China closes AI gap to 2.7% as US-China competition for Asia's AI market intensifies

The U.S. wants Asia to use its AI -- but China dominates cheaper models

Chinese companies have ramped up cheaper alternatives to American AI, while Beijing promotes its tech internationally. BEIJING -- The artificial intelligence race between the U.S. and China is heating up in the world's largest continent: Asia. "The American strategy is to stop China from becoming the leading AI supplier for the rest of Asia ... and frankly the whole world," said Gary Dvorchak, managing director at The Blueshirt Group. While China's alternatives are cheaper, he pointed out the U.S. currently offers a more complete solution from chips to AI models. But the U.S. sales challenge was apparent at the Asia-Pacific Economic Cooperation "Digital Weeks" in the southwestern Chinese city of Chengdu this month. The U.S. left few public traces of its involvement in the event, despite a U.S. official and a U.S. business representative to APEC both highlighting AI in promoting the Chengdu event earlier this year. The subdued U.S. presence comes after Anthropic flip-flopped on its Fable AI model release due to abrupt U.S. policy changes, and new Chinese AI models have recently launched similar capabilities for far less. In contrast, last summer at the first APEC AI meeting in South Korea, Michael Kratsios, President Donald Trump's chief science and technology policy advisor, highlighted the U.S. AI Action Plan and the establishment of the American AI Exports Program, according to a White House transcript of his remarks. However, earlier this month Politico cited three former officials in reporting the Commerce Department has so far received a less-than-expected 78 applications for the American AI Exports Program. And on July 24 at an APEC High-level Forum on AI organized by China's cybersecurity regulator, Bill Guidera, deputy under secretary for innovation and engagement at the U.S. Department of Commerce, still focused on the AI exports program, according to materials reviewed by CNBC. He called broadly for Asia-Pacific partnerships, noting buyers can acquire a full U.S. tech stack or just portions through the exports program. "It is the brilliant design that shows the strength, security and capability of U.S. AI," Guidera said. The Commerce Department's International Trade Administration confirmed in a July 29 social media post that Guidera spoke in Chengdu. When asked about the Politico report, an ITA spokesperson said the volume of applications "exceeded our expectations." The White House did not respond to a CNBC request for comment. American business showcases were also limited. Google and Meta were the only U.S. companies that CNBC noted had booths at APEC as of July 23, among booths for Thailand and China, which were mostly Chengdu-based companies. The two U.S. companies respectively emphasized molecular AI system AlphaFold and AI applications for small businesses, rather than large language models. Google's government affairs vice president, Wilson L. White, only made passing references to Gemini in a speech on July 24, while Tencent Vice President Cai Guangzhong took the stage after White to emphasize growing adoption of its Hunyuan LLM and a cloud project in Thailand. China is hosting APEC this year, which comes at a critical moment of U.S.-China tensions and tech rivalry. Beijing has doubled down on the opportunity to emphasize its AI capabilities, which are mostly open-source versus largely closed U.S. models. Chinese President Xi Jinping announced at the World AI Conference in Shanghai on July 17 that China would provide developing countries with 5,000 opportunities in AI training and seminars, while developing AI application cooperation centers with Southeast Asia and other regions. Beijing then sent a high-ranking official, Vice Premier Zhang Guoqing, to advocate for developing tech standards with other Asia Pacific nations at the minister-level APEC Digital Weeks on July 23. Later that day, the 21 member economies, including the U.S., agreed to back open-source AI with "strong security." "The 'endorsement' of open-source models with strong security assurance gives China's open-weight strategy greater regional legitimacy, especially across emerging Asian economies where deployment cost and technological sovereignty are major considerations," said Wei Sun, principal analyst, artificial intelligence, Counterpoint Research. But rather than a world divided into spheres of U.S. and Chinese AI, Sun expects a combination of the tech, especially in Asia. With more than 1,300 living languages in Southeast Asia alone, just using a U.S. or Chinese AI model isn't as straightforward as it looks. Governments in Asia and elsewhere are spending "billions" on AI systems tailored to local languages, according to privately funded startup Votee AI. CEO Pak-Sun Ting said he is working with at least five governments, including two in Southeast Asia, and that the startup is already making well over $10 million in revenue a year. Ting said entities in Southeast Asia tend to use Nvidia chips, especially for AI training, but may use other chips for running models. He noted Votee's open-source model for Cantonese speakers was developed partly using Alibaba's open-source Qwen model. AI's ability to generate economic returns remains critical regardless of origin. "While the U.S. and China are fiercely competing in AI technology and diplomacy through distinct approaches, they ultimately cannot fully decouple from one another," said Yue Su, principal economist at the Economist Intelligence Unit. She pointed out the light U.S. presence at APEC wasn't that surprising given other events, such as a San Francisco AI Summit on July 24. South Korea's tech ministry organized the event, where President Lee Jae-myung sought to build on Korean chip and AI megaprojects by meeting with U.S. frontier AI model leaders Sam Altman of OpenAI, Dario Amodei of Anthropic and Jensen Huang of Nvidia. -- CNBC's Jenny Lee contributed to this report. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.

As the West mulls slowing AI down, will China follow suit?

Employees at OpenAI, Anthropic and other top labs want Washington to help pace the AI race. China has spent the year closing the gap, building a rival governance body and betting on open-source models instead. While Silicon Valley debates whether to slow down, Beijing has so far shown no sign of wanting to. More than 1,100 employees at some of the world's most powerful AI companies signed a petition urging the US government to help "pace" the industry, following the shocking revelation last week that an OpenAI model autonomously hacked into rival platform Hugging Face's servers to cheat on an evaluation. It is a striking scene: some of Silicon Valley's most competitive companies, asking to be reined in. But the more interesting question may not be whether Washington listens -- it is whether Beijing will, particularly given that Chinese frontier models are now performing almost on par with their American and Western counterparts, while also being offered as open-source and open-weight alternatives. The gap that is vanishing China has spent the past three years closing a lead that once looked insurmountable. Stanford University's 2026 AI Index found the performance gap between the top US and Chinese models has shrunk from more than 1,300 points in May 2023 to just 39 points by March 2026, with the leading US model, Anthropic's Claude Opus 4.6, ahead of China's Dola-Seed 2.0 by only 2.7%. China has also overtaken the US on AI research citations, patents and the rollout of robotics. That is not the backdrop against which a country typically agrees to slow down. Rather than waiting for an invitation to join a Western-led pacing effort, China has been busy building an alternative one. Earlier in July, Beijing launched the World Artificial Intelligence Cooperation Organization in Shanghai, a body whose 29 founding members include Russia and Brazil but notably exclude the US, UK and EU, in what observers describe as a deliberate move to establish a parallel, China-led track for global AI governance. But China has not entirely shunned Western safety cooperation. Chinese officials have signed the Bletchley Declaration -- the world's first international agreement on AI safety, backed by 28 countries and the EU at the UK's inaugural AI Safety Summit in November 2023 -- and joined intergovernmental safety dialogues with Washington, as well as co-sponsoring a UN resolution on AI safety. But that cooperation has run in parallel with, not instead of, its drive to build independent standards and alliances of its own. Open by default China's public posture, meanwhile, leans firmly towards openness rather than restraint. China's AI industry has consistently pursued an open-source, open-architecture approach, arguing this benefits global AI development. Open-source and open-weight models are published for anyone to download, inspect and adapt, unlike closed models such as ChatGPT, which can only be accessed through the company's own paid interface. In tech terms, open-weight and open-source models are like publishing a recipe for a dish in full, including every ingredient and measurement, so anyone can cook the dish themselves at home. Closed models, such as ChatGPT, are more like ordering that same dish at a restaurant, meaning you can enjoy the result, but the kitchen keeps its recipe to itself, and you can only get it by going through the restaurant's own front door. Nvidia's chief executive, Jensen Huang, made a similar case for keeping models open. Openness improves safety rather than undermining it, he argued, since outside researchers can audit models, spot vulnerabilities and build defences. A world with only one dominant model and a single point of failure, he said, would be extremely fragile. Huang's voice carries particular weight since Nvidia designs roughly 90% of the specialised graphics processors, or GPUs, used worldwide for artificial intelligence and machine learning. Beijing's own answer At the World AI Conference in Shanghai on 17 July, President Xi Jinping unveiled the World Artificial Intelligence Cooperation Organization, a new intergovernmental body headquartered in the city. Twenty-nine countries signed the founding document, including Russia, Kazakhstan, Laos, Pakistan and Indonesia, with UN Secretary-General António Guterres in attendance, though no major Western democracy joined. Xi called the organisation "an important milestone in the history of AI development" and pledged 5,000 AI training opportunities for developing countries over the next five years, framing it as Beijing answering "the call of the Global South" for a greater say in setting global AI rules. At the same conference, Xi urged countries to embrace what he called the "historic opportunity" of open-source AI. For Beijing, the new body is more than a diplomatic gesture. China is placing its headquarters in Shanghai, staffing it from Chinese government ministries, and opening founding membership to states well outside the existing Western-led summit process, which has so far been hosted by the UK, South Korea, France and India. At home, meanwhile, China continues to run its own, separate system of control. Chinese AI models must clear government safety and content reviews before release, though the rules do not extend to changes made afterwards, and many Chinese labs, lacking the computing power for extensive safety training, have focused instead on building raw capability, according to industry observers. Washington, for its part, seems to also be set on dominating the AI race. A Reuters exclusive last week revealed that US Secretary of State Marco Rubio had instructed American diplomats, in a cable dated 16 July, to push back against talk of a US technology "kill switch" and to counter "AI sovereignty" arguments gaining traction in Europe. The cable told diplomats to advertise American AI products as the best tools available and to describe efforts to build rival AI systems from the ground up as a waste of time and resources.