Last month, we had the opportunity to travel to China as part of a high-level UK delegation of companies and policymakers.
Over two weeks—starting in Beijing and traveling by bus, train, and plane—we visited Shandong and Zhejiang provinces. Along the way, we engaged with senior government officials and met with dozens of leading Chinese companies operating in energy, AI, robotics, healthcare, and biotech.
Three Key Takeaways
1. China Is Back in Business
As we’ve written before, a primary concern post-COVID wasn’t just economic indicators—it was the deep sense of risk aversion that had taken root in the corporate sector. Years of regulatory crackdowns, state intervention, and surveillance had stifled the entrepreneurial energy that once propelled China’s meteoric growth. Even financially strong private enterprises were hesitant to act.
The turning point came in February, with DeepSeek. President Xi Jinping—ever the pragmatist—appears to have recognised that revitalising the economy, pushing forward with “Industrial Revolution 4.0,” and achieving “common prosperity” were not possible without the private sector. DeepSeek, a symbol of private-sector innovation, marked a pivotal moment. The publicised meetings between Xi, senior officials, and industrial titans sent a clear message: the private sector is once again central to China’s economic vision.
This shift was palpable during our visit. The government is stepping back from direct economic management and focusing instead on creating strong incentives for investment. Priority sectors include next-gen technology, biomedical innovation, EVs, advanced materials, smart equipment, and clean energy. The goal is to harness AI and digital tools to modernise manufacturing across all company sizes.
2. Geopolitics and Trump’s Trade War Are Reshaping Alliances
Europe is looking East. As we’ve previously argued, Europe stands to lose the most from a Trump 2.0 presidency. His aggressive trade policies, unilateral stance on Ukraine, and NATO funding demands have strained transatlantic ties. Europe can no longer rely on the U.S. for security or technological leadership.
China, on the other hand, is indispensable—especially if Europe is to meet its net-zero goals. China leads the world in green technologies: from EVs and batteries to solar, wind, and energy optimisation. Chinese firms produce 70% of global EVs and 80% of batteries. A new EV rolls off the line every 76 minutes—built by just 100 people and robots. Xiaomi’s YU7 EV can charge from 10% to 80% in 12 minutes, delivering 620 km of range in just 15 minutes of charging.
The AI gap with the U.S. is narrowing, and China’s expertise in applying AI to manufacturing and energy optimisation is advancing rapidly. China is also home to some of the most cost-competitive manufacturers in the world. One standout was Unitree, a robotics firm we met that sells factory-ready robots for as little as $16,000.
Engagement is becoming essential. While national security concerns persist, economic cooperation with China is becoming a necessity for Europe. Meanwhile, China is actively courting new partners. Across dozens of business meetings, Chinese firms were eager to collaborate, expand overseas, and welcome UK investment.
Foreign companies remain vital to China. We were told that foreign firms account for 13 million jobs, a third of tax revenues and exports. In Beijing alone, there are 49,000 foreign enterprises from 16 countries. New foreign-funded company registrations rose 16% year-on-year in 2024.
Still, the data shows a recent cooling in inbound FDI. Post-pandemic uncertainty, domestic policy shifts, and geopolitical tensions—especially Trump’s trade war—have caused FDI flows to drop to $18 billion in 2024, their lowest since 2009 (Figure 1). It's no wonder China is accelerating reforms to attract foreign investors and level the playing field.