Washington is now more focused on China but remains in denial about the threat. Fourteen rationalizations explain why its techno-economic response remains limited.
Washington’s techno-economic response remains limited not because the challenge is invisible, but because it is still being assessed through the wrong economic lens.
From a Taiwan perspective, the semiconductor supply chain offers a clear lesson: innovation without manufacturing scale, ecosystem depth, and capital commitment does not translate into industrial leadership.
China’s competitive advantage is not simply low-cost production or state subsidies. It is the ability to mobilize capital, absorb lower margins, build capacity, and move up the value chain across multiple industries simultaneously.
The U.S. response, centered on advanced semiconductors and AI, is strategically important but insufficient on its own. Export controls may slow competitors; they do not automatically create domestic production ecosystems. Nor can Silicon Valley innovation alone replace the industrial capabilities that underpin economic and national security.
The real challenge is execution: aligning government policy, private capital, M&A, R&D, workforce development, and allied supply chains into a coherent techno-industrial strategy.
For Taiwan and its partners, this is not merely a geopolitical debate. It is a capital allocation question—and a reminder that technological leadership must ultimately be converted into scalable industrial capacity.
The next phase of competition will be won not only by those who invent the future, but by those who can finance, manufacture, and commercialize it at scale.
Not sure who is saying “Why don’t we see Chinese products in the United States? Things must be okay.”? Chinese products are everywhere on Amazon, Walmart, Home Depot, Lowes. Why can't the government force Amazon to accurately show country of origin for goods on their web site? Even if Americans prefer to buy American on a new purchase there are only Chinese options available. As you say, we need to be much more afraid.
Tom, I completely agree. In our report on how to slow China down, we talked about product labeling, and why it should be mandatory that all products imported into the US/consumer product should know that they were made by a Chinese company.
Rob, a colleague in a Great Decisions discussion group I chair frequently – dare I say, repeatedly – challenges concerns about China’s techno-economic rise by pointing to Japan. Needless to say, in the 1970s and 1980s, Americans were warned that Japan’s industrial policies, export strength, and growing dominance in automobiles, electronics, semiconductors, and other advanced industries posed a serious threat to American economic leadership. Some of those fears, in retrospect, proved exaggerated. You argue that today’s China challenge is fundamentally different—not simply another Asian economy using an export-oriented development model. What do you regard as the two or three most important differences between the challenge Japan posed then and the challenge China poses now? And, perhaps more importantly, what would you say to someone such as my normally quite astute colleague who argues that today’s warnings about China may eventually look much like yesterday’s warnings about Japan? Is the essential distinction economic scale, the nature of the Chinese political system, China’s status as a geopolitical and military competitor, its industrial policies and methods, or some combination of all four?
2. Japan was dependent on us for security so we had some influence over them, such as plaza accord
3, japan is rule of law so their mercantilism was much more limited than PRC
4 japan did not want to be global hegemon
5 japan was not and is not entrepreneurial, china is
6 china learned from japan mistakes, especially its galapagos island syndrome
7 because japan is a democracy it was somewhat limited on its subsidies and the immiseration of the proletariat. China is not
8. China market so huge companies have to be there. uS companies have to be in china and so are held hostage
9. Jaoan didnt let our companies in so the political supoort for being tough on japan and having an active industrial policy was higher than with China
If I may be permitted to chime in here, Robert G. Rogers, as I have lived and worked in Taiwan, Rob is correct about the PRC and how it differs.
I note here, too that Taiwan is actually the other, democratic China that most people forget about, while China is the PRC, another name for China people seem to have elimnated from their vocabulary, possibly from years of the CCP's drive to convince there world there is but "One China".
Why are those names and distinctions important? Japan may have been an economic rival to the US in the 1980s, but it was still essentially a liberal democratic system. The PRC under the CCP has never been one, and it has employed authoritarianism politically and mercantilism as an economic strategy to rise from a backwater in the 1970s, when the U.S. importantly switched its official relations from the ROC to the PRC, to where it is now, the world's second-largest economy and more than just a rival.
Fears on Japan's rise came from several sources, including even memories of the Second World War and the Japanese militarist empire. However, by the 1980s, it was firmly an ally of the U.S. The PRC has openly said it does not agree with Western, liberal democracy and - not surprisingly, since it continues to be the Chinese "Communist" Party rather than morphing it an openly "socialist" party like those in Europe or elsewhere - believes its communist system will replace free-market capitalism. Japan, yes, had large corporations - keiretsu - but they are not really the same as the PRC's "China, Inc." and its state-run or state-backed firms.
Others, such as economist George Magnus have for years been pointing these distinctions out, in his work "Red Flags" and even recently when he argued one can trade with competitors, but not with nations that intend to be systemic threats. The latter sees the world and its trade relationships in zero-sum terms, so there really is no "win-win" that can come from competition. There are real reasons why the CCP pursues this strategy, but the main point is that engaging with the PRC's economy carries enormous risks and in fact has, as we see with the weaponization by the CCP of critical minerals or trade policy.
And yes, size does matter. I was talking with an investor from Turkey recently, and they lamented about the authoritarian government there. But Turkey being an authoritarian government will not shake the world or pose a severe threat to the US, give its size. The PRC, with 18% of the world's population and having attracted or strong-armed the location of many key industrial supply chains, can pose a severe threat to both the US and the global economy. For that matter, India can, too, given its size, but its democratic form of government means while foreign investors may relent about the often closed markets, they do not fear India as a political threat. They do, however, fear an undemocratic and mercantilist PRC.
The answers to what "China" could be exist in the ROC (or Taiwan), with a democratic government, non-"red" or democratic supply chains, free speech and religion, and more. And as Taiwan has gotten more democratic, its has gotten more advanced and wealthier. When the CCP will realize how big its economy could be - and correspondingly less of a threat to the world it could also be, then real change will happen. And the Nationalists (or KMT) did not have to be crushed to pave the way for democratization to occur in Taiwan; all they had to do was be willing to compete. The CCP does not like competition, politically or economically, and this must change, before we enter a whole new world that will be led by artificial intelligence. Otherwise, rather than being a tool to empower the world and economies, it will be a weapon by the world's largest authoritarian regime to coerce and dominate. Thanks.
Washington’s techno-economic response remains limited not because the challenge is invisible, but because it is still being assessed through the wrong economic lens.
From a Taiwan perspective, the semiconductor supply chain offers a clear lesson: innovation without manufacturing scale, ecosystem depth, and capital commitment does not translate into industrial leadership.
China’s competitive advantage is not simply low-cost production or state subsidies. It is the ability to mobilize capital, absorb lower margins, build capacity, and move up the value chain across multiple industries simultaneously.
The U.S. response, centered on advanced semiconductors and AI, is strategically important but insufficient on its own. Export controls may slow competitors; they do not automatically create domestic production ecosystems. Nor can Silicon Valley innovation alone replace the industrial capabilities that underpin economic and national security.
The real challenge is execution: aligning government policy, private capital, M&A, R&D, workforce development, and allied supply chains into a coherent techno-industrial strategy.
For Taiwan and its partners, this is not merely a geopolitical debate. It is a capital allocation question—and a reminder that technological leadership must ultimately be converted into scalable industrial capacity.
The next phase of competition will be won not only by those who invent the future, but by those who can finance, manufacture, and commercialize it at scale.
Not sure who is saying “Why don’t we see Chinese products in the United States? Things must be okay.”? Chinese products are everywhere on Amazon, Walmart, Home Depot, Lowes. Why can't the government force Amazon to accurately show country of origin for goods on their web site? Even if Americans prefer to buy American on a new purchase there are only Chinese options available. As you say, we need to be much more afraid.
Tom, I completely agree. In our report on how to slow China down, we talked about product labeling, and why it should be mandatory that all products imported into the US/consumer product should know that they were made by a Chinese company.
Rob, a colleague in a Great Decisions discussion group I chair frequently – dare I say, repeatedly – challenges concerns about China’s techno-economic rise by pointing to Japan. Needless to say, in the 1970s and 1980s, Americans were warned that Japan’s industrial policies, export strength, and growing dominance in automobiles, electronics, semiconductors, and other advanced industries posed a serious threat to American economic leadership. Some of those fears, in retrospect, proved exaggerated. You argue that today’s China challenge is fundamentally different—not simply another Asian economy using an export-oriented development model. What do you regard as the two or three most important differences between the challenge Japan posed then and the challenge China poses now? And, perhaps more importantly, what would you say to someone such as my normally quite astute colleague who argues that today’s warnings about China may eventually look much like yesterday’s warnings about Japan? Is the essential distinction economic scale, the nature of the Chinese political system, China’s status as a geopolitical and military competitor, its industrial policies and methods, or some combination of all four?
1. Japan still runs trade surpluses with us.
2. Japan was dependent on us for security so we had some influence over them, such as plaza accord
3, japan is rule of law so their mercantilism was much more limited than PRC
4 japan did not want to be global hegemon
5 japan was not and is not entrepreneurial, china is
6 china learned from japan mistakes, especially its galapagos island syndrome
7 because japan is a democracy it was somewhat limited on its subsidies and the immiseration of the proletariat. China is not
8. China market so huge companies have to be there. uS companies have to be in china and so are held hostage
9. Jaoan didnt let our companies in so the political supoort for being tough on japan and having an active industrial policy was higher than with China
If I may be permitted to chime in here, Robert G. Rogers, as I have lived and worked in Taiwan, Rob is correct about the PRC and how it differs.
I note here, too that Taiwan is actually the other, democratic China that most people forget about, while China is the PRC, another name for China people seem to have elimnated from their vocabulary, possibly from years of the CCP's drive to convince there world there is but "One China".
Why are those names and distinctions important? Japan may have been an economic rival to the US in the 1980s, but it was still essentially a liberal democratic system. The PRC under the CCP has never been one, and it has employed authoritarianism politically and mercantilism as an economic strategy to rise from a backwater in the 1970s, when the U.S. importantly switched its official relations from the ROC to the PRC, to where it is now, the world's second-largest economy and more than just a rival.
Fears on Japan's rise came from several sources, including even memories of the Second World War and the Japanese militarist empire. However, by the 1980s, it was firmly an ally of the U.S. The PRC has openly said it does not agree with Western, liberal democracy and - not surprisingly, since it continues to be the Chinese "Communist" Party rather than morphing it an openly "socialist" party like those in Europe or elsewhere - believes its communist system will replace free-market capitalism. Japan, yes, had large corporations - keiretsu - but they are not really the same as the PRC's "China, Inc." and its state-run or state-backed firms.
Others, such as economist George Magnus have for years been pointing these distinctions out, in his work "Red Flags" and even recently when he argued one can trade with competitors, but not with nations that intend to be systemic threats. The latter sees the world and its trade relationships in zero-sum terms, so there really is no "win-win" that can come from competition. There are real reasons why the CCP pursues this strategy, but the main point is that engaging with the PRC's economy carries enormous risks and in fact has, as we see with the weaponization by the CCP of critical minerals or trade policy.
And yes, size does matter. I was talking with an investor from Turkey recently, and they lamented about the authoritarian government there. But Turkey being an authoritarian government will not shake the world or pose a severe threat to the US, give its size. The PRC, with 18% of the world's population and having attracted or strong-armed the location of many key industrial supply chains, can pose a severe threat to both the US and the global economy. For that matter, India can, too, given its size, but its democratic form of government means while foreign investors may relent about the often closed markets, they do not fear India as a political threat. They do, however, fear an undemocratic and mercantilist PRC.
The answers to what "China" could be exist in the ROC (or Taiwan), with a democratic government, non-"red" or democratic supply chains, free speech and religion, and more. And as Taiwan has gotten more democratic, its has gotten more advanced and wealthier. When the CCP will realize how big its economy could be - and correspondingly less of a threat to the world it could also be, then real change will happen. And the Nationalists (or KMT) did not have to be crushed to pave the way for democratization to occur in Taiwan; all they had to do was be willing to compete. The CCP does not like competition, politically or economically, and this must change, before we enter a whole new world that will be led by artificial intelligence. Otherwise, rather than being a tool to empower the world and economies, it will be a weapon by the world's largest authoritarian regime to coerce and dominate. Thanks.