China: a la carga (rápida)

Powered by innovation from massive R&D spending, China’s technology-focused corporate leaders are pushing ahead of their Western peers, acting out the “Made in China 2025” roadmap before our eyes, says Jian Shi Cortesi, Investment Director, Asia/China Growth Equities. From advances in artificial intelligence (AI) to electric vehicles (EVs) and beyond, these innovations represent a global power shift, presenting what Jian sees as opportunities for investors.

15 April 2025

Driven by R&D

As a powerful example of this shift, Chinese EV manufacturer BYD sold 4 million cars globally in 2024¹, twice as many as Tesla, and, like many tech-led Chinese companies, BYD is only just getting started in key international markets such as Europe. Spending upwards of USD 5 billion per year¹ on R&D is delivering breakthroughs for the company in EV battery technology and ultrafast charging systems that could soon consign ‘range anxiety’ to history.

Range, safety and price – overcoming resistance to EV adoption

Consumers often cite ‘range anxiety’ as a key concern dissuading them from switching to EVs – the fear that your car might run out of power mid journey, so require en route charging to get you where you want to go. Typical motorway EV chargers might take an hour to put enough ‘juice’ into the battery to cover even 150 miles, creating stress and delays for drivers, - and that is assuming they can find an available charger at busy times. And even the latest versions of Tesla’s famed supercharger can take as long as 30 minutes to top up compatible EVs.

BYD = Boost Your Distance

On 18 March, BYD announced a new, superfast charger, one that can top up batteries with enough power to cover 400 kilometers (or 249 miles), in just five minutes² – less than the time it takes to pick up a coffee on the go. Part of BYD’s new “Super e-Platform”, the game-changing system charges at a peak of 1,000 kilowatts² (equivalent to 300 electric kettles), with a network of 4,000 charging stations being rolled out across China for BYD’s latest models, such as the new Han L saloon and Tang L SUV.

Attractive pricing is needed to charge up the EV market

As in most manufacturing operations, economies of scale have a huge effect on the cost of EV production. And while traditional manufacturers like Toyota and Volkswagen still dominate global sales of legacy internal combustion engine (ICE)-powered vehicles, four of the world’s top five EV makers are either China-based, or heavily reliant on a Chinese partner¹. As the world’s biggest producer of EVs, BYD is enjoying economies of scale that few others can even approach, an advantage that is feeding through both to customers in the form of lower pricing, and to shareholders in the shape of rising earnings. In the present environment of rising global trade frictions, BYD – which manufactures buses in California but does not sell passenger cars in the US and has explicitly stated that it has no plans to do so³ – we believe that BYD should have significantly less exposure than some competitors to uncertainty related to the Trump administration’s import tariffs.

BYD

Innovation drives progress - a product range with broad international appeal

But BYD is just one brick in China’s Great (technology leadership) Wall

Impressive as BYD’s growth and prospects are, the company is just one of dozens at the cutting edge of China’s tech-led surge and China’s growing technology leadership. For some investors slow to realise the potential, the emergence of DeepSeek’s low-cost, high-performance R1 AI model in January should have been a wakeup call. Despite being largely trained on Nvidia’s H600 – essentially throttled versions of the more powerful H600 chips, ironically largely due to export restrictions as part of the US’s 2022 CHIPS Act – DeepSeek broadly matched or exceeded the performance of lauded Western AI models from companies like OpenAI and Google’s DeepMind.

Technology leadership

US versus China

Huawei: Necessity is the Mother of Invention

Founded as recently as 1987 as a phone switch maker, Shenzhen-based Huawei quickly grew to be a global tech leader in segments such as telecom network infrastructure, smartphones and consumer electronics. While Huawei’s growth areas like 5G equipment was briefly stymied amid bans from some Western countries’ networks amid security concerns, US sanctions and export controls, the company’s strategy quickly evolved to develop its own solutions. For example, it has sidestepped bans on the sale of next-generation chipmaking infrastructure by developing its own equipment, and could be set to use domestic three nanometre Extreme Ultraviolet (EUV) lithography as soon as the second half of 2025. By making a breakthrough in the 3-nano league presently dominated by Dutch giant ASML, Huawei’s innovation could go into production as soon as 2026, at a stroke removing China’s dependency on Western microchips.

AI: powering earnings growth across Chinese companies

E-commerce giant JD.com is harnessing AI-driven robotics and drone delivery across its logistics network. Meanwhile, tech heavyweight Tencent is using AI to enhance gaming experiences, boost content moderation and even detect early-stage cancers at its medical diagnostics unit. And even in sectors not traditionally associated with AI and tech, such as industrials, Full Truck Alliance – a logistics platform that matches customers with transport providers – is increasingly using AI, big data and cloud capabilities to address fragmentation in China’s transport sector. Sometimes called China’s “Uber for Trucks”, Full Truck Alliance’s technology-driven model has captured approximately 60%³ of China’s truck freight market, while the company also has interests in credit solutions, insurance and autonomous driving technology.

How China’s tech-driven rise is shaped by the Made in China 2025 roadmap

Chinese companies’ tech-led advances align closely with Made in China 2025, a national strategy first rolled out a decade ago aimed at propelling China into a global leader across a range of tech-based industries, from advanced/precision manufacturing to EVs and AI.

“Made in China” 2025

10 sectors

While, as the above chart demonstrates, Chinese companies have been in the driving seat of research leadership for the last decade, we believe investors can now begin to reap the full rewards. Chinese companies are by no means resting on their laurels, and as targeted by the next phase of Made in China 2025, are already targeting still-higher R&D to achieve new breakthroughs in industrial and IT applications. With many of China’s most innovative and dynamic companies investing heavily for future growth, notwithstanding immediate geopolitical factors such as trade frictions, investors should recognise that China’s tech-led ascent is not an aberration, but rather a structural shift in the global investment order.

China’s innovation-led long-term economic glow-up

While many Western economies struggled with anaemic growth, China’s economy has been growing by about 5%¹ per annum for the last two years, and the Chinese policymakers have acted decisively over recent months to help address stress in the debt-heavy property sector and stimulate economic activity. But growth of 5% does not tell the full story; long gone are the days when China’s economy was based largely on low-end mass manufacturing of cheap low-quality products made for exports. These low-value manufacturers are increasingly moving to other countries where labour costs are far lower, while China’s growth is driven by future-focused, R&D-led industries such as advanced manufacturing (eg aircraft and robotics), new energy systems (eg solar), EVs, pharma, medical devices and consumption-based industries that satisfy demand from China’s increasingly affluent, growing consumer class.

While recognising that, as in any stock market, some valuations can become overly high in the short-term, and global trade frictions are creating short-term uncertainties for those companies focusing on growing US sales, the depth and scale of China’s stock market provides considerable scope for active stockpickers to focus on key secular themes. Perhaps to the surprise of many investors, only around 2.3%¹ of China’s GDP is dependent on exports to the US, far below that of Germany, Japan, Mexico and Canada, while China’s stock market soared by over 100% during the last Trump-led trade war of 2017-2021. Helped by their emphasis on innovation and growing exposure to the domestic economy, I believe our favoured Chinese companies are well-placed to perform strongly in the future.

Driven by innovation in areas such as AI and EV technologies, China is fast charging into the future.

Jian Shi Cortesi manages China and Asia equity strategies at GAM Investments.
Read more about Jian and the strategies she manages here.