Why China Is Trying to Tame Its Electric Car Frenzy (opens in new tab)

The reason is basically that Chinese cities compete with each other through financial instruments that basically put the citizens of the city on the hook for the success or failure of their car companies.

Because the leaders of the cities are making the decisions and not the citizens, the leaders are more than happy to drain the citizen’s bank accounts and try to win in this competition. (Leaders can’t be voted out)

In a roundabout way it’s very similar to how pegging the currency to the dollar reduces the earning potential of every Chinese citizen as a type of hidden wage theft that the central government uses to run the economy as they desire.

> 129 brands in China were selling cars that ran mainly or entirely on electricity, and only 15 of them would be financially viable [in 5 years time]

The brands really can't care about reliability if they know they'll be bust.

If the biggest item on assets and liabilities is warantees, there are a lot of tricks to reset that to zero.

And even if you win in the market, you probably had to race to the bottom for reliability.

Unfortunately, the cost of judging information to decide on reliability is too high as a consumer. So we fall back to price (which we can mostly quantify) and it is rational to choose lemons.

>And yet they keep borrowing from state-run banks to build more factories, leading to extensive overcapacity.

Are state banks not able to exercise some independence and judgment in terms of evaluating the risks of lending here and ... just say no?

Or do they need someone at the top to of government to do that for them?