Reference News Network, July 30 report - Reuters published an article titled "China's Economic Recovery Carries a Distinct 'Cool Element'" on July 28. The author is Wang Taosha, Chief Portfolio Manager at Fidelity International. The following is the translated version of the article:

This year, news about the development of Chinese technology and business has been overwhelming, with varying tones in these reports, but there is a growing "cool element" running through them.

Earlier this year, the Chinese artificial intelligence company DeepSeek stunned the world with its high-performance, cost-effective R1 inference model, sparking an intense discussion about who will dominate the AI competition.

Then in early May, tensions in U.S.-China relations and rising tariff rates once hindered trade. But by summer, trade relations between the two major economies turned more relaxed.

The capital market responded positively. As of July 25, the MSCI China Index had risen by about 25% this year, surpassing the MSCI Global Market Index's 12% and the S&P 500 Index's 9%.

Notably, this strong performance was not only driven by the business cycle, but also by the attraction rooted in innovation, collaboration, and youth culture, indicating that China's next growth cycle may be quite different from before.

The process of China dominating the electric vehicle industry is a microcosm of its transformation from a low-cost imitator to a global innovator.

Chinese electric vehicle giant BYD started as a battery manufacturer. After about ten years of development, thanks to infrastructure such as government-supported charging stations, BYD's global sales have surpassed Tesla. Like many Chinese electric vehicles today, the models launched by BYD combine innovative features and fashionable designs, traits that were previously associated with American car manufacturers.

In addition to product innovation, Chinese companies are also pioneers of new business models and sales strategies. For example, the live-streaming e-commerce model pioneered by Chinese e-commerce companies has been adopted by Amazon, YouTube, and even Walmart in the United States, aiming to attract young consumers.

New business models also come from new players like Chinese toy manufacturer Pop Mart. This company sells trendy toys in "blind boxes," where each sealed box contains a randomly selected "Lubu" doll. These dolls have been used as decorations on luxury brand handbags by many celebrities and influencers.

Through the excitement generated by uncertainty, the "blind box" strategy has created significant demand in overseas markets. In 2024, Pop Mart's overseas business revenue accounted for nearly 40%, and it is expected that profit will grow by no less than 350% in the first half of 2025.

Intellectual property disputes have long troubled China's trade relations. However, China is now embracing open-source collaboration, which may signal a profound shift.

DeepSeek's R1 model is a prime example of this strategy. The model uses a permissive MIT open-source license, allowing large-scale commercial use, and has spurred the creation of countless derivative models worldwide. This openness helps build developer loyalty, influence the development of AI standards, and avoid potential geopolitical friction.

This shift stems from a focus on developing scientific capabilities. According to the British journal Nature, in 2024, the share of Chinese authors in high-quality journals in relevant fields continued to lead globally. Moreover, China's advantage in papers has extended to the semiconductor design and manufacturing fields, areas where the U.S. was traditionally considered to have an edge.

Innovation and open cooperation may reshape China's global identity. Importantly, compared to traditional economic engines such as real estate, infrastructure, and capacity investment, these new elements may drive China's economic growth to be more balanced and distinctive, thereby weakening its cyclical nature.

China is no longer just the "world factory"; it is increasingly becoming an innovation source that resonates culturally. As demonstrated by the achievements of the United States over the past few decades, no one should underestimate the value of "coolness." (Translated by Hu Guanghe)

Original: https://www.toutiao.com/article/7532699347675333147/

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