The Truth About China's Generative AI Revolution Nobody Talks About with Grace Shao

Jul 28, 2025

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"China's approach is very pragmatic. People have been saying DeepSeek did it out of necessity. There's obviously a GPU constraint and hardware constraint in China, something they're working around. In many ways, the engineering genius and engineering innovation is what set DeepSeek apart. It challenged a global narrative around needing more GPUs and more money to get better AI. It was about throwing capital at the problem. It was a different approach because the capital ecosystem in China itself is very different. People talk about proof of concept - you have to prove your concept first in China to get funding. For many startups, they weren't getting much funding before the DeepSeek moment. To your point, no one really knew it would have a strong ROI, so only the BATs that had money and understood the technology were backing it." - Grace Shao, Founder of AI Proem Newsletter

Fresh out of the studio, Grace Shao, founder of AI Proem Newsletter and former CNBC and CGTN journalist, joins us to explore the rise of generative AI in China and how it's reshaping the global technology narrative. She began the story of her career journey and started with the conversation reflecting on how the DeepSeek moment revitalized China's internet sector after years of regulatory challenges and geopolitical tensions. Grace unpacks the pragmatic Chinese approach to AI development, explaining how companies like ByteDance, Alibaba, and Tencent are leveraging their unique ecosystems and data advantages while startups embrace open-weight models to prove innovation over imitation. She discusses why the "China versus US AI arms race" narrative misses the point, the strategic reasons behind companies relocating to avoid geopolitical sensitivities, and how distribution challenges are separating winners from losers in the consumer AI space. Addressing the broader implications, Grace explores the real opportunities in robotics, vertical AI applications, and why collaboration rather than competition should define the industry's future. Closing the conversation, she shares her vision for bridging cultural understanding between East and West and what success looks like for the next generation of AI development.

Episode Highlights: [00:00] Quote of the Day by Grace Shao, Founder of AI Proem [01:21] Introduction: Grace Shao from AI Proem [04:29] China's tech moves incredibly fast. [08:09] China's generative AI landscape: BATs, Startups & Research Labs [09:23] Most AI startups have financial ties with Alibaba or Tencent [10:02] Chinese AI approach more pragmatic: commercialize quickly versus philosophical AGI pursuit [12:23] Alibaba's approach to LLMs with Qwen [15:00] Tencent's WeChat integration with DeepSeek vs Tencent Yuanbao [18:03] ByteDance pivots to multimodal LLM models [21:31] DeepSeek moment revitalized China's internet sector after rough 2022-2024 period [27:28] DeepSeek and Kimi embrace open-weight models for talent and adoption [29:46] Open sourcing as strategic decision for China LLMs [33:19] US capital pullout from China forced companies like Manus overseas to Singapore [37:17] Robotics in China: Unitree Robotics, UBTech and Galbot [42:05] Chinese startups focus on vertical integration rather than competing on LLMs [43:51] Healthcare and agricultural AI applications extremely advanced in China [44:13] This isn't an arms race; framing as competition misses the point [45:49] China and US should collaborate on AI safety and regulation for future generations [49:00] Closing

Profile: Grace Shao, Founder of AI Proem Newsletter: https://aiproem.substack.com/ Personal Site: https://www.proemcommunications.com/aboutgraceshao LinkedIn: https://www.linkedin.com/in/gmzshao/

Podcast Information: Bernard Leong hosts and produces the show. The proper credits for the intro and end music are "Energetic Sports Drive." G. Thomas Craig mixed and edited the episode in both video and audio format. Here are the links to watch or listen to our podcast.

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