The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2020

The AI race - China’s AI landscape

Artificial intelligence: Can China dominate this landscape by 2030?

By Chunming Shi

  • AUG 2020
17 minutes to read

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AI: An awakening giant

Once spoken about as something belonging to the future, artificial intelligence (AI) is becoming an increasingly common feature of modern life, thanks to major advances in computing speed, big data, algorithms and deep learning. While already disrupting industry sectors and traditional employment patterns, AI has the potential to completely transform economies and societies as we know them, and even shift the geopolitical power balance. Russian President Vladimir Putin recently said that whoever becomes the leader in the AI domain will be able to design the new world order.

In a nutshell, AI is software that enables machines to simulate humans’ thoughts and actions, or even exceed them. AI is generally algorithm-based, requiring a physical interface (like a robot) to carry out its functions. The link between AI and robots is analogous to that between the human brain and limbs. The former oversees the thinking, storage of information and issuing of instructions, while the latter acts on those instructions. Although AI can function independently as software only (such as the Siri function on an iPhone), it still relies on hardware like servers and supercomputers.

The main capabilities of AI are: (i) perception (e.g. facial recognition and translation of verbal speech into other languages); (ii) prediction (e.g. forecasting of changes in traffic patterns and anticipation of natural disasters); (iii) prescription (e.g. medical diagnostics and transport planning); and (iv) integrated solutions (e.g. voice recognition and self-driving vehicles). It will take time for AI-powered goods and services to see wide-scale commercialisation, but life will be very different when AI goes mainstream and its enormous potential is more fully exploited.

Once spoken about as something belonging to the future, artificial intelligence (AI) is becoming an increasingly common feature of modern life, thanks to major advances in computing speed, big data, algorithms and deep learning.

One of the major concerns about AI is that it will deprive large numbers of people of their jobs as work becomes increasingly automated. Jobs requiring few social tasks and low dexterity, such as a truck driver or radiologist, are destined to be replaced quite quickly by AI. Jobs that require creativity and flexibility, such as a mechanic or financial analyst, are less at risk. Of course, AI should also create opportunities for new forms of human-centred work, requiring technological optimisation and problem-solving. Another area of concern is how to design a legal and regulatory framework that is suited to a high-tech, often virtual (and thus jurisdiction-free) environment.

A few years ago, the AI gaming program, AlphaGo, famously defeated one of the world’s best players of the Go board game. The fact that a machine can outwit a highly intelligent human being is intriguing but also somewhat disconcerting. In ancient China, the Go game was one of the four basic art forms that Chinese scholars were expected to master. It was thought that proficiency in the game would imbue in its players Zen-like intellectual refinement and wisdom. For thousands of years, the Chinese had led the world as Go masters, only to be defeated ultimately by a machine. Somewhat ironically, AlphaGo was the creation of Alphabet (Google’s parent company). To some observers, AlphaGo’s victory represented not just the triumph of machine over man but also that of Western tech over the rest of the world.

The dethroning of the top Go player by AlphaGo was a defining moment for China, providing the impetus for the crafting of an ambitious plan to elevate AI to the centre of the country’s national strategy to drive public and private investment, manufacturing and human capital development. The ultimate goal, said Prime Minister Li Keqiang in 2017, was “to become the global innovation centre in AI by 2030”. China sees AI having the power to reduce bottlenecks in the country’s development: an ageing population (AI could render assistance to or replace humans), rising labour costs (machines could dramatically boost productivity) and an industrial sector in need of upgrading (AI could help China reposition itself as a technology-driven economy). AI is the focus of a range of policy documents and an AI-specific national development plan has been mooted.

A strong AI drive on the part of China will influence its relationships with other countries ‒ including the USA, China’s most formidable geopolitical and technological rival. Trade disputes between the two superpowers in recent years can be traced to the Trump Administration’s concerns about China’s quest for greater competitiveness, much of which centres on innovation and technology. While the USA is the global leader in cutting-edge research and development on AI, focusing on algorithms, machine learning and deep learning, China conducts more AI research than the USA (according to numbers of published articles and patent registrations).

What will China’s AI landscape look like by 2030? And who will win the AI race between China and the USA? These questions were the focus of an MPhil Futures Studies research assignment, on which this article is based.

The link between AI and robots is analogous to that between the human brain and limbs. The former oversees the thinking, storage of information and issuing of instructions, while the latter acts on those instructions.

Broad trends in artificial intelligence

Some regions will gain more from advances in AI than others. It has estimated that some 70% of the global economic impact of AI will be concentrated in China and North America. The acknowledged top tech leaders in the world today are the USA’s Google, Facebook, Amazon and Microsoft, and China’s Baidu (similar to Google), Tencent (similar to Facebook) and Alibaba (similar to Amazon). While Europe is making strides on the AI front, regions such as South America and Africa are not yet ready to leverage the benefits of AI on a large scale.

China has huge public and private sector investment capacity and a long-term strategic outlook. The top three sectors attracting AI investment in China are transportation, healthcare and finance – well ahead of sectors such as education, logistics and manufacturing. Public funding focuses on long-term, high-risk and basic AI R&D, such as supercomputers, high-end chip manufacturing and basic algorithms. Private funding focuses on major capital investment and medium-term AI commercialisation, such as facial recognition, voice recognition, smart cities and self-driving vehicles.

It is predicted that China will be the world leader in the areas of facial and voice recognition, not only because it has large numbers of smartphone users, but also because it has mature internet infrastructure and the largest cashless payment market in the world. It is also less concerned about privacy than many other countries. Furthermore, China is almost certain to lead the autonomous drone market, with Shenzhen being home to the world’s premier drone maker, DJI. DJI, which already has about 50% of the North American drone market, makes drones for personal and industrial applications, such as crop spraying, fire-fighting, parcel delivery and search-and-rescue operations. Shenzhen is also host to the factories of leading smartphone brands (including Apple, Samsung and Huawei), self-driving vehicles (such as Momenta and UISEE) and chip manufacturers (such as Foxconn and TSMC).

China’s political system is very different from that of most other countries. Its one-party, highly centralised system of governance and lack of political transparency strongly influence the country’s economic structure and performance, and will impact its AI development trajectory in the future. Because of its centralised system of governance, China lacks spontaneous, ‘bottom-up’ innovation from individuals and private-sector entities. Nevertheless, AI is one of the most in-demand and highest paid sectors in China. In this regard, Chinese universities’ strong computer science and mathematics programmes have enabled large cohorts of engineering graduates to enter the job market each year, thereby adding to the country’s AI talent pool.

Jobs requiring few social tasks and low dexterity, such as a truck driver or radiologist, are destined to be replaced quite quickly by AI. Jobs that require creativity and flexibility, such as a mechanic or financial analyst, are less at risk.

Using quantitative methods to probe the AI potential of China and the USA

Most studies focus on past and current developments; very few look critically at what the future holds. Furthermore, most of the literature on AI is the work of Western authors whose views of China invariably have an ideological bias. In addition, comparative country studies of AI development are not common and where they have been conducted, they have rarely incorporated any form of quantitative analysis.

As a supplement to the literature review, this study used four quantitative methods to predict which of the two countries (the USA or China) is most likely to win the AI race (in other words, profitably gain the most) by 2030, based on an internal and external environmental assessment. The four methods were:

  • Trend impact analysis. This involves studying past developments and historical changes to project future outcomes.
  • Black swan identification. A black swan event has a low possibility of occurrence, but if it does occur it will have a considerable impact.
  • Scenario method. Scenarios simulate what might happen as a result of specific choices and strategies. This is one of the most frequently used methods in foresight as it allows flexibility in long-term planning.
  • SWOT analysis. This helps to reveal aspects that should be capitalised on (strengths), rapidly improved (weaknesses), further exploited (opportunities) and prepared for/adapted to (threats).

It is predicted that China will be the world leader in the areas of facial and voice recognition, not only because it has large numbers of smartphone users, but also because it has mature internet infrastructure and the largest cashless payment market in the world.

Key findings from the quantitative analysis

In the AI contest between the USA and China, black swan events might include escalating trade tensions between the two countries, the possible reunification of mainland China and Taiwan, and a possible political transformation in China (spurred by internal democratic movements and pressure from the West).

Three possible future scenarios for China are: (i) co-lead, in which China and the USA collaborate to their mutual advantage and jointly dominate the global AI landscape; (ii) stagnation, in which the USA leads the way and uses containment tactics to head off a competitive threat from China, despite the latter’s efforts to improve transparency and ethics; and (iii) cold war pattern, in which both countries adopt a zero-sum attitude, keeping their resources and technologies to themselves, and aggressively blocking the other’s attempts to get ahead in the AI game.

In terms of AI strengths, China has a vast ‘data sea’, which refers to the range of information that allows AI programs to learn independently and become smarter. Smartphones (facilitating location-based services, online payments and search engine usage) feed this data sea. The country also has a strong AI commercial footprint, with particularly high potential in the self-driving vehicle market (China is the world’s largest vehicle manufacturer and consumer). Moreover, the government is highly supportive of AI developments. In terms of AI weaknesses, China trails the USA when it comes to cutting-edge AI developments (notably algorithms and data structures), and has poor intellectual property rights protection, a reputation for dubious ethics in business and comparatively limited chip manufacturing capabilities, with the USA still set to dominate the chip market by 2030.

Notwithstanding the myriad risks and uncertainties that grip the world today, China is poised to make a significant leap into the future and adopt a leadership position in the sphere of AI.

Opportunities include China’s steady transition towards a more high-tech and capital-intensive economic structure, the expanded market and commercial linkages provided by the New Silk Road Plan, and the possibility of leveraging Taiwan’s supremacy in the chip manufacturing sector. In contrast, one of the most ominous threats to China’s AI development is the prospect of an ongoing economic and political power struggle between the USA and China. In addition, rising nationalism and protectionism in various parts of the world could well intensify, making it difficult for China to expand its AI footprint.

Conclusions

In the final analysis, the USA is predicted to dominate in the area of basic AI R&D by 2030, helped by tech giants like Google, Amazon and Facebook, which will retain the best AI brains. The USA will also lead in terms of chip manufacturing as well as the so-called ‘second wave’ of AI developments (or ‘Business AI’), covering the banking, healthcare and insurance sectors, among others.

China, in turn, is predicted to lead the so-called ‘third wave’ of AI developments (or ‘Perception AI’), covering innovations like facial and voice recognition and autonomous stores. It will likely co-lead, with the USA, the so-called ‘first wave’ (or ‘Internet AI’), covering search engines, e-commerce and social media, and the ‘fourth wave’ (or ‘Autonomous AI’), covering innovations such as unmanned warehouses, civil drones and self-driving vehicles. The latter are the epitome of AI-inspired innovation, making use of cloud data and intricate algorithms to choose routes and navigate around other moving vehicles, pedestrians and buildings.

Notwithstanding the myriad risks and uncertainties that grip the world today, China is poised to make a significant leap into the future and adopt a leadership position in the sphere of AI. Much depends on the effective implementation of its AI plans and strategies, especially in the areas of capital investment and human capital development. Moreover, if the USA loses its technological edge because it lacks a long-term AI strategy and because of its waning appetite for international collaboration, China could inch closer to AI supremacy by 2030.

  • This article is based on the MPhil in Futures Studies research assignment of USB alumnus Chunming Shi. The title of his assignment is “The AI race: China’s artificial intelligence landscape by 2030”.
  • His study leader was Prof André Roux, Senior Lecturer in Futures Studies at USB and head of the business school’s portfolio of Futures Studies programmes.

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