Discussion keeps the world turning.
We've all heard about China's big -name companies such as Huawei and BYD but what about the underdogs quietly revolutionizing industries behind the scenes?
Meet China's hidden champions.
Companies you've probably never heard of but whose tech and innovation powered everything from AI to green energy.
What's the secret sauce behind these hidden champions and why should we be paying attention to them now?
And Motivational Monday is here to turn meh into magic.
Tune in for stories and songs that will light a fire under your week.
Coming to you live from Beijing, this is Ram Table.
I'm He Young, for today's program, I'm joined by Steve Hatherly and Yushan in the studio.
First on a day's show… Imagine a League of Under -the -Radar innovators quietly shaping the future of their respective industries.
In the words of Hermann Simon, a renowned German scholar on management, they are called the Hidden Champions.
And they aren't just taking the lead in business operations.
They're filing thousands of patents and redefining what's possible in sectors such as new energy, tech, and beyond.
So isn't this a little bit of an oxymoron, guys, if you are a champion, you enjoy the spotlight.
Don't you? Well, not always.
But why are these champions hidden?
These are really successful companies.
But they're largely unknown to the general public.
And they're often leaders in niche markets.
And they can be privately owned.
They focus on long term growth.
They can be globally active, often exporting a significant portion of their products and services.
and they're called hidden champions, because they excel in a very specific often technical or industrial market.
But their expertise and their specialization, it makes them really indispensable to their customers, even if the company name is not a household name.
The reason I think that they are largely unknown to the general public, oftentimes they'll do B2B business, right?
Business to business.
and because they're supplying other companies, well, their name isn't really in the spotlight, hence the hidden in front of Champion.
Right, and hidden from the eyes of the average consumer when a lot of these companies are simply not consumer -facing brands.
Yeah, and their products are oftentimes integrated into larger systems, right?
So therefore, even though the company is represented in a product, and that product, of what they get from that company is essential to making it, people still don't know about that because that's not the brand name they hear about first.
Right, so let's take a look at the hidden champions, especially in the context of China.
Yes, I think what Steve mentioned just now is very interesting, not because we as customers we're general public haven't heard about them, doesn't mean that they're not important.
And as one of the major global forces, China also has its own version of these industry leaders and that's known by a slightly different name called specialized and new SMEs.
What does it mean? In Chinese, it is zhuanjing tuu zhunjungsao qi 'i which is the small and medium sized enterprises with advantages in research and development and also marketable products and profitable operations and growth potentials.
And this term, specialized and new SMEs was first introduced in 2011 by the Ministry of Industry and Information Technology or the MIIT of China and then was systematically developed all the way until now.
That's all sounding good, right?
I mean, they're already kind of promising as a leader in their respective industries, but among these SMEs, they are the top performers.
owners. And that's referred by another name called the Little Giants.
Yes, that's so cool.
And also the MIIT identifies what it takes to become a Little Giant.
And there are three features which are the industry experts.
So these companies, they need to deeply understand the users need and dominate niche market with 20 % of the little giants holding over 50 % of the domestic market share.
And secondly, they need to have technology experts.
And that means they develop critical core technologies and also just supply major national projects, in, for example, aerospace, the high -speed rail, and deep sea explorations.
And last but not least, these companies also need to have innovation experts because they lead in adopting new technologies, the materials, the processes, and the business models, continuously upgrading products and services.
So basically, only the most outstanding SMEs are selected to be the little giants.
And in order to become one, the enterprise needs to undergo a rigorous selection process based on specialization, innovation, economic performance, etc. So yeah, it's hard to become a little giant, even a little giant.
So what about if we look at the current landscape of different sectors?
What are some of the hidden champions or little giants that's worth our attention now?
Sure, yeah, as of the end of last year, December 1st, China had cultivated a total of 14 ,600 little giant enterprises over 140 ,000 specialized and new SMEs and more than 600 ,000 tech driven and innovative SMEs.
That's an impressive number for all of those groups.
Nearly 90 % of little giant enterprises are in the manufacturing sector 80 % operate in strategic emerging industries like integrated circuits and aerospace.
You mentioned that you shouldn't already.
More than 90 % service suppliers for major domestic and international enterprises, playing a key role in strengthening industrial chains, and that was the point that I was trying to make before, is that what we just described is essential, isn't it?
But it's also something that doesn't make the front page news every single day of the week.
Yeah, and there is also this innovation capability among these companies in China nowadays as well, especially the little giants enterprises is that's investing an average of 7 % of their revenue in R &D, which is the research and development approaches.
So, they hold an average of 22 authorized invention patents, a 30 % year -on -year increase for exceeding similar sized firms.
And they also have contributed to over 50 ,000 industry standards with each company drafting an average of more than three.
For future industries, nearly 5 ,000 little giant enterprises are engaged in areas such as AI, the low -altitude economy, and other future industries as well.
So we can tell these companies and enterprises, they are pretty futuristic, and they are facing towards bigger growth in the coming years as well.
That's really interesting.
You mentioned also low -altitude economy, So, that's very much referring to where the altitudes where the drones can operate.
And that's become an area of interest to here in China.
And we can see that with these companies, it seems like they're very much tech -driven, even if they're not tech companies.
It's like you have to have some kind of secret sauce, some kind of special niche that you're really good at.
It's not just about, okay, let's say if you're like a huge manufacturing for light bulbs, manufacturer for light bulbs then you kind of don't, even if you make good money, you don't really necessarily fit into this particular category.
I mean, a lot of these companies I'll give you an international example.
Have you ever heard of the Swedish slash uh, slash Swiss company called Tetra pack?
Exactly. Right. You've never heard of them before, but they revolutionized food packaging with their technology and now they're the world's leading supplier of processing and packaging solutions for liquid and food products, and their products are ubiquitous.
But the company itself they operate behind the scenes, they supply to major food and beverage producers.
So again, back to a previous point, the food and beverage producers, those are the brands that we're familiar with, but we never hear about a company called Tetra Pak, even though they're essential to that food packaging.
Right, I'm glad that they're finally in the limelight a bit!
Yeah, they're getting their moment right now!
They're on our table!
Yeah, so besides we've mentioned industries such as aerospace, you mentioned packaging and some even allude to AI.
Of course, you get Deep -Seek stealing the limelight, as well as Huawei and some of these big names, but there are actually still a lot of other little giants who are working diligently in this field.
and I'd like to turn our attention to green energy.
When we talk about this sector, most think of electric cars and solar panels, but what about the companies producing the materials, components, and technologies that make it all possible?
It turns out nearly 95 % of China's green hidden champions slash little giants operate in the B2B business -to -business sphere, making them invisible to most consumers, what role did they play in China's green sector?
They manufacture components, or semi -finished products, for downstream businesses, and that's even higher than the 84 % B2B proportion that they observed among international hidden champions, making them even less visible to consumers.
That's from the Southern Weekly Survey.
survey. You're right.
It's much more, yeah, AI gets a lot of attention, of course.
Aerospace gets a lot of attention, of course, when we're talking about, you know, drones, remember we talked about in the agricultural industry, their use there and also, drone taxis that we'll be seeing at some point in the future.
That's the stuff that makes the news every single day.
But when you're creating semi -finished products for downstream businesses, and you operate at such a high percentage there, almost 95%.
That just shows how important these companies are, even though the sectors that they might be working in, the green sector for example, still ultra important to their successes.
Yeah, and some data shows that among the 100 leading green hidden champions, 30 have core business tied to what we call the new three, or rather the three types of new industries.
Well, that includes the NEVs, the new energy vehicles, lithium batteries, and photovoltaics.
So we never really heard about how, you know, on the manufacturing side, these companies are working towards these innovations.
But in the meantime, they're really pouring out a lot of efforts on that.
And geographically speaking, the hidden champions in China that's working on all of these different aspects towards green energy and green technologies.
countries, they are mainly gathered in the eastern and central coastal provinces of China, particularly in Jiangsu province, and also there are those in Shandong, Zhejiang, Guangdong and Anhui provinces as well.
But Jiangsu on its own leads with 85 % of such enterprises.
And it's very interesting when I first discovered this as well because when we see these, say, high -tech companies and enterprises.
We talked previously on Roundtable about how Hangzhou is now the tech you know..
yeah, it's the hub there and also we talked about how Jiangsu is leading with that as well but there's also those in northern or rather northwest China in Xinjiang Uighur Autonomous Region in Gansu Province where there's also a high proportion of Green Hidden Champions is relative to their total number of hidden champions as well.
So Xinjiang, a Uyghur autonomous regional launch, has the share at 17%, and Gansu is at 13%.
So we see different areas in China, regardless of which direction geographically they're spreading out, is all contributing to this niche development.
Yeah, and it's important, right?
But we talk about this a lot, these green initiatives.
Climate change is always a topic of discussion, carbon neutrality goals, industries related to renewable energy, clean transportation, energy storage.
They've become priorities, haven't they?
And with these policy changes and with these types of things becoming a priority, you get new enterprises.
And the enterprises that we're talking about today are relatively young.
They're about 15, 16 years old, more than half of them were established within the last 15 years and that aligns with the timeline of the country's green policies.
That's really interesting.
So we see that the company's businesses and sectors, they're growing and developing our.
It's in line with the national path in a way and it sort of helps each other out.
It's interactive in a way, and it's good for business to grow if you are sort of riding this right tide.
And we've seen that with these hidden champions as well as little giants, they're developing not only here in China, but some of them are mature enough, strong enough to gain international market foothold as well.
Yeah, that's right.
some of them are already global leaders.
And that's evident from the multilingual corporate websites that are already in use.
Of the hundred leading enterprises, sixty of them offer bilingual or multilingual websites.
So if you visit their sites, English is the most common, I think, when you're looking at other languages.
But then there's Spanish versions, Japanese, Russian, French is represented as well.
So yeah, these companies are not only existing or catering to clients here in China.
It's a global initiative Yeah, I totally agree with that too because we see that Globalization is now a key factor for a lot of the hidden champions Chinese or not to participate in such global economy and also take part in combating global challenges all together and according to Hermann Simons study that's quoting from his book, Hidden Champions of the 21st Century.
These SMEs in China tend to follow a three -stage development for entering international markets.
And take the specialized and new SMEs in the green sector as an example.
The first step there, stepping out is on exporting, because among the top 100 green hidden champion enterprises analyzed by The Southern Weekly, 28 listed companies generated an average of nearly 13 % of their revenue from exports in 2023, that's slightly higher than the A -share market average of around 12%.
And some companies such as ARCTAC achieved export ratios that's exceeding 50%.
Now, when we're looking at the exporting volume, let's take a brief look at the little giant enterprises.
Because in 2024 alone, China's little giant enterprises saw a slightly over 12 % year on year increase in experts.
The exported integrated circuits and medical devices had reached up to over 25%, while the exported motor vehicles and parts had reached up to over 11%.
And also the volume of exports to different countries has been shown increase as well, to ASEAN countries, to the EU, to the US, with exports to ASEAN surge by 30 .3 % that's highlighting strong foreign trade resilience and also growth potential as well.
So they're actively trying to get into the international markets.
Well, this does show that on the one hand, These companies they have a strong advantage at home considering China is a massive market.
In many areas it is the world's number 2 biggest market, if not the biggest market depending on sector so for Chinese companies if you can really do well in your home market that's fantastic but we also know that in China when competition tends to be fierce.
You've got so many people, super smart and hard working people devising up all kinds of marketing plans, promotional plans, and awesome products.
There's a race to the bottom in a lot of things, including the margins.
It also gives rise to the phenomenon called involution.
It not only happens in your workplace, But it also happens in industries as well.
That is, there is this ruthless competition of different parties all trying to compete inwards.
And then it's not the healthiest competition, to say the least.
But for a way to break away from this kind of predicament, it's companies going abroad and conducting in exports.
And still, even until today, despite the fact that we've talked about for years that China is trying to improve its consumption sector or what -not, I think it's still important to face the fact that we're still very much depending on trade.
And exports is paramount for so many sectors beyond just manufacturing as well, and you can see in these little giants.
Yeah. And for all the reasons that you just said, this could be the reason that they tend to adopt an international strategy from the beginning.
14 of the 100 leading green hidden champions, they have established 34 overseas subsidiaries or representative offices or R &D centers.
And when you compare that to the German benchmark of 9 .6 subsidiaries per company, The Chinese firm still have room to expand, but when they have that strategy from the get go, Huyang, for the reasons you just mentioned, they're aware, aren't they, of the lethal competition levels that exist in the domestic market.
So when they start, they know, or they have on their radar this international strategy, and this I think helps the companies because it's not something, you know, oftentimes the company will develop and then think, oh, maybe we should be expanding overseas.
companies. That might come 4 or 5 or 10 years later.
But for these types of companies, these hidden giants, or many giants or whatever you want to call them, right from the beginning that's the strategy.
And specializing in these different industries, it prioritizes a large domestic market, yes, but it also prioritizes the international markets too.
Yeah. But in the meantime, we see that even though you mentioned earlier, Steve, that many of these little giants, so many giants, by the way there.
I was confusing with hidden champions, wasn't I?
Well, many of them are building subsidiaries all across the world.
Establishing overseas factories, however, still remain the most challenging step for a lot of these enterprises.
And the key obstacles for them to build factories outside of China would include power shortages, labor difficulties, political instabilities, selective law enforcement, etc. High tariffs.
So currently fewer than five of these SMEs or little giants in green sector that have been surveyed that have confirmed foreign manufacturing plans for their factories.
Despite challenges, However, some firms such as the Sumwanda EVB Company Limited and Mayfair Technology China Company Limited have set up factories in Hungary, in Morocco, in Malaysia, Japan, and including Canada.
Well it's an interesting time to talk about trade for sure.
Well guys, what do you see?
Why is this an important topic?
Just in general? Yeah.
Well, I think that these companies deserve the recognition that they get, for example, us talking about the show today, but also how important they are, even if they don't get the attention.
These companies support industries that don't get the most attention in the news every single day.
We talk about the green sector.
We're talking about companies that are working business to business by supporting others.
Without these industries, without these businesses doing that, we wouldn't have the big brand products many times.
We wouldn't have the success of these products because they wouldn't have the support that was necessary.
So, what I'm trying to say is that these companies don't have name recognition a lot of the time, but still without them, the products that they're supporting couldn't exist at all.
Yeah, also when we talk about, yeah, the big names getting the limelight, and then these smaller or medium -sized companies, they're actually the backbone of industrial revolution, evolution rather, and global competitiveness that we've mentioned and also the country's transformation in so many sectors.
And I just really appreciate it when they get some recognition.
Yeah. It's like in a class.
Sure, you have the top, a straight A student or students, that's in a handful, and there's a majority of students who are working really hard and they're doing well too.
But they don't always get the, what do you call that?
The praise? Yeah, the purple or blue ribbon or whatever.
And it's good to sort of put everybody on the pedestal for once and let's see what they excel at.
Yeah and without them, then we might have a hard time shaping the future of technology which sounds like a very grand thing to say but I think there's plenty of truth in that.
So what do you see as the future of these hidden champions or the development of these little giants which let me highlight once again that their average age is just above 15 years.
Well, probably not even that long.
Many of these companies are seen to have a very good leap of faith and a very promising growth in just the next five years or ten years.
And of course, like we already touched upon, China's hidden champions are well -positioned to shape the future technologies.
So by all of these different measures, we are kind of giving these companies a chance to thrive and really shape a future for us in a new way.
Yeah, essentially these companies prove that innovation isn't just about being big, it's about being smart, specialized, and ahead of the curve.
Understanding their role helps us grasp where China and the world is headed in tech, sustainability, and so much more that we've covered on this show.
