Abstract

This study analyses China’s expanding artificial intelligence (AI) capabilities within the nation as a whole. The paper will prioritise an in-depth analysis of China’s military, economic, regulatory, societal and political impacts on AI. It has been found that China has been closely monitoring the AI-related military activities of other nations and applying the successes onto its own AI models. Within the economy it has been noted that AI has been used to improve industrial and investment capacity to strengthen production to achieve long-term goals. In the context of AI regulation, China has been able to balance its innovation and regulation in a way that ensures security while not compromising the nation’s goals. Ultimately, China has been able to slowly shift the perception and distribution of global power while not depending on creating the strongest large language model (LLM). 

Introduction

The introduction of widescale use of large language models (LLMs) has caused a noticeable shift in power dynamics on the global level. This paper will examine the new changes of power that artificial intelligence (AI) has caused and the potential future impacts. This paper will examine the changes in China through four lenses: (1) military; (2) economic; (3) regulatory; and (4) societal and political.

The field of artificial intelligence was officially defined by John McCarthy in 1956 at the Dartmouth Summer Research Programme (AI100 Standing Committee and Study Panel, 2015). The goal of the research was to investigate the ways that a machine program could be used to imitate aspects of human intelligence. McCarthy has been credited as the first person to coin the term “artificial intelligence” in a proposal he co-authored with Marvin Minsky, Nathaniel Rochester and Claude Shannon (AI100 Standing Committee and Study Panel, 2015). 

China’s history regarding AI began in the late 1970s at the inauguration ceremony of the National Science Conference in 1978 when Xiaoping Deng delivered a statement regarding AI as an item that would help progress the future; however, the want for research was heavily counterbalanced by the fact that AI was heavily looked down upon in China due to influences from the Union of Soviet Socialist Republics. In the modern day, China has re-evaluated its stance on AI to a more positive perspective. The current phase has been noted with a strong drive of AI research and construction.

1. Artificial Weaponry in China

1.1 INTRODUCTION TO AUTONOMOUS WARFARE

Despite AI having seen few experimental uses in warfare, the recent widespread use of large language model programs has allowed new uses to be adopted within the military. Currently, China has the third strongest military in the world, following Russia and the USA, but with the new introduction of AI, we may see the tides of war shift into a new preferable position for China. Within the military, AI has been known to allow the Chinese army to gain new autonomous functions and systems, which opens the door to new ground-breaking innovations. AI allows for missiles to be guided to exact target locations, detect tanks and military vehicles, and gain research on important targets, with no human intervention needed. 

While China and the United States of America are key players within the AI arms race, Spain has been making major advancements in AI regulations. State delegations and AI representatives within Spain created the Responsible Artificial Intelligence in the Military Domain (RE-AIM) Framework, with the mission of fostering international cooperation within the field of AI. The expansion of AI use has already seen use in ongoing conflicts in Russia-Ukraine and Israel-Gaza. The use of AI in war has created new war strategies and led to the invention of new weaponry. The UN has begun to create binding regulations as the use of military AI continues to increase.

1.2 CHINA’S USE AND OBSERVATION OF MILITARY AI

China has been a known observer to those who use military AI, including Russia, the US, Ukraine and Israel, adopting strengths and trying to diminish disadvantages. The country has been making major breakthroughs within the field of artificial intelligence, facilitating improvements to national security, governance and decision making. The Center for International Security and Strategy at Tsinghua University has reported that the introduction of AI at such a scale will change warfare forever and, as a result, will create new unprecedented challenges worldwide (Chuanying, 2025).

Some of the most important findings that have been found within the field of military AI involve the assistance AI provides in logistical and organisational fields. One of the most important uses of AI in this capacity is how both China and the US use it to shorten the Observe, Orient, Decide and Act (OODA) loop (Ungvarsky, 2019). Shortening this loop allows for quicker analyses and military deployment. The OODA loop handles the process of intelligence gathering and active military combat (Ungvarsky, 2019). Without the use of AI, this loop would have a typical range of six hours to several years, but with the use of AI, this loop would be cut down to just a few seconds. 

1.3 PLANS FOR THE FUTURE

China has shown a deep desire for international cooperation regarding artificial intelligence and has encouraged unity between other nations. China holds the belief that all current efforts in the present moment are crucial to supporting and improving human military decision-making, but should never replace humans. The nation believes that human judgement in situations that affect the lives of others in a conflict is necessary to uphold both moral and international standards.

2. China’s Path to Economic Power

2.1 BEYOND THE AI RACE

The economic AI race is no longer simply a competition to produce the most capable model: it is increasingly a competition to determine which country can translate AI capability into productivity. This distinction is particularly important for China because its greatest economic strength is not its position in frontier AI investment, but its ability to embed AI within an already extensive industrial and manufacturing base. AI therefore functions less as a new economic sector and more as a force multiplier for China’s existing economy, potentially increasing the output and efficiency of industries that already form the foundation of its economic strength. 

China has demonstrated its strong position in this race. Although the United States still leads in AI investment and frontier models, China has focused on integrating AI into an industrial platform as an essential catalyst for growth. Rather than creating demand for a unique product or service, AI can make existing production processes more efficient. For example, if a system predicts that a specific machine is going to fail, it can be repaired before it breaks down, making the entire factory more productive. This strategy is driven by government policies and restrictions on using foreign technology. The significance of this approach is that China can extract economic value from AI through widespread adoption, rather than depending solely on its ability to produce the most advanced models. 

By the end of 2025, China’s core AI industry was valued at over 1.2 trillion yuan, growing approximately 40% year-on-year, and more than 6,600 AI companies were operating in the country by June 2026. More importantly, AI applications made up about 55% of China’s AI industry in 2025, compared with 38% for basic AI technology and 7% for models and frameworks. This suggests that China’s AI economy is increasingly focused on applying AI across existing economic activity rather than relying only on the development of frontier models. According to China’s National AI Strategy, AI is intended to become increasingly integrated across industries. This trend suggests that China is not limited to AI as a technology market but rather uses it as an economic catalyst: a technology capable of improving productivity across sectors that already contribute substantially to the national economy. 

2.2 CHINA’S SELECTIVE STRATEGY

China’s approach seeks to balance regulation with technological leadership. Rather than relying on a single framework that applies similar requirements to every new technology, China developed an incremental approach in which regulation can respond to the economic and political significance of particular technologies. This allows authorities to manage risks while giving companies more room to continue developing AI. The economic importance of this approach lies in the balance it creates between control and development. If regulation becomes too restrictive, companies may face higher compliance costs and less opportunity to experiment with emerging technologies. This could slow investment and make it harder for Chinese firms to compete internationally. At the same time, insufficient regulation could create security and social risks that threaten the wider environment in which technological development takes place. 

China therefore has an incentive to regulate enough to preserve political and social control, while avoiding restrictions that could threaten its position in the global AI race. Regulation provides conditions under which technological development can continue while remaining within politically acceptable limits; this is particularly important because China’s economic strategy increasingly depends on technological autonomy. The World Bank says that China needs faster productivity growth as its workforce shrinks and its earlier investment-led growth model becomes less effective. This creates an economic incentive for China to develop technologies that can increase output without requiring the same expansion of labour that supported previous growth. The importance of productivity is also visible in China’s wider economy. In 2025, China’s GDP grew by 5.0% while overall labour productivity increased by 6.1%. Manufacturing value added by 6.1% and high-tech manufacturing value added by 9.4%. These figures do not demonstrate that AI directly caused the growth, but they show the industrial environment into which AI is being introduced: an economy already undergoing technological and industrial upgrading. AI therefore has the potential to reinforce an existing process of productivity growth, rather than creating an entirely separate economic sector. 

2.3 CHINA AND THE USA: DIFFERENT SYSTEMS, SIMILAR COMPETITION

The 2026 AI Index shows the scale of America’s advantage in private investment. In 2025, investment in the United States was about $285.9 billion, compared with $12.4 billion in China, meaning America had more than 23 times as much AI funding (Stanford HAI, 2026). However, Stanford also notes that investment figures may understate China’s total AI spending (Stanford HAI, 2026). The difference therefore raises an important question about China’s economic model: if China attracts substantially less AI investment than the United States, what allows it to remain competitive? 

China’s answer relies less on investment alone and more on the interaction between government-supported development and large-scale adoption. Rather than needing to match the United States in every category of frontier AI investment, China can use its existing economic base to commercialise AI across a much larger range of activities. BNP Paribas similarly identifies innovation, AI and technological autonomy as central to China’s development strategy, with the aim of generating productivity gains while strengthening its industrial position. The two countries therefore represent different economic pathways to AI development: the United States has a stronger position in private capital and frontier innovation, while China can potentially derive greater value from the diffusion of AI throughout its existing productive economy. 

China’s economic advantage is clearest in manufacturing. It combines smart software with one of the world’s largest production bases, allowing AI technologies to spread across thousands of factories instead of being concentrated within a small number of companies. China has more than 30,000 basic smart factories, about 1,200 advanced factories and 230 excellence-level factories across all 31 regions, covering more than 80% of manufacturing areas (Simpson, 2026). According to China’s Ministry of Industry and Information Technology (2026), the highest-performing factories achieved 28.4% shorter development cycles, 22.3% higher productivity, 50.2% fewer defects and 20.4% lower carbon emissions. These figures demonstrate the economic significance of AI adoption: its value is not limited to the creation of AI companies, but can appear through measurable improvements in the efficiency of existing production. 

These improvements are made possible by the different ways AI and automation are being used across factories. Computer vision can spot production problems, predictive systems can forecast machine failures, virtual models can test factory plans and robots can complete tasks with less human assistance. China added about 295,000 robots in 2024, accounting for 54% of global demand, and now has more than two million factory robots, around 4.5 times more than Japan. Automation allows factories to increase production with fewer workers by taking over repetitive and time-consuming tasks. The International Labour Organization’s research on China examines AI adoption through the cost of performing different job tasks and finds that tasks involving strength and information-processing are more likely to be replaced earlier, while tasks involving solution generation are less likely to be substituted in the short term. This suggests that AI’s economic impact will depend on how workers and firms reorganise around changing tasks. AI can therefore change both the quantity and composition of labour required, making productivity gains dependent partly on whether workers can move towards tasks that complement rather than compete with AI. 

China’s AI economy is also becoming increasingly connected to the wider digital economy. Core digital-economy industries accounted for approximately 10.5% of China’s GDP in 2024, creating an existing ecosystem through which AI applications can be commercialised and adopted. The importance of applications within China’s AI industry supports this broader pattern: the application segment represented approximately 55% of the AI industry chain in 2025 and grew by 22% year-on-year. This means that China’s economic advantage may come not simply from producing AI systems, but from connecting them to an already extensive digital and industrial economy. The larger this ecosystem becomes, the greater the potential for AI to move from individual technological applications into economy-wide productivity gains. 

The economic effects can also extend upstream. In the first quarter of 2026, digital-product manufacturing increased by 11.2% year-on-year, specialised electronic materials manufacturing increased by 32.5%, and integrated-circuit manufacturing increased by 49.4%. These figures should not be treated as evidence that AI alone caused this growth. Instead, they suggest that expanding digital and AI-related activity can produce spillover effects into the technologies and supply chains needed to support it. AI adoption can therefore also create demand for the hardware, materials and infrastructure required to sustain them. 

This broader economic strategy is important because China’s earlier growth model relied heavily on investment and export-oriented manufacturing, but the World Bank notes that this model has reached limits and that stronger productivity growth is needed as the labour force declines. AI therefore offers China a potential way to increase the productivity of an already large industrial base rather than simply expanding that base further. Its economic importance lies precisely in this possibility: AI can allow China to seek greater output from an economy facing increasing limits on the expansion of labour and traditional investment.

2.4 CHINA’S INTERNATIONAL POSITION

The economic implications of this strategy can eventually extend beyond China’s borders. Artificial intelligence chips and cloud platforms are being used to advance not only commercial interests but also political ones. The restrictions on Chinese technology access to other countries can have the effect of both limiting their technological capabilities and motivating their domestic development. In other words, China seeks to increase both its competitive edge and capitalise on its position to influence international AI governance. China’s economic scale provides a potential basis for this influence. Its AI industry exceeded 1.2 trillion yuan in 2025 and included more than 6,600 AI companies by June 2026, while its application segment was already the largest part of the AI industry chain. If these capabilities continue to expand across manufacturing, digital services, infrastructure and other sectors, China’s influence could extend beyond the production of individual AI models and into the technologies and systems used by other economies. 

The pervasiveness of China’s manufacturing base means that these technologies can go beyond a few technology-intensive sectors and become embedded in broader industrial processes. At the same time, AI-driven improvements to production can generate valuable data that can be used to make AI models themselves more capable. Meanwhile, advances made in China’s domestic semiconductor industry and broader information technology infrastructure can reduce the country’s technological dependence and provide it with alternative, self-made solutions. Technological autonomy is therefore economically significant, as well as strategic: reducing dependence on critical foreign technologies can help protect the continuity of domestic AI development when external restrictions or supply disruptions occur. China’s broader economic conditions make this transition particularly significant. BNP Paribas notes that China’s growth model continues to face weak domestic demand and excess production capacity, while exports remain an important source of growth. At the same time, its industrial policy places AI and technological autonomy at the centre of efforts to generate productivity and economic growth. AI therefore provides an opportunity to strengthen the productivity and competitiveness of existing industries at a time when China needs new sources of economic growth. Rather than replacing China’s existing industrial model, AI may therefore become a mechanism through which that model is upgraded. 

In short, China is positioned to use AI not merely to enter an entirely new sphere of economic activity but to transform the economy-wide production process and engender broader shifts in the development of its industrial base. Its success in 2026 will be determined not by its ability to rival the rest of the world in every domain and technology but rather by its ability to use AI to drive broader productivity gains, industrial leapfrogging and economic growth. This gives China a distinctive economic pathway: frontier innovation provides capability, but widespread industrial adoption determines how much economic value that capability can produce. If China can convert AI adoption into sustained productivity gains while reducing dependence on critical foreign technologies, it could strengthen the economic foundations from which its wider technological and international influence develops. 

3. A Race to Regulate Innovation

3.1 GLOBAL REGULATION AND EXPANSION

The rapid development of artificial intelligence poses a recurring challenge for governments seeking its regulation: the race to produce coherent law while keeping up with constant innovation. States have long addressed issues relevant to AI through rules on data protection, cybersecurity, privacy and automated decision making, but specific frameworks are only recently emerging. For instance, the OECD adopted its AI Principles in 2019 (OECD, n.d.), while the European Union proposed its AI Act in 2021 although it only entered into force as late as August 2024 (European Commission, 2026).

The gap between technological development and regulation is in part structural. AI systems evolve through rapid cycles of research, commercialisation and adoption, whereas legislation requires far more extensive consultation, negotiation and implementation. Consequently, new systems can reach widespread use before governments have fully assessed their implications. The emergence of generative AI is a key example: governments were already developing rules for data and algorithmic systems when publicly accessible tools capable of producing extensive text, images, audio and video revolutionised the regulation landscape within an incredibly short time period. Governments were then faced with a key issue: regulation that arrives too late gives may to misinformation, privacy violations and other potential threats, while excessively restrictive regulation might get in the way of growing commercial development. This is made especially clear in states looking to gain global leadership in the market, as regulation might slow emerging competitiveness.

3.2 CHINA’S UNIQUE STRATEGY

China’s approach to this challenge is intriguing as it seeks to balance regulation with a national strategy for establishing market leadership. In 2017, the State Council issued the New Generation Artificial Intelligence Development Plan, which identified AI as a strategic opportunity and set the goal of placing China in a leading role in regards to AI innovation by 2030 (State Council, 2017). Moreover, the plan also reflected the intention of developing AI legislation, regulatory mechanisms, ethical norms and security-assessment systems (State Council, 2017). 

Consequently, China imposed a series of regulatory measures. The Algorithm Provisions, beginning in March 2022, regulate online recommendation algorithms and address transparency, user rights, data security and platform responsibilities (CAC, 2021). The Deep Synthesis Provisions, introduced in January 2023, extended the same approach to technologies capable of generating or altering text, images, audio and video with a concrete focus on impersonation and misinformation (CAC, 2022). In August of 2023, another significant step was taken with the Interim Measures for the Management of Generative Artificial Intelligence Services, seeking to regulate publicly accessible generative AI services and address data, personal information, illegal content, security and provider responsibility. From September 2025, the Measures for the Labelling of AI-Generated Synthetic Content requires AI-generated material to contain both visible and technical markers, allowing users to directly identify fake generated content and trace its origins. China has therefore not relied on a single comprehensive AI statute, instead opting for the development of its regulations incrementally around specific technologies as they acquire social, commercial or political significance.

China’s regulatory system reflects the leadership’s goal of balancing control and technological acceleration as an effort to surpass US competition. They have come to understand excessive regulation would increase compliance costs and limit experimentation, fundamentally weakening Chinese players relative to foreign competitors, but insufficient regulation would see to security and social risks that threaten the state’s broader political interests. Considerable flexibility is again provided by the system structure as it allows authorities to establish rules for particular applications such as recommendation algorithms, deep synthesis or generative AI without immediately imposing identical obligations on other emerging technologies. Regulation can consequently evolve together with technological capabilities and associated risks change.

3.3 CHINA AND THE USA: CONTRASTING APPROACHES

The American legislation landscape has recently shifted in sync with leadership changes. The Biden administration’s 2023 Executive Order 14110 prioritised safe, secure and trustworthy AI. However, In January of 2025, the Trump administration shifted national priorities in favour of adopting a policy oriented towards keeping US leadership on the global stage by erasing existing innovation barriers. Now, the fundamental difference between countries is implementation. China’s political system allows central authorities to establish nationwide requirements through administrative regulation, while the US approach has traditionally been more fragmented, requiring a combination of federal action, agency guidance, state legislation and private-sector standards. From the Chinese perspective, US policy poses the same fundamental dilemma of protecting national interests without imposing restrictions that slow technological competitiveness, consequently locking both countries in a race for market dominance.

3.4 FUTURE IMPACT

The Chinese government has made clear its intentions of extending its influence to international rules and norms surrounding AI. In 2023, the Global AI Governance Initiative was launched, which called for international cooperation, respect for national sovereignty, greater participation by developing countries and international AI governance standards. This attempt shows how competition in AI no longer only concerns which state develops the most capable models but defines legitimate uses and establishes standards, subsequently shaping international governance. If Chinese regulatory standards or governance principles gain wide acceptance, China’s influence would extend beyond its technological production and infrastructure. With this, China can present its approach as an alternative to an international order predominantly shaped by Western powers. It can portray itself as a state with practical experience in governing the emerging AI technology, with the hope of promoting its preferred principles beyond its national borders. Whether competing powers will adopt or accept their principles is yet to be seen.

4. The Global Power Stage

4.1 CHINA’S DEVELOPMENT AND INTERNATIONAL SPREAD OF AI

Artificial intelligence is becoming an increasingly important part of global power. However, AI leadership cannot only be measured by which country produces the most advanced models. It also depends on research, investment, infrastructure, manufacturing, industrial use and the ability to make the AI technology itself available to other countries.

As of August 2026, the United States has been strong within developing the most advanced AI models, primarily funded by investment in the private sector, while China has major strengths in research, patents, manufacturing and using AI industrially, with heavy investment from the state (Stanford HAI, 2025-26). The United States relies heavily on private companies, while the Chinese government plays a much larger role in supporting the country’s technology sector. 

4.2 CHINA AND THE USA: STRENGTHS AND WEAKNESSES

The AI race is dependent on a huge international system in which different countries control different parts of the technology. 

The United States currently has major advantages in private investment, advanced AI models and computing infrastructure. In 2025, American private AI investment reached $285.9 billion, compared with $12.4 billion in China, while American institutions produced 59 notable AI models compared with 35 from China (Stanford HAI, 2026). However, the difference in model performance is now much smaller. By March 2026, the leading American model was only 2.7% ahead of the leading Chinese model on some community benchmarks, suggesting that China is rapidly narrowing the gap in AI development despite spending far less private money on AI (Stanford HAI, 2026). 

China’s strengths are different. It leads in AI publication volumes, citations and total patent grants, while its large industrial sector base gives it a major advantage in applying AI at large quantities. In 2024, China accounted for 54% of all industrial robot installations worldwide, more than the rest of the world combined (Stanford HAI, 2026). This is significant because AI is increasingly moving beyond software. As AI becomes integrated into physical systems such as robots, factories and logistics, China’s existing manufacturing capacity could allow it to deploy AI at a scale that countries with weaker industrial bases may struggle to match.

The United States and China both have important weaknesses because neither controls the entire AI supply chain. One of the most important examples is computer chips. Almost all of the world’s most advanced AI chips are fabricated by TSMC in Taiwan (Stanford HAI, 2026), meaning that a crucial part of the AI industry depends on a supply chain outside both the US and China. A major disruption to Taiwanese semiconductor production could therefore affect several AI powers simultaneously. The United States could have trouble getting enough advanced chips for companies such as Nvidia, Microsoft and Google. China would also face problems as it relies on the same wider Asian supply chains. Countries such as South Korea, Japan and the Netherlands could also be affected because of their roles in semiconductor materials, equipment and components. China faces an additional weakness in advanced semiconductor technology. American restrictions on advanced AI chips and semiconductor manufacturing equipment have limited China’s access to the technology needed for the highest level of AI development. At the same time, these restrictions have encouraged China to develop its own chips and reduce its dependence on foreign technology (Ministry of Industry and Information Technology, 2026). China has therefore not been removed from the semiconductor system, but it remains more restricted than the US at the most advanced end of the supply chain. 

The result is a complicated balance of power. The United States is particularly strong in advanced AI models investment and commuting; China is particularly strong in manufacturing, research and putting AI into practical use. Both, however, depend on other countries. Countries such as Taiwan, South Korea, Japan and the Netherlands can have a lot of influence even though they are not AI superpowers themselves. As AI becomes more dependent on chips, electricity, manufacturing and international infrastructure, control over these systems could become almost as important as control over the AI models themselves.

4.3 TECHNOLOGY AS A POLITICAL INFLUENCE

Having advanced AI does not automatically create geopolitical power. The technology must first reach other countries before it can create influence. The most important question is therefore how AI capability can be converted into international influence. 

One possible route is through affordability and access. If Chinese companies can provide effective AI models, cloud services, robotics, data-centre technology and other AI systems at significantly lower prices than competing alternatives, countries that cannot afford to develop these technologies themselves may have a strong incentive to adopt them. This could be especially important for developing countries, where building advanced AI infrastructure from scratch could be extremely expensive. China’s own policies support this international approach. In its 2025 Global AI Governance Action Plan, China called for wider international cooperation, development of digital infrastructure and support for countries in the Global South to access and use AI (Ministry of Foreign Affairs of the People’s Republic of China, 2025). China has therefore already made international AI cooperation part of its foreign policy. 

Building infrastructure can create long-term dependence and influence. AI requires a lot of infrastructure in order to operate, including data centres, computing power, electricity, networks, chips and technical expertise. If another country’s economy or public services become heavily dependent on another country’s technology, replacing it later could become very expensive and difficult. This creates the possibility of technological dependence. However, dependence does not automatically mean political control. Countries can use several suppliers and may deliberately avoid becoming dependent on one country.

4.4 AI AND DEVELOPING COUNTRIES

AI has the potential to reduce development gaps by giving countries access to technologies they would otherwise lack the resources to develop, but it could also widen those gaps if technological and economic power becomes concentrated among a small number of states and companies. The OECD (2025) argues that AI has the potential to increase productivity, but that its effects may differ greatly between countries due to unequal access to infrastructure, skills and other supporting technologies. This creates two possible outcomes. 

In the first, AI becomes a tool that allows less developed countries to catch up more quickly. Chinese companies could contribute to this process if they provide relatively affordable AI systems, infrastructure and industrial technology. China’s 2025 Global AI Governance Action Plan specifically supports greater access to AI infrastructure in developing countries (Ministry of Foreign Affairs of the People’s Republic of China, 2025). The second outcome is that AI could increase existing inequalities. Countries without sufficient electricity, computing power, skilled workers or funds may struggle to benefit from such advanced AI. They could become users of technology developed elsewhere rather than producers of it. In this situation, AI could create a new form of technological dependence. The outcome is therefore not yet clear. China’s role could be important because it may provide developing countries with an alternative to technology from the United States and other Western countries. However, the existence of an alternative does not necessarily mean that countries will become politically aligned with China. Many developing countries may instead use competition between suppliers to increase their own freedom of choice.

4.5 A WORLD WITH SEVERAL AI POWERS

The future of AI power may not produce one clear winner; instead, countries that control specific parts of the AI system could gain influence without even developing the world’s strongest models. This creates the possibility of a more multipolar control over AI. The European Union is developing its own AI infrastructure and regulatory framework, while India, Japan, South Korea and the Gulf States are investing in domestic AI capabilities and infrastructure (Access Partnership, 2026; GINC, 2025). These countries can work with both US and Chinese technology, giving them the ability to avoid complete dependence on either side. 

For China, this could create both an opportunity and a limitation. If countries choose Chinese technology alongside American or European systems, China could expand its international influence without needing to dominate the entire AI industry. However, if countries deliberately diversify their suppliers, China’s ability to turn technological strength into political influence may remain limited. The decisions of middle powers could therefore become an important factor in determining China’s future global position.

4.6 LIMITS TO CHINA’S RISE

AI has the potential to strengthen China’s position as a global power, but several factors could limit this. China remains dependent on international supply chains for important technologies, particularly at the most advanced stages of semiconductor production. It must also compete with American, European, Japanese, South Korean and other technology companies for international markets. Some governments may be cautious about depending heavily on Chinese technology because of concerns about data, security or national control. However, these limitations also apply in different forms to the United States. The US depends on international semiconductor production, foreign manufacturing and global supply chains, while its AI industry requires enormous amounts of capital, energy and computing infrastructure. Neither country therefore has complete technological independence. 

The more important question is how each country manages these dependencies. If China can reduce its semiconductor dependence while expanding the international use of its AI systems, its technological capabilities could translate into greater global influence. If the US maintains its lead in frontier models while strengthening its supply chains and international partnerships, it may preserve its current position. The balance between these outcomes will depend not only on technological progress, but on how other countries choose to participate in the emerging AI system.

AI will not necessarily make China the world’s most powerful country. What it may do is change what power itself means. In these emerging times where AI is becoming an increasingly important topic, influence may depend less on developing the most advanced models than on controlling the infrastructure, industries and standards through which those models are used. China’s ability to connect AI with manufacturing, research, state investment and international technology exports could therefore strengthen its global position even if it does not overtake the United States in every area of AI. However, technological reach does not automatically produce political control. China’s influence will depend on whether other countries become genuinely dependent on its systems or simply use them alongside American, European and national alternatives. The more countries diversify their partnerships, the harder it will be for any single power to turn technological strength into long lasting control. AI may therefore create not one dominant power, but a more complex distribution of power in which influence belongs to those able to shape how technology is used, connected and governed.

The most important consequence of China’s AI development may be that power becomes less visible. It may no longer rest only in armies, markets or territory, but in the systems that keep economies, governments and societies functioning. If the future belongs to the countries whose technology others cannot easily function without, then the question is not who will build the most intelligent AI, but who will shape the world that comes to depend on it?

Conclusion

As China’s artificial intelligence grows to showcase new capabilities the nation has demonstrated the fact that the most advanced AI system is not necessary to succeed in the AI arms race. The strength of China’s large language models comes from what the nation does when its AIs come into existence. China has been able to seamlessly integrate its AI into manufacturing, infrastructure, robotics, public services, economy, military, all the while China’s AI has expanded beyond its borders. The real question of this matter lies not in who has the strongest artificial intelligence but rather who is able to use its AI most efficiently. 

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