US policy makers tend to have this view of Chinese technology policy as being long-range, strategic, and top-down. We know that the most successful parts of the Chinese tech economy are the ones that grew up ignored — or at least initially ignored by the Chinese states. I think what really worked for the Chinese system is just a huge amount of flexibility. It really acted in some ways like a federal system. Localities and provinces managed to experiment with different forms and shapes. Took advantage of a huge in-flow of capital and talent.
… The Chinese SOEs [state owned enterprises] were not particularly important players in the Chinese R&D system. A lot of it was happening at the Chinese academy of science. SOEs had large R&D budgets, but not much was coming out of it… I still think the most interesting R&D is happening outside of the SOEs.
That was Adam Segal on Jordan Schneider’s excellent EconTalkPodcast, “The changing nature of US-China tech competition.” This is a point of view not often expressed, particularly in Washington DC. I was once berated by an earnest woman in front of a conference audience for suggesting that Chinese success, like the US in WWII, was due more to flexibility than top-down policy. She was advocating a singular approach to US cybersecurity across government and industry.
Of course, I’m not a China expert. But I hope US leaders don’t create policy under misguided assumptions about how the Chinese system actually works. Department of Defense technology development is likely more centralized than anywhere else, save North Korea.
Our present defense woes are the result of the US trying to emulate the Soviets in the 1950s and 60s. There was a general agreement by economists and policymakers that Soviet central planning and higher capital investments led to accelerated progress. The DoD’s budget process is a central planning construct more complete than what actually occurred in the Soviet Union. Whereas the US had a market economy to provide pricing signals and productivity to bolster terrible central planning in the DoD, the Soviets realized they needed to take a more decentralized, trial-and-error approach. They moved away from the central planning ideals of the 1930s, whereas the US, not recognizing that fact and prematurely announcing Soviet dominance (e.g., after Sputnik), decided to go all in on top-down planning.
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