Beijing Bites into AI

Jayadevan PK December 10, 2018 10 min

No hotel in Beijing is run by a sentient robot named after Edgar Allan Poe. But almost every high-end hotel in this city has a corner where a robot receptionist made by Tami Intelligence Technology (Beijing) Co. Ltd finds a place.

It’s not unusual in Beijing to spot people practising Tai Chi in the open. So you wouldn’t pay any mind to a couple of old-timers at the Haidian park in the northwestern part of the city doing that. Unless, of course, if the Sifu is on a giant screen and scoring them based on how well they follow his moves.

Tai Chi practice at the Haidian Park powered by a Virtual Shifu built by Baidu| Photo: Jayadevan PK

Two kilometres away, at a traffic signal at Zhongguancun a.k.a China’s Silicon Valley, a woman’s picture and some of her details are blown up on a roadside giant screen. She’s being ‘named and shamed’ by an algorithm for jay-walking. At this busy intersection of the city – home to some 21 million – the algorithm tirelessly picks out offenders.

In China, law enforcement agencies use computer vision extensively| Photo: Jayadevan PK

About five minutes away from the traffic intersection, at a bread store, a machine sits waiting for a customer. The store, which sells dozens of varieties of bread, is trying out the machine which could replace a few workers in the future. Its makers claim that the machine can recognise different types of bread – baguette to focaccia to not so healthy but popular croissants – and bill the buyer.

William Qiang, who works for AInnovations showing the company’s computer vision powered Kiosk. Photo| Jayadevan PK

Close to Tiananmen Square, a sportswear shop has partnered with China’s biggest e-commerce company to bring you the best of the offline and online shopping experience. At the Intersport X Tmall store, you can use a trial room to see if the clothes fit you. Or, if you are short on time, do it in front of a virtual changing station.

At the Intersport X Tmall store in Qianmen, store manager Jerry shows off the AI-powered trial station.

Beijing is a city of busy workers, restaurants, palaces, universities, communist party powwows, and Karaoke lounges. But if the city could speak for itself, say a few words to strangers, it would probably say: “Welcome to the future.”

On a bright day this winter, when the sun is out and you’re feeling up even if not upbeat, you’ll see signs of an urban, tech utopia where artificial intelligence (AI) is starting to meet real life. And, please note that it’s only been a year since China made public its ambitions to become an AI superpower.

“It’s kind of the hot thing and hard to ignore,” says Jeffrey Towson, who teaches at the Peking University. Since China made public its plans to focus heavily on innovation in AI last year, nearly every company in the country – from learning apps to short video companies – has started talking about how it uses AI.

“You’re seeing everybody jumping into it but how much of this was talk and how much of it really mattered is something we’ll see in a couple of years,” says Prof. Towson, who focuses on Digital China.

It’s early days for AI in China and there’s much hype surrounding it. But it’s not all talk.

The country is already home to companies like Bytedance, the most valued startup in the world right now. China’s top companies like Alibaba, Tencent, and Baidu have committed serious resources to develop AI with the goal to further their addressable markets. Other pieces of the plan are quickly coming together.

“China has more consumer data than anywhere in the world,” says professor Jeffrey Towson who teaches at the Peking University.

In many ways, the Middle Kingdom is the perfect testbed to take AI mainstream. It has a large number of consumers who are happy – at least, not frothing in their mouth not to – share their data, entrepreneurs who are eager to use AI, a thriving electronics manufacturing industry, a policy environment that favours domestic companies, and, not to say the least, abundant venture capital.

China has 1.4 billion people and with a gross domestic product of over $12 trillion, its economy is second only to the United States. The country has over 800 million internet users versus 300 million in the US or 400 million in India. This not only means the Chinese has a large affluent middle class but also that the population generates lots of data that can be fed into AI algorithms.

“China has more consumer data than anywhere in the world,” declares Prof. Towson, nicknamed ‘celebrity professor’ for his nearly three million LinkedIn followers. “You have a big population, you have no interest in privacy, you have these major tech companies like Alibaba and Tencent which you don’t see in other countries, really,” he says.

Before 2005, Alipay recorded abnormal bank payments manually. Now, the company’s systems can recognise real-time data for billions of transactions a day. Fraud detection and underwriting credit is one area where Alipay uses AI| Photo: Jayadevan PK

While both Alibaba and Tencent have been using AI in areas such as fraud detection and underwriting credit, China is also home to a new breed of companies that call themselves ‘AI companies’ and are challenging incumbents.

Bytedance, for instance, calls itself an AI company. And, if anyone had doubts about its audience, over 200 million people in China use the company’s products.

A product that showcases Bytedance’s prowess is an app called Toutiao, a content app. “Other than apps like Alipay and WeChat, Toutiao is what I use to get news and updates,” says the bartender at Masons’, a bar in a tony joint in Beijing. The app’s recommendations, driven by AI, make it useful for a wide range of users who spend on an average over 66 minutes on the app every day. At a valuation of $75 billion, the company founded by 35-year-old Chinese entrepreneur Zhang Yiming is valued nearly 5 times India’s largest Internet company Flipkart.

Toutiao is a harbinger. Another AI-driven Chinese startup, Liulishuo, which sells an English learning app to over 1 million paying users, listed on the New York Stock Exchange in October and now has a market cap of over $250 million. Sinovation, an AI-focussed investment firm founded by well known AI expert Kai-Fu Lee, already counts more than 50 companies that have a valuation of over $100 million in its portfolio.

Much of China’s development has come through strong policy measures. And its rise to become an AI superpower will be no different.

“The Chinese AI ecosystem is moving very fast because of this very specific industrial policy,” says Zhenghuan Ma, who works at AInnovations, a portfolio company of Sinovation Ventures. His company has built a smart vending machine which uses facial recognition to identify a buyer and complete a transaction with nearly no human intervention. The company also uses computer vision, backed by deep learning algorithms developed in-house, to check on stock keeping units and facial recognition (The users opt-in, the company says). “We’re working on more using more advanced AI to create more value,” says Ma, who graduated from Stanford University in Maths and Computer Science.

Visual: Breaking down China’s AI ambitions

China benchmarks itself to the US but it operates differently. Much of China’s development has come through strong policy measures. And its rise to become an AI superpower will be no different. “The Obama administration’s policy talked about open innovation. The China policy talks about Open and Co-ordinated innovation,” says Ravish Bhatia, a Yenching Scholar at Peking University. For instance, Bhatia points out, Tsinghua University, one of China’s oldest and most feted institutions, runs a company called Tsinghua Holdings which owns a 51% stake in a company called Tsinghua Unigroup. They hold multiple silicon industry companies. “When the government says we need to improve semiconductor systems in the country, all these cogwheels start moving in the same direction,” says Bhatia, who recently published a paper called Making of China’s AI Policy. Analysts call it the ‘command innovation approach.

China wants its core AI industry to be about RMB 150 billion (~$22 billion) and AI-related industries to be about RBM 1 trillion. By 2030, it wants these industries to grow tenfold. The idea is to focus on technology and talent, data management, research and rules and creating the commercial ecosystem.

Also see: Breaking down China’s AI ambitions

China’s ambitions won’t be contained to the Mainland anymore. It has now started taking its capital and companies to South East Asia, India and other markets such as Africa. Nearly $4 billion of Chinese money has gone into Indian companies in the last 2 years alone. The success of Xiaomi in becoming the country’s largest smartphone seller has inspired the business community in China to look for opportunities in India. Moreover, the trade war with the United States is forcing the country to look to India. Even before that, this is what the India focus means.

Nearly $4 billion of Chinese money has gone into Indian companies in the last 2 years alone.

China’s lead in manufacturing, especially of electronic goods, gives it a natural advantage in building smart devices that in turn helps it create the AI ecosystem. They can ship phones with AI- assistants, machines equipped with smart features, intelligent screens, self-driving cars, and other autonomous vehicles and drones — like the ones you spot at the Intersport store in Qianmen, near the Forbidden City or the virtual Tai Chi arena in Haidian Park.

“If you’re talking about sensors and things you embed, infrastructure, scanners or drones, or anything that comes out of a manufacturing base, Chinese companies might win that,” Prof Towson points out. However, he adds that “Chinese software tends to stay in China.” In the case of AI, for instance, all the data the companies have is Chinese and is of very little use in other markets, he says.

A shoe fitted with sensors shows up on the shopping screen as it is picked up on the rack| Photo: Jayadevan PK

Meanwhile, venture capitalists in China are tripping over each other to invest in the next AI company. Chinese AI startups raised $5 billion in venture capital in 2017, overtaking the US to attract the most amount of capital in the space, as per a report in August by ABI Research, a market research firm. That’s almost half of all the money that went into the sector globally. Nearly $10.7 billion was invested in AI startups across the globe.

Despite all the advantages the Chinese have, winning can’t be taken for granted in markets abroad where it has to compete in the open with the likes of Google and Facebook, comply with regulations and even take into account linguistic diversity and cultural nuances. Take, for instance, the case of WeChat. The company’s attempt to grow in India came to nought, where WhatsApp is the top messaging app with over 250 million users.

Also read: How WeChat faded into the silence in India

***

On a grey winter morning in Beijing, the sight of the CGTN Headquarters and China Zun– one a state-owned news network and the other, China’s tallest building– will suck some cheer out of you. It’s the sort of imagery cyberpunk fans would like to see in the next adaptation of dystopian classic Altered Carbon.

The state-owned CGTN headquarters and China Zun building| Photo: Jayadevan PK

If the city could say a few words to strangers now: it would say, welcome to the future. Only, this version is different. There are cameras everywhere — helping algorithms recognise people.

The country is building a social credit system, based on facial recognition, big data and tracking citizen, to improve law and order.

Private companies are also experimenting with ideas such as showing people personalised advertisements in elevator screens based on face recognition – sort of how Frederik Pohl imagines a hucksters utopia in The Space Merchants.

The West sees much of China’s plans with AI as Orwellian. But China sees it as progress – a mere extension of what lifted nearly 700 million Chinese out of poverty in 40 years.

Reporting from Beijing, with inputs from Shadma Sheikh.


               

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