China’s AI Surge Could Impact the Global Business Landscape, Experts Say

Chinese companies are racing ahead in adopting generative artificial intelligence (AI), a technological leap that experts say could upend global commerce and give China a critical edge.

This significant lead, coupled with China’s dominance in AI patent filings and strong government support, could reshape global market dynamics and give Chinese companies an edge in industries ranging from eCommerce to manufacturing.

As the AI race intensifies between the world’s two largest economies, the implications for international trade, technological innovation and economic competitiveness are profound, potentially straining U.S.-China relations and forcing a reevaluation of regulatory approaches to AI development.

“China’s government is pouring massive resources into AI research and development,” Robert Khachatryan, CEO of Freight Right Global Logistics, told PYMNTS. “For example, in 2020, they unveiled a $1.4 trillion investment plan for AI and other high-tech industries over five years.”

The Biden administration recently introduced a policy mandating federal agencies to assess and address potential risks associated with artificial intelligence (AI) systems. And European leaders sounded the alarm on lagging innovation as Norway’s oil fund chief declared American firms are outpacing their European counterparts in tech advancements, prompting calls for EU economic self-reliance.

China’s AI Dominance: A Perfect Storm

A study by U.S. AI and analytics software company SAS and Coleman Parkes Research found that 83% of Chinese respondents across various industries use generative AI, compared to just 65% in the United States and a global average of 54%. This lead in AI adoption, spanning sectors from banking to manufacturing, could have significant commercial implications, potentially reshaping global market dynamics and competitive advantages.

The survey, which included 1,600 decision-makers from 17 countries and regions, covered banking, insurance, healthcare, telecommunications, manufacturing, retail and energy industries. It’s the latest indication that China is making rapid strides in AI technology, which gained global attention after U.S.-based OpenAI launched ChatGPT in late 2022.

China’s progress extends beyond adoption rates. A recent report by the United Nations’ World Intellectual Property Organization revealed that China is also leading the generative AI patent race, filing more than 38,000 patents between 2014 and 2023, compared to 6,276 filed by the United States in the same period.

The regulatory landscape in China has played a crucial role in its AI success.

“China’s approach to regulation has not surprisingly taken a China-first approach,” Nicholas Rioux, CTO of Labviva, an AI procurement technology company for life sciences, told PYMNTS. “Regulations are being implemented to ensure local market dominance within the Chinese market for local firms. This gives local companies, aligned with regulators, an unfair advantage over foreign and less aligned local competitors.”

The implications of China’s AI leadership could be far-reaching.

“China’s lead in AI could give its companies a significant edge in sectors like eCommerce, manufacturing and finance, leading to more efficient operations, cost savings and innovative products,” Khachatryan said.

Some observers said that the importance of AI dominance is difficult to overstate.

“I equate a nation having economic control of emerging AI technologies to owning the internal combustion engine. It will have that much impact, if not more,” Rioux said.

This technological advantage could also impact global trade dynamics, potentially straining relations between China and other countries, particularly the United States. The competition could lead to increased conflicts over technology and intellectual property.

Despite China’s advances, the United States is not standing idle. In recent months, the U.S. government has intensified its efforts to curb the export of advanced AI technologies to China. These measures aim to slow China’s progress in AI development and maintain America’s technological edge.

In October 2022, the Biden administration imposed sweeping export controls on advanced computing chips, specifically designed to hinder China’s ability to develop robust AI systems. More recently, the U.S. has been considering additional restrictions on the export of AI software and cloud services to China.

These actions reflect growing concerns in Washington about China’s rapid AI advancements and their potential implications for national security and economic competitiveness. However, as the survey results and expert opinions suggest, the effectiveness of these measures in slowing China’s AI momentum remains to be seen.

How Will the US Respond?

For U.S. businesses and policymakers, the stakes are high.

“The best response to this from the U.S. perspective would be to ensure that any regulatory actions taken against domestic AI enablers be focused on helping those companies gain economic advantages over efforts originating from competitive countries,” Rioux said. “We need to minimize intrusion on American firms and not push political and social agendas over growth-oriented regulation in order to be successful.”

These developments come despite U.S. efforts to curb China’s technological advancements, highlighting the intense competition between the world’s two largest economies in the AI industry. As businesses worldwide scramble to harness AI’s transformative power, China’s headstart raises questions about future innovation, productivity gains and market dominance in the AI-driven economy.