How China’s data strategy could reshape the AI race

The U.S. - China Economic and Security Review Commission released a brief stating that China has developed policies to collect, standardize, value, and commercialize data on a national scale. In 2020, China officially recognized data as a factor of production, alongside land, labor, capital, and technology, integrating it into its broader economic strategy. The growing importance of proprietary data is expected to be particularly relevant for AI development, as publicly available information from the open internet becomes less useful for gaining a competitive edge. Enterprise records, industrial operations, and data generated by machines, sensors, and physical systems cannot be collected through conventional web scraping, making such data increasingly valuable for specialized AI applications. China’s large manufacturing and robotics sectors are identified as potential sources of this data. Factories, warehouses, and robotic systems continuously generate real-world operational data that can enhance AI models for manufacturing, autonomous systems, and embodied AI—artificial intelligence operating through physical machines like robots. The Commission notes that China’s industrial base could provide an advantage in developing these applications if data can be effectively collected, labeled, and shared. China has also developed infrastructure to turn data into a tradable economic resource. The National Data Administration, established in 2023, oversees data regulation and standards, supporting the development of a unified national data market. Government-backed data exchanges operate in major cities, and accounting rules introduced by the Ministry of Finance allow companies to record qualifying data resources as assets on their balance sheets. The report highlights ongoing challenges, including uneven data quality and reluctance among some private companies to participate in state-led data markets. Despite these obstacles, official exchanges and infrastructure have expanded, offering mechanisms for companies and public entities to package, value, and trade datasets. The Commission also addresses regulatory implications for foreign companies, noting that U.S. businesses participating in China’s domestic data economy could face uncertainty under the country’s data security and cybersecurity rules, particularly regarding national security restrictions. Among its recommendations, the Commission urges Congress to consider developing a national strategy recognizing data as an economic asset. It also suggests examining accounting standards for corporate data and increasing U.S. engagement in international rules governing data transactions and interoperability.