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Five Realities of Tech in China

 10 min read / 

As the world’s most populous nation and second largest economy, not a day goes by in China without its fair share of ground-breaking tech news. Yet, obsessed as some are with their navels, those in the West rarely take the time to analyse and process what little information they may gather in between Trump-bashing sessions. Fear not, The Market Mogul is here to help: below is all one needs to avoid the usual stereotypical platitudes at the next international dinner party.

1) The Rise of Chinese Tech Entrepreneurship

A decade ago, “Chinese innovation” mainly meant copycats and counterfeits. No more(ish). As of December 2017, China holds four spots out of ten on the world’s most valuable unicorns list (Didi Chuxing, Xiaomi Corp, Lu.com and Meituan-Dianping) and accounts for 46% of the list’s combined valuation, as opposed to one spot and 28% just three years prior. China is now home to 55 unicorns out of 214 worldwide, many of which operate in fertile fields such as medical tech, A.I., transportation, retail and the internet of things.

The main driving force behind these changes is an ambitious, talented, career-driven and globally minded generation of entrepreneurs (an authoritarian government also helps). They are propped up by three macro-trends:

  • i) The Chinese economy is large enough to let firms attain massive scale just by operating at home. It helps that the country is more homogeneous than Europe and that its transport and telecommunication infrastructures are modern and regularly improved, unlike in America, which struggles to fix potholes.
  • ii) Chinese shoppers are curious and risk-prone, an advantage to innovators with clever products but unfamiliar brands. They are also unusually eager to embrace technology (especially fintech and mobile tech), leading to healthier competition. Chinese consumers are fast-evolving, try everything, and move quickly.
  • iii) State-dominated industries ranging from telecommunications and banking to healthcare are woefully inefficient and at times even appear hostile to consumers. This leaves enough room for agile tech entrepreneurs to fill in the gaps.

There are, however, a handful of risks factors that could spoil the party, such as a potential sharp recession or a financial crisis spurred by bad debt. Any of these two could lead to a panicky venture-capital bust similar to what we saw in 2008. Furthermore, the Chinese government remains somewhat capricious, and most companies could be subject to new stringent laws in a heartbeat should the Party decides so. Nevertheless, the government seems eager to keep entrepreneurs satisfied.

This great documentary explores China’s fascinating start-up world in depth for those eager to know more.

2) China May Match or Beat America in A.I.

The entrepreneurship push is most visible in the A.I. field. Last year, China laid out a development plan to become the artificial intelligence world leader by 2030, aiming to surpass its rivals technologically and build a domestic industry worth almost $150bn. Though no small feat, here is why this plan could succeed:

  • i) Education: China has a huge army of young people coming into A.I. Generally supportive government policies combined with generous salaries are already helping China’s internet titans lure top talent away from western rivals. They also work really, really hard (46.6 hours a week on average compared to 34.5 in the U.S).
  • ii) Data: China has more data than the US — way more. The nation has the most mobile phones and internet users in the world — triple the number in the United States. People there rarely carry cash and pay many of their utility bills with their phones. They can also do all their shopping on their phones, leading many urban youths to leave their wallets at home when going to get groceries. To give you an idea of scale, shared bicycles in China generate 30 terabytes of sensor data per day, roughly 300 times the data being generated in the US.
  • iii) Government: public policies are accelerating A.I. integration in China, from the ministry of science and technology to the ministry of education, further integrating the internet, big data, and artificial intelligence with the real-world economy. The Chinese government can implement policy in ways that are impossible in western democracies (its mass entrepreneurship and innovation campaign launched in 2014 caused roughly 4,000 incubators to be built over two years, while France had 233 incubators in total in 2016).

Knowing this, it seems to be no wonder that China now has the most valuable A.I. startup in the world. And though China’s ambitions with A.I. range from the anodyne to the dystopian (it helps that Chinese consumers are more relaxed than Westerners about sharing personal data), it appears that the 2030 goal is achievable, bar an economic or geopolitical meltdown (and even then, military A.I is all the rage nowadays).

3) Facial Recognition is Everywhere

A.I is not only used to sell more products to Chinese consumers: the government is also heavily investing in facial recognition tech, and progressively embedding it into everyday life; cameras track passengers at railway stations, identify homeless people on the streets, and even monitor worshipers in state-approved churches. Across the country, applications of the technology are proliferating, ranging between helpful and unsettling: one may track jaywalkers (as a Parisian, this is cultural discrimination), another reduces airport check-in to a one-second face scan, while a university dormitory has employed facial recognition to keep nonresidents outThe Colonel even joined in on the finger-lickin’ fun.

But the real reason China is pouring money into facial recognition is for surveillance and security. And especially so in the Xinjiang province, where the situation is far beyond Orwell’s worse nightmares (which also makes for juicy contracts). Picture a high-tech version of the Cultural Revolution, with the minor difference that the technology enabling a techno-police state has become widely accepted by the population. The country already has an estimated 176m cameras. It plans to have more than 600m installed by 2020.

Hey, at least they’re not mining data directly from workers’ brains on an industrial scale.

Wait, what?

4) A Social Credit System Exists Thanks to Big Tech

In an attempt at a softer, more invisible and Black-Mirror-like authoritarianism, the government is also working on a “social credit system,” which would put together an infinity of variables, including patriotism and moral behaviour, to assign a score to its citizens. The aim is for every Chinese citizen to have an assigned file continuously compiling data from public and private sources by 2020 (when the program becomes mandatory), and for those files to be searchable using a wide array of techniques, new and old, ranging from fingerprints to facial recognition.

The goal is to nudge people toward behaviours ranging from energy conservation to obedience to the Party. Cheating on an exam would lower your score, as would leaving bikes parked in a footpathissuing apologies that are deemed “insincere”, browsing the internet late or buying video-games (take that, gamers). Having a good score would entitle one to favourable terms on loans and apartment rentals, as well as showcasing a person on several dating apps (paying your taxes on time just became hot!). With a really good score, one could even get a streamlined visa to Luxembourg. There is a”fun” social aspect, too: if your friends are all high-score people, it’s good for you. However, if a couple of close friends miss their student loan repayments, you ca not even travel. Starting this month, Chinese citizens who rank low on the country’s “social credit” system will be in danger of being banned from buying plane or train tickets for up to a year. This has already affected more than 11m Chinese citizens.

Commercial versions of the nascent national program are already in operation, and crooks have already made their moves. So will tech-savvy Chinese, who are wondering how they can rig their scores, accustomed as they are to having their data mined and lives surveilled. And therein lies the problem: a government offering to (literally) codify credibility when it itself inherently lacks any is more likely to undermine public trust than instilling it.

This great article explores this more.

5) Discrimination Is Rife at China’s Tech Giants

For all its talk of tech dominance, China still can be a rotten place for some people (just like everywhere…). Though the country has national laws prohibiting discrimination based on gender, religion, and disability, declining to hire someone based on age is perfectly legal there. This is especially flagrant within the tech sector, where three-quarters of tech workers are younger than 30. The logic for this goes as follows: most people in their 30s are married and have to take care of their family. Furthermore, it is harder to recover from tech’s infamous late nights at a certain age. Hence older workers are considered unable to focus on high-intensity work.

In a country of 1.4bn people, many Chinese tech companies are able to move faster than their overseas rivals by simply throwing people at a problem, and younger workers cost less than their more experienced colleagues. Thankfully, China’s shifting age dynamics will probably change the issue within the next 20 years. Yet, as the US shows, the idealisation of youth can be hard to scrub from the tech sector’s DNA: both Google and IBM are currently fighting age discrimination suits.

Speaking of Google and discrimination lawsuits, sexism is also a rampant issue in the Chinese tech sector, despite its illegality. Some roles are open only to men while others have requirements on the height, weight, voice or appearance of female applicants. Tech companies are not the only employers regularly discriminating against women: according to Human Rights Watch, 13% of postings for central government jobs in 2017 included a requirement or preference for male applicants.

China is an exciting and often terrifying country for Laowais. One hopes that Western governments can learn something from some of the policies implemented there. Yet, there are fears they may be more likely to learn from the bad than the good, as is sometimes the case.

Fingers crossed.

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1 Comment

1 Comment

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  1. Tony Chopkoski

    May 30, 2018 at 7:19 AM

    A bit of Zazie Dans le Metro tra la la going on here.

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