenstein Asia-Pacific Research Center (APARC) invites applications for several fellowships in contemporary Asia studies beginning in fall quarter 2027.

APARC offers a postdoctoral fellowship on contemporary Asia, broadly defined, and, through its research programs, postdoctoral and visiting fellow positions focused on Asia health policy, contemporary Southeast Asia, contemporary Taiwan, and research tracks of the Stanford Next Asia Policy Lab.

Learn more about each opportunity and its specific application deadline and requirements:

2027-2028 Shorenstein Postdoctoral Fellowship on Contemporary Asia

APARC offers two postdoctoral fellowship positions to recent PhD recipients for research on contemporary Asia. The primary research areas focus on political, economic, or social change in the Asia-Pacific region (including Northeast, Southeast, and South Asia), or international relations and international political economy in the region. Appointments are for one academic year beginning in fall quarter 2027. The application deadline is December 1, 2026. 

2027-2028 Asia Health Policy Program Postdoctoral Fellowship

Offered by the Asia Health Policy Program at APARC, the fellowship is awarded to one recent PhD recipient for research on contemporary health or healthcare policy of high relevance to countries in the Asia-Pacific region, especially developing countries. Appointments are for one academic year beginning in fall quarter 2027. The application deadline is December 1, 2026.

2027-2028 Lee Kong Chian NUS-Stanford Fellowship on Southeast Asia

The Lee Kong Chian Fellowship supports scholarship on contemporary Southeast Asia. It is open to candidates of all career stages with professional backgrounds and ongoing positions in the social sciences or humanities. Lee Kong Chian Fellows spend two to three quarters at Stanford pursuing research and writing projects. APARC's Southeast Asia Program supports research conducted under the fellowship. Appointments must begin and conclude within the period September 1, 2027, to June 30, 2028. The application deadline is January 25, 2027.

Note: The fellowship is no longer offered as a joint-residency program with the National University of Singapore. Fellows appointed through Stanford will be hosted at Stanford's Asia-Pacific Research Center, while those appointed through NUS will be hosted at NUS. Applicants who wish to pursue the fellowship at NUS should apply through the NUS application portal.

Stanford Next Asia Policy Lab Postdoctoral and Visiting Fellowships

For Pita Limjaroenrat, Thailand’s liberal icon and “almost prime minister,” the experience of being banned from politics following his decisive 2023 general election win has only strengthened the calling to fight for democracy in his country.

Thailand’s distinctive power structure – an entrenched alliance among the monarchy, the military, and economic monopolies – has repeatedly undermined and dismantled democratic forces’ attempts to challenge the dominance of unelected institutions. “This is a systematic issue that if I don't stand up for, then it's going to happen to my daughter's generation and my granddaughter's generation,” Pita says.

Joining APARC Director Kiyoteru Tsutsui on the latest episode of the APARC Briefing video series, Pita reflects on his journey, shares lessons in leadership and resilience, and discusses the forward-looking vision that continues to define his commitment to contribute to the conversation on Thailand’s future.

The APARC Briefing interview followed a fireside chat with Pita, Thailand at a Crossroads, hosted by APARC’s Southeast Asia Program, where he examined Thai politics and Southeast Asian regional dynamics.

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The People’s Mandate

In May 2023, Pita led the Move Forward Party (MFP) to win the most seats in Thailand’s general election on a platform of progressive reform. He was poised to lead the country, but a court injunction and parliamentary maneuvering halted his path to the prime ministership. In August 2024, the Thai Constitutional Court disbanded the MFP and banned Pita from politics for ten years. He may still face a lifetime ban. Rather than retreating, however, Pita has reframed his political setback as a summons to a larger mission.

To compartmentalize, find purpose in adversity, and manage anxiety, Pita proactively maps out worst-case scenarios, he revealed. “Once I have that down on paper, I stop worrying,” he said. Having anticipated the possibility of being blocked from power, the event, when it happened, was not a personal shock but the activation of a pre-analyzed outcome. This mindset allows him to see his ban from office as a reversible obstacle in a long-term struggle, citing the comebacks of leaders like Brazil’s President Lula da Silva. 

Politics is a ball that could turn either way, Pita believes. “If there's enough mandate, if there's enough calling from the people that they want me to govern and they want me to run again, whatever legal procedure that is done to me can be reversed. A pathway to power is always there as long as you still have that fire in you and people give you the mandate,” he argues.

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The Art of the Middle Way

Pita’s leadership philosophy is rooted in a life spent bridging divides. Describing himself as a “jack of all trades,” he recalled how, as a child, he moved easily between being a bookworm and taking on leadership roles in school and basketball. He traces this identity back to his upbringing, which included a middle-class childhood in Bangkok, formative years at an all-boys school in rural New Zealand, and an education and professional experiences in both the public and private sectors, with degrees earned from Harvard’s Kennedy School and MIT’s Sloan School of Management.

“That became who I am,” he stated, outlining his unique proposition to Thai voters. “Someone who understands international markets and rural areas. Someone who's middle class, who understands people who are well off and people who are struggling [...] Someone who understands both the private side and public side because he prepared himself that way.”

This dual expertise, he argued, is crucial for effective governance. He noted the fundamental difference in objectives between the two sectors. “The goal of public service is service. The goal of the private sector is profitability,” he said. “Just because you're a successful businessman doesn't make you a successful politician.”

He recounted how his political calling was ignited in the wake of the 2004 Indian Ocean tsunami, when, as a management consultant, he worked on a tourism recovery strategy for Thailand. The intellectual challenge of balancing complex public needs, like national energy security, sparked a passion that private-sector work couldn't match.

From Campaign to Campus

Now a Senior Democracy Fellow at Harvard Kennedy School, Pita channels his experiences into mentoring a new generation of leaders. He teaches a class on running for public office in developing countries, hosts workshops, and holds “private office hours” for students committed to entering public service, helping them craft their first campaign strategies. It is a way of “turning reality into a textbook” for others.

He also remains a keen observer of global affairs, characterizing the current U.S.-China relationship as a “managed rivalry” or “competitive coexistence,” where deep distrust is checked by the understanding that a full-fledged decoupling would be “economic suicide” for both sides. He sees Southeast Asia as a central and crucial bloc of “swing states” that must leverage its position to determine its own future without being forced to choose sides in the competition between the world’s two greatest powers.

When asked for his message to young people, Pita’s advice is a blend of passion and pragmatism. “Always follow your heart, but take your brain with you,” he urged. For those with aspirations to tackle the world’s crises and pressing social challenges, he stressed the importance of pairing that fire with a concrete plan.

“It's up to you whether you find your North Star, improve your skills to have a plan to get there,” he concluded.

Pita clearly articulates what he wants: a more just and democratic Thailand. Even from outside the halls of political power, he is methodically working on his plan to get there. “I can wait for my time, and I will come back stronger, more vigorous, more capable, and more relevant.”

Stanford University’s Walter H. Shorenstein Asia-Pacific Research Center (APARC) is delighted to welcome a new cohort of fellows joining us starting in summer 2026.

APARC offers multiple prestigious fellowship opportunities for Stanford doctoral students, emerging scholars of exceptional promise, and accomplished faculty and mid-career experts researching contemporary Asia topics. Supported by these fellowships, our incoming fellows will complete dissertation research, work on book manuscripts, undertake new research projects, and engage with the center's scholarly community.

Meet the Fellows

Herbert Chang is an assistant professor of quantitative social science at Dartmouth College and a Forbes 30 Under 30 honoree in Science for his work on network science and offshore finance. His research examines how emerging technologies reshape democratic behavior, including recent work on AI and misinformation in the 2024 Taiwan and U.S. presidential elections. His work has been featured in the New York Times, the Washington Post, and Scientific American, and has informed both academic and policy debates.

Chang will use his time at APARC to write a monograph on the interdependence of AI infrastructure and information ecosystems, with Taiwan and the United States as central empirical sites. He will also collaborate with SNAPL to quantify its talent-portfolio theory and empirically model how Asian Pacific nations cultivate and retain scientific expertise. 

Alicia R. Chen is a doctoral candidate in the Department of Political Science at Stanford University. She studies international relations and political economy, with a focus on China. Her dissertation examines the domestic political economy of China's international aid and finance, revealing how domestic politics and institutions shape its overseas economic activities.

Her research is published in the British Journal of Political Science and has been generously supported by Stanford’s King Center on Global Development, the Freeman Spogli Institute for International Studies, the Stanford Center on China’s Economy and Institutions, and the Stanford Institute for Economic Policy Research, among others.

Before her doctoral studies, Chen was a research specialist with the Empirical Studies of Conflict project at Princeton University. She holds a master's degree in international policy from Stanford University and a bachelor's degree in political science from the University of Southern California. 

Dr. Sheikh Jamal Hossain is a researcher and academic specializing in child development, maternal mental health, health promotion, and health economics. His professional interests center on advancing evidence-based interventions through rigorous research, teaching, and capacity strengthening, with a commitment to translating scientific evidence into policies and programs that improve the lives of women and children globally.

With over two decades of experience spanning academia, public health research, and international development, Dr. Hossain has led and contributed to large-scale randomized controlled trials, implementation research, and economic evaluations addressing early childhood development, nutrition, maternal mental health, and health system strengthening. He has successfully secured and managed research grants from international donors, including Grand Challenges Canada, UNICEF, FCDO, and Sida.

Dr. Hossain has authored more than 30 peer-reviewed scientific publications, including 13 as first author, in leading international journals such as The Lancet Regional Health, Pediatrics, Social Science & Medicine, The American Journal of Clinical Nutrition, and BMJ Global Health. He currently mentors multidisciplinary research teams and supervises early-career researchers and graduate students.

He earned his doctorate in women’s and children’s health from Uppsala University, with research focused on the effects of parenting interventions integrated with social protection programs on child development and maternal well-being in Bangladesh. He also holds master's degrees in public health and in health economics from the University of Dhaka.  

Angela Ju is an associate professor of international affairs and political science at St. Edward's University in Austin, Texas. She uses mixed-methods approaches to study race/ethnicity, gender, international migration, social determinants of health, the nonprofit sector, and urban politics in North America, Latin America, Europe, and East Asia. Her first book, Identities Matter: The Politics of Immigration and Incorporation (Oxford University Press), was published last year. 

While at APARC, Angela will be working on her second monograph, Taiwan's Migration Diplomacy Towards Mainland Chinese Migrants and Refugees. In this book, she will examine why Taiwan has not formed consistent immigration policies for migrants from Mainland China.

Using textual analysis of Taiwanese government legislation and publications, the book's primary argument is that Taiwan uses its migration policies to manage its foreign relations with Mainland China. It also argues that one way in which Taiwan pursues international participation, despite lacking international recognition as a state, is through its migration diplomacy.

Siyu Liang is a doctoral candidate in political science at the University of California, Los Angeles (UCLA). Her research lies at the intersection of political communication, public opinion, and computational social science, focusing on how media and information environments shape political attitudes in both democratic and authoritarian contexts.

Her dissertation examines the role of media in shaping perceptions of China in contemporary U.S.-China relations. In particular, she studies foreign influencer propaganda and the downstream effects of U.S.-China competition on public opinion and intergroup relations. As a computational social scientist, she develops and applies natural language processing and machine learning methods to study political communication and international politics, with particular interests in stance detection, transfer learning, and soft-label modeling.

At the Stanford Next Asia Policy Lab, she will expand this research agenda by examining how digital media and geopolitical conflict shape public opinion and social exclusion, with a particular focus on U.S.-Asia relations. She will also pursue projects on nationalism and racism in East Asia. Together, these projects seek to advance a more global understanding of how international politics shapes social inclusion and group relations across the Asia-Pacific region.

Siyu received master's degrees in statistics and political science from UCLA and holds bachelor's degrees in political science and statistics from the University of Wisconsin–Madison.

Deepika Padmanabhan is a political scientist whose research examines nationalism, language politics, and self-determination, with a regional focus on South Asia. 

Her book project explores how nation-building unfolds not only through grand policies and formal institutions, but also from the ground up, in everyday life. It examines how states promote national languages through routine, informal interactions with citizens, a process she terms the Everyday Imposition of language.

More broadly, her research explores how everyday practices shape political identities and collective belonging. In related projects, she examines the politics of language, food, film, and symbolic rituals as sites through which nationalism is cultivated, contested, and reproduced in daily life.

At APARC, Deepika will revise her book manuscript and develop additional projects on nationalism and political behavior. 

She received her doctorate in political science from Yale University in 2025. She holds a bachelor's degree in political science from St. Xavier’s College, Mumbai, and master’s degrees from the School of Advanced International Studies at Johns Hopkins University and the Department of Politics at New York University.

Grace Zeng is a political scientist specializing in international political economy, with a focus on China's use of trade and investment to influence global regulatory governance. Her research examines how states leverage economic tools to shape international rules and institutions. Her work on China's trade practices shows how China uses seemingly technical health and safety regulations to exert pressure on other nations, systematically increasing import restrictions in response to political tensions.

At APARC, she will pursue projects that extend this research agenda by examining China's growing influence in global governance. One project investigates whether China strategically uses infrastructure investment and foreign subsidiaries to shape international environmental standards. Another examines China’s information control system through the lens of its WTO commitments and the global governance of cyberspace.

Before joining Stanford, Grace was a lecturer in the Department of Political Science at the University of California, Berkeley. She received her doctorate in politics from Princeton University. She also holds a master's degree in the social sciences (MAPSS) from the University of Chicago and a bachelor's degree in mathematics from the University of Hong Kong.

China’s economy presents a structural contradiction: it combines extraordinary technological and industrial capabilities with a prolonged slowdown in domestic economic momentum. While Beijing focuses on building dominance in frontier technologies, China's economy is navigating a slowing economy and a local government debt crisis. In an article published on June 8, 2026 – China is innovative. Its economy is a mess. Which will win out? – The Economist explores this dynamic and Beijing's high-stakes bet that a new, tech-driven growth model takes off before the old, debt-fueled one, driven by land sales and construction, collapses.

Now investment is going into a narrow range of fast-growing, innovative sectors, and local governments are doubling down on efforts to create financial vehicles using tax revenues and capital from local state companies, setting up “high-tech zones” and “AI parks” to lure innovative companies with tax breaks and other perks. These new tech businesses are meant to generate tax revenue and help local governments reduce their debt, Stanford political scientist Jean Oi, the director of the China Program at APARC, tells The Economist.

Sometimes local authorities have some success, but other times such projects go wrong. The pressure on local officials reveals the fragility of a strategy that relies on speculative tech ventures to solve deep-seated structural problems in China's economy. Beijing's high-stakes gamble might do too little to fix China’s persistent economic challenges, the story argues.