China Doesn't Need Better Al to Beat America

Last year, the United States built around five ships and China built about 1,500. It takes an American automaker five to six years to release a new model. But, in China, that cycle is 18 months. So who is actually winning the race to engineer the future?

Dan Wang spent six years on the ground in China as a technology analyst, studying its political economy and industrial ambitions. He is the author of Breakneck: China's Quest to Engineer the Future and a research fellow at Stanford's Hoover Institution.

Dan Wang: My name is Dan Wang. I am the author of Breakneck: China's Quest to Engineer the Future and a research fellow at Stanford's Hoover Institution. For six years in China, I was a technology analyst at an economic research firm called Gavekal Dragonomics. What I was really trained to do was to think about China through the lens of political economy and everything that it wants to achieve, especially in the realm of technology.

Dan Wang: There is no doubt that the US is ahead of China on artificial intelligence. The only question is whether the US has a very substantial lead or only a moderate lead. My view is that the US has at best a moderate lead over China, and it is not so much of a decisive lead.

We are sitting here in Silicon Valley, which is very capable of magical thinking. But I think that Silicon Valley's magical thinking does not translate very well to Washington DC, which engages in all sorts of magical thinking about how it could outcompete China if it could only have somewhat better artificial intelligence, which could really promote a decisive strategic advantage, because the US will be able to invent superintelligence and the Chinese will not. That is a category of magical thinking which does not seem very compelling to me, because it assumes that China will not be able to catch up pretty quickly.

By most indications, China is in fact far ahead in many respects. Chinese companies have produced a lot of excellent models in spite of pretty substantial export controls that the US government has asserted over close to a decade on some of China's leading firms. The Chinese companies are producing open source models that seem to be more cheaply run. If we look at some of these video generation models coming out of China, they seem to be maybe even ahead of the United States.

Dan Wang: What is far more important, perhaps in the next few years as we start to deploy AI, is that China is just vastly outbuilding the United States in electrical power. China is building so much more coal, so much more nuclear, so much more solar and wind than the United States. Last year, China built about 300 gigawatts of solar power alone. The US built about 30 gigawatts. China right now has 40 nuclear power plants under construction. The United States has zero.

China is also made up of some of the most advanced factories in the world today. What they have are these things they refer to as dark factories. It is dark because most of the lights are off, because you hardly need any human workers and everything is very well automated.

But it is not just these dark factories that matter so much. What really defines the backbone of Chinese manufacturing are the broader masses of factories that are able to make iPhones, consumer electronics, electric vehicles, and their batteries, in which the Chinese are far ahead of the Americans in terms of all sorts of manufactured products. China has these very well developed production ecosystems. For any part that you care to name, whether it is batteries or sensors, all of these factories are right next to each other so that factory managers can just go next door to find another part.

China also has dense networks of workers, about 70 million in manufacturing. You have mass workers, medium-skilled workers, and very high-skilled engineers who are probably among the most skilled engineers in the world today. I am not sure I would trade that for simply having more sophisticated AI models. How much is that greater sophistication really worth when you weigh it against such a vibrant industrial manufacturing ecosystem?

Dan Wang: China's leadership is made up of a lot of engineers, and for the most part I think they have done a good job in terms of promoting physical dynamism in the country. If you are growing up in China, probably 20 years ago your city had no subway lines and now you might have a dozen or two dozen. China built its very first high-speed rail system about 15 years ago and now has about twice as many high-speed rail lines as the rest of the world combined. These are all good things that the engineering state has been able to produce.

But there is a fundamental problem with a country made up of engineers: they cannot stop themselves from entering social engineering, from entering population engineering, from treating the population as yet another building material to be torn down and remolded as they wish. Especially something like the one child policy, in which the Chinese leadership really believed in the western doomerism of the 1970s and the mathematical formulas that determined an optimal population. The Chinese took it too seriously and the eventual result over 35 years was around 300 million abortions and 100 million sterilizations of women. This was a campaign of rural terror that ran throughout the countryside. This is the problem when you have a leadership that does not respect individual human dignity.

Dan Wang: Living in China produces all sorts of unexpected experiences. My personal website, danwang.co, where I published my annual letters, was blocked one day in the spring of 2022. I was a little bit surprised to see that my small website, hardly as big as Facebook or Wikipedia or the Wall Street Journal, was blocked as well. But this is the information environment that people in China simply have to deal with, in which a message sent on WeChat may never be received because the state and the censors inside Tencent have already decided to block it.

There is a wonderful analogy produced by a professor named Perry Link, the metaphor of an anaconda in a chandelier. Imagine all of us sitting around a dinner table with a chandelier above us, and inside the chandelier is a giant anaconda just coiled there. None of us need to fear the anaconda to emerge and strangle one of us. All we need to know is that there is an anaconda hanging there that might come down and might not. That is enough to intimidate and introduce fear, and that is enough to make people automatically self-censor. I think that sort of attitude is corrosive to creative thinking in China.

One of my determinations as a writer has been not to be intimidated by whatever rumblings come out of China, and to just tell the truth as best as I can, talking about both the spectacular achievements around manufacturing and public works, while also acknowledging that the Communist Party made some pretty grave mistakes during the zero-COVID program.

Dan Wang: Right now it looks like the US and China are both very intent on losing. Both of these countries have this remarkable skill in delivering self-beatings and trying to hobble themselves in this very big race.

My model of the US-China competition is that whichever country is ahead is going to make mistakes out of overconfidence and hubris, and whichever country is behind is going to really feel the crack of the whip in order to catch up. I was living in China in 2021 when Xi Jinping decided to have a controlled demolition of the property sector as well as crack down on a lot of tech entrepreneurs, most notably Jack Ma, because he felt he was in a very good spot after managing COVID very well. What we have seen since is that this property slowdown and the crackdown on tech entrepreneurs has been exactly the cause of a lot of China's economic problems today.

Dan Wang: I think a decade from now the label of made in China is going to be viewed as excellent quality, the way that made in Germany or made in Japan has been viewed as excellent quality. Over the next 10 years, the future of manufacturing is going to move more and more towards China.

Silicon Valley founders have been some of the most inspirational, hardest working, and most ambitious people ever in history, and they have been rewarded for it by driving a lot of economic value. But Silicon Valley has not necessarily delivered value throughout the rest of the country, which feels that entrepreneurs in California are very different from them. That is not usually Silicon Valley's fault. That is the fault of the San Francisco government, the California government, and the American government, which have not been able to deliver basic services that people want, like clean and orderly streets, affordable housing, and the feeling that they are living in a growing and thriving country.

I hope that Silicon Valley founders can think a little bit more broadly and be supported by politicians to deliver these benefits to ordinary Americans who do not always feel well connected to some of these strange people here in Silicon Valley.