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The AI Revolution: How Xi Jinping Is Changing the Rules of the Game - Report


Key Points

  1. Chinese Strategy on AI:

    • China focuses on the practical application of AI to solve concrete problems such as economic growth and industrial modernization.

    • Beijing replicates Western innovations and releases its own models, such as DeepSeek, for free.

  2. Xi Jinping's vision:

    • Xi Jinping promotes technological self-sufficiency and innovation to narrow the gap with the United States.

    • Stresses the importance of strengthening basic research and mastering key technologies such as high-end chips.

  3. Zhu Songchun's approach:

    • Zhu criticizes the U.S. model based on "big data" and proposes AI based on reasoning, causality and values.

    • Promotes a theoretical and philosophical approach, integrating neo-Confucian thought to develop AI aligned with human values.

  4. Role of Shanghai:

    • Shanghai funds innovative projects such as brain-computer interfaces and models inspired by the human brain.

    • The city focuses on advanced AI architectures to bridge the technological gap with the West.

  5. Competitive Advantages of China:

    • China excels in technology adoption and scalability, with strong government support and a dynamic entrepreneurial ecosystem.

    • Chinese applications, such as TikTok, accumulate users and data rapidly, creating a competitive advantage.

  6. Challenges to Face:

    • Dependence on advanced chips and talent shortage in fundamental research.

    • Need to improve data quality and address privacy issues.

  7. Goals for 2030:

    • China aims to become a world leader in technological innovation, as outlined in the Next-Generation AI Development Plan and Made in China 2025.

  8. Digital Financial Inclusion:

    • AI is being integrated to improve the accessibility and reach of financial services, supporting entrepreneurship.

  9. Conclusion:

    • China's pragmatic approach may bring significant results in the short term, but long-term success will depend on its ability to overcome technological dependencies and develop more advanced and autonomous AI.



An intelligent refueling robot is refueling a car at the PetroChina Huaqiao gas station in Suzhou, Jiangsu Province, China, on December 25, 2023. (Photo by Costfoto/NurPhoto via Getty Images)
An intelligent refueling robot is refueling a car at the PetroChina Huaqiao gas station in Suzhou, Jiangsu Province, China, on December 25, 2023. (Photo by Costfoto/NurPhoto via Getty Images)

Introduction

In recent years, China has been in a strategic race to establish itself as a global leader in Artificial Intelligence (AI), challenging the technological dominance of the United States. While American companies focus on developing advanced and complex models, Beijing has taken a pragmatic approach, focusing on the practical application of AI to solve concrete problems related to economic growth and industrial modernization. Guided by President Xi Jinping's vision, China is investing heavily in innovation, technological self-sufficiency and infrastructure, seeking to close the gap with the West and build an independent and competitive AI ecosystem. This article explores China's strategies, advantages and challenges in its ambitious plan to dominate the future of AI.





While U.S. companies focus on developing advanced Artificial Intelligence (AI) models, in what Vice President JD Vance has called a veritable "arms race" with China, Beijing appears to have refocused its strategy, focusing on the practical application of AI.


Initially similar to that of the U.S., China's strategy has evolved toward two main goals: on the one hand, to weaken U.S. dominance over advanced AI by replicating Western innovations and releasing its own models for free, as demonstrated by the example of DeepSeek; and on the other hand, to focus on the day-to-day implementation of AI, as urged by President Xi Jinping.


While U.S. tech giants often envision utopian future scenarios for artificial intelligence, China pragmatically focuses on its application to solve concrete problems such as economic growth and industrial modernization, noted Karson Elmgren of the RAND think tank.


A Practical Approach and the Challenges to Overcome

China's strongly application-oriented approach reflects China's current shortcomings in artificial intelligence talent and chips, as well as in "basic theory and key technologies," as Xi Jinping himself pointed out last April, "We need to close the gap." Liu Zhiyuan, of Tsinghua University, likened this strategy to what Mao Zedong argued in 1938 in his lectures "On the War of Long Duration": a weaker opponent can wear down and outlast a stronger one.


On May 8, Qiushi magazine published an article by Tang Jie, also of Tsinghua University, recommending that China closely monitor American innovations, but focus on creating cheaper and faster applications. Zhu Songchun, director of the Beijing Institute for General Artificial Intelligence (BIGAI), has repeatedly emphasized the need for an independent path for AI development away from imitating the American model based on large language models. Zhu proposes a more robust AI based on deep theoretical understanding, reasoning skills and value integration.



Xi Jinping: A Vision of Self-reliance and Innovation

Chinese President Xi Jinping has stressed the importance of greater "self-reliance and self-empowerment" in AI development, urging the country to narrow the technology gap with the United States.


During a Politburo study session in April, Xi highlighted the need to promote technological innovation, industrial development and AI-based applications. He also reiterated the importance of leveraging the "new national system" to accelerate progress in AI, with strong policy support in areas such as procurement, intellectual property rights, research and talent development.


Recognizing future challenges, Xi insisted on the need to strengthen basic research and master key technologies, such as high-end chips and core software, to build an "independent, controllable and collaborative" AI ecosystem. He also called for accelerating the creation of AI regulations, risk alert systems and contingency protocols to ensure safe and responsible development of the technology.


The Value of AI and the Chinese Competitive Advantage

In China, the central idea is that the value generated by artificial intelligence will benefit those who use it, rather than those who develop it. According to Kai-Fu Lee, an influential Beijing-based entrepreneur, when artificial intelligence reaches full maturity, China will be in an advantageous position over the United States. This is because of the presence of "robust social applications, search engines, agents and ready-made hardware." Lee points out that by accumulating users and data in advance, Chinese applications can create a competitive advantage that is difficult for Western competitors to overcome, just as happened with TikTok.


Zhu Songchun: A Philosophical and Theoretical Approach to AI

Zhu Songchun, director of the Beijing Institute for General Artificial Intelligence (BIGAI), has repeatedly expressed a critical view of China's approach to AI development. He argues that China should not simply follow the American model, particularly one based on large language models (LLMs) and "big data." Zhu criticizes the focus on training AI models based on huge amounts of data, calling it the "parrot paradigm." According to him, these models, while capable of replicating behaviors and generating text, do not possess true understanding or reasoning capabilities.


Zhu proposes an alternative approach, the "crow paradigm," which focuses on developing intelligence based on reasoning, causality and a value system. This approach aims to move beyond mere statistical correlation of data to deep understanding and the ability to act autonomously and meaningfully in the world. Zhu believes that the real progress in AI lies not only in algorithms or computational power, but in theoretical and philosophical foundations. He encourages China to integrate Chinese philosophical thought, such as neo-Confucianism, to develop a general AI (AGI) that is not only capable but also aligned with human values.


Shanghai: An Innovation Lab for AI

In April, the Shanghai government offered funding to researchers advancing AI using new types of architectures. These include models that interact with the real world through images, others that can control computers with their minds, or theoretical algorithms to emulate the human brain.


Shanghai's approach in developing AI reveals a clear strategy to distinguish itself by not just following the "arms race" of large American-style language models, but by focusing on radical innovation. Recent investments in research centers and startups demonstrate a commitment to advanced AI architectures capable of interacting with the real world through vision, controlling devices with the mind through brain-computer interfaces, and emulating the human brain with complex algorithms.


This push toward embedded intelligence and brain-inspired AI underscores Shanghai's intention to bridge the gap in "core theories and key technologies" highlighted by Xi Jinping. It also reflects the vision of experts such as Zhu Songchun, who promote AI with solid theoretical foundations and innovative practical applications, potentially cheaper and faster.


A Strategic Vision for 2030

AI development in China is driven by a strategic vision that aims to position the country as a world leader in technological innovation by 2030. This ambition is outlined in key policy documents such as the Next-Generation AI Development Plan (2017) and the Made in China 2025 initiative. Both plans emphasize the importance of technological self-sufficiency, the creation of innovation hubs, and the widespread adoption of AI in various economic and social sectors.



Investment, Innovation and Financial Inclusion

Through continued investment in basic infrastructure and a strategic focus on sector-specific applications, China has made significant progress. A key element of the AI development plan is the focus on innovation and entrepreneurship, fostered through the creation of entrepreneurial bases that serve as hubs for the development of new ventures. These hubs are supported by collaboration between tech giants such as Baidu, Alibaba, Tencent and Huawei and the Chinese government. In parallel, prestigious universities such as Tsinghua and Peking University stand out globally for advanced research in AI.


Another crucial aspect is digital financial inclusion, which plays a key role in meeting the capital needs of entrepreneurs. By integrating AI in this area, China aims not only to improve the accessibility and convenience of financial services, but also to expand their reach.


Conclusions

In summary, China's pragmatic approach to applying AI for industrial modernization and economic growth is a strength that can lead to significant results in the short and medium term. However, the sustainability of this long-term success will depend on Beijing's ability to overcome technological dependencies (especially on chips), bridge the gap in fundamental research, and develop AI that goes beyond mere application, while also integrating deeper understanding and causal reasoning.



About Extrema Ratio
Extrema Ratio is a leading organization specializing in geopolitical analysis and intelligence, with a particular focus on China’s global influence and the complexities of international relations. Through in-depth research and expert commentary, Extrema Ratio provides valuable insights into national security, foreign interference, and the strategic challenges posed by emerging global powers. The organization’s mission is to inform and educate policymakers, professionals, and the public about the risks and opportunities in today’s rapidly evolving geopolitical landscape. For more analysis and resources, visit Extrema Ratio’s blog and publications.


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