【Market Brief】Technological Cold War: In-Depth Diagnostic Report on US-China AI Competitiveness

What we want you to know:
In March, the Federal Reserve FOMC maintained the benchmark interest rate in the 3.50% to 3.75% range, and the dot plot also kept the path of a 1 percentage point rate cut in 2026. Amid the uncertain Middle East situation, members provided slightly upward revisions to economic, inflation, and productivity forecasts in the SEP, while financial analysts offered scenarios on oil prices, inflation expectations, and interest rate developments!

Key points of this article:

2. China’s economy is leaving behind the “5% growth” era. This is not a slowdown but a gamble on economic restructuring and a full-scale bet on AI as the national destiny.
3. Under U.S. chip restrictions, Chinese supply chains are fighting back from the brink, as the global supply chain officially enters a “steel curtain” in the tech cold war.
4. With open-source large models and C-end breakout tactics, can China’s internet software giants win the AI era?
5. Physical AI: The gateway for AI to the real physical world! How to become the ultimate trump card to turn the tide in the China-U.S. game and define the future of technology?

1. Abandonment of the “5% growth” target! Shifting from total stimulus to structural reform

Starting with the government work report from China’s Two Sessions in early March, we observe changes from top to bottom. The report highlights two key points: First, China’s current economic policy focus is shifting further from previous total growth targets toward more refined structural transformation. The most obvious adjustment is that the GDP growth target has been revised from the original 5% to a range of 4.5% to 5%, marking the first time since 2023 that the 5% goal has been abandoned.

This adjustment indicates a shift in focus from “quantity” to “quality” of economic growth. This principle is also reflected in fiscal and monetary policies. On the fiscal side, China is slowing the growth of local government debt, with the central government承担 more deficits, and expenditure is increasingly focused on people’s livelihoods and technology, while reducing infrastructure investment proportions. On the monetary side, the policy remains accommodative, but instead of traditional tools like reserve requirement ratio cuts and interest rate reductions, more emphasis is placed on structural monetary tools such as government bond trading to achieve precise liquidity management.

The second key point is undoubtedly technology,

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                            Click on questions to let MM AI answer for you
                        

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                                            How does China’s shift away from the "5% growth" target reflect changes in its economic policy focus?
                                        
                                        

                                            💡China’s economic policy focus is shifting from total targets to structural transformation, with the GDP growth target adjusted to 4.5% ~ 5%. Fiscal policy is slowing local debt growth, with the central government承担 more deficits, and expenditure emphasizes people’s livelihoods and technology. Monetary policy remains accommodative, focusing more on structural tools like government bond trading to achieve precise liquidity control.
                                        

                                    

                                
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                                            How does the development of new quality productivity influence China’s economic restructuring?
                                        
                                        

                                            💡New quality productivity, synonymous with high technology and new driving forces, is key to China’s economic restructuring. Officially, the emphasis on overall GDP growth is downplayed, with a focus on increasing the proportion of high-tech in the structure, aiming to raise the digital economy’s share of GDP to 12.5%. Through industrial upgrades, China aims to transform its economy to better compete in the China-U.S. tech race.
                                        

                                    

                                
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                                            How does China’s advanced power infrastructure deployment impact AI development?
                                        
                                        

                                            💡China’s proactive deployment in power infrastructure, such as the "East Data West Computing" project, leverages western green energy resources to support AI computing centers. Despite the significant electricity advantage, actual utilization remains limited by chip supply bottlenecks, preventing full exploitation of power benefits. U.S. data centers still lead in electricity load growth.
                                        

                                    

                                
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                                            How are Chinese internet giants breaking through in the AI market through C-end applications?
                                        
                                        

                                            💡Chinese internet giants like Alibaba and ByteDance leverage high-cost-performance open-source models and large user bases to break into the C-end market. For example, Alibaba’s QWEN AI, through promotional activities, deeply integrates into software ecosystems, enabling hundreds of millions of users to experience AI shopping, moving AI from chatbots to agents and real consumer scenarios.
                                        

                                    

                                
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                                            How can Physical AI become the key to China reversing the China-U.S. tech game?
                                        
                                        

                                            💡Physical AI is crucial for China to turn the tide in the China-U.S. tech rivalry, with faster industrialization and regulatory implementation. For instance, Level 3 autonomous vehicles are approved for road testing, and Chinese firms lead U.S. giants in humanoid robot shipments, leveraging complete manufacturing, advanced regulation, and vast data to catch up.
                                        

                                    

                                
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                                            Under the China-U.S. tech cold war, what key investment directions should investors focus on?
                                        
                                        

                                            💡In the China-U.S. tech cold war, investors should focus on data center computing power (semiconductors), power infrastructure (grids, energy storage), and spillover supply chains (memory, cooling, other components). These areas will remain in the storm of U.S.-China competition long-term. The U.S. faces fewer challenges overcoming power bottlenecks, while China needs continuous innovation in models, C-end business models, and advantages in robotics and autonomous driving.
                                        

                                    

                                
                                                

                
                
                

                

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