Experts debunk myths about China Opportunity 2.0

"China Opportunity 2.0" does not imply that Beijing will appropriate a bigger share of the global manufacturing pie going forward, but rather it would help the world to bake a larger one as Chinese industrial capabilities become increasingly embedded in global supply chains, multinational executives and industry experts said.

They made the comments after the country highlighted "China Opportunity 2.0", a new concept of growth driven by innovation, advanced manufacturing and deeper integration with the global economy, at the 17th Annual Meeting of the New Champions of the World Economic Forum, also known as the Summer Davos, in Dalian, Liaoning province, in June, pushing back against the Western rhetoric of the so-called China Shock 2.0.

Speaking about the concept, Joerg Gnamm, head of global manufacturing at consulting firm Bain & Company, said: "China's next phase of growth will be defined not simply by producing more goods, but by exporting advanced manufacturing capabilities, industrial know-how and scalable innovation.

"It is not only about China capturing more of the pie. It is also about Chinese capabilities being combined with global ecosystems," he added.

As geopolitical tensions prompt some multinational companies to diversify production, debates have intensified over whether China's expanding manufacturing capacity is crowding out industrial economies elsewhere, a claim that China has repeatedly refuted on various occasions.

Gnamm said the framing overlooks what increasingly distinguishes China's manufacturing sector.

"What stands out in China is the combination of scale, speed and the ability to integrate across the full value chain. That enables what we call impact at scale," he said.

Gnamm added that China's manufacturing ecosystem remains structurally distinct due to its complete domestic supply chains and rapid innovation cycles.

"China has almost the entire value chain within one country at massive scale. That creates a very different environment for deploying advanced manufacturing," he said.

He said that factories also benefit from rapid feedback loops between production, engineering and customers, enabling products and manufacturing processes to evolve much faster than in many overseas markets.

The third advantage, he added, is organizational discipline in scaling innovation. Once a solution has been proven effective, it can be replicated across multiple plants and regions far more quickly than in many other markets.

In June, the World Economic Forum added eight Chinese factories among a new batch of 16 Global Lighthouse Network factories. It means that China now hosts 109 of the world’s 238 lighthouse factories, which are widely seen as the benchmark for the most advanced factories globally.

China's lighthouse factories, which span the steel, new energy, automobile, electronics and telecommunications industries, were recognized for their application of advanced technologies such as artificial intelligence, big data and automation on a large scale, delivering measurable gains in efficiency, flexibility and sustainability.

According to Hou Wenhao, a partner at market consultancy firm McKinsey & Company, such achievements not only reflect the broad adoption of smart manufacturing technologies in China, but also its strong capabilities in large-scale implementation, technological innovation, scenario expansion and efficient commercialization.

"China's manufacturing sector is moving from exploration to maturity, injecting new momentum into the high-quality development of global industry," he said.

Multinational companies operating in China are building deeply localized industrial ecosystems that increasingly serve both the domestic market and global operations, vividly demonstrating what exactly is "China Opportunity 2.0".

Yum China, which operates more than 18,000 restaurants across the country, likens its business in the country to "a bamboo forest" rather than "a collection of individual trees".

Describing the company's nearly four decades of investment in China, Yum China CEO Joey Wat said that the real moat is formed by the "underground bamboo root system". The root system consists of 35 logistics centers serving more than 2,600 cities and counties and a network of over 850 suppliers, enabling the company to maintain resilience even during periods of market disruption, she said.

"At the same time, Yum China is leveraging the scale of the Chinese market to help international suppliers of products such as Australian cheese and Italian coffee beans establish traceability and compliance systems, while exporting innovations developed in China — including autonomous, temperature-controlled delivery vehicles and automated supply-chain technologies — to global restaurant operations," she said, adding that these can greatly enhance the operation efficiency of the firm's global branches.