A U.S. congressional advisory body warns that China is monetizing data as a strategic national asset to boost its artificial intelligence, giving it a potential advantage over the United States in sectors such as robotics and military use.
A U.S. congressional advisory body warned that China is commercializing and monetizing data as a strategic national asset to advance its artificial intelligence and technology goals, which could give it an edge over Washington in the global AI race. The U.S.-China Economic and Security Review Commission published a report stating that Beijing is "mobilizing data to boost productivity" and improve its intelligence gathering and military capabilities.
The document emphasizes that while major U.S. AI companies have largely exhausted the open internet to train their language models, China is systematically collecting national data "business, operational, and from the physical world" that cannot be extracted from the web. This data is crucial for training AI tools intended for business use, autonomous vehicles, and humanoid robots, an important symbol of the top-down innovative push promoted by the Chinese government for years.
Mike Kuiken, vice chairman of the commission, explained in an interview that China has managed over the past five years to consolidate data, find ways to label and refine it, and gather new data to quickly make it available to entities. "It has the benefit of advancing its innovation ecosystem, and it has the benefit of improving Party control," Kuiken stated, highlighting the dual utility that Beijing extracts from its data strategy.
The report highlights that China's advanced manufacturing and industrial robotics ecosystems provide a vast pool of high-quality data for embodied AI applications, i.e., systems that operate in the physical world like humanoid or autonomous robots. This data repository gives Beijing a potential advantage over the U.S. in developing robotic software for both commercial and military uses, an area where the U.S. industry still lacks a comparable source of information from the physical environment.
The collection of physical world data is not limited to production lines; it also encompasses logistics operations, transportation networks, and energy systems, all sectors where China has integrated sensors and connected devices on a large scale. This data advantage becomes a critical input for training algorithms that must operate in changing environments and with real-time information, something that the public internet cannot provide with the same level of detail.
Analysts consulted by the committee point out that this advantage is not only quantitative but qualitative: data from real industrial operations is difficult to replicate in a laboratory or through simulations. The report warns that, without action, this gap could widen in the coming years as China continues to expand its data collection infrastructure.
China has tightened its regulatory oversight of cross-border data transfers in recent years, leading to widespread compliance issues for foreign multinational companies operating within its territory. To comply with Chinese regulations, companies have been forced to further localize their subsidiaries and separate their Chinese customer data from the rest of their global operations, a costly and complex process.
The report from the U.S. commission states that U.S. companies operating in China "risk violating the strict data and cybersecurity regimes" of the Asian country. Although Beijing has introduced limited exemptions for some companies, regulatory uncertainty continues to weigh on multinational operations and could lead them to reduce their presence in the Chinese market.
This data control policy not only has an economic impact but also a strategic one, as it limits foreign competitors' access to data generated within China's borders. President Xi Jinping's administration has made data management a pillar of its autonomous technological development plan while reinforcing the Communist Party's internal surveillance over its citizens' digital information.
The report concludes with a clear recommendation to the U.S. Congress: to consider a national data strategy and how the federal government could treat data as a priority economic asset. "We recommend that the 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," said Mike Kuiken to Reuters.
The lack of a unified federal data policy contrasts with China's centralization, which has elevated data to a central "factor of production" alongside land, labor, capital, and technology. In 2023, Beijing established the National Data Administration, an agency responsible for overseeing the standardization and classification of data at the national level, as well as building a unified market for data trading.
Beijing has also promoted the commercialization of data in its digital economy, alongside a broader effort to implement AI across all industries. Its goal is to standardize data assets in critical sectors such as manufacturing, transportation, finance, and healthcare, while Chinese companies are already beginning to list their proprietary datasets on regional data exchanges located in Shanghai, Shenzhen, and Beijing.
The report's bluntness and the urgency of its recommendation reflect a growing concern in Washington about China's ability to turn its data into a tangible competitive advantage in AI. The debate on how to respond to this situation is just beginning, but what is clear is that the race for supremacy in artificial intelligence is also being played out in the realm of national data management.
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