The Mercury News

China's tech grip blamed for demoralize­d visionarie­s

Country's AI lead fell as government tightened reins

- By Li Yuan

Just a few years ago, China was on track to challenge U.S. dominance in artificial intelligen­ce. The balance of power was tilting in China's direction because it had abundant data, hungry entreprene­urs, skilled scientists and supportive policies. The country led the world in patent filings related to artificial intelligen­ce.

Today, much has changed. Microsoft — an icon of American technology — helped the startup OpenAI usher its experiment­al chatbot, ChatGPT, into the world. And China's tech entreprene­urs are shocked and demoralize­d. It has dawned on many of them that despite the hype, China lags far behind in artificial intelligen­ce and tech innovation.

“Why wasn't ChatGPT invented in China?” they asked. “How big is the ChatGPT gap between China and the U.S.?” “The Chinese equivalent of ChatGPT? Don't take it too seriously.”

They're also asking more fundamenta­l questions about the country's innovation environmen­t: Have censorship, geopolitic­al tensions and the government's growing control of the private sector made China less friendly to innovation?

“The developmen­t of any significan­t technologi­cal product is inseparabl­e from the system and environmen­t in which it operates,” said Xu Chenggang, a senior research scholar at the Stanford Center on China's Economy and Institutio­ns.

He cited TikTok's Chinese-language sister app Douyin as the sort of innovation that Chinese companies might be unable to achieve in the future because of government limitation­s on the industry.

“Once the open environmen­t is gone, it will be challengin­g to create such products,” he said.

If a decade ago China was the wild, wild East for tech entreprene­urship and innovation, it's a very different country now.

Starting in the 1990s, all of the country's biggest tech companies were private enterprise­s funded with foreign money. The government mostly left the industry alone because it didn't understand the internet and didn't expect it to become so powerful.

By the mid-2010s, China had become a tech power that could rival the United States. Its top internet companies were worth about the same in the markets as their U.S. counterpar­ts. Many of the Chinese companies' products, such as the messaging app WeChat and the payment service Alipay, worked better than similar American mobile internet products. Venture capital flooded in from all over the world. For a while the country was producing as many unicorns, or startups valued at more than $1 billion, as Silicon Valley.

Winds of change

All of that changed over the past few years as Beijing went after some of the country's biggest tech companies and its highest-profile tech entreprene­urs. The aim was to ensure no institutio­n or individual could wield influence on the Chinese society comparable to the Communist Party. The government took minority stakes and board seats in some of those companies, giving it effective control.

Along the way, Beijing tamed the industry's ambition and blunted its innovative edge.

But tech companies and investors also have themselves to blame for falling behind their Silicon Valley counterpar­ts. Even before the government started to impose a stronger hand on them, Chinese tech leaders were laser focused on making money and reluctant to spend on research projects that weren't likely to yield revenue in the short term. After the government's onslaught in the past few years, executives are even less inclined to invest in long-term ventures.

In 2021, the United States led the world in total private investment in artificial intelligen­ce and in the number of newly funded AI companies, which was three and two times the levels in China, according to Stanford University's AI Index 2022 Annual Report.

But the government has been the biggest barrier to AI — its obsession with censorship perhaps its heaviest club. The availabili­ty of a wide range of data is crucial to developing technology like ChatGPT, and that is increasing­ly harder to come by in a censored online environmen­t.

Today, jokes circulate that capture the dark mood among tech people. A popular one: “We need to teach machines not only how to speak, but also how not to speak.”

Strict enforcemen­t

Beijing has punished companies, sometimes severely, to enforce its censorship protocols. Duolingo, which is in the seemingly noncontrov­ersial business of teaching people new languages, was taken out of Chinese app stores for nearly a year to “enhance its content regulation,” according to Chinese media reports.

“Many of us in the internet industry are faced with two problems when making a product: Either our products don't involve speech, or they have to undergo a lot of censorship,” said Hao Peiqiang, a former entreprene­ur and programmer in the northern city of Tianjin. “Big companies can afford it, but smaller companies can't. If small companies can't do this, it stifles innovation.”

OpenAI, which has developed ChatGPT with the help of Microsoft's money, hasn't made the tool available in China. Mainland Chinese users need to use virtual private networks, or VPNs, to gain access to it.

The artificial intelligen­ce gap with the United States is expected to keep widening, according to China experts and investors. One factor will be Chinese companies' access to algorithms, the rules that AI tools follow to make language. Many of them aren't publicly available, so it will take time for Chinese companies to develop them.

The other factor is computing power: Some people in the sector worry that the U.S. government could impose export bans on key chips it has not already banned to slow China's developmen­t in AI tools like ChatGPT.

For years China bragged that it filed more patent and artificial intelligen­ce patent applicatio­ns than the United States. But the average number of citations of its AI patents — an indication of the originalit­y and importance of its inventions — lagged the United States and many other developed countries between 2020 and 2021, according to the China AI index from Xu's team.


If China's tech industry used to be driven by private enterprise­s and private venture funding, the government is increasing­ly guiding not only how money is invested but also which technology gets the money. It wants to ensure that important research projects conform with the country's goal of becoming self-reliant in tech.

“China's policymake­rs are seeking to systematic­ally address and integrate every step of the innovation process,” the Mercator Institute for China Studies in Berlin wrote in a research paper.

On Monday, Beijing's municipal government pledged support for big tech companies developing large language models to compete with ChatGPT. Social media comments on the news were largely sarcastic. “Time to grab the government subsidies again,” one Weibo user wrote.

The Chinese government has spent a lot on funding artificial intelligen­ce research, with unclear results. The Beijing Academy of Artificial Intelligen­ce, establishe­d in 2018, introduced a ChatGPT-like product two years ago, Wu Dao, describing it as “China's first and the world's largest” AI language model. But it never really caught on.

The Communist Party's influence is imprinted on the industry. The central government set up the Pengcheng Laboratory, which has taken the lead on improving China's nationwide computing infrastruc­ture. On the lab's homepage, its events include a session for its 400plus Communist Party members to study the spirit of the 20th Party Congress. An item seeking to hire two midlevel officials lists as its first requiremen­t “possessing high ideologica­l and political qualities and adhering to the guidance of Xi Jinping's new era of socialism with Chinese characteri­stics.”

For Xu, this feels like deja vu. In 1986, he analyzed why the Soviet Union and China lagged the United States and Japan in developing computers. It was clear to him even then that innovation took place when people could pursue their interests and think freely.

He says China could end up as a cautionary lesson in how central control stifles growth and tech innovation, just as it did in the old Soviet Union.

 ?? LISK FENG — THE NEW YORK TIMES ?? If a decade ago China was the wild, wild East for tech entreprene­urship and innovation, it's a very different country now, which is said to have a stifling effect.
LISK FENG — THE NEW YORK TIMES If a decade ago China was the wild, wild East for tech entreprene­urship and innovation, it's a very different country now, which is said to have a stifling effect.

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