February 14, 2025

Beyond DeepSeek: How China’s AI Ecosystem Fuels Breakthroughs

By: Ruby Scanlon

In mid-January, leading U.S. artificial intelligence (AI) companies were sent reeling. DeepSeek, a Chinese AI company, unveiled its R1 model, a new chatbot of comparable quality to OpenAI’s GPT-4. While many analysts rushed to scrutinize DeepSeek’s technical capabilities, a more fundamental question loomed: How did a Chinese lab achieve such an impressive feat?

The answer lies not just in DeepSeek’s top engineers or innovative training techniques, but in the vast political and financial ecosystem China has built to accelerate AI innovation. Over the past decade, the Chinese government has made AI development a national priority, directing considerable sums of money, policy incentives, and public-private partnership opportunities toward ensuring that Beijing can compete—and ultimately lead—in AI.

While the United States should not mimic China’s state-backed funding model, it also can’t leave AI’s future to the market alone.

A recent investigation by Radio Free Asia has revealed that DeepSeek is closely tied to the Chinese Communist Party, benefiting from the state’s full-throttle push for AI leadership. However, DeepSeek’s parent company, High-Flyer, began not as an AI laboratory but as a quantitative hedge fund using AI for stock trading. Beijing’s 2021 crackdown on speculative investments forced High-Flyer to pivot. Seeking to align with government priorities, High-Flyer transitioned to AI research—giving rise to DeepSeek.

By December 2023, DeepSeek had been designated a “national high-tech enterprise,” or HTNE, by Zhejiang provincial authorities. The coveted status, awarded by China’s Ministry of Science and Technology, grants preferential tax treatment, government subsidies, and research grants. These tools demonstrate Beijing’s commitment to fostering homegrown AI. The company’s political significance was cemented in early 2024 when DeepSeek’s co-founder, Liang Wenfeng, was invited to offer “opinions and suggestions” to Chinese Premier Li Qiang in Beijing. This official recognition of DeepSeek’s expertise made clear that China sees DeepSeek as not just another AI lab but as a champion of its technological ambitions.

Read the full article on Lawfare.

More from CNAS

View All Reports View All Articles & Multimedia