Nations — particularly in the West — face a significant and underappreciated risk from artificial intelligence (AI) developed by Chinese companies such as DeepSeek and Xiaomi, which is being made available to businesses and governments at near-zero cost, according to a detailed analysis published by The Guardian. The report, authored by journalist Phillip Inman, argues that the threat posed by cheap Chinese AI far exceeds that of earlier waves of low-cost Chinese exports such as electric vehicles.

The Scale of China's AI Rollout

Chinese developers are launching AI models at a rate of dozens per month, at a fraction of the cost of their US equivalents, according to the report. In practical terms, this leaves an AI user choosing between an inexpensive, open Chinese system that can be customised to specific needs, and expensive American software bundled with features most users do not require. The price asymmetry alone gives Chinese offerings a structural advantage in price-sensitive markets.

Data Privacy and Surveillance Risks

The report flags serious data governance concerns around DeepSeek's online chatbot. Its publicly available policy states that the platform collects user prompts and uploaded material, processes and stores personal data in China, and permits disclosure to Chinese authorities. Michael Wooldridge, a Professor of AI at the University of Oxford, is cited as saying it is 'not unreasonable to assume' that data entered into the chatbot could be shared with the Chinese state. For governments and businesses handling sensitive information, this represents a material security exposure.

A Threat Beyond Trade

The analysis draws a sharp distinction between China's earlier export offensives — cheap EVs undercutting domestic car industries — and what it describes as the new phase of Chinese economic expansion. 'It's scary because Beijing is entering a new phase in the long march of economic development, taking the world's second largest economy closer to making China great again,' the report states. Cheap AI, it argues, takes this export threat 'to a much higher level' than physical goods because it embeds Chinese technology — and potentially Chinese state access — into the decision-making infrastructure of foreign governments and businesses.

Geopolitical Dimensions

The report also situates the AI push within a broader geopolitical context. It notes that China is building a fleet of warships to challenge US dominance in the Pacific — drawing a historical parallel with Japan's naval expansion in the 1930s — and that Taiwan, described as 'the engine of semiconductor development', remains in Beijing's strategic sights. While Russia is reportedly using AI to enhance cyber-attacks on European government agencies and businesses to generate disruption, China's approach is characterised as more expansionist: widening a circle of client states that depend on Chinese technology for fundamental needs, with potentially deeper long-term influence.

What Experts and the Report Recommend

The Guardian analysis calls on the UK to 'reject the lure of cheap Chinese AI' and instead focus on better regulating US AI while actively supporting domestic and EU technology suppliers. The underlying argument is that relying on Chinese tech across sectors — from automobiles to artificial intelligence — risks hollowing out domestic industry and compromising national data security. For countries like India, which is itself navigating AI adoption and strategic technology partnerships, the report's warnings carry direct relevance as policymakers weigh cost against sovereignty.