Less than four years ago, the US was sitting pretty in the race with China for global tech supremacy.<\/p>\n
As 2022 drew to a close, OpenAI released ChatGPT, its breakout artificial intelligence model. Meanwhile, Washington was tightening the vice on chip exports to its rival superpower. China seemed to be flailing.<\/p>\n
Then China put the pedal to the metal and with bewildering speed, it has motored to within touching distance<\/a> of the US.<\/p>\n At the start of 2025, Chinese tech firm DeepSeek released its open-source AI model R1 and revealed just how quickly China’s tech bros<\/a> were closing in on Silicon Valley.<\/p>\n It was still significantly less powerful than the US front-runners, but surprised investors triggered a stock-market nosedive, fearing that the Chinese might eat the American tech titans’ lunch.<\/p>\n Now those fears are at the fore again.<\/p>\n Last month, China’s Z.ai launched GLM 5.2, an AI model that fell not far short of American leader Claude Opus 4.8. Moonshot’s Kimi K3, which came last week, seems to have narrowed the gap<\/a> still further \u2013 and at half the price.<\/p>\n “The US moat in building frontier AI software might be softer than many people thought. It’s clear the Chinese AI labs are remarkably capable in building near-frontier models,” says Ryan Fedasiuk, of the American Enterprise Institute.<\/p>\n But this isn’t just about whether China or the US has the shinier or more sophisticated model.<\/p>\n For both Washington and Beijing, this is civilisational. Their future prosperity \u2013 and their ability to shape the world \u2013 is at stake.<\/p>\n “The way people use and interact with AI is becoming increasingly important and really defining people’s lives,” Fedasiuk says.<\/p>\n “So the race to build and install computing infrastructure and to set global AI standards is really a contest between the United States and China to build the operating systems through which people live, work and obey.”<\/p>\n For the rest of the world, the superpower’s tech showdown will once again throw up hard, potentially binary choices.<\/p>\n Britain and Europe will be torn. On the one hand, they face an increasingly testy and unreliable American ally. On the other, the economic lure but potential security risk of cheaper Chinese alternatives.<\/p>\n ‘AI communism’ vs US control<\/p>\n The US-China competition is not just over scale and price but also over the very nature of AI models.<\/p>\n DeepSeek R1, GLM 5.2 and Kimi K3 are open-source models, which anyone with enough computing power can download and adapt.<\/p>\n ChatGPT<\/a> and Anthropic’s Mythos and Claude are proprietary systems, which remain under the creator’s control.<\/p>\n Dean Ball, a ChatGPT executive, has described open-source, or open-weight, models as “AI communism<\/a>“. But both the open and proprietary approaches have strengths and weaknesses.<\/p>\n Open-source AI models are cheap<\/a> and easy to run, so demand is running hot. But it’s unclear how the creators make money rather than simply burn through it.<\/p>\n For users, especially in the West, lower costs aren’t the only benefit. Once a model like Kimi is downloaded on to their own servers, it is entirely insulated from Chinese control.<\/p>\n “We are not providing data to any Chinese companies. They don’t have access to any data … It doesn’t work that way,” Brian Chesky, Airbnb’s chief executive, said recently after coming under fire for choosing Alibaba’s model Qwen.<\/p>\n Xi Jinping, the Chinese president, sees open-source as a way to win new friends on the world stage. Last week, he launched the World Artificial Intelligence Cooperation Organisation, which will be based in Shanghai. Thirty countries have already signed up.<\/p>\n America’s closed models are easier to regulate and supervise but that degree of control also creates risk for the user \u2013 as the world realised last month, when Donald Trump abruptly forbade Anthropic from offering its most powerful models overseas.<\/p>\n China, though, has been under similar US prohibitions for years. Washington has prevented the Chinese from obtaining not just Taiwanese chips but also the lithographic chip-making machines<\/a> produced exclusively by Dutch company ASML.<\/p>\n Washington doesn’t control these choke points, often relying on strong-arm tactics to get its way. But that has been enough to make Beijing take matters into its own hands.<\/p>\n The Chinese Communist Party is not just trying to plant a flag on the frontier of AI, where companies such as DeepSeek, Moonshot and Alibaba are making the running. It also wants to embed AI into all its industries and businesses and to dominate global supply chains. And it wants to do this entirely off its own bat.<\/p>\n China’s economic reboot<\/p>\n AI self-sufficiency is not just a question of security. The flagging Chinese economy urgently needs fresh legs.<\/p>\n Government subsidies to industry are becoming more unaffordable. Cautious Chinese consumers aren’t spending enough. The country’s traditional exports are now running into trade barriers.<\/p>\n “China is betting on this new technology<\/a> to bring on a fresh round of economic growth,” says Ciel Qi, of the consultancy Rhodium Group.<\/p>\n However, it’s a daunting task. As Winston Mok, a private-equity investor, wrote in the South China Morning Post this week: “China’s challenge is not to surpass the US alone but to replicate the combined technological capabilities of the entire Western world.”<\/p>\n Beijing’s traditional model of industrial development has been simply to copy Western ideas or tech, set targets, then pump in money.<\/p>\n This might help solve China’s biggest problem: it is miles behind the US in building up its computing capacity and chip production, hampering AI firms such as Moonshot from keeping up with demand.<\/p>\n Some 2tn Chinese yuan (\u00a3220bn) of state-directed investment will hit the sector in the next three to four years.<\/p>\n Beijing also has an array of blueprints in train to spread best practice in AI across a series of sectors, from manufacturing to healthcare.<\/p>\n The strategy is already working. Business and consumer use of AI<\/a> in China has soared in the past year. Semiconductor exports doubled year-on-year in June.<\/p>\n More than half of China’s quarterly economic growth in the past three months came from electronics manufacturing, tech and telecommunications.<\/p>\n “The emergence of AI as the new engine of Chinese growth could prove to be a key source of economic resilience over the rest of the year and into 2027,” said Julian Evans-Pritchard, of Capital Economics.<\/p>\n He warned, however, that this “does leave the country exposed should the global AI capex boom<\/a> turn to bust”.<\/p>\n Even if AI keeps booming, Xi faces a particular challenge that Trump does not.<\/p>\n Winning the AI race means fostering innovation and profit-driven entrepreneurship but a top-down, authoritarian regime like China often struggles to let a thousand flowers bloom.<\/p>\n Beijing has already shown its willingness to slap down high-flying tech tycoons who criticise its policies or whose offshore expansion plans are seen as a risk.<\/p>\n Even this week, officials told top tech executives they were considering potential restrictions on foreigners’ access to the leading AI frontier models.<\/p>\n On the plus side, Beijing’s support may help companies such as DeepSeek or Moonshot stay afloat while they’re spending money rather than making it.<\/p>\n But the authorities may also be tempted to pick winners, says Matt Sheehan, of the Carnegie Endowment for International Peace.<\/p>\n “The biggest strategic decision that the Communist Party could make is saying, ‘Look, we don’t have enough compute to go around for everybody, we want to get to artificial general intelligence<\/a> first and so we’re going to consolidate our computing resources, our companies. We’re going to do one national Manhattan Project on AI’,” he says.<\/p>\n Sheehan doubts Beijing will go down that path. But one thing is certain: the regime will do whatever it takes. Its economic future, and its status as a superpower, are at stake.<\/p>\n