Why have external headwinds not weakened China’s manufacturing competitiveness? Subsidies may provide a cushion, but they are not enough to create industrial competitiveness. China’s industrial competitiveness starts with large, deep, and complete supply chains. A third source of China’s competitiveness is the innovative capacity of its technology firms. Successful Chinese firms owe their strength not just to low costs, but also to their ability to turn technological innovation into industrial competitiveness rapidly.