Despite geopolitical tensions, Taiwan's world-leading semiconductor fabs are completely dependent on specialty gases imported from mainland China. An export restriction on a single chemical, like NF3, could shut down the entire Taiwanese chip industry, an often-overlooked vulnerability.

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 is poised to create a microcycle in chemicals by moving up the value chain to compete on quality, not just cost. This will create massive overcapacity and upend a global industry that seems unprepared for the coming upheaval.

China's government designates strategic industries, and provinces subsidize local firms to become national champions. This hyper-competition, while creating overcapacity and unprofitability, forces surviving companies to become technologically superior and globally competitive. The state then helps the winners consolidate and scale.

China is explicitly subsidizing domestic semiconductor firms through its National Integrated Circuit Industry Investment Fund. This state-backed capital is the key driver behind its policy to achieve technological independence and replace foreign companies like NVIDIA.

China's economic model, driven by internal provincial competition, creates massive overcapacity. This is intentionally turned into an asset by dumping subsidized products (like EVs) into foreign markets below cost. The goal is to eliminate foreign competitors, create dependency, and convert domestic economic chaos into international power.

China's government sets top-down priorities like dominating EVs. This directive then cascades to provinces and prefectures, which act as hundreds of competing, state-backed venture capital funds, allocating capital and talent to achieve the national strategic goal in a decentralized but aligned way.

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.

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.