Dragoman Digest

Quantum computing approaches inflection point as manufacturing challenge looms

Laboratory successes have yet to translate into the production capacity needed for broad-scale commercial use

Quantum computing – which harnesses atomic-level physics to simultaneously explore vast computational possibilities – is transitioning from theoretical promise toward commercial viability. Recent months have seen a flurry of announcements. Google claimed its Willow chip demonstrated ‘quantum advantage’ in simulating molecular behaviour. HSBC and IBM also reported markedly superior performance in using a quantum tool to predict bond market trading. McKinsey estimates the technology could create up to US$1.3 trillion of value across an array of industries by 2035. This forecast is largely theoretical. General-purpose quantum computing requires scaling from around 100 qubits (quantum bits) today to upwards of one million – a transition which would take decades at current rates of improvement. Experts increasingly argue the bottleneck is architectural. Current cooling and control systems become unmanageable as qubits multiply, demanding an industrial leap akin to the shift from room-sized computers to microchips.

As it stands, the US leads in cutting-edge research and industrial deployment, but China is closing the gap. Analysis of patent portfolios – a proxy for research momentum – forecasts China overtaking the US in quantum technology development as soon as 2027. However, demonstrated Chinese capabilities lag behind the headline figures. For example, leading private Chinese firm Origin Quantum’s Wukong computer exhibited higher error rates and lower qubit connectivity than IBM machines. Beijing has reportedly committed US$15.3 billion in public funding – eight times Washington’s commitment. Though private investment likely puts total US spending ahead.

Nevertheless, China’s success in industrialising Western-pioneered technologies and its vast manufacturing ecosystem positions it favourably. Western policymakers have responded with export controls, though as has occurred with semiconductors, China has already successfully localised production of several quantum components. However, quantum spans hardware, algorithms, and huge supply chains. No single continent, let alone country, currently possesses a ‘full-stack’. In the near term at least, the path to commercialising quantum favours coalitions over autarky.

China defies wage pressures with automation-driven export gains

Homegrown robots enable factories to maintain cost advantage in labour-intensive sectors

China has defied the conventional wisdom that rising wages push countries out of labour-intensive manufacturing. Between 2019 and 2023, its global export share of small manufactured goods like brooms and pens rose nine percentage points to 52.3 percent. This growth occurred despite average factory worker wages in manufacturing hubs being up to four times those in aspirant competitors like India. China’s aggressive automation, combined with its industrial policy largesse and formidable local supply chains, helps explain this enduring competitive advantage. Chinese factories install 280,000 industrial robots annually – 50 percent of the global total – with domestic manufacturers now supplying half of these. This scale has pushed China’s robot-to-worker density ahead of Germany and close to leader South Korea.

Lower-cost domestic robot makers have made automation viable for low-margin producers. For example, Chengdu CRP Robot Technology’s welding robots sell at 60 percent the price of Japanese rivals Yaskawa and Fanuc. These robots are less sophisticated but, as the company’s chief highlighted, “not everyone needs an Audi”. Similar automation has spread to furniture, fitness equipment, and bicycle manufacturers. This complicates prospects for countries like Vietnam and India which have benefited from rising Chinese wages. In the Chinese textile hub of Keqiao, one factory owner boasted: “In India they are still embroidering by hand. We are using machines.”

Beijing hopes that affected workers can transition to “purple collar” roles maintaining increasingly autonomous factories. However, whether China has the skills base to do this is an open question, particularly among the nearly 300 million internal migrants, over half of whom work in construction and manufacturing. Beijing has pledged to strengthen social welfare but remains vague on specifics. It has pointed to existing buffers such as high rates of home ownership and household savings – the trappings of middle-class life that many of China’s internal migrants lack. For now, low wages act as a “cruel and simple” brake on automation, with many workers still costing less than machines. This protection will invariably erode as technology costs decline.

Argentina’s economic reform agenda faces crucial decisions

Bold policy moves have delivered short-term relief, but are insufficient to secure lasting macroeconomic stability

Since unexpectedly taking office in December 2023, Argentina’s President Javier Milei has made concerted efforts to stabilise Argentina’s crisis-ridden economy. Milei campaigned on a libertarian platform promising to dismantle the edifice of “Peronism” – a populist and economically interventionist ideology that has shaped Argentina since the 1940s. Milei’s economic “shock therapy” program has combined austerity measures with pro-business reforms. As one of his first steps as president, Milei implemented a 54 percent peso devaluation, aligning the official exchange rate closer to market equilibrium. Simultaneously, his government cut spending by 4.5 percent of GDP through welfare, subsidy, and public sector workforce cuts. These measures have, at least from a broader macroeconomic perspective, borne immediate results. Argentina’s monthly inflation rate has declined from a peak of 25.5 percent in December 2023 to 2.1 percent in September 2025. Milei also recorded the country’s first fiscal surplus since 2010.

However, in the run-up to October’s national legislative elections, the lustre had well and truly begun to fade. A series of political scandals and a setback in provincial elections in September caused the peso to drop precipitously. To protect the value of the peso, which remains significantly overvalued, Milei’s government has burned through sparse foreign exchange reserves to prop up the national currency. As part of his inflation fighting agenda, Milei has been reluctant to countenance a freely floating currency. The Trump Administration subsequently intervened with support measures including a US$20 billion currency swap. Milei’s La Libertad Avanza party ultimately won over 40 percent of the vote, in what some considered a shock result. This will give Milei a much easier pathway towards implementing his economic agenda – before facing re-election in 2027 – which includes promised revisions to labour and tax reforms as part of his vision to make Argentina much more attractive for foreign investors. Among them, miners eyeing Argentina’s vast copper deposits. Whilst these measures and US support will undoubtedly be helpful, they will be insufficient to guarantee exchange rate stability. To achieve this, Argentina will need to either float the peso or take the much more radical step of dollarising its economy. Restoring the fortunes of what was once one of the world’s richest countries was never going to be easy.

Chinese automakers drive South America’s EV revolution

Chinese EVs are rapidly reshaping South America’s car market

EVs and hybrid vehicles are quickly gaining ground across South America, led by Chinese brands such as BYD, Geely, and Great Wall Motors (GWM). EV penetration in Latin America doubled in 2024, reaching around four percent of new car sales, supported by government incentives and a surge in affordable Chinese models. Chinese EVs typically sell for about 60 percent of the price of competing brands, including Tesla. The Chinese-built Port of Chancay in Peru, which opened in 2024, has also halved trans-Pacific shipping times, boosting imports and positioning Peru as a key regional distribution hub. Vehicle transshipments through Chancay are growing rapidly, enabling efficient and cost-effective deliveries to Chile, Colombia, Ecuador, and beyond. Overcapacity within China and growing trade barriers in the US, EU, Mexico and indeed Russia, has provided a clear impetus for Chinese automakers to target South America. BYD has plans for a fourth dealership in Lima, while Chery and Geely now operate more than a dozen outlets across Peru.

As is the case elsewhere, China’s export gains face headwinds. Fearing job losses from growing Chinese imports, Brazil is re-imposing EV import tariffs of up to 35 percent by mid-2026 to encourage domestic assembly. Meanwhile, the EU-Mercosur free trade agreement is finally on the cusp of implementation. Under the deal, Mercosur will gradually remove its 35 percent duties on EU-made vehicles over 15 years, which Europe hopes will triple automotive exports by 2040. While BYD and GWM have begun assembling EVs in Brazil, much of the supply chain, especially battery production, remains dependent on China. BYD’s first factory in Brazil has faced allegations of “slave like” labour. This may ultimately lead to calls for guarantees of local employment and content – as are being heard in Europe.