Hello! I'm your financial analysis assistant. Today, we're going to discuss an article written by a scholar who completed a PhD at Peking University and has in-depth research on the Indian economy.
Many Indians (and even some Western observers) view China's rise in technology as simply "copying" (acquiring intellectual property), "using protectionist measures" (trade barriers), or "being forced into action" (in response to US sanctions). However, this author offers a different perspective: This is a complete misunderstanding. What China has established is a super-innovation ecosystem that combines the state, the market, and universities.
In contrast, although India has a large number of science and engineering graduates and startups, they are like scattered pearls without a thread to connect them.
Let me break down this long article into five key points in plain language, so you can see where China excels and where India is struggling.
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1. Don't Just Look at Batteries – Look at the “Systemic Overpowering”: From Participants to Rule-Makers
The article starts with a clear example: power batteries.
In the past, people thought Chinese battery companies like CATL and BYD were successful because of their low costs. But now, CATL has developed two breakthrough technologies:
1. New battery cell architecture: This reduces the need for graphite (a supply chain bottleneck) and increases energy density by 60% while also making the batteries safer.
2. Commercialization of sodium-ion batteries: Previously considered impractical, sodium-ion batteries can now maintain 90% of their charge in extreme cold weather and can replace lead-acid batteries.
The key point is this: CATL and BYD control 60%-70% of the global power battery supply chain. What does this mean? It means that China is no longer just following Western standards; it is now setting the standards.
It's like before, someone else decided the recipe, and China was just the cook. Now, China sets the recipe, controls the supply of ingredients, and decides who can enter the kitchen. This shift from being a participant in the supply chain to a leader is the essence of China's technological rise. This advantage is not limited to batteries but extends to fields like AI and quantum computing.
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2. China is an “Engineering Nation”: The Government Sets the Direction, and Companies Move Fast
The author introduces the concept of an “engineering nation.”
In China, the government doesn't just hand out money; it acts like a chief designer:
- Government role: It outlines strategic directions, allocates resources (capital, talent), and takes on risks (early investments). For example, 20 years ago, the government recognized the importance of liquid crystal displays and worked with companies like TCL and BOE. As a result, China's share of global production increased from 0% in 2004 to 72% in 2024.
- Company role: Companies like Huawei, BYD, and Alibaba, along with countless smaller ones, innovate aggressively within the government's framework, competing and evolving with each other.
Why is this effective?
Because China has established a seamless connection between research laboratories, factories, and markets.
Technologies developed in labs at Peking University or Tsinghua University can quickly become mobile phone screens on production lines in Shenzhen. This “triple helix” model (government, universities, industry) enables rapid technology transformation.
In India, however, the government, universities, and companies operate independently. The government wants to develop semiconductors, but university research stays in papers, and company factories focus on assembly, lacking the link for practical application.
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3. India’s Problem of “Scattered Resources”: Talent, but No Ecosystem
The article discusses India's challenges in detail. India is not lacking in talent or startups, and its digital infrastructure is good. So why hasn't it formed a cohesive system?
1. Lack of “system integrators”:
Chinese leading companies like Huawei are not just sellers of products; they are “system integrators.” They connect suppliers, research institutions, investors, and standard setters.
Indian policies (such as the PLI production incentive program) focus on increasing production, not innovation. They provide funding but not an ecosystem. As a result, while production capacity has increased, core technologies still depend on others.
2. The Side Effects of the “Jugaad” Culture:
India has a culture of improvisation, which is useful for short-term problems but harmful for high-tech fields like chips and quantum computing. High-tech requires long-term, stable, and precise investment, not just quick fixes. Indian companies often prioritize short-term profits over R&D.
3. Embarrassing Patent Data:
The article cites a striking statistic: As of April 2025, 101 out of India's 117 unicorn companies had no patents, and two-thirds of the remaining 229 patents were held by two hardware companies. In contrast, Chinese AI startups account for 74.4% of global patent applications. This suggests that India's success is more in business models (e.g., delivery services, e-commerce) rather than high-tech.
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4. How to Spend Money? China Uses “Patient Capital,” India Uses “Casual Spending”
Innovation requires funding, but how you spend it matters.
China’s approach:
- Government-guided funds: The state has established thousands of funds totaling about $1 trillion. These investments are strategic.
- Focusing on Future Industries: The National Development and Reform Commission (equivalent to India’s planning committee) focuses on areas where global standards are still being defined (e.g., quantum computing, 6G) and makes early investments.
- Reducing Risks: With government support, private and foreign capital are willing to invest. This creates a pool of funds for high-risk, high-return high-tech projects.
India’s approach:
- Scattered and Short-Sighted: India’s R&D investment is only 0.6% of its GDP (far lower than China’s).
- Lack of Long-Term Mechanisms: Except in defense (e.g., the iDEX framework), there is a lack of long-term patient capital for civilian innovation. Investors prefer quick profits and are reluctant to invest in chip research for 10 years.
- Disconnection between Research and Industry: Indian university research often focuses on publishing papers, not commercialization. In China, universities like Tsinghua and Peking directly incubate companies (e.g., Zhipu AI), while in India, there is a gap between them and businesses.
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5. The Ultimate Question: Dependence or Autonomy?
The article raises this question from a geopolitical perspective.
By controlling key industries like batteries, semiconductors, and AI, China has built a network of strategic dependencies. For India, this presents a dilemma:
- Short-Term Benefits: Using China’s cost-effective technologies can quickly reduce costs and drive economic growth.
- Long-Term Risks: Dependence means that your standards, data, and supply chains are in others’ hands, posing structural risks.
The author’s advice to India:
Don’t blindly imitate China (given different national conditions), but establish an accountability mechanism:
1. Align private innovation with national strategies: Guide companies to tackle critical technologies.
2. Integrate Military and Civilian Innovation: India’s success in defense (e.g., drones, quantum encryption) should be replicated in civilian areas.
3. Foster a Complete Ecosystem: Policies should support the entire chain, from raw materials to design.
In summary:
China wins because of its systemic approach, while India loses due to its fragmented system.**
In an era where technology is a geopolitical tool, if India continues to view China’s rise as simply copying or protectionism, it will miss the best opportunity to build its own innovation ecosystem. Autonomy is the greatest power, and innovation is the only lever to leverage that power.