Chinese technology giant Baidu has announced it will make its artificial intelligence chatbot Ernie Bot freely available from 1 April, intensifying competition in China's rapidly evolving AI market.

The Beijing-based company cited technological improvements and reduced costs as key factors behind the decision to remove the 59.9 yuan ($8.18) monthly fee for premium features. The move will make the service accessible at no cost across both desktop and mobile platforms.

"As people shift to imitate DeepSeek methods, the costs to train the model will decrease and may be reflected in their fundamentals with better cash flow," said Morningstar Asia equity market strategist Kai Wang.

The announcement triggered a significant market response, with Baidu's Hong Kong-listed shares surging as much as 12 per cent on Thursday, positioning the company for its largest single-day gain in nearly two years.

While Baidu was among China's first movers in AI following OpenAI's ChatGPT debut in 2022, the company has faced growing competition from emerging players like DeepSeek, which has gained attention for delivering high-performance AI systems at lower operational costs. Data from AI product tracker Aicpb.com suggests Baidu's AI offerings have lagged behind domestic competitors, including ByteDance's Doubao chatbot.

Alongside making Ernie Bot free, Baidu announced the launch of an advanced search function, also available at no cost from April. The company claims this new feature will provide enhanced reasoning capabilities and tool integration for delivering expert-level responses.

Robert Lea and Jasmine Lyu, analysts at Bloomberg Intelligence, noted: "Baidu's decision to cease charging for its once-market leading AI chatbot Ernie Bot highlights the intense monetisation challenges in China's AI sector. The firm's decision to throw in the towel likely relates to the market disruption caused by DeepSeek, which has stormed the download charts in China."

The move represents a significant shift in strategy for Baidu, which has reported amassing 430 million users for its Ernie Bot platform since its launch in 2023.

---