China is reported to be weighing a plan to manage homegrown artificial intelligence (AI) models and semiconductors as strategic national assets. If China moves to directly control exports of AI technology after the United States has limited exports of advanced AI chips and chipmaking equipment to China, U.S.-China technology competition could expand beyond supply chains to the AI models themselves.

China is reviewing export controls on its AI models and semiconductors, blockchain outlet Cryptopolitan reported on July 21 local time. A draft of related rules has not been made public, but China is said to be preparing to directly manage overseas transfers of core technologies while strengthening industrial competitiveness and building legal mechanisms at the same time.

The move is tied to a shift in China's strategic position. China, which had focused on securing advanced foreign technology, is now said to be transitioning to a stage where it views its own AI models, semiconductors and robotics as key national assets and seeks to manage even their exports. Major research institutions including the Center for Strategic and International Studies (CSIS), the Mercator Institute for China Studies (MERICS) and Rhodium Group also pointed to the change.

In the background are U.S. semiconductor export restrictions targeting China. The United States sharply restricted exports to China of high-performance AI chips and semiconductor manufacturing technology from October 2022 and has continued to tighten rules. CSIS said in a March report that China's integrated circuit output has fallen about 9.8 percent since 2022, and that many Chinese companies have been unable to produce chips made on processes of 7 nanometers or below as access to advanced technology has been restricted.

Some assessments say those restrictions instead spurred China's technological self-reliance. CSIS researchers said U.S. export controls became a catalyst for accelerating expanded national investment, improving procurement policies and shifting to domestically produced chips, rather than blocking industrial development. China is now expanding the scope of investment beyond semiconductors to foundation AI models, AI infrastructure and robotics more broadly.

The legal foundation to support export controls is also being strengthened. MERICS said China's State Council implemented two sets of regulations in April that address industrial and supply chain security and responses to extraterritorial jurisdiction by foreign governments. The new rules include expanding authority over corporate sanctions, business restrictions and designation of "malicious entities".

Zheng Shan Jie (郑栅洁), head of China's National Development and Reform Commission, also stressed in an April op-ed in the People's Daily that there remains a choking risk stemming from dependence on foreign countries in core technology fields, and that stronger policy tools are needed to respond to overseas de-risking policies.

MERICS researcher Jacob Gunter assessed the process of strengthening economic security as one of the most extreme cases of industrial defense in modern history.

Markets are focusing on the point that China could exert significant influence even without controlling the entire AI supply chain. Rhodium Group said in a May report that while cutting-edge AI chips remain a weakness for China, competitiveness is rising quickly in AI models, production of mature-node semiconductors, AI infrastructure and robotics.

That has prompted a view that if China manages its AI models or self-designed semiconductors through a licensing system or restricts exports, the global AI industry could be reshaped into a two-way structure in which the United States and China each control access to core technologies.

It also differs from the trajectory of the past three years. So far, AI-related export controls have largely been one-way measures implemented by the United States against China, but if China also moves to direct controls, AI governance could shift into a structure in which the two countries restrict each other's access to core technologies.

In actual enforcement, the issue of circumvention distribution remains a variable. CSIS estimated in a November report last year that more than 1 million lower-performance Nvidia AI chips were brought into China through grey distribution networks even after U.S. export restrictions. The report also said Huawei was believed to have secured more than 2 million chips produced by TSMC through intermediaries. The same report said the U.S. Congress is also pushing a semiconductor security bill that would require high-performance AI GPUs to be fitted with origin tracking devices.

Markets are focusing on whether China will introduce a licensing system or export restrictions and which areas would be covered between AI models and semiconductors. If China begins to restrict overseas transfers of core AI technology in earnest, global AI competition is increasingly likely to expand beyond technology development into a contest over who controls access rights to core technologies.