I’ve been listening to the latest podcast from Dwarfish Patel in which he’s interviewing Arthur Kroeber (“China’s Manufacturing Dominance: State Directives & Ruthless Competition“).
One of the topics discussed is how “China recognized that pretty much every other country that had gotten rich had done so in large part by building up an automotive industry that then served as the mechanism for creating innovations in other sectors. … They said, “We have to have a big auto industry. This is one of the key industries that we have to support.””
Kroeber goes on to describe how China opened up to enabling 50/50 joint ventures between Chinese auto companies and foreign auto manufacturers.
While that worked initially, eventually it became clear that to really enable globally competitive auto manufacturing in China there had to be another solution.
That solution was allowing Tesla to come into China in 2018 and build a Gigafactory in Shanghai. In so doing, China allowed a globally competitive auto manfacturer (Tesla) to effectively compete with local Chinese companies and, in so doing, create the need for those local Chinese companies to compete much more effectively with a global player like Tesla.
It’s a fascinating story. One of the other discussions in the early part of the interview involves how the U.S. might consider doing that in reverse – allowing Chinese companies to come into the U.S. market and through competition educate American companies so that they improve their globally competitive position. Politically impossible in the current climate – but an obvious idea based upon the Chinese experience.
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