Elon Musk’s Success In Navigating US-Chinese Governments And Markets – Analysis

By He Jun

Elon Musk, the CEO of Tesla, is undoubtedly a highly unique personality in today’s world. According to researchers at ANBOUND, in the pursuit of technological advancements that shape human society, against the backdrop of deteriorating U.S.-China relations, in the competition between industry and capital, and in the realm of commercial practices aiming to achieve innovation, Musk’s distinctiveness and influence far surpass his counterparts.

Firstly, he is a maverick and successful entrepreneur. Musk founded or invested in two remarkable companies. In June 2002, he invested USD 100 million to establish SpaceX. Then in 2004, he invested USD 6.3 million in Tesla, a company founded by Martin Eberhard, and currently serves as its CEO. Both companies have achieved significant success. SpaceX not only developed the Falcon rockets and Dragon spacecraft, reclaiming America’s dominance in manned space launches after the end of the Space Shuttle program but also launched the Starlink project, a low Earth orbit satellite internet constellation aimed at providing global high-speed internet coverage. Starlink played a significant role in transforming the nature of warfare during the war in Ukraine. Tesla has become the leading global company in the electric vehicle field, and it has almost become synonymous with Musk himself.

Secondly, Musk has managed to navigate well within the governments of both China and the U.S. As it is widely known, U.S.-China relations have taken a sharp downturn in recent years, with the U.S. designating China as its “long-term strategic competitor”. From the Trump administration to the Biden administration, the U.S. has implemented severe and systematic measures to suppress and sanction China, resulting in the lowest point in geopolitical and economic relations between the two countries since their establishment of diplomatic ties. With the U.S. rallying its allies worldwide to contain China, nations and companies have been forced to take a stance and make public statements when it comes to China-related issues. Many countries/regions (such as Japan, South Korea, the Netherlands, and Australia) and companies (such as ASML, Intel, Tokyo Electron, and TSMC) have had to comply with U.S. government sanctions measures and sacrifice significant economic interests. In response to the U.S. crackdown, China has also launched fierce countermeasures, ranging from diplomatic and trade aspects to sanctions against companies.

However, amidst the intense geopolitical rivalry between the two countries, Musk has displayed remarkable ease in both the governmental and societal spheres of the U.S. and China. In the U.S., SpaceX has established close ties with the military, securing numerous rocket launch orders and receiving financial support from the American military during its development process. This allows SpaceX to conveniently utilize rocket launch facilities under U.S. government control. The rockets and Dragon spacecraft developed by SpaceX have become the primary means of manned space launches in the country, eliminating the need for exorbitant payments to Russia for seats on the International Space Station (ISS). Of particular note is the Starlink project developed by SpaceX as a private enterprise, which has garnered significant attention during the war in Ukraine, as mentioned earlier. The space-based internet services it provides have played a crucial role in supplying vital network services to Ukraine. Industry insiders have praised the Starlink project for single-handedly redefining modern warfare and accomplishing feats that even the U.S. government could not achieve.

In China, Elon Musk is regarded as an esteemed guest of the Chinese government and enjoys a positive reputation in Chinese society and the market. While the Trump administration intensified its efforts to suppress China, causing U.S. companies to have doubts about investing in China, Tesla took a different approach by establishing a Gigafactory in Shanghai. The Chinese government supported this project, creating an unprecedented record for Tesla in terms of land acquisition, factory construction, production, sales, and profitability. The Shanghai factory has now become Tesla’s largest production base globally, and the Chinese market has become one of Tesla’s most significant markets. Tesla’s investment in the Chinese market was a mutually beneficial endeavor. It defied the cooling trend in U.S.-China relations and demonstrated Tesla’s attitude to the Chinese government. Moreover, Tesla became the first foreign-owned car company to have full control of its operations in the country after China adjusted its foreign investment policies. This extraordinary story of the Chinese market provided substantial support for Musk to counter Wall Street’s near-consensus bearish sentiment on Tesla.

Amidst the U.S. efforts to rally allies against China and the growing anti-China sentiment within American society, Musk openly recognized China’s advancements in the economic and technological domains. His statements not only conveyed admiration for China but also emphasized the striking disparity between his position and the uninformed views held by certain politicians and geopolitical observers. During his recent visit to China, Musk made it clear that Tesla stands against the notion of “decoupling” and remains committed to expanding its operations in China, embracing the opportunities presented by China’s ongoing development.

Furthermore, Musk advocates for industrialism and technological innovation, holding capital in contempt and disregarding Wall Street’s influence. He leads Wall Street, rather than being led by it. According to the tracking research conducted by ANBOUND, Tesla’s development was once highly precarious, particularly in 2018 when the company struggled with issues such as production capacity, financial losses, and debt repayment. The American capital market, represented by Wall Street, had lost faith in Tesla. Major investment banks like Goldman Sachs and Morgan Stanley, as well as some aggressive hedge funds, started shorting Tesla. During that time, Tesla signed an investment cooperation agreement with Shanghai. During that time, researchers at ANBOUND had already analyzed and predicted in 2018 that Tesla’s salvation lay in the Chinese market. If Tesla could seize the opportunity to successfully penetrate the Chinese market, it would not only be reflected in its performance but also generate new expectations in the capital market.

In 2019, Tesla’s situation took a turn. During Christmas of that year, Tesla received two significant “gifts”: first, an RMB 10 billion ultra-low-interest loan from a Chinese state-owned bank, and second, Tesla’s stock price reached a historical high, surpassing a market value of USD 75 billion. On December 26, 2019, Tesla’s stock price rose to USD 430, causing short sellers to face pressure to cover their positions. Musk ridiculed David Einhorn, the founder of a short-selling firm Greenlight Capital, saying, ” “It is understandable that you wish to save face with your investors, given the losses you suffered from Tesla’s successful third quarter, especially since you’ve had several down years in performance and a sharp drop in assets under management from $15 billion to $5 billion”, and added that, “you have our sympathies”. Einhorn also admitted that Tesla had caused significant losses for Greenlight Capital and was one of their most unsuccessful bets. Morgan Stanley was also among the short sellers who suffered losses due to their misjudgment of the direction.

Musk’s disregard for Wall Street financial institutions, which are feared by everyone in the international market, showcases his attitude as a new generation of technologists. In a world characterized by prolonged credit expansion, humanity finds itself in an era of abundant yet cheap capital, particularly after the 2008 financial crisis. The true rarity lies in technological innovation that aligns with humanity’s future aspirations and effectively connects creativity with market demand, a pursuit that Musk is fully committed to. While Wall Street prioritizes capital investment returns, Musk directs his attention to human ingenuity and the realization of future dreams.

Final analysis conclusion:

Elon Musk’s ability to navigate seamlessly between the United States and China, transcending the complexities of geopolitical rivalry, lies in his capacity to establish a commercial connection between technological innovation and human needs. Moreover, he continuously contemplates significant topics such as the threat of AI to humanity, human migration to Mars, and freedom of speech in the digital age. In the current highly intricate global landscape, Musk’s exceptional ability is not merely a stroke of good luck. The actions he takes and the questions he ponders largely align with the common aspirations of nations worldwide. His contributions exemplify the rare ability to address the shared interests and challenges that the world collectively faces.

He Jun is a researcher at ANBOUND