by Amy Webb
Like Amazon, Alibaba also has a smart speaker—it’s called the Genie X1, and it is smaller and squatter than Amazon’s Alexa and Google’s Home devices. It uses neural network–based voiceprint recognition technology to identify users, automatically authenticating them so they can shop and make purchases. More than 100,000 of Alibaba’s speakers are being installed in Marriott hotels throughout China.
Alibaba has a bigger vision for AI, which it calls its ET City Brain. The program crunches huge amounts of local data, from smart city cameras and sensors to government records and individual social media accounts. Alibaba uses its AI framework for predictive modeling: to suss out in advance traffic management, urban development, public health needs, and whether there might be social unrest on the horizon. Under Ma’s direction, Alibaba has made inroads into delivery logistics, online video, data centers, and cloud computing, investing billions of dollars into various companies in an attempt to build a sprawling digital behemoth, connecting commerce, home, work, cities, and government. In fact, before the Amazon Go store launched in Seattle, Alibaba had opened Hema, an automated, cashless multifunctional retail operation combining groceries; a fast, casual food market; and delivery service.
There’s one more odd similarity worth noting here. I say “odd,” because it’s also a contradiction. In 2016, Ma purchased the South China Morning Post, which was Hong Kong’s biggest and most influential independent newspaper. The sale was significant because in China most media are state-sponsored, and the English-language SCMP was known for hard-hitting stories that could be critical of the Chinese government.31 When I lived in Hong Kong, I used to have drinks with a group of SCMP reporters who were best-in-class muckrakers. Ma’s purchase was a show of loyalty to the Communist Party. Three years earlier, Jeff Bezos bought the Washington Post, a move that eventually made him an enemy of the Trump White House for the paper’s dogged investigative reporting, its critical analysis of administration policies, and its relentless pursuit of unraveling propaganda.32
Finally, the biggest and in many ways most influential member of the BAT is Tencent. The T in China’s BAT was founded in 1998 by two men, Ma Huateng and Zhang Zhidong. Originally, they started with just one product called OICQ. If that sounds somewhat familiar to you, that’s because it was a copy of ICQ, the instant messaging service. The two wound up facing legal action, but they dug in their heels and kept working on their version of the system. In 2011, Tencent launched WeChat, which not only offered messaging, it copied the features and functions of Facebook. Since the Chinese government had blocked Facebook from its already walled-off internet, WeChat was poised to explode. It was not only popular in universities, it was being used to recruit new talent—and much more.
WeChat has a mind-bending 1 billion monthly active users and a nickname—“the app for everything.” That’s because in addition to standard social media posts and messaging, it’s used for just about everything in China, from new-hire recruiting at universities and text messaging to making payments and even law enforcement. More than 38,000 hospitals and clinics have WeChat accounts, and 60% of them use the service for patient management (e.g., scheduling appointments and payments).33 It’s a company powered by—and focused on—artificial intelligence, viewing “AI as a core technology across all our different products.”34 Appropriately, Tencent’s official corporate slogan is “Make AI Everywhere.”
Facebook may be the world’s largest social network, but Tencent’s technology is, by many measures, far superior. Tencent built a digital assistant called Xiaowei, a mobile payment system (Tenpay), and a cloud service (Weiyun) while also recently launching a movie studio (Tencent Pictures). Tencent’s YouTu Lab is a world leader in facial and object recognition, and it feeds that technology into more than 50 other company initiatives. It’s making inroads into health, too, by partnering with two UK-based health care companies: Babylon Health, a telemedicine startup, and Medopad, which uses AI for remote patient monitoring. Tencent also made big investments into two promising US-based startups in 2018, Atomwise and XtalPi, which are focused on pharmaceutical applications of AI.
In 2018, Tencent became the first Asian company to surpass a market value of $550 billion and overtook Facebook to become the world’s most valuable social media company.35 What’s most astonishing of all: less than 20% of Tencent’s revenue comes from online advertising, compared with Facebook’s 98%.36
The BAT’s talent pipeline includes AI’s North American university hubs, and it’s making sure that kids are getting an AI education around the same time they’re learning how to add and subtract.
None of this would matter if the BAT weren’t so incredibly successful—and if they weren’t making gobs of money. The BAT makes so much of it, and the Chinese market is so enormous that China’s AI tribes wield tremendous power—both in China and elsewhere in the world. The global AI community pays attention to China because of all that capital and because of its numbers, which are hard to downplay.
Facebook may have 2 billion monthly active users, but those users are spread out around the world. Tencent’s WeChat’s 1 billion active users are predominantly located in just one country. Baidu had 665 million mobile search users in 201737—more than double the estimated number of mobile users in the United States.38 That same year, Amazon had its best-ever holiday shopping season. For context, from Thanksgiving through the following Cyber Monday, Amazon customers ordered 140 million products, totaling $6.59 billion in sales.39 That might have been a record for Amazon, but it hardly compares to what Alibaba did in China in just 24 hours. Alibaba sold to 515 million customers in 2017 alone, and that year its Singles’ Day Festival—a sort of Black Friday meets the Academy Awards in China—saw $25 billion in online purchases from 812 million orders on a single day.40 China has the largest digital market in the world regardless of how you measure it: more than a trillion dollars spent annually, more than a billion people online, and $30 billion invested in venture deals in the world’s most important tech companies.41
Chinese investors were involved in 7–10% of all funding of tech startups in the United States between 2012 and 2017—that’s a significant concentration of wealth pouring in from just one region.42 The BAT are now well established in Seattle and Silicon Valley, operating out of satellite offices that include spaces along Menlo Park’s fabled Sand Hill Road. During the past five years, the BAT invested significant money in Tesla, Uber, Lyft, Magic Leap (the mixed-reality headset and platform maker), and more. Venture investment from BAT companies is attractive not just because they move quickly and have a lot of cash but because a BAT deal typically means a lucrative entrée into the Chinese market, which can otherwise be impossible to penetrate. For example, a small Kansas City–based face recognition startup called Zoloz was acquired by Alibaba for $100 million in 2016; it became a core component of the Alipay payment service and, in the process, gained access to hundreds of millions of users without having to contend with strict privacy laws in Europe or the potential threat of privacy lawsuits in the US. But this investment doesn’t come without serious trade-offs. Chinese investors don’t just expect a return on their investments—they also demand IP, intellectual property.
In China, demanding IP in return for capital isn’t a cultural quirk or a greedy way for certain investors to get ahead. It’s part of a coordinated government effort. China has a clear vision of its near-future global dominance in economics, geopolitics, and military—and it sees AI as the pathway leading to that goal. To that end, maintaining absolute control over information is a paramount issue for state leaders, so China has adopted an authoritarian command of content and user data, an industrial policy designed to transfer intellectual property from American companies to their Chinese counterparts. Examples include particular data sets, algorithms, and the design of processors. Many American companies hoping to do business in China must promise to hand over their proprietary technologies first. And there are new regulations in place, forcing foreign companies to localiz
e their research and development within China, and to store any data used locally as well. Storing data locally is a difficult ask of foreign companies, since the Chinese government could invoke its authority to review data and circumvent encryption at any time.
Beijing takes long-term planning seriously. It’s a tradition stemming back to Chairman Mao, who ushered in the first of China’s many five-year plans in 1953. (President Xi launched the 13th five-year plan in 2016.)43 Both government leaders and Communist Party officials embrace strategic foresight—making China one of the few countries on Earth that plans and maps comprehensive economic, political, military, and social strategy that spans many decades into the future. Chinese government has the unique ability to implement whatever policy it wants, and to do whatever it takes to deliver on its national strategy, including its 2030 plan to transform China into “the world’s primary AI innovation center” and create an industry worth $150 billion to its economy by 2030. That plan is unlikely to be repealed by a new government, since in March 2018 China abolished its term limits and effectively allowed President Xi Jinping to remain in power for life.
Under Xi, China has experienced an impressive consolidation of power. He has emboldened the Communist Party, tightened the flow of information, and instituted new policies to accelerate myriad long-term plans, which he expects to start paying dividends in the next decade. At the uppermost levels of China’s government, AI is front and center. Unlike former CCP leader Deng Xiaoping, whose governing philosophy was “hide our capabilities and bide our time,” Xi is ready to show the world what China can do—and he intends to set the global pace.44 The leadership within China are looking into the future and executing on bold, unified plans right now. This alone gives China an incredible advantage over the West, and importantly, it gives the BAT superpowers.
This is all happening during a period of strong economic growth in China, whose middle class is growing at breakneck speed. By 2022, more than three-quarters of China’s urban population will earn enough money to make the middle-class cut. In 2000, just 4% of its population was considered middle class—that’s a staggering amount of projected growth in a short period of time. Higher paying jobs in tech, biosciences, and service will likely push a large chunk of that group out of its current classification and into the “upper middle class.” Chinese households carry very little debt. While it is true that poverty exists throughout the country, the current generation of Chinese kids is well positioned to earn more, save more, and spend more than their parents.45 (Strikingly, 70% of Americans consider themselves to be part of the middle class, but Pew Research Center data shows that our middle class has been shrinking for the past four decades46—less than half of Americans earn enough to fit the category.47)
China is a powerful economic force that’s become difficult to ignore. Marriott may have inked a deal to install 100,000 of Alibaba’s smart speakers in its hotels throughout China, but when Beijing found out that the hotelier listed Hong Kong, Taiwan, Tibet, and Macau as stand-alone countries on an email questionnaire it sent to rewards club members, Marriott executives received an immediate take-down notice. The government told Marriott to shut down all of its Chinese websites and apps, and the company relented. Marriott, which has been expanding throughout China to take advantage of its growing middle class, had recently opened more than 240 hotels and high-end resorts. Its chief executive, Arne Sorenson, found himself publishing a staggering apology on the company’s website:
Marriott International respects and supports the sovereignty and territorial integrity of China. Unfortunately, twice this week, we had incidents that suggested the opposite: First, by incorrectly labelling certain regions within China, including Tibet, as countries in a drop-down menu on a survey we sent out to our loyalty members; and second, in the careless “like” by an associate of a tweet that incorrectly suggested our support of this position. Nothing could be further from the truth: we don’t support anyone who subverts the sovereignty and territorial integrity of China and we do not intend in any way to encourage or incite any such people or groups. We recognize the severity of the situation and sincerely apologize.48
China is also a geopolitical force that’s become too powerful to subvert. It is pressuring foreign governments in another long-term national scheme called the Belt and Road Initiative, an ambitious foreign policy that gives the 2,000-year-old Silk Road route a 21st-century update. China is spending $150 billion a year in 68 countries to upgrade infrastructure like roads, high-speed rails, bridges, and ports. This will make it difficult for one of those countries to escape the policy and economic influence wielded by Beijing during a time in which America has retreated inward. As the pendulum swung between uncertainty and turmoil within the Trump administration, President Xi established China as a fulcrum of stability. Without America at the helm, Xi began filling the vacuum in global leadership.
For example, during his campaign, Donald Trump repeatedly tweeted denials about climate change, including a bizarre conspiracy theory that it was a great hoax perpetuated by the Chinese, who simply wanted to handicap our economy.49 Of course that isn’t true. China for the past decade has been building alliances to reduce global plastic waste, transition to green energy, and eliminate its own factory pollutants. It didn’t have a choice, really: decades as the world’s factory and dumping ground had led to extraordinarily bad pollution, widespread sickness, and shortened life spans in China. In 2017, the government announced that China, which had bought and processed 106 million tons of our junk since 1992, would no longer import the world’s garbage.50 Since the US is not engaged in long-term planning, we didn’t have an alternate plan ready. We don’t currently have any other place to send our trash, so effectively this means that China is forcing other countries around the world to stop using stuff that can’t be recycled. China is quickly become the global leader in sustainability, and it’s powerful enough to dictate the terms.
In China, people are fond of chengyu, which are four-character idioms to impart bits of wisdom. One comes to mind that describes this particular moment in time: , which literally translates as “the grain sheds its husk and comes forth.”51 China is now fully showing the world its might and power, and in a very public way.
Xi’s consolidation of power, coupled with China’s economic rise and might, has created the right conditions for AI’s tribes to flourish, especially given the country’s unified, top-down AI effort. There’s a $2 billion research park being built just outside of Beijing, which will focus on deep learning, cloud computing, and biometrics and will have a state-level R&D lab. Not only is the government investing in the BAT, it’s protecting them from the world’s most formidable competition. The Chinese government bans Google and Facebook, and it’s made it impossible for Amazon to break into the market. BAT companies are at the heart of the government’s 2030 plan, which rely heavily on their technologies: Baidu’s autonomous driving systems, Alibaba’s IoT and connected retail systems, and Tencent’s work in conversational interfaces and health care.
Here’s why China’s AI tribes should be concerning to you regardless of where in the world you might be living.
China’s economy has been growing at a fast pace, and the rapid development of AI is only going to speed China’s ascent. In late 2017, modeling and analysis my Future Today Institute team and I did showed that AI has the potential to boost China’s economy 28% by 2035. AI—fueled by the sheer number of Chinese people and their data, widespread automation, machine learning and self-correction at scale, and improvements in capital efficiencies—will stimulate growth across Chinese manufacturing, agriculture, retail, fin-tech and financial services, transportation, utilities, health care, and entertainment media (including platforms). Right now, there is no other country on Earth with as much data as China, as many people as China, and as many electronics per capita. No other country is positioned to have a bigger economy than America’s within our lifetimes. No other country has more potential to influence our planet’s
ecosystem, climate, and weather patterns—leading to survival or catastrophe—than China. No other country bridges both the developed and developing world like China does. As a Communist power and economic powerhouse, China is a partner that’s now too big to ignore, a political adversary that has radically different viewpoints on human rights, and a conduit for global alliances. With increased wealth comes power. China is positioning itself to influence the global supply of money and international trade. This necessarily unseats other countries from those positions of power and influence, and it also weakens democratic ideals worldwide.
Second, China will leverage its advancements in AI and economic stimulus to modernize its military, giving it an advantage over Western nations. That transition has already begun as part of an airborne domestic surveillance program, code-named Dove. More than 30 military and government agencies have deployed “spy birds” that look like white birds, mimicking the flapping actions of biological wings. The drones are part of a biologically inspired drone program intended to subvert radar and evade human detection.52 The drones capture footage, and an AI system looks for patterns, recognizes faces, and identifies anomalies. But spy birds, while scary sounding, are the least of your worries.
Late in 2017, an unreleased Pentagon report obtained by Reuters reporters warned that Chinese firms were skirting US oversight and gaining access to sensitive US AI technology with potential military applications by buying stakes in American firms. China’s People’s Liberation Army is investing heavily in a range of AI-related projects and technologies, while PLA research institutes are partnering with the Chinese defense industry.53