The Chinese AI innovation chasm

The Chinese AI innovation chasm

The country has great potential but is hindered by its education system.
5 min.
October 2018
The Chinese AI advantage

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 and created the Next Generation Artificial Intelligence Development Plan to catch up with the West by 2020 and overtake it by 2025.

Investment is not only coming from the government. In April 2018, SenseTime Group Ltd, backed by Alibaba, became the world’s most valuable AI start/up, having raised $600 million. By 2030, it is predicted that AI will increase China’s GDP by 26.1%.

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 unique brand of socialist market economy gives the government substantial control over market forces, creating a closer cooperation between businesses and the government, and giving Beijing economic leverage to expand its AI initiatives across many industries. Additionally, China has relatively few privacy protection laws, providing the government with extensive access to consumer data, a key to AI development.

China’s innovation talent gap

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 U.S. 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, something that the country is sorely missing.

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% 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. Roughly 90% of AI positions advertised in Mainland China go unfilled unless companies offer them to overseas workers. 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.

Educational barriers

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