As with any investment your capital is at risk.
The timing turned out well.
As luck would have it, we arrived days after state TV broadcast the famous handshake between President Xi Jinping and Jack Ma. The Alibaba founder had been a near pariah since 2020 and, according to many, the gesture signaled Beijing’s re-embrace of private sector energy.
That political stagecraft, coming hard on the heels of DeepSeek’s sensational unveiling of its low-cost AI model, heightened the buzz I’d sensed the previous year, stirred by policy moves to reverse the downturn. So, a good historical moment to share with colleagues.
Three cities, multiple meetings, a growing Chinese market
Shanghai, Shenzhen, Beijing: three very different hubs of Chinese growth. We visited them over five days packed with company meetings, briefings from China experts, 2,000 miles of internal flights and hundreds more by minibus and taxi.
My highlights? Probably road-testing Horizon Robotics’ self-driving cars in the capital’s rush hour. Also, the surprise birthday party fellow manager Linda Lin, head of the China Equities Team, kindly laid on at a Haidilao hotpot restaurant – one of our thriving portfolio companies.
Our trip started at Baillie Gifford’s Shanghai office, which has transformed our China operations since it opened in 2019. The team there, plus invited economists and other outside experts, briefed us ahead of our three-city meetings marathon.
From chip maker AMEC in Shanghai to consumer electronics company Anker in Shenzhen to home-delivery powerhouse Meituan in Beijing, we saw an impressive turnout of leaders and founders.
The leaders spoke openly as we probed their manufacturing operations, technology use, competitive pressures, and more. As always, we wanted reassurance about where growth was coming from over the next five to 10 years.
Trade restrictions as drivers of domestic innovation
Suffice it to say that no one thinks the sky will fall because of Washington’s trade restrictions. They have long since considered how to mitigate those. In any case, we don’t own many big exporters.
Some meetings reinforced the potential benefits of ‘domestic substitution’ of imported parts in Chinese supply chains. That’s now likely to accelerate, possibly leapfrogging western technologies, as BYD has done with electric vehicles. For example, US export restrictions on NVIDIA’s AI-focused H20 chip may accelerate a switch to domestic semiconductors. Or so believe the heads of Shanghai-based AMEC, which makes wafer fabrication equipment. They told us how sanctions were spurring innovation. BYD told us that securing parts domestically had become a matter of survival.
How long will it be before US trade restrictions on chip sales result in genuine innovation here? Chinese chipmakers are already attempting to ‘do a DeepSeek,’ finding an unexpected route to cracking the seven-nanometer transistor miniaturization barrier that gives the US, Taiwanese and South Koreans their lead.
Looking back, I’ll remember this trip as an excellent opportunity to swap notes and learn from my colleagues’ multifaceted experience. It was also a chance to savor jointly the great paradox of China: that the world’s biggest communist state is the most ruthlessly and creatively competitive.
China’s innovation ecosystem
In the little spare time we had, we wandered around to gauge the atmosphere. I have a line about how we’re moving from the era of ‘made in China’ to ‘invented in China.’ At street level, it’s easy to see how the scale and dynamism of these great cities drive so much innovation and competition to make better products and services.
China seems to me increasingly the place to glimpse the future: whether that’s the Anker robot vacuum cleaners, Horizon Robotics’ driverless cars, WeChat and AliPay's dominance of payment services, or Meituan's delivery (and multiple other) services. Everyone seems to live in their digital ecosystems.
Many innovators have no equivalent in the west. One such is Pop Mart, which sells collectible figurines in ‘blind boxes,’ so you don’t know what you’re getting. Anyone who remembers the thrill of mystery toys in the cereal boxes of childhood will understand the feel-good factor: boyfriends and girlfriends, grandparents and grandchildren were treating each other with Chinese-designed character products that owe nothing to Disney, Harry Potter or Japanese pop culture.
Meituan’s ubiquity as a facilitator of everyday life was also a surprise. Our hotel concierge turned to the app to make restaurant arrangements for our last night. Linda used it to order a birthday cake for me and deliver it to our restaurant, complete with candles and dimmed lights, one woman with a neon Happy Birthday sign, another waving pom-poms. We all clapped along.
Another moment, a colleague recounted, was his discovering that the statue in the lobby of chipmaker AMEC, which he’d assumed to be a Chinese notable, turned out to be of Andrew Grove, co-founder of Intel, the AMEC boss’s former employer. Another reminder to forget any preconceptions of limits to Chinese company ambitions.
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