Artificial Intelligence in China and how European small and medium enterprises can

benefit

August 2019

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This EU SME Centre report is written by:

Bjørn Hembre, General manager and founder of Branditat

John Artman, Editor in Chief, Technode.com

Liam Z. Jia, Business Development Advisor, EU SME Centre

Disclaimer

This document is provided for general information purposes only and does not constitute legal,

investment or other professional advice on any subject matter. Whereas every effort has been made to

ensure that the information given in this document is accurate, the EU SME Centre accepts no liability

for any errors, omissions or misleading statements, and no warranty is given, or responsibility accepted

as to the standing of any individual, firm, company or other organization mentioned. Publication as well

as commercial and non-commercial transmission to a third party is prohibited unless prior permission

is obtained from the EU SME Centre. The views expressed in this publication do not necessarily reflect

the views of the European Commission.

NB:

All product names, logos, and brands are property of their respective owners. All company, product and

service names used in this report are for identification purposes only. Use of these names, logos, and

brands does not imply endorsement.

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Background

China is at the forefront of Artificial Intelligence development, and it couldn’t be otherwise. The PRC’s

sluggish productivity coupled with an aging population and rising incomes has eaten in the country’s

traditional advantage of a cheap labour force. This, coupled with the pressure coming from other South-

East nations and the difficulties of a radical shift in the country’s production paradigm have called for

decisive measures by the central government to sustain and support the future growth of the country.

Investment in advanced technology, automation, new systems (what is usually referred as Made in

China 2025), are all part of this plan, where Artificial Intelligence, short AI, is playing a massive, central

role. In fact, AI is what will fuel the country’s future development: through its applications in sectors

such as automotive, healthcare, retail and security (just to name a few), AI is what will help China make

sense of the huge amount of Big Data produced every day and channel it through usable applications to

solve the most compelling issues the country is facing nowadays: pollution, traffic congestion, low

productivity, overexploitation of public resources and many others.

For these reasons, one shall not be surprised to know that since 2013 to the first quarter of 2018, China

has attracted the largest share of investment in the AI sector worldwide (60%), and that at the end of

2017, the PRC’s AI market was worth EUR 3,05 billion, increasing 67% y-o-y.1

Nevertheless, the development of AI in China is facing a number of issues that, in return, represent

opportunities for EU companies. The main is that China, although rich in financial resources, lags

behind in term of AI talents, especially on the hardware side. This reflects in the fact that China is very

strong when it comes to the development of application, but much less when it comes to the

development of core technology.

What does this all mean for EU SMEs? A lot. It means that opportunities are out there available for

those companies with the right products and services that can match the demand coming from the

Chinese AI sector. Among them, the creation of local R&D centres, trainings, technology transfer, joint

research labs and many others.

Naturally, challenges are also ahead for those companies seeking to establish a foothold in this market:

IPR issues, financing, development of local networks and others are all aspects that should be carefully

weighed before stepping into the local competition.

Understanding the status of the AI market in China, the opportunities and the challenges, the best

practices and the most effective access paths, is paramount for every single company, organization or

institution looking to expand into that market maximizing the benefits and reducing the potential threats.

To this aim, the EU SME Centre has decided to develop a New Report on the Artificial Intelligence

market in China.

1 http://www.chinadaily.com.cn/a/201809/18/WS5ba09a8ca31033b4f4656b65.html

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Table of Contents

1 What is AI? ··························································································· 6

1.1 Definition of AI ··················································································· 6

1.1.1 Chips - the motor for AI ······································································· 6

1.1.2 Algorithms - the recipe of AI behaviour ···················································· 7

1.1.3 Data - the AI food ·············································································· 9

1.1.4 The layers of AI ···············································································10

1.2 Artificial Intelligence in China ·································································11

1.2.1 Brief history of development of AI in China ··············································11

1.2.2 Actual size, status of development and main policies ···································12

1.2.3 Drivers and future outlook ···································································14

2 AI in use ······························································································17

2.1 Applications of AI in China ····································································17

2.1.1 Perception ······················································································18

2.1.2 Prediction ·······················································································24

2.1.3 Prescription ·····················································································26

2.1.4 Integrated solutions ···········································································27

3 AI in China And The Possibilities For Europe ·················································35

3.1 Opportunities and challenges for European companies ····································35

3.1.1 Knowledge: Human resources and skills transfer ········································35

3.1.2 Technology: transfer and development ····················································35

3.1.3 Applications: development and distribution ···············································36

3.1.4 Data: Oversees data sets, training and data acquisition ··································36

3.1.5 Hardware: Chips and sensors ································································36

3.1.6 Research: Exchange and joint ventures ····················································36

3.2 Practical advice ···················································································37

3.2.1 Legal advice: IPR protection ································································37

3.2.2 Standard and Conformity: Barriers to entry ···············································37

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3.3 Conclusions and recommendations ····························································37

4 Annex ·································································································39

4.1 The Major Chinese AI Players and their technologies ·····································39

4.1.1 Tencent ·························································································39

4.1.2 Alibaba ··························································································40

4.1.3 Baidu ····························································································41

4.1.4 Huawei ··························································································41

4.1.5 Xiaomi ··························································································42

4.1.6 Bytedance ······················································································42

4.1.7 Didi ······························································································43

4.1.8 Meituan Dianping ·············································································44

4.2 The Chinese Niche AI Players and their technologies ······································44

4.2.1 Cloudwalk ······················································································44

4.2.2 DJI ·······························································································45

4.2.3 Horizon Robotics ··············································································45

4.2.4 Inspur ···························································································46

4.2.5 Mobvoi ··························································································46

4.2.6 Nio ·······························································································47

4.2.7 Sogou ···························································································47

4.2.8 UBtech Robotics ··············································································48

4.2.9 Unisound ·······················································································48

4.2.10 Sensetime ·······················································································49

4.2.11 Megvii (Face++) ···············································································49

4.2.12 iFlytek ···························································································50

4.2.13 Rokid ····························································································50

4.2.14 Yitu ······························································································51

4.2.15 Pony.ai ··························································································51

4.2.16 Momenta ························································································52

4.2.17 Cambricon ······················································································53

4.3 Useful Resources ·················································································54

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1 What is AI?

1.1 Definition of AI

This report will not dive too deep in the history, theory or the academics of artificial intelligence (AI)

but will try to give a sound overview of what China is up to in regards of AI and how European small

and medium businesses can benefit from this. Still, in the first chapter, we will give a short introduction

to make sure we are all on the same page. To start with, we need to understand the three core components

that makes AI possible in the first place: computing power, clever algorithms and massive data to run

it all. These three components are all equally needed - and China has them all.

1.1.1 Chips - the motor for AI

The development of ever faster or newer types of chips is a race led by Chinese and international

companies like Baidu, Intel, Qualcomm and AMD among others. There are currently four different

types of chips being used and developed for AI. Intel (USA) and Qualcomm (USA) have, with their

vast experience with CPUs (central processing unit) have shown the possibility of using these chips for

AI. Nivida (USA), AMD (USA) etc. with their graphics chips have shown that their GPUs (graphics

processing unit) are suited as well, whereas Microsoft (USA), Baidu (China), etc. develop FPGAs

(field-programmable gate array) for their AIs. Further, new ASIC (application-specific integrated

circuit) is flexible and economical, but with a longer development cycle.2 They are most suited for

specific applications - such as automated-driving chips used by Horizon Robotics3 (China), or traffic

security video processing for IntelliFusion4 (China) as a customized chip accelerator.

Photo of computer chip. Source: Brian Kostiuk via Unsplash.com

As traditional chips are reaching their fundamental computing performance limits, new types of chips

are being developed. These Neuromorphic Chips5 are an alternative design for computer chips that will

2 The State of AI Venture Capital 2017 Research Report Jointly published by Tencent Research Institute & IT

Juzi 3 https://www.horizon.ai 4 http://www.intellif.com/?_l=en 5 https://www.technologyreview.com/s/526506/neuromorphic-chips/

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enhance artificial intelligence, and tests and trials are carried out all over the world. Back in 2015,

researchers from Zhejiang University and Hangzhou Dianzi University in Hangzhou successfully

managed to develop a neuromorphic chip based on Spiking Neural Networks - a type of information

processing system based on mimicking the principles of biological brains.6

There is no doubt that China has the intention to take the lead in this race to develop new AI chips, but

as Elsa B. Kania, adjunct fellow with the Center for a New American Security's Technology and

National Security Program puts it: "China has been heavily reliant upon the import of the hardware

required for AI, and is deeply dependent on semiconductors and struggles to develop specialized chips

of its own. So far, China has poured a lot of money into that industry without a lot of results."7

For those of you who are interested to learn more about the latest chip development and the current

status in China, Beijing Innovation Center for Future Chips (ICFC) and Tsinghua University have

published an excellent White Paper on this topic. Feel free to read it here:

https://drive.google.com/file/d/1ieDm0bpjVWl5MnSESRs92EcmoSzG5vcm/view

1.1.2 Algorithms - the recipe of AI behaviour

Chips and computing power do need clever algorithms to serve any valuable purpose. The algorithms

determine how to conduct the computing, this being calculation, data processing or automated reasoning

tasks. Back in 2006, Hinton, Simon Osindero, and Yee-Whye Teh published a paper that has been seen

as a breakthrough in the academic and technical areas: A fast learning algorithm for deep belief nets.8

Deep learning, also called neural networks, are the algorithms that allow computation models build-up

of several processing layers that can learn a representation of data with multiple levels of abstraction.

This has given us a breakthrough in many areas of AI, e.g. image recognition and speech recognition.9

6 https://www.eurekalert.org/pub_releases/2015-12/scp-csd122215.php 7 https://www.techrepublic.com/article/how-china-tried-and-failed-to-win-the-ai-race-the-inside-story/ 8 https://www.cs.toronto.edu/~hinton/absps/fastnc.pdf 9 http://pages.cs.wisc.edu/~dyer/cs540/handouts/deep-learning-nature2015.pdf

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A humanoid is learning to run in Google's Deepmind AI 10

A common thing is that these neural networks need training. This can be done in numerous ways, but

we have three fundamentally different ways of training. Supervised learning is a method to train the

network with multiple existing examples. The AI-model gets examples in the form of input data and

gets to know the answers (output data). By this, the model train to recognize new examples that do not

still exist in the data set. Reinforcement learning, on the other hand, works differently. Here the

network is only told the rules but is given a reward if a task is executed in a satisfactory way. The

network is them, by trial and error, trying different solutions and learns what works and not. We may

all have seen Google's Deepmind AI learn to navigate obstacles using reinforcement learning.11 Few

people can watch the movie clip without giggling but looking at the mathematics behind we see there

is hard intelligent work.12 The last is unsupervised learning. This is used if we have a data set without

answers or when we do not ourselves understand the correct answer. This is still not so heavily used

but can be used to gain understanding of how to tackle the data material we have acquired.13

So how does this work in praxis? Here is a good example of supervised learning:

Let's say we have a dataset of tens of thousands of pictures of persons and that we give the computer

the answer to who is female and who is male. Now, let's show a picture to the computer that we have

not yet told what gender it has. When the computers neural network “look” at this picture it senses

everything in the picture equally well. It can be the lightning, the expression of the face, the angle of

the picture etc. But due to the fact that the network is given a huge sample with pictures of females and

males upfront, the network will look for the factors that are unique for the different gender.14 The neural

network, or deep learning if you will, discover structures and patterns that can tell genders apart. This

10 https://www.youtube.com/watch?v=faDKMMwOS2Q 11 https://www.youtube.com/watch?v=faDKMMwOS2Q 12 https://arxiv.org/pdf/1707.02286.pdf 13 P. 19 - Kunstig Intelligens, Per Kristian Bjørkeng, ISBN: 978-82-8211-600-8 14 P. 43 - Kunstig Intelligens, Per Kristian Bjørkeng, ISBN: 978-82-8211-600-8

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is a way more intricate and complex process that how humans look at persons. These structures and

patterns are constantly checked against the large dataset of pictures of persons where we have already

tagged the persons as a female or male.

To read more about the history of neural nets and deep learning, a deep dive in Andrey Kurenkov or

Andrew L. Beam writing will enlighten you.15

1.1.3 Data - the AI food

Although computer power and algorithms are crucial for artificial intelligence, it is empty without data.

To train the algorithms a huge amount of data is needed. Data is key. This is also where China differ

the most from Europe. Due to the strong data security and data protection rules of Europe, European

corporations and companies have fewer data to play with. In China, on the other hand, this is less of a

concern, and data are being extracted from users all over.

“Data is the new oil, so China is the new Saudi Arabia,” is a claim from Kai-Fu Lee, venture capitalist

and author of “AI Superpowers: China, Silicon Valley, and the New World Order.”16 There is no doubt

that this statement resonates well in the industry. China has, with its 1,4 billion people17 and over 828

million internet users18, a source of data that few, if any, country can match. Data is being collected

through apps, internet usage, in the streets with cameras and tracking devices, from the bank and so on.

Chinese consumers have been willing, or forced, to give away their data in exchange with the

convenience of the service given. Often there is no option. We do, however, see a rising concern around

the topic privacy and data protection19, and it will be interesting to see how this evolve. The government

has already cracked down on 14 apps that have been collecting data illegally.20

Important to know is that data collected and used in China has to be stored on a server in China, even

if it is a simple webpage.21

15 http://www.andreykurenkov.com/writing/ai/a-brief-history-of-neural-nets-and-deep-learning/

https://beamandrew.github.io/deeplearning/2017/02/23/deep_learning_101_part1.html 16 https://www.cnbc.com/video/2018/09/24/data-china-tech-trade-war-artificial-intelligence.html 17 http://www.stats.gov.cn/tjsj/ndsj/2018/indexeh.htm 18 https://www.statista.com/statistics/265140/number-of-internet-users-in-china/ 19 https://slate.com/technology/2019/02/china-consumer-data-protection-privacy-surveillance.html 20 http://www.chinanews.com/sh/2019/01-03/8718384.shtml 21 https://medium.com/@Alibaba_Cloud/web-hosting-in-china-what-you-need-to-know-1b050374c61b

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1.1.4 The layers of AI

Source: Own illustration

Hardware, algorithms and data as we already have discussed are the base of all AI. With this AI starts.

A bit simplified, we can interpret this as the first layer: the foundation layer. Still, to make an AI do

something useful for us, we need to add another two layers.

The next layer, the second layer, is the technical layer. This layer refers to certain applied technologies

based on core algorithms including phonetic recognition, natural language processing, computer vision

and many more. Not to be confused with end products as applications, this technical layer is single

building blocks of code utilizing algorithms, data and hardware needed in AI to make something that is

useful for us human. Compared to something more familiar this would be the HTML, CSS or Java in

web development.

The third and last layer is the application layer. This is the layer that utilizes the hardware, algorithms

and data in the first layer and uses the software building blocks in the second layer to develop concrete

applications for practical usage in our daily lives. In the next chapters we will take a closer look at

various applications of AI in China and discuss why China will be number one of applying AI in

multiple cases. But first, let us look at how China has dealt with the development of AI and what China

is planning.

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1.2 Artificial Intelligence in China

1.2.1 Brief history of development of AI in China

Source: Own illustration, https://factordaily.com/china-ai-policy-and-industry/

That China has a plan and that they are following that plan there is little doubt about. Since 2006 China

has had a more or less fix plan towards AI: From the National Medium- and Long-Term Program for

Science and Technology Development (2006-2020)22 to the latest Three-year AI Action Plan23 China

sees AI as a core technology that they want to be the leader at.

We can see this in both the rise in the number of patents and the number of academic papers written.

Whereas in 1997 China produces only 4,26% of the total academic papers, this number has risen to

27,68% in 2017 - ahead of any other country in the world. When it comes to registered patents, China

has pushed down the US to a second place. Japan is a following third. These three countries combined

count for 74% of the worlds issued AI patents.24

22 https://www.itu.int/en/ITU-D/Cybersecurity/Documents/National_Strategies_Repository/China_2006.pdf 23 http://almostism.com/chinese-government-three-year-action-plan-on-artificial-intelligence/ 24 http://www.sppm.tsinghua.edu.cn/eWebEditor/UploadFile/China_AI_development_report_2018.pdf

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China has outdone the U.S. in AI-related patent applications

Source: ATLAS, CB Insights, http://www.stansberrypacific.com/

Trends of the output of highly cited AI papers of the top 10 countries

Source: https://www.nanalyze.com/2019/01/artificial-intelligence-china/

There have been five stages of AI development since 2009, each stage with different priorities.

Generally, China’s AI policy mainly focuses on six categories: “made in China”, innovation-driven

development, IoT, Internet+, big data, and scientific and technological R&D.

1.2.2 Actual size, status of development and main policies

In July 2017, China’s State Council issued "A Next Generation Artificial Intelligence Development

Plan," an ambitious scheme that would see the country as a global leader in AI by 2030. The State

Council predicted that the value of the AI industry in China would reach RMB 150 million (€19 million)

by 2020. Industries impacted by AI was predicted to be RMB 1 trillion (€129 billion) by that same year.

By 2025, the State Council wants AI to be the main driving force behind economic growth and

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development of its industry. By that time, the AI industry will be worth RMB 400 billion (€52 billion)

and industries affected will be worth RMB 5 trillion (€646 billion).25

According to IDC, in a report published in May 2019, China’s AI market had reached $1,76 billion

(€1,57 billion) in 2018. In the report, IDC says that computer vision applications (facial recognition,

image recognition, etc.) had the largest share of the market at $750 million (€669 million). Within that

sub-sector, SenseTime had 23% market share while Megvii had 20,8%.26

The 2018 World AI Industry Development Blue Book, published by the CAICT and Gartner, says that

China has the most evenly distributed financing projects (over industries and applications) when

compared with the US, UK, Canada, France, Germany, and other global leaders.27 According to an

analysis by Chinese media Huxiu, the BAT (Baidu, Alibaba, and Tencent) have invested in 53% of

China’s major AI companies.28

Source: https://www.technologyreview.com/s/612813/the-future-of-chinas-ai-industry-is-in-the-

hands-of-just-three-companies/, Jan 22, 2019

25 https://multimedia.scmp.com/news/china/article/2166148/china-2025-artificial-intelligence/index.html 26 https://kr-asia.com/chinas-ai-market-size-reaches-usd-1-76-billion-in-2018 27 http://www.caict.ac.cn/kxyj/qwfb/bps/201809/P020180918696200669434.pdf 28 https://mp.weixin.qq.com/s/3BcoGMDzp-

oOzvj9mijvrA?fbclid=IwAR1CckzxrXKmRPwYzT7Pg3CqmOFtSqFcC3oSSAX_wDmhxUE3Gc_pbs8dLfU

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1.2.3 Drivers and future outlook

Own illustration. Chinas ambition in the AI Industry.Data from: https://factordaily.com/china-ai-

policy-and-industry/

So, what is driving China towards AI? The government has, with its clear and determined strategy,

contributed to the hype around AI, but we must credit the private sector as well. To start with, much of

the AI-expertise are coming from high ranked Chinese universities. Tsinghua University and the

Chinese Academy of Sciences are generating more AI talent than any other place in the world. Still,

although the quantity is high, China still lacks a huge number of internationally top-ranked AI specialist.

These we do still find in the USA.29

Also, in terms of venture capital investment, China is in the lead, although it has not always been the

case. The 2018 World AI Industry Development Blue Book puts investment into AI from 2013 in China

at $27,7 billion.30

If we look at the total investment in the AI-industry, private, governmental and others, we see that from

2013 to the first quarter of 2018, China received 60% of the total venture capital worldwide and that in

2017 the Chinese AI marked reached RMB23,7 billion. This was an increase of 67% from 2016, and

the market is expected to grow 75% y/y the next years.31

29 http://www.sppm.tsinghua.edu.cn/eWebEditor/UploadFile/China_AI_development_report_2018.pdf 30 http://www.caict.ac.cn/kxyj/qwfb/bps/201809/P020180918696200669434.pdf 31 http://www.sppm.tsinghua.edu.cn/eWebEditor/UploadFile/China_AI_development_report_2018.pdf

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Source: https://www.oecd.org/sti/ieconomy/private-equity-investment-in-artificial-intelligence.pdf

The three top segments are computer vision (34,9%), voice (24,8%) and natural language processing

(21%). More core technologies like hardware and algorithms count for 20%.32 Later in this report, we

will discuss all these segments and try to understand what China is up to in each of them.

State Grid Corporation of China’s main areas of AI research. China AI Development Report 2018,

China Institute for Science and Technology Policy at Tsinghua University

32 http://www.sppm.tsinghua.edu.cn/eWebEditor/UploadFile/China_AI_development_report_2018.pdf

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BOSTON CONSULTING GROUP, Mind the (AI) gap: Leadership makes the difference, December,

2018 by SYLVAIN DURANTON, JÖRG ERLEBACH, and MARC PAULY https://www.bcg.com/de-

de/perspectives/208836

So where do we find the young AI startups? Back in mid-2017, 42,87% of Chinese AI companies

resided in Beijing, the birthplace of China’s internet, with rich human resources and capital resources.

Beijing provides a rich economic and cultural environment for AI enterprises and many new companies

are born and nurtured by eager investors. The remaining companies are distributed widely and deeply

in first-tier cities including Guangzhou and Shanghai. Clearly, the AI boom in China has created certain

scaling effects that we will see the result of in the years to come.33

For the fourth industrial revolution, China is no longer lagging behind trying to catch up the west but

has leapfrogged and are no head-to-head with the US.

33 The State of AI Venture Capital 2017 Research Report Jointly published by Tencent Research Institute & IT

Juzi

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2 AI in Use

2.1 Applications of AI in China

As with many areas of innovation, China’s entrepreneurs aren’t waiting for permission to develop

significant applications for artificial intelligence. Beginning with the most basic (perception), China has

developed strong competencies in all four areas of AI.34

Perception: computer vision, audio recognition, natural language processing,

medical diagnosis

Prediction: finance, marketing, content recommendation

Prescription: route and logistical planning

Integrated solutions: autonomous driving, robotics, smart cities

Source: MIT Technology Review; TechNode; WealthManagement.com; Google Research blog; McKinsey Global

Institute analysis

With its unique mix of data surplus, government support, and pressure to commercialize, China’s

entrepreneurs have focused on more mature and immediately applicable technologies where demand is

high and implementation barriers are low, including vision and speech recognition.

34 Defined by the McKinsey Global Institute

https://www.mckinsey.com/~/media/mckinsey/featured%20insights/China/Artificial%20intelligence%20Implic

ations%20for%20China/MGI-Artificial-intelligence-implications-for-China.ashx

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Source: China AI Development Report 2018, China Institute for Science and Technology Policy at

Tsinghua University

A similar trend can be seen with industrial applications of AI, with Chinese firms concentrating more

on robotics, autonomous driving, drones, big data, and AR/VR.

Source: China AI Development Report 2018, China Institute for Science and Technology Policy at

Tsinghua University. AI+ is defined here as “various vertical applications,” such as medicine, finance,

etc.

2.1.1 Perception

Applications of perception have seen some of the widest variety of use cases and implementations in

China. It’s not only low-hanging fruit but also in line with government priorities of using technology to

meet enforcement goals and encourage “social stability,” i.e. making sure people are doing what they’re

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supposed to be doing. There have also been readily available consumer applications for facial

recognition and natural language processing. China’s medical care system is already stretched thin with

most resources ending up in big hospitals; increased efficiency and access to AI-powered diagnostic

tools could bring higher-quality care to China’s rural hospitals and clinics. For this, let us take a look at

some concrete examples of where AI is used in China.

2.1.1.1 Vision - Government

Police officers in Luoyang, Henan province showing off AR glasses equipped with facial recognition

(Reuters). There’s been no reported cases of these glasses used successfully to catch criminals or stop

crimes.

China has long been the land of a thousand regulations, but not enough effective enforcement. An

overburdened and under-enthusiastic bureaucracy, information silos between cities, provinces, and

ministries, as well as 1,4 billion people has made identifying and catching criminals difficult. However,

with facial recognition, this has become much easier.

In October 2017, police in Wuzhen, the annual host of the World Internet Conference, caught an escaped

criminal travelling through the city.35 Originally used to keep track of tourists and use their face as entry

passes to the various areas of the city, the police quickly showed that they were also useful to help catch

criminals. In April 2018, police in Nanchang, the capital of Jiangxi province, used facial recognition to

catch a man for “economic crimes.” He was identified using cameras installed at security checkpoints

at the venue’s entrance.36

35 https://technode.com/2017/10/26/wuzhen-facial-recognition/ 36 https://www.washingtonpost.com/news/worldviews/wp/2018/04/13/china-crime-facial-recognition-cameras-

catch-suspect-at-concert-with-60000-people/?noredirect=on&utm_term=.724dc40b2dcc

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Originally launched in 2005, Skynet was originally envisioned as a comprehensive surveillance network.

In 2018, its successor, Sharp Eyes, was written into some of the first documents released by the Chinese

Communist Party (CCP) Central Committee in February37 and is estimated to be able to identify citizens

within 3 seconds.38 By 2020, China is expected to have 626 million surveillance cameras operational.39

Facial recognition is also being trialled in airports40 to help with the check-in process and also identify

criminals and people blacklisted from travel, including those with previously dangerous behaviour on

aircraft and whose social credit score is too low.41 Pictures and fingerprints are now the norms at border

control checkpoints into and out of China. If you’ve travelled here recently, your biometric information

is now probably in a database somewhere.

Drowning is surprisingly common in China’s countryside, so to prevent it, one city installed facial

recognition cameras near a popular river. When it detects people getting too close to the riverbank, it

will issue a warning through loudspeakers. If it finds matches a face with one from a database of 110

000 students in the area, it will send emergency messages to parents and teachers.42

Municipal governments around the country are also using facial recognition to stop jaywalking. A huge

problem especially in rush hour, many pedestrians choose to ignore traffic signals, sometimes causing

a tide of people all crossing when they shouldn’t cause even more traffic jams. However, in China,

public shaming is a powerful tool. Cameras will identify jaywalkers and then post their photo on big

screens for everyone to see. Some municipalities are even looking into automatic fines using WeChat

and Alipay, two of China’s most popular and ubiquitous payment methods.43

Beginning in 2018, the government has gotten stricter with mobile game makers, especially when it

comes to preventing minors from getting addicted to popular games. In order to ensure that minors

aren’t circumventing restrictions, Tencent and Netease, China’s two largest mobile game publishers,

have implemented facial recognition on their most popular titles. Connected to a local police database,

the games will scan users face to see if they are who they say they are (e.g., not a child using their

parents’ account) and whether they can keep playing.44 The good news for the games industry, though,

is that minors make up a relatively small percentage of total users.45

37 https://www.hongkongfp.com/2018/04/08/sharp-eyes-smartphones-tv-sets-watching-chinese-citizens/ 38 https://www.scmp.com/news/china/society/article/2115094/china-build-giant-facial-recognition-database-

identify-any 39 https://technode.com/2017/11/22/china-to-have-626-million-surveillance-cameras-within-3-years/ 40 https://www.pressherald.com/2018/10/16/fully-automated-airport-check-ins-using-facial-recognition-arrive-

in-china/ 41 https://www.independent.co.uk/news/world/asia/china-social-credit-system-flight-booking-blacklisted-

beijing-points-a8646316.html 42 https://www.sixthtone.com/ht_news/1002850/anti-drowning-facial-recognition-cameras-warn-kids-not-to-

swim 43 https://www.independent.co.uk/news/world/asia/china-police-facial-recognition-technology-ai-jaywalkers-

fines-text-wechat-weibo-cctv-a8279531.html 44 https://www.scmp.com/tech/big-tech/article/2166447/tencent-employs-facial-recognition-detect-minors-top-

grossing-mobile 45 https://technode.com/2019/02/15/chinas-love-hate-relationship-with-gaming-wont-stop-it-from-dominating-

the-industry/

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2.1.1.2 Vision - Consumers

Alipay’s Smile to Pay feature at KFC

Even before Apple revealed their Face ID biometric security system for their devices, KFC was using

customer’s faces to make ordering that much faster. Using Alipay’s facial recognition technology

including a liveness test, customers just need to look at the camera and enter their phone number (to

prevent fraud) and the payment will happen automatically. As with all current facial recognition

technology, the system can recognize users even with wigs and heavy makeup on.46 The Smile to Pay

system has recently been rolled out to convenience stores around the country.47

After Apple revealed Face ID with their iPhone X line of phones, Chinese smartphone makers rushed

to implement a similar biometric solution. Now all major smartphone makers in China (Xiaomi, Huawei,

Oppo, Vivo, OnePlus) all offer phones with this feature.

In China, mobile payments are ubiquitous. Currently most major cities accept some form of mobile

payment, WeChat, Alipay, and even Apple Pay. However, to make it more convenient for travellers,

Shenzhen is experimenting with 5G data technology and facial recognition. Where passengers can

swipe their phones, users who wish to use facial recognition are prompted to present their faces instead.

Currently, it is only being used in one station in the city and plans for further rollout aren’t clear.48

46 https://www.theverge.com/2017/9/4/16251304/kfc-china-alipay-ant-financial-smile-to-pay 47 https://twitter.com/mbrennanchina/status/1104532804979867648 48 https://www.theverge.com/2019/3/13/18263923/chinese-subway-facial-recognition-fares-pay-ai

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In Dec 2018, Xiaozhu, an Airbnb-like home sharing platform introduced smart locks that would feature

facial recognition.49 The Beijing government plans to implement something similar for their public and

affordable housing programs.50

A last vivid example is the one college professor using facial recognition and drones to keep his eye on

students during class51 while a company in Guizhou is using facial recognition and GPS chips to make

sure that students are coming to school.52

2.1.1.3 Voice, natural language processing (NLP), and machine translation

Voice recognition, unlike computer vision and facial recognition, has fewer actual applications in China,

perhaps because sight is such a powerful sense for humans while our hearing isn’t so great. The two

major use cases for voice recognition both involve natural language processing (specifically speech-to-

text (STT), text-to-speech (TTS)): smart assistants, smart speakers, and machine translation.

How NLP is used to interact with voice-powered hardware and software.

Source: Image via Lekta.ai53

In China, almost all major players are producing their own smart speakers, some with greater impact

than others. Tencent, for example, seemed to be marketing two separate speakers and then decided to

kill one line to focus on the other. Xiaomi, Alibaba, JD.com, and Baidu all have their own lines of smart

speakers coupled with their own smart Alexa-like smart assistants. According to research from Canalys,

Alibaba is leading the pack in terms of total shipments.

49 https://www.scmp.com/tech/start-ups/article/2179495/chinese-home-sharing-site-xiaozhu-roll-out-facial-

recognition-enabled 50 https://www.slashgear.com/china-will-use-facial-recognition-smart-locks-to-monitor-120000-tenants-

02559729/ 51 https://www.sixthtone.com/news/1002354/facial-recognition-drone-monitors-chinese-college-class 52 http://www.sixthtone.com/news/1003388/company-says-smart-uniforms-wont-track-students 53 https://lekta.ai/blog/talking-to-machines-more-naturally-than-ever-before-voice-interface-for-lekta-nlp/

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Canalys estimate, Smart Speaker Analysis, May 2018

Source: CBINSIGHTS: https://www.cbinsights.com/research/china-voice-assistants-smart-speakers-ai/

Companies like iFlytek, Mobvoi, and Unisound also provide white-label hardware and software to a

variety of companies, including telecommunications and home appliance companies.

Part of voice recognition is also machine translation. While, strictly speaking, machine translation

doesn’t require voice, in China many of the more compelling applications of machine translation

involve live simultaneous interpretation. Both Sogou and iFlytek offer free solutions for conferences

and live events. Taking the speaker’s speech, the companies use STT to feed the words into their

translation algorithms and is then outputted onto LED screens, sometimes to hilarious effect.54

2.1.1.4 Medical diagnosis

Ever since Virginia Apgar introduced her synonymous formula for determining overall well-being in

195255 , physicians have understood the power of algorithms when it comes to diagnosis. However,

with AI, the power of algorithmic diagnostics is coming in full force.

In 2017, Tencent, named as the national champion for medicine,56 launched the Miying platform that

uses medical imaging and AI to help doctors screen for different types of cancers. In Dec 2018, they

announced their Medical AI Lab that will focus on Parkinson’s diagnosis.57

54 https://www.scmp.com/tech/innovation/article/2141940/ai-powered-translation-still-needs-work-after-errors-

mar-debut-boao 55 https://americanpregnancy.org/labor-and-birth/apgar-test/ 56 https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-

team 57 https://medium.com/syncedreview/tencents-new-medical-ai-lab-targets-parkinson-s-715c5a1b68f2

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In August 2018, Chinese researchers the from Chinese Academy of Sciences and PLA General Hospital

in Beijing were able to create an algorithm to determine whether patients could recover from a

vegetative state with 88% accuracy.58

In February 2019, researchers from China and the US published a joint paper detailing how they were

able to train an algorithm to identify conditions with 90% to 95% accuracy.59 Yitu Healthcare, a

subdivision of AI giant Yitu listed below, announced that the researchers were using their NLP

technology to diagnose paediatric diseases.60 The system uses medical history, vital signs, and physical

examination data to create its diagnosis.

2.1.2 Prediction

2.1.2.1 Finance and insurance

One of the earliest adopters of AI, fintech (financial tech) companies in China rely on AI to predict

borrower behaviour and mitigate risk. The largest company to leverage AI for this purpose is Ant

Financial. Created by Alibaba in 2014 as the operator of Alipay, the online payment method that helped

create Alibaba’s e-commerce success. The company now provides a variety of services including

lending, instalment plans, and insurance. Mostly targeting those without access to traditional sources of

credit (difficult to find in China where banks are very risk-averse when it comes to retail lending), Ant

Financial has used AI to create credit profiles of its users with data collected from social media,

purchase history, friends’ credit scores, assets, and contractual obligations. 61 The company also

provides insurance and uses computer vision to process claims. The Ant Financial credit score (called

Sesame Credit) can also be used to get cheaper and, in some cases, deposit free services.

Many of China’s other smaller lending companies use AI for a similar purpose: with a very short history

of traditional credit, any company that does want to get into the lending game must create their own

technology to understand and predict user behaviour to ensure maximum repayment rate. Notable

companies include Lufax, 360 Finance, Dianrong, Lexin Fintech, and Pintec.

In 2019, Tencent’s WeChat began testing their own credit system in Beijing, Shanghai, Guangzhou,

and Shenzhen.62

2.1.2.2 Marketing and advertising

Another area of first adopters, marketers and advertisers continually find ways to integrate the latest

technologies with many marketers claiming that AI has had a very positive impact on their digital

58 https://qz.com/1384725/an-ai-algorithm-in-china-is-learning-to-detect-whether-patients-will-wake-from-a-

coma/ 59 https://qz.com/1548524/china-has-produced-another-study-showing-the-potential-of-ai-in-medical-diagnosis/ 60 https://www.computerweekly.com/news/252457694/Chinese-AI-startup-claims-breakthrough-in-pediatric-

diagnosis 61 https://www.technologyreview.com/s/608103/ant-financial-chinas-giant-of-mobile-payments-is-rethinking-

finance-with-ai/ 62 https://technode.com/2019/01/11/wechat-credit-score-sesame-credit/

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marketing initiatives.63 AI is used at every step of marketing, including user insights, placement and

targeting, and retargeting.

Advertisers spend the most on AI-powered marketing mobile devices with fast-moving consumer goods,

financial services, education and entertainment taking up much of the projected growth into the second

half of 2018.

Souce: iResearch report http://www.iresearchchina.com/Upload/201809/20180913115843_5684.pdf

A survey by Dentsu Aegis Network showed that AI in China is used most for automation with insight

development and CRM tools tying for 2nd place.

Source: https://www.mumbrella.asia/2018/10/86-of-chinese-marketers-believe-ai-will-impact-their-

industry-says-dentsu-aegis-network-report

In November 2018, Tencent’s senior product director of Smart Retail, Yinyin Gao, explained how

artificial intelligence is enabling new forms of connectivity and commerce for brands, marketers,

retailers and consumers. With 1,06 billion users on its platforms, the impact of AI could be extensive.64

63 http://www.iresearchchina.com/Upload/201809/20180913115843_5684.pdf 64 https://www.mobvista.com/en/press/ai-transforming-mobile-marketing-2/

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Alibaba is using AI to predict user consumption behaviour. In Nov 2017, the company showed off their

FashionAI that leverages users previous in-store behaviour (i.e., trying on clothes) to recommend

clothing items.65

Shanghai-based startup Luxsens uses AI to determine the best price for luxury goods across 19 countries

and 500 suppliers.66

2.1.2.3 Content and entertainment

One of China’s largest content and entertainment companies has based their entire business model on

understanding user-generated content and user preferences to match content with the right audience.

Started as Jinri Toutiao (“today’s headlines” in English, commonly referred to as Toutiao) in 2012, the

company, now called Bytedance, created engagement with content as seen on many social networks,

but without the need for friends.67

After the success of Toutiao, Bytedance launched Douyin in 2017. Very similar to Musical.ly, Douyin

is an endless feed of 15 second user generated content (UGC) videos. As with Toutiao, in order to match

user preference with the right content, Bytedance built powerful algorithms to understand what users

were uploading. In 2019, the company launched a content-powered social network called Duoshan.

ByteDance also operates other video platforms (Watermelon Video and Volcano Video) in China as

well as globally (TikTok). They’ve brought their content aggregation to the world via News Republic,

Helo (in India), and TopBuzz.

Bytedance’s major rival in the content and entertainment space, Tencent, launched Qutoutiao (literally

“interesting headlines”) in 2016 and went public in 2018.68

Baidu-backed iQiyi has been working on AI solutions since at least 2017 when founder and CEO

announced the formation of an AI lab.69 With a similar solution to Bytedance, iQiyi has developed

natural language processing (NLP) and pattern recognition algorithms to “tag” content, making it easier

to serve relevant content and advertisements.

2.1.3 Prescription

2.1.3.1 Route planning

Two of China’s top O2O (online to offline) companies rely heavily on optimized routing and dispatch.

Didi for their fleet of drivers, taxi and private, as well as Meituan for their huge numbers of food delivery

people.

65 https://www.technologyreview.com/s/609452/alibabas-ai-fashion-consultant-helps-achieve-record-setting-

sales/ 66 https://jingdaily.com/six-ways-ai-will-revolutionize-chinas-luxury-market/ 67 https://blog.ycombinator.com/the-hidden-forces-behind-toutiao-chinas-content-king/ 68 https://techcrunch.com/2018/08/19/tencent-backed-news-aggregation-app-qutoutiao-files-for-u-s-public-

offering/ 69 https://medium.com/@actallchinatech/iqiyi-is-developing-ai-technology-to-add-to-its-video-streaming-

service-4cc9f465536d

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Offline behaviour is especially tricky to understand and create models on as traffic conditions, weather

conditions, individual habits, and group dynamics all change conditions on the road. Both companies

have done extensive R&D work in ETA, important for the users to predict how long it will take as well

as for the platform to understand where which drivers will be and when.70

For route planning (how a driver gets from A to B), Didi has developed sophisticated algorithms that

not only asses the shortest path, but also the shortest travel times.71

Meituan uses their “Super Brain” to effectively assign drivers to orders, estimate delivery times, give

drivers the fastest routes, and determine network load.72

Source: Meituan’s “Super Brain” (https://medium.com/@actallchinatech/iqiyi-is-developing-ai-

technology-to-add-to-its-video-streaming-service-4cc9f465536d)

2.1.4 Integrated solutions

2.1.4.1 Education

China, as with Asian cultures, puts a heavy emphasis on education. Not only children but also adults

continually pursue ways to improve. Whether its English, computer science, or other areas of

competency, the Chinese market is absolutely huge. The digital English education market alone is

expected to reach $1,4 billion (€1,25 billion) by 2022.73

Edtech companies like VIPKid, CCTalk, and Liulishuo have been at the forefront of delivering

education services to customers around the country via the internet. Chinese edtech companies have

earned more than $9 billion (€8 billion) since 2014. The top 5 companies, each worth over $1 billion

70 https://www.youtube.com/watch?time_continue=7&v=KruV6_j8mzM 71https://outreach.didichuxing.com/tutorial/kdd2018/static/AI%20in%20Transportation_KDD2018_Tutorial_fin

al.pdf 72 https://medium.com/syncedreview/meituan-drives-instant-food-delivery-with-ai-super-brain-be77074792fd 73 https://markets.businessinsider.com/news/stocks/digital-english-market-in-china-surges-to-1-4-billion-by-

2022-1002359286

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(€891 million), took up almost 20% of those revenues.74 Now, they’re looking at AI to improve their

services. VIPKid uses AI to provide personalized classes and homework to keep students engaged.

According to VP of Technology Zhang Yanjing, “Interactivity and involvement are crucial in online

education. We developed a complicated algorithm to analyse students’ eyes and how they move. And

we train the model through deep learning. Each student has different ways to express feelings, so the

feedback could be very different.”75

Liulishuo, on the other hand, uses AI to create virtual, interactive educators.76 iTutorGroup is using AI

to supplement real teachers by letting the AI be the subject matter expert while the human teacher

provides the interaction and human touch.77 AI-powered online education market reached $568

million (€506 million) in 2017 and is expected to surpass $26 billion (€23,2 billion) in 2022, according

to an iResearch report.78

2.1.4.2 Autonomous driving

According to McKinsey, China could become the largest market for autonomous vehicles, making up

66% of all travel and generating revenue up to $1,1 trillion (€981 billion) by 2040.79

Source: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/how-china-will-

help-fuel-the-revolution-in-autonomous-vehicles

74 https://www.thetechedvocate.org/edtech-innovations-in-china/ 75 https://news.elearninginside.com/chinese-edtech-has-no-reluctance-with-ai/_ 76 http://fortune.com/2018/11/29/whos-teaching-who-ai-enabled-learning-is-booming-in-china/ 77 https://medium.com/accelerated/big-data-ai-the-future-of-online-teachers-key-takeaways-from-the-get-china-

conference-360b1fb0ebba 78 http://www.iresearchchina.com/content/details8_45510.html 79 https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/how-china-will-help-fuel-the-

revolution-in-autonomous-vehicles

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For city planners and managers, this could mean decreased road congestion as cars can be more easily

shared, lowering the total number needed. While initial adoption is a concern, especially with China’s

drivers’ and pedestrians’ penchant for ignoring road safety expectations, 66% of all traffic by AVs will

mean that accidents and other human errors will be greatly reduced.

McKinsey’s research suggests that mass adoption of autonomous vehicles could start as early as 2027.80

By 2020, half of all new cars on China’s roads are expected to be autonomous.81

Source: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/how-china-will-

help-fuel-the-revolution-in-autonomous-vehicles

According to research from KPMG published in Feb 2019, China ranks 20th in terms of AV

development, with the Netherlands at number one and Singapore at number two.82

In 2017, the national government named Baidu, Alibaba, and Tencent as part of the “national AI

team”.83 In the announcement, Baidu was appointed to lead autonomous driving. With their Apollo

program84, an open platform “Android for autonomous driving,” Baidu provides solutions for every

level of autonomous driving for an extremely wide range of partners. In China, they have been working

primarily with Ford85 and Volvo.86

80 https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/how-china-will-help-fuel-the-

revolution-in-autonomous-vehicles 81 https://technode.com/2019/02/07/china-av-roadmap/ 82 https://home.kpmg/xx/en/home/insights/2019/02/2019-autonomous-vehicles-readiness-index.html 83 https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-

team 84 http://apollo.auto/ 85 https://edition.cnn.com/2018/10/31/tech/baidu-ford-cars/index.html 86 https://techcrunch.com/2018/11/01/baidu-volvo-ford-autonomous-driving/

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In Sep 2018, the Beijing Environmental Equipment Company launched seven autonomous driving

vehicles for urban environment cleaning based on the Apollo project.87 In Jan 2019, the search and AI

giant announced the latest version of Apollo the 3.5, that includes support for automated taxis and

delivery robots.88

Other significant players in autonomous driving include Pony.ai and Didi, both listed in the “Major

Players’’ sections. By Jan 2019, the Chinese government has issued 101 license plates to 32 companies

across 14 cities.89

2.1.4.3 Smart hardware and smart home

The body and the home are the next frontiers for many consumer hardware companies. And it’s more

than just smart speakers. According to a ResearchAndMarkets.com report, household penetration in

China for smart home devices was 8% in 2018. In Feb 2019, Statista predicted that smart home revenue

in China would reach $30 trillion (€26,7 trillion) by 2023.

Source: https://www.statista.com/outlook/279/117/smart-home/china

Typical products in China for the smart home include speakers, locks, washing machines, air

conditioners, cleaning “robots,” water filters, CCTV cameras, and various connectivity devices.

Xiaomi, one of China’s most popular phone makers and the Ikea of consumer electronics90, has gone

all in on AIoT (AI powered IoT) for the home. In November 2018, they teamed up with the real Ikea to

87 https://technode.com/2018/09/28/baidu-autonomous-driving/ 88 https://www.greencarcongress.com/2019/01/20190115-baidu.html 89 http://www.chinadaily.com.cn/a/201901/15/WS5c3d2bb0a3106c65c34e46e2.html 90 https://technode.com/2018/03/09/xiaomi-everything-store/

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bring more smart devices into the home.91 In January 2019, they announced a $1,5 billion (€1,34 billion)

investment over 5 years into AI and smart devices.92

Huawei and its sub-brand, Honor, has an entire line of smart home products.93 Their latest home routers

come equipped with a special band to service only smart devices in the home.94

2.1.4.4 Robotics

Much like Japan, China loves robots. UBTECH, one of the more famous robotics startups, showed off

their toy robots in 2016 during the CCTV Spring Festival Gala, one of the most watched TV programs

in China every year.95 Since then consumer-facing applications of robots has expanded out from just

toys into customer-service robots for public spaces, including hotels and convention venues, home-

service robots, and robots for food and beverage service.

Source: Left: Cruzr, UBTECH’s customer service robot https://ubtrobot.com/pages/cruzr

Right: Walker, UBTECH’s home service robot https://ubtrobot.com/pages/walker

91 https://radiichina.com/ikea-teams-up-with-xiaomi-to-corner-iot-smart-devices-market/ 92 https://www.bloomberg.com/news/articles/2019-01-11/china-s-xiaomi-places-a-1-5-billion-bet-on-ai-and-

smart-devices 93 https://consumer.huawei.com/en/smart-home/ 94 https://consumer.huawei.com/en/smart-home/hilink/about-huaweihilink/ 95 https://www.youtube.com/watch?v=8IQFX2BjK9s

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Ratio’s Swedish robot arm pours coffee at CNBC’s East Tech West conference in Guangzhou. (Image

credit: Bailey Hu/TechNode) https://technode.com/2019/02/27/robots-food-service-industry/

As part of China’s “Made in 2025” the number of industrial robots operating the country could expand

to 1,8 million units by 2025. That’s 10 times increase from current levels.96 In 2017, China installed the

more industrial robots than any other country.97

Source: https://multimedia.scmp.com/news/china/article/2164290/china-2025-robotics/index.html

96 https://www.scmp.com/economy/china-economy/article/2164103/made-china-2025-peek-robot-revolution-

under-way-hub-worlds 97 https://multimedia.scmp.com/news/china/article/2164290/china-2025-robotics/index.html

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E-commerce and logistics companies like Alibaba and JD.com are already using robots to help in

sorting warehouses.98 Both JD.com and Meituan are experimenting with automated delivery robots.99,

100 JD.com is also exploring the use of drones to deliver parcels to more remote regions.101

2.1.4.5 Smart Cities

Bringing almost every application of artificial intelligence, as well as other emerging technologies such

as blockchain, smart cities are envisioned as the next step in urban planning and city management. Built

to improve liveability and sustainability, smart cities are seen by many governments as a necessary next

step. And, in China, as with many areas, they’re moving ahead with full speed.

A report by MarketsandMarkets puts the market for smart city solution in China to be worth $59,9

billion (€53,4 billion) by 2023.102

Since the concept’s inclusion in the 12th Five Year Plan in 2010 and their first pilot in 2012, China has

gone on to create 500 pilot projects around the country, making up half of the global total and leading

in the total number of pilots. China’s president Xi Jinping said at the 19th Party Congress in 2017 that

smart cities were part of “deep integration of the internet, big data and artificial intelligence with the

real economy.” In order to speed up the development of the entire solution, the government has

designated certain cities to lead in certain areas of smart city development.

Yinchuan

As early as 2015, the city of Yinchuan, in western China’s Ningxia province, cooperated with ZTE to

install smart waste bins, a smart health centre, and a smart water purification system.103

Hangzhou

Partnering with local champion Alibaba, Hangzhou has installed traffic cameras and road sensors to

collect traffic data in real-time. Combining this data, Hangzhou’s “City Brain” can regulate traffic

throughout the city by controlling traffic lights at over 100 intersections.104

Shanghai

With “Citizen Cloud,” Shanghai is focusing on creating parking easier for the city’s residents. Building

on top of the city’s big data exchange, Huawei has implemented a smart parking solution. Low power

IoT chips are embedded in parking spots, transmitting occupancy rates to operators and drivers.105

98 https://www.youtube.com/watch?v=ShMJoRYDgPM 99 https://asia.nikkei.com/Business/China-tech/JD.com-rolls-out-fleet-of-AI-equipped-delivery-robots2 100 http://www.thatsmags.com/china/post/26505/meituan-takes-another-step-towards-making-autonomous-

delivery-robots-a-reality 101 https://technode.com/2018/11/20/jd-logistics-drone/ 102 https://www.marketsandmarkets.com/ResearchInsight/china-smart-city-market.asp 103 https://www.amsterdameconomicboard.com/nieuws/visiting-the-smart-city-of-yinchuan-china 104 https://govinsider.asia/security/five-chinese-smart-cities-leading-way/ 105 https://www.huawei.com/minisite/iot/en/smart-parking.html

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Guangzhou

Panoramic view over Guangzhou. GNU Free Documentation License.

Source: https://commons.wikimedia.org/wiki/File:PanoramaofCanton.jpg

Home to Tencent, the appointed national champion for medical AI applications, Guangzhou has created

a centralized database of 8 million electronic health records of Guangzhou residents 106. Further, they

have, with help from Plug and Play and Cisco, signed a strategic cooperation agreement on the Cisco

Smart City project in Panyu district.107

Hong Kong

The special administrative region of Hong Kong is taking a more comprehensive approach to smart

cities. Plans include smart mobility, living, environment, people, government, and economy.108

106 https://qz.com/1548524/china-has-produced-another-study-showing-the-potential-of-ai-in-medical-diagnosis/ 107 https://medium.com/@PlugandPlay/cisco-partners-with-plug-and-play-to-develop-a-smart-city-in-

guangzhou-fa1561fa41f0 108 https://www.smartcity.gov.hk/develop_plans/mobility/

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3 AI in China and the possibilities for Europe

3.1 Opportunities and challenges for European companies

So, now what? It may seem like China has become the huge locomotive that sets its own pace, and sure

it would be an understatement to say that China is not aiming to dominate the AI world in a few years.

Still, China is in need of international support and exchange, and companies in the field all over the

world could benefit from China's massive AI expansion.

Where Chinese enterprises, companies and startups brilliantly perform is in the usage and

implementation of AI. China has always been strong in the adaptation of technologies and with AI this

is no difference. We see plenty of companies use AI for various applications. This can be due to easy

access to investor money, a strong push from government, willingness to take extreme business risk etc.

Where we do, however, see that China tends to be weaker is in the development of core technologies

such as hardware and algorithms. Further, China lacks top-tier talent and has a significant gap with

developed countries, especially the US in this regard.109

For European small and medium enterprises this opens up some possibilities.

3.1.1 Knowledge: Human resources and skills transfer

First and most obvious is human skill transfer. We can imagine everything from European HR

companies, head-hunters and alike to benefit from China's AI-boom. China is in need of qualified

people. This is indeed one thing that sets it apart from the west – its ambitions are high, but the needed

skills and resources are not fully there. Tencent and ItJuzi express in their joint report that “[the] human

resource shortage may be its most serious obstacle to catching up to the U.S. [in terms of AI]”.110

Opportunities: Cross border HR agency, European AI-head-hunter for Chinese companies,

arrangements of work-fairs in EU for Chinese companies

3.1.2 Technology: transfer and development

Although China has an impressive momentum and already a legacy within the AI industry, they are

lagging behind the leader in AI - the USA - in many ways. As the European Commission contributions

puts it in its “EU-China – A strategic outlook” memo to the European Council in March 2019: “Even

recognized domestic AI giants such as Baidu, Alibaba and Tencent (BAT) don’t have an impressive

performance in AI talent, papers and patents, while their U.S. competitors like IBM, Microsoft and

Google lead AI companies worldwide in all indicators.”111 Although Europe also lagging behind the

USA, and China as well, there would be room for European technology development as a service, sales

of licenses, patent exchanges etc. with many Chinese companies and organization that lack the needed

technology, software solution, chip or what they currently are in need of.

109 http://www.sppm.tsinghua.edu.cn/eWebEditor/UploadFile/China_AI_development_report_2018.pdf 110 The State of AI Venture Capital 2017 Research Report Jointly published by Tencent Research Institute &

ITJuzi 111 European Commission contribution to the European Council, EU-China – A strategic outlook, 12 March

2019

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Opportunities: Software development services for Chinse companies, outsourcing of software

development to Chinese partners, sale of software licenses, sale of patents, patent exchanges

3.1.3 Applications: development and distribution

European SMEs, especially within the software industry, do have possibilities to fill narrow niches with

specialised AI-software to solve unique tasks. There is, though, due to the ease of software copying,

always a risk entering a super competitive market as China with such software. Finding good reliable

partners will be key.

Opportunities: sales of AI-software

3.1.4 Data: Oversees data sets, training and data acquisition

As we know, data is a core element in the development of usable AI application, and although China

has a bunch of data, this data is typically Chinese. China has the intention of serving the whole world

with its technology and due to such, overseas data is also needed. This can be anything from pictures

of blonde faces to train the face recognition AI, film snippets of European traffic to train for autonomous

driving or just shopping habits of European online shoppers.

One concrete and a relevant case for many foreign students in China is speech training and translation

to further build the data set of one of Europa’s many languages. This could then, in turn, be used to

make any new Chinese tech adaptable on the European market. Do not be surprised if a Dutch student

has trained the speech-AI for the new Huawei smartphone launched for the Dutch market or if an

engineering student from Barcelona has clicked through hours of excel documents with Spanish to

English translation on his spear time just to make the Baidu translation-app work a tad better.

Opportunities: sale of data sets, collection of specific data for Chinese companies, verification of data

3.1.5 Hardware: Chips and sensors

As more and more applications will rely on AI in the future, we will see more and more tailormade

hardware as well. For European SMEs this would mean possibilities to serve a fast grooving business

with tailored hardware in the form of chips, sensors, mechanics and more. There are many European

specialised sensor companies that could benefit from developing niche products optimised for AI

applications.

Opportunities: sales of components, sales of sensors, sale of chips

3.1.6 Research: Exchange and joint ventures

A more abstract opportunity opens in the field of research. We do see that, although Chinese universities

are betting big on AI and more academic subjects are offered, more research is done, and more titles

are given112, that China still catching up with US113. There is therefore to believe that there is an upside

within the academics and that this could open possibilities for European universities, organisations, and

private and governmental research institutes for business with China.

112 https://www.studyinternational.com/news/china-universities-big-data-ai/ 113 https://www.wired.com/story/china-catching-up-us-in-ai-research/

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Opportunities: exchange programs, arrangement of excursions, university cooperation

3.2 Practical advice

3.2.1 Legal advice: IPR protection

When entering the Chinese market, international companies should utilise trademarks and patents to

safeguard their intellectual property. EU SMEs are encouraged to consult intellectual property experts

that have experience with China and engage in proactive enforcement of their intellectual property

rights.

For further guidance, the China IPR SME Helpdesk can provide you with free of charge, confidential,

business-focused IPR advice.

Reach their experts at: http://www.china-iprhelpdesk.eu/

3.2.2 Standard and Conformity: Barriers to entry

Although opportunities may look vast, China tends to preserve is the domestic market for its own

champions by shielding them from any international competition. This they can do through various

means like selective market openings, licensing and other investment restrictions or by subsidies both

state-own and private sector companies to gain market and at the same time restrict foreign companies

with hard-to-apply localisation requirements or to limit any of foreign business access to governmental-

funded programs. We also often see that EU operators have to submit to burdensome requirements as a

precondition to access the Chinese market for instance by forcing in place joint venture programs with

local companies which have to gain access to key technologies and methods.114

Before engaging in any business operations with local partners, EU SMEs are recommended to perform

a thorough due-diligence on their Chinese counterparts.

You can download Knowing Your Partners in China - our guide on how to perform basic due diligence

- at the following link: http://eusmecentre.org.cn/report/knowing-your-partners-china

3.3 Conclusions and recommendations

That China as ambitions within the AI industry is clear, and that there are opportunities for European

SMEs within this industry in China is obvious. Still, there are multiple issues to overcome and a need

to take the risk to make any success out of this.

The EU SME Centre advice to be careful and patient when starting to deal with the Chinese market or

when setting up any venture with Chinese firms or persons. First and foremost, patents, rights and

contracts must be secured to avoid fraud, copying or theft. For this, the China IPR SME Helpdesk is

the place to start. Further, gaining a sound overview of the market and the players will help to gain an

understanding if and how the access to the Chinese market could be designed. For this, the advisors at

the EU SME Centre will be the first contact.

114 European Commission contribution to the European Council, EU-China – A strategic outlook, 12 March

2019

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Being an SME often means limited resources. This means that a clear opportunity needs to be in sight

before investing too much time and money. The EU SME Centre advice to develop a clear strategy of

the goals of entering the Chinese market or venturing with Chinese firms or persons. Spend some time

getting the needed information before deciding if and how to enter. Further, because of the limited

resources, understand what niche can be filled. Highly specialized products or services are more likely

to succeed than generalized products or services. This due to the effort needed to reach the critical mass

for a generalized product of service, numbers of competitors and the policies from China that such

generalized product or service most likely has to be developed and distributed by a Chinese firm.

Dealing with China and Chinese firms and persons is different than in Europa. There often is

asymmetrical information exchange where the Chinese part easily can read English information but

where the counterpart finds it difficult to gain the needed information and if so, it is often in Chinese.

This, and, for the Europeans, unknown business etiquette, can cause much delay and confusion.

Nevertheless, there is indeed a huge upside within the AI-industry in China and gaining a foothold could

be mighty profitable. Good luck!

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4 Annex

4.1 The Major Chinese AI Players and their technologies

4.1.1 Tencent

Founded: 1998

Key executives: Pony Ma (co-founder, CEO, and Chairman), Martin Lau (President), Allen

Zhang (Head of WeChat)

HQ: Shenzhen

Market Cap: 407.958B (05 Mar 2019)

AI sectors: Cloud computing, big data, machine translation, IoT, mapping, autonomous

driving (via Didi), robotics (via UBTECH), education, medicine, financial

services

Description: Unlike many other Chinese companies who prefer to build internally or buy

controlling shares, Tencent has expanded via minority investments (usually no

more than 20%) into partner companies and this is no less true for AI. Founded

as a social and content company, Tencent is best known internationally for their

messaging and “super-app” WeChat. As with most tech companies in China,

AI is a strategic priority and they are well placed to deliver in a wide variety

through partner companies as well as on their own platforms by leveraging the

mountains of user data they have accumulated through products like WeChat,

QQ, Tencent Music Entertainment Group, and China Literature. They have an

AI Lab 115 that focuses on computer vision, speech recognition, natural

language processing, and machine learning. In 2018, they announced an open

AI platform116 to allow enterprises access to their AI and machine learning

technologies. However, Zhang Tong, head of their AI lab, stepped down in

January 2019.117 In 2017, the national government named Baidu, Alibaba, and

Tencent as part of the “national AI team”.118 In the announcement, Tencent was

appointed to lead computer vision for medical diagnosis.

115 https://ai.tencent.com/ailab/en/about 116 https://www.scmp.com/tech/big-tech/article/2164765/tencent-releases-open-platform-help-drive-ai-projects-

other-companies 117 https://techcrunch.com/2019/01/03/tencent-ai-lab-loses-key-executive/ 118 https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-

team

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4.1.2 Alibaba

Founded: 1999

Key executives: Jack Ma (co-founder, executive chairman), Joseph Tsai (vice-president)

HQ: Hangzhou

Market Cap: 485.386B (05 March 2019)

AI sectors: Basic research, chips, cloud computing, sensors, IoT, voice recognition,

computer vision (via SenseTime and Yitu), mapping (via AutoNavi), robotics,

autonomous driving (via Didi and XPeng), education, new retail, finance (via

Ant Financial), logistics, hardware

Description: Founded by ex-teachers in Hangzhou, Alibaba began as a way two-sided

network connecting overseas buyers with Chinese manufacturers. It quickly

grew into domestic e-commerce through its Taobao platform. It managed to

become the market leader by providing something no one else was: trust via an

escrow system. Since then Alibaba has moved into many different peripheral

sectors most notably “new retail.” Coined by Jack Ma at Alibaba’s annual

conference in 2017, new retail is an omnichannel strategy that applies internet

technology and business practices to traditional retail. For AI, in particular, they

are using facial recognition to process payments119 as well applying it logistics

for their offline food delivery services. They also have plans to produce their

own chips in 2019.120 Alibaba founded the DAMO Academy (Academy for

Discovery, Adventure, Momentum and Outlook) in October 2017 to focus on

AI research, including voice assistant, industrial design, intelligent

manufacturing, and robotics. They also have significant stakes in two of

China’s biggest computer vision companies, SenseTime and Yitu. In 2017, the

national government named Baidu, Alibaba, and Tencent as part of the

“national AI team”.121 In the announcement, Alibaba was appointed to lead

“city brains” using their cloud computing technology.

119 https://www.scmp.com/tech/start-ups/article/2109321/alipay-rolls-out-worlds-first-smile-pay-facial-

recognition-system-kfc 120 https://www.zdnet.com/article/alibaba-to-launch-own-ai-chip-next-year/ 121 https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-

team

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4.1.3 Baidu

Founded: 2000

Key executives: Robin Li (founder, chairman, and CEO)

HQ: Beijing

Market cap: unknown

AI sectors: cloud computing, chips, big data, sensors, computing and algorithms, IoT,

voice recognition, computer vision, mapping, autonomous driving, robotics,

education, content and entertainment, hardware

Description: Most known for their search engine, Baidu for a long time was a one trick pony,

never quite leveraging their technical prowess in the same way their Western

counterpart, Google, did. For many years, they pursued similar areas that their

competitors did (group buying and food delivery mostly) without ever finding

success. However, autonomous driving and AI have been a great boon to the

company. In 2017, the national government named Baidu, Alibaba, and

Tencent as part of the “national AI team”.122 In the announcement, Baidu was

appointed to lead autonomous driving. Before and since, Baidu has been the

leader in this area with engineers working on all levels of autonomous driving.

In 2018, they were given approval to test driverless cars in Beijing. As part of

their autonomous driving efforts, they have released the “Android of AV,” the

Apollo Project; an open platform, it is designed to allow traditional car makers

to easily integrate different levels of autonomy.

4.1.4 Huawei

Founded: 1987

Key executives: Ren Zhengfei (rotating CEO and founder), Guo Ping (rotating chairman), Meng

Wanzhou (CFO and daughter of Ren)

HQ: Shenzhen

Market cap: unknown

AI sectors: cloud computing, big data, chips, IoT, smartphones

122 https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-

team

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Description: Perhaps the most aggressive company in an already aggressive market,

Huawei’s core business started and still is telecommunications equipment.

Founded by Ren Zhengfei, former military engineer, the company has

expanded into enterprise IT equipment and services as well consumer

technology, including smartphones, wearables, and smart home IoT. In 2018,

the company announced a “full-stack” AI solution123 that will cover a wide

variety of use cases and scenarios. Huawei has also moved aggressively into

AI chips.124 While not as widely spread as other companies in this report,

Huawei is a company to watch, especially as they continue to grow in the

consumer space and apply their AI to their products throughout each business

line.

4.1.5 Xiaomi

Founded: 2010

Key executives: Lei Jun (co-founder and CEO), Manu Kumar Jain (Global Vice President)

HQ: Beijing

Market cap: unknown

AI sectors: IoT, smartphones, hardware

Description: One of the first companies to offer an affordable smartphone in China,

Xiaomi’s brand has become synonymous with affordable “smart” products,

including wearables and home appliances. Not as robust in AI development as

other major players, in Jan 2019, they announced they would invest $1.5 billion

in AI over the next 5 years125 specifically in smart devices and “AIoT.”

4.1.6 Bytedance

Founded: 2012

Key executives: Zhang Yiming (founder and CEO)

HQ: Beijing

Market cap: $78 billion (estimated, as of Nov 2018)

AI sectors: content recommendation

Description: First incarnated at Jinri Toutiao (literally “today’s headlines”), a news

aggregation platform, Bytedance has expanded rapidly into short-video

(Douyin and TikTok) and social messaging (Duoshan). Firmly in content

123 https://www.huawei.com/en/press-events/news/2018/10/huawei-hc-2018-eric-xu-ai 124 https://technode.com/2019/01/25/huawei-wolf-culture-fight-off-attack/ 125 https://www.bloomberg.com/news/articles/2019-01-11/china-s-xiaomi-places-a-1-5-billion-bet-on-ai-and-

smart-devices

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recommendation, Bytedance has built their entire business on their ability to

surface relevant content to users and leverage ad placements, similar to

Facebook. Since most of the content on their platform is user generated (UGC),

much of their AI R&D has gone into textual and visual recognition to

accurately classify the types of content users are uploading so they can serve

the right content to the right user. They’ve also developed advanced ways to

understand user behaviour such that neither explicit input (i.e., telling the

platform your interests) nor social graphs are needed for their AI to understand

user preference (https://bytedance.com/ai/). Bytedance is aggressively moving

into overseas markets through Tiktok internationally and Helo in India.

4.1.7 Didi

Founded: 2012

Key executives: Cheng Wei (founder and CEO), Jean Liu (President)

HQ: Beijing

Market cap: unknown

AI sectors: autonomous driving, big data analysis, transportation

Description: Another large, but niche player, Didi is squarely focused on the applications of

AI to transportation. In Jan 2018, they launched the “Didi Smart Transportation

Brain,” a public-private traffic management solution that aggregates data from

government and private sources to aid traffic management in China’s cities.126

A large project that brings together multiple information streams, including

video cameras, sensors and GPS signals from Didi’s cars, as well as intelligent

traffic lights, the project hasn’t gotten much press since the sexual assault and

murder scandals of mid-2018.127 In March 2017, they opened an AI lab focused

on autonomous vehicles in Mountain View, California. As of Mar 2019, the

site still lists open positions including technical development and engineering

positions. In Jan 2018, they launched their second R&D centre in Beijing,

focused on deep learning, computer vision and natural language processing

technologies.

126 https://technode.com/2018/01/26/didi-ai-brain/ 127 https://technode.com/2018/08/27/didi-safety-murder/

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4.1.8 Meituan Dianping

Founded: 2010

Key executives: Wang Xing (founder and CEO)

HQ: Beijing

Market cap: unknown

AI sectors: autonomous driving, logistics, big data

Description: Born in the heady days of group buying, Meituan is the only group coupon

company to survive until today. To do so, they merged with major rival

Dianping and branched out into O2O (online to offline) services and products.

Now a major portion of their business is “instant” food delivery, fresh food

from F&B merchants delivered in 60 minutes or less. In order to create an

efficient network, Meituan has created an AI and big data platform to assign

deliveries to drivers. They are also exploring MAD (Meituan autonomous

delivery) systems, basically robots to deliver food. However, no actual real-

world implementation has actually been observed.

4.2 The Chinese Niche AI Players and their technologies

Additionally, to these major players, we find multiple smaller niche players within the AI industry. Here

are some:

4.2.1 Cloudwalk

Founded: 2015

Key executives: Zhou Xi (founder)

HQ: Guangzhou

Valuation: ~$2 billion

AI sectors: computer vision (facial recognition)

Description: Founder Zhou Xi graduated from the University of Illinois with a PhD in

computer vision and once worked at the Chinese Academy of Sciences. The

company provides solutions to law enforcement across the country as well as

banks, including Bank of China and Haitong Securities.128 In April 2018, they

128 http://www.sixthtone.com/news/1001018/facial-recognition-company-founder-courts-banks-for-business

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signed a deal with the Zimbabwe government for facial recognition

solutions.129

4.2.2 DJI

Founded: 2006

Key executives: Frank Wang (founder)

HQ: Shenzhen

Valuation: ~$15 billion

AI sectors: robotics, computer vision, mapping

Description: Perhaps the most successful drone company in the world, DJI is looking to

stay in the lead by applying AI to its already best in class flying robots. In

May 2018, the company signed a deal with Microsoft to develop an edge-

computing implementation using DJI’s drone camera’s and Microsoft’s AI130

for potential industrial uses including visual inspection.

4.2.3 Horizon Robotics

Founded: 2015

Key executives: Yu Kai (founder)

HQ: Beijing

Valuation: ~$1.5 billion

AI sectors: cloud computing, chips, computer vision, IoT

Description: Horizon Robotics features a powerhouse of a founding team: Yu Kai,

previously founder of Baidu’s Institute of Deep Learning, and Yang Ming,

founding member of Facebook AI Research. However, their name is a bit of

misnomer as they don’t actually produce any robots. Instead, as their about-

page puts it, they “develop algorithms, software, hardware, processors, and

cloud infrastructure”.131 So far, they have developed and release 4 products:

the Journey 1.0 Processor, an edge computing AI chip for smart mobility132;

Sunrise 1.0 Processor, an AI chip designed for facial recognition

applications 133 ; Horizon Matrix, an “autonomous driving computing

129 http://www.stdaily.com/kjrb/kjrbbm/2018-04/12/content_658070.shtml 130 https://news.microsoft.com/2018/05/07/dji-and-microsoft-partner-to-bring-advanced-drone-technology-to-

the-enterprise/ 131 https://www.horizon.ai/about 132 https://www.horizon.ai/product/journey?lang=en-US 133 https://www.horizon.ai/product/sunrise?lang=en-US

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platform”134; and Horizon Edge AI Cameras for L3 and L4 autonomous

driving, powered by the company’s deep learning vision perception

technology.

4.2.4 Inspur

Founded: 2000

Key executives: Sun Pishu (Chairman & CEO)

HQ: Jinan

Market cap: unknown

AI sectors: chips, cloud computing

Description: Originally founded as a data centre services and hardware company, Inspur

has quickly moved into providing value-added AI services and hardware,

including a “full-stack” solution of hardware and software.135 Now one of the

top providers, the company has worked with many leading technology

companies, including Intel, Nvidia, and Cisco.136

4.2.5 Mobvoi

Founded: 2012

Key executives: Zhifei Li (founder and CEO)

HQ: Beijing

Market cap: Undisclosed

AI sectors: Voice recognition, smart hardware, chips

Description: Mobvoi (chumenwenwen in Chinese, literally “go outside and ask”) stands

for “mobile voice.” One of the first companies to start exploring voice

recognition technology, they now have a range of smart devices, including

watches, rear view mirrors, and smart speakers. In 2018, they signed a deal

with Hangzhou Guoxin Technology to produce AI chips for voice

recognition.137

134 https://www.horizon.ai/product/matrix?lang=en-US 135 https://www.inspursystems.com/ai-deep-learning/ 136 https://www.inspursystems.com/partners/ 137 https://www.forbes.com/sites/ninaxiang/2018/10/05/chinas-ai-industry-has-given-birth-to-14-unicorns-is-it-

a-bubble-waiting-to-pop/#3301090c46c3

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4.2.6 Nio

Founded: 2014

Key executives: William Li (founder, chairman, and CEO)

HQ: Shanghai

Market cap: ~$5 billion

AI sectors: autonomous driving

Description: One of many recent Tesla challengers from China, Nio is the first to go public

before actually bringing their product into mass production. Billing

themselves more as “the future of mobility”138, their current products focus

on enhancing the electric vehicle experience. However, they have been given

licenses to test their autonomous driving technology in Shanghai 139 ,

Beijing140 , and California.141 We include them here because if you haven’t

already, you will soon.

4.2.7 Sogou

Founded: 2010

Key executives: Wang Xiaochuan (founder and CEO)

HQ: Beijing

Market cap: unknown

AI sectors: machine translation, speech recognition

Description: Originally the search engine of portal giant Sohu.com, Sogou was spun out,

with investment from Alibaba, in 2010. In 2012, they merged with Tencent-

backed SoSo.com, and became the default search engine for QQ and WeChat.

Many of Sogou’s products are still based around search and web browsing.

However, they have been working on voice recognition since 2011. In 2016,

they showed off their speech-to-text at the World Internet Conference in

Wuzhen142 and have remained a leader, along with iFlytek, in this space,

servicing conferences and other live events.

138 https://insideevs.com/nio-vision-future-ev-mobility/ 139 https://www.scmp.com/business/companies/article/2135302/tesla-challenger-nio-and-car-giant-saic-given-

green-light-road 140 http://autonews.gasgoo.com/china_news/70014564.html 141 https://www.nio.io/news/nextev-issued-autonomous-vehicle-testing-permit-california 142 http://www.chinadaily.com.cn/business/3rdWuzhenWorldInternetConference/2016-

11/19/content_27428750.htm

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4.2.8 UBtech Robotics

Founded: 2012

Key executives: James Zhou (founder and CEO)

HQ: Shenzhen

Market cap: Undisclosed

AI sectors: Robotics

Description: Started as an intelligent toy company, UBTech has a wide range of robot and

Lego-like intelligent toys for children. In 2017, they began to expand their

offering to include enterprise solutions, including a customer service robot

designed for public spaces.143 At CES 2019, the company showed off their

first humanoid robot, Walker144, billed as a robot for family services.

4.2.9 Unisound

Founded: 2012

Key executives: Huang Wei (founder)

HQ: Beijing

Market cap: Undisclosed

AI sectors: voice recognition, IoT, chips

Description: Founded by former Motorola Research Center researcher, Unisound provides

voice recognition solutions to appliance makers as well as the medical and

automotive industries. 145 In July 2018, the company received RMB 600

million from state-backed investment funds, including the China Internet

Investment Fund, created by the Ministry of Finance and the Central

Cyberspace Affairs Commission.146 In May 2018, Unisound announced Swift,

an AIoT chip, the world’s first they claim.147

143 https://ubtrobot.com/pages/cruzr/ 144 https://www.youtube.com/watch?v=7gxOg9XbBRE 145 https://medium.com/syncedreview/chinas-voice-tech-ai-startup-unisound-raises-us-100-million-to-boost-iot-

services-125d6725ad13 146 https://www.caixinglobal.com/2018-07-19/provider-of-voice-services-becomes-chinas-latest-ai-unicorn-

101306483.html 147 https://www.prnewswire.com/news-releases/cogobuy-supports-unisound-in-release-of-worlds-first-aiot-chip-

300650244.html

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4.2.10 Sensetime

Founded: 2014

Key executives: Tang Xiao’ou (founder), Xu Li (CEO)

HQ: Hong Kong

Valuation: $4.5 billion (unconfirmed, as of Jul 2018)

AI sectors: computer vision, deep learning, autonomous driving, basic research

Description: Founded by Tang Xiao’ou, a former professor at the Department of

Information Engineering at the Chinese University of Hong Kong (CUHK),

SenseTime had a strong start. Tang’s research team was already well known

at AI conferences.148 In 2014, SenseTime released DeepID, a computer vision

algorithm, with 99.15% face recognition accuracy, the highest at the time.

Backed by Alibaba, the company services a wide range of companies and

institutions, including Massachusetts Institute of Technology (MIT),

Qualcomm, Alibaba, China Mobile, Huawei, Xiaomi, and iFlytek across

multiple verticals, including smart city, smart cities, smartphones, mobile

Internet, online entertainment, automobiles, finance, retail, education, and

real estate.

4.2.11 Megvii (Face++)

Founded: 2011

Key executives: Yin Qi (founder and CEO)

HQ: Beijing

Valuation: ~$2 billion

AI sectors: Computer vision, facial recognition

Description: Another founding team from a top research institution, Yin Qi and his co-

founders all graduated from Tsinghua in Beijing.149 The company focuses on

computer vision, specifically facial and body recognition. They provide

services to a wide variety of verticals including surveillance, public

security150 finance, smart city, and smartphones.151 Major investors include

Alibaba, Huawei, Lenovo, and Foxconn.

148 http://www.ee.cuhk.edu.hk/~xgwang/, https://www.cse.cuhk.edu.hk/~ttwong/myself.html 149 https://www.businessinsider.com/china-facial-recognition-tech-company-megvii-faceplusplus-2018-5 150 https://www.businessinsider.com/china-facial-recognition-limitations-2018-7 151 https://megvii.com/newscenter/

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4.2.12 iFlytek

Founded: 1999

Key executives:

HQ: Hefei

Valuation: unknown

AI sectors: voice and speech recognition, machine translation

Description: Famous locally for producing a deep fake of Donald Trump speaking

Chinese152, the company claimed in Feb 2018 to have 70% market share in

voice recognition solutions.153 In Jun 2018, they announced smart speaker

partnerships with China’s three telecommunication operators, China Mobile,

China Unicom, and China Telecom. In September 2018, they were caught in

an “automated translation” scandal when they were accused of false

representation after an interpreter claimed they were passing off his

translation as one produced by an artificial intelligence.154 The company lists

several product lines on their site, including a speech engine, educational

applications of their technology, and mobile applications.155

4.2.13 Rokid

Founded: 2014

Key executives: Misa Zhou (founder)

HQ: Hangzhou

Valuation: unknown

AI sectors: smart hardware, voice recognition

Description: A slower than most startup, Rokid specializes in building hardware around

their voice algorithms, including a smart speaker (powered by their smart

assistant) and AR glasses. In Jun 2018, they announced their own AI chip to

power speech recognition in their hardware.156 At CES 2019, they showed off

their “nearing mass-production” AR glasses, called Rokid Glass.157

152 https://www.youtube.com/watch?v=SsWm0m7K30U 153 https://asia.nikkei.com/Business/Company-in-focus-China-s-leader-in-voice-recognition-AI-goes-global 154 https://www.caixinglobal.com/2018-09-22/iflyteck-accused-of-giving-its-ai-program-credit-for-translations-

done-by-humans-101329380.html/ 155 http://www.iflytek.com/en/ 156 https://technode.com/2018/06/05/rokid/ 157 https://techcrunch.com/2019/01/07/rokid-debuts-project-aurora-computing-interface/)

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4.2.14 Yitu

Founded: 2012

Key executives: Zhu Long (co-founder and CEO)

HQ: Shanghai

Valuation: ~$2 billion

AI sectors: computer vision, surveillance and security, natural language processing,

smart hardware, medicine, finance

Description: Beginning by selling computer vision solutions to local law enforcement in

China, Yitu has concentrated on improving their visual AI solution. In Nov

2017, they won 1st place at first Face Recognition Prize Challenge (FRPC)

hosted by the Intelligence Advanced Research Projects Activity (IARPA)

which is under the U.S. Office of the Director of National Intelligence.158 Just

a few days after that, they announced a partnership with Microsoft for smart

city development. 159 As of Dec 2017, the company had 1.8 billion

photographs from China’s national database as well as customs and border

control.160 More recently, researchers published a paper in Feb 2019 detailing

their NLP approach to medical diagnosis with accuracy between 93% and 97%

depending on the condition.161

4.2.15 Pony.ai

Founded: 2016

Key executives: James Peng (co-founder and CEO), Lou Tiancheng (co-founder and CTO)

HQ: Beijing

Valuation: unknown

AI sectors: autonomous driving

158 https://www.prnewswire.com/news-releases/yitu-tech-wins-the-1st-place-in-identification-accuracy-in-face-

recognition-prize-challenge-2017-300549292.html 159 https://www.prnewswire.com/news-releases/yitu-tech-puts-forth-a-global-ai-vision-strategy-by-joining-

forces-with-microsoft-to-build-a-smarter-city-300556419.html 160 https://www.scmp.com/magazines/post-magazine/long-reads/article/2123415/doctor-border-guard-

policeman-artificial 161 https://www.businesswire.com/news/home/20190212006052/en/YITU-Healthcare-Publishes-Major-AI-

Breakthrough-Diagnostic

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Description: Founded by “the godfather of hacking”162, Pony.ai is China’s independent

answer to Waymo. Both James Peng and Lou Tiancheng left Baidu’s AV unit

to found Pony.ai in 2016. Andrew Ng, AI superstar and former head of Baidu

AI Labs once called Lou “one of the world’s best hackers”.163 With offices in

Guangzhou, Beijing, and Silicon Valley164, the company has licenses to do

road tests in Beijing and California. In Guangzhou, they have been testing an

autonomous taxi fleet.165 While very ambitious, the company, along with

Waymo, still lag behind Waymo in terms of human intervention.166

4.2.16 Momenta

Founded: 2016

Key executives: Cao Xudong (founder and CEO)

HQ: Beijing

Valuation: unknown

AI sectors: autonomous driving

Description: Momenta, as with many companies on this list, comes with an impressive

pedigree. CEO Cao Xudong graduated from Tsinghua (one of China’s top

universities) and was a scientist at Microsoft Research and used to be

executive director of research and development at SenseTime. Their research

director team has PhDs from University of Science and Technology of China

and University of Chinese Academy of Sciences.167 Their mission is to build

what they call the “brain” for autonomous vehicles, including services around

autonomous driving and big data. In 2018, they received license from the

Suzhou government to conduct road tests.168 In Oct 2018, they claimed to be

China’s first AV unicorn with $200 million in funding. They were rumoured,

however, to have cut staff in Dec 2018 by 60%.169

162 https://www.scmp.com/tech/start-ups/article/2132420/one-worlds-top-coders-known-godfather-backing-

chinese-self-driving 163 https://twitter.com/andrewyng/status/723640197875830784?lang=en 164 https://technode.com/2018/04/26/pony-ai-autonomous-driving-success-needs-china/ 165 https://www.pony.ai/pony-ai-debuts-product-ready-autonomous-vehicle-fleet/ 166 https://www.scmp.com/tech/start-ups/article/2186243/ponyai-and-baidu-still-lag-likes-waymo-us-tests-gap-

narrowing 167 https://www.momenta.ai/en/about 168 https://www.prnewswire.com/news-releases/momenta-chinas-leading-autonomous-driving-company-

receives-a-new-round-of-funding-at-a-valuation-over-1-billion-300732853.html 169 https://equalocean.com/ai/20181229-momenta-is-said-to-cut-60-percent-of-projects-and-move-rd-center-to-

suzhou-in-2019

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4.2.17 Cambricon

Founded: 2016

Key executives:

HQ: Beijing

Valuation: unknown

AI sectors: chips

Description: As part of China’s drive for supply chain independence (across a variety of

industries), Cambricon has come ahead after receiving significant funding

from the Chinese Academy of Sciences, iFlytek, Alibaba, government-

backed State Development and Investment, Alibaba, and Lenovo.170 In 2016,

they launched the Cambricon-1A, China’s first deep learning AI chip. They

also make Huawei’s Kirin chipset.171 The AI chip market is expected to be

worth $34 billion by 2020, including chips from Google, Amazon, and

Cambricon.172

170 http://www.ejinsight.com/20170824-meet-chinas-first-ai-unicorn/ 171 https://www.anandtech.com/show/12815/cambricon-makers-of-huaweis-kirin-npu-ip-build-a-big-ai-chip-

and-pcie-card 172 https://www.barrons.com/articles/artificial-intelligence-chip-market-could-soar-to-34-billion-in-five-years-

51550681107

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4.3 Useful Resources

Useful Resources

TechnoDe

www.technode.com/

South China Morning Post

www.scmp.com/tech/big-tech

China Technology News

www.technologynewschina.com

The Telegraph – China Watch: Technology

www.telegraph.co.uk/china-watch/technology/

e27

www.e27.co/category/china

China TechNews

www.chinatechnews.com

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About the EU SME Centre

The EU SME Centre helps EU SMEs get ready for China by providing them with a range of

information, advice, training and support services. To find out more, visit:

www.eusmecentre.org.cn.

The EU SME Centre is an initiative implemented with the financial support of the European Union.

The EU SME Centre provides a range of China Business Solutions, including:

• Tailored China market research

• Company verification

• Customised step-by-step guide to exporting to China

• Importer/distributor search, and others

Read more about China Business Solutions at www.eusmecentre.org.cn/solutions or contact

info@eusmecentre.org.cn. To submit your enquiries directly to our experts go to Ask-the-

Expert www.eusmecentre.org.cn/expert.

Need more help?

The EU SME Centre has over 100 reports, guidelines and case studies in its Knowledge

Centre, the following may be relevant to you:

• Individual Income Tax in China

• Tax Liability for Non-Resident Enterprises Engaging in Service Provision

• China Enterprise Income Tax

• Establishment and Operation of a Representative Office

• Establishment of a Foreign Invested Enterprise in China

• Repatriation and Reinvestment of the Assets of Foreign Invested Enterprise in China

Access the Knowledge Centre here: www.eusmecentre.org.cn/knowledge-centre.

Further reading…

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Phone: +86 10 8527 5300

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