The UK-China Artificial Intelligence pact

The rise of artificial intelligence is going to bring about many changes in all of our lives, and a combination of China’s governmental support and Britain’s innovative companies will make the two nations sit at the forefront of those changes, write Tom Pattinson and Mark Hedley

Artificial Intelligence (AI) has already infiltrated so much of our lives. The targeted ads that pop up on social media, the recommendations to buy products online, the suggestions on our TV streaming services and even the apps that help us find dates – it’s already there. And whether we’re trying to get a new mortgage or better car insurance it is AI algorithms that are making those decisions.

Computers are being embedded into more items we buy, from clothes to food packaging as well as cars, phones and watches. By 2035 it is thought that over a trillion computers will be connected – talking to each other to make our lives cheaper, easier and safer.

The data that is collected by all of these computers allows them to act faster and smarter and become more targeted to fulfil the needs of the individual. Fitness trackers are not only helping medical practitioners and researchers learn more about exercise, sleep and eating patterns but police have also used them to track burglars and find murderers. Fears over data collection or hacking of connected cars or human implants are not unfounded but predicting the future challenges is never easy. One thing is for sure, big data and AI is creating the Internet 2.0 as the Internet of Things (IOT) increasingly connects more and more of our daily encounter and experiences.

China is the second-largest global artificial intelligence market after the U.S. The market was estimated to have reached £3.9 billion in 2018 and is expected to reach £8 billion by 2020. China has one of the fastest growing AI markets in the world, being expected to grow 45.5 percent between 2015 and 2020.

China is widely seen as standing to make the greatest productivity gains from AI of any country. PwC estimates that AI has the potential to provide a 26 percent boost to GDP by 2030, and McKinsey predicted that workplace automation AI could add 0.8 to 1.4 percentage points to GDP growth annually, estimating that as many as half of all jobs in China could be automated by 2055.

China’s central government has been very supportive of AI companies, providing R&D grants, tax breaks, office space and frequently investment. As well as well-funded universities producing thousands of highly skilled programmers, there is also plenty of government investment and investment from China’s major tech companies. Not to mention the significant sums of private money from Venture Capital and Private Equity firms who are also jumping into China’s tech and AI sector with glee.

One obvious factor that has led to China’s AI dominance is its huge population that has created an unparalleled depth of data. The hundreds of millions of users of shopping on sites like Taobao and using social media platforms like WeChat has given private companies the ability to generate new value from vast quantities of data. The government too, has used facial recognition software combined with personal identification to be able to use AI to keep track of individuals and catch wanted criminals.

The debate around data privacy and AI ethics is alive and kicking. It has been argued that Chinese citizens value the convenience and personalisation that AI provides over personal data privacy. The recent publication of the Beijing Principles, a code of ethics to ensure the development of ‘human-centric’ AI, highlights a growing awareness of these difficult ethical issues.

The use of personal data for China’s Social Credit System has been the cause of some controversy but mostly from Western media outlets rather than people in China who argue that it brings more positives than negatives.

The use of AI will only grow as companies from all sectors look at how they can incorporate the technology to reduce labour costs, improve efficiency and target customers more directly.

Sectors

There are any number of sectors that will benefit from the growth in AI technologies. Britain has a significant number of global enterprises such as BP, Rolls Royce, AstraZeneca, Shell, BAE Systems and Jaguar Landrover who are actively developing and adopting AI. The UK also has a diverse mix of online, luxury and high-street retail brands with consumers being some of the earliest adopters of digital tech in the world.

Britain already is home to more than 50 companies using AI in the healthcare sector, working on the development of medical imaging, disease diagnostics, drug discovery, digital health monitoring, and chatbots. The UK’s vibrant Education Tech sector has also been thriving with more than 69 AI Ed-Tech companies working in the UK on task automation (including plagiarism detection), student analytics, teacher monitoring, personalised content, and interactive solutions such as robots).

Challenges

The ethics of AI is still a major challenge for the industry. As CBBC’s Torsten Weller explains “Codes of principles written in the west tend to focus on fairness, transparency, individual rights, privacy and accountability. Chinese AI ethicists prioritise values that are open, inclusive and adaptive, adding up to “great compassion and deep harmony” – collective good rather than individual rights.” China’s much discusses Social Credit System (SCS) is an excellent example of this.

As with many sectors in China, it is still culture and communication that are the most significant barriers to greater two-way collaboration between the UK and China. “Working in a cross-cultural environment is complicated, and often leads misunderstandings,” says one Chinese company operating in the UK. “The ethnography of the UK market also needs to be considered, and whether it is possible to attract local customers in the UK for a particular service or product. The practicality and design of the operating page of the system needs to be in line with the local aesthetic and habits,” it says.

The importance of local knowledge varies between industry verticals. Some sectors, such as healthcare and autonomous driving, are perceived to be more challenging for non-UK market entrants than other sectors, largely due the localised nature of these markets (in terms of laws, infrastructure, standards and compliance).

“The UK and China are very different environments,” explains Harry Davies from Tech Nation. “For example, it’s all well-being a healthcare AI company in but understanding how the NHS works is another thing, and very difficult unless you have a footing in this particular environment.”

Several Chinese companies consider the UK to be a more open environment than China in terms of technology adoption. Some industries in China are still seen as lagging in terms of deploying AI-based technologies, taking a cost rather than value approach to adopting new technologies. This has led to a great adoption of hardware technologies over companies supplying AI software, analytics and consultancy (a core strength for the UK).

“There are many business opportunities in China, but I think UK companies are more likely to recognize the value of technology and know-how, whereas Chinese enterprises focus more on production costs and budget,” says Cai Zhonglun of Sigma Squares Tech. “Generally speaking, Chinese enterprises haven’t fully recognised the value of digitisation and intelligent manufacturing technologies – they still haven’t changed their basic mindset. They are more likely to buy equipment than software if they can’t see the huge benefits with their own eyes.”

Differences in laws, regulations and data access issues were also identified as key barriers for greater two-way collaboration. GDPR and data protection rules are seen as a major barrier for Chinese AI companies selling services to UK consumers or businesses. There is also a growing awareness of the importance of relationships with government at a national/regional level, and the importance of managing corporate reputation when entering the UK market.

For British companies looking to enter the Chinese market: “Language and culture is probably the biggest blocker as well as unfamiliarity with the legal system,” says Simon Spier of techUK “Fear of the unknown and some concern about IP has also probably put some companies off the market.”

Access and availability of data was seen as being particular challenge for UK-based companies operating in China. Some companies have had to localise their entire cloud data hosting structure in order to comply with Chinese regulations. Other companies have opted to license their technologies to local partners or find ways to ensure data remains in China. Other UK companies complain that the restricted access to government controlled data has prevented them from providing some services to clients in mainland China.

But whilst there might be some kinks in the road the paths are being laid and it won’t be long before everyone is connected.