Takshashila Working Paper - China's Quest For AI Leadership: Prospects and Challenges

Executive Summary

In 2017, the Chinese government unveiled a plan to develop the country into the world’s primary innovation centre for artificial intelligence (AI) by 2030. In doing so, it identified AI as a strategic industry, crucial for enhancing economic development, national security, and governance. This report evaluates the strategy that has been adopted by the Chinese government in order to achieve these objectives. It examines the peculiarities of the Party-state-led economic model along with the evolving geopolitical and economic faultlines regarding trade and technology. In addition, it assesses China’s policies with regard to factors such as core technologies, research, manpower, data, and the commercial environment, which are crucial to ensure the development of the AI industry.

The assessment finds that the Chinese government’s command innovation approach towards AI development is crafting a political economy that tolerates sub-optimal and even wasteful outcomes in the quest for expanding the scale of the industry. Consequently, going forward, the industry is likely to be plagued by concerns of overinvestment, overcapacity, quality of products, and global competitiveness. In addition, increasing friction over trade with other states and President Xi Jinping’s turn towards techno-nationalism along with tightening political control could further undermine China’s AI industry.

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