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China's AI Dragons Risk Choking Each Other

The Straits Times

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June 28, 2025

DeepSeek has spurred a booming artificial intelligence sector. Intense competition risks a race to the bottom.

- Catherine Thorbecke

It's a story that has played out many times in the history of China's tech sector. Notoriously fierce competition means that whenever a new craze comes along, scores of rivals emerge ready to pounce.

Firms are then locked in a race to the bottom when it comes to pricing. The food delivery wars forced out smaller players over the years and led bubble tea—another consumer fad fallen prey—to be sold in June for as little as 1.68 yuan (about 30 Singapore cents). A similar cutthroat market has left behind a trail of zombie cars in the electric vehicle sector. Now the same forces are in full swing in the booming artificial intelligence (AI) industry.

The stakes could not be higher. The government is betting that the technology will uplift swathes of the economy. Eager to not be left behind, AI start-ups, including the so-called Little Dragons, are awash with funding, and even the Big Tech companies like Alibaba Group Holding are going all in.

For now, AI firms in China are focused on the tech industry's classic playbook: scaling up user bases and racing for market share. But a key difference this time around is that nobody has actually cracked the key to getting consumers to pay.

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