The West CANNOT Beat China. This Is Why. | Arnaud Bertrand

The contest between the West and China is often framed as a battle of armies, trade tariffs, or moral systems. Yet the core advantage China enjoys — and the one the West repeatedly misses — is institutional and organizational: an internal architecture that relentlessly converts local competition into national capability. The conversation with Arnaud Bertrand, taken together with broader observations about Europe’s trajectory, reveals that this is not simply a matter of state control versus market freedom. It is a question of incentives, governance design, and the capacity to translate strategic goals into local action. Until Europe and other Western actors confront these structural mismatches, they will struggle to “beat” China in the arenas that matter for long-term power: industrial scale, technological leadership, and resilient sovereignty. ## Europe’s strategic moment Europe faces a threefold structural dilemma: relative economic shrinkage, loss of industrial capacity, and an eroding guarantee of strategic autonomy. The signature feature of the postwar order was a West-centered security and economic architecture; Europeans organized their policies assuming a benign American umbrella and a rules-based global order. That assumption is breaking down. U.S. policy is increasingly transactional and competitive — exemplified by legislative instruments and geopolitical choices that incentivize reshoring to North America — and European leaders are feeling the consequences in the form of deindustrialization, higher energy costs, and frayed strategic leverage. The problem is not merely cyclical or partisan. Even administrations that rhetorically favor the alliance have pursued measures with centrifugal effects on European industry. The outcome is predictable: industries reliant on cheap and stable energy and scale-intensive investment find Europe a less attractive location. If Europe is to regain strategic heft, the answer cannot be nostalgia. It requires an honest reckoning with the scale of reform needed across technology policy, industrial strategy, energy systems, and above all, governance. ## The decentrally powered Chinese model Contrary to common caricatures, China’s strength owes much to a highly decentralized fiscal and administrative regime. Around 80% of public spending in China is executed at the provincial, municipal, and county level. Far from a monolithic center micromanaging every decision, Beijing sets broad targets and incentives; localities compete to deliver. That competition looks like a meritocratic career ladder for officials: success at solving local problems becomes the ticket to promotion. This design achieves three effects simultaneously. First, it accelerates implementation. When provinces are responsible for budgets and outcomes, the lag between central objective and local action narrows. Second, it fosters experimentation. Local governments become laboratories: different approaches are tried, successful models are copied, and failures are discarded without paralyzing the system. Third, it aligns personal incentives to national goals. If promotion and prestige hinge on delivering on targets, local officials act with urgency and innovation. Europe’s institutions, by contrast, often bundle rules, standards, and enforcement in a way that flattens local initiative. The EU’s regulatory harmonization was historically a powerful force for market integration and political cooperation — but it can also become bureaucratic sclerosis when standards ossify and when compliance becomes the dominant logic. Where China sets objectives and lets localities find solutions, European rules can descend into “must” mandates that stifle variation and local optimization. ## Institutional sclerosis within the EU The European Union is simultaneously a capitalist powerhouse and a machine of procedural complexity. Internal trade barriers remain higher than typically acknowledged: hidden costs, divergent regulations, and national practices impose frictions that can exceed those faced by outsiders. Paradoxically, firms can find it easier to export from the U.S. into Europe than to sell from one EU member state to another. That reality reveals how integration without effective simplification produces transaction costs that dilute the single market’s promise. Beyond administrative friction, the EU’s collective decision-making creates multiple veto points. National, regional, and local actors can block agreements that would be routine in systems with fewer decision nodes. The CETA negotiations with Canada — stalled in practice by subnational opposition — illustrate how a federated or supranational order can be hamstrung by layered consent requirements. The democratic virtues of broad participation come at the price of slower, more conservative policymaking. When the objective is rapid industrial redeployment or energy transition, those trade-offs become existential. Political inertia compounds the problem. Large-scale reforms require coalitions across member states and domestic political realms, negotiation across ministries and parliaments, and public buy-in. The result: even urgently needed changes — to energy pricing, industrial subsidies, or talent attraction — get deferred or diluted. In a geopolitical competition that prizes speed, this structural slowness is a strategic liability. ## Technology, energy, and the sovereignty gap Technological leadership is the axis on which future power will be decided. Europe’s footprint in frontier technologies like large language models, advanced robotics, and emerging semiconductor nodes is thin compared to the U.S. and China. For example, European AI models lag behind the leading global list, and robotics companies that dominate market mindshare are overwhelmingly non-European. This technological lag reflects deeper weaknesses: underfunded research ecosystems, brain drain to more remunerative environments, and compensation structures that make it hard to retain top talent. Energy is another acute vulnerability. European electricity production and prices are out of step with major competitors. Lower output per capita and higher average costs leave industry less competitive, especially in energy-intensive sectors. National successes, like France’s historically cheap nuclear electricity, are neutralized by EU-wide pricing mechanisms that fail to capture local comparative advantages. The result is a mismatch where countries that produce low-cost power can’t fully capitalize on that advantage in an integrated market. Sovereignty, in this context, is not rhetorical. It is the capacity to protect critical infrastructure, control supply chains for strategic goods, and ensure that technology bases and human capital are aligned with national or continental security. Europe is attenuating its sovereignty when it lacks domestic defense industry capacity, outsources critical manufacturing, and allows strategic technologies to consolidate outside its borders. ## Rethinking meritocracy and governance If China’s central government functions primarily as an HR engine — promoting local officials who deliver objectives — the West needs to think harder about the incentives embedded in its institutions. Democracies prize electoral accountability, but they risk elevating leaders on the basis of campaigning prowess rather than administrative competence. Europe's system can thus produce a “Peter Principle” effect: effective officials rise to positions beyond their capability and then stagnate. There are hybrid models worth studying. France’s École Nationale d’Administration (ENA) was designed to professionalize public administration by selecting and training high-caliber civil servants. Switzerland’s use of direct democracy channels popular consent as a corrective mechanism when representative bodies falter. Both approaches illustrate that democracies can create countervailing mechanisms — professional career tracks, indep

The West CANNOT Beat China. This Is Why. | Arnaud Bertrand [Part 2 of 2] While the West is still busy trash-talking China at every waking moment, it has completely eluded them that China has an unbeatable domestic system that neither the USA nor Europe can match. China has one of the most decentralized fiscal policy systems in the world and built its national structure around local competition beyond a simple market economy. Now compare that to the ever-increasing centralization in the European Union and you get a sense of why Brussels doesn't stand a chance to ever produce the same kind of products at the quality that China is now able to bring to the world on a massive scale. This is the second part of an interview with Arnaud Bertrand, one of Twitter/X’s best and most profound political analysts. I recommend everybody subscribe to Arnaud as he really hits the nail on the head every single time. He does fantastic current affairs and data analysis. Aranaud’s Twitter/X Profile: https://x.com/rnaudbertrand? s=21&t=hvGzg_IUq7IAn6aFBkjy5w #M3 Many people assume that because China is a communist country, it's extremely centralized. But actually, no, it's the most decentralized country in the world, with 80% of its government expenditure, its budget, being spent locally by provinces, cities, counties, and so on and so forth. And that's one of the key reasons why China is so fast. It's because it has put in place a system where there is extreme competition between all its local entities. #M2 Thank you very much. That is a wonderful segue, actually, into the second part that I want to discuss with you. Everybody, I'm still talking to Arnaud Bertrand, the prolific analyst on Twitter. We just discussed everything that's happening with the peace negotiations between the US and Russia and how that impacts Europe. I would like to dig a little bit deeper or pick your brains more deeply about the structural problems that Europe now faces. I mean, to me, on the face of it, there are at least three, right? The structural decline of Europe, because some things it's just not able to do anymore, like it has no industrial defense base. It is being abandoned by the US, at least in the way that the Europeans were used to. I remember quite clearly how when Biden was elected, he announced the USA is back. That meant back to what the Europeans knew before, right? And now it's clear that, oh, no, Trump was not just an anomaly. It was not just a glitch. No, this is the system that's changing. And if you look at the setup that Trump has with the Republicans now, with Vance possibly being the next, you know, taking over the reins after him, I mean, you could expect another eight years after these four years, right? That's on the cards now. And then the third -- 1 of 9 -- problem is, of course, the relative economic shrinking. I mean, aside from the fact that Europe is being de-industrialized right now, its current economic base is much smaller compared to the entire rest of the world because the rest of the world rose, right? The Europeans are now economically just much less important than what they used to be 40, 50 years ago. Can you speak to that? And let's go into all the structural problems that Europe has at the moment. #M3 Yes. So first of all, just a small word on the Biden administration, you know, saying that the U.S. is back and so on. Actually, there were in many ways a continuation of the Trump administration, especially with regards to Europe. I mean, they had, you know, the friendly liberal rhetoric, but they did a lot of actions that led to Europe's deindustrialization. Of course, the most famous one is the Ukraine war, the sabotaging of the Nord Stream pipeline, which had a direct consequence on energy prices. You know, industry's energy transformed, right? So energy prices are absolutely critical for industries. And he also had, you know, very significant legislation like the IRA, Inflation Reduction Act, which did a lot to, you know, poach industry from Europe to the U.S. So, yeah, he wasn't a figure that really benefited Europe's interests. So, structural problem, again, as I said before, I think the main structural problem is mindset. First of all, you always have to start with that. Shifting from the mindset of living in a West-dominated world where the Western alliance is like the lodestar and you need to organize your strategy based on that—that's over. Now we live in a multipolar world where the U.S., I mean, it was before, but now it should be really crystal clear to Europeans that it is not a friend that wants you to thrive, but it is very much a competitor that doesn't look out for your own interests. And so you need to shift your mindset to a mindset of sovereignty, defending and protecting your sovereignty as Europeans, defending and protecting your interests. And when you start from that, you have an understanding of how immense the challenge is because we've lost our sovereignty in an enormous number of ways. So we're protected, but we have no defense industry. We have no defense. European defense and security are always the most important conditions for sovereignty. You need to be able to protect your sovereignty, first of all. So that's a huge challenge. You know, speaking of technologies, they're always absolutely critical. As we've seen in world history, when you fall behind technologically, then you're weak and can be taken advantage of by others. It's the whole story of China—a century of humiliation. It fell behind technologically, and so it could be colonized at will by the Western powers. Technologically, Europe has fallen behind in an alarming way. Like, it's nowhere to be seen in most technologies that count for the future. So, you know, take AI, for instance. I was looking at a scoreboard of the best AI models out there. The first European model is 34th on the list, after only Chinese and American models. It's a French company called Mistral. And, you know, look at, I don't know, other technologies that matter for the future, like robotics, for instance. I think robotics is going to be absolutely huge. At some point, we're going to -- 2 of 9 -- have humanoid robots helping us in all our tasks. That's going to arrive, I think, fairly soon. China and the U.S. are quite advanced in that regard. China has that company called Unitree. In the U.S., Tesla is working on its humanoid robot. I forgot the name right now. Prometheus or something like that. Whereas Europe's robots, they just don't have one. So there needs to be a lot of effort to change that because otherwise, it's going to keep falling behind. In order to enable that, you need to make a lot of structural changes. You need to be more attractive for scientists. There are a lot of European scientists out there in the U.S. and so on. You need to be attractive for them to come back. You need to pay them more. You know, salaries for scientists in Europe are extremely depressing, especially when you compare them to the U.S. or China. So, yeah, it's almost overwhelming how much work needs to be done in order for Europe to get back in the race. But there is no choice. It needs to be done. You know, we better start now. Otherwise, we're going to be even further behind. #M2 Yeah, I agree. On the other hand, Europe still has a few things going for it, right? On one hand, you have structures that allow for exchange between these 27, 28 EU member states and the larger Europe, including the UK, including countries like Switzerland, and so on. There is exchange and mechanisms in place, right? So you could try to get this right. #M3 I don't know if you read Mario Draghi's recent article in the FT. What did he write? He wrote on this specific question that, paradoxically, there are more trade barriers within Europe, within the 27, in the form of hidden customs taxes, hidden tariffs, than there are between Europe and the outside world. So it's crazy. It's easier for, say, the U.S. to sell its products in Europe than it is for a French company to sell its products in, say, Germany. So, you know, even in that respect, it's not working. There need to be big reforms made. But I agree with you that this should be done. This should be done. #M2 No, you're absolutely right. I forgot. Because if you have a free trade agreement with the EU, that agreement counts for all member states. But as a member state, you're bound by EU rules and regulations on what to do in order to sell within the EU. And that could be more tedious than having a free trade agreement. Which is why right now the Swiss are not thinking of joining the EU at all. They're just thinking about how to create a proper structural trade agreement in order to solve their issues with the EU. But joining the EU now would have so many downsides. #M3 -- 3 of 9 -- Or take another issue, energy, which is so important. First of all, Europe doesn't produce anywhere near enough energy. I actually checked, and we produce 25% less electricity than the U.S., even though we have 400 million people and they have 330 million or so. So we produce way less than they do. And our energy, European energy, is on average 70% more expensive than American energy. I'm not even speaking about China, whose energy is three times cheaper than the U.S., and they produce twice as much energy as the entire U.S. The way energy is also set up within Europe is completely stupid. Because, for instance, if you look at France, we actually have a big advantage when it comes to that because we went nuclear first. Seventy-five percent of our electricity is produced by nuclear, which is great because nuclear is very cheap. But the way the European rules work is that even though we produce our own electricity in France so cheaply, we can't benefit from those cheap prices because we need to pay a European price, basically. So it's like we willingly shoot ourselves in the foot. So yeah, just so many reforms need to be made that it's almost, yeah, it's overwhelming. But again, it needs to be done. #M2 Yes, it's just also scary to think of what the process would be in order to get all of these things rolling, right? Because the EU administrative apparatus, not just the administrative apparatus, but the political apparatus is so incredibly heavy. I wonder if the political inertia to get anything going is huge. And then once you get something going, the negotiations take place on so many levels. They also take place on the national levels, right? And then they go to the higher level. #M3 I think that actually China is not a bad example in that regard because not many people know the real structure of China and the reason why China is so efficient and so fast at doing things. Many people assume that because China is a communist country, it's extremely centralized. But actually, no, it's the most decentralized country in the world, with 80% of its government expenditure, its budget, being spent locally by provinces, cities, counties, and so on. Only 20% of China's budget is spent at the central national level. When you compare with, like, the U.S., for instance, it's 50-50, even though the U.S. is a federation of states, so states have, you know, compared with France, for instance, where it's 80-20 but in the other sense. The U.S. is already quite decentralized, with states having a lot of power, but China is just on another level with 80% at the province level. And that's one of the key reasons why China is so fast. It's because it has put in place a system where there is extreme competition between all its local entities, and that's how you progress in the Chinese system as an official. It's a meritocratic system. You first start by managing a village, then a county, then a city, and so on and so forth, and you are -- 4 of 9 -- always evaluated compared with your peers, right? It's always an exam system where the best rise to the top. And so the central government gives some sort of vague five-year objecti