Inside the "China Model"

Standfirst: Entrepreneurship should not be romanticized or turned into myth. It does not always promote growth and prosperity, and sometimes, as in the case of rent-seeking, it destroys them. Which way it runs depends on the relative rewards that prevailing institutions offer to activities that build prosperity and to those that drain it. Entrepreneurship in itself is neutral.

1.

"He who knows only one country knows no country."

For more than four decades China has been the world's most closely watched economic case, and few cases have produced so many conflicting readings. Yet observing another national economy from the road, at a remove from that argument, strips away the debate and lets the case reveal its actual character.

A question has long stayed with me: between Steve Jobs in the United States and Jack Ma in China, who commands greater public respect?

The United States was built on commerce, and it holds to an old economic creed: the best economic policy is the one that lets entrepreneurs use their talents freely. The answer should therefore be obvious. It is not.

Respect for entrepreneurship is one of the most important legacies of China's reform era, and only in comparison does its full weight become apparent.

Two forces were decisive in shaping that social climate. The first was officialdom: officials, and local officials in particular, needed entrepreneurs in order to meet the GDP targets set for their jurisdictions and so secure promotion. The second was the economics profession, some of whose members worked tirelessly to advance an account of economic growth and institutional change seen through the entrepreneur's eyes. Practice and theory thus echoed one another from a distance.

None of this is to say that China's rule of law is well developed, since cases of entrepreneurs' rights being violated still appear one after another. The point is rather that the loudest arguments overlook this valuable social climate, which has served as the cultural engine behind economic growth. That climate, unfortunately, is slowly wearing thin.

May, 2023. Standing at the Reflecting Pool in front of the Lincoln Memorial. Image: Frank Fu | R.M.E.

Within the limits of what I have been able to observe and discuss in both countries, China may hold an advantage over the United States at least in how deeply its elites understand the entrepreneur's role. This entrepreneurial conception of society rests on two propositions:

The first concerns the market mechanism itself. A market does not run on atomized individuals but on combinations of them, which is to say on firms, and the entrepreneur, that critical few, is the soul of the firm. The efficiency of a market economy therefore rests chiefly on the efficiency of its firms, and so on the talent of the entrepreneurs who run them.

The second reveals a triangular relationship among technology, entrepreneurs, and institutions. Since the great majority of technological progress occurs inside firms, entrepreneurial talent determines how large a firm can grow and therefore how quickly that progress spreads, while the breadth and depth of its adoption is in turn the fundamental driver of institutional change.

That triangle matters more and more because in the age of AI the commercial entrepreneur increasingly takes on the character of the institutional entrepreneur. Not only do they solve market problems, they also build new institutional pathways through products, platforms, resource networks, and value propositions, thereby reshaping both the content and the boundaries of institutions. The early years of the first Industrial Revolution worked much the same way: the joint-stock company, the securities market, and a great many other institutional innovations originated with entrepreneurs, and it was precisely those innovations that cleared the way for the revolution to continue and deepen.

Silicon Valley is an excellent place from which to watch this trend, and Alex Karp, the co-founder and chief executive of Palantir, is perhaps its representative figure.

Palantir is a leading AI software company known for its big-data analytics platforms, whose products, among them Gotham, Foundry, Apollo, and AIP, serve corporate and government clients alike.

Karp openly rejects the notion of technological neutrality and insists instead on the link between technology and values, a position his company's products and services reflect deeply. Palantir embeds AI within the machinery of government, rebuilding institutional resilience through technological change. Karp's Einstein-like shock of hair is his most recognizable physical feature, and his highly personal brand of entrepreneurship increasingly shapes government efficiency, national security, and public governance.

The entrepreneurial view also helps in observing a second new trend, the so-called entrepreneurial government. As technological change accelerates and global competition intensifies, governments increasingly need to borrow the initiative, flexibility, and innovative capacity of entrepreneurs. They may find themselves compelled to become drivers of innovation and institutional change rather than regulators alone. The traditional night-watchman state may be poorly equipped to handle structural change driven by technology.

The trend toward entrepreneurial government, and whether it proves on balance beneficial, will of course require a longer period of observation.

January, 2025, Richard Nixon Foundation. A photograph of Nixon's visit to China in 1972.   Image: Frank Fu | R.M.E.

2.

That entrepreneurial organizations carry greater influence in China than in the United States is perhaps a further piece of evidence.

Since the first of them appeared in 2000, China has developed a diverse ecology of such organizations, some devoted to research, others to intellectual awakening, others still to direct action. They have played an important part in addressing all manner of stubborn social problems, environmental protection above all. Their existence has allowed entrepreneurs to take on a far richer public-interest role alongside their economic one. They also offer a distinctive vantage point from which to observe how entrepreneurs and society interact.

One qualification is needed here, since the comparison between Jack Ma and Steve Jobs is not representative. Chinese entrepreneurship has had three high tides since the Second Opium War of 1860, arriving with the Self-Strengthening Movement, the early Republican era, and Reform and Opening, and the past forty-odd years have been the peak of the past two centuries. The American case is somewhat different.

Americans have always held entrepreneurs in esteem, yet between 1860 and 1920 that regard ran stronger than in any other period of their history. Those were the years in which the railway network expanded and western land and resources were absorbed into the national economy, and countless ordinary people climbed upward by starting businesses, producing the most voracious entrepreneurial spirit of the country's 250 years. In that sense American entrepreneurship is in fact in decline.

June, 2024, Space Center Houston.  Image: Frank Fu | R.M.E.

Generalizing from the strengths and the experience of entrepreneurial organizations in the two economies would help to advance entrepreneurship further and to improve the efficiency of economic and social affairs. The priority, however, remains one of understanding, and several research directions are already visible.

The first is how entrepreneurs make decisions. Entrepreneurship so far remains a black box, and it is not a clearly definable trait, capability, or spirit. Although arguments can be made for various perspectives—including opportunity recognition, behavioral decisions, personality traits, and situational or institutional contexts—each offers only a partial view. Only a large body of collected and compared cases will show why and how entrepreneurs arrive at decisions unlike anyone else's at the decisive moments of business, and an archive of entrepreneurial decisions carrying both theoretical value and public significance is one effective way to open that box. Entrepreneurship needs to move from myth and inspirational cliché toward structured understanding.

The second is how commercial entrepreneurs become institutional entrepreneurs through their products. What is needed is an account of which entrepreneurs, under what conditions, and with what products and services, both solve market problems and become builders of institutions. It should also cover the resistance they meet and how they overcome it, along with the regularities and lessons these paths yield. This matters as much for developed markets as for emerging ones. For example, China lacked a formal auction system until China Guardian—the nation's pioneering nationwide art and antiques auction house—catalyzed the creation of one. In the age of AI, phenomena of this kind will only grow more frequent, more pronounced, and more consequential.

Third, the comparative analysis of Chinese and American entrepreneurship requires a fresh evaluation. A great deal of research already exists in this direction, yet significant gaps remain. Two key gaps stand out: a lack of focus on how Chinese and American entrepreneurial behaviors evolve dynamically alongside emerging technologies; and limited attention to entrepreneurs navigating dual identities across distinct cultural and institutional environments. This direction could offer a new structural perspective on global entrepreneurship, along with practical recommendations on institutional friction and the potential for cooperation within the economic relationship between the two countries.

Crucially, we must determine how AI and entrepreneurship serve as substitutes, as well as how they serve as complements.

Large language models may prove to be no more than a beautiful detour. AI will retrace the path of human evolution in embodied form and so acquire some, and perhaps all, of human capabilities and temperament, which makes the two substitutes. Yet AI also drives the cost of execution down sharply, even toward zero, freeing human beings to concentrate on imagination and creativity, which makes them complements. Experiments such as Anthropic's Project Vend, which had an AI run a retail shop on its own, therefore deserve close attention, since it is in concrete real-world settings that the precise relationship between the two will become clear.

August, 2025, Kewaunee County, Wisconsin. A boy with the day's catch. Image: Frank Fu | R.M.E.

At the same time, entrepreneurship should not be romanticized or turned into myth. It does not always promote growth and prosperity, and sometimes, as in the case of rent-seeking, it destroys them. Which way it runs depends on the relative rewards that prevailing institutions offer to activities that build prosperity and to those that drain it. Entrepreneurship in itself is neutral.

This is where the Rocky Mountain Entrepreneurship Global Research Center has its origin. Holding research in one hand and action in the other, it works from deep understanding toward a public-interest mechanism for communication that carries both comprehension and influence, connecting thought with practice and scholarship with industry, supporting the new technological revolution, and working toward a future of greater possibility for the United States and for the world.