"Bad Boys" are the Life of China's AI Party
With BABA and DIDI on the bench, U.S.-blacklisted firms show their skills.
The 2021 World Artificial Intelligence Conference, which culminated last weekend in Shanghai, should have been a joyful reunion after Covid-19 forced the 2020 version online. It wasn’t exactly.
Days earlier, Chinese authorities ruined the New York IPO of ride-hailing leader Didi Global (DIDI) with a raft of investigations and punishments. That was the latest blow to an internet sector whose stocks have dropped by a quarter since February. Didi executives tactfully sat out the conference, as did Alibaba (BABA) founder Jack Ma, who arguably started all the trouble by dissing Beijing’s banking establishment at a gala dinner last autumn.
Other tech celebrities tried to cringe their way back into the political bosses’ good graces. Robin Li, CEO of search supremo Baidu (BIDU), assured the gathering that “Baidu's approach towards AI technology has always revolved around delivering equitable outcomes and possibilities for all." Tencent Holdings (700. Hong Kong) chief Pony Ma (no relation to Jack) reiterated the social media giant’s commitment to “tech for good,” and stressed its cooperation with the National Astronomical Observatory in a search for new stars.
Not everyone was on the back foot, though. Last year ex-Google CEO Eric Schmidt, who has emerged as a self-appointed general for the U.S.’ AI war with China, identified five national champions Beijing would rely on for future dominance. Three of them — Alibaba, Tencent and Baidu — look more like whipping boys than champs these days. The other two, SenseTime Technologies and iFlytek (002230. China), remain in favor — not least because Washington banned them from business with U.S. suppliers and customers, while the Mas and Li have become multi-billionaires on the back of Western capital.
SenseTime took center stage in Shanghai. The company, which specializes in face-recognition, was blacklisted by Donald Trump’s Commerce Department in 2019 for supporting “repression, mass arbitrary detention and high-technology surveillance” in Xinjiang region. That’s the Western province where China has sent more than 1 million Muslim Uyghurs to “vocational education and training centers” that bear a striking resemblance to concentration camps. Before the U.S. demarche, SenseTime was pegged as the world’s second most valuable AI startup. Private investments from SoftBank and other A-listers indicated a price north of $7 billion.
The company is now at pains to show that its robo-optics genius can serve warmer and cuddlier ends. Its centerpiece at Shanghai was a bus that can supposedly drive itself “under certain conditions,” like a campus or tourist shuttle route. SenseTime also signed up China’s most famous science fiction writer, Liu Cixin, to fashion “an immersive world which welcomes everyone to experience the vastness of the universe and the infinite possibilities in the future”. (Harry Potter and the Ethnic Cleansing?) It unveiled a “Meta Elements Education Platform” intended to “further empower [the delivery] of personalized AI education.”
The timing of SenseTime’s charm offensive is not coincidental. The company has dusted off IPO plans, and reportedly aims to raise up to $2 billion from a Hong Kong listing later this year. This looks like a sort of bookend to the Didi debacle, which seems to have ended the era of Chinese techies raising fortunes on U.S. markets. A SenseTime debut would actively spit in America’s eye, and you can bet Beijing won’t let it flop, unless SenseTime’s CEO insults some high officials in the meantime.
Iflytek already went public on mainland China exchanges two years ago. Its shares have tripled. The company makes speech recognition systems (not anything that flies), which are also implicated in the Xinjiang crimes against humanity. It tried to show its soft side in Shanghai too, exhibiting a new dual-screen language translator that may even work better than Google (lol).
Non-sanctioned Chinese companies did get a few licks in at the AI expo. Food delivery champ Meituan (3690: Hong Kong) showcased a new drone that one day could deliver orders in 15 minutes, throwing the gauntlet down to Amazon (AMZN) across the planet. “Low-altitude logistics networks in urban areas will present an important growth opportunity,” a company release dryly observed.
A start-up called Shenzhen Yaliote Biometric Technology looked to leapfrog SenseTime and Iflytek with a “vestibular emotional feedback” system that reads human feelings without speech. A government press write-up promised this will be “mainly used for early identification and intervention among school students or those who work in stressful industries.” Uh-huh. One to watch.
If China was trying to show that it has a deep tech bench beyond the marquee companies it is currently cutting down to size, it did. Sort of. But Beijing can’t dominate the future and terrorize its most successful innovators simultaneously. The contradiction of an idea-policing regime trying to win a global war of ideas remains unresolved. Watch out for that SenseTime IPO meanwhile, though.