China’s ‘Silicon Valley’ is building robots and fortune-telling AI apps at the same time

January 2, 2026

TL;DR

Hangzhou is emerging as a significant AI hub in China, focusing on both frontier research and grassroots experimentation in physical AI.
Chinese AI startups are concentrating on practical applications, aided by open-source models and lower energy costs.
The development of physical AI, involving "world models" for robots and autonomous systems, is a key priority for China and the U.S.
Companies like Manycore, Unitree, and Deep Robotics are at the forefront of spatial intelligence and robotics in Hangzhou.
Lower energy costs in China are seen as a potential competitive advantage, even with less advanced chips, as they can offset higher power consumption.
The open-source model adopted by Chinese companies allows for feedback but may limit direct revenue, creating investor pressure.
China's AI focus leans towards practical applications and user experience, as seen with Baidu Map and ByteDance's Doubao chatbot.
A distinct, experimental AI scene is developing in areas like Liangzhu, fostering innovation with low commercial pressure.
Intense domestic competition and consumer reluctance to pay for apps are driving Chinese startups to seek global markets.
Some entrepreneurs are using AI to create independent, profitable businesses, while others are criticized for merely adding AI features for marketing.

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