Xiao Ma and Fengming Lu argue local government partnerships, not Beijing's top-down planning, drove China's EV boom

Key takeaways: China's EV success isn't a top-down planning triumph you can replicate with "industrial policy." It's the emergent product of decentralized competition, regulatory arbitrage, and local-private alliances—messy, risky, and very hard to copy.

Please see more details in our latest @TheChinaJournal paper "The Rise of China's Electric Vehicle Industry: Strategic Alliances Between Local Governments and Private Capital." https://doi.org/10.1086/741394

🚗🔋 Many think Beijing masterfully planned China's EV takeover. Fengming Lu (@ANUBellSchool ) and I spent 3 years and 60+ interviews finding out what actually happened in our latest article @TheChinaJournal. A thread 🧵

How capitalism thrives in China despite the central government.

In 2014, the top 10 automakers in China were ALL state-owned or state-foreign joint ventures. By 2024, BYD, Geely, Chery, and other PRIVATE firms dominate. How did an industry rigged for SOEs get flipped by private entrepreneurs? That's the puzzle.

Some examples: Wuhu sold a cement factory for 200M yuan, bought a used Ford engine line from the UK, poached engineers from state giant FAW, and reverse-engineered a VW platform. That scrappy startup? It became Chery—now China's #2 automaker.

This isn't just about EVs. We find the same pattern in steel and pharma—central policy favors large SOEs, local governments ally with private firms to circumvent barriers, and private capital ends up dominating. It's a recurring structural logic in China's political economy.

The standard narrative: Beijing picked winners, poured in subsidies, and created EV champions. We show that this is largely a misperception--Central policy actually BLOCKED most cities and private firms from the auto industry for decades.

The real engine? A triangular dynamic between central constraints, local government ambition, and private capital's agility. Hundreds of cities—shut out of lucrative SOE joint ventures—formed underground alliances with private automakers to build their own industries.

@maxiaoalex @ANUBellSchool @TheChinaJournal My modeling of your model

Geely started making cars in the 1990s WITHOUT a central government license. Zhejiang Province backed it anyway. When Geely acquired Volvo in 2010 for $1B—10x its annual profit—central policy banks refused to lend. Local governments and Goldman Sachs filled the gap.

The dark side: this model also produces massive overcapacity and spectacular failures. One county invested 6.6 billion yuan in "Sailin," an EV startup linked to US sports car brand Saleen. It produced almost no cars. Chinese leader warned cities against blind EV bets in 2025.

The 2020 turning point: NIO was nearly bankrupt. Beijing passed on it. Then Hefei bet 7 billion yuan at NIO's lowest stock price. The investment doubled in months. The "Hefei Model" triggered a wave of city-level EV investments across China.

Even cities WITH big SOEs started backing private rivals. Guangdong poured billions into XPeng because officials doubted their own state-owned GAC could lead the EV transition. Beijing shifted support from BAIC to Li Auto and Xiaomi. SOEs were too slow.

The irony: Mao-era industrial fragmentation—130 automakers making a few thousand cars each—was exactly what central planners tried to kill. But that fragmentation gave hundreds of cities the infrastructure and ambition to bet on EVs decades later.

@harish7u @maxiaoalex @TheChinaJournal @harish7u Hi! please find the unroll here: https://threadreaderapp.com/thread/2062910018840854722.html Enjoy :) 🤖

@maxiaoalex @TheChinaJournal @threadreaderapp unroll

@maxiaoalex @TheChinaJournal @threadreaderapp unroll

@maxiaoalex @ANUBellSchool @TheChinaJournal this cant be true. i know for sure China had this masterful plan, written and etched on a 5000-foot-tall giant rock 4000 years ago, after having secretly decided to destroy the west, US in particular. 🤓

@maxiaoalex @ANUBellSchool @TheChinaJournal think @kyleichan would find this useful