PARPCC #23 – Will China overtake the United States in the field of AI? ?

By Camille Brugier

Artificial intelligence is commonly perceived by China and the United States as being a strategic technology capable of reshuffling the cards. Its various applications, including in the military field, could give a valuable comparative advantage to the most innovative actor. The Chinese innovation system, largely overhauled since Deng Xiaoping's opening-up policies, has proven itself in other areas. However, is it capable of giving China the advantage in an area as strategic as AI? ?

Pour Lundvall et Rikap, succeeding in the field of innovation depends on two elements: a national innovation ecosystem; and companies active in R&D who interact and collaborate closely with each other.  

Tech giants, like Alibaba and Tencent, benefited from the creation, by China, you « Great Firewall », which de facto prevent large American companies from accessing the Chinese market, thus leaving room for the development of Chinese companies. This guaranteed Chinese companies almost exclusive use of Chinese databases in many areas – from search engines to bank payments.. Like Alibaba and Tencent, the Chinese giants also rely mainly on research from Chinese universities; using patents from the academic sector without holding them.

Pour Lundvall et Rikap, these characteristics of the Chinese research and innovation ecosystem present certain strengths and weaknesses:

On the one hand, China can rely on the quality and number of trained talents (in master's and doctorate) even if the needs of the industry remain partly unsatisfied. On the other hand, Chinese giants deplore the lack of public funding in the primary levels of the TRL (technology readiness level) : basic sciences. In other words, China would fund too little the theoretical development of AI, and by ricochet effect, the technologies that accompany them. Recent budget increases still remain modest compared to US spending in these areas. Ludvall and Rikap also note when reading official Chinese documents, Beijing's identification of various challenges for the development of AI: technical standards, access to software platforms and semiconductors.

Nevertheless, Chinese companies have “innovated” to overcome the weaknesses of the Chinese innovation system by creating R centers&D abroad: this allows them both to have access to missing talents, to benefit from additional scientific funding for the targeted TRLs, and to supply their “expatriate” research projects with semiconductors.

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Pour Lundvall et Rikap, Chinese tech giants are therefore on track to meet the structural challenges of the Chinese innovation ecosystem. On the other hand, they believe China's choice to leave its innovation system open (or not) will determine the country's ability to become a world leader in AI. In practice, if China, for example, were to limit the establishment of its giants abroad [we could obviously discuss the role played by the Western powers, through sanctions and regulation, in the growth of these companies] it would certainly fall behind its competitors in the field.

In other words, the CCP's desire to make China the world's leading scientific power, including in the field of AI, could well clash with Xi Jinping’s desire to maintain control over large tech companies like Alibaba and Tencent – ​​with the mantra of “common prosperity”, and laws favoring state companies to the detriment of private companies.

Reference: Lundvall, Bengt-Ake; Rikap, Cecilia (2022), « China’s Catching Up in Artificial Intelligence Seen as a Co-Evolution of Corporate and National Innovation Systems”, Research Policy, vol.51, pp. 1-13.