China's rise in industry is propelled by commercialization rather than subsidies - and the West lacks a response to this.

      **TL;DR** The Western discussion regarding China’s industrial growth focuses heavily on subsidies, but the true catalyst is commercialisation: the capability to rapidly transition technology from the lab to the global market, outpacing any rival. Over two decades, government VC funds have invested $184 billion in AI companies, yet the real success of firms like BYD, CATL, and DeepSeek lies in competitive domestic environments rather than centralized planning. China's R&D expenditure has eclipsed that of the U.S., and the Made in China 2025 initiative achieved 86% of its objectives, while the 15th Five-Year Plan reinforces this model. The critical inquiry has shifted from whether the Chinese government subsidizes industries—something every significant economy does—to understanding why China’s subsidies foster globally competitive companies compared to Europe’s outcomes, such as Northvolt.

      The ongoing Western debate about China's industrial ascendance continually revolves around the extent of government subsidies. Investigations by the European Commission into Chinese electric vehicles, solar panels, and wind turbines have resulted in tariffs that attribute China's competitiveness primarily to government financial support. Similarly, the U.S. Treasury and Commerce departments have implemented duties and export restrictions based on this premise. While politically advantageous, this perspective is incomplete. Subsidies certainly play a role, but they are not the most compelling aspect. The key focus is on commercialisation: the capability to scale existing technology, whether domestic or imported, to achieve global competitiveness quicker than any other economy in history. This unique ability, rather than the subsidies that support it, has proven elusive for the rest of the world to replicate.

      **The Shift**

      Chinese officials characterize their industrial transformation as a move from the "old three" exports—textiles, furniture, and home appliances—to the "new three"—electric vehicles, lithium-ion batteries, and solar panels. This transition is tangible. By 2025, clean energy contributed over a third of China’s GDP growth. In March 2026 alone, Chinese companies exported a record 68 gigawatts of solar panels, double the amount from the previous month and 49% above prior records. Battery exports also reached $10 billion that month, with fifty countries breaking records for imports of Chinese solar products. The "new three" accounted for two-thirds of the value added in China’s clean energy sector and attracted over half of the investment in these fields.

      The sheer scale achieved is a result of production, not merely subsidies. BYD delivered 4.54 million new energy vehicles in 2025, while CATL claimed 39.2% of the global EV battery market, with BYD contributing an additional 16.4%. Six Chinese battery manufacturers collectively held 69% of global installations. Meanwhile, Europe accumulated seven billion euros' worth of Chinese solar panels in warehouses—sufficient to power 20 million homes—because local manufacturers cannot compete on price. Currently, China produces four out of five of the world’s photovoltaic cells. This dominance arises not from a single subsidy program but from a rapid system that transitions from laboratory development to global market presence faster than any competitor can react.

      **The Machine**

      The mechanism propelling China’s industrial ascent is often mischaracterized as innovation. It does not align with the Silicon Valley notion of innovation as creating something entirely new; rather, it refers to commercialisation: the ability to take existing technologies and produce them at large scale, with constant improvements, supported by a sufficiently large domestic market that can absorb initial failures. The synergy of market size, integrated supply chains, patient state financing, and intense domestic competition among private firms has created an exceptional commercialisation engine.

      Between 2000 and 2023, government venture capital funds reportedly invested about $184 billion in nearly 10,000 AI-related companies. While a significant amount, this funding has been spread out over two decades and many firms, rather than being directed towards a single national champion. It represents a financing ecosystem that nurtures numerous competitors, allowing them to vie for market share and observing which companies emerge successful. The leading firms, such as BYD, CATL, Huawei, and DJI, are not products of state planning but rather outcomes of state-funded competition—an entirely different structural reality.

      DeepSeek’s recent launch of its V4 model using Huawei’s Ascend chips exemplifies this pattern. DeepSeek trained its earlier V3 model for approximately $6 million—only about 3 to 4% of what OpenAI spent on GPT-4—achieving comparable performance not through greater resources but through efficiency derived from constraints. U.S. export controls limited China's access to Nvidia's highest-performing chips, compelling DeepSeek to adapt by rewriting its code for Huawei's CANN framework, culminating in the release of an open-source model that competes effectively at the cutting edge. The discussion around subsidies is largely irrelevant; what matters is how a company subject to technological restrictions developed a competitive AI model at a significantly lower cost.

      **The Numbers