How different are the development paths of major Chinese national manufacturers from those of the dominant Japanese firms and of other Asian latecomers? What brought about these differences? This study attempts to answer these questions through an in-depth comparative analysis based on repeated field surveys carried out between China and Japan on the interfirm divisions of labor that have been formed by indigenous motorcycle makers and parts suppliers to fit their respective domestic demand and market institutions. As China developed rapidly into the world’s largest producer of motorcycles in the 1990s, numerous firms with homogeneous capabilities emerged in a short period of time. In the ensuing decade or more, the major firms have been continuously conducting "minor-change-type" development without showing any clear signs of escaping from the fierce price competition. These features are major complementary factors behind the formation and evolution of their specific interfirm organizations - the "isolated-type" supplier system. This study, adopting the late industrialization approach, explores the essential features of the industrial development process in contemporary China and its international competitive advantages.