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Frank Chen

Adaptability and partnerships between local authorities and private capital have fuelled the rapid ascent of China’s electric vehicle (EV) industry, not simply Beijing’s headline-grabbing industrial policy, according to a new study.
As private EV makers in the world’s second-largest economy overtake state-owned carmakers and make formidable inroads into overseas markets, including Europe, the research found that Beijing’s industrial policy and subsidies played only a limited role in their success.
The paper, by scholars from Peking University and the Australian National University, challenges the view prevailing in Europe that China’s EV boom was the result of central government intervention. Instead, Beijing’s policies initially constrained private players, the authors argued – a conclusion that comes as the Chinese and European Union trade chiefs begin talks amid fraught economic ties.
“Local governments forged alliances with private manufacturers, leveraging capital markets and policy loopholes,” said Lu Fengming, an assistant professor in the Department of Political and Social Change at the Australian National University, and Ma Xiao, associate professor of political science at Peking University, in the study.
“These partnerships proved pivotal to China’s EV take-off, enabling private firms to outcompete SOEs.”
According to the paper, this success rested on the ability to navigate a policy environment that favoured state-owned enterprises. The researchers examined how local officials cooperated with private firms in pursuit of investment, industrial upgrades and economic diversification. These partnerships drove the rise of Geely, Nio, Xpeng and BYD, helping them beat both SOEs and foreign rivals in innovation, responsiveness and market reach.


That dominance, however, was far from guaranteed. Private carmakers initially struggled to gain a foothold as Beijing steered funding towards state firms, the researchers said in the paper.
“From the mid-2000s onwards, China pivoted towards a more state-dominant model. State credit and subsidised loans continued to favour SOEs. This bias became more pronounced as China transitioned to new energy vehicles in the late 2000s,” Lu wrote.
“During the 10th and 11th five-year plans, nearly all recipients of Ministry of Science and Technology seed research grants for EVs were SOEs.”
The fact that private firms still managed to survive – and then thrive – in a tightly regulated, SOE-dominated industry ultimately came down to local dynamism, according to Ma.
“Local governments and private capital formed durable alliances confronting restrictive regulation, bias towards SOEs, technological competition and innovation under profound market uncertainty,” he wrote.
Geely’s rise in Zhejiang province was one such example. The company began producing sedans in 1999 without a central government licence. But to promote local growth, provincial authorities backed production until the company secured formal approval from Beijing.




Local officials again rallied in 2010, when Geely moved to acquire Volvo for more than US$1 billion as part of its global expansion. Denied financing by major policy banks, the company secured funds through alternative sources: China Construction Bank’s Zhejiang branch and the governments of Chengdu, Zhangjiakou, Daqing and Shanghai’s Jiading district all stepped in to offer support.
Similar patterns emerged more recently after Hefei’s high-profile equity investment in Nio in 2020 after incumbent SOEs were slow to respond to sweeping technological shifts. Since then, Guangdong had taken a 2 billion yuan (US$294.3 million) stake in Xpeng, according to the study, while Ningbo had invested 10 billion yuan in Zeekr, the premium EV brand owned by Geely.
While acknowledging the stark differences in local governance between China and the United States, Lu said comparable local dynamism and innovation were also present in America, but not across Europe – something he believed Brussels should reflect on.
“The EU’s actions regarding Chinese EVs stem from a panic about Chinese exports. While criticising China’s industrial policies – even though Germany and others are also supporting large companies like VW with preferential measures – the EU should reflect on why it fails to encourage innovation,” he said in an interview.
Lu added that Beijing now had to address hurdles facing Chinese firms in Europe, including tariffs and other forms of trade protectionism, in its engagements with the EU.
European officials are expected to raise these issues with Commerce Minister Wang Wentao when he arrives in Brussels on Monday, arguing that the economic relationship had to be rebalanced. Beijing, meanwhile, has signalled opposition to any trade-defence tools and has warned it would retaliate.


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The new research comes as the Chinese and EU trade chiefs meet in Brussels to discuss trade tensions fuelled, in part, by electric vehicles


The new research comes as the Chinese and EU trade chiefs meet in Brussels to discuss trade tensions fuelled, in part, by electric vehicles.


China’s EV boom driven by local governments, not Beijing’s industrial policy, study finds

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The new research comes as the Chinese and EU trade chiefs meet in Brussels to discuss trade tensions fuelled, in part, by electric vehicles

The new research comes as the Chinese and EU trade chiefs meet in Brussels to discuss trade tensions fuelled, in part, by electric vehicles