THE WASHINGTON POST: How China is conquering high-tech markets once controlled by the West

BEIJING - It’s the rare factory that doubles as a tourist attraction. But more than 300,000 visitors have streamed through Xiaomi’s sprawling “hyperfactory” here since the company began offering tours of its automobile assembly lines two years ago.

On display is a vision of manufacturing far removed from the labor-intensive operations that characterized China’s emergence as an economic power a quarter century ago. Industrial robots painted a brilliant white pivot and twirl around half-finished electric sedans. Compact unmanned load carriers, chirping a melodic warning for the few humans they encounter, scoot across the floor in a vast factory larger than the Pentagon.

As the Chinese and American presidents met this week in Washington, this is how China prefers to be seen: sleek, innovative and globally proficient in advanced manufacturing.

“They have gone all in on automation and robotics and minimizing labor and maximizing efficiency,” said Michael Dunne, an auto industry consultant in San Diego. “You will find in China’s auto industry the most advanced plants in the world, by far.”

And not just in the auto industry. Chinese manufacturers’ automation, innovative designs, world-class logistics and government support have vaulted them to global supremacy in an ever-longer list of technologically advanced products. Once known for using cheap labor to produce inexpensive clothes and toys, Chinese factories increasingly specialize in some of the world’s most sophisticated merchandise, including feature-rich electric vehicles and robotics.

Only Britain at the dawn of the Industrial Revolution and the United States following World War II have so dominated the global production of goods. China now accounts for 32 percent of global manufacturing value added, twice its share in 2010, and more than the combined total of the next four biggest manufacturing powers - the United States, Germany, Japan and South Korea - according to the U.N. Industrial Development Organization.

China’s achievements come at the expense of U.S. and European companies that have long dominated the global economy’s most advanced precincts. But they may not satisfy the hunger for jobs among China’s younger generation. Thanks to automation, Chinese factories today employ 18 million fewer workers than they did in 2013, when the nation’s manufacturing workforce peaked, according to the Organization for Economic Co-operation and Development in Paris.

Amid continuing worries about jobs at home, this stunning growth has landed China at the center of global controversy.

On Thursday, talks between President Donald Trump and Chinese President Xi Jinping at the White House were shadowed by signs that China’s trading partners would try to head off the country’s ambitions. U.S. Treasury Secretary Scott Bessent has repeatedly blamed China’s $1.2 trillion trade surplus for effectively stealing demand from other nations to make up for a weak domestic economy. The Trump administration plans to announce soon new tariffs on nations that have “excess capacity,” including China.

The concerns are bipartisan: Michael Froman, President Barack Obama’s trade chief, warned in a recent Foreign Affairs article that unlimited Chinese exports could set off a “global economic crisis.” And in Europe, fears of seemingly unstoppable Chinese competitors are even more acute.

More than 1 million Chinese-made cars entered the European Union last year, threatening the future of German automakers already suffering from sagging sales in China. European leaders plan to decide next month on erecting new barriers against Chinese goods.

China’s export success results from an economic model that prioritizes production over consumption, economists said. Government industrial policies provide many manufacturers with low-cost financing, land and tax incentives, which results in China producing more cars, solar panels, steel and measuring instruments than it can profitably absorb at home. The weak Chinese yuan also helps.

The Chinese game plan includes a tolerance for financial losses that would doom companies in the United States or Europe. Nearly one-third of Chinese industrial firms lost money last year, according to Capital Economics in London. Many are exporters, including carmaker Nio, which has lost money without interruption for 10 years but enjoys the backing of the Hefei city government and Anhui province.

China’s worst performers cannot even cover the interest payments on their debt, rendering them commercial “zombies,” according to Natixis, a French investment bank. In the renewable-energy sector, for example, 28 percent of Chinese companies lack sufficient earnings to meet their debt obligations. Economy-wide, 12 percent of Chinese companies are zombies, double the pre-pandemic figure and roughly twice the global average.

“If you look sector by sector, the number of zombies is increasing so fast; 2026 is going to be terrible,” said Alicia Garcia-Herrero, chief economist, Asia Pacific, for Natixis.

The Chinese companies that bleed red ink are often kept afloat by local governments worried about the loss of jobs and tax revenue that would follow bankruptcy or by state banks providing easy credit. China devotes more public money to industrial subsidies than does the U.S. or Europe, according to a 2022 study by the Center for Strategic and International Studies.

The CSIS analysis, funded by the U.S. State Department, put total government support for Chinese businesses at 1.73 percent of gross domestic product. An International Monetary Fund estimate last year was more than double at 4 percent of GDP.

China’s Ministry of Commerce said in July that its exporters prospered thanks to their own innovativeness, dismissing the “excess capacity” allegations as an excuse for U.S. protectionism. Some analysts agree, noting that Chinese carmakers are taking market share globally thanks to improved technologies and performance, not just government subsidies.

Take BYD, China’s largest carmaker. The BYD Seal, which is comparable to the Tesla Model 3, includes as standard equipment a rotating 15.6-inch touch screen, dual wireless charging pads and an interior multicolor lighting system that pulses along with ambient sound or music. But its late-2025 sticker price of $24,190 was more than $8,000 lower than the Tesla sells for in China, according to the Rhodium Group, a New York consultancy.

Government subsidies, meanwhile, account for just $235 of the $4,700-per-vehicle price advantage BYD holds across its fleet over Elon Musk’s Tesla, Rhodium said.

“There’s a lot of technological advancement taking place in China,” said Louis Kuijs, chief economist, Asia Pacific, for S&P Global Ratings. “The Chinese companies are just very good and very fast, and the price-quality ratio is very attractive.”

Chinese companies also are not above playing hardball. In recent years, BYD effectively obtained an interest-free loan by routinely delaying by months its payments to suppliers. At one point last year, the company reported owing nearly $25 billion listed only as “other payables” on its financial reports.

As the practice grew more widespread, China’s governing State Council said this month that large companies should commit to paying suppliers within 60 days. BYD did not respond to an emailed request for comment.

For years, China’s manufacturing gains were seen as the flip side of American factory losses; jobs disappeared from the U.S. industrial heartland only to reappear in Asia. But in recent years, instead of adding bodies to its assembly lines, China has been deploying collaborative robots or co-bots, designed to work alongside humans; conveyors; and automated visual quality inspection systems, according to AlixPartners, a New York-based consultancy.

Robot-rich Chinese auto plants can produce automobiles for 25 to 30 percent less than in the U.S. or Europe. While Chinese wages have increased in recent years, overall labor costs per vehicle remain much lower than in advanced economies. The reason: Chinese cars are designed to be easier to make, meaning fewer hours of labor are needed.

“It isn’t because of low-cost labor. It’s because of efficiencies attributable to proximity to supply chains and this high degree of automation,” said Dunne, formerly president of General Motors operations in Indonesia.

Inside Xiaomi’s facility about 90 minutes from the center of Beijing, 700 robots perform an industrial choreography that delivers a new car every 76 seconds.

“Xiaomi’s car factory has achieved a high level of automation, with most processes completed entirely by machines,” Lei Jun, Xiaomi’s CEO, told Chinese reporters last year.

Xiaomi (pronounced Shao-mee) rose to prominence in China as a leading maker of smartphones before branching out into wearables, tablets and Internet-connected appliances. It began making passenger cars in early 2024, and its tech-forward approach quickly won glowing reviews.

Ford flew a Xiaomi SU-7 electric sedan from Shanghai to Chicago so that CEO Jim Farley could eyeball the competition. After driving the car, Farley pronounced Xiaomi “an industry juggernaut.”

The link between China’s inadequate domestic demand and its surging exports is especially clear in the auto sector. New car sales slumped by 22 percent in the second quarter, which only intensified competition among China’s dozens of carmakers.

They already can produce roughly twice as many cars each year as Chinese consumers will buy and are adding capacity for an additional 5 million vehicles, according to economist Brad Setser of the Council on Foreign Relations.

Many of those extra vehicles are bound for other markets. Through August, Chinese auto exports rose by more than 50 percent compared with the same period in 2025, approaching 7.5 million vehicles, according to China’s General Administration of Customs.

While Xiaomi remains profitable, the division that includes its electric-vehicle operations lost about $387 million in the second quarter, when the average selling price for its vehicles dropped by nearly 10 percent. Over the past year, the company’s stock price has shrunk by more than half.

In response, the company is adopting a familiar strategy: Some time next year, the first Xiaomi cars will begin arriving in Germany.