DeepSeek, TikTok, Temu: How China is taking the lead in tech

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The rise of the Chinese AI chatbot DeepSeek has taken the world by storm. But this is just a part of a larger trend: Chinese apps are climbing the global charts. TikTok, CapCut, Shein, and Temu are just a few examples.

This growth is not limited to apps on our phones. China is becoming dominant in several other tech sectors as well. For instance, in the automotive industry, it has surpassed traditional car manufacturing powerhouses by selling more cars, largely due to electric car makers like BYD. This success is partly fueled by China's position as the world's largest battery manufacturer.

China is also a dominant player in the solar panel industry, controlling 80-95% of the global supply chain. By 2028, it is predicted that 60% of the world's renewable energy will be generated in China. In the drone market, China holds the top position, with 70% of the drones in the sky made by DJI in Shenzhen. Three of the world's top ten drone makers are based in China.

In the rapidly evolving field of quantum computing, Chinese scientists publish more research papers annually than any other country. Remarkably, China is ahead of the United States in some areas of quantum computing development.

China is also making a significant impact in the AI sector. Chinese AI firms now hold more patents than any other nation, and the rise of DeepSeek shows that China is capable of competing with dominant U.S. giants.

Made in China 2025

So, how did China achieve all of this? Much of it is the result of a long-term strategy. In 2015, the Chinese government launched an ambitious plan called Made in China 2025, with the goal of transitioning from being the world's factory for low-cost goods to becoming a global leader in technology and innovation.

The initiative has been largely successful, with China making significant strides in industries like electric vehicles, 5G, batteries, and solar energy. Even in AI and generative AI, China has become one of the key players.

The plan set out over 250 mini-goals across ten target technologies, and according to the South China Morning Post, 86% of them have been achieved. In some areas, like electric vehicles and renewable energy, China has exceeded its targets.

Many analysts, despite occasional bias accusations against the South China Morning Post, have hailed Made in China 2025 as a success.

How China Has Achieved This Success

One of the ways China has been successful is through its unique state-backed capitalism system. The government plays a central role in setting research and funding agendas, bringing in foreign researchers, and enticing them to stay in China or share their innovations with Chinese companies. Additionally, foreign businesses are often required to form joint ventures with Chinese companies to operate in the country.

According to U.S. Congressional research, the Chinese government planned to spend $1.5 trillion on grants for research and development or to acquire foreign companies. By 2020, more than $627 billion had been spent.

Research centers have been set up in city hubs focused on various technologies. However, the U.S. and its allies have accused China of bypassing some of its technological innovations by stealing intellectual property through hacking, particularly in industries like aerospace. China has always denied these allegations.

Sanctions

Made in China 2025 was so successful that the Chinese government stopped using the term after a few years because it was antagonizing rival nations. However, by then, the damage had already been done. Over time, the West imposed various restrictions and sanctions on China regarding sensitive technologies. These external threats forced China to pursue a strategy of self-sufficiency in advanced technology.

An example of this is Huawei. In 2019, Huawei was a global leader in 5G technology and had a significant share of the mobile phone market. However, U.S.-led sanctions, citing national security concerns, severely impacted Huawei's market share and its ability to access the microchips needed for innovation. Nevertheless, the company pivoted to microchip manufacturing and became a major player in that field. In 2023, Huawei released a phone with a microchip that surpassed what the world believed was possible for the company.

A similar situation occurred with the AI chatbot DeepSeek. Due to the lack of access to powerful chips, the company used older chips and innovated new techniques to build an impressive product at a fraction of the cost.

Reactions

For the U.S., DeepSeek's emergence was a shock. The rise of AI from a Chinese company should serve as a wake-up call, urging U.S. industries to stay focused and competitive. Similarly, TikTok has also surprised the West, becoming the first non-U.S. social network to succeed in the last decade. However, its success is under scrutiny, with the U.S. considering intervention over national security concerns.

Other Chinese companies, like Shein and Temu, are proving to be formidable competitors in e-commerce by combining cheap Chinese goods with innovative app technology.

Challenges Ahead

Despite these successes, China has not met all of its Made in China 2025 goals. For example, it is still far behind in chip manufacturing, and the situation is expected to worsen due to further sanctions and controls. Meanwhile, the U.S. government and private companies are investing hundreds of billions of dollars into staying ahead in chip technology. This increased investment is expected to keep the U.S. at the forefront of the industries of the future. In January, U.S. tech giants pledged to invest up to $500 billion in AI infrastructure, much of it taking place within the U.S.

Other industrialized countries like Germany and Japan are also launching counter-plans, but there's no doubt that a new high-tech leader has emerged: China, with its big ambitions, deep pockets, and plenty of patience.