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Why China Is So Bad at Doing Big Things (Bloomberg)

Bloomberg Opinion title: Why China Is So Bad at Doing Big Things
Bloomberg Opinion subtitle: The country has a reputation for accomplishing impossible tasks. But its strengths only work in certain cases. 
By: Minxin Pei
Date: 3 April 2023

“Countries around the world are awed by China’s ability to marshal its national resources and do big, seemingly impossible things. Exhibit A is usually its construction of the world’s largest high-speed rail network — 23,500 miles long — in barely a decade.

Yet both China and its admirers would do well to study the country’s equally massive missteps. In case after case, leaders in Beijing have identified top national priorities and lavished them with support. And time after time, this “whole-of-nation” effort (juguo tizhi), meant to mobilize the talent and resources of a giant country, has led only to waste, graft and failure.

The fates of two totally different initiatives illustrate the problem: making advanced semiconductors and fielding a national soccer team good enough to qualify for the World Cup.

China’s lack of success in developing high-end microchips is well-known. The National Integrated Circuit Industry Investment Fund (aka the Big Fund) has pooled $45 billion since 2014 and funded many critical projects. In 2020 alone, Chinese semiconductor firms received $35 billion in investments from official and private sources.

But, so far, Chinese chipmakers remain years, if not decades, behind their Western and East Asian competitors — and stiff Western export controls now threaten to delay their progress even further. Adding insult to injury, Chinese officials entrusted with achieving chip self-sufficiency appear to have had their hands in the till. Last year several senior executives of the Big Fund, including its general manager, were detained for suspected involvement in corruption.

The story of China’s quest for glory on the soccer field is an even sadder tale of unfulfilled dreams. The Chinese national team has qualified for the World Cup only once (2002) and is the butt of jokes even in official media. In 2015, Chinese President Xi Jinping urged Chinese soccer teams to “ become among the world’s best .”

Yet the billions China has spent since then to lure overseas talent and coaches seem to have made no difference. If anything, China’s side has become even worse. In 2016, the national team lost 0-1 to Syria , which was in the middle of a civil war, and later failed to advance to the World Cup. In 2022 , it again lost too many preliminary matches to qualify for the tournament.

Like their colleagues in the Big Fund, officials responsible for making China a soccer power have also been caught stealing. In February, the head of China’s soccer federation was detained for alleged corruption. In late March, anti-corruption investigators hauled in two other senior officials from the federation.

Despite such failures, Chinese leaders still seem convinced that the Communist Party’s capacity for focusing talent and material resources on specific challenges represents its greatest asset, and a clear advantage over the West. In his report to the Communist Party’s national congress last October, Xi declared that China would set up yet another system to pool its national resources to respond to the West’s tech chokehold.

To be fair, the “whole-of-nation” approach has worked in a few famous cases, in addition to high-speed rail. It helped an economically impoverished and technologically backward China build the bomb in 1964 and launch a satellite into space in 1970.

In all those instances, however, the goal was fixed, and the relevant technology was well-known and relatively static. The ability to muster resources and direct them quickly — at which China does indeed excel — was critical. It also helped that the central government had the power to brush aside any interest groups that might have obstructed the projects.

Such conditions do not apply to most other tasks, including making advanced chips and building world-class soccer teams. In such cases, there no fixed target. Semiconductor technology (think of Moore’s Law) and the skills of soccer players are constantly improving. Moreover, chip technology and, for that matter, soccer talent are widely dispersed; no single country has a monopoly.

While resources are certainly needed, they’re not dispositive. Other factors — collaboration, innovation, competition, autonomy, and maverick streaks — are just as essential to success.

In fact, China’s favored top-down approach may work to its disadvantage in such instances, since talent flourishes in a decentralized and dynamic environment. The small number of “flowers” favored by the government may not blossom since officials often promote risk-averse, established players who have little interest in collaborating with innovative outsiders, seen as potential competitors. As illustrated by recent scandals, generous government funding is also easily stolen.

Unfortunately, failure has not deterred China from doubling down. It is amassing a new war chest of $143 billion for chipmakers, a select few of whom will have easier access to government subsidies and more control over state-backed research. The scandal-plagued Chinese Football Association is implementing a multi-million-dollar soccer program in more than a dozen cities.

The chances of success would seem no better than before. As good as China is at mobilizing resources, it’s even better at wasting them.”



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