Joe Ngai, McKinsey: Domestic rivalry drives Chinese firms

0:00Maura Fogarty:This BBC podcast is supported by ads outside the UK.

0:30Maura Fogarty:us. And then we'll be learning about Francis Galton and the racist, discredited pseudoscience of eugenics with Desiree Birch. We'll meet many medieval saints in their bone boxes with Rachel Parrott. So if that sounds like your sort of thing, listen to You're Dead to Me wherever you get your podcasts. Thank you. Bye.

0:51Joe Ngai:Hello, I'm Maura Fogarty, the BBC's Asia Business Editor, and this is the interview from the BBC World Service. The best conversations coming out of the BBC. People shaping our world from all over the world.

1:04Maura Fogarty:I want to get freedom. I like that freedom.

1:07Joe Ngai:A gender equal world would be a better world for men too. We need this is fire. We need healing. We need trust. These companies don't really, they don't care what governments do. This is a war. The first thing that we want is a war to end. For this interview, I met Zhou Ngai, who oversees the China region for the global consulting firm McKinsey at their office in Singapore. His work advising senior management at Chinese and multinational corporations in the region provides him with a unique, high-level insight into how the world's second-largest economy functions. Having authored numerous reports and co-authored books on China's financial institutions and the country's economic landscape, Ngai has been repeatedly recognized for his expertise.

1:57Joe Ngai:Forbes China placed him in the top 100 most influential Chinese in 2023, 2024, and 2025. And Bloomberg Businessweek has made him one of their influencers of the year. In this interview, we hear how the Chinese market has changed in the 25 years since the country joined the World Trade Organization, as well as his views on how China is developing artificial intelligence and managing tensions with U.S. competitors.

2:27Maura Fogarty:What Chinese companies need to understand is that you can be a very successful factory for the world, but to become a global corporate citizen, there's a lot more that you need to think about. In China, the best student becomes the class captain. The most successful business becomes the business community leader. You show your greatness and then you become the representative. You never learn how to become part of community, part of being loved and integrated. And I do think that's a little bit where Chinese companies will have a bit of a road to learn because they can't assume that the rest of the world needs to play with your rules.

3:13Joe Ngai:Welcome to the interview from the BBC World Service with Zhou Ngai. Let's start first with AI, because that's a big topic on everyone's minds right now. In terms of how the Chinese are developing their AI models, can you explain a bit about how that's different from how the Western companies are doing it? I mean, open sourcing being one of the key factors.

3:35Maura Fogarty:Well, I think the Chinese companies are all constrained, right? They're constrained by, you know, a little bit by the access to chips. They're constrained by geopolitical factors that make them kind of harder to access in some ways. And they are also in some ways behind the U.S. models in the beginning by one or two years. By now, maybe one or two months. And so therefore, the way that they have thought about this is almost I need to find another way, another path to my development. Because if I'm just going to go the same way that the U.S. models are, I'm forever going to be behind. And every minute I'll get behind even more.

4:15Maura Fogarty:So I think open source was a very smart way for them to do it. It was also another path. It offers the world the way to customize these, to look at all the weightings. And I think that it also offers the Chinese models a way out of their constraints.

4:32Joe Ngai:If we can just sort of explain to some of our audiences who may not be that familiar with sort of the AI models, open source meaning that the foundational layer of that model is publicly available.

4:45Maura Fogarty:Yeah, it means that basically people can take the entire model, plug it into your own environment and you see everything. And because of that, people around the world can also work on it, improve on it. It becomes a little bit more of a kind of crowdsourcing, if you will. But, you know, I think that it's a very effective way. And I think that the Chinese are using that as a way for the development of AI.

5:08Joe Ngai:In terms of Chinese development of its AI systems and models, was there a moment where you felt or thought, right, the gap has really narrowed now?

5:16Maura Fogarty:Having worked with lots of Chinese companies during the last 20 years, I've seen how Chinese companies in technology are actually very, very good, right? in the PC, personal computer era. I think Chinese companies were behind the West probably around five years. In the internet era, I think the Chinese companies were probably behind the West for about two years, right? You have Google, I have Baidu, you have Amazon, I have Alibaba. I think in the AI era, right, I think that that has now been only months, right? They're months behind. And I've always seen this because I think for each technology era, I think, you know, Chinese technology and Chinese kind of called the gap, right, between kind of Chinese and the biggest leaders in the West and mostly, you know, American, obviously.

6:09Maura Fogarty:I think that gap has been, you know, narrowing, right? I think in their minds, these Chinese companies are not thinking very much around, am I going to be better than, you know, OpenAI or Anthropic, right? They are being hounded by 15 Chinese companies that's right behind them and trying to put them out of business. So more Chinese companies are put out of business by other Chinese companies. Chinese companies are not put out of business because of Western companies. So this whole competition is not from a Chinese guy's mind, not like a US-China competition, as much as how do I survive this gym, right?

6:52Maura Fogarty:Because it's damn hard just over here, right? To keep staying alive at home. But that in turn makes you very competitive

7:00Joe Ngai:in the rest of the world. It feels very much like the Western development or frontier AI is around these large models. And like you said, who's the best? But in China, it's really about the usage cases and physical AI. Give me some examples that we could see in the next year or two that maybe consumers would see? Yeah.

7:19Maura Fogarty:I mean, if you think about autonomous driving, right? I mean, a car that takes you from one place to another place is essentially a robot, right, that can actually take passengers, right? I think that that actually in China is extremely sophisticated at this stage, right? When I was in Shanghai and I was testing all these Chinese autonomous vehicles and they essentially at this stage are, you know, as good as any driver going through it. I was at a Chinese factory. And today, Chinese factories have the world's highest usage of robots and of also automation. And you compare that to any factory you see in the West, I think the Chinese, again, the usage of these models are actually above others.

8:02Maura Fogarty:I'll give you another example. I was in Shenzhen. And actually, in the supply chain, you have this huge complex in Hwasongbeilu. And basically, you walk through that complex, you can find parts, you can find all sorts of screens, you can actually walk out, go in the morning, you can walk out in the evening with a robot prototype, right? And that's how dense and deep the supply chain is, right? So it's really fascinating. When I was walking through that kind of mall, there are all sorts of fenders that actually one actually does like the arms and one actually does like the head. And, you know, you really have the entire supply chain just within a corridor.

8:45Right.

8:46Maura Fogarty:And that's a little bit how the Chinese fascination and obsession with robots is these days.

8:53Joe Ngai:Do you think there are enough guardrails, regulations around the development of AI? Because that's been a big topic of discussion in the US, for example. Do you think there's enough of that in China, given all the innovation you're talking about?

9:06Maura Fogarty:It's very interesting. People have been doing these surveys around communities on how do you see AI and is it a positive or a negative impact to you? In the Western world, the percentage is roughly around 30 something percent, meaning that 30 percent of the people feel like AI is a net positive to the community, whereas 70 percent feels like there are lots of tradeoffs and we should be very vigilant around how AI is going to cause both inequality and loss of jobs and stuff like that. In China, the percentage is in the 80s, meaning that the vast majority of people feel like AI is the way to go.

9:53Maura Fogarty:And this is going to lead us to progress. That attitude in China also signals a little bit why companies and government and everyone in some ways these days are all in AI. Are they worried about AI? I'm sure they are. but the overriding thought is that we have to get onto this thing because this is going to lead to the next frontier of technology advancements and all the benefits that China have seen in the last 20 years. So they're betting that in the next 20 years, a lot of that is going to come from AI. I think that is actually very important because, of course, we need to regulate. Of course, we need to have safeguards.

10:33Maura Fogarty:Of course, we need all these things. I don't think the Chinese, like all communities around the world, are worried about the same things that we worry about. However, I think that their orientation is that we have to overcome those because there's no choice. We have to get onto this thing because this is good for us. I think that's a very different attitude. and in that way, I think the acceptance, the usage and the deployment of AI in everyday life and in companies is going to be faster because of that attitude, because of that orientation. And we always know that regulation and guardrails and all these things are always a little bit later than innovation that goes a bit faster.

11:18Maura Fogarty:So I think you have to make that trade-off. Are there risks? Of course they are. But at the same time, the risk of not getting on with innovation. Maybe it's even higher in this area.

11:31Joe Ngai:You're listening to The Interview from the BBC World Service.

11:41Maura Fogarty:Before Achilles found glory and Odysseus eventually found his way home, someone had to compose the Iliad and Odyssey. But was their credited author, Homer, even real? Hi, I'm Greg Jenner, host of You're Dead to Me, the comedy show that takes history seriously, and we are travelling back to 8th century BCE to trace the origins of the Iliad and Odyssey, epic poems that became backbones of Western literature. Join me and my fantastic guests as we unpack the stories of ancient Greek culture, war and triumph and have a laugh while we do it. Listen on BBC.com or wherever you get your podcasts. Thank you.

12:18Maura Fogarty:Bye.

12:23Joe Ngai:have had a front row seat to China's economic transformation over the past two decades. Zhou Ngai is one of them. His experience working in China with state-owned enterprises, as well as the private sector, has given him insights into the world's second largest economy and how it's transitioning from being the world's factory to a technological powerhouse. I've interviewed many top business leaders. Some of them are guarded. Some speak in corporate jargon. And others like Zhou are natural storytellers, always ready with a metaphor or an anecdote to get their point across. Okay, let's return to my conversation with Zhou Ngai.

13:03Joe Ngai:Can we go back to something you talked about earlier about how Chinese AI development was sort of further behind and then recently has sort of caught up despite restrictions on access to advanced AI chips, for example. You also do have, for example, the US government complaining that, you know, and alleging that some of these Chinese companies have been unfairly, and I'm using words that the U.S. government has used, stealing capabilities from American AI models as well.

13:31Maura Fogarty:You have all these allegations between U.S. companies as well that they were stealing from each other, right? So I'm sure that in the whole AI world, everyone is distilling, right, from each other. Is there geopolitics in here? Of course, there is, right? And by the way, I thought it was very interesting because actually a few of these Chinese models are also people who were educated in the US, right? So I do think that there is quite a lot of the same community, right, of a lot of Chinese engineers that are from the same schools, right? They all learn from each other. They all were classmates once.

14:03Maura Fogarty:They all worked for the same companies, right? And now they're all coming out to strike out on their own. So is there a lot of kind of IP that goes around? I'm sure there is. So I'm sure that there will continue to be many, many allegations. That's the landscape that we're working with. This tough gym is where imitation and trying to get ahead is for survival.

14:26Joe Ngai:Is there a risk, though, that for Chinese companies who have trained so well within the Chinese gym, so to speak, when they go overseas into new markets, should they be playing by the same rules that they played in China? Because the worry then is that you're going to upset your local partners who are operating in those markets.

14:47Maura Fogarty:I think that's absolutely the problem, that Chinese companies will need to learn the lesson. And I call it from factory for the world to become a global corporate citizen. What Chinese companies need to understand is that you can be a very successful factory for the world, but to become a global corporate citizen, there's a lot more that you need to think about. You need to think about how you contribute to communities. You have to think about how to do technology transfer. If you think about other countries, industrial policies and how do you fit in there, Chinese companies need to learn how to be welcomed and not feared.

15:26Maura Fogarty:I think that right now they've done pretty well in terms of their products being, you know, valuable money for consumers. Right. But they have actually been less successful in becoming part of the business community around the world. In China, the best student becomes the class captain. The most successful business becomes the business community leader. You show your greatness and then you become the representative. You never learn how to become part of community, part of being loved and integrated. And I do think that's a little bit where Chinese companies will have a bit of a road to learn, because they can't assume that the rest of the world needs to play with your rules.

16:17Joe Ngai:So it's a mindset change in a way from a winner-take-all mentality of I've got to be the best, most profitable, successful company to how do I still make money and not upset people around me? Because if not, you're going to see more tariffs come up, right? We're already seeing that in the US. We're seeing that in Europe. Could we potentially see that in Southeast Asia, where we're seeing a lot of Chinese exports?

16:39Maura Fogarty:I think that's right. And I think that for the Chinese companies, they need to think a lot more around how to share. They think a lot more around perhaps having different structures where, in some ways, they are no longer maybe the majority shareholder. They have to think about how to be JVs. I do think that they have a long road to go on this one. Otherwise, I do think that you cannot expect the world to continue to take your, at this stage, 1.2 trillion trade deficit, right? And at some point that to just keep going, right? It's just frankly not sustainable for that to happen forever.

17:16Joe Ngai:You've been advising companies doing business in China, as well as Chinese companies going abroad. I've seen lots of different challenges for the economy over the years. What's some of the biggest concerns and worries that your clients are bringing to you right now? What are the biggest problems you're solving for them?

17:34Maura Fogarty:20 years ago, when China joined the WTO, all the multinationals around the world came to China because China was the market with 1.3 billion population, gigantic market. If I can only get 10 % of that market, I'll actually make a fortune. That was the thought that everyone had. So I was trying to sell into China. It's very clear to me, sitting here in 2026, that that's no longer the case. First of all, it's a much tougher market for you to sell into because there are lots of competition around. But second of all, what's actually very interesting is that actually a lot of innovations in China, a lot of how that consumer market in China is creating new products and new services, a lot of that can be exported to the rest of the world.