China’s cutthroat AI market may soon reshape how the rest of the world pays for artificial intelligence.
Beijing-based Zhipu AI, one of China’s earliest rivals to OpenAI, says the brutal price competition that has crushed margins at home is about to spill into international markets — and US and European AI developers may not be ready for it.
Speaking ahead of its public market debut, Zhipu’s leadership argues that AI pricing globally is heading toward the same reality China already lives with: intense competition, thinner margins, and users who care more about value than brand.
China’s AI Market Has Already Hit the Bottom
China’s AI ecosystem is famously unforgiving. Dozens of startups chase the same customers, government-backed capital floods the sector, and prices fall fast.
Zhipu has embraced that environment rather than fighting it. The company runs a ChatGPT-style service called Z.ai and offers an AI coding assistant for as little as 20 yuan a month — under $3. That’s roughly one-seventh the price of comparable tools from US-based rivals like Anthropic.
According to Zhipu, that pricing isn’t a temporary promotion. It’s the end result of full-scale competition.
An IPO Built on Scale, Not Profits
Zhipu is set to become China’s first publicly listed AI software company, raising more than $500 million in its market debut. The timing is notable: major US competitors remain private, while Chinese investors are eager for exposure to homegrown AI champions.
Financially, the company is still burning cash. Revenue for the first half of 2025 stood at roughly $27 million, while research and development spending surged to more than $220 million. Zhipu isn’t hiding the imbalance. Executives say profitability can wait.
What matters now, they argue, is reach.
Why Zhipu Thinks the World Will Follow China
Chinese AI startups operate with fewer advanced chips, less computing power, and smaller teams than Silicon Valley giants. But Zhipu believes relentless iteration — combined with aggressive pricing — is closing the gap faster than many expect.
Its model-as-a-service platform now has nearly 3 million users, with about 15% paying. Revenue from standardized AI products has more than quadrupled year over year, driven by developers and businesses looking for capable tools without enterprise-level pricing.
Zhipu’s bet is straightforward: once international users see comparable performance at dramatically lower costs, pricing expectations will reset everywhere.
Global Expansion Comes With Friction
Zhipu’s rise hasn’t been without obstacles. The company remains on a US trade blacklist, limiting its access to advanced American hardware without special licenses. That forces heavier reliance on domestic supply chains and alternative optimization strategies.
At the same time, its close ties to Chinese tech giants like Alibaba Group and Tencent Holdings, along with backing from government-linked funds, have helped it secure large domestic contracts — especially with state-owned enterprises.
Now, Zhipu wants to translate that momentum into scalable software products for global customers.
Why This Matters for US and EU AI Firms
For Western AI companies, the warning is clear. High compute costs, expensive talent, and premium pricing models may not hold up if Chinese players succeed internationally.
Even if Zhipu doesn’t dominate overseas markets, its presence could pressure incumbents to cut prices, bundle services, or justify higher costs more aggressively.
In AI, perception matters — but pricing can rewrite the story fast.
Conclusion
China has already shown what happens when AI competition hits full throttle. Zhipu believes that same pricing reality is coming for the rest of the world — and soon.
Whether global markets are ready for China-style AI economics is about to be tested.