For the past years, I have been deeply fascinated by the evolution of China from a copycat country into one of the most innovative states in the world. That’s why I was so excited when China expert, keynote speaker and author Pascal Coppens joined nexxworks around this time last year. A lot has happened since then, not in the least the ‘birth’ of his very first book ‘China’s New Normal', which was just released. So I thought it was high time to interview him about one of my favorite subjects of the moment.

Consumer + competition + government = exponential innovation

I have been thinking a lot about the tension between the individual and the collective lately: the dynamics between companies and their employees, but just as much about the flow between individual companies and markets, or the nations they reside in, and their government. And I absolutely love how the Chinese government is such a powerful motor behind the complete reinvention of this country, like a phoenix rising from its own ashes.

According to Pascal, the government is very much focused on closing the middle-income gap. “They realize that if they don’t climb that scale, they’re never going to play along with the big players and the more developed countries. It’s almost as if innovation and (re)education are not a choice for them, but rather a condition to solve some really big issues in their country. Not just this middle-income gap, either. But environmental problems, demographics, food safety, etc. Innovation sometimes thrives better when it’s an imperative rather than a choice. China is a beautiful example of that.”

But even more than the government, Pascal believes that the Chinese consumer lies at the root of China’s reawakening: “they are set on achieving a better quality of life and that’s why they are so ultra-demanding. And it is this bidding that drives companies to deliver faster, better and to keep adding new features. This speed of the market is for instance why Andrew Ng left the Google Brain project to join China’s internet giant Baidu: he was convinced back then that the ideas he had would be implemented much faster in China than in the US. That’s also the reason why all the talent that left China to study at these high-prestige schools like MIT, is returning to China. The consumer speeds up the market, which attracts the best talent. It’s this perfect feedback loop of innovation attracting innovators attracting more innovation.”

That’s for instance the reason why Tencent has already evolved so much further than its Silicon Valley ‘twin’ Facebook. The Chinese consumer expects so much more functionality embedded in the products, in order to better their personal lives. They practically forced Tencent to add all of these personal comfort applications which makes their lives so much easier compared to the relatively simple Facebook. Facebook Messenger is just about communication, but in Wechat you can interact, look up, order and buy whatever you want. Of course, Mark Zuckerberg just announced that he had a “vision” to add payment between people via Whatsapp, … about 5 years after Wechat introduced this. Chinese innovators look much more at where consumers spend their time than us, and then they buy into companies in these areas and they combine that with the commerce (like Alibaba) or with the social (like Tencent) or with the search (like Baidu) depending on their expertise. It adds to the range and sophistication of their offering, and it really speeds up the market, too.

Needless to say that this results in a ruthlessly competitive market with cut-throat competition, which in its turn accelerates the market again: companies introduce a new product or market, and then 20 competitors follow, so the company has to come up with a better product fast, and that keeps going on, until only one keeps standing. So that’s the third driver of innovation in China, on top of the consumer and the government: ruthless competition, in an exciting red ocean.

China’s artificial backbone

Pascal sees it as his mission to show the world that China is not just about the BAT. “Everybody knows Baidu, Alibaba and Tencent, but that’s just a very small tip of the iceberg. There are so many exciting and absolutely huge companies underneath that, that we’ve never heard of here. Like travel company Ctrip, insurance giant Ping An, Xiaomi and, of course, the TMD: Toutiao, Meituan and Didi. These may not be as big as the BAT, but they almost are, and growing really fast. And artificial intelligence is why. Pascal believes that’s actually the fuel behind the incredible growth of all these companies, and therefore, not surprisingly, the red thread in his book ‘China’s New Normal.

But why exactly AI? Why is the Chinese government pushing it so much - with for instance the infamous Next Generation Artificial Intelligence Development Plan - and why is it the backbone of so many Chinese unicorns? Pascal sees three major reasons for that. The first has everything to do with leapfrogging. It’s commonly accepted that AI is going to completely disrupt and rewrite every industry in the world. It’s not just about an upgrade, or “making a business more digital”, it’s a 360° turn. In many aspects China was lagging behind about 30 years compared to the West. So they saw this “blank page” moment in our economy as an enormous opportunity to completely rewrite the existing industries from scratch with AI, and completely on their own terms. And they grabbed that with both hands.

Another big reason is the huge problems Pascal referred to above: “Pollution is terrible, the environment is a real issue, real estate is crazy expensive, there are food quality problems everywhere, overpopulation, greying demographics. This is not the type of problems that you can solve with man power only. You need technology, the really powerful and smart type, to set these kinds of situations straight. And the Chinese government realizes that AI is absolutely perfect for that.” So here again, there’s this poignant need driving China to innovate.”

But the thing is, out here in the West we have this type of problems too. And for me, it’s really fascinating to hear Pascal talk about how the Chinese government is so action-driven, forward-looking and problem-solving, while here, they are just people-pleasing, collecting votes and short-term oriented. “A lot of it has to do with the fact that in the last 30 years China has been helping 700 million people out of poverty”, according to Pascal. “Deng Xiaoping initiated this evolution in 1978 and the lives of a lot of people have improved drastically since then. That’s why people still feel grateful to technology and the government, and they are willing to follow them, instead of the other way around. Here the politicians ‘follow’ the people - and seeing that there are so many different voices of them, they end up paralyzed, doing nothing - while in China the government ‘leads’ the people, so they get to initiate these huge and drastic plans without being punished for it in the next elections.”

The last reason for the AI boom in China is that they are looking at AI from a very pragmatic point of view. It’s much less about the Moonshot approach that we often see in Silicon Valley: where they are looking at these really radical projects that may start to pay off only 10, 20 years down the road. “Chinese AI tends to be a lot less spectacular: result-driven as they are, they are looking at what the customers want and need now, and – above all – what they are willing to pay for. They make AI that sells, not the ‘cool’ science fiction-like research projects. Like voice assistants such as Mobvoi’s TicHome or facial recognition with Face++. The true beauty of that is that by making so many applications that are used now, they have this awe-inspiring cornucopia of data that is continuously feeding their algorithms. And if there is one thing that makes AI algorithms smarter, it’s data. So one real-life application at a time and very much below the radar, they are winning the AI race.”

I’m really curious about the developments in the coming years, about who is going to “win” this AI race. To quote Vladimir Putin “the one who becomes the leader in AI will be the ruler of the world”, so there’s a lot at stake here. Why not start by reading Pascal Coppens’ eye-opening “China’s New Normal”? It’s the perfect guide for those who want to understand where we are going to in the coming years, and how you can adapt to that.