From China's perspective, producing more than it needs and exporting at cutthroat prices is a strategic tool, not an economic problem. This form of industrial warfare is designed to weaken other nations' manufacturing bases, prioritizing geopolitical goals over profit.

China's airline industry, despite persistent losses, is a surprising beneficiary of the "anti-evolution" strategy. The sector doesn't suffer from seat oversupply, and strong regulatory coordination, rather than capacity cuts, could drive a significant turnaround.

China's policy to combat deflation focuses on cutting excess industrial capacity. However, this is deemed insufficient because the root cause is weak aggregate demand. A sustainable solution requires boosting consumption through social welfare, an approach policymakers seem hesitant to implement on a large scale.

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.

China’s economic strategy prioritizes technology and manufacturing competitiveness, assuming this will create a virtuous cycle of profits, jobs, and consumption. The key risk is that automated, high-tech manufacturing may not generate enough jobs to significantly boost household income, causing consumer spending to lag behind industrial growth.

In an era of financial repression and heavy government intervention, the most effective investment strategy is to identify sectors receiving direct government support. By positioning capital near these "money spigots," investors can benefit from policies designed to manage the economy, regardless of traditional market fundamentals.

While the U.S. AI strategy pursues a 'winner-take-all' model leading to high profits, China's state-backed approach aims to commoditize AI. By spreading resources across many players to create a low-cost, replicable model for export, it structurally limits the potential for monopoly profits to accrue to shareholders.

China's economic structure, which funnels state-backed capital into sectors like EVs, inherently creates overinvestment and excess capacity. This distorted cost of capital leads to hyper-competitive industries, making it difficult for even successful companies to generate predictable, growing returns for shareholders.

China's campaign against "evolution" (excessive competition) is not a broad economic stimulus. It specifically benefits sectors like EV batteries, steel, and cement where state control or rapid market consolidation can restore pricing power and profitability.