The Rise of China’s Electric Vehicle Industry: Strategic Alliances Between Local Governments and Private Capital

Abstract

This article challenges the prevailing view that China’s electric vehicle (EV) boom is primarily the result of top-down industrial policy. Drawing on the history of China’s automotive sector since the 1990s, it shows that stringent central regulations and entrenched state-owned enterprises (SOEs) excluded most localities from lucrative joint ventures. In response, local governments forged strategic alliances with private manufacturers, leveraging capital markets, policy loopholes, and post-2008 credit expansion to attract investment, upgrade industries, and diversify regional economies. These partnerships, initially in traditional automotive manufacturing, proved pivotal to China’s EV takeoff after 2015, enabling private firms to outcompete SOEs in innovation, responsiveness, and market expansion. Comparative cases in steel and pharmaceuticals illustrate the broader applicability of this dynamic. The study highlights the enduring adaptability of Chinese local governments and private capital in navigating central constraints, offering new insights into industrial policies, industrial upgrading, and local developmental states.