If we are specifically discussing about China's developments in AI, whether or not China can, as a whole, reach high income country status is not totally relevant. China's tech competitiveness is generally not what is expected from a middle income country. The development of high technology in China is driven almost entirely in the highly urbanized, relatively well educated and high income coastal provinces. The 8 coastal provinces and municipalities alone account for half of China's GDP while having 480 million people. That would put the per capita GDP of those provinces as a whole at 18,000 USD. Not super high, but somewhere at the cutoff of what we consider as high income countries (Eastern Europe countries such as Latvia, Slovakia).
The fact that there are some 480 million people with considerable human capital and purchasing power is what enables China to be competitive at the forefront of many areas of emerging technology such as clean energy, battery tech and electric vehicles, software and AI. The fact that China as a whole has a per capita GDP squarely at the world average is not what limits it to be unable to compete on cutting edge tech. (A side note, having close 1/5 of all humans, the world GDP average is itself highly weighted by China's GDP per capita)
Back to AI, when ChatGPT was released, it was a huge shock to the Chinese tech sector. So much so that 10s of LLMs were hastily released by companies such as Baidu, Alibaba etc. in the few months after as an attempt to catch up. So far none of the Chinese companies has demonstrated ability to match US companies (OpenAI, Anthropic). According to Chinese sources, Baidu's product likely matches GPT3.5 but still falls below GPT4.
The main obstacles I see with Chinese companies actually challenging the likes of OpenAI are:
Lack of vision. Chinese companies so far are always playing catch up and chasing after the leaders rather than fielding revolutionary products on their own. I think this is due a lack of vision towards AGI which drives companies like OpenAI, DeepMind and so on. My impression (may not be accurate) is that AGI is viewed as far-fetched, unrealistic and simply not taken seriously within Chinese tech sector and high level leadership. This means Chinese tech leaders' directions and energy are directed at commercialization of mature tech and profit making rather than pushing at the frontier. The Jack Ma and Elon Musk conversation video (https://www.youtube.com/watch?v=f3lUEnMaiAU) shows a stark difference in thinking and vision between US and China tech leaders with regards to AI
Censorship hoops. Chinese government imposes wide spread internet censorship and this creates extra hurdles for Chinese tech companies to deal with when developing products. In gen AI, efforts and time are being spent to ensure regulatory compliance with the government, how to impose censorship on generated results and so on. Resources such as HuggingFace, Github are subject to intermittent blocking or slow speeds which creates additional hoops to jump through
Compute. China is under US sanction for advanced GPUs, which forces Chinese AI developers to use older and slower chips, or source them from 3rd parties at markups. This create additional overhead costs and slows down speed of model training and development
Capital. Chinese tech companies have access to less capital than US tech companies. The effect on developing new AI tech is self explanatory
Data. Chinese language data are an order of magnitude less than English data, and quality of data problem is even worse. However Chinese tech companies also make use of the same English data available to train their models, so this is not too much of an issue, except when developing Chinese language models
If we are specifically discussing about China's developments in AI, whether or not China can, as a whole, reach high income country status is not totally relevant. China's tech competitiveness is generally not what is expected from a middle income country. The development of high technology in China is driven almost entirely in the highly urbanized, relatively well educated and high income coastal provinces. The 8 coastal provinces and municipalities alone account for half of China's GDP while having 480 million people. That would put the per capita GDP of those provinces as a whole at 18,000 USD. Not super high, but somewhere at the cutoff of what we consider as high income countries (Eastern Europe countries such as Latvia, Slovakia).
The fact that there are some 480 million people with considerable human capital and purchasing power is what enables China to be competitive at the forefront of many areas of emerging technology such as clean energy, battery tech and electric vehicles, software and AI. The fact that China as a whole has a per capita GDP squarely at the world average is not what limits it to be unable to compete on cutting edge tech. (A side note, having close 1/5 of all humans, the world GDP average is itself highly weighted by China's GDP per capita)
Back to AI, when ChatGPT was released, it was a huge shock to the Chinese tech sector. So much so that 10s of LLMs were hastily released by companies such as Baidu, Alibaba etc. in the few months after as an attempt to catch up. So far none of the Chinese companies has demonstrated ability to match US companies (OpenAI, Anthropic). According to Chinese sources, Baidu's product likely matches GPT3.5 but still falls below GPT4.
The main obstacles I see with Chinese companies actually challenging the likes of OpenAI are: