Challenges and opportunities from China’s tech revolution

This article first appeared in the Western Morning News.

Walking around Beijing or Shanghai is like visiting the future, writes Tim Jones.

When Donald Trump announces the US will impose a 25% tariff on $50 billion worth of Chinese goods and the China promises to respond in kind, should this keep us awake at night? Is something more profound going on which will affect our business plans?“Made in China 2025” is a policy approved by the Chinese State Council to transform their country into a hi-tech powerhouse that dominate robotics, advanced information technology, aviation and new energy systems. It aims to transition away from labour-intensive industries and climb the value-added chain as wages and wage pressures rise from their 1.415bn population. Their nationalistic approach to building internal capabilities and international reach is long standing. A record-breaking eight million students graduated from Chinese universities in 2017, nearly ten times higher than in 1997 and more than double the number of US graduates this year.

Thirty per cent of the world’s graduating engineers are Chinese, compared to just under 3% for the UK (almost one third of non-EU students in the UK are from China). Combine this with the Chinese application of the German concept of integrating advanced technologies, like robotics and wireless sensors, with the internet to yield significant gains in productivity, efficiency and precision – and we start to see that tariff skirmishes are far from the whole story.

Also significant is the staggering speed of change driven by Artificial Intelligence (AI) or what is more broadly described as Robotic Process Automation. The rise in AI is, says Andy Haldane, deputy governor of the Bank of England, threatening 18 million jobs in the UK between now and 2025 – 800 million worldwide. Processing a mortgage application typically takes four-six weeks. Atom Bank (American) recently did it in 15 seconds.

The Chinese came up with four great inventions 1,000 years ago: the compass, gunpowder, paper-making and printing. Today they have claimed four great innovations: shared bikes, e- commerce, mobile payments and high-speed rail.

The Chinese Government are pumping £35 billion into making China a powerhouse for futuristic tech. Arguably they are already the market leaders globally in the application of AI technology. They surpass the US and Europe. Walking around Beijing or Shanghai can feel like a visit to the future.

Watch carefully for names which will shortly be as familiar as Amazon and Google: Alibaba and Tencent, followed by JD.com; Chinese companies rising rapidly to become global players. They have cracked online retailing and balanced this with a blend of on and off line retail (plus more, including online gaming and entertainment). In China, mobile phone payments are so common that paper money is almost a thing of the past. WhatsApp means that even beggars are cashless and loos recognise users. Some corner shops are cashless and staff-less.

Facial recognition means retailers, large and small operate shops with no cash tills and banks of cameras that manage payment and stocking issues while observing shopping patterns and habits, drawn from behavioural data in Goods ordered online can typically arrive in less than five minutes.

Chinese Primary School children self-learn English through online cartoon characters. In health, China has had to address the problems of a rapidly ageing population. They are applying AI to a point where they predict they will need no hospitals in ten years for after-care allowing at-home treatment monitored by hi- tech hubs and even major surgery being controlled remotely.

In food production, where China has had many examples of serious health scares, AI “agricultural brains” are beginning to transform poultry and pork production. Systems can provide traceability and accountability for every animal.

So what does this all mean for us in the South West?

We are experiencing the shift from offline to online retailing, radically reshaping high streets and causing problems with traditional retailers such as House of Fraser. We are also increasingly under attack from global criminals using cyber technology to rob small and micro businesses (an average incident costs around £35,000 and is causing significant job losses).

We have many small and micro business who are nimble and savvy enough to exploit these new opportunities, quick enough to keep up with change and able be part of the global supply chain; also the ability to spot market sectors where the human brain cannot to replaced.

Critically we have leading edge further/higher education and research capability to apply these new technologies in local advanced business applications.

Be aware: while “Made in China” used to be a byword for cheap and shoddy, when it comes to technology, this is now leading edge.