China is quietly winning the physical AI race

People watch as robots perform a dance during Lunar New Year celebrations marking the Year of the Horse, in Beijing, China on 18 February 2026. Photo: REUTERS

In a factory on the border of Shanghai, production moves with a steady rhythm. Robotic arms weld, lift and assemble components with precision, while a small number of workers supervise operations from nearby stations. There is little spectacle, only efficiency. 

Across China, such scenes are becoming increasingly common.

Over the past decade, China has been quietly transforming its manufacturing sector through large-scale investment in robotics. While much of the global conversation around technological change has centred on software and artificial intelligence, China has focused heavily on machines designed to operate in the physical world.

The outcome is a rapidly growing robotics industry that is beginning to reshape not only domestic production, but also global manufacturing. This transformation is not simply about making factories more modern or productive. It is also about economic power — and about which country will lead the next phase of industrial development.

Today, China accounts for more than half of all new robot installations worldwide, with around 295,000 units added in a single year. Chinese factories are now building over two million robots, more than any other country by a wide margin. This dominance did not happen overnight. It is the outcome of a deliberate, state-backed strategy to modernise manufacturing and reduce reliance on human labour.

Both economic and demographic factors play a major role here. Rising wages and an ageing workforce have made automation not just attractive, but necessary. Robots offer consistency, speed and cost efficiency that human workers struggle to match over long periods. In industries such as electronics and automotive manufacturing, where precision is considered crucial, robots have become indispensable. 

But China does not stop at efficiency. At its core, this robotic revolution is about control. By building its own machines and supply chains, China reduces dependence on foreign technology and strengthens its position in global manufacturing networks. Domestic robot makers have already outperformed foreign competitors in their home market, capturing a majority share for the first time. 

This shift has profound implications. As Chinese robots become cheaper and more capable, they are increasingly exported abroad, embedding China's technology into factories around the world. Analysts warn that this could tilt global supply chains in China's favour, leaving other economies struggling to keep pace.

China does not stop at efficiency. At its core, this robotic revolution is about control. By building its own machines and supply chains, China reduces dependence on foreign technology and strengthens its position in global manufacturing networks.

But the story is more about innovation, less about numbers. China is rapidly moving beyond basic industrial robots towards more advanced systems powered by artificial intelligence. Apart from repeating tasks, these machines will learn, adapt and interact with their environment.

In research labs and start-ups across Shenzhen and Beijing, engineers are developing humanoid robots, warehouse systems and service machines capable of performing increasingly complex functions. Some robots can already sort packages in vast logistics centres, while others assist in surgery or rehabilitation. The line between machine and worker is becoming less distinct.

This convergence of robotics and artificial intelligence is often described as the race for "physical AI", where intelligence is embedded in machines that can move, see and manipulate the world. China seems determined to lead this race. Its approach combines massive state funding, dense manufacturing ecosystems and a willingness to experiment at scale.

The advantages are striking. In regions such as the Pearl River Delta, suppliers, manufacturers and engineers operate in close proximity, allowing rapid prototyping and iteration. A robot design can be modified and rebuilt in days rather than weeks. This speed gives Chinese firms a critical edge over competitors in the United States and Europe, where supply chains are more fragmented.

Another decisive factor is cost. Chinese robotics companies have managed to produce machines at a fraction of the price of Western equivalents, making automation accessible to a wider range of industries. This affordability accelerates adoption, creating a feedback loop where more data leads to better machines, which in turn drives further demand.

Yet beneath the optimism lies a more complex reality. The rise of robots inevitably raises questions about work and inequality. While automation can improve safety and productivity, it also threatens to displace workers, particularly those in routine manufacturing roles. Studies suggest that exposure to robots can increase anxiety among workers even as it reduces physical strain. 

For China, managing this transition will be as important as achieving technological leadership. The government has emphasised retraining and upgrading skills, but the scale of change is immense. Millions of workers may need to adapt to new roles in an increasingly automated economy.

Globally, the implications are equally significant. China's robotic surge challenges long-standing assumptions about where and how goods are produced. If automation reduces the importance of cheap labour, countries that once relied on low-cost manufacturing may find themselves squeezed. At the same time, advanced economies face renewed competition from a technologically empowered China.

There is also a geopolitical dimension. Robotics sits at the intersection of economic power, technological capability and national security. Machines that can build cars can also build drones or military equipment. As such, the race for robotics leadership is inseparable from broader strategic rivalries.

And yet, in the factory in Shanghai, daily routines do not reflect these grand narratives. A robotic arm completes another weld, sparks flying briefly before fading into the steady hum. Nearby, a handful of workers monitor screens, intervening only when necessary. 

China's robotic revolution is not a sudden upheaval. It is a gradual, deliberate transformation unfolding in thousands of factories, laboratories and warehouses across the country. 

What is taking shape is not just a shift in manufacturing, but a contest over who will define the next industrial era. For now, China is moving first, and faster than most.