Beijing warns tech firms on AI 'involution'
Authorities in Beijing are warning technology giants to curb "involution" as competition in the artificial intelligence sector intensifies. Regulators are urging companies, which have been engaging in an AI "giveaway war," to maintain a fair and competitive market environment. The warning reflects official concern over unsustainable and overly aggressive business practices.
- The term "involution" (neijuan) describes a hyper-competitive, race-to-the-bottom environment that regulators believe is damaging the economy. In the AI sector, this has manifested as a price war where major players have drastically cut costs; Alibaba's cloud unit, for instance, reduced prices on some AI models by as much as 97%. - China's State Administration for Market Regulation (SAMR) directly intervened by summoning key tech companies, including Alibaba, ByteDance, Baidu, and Tencent, urging them to maintain a fair market environment. This concern is echoed at the highest levels, with President Xi Jinping having previously warned local governments against wasteful over-investment in AI and other strategic sectors like electric vehicles. - The price war extends beyond consumer giveaways to the cost of using the underlying technology. Chinese firms like DeepSeek and Alibaba's Qwen are offering API prices that are 10 to 30 times cheaper than comparable premium models from Western competitors like OpenAI, pursuing a "low-cost/high-volume" strategy. - This domestic competition is occurring as China actively seeks to shape global AI rules. Its "Action Plan for Global AI Governance," released in July 2025, explicitly calls for leveraging international standards bodies like ISO, IEC, and the ITU to establish international consensus on AI norms and technical standards. - While Beijing is cracking down on "disorderly" competition, it is also taking a more flexible approach to overarching regulation. A comprehensive, high-level AI law was removed from the 2025 legislative agenda, indicating a strategic pivot toward using more targeted rules, pilot programs, and standards development to guide the industry. - The regulatory framework for AI is not new but is being built incrementally. Key existing regulations include the Interim Measures for the Management of Generative AI Services (2023), the Deep Synthesis Regulation (2023), and the Algorithm Recommendation Regulation (2022). - The aggressive pricing strategy may be having an international impact, with Chinese open-source models like Qwen and DeepSeek reportedly surpassing US counterparts in cumulative downloads in 2025. Some US companies have even begun switching from US models to these lower-cost Chinese alternatives. - The intense domestic competition, dubbed the "war of a hundred models," threatens to consolidate the market by pushing out smaller, innovative firms, potentially leaving a few giants like Alibaba, Baidu, and Tencent in control.
