Andrew Sinclair came to Caltech as a visiting assistant professor in 2022. Finding Caltech to be an ideal place to carry out his research on Chinese finance, he has stayed on. Sinclair continues to pursue his research and teach Caltech students about finance through courses titled Hedge Funds, International Trade and Finance, and, of course, Understanding China through Finance, his own research area.
Sinclair grew up in Canada and earned a bachelor's degree at the University of Toronto and a master's degree at the University of Waterloo. Interestingly, it was during his primary school years in Canada that he first became interested in China. "Most of my classmates were from Hong Kong," Sinclair explains. "Hong Kong was reverting to Chinese sovereignty. It had been a British colony, but it was going back to China, and people weren't sure what was going to happen. Many families had previously fled to Hong Kong from China during the Cultural Revolution, and they thought it prudent to have an exit plan. As luck would have it, many Hong Kongers settled in my neighborhood."
A summer in Hong Kong during his undergraduate years heightened Sinclair's interest in East Asia further, but China was not fated to find its way into Sinclair's research for many years to come. "When I went to grad school at Yale, I actually wrote my first-year summer paper on Chinese banking," Sinclair says. "My PhD advisor took me aside and said, 'You're never going to get an academic job writing about Chinese finance.' I listened to him, and I ended up switching my research focus to hedge funds."
When he completed his PhD in 2017, Sinclair accepted a job as an assistant professor at the University of Hong Kong. "When I came to China, I saw an economic system that I could not understand," Sinclair explains. "Fortunately, my colleagues were brilliant economists who happened to be largely from China, and I incessantly asked them, at every lunch and dinner, about how Chinese economics works." Sinclair says he learned that, "What makes China so different from America is the role of the government. Whenever anybody in China makes any kind of investment decision; when they buy a house, or put money in the bank, or start a company, they always have to ask: What is the government's policy, and how likely is it to change?"
This is, Sinclair stresses, not simply an academic curiosity regarding different financial systems in different cultures with different governments. "The history of the 21st century is going to be written about China, and most of us have no idea how China works," Sinclair says. "In the past 50 years or so, we've seen a massive trend toward globalization. But the deeper question is: How will the United States and China compete in this global market? The Chinese government controls a vast amount of its society's wealth and has a huge comparative advantage in international trade. The Chinese government can mobilize the resources of the state to subsidize its firms, and with these subsidies, Chinese firms can undercut global competitors. Using this strategy, China has come to dominate industries once led by the US and its allies, including rare earth, steel, chemicals, shipbuilding, solar panels, and electric vehicles. It is not at all clear how America is going to contend with this. The US does not have the fiscal capacity to go toe to toe with Chinese subsidies, and, in order to protect American firms, we may very well see a fragmenting of the global market."
Sinclair's goal in teaching Chinese economics to Caltech undergraduates is to "give them a framework that they can use to understand the way the world works; one that they can keep with them for the rest of their lives, and that they can always come back to." As an example, Sinclair asks his students: Who is the mayor of Pasadena? "Nobody knows, nobody ever knows," Sinclair says. "But in China, everybody knows who the mayor is because if you need bank loans, or land, or tax breaks, or anything you need for business, you know that the mayor can provide it."
After his first two years at Caltech, Sinclair asked the University of Hong Kong if he could return to teach a class on Chinese economics. The answer was no. "You can't talk about the political economy of China in China, it's too political," Sinclair explains. "And most other places that would employ a finance scholar, like business schools in America, have no interest in Chinese economics. Business students want to get jobs on Wall Street. They're not looking to go to China because Americans can't really make money in China. At Caltech, I've been incredibly fortunate that they've allowed me to teach this class and pursue this research agenda. Everyone here, the faculty, the students, the alums, and the staff, are so curious about the way the world works. Caltech is a really special place. There's no place like it in the world. I've been all around the world, and I can tell you!"
