China's advantage in artificial intelligence - Competition with the US. Prices and subsidies, the decisive factors
While discussions about the US-China AI race tend to focus on which country has the most powerful cutting-edge models, this framework is becoming outdated. The question is no longer whose models meet technical standards, but who can create and sustain an ecosystem that integrates AI into everyday products and services.
Such an ecosystem must be based on three pillars. First, it requires cheap, reliable, and widely deployed hardware capable of hosting artificial intelligence systems in a range of applications, from cars and drones to industrial equipment. Second, it depends on software that can be continuously updated. And finally, it includes supporting infrastructure that allows these systems to operate securely.
In this context, China enjoys a distinct advantage. This stems from its excess production capacity.
The electric vehicle sector provides the clearest example. Developing autonomous driving capability requires a large installed base of modern vehicles that can operate advanced driver assistance systems. China has built such a base on a scale that no other country can match, largely due to its excess manufacturing capacity.
At the same time, China is rapidly building the infrastructure to support the transition to autonomous driving. A similar dynamic exists in what Chinese policymakers call the “low-altitude economy”: the airspace below about a kilometer that they seek to transform into a new engine of growth through drones and flying taxis.
Lower prices and subsidies, on the other hand, are accelerating adoption of the technology. Meituan, China’s leading food delivery platform, has completed more than 600,000 orders on dozens of drone routes in major cities.
Sure, China still lags behind the U.S. in developing advanced models. But thanks to its tendency to expand aggressively, it is steadily amassing the equipment base and infrastructure on which the next phase of artificial intelligence will depend, from electric vehicles and robots to drones and flying taxis.
American policymakers are ignoring this shift. The United States risks losing the most important competition to integrate artificial intelligence into the infrastructure and daily routines that will ultimately shape the global economy.
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