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Xiaomi CEO Lei JunXiaomi CEO Lei Jun
Xiaomi CEO Lei JunPhotograph by Imagine China

The biggest unicorn of all lives in the Middle Kingdom. If you haven’t heard of Beijing-based smartphone maker Xiaomi, get ready—its swift rise has the potential to be the biggest thing brewing inside China since Alibaba’s IPO.

In China, Xiaomi’s cheap phones (its Redmi 2 costs $115) are hotter than Apple’s (AAPL). But Lei Jun, Xiaomi’s founder and CEO, isn’t stopping there. He’s working to create a universe of Xiaomi products by expanding into categories as diverse as air purifiers and Internet TV boxes. The company just raised money at a $46 billion valuation. Yuri Milner, the Russian venture capitalist who bet on Facebook in 2009, is one of the prominent investors backing what he calls the next $100 billion company.

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China has several impressive billion-dollar-plus startups. Dianping is a Yelp-Groupon mashup with 190 million monthly active users; Mogujie is a Pinterest clone favored by the country’s fashionistas; Koudai Shopping connects online shops with users on China’s most popular social network, WeChat. With online retail in the country expected to pass $500 billion in 2015 from just $200 billion in 2012, China is a supersize incubator for growth and fertile pasture for unicorns to graze.

This story is from the February 2015 issue of Fortune.