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Why China welcomes the pain Tesla brings

Generous policy expected to reap spillover benefits like Apple created

China has permitted Tesla to establish wholly owned operations and made its domestically produced vehicles eligible for subsidies.   © Reuters

HONG KONG -- When China allowed Elon Musk to set up the Tesla Gigafactory in Shanghai in 2018, it was as if a big catfish had just been dropped into a placid pond. Homegrown electric vehicle manufacturers were suddenly in mortal danger. The introduction of the industry's apex predator signaled an existential challenge. 

To make matters worse, Tesla had taken advantage of a new policy that permitted foreign carmakers to establish wholly owned operations in China, meaning that it was not obliged to share technology and manage relations with a Chinese partner. In addition, the cars produced by the $2 billion factory would be eligible for subsidies, just like those produced by native Chinese companies.

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