China’s AI industry looks unstoppable in the race to best US rivals. But is it?

Chinese AI Industry Faces Uncertain Outlook Amid Rapid Growth

In January, China’s leading artificial intelligence firms convened in Beijing for a pivotal gathering, sparking debate on the nation’s prospects in the global AI race. A central question arose: Could Chinese AI companies surpass their American counterparts within the next three to five years?

“Below 20 percent,” said Justin Lin, technical lead for Alibaba’s Qwen AI models. “And I think 20 percent is already very optimistic.”

The cautious outlook contrasted sharply with a year marked by widespread optimism about China’s AI boom. Following the emergence of DeepSeek, a relatively unknown startup that unveiled a high-performing AI model at a lower cost than U.S. equivalents, Chinese firms dominated global downloads of open models and secured substantial investments in initial public offerings.

However, despite the momentum, some prominent Chinese AI developers warned of potential setbacks. Access to advanced chips and capital constraints were cited as persistent challenges. Lin was not the only voice of concern. Tang Jie, founder of Z.ai (also known as Zhipu), echoed similar sentiments at the same meeting.

“In some areas we may be doing fairly well, but we also need to acknowledge the challenges and gaps we still face,” Tang said.

Yet, the industry remains dynamic. China’s unique tech ecosystem has driven a distinct approach—prioritizing open-source AI models to foster widespread adoption. This strategy, seen as a way to expedite innovation and challenge U.S. competitors, has yielded measurable progress.

Chinese companies are rapidly deploying AI models across real-world applications, integrating them into sectors like manufacturing, e-commerce, and robotics. President Xi Jinping highlighted these advancements in a televised New Year address, praising China’s “racing ahead” AI models and “breakthroughs” in domestic chip development.

Qwen, for instance, surpassed Meta’s Llama as the most-downloaded open model on Hugging Face last September. Even U.S. firms like Airbnb have adopted Chinese AI tools for customer service. The market has also seen a surge in AI-related listings in Hong Kong, with Z.ai and MiniMax raising $560 million and $620 million respectively during their public debuts.

Global attention is growing. In December, Meta announced the acquisition of Manus, a Chinese AI agent firm that relocated to Singapore. The deal has triggered discussions about China’s influence on the international tech landscape.