Speaker: Chinese are, I think, far ahead of the Americans. Last year, the United States built around five ships. China built about 1,500 ships. It takes on average five or 6 years for an American automaker to think of a new model and then release that model onto the streets. In China, the speed of iteration is much closer to 18 months, moving three times faster than the Americans. Last year, China built about 300 gawatt of solar power alone. US built about 30 gawatt. China right now has 40 nuclear power plants under construction. The United States has zero. Who is going to be a clear winner? Right now, it looks like the US and China are both very intent on losing. Both these countries making very big mistakes, self- beatings, and try to hobble themselves.

Speaker: My name is Dan Wong. I am the author of Breakneck, China's Quest to Engineer the Future. I'm also a research fellow at Stanford Tuver Institution. For six years in China, I was a technology analyst at an economic research firm called Goffcow Dragons. And what I was really trained to do was to uh think about China through the lens of political economy um everything that it wants to achieve especially in the realm of technology.

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I think that there's no doubt that the US is ahead of China on artificial intelligence and the only question is whether the US has a very substantial lead or only a moderate lead. And 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're sitting here in Silicon Valley which is very capable of magical thinking. But I think that the Silicon Valley sort of 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 super intelligence and the Chinese will not. That is a category of magical thinking which does not seem very compelling to me because they assume that uh China will not be able to catch up pretty quickly.

Speaker: Every country is complex and a country as big as China with about 1.4 billion people is especially complex. One of the things I really appreciated after spending years living in China was just how different its three main economic hubs feel. Beijing was a city that uh we in Shanghai called western Pyongyang because it is just so centralized. It is so Stalinist defining the political system. See so much of these concrete buildings with these dust storms. Shanghai which is much more of a commercial hub. In Shanghai we refer to ourselves as the Paris of the east much more designed by the French with these leafy boulevards, cafe line streets, much better weather. the southwest which is much more defined by regional beauty, a lot of different mountains, very distinct personalities, amazing ethnic diversity and that is something um in which China is uh somewhat similar to the United States where we're speaking from the San Francisco Bay area. It is very very different from New York City which is still very very different from Texas which is different from Washington DC. That's something that really brings to mind the differences uh between China as well.

Speaker: I think that the Chinese economy is incredibly competitive and my view is that if you're selling any products, China is the most competitive economic system uh in the world. By most indications, it looks like China is in fact far ahead of the United States because what we have seen with uh the Chinese companies is that they have actually produced a lot of excellent models in spite of pretty substantial export controls that the US government has asserted by now close to a decade on some of China's leading firms. And China has produced a lot of models which are not substantially behind a lot of the American alternatives. the Chinese companies are producing open-source uh models. They seem to be more cheaply run. If we're taking a look at some of these particular video generation models coming out of China, they seem to be maybe even ahead of the United States. If we look a little bit beyond just who is making the best models right now, well, it doesn't look to me like China is substantially behind at all. What is far more important perhaps in the next few years as we start to deploy AI is that China is just vastly outbuildinging the United States in electrical power. So 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 gawatt of solar power alone. US built about 30 gawatt. China right now has 40 nuclear power plants under construction. The United States has zero. China is made up of some of the most advanced factories in the world today. What they have are these things that they refer to as dark factories. Essentially, it is dark because most of the lights are off because you hardly need any human workers and which everything is very well automated. But it is not just these dark factories that matter so much. I think that we don't have to take a look at these glistening most advanced factories. 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, I think, far ahead of the Americans in terms of all sorts of manufactured products. China has these very well-developed production ecosystems. So for any part that you care to name, all of these factories, whether it's batteries, whether it's sensors, they're all right next to each other in which the factory managers can just go next door and have another part. China has these dense networks of uh workers. It's about 70 million workers in manufacturing. So you have mass workers, you have mediumskilled workers, you have very highskilled engineers or probably the most skilled engineers in the world today. these sort of disparities um can become a little bit scary when you combine all of these sort of things. I'm not sure if this is much less valuable than the US which is able to build more sophisticated models by every measure. But how much is that greater sophistication uh really really worth? I'm not sure I would trade it for a much more vibrant industrial manufacturing ecosystem.

Speaker: China's leadership is made up of a lot of engineers and for the most part I think that the engineers have done a good job in terms of promoting physical dynamism in the country. If you are growing up in China probably uh 20 years ago your city had no subway lines and now you can have maybe a dozen maybe two dozen subway lines to get around. China built its very first highspeed rail system about 15 years ago and now it has about twice as many highspeed rail lines as the rest of the world combined. And so having the sort of really tall bridges that connect villages, having subways, rail, electrical power, a manufacturing base. These are all good things that the engineering state has been able to produce.

Speaker: But there is a problem with the engineering state. I think the fundamental problem with country made up of engineers is that they cannot stop themselves from entering social engineering, from entering population engineering, from stopping themselves from treating the population as yet another building material to be torn down and remolded as they wish. especially uh something like the one child policy in which the Chinese leadership really believed in the western dumerism of the 1970s that there were these mathematical formulas that determine the optimal population. All countries had to reduce the population as much as possible so that the environmental carrying capacity could be maintained and all of these calculations were bunkked. But the Chinese took it a little bit too seriously. They involved a missile scientist by the name of Sunien to really get into the ears of the leadership and offer the mathematical justification for something as brutal as the one child policy which eventually involved over 35 years around 300 million abortions as well as 100 million sterilisations of women. This was something that I think of as a campaign of rural terror that ran throughout the countryside. This is the problem when you have a leadership that does not respect living in China produces all sorts of new adventures.

Speaker: One of the unexpected things in terms of the geopolitical competition was that my personal website danwong.co where I published my annual letters was blocked one day in the spring of 2022. This is a very small casualty of 2022, but I was a little bit surprised to see that my rinky dink website, which is hardly as big as Facebook or Wikipedia or the Wall Street Journal, um, ought to be blocked as well. But this is the uh sort of information environment that people in China simply have to deal with in which if one sends a message on WeChat to uh someone else in China, they may not have received it because the state and the sensors inside the Tencent have already decided to block it already. That the state has already shuttered most journalism, most independent journalism in China. There are some very strict controls in the information ecosystem in China. Many people are aware of the censorship apparatus and there has been this uh wonderful analogy produced by a professor named Perry Link and this metaphor of an anaconda in a chandelier. So imagine if all of us are sitting around a dinner table with a a chandelier above us and inside the chandelier is this giant anaconda that is just coiled there. That is a lot of what the censorship apparatus feels like. None of us need to fear for the anaconda to emerge and strangle one of us. All we just have to do is to know that there's an anaconda hanging there that might come down and might not. And that is enough to intimidate and introduce fear in a lot of people. And I think that this is one of these things in China's information ecosystem where you never really know when the anaconda might come down before people automatically self-censor. And I think that sort of attitude is corrosive to aspects of creative thinking in China.

Speaker: That one of my determinations as a writer has been not to be intimidated by whatever are the minations in China and to just tell the truth as best as I can within China. talking about what I saw were some of these spectacular achievements around manufacturing as well as public works at the same time as acknowledging that the communist party made these pretty grave mistakes as I saw it during the zerocoid program. I think it was really important for us to just be able to see both of these things. And I think that it is really important for all of us who value independent thinking, critical thinking, not to be too given into that and not to allow censorship uh inflict our consciousness too much. Who is going to be a clear winner? Right now it looks like the US and China are both very intent on losing and both of these countries had this remarkable skill in delivering self-beatings and try to hobble themselves in this uh very big race. Now 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 really catch up. And I am suspicious of any argument says that China must win because of manufacturing or China must lose because of demographics. I think that both of these countries have a lot of strengths and that this is a dynamic process in which both countries are going to try to run faster.

Speaker: I was living in China in 2021 when top leader Sidin Ping decided to have a controlled demolition of the property sector as well as smack around a lot of tech entrepreneurs most notably Jack Ma because he felt that he was in a very good spot after managing co very very well and actually what we've seen is that this property slowdown this smacking round of tech entrepreneurs has been exactly the problem of the cause of a lot of China's economic problems today. So, the US felt like it was ahead for a little while. And uh what did it do? President Trump is now doing what President Trump is doing. Namely, eroding a lot of alliances that the US has had with these tariffs. Uh de-industrializing America. Under uh Trump's first term, the US has lost about 80,000 manufacturing jobs. And President Donald Trump has done these pretty hurtful things to US manufacturing. One of the most hurtful was last year when the Department of Homeland Security deported around 300 South Korean engineers from the state of Georgia who were working at a Hyundai plant trying to build electric vehicle batteries. And I think this was not a pleasant experience for the engineers. I think that this did not look good to much of the rest of the world such that if I were an engineer in France or Taiwan or South Korea, maybe I will have some doubts about whether I want to take a job in Georgia in the future or Alabama in the future or Texas in the future. And so what we see are both these countries making very big mistakes and I think the country will go to the one that stops making so many of these mistakes. I think one of these challenges with China is that it could do much better if the Communist Party could just learn to be a little bit more restrained and do a little bit less and try less to be these intense social engineers, to be engineers of the soul. At the same time, the United States could do much much better if it were not so intent on trying to have these very strange political figures that have also been beating up on America's allies and the home front as well. So my message to both of these countries is do less, please.

Speaker: I think a decade from now the label of made in China is going to be viewed as excellent quality and the way that made in Germany, made in Japan has been viewed as excellent quality. I think 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, most ambitious people ever in history and they have been rewarded for it by driving a lot of economic value. But I would say that Silicon Valley has not necessarily delivered value throughout the rest of the country in which feels that uh the entrepreneurs in California are very very different from that. That's not usually Silicon Valley's fault. That is the fault of the San Francisco government, the California government, the American government, which have not been able to deliver some of these basic services that people want like orderly streets that are clean, that do not have too much crime, in which people feel that they can have affordable housing, in which they feel that they are living in a a growing thriving country. Instead, the California government has driven a lot of people away from the state of California. Net out migration from California, especially to states like Texas and Arizona, have been pretty considerable. So, there are all sorts of uh deficiencies with the US. And I hope that the Silicon Valley founders can also think a little bit more broadly um and be supported by the politicians and deliver these benefits to ordinary Americans who don't always feel that they are very well connected to some of these uh strange people here in Silicon Valley.

Speaker: If we look at within companies and we compare jobs that are more exposed to AI versus less exposed to AI, we're seeing that the jobs that are more exposed to AI, the young workers in those jobs are seeing 16% slower employment growth. So that's pretty large. It's actually high-income jobs because they do the kind of knowledge work that AI is more capable of doing right now. We're not going to be in a world where there's no AI. That we're just not going back to that. That's not going to be what's happening going forward. But I also think that's an enormous opportunity. So whether you're more automated or augmented really depends on what are the tasks that you're focusing on. Are you increasing the scope of tasks that you can do or are your tasks getting shrunk by the introduction of this technology?

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