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What Drives 'Breakneck' Development in China? · Columbia Energy Exchange

• 0:00
  Dan Wang: My view is that the US and China are going to be in competition for a long time. We should understand them not through whatever structural advantages, because I think it is quite easy to paint an ugly picture of China. If we take a look at demography and debt, and political problems. Yes, you can do that. But if you want to focus only on the problems of America, you could also paint a similarly negative picture about the robustness of our political institutions or the robustness of our economy right now, as well.
• 0:01
  Jason Bordoff: Trade tensions between the US and China have hit a new high mark. After China announced plans to ratchet up its export controls of some rare-earths and magnets with strategic uses, President Trump threatened to retaliate with 100% tariffs, which would go into effect on November 1 or possibly sooner. But the competition between these two world powers goes far beyond trade disputes and tariffs. It's a contest between fundamentally different approaches to governance, technology, and economic development.
• 0:02
  China, of course, dominates critical supply chains for clean energy technologies. But many of the innovations that spawned those technologies were born here in the US. China builds, and governs through strong state control. The US innovates, but struggles to build.
• 0:03
  How did these two nations develop such different capabilities? What does China's dominance in manufacturing mean for American competitiveness and national security? And can the United States learn from China's approach to building at scale without sacrificing democratic values and individual rights?
• 0:04
  This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff.
• 0:05
  Today on the show -- Dan Wang.
• 0:06
  Dan is a research fellow at Stanford University’s Hoover History Lab and studies China’s technological capabilities. He is the author of Breakneck: China’s Quest to Engineer the Future, a New York Times bestseller. Dan was previously a fellow at the Yale Law School’s Paul Tsai China Center and a lecturer at Yale University’s MacMillan Center for International and Area Studies.
• 0:07
  Dan and I discussed his book, which casts China as an engineering state and America as a lawyerly society. We talked about how those orientations manifest in everything from public transit to advanced manufacturing to the rise of artificial intelligence. We explored immigration policy, talent retention, and whether the U.S.-China relationship is headed toward further escalation or a different future. And Dan explained why he thinks that despite these deep divisions between our governments, American and Chinese people are similar in profound ways.
• 0:08
  I hope you enjoy our conversation.
• 0:09
  Dan Wang, thanks so much for making time to be with us. Welcome to Columbia Energy Exchange and congratulations on the great book Breakneck. It's getting tremendous reviews, nominations in the Financial Times and other places and congrats on all the success.
• 0:10
  Dan Wang: Thanks Jason. It's my pleasure to be here.
• 0:11
  Jason Bordoff: So there's so much to talk about. I feel like I have to start with a mea culpa because I have a law degree, so I feel like I'm part of the problem.
• 0:12
  Dan Wang: Sorry, next podcast please.
• 0:13
  Jason Bordoff: So for those listening who may not know why I just said that or have read the book yet, just sort of explain the frame you're bringing to help think about the US-China relationship tensions right now and why lawyers are the problem.
• 0:14
  Dan Wang: Yes, so I spent 2017 to 2023 living in China, working as a technology analyst at a global macro research firm, and it felt like a pretty momentous time to be in China when Donald Trump had just launched his first trade war. China was growing in technological capabilities and the centerpiece of my time was living through the entirety of Zero-COVID. I started feeling frustrated that we're reasoning through the US and China with these 19th century political science terms like socialist and capitalist and neoliberal, whatever that means. I just wanted to have a new and inventive fun framing of the US and China. So China's a country I call the engineering state because at various points in the recent past, all of its most senior leadership have had degrees in engineering of a very Soviet sort. They were trained in hydraulic engineering, electrical engineering, civil engineering, et cetera.
• 0:15
  They build their way out of every problem. So China builds a ton of high-speed rail, bridges, roads, highways, homes, hyperscalers, solar, wind, nuclear, whatever. They treat the economy sometimes as an engineering exercise, pushing smart people away out of cryptocurrencies and consumer tech into semiconductors and aviation and clean tech. They also engineer the people. So I write extensively about the one-child policy as well as Zero-COVID in which the number is right there in the name. They get really literal-minded about treating society as just another building material to be torn down and remolded as they wish. I contrast that with the United States, which I call the lawyerly society because it seems like everyone who goes on to be president first has to go through the Yale Law School.
• 0:16
  Jason Bordoff: You said five out of the last 10 presidents have attended law school and some huge number of the Politburo Standing Committee by contrast were trained as engineers, if I recall correctly.
• 0:17
  Dan Wang: At one point all of them, all nine members of the Politburo Standing Committee were engineers. Of the earlier American presidents, first 16 US presidents from George Washington to Abraham Lincoln, 13 of them were lawyers. Within the Democratic party, it's especially lawyerly. Every single presidential nominee to be president from the Democrats between 1980 to 2024 had a law degree. The issue with lawyers is that they block everything good and bad, so you don't have stupid ideas like the one-child policy. You also don't have functional infrastructure, I would say, almost anywhere in the United States.
• 0:18
  Jason Bordoff: I'm going to come to all of that, but just remind people again who may not know you or your background. You were born in China, you've lived in Canada and the US, so just remind people about your journey and how you came to this work and the perspective it gives you on both of these societies.
• 0:19
  Dan Wang: I am from southwest China, a province called Yunnan, which is pretty distant, far away from the more prosperous coasts. When I was seven years old, my parents and I immigrated to Canada. I grew up mostly in Ottawa and my parents and I moved to the US when I was in high school. We moved to Bucks County, Pennsylvania, so this is suburban Philly. I feel like I've spent about equal parts of my life between the US, China and Canada at this point. I used to work in Silicon Valley and part of the reason that I moved out of Silicon Valley was that I thought that too much of tech in California was focused on small problems like consumer tech and cryptocurrencies. The Chinese, when I moved there at the start of 2017, had just announced that they were working on things like Made in China 2025 segments. They really wanted to get great at solar, batteries, nuclear power plants and what the Chinese were up to just seemed to be on a much larger scale.
• 0:20
  Jason Bordoff: Sort of, I guess you're echoing what Peter Thiel's quote, we wanted flying cars and we got 140 characters. Is that sort of the narrowness?
• 0:21
  Dan Wang: That is one element of it. Yeah.
• 0:22
  Jason Bordoff: Actually one of, I do a lot of cycling and I love that five-day bike trip you did through China. So that sounded like a great trip, but also a really interesting way to see the extent to which building in that country is happening, including in so many parts of the country that lots of people who travel there maybe less than before Beijing, Shanghai, but it's much broader than I think people here appreciate about the scale of the building and the modernization.
• 0:23
  Dan Wang: Yeah, I spent five days cycling through a province called Guizhou, which is also in China's southwest, also very mountainous and far away from the prosperous coasts. Guizhou is China's fourth poorest province. It has 15 airports, it has 45 of the world's tallest bridges—the world's tallest bridges, not China's tallest bridges—and it has high-speed rail. As I was cycling through, I was thinking that, oh my gosh, China's fourth poorest province has much better levels of infrastructure than California where I'm speaking to you now as well as New York state. These places don't really have high-speed rail. These places don't really have excellent airports. So there is something pretty remarkable that the Chinese have been able to build a lot of excellent infrastructure. This I think has also been a way to build political resilience into the Communist party because if you're a resident of Shanghai or Guizhou, every year you're getting more subway stations, you're getting more parks, you're getting better integrated into the high-speed rail network where you can take the train from Shanghai to Guizhou as I did. As physical dynamism has produced a better life around you, you also feel like the future will be better than today. Whereas if you're living in a pretty static place, like many parts of the US—I guess San Francisco and New York have built a little bit over the past decades, but if your only exposure to a better life is a new coffee shop around the corner, I think that you don't expect the future to be very substantially better than the past.
• 0:24
  Jason Bordoff: You have that great sort of stat data point at the beginning framing this about the year 2008 when California voters approved a high-speed rail between San Francisco and LA and China began construction of the Beijing-Shanghai high-speed rail line. Three years later that was done in China at a cost of $36 billion. I guess the latest estimate for a small segment of the line between San Francisco and Los Angeles is 2030 to 33, which I'm quoting your book, which means the margin of error for estimating when a partial leg of California's high-speed rail will open is the same as the time it took China to build the entire Beijing-Shanghai line. I thought that captured, well I guess this broadly, not just your book, but the Ezra Klein and Derek Thompson's Abundance book and this whole idea that it has become too difficult to build is all sort of captured in that. So what lessons do you take from that other than lawyers are the problem? Where does that take us in terms of the kind of reforms, the policy approaches that we need in the US?
• 0:25
  Dan Wang: Yeah, I think that lawyers are partially the problem. They're partially the solution. I think that first let me defend a little bit of the lawyerly society, which is that I think that lawyers are guarantors of some degree of pluralism and they are guarantors of rights in many cases. Let me be very clear, I think that the US should not become like China in order to build a lot of infrastructure. There are much better models to reach for. Countries like Spain and France and Denmark and Japan have built excellent infrastructure without trampling over the rights of people at about one-tenth of the cost of New York City's Second Avenue subway or something. But I think the problem with a lot of lawyerly society is that I think lawyers fundamentally are servants of the rich. Now, there are many types of lawyers and there are many types of lawyers that defend rights, but among the most lucrative parts of the law are rich people suing each other or suing the government.
• 0:26
  I think one big problem with, let's say California, is that speaking to you from San Francisco, this area is the only part of the world that managed to create several companies worth over trillions of dollars and especially Apple and Nvidia are super profitable, gigantic companies today. You can't create companies worth trillions of dollars without some degree of legal protection. America is a country that works really well for the rich. They feel comfortable about starting their businesses here. I think this is both a benefit and a problem. I think that the rich in America have a lot of power. There's nowhere better in the world to be rich. You can pretty easily transmute some of your wealth into political influence if you're rich in America. I think the problem with America is that it can't work in the longer run if it benefits especially the rich.
• 0:27
  If you're a rich person in New York City, you don't worry about high housing costs. You have these skinny skyscrapers overlooking Central Park that you're able to buy apartment units in. You don't take the subway to work, you don't have to deal with a screeching loud metallic scream every time the subway rolls in. What I would really like is for the US to build a little bit more for the people—people who need more affordable homes, people who need functioning mass transit in order to get to work. That is a little bit more of what I want the US to be able to do.
• 0:28
  Jason Bordoff: And if you're avoiding mass transit because of the screeching, you're probably in a vehicle that's going to take twice as long to get where you're going. So it's kind of important for densely packed cities like New York to have that. Regardless, I will say for people who want to hear your thoughts a little more deeply on tech and Silicon Valley and what that US-China relationship means, I listened to a great conversation you did with my friend DJ Patil at the Commonwealth Club, which I would encourage people to listen to. I thought that was really good.
• 0:29
  I want to come back to your point about political resilience as one of the things that emerges from this. Is there a limit to that? I mean the argument that we've seen some make, and you can tell me whether you buy into it or not, Hal Brands and people about peak China—when part of the way you're maintaining political and public support is by this continued investment in building like housing. Is there kind of a limit to that if the economy can't catch up? And for all the constraints of lawyers versus engineers, US economy has generally performed pretty well compared to China. So in the long term, do you get political resilience from this approach?
• 0:30
  Dan Wang: There are always a lot of risks now. I think that one way to understand the Chinese experience is to deliver things that people want. So I mean it's always impossible to interpret the public interest, but according to the public interest that's interpreted by the Communist party, people want cleaner air and better parks and monumental projects. That might be right or wrong, but I do feel like plenty of people in Guizhou point to these bridges with pride. Plenty of residents of Shanghai really love it when they have new and better subway lines. Of course there are limits to China's approach. China's economy right now is not on very strong footing and that's in part because of the government's actions to channel so much investment into manufacturing rather than give people more disposable income through some degree of redistribution. I think that China's youth unemployment is really high, long-term simmering demographic decline that China will have to deal with.
• 0:31
  I think the most striking fact to me is that plenty of people want to depart from China. According to some statistics, something like 14,000 millionaires departed from China in the year 2023. They take themselves and their wealth out to Japan, Singapore, London, New York, whatever it is. There's a lot of creative types who feel like journalists, filmmakers, artists who feel that the government is growing more censorious as it is, and they decide that they want to be in places like New York or Amsterdam or northern Thailand where they can be a little bit more free in pursuing artistic pursuits. Then there's a class of people who are not necessarily rich, not necessarily very creative types who have decided to fly to Ecuador where they don't need a visa and then walk across the southwestern American border with other Central American migrants. The US CBP is apprehending something like 40,000 Chinese nationals across the southern border in the year 2024 every single month. There's plenty of people who don't like the engineering. They don't feel like they want to be socially engineered. Xi Jinping has echoed a line from Joseph Stalin that the communist party and the teachers may need to be engineers of the soul. I don't know about you Jason, but I don't like having my own soul engineered.
• 0:32
  Jason Bordoff: That point you made about people wanting to depart for reasons of creativity, open society, economic opportunity—is that changing? Particularly I'm thinking with regard to the US given the posture we've seen, particularly this administration take, but the general hostility in the US-China relationship. We've had so many Chinese students who've come to American universities for so long and often stayed to start companies or contribute to companies. Is that changing? Is the US shooting itself in the foot in that way do you think?
• 0:33
  Dan Wang: Yes, I think that it is definitely a question that many Chinese have about whether they want to stay in the US longer term. I think there are still plenty of Chinese who would move to the US given the chance, but if we take a look at some well-educated Chinese especially, I spend some time thinking about AI researchers in Silicon Valley. According to some of these publicly disclosed top AI researchers, many of them attended Chinese universities, many of them are Chinese nationals. Many of these people are questioning whether they want to stay in the US longer term. It could be as simple as the fact that San Francisco is not always a wonderful city and they don't like walking amidst so many syringes in the streets. It could be that they're really put off by Donald Trump's rhetoric about how he feels about Chinese.
• 0:34
  It could be that they just miss great noodles and they miss mom's cooking. But this is kind of a fluid group of people and I'm sure a bunch of Chinese students who are struggling with staying in Trump's America in part because they don't like the politics, in part because the visa policies are shifting against them. Though they would love to stay, they cannot have any means to stay. I'm still really struck by this episode last month in which ICE conducted this raid on South Korean engineers trying to build a battery facility in the state of Georgia and deporting them and humiliating them in chains. I think that's not the right approach for trying to build America into a clean tech superpower. China's approach was to have a bunch of engineers from Apple and Tesla, welcome them with open arms, treat them really well so that they could teach Chinese to make some of the most sophisticated consumer electronics products in the case of Apple and most sophisticated EVs in the case of Tesla and to impart their managerial expertise and technical expertise into the minds and hands of Chinese workers. I'm wondering if this worked for China, why can't it work for the US?
• 0:35
  Jason Bordoff: I think there's a perception from at least some in the US that China's manufacturing prowess is in making cheap iPhones, it's manufacturing at scale and lowering costs, maybe stealing IP, but it is real innovation too in the end. The companies that emerge like BYD or something, there's extraordinary innovation happening there and I'm wondering if you feel like that is true and maybe not well appreciated enough?
• 0:36
  Dan Wang: Yes, definitely. I think that there is this California mode of innovation in which you get a Steve Jobs, make him take a bunch of LSD, he goes into a garage and then a Mac computer rolls out. I think that is kind of a strange model of innovation and I think that the Chinese approach is much less LSD driven for sure. It is less of these light bulb moments and it is kind of just this incremental working on products in which progress is accretive and by the end of it, a much better product does come out. I think the challenge and the provocation I would offer to Americans is what has greater glory—is it to invent the solar cell as Bell Labs did in the year 1954? And in that case you get into the history books forever. Or is it to actually own this industry as China does?
• 0:37
  Because China makes about 90% of solar photovoltaic panels, everything from the polysilicon processing all the way down to the assembly of the actual modules. I submit it is much better to own an industry rather than to invent it because otherwise I don't think we're giving that much credit to the British and the Germans anymore for inventing everything. It is much better to own these industries and America is really good at building a couple of ladders like reaching the top of the solar ladder, but it is not very good at actually climbing these sort of ladders because its firms are not very good at manufacturing anything anymore. I encourage Americans to treat manufacturing with greater seriousness and to figure out how to own these products that American scientists invent.
• 0:38
  Jason Bordoff: So I want to ask you why that is and then also ask you why that matters—why it matters where we manufacture lots of things. But in terms of why that is, you said you don't want to become like China. You mentioned the rights of people, maybe one-child policy, the way the state has orchestrated people's lives, but in terms of becoming like China in the sense of engineering society, being able to manufacture at scale what you just said a moment ago, I presume you do want more of that. The question is what lessons you think we should learn from China? The idea of abundance has captured a lot of attention, but the question of how you do it—I mean environmental protections exist for a reason. There was a great builder here in New York, Robert Moses, who built lots of built New York for cars and put an expressway through the Bronx and almost through Washington Square Park. So environmental protections, community engagement, the things lawyers do serve a purpose, but if we've gone too far, what lessons can we learn about the right way to address that and fix that? Maybe we don't go too far in the other direction.
• 0:39
  Dan Wang: Yeah. Well let's talk about China and I also have some thoughts about Robert Moses that I want to toss at you first. I think that there's something that the Chinese deeply appreciate with technology production that the Americans have mostly forgotten. I think when I think about technology production, I think that it is made up of three different things. First, technology is made up of tooling and equipment. So these are pots, pans and a stove in a kitchen analogy. The second part of technology is written instruction. So patents, blueprints, something like a recipe. Third and most important, technology is process knowledge and process knowledge is what exists in people's heads that's impossible to write down. It's what exists in people's hands. You can also call it tacit knowledge, industrial expertise. It mostly lives on in communities of engineering practice. I think the United States was relatively relaxed about having Walmart ship a lot of goods into China throughout the 1990s.
• 0:40
  There were some people who dissented against that, but broadly speaking, the elites gave the green light for American corporates to ship jobs to China. The US manufacturing population has declined, not mostly because of China. The economists tell us it is mostly because of technological automation, but a portion of that—American managerial expertise—really did move to China. I think the Chinese live and breathe technology production. They're very intent on making really good products and they have a sense of how important it is to just keep knowledge alive and to keep it going. Technology is something that they practice and such that if you are just making a lot of great products, you don't necessarily think too much about what's going on in the mind of Xi Jinping. You don't necessarily think about what's going on in the mind of Donald Trump. You're just solving three new problems a day before breakfast. Once you're confronted with these challenges, you can move on to solve bigger and better challenges. This is a lot of the reason I think that the US no longer has the ability even to be very aware of what is important and valuable about new manufacturing processes. Now as promised, let me make a quick point about Robert Moses or do you want to say something?
• 0:41
  Jason Bordoff: Well, I was just going to ask you about that. It sounds like if I'm hearing you right, the original sin in some sense was the embrace of globalization that things like tariffs or Buy America provisions to try to keep manufacturing at home, force people to do it here. Actually that's part of the prescription you're describing. Is that wrong?
• 0:42
  Dan Wang: I think that there are several sins. There was no single original sin, but one part was a relatively relaxed attitude about moving offshore. I think that was downstream of this decision by a lot of investors to focus really only on the most profitable bits of technology production. So I mean Apple really is amazing at software and marketing and it has a lot of hardware experience, but a lot of that hardware experience is also shared. It's mostly based in China. So I think that there is kind of also this sense that in China it is good to build manufacturing redundancies. In America the saying from someone like Tim Cook is inventory is evil. What we need is just-in-time production. So everything feels actually much more brittle and poised for perfection. What the Chinese have done is build much greater redundancies into the system. I think what we want is a little bit more focus on resilience rather than profitability.
• 0:43
  Jason Bordoff: Okay. Robert Moses and then I'll come back to what we were just talking about.
• 0:44
  Dan Wang: Yeah, I think that first of all, The Power Broker is just one of the most amazing monumental books ever produced. I think it is an amazing work of biography. I read it last year along with a lot of other people in the 50th anniversary of the book, but I think it is also one of these books that produced the turn towards the lawyerly society in America, along with Jane Jacobs, along with Rachel Carson, along with Ralph Nader's activism. I think it was definitely wrong for Robert Moses to ram so many highways into New York City in the Bronx and Sunset Park, and I think he certainly needed to have been stopped at the time that he was stopped. But I frankly don't quite understand why it is that we in 2024, 2025 are still reading this book and feeling like it is still holding some of the answers of New York City development because the problem with the book is embedded in the subtitle: Robert Moses and the Fall of New York. Has New York fallen to me?
• 0:45
  Well, the real estate prices haven't fallen. It's an extraordinarily expensive place to be. I spend a lot of time in Michigan. My wife is a professor at the University of Michigan, and if you want to take a look at fallen cities, come with me to the industrial Midwest. Places like Detroit and Pittsburgh and Cleveland. Pittsburgh has actually done better, but Cleveland and Detroit have obviously fallen much more. I think there are parts of Robert Moses' agenda that I think have made New York into the gleaming city as it is today. He reorganized the southern part of Washington Square Park and gave that to NYU. NYU used to be closer to where you are in the part of town closer to Columbia. I think NYU wouldn't be the university it is if it weren't a little bit more central in Manhattan. Robert Moses built the Lincoln Center and what could be more elite than the opera and the ballet, but I think that New York City is a gleaming cultural center in part because it has that. So I think that we need a little bit of revisionism on Moses—recognize his mistakes but also recognize that he has done a lot of amazing things also for New York City.
• 0:46
  Jason Bordoff: Yeah, for sure. He was a master builder and a lot of the building was important and gave us the city we have today. We're also living with the legacy of some things. Maybe in retrospect it would've been done differently, but the names you mentioned sort of highlight that tension. Right? Rachel Carson who famously wrote Silent Spring about DDT—through the forties and fifties and sixties was another great book by Douglas Brinkley, the American historian about the history of the American environmental movement where we partly in the spirit of building rapidly did spoil a lot of the air and water across the country and that led to landmark laws to be put in place to prevent that which are important. Also in my view and probably yours, have also been weaponized and gone too far and prevent sensible things from happening today. The challenge we have is sort of how to find the balance between those two things and get that right.
• 0:47
  Can I ask about, you brought up energy, so let me sort of come to that a little bit in terms of the manufacturing capacity that China has, say, in solar PV and the dominant position that it has there. That's true in batteries and electric vehicles, critical minerals refining and processing. We're talking on the day that, and this will come out a couple of days after we talk, but President Trump threatened massive tariffs in response to China imposing restrictions on rare earths and magnet exports, highlighting a concern that many people have about the dominant position they have in these clean energy supply chains. On the other hand, if you think about something like a solar panel, climate is in my view, probably yours too, a very important challenge. We need to be moving much, much faster to deploy clean energy. If you want to move faster to deploy clean energy, you want it to be really cheap.
• 0:48
  To the extent people feel like manufacturing needs to happen at home, buying things from China is a problem. The phrase national security is a label that gets thrown on everything now. All of that is difficult and inflationary and throwing up barriers to try to onshore or friendshore just makes things, I think more costly, causes delay. It takes a long time to build up the kind of supply chains China has. So I'm wondering how you think about the reason we're doing this. You said a moment ago, we should have more manufacturing in the US. Is that because those are jobs that are good jobs and union jobs? Is that because as Jake Sullivan said, there's a small yard of sensitive national security things that we want to make sure we have domestic capacity for military or other applications? Why do we care where all of this stuff is made and is it a problem to buy a lot of what we need in clean energy or otherwise from China?
• 0:49
  Dan Wang: I think my view first and foremost of technology is that technology is like a ladder and if you miss a couple of rungs early on in the ladder, it becomes really difficult to climb up. This is a lot of what I mean by process knowledge. You have a lot of process knowledge in, say, workers who are making iPhones one year, they make a Huawei phone the next year, then they go make a DJI drone and an electric vehicle battery next. So they're able to do these sort of things and move up the ladder. If you're not on the ladder, then you can't win these sort of industries. I think there is a national security argument in which, I mean just in terms of really direct national security goods like munitions now—what's more national security than these sort of military goods? The US shipped a lot of munitions to Ukraine in self-defense against Russia.
• 0:50
  I think that's good, but then the US wasn't able to build its stockpile very easily. So this is a way in which the defense industrial base is rusted and they need to get a lot better. I think there is also an economic resilience argument here where in the early days of the pandemic, the US wasn't able to make relatively simple products like masks and cotton swabs. I think the US ought to be able to respond in any sort of an emergency. For me it is less important to create high-paying union jobs because I'm a little bit traumatized by some of these press releases from California high-speed rail. When the Chinese talk about high-speed rail, they talk about the number of people it's moved. So in the first decade after the completion of China's first high-speed rail line, Beijing-Shanghai, according to state media, China had completed about 1.4 billion passenger trips over the first decade.
• 0:51
  When I see press releases from California high-speed rail, they're always touting about the number of high-paying union jobs that this is supporting. I'm thinking the voters approved this referendum in the year 2008 to connect San Francisco and Los Angeles through high-speed rail. Will anyone be able to take this train from SF to LA 30 years after its completion? I'm not sure if we're on track. So I think this is where I want the Americans to be a little bit more outcome oriented and not be so concerned about process and procedure. We actually need to do the things that the government says that it's going to do.
• 0:52
  Jason Bordoff: And give us a sense of how possible this is given that we missed some rungs in the ladder. When you think about something, again, the news of today, the position that China has in refining and processing the world's critical minerals or making batteries or pick your thing, I do have a sense in which we have some government subsidies, some restrictions maybe on imports in the Inflation Reduction Act or other pieces of legislation. Then you see an announcement of a project here or there and people think, look, we can do it. We can manufacture these things at home. But the scale and magnitude of the dominant position China has really created is almost like staggering to comprehend and how long it would take and how difficult it would be to replicate that to meaningfully put a dent. People talk about diversification, want to diversify supply chains, but to bring in your areas of clean energy where the dominant position is 70, 80, 90% of manufacturing in many of the things I just talked about—to change that meaningfully, is that possible or is that like a scale of challenge at this point that is almost too difficult to tackle and then we need to think maybe about other policy tools to build resilience?
• 0:53
  You could have strategic stockpiles, we can go down the list of other things one can do besides try to make things at home instead of importing them, but give us some sense of the scale of what it means for China to be dominant in these industries and how hard it is to replicate that.
• 0:54
  Dan Wang: I am a sunny optimist from California, but I am not especially optimistic in this case. As a technology analyst in China, I was covering China's capabilities in semiconductors as well as clean tech. Just thinking about the degree of China's solar advantage, about 90% of the solar supply chain is Chinese. In part that is because processing polysilicon as well as other critical minerals is so energy intensive and polluting that only the Chinese have the stomach to do these sort of things. Cancer rates for some of these critical mineral refineries are just off the charts in the towns where these things are based. China is making frankly better electric vehicles at a cheaper cost than the Americans and Germans and the Japanese are able to do. They are deploying—according to, I just saw this on Ember Research—I think that China's on track to deploy about 500 gigawatts of solar this year, and the US is on track to produce 50. So just one order of magnitude difference, and they just seem to be much, much more serious about solving a lot of their energy needs. What's striking is that by the end of this year, one in two cars sold in China will be electric. I'm not sure what the ratio is in the US. Do you know—is it over 10%?
• 0:55
  Jason Bordoff: Just over 10%.
• 0:56
  Dan Wang: Okay. So the Americans is about one in 10, the Chinese is one in two. I think the technocratic seriousness comes in which they know that they need to import a lot of Middle East oil and gas to power their gasoline vehicles. But if they're electric then they could be powered by domestic coal, domestic wind and domestic solar and domestic nuclear. So they have a much more serious sense of energy sovereignty than the Americans. What have the Americans been up to? Well, Donald Trump calls wind and solar the scam of the century. Maybe they'll do more nuclear. Maybe the Trump administration will do more nuclear, but I'm not sure if it is actually on track to do so. With the Biden administration, it was also really slow and plodding and lawyerly, and this felt like industrial policy as conducted by Yale Law School where they were not actually fundamentally interested in the outcome. It was so procedural and they simply did not build enough even after passage of the Inflation Reduction Act. Right after they lost the election, Donald Trump is now in office threatening to cancel a lot of these different projects. I think this is where I would challenge parts of the left to question, is this about union jobs or is this about deployment of clean tech? What I think we should do is to focus a little bit more on the outcomes here rather than the process of trying to build.
• 0:57
  Jason Bordoff: And tell me again in terms of the dominant position in manufacturing for maybe not the most advanced semiconductors with sensitive military applications, but technology broadly like solar panels or something, maybe batteries again, why we care. In that sense, how you think about the way China thinks about its dominant position and what it is using that for. We saw, as I mentioned a moment ago, restrictions announced this week on rare earth and magnet exports. Is the view here on both sides of the aisle that the US-China relationship is in a state now where there is a significant risk to this dependence because China will weaponize it? Do you think that is a view shared in China? Is that the intent of building this dominance—to weaponize it?
• 0:58
  Dan Wang: Let me tell you that this is not a view that's shared in China. This is a certainty in China because they can very well say that the United States was way earlier in weaponizing its economy against China. We don't need to get into finger pointing about who's to blame. That's not a very interesting exercise. But I did live through the first trade war Donald Trump launched in China, which quickly morphed into the technology war in which the US government started adding all of these Chinese companies onto obscure blacklists in which Chinese companies, most notably Huawei, found that they could no longer procure American semiconductors. For several of these companies, their entire supply chain collapsed because some office in the Department of Commerce says no more American semiconductors for you. So I would say that the Americans have been showing the Chinese their weak spots and their vulnerabilities over much of the past decade to the considerable pain and suffering and distress of a lot of Chinese companies.
• 0:59
  China is really paying back the US only at the start of this year when they started controlling the exports of rare earth magnets, which devastated a lot of automakers and a lot of clean tech producers. So I think that is certainly one reason to care. Another reason to care is that you shouldn't give up on technologies of the future, that you should keep continuing to climb various technological ladders. Yet another reason to care is that I think that there is an important resilience argument here as well, that you should be able to train your workforce to be able to respond in an emergency if an emergency comes.
• 1:00
  Jason Bordoff: You probably saw President Trump's response to the China announcement earlier today in which he said, well, for every restriction they can put in place, we can do two, I'm paraphrasing—or the US has a far stronger monopoly, we have more weapons to use against them than they have against us. That was basically the point of his message. Is that true? Where does the US have a pretty weak hand to play here in terms of trying to think about the threats posed by the dominant position China has on a lot of these critical technologies?
• 1:01
  Dan Wang: I think it is probably true, but I say let's not find out. I think that when you bring up this analogy of hand, one of the earlier remarks from Treasury Secretary Scott Bessent in the early days of the trade war was that America has a super strong hand. They're playing with a pair of twos and we're playing with a pair of aces. This was based on this theory that ultimately what matters is the market. If the Americans don't buy from you, then your economy collapses. I think the Chinese and I believe in an alternate theory, which is that it is actually the goods manufacturers which have the much greater advantage here. If your critical goods suppliers do not wish to sell to you, then your economy might have pretty substantial problems as well. What was really striking to me was that China does have a lot of these chokeholds over the US and they were relatively restrained early on in the trade war.
• 1:02
  They only stopped the export of rare earth magnets. They could have done a lot more. They could have stopped the export of a lot of electronics products. A lot of pharmaceuticals are almost entirely Chinese, I believe—fermented antibiotics as well as ibuprofen. So they only squeezed one finger and they could have squeezed much harder. Now obviously the US could squeeze harder itself, could block more semiconductors from going to China. It could block more aviation jets from going to China. It could heavily sanction China through the Department of the Treasury. But I feel like we should not get into this escalatory spiral in which these two countries attempt to destroy each other's economies. I think that would be disastrous for everyone because then we can start contemplating about the possibility of hot war and we really shouldn't get anywhere close to that.
• 1:03
  Jason Bordoff: Yeah, the risk of escalation, the tension in the relationship now, it seems to be growing. I'm wondering if that's where you think things are headed now. I thought it was for all of that conversation we just had and all the difficulty and dangers in the US-China relationship, I was struck that you started off the book by saying, I am sure that no two peoples are more alike than Americans and Chinese. What did you mean by that and what does that portend for a different sort of future?
• 1:04
  Dan Wang: Yeah. Well, myself, I am a cool, calm, collected Canadian going through these two big countries. They feel maddening and thrilling and fundamentally bizarre. I feel like a lot of Europeans and a lot of Japanese are quite alike. There's a sense of coziness, there's a lot of perfectionism. Their cities are much more beautiful than I think American and Chinese cities. But Chinese and Americans have a sense of hustle. They appreciate the technological sublime. They really want to become great powers and they want other countries to listen to them and they take shortcuts. I think what Chinese and Americans share is just that companies are really hungry. They want profit, they're willing to make tradeoffs, and the American government and the Chinese government both also have a raw hunger for geopolitical power. They really, really want power in a way that I think you don't really see this so much among the Europeans or again, the Japanese. So there's much more that unites these two countries in terms of similarity, which is probably why they're so directly competitive with each other.
• 1:05
  Jason Bordoff: And I just want to come back to the question I asked you earlier about sort of where China is in its growth and its evolution now. Because again, there have been various articles written about so-called peak China—that China is nearing a point where it's going to be difficult to sustain its economic growth and economic competitiveness. Is that where you think things are as there's only so many cities of cement and steel, only so many bridges and buildings you can build? At a certain point once you've stimulated the economy with all of that engineering you talked about, is it nearing the apex of that and does that portend a slower outlook for the economy and maybe political challenges?
• 1:06
  Dan Wang: No, I think that my view is that the US and China are going to be in competition for a long time, that we should understand them not through whatever structural advantages, because I think it is quite easy to paint an ugly picture of China. If we take a look at demography and debt and political problems, yes, you can do that, but if you wanted to focus only on the problems of America, you could also paint a similarly negative picture about the robustness of our political institutions or the robustness of our economy right now as well. My view of the competition is that I think that neither the US nor China are going to implode and then fail to get back up. I think that the more ahead that one country looks, the more the leader will make mistakes out of overconfidence and then overstep.
• 1:07
  The more behind that the other country feels, they will work harder to reform themselves, to be more competitive. I think both countries have done superb jobs of hurting themselves and hobbling themselves. I think that is going to be a challenge with both of them. Now, I also want to be clear that I think that China will not replace the US as the global superpower, largely because the US is also a financial superpower, cultural superpower, diplomatic superpower. The engineering state will never, for example, become a financial superpower because they are insistent on capital controls. So you can't be a global financial power if you insist on capital controls. But I think there is one area in which China is set to succeed because they're engineers—they're going to win on advanced manufacturing. I think that there will be a second China shock against American manufacturers.
• 1:08
  Right now America has 12 million manufacturing workers. Could I see that dropping? Yeah, I can imagine a scenario in which that number of manufacturing workers halves over the next 10 years because of various problems. I think that even if the Chinese win on this fairly narrow victory of manufacturing, it could be the case that as the US loses more manufacturing workers, the economy and the industrial Midwest weakens, I think our politics will get worse. So this is kind of the big scenario that I'm worried about—worse economy, worse politics too because of manufacturing loss.
• 1:09
  Jason Bordoff: You may not have sort of looked carefully at the energy outlook, but I'm wondering if what you just said sort of relates to it in the sense of how dramatic the growth in energy use and greenhouse gas emissions have been in coal use. One objection you often hear when people suggest the US should move faster to decarbonize is, but look at China, look at how much coal they use—half the world's coal. But that outlook is changing. Coal use is maybe plateaued in China. It's kind of flatlining. Renewables are still growing pretty strongly and I'm wondering if that's partly about policy or climate or otherwise, but also just structural changes in the economy. As I said, very energy intensive or coal intensive, steel, cement, building and building all the bridges and buildings and cities—at a certain point that starts to plateau and change towards something like advanced manufacturing. Maybe that changes the energy mix as well.
• 1:10
  Dan Wang: Yeah, I think it's definitely both structural as well as political. Last I checked about 60% of China's total energy use is still driven by coal. That is a really high share, but it is definitely the case that it seems like oil dependence has stopped growing. So both coal as well as oil has stopped growing at least. I think that's in part because the Chinese are reacting—the Chinese government is reacting to people's demands to have cleaner air. So that is definitely very positive. As I mentioned, the Chinese are reading all of these CSIS or American reports saying that, oh, China has all these vulnerabilities through the Straits of Hormuz or Straits of Malacca in which they can't have oil. The Chinese say, oh, well maybe that's right. Which is why now one in two cars sold in China is electric and so they want to be using domestic power. So part of this is a natural slowdown in the Chinese economy. Part of this is to respond to the citizens' demands for cleaner air. I think part of it is a very real geopolitical, geostrategic element to say let's have real energy sovereignty in which the Chinese seem much more all of the above on energy than frankly Donald Trump does. All of the above except for wind. That's weird.
• 1:11
  Jason Bordoff: He does not seem to be a fan of wind, although we do need a lot of power and it's probably going to need to come from lots of sources, particularly. Well, it relates to what you said earlier actually. You mentioned AI and we haven't talked too much about it, but the broad frame of competition to win an AI race, is that sort of the right way to think about it? Where is China in this race? How advanced is it, and how will sort of the coming age of AI affect some of the dynamics you just talked about in the US-China relationship?
• 1:12
  Dan Wang: The US is still definitely in the lead on AI. They have compute capacity represented by advanced chips. They have the better reasoning models and they have a lot of amazing talent. But I say don't count China out. I just wrote a piece that came out yesterday in the Financial Times outlining how China could win on AI. My case is that partly due to electrical power, China right now has twice the electrical capacity as the US and maybe that gap will grow even larger because they're building so much more solar and nuclear and the US is not. There's a lot of Chinese students and Chinese researchers who are doubtful of staying in Trump's America, especially if a trade war between these two countries escalates. I wonder what AI is going to be used for between both the US and China. The US is much more of a lawyerly society and maybe we're going to use all the AI to produce even more lawsuits, and the Chinese is much more manufacturing driven and they're going to use AI to produce more electronics, to produce more munitions and to produce more wind turbines as well.
• 1:13
  Maybe just let me make one more note about wind and the lawyerly society. I think one of the more radicalizing stories I heard about wind was the story of Cape Wind. Now I'm thinking about wind because you have a scale model of a turbine behind you, but Cape Wind was made up of a bunch of wealthy landowners in Nantucket or Martha's Vineyard hiring top lawyers, including a top Harvard law professor to say, we should not have wind because it will ruin the sight of our coastline and we need to save the whales too. This is one of the sins of the lawyerly society. Progressives are saying, not in my backyard, not in my coastline. They're able to hire incredible lawyers to get what they want. So this is where I am doubtful that the lawyers have the right answer here.
• 1:14
  Jason Bordoff: Yeah, I mean it is partly I think not in my backyard and sort of a knee-jerk reaction. There was a little panel at Aspen Ideas Festival this year on the book Abundance and Mark Dunkelman's—I'm blank on the name of it, but in that vein, another great book.
• 1:15
  Dan Wang: I thought, Why Nothing Works.
• 1:16
  Jason Bordoff: Yes, correct. Also a great book. I thought it was a good comment when there was a lot of support in the crowd for this idea. The moderator, Fareed Zakaria sort of noted, everybody who's working in the buildings at this conference needs to live an hour away because it's pretty hard to build housing anywhere near the town of Aspen for reasons. So that's sort of the point you're making—that people like that idea in theory, but maybe not in their backyard. There's another dimension to it, which is environmental groups have spent a very long time trying to protect fisheries, trying to protect the oceans, and if we want to have a lot more clean energy, there's a dimension to which you need to industrialize the oceans for energy and there are very few sources of energy that don't have trade-offs, whether that's mining critical minerals in Nevada or putting wind turbines offshore. The question is, how do we think about these tradeoffs that don't paralyze us, but allow us to make some choices and move forward?
• 1:17
  Dan Wang: I think yes, I think that's a good encapsulation. There are always tradeoffs and don't be paralyzed. I think that's a great motto.
• 1:18
  Jason Bordoff: Well, that's a great note to end on. I really recommend the book Breakneck to people. Fantastic read and just great to see all the accolades it's getting, shortlisted for Business Book of the Year in the Financial Times. I'm torn because one of our own scholars here at the Center on Global Energy Policy, Eddie Fishman's great book Choke Points is also vying for that prize. Maybe it'll be a tie and you can both win, but well—
• 1:19
  Dan Wang: Eddie Fishman's Choke Points is an excellent book and I shall be very happy if Eddie wins with that.
• 1:20
  Jason Bordoff: Breakneck is great. Encourage people to read it and really appreciate your taking time to help us think through all these issues here on the episode today.
• 1:21
  Dan Wang: Thank you very much, Jason. Thank you very much, Jason.
• 1:22
  Jason Borfoff: Thank you again, Dan Wang, and thank you for listening to this week’s episode of Columbia Energy Exchange.
• 1:23
  The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.
• 1:24
  The show is hosted by me, Jason Bordoff, and Bill Loveless.
• 1:25
  Mary Catherine O’Connor, Caroline Pitman, and Kyu Lee produced the show. Gregory Vilfranc engineered the show.
• 1:26
  For more information about the podcast, or the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu or follow us on social media @columbiaUEnergy.
• 1:27
  And please, if you feel inclined, give us a rating on Apple podcasts -- it really helps us out. Thanks again for listening, we’ll see you next week.