Which is what China is developing into in my opinion. Just look at the innovation that occurred within Germany during the 1930s-40s.

The Chinese government seems to have learned very important lessons from the former USSR and its satellites. They know that a market economy is very important to both the growth and strengthening of their country as well as to their continued hold on power. It was after all empty shelves and empty stomachs that to a large degree brought down most of the Communist world. People love a winner, and as long as the "Authorities" give the people a sense of progress and increasing prosperity, then the people will cling to their breadwinner. They also know that they can not out spend the US in a military arms race. Notice how small their military is compared to the size of their population, and how they're not producing nuclear weapons hand over fist to match our arsenal like the USSR did. A few hundred nuclear weapons will deter us just as well as tens of thousands, so why waste all of that money and human capital building up a huge stockpile.

For now it seems that the Chinese have found a winning formula for fast tracking their way to First World status. If they can maintain it, then the 21st century is going to be a very interesting time to live.