What is ‘tokenomics’ and how would China gain the edge in artificial intelligence era?

“Tokens are the new commodity,” said Nvidia CEO Jensen Huang, clad in his iconic leather jacket, at the company’s annual flagship developer conference, GTC, last week in San Jose, California. The chip designer’s helmsman wants to recast his company not as a silicon vendor but as the architect of what he calls “AI [artificial intelligence] factories”, whose standard product is “token”. While Nvidia is busy writing the rules of a new token economy, a parallel debate is emerging in China around the idea of “token exports”. AI-generated intelligence is essentially a tradeable good measured by token, and China is positioning itself across the value chain – from energy and computing power to models and output. This explainer examines how “tokenomics” works – and why some believe China has the edge. What is a token, and why does it matter? In AI, a token is the smallest unit of data an AI model processes or generates. Unlike crypto tokens – which encode ownership or speculative value – AI tokens are purely computational: they are what users pay for, and what models produce. If Satoshi Nakamoto, the presumed creator of bitcoin, gave the world a token you could trade, Huang is selling one that works. As token consumption surges – driven by multimodal models and the rise of AI agents and all kinds of applications – the production efficiency and price of tokens are becoming increasingly critical. Huang argued that tokens were to the AI era what barrels were to oil: a commodity to be produced, priced and competed over. Data centres become factories, revenue is measured in tokens per watt, and companies may soon manage token budgets much as they do headcount. China’s tech groups are moving in a similar direction. Alibaba Group Holding, which is repositioning itself as an AI-driven company, last week reorganised its AI operations into a new top-level unit, the “Alibaba Token Hub”, with the mission to create, deliver and apply tokens. Alibaba owns the South China Morning Post. How does this reshape global tech competition? Tokens are a resource, and like every resource, they have a supply constraint. Producing them at scale requires chips, cooling and essentially electricity. That reality has triggered an infrastructure boom of historic proportions. US tech giants are committing hundreds of billions of dollars to build data centres, while in some regions grid connection queues already stretch to 2028. Tokens are consumed via models. Weekly data from OpenRouter showed that the four most-used models by token consumption are all Chinese – from StepFun, MiniMax, Xiaomi and DeepSeek – with Zhipu’s also in the top 10. Together, the top 10 account for 18.8 trillion tokens. There are also popular Chinese models, like Alibaba’s Qwen series, that are not in the chart because of their open-source nature. The reason is largely cost. Application programming interface pricing for models such as Zhipu’s GLM-5 can be an order of magnitude lower than premium Western models like Claude 4.6 Opus. As token usage scales, price becomes a decisive factor. China still lags the US at the cutting edge of chips. But in a token economy – where the key metrics are output per watt and cost per million tokens – it is building a different kind of advantage. How does electricity give China a structural edge? China is the world’s largest electricity producer, and its power capacity has expanded at a pace that has repeatedly outstripped official targets. By the end of 2025, the country’s total installed generating capacity was 3.89 billion kilowatts – nearly three times that of the US, according to their respective energy agencies. Solar alone grew 35 per cent last year, while wind increased 23 per cent. China’s government work report this year introduced “compute-electricity synergy” as a national priority, aiming to align data centre deployment with energy resources and address geographic mismatches between supply and demand – through projects such as west-to-east power transmission and the “East Data, West Compute” programme. What makes this advantage harder to replicate is the depth of China’s supply chain. The country dominated the manufacturing of key grid and energy components – including transformers, inverters, switching equipment and solar panels – many of which were now being sourced by companies such as Google, Tesla and Amazon, reports said.

What is ‘tokenomics’ and how would China gain the edge in artificial intelligence era?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As tokens are positioned as the AI era’s commodity, China’s energy scale and low-cost models could give it a structural edge

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}What is a token, and why does it matter?

As tokens are positioned as the AI era’s commodity, China’s energy scale and low-cost models could give it a structural edge

What is a token, and why does it matter?