China’s Industrial Strategy: Low Costs, High Production, and Global Competitiveness

China has developed a strategy so effective that within a few years, almost every industry it enters becomes dominated by Chinese companies.

The first commercial lithium-ion battery was introduced by Sony in Japan in 1991, and for many years Japan led the global battery market.

Today, however, around 70% of the world’s batteries are manufactured in China.

And batteries are only one example.

Japan and Germany once led the solar panel industry. Europe dominated steel production. The United States held the advantage in rare earth resources.

Today, China stands at the center of them all.

None of these industries were lost through war.

They were won with a single weapon: low prices.

China’s Four-Step Formula

China’s industrial strategy follows a remarkably consistent pattern.

Step One: Strategic State Support

The government identifies a sector as strategically important and provides massive backing through:

• Low-interest financing
• Discounted electricity
• Cheap industrial land
• Tax incentives

Step Two: Price Below Everyone Else

Supported by these advantages, Chinese companies produce goods at prices competitors cannot match.

Many products are sold with razor-thin margins—or even at a loss.

The objective is not immediate profit. The objective is to force competitors out of the market.

With government support, Chinese firms can sustain these losses for years.

Step Three: Competitors Collapse

Manufacturers in other countries struggle to compete.

Losses accumulate.

Factories close.

Companies disappear.

Step Four: Market Control

Once competitors have exited, China becomes the dominant supplier.

At that point, it gains the power to influence both pricing and supply.

Solar Panels: A Clear Example

The solar industry illustrates this strategy particularly well.

Many Chinese solar manufacturers continue selling below cost even today.

Their combined production capacity is roughly twice current global demand.

Losses are viewed as a long-term investment because, in the end, the surviving producers are overwhelmingly Chinese.

Processing Matters More Than Mining

China’s real strength often lies not in extracting raw materials, but in processing them.

For example:

• China mines only about 8% of the world’s copper, yet produces roughly 47% of refined copper.
• It possesses less than 7% of global lithium reserves, but processes around 80% of the world’s lithium.
• China accounts for 77% of global cobalt refining and around 90% of rare-earth processing.

In other words:

A country may own the mine.

China often owns the factory that turns the raw material into something usable.

Owning resources alone is no longer enough.

Processing is where the real leverage exists.

From Low-Cost Supplier to Gatekeeper

Once market dominance is established, a second phase begins.

The country that once competed through low prices becomes the gatekeeper of supply.

China has demonstrated this repeatedly.

A new export rule means that if a product contains even a tiny fraction of Chinese-origin rare-earth material, exporting it can require Chinese approval.

Antimony: A Real-World Example

Antimony is widely used in ammunition production.

The United States relies heavily on imports.

After China restricted exports,

• Shipments reportedly fell by 97%
• Prices tripled

China also halted shipments of gallium and germanium, two materials considered essential for semiconductor manufacturing.

Later, some restrictions were temporarily eased during trade negotiations.

The message was clear:

China demonstrated that it could close the tap—and reopen it whenever it chose.

That flexibility itself became a source of power.

Control Over Critical Minerals

One statistic summarizes the broader picture.

China leads the world in refining 19 of the 20 most critical minerals.

This is no longer about a single industry.

Modern manufacturing across countless sectors depends on materials processed inside China.

From Cheap Steel to Artificial Intelligence

China’s industrial rise began with something many considered ordinary:

Low-cost steel.

From there, it expanded into increasingly strategic industries.

Today, attention has shifted toward artificial intelligence.

Some observers argue that a similar approach is emerging there as well:

Making advanced AI models freely available or open-source to increase adoption while putting commercial pressure on competitors.

The difference is significant.

Artificial intelligence is not simply another industry.

It is increasingly becoming the foundation upon which future industries will be built.

If that foundation becomes concentrated in one place, the consequences could extend far beyond a single manufacturing sector.

The United States Responds

For decades, the United States championed free-market principles and limited government involvement in business.

Facing growing competition from China, however, Washington has increasingly adopted more active industrial policies.

The U.S. government has taken ownership stakes or provided major strategic support for companies involved in semiconductors, rare-earth processing, and other critical technologies.

Examples frequently cited include investments connected to Intel and MP Materials, along with support for several additional strategic firms.

In other words,

the methods once criticized as state intervention are now being used, in different forms, by both sides.

The challenge, according to many analysts, is timing.

China began pursuing this strategy decades ago.

The United States is only more recently accelerating its response.

The Bigger Picture

The overall pattern is often described like this:

• Enter through aggressive pricing.
• Eliminate competitors.
• Achieve market dominance.
• Turn supply-chain control into strategic leverage.

Consumers may believe they are simply purchasing lower-cost products.

But once a single supplier dominates an essential industry, that supplier may ultimately decide who receives those products—and under what conditions.

Former Chinese leader Deng Xiaoping once famously said:

“Hide your strength and bide your time.”

Many observers believe China spent decades following exactly that principle.

Kaynak: Penguin X @ThePenguinBTC