China Speed: Why I Pay to Own the World's Toughest Gym

Tencent turned a pavement queue into shipped software in seven weeks. BYD paid half its cash flow to train in the same gym. The gym builds champions; the membership fee decides who I keep owning.

Tencent QQ display, Shenzhen. February 2025.

On Friday 6 March this year, I watched around a thousand people queue outside Tencent’s headquarters in Shenzhen. Schoolchildren, retirees, office workers; reports put the ages at eleven to seventy. They were waiting for Tencent engineers to install OpenClaw, an open-source AI agent, on their laptops, free of charge. It was mad. And the question it left me with was how fast Tencent would move now that the queue had formed.

The answer turned out to be four days: Tencent launched QClaw, its own agent built on the same open-source framework, installable in about three minutes. Eight days later QClaw was a mini-program inside WeChat. Within the month Tencent had a full agent suite on the market: QClaw for individuals, Lighthouse for developers, WorkBuddy for enterprises. By late April there was a global beta and a new flagship model.

I cannot name a Western platform company at Tencent’s scale that moves like that. The interesting question is why Chinese ones do.

What is China speed?

Every conversation about Chinese industry arrives, sooner or later, at the same two words: China speed. Almost nobody who says them stops to explain them. So let me.

The Tencent story is the consumer-software version: pavement queue to shipped product family in under seven weeks. The industrial version runs on the same clock, and cars are the clearest place to see it.

A carmaker in Munich or Detroit was built to produce variants of a single model for 7 to 10 years: enough time to stabilise manufacturing, refine a supply chain and amortise the tooling. A Chinese EV maker takes a new model from concept to production in as little as 18 months by industry accounts, and the Wall Street Journal reported in March 2024 that Chinese development timelines run roughly 30% faster than at legacy manufacturers overall. The compression comes from running a different process entirely: development stages in parallel rather than in sequence, virtual testing in place of slower mechanical cycles, smaller and faster suppliers in place of the established names, and a willingness to put a car on sale and improve it in public rather than perfect it in private.

China speed is not the same industrial system executed faster. It is a different operating system, one in which speed is the organising principle and everything else, supplier choice, testing philosophy, launch timing, even pricing, runs downstream of it. I have walked enough mainland dealerships to know the cadence is real. What took me longer to understand is that the cadence is the strategy. The strategy runs on people, and the people running this one have a name for what it costs them: 996.

What does 996 actually mean?

The number is a schedule: nine in the morning to nine at night, six days a week. Seventy-two hours, against the 40 in a European employment contract. In August 2021 China’s top court and labour ministry published model cases ruling the formal 996 schedule unlawful. The schedule survived the ruling; it just stopped appearing in contracts.

Since I came back to Hong Kong in 2025 I have not stood in a Shenzhen office at nine on a Saturday night counting lit desks. What I can report is my own calendar: I keep more than a 996 schedule myself, and in this part of the world that surprises nobody. The stories do the rest. Xiaomi’s EV engineers, by press accounts, ran what insiders called a 996-plus regime through the SU7 programme, and the AI teams at Alibaba and Tencent are racing agent products out the door on timelines that make the schedule self-enforcing. Nobody has to mandate the hours. The launch calendar does that.

When your competitor’s engineers iterate on Saturday, your five-day development plan is a competitive decision someone else has made for you. Multiply that across every function and every rival, and you get an industry whose clock simply runs faster than yours. That is the gym’s first piece of equipment: time itself, used more aggressively than anywhere else in the world.

What does fierce competition actually mean?

The word “competitive” gets used loosely about most markets. Here is what it means in China’s EV market in 2026, where the growth end of my China book trains.

First, capacity. Chinese battery production capacity reached roughly 2,500 GWh in 2024 against shipments of about 1,250 GWh, a two-to-one overhang that pushed utilisation toward 50%. A cyclical glut clears on its own. Capacity sustained at twice demand is structural, and it sits underneath every pricing decision in the sector.

Second, pricing through the product itself. When a new model generation arrives every 18 months instead of every 7 years, pricing no longer happens through list-price cuts a CFO can ration. It happens through the launch: each generation lands at a price the previous one cannot defend. That is why the price war does not pause when executives disavow price cuts. The product cadence is the price cut. BYD’s own interim report last August described “industry malpractices such as ‘one-price policy’ and ‘excessive marketing’” weighing on domestic profitability. That is the market leader describing the arena it is winning.

Third, the state had to legislate against losing money. In February 2026 the market regulator issued the Auto Industry Price Behavior Compliance Guide, which explicitly prohibits selling goods below cost.

The hunger behind all of this has a face. Yang Zhilin, founder of Moonshot AI: born 1992, top of his class in computer science at Tsinghua, a Carnegie Mellon PhD finished in under four years, co-author of the Transformer-XL paper, stints at Google Brain and Meta AI. He went home and founded Moonshot in March 2023, naming it for the Pink Floyd album. By November 2025 a company of a few hundred people had shipped K2 Thinking, an open-source model that beat GPT-5 and Claude Sonnet 4.5 on key reasoning and coding tests, on Moonshot's own published numbers. Silicon Valley did not laugh: Cursor was reported to have built its flagship product on Kimi's models, and Elon Musk praised it in public. I was not laughing either: the research desk behind Cohong Lane runs on Kimi Code. Then the cadence kicked in: Agent Swarm in February 2026, K2.5 and K2.6 in April, K2.7 Code on 12 June: four releases in the four months before this piece went out. Asked what he is building toward, Yang talks about marching toward "the endless, unknown snow-capped mountain".

I keep coming back to that sentence. The hunger is for the summit, and the founders in Beijing, Hangzhou, and Shenzhen believe the summit is reachable from where they stand. That is what I am underwriting against when I own anything in this arena: a generation of founders who do not believe in finished.

Why the toughest gym in the world produces global champions

A company that can survive and thrive inside that arena can survive and thrive anywhere in the world. Not automatically, and not unconditionally. The gym builds the muscle: cost discipline under permanent price war, product cadence nobody outside China has matched, manufacturing flexibility, software iteration at consumer-app speed. What the gym does not hand out is the right to compete abroad. That has to be earned separately, through correct integration: local production, local suppliers, local service networks, political acceptability, and economics that survive tariffs.

Strength travels. Membership does not.

In April I re-tested the reason I own BYD in Can BYD Still Become the Future Toyota I Bought?: not a Chinese EV winner, but a globally localised, cycle-resilient, structurally profitable auto-industrial platform at Toyota scale. That sentence is a five-test scorecard, and I wrote it for BYD. The chairman has now named the destination out loud: at BYD’s annual general meeting in Shenzhen on 9 June, with the Hong Kong shares down by a third over the past year, Wang Chuanfu told shareholders that BYD “will truly become the No. 1 automaker globally in terms of scale in five years”. Scale is the one test a chairman can promise from a stage; the other four are why I keep the scorecard. From this piece onward I run it for Geely as well, because the logic does not care which badge is on the bonnet, only whether the gym graduate can belong abroad.

The two are taking different routes up the same scorecard. BYD is building the foreign base itself: trial production at Szeged in Hungary from January 2026, Brazil operational, Turkey scheduled by end-2026, its own roll-on roll-off vessels carrying the cars in between. Geely leans on a foreign industrial base it already owns through Volvo, plus a home machine that held gross margin flat at 16.61% while NEV sales jumped 90% in FY2025, per its March results presentation. Self-built versus acquired: the gym does not care, but the scorecard does, because each route fails differently.

BYD does not file margins by geography, but Dolphin Research’s March 2026 analysis estimates roughly 17.2% gross margin at home against 28.1% overseas in H2 2025, with gross profit per vehicle of about RMB 22,000 domestically and RMB 52,000 abroad. Analyst inference, not filed fact, and I treat it as such. But it rhymes with what the filings verify: overseas revenue grew to 38.65% of BYD’s total in FY2025 while the group margin compressed.

The margin shows up where the competition is not Chinese.

So the question I keep putting to myself, holding both names: if BYD and Geely can survive and thrive in the toughest EV gym in the world, who exactly beats them outside it? The honest answer is nobody on product or cost. What beats them is the part the gym never trained: the markets they fail to integrate into, and the tariffs they fail to localise around. And there is a harder version of that question I owe you: localisation changes the cost base itself. A car built in Szeged is built on Hungarian wages, European suppliers, and none of the financing habits the home arena permits. Whether the trained discipline survives that translation is not something I can assert from my Hong Kong desk. It is exactly what the overseas margin line will measure, and why I will keep reading it.

The membership fee

None of this is free. I own these companies, so I study the bill.

BYD’s 2025 annual report, filed in Hong Kong on 27 March 2026, carries the two numbers that price the gym. Gross margin fell from approximately 19.44% to approximately 17.74%. Operating cash inflow has fallen two years running: roughly RMB 169.7 billion in FY2023, RMB 133.5 billion in FY2024, RMB 59.1 billion in FY2025. Two-thirds of the operating cash engine gone in two years, while revenue kept growing. I read that line at CAPARESH, an Italian restaurant in Shenzhen Bay’s MixC I keep going back to, an iced Americano going down rather more easily than the cash flow statement. It is the line that would have alarmed me, had I not gone looking for the mechanism.

There are two causes compounding, and most coverage stops at the first. The price war is in the number, plainly. But so is a float unwind: since 2018 BYD had paid suppliers through Dilian, its in-house promissory note platform, on terms that, by Bloomberg’s count, averaged 275 days in 2023. When the new payment regulation took effect on 1 June 2025 and BYD joined 16 other automakers in pledging 60-day supplier terms, the structural float that had quietly financed years of expansion reversed all at once. Cash that was always going to leave left simultaneously. And it is not coming back: the float was a working-capital subsidy, and the subsidy has been withdrawn for good. The FY2023 cash baseline therefore belongs to a financing regime that no longer exists.

The second cause sits on the capex line. None of it reads as distress. It reads as a company investing through the price war rather than harvesting from it: Hungary, Brazil, Thailand, intelligent driving, flash charging, and now an announced entry into humanoid robotics, which Stella Li framed in a June 2026 interview with Yicai as a natural extension of the company’s manufacturing and software base. The strongest member pays the highest fee, and keeps adding equipment. The drop is not comforting. It is legible. Those are different things, and the difference is where my sizing lives.

The other names I own in this arena train in the same gym at different weights. In the growth sleeve, Geely’s flat margin through a violent mix shift is the placement test passed, and XPeng repaired its vehicle margin from 5.5% in Q1 2024 to 13.0% in Q4 2025 before easing back into a loss in Q1 2026: real repair, volume-dependent. In the venture sleeve, the fee is existential rather than uncomfortable. Four frontier sets of accounts in one sitting is its own kind of reading: somewhere around the third I stopped asking who wins the technology and started asking who can afford to stay at the table. Horizon Robotics ships a 64.5% headline margin with an adjusted operating loss underneath it; Pony AI runs a 15.7% gross margin on a US$275 million operating loss; Innoscience works out to roughly 7.3%. Three of the four are still paying for their seat. Hesai is the exception: FY2025 results filed 24 March 2026 show a 41.8% gross margin and a first full-year GAAP net income of RMB 435.9 million on revenue up 45.8%. The frontier’s first graduation certificate. The sizing instruction across the sleeve is unchanged: size by margin durability, not by sales momentum.

The full margin and policy work, the scenario weights, the question of whether the state ends the price war, all of that now belongs to the scorecard piece I will publish after the H1 2026 results season, with this version dated so you can mark me wrong later.

Who actually wins the gym

I have sat across a dinner table from this thesis more than once. Someone, usually someone smart, usually someone who has never read a Chinese filing, says it with the confidence of a conclusion: the toughest arena on earth, whoever survives it wins everywhere. I believe most of it. This piece has been my attempt to show you the machinery behind the slogan: a development clock running 30% faster, a workforce norm that uses time as a weapon, capacity at twice demand, pricing fought through the launch cadence itself, and a public that queues on the pavement to install the next tool. Everyone trains. Nobody rests.

But the gym story is a share-and-survival story, and it skips the question that matters for my capital. The membership fee shows up on the margin line, even for the strongest member, and the prize is collected somewhere else: in Szeged, in Brazil, in the markets where the graduate either belongs or merely exports. The gym makes everyone fitter. The gross margins, not the sales charts, will tell me who actually won it.

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As of the date of publication, I hold positions in BYD Company (HKEX: 1211), Geely Automobile Holdings (HKEX: 0175), XPeng (HKEX: 9868), Tencent Holdings (HKEX: 0700), Alibaba Group Holding (HKEX: 9988), Horizon Robotics (HKEX: 9660), Innoscience Technology (HKEX: 2577), Pony AI (NASDAQ: PONY), Hesai (NASDAQ: HSAI), and Meta (NASDAQ: META). Positions may change after publication without notice. Cohong Lane is a periodical publication made generally available to the public; this is disclosure of my positions, not a recommendation to buy, sell, or hold any securities. Full disclaimer · About Philip.