China has AI Firms That Don't Exist Anywhere Else

This is goin to be an Op-Ed about SenseTime and China’s rise in artificial intelligence.

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China has a number of pure-play Artificial Intelligence companies that other countries cannot replicate. It's not only a leader in facial recognition at scale, but is doing more R&D in new applications of artificial intelligence that can only mean an upgraded version of surveillance capitalism.

SenseTime is a 'Surveillance Capitalism Native' Company

Ideas that China is anti-capitalistic just because it regulates its technology companies or cares about 'common prosperity' are greatly mistaken and purposeful mischaracterizations of what is actually occurring. China's surveillance capitalism is superior by default.

This is because China is a surveillance capitalism leader in facial recognition and has a greater population of CCTV cameras with more consumers, which means more Big Data.

I've been waiting for this company to go IPO for a long while. Founded in 2014, SenseTime was christened as one of China’s four “AI Dragons” alongside Megvii, CloudWalk and Yitu. With Russian likely to invade Ukraine it's quite possible China will invade Taiwan simultaneously.

If such a scenario were to occur, China would export its surveillance technology by force to other regions of the world, even as it increases its presence in South America, Africa, Australia, Europe and South-East Asia.

SenseTime Is Not Without Controversy

In 2019, SenseTime was put on the U.S. Entity List, an export blacklist, which restricts the company’s ability to get access to certain technologies originating from the U.S. The IPO is thus in Hong Kong.

I am very bullish about China's ability to fast track certain kinds of AI that nobody else can match. SenseTime makes money by selling AI software platforms. Some of the company’s products include facial recognition and autonomous driving technology.

SenseTime’s flotation could be the first tech IPO that raises over US$1 billion since Li Auto’s deal in August. I think SenseTime will become the Palantir of China and then some. In the second half of the 2010s, their algorithms found much demand from businesses and governments hoping to turn real-life data into actionable insights.

Cameras embedded with their AI models watch city streets 24 hours a day. Malls use their sensing solutions to track and predict crowds on the premises.

SenseTime’s three rivals have all mulled plans to sell shares either in mainland China or Hong Kong. China's prowess in Neo-Surveillance Capitalism will basically be imported to the rest of the world. Both Softbank and Alibaba have stakes in SenseTime. With $2.6 billion in funding SenseTime is one of the least understood AI companies in the West.

Rita Liao makes a really good point however with how sophisticated China is becoming with regards to data regulation. The window for China’s data-rich tech firms to list overseas has narrowed.

SenseTime IPO Displays China's AI-First Approach to the Future

Beijing is making it harder for companies with sensitive data to go public outside China. And regulators in the West are wary of facial recognition companies that could aid mass surveillance. China is becoming the leader in AI and technological regulation. This will become a competitive advantage.

China's version of surveillance capitalism is superior to free market Silicon Valley winner-takes-all capitalism. There are many reasons for this, but their regulation of common prosperity, more vigorous antitrust laws and a China-first policy makes them have a much more dynamic internal ecosystem which they will eventually export to the rest of the world.

BAT companies have actively invested in the new generation of China's technological dynasty. So for every Palantir and Snowflake in the West, there's literally dozens of Chinese companies.

The United States Lags in Technological, Antitrust and AI Regulation

The American media and Government don't want you to know about this. Technology companies also censor such things. So what? Founded in 2014, the Hong Kong startup has quickly become China’s biggest artificial intelligence company.

If America lags behind in regulating its biggest companies and AI companies, China has passed a slew of major regulations over recent months including in the areas of anti-monopoly laws and data security and protection. The longer the U.S. delays, the more wealth inequality destroys free-market capitalism while China's pivot to a 'common prosperity' model actually lays the foundation for a golden age.

Why China Will Lead the Next Era of Surveillance Capitalism

If Google and Meta pioneered surveillance capitalism, China has taken it to another level. Cameras embedded with their AI models watch city streets 24 hours a day. Malls use their sensing solutions to track and predict crowds on the premises. The U.S.'s Ad-centric internet will eventually fail.

It will be replaced by a Chinese quantum internet. You might say that companies like ByteDance and SenseTime are the real metaverse companies of the future. SenseTime's IPO is thus symbolic of the line history will draw when China began to advance ahead of the U.S. in artificial intelligence. Nobody likes to admit this and it's political but it is a fact.

 To date, the company has raised a staggering $5.2 billion in funding through 12 rounds. Its biggest outside shareholders include SoftBank Vision Fund and Alibaba’s Taobao. For its flotation in Hong Kong, SenseTime plans to raise up to $2 billion, according to Reuters. Companies like ByteDance and SenseTime, working with the Chinese state, can can thus accelerate in ways that aren't options for other global companies.

China's Acceleration in A.I. is part of a Long-Term Vision of Global Domination

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China's surveillance capitalism isn't just about Big Data, it's about collaboration and long-term planning that simply doesn't exist in any other area of the world at the same scale. It isn't just about common prosperity and innovation, but about how to stay ahead of the other countries in creating a new paradigm.

SenseTime is growing quickly. In the first half of 2021, the company reported revenue of 1.65 billion yuan ($255.4 million), up 91.8% year-on-year. SenseTime, however, reported a net loss of 3.71 billion yuan from January to June this year.

Alphabet's Moonshot DeepMind or Microsoft's relationship with OpenAI is nothing compared to the scale of what pure-play AI companies are doing in China with artificial intelligence. This is because it's not the talent that matters, but the quantity and quality of the data.

The amount of R&D China is doing in AI is hard to even estimate. SenseTime spends a large chunk of its capital on research and development, which cost it more than 5 billion yuan ($780 million) between 2018 and 2020, according to its prospectus. 

China's Internet Likely to Replace American Ad-Based System

Google and Meta are essentially based on old systems of an already outdated internet that's not tethered to reality. Their algorithms actively manipulate sentiment and thus behavior, without benefiting people.

Companies like SenesTime, ByteDance (getting into E-commerce) and Alibaba are diversified in the real world. China's pragmatism in the metaverse will mean a more sophisticated architecture for data science, machine learning, predictive analytics and real-time A.I.

China has a smart city AI architecture that's totally foreign to how Silicon Valley operates. Think about it. Like its peers, SenseTime relied on “smart city” projects for monetization. The business comprised 47.6% of its total revenues of 1.65 billion yuan in the six months ended June, up from a share of 27% in the same period of 2020. The number of cities using SenseTime’s software platform reached 119 by June, according to the firm’s prospectus.

China's Smart City Approach to Technology is Superior

SenseTime, while being a pure-play AI company, is also surprisingly well diversified. The “Smart Business” line, which is tailored to commercial space, residential property, and other enterprise needs, made up about 40% of its revenues in the first half of this year. The firm derived the rest of its revenues from the “Smart Life” unit, which supplies to IoT devices, and “Smart Auto”, which applies perception intelligence to autonomous driving solutions.

SenseTime is famous for its facial-recognition software but is now much more than that, just as ByteDance which has the best AI recommendation engine in the world (outside of YouTube), is getting into E-commerce, music, gaming and education. It's clear what China is doing here is creating companies that can scale globally, eventually in ways that American companies will not be able to keep up with.

It's hard to tell what will even become of Hong Kong now. Fundraising on the Hong Kong market in the third quarter stood as the lowest since the first quarter of last year when Covid-19 impacted the market, although it still ranked third after Nasdaq and New York for the 10 months to October. In the U.S. you will have heard hardly anything about the SenseTime IPO. That's not by accident.

China's Unique Diplomacy Threatens its Best Companies

SenseTime is "subject to complex and evolving laws, regulations and governmental policies regarding privacy and data protection,” the company said in its filing. As competition ramps up between China and the U.S. and China's ignorant global policies that are adversarial in the extreme hurt trust in its regime, its innovation sector is clearly producing companies of scale that are growing very fast.

This is confusing as the country is clearly becoming more confident in its technology leadership with plummeting consumer confidence and a birth rate that means it is entering a dangerous period circa 2022 to 2052. China is the center of the world now in business and technology, but also in terms of how young people struggle to find a place in a new world.

Still if you have never heard of SenseTime or China's little dragon army of AI focused companies, you better start paying attention. South China Morning Post refers to SenseTime as China’s largest AI company and notes that its software was used by more than 2,400 customers as of mid-2021. Company filings also show that it supplies AI technology to more than half of the Fortune 500, and has more than 8,000 AI patents granted or pending.

Founded by the MIT-trained engineering professor Tang Xiao'ou in 2014, SenseTime shows the future of China's advance in technology and artificial intelligence. SenseTime is a prime example of a research-oriented company. That it is coming out of China and not America is significant here. 

It has won over 70 top positions in global AI contests and authored more research papers presented in international computer vision conferences from 2015 to 2021 than any competitor. It also has "the world's largest computer vision model with over 30 billion parameters."

China is learning how to monetize AI for the next world, a global surveillance capitalism net that was invented by Google. We have Meta and Google's Ad-based model to thank for what will come. 

SenseTime's prospectus reads like a compilation of all the buzzwords in today's technology world. Its AI algorithms are currently being used in products from enterprise software to smart city solutions to self-driving cars to consumer tech apps. Yet it's still woefully unprofitable. Despite growing revenue, the company has always run a deficit.

I also write about China's companies and how they influence the future here.

What do you think about China's ability to become an AI superpower? Will the world ever accept it? Comment below.