China commoditizing the complement

China is trying to win by commoditizing the complement and I believe they are close to succeeding.

For the last two decades, the West exported cognition because it owned the platforms, the cloud, the software distribution, and the talent concentration. If the cognitive engine becomes cheap, portable, and good enough, that asymmetry weakens. A small country can buy or download the same cognitive machinery, then apply it to its own bureaucracy, its own companies, its own language, its own domain problems.

The West has dominated the thinking and services world. Software, finance, media, research, management layers, and the export of expertise. The US is the cleanest example. In 2024, US services exports were about 1.1 trillion dollars, the highest on record. The US and the West sells thinking at scale. AI threatens to flatten that advantage because AI turns thinking into infrastructure.

China dominates the atoms world. Industrial capacity, manufacturing throughput, physical supply chains, cost curves. In 2023 China produced about 28 percent of global manufacturing value added.

If you can make the layer next to you cheap and abundant, you drain its pricing power and force value to move somewhere else. In AI, the complement is model access. For a lot of Western companies, the business is still basically gated intelligence sold as an API. China has every incentive to make that layer feel like electricity: available everywhere, cheap, hard to monopolize.

Open weight releases are part of that play: DeepSeek, Qwen, Kimi and MiniMax are only a few of the chinese open source models. Once strong models are common, model access stops being a moat. It becomes a commodity input.

A huge fraction of what we call services is legible work: reading, writing, coding, summarizing, translating, drafting, answering, generating variations, searching a space of options. That layer is now replicable and it is getting local. Apple is publishing technical reports about on device foundation models, including aggressive quantization aimed at making serious inference run on consumer hardware. When strong models run on a laptop, countries stop importing thinking as a service. They import weights, or they distill, fine tune, and deploy inside their own borders.

I believe that:

1. China stays strong in atoms because it already has the scale advantage.
2. The West still leads in many areas that require deep institutions and long accumulated competence, including parts of frontier research and high trust services.
3. But AI compresses the services premium by making a large portion of cognition cheap and replicable. That is why open models matter. They are a weapon that attacks the margin structure of the thinking economy.
4. If you sell intelligence, this is bad news. If you own distribution, hardware, data, or a workflow people cannot easily leave, you survive. If you own atoms and you get thinking for free, you get a scary combination.