China’s Manufacturing Dominance: State Directives & Ruthless Competition — Arthur Kroeber

Arthur Kroeber is a leading researcher on Chinese tech and macro, a founding partner at Gavekal Dragonomics, and author of "China's Economy: What Everyone Needs to Know." It's the most useful, detailed resource I've found of how China actually works. On this episode, we discuss how China achieved high-tech manufacturing dominance, and where they'll go from here. By Arthur’s account, the Chinese government is like a giant VC fund: they decide on key priorities and then spend hundreds of billions of dollars subsidizing ruthless competition at the local level. They are willing to lose huge amounts of money for a few of their bets to pay off: at China’s scale, effectiveness matters more than efficiency. There's also a growing bipartisan consensus that we need to combat China's rise. This doesn’t make much sense to me. China is a big, powerful country at the frontier in many fields, and its economy is intricately tied in with our own. Being instinctively adversarial is both unsustainable and risky. Arthur and I discuss how we can create a productive, mutually beneficial version of this relationship. Watch on YouTube; listen on Apple Podcasts or Spotify. Sponsors * Scale is building the infrastructure for smarter, safer AI. In addition to their Data Foundry, they recently released Scale Evaluation, a tool that diagnoses model limitations. Learn how Scale can help you push the frontier at scale.com/dwarkesh. * WorkOS Radar ensures your product’s free trials go to actual users. Radar uses 80+ signals to distinguish malicious bots from real people, eliminating costly free-tier abuse. See why companies like Cursor, Perplexity, and OpenAI use Radar by visiting workos.com/radar. * Lighthouse is THE fastest immigration solution for the technology industry. They help you understand your options and navigate applications for expert visas like the O-1A and EB-1A. Explore which visa is right for you at https://www.lighthousehq.com/ref/Dwarkesh. To sponsor a future episode, visit dwarkesh.com/advertise. Timestamps (00:00:00) – We should reconcile with China (00:21:21) – BYD, Tesla, & Chinese EV industry (00:36:05) – Will China have a Japan-style financial crisis? (00:44:39) – Local debt situation is manageable (00:57:28) – If CCP is so competent, why isn’t China richer? (01:05:08) – How China keeps tech under control (01:33:45) – Does China win AI? (01:43:34) – Communication with China key for AI safety (02:10:08) – What foreigners get wrong about China (02:17:32) – China-US relationship future Get full access to Dwarkesh Podcast at www.dwarkesh.com/subscribe