Long read: The Future, Made in China

For a generation, “Made in China” was a story about scale. The country became the factory of the world by making ordinary goods in volumes, and at a cost, that no rival could come close to matching. Then it ran the same playbook on a piece of genuinely advanced technology — the electric car — and BYD has now passed Tesla to become the world’s largest maker of EVs. Now China is attempting the trick a third time, on the most sophisticated technology of all: this July, a Beijing firm called Moonshot released an artificial-intelligence model that matched the West’s best at a fraction of the cost, and semiconductor stocks promptly wobbled.

In a richly reported “Letter from Beijing” for The New Yorker, Evan Osnos — who lived in the city from 2005 to 2013 — returns to ask a question every long-term investor should be sitting with: as Washington slashes research budgets and backs away from the order it built, is the future now being engineered in China?

One of his guides is Kai-Fu Lee, the AI investor who once ran Google in China and claims to have urged Bill Gates to buy a young startup called Google (Gates passed). Lee has since shut his American office, because the two countries have become, in his phrase, “two different universes.” Where Washington largely outsourced its AI strategy to Silicon Valley, Beijing published a dense industrial plan promising “world leading”status by 2030 — what Lee calls an “all-hands-on-deck approach to national innovation.” Xi Jinping puts it less diplomatically, calling technology the “main battlefield of international competition” and declaring that “the East is rising, and the West is declining.”

The scale is difficult to dismiss. China now makes at least seventy per cent of the world’s drones, electric vehicles, lithium-ion batteries and solar cells; it deploys more industrial robots than the rest of the planet combined; and it has overtaken America in registered clinical trials, with shipbuilding capacity roughly two hundred times larger. The trade map has inverted: in 2001, four of every five countries traded more with the United States than with China, but by 2023 seven in ten traded more with China — which last year booked a record $1.2-trillion surplus even as it redirected exports away from Trump’s tariffs.

Osnos frames the rivalry through Rush Doshi of Georgetown, who sees in America’s fixation on territory a recurring historical blunder — Russia chasing Eurasia while Britain built the steam engine, Europeans carving up Africa while Americans mastered the assembly line. Today, Doshi argues, while Washington tries to govern Venezuela and hobble Iran, “China is focussed on winning the technologies of the future,” and losing the coming wave of AI, biotech and robotics “would irreversibly change the balance of power.” Beijing increasingly says to fellow autocrats, in his telling, “Would you like to stay in power? I can help you with that.” Its pitch to everyone else carries two messages: “We are inevitable” and “Don’t worry.”

This is where a sceptic should linger, because Osnos does. The same state that builds a car factory the size of a hundred football pitches in fourteen months also runs “exposure stations” that shame residents for mis-sorting their rubbish, kiosks that scored the author’s face as 76.67 per cent positive emotion, and software — sold by Lee’s own firm — that logs employees’ spoken promises in a “Promise Ledger.”

Nor does the hype about Chinese tech always survive contact with reality: at one showcase, a humanoid shop assistant cheerily offered Osnos a sausage, only to drop it back among the rollers and hand him thin air.

Governance, capital allocation and competitive advantage — the three lenses we care about — all look less flattering in China on inspection. The property crash has left an estimated 90 million empty homes, enough to house all of Russia, and a skyline of lanweilou, or “rotten tail” towers abandoned by bankrupt developers. Youth unemployment breached 21% before officials simply changed how they counted it. A Stanford and Harvard study found the national mood swinging “from optimism to pessimism”; last autumn censors opened a campaign against “excessively pessimistic sentiment” online, including the heresy that “Hard work is useless.”

The deepest cautionary tale is demographic. In the late 1970s a rocket scientist, Song Jian, used the nation’s best computers to argue that each family should be limited to one child. The anthropologist Susan Greenhalgh writes that the engineers were “enclosing everything in a black box that got labeled ‘science,'” though the policy rested on political judgments dressed as arithmetic. It was also wrong: some two hundred million sterilisations later, China’s fertility rate has collapsed to one birth per woman, with fewer than eight million babies born last year — the lowest tally since 1949. A Yale sociologist, Emma Zang, concluded that the real barrier is no longer cost but the conviction that “parenthood no longer makes sense in a future that feels uncertain.”

Here the reader tempted towards easy pessimism about China should pause. After Trump launched a “China Initiative” that targeted scientists of Chinese descent and then cut research funding, some twenty thousand Chinese-born researchers left America between 2010 and 2021; a Chinese cancer drug recently outperformed Merck’s gold-standard Keytruda, and Chinese firms now generate nearly a third of the world’s new drug candidates. The biologist Yi Rao, who gave up a US professorship to rebuild Peking University’s life-sciences school, is blunt: “Trump really helped us.”Ford’s chief executive, having toured China’s plants, called their progress “the most humbling thing I’ve ever seen.”

For Indian readers this piece in the New Yorker is a reminder of how far behind we have fallen. China is courting precisely our neighbourhood — one European hand describes Beijing “building ties with Jakarta and Delhi” — even as India inherits the demographic crown China is losing, now the world’s most populous nation with a far younger workforce. We should also recognise the darker echo: our own Emergency-era sterilisation drive of the 1970s was the same hubris, the state treating a society as a machine to be optimised. And the investing lesson is universal. One American financier likens Xi to a man trying to “tether” the “goose that laid the golden egg,” adding that “geese don’t like to be tethered” — a tidy summary of the tension between control and dynamism that decides whether a national compounding story endures or stalls.

Osnos resists crowning a winner. The country best placed to lead, he suggests, will not be the one that races AI into every corner of civic life, but the one that shields those decisions “from the distortions of ideology and corruption” and makes people “feel they have a voice in their future.” As one long-time China hand tells him, America “has a knack of going down in flames and then rejuvenating. China does not.” Osnos closes, wonderfully, with a Beijing fortune-teller who insists that “China is also powerful” — though “not as good as America”.

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