China's AI Ecosystem: Market Competition as a Driver Alongside State Direction (warontherocks.com)

• Price wars and talent poaching define China's AI sector
• Beijing co-opts winners like DeepSeek through state capital and infrastructure
• Chinese open-weight models outpace US in global downloads

"China's AI progress is driven by brutal domestic competition ('involution') as much as by state industrial policy, argues David Lin. Price wars, talent poaching, and provincial funding create efficiency but undermine foundational innovation. Beijing selectively co-opts market winners like DeepSeek via state funds and chip access, while US export controls are circumvented through smuggling. Chinese open-weight models now account for 17.1% of global downloads. Lin recommends the US calibrate export controls and investment screening, compete in open-weight models, and invest in basic research."