This Is the Reason Why China Will Dominate the AI Race
The US might be leading the AI race today, but China is taking measures to quickly catch up.
China’s Industrial Revolution only started about 40 years ago. The resulting rapid economic growth has been called a miracle, establishing China as the World’s second-largest economy. While its economy has been able to catch up, China still shows a large gap in the field of science and technology.
China, however, is not trying to play tech catch up; instead, it plans to leapfrog the US and other Western economies.
In order to seize global dominance, China is betting heavily on artificial intelligence (AI), which is destined to become the strategic technology leading the future. Already, it is estimated that, by next year, AI augmentation will create $2.9 trillion of business value and 6.2 billion hours of worker productivity globally. PwC predicts that AI will add $15.7 trillion to the global economy by 2030. And Accenture believes that AI could double the annual economic growth rate in 2035 and increase labour productivity by up to 40 percent.
But, for China, winning the race on AI is about more than just productivity growth. This became clear when, in July 2017, the State Council of China released the “New Generation Artificial Intelligence Development Plan,” with the ambitious goal of becoming the leading AI supremacy by 2030. Specifically, the plan stated that AI will
“promote the birth of new technologies, new products, new industries, new formats, and new models, trigger significant changes in economic structure, profoundly change human production, lifestyle and thinking mode, and achieve the remarkable jump of social productivity as a whole.”
The broad applicability of AI
Because of its broad spectrum of applications in nearly every industry, artificial intelligence is often referred to as general-purpose technology (GPT).
A GPT is a technology that has an impact on the entire economy. Some examples include the steam engine, electricity, and computers. These technologies have drastically altered our societies by changing pre-existing economic and social structures. Whole eras of technological progress and productivity growth have been driven by those GPTs. The steam engine, electricity, and computers are all seen as fundamental drivers of the First, Second, and Third Industrial Revolutions, which brought increases in wealth, life expectation, and the production of goods, raising the standard of living for millions of people in the developed world.
The expectations for AI are massive. Every day, there are new reports that herald the almost limitless applications of AI in advancing humanity. AI algorithms outperform radiologists in diagnosing medical images, translate spoken English into Chinese in real-time and vice-versa, drive our cars, detect fraud in millions of credit card transactions a day, and help fight terrorism, just to name a few applications. No wonder that the world’s developed countries regard the development of AI as a major strategy for increasing national competitiveness.
Looking back at past GPTs, however, shows that many of the technologies did not bring immediate change. Instead, when initially adopting a new GPT into an economy, it took quite some time until the productivity would improve and the positive effects would start to permeate all aspects of the society. AI is no exception.
After two AI winters and over 60 years of research and evolution, AI finally seems to be at a point where the technology starts to have a real impact on the economy. Nevertheless, the AI race is not decided yet. In order to dominate the field, substantial investments and policies are needed to develop the infrastructure, nurture top talent, and to create the right environment for deploying AI on a global scale.
How China is winning the AI race
While industrialization in China only happened recently, this time, the State Council of China does not want to miss out on the opportunity to be on the forefront of the next GPT. Therefore, to become the AI superpower, China is relying on three key pillars:
1. Development of new infrastructure
(Big) Data is the fuel powering AI. AI’s promise is that the knowledge gained from applying analytics to the wealth of data available today will enhance any decision-making process with additional intelligence, helping to produce quicker and more effective outcomes.
In order to harness, store, and process data China is shoring up its investments in 5G technology, cloud computing, data centers, and the internet of things (IoT). The China Central Government has coined the term “new infrastructure” for these technologies and is expecting to invest more than CNY27 trillion ($3.8 trillion) within the next three years.
Additionally, China’s alternate digital universe includes mobile apps and services like WeChat, QQ, Weibo, and Alipay that have several hundred million active users. This, coupled with China’s relatively lax — compared to other countries — data privacy laws is creating and capturing an ocean of real-world data that will give the country a competitive edge.
2. Education
An educated AI-savvy workforce is going to be crucial in advancing China. The best universities in the field, however, are overseas. Even though Chinese nationals represent the highest number of international students, with over 650,000 Chinese studying abroad, this only accounts for about 2% of all Chinese students currently enrolled in university.
The number of students that actually study a subject relevant to advancing AI research and development is even lower. In order to be able to compete, in 2018, the Chinese Ministry of Education announced the set up of 35 new undergraduate AI majors. But it doesn’t end there.
China is introducing AI textbooks to students as early as elementary school to raise and prepare the next generation for the age of AI.
3. Chinese entrepreneurial environment
In his book, AI Superpowers, Kai-Fu Lee describes how the Chinese mindset of creating copycats of Silicon Valley Startups has forged a generation of the most tenacious entrepreneurs on earth:
“Survival […] requires relentlessly iterating products, controlling costs, executing flawlessly, generating positive PR, raising money at exaggerated valuations, and seeking ways to build a robust business “moat” to keep the [other] copycats out.”
The entrepreneurs are incentivized to develop cutting-edge AI technology by generous subsidies. Following the central government plan on AI, dozens of special development zones, incubators, and venture capital funds for AI development have sprung up all over China.
In the pursuit of outbidding each other, local governments have spent hundreds of millions RMB in attracting the AI companies of tomorrow.
While the US is still leading the AI race, China is flexing its muscles and is quick to catch up. Looking at the measures the Chinese government is taking, it is already foreseeable that artificial intelligence will be the first GPT of the modern era in which China stands shoulder-to-shoulder with the West, even surpassing it.
With the US struggling disproportionally under the Covid-19 crisis, the outlook of a Chinese AI supremacy by 2030 seems more realistic than ever before. When China wins the AI race and surpasses the US as the biggest economy, we might be able to witness the end of the American era and the rise of China as the dominant superpower. What this means for global politics will remain a question that maybe AI will be able to answer.
