China is advancing AI not by chasing AGI but through rapid open-source model development and broad sectoral integration—especially in manufacturing—underpinned by national 'AI-plus' initiatives. Its regulatory stance has shifted from caution to active support, spurred by market-driven breakthroughs like DeepSeek. While US-China capability gaps have narrowed to weeks or months, China faces real constraints in compute due to US chip restrictions, pushing it toward efficiency-focused innovation rather than scale. Its open-source strategy serves dual economic and diplomatic goals: lowering global AI costs, attracting talent, and expanding influence in the Global South. Meanwhile, China’s semiconductor progress is now irreversible, with domestic AI chips rapidly replacing NVIDIA GPUs. The competition extends far beyond AI into energy, robotics, and consumer tech—reshaping global perceptions of technological leadership and challenging assumptions about who defines the future.