Who’s Laughing Now? China’s Shrewd Planning Paved Way for Manufacturing Dominance

The success of China in a number of areas owes to the country’s unique economic system, unlike anything else in the world.

Among the many adjectives that could be used to describe tech magnate Elon Musk, “humble” is not one of them.

When a US journalist warned Musk in 2011 that Chinese company BYD Auto sought to compete in the electric vehicle (EV) space, the Tesla CEO literally laughed off the prospect.

“Have you seen their car?” Musk asked derisively, adding he didn’t see the upstart manufacturer as a competitor at all.

Some 13 years later, the more relevant question may be whether BYD should view Musk as a threat as China’s EV industry seems poised to dominate the global market.

The numbers are striking. After years of double-digit increases, EV sales in China accounted for 60% of global purchases in 2022. Last year BYD surpassed Tesla in total electric vehicles sold worldwide. One-third of EVs purchased anywhere are BYD cars.

Now, trade barriers against the domestic sale of Chinese vehicles are the primary factor preventing BYD from dominating the US market as well, as the Xi'an-based manufacturer rolls out affordable cars unmatched by anything from Musk. That’s set to change as BYD explores assembling vehicles in North America.

How was BYD able to turn the tide so quickly? The answer lies in smart industrial planning that has allowed China to lead in the manufacture of everything from smartphones to solar panels.

As former Chinese leader Deng Xiaoping pursued economic reform in the 1980s, Western leaders declared victory. Won over by the efficiency and superiority of US capitalism, China had abandoned communist dogma and would soon join the ranks of the “free world,” we were told. With the collapse of the Eastern Bloc, American political scientist Francis Fukuyama claimed human civilization had reached “the end of history,” with the only remaining questions pertaining to minor tweaks and refinements of the free-market system.

Those paying closer attention knew China never abandoned Marxist analysis, but rather sought a contingency that allowed the developing country to access global investment and technology. Offering cheap labor and little regulation, Beijing was able to lure global manufactures eastward, learning Western methods in the process.

Decades later China’s efforts have paid off as the country has built the largest middle class in the world. With trillions of dollars of wealth at his disposal, President Xi Jinping has reaffirmed shared prosperity as China’s guiding principle, claiming the world power will develop into a modern socialist society in the years to come.

“What does any of this have to do with eclectic vehicles?” you may ask. The answer is that China’s success in this area was only made possible by its unique economic system. China threw open the doors to global market forces in the 1980s but maintained the leading role of the Communist Party. As a result, its government is able to quickly and effectively launch new industries through the provision of grants and subsidies.

But China’s newfound financial largess isn’t the only factor at play. State ownership of the country’s largest banks allows leaders to funnel profits towards infrastructure that makes China the best place in the world to manufacture goods. Shrewd planning has allowed the country to maintain its competitive edge even as workers enjoy rising wages.

Additionally, China makes great efforts to ensure its workforce is trained to meet the needs of businesses worldwide. Apple CEO Tim Cook summed up the reason for China’s success in a 2015 interview, noting simply, “It's skill.”

“China put an enormous focus on manufacturing, in what you and I would call vocational kind of skills,” Cook said. “I mean you could take every tool and die maker in the United States and probably put them in the room that we're currently sitting in. In China you would have to have multiple football fields.”

Understanding the magnitude of the country’s growing economic dominance provides insight into why relations between China and the United States have reached almost Cold War levels of hostility. The United States lacks the will or capability to transform its economic system overnight. What it does have is Westerners’ fear of the communist-ruled country, which it can endlessly stoke to enforce sanctions and erect barriers to trade.

It also has a ruthless military and intelligence complex capable of undermining perceived enemies around the globe. “We will coup whoever we want!” declared Musk on X (formerly Twitter) in the wake of a 2019 US-backed putsch in Bolivia that set the stage for Tesla and other Western companies to exploit the South American nation’s vast lithium reserves.

Chinese leaders have made it clear their country will not succumb to the same fate. “The US will not stop the rejuvenation of China,” said the country’s foreign minister recently, warning of the “catastrophic consequences” of US aggression.

War with China’s population of 1.4 billion would indeed make mutually-assured destruction certain. Still the question remains whether the hubris of US leaders will make it inevitable.