Completed Zeekr electric vehicles are inspected at a factory in Ningbo, China, in April 2025. China’s gains in EVs, solar and batteries owe less to a master plan than to political centralization combined with rivalry across provinces and cities.Nick Carey/Reuters
Carl-Benedikt Frey is the Dieter Schwarz Associate Professor of AI & Work at the Oxford Internet Institute and a Fellow of Mansfield College, University of Oxford. His book, How Progress Ends: Technology, Innovation, and the Fate of Nations is on the shortlist for the 2026 Lionel Gelber Prize, presented by the Munk School of Global Affairs & Public Policy.
China has become the West’s most awkward benchmark. In 2013, Liberal Party leader Justin Trudeau said he admired China because its “basic dictatorship” could “turn their economy around on a dime” and decide “we need to go green.” Italy’s former prime minister Mario Draghi has since warned that China spends “around three times as much on industrial policy as Germany or France” (as a share of GDP). The fixation on China is understandable. But before the West tries to copy China, it should be clear about what it is trying to copy.
The usual story is that an all-seeing state picks champions and subsidizes their way up the value chain. In practice, China’s edge has often come from something closer to the opposite: institutions that force provinces, cities and firms to compete, with the centre acting less as engineer than as referee and disciplinarian.
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Deng Xiaoping’s cat that “catches mice” captured the shift: results over doctrine. Beijing stopped micromanaging and set broad goals – catch up technologically, expand exports, create jobs – while letting local governments scramble to deliver. Special economic zones were the proving ground. Shenzhen and other cities were fenced-off experiments where officials could loosen rules, court foreign capital and improvise fixes without rewriting the national system. What worked was scaled; what failed was contained – try locally, copy nationally.
The result was an industrial policy that looked more like a tournament than a blueprint. Instead of anointing one champion, China let provinces and firms chase the same prize in parallel. It can look like duplication; in practice it functions as selection: many bets, hard tests, fast diffusion of what works.
Industrial policy delivered productivity gains when it intensified competition – spreading support, encouraging entry and refusing to shield laggards indefinitely. China did best when policy made markets tougher, not cozier.
That rivalry is institutionalized. China runs a promotion race: provincial and city leaders rise or stall on measurable outcomes such as investment, growth and jobs. That turns local governments into competitors. As the political economist Xu Chenggang argues, it is “regionally decentralised authoritarianism”: Beijing controls personnel and direction, and localities are judged on delivery.
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You see the logic in the industries now shaping geopolitics. China’s gains in EVs, solar and batteries owe less to a master plan than to political centralization combined with rivalry across provinces and cities. In EVs, local governments bid for plants and add inducements; competition has become so fierce that Beijing frets about “irrational” price wars. Solar followed the same trajectory, and the pattern is reappearing in AI as energy-rich regions lure data centres with cheap power and other inducements.
Scale amplifies the effect: China’s market is big enough to sustain many rivals in the same sector, so rivalry coexists with size – and Beijing reinforces pressure by keeping multiple state firms in key industries rather than collapsing everything into a single champion.
Could the United States, Canada or Europe replicate this? Not in any straightforward sense. China’s model is inseparable from a one-party cadre system that can appoint and reshuffle local leaders, tying careers to targets.
In contrast, Western industrial policy often mutates into incumbency protection rather than a competition engine. In pluralist systems, the easiest cheques to write go to firms with large payrolls and powerful lobbies. “Strategic” becomes whatever the best-organized interests can defend – and subsidies meant to build tomorrow’s capacity end up preserving yesterday’s structure.
The lesson is not that authoritarianism beats markets. At its best, China’s industrial policy behaves less like central planning than a state-enabled pressure cooker: rivalry across firms and provinces, with the centre steering, rewarding and occasionally reining in excess. Copying subsidies without incentives will disappoint.
For Western governments, the task is not to mimic China’s tool kit or retreat into techno-nationalist fortresses, but to make their own economies more contestable. The test should be simple: does policy widen entry and rivalry, or entrench incumbents?
China did not become an industrial superpower because it always picked the right winners. It rose by forcing provinces and firms to fight for the prize – and rewarding those who delivered. Democracies cannot replicate that politics, and should not want to. But they can replicate the principle: industrial policy that shelters incumbents will disappoint; industrial policy that backs challengers and subjects them to real competition has a chance.