“The global success of ‘Silicon China’: How Europe can react”

Is there a second “Silicon Valley” developing in China? Does China hold a decisive lead in Big Data and Artificial Intelligence (AI) research? How should and how could Europe react to the emerging Chinese dominance in this field? This was discussed in the MERICS China Lounge on October 31, 2018 by André Loesekrug-Pietri, co-founder of the innovation agency J.E.D.I. (Joint European Disruptive Initiative), and Stephan Scheuer, journalist and former China correspondent for German news agency dpa and daily newspaper Handelsblatt.

In exchange with host Claudia Wessling they outlined China’s ambitions in big data and artificial intelligence research. Both guests agreed that the success of Chinese internet enterprises was partially the result of China’s unique economic system. Companies like Tencent and Alibaba had no competitors in their segment, as state-owned companies never operated in internet-related businesses. The Chinese state encouraged the private sector to take the initiative in this field and left a lot of room for experimentation. Furthermore, potential foreign competitors were systematically cut off from the Chinese market. According to Scheuer, another reason for China’s current innovation potential is due to the successful network expansion during the Hu Jintao era in the 1990s.

China Lounge_Panel

Both experts agreed that China will play a leading role in future research in artificial intelligence. For the first time since the beginning of industrialization, a key technology could be developed in a country outside the established industrialized nations. As Scheuer emphasized, China holds a competitive advantage: The Chinese government is willing to share vast amounts of citizens’ personal data with private companies. Access to patient records, for example, is crucial for the development of high-quality AI applications in the health care sector. This could even persuade foreign companies to develop their algorithms in China.

How should Europe react to this development? The panelist agreed that Europeans were right to consider public security and data protection before implementing tech innovation from China in the EU. According to Loesekrug-Pietri, such considerations are becoming more urgent as the ongoing isolation of the United States would redirect Chinese financial investments from the US to European markets.

Both panelists agreed that the European General Data Protection Regulation was a first step towards an adequate reaction to Chinese business activities in Europe, and that Chinese companies were taking these regulations seriously. But while agreeing that the ethical dimension of new technologies deserves consideration, Loesekrug-Pietri also warned that there was a lack of understanding of the speed of technological development among European policymakers. Scheuer added that many large German companies – from banks to car manufacturers – did not realize the extent to which digital innovations threatened their traditional business models.

Loesekrug-Pietri stressed that, instead of issuing competing national plans, the EU should pursue a uniform approach in the field of digitalization. “Radically innovative strategies” would be needed in order to secure a future leading position for Europe in AI research. The J.E.D.I. initiative was formed after the example of the US Defense Department’s innovation agency Darpa and promotes innovation in technology research. The agency aims to streamline processes in research financing, to prevent talents from moving to China, as is already the case in many industries such as autonomous driving. European talents should be able to find innovative research opportunities inside Europe.

China Lounge Scheuer and Claudia Wessling