Open without fuss: The secret of China's current AI explosion

Author: Yu Shaoqing

The Chinese economy is far from out of the trough, but with DeepSeek's unexpected solo breakthrough in the field of AI large models, technology stocks are ushering in an asset revaluation, and there is also hope for the recovery of the Chinese economy.

Obviously, the positive feedback brought by DeepSeek is still continuing. Starting from February 24, DeepSeek announced the launch of "Open Source Week". The first open source code base is Flash MLA, which will further benefit cloud vendors and data centers, making it easier for them to further "squeeze" the computing power of existing chips.

The popularity of DeepSeek has not only attracted hundreds of millions of ordinary users to download it, but also promoted government departments in Shenzhen, Shenyang, Dongguan, Guangzhou and other places to access it. It also made Tencent, a technology giant that had previously been cautious about AI, choose to bet on DeepSeek. At present, Tencent Yuanbao App has surpassed ByteDance's Doubao in the free download rankings of the Apple Store and is second only to DeepSeek; in the application stores of Huawei, Xiaomi, vivo and others, Tencent Yuanbao ranks first.

A number of technology giants represented by Tencent and Alibaba are trying to take advantage of the technology dividends brought by DeepSeek's open source, and then spread the above technology dividends through hundreds of millions of application scenarios, which will undoubtedly help narrow the overall gap between China and the United States in AI development.

DeepSeek was founded in May 2023, less than two years ago. However, in the two years from the end of 2022 to the present, China has demonstrated an amazing art of policy adjustment: on the one hand, under the international context of "decoupling theory", it has established the policy tone of "further expanding opening up", and used the continuously expanding visa-free policy to attract foreigners to travel, do business and invest in China; on the other hand, against the background of insufficient confidence in the development of the private economy, it has successively introduced hundreds of policies to promote the development of the private economy, established a Private Economic Development Bureau under the National Development and Reform Commission, and at the same time cracked down on the phenomenon of "distant-sea fishing" and so on.

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Maintaining an open pattern to the outside world and maintaining inclusiveness in development at home are fundamental conditions for China's science and technology industry to achieve breakthroughs. However, when summarizing the reasons for the success of DeepSeek's single-soldier breakthrough, two extremely bad voices dominated the mainstream. First, DeepSeek's team mainly consists of domestic university graduates, so China can achieve breakthroughs in independent research and development even behind closed doors; second, DeepSeek's success comes from the local government's keen eye for talent and precise support.

The first view exactly reverses the basic logic. Since the trade war and technology war broke out between China and the United States in the spring of 2018, China has maintained a "tit-for-tat" strategy while being more open than the United States. Especially after the emergence of ChatGPT in 2022, China's intellectual, industrial and policy circles conducted collective reflection, and the vast majority of people recognized that the United States is further widening the gap with China in cutting-edge technology. With this sense of crisis, China has been able to endure humiliation and actively promote people-to-people exchanges between China and the United States, including exchanges in academia and business, and resolutely curb the trend of decoupling.

Therefore, DeepSeek's success is first of all based on OpenAI, which is acknowledged by Liang Wenfeng himself. Secondly, it is precisely because the United States thinks it can block Chinese technology by using the "small courtyard and high walls" method that it has led China's young scientific and technological researchers to take an unconventional approach, achieve major breakthroughs in engineering technology, and greatly reduce their dependence on computing power. It can be said that the United States, the most closed and conservative country since World War II, paid the price for its closedness in the AI ​​competition with China. On the other hand, China chose the open source DeepSeek and won victory and respect.

The fatal flaw of the second view is the over-confidence in the government’s ability to “take action”. If the local government clearly understood the value of DeepSeek, the Hangzhou Municipal Government should have promoted it as early as May 2024 after the release of version V2, instead of waiting until eight months later after it was double-certified by Silicon Valley engineers and Wall Street analysts. "Greatness cannot be planned." Back to the birth background of DeepSeek, its parent company was engaged in quantitative trading, a financial operation method that was not favored by regulators. But Hangzhou did do something right, which was to allow many unclear and gray market behaviors to proceed.

In January 2024, the China Securities Regulatory Commission issued new regulations on securities lending business, including: First, a comprehensive suspension of lending of restricted shares; Second, the market-based agreement declaration for securities lending was adjusted from real-time availability to next-day availability, which restricted the efficiency of securities lending. Some analysts believe that the biggest impact will be on quantitative institutions.

Hangzhou is an important city in the development of China's private economy. In 2024, there were 36 companies listed in the top 500 private enterprises in China, exceeding Shenzhen's 27 and ranking first among all cities. In areas where the private economy is well developed, in addition to the emergence of a service-oriented government, the emergence of a limited government is also required. As the saying goes, “When the water is too clear, there will be no fish.” Although Hangzhou’s past tolerance towards P2P brought quite tragic consequences, it also reflects a valuable tolerance towards private finance.

Over the past two years, China has insisted on promoting greater opening-up externally and letting the domestic market take its course. This has given China’s science and technology industry a chance to recuperate and even catch up, and has also unleashed unexpected energy. In addition to large models such as DeepSeek, China is also accelerating breakthroughs in its basic technological capabilities in the semiconductor field.

According to the in-depth analysis report on the technological level in three key areas released by the Korea Institute of Science and Technology Planning and Evaluation (KISTEP) on February 23, the results of a questionnaire survey of 39 domestic experts showed that as of 2024, South Korea's technological basic capabilities in the semiconductor field will lag behind China in all key areas.

It is worth noting that the experts participating in this questionnaire survey had undergone the same assessment in 2022. At that time, they believed that South Korea was considered to be leading in high integration, resistive memory technology, advanced semiconductor packaging technology, and next-generation high-performance sensing technology. However, in just two years, the situation has completely reversed.

Currently, the Russo-Ukrainian war has entered its fourth year. This war has not only brought Russia into "wartime Keynesianism", but also dragged the whole of Europe into the quagmire of economic and technological stagnation. Interestingly, the Russia-Ukraine battlefield was the first war in which humans used AI technology on a large scale. AI has penetrated into the entire chain of intelligence, decision-making, strikes, and public opinion warfare for both sides. It is in this context that the current explosion of China’s AI industry has demonstrated its invaluable value.