With DeepSeek, China innovates and the US imitates

The start-up’s breakthrough confounds outworn prejudices about the two countries

January 30th, 2025, Financial Times

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Triumphalist glee lit up the Chinese internet this week. Just as Google DeepMind’s victory over China’s strongest Go player in 2017 showcased western brilliance in artificial intelligence, so DeepSeek’s release of a world-beating AI reasoning model has this month been celebrated as a stunning success in China.

DeepSeek’s smarter and cheaper AI model was a “scientific and technological achievement that shapes our national destiny”, said one Chinese tech executive. The start-up had become a key player in the “Chinese Large-Model Technology Avengers Team” that would counter US AI dominance, said another.

China’s delight, however, spelled pain for several giant US technology companies as investors questioned whether DeepSeek’s breakthrough undermined the case for their colossal spending on AI infrastructure. US tech and energy stocks lost $1tn of their market value on Monday, although they regained some ground later in the week.

The stereotypical image of China abroad may still be that of a state-subsidised, capital-intensive manufacturing economy that excels at churning out impressive low-cost hardware, such as smartphones, solar panels and electric vehicles. But, in truth, China long ago emerged as a global software superpower, outstripping the west in ecommerce and digital financial services, and it has invested massively in AI, too.

DeepSeek’s emergence confounds many of the outworn prejudices about Chinese innovation, although it is far from a typical Chinese company. It certainly invalidates the old saw that while the US innovates, China imitates and Europe regulates. In several ways, DeepSeek resembles a bootstrapped Silicon Valley start-up, even if it was not founded in a garage. Launched in 2023, the company has the same high-flown ambition as OpenAI and Google DeepMind to attain human-level AI, or artificial general intelligence (AGI). But its founder Liang Wenfeng runs one of China’s leading hedge funds, meaning the company has not had to raise external financing.

In an interview republished in the China Talk newsletter, Liang explained that DeepSeek operated more as a research lab than a commercial enterprise. When recruiting, it prioritised capabilities over credentials, hiring young Chinese-educated researchers. Liang said these people were given the space to explore and the freedom to make mistakes. “Innovation often arises naturally — it’s not something that can be deliberately planned or taught,” he said.

外刊精读242/243期：Deepseek与梁文锋，开启“中国创新，美国模仿”新时代(Financial Times)

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