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This report is from this week’s CNBC’s The China Connection newsletter, which brings you insights and analysis on what’s driving the world’s second-largest economy. You can subscribe here.

Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a succinct snapshot of what I’m seeing and hearing from local businesses.

In Hangzhou, startups are taking on both software and hardware as they build devices to run AI. How does this change the AI tech race?