Charles Ferguson
The release of the Chinese DeepSeek-R1 large language model, with its impressive capabilities and low development cost, shocked financial markets and led to claims of a “Sputnik moment” in Artificial Intelligence (AI). But a powerful, innovative Chinese model achieving parity with US products should come as no surprise.
It is the predictable result of a major US and Western policy failure, for which the AI industry itself bears much of the blame.China’s growing AI capabilities were well known to the AI research community, and even to the public. After all, Chinese AI researchers and companies have been remarkably open about their progress, publishing papers, open-sourcing their software, and speaking with US researchers and journalists.
Two factors explain China’s achievement of near parity. First, China has an aggressive, coherent national policy to reach self-sufficiency and technical superiority across the entire digital technology stack, from semiconductor capital equipment and AI processors to hardware products and AI models – and in both commercial and military applications.
Second, US (and EU) government policies and industry behaviour have exhibited a depressing combination of complacency, incompetence, and greed.It should be obvious that Chinese President Xi Jinping and Russian President Vladimir Putin are no friends of the West, and that AI will drive enormously consequential economic and military transformations. Given the stakes involved, maintaining AI leadership within democratic advanced economies justifies an enormous public-private strategic mobilisation on the scale of the Manhattan Project, NATO, various energy-independence efforts, or nuclear-weapons policies. Yet the West is doing the opposite.In the US, government and academic research in AI are falling behind both China and the private sector.
Owing to inadequate funding, neither government agencies nor universities can compete with the salaries and computing facilities offered by the likes of Google, Meta, OpenAI, or their Chinese counterparts. Then there is the US policy on regulating Chinese access to AI-related technology. Export controls have been slow to appear, wholly inadequate, poorly staffed, easily evaded, and under-enforced.
Chinese access to US AI technologies through services and licensing agreements has remained nearly unregulated, even when the underlying technologies, such as Nvidia processors, are themselves subject to export controls. Finally, US policy ignores the fact that AI research and development (R&D) must be strongly supported, used, and, where necessary, regulated throughout the private sector, the government, and the military. The US still has no AI or IT equivalent of the Department of Energy, the National Institutes of Health, NASA, or the national laboratories that conduct US nuclear-weapons R&D.This situation is partly the result of sclerotic government bureaucracies in both the European Union (EU) and the US.
The EU technology sector is severely overregulated, and the US Departments of Defense and Commerce, among other agencies, need reform.Here, the tech industry is somewhat justified in criticising their governments. But the industry itself is not blameless: Over time, lobbying efforts and revolving-door personnel appointments have weakened the capabilities of critically important public institutions. Many of the problems with US policy reflect the industry’s own resistance or neglect. At least in public, the industry’s line has been: “The government is hopeless, but if you leave us alone, everything will be fine.”
Yet things are not fine. China has nearly caught up with the US, and it is already ahead of Europe. Moreover, the US government is not hopeless and must be enlisted to help. Historically, federal and academic R&D compare very favourably with private-sector efforts.
The challenges of AI R&D and China’s rise require a forceful, serious response. Where government capacity falls short, we need to bolster it; not destroy it. We need to pay competitive salaries for government and academic work; modernise US (and EU) technology infrastructure and procedures.The one truly difficult policy problem is openness, particularly open-source licensing. We cannot let everyone have access to models optimised for hunter-killer drone attacks; nor, however, can we stamp “top secret” on every model. -- Project Syndicate
Author; Charles Ferguson is a technology investor and
policy analyst
