China and Big Data

In an earlier blog, we saw how the Chinese government was instrumental in kick-starting China’s foray into AI. But that started in 2014, so how has China made so much progress in such a short time? Given that most of the R&D around AI was done in the West – the US, UK, and Canada - how did China emerge in this #2 position so quickly?

 

It helped greatly that most of the AI algorithms are public knowledge. They are not trade secrets or protected by patents. Combine that with the fact that these AI’s get better the more data they have access to. Not surprisingly, China with its huge population, generates enormous data.

 

Further, unlike the West, China doesn’t care about privacy. No, this isn’t just because the government says so. Rather, most Chinese don’t mind sharing their data with Alibaba, TikTok, Baidu or WeChat either. They find the conveniences and features they get in return to be worth it.

 

Plus, China has learnt AI by doing, i.e., by its entrepreneurs trying to build the next killer app. Those battles have been vicious and under-handed, as I explained in another blog:

“No dirty trick or underhanded manoeuvre was out of bounds.”

Whoever rises out of such dog-eat-dog competition is the best at what they do.

 

Kai-Fu Lee writes in his book:

“China’s data advantage extends from quantity to quality.”

How/why is their “quality” better? It is because in China, like India, the Internet became universally accessible only because of the smartphone, not laptops or desktops. And thus, most of China’s Internet usage involves all the info that a phone can give e.g. (1) the phone model serves as a reasonable proxy for income, (2) GPS gives the location of use, (3) As China’s apps, like India’s, moved onto the offline (physical) world (think of the equivalents of Dunzo, Ola, Swiggy, bike renting apps), they got even more info of traffic patterns and which neighborhoods needed which services, and (4) Payment apps (equivalent of UPI based apps) made it possible to know who paid whom, when, where, how much, and how often.

 

Much of the above still hasn’t become as popular in the West. Why not? The growing and richer places in China are the cities, and they are congested and commuting takes forever. Hence, people love the convenience of these physical world services. That’s hardly a problem in America which lives in the suburbs.

 

The other reason is that in the physical world, one has to pay for services. And for that, one needs the equivalent of India’s UPI or China’s private party payment apps like Alipay or WeChat. After all, why would anyone trust every new app out there with their credit card number, which is what the West still uses?

 

And thus, Western companies are missing entire categories of data – they can know which posts, photos and articles you read or like (what Google or Facebook knows), but it’s limited to digital data, not data about the physical world.

 

To summarize then, China has caught up so fast because (1) Smartphone is how people use the Net, (2) the evolution of physical world services, and (3) online payment systems that can be trusted and don’t take transaction fees.