John Minnich

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268 appearances 1 recordings 1 series first heard Aug 2026 last heard 6 Aug

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Unhedged · The Economics Show: China wanted western tech. Now, the tables have turned. · 6 Aug 2026 podcast

And Apple faced these same kinds of pressures in the middle of the 2010s.

And this, of course, is what Patrick McGee documents in his book, Apple and China.

But the story that Patrick tells there, which I think is really fascinating, is how Apple was able to effectively reframe what it had been doing in China over the past decade as a kind of voluntary technology transfer policy.

So Apple's story was, look, you don't have to force a joint venture on us because, in effect, we've been engaged in a joint venture or we've been engaged in dozens of joint ventures across the supply chain over the past decade.

And it turned out that that was a very convincing piece of public relations from the Chinese government's perspective.

To some extent.

I mean, so what we see with the Tesla case is that what in the Apple case had previously been kind of an emergent property of happenstance events unfolded this way.

By the time we get to Tesla, it's beginning to congeal into something like a conscious strategy on the Chinese government's part.

And the name that's been given to the strategy is what we call the catfish effect.

The idea is you want to bring in.

a hyper-competitive foreign multinational enterprise, both to drum up competitive pressure for other original equipment manufacturers, in Tesla's case, BYD, Xpeng, so on and so forth.

But also you want to bring in a firm that, like Apple, has very high standards when it comes to sourcing components and parts and will very actively work with your domestic supplier ecosystems to build them up.

So with Apple, it happened almost by accident.

By the time we get to Tesla, this becomes a concrete strategy.

Now, is the message of this that joint venture requirements are not useful or that you can just pursue CAPA strategy in every particular case?

And I would say no, in the sense that, one, I think we have to recognize that Apple and Tesla are pretty unusual companies, I think, in the

demands that they place on suppliers and the extent to which they're willing to invest in working to build up those supplier bases i don't think that that is going to replicate itself organically in most cases two although there are real limits and real problems with joint venture requirements it can generate

rent-seeking incentives on the domestic party's part, and so on and so forth.

At the same time, the benefit of a joint venture requirement is that it gives you a direct ownership stake in the venture, and through that, formalized control over what the foreign partner is doing in a way that, especially, I think, in developing contexts like China in the early 2000s, can be really beneficial.

Europe has some really significant advantages and resources that it can leverage to do this pretty effectively.

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