There is No Wall for China

The rise of the AI dragon signals not just a shift in power but a transformation in how artificial intelligence is developed and deployed globally. The message is clear for a world watching with bated breath: the race for AGI is heating up, and for China, there is no (great) wall.

Look at DeepSeek’s R1-Lite Preview, for instance. Hailed as a reasoning model rivalling OpenAI’s o1, it has achieved real-time chain-of-thought transparency. 

And here’s the kicker: Within just two months of o1’s release, Chinese researchers not only caught up but surpassed it, dominating benchmarks like AIME and MATH. DeepSeek’s rise as a leader in reasoning isn’t just impressive—it’s a wake-up call you can’t afford to ignore.

Moreover, StepFun’s Step-2, a trillion-parameter mixture of experts (MoE) model ranking 5th globally on LiveBench, showcased innovations in efficiency and long-context tasks. Not to be left behind, Yi-Lightning, developed by the startup, 01.AI, demonstrated how careful engineering can replace brute computational force, achieving competitive results with only $3 million in training costs—a fraction of what Western labs spend. (OpenAI’s GPT-4 costs about $80-100 million to develop).

“It is not that you must spend a billion dollars to train a great model. Detailed engineering and resource prioritisation is key,” said Kai-Fu Lee, founder of 01.AI. 

“The top open source models are Chinese, and they are ahead because they focus on building, not debating AI risks,” said Daniel Jeffries, chief technology evangelist at Pachyderm. 

China’s success is underpinned by its focus on efficiency and resource optimisation. With limited access to advanced GPUs due to export restrictions, Chinese researchers have innovated ways to reduce computational demands and prioritise resource allocation. 

“When we only have 2,000 GPUs, the team figures out how to use it,” said Lee. “Necessity is the mother of innovation.” 

He further highlighted how his company transformed computational bottlenecks into memory-driven tasks, achieving inference costs as low as 10 cents per million tokens, a mere fraction of their competitors. “Our inference cost is one-thirtieth of what comparable models charge,” said Lee. 

The rapid rise of Chinese AI extends beyond its borders, with companies like MiniMax, ByteDance, Tencent, Alibaba, and Huawei targeting global markets. 

MiniMax’s Talkie AI app, for instance, boasts 11 million active users, half of whom are in the US. 

At the Wuzhen Summit 2024, analysts noted that as many as 103 Chinese AI companies were expanding internationally, focusing on Southeast Asia, the Middle East, and Africa, where the barriers to entry were lower than the Western markets. 

ByteDance has launched consumer-focused AI tools like Gauth for education and Coze for interactive bot platforms, while Huawei’s Galaxy AI initiative supports digital transformation in North Africa. 

AI Video Models 

Models like Kling and Hailuo have outpaced Western competitors like Runway in speed and sophistication, marking a shift in leadership within this emerging domain. This success is mirrored in advancements in multimodal AI, where models like LLaVA-o1 rival OpenAI’s vision-language models by implementing structured reasoning techniques that break down tasks into manageable stages.

The Silent AI Leader 

Meanwhile, Baidu is quietly outpacing the West with groundbreaking innovations like the hallucination-mitigating iRAG, no-code multi-agent tool Miaoda, and Xiaodu AI Glasses, solidifying its leadership in AI applications despite geopolitical sanctions.

Yet, this progress is not without challenges. The US has tightened restrictions on the export of high-performance GPUs, limiting China’s access to essential hardware. Plus, Chinese AI developers must navigate stringent government regulations mandating that models embody “core socialist values” and avoid politically sensitive topics. These obstacles, however, have only spurred further innovation, with researchers designing new architectures and cost-efficient training methods to maintain their competitive edge.

China’s strategy of combining cost efficiency with high performance is reshaping the global AI landscape. While US companies remain dominant in foundational AI research, China’s focus on application-driven innovation is enabling it to create scalable and accessible AI solutions. Open source initiatives like Alibaba’s Qwen 2.5 and DeepSeek’s R1 are democratising access to advanced AI, ensuring that innovation rises above the borders. 

Meanwhile, Shenzhen’s rapid hardware iteration cycles are giving Chinese firms a unique advantage in robotics and AI hardware development, driving advancements in physical intelligence and autonomous systems.

“Shenzhen iterates hardware at the speed of software,” said Jensen Huang, CEO of NVIDIA. 

For more insights on AI, stay tuned to AIM.

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