China Dominates New Age Manufacturing Industries with “Survival of the Fittest Chinese” Principle

China’s industrial strategy of dominating new industries through massive state support in the form of billions of dollars in loans and subsidies has ensured that it has become the dominating global force in these industries. The country through its state apparatus ensures that multiple companies fight it out viciously amongst each other leading to lower costs which ensure the bankruptcy of foreign companies who work on free-market principles. The competition even leads to the bankruptcy of some Chinese firms but this hardly matters as the capacity and workers are absorbed by other larger Chinese companies. There is the principle of the “Survival of the Fittest Chinese” companies but the important point is that it is Chinese.

China is currently dominating solar manufacturing with over 80% of the solar panels being made in the Middle Kingdom. Despite years of anti-dumping and safeguard duties being imposed by Europe and the USA on Chinese imports, China’s manufacturing has remained undaunted and even emerged stronger as they found new markets and reduced costs even more. The scale and the costs of the Chinese companies are now such that they dwarf western and other Asian players. Even in technology, the Chinese companies have caught up as their huge revenues allow them to spend on R&D. There is also the ever-present Chinese government support in the form of billion-dollar credit lines, low-cost utilities, subsidies for labor payments, R&D and a host of other things. Other countries have either simply given up competing with the Chinese or erected large trade barriers to protect their fledgling industries.

Besides, solar panels, lithium battery production is another area where strong Chinese government support has ensured that the Chinese production scale and costs have become almost unbeatable. With 73% of the global production and a vice-like control over the production of raw materials, China is all set to become a global force in the new age of Electric Vehicles and Lithium batteries. Besides subsidies, China also makes sure that its massive domestic demand is almost fully met by domestic companies through both explicit and implicit protection. It is almost impossible for a foreign company to sell solar or battery in China. As the state controls almost every player in the supply chain, it can ensure that all demand is met locally without falling foul of WTO rules.