Breakingviews - China backseat driving risks sending AI off course
作者：Robyn Mak
An AI (Artificial Intelligence) sign is seen at the World Artificial Intelligence Conference (WAIC) in Shanghai, China July 6, 2023. REUTERS/Aly Song/File Photo Purchase Licensing Rights, opens new tab
HONG KONG, Sept 2 (Reuters Breakingviews) - China's economy is a study in contradictions. Decades of centralised industrial planning in China have led to endemic overcapacity, which in turn has fuelled destructive price wars across an array of sectors. Yet Beijing's approach, for all its flaws, also helped create world-class corporate champions like electric-car maker BYD
(002594.SZ), opens new tab,
(1211.HK), opens new tab. Officials now want to curb what they call "disorderly competition" in the booming $140 billion artificial intelligence sector. There is some logic to intervening, but that will come at a cost.
Unlike with EVs or solar panels, it's not clear what exactly about AI is worrying China's economic planners. On the contrary, optimism is buoying up the sector, which combined with infrastructure and other related sectors will be worth $1.4 trillion by 2030, analysts at Morgan Stanley
reckon, opens new tab.
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Such optimism has pushed the Hang Seng Tech Index
(.HSTECH), opens new tabin Hong Kong up 30% this year, outperforming the mainland benchmarks. There is some justification for the hype. Despite U.S. sanctions and export restrictions, DeepSeek, Alibaba
(9988.HK), opens new taband peers are still churning out open-source models that are competitive with, if not superior to, those from Meta
(META.O), opens new tab, OpenAI and others in the West.
Chatbots and agents are proliferating across the country. Alibaba last week revealed that surging demand for AI services powered triple-digit year-on-year growth in related revenue. And chipmaker Cambricon Technologies
(688256.SS), opens new tabrevealed that its first-half revenue rocketed more than 4000% from a year ago, albeit from a low base.
But there's caution, too. Cambricon's Shanghai shares had doubled since the end of July. On Friday, hours before Beijing stated its willingness to intervene in the industry, the $88 billion company took the unusual step of warning investors that the stock price may have "deviated from the company's current fundamentals", triggering a selloff.
To be sure, pockets of wasteful investments are bubbling up. It's reminiscent of the mad scramble playing out among U.S. tech giants, which analysts at research outfit IDC
forecast, opens new tabwill spend a whopping $336 billion in 2028 on AI. In the People's Republic, local governments desperate to hit growth targets have embarked on a debt-fuelled spree to hoard chips and build data centres – many of which are sitting idle. And price wars are intensifying in what one tech executive dubbed "a war of a hundred models", even as business models remain hazy.
Yet the authorities now intent on coordinating the country's AI development and resources do not have a strong record of picking winners, particularly in sectors where the technology is rapidly evolving. Semiconductors are a prime example: the government has deployed billions of dollars into state-designated champions, only to see many
go bust, opens new tab, including Wuhan Hongxin Semiconductor Manufacturing and Tsinghua Unigroup, whose former chairman was jailed for corruption and embezzlement.
Too much oversight and planning will also squeeze the private sector, where under-the-radar upstarts like DeepSeek have unexpectedly emerged. Beijing is prudent to want to avoid excess, but history suggests its approach risks sending progress off course.
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Editing by Antony Currie; Production by Ujjaini Dutta
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Robyn Mak joined Reuters Breakingviews in 2013. Previously, she was a Research Associate for the Global Policy Programs at the Asia Society in New York. She has also worked at the Carnegie Endowment for International Peace in Washington DC and interned at several consulting firms, including the Albright Stonebridge Group. She holds a masters degree in international economics and international relations from the Johns Hopkins School of Advanced International Studies and is a magna cum laude graduate of New York University.
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