China's core artificial intelligence industry is projected to surpass 1.2 trillion yuan ($170 billion) in 2025, representing a 33 percent increase from the more than 900 billion yuan recorded in 2024, according to a new assessment from the China Academy of Information and Communications Technology.
The estimate was outlined in a report released by CAICT, an institute affiliated with China's Ministry of Industry and Information Technology, during an industry forum in Beijing. The projected growth underscores China's accelerating AI development despite ongoing technology restrictions from the United States and intensifying competition with American AI leaders.
Rapid Sector Expansion
The 300 billion yuan increase from 2024 to 2025 reflects China's aggressive push to establish AI self-sufficiency and compete with Western technology leaders. The growth rate significantly outpaces most traditional technology sectors and demonstrates how AI has become a national strategic priority for Beijing.
China's core AI industry encompasses fundamental technologies including machine learning platforms, natural language processing systems, computer vision applications, and AI chip development. The sector excludes broader AI-enabled applications across other industries, meaning the total economic impact of AI in China extends well beyond the core industry valuation.
Strategic Government Support
The projected growth comes amid substantial government backing for AI development. Beijing has designated artificial intelligence as a critical technology for national competitiveness and economic transformation, directing state funding and policy support toward AI research, infrastructure, and commercialization.
Chinese authorities have implemented favorable regulations for AI deployment, established AI innovation zones in major cities, and encouraged collaboration between research institutions and commercial enterprises. This coordinated approach contrasts with the more market-driven AI development model in the United States and Europe.
Competition with Western AI Leaders
China's AI industry growth occurs as the country works to close gaps with American competitors like OpenAI, Google, and Anthropic. Chinese companies including Baidu, Alibaba, and ByteDance have released competitive large language models, while startups like DeepSeek have gained attention for developing capable open-source AI models at lower costs than Western counterparts.
However, U.S. export restrictions on advanced AI chips from Nvidia and AMD have complicated China's efforts to train cutting-edge models. Chinese companies have responded by stockpiling chips, developing domestic alternatives, and optimizing AI training efficiency to maximize performance from available hardware.
Domestic Market Focus
Much of China's AI growth centers on domestic market applications rather than international expansion. Chinese AI companies focus heavily on e-commerce optimization, content recommendation systems, autonomous vehicles, smart city infrastructure, and industrial automation tailored to the Chinese market.
This domestic focus provides advantages including direct government support, massive data availability from China's 1.4 billion population, and fewer regulatory constraints on data collection and AI deployment compared to Western markets. However, it also limits Chinese AI companies' global market share and influence on international AI standards.
Industry Implications
The projected 1.2 trillion yuan valuation positions China's core AI industry as a major force in global technology competition. While still smaller than the combined AI sectors of the United States and Europe, China's rapid growth rate and government backing suggest continued narrowing of capability gaps.
For global AI development, China's expansion creates a bifurcated technology landscape with distinct ecosystems. Western and Chinese AI systems increasingly develop along separate paths, with different training data, deployment contexts, and regulatory frameworks shaping their evolution.
The growth projections from CAICT signal that competition in AI will intensify throughout 2025, with implications for everything from chip manufacturing to model development to international technology policy. As China's AI capabilities advance, questions about technological decoupling, standards setting, and competitive dynamics will become increasingly central to global technology discussions.
