China’s innovation hidden in plain sight

1. Headline News Obscures the True Competitiveness of Chinese Companies

The article argues that judging the Chinese market solely through macroeconomic headlines misses companies that are leading globally in technology and manufacturing. Linda Lin, co-manager of the China Growth Trust, likens this approach to "judging a restaurant from the weather outside." She notes that while the overall economic picture is real, her meetings with founders reveal ambition and rapid innovation. In green technology, advanced manufacturing, robotics, and artificial intelligence, China is setting the pace, and broad economic narratives may obscure the true face of enterprises doing entirely different things.

2. Risk Pricing: A Pragmatic Investment Logic Using BYD as an Example

The article points out that geopolitical and regulatory risks have been factored into company and portfolio-level considerations to assess whether potential returns remain attractive. Taking the world's largest pure electric vehicle manufacturer BYD as an example, the institution's investment case assumes that BYD will not sell passenger cars in the United States—the products may be appealing, but political factors could keep them out. For the European market, the outlook is less clear; although tariffs and political headwinds may limit its market share, early expansion is encouraging. Nonetheless, managers still see a strong growth case. The article emphasizes that managers conduct deep dives into each company to evaluate whether potential returns remain attractive after accounting for risks.

3. Deep Integration of Digital Life and Manufacturing

The article uses specific examples to show how Chinese companies seamlessly connect digital services with the physical world and achieve technological leadership in manufacturing.

• Digital Platforms: Holdings in the fund, such as Meituan, PDD Holdings, and RedNote, demonstrate how digital and physical experiences make daily life more convenient. For instance, at a remote section of the Great Wall, tourists can order iced coffee via Meituan, and a drone delivers it within five minutes. Meituan served over 800 million users in 2025 and, as of July 2026, had completed over 1 million drone delivery orders.
• Manufacturing: BYD challenges the old assumption that "China is still catching up." Its Seagull model sells for around £8,000 in China, while the Yangwang U9 Ultimate is the world's fastest production car. More important is the technological complexity behind it: BYD produces many core components in-house, and its flash-charging technology can add 400 kilometers of range in five minutes. Value, vertical integration, and technological progress make Chinese EV manufacturers a formidable challenge to legacy automakers.
• Battery Giant: CATL supplied nearly 40% of the world's EV batteries in 2025. As of March 2026, its batteries had been installed in over 24 million vehicles. Managers attribute CATL's advantages to manufacturing expertise, scale, and a willingness to abandon last year's solutions when better ones emerge.

4. Practical AI and the Value of Localized Research

The article argues that China's approach to AI focuses more on practical applications, and localized in-depth research is key to uncovering such investment opportunities.

• AI Path Divergence: Unlike the U.S., which focuses on artificial general intelligence (AGI), Chinese developers typically concentrate on practical applications, often modifying open-source models and deploying them at lower cost in factories, schools, and public services.
• Specific Companies:
• Horizon Robotics is a leader in autonomous driving chips and software in China, with technology that could lay the foundation for future robotics. The fund's investment reflects the value of patient, localized research conducted from its Shanghai office. When Linda Lin first met founder Yu Kai, he was still at Baidu. The team tracked Horizon for years before its IPO. Relationships help with early discovery of founders, but managers still need evidence of a company's sustainable advantage. As Lin puts it: "Relationships help us open the door, but research—deep research—helps us decide whether to walk through it."
• ByteDance combines its AI models with strong distribution capabilities through users in China and globally. She believes the combination of data and distribution should continue to help translate technological advances into products people use.

5. Chinese Companies Are Shedding the "Western Counterpart" Label

The article notes that Chinese companies are increasingly difficult to simply analogize with Western competitors; they are reshaping the global competitive landscape. PDD Holdings, Didi, and RedNote were once referred to by Western markets as China's versions of Amazon, Uber, and Instagram, respectively. But when Western competitors are all imitating TikTok, what can ByteDance be called a Chinese version of? Similarly, RedNote, Temu, and SHEIN are changing how consumers discover content and shop. Advances in EVs, batteries, open-source AI, and semiconductors are reshaping global competition. If China can develop domestic alternatives under external constraints, this could strengthen its manufacturing ecosystem and alter the prospects for its chipmakers, manufacturers, and technology platforms.

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Position Moves

Ticker	Direction	Author's One-Sentence View	Key Data
BYD	Hold & Observe	Even assuming no sales in the U.S., the growth case remains strong; vertical integration and technological leadership form core advantages.	Seagull priced at ~£8,000; Yangwang U9 is the world's fastest production car; flash charging technology adds 400 km of range in 5 minutes.
CATL	Hold & Observe	Manufacturing expertise, scale, and determination for technological iteration make it the global battery champion.	Supplied nearly 40% of global EV batteries in 2025; installed in over 24 million vehicles as of March 2026.
Meituan	Hold & Observe	Deep integration of digital and physical experiences; drone delivery showcases innovation.	Served over 800 million users in 2025; completed over 1 million drone delivery orders as of July 2026.
PDD Holdings	Hold & Observe	As a digital platform, it is changing how consumers discover content and shop; difficult to benchmark against Western companies.	No specific data.
RedNote	Hold & Observe	Alongside Temu and SHEIN, it is reshaping the global consumption landscape, shedding the "Chinese Instagram" label.	No specific data.
Horizon Robotics	Hold & Observe	China's leader in autonomous driving chips and software; localized patient research is the key discovery path.	Team tracked for years before IPO; founder Yu Kai originally worked at Baidu.
ByteDance	Hold & Observe	Combination of AI models with strong distribution capabilities; data and distribution advantages help turn technology into products.	No specific data.
Didi	Not specified	Mentioned as a case of the "Western benchmark" label, but no specific view or data.	No specific data.
Temu	Not specified	Mentioned as one of the companies reshaping the consumption landscape, but no specific view or data.	No specific data.
SHEIN	Not specified	Mentioned as one of the companies reshaping the consumption landscape, but no specific view or data.	No specific data.