China's AI Video Revolution: A Strategic Investment Case in the Post-OpenAI Era

The global AI video market is undergoing a seismic shift, with China emerging as a formidable leader in innovation and capital efficiency. In the shadow of OpenAI's dominance, Chinese firms and policymakers have forged a distinct path, leveraging open-source models, multimodal AI agents, and state-backed infrastructure to outpace competitors. For investors, this represents a compelling opportunity to capitalize on a market poised for exponential growth.

Competitive Advantages: From Cost Efficiency to Multimodal Mastery

China's AI video market is defined by its ability to combine technical innovation with economic pragmatism. A key differentiator lies in the proliferation of open-weight models, which allow developers to freely modify and deploy AI tools. By 2025, nine of the top 10 best-performing large language models (LLMs) on the Artificial Analysis LLM leaderboard are Chinese, including DeepSeek R1, which offers inferencing costs 90% lower than OpenAI's o1 model. This cost advantage is not merely a byproduct of scale but a deliberate strategy to democratize access to AI tools, enabling rapid iteration and adoption across industries.

The shift from conversational AI to autonomous task execution further underscores China's competitive edge. Startups like Shengshu Tech have pioneered tools such as Vidu Agent, an AI-powered platform that integrates creative planning, video generation, and voice-over production into a single workflow. This "one-click" approach reflects a broader trend: the market is no longer competing solely on video quality but on end-to-end efficiency. By February 2025, China's generative AI user base had already reached 250 million, with vertical tools like "Ji Meng" seeing weekly active users surge to 2 million. Such adoption rates signal a maturing ecosystem where AI video tools are becoming indispensable for content creators and enterprises alike.

Capital Efficiency: State-Backed Infrastructure and Open-Source Synergy

China's AI video market is underpinned by a strategic alignment of government policy and private-sector innovation. The "1397" AI development plan, launched in 2025, emphasizes large-scale technology adoption, robust infrastructure, and rapid scaling, with a focus on nine priority research areas and seven implementation mechanisms. By 2025, the government aims to achieve a compute power capacity of 300 EFLOPS, with 35% allocated to smart computing. This infrastructure is critical for training large multimodal models, which require vast computational resources to simulate realistic human interactions and automate complex workflows.

Funding mechanisms further amplify this efficiency. In January 2025, the Chinese government launched an $8.2 billion National AI Industry Investment Fund, complemented by state-backed AI labs, talent incentives, and industrial park support. Local governments are also mobilizing public-private partnerships, with initiatives like the "state venture capital guidance fund" aiming to attract nearly 1 trillion yuan ($138 billion) over 20 years to support AI and other high-tech sectors. These efforts are not merely about funding but about reducing redundancy through open-source collaboration. Clause five of the Global AI Governance Action Plan explicitly calls for "safe and reliable open-source platforms", enabling broader adoption while circumventing overseas licensing challenges.

Strategic Risks and Opportunities

While China's AI video market is thriving, investors must remain cognizant of geopolitical headwinds. U.S. export controls on advanced computing hardware and the global dominance of OpenAI's models pose challenges. However, Chinese firms are mitigating these risks through energy-efficient computing technologies and green AI initiatives. For instance, the development of low-power chips and enforceable performance standards ensures long-term resilience, even as access to cutting-edge hardware remains constrained.

The market's trajectory is also bolstered by its integration with hardware solutions. AI-enabled devices, from smart cameras to autonomous robots, are expanding the addressable market beyond software. This hardware-software synergy creates a flywheel effect, where advancements in one domain accelerate progress in the other.

Conclusion: A Compelling Investment Thesis

China's AI video market is not merely a beneficiary of global AI trends but a driver of them. With a projected compound annual growth rate (CAGR) of 32.5% from 2025 to 2033, the market is set to reach $3.6 billion by 2033. For investors, the combination of cost-efficient open-source models, state-backed infrastructure, and rapid adoption of multimodal AI agents presents a unique opportunity. While risks such as geopolitical tensions persist, the strategic depth of China's AI ecosystem-rooted in both innovation and capital efficiency-makes it a compelling long-term bet.