Green Value Chains, Industrial Policy, and State-State Relations: Political Realignment in the Transition to Electric Vehicle Production in Thailand

As China has gained a commanding lead in most of the technologies required for the transition to renewable energy, countries around the world are turning to China to further their own industrial development and advance their own energy transitions. However, China’s lead in green technology is the product of a unique form of state-business linkage, which produces a very peculiar form of comparative advantage for Chinese firms. This potentially makes substantive investment and technology transfer by Chinese companies harder to induce, requiring a more proactive role of recipient country governments. The way in which countries approach this challenge seems certain to impact their relationship with China for the years to come. This paper puts forward an exploratory argument about how this dynamic is shaping the relations between China and other countries, based on a case study of the Chinese electric vehicle (EV) industry and its expansion in Thailand. It is based empirically on document analysis, interviews, and fieldwork, mainly conducted in late 2025. We find that the much of the strength of Chinese EV and battery manufacturers comes from being embedded in tightly knit production clusters in mainland China, themselves the result of a decade-long industrial policy and marked by close state-business cooperation. A combination of factors such as skilled workforces, strong infrastructure, ample financing and support from local authorities is making these clusters unparalleled bases for production for Chinese companies. From a firm perspective, however, this has meant that cost-based incentives for international expansion of the production process have been comparatively weak . Conversely, we find that external pressures to diversify are providing very strong incentives for Chinese EV firms. These include market conditions at home, tariff threats, but crucially also recipient country development policies. In the case of Thailand, the government plays a key role in affecting localization and technology transfer. Prioritized industries receive preferential treatment in exchange for localization of production facilities. This policy has been quite successful in attracting Chinese manufacturers to Thailand, who often vocally commit to government targets. We argue that, in response to China’s own close state-business coordination, regional middle-income states are taking much more proactive roles in guiding investments from the outside to build local production networks; what is emerging is a new political dynamic in economic relationships, centered on state intervention and negotiation. Government departments and companies on both sides need to negotiate appropriate levels of technology transfer. This is reinforcing and accelerating an existing trend towards bilateralism over multilateralism in China’s foreign economic ties. Due to the clear capability gap in the relationship, integration will be highly asymmetric. We predict that, under the emerging model, Thailand will attain a base level of technology transfer and value added but remain structurally at a level of dependence. The political priorities of the Chinese government put a hard limit on any form of transfer, and constant negotiation will be necessary as they evolve. Under such a mode of engagement, polyalignment remains possible, but vulnerability to political fluctuations is significantly increased.