Jan 21, 2020 Equities

China and artificial intelligence: "probably more dynamic than the USA"

Fund manager Tobias Rommel spent several weeks travelling around China to learn first-hand about the development of artificial intelligence there. "Companies are making tremendous progress," he explains in this interview.

  • Thanks to ever more powerful software and hardware, artificial intelligence (AI) – computers’ ability to acquire and apply knowledge independently - is permeating our everyday lives.
  • Silicon Valley in California is considered to be the centre for AI development, but other countries, especially China, are also in an excellent position to lead the way in the technology of the future.
  • China is best placed actually to take a leading role in artificial intelligence applications.
4 minutes to read

"China has set itself the goal of becoming a world leader in the field of artificial intelligence."

Tobias Rommel, DWS fund manager DWS Invest Artificial Intelligence

When we think of artificial intelligence (AI), we automatically think of the technology centre in Silicon Valley in California. As fund manager of DWS Invest Artificial Intelligence, you recently toured China. What were your impressions?

I visited about 100 companies in China, all of them dealing with AI in one way or another, from the end of August to the beginning of October last year. Development there is incredibly dynamic, probably even more so than in the USA. You can see this from the major Internet companies there, which just a few years ago were on hardly anyone‘s screens. Even today, a large AI-related company such as Meituan Dianping is still virtually unknown outside China, although this leading delivery services platform delivers more than 20 million meals a day in more than 2,800 cities. Another example is the online marketplace Pinduoduo, which organises group purchases. But you can also see this dynamism in the start-up scene[1], where there are many so-called unicorns, which means companies that already have a market value of more than one billion dollars.

Tobias Rommel

DWS fund manager DWS Invest Artificial Intelligence

How come China is setting such a fast pace in AI?

Well, the state is a driving force. It is pursuing a long-term industrial policy and aims to be at the forefront of AI development by 2030, as the "Development Plan for the Next Generation of Artificial Intelligence" published in 2017 makes clear. Provincial governments are judged by how well they implement this requirement, among other things, which is why there is a flow of state funds. The Chinese also have a strong affinity with technology. More than 800 million Chinese users regularly surf the Internet - more people than in the USA and Europe combined. Even small children are taught how to operate new technologies and can, for example, learn programming.

Is there a geographical technology centre like in the USA?

Development in China is actually happening in many places at once. However, the Bay Area in the south of the country, which comprises the cities of Shenzhen, Guangzhou and Dongguan, is home to a particularly large number of technology companies. Under the government's development plan, the region is to be developed into a globally influential international innovation and technology site. This can be seen as a response to Silicon Valley in the USA.

"Autonomous driving and robotics are two areas where great progress is being made with the help of machine learning."

Tobias Rommel, DWS fund manager DWS Invest Artificial Intelligence

Where is China ahead and where does it need to catch up?

In terms of data availability, China certainly has an advantage, because there are no widespread data protection concerns in the country, and it has a large number of users who are constantly online. The more data you have, the easier it is to optimise self-learning software. China also benefits from the wealth of technological experience it acquired in the integration of hardware and software as the "world’s workbench". Powerful computer chips remain a weak point at the moment, with China dependent on deliveries from US manufacturers. However, Chinese companies are working flat out to develop their own powerful chips for AI to reduce their dependency and ease the impact of possible supply bottlenecks.

Where are the most exciting developments at the moment?

Great efforts are currently being made in the field of autonomous driving. On journeys in autonomous vehicles in China, I have seen how well this technology works even in heavy traffic and with no driver intervention. Another development is humanoid robots. Artificial beings are created that move like humans and that you can talk to. These products are far from fully developed, but the progress made in a relatively short time is considerable.

Innovation in the field of AI is happening at a cracking pace. How do you manage to keep on top of it?

Travel is part of my job, and I try to visit companies in both the USA and China at least once a year. When you’re talking to people on the ground you get a good overview of how the market is developing and who is competing with whom. And fortunately, I'm not alone, but manage DWS Invest Artificial Intelligence with my colleague Frederic Fayolle. We are both members of DWS's global equities team, which has 20 employees in Frankfurt alone who regularly exchange information. This ensures that we are always up to date with the latest technological developments.

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