2.1 Tech-Acceleration
The latter years of the 20th century witnessed innovative policy-creation, computing power (microprocessor advancements), Internet, and entrepreneurship rendering the ‘Tech Boom’. Nearing the end of a recovery phase from decades plagued by poor economic/political conditions, China experienced monstrous acceleration in technology sectors aided by international trade ($1.58 trillion in imports, 2010) and foreign direct investment ($105.7 billion, 2010) (Liu et al, 2011). Then superpower, and current AI leader, the US, employed the first of many innovative policies, including the Bayh-Dole act in 1980 allowing universities to patent and license inventions to increase tech transfer and commercialize research (Schacht, 2010). Crucially this permitted two factors: 1) Stemming from the “Four modernizations” program which incentivized collaboration with foreigners, it permitted greater global investment in computing power and start-up funding overseas highlighting the benefits of technological spillover from the US and 2) Provided a skeleton framework of tested and successful legislature for governments to implement a quasi-capitalist foundation for domestic tech sector growth.
As such, in 1986 the government implemented the “863 program” promoting aggressive developments to enhance the countries technological capacity and competitiveness. Importantly the program, divided into five phases, utilized over ¥240 billion in domestic investment resulting in an economic output of ¥10 trillion from the program, promoting a shift with industrial policy theory and human capital theory (Kang et all, 2011).
Vitally, China’s prior spectator-role allowed latecomer advantage, identifying others’ misallocations of capital and labor, next to a booming population with shifting dexterity in tech-centric employment. In 2006 the 863-program seeded $USD 500 million towards the AI industry to amplify economic and social progress but also aid in determining the country’s global future position in the world (Ding, 2018). This was later cemented in 2015 when the government “Made in China 2025” blueprint landed, aiming to upgrade 10 tech-heavy sectors, AI being a priority, with a mammoth funding of $USD 300 billion alongside tax incentives and special-economic-zones (Hamlin, 2019). Although China’s government has implemented policies with cursory objectives for utilitarian welfare, domestic firms possess significant advantages over foreign competitors (section 4.0).
3.0 Overview of China’s AI industry
China hosts leading AI-firms including Baidu, Tencent and Alibaba, with applications in healthcare, finance, transportation, and retail (appendix 1.0). Baidu, China’s leading search engine, leverages AI for search capabilities to aid businesses and consumers, with TenCent disrupting gaming and social media, and Alibaba establishing neo-consumerism via AI business strategies in online retailing (Xiao, 2019). All firms have developed (or derivatives) voice recognition software, translation tools, image recognition technology, virtual assistants, and chatbots to cement themselves as
‘amalgam’ giants. Monetization channels primary stem from AI-powered services generating revenue such as iFlytek’s sale of speech recognition to businesses ($10 billion in 2020) (Xiao, 2019).
Importantly, given AI’s adoption into customary life, and a lack of general expertise, licensing (Horizon Robotics licensing edge-computing to 500 firms), and selling data (ByteDance collected and sold user-data to businesses) have risen in importance in contemporary AI-monetization (EqualOcen, 2021).
4.0 Ingredients to China’s AI industry
Core constituents ensuring appropriate market-entry and growth to operate in or with the Chinese market is outlined below.
4.1 Rigged Policy Frame-of-thought
China’s government, may be labeled as a zero-tolerance authoritarian ruling style relying on black-box-networking and personal connections, rooted in pursuit of absolute power, dubbed
“Guanxi” (Hupert, 2015). The private sector is compelled to forfeit perks tainted by corruption and favoritism. Importantly the Chinese Communist Party (CCP), the summit in chain-of-command, is highly centralized and militarized dictating policy reform at a national, state, and provincial level. The CCP has established several key organizations responsible for AI policy creation including MIIT, NDRC and CAC, however, policies are based on recommendations of so-called ‘experts’ and government officials who lead, blinded by individualistic motives (Hupert, 2015).
