China’s Hybrid AI Regulatory Approach

China’s AI governance appears centralized but operates quite differently in practice.

Despite rigorous national guidelines covering deepfakes, recommendation algorithms, and generative AI, enforcement is deliberately uneven. Large “National Champions” (Baidu, Tencent, Alibaba) face full compliance expectations because of their public influence. But innovative “Little Giants,” the small and mid-sized enterprises China sees as key sources of innovation, informally operate with lighter enforcement as long as they don’t have large public presence.

This creates a hybrid combining EU-style top-down values alignment with US-style bottom-up market competition. Central government sets direction and ideology; local officials ensure outcomes align; but startups get room to experiment.

The practical result: regulations that look strict on paper can be quite permissive for innovators who stay below the visibility threshold.

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