Chapter 1: What is the main topic discussed in this episode?
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Hey, What's News listeners, it's Sunday, January 18th. I'm Luke Vargas for The Wall Street Journal, and this is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to explain what's happening in our world. On today's show, one year ago, Chinese-made AI model DeepSeek shocked the world.
Earth-shattering developments in the AI space. DeepSeek said its chatbot was created... with less than $6 million.
The app has become the most downloaded free app in the US. Technology shares on Wall Street have fallen sharply.
It's mind-blowing, and it is shaking this entire industry. Since then, China's AI prowess has only grown in ways that could change global tech norms, challenge Silicon Valley's pricing power, and become a bone of contention in the US-China trade war. This week, China's AI strategy and what it means for the world. Let's get right to it.
Joining me to unpack China's approach to AI and consider the economic and geopolitical impacts of its growing adoption, I'm joined by a pair of great guests. First off, Tatia Bolk-Wadza is a technology analyst at Oxford Analytica, and Josh Chin is The Wall Street Journal's senior global correspondent in Asia. Josh, in a nutshell, what's China's AI strategy?
China's AI strategy, as opposed to the US AI strategy, China's is much more state-driven. Things really picked up in early 2005. People remember the unveiling of DeepSeek's big frontier model called R1, which was basically nearly as powerful as the top models from Google, OpenAI, Anthropic. had to produce much more cheaply.
And this was such a surprise to some people in the US and really started to wake people up to the potential of Chinese AI, but also to leaders in Beijing. And it was at that moment that the Chinese Communist Party really started to feel some hope and some confidence that they could compete. And that unleashed a whole geyser of government support.
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Chapter 2: What groundbreaking AI model did DeepSeek release last year?
But that didn't actually keep Huawei from dominating globally. And actually, we're now at a point where Huawei owns many of the essential patents for 5G and has built out networks throughout the developing world. That is a success story that Beijing is constantly looking to replicate. And you are certainly starting to see Chinese AI models being adopted around the world because they're so cheap.
Right, absolutely. I have to agree with Josh here. And I think it's important to note also that Huawei's previous success in the Global South is also paving a way for Chinese AI models as well. Because if you look at Huawei's sort of phone adoption in the Global South, That's enabling the adoption of Chinese AI models like DeepSync because DeepSync is the default AI chatbot on Huawei phones.
So we've seen a very rapid adoption in countries like Iran, Ethiopia, Niger, and others. But also the open source strategy that we mentioned before, China is using this as a way to advance its image as the champion of the developing world. It's painting open source strategy as a way to democratize access to AI data.
At the 2024 G20 summit, President Xi famously noted that AI should not become a game of rich countries. And since then, Beijing has really stepped up convening international conferences which are catered specifically to the Global South. And you see a lot of the members here entering into partnerships with Chinese tech and AI firms, adopting their AI models, which are, again, open source.
And these countries are later able to sort of develop their own national models off of Chinese products.
All right. Chinese AI there differentiating itself from other products out there in the market and Beijing promoting that. We've got to take a short break. But when we come back, how that's all going over with America's tech giants. Stick around.
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Now, Tatia, in addition to these Chinese AI companies potentially opening up new markets for themselves, it sounds like they may be chipping away at the pricing power big U.S. tech firms have been commanding.
Right. I think the success of Chinese AI models, which are so low cost, in many cases free, is really exacerbating the really deep fears about the AI bubble that's been forming in the US tech industry for a while. So beyond pricing concerns about how to make your products more competitive in the global market,
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Chapter 3: How has China's AI strategy evolved over the past year?
Yeah, absolutely. I think that could be one use case for governments when it comes to world models. It's also important to note that autonomous vehicles are powered by a type of world model. So China has a huge advantage in that domain already. I mean, China's EVs and autonomous vehicles have been vastly successful worldwide.
So I think it is expected that given the fact that world models generally align well with China's industrial development model and larger vision of AI and there's going to be a pretty significant state support directed to this domain in the coming years.
Josh, lots of advantages here for this Chinese approach. What are the major challenges to it that you're hearing about?
The biggest challenge for China is chips. This is an area where the U.S. has an immense lead. It owns all of the intellectual property and it controls the supply chain for the super high-end, really cutting-edge chips that are used to train AI models. I talked to a Former U.S. official who was behind efforts by the Biden administration to ban exports of U.S.
chips to China, who was saying it's a really difficult technology gap for China to close. They're probably as much as a decade behind. Just this last weekend, you had a bunch of top Chinese figures in AI, including Justin Lin, who is Alibaba's lead for the Quinn project, who said that China won't be able to compete if it doesn't solve the chip gap.
Though that edge in chips, I don't know, could it be a double edged sword? It's really dependent on chip performance, especially those highest end U.S. chips continuing to just achieve bigger and bigger gains over their Chinese counterparts. But if that were to sort of plateau or top out, that's a risk for Silicon Valley.
That's certainly true. We don't know for a fact that these chips are going to keep getting better and better. It's also a possibility that there's a new type of chip architecture out there that has yet to be invented that China may invent, right? There's just a lot of huge unknowns in terms of where this technology is going to go.
For the foreseeable future, there definitely are some big challenges for China and not just with chips, but also with financing. U.S. companies have much, much more money available to them.
Yeah, Josh, just jumping in, a recent Morgan Stanley report that tried to assess who could win this AI race gave credit to China and maybe an edge overall, citing its state resources, its ability to scale. But for the U.S., as you mentioned there, not just higher salaries that help boost the talent pool, but specifically private sector money that can come in off the sidelines.
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Chapter 4: What role does Alibaba's Qwen play in China's AI landscape?
Huawei has its own chips it's trying to build. And Huawei has said that it can match the computing power of American data centers by just stringing together huge numbers of sort of lower powered, less efficient chips. It's a strategy they call swarms to beat the titan. The Chinese government is committed to that. So it'll be really interesting to see exactly how many NVIDIA chips they let in.
China has been a huge market for NVIDIA. There is a lot of interest in China in H200 chips, particularly among private companies. Again, the question kind of just comes down to how much of that is Beijing going to allow to come to fruition and in what ways?
Josh Chin is The Wall Street Journal's senior global correspondent based in Seoul. Josh, thank you so much. Always a pleasure. Thanks, Luke. And Tatja Bokvadze is a technology analyst at Oxford Analytica. Tatja, thank you.
Thank you for inviting me.
And that's it for What's News Sunday for January 18th. Today's show was produced by Daniel Bach with supervising producers Sandra Kilhoff and Melanie Roy. I'm Luke Vargas, and we'll be back Tuesday morning with a brand new show. Until then, thanks for listening.
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