10/26/2018 Cooperation In The US-China Race For AI Domination - Law360

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Cooperation In The US-China Race For AI Domination

By Rodger Sadler and Chuan Shen (October 25, 2018, 3:26 PM EDT)

Worldwide demand for artificial intelligence is poised to increase dramatically.

PriceWaterhouseCoopers estimates AI will add $15.7 trillion to the global GDP
by 2030.[1]

The two most robust economies in the world — the U.S. and China — are
leading the charge. Both bring unique strengths and resources to the race for
AI dominance.

But does this race have to be a zero-sum game, where only one country
emerges as winner?

China: AI Powerhouse Rodger Sadler

China is poised to become an AI powerhouse for at least three reasons.

1. National Focus

The Chinese government has thrown its full support behind an effort for the
country to lead the world in AI development by 2030.

A July 2017 national strategy blueprint — the “Next Generation Artificial

Intelligence Plan” — outlines China’s plan to treat AI like the country’s own
version of America’s 1969 Apollo 11 lunar mission, an all-in, laser-focused
innovation effort.[2]
Chuan Shen
Having the highest level of government identify AI as a strategic focus creates tremendous
momentum. The resulting flood of investment capital is fueling AI innovation at universities, research
institutions, large technology companies, and countless startups:

A September 2018 U.S. House subcommittee report on AI warns that by the end of 2018,
China will be outspending the U.S. on research and development for the first time ever;[3]

A July 2018 study by China’s top research university — Tsinghua University — found that
between 2013 and Q1 2018, China’s AI industry attracted 60% of all global investment in AI,
knocking the U.S. into second place;[4] and

An August 2018 CB Insights report notes that global investment in Chinese AI startups has
outpaced investment in U.S. counterparts. Chinese startups are currently attracting 48 percent
of global AI investment (up from only 11 percent in 2016), while the U.S. lags behind at only
38 percent.[5]

2. Massive Data
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The Chinese government and Chinese technology companies have access to massive amounts of
consumer data — the lifeblood of AI development.

Just as oil fueled the industrial age of the 20th century, data will fuel the advances of the AI age. As
Kai-Fu Lee, former head of Google China, and founder/CEO of Beijing-based venture capital firm
Sinovation Ventures recently noted, China is “the Saudi Arabia of data.”[6]

Huge pools of data are needed to “train” AI systems. As an AI algorithm is fed more data regarding a
problem, it becomes more adept at solving it. Relatively unfettered access to data relating to
practically every aspect of life — facial recognition, consumer purchases, energy use, health care,
commuting habits, driving behavior patterns — will dramatically accelerate development of Chinese
AI.

3. Ability to Implement, Test, and Refine on a Large Scale

China has the ability to implement, test, and refine AI technologies on a large scale, and at a
lightning-fast pace.

The population is huge — 1.4 billion people, with more internet users than any other country in the
world. And the Chinese are incredibly open to using technology in their daily lives. Day-to-day
consumer purchases — from breakfast snacks to taxi fares to haircuts — are generally paid for
digitally on smartphones. In 2016, Chinese mobile payment transactions totaled an estimated $9
trillion, about 80 times more than the $112 billion in U.S. mobile payments that year.[7] Leveraging
this, Chinese technology companies can make ultra-fast alterations to product design based on real-
time feedback from huge pools of market data.[8]

The Chinese government is also developing and adapting infrastructure and institutions with AI
implementation in mind. As AI applications move from the purely digital world to influencing the
physical world, infrastructure and institutions need to keep up. For example — as Kai-Fu Lee, to
properly pave the way for self-driving cars, it may be important to embed sensors into highways and
local roads.[9] Lee further notes that for AI medical diagnosis applications to work effectively,
institutions like hospitals may be required to enter into data-sharing arrangements to allow
algorithms to access required data, while still protecting privacy.[10] In this regard, the Chinese
government has the power to mobilize and direct local government infrastructure projects and
private sector institutions in ways many Americans could never contemplate.

Still, China’s dominance in AI development is far from inevitable. Despite lacking the momentum a
clearly defined national strategy for focused AI investment and development would create, the U.S.
has tremendous strengths.

The U.S.: Innovation Machine

There are at least three reasons to bet on the American innovation machine.

1. American Hardware Drives Advanced AI

The hardware needed to run advanced AI algorithms is largely American-developed and owned.
China lags behind the U.S. in AI chip design and fabrication, and in conducting underlying research
on innovative computer design and architecture. And by blocking Chinese attempts to acquire much-
needed hardware technology through acquisition of U.S. chip companies, the U.S. government is
ensuring that AI developers in China will continue to look to the U.S. for cutting-edge hardware.[11]

2. Top Research Institutions and Universities

U.S. research institutions and universities are peerless. Less than a dozen Chinese universities have
advanced AI programs, compared to many dozens in the U.S. American programs remain second to
none. Four of the world’s top five schools for studying advanced AI are in the U.S.: (1) MIT, (2)
Carnegie Mellon, (3) Stanford and (4) University of California, Berkeley (the fifth school is in
Singapore).[12]

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U.S. dominance in this area is solid. As Oren Etzioni, CEO of Seattle’s Allen Institute for Artificial
Intelligence notes “The leading AI researchers, university departments, and research labs are still in
the U.S.”[13]

3. Magnet for Global Talent

The U.S. still has the ability to attract the best and brightest from around the world. This powerful
magnet for attracting diverse AI talent gives America a powerful upper hand over China.

A July 2016 Tsinghua University study found that 13.9 percent of the world’s total AI talent pool is
working in the U.S. (well in front of the 8.9 percent working in China).[14] A recent MIT-Boston
Consulting Group report found that almost 60 percent of senior Chinese AI technology executives
believe their companies lack the appropriate talent needed to take and maintain a lasting competitive
edge.[15] By contrast, in the U.S., Google alone is estimated to employ 50 percent of the world’s top
100 AI scientists.[16]

American technology companies like Google have further upped the ante in the global battle for AI
talent by opening AI research centers internationally — including in China — to better attract and
retain local prodigies.[17]

Diversity is a critical piece of AI development, due to the nature of machine learning. A goal of AI is
to teach computers to perform tasks humans do naturally: recognize speech, make decisions,
identify faces, and even emotions. To do this, computers are fed vast amounts of information. The
more images of different faces or emotions a computer sees, the more effective it will be at
identifying faces and emotions. If the data sets are limited or biased, or if those creating an AI
algorithm don’t recognize or account for those limits and biases, the output will be flawed.

Thus, the ability to attract diverse AI talent from around the world gives America a tremendous
competitive advantage when it comes to developing strong AI algorithms and applications for use
globally. Similarly, the data generated by the diverse population of the U.S. is invaluable for
purposes of training AI algorithms and applications to be effective around the world.

Unite and Conquer

If the U.S. and China simply try to double-lock their doors when it comes to developing and owning
the technology that will power the global AI revolution, both run the risk of locking into mediocrity.
[18] However, if they treat each other as vigorous competitors with unique strengths that can be
learned from and leveraged, there is no limit to what can be accomplished. Together.

China can leverage the diversity and advanced expertise of American AI developers to develop much
more robust algorithms and applications. Similarly, the U.S. can leverage the sheer volume of data
available from China to further advance American AI algorithms and applications. American
researchers and developers also can use the Chinese AI-friendly infrastructure and institutions, and
rapid pace of technology adoption, to test and refine U.S. algorithms and applications in a real-world
setting. China can also use the incredible diversity of the U.S. population to test and improve their AI
algorithms and applications for use around the world.

Together, the U.S. and China can also jointly set the pace when it comes to developing and
implementing global technical standards for AI, such as terminology, reference architecture, and
computational methods. Currently, the Institute of Electrical and Electronics Engineers in the U.S.
has been working on standards development for AI. China is doing similar work with its AI Industry
Alliance. Encouraging these agencies to work together will ensure that adopted standards mutually
benefit everyone (including end-users), everywhere. As Helen Liang, co-president of the AI Alliance
of Silicon Valley noted at a recent U.S.-China AI Tech Summit, “If there is a solution benefiting
everyone, why not collaborate?”[19]

Concerns regarding privacy and data security are also better addressed collaboratively. In the U.S.,
discussions are already happening to create a rigorous data protection policy similar to the General
Data Protection Regulation enacted in Europe in May 2018. If China hopes to further increase its
influence on the global stage, regulators there will eventually have to adopt similar standards to
those in Europe and the U.S. Working together to reach a mutually acceptable middle ground, that
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takes into full account the valid data security and privacy concerns of AI end-users globally, will
greatly benefit both countries, not to mention the world as a whole.

Finally, U.S. AI innovators concerned by the prospect of having their technology stolen or copied in
China can benefit by working more closely with the Chinese government and technology counterparts
to explain their concerns, and lobby for specific solutions to address those concerns.

The U.S. system for protecting intellectual property remains one of the most successful in the world,
and the Chinese government has repeatedly emphasized its commitment to developing an equally
efficient system.[20] It was U.S. President Abraham Lincoln who first noted that the U.S. “patent
system added the fuel of interest to the fire of genius.” By working together on intellectual property
protections concerns and solutions, China and the U.S. will add the fuel of interest to the fire of AI
genius in both countries, and throughout the world.

Conclusion

Both the U.S. and China bring unique strengths to the race to create and own the technologies that
will power the coming AI revolution. By working together, while embracing the competitive spirit that
has always driven each nation's respective development and growth, the U.S. and China are ready to
unite and conquer the world of AI.

Let’s get to work!

Rodger Sadler is managing director and head of legal and intellectual property at Cote Capital in New
York City.

Chuan Shen is director of the Overseas Business Division at China's Intellectual Property Publishing
House in Beijing.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the
firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for
general information purposes and is not intended to be and should not be taken as legal advice.

[1] See “Sizing The Price – What’s The Real Value Of AI For Your Business And How Can You
Capitalise?,” PriceWaterhouseCoopers (June 2017).

[2] See “A Next Generation Artificial Intelligence Development Plan,” China State Council (July 2017)
(English translation available at https://chinacopyrightandmedia.wordpress.com/2017/07/20/a-next-
generation-artificial-intelligence-development-plan/).

[3] See Hurd W. and Kelly R., “Rise Of The Machines: Artificial Intelligence And Its Growing Impact
On U.S. Policy,” Subcommittee On Information Technology, U.S. House of Representatives (Sept.
2018).

[4] See Deng I., “China’s AI Industry Gets The Most Funding, But Lags The US In Key Talent, Says
Tsinghua,” South China Morning Post (July 2018).
[5] See “Top AI Trends To Watch In 2018,” CB Insights (Feb. 2018).

[6] See Gao G. and Wu Z., “China Is To Data What Saudi Arabia Is To Oil Kai-Fu Lee Tells AI Forum,”
YiCai Global (Sept. 18, 2018).

[7] See Abkowitz, A., “The Cashless Society Has Arrived – Only It’s In China,” Wall Street Journal
(Jan. 4, 2018).

[8] See Gardels N., “The Great AI Duopoly,” World Post (Sept. 24, 2018) (quoting former head of
Google China, and Founder and CEO of Sinovation Ventures, Kai-Fu Lee).

[9] See Lee K-F., “What China Can Teach The U.S. About Artificial Intelligence,” New York Times
(Sept. 22, 2018).
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[10] See id.

[11] See Krause R., “In AI Technology Race, U.S. Chips May Be Ace-In-The Hole vs. China,”
Investor’s Business Daily (Nov. 27, 2017),

[12] See Mayekar S., “Top Universities In The World To Study Artificial Intelligence,” Analytics
Insight (May 23, 2018).

[13] Konrad A., “China’s AI Advantage: Why Google China’s Founder Sees The U.S. Losing Its Edge,”
Forbes (May 30, 2017).

[14] See supra note 3.

[15] See Dai S., “Chinese Firms Are Aggressive Investors In AI And Show A ‘Thirst For Talent,’ Says
MIT-BCG Report,” South China Morning Post (Sept. 18, 2018) (citing to “Artificial Intelligence In
Business Gets Real,” MITSloan Management Review (Sept. 17, 2018)).

[16] See McCaney K., “Can US AI Programs Keep Up With China’s?,” Government CIO Media (Sept.
13, 2018) (quoting former head of Google China, and Founder and CEO of Sinovation Ventures, Kai-
Fu Lee).

[17] See Cyranoski D., “China Enters The Battle For AI Talent,” Nature (Jan. 15, 2018).

[18] See Reif L., “China’s Challenge Is America’s Opportunity,” New York Times (Aug. 8, 2018).

[19] Zhu L., “AI Experts Push For Common Standards,” China Daily (July 2, 2018).

[20] See, e.g.: (i) “China To Adopt Stricter IPR Protection: Official,” Xinhua (Aug. 30, 2018) (quoting
Head of the Chinese Patent Office (SIPO), Shen Changyu); and (ii) “China To Strengthen IPR
Protection: Xi,” Xinhua (Apr. 10, 2018) (quoting Chinese President Xi Jinping).

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