Closing the Strategic Capital Gap: The Case for Modernizing the Export-Import Bank
In the mid-1990s, researchers at the University of Texas at Austin developed lithium iron phosphate, the cathode chemistry that would come to dominate the global electric vehicle battery market. The technology was American. A few years later, A123 Systems, a start-up spun out of MIT, commercialized it, building what was then the largest lithium-ion battery factory in North America with the help of a $249 million Department of Energy grant. The technology worked. The company had customers, including several leading automakers.
But the broader ecosystem was not there: EV demand materialized far more slowly than projected, manufacturing costs remained high without the scale to drive them down, and no institutional mechanism existed to bridge the gap between a working technology and a commercially viable industry. The company received substantial public funding, but a single grant, however large, cannot substitute for the sustained ecosystem support at the early and scale-up stages that modern industrial production requires. A123 filed for bankruptcy in 2012. In 2013, China’s Wanxiang Group acquired it.
Meanwhile, China was building that ecosystem. The government launched EV battery subsidies in 2009, mandated technology transfer from foreign automakers, and designated advanced batteries as a strategic priority under Made in China 2025. Chinese firm CATL, founded in 2011, scaled the same lithium iron phosphate chemistry that American researchers had invented and A123 had tried to commercialize. By 2017, CATL was the world’s largest battery producer. Today it holds roughly 38 percent of the global market, with China as a whole responsible for nearly 80 percent of global EV battery cell production. BYD, another Chinese manufacturer, outsold Tesla in 2025 by nearly three to one (4.6 million vehicles versus 1.6 million), drawing on its expertise in battery manufacturing. The chemistry was ours; the industry is theirs.
This is not an isolated story. It is a pattern that repeats across the sectors most critical to American economic and national security. China controls over 60 percent of global rare earth mining and 90 percent of processing; MP Materials operates the only active rare earth mine in the United States. The solid rocket motor supply chain, which is essential to America’s nuclear deterrent and missile defense, has collapsed from six qualified domestic suppliers in the 1990s to two today. China installed 295,000 industrial robots in 2024 while the United States installed 34,000, a disparity that has accelerated since Covid. We now import over half of our active pharmaceutical ingredients, and Chinese companies now run nearly a third of global clinical trials, up from just 5 percent a decade ago. Unsurprisingly, China now accounts for 35 percent of global manufacturing volume (three times the American share) while leading in research and development in sixty-six of seventy-four tracked technology areas.
These figures are not, of course, mere abstract facts; they represent genuine economic and employment realities: for example, the automotive sector alone supports nearly eleven million American jobs. They also carry serious security implications: a defense-industrial base that cannot surge production, pharmaceutical supply chains dependent on geopolitical rivals, and critical minerals choke points that give Beijing leverage over American technology.
Read more in American Affairs.
Investment should instead be directed at sectors where American technology and innovation exist but the infrastructure to commercialize them domestically does not—and where the national security case is clear.
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