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Investing.com -- China is rapidly establishing itself as the frontrunner in the global robot race, according to Morgan Stanley (NYSE:MS) analysts, who cite a confluence of industrial policy, demographic necessity, and long-term strategy.
“In our informed opinion, China is in a commanding lead in Physical AI (AVs, Drones, Humanoids, etc.),” Morgan Stanley wrote. “The conspicuous advancement of AI-enabled robots in China is a powerful innovation catalyst for the US.”
The analysts outlined 10 reasons behind China’s potential dominance.
First, “China has significant control of the supply of critical magnets used in nearly all mobile machines,” with a 65% share of mining and an 88% share of refining of rare earths, argues Morgan Stanley.
Second, the PRC’s early embrace of “Foreign Technology Transfer” through joint ventures has helped its auto industry “lap the West in terms of tech and efficiency,” said the bank.
Third, “China’s expansive network of Government Guidance Funds” has unlocked “Darwinian forces of internal competition.”
Fourth, the “Military-Civil Fusion” doctrine ensures dual-use tech advances for both civilian and defense purposes—“drones are a classic example,” writes Morgan Stanley.
Fifth, the bank explains that China’s “demographic challenges provide a natural incentive” to develop physical AI.
Sixth, they state that the country hosts public displays like “robot marathons” to build enthusiasm.
Seventh, education is said to play a key role, with Morgan Stanley noting that “China had 35 million students enrolled across over 11,000 vocational schools” in 2023.
China also offers aggressive “R&D subsidies,” including a 200% ‘super deduction’ for high-tech expenses.
Ninth, “China spent 4.8% of its GDP on domestic infrastructure,” the highest globally.
And finally, it is seen as a “long game” mindset, rooted in cultural philosophies like Weiqi, that encourages “psychological advantage as opposed to direct conflict.”
Morgan Stanley concluded: “We believe China EVs are eventually coming to US shores—it’s just a matter of time.”
