The American strategy to dominate Asia's artificial intelligence market is running into a stubborn problem: price. China's AI alternatives cost far less, and they're winning adoption across the region while the U.S. struggles to gain traction despite offering what officials describe as a more complete technological solution.
The gap became visible this month at APEC's Digital Weeks in Chengdu, where the U.S. presence was notably subdued. Only Google and Meta maintained booths among American companies, and even they downplayed their flagship AI capabilities. Google's government affairs vice president, Wilson L. White, made only passing references to Gemini during his July 24 speech. Minutes later, Tencent Vice President Cai Guangzhong took the stage to highlight his company's Hunyuan language model and cloud expansion into Thailand.
"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. But the economics are working against Washington. Chinese models are cheaper. That's the core problem.
The Export Program's Weak Start
The Commerce Department launched the American AI Exports Program last summer with considerable fanfare. Michael Kratsios, President Donald Trump's chief science and technology policy advisor, announced it at the first APEC AI meeting in South Korea, touting the U.S. AI Action Plan as a competitive advantage. The program was designed to let countries buy either a complete U.S. tech stack—from chips to AI models—or individual components.
But uptake has disappointed. According to Politico, the Commerce Department received just 78 applications for the program. When asked about that figure, an International Trade Administration spokesperson claimed the volume "exceeded our expectations." The discrepancy raises questions about whether the program is generating the interest officials anticipated.
Bill Guidera, deputy under secretary for innovation and engagement at the U.S. Department of Commerce, spoke at the APEC High-level Forum on AI on July 24, emphasizing the program's flexibility. "It is the brilliant design that shows the strength, security and capability of U.S. AI," Guidera said. Yet his pitch couldn't overcome the fundamental advantage China holds: cost.
China's Regional Dominance
China isn't waiting. On July 17, President Xi Jinping announced at the World AI Conference in Shanghai that China would provide 5,000 training opportunities and seminars in AI to developing countries. Beijing also pledged to develop AI application cooperation centers across Southeast Asia. Vice Premier Zhang Guoqing appeared at APEC's Digital Weeks on July 23 to advocate for developing tech standards with other Asia-Pacific nations.
The strategy paid off immediately. The 21 APEC member economies, including the U.S., agreed on July 24 to back open-source AI with "strong security." This endorsement legitimizes China's approach—open-source models at lower cost—precisely when emerging Asian economies are most price-sensitive.
"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 reality on the ground reflects this shift. Votee AI, a privately funded startup working with at least five governments including two in Southeast Asia, generates over $10 million in revenue annually by building AI systems tailored to local languages. CEO Pak-Sun Ting noted that Southeast Asian entities favor Nvidia chips for AI training but may use other chips for running models. His company's open-source Cantonese model was developed partly using Alibaba's open-source Qwen model—a Chinese product.
The Decoupling Myth
Yue Su, principal economist at the Economist Intelligence Unit, offered perspective on the broader competition. "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." She noted that the light U.S. presence at APEC reflected competing priorities, including a San Francisco AI Summit held on the same day where President Lee Jae-myung of South Korea met with U.S. AI leaders Sam Altman of OpenAI, Dario Amodei of Anthropic, and Jensen Huang of Nvidia.
The U.S. challenge extends beyond pricing. Anthropic, a major American AI company, flip-flopped on releasing its Fable AI model because of abrupt U.S. policy changes. That uncertainty undermines confidence in American AI commitments. Meanwhile, new Chinese AI models launch with similar capabilities at a fraction of the cost, giving regional buyers little reason to wait for Washington's next move.
Southeast Asia alone contains more than 1,300 living languages. Neither a purely U.S. nor purely Chinese AI solution addresses that complexity straightforwardly. Governments across the region are spending billions on AI systems tailored to local needs. They'll likely adopt a combination of both American and Chinese technology, selected on merit and cost rather than geopolitical alignment.
Why This Matters:
The U.S. is losing ground in Asia's AI market not because of espionage or military coercion, but because market forces favor cheaper alternatives. The Commerce Department's American AI Exports Program, designed to counter Chinese dominance, appears to be underperforming expectations with only 78 applications received. China's open-source strategy, backed by government investment in training and regional partnerships, is gaining legitimacy precisely where it matters most—among price-sensitive developing economies. The fundamental issue for U.S. policymakers is whether government programs and diplomatic pressure can overcome the simple economics of cost. History suggests they cannot. Unless American AI companies can compete on price while maintaining their technological edge, or unless government policy becomes more flexible and responsive to market conditions, the region will likely adopt a hybrid approach favoring whichever solution delivers the best value. That outcome would represent a significant shift in technological influence away from American interests.