Artificial intelligence (AI) has seen significant advancements over the past decade, enabling machines to perform tasks like visual perception, speech recognition, decision-making, and language translation. The United States has been a leader in AI innovation, benefiting from research universities, a strong technology sector, and a supportive regulatory environment. However, China has emerged as a formidable competitor in the AI industry, challenging the narrative that it is merely a copier of technology. Chinese academic institutions like Tsinghua University have produced top AI start-ups, closing the performance gap with the U.S. in large language models.
China leads in research volume, while the U.S. excels in translating research into real-world products. Despite U.S. efforts to restrict China’s access to technology through export controls, China has advanced its homegrown ecosystem. The Chinese government supports domestic AI firms financially through government guidance funds and subsidies. These measures help nurture high-potential companies and regions often overlooked by private investors. However, the impact of these government funds has had mixed results, with some inefficiencies but significant benefits for selected high-potential firms.
China has a greater number of AI companies than the U.S., but the U.S. receives significantly higher private investment in AI ventures. Chinese firms have less access to private capital, and the government aims to fill this gap. China also exceeds the U.S. in the number of AI patents but lags in patent quality. The U.S. leads in the number of top-cited AI research publications, indicating higher quality research. Talent is essential for fostering national innovation in AI, and China leads in producing top-tier AI researchers. However, the U.S. attracts more elite Chinese talent, but there are indications that more top talent is staying in China.
China has a large volume of data for AI development but lags in data quality, while its access to advanced chips is reliant on the U.S. China is pivoting to develop its own chip supply chain to reduce dependency on U.S. technology. The Chinese government promotes digital transformation through initiatives like the “AI+” initiative, focusing on integrating AI across all sectors of the economy. U.S. policymakers are urged to stimulate private investment in AI, revitalize federal funding, avoid policies harming U.S. competitiveness, and develop a national data strategy. Increasing AI adoption calls for a national AI roadmap, prioritizing AI in the federal government, supporting digital transformation, and incentivizing AI workforce training investment.