Last month, Stanford University published research that contradicts the dominant narrative on US-China artificial intelligence (AI) competition. According to millions of human voters, the performance gap between the top US and top Chinese AI models has effectively closed (see chart).
Most importantly, Chinese firms are generating frontier AI capability at a fraction of the costs of US firms. According to Stanford, a 23-to-1 spending gap between US and Chinese private firms is producing a 2.7% performance gap. This has direct implications for US-based AI companies whose valuations rest on the assumption of a structural advantage. It also suggests the DeepSeek shock of January 2025 – when the launch of a single Chinese model briefly erased a trillion dollars from US tech stocks – was not an anomaly, but the first sign of a convergence that had been underway for several years and has continued since.
A key question in the coming years will be how Western investors can profit from China's AI capabilities. On April 27, the Chinese government cancelled Meta's $2 billion acquisition of Manus, a Singapore-based AI startup founded by Chinese engineers. Beijing is signaling that frontier AI capability is now treated as strategic territory in the same category as rare earths and semiconductors – and is therefore closing the offshore "Singapore-washing" route that Chinese tech firms have used for years to reach Western investors.
Since COVID, western societies have grown deeply dependent on government financial support during times of global crisis. The COVID response from 2020 onwards was unprecedented: the US launched the largest infrastructure investment packages in its history, while EU countries agreed for the first time to issue joint debt. The energy support packages that followed the war in Ukraine in 2022 were also significant, reaching up to 5% of GDP in some European countries. In 2026, however, as the economic impact of the war in Iran threatens to become severe, the capacity for a similar response is largely gone.
The main reason is the worsening state of government finances. Since COVID, the yields investors demand on government debt are substantially higher than six years ago. In simple terms, governments can no longer afford large-scale financial support without triggering a further rise in the yields on their debt. And rising yields, for countries already carrying high debt-to-GDP ratios, risk setting off a vicious cycle: higher borrowing costs force spending cuts, which slow growth, which worsens the debt burden, which pushes yields even higher - and so on.
A key implication is that western governments, without the ability to soften the blow of a global crisis, are losing control over the way economic pain will drive change. The early signs are already visible. In the US, the adoption of renewable energy is accelerating despite the Trump administration's efforts to protect fossil fuels, because businesses and households are discovering that renewable technology – including the Chinese-made products the administration has sought to block – offers greater price stability than oil and gas. In Europe, calls for a more stable relationship with China are growing for the same reason.
In the coming years, alternative protein (plant- and cell-based protein as a substitute for animal-based food) is likely to follow the same pattern as renewable energy technology over the past twenty years: driven by Chinese innovation, the cost falls so far that the case for transition shifts from a divisive moral ideal into a shared economic necessity.
Twenty years ago, the Chinese government made renewable energy technology a top priority for the first time in its 11th Five Year Plan (2006–2010). Today, China is the global leader in solar panels, batteries and electric vehicles. Over that period, several global crises that drove up the price of energy (the war in Ukraine, the war in the Middle East) turned renewable energy into a shared economic necessity: a more reliable energy supply at a lower cost. Something similar is now likely to happen in food, whose global prices are high and rising because of the war in the Middle East.
In its 15th Five Year Plan (2026–2030), the Chinese government has made alternative protein a top priority. China is already the world's largest funder of agricultural R&D, spending twice as much as the United States. The city of Shanghai has made the industrial scaling of alternative protein a key strategic objective. In November 2025, one Chinese company opened a factory the size of 75 football fields capable of producing alternative protein at 50% of the cost of animal-based protein - and with 95% lower carbon emissions.
