Party-State Capitalism under External Trade Pressure: Explaining Firm-Level Variation in China's Electric Vehicle Sector

Why do Chinese electric vehicle firms respond differently to the same external trade pressures despite operating within a heavily state-supported strategic sector? This study examines how variation in firm-level embeddedness within China’s party-state capitalist system shapes corporate adjustment under the tightening trade environment of 2023 and 2024. It develops a two-dimensional framework distinguishing organizational embeddedness from capital embeddedness and argues that the former is most closely associated with the timing of strategic-agenda activation, while the governance form of state-linked capital conditions the response tools firms can credibly deploy. Using a structured, focused comparison of BYD, NIO, XPeng, and SAIC Motor, the analysis reconstructs firms’ pre-shock embeddedness profiles and compares their subsequent responses across timing and strategic tools. The findings show that stronger organizational embeddedness corresponds to earlier and more formal strategic activation, while differences in capital governance form help explain divergence among overseas production, partner-based expansion, contract manufacturing, market defense, and legal challenge. The comparison also shows that firm behavior cannot be reduced to a simple continuum of state proximity: privately controlled firms may pursue more autonomous and capital-intensive adjustment than more state-embedded firms. The study therefore advances party-state capitalism from a system-level description toward an explanation of differentiated firm-level behavior under external economic pressure.