China’s AI sector could narrow the technological AI gap with the United States through growing risk-taking and innovation, according to leading researchers. Despite export controls on advanced chipmaking tools, Chinese firms are accelerating development across multiple AI fields.
Yao Shunyu, a former senior researcher at ChatGPT maker OpenAI and now Tencent’s AI scientist, said a Chinese company could become the world’s leading AI firm within three to five years. He pointed to China’s strengths in electricity supply and infrastructure as key advantages.
Yao said the main bottlenecks remain production capacity, including access to advanced lithography machines and a mature software ecosystem. Such limits still restrict China’s ability to manufacture the most advanced semiconductors and narrow the AI gap with the US.
China has developed a working prototype of an extreme-ultraviolet lithography machine that could eventually rival Western technology. However, Reuters reported the system has not yet produced functioning chips.
Sources familiar with the project said commercial chip production using the machine may not begin until around 2030. Until then, Chinese AI ambitions are likely to remain constrained by hardware limitations.
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The US administration’s new AI action plan frames global development as an AI race with a single winner. Officials argue AI dominance brings economic, military, and geopolitical advantages. Experts say competition is unfolding across multiple domains.
The United States continues to lead in the development of advanced large language and multimodal models by firms such as OpenAI, Google, and Anthropic. American companies also dominate global computing infrastructure. Control over high-end AI chips and data-centre capacity remains concentrated in US firms.
Chinese companies are narrowing the gap in the practical applications of AI. Models from Alibaba, DeepSeek, and Moonshot AI perform well in tasks such as translation, coding, and customer service. Performance at the cutting edge still lags behind US systems.
Washington’s decision to allow limited exports of Nvidia’s H200 AI chips to China reflects a belief that controlled sales can preserve US leadership. Critics argue the move risks weakening America’s computing advantage. Concerns persist over long-term strategic consequences.
Rather than a decisive victory for either side in the AI race, analysts foresee an era of asymmetric competition in AI. The United States may dominate advanced AI services, but China is expected to lead in large-scale industrial deployment within the evolving AI race.
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China’s cyberspace regulator has proposed new limits on AI ‘boyfriend’ and ‘girlfriend’ chatbots, tightening oversight of emotionally interactive artificial intelligence services.
Draft rules released on 27 December would require platforms to intervene when users express suicidal or self-harm tendencies, while strengthening protections for minors and restricting harmful content.
The regulator defines the services as AI systems that simulate human personality traits and emotional interaction. The proposals are open for public consultation until 25 January.
The draft bans chatbots from encouraging suicide, engaging in emotional manipulation, or producing obscene, violent, or gambling-related content. Minors would need guardian consent to access AI companionship.
Platforms would also be required to disclose clearly that users are interacting with AI rather than humans. Legal experts in China warn that enforcement may be challenging, particularly in identifying suicidal intent through language cues alone.
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Chinese President Xi Jinping said 2025 marked a year of major breakthroughs for the country’s AI and semiconductor industries. In his New Year’s address, he said that Chinese technology firms had made significant progress in AI models and domestic chip development.
China’s AI sector gained global attention with the rise of DeepSeek. The company launched advanced models focused on reasoning and efficiency, drawing comparisons with leading US systems and triggering volatility in global technology markets.
Other Chinese firms also expanded their AI capabilities. Alibaba released new frontier models and pledged large-scale investment in cloud and AI infrastructure, while Huawei announced new computing technologies and AI chips to challenge dominant suppliers.
China’s progress prompted mixed international responses. Some European governments restricted the use of Chinese AI models over data security concerns, while US companies continued engaging with Chinese-linked AI firms through acquisitions and partnerships.
Looking ahead to 2026, China is expected to prioritise AI and semiconductors in its next five-year development plan. Analysts anticipate increased research funding, expanded infrastructure, and stronger support for emerging technology industries.
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A significant shift away from global views on central bank digital currencies has been made with the decision to allow China’s digital yuan to earn interest starting in January 2026. Wallet balances will now accrue interest at demand deposit rates, marking a shift from the widely held view that retail CBDCs should function purely as digital cash.
Central banks in Europe and the United States have long argued against interest-bearing CBDCs, warning they could destabilise financial systems by drawing deposits away from commercial banks.
Institutions such as the European Central Bank, the Federal Reserve and the Bank for International Settlements have stressed that digital currencies should not become savings instruments.
China’s move, however, effectively repositions the digital yuan closer to a deposit-like form of money rather than a simple cash substitute.
The policy applies to verified individual and corporate wallets, while anonymous wallets remain excluded. Digital yuan balances are also now covered by China’s deposit insurance scheme, offering the same protection as bank deposits.
Analysts say these design choices, combined with China’s two-tier distribution model that keeps commercial banks as intermediaries, aim to limit risks of bank disintermediation while encouraging wider adoption.
China’s decision could influence global debates as dozens of countries continue to explore the use of digital currencies. While Europe remains committed to a non-interest-bearing digital € and the United States has formally banned a retail CBDC, China is testing whether an interest-paying digital currency can coexist with traditional banking.
The experiment is likely to be closely watched as policymakers reconsider what role digital money should play in future financial systems.
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China is closing 2025 with renewed confidence in its economic resilience and growing influence across technology, manufacturing and global markets. Breakthroughs in AI, electric vehicles, green energy and biopharmaceuticals have reshaped perceptions of the country, moving it beyond its long-standing image as the world’s factory towards a centre of innovation.
Despite trade tensions with the United States and ongoing challenges in property and consumer spending, China is expected to meet its 5% growth target for the year. Exports remained robust as firms diversified away from reliance on the US market, while a temporary trade truce eased pressure on global supply chains. Competition with Washington is increasingly shifting from tariffs to technology leadership in areas such as AI, advanced chips and biotechnology.
AI emerged as a defining theme, with Chinese companies pushing large language models into widespread industrial and consumer use. Government-backed initiatives are accelerating integration across manufacturing, transport and healthcare, while tighter rules aim to address risks such as deepfakes and data security.
At the same time, Chinese electric vehicle manufacturers expanded rapidly overseas, and domestic sales of new energy vehicles surpassed those of traditional cars for the first time.
Capital markets and global outreach also strengthened China’s position. Hong Kong reclaimed its status as the world’s largest IPO market, while Shanghai advanced its role as a financial and fintech hub. Looking to 2026, analysts expect China’s growth story to depend less on volume expansion and more on technological competitiveness, global integration and the ability to navigate a more fragmented geopolitical landscape.
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China is proposing new rules requiring users to consent before AI companies can use chat logs for training. The draft measures aim to balance innovation with safety and public interest.
Platforms would need to inform users when interacting with AI and provide options to access or delete their chat history. For minors, guardian consent is required before sharing or storing any data.
Analysts say the rules may slow AI chatbot improvements but provide guidance on responsible development. The measures signal that some user conversations are too sensitive for free training data.
The draft rules are open for public consultation with feedback due in late January. China encourages expanding human-like AI applications once safety and reliability are demonstrated.
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China’s AI industry entered 2025 as a perceived follower but ended the year transformed. Rapid technical progress and commercial milestones reshaped global perceptions of Chinese innovation.
The surprise release of DeepSeek R1 demonstrated strong reasoning performance at unusually low training costs. Open access challenged assumptions about chip dominance and boosted adoption across emerging markets.
State backing and private capital followed quickly, lifting the AI’s sector valuations and supporting embodied intelligence projects. Leading model developers prepared IPO filings, signalling confidence in long term growth.
Chinese firms increasingly prioritised practical deployment, multilingual capability, and service integration. Global expansion now stresses cultural adaptation rather than raw technical benchmarks alone.
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China has proposed new rules to restrict AI chatbots from influencing human emotions in ways that could lead to suicide or self-harm. The Cyberspace Administration released draft regulations, open for public comment until late January.
The measures target human-like interactive AI services, including emotionally responsive AI chatbots, that simulate personality and engage users through text, images, audio, or video. Officials say the proposals signal a shift from content safety towards emotional safety as AI companions gain popularity.
Under the draft rules, AI chatbot services would be barred from encouraging self-harm, emotional manipulation, or obscene, violent, or gambling-related content. Providers would be required to involve human moderators if users express suicidal intent.
Additional provisions would strengthen safeguards for minors, including guardian consent and usage limits for emotionally interactive systems. Platforms would also face security assessments and interaction reminders when operating services with large user bases.
Experts say the proposals could mark the world’s first attempt to regulate emotionally responsive AI systems. The move comes as China-based chatbot firms pursue public listings and as global scrutiny grows over how conversational AI affects mental health and user behaviour.
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Chinese robotics firm AI² Robotics has launched ZhiCube, described as a modular embodied AI service space integrating humanoid robots into public venues. The concept debuted in Beijing and Shenzhen, with initial installations in a city park and a shopping mall.
ZhiCube places the company’s AlphaBot 2 humanoid robot inside a modular unit designed for service delivery. The system supports multiple functions, including coffee, ice cream, entertainment, and retail, which can be combined based on location and demand.
At the core of the platform is a human–robot collaboration model powered by the company’s embodied AI system, GOVLA. The robot can perceive its surroundings, understand tasks, and adapt its role dynamically during daily operations.
AI² Robotics says the system adjusts work patterns based on foot traffic, allocating tasks between robots and human staff as demand fluctuates. Robots handle standardised services, while humans focus on creative or complex activities.
The company plans to deploy 1,000 ZhiCube units across China over the next three years. It aims to position the platform as a scalable urban infrastructure, supported by in-house manufacturing and long-term operational data from multiple industries.
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