China’s AI breakthroughs show how it is outcompeting Western monopoly capitalism

The Chinese company DeepSeek has made a major breakthrough in the development of artificial intelligence (AI), with the release of its deep learning model R1. As the Financial Times put it, “With DeepSeek, China innovates and the US imitates”.

Until now, the West had deemed China incapable of innovation, and Western monopoly capitalism was considered the summit of technological development. China has quietly and gradually overcome not only crucial internal contradictions but, above all, impediments imposed by the West that sought to curb its development.

Since the communist revolution of 1949, China has endured enormous economic pressure. Before that, during the Century of Humiliation (from 1839 to 1949), the West colonised China and destroyed its economy and culture.

Around 1820, China had the world’s largest economy. By the 1920s, Western colonialism had turned it into one of the poorest countries in the world.

Under Western colonial rule in Shanghai, Chinese people were banned from entering parks. They were deprived of their humanity, reduced to the condition of animals. China’s large population was denied the material resources needed for its social reproduction and development.

Even after the Century of Humiliation ended with the 1949 revolution, capitalist imperialism sought to prevent China from developing by imposing harsh economic sanctions.

In addition to Western impositions, limitations, and threats, China’s relationship with the Soviet Union went sour. Despite the initial help the Chinese communist revolution obtained from the Soviets, the two civilisations parted ways.

This enabled the world’s largest imperial might to step in, widening the existing fracture between the socialist countries. In the Shanghai Communiqué of 1972, signed when Richard Nixon met Communist Party Chairman Mao Zedong, the People’s Republic of China was recognised by the United States as the only China, with Taiwan as part of China, in the One China Policy.

By the end of the 1970s, Deng Xiaoping’s Reform and Opening Up marked a new era for Chinese development. The previous constraints and failure to develop the productive forces had created a condition of equality of poverty.

Deng recognised that such a situation was antithetical to any socialist project, which envisions social equality through economic abundance, not misery. A bold and tactical move was thus made.

China’s former leader Deng Xiaoping

Analogous to Lenin’s New Economy Policy (NEP), the Communist Party of China acknowledged that the use of capital could foster and accelerate economic development, despite the chronic and pervasive contradictions it would carry with itself.

The strategy consisted of bringing in capitalist forces, like the power of a wild animal that would have to be tamed and wisely used. Capital was not the goal; it was simply a means to an end. Western binary thinking, on the right and the left, could not understand this – and most Westerners still don’t today.

The contradictory relationship and social relations that emerged from Socialism with Chinese Characteristics – which has a powerful Communist Party leading the development of the Chinese people while, at the same time, enabling social participation of capital – was hastily branded by foreign critics as the supposed defeat of Chinese socialism and the victory of capitalism.

In reality, the opposite occurred. Since the end of the 1980s and the beginning of the 1990s, the Chinese socialist model has gradually become stronger, while Western capitalism became weaker and decadent.

The lack of fear of an alternative political-economic model (represented by the former Soviet-led socialist bloc) led Western capitalism to abandon its social-democratic characteristics, which — together with neocolonialism, which was often ignored by many Western left-wing thinkers — had created a large and prosperous middle class.

The Western welfare state was not a means of social development, but a tool to sustain the power of the ruling elites. It did not work as a mechanism to enable the transformation of social relations that, ultimately, would render the very welfare state superfluous, namely through the development of the productive forces and the socialisation of the means of production (of the people, by the people, for the people), in truly democratic political-economic relations.

Instead, the Western welfare state was a mechanism to mask capitalist contradictions, sustaining the power relations in a manner so that the capitalist oligarchy could maintain its privileges while the masses of workers would be tamed and become depoliticised.

Actual economic development presupposes intellectual development. China’s tactical move to allow capital to exploit its cheap and educated labour, sophisticated infrastructure, raw materials, and (now highly developed) chain value was not made in the same fashion that imperialism was used in order to obtain profit. Production in China came with strings attached.

Unlike Western capitalist development through colonialism and plunder, the Chinese did not steal intellectual property; knowledge and technology transfer was a vital element of investment contracts, done consensually by investors. Western capital agreed to it and signed those contracts.

The myth that China “stole” Western intellectual property is a gross falsification of collective memory and history. In reality, the capitalist’s immanent need for growing rates of profit presupposes the exploitation of a relatively cheap labour force and raw materials. Production and, with it, labour posts were freely exported by the capitalist owners themselves.

The contemporary lack of profitable conditions in the West means that, while a capitalist path is sustained, the tendency is for things to get worse, not better for the majority of people – despite empty slogans and populist politics blaming immigrants and foreigners.

At least since Barack Obama’s administration, the United States has maintained a very hawkish posture against China. The “Pivot to Asia” strategy was designed to contain Chinese development through military threats and force. This approach was not only continued by subsequent administrations; it was strengthened and deepened, with more sanctions and tariffs.

As local economies have become highly integrated with the global economy, most countries are exceptionally interdependent on one another. Nonetheless, the US empire maintained the capitalist win-lose strategy and weaponised its economy. By doing so, it has tried to hinder the China’s economy, which is based on a socialist win-win strategy.

As my upcoming book (The Privatisation of Knowledge, 2025) demonstrates, today, China dominates intellectual property filling activity by office. In this sense, each time the US capitalist government tried to curb the Chinese economy to safeguard Western monopolies, it backfired.

Chinese manufacturers of smartphones, computers, solar panels, cars, etc., have been hit by US economic wars. Barack Obama failed, Donald Trump failed, Joe Biden failed, and now Trump is failing again.

Although US bans against Huawei in 2020 caused an enormous disruption for the company, the launch of Huawei’s Mate 60 Pro series phone in 2023 demonstrated that the flagship Chinese company came out of it stronger and more independent than before.

A Financial Times headline read: “How Huawei surprised the US with a cutting-edge chip made in China”. Two months earlier, the same publication had announced, “China set to overtake Japan as the world’s biggest car exporter”. Six months later, Chinese EV cars were announced as being superior to their US-American counterparts. By the end of 2024, Western mainstream journalists asked, “Has China already won the EV race”?

In my book The Paradox of Intellectual Property in Capitalism, I explained not only how the development of property and intellectual property represent a totality but also the destruction of the (exchange) value of knowledge.

Today, as intellectual property becomes an essential element of our daily lives, and the exchange of knowledge becomes easier through material means of smartphones and computers, mainstream theses that knowledge and intellectual property would be and remain metaphysical entities (that is, separated from “tangible” properties) reveal themselves nonsensical and incapable of helping us understand our complex reality.

Following the analysis of my book, it is not a surprise that DeepSeek’s breakthroughs wiped out roughly $1 trillion USD from the US stock market, turning it upside down.

The fact is that, in the Chinese socialist system, both competition among capitalists and the (material-intellectual) infrastructure are very developed, creating a social arrangement in which, with the imperative of efficiency, the necessary labour time to produce and reproduce knowledge diminishes constantly.

At the same time that the use value of knowledge increases – for capital is subsumed to political imperatives of social development – its exchange value is obliterated.

The socialisation of the productive process in socialism outcompetes the parasitic character of monopoly capitalism.

DeepSeek is groundbreaking not only because it represents Chinese efficiency, as it produces top-tier technology despite US restrictions, but also because it makes its own R1 model open-source.

Development of the DeepSeek model also only cost around $6 million USD, representing a fraction of the hundreds of billions that US monopoly tech companies have committed to spend, from governmental and investor money. The hundreds of billions already spent have not yielded models that are superior to their Chinese counterpart.

As a result, DeepSeek is already being banned and restricted in the West, not only by the United States government but also by vassal countries like Italy, Australia, and South Korea.

A few days after DeepSeek’s R1 model was officially announced, Alibaba released an AI model in China, claiming to have surpassed DeepSeek.

This demonstrates, in practice, how the Chinese socialist system uses capital to enable a constant struggle for efficiency and progress, while being able to hinder the same capital from obtaining political power.

In the West, however, governments obstruct social development to sustain the monopoly power of the 0.01%.