China has declared artificial intelligence (AI) as a cornerstone technology aimed at bolstering its competitiveness, enhancing military capacities, and improving governance under the Communist Party of China (CPC). During the BRICS summit in June 2022, President Xi Jinping emphasized the national security and geopolitical significance of AI, noting, "Whoever can seize opportunities from the new economic development, such as big data and artificial intelligence, will have the initiative." This strategic focus reveals China's ambitions to leverage AI for economic recovery and assert its position as a global power.
The swift growth of China's AI ecosystem is attributed to strong government support and effective partnerships between industry and academic research labs. The launch of ChatGPT in November 2022 catalyzed interest, prompting at least fifty companies to develop large language models (LLMs), with contributions from both established tech firms like Baidu and Huawei and ambitious startups like Zhipu AI and 01.AI. Experts estimate Chinese firms are currently one to two years behind American counterparts, yet many have begun achieving notable results according to various benchmarks.
This article addresses three central challenges China faces as it seeks to capitalize on generative AI and other innovations: enhancing productivity through AI, managing the vast energy consumption of AI systems, and overcoming limited access to foreign technologies, especially in semiconductors. Improving productivity is particularly pressing as China contends with economic stagnation, rapid aging, and diminishing productivity growth.
To address these pressing issues, the CPC has launched the 'AI Plus' initiative, reflecting initiatives from 2015 aimed at revolutionizing the economy through Internet and technology integration. The plan is to stimulate demand for LLMs and other AI systems across traditional industries to bolster efficiency. Still, transitioning to a high-tech economy is far from straightforward; historical precedents indicate AI alone won't resolve underlying structural issues within China's economy.
Xi Jinping contends AI is instrumental for achieving what he terms the "new quality productivity," pivotal for modernizing China's manufacturing base—considered the bedrock of the country's competitive edge. He stated, "The effect of the 'head goose' of artificial intelligence will have repercussions on other sectors and will give new impetus to innovation." Nevertheless, the Chinese economy faces significant hurdles, including substantial talent shortages and high youth unemployment rates, undermining ambitious growth plans.
Balancing AI ambitions with climate objectives adds another layer of complexity. The International Energy Agency (IEA) predicts Chinese data centers will consume about 6% of the country’s total electricity by 2026, exerting tremendous pressure on both resources and infrastructure. The China Water Risk organization warns of impending water scarcity, estimating data centers could consume over three billion cubic meters of water by 2030, equaling the annual residential water use of Singapore.
While China strives to meet its CO2 emissions peak by 2030, opportunities for sustainable innovation within AI are being explored; for example, state-driven projects like Tianshu-1 aim to reduce energy consumption through smart grid technologies and AI integration. The dual challenge remains: ensuring energy consumption does not exacerbate existing climate issues amid burgeoning infrastructure demands.
Externally, U.S. restrictions on advanced semiconductor exports to China amplify these challenges. Initiated by the Biden administration in October 2022, these limits target cutting-edge technologies integral for AI development, including graphics processing units (GPUs)—key for machine learning operations. The restrictions have been tightened as of October 2023, prompting concerns over China's reliance on outdated chips, exacerbated by efficient resource allocation issues during the AI race.
Experts suggest these export controls can potentially hinder algorithmic improvements and overall efficiency ratios, impeding progress within both U.S. and Chinese tech giants. Some estimates imply potential energy savings lost due to these restrictions could equate to the annual consumption of thousands of American households, hinting at broader ramifications across both nations.
Encouragingly, some academic and corporate research groups within China are innovatively pursuing brain-inspired intelligence approaches, capitalizing on less energy-intensive models. These advancements may yield licit benefits, but significant geopolitical pressures will likely hinder the complete transformation of China’s AI strategy, raising the challenge of sustaining momentum amid fierce international competition.
Despite the highlighted challenges, China's achievements place it alongside the U.S. as one of the leading players on the global AI front. Moving forward, policymakers, legislators, and businesses within Europe must take the developments within China's AI ecosystem seriously. Researchers indicate deep interconnections between European and Chinese AI ecosystems, particularly through collaborative initiatives but advocate for more cautious engagement amid varying geopolitical agendas.
European virtue now lies in promoting innovation yet safeguarding local talent and technologies from absorption by international tech conglomerates. There remains no clear strategy for engaging China within the global AI governance framework, contradicting the necessity for insight beyond ideological divides to navigate the ambitious regulatory environment China presents.
Rebecca Arcesati, lead analyst at the Mercator Institute for China Studies, emphasizes the urgency of this engagement, noting the significance of grasping China's strategic capabilities and innovations within the AI space, which will inevitably shape the future technological geopolitical climate.
