China is already the world’s second largest ICT market place. By 2020 the market is estimated to reach USD 850 billion. For the Chinese government, digital, ICT an AI market is not only seen as a business, but it is increasingly seen through national security and social stability lenses. Furthermore, policies to ensure security often appear to do so at the expense of foreign companies. The Cyber Security Law from 2017 has increasingly tightened the operational landscape for foreign companies in China.

1. CHINA’S RACE
TO BECOME THE WORLD'S LEADER
IN ARTIFICIAL INTELLIGENCE
Team Finland Future Watch
Strategy and Foresight Asia Pacific
Sari Arho Havrén
@SariArhoHavren
sari.arhohavren@businessfinland.fi

2. WHERE IS CHINA NOW?
China has made AI-development a strategic priority and by 2030: “Dominant AI power in the world in all aspects, including
military”
China is clearly leading in AI start-up funding
BUT: ”China’s AI capabilities are about half of those of America” - China is clearly behind the US in hardware, research,
algorithms and the commercialisation although the number of AI research papers exceeds the US
… also behind in advanced university AI programs, qualified faculties, qualified researches, lack of experienced algorithm
developers… and regardless of funding, China still lacks behind in number of AI companies and semiconductors developed
for AI applications
Abundance of data seen as the competitive edge, BUT data alone is not going to be enough
Disadvantaged in hardware – AI needs processors and chips. Long creation cycle.
Trade War with the US
China academia and businesses alike open about working closely with the military on AI – “MILITARY-CIVIL FUSION”
NOTE: The US is creating a national strategy for AI, triggered with fear that the US is not keeping pace enough with China’s
ambitious plans. US wants to be ”a leader not just in matters of defense but in transformation of the human condition”.
Silicon Valley industries, researchers protesting working with Pentagon. Pentagon offers to include “ethics, humanitarian
considerations, AI safety”. Discourse very different from that of China.

3. Mattis’ proposal for the AI
strategy August 2018
GLOBAL AI INITIATIVES

4.  YES
Strategic priority and vision: “Dominant AI power in
the world in all aspects, including military”
Huge investments, larger than any other nation
China is the world’s 2nd largest ICT market place
already, by 2025 the market size USD 850 billion
Will be the biggest, scalable market in the world
Access to large quantities of data aided by lax
privacy protection laws
Chinese tech-savvy consumers are keen in trying
new products and services
China is advancing in quantum information sciences
China is very strong in surveillance AI technologies,
domestic security works hand in hand with the
military – deep pockets for funding
NO
Push-back to China’s development in the form of trade
war and investment restrictions to Chinese looking for
technologies in the US, Europe, Australia
China lacks in advanced university programs and
researchers
Long cycle to develop required AI hardware: processors
and chips
Even stricter data localisation requirements by the
Chinese government in implementing the Cyber
Security Law could potentially hurt AI research and
development efforts of the foreign labs operating in
China – innovating in a bubble is short sighted
Chinese companies who want to expand their business
globally will face suspicion and concerns over their data
privacy and government surveillance behind
Potential push-back in China over strict surveillance

5. RISKS FOR FINNISH COMPANIES
BUSINESS CONSIDERATIONS:
Foreign firms are prohibited from operating numerous digital services without a JV structure: Data must stay in China which
obviously requires local servers, in many cases manufacturing too. Foreign companies risk handing over their sensitive business
secrets and IP to a (forced) Chinese partner. Chinese partners interested “only” in technologies they need (Made in China 2025).
De facto all businesses must provide access to government to any data they possess.
Cyber Security Law has increasingly tightened the operational landscape.
ETHICAL/MORAL CONSIDERATIONS:
AI aided social credit system and extensive surveillance of citizens might cause a serious push-back, even unrest.
The recent policies and regulations allow the authorities, including Chinese police, to silence any dissent, restrict or censor
information and prosecute human rights defenders or others in the name of “national security”. As a result, Chinese Internet users
can face arrest and imprisonment for merely expressing, communicating or accessing information that the authorities don’t like. AI
makes the surveillance easier than ever before.
Xinjiang, with 1.4 million Uighurs on “re-education camps”, has been turned into a laboratory for cutting-edge AI surveillance and
social control and a heavy testing ground for AI deployment.
Foreign technology in Chinese hands or under the local laws can be used to compromise people’s privacy with consequences to the
individual that can violate human rights drastically.
FUTURE CONSIDERATIONS:
European Union governments have become concerned over strategic Chinese investments in high technology. Screenings might
widen.
Trump’s goal of tariff free trade between the US and EU – will the cost be siding with the US against China?