Navigating China's AI Regulations: Implications for Tech Giants

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0:37There was a lot of, you know, talk from Alibaba Holding Group and from Baidu, who's kind of like the Google of China, from SenseTime Group, who is official recognition pioneer based out of Hong Kong. And it's kind of interesting because we've had a few months to gauge exactly what's happening. So on the podcast today, I'm going to be talking about what is happening in AI in China right now, what we're seeing from the last few months, how the government there is responding, how the big tech companies have been responding to the situation, and what we can look to see in the future. So let's break it down.

1:12The first thing I'd want to say is that the three main players, like I mentioned, are Alibaba, Baidu, and SenseTime. but also there's a couple other big companies and that is ByteDance who is the owner of TikTok and a lot of other Chinese technology companies and so I think the biggest thing to know about all of this is that the Beijing government essentially recently just laid out draft regulations you could say which essentially gives AI developers a green light to develop AI technology just so long as everything that they produce the results from their large language models are three things.

1:53Number one, truthful. Number two, accurate. And number three, objective. This is going to be a pretty big difficult task, I would say, because even OpenAI is obviously having issues with all of those three things. And then you have to keep in mind that in China, this is a whole nother level of, you know, what is truthful, obviously what the government would deem as truthful, what is accurate, what the government deems is accurate, and what is objective, which is obviously going to be, you know, it's going to be a bit of a tricky thing. So definitely these large technology companies in China have a few different things going against them.

2:28Number one being the government, its regulation, and trying to dance around that situation. I mean, I think that they're probably already, they're all happy that they have a green light to go and develop this, but they definitely have stipulations that I believe are going to hold them back and make their technology not very relevant outside of China. But because the Chinese government has banned technology like Google Bard and ChatGPT, OpenAI, and a lot of all of the American AI companies, they do have time and space to kind of keep up. So it is interesting because the stock prices of these companies uh initially um i believe that baidu had one called ernie bot so baidu is like the google competitor and they're it really overwhelmed the mark underwhelmed the market so it wasn't a super great bot and so their company shares went have been down six percent since march and you can contrast that to google who had their big ai day yesterday and their stock is up over 150 billion dollars since debuting AI Day and showing all of the new advancements in AI.

3:36Obviously, an area that in America is largely completely unregulated, so they can integrate and create these tools at whatever speed they want. And I mean, that being said, I do believe there's a lot of self-regulation. Google is a company that is obviously focused on its profits. It's not going to release something that's going to damage its brand. So they put a lot more research, a lot more work into making sure that their AI was, you know, as good as it could get. That being said, you know, Google is definitely, Google BART is definitely not perfectly, doesn't always have perfect facts. ChatGPT definitely doesn't always have perfect facts.

4:11And I think the fact that, you know, they can label these things as experimental or under research or beta allows them to be able to release them, gather data and improve them. And this is unfortunate that China is not going to have the ability to really do that. So in China, because the US stocks have been blocked, retail investors have really gone wild for any domestically listed Chinese AI stocks or any stocks that even have like a small hint of having AI in them. So one called Canbercon Technologies, its shares have more than tripled this year because of that. And so I think the pros in America are largely staying away.

4:54And so the leading companies are the ones who essentially can just afford to be successful in AI, afford to put up with the government regulation and all of that. So I would say despite Baidu's bad news with Baidu's Ernie Bot, they still have a lot of first mover advantage in China. and I think that they've been investing in AI for over a decade at this point and they have hundreds of PhDs in their company that are currently that is currently working on this so it's obviously been a big focus for them for a long time this is something I tell people a lot right it's not like all of a sudden AI you know broke into the scenes AI like this company's been investing in them for 10 years AI is something that's been around for a long time Facebook has been using AI to help with their homepage algorithm since 2006 so it's nothing new but But it's definitely with the advent of ChadGPT super buzzy, super hyped up and very talked about at the moment.

5:49So another area that I believe is going to be a challenge for China is in the semiconductor industry. So at the moment, the U.S. has blocked the NVIDIA's A100 chip from being shipped to China. The sales were banned by Washington. And so NVIDIA substituted that with the A800, which is about a third slower. I'm still a still a good chip I would say but it definitely is a very real challenge that China's not able to get as fast or as powerful microchips they have some you know Chinese versions that are not quite as good and it's going to be interesting to to see how that plays out as they're trying to kind of fight against government regulation and chips I would say though that the the competition in China is still pretty tough so Tencent Holdings which dominates Chinese social media and online gaming and then also ByteDance, which owns TikTok, are expected to really put up a fight in the artificial intelligence arena because they have massive data sets.

6:54So if you can just imagine all of the content and all of the information that ByteDance has from TikTok, right, they can pull in American consumers data, they can pull in data from all around the world, all different languages, they can put transcripts on their videos and then they have tons and tons of data on every single topic and what people are saying in every single area and I think that that alone is enough data to make a very substantial competitor to OpenAI and ChatGPT and I'll be also interested to see if Facebook comes out with anything in the near future that is consumer-based based off of their massive trove of information and data they have on customers on their platform.

7:33So I think that it's obviously going to be these first tier players that have already broken in and are rather large that are going to be the winners. They're the only ones that can really put up with fighting with the government of Beijing and doing all of their stipulations. But I do think that this push for AI right now is kind of a rehabilitation effort by the Chinese government for China's big tech industry, which essentially has been in the regulatory doghouse for at least two years now. You'll see large companies like Alibaba had their CEO. He just disappeared for a couple months and then he came back and said he was just a painter after he criticized the Chinese banking system.

8:16So Chinese government has been keeping close wraps on big tech and on the leaders of those industries and has really been keeping them under their thumb for the last couple of years. And now they've kind of like extended the olive branch and said, you're allowed to, we blocked all AI from coming into China, but you're allowed to pursue it as long as you follow our rules and evidently have just as strict of censorship and regulations as the Chinese government currently has on the internet. So I think that the new regulations definitely make this harder. And the difference is that in the US, you know, models, they can do these AI models, they can learn, they can, they can be released, people can argue one way or another over how the best way to train them or to fine tune them or to get them to be more accurate.

9:07And if we need to make them more accurate, right, there's all debate going on. But in China, that's not going to be the model. The model is going to be strong regulation and the companies are going to be liable if their chatbots produce answers that officials consider wrong. So this definitely is going to slow down the releases. They're going have to really really carefully test their products and I think that it's gonna be pretty difficult because they also have to keep an eye on what's happening in Washington in the US and how the regulations here going because inevitably they're gonna want to follow those and so I think it definitely is a very challenging landscape that these companies have at the moment and I also think that there was a recent there was a recent industry professional who it was Patel who estimated that there is about two years at most that Chinese companies are off or behind open AI.

10:06So he thinks that Baidu's product is not as good as ChatGPT, but it's pretty good. So I would say two years is a pretty long time in tech. So as far as placing your bets on which tech giant is going to win. I think that we'll have to give that a year or so to see what the main difference is between these Chinese AIs and the American ones are and to see just how badly they're either legging or if they find a way to miraculously catch up by, you know, I mean, I'm sure some people will say they're going to steal data and clone chat GPT and get their source code. But I mean, who knows, right? Anyways, I'd love to hear your opinion.

10:44So make sure to join our our ChatGPT community on Facebook. Let me know what you think about this. Let me know if you would use a AI chatbot out of China and we will continue to follow this into the future.