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Zhang Youxia, Liu Zhenli, He Weidong, Li Shangfu, Wei Fenghe, Miao Hua, He Hongjun, Wang Xiubin, Lin Xiangyang, Qin Shutong, Yuan Huazhi, Wang Houbin, Wang Chunning—all central committee members, all senior military-politicians of great authority and weight, all purged, and they are only the tip of the iceberg.

This AM we have:

Adrian Monck: The End of China’s Central Military Commission <https://7thin.gs/p/china-military-purge>: ‘What the Zhang Youxia purge tells us about Xi Jinping’s China:

1. Xi Jinping has gutted his high command: On Saturday, China’s Ministry of National Defence announced that Zhang Youxia – the country’s most senior uniformed officer – was under investigation for ‘serious violations of discipline and law.’ Also swept up: Liu Zhenli, chief of the Joint Staff Department. With their removal, China’s top military body, the seven-member Central Military Commission appointed at the 2022 Party Congress, has essentially ceased to exist. The only remaining members are President Xi himself and the head of the Discipline Inspection Commission. Five of six uniformed officers have been purged in less than three years. China’s military leadership is now a politician and someone from internal affairs, with no one between them and an officer corps that has just watched every senior general disappear.

2. Zhang wasn’t expendable – which is why he’s gone: Zhang was from China’s revolutionary aristocracy. He served in the 1979 Sino-Vietnamese War and the 1984 Battle of Laoshan. His father, Zhang Zongxun, fought alongside Xi’s father during the revolution. The two families could trace their connections to the same region of Shaanxi. In 2017, a retired PLA officer told the South China Morning Post that Xi once saw Zhang as a kind of elder brother. But even families have feuds.

Former Pentagon China hand Drew Thompson met Zhang during a 2012 delegation to the United States. He says Zhang stood out from his peers: intellectually curious; willing to engage with foreigners; respected by his staff as a soldier rather than a pen-pusher. He jumped at the chance to fire a machine gun at Fort Benning. He asked smart questions. He had, says Thompson, ‘an aura of competence around him,’ but not an aura of indestructibility…

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The rest Adrian has put behind his paywall.

So I get to continue this by saying what I think we should draw from this bizarre chain of events—which, I think, is largely aligned with Adrian’s point of view. A

drian puts what I think is the right big conclusion in an if mode: “If Xi genuinely believes that a corrupt PLA is no PLA at all—that selling ranks poisons everything downstream—then the purges follow their own logic, whatever the cost to institutional continuity.” I would make that stronger: it is not an if hypothesis but has a very high probability of being a correct description of what is going down.

Because Xi believes, and all the stories the CCP tells itself about how it won the 1945-9 civil war reinforce his belief, that a corrupt army is no army at all, Xi now believes that he has no choice but to continue the purges until all of the corrupt rot in the PLA is, well, purged.

To that end, Xi Jinping has constructed a bureaucratic machine to carry out purges of the corrupt: a political order whose main tool is permanent, performative purging—much like what Stalin did in the 1930s when he concluded that something big had gone wrong when Stalin’s hand-picked senior party officials like Sergei Kirov more than they liked him. And so Stalin built a machine to find and root out the disloyalists. And, ultimately, it turned out nearly everybody old enough to have known Kirov before Stalin had him assassinated was disloyal. As Adrian says: When you build an Inquisition, you should not be surprised that it keeps finding and burning heretics.

This dynamic is reinforced by three other things very much in the forefront of Xi Jinping’s mind:

• The first is that everyone and everything in the junior-senior leadership of the PLA is and has long been deeply corrupt.

• The second is that Muscovy ’Rus’s corrupt army failed, and is now churning up 30,000 or so young Muscovite men a month killed and maimed. (Cf. likely Ukrainian killed-and-maimed pace of 10,000 a month.)

• The third is that espionage allegations raise the stakes—their corruption knows no bounds, as they will do anything for money.

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Hence when the purge trail reached Zhang Youxia, not princeling status, not war veteran status, not longtime Xi ally status, not having been at one time Xi’s “elder brother” in the party, could keep him from becoming a subject of the purge. So now Xi has completely dismantled the Central Military Commission: purged five of six uniformed members since 2022, leaving the PLA’s top command effectively beheaded. Lower down, the number of officers in some way disciplined really has now probably risen into the six figures.

I reach for analogies as to what this is doing to the PLA as an organization—both a peacetime bureaucracy and something that might actually be tasked with doing something violent—and I find myself at sea.

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Adrian Monck: How to Get a Job in the Chinese Communist Party <https://7thin.gs/p/china-communist-party-jobs>: ‘There’s a phrase that circulates on Chinese social media: “every road leads to biānzhì”—biānzhì is a job with the state, which means a career, benefits and a pension…. Tech jobs disappeared in the regulatory crackdowns. Property sector careers vanished with the developers. Export manufacturing faces tariffs and reshoring…. The only rational destination was… government…. Your parents were right. Nie Huihua… has become an unlikely guide to this world. His videos on bureaucratic life have racked up tens of millions of views. His new book, The Operating Logic of Grassroots China, is a bestseller. In a recent podcast, he asked a question his audience of aspiring civil servants rarely considers: what happens after you get in?

‘Before you apply, understand what you are joining. Nie’s core insight[:]… “hierarchical resource allocation.”… Resources flow toward power, and power is organised by administrative rank…. Higher-ranked officials can secure resources from above. Beijing, Shanghai and Shenzhen are not rich because they are efficient. They’re rich because they are politically important, which attracts resources, which makes them efficient, which reinforces their importance. This has practical implications… The position you secure determines… the entire infrastructure of a decent life…. Geography is destiny, but geography is set by administrative hierarchy….

The examination tests memorisation and procedural knowledge. It doesn’t test what actually determines success.

Nie is pretty direct about what you need to do well…

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The rest of it is below Adrian Monck’s paywall. But let me excerpt the list of things you need to succeed as a government official, according to Nie Huihua are:

• Sharp eyes (眼尖) – knows who’s rising, who’s falling, and what superiors actually want as opposed to what they say

• Zipped lips (嘴紧) – keep secrets, no leaking, don’t gossip

• Tireless legs (腿勤) – run errands without complaint, always available, never say no

• Write well (文笔好) – draft reports, speeches and minutes fluently, makes superiors sound intelligent

• Poker face (喜怒不形于色) – conceal frustration, anger, and over-enthusiasm

• Thick skin (能忍辱负重) – accept unfair criticism, take the blame for others’ failures, don’t fight back

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Let me now reflect on what I have posted from Monck’s piece, and on the rest of it below his paywall:

I have to start with the big and major point: Most of this is normal—for the human collective societal-organizational institution we call “bureaucracy”. Every civil service everywhere—across time, across space, across political systems—complains about the same things. The gap between what gets measured and what actually matters. The perverse incentives that emerge when you try to make legible what is fundamentally illegible. The paperwork that crowds out the actual work. The patron who falls and drags you down (or, optimistically, rises and carries you up). These are not Chinese characteristics. These are bureaucratic characteristics—as true in Washington and Brussels and Whitehall as in Beijing, as true in the 800s as in the 2000s.

What makes China most interesting is not that it has a bureaucracy, and that its bureaucracy has these problems. What makes China most interesting is that it has so much bureaucracy, and has and has had it for so long. Its bureaucracy has thus had more time to think about itself and adjust itself, as a hegemonic institution, than bureaucracy has had anywhere else.

That, I think, must have consequences.

The keju imperial examination system ran from 607 to 1905: over 1,300 years. It was the world’s first meritocratic institution. The effects persist today—prefectures with more jinshi degree-holders in the Ming-Qing period still show higher educational attainment in 2010; a doubling of jinshi holders, an 0.7-year increase in schooling today. Tang Dynasty poets like Bai Juyi were already writing about preferring “the carefree life” to the burdens office-holding, when “palace eunuchs had gained control of the throne” and political advancement had grown uncertain.

Now Chinese bureaucracy has been, historically, better than most—better than nearly all. Stability, Relative prosperity. Relative peace. Face it, in the long agrarian age, more likely than not CHINA RULED!!

Why? As I see it, three reasons: First, the exam selected for competence. Second, the exam acculturated, for studying hard enough to succeed in it could not but bath the scholars’ brains in the Confucian moral philosophy that emphasizes virtue, merit, and reciprocity. Third, the exam acculturated in another way, as it trained candidates in S.O.P. that meshed with those above, below, and beside you in your position.

You thus got a baseline of meritocratic competence, objective alignment, and confidence that you understood what your collaeages were likely to do. Other systems struggled to match this, and failed.

But—here is the rub—since before the first Tang Emperor, “exam” and “job” have selected for different things. The exam selects for competence. The job selects for compliance with the will of your superior, who if you are lucky becomes your patreon. If you are not lucky, he makes you the fall guy and moves you out so one of his clients can move in. If you are lucky, and if your patron rises, you rise as well, with high probability. But if your patron falls, you fall.

All this is par for the bureaucratic agrarian-age course. The defects of the hegemonic Confucian bureaucratic order and the scholar-bureaucrate-extractor-landholder-student-scholar cycle were small beer compared to the defects of other agrarian-age societies-of-domination.

But this is no longer the agrarian age. In the modern Schumpeterian Age, stability = ossification and dysfunction as the underpinning of every single ruling-class order vanish as the mode of production earthquakes. And that puts prosperity and peace in grave danger.

Plus we now have to layer on top of this the specific dysfunctions of contemporary Chinese governance. First, a great deal of Chinese local government is based on lthe sale of land development rights. That only works with rising land values. That only works with income growth. It might work, alternatively, with population growth, but without income growth you have population decline. Statistics are dodgy. But it does look like, since the plague, land sales revenue has collapsed from 2/5 to 1/5 of local government revenue. This is a dire crisis, without—so far—even a hint of a solution.

Second, Chinese local government officials are tasked with conducting regional industrial development policy, including venture capital investments. They have no particular skill at these. Moreover, their incentive structure is bad: short tenures, risk aversion, pressure to show activity and so forth. That makes them likely to be systematically worse than private investors would be. And, of course, credit for any successes are taken out of the hands of worker-bee bureaucrats and grabbed by higher-upstream bosses; while the manure from failures higher up rains down.

Third, since 2012 Xi Jinping has attempted to curb corruption and improve bureaucratic performance by instituting what the Russian writer Gogol dramatically wrote about in 1836 in his story of Khlestakov, who is mistaken for the real Inspector General. increased central inspections. The —central investigators examining local officials—dates to imperial times but has intensified into what Minxin Pei describes the transformation of this xunshi system as a shift “from purge to control”: rather than pruning the worst, guarding against the inevitable arrival of the Inspector General becomes a major focus of effort. Overcentralization looms.

The Party-State recognizes all of this: Nie Huihua’s analyses are critique sanctioned and welcomed by the highest levels, not samizdat whispers. And yet Nie Huihua offers no systemic solutions. None. Instead, he offers a survival guide for careerists—including exercise (as you can control your health even though you control nothing else), read history (to gain a sense of how things might suddenly change and be different), and learn English (to keep as many options open as possible).

Are China’s bureaucratic pathologies truly worse than those of its peer aspirants to “forging the future” status on this here globe?

I think they are different in kind and—right now—more constraining:

• India’s problem-set is state capacity scarcity: fragmented administration, uneven tax extraction, limited local delivery—yet also plural centers of accountability and competitive politics that, while noisy, periodically refresh incentives.

• Europe’s challenges are coordination and risk appetite: it can write excellent rules and mobilize subsidies, but often hesitates at the frontier—industrial bets arrive diluted, and macro impulses are counter-cyclical at precisely the wrong times.

• America’s maladies are polarization and veto-point overload: it still does science, scale, and capital formation superbly; it does follow-through haphazardly.

China’s disadvantage is that the greater hegemony of the bureaucratic operating system—hierarchical resource allocation, land-finance dependence, inspection-centric control—makes discretion costly and truth dangerous. When promotion follows patrons rather than performance, risk shifts downward and blame flows downward faster. In that environment, Nie Huihua’s survival lexicon—sharp eyes, zipped lips, tireless legs—is rational. But it is not developmental. And with land sales now a fraction of pre‑pandemic revenues, local governments’ room to maneuver has shrunk at precisely the moment when experimentation is most needed.

Can Xi Jinping and other forces surmount this?

To a degree:

• Xi Jinping can recentralize fiscal capacity.

• He has already intensified oversight.

• He can compel sectoral mobilizations (chips, EVs, grid, machine tools) and will get visible output.

• But my inner von Hayek forces me to believe that the deeper problem is informational: overcentralization starves the center of honest signals and starves the periphery of initiative.

• The historical Chinese fix—meritocratic exams and shared Confucian norms—uniquely aligned competence in an agrarian-age society-of-domination.

• It did not align incentives for dissent, error-correction, and local search.

Unless the Party-State rebalances toward transparency, longer tenures, accountable budgets, and permissioned risk at the edge, China will continue to deploy capacity impressively while discovering—too late—that that was not where it actually needed most to adapt.

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es, I am biased, because Wang is my friend. But I would say the same thing if I did not know him. Nor am I alone. The economist Tyler Cowen calls Breakneck “arguably the best book of the year flat out.” John Thornhill of the Financial Times calls it “compelling, provocative and highly personal.” Stripe CEO Patrick Collison says that Wang “illuminates China like no one else.” Bloomberg’s Tracy Alloway calls him “one of the best China writers out there.”

At seven, Wang’s family migrated from Yunnan, in China’s far southwest – where the local dialect differs from the Mandarin spoken in Beijing as much as Louisiana Cajun does from the English of Down‑East Maine. He now rotates between Palo Alto and Ann Arbor, and has lived in Toronto, Ottawa, Philadelphia, Rochester, Freiburg, San Francisco, Kunming, Hong Kong, Beijing, Shanghai, and New Haven.

An insider‑outsider across Canada, China, and the United States, Wang finds both China and the US “thrilling, maddening, and bizarre.” Drive around either and you will find places that feel deranged. He does not mean this as a reproach. Unlike tidy Canada, where he feels relaxed, China and America each exhibit the hallmarks of an engine of global change.

READ MOAR at Project Syndicate: <https://www.project-syndicate.org/commentary/china-and-us-each-can-learn-from-the-other-dan-wangs-breakneck-by-j-bradford-delong-2025-08>

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Breakneck describes China as a country of the sledgehammer, and America as a country of the gavel. China’s technocratic engineering elite solves problems with concrete, steel, and scale – with roads, bridges, power plants, and other massive projects. The same impulse extends to society, reflected in the notorious one‑child policy and the repression of Tibet and Xinjiang. China’s technocracy prizes order, control, and visible achievement.

By contrast, America’s legalistic elite solves problems by assigning rights to property and security. This creates the conditions for people to live as they wish, and enterprise and innovation follow as a matter of course. The reflexive response to any problem is to establish another entitlement or right, pulling more people into the frameworks required for agreement and approval.

At bottom, though, Americans and Chinese are alike – a fact that stands out when you compare Chinese to Japanese and Koreans, or Americans to Canadians and Europeans. Both peoples are restless and innovative. Both mix crass materialism with admiration for entrepreneurs. Both tolerate tastelessness. Both love competition. Both are pragmatic and will often rush work to “get it done.” Both countries teem with hustlers and hucksters selling quick paths to health and wealth. Both admire the technological sublime – grand projects that push the limits. Elites and masses in both countries share a creed of National Greatness, represented by John Winthrop and Ronald Reagan’s “City upon a Hill” in America, and in China by the “Central Country” inscriptions on Zhou Dynasty bronze ritual wine bowls.

Both countries are also tangles of imperfections, often making them their own worst enemies. Old labels like “socialist,” “democratic,” or “neoliberal” simply do not fit, either. China delivers rapid, visible material progress, but at a cost to rights and with risks of overreach. Its Leninist technocracy goes off track with social engineering, careening from practical to preposterous.

America goes off track by spending too much time specifying and vindicating rights, becoming a super‑litigious veto‑ocracy. Safeguards restrain excess, but also produce stagnation and squandered ambitions.

China would benefit from more respect for rights and impersonal rules. Yet China’s elite sees little appeal in any system that can elevate a Donald Trump instead of a Xi Jinping. Equally, the US once built ambitiously, especially between the late nineteenth century and the post‑World War II era, but it now needs to reclaim that building and engineering spirit.

American sclerosis shows up even at the frontier of the global economy. Silicon Valley says it prizes invention, but it builds moats from network effects and legal maneuvering. China, by contrast, prizes scale and production, embracing the ethic of Intel’s famous former CEO, Andy Grove. If either Silicon Valley or the Pearl River Delta could balance engineering scale and ambition with strong legal rights and safeguards, it would be unstoppable.

What makes Breakneck special is how it blends theory, economic data, sociology, and personal observation. Too much China talk nowadays mixes distant, derivative third-hand reporting with think-tank abstractions. But Wang lives the story. Familiar with the food, streets, cities, and politics in China, America, and Canada, he brings the perspective of both a native insider and a visiting outsider to each, letting readers see, feel, and taste the places that are moving the contemporary world. Details that seem like color become the substance of understanding.

One of the world’s most urgent and challenging twenty-first-century task may be to forge a synthesis of the best of China and America, while avoiding the worst of each. Read Breakneck for the reporting as much as for the argument – and for its meditation on the trade-offs between ambition and restraint, building and blocking, sledgehammering and gaveling.

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My friend Dan Wang's Breakneck: China's Quest to Engineer the Future is out this week. It launches Tuesday, August 26: <https://www.amazon.com/dp/1324106034/> <https://danwang.co/breakneck/>.

• Wang, Dan. 2024. Breakneck: China's Quest to Engineer the Future. New York: Farrar, Straus and Giroux. <https://danwang.co/breakneck/>.

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I am biased, because he is my friend. However, you need to read it. I would say the same thing if I did not know him from Adam. And I am not alone: Tyler Cowen calls it "arguably the best book of the year". John Thornhill calls it "compelling, provocative and highly personal". Patrick Collison claims that it "illuminates China like no one else". Tracy Alloway calls him "one of the best China writers out there".

Breakneck is Dan Wang’s sharp, lived account of a world with two dynamos: the “thrilling, maddening, and bizarre” engines of change that are China and the United States.

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James Cham and Noah Smith interviewed Dan about the book on a Bloomberg zoom last Friday. Below are my Chatham House-style notes on the conversation. But, first, let me transcribe the opening:

Dan Wang: Noah, want to tell us a good joke?

Noah Smith: Me? Yes! What do you call a pig with three eyes?

Dan Wang: What’s that, Noah?

Noah Smith: Pi-i-i-g!

James Cham (loses it): That’s terrible!

Noah Smith: I got another one!

James Cham: OK!

Noah Smith: What do you call an elephant crossed with a rhino?

Dan Wang: What’s that?

Noah Smith: Hell if I know!

James Cham: OK. That’s painful.

Dan Wang: That’s not as good as the pig…

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My Chatham-Style Notes:

1. China and America as “Dynamos” of Global Change: Breakneck is Dan Wang’s sharp, lived account of a world with two dynamos: the “thrilling, maddening, and bizarre” engines of change that are China and the United States. China solves problems with concrete, steel, and scale and then extends that mindset into counterproductive social engineering. America solves problems with rights, litigation, and vetoes—protecting freedoms while sacrificing speed and ambition…

2. The Sledgehammer vs. the Gavel: Engineering State vs. Lawyerly Society: Breakneck sees China as the country of the sledgehammer. Breakneck sees America as the country of the gavel. China’s technocratic engineering élite solves problems with concrete, steel, and scale—roads, bridges, power plants, hyperscale projects. The impulse extends to society: the one‑child policy and repression in Tibet and Xinjiang. This technocracy prizes order, control, and visible achievement. America’s lawyer élite solves problems by assigning and vindicating rights to property and security. Enterprise and innovation follow as people live as they wish…

3. The Need for Synthesis, Not Choosing Sides: The big payoff isn’t choosing sides but synthesizing strengths: engineering drive with rights and due process. If either Silicon Valley or the Pearl River Delta could balance engineering scale and ambition with strong legal rights and safeguards, it would be unstoppable. About 20% more building-engineering in America, about 40% more respect for rights-process in China, and each would truly attain the utopian hopes and dreams of a John Winthrop or of a Chéng Wáng (成王)...

4. Lived Experience as the Foundation for Analysis: Read it for the reporting as much as the argument. It is a field guide to the trade‑offs that will determine the twenty‑first century, for Dan Wang lives his China story—streets, factories, lockdowns—and writes with the analyst’s clarity, the reporter’s eye, the insider’s local knowledge, and the outsider’s perspective. Breakneck is a corrective to clichés and a blueprint for balancing ambition with restraint…

5. Restless Transformation as a Shared Trait: At bottom, Americans and Chinese are alike. The likeness stands out when you compare Chinese to Japanese or Koreans, and Americans to Canadians or Europeans. Both peoples are restless, eager for shortcuts, and drive much of the world’s change. Both mix crass materialism with admiration for entrepreneurs. Both tolerate tastelessness. Both love competition. Both are pragmatic—“get it done”—and often rush work…

6. Old Labels Don’t Fit: Beyond “Socialist,” “Democratic,” or “Neoliberal”: Both countries are tangles of imperfection, often their own worst enemies. Old labels—“socialist,” “democratic,” “neoliberal”—do not fit. China delivers rapid, visible progress, but at a cost to rights and with risks of overreach. It goes off track with social engineering, becoming a Leninist technocracy with grand‑opera traits—practical until it turns preposterous. America goes off track by spending too much time specifying and vindicating rights, becoming a super‑litigious veto‑ocracy…

7. China’s Technocratic Elite & the Bias for Building: China’s technocratic engineering élite solves problems with concrete, steel, and scale—roads, bridges, power plants, hyperscale projects. The impulse extends to society: the one‑child policy and repression in Tibet and Xinjiang. This technocracy prizes order, control, and visible achievement…

8. The Chinese View: China would benefit from about 40% more legal respect for rights and process. Yet China’s élite sees less than zero appeal in any system that can elevate a Donald Trump instead of a Xi Jinping…

9. America’s Lawyerly Elite and the Reflex to Create Rights: America’s lawyer élite solves problems by assigning and vindicating rights to property and security. Enterprise and innovation follow as people live as they wish. The reflex response to any problem is to create another entitlement or right, pulling more people into the set required for agreement and approval…

10. U.S. Sclerosis: The U.S. once built ambitiously—the late 19th century and the post‑WWII decades. It should reclaim roughly 20% more building and engineering spirit. American failure shows even at the frontier of the global economy. Silicon Valley prizes invention, then builds oligopoly moats from network effects and legal maneuvering. China, by contrast, prizes scale and production, embracing the Andy Grove ethic…

11. The Path-Dependence of Development & Political Economy: Development theory says early stages prioritize building; later stages prioritize allocation. As marginal utility of capital falls, rule‑crafting and market design matter more; lawyers, regulators, and policy architects rise. But transitions are path‑dependent. China still builds beyond Western expectations due to political economy: entrenched interests, Party structure, and a state‑citizen contract keep bulldozers running…

12. China’s “Involution” & Overcapacity as Both Weakness & Strength: “Industrial policy”’s costs are real. Subsidies, cheap loans, and local protectionism create overcapacity. Every province backs an EV maker; profits go to zero; firms steal tech; BYD faces near‑clones. China calls this “involution”; Japan called it “overcompetition.” It is larger‑scale now. Still, do not mistake dysfunction for weakness. Despite weak consumption, property woes, demographics, and political risk, China remains a technological peer…

13. The Role of Institutional Memory & Process Knowledge: U.S. tech should learn China’s process‑knowledge playbook: how firms transfer and scale operational expertise. JVs are not the main channel; informal networks matter more. The path to better policy starts with humility, curiosity, and hard work. End lazy thinking. Our ability to navigate a world shaped by others’ dynamism depends on it…

14. Epistemic Humility & the Limits of Outsider Understanding: It is tempting to attribute such differences to deep-seated cultural traits, but that would be a mistake. The reality is more prosaic: cognitive endurance—what one might call “institutional memory”—is shaped as much by habits (perhaps even by the absence of alcohol, as Wang jokes) as by any “Asian” characteristic. The crucial point is epistemic humility. Both China and the United States are, in their own ways, bizarre and opaque to outsiders and even to their own citizens. The only defensible stance is curiosity, not certainty…

15. The Persistent Power of the State in China: Most striking is the state’s power over entrepreneurship. The story of China’s EdTech crackdown is illustrative. In late 2020, flush with confidence after its successful pandemic response (especially in contrast to the chaos in the United States), the Communist Party embarked on a campaign of “major structural reform.” The government moved swiftly to rein in tech giants, motivated by concerns that private platforms had gained too much influence over what people see, think, and buy—a concern shared, in different forms, by policymakers in the U.S. and Europe. Yet the Chinese approach was far more direct and draconian.”..

16. America’s Shift from Creative Dealmakers to Litigious Regulators: Through the nineteenth and into the early twentieth century, the country’s lawyers were, above all, creative dealmakers. They raised capital for railroads, navigated the complexities of eminent domain, and facilitated the construction of the infrastructure that made the United States an economic powerhouse. The lawyerly society, in this era, was one of action—enabling, not obstructing, economic growth. The postwar period, however, marked a significant shift. Even as late as Franklin D. Roosevelt’s New Deal, lawyers in government were focused on pragmatic problem-solving. But by the 1950s, the American engineering state had run amok: highways slashed through cities, DDT and other pesticides were sprayed with abandon, and the nation embarked on disastrous military adventures in Asia…

17. The 21st-Century Task: Synthesize the Best, Avoid the Worst: Breakneck is a meditation on trade‑offs—ambition vs. restraint, building vs. blocking, sledgehammer vs. gavel. The 21st‑century task is to synthesize the best of both while avoiding the worst of each. The true City on a Hill, the true Central Country, will be the one that best accomplishes that task. And might turn out, come 2100, to be the same trans-Pacific civilization…

18. What Makes Breakneck Extra Special: How it blends theory, economic data, sociology, and personal observation. Too much China talk is distant and derivative—third‑hand reporting and think‑tank abstraction. Wang lives it: food, streets, cities, politics, in China, America, and Canada, able to see each one both as a native insider and as a visiting outsider. Thus if you want to know what is happening and what it feels like, read the entire book. He lets readers see, feel, and taste these movers and shakers in the contemporary world. Details that seem like color become the substance of understanding. Read it for the reporting as much as the argument. Break free of clichés and caricatures.

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Chinese economist Zhu Hengpeng criticized Xi Jinping’s economic policies, and apparently vanished last spring. Now his vanishing is being publicized—just as there is what is being sold as a major shift in Chinese economic policy away from the previous austere focus on green manufacturing exports and new productive forces as the only allowable drivers of demand going forward. Is there any connection here? And how does this interact with what we have all been expecting to see in terms of cracks developing in China’s “sultanist” régime’s functioning as the paramount leader ages?

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I must confess that it has never been clear to me just what the military applications of sub 10-nm node chips are supposed to be that would make them such a military game-changer. What you can do with a small chip. You can also do with four chips constructed at double the node length. There is the dream of real-time observation-decision-action robots on the battlefield destroying human-crewed vehicles before they can notice anything going on. But, otherwise, if it were decisive and could be done with chips at 5-nm scale we would've spent the money to do it with chips at 10-nm scale.

Yet military and national-security thinkers are obsessed as the modern day equivalent of pre-World War I specialty steels and chemistry that did interesting things with the creation of the triple nitrogen bond. I really do not know enough to have an informed view of this.

Can anyone here elucidate it for me?:

Ben Thompson: The Huawei Mate 60 Pro <stratechery.com/2023/the-huawei-mate-60…>: 'The rhetoric around this story has been completely over the top, on both sides: Chinese state media and social media is hailing the Mate 60 and the Kirin 9000 chip as evidence of China overcoming U.S. attempts to limit China's technological development; China hawks in the U.S.…well, they're saying the same thing…. Jonathan Goldberg: "Three large constituencies… want the Kirin 9000 [chip] to mean something more than it probably does…. Pro-China commentators.. want to show… China… resilient in the face of US "aggression"…. US China watchers who want to see more sanctions… a third camp who paint everything as a failure of the Biden administration…". The reality is that this chip isn't a big surprise, and what it says about the future of China's technological development, at least in terms of chips, is surprisingly little…

STRATECHERY.COM

The Huawei Mate 60 Pro, 7nm Background, Implications and Reactions

Huawei’s new smartphone with a 7nm chip shouldn’t be a surprise; understanding why explains why the U.S. shouldn’t over-react.

Ben Thompson ends his piece with a somewhat contrarian take: His view is that the road to Chinese success in building the semiconductors of the future is to develop, organically, its own engineering community that can substitute for what ASML and Applied Materials make, rather than pursuing a path that depends on somehow getting access to the outside porducts of the chipmaking-machinery making firms, and that the Kirin 9000 takes the second road—with admittedly, dazzling success in the short run, if their yield percentage is anything at all, but to the long run detriment of the sector’s development.

Again: I am out of my depth here, and I want a reliable guide to What kind of trade-&-technology "cold war" should we here in þe United States be trying to fight? Aftrer all, the easiest way to disastrously lose a war is to pick the wrong one to try to fight.

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Smart no-longer-young whippersnapper Dan Drezner writes:

Dan Drezner": The End of the Rise of China?: it’s been impossible to go 24 hours this month without reading a piece noting China’s economic woes…. it’s been impossible to go 24 hours this month without reading a piece noting China’s economic woes…. Lingling Wei and Stella Yifan Xie… Rebecca Choong Wilkins and Colum Murphy… Catherine Rampell… The Economist… in its cover story… Ian Johnson[‘s] “Xi’s Age of Stagnation….. All of this is from the last ten days in August…. Earlier in the month… Adam Posen in Foreign Affairs, Peter Goodman in the New York Times, Paul Krugman in the New York Times, Keith Bradsher in the New York Times, James Kynge in the Financial Times, and the entire editorial board of the Financial Times…. Are there any China optimists left out there?… Nicholas Lardy… argues that, “[the] widely popular assessment is likely premature and, at least in part, perhaps simply wrong….. The combination of rising personal incomes and a falling saving rate means that future household consumption growth will likely surprise on the upside…”. Lardy’s… caution is well taken…. That said, even a modest increase in consumer spending cannot reverse two dominant problems…. First, China’s structural problems are very real… demographic decline… productivity… continu[es] to stagnate, its ability to crib technology and foreign investment… is ebbing… real… a huge mess. Second, China’s leadership under Xi does not seem to be prioritizing economic growth…. That does not bode well for a sustained return to healthy economic growth…. I wonder… if the discourse is starting to catch up to the reality that maybe, just maybe, Chinese power has peaked…

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The extremely wise Arpit Gupta has a very, very very nice summary of the possible reasons why the Chinese economy will get stuck in the middle income trap—if it in fact gets stuck. He sees four reasons it might get stuck:

1. Authoritarian Expropriation Risk…

2. Structural Imbalances…

3. Real Estate Boom-Bust…

4. Soft Budget Constraints…

He concludes that a China that gets stuck in the middle-income trap does so because of “all four…. What’s common across all… narratives is that China’s growth story may be more brittle than commonly accepted”:

Arpit Gupta: What's Going on with China's Stagnation?: ‘Authoritarian Expropriation Risk…. Most economists would offer a version of this incentives story when articulating why only democracies (and resource rich countries) have passed the middle-income trap… [perhaps] really a Xi Jinping problem… crackdown on… “soft”… in favor of “hard” tech, along with disappearing Jack Ma…. Structural Imbalances—China… too dependent on investment relative to consumption… has grown only by… pushing down… investment productivity… a weak social safety net, ensuring… precautionary savings… financial repression…. Real Estate Boom-Bust… heading for a crash, and China may be headed for years of weak growth ahead…. The Soft Budget Constraint…. Loss-making enterprises (whether formally public or private with public characteristics) are not allowed to fail, and this expectation infects all firm decisions… because firms all get bailed out, and continue operations as zombie entities….

I think all four stories likely play a role…. This last story... that China in the same category as Communist countries which were able to grow and achieve some structural transformation, before ultimately flaming out due to fundamental political economy… remains undercovered…. What’s common across all these narratives is that China’s growth story may be more brittle than commonly accepted, and to fix it may require politically challenging reforms to both the underlying economic and political model….

[But remember:] the rapid period of economic growth in the last several decades is one of the best things to ever happen to humanity…. China remains a very high performing economy… traditional sectors of manufacturing… increasingly in renewable energy… EVs… airplanes… AI, semiconductors, digital platforms, and so forth—far beyond what most economists would have thought possible under a Leninist one-party state…

What do I think?

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First of all, China may well not get stuck.

It may pull on through.

A huge science, technical establishment, coupled with the worlds greatest concentration of engineers focused on process technology improvement and a 1.4 billion person market to provide the scale to wring all possible benefits out of process improvements and initial leads in frontier industries—all that may wind up leading China to do vis-à-vis the US over the next sixty years as the U.S. did vis-à-vis Britain from 1870 to 1930. People back in 1870 might well have said that the United States had second-rate universities and third-rate science, a corrupt version of crony capitalism focused on robber-baron rent seeking, no state capacity worthy of the name, and a bitterly divided population—yankees, white southerners, Blacks, immigrants, and new waves of future immigrants different from and hence alien to the old immigrants—which a creaky political system designed for the previous century was unlikely to be able to manage.

While that was a plausible view of the U.S. around 1870, it was a wrong one.

Thus China may surprise us.

China has certainly already over the past fifty years. It has astonished the world and absolutely flabbergasted me.

Remember: back in 1980 I thought that China had a working short-run development model and the legacy of the Maoist version of really-existing socialism had left it with enormous but easily correctable economic deficiencies. Thus I expected Chinese growth to astonish the world over the next five to ten years:

But then I expected the development model to lose steam. The systemic structural and authoritarian politics governance deficits of China seemed to me to make it make successful continuation of that development model beyond a 10-year horizon very unlikely indeed. The closure of society that the maintenance of party domination requires would break the developmental model.

First, agricultural de-communization would mean that there needed to be some way to rapidly reemploy workers no longer needed on low-productivity communes. How was the government to survive the social stresses? It did so via borrowing the entrepreneurial class of Hong Kong, and building good-enough institutions for investment and private enterprise that aligned local party élites on the side of growth rather than exploitation via the TVE framework.

Second, later, how was a all-thumbs communist system going to be able to do for the cities what the Soviet Union never did—get the goods to people who were not politically well-connected? The answer was to transform China’s cityscapes via an extraordinarily rapid and successful process of retail decontrol.

Third, later still, as of the mid-1990s the heavy-industrial state-owned enterprises of the Chinese state and their losses and their debts were simply too large a drag on the economy to be sustained, but shutting them down would produce the potential for enormous social dislocation and uproar—a Generalissimo Ludd, perhaps. But they did it. They shut them down. And, borrowing the entrepreneurial class from Taiwan this time, the private-sector and local-government and mixed busines and ownership forms had reached sufficient scale to absorb the workers.

Fourth, as of the end of the 1990s the gap between urban and rural living standards had grown so great that upwards of 150 million migrants were flooding into the cities. The 1998 decision to privatize new urban housing construction and to incentivize local governments to coöperate by tying their funding to development created places for the inmigrants to live, and the decision to go for the export-growth model coupled with the coöperation of the George W. Bush administration in the (bipartisan) hope that a China that rapidly became richer would ipso facto acquire a powerful-enough bourgeoisie to remain peaceful and become liberal.

And yet now it all seems to have shifted. Energies that would otherwise have been entrepreneurial are now being devoted to ascending within the party, controlling non-party elements, and (for outsiders) figuring out the right way to bribe party members with power in the present and the future to leave your business alone—perhaps in most part by giving their relatives a share of it.

And that is when those with entrepreneurial energy do not decide to just leave, and set up shop elsewhere, perhaps in Singapore.

China’s development model was, after all, only rescued in its first decade by the existence of Hong Kong’s entrepreneurial class, grown out of those who got out of Dodge City before the PLA arrived and sent those who remained to reëducation camps, at best. and its willingness to play ball. It was only rescued in its second decade by the existence of Taiwan’s entrepreneurial class, and its willingness to play ball. It was only rescued in its third decade by the willingness of the WTO to play ball with China’s development model. And it has only been rescued in its fourth decade by various low-quality investment bubbles.

Still, the system has held together. China has managed to mobilize resources on a truly titanic scale. And it has created a bourgeoisie—a bourgeoisie that has not felt that it has the need or the power to flex muscles for political dominance, but has been willing to focus, on an individual case-by-case basis, in cementing protective links with their party-side patrons.

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I keep reaching for historical analogies, and I don't find any good ones. The rising bourgeoisie of Europe's imperial-commercial age led to the development of the absolutist monarchies that, in Engels’s famous formulation, held the balance between their aristocratic-military-police-control classes and their wealth=creation classes: the “relative autonomy of the state”. But it was those monarchs that ceded power to and promoted the rise of the bourgeoisie most rapidly that were by far the most successful in the long run. The relative autonomy of the state was real, but, where it was exercised in favor of the aristocracy, consequences for development or destructive for national development.

(Prussia in the 1800s is the only exception. But that is because in 1814 Austrian Foreign Minister Metternich handed the Junkers and the Hohenzollerns the Rhineland and the Ruhr. Metternich, fighting the last war, thought it very important that Prussia be more focused on containing France than Austria. Big long-run mistake—not in Metternich’s day, but a generation after his forced retirement. Do note that, had I been on Henry Kissinger’s dissertation committed, I would have rejected the dissertation without a chapter on the long-run consequences for the Austrian Empire of handing the most economically dynamic regions of greater Germany to Prussia. And I do think that there is definitely a book to be written about how reactionary governments in Berlin and Vienna in the 1800s did not do more to hobble industrial growth in the Ruhr, in Silesia, and in Bohemia.)

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Gupta does not think much of Authoritarian Expropriation Risk…

The main challenge with the “expropriation” view is that there are surprisingly no obvious signs for incentive problems in China holding back wealth generation—R&D spending is huge, entrepreneurship is massive, and China is home to more large digital platforms (Alibaba, etc.) than Europe….

But Adam Posen does. He sees Xi Jinping as following “Hugo Chávez and Nicolás Maduro in Venezuela, Recep Tayyip Erdogan in Turkey, Viktor Orban in Hungary, and Vladimir Putin in Russia… down this well-worn road…

Gupta also does noit think much of Structural Imbalances view of Michael Pettis and Matt Klein:

[The] challenges… [to] the “imbalances” view… [are that it is] not obvious how greater domestic consumption spending is going to further future productivity growth…

I think somewhat more highly of this view. Underlying it is a belief that you need to shift your demand into a configuration in which you are spending money on sectors where there are technological research and development externalities. Export industry had such. Infrastructure and construction by and large do not. And China is ideologically opposed to raising the private-consumption share of production.

This view shades into the “real estate bubble” view of:

Noah Smith… as well as Ken Rogoff…. China only kicked the can down the road in 2008, allowing a real estate bubble…. But now this is heading for a crash, and China may be headed for years of weak growth ahead….

And Òscar Jordà, Moritz Schularick, and Alan M. Taylor would say not “years” but “decades”:

Òscar Jordà, Moritz Schularick, and Alan M. Taylor: The great mortgaging: housing finance, crises and business cycles: ‘Disaggregated bank credit for 17 advanced economies since 1870…. Financial stability risks have been increasingly linked to real estate lending booms, which are typically followed by deeper recessions and slower recoveries...

Heavy real estate debt loads, unless quickly resolved, appear to be poisonous for medium-term growth, and perhaps beyond. (Note that this is true in a sense in which it does not appear to be true for government debt.) in China, this channel would be amplified by the interaction between real-estate busts and local government’s ability to do its job.

And as for the last story? I agree with Gupta that:

[Seeing] China in the same category as Communist countries which were able to grow and achieve some structural transformation, before ultimately flaming out due to fundamental political economy… remains undercovered…

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In addition, I think there is a fifth factor. Xi Jinping is 70. There are valid complaints that the United States is too gerontocratic, but the open-speech nature of nature of political contestation greatly moderates the extent to which no-longer-rational aged decision-makers’ erratic choices cause lots of damage.

In autocracies, there is the erratic-aging-emperor problem. And there is also the loss-of-control to an illegitimate power-broker problem. We are told that Tiberius Cæsar started to lose control of Rome to his Prætorian Prefect Sejanus in the year 23, when he was 65, and much more so after the year 26 when he (mostly) withdrew to Capri. (Tiberius reasserted control by executing Sejanus in the year 31, when he was 73; and thereafter he lived for five more years—although it is not clear how much sway was exerted by Sejanus’s successor Macro and by Antonia Minor.)

Perhaps this is a case in which Adam Tooze’s concept of “polycrisis” is of great value?

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