China Works to Dominate in AI and EV

0:00Today on State of the World, China works to dominate in AI and EV.

0:09You're listening to State of the World from NPR. We bring you the day's most vital international stories up close where they're happening. I'm Greg Dixon. In today's episode, two stories about the reality of China's desire to dominate in two expanding areas of the tech economy. In a few minutes, the battle brewing over the price of electric vehicles. First, a different competition over the use of data. Creating more and more powerful artificial intelligence applications creates a huge demand for the data necessary to train those models. As NPR's Emily Feng tells us, China is betting that controlling that data will give them a leg up in the AI industry and the jobs that come with it.

0:56In this brand-spanking-new office building in northeastern China, rows and rows of people sit silently clicking at their computer screens. This is the fuel that powers so much of generative AI, raw data. And this data processing center is the brainchild of this man. My name is Henry, Henry Chen. He's the founder of Sapien AI. It hires people around the world to collect data and tag and organize it so it can be used to train a variety of artificial intelligence applications. China is a big market. Especially after DeepSeek came out. DeepSeek, the Chinese chatbot performing on par with American-trained chatbots, but trained at a fraction of the cost.

1:38That demand for data is why Chen's company now has about 60 employees in China labeling maps of Chinese streets. This data today is being used to train an autonomous driving program. Looks very abstract. That's NPR producer Au Wencao. I see people working in front of computers, but on the computer screens there are black backgrounds with squares. Squares and green dots. It almost looks like, Owen says laughing, the television show Severance. The data may look abstract, but it's a valuable commodity, says Rohir Krimers. He's a professor at Leiden University in the Netherlands who studies China's digital technology policies.

2:20They believe that data is an economic input. And in a way, they see it as akin in that sense to raw materials. Chat bots today, like ChatGPT, need literally trillions of data points to get up to speed. And who owns that data has increasingly been a competition between companies and between countries like the U.S. and China. Each wants an edge over the other in AI, and that means hoarding data. Data is such a choke point that since last year, China's cyberspace regulators have to approve any bulk export of data out of the country, which is in part why Sapien AI, a Canadian company, is in China to begin with.

3:02For the AI models that are trained here, the data needs to be processed in the country and cannot leave the country. The race to create and protect data is also because the data AI companies want is getting more complicated. Olga Mugerskaya, the founder of an Amsterdam-registered data processing company called Toloka, now specializes in creating datasets for highly technical scientific and engineering fields. She uses an analogy that compares early AI models to human toddlers. The person is like two years old. He or she is taught by kids' books with very bright pictures. And more advanced AI models are like university students.

3:43When she goes to the university, there are dozens of textbooks that she needs to read. For an AI model, that means gobbling up more and more advanced data sets. The data industry is crucial enough that local governments in China, once dependent on dying industries like steelmaking and coal mining, are actively recruiting AI data processing companies. Here's Creamers at Leiden University again. China wants to make a large amount of money through developing the industries of the future. The Rust Belt city of Xinyang, where Sapien AI chose to locate one of its offices, is one of seven Chinese cities that says it wants to become an AI data hub.

4:26The city offers low interest rates on loans and flexible and affordable office space. Here's Chen again at Sapien AI. They benefited from this help. So they give us a lot of help as well. So we find a really good environment to set up the office here. Because data processing employs a lot of young people. China's economy never fully recovered from a global coronavirus pandemic. And youth unemployment has concerned policymakers enough that they briefly stopped publishing that statistic. One of the young people working at Sapien AI is Huang Re, age 21. She's a data quality specialist. She says the work of data processing is suitable for people with obsessive compulsive tendencies because it requires a high level of attention to detail.

5:16Data processing is admittedly not the most exciting work, says Chen, her boss. Just picture yourself sitting at a desk and try to draw bounding boxes around cars for 40 hours a week. But sometimes innovation requires someone, actually a whole lot of people, to do the boring work. Emily Fang in Peer News. Now to another tech sector, electric cars. There are many Chinese manufacturers in the electric car game, which has caused oversupply and lower and lower prices. But some are afraid that what might be good for the consumer could be bad for this burgeoning industry long term. Charisse Pham explains.

6:00China's electric car makers are slashing prices in an effort to boost sales. But there are growing fears that an escalating price war could seriously dent the country's EV industry.

6:14Actually, we are strongly opposed to price wars. It's not sustainable. You have to survive, but this is not healthy. That was ex-Peng founder Xiao Peng He and BYD executive Stella Lee speaking to CNBC and Bloomberg. The comments from Li raised eyebrows because industry experts say BYD is the one driving this current price war. This is BYD. China's biggest EV maker has cut prices for its cars by as much as a third. Its budget electric car now costs less than$8 ,000. Other EV makers have followed suit, leading to an unprecedented race to the bottom. I've covered the Chinese auto market for about a quarter century, and I've seen plenty of price wars during that time.

7:03But none has been this brutal, this ruthless, this widespread. That's Lei Xing, an independent industry analyst and the former chief editor of China Auto Review. Xing says the current price war is also notable because Chinese regulators are signaling they are unhappy and will intervene. A few weeks ago, China's Car Manufacturing Association issued a statement and took a subtle swipe at BYD. A certain automaker has led a substantial price reduction campaign, the statement said, adding that price wars cause panic, squeeze profits and hold back industry development. Tu Li is managing director at Sino Auto Insights.

7:46He says overcapacity with too many brands making too many electric cars is just part of the problem. There's overcapacity in e-motors. There's overcapacity in batteries. There's overcapacity in mineral refining up and down the supply chain. And Li says that overcapacity will likely spill over into foreign markets, such as Europe and maybe Mexico. Meanwhile, Chinese EV makers are in a bit of a bind because consumers at home just aren't spending these days, which means they won't be pumping the brakes on this price war anytime soon. For NPR News, I'm Sharice Pham in Hong Kong.

8:28That's the State of the World from NPR. Thanks for listening.