Kok How Lee

Opinion | What truly drives China’s breakneck innovation (it’s not subsidies)

China’s success lies in its user-centric focus and ability to micro-innovate quickly and scale up in a vast, fiercely competitive market

Reading Time:4 minutes

Why you can trust SCMP

Huawei’s Mate XT, billed as the world’s first trifold phone, in a Huawei store in Shanghai on September 14. Photo: EPA-EFE

Kok How Lee

Published: 4:30pm, 9 Oct 2024

China’s rapid rise as a global innovation powerhouse is often attributed to government subsidies and policies. This narrative misses the real drivers behind the country’s innovation outperformance: its vast domestic market, user-centric products and services, as well as fierce competition. These elements create an environment that fosters fast-paced innovation, enabling Chinese companies to stay ahead.

With a 1.4 billion-strong population, the sheer size of China’s domestic market offers companies unparalleled opportunities to scale up quickly. This enormous consumer base allows businesses to achieve economies of scale difficult to replicate in other markets.

Take, for example, the smartphone industry. Chinese brands such as Huawei Technologies, Xiaomi, Oppo and Vivo focused on meeting the needs of the massive domestic market before expanding globally. By leveraging high-volume production to lower per-unit costs, these companies can make affordable devices without compromising on quality.

This ability to scale up domestically first provides a critical edge over international counterparts who operate in smaller markets.

Another key driver of China’s innovation success is the user-centric approach adopted by Chinese companies. They excel at integrating user feedback into product development, allowing them to iterate and improve products at an unprecedented speed, ensuring they remain relevant in a rapidly changing market.

The colossal user data afforded by the sheer size of China’s market gives companies a unique advantage in understanding consumer behaviour and preferences.