When Planning Meets the Market: Industrial Policy and Electric Vehicles in China

• In Event: The State and Its Infrastructure Fantasies: Domestic and International

Abstract

Over the past decade, the implementation of industrial policies helped midwife the miraculous development of electric vehicles (EV) in China. The rapid growth of EVs has reshaped automotive markets both domestically and internationally, with salient geopolitical and geoeconomics implications. Indeed, according to a report from Center for Strategic & International Studies, China’s EV market accounts for 60% of new vehicle registration and 40% of the global stock. This paper explores the factors and actors that most decisively shaped this growth trajectory. In so doing, this paper explores the following analytical questions. First, why the Chinese EV sector became globally dominant? Second, what motivated the development of the sector and its complementary infrastructures. Finally, what kinds of industrial policies were introduced and how do they improve our understandings of state-market relations in China? We argue that this particular developmental path is similar to that of China’s high-speed railway industry. One key distinction, however, is that the consumers of the former are ordinary people, in contrast to the state-owned enterprises which are the primary consumers of the high-speed railway industry. Therefore, the Chinese EV industry showed a unique combination of authoritarian central planning fused with market competition. Through both administrative guidance and creating market signals, the deployment of industrial policy successfully shaped the market incentives in the demand side and simultaneously fostered the development of complementary sectors. This includes the massive and rapid expansion of upgrades of infrastructure development that could support the growth of EVs. These infrastructures have become increasingly pervasive in the domestic setting. In turn, these policies helped China becoming a manufacturing and export hub for domestic and international firms. More importantly, this experience suggests that the Chinese EV market could be anything but a natural occurrence—as its establishment was carefully calibrated against the backdrop of shaping China to become an innovation powerhouse and promoting green development.

Author

• Karl Yan, Chinese University of Hong Kong, Shenzhen