After 1991, the central error of U.S. economic statecraft was not adherence to any single doctrine—market fundamentalism, free-trade universalism, or neoliberal reform—but the deeper meta-error of treating those doctrines as natural laws rather than contingent tools. The absence of a peer rival was mistaken for the end of competition; a fleeting unipolar moment was misread as proof of a universally valid model. Ideology displaced strategy. Policy assumed that open markets, privatization, and global integration would automatically generate optimal outcomes, independent of timing, sector, or national capability. This belief hardened into dogma precisely when strategic judgment was most required.
Li Anding’s A History of Chinese Automobiles: Forty Years of Personal Experience shows that China did not make this mistake in the automobile industry. Rather than embracing liberalization as an end in itself, policymakers treated markets instrumentally and argued explicitly over sequencing, control, and learning. Li documents how ministries rejected full foreign ownership, enforced joint-venture structures, and tied market access to technology transfer—not as ideological reflex, but as debated mechanisms to force capability accumulation. Decisions to protect fragmented domestic producers, tolerate inefficiency, and delay consolidation were criticized internally yet retained because they preserved bargaining power and learning space. When circumstances changed, policies changed with them. These choices worked not because they followed an alternative ideology, but because they rejected the U.S. assumption that one permanent model governed all contexts—and instead treated industrial policy as adaptive strategy under competition.
Markets as Doctrine or Markets as Design: Divergent Paths in U.S. and Chinese Political Economy
In the post–Cold War period, U.S. economic policy increasingly rested on a form of market fundamentalism: the belief that markets are self-optimizing systems whose outcomes reveal underlying economic truth, and that the primary task of the state is withdrawal. Competition, efficiency, and technological progress were presumed to emerge spontaneously once barriers were removed. In this framework, state intervention was treated as distortionary by default, and policy success was measured by the degree of conformity to abstract market principles rather than by sector-specific capability formation.
By contrast, Li Anding’s A History of Chinese Automobiles: Forty Years of Personal Experience documents a fundamentally different logic at work in China’s automobile industry. Chinese policymakers explicitly rejected both the Soviet-style state monopoly and laissez-faire dependence on foreign capital, instead pursuing what Li terms an “autonomous–open development path.” Markets were not assumed to exist in a mature form; they were deliberately constructed, sequenced, and bounded by the state. Entry conditions, ownership structures, and competitive scope were treated as policy variables, subject to adjustment as domestic capabilities evolved.
This approach was institutionalized through concrete mechanisms rather than slogans. Foreign firms were permitted access only through joint ventures, ensuring that competition occurred under conditions favorable to domestic learning. Enterprises were encouraged to operate with debt, long planning horizons, and scale ambitions, while the state provided policy authorization rather than direct financial subsidies—captured in Li’s formulation, “policy support, not money.” Competition was not left to chance: the state determined who could enter, at what scale, and in which market segments, shaping rivalry to induce accumulation rather than premature elimination.
The consequences of this divergence were profound. China treated markets as instruments for learning, coordination, and technological accumulation, not as neutral arbiters of efficiency. Inefficiencies were tolerated when they served long-term strategic goals, and policies were revised as conditions changed. The U.S., by contrast, increasingly treated market outcomes themselves as authoritative, mistaking ideological consistency for strategic success. Where one system designed markets to serve national development, the other elevated markets into doctrine—and in doing so, surrendered the capacity to shape them.
Trade as Creed or Trade as Instrument: Universal Openness versus Conditional Integration
In the post–Cold War era, U.S. trade policy was anchored in a universalist premise: that free trade generates broadly symmetrical gains and that reciprocity emerges naturally once markets are opened. Openness was treated not merely as a policy choice, but as a self-justifying principle. Transitional asymmetries, sectoral vulnerabilities, and sequencing concerns were largely discounted, on the assumption that exposure to global competition would discipline firms and accelerate convergence toward efficient outcomes.
Li Anding’s account of China’s automobile industry reveals a sharply different conception of trade. Chinese policymakers did not treat openness as an end state to be reached immediately, nor as a moral commitment. Instead, trade was framed as a conditional process, calibrated to domestic capability and bounded by explicit time horizons. During WTO accession negotiations, autos were classified as an “A-category” sector in which challenges exceeded opportunities, and Chinese negotiators insisted on extended transition periods—six to eight years—before full exposure to international competition.
This insistence was operationalized through concrete protective measures. Tariffs on automobiles remained in the 25–30 percent range throughout the transition, deliberately preserving policy space for domestic firms to expand scale, cultivate supplier networks, and internalize production knowledge. Foreign participation was permitted, but only through joint ventures, ensuring that market access did not devolve into import platforms detached from domestic accumulation. Protection was not indefinite, but it was real, targeted, and time-bound.
The strategic effect of this approach was to transform trade from a test of immediate efficiency into a structured learning environment. Exposure to global firms was sequenced to follow, rather than precede, capability formation. By contrast, U.S. free-trade universalism assumed that openness itself would generate convergence, mistaking integration for development. Where China treated trade as an instrument to be managed under competitive pressure, the U.S. elevated openness into doctrine—and in doing so, forfeited control over the conditions under which competition unfolded.
Teleology versus History: Liberal Finalism and Strategic Memory in Development Policy
In the aftermath of the Cold War, U.S. policy thinking was increasingly shaped by a belief in historical finality: that economic growth would naturally produce political and institutional convergence, rendering ideology obsolete. Liberal capitalism was treated not as one historically situated system among others, but as the endpoint of development itself. Under this view, strategy gave way to expectation—once growth was unleashed, nations would inevitably arrive at the same destination.
Li Anding’s A History of Chinese Automobiles: Forty Years of Personal Experience documents a markedly different intellectual posture within China’s industrial planning. Chinese policymakers and experts rejected teleology outright. Rather than assuming convergence, they engaged in systematic historical comparison, studying the automotive development paths of the United States, Japan, South Korea, Brazil, and the Soviet Union. These cases were not treated as templates to be copied, but as bounded experiences shaped by specific national conditions—and none was judged transferable wholesale to China.
This historical consciousness informed early warnings about China’s likely trajectory. As Li recounts, experts emphasized that China would necessarily follow a “large-nation development path,” characterized by massive scale, extended learning cycles, and sustained political coordination. The premise was not that rising income would dissolve structural constraints or political choices, but that size itself imposed strategic demands distinct from those faced by smaller or earlier industrializers. Liberalization was therefore evaluated instrumentally, not assumed as destiny.
The consequence of this perspective was strategic clarity. China never equated Western victory in the Cold War with universal historical destiny, nor did it presume that wealth would automatically yield liberal political outcomes. The central concerns were capacity, scale, and survival in a competitive international system. Where end-of-history liberalism collapsed history into inevitability, China’s planners treated history as a reservoir of cautionary evidence—and policy as an ongoing act of choice rather than a march toward a predetermined end.
Beyond Post-Industrial Illusions: Manufacturing as Decline or as Civilizational Backbone
In the late twentieth century, U.S. economic thinking increasingly embraced an anti-industrial bias. Manufacturing was treated as a mature or declining sector, while services, finance, branding, and design were elevated as the true sources of value. Production itself was assumed to be modular and geographically footloose—something that could be safely outsourced without long-term strategic cost. Under this view, industrial capacity followed human capital, not the reverse.
Li Anding’s A History of Chinese Automobiles: Forty Years of Personal Experience records a sharply contrasting debate within China. Far from dismissing manufacturing as passé, Chinese policymakers treated it as the backbone of modernization. Fierce internal arguments over whether automobiles should be allowed to enter ordinary households were ultimately resolved in favor of expansion, despite ideological resistance, precisely because autos were understood as a general-purpose industrial engine rather than a mere consumer good.
This judgment rested on an explicitly systemic understanding of production. Li documents how the automobile industry was linked—by design—to steelmaking, machinery, chemicals, road construction, housing, energy systems, and urban planning. The concept of a “car society” was not framed as a lifestyle aspiration or consumption trend, but as an integrated industrial and infrastructural system capable of pulling multiple sectors forward simultaneously.
The strategic payoff of this approach was the creation of dense production ecosystems. China recognized that manufacturing does not simply absorb preexisting skills; it generates them through scale, repetition, and coordination. By contrast, the U.S. increasingly assumed that innovation and human capital could be sustained independently of production. Where one side treated manufacturing as expendable, the other treated it as civilizational infrastructure—essential not only to growth, but to long-term technological and social capacity.
Ownership or Orchestration: Asset-Light Orthodoxy versus Asset-Heavy Learning
By the late twentieth century, U.S. industrial strategy had converged on an asset-light doctrine. Firms were encouraged to outsource production while retaining intellectual property, design, and branding, on the assumption that physical manufacturing was low value and easily replaceable. Process knowledge was treated as codifiable and mobile; ownership of factories and suppliers was seen as a burden rather than a strategic asset.
Li Anding’s account of China’s automobile industry reveals the opposite premise at work. Chinese planners insisted on asset-heavy commitment—owning factories, production lines, and supplier networks—even when this entailed inefficiency and financial loss in the early stages. Scale thresholds were not pursued for cost reasons alone, but because policymakers understood that tacit knowledge emerges only through sustained, high-volume production. Without ownership and repetition, learning would remain superficial.
This logic also shaped China’s approach to foreign participation. Joint ventures were accepted not because they minimized risk, but because they anchored production physically inside China. What mattered was not formal technology transfer clauses, but immersion in the full production stack: tooling, quality control, logistics, and process integration. By keeping manufacturing local and continuous, Chinese firms could absorb capabilities that could never be fully captured in blueprints or contracts.
The strategic consequence was long-term process mastery. Loss-making years were treated as tuition—the unavoidable cost of learning complex systems—rather than as evidence of failure. The United States, by contrast, externalized production and with it the cumulative knowledge embedded in factories and supply chains. Where China bore the short-term costs of asset-heavy learning, the U.S. surrendered process control—and ultimately lost capabilities that could not be easily reacquired.
Capital in Motion or Capital at Work: Financial Primacy versus Reinvestment Discipline
In the late twentieth and early twenty-first centuries, U.S. economic governance increasingly elevated finance from a supporting function into a commanding one. Capital markets were treated as the most sophisticated allocators of resources, and financial innovation as a proxy for economic advancement. Under this logic, firms were incentivized to maximize shareholder value through liquidity, leverage, and rapid returns, even when this came at the expense of long-term productive capacity.
Li Anding’s A History of Chinese Automobiles: Forty Years of Personal Experience describes a starkly different hierarchy in China’s automobile sector. Finance was deliberately subordinated to industrial accumulation. After China’s entry into the WTO, the industry experienced massive capital inflows, yet these funds—overwhelmingly from enterprises themselves and their foreign partners rather than from the state—were channeled almost entirely into physical investment: plants, equipment, tooling, and supplier capacity. Paper assets and purely financial plays were structurally marginal.
This pattern was not accidental. Profit extraction was intentionally delayed, and reinvestment was treated as an expectation rather than a choice. Firms were evaluated not by short-term returns, but by their willingness to plow earnings back into capacity expansion and process improvement. Speculative exits and rapid divestment were discouraged through ownership structures and policy signals that privileged endurance over liquidity.
The consequence was a distinctive form of capital discipline. Money was forced to “touch metal”—to embed itself in machines, production lines, and accumulated know-how. In contrast, U.S. financialization allowed capital to circulate without commitment, chasing yield across sectors and geographies. Where one system bound finance to the slow work of building industry, the other severed that link—and in doing so, weakened the material foundations of growth itself.
Hands Off or Hands On: Limited Government Absolutism versus Strategic Steering
In the post–Cold War United States, industrial policy was widely treated as inherently distortionary. The prevailing belief was that government intervention in production or market structure would inevitably misallocate resources, stifle competition, and compromise efficiency. Policy debates focused less on strategic objectives and more on minimizing state involvement, under the assumption that markets, left alone, would produce optimal outcomes.
China’s approach in the automobile industry, as documented by Li Anding, followed an entirely different logic. Industrial policy was understood as a tool of coordination rather than micromanagement. The Ministry of Automotive Industry actively intervened to shape market structure: granting or denying production licenses, forcing consolidation to avoid excessive fragmentation, and generating competitive pressure while preserving strategic coherence. Policy debates were intense, but the fundamental premise—that the sector was strategic and worthy of government attention—was never questioned.
This mode of strategic steering allowed China to navigate trade-offs between competition and coordination. Rather than treating intervention as a distortion, policymakers treated it as a means to orchestrate industrial development according to national priorities. Constant negotiation, debate, and adjustment ensured that policy remained adaptive, targeting specific structural and learning objectives rather than imposing a rigid ideological template.
The contrast with the U.S. model was stark. While the U.S. debated the extent to which the state should abstain, China debated how to steer. By anchoring intervention in strategic purpose rather than ideological suspicion, China retained flexibility and control over industrial outcomes. Where limited government absolutism saw markets as self-evidently superior, China treated industrial policy as a deliberate instrument of capability building and long-term national development.
Free Flow or Anchored Investment: Global Capital Mobility versus Capital with Conditions
In the United States, the post–Cold War economic orthodoxy embraced the principle of global capital mobility. Capital was treated as inherently efficient, and firms were encouraged to allocate resources wherever returns were highest, with minimal regulatory constraint. Foreign investment, cross-border mergers, and outbound capital flows were celebrated as signs of sophistication, and domestic industry was assumed to benefit indirectly from global integration.
China adopted a markedly different approach in its automobile sector, as documented by Li Anding. Foreign capital was welcomed, but only under tightly defined conditions. Investment was required to be embedded in fixed assets, channeled through joint ventures, and integrated into localized supply chains. There was no counterpart to the unrestricted outbound flows common in the U.S.; domestic capital was deliberately kept within national boundaries, preventing hollowing out of local industries for the sake of chasing short-term margins abroad.
This strategy ensured that investment directly contributed to domestic capability. Foreign partners brought technology and expertise, but their engagement was designed to strengthen local firms and production networks rather than enable external accumulation. Chinese capital remained “locked in place,” creating a dense ecosystem of factories, tooling, and skills that reinforced national industrial objectives.
The contrast was strategic as well as conceptual. Where U.S. policy treated capital mobility as an unqualified virtue, China treated it as a tool to be harnessed under specific conditions. By anchoring investment domestically, China forced capital to build China first—its factories, supply chains, and human capital—rather than competitors elsewhere. In doing so, the country converted financial openness into an instrument of national development rather than a vector of externalization.
Prices or Potential: Consumer Welfare Reductionism versus Capability-First Thinking
In U.S. economic orthodoxy, consumer welfare is often reduced to a single metric: lower prices. Market success is measured by affordability and efficiency, and policy interventions that raise prices—even temporarily—are treated as distortions. The underlying assumption is that static consumer surplus captures the essence of societal well-being.
China, by contrast, adopted a capability-first conception of welfare in its automobile sector, as documented by Li Anding. Early Chinese cars were neither cheap nor fully refined, yet they were deliberately protected and promoted. Policymakers prioritized the accumulation of industrial capability—skills, production experience, supply chain development—over immediate consumer benefits. The objective was to generate long-term productive competence, not short-term price reductions.
This approach created a sequence in which welfare evolved dynamically. As firms achieved scale, mastered processes, and built competitive ecosystems, the cost structure improved, and prices eventually fell dramatically. Consumer surplus was realized only after capability was secured, ensuring that the domestic market could sustain competition and innovation in the long term.
The strategic contrast is clear. While U.S. policy often optimized for immediate consumption metrics, China optimized for dynamic, future-oriented welfare. By privileging capability over price, the country transformed short-term protection into long-term benefit, ensuring that the gains of industrial development extended beyond temporary affordability to lasting national competence.
Interdependence or Industrial Autonomy: Peace-Through-Trade versus Strength-Through-Capacity
In U.S. strategic thought, trade is often cast as a guarantor of peace. Economic interdependence is presumed to reduce the likelihood of conflict, and industrial policy is subordinated to market forces. The assumption is that mutually beneficial exchange aligns interests and makes rivalry unnecessary.
China, by contrast, treated trade instrumentally while prioritizing domestic strength, as Li Anding documents in the automobile sector. Automobiles were recognized as a strategic national capability, not a commodity to be outsourced for short-term cost advantage. Investments in production, supply chains, and infrastructure were deliberately concentrated within China, building capacity even beyond immediate domestic demand. The recent surge in electric vehicle exports, for example, rests on deliberate overcapacity, designed to ensure global competitiveness, not on incidental efficiencies.
This approach reflects a recognition that rivalry is a persistent structural condition rather than a temporary anomaly. Trade serves as a channel for learning and revenue, but national security and industrial autonomy govern strategic priorities. By contrast with U.S. assumptions, China assumed that economic ties alone cannot guarantee peace and therefore prepared for competition proactively.
The contrast is fundamental: while the U.S. relies on interdependence as a stabilizing force, China invests in industrial capacity as insurance. Peace is desirable, but it is insufficient; strength underpins security and long-term strategic freedom. In doing so, China converted trade into a tool for capability accumulation rather than a substitute for preparedness.
Summary & Implications
The deepest error of U.S. policy after 1991 was not adherence to any single doctrine—market fundamentalism, free-trade universalism, end-of-history liberalism, anti-industrial bias, asset-light corporate doctrine, financialization, limited government absolutism, global capital mobility, consumer welfare reductionism, or peace-through-trade assumptions—but the meta-error of treating these ideologies as immutable laws rather than context-dependent tools. The absence of a peer rival was mistaken for the end of competition, a fleeting unipolar moment was misread as a universal model, and ideology often displaced strategic judgment. Economics was treated as a morality play, in which market outcomes signaled truth, rather than as a battlefield shaped by history, power, and cumulative learning.
China, by contrast, rejected these assumptions at every turn. Li Anding’s account of the automobile sector demonstrates that the rise of Chinese autos was not inevitable; it was the product of deliberate choices to subordinate ideology to strategy. Markets were constructed, trade and capital were conditioned, industrial capacity was nurtured, and learning was prioritized over immediate efficiency or consumption. By treating policy as an instrument rather than doctrine, China converted structural constraints into capabilities, demonstrating that development is contingent, adaptive, and historically grounded—precisely the insight the post-1991 U.S. overlooked.
References
- A History of Chinese Automobiles: Forty Years of Personal Experience(zhong guo jiao che shi: si shi nian qin li). Li Anding. 2023