Recent commentary—captured in the Wall Street Journal’s ironic phrase “state capitalism with American characteristics”—marks a telling shift in U.S. political economy. Ostensibly satirical, the formulation nonetheless signals a substantive break: the erosion of the neoliberal consensus, a forced recognition of state capacity as a core dimension of power, and an implicit admission that China’s model can no longer be dismissed as a mere distortion of “true” capitalism. The United States now openly embraces tools once criticized as incompatible with market liberalism, revealing a deeper transformation beneath the rhetoric.
At a structural level, the United States and China increasingly deploy similar instruments of economic intervention. The divergence lies not in the tools themselves, but in their organization and purpose. China integrates state intervention into a coherent, institutionalized development system, whereas the United States employs comparable measures in a reactive, leader-driven manner, often justified by crisis. This contrast—surface convergence paired with structural divergence—frames the contemporary evolution of American political economy and the limits of its emerging state capitalism.
Converging Instruments: The Common Architecture of State Intervention in the U.S. and China
Despite sharp ideological contrasts, the United States and China are increasingly converging in the form of their economic governance. Both now deploy a shared repertoire of interventionist instruments that privilege control, coordination, and strategic alignment over classical market neutrality. This convergence in tools does not imply convergence in systems. Rather, it reveals how geopolitical competition and technological rivalry are pushing distinct political economies toward similar operational methods.
A first point of convergence lies in personnel control and the politicization of corporate leadership. In China, the Communist Party has long managed cadres across state-owned enterprises, universities, research institutions, and mixed-ownership firms through party committees and cross-appointments, treating personnel as strategic governance infrastructure. The United States lacks an equivalent cadre system, yet executive leadership in key firms is increasingly shaped by political pressure rather than purely market criteria. Public scrutiny of Intel’s CEO, White House involvement in the U.S. Steel–Nippon Steel transaction, and Department of Defense influence over MP Materials’ management all signal a shift toward securing strategic compliance. The contrast is not in intent but in method: China’s approach is institutionalized, while the U.S. relies on ad hoc executive pressure.
Revenue extraction mechanisms further illustrate this convergence. China systematically channels profits from state-owned enterprises into state-owned capital operation budgets and extracts higher remittances from monopolistic sectors such as tobacco, power grids, and telecommunications. Recent data factor reforms extend this logic to the platform economy by gradually pooling digital revenues. The United States, traditionally reliant on taxation, is now experimenting with quasi-fiscal instruments. Examples include revenue-sharing requirements embedded in AI chip export licenses and proposals under the CHIPS Act to convert subsidies into equity stakes or dividend rights. In both cases, administrative permission increasingly substitutes for taxation as a fiscal lever, though China’s model is rule-based and durable, while U.S. practices remain legally fragile and politically contested.
A third shared instrument is the use of control rights without proportional ownership. China’s “special management shares” in sectors such as power grids, telecommunications, ports, and the BeiDou industrial chain grant the state veto power over asset disposal, technology licensing, and foreign investment with minimal capital commitment. The United States has begun experimenting with analogous arrangements through “presidential golden shares,” most notably in the U.S. Steel case, which grant veto authority over relocation, shutdowns, and mergers. In both systems, the governing principle is that control outweighs ownership. Yet what is a normalized governance mechanism in China remains an exceptional and controversial legal experiment in the U.S.
Supply-chain intervention represents perhaps the most consequential area of formal convergence. China embeds state capital across entire industrial ecosystems, exemplified by the National Integrated Circuit Industry Fund, which spans design, fabrication, equipment, and materials, as well as by SOE- and local government–led clusters in batteries, photovoltaics, and new-energy vehicles. The United States increasingly mirrors this logic through targeted equity stakes and conditional subsidies. The Department of Defense’s investment in MP Materials, governance-linked subsidies to TSMC and Samsung, and pressure for board representation in arrangements such as the Intel–TSMC joint venture all reflect a growing willingness to embed state influence directly into supply chains. The shared objective is mobilizability and resilience, though China emphasizes ecosystem construction while the U.S. intervenes at critical nodes.
Taken together, these practices amount to a shared model of “denationalization combined with strong control.” Firms operate under market forms, yet strategic authority is retained by the state through personnel influence, fiscal extraction, veto rights, and embedded capital. The convergence is thus unmistakable at the level of instruments and techniques. What separates the two systems is coherence and intent: China deploys this toolbox systematically as part of a long-term development strategy, whereas the United States adopts similar tools selectively and defensively, driven by crisis, political leadership, and immediate strategic pressure rather than institutional design.
Systemic Design versus Reactive Governance: The Structural Divide Between China and the United States
Beneath the growing similarity in interventionist tools lies a more fundamental divergence between China and the United States: the difference between a system built for sustained state-led development and a polity that intervenes primarily in reaction to crisis. What appears, at the surface, as parallel activism masks opposing logics of governance, decision-making, and legitimacy. The contrast is not one of intensity, but of architecture.
China’s interventions originate in a developmental-state logic oriented toward long-term capability building. Industrial policy is embedded in forward-looking planning frameworks, most visibly through successive Five-Year Plans that integrate technological self-reliance, industrial upgrading, and redistribution under the banner of common prosperity. Each cycle is designed to compound state capacity and reduce strategic vulnerability over time. By contrast, U.S. interventions are typically backward-looking responses to discrete shocks—chip shortages, rare-earth dependence, electoral pressures, or fiscal stress. The difference is therefore temporal as much as strategic: China plans forward, while the United States reacts to problems already materialized.
This divergence is reinforced by distinct decision-making architectures. In China, top-level design is centralized within permanent coordinating bodies such as the Central Reform Commission and the Central Financial and Economic Affairs Commission. These organs align the work of key ministries—including the National Development and Reform Commission (NDRC), the State-owned Assets Supervision and Administration Commission (SASAC), and the Ministry of Industry and Information Technology (MIIT)—while local governments compete to execute unified national objectives. Feedback mechanisms allow for policy correction, as seen in the iterative regulation and subsidy adjustments in the new-energy vehicle sector. In the United States, decision-making is far more fragmented and president-centric, relying heavily on executive orders, emergency authorities such as the Defense Production Act, and improvised inter-agency coordination. Persistent friction among Commerce, Treasury, and the Department of Defense reflects the absence of a standing mechanism for strategic economic governance.
Institutional stability further differentiates the two systems. In China, state intervention is constitutionally and politically embedded: public ownership occupies a formal place in the state constitution, while Party leadership is enshrined in the Party Constitution. Policy initiatives are organized into named reform cycles—such as the SOE Three-Year Action Plans—with explicit performance indicators that anchor expectations across political and economic cycles. In the United States, by contrast, most interventions are inherently reversible. They depend on the preferences of individual administrations and remain vulnerable to judicial review, electoral turnover, and congressional contestation, producing chronic policy fragility.
These structural differences shape how markets interpret and respond to state action. China places significant emphasis on expectation management through relatively transparent rule evolution, including negative lists for market access and published roadmaps for data governance reform. Firms are given clear signals about what activities are encouraged, restricted, or rent-bearing, allowing capital to align with state priorities. In the United States, policy signaling is often inconsistent, with presidential rhetoric, agency rulemaking, and court decisions pulling in different directions. As a result, firms increasingly hedge politically rather than commit to long-term strategic investment.
Finally, the ideological framing of intervention diverges sharply. China has developed a coherent theoretical narrative—variously articulated as the “socialist market economy” and the combination of an “effective market and an active government”—that integrates intervention as a legitimate and necessary feature of governance. The United States, by contrast, operates under a discursive contradiction: it continues to condemn “state capitalism” in principle while practicing functional equivalents in fact. Intervention is repackaged through euphemisms such as “economic security” or “Buy American,” reflecting not ideological integration but ideological denial.
In sum, while the United States and China may increasingly resemble one another in the instruments they deploy, they remain fundamentally separated by the logic that animates those instruments. China’s model is systemic, coordinated, and forward-planning; the U.S. model is reactive, fragmented, and politically contingent. This distinction—system versus reaction—defines the enduring structural divide between the two political economies.
Divergent Origins: The Historical Foundations of U.S.–China Economic Governance
The contemporary divergence between Chinese and American approaches to state intervention is rooted less in recent policy choices than in fundamentally different historical starting points. These origins shape how each system understands the role of the state, the meaning of reform, and the sources of political legitimacy. What appears today as a contrast in capacity is, at bottom, a contrast in historical trajectory.
In China, state-led development has long been equated with national sovereignty and survival. Economic reform was never conceived as a retreat from this principle, but as an adjustment of methods to better achieve enduring state objectives. Market mechanisms were introduced to strengthen, not replace, state direction. This continuity produced a stable developmental path in which policy evolution occurred within a broadly consistent strategic framework. The United States, by contrast, experienced a sharp rupture during the neoliberal turn of the 1980s, when market supremacy and state withdrawal became guiding doctrines. The result was not gradual adaptation but a redefinition of legitimate state action, the consequences of which continue to shape contemporary constraints.
These divergent starting points generated different driving forces behind state intervention. China’s model has been characterized by proactive accumulation of long-term assets, including physical infrastructure, mass education, and large-scale cultivation of STEM talent. Capacity building preceded crisis. In the United States, renewed state intervention has been driven largely by external shocks—most notably the COVID-19 pandemic, the war in Ukraine, and the rapid technological ascent of China itself. Where China built in anticipation, the U.S. has scrambled in response, with interventions designed to patch vulnerabilities rather than compound capability.
The basis of political legitimacy further reinforces this divergence. China’s governing model rests heavily on performance legitimacy, derived from sustained poverty reduction, visible infrastructure dominance, and material improvements in living standards. These achievements are embedded within a broader civilizational narrative of national rejuvenation that provides continuity across policy cycles. In the United States, by contrast, contemporary interventionism draws legitimacy primarily from crisis framing—whether the perceived “China threat” or the mobilizing rhetoric of populist movements such as MAGA. This form of legitimacy is episodic and volatile, dependent on threat perception rather than cumulative performance.
Finally, differences in interest group structure shape the effectiveness of state action. China’s political system is comparatively insulated from organized veto players such as unions, professional associations, and local zoning interests, allowing for disciplined execution once priorities are set. In the United States, federalism, judicial review, and an entrenched lobbying ecosystem create multiple structural choke points. These features do not prevent intervention, but they fragment it, raising costs and limiting coherence. The result is a pattern of partial, contested, and often inefficient state action.
Taken together, these historical roots explain why convergence in policy tools has not produced convergence in outcomes. China’s approach reflects continuity, accumulation, and insulated execution; the American approach reflects rupture, shock-driven mobilization, and institutional friction. Understanding this historical divergence is essential to explaining why similar instruments operate so differently in the two systems.
The Rational Turn to Markets: Why the United States Embraced Neoliberalism
The United States’ embrace of neoliberalism from the late 1970s through the early 2000s was not an ideological accident, but a historically rational response to acute economic and political pressures. Faced with stagflation, declining productivity, rising fiscal strain, and the perceived rigidity of organized labor, policymakers sought a framework that could restore growth, discipline costs, and reassert corporate profitability. Market liberalization, deregulation, and the weakening of union power appeared not only pragmatic but necessary to stabilize an economy that seemed trapped by its own postwar institutions.
Central to this shift was the elevation of shareholder value as the organizing principle of corporate governance. By prioritizing returns to capital, U.S. firms regained profitability and flexibility, enabling rapid globalization of production and finance. This model dovetailed with America’s structural advantages in high-value sectors such as finance, advanced technology, and intellectual property. The underlying assumption was that the United States would permanently dominate these commanding nodes of the global economy, allowing it to outsource lower-value activities without strategic risk. Within that historical context, neoliberalism was less a doctrinal choice than a confident bet on enduring American supremacy in the world economy.
From Solution to Liability: How Neoliberalism Produced the Current Crisis
The very features that once made neoliberalism effective have become sources of structural vulnerability in the contemporary U.S. economy. Policies that prioritized efficiency, cost minimization, and global integration succeeded in restoring profitability and lowering consumer prices, but they did so by systematically hollowing out productive capacity. Large-scale offshoring did not merely relocate factories; it eroded industrial memory, weakened supplier ecosystems, and left critical supply chains exposed to external disruption. What appeared as optimization in stable conditions translated into fragility under stress.
At the firm level, the doctrine of shareholder primacy further deepened these weaknesses. Capital that might have been directed toward long-term investment, workforce development, or technological upgrading was increasingly diverted into share buybacks and financial engineering. The result was a bias toward short-term earnings at the expense of durable capabilities. Over time, this short-termism degraded the innovative and manufacturing base needed to sustain leadership in complex industries.
More fundamentally, neoliberalism rested on a flawed assumption about what markets are designed to achieve. Markets excel at allocating resources for price efficiency, but they do not inherently optimize for national security, economic sovereignty, or long-horizon innovation. As geopolitical rivalry intensified and systemic shocks multiplied, these blind spots became impossible to ignore. Today’s crisis is therefore not an aberration but the cumulative outcome of a model that systematically discounted resilience, capability, and strategic control.
Compelled Transformation: Why the United States Is Turning Toward State Capitalism
The United States’ turn toward state capitalism is less a matter of ideological choice than one of structural compulsion. The return of great-power rivalry has fundamentally altered the criteria of economic success. Under conditions of systemic competition, efficiency can no longer be defined narrowly in terms of cost minimization or short-term profitability. Instead, control, resilience, and strategic reliability have become paramount, forcing a reassessment of the market-first doctrines that once governed U.S. economic policy.
This shift is most evident in the reclassification of certain economic inputs as strategic assets. Advanced semiconductors, data infrastructure, critical minerals, and complex supply chains are no longer treated as neutral commodities to be allocated by global markets. They are increasingly understood as sources of national power that require deliberate coordination, protection, and, at times, direct state involvement. In this environment, the assumptions underlying neoliberalism—stable globalization, benign interdependence, and enduring U.S. technological dominance—no longer hold.
As a result, neoliberalism proves ill-suited to an era of sustained geopolitical contestation. Markets alone cannot guarantee access, security, or mobilizability when rival states actively weaponize interdependence. Faced with these constraints, the United States has little choice but to adopt state-capitalist practices, even if it resists the label. The emerging model is not the product of theoretical conversion, but of necessity: a reactive adaptation to a world in which economic power and state power are once again inseparable.
The Return of the Venture State: Why China’s Model Reemerges in U.S. Practice
China’s development model continues to resurface in U.S. economic practice not because of ideological emulation, but because it reflects a proven logic of state-led risk management under conditions of uncertainty. At its core is a “venture-state” approach that tolerates firm-level failure in order to optimize system-level success. Rather than demanding immediate commercial returns, the state deploys patient capital to build ecosystems, capabilities, and optionality over time—an approach that has proven effective in complex, capital-intensive industries.
This logic is not foreign to the United States. Historically, U.S. state capacity has been most effective when it adopted similar methods, as seen in the Office of Scientific Research and Development during World War II, the creation of NASA, the long-term funding model of DARPA, and more recently Operation Warp Speed. In each case, the state absorbed risk, coordinated actors, and prioritized speed and capability over efficiency, accepting failures as the cost of systemic advancement.
What distinguishes the current moment is the domain of application. Whereas earlier U.S. examples were largely confined to wartime mobilization or discrete national missions, comparable approaches are now being extended into peacetime, civilian industries such as semiconductors, biotechnology, and clean energy. As structural competition intensifies, the practical logic of China’s model repeatedly reasserts itself in U.S. policy—not as imitation, but as rediscovery of a state capacity that markets alone cannot supply.
Imitation Without Infrastructure: The Limits of Borrowed State Power
At the heart of contemporary U.S.–China economic convergence lies a fundamental asymmetry that tools alone cannot bridge. China operates with an institutionalized strategic state capacity: governance mechanisms are designed for self-correction, long planning horizons, and disciplined execution across political cycles. The United States, by contrast, increasingly relies on personalized and tactical forms of intervention—executive improvisation, selective extraction, and ad hoc control—within a system constrained by legal volatility and political instability. What converges in form diverges sharply in capacity.
This asymmetry helps explain the evolution of U.S. rhetoric toward China’s state capitalism. For decades, American criticism served dual purposes: preserving domestic ideological legitimacy and delegitimizing a rival model that challenged market orthodoxy. Yet as neoliberalism progressively weakened U.S. industrial power and strategic resilience, China’s success exposed the limits of that critique. Faced with declining capability, the United States has begun to deploy instruments once denounced—not out of admiration, but out of necessity.
Crucially, adopting similar tools does not confer similar power. Institutional capacity is not a modular asset that can be imported wholesale. China’s model rests on deep foundations: bureaucratic discipline, strategic coherence across agencies and regions, and an execution culture oriented toward long-cycle objectives. Without these underlying conditions, intervention risks becoming performative rather than productive—multiplying frictions instead of compounding strength.
The core lesson, then, is stark. Techniques of control, coordination, and capital deployment can be imitated, but the capacity that gives them effectiveness cannot be quickly reproduced. Absent institutional discipline and strategic integration, U.S. state intervention may generate more disorder than power. The challenge facing the United States is not whether to intervene, but whether it can build the durable state capacity required to make intervention coherent, credible, and cumulative.
Summary & Implications
What is unfolding in the United States is not imitation of China, but constraint-driven adaptation. When national survival and strategic position are perceived to be at risk, markets revert to their proper role as instruments rather than masters, and states override ideology in favor of necessity. The convergence in tools reflects this logic: under systemic pressure, doctrines yield to power realities.
The unresolved question is whether the United States can institutionalize state capacity without triggering internal instability or abandoning its political structure. China’s strength lies in the coherence of its system; America’s response thus far lies in the selective use of tools. Tools without system generate tension rather than power. In the end, history will judge capability, not rhetoric—and it consistently rewards coherent capacity over ideological consistency.
References
- “The U.S. Marches Toward State Capitalism With American Characteristics”. Greg Ip. WSJ, 11 Aug 2025. https://www.wsj.com/economy/the-u-s-marches-toward-state-capitalism-with-american-characteristics-f75cafa8