China is aggressively positioning itself to dominate the emerging field of embodied artificial intelligence (EAI) and humanoid robotics, leveraging its massive industrial base and state support. However, a comprehensive new report from the Mercator Institute for China Studies (MERICS) reveals that while China’s production capacity is unmatched, the sector still faces significant technological hurdles and relies heavily on foreign innovation, a tension that will define the industry’s trajectory over the next decade.
China’s Manufacturing Dominance
The report, titled “Embodied AI: China’s ambitious path to transform its robotics industry,” paints a picture of an industry scaling at breakneck speed. China already boasts the world’s largest installed base of industrial robots, with an annual production of 556,000 units. In 2024, Chinese companies supplied over 57 percent of the domestic market, overtaking foreign competitors for the first time.
This manufacturing prowess is now being directed toward humanoid robots. In 2025, China produced an estimated 12,800 humanoids, accounting for approximately 90 percent of the global total. Companies like AgiBot are scaling rapidly; the firm rolled out its 10,000th humanoid in late March 2026, tripling its production from the previous year. The momentum was evident at CES in January 2026, where more than half of the humanoid robotics exhibitors hailed from China.
The State Strategy
This push is driven by top-level state directives. President Xi Jinping has outlined a vision for an era of “tripartite integration between people, machines and objects.” EAI has been explicitly included in the 2025 annual government work report and the 15th Five-Year Plan. The national “AI Plus” strategy envisions robots as “intelligent terminals” that will diffuse AI capabilities throughout the Chinese economy, from manufacturing floors to domestic service environments, as demonstrated by X Square Robot’s new home cleaning service.
China’s dominance in electric vehicle (EV) supply chains, particularly in batteries and sensors, provides a crucial advantage in developing embodied AI. Many EV manufacturers have seamlessly integrated robotics into their portfolios, creating a robust ecosystem that European firms fear could lead to a repeat of the EV race, where they were outpaced by China’s industrial capacity and state support.
The Gaps That Remain
Despite these impressive figures, the MERICS report highlights substantial limitations. The founder of a leading Chinese humanoid firm admitted that humanoids currently deployed in Chinese factories are “only half as efficient as humans.” Most deployments remain in “small-scale, single-point trials,” where the robots seldom act autonomously and are often preprogrammed or teleoperated. For commercial viability, the report notes, costs would need to fall by at least half.
Furthermore, China remains dependent on foreign technology for critical components. The industry still looks to US-based research for breakthroughs in visual-language-action models, the AI architecture that gives robots the ability to understand and interact with their physical environment. There is also a strong reliance on the Nvidia ecosystem, particularly Jetson modules, which poses geopolitical risks given ongoing US export controls. A recent ZY&YR ranking awarded US companies an “A” for overall competitiveness in computation, data processing, communication modules, and robot hands, placing them ahead of their Chinese counterparts.
China’s strategy is clear: use its unparalleled manufacturing scale to iterate rapidly and drive down costs, while simultaneously racing to close the intelligence gap. As the MERICS report concludes, the sheer volume of real-world data generated by these deployments may eventually allow China to overcome its current technological deficits — but the path from production scale to genuine intelligence remains the defining challenge.
Geopolitical Implications
The MERICS report situates China’s robotics ambitions within a broader geopolitical frame. European and US policymakers are watching the sector with growing alarm, fearing a repeat of the EV scenario in which Chinese industrial policy and supply chain advantages allowed domestic champions to achieve cost structures that Western competitors could not match. The report notes that several European robot manufacturers have already begun lobbying for protective measures, arguing that the combination of state subsidies, captive domestic demand, and supply chain integration gives Chinese firms an unfair structural advantage.
For the United States, the concern is more acute. Humanoid robots are dual-use technologies: the same visual-language-action models that allow a robot to navigate a factory floor can, in principle, be adapted for military applications. The MERICS report does not make this argument explicitly, but it is implicit in the policy discussions it describes. The Nvidia Jetson dependency is particularly sensitive, as it means that China’s most advanced humanoid robots currently rely on US-designed chips, a vulnerability that both sides are acutely aware of. As China’s semiconductor equipment makers continue to gain ground, the timeline for closing that dependency is shortening.
The MERICS report ultimately frames China’s embodied AI push as a long-term strategic bet rather than a near-term commercial success story. The technology is not yet ready for mass deployment at the scale the government envisions. But the infrastructure, the supply chains, the manufacturing capacity, the policy frameworks, and the data pipelines, is being built now, in anticipation of a capability threshold that most experts believe is five to ten years away.