^{Photo: Asia Times}

China is pushing forward with an ambitious plan to lead the global AI race, even without the same scale of chips, funding, or Silicon Valley-style hype that dominates the United States. While Washington and U.S. tech giants pour billions into advanced models and moonshot projects, Beijing is taking a leaner approach: focusing on practical applications, state-backed funding, and strategic integration across its economy.

A tale of two strategies

In the U.S., the AI narrative is defined by staggering numbers and headline-making ambitions. OpenAI has warned that its research may require as much as $115 billion by 2029. Tech heavyweights like Apple and Meta have pledged billions more, while Washington rolls out initiatives to cement American dominance.

China, by contrast, has opted for a slower but steady path. In early 2024, Beijing quietly launched a 60.06 billion yuan ($8.42 billion) national AI fund. Since then, it has accelerated efforts under a sweeping “AI+” plan, designed to weave artificial intelligence into critical sectors—from power grids and coal mining to healthcare, education, and consumer services.

Making do with ‘usable’ chips

China’s biggest handicap remains in advanced semiconductor design. U.S. export restrictions have cut off Chinese firms from Nvidia’s most powerful AI chips, leaving them a step behind in high-end hardware. Yet, Chinese policymakers and researchers argue that “usable” chips are enough to push forward.

Shan Zhiguang, director at the State Information Center, emphasized that China is consolidating its resources for impact. “Our path is not identical to America’s pursuit of human-level artificial general intelligence. We are building practical systems that serve society and industry,” he said this week.

Evidence of this approach can be seen in DeepSeek and other Chinese firms that have produced competitive, lower-cost generative AI models despite hardware limits. CreditSights’ Head of Asia Strategy, Zerlina Zeng, noted that China’s success reflects a broader truth: smarter algorithms and resourcefulness can sometimes outweigh brute computing power.

State-backed muscle

The $8.42 billion AI fund is led by the National Integrated Circuit Industry Investment Fund III, supported by the Ministry of Finance, the China Development Bank, and several state-owned giants, including China Tobacco. This structure mirrors Washington’s AI action plans but with a distinctly Chinese twist: tight state direction and alignment with industrial priorities.

Private capital is also moving in. Humanoid robotics firm X Square Robot recently raised about $100 million in a round led by Alibaba Cloud, with support from CDB Capital and CAS Investment. Earlier this week, the company unveiled an open-source AI model for robotics, underscoring how state backing and private innovation are working hand in hand.

Unlike a decade ago—when semiconductor policies fizzled due to misaligned incentives—China’s current strategy has been sharper. Local government-backed funds are prioritizing hardware and infrastructure, moving beyond the software-heavy investments of the past.

Learning from past failures

China’s history with industrial policy has been mixed. The EV industry became a global success story, though not without significant waste and fraud—Beijing admitted that more than 1 billion yuan was lost in subsidies. Semiconductor development, however, lagged behind expectations despite two decades of state programs.

This time, Beijing seems determined to avoid past pitfalls. Instead of chasing every frontier technology, it is concentrating on realistic goals: mass adoption, integration into legacy industries, and improving efficiency across the economy.

Competitive edge in adoption

China’s AI adoption curve is already steeper than many outsiders realize. A recent AmCham Shanghai survey found that over 40% of U.S. firms operating in China believe local rivals are ahead in practical AI deployment. Baidu, for instance, has released AI tools designed for elderly users, showing how the technology is being tailored for wide demographics.

Even so, analysts warn of potential overcapacity risks, particularly in AI infrastructure like data centers and chip manufacturing. If supply overshoots demand, resources may be wasted, echoing past industrial bubbles. Still, Beijing appears ready to accept short-term inefficiencies in exchange for long-term competitiveness.

The long game to 2030

China has had AI on its agenda for years. In 2017, it announced plans to become the world’s AI innovation hub by 2030. With five years left, results are uneven. Yet optimism persists, with some analysts calling this China’s “third attempt” at building a world-class tech ecosystem.

Andy Rothman, founder of Sinology, argues that optimism about China’s broader economy is resurfacing. “This time the environment is different,” he said. “Global companies and domestic players alike recognize that AI is not optional—it’s a requirement for competitiveness.”

Market pulse

Chinese markets are reflecting this sentiment. The CSI 300 index closed 0.21% higher at 4,445.36, while Hong Kong’s Hang Seng Index rose 1.04% and its Tech Index gained 1.82%. Shares of Alibaba climbed 2.1% in Hong Kong trading after the X Square Robot funding news.

Yet challenges remain. Consumer prices in China dropped 0.4% year over year in August, missing forecasts, while the producer price index slid 2.9%. These figures underscore the economic pressures that may limit Beijing’s room for lavish spending—further reinforcing its pragmatic, targeted AI strategy.

Final word

While the U.S. charges forward with massive bets on artificial general intelligence, China is taking a different path: one that values resourcefulness over scale, practicality over prestige, and long-term adoption over quick wins. Whether this strategy pays off by 2030 remains uncertain—but China is betting that efficiency and integration may prove just as powerful as moonshot innovation.