CHINA ADVANTAGE

China's AI Advantage: Why Google China's Founder Sees The U.S. Losing Its Edge

Kai-Fu Lee watched the U.S. beat China to global internet leadership during the dot-com bubble from the inside. Now with what he sees as an even greater technological revolution taking place in the fast-growing field of artificial intelligence, Lee doesn't expect China to take a backseat a second time. "China started slow, and American companies went international," Lee says during a May visit to Forbes Media's headquarters. "But simple math says China has a larger GDP. The market will be bigger."

When Lee talks about AI, he speaks from firsthand experience. The Taiwan native developed the first speaker-independent phone recognition program as a Ph.D. student at Carnegie Mellon in the late 1980s, before stints at Apple and as an executive at Microsoft and Google in China--in fact, he was founding president of Google China.

Google and its peers were ultimately thwarted in their ambitions to carve out leadership stakes in the Chinese market, in part due to cultural differences among consumers as well as privacy clashes with the Chinese government. When Lee returned from working at Google's Mountain View, California, headquarters to launch his own VC fund, Sinovation Ventures, he came back to a China firmly entrenched in what he now describes as a duopolistic global tech economy. U.S. internet software continued to lead the English-speaking world, while a group of ?Chinese companies, famously led by Baidu, Alibaba and Tencent (B-A-T), controlled their domestic market and exerted increasing influence in Southeast Asia and developing markets.

With companies on both sides of the Pacific racing to develop applications of AI, China's scale can prove a decisive advantage, Lee believes. The country boasts perhaps 43% of the world's trained AI scientists, Lee says, with Microsoft alone training about 50,000 Chinese scientists in processes critical to the field starting in 1998. Overall, this doesn't represent the cream of talent in the field--that is still found in the U.S., Canada and Britain, he says--but China's legions are good.

China's political leadership continues to invest heavily in research and technology. And developers may not face the same regulation when it comes to pushing real-world trials, such as with autonomous vehicles, or in mass data collection that would be viewed as intrusive or a privacy violation in the West.

In driverless cars, the U.S. has about a two-year head start, according to Lee. But each minute American tech companies find themselves mired in a regulatory battle or hobbled by objections from transportation incumbents, the Chinese can close that gap.

What's more, he says, top-down rule in China will countenance a long stretch of data-gathering experience in which the casualty rates from autonomous-vehicle use steadily drop--by orders of magnitude, Lee hypothesizes. Even relatively safe records may not pass muster in democracies.