To counter the economic threat from China's state-directed capitalism, the U.S. is ironically being forced to adopt similar strategies. This involves greater government intervention in capital allocation and industrial policy, representing a convergence of economic models rather than a clear victory for free-market capitalism.

Effective US industrial policy should foster competition among states rather than imposing top-down federal plans. By offering federal loans with equity kickers to states that opt-in to host critical industries like mining or chip fabs, the government can incentivize reshoring while allowing for a market-driven, locally-supported approach.

Attempting to beat China by mimicking its state-controlled industrial policies is a strategic failure. This approach politicizes the economy, breeds inefficiency, and plays to China's strengths. The U.S. wins by leveraging its own core advantage: out-innovating and out-competing through a market-driven system.

China's immense state capacity allows for rapid infrastructure development but also enables disastrous national policies like the one-child policy or Zero-COVID. Unlike the deliberative U.S. system, China's efficiency means that when it goes off track, it can go catastrophically off track before any course correction is possible.

Unlike the U.S. government's recent strategy of backing single "champions" like Intel, China's successful industrial policy in sectors like EVs involves funding numerous competing companies. This state-fostered domestic competition is a key driver of their rapid innovation and market dominance.

China operates as a high-agency "engineering state" that executes relentlessly on large-scale projects. In contrast, America's deliberative, litigious society often leads to endless delays and failures on major infrastructure goals like the California high-speed rail, highlighting a fundamental difference in state capacity and approach.

China prioritizes industrial growth and physical manufacturing (an engineering mindset), while America focuses on software valuations and financial engineering (a lawyerly mindset). This fundamental difference explains China's rapid dominance in cars, solar, ships, and advanced manufacturing.

The US is countering China's state-led infrastructure projects by creating commercially viable platforms for its private sector. This strategy leverages America's corporate strength to build sustainable, market-driven supply chains, avoiding the "debt trap" reputation of China's initiative by empowering companies rather than governments.

The "invisible hand" of the market has led to the hollowing out of America's industrial base. The US should learn from China's focus on production and scale, adapting tools like public investment to crowd in private capital for frontier industries, rather than fully copying China's state-directed model.