For the last week I’ve been on a trip to China. Although I’m quite used to Asia (see below) I’ve never been to mainland China. My only previous contact was a trip to Hong Kong more than 15 years ago. I just returned yesterday, so the experience is still fresh. If you’re in a rush, here’s the TLDR:
- China is way more relevant than Western media portrays it
- It has a big advantage in AI, and the current context is favorable for an even faster evolution
- The “communism” vs “democracy” narrative has limited application here Now, let’s dive in.
Context
You may wonder why and how this article may be relevant to you, so here are a few things that clarify the context:
- I know communism first hand, I lived in a communist country (Romania) until I was 19
- I’ve lived in South East Asia for about 3 years now, in Vietnam, and on top of that I visited extensively Japan, Korea, Thailand and Bali.
- I’ve studied AI since before ChatGPT 3, back then it was called “machine learning”
A Very Big Place
First thing that hits you in China is that it’s big. It has a certain comfort of dimensions, so to speak, that makes it seem endless. You don’t even have to travel for days, you get it in the first few hours.
The infrastructure — I mean roads and general transportation — is second to none. I never experienced any sort of traffic jam, there are spaghetti junctions even in the smaller cities and that makes transportation feel solved.
The level of development seems to even out. We traveled from Hangzhou to Shanghai by bus and I never noticed any significant difference. By comparison, once you get out of Saigon to travel, let’s say, to Da Nang, you will notice a completely different kind of city, more crowded and significantly less developed.
Being big and more or less uniform makes it a very good market. One that can absorb new products very fast.
From Proletariat to Middle Class
I had, for about 3 years, the biggest car portal in Romania. I still know the brands and understand the economy behind owning and using a car. Chinese cars are on the top tier: plenty of Tesla and BYD (I just learned it means “Build Your Dreams”), or less known brands like AION or Roewe. Your regular BMW and Mercedes are common place. Almost all bikes I’ve seen, especially in Shanghai, are electric.
Based on what I’ve seen on the roads, China doesn’t have a proletariat class anymore — I guess this may be true for a few decades already, I just had my own confirmation.
This is a very important detail, from a business perspective.
A strong middle class will consume better and more expensive products. Being also evened out, without too many differences between rich and poor, will make it absorb the products faster.
Size Matters
So, putting these together, you get a very relevant player, one that is probably sharing the first place with USA as the leader. The only difference is that China doesn’t have 850 military bases across the world, but this is a political view that I will not touch. Let’s stick to the economics.
Very big country + functioning middle class + great infrastructure = way more relevant than the Western media portrays.
If you’ve never been there and you only consume your information from Western media, you are biased. To make an informed decision, you really have to be there.
The Obstacle Is The Way — The AI Version
It still baffles me that one of the most famous books in the West, The Obstacle Is The Way, was not yet read by the decision makers. If they did read it, they will never impose any ban on China.
Because of all this pressure they applied, now Chinese companies have to find new ways to compete. And they did find new ways. It was the restrictions that made them better.
Here are just a few examples: DeepSeek, Kimi, MiniMax, Qwen (backed by Alibaba, which I think it has strong ties with the government, the only player with really big media exposure).
So, trying to mechanically stopping China is backfiring big time now.
But They Are Communist, right? Right?
During my trip we made on average 300km per day on the roads. I never once saw any communist propaganda. For what it’s worth, I’ve never seen any kind of advertising either.
This is in stark contrast with Vietnam (another single party country) where you see ads everywhere on the roads and maybe 2–3% of them are communist propaganda.
At least at the visual layer, communism is somehow pushed in the background. I know for sure they have limited free speech, they have to obey more rules than in the West, but I do not see any visual enforcement on the outside. At the social fabric level, this is enforced, but you don’t have first contact with it if you just travel.
My point is that purely from an economic point of view, politics seems not to stand in the way, or at least not in an exaggerated, dictatorial way as it seems from the outside. Of course, there may be businesses benefitting from government favors, but isn’t the United States owning some shares in Intel? How is that different?
The Takeaway: It Already Happened
China is such a big country that a star analogy may be useful. The light from a very distant star may take years to reach us. Similarly, the impact of the progress that China has already made may take a few years to materialize in the West.
They already have everything in place: great infrastructure, functioning middle class, top tier intelligence. On top of that, the West unknowingly added a few obstacles that made them even more effective.
From a benchmarking perspective, the open source models from China are 6–9 months behind the SOTA Western models. But seeing things on the ground, I’m now sure the next generation that is trained by Chinese neolabs is already ahead.
