This is also why China has heavily invested in high-speed rail. Even today, many people who are influenced by persistent misinformation and years of criticism toward China continue to question its high-speed rail system, asking why China doesn’t follow the U.S. model of relying on cars and airplanes instead. But China’s limited ability to rapidly scale commercial aviation means it would have to purchase large numbers of aircraft at high prices to meet domestic passenger demand, while also keeping ticket prices low. That is fundamentally not feasible. In this sense, high-speed rail is China’s only viable solution. Even though many lines are not profitable on a strict accounting basis, the enormous social and systemic benefits make the investment worthwhile.
This is somewhat similar to the camera industry. It is a shrinking market, while iterative improvements in smartphone cameras are where the real economic returns are. This is why the traditional camera industry remains dominated by Japan, while China has gradually captured adjacent markets such as smartphones and products like DJI. Of course, the barriers to entry in traditional cameras are not as deep.
As the article suggests, China is mainly “late” in certain areas. The industries are not always large, the profit pools are limited, and compliance requirements can be cumbersome. In this sense, the Chinese government does not seem to have made any major strategic mistake here. The current pattern of catching up and lagging behind is largely predictable.
Unlike in high-end semiconductors, I do think China has made significant mistakes here. In state-led industrial programs of this kind, a lack of market discipline and episodes of corruption scandals have repeatedly slowed progress and led the government to become more cautious. However, given that China already holds a dominant position in mid-to-low-end semiconductors, the overall outlook may still be optimistic.
Since it is currently World Cup season, Chinese football is another example of a similar structural issue. The system is simply deeply broken and incapable of properly identifying and cultivating top talent.