China's AI Boom Is Reshaping The Global Economy—And The U.S. Isn't Ready

The rapid advancements in artificial intelligence by Chinese companies like DeepSeek are transforming the global economic landscape, while the U.S. and European Union struggle to keep pace.

DeepSeek’s ability to develop cutting-edge AI models despite reportedly not having access to the most advanced American chips has caught the attention of researchers worldwide.

The company’s success is an example of the ongoing race to make AI more efficient and accessible, with researchers at Stanford University and the University of Washington also making strides in reducing the cost of training AI models.

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The technological leap has presented Europe with an unexpected opportunity to catch up in the AI race, according to The Economist, provided it can overcome its stringent regulatory hurdles. French President Emmanuel Macron has encouraged investment in data centers, but equally important is the need to streamline the red tape that hinders companies from innovating and adopting AI.

The EU’s AI Act, for instance, imposes a daunting set of requirements on startups offering AI services, ranging from risk management systems to impact assessments and inspections. Privacy rules also pose a challenge, with even large tech firms experiencing delays in launching AI products in Europe due to compliance issues.

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German manufacturers, who possess a wealth of proprietary data that could fuel productivity-enhancing AI tools, are often deterred by the fear of breaching regulations. The Economist argues that a relaxation of rules and harmonized enforcement could help Europe harness the potential of AI more effectively.

At the same time, the report noted that the U.S. must recognize that its monopoly power over AI is fading, as China’s advances demonstrate that access to cutting-edge chips is no longer the sole determinant of success. 

To maintain its competitive edge, The Economist said America needs to attract the world’s top talent, even if it proves unpopular with MAGA Republicans.

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While Vice President JD Vance‘s warning against the use of Chinese infrastructure at the recent AI summit in Paris was justified, the report said America would be more successful in discouraging the adoption of Chinese AI if it were more willing to share its technology with partners like India.

The strict AI controls proposed by then-President Joe Biden in his final days in office, which would hinder exports even to allies, risk pushing countries into China’s embrace. Revising the controls would encourage the use of American technology over Chinese alternatives.

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