Innovation by Design: How China builds a competitive advantage
In early March, BYD attracted global attention with its groundbreaking battery platform, which can offer a range of 470km on a five-minute charge. It has shown a wider change than a technical milestone. China is no longer catching up, setting a global pace of innovation.
That momentum is now far beyond electric vehicles. China's position in consumer technology, fintech and AI-enabled platforms is strengthened. Tencent and Baidu, for example, were top rankings at CCTI in 2025, reflecting their deep and sustained investments in AI, including Tencent's 64bn R&D spending in 2025.
In parallel, hub startups like Shenzhen and Hangzhou are expanding AI applications across education, logistics and urban infrastructure, often outperforming the western counterparts of speed and deployment.
CATL expands to Southeast Asia with sodium-ion batteries, which prioritize safety and affordability, driving an increase in micromobility across the regional market. Deepseek's large-scale language model, Deepseek-R1, surpassed Openai's GPT-3.5 on mathematics and inference benchmarks, despite operating under export restrictions. This is an impressive example of China's efficiency-driven approach to frontier innovation.
At the heart of this innovation is a scale that is fused with speed, institutional support that is consistent with entrepreneurial autonomy, and a long-term view of capacity building. It's a new model.
The institutional infrastructure is central. Large companies have developed deep partnerships with top universities, invested in national research platforms, and built robust mid-career advancement skills programs. Bytedance, for example, combines the R&D Centre, which was developed jointly with Tsinghua and Shanghai Jiaotong University, to carry out content algorithms and behavioral analysis.
Although CCTI currently covers a limited number of sectors, early findings suggest that China's innovation is becoming increasingly systematic. It is not limited to labs or executive teams, but is embedded in procurement, compliance, design and customer experience.
Hidden Edge: How Chinese Companies Manage
Western observers often marvel at the speed of Chinese companies. It's rare to ask where that speed comes from. The answer lies not only in the strategy and size, but in the way these companies manage.
Higher's conversion to autonomous micro-company platform is a textbook case. From refrigerator design to customer service, all units operate as semi-independent businesses. They compete, cooperate and share profits across the digital backbone. As Zhang Ruimin, founder and longtime CEO of Higher once explained, “We encourage members of our team to become entrepreneurs and start their own microenterprises. This process eliminated 10,000 mid-level managers who didn't create value for their users.” His belief in distributed entrepreneurship has transformed the organization from traditional appliance makers to one of the world's most innovative business ecosystems.
Huawei's internal project team operates on sprints rather than quarterly. Managers lead horizontal collaborations as well as vertical chains. Despite facing export bans and shortages of components, Huawei has rebuilt its innovation engine around its internal design and ecosystem partnerships.
Ping AN has built a modular platform that integrates healthcare, finance and AI. Each is tailored to the local regulatory environment, but is unified through central governance. This allows for quick iterations without sacrificing strategic alignment.
Even traditionally strict sectors such as insurance and energy are ongoing change. China Life has launched an internal incubator to fund and test new service models. The state's dominant utility, the state's grid deploys regionally distributed teams to lead smart grid pilots across the state, bringing local insights into the national innovation framework.
This is management innovation, the hidden edge of China. This is a competitive moat that is not dependent on a single product, technology, or founder. Replication is difficult and sanctions are impossible.
Strategic Lessons from China's Playbook
Of course, China's roads are not frictionless. The innovation ecosystem varies from state to state, and many companies still navigate regulatory uncertainty and uneven market access. But even within these constraints, lessons are emerging.
1. It is designed for resilience. Chinese companies are restructuring their supply chains not in response to isolated shocks but to coincide with a fragmented, politically charged global economy. Local ecosystems are not just defensive, they are growth strategies. CCTI's insights show that top-performing Chinese companies are designing sourcing and logistics from the start with redundancy, regulatory flexibility, and local response.
2. Compliance has now become a strategic function. In a world where regulatory regimes overlap, adaptability is a source of speed, trust and long-term value. Successful companies treat compliance as an enabler rather than as a cost, and embed it in their design, procurement and customer engagement.
3. Innovation must be embedded locally. Large companies empower market teams, plug into the local talent ecosystem, adapting their platform to local norms as well as consumer preferences. This localization ensures relevance and resilience, allowing businesses to innovate around constraints rather than slowing them down.
4. Global South is central. China's investment in Africa, Latin America and Southeast Asia is about setting standards and building durable impacts. The Huawei training hub in Kenya and the BYD factory in Brazil are examples of this embedded existence. By co-creating local infrastructure and knowledge, Chinese companies are building a long-term foothold beyond traditional markets.
5. Geopolitis currently belongs to the boardroom. Management needs to develop tools and foresight to manage political risks, as CFOs once did with currency volatility. Geopolitical flow is rapidly becoming a leadership capability as alliance and regulatory climates impact supply decisions, talent mobility and product design.
6. China cannot be copied, but can be researched. The alignment model between state priorities, corporate architecture, and ecosystem strategies provides powerful examples of how to operate consistently in an increasingly inconsistent world. Global companies must find their own version of this consistency. Here, objectives, capabilities and policies are lined up throughout the region.
From multipole mixed chaos to strategic clarity
The global trade environment may seem confusing, but for China, the signal is unmistakable. The world is fragmented, and the strategic response is integration. At home, across ecosystems, and in new regions, Chinese companies are aligned for resilience.
As trade tensions rise and technology separation continues, China's long-term outlook focuses on capacity building for energy, semiconductors, biotechnology and digital infrastructure. This stable orientation provides a roadmap for how to build strategic depth amid global volatility.
In fact, what may appear calm on the surface is the result of a deliberate redesign that has been in development for many years and is now accelerating under external pressure. It's about building an institution and system that thrives under uncertainty, rather than beating headlines.
China's transformation is not reactive, but reflects a long cycle of strategic thinking that prioritizes structural advantage over short-term victory. Global Leader Lessons? Resilience is not embedded in the storm. It is designed before the storm arrives and will continuously adapt as the weather changes.
Focus
Growth of China's economic partnerships
Regional Comprehensive Economic Partnership (RCEP)
Launch: negotiations began in 2012. The contract was signed in November 2020 and came into effect in January 2022.
Members: 15 Asia-Pacific countries, including 10 countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and five FTA partners (Australia, China, Japan, New Zealand and South Korea). India was initially involved, but withdrew in 2019.
Purpose: To create the world's largest free trade area with the aim of reducing tariffs, streamlining trade and strengthening economic integration between member states by building up existing ASEAN+1 FTAs with harmony.
Belt and Road Initiative (BRI)
Released: Announced in 2013 by President Xi Jinping.
Scope: In early 2024, over 140 countries joined BRI, covering nearly 75% of the world's population, accounting for more than half of the world's GDP.
Purpose: To strengthen regional ties and economic integration through infrastructure development, including transportation, energy, and digital projects. BRI aims to boost trade, stimulate economic growth and promote cultural exchanges between participating countries.
Global South Alignment
Starting: China's involvement with the Global South dates back to the early 1950s and has grown significantly over the last few decades.
Scope: China has established 15 free trade agreements with global tropical countries, among 21 FTAs around the world. The relationship between trade and investment with regions such as Africa, Latin America and Southeast Asia is also increasing.
Purpose: To reduce dependence on the Western economies by strengthening economic partnerships with developing countries, promoting North-South cooperation, and supporting infrastructure and industrial development of partner countries.
