A critical asymmetry exists in the US-China competition: It is far harder for the U.S. to rebuild its complex manufacturing ecosystems and tacit process knowledge than it is for China to improve its scientific research capabilities, where it is already making significant strides.

China's durable advantage isn't just its massive workforce but the collective "process knowledge" generated on factory floors. This expertise in solving countless small manufacturing problems cannot be easily written down or encoded in equipment, creating a powerful, hard-to-replicate competitive moat.

Beyond algorithms and talent, China's key advantage in the AI race is its massive investment in energy infrastructure. While the U.S. grid struggles, China is adding 10x more solar capacity and building 33 nuclear plants, ensuring it will have the immense power required to train and run future AI models at scale.

The belief that China's manufacturing advantage is cheap labor is dangerously outdated. Its true dominance lies in a 20-year head start on manufacturing autonomy, with production for complex products like the PlayStation 5 being 90% automated. The US outsourced innovation instead of automating domestically.

While China bans many US tech giants, it welcomed Tesla. A compelling theory suggests this was a strategic move to observe and learn Tesla's methods for mass-producing EVs at scale, thereby accelerating the development of domestic champions like BYD, mirroring its past strategy with Apple's iPhone.

The US-China tech rivalry spans four arenas: creating technology, applying it, installing infrastructure, and self-sufficiency. While the U.S. excels at creating foundational tech like AI frameworks and semiconductors, China is leading in its practical application (e.g., robotics), installing digital infrastructure globally, and achieving resource independence.

From a Chinese perspective, its vast manufacturing capacity, supported by world-class infrastructure, is a global utility. The concept of "Made in China" is reframed as "Made for the World." This view suggests the U.S. should focus on its own strengths like innovation ("zero to one") instead of viewing China's manufacturing prowess ("one to 100") as a national security threat.

China's semiconductor strategy is not merely to reverse-engineer Western technology like ASML's. It's a well-funded "primacy race" to develop novel, AI-driven lithography systems. This approach aims to create superior, not just parallel, manufacturing capabilities to gain global economic leverage.

While the West may lead in AI models, China's key strategic advantage is its ability to 'embody' AI in hardware. Decades of de-industrialization in the U.S. have left a gap, while China's manufacturing dominance allows it to integrate AI into cars, drones, and robots at a scale the West cannot currently match.