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Deep Dive: China’s Industrial Might and Domestic Policy About 6 months ago, after an eye-opening dinner with two CEOs building an American supply chain for EV battery materials and rare earths, I posted on X: “The difficulty in beating China won’t come down to tariffs but mercantilism. The Chinese have 1-2 ‘National Champions’ for critical parts of the global economy.” With further research, I want to expand on what China’s industrial playbook has been. Beijing doesn’t simply pick “National Champions” and back them with unlimited capital. That would be highly inefficient - the Soviets tried it and, broadly speaking, failed. Part of what separates modern-day China’s state-backed model from the Soviets is decentralization. Beijing designates an industry a “national priority”. It then instructs its 31 provincial governments to nurture that industry by backing over 300 prefecture-level governments. These 300+ prefectural governments compete against each other in what you could think of as a national tournament. An illustrative but imperfect analogy could be to imagine the prefectural governments as state-guided VCs. They deploy a lot of capital and most of the companies they back fail, but some winners emerge too. This tournament-style competition creates some national champions (like BYD), but it also generates problematic overcapacity. Fiscally, China’s large investments are reflected in its debt-to-GDP ratio. Officially, China’s government debt sits at 96.3%. But this “official” number leaves out the huge debts of local government financing vehicles (LGFVs), which borrow off-budget to fund infrastructure and industrial projects. It also excludes the large debts of state-owned enterprises and the rising liabilities of households. Taken together, these shadow obligations make China’s debt burden far larger than the headline government figures suggest. At the same time, China has considerable assets: The country now has one of the world's best transportation networks, busiest ports, manufacturing capacity, high voltage transmission lines, and digital infrastructure. It built more solar energy capacity in 2024 than the U.S. has in total. China added more robots per capita than any other country from 2018 to 2023. This is just a shortened list of what China has going for it. However, there are several massive forces pulling it down (demographics & fleeing capital just to name a few). So how did a country once known for cheap toys and textiles leapfrog into EVs, solar, and AI? Can China sustain growth under mounting debt, demographics, and political centralization? How does China's coordinated approach to tech development compare to the West's market-driven competition? These are macro questions I wanted to explore and answer in our 168-page China Deep Dive inside Learn with Me. Learn with me here: https://t.co/bW0eSzTPgx