"China stopped being the low labor cost country many years ago. Companies come . . . because of the quantity of skill in one location, and the type of skill," Apple CEO Tim Cook reportedly said — a line Joe Ngai and Nick Leung seize to underline a central claim of their new book, The Next China is Still China.
Ngai and Leung's thesis: a China at 'reset'
Ngai and Leung, management consultants at McKinsey & Company, argue that China is entering a moment of "reset" and that the next China is forming as "outward-facing, commercially sophisticated and structurally embedded in the world economy." They place this transformation at the centre of the country's 2026–2030 Five-Year Plan, which positions innovation as a strategic driver and balances a renewed emphasis on self-reliance with continued global economic integration.
Scale, growth and structural context
The authors set their argument against contested assessments of China's future. Pessimists point to demographic headwinds — rapid ageing — high national public debt, a high degree of state economic control, geopolitical tensions, an ongoing real estate crisis, industrial overcapacity and stubbornly high youth unemployment. Optimists highlight rapid technological progress in artificial intelligence, electric vehicles, renewable energy and space exploration, and a large remaining catch-up potential: China’s GDP per capita is cited at US$14,870 (A$21,290), roughly one-sixth that of the United States, while its urbanisation rate is 66 percent compared with the US rate of 80 percent.
The book notes that China’s growth is slated at 4.5 percent in 2026 — more than double the anticipated growth of advanced economies that year — and observes that even a modest decade-long growth rate (an example given is 2 percent annually) across China’s vast economy would add the equivalent of another India to the world economy.
Innovation, manufacturing and global footprints
Ngai and Leung document what they describe as a decisive shift from "copycat to innovator." China and the United States are now the world's top research-and-development spenders, together representing about 27 percent of global R&D outlays, the authors say. China generates nearly half of all patents worldwide and remains the world's manufacturing powerhouse, with its manufacturing sector described as 60 percent bigger than that of the US.
They name sectors and companies that illustrate this profile: breakthroughs in electric vehicles, batteries, AI, biotech and new models of online retail and social commerce; BYD locating EV production near customers in Europe and emerging markets; Huawei building one of the world's largest international research-and-development networks; TikTok scaling through regional hubs and local hiring; and Haier localising its manufacturing ecosystems and empowering local managers.
The labour story is reframed as skill-driven rather than cost-driven: China now produces more than 14 million skilled workers annually and five million science, technology and engineering graduates, and it has become the world's largest end market for robots, installing more than half of all industrial robots globally.
Pressure from tariffs and decoupling: mixed effects
Ngai and Leung contend that external pressure — notably the US tariff strategy and efforts at decoupling — have had mixed results. The authors argue that tariffs and restrictions may be accelerating China's movement toward technological self-reliance by stimulating domestic innovation. They also report that diversification efforts often take the form of Chinese enterprises relocating production to places such as Vietnam or Mexico, rather than the emergence of fully independent supply-chain alternatives.
What this means for manufacturers, technology firms and policymakers
- Manufacturers: Expect continued concentration of advanced manufacturing capacity in China even as firms localise production for key markets — examples cited include BYD in Europe and Haier's localised ecosystems.
- Technology firms: The book signals intensifying competition in high-tech fields as China moves from imitation to original innovation, supported by large R&D budgets and a huge pipeline of STEM graduates.
- Policymakers: Ngai and Leung suggest that trade and industrial policy will interact with domestic competition across thousands of provinces and districts; the authors challenge the notion of a monolithic, centrally administered economy and instead point to local competition driving dynamism even under Beijing's guidance.
The authors frame a paradox: despite slower headline growth than in past decades, China's size and structural shifts could deliver outsized global impact — from patent portfolios and R&D spending to the localisation strategies of major firms. Their view is neither unalloyed optimism nor simple pessimism, but a case that the country's next phase will be defined by technological advancement, deepening commercial integration and a reconfigured interplay between local dynamism and national direction. The book leaves readers with a concrete metric to watch: China’s planned orientation in the 2026–2030 Five-Year Plan and the degree to which innovation, self-reliance and global embedding translate into sustained output and international market reach.
Source: https://www.aspistrategist.org.au/bookshelf-the-next-china-is-still-china/
