The Chinese government's intense desire for technological self-sufficiency and global leadership paradoxically reduces investment risk. Beijing now "desperately" needs its deep science companies to succeed, making another unpredictable, Jack Ma-style crackdown on the industry less likely than in previous years.

Chinese AI models are largely open source not for ideological reasons, but as a pragmatic branding strategy. Open-sourcing their models was necessary to build trust and credibility with Western developers who might otherwise be skeptical of closed, proprietary Chinese technology.

China's seemingly contradictory AI policy—promoting both openness and strict control—stems from its view of AI as a "normal technology" akin to the internet. Unlike some in the West who see it as an existential risk, Beijing sees a technology that should be diffused as widely as possible for economic gain, while managing its risks with conventional tools like robust cybersecurity.

The intensity of Chinese AI regulation fluctuates with the government's confidence in its domestic industry. When feeling behind (post-ChatGPT), they eased up to foster innovation. After recent successes, they feel more secure and may re-assert stricter, more hands-on control.

Contrary to fears that U.S. regulation cedes ground to China, the CCP has strong self-interested reasons to regulate AI. It is highly concerned with internal stability and control, cracking down on AI-driven social disruption and the risk of domestic cyberattacks, independent of Western policy.

China champions open-source AI on the global stage to position itself as the open alternative to a restrictive U.S. This narrative is a valuable diplomatic asset, making a complete reversal on open-sourcing advanced models unlikely, even with rising security concerns.

Contrary to expectations of a closed system, authoritarian China has taken the lead in developing the world's best open-source AI models. This may be a deliberate strategy to accelerate its progress by attracting a global community of developers to build on its platforms.

Xi concluded his AI speech by quoting the "Discourses on Salt and Iron," an 81 BC text about the Han dynasty's struggle to govern the privatized salt and iron industries. This historical parallel suggests China's current AI governance debate is a modern iteration of a centuries-old tension between private innovation and state extraction/control.

Mindful of historical Luddite backlashes, both the Chinese government and AI entrepreneurs adopt a cautious, collaborative approach. Regulations, like those for AI companions, are drafted and then softened after industry feedback, balancing innovation with the government's top priority: social stability.