A Chinese city with no display industry bet $500 million on a screen manufacturer. Another courted Taiwanese businesses with cheap land, familiar restaurants and 40 Taiwanese television channels. Shanghai helped Tesla go from construction to car production in less than a year.
These deals reveal how China built its industrial power, argue Robin Rivaton and Ben Southwood: through competing local governments whose leaders have money, authority and careers riding on growth.
“Imagine if Y Combinator owned and ran San Francisco,” they write in an article.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
Rivaton, a tech founder and author of Why China Will Run the 21st Century, and Southwood, an editor at Works in Progress, describe cities operating like investment firms. They back companies, clear obstacles and collect returns through equity stakes, taxes and rising land values.
The $500 Million Gamble
In 2008, Hefei invested $500 million in BOE Technology, then the world’s ninth-largest LCD manufacturer. The city supplied land, utilities and capital, committing almost a tenth of its annual revenue.
BOE became the world’s largest display-panel manufacturer, making roughly a quarter of smartphone screens worldwide, the authors write.
Hefei subsequently backed electric-car maker NIO and chipmaker CXMT. Over the decade to 2023, its roughly $25 billion in public investments generated reported earnings approaching $9 billion.
“Beijing set a prize, and local bureaucrats competed to win it,” they write.
Officials compete for promotion too. The article cites research finding that those delivering growth 3.3 percentage points above their predecessors were 40–50% more likely to advance.
A Factory In Months, An Industry Around It
Shanghai offered Tesla grants, cheap loans, tax concessions and discounted land. Construction began in January 2019. Production started that December.
Kunshan pursued an entire business community. Its officials accommodated Taiwanese companies with schools, restaurants and television channels, alongside inexpensive industrial sites. By the late 2000s, the city made half the world’s laptops, according to the article.
The concentrations extend far beyond electronics.
Shaodong produces 70% of the world’s disposable cigarette lighters; Danyang manufactures half its spectacle lenses; Zheng’an makes roughly one in seven guitars.
Nearby suppliers and experienced workers let newcomers develop products quickly. The authors cite Bambu Lab, which brought its first 3D printer to market in 22 months and reached $1.5 billion in revenue within five years.
Who Pays For The Bets?
Chinese savers help fund the machine through low deposit returns and restricted overseas investment options, the authors argue.
Cheap capital also finances excess. China’s car industry could produce 55.5 million vehicles annually in 2024 but used only half that capacity, they write.
Growth targets have encouraged inflated statistics, while powerful officials have attracted corruption.
Their comparison is with postwar America, when ambitious city leaders built airports, roads and housing to attract business.
“The lesson from China’s economic miracle is not that the West needs a new economic model,” they write. “It needs its old one.”
Essential Business Intelligence,
Sharp Market Insights,
Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
