When OpenAI cut off China's access to its advanced AI tools in July 2023, Chinese developers made an instant switch to open-source tools. Initially, they used models created by US firms such as Meta. But within a year, China's native open-source AI systems — by DeepSeek, Alibaba, and Huawei — have started competing internationally in performance and use, the New York Times reported.
A decade-long strategy to dominate tech
This is rapid progress founded on a decade of industrial policy. Beijing put big money into high-tech sectors like solar panels, electric vehicles — and now AI By investing at every level of the AI "tech stack" — chips and servers, all the way down to research labs — the government is enabling Chinese businesses to catch up even with US chip export bans and sanctions.
Infrastructure, funding and talent concentration
Unlike the US, where Google and Meta build their own infrastructure, the Chinese government has subsidized gargantuan data centres and hardware facilities. It's also spent $100 billion in semiconductors and committed $8.5 billion to new AI start-ups. Provincial governments bid against each other to host AI firms with subsidies, grants, and even apartments, building incubators like Dream Town in Hangzhou.
China's training data is affected by censorship
China's AI strategy is combined with tight government control. Models are trained on data sets that are compliant with state censorship, e.g., sources like "mainstream values corpus" — derived from state-approved media. American models are trained on open forums like Wikipedia and Reddit, whereas Chinese models are trained on filtered data that nevertheless manage to achieve world-class performance in certain domains.
A competition to develop chips and break dependence
To reduce its reliance on Nvidia, which is subject to US export restrictions, China has turned to domestic chipmakers like SMIC to support Huawei’s development of AI chips. Although Huawei’s chips don’t match Nvidia’s top offerings in performance or scale, they offer a strategic fallback that keeps Chinese AI development on track.
Open-source as China’s AI soft power
Chinese firms have embraced open-source AI as a way of spreading their global influence and reach. ByteDance, Alibaba, and Baidu have all introduced systems that are usable and modifiable free of charge. The method is at odds with US firms like OpenAI and Google, which limit usage and charge. Chinese systems thus have an opportunity to gain popularity among engineers and governments looking for flexible AI tools.
A geopolitical and ideological race
OpenAI CEO Sam Altman has framed the AI race as a contest between "democratic" and "authoritarian" regimes. But China's open-source push can potentially allow it to shape world standards and markets. As American investor Kevin Xu puts it, open-source AI is becoming a "technological soft power" — China's equivalent of exporting Hollywood films or fast food to the globe.
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