The United States is losing ground in Asia's artificial intelligence market to Chinese competitors offering lower-cost alternatives, even as Washington pushes its own technology through official channels and export programs.
At the Asia-Pacific Economic Cooperation Digital Weeks in Chengdu 7 days ago, the American presence was notably subdued. Only Google and Meta maintained visible booths among the showcases, and neither emphasized their flagship large language models. Meanwhile, Chinese companies—particularly those based in Chengdu—dominated the floor space, with Tencent Vice President Cai Guangzhong taking the stage to highlight growing adoption of its Hunyuan LLM and a cloud project in Thailand.
The contrast reflects a deeper strategic challenge. "The American strategy is to stop China from becoming the leading AI supplier for the rest of Asia ... and frankly the whole world," said Gary Dvorchak, managing director at The Blueshirt Group. "China's alternatives are cheaper, while the U.S. currently offers a more complete solution from chips to AI models."
The Export Program's Slow Start
The Trump administration launched the American AI Exports Program last summer at the first APEC AI meeting in South Korea, with Michael Kratsios, the president's chief science and technology policy advisor, highlighting the initiative. But momentum has stalled. According to Politico's reporting of three former officials, the Commerce Department received only 78 applications for the program—a less-than-expected figure that suggests limited business interest.
On July 24 at an APEC High-level Forum on AI, Bill Guidera, deputy under secretary for innovation and engagement at the U.S. Department of Commerce, promoted the exports program as offering buyers either a full U.S. tech stack or individual components. "It is the brilliant design that shows the strength, security and capability of U.S. AI," Guidera said.
When asked about the low application numbers, an International Trade Administration spokesperson claimed the volume "exceeded our expectations"—a statement that contradicts the Politico reporting. The White House did not respond to requests for comment.
China's Regional Investment Strategy
China, hosting APEC this year, has seized the opportunity to expand its AI footprint across the region. On July 17, 13 days ago, Chinese President Xi Jinping announced at the World AI Conference in Shanghai that China would provide developing countries with 5,000 opportunities in AI training and seminars while developing AI application cooperation centers with Southeast Asia and other regions.
Beijing then sent Vice Premier Zhang Guoqing to the minister-level APEC Digital Weeks on July 23 to advocate for developing tech standards with other Asia Pacific nations. The strategy paid off: all 21 member economies, including the U.S., agreed to back open-source AI with "strong security."
"The 'endorsement' of open-source models with strong security assurance gives China's open-weight strategy greater regional legitimacy, especially across emerging Asian economies where deployment cost and technological sovereignty are major considerations," said Wei Sun, principal analyst for artificial intelligence at Counterpoint Research.
The Local Language Advantage
Asia's technological diversity is creating opportunities for vendors who can navigate local needs. Southeast Asia alone has more than 1,300 living languages, making a one-size-fits-all approach impractical for either superpower.
Privately funded startup Votee AI is capitalizing on this gap. CEO Pak-Sun Ting said he's working with at least five governments, including two in Southeast Asia, and the startup already generates well over $10 million in revenue annually. Votee's open-source Cantonese model was developed partly using Alibaba's open-source Qwen model—a hybrid approach that reflects how Asian markets are combining U.S. and Chinese technology.
Ting noted that entities in Southeast Asia tend to use Nvidia chips for AI training but may deploy other chips for running models. Governments across the region are spending "billions" on AI systems tailored to local languages, according to Votee AI.
Institutional Limits and Diplomatic Tensions
The subdued U.S. presence at APEC also reflected recent policy instability. Anthropic, an American AI company, flip-flopped on its Fable AI model release because of abrupt U.S. policy changes. That hesitation came just as new Chinese AI models launched similar capabilities for significantly less money.
Yue Su, principal economist at the Economist Intelligence Unit, noted that the light U.S. presence at APEC wasn't entirely surprising given competing priorities—the same day saw a San Francisco AI Summit on July 24 where President Lee Jae-myung of South Korea met with U.S. frontier AI model leaders Sam Altman of OpenAI, Dario Amodei of Anthropic, and Jensen Huang of Nvidia to discuss Korean chip and AI megaprojects.
Still, Su observed a fundamental reality: "While the U.S. and China are fiercely competing in AI technology and diplomacy through distinct approaches, they ultimately cannot fully decouple from one another."
Why This Matters:
The U.S. retreat in Asia's AI market has significant implications for technological sovereignty and economic inequality across the region. When developing nations adopt cheaper Chinese alternatives because American options are unaffordable or come with regulatory uncertainty, they're making rational economic choices—but those choices reshape geopolitical power and technological dependency. The Commerce Department's stumbling export program suggests that U.S. policy coordination between agencies remains weak, undermining stated strategic objectives. Meanwhile, China's investment in local language AI and training opportunities positions it to capture long-term market share and influence over how emerging Asian economies build their digital infrastructure. For countries with limited resources, this isn't about ideology—it's about cost and accessibility. The absence of affordable, stable American options leaves them little choice but to turn elsewhere.