By Benson Daniel
For years, predictions of China’s economic collapse have appeared with striking regularity. Debt, a property crisis, demographic pressures, political controls and industrial overcapacity have repeatedly been presented as signs that the country’s extraordinary rise was approaching its limit.
Yet China has continued to find new areas of growth.
The latest frontier is artificial intelligence, where Chinese companies are increasingly challenging the assumption that the United States and its Western allies will maintain an unassailable lead.
China’s economic transformation has taken place in stages. Its first major breakthrough came through low cost manufacturing, turning the country into the factory of the world. It later moved into higher value industries including electric vehicles, batteries and solar technology, sectors where Chinese companies now exert enormous influence.
Artificial intelligence represents the next stage of that industrial push.
Chinese firms are no longer simply attempting to reproduce technology developed elsewhere. Companies such as DeepSeek and Moonshot are producing models that have attracted international attention for their performance, cost and ability to compete with leading American systems.
Moonshot’s Kimi K3 model, launched earlier this year, has emerged as one example of the country’s rapidly expanding AI capabilities. The company has now confidentially filed for a Hong Kong initial public offering that could raise as much as $3bn, while its valuation has reached about $50bn following its latest funding round.
DeepSeek has also become a significant force in the global AI race. Its earlier models challenged assumptions about the enormous computing resources required to develop competitive artificial intelligence, while its latest efforts have increasingly focused on reducing dependence on foreign semiconductor technology.
The company has been developing its own AI chip and has also worked with Huawei technology as Chinese firms attempt to build a more self sufficient computing ecosystem.
That shift has been accelerated by restrictions on China’s access to the most advanced American semiconductors.
Rather than ending China’s AI ambitions, the restrictions have encouraged greater investment in domestic alternatives. Huawei has expanded its work on AI processors, while Chinese technology companies have poured money into research and development aimed at reducing their dependence on Western hardware.
The broader strategy is being backed by Beijing.
China announced a new five year programme this week aimed at supporting thousands of smaller technology companies, particularly those working in areas such as robotics, quantum technology, advanced materials and embodied artificial intelligence. The government wants to increase the number of specialised “little giants” to 22,000 by 2030 and raise their research spending substantially.
The approach reflects a wider belief that technological capability is central to China’s economic and geopolitical future.
There are, however, reasons for caution. China still faces weak domestic demand, a troubled property sector, demographic challenges and the risk of producing more goods than markets can absorb. Its AI industry also remains constrained by access to some of the world’s most advanced chips and manufacturing equipment.
But those difficulties do not fit neatly into the old prediction that China’s economic rise would simply run out of momentum.
Instead, the country has repeatedly redirected its industrial capacity towards new sectors.
Its dominance in electric vehicles, batteries, solar panels and other technologies has demonstrated how quickly Chinese manufacturers can scale once government policy, investment, supply chains and domestic demand move in the same direction.
AI could prove to be an even more consequential test.
China is seeking not only to develop competitive models but also to spread them internationally and gain influence over the standards that will shape how artificial intelligence is deployed. Foreign technology companies and investors are increasingly watching developments in Chinese AI closely, while some are travelling to China specifically to understand how its industrial ecosystem turns technological advances into mass production.
That does not mean China has won the AI race. The United States remains home to many of the world’s most powerful AI companies, enormous pools of capital and leading semiconductor technology.
But the assumption that China would inevitably fall behind is becoming harder to sustain.
The more important lesson may be that China’s economic story has never been as simple as either unstoppable expansion or imminent collapse.
The country has shown an ability to absorb pressure, redirect investment and build new industrial strengths. Artificial intelligence is now becoming the latest arena in which that strategy is being tested.
For Western policymakers and businesses, the challenge is no longer simply predicting when China’s rise will end. It is understanding what China is building while those predictions are being made.
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