China’s drive toward self-reliance in artificial intelligence: from chips to large language models
Wendy Chang, Rebecca Arcesati and Antonia Hmaidi
MERICS Jul 22, 2025
- China is pursuing self-reliance in AI at every level of technology. It
sees AI as strategic for national and economic security. Facing
technology export controls from the US, Beijing has made “independent
and controllable” AI a key objective. Examining China’s efforts may
provide useful learnings for Europe in its own pursuit of digital
sovereignty.
- While
China’s government has long identified AI capabilities as a critical
goal, it employs different strategies to aid each layer. The
heaviest state support is reserved for the capital-intensive
semiconductor sector. Indigenization efforts for software frameworks are
entrusted to Big Tech companies. Higher layers, i.e., AI models and
applications, benefit from an enabling environment but receive less
direct state support.
- China’s
semiconductor industry has managed to produce its own AI chips, but
their performance does not yet match that of US semiconductor designer
Nvidia. Beijing has set indigenous capabilities as a top
priority, especially faced with US export controls. Huawei leads this
effort, working closely with domestic chipmakers.
- In models and applications, China is closing in on the US. China is heavily embedded in global open-source communities. Coupled
with a protected home market, this has spawned large language model
(LLM) developers like DeepSeek. Hardware challenges still hinder wider
deployment, but local adoption of LLMs is high, and China’s AI industry
is pivoting toward specialized applications.
- China’s AI ecosystem can source critical inputs domestically, but its future will also hinge on external factors. The
country has nurtured a large talent pool, provided ample funding,
promoted a maturing data environment and built computing infrastructure.
Vulnerabilities include limited access to advanced chips and China’s
future participation in the global open-source community, which has long
been key for its AI progress.