China is significantly increasing its research and development (R&D) investment, particularly in artificial intelligence (AI), following the emergence of its cost-effective and high-performance AI model, DeepSeek.

At the National People's Congress (NPC) held on March 5, 2024, China announced its R&D budget for the year would increase by 10% to 398.119 billion yuan (approximately $55.3 billion). According to the NPC's work report, China will focus on nurturing future industries such as bio-manufacturing, quantum technology, embodied intelligence (AI that interacts with the real world), and 6G mobile communication technology. These cutting-edge technology terms appeared for the first time in the government's work report. This move is seen as China's strategic reinforcement of its 'high-tech industry rise' amidst intensifying trade tensions with the United States and economic slowdown.

Premier Li Qiang stated that the government plans to innovate the operating model of national research institutes and expand the training of young scientists and engineers to promote technological innovation and strengthen self-reliance. He also emphasized, "We will significantly develop next-generation smart devices such as AI mobile phones, computers, and intelligent robots. China will strive to create an innovative environment that encourages exploration and tolerates failure."

The Chinese government expressed optimism that this investment increase will contribute to economic growth. Sun Dongsheng, director of the State Council Research Office, stated at a press conference related to the government's work report, "Considering the positive changes in the real estate market and the rapid development of electric vehicles and AI, we can achieve this year's economic growth target (around 5%) with thorough efforts."

AI was a prominent topic among NPC attendees. Lei Jun, CEO of Xiaomi and NPC representative, said at the opening ceremony, "We will apply the latest AI technology to various devices to allow consumers to enjoy the benefits of science and technology and contribute to the development of Chinese-style modernization." Wang Jiangping, former Vice Minister of Industry and Information Technology, predicted, "With the emergence of the DeepSeek large model, dedicated chips tailored to specific AI models will become the core of future development. The dedicated chip sector will experience explosive growth within one to two years."

However, some critics pointed out that China's AI industry development policies have been declarative rather than having concrete implementation plans. Charu Chanana, a Saxo Capital Markets investment strategist, noted, "Positive signals can be sent to the market only if detailed specifics of the AI investment plan are disclosed."

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