In the context of the increasingly fierce AI competition, China is showcasing a new strategic stance:
“By releasing a large number of open-source AI models, it seeks to weaken the advantage of American technology companies” and, with hardware at its core, redefine the global AI industry value chain. What seems to be an initiative under the name of “open-source” may hide a much grander national interest and industrial restructuring blueprint.
Balaji: China is “Commercializing” AI Models
Former Coinbase CTO Balaji took to Twitter recently, pointing out signs that China is releasing various AI models on a large scale, covering areas such as computer vision, robotics control, and image generation.
He expressed concerns that the purpose of these open-source models might not only be to promote technological exchange but may also attempt to “squeeze the profits from AI software,” as China’s main profit sources lie in AI-driven hardware, such as smart home devices, self-driving cars, drones, and robots. This model resembles China’s past strategy towards American manufacturing: “Copy, optimize, scale up, and then seize the market with low prices.”
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Deep Logic: From DeepSeek to National Strategy
Balaji believes that China’s aggressive push for AI model open-sourcing can be understood through the following points:
- Market Shocking Effect: The release of DeepSeek once caused the evaporation of about $1 trillion in the market value of U.S. tech stocks, demonstrating the strategic value of its AI models and their market-shaking potential.
- Hardware Export Advantage: China has always been good at exporting physical goods, whereas software has not been its strength. Open-sourcing to weaken the software advantage of its competitors makes economic sense.
- Scale Suppression Strategy: Similar to the pressure China’s electric vehicles put on German and Japanese automakers, low-cost and large-scale open-source model supply could force Western AI companies to struggle with recovering their high training costs.
- National Glory and Transformation: China aims to shed its image as a “copier” and sees AI as a breakthrough that could catapult it into a global leadership position.
- Public Participation in Open-Source: DeepSeek’s open-source release not only encouraged developers to use it but even local officials and small businesses shared their self-developed AI applications on WeChat, creating a culture of widespread participation.
- National-Level Endorsement: DeepSeek’s founder, Liang Wenfeng, has met with Chinese leaders and Premier Li Qiang, suggesting that the Chinese government is likely to invest significant resources into promoting the technology.
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China’s Contrasting Strategy: Open Software, Winning Hardware
Balaji emphasized that if China succeeds in making AI software “free,” it will force Western closed-source AI model development companies into a severe challenge, especially in recouping their high R&D costs. In that case, the real source of stable profits will shift to AI hardware and integrated solutions, which is China’s strength.
China’s strategic core is: “To disrupt existing business models with open-source models while selling supporting hardware products and continually improving quality and market share.”
What surprised him was that China, which has always been known for its information secrecy, has now become one of the global leaders in open-source AI. This “contrasting strategy” actually reflects China’s highly flexible and pragmatic national policy thinking: “As long as it helps achieve victory, even parts of ‘Western values’ can be borrowed or adapted.”
It is worth noting that although the DeepSeek model has built-in censorship mechanisms, this system can be easily bypassed outside of China, indicating that China is not overly concerned with foreign speech, as long as it does not interfere with its “internal affairs.”
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The Rise of Asymmetric Strategy: How Western Countries Can Break the Deadlock
In this increasingly intense AI war, Balaji urges the Western tech world to reconsider: “How to avoid direct competition with China’s open-source models?” rather than just focusing on “What should Google do next?”
One potential answer is Bitcoin, as a decentralized and uncopyable digital asset, it may be an area that China cannot directly control. Additionally, building a stronger and more diverse developer community and ecosystem is another way to respond.
He emphasized that China is following a completely different strategic path from the 20th century: “While the West turns towards closed markets, closed borders, and closed technologies, China chooses ‘openness’ and uses ‘open-source’ as a weapon for strategic purposes.”
As a technology war with asymmetric and divergent strategic directions, the outcome of this AI competition remains uncertain, but it cannot be ignored.
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