Why China is racing ahead in AI, and in everything else: their whole economy is open source

Tech industry insiders are shocked at China's rapid progress in Artificial Intelligence, especially given our export bans on the fastest semiconductors.

In the most recent development, DeepSeek introduced their AI model that outperforms the ones developed by Facebook (Meta) and ChatGPT (OpenAI).

DeepSeek's model was developed with less than 9% of the computing hours thought necessary to build such a rich model, and at an astonishing cost of just $6 million.

DeepSeek's announcement followed those of Tencent and Alibaba, who developed their models with slower, older-generation chips, but whose AI outperform rivals from Silicon Valley.

The difference, though, is that these Chinese AI models and LLM's were all developed using open-source frameworks. And China's entire economy runs the same way: infrastructure, supply chains, university research, and technology are widely shared by hundreds of companies with hundreds of thousands of engineers within similar industries. The same dynamics that propel China's industries to dominate in other sectors are employed in the fields of AI and semiconductor chip design.

To understand how and why China has closed the gap so quickly in technology, knowledge of tech and semiconductors are far less important than the understanding of China's industrial clustering policy.

Resources and links:
South China Morning Post, Chinese start-up DeepSeek launches AI model that outperforms Meta, OpenAI products
https://www.scmp.com/tech/tech-trends/article/3292507/chinese-start-deepseek-launches-ai-model-outperforms-meta-openai-product

Analyst notes on DeepSeek V3
https://x.com/karpathy/status/1872362712958906460?lang=en

Introducing DeepSeek-V3!
https://x.com/deepseek_ai/status/1872242657348710721

CNBC, China wants to dominate in AI — and some of its models are already beating their U.S. rivals
https://www.cnbc.com/2024/12/17/chinese-ai-models-are-popular-globally-and-are-beating-us-rivals-in-some-areas.html

Alibaba's new AI model rivals OpenAI's GPT-4o in coding ability amid open source competition
https://finance.yahoo.com/news/alibabas-ai-model-rivals-openais-093000571.html

The Knowledge Spillover Effect of Multi-Scale Urban Innovation Networks on Industrial Development: Evidence from the Automobile Manufacturing Industry in China
https://www.mdpi.com/2079-8954/12/1/5

A Study of Knowledge Spillovers within Chinese Mega-Economic Zones
https://www.degruyter.com/document/doi/10.1515/econ-2022-0023/html

KNOWLEDGE SPILLOVERS AND SCIENCE PARKS: EVIDENCE FROM CHINA
https://www.jstor.org/stable/48767564?seq=1

DeepSeek: The New Frontier in Chinese AI Shocks Industry Giants
https://substack.com/home/post/p-153962801?utm_campaign=post&utm_medium=web

How China Is Advancing in AI Despite U.S. Chip Restrictions
https://time.com/7204164/china-ai-advances-chips/

Forbes, Eric Schmidt profile
https://www.forbes.com/profile/eric-schmidt/

Map of China’s manufacturing distribution
https://www.berkeleysg.com/china-manufacturing-distribution-map/

Closing scene, farms in Yunnan province