American Interest:

Overcoming the China Challenge

"If U.S. policy continues to rely only on the market to support innovation by its universities, government labs, and companies, not only will America miss out on the millions of high-wage jobs the industries of the future will produce, but its defense capabilities will be severely weakened. . . 

The Chinese authoritarian model of business development may fail, but hope is not a strategy. China’s economic growth in the past three decades is unprecedented, and the United States should not underestimate its ability to adapt and to continue its rise. It has shown skill in taking advantage of the dynamism of a substantial private sector by throwing government resources behind companies that innovate and export. Yet too many analysts still liken China’s economy to the Warsaw Pact economies of the Cold War era; socialist, state-directed economies that could never really progress. A better analogy would be to those countries’ illegally juiced Olympic teams. China generally lets its “capitalist” companies make business decisions on their own and then supports them with purloined technology, massive subsidies, and protected domestic markets. Chinese companies are much more formidable competitors than the Russian and East European companies of the past century."