1) The Chinese are not breaking new ground and are doing a lot of catching up. I am not saying that it's as easy as following in the path of an icebreaker that has gone before, but it is easier. When the Chinese overtake the USA in GDP terms in the next few decades it will not be in per capita terms, that will take beyond our lifetimes. This is off the shelf engineering. And a lot of the high tech stuff is being done for American companies off the back of American R&D too. But the investment of the Chinese in university league tables, and then in investing heavily in research to climb up them shows they are well aware of what they need for the next stages of their development.

2) China was centrally controlled to disastrous results for a long time but from Deng Xiaoping onwards - where we see most of the growth - there have been more and more reforms both to regulation and to government. So not only are there now a lot of capitalist-like incentives and "special economic zones" as well as partnerships with companies outside of China the regional governments have been give more power to customize things to their local conditions. That's not to say the party isn't in control and there isn't massive corruption, but it's a very sophisticated system that's entirely different to the mechanisms of government and economic calculation that the Soviets employed. The recycling of sovietology is not fruitful though. Timothy Geithner being an Asia specialist is no accident. Also, there is a significant faction in the party that wants to transition to democracy (or a "Chinese version" of it), including some in the party central think tank and former generals. It's beyond me to gauge its strength other than to say it wouldn't surprise me if they won the argument and that we'd see a transition in the next three decades to something that looks like a cross between post-war South Korean/Japanese authoritarian democracy and post-communist Russian plutocratic democracy.

All that said, it must also be remembered that the USA is not purely free markets either and has had a significant portion of the economy state-funded and directed via military and space investment; to say nothing of the unique role that universities play in all western capitalist democracies that often goes under the radar of economists. That said, look at the wikipedia list of US inventions and Nobel prizes. There is much more to that incredible record than free markets, it's common law, bankruptcy law and many democratic anti-corruption techniques. Hence Hayek's "The Constitution of Liberty"[1], and Popper's "The Open Society and its Enemies"[2] which continue the reading above to the complex of arguments about the rest of the social aspects of free societies. From across the sea, this has to be the greatest problem with a certain brand of American free marketeer that turns to Mises' work, done before Hayek, and merely sees Hayek as a regurgitation. This is not the case Hayek has a much more powerful articulation of a political philosophy beyond just an economic theory. Agree or not, it's something which needs to be engaged with. I hope these qualifications and extensions help.

[1]http://www.amazon.com/Constitution-Liberty-F-Hayek/dp/022632...

[2]http://www.amazon.com/Open-Society-its-Enemies-Routledge/dp/...