How the U.S. Stacks Up to China’s ‘Engineering State’

0:00Where were you? What were you doing when you realized that the US had lost its global dominance to China? I was on the train on the Metro North commuting between New York City and New Haven, Connecticut. One day I came across this timetable from 1914. I found that the trains over 100 years ago were faster than they were in 2023. Now, it's not totally an apples to apples comparison because the trains make many more stops today than in the past. But still, something's going really badly off track when we're not building trains that are faster than 100 years ago. What's going on?

0:48This week on Bold Names, Dan Wong. He is a research fellow at the Hoover Institution at Stanford University. He's also the author of a new book. It's called Breakneck, China's Quest to Engineer the Future. That's why I invited him on to talk about the competition between the U.S. and China. And Mims, you went solo this week because I was off. But before I went, you were so excited about getting him on because of all the stuff in his book, the stuff you learned, and also some of the provocative kind of arguments that he's making. Yeah, Dan Wong is very opinionated, but he also brings receipts because he lived in China from 2017 all the way until 2023, where he was a tech analyst.

1:32Dan also has a surprising way of framing the key differences between the U.S. and China. He says China can be understood as an engineering state. The U.S., on the other hand, is a lawyerly society. It's a provocative thesis. The idea is that in the U.S., we have a lot of rules and regulations. They're managed, in Dan's view, mostly by a class of lawyers. That's good in a lot of ways, though. Lawyers protect people's rights. That includes things like access to a clean environment, also the rule of law, and property protections. If you don't agree with something in the U.S., you have a voice. You can dissent.

2:12But Dan says that having all these lawyers around also means a lot of rules and procedures. Those can slow the U.S. down. Like building things. Think of infrastructure projects or housing or manufacturing. manufacturing. Now, contrast that with China. Dan says that China is run mostly by engineers and they like to build stuff. Think of enormous bridges, highways, or in their case, a manufacturing base that's the envy of the world. But China, of course, is a one-party system. People don't often have a say in any of this. They don't have a lot of rights necessarily. And the state has the power to build anything it wants.

2:55Dan and I talk about how China's efforts to engineer the environment have become social engineering through the country's one child policy and, of course, its zero COVID policy. I think this distinction between the US and China is important to keep in mind as you listen to and watch this interview. Dan here talks us through some of the very big challenges that both superpowers are facing now. And Dan was in China at a time that It was both interesting politically and geopolitically, right? Chinese leader Xi Jinping was consolidating his domestic hold on China, getting that third term, and also looking outside of the borders, trying to develop even closer relationships with perceived U.S.

3:38rivals, Russia and North Korea. Right. And obviously, things have just gotten more tense between the U.S. and China since then. Meanwhile, China's having some economic issues of its own, slowing growth. there could hardly be a more timely guest. Oh, absolutely. This is a good one.

3:59From the Wall Street Journal, I'm Tim Higgins. And I'm Christopher Mims. This is Bold Names. Today we ask, when it comes to the U.S. and China, which country ultimately has the upper hand in today's geopolitical and technological arms race?

4:19so let's take a big step back and you know why are we talking about China and the U.S. at all right they're the two biggest economies in the world they're the number one and two manufacturers and you frame it in a way that that I think is is very useful and so could you lay out for me kind of what is it when you really boil it down that the US is versus what China is when we're just trying to give people a shorthand? So the central thesis of breakneck is that China's a country I call the engineering state because at various points, the entirety of China's most senior leadership, all nine members of the standing committee of the Politburo.

5:01And that Politburo effectively controls the whole country. That's right. It was the highest ruling echelon within the Communist Party. And so these were people trained as thermal engineers or electrical engineers or mechanical engineers. And what is it that engineers like to do? Well, they build, build, build. They kind of treat building another mega project as the solution to all of their problems. I contrast the engineering state with the United States, which I call the lawyerly society. The issue with lawyers is that they block absolutely everything. And I sort of came up with this framework in part to move away from these 20th century political science terms like capitalist or socialist or autocratic or neoliberal, whatever that means, to try to reason through the tensions between the US and China at the moment.

5:52It's kind of my simple shorthand for just thinking about what explains the pathologies of these two big superpowers. Yeah, I love that both of these characterizations fly in the face of sort of the cartoonish, for somebody like me, you know, raised on like 80s films where it's like the American hero versus the communist villain. And then like the Loyalty Society is not really a Rambo-like figure. And the engineering state where you actually have a pretty light social safety net and everything is geared toward really giant corporations, that's not very conventionally communist. And I just highlight that because I feel like yours is a truer framing and it really kind kind of, you know, bake my noodle in terms of thinking differently about how each of these countries function.

6:46I think it'll really help our listeners if you can give a concrete example. Let's start with China. Let's start with the engineering state. But let's start with something that's very familiar. Most people are going to have one sitting in their pocket. You know, China is where still most of the components for the iPhone are made and made on a scale that's kind of incomprehensible in all of history. What is it about the engineering state which has made, ironically, this iconic American company, Apple, possible? Shenzhen is one of these legendary Chinese cities that substantially liberalized. It built at breakneck speed.

7:24Tim Cook and Steve Jobs decided that Shenzhen was going to be the site of most iPhone production. It was kind of a natural choice because Foxconn had already been building a lot of iPods in Shenzhen at that time. Right, and Foxconn being Apple's number one contract manufacturer. The biggest contract manufacturer in the world that is this big Taiwanese company that other electronics makers contract to organize their workforces to produce their PCs or game consoles or iPhones. And after iPhones started rolling off the assembly lines, Shenzhen is just now the undisputed hardware capital of the world.

8:01And so Shenzhen is now the headquarters of companies like DJI. It is the headquarters of Tencent, one of China's most innovative internet platforms. It is just building a lot of stuff. And one of the things I point out in my book is that, you know, if you want to figure out what Detroit was like in its heyday of production, I wouldn't go to Detroit today. I would go to Shenzhen to see historic Detroit. And so Shenzhen is the site where you had this giant manufacturing workforce rubbing shoulders with investors, being the site of a lot of universities as well. And so this is kind of the magic of China's manufacturing ecosystem where you just had so many ingredients in place to produce innovative devices at great scale.

8:46And let's talk about the lawyerly society. You know, this example is almost, it's almost like a hoary old chestnut at this point. But if people don't know, we should talk about it. And that is California's failure to build high-speed rail and how that contrasts with China's, the fact that China now has more high-speed rail than every other country on earth combined. How does California's inability to build high-speed rail exemplify the lawyerly society? I go back to 2008, which was a pretty important year for high-speed rail in both the U.S. and China. So in 2008, the voters in California approved a referendum to build a high-speed rail line between San Francisco in the north and Los Angeles in the south.

9:35In 2008, China began construction of its major, most profitable high-speed rail line connecting Beijing and Shanghai. So three years later, China actually completed the Beijing to Shanghai high-speed rail system. And over the first decade of its operation, this rail moved about 1.3 billion passenger trips. What has happened in California since 2008? Well, here it is, and here we are in 2025. They've really reduced their ambitions such that segment one is supposed to connect only Bakersfield and Merced. It is slated to open this first segment somewhere around 2030 to 2033. That's the official estimate from the California state government.

10:20And maybe we will have high-speed rail 20 years after California first approved this big referendum, but the Chinese were able to do this in three years. And it's just going to move billions more people, billions more passenger trips than whatever California is able to accomplish. You had this great line in your book. You said the US manufacturing base has rusted from top to bottom. And to read that as somebody who writes so much about manufacturing in the US, I was just like, ouch. What did you mean? I meant that if you take a look at America's apex manufacturers, who is still making a lot of products, manufactured products today, I would point to Intel, the semiconductor maker.

11:05I would point to Boeing, the aviation maker. I would point to the automotive sector, which consists of Detroit automakers plus Tesla. And if you take a look at these apex manufacturers, almost always the headlines, including from the Wall Street Journal, are a tale of woe about these big manufacturers. Intel has been slipping extensively. Mostly what we hear are its layoffs and how it is not meeting a quality production targets. Boeing has also had a lot of safety failures. That's very well covered. Detroit's has been falling for decades now. Now, for a while, Tesla was kind of the bright spot in American manufacturing, but that's pretty uncertain now, given how erratic Elon Musk has been over the last couple of years.

11:50If you take a look at just the broader data of American manufacturing, manufacturing output fell pretty substantially since 2008. It's never really recovered. The U.S. has lost about a million manufacturing workers since about 2008. And if you take a look at some of these more simple, basic products, the U.S. simply hasn't covered itself in glory at the start of the pandemic when its manufacturers had a really hard time shipping products that were relatively simple, like masks and cotton swaps. We had shortages of all of these goods at the start of the pandemic in 2020. And if you take a look at some pretty critical military goods, something like munitions, Ukraine has drawn down a lot of American stocks in its defense against Russia, but the U.S.

12:37hasn't really been able to get munition shells restarted either. And so I think that the U.S. has rusted from top to bottom. Maybe there's still some successes out there in something like semiconductor production equipment. I'm sure we can find some bright spots here and there. But for the most part, the U.S. hasn't been doing all that well. Why does this matter? And when I say that, China for a long time, before its pivot to, you know, I think in the book, what you call hard tech and infrastructure, was pursuing this U.S. model of who cares where things are made, will control the intellectual property.

13:12You know, it's manufactured in Shenzhen, but it's designed by Apple and Cupertino, you You know, NVIDIA controls all of its IP and has all the know-how and the critical software and designs, which are then, of course, manufactured by TSMC and others, TSMC in Taiwan specifically. Why does it matter that it's rusted from top to bottom? Isn't this the goal? Aren't we trying to dematerialize our entire economy? Maybe it doesn't matter so much. So if you take a look at stock valuations, it is certainly pretty remarkable that American tech companies hold up so much stock market growth. It is pretty remarkable that there are multi-trillion dollar companies, namely, especially NVIDIA out there making all of the AI chips.

14:01But I think if you are sitting almost anywhere else, again, I'm speaking to you from Michigan. People here aren't celebrating the stock valuations of NVIDIA. They're saying, my goodness, the jobs shouldn't have moved south into the United States and the other sorts of production shouldn't have moved to China. The elites certainly have the sense that, well, maybe it wasn't a very good idea that we are now pretty dependent on China for something like rare earth magnets. When Beijing suspended exports of rare earth magnets. All electric vehicles and weapons systems. Which are pretty important, right?

14:39I think weapons systems are important. I think electric vehicles are important. And automakers immediately panicked when they couldn't get Chinese for Earth magnets. I think that we live in a material world. Maybe there are a lot of people who would like nothing better than to disappear into the computer and become an algorithm or something. And that's not the life you and I live, Christopher. That's not the life that most people live. I think we live in a physical world and we need to make stuff. And that's still pretty important. We reached out to the California High-Speed Rail Authority. A spokesperson said that while the Central Valley line is a critical part of the statewide Phase 1 high-speed rail system from San Francisco to Los Angeles, last month's report to the state legislature, quote, provides a clear path forward to connect the high-speed rail system to northern and southern California via the Central Valley by 2039.

15:35He also said that China's high-speed rail, quote, benefits from state control, low land acquisition cost, and high population density, whereas California's has had time and cost increases due to factors such as environmental, local needs, and legislative complexity. We also reached out to Tesla, which did not respond to a request for comment. Coming up, the engineering state has its benefits, especially when it comes to building infrastructure. But what happens when it encounters a problem that engineering alone can't solve? I think one of the challenges is that the engineers can only engineer their way out of problems, even the ones that are created by engineering.

16:25Stay with us.

16:40So the knowledge that we've lost to build and to live in that physical world, that's process knowledge. What is process knowledge? What is it that we have lost, which goes beyond just the infrastructure to do all this manufacturing? So I like to think of technology as three different things. So the first thing that technology is, is the tooling, the equipment. This is the really observable stuff. So in a kitchen analogy, this is the pots and pans. This is the stove. This is the spatula that we need to cook something. The second component of technology is written instruction. So these are things like patents and blueprints, all of the stuff that we're able to write down like a recipe as well.

17:25And the third, I think the most important part of technology is something I call process knowledge. You can also refer to this as know-how. There's a Greek word metis to refer to this. You can talk about this as tacit knowledge. And I think this is the most important part of technology because a lot of things can't be written down and a lot of things can't be encoded as equipment. So if we're sticking with a kitchen analogy, let's think about giving someone who has never cooked a day in his life before the most wonderfully equipped kitchen and most exquisitely detailed recipe. Can we expect that person to do something as simple as making scrambled eggs?

18:04Or maybe he'll make a big mess because he's never cooked anything before. And so it is a lot of this process knowledge that disappeared when American communities of engineering practice dissipated, when a lot of jobs moved away from where they were. And so one One of these thought experiments I always wonder about is, let's say that Tim Cook and Steve Jobs decided that they weren't going to build these factories in Shenzhen. Let's just say for the sake of fantasy that they built all of these iPhone manufacturing hubs in Wisconsin, Ohio, Michigan, Pennsylvania. One might well imagine that in the future, it's Pennsylvania that created all of these follow-on innovations around the smartphone.

18:45So maybe it could be the case that All of these battery technologies could be built in Pennsylvania. All of the screen and acoustics technologies, all of the consumer drones could still be in the U.S. But right now it is Xinjiang that's making all of these pretty critical materials. Let's turn back to China, because the engineering state has its flaws. They're not just engineering, you know, giant new water transportation infrastructure and high speed rail and factories. They're also doing a lot of social engineering. What are the excesses of the engineering state? For the most part, I think that the engineering state is really, really good once it builds a lot of infrastructure.

19:30You can certainly point to a lot of unprofitable bridges, unprofitable high-speed rail lines. But for the most part, I would say that it is really, really good to be building more mass transit, more trains, more subways, more bridges that connect people. And physical engineering, for the most part, is pretty good in spite of a lot of waste and a lot of profitability. And I think it would be excellent if the Chinese stopped themselves at physical engineering. But the problem, the fundamental problem with the engineering state, that they cannot restrain themselves. They cannot restrain themselves to be social engineers, and they cannot restrain themselves to be also population engineers as well.

20:07We take a look at modern China. A lot of the human rights abuses are concentrated with ethno-religious minorities in Xinjiang, as well as Tibet. Even if you're in the high majority, there has been all sorts of controls on your life. namely the hukou system, which is called household registration, which makes it really difficult for a migrant worker to move to a hidden city on the coast and have her child be educated in the schools. And I focus a lot in my book on the one-child policy, as well as zero COVID. And the one-child policy, as I wrote, produced this sort of campaign of rural terror that really severely disrupted a lot of families in rural China that really relied on multiple children as their only guarantee of livelihood.

20:52I also lived through the zero COVID pandemic. And what zero COVID led to was Shanghai being locked down for about eight weeks in which 25 million people could not step foot outside of their apartment compounds over the springtime of 2022. And so these are the sort of ways in which the physical engineers sort of treated the population as just another building material, as if it could be torn down and remolded as they wish. And that's really the sin of the engineering state. Yeah. And there are ways in which the engineering state seems to get in its own way, even with respect to its stated goals of building things and economic dynamism.

21:34And so, you know, you have a great example in your book where you said, you know, at one point she was asking where all of China's unicorns had gone, tech unicorns, right? How are these companies faring now? Is the engineering state kind of learning its lesson that there are these excesses to how it tries to control the economy? I think one of the challenges is that the engineers can only engineer their way out of problems, even the ones that are created by engineering. And so you're referring to a meeting I wrote about when Xi Jinping was touring the province of Shandong. And at this economic symposium, he started asking, oh, what happened to all of our unicorns?

22:20And some snarky people on the internet whose comments were quickly censored called Xi the unicorn hunter-in-chief, who didn't even really realize what he was doing. I think it's not unfair to say that Xi is not some sort of great economic thinker. This is not where his strengths lie. And he's sort of strangled and hunted down most of China's most wondrous beasts for creating a lot of economic value that investors were getting really excited about. I don't think that China is really creating an excellent startup environment right now. They are doing some supportive policies on artificial intelligence.

23:00They're trying to help deep seek along. But I also am really reminded that the one-child policy started as an engineering exercise, in which the country decided that, well, we can just stop people from reproducing because it judged, I think, incorrectly that China had an exploding population. But now, how are they trying to get people to really have children again? Well, they're really deploying the tools of the engineering state once more. They're deploying party members. Many of these are people with too much time on their hands to harass women, younger families, asking women, when was your last period?

23:38Well, why don't you have another child? And so they're kind of hounding and harassing a woman to say, why don't you go have some children? And I don't think this is going to work. It is a lot more easy to block people from having children by sterilizing them or forcing abortions upon them than it is to encourage copulation. After the break, we will find out why Dan Wong says he's worried the U.S. lacks the industrial base required to produce critical goods, from rare earth magnets to antibiotics. I don't like it when any country is so dependent on an adversarial relationship in order to supply critical goods.

24:20I think this is where the U.S. really needs to figure out, well, AI really solve all of these critical deficiencies, or should it actually try to make a lot more stuff instead? That's next.

24:48Are the excesses of the engineering state in China, does that provide an opening for America to regain its footing in terms of the battle over who is building the future with tech at the very least or in any other areas? I think one thing that is similar between the US and China are that they are both delivering all of these self-humiliations on a daily basis that are beating themselves up as quickly as they can. I think the game is going to go to the country that just manages to stop beating itself up all the time. So the least bad policymaking? That's right. So stop spanking yourself, I think, would be a great policy.

25:33policy. I think that Xi Jinping has been this remarkable unicorn hunter. I'm not sure that Donald Trump is being a great unicorn breeder right now. If we're thinking about all of these manufacturing problems that we've noted earlier in the conversation, I'm not really sure that the Trump administration is delivering anything of a manufacturing renaissance. I think the tariffs are on net pretty bad for American manufacturing. If we take a look at manufacturing employment since April, since Liberation Day. We'll see that the U.S. has lost about 40 ,000 jobs since Liberation Day in manufacturing alone.

26:09And so that isn't promising any sort of a great renaissance. I struggle to think that the U.S. can stay a scientific leader by depriving the scientific agencies of a lot of funding. So I think the estimates out there are that National Science Foundation and the NIH have about half of their funding cut by the Trump administration. I think there is something real to the Trump deregulatory agenda. I think that might well be quite positive. But I think on net, the Trump administration is producing many more headwinds than tailwinds for achieving some sort of a technological renaissance in the U.S.

26:44So what can the U.S. do better? How can the U.S. be more of an engineering state without becoming a social engineering state? I want to start with the simple stuff. So there are so many of these headlines that San Francisco wasn't able to build a public toilet very well. It cost something like$1.3 million to build. 1.7 million was the estimate. It came in well below that only because a construction firm volunteered its services. Volunteered. This is strange. We don't need the volunteering. We just need these contractors to do a good job. So I just want us to get the simple stuff, right? Denmark, I just spent a month in Denmark, which has these superb subway stations.