Keywords

Zhongguo—the Middle Kingdom or Central Kingdom—a name that China inherited during its long history of monarchy—was not simply a geographic term, but implied that China was the cultural, political, and economic epicentre of the world. This Sino-centrist worldview is being significantly reflected today, in China’s efforts to influence global governance—the rules, norms, and institutions that regulate international cooperation—in a manner that aligns with Beijing’s values and priorities.

President Xi Jinping, the most influential Chinese leader since Mao Zedong, in his latest Report to the 20th National Congress of the Communist Party of China, has called for the country to “actively participate and guide the reform of the global governance system,Footnote 1” thereby promulgating a vision of fairer and more equitable global governance featuring shared growth through discussion, collaboration, greater democracy in international relations, and true multilateralism by moving away from the unipolar status quo.

China's Global Supply Chains

Data in this section is primarily sourced from https://hbsp.harvard.edu/product/719034-PDF-ENG.

One of the first economies to face the deleterious effects of the Covid-19 pandemic, China reported a negative 6.8% GDP growth in the first quarter of 2020. Although it had managed to tackle the growth drop by 2021, the recent renewed Covid-19 outbreaks in China, zero Covid policies, and demand contraction accompanied with a global economic slowdown have brought on tough headwinds for the Chinese economy, which is presently expected to grow at 4.9% in 2022, which would be the second slowest pace since 1976 for the world’s fastest growing major economy.

Around 2017, China announced a huge transition from an investment and export driven economy to a private consumption led growth model that had led major global companies to swoop in to cash in on the Chinese consumption boom. A decade ago, China’s retail-goods market was worth about $1.8 trillion—less than half that of the USA, which by 2021 had reached $6.5 trillion. However, China’s private consumption represented only about 52% of its GDP in 2021—significantly below the US level of 68% and the world average of 63%. This lacuna leaves much room for growth as well as opportunities for investment, especially in businesses that cater to retail consumers.

Inbound foreign direct investment (FDI) has been an integral aspect of the Chinese economy since the 1980s; in fact, it grew 6.3% year-on-year to CNY1.27 trillion in 2022, mostly in the manufacturing industry. However, some sectors including media and the internet are on a negative list for foreign investment.

The internet itself has been a thorny spot with total revenue of Chinese internet firms first falling in 2022 since the data was made available in 2017, amid the global economic slowdown and tightened domestic regulations.

A case in point is a decline in the growth momentum of Alibaba holdings, which was given the highest-ever antitrust penalty imposed in China for allegedly abusing its position of market dominance. It also happens that the CEO had denounced China’s “regulatory restrictions” that were “hampering innovation.”Footnote 2

Nonetheless, if a business turns out to be successful, taking outside capital for quick nationwide expansion is usually permissible, which has made China one of the most active private-equity markets in Asia.

The US-China trade war and the supply and demand bottlenecks brought on by the Covid-19 pandemic have forced manufacturers everywhere to reassess their supply chains, rethink strategies of lean inventories, and come up with just-in-time replenishment, which can prove to be crippling when material shortages arise. In addition, pressure to make operations more efficient and improve capital use and manufacturing capacity will remain unrelenting.

Since the trade war with the USA began in 2018, some Western manufacturing companies have relocated from China to countries where they perceived themselves as safe from being caught in the geopolitical line of fire. However, with the onset of the Covid pandemic, the world has found itself increasingly dependent on Chinese exports of pharmaceuticals which is corroborated by the fact that critical medical supplies from China have grown by 21% since 2020.

Another less known example is that South Korea and China are the primary producers of a group of chemicals known as nucleoside phosphoramidites and the associated reagents that are used for generating DNA and RNA sequences, making these essential for companies that develop and manufacture DNA- or mRNA-based Covid-19 vaccines as well as DNA-based drug therapies.

Any shift in value chains should be partial and gradual, because it is not cost effective or efficient to move from the most efficient supplier to the second or third best. American companies will do this only if the US tariffs become more penalizing than relocation would be. Moreover, it’s relatively easier to shift the sourcing of low-value-added products from China to Vietnam or Mexico than moving an entire supply chain.

Reducing dependency on China will be easier for some products like furniture, clothing, and household goods because their inputs are easy to obtain elsewhere—lumber, fabrics, plastics, and so forth—which are basic materials. On the other hand, finding alternative sources for sophisticated machinery, electronics, and other goods that incorporate parts such as high-density interconnect circuit boards, electronic displays, and precision castings will be harder to find. Additionally, moving production would be counterproductive if the target market is China itself.

Building a new supply infrastructure in a different region will involve huge time and monetary costs, as China’s own experience illustrates. Having no indigenous suppliers in the 1980s when it first opened its special economic zones, China had to rely on remotely connected global supply chains and far-flung logistics experts who stocked them for assembly in Chinese factories after procuring materials from around the world. Even though it was supported by government incentives, it took 20 years for China to build a local supply base capable of producing the vast majority of electronic components, auto parts, chemicals, and drug components required for domestic manufacturing.

Furthermore, shifting production from China to Southeast Asian countries would entail major changes to existing logistics strategies. Unlike China, these new locations often are not equipped with efficient, high-capacity ports that can handle direct marine liner services to major markets and the largest container ships, which will mean more transhipment through Singapore, Hong Kong, etc., and longer transit times to destination markets.

All things considered, in the long run, it would be unwise to leave China completely out of the global supply picture because its deep supplier networks, flexible and able workforce, and large and efficient ports as well as transportation infrastructure imply that it will remain a highly competitive value source for years to come.

China also has the second-largest economy in the world; it is imperative that firms maintain their presence in the country to take advantage of its markets and obtain competitive intelligence.

Does the USA have the Power to Hurt China Economically?

Washington, keen to continue its economic dominance in the wake of a rising China, is fast backtracking on the neoliberal consensus of non-discrimination and interdependence in international economic order that it meticulously built over the last three decades.

This is apparent in the recent adoption of the Inflation Reduction Act which provides huge industrial subsidies to domestic American manufacturers at the cost of imports from foreign companies.

Having been in place for over 40 years, China-US economic cooperation involves deeply integrated industries and highly complementary trade that is generally considered a win-win combination because of the huge profit for both sides due to this interrelation. Therefore, economic harm to one is not possible without harming the other.

Each is the other’s largest trading partner, and China’s holding of US Treasury bills has lent more than $1 trillion to the US government. A rising China may threaten America’s economic and technological supremacy, but because China doesn’t export its ideology or political system, the US national security will be left untouched.

However, in another area of contention, China shows no signs of backing down from its territorial claims. Conflict will be inescapable, with unprecedented adverse consequences for the world market if the US abandons the one-China policy and rallies behind Taiwan’s independence.

The technology war launched by the Trump administration drove China to begin developing critical technologies, such as semiconductor chips, for which it had previously sourced from US suppliers, but it will take China years if not decades to level up in this area and it will come at great cost. The technology war also has affected the US because the top ten American semiconductor chip companies sell about three times as much in China as in the USA. The American tech companies, therefore, are unwilling to lose the China market as it will deprive them of funds for further R&D.

Upcoming Risks for China’s Economy

China is the only G20 country to have demonstrated positive growth during the pandemic. Its currency appreciated 6% against the dollar last year, speaking to the strength of the Chinese economy, which has grown over 36 times over the past three decades, mostly due to market-oriented reforms that have also created a vibrant private sector that now contributes to about two-thirds of China’s GDP.

Even though it faces imported inflationary pressure, China, buttressed by its continuous industrial transformation and upgrading, is working towards stabilizing global supply chains.

However, the state-owned sector in China is proving to be too big and inefficient. What’s more, as home to the world’s largest number of ageing people, China’s savings and investment rates will drop significantly in the future. If it is to sustain its remarkable growth, the country will need to privatize and reform its state-owned firms and drive a further shift from investment to private consumption.

Furthermore, a challenge that has continued to haunt Chinese economic diplomacy since 2013 is a trilateral free trade agreement (FTA) with Japan and South Korea, which has not materialized yet because of firstly, the opposition from domestic economic sectors especially agriculture and concerns over loss of market share and intellectual property rights; secondly, each of the three countries has proposed a different FTA framework from the other two, and thirdly, the geopolitical competition in the trans-Pacific region vis a vis the USA with which Korea and Japan are allies but China isn’t.Footnote 3

However, the concluding of the RCEP with South Korea and Japan, which is the largest FTA that China has signed to date China shows its efforts to overcome the above hurdles through compromise and negotiation by proposing a new RCEP plus CJK (China, Japan, Korea) FTA and willingness to change in favour of a win-win-win mega trade and supply chain pact.

A Capitalist China?

China is among the most open markets in the world: its rapid economic growth is the result of its adoption of a market economy and private enterprise. It is also the largest trading nation as well as the largest recipient of foreign direct investment, having surpassed the USA in 2020. The major focus of government expenditure has been domestic infrastructure as a result of which China now has better rail systems, highways, airports, and bridges than the USA. China is home to six of the world’s ten high-speed rail networks, and it is also the longest.

China can afford to spend so much on infrastructure because its defence budget, even after years of increases, is still only a quarter of what the USA allocates.

Finally, China is in the process of establishing a social safety net, albeit currently undefined and underfunded, but levies no tax on personal capital gains. In 2020, there were more Chinese billionaires than there were American and China outpaces the latter three to one in producing them. Consequently, according to the countries’ Gini coefficient, inequality is greater in China than in the USA. Well-rounded economic growth is still an aspiration for China and a goal that it should focus on.

Global Environmental Governance

Data in this section is primarily sourced from https://risingpowerproject.com/changing-rolechina-global-environmental-governance.

Despite its suspicion of the current global order, China has shown support for international institutions and agreements that align with its policy goals, such as the World Bank in economic matters and the Paris Agreement on climate change.

Under the Paris Agreement and the UN Sustainable Development Goals, China strongly emphasized the implementation of its national strategy to mitigate the global climate crisis, mainstreaming the vision of a Community with a Shared Future for Humanity (CSFH) and the construction of international environmental institutions by advocating fair cooperation resulting in mutual gain. This has elevated China’s role globally in terms of envisioning policy and pioneering norms attuned to environmental governance.

One of the major elements of President Xi Jinping’s global ecological and environmental theoretical system, the CSFH concept holds a crucial normative power for China’s practice of environmental cooperation that has been deepened through its work in South–South cooperation, the Belt and Road Initiative (BRI), and international climate regime through the UNFCCC and other international as well as local cooperative platforms.

China is also the largest financier of renewable energy projects in the Indo-Pacific. More than half of its overseas energy investments under the Belt and Road Initiative, amounting to $20 billion in 2020, are in the renewables sector, which is critical to supporting an energy source transition in the region.

A major rising power continually increasing its influence in global economic, political, and environmental governance, China consumes considerable energy to fuel its industrialization, which creates severe pollution. Having burned around half of the coal consumed in the world, China has been the world’s largest greenhouse gas emitter since 2007 and was responsible for 27% of global emissions in 2022—more than the USA and the EU combined. Meanwhile, the rising standard of living, urbanization, and industrialization makes China the largest importer of many raw materials, contributing to it producing almost a third of the world’s annual carbon emissions.

The Chinese government prioritizes investing in renewable energy because it enables the country to mitigate air and water pollution and deal with the risks of socioeconomic instability.

Between 2004 and 2010, the country increased its investment in renewable energy 13 times and another two and a half times from 2010 to 2015, reaching $102.9 billion—by far the world’s largest investor (Frankfurt School-UNEP Centre 2016). To control air pollution, the government also introduced a comprehensive action plan in 2013, pledging an investment of CNY1.700 trillion ($277 billion) by the central government (China Daily 2013). With various efforts by its government, China reduced its energy intensity by 18.2% and carbon intensity by 20% in the period between 2010 and 2015. This shows that China is committed to becoming a model for how to clean up the planet, rather than being a threat to it.

More recently, China’s leadership announced ambitious plans to mitigate climate change, promote green finance, and control pollution, showing to the world their determination to lead efforts in global environmental governance.

However, some scholars maintain that “China is extremely skeptical towards externally enforced measures that would undermine the potential for social and economic development for the sake of climate change.”Footnote 4 Despite this, China’s environmental diplomacy has changed rapidly over the last few years—with its ambitious plans on the domestic level that matching up to its global environmental commitments.

China’s dominance in renewable energy products and control over the supply chains for rare-earth minerals and the processing capacity to produce them is noteworthy. The International Energy Agency estimates that China’s global share in all the key manufacturing stages of solar panels, which currently exceeds 80%, will rise to more than 95% in the coming years. The country also produces about 85% of the world’s rare-earth oxides and about 90% of rare-earth metals, alloys, and permanent magnets.

Interestingly, China has demonstrated its willingness to use its control of the supply chain in pursuit of its wider geopolitical interests, most notably in 2010 when in retaliation for a maritime dispute with Japan, it restricted rare-earth mineral exports to that country, underscoring that Beijing will leverage this financing for political influence and strategic advantage.

Proactive Actions on Climate Mitigation

Starting from its 11th Five-Year Plan (FYP) set in 2005, the Chinese government started decreasing national energy intensity and creating a set of strategic low-carbon industries (Lewis). Since 2007, China has shut down thousands of old and inefficient power and industrial facilities, resulting in a consistent decrease in its energy consumption per unit of GDP over the last decade.

In September 2015, Chinese and American leaders issued a Joint Presidential Statement on Climate Change to synchronize their position for the Paris conference, which China finally ratified together with the USA. The two countries also announced their plan to address another important greenhouse gas—Hydroflurocarbons (HFCs)—in the Kigali amendment of the Montreal Protocol and their backing of action on global emissions under the International Civil Aviation Organization (UNFCCC 2016).

An Emerging Leader in Green Finance

Another area where China shows its willingness to take leadership roles is in green finance, aiming to create a green financial system, develop green credits, green bonds, and establish green development funds. Since 2013, the Chinese government has launched a range of initiatives in order to establish a green financial system, including the fostering of a corporate green bond market to enable China’s smooth transition to a low-carbon economy and the joint endeavour of the People’s Bank of China (PBoC)—China’s central bank—and the UNEP to create a Green Finance Task Force in 2014, which included more than 40 Chinese and foreign experts from think tanks, regulatory institutions, academia, and the private sector.

On the international stage, China also shows its intention to lead global reform. One remarkable outcome of the G20 summit in Hangzhou in 2016 was to recognize the importance of scaling up green financing and identifying a range of efforts needed. Moreover, China’s overseas investments including the multilateral development banks under its aegis—the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (“BRICS Bank”) are also green financed.

War on Pollution

The Chinese Communist Party, in 2012, revised its constitution by adding in the Party’s overall plan for “the establishment of an ecological civilization,”Footnote 5 which highlighted resource conservation and environmental protection as key policies. Meanwhile, between 2011 and 2014, China’s legislative body amended its Environmental Protection Law (EPL), which took effect in 2015. The new law set forth a stringent legal framework for China’s sustainable development with critical revisions in several aspects, including toughening penalties for environmental offenses, establishing a public environmental litigation system that increases the number of groups eligible to bring lawsuits, makes it mandatory for local environmental protection bureaus to disclose environmental information, and oversees the formulation of unified pollution control and coordination mechanisms for key areas across administrative units.

China has also proposed its own goals for “carbon peaking” and becoming “carbon neutral,” which will set higher objectives and targets for future environmental policies and lead to the promulgation of increasingly complex policies.

Recently, as China phases out cash subsidies to Tesla, the largest manufacturer of electric cars in China, growth of China’s EV deliveries may drop to 30% in 2023, after more than doubling in 2022 to around 6.4 million units. However, the sales of home-grown BYD’s wholly electric cars rose 4% from November to 235,197 units last month, indicating China’s intent to fight fossil fuel-based pollution besides developing indigenous industries.

Impediments in the Journey Towards a Green Future

The aforementioned ambitious plans embody the resolve of China’s leadership to improve the country’s environment while also increasing China’s contribution to global sustainability. In spite of this, China’s ultimate impact on the global environment will rest on the implementation of such plans despite a domestic governance model that poses considerable obstacles. Three key areas for future policy reforms are mentioned in the next section that China’s leaders have to focus and strategize on to build an ecological civilization for the well-being of the Chinese people as well as the global population.

Correcting: The Power Imbalance between the State and the Civil Society

First, it is important that private actors can be truly empowered and engaged in governance, because China’s progress in environmental policy is characterized by a strong state presence, which uses a top-down approach through the control mechanisms led by Beijing.

However, this approach has its limitations because non-state actors—businesses, NGOs, and the public—are excluded from formally participating in the political process.

The present needs of a sustainable and financially healthy environmental policy can only be met with the infusion of private capital to finance the government’s pollution control and energy transition targets. The Chinese government should rope in the expertise of private actors to develop relevant technology and welcome supervision by civil society to increase transparency and better comply with the environment legislation it creates.

Lastly, on green finance, China has not established a credible third-party verification system to evaluate whether or not projects are eligible as “green.” Such a system, incorporating the engagement of private actors including auditors, standard-setting institutions, and rating agencies, is crucial for a successful and tenable green financial ecosystem.

Reforming a Fragmented Governance Structure

The Chinese government must both horizontally and vertically structure and harmonize its fragmented governance system for unified policy management. Some of China’s poor track record in environmental performance can be attributed to overlapping and colliding authority across different government agencies (Economy 2014; Wang et al. 2017).

For example, regulatory responsibility for controlling water pollution is shared by multiple ministries, including the Ministry of Environmental Protection, the Ministry of Water Resources (in charge of protection of land-based water resources), the State Oceanic Administration (in cases of marine pollution), the Ministry of Housing and Urban-Rural Development (sewage treatment plants), and the Ministry of Agriculture (agricultural runoff pollution). It is of paramount importance to formally establish a unified governance system under one leading independent agency to coordinate the inter-ministerial sphere of control and strategies on pollution and prevent inefficient implementation due to the varied source, nature, and impact of the pollutants.

Coordination across sub-national units is also critical for effective governance. In this respect, China’s decentralized local government system, which lacks enforcement capabilities and autonomy, seems “highly damaging” to the environment (Economy 2016).Footnote 6 Moreover, since pollution often affects different administrative units at the same time, the central government at Beijing needs a spearheaded approach to ensure the adoption of control measures in the whole area impacted by pollution while preventing inaction due to various actors shifting the blame.

Raising Public Awareness on the Issue of Sustainable Development

An efficient governance system should inculcate public awareness about environmental protection and more sustainable development. Many Chinese citizens lack a thorough understanding of the environmental impacts of their behaviour and only care about their local situation, instead of the overall environment, implying a strong feature of Nimbyism (not-in-my-backyard) among the Chinese public in terms of participation in environmental causes.

The impact of China’s development on natural resources beyond its borders also requires critical attention. The continuous expansion of its domestic market has made China the world’s largest importer and consumer of many commodities and thereby negatively affects the environment in other developing countries. For instance, Indonesia’s desire to secure its position in the global supply chain of EV production with help from a powerful partner, China, has resulted in an arrangement where, instead of exporting raw nickel ore, Chinese companies, in partnership with their Indonesian counterparts, are exporting refined nickel products, such as nickel matte, which is a crucial for manufacturing many EV batteries. In August 2018, a government official announced that Tesla had signed a five-year contract with two Chinese nickel-processing companies operating out of Sulawesi to obtain the nickel for use in Tesla’s lithium batteries.

But while Indonesia dreams of being a key player in the EV industry, villagers like Anton are left to face the environmental destruction caused by the nickel-processing industry involved in making EVs—much of which is still fuelled by coal—as well as threats to their lands and livelihoods.

China is responsible for half of all trades in illegal wood-based products. Its growth, thereby, indirectly exacerbates deforestation in Africa and Southeast Asia. The Chinese appetite for seafood is also cited as a major cause of illegal fishing and global overfishing (Economy 2015).Footnote 7 Nonetheless, most Chinese know little about the adverse environmental impact of their rising standard of living and consequently lack the incentive to demand a policy change or change their own consumption behaviour. Therefore, raising public awareness about the environmental ramifications of China’s development trajectory on other countries as well as globally is a necessary part of the solution for arresting and reversing the depletion of global natural resources.

AI and Emerging Technologies

Data in this section is primarily sourced from https://hbr.org/2021/02/is-china-emerging-as-the-global-leader-in-ai#:~:text=Further%2C%20the20uncertain%20business%20environment,to%20have%20long%2Dlasting%20impacts.

China’s cloud-computing capacity is rapidly increasing. In terms of the sheer volume of research and development on AI, Chinese academics surpass their American peers, and according to earlier research—the China AI Development Report 2018 project—as well as an ongoing study of the economic and social impacts of AI technologies, the country’s progress is remarkable.

China’s global share of research papers in the field of AI has skyrocketed from 4.26% (1,086) in 1997 to 27.5% of all AI journal articles worldwide in 2021, surpassing every other country in the world, including the USA. China also consistently files more AI patents than any other country. China’s central government has a list of "national AI teams" including fifteen China-based companies, including Baidu, Tencent, Alibaba, and iFlytek, whose areas of focus lie more on speech, image, video recognition, and synthesis than their overseas counterparts. Chinese start-ups are also attracting billions in venture capital, leading to China quickly closing the once formidable lead the USA maintained in AI research.

What’s more, China has over 1 billion smartphone users, more than any other country, which gives local firms the opportunity to concoct best-in-class AI systems for everything from facial recognition to messaging bots. The government in Beijing too is convinced of the potential it harnesses, thereby outlining a development strategy designed to make China the world’s leading AI power by 2030.

An AI boom in the world’s most populous country holds enormous promise by virtue of its population strength, because no other country can generate such a volume of data that can be fed into machines for them to learn to discern patterns. According to the McKinsey Global Institute, AI-driven automation could add more than a full percentage point to China’s annual GDP growth.

How China managed to catch up to the USA underscores a few important factors: how leaders in AI research lack certain technological advantages; how China’s huge market is conducive to enhancing AI because of the supply of data; and how the country’s friendly regulatory environment encourages AI investment and adoption.

Improvements in AI often come from the virtuous cycle of users generating data through their use of AI and firms refining their product based on what they amass from that user data.

AI is also open science, unlike drug development or computer hardware. In terms of knowledge and technologies, many of the essential algorithms in the field of AI have become public knowledge and are accessible from published papers and conference proceedings. The open science nature of AI is important for latecomers looking to catch up to forerunners, because it allows them to close the knowledge gap in a shorter period of time.

The second way that AI differs from traditional sectors is where innovation creates profit. Put simply, data and talent trump patents in AI research where firms’ competitive advantages stem from the size of the database they can assemble and the time they take to develop domain-specific knowledge or applications around it, whereas patents play a critical role in securing firms’ positions and protecting profit in traditional sectors such as mobile communications or pharmaceuticals.

China has a vibrant market that is receptive to these new AI-based products, and Chinese firms are relatively fast in bringing AI products and services to the market. Chinese consumers are also fast in adopting such products and services. As such, China’s environment supports rapid refinement of AI technologies and AI-powered products.

Given how important large datasets are to innovation in AI, it’s easy to see how China’s gigantic market size has helped it quickly catch up in the field of AI. Didi is China’s counterpart to Uber and the largest ride-sharing company in the world today. According to its CEO Liu Qing, every day, Didi processes more than 70TB of data, amassed from the planning of 9 billion routes per day and the processing of 1000 car requests per second.

In addition to providing advantages in big data, China’s huge market also offers firms strong economic incentives and large economies of scale that encourage them to tackle technological challenges. For instance, while chipsets have long been a weak link in China’s information and communication technology (ICT) industry, Chinese firms recently have almost narrowed the gap with the USA in AI chipsets reflecting the healthy payoff that investment has wrought in Chinese AI.

In addition to its sheer size, the Chinese market also shows large variety and is fast changing, which allows start-ups and established firms to explore different AI applications in their respective market segments at a fast pace, allowing dynamic research. These kinds of market dynamics allow latecomers to catch up, resulting in the emergence of new products and ventures.

The final pillar relates to the AI policy environment in China, which has enabled such rapid development of AI research in recent years.

Such policies include, but are not limited to, “Action Outline for Promoting the Development of Big Data,” “Made in China 2025,” “Next Generation Artificial Intelligence Development Plan,” etc., which send a clear signal to different AI stakeholders, from entrepreneurs to investors, and even researchers, that AI is a field backed by the government and is worth investing in.

China’s lack of clear regulations in areas such as privacy can also explain how it caught up so rapidly in certain AI application fields. For instance, the omnipresence of surveillance cameras in China provides a big data source for AI firms that specialize in visual and facial recognition. A country where tighter privacy regulations prevailed would not have fostered such a rapid growth of these firms in so short a time.

Challenges and Future Prospects

By many indicators, China is now on the global frontier of AI in terms of technological development and market applications.

But, paradoxically, while China may have caught up in record time, the conditions that have allowed it to do so may impede its further development in AI.

For example, the open science nature of AI results in Chinese firms favouring applied AI research that can bring quick money and not investing in developing core AI technologies. Unlike developed Western economies, where companies primarily hold AI patents, in China, the majority of AI patents are filed by government-owned or sponsored universities and research institutes because university-industry linkages in China are relatively weak, resulting in a limited technology transfer between the two sectors. Although aggregate AI research outputs, including scientific publications and patents, have seen a rapid rise in China, original ideas and breakthrough core AI technologies that have long-lasting impacts are still lacking. This shows a dire need for improvement and a sustainable shift in objectives for the research culture in China.

Furthermore, as highlighted in the Boao Forum for Asia Annual Conference 2022, AI poses a critical conundrum for intellectual property rights (IPR) and copyright regime in China given the sheer amount of patents filed regarding AI: just as it is important to bolster the patent system to tackle disputes arising out of IPR protection of artificial intelligence given its general open source nature, we also need to address the issue of who are the owners and patentees of inventions created by AI and how to involve the copyright owners of the source material used by AI in the development of such inventions.Footnote 8

Another critical area that China needs to develop and regulate is the use of AI in block chain technology because its decentralized nature poses certain policy issues for China’s centralized governance and also because China allows certain application of the technology such as NFTs but has banned others like cryptocurrency, rendering the regulatory framework more complex. It also should consider bringing NFTs, which are currently unprotected online virtual assets in the country, within the IPR regime, as they too are capable of infringing copyright laws.Footnote 9

As exemplified above, on the policy front, the relaxed regulatory environment has proven to be a double-edged sword. While some firms are bold enough to take advantage of such an environment by aggressively pushing different AI applications to markets, others feel frustrated as they don’t know what is allowed due to such policy uncertainty.

The country’s data protection policies also give cause for concern; one worry is that the benefits of Chinese breakthroughs will be affected by such data protectionism. A cyber-security law that came into force in June 2017 requires foreign firms to store data they collect on Chinese customers within the country’s borders and outsiders cannot use Chinese data to offer services to third parties. It is not hard to imagine tit-for-tat constraints on Chinese firms. And if data cannot be pooled, the algorithms that run autonomous cars and other products may not be the most efficient.

China’s 2017 cyber-security law marked the first major set of rules governing the storage and transfer of data of Chinese origin, and over the past year, the country has added laws on data security and personal information protection.

A second area of concern is ethics and safety. In the USA, the technology giants of Silicon Valley have pledged to work together to involve techniques like boxing that isolate AI from any wayward behaviour in their environment to ensure that compromised behaviour in one component doesn’t spread. With the research in deep fake and generative AI reaching its climax in 2022, China has been quick to ponder on regulations that would protect data and creative authenticity.

Chinese AI companies have incentives to act on some of these issues. Unfair and malicious use of AI would be a problem for the planet irrespective of the location it happened in. There is a self-interested case for the formulation of global safety standards for everyone involved. However, another concern—that AI will be used principally to the benefit of China’s government—is a less tractable problem.

Conclusion

The concept of G-Plus governance and a G-Plus world, echoed by China, envisages an increasingly hybrid and decentred form of global governance by including various forms of partnership between governments and private entities such as NGOs, social movements, corporations, which appears to be the best option possible in a fragmented world. This challenges the familiar tendency to think of global leadership in terms of exclusive power groups such as G-7 and G-20, leading to what could be termed a Multiplex World Order that organizes international cooperation and addresses conflict-management in new ways.

At present, with the emergence and existence of global problems such as pandemics, AI usage and regulations, space exploration, climate change, protectionism, and recessionary impact on global supply chains, the biggest challenge is whether we can jointly form a balanced development and mitigation model of joint consultation and construction in different regions, countries, and cultural sectors that can contribute to common problems in global governance in an increasingly fragmented world.

Other References