A price war is unfolding in China’s crowded artificial intelligence sector as companies cut rates or dangle promotions at a pivotal moment when falling costs and converging model capabilities are ratcheting up the competitive pressure, according to analysts.

TikTok parent ByteDance and Shenzhen-based video gaming giant Tencent Holdings are the latest to launch AI price offensives.

“China’s AI model landscape is vibrant and intensely competitive, with limited capability gaps across incumbents,” said analysts from investment consultancy Bank of America Securities in a research note on Monday.

ByteDance on Monday introduced Seedance 2.0 Mini, a video-generation model, with a price of 23 yuan (US$3.40) for 1 million tokens – half the price of the standard version of the popular model. The move followed a promotional campaign that offered rebates to users of its Coze AI agent platform.

With its lower pricing, ByteDance joined AI rivals including Chinese frontier lab DeepSeek and smartphone-to-vehicle giant Xiaomi. Both cut prices in late May, with Xiaomi making its MiMo V2.5 model 99 per cent cheaper, triggering other frontier labs to follow.

Tencent last week cut prices for certain existing models on its TokenHub platform, slashing the cost of its own Hy-MT2-Pro by nearly 70 per cent. Hong Kong-listed MiniMax AI also halved the price for its newly released M3 model series. Meanwhile, Alibaba Group Holding launched a promotion tied to the 618 midyear sales event, offering 50 per cent off its newest Qwen3.7-Max AI system. Alibaba owns the South China Morning Post.

The falling prices were welcomed by some of China’s AI-savvy users, including an office worker surnamed Li from Guangzhou, capital of China’s southern Guangdong province.