China Warns Against 'Disorderly Competition' in Booming AI Race

Reviewed byNidhi Govil

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China's top economic planner signals a move to prevent excess competition in the AI sector, aiming to avoid wasteful investments while still promoting growth and innovation.

China's Strategic Approach to AI Development

China has announced plans to prevent excessive competition in its rapidly growing artificial intelligence (AI) sector, signaling a strategic shift in how the country aims to develop this critical technology. The move comes as Beijing seeks to balance its ambition to make AI a key pillar of the economy with the need to avoid wasteful investments and market instability

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Source: Economic Times

Source: Economic Times

Zhang Kailin, an official from the National Development and Reform Commission (NDRC), China's top economic planning body, stated that the government will encourage provinces to develop AI in a coordinated and complementary manner. The goal is to leverage distinctive regional strengths to foster growth without duplicating efforts

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Avoiding 'Disorderly Competition'

"We will resolutely avoid disorderly competition or a 'follow-the-crowd' approach," Zhang emphasized during a press briefing. He stressed that AI development should be based on local advantages, resources, and industrial foundations

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This stance echoes recent cautions from Chinese President Xi Jinping against excessive local government investment in AI. The government's concern stems from experiences in other emerging industries, such as electric vehicles, where overcapacity has contributed to deflationary pressures

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Balancing Growth and Innovation

Source: Bloomberg Business

Source: Bloomberg Business

While aiming to curb excess competition, China remains committed to accelerating AI development. The government recently published an action plan to boost AI progress, application, and governance. The NDRC has pledged better AI planning at the national level and increased support for private companies to nurture more "dark horses" for innovation

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This approach has already yielded results, with Chinese startups like DeepSeek gaining global prominence. The company's powerful yet cost-effective AI model has spurred a domestic AI frenzy, exemplifying the kind of innovation China seeks to encourage

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Infrastructure and Investment

The government's strategy extends beyond just AI development. To bolster economic growth, authorities are setting minimum private shareholding requirements for infrastructure projects in sectors such as railways, nuclear power, and oil pipelines. This move aims to broaden private investors' access to major national ventures

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Additionally, policymakers are considering increasing central government spending on projects related to people's well-being. This shift aims to ease the burden on debt-strapped local governments and boost long-term consumption

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Global Competition and Future Outlook

Source: Fortune

Source: Fortune

China's strategic approach to AI development comes amid intense global competition, particularly with the United States. By identifying AI as a critical growth driver and area of competition, China has spurred both public and private investment in the sector

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As the AI race continues to heat up, China's balanced approach of promoting innovation while avoiding market instability could set a new standard for technological development. The success of this strategy will likely have far-reaching implications for the global AI landscape and economic competition between major powers.

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