Xi has forcefully reminded China’s tech companies that they cannot represent a power center that challenges the state’s sovereignty. It was, in other words, an attempt to change the cultural mindset of companies. The Communist Party reminded them that it retains the discretionary power to engineer all aspects of society, which means putting tech companies in their place.

There might be something to be said for this sort of approach. What if, say, the US government had responded to the 2008 financial crisis by reshaping Wall Street’s risk management culture rather than engaging in the endless negotiations that yielded a 2,300-page statute that nobody understands? But Xi’s attempt to achieve cultural change has left people disgruntled and whole industries disfigured.

The trouble with Xi Jinping is that he is perhaps 60 percent correct on everything. He’s driving toward a usually admirable long-term goal. But in the name of achieving change, the engineering state delivers such beatings on people or industries that they are unable to pick themselves back up again. Even if Xi’s judgments are right, his brute-force solutions reliably worsen things. Does big tech have too much power? Fine, but stomping out their businesses has traumatized entrepreneurs. Are housing developers taking on too much debt? Yes, but driving many of them toward default subsequently triggered a collapse in homebuyer confidence, prolonging a property slump. Does the government need to rein in corruption? Definitely, but Xi has terrorized the bureaucracy to the point of paralysis.

The control neurosis of the engineers is the fundamental limit to China’s power. But it will also push China to be an advanced manufacturer with dominant positions in many of the high-tech supply chains of the twenty-first century, with military capacity to match and a good chance to challenge US hegemony in Asia.

I spent years covering the twists and turns of these technology restrictions. The more it went on, the more it felt that the United States was committed to a strategy of destroying its scientific and industrial establishment— through prosecutions of scientists and cutting off the sales of chipmakers— in order to save it. Rather than realizing its own Sputnik moment, the United States triggered one in China.

China’s technology leaders have always bought American chips because they wanted to sell globally competitive products. They ignored Beijing’s beseeching to buy from domestic vendors for the simple reason that Chinese technologies were not good enough.

Sometimes I think that the United States’ tech competition with China— chaotic policymaking under Trump, porous implementation under Biden— has ended up in the worst of all worlds. These restrictions have scorched China’s most dynamic companies without killing them, which riles them up to break free of American restrictions.

Throughout this book, I’ve avoided calling Xi’s regulatory storm a “tech crackdown.” While disciplining digital platforms and the real virtual economy with one hand, Beijing has with its other dispensed favour to harder technologies like semiconductors. Xi was trying to reorient technology companies to be less focused on virtual or financial innovation, and for the best and brightest from Tsinghua and Peking Universities to work in strategic industries instead.

Underlying Beijing’s actions against digital platforms is a suspicion that tremendously profitable digital companies are not producing value for the rest of society. Entrepreneurial dynamism in online education, social media, or fintech are producing various forms of social harm. The virtual economy, including cryptocurrencies and the metaverse, sucked up too much talent and money. Xi and the rest of the Politburo were discomfited that the cutting edge of the economy seemed to have been driven by the vagaries of investors rather than the interests of the state.