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.
Scale matters.
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.
China has a social credit score with facial recognition on their network of security cameras in public settings....
Recording peoples conversations to monitor for undesirable terms (likely with AI) is almost a certainty...
oh wait.
Combine the public western data and private chinese data, and it should be enough for them to give the west a run for its money if they decide to slow/stop. Not to mention that chinese apps like tiktok are used very widely in the west, and coorps like Tencent have a tentacle wrapped around hundreds of western coorps.