I. Zhang Weiying’s Worldview: Elegance, Coherence, and Its Narrow Frame
Zhang Weiying’s critique of industrial policy is not a superficial stance but the product of a highly coherent intellectual synthesis. Drawing on Austrian economics, he emphasizes the radical uncertainty and dispersed knowledge that make centralized planning inherently flawed. Schumpeter’s notion of entrepreneurs as engines of creative destruction further reinforces Zhang’s belief that genuine innovation emerges from decentralized experimentation rather than government direction. Classical liberal principles, including rule of law and neutrality, combined with public choice theory, heighten his skepticism toward bureaucratic incentives and the rent-seeking behaviors they encourage. Adding to this, Zhang rejects the neoclassical conception of “market failure” as a flawed justification for industrial intervention.
From within this tightly knit framework, Zhang’s conclusion follows logically: if technological innovation is inherently unpredictable, entrepreneurial, and emergent, then any attempt at industrial policy risks misallocating resources, distorting discovery, and suppressing true entrepreneurship. The elegance and internal consistency of his reasoning make it intellectually compelling. He offers a principled defense of free markets and entrepreneurial autonomy, insisting that the government’s best role is neutrality rather than direction.
Yet the very coherence of Zhang’s worldview also exposes its narrow framing. While internally consistent, it increasingly clashes with observed economic realities. China’s industrial policy, carefully orchestrated across decades with a mix of state and market mechanisms, appears to deliver outcomes that contradict Zhang’s assumptions about predictability, incentives, and the role of the state. The tension arises not from a violation of economic law but from the mismatch between Zhang’s theoretical lens and the pragmatic ways in which industrial policy actually functions in practice. His worldview, elegant and rigorous, is simultaneously limited in its ability to account for these real-world complexities.
II. Zhang’s Key Mischaracterization: Industrial Policy as Centralized Substitution
Zhang Weiying’s critical misstep lies in his fundamental portrayal of industrial policy as a centralized substitute for market mechanisms. In his framework, the state makes a single decisive bet, entrepreneurs are sidelined, bureaucrats supplant the process of discovery, and failure becomes systemic. This vision mirrors Soviet-style central planning, presenting industrial policy as inherently rigid, top-down, and destructive to entrepreneurial initiative.
However, this depiction mischaracterizes the way industrial policy functions in practice, particularly in China. Rather than replacing markets, industrial policy often serves as a meta-framework that reshapes competition, guides investment, and coordinates long-term strategic goals while leaving space for decentralized entrepreneurial experimentation. Zhang’s model, while internally consistent, increasingly clashes with observable outcomes as China accumulates tangible economic results and even his ideological allies abroad quietly abandon the assumptions he defends. The cost of this mischaracterization grows more evident with each successful demonstration of adaptive, state-guided market dynamics.
III. How China’s Industrial Policy Actually Works, And Why Zhang Misreads It
China’s approach is neither pure laissez-faire nor rigid central planning. It is more accurately described as state-amplified, market-driven, Darwinian competition operating at scale.
When we compare this model directly with Zhang’s assumptions, the discrepancy becomes immediately apparent.
1. Prediction vs. Domain Selection
Zhang Weiying argues that innovation is inherently unpredictable, and therefore governments cannot effectively guide it. From his perspective, any attempt at industrial policy is doomed because it assumes foresight where none exists. His critique focuses on outcome planning, treating government intervention as a misguided effort to pick winners.
China’s approach, however, operates differently. Rather than predicting specific technological victors, the state selects broad domains—energy, mobility, semiconductors, networks, infrastructure, artificial intelligence, and advanced manufacturing—and constructs arenas where competition unfolds. Within these domains, hundreds or thousands of firms enter, technologies compete intensely, most fail, and a few survive and scale globally. In effect, China amplifies Hayekian discovery: entrepreneurial experimentation occurs freely within the domain, but it is financially and institutionally magnified by the state. By building competitive arenas rather than preordaining outcomes, China combines decentralized innovation with strategic guidance, creating a fundamentally different model from the one Zhang critiques.
2. Centralized Decision vs. Mass Parallel Experimentation
Zhang Weiying famously frames industrial policy as a probabilistic gamble: one planner versus ten entrepreneurs. In his model, a single government decision replaces decentralized market experimentation, concentrating risk and ensuring systemic failure if the planner errs. This reasoning underpins his argument against industrial policy, portraying it as inherently rigid and prone to misallocation.
China’s actual structure, however, undermines this simplification. While the central government sets broad strategic directions, provincial governments actively compete, cities replicate industries, and both state-owned enterprises and private firms engage simultaneously. Overcapacity is not strictly penalized but is often tolerated—or even encouraged—as a natural feature of widespread experimentation. In practice, China is making thousands of overlapping bets, rather than relying on a single, decisive judgment.
Ironically, this approach resembles the Austrian notion of discovery more closely than Zhang allows. Entrepreneurs and firms experiment within the arenas the state constructs, generating trial and error, failure, and selective success—but at a scale that no purely private market could achieve. The combination of decentralized experimentation and strategic coordination creates a hybrid system: mass parallel experimentation amplified by institutional and financial scaffolding, rather than the centralized substitution that Zhang critiques.
3. Rent-Seeking vs. Ruthless Selection
At the micro level, Zhang Weiying is correct: subsidy gaming, local protectionism, and bureaucratic distortions all exist, and they distort incentives. In many cases, firms attempt to leverage government support for private gain, creating inefficiencies and capturing rents. These phenomena are real and observable, and they provide a valid caution against naïve reliance on government intervention.
However, Zhang misses the macro-level selection mechanisms that operate within China’s industrial system. Export markets, global price competition, technological performance thresholds, and scale-driven learning curves act as rigorous filters that determine which firms succeed and which fail. No company can dominate strategic sectors—such as electric vehicle batteries, solar panels, drones, shipbuilding, or telecom equipment—through rent-seeking alone. The battlefield may be widened by subsidies, but survival is ultimately dictated by performance in global markets.
In effect, China treats rent-seeking as noise within an evolutionary system, not as a determinant of success. Firms are exposed to intense competitive pressures that ruthlessly reward genuine innovation, scale, and operational excellence. Whereas Zhang frames rent-seeking as terminal and fatal to industrial policy, the Chinese approach demonstrates that it can coexist with, and be filtered out by, broader competitive dynamics, producing firms capable of surviving and scaling globally.
IV. The Deeper Blind Spot: Scale, Time, and Strategic Externalities
Zhang Weiying’s worldview is most effective in economic environments characterized by frontier innovation, small and flexible firms, short feedback loops, and relatively low fixed costs. In such settings, decentralized entrepreneurial discovery performs exceptionally well, and market signals rapidly reward success while punishing failure. His framework excels at explaining innovation at the margins, where experimentation is cheap, reversibility is high, and individual judgment dominates outcomes.
Modern techno-industrial competition, however, is governed by a very different set of structural conditions. It is dominated by massive fixed costs, long investment horizons, cumulative learning-by-doing, powerful network effects, and strategic externalities tied to national security and supply-chain control. These are not minor imperfections that can be smoothed out by marginal price adjustments; they are foundational features of contemporary industrial systems that shape who can enter, survive, and ultimately lead.
Under these conditions, markets alone tend to underinvest systematically in sectors such as semiconductor fabrication, large-scale energy systems, infrastructure, and complex manufacturing ecosystems. China recognized this structural reality early and built institutions capable of absorbing long time horizons and coordinating large-scale capital deployment. The United States, by contrast, long resisted this logic under the banner of market orthodoxy—but is now reversing course through measures such as the Inflation Reduction Act and the CHIPS and Science Act. Zhang’s continued rejection of industrial policy reflects an implicit attachment to an earlier phase of capitalism, one increasingly misaligned with the scale, tempo, and strategic stakes of today’s global technological competition.
V. China–U.S. Tech Competition: Reality Has Moved On
This is the point at which Zhang’s argument crosses from controversial into anachronistic.
1. The United States’ Quiet Departure from the Line Zhang Defends
For decades, the United States appeared to embody the economic ideal Zhang Weiying defends: minimal industrial policy, financialized capital allocation, and deep faith in private markets as the primary engine of efficiency and innovation. State intervention was framed as distortionary, while market outcomes—however uneven—were treated as the natural and optimal result of decentralized decision-making. This model was not merely theoretical; it shaped American policy orthodoxy across administrations and institutions.
The consequences of this approach gradually became visible. Semiconductor production migrated offshore, infrastructure investment lagged, supply chains grew brittle, and strategic vulnerabilities accumulated in sectors once taken for granted. What had been dismissed as acceptable market outcomes increasingly revealed themselves as systemic weaknesses with national security and technological implications. The gap between market efficiency in theory and strategic resilience in practice widened.
In response, the United States has begun to do precisely what Zhang condemns. Through the CHIPS and Science Act and the Inflation Reduction Act, Washington now deploys direct subsidies, strategic coordination, and long-term industrial incentives. The government has taken explicit stakes in firms such as Intel, while bipartisan protectionism—spanning both the Biden administration and Trump’s return—has normalized state involvement in shaping industrial outcomes. This shift has occurred without a grand ideological reckoning, yet its substance is unmistakable.
The United States has entered the domain of industrial policy it once derided, even as it continues to insist that it remains a free-market system. Much like Chinese reformers who once claimed they could selectively adopt Western economic methods without compromising China’s institutional foundations, U.S. leaders now argue that Chinese-style state intervention can be embraced without betraying American values. History suggests that such selective borrowing is rarely neat or frictionless, and that the line Zhang defends has already been crossed—quietly, pragmatically, and perhaps irreversibly.
2. China’s Achievements: No Longer Isolated, No Longer Deniable
What has shifted in recent years is not merely China’s material performance, but the way that performance is perceived abroad. For a long time, China’s successes could be framed as isolated anomalies, statistical quirks, or the byproducts of unsustainable policies. That interpretive space is rapidly closing. China’s achievements have accumulated to a scale and scope that resist dismissal, forcing a reassessment even among long-standing skeptics.
American media now increasingly acknowledges China’s concrete leadership across a wide range of advanced industries. These include dominance in electric vehicles, batteries, and solar energy; global leadership in drones; rapid progress in robotics; accelerating advances in artificial intelligence and semiconductors; pharmaceutical innovation unfolding at a pace comparable to AI development; and unmatched capacity in shipbuilding. Individually, any one of these areas might be explained away. Collectively, they form a pattern that is difficult to ignore.
Infrastructure has become an especially visible symbol of this shift in perception. China’s extensive high-speed rail networks, miles-long cross-sea bridges, and dense, integrated urban transport systems no longer provoke reflexive dismissal. Instead, they increasingly inspire a sense of envy, particularly in contrast to aging and fragmented infrastructure in advanced Western economies. What was once framed as excess or waste is now viewed as execution at scale.
This perceptual change is reflected in mainstream intellectual discourse. Books such as Abundance by Ezra Klein and Derek Thompson openly ask what it would mean to replicate Chinese-scale execution in the United States—a question that would have been politically and intellectually unthinkable a decade ago. China’s achievements are no longer treated as isolated cases or temporary deviations; they have become a reference point in global debates about state capacity, industrial strategy, and the future of economic organization.
3. The Psychological Shift: From Dismissal to Unease
American strategic discourse regarding China has followed a striking trajectory over the past two decades. Early assumptions held that China would inevitably fail under its own internal contradictions. As China’s growth and global influence became undeniable, the narrative shifted to one of containment: the United States must act to check China’s rise. Today, the conversation has moved further still, with analysts and policymakers quietly asking whether the U.S. may have already lost certain technological or strategic advantages.
This progression reflects more than changing policy preferences; it is itself evidence against Zhang Weiying’s certainty about the limits of state-guided development. After a decade of escalating competition, U.S. rhetoric has grown quieter, more measured, and unmistakably unsettled. Confidence in American technological primacy has been replaced by confusion and cautious reassessment, signaling a profound cognitive shift for a country long accustomed to unquestioned dominance in innovation and industrial capacity.
VI. Why Zhang’s Argument Now Fails Empirically—Not Logically
Zhang’s critique retains its theoretical rigor, institutional caution, and liberal moral grounding—but it does not hold up empirically.
1. He Treats Industrial Policy as Binary
Zhang Weiying frames industrial policy in starkly binary terms: it is either pure market allocation or rigid government planning. In his view, there is no middle ground. Reality, however, presents a far more nuanced picture. Modern industrial systems often embed markets within state-constructed frameworks, combining strategic guidance, institutional scaffolding, and competitive experimentation. By reducing industrial policy to an either-or choice, Zhang overlooks the hybrid structures through which innovation, competition, and strategic coordination coexist and reinforce one another.
2. He Underestimates Evolutionary Competition at Scale
Zhang Weiying underestimates the power of evolutionary competition when applied at scale. China’s industrial system deliberately tolerates failure, accepts waste, and sacrifices static efficiency in order to generate learning and experimentation. By trading short-term misallocation for long-term dynamic dominance, the system repeatedly produces successful outcomes across multiple sectors. Zhang’s narrow efficiency lens cannot account for why this approach—seemingly inefficient in conventional terms—consistently delivers results at scale.
3. He Overgeneralizes Frontier-Innovation Logic
Zhang Weiying’s critique of industrial policy is well-suited to radical, unpredictable frontier breakthroughs, where decentralized experimentation and individual entrepreneurial insight dominate outcomes. In these contexts, his warnings about the limits of government foresight and the dangers of centralized planning hold considerable theoretical weight. His framework captures the uncertainty, novelty, and inherent unpredictability of pioneering innovation.
However, much of China’s industrial success does not rely on frontier invention alone. It emerges from scaling technologies, building engineering depth, refining processes, and exploiting manufacturing learning curves—areas where markets systematically underperform without coordination. These forms of innovation benefit from deliberate orchestration, infrastructure support, and knowledge accumulation. By applying frontier-innovation logic too broadly, Zhang fails to account for the structural advantages that coordinated, large-scale systems can provide, and why such systems can generate persistent competitive success across diverse sectors.
VII. Zhang Weiying’s Worldview and Its Limits
Zhang Weiying’s worldview emphasizes a Schumpeterian entrepreneur navigating a Hayekian epistemic universe, constrained by public-choice realism and classical liberal institutions. His perspective highlights the unpredictability of innovation, the centrality of individual entrepreneurial judgment, and the dangers of centralized planning. It offers a coherent theoretical framework for understanding frontier, radical breakthroughs, where decentralized experimentation dominates and government foresight is inherently limited.
China’s system operates differently. It functions as a state-constructed evolutionary arena, where markets are strategically embedded, failures are tolerated, and scale and coordination amplify learning. The tension between Zhang’s model and China’s practice is not merely ideological; it is ontological. Zhang asks whether governments can know enough to plan innovation. China demonstrates that they do not need to predict outcomes—they only need to identify which battles matter and create arenas in which decentralized competition can produce systemic, long-term success. This contrast underscores both the elegance and the empirical limitations of Zhang’s worldview.
VIII. Summary & Implications
Zhang Weiying is correct to highlight the dangers and distortions associated with industrial policy, but he is mistaken in treating it as inherently impossible. In a world shaped by geopolitical rivalry, technological scale, long capital cycles, and strategic externalities, industrial policy has re-emerged not as an ideological preference, but as a structural necessity. China recognized this early, the United States resisted before ultimately conceding, yet Zhang continues to reject the premise. What was once an elegant, influential, and clarifying worldview is increasingly out of step with the realities it seeks to explain.
References
- Rethinking the Entrepreneurial Spirit(chong xin li jie qi ye jia jing shen). Zhang Weiying. Hainan Publishing House. 2022
- “The Great Reckoning: What the West Should Learn From China”. Kaiser Kuo. October 16, 2025. https://www.theideasletter.org/essay/the-great-reckoning/
- “America Is Waving the White Flag in the New Cold War”. David Wallace-Wells. January 22, 2026. The New York Times. https://www.nytimes.com/2026/01/21/opinion/us-china-cold-war-tariffs-trump.html