As in the US and Europe, ChatGPT sparked a frenzy of interest in AI, a sector that had started to look a bit moribund. “Some large companies had actually fired their teams working on large language models,” says Xie Mingxuan, founder of an AI startup called vrch.io, adding that the companies regret it now, because those teams then went on to found their own startups.

But developing AI models outside of big companies is a lot more challenging in China than it is in the US. American companies, like OpenAI, were able to access huge amounts of data from Google or social media platforms like Twitter and Reddit. But China skipped the open web, going, essentially, from no internet at all straight to apps, which are far, far harder to scrape for data.

That, along with the cost of computing power, makes it difficult for startups like Xie’s to build the kind of huge, sweeping models that their equivalents in the US are trying to create, so most are focusing on the application level, instead of making their own models.

Founded last year, vrch.io is developing an AI-powered voice-entry image generator. In the past, interior designers might have needed to use renderings made in Photoshop to show clients. Now, when people want to redesign a space, they can do so on the spot using generative AI. “For those of us in design,” Xie says, “we used to spend most of our time converting information that was difficult to accurately express in words, into images, and then using those images to communicate with clients.”

Though vrch.io has an investment from Miracle Plus (formerly Y Combinator China), a startup incubator in China, it’s not currently targeting the Chinese market. That’s because of the lack of regulatory clarity.

“As a small company,” Xie says, “we can’t guarantee that every segment of the business, whether it’s the algorithms, the data sources, or the training of the models themselves, is in line with regulations.”

In July this year, China’s Cyberspace Administration released interim guidelines on generative AI that focused on privacy, personal information protection, transparency of algorithms, and intellectual property rights. They didn’t set compliance standards for the technology that were substantively different from existing regulations on technology, but startups like Xie’s are waiting for more details.