China’s unbeatable new export is not a product

The Chinese “cannot be allowed to export their way back to prosperity’, argues US Secretary of the Treasury Scott Bessent, who claims that China's economy is the “most unbalanced in history’ Such remarks reflect the growing fear in Washington that China’s overcapacity, subsidies, and dumping are distorting global trade.

- Jeffrey Wu

The more pressing concern, however, is not what China exports, but how. Global cost structures are indeed being reshaped, but by a quieter and more complex force: relentless productivity improvements. China is not merely moving more goods; it is exporting a new production model powered by automation, AI, and state-guided industrial optimisation. This shift is disruptive, deflationary, and still largely misunderstood.

China's rise as the world’s factory in the late 20th century was driven by labour and scale. But now, China aims to achieve a new form of dominance through intelligent infrastructure. No longer confined to apps or chatbots, AI has been embedded across the physical economy — guiding everything from robotic arms and warehouse fleets to autonomous production lines. For example, Xiaomi's “lights-out” factory in Beijing can assemble ten million smartphones annually with minimal human intervention. AI conducts a symphony of sensors, machines, and analytics that form a tightly woven industrial loop, driving efficiencies that traditional manufacturers can approach only incrementally.

Nor is this technology-driven ecosystem confined to a single factory. DeepSeek’s 671-billion-parameter open-source large language model is already being deployed not just for coding but also to optimise logistics and manufacturing. JD.com is revamping its supply networks through automation. Unitree is exporting bipedal warehouse robots. And Foxconn (Apple's primary manufacturing partner) is developing modular, AL-led microfactories to reduce its dependence on static production lines. These examples may not represent “prestige innovation,’ but they do attest to a broad culture of industrial optimisation. Under the banner of “new quality productive forces” the Chinese government is rolling out AI pilot zones and subsidising factory retrofits; and cities like Hefei and Chengdu are offering local grants that rival the scale of national initiatives elsewhere.