Essentially the state decides, let’s say high tech cutting edge batteries for storing renewable energy is where they want to invest in. They gather a few companies into a building that can do it or are interested. They then have state representatives who effectively ask “what do we need to know” and “who are the major players in the field.
In a month or so they come back again. They do big closed door presentation for all the companies in the building. Suddenly all the Chinese companies in the space start delivering R&D and eventually products that match some of the best stuff being done in the space. You could almost say they’ve learnt to copy it..
How do they do it? Industrial espionage, essentially, and building an industrial and intelligence infrastructure that allows for maximum impact of the state’s intelligence apparatus into the national economy. In a way it’s kind of brilliant.
I heard it described by an NSA analyst in a very interesting talk. I thought it was fascinating and speaks exactly to your point. The idea that we are competing with “free market” Chinese companies is a fiction that we’ve made up in our own minds. It’s just not how China works. And to be fair it’s been working gang busters for them.
edit since someone asked for it, here’s the talk - https://cybersecpolitics.blogspot.com/2017/04/fusion-centers...
My description was from memory so I hope I remembered it right.