What the US and China Should Discuss at APEC
Both sides are feeding an AI investment bubble – and Shenzhen is the place to talk about it.
On September 24, U.S. and Chinese presidents met in Washington and pledged to foster a "constructive relationship of strategic stability." The two leaders are set to meet again on November 18-19 during the APEC Economic Leaders' Meeting in Shenzhen. Their first summit, their second of 2026, focused heavily on artificial intelligence (AI).
At the September summit, U.S. Treasury Secretary and Chinese Vice Premier discussed restarting government-to-government AI dialogue. They agreed to establish a channel for AI incidents and scheduled another round before the end of November. Xi Jinping subsequently described China and the U.S. as AI powers that should collaborate, not compete.
Recent developments in the U.S. AI sector are troubling. The business model for frontier AI companies assumes exponential compute demand, reliable revenue conversion, and persistent capital. All three assumptions are now at risk. U.S. AI firms are facing diminishing returns and excessive capital expenditure. In China, companies are struggling to close the frontier gap under foreign constraints while meeting domestic return expectations.
Both nations' capital markets are weary of unprofitable ventures, and the competition only exacerbates these economic dynamics.
At the upcoming APEC summit in Shenzhen, an opportunity arises to address the AI economic problem. The APEC CEO Summit will bring about 1,000 business leaders to Shenzhen, with AI on the formal agenda. The Shenzhen Initiative will be released, highlighting the potential for collaboration. The November summit offers a practical setting for addressing AI's economic impact.
While China and the U.S. have acknowledged common AI risks, the economic issue remains unaddressed. The November APEC summit provides an opportunity for China and the U.S. to initiate a standing China-U.S. AI economics dialogue mechanism, including track two discussions involving finance officials, stock market regulators, and executives.
This could help bridge the gap between the official AI dialogue and the economic realities faced by both nations.
Written by urgent.news from The Diplomat's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
