The Dragon’s Catalyst: How China’s Innovation Fuels the Transformation of Thailand’s Economy

The narrative that China is “winning” the innovation race is no longer just a geopolitical talking point—it is a tangible economic reality visible from the factory floors of Rayong to the boardrooms of Bangkok. This shift is underscored by China’s rapid advancements in technology, infrastructure, and manufacturing capabilities, which have not only transformed its domestic economy but also reshaped global supply chains.

From pioneering breakthroughs in artificial intelligence to dominating sectors like electric vehicles and renewable energy, China’s influence is increasingly felt across industries worldwide. This momentum has left neighboring nations and global competitors grappling with the challenge of keeping pace, while also presenting opportunities for collaboration and integration in the evolving economic landscape.

As we approach the end of 2025, celebrating 50 years of Thai-Chinese diplomatic relations, the question for Thailand is no longer if China will lead in deep tech, but how Thailand can avoid becoming merely a consumer of it. From the EV supply glut to the “Digital Silk Road,” China’s push for technological supremacy is creating a complex new playbook for Thai businesses.

Foreign Direct Investment (FDI) and Industrial Relocation

Chinese FDI into Thailand has surged, particularly in high-tech and manufacturing sectors. This is not solely due to trade war-induced diversification but also a deliberate strategy to leverage Thailand’s regional hub status and existing supply chains.

The Hardware Reality: Beyond the “Assembly Line”

For decades, the “China Plus One” strategy meant using Thailand as a hedge for low-cost manufacturing. Today, that dynamic has inverted. Chinese firms are not just offshoring labor; they are offshoring advanced capacity to bypass Western sanctions, effectively treating Thailand as a sophisticated industrial suburb of the Greater Bay Area.

The EV Paradox Thailand’s ambition to become the “Detroit of Asia” for EVs has largely succeeded in volume, but the value-add story is more complicated. Chinese giants like BYD, GWM, and Changan have poured over THB 140 billion into the Kingdom by late 2025.

However, the recent friction over the “EV 3.5” policy reveals the tension. While final assembly happens here, the high-value “brain and heart” of the cars—the advanced battery cells and BMS chips—are predominantly imported.

• The Opportunity: Local suppliers are finally seeing technology transfer in chassis and body manufacturing.
• The Risk: Thai auto-parts makers (mostly aligned with Japanese ICE supply chains) face an “adapt or die” moment as Chinese supply chains remain notoriously insular.

The Digital Front: The “ChiNext” Effect

While the manufacturing shift grabs headlines, the financial integration of 2025 is subtler but equally profound. The recent launch of the ChiNext 50 Depositary Receipt (DR) by InnovestX has given Thai investors direct access to China’s “Nasdaq”—the engine room of its deep-tech economy.

This is not just a financial instrument; it is a signal. China is exporting its digital infrastructure standards to Thailand.

• 5G & Cloud: Huawei and Alibaba Cloud have effectively built the backbone of Thailand’s EEC (Eastern Economic Corridor) digital infrastructure.
• AI Applications: Unlike the US focus on “Frontier Models” (like GPT-5), Chinese tech in Thailand is focused on industrial AI—optimizing logistics, port management at Laem Chabang, and smart grid management.

Digital Platforms and E-commerce

Chinese tech giants have expanded their consumer-facing platforms, directly influencing Thai business practices and consumer behavior.

• E-commerce: Platforms like Alibaba-backed Lazada have set the standard for digital logistics, mobile payments, and cross-border trade, forcing local retailers to rapidly digitize.
• Fintech: Chinese payment systems and investment in local fintech firms are accelerating the shift away from cash, promoting greater financial inclusion through mobile wallets and digital lending.

The Geopolitical Tightrope

Current data from 2024 and 2025 suggests China has moved from being a “fast follower” to a genuine leader in several critical sectors, particularly those involving advanced manufacturing and green technology. However, the US retains a structural advantage in foundational technologies like high-end semiconductors, biotechnology, and frontier AI models

Scientific Output (China Leads): According to the ASPI Critical Technology Tracker (2024/2025), China now leads the world in high-impact research for 57 out of 64 critical technologies. This includes areas like advanced batteries, hypersonics, and 5G/6G. In sheer volume of PhDs, patents, and scientific citations, China has overtaken the US.

The question of whether China is “winning” the innovation race yields a complex answer that depends heavily on how you define “winning”—whether by scientific output, commercial dominance, or strategic independence.

Current data from 2024 and 2025 suggests China has moved from being a “fast follower” to a genuine leader in several critical sectors, particularly those involving advanced manufacturing and green technology.¹ However, the US retains a structural advantage in foundational technologies like high-end semiconductors, biotechnology, and frontier AI models.²

The following breakdown assesses the “race” across key dimensions.

The Big Picture: Research vs. Power

A distinction exists between “academic leadership” (publishing papers) and “commercial/strategic leadership” (selling products and setting standards).

• Scientific Output (China Leads): According to the ASPI Critical Technology Tracker (2024/2025), China now dominates global high-impact research in 57 out of 64 critical technologies, including advanced batteries, hypersonics, and 5G/6G. In terms of the sheer volume of PhDs, patents, and scientific citations, China has surpassed the United States.
• Commercial & Strategic Power (Mixed): While China generates more research, the US often retains the ability to commercialize high-value innovations more effectively (e.g., in software and pharmaceuticals). The US also controls key “chokepoints” in the global supply chain, such as chip design software and advanced lithography tools.

Sector-by-Sector Scorecard

A. Green Technology & Advanced Manufacturing

Status: China is Winning

China has moved beyond just “making things” to defining the cutting edge of innovation in this sector.

• Batteries & EVs: China is the undisputed global leader.⁵ Companies like CATL and BYD are not just manufacturing leaders but innovation leaders, pushing boundaries in sodium-ion and solid-state battery technologies.⁶
• Solar/Wind: China dominates the entire supply chain and patent landscape. In 2024, Chinese firms held a massive lead in green tech patents, and “Made in China 2025” goals for self-sufficiency in these areas have largely been met or exceeded.

B. Artificial Intelligence (AI)

Status: Competitive / US Leads in Frontier Models

• The US Advantage: The US retains the lead in “frontier” AI models (like GPT-4/5, Claude, Gemini) and the hardware that powers them (NVIDIA GPUs).⁷ The US private sector ecosystem is currently more dynamic in generating breakthrough algorithms.
• The China Strategy: China is pursuing a different path focused on deployment and industrial application. It leads in applying AI to manufacturing, surveillance, and robotics.⁸ Recent reports indicate China also leads in “open source” model adoption, with models from firms like DeepSeek and Alibaba gaining significant global traction among developers.⁹

C. Semiconductors (Chips)

Status: US Leads / China is “Catching Up” under Pressure

This is the US’s strongest fortress.

• The Bottleneck: The US and its allies (Netherlands, Japan, Taiwan) control the ultra-complex supply chain for the most advanced chips (EUV lithography).¹⁰ China remains dependent on foreign technology for the absolute cutting edge (3nm and below).
• China’s Resilience: Despite harsh sanctions, China has shown surprising resilience. In late 2024 and 2025, domestic champions like Huawei and SMIC achieved breakthroughs in producing 7nm (and potentially 5nm) chips using older equipment.¹¹ China is arguably “winning” the war for legacy chips (used in cars, appliances, and weapons), flooding the market with mature-node semiconductors.¹²

D. Biotechnology

Status: US Leads

• The US remains the clear leader in the development of novel therapeutics, vaccines, and complex biologics. The “commercialization gap” is visible here: while China publishes vast amounts of biotech research, the highest-value drugs and IP largely originate from US and European firms. However, China is rapidly scaling its capacity in “industrialized biotech” (e.g., contract manufacturing).

Summary: The Innovation Map

Thailand’s neutrality is being tested by the “Bifurcated Stack.” As the US tightens controls on high-end semiconductors, Thailand is emerging as a neutral ground where Western capital meets Chinese engineering.

However, this comes with scrutiny. With the US Department of Commerce keeping a watchful eye on “transshipment” (goods made in China but stamped “Made in Thailand” to avoid tariffs), Thai exporters in 2026 will face unprecedented compliance costs. The solar panel sector has already felt this chill; electronics could be next.

What This Means for Thai Business

For the Thai CEO, the China innovation surge requires a three-part strategy:

1. Decouple Your Tech Stack: Ensure your critical software systems aren’t locked into a single ecosystem that could be sanctioned.
2. Partner for Process, Not Just Product: Don’t just buy Chinese machinery; seek joint ventures that transfer the process engineering knowledge (the “secret sauce” of Chinese efficiency).
3. Look to the “Middle Market”: The biggest opportunities in 2026 aren’t in competing with Chi nese tech giants, but in servicing the massive influx of Chinese mid-market firms relocating to the EEC. They need legal, HR, and logistics partners who understand local nuance.

Bottom Line

China is winning the race to scale innovation. Thailand’s prize for 2026 isn’t to beat them, but to integrate so deeply into their supply chain that we become indispensable—while keeping the door open to the West. To achieve this, Thailand must focus on fostering strategic partnerships, investing in advanced technologies, and enhancing workforce skills to align with China’s rapid advancements. Simultaneously, maintaining strong relationships with Western nations will ensure a balanced approach, enabling Thailand to leverage opportunities from both sides. This dual strategy will position Thailand as a pivotal player in the global economy, securing long-term growth and resilience.