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Advances in Social Sciences Research Journal – Vol. 10, No. 4
Publication Date: April 25, 2023
DOI:10.14738/assrj.104.14416.
Wenning, S. (2023). What Influence Does the AI Strategy Have on Possible Outcomes of Chinese Foreign Policy and Economic
Development? Advances in Social Sciences Research Journal, 10(4). 50-75.
Services for Science and Education – United Kingdom
What Influence Does the AI Strategy Have on Possible Outcomes
of Chinese Foreign Policy and Economic Development?
Sebastian Wenning
Global Humanistic University, Curacao
IIC University of Technology, Cambodia
ABSTRACT
This article examines the impact of China's AI strategy on the country's economic
development, digitalisation and geopolitical relations in both a domestic and
international context. The analysis shows that China's AI strategy, especially the
Next Generation Artificial Intelligence Development Plan, promotes AI education
and research, leading to an increase in AI-related scientific publications and success
in international AI competitions. This development may lead to a further
strengthening of China's position in the global power structure to an almost
disruptive shift in geopolitical bloc relations. Digitisation through AI technologies
is also showing significant impact on the country's economy. Increased productivity
and efficiency in various industries, especially in the automotive and electronics
sectors, is leading to increased creative destruction in this regard. While millions of
new jobs are being created in the AI sector, up to twelve percent of jobs in Chinese
industry can be replaced by automation. The introduction of AI technologies
generates higher economic output and productivity in some regions, as exemplified
by the Pearl River Delta. Here, the AI clusters play a decisive role in regional
economic development. Through these developments, China will rely less on
imports and expand its economic presence by exporting AI-based products and
services to numerous countries and industries. The new trade opportunities
burgeoning in this way create opportunities for rapprochement, but growing
competition and trade conflicts with other technologically advanced nations is also
likely, as the controversial expansion of the Digital Silk Road and the Made in China
2025 initiative demonstrate. Altogether China gets more economic independent
then, which has an impact on foreign policy and of course influences possible
military conflict
Keywords: AI strategy, Digital Silk Road, geopolitics, economics, NGAIDP
INTRODUCTION
In recent years, the development of artificial intelligence (AI) has emerged as one of the key
factors for economic growth and geopolitical power. China has recognised the importance of AI
and has developed a comprehensive national strategy to become a world leader in this field.
This strategy has far-reaching implications, not only for China's own economic development,
but also for the global balance of power and relations between the bloc states.
For example, China has increased its commitment to AI at both national and regional levels,
with the aim of strengthening the country's innovation capacity and competing in the global
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Wenning, S. (2023). What Influence Does the AI Strategy Have on Possible Outcomes of Chinese Foreign Policy and Economic Development?
Advances in Social Sciences Research Journal, 10(4). 50-75.
URL: http://dx.doi.org/10.14738/assrj.104.14416
market. Particular focus is being placed on the application of AI in key industries such as
manufacturing, healthcare, education and transport. Through these investments in AI
technologies, China aims to increase its competitiveness and consolidate its economic
dominance. These efforts are developing radiant powers on a global scale as they influence
relations between bloc countries. The Middle Kingdom's growing influence in the AI industry
has raised concerns among some countries, particularly the United States and the European
Union. This concern has ultimately led to allies developing and adapting their own AI strategies
to counter China's growing ambitions and secure their own geopolitical position. This
competition, in turn, has the potential to foster both cooperation and disparity between states
and alter the balance of power on the global stage.
This essay therefore analyses the key aspects of China's AI strategy, examines its impact on the
country's economic development and discusses the possible global consequences for relations
between the bloc states.
METHODOLOGY
In order to comprehensively examine the various aspects of China's AI strategy, its economic
development and the global impact on relations between the bloc states, a literature review will
be conducted. This approach makes it possible to gain an overview of the existing research and
to summarise the most important findings from different sources. In order to implement a
focused literature review, clear research questions are first formulated to determine the scope
and objectives of the study:
a) How has China's AI strategy developed and what are its goals?
b) What impact does China's AI strategy have on the country's economic development?
c) How does China's AI strategy influence relations between the bloc states and the global
power structure?
After a holistic overview (cf. Bandara, Furtmueller, Miskon, Gorbacheva & Beekhuyzen, 2015)
of the literature available in the databases sciencedirect, JSTOR and Scopus, the following
syntactic nomenclature for dealing with the research-relevant topic crystallised in order to
narrow down and identify relevant literature (see Figure 1).
Figure 1: Terminology of the literature search (term matrix)
Source: own representation
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In this way, a search syntax emerges that facilitates the retrieval and synthesis of research
findings connoted with the topic (Durach, C. F., Kembro & Wieland, 2017; Guba, 2008;
Kitchenham, 2007; McManus et al., 1998). By aggregating the relevant terms, a tripartite
approach emerges that can be represented by examining the chosen generic terms on China's
AI strategy, the economic development associated with it, as well as implications for the
country's foreign policy.
Finally, once the relevant sources have been identified, the necessary information required to
answer our research questions is extracted (Gough, 2012). In doing so, it is important to
systematically record the main arguments, methodology and key findings of each source. The
collected data is then analysed to identify commonalities, differences and possible gaps in the
research, as well as to triangulate a criterion-weighted selection of predictors (Boland et al.,
2017; Briner & Denyer, 2012).
In the final step, the main findings from the literature will be summarized and discussed how
they relate to our research questions. In doing so, we will try to draw a coherent picture of the
existing research and discuss how China's AI strategy affects economic development and global
relations between the bloc states (Feak & Swales, 2009; Gough et al., 2012).
Politeconomical Contexts and Implications
China's AI Strategy
AI strategy is a central concept when analysing China's role in the global context, as it describes
the country's plans and ambitions regarding the development and application of artificial
intelligence (Lewis, 2019). Thus, in context, it can be used to elicit how China plans to shape its
economy, security and international relations through the use of AI technologies.
In his book AI Superpowers (2018), for example, Kai-Fu Lee examines the dynamics between
China and Silicon Valley in terms of AI development and shows how China could catch up and
even overtake. Lee argues that China's growing technological capabilities, particularly in AI,
make it a global superpower (Lee, 2018; Schlaefli, 2018; Fischer, 2018). Graham Allison comes
to similar conclusions in his Harvard study "The Great Rivalry: China vs. the U.S. in the 21st
Century" (2021), which states that China will have overtaken the USA in all cutting-edge and
key technologies by 2031. In addition to looming geopolitical erosions, the radiant power of
such a development would also have an impact on domestic economic transformation and on
the labour market (Lee, 2018; West, 2018; Kania, 2017).
Darrell M. West (2018) emphasises in "The Future of Work" that the impact of AI and
automation on the economy and labour markets should not be underestimated. China's AI
strategy plays a crucial role in shaping the future of work in the country and induces global
impacts on labour markets (West, 2018; Groth & Straube, 2021).
Thus, China's AI strategy is already influencing the global economy and affecting countries'
global economic strength. In "The Rise of the Global Company", Webber (2017) shows the role
of multinational companies in shaping the modern world. In the battle for talent and resources,
Chinese companies have a high degree of competitiveness due to the unconditional orientation
of the economy towards AI-based core industries and service sectors, which leads to an
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Wenning, S. (2023). What Influence Does the AI Strategy Have on Possible Outcomes of Chinese Foreign Policy and Economic Development?
Advances in Social Sciences Research Journal, 10(4). 50-75.
URL: http://dx.doi.org/10.14738/assrj.104.14416
expansion of global presence (Webber, 2017; Gehrke & Schiersch, 2015; Pop-Silaghi, Alexa,
Jude, & Litan, 2014; Rammer, Gottschalk, Peters, Bersch & Erdsiek, 2016).
Furthermore, it can be noted that the AI strategy is closely linked to China's social credit system
(Creemers, 2018). This system uses AI to collect and analyse information about individuals and
companies in order to evaluate and control their behaviour. This shows how China's AI strategy
is also geared towards internal political control (Laudien, Hmaidi & Hedemann, 2016). In their
research, Horowitz (2018) and Scharre (2018) additionally point to the military implications.
China's AI strategy in defence and security may lead to the development of new weapon
systems that affect military balance and international relations. The integration of AI into
Chinese armed forces is identified as a critical factor in modernising and strengthening its
defence capabilities (Bitzinger & Raska, 2022; Levesque, 2019; Murray & Knox, 2001; National
Security Commission on Artificial Intelligence, 2021).
This integration aims to increase China's military power projection and improve its ability to
manage asymmetric wars and hybrid threats (Slijper, Beck & Kayser 2019; Su & Tian 2021).
Moreover, China's AI strategy has implications for the political arena, both nationally and
internationally. Nationally, China has used AI technologies such as the social credit system to
strengthen social control and maintain political stability (Creemers, 2018; Zenglein &
Holzmann, 2019; Meister, 2018). Internationally, the AI strategy has helped to increase China's
influence in shaping global norms and standards for AI and consolidate its role as a global
player.
The Digitalisation of The Economy
The impact of AI on business and economic development has already been explored in sources
such as Lee (2018) and West (2018). They discuss inter alia how AI will change the world of
work and the global economic order. It is clear that digitalisation has not only fundamentally
transformed the Chinese economy and made the country one of the world's leading economies
(Reese, 2018; Webb, 2019; Smith, 2018; Daugherty & Wilson, 2018). Rather, the rapid
development of information and communication technologies (ICTs) holds great potential for
both increasing productivity and fostering innovation and competitiveness (McAfee &
Brynjolfsson, 2017; Brynjolfsson & McAfee, 2014; Mokyr, 2002; Agrawal, Gans & Goldfarb
2018). In particular, investments in ICT and the development of digital business ecosystems
have had positive effects on the growth of the Chinese economy (Wu et al., 2020; Fu & Zhang,
2018). Studies show that the use of digital technologies has led to an increase in gross domestic
product (GDP) and labour productivity (Jasanoff, 2015).
The spatial distribution of digitalisation in China is heterogeneous, with eastern regions
showing higher levels of digitalisation than western and central regions (Liu & Chen, 2021; Li
& Li, 2018). However, digitalisation has also helped to promote regional economic development
and narrow the gap between different regions (Naughton, 2018; McNally, 2012; Zhong, Xu,
Klotz & Newman, 2017). From a macroeconomic perspective, the rapid development of e- commerce has had a lasting impact on the Chinese economy and changed consumer behaviour
(Zhu, 2021; Wang, 2019). The e-commerce industry has proven to be an important driver of
economic growth and industrial upgrading, especially in areas such as retail or logistics.
Furthermore, the extensive digitalisation of the Chinese economy enables the government to
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respond more effectively to economic and social challenges (Xiang & Worthington, 2020; Keane
& Yu, 2019). By implementing digital technologies, the Chinese government has been able to
improve both the efficiency of public administration and the transparency and accountability
of decision-makers (Büthe, Djeffal, Lütge, Maasen & von Ingersleben-Seip, 2022; Rospigliosi,
2022; Cheng & Zeng, 2022).
The economic growth fostered by digitalisation has helped to make China more politically
independent. The development of digital infrastructure and the promotion of high-tech
industries have enabled China to reduce its dependence on foreign technologies and investment
(Bajikar, 2018; Barton, Woetzel, Seong & Tian, 2017; Chen, Sanders & Wang, 2008; Chou, 2018).
Just as with the mega-project of the One Belt, One Road initiative, the investments in AI are
aimed at global influence on the one hand, and there are domestic political reasons on the other.
This independence enables the Chinese government to implement its political agenda more
effectively and strengthen its geopolitical position (Chen & Hao, 2018; Baldwin, 2018).
In the context of digitalisation, China has evolved from a labour-intensive, export-oriented
economy to an innovation-driven, technology-based economy in terms of the process of
creative destruction (Wang & Zhao, 2019; Xiang & Worthington, 2020). This transformation has
enabled China to move up the global value chain and compete with leading industrialised
nations (Baldwin, 2018; Chen & Hao, 2018).
On The Economy and AI Strategy
In order to classify the influence of China's AI strategy on the national economy, first a domestic
economic approach is chosen and then foreign trade is included. In principle, a labour market
function is to be developed via the development of the AI sector, which can be represented
correlatively.
China's labour market policy should adapt to the changes caused by the introduction of AI and
automation. The spread of AI in the economy will change the demand for skilled labour as some
traditional jobs are replaced by automation and new jobs emerge that require specialised AI
skills (West, 2018). The rapid development of artificial intelligence (AI) and automation has
far-reaching implications for labour market policies and education in China. It is crucial that
China adapts its labour market policies and education systems to meet the demands of the AI- driven economy. In this regard, retraining and upgrading the workforce in AI-related skills and
adapting education programmes play a key role (Ding, 2018; Schwab, 2020; West, 2018).
One of the initiatives launched by the Chinese government to promote AI education is the Next
Generation Artificial Intelligence Development Plan. This initiative aims to introduce AI courses
and programmes in primary, secondary and tertiary schools to prepare students for the future
demands of the job market. In addition, the government has also encouraged collaborations
between universities and businesses to provide hands-on AI research and training (Webster et
al., 2017; Prasad, 2019; Dyer, 2019). The plan represents a long-term vision to help China
become the global leader in AI development by 2030. The education initiatives within the
NGAIDP particularly emphasise the integration of AI into the education system at different
levels, from primary schools to universities.
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Wenning, S. (2023). What Influence Does the AI Strategy Have on Possible Outcomes of Chinese Foreign Policy and Economic Development?
Advances in Social Sciences Research Journal, 10(4). 50-75.
URL: http://dx.doi.org/10.14738/assrj.104.14416
In primary and secondary schools, the NGAIDP aims to integrate AI concepts and technologies
into the curriculum (Scharre, 2018; Doshi, 2020). This includes introducing AI-related teaching
materials and training teachers to ensure they have the necessary knowledge and skills to teach
AI topics effectively. In addition, students are encouraged to participate in AI-related projects
and competitions to foster their interest in and practical skills in AI (Huang & Spector, 2018;
Kania, 2017; Triolo & Webster, 2018). This has raised awareness of AI among younger students
and enabled them to learn basic AI concepts and skills that can be beneficial for their future
education and careers in an AI-driven economy.
In higher education, the NGAIDP focuses on further expanding AI research and education (He
et al., 2016). This includes establishing AI research centres and institutes at leading
universities, promoting cooperation between universities and industry, and recruiting
international experts to improve the quality of AI education and research in China (Liu et al.,
2016; Zoph & Le, 2016). One example here is the Institute of Automation of the Chinese
Academy of Sciences as a leading research centre in China focusing on AI research, automation
engineering, pattern recognition, image processing and related technologies. It has made
numerous contributions to AI research and has established partnerships with various
international institutions (ibid.).
Furthermore, the plan encourages the development of AI-related degree programmes and
specialisations at bachelor's, master's and doctoral levels to ensure a continuous pipeline of
skilled AI professionals for the Chinese economy. For example, between 2015 and 2018, the
number of AI-related scientific publications from China increased by more than 150%,
surpassing the number of publications from the US (Elsevier, 2018; WIPO, 2019; OECD, 2019).
This shows that China has intensified its AI research activities and remains strong in the global
market. In addition, the broad-based education manifests itself through successes in AI
competitions: Chinese teams and researchers have achieved superlative results in international
AI competitions and hackathons in recent years, such as the ImageNet Large Scale Visual
Recognition Challenge and the Association for Computational Linguistics (ACL) conference (Yu
& Liu, 2018).
To continue to compete internationally, the NGAIDP emphasises the need to continuously
monitor and evaluate the quality of AI education and research (Cheng & Chen, 2018). This will
be achieved through regular curriculum reviews, promotion of research collaboration and
sharing of best practices both nationally and internationally. The number of potential jobs that
can be created by the AI industry in China is difficult to quantify precisely, but there are
estimates (see fig. 2) that suggest AI technologies have the potential to generate millions of new
jobs in the coming years (Bessen, 2019; Chui et al., 2016). These new jobs will be created in
various industries, including research and development, data analysis, AI software
development and management of AI systems (Hinton et al. 2006; Krizhevsky et al., 2012; LeCun
et al., 1998; Hochreiter & Schmidhuber, 1997; Schmidhuber, 2015).
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Figure 2: AI estimated impact on Labour market
Source: Schenker, 2019
This conclusion is confirmed by a study by Liang, Li, and Zhang (2018). In their report on the
development of Chinese industrial robotics, the authors describe how the AI industry in China
has grown rapidly in recent years. It is emphasised that the Chinese government has made great
efforts to promote the development of the AI industry and that this has led to an increase in
productivity and efficiency in various industries. The authors point out that the AI industry is
particularly strong in the automotive and electronics sectors in China (Chui et al., 2016; Zhao
et al., 2022; Brynjolfsson et al., 2014; Arntz et al., 2017; Frey & Osborne, 2013; Acemoglu &
Restrepo, 2018). At the same time, factors of production are shifting in line with the industrial
revolution: "However, multiple regression analysis reveals that the use of robots has reduced
employment in traditional industries such as agriculture and mining" (Zhao op. cit.).
A similar statement is made by Cheng and Chen (2018), who examine the role of education in
the AI industry in China. They found that Chinese government has allocated significant funds to
support AI start-ups and to create innovation centres for AI research and development. The
authors state that these initiatives have contributed to the rapid development of the AI industry
in China, and that this can lead to an increase in innovation in various industries, but at the
same time has a negative impact on other sectors of the economy (Lu et al., 2022; Wu, 2022;
Chi et al., 2021). A study by McKinsey Global Institute (Chui et al., 2016) estimates that up to
800 million jobs worldwide could be replaced by automation and AI technologies. In the case
of China, up to 12 per cent of industrial jobs could be affected in this way, with implications for
the labour market and workers' incomes.
Furthermore, there is the possibility that so-called multiplier effects can be identified through
the technology-driven development of the labour market in the field of AI.
One of the main mechanisms through which AI can generate labour market multiplier effects is
thus the automation of work processes. Brynjolfsson and McAfee (2014) explain in their book
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Wenning, S. (2023). What Influence Does the AI Strategy Have on Possible Outcomes of Chinese Foreign Policy and Economic Development?
Advances in Social Sciences Research Journal, 10(4). 50-75.
URL: http://dx.doi.org/10.14738/assrj.104.14416
"The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies"
how automation and AI can increase productivity by supplementing or replacing human labour.
By automating routine tasks, companies can increase efficiency and direct resources to more
value-added tasks (ibid.). Furthermore, AI can improve decision-making and forecasting
capabilities in companies. For example, Agrawal (2018) argues in his book "Prediction
Machines: The Simple Economics of Artificial Intelligence" that AI systems can increase the
information content of decisions by analysing large amounts of data to identify patterns and
correlations. Improved decision-making allows companies to use their resources more
efficiently, leading to increased productivity and also the possibility of entering new markets
(Agrawal et al., 2018, Author, 2015, Bessen, 2019; Fry & Osbonre 2017).
Another possible multiplier effect of the AI industry is the expansion of research and
development (R&D) in different industries. Cockburn et al. (2018) argue in their article "The
Impact of Artificial Intelligence - Widespread Job Losses or Gains?" that AI technologies have
the potential to accelerate and optimise the R&D process. This leads to new products and
technologies reaching the market faster and further driving economic growth (Cockburn et al.,
2018; McClelland 2023).
Finally, the AI industry can thereby generate indirect multiplier effects by fostering the growth
of supporting industries, such as cloud computing, hardware development and data storage
(Bughin et al., 2017).
China's focus on AI development may thus lead to increased creative destruction where
traditional industries and occupations, especially in manufacturing, are affected by AI-based
technologies and automation. As a result, new businesses and jobs will emerge, especially in
high-tech sectors and services related to AI.
As an example, we can point to the rapid increase in the adoption of industrial robots in China,
especially in the automotive and electronics sectors. In 2021, China accounted for about half of
all industrial robots installed worldwide, with 243,300 units - a 44% increase over 2020,
indicating that China is playing a significant role in the global economic recovery from the Covid
19 pandemic. According to the IFR, growth in China has been across sectors, with the electrical
and electronics industry recording a 30% increase to 81,600 installations. The automotive
industry also experienced a strong upswing, with an 89% increase to 50,700 installations,
mainly due to the production of electric vehicles in China (International Federation of Robotics,
2022). According to iResearch's classification, the volume of the AI industry in China includes
AI application software, hardware and services. In particular, this includes AI chips, commercial
AI robots, basic AI data services, data-driven AI management, computer vision, intelligent
speech and human-computer interactions, machine learning, knowledge networks and natural
language processing, as well as other key sectors. In 2022, China's AI industry was worth 195.8
billion yuan, representing annual growth of 7.8%. The industry is developing steadily
(iResearch, 2023)
Business development in 2022 can be mainly attributed to the construction of smart data
centres, the AI chip industry due to demand for applications such as extensive model training,
the AI robotics market driven by the need for touchless services, and the market for voice-based
AI systems (ibid.)
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At the moment, almost all large Chinese companies are continuously implementing AI projects.
In the future, with the participation of small and medium-sized enterprises (SMEs), strategic
implementation by large enterprises and AI as a key productive force in the digital economic
era, areas such as AI chips, visual solutions for autonomous driving and connected vehicles, AI
robots, smart manufacturing and intelligent decision-making applications will grow rapidly.
The total size of the AI industry is expected to reach 612.2 billion yuan in 2027, with a
compound annual growth rate (CAGR) of 25.6% from 2022 to 2027 (ibid).
Li and Wang (2020), meanwhile, examine the impact of digital technologies, including AI, on
regional economic growth in China. Regional AI cluster development and the Pearl River Delta
District in China play a crucial role in promoting AI technologies and regional economic
development (Li et al., 2020). The targeted creation of AI clusters in different regions of the
country creates synergies that drive innovation and growth (McKinsey Global Institute, 2017).
The targeted creation of AI clusters in different regions of the country creates synergies that
drive innovation and growth.
For example, AI clusters focus on providing appropriate infrastructure, access to talent and
creating business opportunities for companies specialising in AI technologies (McKinsey Global
Institute, 2017). The Zhongguancun Science Park in Beijing, one of the leading AI clusters in
China, has attracted more than 20,000 high-tech companies since its establishment in 1988,
many of which specialise in AI and machine learning. The region also includes cities such as
Shenzhen, Guangzhou and Dongguan and is known as the "workbench of the world". However,
in recent years it has emerged as a leading high-tech industrial region. Therefore the Pearl River
Delta (PRD) is one of China's most dynamic and fastest growing economic regions, playing an
important role in promoting high-tech industries. According to a 2019 World Economic Forum
(WEF) report, the PRD region is responsible for 70% of China's total technology production and
90% of mobile phone production (WEF, 2019). The PRD region is also an important hub for the
development of 5G technology, as it was one of the first cities to launch 5G networks in China
(China Daily, 2022).
Many innovative companies are being established in the PRD region, especially in the fields of
artificial intelligence, robotics and IoT (Internet of Things). According to a 2022 China Daily
report, the PRD region has shown strong momentum in the development of high-tech industries
in recent years, recording a 10% increase in annual growth in the high-tech industry sector
(China Daily, 2022).
The development of high-tech industries in the PRD region is also supported by government
policies and programmes. The Chinese government's 'Made in China 2025' programme, which
aims to promote domestic manufacturing in areas such as AI, robotics, renewable energy and
smart manufacturing, also has a positive impact on high-tech industries in the PRD region
(WEF, 2019).
However, there are also challenges for the high-tech industry in the PRD region. One important
challenge is the shortage of skilled workers, especially in AI and other high-tech industries
(China Daily, 2022). To address this shortage, the Chinese government has launched several
initiatives in recent years to promote training and access to talent as mentioned before.
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Wenning, S. (2023). What Influence Does the AI Strategy Have on Possible Outcomes of Chinese Foreign Policy and Economic Development?
Advances in Social Sciences Research Journal, 10(4). 50-75.
URL: http://dx.doi.org/10.14738/assrj.104.14416
According to reports by the International Federation of Robotics (IFR) and the McKinsey Global
Institute, the use of AI and robotics in the Pearl River Delta manufacturing industry has
increased significantly (IFR, 2021; McKinsey Global Institute, 2017). IFR statistics show that the
number of industrial robots in the manufacturing industry in the region has increased. This
integration of AI technologies has helped to increase labour productivity and reduce
dependence on human labour (McKinsey Global Institute, 2017).
China's AI strategy may continue to transform trade relations and global supply chains as the
country becomes less reliant on imports and instead uses AI technologies to increase
production (Balding & Clarke, 2019).
In the context of global trade relations, China has established itself as a leading power in the
development and implementation of artificial intelligence (AI) in recent years. The country's AI
strategy thereby pursues the goal of benefiting both economically and geopolitically from the
rapid technological development. To better understand this context, it is necessary to analyse
the different dimensions of China's AI-based trade relations (Liu, 2019).
First, state support for the AI industry plays a crucial role in shaping global trade relations.
Through targeted investments in research and development, as well as the creation of AI
clusters and innovation centres, China has created a competitive infrastructure that attracts
international companies and talent. (Shi et al., 2013; Li & Zhang, 2017). This not only promotes
technology transfer and cooperation between Chinese and foreign companies, but also
strengthens the country's position in the global AI market.
Furthermore, Chinese companies have made significant strides in the development of AI
technologies in recent years, which have far-reaching implications for global trade relations. By
exporting AI-based products and services, such as autonomous vehicles, robotics, machine
learning and Big Data analytics, China has expanded its economic presence in numerous
countries and industries (Liang, 2022; Yang & Huang, 2021; Lin et al., 2022).
This development opens up new trade opportunities, but also leads to growing competition and
trade conflicts with other technologically advanced nations (Cunha et al., 2023; He et al., 2022;
Liu & Ma, 2023). Europe, for example, could reassess its trade relations with China and possibly
diversify trade with other countries to mitigate potential economic risks (Yu et al., 2021; Catão
& Obstfeld, 2019). Given these economic implications of China's AI strategy, Europe can explore
opportunities to collaborate and partner with China in AI research and development (Lee,
2018). Through joint research projects and the exchange of knowledge and technologies, both
Europe and China can reap the benefits of AI development while minimising potential risks. In
2020, for example, total trade between China and the EU amounted to €586 billion (696 billion
in 2022), with the EU exporting €383 billion worth of goods to China and receiving €203 billion
worth of imports. The EU is the second largest trading partner for China after the United States,
while China is the largest trading partner for the EU (European Commission, 2021; European
Parliament, 2021; European Chamber of Commerce in China, 2020).
It is important to mention that rade relations between China and Europe are not without
challenges. Severe points of discrepancy are the trade imbalance, different legal and economic
systems, intellectual property and market access restrictions. In addition, China is pursuing its
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own plans to increase exports and has also a different approach to deal with human rights while
strengthen the domestic economy.
Made in China 2025 (MIC2025) for instance is a comprehensive industrial development
strategy launched by the Chinese government in 2015. This initiative aims to help China
become a global leader in various high-tech fields, with Artificial Intelligence (AI) being a
particular focus. China's AI strategy is focused on promoting innovation, developing AI
technologies and building a robust AI ecosystem to foster the country's economic
transformation and global competitiveness.
The MIC2025 strategy includes ten priority high-tech areas, including Artificial Intelligence,
Robotics, Information and Communication Technology, and New Energies. AI plays a crucial
role as it is seen as a fundamental technology for progress in the other priority areas.
A central goal of the MIC2025 initiative is to make China a world-leading centre for artificial
intelligence by 2030. This includes promoting research and development (R&D), strengthening
cooperation between industry, education and research, and creating a favourable policy and
regulatory environment for the AI sector. The implementation of the MIC2025 strategy has led
to the rapid development of China's AI industry. Investment in AI start-ups has increased
significantly in recent years, and Chinese AI companies are increasingly present on the global
stage. On an economic level, China's AI strategy ultimately aims to make the country a world- leading AI power by 2030 (Lee, 2018; Chen, 2020). These efforts have led to Chinese companies
becoming leaders in key areas of AI technology, such as machine learning, speech recognition
and computer vision (Lee, 2018; Balding & Clarke, 2019). As a result, China has developed a
growing number of AI-based products and services that serve both domestic and export
markets (Webber, 2017; Bremmer, 2018). China's AI strategy is henceforth closely linked to the
Digital Silk Road, an initiative that aims to develop digital infrastructure and connectivity along
the traditional Silk Road route (Creemers, 2018). By building AI-based technologies and digital
platforms in partner countries, China is strengthening its economic and political ties and
consolidating its role as a global player.
Foreign Policy Development
Sources such as Bendiek & Metzger (2015) and Rühlig (2020) examine the role of AI in the
context of foreign policy and how it influences international cooperation and geopolitical power
relations (see also Godehardt, 2020). China's rapid economic transformation based on
innovation and technology has changed the country's position in the global economy (ten Brink,
2019: McNally, 2012; Heberer & Müller, 2020; Breznitz & Murphree, 2011).
Through this transformation, China has moved from a labour-intensive, export-oriented
economy to a technology-based, innovation-driven economy (Miller, 2017; Goh, 2016). This
development has enabled China to move up the global value chain and become a leader in global
trade and financial systems (Chen & Wang, 2018; Callahan, 2016).
The Chinese leadership has also pursued a proactive and assertive foreign policy in recent
years, reflecting its geopolitical strategy and influence in international politics (Shambaugh,
2018; He, 2018). China's ambitious infrastructure projects, such as the 'One Belt, One Road'
initiative, are examples of the country's global expansion aimed at opening up new markets and
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resources, securing its political and economic stability, and expanding its geopolitical reach
(Ferdinand, 2016; Rolland, 2019).
Current research continues to examine Chinese state and party leader Xi Jinping's strategy of
using the size and attractiveness of the Chinese market for political purposes to achieve
geopolitical goals (Allison, 2017; Shambough, 2020). This strategy involves deepening other
countries' dependencies and gaining and expanding technology leadership in key industries
(Economy, 2018). In doing so, China aims to strengthen its resilience to geopolitical risks
(Naughton, 2007; Huang, 2008; Lardy, 2014).
In this context, Xi Jinping presented a new macroeconomic concept for China in April 2020, the
"dual cycle" (Boyl & McNally 2015). At its core is the expansion and unification of China's
growing domestic market, while international markets form a complementary external circuit.
The external markets are to serve as a source of raw materials, resources, investments and
technologies, while at the same time being used as sales markets for Chinese products or excess
capacities (Huang & Dollar, 2020; Naughton & Tsai, 2021).
In terms of economic autonomy, China's "dual circulation" concept aims to ensure a functioning
domestic market in times of international conflict or sanctions (Kynge, 2021). To achieve this
goal, import substitution and the development and expansion of its own scientific and
technological capabilities are crucial (Li, 2021).
Foreign companies that possess cutting-edge technologies in which China still needs to catch
up will also continue to be heavily courted. However, in economic sectors where China can
already offer competitive products and technologies, foreign companies have to prepare for
cut-throat competition. This competition may be accompanied by increasing competitive
pressure from domestic companies as well as discriminatory market interventions by the
Chinese government (Göbel, 2020).
Despite efforts to achieve independence, China will not be able to become fully independent in
all areas of raw materials and technologies in the future either (Economy, 2018). Therefore, the
Chinese leadership should specifically promote dependencies of other economic partners on
China in order to protect its own supply interests (Lee, 2021). As Xi emphasised in his speech,
China needs to develop "killer technologies" to "further tighten the existential dependence of
international industrial value chains on our country and thus build up deterrence and
countermeasure capabilities with regard to deliberate foreign supply stoppages" (Xi in Gätzner
2022).
China's growing influence is also evident in its relations with other countries and regions, such
as the US, the European Union, Africa and the Middle East (Economy, 2018; Godement &
Vasselier, 2017: Hamilton & Quinlan, 2019). The Chinese leadership pursues a pragmatic
diplomacy based on economic interests and political calculations to advance China's global
interests and shape its relations with other countries (Swaine, 2015; Yahuda, 2018).
In this way, geopolitical implications are generated for China as the country strengthens its
technological autonomy and political independence. The growing digital infrastructure and the
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promotion of high-tech industries reduce China's dependence on foreign technologies and
investments.
Finally, digitalisation plays an important role in shaping China's approach to international
cooperation and norm-setting in the digital space (Dignum, 2018; Susskind & Susskind, 2017;
Whittlestone et al., 2019). Despite its growing importance on the world stage, China faces a
number of challenges, including the need to continue its own economic transformation, manage
regional tensions and respond appropriately to global challenges such as climate change, health
crises and technological disruption (Ross & Tunsjø, 2018; Wu et al., 2020). China's ability to
meet these challenges and manage the associated risks will be critical to maintaining and
expanding its position in the global economy and in the international context (Economy, 2018;
Brown, 2018).
China's foreign policy also involves the use of soft power and cultural influence to increase its
global presence and appeal (Callahan, 2016; Lynch, 2016). Examining these aspects of China's
foreign policy helps us to better understand China's self-image as a cultural and ideological
power and its ability to promote its values and ideas on the international stage.
CONCLUSION
In the concluding part of the study, the three questions will be taken up again:
a) How has China's AI strategy developed and what are its goals?
b) What impact does China's AI strategy have on the country's economic development?
c) How does China's AI strategy influence relations between the bloc states and the global
power structure?
Re a) China's AI strategy has evolved over time to meet the demands of an AI-driven economy.
One important initiative is the Next Generation Artificial Intelligence Development Plan
(NGAIDP), which aims to help China become the world leader in AI development by 2030.
Under this initiative, AI courses and programmes will be introduced in primary, secondary and
tertiary schools, and collaborations between universities and companies will be promoted to
provide hands-on AI research and training. The NGAIDP emphasises the need to continuously
monitor and evaluate the quality of AI education and research in order to succeed in
international competition. China's AI strategy has focused on the development of AI application
software, hardware and services, including AI chips, commercial AI robots, basic AI data
services and other key sectors. The AI strategy also focuses on the creation of AI clusters and
regional economic development, as in the example of the Pearl River Delta District. The goals
of the AI strategy include fostering innovation and growth, access to talent and creating
business opportunities for AI companies.
Re b) China's AI strategy has significant implications for the country's economic development.
The spread of AI in the economy is changing the demand for skilled labour as some traditional
jobs are replaced by automation and new jobs are created that require specialised AI skills. By
focusing on AI research and education, China has been able to increase the number of AI-related
scientific publications and successfully compete in international AI competitions and
hackathons, strengthening the country's competitiveness in the global market. The AI strategy
has led to increased productivity and efficiency in various industries, especially in the
automotive and electronics sectors.
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URL: http://dx.doi.org/10.14738/assrj.104.14416
AI technologies have the potential to generate millions of new jobs in the coming years.
However, automation could also replace up to 12 per cent of jobs in Chinese industry.
Confirming this assumption, China's AI strategy has led to increased creative destruction, with
traditional industries and occupations affected by AI-based technologies and automation, while
new businesses and jobs are created.
The introduction of AI technologies has led to higher economic performance and productivity
in some regions. AI clusters have played a crucial role in promoting AI technologies and regional
economic development. The total size of the AI industry is expected to reach 612.2 billion yuan
in 2027, with a compound annual growth rate (CAGR) of 25.6% from 2022 to 2027.
By using AI technologies to increase production, China will rely less on imports. In addition,
China has expanded its economic presence by exporting AI-based products and services to
numerous countries and industries. This development leads to new trade opportunities, but
also to growing competition and trade conflicts with other technologically advanced nations. In
this context, countries like Europe could re-evaluate their trade relations with China and
possibly diversify trade with other countries to mitigate potential economic risks.
Re c) China's AI strategy influences bloc-state relations and the global power structure by
intensifying its research activities and remaining competitive in the global market. Through its
success in international AI competitions and the growing number of AI-related scientific
publications, China is strengthening its position as a leading nation in the field of AI. This may
lead to a shift in the global power structure and further intensify competition between the bloc
countries, especially with regard to technological advancement and the application of AI in
critical infrastructure, economy and defence.
China's economic transformation into a technology-based, innovation-driven economy is
enabling the country to move up the global value chain and take a leading role in the world's
trade and financial systems. China's proactive and assertive foreign policy, such as the "One
Belt, One Road" initiative, aims to open up new markets and resources, secure political and
economic stability and expand the country's geopolitical reach. China's leadership also uses the
Chinese market for political purposes to achieve geopolitical goals by deepening other
countries' dependencies and gaining technology leadership in key industries.
The "dual cycle" concept presented by Xi Jinping also aims to ensure a functioning domestic
market in times of international conflict or sanctions by promoting import substitution and the
development of domestic scientific and technological capabilities.
China's growing influence is also evident in its relations with other countries and regions, with
the leadership pursuing pragmatic diplomacy to promote China's global interests and shape its
relations with other countries. This strengthens China's technological autonomy and political
independence and has geopolitical implications.
In addition, digitalisation plays an important role in shaping China's approach to international
cooperation and norm-setting in the digital space. China's foreign policy continues to involve
the use of soft power and cultural influence to increase its global presence and attractiveness.
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Figure 3: Tabular summary of the results
Source: own representation
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