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The motives for the government’s actions are complex. Officially, it is intended to restrict anti-competitive practices, protect personal data and tackle income inequality or “capitalist surplus”. But it also brings together powerful enterprises in line with the Communist Party.
“When Alibaba, Tencent and JD.com cost billions or even trillions of dollars and yet are not under the direct control of the party, this is a completely new and unprecedented reality that China has never experienced in history,” said Jiu Chen, a professor of economics at the University of Hong Kong.
Many experts describe these moves as a kind of criminal industrial policy – an effort to direct China’s technology industry to areas considered vital to economic development and geopolitical advantage. “Companies that deal with solid technology, such as modern engine manufacturing, computer chips, biotechnology and the defense industries, in which China is really lagging behind, are unaffected,” Chen said.
This may help explain why AI companies have withdrawn slightly so far. “AI is important to the economy,” Beraya of MIT said. “It has been repeatedly referred to by Chinese officials as a ‘strategic industry.'”
The belief that AI can contribute to progress in dozens of industries was set out in a national plan published by the State Council of China in 2017. The plan sparked widespread investment in AI by regional governments. Some artificial intelligence companies have also benefited from government data, including images used to build and refine face recognition systems.
Minuan Zhao, an associate professor at the University of Washington in St. Louis who studies Chinese business, says artificial intelligence companies are just as much in the spotlight as anyone else, but they are already closely tied to the government. “There is less concern about losing control,” she said.
Graham Webster, a Stanford researcher who specializes in China, notes that the country’s new privacy law will tighten rules for all companies working with personal information, including artificial intelligence companies that sell face recognition technology. .
SenseTime warns potential investors that data regulations can be a headache. “It remains unclear whether the proposed measures will be applicable to our business” or other changes could impose restrictions, the prospectus said.
In a sense, Beijing’s repression of personal information can serve to strengthen the government’s relationship with the companies it shares data with if it helps build public confidence in the idea that personal information is kept safe.
However, this may not isolate artificial intelligence companies from additional restrictions or regulations indefinitely.
“AI is a relatively new field,” said Yun Sung, director of China’s program at the Stimson Center think tank. “Regulators may not yet fully understand the scope of related data security,” she said. “There is a model for the government to respond to such IPOs when the industry is more mature, participants are in abundance and regulation is becoming a problem.
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