Sure, at the government level it has access to the same data as everyone else, but that firewall's still there, can't have an AI trained on data that might give a more worldly view on matters the party doesn't want citizens exposed to. A Chinese AI will be pretty useless for western audiences, so best they can do is make the hardware.
Which they already do.
All the tech companies in China are practically under the control of the party. China also has a billion+ people, even the market is smaller than the west, I think they will manage.
Not to mention the difference in privacy laws and a higher number of stem grads to throw at the problem.