 Challenges and Pathways for China’s AI DevelopmentC I C C Research CICC Global Institute ()
Chapter Chapter 7 in The AI Economy, 2026, pp 219-265 from Springer Abstract: Abstract China, the US, and Europe jointly led the initial wave of AI innovation. China’s progress has been driven by policy support, a vast domestic market, and a talent dividend resulting from large-scale investment in IT education. However, in the era of AI foundation models, the gap between China and the US did not narrow in the short term, with the US holding a clear advantage, as is shown by the four major elements underpinning the AI industry. Regarding foundation models, the US surpasses China in both the quantity and quality of models. In terms of talent, while both China and the US rank highly in the number of skilled individuals, the US has a more advanced pool of high-level experts. In terms of compute power, China lags the US in computing chips and ecosystems, and the gap in intelligent computing has further widened under ongoing friction. In terms of data, although China ranks second globally in terms of data volume, the quality of data remains behind that of the US. These disparities have resulted in different development trajectories: China has been actively expanding the AI application deployment, while the US has been focusing on pushing the boundaries of model capabilities. To provide a more comprehensive comparison of the potential of both countries, this chapter also constructs an index for the new round of AI development, encompassing both R&D and applications. Looking ahead, in terms of compute power, sustained engineering optimization has enabled leading computing chip companies worldwide to achieve strong compatibility with mainstream open-source foundation models. This reinforces China’s confidence in the development of domestic computing chips. Moreover, as traditional chip architectures encounter bottlenecks, the next generation of computing architecture may allow China to accelerate its catch-up with the US. At the model level, current foundation models broadly follow scaling laws. Nevertheless, regardless of whether these laws have an ultimate limit, China should actively pursue the development of its own independent foundation models. Such efforts not only embodies technological autonomy and industrial upgrading, but they are also key to safeguarding national security in the AI domain and driving the steady, sustainable growth of the technology-driven economy. AI applications based on foundation models are still in the early stages of commercialization. Within China’s domestic market, a diverse range of targeting both individuals and enterprises is flourishing. The product experience accumulated during the mobile internet era, combined with China’s large and comprehensive industrial base, is expected to support the country in leading future AI innovation. In the field of AI terminals, with its world-leading manufacturing capacity and brand influence, China’s consumer electronics industry may catch up or even take the lead in the new AI era. The large domestic market, strong policy support, and the talent dividend accumulated in the internet era are major advantages for China’s AI development, which is expected to help the country catch up or surpass competitors in compute power, models, and applications. Finally, while striving to catch up with AI technologies to boost productivity, China should also refine AI-related economic and trade rules to optimize production relations. First, it is crucial to unleash the creativity of large technology companies and other key entities, by encouraging their international expansion and providing AI trade frameworks that align with business needs. Second, considering the needs of enterprises, national security, and other factors holistically, China should consolidate AI-related provisions within mechanisms it leads, such as RCEP, by institutionalizing rules on cross-border data flows, personal information protection, and other relevant areas. Finally, multilateral platforms such as the WTO should adapt to new trends in AI development—covering tariffs, intellectual property rights, and trade statistics—laying the groundwork for addressing fairness and security issues in AI and unlocking the potential for international economic and trade cooperation in this field. Date: 2026 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-92-3270-3_7 Ordering information: This item can be ordered from DOI: 10.1007/978-981-92-3270-3_7 Access Statistics for this chapter More chapters in Springer Books from Springer |
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