China is the incremental engine of the global "hidden champion" (Understand China·Understand Chinese Modernization)
——A conversation with Hermann Simon, a German management scientist and the originator of the “Hidden Champions” theory
At present, the global industrial chain is deeply restructured, and the degree of segmentation of industry tracks is constantly increasing. Small and medium-sized enterprises that delve into niche tracks and focus on innovation and iteration are becoming the key force to stabilize the global industrial system, hedge against market uncertainty, and the "hidden champions" that lead global manufacturing.
The "hidden champion" theory was proposed by German management scientist Hermann Simon. It refers to small and medium-sized enterprises with limited visibility, deep penetration in niche fields, and stable market share among the top three in the world. Most of them focus on segmentation, continuous innovation, and global layout as their core characteristics. Simon has visited China more than 70 times, has long been concerned about China's industrial development, and is very optimistic about the development vitality of China's small and medium-sized enterprises. In an exclusive interview with this reporter in Hasborn, Germany, he recently pointed out that China has cultivated a group of "hidden champions" by relying on a gradient cultivation system of high-quality small and medium-sized enterprises. He highly recognized China's outstanding achievements in technological innovation, industrial upgrading and the cultivation of specialized and new enterprises, and believed that Chinese enterprises are already the world's leading innovators in many frontier fields.
Interlocutor:
Liu Zhonghua, President of the European Bureau of this newspaper
Hermann Simon, German management scientist, founder and honorary chairman of Simon-Kucher Management Consulting
“The scale and development speed of China’s specialized and new enterprises are eye-catching”
Question: Please introduce the core connotation of the "hidden champion" theory, and combined with years of research, talk about your observations of China's leading enterprises that specialize in new technologies and local segments.
Answer: When I studied global trade competitiveness in 1987, I found that the key factor supporting the export advantage of industrial powers is not the leading multinational companies that are well-known to the public, but a large number of small and medium-sized enterprises that are deeply involved in market segments and ranked among the top three in the world in terms of market share. This is the core definition of "hidden champions". Since 2000, I have visited China frequently and I am pleased to see that China has more than 300 local "hidden champions". The strategic focus and growth path of the company are highly consistent with the world's top "hidden champions", and the development trend is booming and good.
Q: Germany's "hidden champion" relies on the natural evolution of the market, while China uses a gradient cultivation system to strengthen small and medium-sized enterprises. Is adhering to specialized tracks a necessary condition for segmented companies to grow into global champions?
Answer: The success of "Hidden Champions" relies on three pillars: lofty pursuit of development, high strategic focus, and firm globalization. Only by focusing can we polish world-class quality, rely on segmented tracks to accumulate core technologies, and then expand the market through global layout, we can achieve steady and large-scale growth of the enterprise. China's practice of gradient cultivation of specialized and new enterprises has fully proved that guiding small and medium-sized enterprises to anchor on segmented tracks and focus on long-term development is a solid path to becoming a global industry leader.
Question: China has cultivated more than 140,000 specialized, special and innovative enterprises and 17,600 national-level “little giant” enterprises that specialize in special innovation, focusing on high-end manufacturing, new materials, and new energy. What role do such industrial clusters play?
Answer: The scale and development speed of China's specialized and new enterprises are eye-catching. Relying on its huge economic size and continuous investment in innovation, it is inevitable for China to cultivate a large number of high-quality enterprises. Both Germany and China have a profound engineering culture and technology-oriented tradition. China's specialized and new "little giant" enterprises have outstanding competitiveness in the field of high-end manufacturing. The agglomeration of specialized industries has greatly consolidated the underlying strength of China's supply chain. Precision manufacturing cannot develop independently of industrial ecology. Germany has characteristic industrial highlands such as the Tuttlingen Medical Technology Industrial Cluster and the Jena Optics and Photonics Industrial Cluster. Many Chinese cities have also formed specialized world-class industrial clusters and built a complete industrial ecology in subdivided fields. This provides China's manufacturing industry with strong risk resistance and core advantages that continue to attract global investment.
Question: There used to be a one-sided perception in the outside world that "China will only copy overseas technologies", but in fact, the R&D intensity of China's specialized and new enterprises far exceeds that of similar European enterprises. Can high-intensity R&D promote China's subdivided industries to complete the transformation from technology following to technology leading?
A: The old perception that "China can only copy overseas technology" is no longer consistent with reality. Chinese companies are already the world's leading innovators in many frontier fields. As early as 20 years ago, the R&D volume of Chinese companies such as Huawei surpassed traditional Western giants, and the R&D personnel of leading segment companies such as Hikvision were several times that of European companies of the same size. This benefited from China's abundant scientific, technology, engineering, and mathematics talent dividends. There are 7 Chinese cities in the top 15 of the "Nature" magazine's list of the top 100 global scientific research cities, highlighting China's solid scientific research foundation. More importantly, China has a rapid transformation mechanism for the marketization and productization of scientific research results, which is worthy of reference by the world.
Q: How does focusing on long-term development support the growth of specialized and specialized new enterprises?
Answer: About 70% of Germany's "hidden champions" are family-controlled companies. The average CEO tenure is 21 years, and the employee turnover rate is less than 3%. They have outstanding long-termism and strategic continuity, and a stable operating structure forms the "moat" for corporate development.
Most of the market space in the global industry comes from niche segments, and technological iteration of high-end equipment and precision components requires long-term accumulation. China advocates long-termism and strategic focus, and guides specialized and new enterprises to deeply explore underlying technologies and continue micro-innovation. This is the key for enterprises to conquer core technologies and establish a firm foothold on the global segmented track.
Q: Some people have the stereotype of "Made in China" focusing on cost-effectiveness. At present, China's specialized and new enterprises are accelerating their upgrading to high-end and green. How should they shape high-end brand recognition?
Answer: Building a global high-end segmented brand is a long-term project. The enterprise value chain covers four major links: R&D innovation, lean manufacturing, global marketing, and localized services. At present, Chinese enterprises have achieved historic leaps in R&D and manufacturing, and their factory intelligence and refinement levels are among the best in the world. However, global brand building is still in the exploratory stage. The core advantage of Germany's "hidden champion" lies in its independent control of the global service network and ensuring full-process service quality. To build an international high-end brand, Chinese companies need to take root overseas and establish independent service entities, connect a complete value chain, rely on high-quality products and full life cycle services, and establish a long-lasting high-end brand reputation.
"Ignoring the Chinese market means giving up nearly 1/5 of the world's core industrial positions."
Question: What are the advantages of China's two-wheel cultivation model of "strategic guidance + market empowerment" compared to the market-oriented cultivation in Europe and the United States? What experience can it provide for the industrialization of late-developing countries?
Answer: China continues to implement its five-year plan, based on solid research and judgment on cutting-edge industries, providing clear development guidance for enterprises, and demonstrating strong institutional and strategic leadership. By gathering resources through top-level planning and standardizing market competition, leading companies with global competitiveness can be forged. The vast number of late-developing countries should learn from China's strategic wisdom based on long-term development, combine their own unique endowments to deeply explore specialized subdivisions, and cultivate high value-added small and medium-sized champion enterprises. This is a pragmatic industrialization path that can be used as a reference.
Q: With the restructuring of the global industrial chain and the rise of protectionism, China's specialized and new enterprises started late in internationalization. What opportunities and challenges do they face in the current global industrial landscape?
Answer: Globalization has not ended. Instead, it is accelerating from commodity exports to localized investment. The internationalization of Chinese enterprises is entering a new stage of global rebalancing. In the face of intensifying geopolitical risks and protectionist challenges, companies such as CATL and BYD have taken the initiative to deploy localized production in Europe, effectively avoiding trade barriers and winning recognition through joint construction of industrial chains, demonstrating the survival wisdom of Chinese companies in globalization.
Q: The pricing power theory you proposed believes that pricing power does not come from cost or market share but from customer value perception. How should Chinese specialized and innovative enterprises optimize their business models and pricing strategies to enhance their voice in the global value chain?
Answer: The core of pricing is customer value perception, not a simple price game. Chinese companies are bidding farewell to traditional cost-based pricing and low-price competition models, and are turning to value-based pricing models that rely on technological innovation, precise value delivery, and full-cycle services. Only by taking the initiative in value pricing can we help specialized and innovative enterprises become global industry benchmarks and enhance their voice in the global value chain.
Q: Two-way cross-border innovation and R&D cooperation between China and Europe are becoming more and more frequent. What value does this kind of industrial synergy bring to the development of subdivided industries on both sides?
Answer: High-end equipment manufacturing relies on multi-disciplinary integration and transnational ecological collaboration, and European industrial supporting facilities have formed normalized transnational collaboration. Dutch lithography machines integrate German Zeiss optics, TRUMPF laser and other technologies, and German high-end manufacturing projects often attract Chinese companies to participate in precision supporting. China has global leading advantages in new energy, artificial intelligence, power batteries and other fields, and is highly complementary to Europe's deep accumulation of precision manufacturing. Two-way technological empowerment and industrial nesting are important ways to overcome global cutting-edge engineering problems.
Q: Do you believe that China’s complete and open industrial market is a core carrier that cannot be ignored for global “hidden champions”. Why?
Answer: China, the United States, and the European Union account for more than 60% of the world's total economic output. They dominate the world's industrial purchasing power and technology demand, and are the world's major economies and economic sectors. Global segment leaders must take root in these three major markets, improve global asset allocation, and build strong risk resistance capabilities. This is a required course to maintain world-class competitiveness.
China has the most complete and irreplaceable industrial ecosystem in the world. German companies have set up more than 2,000 factories in China, which is precisely because they value China's domestic high-density supply chain and industrial cluster advantages. Complete industrial supporting facilities, sufficient engineer resources and ultra-large-scale application scenarios make China the best testing ground for real-world testing and large-scale implementation of advanced manufacturing technologies in the world. Ignoring the Chinese market means giving up nearly 1/5 of the world's core industrial positions.
The resilience of domestic demand in the Chinese market provides valuable mid- to long-term certainty for multinational companies. Many German "hidden champions" have deployed their R&D and entire value chain in China, taking advantage of China's open industrial fertile ground to extend the industrial life cycle. China's complete open industrial market is not only an incremental engine for the world's "hidden champions", but also an important support for its core competitiveness.
Question: The world is accelerating the low-carbon transformation, and the industrial endowments of China, Germany, and China are significantly different. What synergy space is there for the development of green industries between the two sides?
Answer: The energy transformation and green technology industry chain is complex and has many links. German companies have deep accumulation in key sub-technical fields such as power grid tap-changers and precision pneumatic components. Related technologies have achieved large-scale application and deep collaboration in China's clean energy system and smart factories. In third-party market cooperation, European and Chinese companies have combined European high-reliability engineering standards with China's efficient manufacturing support and rapid delivery capabilities, effectively promoting the construction of global green infrastructure.
“The diversified collaboration between European and Chinese segmented enterprises is an important force in reshaping the global industrial order.”
Question: The modernization of some countries is accompanied by industrial exclusivity and trade barriers. China insists on openness and cooperation, and local "hidden champions" have emerged in batches. What kind of industrial development path has been confirmed?
Answer: The rise of China's specialized, specialized, new enterprises and "hidden champions" outlines a unique industrialization path for Chinese-style modernization based on the real economy and consolidating micro-resilience.
First, we must adhere to the foundation of the real economy, stabilize the fundamentals of the manufacturing industry, always maintain a high proportion of the manufacturing industry, and rely on the entire industrial chain to build a solid foundation to withstand external uncertainties.
The second is to break the "giants dominate" pattern, build an integrated development system for large, small and medium-sized enterprises, guide small and medium-sized enterprises to deepen their exploration in subdivided tracks through gradient cultivation, and open up a complete closed loop from basic components to complete sets of equipment.
The third is to rely on a complete industrial ecology to forge strong resilience. Unlike a single assembly economy, China has the ability to support full-chain parts and components, and has the advantage of super-large-scale market internal circulation, which effectively hedges the impact of external supply chain risks.
Question: Common prosperity is an important feature of Chinese-style modernization. A large number of specialized and new enterprises have taken root in local areas, absorbing jobs and driving regional industrial income growth. How can subdividing industrial clusters help the balanced development of urban and rural areas and regions and consolidate the industrial foundation for common prosperity?
Answer: China's specialized and innovative enterprises play an important role in coordinating regional coordinated development and promoting common prosperity. Most of the large leading companies are concentrated in megacities, while the “hidden champion” companies are mostly based in counties and small and medium-sized towns. For example, Merui Technology Co., Ltd. in Shouguang, Shandong Province is based in the county and has grown into a "hidden champion" in the specialty chemicals segment, providing more than 2,000 local jobs and realizing cross-regional industrial layout. Cultivating and strengthening specialized and special new enterprises and allowing high-skilled jobs and industrial value-added opportunities to be distributed in wider urban and rural areas is an important and feasible path to promote coordinated regional development and move towards common prosperity.
Question: What experience can China’s gradient cultivation system provide to late-developing countries with weak industrial foundations in promoting industrialization and modernization?
Answer: The industrialization of late-developing economies cannot blindly copy the models of established industrial countries. China's practice of cultivating specialized and new enterprises and building a modern industrial system has provided a practical path for developing countries.
First of all, late-developing countries have limited funds and technology in the initial stage, so they should not blindly deploy asset-heavy high-end industries. They should find breakthroughs in segmentation based on their own resource endowments and deeply explore distinctive tracks with comparative advantages. Secondly, many developing countries have been exporting low value-added primary products for a long time and have weak risk resistance. They can learn from China's experience in cultivating specialized and special new enterprises through hierarchical classification and gradient to guide enterprises to upgrade to intensive processing and create expertise in subdivided fields. Third, the growth of small and medium-sized enterprises cannot be separated from the support of logistics, energy and global sales networks. They can rely on the cooperation in building the "Belt and Road" to fill in infrastructure shortcomings and open up channels to the sea. The cooperation in jointly building the "Belt and Road" effectively helps developing countries improve their transportation and power infrastructure. The mature cross-border economic and trade logistics system can help local specialty products connect with the global market. This is a convenient way for small and medium-sized enterprises in late-developing countries to integrate into the global industrial division of labor.
Q: In the context of intensified competition in global subdivisions, how will the diverse collaboration of Chinese and European subdivision companies promote a more balanced and inclusive global industrial order?
Answer: The diversified collaboration between European and Chinese segmented enterprises is an important force in reshaping the global industrial order. Two-way investment between Europe and China can improve the structural imbalance of economic and trade. Chinese companies will accelerate their localization in Europe, build R&D and production bases, increase local tax revenue and employment, and promote the upgrade of EU-China economic and trade cooperation from single commodity trade to two-way industrial co-construction, which can effectively hedge the risk of trade barriers. At the same time, normalized offline communication can consolidate business mutual trust, stabilize industrial investment expectations, and eliminate cognitive biases caused by geopolitical games.
The industrial advantages of Europe and China are highly complementary, and there are many mature cooperation cases: Ningbo Joysheng Electronics acquired German Preh and Denisat Automobile, and the Chinese market helped German companies expand capacity and increase efficiency; German TRUMPF Group acquired Jiangsu Jinfangyuan CNC Machine Tool Co., Ltd. and built it into a global core production base. Through joint research and development, two-way investment, and brand synergy, the two parties work together to break through technical problems, expand the global market, inject certainty into the turbulent economic and trade landscape, and promote a more balanced, inclusive, inclusive, and win-win global industrial order.
Q: Based on decades of industry observation, what are your expectations and suggestions for the high-quality development of China’s real economy and the collaboration of domestic and foreign subdivided industries?
Answer: In the past 20 years, China's industrial manufacturing has achieved profound transformation and upgrading. A large number of specialized and new enterprises have greatly improved their technical level and product quality, and completed key technological leaps. Currently, Chinese companies are still in the early stages of exploration in terms of in-depth internationalization, building globally renowned brands, and conducting overseas localized investments.
Facing the future, I have three prospects: first, I hope that more Chinese manufacturing companies will go overseas to expand into the European and American markets and achieve substantial breakthroughs in global brand building; second, promote a more balanced and symmetrical industrial investment layout between Europe and China and optimize the industrial structure of both sides; third, maintain a stable and orderly global economic and trade environment, avoid the risk of industrial chain breakage, deepen Sino-foreign real economic cooperation in an open, integrated, mutually beneficial and win-win pattern, and safeguard the long-term stable development of the global industrial chain.
"People's Daily" (page 17, September 16, 2026)
