For years, China’s economic rise was explained through scale, low costs and manufacturing efficiency. That explanation no longer fits. What China is building today is more advanced – and more strategic – and I had the chance to see it first-hand.
As 2026 begins, China is positioning itself as a leading force behind what it calls the AI-plus intelligence economy: an economy in which artificial intelligence is not a standalone sector, but a multiplier embedded across every industry. This shift is deliberate, planned and already visible in data, companies and institutions.
China’s 15th Five-Year Plan, a pivotal phase in the country’s “path to modernisation” aimed at becoming a globally leading economy and superpower by 2049, places AI-plus at its core. AI-plus, in Chinese policy language, does not mean adding AI tools to existing processes. It means re-engineering entire value chains – manufacturing, logistics, energy, transport, health care and services – so intelligence becomes a built-in feature of how the economy operates.
This pivot comes at a critical moment. China’s old growth model, based on price competition and scale, is under strain. Between 2019 and 2024, the average operating margin of listed Chinese firms fell from 12.4 per cent to 11.2 per cent. Growth has slowed, labour costs are rising and competing on cost alone is no longer viable. The response has been a deliberate shift from price to value, with AI as the central lever.
One of the clearest examples is China’s strategic push to lead the “low-altitude economy”, a priority of the previous five-year plan. This includes drones and autonomous systems for logistics, emergency response, agriculture, inspections and urban mobility. Rather than treating drones as niche technologies, China is building an entire ecosystem around them: regulation, manufacturing clusters, data platforms, services and financing. Analytics firm Drone Industry Insights estimates that China accounts for 70-80 per cent of global commercial drone production and 79 per cent of approved drone patents worldwide in 2024.
The state plays a catalytic role through government guidance funds, which together amount to about 30 billion yuan ($4.3 billion). Operating at national, provincial and municipal levels, these funds seed companies at different stages and crowd in private capital. The goal is speed, scale and strategic alignment – not permanent state ownership.
The impact is increasingly global. According to The Economist, Chinese firms generated $2 trillion in overseas sales in 2024, up from $1 trillion in 2021. Chinese companies now invest more abroad than foreign firms invest in China. This expansion spans electric vehicles, AI, cloud services, fashion, retail, food and consumer brands. More importantly, Chinese firms are no longer exporting mainly low-cost goods. They are exporting integrated systems, platforms and brands.
BYD has overtaken Tesla to become the world’s largest electric vehicle maker by sales, delivering more than 3 million vehicles last year, with more than 20 per cent sold outside China. Xiaomi, once known for affordable smartphones, now produces fully electric, digitally integrated cars that connect seamlessly with smartphones and smart homes. Its flagship model accelerates from zero to 100 kilometres an hour in 1.8 seconds.
Chinese AI models such as DeepSeek and Manus are now used globally by developers, enterprises and platforms well beyond China.
At the consumer level, Chinese brands are scaling quickly. Miniso operates more than 6,300 stores globally, over half outside China, while fashion retailer Urban Revivo has expanded across the US, Europe and South-East Asia through digital-first design and rapid product cycles. Cultural exports are breaking through as well. Labubu, the collectible character created by Pop Mart, has become a global cult symbol, with Pop Mart reporting revenues exceeding $900 million and overseas sales growing at more than 40 per cent year-on-year.
Underpinning this transformation is a critical factor: talent and research capacity. Data highlighted by The New York Times shows the scale of the shift. In the Leiden Ranking of global research output, Zhejiang University now ranks first worldwide, overtaking Harvard. Seven Chinese universities sit in the global top 10, while Tsinghua University ranks 12th and Peking University 13th globally.
This transformation is often misunderstood. Debate is usually framed as state versus market, or subsidies versus competition. The more important factor is execution at scale. China plans centrally but delivers locally. National priorities translate into provincial competition, municipal specialisation and firm-level experimentation. All delivered at what locals like to call “China Speed”.
The lesson is clear. China treats AI not as a technology trend, but as a development strategy. It aligns planning, finance, talent, industry and execution over decades, re-pivoting from price to value, and embedding intelligence at the core of the economy.
That is the shift the world now needs to understand, and learn from.
