As China's DeepSeek - a relatively recent entrant in a crowded field of companies producing artificial intelligence (AI) models - threatens the dominance of the United States in the nascent but highly competitive sector, the province that nurtured the upstart company is taking steps to become a world-leading hub for frontier technologies of all types.

The eastern province of Zhejiang, home to e-commerce giant Alibaba, is abuzz as a new breed of start-ups emerges there. Local officials have expressed their hopes for the province to supercharge China's advancements in AI and other complicated tech - a development that would undercut the US' lead.

"Zhejiang will further boost support for AI industries and strive to build itself into China's innovative high ground," said Du Xuliang, director of the province's development and reform commission, last week.

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The January 20 roll-out of Hangzhou-based DeepSeek's R1 large language model - open-source software judged to be on a par with the latest language processors from industry leader OpenAI at a fraction of the cost - took the tech world by surprise and prompted US President Donald Trump to say the release was a "wake-up call" for Silicon Valley.

Markets responded quickly, with the share price of semiconductor behemoth Nvidia plummeting from US$142 on Friday to US$128.99 by close on Tuesday.

DeepSeek is not the only tech company in Zhejiang making waves. The provincial capital of Hangzhou is also home to robotic dog maker Unitree and Game Science, developer of the popular action title Black Myth: Wukong.

DeepSeek founder Liang Wenfeng, right, in a meeting with Chinese Premier Li Qiang on January 20. Photo: CCTV alt=DeepSeek founder Liang Wenfeng, right, in a meeting with Chinese Premier Li Qiang on January 20. Photo: CCTV>

Outlining the province's ambitions, Du said Zhejiang will have a combined computing capacity of no less than 100 Eflops - 100 quintillion floating-point operations per second - by the end of 2025.

As of September, China's total computing capacity stood at 246 Eflops, according to data from the Ministry of Industry and Information Technology.

Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, said the emergence of DeepSeek has changed investor sentiment on China - a domestic achievement that has shifted their focus from the typical subject of macroeconomic challenges.

"DeepSeek's success will likely motivate Beijing to further promote private sector tech innovation. AI has been a top priority for years," he said, adding the market now realises innovation in China's private sector is competitive on a global scale.

"It is interesting that this breakthrough was achieved not by government-backed research institutes or large state-owned enterprises, but by a hedge fund with no [direct] government subsidies. It is a clear example of private sector efficiency."

Last week - the same day as the release of R1 but before the model made global headlines - DeepSeek founder Liang Wenfeng joined other figures from prominent industries in a meeting with Premier Li Qiang. They gave suggestions for inclusions in the government's work report, a summary of the country's policy priorities to be delivered at the March sessions of the national legislature.

Du said his province would offer favourable policies to help AI firms maximise their computing capacity and train models to "substantially slash costs".

Hangzhou mayor Yao Gaoyuan said in an interview with state media last week that the city would never cut back on support for tech start-ups. "No matter how tight the financial resources are, we will not reduce investment in science and technology."

A professor at Zhejiang Gongshang University said the province is now reaping the benefit from years of cooperation between the tech community and local government.

"The success of [e-commerce firm] Alibaba, with its big pay and ecosystem and Zhejiang's good living environment, has lured many tech graduates to the province, so we have a deep talent pool," he said on condition of anonymity.

Alibaba owns the South China Morning Post.

"Some of them then start their own business in Zhejiang," he said. "Though many will fail, those who can survive and show potential are always taken care of by the local government. Both President Xi Jinping and Premier Li worked for years in Zhejiang, and they know its vibrant tech landscape."

As Beijing looks for the next DeepSeek in pursuit of greater self-reliance in tech, the professor said, the province will have an indisputable role - especially its private firms.

"Zhejiang can be the new face of China's innovation."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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