Open-source platforms are an increasingly popular business model for AI development for global technology companies. This chapter examines why a restrictive (non-fuzzy) interpretation of the data localisation provisions within the Cyber Security Law would harm the growth of China’s entrepreneurial ecosystem, focusing on recent Chinese government plans to grow its own domestic open-source AI ecosystem. Accordingly, this chapter reinforces the reasons why fuzzy logic lawmaking in China is so effective. It also queries whether the increased popularity of open-source platforms in China during 2017–2019 may have been another reason why data localisation was not comprehensively enforced.

China’s approach to innovation is unique. To analyse the main features of economic innovation and entrepreneurship in contemporary China, it is first necessary to dispel some common misconceptions. In addressing that topic, this chapter focuses on explaining: (1) technological innovation and how it has been conventionally understood in the literature; (2) China’s distinctive approach to technological innovation; (3) in particular, the complex role of the government, and regulation, in innovation in China; and (4) how China’s distinctive approach to innovation may actually be better at promoting innovation in AI technologies, and other rapidly developing technologies, than other approaches.

China’s fuzzy logic system and government support for pilot petri dishes is perfectly suited to the current state of AI research. This has enabled the rapid development of world-class AI applications, particularly in image recognition. This is due, in part, to the regulatory environment facilitating the development of AI pilots. Yet it is further argued that this suitability is due to a combination of three factors: (1) the current state of AI research and its applicability to numerous real-world applications; (2) the open nature of AI research culture globally; and (3) the complex emerging role of public–private petri dishes in China for testing innovative applications. The chapter also explains how public–private connections are formed, including how top-down government signalling is important to the trajectory of private companies.