But what happens to the failures, especially since they are overwhelmingly subsidized by local governments?
Shanghai (SAIC), Jiangxi (BAIC), Guangxi (GAG), Guangdong (GAC), Hebei (Dongfeng), Beijing (BAIC), and other prefectures are putting tens of millions of dollars in SoEs that cannot compete with BYD domestically, and face preemptive hurdles entering foreign markets.
If these were private players, it wouldn't matter as much because they could be safely shut down, but these are mixed public-private, and this means a lot of misallocated capital due to political considerations.
Ideally, all these prefectures could better utilize that equivalent amount of money building domestic consumption instead - like I pointed to you before, the median household income in China is still around $350-400/mo in 2024, so even with a loan, a cheap class-A vehicle like a Wuling Hongguang Mini is still pricy.
Instead, these players are forced to export abroad leading to unnecessary trade wars and causing other countries to either limit ToTs with Chinese companies, or force Chinese companies to ToT to domestic players abroad.
This is the same story in PV Cells, Analog Chips, Mobile Phones, etc.
>Instead, these players are forced to export abroad leading to unnecessary trade wars
This is very necessary, no reason not to take share from incumbent car makers, especially in RoW markets. ToT domestic players fine (E: as in fine to jurisdictions that, especially ASEAN / more integration), especially with current sanctions/potential, PRC FDI via recirculating USDs, better use now than risk lose later. E2: Let's not pretend PRC trade wars are any less strategic than US trade wars (like semi). PRC EVs sells -> EV piles -> energy infra -> sensors/fusion -> telco.
No worries. We all have lives.
> Some local jurisdictions
It's not some - it's a lot. And a number of these are not wealthy prefectures - Guangxi, Jiangxi, Jillin, Anhui, and Hebei underperform compared to the Chinese average on social indicators and economic health.
The amount of money spent to subsidize EV cars made by GAG, FAW, Dongfeng, Changan, Chery, JAC, etc that most Chinese buyers just don't think about for EVs when they can buy a BYD is staggering, and could be better used by the prefectures I listed to better living standards or further increase consumer spending via DBTs or a better welfare system (which itself has been devolved to prefectures since the 90s).
> This [export] is very necessary
Absolutely, and this is why every major automotive market (US, EU, TR, MX, BR, SK, JP, VN, ID, IN, ZA) has already or is in the process of closing their markets to direct "Made in China" automotive exports (as well as other sectors like renewables, consumer electronics, pharmaceuticals, etc). Why should these countries lose their domestic champions at the expense of Chinese players?
What large greenfield market can Chinese manufacturers directly sell to? And you can't say "Africa" - it's not a uniform market, and Chinese companies face competition from (depending on the region) Turkish, Japanese, Korean, Brazilian, Vietnamese, Indian, Emirati, European, South African, and American competitors.
This is the crux of the problem - the very low median household income forcing players to export.
Either the collective billions in subsidizes are deployed to push Chinese median household incomes to at least Malaysian or Mexican levels (~$10,000/yr) or even Thai levels (~$6,500/yr) in order to consume this excess capacity, or keep burning money subsidizing laggards while alienating foreign markets and partners.
> Let's not pretend PRC trade wars are any less strategic than US trade wars
At a high level it is, but the governance is atrocious. Just look at the First and Second Big Fund for example.
And anyhow, Chinese manufacturers in these sectors then face similar tariffs like EVs in the markets I listed above under NatSec or Dumping grounds, which in turn drives neighbors further into the US camp (eg. VN after the 2011 standoff and the Techo Canal, JP after Senkaku Diaoyu, TW after the 2014 trade war, SK after the 2017 trade war, India after the 2019-20 Galwan crisis, PH after the PoGo scandal, ID and the US CSP, etc).
This in turn means you guys will escalate under the fear of being encircled, which pushes those countries to further up the ante. The same fear Chinese nationalists have about the US is the fear those countries have about China.
Either way, this means China both loses potential economic partners/markets AND exacerbates an arms race.
It didn't have to be this way, but the MFA's and CMC's tone change since 2014 has drastically deteriorated China's relations with it's neighbors.
>It's not some - it's a lot.
It's a lot now, because the race just winding down. It will be some later, if local gov can dig hard enough to eat shit on land finance, they can learn to eat shit on losing out on race for XYZ strategic sectors. Are we going to pretend this initial overcapacity -> cull -> consolidation cycle hasn't happened before? It's textbook. Like bro, it's only been ~5 since capacity explosion ramp, last few years was shaking out winner, it will take a few more years before losers accept they've lost. You're portraying as some long term sunk cost that will never end, when cycle is barely even short term, and local govs are historically pretty good at ditching dead ideas. A few years to adjust course is about as responsive as governance can be. Everyone knows model of "quality growth" = lots of regional hubs up for grabs in many industries PRC wants to compete with western incumbents on, local gov going to ditch dead weight and try to grab the next big thing. And you know what, some are just geographically rat fucked and won't make it.
> staggering
Naw, it's good deal. I surmise you're thinking about CSIS report that overestimates subsidies per vehicle (nvm subsidies are drawing down), a few $1000 per vehicle last few years now made 20k-30k quality vehicle accessible to 10k buyers. Fuel savings on 11k avg annual kms -> EV is ~$400. Proliferating new energy vehicles to 50% market share in short term is going to pay for itself in terms of fossil imports and energy secuirty.
> Why should
They wouldn't, they'll do what they do, and PRC glad to FDI their way, and entrench PRC components into global supply chains. Are you going to pretend all those competitors are on the same cost:value level as PRC? Just randomly making lists doesn't make a compelling argument.
> forcing players to export
Except what are most of the auto export? ICE vehicles, mostly from western manufactures with idle PRC capacity because PRC market not buying their ICE after shifting to EVs. Meanwhile PRC EVs selling abroad at reasonable markup, we're already seeing shifts in ASEAN against SKR/JP leaders. Where's the NEV excess capacity, oh right, it doesn't exist. Most % of NEV prorduced still absorbed by domestic market, less % export vs other automakers.
> consumption
Meanwhile I'm sure know the argument that PRC consumption about OECD average with proper accounting, that western wonks like to ignore to push the lack of consumption narrative. All the while disposable income according to states.gov.cn that you link frequently is growing at health clip YoY. And for whatever reason, you seem to enjoy obfuscating per capita to USD instead of PPP or local currency and use local prices for comparisons. Like it matters BYD dophin sells for 20k USD in malaysia but 10k USD in PRC. Lot's of shit just much cheaper in PRC since PRC producer. Like PRC doesnt magically overtake US on protein consumption because they spend all their money on protein (yes they love pork), but also because they consume a lot of stuff, most stuff just happens to be cheap.
Was First and Second Big Fund attrocious? It seemed so until export controls forced PRC semi to coordinate, and then they realize big funds built a shit load of pieces, but just never connected them. Dumping 500b into semi over ~10 years to setup conditions to move away from 300-400B PER year semi impmorts is fair deal, especially considering how PRC indigenous semi doing last post sanction compared to how CHIPs doing.
> or keep burning money subsidizing laggards while alienating foreign markets and partners.
Again is it burning? Again subsidies phasing out, and actually effective in driving down durable unit cost. Is it alientating foreign markets or partners? Seems like tike most are fine with following PRC JV path, taking PRC FDI, and so far seems like PRC is fine with that arrangment too. Except you know, US whose allergic to anything PRC. Are we also ignoring PRC exports still hitting/maintaining near record levels, including with India. Is it any worse than US spending 5%+ GDP than average healthcare spending for less life span, i.e. ~1.4T annually. Or the aforementioned 700b on fossil subsidies. Is PRC spending a 200B on NEV subsidies that will save trillions in keeping money into PRC compnaies and energy import costs in perpituity... burning money?
In similar lens, was First and Second Big Fund attrocious? It seemed so until export controls forced PRC semi to coordinate, and then they realize big funds built a shit load of pieces, but just never connected them. Dumping 500b into semi over ~10 years to setup conditions to move away from 300-400B PER year semi impmorts is fair deal, especially considering how PRC indigenous semi doing last post sanction compared to how CHIPs doing.
> neighbours
And does it matter if SKR/JP/TW/PH goes into US camp? The point is to bleed the first 3 that are high end export competitors. US security partner gotta US security hedge regardless. That's less an economic battle more a military force balance, one which PRC is increasing gap in theatre. Whose To Lam's first visitor? To PRC. I think blob wank thinks PRC is really interested in playing nice with US partners in region, when PRC see knos no amount of playing nice is going to get US security architecture out of east Asia short of force. In the meantime (peacetime) focus on eroding them as economic competitors. And we can all pretend PRC is making a folley not using carrots when the only real solution, is a much bigger stick.
It was always going to be this way, PRC was always going to move up value chain to compete with tier1 economies/exporters. PRC was always going to move up value chain, it was always going to take a swipe at leading incumbants, and at PRC scale, it's was always going to aim for her disproportionate share of pie. In a world where PRC is adding more skilled workforce than rest of the world combined + going for 11 on involution driven industrial output is also world where PRC is poised to win the arms race. She simply has too much people not to do all these things and still have 100ms farmers/informal economy. There was never going to be anything but (arguably zero sum) fight for many pies.
TLDR We've interrogated this before, I don't find you rehashing latest blob narratives on PRC behaviour compelling. I don't find their conclusions/analysis particularly sincere/unmotivated. Trade numbers seems to show PRC is building lots of economic partners AND winning the arms race. Meanwhile US security architecture straying further and further from what was deemed neccessary (AGILE, NGAD, lol missiles in vietname) while acquisitions/prepositions in theatre by US+co is being out paced by magnitudes by PRC. I sit any wonder defense blob last couple month started referencing PRC as no longer "pacing power" but "past pacing". That's what happens one PRC shipyard builds more than entire US shipbuilding combined.
> You guys
Again, I'm Canadian, like you. I'm just not (a presumably American related/adjacent) recovering policy wonk. Anyway feel free to have last word. You're still a very intelligent posters with IMO very obvious biases, as am I.