In China, local officials are promoted by pleasing the party with economic results, not by winning votes. This 'mayor economy' creates a dynamic where mayors compete fiercely to support their local businesses and industries, hoping that success will lead to their own political advancement.

Massive, record-breaking infrastructure projects in China are often "vanity projects" driven by local officials' desire for political promotion. The incentive structure rewards party secretaries for creating large, visible projects that boost local GDP and prestige, which they can leverage for advancement within the Communist Party.

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.

The city of Wuhu, frustrated by the arrogance of state-owned auto giant FAW, used windfall funds to independently buy an engine assembly line from the UK. This allowed them to launch their own car company, Chery, completely bypassing the established SOE system.

China's industrial policy mirrors a venture capital model: it funds numerous companies in strategic sectors like EVs and batteries, expecting most to fail. This ensures the few survivors, like BYD and CATL, become world-leading giants.

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.

China incentivizes its regional leaders by allowing them to personally profit from the economic growth they generate. This corrupt system, while flawed, aligns their interests with increasing their region's productivity, making them more effective planners than their counterparts in other systems.

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.