DeepSeek's AI Breakthrough: China's Leap Forward and the West's Response

China's AI leap demands a Manhattan Project-level Western response

January's wave of artificial intelligence (AI) announcements from China comes as a warning shot to the world. Beijing is moving at an unprecedented pace, transforming AI into a tool of societal influence, control, and dominance. While Western countries, including Australia, watch from the sidelines, China is laying the groundwork to dictate the future of the most transformative technology humanity has ever created. This isn't hyperbole. This isn't just another revolution like the steam engine or even the internet. Before diving into Australia's AI challenges - and those faced by the West as a whole - it's crucial to first understand the magnitude of China's AI achievements. To do that, we must discuss DeepSeek, a Chinese AI company that has taken the tech world by surprise. This cutting-edge startup, headquartered in Hangzhou, a city in eastern China, is already competing with the biggest names in Silicon Valley. Its flagship product, DeepSeek-V3, is an advanced Large Language Model (LLM) - a type of AI that processes and generates human-like language. These models are behind tools like ChatGPT, which can write essays, generate code and even offer legal or medical advice. But what makes DeepSeek stand out is not just its capabilities - it's how much it's achieved with so little. While American companies like OpenAI and Google pour hundreds of millions into developing their AI models, DeepSeek built its highly advanced system on a reported budget of just $5.5 million, approximately $8.8 million AUD. Despite the shoestring funding, its technology has already outperformed some of the most sophisticated Western models. Let that sink in for a minute. This raises a critical and unsettling question: If China can achieve this with a fraction of the resources, what will happen when Beijing inevitably pumps billions into projects like this? DeepSeek offers a glimpse into China's broader ambitions for AI. For context, in China, companies are not independent entities like the way they are in the West. Every major business, especially those in strategically important sectors like AI, operates under the watchful eye of the Chinese Communist Party (CCP). Many executives and workers are party members and laws like the National Intelligence Law require companies to cooperate with government intelligence efforts. In essence, DeepSeek is a tool in Beijing's arsenal, part of a larger strategy to dominate global technology and influence. The implications are, for lack of a better word, vast. DeepSeek's language models are designed to process and generate text, making them integral to apps, customer service platforms, and even decision-making systems. These models shape how people think, work, and interact. If these systems are embedded in everyday life - whether in businesses, schools, or even government operations - they could subtly manipulate information, push narratives favourable to China and collect vast amounts of data along the way. Every time someone uses a DeepSeek-powered tool, they could unknowingly be feeding data into Beijing's systems - data that isn't just a hypothetical weapon for the future but under China's regime, an inevitability. We've already seen how TikTok has taken over the world. Once dismissed as just another social media app, TikTok has reshaped cultural trends, spread CCP-endorsed propaganda and dramatically shortened attention spans, all while quietly collecting troves of user data. Its influence on younger generations, from shaping identities to dictating what trends gain traction, has become impossible to ignore. Now imagine that same power, not confined to an entertainment platform, but multiplied and weaponised, embedded into AI systems capable of influencing decisions and redefining societal norms on a global scale. When it comes to AI strategy, Australia is stuck in the slow lane. The government's focus on incremental advancements, patchwork investments and outdated regulatory frameworks reflects a failure to grasp the profound stakes of the AI race. While other nations funnel huge sums into research and development, Australia prioritises vague policy initiatives that lack both ambition and urgency. This complacency is particularly concerning given AI's trajectory. Unlike traditional technologies that amplify human ability, AI has the potential to replace human involvement altogether. Entire industries - education, healthcare, agriculture - are poised to be reshaped by systems that are faster, cheaper, and more efficient than their human counterparts. What happens to work, identity, and agency in a world where machines outperform us in every measurable way? And, more critically, what happens when another nation, namely China, controls those systems? It bears emphasising the fact that China isn't merely dabbling in AI - it's set to dominate. With state-backed investments and a strategic roadmap, Beijing has created an ecosystem where companies like Baidu, Tencent, and DeepSeek can push the boundaries of AI innovation. The implications of losing the AI race go beyond innovation. They strike at the heart of freedom itself. AI is fast becoming the ultimate tool for control. If Beijing controls the algorithms that dictate what billions of people see, hear, and believe, then it controls the global narrative. In such a world, dissent could be stifled and entire societies reprogrammed to align with the values of the CCP. Many will argue that Australia's commitment to freedom is faltering and has been for many years. Australia's elected leaders may be flawed, painfully so, but they pale in comparison to Xi Jinping and his cohort. Some might insist they're equally bad, but let's not pretend Canberra operates on the same level of authoritarian control as Beijing. The stakes could not be higher and Australia's response thus far has been tepid. And that's being kind. A fragmented approach to funding research and an embarrassing lack of emphasis on building domestic expertise leaves the nation dangerously exposed. This is more than an issue of economics or innovation - it's a matter of sovereignty. Australia risks becoming a digital colony, dependent on more technologically advanced nations for critical infrastructure, innovation and security. Worse, it leaves itself vulnerable to manipulation by foreign powers that could exploit its technological gaps. This moment calls for more than lukewarm rhetoric or piecemeal reforms. It demands a unified, urgent national effort - a Manhattan Project for AI. The comparison may seem dramatic. But we are standing on the precipice of a significant moment for mankind, with AI poised to reshape the global order in ways that could destabilise entire nations. As I alluded to earlier, AI is not just another technological leap. It's the most profound tool humanity has ever created, capable of reshaping every aspect of our lives. It's a technology that can remove humans from the equation of work, decision-making, and even creativity. Paradoxically, as AI grows more "inhuman", it forces us to confront what it truly means to be human. What values, rights, and freedoms do we want to preserve in a world where intelligence is no longer a uniquely human trait? What will our world look like if China calls the shots?

As DeepSeek upends the AI industry, one group is urging Australia to embrace the opportunity

Recruiting top graduates could stop other countries pulling ahead in artificial intelligence race, tech council says One Australian company has tentatively blocked staff from using the technology, others are scrambling for advice on its cybersecurity implications - while federal government ministers are urging caution. But others have welcomed DeepSeek's arrival, calling for Australia to follow China's lead in developing powerful yet less energy-intensive AI technology. In the days since the Chinese company launched its R1 artificial intelligence model and publicly released its chatbot and app, it has upended the AI industry. Several global industry leaders saw their market values drop after the launch, as DeepSeek showed AI could be developed using a fraction of the cost and processing required to train models such as ChatGPT or Meta's Llama. Its arrival may signal a new industry shift, but for government and business, the effect is unclear. Whereas ChatGPT's 2022 arrival caught governments and businesses by surprise as staff began to try out the new AI technology, at least for the arrival of Deepseek, some had a playbook. A spokesperson for Telstra said the company had "a rigorous process to assess all AI tools, capabilities, and use cases in our business", including a list of approved generative AI tools, and guidelines on how to use them. For now at Telstra, DeepSeek is not allowed. "Our preferred partner is MS Copilot, and we're rolling out 21,000 Copilot for Microsoft 365 licences to our employees." Other companies sought immediate advice on whether DeepSeek should be adopted. Major Australian cybersecurity firm CyberCX's executive director of cyber intelligence, Katherine Mansted, said customers had already approached the company for advice on whether the technology was safe. "That's no surprise, because it seems the whole world has been in a bit of a DeepSeek frenzy - both the economically and market inclined and those with the security lens," Mansted said. CyberCX this week took the unusual step of quickly issuing advice recommending organisations, including government departments and those storing sensitive information, strongly consider restricting access to DeepSeek on work devices. "We know that there is no proactive policy here from government ... We've been down this road before," Mansted said. "We've had debates about TikTok, about Chinese surveillance cameras, about Huawei in the telco network, and we always act after the fact, not before the fact ... Here, particularly because the threats are around compromise of sensitive information, in terms of any information that you put into this AI assistant: it's going straight to China. "We thought we needed to act faster this time." Under federal AI policy implemented in September 2024, agencies have until the end of February 2025 to publish transparency documents about their use of AI. But understanding who makes decisions on the specific use of DeepSeek in the federal government has proved tricky. The attorney general's department, which made the decision to ban TikTok use on government devices, referred inquiries to the Digital Transformation Agency, which in turn referred enquires to the Department of Home Affairs. Home Affairs was asked on Thursday for its official policy and did not provide a response by the time of publication. Some of the reaction in Australia to DeepSeek is by now familiar. There have been calls to ban the technology, amid concern over how the Chinese government might access user data - an echo of the days Huawei was banned from the NBN and 5G rollouts in Australia, and more recently, of the debate over banning TikTok. The Australian Strategic Policy Institute, a strong critic of the China government, said this week that Australia "cannot continue the current approach of responding to each new tech development". It called for a tech strategy covering AI that included investing in sovereign AI capabilities. The industry minister, Ed Husic, said on Tuesday it was too early to make a decision on whether DeepSeek was a security risk. "If there is anything that presents a risk in the national interest, we will always keep an open mind and watch what occurs. I think it's too early to jump to conclusions on that," he said. "But, again, if we have to act, then responsible governments do." He stressed that Australia is "in the final stages" of planning its response and would develop its own regulatory settings. "The US is flagging their approach. The EU has theirs. Canada likewise will have a different approach. And our regional partners as well are looking at this," he said. "We will harmonise where we can and we'll localise where we have to, and that's the approach that we will take." DeepSeek was approached for comment. There are suggestions Australia could learn from what DeepSeek has achieved. DeepSeek, headed by previous hedge fund co-founder Liang Wenfeng, reportedly focused on research into developing AI over looking for ways to turn a profit, hiring top graduates from Chinese universities or those relatively early on in their careers. The Tech Council of Australia - whose members include Microsoft, Atlassian, Google and IBM - argued Australia should adopt a similar approach. "The process that DeepSeek has taken from going from idea to world-leading technology in less than two years, and they've done so employing largely new graduates straight out of universities - this is a model that Australia should be following," the lobby group's head of policy, Harry Godber, said. "We have some of the greatest AI research occurring at Australian universities. We also have amazing R and D that's been undertaken by Australian companies like Atlassian and Canva." Australia's newly appointed chief scientist, Tony Haymet, noted on Tuesday how quickly DeepSeek had changed the conversation around AI. "Privately funded in Shanghai, a bunch of talented 22-year-olds without access to the world's best chips, without access to Nvidia chips, seem to have created something that's even better than the best companies in the western world have done," he said. Husic last year announced plans to develop an AI capability plan by the end of 2025, as the government also looks towards mandatory guardrails for "high risk" AI. The Tech Council's chief executive, Damian Kassabgi, said Australia stood to benefit from DeepSeek's demonstrated cost and computing power efficiencies. But he argued the capability plan wasn't moving quickly enough, with other countries pulling ahead in the AI race. "When we look at our R&D investment in Australia, especially business investment, we're about one-third of that of the US [on GDP spend]," Kassabgi said. "So we're not just a little bit behind."