Six months after DeepSeek's breakthrough, China speeds on with AI

Real-world applications have priority over cutting-edge development.

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The mecca for China's boom in artificial intelligence (AI) is Liangzhu, a leafy suburb of Hangzhou, the tech-heavy capital of Zhejiang province. The Communist Party has long touted Liangzhu's famous archaeological remains, dating back to 3300BC, as proof of the age of Chinese civilisation.

Now Liangzhu, with its myriad AI start-ups, represents the future. Investors from all over China flock there to meet growing numbers of founders, app engineers and other AI developers and dreamers. It is six months since a barely known AI start-up, DeepSeek, caused a huge stir by releasing an impressive open-source model trained for a sliver of the cost of fancier Western ones.

Its founder studied at Zhejiang University, a tech mothership not far from Liangzhu. The area is at the heart of an AI ecosystem, which China hopes will soon rival America's.

The signs are promising. In July, three Chinese labs introduced stellar large language models that are reckoned to be among the world's best. AI technologies have "broken through the critical threshold of usefulness", says one early-stage investor who frequents Liangzhu.

He predicts a surge in how AI can be applied. "Once the water boils," he says, "many people want to build a steam engine."

Mr Sam Hu, at a sunny cafe in Liangzhu's main plaza, is one such person. After stints at Tencent, a tech giant, and two ride-hailing firms, in 2024, Mr Hu struck out on his own to develop an AI agent that helps managers make decisions. The moment was right. These days, he explains, "the cost of trial and error is lower".