What the West misses when it judges China’s dogged AI pursuit

PHILADELPHIA – China’s artificial intelligence success story, often criticised in the West for being unfairly underwritten by the Chinese government, reflects the country’s resolve not to repeat a strategic mistake made 150 years ago, said Singapore’s Foreign Minister Vivian Balakrishnan during a discussion on US-China rivalry.

China missed the industrial revolution, but it will not make the same mistake twice, said Balakrishnan during a Sept 25 conversation with former Australian prime minister Kevin Rudd, who is now the global president and chief executive of the Asia Society in New York.

“Because China missed it. China underwent a century-plus of humiliation and unequal treaties. This time, China has absolutely no intention of missing it again,” the minister said in an hour-long exchange, during which he challenged how the US seizes competition from China.

“You need to understand, it is not just a matter of competition with America, being No. 1 or No. 2, and I am projecting into China’s motivations, but China says: ‘This is my turn, my time in the sunshine. Why should anyone get in the way, especially when I have the human talent, the brain power?’” he said.

“So from China’s perspective, ‘I am not going to make the strategic mistake made a century and a half ago. This is a strategic opportunity, and I do not want anyone to get in my way. And all I am asking for is a level playing field, access to technology and to get ahead as quickly as I can.’”

Their intense competition is sharply different from the Sputnik-era contest between the US and the Soviet Union, he said, because today’s superpowers rely on a shared global technological stack and brainpower rather than isolated ecosystems.

“What is interesting is that the mathematical and computational basis for AI, the foundations that both America, China and the rest of us are operating on, is essentially the same stack. The mathematicians, the techniques, the machines are the same,” Balakrishnan said.

“And because it is the common stack and it has been open and competitive, the rate of acceleration has been dramatic.”

Rudd pointed out that China was building its success on an “unlevel playing field”.

“What is working in China is… state-driven investment in its techno-industrial strategy, plus net exports, and this becomes unsustainable,” he said, pointing to China’s weak domestic consumption and its reliance on exports for growth that have flooded other economies.

Balakrishnan said the use of subsidies did not fully explain the country’s AI prowess, and that what also drives Chinese AI companies is the cut-throat domestic competition, which results in the creation of cheap and efficient Chinese AI models.

“Let us assume all subsidies, direct or implicit, are removed. Do you think that would automatically remove the academic, scientific, technological edge of China? I do not believe so.

“Do you think that the hyper competition domestically is going to disappear? It is not.

“The easy answer is (to) just blame it on subsidy, but I am saying there is something more going on than that, and we had better understand what that source of competitive advantage is, and that it is real,” he said.

Rudd accepted the pushback, but said both forces were at work – China’s scientific brilliance as well as its subsidies, which have led to global overcapacity and set off a political backlash in the US and Europe.

“They are applying through conscious industrial strategy, subsidies, which underpin their model, which is producing political blowback here, hence the tariff war from the US and the reduction in the trade surplus of America, and on the cusp of bringing about a similar reaction in Europe,” Rudd said.

A fundamental imbalance existed in the global economy before AI, Balakrishnan also pointed out, as the two discussed how the two economies evolved.

China became the world’s manufacturing hub, while the US benefited from cheap consumer goods and low interest rates funded by Chinese trade surpluses that were invested in US Treasury bills.

In the West, higher productivity historically led to higher wages that created a massive middle class, which consumed products and fuelled more economic growth.

But the coming AI economy may not follow this same trajectory, since a company can reap huge productivity gains without hiring thousands of workers or raising wages.

The bind is worse for China, where the pressure of an ageing and shrinking population creates an incentive for Beijing to deploy AI rapidly to remain competitive. However, going too fast could lead to social unrest by worsening youth unemployment.

America has its own problems, Balakrishnan said, including deficits of trillions of dollars that are a result of its industrial and trade policies.

But it is capable of surprises when it leans into its longstanding strength: turning new science into profitable products faster than anyone else.

“That is why, at least from Singapore’s perspective, we do not count America out. It is still capable of pulling a rabbit out of the hat,” he said.

In an interview with the Singapore media on Sept 26 as he concluded his trip to New York to attend the United Nations General Assembly, Balakrishnan said the exchange with Rudd was an effort to understand a world being reshaped by the US-China relationship and their intense rivalry over AI.

“He pushes, I push back, and the to-and-fro occurs. The objective is not to convince each other. The objective is to sharpen our perspectives and to explore the issues in greater depth and breadth than we would otherwise,” Balakrishnan said.

“The people who watch that conversation don’t have to agree with Kevin or me, but if Kevin and I have succeeded in making you think about the issues, then we have succeeded,” he said.