U.S. AI companies seem to be in the lead, but that could be short-lived as Chinese competitors offer cheaper products with more commercial appeal worldwide.
SINGAPORE — In the competition for global dominance in artificial intelligence, Chinese AI leaders increasingly see themselves running a different race than their American counterparts, focused not on developing the most sophisticated capabilities, but on offering “good enough” models at cheaper prices that will proliferate more widely.
In Shanghai and Hangzhou, China’s AI hubs, many no longer see the “frontier” as achieving technical benchmarks, said Cherie Shi, global business manager for the Chinese AI company MiniMax, but rather “how many people in the real world are actually using our models every day.”
Over the past year, Chinese AI firms have gained significant ground in promoting adoption of their models by companies, governments and individual users in places from Southeast Asia to the Persian Gulf region.
A government-backed AI initiative in Singapore recently chose to build its capabilities on Alibaba’s Qwen. A Malaysian property conglomerate is embarking on a $20 billion “smart city” project featuring an AI research center backed by Chinese tech firms. Saudi Arabia is partnering with ByteDance and Huawei to apply AI in urban infrastructure.
U.S. leaders have pitched the battle for AI preeminence as a contest over commanding the future. “Whoever leads that is going to really lead the world to a large extent. That’s how big it is,” President Donald Trump said earlier this month. The United States, he told reporters, is “leading China by a lot.”
But analysts and investors in the AI sector say that lead may be misleading — and short-lived.
“Top models may converge near the frontier, but outcomes increasingly depend on prompt quality, tools and domain integration,” the JPMorganChase Center for Geopolitics said in a May report. Chinese AI labs, it added, are producing models primed to “win at adoption.”
After initially scrambling to get employees to incorporate AI into their work, companies are now reeling from the skyrocketing costs of AI use and seeking ways to stretch the utilization of “tokens,” which are the basic units of AI data consumption.
This has opened opportunities for Chinese AI firms, which offer cheaper rates for tokens and build on models that operate more efficiently, those in the industry said.
Many enterprises need “a fraction of the capability” offered by leading U.S. firms like Anthropic and Open AI, said a salesperson at a leading Chinese AI firm, who spoke on the condition of anonymity because he was not authorized to speak to the press. “If we can provide 80 percent of the value at a much lower cost, that’s enough. We’ll take that market share.”
Gunja Gargeshwari, chief revenue officer for Bright Data, a Tel Aviv-headquartered tech firm providing web data for AI, said many of his company’s clients are experimenting with Chinese AI.
“It’s undeniable,” Gargeshwari said, “the cost efficiency, the token efficiency. It’s amazing.”
Even as the U.S. government amps up its concerns over the national security risks of Chinese AI, Chinese firms “are getting a seat at the table” in many meeting rooms — a change from just a year ago, Gargeshwari said.
“Companies are not biased against China,” he added. “They are very open to using the right solution for their enterprises. … So the future is bright from that perspective for Chinese makers.”
In mid-June, Zixuan Li, an executive at one of the most promising Chinese artificial intelligence start-ups took to a stage at Singapore’s glitzy Marina Bay Sands for a conference called SuperAI.
Top U.S. companies are selling Rolls-Royces, while top Chinese firms are selling Mercedes, said Li, the director of product at Z.ai, known in China as Zhipu AI.
The standing-room-only audience grasped his point: American AI is better — for now. But Chinese products are not far behind in capability, more affordable and, eventually, likely to be far more widely sold.
Restricted by the U.S. Commerce Department for alleged ties to China’s military, Zhipu recently opened offices in Singapore and Dubai, and it is picking up government contracts across Asia, salespeople familiar with the deals said.
Zhipu has objected to being on the Commerce Department entity list, which limits designated entities from doing business in the U.S. based on national security concerns.
In a blog post last year, Open AI singled out Zhipu for its aggressive overseas expansion, writing that it was working to “lock Chinese systems and standards into emerging markets before U.S. or European rivals can.”
The company’s marquee product is a model called GLM, which is popular among coders. As of March, the company said it had more than 4 million registered users in 218 countries. Chief scientist Tang Jie suggested GLM could match the capabilities of Anthropic’s latest model, known as Fable 5, before the end of the year.
The Chinese government has poured hundreds of billions into companies like Zhipu in recent years and helped them broker deals with countries along what it calls the “Digital Silk Road” to fuel the outward push on AI.
The geopolitical goal is for China to “challenge the West’s long-standing dominance over rule-setting” in digital technology, according to researchers at the China Academy of Macroeconomic Research and the Economic Information Network, two state-affiliated think tanks.
This push is also ramping up at a time when U.S. policy toward AI diffusion seems increasingly convoluted, analysts say.
Attendees pass by a poster promoting the AI chatbot from Alibaba at the China International Supply Chain Expo in Beijing this month. (Ng Han Guan/AP)
In mid-June, the Trump administration blocked foreign nationals from using Anthropic’s most powerful artificial intelligence models, sending stocks of Chinese AI companies, including Zhipu, soaring as much as 48 percent. Before this, Anthropic had imposed its own restrictions on how Claude, its signature large language model, could be used for military purposes, clashing publicly with the Trump administration.
Users are “reasonably concerned” that access to American AI products is unreliable, said Martijn Rasser, a vice president at the Special Competitive Studies Project (SCSP), a nonpartisan initiative on tech leadership based in D.C. “It’s not an attractive feature,” Rasser said.
At a forum in Paris last week, Alibaba’s chairman, Joseph Tsai, referenced the curbs on Anthropic and called on Europe to consider China’s AI offerings. “The problem is right now all your eggs are in one basket,” Tsai said. “Why not choose a second basket and diversify your eggs?”
White House spokesperson Liz Huston did not respond to queries on the Trump administration’s clashes with Anthropic, saying only that the administration has adopted a “whole-of-government effort” to pursue AI dominance.
Apart from affordability, the other major draw of Chinese AI products is that most are open-source, meaning they can be downloaded and used locally instead of over cloud-based services.
This appeals to governments that want to deploy AI from local data centers that they control, said Shi at MiniMax. It also attracts entrepreneurs and start-ups handling sensitive information, such as banking details or health metrics, and users who are wary of being beholden to AI companies that can increase their prices at any point.
Aleksander Mordvinov, a Russian living in Thailand, said his entire AI banking start-up was built on Qwen because he wanted data to be controlled locally.
“All companies who have cloud systems sometimes have accidents where the data leaks. I can’t have that,” Mordvinov said. “This guy,” he said, grinning as he picked up a plushie version of Qwen’s capybara mascot, “this guy is what works for me.”
By focusing on achieving technological advances at the frontier of AI development, and neglecting the commercial application and spread of their products known as diffusion, American AI companies risk ceding “soft power and economic clout” to China that could ultimately give Beijing greater influence in shaping the global AI sector, Rasser said.
If China can capture greater market share, it can also pour those profits back into advancing its tech, as it has done with solar equipment, rare earth processing, electric vehicles and other industries, said William “Chip” Usher, another SCSP analyst.
But others in Washington and in Silicon Valley think it is still more worthwhile to focus on the cutting edge. Their argument, Usher said, is that there are capabilities beyond the frontier that will be transformative once achieved.
Bo Bai, a Chinese-born U.S. citizen, said his Singapore-based fintech company MetaComp initially started building its AI capabilities on open-source Chinese models. But in October, Anthropic released a powerful new feature called “Skills,” which allows users to teach Claude repeatable workflows. The update stunned Bo and his engineers.
“We threw away everything,” he said. “And then we restarted using Anthropic’s Claude system.”
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