What China Knows

• Evaluating process knowledge is challenging due to its prevalence in individuals’ minds and the networks they form with other technical experts. Often labeled as know-how, institutional memory, or tacit knowledge, this intangible asset thrives in environments populated by seasoned workers, like those in Shenzhen. In this vibrant ecosystem, an individual might transition from working at an iPhone factory one year to a competitor the next and eventually start their own drone enterprise. Shenzhen epitomizes a hub of engineering expertise where factory owners, skilled engineers, entrepreneurs, investors, and researchers coexist with an unparalleled workforce adept at producing high-end electronics.
• —Dan Wang, Breakneck^[1](74)

Dan Wang’s Breakneck highlights America’s vulnerabilities in comparison to China. A significant issue arises from outsourcing the production of smartphones and other electronics. This outsourcing enables Chinese managers and laborers to acquire the essential tacit knowledge related to designing and operating factories, leaving American workers at a detrimental competitive edge.

The significance of tacit knowledge has been acknowledged by economists for decades. Kenneth Arrow discussed “learning by doing,” a concept later expanded by scholars like Paul Romer and Robert Lucas.

In his seminal work, Principles of Economics (1890), Alfred Marshall elaborated on the clustering of specialized industries in specific areas. He stated,

• Once an industry establishes itself in a location, it is likely to remain there for a long time, as the benefits of proximity among skilled tradesmen enhance knowledge sharing and innovation. The trade’s secrets become common knowledge, allowing children to absorb many of them unconsciously. High-quality work garners appreciation, and innovations regarding machinery, processes, and business organization invite discussion. If one individual initiates a new concept, others adopt and refine it, resulting in a cascade of new ideas. This collaboration fosters the growth of ancillary industries in the area, providing necessary tools, materials, and transportation, thereby enhancing economic efficiency.

Marshall’s insights laid the groundwork for Paul Krugman’s theory of agglomeration economics, earning Krugman a Nobel Prize.

Wang observes,

• China’s manufacturing workforce surpasses one hundred million employees, approximately eight times that of the United States. This significant labor pool drives the development of innovative process knowledge. (page 80)

Process knowledge generates a return on investment, reinforcing worker productivity and offering a competitive edge.

Why does China invest more in process knowledge compared to America? Wang argues that the governance structure in China is predominantly engineering-focused, while America’s leadership leans towards legal professionals who may undervalue the importance of process knowledge.

• China embodies an engineering state, driven by a relentless urge to construct, contrasting with America’s lawyerly society, which tends to obstruct progress. (page 2)

Wang notes that as of 2002, every member of the Chinese Politburo’s standing committee had an engineering background.

• What do engineers prefer? Building… Since 1980, China has created a highway network double that of the United States, a high-speed rail system twenty times larger than Japan’s, and amassed nearly as much solar and wind capacity as the rest of the world together. (page 3)

Conversely, American leaders are often legal experts.

• Five of the last ten presidents pursued legal education. In any given year, at least half of the U.S. Congress holds law degrees, while only a handful have backgrounds in science or engineering. From 1984 to 2020, all Democratic nominees for president and vice-president attended law school, as did many Republican elites and high-ranking civil servants…
• The United States once shared an engineering ethos like China’s, but this shifted sharply in the 1960s as elite lawyers redirected their focus. As Americans grew concerned about the adverse effects of growth—such as environmental degradation, rampant highway expansion, and prioritizing corporate interests over public welfare—lawyers increasingly turned to litigation and regulation. (pages 4–5)

Before the 1960s, America’s legal framework excelled in safeguarding individual rights from government encroachment, a scenario not reflected in China. Wang highlights the ramifications of Premier Xi Jinping’s regulatory actions since 2021, which severely impacted leading technology firms.

• Xi unleashed a series of regulatory assaults on China’s tech industry, targeting companies like Didi and Ant Financial, owned by well-known entrepreneur Jack Ma. Founders and investors alike were astounded to realize Xi could wipe a trillion dollars off corporate valuations in mere months. (page 7)

Wang vividly illustrates the scale of Chinese construction, focusing on Guizhou Province, previously remote and impoverished.

• Guizhou now boasts forty-five of the world’s top one hundred bridges. The province has eleven airports, with three more underway, and thousands of miles of expressways… along with nearly a thousand miles of high-speed rail. Massive data center facilities make Guizhou a symbol of the cutting-edge infrastructure boosting AI development. (page 27)

However, he cautions that

• The engineering state often emphasizes monumental projects. While public restrooms are abundant, toilet paper is a rare provision. Drinking tap water anywhere in China, not even in Shanghai, is unwise. (page 50)

Wang takes issue with China’s engineers for their heavy-handed approach to cultural challenges, writing extensive critiques of the one-child policy and the zero-COVID strategy. Nevertheless, he suggests that directly addressing cultural issues could be beneficial.

• Imagine if the U.S. government had tackled Wall Street’s risk management culture after the 2008 financial crisis instead of getting bogged down in lengthy negotiations that produced a 2,300-page bill devoid of clarity. (page 183)

Wang critiques the lawyerly society’s failure to build effectively.

• In 2021, Congress set aside $42 billion to expand broadband in rural areas under the plan known as Internet for All. Four years later, not a single household had been connected to this initiative. Likewise, three years after Congress allocated $7.5 billion for electric vehicle charging stations, only seven have been installed. (page 228)

In summary, Wang expresses his hope for mutual improvements:

• I envision a world enriched if both superpowers could adopt select traits from one another… I wish for China to embrace pluralism alongside substantive legal protections for individuals and for the United States to regain its capacity for construction. (pages 205–206)

Wang advocates for elevating engineers’ status in America while calling for a similar shift in China.

Footnotes

^[1] Dan Wang (2025) Breakneck: China’s Quest to Engineer the Future. W.W. Norton & Company.