I'm not sure how much of it is subsidies. If the open weight models are anything to judge by, China is taking price performance seriously, and the US model vendors are looking for performance at any cost. Like any other Pareto optimization, we end up paying 10x more for the last few percent improvement on benchmark scores.

Of course, like literally every other time this has played out in computing history, the companies focused on price performance will end up with more economic resources, and get to turn the upgrade crank more often and for longer.

Also, of course, China's way ahead of the US on things like renewables, batteries, and electrification of their economy. All of that feeds into cheaper power to run the models, but I suspect it's a second order effect vs. "improve the software".