When Chinese Go master Ke Jie was comprehensively defeated by Google's artificial intelligence (AI) program AlphaGo on May 27 in the ancient canal town of Wuzhen, technology watchers around the world had to redraw the timeline in which AI rules the world.

The artificial mind had swept all three matches against the world's top player, a feat once thought impossible, given Go's deep complexity compared with previous AI wins, such as in chess or checkers.

The event also underscored continued Western dominance in the field of AI. AlphaGo was developed by the American search juggernaut's Deepmind unit, a British firm it acquired in 2014.

But China is today nipping at the heels of the United States, long the undisputed leader in AI technology, and may soon be poised to edge ahead as it brings products to market at a quicker pace.

One firm is using AI to analyse and approve loans more quickly and with a far lower default rate, while another that uses AI to enhance photos already has a user base of 1.3 billion, venture capitalist and former Microsoft and Google executive Lee Kai-Fu said at a commencement speech at Columbia University last month.

The quantity of papers published by Chinese researchers on branches of AI research such as deep learning - where a machine modelled after the human brain can learn by itself over time - already exceeds those by American scientists.

Chinese studies have also been cited more often than American ones, said a White House report last October that sought to draw attention to China's soaring capabilities in the field and the US' own eroding lead.

AI firms in China are also drawing unprecedented amounts of funding. While the US$2.6 billion (S$3.6 billion) they attracted last year is still a fraction of the US$17.9 billion that went to American AI firms, Shenzhen research firm ASKCI estimated that this is a 12-fold increase compared with three years ago.

Experts said three key ingredients make China's rise to the top in AI capability inevitable.

Its population of 1.3 billion provides a broad domestic market to test out new applications for AI, and to also supply the vast amounts of data that AI systems - like search engines before them - need to become more accurate, said Professor Zhang Wenqiang, director of the Robot Intelligence Lab of Fudan University.

"Firms such as Huawei and BAT (Baidu, Alibaba and Tencent) are also taking AI into uncharted territory in China, exploring possibilities in areas such as mobile payments," he told The Straits Times.

Having lost the PC and mobile Internet eras to the West, Beijing sees AI as a field it must dominate, and a key piece of the "Internet-plus" strategy that the government introduced in 2015 to use online technology to modernise its economy.

Besides putting in place fiscal policies last year to grow the sector, such as financial incentives to encourage greater use of industrial robots, Premier Li Keqiang drove home the point in March when he used the term "artificial intelligence" for the first time in his Government Work Report.

But amid the exuberance and high expectations, experts say China's AI sector may already be frothing.

The tussle with Silicon Valley for AI talent has seen salaries soar, while start-ups without any revenue are seeing valuations of as much as US$1 billion.

"As AI remains largely a technology tool and not a full-fledged product or platform, some companies are clearly overvalued," an analyst at Fortune Venture Capital told the China Money Network.

And even as it has made large strides in AI, China remains better at imitating and improving rather than truly inventive, ground-breaking work, said Prof Zhang.

"The US remains superior in this area and in attracting AI talent from all over," he added. "China has to innovate on its education and immigration policies if it is to get to the next level."