China's New "New Three"

Since 2023, China's "new three" referred to three renewable industries where China achieved global dominance and made China an electrostate: solar panels, lithium batteries, and electric vehicles. After the financial crisis of 2008, China's policy plans moved from theory to concrete industrial engineering, committing massive capital to clean tech. It took five years for solar to achieve global dominance, ten years for lithium batteries, and fifteen years for EVs. Today, the West has largely lost the industrial race with China on solar and batteries, and automakers are bleeding today to keep up with Chinese EVs.

But while Western policymakers are busy erecting tariffs and protectionist walls around the old "new three", China has moved on. In the first half of 2026, a new generation of high-tech products has emerged as China's new export engines: artificial intelligence, humanoid robots, and innovative biotechnology. These are China's new "new three".

Photo: China Daily

But while the fifteen-year clean tech wave was rooted in manufacturing, the new "new three" are rooted in knowledge-based and high-tech industrialisation. Talent, R&D, and labs are the new factory ingredients. And I believe the same timeline could well play out again: China's global leadership in AI by 2030, in robots by 2035, and in biotechnology by 2040. If you look closely at what happened in July 2026, the volatility in Western stock markets every time a new Chinese model is released already shows the first real cracks.

1. AI: The Commoditisation of Intelligence

For the past two years, the consensus was that China was somewhere between 6 and 12 months behind the US in generative AI. Last month, Eric Schmidt called the remaining gap "a nanosecond in our world". The assumption that China is still trying to catch up collapsed in July 2026. For the past three months, Chinese open-weight AI models have constantly ranked first globally in weekly token usage on OpenRouter, serving users in 141 countries. US investors are beginning to price in this new reality.

From Moonshot AI's Website

When Moonshot AI unveiled Kimi K3, a 2.8-trillion-parameter open-weight model that outperformed both Anthropic's Claude Opus 4.8 and OpenAI's GPT-5.5 across most coding and AI agent evaluations, it was considered China's second DeepSeek moment. US chip stocks tumbled, the semiconductor index posted its worst weekly decline in months, and the Wall Street Journal ran the headline "Chinese AI Models Rattling US Stocks". DeepSeek's V4-Pro (April) and Z(dot)ai's GLM-5.2 (June) had already closed the gap, with Marc Andreessen writing that GLM-5.2 was "the first Chinese AI model to match and often beat the American big lab public AI models. " Three China AI shocks in three months are no anomaly anymore but a pattern. And the disruption is not just performance. These Chinese models are being released as open-weight, allowing companies globally to download, modify, and deploy them without depending on a much more expensive proprietary American platform.

The logic here is simple but devastating: AI models are becoming commodities. When a technology commoditises, competition shifts entirely to price. And nobody will beat China on price. My prediction is therefore that over time Chinese open-weight AI models will be capturing up to 80% of the global markets. US closed-weight models will remain important, mainly for highly secure environments or for the last mile of very complex systems. China will dominate AI because its models are easily accessible and locally deployable (open-weight), much more affordable (optimised models and abundant electricity), and very easy to use (readily applicable in every industry).

At the World AI Conference (WAIC) in Shanghai in July, President Xi Jinping delivered his first-ever keynote at the country's premier AI summit, pitching China as the champion of a new global AI order. Comparing AI's significance to the invention of the steam engine and electricity, he urged countries to seize the "historic opportunity" of open-source AI and pledged to help developing nations build their own capabilities. He launched the World AI Cooperation Organisation, and signed up 29 countries. His message was unambiguous: "China is not going to follow anyone on both AI technology and standards. Instead, China is going to lead the world in both aspects." The three key takeaways from his speech were China’s commitment to open-weight AI infrastructures, a stricter regulatory framework on AI, and a multilateral push to help developing nations build AI capacity.

Photo: Xinhua News

Even the hardware bottleneck is being resolved domestically. At WAIC 2026, nearly every major Chinese chip and server vendor showcased a supernode design, integrating hundreds or thousands of AI processors into a single system. ChangXin Memory Technologies (CXMT) debuted on the Shanghai STAR Market, surging 466% to become China's most valuable mainland-listed company, securing the domestic supply of critical memory chips. By then, the US semiconductor ETF had already lost over $1 trillion in market value from its June peak. Meanwhile, a state-backed company in Shanghai has begun manufacturing homegrown DUV lithography machines. Nothing that can challenge ASML yet, but another step toward reducing China's dependence on Western chipmaking equipment for the commodity chips that power its AI supernodes.

The race is far from over. But the Chinese peloton is closing in fast on the American breakaway, and China is determined to industrialise and democratise AI by giving Global South countries and Europe what Silicon Valley never offered: affordable, locally deployable intelligence.

2. Robots: The Embodied AI Economy

If AI is the brain, robots are the body. As I wrote in last month's newsletter “China: The Next Robot State”, and WAIC 2026 made it abundantly clear, the focus is no longer just on digital AI. It is squarely on embodied AI.

The American Boston Dynamics has long been the world's most recognisable humanoid robot company. Founded in 1992 as a spinout from MIT, it has had a 34-year head start. When Hyundai bought SoftBank's remaining stake this July, the implied valuation was approximately $3.4 billion. Today, five Chinese humanoid robot firms now carry a valuation above or close to that number, three of them founded in 2023. The symbolism is hard to ignore. As the chart below puts it, "Shipping volume is settled. Pricing is not." In other words, China has already won the manufacturing race. The financial race is just beginning.

Photo: Dado Van Peteghem

Washington escalated its response in July when the US banned imports of new foreign-made (read China-made) humanoid and quadruped robots, citing national security risks. It is a desperate move, but it misses the point entirely. China already commands an estimated 85% of the global humanoid robot market, with an estimated 100,000 robots that will leave Chinese factories in 2026, a five-fold leap from 2025.

The ban gives US robot companies, primarily Tesla, a time window. But protection will not help American firms to compete for two reasons: First, the US lacks the industrial hubs, where all hardware components are readily available and at low cost. Secondly, without the cheaper humanoids, American startups will not be able to develop and train their own designs. They may achieve a better AI (brain) and invest much more money, but they will also burn through far more time and money with every new robot they want to launch. 

The IP race is equally one-sided. According to Asiabits Research and LexisNexis, China holds 73% of all humanoid robot patents by volume and 63% by portfolio strength. The United States holds just 5%. Six of the world's ten most innovative humanoid robot start-ups are Chinese, and the top five are all Chinese: Fourier, AgiBot, LimX Dynamics, Pudu Robotics, and Unitree.

Banning Chinese robots in the US will not slow China's overall humanoid development. It will simply mean that the rest of the world, from factories in Southeast Asia to hospitals in the Middle East, will automate further using Chinese robots. The US is building a wall around a shrinking market, while China is building the physical workforce for the global economy.

For the past decade, the old 'new three' — electric vehicles, lithium batteries, and solar panels — added trillions to China's GDP and reshaped global trade. The humanoid robot economy is now being built on the same industrial foundations, with the same policy ambition and the same long-term commitment. If history is any guide, the next decade will belong to those that will build the physical AI workforce, and China is already building it. 

3. Biotech: The Health Silk Road

The third pillar of the new "new three" is perhaps the most overlooked, but it is following the exact same industrial playbook. In my May 2025 newsletter, I predicted that biotech would be the next battleground between China and the US, with a reverse brain drain of biotech scientists living in the US steadily moving back to China. A year later, the data is undeniable.

In the first half of 2026, China's National Medical Products Administration approved 38 Class 1 innovative drugs. None had been approved anywhere in the world before. Of these, 31 were developed by domestic Chinese pharmaceutical companies. In all of 2025, the equivalent figure was 11. China is on track to multiply that seven times over in a single year. China now accounts for around 30% of the world's innovative drugs under development, ranking second globally. Overseas licensing deals exceeded $110 billion in the first half of 2026, equivalent to 80% of the total for all of 2025, which was already a record year itself.

The Western biopharma industry is beginning to panic, and rightly so. Western drug development is hyper-linear, hyper-expensive, and designed to protect single patented monopolies. China has commoditised early-to-mid-stage drug discovery. By leveraging AI, urban hospital networks, returning scientific talent, clinical trials and investment in R&D infrastructure, China can reduce drug discovery costs by up to 60% and move exponentially faster in approvals.

Global capital is now investing in Chinese assets and capabilities to keep its own R&D flowing. In doing so, it pumps money directly into the Chinese industrial ecosystem, training the very competitor that is about to make it obsolete. We have seen this before. When Western manufacturers massively invested in the Chinese supply chains, they transferred expertise, precision engineering knowledge, and industrial scale that China absorbed and built upon. Today, Western pharma is doing the same. They are licensing Chinese drug assets, funding Chinese clinical trials, and building Chinese R&D capacity. The difference is that this time, the Chinese government is also investing massively into the sector, and the product is not about atoms. It is about molecules. By driving down the cost of complex molecular manufacturing, it is constructing a parallel infrastructure of global health dependency.

The Civilisation Factory

These three emerging industries, AI, robotics, and biotechnology, are reshaping how humans think, work, and live. Together, they form the foundations of a new stage of civilisation. Taken together, AI, robotics and biotechnology represent a transition from manufacturing physical products to industrialising intelligence, work and health.

China is therefore evolving from exporting products to exporting technology, clinical solutions, and industrial operating models. Decades ago, China's exports of clothing, furniture, and household appliances showcased its manufacturing capability. Over the past decade, exports of solar panels, batteries, and electric vehicles have demonstrated the strength of its industrial ecosystem. In the coming decade, Chinese AI models, humanoid robots, and innovative medicines will showcase something fundamentally different: China's ability to export knowledge, industrial know-how, and human capabilities: the traditional strengths of America and Europe.

The new 'new three' are not isolated sectors. They are knowledge and high-technology-intensive industries driven by continuous iteration, long-term commitment, and scale. China is not even trying to defeat the West within the parameters of the ROI (return on investment) model. It is building an independent, self-sustaining industrial system that prioritises investment of resources (IOR)—expanding the total market rather than maximising its own short-term share. As I wrote in China's Next Miracle: "Low profit margins often seem like market disruption, but in China, it's like charging a battery: the energy is in the capacity being built up. Once the battery is fully charged, they unleash the power to conquer the market." The transition is already happening. And once again, the West is still refusing to understand it until it is already complete.