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December 7, 2018

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The Chinese AI innovation gap

Leading economies in the world understand the importance of artificial intelligence (AI) in generating economic growth. China is no exception. In July 2017, the Chinese State Council declared that AI was a top priority.

In April 2018, SenseTime Group Ltd, backed by Alibaba, became the world’s most valuable AI startup, having raised US$600 million.

By 2030, it is predicted that AI will increase China’s GDP by 26.1 percent.

In addition to massive investment, China has other distinct characteristics that put it at an advantage in the development of AI. With more than 700 million Internet users, China has a clear advantage in data volume that can be used to train AI-learning algorithms. Its socialist market economy gives the government economic leverage to expand its AI initiatives across many industries.

Additionally, Chinese business could enjoy relatively easy access to consumer data, a key to AI development.

Despite heavy investment and easy access to data, however, we believe China will struggle to realize its AI ambitions. The main obstacle for AI development in China is not lack of funding, but lack of innovative talent.

China is not short on raw technical talent — quite the opposite. The number of STEM (science, technology, engineering, and mathematics) graduates has been particularly explosive as part of the government’s push to develop a technical workforce. In 2013, 40 percent of Chinese graduates finished a degree in STEM, more than twice the US average.

Nevertheless, we believe that AI advancements will plateau as China struggles with its lack of innovative talent. This limiting factor cannot be easily overcome by government legislation, as it must be fostered through a culture of entrepreneurship.

In recent years, China has been importing its AI talent from overseas. According to LinkedIn’s Global AI Talent report published in July 2017, 44 percent of the overseas AI talent working in China comes from the US, followed by the UK and France as the second and third source countries. The number of Chinese AI job postings on LinkedIn surged from about 50,000 in 2014 to 440,000 in 2016, according to Wang Di, vice president of LinkedIn China. China ranked 40th and 31st out of 63 countries in the IMD World Talent Report and Digital Competitiveness Report, respectively.

Foster creativity

Jack Ma, founder of the Alibaba Group, suggests that the Chinese education system does not give students enough time to have fun, explore and experiment. It is often in these moments that great ideas are born. Chinese students, especially at university level, are so consumed by academics that they rarely get an opportunity to experiment with outside-the-classroom learning and growth.

A study conducted by researchers from Kyungpook National University in South Korea to analyze creativity in Chinese and Korean universities concluded that Chinese students at top-ranked institutions were less creative than those at less prestigious institutions.

Once they enter the workforce, these graduates struggle to step out of their disciplined and rigidly structured environment. As a consequence, they tend to produce superficial, mechanical innovations that require little imagination.

Some students who enter top Chinese universities, through China’s highly competitive gaokao (college entrance examination), have their creativity somewhat muted by a mechanism that tends to reward rote memorization over original thinking.

While China produces twice as many college graduates as the United States, it still has a long way to go in cultivating entrepreneurial and creative spirit in these highly educated workers.

But frequent tiny and incremental changes can add up to large innovations over time. Tencent’s WeChat started out as a direct copy of WhatsApp, but through thousands of rounds of iterative improvement, it has become something much more impressive.

However, AI is unchartered territory, and innovations tend to be less linear than for apps, games, and marketplaces. It remains to be seen if Chinese digital giants can use fast, incremental approaches to compensate for a lack of AI innovation.

China has the potential to become the preeminent global leader in AI innovation. Money and other resources are available and its people have boundless intellectual capacity. At the moment, however, the cultural climate with respect to innovation needs to be more encouraging.

By fostering creativity from an early age, and reducing structural barriers, China’s model for AI development would become more sustainable.

Michael Wade is director of the Global Center for Digital Business Transformation at IMD. Amanda Bris is a computer science student at Boston College and chief information officer at Canor, and was an intern at the IMD Global Center for Digital Business Transformation. Copyright: IMD. Shanghai Daily condensed the article for space.


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