Country achieves crucial technological breakthroughs

Companies eager to cash in on AI to boost global competitiveness

Yu Zhongyuan, a 59-year-old businessman engaged in foreign trade in Shenzhen, Guangdong province, is a loyal user of Huawei Technologies Co's smartphones.

But he never expected the company's phone business to spring back to life so quickly.

After being subject to technology restrictions imposed by the United States government for four years, Huawei made a high-profile comeback to the 5G smartphone arena last year.

The company surprised the world with its Mate 60 series of smartphones, which are equipped with chips that support 5G technology. The phones made headlines worldwide and triggered an enthusiastic response from Chinese consumers.

Yu said: "Having witnessed Huawei emerge stronger from mounting challenges, I am confident that China's technology industry can overcome any future difficulties. This is a symbolic moment."

The recovery in Huawei's smartphone business offers an insight into how China's innovation-driven economy is scrambling to achieve breakthroughs in crucial technologies through long-term input into research and development, and by using a robust industrial support system.

Officials, company executives and experts said that despite geopolitical uncertainties and lackluster global demand, Chinese companies are eager to ride the latest technological wave, which includes artificial intelligence, or AI, to sharpen their global competitiveness and strengthen the security of key industrial chains.

The past year has seen innovation helping to set milestones in China's manufacturing industry.

The first commercial flight of the C919, China's self-developed large passenger aircraft, took off last year. The nation's first domestically produced large cruise ship, Adora Magic City, was delivered, and China surpassed Japan to become the world's largest exporter of automobiles.

Meanwhile, with AI set to unleash enormous potential in reshaping the world, Chinese companies are coming up with new applications to rival ChatGPT, a chatbot developed by the US company OpenAI, which has taken the world by storm. Such progress was made despite Washington's restrictions on exports of high-end AI chips to Beijing, the officials, company executives and experts said.

Wei Jianguo, former vice-minister of commerce, said, "Some countries attempted to contain China's economic development by promoting decoupling, but our progress proved that their efforts have failed."

China boasts the world's most complete industrial system, and its highly efficient industrial clusters, with close upstream and downstream connections, make Chinese companies extremely competitive on the global stage, Wei said.

"Meanwhile, China's development in high-tech sectors has promoted development of its digital economy. The nation is now closely intertwined with other countries in high-tech industries," said Wei, who is also vice-chairman of the China Center for International Economic Exchanges.

Data from the World Intellectual Property Organization show that China is now home to 24 of the world's top 100 science and technology innovation clusters, making it the country with the most such clusters.

Progress made

Huang Hanquan, head of the Academy of Macroeconomic Research, said China has made progress in key technologies in strategically important sectors, showing that scientific innovation plays an increasingly bigger role in driving economic growth. The academy is part of the National Development and Reform Commission, or NDRC.

As the innovation-driven development strategy gains traction, technological innovation continues to empower the real economy and new industries, and driving forces continue to develop and grow, Huang said.

Denis Depoux, global managing director of consultancy Roland Berger, said: "China has demonstrated its innovation capability. It is leapfrogging in several fields, gaining leadership globally in areas like the electric vehicle chain — from batteries to charging infrastructure, photovoltaic panels, wind turbines, nuclear and telecommunications equipment."

The nation's industrial modernization, huge consumption potential, and growing innovation prowess are three strong points that create a new China story for the world, he added.

Last month, the tone-setting Central Economic Work Conference made the construction of a modern industrial system through technological innovation the top priority for economic work this year.

The conference called for efforts to develop new productivity boosters, and produce new industries, models and impetus with cutting-edge technologies.

Chen Zhichao, an assistant researcher at the Xi Jinping Thought on Economy Study Center, which is part of the NDRC, said the call will inject strong impetus into the country's high-quality economic development.

Compared with traditional productivity tools driven by elements such as labor, land and capital, Chen said new productivity boosters are led by technological innovation, which will promote the transformation of the economic growth mode.

"Challenges still exist, and more efforts, including higher fiscal investment and stimulation of social capital, are needed to increase investment in fundamental and applied research, and cultivate high-end innovation-oriented talent," Chen added.

Jin Zhuanglong, minister of industry and information technology, the country's top industry regulator, said China will step up the development of a number of strategic emerging industries such as biomanufacturing, commercial aerospace, and the low-altitude economy.

The ministry will also open up new paths for future industries such as quantum and life sciences, and make extensive use of digital intelligence and green technologies to accelerate the transformation and upgrading of traditional industries, Jin said.

"Technologies such as AI can empower China's new industrialization push, and their applications in industries such as manufacturing and healthcare will be an important symbol of a new round of technological revolution and industrial transformation," he added.

Goldman Sachs Research forecast in a report that breakthroughs in generative AI, represented by applications such as ChatGPT, can drive a 7 percent, or almost $7 trillion, increase in global GDP and raise productivity growth by 1.5 percentage points over a 10-year period.

Well aware of the opportunities ahead, established tech heavyweights such as Alibaba, Tencent, Baidu, ByteDance and Huawei, as well as thousands of startups in China, are scrambling to develop and embrace large language models. Such models are computer algorithms fed with huge amounts of data, which are key to supporting ChatGPT-like applications.

A report, released by the Beijing Municipal Science & Technology Commission, said that as of October, China had developed at least 254 AI large language models.

Chi Xiannian, a senior engineer at the China Center for Information Industry Development, a think tank affiliated with the Ministry of Industry and Information Technology, said finance, manufacturing, governance and transportation are the top industries in China to use AI large language models.

Vital impact

Liu Qingfeng, chairman of iFlytek, a Chinese AI pioneer, said: "Chinese companies must devote big, real money to research and development of fundamental science to achieve breakthroughs in AI. The impact of this generative AI technology is no less important than that of the birth of the PC or the internet."

In October, iFlytek unveiled the latest version of its AI large language model, Spark-Desk V3.0. A test and evaluation report by the Guoyan Institute of Economic Research, which is affiliated with the Development Research Center of the State Council, said Spark-Desk V3.0 has an overall capability stronger than that of ChatGPT.

The model's core capability is evaluated in seven dimensions — text generation, language understanding, Q&A knowledge, logical reasoning, mathematic ability, coding ability, and multimodal ability, Liu said.

The ongoing AI boom is also spurring surging demand for AI chips, which are vital to enabling ChatGPT-like applications. Experts said Washington's restrictions on exports of US company Nvidia's advanced AI chips to Beijing last year have left plenty of room for competitive Chinese rivals to emerge.

For example, Huawei has launched its 910B AI chips, which have already been bought by major Chinese internet companies to support their large language models. The performance of Huawei's AI processor Ascend 910B can be roughly compared with that of Nvidia's A100 chip, iFlytek said.

Jensen Huang, CEO of Nvidia, said recently that Huawei is among a field of "very formidable" competitors to Nvidia in the race to produce the best AI chips.

Wei Shaojun, president of the integrated circuit design branch of the China Semiconductor Industry Association, said, "This is the latest evidence that Washington's restrictions hurt the interests of US companies hard and accelerated Chinese companies' efforts to make technological breakthroughs."

In addition to AI and chips, China also recorded rapid growth last year in the production of new energy vehicles, or NEVs.

In the first quarter of last year, China replaced Japan as the world's largest vehicle exporter. The China Association of Automobile Manufacturers estimates that the nation's total vehicle exports for last year will exceed 5 million, a record high.

Xu Haidong, the association's deputy chief engineer, said, "Chinese automobile brands have accurately grasped the emerging opportunities in NEVs, and the trend of integration with intelligence and connectivity."

A report from consultancy KPMG said Chinese carmakers are expected to capture about 15 percent of Europe's electric vehicle market by next year, as established players such as BYD and emerging companies, including NIO and Li Auto, gain popularity among European consumers.

This would mark a big step forward, as Chinese marques accounted for less than 10 percent of the 1.1 million battery-powered electric vehicles sold in Europe in 2022, KPMG said.

Kevin Kang, chief economist at KPMG China, said, "Chinese brands have huge potential in the European market and could contribute the most to future sales increases there."

Ding Yuqian, head of China Autos Research at HSBC, said China has the world's most competitive electric vehicle battery supply chain.

The single most expensive item for such a vehicle is its battery, and carmakers based in China have access to high-quality batteries produced at a relative cost advantage, with manufacturers continuing to improve this technology.

Hans-Paul Burkner, global chair emeritus of Boston Consulting Group, said electric cars are a typical example of China moving up in the value chain. Chinese companies have become highly competitive, not just because of costs, but also due to quality and innovation, he added.

"When I look at some of the new cars on the streets of Beijing and Shanghai, the electric vehicles are really impressive. This is what makes Chinese companies competitive," Burkner said.

"We see quite a lot of Chinese companies being the top producers of patents and really good products, which are witnessed all over the world."

Jeffrey Sachs, a renowned economist and director of the Center for Sustainable Development at Columbia University in New York, said, "China's strength right now is that it is at the cutting edge of many of the most important technology innovations for the future.

"These include low-carbon energy solutions, electric vehicles, batteries, supply chains, artificial intelligence, high-speed trains, and many other sectors. All of these will be very good for China's future growth."