Streets ahead: China is winning the technology war with the US

Elon Musk should be ruing the day that he scoffed at BYD, the Chinese car manufacturer. In a television interview in 2011, the Tesla chief executive was asked about competitors that might challenge his world-beating electric vehicles (EVs). He burst into laughter at the mention of BYD and said he didn’t see it as a competitor. “I don’t think they have a great product,” he said.

Fourteen years on, the script has flipped. BYD now outshines Tesla in almost every metric of performance. The revenue of BYD – which stands for Build Your Dreams – leapfrogged Tesla’s last year. The Chinese company sells many more cars worldwide than its American rival and, in March,  announced a breakthrough in battery-charging technology that leaves Tesla’s Supercharger in the dust.

The story of Tesla’s eclipse by BYD is well known. What is less understood is that it represents the shape of things to come – in technology after technology, industry after industry. The disruptive power of China’s technological rise is set to be felt throughout the west, notwithstanding the trade war that Donald Trump has launched to slow down or stymie China’s emergence.

The reordering of the world’s technological tectonic plates is a topic that calls for big comparisons. Some liken it to the US overtaking the UK as the world’s leading tech power over a century ago. Others, more ominously, see echoes of Germany’s “mercantilist” policies in the late 1800s as Berlin sought to catch up with the established industrial powers.

“China’s rate of progress in production and innovation across a wide range of industries is striking,” write Robert Atkinson and Stephen Ezell at the Information Technology and Innovation Foundation (ITIF), a Washington thinktank. “History has seen campaigns such as this before. From the late 1800s through World War Two, Germany illustrated how trade could be weaponised into an instrument of power, pressure and even of conquest.”

The breadth and speed of China’s tech ascendancy is spooking America. Researchers at the Australian Strategic Policy Institute have found that China has surpassed the US in cutting-edge research for 57 out of 64 technology areas. Reinforcing such findings, the ITIF 10 advanced tech sectors and found that China is ahead or “near” the world leaders in six of them.

Individual stories reveal the extraordinary endeavour behind China’s progress. Xiaomi, a Chinese mobile phone manufacturer, announced in 2021 that it was going to make electric vehicles. Sceptics doubted that a young, privately owned phone company could jump into a completely different industry.

Eighteen months later, Xiaomi’s first EV, the stylish SU7, was unveiled in Beijing. So highly automated are Xiaomi’s production lines that a new SU7 is produced every 76 seconds. In its first year of production last year, the company sold 137,000 cars, more EVs than either Ford or GM.

The most revealing thing about Xiaomi, however, is its vision. Its chairman, Lei Jun, is a software engineer who sees his smartphone and car businesses as conduits to a future infused by artificial intelligence or, as he calls it, “hyper AI”. Thus, Xiaomi phones are able to communicate with Xiaomi cars, which in turn can communicate with Xiaomi AI-activated homes. Xiaomi customers will inhabit an end-to-end ecosystem in which AI assists their lives.

So you may drive your car while telling your robot vacuum cleaner to hoover your home. Or you may ask your home to dim the lights, turn on the air purifier and cook some rice.

This vision of an AI-enabled future is animating many Chinese tech giants. Crucial to turning this into reality is the superfast and high-capacity 5GA telecoms infrastructure China is rolling out this year, ahead of any big western economy.

This new infrastructure, largely developed by Chinese telecoms giant Huawei, provides data speeds up to 10 times faster than those achieved by 5G. Most of the UK still uses 4G, putting it two generations behind what Chinese in some 300 cities will be using by the end of this year.

Not only do the fast speeds of 5GA enable new industries, such as self-driving cars, they also improve the performance of just about every piece of networked technology from humanoid robots to generative AI.

The “kung fu” robot launched by Unitree, one of China’s leading robotics developers, went viral on social media this year as it twirled and kicked out at imaginary foes while never losing its balance. Another Chinese robot, named Kuafu, displayed a different type of dexterity, “interviewing” Chinese officials with a robotic voice and suitably tame questions.

It is hard to say whether the Unitree G1 robot or “Atlas”, developed by Boston Dynamics, a US industry leader, is superior. They excel at somewhat different tasks. But in terms of cost, there is no comparison: the G1 retails for just $16,000 – a fraction of Atlas’s price tag.

Such cost advantages – repeated in almost every field of Chinese industrial endeavour – show why China is winning its tech war with the US. At $16,000, a Unitree robot is within reach of many Chinese customers. This creates demand that justifies mass production, and mass production in turn generates cost savings to help finance further product iterations.

The same dynamic is visible across China’s technology waterfront. The main reason why DeepSeek, the Chinese chatbot sensation, caused such a stir this year is because it could do everything OpenAI’s ChatGPT could do but incurred a scintilla of the US company’s development cost.

The lower cost base afforded by China’s world-beating supply chain allows companies to launch many more upgrades each year than their US counterparts. BYD, for example, has at least a dozen EV car models on the market and is due to launch about five more this year. This compares with just six models sold by Tesla.