Why China is a key market for major international companies
It’s no secret that China has become a major economic force in the world. Indeed, it is the number one country in terms of GDP PPP, and is predicted to be the number one in USD by 2030.
In addition to this there are some interesting trends in the Chinese market:
- The middle-class population is approaching 500 million inhabitants. Larger than Europe’s middle class as well as the US middle class, China therefore has a tremendous domestic consumer market.
- Artificial Intelligence is quickly gaining a solid foundation in China, benefiting from a favourable socio-political environment. Chinese people, especially the younger generations, are very tech-savvy and welcoming of new technologies. They are also much happier to share personal information online compared to their western counterparts, fuelling Chinese AI start-ups with a huge amount of data to test and refine technology.
- China will drive innovation for their international HQs. I believe that XPM’s core business could play an important role in this area, considering we are experts in Transformation. Chinese offices of international companies find it challenging to convince their HQ of certain new directions or investments. Understanding China, its fast pace, innovative mindset and unique culture is not that easy. We can support international companies as an globally networked company in China versus a local one, and our links with X-PM China. We have the capability to reach out to very senior decision makers both in China and at their HQ.
AI in China:
China’s State Council recently unveiled the country’s New Generation Artificial Intelligence Development Plan (AIDP) a top-level blueprint mapping China’s approach to developing AI research, technology and application.
The AIDP sets out interim goals to be reached in the coming years:
- 2020 - close the gap with the rest of the world in terms of overall technology and application of AI, making it a new important driver for future growth.
- 2025 - achieve breakthrough in certain areas of AI research, and become global leader in selected technologies and applications.
- 2030 - become the overall leader in AI theories, technology and applications, guiding global innovation and achieving visible results in intelligent economy and intelligent society application.
China’s AI market facing the US:
A 2018 survey by China Money Network counted 14 young Chinese AI companies valued at USD 1 billion or more. Together they have a market evaluation of more than USD 40 billion. This group of AI companies exclude major players such as ALIBABA, Tencent, Didi or Toutiao. In Beijing alone more than 1,200 AI start-ups have received venture capital support…
In robotics, China is not yet the leader, but with enormous spending on research, close to 7,0000 robotics start-ups and many successful products on the market, China has the potential to take the lead in this booming sector.
Closely connected to traditional robotics is the field of self-driving cars, trucks and buses. Although China entered this field later than Europe and the US, it could assume global leadership, boosted by explosive growth in the Chinese automotive industry and massive government support.
Upstream and downstream strengths and weaknesses
From the upstream side, high level education is one area of opportunity. Research is the fuel for constant innovation in AI, and universities and research centres play an important role. A good percentage of China’s top AI talent have studied and trained abroad, and the country has published papers in collaboration with other countries (USA, UK, Australia, Germany, Italy and France), showing that cooperation at this level is not just beneficial, but very much needed.
Advanced hardware is another source of potential opportunities. Although this might not be a typical SME industry, companies will be seeking technology providers within their supply chains.
On the downstream side, AI is finding rapid adoption in healthcare, security, finance and education. Retail is also increasingly warming to AI, especially in facial recognition. Meanwhile energy has not been taken into great consideration, by AI specialists, so there is a gap here.
Strategies to potentially access AI market opportunities in China from Europe…
Non-Chinese companies can be faced with issues at a regulatory and practical level. Restrictions and barriers to entry apply, for example, in the form of ownership requirements or access to financing, especially in those sectors deemed of special interest for the country.
Partnering up with local companies already established in the field could partly help solve these issues and help overseas businesses tackle practical challenge such as access to data, setting up of local servers, opening offices in the mainland and more.
Developing the market could be also another area where partnership with local Chinese companies could be beneficial to external SMEs, considering that many state-affiliated entities will prefer to work with domestic companies. This makes it difficult for external companies to supply products and service into China.
A comparative analysis of demand and potential concludes that collaboration between China and Europe in the field of AI offers great opportunities for both sides, as research and technology development on both sides have complementary strengths. It is a win- win situation for both countries.
International competition in AI has become a major focus across science, business and politics. Together with the Internet and technology for handling massive volumes of data, AI will be a key driver in the upcoming economic evolution.
AI will play a central role in this development: it enables technologies that will replace huge numbers of humans in white collar jobs; assisting and empowering other humans in creative work and complex decision making; and extending the boundaries of human cognitive capabilities both individually and collectively. AI could be the new industrial revolution, driving technologies that will profoundly change every social subsystem.
Why China is, and will continue as, the initiator of innovation
The AI evolution coincides with a radical shift in global balance. While China is rapidly reducing the remaining gap between the most developed countries and its own economy, the Chinese Government and Chinese society seem to be committed to leading the vanguard of the AI revolution. Backed by the Next Generation Artificial Intelligence Development Plan, issued by the Chinese government in July 2017, and with unprecedented enthusiasm for AI that seems to be shared by its population, AI has already developed faster than in any other country in the world.
Innovation is no longer about the future – it’s now the present, and it all starts in China. Innovations must also be tested, and China has the means to do so, starting with its own population and the fact that all data is controlled by the government’s tough regulations. Here, political control is seen as a benefit in putting into practice new theories and ideas. Consumer behaviour is easily measured and, to be more precise, easily manipulated. By changing regulations to its advantage, the Chinese government will educate its own consumers.