When East beats West

With the notable exceptions of Alibaba and WeChat and their respective payment apps, much of China’s innovation in financial and related technology is perhaps underestimated and under observed by the West. Pascal Coppens, author of China’s New Normal, will use the Innotribe stage to explore what ‘team China’ has to teach us

Is the world’s second-largest economy leaving everyone else in the digital slow lane?

‘Made in China’ used to be a euphemism for copycat products, often of poor standard. Today, ‘Created in China’, or ‘Led by China’ is more appropriate. It’s the technology giant to watch – and, perhaps, to emulate.

China’s rise as a technology superpower, spanning everything from mobile money to autonomous vehicles, is no surprise to Pascal Coppens. As the author of China’s New Normal, as well as many other works on China, Coppens has an expert understanding of China’s digital economy and the cultural traits that are fuelling its growth, having lived and worked there for 20 years.

The Chinese technology revolution has been both swift and ubiquitous, catching the West by surprise, he says. From about 2008, mobile technology raced ahead, with China becoming not just a ‘mobile-first’ nation, but practically ‘mobile-only’ – certainly as far as cash is concerned. Smartphone payment services such as Alipay mean that the world’s most populated country is well on the way to becoming a cashless one, as mobile asserts itself as the primary way for Chinese consumers to access the internet and organise their lives.

“Chinese consumers have fully embraced mobile commerce and digital business,” says Coppens. “And China has jumped from cash to mobile payments, leapfrogging the credit and debit card transitions familiar to the West.”

Several factors have accelerated digital transformation. First, China is a nation of entrepreneurs and doers, says Coppens, and there are tremendous freedom and encouragement for people with ideas and vision. It contradicts our impression of China as a closed and reactionary society.

“It’s a misconception, says Coppens. “The Chinese have enormous energy for progress and creativity. It is a consumer market where there is every incentive to build something new, create something different. There is a stereotype about Chinese control and repression, the reality is that China has a better model than the West when it comes to advancing the digital economy.

“It’s a teamwork mentality where things get done quickly, without some of the bureaucratic obstacles we encounter in the West. We talk about agile development, but China raises it to another level. There is no fear of failure – just a determination to try new things and push boundaries – and the government is very supportive, meaning regulations are implemented only after innovations have been tested. Things can move fast because they are allowed to, whereas regulation comes first in other countries.’

Customer focus has been a critical part of the digital journey.

“The Chinese always look at what’s best for the consumer,” he continues. “This is not always so apparent in other countries, where customer focus sometimes means what a business thinks the customer wants and what it would like to deliver to the market, rather than staying close to user needs at all times. In China, customer centricity means customer loyalty. There is less business competition, more a collective desire to deliver what people want.”

The country is also a master at creating the ecosystems that map and connect data; some of the most powerful through companies such as Alibaba and Tencent. There are countless smaller enterprises that are linked to these platforms, says Coppens, which creates tremendous depth and versatility.

“What’s happening now,” he says, “is we’re moving to the next stage of development. The focus is shifting from connectivity and the internet to data and artificial intelligence (AI). The reason is that we’re accessing huge amounts of information and advanced algorithms are enabling us to analyse and harness it. China is particularly good at this. In the future, we will see massive uplift, thanks to the combined power of algorithms, AI, robotics, the Internet of Things and, of course, the roll-out of 5G.”

In 2017, the Chinese government launched the New Generation Artificial Intelligence Development Plan with huge ambitions to put China in the driving seat of the technology – quite literally, in the case of autonomous vehicles – by 2030. Companies like the world’s most valuable AI startup, SenseTime, the country’s biggest algorithm provider, which has commercial and research relationships in the US, Japan and Malaysia, are working hard to help it get there. Unisound, the voice services unicorn, iFlytek, another voice services provider, and another unicorn Megvii (which means mega vision) Technology, the startup behind the Face++ facial recognition platform that processes about 2.4 million face ID verification requests a day, are some of the others.

Coppens identifies ‘smart finance’ as one of the eight industries where China is taking a clear lead over the rest of the world, with AI being an engine of growth, interpreting data to get ever-closer to customers and mirror their needs and desires. Coppens says the Chinese place great trust in technology and what it can do. They are very receptive to the role fintech can play in their lives and the positive impact that AI and other emerging technologies, such as deep learning, can have.

“Trust is the foundation for growth and it breeds confidence in innovation and innovators,” he says. “If you look at big players like Alibaba, they have a 360-degree view of their customers. They are totally plugged into their needs and, because there is this high level of trust and they know all about their customers, they are much better able to serve them in the ways that they want.”

In the West, that sentiment of trust sits uneasily with evidence that Chinese authorities are using facial recognition technology for racial profiling, targeting the country’s mainly Muslim population of Uighurs, whose treatment continues to draw condemnation from world leaders.

In response to those concerns, Beijing-based Megvii, which is backed by Alibaba, said it wanted to guard against the weaponisation of AI in advance of listing on the Hong Kong stock exchange last month. It has laid down a code of conduct and established an ethics committee, saying it strives ‘ to find solutions that respect people’s dignity and privacy’. It clearly recognises that there is a disconnect between East and West that could threaten China’s obvious desire for help to realise the country’s technology vision.

Notwithstanding the trade war of words with the US and hardening of the relationship with Britain during the ongoing Hong Kong uprising, China has recently liberalised still further the rules around foreign investors taking stakes
in Chinese financial services providers.

Meanwhile, the UK Financial Services Trade and Investment Board continues to focus efforts on China this year, which includes supporting the launch of the London-Shanghai Stock Connect, a landmark initiative that permits UK investors to access Shanghai-listed equities and vice versa. There is also the first UK Belt and Road Initiative Forum.

Coppens agrees that we mustn’t make the mistake of turning away from the country and missing the opportunity for collective growth – not least because the nature of the new wave of technology means it will never be constrained by geopolitical borders.

The message in Coppens’ book is that we must learn from, and work with, a country that was once labelled a copycat nation. No longer a follower, China is shaping everyone’s digital future.

All hail AI!

According to McKinsey, China could become the world’s biggest market for vehicles driven by AI – and the race to provide them in the e-commerce ride-hailing industry is already on.

Didi, which drove Uber out of China in 2016, has just launched an autonomous taxi pilot in Shanghai, while China’s biggest self-driving car startup Pony.ai, also based in Silicon Valley, unveiled PonyPilot in Guangzhou late last year. It’s teamed up with Toyota to provide an autonomous vehicle ride-hailing service (above), competing against rival startup WeRide, which last month announced a joint venture for another service in the city. Chinese internet giant Baidu also hopes to bring 100 robo-taxis to Hunan province this year.

Meanwhile, London-based Splyt Technologies signed a deal this summer with Alipay, giving Chinese tourists access to e-rides in 1,000 cities without having to download another app. The Splyt software divides fares between the local provider and the mobile booking platform.