Here’s what’s on our plate today:

• 🇨🇳 China’s chip-starved AI surge—how startups thrive despite U.S. bans.

• ⚡ Grammarly nabs Superhuman, Trump targets China solar, and more.

• 🗳️ Can China keep pace in AI without top-tier NVIDIA GPUs?

• 😂 Gru’s 4-step “foil China” plan—watch panel 4 flip the script.

Let’s dive in. No floaties needed…

The Laboratory

How is China’s AI industry growing despite U.S. export restrictions?

Consumers and organizations are integrating AI products into their workflows daily. Whether you ask a writer, musician, software developer, or social media marketer, AI has had an impact on how they function and how they utilize technology to enhance their productivity. Access to tools like ChatGPT, Midjourney, Gemini, Dall-e, and others will define the future of work for workers and for organizations. Amidst this, there is a clear lack of alternatives to AI tools developed by U.S. companies. And there is a reason for that. Fears of misuse of user data, state control, and global dominance have many users and organizations shying away from the Chinese alternative to the U.S.-based AI tools. But, despite this, China’s AI ecosystem appears to be thriving.

As the adoption of AI tools increases, there is a clear advantage that U.S.-based tech companies have had over their Chinese counterparts. While big tech companies in the U.S. continue to push for more investment, hunt for talent, and advocate for fewer regulations to maintain their lead in the AI race, Chinese AI startups have been functioning with the severe handicap of U.S.-backed curbs on export of AI chips, chip design software, chemicals, and other shipments.

Despite this clear disadvantage, China’s Zhipu AI recently made headlines for providing an AI solution to governments and state-owned enterprises in Malaysia, Singapore, the UAE, Saudi Arabia, and Kenya. DeepSeek, another Chinese AI startup, surprised the global tech community in January by announcing it had developed an influential AI model with an investment of just $5.6 million. How is it, then, that despite export restrictions, China’s AI ecosystem is not just surviving but going head-to-head with some of the biggest global tech companies? Let us take a look at what is enabling China’s AI industry to continue to innovate and thrive.

China’s strategic approach to AI

Even before the world was talking about AI or debating its deployment in different sectors, China was defining its long-term strategy for AI. In 2017, China set out to become a global AI leader to boost its technological and economic progress.

The plan was supported by the government, aligned with corporate interests, and was projected as a national goal. Today, the country is putting AI at the center of business priorities, consumer behavior, and economic growth. According to Morgan Stanley Research, China’s core AI industry may become a market valued at $140 billion by 2030. And, the estimate jumps to $1.4 trillion when related sectors, such as infrastructure and component suppliers, are included.

In the coming years, the country is aiming to achieve full independence from foreign countries in its AI development, which has been spurred on by export controls that have been becoming increasingly stringent since they were introduced in October 2022. And the country’s startup ecosystem has been working in this direction, as was seen in the case of DeepSeek, which was able to develop an AI model at lower costs and with less capable chips when compared to models being developed in the U.S.

Another aspect of China’s AI strategy that has helped it scale is its efficiency-driven and low-cost approach. This has helped it create different paths to return on investments in AI development. Chinese AI investments may break even in 2028 and achieve a 52% return on invested capital by 2030.

“The next six to 12 months will be a critical period for Chinese AI firms, as an increasing number of enterprise deployments attempting to solve real-life problems will begin to show productivity gains,” according to Shawn Kim, Morgan Stanley’s Head of Technology Research in Asia.

Turning challenges into innovations

While the export controls helped widen the compute gap between the U.S. and China in the short term, in the long run, they forced the Chinese to improvise and innovate.

Several Chinese AI startups, including High-Flyer AI, the creator of DeepSeek, proactively stockpiled tens of thousands of A100 chips before the trade restrictions took effect. Others reportedly sourced GPUs through intermediaries in Southeast Asia.

Aside from improvisation, the country also responded by increasing investment in domestic chip design and homegrown semiconductor fabrication. Restrictions on advanced AI chips compelled Chinese developers to aggressively optimize for efficiency, creating techniques that minimized training costs without compromising performance.

So what export controls did for China was to sharpen the incentives for AI engineers, founders, and funders in China to do more with less.

Strategic coordination between the government, market, and academia

An often overlooked factor in China's rapid AI advancement is the close coordination among public institutions, academic research bodies, and private enterprises.

Some of the country’s most capable research universities, like Tsinghua, Peking University, Shanghai Jiaotong, and Zhejiang University, serve not only as training grounds for AI talent but as intellectual incubators for commercial ventures. Many of the country’s leading generative AI firms, like Zhipu AI and Baichuan, emerged directly from university research labs and were backed by funding from the state to be built in partnerships with municipal development zones or digital economy clusters.

The state also guides funds aligned with the private market to ensure larger growth, which in turn helps startups continue working even during periods of economic tightening or when returns on investment are uncertain. While at the same time, the market incentives remain intact, forcing companies to compete in a fast-moving environment that rewards iterative gains and rapid deployment.

The Chinese government also promotes public-private partnerships when it comes to refining content guidelines, interface design, and usage monitoring, all of which allow for the realization of a vertically integrated ecosystem that works better than fragmented innovation ecosystems.

Can China’s AI ecosystem sustain its growth?

The resilience shown by the Chinese AI ecosystem is not just the result of a few well-placed decisions but the product of a well-thought-out long-term strategy. Instead of stalling innovation, U.S.-led restrictions have forced Chinese companies to rethink how they build, train, and deploy AI models, often at lower costs and with greater efficiency.

The alignment among the government, academia, and private industry has enabled China to build a resilient AI ecosystem capable of withstanding geopolitical pressures while continually achieving breakthroughs in AI research and deployment. From startups like DeepSeek and Zhipu AI to investments in homegrown chip development and public-private collaboration, China is demonstrating that a determined and strategically organized effort can challenge existing technological hegemony.

As such, the country’s prospects in the global AI race cannot be reduced to questions of missing Nvidia GPUs or compute power. The Chinese approach to building AI models rests then on not just its capacity to invent but also to diffuse and scale, all of which has allowed it to grow with remarkable speed.

Quick Bits, No Fluff

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