China is building a humanoid robot industry that has Musk, United States scrambling to respond

China is building a humanoid robot industry from scratch at a speed that has Elon Musk worried and the United States scrambling to respond.

More than 140 Chinese companies now make humanoid robots, mostly in Shenzhen and Suzhou. Since late 2024, Beijing, Shenzhen, and other cities have put together investment funds worth over $26 billion, according to Morgan Stanley.

Local governments are giving out free land, slashing office rent, and paying about 10% of each robot’s price to get buyers to try them.

It’s the same playbook China used for electric vehicles. Government subsidies helped brands like BYD take market share from General Motors and Volkswagen in China, Europe, and beyond. Beijing has marked “embodied AI”, AI combined with physical robots, as tech it wants to own over the next five years.

“China is an ass-kicker, next level,” Musk said in January in Tesla’s Q4 earnings call. “To the best of our knowledge, we don’t see any significant [humanoid robot] competitors outside of China.”

$300 million in orders, 100,000 units expected

Chinese companies got orders worth more than $300 million for humanoid robots in the second half of 2025. Shenzhen-based UBTech is selling to Texas Instruments and Airbus. Morgan Stanley thinks up to 100,000 humanoids could ship in 2026, with China buying faster than the U.S.

Government agencies and state firms are early buyers. They’re putting robots in museums, at events, and on streets as robocops directing traffic. These deployments give companies data to make robots better while building a market.

UniX AI in Suzhou has about 100 employees and sells wheeled humanoids starting at $12,600. The company has hundreds deployed in Chinese hotels, doing tasks like adjusting bedsheets, picking up trash, and running laundry machines. Founder Fred Yang studied at University of Michigan and Yale. He said he can get 80% of parts from suppliers within an hour’s drive, which makes changes fast and cheap.

“Policy is one of the decisive reasons that embodied AI is doing so well in China,” Yang said in August, as quoted by WSJ. Some local governments give free land and office space for three years, then half price for three more.

Shenzhen has a “Robot Valley” with around 15 robotics firms. The city set up a $1.4 billion fund for AI and robotics and another $640 million fund for AI models. Beijing put together $14 billion in funds for the same thing.

EV bubble risk looms over robot boom

China’s approach worked for EVs, but it also created problems. Hundreds of brands fought for customers, prices crashed, and many companies lost money. The same could happen with robots. China’s government is writing technical standards to push out weak companies and speed up adoption. Financial regulators are watching robotics companies that want to go public to avoid a bubble.

The U.S. still leads in the AI models that run robot brains. Tesla, Boston Dynamics, and Agility Robotics use tech from Nvidia and Google. But American firms have a problem: they need China’s supply chain. Tesla’s Optimus robot will use Chinese suppliers for parts like roller screws for joints and motors for hands when it ramps up production, according to people familiar with the matter.

“Although we’ve heard of American robot companies, they’re not in the market,” said Jonathan Beh from an industrial park in Singapore, looking at humanoid robots. “Chinese companies have great products, and they’re the only available option.”

The White House is working on an executive order to help American robotics, people familiar with the matter said. But China’s head start in manufacturing, plus government money, gives it an advantage that won’t be easy to beat.

This fits China’s bigger plan to lead in new tech, like its push to control AI chip manufacturing despite U.S. export controls and its spending on quantum computing over the past two years.

The smartest crypto minds already read our newsletter. Want in? Join them.