China’s way to an innovation superpower

From 5G networks to blockchain and electric driving: China has caught up to the forefront of new technologies that are based on artificial intelligence. Chinese companies benefit from state support for R&D, from internationally trained experts and from the sheer mass of data generated by 800 million internet users. Today’s innovation leaders in the United States and the EU would do well not to rest on their laurels.

We have it on good authority: China could overtake the United States in the development of artificial intelligence as soon as sometime next decade, says Eric Schmidt, executive chairman of Google’s parent company, Alphabet. Speaking at a conference last November, Schmidt warned policymakers that Chinese developers are making up ground extremely quickly and are intent on finding commercial and military applications for AI technologies originally developed in the USA. “Trust me, these Chinese people are good,” he concluded ominously.

Whether financed by the government or the private sector, Chinese researchers in young, promising industries such as AI and biotech have shown themselves determined to catch up with leading firms and institutions based in the United States, Europe and Japan. Chinese investment in research and development (R&D) is now only surpassed by that of the United States: in 2016, 2.1 percent of Chinese GDP (roughly 233 billion USD) was channeled into R&D. By 2020 the figure will reach 2.5 percent.

Within the field of information technology these efforts have already yielded concrete results in the shape of ground-breaking studies with broad fields of application. Making use of new state-of-the-art facilities, Chinese engineers are experimenting intensively with quantum cryptography, the world’s best bet for an “uncrackable” form of electronic communication encryption.  In Anhui province ground will soon be broken for a 10 billion USD facility for further applications of quantum research. And while in Europe blockchain technology is still largely perceived to be the domain of the new crypto-currencies, Chinese universities are already training thousands of blockchain engineers whose work will focus on the technology’s potential uses in such areas as customs administration and food and drug safety.

Private tech companies tap into expertise in global markets

China’s great leap forward in research and development can be attributed to the country’s practice to send its most talented students to study in the United States, claim Richard B. Freeman and Wei Huang in an analysis produced for the American National Bureau of Economic Research. The global mobility of people and ideas, they argue, has allowed China to reach the forefront of scientific research and technology in only two decades. The field of artificial intelligence, a meta-technology, demonstrates just how successful these efforts have been: today Chinese authors contribute around 43 percent of all papers published globally on AI. Between 2006 and 2015 this share almost doubled.

China’s private technology companies are now making concerted efforts to tap into international reserves of scientific expertise. In 16 globally distributed research centers, telecommunications giant Huawei oversees the development of 5G, the future standard for wireless networks. Chinese electric car manufacturer NIO researches new battery technologies and tests prototypes at 30 locations located in China and abroad, employing mixed teams of Chinese and non-Chinese researchers – a staggeringly ambitious enterprise for a company founded only three years ago.  Chinese tech firms Baidu, Tencent, and Didi have all opened generously outfitted AI research labs in Silicon Valley in order to cross-pollinate their domestic R&D operations. And online-shopping-giant-turned-commercial-juggernaut Alibaba has committed 15 billion USD over the next three years to its R&D activities which include cooperative projects with labs at Harvard and Princeton and engage many of the roughly 25,000 engineers and scientists on the company’s global payroll.

In AI research itself, which remains central to nearly all these new technologies, one singular competitive advantage makes up for China’s relative lack of top researchers: the sheer mass of internet users and data. “A very good scientist with a ton of data will beat a super scientist with a smaller data set,” write Kai-Fu Lee and Paul Triolo in a study published last December. China enjoys access to immense data troves which grow larger by the day. In the fall of 2017, 1.4 billion cell lines were in use and roughly 800 million Chinese were active online. Data created through the use of e-pay services or bike-sharing apps, made available by extremely lax data protection laws, flows directly into researchers’ databases.

Universities still fail to attract international talent

But in order to produce world-class research, corporate initiative is not enough, a country’s universities must also be able to network globally and attract international talent. This is China’s Achilles’ heel. Even such renowned institutions as Peking University have only been internationalized to a relatively small degree. Administrative hurdles such as strict visa regulations have made it difficult for foreign researchers to get a foot in the door. Courses and talks are held nearly exclusively in Chinese. Air pollution, internet censorship, and an academic system based primarily on lectures and note-taking have proven additional deterrents for foreign academics. Concerns about academic integrity have in turn put the breaks on international collaborations: according to the Blog “Retraction Watch,” since 2012, no country has withdrawn more papers from academic journals due to suspicions of fraud than China. Despite the country’s improved showings in international rankings, which is itself largely a function of the enormous quantity of its research output, China seems to still be quite far from attaining global leadership in academic research and education.

Yet these deficits aside, in the fields that will define our future China’s researchers are close to catching up. A growing number of Chinese developers are choosing to return home after professional training or employment abroad. Even some non-Chinese scientists working in ethically sensitive areas, weary of fighting funding cuts and research restrictions, have been tempted by extremely generous funding offers to relocate to China, if only temporarily.

The findings are unambiguous: China is rapidly gaining ground in research and development.  Today’s innovation leaders would do well not to rest on their laurels. European businesses, governments, and universities will need to substantially strengthen and renew their efforts in support of research, innovation, and education if they hope to maintain their narrow edge over agile Chinese competitors.

A German version of this article appeared on March 11, 2018 in the column “Sonntagsökonom” of the Frankfurter Allgemeine Sonntagszeitung.