AI Market in China : what should we expect this year?
In May 2015, the Chinese government elaborated a strategic plan in order to upgrade the manufacturing industry of the country. Indeed, China is trying to move from being the world’s factory to higher value products and services. The “Made in China 2025” is China’s blueprint to reach its goal. Artificial Intelligence is given major importance in this strategic plan. Artificial Intelligence, also known as AI, involves computers realizing tasks that are similar to human intelligence. In 2017, China published its “Next Generation Artificial Intelligence Development Plan”. China is improving its technology sector in order to become the leader in the AI industry by 2030. It is already ranked second after the United-States. The country dominates cross-border and global AI funding that accounted for 60 percent of all global investment from 2013 to 2018. The Chinese AI market was estimated to be worth 23.74 billion yuan (3.5 billion dollars) in 2017 and is expected to reach 1 trillion yuan (146 billion dollars) by 2030.
[/et_pb_text][et_pb_code admin_label=”CTA – Article” _builder_version=”3.0.62″ custom_css_main_element=”border: 1px solid #e6edf3;||padding: 22px 30px 32px;||margin: 30px 0;||position: relative;||border-radius: 5px;||background-color: #f9f9f9;” global_module=”37915″ saved_tabs=”all”]AI, increasingly influenced by politics
Cooperation between tech firms around the world led to the fast development of AI. However, since 2018, country leaders in the field are increasingly imposing regulations on the development of further AI technology, regulations that converge with national interests of data collection and intelligence. This national protection concerns trade and defense. This situation is expected to slow down advances in AI.
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The first step for China to become the world leader in AI is to catch up with its competitor, the United-States by the end of 2020. Since 2018, the US-China trade war is threatening China’s development of its AI field. The United-States government has imposed tariffs and export restrictions on products and services necessary to create AI. China, still depending on foreign suppliers of important hardware and software components, is facing restraints. However, this situation is leading China to increase its effort in research and development even more in order to become self-reliant. For example, Huawei, a Chinese tech manufacturer, is planning to develop its own AI processing chips. China won’t need to rely on American manufacturers such as Intel and Nvidia anymore. Furthermore, Google showed its willingness to do business with Chinese tech firms which for most of them are State companies instead of the United-States. Indeed, employees were reluctant to the idea that the United-States would use this technology in their military industry.
China, the leader in AI in terms of revenue
The United-States is expected to stay leader of the AI industry for another decade however China will be ahead in terms of revenue. This is due to the 1.4 billion Chinese residents. With AI already spread on the Chinese market, Chinese tech firms are gaining a massive amount of data generated by those 1.4 million users. Indeed, China is a cashless economy. Mobile payments such as Wechat Pay and Alipay are well known and used by more than half of the population. The data generated and collected from these mobile payment platforms is massive and concerns an important percentage of the Chinese population. Thus, Chinese tech firms know about everyone.
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In addition to its population, China’s privacy laws are not a barrier compared to other countries, furthermore, the government actively develops and seeks new technologies for data collection. Tech companies have no restraint. This situation is favorable to the development of AI. Indeed, thanks to the significant amount of data generated, China can understand better what to improve and what new jobs can be designed. AI is, after all, supposed to revolutionize industries. Enabling companies to create fully autonomous and automated factories.
AI will continue to boost the fashion industry
AI is notably used by online and offline retailers in the fashion industry. Indeed, AI recommends products that are in the interests of consumers. It also predicts when consumers need certain products or services thanks to their previous purchase. Each Chinese consumer has an online purchase history and behavior. We can take the example of Alibaba and its sales during Single’s Day. They generated 30.8 billion dollars in 24 hours in 2018. This is due to Ai, machine learning, and cloud computing. They can help businesses predict demands thus, what to buy, when to sell and for how much. AI provides more advanced personal services.
Seeing the impact of AI on Alibaba and Tencent, smaller companies are expected to use more and more AI as a way to boost their sales.
Facing AI, Luxury brands need to reconsider their marketing strategies
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Luxury brands are using emotions and sensorial experiences in order to attract and create long term relationships with consumers. However, AI and the developing robotization can affect consumers perceived emotions. Indeed, we can take the example of traditional car manufacturers facing the apparition and soon adoption of autonomous cars. BMW’s catchphrase is “the pleasure of driving”. Some companies will need to review their positioning.
Furthermore, luxury brands are using salespeople as a brand image marketing strategy. With AI replacing staff members and providing cheaper (and sometimes more efficient) services, luxury brands adopting AI will need to review their marketing strategies.
More partnerships between brands
Thanks to the massive amount of data generated, brands will have more knowledge of consumers’ needs and preferences. This will allow them to create more personalized products and services, something that Chinese millennials crave. It is called the “new mass market”. In addition to this new demand, Chinese consumers are also more and more exigent in terms of customer services. Indeed, they expect a service of high-quality available 24/7. In order for brands to meet this growing demand for personalized goods and services and high-end customer service, brands need to cooperate and partner with leaders of the AI market.
Baidu, Tencent, and Alibaba are by far the number ones on the AI market in China. They are followed by numerous valuable startups such as iFlyTek and SenseTime. Thanks to their advanced findings related to the AI field and significant amount of active users thus, a significant amount of data generated, Baidu, Tencent, and Alibaba can help brands fully understand their consumer behavior and buying profile. Louis Vuitton partnered with Baidu in 2018 to launch its first fragrance line in China.
Baidu
Baidu’s AI found seven Chinese celebrities who would best represent the fragrance’s desired image. Buyers would then be paired with a celebrity by the AI system. Partnering with leaders of the AI market can attract more consumers as they are better targeted thus enhancing sales.
A growing debate over the ethics of AI
AI is already everywhere: the healthcare industry, driverless vehicles, smartphones processors, financial industry, retail industry… China even uses AI as a way to watch over its residents. Indeed, with a database of 1.4 billion ID photos, the Chinese government uses its facial recognition system to monitor its population at all times, in all places. It successfully tracked and located suspects and known fugitives in the past.
AI is enabling absolute State surveillance. Indeed, facial recognition is also used for minor infractions such as jaywalking or paying attention in class. The system was created to recognized people in less than 3 seconds with a 90 percent accuracy. The Chinese government is also planning on using AI to power its Social Credit System, an automatic system introduced back in 2014 to rate the trustworthiness of each Chinese citizen and businesses. It is only partially in place but the advances in AI will help the system to be fully operational by 2020.
Following China’s “Next Generation Artificial Intelligence Development Plan”, the year 2019 is focusing on big data intelligence, autonomous intelligence system, and AI foundational theories. AI is set to not only improve the fields its already in but to modernize a whole new range of industries and sectors of business and everyday life. If China succeeds to be the leader in the global AI market, Chinese technology firms will push American companies out of its market.
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