Almost daily, newspapers in the U.S., Europe and China release eye-catching headlines about China's technological advances and economic prowess. The accomplishments are real. But they're not necessarily evidence of Western failure or Chinese invincibility.
In touting such achievements, commentators too often overlook the structural factors that have shaped them. Economists now recognize just how much of economic interaction is driven by such forces. For instance, the gravity model in international trade posits that the distance between countries impacts how much they trade. No matter how warm the ties between China and Bolivia, sheer distance will always limit their bilateral trade volumes. By contrast, despite frosty relations, large amounts of trade and investment flow between China and Taiwan owing to proximity and shared language.
Many of the most innovative Chinese companies have benefited not only from government support and protection, but from structural conditions that have made their businesses more viable than they would've been otherwise. They've thrived in a unique cauldron of challenges and inputs that don't exist in most other places in the world.