Alibaba Group to Spend $431M on Qwen Chatbot Incentives as China’s AI Race Heats Up

China’s tech giants are throwing money at AI apps this Lunar New Year. Alibaba just announced the biggest spend yet: 3 billion yuan, or about $431 million, to flood its Qwen chatbot with user incentives starting February 6, Reuters reported Monday.

That’s three times what Tencent and Baidu committed to their own AI campaigns combined. Tencent pledged 1 billion yuan late last month. Baidu followed with 500 million yuan. Alibaba looked at those numbers and tripled down.

The money goes toward digital red envelopes covering dining, drinks, entertainment, and leisure. Alibaba says the rewards will be “distributed continuously” throughout the holiday period, which officially starts February 15 and runs nine days.

Here’s why the timing matters. When hundreds of millions of people travel home for the holiday and spend extended time with family, they’re on their phones more, sharing more, downloading more. That’s when new apps explode. Chinese tech companies know this. They’ve been using the Lunar New Year as a user acquisition battleground for years.

Why the red envelope strategy works

Tencent proved the model in 2015. The company pushed digital red envelopes through WeChat during that year’s Lunar New Year holiday. People shared them with family. Recipients downloaded WeChat to claim the money. Usage spiked. WeChat Pay went from challenger to one of China’s two dominant payment platforms almost overnight.

Alibaba’s betting the same mechanics work for AI. Get people downloading Qwen to claim rewards. Keep them engaged during the holiday. Hope enough stick around after.

Tencent’s running its own version this year. The company’s Yuanbao chatbot campaign launches Sunday. Users who update the app can claim digital payments that withdraw straight to WeChat wallets. The app also generates shareable reward links—designed to spread through family group chats when everyone’s together.

Alibaba hasn’t said whether Qwen’s rewards function as withdrawable cash or discount vouchers for platforms like Taobao. Either way, the goal is the same: pull users into the ecosystem and keep them there.

The bigger picture

This spending war didn’t come from nowhere. Competition in China’s AI sector jumped sharply after DeepSeek’s R1 model rattled global markets in January last year. The release triggered faster adoption across the industry and fiercer rivalry among domestic players.

DeepSeek’s not waiting on the sidelines either. The company’s expected to drop its next-generation V4 model around mid-February, with stronger coding capabilities, according to The Information. That puts it squarely in the same promotional window as Alibaba, Tencent, and Baidu.

The stakes go beyond user counts. Whoever locks in engagement during this narrow holiday window positions themselves as the default AI assistant for millions of users. That means data. Platform lock-in. Revenue streams that justify the massive upfront spending.

Whether Alibaba’s $431 million bet pays off depends on execution and how hard competitors push back. But the race for China’s AI users just got a lot more expensive.