OpenAI’s Chinese Rivals
The global AI leadership race intensifies as China catches up. Despite OpenAI’s impressive achievements with its ChatGPT language model, multiple Chinese tech giants pose significant competition. Beijing Academy of Artificial Intelligence (BAAI), China’s rough equivalent to OpenAI, developed Wudao, a 1.75 trillion parameter deep learning model. But all eyes are on the private sector to find adoptions at scale.
The strongest contender here is probably Baidu but despite the technical prowess of its AI platform, Ernie Bot, concerns linger about its monetization strategy. Tongyi Qianwen, Alibaba’s AI, integrates across the company’s enterprise tools but may threaten its core marketplace business. Tencent’s AI division, Hunyuan, focuses on gaming and enterprise software, with potential AI integration into the company’s cloud services.
Besides the “BAT”, several AI companies stand out. iFLYTEK is a well-known artificial intelligence publicly listed company in the Asia-Pacific Region. Its product iFlyrec emphasizing speech-to-text transcription. SenseTime directly competes with OpenAI, with products including the SenseChat chatbot, an image generator, and developer tools.
Political encouragement and hardware accessibility define China’s AI landscape. Regulations necessitate AI training on censored content and watermarking of AI-generated content. Export controls on GPUs (graphic processing units) from the U.S pose challenges. However, vast datasets from the Education Exam System and a domestic GPU (graphics processing units) manufacturing surge are unique opportunities. Despite the challenges, the allure of large language models (LLMs) may attract more Chinese companies, such as Bytedance and Meituan, into the AI race. As these tech giants continue to innovate and address challenges, China could soon produce a new AI leader. Read more on China’s encouragement of AI since 2018 here and read more on the assessment of China’s LLMs here.
Waiting for reform
The recovery of China’s economy is rocky. The first five months of 2023 saw a robust 4.5% GDP growth, but ups and downs in trade, consumption and slower growth in industrial output than expected. Although retail sales has been growing over 18% and industrial output over 5%, the below-expected performance is prompting calls for policy stimulus. A Politburo meeting of some of China’s most senior politicians at the end of April 2023 headed by President Xi Jinping, was a review of China’s first-quarter economic performance. The key message was the need for a return to pro-growth policies.
A maturing economy after decades of high growth and post Covid struggles brings friction, as does the increasingly dominant and visible role that China is taking on the world stage. As China’s economic situation evolves, it is crucial to monitor with greater attention the country’s various decision-making gatherings such as the plenums, politburo study sessions and the central financial and economic affairs commission meetings. Going beyond the statistics and carefully interpret these decisions is an increasingly important capability for business leaders around the world. Read more on how China makes economic plans here.
The reorg of Alibaba
The challenges that CEOs and their teams face are constantly evolving, and for Alibaba, this has resulted in a significant planned restructuring of its business into six separate groups, each with its own CEO and board of directors. While this move is one of the most significant reorganizations in the Chinese giant’s history, it is not entirely surprising given the frequent reorgs by Chinese companies to adapt to the dynamic consumer market, cutthroat competition, policy ambiguity, and shareholder demands. The response from financial markets was initially positive as Alibaba stock (in terms of price-to-estimated earnings) seems to be undervalued as compared to its tech peers Meituan, Tencent and even JD.com and Baidu – and it may prove to be good news for their cloud computing (Alibaba Cloud) and logistics businesses (Cainiao).
To be frank, a reorganization is nothing new for Alibaba, nor generally speaking for Chinese tech companies like Haier (the ongoing reorg since the 1990s in their rendanheyi approach) and Midea (at least 9 times in recent history). Even their competitor JD.com’s newer business units, JD logistics and healthcare, already raised capital from outside investors, and then went on to list in Hong Kong. JD.com is likely to consider spinning off other business units, following Alibaba’s lead.
It is a perfect storm for Alibaba. Alibaba’s decision to restructure its business has significant implications for a range of stakeholders, including employees, customers, the government, and shareholders. In many ways, Alibaba did not have much of a choice as in the highly competitive landscape they could not survive without reconsidering – quite fundamentally – their relationship with these key stakeholders. One thing is for certain, the evolution of their ecosystem – and that of other Chinese tech companies – will never be finished. Read more on Alibaba’s reorganization here.