Chinese AI giants are turning to the west to scale their businesses

The rise of Chinese AI on the global stage: Chinese AI companies are rapidly expanding internationally, marking a new era of technological influence and global competitiveness for China.

• As of 2024, out of 1,500 active AI companies worldwide, 751 are based in China, with 103 already expanding internationally.
• This expansion is driven by both China’s growing strength in tech innovation and the need to find new markets as domestic competition intensifies.

Key players and strategies: Major Chinese tech giants and startups are adopting diverse approaches to international expansion, focusing on different regions and market segments.

• Tech giants like Huawei, Tencent, and Alibaba are concentrating on cloud computing and AI infrastructure in Southeast Asia and the Middle East, aligning with China’s Belt and Road Initiative.
• ByteDance has launched 11 overseas applications in seven months, targeting familiar Western consumer markets.
• AI startups are adopting a model + application approach, focusing on Western consumer markets with productivity, creative, and companion apps.

Driving factors for overseas expansion: A combination of domestic market pressures and international opportunities is propelling Chinese AI companies to look beyond their borders.

• Intense domestic competition has led to market saturation and profit pressure, with 238 Large Language Models (LLMs) released in China between October 2023 and September 2024.
• Regulatory pressures and a cooling investment environment in China are pushing companies to seek growth opportunities abroad.
• Overseas markets, particularly in emerging economies, offer higher willingness to pay and less competition, presenting attractive opportunities for Chinese AI companies.

Key success factors for international expansion: Chinese AI companies are adopting several strategies to succeed in foreign markets and build global influence.

• Localization efforts include adapting to diverse regulatory environments, such as the EU’s AI Act, and adjusting technical solutions to local infrastructure and standards.
• Companies are boosting international influence through open-source projects, with Chinese models frequently appearing on global leaderboards like Hugging Face.
• Many firms are adopting new brand names or promoting themselves using model or application names to better fit into local markets and mitigate geopolitical pressures.

ESG and AI for Good initiatives: Chinese AI companies are increasingly focusing on environmental, social, and governance (ESG) strategies to enhance their global appeal and contribute to sustainable development.

• The China ESG30 Forum has highlighted ESG and AI as two pillars for Chinese companies to integrate into a new phase of globalization.
• AI applications are being used to develop green technologies and promote product sustainability, helping Chinese firms stand out in the competitive landscape.

Challenges and future outlook: While overseas expansion offers significant opportunities, Chinese AI companies face numerous challenges in unfamiliar markets.

• Companies must quickly adjust to local markets, comply with regulations, and build awareness in new territories.
• The true potential of AI lies in its ability to reshape industries, requiring Chinese companies to find the right balance as AI+ enablers in local contexts.

Broader implications: The global expansion of Chinese AI companies represents a significant shift in the technological landscape, with potential far-reaching consequences for international competition and innovation.

• This expansion echoes historical Chinese expeditions but in a modern, technology-driven context.
• The success of Chinese AI companies abroad may depend on their ability to navigate complex geopolitical dynamics and contribute to open, collaborative innovation ecosystems.