China's burgeoning energy resources are positioning the country as a formidable competitor in the global artificial intelligence (AI) landscape, particularly in the establishment of data centres essential for AI operations. While the United States currently leads in semiconductor technology, China's access to inexpensive electricity gives it a significant edge in powering the vast data centres required for AI processing.
Data centres, which are critical for training and running AI models, consume enormous amounts of energy. A typical facility can use as much electricity as 100,000 households, while advanced "hyperscale" centres can require power equivalent to that of two million homes, according to the International Energy Agency (IEA). With China generating more than double the electricity of the U.S., the gap is expected to widen as the country invests heavily in its energy infrastructure.
Research by BloombergNEF indicates that over the next five years, China will add more than six times the electricity generation capacity of the U.S., primarily through renewable sources like solar and wind. In 2025, China alone increased its wind and solar capacity by over 430 gigawatts, accounting for more than half of the global growth in renewable energy that year.
Central to China's AI strategy is the integration of data centres with its expanding renewable energy sector. The government’s "East Data, West Computing" initiative aims to concentrate new data centre construction in the sparsely populated western regions, where land and renewable energy are more abundant compared to the crowded eastern coast. Recently, Beijing launched operations at its first large-scale renewable energy project directly linked to a data centre, a 500-megawatt facility in Ningxia that will power a cloud data centre operated by China Datang.
“In the long run, the country that can provide cheap, stable, low-carbon electricity will have a major advantage in AI infrastructure,” said Qiyang Xiong, a PhD candidate at Renmin University of China.
Despite the U.S. maintaining a larger data centre footprint, with an estimated 5,427 facilities compared to China's 449 in 2025, the rapid pace of China's data centre construction is narrowing this gap. The number of data centre racks in China has grown by 30 percent annually from 2016 to 2023, according to the China Academy of Information and Communications Technology. As the U.S. faces export controls on high-end chips from companies like Nvidia, China is increasingly relying on its own Semiconductor Manufacturing International Corporation (SMIC) to meet its chip needs.
By 2030, China's data centre capacity is projected to reach 60 gigawatts, nearly double its current level, while consuming 2.3 percent of the country's total electricity demand. The rapid construction of modular data centres in China, which can be completed in six months, contrasts sharply with the year-long timelines typical in the U.S., a senior economist at Capital Economics.
However, the U.S. is beginning to encounter limitations in its energy grid, which has led to a significant drop in new data centre projects. Energy consultancy Wood Mackenzie reported a 50 percent decline in new projects at the end of 2025 due to these constraints. Community opposition to data centres, driven by concerns over local power supply, has also stalled at least 36 projects in the U.S. between May 2024 and June 2025.
Prominent tech leaders, including Elon Musk and Jensen Huang, have acknowledged China's advantages in energy. Musk stated that the primary limiting factor for AI deployment is electrical power, emphasizing that China’s growth in electricity generation is substantial. Howard Yu, director at IMD Business School, remarked that advancing AI now hinges on both electricity and chip availability, with China strategically controlling its energy resources.
Despite these advantages, China faces its own challenges. Many data centres are still located in eastern megacities like Beijing and Shanghai, which are experiencing power supply issues and have imposed restrictions on new facilities. Furthermore, China's power grid suffers from fragmentation, complicating the efficient distribution of electricity across regions.
As the competition for AI supremacy intensifies, China's energy strategy and its rapid development of data centres may prove crucial in shaping the future of AI infrastructure globally.
