City Mechanics: What Chongqing Taught Me About My Portfolio

My portfolio had more Chongqing in it than I understood. My trip sharpened one position — BYD — and surfaced one signal I am now watching.

Hongya Cave, Chongqing, China. November 2025.

In a car from Chongqing East station to the hotel, I spotted a vehicle I had never seen before. Low, sculpted, with lines that belonged in a concept video rather than on a road. The badge read AVATR — a joint venture between Changan Automobile, Chongqing’s anchor state-owned automaker, CATL, and Huawei. Three of China’s most consequential industrial players, converging in a single vehicle, designed and assembled in a city roughly 2,000 kilometres from the nearest major seaport.

I hold BYD, CATL, and China Mobile. All three have operations here: BYD’s Blade Battery plant, CATL’s first “factory-in-factory” production line, one of China Mobile’s 8 national data centre hub nodes. The mountain topography over the Yangtze is genuinely dramatic, but I did not come for the scenery. I came to work out what that overlap in my own book actually meant.

What Role Does Chongqing Play in China’s Economic Plan?

My working view after the trip: Chongqing’s logistics stack is a potential structural edge for BYD’s and CATL’s European supply chains that was not in my model. The rest of this piece is the case, and the one signal that would falsify it.

Chongqing is one of only 4 direct-administered municipalities (直辖市) in China — alongside Beijing, Shanghai, and Tianjin. That status means it retains a larger share of tax revenues, issues its own municipal bonds, and competes directly for central government capital without provincial intermediation. When Beijing allocates RMB 800 billion (~US$110 billion) in ultra-long special treasury bonds for infrastructure in 2026, Chongqing sits at the same table as Shanghai.

“Boost the development capacity of the Chengdu-Chongqing economic zone.” — CPC Central Committee 15th Five-Year Plan Recommendations, Section 29 (October 2025)

The policy stack underneath is what matters: direct municipality status, the Liangjiang New Area, a Pilot Free Trade Zone handling roughly 70% of the municipality’s foreign trade across just 0.1% of its land, and the China-Singapore Demonstration Initiative — a government-to-government project giving Chongqing privileged access to Singapore’s capital networks and ASEAN markets. No peer inland city has this many stacked in one place. Not Chengdu, not Wuhan, not Xi’an.

The Numbers That Matter — and Where the City Is Fragile

Chongqing’s 2025 GDP reached RMB 3.376 trillion (~US$485 billion), growing 5.3% against a 5.0% national average — enough, for the first time, to overtake Liaoning, the old industrial heart of the northeast. The city missed its own 6% target by 0.7 percentage points, and has lowered the 2026 target to “above 5%”. The automotive industry kept doing most of the lifting: smart-connected NEV value-added rose 13.4% on the year, and the city’s NEV output has stepped up from roughly 43,000 in 2020 to 1.296 million in 2025, reclaiming the title of China’s top auto-producing city.

Three numbers cut against the headline.

First, the NEV growth rate has already halved. The 90.5% print in 2024 dropped to 36% by 2025, and I expect Chongqing will converge toward the national rate within 2 to 3 years.

Second, the concentration is brutal. The automotive industry alone contributed two-thirds of Chongqing’s entire industrial expansion in 2024. Two-thirds. From one sector.

Third, the population is shrinking. A net loss of 92,000 people in 2024, against an economy that still grew 5.7%. If your China model starts with demographics, Chongqing is the city that breaks it — the growth is coming from productivity and capital upgrading, not headcount, and that is a harder trick to repeat than a demographic tailwind.

Taken together: if automotive growth decelerates to 10–15% before the named replacement sectors — electronics, advanced materials, AI, biomedicine — reach scale, Chongqing faces a growth gap. Not a crisis for the city, but a reason to read every subsequent Chongqing data release more carefully than I used to.

Is the Advantage Structural, or Just Subsidies?

Every major Chinese city offers subsidies, land deals, and tax breaks to attract manufacturers. By CSIS’s Red Ink estimate (Scott Kennedy, 2024), China’s EV industry received roughly US$230 billion in state support from 2009 to 2023, with local governments accounting for about 80% of industrial policies. BYD’s largest megafactory is in Zhengzhou, not Chongqing. CATL’s main cell production hubs are in eastern China.

The answer is logistics — the kind that cannot be replicated by writing a bigger cheque.

Chongqing is the only city in China to hold all five categories of national logistics hub designation simultaneously — port, land-port, airport, production-service, and trade-service. A manufacturer here can route goods east down the Yangtze via Guoyuan Port, west to Europe by China-Europe Railway Express, south to ASEAN via the New International Land-Sea Trade Corridor, or by air through Jiangbei Airport. Four export corridors from a single inland hub. Xi’an moves more CRE rail volume, but Xi’an does not have the Yangtze. Chengdu shares the western rail corridor, but Chengdu does not have the river port. No peer city replicates the combination.

The detail that made me sit up: while I was in Chongqing last November, Xinhua’s Chongqing wire reported (30 November 2025) that China had launched its second fixed-schedule freight rail service to Europe — from Chongqing to Budapest, Hungary, running biweekly in approximately 11 days. The first route, to Duisburg in Germany, has been running since 2011. Why does Budapest matter? Because BYD is building a €4 billion plant in Szeged, Hungary — 160 kilometres from Budapest — its first European passenger-car factory, targeting 300,000 EVs a year at full capacity, with pilot production in Q1 2026. CATL’s Debrecen gigafactory — a €7.34 billion plant, initial capacity 40 GWh with cell production from early 2026 and designed for 100 GWh at full build-out — is 250 kilometres away. When Chongqing’s 1,000-plus automotive parts suppliers need to ship components to those European assembly lines, the timetable now exists. 11 days by rail versus 30-plus by sea makes rail competitive for just-in-time supply chains. For the first time, an inland Chinese city has a direct, timetabled logistics link to the Central European EV cluster.

Ground Truth — What You Won’t Read Elsewhere

To understand Chongqing, you have to leave it.

One morning we drove 90 minutes southwest to the Dazu Rock Carvings. The carvings are extraordinary — a UNESCO site, 50,000 sculptures carved into cliff faces since the 7th century. But it was the drive that changed how I think about the data.

Within 40 minutes of leaving the urban core you are in a different economy. The road narrows. The buildings are older, lower, unfinished. This is the other Chongqing: 82,400 square kilometres of mountain terrain where the main urban district produces 78% of GDP. The per capita income gap between urban residents (RMB 49,778, ~US$6,800) and rural residents (RMB 22,221, ~US$3,000) is more than 2-to-1. An investor assuming the headline applies evenly is making an error I nearly made myself.

Restaurants were packed — not the performative busy of a new development, but the organic busy of a consumer economy actually spending. Wholesale and retail grew 9.5% in 2024. Accommodation and catering grew 7.3%. You feel these numbers in the queue for a hotpot table at 9pm on a Tuesday, not in a spreadsheet. (If you visit: skip the tourist hotpot and try 烤匠麻辣烤鱼. It is a Chengdu-born chain — and their sea bass, buried under a small mountain of dried chillies and green Sichuan peppercorns, is the best thing I ate in China in 2025. 不吃火锅，就吃烤匠.)

Sea bass buried under dried chillies and green Sichuan peppercorns at 烤匠麻辣烤鱼, Chongqing. November 2025.

One evening walking through Chongqing’s malls is not statistically significant. I know that. But what on-the-ground observation gives you is not data — it is a filter for obvious nonsense in the data. It does not prove a bearish report wrong. But it tells me to ask better questions about which consumers, where.

What Does This Mean for My Portfolio?

I came to Chongqing to understand a city. Two of my positions got sharper. One did not.

BYD operates a dedicated Blade Battery factory here through its Fudi subsidiary: 8 production lines, 20 GWh annual capacity, running at or near full utilisation since 2020. What I had not connected was the logistics. The Budapest rail link means BYD can ship battery components to Szeged in 11 days without routing through Shanghai. For a company building out its first European passenger-car production base targeting 300,000 EVs a year, that is a potential structural cost advantage — contingent on the Budapest schedule going weekly — that was not in my model. It is now.

CATL entered Chongqing in June 2025 with a factory-in-factory model: 2 battery pack lines physically inside the SERES Super Factory in Liangjiang, a 5-year exclusivity agreement for all AITO vehicles to use CATL batteries, planned annual output value of RMB 7 billion (~US$960 million). I knew the concept on paper; being in the city where it runs forced me to focus on what it means — switching costs that are physical and contractual, not just commercial. Beyond that, the Chongqing presence did not change my view of the position; I hold CATL on the global platform thesis, not on a single-site read-across.

China Mobile also runs a Chongqing node — one of 8 national “Eastern Data, Western Computing” hubs. Nothing on the ground changed my view of the position; I hold it on the telco thesis, not on a Chongqing read-across.

The Signal I Am Watching

In that first car ride from Chongqing East, I thought I had spotted an unfamiliar vehicle. What I had actually spotted was my own blind spot. The AVATR was the whole city in miniature: Changan, CATL, Huawei, capital, policy, manufacturing, all compressed into one thing moving down the road.

The question for me now is whether Chongqing's logistics stack can turn that industrial density into a durable edge for my BYD and CATL positions, rather than just an impressive story. The Budapest rail schedule is the test. If it goes weekly by end-2026, I will treat that first sighting as an early clue I was lucky enough to notice. If it does not, the car was still real, but the edge I thought I saw behind it was smaller than I believed. And the deeper question, which I unpack separately in Why Huawei Now Sits Inside My China EV Underwriting, is how much of that value is ultimately being captured not by the assembler, but by the platform layers sitting inside the same machine.

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As of the date of publication, I hold positions in BYD (HKEX: 1211), CATL (HKEX: 3750), and China Mobile (HKEX: 0941). Positions may change after publication without notice. Cohong Lane is a periodical publication made generally available to the public; this is disclosure of my positions, not a recommendation to buy, sell, or hold any securities. Full disclaimer · About Philip.