Is Xi Jinping’s iron grip better than Adam Smith’s invisible hand for technology innovation?

Although China is not standing shoulder to shoulder yet with the West on core disruptive technologies, it has emerged as an up-and-coming challenger

Substantial governmental funding – including research grants, loans and subsidies – is arguably one of the strongest weapons a top-down approach has

Reading Time:6 minutes

Visitors walk past a stand with artificial intelligence security cameras using facial recognition technology at the 14th China International Exhibition on Public Safety and Security in Beijing on October 24. Photo: AFP

Published: 6:00am, 15 Nov 2018Updated: 2:43pm, 15 Nov 2018

In 2011, Princeton graduate and Google-trained product manager Wang Yi gave up on the “American dream”. Bidding farewell to Silicon Valley, he returned to China minus a solid plan but with a strong desire to set up a business that “can better meet consumer demands in one of the world’s largest mobile internet markets”.

Now, riding the wave of China’s national plan to achieve global leadership in artificial intelligence (AI), the 38-year-old is perhaps a living example of the “Chinese dream”, part of President Xi Jinping’s national drive to achieve dominance in a wave of cutting-edge technologies to drive future economic growth.

Wang’s Shanghai-based LAIX, which operates AI-powered English learning app Liulishuo, has grown from a three-man shop into a US-listed company with more than 2,000 employees in less than six years. More than 7 million Chinese now practise English on Liulishuo with their personalised AI teachers online on a monthly basis.

“Government policies work like batons in China. It [the government] can rapidly guide capital and talent towards the direction it wants,” said Wang, talking about his experience of setting up an AI business in a country that has prioritised the field.

But it is this flowering of AI start-ups, covering applications from education to security and finance, pushed forward by the “baton effect” of government policy, which has fanned Western accusations of unfair state intervention in China's economy.

China’s national plan for AI development, a three-step road-map towards worldwide dominance in AI by 2030, is just one of the more than 100 top-down state-led policies designed to propel industrial and technological development. This has not only unnerved the West, it has become central to the ongoing trade war between the US and China.