⭐️ The year-end wake-up: The ‘Chinese Sputnik’ that demands our attention

And how to maintain peace and prosperity in 2025

As 2024 draws to a close, I want to reflect on the pivotal nature of the coming year.

Let me take you back to 1957. On October 5th, the United States changed course. The bleeps emanating from Sputnik 1, roughly three times a second, were a wake-up call, an alarm that didn’t stop. America changed: funnelling cash into aerospace & military technologies, creating new agencies, most notably, ARPA, and investing in STEM education. The public was, in many cases, mobilised.

This week, three bits of news should have collectively had the same impact, having America (and, indeed, Europe) question their capabilities and direction. All are achievements from China.

DeepSeek outwits the top American labs

DeepSeek, a Chinese AI company that has spun out of a hedge fund, released its Version 3 large language model. It performs about as well as Claude 3.5 Sonnet. The breakthrough is how cheap it was to train. At roughly $5.6m to train, DeepSeek v3 was about a hundred times cheaper than Meta’s Llama 3 and probably a similar magnitude cheaper than Claude. (Technical details for those who want are here.)

DeepSeek’s API costs 12 times less than Anthropics. Developers around the world are starting to have fun with it.

Biden’s chip export controls have notionally hampered the team. But necessity is the mother of invention, and they delivered this superb model through ingenuity rather than brute force.

The ramifications:

1. As was reasonably likely, the export controls have backfired.

2. The gap between open source (like DeepSeek) and closed source (like OpenAI) is narrowing rapidly. It calls into question efforts to constrain open-source AI development.

3. China now has several world-class teams building AI systems, including Qwen, Kling (in video), Apollo (in self-driving) and, of course, Bytedance.

The crucial significance of DeepSeek’s cheaper training methods lies in the path it opens up for wider adoption and innovation—particularly outside established tech hubs. If cutting-edge LLMs can be built on smaller budgets, then Western efforts to control or slow AI development may prove futile. Constraints breed ingenuity; ironically, export controls appear to have spurred Chinese AI teams to engineer leaner, more efficient solutions.

A vast, ambitious hydropower plant takes shape.

The government approved the world’s largest hydropower project, a $137bn dam in Tibet. It will have a capacity of 70 GW, more than triple the vast Three Gorges project. By contrast, the venerable Hoover Dam has a rated capacity of 2GW.

This new Tibetan dam underscores how China has developed the capacity—financial, political, and technological—to embark on colossal infrastructure projects with astonishing speed. While such projects raise concerns about environmental impact and geopolitical tensions over water resources, they also demonstrate China’s ability to mobilize capital, labor, and policy approvals at scale. In sharp contrast, the United States struggles with decades of underinvestment and regulatory gridlock, a reality I highlighted in the New York Times regarding the nation’s aging power grids. This dam is emblematic of a broader reality: bold investment, swift execution, and strategic risk-taking that characterize China’s approach to national development.

A new stealth fighter raises the bar

Chengdu Aircraft Industry Group debuted a supersonic stealth multi-role sixth-generation fighter. It’s the first such fighter seen anywhere, matching the specs of the American Next Generation Air Dominance programme, which has been making slow progress over recent years, leading to its suspension a few months ago.

Chengdu’s new fighter is more than a stealth plane; it embodies China’s maturing R&D ecosystem. Rapid iteration cycles, deep integration of AI, and a streamlined procurement process allow breakthroughs that challenge the cumbersome, often politicized U.S. defense-industrial complex.

A Sputnik moment