Why the East is leading in the trillion-dollar AI space

The year 2023 has thus far marked the definitive arrival of the Artificial Intelligence (AI) era, with tools such as ChatGPT taking this technology mainstream. With its profound impact across various industries, AI is projected to contribute a staggering $15.7 trillion to the global economy by 2030, according to PwC’s Global Artificial Intelligence Study.

Interestingly, the East has surged ahead in the global AI race while the West faces challenges. Predictions indicate that AI could contribute up to 14.5% or $3.7 trillion to the US GDP. Yet, China stands to gain the most economically, with an impact equivalent to $7 trillion, or 26.1% of its GDP.

Despite the US’s early lead in AI innovation, it has struggled with regulating the field. The US president recently issued an Executive Order (EO) to address AI risks, which nevertheless leaves comprehensive data privacy legislation unresolved. The executive order calls for Congress to adopt privacy legislation but lacks a legislative framework and implementation strategy. This leaves a potentially conflicting patchwork of state laws in place until proper standards are established.

In stark contrast, China has enacted robust AI regulations, best exemplified by the “Interim Measures for the Management of Generative Artificial Intelligence Services.” This comprehensive regulatory framework delineates China’s approach to managing entities that provide generative AI capabilities to the public. Importantly, this regulatory approach aims to harmonise AI development with ethical considerations.

Investments in AI

China’s commitment to AI is evidenced by its substantial investments. In 2021, China attracted an impressive $17 billion in private investment for AI startups, underscoring the growing interest and confidence in China’s AI sector. Furthermore, China’s dominance in AI research is noteworthy, as it contributed to one-third of global AI journal papers and citations worldwide in 2021.

Faced with China’s remarkable progress, the United States has sought to limit Chinese access to critical AI training chips and advanced technologies, mirroring previous actions against companies like Huawei. Paradoxically, this pressure has spurred Chinese companies to invest heavily in research and development (R&D) and strive for self-reliance.

China’s emphasis on R&D is underscored by its impressive patent numbers. By the end of 2022, China had successfully registered 4.212 million valid patents, surpassing the 3 million milestone and becoming the first country to achieve this feat. Notably, China’s dominance extends to the field of 5G technology, with ownership of nearly 40% of standard essential patents, affording it significant influence over the direction of 5G innovation and development. This influential position naturally extends to AI, where China’s vast data resources, talent pool, and substantial investments have enabled the development and deployment of advanced AI applications across various sectors.

Among the notable players in this AI revolution is Huawei, a prominent Chinese technology company that exemplifies a bold vision. Huawei has significantly intensified its investment in R&D in recent years, allocating an impressive  $23.2 billion in 2022 alone. This substantial R&D investment amounts to 25.1% of the company’s annual revenue. Over the past decade, Huawei’s cumulative R&D investment exceeded a staggering $134 billion. As of the close of 2022, over 114,000 employees, representing 55.4% of Huawei’s workforce, were engaged in R&D activities, while the company held more than 120,000 active patents. Huawei’s success lies in its ability to seamlessly integrate AI with cutting-edge technologies like cloud computing and 5G, yielding innovative solutions across diverse industries.

Advanced regulation, innovation

Huawei has showcased several examples of how AI can create value and impact for different industries and scenarios. For instance, Huawei Pangu 3.0 is an enterprise-focused AI model designed to tackle complex industry challenges, including highly accurate weather forecasting and accelerated drug discovery in medical research. Meanwhile, the Pangu Drug Molecule Model supports commercial services or drug pipeline development cooperation between pharmaceutical companies and research institutes. The company also helped build Tianjin Port, the world’s first smart, driverless, zero-carbon terminal.

China’s effectiveness in AI regulation and innovation places it firmly at the forefront of AI research and innovation, positioning the country to set the global standards and regulations for AI governance. In this transformative era, nations must recognise that bridging the gap between AI innovation and regulation is not merely a contest for dominance; rather, it represents a remarkable opportunity for global collaboration.

The East’s leadership in AI presents an opening for the West to adopt an open collaboration approach founded on adherence to internationally agreed standards. The future of AI governance should be characterised by cooperation and shared responsibility. To this end, the United States and other nations should actively engage with China and collaborate in establishing global standards and norms for AI governance.

AI’s responsible and ethical development should be a global imperative. Nations can work together to ensure AI benefits humanity as a whole, guarding against potential pitfalls and harnessing the trillion-dollar global AI opportunity for the betterment of all. This collective effort can transcend geopolitical boundaries, fostering a world where AI becomes a force for positive change, ultimately enhancing lives worldwide.