Now, most of them are trying to source domestic alternatives or design the necessary technologies themselves. By sanctioning entrepreneurial Chinese companies, he forced them to stop relying on U.S. This has meant that China’s most impressive technological achievements-building state-of-the-art capabilities in renewable energy, consumer Internet services, electronics, and industrial equipment-have as often been driven in spite of state interference as they have because of it. Beijing has, for example, recently begun cracking down on certain consumer Internet companies and online education firms, in part to redirect the country’s efforts towards other strategic technologies such as computer chips. ![]() ![]() sanctions were exactly the sort of spur the country needed:Ĭhina’s private entrepreneurial firms have driven the bulk of the country’s technological success, even though their interests have not always aligned with the state’s goal of strengthening domestic technology. Dan Wang argued in Foreign Affairs (and previously, in a Stratechery Daily Update interview) that U.S. I have spent a fair bit of time over the last few months discussing China’s recent crackdown on its tech industry to me one of the most interesting questions is whether China’s renewed quest to catch up technologically, particularly in the area of semiconductors, might suffer from the country’s recent crackdown. Like laws, they are there to be used, when useful the party remains supreme, above all. The party has embraced markets, but from a position of superiority. Xi, a believer in the historic mission and preordained victory of the Communist Party, is far from receptive to such a message. The largest high-income economies are almost all democracies. South Korea and Taiwan both transitioned from authoritarian to democratic political systems as they became richer. It also potentially implies political change. This inevitably implies some ceding of power by the rulers. ![]() Rules that are transparent, predictable and fairly applied enable market forces to take over the job of directing economic activity, raising efficiency and allowing innovation to flourish. At higher income levels, economies become too complex for command-and-control management by individuals. Ad hoc interventions by governments may work at more basic levels of development. The history of those that have, such as South Korea and Taiwan, points to a need for the state’s role to retreat as markets advance. Relatively few make the transition to high-income status. The middle-income trap describes how economies tend to stall and stagnate at a certain level of development, once wages have risen and productivity growth becomes harder. Matthew Brooker, writing for Bloomberg Opinion, is worried about Xi Jinping leading China into a trap:
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