China doubles chooses AI self-reliance amid intense US competition

The Global AI Race Intensifies: China's Self-Reliance Amidst US Pressure

The artificial intelligence landscape is witnessing a dramatic acceleration, with China doubling down on its self-reliance strategy amidst fierce competition from the United States. This escalating rivalry is not merely about technological supremacy; it's a profound contest for future economic and strategic power, fundamentally reshaping the global tech arena.

Shanghai Leads with Ambitious AI Investment

A prime example of China's commitment is Shanghai's groundbreaking announcement: a colossal one billion yuan (approximately US$139 million) subsidy program dedicated to its burgeoning AI industry. This comprehensive package is designed to supercharge innovation and foster domestic growth, signifying the city's intent to be a vanguard in the national AI race.

The investment strategically targets three critical areas:

• Computing Power Subsidies: A significant 600 million yuan is allocated to bolster access to essential computing facilities, with subsidy rates ranging from 10% to a full 100% of contract values. This is crucial for training and deploying complex AI models.
• AI Model Discounts: 300 million yuan is earmarked to provide discounts on third-party AI models, encouraging broader adoption and development across industries.
• Training Dataset Support: An additional 100 million yuan will directly support companies in acquiring the vast datasets necessary for robust AI model training.

Furthermore, Shanghai plans to allocate up to 500 million yuan to new AI research institutions, guaranteeing funding for three to five years. This demonstrates a long-term vision for nurturing core AI capabilities and talent within the city, aiming to overcome challenges like high operating costs that previously pushed startups to other regions.

A Nationwide AI Competition Unfolds

Shanghai's bold initiative is not an isolated event but a clear reflection of a broader, intense inter-city competition across China. Cities like Hangzhou, Shenzhen, Chengdu, and Beijing are all introducing their own aggressive support measures to establish AI dominance. Hangzhou, for instance, previously unveiled plans for 250 million yuan in computing power subsidies and is actively nurturing its "six little dragons," including prominent AI player DeepSeek.

This internal rivalry underscores the strategic priority placed on artificial intelligence at every level of Chinese government. It highlights a concerted effort to build a robust, self-sufficient AI ecosystem from the ground up, driven by domestic innovation.

The Trump Administration's Counter-Strategy

Coinciding with China's intensified efforts, the United States, under the Trump administration, unveiled its comprehensive AI Action Plan on July 23. This 28-page strategy aims to solidify America's global leadership in AI through continued tight restrictions on key technologies, alongside accelerated deregulation and enhanced infrastructure support for US AI companies.

The plan explicitly states the US policy is to "do whatever it takes to lead the world in artificial intelligence," aiming to become an "AI export powerhouse" while rigorously maintaining national security protections. Key measures include empowering the US Commerce Department to close loopholes in export restrictions, boosting oversight of foreign end-users, and exploring geolocation tools to block access for "countries of concern" like China.

China's Resilient Path to Self-Reliance

Despite these stringent US restrictions, China's domestic AI industry is demonstrating remarkable resilience and growth. Analysts at Bernstein predict that domestic chips will capture a significant 55% of China’s AI accelerator market by 2027, a substantial leap from just 17% in 2023. This growth is a direct consequence of export controls, which, paradoxically, have created a unique opportunity for Chinese AI chip vendors by reducing direct competition with the most advanced global alternatives.

Notably, Huawei’s Ascend 910C chip now reportedly achieves approximately 65% of Nvidia’s supreme H100 capacity. While challenges remain, particularly concerning direct compatibility with Nvidia’s CUDA software platform, the progress signals China's advancing capabilities in crucial hardware components.

Geopolitical Tensions and the Future Outlook

The AI competition between China and the US is undeniably set to intensify. While the US strategy under Trump signals a shift towards more direct competition rather than mere containment, the core "yard" of export control scope has not necessarily shrunk. Chinese Premier Li Qiang, speaking at the World Artificial Intelligence Conference in Shanghai, emphasized the need for international cooperation, advocating that AI should not become an "exclusive game" limited to a select few – a clear reference to US restrictions.

Ultimately, neither US pressure nor Chinese subsidies alone guarantee a definitive winner in this technological marathon. As experts suggest, AI development is a "long game" profoundly shaped by engineering prowess, talent acquisition, and foundational infrastructure. China’s substantial data resources, advanced algorithms, and competitive AI talent pool remain significant strengths despite chip restrictions.

The consensus among some analysts is that "there won’t be a clear winner or loser in the next decade," implying that this strategic technological rivalry will continue to define and drive the global AI landscape for years to come. Businesses and policymakers alike must recognize this dynamic as they navigate the future of artificial intelligence.

Key Takeaways for Forward-Thinkers:

• Strategic Investment is Paramount: Nations and cities are pouring massive resources into AI, signalling its foundational role in future economies. Businesses should align their strategies with these national priorities where possible.
• Domestic Innovation is Key: Geopolitical pressures are accelerating the push for localized AI ecosystems. Companies relying on foreign tech should consider diversifying or investing in domestic alternatives.
• Talent and Infrastructure Remain Critical: Beyond subsidies and restrictions, the long-term success in AI hinges on fostering world-class talent and building robust foundational infrastructure. Prioritize skill development and scalable computing.
• Adapt to a Contested Landscape: The AI domain will likely remain an arena of intense competition. Understanding evolving regulations and supply chain dynamics will be crucial for navigating this complex environment.