20 December 2025

Why China Can’t Win the AI-Led Industrial Revolution

DI GUO and CHENGGANG XU

History has consistently shown that industrial revolutions require free institutions and robust demand to support ongoing entrepreneurship and the commercialization of new, productivity-enhancing products and services. With its system of totalitarian party-state rule, China checks none of these boxes.

STANFORD – AI is widely recognized as the core technology in an emerging industrial revolution that will probably transform every facet of the global economy. UN Trade and Development (UNCTAD) estimates – conservatively – that the global AI market will reach $5 trillion by 2033, thanks to average annual growth of about 31%. The International Monetary Fund predicts that the technology could boost global GDP by 4% over the next decade, with the United States gaining as much as 5.4%. AI’s impact on science, innovation, the military, and geopolitics is already significant, reinforcing the sense that the race for AI dominance is also a race for global dominance.

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