Elon Musk's visit to China has drawn widespread attention from all sectors of society.

This is his first visit in three years—a bit unexpected, though the buzz surrounding it was to be expected. It’s safe to say that wherever he goes, it’s a major event.

As the saying goes, "No one visits the temple without a reason." With increased investment in China, what is Musk seeking?

Musk spent 44 hours on a "commando-style" schedule, meeting with Chinese government officials.

With just a few words, he clearly staked his position and made an impeccable statement.

Let’s just say, while he’s firmly committed to building factories and investing according to “Chinese principles,” he still has his sights set on “Made in China.”

A single stone can send ripples across a lake; once his investment plans are announced, local investment promotion agencies from all over will come flocking to court him.

From the perspective of the Chinese government’s investment promotion efforts, the continuous influx of foreign capital serves as a symbol of the business environment, a calling card, and a hallmark—further highlighting the importance placed on foreign investment.

Signaling goodwill toward China

What signals does this send to the government?

When you mention Musk, “Tesla” immediately comes to mind—a testament to the Chinese government’s investment promotion efforts and the creation of the “Shanghai Speed.”

As a “star” of the automotive industry, he has become a “disruptor of the traditional auto industry.”

As far back as 2013, during a public interview, Musk boldly declared he would “build a massive, staggering factory” to produce batteries—one equivalent in size to over 100 soccer fields.

At the time, many dismissed the idea as far-fetched. Setting aside whether automakers would build their own battery plants, even battery suppliers were unwilling to invest billions to build factories.

However, Musk viewed this as a “chicken-or-egg” dilemma.

While others worried about electric vehicles failing to sell, his concern was the inability to secure batteries—after all, the future of new energy belonged to him.

Based on his modest goal of producing 500,000 vehicles annually, the global supply of lithium-ion batteries wouldn’t be enough to meet his demand—he had no choice but to build his own factory.

Now, with Tesla’s Gigafactory for energy storage established in Shanghai’s Lingang area, it appears Musk has made it happen.

It must be said that achieving this goal was made possible by the strong support of the Chinese government.

Today, Tesla is upgrading production lines at its Shanghai factory in preparation for the Model 3 facelift. The success of this facelift is crucial for Tesla.

Looking ahead, with the inevitable launch of numerous new models requiring further capacity expansion, what other considerations are there regarding Tesla’s production footprint in China?

Without exception, this is not the only factor.

Musk’s current visit to China may also be aimed at rolling out fully autonomous driving technology in the country, particularly as the Chinese government’s intervention is urgently needed at the policy level.

In 2019, when the Shanghai Gigafactory was completed, the Shanghai government helped Tesla—which was teetering on the brink of collapse—make a comeback.

In his view, it is undoubtedly the Chinese government that will once again extend a helping hand. For instance, production licenses, industrial support systems, and preferential policies must be actively pursued to facilitate entry into the Chinese market.

During his visit to China, the most critical priority is securing support for production capacity expansion.

It is worth noting that the Foreign Ministry spokesperson’s remarks were largely consistent with those of Chen Jining, Secretary of the Shanghai Municipal Party Committee, who emphasized providing long-term, stable, efficient, and convenient service measures and policy support for global enterprises operating in Shanghai.

Investing in China

Past Experiences with Government Consultations

In 2014, Musk secured $1.4 billion from the state of Nevada to lay the foundation for the first Gigafactory and set a goal of building ten Gigafactories to achieve an annual production capacity of 2 million vehicles.

It was at this time that Tesla and the Shanghai government first engaged in discussions.

At the time, leaders from the Jinqiao Development Zone proactively visited Tesla’s headquarters in Beijing and offered eight potential sites for the company to choose from. After all, mutual agreement isn’t always easy to reach.

After more than four years of negotiations over the site selection, the partnership with Shanghai was finally officially announced. Last year, Tesla’s plan to build a second Gigafactory in China sparked a bidding war among more than 10 cities.

Previously, at first glance, port cities in South China might have seemed the top choice for a location. Of course, if no better option emerged, an expansion adjacent to the first Shanghai factory was also a possibility.

Sure enough, the company chose Shanghai once again.

In April of this year, Tesla officially announced plans to build a mega-battery factory in Shanghai to produce Megapacks—massive commercial energy storage batteries. The initial annual production target is set at 10,000 units, with construction scheduled to begin in the third quarter of this year and production set to start in the second quarter of 2024.

Data shows that in 2022, Tesla’s Shanghai operations generated a total output value of 183.9 billion yuan, accounting for 23% of Shanghai’s automotive manufacturing output.

In a remarkably short period, Tesla’s Shanghai Gigafactory achieved a local parts sourcing rate of over 95%, driving growth across 360 upstream suppliers, creating 100,000 jobs, and generating 700 billion yuan in cumulative orders.

This further demonstrates that China needs Tesla, and Tesla needs China.

Ten years ago, Tesla had produced only about 3,000 vehicles in total; by 2022, a decade later, that figure had surpassed 3 million. China is Tesla’s largest global production hub and its second-largest market.

In the new energy vehicle industry, bringing in Tesla to act as a “catalyst” and drive the transition from policy-driven development to market competition is the very essence of China’s Gigafactory.

Cooperation with China

Boosting Government KPIs Multiple Times

Large-scale, high-impact “Tesla-style” projects can certainly drive local economic growth.

In the past, investment promotion was all about “prioritizing big projects over small ones.” To attract multinational corporations and publicly listed companies, top local government officials would lead delegations, devise visitation plans, and offer generous settlement terms—often providing support through “super-national treatment.”

There are essentially two reasons behind this:

First, large enterprises possess advanced technology, state-of-the-art equipment, mature operational models, and stable supply chains.

Second, such enterprises are large in scale, involve substantial investment, and generate high returns, thereby driving local employment and fiscal revenue.

However, investment promotion does not mean that only large projects are acceptable, nor does it imply that without large projects, success is impossible.

Not every region has the capacity to “absorb” large-scale projects. For instance, limited land resources, inherent geographical constraints, or shortages of certain resources may make a region unsuitable for the survival and development of large enterprises.

Every region has its own unique factors. While the idea is to leverage immovable factors and attract those that are movable, the reality is not always so straightforward.

Investment promotion is not merely about enterprises choosing a region; regions can also select enterprises. Focusing solely on project size is one-sided; choosing projects that are highly compatible with regional development is more conducive to local growth.

As the global economic landscape becomes increasingly volatile, the direction of investment promotion must also be adjusted. The practice of fixating solely on large enterprises no longer meets the demands of the times; attracting "technology" through local investment promotion is the core driving force behind high-quality development.

Undoubtedly, Chinese enterprises are growing stronger and continuously breaking records in terms of scale, but they still face bottlenecks in core technologies. It is important to recognize that while the numbers are noteworthy, a more detailed analysis from a cross-sectional perspective is even more valuable.

In terms of “Made in China,” with 41 major categories, 207 medium categories, and 666 minor categories, China possesses the world’s most comprehensive industrial system.

Among 500 major industrial products, China ranks first in the world in production volume for over 40% of them. However, these 666 subcategories do not represent specialized sectors.

If we drill down to the dozens or even hundreds of sub-subcategories, Chinese enterprises do not hold a competitive edge in most of them, and in many cases, they are virtually nonexistent.

Put simply, if we examine the full picture of the manufacturing system under a magnifying glass, we will discover vast gaps. It is not hard to imagine that the lack of core technologies lies precisely within these niche sectors.

When it comes to attracting small and medium-sized enterprises (SMEs), local governments need to provide careful nurturing and policy support—rather than filtering out small projects simply because “attracting” seems to yield faster results than “nurturing” on the surface.

Small and medium-sized enterprises—low-key and unassuming—are scattered throughout every corner of the city, serving as the stepping stones and supporting components for leading enterprises. They are a vital link in the industrial chain. When viewed through a magnifying glass and concentrated at a single point, their collective power is sufficient to ignite a sheet of paper.

Therefore, local governments must develop their own “focus strategies” and devote all their energy and resources to these enterprises. You will discover that they possess immense power to “break through the impasse at a single point.”