When DeepSeek released its open-source, low-cost generative AI app in January, the Chinese start-up sparked frenzied global speculation about China’s progress in the AI race. But the curtain that flitted open quickly closed again.  

China’s AI ecosystem has remained largely opaque to Western observers, even though the country far outpaces the United States in the number of patents filed and journal articles published. So, at the Asia edition of INSEAD's inaugural AI Forum, I invited experts in the field to peer through what I called "a window on China".

Our panel discussion revealed an AI landscape that is every bit as competitive as what the world has come to expect of China.

Far beyond the well-known BAT (Baidu, Alibaba, Tencent) triumvirate, a diverse ecosystem has emerged. ByteDance, better known globally for TikTok, has developed into an AI powerhouse with multimodal foundation models and development tools like Coze, a no-code platform for building AI agents. Meanwhile, Huawei continues advancing its AI capabilities alongside its cloud services. Newer entrants like DeepSeek and Zhipu AI are being compared to OpenAI in performance and ambition.

China’s tech companies are also in a full-blown race that we hear a lot less about in the West, a race about physical intelligence – sight, hearing and touch. Firms like iFlytek dominate voice technology while SenseTime leads in computer vision. Upstarts making waves include Moonshot, known for its Kimi app with extensive context windows, and robot makers Unitree and AgiBot. Chinese robots are capable of fine motor skills and human-like movements at a level unmatched by Western players. Witness, for example, two robots go knuckle to knuckle in the first boxing match of its kind. 

Combining physical intelligence with China’s traditional prowess in manufacturing could allow the country to steal ahead in the next frontier of the AI race: intelligent robotics. 

"In China, we call this ‘involution’ (nei juan) – the competition is very intense,” Professor Ming Liao from the Chinese University of Hong Kong observed. 

“Do we really need so many large language models? And so many robotics start-ups? Probably not. However, whoever survives this involution can be a very strong competitor globally."

The Hangzhou model 

It’s not just Chinese firms pitting against other Chinese firms. Cities and provinces compete alongside companies, creating what Professor Weiru Chen from CEIBS (China Europe International Business School) described as a unique blend of "state capitalism" and "entrepreneur capitalism”. The result is an ecosystem where innovation emerges not from central planning alone, but from the intersection of government support and fierce entrepreneurial drive.

One of the lynchpins of this ecosystem is Hangzhou, the ancient coastal city that has emerged as China's AI powerhouse. In just two years, the city has spawned "Hangzhou Six Little Dragons" making waves in various AI applications. They are DeepSeek, Unitree (maker of the boxing bots as well as dancing bots that performed at China’s Spring Festival Gala this year), Game Science, DEEP Robotics, BrainCo and Manycore Tech. 

Tellingly, said Chen, "five of the leaders graduated from local universities. Only one is from Harvard University." Compared with the Silicon Valley model, where individual genius or breakthrough technologies has long been the success factor, the Hangzhou model is quintessentially Chinese – collective in spirit and supported by the state. 

As Chen explained, three factors are key: a vibrant society where young professionals exchange knowledge and develop shared dreams; an effective market supported by alumni networks from Zhejiang University (which boasts 33 publicly listed companies among its graduates); and a “service-oriented” local government that is "responsive but not meddling ".

Robots: The next frontier

Looking ahead, the panellists identified robotics and "embodied AI", or intelligent robots, as China's next competitive frontier. Unlike large language models, which face commoditisation pressures, robotics combines China's manufacturing strengths with AI capabilities.

"If you look at humanoid robots... Asian companies, including China, can really have an advantage on the movement parts, which account for 55 percent of the cost," said Chen. 

He pointed to applications ranging from autonomous vehicles – where new energy vehicles already represent 53-56 percent of Chinese auto sales – to service robotics addressing demographic challenges.

This focus on embodied AI leverages China's manufacturing ecosystem while addressing real societal needs. As populations age across Asia, applications in eldercare, companionship and service industries become not just commercially viable but socially necessary.

Implications for global competition

What emerged from this analysis is a picture of Chinese AI development that is both more sophisticated and more pragmatic than often portrayed. Rather than simply trying to match Western models, China appears to be developing complementary strengths that could prove decisive in the next phase of the AI race.

Understanding AI's future requires looking beyond Silicon Valley and appreciating the diverse approaches across different regions. China's combination of intense internal competition, strong manufacturing capabilities and focus on practical applications may well define the next chapter of AI -- a development the West would be unwise to overlook.