China’s demise was gleefully predicted by the west – meanwhile, it built an AI revolution | Larry Elliott
Larry Elliott argues that Western predictions of Chinese economic collapse have repeatedly failed to materialise, and that China has instead progressed through three distinct phases of development, most recently establishing itself as a genuine rival to the United States in artificial intelligence. He notes that while China's growth model still relies heavily on investment and exports, leaving it exposed to criticism over excess capacity and weak domestic demand, its emergence as an AI power represents a significant shift with implications for global markets and the balance of power between East and West.
The article traces China's evolution from a low-cost manufacturing base ("China 1.0") to a producer of higher-end goods such as solar panels, batteries and electric vehicles ("China 2.0"), and now to a contender in cutting-edge technology ("China 3.0"). It highlights the July launch of Moonshot's Kimi K3 AI model, which proved so popular that new subscriptions were suspended within two days, offering a free alternative that reportedly matches Western models like ChatGPT. Citing analyst Edoardo Campanella, the piece describes Beijing's strategy of staying near the technological frontier and spreading its models globally, warning this could disrupt both markets and geopolitical power, particularly given the US's simultaneous alienation of allies through tariffs.
In short
- China has defied decades of Western predictions of economic collapse
- It has moved from cheap manufacturing to advanced tech leadership
- Free Chinese AI models like Kimi K3 now rival costly US versions
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
China’s progress from low-cost manufacturing to advanced clean technology and AI suggests that repeated predictions of its decline have underestimated its capacity to adapt. A strong case for the article’s argument is that widely used, competitive Chinese AI could expand access to useful technology while strengthening China’s economic and diplomatic influence.
The case against
China’s advances in AI are significant, but they do not by themselves show that its wider economic model is durable or that it has matched the West across the field. Heavy reliance on investment and exports, weak domestic demand and concerns about excess capacity leave room to argue that technological success may coexist with deep structural vulnerabilities, while claims about a major shift in global power remain uncertain.
Explained simply
For decades, China’s economy grew by making goods for export and investing heavily in factories and infrastructure. Its manufacturers have since moved into higher-value products such as electric cars, batteries and solar panels, while concerns remain about weak spending at home and production outstripping demand.
The latest phase is China’s push into advanced technology, including artificial intelligence. Moonshot is a Chinese technology company whose Kimi model has drawn strong demand; its rise reflects a wider effort by China to develop AI and make its systems available around the world.
This matters because competition in AI could affect businesses, trade and the influence of China and the United States. China’s growing role challenges assumptions that its economy is in decline, while questions remain about how sustainable its growth model is.
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