Why China’s Real AI Race Is Happening Inside the Country, Not Across the Pacific
For years, global discussions about artificial intelligence have focused on a supposed head-to-head battle between the United States and China. In this view, the US dominates with its frontier models and immense computing resources, while China is cast as the challenger struggling under export controls.
But this simple two-country storyline no longer captures what is truly happening. China is not following one central AI strategy. Instead, the country is witnessing three distinct AI races happening simultaneously within its borders, each shaped by different goals, constraints, and industry structures. The outcome of these internal competitions is likely to shape China’s AI future far more than any direct contest with the US.
The Compute Maximalists: Bigger Models, Bigger Bets
The first major camp consists of companies that believe scale still rules the game. This group is led by giants such as Alibaba and ByteDance. Their strategy is built on the idea that powerful models require massive computing power and continuous investment.
Over the past year, Alibaba has poured staggering amounts of money into cloud and AI infrastructure, pushing its free cash flow to negative 21.8 billion yuan. Despite the enormous spending, the company’s cloud revenue surged by 34 per cent, and leadership now claims Alibaba holds over 35 per cent of China’s AI cloud market.
A key example of its ambition is the Qwen model family, which has already inspired more than 180,000 open-source derivatives across China. These numbers signal how aggressively the company is trying to build an ecosystem around large-scale AI.
Internal Competition Is Driving Innovation
What makes China’s situation unique is that these companies are not just competing with American firms—they are also competing intensely with each other.
While the US has a handful of leading labs, China has multiple clusters of firms, each pursuing different visions of what AI leadership should look like. Some focus on massive compute, others on lightweight models optimised for everyday use, and still others on deeply integrated industry-specific systems.
This diversity creates pressure, experimentation and a rapid pace of innovation that a simple US–China rivalry narrative fails to capture.
Why This Internal Race Matters
The question is not simply whether China can catch up to the US. The more important question is which Chinese vision of AI will ultimately dominate within China itself.
If the compute maximalists win, China’s future AI landscape could resemble a highly centralised ecosystem built around powerful cloud platforms. If smaller, more adaptive models take the lead, AI may become deeply embedded in local applications and industry-focused tools. And if sector-specific firms rise to the top, China’s innovation might be defined by practical and narrowly optimised solutions deployed at massive scale.
Whichever path prevails will shape how AI is used in Chinese society, how accessible it becomes, and how it transforms public services, business operations and daily life.
A Bigger Story Than a Two-Horse Race
The idea of a dramatic superpower race makes for compelling headlines, but it overlooks the complexity unfolding inside China. The country’s technological trajectory is being shaped by domestic competition, differing corporate philosophies and varied economic constraints.
This internal dynamic is likely to have a greater effect on China’s AI development than any rivalry with the US. As these competing models continue to evolve, they will determine whether China becomes a nation of mega-scale frontier models, specialised industry solutions or a hybrid of both.
