The "Low trust-Open Source" Paradox of AI Adoption in China:

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The "Low trust-Open Source" Paradox of AI Adoption in China:<br>The reasons China has turned to open source AI are not the ones people usually mention

Andrew Stokols<br>Jun 24, 2026

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Shanghai’s West Bund Area is home to the Model Space startup incubation facility and offices of Alibaba, Sensetime, and other tech firms (Author, 2026)<br>A central paradox is that China’s embrace of Open Source AI is directly related to a deep-seated and pervasive lack of trust in data security of cloud and AI cloud platforms.

The “Low Trust-Open Source” Paradox of Ai Adoption in China

My research has focused mostly on the infrastructure underpinning AI—data centers, energy, and the application of AI in governance (smart cities) and other infrastructural sectors. Over the last month in China, I had the chance to talk to a number of AI founders and those in China’s cloud companies and public sectors. One of the themes that kept coming up was how lack of trust in data security hinders cloud enterprise adoption, as well as AI enterprise use. This is hard to square with China’s headlong embrace of all things AI. Since the emergence of Deep Seek in early 2025 as an open source rival to leading US AI models, China is sometimes seen to be following a different path that favors “open source” rather than the proprietary enterprise subscription models of Google’s Gemini, Claude, and OpenAi. By many measures, China’s open source models (DeepSeek, Kimi, Moonshot, Zhipu) are more widely used around the world, and even increasingly in the U.S.1 But from a commercial standpoint, AI business models are more mature and already generating far more revenue for U.S. based cloud companies than their Chinese platform counterparts.<br>The distinction between the U.S. and Chinese AI paths is real. But, a lot of recent commentary on China’s AI ecosystem suggests that China’s “open source” approach arises out of farsighted government promotion of industry adoption and public benefit or high-minded virtues of openness that supposedly contrasts with a proprietary high-fence approach of leading Western cloud and AI platforms. However this narrative greatly oversimplifies actual business dynamics in China. For one, while Deep Seek itself may have developed a culture of research and open source, China’s broader business ecosystem is characterized by mistrust and lack of confidence in data security and data property rights. 2 A central paradox is that China’s embrace of Open Source AI is directly related to a deep-seated and pervasive lack of trust in data security of cloud and AI cloud platforms.<br>By many measures, China is seeing massive embrace of AI. Nearly all professionals I spoke to were using AI, many using American models via VPN. Airports are blanketed with floor to ceiling ads of leading AI companies, stores sell Ai-enabled glasses (Rokid), AI-enabled pets, and AI-enabled (you name it). When talking about enterprise policy at their companies, nearly people I spoke with said their companies generally prohibit putting any private corporate data or operational data into cloud AI systems—either American or domestic. The preferred approach is to deploy internal AI systems “on premises” neibu bushu 内部部署., which are seen to be more secure. I spoke with the founder of an AI company focused on medical imaging technology (infared) in Shanghai whose cofounder had apparently bought Nvidia chips many years ago and had set up server racks in the company’s headquarters. Many also continue to use VPNS to access Chat GPT and Claude as they are still seen to be superior to Chinese models especially for complex tasks and work.<br>The divergence between U.S. and Chinese AI ecosystems starts with the basic fact that enterprise cloud adoption in China lags the U.S by a wide margin both for demand and supply deficits, as JS Tan has analyzed here.3 The reasons for this are multifaceted. Chinese companies have lower willingness to pay for recurring subscription-based SaaS services, as is common in many sectors of U.S. business landscape. Sure, China has several leading cloud providers: Ali Cloud, Tencent, Baidu, as well as state-owned offerings from China Telecom and China Mobile that are mostly geared towards government agencies and state-owned enterprises. But another significant reason has to do with a lack of trust, and a lack of enforcement (or a lack of faith in that enforcement) of private property rights, which extends to data ownership rights.<br>“Trust in Chinese market is low. In many situations contracts are not seriously enforced, and everyone seems to know that data leakage and privacy issues are huge in general.”<br>—-manager at one of China’s leading third-party cloud firms

A Shanghai-based employee of an AI startup that is implementing AI in monitoring operations for their company said their managers prevent them from putting any corporate data directly on AI cloud platforms—of either...