In contrast, the European Union has emerged as a champion of regulatory foresight with its AI Act, the world’s most comprehensive framework to date. By imposing strict compliance standards, the EU seeks to mitigate AI’s potential societal risks. However, as AI innovation accelerates globally, concerns are mounting that Europe’s regulatory rigour could inadvertently dampen its own competitiveness, leaving it vulnerable to faster-moving markets.
China, on the other hand, has adopted a radically different approach. Its model is not driven by market forces or judicial negotiation but is underpinned by state control. For China, AI serves not only as an economic engine but as a tool of statecraft, intricately woven into the fabric of national security, surveillance, and military strategy. Unlike the West, where regulatory frameworks evolve through a combination of corporate influence and legal oversight, China’s AI governance is centrally orchestrated, ensuring that AI development aligns with broader state interests.The growing schism between these regulatory paradigms is setting the stage for an AI Cold War. States and corporations will soon be compelled to choose sides—aligning with either the US’ selective restrictions, Europe’s stringent oversight, or China’s state-controlled approach. The repercussions will be profound. Fragmented AI safety standards, asymmetric restrictions on cross-border collaboration, and competing governance models will further polarise the global AI landscape. Rather than a unified approach, the world will face a discordant patchwork of regulations, which risks stalling progress, hindering cooperation, and entrenching power imbalances that will reverberate for decades.
Underlying this fragmentation is the rise of techno-nationalism. Major powers are now prioritising their own AI ecosystems, consolidating control over intellectual property, and erecting barriers to protect domestic companies from foreign competition. There is a growing ideological divide—one camp champions the virtues of open-source AI, asserting that transparency and accessibility will drive innovation, while the other warns of the risks associated with unfettered access, fearing the misuse of AI technologies by rogue actors. In the absence of a cohesive global framework, AI governance is drifting towards a perilous vacuum, one that risks turning AI into an instrument of geopolitical leverage.
Further compounding this issue is the increasing corporate influence over AI governance. Tech giants are active participants in lobbying for regulatory outcomes that favour their interests. The US, while ensuring the security of its tech sector, is also safeguarding its own corporate champions. Europe’s regulatory approach, despite its ethical considerations, may unintentionally protect its own industrial ecosystem, while in China, AI companies are tightly aligned with state policy, ensuring that their innovations advance national objectives.An even more concerning trend is the weaponisation of AI regulation as a tool of economic warfare. Much like the semiconductor industry before it, AI is being subjected to export restrictions, licensing regimes, and compliance barriers designed to suppress competition and limit the reach of adversaries. This is an economic confrontation, determining which nations will dominate the AI era and which will be relegated to the sidelines.
For India, this moment represents a critical inflection point. Strategic ambiguity is no longer tenable. As the US, China, and the European Union forge ahead with their respective AI governance frameworks, India runs the risk of being relegated to the role of a passive follower—an observer in a game where the rules are being written by others.
The world is not progressing towards a cooperative AI future; instead, it is splintering into competing regulatory enclaves. The nations that seize the initiative today will not only shape the future of AI technology, economics, and military strategy, but will also wield unparalleled influence in global geopolitics. The longer India hesitates, the narrower its window of opportunity becomes. AI is the new frontier of global supremacy. The fundamental question that remains is: Who will control its destiny?
—The author, Dr. Srinath Sridharan ( @ssmumbai), is a Corporate advisor & Independent Director on Corporate Boards. The views expressed are personal.
Read his previous articles here
