December 2023

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HOW CHINA MADE A DIFFERENCE THIS MONTH

“NEIGHBOURS” 

Xi Jinping made four international visits in 2023. To Russia, South Africa, United States and Vietnam. These visits reflect the state, vulnerability and changes in the world. Xi’s last visit of 2023 to Hanoi came only three months after Joe Biden visited Vietnam.

 Vietnam, having China as largest trading partner, has in recent years drifted closer to US with Vietnam as ideal location for global companies to de-couple business away from China. Besides the many deals signed and promises made by China to expand Vietnam’s development, the most important high-level exchange was on seeking a lasting resolution on maritime disputes in the South China Sea. Not unimportant, considering that military experts predict that after Ukraine and Gaza the next major hot war would be in South East Asia.

 Let’s take a quick look at China’s neighbours.

 No country has more neighbours than China. China has 14 land borders covering 22,800km and 7 additional maritime borders (including Taiwan), which have all been disputed once. China has resolved border disputes with 9 of its neighbours, while 12 others are still disputing them.

 India, which is China’s millennia-long historical frenemy, and the next global superpower to rise, is probably the only neighbour of China that could afford not to choose sides in case of a hot war in Asia involving both China and US/NATO.

 China’s other neighbours generally fall into three types that would probably choose a side if needed:

- A SECURITY MINDSET: Kazakhstan, Kirgizstan, Tajikistan, Mongolia, North Korea, Russia, Afghanistan, Pakistan. These nations are economically fragile. China keeps up a most constructive friendship with them, reflected in the multilateral political, economic, and security alliance Shanghai Corporation Agreement (SCO). They keep each other safe and rely on China’s security leadership.

- ECONOMIC INTERESTS FIRST: Laos, Myanmar, Vietnam, Indonesia, Malaysia and Brunei. China seeks to strengthen the friendship, partially reflected in the Maritime Silk Road investment. These nations rely more on China than on the US for future economic development. These are the swing-nations in case of a hot war.

- GEOPOLITICAL ADVERSARIES: Regions with active US military support: Japan, South Korea, Taiwan and the Philippines. China is carefully managing the relationship. They keep each other at a healthy distance. Three strong nations and the Philippines that would likely side with US in case of a hot war in the region.

The issue with this kind of ‘cold-war’ assessment I just made is that it forgets one critical fact: since the Sino-Vietnamese war in 1979 there have been no wars in South East Asian region. China, India, South-East Asia and North-Asia together combine almost 45% of the world’s population with the most diverse and divergent religious, economic and political systems, all living next to each other. And yet, no major wars for 45 years.

The question is why not? And why are experts warning about a new war in South East Asia?

A valid answer to the first question is because these civilisations have learned to live with each other. They generally seek more development through trade, which requires peace. This is why the Association of South East Asian (ASEAN) nations was established. I trust that these nations do not fear China much more today than they did throughout history.

My answer to the second question is because this region has become a target for China and US in a larger geopolitical war. The current threat for a new war in the region is not primarily due to China’s military assertiveness, nor due to US’s military presence in the region, but because China and US are seeing this region as a geopolitical battlefield between them. The South-East Asian nations have become pawns in a larger game.

The year 2024 is especially tricky in this regard. Not so much because of China, but because of the upcoming election in Taiwan and the US. On January 13th, the Taiwanese will choose their new president. If the new leader of the separatist DPP party Lai Ching-te wins, he could challenge Beijing’s red line on Taiwan. This would increase China’s military presence in the Taiwan strait and South China Sea, leading the Philippines to spark a hot war with China over a few disputed islands. President Marcos is not giving in to China’s claims in the South China Sea and even started building an island in the region itself. Marcos is confronting China head-on, turning to the US for more military support, and using a Zelensky-style brave, fierce and unambiguous language on where he stands against China’s threats.

If we now add to that explosive cocktail the 2024 election campaigns in the US, where all candidates – especially Trump and Biden - will want to outbid each other on who is the most assertive against China, this could lead to an escalation and military miscalculation in Asia.

I am therefore worried of an unintended US-China proxy-war in South-East Asia in 2024. My sole wish for 2024 is that China remains as calm as they have been for 45 years, and that the US does not stir up tensions in South-East Asia as they have enough domestic problems to tackle – as has China.

CHINESE INNOVATION NEWS – DECEMBER 2023

1. Chinese scientists develop powerful hydrogen therapy that could reverse ageing

2. Chinese scientists use genetics to boost iron content of corn, offer hope to anaemia sufferers worldwide

3. Xiaomi founder Lei Jun ready to take on Tesla in the EV market

4. China memory chip maker CXMT makes strides in DRAM Technology

5. China releases guideline on upgrading traditional manufacturing industries

6. China targets ‘future industries’ in 2024 and ‘digital push’ by 2026

7. Generative AI updates from China (Dec 2023)

(Click the links in titles below to read a larger news article on each topic)

1. Chinese scientists develop powerful hydrogen therapy that could reverse ageing

 Reverse ageing. It sounds like a hoax or a Hollywood movie. But Chinese researchers have developed an anti-ageing hydrogen therapy that could effectively rewind age-related changes in the body and potentially prevent geriatric diseases. Senescence – the gradual deterioration of bodily function as we age – is one of the major causes of age-related conditions and diseases. At a cellular level, senescence can be responsible for DNA damage and the loss of cell cycle functions like division and growth. Cells can also secrete materials that cause inflammation, creating a “senescence micro-environment” that causes tissues and bones to decline in their ability to self-repair.

Scientists have known for some time that hydrogen can slow or even turn back the clock on the ageing of cells. Hydrogen is able to alter the senescence micro-environment from “pro-inflammation to anti-inflammation”, supporting bone defect regeneration. Hydrogen is able to remodel the senescence micro-environment during the early stage of inflammation and have a continuing effect on later bone repair. It could potentially also prevent and treat diseases like Alzheimer’s. But turning this knowledge into a viable therapy has been a tough nut to crack. 

Using nanotechnology, a Chinese team has developed a scaffold implant that delivers a slow and sustained release of hydrogen for up to a week. The device was successfully tested on 24-month-old mice – equivalent to 70 year-old humans – that had femoral bone defects. The researchers created the scaffold with calcium disilicide nanoparticles – hydrolysed to store hydrogen – sprayed on to porous, bioactive glass and wrapped in a biodegradable polymer to stop it degrading and releasing the hydrogen too quickly. Their next challenge is to to create a scaffold with an even longer period of release to improve repairs.

With China’s declining working population, extending the productivity of the elderly is not just a nice plan, it’s a must for China.  

2. Chinese scientists use genetics to boost iron content of corn, offering hope to anaemia sufferers worldwide

Chinese scientists created a gene-based method to increase the iron content of corn kernels to 70.5 mg per kg, or more than double that of existing varieties. The team identified a gene that regulates iron concentrations in corn kernels, and found that increasing its expression levels raised the iron content. Gene expression is the process by which information stored in DNA directs the formation of cells. The team has been successful to load iron into the corn kernels without compromising yield.

Iron deficiency, the most common cause of anaemia, affects more than 40 per cent of children under five and a third of expectant mothers globally. Anaemia is a problem of not having enough healthy red blood cells or hemoglobin to carry oxygen to the body's tissues. Iron is a key nutrient for development and cell growth in the immune and neural systems, as well as in regulating energy metabolism. 

Taking iron supplements is a feasible solution for deficiencies but the cost is high. Boosting the iron content of daily crops could fundamentally improve the iron nutritional status of a wide population at a low cost, which is of particular significance to developing countries where corn is the staple food.

3. Xiaomi's founder Lei Jun ready to take on Tesla in the EV market

Xiaomi phones are known as the Chinese copy of the iPhone. But that comparison is not doing them justice, as the company created a huge ecosystem of innovated IoT connected devices and gadgets. Now they are entering the electrical car market – a dream Apple has had since 2008, but not (yet) realised. Xiaomi has beaten Apple once again.

Xiaomi’s upcoming car models took 3,400 engineers and 10 times the average industry cost to develop. Xiaomi’s founder Lei Jun said he was confident that the debut vehicles would be competitive in a crowded market, including Tesla. The most innovative of this story is the speed at which Chinese teams have been able to make a Tesla-S rival car from the drawing board to production.

With EVs being computers with a big battery on wheels, it was only a matter of time until a consumer electronic company would build a compelling electrical car. But there is no better company in China than Xiaomi to understands consumer needs.

Xiaomi has drummed up the excitement about its upcoming car models, the SU7 and SU7 Max. But there is no real need to do that if we look at the specs of the car. Besides all the latest EV technologies available, including autonomous driving, the car intends to enhance the onboard experience by leveraging the Xiaomi Car IoT platform open to third parties to develop.

I always envisioned my next car to be NIO ET7 or BYD HAN, but now I am getting excited about Xiaomi’s SU7. I guess I will have to wait for price and availability. As my wife and daughter both have a Xiaomi phone, it could make it easier to convince them – the hardest part of the decision.

4. China memory chip maker CXMT makes strides in DRAM Technology

 ChangXin Memory Technologies (CXMT), China’s top DRAM developer, presented a paper at IEDM in San Francisco, giving an indication of its design capabilities for GAA transistors – the most advanced transistor type for cutting-edge 3-nanometre grade chips.

The evidence of progress by CXMT is impressive, as it shows that the Chinese company is not far away from state-of-the-art research and products, because Samsung Electronics is trying to do the same. The design is still on paper, so nothing to do with CXMT’s production processes, but it describes in detail the fundamental research related to DRAM structure and the feasibility of 4F2 design.

Some analysts claim that CMXT's paper confirms that the company’s progress with the most advanced transistor architecture “breaks US sanctions”. CXMT claims that any accusation that CXMT is violating US sanctions or export controls is completely inaccurate. What is clear is that this paper from CXMT will once again heat up the tech war between China and the US.

5. China releases guideline on upgrading traditional manufacturing industries

China has released a guideline on accelerating the transformation and upgrading of traditional manufacturing industries. By 2027, China's traditional manufacturing industries should achieve notable progress in their high-end, intelligent, green, and integrated development, consolidating their position and competitiveness in the global industrial division of labor and cooperation.

This text sounds like politicians talk, but it is far from that. These new guidelines put forward a series of targets to be met by 2027: The penetration rate of digital research and development and design tools should exceed 90 percent, while the numerical control rate of key processes should exceed 70 percent by 2027. The industrial energy consumption intensity and carbon dioxide emission intensity should continue to decline. The water use of industrial added value should decrease by 13 percent compared to 2023, and the comprehensive utilisation rate of bulk industrial solid waste should exceed 57 percent by 2027. This all will move the needle.

So now we know the next 3-year targets, China’s manufacturing can accelerate its transition to become smarter, greener and more self-reliant. Anyone believing Chinese factories will never be as competitive on product quality as the factories in Europe or America is a fool.

6. China targets ‘future industries’ in 2024 and ‘digital push’ by 2026

Beijing aims to boost tech-heavy sectors, from new materials to biomedicines and high-end equipment, to move ahead with advanced manufacturing development. An action plan for the development of industries of the future like humanoid robots, quantum information, new energy, aerospace, electronic information, 5/6G…will soon be introduced.

China also wants to focus on finance, tech and farms in 12-sector digital push by 2026: industrial manufacturing, modern agriculture, trade, transport, financial services, technological innovation, culture and tourism, medical care and health, emergency management, meteorological services, smart city governance, and green and low-carbon economy. The three-year action plan (2024-2026) includes more than 20 per cent annual growth for the data industry, and the doubling of data transactions by 2026. 

The National Data Administration (NDA), which takes over many duties of the Cyberspace Administration of China, the country’s top internet watchdog, has been tasked with driving digital development by creating blueprints, introducing unified standards for data sharing, and supporting the digitalisation of public services. Scientific and research data will be opened up to boost technological innovation and large AI models, such as those that power prominent chatbots like ChatGPT. This last one is particularly interesting, as China is starting to open up datasets for large language models to be used to enhance services in societal transformative industries.

 My prediction is that China will one day become the service factory of the world.

7. China Generative AI updates - December 2023

Chinese chip start-up unveils GPU-based computing centre, AI graphics card

Moore Threads Intelligent Technology, a Chinese GPU start-up that has been put on a US trade blacklist has introduced a new graphics card along with what it called the country’s first GPU-based computing hub for large language model training. Moore Threads said its center can finish training a 130-billion-parameter model within 56 days.

Moore Threads did not elaborate on which foundry produced its latest graphics cards. They are now teaming up with 15 partners – including 360 Group, Baidu, JD.com, NetEase, Tsinghua University and Fudan University – to establish a large model alliance.

Chinese generative AI to account for a third of industry’s economic value by 2035

A Beijing Think Thank evaluated that Chinese generative artificial intelligence (AI) will contribute 30 trillion CNY (US$4.2 trillion) worth of economic value, out of the industry’s 90 trillion CNY globally, by 2035. In the near term, China’s generative AI market is expected to reach 10 trillion yuan this year.

The adoption rate of generative AI – the technology driven by large language models like those powering OpenAI’s ChatGPT – has reached around 15 per cent in China. Retail and telecoms industries led the use of AI with adoption rates of 13 per cent and 10 per cent, respectively, followed by 7 per cent and 5 per cent for healthcare and manufacturing.

ByteDance joins generative AI frenzy with service for chatbot development

ByteDance, the Chinese owner of TikTok, will launch on an open platform very soon that will allow users to create their own chatbots. Bytedance has also been working on its own text-to-image generator similar to Midjourney. The move aligns with the company’s new strategic vision to explore new generative AI products and how they can integrate with the existing ones.

Beijing launches state-backed AI platform

Beijing has launched a public computing platform to support China’s artificial intelligence. The Beijing AI Public Computing Platform, called Shangzhuang, will offer 500 petaflops of computing power in the first phase now and 1,500 petaflops in first quarter of 2024.

The Shangzhuang project is operated by state-backed Beijing Energy Holding, with an aim to alleviate the ‘acute shortage of computing power’ needed for AI development. It is looking to power its computing platform completely with green energy in the future.

Baidu says its ChatGPT rival Ernie bot now has more than 100 million users

ERNIE Bot, which was only released to the public in July 2023, has reached over 100 million users, which is almost 10% of all Chinese internet users. ChatGPT reached 100 million users in only 2 months after its release end of 2022, and has 100 million daily users now. ERNIE Bot was also just ranked by Super Clue as the top Chinese AI Chatbot, but its score of 79.02 is more than 10 points lower than the latest version of ChatGPT.

Four Chinese generative AI models pass official assessment 

Four large models that went through government assessment are developed by 360 Group, Baidu, Tencent and Alibaba. Baidu has the largest user base, and Alibaba is the only open-source model amongst the four. According to 360 Group CEO, Chinese Generative AI are still 12-18 months behind ChatGPT in performance; while Baidu’s CEO claims Ernie Bot 4.0 now matches ChatGPT4 performance. Would love to see them both on a panel debate.

The assessment was initiated by the China Electronics Standardization Institute under the Ministry of Industry and Information Technology. The national assessment has raised the threshold for large models, and leading Chinese AI models are likely to emerge from the first assessed companies, while other large models may focus on industry-oriented applications

Alibaba donates its quantum lab to local university, shifts focus to AI in agriculture, healthcare

Alibaba has cut a quantum computing laboratory and team from its research arm, donating both the lab and related experimental equipment to Zhejiang University. Alibaba's in-house research initiative which included the lab DAMO would continue to focus on technology research with the aim of being a leader in artificial intelligence research.

Sensetime founder dies at age of 55

SenseTime’s co-founder and major shareholder Tang Xiao’ou passed away on Dec 15th after an illness. Born in 1968, the Massachusetts Institute of Technology graduate and Hong Kong professor was regarded as a pioneer in China’s AI sector, helping create one of the nation’s leaders in facial and image recognition.

If you know of any other breaking China innovation news from December that I missed, do let me know so I can add it in next month’s newsletter!

Recommended interview of the month: TEMU

I was invited for a panel discussion in December on China Global TV Network (CGTN) about the Chinese e-commerce app TEMU taking on the world.

What should we know about TEMU? Why is it so successful around the world? Can TEMU's business model be sustainable? What are TEMU's challenges and risks? Will its model get copied by Amazon and others? ...

Worth a watch! Link on YouTube