Pangyue Cheng and Ernest Lim
Law, Innovation and Technology
Published online: August 2026
Abstract: The Chinese AI regulatory model is often described as state-driven, with the government deploying AI to entrench power through surveillance, control, and cooptation of public and private sectors – a comprehensive, top-down approach leaving little room for private agency. This article offers a more nuanced picture. We argue that the Chinese state, at both central and local levels, has adopted a subtle, collaborative approach that integrates state action with private capabilities in ways that are not necessarily autocratic. We demonstrate this through a framework analysing the state’s roles as investor, regulator, and procurer of private AI companies. As investor, the state is typically a non-controlling shareholder exerting indirect influence while preserving corporate governance powers. As regulator, local governments rely more on financial incentives than coercive command-and-control enforcement. As procurer, legal and institutional restrictions on data sharing persist, pushing firms toward non-government data sources. These findings complicate conventional narratives of Chinese AI governance.
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