In the 2010 remake of The Karate Kid, Sherry Parker (Taraj P. Henson) moves with her son Dre (Jaden Smith) from Detroit to Beijing for a new career and a new life. While the exact job was never spelled out, the subtext was that it may have been in the auto industry.

If only they had moved to Hefei, then the film would have been much more than just the triumph of Jackie Chan training Jaden Smith to karate redemption and glory—it would’ve also been a triumph of prescience on the reordering of global production.

You’ve probably never heard of the second-tier Chinese city Hefei, but it has reasons to lay claim to the Detroit of the 21st century.

From Detroit to Hefei

At the turn of the 20th century, Detroit was a sleepy city of a quarter million nestled by Lake Erie. In just thirty years, the city’s population exploded to 1.6 million, catapulting Detroit to the fourth-largest metropolis in America. By mid-century, Detroit was the bona fide “Motor City” for one of the most technologically advanced industries at the time: automobiles.   

The American auto industry, centered on the “big three” of General Motors, Ford, and Chrysler (now Stellantis), blanketed the industrial Midwest with an auto supply chain and manufacturing assets. The auto industry sustained a middle class and spawned strong labor unions. You could aspire to join the middle class by earning a good wage in the auto industry, which also afforded you the material trappings of the middle class: the very car you helped to make.

Since the 1970s, Detroit’s auto industry has been challenged by the rise of European and Asian competitors. But perhaps no challenge is as significant as the clear and present threat: the age of electrification.

Not that electric vehicles (EVs) are new—GM had built one long before Tesla did but ended up killing it. Yet today, even within America, the EV action isn’t centered around Detroit. Instead, a once backwater Chinese city halfway around the world is buzzing with electricity and the potential to assume its centrality in the auto industry.

Like Detroit, Hefei, the capital of Anhui province, is nestled next to a (much smaller) lake. At the turn of the 21st century, the Chinese city was mainly notable for being remarkably poor. It had an abysmal per capita GDP of $930, which was even below the paltry national average of $955. By 2023, the city had flipped the plot. It added more residents than any other provincial capital that year, while its per capita GDP ($18,365) now stands ~50% higher than the national per capita GDP, thanks to clocking the fastest growth among the top 30 Chinese cities since 2010.

The city’s meteoric rise has also propelled Anhui’s economy from just 2.7% of China’s GDP in 2008 to 3.8% in 2023—the largest increase among all provinces and regions—far outpacing traditional coastal growth engines like Guangdong and Shanghai (see Figure 1).

Figure 1. Anhui’s Share of China’s GDP Grew Most over Last 15 Years

Note: Data show each provincial administration’s contribution to China’s national economy.
Source: National Bureau of Statistics.

Hefei’s growth is increasingly powered by the automobile industry, like Detroit in its heyday, though in this case it’s mainly EVs not gasoline cars. The who’s who of Chinese EV manufacturers have set up shop in Hefei, including NIO, BYD, and even Huawei. Volkswagen, too, is a first-mover foreign player to invest $2.7 billion in the city to manufacture EVs and establish a research and development center. As a result, Hefei in 2023 churned out an impressive 740,000 vehicles (including hybrids and full battery), or 1/10 of China’s total, and has ambitions to reach an annual output of 3 million vehicles by 2025 (see Figure 2).

Figure 2. Hefei Vying To Become Top EV Production Hub

Note: This shows the top 10 EV production hubs by volume. Only Fremont, Tesla’s production base, is not in China. Some 2025 production targets are unavailable.
Source: China Association of Automobile Manufacturers; Tesla.

It’s Not Just Cars, It’s The Ecosystem

Suppliers, particularly battery makers like Gotion, CALB, and SinoEV, have of course followed the EV manufacturers to Hefei. Take Gotion for example. Based in Hefei since 2006, the battery giant has steadily deepened key customer relationships with the likes of NIO and Volkswagen, which also became a major shareholder in Gotion in 2021. Anchored in Hefei’s EV cluster, Gotion has aggressively expanded into the global market, establishing footholds from Illinois and Michigan to Morocco and Germany.

Beyond batteries, the suppliers flocking to Hefei are different because today’s cars exist within an ecosystem that also includes chips, software, advanced displays, and other digital accoutrements. They are not just “driving machines” that require traditional auto parts like a carburetor and timing belt—they are “digital machines” that increasingly share characteristics with consumer electronics and robotics. 

Take advanced display giant BOE, an emblem of state capitalism. The Hefei government invested in the state-owned company as far back as 2008. BOE doesn’t just have a significant manufacturing presence in Hefei today; over the last 15 years, the company has grown from a market cap of $1 billion to more than $20 billion. It had bought Varitronix in 2016, which specializes in LCD displays for automotives, positioning it as a supplier for the EV industry.

The city has also attracted Changxin, China’s memory chip champion, as well as nearly two dozen “Little Giant”companies from which Beijing hopes a new batch of hard tech unicorns will spring. These firms span segments like machine tools and battery materials to EV drivetrain management systems.

Then there’s also solar. Hefei is already home to 100 companies spanning the entire supply chain from polysilicon to energy storage. In fact, Hefei-based solar companies have seen their total revenue jump from $7 billion to $27 billion in just two years, which in turn propelled Anhui’s energy storage industry to the third-largest nationally last year.

EVs, batteries, and solar, oh my! Could it be that Hefei is going for the “new three” sweepstakes? It is certainly emerging as a posterchild of Beijing’s de novo development strategy of “new quality productive forces”—an alignment that is good politics and good for business these days.

Tried and True Playbook

So, was Hefei just lucky or did it have outsized strategic foresight to put its chips in EVs? Neither. Hefei’s rise seems to follow a conventional playbook that China leverages exceptionally well: the clustering effect, or agglomeration. The textbook case of economic agglomeration is probably the city of Dongguan in the Pearl River Delta. At one point, Dongguan alone produced 25% of the world’s cell phones.

And if Hefei had its way, it would become for EVs what Dongguan has been for consumer electronics. In fact, if the city hits the 3 million vehicles target next year, it will already account for over 20% of global EV production. Even if it misses the mark, Hefei is still methodically laying the foundation to realize its ambitions by clustering suppliers in its ecosystem, agglomerating over 200 technology companies in its Innovation Industrial Park, and investing in key research institutions like the University of Science and Technology.

Yet if such a playbook is prevalent, why haven’t other Chinese cities been brimming with Hefei’s level of success? That’ll require a separate deep dive, but one macro explanation may be that Hefei is benefitting from a broader shift in China’s economic center of gravity. It’s a shift that somewhat parallels what’s been taking place in the United States over the last couple decades.

In 2000, the “Acela Corridor”—a term of endearment for the East Coast powerhouses from Boston to DC—accounted for a quarter of US economic output, a share that dropped to 22.4% in 2023. The six fastest-growing southern states (Texas, Florida, Georgia, Tennessee, and the Carolinas) now surpass the East Coast as a bigger contributor to US GDP at nearly 24%.

Likewise in China, the ever-dominant Beijing-Shanghai corridor is also slipping in its share in the national economy, dropping from 31% in 2000 to 29% in 2023. Meanwhile, the regions along the Yangtze River Belt (Sichuan, Chongqing, Hunan, Hubei, Henan, Jiangxi, and Anhui) saw their contribution to GDP rise from 22% to 26% over the same period (see Figure 3).

Figure 3. From Coastal Economies to River Belt Economies

Note: Data show regions’ aggregate share of China’s total GDP.
Source: CEI Data.

But what is obvious today was hardly preordained. These shifts can be glacial for a long time before they start to cascade. That’s because clustering isn’t easy—it requires some synchronicity in the allocation of physical capital, financial capital, and human capital. Above all, it needs to be sustained over decades before the outcomes become apparent. Hefei seems to have doggedly kept at it, bootstrapping itself from paucity to prosperity.

Clearly, Hefei isn’t content to just be a Chinese version of the “motor city”; it wants to be an advanced manufacturing hub writ large. Whether Hefei can avoid the fate of one-industry towns is anyone’s guess at this point. But so far, it seems to be doing many of the things that will maximize its runway to grow and remain vital to China’s new economy.