You spawn in a lantern-lit teahouse. A scholar in white turns, remembers your name, and asks how your journey from Hangzhou went. She’s not real, but she improvises, responds to your tone, and her memory carries over, because she’s running on a large language model hooked into a blockbuster mobile game. Justice Mobile, from Chinese gaming giant NetEase, added a DeepSeek-powered character called Shen Qiusuo last year, an AI-driven nonplayer character that chats, schemes, and reacts beyond canned dialogue.
Meanwhile, last week in the United States, Google DeepMind unveiled "Project Genie", a dazzling prototype that turns text prompts into tiny, playable worlds. It's limited to 60 seconds per session, U.S.-only for now, and tucked behind a premium paywall. The demo flooded social feeds and rattled markets. Stocks in the gaming firms Unity, Roblox and Take-Two all slid as investors tried to price a future where "worldbuilding" becomes the norm.
But the lesson is alarming for America, and the lesson is not about "AI slop." If you want to understand where AI gameplay at scale will happen first, step into that teahouse. It’s already open for business, and the West doesn't control what it sells.
Common Knowledge
On the left, the mood on AI in general is suspicion bordering on hostility. "This process of transformation does generate new work," a writer for Jacobin warns, "but it is work that is more fragmented, more surveilled, and more alienated."
A new survey by GDC Festival of Gaming shows the gaming industry itself is nervous. "Over half (52 percent) of game industry professionals think generative AI is having a negative impact… up from 30 percent last year and 18 percent the year prior," it said. One respondent said: "I’d rather quit the industry than use generative AI."
On the right, the focus is more about constraining China. The Heritage Foundation has said it would be "a historic mistake" to "supercharg[e] China’s AI capabilities," urging tighter limits on U.S. tech exports as Chinese models catch up.
Uncommon Knowledge
The surprise isn’t that Google can conjure a toy world in a minute. It’s that China has already built the factory to ship a million of them when the tech is ready.
China’s domestic games market hit around $50 billion in 2025, up 7.7 percent year-on-year, with 683 million players, both record highs. Licenses are flowing: regulators issued 497 approvals in the last quarter of 2025, the highest since 2019.
Look at the conveyor belt that AI will grease. WeChat’s "minigame" ecosystem—Tencent’s snack-sized, instantly playable titles inside China’s super-app—reported 500 million monthly users by mid-2025, with more than 400,000 developers building for it. Nearly 70 titles top 1 million daily users, and more than 300 make over $1 million in a single quarter.
Chinese firms are also knitting AI directly into production. NetEase’s Justice Mobile deployed its DeepSeek-powered NPC last year. Tencent has been rolling out AI creation suites and boasting of performance gains from its Hunyuan foundation model. It's not that Chinese labs have "better" models, rather that their distribution machines are already geared to use them.
And the rules—often cast in the West as shackles—can function like rails. China’s Deep Synthesis provisions and Generative AI Interim Measures force providers to label AI content, manage training data, and run security assessments. That sounds slow, except that in a world of AI pipelines, "compliance-by-design" becomes a feature to secure licenses faster.
The U.S. story, by contrast, is demo-first and platform-later, with regulation a mess. Project Genie is magical, but DeepMind itself describes it as "experimental," with U.S.-only access, time caps, and no publicly available path yet into production. That didn’t stop Wall Street from connecting the dots. In one day after Genie’s reveal, Unity fell by 24.22 percent, Roblox by 13.17 percent, and Take-Two by 7.93 percent. The sell-off was driven not by what Genie does today, but on what content-at-scale means tomorrow.
If you think this is only about mobile, consider the cultural ambition. Black Myth: Wukong proved a Chinese studio can make a global, premium "AAA"-feeling game—and do it profitably at lower budgets—while platforms such as WeChat normalize rapid, data-driven iteration. AI doesn’t replace those advantages; it multiplies them.
So where does this leave the politics? The left warns of a "factory logic" that eats creative work; the right warns against feeding China’s capacity. Both can be true. The market will reward whoever runs the best AI-assisted production lines. Today, that looks suspiciously like Shenzhen rather than San Francisco.
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