China threatening the undisputed US supremacy on AI

  • Strategic importance of AI
  • China vs. the US: how China is closing the AI gap in spite of a head start enjoyed by the US? 


Artificial intelligence or AI, a futuristic probability in the past is now a present-day reality and is also a hot new battleground between two major economies. The global AI market is projected to be worth US$36.82 billion by the year 2025 or is likely to see a staggering CAGR of 51% in comparison to 2017. All the main economies across the world have understood the strategic importance of AI and thus are adopting the technology for transformation, empowerment and to bolster their economic growth.

Moreover, as China and the US indulge in a trade war, Chinese officials made it clear that there would not be any type of consideration on the two prominent trade demand of the US. The first being the US trade deficit and the second is China’s aggressive push towards the AI technology (which can possibly create room for the biggest conceivable technology war ever [after the space battle]). Presently, the US is the world leader in AI and has a strong reason for concern on the stubborn stance taken by the Asian economic giant. While the ongoing trade war talks have been grabbing eyeballs world over, it is the tussle between the two nations for AI supremacy that is gaining more spotlight.

In July 2017, after China’s board game champion Ke Jie was defeated by Google’s AlphaGo at a series of Go matches (an obsession in China), the country’s state council laid out a rather ambitious plan to create a 1 trillion-yuan domestic AI industry (c. USD 147.8 billion) as well as envisaged to make China the leading AI innovation centre by the year 2030. According to the plan, China is aiming to bolster fundamental research in AI and adopt the technology in a wide range of areas including; social welfare, economy, national security and environmental protection, it is, therefore, a national priority. In a carefully drafted document, China explicitly stated that it will go all out to challenge the stronghold of American AI, which the nation enjoyed since the inception of the technology. This is not a mere challenge, but also shows China’s intent to employ AI for assisting its goal of becoming a global leader, one that is not limited to a mere leadership role but rather to exert control and set standards on every aspect of the technology.

China also understands how AI can significantly provide a boost to productivity, this would be pertinent for a country to sustain its future economic growth as its working-age population decline. A recent study by the McKinsey projected that China could possibly add 0.8% to 1.4% gradually to its GDP growth (depending on the pace of adoption), by automating workplaces.

The US, which is home to tech giants such as Microsoft, Google, IBM and Apple and is the nation where the majority of AI innovations have taken place for long. Presently, it supersedes China in most facets of AI, which comprises hardware, algorithm, research and industrial commercialisation. However, China has been very diligently building an ecosystem that is fuelling its ambition of AI dominance, which may be achieved by 2030. Hence, with its own army of tech giants comprising Tencent, Alibaba and Baidu, China is resolutely trying to close the gap. Significantly, the country has perfect ingredients to threaten the supremacy of Silicon Valley in form of; start-up capital, market readiness and supportive government budget and policies.

But there is something else that really favours China, which is its massive pool of data. The country has a distinct advantage over others due to its enviable size of present data sets that offers a competitive edge in the field of AI. According to the QuestMobile (a Chinese research firm), China has as many as three times active net-connected devices than the US. The country’s enormous population is remarkably well-connected and is home to around 800 million internet users with access to mobile data primarily. 

Trends that portrays why it is easier for tech companies in China to collect data with an ease?

1. Chinese use their mobile devices to perform monetary transactions far more than their counterparts across the world.

2. The proliferation of online-based food delivery apps, which are funded by wealthy tech giants and employ cheap labour. Chinese consumers place about ten times more meal orders through their smartphones than Americans.

Additionally, China lacks stringent regulations on data protection or privacy laws, this provides companies with a free run to develop their technology. China has a negligible regulation to regulate its large consumer data set and has a population which is willing to adopt new technology and is not bothered by privacy. WeChat (Tencent’s multipurpose messaging, mobile payment and social media app) processes close to 7 billion photos per day that are a humongous data set, thereby, giving the company a clear edge in image recognition. Another example is China’s technology giant Baidu. The company unambiguously is one of the top global companies in AI research. Baidu managed to develop an AI system, which is capable of a better-than-human speech recognition system a year prior to any of the Western firms. For instance, SenseTime, which is considered as world’s most valuable start-up with an approx. implied valuation of $4.5 billion (after its latest round of funding worth $600 million in May 2018). The company is making AI-powered tracking and surveillance devices for the police in China. The facial recognition technology is already widely used in China and encompasses both the public surveillance systems (identifying and issuing text messages to jaywalkers) as well as private commercial products.

Although, the Chinese government has opened up its deep coffers to bolster AI research, its counterpart could struggle in this area under the Trump administration, wherein spending on the tech front does not seem to be a priority in the US. According to the OECD (Organization for Economic Cooperation and Development), research and development spending in China grew almost tenfold between 2000-16, this was a spike of $412 billion. Although, the US still spend relatively more (c. $464 billion in 2016), the total increase was a mere one-third since 2000.

In addition, the immigration restrictions imposed by the White House could soon increase the struggle for attracting as well as retaining high skilled tech professionals for Silicon Valley. This may affect American hold on the AI supremacy in innovation and research. On the contrary, China is vigorously wooing AI talent from all across the globe. The country has been recruiting high skilled engineers of Chinese descent, which are currently working in the Silicon Valley. What also works for the nation is the cultural difference. In comparison to citizens of other countries, Chinese are more open and are willing to adopt a technology if it delivers potential benefits in the day-to-day life. This technological advantage is something that the US citizens probably would not like to replicate.

Although the 2030 plan appears a little too ambitious, it is nonetheless achievable for an overtly aspiring country like China. AI is not only a mean to achieve economic boost but is a way to become the world’s most powerful nation. China is using AI for self-driving cars, health care, traffic management as well as various other smart city applications, indirectly pushing to add the technology in each and every facet of individual and commercial space. Though the US has had a head start in the field of AI technology, China’s track record on the successful implementation of top-down directives for anything which the country sets its eye on is commendable. Thus, AI is also more likely to be accomplished. A case in point is the year 2010 when China declared it will be a world leader in the adoption of HSR (high-speed rail). Presently, it has 60% of the world’s HSR market to its credit. Similarly, in 2014, the government declared the ‘mass entrepreneurship and innovation plan’. This plan translated into 8,000 business incubators in the nation vis-à-vis just 1,400 in 2014. One can thus expect an identical trajectory from China in the field of AI technology.