China is leveraging state-supported companies to release powerful, open-source AI models at drastically lower prices. The core strategy is not to build the single best model, but to commoditize the market, capture global usage, and undermine the pricing power of Western competitors.

To manage high operational costs, some American AI startups adopt a hybrid approach. They build the bulk of their applications on performant, cheaper Chinese open-source models, reserving expensive frontier US models for critical tasks like evaluation and guidance.

China's strategy for AI dominance is not to build superior models, but to proliferate its own cheap, open-weight AI models globally. By offering free technology and training, especially in the Global South, China aims to establish its standards and geopolitical influence.

China's strategy of releasing free, powerful AI models is an economic counterattack to US chip controls. It cannibalizes the market for paid API access from US leaders like OpenAI, hitting their revenue and slowing R&D, thereby neutralizing the American technological advantage.

China may treat AI as a public utility—free and open-source—to maximize national productivity. This model directly conflicts with the U.S. profit-driven approach, where companies must monetize AI to survive. This creates a systemic risk for U.S. firms that may be unable to compete with free, state-backed alternatives.

While US firms lead in cutting-edge AI, the impressive quality of open-source models from China is compressing the market. As these free models improve, more tasks become "good enough" for open source, creating significant pricing pressure on premium, closed-source foundation models from companies like OpenAI and Google.

China's strategy for winning the AI race is not about building the most advanced model, but about mass distribution of lower-cost, 'good enough' open-weight models. By prioritizing volume and accessibility, they capture the majority of token usage and achieve market dominance.

China's strategy of open-sourcing near-frontier AI models is a calculated move to create pricing pressure and market disruption for Western AI companies. This benefits China's global standing by creating disturbances, as seen with the DeepSeek model release. Considering export controls marks a potential pivot from this disruptive strategy.

China's AI strategy is not to beat the US on building the most advanced "frontier" models, but to create "good enough" open-source alternatives that are significantly cheaper. This price war threatens to hollow out the revenue of US AI leaders, even if US technology remains superior.