China’s approach to data and AI is changing. Here’s what that means 

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Winston Ma, Adjunct Professor, New York University

• China’s approach towards the digital economy is moving from internet “plus” to data “multiply”.
• This represents a significant move forward in the integration of AI and data into the economy.
• For developing nations it represents a case study in the use of AI — but for those with less access to data, catching up may prove difficult.

China’s industrial policy towards data and Artificial Intelligence (AI) is changing. The fresh approach could be a model for developing economies to follow — but the nature of AI innovation and expansion means they also risk being left behind.

China’s industry policy last decade was “Internet+ (plus)”, but the current focus of its digital transformation is “data x (multiply)”. The small word change means the profound development of China’s digital economy, which provides an important case study for all emerging markets seeking an AI revolution of their own.

Late 2023 China officially inaugurated the National Data Administration (NDA), a national bureau dedicated to data-centered economic development and market regulation. Its main mission includes unifying industry data standards, facilitating data sharing across industries and streamlining data regulations from various government agencies. The new NDA Chief introduced a “Data Element X” plan — highlighting NDA’s mission to unlock data’s multiplier effects in all industries. Its eventual goal is “to build a digital China.”

The NDA establishment as China’s dedicated data agency is not a surprise, because earlier in 2020 China’s central government issued an economic policy guideline to include “data” in “factors of production”, joining the traditional elements of land, labour, capital and technology. Nevertheless, NDA’s official start probably was not completely unrelated to the Generative AI boom led by OpenAI in 2023.

China’s digital strategy, then and now

China’s data focus was already triggered by AI years ago. In 2015, China launched the “Internet Plus” strategy, with the goal of integrating the internet with other industries, like finance, healthcare and transportation. The strategy aimed to promote innovation, efficiency and competitiveness and has proven extremely successful.

However, in May 2017, China hosted the historical Go match between Ke Jie, the world’s No 1-ranked player and world champion, and the AI-enabled computer program AlphaGo, designed by Google’s DeepMind Lab. The Wuzhen showdown resulted in the AI machine’s straight 3-0 win over best human player, illustrating the unequivocal rise of the “digital economy”.

Almost overnight, the internet business community in China started discussing “the second half” of the mobile economy era, which in 2013-2016 drove a boom in e-commerce and mobile entertainment. Since 2017, the new key words have been “data” and “intelligence”. Perhaps it was a coincidence of timing, but soon after the Wuzhen Go match, China’s central government released the Next Generation Artificial Intelligence Development Plan in July 2017.

Now the Generative AI boom in 2023 is further driving Chinese companies — in about every sector — to invest heavily in research and development of the latest digital technologies. They are rushing to learn how new digital technologies, also including the internet of things, blockchain, cloud computing and data analytics (dubbed “iABCD”) can be integrated into their businesses to unlock value from non-traditional angles.

This powerful trend is real and accelerating. In early January, China’s 17 government departments and ministries issued a three-year “Data Element X” action plan, one month after the “Data X” concept was introduced. The action plan will promote “high-level application of data”, highlighting “high quality” data supply, data circulation, data analytics and data security.

For example, enterprise leaders use data and metrics to assess performance, identify gaps and update plans. In almost all companies, this is historical data about what has already happened, and leaders may get away with that (the figurative equivalent of driving forward with your eyes fixed on the rearview mirror) when the world is stable and business conditions are certain.

But today’s tumultuous post-pandemic world is riven with macroeconomic, geopolitical and technology disruptions. In addition to the need for more real-time data, the businesses further need the predictive capabilities of AI that can help them anticipate and shape the future. As such, the new data capabilities of businesses and industries will result in more profound transformation than from the mere addition of internet.

In short, the main task of “Data X” is to activate the data market, enabling data to realize its full value. This happens at a time when data is created at an increasing pace. In addition to the data creation by the existing digital economy, in August 2022, the number of connected “things” (mobile IoT devices) exceeded that of connected “people” for the first time in China. More data will be created by “things” in the future than “humans”.

Furthermore, Generative AI and Machine Learning (plus more data-driven breakthroughs to come) will involve increasingly data- and energy-intensive computing.

Therefore, the data-focused push also means innovation of data infrastructure. From the quantity aspect, more data centres, cell towers and 5G networks are needed for computing power demand. From the quality perspective, the new data infrastructure will be “more green”, since global cloud computing currently contributes 4% global greenhouse gas emissions (more than the emissions from commercial flights).

Overall, the age of “Data X” means a comprehensive upgrade of the digital economy in China — mobilizing data to be “good to use, and use for good”. That has profound implications for emerging markets that are looking at China as a reference case when they work on their own digital transformation.

It means they need to look beyond smart phones and the mobile wallet; instead, they must start positioning themselves for the next phase — AI and the digital economy — now.

It may also be a leapfrogging opportunity for emerging markets if they embrace the data revolution as keenly. But China’s leaping forward may also give emerging markets a sense of urgency: the digital revolution may impose significant challenges for many smaller countries, especially those lacking technology resources and with large labour forces that might be replaced by AI.

In particular, less-developed countries and emerging markets face an uphill battle as latecomers to the AI game. AI runs on data and that correlation leads to a self-perpetuating cycle of consolidation in industries: The more data you have, the better your product. The better your product, the more users you gain. The more users you gain, the more data you have.

That’s why global dialogue and cooperation are ever more important for the next phase of the global digital economy — a shared digital future.