President Obama's personal summit with China's new president, Xi Jinping, at the well-named venue of Rancho Mirage, Calif., covered a wide range of issues, from North Korea to cyber-spying to territorial disputes with Japan and Taiwan, to global climate change. What the meetings did not engage is the fact that China's entire economic system violates the naïve American premise that free markets produce efficient and balanced outcomes. As China has demonstrated for more than a generation, "free trade" is a useful American fantasy, and state-led capitalism is not a contradiction in terms. It is a recipe for hollowing out the U.S. economy in favor of Chinese economic primacy. Nor does capitalism, Chinese-style, logically lead to increased democracy and human rights.