China AI labs roll out new models as competition intensifies
Synopsis
ByteDance launched Doubao 2.0, Seedance 2.0, and Seedream 5.0 in mid-February 2026, while Alibaba released Qwen 3.5 and Moonshot unveiled Kimi K2.5, a 1 trillion parameter open-source model. The launches coincided with large consumer cash promotions during China's Lunar New Year. Alibaba reported 34% cloud revenue growth in its latest quarter. China's generative AI market generated $2.54 billion in revenue in 2024 and is projected to reach $17.6 billion by 2030, per Grand View Research.
Chinese artificial intelligence companies have launched new large language models and stepped up promotional campaigns as competition intensifies in the domestic AI sector. Firms are targeting enterprise clients and developers while competing on pricing and performance. China’s AI industry continues expanding amid global growth in generative AI technologies.
Key Highlights
- Chinese AI labs release upgraded large language models amid rising competition
- Companies increase marketing efforts to attract developers and enterprise clients
- China’s AI industry supported by government policy and venture funding
- Global AI market projected to reach hundreds of billions in revenue
China’s artificial intelligence sector began 2026 with a surge of activity, as ByteDance, Alibaba and Moonshot AI each launched new AI models within weeks of the Lunar New Year, alongside aggressive consumer promotions aimed at attracting users.
ByteDance Launches Three AI Products at Once
ByteDance released three models in mid-February. Doubao 2.0, the company's flagship large language model, went live on February 14 via its cloud platform, Volcano Engine. The same day, ByteDance launched Seedance 2.0, a video generation model, and Seedream 5.0, an image creation tool.
Seedance 2.0 attracted the most attention. Built on a multimodal architecture that accepts text, image, audio, and video as inputs, the model generated realistic short clips that spread rapidly across social platforms. A simulated fight scene involving actors Tom Cruise and Brad Pitt went viral and quickly drew criticism from Hollywood studios. The Motion Picture Association formally objected to the model, citing copyright concerns.
The Walt Disney Company sent ByteDance a cease-and-desist letter on February 13, alleging the model was trained on Disney content without authorization. Paramount Skydance also accused ByteDance of infringing its intellectual property, including Star Trek and South Park. On February 16, ByteDance said it "respects intellectual property rights" and announced it would restrict real-person image inputs, requiring identity verification for certain content types. Elon Musk commented on the model's development on social media, writing "it's happening fast."
Doubao 2.0 Pro, the language model released the same day, is now available on the Doubao app and through Volcano Engine's API services. ByteDance reported that Doubao's daily token usage exceeded 50 trillion as of December 2025, ranking first in China and third globally, according to the company.
Alibaba Pushes Qwen and Cuts Costs
Alibaba released its Qwen 3.5 model in the days before Lunar New Year, describing it as 60% cheaper to run than its predecessor while handling workloads up to eight times larger. Independent benchmarks placed it ahead of several US models on key performance tests. The company also released Qwen3-Max-Thinking earlier in February.
Alibaba's most recent quarterly results, covering the three months to September 30, 2025, showed cloud revenue rising 34% year-on-year to 39.8 billion yuan, outpacing analyst expectations of 37.9 billion yuan. Overall group revenue reached 247.8 billion yuan, up 5%. AI-related product revenue grew at triple-digit rates for the ninth consecutive quarter.
The company has committed 380 billion yuan ($53 billion) to AI and cloud infrastructure over three years, a figure its CEO said "might be on the small side" given current demand levels. Alibaba has already spent 120 billion yuan of that commitment over the four quarters through September 2025. As of October 2025, more than 180,000 derivative models had been built on the Qwen family on Hugging Face, over twice the number of the next closest competitor.
Moonshot Releases Open-Source Kimi K2.5
Beijing-based Moonshot AI released Kimi K2.5 on January 26, 2026, as an open-source multimodal model. Trained on 15 trillion mixed visual and text tokens, the model uses a Mixture of Experts architecture with 1 trillion total parameters, activating around 32 billion per task.
It scored 50.2% on HLE-Full and 74.9% on BrowseComp, and outperformed GPT-5.2 and Gemini 3 Pro on the SWE-Bench coding benchmark. A feature called Agent Swarm allows the model to coordinate up to 100 sub-agents simultaneously, executing up to 1,500 tool calls per task and running 4.5 times faster than a single-agent setup.
Moonshot also released Kimi Code, an open-source coding agent for use in terminal environments and IDEs. The company previously raised $500 million at a $4.3 billion valuation, with reports indicating it is already seeking a new round at $5 billion.
Cash Promotions Accompany the Product Launches
The model releases came alongside some of the largest consumer giveaways China's tech industry has run during a holiday period. ByteDance offered 100,000 prizes during China's main New Year's Eve television gala, including luxury cars, along with digital cash packets of up to CNY 8,888 each. Alibaba distributed 3 billion yuan in consumer rewards during the Spring Festival period. Baidu contributed 500 million yuan in cash prizes. Alibaba, Tencent, and Baidu separately offered digital red envelopes worth up to CNY 10,000 each through their respective platforms.
The competition arrives as China's AI sector is growing fast. The country's overall AI market exceeded 700 billion yuan ($97.5 billion) in 2024, maintaining more than 20% annual growth for several consecutive years, according to official Chinese government data cited by state media.
China's generative AI segment specifically generated $2.54 billion in revenue in 2024, according to Grand View Research, which projects that figure will reach $17.6 billion by 2030, growing at a compound annual rate of 31.7%. By February 2025, the number of generative AI users in China had reached 250 million, according to Roland Berger. As of March 2025, 346 generative AI services had been formally registered with the Cyberspace Administration of China, the country's internet regulator.
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Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
