Microsoft president raises concerns over Chinese AI subsidies
Microsoft President Brad Smith speaks about future visions for the development and implementation of artificial intelligence in education in North Rhine-Westphalia at a press conference held at the North Rhine-Westphalia State Representation in Berlin on June 4, 2025.
Sören Stache | Picture Alliance | Getty Images
Microsoft President Brad Smith told CNBC that American tech companies should be “a little concerned” about the subsidies their Chinese rivals are receiving from their governments in the AI race.
As competition between US and Chinese companies intensifies to develop the most advanced models, Smith said the US has an advantage in terms of “access to the most powerful chips in the world” and “other technology innovations”.
But he also said in an interview on the sidelines of the AI Impact Summit in New Delhi, India: “I think we should always be thinking about Chinese subsidies, maybe even worrying a little bit.”
Chinese AI companies are backed by their government with measures such as a multibillion-dollar national investment fund and cheaper energy vouchers for computing needs. Smith’s warning comes after Chinese companies launched a number of models in the past two weeks and low-cost AI models could be attractive in developing countries.
Subsidies to Chinese companies from Beijing are “the key approach China has successfully taken to disrupt the telecommunications market” at a time when government money and support has helped companies like Huawei and ZTE grow, Smith said.
“Some American companies have disappeared. European companies like Ericsson and Nokia have gone on the defensive,” Smith added.
Smith said that Chinese companies Huawei and Alibaba have data centers around the world and that “it would not be difficult for China to subsidize them.”
“For the rest of us, I think we have to compete with that, and we should be good at competing with the support of our governments,” Smith said.
CNBC approached Alibaba’s and Huawei for commenting on whether they accepted Chinese government subsidies but had not received a response by the time this article went live.
Alibaba’s cloud computing division, through which it sells artificial intelligence services, operates globally. But it doesn’t always build data centers outside China, instead partnering with other infrastructure players.
How does China support tech companies?
Beijing launched a 60.06 billion yuan ($8.42 billion) national artificial intelligence fund last year to invest in early-stage projects.
Cities across the country, from Shanghai to tech hub Shenzhen, have offered “vouchers” reducing the cost for companies looking to rent computing power.
Cheap energy has been another advantage for Chinese companies trying to build the energy-hungry infrastructure needed to train and run AI models.
Microsoft said on Wednesday it was on track to invest $50 billion by the end of the decade to help bring artificial intelligence to developing countries in the “Global South,” including investments in infrastructure and reskilling.
Rory Green, TS Lombard’s chief China economist, told CNBC this week that a “Chinese tech sphere” could easily form in developing countries.
“I think the choice is pretty simple for these economies, and you can easily see a world in five to 10 years where most of the world’s population will be working on the Chinese tech stack,” Green said.
