Beyond DeepSeek: Eight Technology Areas Where China Already Leads

What was the DeepSeek “Sputnik moment”?

In January 2025 the Chinese AI company DeepSeek unveiled R1, a model with capabilities on par with leading Western systems — built at a fraction of the cost and with less data, despite US sanctions on semiconductor exports.

Markets reacted sharply. Nvidia’s shares fell nearly 18 percent in a day, erasing around $593 billion in market value, a historic single-day loss for a company. Microsoft, Alphabet and Broadcom also dropped; the Nasdaq 100 fell about 3 percent and the S&P 500 nearly 2 percent.

It felt like a wake-up call. But China has been ahead in several critical areas for years. (Written in January 2025; figures are as reported at the time.)

1. Recommendation algorithms: TikTok

TikTok, from ByteDance, grew on the strength of its recommendation algorithm — “the secret sauce”, as the New York Times put it. It used machine learning to read user behaviour in real time and build highly personal feeds, while Facebook and Instagram relied mainly on the social graph.

Western rivals scrambled to copy it: Instagram Reels, YouTube Shorts, Snapchat Spotlight. Copying the format hasn’t erased the lead.

2. Payments: years ahead of the West

Alipay launched in 2004 and, together with WeChat Pay, turned QR codes into everyday payment infrastructure — even for small vendors and rural businesses that never had card terminals. By the mid-2010s street vendors and taxi drivers were using them.

By 2022, mobile payments in China reached about $5.5 trillion, against roughly $1.4 trillion in the US.

3. Electric vehicles

BYD has become one of the fastest-growing EV makers in the world, with models significantly cheaper than Tesla’s, and it’s expanding aggressively in Europe. NIO bets on premium electric cars and battery swapping, XPeng on autonomous driving and smart cockpits, and Geely — owner of Volvo and Polestar — on global partnerships.

4. Smartphones

Despite sanctions, Huawei remains a major brand, and Xiaomi, Oppo and Vivo have taken big shares of global markets: affordable, feature-rich phones in Asia, Europe and Africa, and strong camera technology in Southeast Asia and India.

5. Consumer drones

DJI holds more than 70 percent of the consumer drone market, from hobby models to professional ones used in filmmaking and farming. Western drone makers have been slowed by strict regulation and export controls, which handed DJI the field.

6. Robotics

Companies like Unitree and UBTech are building robots for industry, logistics and consumers. Unitree sells quadrupeds at a fraction of the price of Boston Dynamics’ Spot.

Decades of manufacturing mastery help. Tim Cook has explained Apple’s reliance on China as a question of skills: in the US you might struggle to fill a room with tooling engineers, while in China you could fill several football fields. Government support, such as the “Made in China 2025” plan, adds fuel.

7. Infrastructure

China has the world’s largest high-speed rail network — over 42,000 kilometres as of 2023 — and builds roads, bridges and cities at a speed Western projects rarely match.

8. Energy

In 2022 China produced about 137.8 quadrillion Btu of energy against about 98.5 for the US. It has 23 nuclear reactors under construction, and in 2024 approved five more projects covering 11 reactors.

Germany, by contrast, shut its last three reactors in April 2023 and leaned further on imported gas. Different strategies, very different long-term exposure.

What should the West do? My take

This is an opinion, not a forecast: the way to compete is to build faster. That means less regulatory friction, freer markets, serious investment in education and infrastructure, and more room for entrepreneurs to take risks.

I hope leaders focused on economic competitiveness can persuade more voters to see that. Without strategic action, the West risks becoming a relic of the past.