By Eric Vandenbroeck and co-workers

Other countries cannot simply expect that China and its authoritarian regime will follow the Soviets into history’s dustbin. Indeed, contrary to Western hubris, smart authoritarians have shown themselves to be adaptable and competent. To meet the challenge of an innovative China, then, the United States must lean into the strengths that have made it a technological powerhouse: world-class educational institutions (and the overseas talent they attract), well-regulated and deep financial markets, global financial leadership, a robust culture of entrepreneurship, a vibrant civil society, and a unique position at the center of innovation networks in both Europe and Asia. China has shown that, through adaptation, authoritarian regimes can innovate effectively and compete with democracies. How well the United States deals with the rise of smart authoritarianism depends on whether it can adapt, too.

Conventional wisdom has long held that China would never become a technological powerhouse. From the late 1970s to the early twenty-first century, despite the country’s rapid economic growth, its technology base lagged decades behind that of the United States. Many prominent social scientists assumed that China would be unable to catch up: the country’s authoritarian institutions, they argued, stifled innovation through repression, censorship, and corruption, which would prevent it from ever truly competing with the United States. China, unable to keep pace with the United States technologically, would thus be no match for it economically or militarily.

But seemingly in the blink of an eye, China has become a global innovation leader. Chinese firms dominate high-tech sectors such as electric vehicles, advanced batteries, renewable energy, and telecommunications. And Beijing is now vying for leadership in artificial intelligence, supercomputing, and quantum science - the technologies on which future productivity and military power will be based.

China defied the conventional wisdom because its leaders understood that they faced a tension between maintaining political control and fostering innovation to sustain growth. Pursuing what I call “smart authoritarianism,” the Chinese Communist Party adapted its tools of authoritarian control to meet the demands of the globalized information age. Beijing found ways to provide freedom to entrepreneurs and innovators while inhibiting collective action and restraining passions that might imperil the regime. In its effort to maintain political control, the CCP sacrificed some growth that may have been possible under a freer system. But the party created enough space to foster innovation without loosening its hold on power.

China’s successful pursuit of innovation means that an authoritarian superpower is now capable of challenging the United States in East Asia, supporting autocracies worldwide, and shaping global governance to advance its own interests. For the United States and its allies to address China’s growing challenge, they must first understand how analysts erred in underestimating it.

 

From Stagnation to Innovation

The success of Singapore, South Korea, and Taiwan in the late twentieth century showed that authoritarian regimes can preside over what economists call catch-up growth: lifting their economies from poverty to middle income in terms of per capita GDP. The leaders of those countries invested in education and infrastructure, professionalized their civil services to improve the quality of governance, and directed investment into manufactured exports to grow their economies. China’s economic rise began in the late 1970s when Deng Xiaoping implemented this model.

After economies catch up, however, they can no longer rely on cheap labor and capital to drive future growth. They need to enhance productivity through innovation. But many scholars argue that the political controls on which authoritarian regimes rely to stay in power quash innovation, giving liberal democracies an advantage in economic development. The 2024 Nobel Prize in economics, for instance, was awarded to Daron Acemoglu and James Robinson for their theory that inclusive institutions - those that foster broad participation in economic activity and create a stable business environment, such as property rights, rule of law, and an open and vibrant civil society - are the keys to sustained growth.

Such institutions, other scholars argue, are incompatible with authoritarian rule. Autocrats censor information and limit citizens’ participation in global educational and scientific networks. They typically permit little or no independent civil society, curbing the actions of the private sector, universities, and nongovernmental organizations. And they are wary of constraining their arbitrary decision-making authority or engaging in reforms that would disrupt the patronage relationships that undergird their power.

In the words of political scientist Samuel Huntington, authoritarian leaders face a “king’s dilemma.” They can maintain a tight grip over their societies, but doing so will suppress innovation and growth. Alternatively, they can permit the freer flow of information and encourage creativity and dynamism, but it risks opening their societies to alternative sources of influence and power that could threaten the regime. Many scholars thus concluded that authoritarian regimes faced an inexorable choice between maintaining control and having an innovative economy.

The fate of other East Asian regimes seemed to support these arguments - and to suggest that China’s future growth would be stymied by the king’s dilemma. South Korea and Taiwan grew highly innovative, but they also democratized. Authoritarian Singapore was the exception: its ruling party remained in power while the country grew innovative and rich. Yet the tiny city-state’s success seemed an improbable model for a country like China, with its massive economy and over a billion people.

A humanoid robot at a laboratory in Beijing, China, February 2025

 

Smart Authoritarianism

China has proved that the supposed incompatibility between political control and technological innovation is not nearly as insurmountable as many observers believed. China’s leaders showed that the Singaporean case offered many lessons for countries large and small alike.

The CCP, following the example of other smart authoritarian regimes, learned how to adapt its tools of control to a modern economy. Its leaders knew that the country needed highly skilled workers, information flows, and international exchange and collaboration - even as the CCP feared that these could threaten the regime. Beijing also realized that it needed to project a friendlier image and eschew wanton violence to avoid the opprobrium of the global community, reassure domestic investors, and attract foreign direct investment. This form of softer, smarter authoritarianism, argue political scientists Sergei Guriev and Daniel Treisman, is “better adapted to a world of open borders, international media, and knowledge-based economies.”

Starting with Deng’s reforms, China’s government created a highly skilled workforce by investing heavily in elite higher education. Today, China leads the world in producing engineers and Ph.D. graduates in science and engineering, and its universities claim eight of the top ten spots on Leiden University’s 2025 global ranking of schools by scientific research output. The CCP also professionalized the civil service, implementing strict qualification examinations and prioritizing competence over connections. And the government has gradually improved property rights protections and commercial law. Provinces advertised their property rights systems to compete to attract foreign direct investment, which helped boost their economic growth rates.

In the reform period, especially under Jiang Zemin’s leadership (1989 to 2002), the CCP also permitted the expansion of commercial media outlets, private-sector companies, and nonprofit organizations. A larger civil society not only boosted economic growth and enabled the diffusion of ideas; it also strengthened the CCP, as the political scientist Jessica Teets observes, by serving as a source of information about societal problems and by promoting policy reforms that strengthened the regime’s hold on power.

Yet the regime has never relinquished control over civil society. The party uses its monopoly on power to direct research agendas toward topics that support state goals, restrict public discussions of politics, and predetermine judicial rulings if it feels social stability or its reputation is at stake. It also strictly monitors individuals, firms, and nongovernmental organizations and only permits those who are compliant to operate. In 2009, for example, the tax and civil affairs bureaus imposed a massive fine and revoked the registration of the Open Constitution Initiative, also known as Gongmeng, a prominent legal advocacy organization, on questionable tax evasion charges. Gongmeng had published research reports on governance issues, including the 2008 protests in Tibet against CCP rule, and defended citizens in high-profile public interest cases. Social organizations are thus given enough space to achieve narrowly defined goals that accord with state priorities, but risk being shut down if they venture into territory that threatens CCP control.

The CCP also adapted to the advent of digital and social media by pioneering new strategies for controlling information. Although they sometimes revert to heavy-handed censorship, China’s leaders have found novel ways to more subtly and efficiently control the public sphere. For instance, the political scientist Margaret Roberts identifies how the regime makes information harder to access by slowing web traffic or misfiling documents, flooding online spaces with pro-regime content to distract or dilute criticism, and privately intimidating users to dissuade them from spreading sensitive material.

The CCP also shifted from high- to low-intensity repression. The bloody crackdown at Tiananmen Square in 1989 put CCP repression in the global spotlight and discouraged foreign investment in China. Since then, the party has adopted more targeted methods to constrain domestic opponents. As political scientist Rory Truex finds, Beijing closely tracks dissidents and disgruntled citizens to stop them from joining protests, observes a “dissident calendar” in which it preemptively detains activists during key anniversaries, and recruits family members to pressure protestors to desist. When the regime feels it must resort to violence, such as when it wants to forcibly evict farmers from land for development projects, it outsources coercion to “thugs for hire,” as the scholar Lynette Ong argues, to distance itself from the aggression. And through massive investments in AI, especially facial recognition and other biometrics, the CCP can rely more on technology than truncheons to control the population.

Importantly, smart authoritarianism is not a growth-maximizing strategy. Leaders understand that through their efforts to retain control, they are leaving some economic growth on the table. But while greater openness and freedoms could mean more innovation and faster growth, it could come at the cost of losing power. Where this sweet spot between freedom and control lies changes in response to public opinion, the economy’s developmental stage, evolving technologies and methods of control, and the drivers of growth and innovation. Smart authoritarian leaders must constantly adjust the levers of control to open up society when they can and tighten their grip when they must. When they get that balance right, innovation can flourish even without inclusive institutions.

 

Technology Superpower

China’s smart authoritarianism has yielded impressive results. The country once dismissed as a copycat now ranks among the world’s most innovative. In 2025, China ranked among the top ten most technologically advanced countries in the Global Innovation Index, leap-frogging France, Germany, and Japan. Not even a decade ago, consumers around the world may have struggled to identify a single Chinese brand; now, Chinese firms such as BYD, Huawei, ByteDance, and Alibaba are household names. Chinese-dominated supply chains underpin many high-tech industries, and the country controls large shares of global production and processing capacity for batteries, solar panels, and critical minerals. And Chinese firms are becoming increasingly competitive in other sectors traditionally dominated by U.S., Japanese, or European firms, such as industrial robotics, advanced machine tools, and parts of biotech and biopharmaceuticals.

China’s advance has shifted global technology flows. For decades, Western companies sold products to China and built factories there to access the country’s cheap labor and vast markets, while Chinese firms absorbed Western intellectual property. Today, China has reached the global technological frontier in industries such as electric vehicles, batteries, drones, and robotics; Western firms are increasingly licensing Chinese technology and partnering with Chinese firms to stay competitive.

Starting in 2022, the United States and other countries imposed export controls on cutting-edge chips to slow the pace of China’s AI development. But these policies have also galvanized Chinese innovation. In 2025, Chinese AI company DeepSeek unveiled its R1 model, which performed comparably to top U.S. large language models despite being trained on a fraction of the chips typically used by rivals. China’s top-tier generative AI startups, known as the “six tigers” (Zhipu AI, MiniMax, Baichuan, Moonshot, StepFun, and 01.AI), are battling for market share and technical leadership. Meanwhile, tech behemoths Baidu, Alibaba, Tencent, and Xiaomi are pouring resources into AI development. Although the United States continues to lead in producing the world’s most prominent AI models, it now finds itself locked in a technology rivalry with the country that previously faced a seemingly insurmountable disadvantage.

China’s commercial innovation also translates to military advancements and the modernization of the People’s Liberation Army. The PLA has integrated AI into command, targeting, surveillance, and autonomous operations. China is testing AI-powered swarms of hundreds of autonomously operating drones and has developed intelligent battle management systems that can process vast amounts of battlefield data faster than human commanders can. The PLA has also expanded both its nuclear forces and improved the delivery systems it uses to deploy them, such as through fractional orbital bombardment systems that send weapons into low Earth orbit and could potentially evade U.S. missile defense systems. The PLA is untested in battle, but commercial innovation has equipped the military with cutting-edge technology that could make its forces more capable than their experience might suggest.

 

Wishful Thinking

Skeptics might argue that China won’t pose a serious geopolitical challenge because it faces a host of economic problems that will preoccupy its leaders and diminish its national capabilities. Although it has made major strides in innovation, the country has a long way to go to generate enough productivity to sustain economic growth - even at much-reduced levels - in the face of an aging population, a troubled property market, and competition among firms for shrinking returns so intense that it threatens to undercut entire sectors.

Although China’s economic headwinds are real, the CCP has repeatedly defied predictions of both political and economic catastrophe. Public anger over draconian COVID-19 lockdowns, which appeared to portend an imminent crisis, has not fundamentally destabilized the regime. The country has made significant progress cleaning up environmental damage, notably air pollution, caused by decades of lightly regulated growth. And in the 1990s, the CCP presided over massive reform of the bloated state sector, which included more than 30 million layoffs. Much more reform of the state sector is essential to improve the efficient use of capital and promote innovation, but in the past the party has shown itself capable of far more difficult challenges.

Xi Jinping’s centralization of power, repressive policies, and crackdowns on civil society organizations and private-sector firms have also raised concerns that China’s era of smart authoritarianism is over and that such policies will stifle the country’s economic dynamism. But periods of tightening are part of the smart authoritarian model and recurred frequently throughout China’s own decades of rapid growth. China’s stunning success in the AI sector - a sector that did not exist prior to Xi’s rule - shows that Xi’s policies have not stopped innovation. And Xi appears keenly aware of the balance between control and openness. After initiating a strict crackdown on the tech sector in 2020, which erased more than $1 trillion of firms’ market value, Xi gathered private business and technology leaders for a symposium in February 2025 to show the party’s support for entrepreneurs in critical sectors. In December, officials announced the establishment of a state-backed venture capital guidance fund to channel about $140 billion in investment into strategic sectors such as artificial intelligence, quantum technology, and hydrogen energy.

The United States and its partners should assume that China will remain a formidable economic, technological, diplomatic, and military power. Indeed, the challenge posed by China is even more daunting than that of the previous superpower, the Soviet Union. Whereas the Soviet Union at its peak had only about 40 percent of U.S. GDP (adjusted for purchasing power parity), China already exceeds 100 percent of U.S. GDP on comparable measures. Many observers expected China to mirror the Soviet Union’s inability to reform its institutions to meet the challenges of the information age, but China has shown itself adept at acquiring and working with new technology.

China now poses a serious military threat to Taiwan and across East Asia - a region where the U.S. military previously roamed unimpeded. The CCP is sharing its control technologies with autocrats around the world, including in Egypt, Ethiopia, and Iran, and frequently trains those countries’ officials in methods of authoritarian governance. Beijing has also been strategically shaping the agendas of international institutions, and its influence is growing as the Trump administration pulls out from such groupings and Washington seeks to reduce its international responsibilities. The success of China’s smart authoritarianism provides an appealing model for leaders in places such as Saudi Arabia, the United Arab Emirates, and Vietnam to emulate.

Other countries cannot simply expect that China and its authoritarian regime will follow the Soviets into history’s dustbin. Indeed, contrary to Western hubris, smart authoritarians have shown themselves to be adaptable and competent. To meet the challenge of an innovative China, then, they must lean into the strengths that have made it a technological powerhouse: world-class educational institutions (and the overseas talent they attract), well-regulated and deep financial markets, global financial leadership, a robust culture of entrepreneurship, a vibrant civil society, and a unique position at the center of innovation networks in both Europe and Asia. China has shown that, through adaptation, authoritarian regimes can innovate effectively and compete with democracies. How well other countries deal with the rise of smart authoritarianism depends on whether they can adapt, too.

 

 

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