The fall of General Electric, as chronicled in Lights Out: Pride, Delusion, and the Fall of General Electric (Thomas Gryta and Ted Mann, 2020), offers a sobering yet instructive case study for China’s manufacturing sector. Rather than a cautionary tale of inevitable decline, GE’s experience serves as an analytical framework for examining how structural weaknesses can accumulate within vast, complex industrial organizations during periods of rapid transformation.
Viewed through this lens, GE’s collapse is less about corporate failure in isolation and more about the systemic risks facing large-scale, state-adjacent manufacturing systems operating amid technological disruption and intensifying geopolitical competition. Its trajectory highlights how strategic overreach, managerial opacity, and misaligned incentives can quietly erode resilience—lessons that are highly relevant for any industrial power seeking sustainable global leadership.
Learning from Decline: What Huawei Has Drawn from the Fall of America’s Industrial Giants in an Era of Sino–U.S. Competition
Against the backdrop of intensifying Sino–U.S. strategic competition, Huawei’s rise is best understood not as an accident of scale or state support, but as a deliberate counter-learning exercise from the decline of American industrial icons such as General Electric, IBM, Boeing, and Lucent. Huawei closely studied how once-dominant firms mistook historical success for permanent advantage, allowed financial logic to override engineering discipline, and hollowed out their long-term capabilities. In response, Huawei embedded a permanent “sense of crisis” into its culture, treating survival—not short-term performance—as the core objective. Redundancy, backup systems, and worst-case planning were institutionalized long before external pressure materialized, reflecting a strategic mindset shaped by geopolitical vulnerability rather than market complacency.
One central lesson Huawei absorbed was the danger of managerial and financial overreach detached from real value creation. The trajectories of GE and Boeing illustrated how performance metrics, quarterly targets, and shareholder primacy can gradually erode engineering ethics and operational truth. Huawei therefore sought to subordinate performance management to technological substance: customer value, system reliability, and long-cycle R&D outcomes. Internal mechanisms that legitimize dissent—such as structured opposition teams, anonymous criticism channels, and routine self-criticism—were designed to prevent organizational silence and leadership infallibility. Where American conglomerates often suppressed bad news until failure became catastrophic, Huawei aimed to surface disagreement early as a form of institutional self-correction.
A second lesson concerns the “financialization trap.” The decline of GE Capital–driven GE, hardware-divested IBM, and buyback-focused Boeing reinforced Huawei’s conviction that manufacturing and infrastructure must remain the strategic core of a technology firm. By remaining unlisted, reinvesting a large share of revenue into R&D, and refusing to cash out high-margin segments, Huawei insulated itself from short-term capital pressures. It treated chips, operating systems, networks, and industrial equipment not as isolated products but as productivity infrastructure—assets that determine long-term technological sovereignty and cannot be outsourced without strategic cost.
Huawei also learned to distrust narrative-led strategy divorced from execution. The contrast between slogan-heavy transformations in American firms and Huawei’s own response to supply-chain cutoffs was instructive. Under pressure, Huawei translated strategic narratives—such as self-reliance and full-stack capability—into concrete engineering outputs: operating systems, server software, AI chips, and vertically integrated industrial solutions. In this sense, vision followed capability rather than substituting for it. Strategy was validated not by investor storytelling, but by whether systems could function under extreme constraint.
Equally important was governance. The experience of American boards dominated by financial and political elites highlighted the risk of groupthink and technical illiteracy at the top. Huawei’s alternative—diffuse authority, rotating leadership, employee shareholding, and strong independent research institutions—was designed to prevent any single logic, personality, or interest group from capturing the organization. Effectiveness, rather than formal corporate orthodoxy, became the benchmark of governance. This structure proved critical in sustaining coherence during prolonged external shocks.
Finally, Huawei internalized a system-level view of competition. Lucent’s failure to grasp the shift from equipment sales to ecosystem and standards competition reinforced Huawei’s commitment to full-stack integration: from chips and networks to cloud, AI, and industry applications. Under sustained external pressure, Huawei treated sanctions not as a signal to retreat, but as a stress test to accelerate internal capability building and ecosystem reconstruction. In doing so, it transformed constraint into a form of institutional immunity.
In sum, Huawei’s trajectory represents a counterfactual response to the decline of America’s industrial champions. Rather than maximizing financial efficiency or managerial elegance, it prioritized technological sovereignty, organizational resilience, and long-term system capacity. Its core lesson from the American experience is stark: in an era of geopolitical rivalry, enterprises that allow short-term capital logic to dominate engineering, manufacturing, and strategy ultimately forfeit their future.
The Perils of Believing in Institutional Invincibility
Narratives of institutional invincibility carry a subtle but profound danger. When organizations or systems come to be seen as inevitable winners, prestige can replace scrutiny, and reputation can substitute for performance. The history of General Electric offers a cautionary example: decades of near-unquestioned esteem, reinforced by its symbolic status in American engineering, dulled internal and external vigilance. By the time structural weaknesses became undeniable, risks had already compounded beyond easy repair.
A similar dynamic is visible in contemporary discussions of China’s industrial strength. The country is frequently described as the “world’s factory,” endowed with a “complete industrial chain” and a uniquely “resilient ecosystem.” While these claims rest on real achievements, their repetition can harden into an assumption of inevitability. Overconfidence risks obscuring mounting frictions, including persistent overcapacity in electric vehicles, solar panels, and batteries; declining returns on invested capital in heavy industry; hidden liabilities within local state-owned enterprise subsidiaries; and distorted incentives created by provincial efforts to promote “champion firms.”
The central risk is not weakness itself, but the suppression of corrective signals. When firms or sectors are shielded by national-champion status or political prestige, poor capital allocation and operational inefficiencies are less likely to be challenged. GE’s boardroom failures under Jeff Immelt illustrate how deference to reputation can mute accountability, allowing systemic problems to deepen quietly rather than trigger early intervention.
China’s advantage, however, lies in the existence of strong feedback mechanisms: inter-provincial competition, central audits, pilot reforms, and periodic policy recalibration. These tools can counteract complacency—if they are allowed to function without deference to prestige. The true test is whether institutional narratives of success remain flexible and self-critical. When invincibility becomes an article of faith, the very strengths that once drove performance can evolve into sources of latent systemic risk.
Beyond Financial Optics: Re-anchoring Growth in Industrial Fundamentals
The experience of General Electric illustrates the long-term risks of prioritizing financial performance over industrial capability. GE’s pivot toward GE Capital sustained reported growth and earnings for a time, but it did so by diverting attention and resources away from core industrial reinvestment. Over time, this strategy hollowed out the firm’s ability to fund R&D, cultivate technical talent, and upgrade next-generation production systems, leaving financial optics increasingly detached from productive strength.
China faces parallel risks, though through different institutional channels. The danger does not primarily arise from shadow banking, but from incentive structures that favor scale over substance. Performance metrics for state-owned enterprises often emphasize revenue growth or asset expansion rather than return on equity or cash conversion. In parallel, local governments may use manufacturing firms as vehicles for land development, balance-sheet expansion, or debt rollover, diluting their focus on operational excellence.
A further risk lies in the rhetorical elevation of “digital transformation” or “new quality productive forces” without corresponding changes in underlying processes. When such language substitutes for genuine modernization—rather than driving deep technology absorption, workflow redesign, and skills upgrading—it can mask stagnation while reinforcing complacency. In these cases, industrial systems appear dynamic on paper but remain structurally outdated in practice.
Unlike GE, however, China retains powerful institutional levers to correct course before financialization fully decouples from physical output. Central oversight by SASAC, periodic resets of Five-Year Plan KPIs, and Party supervision mechanisms provide channels to realign incentives and discipline managerial behavior. These tools create the possibility of intervention while productive capacity can still be rebuilt rather than merely managed in decline.
The implication is clear: state governance can prevent a GE-style erosion of industrial fundamentals, but only if it consciously prioritizes cash-generative capability, technological depth, and reinvestment discipline. Headline indicators—such as gross output value or patent counts—must remain subordinate to measures that reflect real productivity, learning, and long-term industrial resilience.
The Hidden Price of Organizational Silence
Organizational silence carries a substantial and often underestimated cost. When dissent is discouraged and bad news is filtered upward, decision-makers operate within an artificially optimistic environment. The experience of General Electric illustrates this danger: a culture that implicitly punished dissent incentivized managers to protect narratives rather than confront realities, allowing problems to compound until they became systemic. In such settings, silence is not neutral—it actively distorts judgment, delays correction, and magnifies risk.
Similar dynamics exist within China’s hierarchical and performance-driven organizations, particularly in state-owned or semi-state enterprises. Strong incentives to “meet the target,” avoid embarrassing leadership, and preserve institutional narratives can suppress uncomfortable truths. Under these pressures, data may be smoothed, warnings softened, and structural weaknesses concealed. The result is not merely informational inefficiency, but a strategic vulnerability: leadership decisions are made on partial or distorted signals, increasing the likelihood of misallocation and crisis.
Yet China also possesses distinctive countervailing mechanisms that complicate a simple comparison. Central inspection tours, such as those conducted by the CCDI, are explicitly designed to pierce local information bubbles and expose falsified reporting. Digital management systems and supply-chain dashboards can create bottom-up pressure by making operational bottlenecks visible in real time. In some leading technology firms, institutionalized “red team” practices and cultures of internal critique serve as formal channels for dissent, stress-testing assumptions before they harden into policy.
The critical implication is that China’s relative strength does not lie in the absence of organizational distortion, but in the existence of structured pathways to override it. These mechanisms, however, are fragile. During periods of heightened nationalist sentiment or external pressure, the temptation to suppress negative signals in favor of unity and narrative control increases sharply. When that happens, the cost of organizational silence rises—from a managerial problem to a systemic risk with far-reaching economic and strategic consequences.
The Mirage of Diversification as Resilience
Diversification is often mistaken for resilience. Large organizations, especially conglomerates, frequently assume that spreading activities across multiple sectors inherently stabilizes performance and mitigates risk. Yet diversification can just as easily conceal structural weakness, allowing underperforming units to survive through internal subsidies rather than genuine competitiveness.
General Electric offers a cautionary example. Its conglomerate structure was long celebrated as a model of resilience, premised on the pooling of unrelated cash flows to smooth earnings across cycles. In practice, this financial diversification obscured unit-level deterioration and fostered cross-subsidization traps, with healthier divisions propping up weaker ones. What appeared as stability was, in reality, deferred fragility.
China’s current industrial strategy reflects a different conception of resilience. Rather than relying on financial diversification, it emphasizes operational integration through tightly coupled ecosystems. In sectors such as electric vehicles, firms specializing in manufacturing, batteries, digital platforms, and energy infrastructure are linked through sensing, computation, and control loops that span supply chains, grids, logistics, and data systems. This approach seeks robustness through coordination, feedback, and shared capabilities, not through the averaging of unrelated risks.
However, this model is resilient only under specific conditions. If coordination becomes rigid or ceremonial, or if provincial protectionism and “local champion” mandates fragment the ecosystem into redundant and competing silos, integration degrades into imitation. In such cases, China risks recreating the same illusion that afflicted diversified conglomerates: apparent resilience built on structural incoherence. True resilience lies not in diversification alone, but in adaptive integration that continuously exposes, rather than masks, underlying weaknesses.
Leadership Transitions and the Architecture of Strategic Continuity
Leadership succession is a critical stress test for any large organization or political system, revealing whether strategy is genuinely institutionalized or merely personified. Apparent continuity in language can conceal deep discontinuities in execution, capability, and risk management. The quality of succession therefore determines not only short-term performance but the long-term resilience of the system itself.
The transition from Jack Welch to Jeff Immelt at GE illustrates how rhetorical continuity can mask strategic rupture. While the vocabulary of “growth” and “innovation” remained intact, the underlying economic engine was already impaired. Immelt inherited structural weaknesses but continued to operate as if the prior conditions still held, effectively accelerating into constraints that demanded recalibration rather than momentum.
By contrast, leadership transitions in China are designed to be more institutionalized and less dependent on individual discretion. Cadre evaluation systems emphasize long-horizon objectives—such as technological self-reliance and carbon reduction—over short-term performance optics. Dual leadership structures, pairing Party Secretaries with executive management, introduce internal checks, while tenure limits reduce incentives for personal legacy accumulation at the expense of systemic stability.
This institutional design lowers the risk of catastrophic individual misleadership, but it introduces a different vulnerability: collective groupthink. Overconfidence in execution timelines, particularly in complex domains like advanced semiconductors, can propagate through consensus-driven systems. Recognizing this, recent planning frameworks increasingly emphasize red-teaming, stress testing, and “bottom-line security” mechanisms, aiming to preserve strategic continuity not just in intent, but in realism and adaptability.
Strategic Asymmetry Between the United States and China: Risk, Resilience, and Opportunity
General Electric’s decline did not occur in isolation. It unfolded alongside a broader U.S. shift toward financialization and increasingly fragmented governance—an environment that weakened industrial feedback loops and made systemic course correction slow and politically costly. In such a setting, managerial misjudgments were not quickly surfaced, nor were failing business lines decisively restructured. The GE story thus reflects not only corporate failure, but also the structural constraints of the system in which it operated.
China’s position is asymmetric in a way that matters strategically. Its political–economic system retains tools that enable earlier and more forceful intervention when industrial assets underperform. These include the capacity for preemptive deconglomeration, as seen in mixed-ownership reforms and the willingness to spin off or separate non-core businesses, as well as targeted triage—most visibly in the deliberate shutdown of excess steel and coal capacity between 2016 and 2020. Such measures, while disruptive, prevent stagnation from compounding.
Equally important is China’s approach to reinvestment. Large-scale upgrading of logistics networks, power grids, and data infrastructure is treated as a public good rather than a firm-level luxury. This raises the productivity floor across the economy and cushions individual enterprises from shocks. In contrast to shareholder-driven capital allocation, infrastructural leverage strengthens the system as a whole, not merely its most profitable nodes.
From this perspective, GE’s experience serves less as a forecast for China and more as a stress test. It clarifies which institutional features matter most in a prolonged technological and industrial contest: the speed with which bad news reaches decision-makers, the accuracy with which local conditions are reflected in central planning, and the presence of adaptive redundancy—layered fallbacks rather than single-point national champions. These attributes determine whether decline is arrested early or allowed to metastasize.
China’s manufacturing future is unlikely to be undone by any single managerial failure. The greater risk lies in cultural drift—if symbolic performance metrics such as export quotas or patent counts begin to crowd out operational truth and system reliability. The lesson is not that state involvement should recede, but that it must become more discriminating: rewarding candor, enforcing cash discipline, and planning under uncertainty with humility. These are precisely the lessons that GE learned too late—and the opportunity China still has time to internalize.
Final Thoughts
China’s greatest risk is not a sudden collapse like GE’s eventual fall, but a prolonged period of apparent invincibility that conceals a steady erosion of underlying strength—much as GE experienced in the 1990s. GE’s decline illustrates how long-term success can breed complacency, financialization, and narrative-driven decision-making that obscure weakening core competitiveness and deteriorating cash flow, while suppressing internal dissent. In the context of intensifying Sino-US rivalry, technological constraints, and supply-chain reconfiguration, this is a clear warning for China’s manufacturing sector: scale, subsidies, and “domestic substitution” narratives cannot compensate for fragile real-economy capabilities. The path forward lies in returning to core manufacturing competence—sustained R&D investment, disciplined resistance to excessive financialization, pragmatic and execution-focused leadership, and governance structures that reward honesty and expose risk early. Only by prioritizing genuine profitability, resilient cash flow, and technological self-reliance can China’s manufacturing industry evolve from a scale advantage to a durable advantage in quality and resilience, and avoid repeating GE’s trajectory.
References
- Lights Out: Pride, Delusion, and the Fall of General Electric. Thomas Gryta, Ted Mann. 2020