Over time, China is gradually moving away from its cheap-mass-production-based economy and is progressing up the value chain toward the innovative field, especially in high-tech. In particular, Artificial Intelligence (AI) in China has emerged as a pivotal domain of innovation, becoming a critical factor in different segments of the economy.
China has become a global leader in AI research and development
China has positioned itself as a global technology leader. It is one of the largest producers of mobile phones, electronic equipment and information technology products, as well as one of the largest investors in the market of big data and cloud computing. Considering this framework, the core industry of artificial intelligence in China is worth more than RMB 400 billion (USD 54.8 billion), making the country a formidable player, second only to the US. However, it is still unsure how long will the US’s advantage over China last. In fact, according to Stanford University’s “2022 Artificial Intelligence Index Report”, China counts 63.2% more publications in AI-related journals and papers than the US.
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Fields of application of AI: generative AI and quantum technology
Recent years have witnessed the integration of AI technology into different sectors of Chinese society and economy, including finance, education, healthcare and urban development, for the construction of smart cities. AI was even used to build the world’s first quantum satellite, Mozi, which represents a major breakthrough in quantum encryption technology.
The country’s main focus in AI research revolves around natural language processing, voice and face recognition, computer vision, and Generative AI, which have brought about major improvements in the field of Augmented Reality (AR). The development and adoption of Generative AI in AR and the Metaverse can potentially further improve participation, by creating original content based on users’ inputs.
Generative AI and ChatGPT: Baidu’s response to OpenAI’s global success
Released in November 2022, ChatGPT started off as a research experiment in Generative AI. Within two months, ChatGPT is estimated to have reached 100 million active users, a milestone which took 9 months for TikTok to achieve.
Merely four months after ChatGPT’s launch, Baidu released its own version of the large language model (LLM), Ernie (Enhanced Representation through Knowledge Integration).
At first, the chatbot was welcomed with some skepticism: during the conference for the launch, the company only showed pre-recorded demonstrations of the bot’s functionality and left room for people to think that a live demonstration had been avoided to cover possible technical problems. However, recently the chatbot made a comeback. Despite showing ChatGPT’s same limitations, Ernie Bot has the advantage of offering fresh information, contrary to the US’s counterpart which is updated only until 2021. Overall, Ernie Bot has won back the title of ChatGPT’s competitor in China.
What is the future of the job market?
AI is set to make major changes in the job market, with some roles being replaced, new ones being introduced, and many becoming obsolete. This shift is already happening. In first-tier cities in China, many supermarkets have adopted facial recognition devices linked to a person’s Alipay account. This allows customers to pay by simply showing their face to the camera, resulting in the substitution of human grocery clerks with AI. Although the unmannered economy is still in the developing phase, it is gaining more traction and is reshaping the conventional market mechanisms in the sectors of hospitality, retail, and food service.
Besides these changes involving manual and non-professional jobs, it is expected that AI will be slowly implemented in companies’ corporate management sector too and will get to cover important positions involving decision-making. For example, the gaming company Fujian NetDragon Websoft has already elected in August 2022 the world’s first AI CEO, called Tang Yu for their subsidiary company.
Tech giants fueling growth of China’s startup landscape
The Chinese government strongly encourages the formation of new start-ups with the purpose of aiding China’s competitiveness in the AI market worldwide. The country counts many AI-involved companies, but the four major ones surely remain the three giants Baidu, Alibaba, and Tencent, known as BAT.
BAT’s battle in Generative AI makes China a leading worldwide powerhouse
The three companies under the acronym BAT have invested heavily in AI over the years. In May 2023, Baidu Inc. announced a RMB 1 billion (USD 145 million) venture capital fund destined for Chinese start-ups involved with Generative AI and launched a competition among developers to build applications off their LLM, Ernie Bot.
Alibaba Cloud Intelligence, Alibaba Group’s backbone in digital technology and cloud computing, recently announced the launch of another LLM, called Tongyi Qianwen (通义千问), which will be gradually included in all services of the Alibaba ecosystem, starting from DingTalk and Tmall Genie. The model will support efficient communication on the digital work platform DingTalk, where it will be able to autonomously write emails, take note of meeting conversations and formulate business proposals. On the Internet of Things (IoTs) provider of house appliances Tmall Genie, Tongyi will be able to engage in more dynamic conversations.
Riding the popularity wave of generative AI, Tencent launched in June its own advanced company-owned LLM, that will be added as a feature to most of the company’s large application offering. Furthermore, they have also invested USD 250 million in the startup MiniMax, demonstrating the large company’s commitment into contributing to China’s technological improvement journey.
Overall, private investments in the area of generative AI has experienced an impressive surge. As the battle to outperform tech-competitors becomes harsher, AI in China blooms, sustained in particular by big private corporations.
Companies invested in visual artificial intelligence in China
Besides LLMs, which have become a big success just recently due to ChatGPT’s influence, various companies in China have shown interest for other AI-enabled areas. The companies that stand up in the visual AI field are Megvii (旷视), Cloudwalk (云从) and Yitu (依图), which specialize respectively in image recognition and deep learning, facial recognition, and IoTs technology. Another big company in the Chinese AI landscape surely is DJI, a global manufacturer of drones.
Present and future governance: China is improving its AI regulatory landscape to warn off ethical risks
The Chinese government has issued different regulations and policies to guide the development of this strategic sector. In 2017, the State Council published a document called “New Generation Artificial Intelligence Plan”, which identified the field of AI as a new stage for international competition, hence encouraging investors and entrepreneurs to aid the country in becoming a global AI driver by 2030. Different regulations followed, like the 2021 “Guiding opinions on Strengthening the Comprehensive Governance of Internet Information Service Algorithms”, which compels the internet industry to strengthen the security governance in the sector, to promote social justice and the healthy development of the internet information service algorithms. The government has also highlighted the importance of taking into account the ethical risks of new technologies development, and consequently implementing a governance system to realize healthy innovation.
In light of the impressive popularity of Generative AI, the “Interim Measures for the Management of Generative Artificial Intelligence”, which came into force on August 15th 2023, states that companies providing Generative AI services to a public audience have to improve transparency in respect of IPR regulations, private information gathering and data mining.
Investments and funding landscape
The Chinese government is encouraging the private sector to invest and sustain new domestic startups. However, a substantial portion of AI funds derives from US investments. A report published in February 2023 by the Center for Security and Emerging Technologies (CSET) shows that, although Chinese nationals remain the dominant investing agents, US investors have contributed to the Chinese AI development with around USD 40.2 billion from 2015 to 2021.
Nevertheless, in the last couple of years US investors have been slowly retreating from the Chinese high-tech sector. In August 9th 2023, the Biden administration has eventually issued an executive order which will take effect next year, aimed at limiting US investments in quantum computing, semiconductor and AI.
The reason behind this choice is purely political and can be inserted in the framework of international tensions for national security reasons and contention of tech superiority.
Future trends and opportunities for businesses
With the fast-paced development of the tech-industry, multiple opportunities open up for businesses. AI will most likely revolutionize the world development’s trend. Scientists already talk about a fourth industrial revolution, driven by quantum computing, AI, gene editing, and smart automation, hence it is essential to learn how to navigate this fast-changing landscape.
Leveraging Gen-Z’s tech-fever for marketing purposes
Born in the middle of digitalization, Gen-Z grew up with a smartphone in hand and has developed a unique interest in anything new. They are particularly interested in high-tech and in making new experiences, hence they often purchase products they believe to be innovative, and which might offer them a new experience.
Using AI in their marketing strategies might be an effective way for brands to cater to the younger generations, as it might give out the impression that the company highly invests in technology and R&D.
This approach has already gained traction in various markets. For instance, certain brands in the beauty industry, like L’Oréal, are introducing virtual makeup try-ons, powered by AI, which generate a simulated look using the brand’s specific products directly through a camera. Additionally, AI is being used to power virtual live-streaming hosts, which are bringing major changes to China’s live-streaming market. Thes moves has the potential to bolster the growing e-commerce sector, as it curbs the need for consumers to physically test makeup before purchasing.
Artificial intelligence in China: paving the path for a socioeconomic transformation
- China’s AI industry is valued over RMB 400 billion, making the country a major player globally, only second to the US.
- AI has been in various sectors, including finance, education, healthcare, and urban development with smart cities.
- The main focus of AI investments in China are natural language processing, voice and face recognition, computer vision, and Generative AI.
- Given the huge success of ChatGPT worldwide, Baidu released its own version of the chatbox, called Ernie. Alibaba and Tencent have also heavily invested in generative AI and are slowly including it in their application offering.
- Other noteworthy Chinese companies in the visual AI field include Megvii, Cloudwalk, and Yitu, along with DJI, which is the global leader of drone manufacturing.
- The Chinese government has issued different regulations on AI and is aiming at making China the world leader in the field by 2030.
- The government encourages AI startups and foreign investments. Most of these investments are from Chinese nationals, but a significant portion of them comes from the US.
