China: The First Robot State

For years I have argued that China is not trying to catch up to the West in technology but is rather building the global industrial dominance that would eventually make China a de facto innovation leader. We witnessed this reality happen in renewables and electric cars, and the next big market dominance is taking shape with embodied AI.

I was glad to see that Yong Qian, in a recent LinkedIn article, arrived at the same conclusion from a financial perspective. His framing is sharp: China's embodied AI boom is not another venture capital craze. It is China's search for a new physical container for capital. Real estate was the last one. Before that, the internet platforms. Now, with both these engines sputtering, capital is looking for somewhere to go to invest in China. After five years of restraint, it has finally found it.

In 2025, China's embodied AI and robotics sector attracted over $10 billion in financing across 744 investment rounds. In the first half of 2026 alone, disclosed funding exceeded $6 billion. This is not hype. Unlike large language models, which require very large datacenters, humanoid robots require more than money and NVIDIA chips. They require vast industrial capacity and global supply chains of motors, reducers, sensors, batteries, semiconductors, production lines, testing facilities, field engineers, and enormous quantities of real-world data. One consumes computation. The other consumes and revitalizes an entire industrial production capacity. America’s big tech will soon find out money can’t buy an ecosystem.

1. An Ecosystem Nobody Can Match

"China sees a clear opportunity to become the world's robot factory. China already dominates the global humanoid robotics supply chain, with 65 percent of key components produced locally; 56 percent of publicly traded humanoid robot companies are Chinese; and 45 percent of the world's robot integrators are based in China." - China's Next Miracle, p. 223

That was true when I wrote it. The numbers have only moved further in China's direction since. China is building an ‘embodied AI’ ecosystem that nobody else can match, not even Musk. Chinese companies shipped approximately 90% of the world's humanoid robots in 2025, totaling 17,000 units. The average selling price dropped from $85,000 in 2023 to $25,000 in 2025. China is doing to humanoid robots exactly what it did to electric vehicles and solar panels.

“By 2027, humanoid robots will be 40 percent cheaper, making them affordable for factories and the service sector.” China’s Next Miracle p. 223

On June 9, 2026, China's Ministry of Industry and Information Technology and its state enterprise regulator jointly issued an official mandate: "By the end of 2026, key humanoid robot products will complete application verification and regular deployment in a number of representative scenarios, entering work mode." Their target is 10,000 units deployed across more than 100 scenarios, including manufacturing, logistics, healthcare, and emergency rescue. Local governments have submitted implementation plans, and progress reports are due in November. The cool demos are leaving the labs. Since May, every humanoid robot manufactured in China carries a unique 29-digit digital identity code, regulated like a car or a medical device, with lifecycle audits. China now wants to learn from every robot out there.

China has a hardware supply chain that is almost impossible to replicate. It holds 90% of permanent magnet processing globally, 40% of precision bearings, 35% of motors, and 30% of power electronics. China filed 7,700 humanoid-related patents in the past five years, versus 1,560 in the US and 1,100 in Japan. Building Tesla's Optimus Gen 2 without any Chinese suppliers would today cost approximately three times as much and turn Musk’s robot vision into a pipe dream.

The difference this time is that China is not playing catch-up. Unlike with EVs, where Tesla had a decade's head start, China is already at the frontier. Humanoid robots inherit much of the foundation China’s EV decade built at scale: Robot joints borrow from electric drivetrain technology. Perception systems build on autonomous vehicles. Manufacturing resembles the automotive supply chains. Today, the robots themselves are already being deployed inside the Chinese factories that built them.

"It's no coincidence that China's biggest EV players (BYD, Xpeng, NIO, Chery, Seres, Geely, Xiaomi, and GAC) are investing heavily in humanoid robotics. Their extensive expertise in precision hardware, sensors, mass production, and AI makes them the ideal leaders in this emerging industry." – China’s Next Miracle. P. 223 

73-minute podcast about China's Robot Economy

Recently, I sat down with AI and digital transformation expert Dado Van Peteghem to discuss what is actually happening on the ground in China's robot economy and what it means for businesses in the West.

2. The Next Masterplan

Today, China is the world's first electrostate, a nation that has built its most recent economic growth model around electrification, from solar panels and batteries to electric vehicles. By 2030, it could become the world's first robot state, building its next growth model in the same way, this time around, embodied AI. But China is not just building robots. It is getting one billion people excited about them. In 2025, at the Chinese New Year Gala, the country's most-watched television event, Unitree showcased humanoid robots performing live on stage. That same year, robots ran alongside thousands of athletes in the world's first humanoid half marathon in Beijing, and China hosted the inaugural World Humanoid Robot Games, attracting 280 teams and over 500 humanoid robots from 16 countries. A year later, these same events showed not only China's commitment to the industry but also how fast the robot industry had evolved. Robots are China's next tsunami, and every citizen is being invited to believe in it. 

The strategic framework behind this revolution is what is called the New Quality Productive Forces, or NQPF. Unlike the old growth model, which relied on infrastructure investment, exports, and debt, the NQPF is driven by innovation and knowledge in order to achieve a higher quality of development. Humanoids sit at the very heart of this master plan. China's latest 15th Five-Year Plan (2026-2030) lists embodied intelligence alongside quantum, 6G, hydrogen and nuclear fusion, biomanufacturing, and brain-computer interfaces as one of six designated growth engines for the next decade. Six categories China intends to lead globally.

But there is another major driver: China's demographic decline. It is widely considered the biggest structural risk to its economic model. And yet, what observers often fail to appreciate is that this very crisis is what pushes Beijing to become the world's first robot state. Beijing is not automating because it wants to lead the sector. It is automating because it has no choice. Whether China can replace its shrinking workforce with humanoids fast enough is unknown. But what China demonstrated by becoming an electrostate is that once it becomes a full robot state, Western factory workers will be replaced faster than Chinese ones. China does not need to solve its own labor shortage to displace ours. 

And if you still need proof that China is serious about getting its citizens to embrace robots, check out UBTECH. They just launched the U1 on July 1st, a full-size ultra-bionic humanoid companion robot with silicon skin, blinking eyelashes, and eyes that follow you around the room. It comes in male and female versions, stands between 168 and 183 centimeters tall, and starts at around $17,000. Within days, UBTECH received over 13,000 orders. The Chinese consumer is not even waiting for the robots to arrive at the factory. They want it at home.

3. Jumping the Hurdles

There are also real challenges ahead. A recent McKinsey report identifies three major chokepoints in the humanoid supply chain: precision actuation components, force and tactile sensing, and compute and control. Actuators, the joints and motors, account for 40 to 60 percent of the total robot cost. The single biggest problem is the gearbox inside each joint, called a harmonic drive. Fewer than five companies in the world can make them at the required precision, and you cannot simply build a new factory overnight to fix that. Current robots achieve only 30 to 50 percent of human worker productivity. Battery life is 2 to 3 hours. Morgan Stanley warns a shakeout is coming.

But here is the thing. China does not see these as obstacles. It sees them as hurdles. In China's Next Miracle, I describe the Chinese hurdle methodology as a fast, rhythm-driven innovation model where mistakes are tolerated early and branding is refined later. 

"Unlike Agile, the hurdles methodology is based on acceleration rather than velocity; it is structured by rhythm rather than cycles; it focuses on switching rather than iterating." p.86 

As the Chinese jump over each hurdle, they slow down briefly to only accelerate again.

We are watching this play out in real time. In June, AGIBOT ran a six-day live factory deployment in Nanchang. No stage, no controlled environment. Multiple humanoid robots working inside a real tablet mass-production facility, alongside human operators, moving materials, and live manufacturing rhythms. Over those six days, the robots completed 64,828 production tasks with a success rate of 99.99%. The McKinsey question is whether humanoid robots can be deployed, integrated, and create real value in an actual operating environment. AGIBOT just answered it. Other challenges like dexterous hands are being resolved by Xynova, AgiLink, and IT Juzi. AgiLink became a unicorn in five months across four funding rounds. The major chokepoints McKinsey identifies are real. China is jumping them anyway. 

China's Agibot worked alongside human workers assembling and inspecting tablets at Longcheer Technology's Nanchang factory for six days in June, 2026 (Agibot)

Conclusion: The Next White Good

As AI models become a commodity, I believe China will attract significantly more global capital in the years ahead. I fully realize this is a counterintuitive claim. The US stock market is far outperforming China's mainland and Hong Kong exchanges, and 95% of global venture capital is still dominated by the US. But I have a habit of reading China differently from the mainstream. And more often than not, that has served me well.

My conviction comes from history. After the Second World War, electronic white goods, the washing machine, the refrigerator, and the vacuum cleaner redistributed how people worked and lived. The factories that captured the value of that revolution were in the United States and Western Europe, and they fueled decades of economic growth and the rise of the middle class. Today, physical AI is the new white good. It will redistribute physical labor the way those machines redistributed domestic work. And this time, the factories capturing that value are mostly in China.

The gap between demonstration and deployment is still wide. But China has closed this kind of gap before in EVs, in solar, and in batteries. The question is not if, but when. For investors watching this space, the real opportunity may not be in the robot manufacturers themselves. It may be in those hidden champions: the companies providing harmonic drives, specialized force sensors, training data infrastructure, and robot-specific chips that enable the entire industry. These are the picks-and-shovels businesses of the robot economy, and most of them are not yet on anyone's radar in the West. This is not investment advice. But if you are not paying attention to China's robot supply chain, you may be about to miss the next tsunami.