Ambition and Reality: China’s AI Policy
Report by Comet Labs Research — Beijing
Since July 2017, China has marched towards its goal of becoming the world leader in both application development and fundamental research for AI by 2030. The State Council of China first announced these intentions in the Next Generation Artificial Intelligence Development Plan (“the Plan”) in mid-2017, and since then the Chinese government has undertaken major steps to fulfill this accelerated timeline.
A crucial difference between China’s AI plan and the U.S. plan is that the Chinese government stresses the necessity of AI as a driving force for economic transformation. AI is also seen as a way of strengthening national security and defense for the country.
The recent AI boom came at a time when China’s economic growth was initially declining, as the country’s production chains showed the need to become more technologically advanced. In China, many believe that AI will be more disruptive to industries such as finance and healthcare than the Internet.
The Plan sets output targets for the commercial AI sector, aiming for RMB 150 billion (US$ 22.5 billion) by 2020 and RMB 1 trillion (US$ 151 billion) by 2030. It’s also anticipated that related sectors will have a similar growth.
In the past, China’s national engineering programs have yielded impressive results such as the world’s largest bullet train infrastructure and dominance in supercomputers. However, the Chinese government has had to take a different approach to develop AI, as the AI industry is largely composed of private companies, established internet companies and venture capital-funded startups, instead of state-owned enterprises or academia.
As a new strategy, the government has chosen major tech companies to build national platforms in AI fields; for instance, in autonomous driving, smart city, medical imaging and speech recognition it has backed Baidu, Alibaba, Tencent, and iFlytek, respectively. While it’s unknown how this unprecedented model will play out, it is expected that commercial applications and market value will be driven mainly by the private sector.
To boost growth in the private AI sector, national and local governments have implemented with financial incentives, set up venture capital funds solely dedicated to AI, and built AI industrial parks. Local governments, which compete not only on tax revenues but also on how well they’ve carried out the Plan, have entered a race to attract AI companies and talent. Tianjin, the fifth largest city in 2017 GDP, announced in May 2018 that it will set up an RMB 100 billion (US$15 billion) AI fund and offer generous cash rewards to top talent in the field.
Regulators of the largest cities, including Beijing, Shanghai, and Shenzhen have issued licenses for open road testing to several autonomous vehicle developers earlier this year. SF Express, a leading logistics company, won the first license for logistics drone in March this year.
China’s commercial AI ecosystem has seen early successes in a few areas like facial and object recognition and natural language processing in terms of application development and monetization. Applications like face authentication and intelligent conversational systems have been widely adopted by finance, e-commerce, media and security sectors. The field of computer vision and machine learning has produced several unicorns, including SenseTime which is now the world’s most valuable AI startup.
However, in industrial and business sectors such as manufacturing — where the government wants to see the most development — AI applications are not abundantly used yet. Whereas the advanced consumer internet service ecosystem and massive stores of data generated by online services are advantageous for the Chinese AI industry, industrial and business sectors have no such advantage because Chinese enterprises have been slow to adopt business applications.
China is seeing increased foreign investment flowing into emerging technologies like AI. Foreign-invested enterprises established between 2016 and October 2017 in Guangdong province, one of the most economically advanced regions and China’s manufacturing hub, were mainly in emerging technologies such as AI, robots, high-end chips, and biotech.
The Chinese government doesn’t impose restrictions on foreign investment in AI like they did before in the telecom and the internet industries. Instead, they are keen for more foreign investment in these technologies in the hope that a more open market will enhance the digital transformation of Chinese enterprises and economic upgrades. China has revised the Catalogue for the Guidance of Foreign Investment Industries twice in the last three years, removing around one-third of the restrictive measures on investment to open even more doors.
There’s a long way to go before China catches up with the U.S. in basic research. But to acquire technology or turnkey solutions and talent for the development of China’s AI market, Chinese tech companies and venture capital funds are actively investing in advanced markets. Chinese tech companies are also building AI labs in foreign countries, particularly in the U.S. and much more activity will soon follow.
The Comet Labs Research Team in Beijing explores industry and AI technology trends in China, and seeks to understand how they might serve as helpful cases for startups in the United States and around the world.
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