Since no one is giving answers, I'll give my super uninformed take. If anyone replies with a disagreement, you should presume that they are right.

During a recession, countries want to spend their money on economic stimulus programs that create jobs and get their citizens to spend more. China seems to be doing this.

Is spending on AI development good for these goals? I'm tempted to say no. One exception is building power plants, which China would maybe need to eventually do in order to build sufficiently large models.

At the same time, China seems to have a pretty big debt problem. Its debt-to-GDP ratio was 288% in 2023 (I think this number accounts not only for national debt but also for local government debt and maybe personal debt, which I think China has a lot of compared to other countries like the United States). This might in practice constrain how much it can spend.

So China is in a position of wanting to spend, but not spend too much, and AI probably isn't a great place for it to spend in order to accomplish its immediate goals.

In other words, I think the recession makes AGI development a lower priority for the Chinese government. It seems quite plausible to me that the recession might delay the creation of a large government project for building AGI by a few years.

(Again, I don't know stuff about this. Maybe someone will reply saying "Actually, China has already created a giant government project for building AGI" with a link.)

I doubt it matters much. 

If Xi Jinping would care enough then they will build A(G)I. 

China has 1,4 billion people.The Chinese economy is 18 trillion dollars per annum. What is a 1,10,100, even a 1000 billion dollar training run on that kind of industrial might? The stickler is political will not economic possibility. 

The only real question is whether Western controls on chip import/exports is working. It seems that China is about 10 years behind on Western chip manufactures - but catching up quickly. 

In general I think it's often helpful to ignore mood afilliatiated stories about this or that country doing well or not well. Focus on the actual numbers*. In many cases the narrative is about an effect that is <1% of the economy. That's not going to matter. 

*well caveat that a Chinese GDP statistics are maybe probably somewhat fake. e.g. satelite light photos etc. 

[Epistemic status: somewhat informed speculation] TLDR: I do not believe China was a major threat source, recession makes it slightly less likely they will be one too. Conventional wars are more likely to happen, and their effect on AI development is uncertain.

I generally do not think China is a big of a threat in the AGI race as some others (notably Aschenbrenner) think. I think for AGI to be first developed in China, several factors need to be true: China has more centralized compute available than other countries, open models are near the frontier but not over the AGI limit, and China's attitude towards developing AGI shifts (possibly due to race dynamics). I think for compute they are currently not on track, for frontier models there is a lag, and attitude is towards trying not to develop AGI, at least publicly and it seems also privately as far as we can glimpse. While the Chinese public is more techno-optimistic than the US, the CCP is leaning towards engineers rather than politicians, and senior advisors in AI are AI-pilled.

The current recession in China is due to a set of complex causes, but it's a mix of politics and economics, and politics are quite slow to budge. I don't want to get too much into it, but the banking sector is stretched thin with a lot of workers unable to pay back mortgages on apartments which were not completed due to real-estate developers building too much real estate and ending up holding the bag with many unsold apartments - with most of them being second apartments, so not necessities but "investments". This is causing a loop of bankruptcies which is hard to stop, and has led to overall pessimism over the future. Lowering of the interest rates and making money available to banks has caused loans to be available, but people are skeptical to take them due to what they perceive as an uncertain future. CCP is likely to work on things which make the future more certain, large infrastructure projects such as bridges and dams as they have historically done, at least for some time. Nuclear power plants and hydroelectric dams definitely will qualify, but enormous compute clusters (using which chips? overpriced smuggled ones?) will likely not.

That is not to say that, if it seems like US is racing towards AGI and is reaping benefits from advanced AI, China will not put all the resources of a centralized government into catching up - and that can be quite a few resources since they can comandeer private enterprise or property to do so. If countries of the world play it sane, actually negotiate international limits, and meet China where they want to be met (CCP has many reasons not to want AGI) I do not expect China to be a threat to existence directly.

Recession is also more likely to make China want to blame bad economic results on foreign influence, and perhaps more likely to stoke international conflicts directly. I am personally not likely to want to live in a country bordering China in the next 10 years. How this will influence AGI is tough to predict - more resources spent on war means less on AI development, unless AI development is essential for a warfare edge, in which case we should expect a boom in AI development. The earlier the conflict happens, the less likely AI is to play a major role in warfare.