For as far back as many of us can remember, it was American technology companies that were pushing their products and their values on users around the globe. As a result, American companies, citizens, and politicians have forgotten what it feels like to be on the receiving end of these exchanges, a process that often feels akin to “technological colonization.” China does not intend to use its advantage in the AI era as a platform for such colonization, but AI-induced disruptions to the political and economic order will lead to a major shift in how all countries experience the phenomenon of digital globalization. - AI Superpowers

China is today the biggest economy in the world1, even if we don’t hear that enough. A lot of people still think China as a sweetshop providing cheap labour for USA corporations, or just a copycat based economy. Both statements are just prejudice of the Global North that is unable to see a new leadership in the world.

Although China is still very unequal country, its approach to minimum wage is somewhat good2. The minimum wage depends on the cost of living of the region, so workers in Shanghai will receive more than workers in smaller towns around the country. Because of it, the wages in China are growing in a way that it wouldn’t make sense for the country to continue to be the “industry” of the world for much longer. Though it’s important to remember that China is producing technology to increase the productivity of its industry. So although wages may be higher (than in the past), there are products that don’t make sense to build in other parts of the world. Also, because of the differences on the country minimum wage and given the amount of people migrating to big cities, the pool of poor workers is not reducing, what balances the wage raises.

If China cannot live forever as the world manufacturing place and give its population a good standard of living what they can do?

The Chinese government’s sweeping plan for becoming an AI superpower pledged widespread support and funding for AI research, but most of all it acted as a beacon to local governments throughout the country to follow suit. - AI Superpowers

China is a socialist market economy, where the government still have a lot of power in the economy. The last couple of years we saw China incentivize their internet/tech sector and as consequence we saw Alibaba, Tencent and Baidu to surge as big giants that we normally don’t pay much attention because the “Western” media is focused on far less innovative companies due to headquarters location. Now the government is focusing on chips and AI. We should expect a similar result. Focusing on it will give China a path to keep growing its own economy while continuing the improvement of its people’s life.

Let’s focus a bit on the AI. Due to the mobile payments platform, the Chinese produced several terabytes of data regarding their lives, very similar to (debit/credit) cards, though given the modern nature of the technology, the mobile payments give Chinese companies much extra data that are not available on cards. This can be used to fuel machine learning algorithms in a way the USA cannot compete. Of course, more data is not the only way to improve algorithms, you can still compete with much less data if you know how to clean / use what you have. If a ML algorithm is given garbage as input, it will output garbage as well.

Also, tons of data incentivize blackbox AI, which is not good for ethical reasons but also for not given the correct output. Example: if you collect blood samples from coronavirus patients and give it to a blackbox AI, the AI will be able to tell with almost 100% who is a covid patient, probably because of the medicines the person is receiving. That information which the AI based itself is useless and with explainable AI a doctor/researcher would be able to tell and fine-tune the algorithm and ignore this type of garbage data.

Though it’s important to highlight that the Chinese strategy is not about using its own data to conquer the market by force like USA, but rather use its expertise to help local startups to fine-tune their own models based in local data. An example of it is DiDi and 99Taxis in Brazil. This is well said in AI Superpowers book:

In other words, Silicon Valley giants like Google, Facebook, and Uber want to directly introduce their products to these markets. They’ll make limited efforts at localization but will largely stick to the traditional playbook. They will build one global product and push it out on billions of different users around the globe. It’s an all-or-nothing approach with a huge potential upside if the conquest succeeds, but it also has a high chance of leaving empty-handed. Chinese companies are instead steering clear of direct competition and investing in the scrappy local startups that Silicon Valley looks to wipe out. For example, in India and Southeast Asia, Alibaba and Tencent are pouring money and resources into homegrown startups that are fighting tooth and nail against juggernauts like Amazon. It’s an approach rooted in the country’s own native experience. - AI Superpowers

The semiconductor war waged by USA against China is also related with AI. Our common CPU is not very useful for AI, while GPU is great! So improving GPU for AI related tasks is a path to be able to compete without much data. Also, hardware in general is somewhat easier to create monopolies (e.g. Intel, NVIDIA). Besides the race to create better GPUs, China and the whole world depend on few corporations to supply their demand for chips. The USA sees this as an opportunity to block Chinese companies from being world leaders.

The trade war actually pushed China to speed up its plan to stop depending on foreigner companies. There is the possibility on we living very soon in a world with two main semiconductor technology: NATO and China.

China is also helping several countries with vaccines for Covid193, which will probably open their market to Chinese companies. USA that is used to use force in order to control developing countries is lost on what to do next. It could be that those countries will follow a Chinese block regarding tech.

Historically when USA saw the possibility of losing its power, they installed dictatorships, dropped bombs and pushed embargo against those who refuse to follow their orders. All this is harder to justify against China. Not that they are not trying to provoke China to strike first.

China hasn’t won this Cold War initiated by the USA, but they are the favorite. The way China does business means victory also for developing countries.

  1. Of course, everything depends on which metric you are watching. Here I’m considering PPP Adjusted GDP. [return]
  2. Opposed to something like the Brazilian minimum wage where the minimum wage is the same for the whole country, even though São Paulo and Acre will have pretty different cost of living. [return]
  3. China is helping several countries, while the Global North sits on unused vaccines [return]