Chinese firms are attempting to step out of their comfort zones and expand internationally as domestic competition intensifies. This shift has resulted in learning curves, labor law violations, and more diverse supply chains. A BYD manager’s claim on social media that “foreign forces” and some domestic media are deliberately slandering Chinese brands and the country was a response to a Brazilian investigation revealing that 163 Chinese nationals were working under “slave-like conditions” at a construction site for the electric vehicle giant. Experts in China’s foreign investment sector have pointed out that the underlying issues may not be fully recognized.

Some argue that the race to the bottom is deeply embedded in the structures of Chinese business, with low costs and prices being the golden rule. This mindset often leads companies to undercut others by offering the lowest bid and then reducing costs to make that bid financially viable. Liu Tanghua, regional director of Terra Regia Industrial Park in Mexico, noted that this approach reminds him of his experiences over two decades ago when he worked as a translator for construction projects in India and Sri Lanka. “Two decades later, as China has become much stronger, people think there should be improvements across all areas,” Liu said. “But such routines remain unchanged.”

As more Chinese companies establish factories abroad to counteract insufficient domestic demand and persistent high trade barriers, experts warn that transferring the competitive approach overseas could be counterproductive. This could hinder their local operations and damage the overall reputation of Chinese firms. “Chinese companies need to adapt to the local context: one cannot approach other countries with a specific Chinese methodology,” stated Dominique Turpin, Professor of Marketing and European President of the China Europe International Business School (CEIBS) in Shanghai.

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China challenges Tesla with low-cost humanoid robots. State support is driving development, but it remains to be seen who will win the race for artificial helpers.

China’s Push into the Robotics Industry

At this year’s World Robot Conference in Beijing, over two dozen Chinese companies presented humanoid robots designed for use in factories and warehouses. With this, China is challenging the U.S. company Tesla in the emerging market for battery-powered humanoid robots. These robots could not only increase efficiency in production but also revolutionize the way various industries work.

China’s strategy follows a proven pattern that was already successful in promoting electric cars more than a decade ago. The combination of state support, intense price competition from numerous new market entrants, and a well-developed supply chain is intended to ensure success in this new industry.

“China’s humanoid robot industry shows clear advantages in supply chain integration and mass production capability,” emphasizes Arjen Rao from the Chinese research institute LeadLeo to Reuters. These advantages could prove decisive when it comes to winning market shares in international competition.

State Support and Market Potential

The efforts are supported by President Xi Jinping’s policy aimed at developing “new productive forces” in the technology sector. In January, the city of Beijing set up a state-sponsored robotics fund of $1.4 billion to promote research and development in this area. Shanghai announced similar plans for a fund in July, underlining the Chinese government’s commitment to this industry.

The market for humanoid robots is growing rapidly and could soon produce many new companies. Goldman Sachs predicts that the annual global market for humanoid robots will grow to $38 billion by 2035. Material costs per robot are said to have fallen to around $150,000 in 2023, not including research and development costs. These cost reductions could allow new companies to enter the market and offer innovative products.

Chinese Companies in Competition

Some Chinese companies are already showing promising progress. Hu Debo, the CEO of the startup Shanghai Kepler Exploration Robotics, expects that the fifth version of his work robot, which is to be tested in factories, will cost less than $30,000. His company states that it was inspired by Tesla’s humanoid robot Optimus, highlighting the direct competition between the two players.

The Hong Kong-listed company UBTECH Robotics is already testing its robots in Geely’s car factories and has announced an agreement with Audi. According to project manager Sotirios Stasinopoulos, UBTECH plans to start mass production next year. Over 90 percent of the components for their robots come from China, further strengthening local manufacturing and the associated cost advantages.

Although Chinese competitors and analysts see Tesla as having an advantage in artificial intelligence, they believe that China can significantly reduce production costs. Tesla itself plans to produce Optimus in small series next year, which is likely to further fuel competition.

Outlook for the Future

Xin Guobin, China’s Vice Minister of Industry and Information Technology, stated that his ministry has implemented President Xi’s guidelines and made China an “important force in the global robotics industry.” By 2025, the country plans to begin mass production of humanoid robots, albeit on a much smaller scale than with electric vehicles.

Analyst Rao from the LeadLeo Research Institute estimates that “it will probably take at least 20 to 30 years before humanoid robots can be commercially used on a large scale.” This long-term perspective shows that despite rapid developments in technology and state support, many challenges still need to be overcome before humanoid robots are widespread in everyday life.

Overall, China stands at a crucial point in the development of its humanoid robotics industry. The combination of state support, innovative companies, and a growing market could soon lead to China taking a leading role in this emerging sector.

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• Entering a new geography.
• Entering a new product category.

We will discuss a few consulting cases and show that this framework may not work well when entering foreign market.

The European economy is poised for a challenging period ahead, with Germany likely entering a recession. The European Commission predicts sluggish growth of just 0.8% for the EU in 2023 and a similar outlook for 2024. Inflation rates are decreasing at a slow pace, prompting the European Central Bank (ECB) to implement further rate hikes in September. Business confidence is on a declining trend, necessitating urgent measures to bolster Europe’s economic resilience. The Commission has enlisted the expertise of former ECB chief, Mario Draghi, to devise a comprehensive strategy for economic strengthening, potentially culminating in a publication titled “Whatever it Takes (to Grow)”.

However, not all European countries are equally affected. They vary in performance across five pivotal challenges: managing demand to combat inflation, addressing demographic shifts, coping with mounting debt, navigating the transition to a greener economy, and disentangling from autocratic regimes.

The ECB faces a dilemma in setting interest rates, as inflation rates diverge significantly among EU countries. Austria grapples with 5.8% inflation, while Greece nears the ECB’s 2% target at 2.4%. This discrepancy could lead to some countries facing excessively high rates, while others find them too low, potentially requiring costly adjustments.

Debt servicing costs are poised to impact countries differently, particularly those with high existing debt. Tax havens like Ireland see minimal local impact despite high corporate debt, while Hungary, Scandinavia, and the Netherlands are likely to experience a drag on consumption and investment due to private debt.

Demographic challenges loom large, with aging populations affecting labor markets. Successful countries stabilize birth rates, embrace immigration, encourage longer working lives, and promote gender-balanced care responsibilities to unleash women’s full economic potential.

In the pursuit of decarbonization, investment in green technologies is crucial. While transport and heating show promise, industry faces fiercer competition. Moreover, Europe’s interconnected power markets mean that industry costs remain high even in countries with abundant renewable resources.

Lastly, all EU members confront the need to disengage from autocratic nations, with a careful reevaluation of relations with China being paramount. Germany and its major industries, particularly automakers, stand to be most affected, but all countries face supply chain risks.

Which EU country is winning our economic pentathlon?