American and Chinese companies have come to dominate the global artificial intelligence race.
Imen Ben Youssef | AFP | Getty Images
Hello, I’m Evelyn. I am writing to you from Beijing. Welcome to the latest edition of The China Connection. This is a snapshot of what I’ve seen and heard from local businesses.
As Chinese startups build new artificial intelligence models and more U.S. startups tap into them, risks to the U.S.-China relationship are rising.
big story
China’s role in AI is rapidly changing.
President Xi Jinping’s AI speech on July 17th and the simultaneous release of Claude Fabre 5’s rival Kimi K3 were just the beginning. An open letter on Friday spoke out against “premature restrictions” following a series of U.S. government backlash against China’s open source model. Nvidia’s Jensen Huang and over 20 other technology companies.
“For me, the release of the Kimi K3 was the beginning of a hornet-like discussion in Washington about what to do with China’s open-class model,” said Ryan Fedasiuk, a fellow at the American Enterprise Institute.
The debate will soon be tested at a higher level.
Late last week, President Donald Trump said in remarks about U.S. data center policy that he plans to discuss AI with President Xi Jinping during a visit to the United States in late September. In response, China’s Ministry of Foreign Affairs said that the Chinese government is ready to cooperate with the United States on AI.
Rex Zhao, a Chinese-born venture capitalist who manages $150 million in assets as managing partner of Boston-based One Way Ventures, said whether the two countries end up becoming more cooperative or adversarial on technology “has very important consequences.”
“The reality is that many American startups are using Chinese AI models,” he said. “Many of the companies we invest in are built on these models.”
Zhao believes that the US and China each have “tremendous influence” over the other and are limited in their actions against AI.
This commercial interdependence turns a technological challenge for Washington into a diplomatic one.
This month, China not only hosted the World AI Conference in Shanghai, but also hosted APEC Digital Week in Chengdu, which attracted nearly 20 senior technology officials, including from the United States.
George Chen, partner and head of digital practice at consulting firm Asia Group, also attended both events.
“The Chinese government now also sees AI as a new kind of diplomacy to win more allies and partners,” he said, adding that the September summit between President Trump and Xi Jinping in Washington, D.C., will be the first opportunity for the two leaders to address AI diplomatic issues.
overwhelming demand
China’s technological advances come despite four years of U.S. restrictions on access to advanced semiconductors for AI training. Excitement about powerful new models is still limited by computing power.
He said he was visited by AI consultant Shu Weibing earlier this month. Zai‘s office and found a three-month waiting list for companies interested in using the startup’s cutting-edge GLM 5.2 coding tool, released in mid-June. Z.ai did not respond to a request for comment.
And just days after Moonshot launched Kim K3, the startup announced it would be pausing new subscriptions due to computing power limitations.
China is pouring resources into domestic computing power. Z.ai is expanding its massive 1-gigawatt data center, a person familiar with the matter confirmed to CNBC.
But the pace of China’s AI releases has led to slightly more Americans believing that China is more advanced in AI development than the United States, even as of late June, according to a Pew Research survey. Another Pew poll in early July found that about half of Americans disapprove of both Democratic and Republican policies related to AI.
US-based Hugging Face even said it needed to use Z.ai’s GLM 5.2 to combat cyber-attacks from rogue OpenAI models.
“This incident clearly shows why open source is so necessary for American companies, and it would be foolish to shut it down,” Fedasiuk said. “I think it’s possible to reach a compromise here.”
As U.S. companies claim that Chinese developers stole their AI capabilities, startup Thinking Machines Lab has revealed that it used DeepSeek and Kimi in its development process, the most advanced U.S. open source model to date.
Other countries are also watching closely. APEC delegates gathered in Chengdu issued a statement on Thursday supporting open source AI models that “adopt strong security guarantees.”
Even if policies are discussed between the leaders of the world’s two largest economies within two months, it is unclear whether they will be able to secure an advantage in the rapidly advancing AI race.
One Way’s Zhao said the best practice for companies is to use systems that provide the option to switch between different models, rather than relying on just one model.
As the Chinese model improves and becomes more widespread, it may become harder for companies in the United States and other countries not to build on it.
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very soon
July 30: China Politburo policy meeting scheduled
July 31: Official Manufacturing PMI
August 3: RatingDog China General Manufacturing PMI
