On Silicon Valley and the CCP

January 6, 2026 1:49 AM Subscribe

2025 letter - "American problems seem more fixable to me than Chinese problems. That’s why I live here in the US. I made clear in my book that I am drawn to pluralism as well as a broader conception of human flourishing than one that could be delivered by the Communist Party. The United States still draws many of the most ambitious people in the world, few of whom want to move to China. Even now a significant number of Chinese would jump to emigrate to the US if they felt they could be welcomed. But this enduring American advantage should not excuse the US from patching up its deficiencies."

I want to be clear that though I expect China will overrun advanced technology industries, it won’t make the country a broad success. Over the past five years, it has been mired in disinflationary growth, where young people struggle to find a job and find a spouse. The political system is growing even more opaque, terrifying even the insiders. This year, Xi deposed a dozen generals of the People’s Liberation Army, one of whom was also a sitting Politburo member. I wonder how many people inside the Politburo feel confident about where they stand with Xi.

Entrepreneurs are on even worse ground. Earlier this year, investors greeted Xi’s handshake with prominent entrepreneurs (including Jack Ma) as good news. It was so, but who can be sure that Xi will not greet them differently once they revive the economy? Though Xi can cut entrepreneurs some slack, the trend is towards greater party control over business and society. Xi himself doesn’t evince concern that economic growth is lackluster. It’s an acceptable tradeoff for making China’s economy less dependent on foreign powers. None of this is a formula for broad human flourishing. Rather, it is depriving Chinese of contact with the rest of the world.

Beijing has been working relentlessly to build up its resilience. While the US talks itself out of Sputnik Moments, Beijing has dedicated immense resources to patching up its own deficiencies. It’s not a theoretical fear that Chinese companies might lose access to American technologies. So the state is pouring more money than ever before into semiconductor makers and research universities. It is investing in clean technologies not so much because it cares about the climate, but because it wants to be self-sufficient in energy. And it is re-writing the rules of the global order, with caution because it has been a giant beneficiary of it, while the US is still wondering about what it wants from China. Beijing has been preparing for Cold War without eagerness for waging it, while the US wants to wage a Cold War without preparing for it.

So here’s a potential way that China succeeds. Beijing’s goal is to make nearly every important product in the world, while everyone else supplies its commodities and services. By making the country mostly self-sufficient, and by vigorously policing the outputs of LLMs and social media, Xi might hope to make China resilient. He is building Fortress China stone by stone in order to outlast the adversary. Beijing doesn’t have to replicate American diplomatic, cultural, and financial superpowerdom. It might hope that its prowess in advanced manufacturing might deter the US. And its success in manufacturing might directly destabilize the US: by delivering the coup de grace to the rustbelt, the US might shed a few million more manufacturing jobs over the next decade. The job losses combined with AI psychosis, social media, and all the problems with phones could make national politics meaningfully worse.

I don’t think this scenario is likely to be successful. Authoritarian systems have always hoped for the implosion of liberal democracies, while it is the liberal democracies that have a better track record of endurance. But I also don’t think that authoritarian countries are obviously wrong to bet that western polarization will get worse. So it’s up to the US and Europe to show that they can hold on to their values while absorbing the technological changes coming their way.

also btw... Julius Krein Left Wall Street to Build a Journal for America’s Next Ideology - "As heterodox as American Affairs may be, since its founding in 2017 it’s had a clear theme: The system of free markets and global trade that’s come to be known as neoliberalism isn’t working."

Building an intellectual agenda around these populist energies is not so simple. In 2017, in the wake of a fatally violent White nationalist protest in Charlottesville, Virginia, Krein called his earlier support for Trump a mistake. This year, on the website of American Affairs, he wrote that the president’s trade policies “seem confused” and that the so-called Liberation Day tariffs were miscalculated.

Instead of red-meat politics, Krein and the writers in American Affairs tend to focus on the pivot points of economic power. Many of the pieces make an argument along these lines: The US has racked up unsustainable levels of debt while financing ever greater concentrations of wealth at home and the industrialization of competitors abroad, particularly China. Both to win the great power competition and boost American workers, America needs more factory building, less financial engineering, and new policy on everything from chip manufacturing and artificial intelligence to warships and nuclear power plants...

To do that, Ivey and Shirk lay out a plan that includes incentives in the tax code to invest in new productive enterprises. But they also call for limiting the influence of billionaires and corporations on elections, robust antitrust enforcement, and a wealth tax on personal fortunes of $50 million or more. Most conservatives revile wealth taxes, which Democratic Senator Elizabeth Warren of Massachusetts has championed. But Krein says, “the right is changing.”

The American Affairs agenda differs from the traditional right in other ways. China is cast as a military rival to be feared, but in some respects it’s also an economic model to learn from. Few conservatives would have made the same case about the Soviet Union during the Cold War. Essays in Krein’s journal suggest the US should take lessons from China’s development of mega-urban regions and argue for a homegrown version of the “Made in China 2025” industrial policy aimed at achieving dominance in tech, aerospace and electrical capacity. China practices a form of economic nationalism, and American Affairs often argues that the US must do the same.

cf. -China’s Comac on Track to Miss C919 Delivery Target by Half -Air China to Buy 60 Airbus A320neo Planes for $9.53 Billion

more re: a ‘china shock’...

• Is China winning the innovation race? - "Once the world’s factory, Beijing’s relentless focus on R&D means the country has become the world’s laboratory."[1]

The technology, a forerunner to completely driverless cars, has taken the German company about 18 months to develop, test and now commercially deploy — all in China. It is the fruit of a 700-person research and development team comprised mostly of Chinese software engineers with masters or PhDs and more than five years’ experience.

Asked how long it would have taken to deliver something similar back home, Hafkemeyer, who worked with Audi, Chinese state-owned auto group BAIC and tech giant Huawei before joining VW in 2022, sighs with exasperation. Typically, he says, the technology development cycle in Germany is a slog of around four to four-and-a-half years, where ideas are bogged down in endless internal debate and commercial negotiations with suppliers.

• Why China is pulling ahead in the robotaxi race - "Government enthusiasm and cheap technology are giving it an edge."

Waymo, America’s robotaxi leader, spends between $130,000 and $200,000 each on its current generation of vehicles, which are equipped with a multitude of sensors and oodles of computing power. HSBC puts the average cost of a Chinese robotaxi at $40,000. Baidu’s RT6, made in partnership with Jiangling, another state-owned carmaker, costs just $35,000. Cars and the peripheral technology needed to make autonomy work are much less expensive in China. An enormous domestic market and fierce competition have pushed down vehicle costs in general, while the availability of basic self-driving systems in even cheap cars has brought scale and lowered prices for the sensors required for autonomy, such as the laser-based lidars that create a 3D model of the area around a vehicle. Four Chinese companies, led by Hesai, control around 90% of the global lidar market.

• Chinese pharma is on the cusp of going global - "Its fast-moving, cut-price drugmakers stand to make more money abroad than at home."[2]

Many of China’s “sea turtles”, as such returnees are jokingly known, came back with experience of building biotech firms and dealing with investors and regulators. Their entrepreneurial zeal was bolstered by rules making it easier to raise funds and to list on the Hong Kong stock exchange.

• What China will dominate next - "Nothing says that China must own the future. But if the West wants to compete in self-driving cars and medicine, let alone EVs, solar power and other vital technologies, it must learn the right lessons from China’s rise."[3]

viz. THE most advanced city in the world? - "In this video, we explore the most high-tech things in the fastest growing tech-hub city in the world: Shenzhen!"

otoh...

• The China That the World Sees Is Not the One I Live In - "Despair about dimming economic and personal prospects has created an outwardly strong, inwardly brittle nation."
• After a terrible fire in Hong Kong, public fury smoulders - "The government is determined to suppress protest."
• The general who refused to crush Tiananmen’s protesters - "A leaked video of his court-martial has suddenly appeared."

oh and speaking of technology and innovation :P

• Capital is Cheap, This Is the Last Source of Scarcity - "An interview with Albert Wenger on history and economy."[4,5,6]
• Is everything computable? - "Professor Hannah Fry sits down with Google DeepMind Co-founder and CEO Demis Hassabis for their annual check-in. Together, they look beyond the product launches to the scientific and technological questions that will define the next decade."[7]
• Terry Tao on the future of mathematics - "A conversation on the future of mathematics."[8]
• The Math Legend Who Just Left Academia—for an AI Startup Run by a 24-Year-Old - "Ken Ono had an epiphany. Now the professor is moving to Silicon Valley to chase mathematical superintelligence."[9]
• Meet The Stanford Dropout Building An AI To Solve Math’s Hardest Problems—And Create Harder Ones - "Axiom Math, which has recruited top talent from Meta, has raised $64 million in seed funding to build an AI math whiz."
• The most complex model we actually understand - "In this video, I’m going to claim that one specific example, ‘grokking’ modular arithmetic with a single layer transformer, is the most complex AI model that we fully understand."[10]
• Kolmogorov-Arnold networks bridge AI and scientific discovery by increasing interpretability - "As KAN models scale up, even if all spline functions are interpretable individually, it becomes increasingly difficult to manage the combined output of these 1D functions. Consequently, a KAN may only remain interpretable when the network scale is relatively small."[11]