As China emulated America’s past successes, the US government got busy undermining its own strengths. A procedure-obsessed left conspired with a thoughtlessly destructive right to constrain the government. Neither the left nor the right allows the state to deliver essential goods expected by the public. The Biden administration may have ushered through historic bills on industrial policy, but executive agencies were so obsessed with procedural concerns that little building actually took place before voters reelected Donald Trump, who has threatened to cancel many of these projects. The United States is still a superpower that is able to outclass China on many dimensions. But it is also in the grips of an ineffectual state where people are increasingly concerned with safeguarding a comfortable way of life.

Xi’s reining in of tech giants are not altogether different from what a lot of American and European regulators wish to do to Silicon Valley. Every government in the world is grappling with companies that have too much influence over the flow of information and commerce. Individually, China’s regulations around antitrust, data protection, or financial risks may pass muster on technocratic grounds. But Beijing issued regulations with a speed and ferocity that no other state can match. It did so for reasons that the West would not: to shift investment and talent into state-prioritized industries and to crush the power that these companies were gaining at the expense of the state.

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.

Even if the United States is able to outclass China in diplomacy, finance, and innovation, the contest between these two great powers is going to be close if the United States can't build anything in the physical world.

The strongest wind in China’s sails is the entrenched technological workforce that preserves process knowledge that I wrote about in Chapter 3 on tech power. Though 50 percent of China’s economy might be dysfunctional, 5 percent is doing superbly well (an approximation I borrow from Greg Ip at the Wall Street Journal).

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.