Renovation on hold: Dan Wang's "Breakneck"
A fascinating if flawed analysis of the China-America dryad.
“These two countries” – China and the United States – “are thrilling, maddening, and, most of all, deeply bizarre.”
So begins Dan Wang’s new book, Breakneck. It’s a highly readable, bravura account of the problems both countries face. The challenges to China and America, and their respective responses, may be polar opposites, but they are obverses on the same coin.
Wang sees benefits to each nation if it is able to face down the factors that make them maddening and bizarre, and learn from one another about what it takes to be thrilling again. This matters to more than just the Chinese and American people: “It is Americans and Chinese – Silicon Valley, Shenzhen, Wall Street, and Beijing – that will determine what people everywhere will think and what they will buy,” he writes.
I’m sure many readers are familiar with Dan Wang, a macro analyst at Gavekal Research whose annual newsletter has become a must-read. Wang’s yearly account marry personal experience with the sort of big-picture, thematic analysis about The State of China one would expect from someone in his position. Breakneck emerged from his desire to pen multiple essays, and to deepen his insights into the US-China dyad.
The resulting book succeeds in fusing these newsletter-like essays into a theme. The book’s subtitle is China’s Quest to Engineer the Future, and most chapters focus on China, but the most interesting insights come from examining the funhouse-mirror image of the two countries. I believe this book will prove influential among that cosmopolitan niche of businesspeople whose interests span both nations. I’m not so sure it will resonate beyond, as I’ll explain later.
If the Sino-American duet is full of contradictions, so are the domestic politics of both countries: scrambled like broken eggs. Wang is excellent at explaining these paradoxes in pithy words: “It became no contradiction for me to appreciate that things are getting better and getting worse. I saw how China is made up of both strong entrepreneurs and a strong government, with a state that both moves fast and breaks things and moves fast and breaks people.”
And: “The US is still a superpower that is able to outclass China on many dimensions. But it is also in the grips of an ineffectual state where people are increasingly concerned with safeguarding a comfortable way of life.”
His thesis is that China is run by engineers and America is run by lawyers, both to an extreme that has become self-damaging. The ‘engineering state’ has created a global manufacturing and export superpower, while American ingenuity and economic dynamism has been curtailed by regulation and financialization. But the engineering state treats everything, including people, like a physical project of valves, pipes, and channels, leading to disastrous policies around demography, economics, and health, leading to social nhilism, indebtedness, and economic malaise.
The Communist Party (ironically) reviles social welfare or redistribution of wealth, but regards building infrastructure as the key to rising prosperity. This produces tangible benefits to many people but also sharpens its own pathologies. As Wang describes it, “Consumption is capitalist filth, but infrastructure is communist productive power.” The engineering state builds relentlessly according this belief, encouraging each province or city to champion its own companies, creating gluts that destroy profits and anger foreign societies subjected to Chinese dumping.
For the Party, the commitment to manufacturing at the expense of consumption is like a religion, which is why it was prepared to crush digital-platform companies like Alibaba. “Xi prefers his industry heavy and his output hard,” Wang says.
The US safeguards individual dignity, private property rights, and entrepreneurialism, but its response to the emergence of a peer competitor has been sanctions and export controls rather than reinvention and renovation. Wall Street and Silicon Valley favor capital-light SaaS, crypto, and social media over building hard tech for things like infrastructure or manufacturing. The lawyerly state has left Americans today living “in the ruins of an industrial civilization, whose infrastructure is just barely maintained and rarely expanded.” And when the Biden adminstration passed landmark legislation for an industrial policy, lawyers and regulators ground these projects to a halt.
Wang has other insights, which I’ll get to in a moment. But I want to step back and think about the implications of his framing. As a macro analyst, it’s Wang’s nature to look at what really matters, what paints the big picture. It’s about looking through the noise, which is usually political or half-assed commentary on CNBC or LinkedIn. Look past woke lefties or MAGA rightwingers, look past the Maoist nomenclature, penetrate the veils meant to distract us, and find the best way to describe China and the US, separately and combined.
The problem with this approach is that ideology, unfortunately, does matter. American Democrats are currently involved in an ideological civil war. Wang is correct when he describes how commitments to environmentalism, health, and redistribution became obstructions to new building or growth. NIMBYism and a misguided commitment to environmental and privacy rules have tied America in knots. Today the left has awakened to this; the most talked-about ideas now are to be found in Ezra Klein’s Abundance, a call for building but building green. We’ll see how far this goes. A traditional, centrist left with an appreciation of market forces can achieve this pivot, but the Bernie Sanders-AOC-Zohran Mamdani wing – the ascending wing – is unlikely to do so. Not because they want to impose lawyerly solutions, but because they are hostile to market-based approaches.
The MAGA movement...well, what can I say? Wang equates the self-destructive populist right with the regulatory left. I think he underestimates the changes being wrought by Trump 2.0. There is no civil war within the Republican Party: the moderates have been chased out. There is nothing lawyerly about MAGA, which is taking a sledgehammer to Constitutional norms and actual written law. I’d say, if anything, the US needs to reaffirm the lawyerly state, if on more pragmatic terms. It needs to recommit to the rule of law and basic notions that everyone including the President is equal under that law. Wang would like to see the US learn from China but right now the only lessons being learned involve lawfare.
The attention to lawyers is insightful but there could be other ways to describe the US. It’s a media state. In this context, Trump is a continuation, not an aberration. The US invented the mass consumer society and with it the age of television, the internet, and now social media. Presidencies have been won or lost depending on how adroitly parties leveraged media, narrative, and image.
China is ruled by harder stuff, but the Communists once relied on dreams too. And here too Wang’s logical approach faces the same limitations. Wang notes that all eleven members of the Politburo’s standing committee today are trained engineers. He says this explains how the Party sees the world. But I’d say they see the world through the eyes of being the Communist Party, with their own cult of Marxist ideology and Leninist tactics. Engineering is how they express their relentless quest for power, not what drives them. The one-child policy, zero Covid...an engineer would have realized early on that the values and pipes and channels were failing, and tried to solve the problem. A Communist party only changes tack when forced to because of those failures, while burying any hint or evidence that they ever made a mistake.
My guess is Wang prefers the sober, practical notions of engineers and lawyers because it reduces the temperature. It brings the discussion into a realm where everyone can debate without things getting personal. It’s an optimistic approach. Over time, it will have its place, but right now the fires of ideology seem to burn hot in both Washington and Beijing.
However, there is more to Wang’s analysis. One of the best parts of Breakneck is his discussion of technology and how both Americans and Chinese leaders are semi-blind to its importance. Americans cheer the moment of invention – Bell Labs’s transistor, the iPhone – while China celebrates when a product scales to mass production, regardless of its origin. Both aspects are important but insufficient.
“Technology isn’t a product,” Wang says, “it’s a living practice.” He mentions how Apple sent its best engineers to train hundreds of thousands of Chinese workers to co-design all of its products, including the iPhone – a topic I covered in my recent review of Dan McGee’s Apple in China. Wang emphasizes the personal aspect to manufacturing and innovation, such as the knowledge and even craftsmanship required to pull it off.
“Process knowledge is hard to measure because it exists mostly in people’s heads and the pattern of their relationships to other technical workers,” he says. That is, know-how. Tech is about people and process knowledge; the gadgets are just the output. Process knowledge also ensures inventors and engineers have a firm grasp of what they’re doing, so they can control their creations. I could argue that process knowledge has broken down in America’s current AI craze, where the creators of large-language models seem just as befuddled about their processes as the rest of us. Is this the product of a lawyerly state, or a media-narrative state? Trump runs the country as though it’s a TV show, and his chosen form of corruption is crypto. Financialization has rotted once-great corporations, from GM to Boeing.
Virtualism has done just as much as nanny-state regulation to deindustrialize the United States. The outcome is now clear, about which Wang says, “Now it’s more obvious that the departure of manufacturing has created economic and political ruination in for the United States.”
Yet American elites seem oblivious: while China has spent two decades imbibing detailed know-how from the likes of Apple and Tesla, with restless people working killer hours to get around bottlenecks, “The US government has a indulged a preening self-regard concerning how much technological power its country still wields.”
Whether this is due to overregulation or the effect of living in bubble driven by self-pleasing narratives, the best tonic is a return to belief in (appropriately regulated) markets. A markets-based strategy in Washington would have recognized an opportunity to rally the world to pressure China over its dumping practices. It would have enticed Chinese companies such as electric-vehicle and drone makers to set up factories in the US, to gain access to US consumers, in return for technology transfer – the same playbook that China has used towards multinationals, to great success.
But the arrogance in the US blinds its elites from seeing China as a peer competitor with learnable lessons. Of course, the Trump administration has departed severely from market-based principles. The government is taking direct stakes in private companies, interfering in deals, and assailing migrant workers, including those working on the very types of manufacturing investments that the administration says it wants. (Not to mention many other violations of civil rights, transparent government and law enforcement, and freedom of speech.) This is not the act of lawyers. It is pandering to the xenophobic MAGA base.
A return to markets would best serve China too. The Party has never relinquished its hold over the commanding heights of the economy. For three decades, the breakneck growth obscured the downsides, hence the infrastructure and building that Wang describes. But that model, spurred by currency devaluations in the mid 1990s, no longer functions well. However, China’s leadership indulges in its own virtualism, in the form of sciencism, the Party’s cultlike belief that everything it does must be couched in the language of science – that Spock-like logic can enable the Party to decide the fate of one billion-plus people.
Science, however, requires humble human judgment for it to serve as a positive force. Instead it is wielded by a Party that distrusts and fears its own people, putting the brakes on their own flourishing. The example of an America that is confident in its people’s liberty and their skepticism of government is a grave threat to autocratic regimes; America’s loss of confidence in itself is only going to perpetuate the CCP’s belief in sciencism.
Wang concludes: “The best hedge I know against heightening tensions between the two superpowers is mutual curiosity. The more informed Americans are about Chinese, and vice versa, the more likely we are to stay out of trouble.”
Human, personal exchanges are needed more than ever. Yet Xi Jinping’s decisions have scared away foreign students, particularly Americans. Wang describes Zero Covid as China’s trial run at completely separating itself from the US, if not the West as a whole. Meanwhile, MAGA is actively tormenting foreigners working or living in the United States.
Wang also wisely concludes, “The ultimate contest between China and the United States will not be decided by which country has the biggest factory or the highest corporate valuation. This contest will be won by the country that works best for the people living in it.”
Rather than China relaxing its engineering habits and America relearning to build big, I fear we will come to miss both the engineers and the lawyers. So how to get Chinese and Americans to start talking to one another again? The best ways are through business contacts, and when business opportunities are guided by market forces rather than by government caprice, such dialogues will grow exponentially.
Dan Wang, Breakneck: China’s Quest to Engineer the Future, WW Norton & Compnay: New York, 2025