Transcript | The Platform State: Angela Zhang and Alex Yang on How China Really Governs Its Economy
Transcript (courtesy of the fantastic CadreScripts) further down the page. Image by Keya Zhou. Listen in the embedded player above!
This week on Sinica, in a special episode recorded at the Davos On Air booth at the World Economic Forum’s Annual Meeting of the New Champions in Dalian, I sat down with Angela Huyue Zhang, professor of law at USC’s Gould School of Law and author of High Wire: How China Regulates Big Tech and Governs Its Economy, and S. Alex Yang, professor of management science and operations at London Business School. Angela and Alex — who are also married, and who arrived at this collaboration from opposite ends of the academy — have developed what I think is one of the most useful new mental models for understanding China’s political economy: the platform state. Their argument is that we should think of the Chinese state less as a central planner or owner and more as a platform company like NVIDIA or Apple, one that builds architecture, sets standards, and governs an ecosystem within which fiercely competitive private firms fight it out. Value accrues at the system level rather than as firm profit, and the payoff may decide who wins the race to put AI to work across an entire economy.
5:37 – Three puzzles the framework is built to solve: profitless dominance in solar, EVs, and batteries; why the “grabbing hand” hasn’t strangled Chinese innovation; and how China is attempting both zero-to-one invention and one-to-hundred scaling at once
7:57 – The platform state thesis: why the Chinese government behaves like a platform company, how nurturing an ecosystem of private firms solves the information deficit that cripples command-and-control, and why over-entry, involution, and consolidation are a repeated pattern — from EVs to the 140-plus humanoid robot companies operating today
16:13 – The aha moment: how a paper on the legal infrastructure of physical AI became the platform state idea over the Zhang-Yang dinner table, and whether this is a new species of political economy or the East Asian developmental state in new clothes
20:44 – State conditions: why state capacity and domestic scale are the two preconditions for the model, and why an ambitious Vietnam — which has the top-down capacity — may still find the Chinese playbook impossible to replicate
23:39 – Profitless dominance by design: harvesting versus extracting, the Uber analogy, overshooting as a control-theory strategy for nudging sectors, and how the anti-involution campaign and the 60-day supplier payment mandate show the state moderating the very competition it engineered
30:33 – Organized chaos: from the bike-sharing graveyards of the O2O wars to today’s disciplined market, the exit of more than 400 EV makers since 2018, and why the survivors of China’s “Premier League” of competition are now turning profitable
32:59 – The 3Gs playbook: growing markets by solving the cold-start problem, from Liuzhou’s EV test drives to Beijing’s green license plates, and how subsidy is only one lever among many
38:36 – Governing the ecosystem like Apple runs its App Store: why Beijing regulates generative AI with a light touch but physical AI is a different species entirely, law as the sixth layer of the AI stack, why robotaxis scale faster in China than in the U.S., and the state-convened standard-setting that’s driving down humanoid robot costs
46:54 – Two flywheels: the familiar data-and-cost flywheel and the deeper state capacity flywheel, and how the National AI Fund’s small but voting stake in DeepSeek aligns a complementor with the domestic stack — tilting the ecosystem toward Chinese chips
53:28 – Guarding the moat: automotive data rules and Tesla’s stalled FSD ambitions, the unwound Manus sale, China’s own small yard and high fence, and the closing provocation — that America could build the smartest frontier models and still lose the diffusion race to “artificial good-enough intelligence.” Plus: the case for coopetition, and what policymakers should (and shouldn’t) borrow from the platform state
Links from the episode
Angela’s paper on law as the sixth layer of China’s AI stack:
Three Project Syndicate op-eds on the platform state idea:
The Rise of the Chinese Platform State by S. Alex Yang & Angela Huyue Zhang
Are Government Stakes the Key to AI Sovereignty? by Angela Huyue Zhang
Overcapacity Is China’s Biggest AI Advantage by Angela Huyue Zhang
Two Management Science papers on commercial platforms:
Crowd-Judging on Two-Sided Platforms: An Analysis of In-Group Bias
Improving Dispute Resolution in Two-Sided Platforms: The Case of Review Blackmail
Transcript
Kaiser Kuo: Welcome to this special edition of the Sinica Podcast, a weekly discussion of current affairs in China. In this program, we look at books, ideas, new research, intellectual currents, and cultural trends that can help us better understand what’s happening in China’s politics, foreign relations, economics, and society. Join me each week for in-depth conversations that shed more light and bring less heat to how we think and talk about China.
I’m Kaiser Kuo, coming to you this week — and that’s what makes this a “special edition” — from Dalian, from the Davos On Air booth at the World Economic Forum’s Annual Meeting of the New Champions 2026.
For over 20 years now, I have had the privilege of working as an official writer for the World Economic Forum. And this year, they’ve asked some podcasters to team up with them to bring shows to you under both the Davos on Air banner and under the banner of our own podcast. So, I am delighted to be able to do this with Sinica.
Sinica, of course, is supported this year by the Center for East Asian Studies at the University of Wisconsin-Madison, a national resource center for the study of East Asia.
Listeners, you can support my work by becoming a paying subscriber at sinicapodcast.com. Really, I do need your help to keep doing this work to be able to continue to bring you these conversations.
When this year’s two sessions wrapped up in Beijing and the 15th five-year plan was formalized, to the surprise of basically no one, the Chinese leadership had placed at the center of China’s economic future the familiar “new quality productive forces.” Things like, of course, AI, quantum computing, biotech, clean energy, drones, and other components of the so-called low-altitude economy, 6G telephony.
The easy read was one that we so often hear from the punditry in the West especially. This is a command economy picking champions and winners and directing investment and other resources from the top down. But that read keeps colliding with an awkward fact. In most of the sectors where China now leads — EVs, batteries, solar, increasingly in AI — the dominant firms are actually private.
Margins, despite all the help from the government, are razor-thin. Competition is so brutal that the government often has to step in to cool things down. So, what exactly is the state doing if it’s not central planning as we once understood it? My guests today have a really striking answer. They tell us we should think of the Chinese state less as a planner and more as a platform company like NVIDIA or Apple that builds the architecture, that sets the standards and governs the ecosystem, within which fiercely competitive firms are then allowed to fight it out.
Value doesn’t show up as firm profit. It accrues instead at the system level in lower costs, integrated supply chains, and faster learning. They call it the “platform state,” and they break its playbook into a handful of deliberate moves, growing markets, governing them, and guarding them. So growing, governing, and guarding. The payoff, they argue, could decide who wins, not the race to build the smartest model necessarily, but the race to put AI to work across an entire economy.
I find it a really compelling mental model that I suspect is going to catch on. You’ll remember you heard about it here first. It’s sure to generate a lot of debates and some pushback too, but it’s a terrific idea.
I am joined today in Dalian by the two people behind this argument. Angela Zhang is professor of law at the University of Southern California, previously seven years at University of Hong Kong, and she’s the author of High Wire: How China Regulates Big Tech and Governs Its Economy, and Chinese Antitrust Exceptionalism.
Her recent work includes a paper arguing that law is a sixth layer of China’s AI stack. I’ve been following her work for years, but only just met her actually earlier this year in Hong Kong, where she, until recently, lived at an AI governance conference there that we both attended. Angela, great to see you here in Dalian, and a warm welcome at last to Sinica.
Angela Zhang: I’m so happy and delighted to be here. I’m a big fan of your show, Kaiser.
Kaiser: Thank you so much. That’s very kind of you. Also here in Dalian with us is Alex Yang, Professor of Management Science and Operations at London Business School, where he studies platforms, not surprisingly, supply chains, and operations strategy. What I find irresistible about this collaboration is that they arrive at the same thesis kind of from opposite ends of the economy, or the of the academy, really. One from law and regulation and the other from operations and platform economics.
They are also, I should mention, not meeting here for the first time. They’re husband and wife, a household that apparently argues about Chinese industrial policy over dinner. Maybe we can get them to talk about that a little bit. But Alex, first, a very warm welcome to Sinica.
Alex Yang: Thank you. Thank you for having me, Kaiser.
Kaiser: It’s a real pleasure to have you both on. And let’s just jump right in and talk about how you frame this in talks that you’ve given about the paper in terms of puzzles. And I’ll lay out some of these. I want to start thinking about this because these are things that your framework is really built to solve, to really give us an understanding into why these conundrums exist.
I mean, these are things that I’m sure many of the people listening will have thought about, will have scratched their heads over. These are seeming contradictions. So, three of them I’ll just talk about very quickly. The first is what we might call profitless dominance. Right? China controls over 80 percent, as everybody knows, of the global solar supply chain.
BYD has passed Tesla now as the world’s largest EV maker. Battery makers like CATL are enormous. The firms, though, they find themselves, not in all cases, but many of them find themselves bleeding cash in these vicious price wars. We’ve all talked about neijuan, you know, about involution. How do you win an industry while your own champions are going broke? So that’s one puzzle.
A second is older, maybe more theoretical. There’s a common view that I’m sure many, probably people hold to that somehow, without secure property rights, without constraints on state power, authoritarian systems just can’t sustain innovation. The state becomes a grabbing hand, not a helping hand. And in the Chinese tech world, it’s pretty easy to find examples that seem to support this idea of the state as a grabbing hand. If you think the Manus sale to Meta, which had to be completely unwound, exit bans that they’ve placed on leading Chinese AI researchers.
So I guess the puzzle, if you wanted to put it this way, is why hasn’t this grabbing hand strangled Chinese innovation? Because quite obviously China continues to innovate. And third, a puzzle again rooted in a common idea that innovation and discovery tend to under decentralization while scaling is perhaps easier under central control. So, looks like, you know, America, very decentralized, very, very good at zero to one innovation. And then China, the great scaler, the one that goes one to 100 really well because of its tight central control.
But no system is supposed to be able to do both. Here we have though China really now trying very hard to do both. So, let me put it simply into Angela. Is there a single key that unlocks all three of these puzzles at once, and what is it?
Angela: Yeah, and the idea that we propose in the paper that crucial key to understanding these puzzles is to see the Chinese government as a platform company. I mean, I want to first clarify that I want to see the government as a platform company rather than just a platform. So, think about what platform companies do, right? I mean, why platform company represents such a revolutionary idea for organization in the past two decades, right?
I mean, companies like Google, Amazon, NVIDIA, they become like dominant forces in economy. It’s because they unlock values through facilitating transactions among platform participants from different sides. So they don’t directly participate in either providing the services or producing the goods, right? Just like Uber does not own the car or don’t drive the car themselves, but they’re trying to facilitate those transactions and that’s how they create values, right? I mean, at the end of the day, they want to nurture an ecosystem.
So that allows them to take a very asset-like approach to scale very quickly. And what we see is the Chinese government is adopting a very similar approach right now. When you look at the fastest growing companies, the fastest growing industry in China, whether it’s renewable energy or EV, right, and now humanoid robots, as well as other future industries that China want to invest in, they’re almost all predominantly privately owned, right?
I mean, it doesn’t mean that the state does not invest in anything in those companies, but those states are very small, right? And for the most part, the government is trying to nurture an ecosystem, trying to get everybody on board. And whether from different stages of supply chain to get everyone there, and then trying to get them to compete, right? And that’s the way for the state to accrue its capability. And that’s why, you know, you see these industries, China, have dominated one sector after
