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China’s demise was gleefully predicted by the west – meanwhile, it built an AI revolution | Larry Elliott
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- DeepHorus
China's long-predicted economic demise has instead given way to an unprecedented technological revolution, with artificial intelligence emerging as its latest frontier. For decades, Western commentators have foretold a collapse driven by overinvestment, debt, property market turmoil, and social unrest. However, China has systematically defied these predictions, first becoming the world's manufacturing hub and now aggressively competing for dominance in the global AI race. This evolution marks a critical shift from low-cost production to high-tech innovation, challenging long-held Western assumptions about economic development.
The transformation began with China 1.0, focusing on low-cost manufactured goods fueled by cheap labor. This phase was so impactful that it contributed to major geopolitical shifts, including the rise of populist movements in the West. Yet, China did not remain stagnant. It transitioned into China 2.0, heavily investing in higher-end manufacturing and capturing key global markets like solar panels, batteries, and electric vehicles. This progression shattered the illusion that China would be confined to assembling low-grade products indefinitely.
Now, China 3.0 is defined by a strategic push into artificial intelligence. In July, Chinese startup Moonshot launched the Kimi K3 model, which matched U.S. rivals like OpenAI's ChatGPT at no cost. The demand was so overwhelming that the company had to suspend new subscriptions within two days. This is not an isolated incident but part of a clear national strategy. Beijing aims to stay at the technological frontier, diffuse its models globally, and set international AI standards.
China's rapid AI advancement presents significant challenges for global economic stability and geopolitical balance. Experts warn that free Chinese AI models could disrupt markets, as the U.S. has relied on its technological edge for leverage. Meanwhile, China faces criticism for its investment-heavy model, which creates excess capacity and necessitates large-scale exports to maintain growth and social stability. At recent G20 meetings, China faced isolated criticism for failing to boost domestic demand.
The implications are profound. A successful Chinese AI strategy could reshape not just the global economy but the balance of power itself. This race unfolds as the U.S. imposes punitive tariffs on traditional allies, potentially weakening the coalition needed to counter China's influence. The emergence of cost-effective, high-performance Chinese AI models complicates the competitive landscape, forcing other nations to reconsider their technological and trade policies.
Looking ahead, the global community must adapt to a new reality where China is a peer competitor in foundational technologies. The outcome of this AI race will depend on innovation, global alliances, and economic strategies on all sides. While Beijing's strategy may face hurdles, its clear intent and rapid progress have already altered the trajectory of technological development. The world is no longer waiting for China's collapse but is now grappling with its rise as a high-tech superpower.
