The US-China tech rivalry is one of the most pressing issues in global politics today, with tension escalating between these two nations. The US government is considering export controls on its most advanced AI models and proprietary software, including systems like ChatGPT, to prevent them from falling into the hands of China and Russia. This comes on top of measures implemented over the last two years to block the export of sophisticated AI chips to China.
China is aggressively developing cutting-edge technology for military purposes. Although a latecomer to the AI scene, China is now striving to catch up with OpenAI and other major players in the market, including tech giants Microsoft, Google, and Amazon.
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China’s response to US curbs
China’s response to the US technological lead includes a robust initiative in the stock market and chip development. China is striving to match the advancements of companies like OpenAI. This is evident in its significant investment in proprietary chip manufacturing aimed at reducing reliance on western technology, particularly from firms like Nvidia. This effort shows a broader ambition to secure a competitive edge in AI, not just for commercial success but for strategic autonomy.
Despite efforts by rival nations to curtail its progress by safeguarding technology, it will be challenging for regulators to keep up with the industry’s rapid developments. China has described these actions as typical economic coercion and unilateral bullying.
AI is experiencing a watershed moment, clearly demonstrating its role in shaping the future and intensifying competition in the domain. In October 2022, the US imposed a series of export controls that severely restricted China’s future advancements in AI. In March of the following year, other nations, including Japan and the Netherlands, joined in imposing restrictions on advanced semiconductor technologies and their exports. Together, the US, Japan, and the Netherlands account for approximately 90% of the equipment used in computer chip manufacturing facilities worldwide.
US-China tech rivalry
The competitive landscape is also reflected in venture capital dynamics, where the US remains the predominant player. In the past year, the funding of generative AI startups in the US accounted for nearly half of the global AI investment, significantly outpacing China’s investment efforts. This disparity highlights the challenges China faces not only in terms of technology but also in attracting global capital to fuel its ambitious AI programmes, which are critical to closing the gap with leading US companies.
The US government has also barred companies like Google DeepMind and Anthropic, which have developed some of the most powerful closed-source AI models, from selling these technologies almost anywhere in the world without government oversight. Other countries on the US government’s watch list include Russia, North Korea, and Iran.
Can US contain China’s rise in AI
AI technology is evolving rapidly, and while governments worldwide strive to bridge gaps in their efforts to thwart Beijing’s AI ambitions, there are serious challenges to implementing a stringent regulatory regime on such a swiftly evolving technology. Analysts believe that China is only about two years behind the United States in developing its own AI software.
It may not be feasible to turn this situation into an export-controllable choke point. Instead, the focus should shift towards enhancing national security over technological thresholds, as this approach is more sustainable and directly addresses the threat. Additionally, open-source models present a significant challenge in controlling AI model exports, as they fall outside the scope of export controls. Regulators will also face challenges in determining the right criteria for which models should be controlled.
Despite the hurdles imposed by US export controls, Chinese tech firms are not merely reactive but are proactively seeking alternatives. Companies like Huawei and SMIC are intensifying efforts to develop indigenous AI chips, a crucial step towards technological independence. Moreover, China’s capability in applications such as computer vision suggests that while foundational AI model development may lag, application-specific advancements could offer China a different path to AI dominance. This strategic pivot reflects a broader trend of bifurcation in the global tech market, where parallel ecosystems might emerge as each superpower fortifies its technological ramparts.
China boasts of a significant AI talent pool, with nearly triple the number of AI undergraduate degrees compared with the US. However, no dominant next-generation AI contender to OpenAI has yet emerged among the numerous Chinese tech giants and startups. Historically, Beijing has insisted it will not remain passive in the ongoing cold war.
Beyond US-China AI race
While the US-China tech rivalry garners major headlines, other countries are also deeply involved in tech development. Caught in the middle of this trade war, the rest of the world, including the European Union, Japan, South Korea, and India, will feel the repercussions.
Analysts suggest that if the US restricts access to certain technologies or imposes export controls, it could also limit India’s ability to acquire those specific technologies. Even if India is not directly targeted, the climate of restricted technology sharing could hinder global collaboration and slow down overall innovation, impacting everyone.
The tech curbs may also slow India’s progress in fields like artificial intelligence, quantum computing, and semiconductors. Regardless of US tech restrictions, India requires improvements in infrastructure and educational systems to fully support innovation. It is imperative for private players to increase investments in research and development to foster a more self-reliant Indian tech sector.