To circumvent a state-controlled banking system that favored SOEs, private Chinese automakers sought capital abroad. Brilliance Auto's 1992 IPO on the NYSE, which raised $70 million, occurred five years before even tech giant TSMC went public overseas.

The city of Hefei's government saved the struggling EV startup NIO with a $1 billion equity investment. It later sold its stake for a 3-4x return, creating the "Hefei Model." This success spurred a nationwide trend of local governments acting as venture capitalists, fueling massive investment and overcapacity.

Contrary to common belief, China's EV dominance wasn't a top-down mandate. It grew from a mix of entrepreneurs and local officials using personal connections (guanxi) to circumvent regulations and state-owned enterprises, leveraging private and foreign capital.

Unlike the U.S. government's recent strategy of backing single "champions" like Intel, China's successful industrial policy in sectors like EVs involves funding numerous competing companies. This state-fostered domestic competition is a key driver of their rapid innovation and market dominance.

In the 1990s, while governing Fujian province, Xi Jinping circumvented strict quotas on foreign auto joint ventures. He partnered with a Taiwanese firm and argued to Beijing regulators that it was a domestic venture between two Chinese provinces, not a foreign partnership.

The central government maintains a strong bias toward state-owned enterprises (SOEs). Private firms like Geely were only given the green light for major overseas acquisitions, like Volvo, after all preferred SOE suitors had officially declined the opportunity. Beijing offered approval, but no financial help.

Contrary to the view of a monolithic state, China's economic strength comes from intense competition between its provinces. This hyper-local market forces companies to become incredibly resilient, and only the strongest, like BYD, survive to dominate globally.

For Chinese officials seeking promotion, establishing a major automaker is a significant political achievement. It serves as a tangible "deliverable" to demonstrate economic stewardship to their superiors. Both Xi Jinping's and Li Qiang's careers feature major automotive project successes.

China uses a systematic four-step process to dominate industries. First, it subsidizes over 100 entrants. Second, it allows intense domestic competition to find the strongest. Third, it consolidates all subsidized manufacturing capacity under the few winners for free. Finally, it unleashes these champions to conquer global markets.