Hefei, the city that dares

Hefei, the capital of Anhui province, has grown in twenty years from a modest provincial city into the place that builds more electric cars than any other city in China. It got there with what China calls the Hefei model: the city put public money into companies like a venture capitalist, used it to attract display, memory chip and car makers, and later sold its shares at a profit. The delegation of the China Business Mission 2026 had Hefei on its programme on 15 and 16 October, with a selection from iFlytek, NIO, JAC and Sungrow, the USTC Silicon Valley innovation zone and display maker BOE.

From provincial town to car city

Hefei lies between Shanghai and Wuhan and was long a city few foreigners had heard of. Today it has more than ten million residents, and its economy reached 1.42 trillion yuan in 2025. That same year about 1.37 million electric and plug-in hybrid cars rolled off its production lines, more than in any other Chinese city.

The growth continues. In the first three quarters of 2026 GDP rose by 6.5% to 1,118 billion yuan. Industry is the engine: value added at large industrial firms rose by 28.7%, the electronics industry more than doubled, and exports were 62% higher than a year earlier, according to the statistics bureau's quarterly figures. There is a flip side. Fixed-asset investment fell by 18.6% and retail sales were almost flat. Hefei is growing on factories and exports, far less on its own consumers.

How the Hefei model works

Chinese business media sometimes call Hefei the best venture capitalist in the country. In 2015 the city pooled its funds into three state holding companies, which it uses to bring in large projects. The pattern repeats itself each time.

The first and best-known example is BOE. In 2008 Hefei invested 17.5 billion yuan in a sixth-generation display plant, at a time when the city's entire fiscal revenue was about 30.1 billion yuan. To pay for it, according to an analysis by Pekingnology, the city even shelved its first metro line. From December 2017 Hefei sold its shares and, according to 36Kr, made a net profit of about 14 billion yuan. Suppliers such as Corning and Sumitomo Chemical followed the plant to the city.

Not every bet paid off. A plasma display plant from 2009 lost more than a billion yuan in three years and closed. A solar project from 2010 was largely lost when the world market became oversupplied. What sets Hefei apart from many other Chinese cities is that it budgets for such losses and reinvests the gains.

Three bets that changed the city

In April 2020 carmaker NIO was close to running out of cash. Three state investors led by Hefei put 7 billion yuan on the table for 24.1% of a new entity, NIO China, based in Hefei's economic development zone, TechNode reported. According to 36Kr, the city later took out about 10.5 billion yuan and still holds around 8%. NIO delivered 334,547 vehicles from January to October 2026, 38.5% more than a year earlier, according to the company's delivery figures. How the brand works is explained in our article on NIO and its swappable batteries.

The biggest payoff came in 2026. Hefei had put between 25 and 30 billion yuan into memory chip maker CXMT since 2016, depending on the source, and the company made losses for years. On 27 July 2026 CXMT listed on Shanghai's STAR Market. The shares rose by 465.82% on the first day and the market value passed 3.2 trillion yuan, the highest of all Chinese A-shares. The city's stake, roughly a third, was worth about 1.1 trillion yuan that day according to Caixin: almost three quarters of Hefei's GDP in 2025.

Cars, chips, screens and AI

The city sums up its strategy in four characters: 车芯屏脑, car, chip, screen and brain. In 2025 six carmakers built vehicles in Hefei: JAC, NIO, BYD, Volkswagen, Changan and bus maker Ankai. Batteries, chips and parts are largely made in the region, which explains how quickly output could rise.

For screens, BOE is the big name: in 2021 it overtook Samsung as the largest maker of LCD panels for televisions, and in Hefei it built lines from the sixth to the 10.5th generation. The brain comes from iFlytek, the speech recognition specialist founded in 1999 by students of the University of Science and Technology of China (USTC). That university moved from Beijing to Hefei in 1970, and it is the reason the city also counts in basic research. On Science Island, the EAST fusion reactor held a plasma stable for 1,066 seconds in January 2025, a world record.

The Belgian connection

Hefei's most famous son is Li Hongzhang (1823-1901), the statesman who wanted to modernise late Qing China with arsenals, shipyards and railways. On his great journey of 1896 he also visited Belgium. King Leopold II invited him to Brussels to promote Belgian expertise and win a railway concession, according to the French-language Wikipedia. Shortly afterwards a Belgian consortium was awarded the Peking-Hankou line, a story that continues in our article on Beijing.

Today's connection runs through energy. Sungrow, a Hefei maker of inverters and battery storage, supplied 320 PowerTitan units for Engie's battery park in Vilvoorde, rated at 200 MW and 800 MWh. The first 400 MWh was connected to the grid in September 2025. More on the company in our article on Sungrow.

Judge Bao, Huangmei opera and stinky fish

Hefei is not a tourist city, but it has a clear character of its own. In the city centre lies the park with the temple of Bao Zheng (999-1062), the incorruptible Song dynasty judge who appears with a black face in every Chinese opera. Government departments still use his story as a lesson in integrity. The folksy Huangmei opera comes from Anhui, and Anhui cuisine is one of China's eight great cuisines. The brave order fermented mandarin fish or hairy tofu: both smell stronger than they taste.

Who else sits at the table

For a European business owner the lesson of Hefei is very practical. In this city the government is often regulator, shareholder, financier and customer at once. That speeds up decisions: if you fit into the city's supply chains, you will find land, capital and suppliers within an hour's drive. It also means every conversation has a political side. Two questions are best asked early in Hefei: who co-owns your partner, and when does that owner want to exit?

For European regions debating industrial policy, the lesson lies elsewhere. Hefei chose a few sectors, accepted losses, stayed patient and sold as soon as a company could stand on its own feet. Each time, the money went to the next factory instead of rescuing the last one.