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

China’s AI Ambitions Face Real Challenges Amid Rapid Growth

In January, China’s leading AI innovators convened in Beijing for a pivotal gathering, sparking debate on whether a Chinese AI firm could surpass US competitors within the next three to five years. A top AI scientist present offered a stark outlook:

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

This cautious assessment contrasted sharply with a year of media coverage highlighting China’s AI surge.

Since the breakthrough of DeepSeek, a previously obscure startup, Chinese companies have dominated global downloads of freely available AI models and secured substantial capital through public market listings. Yet, beneath the celebration, some experts caution that China may be losing ground in developing cutting-edge AI models.

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

noted Tang Jie, founder of Z.ai (Zhipu), during the same meeting.

Key obstacles include restricted access to advanced chips and limited capital, which have shaped a distinct approach in China’s AI landscape. The country’s emphasis on open-source models—a strategy seen as a way to rapidly advance innovation and challenge US rivals—has driven significant progress. Companies are swiftly deploying AI applications across sectors like manufacturing, e-commerce, and robotics. Chinese leader Xi Jinping echoed this momentum in a televised New Year address, praising AI models that are “racing ahead” and advancements in domestically developed chips.

Qwen, for instance, surpassed Meta’s Llama last September as the most-downloaded open model on Hugging Face. Even American firms like Airbnb have adopted it for customer service. The trend extended to Hong Kong, where unicorn startups Z.ai and MiniMax launched public offerings in January, raising $560 million and $620 million respectively, with share prices surging.

Global attention to China’s AI progress is evident, as seen in Meta’s December acquisition of Manus, a Chinese AI agent firm relocated to Singapore. While the deal has fueled discussions, it underscores the growing influence of China’s AI ecosystem on the world stage.