China has long identified specific sectors as future engines of growth and recipients of expansive state subsidies. Despite charges of economy-wide imbalance, overcapacity, and, most recently, involution, China has achieved impressive gains in its priority sectors, particularly electric vehicles (EVs). In 2024, Chinese EV production hit 12.4 million units, accounting for 70 percent of global output, and the country was home to five of the world’s 10 largest EV manufacturers. 

In late October, Chinese leaders released the 15th Five-Year-Plan (2026-2030), notably omitting EVs from the official list of strategic industries for the first time in a decade. Without the strategic industry designation, analysts expect the end of EV subsidies and the return of market forces. As this sector transitions out of hyper-accelerated development and into maturity, U.S. policymakers should consider how China achieved global leadership in EVs, drawing lessons that can guide U.S. efforts to compete more effectively with China and mitigate its efforts to attain global leadership in industries of the future.

Imbalance, Overcapacity, and Involution

The economic conditions enabling what Beijing now calls “involution” is a long-standing reality in China’s economy that has also been labeled “imbalance” and “overcapacity”: investment is high, consumption is low. From 1990 to 2023, gross fixed capital formation as a percentage of GDP rose from 24 percent to 40 percent – well above the typical level in developing economies.

At the same time consumption as a share of GDP declined to less than 40 percent, 20 percentage points below the global average.

While other countries have achieved remarkable, investment-led growth, China’s imbalance between investment and consumption stands out. During their respective high-growth periods, South Korea and Singapore also sustained investment rates exceeding 40 percent of GDP, yet household consumption remained far higher by comparison. Between 1990 and 2023 – spanning China’s emergence and rise to global economic prominence – its average gap between consumption and investment was just 18.8 percentage points. In contrast, during their growth booms, consumption in South Korea and Singapore exceeded investment by roughly 45 to 55 percentage points, narrowing only as........

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