Pacific Money | Economy | East Asia

China’s Data/AI Economy and the Global Order

Insights from Winston Ma.

Mercy A. Kuo
China’s Data/AI Economy and the Global Order
Credit: Pixabay

Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Winston Ma, CFA & Esq. tech investor and adjunct professor at NYU School of Law and author of China’s Data Economy (Hayakawa 2019, Japanese title China’s AI Big Bang) and China’s Mobile Economy (Wiley 2016) is the 215th in “The Trans-Pacific View Insight Series.”

Explain the core components of China’s data/AI economy.

The keyword is iABCD. All Chinese companies are rushing to learn how new digital technologies — including the Internet of Things, artificial intelligence (AI), blockchain, cloud computing, and data analytics (iABCD) — can be integrated into their businesses to unlock value from nontraditional angles. The companies will become “smarter” by fusing institutional human knowledge with machine learning, and their increased efficiencies, faster decision making, and cost savings will all lead to better customer experiences.

In the context of the worldwide fourth industry revolution, the corresponding “creative destruction” of traditional industry sectors is happening in all markets. However, it is likely to happen more quickly and on a larger scale in China, given the existing “mobile infrastructure” and the inefficiencies in traditional sectors (for example, the finance industry, healthcare, retail, and so on). The market has already seen immature industries such as retail and logistics leapfrog straight from the early industrial age to the data/AI economy.

Explain the correlation between China’s mobile and data economy.

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In May 2017, China hosted the historic Go match between Ke Jie, the world’s number one-ranked player and world champion, and the AI-enabled computer program AlphaGo, designed by Google’s DeepMind Lab. With the AI machine’s straight 3-0 win over best human player, the internet business community in China, almost overnight, started discussing “the second half” of the mobile economy era, which in 2013-2016 drove a boom in e-commerce and mobile entertainment.

Since 2017, the new buzz words have been “data” and “intelligence.” Across just about every industry sector, Chinese companies are investing heavily in research and development of the latest digital technology. In short, China’s consumer-focused internet is transforming into a more enterprise-oriented internet, characterized by more advanced digital technologies and faster 5G mobile networks. The transformation of businesses and industries has been more profound than from the mere addition of internet.

How will 5G and artificial intelligence impact China’s digital economy?

So far, Chinese tech companies have already proven their mettle by catching up to global rivals in the smartphone and fourth-generation (4G) technology development process. They are now joining a fiercely competitive global race to become the first company to offer fifth-generation (5G) wireless networks and cutting-edge artificial intelligence products to global customers.

Overall, Chinese companies have secured a stronger role in the 5G development process than they had during the run-up to 4G, and China may well play a leading role in setting global standards for 5G and artificial intelligence technology. As such, Chinese tech companies today can no longer be simply described as the Chinese versions of Silicon Valley firms. The story of China’s digital economy is rapidly transforming from the old “Copied to China” to the new “Innovated in China.”

How will China’s data/AI economy transform the global order?  

China’s ambitions and progress to date have led to talk of an artificial intelligence arms race with the U.S. Similar to the United States, China’s tech industry exports AI to other parts of the world through cloud computing services, so the future of AI would be defined, to a large extent, by the two-horse race between the U.S. and China.

Looking forward, China in Asia and the U.S. in the West are forming two leading innovation centers of different strengths. However, a model for national collaboration has yet to be worked out, and the mutual distrust of the two spheres of innovation power could lead to fragmented tech worlds. In fact, the year 2019 may be remembered as an important inflection point for the global digital economy, from collaborative co-existence to head-on tension.

Assess the impact of China’s data economy on the global economy and its implications for policymakers and investors in the United States and across the globe.

China’s data/AI economy development has profound implications for emerging markets that are looking at China as a reference case when they work on their own digital transformation. That means they need to look beyond mobile phones and the digital wallet; instead, they must start positioning themselves for the next phase – AI and the data economy – now. The billion-user messaging service of WeChat, $30 billion and more total GMV (“Gross Merchandise Value”) in 24 hours on Singles Day, and “smile-to-pay” functions creating a cashless society are already screenshots from yesterday.

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Meanwhile, China will be the main competitor to the U.S. and, interestingly, that competition may drive the U.S. into building a more focused national strategy to expand its core strength in innovation — for example, to better harness the intellectual power of U.S. universities, an unrivaled resource in the world. Furthermore, the U.S. could develop important positions on issues such as data privacy for thought leadership in the age of artificial intelligence privacy.

To conclude, it is critical for the U.S. and China to reach a new equilibrium to collectively lead innovation in the age of AI, because at the core of digital economy is the free flow of trade, capital, intellectual, and data.