China’s Data Strategy Could Give It An Edge Over the U.S. In AI Race, Congressional Panel Warns

China’s aggressive effort to collect, standardize and commercialize data could give Beijing a structural advantage over the United States in the global artificial intelligence race, a U.S. congressional advisory body said on Tuesday.

The U.S.-China Economic and Security Review Commission said China is treating data as a strategic national asset, combining government oversight with industrial-scale data collection to accelerate AI development, improve productivity and strengthen its intelligence and military capabilities.

Beijing is “marshalling data to drive productivity … (and) improve its intelligence collection and military capabilities,” the commission said in a report.

The assessment highlights a growing divide in how the world’s two largest economies approach one of the most important resources underpinning AI. While U.S. technology companies have largely relied on vast amounts of information available on the open internet to train large language models, China is seeking to capture proprietary data generated by factories, businesses, vehicles, infrastructure and other physical systems.

That data could become valuable as AI moves beyond chatbots and search tools into robotics, autonomous vehicles, industrial automation and other applications that interact directly with the physical world.

China Is Building A Data Pipeline For Physical AI

The commission said China’s manufacturing and industrial robotics sectors give the country access to large volumes of high-quality operational data that cannot simply be scraped from the internet.

Such data can help train so-called embodied AI systems, which use artificial intelligence to perceive and act in the physical world. The technology is important to the development of autonomous vehicles, industrial robots and humanoid machines.

China’s manufacturing base could therefore provide an advantage that is difficult for U.S. AI developers to replicate solely through computing power and access to internet data.

“Over the last half decade, China has been able to consolidate data, find ways to label it and refine it, and hoover up new data and make sure it’s quickly made available to entities,” Mike Kuiken, vice chair of the commission, said in an interview.

“It has the benefit of advancing their innovation ecosystem, and it has the benefit of enhancing the control of the (Chinese Communist) Party.”

The report’s argument matters because the AI race is moving into a phase where access to high-quality, specialized data may matter as much as access to advanced chips and computing infrastructure.

China formally elevated data to the status of a “factor of production” alongside land, labor, capital and technology.

The government established the National Data Administration in 2023 to oversee data standardization and classification and to help develop a unified national market for data trading.

Beijing has also sought to standardize data assets across major industries including manufacturing, transportation, finance and healthcare. Chinese companies have begun listing proprietary datasets on regional data exchanges in Shanghai, Shenzhen and Beijing, creating mechanisms through which data can be bought, sold and deployed commercially.

The strategy is designed to turn data generated throughout China’s economy into a resource that can be reused across industries rather than remaining isolated within individual companies. That could help Chinese AI developers gain access to specialized datasets needed to train models for industrial and commercial applications.

The report also highlights a potential disadvantage for U.S. companies operating in China. Beijing has tightened controls on cross-border data transfers, forcing multinational companies to localize more of their Chinese operations and separate customer data generated in China from their global systems.

Although China has introduced limited exemptions, the commission said U.S. companies operating in the country remain exposed to strict data and cybersecurity requirements.

“U.S. firms operating in China risk running afoul of China’s strict data and cyber governance regimes,” the report said.

The result is a more fragmented data environment for multinational companies, with Chinese data subject to local controls rather than freely flowing into global databases.

Data Could Become The Next Front In U.S.-China Technology Rivalry

The commission’s warning comes as Washington and Beijing compete across AI, semiconductors, cloud computing, robotics and other strategic technologies.

The United States has focused heavily on restricting China’s access to advanced chips and semiconductor manufacturing equipment, while also investing in domestic AI infrastructure. The commission’s report suggests that controlling access to computing hardware may not be enough if China develops a more effective system for generating, organizing and deploying proprietary data.

For AI systems operating in the physical economy, data generated by factories, logistics networks, vehicles and robots can be difficult to obtain at scale without access to the underlying infrastructure. This gives China’s enormous manufacturing ecosystem potential strategic value beyond its contribution to economic output.

The issue also presents a policy challenge for Washington. Creating a national data strategy would require balancing economic competitiveness and AI development against privacy, cybersecurity, and competition concerns that are more deeply embedded in the U.S. regulatory system.

“We recommend that U.S. Congress think about a national data strategy and how the U.S. government could treat data as an economic asset as our number one recommendation,” Kuiken said.