BeijingS push to compete with the United States in the rapidly evolving field of artificial intelligence is intensifying, spurred by initial setbacks and concerns over American dominance. After falling behind companies like OpenAI and Google, Chinese leaders implemented a series of measures-including increased funding, regulatory easing, and a focus on domestic chip development-to accelerate advancements in AI.This strategic shift comes as both nations recognize the transformative potential of AI across industries and its implications for global power, drawing parallels to previous technological races like the Cold War.
Chinese leaders expressed concern and frustration as the burgeoning field of artificial intelligence became dominated by OpenAI, Google, and other American companies.
By early last year, Chinese tech firms were falling significantly behind in the development of generative AI, leading many to rely on Meta Platforms’ open-source Llama models, which were freely available for download. Adding to the challenge, U.S. restrictions on exports of high-end AI chips threatened to further hinder China’s progress, according to the Wall Street Journal.
In response, Beijing intensified pressure on technology company executives in the spring of 2024. One leading Chinese AI firm reported receiving calls from ten different government agencies within a single month, urging action on domestic AI model development. The country subsequently eased regulations, increased funding, and accelerated the installation of computing power. This move underscores the strategic importance of AI to China’s economic ambitions.
Nine months later, Chinese startup DeepSeek garnered attention in Silicon Valley with a powerful new AI model, signaling a potential turning point.
The escalating race to develop artificial intelligence is drawing comparisons to the Cold War and the major scientific and technological competitions that defined that era – and is likely just as significant.
The competition is already fueling a global surge in technology spending, boosting stock markets in both the U.S. and China and unlocking new sources of economic growth, even as it raises concerns about a potential global AI bubble.
AI is poised to transform industry, society, and geopolitics, pushing leaders to set aside concerns about the dangers of powerful AI models, including the spread of misinformation and the development of superintelligent systems that don’t align with human values. “The future of AI will not be won with a cautious approach to safety,” Vice President Jay D. Vance stated in a February speech in Paris.
Both Sides Driven by Fear and Hope for Progress
Warnings about “authoritarian AI” from China, and its potential to undermine U.S. technological superiority, are circulating in Washington and Silicon Valley. Meanwhile, Beijing is convinced that failing to master AI will allow the U.S. to thwart China’s resurgence as a global power.
Both countries believe that global market share for their companies is at stake – and with it, the potential to influence large segments of the world’s population.
The U.S. currently maintains a clear lead, producing the most powerful AI models. China cannot match the U.S. in advanced chip manufacturing or the financial strength of private American investors, who poured $104 billion into AI startups in the first half of 2025 and are preparing to invest even more. However, China possesses a vast pool of skilled engineers, lower costs, and a state-directed development model that often evolves more rapidly than that of the U.S., all of which Beijing is leveraging to shift the competitive landscape.
A new “whole-of-society” campaign aims to accelerate the construction of computer clusters in regions like Inner Mongolia, where massive solar and wind farms provide an abundance of cheap energy. These clusters will connect hundreds of data centers to create a shared computing pool – some describe it as a “national cloud” – by 2028. China is also directing hundreds of billions of dollars into its energy grid to support AI training and deployment.
China has a history of allowing the U.S. to take the lead in emerging technologies, only to catch up later as know-how spreads. In social media, American companies were early leaders, only to see TikTok, created by Chinese engineers, ultimately dominate and redefine the industry. China’s AI strategy reflects a similar effort to replicate that success.
Currently, Chinese AI models rank at or near the top in every task – from coding to video generation – with the exception of search, according to Chatbot Arena, a popular crowdsourced ranking platform. Meanwhile, China’s manufacturing sector is outpacing the U.S. in deploying AI in the physical world through robotic taxis, autonomous drones, and humanoid robots.
Echoes of the Cold War
Industry insiders, recalling the space race of the Cold War era, often described the release of ChatGPT as a “Sputnik moment” for China in its intensifying competition with the U.S.
Given the broad applications of AI, a more apt analogy may be the decades-long competition between the U.S. and the Soviet Union to build computers for defense. While less remembered than the sprint to the moon, this lesser-known Cold War race – which the U.S. won – spurred American military, university, and corporate innovation in computer technology that spread throughout the global economy, redefined warfare, and reshaped daily life worldwide.
Leaders in both Washington and Beijing now view AI as a revolutionary technology that could surpass digital computing – and its offspring, the internet – in its potential for transformative change.
If AI surpasses human intelligence and gains the ability to self-improve, it could provide an unassailable scientific, economic, and military advantage to the country that controls it. Furthermore, AI’s ability to automate tedious tasks and process vast amounts of data quickly promises to accelerate everything from cancer diagnoses to missile defense.
With so much at stake, hacking attacks and cyber espionage are likely to worsen as AI provides hackers with more powerful tools while increasing the incentives for state-sponsored groups to steal AI-related intellectual property. As trust erodes, Washington and Beijing will also face difficulties, if not impossibility, in cooperating on areas such as preventing the use of AI by extremist groups for destructive purposes, such as creating biological weapons.
China’s focus on the technology dates back to at least 2017, when Xi Jinping unveiled a national AI development plan envisioning China becoming a global leader in AI by 2030.
At the time, Beijing was particularly interested in its potential to enhance facial recognition, which is crucial for the government’s surveillance capabilities. The emergence of OpenAI’s ChatGPT in late 2022 demonstrated that AI, beyond facilitating the tracking and analysis of populations, also has the potential to influence the dissemination and manipulation of ideas.
For Chinese leadership, which had built the world’s most sophisticated information control system, this prospect was both alluring and alarming.
The initial instinct of leaders was to proceed cautiously. Months after the launch of ChatGPT, China imposed the world’s first comprehensive restrictions on deepfakes. Shortly thereafter, rules were introduced to censor the input and output of generative AI models, tightening earlier regulations that required tech companies to disclose extensive details about their algorithms.
But as the power of American generative AI systems grew, so did China’s concerns about missing out on the next major technological leap.
Chinese tech executives lobbied to relax the country’s regulations, which at one point required every company to prepare 70,000 questions to verify that its models provided safe answers before being approved for public use. Regulators streamlined the process, including allowing companies with good records to skip data-training reviews, according to people involved in the process.
Officials were convinced that AI developers needed further support after the Biden administration tightened controls on exports of advanced chips in late 2023. The cyberspace regulator began to loosen rules for companies seeking to use computing power abroad for AI training.
Beijing also activated the engine of state capitalism. More than a dozen local governments began offering researchers access to computing power at subsidized prices through state-owned data centers. Some of these contained limited American chips that Chinese authorities purchased from resellers who obtained them through underground channels, people familiar with the operation reported.
Authorities built public training datasets and created marketplaces where government agencies and companies could trade data. Local governments organized roadshows to help raise funds for startups.
When China’s breakthrough finally came in early 2025, it wasn’t thanks to a company heavily benefiting from state largesse. DeepSeek was largely funded by the hedge fund of founder Liang Wenfeng and continued to follow its own path. But after its R1 problem-solving model nearly matched OpenAI’s top offering in performance at a fraction of the cost, the little-known startup of Liang became central to Beijing’s plan to catch up with the U.S. in AI.
A month after DeepSeek released its model, Xi convened a meeting with Liang and other Chinese tech executives. Xi told them to focus on AI, according to people familiar with the meeting, stating that the technology could determine China’s ability to compete globally.
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