US advisory body warns China's data strategy creates AI advantage

The US-China Economic and Security Review Commission has released a report warning that China is treating data as a strategic national asset to power its artificial intelligence and technology goals. The advisory body stated that Beijing is commercialising and monetising data to drive productivity, improve intelligence collection, and enhance military capabilities, potentially giving it an advantage over the United States in the global AI race.

According to the report, while major US AI companies have largely exhausted open internet sources for language model training, China is systematically collecting domestic enterprise, operational, and physical-world data that cannot be scraped. This data is described as crucial for training AI tools designed for business use, autonomous vehicles, and humanoid robots, which are central to Beijing's top-down innovation push.

The commission highlighted that China's advanced manufacturing and industrial robotics ecosystems provide a vast pool of high-quality data for embodied AI applications. These AI systems operate in the physical world, such as in robots, giving China a potential advantage in developing robotics software for both commercial and military uses. The report noted that this approach allows Beijing to leverage its industrial base for technological development.

Mike Kuiken, the commission's vice chair, stated that over the last half-decade, China has consolidated, labelled, and refined data to make it quickly available to various entities. He noted that this strategy has the dual benefit of advancing China's innovation ecosystem and enhancing the control of the Chinese Communist Party. Kuiken emphasised that the systematic nature of this data collection sets China apart from US approaches to AI development.

The report also outlined the regulatory landscape in China, noting that Beijing has tightened oversight of cross-border data transfer in recent years. This has led to compliance issues for foreign multinational firms operating in the country, which have had to localise their China subsidiaries and separate customer data from global operations. The commission warned that US firms operating in China risk running afoul of the country's strict data and cyber governance regimes.

China has elevated data to a core "factor of production" alongside land, labour, capital, and technology. In 2023, the country established the National Data Administration to oversee nationwide data standardisation, classification, and the building of a unified national market for data trading. Chinese firms have begun listing proprietary datasets on regional data exchanges in cities including Shanghai, Shenzhen, and Beijing, further integrating data into the digital economy.

In response to these developments, the commission recommended that the US Congress develop a national data strategy. Kuiken stated that treating data as an economic asset should be a priority for the US government. The report suggests that without a similar strategic approach, the US may face challenges in competing with China's data-driven AI capabilities.