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In Beijing’s Zhongguancun district, a non-descript skyscraper rises between a subway station and an electronics store; the name on the facade: Sea Dragon Buildings. The windows on the ground floor are boarded up and the businesses have long since been shuttered. Yet a few floors above, some of China’s most sophisticated start-ups are developing cutting-edge technology. One of them is Horizon Robotics, a company that is just three years old, but already a globally known name in artificial intelligence.

“Our mission is to create one of the leading platforms for AI worldwide,” said the company’s founder Yu Kai. He was head of the Institute for Neural Networks for Chinese IT conglomerate Baidu before breaking off to start Horizon Robotics. The company builds chips and software that resemble those neural networks and drive AI. Their technology can recognize and interpret patterns and situations—invaluable for companies working in the auto, aviation, and robotics sectors.

Horizon is a paragon of China’s booming AI scene. The country is well on its way to dominating what has become a crucial 21st century technology. The State’s Council announced at the end of last year that China is aiming to develop world-class AI technology by 2020: “The use of AI should underpin our aspiration to be on equal footing with other innovation leaders,” wrote China’s top state planners in a July 2017 directive. “This is the new focus of international competition and the strategic technology of the future.”

In other words, China is not only endeavoring to be a central production site for the next generation. It wants to even the playing field with its global rival, the United States. After all, the country that dominates AI will, according to experts, also gain a key military and geopolitical edge. And China has left no doubt about its ambition: to be a “technical-economic great power,” according to the directive.

It is no wonder, then, that AI has top priority. In an address last year, President Xi Jinping called the technology one of the pillars of his economic policy. “It is important to promote the deep integration of the internet, big data, artificial intelligence, and the real economy,” he said in his 2017 party speech. And if China sets itself an objective, things start happening. Billions have been invested in innovation and start-ups, and the country’s provinces are competing to have AI companies settle in their regions. In its 2017 Global Artificial Intelligence Study, consulting firm Price WaterhouseCoopers dubbed the growing competition between China and the US a “global AI arms race,” where the great powers will compete—and where the “war over research, investment, and capable minds” will eclipse any trade dispute.

AI Starts Early

The Chinese planning apparatus is indeed pursuing a long-term approach and investing heavily in training. AI has been a nationwide subject in computer science education for a few months now; the first lessons begin in primary school. Initially, 40 select schools are offering courses for secondary school classes—at a level that elsewhere in the world would be considered appropriate for universities. The Ministry of Education started issuing its own textbook on AI in April, according to the Hong Kong-based daily South China Morning Post. Colleges and universities, meanwhile, encourage students to start their own companies.

China has already acquired considerable knowledge and success in AI. The Beijing City Council counts some 400 AI companies in the vicinity of the Horizon Robotics office alone. And according to a study by the Japanese engineering company Astamuse, China is second in the world in patent applications, only behind the US. But they are catching up fast. Also, AI is already in regular use in China for a wide range of applications. Facial recognition, for example, is widely employed. In some public bathrooms, a machine will only dispense toilet paper to people who first look into a camera—and they only receive four pieces of paper. If the same person tries to return for more, the machine refuses. The idea is to stop people from stealing toilet paper (a rampant problem authorities are trying to stamp out). Then there are university entrance exams: schools are required to register students with a biometric photo to prevent them from sending a substitute to sit for a test.

The biggest client, however, is the police. One of their contractors is Megvii, or Mega Vision, also located in Beijing’s Zhongguancun engineering district. The company’s facial recognition software is based on neural networks and can pick out and positively identify people from blurred images and in huge crowds. Beijing police are now able to catch suspects who make the mistake of walking down the street in a camera’s line of sight. Some 400 million cameras will be installed in public spaces across the country; soon, culprits will have no chance of moving around unnoticed.

In this way, an authoritarian state is gaining a sizeable technical advantage over the West. It is a paradox to many observers who believe democracy goes hand in hand with technological supremacy. “The reason for China’s success in AI and data mining, however, is precisely the lack of data protection,” says Dong Tao, a China economist at Credit Suisse.

The Chinese communication app Wechat, for example, processes seven billion photos per day that the government and AI researchers can access. As the Davos World Economic Forum pointed out, the explosion of patent applications in China is thanks in part to having the world’s largest digital user base.

Alibaba vs. Amazon

Alibaba is another example of how China appears to be gaining an edge. Like Amazon, Alibaba is a platform for selling items online. The company uses adaptive learning methods to improve its suggestions for the customer’s next purchase, pointing them to its shopping sites like Taobao. With its algorithms, Alibaba can align and adjust its own forecasts to match actual customer behavior; the quality of Alibaba’s suggestions, therefore, are better than Amazon—according to their own statement, at least.

Horizon Robotics, meanwhile, is gearing up for the use of its AI chips in self-driving cars. For Beijing, it’s crucial to have key technologies in Chinese hands. The state does not directly fund Horizon Robotics, but it does so indirectly: if you want to sell high-tech products in the Chinese market, you have to demonstrate a minimum added value from a Chinese company. That’s why Audi is interested in using Horizon’s technology for developing self-driving cars in China. In other markets, however, the carmaker has turned to competitors, like US company Nvidia.

More and more, the Chinese appear to be surpassing the Americans in technology. Horizon’s cameras do not merely capture a pixel pattern, like traditional devices: They understand what they see and assign parts of the picture to a corresponding meaning. A cyclist is recognized and assigned a code; so is a building, a pedestrian crossing, or a mother with a stroller. And the chip even provides predictions on what might happen in the next few seconds. A yellow traffic light, for example, will turn red (it was just green); a cyclist will be one meter to the left (riding from the right); the mother with the stroller will likely stop (the pedestrian light is flashing red). The chips then feed that data to the central computer board, which uses the information to decide on the car’s next move.

AI on the Battlefield

Horizon doesn’t talk much about future uses of its technology, but it’s clear the possibilities are endless. Take aviation, where improved autopilot systems and autonomous aircrafts are already in use. That brings us to the military. In sealed-off research facilities, the People’s Liberation Army is furiously at work on mapping the future of warfare and its consequences.

In an essay that has since been taken off the internet, Officer Chen Hanghui from the Army College in Nanjing debated how artificial intelligence could “change the rules of warfare.” He came to the conclusion that technological singularity on the battlefield is imminent. Technological singularity is the theory that radical and rapid developments in AI will means that machines will overtake humans. Thinking systems can learn, adapt, and reprogram themselves, creating super-intelligence.

China’s military is already looking ahead to the time when traditional armies will not be able to compete with AI-driven, automated armies. The country’s air force considers the introduction of highly intelligent systems to its fleet an utmost priority.

“In the future, mobility of information will be a decisive factor in aerial combat, electromagnetic attacks, or cyber operations,” Yang Wei, Vice President of the Commission for Science and Technology at the state-owned Aviation Industry Corporation of China (AVIC), told the official state newspaper in July 2017. That opens an opportunity for China to “overtake the West,” he added.

Most Chinese defense experts have remained sober in their assessment of AI on the battlefield, describing instead the practical applications the technology can provide. Their attitude is mostly defensive: it’s about ensuring that China has the capability to defend itself should the need arise.

And for good reason. Militaries around the world are weighing up the same issues. The combat machine of the future is unassailable: It no longer has a human form; it distinguishes between friend and foe in a matter of milliseconds, and it reacts without hesitation, with minimal doubt. Experts have long since been raising the alarm bells over the dangers of such fighting machines, but as China’s military websites repeatedly point out, anyone who wants to survive in international competition needs that technology. If AI determines who rules the world, as Vladimir Putin recently noted, China is ready for the challenge.

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As a journalist accredited to cover last weekend’s G20 meeting in Hamburg, I felt a bit like Berlin’s new panda bears: an exotic, encaged, and expensive guest.

For those of you more familiar with world affairs than animal affairs, Meng Meng and Jiao Qing are two new bears on long-term loan to the German capital. It’s a new twist on Chinese panda diplomacy that stretches back to the days of US President Richard Nixon. Berlin zoo built a new €10 million pagoda, will feed the bears a small fortune in bamboo shoots daily and has promised Beijing €1 million a year in rent.

Last week President Xi Jinping and Chancellor Angela Merkel officially opened the enclosure and, as Beijing sees it, a new chapter in China’s efforts to fill a place in global leadership vacated by the Trump administration.

The following days I was one of the thousands of journalists in another expensive enclosure, this time in Hamburg. Germany’s outward-looking harbor city was built on trade and was thus, we heard, an ideal host city given competing views on whether globalization tide lifts all boats.

For the G20 summit, Hamburg’s trade fair was transformed into a high-security conference area and adjoining panda, sorry, press pen. Behind two – or was it three? – security checks, the press area was in three parts: a functional working area, a dining area, and a “chill-out” lounge area that echoed the aesthetics of countless tech startups: exposed wood, random cushions, table football, and a massive stuffed lobster.

Given the comfort of our enclosure, and the excellent catering, it was easy to forget why we were there at all. At an estimated, conservative cost of €130 million, Chancellor Merkel was hosting us – and the presidents and prime ministers from the United States, China, France, India, Indonesia, Australia, and more. The leaders of two thirds of the world’s population held sessions to discuss issues of global importance: climate change, trade, and security.

Negotiation Marathon

Behind the scenes the real G20 played out. After months of preparation, it boiled down to a 48-hour all-night negotiation marathon. In the end, full agreement was not possible and the G20, for the first time, issued dissenting positions in its final communiqué.

The climate section reflected the Trump position that economic growth and energy security take priority over reducing carbon dioxide emissions. The other delegations agreed to “take note” of last month’s US withdrawal from the Paris agreement. They described the climate deal as “irreversible” and reiterated their determination to move “swiftly” to full implementation.

On trade, the other key issue, the Trump delegation agreed with others on the importance of “reciprocal and mutually advantageous trade and investment frameworks” and a need to “fight protectionism”. But, in a concession to the US, the final statement recognized the role of “legitimate trade instruments” and demanded “concrete” solutions by November from a G20 sub-body on what to do about a surplus of steel on world markets.

Seven months after the “America First” president took office, Donald Trump held a closely watched meeting – his first – with Russian president Vladimir Putin, then skipped out of town without holding a press conference. With characteristic hyperbole he described the Hamburg summit on Twitter as a “wonderful success.”

For Merkel, Hamburg was a mixed blessing. She succeeded in holding the G20 together on globalized trade, for now, and prevented further cracks emerging over the Paris climate deal.

But when Germans go to the polls in September, few will remember the G20 communiqué and many will remember three nights of running street battles, traumatized Hamburg residents, looted stores, and burnt-out cars.

Small Steps

On the final day of talks, a seasoned if exhausted G20 official suggested Europe was “moving in small steps toward a certain normality” with the Trump administration. The official left open what that normality will be.

My inkling of that new normality took shape as I departed my Hamburg press pen after two days of expensive activity, catching up with remarks of departing G20 leaders. While Trump promised on Twitter to “fix the many bad trade deals” the US has signed, another had urged colleagues to recognize the need for “interconnected growth for shared prosperity.”

The plea for growth and co-operation was not from Trump but Xi Jinping, president of China. His last words to the G20 colleagues: “Those who work alone, add; those who work together, multiply.”

In the era of diplomatic innovations – from Trump on Twitter and to leased Chinese panda bears – Hamburg had the air of an American Requiem.

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© REUTERS/Kirsty Wigglesworth/Pool

As it moves away from Deng Xiaoping’s advice to “hide its brilliance and bide its time” in favour of a foreign policy more in keeping with its economic weight, China is steadily expanding its reach abroad – and not just in its traditional relations with countries that supply it with resources, but also further afield in Europe. And Britain, for its part – though its trade with the People’s Republic remains well below that of Germany and France – is making every effort to prove itself “China’s best friend” on the continent, as Prime Minister David Cameron and Chancellor of the Exchequer George Osborne put it when Chinese President Xi Jinping made a state visit to the United Kingdom in October.

For Osborne, Chinese investment offers are a godsend, as he is currently facing the quandary of reducing the budget deficit while meeting election pledges to increase spending on infrastructure. It remains to be seen how well these investment offers will translate from the big numbers thrown around during the visit – totaling tens of billions of pounds sterling – into real and complete projects in regional regeneration, a high-speed train link between London and Birmingham, and nuclear power stations on the west and east coasts; the rail link in particular has aroused widespread opposition from people living along the route, and the price of electricity generated by the nuclear stations seems likely to be high, quite apart from questions about the reliability of the technology to be used, especially if China builds a station in eastern England. But there is no doubting the enthusiasm the government is showing for its Chinese connection. It has been careful not to mention sensitive subjects such as human rights after Beijing expressed its disapproval of Cameron’s 2012 meeting with the Dalai Lama.

The rapprochement between London and Beijing, which Osborne calls a “golden age” of Sino-UK relations, fits into a pattern of a more expansive Chinese foreign policy at a time when the country is suffering a slowdown in economic growth. With relations with the United States frozen by disputes ranging from freedom of navigation to cyber espionage, the People’s Republic wants to find new friends across the globe. It has launched the “One Belt, One Road” initiative, along with other programs to dispense aid and investment to countries including South-East Asia, Russia, Pakistan, Brazil, and the -Stans of Central Asia.

For Britain, as well as inviting a flow of investment funds from the world’s second largest economy, the hope is that the City of London will become the predominant Western center for trade in the Chinese currency. For Beijing, there are economic motives for the investment: in particular, it should provide orders for companies that are suffering from the economic slowdown on the mainland and want to export some of their export capacity. It should also be seen as one step in the Xi administration’s broader efforts to extend its foreign policy reach beyond Asia.

The Chinese president’s visit to the United States In October for a summit with President Barack Obama produced little in the way of meaningful agreements, and the American navy subsequently sailed a destroyer around South China Sea reefs on which China has built military bases in water claimed by the People’s Republic. There is a trust deficit between the two powers, leading China to try to strengthen relations with European countries.

Internationally, China can now rely on Britain to tacitly approve its actions – for instance in Tibet, or even Taiwan should cross-Strait relations grow more tense following the likely victory of the Democratic Progressive Party (DPP) in the Taiwanese presidential election in January. Russia, China’s other new friend, and Britain are both permanent members of the United Nations Security Council, so the People’s Republic will have enough friends to be able to deflect critical motions at the international body.

In Europe, Britain can be expected to support the free trade agreement Beijing wants and grant China market economy status, which would make anti-dumping measures more difficult. The People’s Republic has also been seeking to strengthen ties with other major European countries – French President François Hollande and German Chancellor Angela Merkel have both just visited China. Their two countries enjoy much higher trade with the mainland than Britain, but they also take a less mercantilist approach to the relationship than Cameron and Osborne: Merkel used her visit to talk to Chinese leaders about Syria and the European refugee crisis, while for Hollande the UN Conference on Climate Change in Paris was the core issue of discussion with Xi Jinping. Both leaders want to leverage their countries’ commercial link with China to develop a broader political relationship in which each side speaks frankly without letting the financial aspects of the relationship predominate; Merkel even had a special meeting in Beijing with human rights activists and political dissidents.

Britain, on the other hand, has chosen to limit its relationship to economic links, an area in which China clearly has the strongest hand. It says it will act as Beijing’s advocate in Europe, a role which is bound to have an impact of foreign policy; for instance, in any dispute between China and Japan, would the UK feel free to back Tokyo if it felt Japan had the stronger case? Cameron and Osborne may regard the short-term benefits of an influx of Chinese money as justifying any longer-term political price. But, unlike Merkel, they have tied their hands in advance, and signalled a decline in their country’s global freedom of action.

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