China's AI Strategy Isn't About Beating Benchmarks—It's About Winning Users

Tencent is giving away $140 million through its AI chatbot during Chinese New Year. But this isn't just marketing—it's a glimpse into how Chinese AI companies are playing a completely different game than their U.S. rivals.

The Release Race Accelerates

Chinese AI companies are dropping new models at breakneck speed. On Tuesday, Beijing-based Moonshot AI unveiled Kimi K2.5, boasting video generation and agentic capabilities that allegedly outperform all three leading U.S. AI models. This came just three months after releasing its K2 model.

The same day, Alibaba announced Qwen3-Max-Thinking, claiming it beat major U.S. rivals on "Humanity's Last Exam" benchmark. A week earlier, Z.ai released a free version of GLM 4.7, only to restrict new signups two days later when demand overwhelmed their computing power.

Baidu'sErnie 5.0 launch sent Hong Kong-traded shares to their highest level in nearly three years. Even Google DeepMind CEO Demis Hassabis admitted Chinese AI models may be just "months" behind U.S. developments.

Beyond Benchmarks: The Ecosystem Play

But here's where it gets interesting—Chinese companies aren't actually chasing benchmark bragging rights. They're playing a different game entirely.

Morningstar analyst Ivan Su notes that "paying too much attention to AI benchmarks distracts from the tech's real value—when it's integrated into existing gaming or entertainment ecosystems such as Tencent's."

Consider Alibaba's recent Qwen AI update. Users can now chat with the bot while simultaneously shopping, ordering food, and making payments—all without leaving the app. With 100 million monthly active users, Qwen becomes a gateway to Alibaba's entire e-commerce empire.

As LSY Consulting's Alex Lu explains: "The greater the number of people who use Qwen, the more they will use Taobao and shop on it." It's a self-reinforcing cycle that helps offset AI development costs.

The Open-Source Trojan Horse

While U.S. companies guard their models behind paywalls, Chinese firms are embracing radical openness. Most Chinese AI models are open-sourced, offering free or low-cost access with customizable underlying code.

This strategy is already paying dividends globally. Microsoft reported that DeepSeek usage in Africa is two to four times higher than in other regions. "The hope is countries apart from China will use these models to ensure large amounts of applications are built on these Chinese models," Lu observes. "That's one way for Chinese companies to penetrate the market."

ByteDance and Baidu are also running AI-related promotions around the upcoming Lunar New Year, following Tencent's playbook. The $140 million cash giveaway mirrors the "red envelope" campaigns that helped WeChat become a dominant mobile payment platform over a decade ago.

The Real Competition

Chinese companies are "mostly competing for user traffic rather than developing the most advanced models," according to Lu. While U.S. firms obsess over who has the smartest AI, Chinese companies are asking: who can integrate AI most seamlessly into daily life?

Tencent's WeChat ecosystem, Alibaba's e-commerce platforms, and ByteDance's content algorithms all become more powerful when infused with AI capabilities. The question isn't whether their models can pass academic tests—it's whether they can make users' lives easier while keeping them within Chinese digital ecosystems.