Rethinking China’s Industrial Logic

I’ve been researching for a special project lately, and while I’ve always approached China through the lens of business models, I’ve found myself doing a ton more around policy and manufacturing. What’s striking is how much in common there is. Whether it’s platforms or factories, the real gap isn’t just in facts -- it’s in how ecosystems are conceived, built, and talked about inside China vs. how they’re interpreted outside.

Western analysts often dismiss Chinese narratives as propaganda or PR, but that’s a category error. Most of these documents aren’t spin for outsiders -- they’re meant for domestic audiences. Policymakers, company execs, and sources of capital use this language to coordinate, to persuade, to explain strategy, to align on and then take action.

I’ve written below about how China tracks ~20 different metrics to define “manufacturing power,” far beyond just GDP share or cost advantage. That framework may sound convoluted if you’re only looking for efficiency, but it’s extremely internally consistent, and it has immense explanatory power for how the government is guiding the buildout of new sectors.

Take Tesla. I see many Western narratives claim that China “let them in” to learn from them, just like automakers in the 90s or even Apple in the decade earlier. But that’s almost the opposite of the reality,  which reflects decades of evolving state logic on how to engage foreign firms. If anything, JVs with foreign automakers were considered gross failures and even Apple is considered a highly imperfect case study (although that is a dynamic situation that is still shifting).

This kind of misunderstanding reminds me of something more basic: when someone tells you why they did something, and you wave it off because it doesn’t fit your theory. If your goal is to understand how China works and not just judge it, you have to take their internal reasoning seriously. Otherwise, you’re not analyzing. You’re just projecting.

-Rui