China – Technology Performance Digest

Executive Summary

This report provides an in-depth assessment of China’s current performance and trajectory in four critical dual-use technologies: additive-manufacturing, artificial-intelligence, facial-recognition, and internet-of-things-iot. The analysis focuses on the capabilities and activities of five leading Chinese organisations: Megvii, Neomodulus, SenseTime, Terminus Technologies, and Zhipu AI. These technologies and enterprises play a pivotal role in China’s strategic ambitions, both domestically and on the global stage, blurring the lines between civilian and military innovation.

China’s progress in these domains is marked by significant state-led investment, rapid commercialisation, and a robust ecosystem of academic-industry collaboration. The country has achieved notable advances in artificial intelligence and facial recognition, with companies like SenseTime and Megvii leading globally. In additive-manufacturing and internet-of-things-iot, Chinese firms are rapidly closing the gap with Western counterparts, leveraging scale, data access, and government support.

However, China faces challenges including technology bottlenecks, international regulatory scrutiny, and concerns over data privacy and security. The trajectory for the next five years suggests continued strong growth, with China likely to consolidate its position as a global leader in dual-use technologies, though not without facing significant headwinds.

Strengths

State-Driven Innovation Ecosystem

China’s innovation ecosystem is characterised by a high degree of state coordination, strategic planning, and resource mobilisation. The government’s “New Generation Artificial Intelligence Development Plan” and “Made in China 2025” initiatives have prioritised dual-use technologies, providing funding, policy support, and infrastructure. This top-down approach has enabled rapid scaling and deployment, particularly in artificial-intelligence and internet-of-things-iot applications.

Leading AI and Facial Recognition Capabilities

Chinese companies are at the forefront of artificial-intelligence and facial-recognition technologies. SenseTime and Megvii have developed world-class computer vision algorithms, large-scale data processing capabilities, and integrated hardware-software solutions. These firms supply both commercial and government clients, enabling wide deployment in public security, urban management, and smart-city projects.

Expanding Additive-Manufacturing Capacity

China is investing heavily in additive-manufacturing, with a focus on aerospace, automotive, and medical sectors. Companies like Neomodulus are advancing metal 3D printing and large-scale industrial applications, supported by national R&D programmes. The country’s manufacturing scale and supply chain integration provide a competitive edge in cost and speed.

IoT Integration and Smart City Leadership

Terminus Technologies exemplifies China’s strengths in internet-of-things-iot, deploying large-scale sensor networks, edge computing, and AI-driven analytics in urban environments. The integration of IoT with AI and big data analytics underpins China’s smart city initiatives, enhancing public services, security, and resource management.

Data Abundance and Market Scale

China’s vast population and relatively permissive data governance regime enable the collection and utilisation of large-scale datasets, critical for training advanced AI models and optimising IoT systems. This data advantage accelerates innovation cycles and enhances the performance of AI and facial recognition systems.

Weaknesses

Dependence on Foreign Core Technologies

Despite progress, China remains dependent on foreign suppliers for key components in additive-manufacturing (e.g., high-end lasers, control software), advanced AI chips, and certain IoT sensors. Export controls and supply chain disruptions pose strategic vulnerabilities, particularly in the context of US-China technology competition.

Regulatory and Ethical Challenges

Chinese facial-recognition and AI technologies have attracted international criticism over privacy, surveillance, and human rights concerns. This has led to export restrictions, blacklisting of firms like Megvii and SenseTime, and reputational risks that limit access to some overseas markets and partnerships.

Fragmented Standards and Interoperability Issues

The rapid proliferation of IoT devices and platforms has resulted in fragmented standards and interoperability challenges. This hampers the integration of systems across regions and sectors, limiting the scalability of certain solutions.

Talent Bottlenecks

While China produces a large number of STEM graduates, there is a shortage of top-tier AI researchers and engineers, particularly in foundational research areas. Brain drain to overseas institutions and companies remains a concern, despite government efforts to attract and retain talent.

Innovation vs. Imitation

Although Chinese firms excel at rapid commercialisation and incremental innovation, there are persistent questions about the depth of original, breakthrough research, especially in foundational AI and advanced materials for additive-manufacturing.

Notable Programmes & Investments

Megvii

Megvii is a global leader in facial-recognition and computer vision, known for its Face++ platform. The company has secured major contracts with public security agencies and urban management authorities. Its investments in AI chip design and edge computing aim to reduce dependence on foreign hardware.

Neomodulus

Neomodulus focuses on industrial-scale additive-manufacturing, particularly metal 3D printing for aerospace and automotive applications. The company participates in national “smart manufacturing” demonstration projects and collaborates with leading universities on advanced materials research.

SenseTime

SenseTime is the world’s most valuable AI startup, with a portfolio spanning facial-recognition, autonomous driving, and smart retail. The company has established joint labs with top Chinese universities and international partners, and is a key supplier for national surveillance and smart city projects.

Terminus Technologies

Terminus Technologies specialises in internet-of-things-iot, smart buildings, and urban robotics. The company was the official AI and IoT partner for the Beijing 2022 Winter Olympics, deploying integrated sensor networks and AI-driven analytics for crowd management and security.

Zhipu AI

Zhipu AI is a leading Chinese AI research company, focusing on natural language processing (NLP), large language models, and knowledge graphs. The company collaborates with government agencies and industry partners to deploy advanced AI solutions in education, healthcare, and public administration.

National Programmes

Competitive Comparison

United States

The US maintains a lead in foundational AI research, high-end additive-manufacturing equipment, and advanced IoT cybersecurity. Companies like Google, NVIDIA, and GE Additive set global benchmarks. However, China is closing the gap rapidly in commercial AI deployment and smart city applications, leveraging scale and government support.

European Union

The EU excels in privacy-centric AI, industrial IoT, and additive-manufacturing for aerospace. European firms benefit from strong regulatory frameworks and cross-border collaboration, but often lack the scale and speed of Chinese deployments. China’s approach is more top-down and data-driven, enabling faster iteration and market penetration.

Russia, Israel, and Others

Russia focuses on military AI and additive-manufacturing for defence, but lags in commercial applications. Israel is a leader in AI cybersecurity and niche IoT solutions, but its market size is limited. China’s advantage lies in the integration of dual-use technologies at scale, supported by a large domestic market.

Domestic Competition

Within China, competition among Megvii, SenseTime, and Zhipu AI drives rapid innovation in AI and facial-recognition. Terminus Technologies faces rivals such as Huawei and Alibaba in the IoT space, fostering a dynamic and competitive environment.

Opportunities for Collaboration / Export

Belt and Road Initiative (BRI)

China is leveraging the BRI to export dual-use technologies, particularly AI-powered surveillance, smart city solutions, and additive-manufacturing equipment, to partner countries in Asia, Africa, and the Middle East. Megvii, SenseTime, and Terminus Technologies have established overseas offices and joint ventures in these regions.

Emerging Markets

Chinese firms are well-positioned to supply affordable, scalable IoT and AI solutions to emerging markets with less stringent regulatory requirements. This includes public security, urban management, and healthcare applications.

Academic and Industrial Partnerships

Despite geopolitical tensions, opportunities remain for joint research in non-sensitive areas, such as AI for healthcare or sustainable manufacturing. Zhipu AI and Neomodulus have participated in international conferences and collaborative research projects.

Technology Licensing

Chinese companies are increasingly licensing AI and IoT platforms to overseas partners, particularly in Southeast Asia and the Middle East, where demand for smart city and surveillance technologies is strong.

Risks & Mitigation

Geopolitical Tensions and Export Controls

US and allied export controls on AI chips, advanced manufacturing equipment, and critical software pose significant risks to China’s dual-use technology ambitions. Blacklisting of firms like Megvii and SenseTime restricts access to foreign capital and markets.

Mitigation: China is accelerating efforts to achieve self-sufficiency in semiconductors, developing domestic alternatives, and diversifying supply chains. Strategic stockpiling and import substitution are being pursued.

Data Security and Privacy Concerns

International scrutiny over data privacy, surveillance, and human rights abuses threatens Chinese firms’ global expansion, particularly in Europe and North America.

Mitigation: Some companies are adopting “data localisation” and privacy-enhancing technologies to comply with local regulations. There is also a push to improve transparency and ethical standards, though progress is uneven.

Intellectual Property (IP) and Technology Leakage

Concerns over IP theft and weak enforcement of IP rights in China deter some potential collaborators and investors.

Mitigation: The Chinese government has strengthened IP laws and enforcement mechanisms, and leading firms are investing in proprietary R&D and patent portfolios.

Domestic Regulatory Uncertainty

Frequent changes in domestic regulations, particularly around data governance and AI ethics, create uncertainty for both domestic and foreign investors.

Mitigation: Companies are engaging with regulators, participating in standards-setting bodies, and developing compliance frameworks to navigate evolving requirements.

Outlook (5-year)

Artificial Intelligence

China is poised to consolidate its position as a global leader in applied AI, particularly in computer vision, NLP, and smart city applications. Companies like SenseTime, Megvii, and Zhipu AI will continue to scale, driven by state support and a vast domestic market. However, foundational AI research and high-end AI chip design will remain challenging areas, with progress dependent on overcoming foreign technology dependencies.

Facial Recognition

Facial-recognition technology will see continued deployment in public security, financial services, and retail, with increasing integration of privacy-preserving features in response to domestic and international concerns. Export growth will focus on emerging markets, while regulatory headwinds will persist in developed economies.

Additive-Manufacturing

China will expand its additive-manufacturing capabilities, moving up the value chain into high-performance materials and complex components for aerospace and defence. Neomodulus and similar firms will benefit from national investment, though reliance on imported equipment and software will remain a vulnerability.

Internet-of-Things-IoT

China’s leadership in IoT will be reinforced by large-scale smart city deployments, industrial automation, and integration with 5G networks. Terminus Technologies and peers will drive innovation in edge computing and AI-enabled IoT analytics, though standardisation and cybersecurity will be ongoing challenges.

Strategic Trajectory

By 2030, China aims to achieve global leadership in dual-use technologies, with significant progress expected in the next five years. The country will focus on reducing foreign dependencies, enhancing indigenous innovation, and expanding exports to friendly markets. However, geopolitical tensions, regulatory scrutiny, and technology bottlenecks will shape the pace and direction of progress.

Conclusion: China’s dual-use technology ecosystem is dynamic, state-driven, and increasingly competitive on the world stage. While challenges remain, the trajectory points toward continued growth and global influence, particularly in artificial-intelligence, facial-recognition, and internet-of-things-iot. Additive-manufacturing will see steady advances, contingent on success in overcoming key dependencies. Strategic engagement, risk management, and international collaboration—where feasible—will be essential for maximising opportunities and mitigating risks in this evolving landscape.