Kyle Chan On Chinas Industrial Power And Entrepreneurship

TITLE: Kyle Chan on China’s industrial power and entrepreneurship | Subtext by Zerodha CHANNEL: Markets by Zerodha DATE: 2026-05-08 ---TRANSCRIPT--- Every day the straight of hormuz is closed and the Iran war continues is like a month’s worth of free marketing for Chinese EVs and batteries and solar and clean tech.

Is it fair to expect them to sort of double down in sort of the wake of what’s happening in the straightup hormones? The oil shocks of the 1970s and how even when oil prices came back down actually left a structural effect on the entire global economy. How do you see a world where Chinese FDI into India sort of increases benefits both sides without sort of having the geopolitical implications? Chinese companies could overtake on the curve. This is like a very common like business term in China. Hi folks, this conversation is with Kyle Chan. In many of our past daily brief stories that cover China, chances are that we’ve referred to his work. He runs an excellent popular newsletter called High Capacity where he delves into the Chinese economy, Chinese industrial policy and manufacturing and the relations between the US and China today. He has been interviewed by international media outlets like the New York Times, Harvard Business Review, BBC, the Financial Times and so on. Currently, he is a fellow at the Brookings Institutions China Center and holds a PhD in sociology from Princeton University. Our chat of course is about understanding China’s manufacturing prowess, the factors that drive it, what Chinese entrepreneurship looks like, and how it’s wielded as a geopolitical power from time to time. Each question was its own deep exciting rabbit hole that Kyle took us through in vivid detail. But that also meant that unfortunately many other questions were left unass on our end this time around. We hope you enjoy the sheer depth if not breadth of this conversation. Kyle, thank you so much for joining us uh from a completely separate time zone, entire worlds apart. We at market are huge fans of your work. Honestly, sural to be speaking to you. The first question is not necessarily economic or industrial policy related maybe. But it’s a question that I think people keep wondering. I have kept wondering which is that in China entrepreneurs seem to operate in a very different social and political context, right? and all entrepreneurship to a degree works in certain social and political contexts, right? What do hero stories of entrepreneurs sort of sound like in China? What is it that exactly gets rewarded in sort of the Chinese system, which also we’ll be delving into? Yeah, that’s a really interesting question. Um so I don’t think that there are many of these hero stories where the entrepreneurs have gone around the system and I think like that’s also a more popular theme in the US where you have like the disruption idea you know move fast break things I think that there are reasons why in China that is not as acceptable and we can come back to that in a second. So for uh Chinese tech entrepreneurs especially the idea is like if you tackle a really hard problem or able to scale the business really really quickly you know like the more sort of like barriers you were able to overcome and especially this idea of like grinding I mean it’s like a very I guess it’s also big in Silicon Valley too but just like really heavy emphasis on uh how hard you work like sheer effort it’s like you know for better or for worse it can it can definitely go way overboard in terms of like then demanding hours out of your team that are like inhuman but that that is like a big part of it. So like yeah getting over and also this is maybe true across many different countries but the underdog story right especially I think when it comes to the comparison with the American competitors this idea that like for a lot of Chinese tech founders they’re like an underdog to their compared to the like Chinese big tech companies like Alibaba or Tencent but then also they’re underdogs relative to like the global big tech which is a lot of that is American big tech. So yeah those are some of like the elements. Um yeah, I mean it’s there’s there’s so many interesting like cultural quirks and then there’s structural reasons too and there’s like idea of like disrupting um government policy is is like a no no. It’s like you know you’ve seen cases where some of the entrepreneurs have been more outspoken like Jack Maw um or the head of bite dance and have gotten more than a slap on the wrist for that has had a ripple effect on the whole culture and so people don’t want to go against the system. If anything, they want to show how much they’re working, you know, in line with China’s national priorities. That’s a great answer. And um why I sort of asked you this question is because I very recently read House of Huawei. Oh yeah, amazing book. I think one of my favorite pieces was by Kevin Zu where he wrote about Hang Chuan Fu. Please correct me if I’m wrong. Uh but I was very enamored by the story of Wang Chanfu and broadly the story of BYD. Right. Yeah. Yeah. To what extent are say the go-to market strategies of companies like Huawei or BYD, right? Like Huawei has the famous infamous rather sales wolfpack so to speak, right? Where they supposedly borrowed like some playbook out of [snorts] uh Maong to sort of market uh their technologies, right? How much of these go to market strategies of different Chinese firms, the biggest ones driven by sort of individual firm level decisions versus the broader structural stated driven ecosystem that they sort of operate in? Yeah, I think that’s a really interesting question. I think it depends on kind of like where you stand in the system. So there are as you probably know uh in China like these big stateowned enterprises and they play a huge role in the economy and they’re sort of like the giants in the room and when it comes to like the auto industry there was like a very very strong bias. I mean basically for a long time you you could not basically start your own private auto company. You needed to go through the state automakers. it was very tightly controlled and actually it was companies uh some companies outside the system like Cherry and Gile that kind of broke the rules um and were able to kind of sneak past and you know set up an auto plant um and then they ended up becoming like a new generation kind of before BYD but after like the old state own enterprises of um China’s growing auto industry but then you have players yeah so you have some players that are like more on the outside and then their strategy I would say is partly one where they’re trying to like creep around in the margins when they’re not like immediately brought in. And actually, Huawei, ironically, was one of those companies. Like today, we think of Huawei as being like the center of the storm, deeply aligned with China’s national priorities, deeply aligned with like Chinese political leaders. There’s like so many photos of like um you know uh Huawei uh uh and Renjungf with um Chinese political leaders, you know, uh jointly selling Huawei gear abroad. So that’s what we think of today. But early on, Huawei was sort of an outside player trying to get in on the game in China. And so they tried to pursue this strategy of sort of like targeting um you know, smaller markets, local governments um maybe knowing that they you know had an uphill battle. And BYD kind of similar too, right? They really started like with the very very cheap, you know, kind of almost like laughed at uh cars when they were starting off. Globally, it’s interesting. They follow a similar strategy, right? they’re not going to go straight for like the American market, you know, telecom gear or for the automotive market. Um, they know that that’s like that would be the holy grail in terms of like uh revenue but and profitability, but that is a distant dream. And instead they begin by targeting, you know, countries in the global south, maybe markets that are more similar to China’s, Southeast Asia, Asia more broadly, uh maybe Latin America, Africa, and then and then maybe starting to enter into the European market and then maybe the US last. So you see this happen again and again where it’s like, you know, knowing that you can’t jump straight to 100, you you see them go sort of around the margins and gradually work their way up. And of course, it doesn’t always work, right? Sometimes they end up being stuck where they are. And sometimes being stuck is actually not so bad because global market is pretty huge. So even if you don’t make it to the US eventually if you are able to sell to virtually every other country that’s not bad either. Makes sense. As Chinese firms sort of globalize as they sort of look to other markets to sell, right? Does their model of whatever marketing model that they followed earlier, does that sort of translate well or do they have to do they find themselves pivoting really hard to sort of figure out how to sell in a different market? Right. like as a very wild example it it’s going to be like an uphill battle for any Chinese brand EV brand not withstanding say whatever um regulations are there currently for a Chinese EV brand like BYD or Gil to sort of sell in India immediately there’s it’s the entire idea of a Chinese good here is sort of under question. Yeah. Yeah. So that’s a really important point. One big thing is just how does that market view Chinese goods and and the the made in China brand and it can be a neutral thing for some countries but for a lot of countries it is a liability and it is a kind of like stigma that Chinese companies have to um like work against and so either that could be and it could be multiple dimensions too. It can be on the security front um or it could be on the quality front and probably for most consumers you know in the US uh in India there’s like a long-standing association with like lower quality you know cheap Chinese goods um and then maybe more recently uh there’s a greater concern about security issues and maybe that’s for more high-tech goods anyways but um overall that presents like a already kind of a steep uh initial uphill um battle that Chinese companies have to deal with and then on top of that um so in some cases they they kind of circumvent that and like MG um the uh the automotive brand um is owned by uh uh sic which is a Chinese state automaker and so that’s sort of one way it it looks like a British brand maybe to some to some consumers but that can be one way around it but another factor even beyond just the China label is the differences in the cultures the markets the customers and in some cases um Chinese companies are able to understand emerging markets better than maybe even some of their uh American or European competitors because they know what people really want. Um at the same time though when they’re adapting especially for um you know looking beyond the Asian markets um there can be a lot of interesting friction points uh and learning curves along the way. One example is you know for the electric vehicle market within China a lot of people buying EVs many of them are younger firsttime car buyers and they might be used to like buying smartphones and consumer electronics and expect a degree of software integration and you know fancy features in their cars and so Chinese EV companies are like catering to some of that uh domestically but then when they go abroad right it it might be other variables that are more important it might be I don’t know um uh like an association with reliability or or safety ratings or things like that and they need to then cater to those tastes and in fact maybe consumers in the US or Europe maybe they wouldn’t want so many fancy features they just want a car that works. [laughter] So there’s like all sorts of ways they need to adapt depending on the market depending on how big the cultural uh difference is between the sort of Chinese consumer market and wherever they’re heading next. I recently saw an ad for Xiaomi Xiaomi phone that advertised a 200 megapixel camera and in India phone camera quality is like one of the biggest sort of attractive features that any sort of Indian user smartphone user sort of looks at and that’s sort of partly why brands like HPO Vivos Xiaomi have sort of seen a lot of success. Yeah. Oh, Leica. I think they have a recent phone where they’re like the camera has like the giant Leica logo on it because they have the partnership with Leica which is an iconic brand from my understanding in India right there are a lot of camera enthusiasts like people who love like photography and Leica is like one of the gold standards for for high quality optics. So yeah and then the phone itself is like 90% camera and [laughter] then like the rest it’s like a camera with a bit of smartphone attached to it versus the other way around. [laughter] Yeah, that’s we we’ve seen quite a bit of that. Great. So, Kyle wanted to sort of move from like sort of entrepreneurship and product to sort of also talking about I mean it’s not right to probably call an elephant in the room but sort of understanding Chinese manufacturing. I think you had an interview with uh Dr. Lu Fang uh I believe is his name where he sort of described the concept of Chinese industrial maximalism. From what I understand, it’s the idea that you should continue to prioritize sort of quote unquote low-end manufacturing, right? Or a lot of the nitty-gritties of manufacturing that are not necessarily high-tech because you need an industrial that industrial base basically sort of complements any sort of advances that you make in say robotics or other high-tech industries. Right? Dr. Fang sort of projected that power as something being similar to the dollar’s reserve currency status or Russia’s oil reserves. Right? Throughout history, manufacturing is something that gets offshored the moment profits sort of decline. How do you sort of think about Dr. F’s sort of thesis and is China really sort of trying to keep this industrial base sort of intact as they sort of try to move ahead in the value chain? Yeah. So there’s actually a big debate, an ongoing debate among especially Chinese economists about these issues and there’s not um necessarily a full consensus. So there are some people like Lufang who argue that China should go allin every industry essentially that China should continue on you know the so-called sort of lower end or more traditional manufacturing lines while moving into the higher end and there are others who argue that no China should start to leave some of those behind that they are the kinds of jobs that people might not want anymore wages are rising they tend to be uh more pollutive and worse for the environment. So, you know, China should follow the path of other countries and leave them behind as as China gradually upgrades. Yeah. And this this debate is still unfolding. I think um in practice, we see a mix. So, I think we do see in some cases China really tightly holding on to some of these older industries. And you can see that as in part a a resilience um strategy as well. It helps to be the largest steel or aluminum producer in the world at a time when when some of these supply chains are in flux and that can still feed into all of your other downstream industries, automotive, ship building and everything. And then there also u is this argument as as you pointed out that it provides China with a kind of geopolitical leverage and this is something that I think in some ways is a bit newer. So there had been discussions about critical minerals and and rare earths for example as being like a special point of leverage that uh China could use but I really think a lot of that got stepped up in sort of like the rise of geo economics more more generally and I don’t think they were necessarily intended to be you know quotequote weaponized um but now they can form a point of leverage and then I think especially given the most recent round of uh trade wars between the US and China. Um I think China felt very vindicated when uh President Trump tried to up the ante and like really um raise tariffs, you know, like over 100% on Chinese goods and China, you know, retaliated as well. But ultimately the difficulty with trying to raise tariffs so high on China um is that Americans need those goods and um and very they’re very hard to source elsewhere. And so even if China hadn’t retaliated, there is a sense that you know like was it the US punishing China or was it the US like uh um embargoing itself from goods that it needed and that’s where China’s like you know the argument is China’s unique position as the provider of so many different goods consumer goods uh pharmaceutical ingredients inputs for uh industrial production in the US like that that gave China a unique leverage and so yeah going forward there there are some who say like okay including Luong China should hold on to these industries and um like recent history has proven the value of retaining this so yeah we we’ll see I mean at the same time some of this is actually being moved out of China right so some of this is actually um say parts of the solar supply chain or consumer electronics some of that is being um relocated to Vietnam Thailand and India so um there’s that story happening as well so maybe it depends on sector by sector uh even even down to the subsector level. We’ll come back to the India side of things uh towards the end of this conversation. But China I believe very recently just released its latest 5-year plan uh doctrine and where the focus [snorts] uh where Zinping’s focus seems to be highquality development so to speak right what to me it seems like it denotes a shift from sort of the old sectors to the new sectors and like that’s where I sort of see the debate right like how do you sort of see this clash ever being sort of resolved if it needs to be resolved secondly how do you see the sort of tech industry ustrial overlap that you talk about right where you have one industry empower the other and that industry empowering another right and there are players who operate in the intersection of those industries in Dr. Fong’s sort of idea. I see that paradigm being more sort of reflective. Yeah, definitely. So, right now, China’s kind of at this um inflection point in its growth strategy where the old engines of growth are running out, right? The real estate boom is over. The uh infrastructure boom, well, we’ll see. People keep keep calling it that as at reaching the peak and maybe they still keep going. and then sort of like the older uh older manufacturing lower lower value manufacturing um are is no longer like a source of growth if China even can hold on to that. So the idea especially with the latest 5-year plan is to look to the engines of future industries um industries that will become the kinds of pillars for economic growth that will create not just jobs but highpaying jobs you know like jobs for college graduates uh skilled workers like that kind of idea. And yeah, it’s interesting because um you know they they target a range of different uh technologies and sectors that are in and of themselves each of them are are fairly multi-purpose or even general purpose technologies. So things like semiconductors or energy especially clean energy or even the broader automotive supply chain and uh transportation you know you can argue that these these industries are important in and of themselves but then they have like huge spillover effects onto the rest of the economy onto other sectors as well. Overall, we see this picture where um China is trying to leverage like multiple strengths and to make this sort of interlocking mutually beneficial uh ecosystem of different industries that compound on each other. And so, you know, we already know that, um, China is very strong on smartphones and, you know, consumer electronics, uh, uh, LCD screens like, um, some of the chips that that go into them and they can leverage some of these capabilities to then become, uh, to feed into their EV industry. So, electric vehicles borrow from some of those components or at least some of those uh, industrial capabilities. And that can actually lead that can actually overlap with other things like drones or like um robotics and uh and of course AI is sort of the layer on top of all of this. So when you when you put that all together, the idea is that um China’s not just trying to become a really strong, you know, player in one of these sectors, but that they’re pushing forward across all these sectors at once and that they kind of create this mutually reinforcing effect. Um and so you have these companies that sit as you mentioned right at the intersection of a whole bunch of these. So Huawei is probably the most prominent example, but then you have other um more recent upstarts like uh Xpong that have you know that are making EVs and uh AI foundation models and autonomous vehicles and robotics you know all all at once. Um BYD they make their own chips. Uh they are also um you know doing a lot on the autonomous vehicle front. So yeah, you can kind of pick these different Chinese companies. They’re branching out at the same time that the Chinese government is trying to um like do this, you know, multi-prong bet on industries of the future. One of the things that obviously the 5-year plan talks about in quite detail and has been something that people have been debating about for a long time is the idea of involution, right? Which is where everyone’s sort of involved in a price war to the death, so to speak. But at the same time, I’d seen a tweet very recently uh which sort of said that you know when profit margins shrink, European firms, European car firms might cut costs or investments while Chinese firms end up sort of spending even more, right? Expanding capacity, expanding R&D. Yet one might also say that that same increase in investment is what sort of causes like an excess capacity problem, right? Which again creates an excess supply problem and therefore deflates all prices. what is the sort of dynamic between involution and sort of technological innovation in China because I personally don’t think it’s very clear-cut. Uh I know people say that one happens at the expense of the other but I am like not so sure having read whatever I have. Yeah. So the involution question is really huge right now in China. they used to use the term overcapacity more directly and I think it became sort of politicized when uh the EU and the US started to use that term um because they were upset um about getting flooded with Chinese uh exports. So they you know so China has kind of pivoted but the concept is still basically the same and it’s that Chinese firms don’t always operate uh in terms of profit maximization at least in the near term like you would expect a normal firm in a normal uh market. Um instead sometimes they’re trying to um uh volume maximize rather than profit maximize. that is they’re trying to step up um production capacity and make greater and greater investments. And sometimes there is a temporal logic to this and that is that even though today the early stages of an industry like say the electric vehicle industry um there might be um it might be harder to be profitable in the long term you want to have that capacity to ramp up and so it’s a it’s a bet on the future. So that’s some of the justification, but some of the other justification is that some of this is sort of um politically uh oriented where local governments themselves have their own KPIs, their own key performance uh indicators and their ability to be promoted to get, you know, better jobs within the, you know, the party state hierarchy is contingent on their ability to show that not only do they post higher GDP growth, um but that they are in line with national goals. and that they’re boosting production and they can point to concrete cases of like, oh, you know, we got this new factory in our jurisdiction or we got um these new factory jobs. So, there’s a rationing effect where different local governments are trying to boost their production. and they’re trying to bring in, you know, more EV factories or battery plants or solar plants and um and that looks good maybe at the local government at the individual local government level and the officials themselves, you know, might feel like they are doing what they’re supposed to be doing and what they’ve been incentivized to do. But in aggregate I do think you get this effect where everyone’s piling in um and there’s not a sense that you know the aggregate capacity will match necessarily the current market demand. And so there’s that that mismatch and right now um like Chinese firms are responding in a number of ways. I mean one is that uh it does hurt margins a lot. it makes it very hard to uh have those profits that you can drive back into R&D and you know really improve on features and other you know uh higher quality aspects. Um another thing that they’re trying to do so so that that can limit some of that um and one thing that they’re trying to do is they’re trying to look to overseas markets. um they’re trying to look for areas where they can they can find that margin. And BYD, I think, is actually an interesting example where they’ve been they’ve been taking a hit domestically within China, but they’re really focused on not just selling overseas, but building plants overseas. And you can see that um they I don’t know how they feel about the long-term, you know, uh prospects within China, but they feel like the future of their business depends on winning the global market for uh for automotive. So that’s an example of sort of um some of the responses but the government is kind of like the ch the the central government in China overall is trying to like put its foot on the gas and the brake at the same time as it were where they keep saying like these are priority areas you know continue to invest you know we want to be the leaders in these areas and local government should should follow suit and at the same time they keep trying to warn local governments and the companies themselves like don’t overinvest so it’s a mixed message and I think it’s probably pretty confusing for um you know it’s like I thought I was doing what you you told me to do but now like what I’m doing is exactly the opposite. So so what is it that you want and I think right now overall the bias is still in favor of um trying to boost up uh capacity although that that could be changing. It depends on how strong the different signals are. Got it. Just as a side question because you mentioned BYD sort of now moving into overseas markets to sort of expand their profit margins. Is it fair to expect them to sort of double down in sort of the wake of uh what’s happening in the straight of hormones because I think it was Financial Times that sort of reported that a lot of people are now sort of buying EVs in Europe because like obviously petrol and diesel are quite short. Do you think that’s like a important inflection point for a firm like BYD? Oh yeah, definitely. I had like tweeted this earlier. I was like, every day that the straight of Hormuz is closed and every day that the Iran war continues is like a month’s worth of free marketing for Chinese EVs and batteries and solar and clean tech. And it’s really interesting because um maybe one day, hopefully soon, like this disruption will be cleared up. You know, we’ll kind of be dealing with the the cleanup of everything that happened, but the psychological effect, I think, will continue to reverberate. And I think back to I mean I wasn’t alive then but the oil shocks of the 1970s and how even when oil prices came back down actually left a structural effect on the entire global economy. You think about um how much countries stepped up their investment actually in alternative energy as it was called back then and how much they really emphasized how consumers really emphasized energy efficiency. And you have the rise of Japanese automakers where they were doing well because they were priced pretty competitively, maybe like the Chinese EVs of today. But then with the oil shock of the of the ‘7s, you got these Japanese highly fuelefficient vehicles that seem suddenly really really attractive. You know, not only are they are they uh cheap to buy, but they’re cheap to own. So that caused like a huge boom for Japan’s automotive industry that I think might be happening to a certain extent also with China’s EV industry and and broader clean techch industry. So that’s what I’ll be curious about. I mean people were worried about this for a long time. They were, you know, we’ve had so many different supply chain disruptions, COVID and everything. Um I think this one really will add uh fuel to the fire in terms of you know people’s efforts around the world to try to reduce dependence on you know oil and gas and to shift to renewable energy. There’s a piece I think on your newsletter where you said that Chinese EVs are going to be strong but they won’t dominate. Has that thesis changed since uh this crisis erupted? Yeah that’s a good question. So that piece was meant to be um kind of provocative. I kind of wanted to counter this narrative that goes like kind of extreme in one direction where it was like well Chinese EVs are just going to completely swamp every single market. I found that very unsatisfying and so I wanted to lay out like why I didn’t think that would necessarily happen. And the auto industry in particular is really really interesting because it is not a commodity market by any means. Like brands matter tremendously. people have incredible brand loyalty and they also have country loyalty in terms of the producers and actually the Japanese story uh is useful here. you see that it’s not always the case that the cheapest or the sort of best value vehicle wins out in the market whatever that means because consumers have different tastes they have different preferences and they also like have ideas and even dreams associated with certain car brands and certain you know like why for example in the United States is the most popular vehicle actually I think the most the three most popular vehicles are uh all pickup trucks like how many Americans actually need a pickup truck on a daily basis is um and and I I think the Ford F150 is is the number one selling vehicle still in the US. In theory, you might be able to get by with either a four-door sedan or maybe an SUV, you know, for for most people. Um but the pickup truck, I mean, it has that association, especially the American pickup truck of being rugged and independent and those things matter tremendously. I I I can tell you in Europe too, right? It’s not that uh Germans suddenly just abandon, you know, German cars and switch to Japanese cars. they love their own Volkswagens and there’s a loyalty there as well. So yeah, there’s other factors um you know I could mention as well you know and another big one actually is that um it doesn’t have to be so neatly divided into like the Chinese automakers versus the non-Chinese ones that the supply chains can be mixed and matched and that you can have these kinds of partnerships and again the Japanese experience is useful because um Japanese automakers they um invested abroad they even formed joint ventures with other companies um like uh GM and Toyota uh in the US And so right now we’re seeing that happening with the Chinese auto supply chain where uh battery makers like CL are working with um say German automakers or uh Stellantis has this partnership with Leak Motor which is a Chinese uh EV company. There’s a lot more sort of messiness and gray area. I would expect you know companies like B to do very very well but I wouldn’t predict that um they would you know take up 90% of the global auto industry uh anytime in in our lifetimes perhaps. I’ve been meaning to also ask you about sort of Chinese FDI because that’s something that you’ve written about extensively and because we’re now talking sort of about the auto sector. It just felt like a good time to ask you that. I think it was in one of your testimonies with the US China Security Commission where you had said that China’s auto sector for a while was not considered a full-blown success because they could never build a domestic brand and couldn’t build like deep linkages with domestic suppliers. What changed when sort of that was deemed like oh this didn’t work out and what changed sort of with EVs that where China was able to sort of incentivize those linkages to be formed and like how did China adapt basically in that situation? Yeah. Yeah. So like the broader story of industrial policy in China for the auto industry is a really interesting one and it’s a very messy story because right now we see the success of the EV Chinese EV industry. But for a long time they had this um for for traditional internal combustion engine cars they had this joint venture approach. It helped in some areas. So it did help to build out some of the supply chain domestically within China and it ended up produc ended up turning China into the world’s largest actual producer of of cars but almost all of that was for the Chinese domestic market. So you didn’t have these like truly globally competitive homegrown players. Um you have large volumes of back then the reputation was like very very um middle quality cars just for Chinese consumers. A key barrier there was um the engine technology itself. And so what changed was the shift to um battery electric vehicles, hybrids, and even an investment in hydrogen fuel cells. if Chinese automakers can’t catch up to uh their global competitors on the actual combustion engine technology. Other ways that Chinese companies could um overtake on the curve, this is like a very common like business uh term in China, like if you can’t beat them on the straightaway on like imagine you’re like on a race car track, you know, if there’s a pivot, a paradigm shift in the technology, maybe you can overtake at that moment. And that’s where way before EVs seemed like a viable, you know, global commercial market, China was already trying to create an EV industry. They were investing in battery technology and R&D. They were investing in especially at the local government level in um getting uh you know their uh public bus systems electrified. They were investing in um building out charging infrastructure. And you know, it’s interesting because when you go back to that time, there was a debate in China about whether this was really going to pan out. It was a bet on the future. It was a bet that these technologies would eventually scale, that prices would come down, especially for batteries, and that they would be a real viable competitor to traditional combustion engine cars. And yeah, at the time it was seen as like, well, we’re not sure if this will really work out, but we’re going to just go for it. And actually, part of it is this energy security. A big part of why China kept going with the uh EV story is energy security. So it’s interesting today you know the situation with uh the Middle East like that is the kind of situation that China is always worried about um you know the straight of Mala like uh oil supplies going through uh and feeding into um China’s auto sector and industries. So the EV story was not just a bet on technology for the future but also a bet on um trying to build resilience to um you know what is still actually a major liability for for China which is dependence on uh oil and gas. When you go up to the present and you see the effects of all this, it can look like a far-sighted, you know, uh, genius level master plan to become like globally dominant. But in reality, it it was a bet. And I think the key thing for China’s approach was that they kept going at it. That they believed that this was going to be the future and that they needed this technology even back when the commercial environment was not amendable to that. So that long-term bet I think ended up paying off. In the cases where the Chinese industrial policy strategy has worked, it’s it’s because they stay consistent. It may take decades to to finally get there, but when they do, it can look to the rest of the world like, “Oh, wow. They were so, you know, they were able to predict the future, and it’s like, no, no, no.” I think we all kind of had been talking about this for a long time, but um but China kept throwing resources at the at this issue. Makes sense. One reason why I sort of also asked a question around FDI is because a lot of countries have had very mixed experiences with FDI. I think now people know that sort of FDI is not the sort of catch-all beall solution to sort of economic development so to speak right but China is one country and to a degree so have Taiwan so so has Japan u these are all countries that sort of used FDI and get as much knowhow as they could from foreign firms right now that sort of we in the situation where you know foreign firms sort of have understood you know how sort of China was able to extract a lot of this know-how very successfully, right? Do you think FDI led economic development sort of as a future like you know will firms now become even more protective about the secrets that they hold the knowledge that they keep and it’s not even about capital. It’s purely about sort of the managerial the technical knowhow which I think anyone would argue is just as important. Yeah. So I think that there’s still a future for that strategy and for the FDI uh and technology transfer story and I think it depends on two things. One is can you generate leverage in negotiating with these foreign firms and two do you have adequate investment in your own scientific and technical foundations. So I think in China’s case where that strategy worked was where frankly the Chinese government um like was pretty aggressive in demanding that foreign companies that want to sell to Chinese consumers that want to access the growing Chinese market. They had to basically uh localize production, work with Chinese partners, localize in particular their supply chains to help upgrade Chinese suppliers. We saw this with Tesla. We saw this with a whole bunch of highspeed rail companies. And then like that was part of this implicit deal or sometimes very explicit deal between China and and these foreign companies. And the foreign companies for, you know, for their own sake, they made a ton of money in in many of these cases. So it was worth it. And they were also going into this with eyes wide open, right? They were long-standing concerns about IP issues, about sharing core technology. And so even back then they were never going to be giving away the crown jewels. And you saw that for example with the uh combustion engine technology or for some of the um software for for signaling control systems for trains. But at the same time, China also invested very heavily in the scientific foundations that allowed for that absorption of knowledge of um knowhow. And so I think that was really crucial. And you know the irony is when I look at other countries in the world, I think of India first and foremost as the country that can do this because you have like an enormous market. You have the scientific and technical talent there and you have actually an an existing large and diversified industrial base to build off of. So it’s not like you’re trying to bring in car factories when you’ve never produced a car before. India is like one of the largest uh auto producers in the world. But the final variable is the most critical one which is can government policy provide that kind of leverage. Can it harness these advantages that India has in order to get the best deal from the foreign firms? And that’s one thing where I mean the foreign companies will push back as hard as they can and sometimes they even bring in their own foreign governments to give them some backing there. So there’s always going to be that push and pull. But the other advantage that India has that China did not have is that India is a democracy. India is viewed as important to the west, important to the US, important to Europe in a way that India can and has already started to take advantage of, right? Um, so you see some of this sort of like offshoring from China or China plus one strategy. India is like one of the the major countries take advantage of of this opportunity. So yeah, I I do think that like the potential is there and I think you do see it happening in some spaces and you know we can get into for India some interesting cases of FDI working but I think that process like it really boils down to can you generate that kind of leverage because at the end of the day when you have all these advantages like how much you want to give away for free of [snorts] course consumers benefit versus how much do you want to leverage that to upgrade your own uh industries. Great. Which also quite aptly leads me to my last couple of questions. Firstly, I think because you mentioned India and at this point I think it’s sort of not in debate that for a lot of these new age industries, India will need Chinese knowhow, will need Chinese expertise which makes it very tricky from a geopolitical standpoint even if there is a very obvious economic win-win in many of these situations. Right? India has a huge market that Chinese firms that are facing declining profits can take advantage of and obviously India can learn a lot of new things right how do you see a world where Chinese FDI into India sort of increases benefits both sides without sort of having the geopolitical implications yeah that’s a tricky question because as you point out I mean just on the sheer sort of economics and technology and market fit it would seem natural that there would be a lot of crossber investment flows a lot of commercial partnerships. You know, I I still remember when I believe it was Alibaba was the largest shareholder in um in PTM and uh this was like way back in the day. This is before Doc Lum and before uh Gwen and Yeah. And so you know but then on the other side of the ledger is the geopolitics and the security risks and the the conflicts and India China case in particular is kind of unique to me as well because these are two countries that have not had many deadly military clashes with other countries and so the fact that they have had it with themselves is like not so long ago just makes this whole relationship much more complicated. Um so even where the US is sort of like very wary of China right there’s not that kind of history. So yeah, overall I I think that probably there could be a path for creating those kinds of avenues for partnership, but it would probably be have to be tightly constrained by these security risks, these economic security risks and maybe you know like from the India standpoint if you can identify certain key industries where the riskreward trade-off is that you would want to bring in some Chinese technical know-how and maybe deal with some of the security issues like uh data uh uh data sharing or um you know keep Chinese firms out of you know say critical infrastructure like that would make sense but you kind of create I don’t know how to how to call it like basically a more sort of nuanced framework for for dealing with uh China that was our conversation with Kyle Chan we hope you enjoyed it I certainly did until next