The 'Engineer State' Is a Fairy Tale. I Was There.

So I’ve been stewing on this one for a while, since the end of last year in fact, when everyone, particularly the VCs, in the energy circles I dip my toes in started gushing about the engineer state and the magnificent speed at which it pushed innovation and clean energy forward.

I’ve been stewing this long because I was trying to dampen my enthusiasm enough to create a civilized response to the fanboys of state-sponsored engineering as a first-hand, on the ground, witness.

The amazing leaps and bounds that China’s made in their domestic EV market is correctly attributed to brutal market competition, but incredibly, that market competition is attributed to the design brilliance of the engineer state??

To hear attribution of success to long-ranged planning and careful engineering is akin to hearing some prominent Silicon Valley VC come back from a wine-and-dine tour of China and start to talk out of their rears about the superior competitive infrastructure of the Chinese Market, or retroactively praising the vision of the Engineer State for implementing the 863 plan (conveniently ignoring new energy vehicles was still less than 0.1% of civilian vehicle sales as late as 2013, despite the plan being almost a decade earlier).

It’s not like this is the only blatant example of the complete bullshit that is the engineer led State narrative. I started my little WFOE gas turbine MRO company in China in 2006, the State absolutely planned for a path forward in gas turbines.

So what was the state-sponsored engineering path forward? Collaborating with GE in Qinhuangdao, Siemens in Shanghai, and eventually Mitsubishi in Guangzhou in JVs hoping a technology transfer will, by osmosis, give China its own domestic capabilities in a critical heavy industrial policy priority area. It was a playbook that worked as far back as the early 90s with the telecom industry: learn what you could, pull the legs out when you have (the foreign investment structure crackdown in 1998).

The problem was that by 2006, multinationals had gotten pretty wise to how to work with China to access its markets while protecting IP, because China is not, and never has been an engineering state. It has always been and remains a political state, first and foremost, highlighted by the fact that hiring and firing in State Owned Enterprises have always been throttled by Party Secretaries, by definition a political position, not the operations executives.

This has a direct effect on the operation of these State-Owned engineering machines: no engineer is ever valued above a political operative, and the only person who ever knows how anything works in a factory is some 60 year old laoshifu that you hope won’t retire next year because the 10 ambitious political climbers managing him won’t know what to do with anything in the assembly area.

The result of 20 years of engineering for speed? Not a single joint venture produced anything technically significant besides some non-moving combustion chamber parts and even those have issues. (If you want to talk about that one 300MW domestically produced heavy duty gas turbine, DM me, I have a piece of the Brooklyn Bridge to sell you.)

No, EVs didn’t take off in China because of an engineer state. People point to government subsidies, for example, as evidence of long term thinking and strategic planning contributing to EV taking off: subsidies remained pretty much the same, year over year since their implementation in 2009, while BYD’s breakthrough sales year happened in 2015, and they applied to everyone, even the SOEs who continued to produce nothing but happily had tea parties with their multinational equals.

BYD had to lobby their regional champions in Shenzhen for scraps as the central planners served the SOEs the buffet.

Even China’s much ballyhooed special license plates for EV scheme wasn’t implemented until 2 years after BYD began to show everyone how many EVs they can sell. Yes BYD, the private, rechargeable battery maker shunned by the politicians who were busy cosplaying industry titans, made them take notice by kicking everyone’s ass.

It’s a similar story in solar panels, where it played a laughably small part in the rural power planning part of the engineer state’s plans to supply power to rural regions, until Suntech Power showed every municipality how much money they can make by making solar panels. That’s long term planning?

What China did plan was securing raw inputs decades earlier. Critical minerals, base chemicals, processing capacity. And nuclear. Those took real coordination.

Everything else was market chaos in a market that’s partly deliberately, partly greedily not regulated for the long term, but got relabeled as strategy after the fact. Perhaps that’s what the prevailing narrative is trying to regurgitate with its nonsense about engineers and lawyers, the frequent reframe in China that the U.S. is a system of laws, whereas China is a system of relationships.

Brutal competition came from complete lack of consumer trust in the long term quality of every product, thus every product had a viable shot of having offtake, not some masterful four dimensional planning and engineering.

But the real lesson here isn’t engineering or lawyering, it’s if you want to leapfrog the incumbent system, you need to kick their butt first, much like BYD, or Suntech, and recognize when you have winners, back them from the ground up to build something that’s newer and better.