Yes, We Do Want to Be Like China

One of the more amusing things about Washington is how hard many people work to discover, and then loudly and proudly repeat, the prevailing political and economic groupthink. For several decades, anyone who wanted to be somebody dutifully praised the so-called Washington Consensus: markets good, governments bad.

Now that the Washington Consensus is out of fashion, many have scrambled to latch onto a new orthodoxy to signal their allegiance to. Nature abhors a vacuum, and D.C. abhors real intellectual debate. So a new techno-economic dogma has taken hold: “Okay, maybe we need some government involvement in the economy, but under no circumstances should we emulate China.”

This caution is now obligatory. A recent industrial policy playbook feels the need to clarify, “We don’t want to imitate Beijing’s playbook.” Bloomberg ran an article titled “China Is the Wrong Model for the US Economy.” One free-market scholar wrote that the United States should definitely not copy China. And Rhodium Group warned that a “headlong embrace of [Chinese] statism would be immiserating for many nations.”

The consensus has settled around a convenient middle ground: It’s okay for the government to dabble in tech policy, but under no circumstances should it implement a full-blown industrial policy of the kind China uses—that must be off the table.

Like all policy shibboleths, this is rarely questioned.

Well, it’s time to not only question it, but to reject it outright. The reality is that if the United States doesn’t become more like China, it will lose the battle for advanced technology leadership.

And before anyone starts hyperventilating and asking, “Are you saying we should become a dictatorship?!”—relax and keep reading.

Being more like China doesn’t mean suppressing civil liberties or locking up dissidents. It means four main things:

1. Investing in the Future

China invests more societal resources in innovation and long-term growth. ITIF estimates that China now spends more on R&D than the United States in nominal terms and considerably more when adjusted for purchasing power parity (PPP). China also devotes a significantly higher proportion of its GDP to overall investment. The United States, by contrast, specializes in consumption. Even if China misallocates some of its funds, it is still likely to end up with more effective investments than the United States. In other words, China is out-investing the U.S. and that matters.

2. Targeting Strategic Sectors

China identifies and backs key sectors that provide national leverage. Unlike the United States, Beijing doesn’t believe that potato chips are the same as microchips or that all manufacturing is created equal. It treats a wide range of advanced industries as essential to its future global power—and it supports these sectors unapologetically. To the extent that the United States does this at all, it’s either an isolated intervention (such as the CHIPS Act) or filtered through social objectives (like the IRA’s climate focus), rather than being grounded in a comprehensive national competitiveness strategy.

3. Subsidizing Industry, Because That’s How You Win

China aggressively subsidizes companies in advanced, strategic industries. That’s a big reason why Chinese firms are steadily gaining global market share in everything from EVs to solar panels to telecom equipment. We can whine about “unfair” subsidies all we want, but unless the United States offers its own support—tailored, accountable, and strategic—American firms will keep losing. Take displays. How is a U.S. display company supposed to compete with a Chinese display rival whose capital costs are fully paid for by the government? The answer is simple: it can’t.

4. Building a National Techno-Economic Strategy

At a recent ITIF-hosted Chatham House Rule roundtable on industrial policy, one skeptic of industrial policy laid out three reasons why we shouldn’t “become like China.”

1. Even if we try, we can’t replicate China. No kidding! Of course we can’t. They have a different system and way more money. But that doesn’t mean we shouldn’t mount our own best effort.
2. China wastes massive amounts of money. Sure! Of course they do. But waste isn’t inevitable. The United States can implement what works and adjust what doesn’t, eventually designing a more disciplined and effective approach to industrial strategy.
3. China is still catching up while we’re innovating. Wrong! Of course, I can understand why U.S. leaders want to believe that. As ITIF recently found, China is not just catching up—it’s innovating at the frontier. Meanwhile, the United States now faces the difficult task of reclaiming some industrial ground lost over the last two decades.

I hate that I even have to say this, but fine—here it goes. No, the United States shouldn’t copy everything China does. Democracy is good. Rule of law is good. Intellectual property rights are good. The list goes on.

Copying some does not mean copying all. However, the fact is that we’re not emulating many aspects of China’s model that we should be.

For example, the United States:

• Is not making winning the techno-economic war a top national priority.
• Is not developing sophisticated, coordinated advanced industrial strategies.
• Is not investing enough—directly or via the tax code—in foundational and emerging technologies.
• Is not supporting domestic firms as they fight for global market leadership.
• Is not applying the innovation principle when crafting regulation.
• Is not reining in anti-corporate antitrust attacks on our national champions.

Let’s be honest, those of us pushing for a serious industrial strategy are fighting an uphill battle. And it’s not clear if we “emulators” will prevail. We’re squeezed between the new Washington Consensus that reflexively opposes industrial policy and a left-right coalition that either distrusts government or hates big business.

Still, there’s precedent. In the 1980s and early ’90s, U.S. firms worked closely with the Reagan administration, the first Bush administration, and Congress to advocate for a strong techno-competitiveness agenda to counter Japan’s rise. Today, with Chinese state capitalism threatening to wipe out entire sectors, a similar awakening may occur. We’ll have to wait and see.

If the elites prevail and U.S. leaders continue to reject the best elements of China’s innovation and industry policy system, there may be only one hope left: to convince Beijing to emulate America’s playbook—especially in areas such as the growing animus toward large corporations, the financialization of the economy, the overproduction of lawyers, and, of course, the dominance of neoclassical economics. Maybe then (and just maybe) we’d stand a chance of winning.