A breakthrough bet: in which technologies does China want to establish hegemony
China has conquered the global electric vehicle industry in recent years. In 2024, the share of China's EV production reached 70% globally. It was no coincidence that massive government support played a key role, including tens of billions of subsidies and the inclusion of vehicles powered by new energy sources in the list of strategic developing industries. However, this program is now being curtailed: in the draft five-year development plan (2026-2030), electric vehicles were excluded from this list for the first time in more than a decade. Why this happened, what problems have arisen in one of the fastest growing industries in the world, and what will take the place of EV in China's "breakthrough" industries — in the Izvestia article.
The Green Plan
Chinese five—year plans are an important indicator of the potential development of the world's second (or first in terms of GDP PPP) economy. This is the 15th in a row. Initially, in the era of Mao Zedong, they meant about the same thing as in the USSR of those times: a strict definition of what and in what quantity should be produced and built in a command economy, as well as how this should be achieved (it did not always work out). After the first stage of reforms and the transition to a market—based economic structure, this is rather a general goal setting, for which the necessary mechanisms are being developed, both financially and legislatively. Benefits, subsidies, and other incentive measures are key, and the provinces play a crucial role in implementing specific programs — China's economy, unlike politics, is highly decentralized.
The development of green energy and the electric car industry were among the priorities of the CPC ten years ago. Beijing took the lead, deciding to conquer an industry that was only taking its first steps around the world. And this bet has played out to the fullest. But by 2025, serious problems had emerged.
The Chinese authorities called the market situation an involution. This means excessive, excessive, and ultimately destructive competition that consumes resources but does not create new value. In the Chinese automotive industry, this phenomenon has taken on catastrophic proportions. As the largest EV market in the world, China has become a battleground for about 50 automakers who have escalated the price war to a relentless level. Companies with various government support are constantly lowering prices. This led to the fact that manufacturers, including even such a giant as BYD, faced a drop in profits. BYD, the largest manufacturer of electric trains in the world, reported a drop in profits by almost a third in the spring due to price competition.
The risks spread further throughout the economy. There were problems with the payment of supplies. The government's directive to pay suppliers within 60 days has been ignored by most private companies. This was followed by difficulties for banks: automakers and their suppliers, in order to stay afloat, are forced to take out risky loans, exposing banks to potentially heavy losses. The banking system is under pressure, as lending to clean energy technologies has been mandatory.
A chronic problem
The crisis of overproduction is a chronic problem of the Chinese economy, arising from a growth model based on debt-fueled investments. Despite government warnings and market saturation, investment in the automotive industry increased by 21.7% in the first seven months of the year, continuing a four-year period of rapid growth. Money is being spent on building new factories, and cars continue to get cheaper, which is not always justified.
At the same time, Beijing is unable to contain total capacity partly due to the reluctance of the four largest state-owned automakers (FAW, Dongfeng Motor, Changan Automobile and GAC Group) to reduce production. These companies are strong in internal combustion engines, but weak in electric vehicles. Closing factories and laying off workers is politically difficult. Thus, they create "excess capacity" that private companies are forced to compensate for.
Finally, the last and very acute problem is trade wars. The domestic oversupply has led to an increase in exports, which act as a lifeline. Chinese manufacturers now export a fifth of their products, whereas before the pandemic this figure was almost zero. These exports have established Chinese automakers as global leaders, and the automotive industry of other countries has become their victims. All this became a trigger for the introduction of duties from the West, even under the previous US President Joe Biden.
Thus, the market needs to be cooled. The exclusion of electric vehicles from the strategic list is a signal that the government no longer considers it necessary to artificially stimulate the industry. On the contrary, it is doing its best to contain the uncontrolled growth dictated by corporate ambitions. To begin with, the "artificial support apparatus" is turned off, which is why the market must go through a painful but necessary consolidation phase. It is likely to become even more painful due to the global slowdown in demand for electric trains.
What's in place of electric cars
By redirecting capital flows, China is making it clear that the next five years will focus on technologies that promise not only growth, but also "strategic sustainability" and "security" in the face of increasing global volatility. The new five-year plan prioritizes four key areas: quantum technologies, biotechnology, hydrogen energy, and nuclear fusion.
Quantum computing, communications, and sensors promise a revolution in encryption, materials science, and pharmaceuticals. In the context of the US-China trade war, quantum technologies are seen as a key area of "strategic sustainability" and future technological independence. China has made significant strides in quantum communication so far, including the launch of the Mo-tzu satellite (Micius), the world's first quantum communication device. The country is also leading the way in creating a large-scale secure quantum network and is actively investing in building its own quantum computers based on various technologies, aiming to catch up with the United States.
Bio-production involves the use of genetically modified organisms, cells, or enzymes to create materials, chemicals, pharmaceuticals, and even new fuels. This technology is directly related to the ideology of the 15th plan: "innovation must lead to real value" and a shift in focus to "from one to one hundred," that is, to scaling laboratory breakthroughs. China's position here is quite strong, and its natural advantages come from its industrial potential and well-developed supply chain to strong domestic demand in a rapidly aging nation.
Hydrogen Fuel Cell Production Line in Zhangjiakou, Hebei Province, China
Perhaps the most controversial point is hydrogen energy. Hydrogen, in theory, can solve the problems of storing and transporting renewable energy, as well as become a clean fuel for heavy transport (ships, trucks, trains) and industry, where the use of batteries is inefficient. China is already the world's largest producer and consumer of hydrogen, but so far most of its hydrogen is "gray" (produced from fossil fuels). It is planned to switch to green hydrogen from renewable sources, but so far no one has really managed to do this on a commercial basis.
Finally, thermonuclear fusion is something like the "philosopher's stone" of energy. Solving this problem will be as much a revolution as the discovery of electricity itself. This is the most long-term and risky, but potentially the most ambitious of all four priorities. In other words, the government is ready to make risky bets on technologies that can ensure energy security for centuries. China is not starting from scratch: it is a key participant in the international ITER (International Thermonuclear Experimental Reactor) project and is actively developing its own experimental reactors, such as EAST (Experimental Advanced Superconducting Tokamak).
Module assembly workshop of the future thermonuclear reactor ITER
Excluding electric vehicles from the strategic list does not mean that the industry will cease to be the dominant force in China — it's just that now the requirements of financial stability and stable profits (and not just "growth for the sake of growth") will be the main ones. At the same time, the redirection of government investments, subsidies, and benefits into quantum technologies, bio-production, hydrogen energy, and nuclear fusion reflects a profound strategic shift: China is changing the "speed" of economic growth. The country is moving from a model focused on quantitative expansion (electric vehicles, solar panels, steel) and exports to a model focused on "qualitative development." This new approach relies on innovations that provide security, sovereignty, and real industrial value. These projects are bigger and more daring compared to electric cars, where it was only necessary to bring ready-made technology to mind. But the gain will be incomparably greater.
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