Tech War: China's Quest for AI Independence
There is no race, because there is no finish line in sight.
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The U.S.-China tech war is in full swing, with NVIDIA chip embargoes, rare earth export bans, and escalating superpower rivalry that is impossible to ignore.
This MERICS report, funded by the German government, is one of the best-written and least biased coverage on China’s quest for AI independence I’ve seen, and provides a great overview of China’s ambitions.
AI is now a major player in geopolitics, with the perception that domination of AI will lead to the rise and fall of nations.
Attributing this amount of import to AI is an overstatement, as rising economic, social, and political clout depends on far more than AI. Still, it’s a catchy theme that gets investors to spend and opens government coffers.
Unsurprisingly, China is pursuing a path of AI self-reliance in everything from AI chip development, where it lags, to LLM models like DeepSeek, where it competes among the world’s best.
Whole Nation Effort
To achieve self-reliance, it is engaging in a “whole nation effort.”
This involves significant state investment, ambitious policy goals, a push for widespread AI adoption, and even primary school education.
Interestingly, many perceive a “whole nation effort” as uniquely Chinese, as a child of the US space race, I can tell you it is not.
I remember well the US’s "whole nation effort” to go to the moon, and I became an engineer because of it.
What I am seeing in China today with AI is very much reminiscent of that time.
Industrial Policy
Whole nation efforts also involve “industrial policy,” which in China’s case includes heavy government investment in chip making to make it independent.
These investments raise howls from free marketeers in the West, who see industrial policy as anathema to a free-market system.
They seem to have forgotten the $1 trillion in 2018 dollars invested in going to the moon and space, or the “Big Beautiful Bill’s” 35% tax break for chipmakers.
Curiously, the space race is also not perceived as US industrial policy, even though it advanced technologies across aerospace from jetplanes to microchips and Velcro.
There is no AI race
Meanwhile, Trump states that "America is going to win the AI race,” as did Biden before him.
The problem is that no one knows where this race’s finish line is.
Who wins? And what is the prize?
Does the nation that has the smartest AI or achieves artificial general intelligence (AGI) first win?
This is where this whole race analogy breaks down.
There is no AI race.
While it makes it easy for the media and governments to put it in these terms, this is a competition that will never end.
Given enough time, China will succeed in building independent AI systems. Its whole nation effort can’t be stopped, and chip bans only strengthen China’s resolve.
What the world is waiting for and watching isn’t to see who wins the race. Instead, it is waiting to see which nation will best implement AI to solve societal problems.
This is where things get interesting, as China is the world’s fastest implementer of new technology.
No one gets tech out of the research labs and onto people’s smartphones faster.
What we are all waiting breathlessly to see is whose AI can make our world a better place.
Both nations can be successful at this, without either winning!
👉Key Points and Options for The EU
🔹 China is pursuing self-reliance in AI at every level of technology. It sees AI as strategic for national and economic security. Facing technology export controls from the US, Beijing has made “independent and controllable” AI a key objective.
🔹 While China’s government has long identified AI capabilities as a critical goal, it employs different strategies to aid each layer. The heaviest state support is reserved for the capital-intensive semiconductor sector. Indigenization efforts for software frameworks are entrusted to Big Tech companies.
🔹 China’s semiconductor industry has managed to produce its own AI chips, but their performance does not yet match that of US semiconductor designer Nvidia. Beijing has set indigenous capabilities as a top priority, especially faced with US export controls.
🔹 In models and applications, China is closing in on the US. China is heavily embedded in global open-source communities. Coupled with a protected home market, this has spawned large language model (LLM) developers like DeepSeek.
🔹 China’s AI ecosystem can source critical inputs domestically, but its future will also hinge on external factors. The country has nurtured a large talent pool, provided ample funding, promoted a maturing data environment and built computing infrastructure.
🔹 Europe should decide whether to integrate China-origin AI technology into its AI stack. DeepSeek has attracted European users, which has led to scrutiny of its data and content moderation practices.
🔹 Geopolitical competition will continue to shape Europe’s choices. The US and China both aim for dominance in AI and their ecosystems are bifurcating. Reliance on US hardware could expose Europe to supply constraints or even coercion. But alternatives like Huawei’s AI chips, besides technical difficulties, may present security risks or even be in breach of US export controls.
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