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.

Contrary to common Western assumptions, China's official AI blueprint focuses on practical applications like scientific discovery and industrial transformation, with no mention of AGI or superintelligence. This suggests a more grounded, cautious approach aimed at boosting the real economy rather than winning a speculative tech race.

China's investment in green technology is driven less by environmentalism and more by strategic goals. By dominating renewables and EVs, China reduces its dependence on foreign oil—a key vulnerability in a potential conflict with the US—while building global soft power and boosting its GDP through green tech exports.

Chinese policymakers champion AI as a key driver of economic productivity but appear to be underestimating its potential for social upheaval. There is little indication they are planning for the mass displacement of the gig economy workforce, who will be the first casualties of automation. This focus on technological gains over social safety nets creates a significant future political risk.

While investing in government-supported sectors like AI and semiconductors seems safe, it's a long-term risk. A government's priority is political—winning elections and preserving jobs—which will eventually conflict with an investor's goal of maximizing profit, leading to poor returns as seen in China.

China’s economic strategy prioritizes technology and manufacturing competitiveness, assuming this will create a virtuous cycle of profits, jobs, and consumption. The key risk is that automated, high-tech manufacturing may not generate enough jobs to significantly boost household income, causing consumer spending to lag behind industrial growth.

For Chinese policymakers, AI is more than a productivity tool; it represents a crucial opportunity to escape the middle-income trap. They are betting that leadership in AI can fuel the innovation needed to transition from a labor-intensive economy to a developed one, avoiding the stagnation that has plagued other emerging markets.

The widely reported collapse of China's housing market is not an organic crisis but a state-directed reallocation of capital. By instructing banks to prioritize industrial capacity over mortgages, the government is deliberately shifting funds away from a speculative real estate bubble and into strategic sectors like microchips to counter US sanctions and build self-sufficiency.

The US is betting on winning the AI race by building the smartest models. However, China has strategically mastered the entire "electric stack"—energy generation, batteries, grids, and manufacturing. Beijing offers the world the 21st-century infrastructure needed to power AI, while Washington focuses on 20th-century energy sources.