Ex-Pentagon Official: China’s Ecosystem Strategy Eclipses US AI Lead

Is America's AI lead already history? On August 2, CNBC ran an opinion piece with a blunt message: The US lead over China in AI is all but gone. We need a change in national strategy.

Facing a barrage of breakthroughs from Chinese AI companies, the article presses a harder question. The real issue isn't whether China can compete at the frontier. It’s whether Washington can adapt fast enough to a rapidly maturing Chinese innovation machine.

The author Dewardric McNeal is a former US Defense Department official from the Obama years, where he handled East Asia and China security. Now he's managing director and senior analyst at Longview Global, a consulting firm.

Ex-Pentagon official: US AI dominance is vanishing. We must learn from China's strategy.

Look at the buzz around DeepSeek, Moonshot AI's Kimi K3, Alibaba's Qwen models, Tencent's Hunyuan, Zhipu AI, and MiniMax.  It's solid proof that China has built an AI ecosystem that churns out world-class capabilities from not one, but many companies.

The Ecosystem vs. the One-Off Mindset

McNeal argues that China's AI ecosystem isn't just leading on model benchmarks. It's pulling ahead on cost, deployment, customization, financing, standards, developer adoption, and global reach. The US, meanwhile, is stuck in reactive mode. It's scrambling to respond to one breakthrough after another, rather than shaping the playing field.

China's AI breakthroughs aren't flukes. They stem from a deliberate, world-class innovation ecosystem.

That's a bigger deal than any benchmark score or model launch. Policymakers, tech CEOs, investors, and US allies should be paying attention. The competition has moved beyond individual companies. It's now a clash of entire innovation ecosystems.

The biggest misjudgment? Washington, according to the article,  still views China's AI advances through the lens of individual companies and single technologies. But China is building something far more formidable: a complete industrial ecosystem.

“Whether those advances emerge through original innovation, engineering optimization, open-weight collaboration, or from distillation of US models is increasingly beside the point. The larger strategic reality is that they are occurring across an ecosystem, while the US continues to evaluate them one company at a time and often responds as though each breakthrough were an isolated event rather than evidence of a broader structural transformation.”

In McNeal’s view, projects like DeepSeek, Kimi, and Tongyi Qianwen are not isolated cases. They are pieces of a coordinated whole.

Over the past few years, the US has consistently underestimated China's long-term tech investments and its ability to turn domestic industrial strategy into global competitive advantage. From rare earths to EVs, robotics, semiconductors, and now AI, the pattern is the same.

China's AI breakthroughs aren't flukes. They stem from a deliberate, world-class innovation ecosystem.

McNeal noted: “the analytical mistake has remained remarkably consistent.”  The US tends to assess China's progress product by product, dismissing each advance as “exceptional” or “unsustainable”. China, on the other hand, has pursued a patient, meticulous strategy. It's cultivating conditions for the entire ecosystem to innovate and deploy in sync.

McNeal points out that China's plan to become a tech superpower was set long before Biden's tech restrictions came into play. DeepSeek's R1 release in January 2025 was a wake-up call. It forced many to finally admit what China has been signaling for over a decade through industrial policies, five-year plans, and national science and technology strategies.

China's Full-Stack Strategy Goes Global

China’s ecosystem strategy aims to shape the competitive environment for technology R&D, financing, standardization, deployment, and ultimately promotion and application.

Together, a giant net is woven: industrial policy, finance, innovation, global standards, university curricula, state-supported developer ecosystems, diplomacy, and commercial expansion, bonded into a single coherent national strategy. The objective: lock in long-term technological leadership.

It doesn't compete company by company or technology by technology. It shapes not just the technology itself, but the environment and conditions for technological success.

AI is the strategy's clearest expression today. But it's hardly the only one.

The same logic runs through China's push in semiconductors, electric vehicles, batteries, robotics, telecom, renewable energy, critical minerals, digital infrastructure, and advanced manufacturing. AI is no exception to China's industrial strategy, but the most refined version of it.

McNeal argues China is now taking this AI playbook global. It's pushing its technology outward through open-source development, international cooperation, and targeted promotion to developing countries. The goal: expand the reach of its tech ecosystem.

The old US playbook won't work here. Washington once squeezed Chinese telecom firms. But that model is much harder to replicate in AI. Why? Because AI adoption hinges on the autonomous choices of global developers, enterprises, and governments.

The article cites US Commerce Secretary Lutnick's earlier comments on chip export restrictions. He indicated that Washington wants to make global users unable to leave the American tech ecosystem. But the author pushes back, questioning whether the US technology ecosystem is really the best choice right now.

Moonshot AI's Kimi K3 is the latest Chinese model turning heads in the US tech world.

The Bottom-Up Battle Washington Can't Win

Forget the Huawei playbook. McNeal draws a sharp contrast. Steering countries away from Chinese AI, he argues, is a far tougher challenge than Washington's earlier crackdown on Huawei and ZTE.

Governments can regulate telecom infrastructure. But they can't stop millions of developers from weaving AI models, software libraries, and tools into commercial applications worldwide.

The reason? Technology adoption today is a bottom-up wave, not a top-down decree.

The article lands on a blunt conclusion. For the US, the real question isn't just whether American tech firms can keep building the world's most powerful AI models. It's whether Washington can craft a coherent national strategy.

Because once the fight shifts to ecosystems, success hinges on more than which model tops the leaderboard. It depends on which ecosystem global developers, researchers, entrepreneurs, universities, companies, governments, and investors choose to trust, adopt, and rely on.

Mao Paishou

** 博客文章文責自負,不代表本公司立場 **

Robots, AI, and innovative drugs — the so-called new ‘New Three’ — have become China's newest foreign trade calling card, with state media highlighting their explosive overseas performance.

In the first half of 2026, China's industrial robot exports jumped 18.6% year-on-year, reaching 141 countries and regions. Surgical robot exports surged 3.3 times. The numbers signal more than industrial upgrading: they mark a solid entry into the global high-end medical market, confirming that Chinese manufacturing has evolved from the labor-intensive old 'New Three' to the technology-intensive new 'New Three’.

AI technology is accelerating integration with hardware, opening up new application scenarios in overseas markets.

As for AI: data from OpenRouter, a global AI model aggregation platform, shows that in the third week of July, China's large models recorded 36.11 trillion tokens in weekly usage, ranking first globally for twelve consecutive weeks.

That report card means China's large models are not only popular domestically but have also secured a leading position in the global AI application market, outpacing competitors for three straight months.

Innovative drugs also broke through. In the first half, China's National Medical Products Administration (NMPA) approved 11 innovative drugs with new targets and mechanisms, all independently developed by Chinese pharmaceutical companies.

AI-assisted R&D is shortening the cycle for new drug discovery, speeding up the internationalization of homegrown innovative drugs.

Out-licensing transaction value reached about $110 billion (HK$858 billion), already 80% of last year's total. Chinese companies also claimed eight of the top ten global pharmaceutical transactions. That shows Chinese pharmaceutical companies are no longer 'following' — they've taken the lead in the global innovative drug transaction market.

Global Impact and Open-Source Leadership

Chinese-made cleaning robots are replacing high-altitude 'spider-men' in Australia, cutting the risks of dangerous work. In Brazil, Chinese large models assist local power grids with maintenance and inspection in complex environments.

An innovative drug capsule from Shanghai has also been included in global authoritative treatment guidelines. These concrete cases show that China's new ‘New Three' are not just a slogan — they are genuinely changing daily lives in other countries.

NBC recently cited a Pew Research Center poll released July 15, pointing out that the view of China as a more reliable partner is gaining recognition in many regions. Even the Financial Times reported that international platforms like Pinterest and Airbnb have long used Chinese open-source models to optimize products and iterate services.

France's Libération added that thanks to a complete production system and economies of scale, Chinese innovative drugs often launch at prices far below European and American counterparts. After some cancer treatments enter the French medical insurance system, each patient can save tens of thousands of euros annually.

Some Western countries, in contrast, have been building walls and barriers to contain China's tech rise. But China is doubling down on an open-source ecosystem, giving small and medium-sized enterprises and developing countries worldwide access to top-tier computing power at rock-bottom costs.

Global downloads of Chinese open-source large models have surpassed 10 billion. And on July 28, the World Artificial Intelligence Cooperation Organization was officially established in Shanghai, hailed as a milestone in AI

Western Dependence and Expert Endorsements

A Morgan Stanley report put it bluntly: Without China, the supply-chain cost for Tesla's Optimus Gen 2 humanoid robot would multiply several times over. That's a stinging rebuke to the West — even Elon Musk's own robot project can't escape China's supply chain.

Industrial robots are now widely used in automated sorting and logistics, boosting supply chain efficiency

Wang Xiaosong, a professor at Renmin University's School of Economics, argues that China's manufacturing upgrade rests on a complete, constantly evolving industrial system, sustained R&D spending, and a super-sized market.

It's the fruit of hard work and open collaboration. Over the past five years, China's R&D spending has grown 10% annually, ranking second globally.

Retired Pakistani Air Force Colonel Sultan Hali, a China expert, recently argued that Chinese-style modernization shows tech innovation isn't just a national engine — it can also fuel global development through open cooperation.

That's, to some extent, a direct rebuttal to the 'China threat theory': China brings opportunity, not impact; empowerment, not threats.