- China aims to become the world's dominant player in artificial intelligence by 2030 according to its government plan. This puts China on track to surpass the current front runner, the US, and become the global leader in AI. - China has several advantages that are helping it gain a lead in the global AI race, including a large consumer market that provides vast amounts of data for training AI systems, and strong government support and funding of AI development. - The three largest Chinese tech companies, Baidu, Alibaba and Tencent (BAT), have expanded into other countries and invested heavily in AI startups, which is boosting China's capabilities in areas like autonomous vehicles, smart cities and healthcare AI.

1. CAN EUROPE
COMPETE?
Q&A WITH EUROPEAN
COMMISSIONER
CARLOS MOEDAS
SMART CITIES
HOW CHINA IS USING
AI TO IMPROVE
URBAN LIFE
AUTONOMOUS CARS
CHINA’S $500 BILLION
MARKET AND
ITS DRIVE FOR GLOBAL
DOMINATION
#7 – September 2018 — Special Edition for the World Economic Forum’s Annual Meeting
of the New Champions
SUPPLEMENT GRATUIT AU # 22783 DU QUOTIDIEN
”LES ECHOS” DU 18 SEPTEMBRE 2018
NE PEUT ETRE VENDU SEPAREMENT
THEGLOBALAIRACE
AND ITSCONSEQUENCES

2. WE NEED
Y U
“If you want to be a startup billionaire, you have to solve a billion peoples‘ problems”
Thimo V. Schmitt-Lord MBE, Head of Bayer Foundations
We believe in the game changing power of innovation – we support pioneers who apply tech innovations to humanity’s
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In 2018 we are scouting for Startups, Innovators, and Impact Innovations particularly focused on agriculture and food
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3. — P.3
LETTER FROM THE EDITOR
ItisfittingthattheWorldEconomicForum’sAnnual
MeetingoftheNewChampionstakesplaceinChina.Thecountry
has moved from imitation to innovation in record speed and is
now a leader in many of the technologies underpinning the
Fourth Industrial Revolution, including artificial intelligence.
Past industrial revolutions have generated significant changes
in the balance of power, international competition and interna-
tional conflict. Given the extent of the disruptions that analysts
believe AI could cause in the global economy, it is essential to
think about the consequences.
The Forum, which convenes stakeholders from government, in-
dustry and civil society, is a good place to have that discussion.
In the pages of our magazine we have interviewed a number of
experts on the topic, in the hopes of furthering the conversa-
tion. As the AI expert Kai-Fu Lee says in his new book “AI
Superpowers: China, Silicon Valley and The New World Order”:
“We are not passive spectators in the story of AI – we are the au-
thors of it.”
ByJenniferL.Schenker
Editor-in-Chief,TheInnovator
THEBRIEF
COVERSTORY
THEGLOBALAIRACEANDITS
CONSEQUENCES
CANEUROPECOMPETE?
Q&AWITHEUROPEANCOMMISSIONER
CARLOSMOEDAS
BUILDINGBRIDGESBETWEENEUROPE
ANDCHINA
HOWFRANCE’SLARGESTCOMPANIES
ARECONNECTINGWITHINNOVATIVE
COMPANIESINCHINA
TOP30TECHPIONEERSTOMEETATTHE
WORLDECONOMICFORUM’SANNUAL
MEETINGOFTHENEWCHAMPIONSIN
TIANJIN
HOWCHINA’SINTERNETGIANTSARE
DISRUPTINGTRADITIONALINDUSTRIES
GREATERBAY’SGREATAMBITIONS
TAKINGSMARTCITIES
TOTHENEXTLEVEL
AISURVEILLANCE:SECURITYENABLER
ORTOOLOFADYSTOPIANSOCIETY?
OURALGORITHMICSELVES:
THEIMPACTOFSOCIALSCORING
CHINA’SGREATLEAPINTOPRECISION
MEDICINE
CHINA’SDRIVETODOMINATE
AUTONOMOUSCARS
CHINA’SFINTECHSTARTUPSARE
TRANSFORMINGFINANCIALSERVICES
HOWCHINA’SINTERNETGIANTSARE
CHANGING
OFFLINEANDONLINERETAIL
THEIMPACTOFAIONJOBSINCHINA
Q&AWITHTHEHEADOFTHE
WORLDECONOMICFORUM’S
GLOBALCENTREFORCYBERSECURITY
HELPINGDRONESTAKEFLIGHT
HOWTECHSTARTUPSCANCHANGE
THEWAYWEFEEDTHEWORLD
P.04
P.06
P.12
P.16
P.18
P.20
P.22
P.24
P.28
P.30
P.32
P.33
P.34
P.36
P.38
P.40
P.43
P.44
P.46
P.48
TABLE
OF CONTENTS

4. P.4 — THE INNOVATOR
A network comprised of the world’s best manufacturers will
officially launch at the World Economic Forum’s 12th Annual Meeting of
the New Champions, in Tianjin, China on September 18-20. Concluding
a year-long study with McKinsey, the World Economic Forum named the
world’s nine most advanced factories earlier this month, a recognition of
the strides that the winners have made toward embedding the technologies
of the Fourth Industrial Revolution into modern production, improving
financial and operational performance in the process. Five of the winning
factories are located in Europe, three in China and one in the U.S. They
were selected from an initial list of some 1,000 manufacturing companies.
“These pioneers have created factories that have 20%-50% higher
performance,” Enno de Boer, partner and global head of manufacturing
at McKinsey & Company, said in a statement. “They have agile teams with
domain, analytics, IoT and software development expertise that are
rapidly innovating on the shop floor.” The aim of the Forum is to build a
network of these manufacturers to address problems confronting
industries in both advanced and emerging economies when they invest
in advanced technologies. Earlier work by the Forum found that over 70%
of businesses investing in technologies such as Big Data analytics, artificial
intelligence or 3D printing do not take the projects beyond the pilot phase
due to unsuccessful implementation strategies. To aid the learning and
adoption of technologies by other companies, all nine factory owners in
the network have agreed to share their knowledge with other
manufacturing businesses.
THE NINE WINNERS ARE:
— Bayer Biopharmaceutical (Garbagnate, Italy): “Using data as an asset”
– While most companies use less than 1% of the data they generate,
Bayer’s massive data lake (a storage repository that holds a vast
MEET THE WORLD’S
MOST ADVANCED FACTORIES
amount of data) has led to a 25% reduction in maintenance costs
and 30%-40% gains in operational efficiency.
— Bosch Automotive (Wuxi, China): “Optimizing competitiveness” – By
implementing an “order-to-make” product customization platform
and using remote AI, the factory is able to predict maintenance
needs before they occur.
— Haier (Qingdao, China): “Customer-centric technologies” – Artificial
Intelligence-led transformations include an “order-to-make” product
customization platform and the use of remote AI, helping the factory
to predict maintenance needs before they happen.
— Johnson & Johnson DePuy Synthes (Cork, Ireland): “Process-driven
digital twinning” – This factory used the Internet of Things to make
old machines talk to one other, resulting in 10% lower operating
costs and a 5% reduction in machine downtime.
— Phoenix Contact (Bad Pyrmont and Blomberg, Germany): “Customer-
driven digital twinning” – By creating digital copies of each customer’s
specifications, production time for repairs or replacements has been
cut by 30%.
— Procter & Gamble (Rakona, Czech Republic): “Production agility” –
A click of a button is all it takes for production lines in this factory
to instantly change the product being manufactured, which has
reduced costs by 20% and increased output by 160%.
— Schneider Electric (Vaudreuil, France): “Factory integration” – Sharing
knowledge and best practices across sites has helped this company
make sure all its factory sites have the highest energy and operational
efficiencies, reducing energy costs by 10% and maintenance costs by
30%.
— Siemens Industrial Automation Products (Chengdu, China): “3D
simulated production line optimization” - Using 3D simulation,
augmented reality and other techniques to perfect the design and
operations of its factory, employees helped increase output by 300%
and reduced cycle time.
— UPS Fast Radius (Chicago, U.S.): “Balancing capacity with customer
demand” – Meeting increasing consumer demand for fast-turnaround
customized products has been made possible through a combination
of globally distributed 3D-printing centers with real-time
manufacturing analytics.
THE BRIEF

5. — P.5
THE BRIEF
Togettechnologynewsincontexteveryweek,subscribetoournewsletter:http://innovator.news
A report scheduled to be
releasedattheWorldEconomicForum’s
Meeting of The New Champions in
TianjinoutlineswhyChinaiswinning
the game of drones and forecasts
that the country will become a
leading force and inevitably disrupt
theglobalaviationsector,challenging
Boeing’s and Airbus’s duopoly.
The report, written by Harrison
Wolf, the Forum’s lead, Drones and
Tomorrow’s Airspace, points out
that the drone industry is dominated
by one company: Shenzhen-based
Da-Jiang Innovations (DJI), which
owns over 70% of the global market
sharefortheconsumerdroneindustry
with revenue of $2.7 billion in 2017.
The report also notes that Chinese
manufacturers are well ahead of
theircompetitorsin thedevelopment
and testing of autonomous systems
for personal mobility. For example,
Ehang, a Chinese company focusing
on passenger transport without
onboard control, completed its first
human test flights in rural China in
early 2018; boasting speeds of up
to 130km/h. “While international
competitors exist, finding a test bed
for new mobility projects has been
a challenge and the burden of
certification developed by traditional
aviationauthorities nearimpossible.”
says the report.
Recently, the Chinese cities of
Shenzhen, Jiangxi, and Sanya,
announced unmanned traffic
management (UTM) pilot projects
that enable real-time coordination
among drone operations over cities;
one of the key elements for a
commercialdroneindustrytodevelop.
While the rest of the international
community meet in industry-
standards groups to develop
technological protocols over a period
of years, China is testing Remote
Identification and Tracking and
UTM in real-time; leveraging the
experiences of companies like Unifly,
who seek new test beds open to
innovation, through partnerships
with domestic technology leaders
like Huawei, the report says.What’s
more, JD.Com, China’s second-
largest online retailer, has spent the
last year building a drone-delivery
networkthatcovers100ruralvillages
leveraging 40 unmanned aircraft,
while Amazon in the United States
still hopes for approvals to begin
flighttesting.AndChina’sSFExpress,
arguably the leader in drone delivery
internationally, recently became the
first company with a Drone Operator
License in China; providing a scale
of delivery that the report says is
unparalleled anywhere else.
Leadership in drones is important
becauseChinaisprojectedtobecome
theworld’slargestpassengeraviation
market by 2024, according to the
report.
While it currently purchases nearly
all of its aircraft from abroad, much
of the technology being developed
for drones is expected to transfer
over to larger passenger aircraft
and autonomous personal mobility
platforms; leapfrogging the current
technology leaders like Boeing and
Airbus. “Ultimately, it will be the
nation that is able to implement
revolutionary technologies the
quickest,andwiththegreatestagility,
which will win in the aerospace
industry in the future,” says the
report. “Today that player is China.”
CHINA IS WINNING
THE GAME OF DRONES
The World Economic Forum
isscheduledtoannouncetheopening
of a Centre for the Fourth Industrial
Revolution in China during its
conference in Tianjin September
18-20. The focus will be based on
the nine project areas at the Centre
for the Fourth Industrial Revolution’s
headquartersinSanFrancisco,which
includes precision medicine,
autonomous vehicles and artificial
intelligence. The Forum has also
opened a Centre in Japan and will
open one in India in October.
ANEWFOURTH
INDUSTRIAL
REVOLUTION
CENTRETOOPEN
INCHINA
TheWorldEconomicForum
is set to launch a new global Centre
forEntrepreneurshipandInnovation
at its September. 18-20 conference
inTianjin.“Wewanttobuildaglobal
community of startups and help
themtocreatemorerelevant,diverse
connections,” Knut Haanaes, who
will head the center, said in an
interview with The Innovator. Some
200 startups have already been
selected,saysHaanaes,whoworked
asaseniorpartneratBCGandtaught
atIMDBusinessSchoolinSwitzerland,
StanfordUniversityandBINorwegian
Business School, before joining the
Forum. Plans are for a virtual space
tobecreatedontheTopLinknetwork
used by the Forum’s constituents
toallowstartupstomakeconnections
with large corporates and other
relevant partners.
CENTREFOR
ENTREPRENEURSHIP
ANDINNOVATION
TOLAUNCH
ATTIANJIN
CONFERENCE

6. P.6 — THE INNOVATOR
THEGLOBAL
AIRACEAND
ITSCONSEQUENCES
If the Chinese government has its way the country will be the
world’s dominant player in artificial intelligence by 2030. That’s the plan.
And it appears to be on track. Governments across the world are rushing
to craft AI policies, but none have published a plan as comprehensive as
that outlined by the Chinese government in July, 2017. And few, if any, have
an equivalent ability to execute.
As a result the U.S., now the front runner, risks losing its lead in the global
AI race. Europe is expected to land up a distant third. And if pundits are
right the rest of the world will find it difficult – if not – impossible to catch
up. The winners of the global race for dominance in AI stand to reap
enormous economic benefits. Already the potential impact of AI on GDP in
China is expected to be greater than in the U.S. or Western Europe. That is
also projected to translate into stronger job creation potential in the country,
according to a new report from PwC that is scheduled to be released at the
World Economic Forum’s Annual Meeting of the New Champions in Tianjin
Sept. 18-20. (See the story on page 43.)
How did China, the world’s largest consumer market and the world’s most
populated country with nearly 1.4 billion people, leap ahead? Years of work
to become a digital-first economy have resulted in a plethora of consumer
data at the disposal of the government and big tech companies, says a recent
report by the research firm CB Insights. And the more data you feed AI the
betteritbecomes.GovernmentsupportforandinterventioninAIdevelopment
is boosting China’s fast-growing tech market. China’s Science Ministry
announced that the nation’s first wave of open AI platforms will rely heavily
on the country’s three Internet giants – Baidu for autonomous driving,
Alibaba for smart cities and Tencent for AI in healthcare.
Tencent, which runs the social networking service WeChat, has access to
over one billion users on its platform, while Baidu is the country’s largest
search provider and Alibaba is its biggest e-commerce platform. All three
offer a widening range of products and services, and like the biggest tech
giants in the U.S., have far-reaching global ambitions.
The three Internet giants, collectively known as BAT, are expanding into
other countries in Asia, recruiting U.S. talent, investing in U.S. AI startups
and forming global partnerships to advance smart city solutions, autonomous
driving, conversational AI and predictive healthcare, among other initiatives,
says the CB Insights report. Baidu, Alibaba and Tencent have participated
in 39 equity deals into startups building AI software and AI chips since 2014,
says the report. A major portion of the deals – around 44% – went to startups
COVER STORY
— The battle for dominancein artificial intelligence is expected to impact economic supremacy,
defense and social stability.
By Jennifer L. Schenker

7. — P.7
CHINA’S AI DEVELOPMENT STILL LAGS
BEHIND THE U.S.
As of 2017, the U.S. was home to the most AI startups in the world at 1,078 with China in second at 591
1078
1000
500 488
591
304
666
14
Other
MachineLearning,
Robotic,&
Autonomous
Vehicles
ComputerVision
&Language Infrastructure
138
586
74
273
70 33
NumberofAIStartupsByCountryasofJune2017 NumberofAIStartupsByCountryasofJune2017
BUT THE CHINESE GOVERNMENT HAS AMBITIOUS PLANS
TO CATCH UP
Baidu, Alibaba, Tencent and iFlyTek have been a driving force behind China’s AI advancement.
Investment
and
Training
Leading
Chinese
CompaniesinAI
AIStrategic
Plan
InJuly2017,China’sStateCouncilreleaseditsroadmaptocreateadomestic1trillionRenminbi (US$148billion) AIindustryand
leapfrogtheU.S.tobethegloballeaderinthefieldofAIby2030.
w KeeppacewithleadingAItechnologyandapplicationsingeneralby2020
w Makemajorbreakthroughsby2025
w Betheworldleaderinthefieldby2030
Baidufocusesonautonomousdriving.
ThecloudcomputingdivisionofAlibabaisworkingonaprojectcalled”CityBrain,”,asetofAIsolutions
toimproveurbanlife,includingsmarttransport.
Tencentfocusesoncomputervisionformedicaldiagnosis.
Shenzhen-listediFlyTek,adominantplayerinvoicerecognition,specializesinvoiceintelligence.
w InJanuary2018,thegovernmentannouncedthatitwouldspendUS$2.1billiontobuildanAIindustrialparkinthesuburbsofBeijing.
w InApril2018,theMinistryofEducationlaunchedafive-yearAItalenttrainingprogram,where500teachersand5,000students
wouldtrainattopuniversities.
Source:SCMP
U.S.
CHINA

8. P.8 — THE INNOVATOR
in the U.S. In contrast, the report says, Facebook, Apple, Google, Microsoft
and Amazon “have a negligible private market footprint in China,” noting
that there has been only one equity deal among this group into a China
startup: Google’s investment in the voice startup Mobvoi.
All three Internet giants are investing in autonomous vehicle technology
and have snapped up startups in this area. The reason? China is likely to
emerge as the world’s largest market for autonomous vehicles and mobility
services, worth more than $500 billion by 2030, according to an annual
report on the nation’s innovation economy by the South China Morning
Post and 500 Startups, a Silicon Valley venture fund and seed accelerator.
That leadership means China will likely have tremendous global influence
over design, operating rules, and sales of autonomous vehicles, since
breakthroughsineachoftheseareasareexpectedtobedrivenbyitscompanies
and regulators. (See the story on page 36.)
But the AI race involves more than economic and technological might. As
AI becomes better at mimicking and surpassing humans, the countries and
companies who control the technology could end up serving as mission
control for humanity.
The Dark Side of AI
AI, like all technologies, is Janus-faced. It depends on who designs the
technology and how it is applied. For example, AI-equipped surveillance
technology can be used to make cities safer and more efficient or as a tool
of dystopian societies. (See the story page 32.)
ThedarksideofAIisincreasinglyinthespotlight.Inhisbook“Superintelligence:
Paths,Dangers,Strategies,”thephilosopherNickBostromofOxfordUniversity
imagines an AI that has been programmed to make as many paper clips
as possible. It ruthlessly transforms all of Earth and then an ever increasing
portion of outer space into paper clip manufacturing facilities. Bostrom’s
book was one of the things that inspired Elon Musk, the U.S. billionaire
behind Tesla and SpaceX, to say that AI is “potentially more dangerous
than nukes.” Musk, the late physicist Stephen Hawking and others in the
scientific community signed an open letter calling for a ban on autonomous
military weapons and research to ensure that AI systems are beneficial to
humanity.
Concerns go far beyond killer drones and super-intelligent systems running
amok. When Axon, the U.S.’s biggest seller of police body cameras, voiced
interest in pursuing face-recognition technology and other AI capabilities
into real-time video, which would have allowed officers to scan and recognize
the faces of potentially everyone they see while on patrol, some 42 civil
rights, technology and privacy groups protested. They wrote a letter urging
an outright ban on face recognition on policy body cams, which it called
“categorically unethical to deploy” in part because of the technology’s
privacy implications.
In China police regularly use AI-powered surveillance technology to capture
fugitives and shame jaywalkers, part of an effort to make cities safer and
more efficient and to exert more control. The reliance on AI-powered
technology has created a booming industry: the Beijing startup SenseTime,
which makes surveillance technology, has a valuation of $4.5 billion, making
it the world’s most highly-valued AI startup.
Concerns about AI’s uses also include bias. The letter from U.S. civil rights
groups pointed out that recent research found that most facial-recognition
systems perform far less accurately when assessing people with darker
skin, opening the potential for an AI-enabled police officer to misidentify
an innocent person as a dangerous criminal, with potentially deadly
consequences.
The application of AI to areas such as loan services and recruitment and
its use by the Chinese government to give people a “social score” based on
their behavior is leading to calls for transparency and for standards to
prevent discrimination and marginalization. (See the story on page 33.)
One way of doing this is to require algorithms to be interpretable to end
users, by describing how their algorithms work and articulating rationales
fortheirdecisions.Forexample,theEuropeanUnionhasmade“explainability”
COVER STORY
AI IS INFUSING EVERY LEVEL
OF SOCIETY
Chinaseemspoisedtodominatethen
marketforautonomouscars
InShenzhen,theAIfirmIntellifusion
workswithlocalpolicetodisplaythe
facesofjaywalkersonlarge
LEDscreensatintersections.

9. — P.9
in-depth white paper on AI standards in January and hosted a major
international AI standards meeting in Beijing in April. The white paper’s
discussion of data privacy standards reflects an emerging, important debate
over privacy protections in China, says the analytical report by Ding, Triolo
and Sacks. “On the one hand, there is demand from the public for restrictions
on how companies collect and use personal information. These concerns
are reflected in a standard for personal information security which aims to
strengthen user control over how their data is handled by companies. But
at the same time, the government does not want to to make the rules too
strict for companies in a way that would inhibit AI development.”
While it is important to bring China into the global dialogue and help set
standards, the paper written by Ding, Triolo and Sacks warns that “should
Chinese officials and experts succeed in influencing such standards and
related AI governance discussions, “the policy landscape may skew toward
the interests of government-driven technical organizations, attenuating the
voices of independent civil society actors that inform the debate in North
America and Europe, because these organizations do not have a voice [in
China].”
China’s Sputnik Moment
China’s ambitious plans to dominate AI can be traced back to the moment
the computer AI program AlphaGo scored its first high-profile victory in
March 2016 during a five-game series of matches of the strategic board
game Go against an expert human player, winning four to one. While barely
a check on the potential dangers of AI, guaranteeing a person’s right to
obtain“meaningfulinformation”aboutcertaindecisionsmadebyanalgorithm.
As technology companies move to hardwire ethics into AI, questions are
being raised not only about how machines make decisions but about what
values are being used to underpin them, as there is no global consensus
on ethics or issues such as data privacy.
The Cambridge Analytica scandal made the public aware of the growing
power and influence of technology companies and the way they share and
use data. Some see this as a chance for Europe to gain a competitive edge
by offering an alternative form of AI – one that safeguards European values
such as data privacy and democracy, by hardwiring them into the technology.
(See the story on page 12.)
The Data Privacy Debate
The push in Europe to encode “European values” is a reaction to a perception
that technology companies in the U.S. are out only to maximize profits with
no accountability to government, and that China primarily wants to use AI
to control its population and does not care about data privacy.
But data privacy is now on the agenda in China. Part of the country’s plan
todominateinAIistodevoteconsiderableeffortstostandard-settingprocesses
in AI-driven sectors, including algorithmic transparency, liability, bias and
privacy, says a June analysis of China’s involvement in AI standards written
by Jeffrey Ding, the China lead for the Governance of AI Program at the
Future of Humanity Institute; Paul Triolo, China Digital Economy Fellow at
New America; and Samm Sacks, Senior Fellow, Technology Policy, Center
for Strategic and International Studies. Chinese organizations released an
Source: SMCP and 500 Startups
AI-equippedsunglasseshelpChinese
policespotfugitivesincrowds.
Roboticsisanareaofmajordevelopment
inChina.Theiruseinfactoriesandinwarehouses
isincreasingefficiency.
AIishavingabigimpactonhealthcareinavarietyofways.
InSeptember2017arobotdentistinChinabecame
theworld’s firsttoperform3D-printedteethimplants
inapatient’smouthwithoutanyhuman involvement.

10. P.10 — THE INNOVATOR
environments. Theprivatesectorshouldfocusonentrepreneurship,investment,
worker reskilling and talent development, and business innovation. Both
must focus on what Accenture calls Responsible AI, which is about adopting
AIpolicies,guidelines,andimplementationsthatensuretransparency,fairness,
and accountability,” he says. “A new, tighter level of collaboration, integration
and commitment across the public and private sectors is absolutely essential.”
Managing AI’s Use
Managing the creation and use of AI technology is crucial, given AI’s ability
to influence defense, diplomacy, intelligence, economic competiveness, social
stability and the diffusion of information, notes the CNAS report.
“The sharper the competition…the greater the need to also think about the
potential for a race to the bottom in AI safety,” says the CNAS report. “As
countries and companies competitively create AI applications, especially if
they believe that there are large advantages to being first movers, there is
a risk that countries may put aside safety and reliability concerns due to the
desire to be first. Such a race to the bottom would escalate the potential for
AI-driven accidents, both in the commercial and military sectors.”As with
past industrial revolutions, the outcomes of this race for technological
dominancewilldependnotjustonthetechnologyitselfbutonhowcompanies,
governments and people use it.
noticed by most Americans, the five games drew more than 280 million
Chinese viewers, notes Kai-Fu Lee, the former head of Google China, in
his new book “AI Superpowers: China, Silicon Valley And The New World
Order.” “Overnight, China plunged into an artificial intelligence fever,”
notes a passage in the book. It was China’s Sputnik moment, comparable
to when the Soviet Union launched the first human-made satellite into
orbit in October 1957, an event that sparked widespread U.S. public anxiety
about perceived Soviet technological superiority and triggering what was
known as the “Space Race,” Lee says in the book. Lee, now the dean of
China’s new AI Research Center and the CEO and founder of Sinovation
Ventures, a Chinese early-stage ventures firm with a presence in Beijing,
Shanghai, Shenzhen and Silicon Valley, says China is rapidly catching up
to the U.S. and may surpass it. As AI companies in the U.S. and China
accumulate more data and talent, the virtuous cycle of data-driven
improvements will widen their lead to a point where “it will become
insurmountable,” says the book.
That is not necessarily a bad thing, says Lee. While the book acknowledges
there is a real threat that AI, which will have a huge impact on the labor
force,couldleadto“tremendoussocialdisorderandpoliticalcollapsestemming
from widespread unemployment and gaping inequality,” Lee says he believes
worst-casescenarioscanbeavoided.Thenewbook“describesthiscompetition
as an enabler, not as a destroyer,” Lee said in an interview with The Innovator
earlier this year. “The technologies underneath the applications are well
known and their applications mostly benign, unlike the nuclear weapon
arms race. So I expect China and the West to leverage their strengths and
make great progress, creating wealth and innovations benefiting all of
mankind.”Just how positive global control of AI by China and the U.S. would
be is still a matter of debate. So what steps should countries take to better
their position? The elements of national power in the age of AI include
owning large quantities of the right type of data, training and enabling AI-
capable talent pools, having the right computing resources and fostering
public-private partnerships, says a July report by the Center for a New
American Security (CNAS). It is crucial that both the public and private
sectors play a role to fully realize the promise of AI, says Paul Daugherty,
Accenture’s chief technology & innovation officer.
“The public sector must focus on national investment, an R&D agenda, data
policies, workforce and education initiatives, and favorable regulatory
COVER STORY
AI’S IMPACT IS NOT LIMITED
TO BIG CITIES
WiththehelpofAI,aJDchickenfarm
inChinaismonitored24/7
withfunctionsincludingautomatic
feeding,cleaningandhealth
diagnosis.
AlibabausesAItoraisepigsbyusinga
digitalIDforeachpig,whichcanhelp
trackvitalsigns,pregnancy,sickness,
sleepingandeatingschedulesand
theirmood.ThishashelpedTequ
Group,aSichuan-basedpigfarming
enterprise,toraisemorenewborn
pigs,decreasingdeathrates
andincreasingincomeby10%.Data Source: SMCP and 500 Startups

12. P.12 — THE INNOVATOR
– one that safeguards European values such as data privacy and democracy,
by hardwiring them into the technology. Such an approach addresses
growing concerns about the way data privacy is handled by Silicon Valley
companies. The Facebook/Cambridge Analytica scandal brought the issue
front and center. The firm is accused of using data it improperly obtained
from Facebook to build voter profiles and influence the U.S. presidential
election. At the same time, China’s use of AI-powered surveillance technology
to control its population is creating unease in the West.
Carlos Moedas, the European Commissioner for Research, Science and
Innovation and a co-chair of the World Economic Forum’s Annual Meeting
of The New Champions in Tianjin, confirmed to The Innovator that the
EU is considering hardwiring ethics into AI. “The recently launched High-
Level Expert Group on Artificial Intelligence is looking into this, working
closely with a broad range of stakeholders through the European AI Alliance,”
says Moedas. “Beyond privacy, ethics by design is also on the agenda, as
well as possible certification and standardization procedures.” (See the
full interview on pages 16 and 17.)
Embodying Ethics
Françoise Soulié, a member of the EU’s High-Level Expert Group on AI
who has over 40 years’ experience working with neural networks, machine
learning, social network analysis and Big Data in academia and in industry,
is pushing for Europe to take that approach. She is a co-founder of Hub
France Intelligence Artificielle, a French organization that aims – through
a bottom-up approach – to help create an AI industrial sector in France
and Europe.
“To me it is very important that Europe has an offer – not just a law – an
offer of technical products that embody ethics in them, ethics as a design
principle,” says Soulié. “This is going to be a competitive advantage. The
European mark will say ‘these projects can be trusted’ – and they are
going to be on the market side by side with American and Chinese products
without that label. The Commission has put that on their list. For me it is
not about legal issues only. We need products with ethics in them. The
question is how can we develop norms so a product would have a kind
of International Organization for Standardization (ISO) standard stamp.
This is what I intend to push.”
Europe could be a global leader in ethical AI, agrees Charlotte Stix, a
policy officer and research associate on AI policy at the Leverhulme Centre
for the Future of Intelligence, University of Cambridge. “The European
Commission’s recent documents, as well as national policy reports and
legislation such as the GDPR [Europe’s new stricter data protection law]
point towards that direction,” says Stix, who formerly worked at the
CanEurope
Compete?
— Progress has been slow, but Europe
may have a chance to lead by offering an alternative
form of AI.
GLOBAL AI RACE
As the U.S. and China vie for supremacy in the global artificial
intelligence (AI) race, Europe risks being left behind. The European Union
is home to some of the world’s best universities and coders and has long
emphasized the deep math thatunderpinsAI.But progress isbeing hampered
by slow decision-making, too little investment in AI by Europe’s private
sector and bureaucratic procedures in the public sector, an emphasis on
separate national AI strategies, no sense of urgency and too little prototyping.
Some of its best AI experts are now running AI operations for Facebook
and other Silicon Valley companies and some of its most successful AI
companies – such as DeepMind – have been snapped up by the likes of
Google. And venture capital is flowing elsewhere: In 2017, according to
the Joint European Disruption Initiative (JEDI),
48% of VC investments in AI went to China, 38% to the U.S. and 14% to
the rest of the world including, among others, the EU. But a group of
respected policy makers, academics, investors and entrepreneurs say they
believe Europe has a chance to lead by offering an alternative form of AI

13. — P.13
European Commission’s Robotics and Artificial Intelligence Unit, where
she oversaw a total of €18 million in Robotics and AI projects and contributed
to the formulation of EU-wide AI strategy.
The problem is that the European Union is composed of 28 member states
with potentially diverging strategies and long-term ambitions. “Nevertheless,
thisdiversitymayequallyprovetoproviderichgroundsforafirstinternational
cooperation on AI,” says Stix, the author of a new report entitled “What’s
Stopping the European Union From Achieving AI Leadership?” which is
scheduled to be published in late September. She points to a recent EU
Digital Day declaration entitled “Cooperation On AI” as a sign of progress.
“One recommendation I would propose for Europe is to create a single
Europe-wide agency for disruptive innovation,” says Stix. This proposal
was initiated by JEDI, a group representing the deep tech ecosystem in
Europe. Such an agency could pool existing funds across the European
Union and divert them towards fewer but higher-risk projects and research
which may not receive funding otherwise. That said, in the AI field JEDI
remains cautious, pointing to the market fragmentation created by French,
German and European politicians all wanting their “own” AI strategy.
JEDI – which is now operational – is setting up a pan-European fund of
€1 billion for fundamental research projects similar in nature to The Defense
Advanced Research Projects Agency (DARPA), an arm of the United States
Department of Defense which is credited with helping create a precursor
of the Internet known as DarpaNet and other innovations. Its 120-strong
members include most presidents of major research institutions, executives
at large European technology groups and the founders of deep tech startups.
“Europe, starting with France and Germany, needs to focus on disruptive
innovation as this is the only way to leapfrog and become technological
leaders again,” says André Loesekrug-Pietri, a venture capitalist who was
a member of one of French President Emmanuel Macron’s ministerial
cabinets in 2017. The EU’s huge research projects, which eat up billions
GLOBAL AI RACE
Inthepastyearandahalfsome16countriesandtheEuropeanUnionhaveallreleasedstrategiestopromotetheuseanddevelopmentofAI.Notwostrategiesare
alike,witheachfocusingondifferentaspectsofAIpolicy:scientificresearch,talentdevelopment,skillsandeducation,publicandprivatesectoradoption,ethicsand
inclusion,standardsandregulations,anddataanddigitalinfrastructure.
Credit:Politics+AI,TimDutton
ARTIFICIAL INTELLIGENCE
STRATEGIES
CANADA
MARCH
Pan-
Canadian
AIStrategy
JAPAN
MARCH
AI
Technology
Stategy
FINLAND
DECEMBER
Finland’s
AIStrategy
KENYA
JANUARY
Blockchain
andAI Task
Force
TUNISIA
APRIL
First
Workshop
forStrategy
EU
APRIL
Communi-
cation
onAI
SWEDEN
MARCH
Sweden’s
AI
Strategy
INDIA
JUNE
National
Strategy
forAI
SINGAPORE
MAY
Singapore
Announced
CHINA
JULY
Next
Generation
AIPlan
TAIWAN
JANUARY
Budget
forAI
Taiwan
DENMARK
JANUARY
Strategyfor
Digital
Growth
UK
APRIL
UK
AISector
Deal
AUSTRALIA
MAY
Australian
budget
MEXICO
JUNE
Towardsan
AIStrategy
inMexico
GERMANY
FALL2018
GermanyAI
Strategy
UAE
OCTOBER
AIStrategie
2031
CHINA
DECEMBER
Three-Year
Action
Plan
ITALY
MARCH
AIatthe
serviceof
Citizens
FRANCE
MARCH
France
AIStrategy
USA
MAY
WhiteHouse
summit
onAI
S.KOREA
MAY
AIR&D
Strategy
EU
FALL2018
EU’SAI
Stategy
2017 2018

14. P.14 — THE INNOVATOR
GLOBAL AI RACE
in funding, are launched too slowly, spread into too many directions and
are “not at all results and speed oriented,” he says. “Europe has under-
estimated how much we are living in an accelerated world where winner
takes all,” says Loesekrug-Pietri. “We need fast decision-making, thinking
outside the box, high risk/high yield initiatives, bold investments, an
independent ability to change/stop, ambitious goals and fast prototyping.”
JEDI will be first funded by EU regional governments (France and German
regional governments have already signed on) but will be uniquely co-
managed by the entrepreneurial tech system to ensure it moves fast to
reach ambitious goals. It will finance moonshots: projects that are too
long-term or too risky for the private sector in four core areas, including
human-centric digital transformation, energy and massive improvements
in healthcare, three areas that will be underpinned by AI.
The Road Ahead
At the moment, though, the jury is still out on whether Europe can lead
on AI, says Paul Daugherty, Accenture’s chief technology & innovation
officer and co-author of “Human+Machine, Reimagining Work In The Age
ofAI.”“Asmorebusinesses becomereliantonAItechnologies,itisincreasingly
importantfornationstoaddressdataaccessibilityissuesasthisisacornerstone
to driving new growth and innovation,” says Daugherty. “Europe has
focused on protecting data through GDPR which is very important. However,
many countries have not yet taken the steps necessary to make data more
broadly available in a way that will stimulate new entrepreneurial, AI-
enabled businesses. Europe must adopt a ‘platform mindset’ and focus on
how it can encourage, stimulate, and support hyperscale platforms that
compete with the U.S. (Google, Apple, Facebook, Amazon) and China
(Baidu, Alibaba, Tencent), or it must partner more effectively with these
platforms. Individual countries in Europe simply do not have the scale to
do this – which is why a pan-European strategy is an essential, albeit
difficult, approach.” The German entrepreneur Chris Boos, a JEDI member
and the founder and CEO of Frankfurst-based arago, which uses AI to help
businesses automate their IT processes, and one of nine members of a
council that advises the German government on technology issues, says
he is optimistic that Europe can pull together on an AI strategy, and about
its entrepreneurs’ ability to compete. France and Germany are aligned on
their AI strategies and can influence other EU countries to come aboard,
he says. And his company is working on a global AI platform that aims
to serve all industries. Elsewhere in Europe’s private sector there is a
movement afoot to use AI and blockchain technologies to safeguard data
privacy in ways that could profoundly change the way the Internet and
social networks operate and – in the opinion of some – better reflect
European values. For example, Fabric Ventures, a London-based venture
fund, is dedicated to investing in decentralized data networks that enable
individuals to regain data ownership sovereignty, while powering a new
level of technological experimentation and becoming the “data substrate”
for artificial intelligence. “Nothing is going to happen in a heartbeat,” says
the British serial entrepreneur Richard Muirhead, a founding partner of
Fabric Ventures. “This is quite a fundamental shift so there will be a period
where it is going to feel like hard-going.”
The road ahead will be anything but easy for Europe, says Soulié, another
JEDI member. In China the country has a government which is strong, has
a vision and the political power to push its agenda, she says. “We don’t
have that precise vision about where we want to go and what is it is we
want to achieve. Even if the Commission had the vision, who has the
power to push it? So what can we do in Europe? It is going to be tough,
very tough. We have technically good people, a good system of education,
but we do not yet have a common articulated vision of what precisely to
do next.”
Europe needs to take both a bottom-up and top-down approach because
“you can’t impose a vision at the European level if you can’t ensure that
everyone is aligned,” says Soulié. “How these two ways can contribute to
success in AI is going to be the challenge for Europe these next few years,
if we do not want to be left in the situation where our companies are
wiped out by their Chinese and American competitors, selling to us non-
ethical products, like what GAFA (Google, Apple, Facebook and Amazon)
does today.”
J.L.S.
“Itisveryimportantthat
Europehasanoffer–
notjustalaw–anoffer
oftechnicalproductsthat
embodyethicsinthem,ethics
asadesignprinciple.
Thisisgoingtobeacompetitive
advantage.”

16. P.16 — THE INNOVATOR
Carlos Moedas, the
EuropeanCommissionerforResearch,
Science,andInnovation, is a co-chair
of the World Economic Forum’s
Annual Meeting of The New
Champions in Tianjin, China. In an
interviewwithTheInnovator’seditor-
in-chief, Moedas outlined Europe’s
planstocompeteintheageofartificial
intelligence (AI ).
How will Europe leverage its human
capital, R&D strength, and large in-
dustrial base, to be a leader in inno-
vation in the Fourth Industrial
Revolution?
CM: Europe has an excellent scien-
tific base including in computer
science, and a very strong industrial
base. This gives us a firm founda-
tion to boost our innovation capa-
city. Horizon Europe, the new EU
research and innovation program
for 2021-2027 that we proposed in
June, is designed to take advan-
tage of these strengths. It will focus
on impact rather than instruments,
mobilizing all actors needed to
achieve its goals including industry,
academia, research centers, public
authorities, foundations, civil so-
lined its strategy for AI in the com-
munication Artificial Intelligence for
Europe, published earlier this year.
One of the main messages is that we
must ensure that Europeans are pre-
pared for socio-economic changes
brought about by AI. The communi-
cation outlines a list of measures
needed to create an appropriate ethi-
cal and legal framework. Only such
a holistic approach to this pervasive
and enabling technology, recogni-
zing potential benefits and challen-
ges, will provide a strong basis that
Europe can build on.
Is Europe considering drafting an
industrial policy that would
ciples suddenly became an impor-
tant marketing tool for companies.
At this point, only 4% of world data
is stored in the EU. But high protec-
tion standards are increasingly beco-
ming a competitive advantage for
companies that operate in Europe
and adhere to these standards.
In launching the Ethics initiative it
seems as if Europe wants to build AI
that reflects European values. How
can the Commission articulate these
values in a way that will appeal to all
Europeans?
CM: After consulting the European
Group on Ethics in Science and New
Technologies, the Commission out-
ciety, and end-users.
Given that machine intelligence and
learning is driving access to large
volumes of data, Europe’s high data
protection standards could be seen
as a disadvantage against the likes
of China, where personal data flows
more freely. But some believe
Europe’s focus on data protection
could give it a competitive edge. Do
you agree?
CM: Citizens around the world now
realize how their personal data can
be misused. Publicity around the
case of Cambridge Analytica drama-
tically increased this awareness. This
is why adherence to our privacy prin-
GLOBAL AI
RACE
Europe’sAIStrategy
AnInterview
WithCarlosMoedas,
EuropeanCommissionerforResearch,ScienceandInnovation
©EdouardJacquinet

17. — P.17
encourage a technology-native
approach to protecting individual
privacy and sovereignty?
CM: Data sovereignty is not only
about privacy. It is also about control-
ling the data you generate in your
car, Internet of Things device, etc.
Here the Commission decided to
take a more cautious approach, even
though “law by technology” is
already a principle of the General
Data Protection Regulation (GDPR),
and privacy by design should be a
key requirement to be taken into ac-
count. Although the approach you
describe, about drafting policy en-
couraging a technology-native ap-
proach, is not excluded for the fu-
ture, for the time being we leave it to
individuals to agree with private law
contracts on how to deal with the
data generated by these devices.
What steps are being taken to not
just draft laws, but to actually
encode ethics into technology used
in Europe?
CM: Computer scientists are current-
ly investigating whether and to what
extent ethics can be encoded into
technology. This is not always a
straightforward process. The recent-
ly launched High-Level Expert Group
on Artificial Intelligence is looking
into this, working closely with a
broad range of stakeholders through
the European AI Alliance. Beyond
privacy, ethics by design is also on the
agenda, as well as possible certifica-
tion and standardization procedures.
What can or should the Commission
do to encourage partnerships and
M&A to build pan-European and
global AI companies?
CM: The Commission is currently
working closely with EU member
states on a coordinated action plan.
Its main purpose is to join forces and
combine strategies so that we do not
waste resources, and we get the
maximum out of synergies. Joint ac-
tions will also encourage pan-Euro-
pean partnerships and strengthen
the EU position on a global scale.
Besides looking into the ethics of AI,
the High-Level Group will also for-
mulate a number of policy and in-
vestment recommendations for AI in
the mid to long-term period.
How can Europe catch up with the
investments in AI in the U.S. and
Asia, given that it is behind not just
in the amount of public funding, but
also funding by private companies?
CM: The Commission recently adop-
ted three proposals of complemen-
tary programs to ensure research
and innovation leadership and the
broad rollout of AI. First is Horizon
Europe, the next research and inno-
vation program for 2021-2027,
which is proposed to work with an
overall budget of €100 billion and
which is expected to increase invest-
ments in AI-related research and in-
novation. The second program,
Digital Europe, with a proposed
budget of €9.2 billion dedicated to
digital transformation, has the ob-
jective of wide uptake and deploy-
ment across Europe of critical inno-
vative digital solutions. And finally,
the InvestEU Fund will provide ac-
cess to finance, covering a broad
range of activities and financial ins-
truments. The interlinking of these
programs between themselves and
EU member states’ national efforts
should provide a powerful tool for
Europe to secure prosperity and
competitiveness through digitaliza-
tion.
How might the new European Fund
for Strategic Investments help?
CM: The European Fund for
Strategic Investments (EFSI), no-
tably under the SME Window, fi-
nances SMEs to develop and adopt
AI solutions for their digital trans-
formation. Given its success, EFSI is
now been confirmed in its invest-
ment strategy and reinforced with
additional EU financing for its ope-
rations. This EFSI 2 will continue in-
vesting into the economy, including
in AI technologies, until 2020, with
the objective of reaching €500 bil-
lion investment between 2016-
2020. EFSI also paves the way to
the future sources of investments
for AI under the new budget of the
Commission for 2021-2027.
What about the role of startups and
other SMEs in research projects?
They don’t have the knowledge, time
or funding to fill out complicated
applications.
CM: SMEs are the backbone of the
European economy and therefore
play a pivotal role in ensuring its glo-
bal competitiveness. In Horizon
2020, our current research and inno-
vation program, over €8 billion is on
track to directly support SMEs parti-
cipating in collaborative research
and innovation projects. To further
boost the participation of the most
promising SMEs, the European
Innovation Council under the new
program, Horizon Europe, will fur-
ther cut red tape and ensure that
companies have the opportunity to
receive quickly EU funding to scale
up their business and create jobs in
Europe.
Large European R&D programs are
often criticized for their failure to
lead to commercialized products.
How do you avoid this trap when it
comes to AI?
CM: The current research and inno-
vation program, Horizon 2020,
already includes a number of instru-
ments that help companies bring
their ideas to the market. But we can
do more. That is why in the last three
years of Horizon 2020, we have
launched the European Innovation
Council (EIC) pilot. This new instru-
ment brings together the parts of
Horizon 2020 that provide funding,
advice and networking opportunities
for those at the cutting edge of inno-
vation. Based on the success of this
pilot, the new seven-year program,
Horizon Europe, will offer an en-
hanced EIC for high potential inno-
vators, aiming to put Europe at the
forefront of breakthrough mar-
ket-creating innovation. The EIC will
focus on breakthrough innovation, a
bottom-up and risk-taking approach,
on innovator needs, and a proactive
management.
J.L.S.

18. P.18 — THE INNOVATOR
Babylon,theLondon-baseddigitalhealthstartupthatusesartificial
intelligence (AI) to assess illness, started out by trialing its service in the
U.K. with Britain’s National Health Service and expanded into a few other
countries, attracting some 1.4 million users. In April it struck a deal with
the Chinese internet giant Tencent to offer its technology on the group’s
WeChat social messaging platform, gaining access overnight to its almost
one billion users.
Deals like this are every European startup’s dream. But they remain few
and far between.The reverse is also true. Europe’s fragmented market is
daunting for the Chinese. European customers have so far not embraced
Internet services that are very popular in China, such as the do-it-all
messaging app WeChat. So for now, Chinese tech companies are mainly
buying up Europe’s technology and taking stakes in some of its best-known
startups such as the music streaming service Spotify and Supercell, a
mobile gaming company. (See the chart.)
Still, the potential for collaboration is promising. That is why Tony A. Verb,
a Hungarian serial entrepreneur turned venture capitalist who lives in
China, plans to launch a bridge fund between Europe and Asia called
Greater Bay Ventures. “If Chinese and Asian expertise and distribution
channels join forces with European intellectual property I see an incredible
opportunity for European entrepreneurs and even SMEs and spin-offs,”
says Verb. “There is an opportunity to build this capability both in Asia
and in Europe. European companies can benefit from Asian distribution
and I feel within five to 10 years we can help Asian companies move into
Europe.” Opportunities to collaborate on health services are early indicators
GLOBAL AI RACE
of this. It is as yet unclear how much success Babylon Health is having in
China. The company declined to provide an update on its collaboration
with Tencent, which has expanded its focus to include applying AI to
medical diagnosis. Tencent has also partnered with UK-based Medopad,
which brings AI to remote patient monitoring. Medopad has signed over
$120 million in China trade deals, notes a report by the research firm CB
Insights.
And Dr. Thomas Wilckens, a German medical doctor and entrepreneur
who founded the LinkedIn group Precision Medicine Insight, says he believes
there is big potential for collaboration on precision medicine, an area that
China is targeting with billions in funding. (See the story on page 34.)
“China is pouring a lot of money into precision medicine opportunities
but has not yet caught up technology-wise,” says Wilckens, who is CEO
of InnVentis, a pharmaceutical company that uses Big Data and machine
learning. “Now they are very aggressively looking to companies from
Europe and Israel to transfer know-how. I think this is an opportunity for
Europe and Israel to leap into the future with technology development
pushed forward with Chinese money.”
A Tough Market
Other European startups – such as Farfetch, a luxury e-commerce platform
– are attempting to enter the Chinese market directly, as is Ledger, a
French company specializing in hardware wallets that allow people to
store their Bitcoin and Ethereum holdings offline without fear of being
hacked.
But investors interviewed were hard-pressed to come up with other
examples. With good reason. “The Chinese market is a market with high
potential of growth, however it is a tough market (very competitive, high
regulation and cultural barriers), and it is often more expensive and takes
longer than expected to be successful in this market,” says Anne J. Quenedey,
a Hong Kong-based lawyer for Baker & McKenzie who has worked with
tech companies entering the Chinese market. “Building relationship and
signing successful agreements with Chinese companies often takes longer
than foreseen,” she says. “Small- and medium-size companies must be
careful in planning their entrance in the market.”
Eric Huet, a managing partner at Ventech, a Paris-based global venture
capital fund investing in tech-driven early-stage companies (with a strong
focus on Europe and China), agrees. “Western companies want to enter
this huge market that to them represents a mountain of gold,” he says.
“But they often fail because they enter the market with wrong assumptions.”
There is a lot of misunderstanding from people in the West about what
BuildingBridges
— It is early days, but there is potential for collaboration
between European and Chinese tech companies

19. — P.19
China is able to do, he says. “Lots of people still see China as a copycat
and a manufacturer of fake products and they think they are much better
than the Chinese.
If you address China like this you are making a big mistake because in
some areas Chinese companies are the best in the world.” Huet says he
considers Alibaba, China’s leading e-commerce provider, to be better than
Amazon and rates the Chinese search engine Baidu higher than Google.
“China has some of the best technology platforms in the world. Look at
WeChat, which is incredibly sophisticated and everybody in China is using
it today. If European or Western companies think they can break into the
market by being better they are totally wrong.”
Another obstacle is that China has historically been protected by the
government and government regulation, which favor local players, says
Huet.
A third difficulty is that market competition is brutal and if you are a
foreigner it is essential to have a Chinese team if you expect to make any
headway, says Huet. Language and cultural differences make that hard.
Reason for Optimism
Still,thereisreasonforoptimismwhenitcomestodealingsbetweenEuropean
andChinesetechcompanies,hesays.WhileinthepastChinesetechentrepreneurs
were almost exclusively focused on their massive home market and did not
careabouttherestoftheworld,thatisstartingtochange.“NowadaysChinese
companies are more willing to address foreign markets and they realize as
well that they don’t always need to reinvent the wheel and can pick up
[technologies] they need in Europe or the U.S,” he says.
J.L.S.
EUROPEAN
STARTUPS
TARGETING
CHINA
LEDGER
FRANCE
WHAT IT DOES : Makessecure
hardwarewalletsthatallowpeopleto
storetheirBitcoinandEthereum
holdingsofflinewithoutfearofbeing
hacked.Thecompanyisintroducinga
morerobustversionforinstitutional
investors,banksandlargerenterprises.
https:www.ledger.fr
BABYLONHEALTH
UNITEDKINGDOM
WHAT IT DOES : This digital healthcare
company’s AI system can identify
specific illnesses, provide health
status assessments, and triage
necessary actions.
www.babylonhealth.com
FARFETCH
UNITEDKINGDOM
WHAT IT DOES : An online luxury
fashion retail platform with more than
one million active users. It has filed for
a $600 million IPO on the New York
Stock Exchange that values the
company at $4.56 billion.
www.farfetch.com
CHINESECOMPANIESAREBUYINGEUROPEANTECHCOMPANIESAND
STAKESINSOMEOFITSHOTTESTSTARTUPS
Announcement TargetCompany TargetDescription BidderCompany BidderDescription DealType DealValue
Date
18/05/2016 KukaRobotics(Germany) Productionsystems MideaGroupManufacturing Electricalappliances Acquisition $4.261Billion
androbotics
18/07/2016 OperaSoftware(Norway) Desktopandmobile Consortiumledby Internetsecurity Acquisitoin $575Million
webbrowser Qihoo360Technology
21/06/2016 Supercell(Finland) Developerofgames TencentHoldings Socialnetworkingand Stakes $8.6Billion
fortabletandmobiledevices videogamesmarketleader
01/08/2017 Taxify(Estonia) Ride-hailingservice DidiChuxingTechnology Mobiletransportation Stakes N/A
platform
05/09/17 Lilium(Germany) Electricverticaltakeoff TencentHoldings Socialnetworkingand Stakes $90Million
andlandingjets videogamesmarketleader
05/12/2017 DialogSemiconductor(UK) Semiconductorsystems TsinghuaUnigroup China’stopstatechip Stakes N/A
manufacturer
08/12/2017 Spotify(Sweden) Digitalmusicstreaming TencentMusic Providerofonlinemusic Stakes N/A
EntertainmentGroup services
20/03/2018 N26(Germany) Germany-basedonline TencentHoldings Socialnetworkingand Stakes $160 Million
bankingcompany videogamesmarketleader
28/06/2018 DSMGroup/Trendyol(Turkey) E-commerceplatform AlibabaGroupHolding Onlineretailer Acquisition N/A
24/07/2018 Linxens(France) Smartchipcomponents TsinghuaUnigroup China’stopstatechip Acquisition $2.6Billion
manufacturer
Credit:MergerMarketandPressReports

20. P.20 — THE INNOVATOR
VENTURE CAPITAL
LinkingCorporates
toGlobalInnovators
entrepreneurs – and at the same time
to create a global platform to connect
theseentrepreneurs.CathayInnovation
raised €287 million for his first
investment fund, which closed in the
middle of last year. About 80% of the
fund has been deployed in 20
investments, athirdineachgeography.
(Oneof those investments, Pinduoduo,
a Chinese company that’s developed
an e-commerce app allowing people
to order products at discounted prices
by grouping together on the social
messaging service WeChat, raised $1.6
billion in its July initial public offering
on NASDAQ, giving it a market cap
of just under $30 billion.)
Cathay’s VC activities also include two
funds in RMB (about €200 million
each)dedicatedtoChinawithaspecific
sector approach and dedicated
For big global companies,
it’s no easy task keeping an eye on
startupsbeingdevelopedintheworld’s
topinnovationhubs–especiallyChina,
which has made no secret of its desire
to become a global leader in tech.
Enter Cathay Innovation, a global
venture capital fund that invests in
small and middle-market companies
inChina,EuropeandtheUnitedStates.
It’s affiliated with Cathay Capital
Private Equity, a cross-border firm
founded by the Chinese serial
entrepreneur Mingpoi Cai that has
€2.5 billion under management and
focuses on the same three
geographies.Cai joined forces with
Denis Barrier, a technology-focused
French venture capitalist, to set up
the fund in 2015. Their idea: to enlist
large corporations to support digital
European corporate strategicinvestors,
also known as limited partners: a
smart energy fund with the oil giant
Total and an auto tech fund with the
tier one automotive manufacturer
Valeo.
In additiontoTotalandValeo,strategic
investors in the group’s first fund
include some of France’s other large
companies, including the tire maker
Michelin; the insurer BNP Paribas
Cardif; the international airport
operator Groupe ADP; the container
transport and shipping company CMA
CGM;andGroupeSEB,amanufacturer
of small home appliances.
A Passport to China
Why would a French producer of
toasters and coffeemakers be
interested? Groupe SEB has a strong
presence in China through Supor, a
leading local cookware and small
appliances company it acquired 10
years ago, but acknowledges that it
is difficult to stay on top of the Chinese
market on its own. “We see this as
complementary to our traditional
innovation process,” says François-
Xavier Meyer, vice-president at SEB
Alliance, the company’s venture arm.
“Our open innovation partnership
with Cathay Innovation is like a
passport to China, it allows us to
benefit from their strong local deal
flow and to possibly co-invest.” The
fund “is a unique platform for
introductions to the best innovative
companies and gives us the capacity
to do real business development with
them.” Besides strengthening SEB’s
capacity to innovate, the arrangement
can “better position us globally, not
just in the areas we know but in new
areas,” Meyer adds.
Other companies appear to be reaping
benefits.CathayhasconnectedShopal,
a Chinese e-commerce search engine
in its portfolio, to a range of French
brands, including the skincare product
maker Caudalie. Shopal took over
the exclusive online marketing rights
to Caudalie in China in early 2017.
The French brand has seen its market
share grow under the company’s
management, with Caudalie rising
in Taobao’s beauty brands ranking
from below 200 to enter the top 50
by the end of last year, according to
Cathay.
The interest for corporates doesn’t
just include distribution deals. It’s a
chance to connect with startups in
Cathay’s portfolio that have interesting
technology or disruptive business
— Cathay Innovation seeks to build connections between China, Europe
and the U.S.; and between corporates and startups.

21. — P.21
VENTURE CAPITAL
models.Examplesofthefund’sportfolio
companies include Ledger, a Paris-
based company, now making a big
push into China, that develops
hardware-based security products to
protect users of cryptocurrencies and
blockchain applications; and Peek.
com, a U.S. startup aiming to digitize
the booking of activities during travel.
Mobilizing
the Ecosystem
“We exchange a lot with [corporate
strategic investors] about their sectors,
on the startups we consider investing
in and on the portfolio companies
we support,” says Jacky Abitbol, a
Paris-based partner at the fund. “For
example, when we have a specific
investment opportunity for Cathay
Innovation which requires advice from
experts in energy, financial services,
healthcare, or mobility, we will work
with the appropriate colleagues on
the Cathay platform but we will also
mobilize our whole ecosystem in order
toidentifythebestcompaniesglobally.”
While there are VC funds in the U.S.
that have a strong track record in
connecting the U.S. and China or the
U.S. and Europe, often those funds
have separate P&Ls, separate
investment vehicles and separate
teams who invest according to a local
approach, not with a cross-border
strategy, says Barrier, Cathay’s co-
founder and CEO. “Even though
Cathay is spread across three
geographies, we act as one single
team,” he says. “We believe that we
are building a strong global ecosystem
for those who really want to tackle
the world.”
J.L.S.
THE CHINA
DISRUPTION RADAR
— One of the largest Tier-1 automotive manufacturers in the world.
— 1st
patent-filler in France.
— 2nd
-largest tire manufacturer in the world.
— Major player in the travel and entertainment sector, with Guide Michelin.
— One of the seven ”Supermajors” oil companies in the world.
— Largest company in France in terms of revenues.
— 3rd
-largest shipping group in the world.
— Operates shipping lines between 420 ports in 160 countries.
— InsurancearmofthelargestbankoftheEurozoneand8thintheworld.
— BNP Paribas Cardif operates in 36 countries in Europe,
Asia and Latam.
— One of China’s leading kitchen appliances manufacturers.
— China’s largest soybean milk machine manufacturer.
— 3rd
-largest telecom company in the world.
— Operations in Europe; Asia; and North, Central and South America.
— Holding company of François Pinault.
— Largest shareholder in Kering, the second largest luxury group in the
world (which owns brands such as Gucci, YSL, Boucheron, etc), and in
Christie’s, the British auction house.
— Global leader in small home appliances.
— Owns over 20 brands including Krups, Moulinex, SEB, Rowenta,
Lagostina, AllClad, WMF, Tefal and Calor.
— Leading operator of international airports.
— Owns Charles de Gaulle, Orly, Le Bourget airports and operates
37 airports in the world (Istanbul, Santiago, Amsterdam, etc.).

22. P.22 — THE INNOVATORP.22 — THE INNOVATOR
THE30WORLD
ECONOMICFORUM
TECHNOLOGY
PIONEERSTOMEET
INTIANJINEach year the World Economic Forum’s Technology Pioneers
community recognizes innovative early-stage companies that are poised
to have a significant impact on business and society.
The following pioneers are scheduled to participate in the Forum’s Annual
Meeting of the New Champions, which takes place September 18-20
in Tianjin, China.
By Esther Attias
A contributing writer at The Innovator,
Attias previously worked as a journalist for Les Echos.
CYBERSECURITY
CYMMETRIA
UNITEDSTATES
WHATITDOES: Offers”deceptiontechnologies”that
usedigitaldecoystotrickhackerstargetingvaluable
assets.Itsproductspromisetoenableorganizations
todetectinfiltrationinsideacompany’sperimeter
andautomatecounter-attacks.
www.cymmetria.com
FOOD&AGRICULTURE
CMY CROP TECHNOLOGY
INDIA
WHATITDOES: The Ahmedabad-based agri-tech
startup has developed a collaborative platform
that uses machine learning to provide smallholder
farmers with recommendations about good
agricultural practices. The aim is to reduce the cost
of cultivation and optimize crop growth.
http://www.mycrop.tech
FINTECH
OVAMBA SOLUTIONS
UNITEDSTATES
WHATITDOES: Offersshort-termfundingsolutions
forAfricansmall-to-medium-sizedbusinessesin
thetradeandcommoditiessectorswhoareunable
tofinancethecostoftrade.Italsooffers
e-commerceandlogisticssupportandflexible
warehousing.
www.ovamba.com
MOBILITY
PROPHESEE
FRANCE
WHATITDOES: Developedacomputervision
technology,enablingmachinesto”see”inmuchthe
samewaythatthehumanbrainprocessesimagesfrom
theretina.Applicationsincludemakinginteractions
betweenhumansandindustrialrobotssaferand
providingsuperiorguidanceforautonomouscars.
www.prophesee.ai
ARTIFICIALINTELLIGENCE
PETUUM
UNITEDSTATES
WHATITDOES: Enablescompaniestodesignand
controltheirownartificialintelligencetools,using
dataofanytype,anddeployingatscaleonany
commodityhardware,fromdatacenterstothe
InternetofThings.
www.petuum.com
ROBOTICS
FETCH ROBOTICS
UNITEDSTATES
WHATITDOES: Developsautonomousmobile
robotsthatprovideon-demandautomationfor
warehouses,factoriesanddistributionsectors.
Cloud-basedsoftwareallowsrobotstobe
operationalwithin24hours.ItcountsSoftBankand
SwayVenturesamongitsinvestors.
fetchrobotics.com
FOOD&AGRICULTURE
APEEL SCIENCES
UNITEDSTATES
WHATITDOES: Addsextrapeeltothesurfaceof
freshproducetonaturallyreinforceaplant’sown
coveringandslowtherateofwaterlossandoxidation,
theprimarycausesofspoilage.Producepromises
tostayfreshtwotothreetimeslonger,withtheaim
ofproducingbetterqualityfoodandlesswaste.
www.apeel.com
INDUSTRY
TULIP INTERFACES
UNITEDSTATES
WHATITDOES: ThisMITspin-offhelpsfactory
ownersturntheirworkflowsintodigitalprocesses
thatcollectdatafromoperations,withtheaimof
increasingtheteam’sperformanceandimproving
theproductionprocess.
www.tulip.co
FOOD&AGRICULTURE
PLENTY
UNITEDSTATES
WHATITDOES: Field-scaleindoorverticalfarms
thatusemachinelearningandInternetofThings
technology togrowfoodsusing1%ofthewaterand
landusedintraditionalfarming,withoutpesticides,
syntheticfertilizers,orGMOs.Investorsinclude
SoftBank,FinistereVenturesandDataCollective.
www.plenty.ag
INDUSTRY
EVRYTHNG
UNITEDKINGDOM
WHATITDOES: : Providesdigitalidentityanddata
managementforphysicalproducts,helping
consumer-productmanufacturersgainefficiencyin
theirsupplychainsanddeliverdigitalservices
directlytotheircustomers.Itstechnologyworks
withanyformofstandardconnectivity.
www.evrythng.com
MOBILITY
H55
SWITZERLAND
WHATITDOES: Headedbyex-pilotAndré
Borschberg,thecompanyhasdevelopedanelectric
propulsionsystemfortheaeronauticssector,with
thegoalofimprovingtheenvironmentalfootprint
andcostofairtransportation.
www.h55.ch
AUGMENTEDREALITY
BLUE VISION LABS
UNITEDKINGDOM
WHATITDOES: Developsaugmentedrealityand
machineperceptiontechnology.Applications
includegamingandself-drivingcars.Itcounts
GoogleVentures,Accel,andHorizonVentures
amongitsinvestors.
www.bluevisionlabs.com

23. — P.23— P.23
INDUSTRY
PRECOGNIZE
ISRAEL
WHATITDOES: Predictivemaintenancesoftware
for processindustriessuchas chemicals,
petrochemicals,oilandgas,andmetallurgy.Ituses
machinelearningtospotsystemfailuresandoffers
alertstopreventshutdowns.ItwasacquiredinJune
byGermany’sSamson.
www.precog.co
ENERGY
CADENZA INNOVATION
UNITEDSTATES
WHATITDOES: A lithium-ion supercell technology
with a unique design that promises to deliver high
energy and improved safety at low cost. The
company has been awarded funding for a
demonstration project to help the state of New
York meet its clean energy goals.
www.cadenzainnovation.com
ENTERPRISE
PYMETRICS
UNITEDSTATES
WHATITDOES: Pymetrics offers human resources
services based on neuroscience and algorithms. Its
technology identifies behavioral signals to match
candidates to jobs and aims to eliminate
discriminatory recruitment biases. Clients include
Tesla, Unilever and LinkedIn.
www.pymetrics.com
ARTIFICIALINTELLIGENCE
NARRATIVE SCIENCE
UNITEDSTATES
WHATITDOES: Technology that translates data
into insightful, contextually-relevant natural
language narratives for enterprise. Customers
include Credit Suisse, Deloitte, MasterCard and
members of the U.S. intelligence community.
www.narrativescience.com
FINTECH
SUADE LABS
UNITEDKINGDOM
WHATITDOES:Aregulation-as-a-serviceplatform
thathelpsbanksandotherfinancialinstitutions
complywithchangesinfinancialregulation.Its
softwareautomatesregulatorydatarequirements
forfinancialinstitutionsandminimizesthecostof
changeinvolvedwitheachnewiteration.
www.suade.org
ARTIFICIALINTELLIGENCE
COGNITIVESCALE
UNITEDSTATES
WHATITDOES: Simplifiesdesign,development,
delivery,andmanagementofenterprise-gradeAI
systemsforindustriessuchasbanking,healthcare,
ande-commerce.
www.cognitivescale.com
BLOCKCHAIN
CHAIN
UNITEDSTATES
WHATITDOES: Providesblockchaintechnologyfor
thefinanceindustry.CustomersincludeVisa,
NASDAQ,andCitigroupaswellasstartupsbuilding
productsforthefinanceindustry.
www.chain.com
ARTIFICIALINTELLIGENCE
FISCALNOTE
UNITEDSTATES
WHATITDOES: UsesAIandBigDatatodeliver
predictiveanalyticsofgovernmentalactionthat
impactsindustries.Itoffersreal-timeunderstanding
ofgovernmentactionandpredictslikelyoutcomesof
pendinglegislation,forattorneys,lobbyists,and
complianceprofessionals.
www.fiscalnote.com
CYBERSECURITY
QUINTESSENCE LABS
AUSTRALIA
WHATITDOES: Offersquantumcomputing-based
cybersecurityencryptionoptionssuchasrandom
keygeneratorsandcryptographickeys.Customers
includetheU.S.StateDepartment,Boeing,and
NorthropGrumman.
www.quintessencelabs.com
ARTIFICIALINTELLIGENCE
SOUL MACHINES
NEWZEALAND
WHATITDOES: Createslifelike,emotionally
responsiveartificialbeingswithpersonalityand
character,openingthedoortoaneweraof
human-stylecustomerexperienceinsectorssuch
asautomotive,financialservicesandbanking,
healthcareandmedia.
www.soulmachines.com
INDUSTRY
UPTAKE TECHNOLOGIES
UNITEDSTATES
WHATITDOES: Apredictiveanalyticssoftware-as-
a-serviceplatformforindustriessuchasaviation,
construction,mining,railandenergy,thatcaptures
datafrominfrastructuresandequipment,
recommendingactionsinrealtimetoimprove
performance,reliabilityandsecurity.
www.uptake.com
MOBILITY
HYPERLOOP
TRANSPORTATIONTECHNOLOGIES
UNITEDSTATES
WHATITDOES: Developingahighspeed,intercity
transportationsystem.Itcrowdsourcesitsresearch
anddevelopmentfromengineersworkingatplaces
suchasNASA,Tesla,Boeing,andLockheedMartinas
wellastheLawrenceLivermoreNationalLaboratoryin
California.
www.hyperloop.global
INDUSTRY
MODERN MEADOW
UNITEDSTATES
WHATITDOES: Producesbio-leatherthatcanbe
brewedonequipmentfoundinlargecommercial
fermentationfacilities.Thecompanyhaspartnered
withtheEuropeanchemicalsgiantEvoniktohelpit
scaleproductionandmakeitsbio-leathersavailable
todesignersofluxurygoods.
www.modernmeadow.com
ENVIRONMENT
WATERGEN
ISRAEL
WHATITDOES: Developedageneratorthatpulls
watervaporfromtheairtoharvestdrinkingwater.
Itsatmosphericwatergeneratorproducesclean,
safe,drinkingwaterat250Wh/Lwhichcorrelatesto
fourlitersper1Kw,orundertwocentsperliter.
www.water-gen.com
ARTIFICIALINTELLIGENCE
MALONG TECHNOLOGIES
CHINA
WHATITDOES: Developsartificialintelligence
applicationsbasedoncomputervisiontechnology
forenterprises,particularlyinretailandhealthcare.
ItisbackedbySoftbankinChina,andwasrecently
nameda2018CoolVendorforAIinComputerVision
bytheglobalresearchfirmGartner.
www.malong.com
LEGALTECH
CASETEXT
UNITEDSTATES
WHATITDOES: Alegalresearchplatform.Its
brief-analysissoftwareenablesattorneysto
jumpstarttheirresearchbyofferingstrongkeyword
queriesonanykindoflitigationdocument.
www.casetext.com
ROBOTICS
SOFT ROBOTICS
UNITEDSTATES
WHATITDOES: Designssystemsmadeoutofsoft
materialthatcangraspandmanipulateitemswith
humanhand-likedexterity.Applicationsinclude
surgery,e-commerce,andadvancedmanufacturing.
AmonginvestorsareScaleVenturesPartnersand
roboticsgiantABB.
www.softroboticsinc.com
HEALTHTECH
BENEVOLENT AI
UNITEDKINGDOM
WHATITDOES: : Atechnologythatanalyzesthe
massivebodyofmedicalresearchtospeed
developmentofnewdrugswhiledrastically
reducingthecostofsuchdiscoveries.Ithasalso
developedaplatformthatoptimizestheaccessand
useofmedicaldata.
www.benevolent.ai

24. P.24 — THE INNOVATOR
China’s big tech companies aren’t content with using their core
businesses of search, ecommerce and gaming and social messaging to
dominate the world’s largest Internet market. Baidu, Alibaba and Tencent
(whicharecollectivelyknownasBAT) arepositioningthemselvestobecome
the artificial platforms of the future, disrupting a whole host of traditional
industries, including automotive, retail, financial services and predictive
healthcare. In November 2017 the Chinese Ministry of Science and
Technology announced that the nation’s first wave of open AI platforms will
rely on Baidu for autonomous vehicles, Alibaba Cloud for smart cities and
Tencent for medical imaging and diagnostics. In each of these areas BAT is
starting with a local focus on China and going global through international
deals and partnerships, notes a CB Insights report. In April 2017 Baidu
announcedanopenplatformcalledApolloforautonomousdrivingsolutions,
attracting partners from across the globe.
The idea is to accelerate AI and autonomous driving research by opening
it up to contributions from other players in the ecosystem. Apollo currently
has over 95 partners, according to a report by CB Insights. By comparison
the U.S. ride hailing service Lyft, which announced its own open-platform
initiative for autonomous driving last year, has fewer than 10 partners.
Announced partnership deals make clear its ambitions for China and
foreign markets. Baidu and the automaker Chery plan to jointly roll out
Level 3 self-driving cars in China by 2020. (Level 3 vehicles are capable
of taking full control and operating during select parts of a journey when
HowChina’s
InternetGiants
AreDisrupting
TraditionalIndustries
— Retail, health, financial services, entertainment and
local services are all being transformed
by technology and the new business models.
INTERNET
certain operating conditions are met.) And it has created a $200 million
joint venture fund with Asia Mobility Industries to invest in autonomous
driving tech in Singapore. That deal is “Baidu’s first overseas expansion
with the prospect of commercially releasing driverless cars outside China,”
the report says.
China is expected to have a tremendous global influence over design,
operating rules, and sales of autonomous vehicles, since breakthroughs
in each of these areas are expected to be driven by companies like Baidu
and regulators. For its part Alibaba, the country’s largest e-commerce
provider, is focusing on a broad range of new business sectors, including
smart cities, retail and financial services.At the core of Alibaba’s AI cloud
platform is “City Brain,” which crunches data from cameras, sensors, social
media feeds and government data, among other things. It uses AI to predict
outcomes across healthcare, urban planning, traffic management and
more.
A Huge Push at Home and Abroad
City Brain, which was first tested in Alibaba’s hometown of Hangzhou,
has since been adopted by other Chinese municipalities. Alibaba made its
first international smart city deal with the Malaysian government this year.
(See the story on smart cities on pages 30-31.)
The first phases of City Brain are primarily focused on traffic management.
To this end, Alibaba has partnered with NVIDIA for its deep learning-based
video platform for smart city services. It also participated in a $600 million
venturecapitalroundinSenseTime,acomputer-visionstartupthatspecializes
in surveillance technology, which is considered the most valuable AI startup
globally. It is partnering with SenseTime on smart transportation, urban
management and intelligent surveillance. Alibaba has also pioneered online-
offline (O2O) retail in China. It has invested over $9 billion in brick-and-
mortar stores since 2015, including a 36% stake in China’s top hypermarket
operator, Sun Art Retail Group. Counting all its investments, Alibaba is
now the largest offline retailer in China as well as the largest online, says
a report from Oliver Wyman, a global management consulting firm.
And its affiliate Ant Financial is disrupting financial services. It operates
Alipay, China’s most popular mobile payment wallet, an investment fund,
micro-loans, insurance services, a digital bank and more. Altogether, it
claims to reach more than 450 million users via its products. (See the
fintech story on page 38.)
Meanwhile, through its investments and partnerships Tencent is bringing
healthcare to AI tech from around the world into mainland China. These
efforts underpin China’s huge push to be a world leader in genomics and
personalized medicine using AI, according to the CB Insights report.
Tencent’s biggest strength is that it owns WeChat. Known as the “app-for-
everything,” it is the most popular social media platform in China with
more than one billion users, offering everything from messaging to money
transfer and ride-hailing. Around 38,000 medical institutions have WeChat

25. — P.25
CHINA’S
MEGA TRENDS
BAIDU
WHAT IT DOES : The country’s largest search
provider is now making a big push into autonomous
cars.
www.baidu.com
TENCENT
WHAT IT DOES : DevelopedWeChat,knownas
the“app-for-everything,”whichisthemostpopular
socialmediaplatforminChinawithmorethan
onebillionusers,offeringeverythingfrom
messagingtomoneytransferandride-hailing.
ItisexpandingintoAI-poweredmedicaldiagnostic
services.
http://www.tencent.com
ALIBABA
WHAT IT DOES : China’s largest e-commerce
provider is also active in smart cities,
online-to-offline retail, financial services and
ride-hailing services.
www.alibaba.com
Retail
—
eCommerce, Omno channel
and connected strores
Digital advertising and
Online-to-offline
credit: PwC
Economic
newnormal
—
China’s economy shifting
from investment to
services and innovation-
driven growth
Technological
breakthroughs
—
Time from breakthrough to
mass-market adoption is
collapsing and disrupting
business models
Demographic
shifts
—
Millennials’ expectations of
what is possible, setting
a new level
of expected experiences
Environment&
sustainability
—
Demand for manual resources
forcing businesses
to address sustainability
Financialservices
—
Direct to consumer
distribution models
Product personalization
and customer experience
Fintech
Health
—
mHealth and remote monitoring
Personalized medication
and treatments
Cloud Hospital and big data
analytics
Automotive
—
Connected cars: safety,
entertainment and well-being
Autonomous vehicles
Vehicle and mobility
management

26. P.26 — THE INNOVATOR
accounts, of which 60% allowed users to register for appointments online,
and more than 2,000 hospitals accept WeChat payment. The ability to
collect huge amounts of consumer data gives Tencent an advantage as the
health care system shifts to digital services.
And it is striking partnership deals and making investments to strengthen
its foray into this sector. Last April it partnered with Babylon Health, a UK-
based startup which is developing a virtual healthcare assistant. WeChat
users will have access to Babylon’s app, allowing them to message their
symptoms and receive feedback and advice. (See the Building Bridges
story on pages 18 and 19.) It has also partnered with UK-based Medopad,
which applies AI to patient monitoring. And it has invested in the AI startup
iCarbonX, which is building a consumer-facing AI platform that is a one-
stop shop for all things health and wellness – from skincare and nutrition
recommendations to behavioral health and genetic analysis. (See the
story on precision medicine on pages 34 and 35.) Tencent is focusing its
internal R&D on developinga healthcare AI platform called Miying.Launched
in 2017, Miying provides healthcare institutions with AI assistance in the
diagnosis of various types of cancers. It also uses AI to assist hospitals in
analyzing and managing health records. There is speculation that it may
also expand into pharmaceutical applications of AI. Tencent participated
in two AI in drug discovery deals this year: a $45 million venture capital
round in Atomwise (alongside Baidu Capital) and a $15 million round in
XtalPi, according to the CB Insights report.
Disrupting the Disruptors
Part of the impetus for BAT to expand into new areas is competition from
a new crop of Internet companies that have emerged known as TMD: the
news platform Toutiao; Meituan-Dianping, a platform for lifestyle services
and products; and the ride-hailing firm Didi Chuxing. Both BAT and China’s
long-established news portals are investing in machine learning to tailor
feeds for users of their news services, but Toutiao, which has first-mover
advantage, has a stated ambition of building the company into the world’s
largest platform for information creation and distribution.
AsBATmovesintoautonomouscars,Didiisexpandinggloballyandbranching
out into the autonomous vehicle market. Meituan was created through a
2015 merger between the rival companies Meituan and Dazhong Dianping,
which were backed by Tencent and Alibaba. Tencent has since become
the main backer of the new combined company, while Alibaba cut its stake
in Meituan-Dianping, and instead invested $1 billion in May in the rival
service Ele.me. Meituan, which has a valuation of more than $55 billion,
is currently planning an IPO on the Hong Kong exchange that could make
it the world’s biggest Internet-focused listing since the e-commerce giant
Alibaba Group’s $25 billion New York float in 2014.
Although Alibaba still dominates in ecommerce, Pinduoduo, a social
commerce platform that allows people to order products at discounted
prices by grouping together on the social messaging service WeChat, is
now the country’s third-largest e-commerce platform, according to a 2018
report on China’s Internet sector created by the South China Morning Post
and 500 Startups, a Silicon Valley investment fund and seed accelerator.
Pinduoduo raised $1.6 billion in its July initial public offering on NASDAQ,
giving it a market cap of just under $30 billion.
And Didi Chuxing and Meituan Dianping are both competing with Alibaba’s
AutoNavi on ride-sharing services. BAT, like traditional industries, will
have to keep on innovating, say analysts, otherwise these disruptors of
traditional industries risk getting disrupted themselves.
J.L.S.
INTERNET
MEITUAN-DIANPING
WHAT IT DOES : Aplatformforlifestyleservicesand
productsorderedthroughsmartphonessuchasfood
delivery,movietickets,restaurantreviewsandgroup
discounts.ItisplanninganIPOontheHongKong
exchangethatcouldmakeittheworld’sbiggest
Internet-focusedlistingsincethee-commercegiant
AlibabaGroup’s$25billionNewYorkfloatin2014.
http://www.usehero.com
DIDI-CHUXING
WHAT IT DOES : Aride-hailingservicethatisexpanding
globallyandbranchingoutintotheautonomous
vehiclemarket.ThecompanyhasaCalifornia-based
researchlabfocusingonAI-basedsecurityanddriving
systemsforcars.
www.didiglobal.com
TOUTIAO
WHAT IT DOES : Apopularnewsandinformation
contentplatformthatusesmachine-learning
algorithmstomonitorusers’readinghabitsandtailor
offerings–includingarticles,videosandads.
www.toutiao.com
“Baidu,AlibabaandTencent
arepositioningthemselves
tobecometheartificialplatforms
ofthefuture,disruptingawhole
hostoftraditionalindustries,
includingautomotive,
retail,financialservices
andpredictivehealthcare.”

28. P.28 — THE INNOVATOR
GuangzhouPearlRiverPianoGroup,whichbillsitselfastheworld’s
largestmanufacturerofpianos,is moving production to a much bigger facility
and turning its old factory into a billion-dollar innovation hub and incubator
for everything from tech startups to music producers, filmmakers and gaming
and fashion designers. When finished, the old factory, which sits at the
crossroads between the cities of Guangzhou and Foshan, will include a
music recording studio, a film studio, a theater and a copyright trading
platform for original creations, among other things – a reflection of the
company’s move into digital and other new businesses.
The piano company’s ambitious plans are in tune with its location, an area
known as Greater Bay. The Greater Bay Area (GBA) is made up of 11 cities
in southern central China, with a total population of about 68 million:
Guangzhou, Foshan, Shenzhen, Zhouhai, Huizhou, Dongguan, Zhongshan,
Jiangmen and Zhaoqing, plus two administrative regions: Hong Kong and
Macao.
Individually the cities have major strengths: Shenzhen is home to four of
China’s powerful tech companies: Huawei, which overtook Apple to become
the world’s second-biggest smartphone seller in the June quarter; Tencent,
a leader in social media and gaming now branching out into new areas such
as health-related image technology (see the story on pages 34-36); Ping
An, an insurance company that has become a tech titan (see the story about
China’s fintech sector on pages 38 and 39) ; and DJI, the world’s biggest
manufacturer of civilian and commercial drones. Guangzhou has a huge
GreaterBay’sGreat
Ambitions
— There are regional plans to position Hong Kong
and the Greater Bay Area as the future platform
for the innovation and technology needs of the Belt
and Road Initiative.
REGIONS
manufacturing base. Hong Kong is a leading global free port and financial
hub and Macau, a global gambling and entertainment destination, is known
as the Las Vegas of Asia. Collectively the Greater Bay is an increasingly
important global economic powerhouse. In addition to manufacturing and
tourism industries, the Greater Bay area leads the nation in insurance,
finance, technology, real estate development, and automotive and home
appliance manufacturing, according to a report by the global consultancy
PwC. By 2030 the GDP of the region is expected to amount to at least 30.4
trillion renminbi ($4.62 trillion), surpassing the economic size of the Tokyo
BayArea($3.24trillion)andtheNewYorkBayArea($2.18trillion),according
to estimates by the think tank China Centre For International Exchange.
Reinforcing the Belt and Road Initiative
During the GBA’s annual meeting, which took place earlier this month, the
Guangdong party chief Li Xi said that as of last year, the total GDP of the
pan-Pearl River Delta region was already nearly 30 trillion yuan ($4.4
trillion), or about a third of China’s total gross domestic product, according
to press reports.
That’s not all. The integration of Greater Bay’s cities is expected to reinforce
Belt and Road, China’s transcontinental trade and infrastructure investment
initiative.“Hong Kong is positioned to be the Belt and Road Initiative hub
for capital markets activity, transport and logistics expertise and professional
services talent,” notes a KPMG report. “As a leading city within the Greater
Bay Area there are regional plans to position Hong Kong and the GBA as
the future platform for Belt and Road Initiative innovation and technology
solutions.” Plans to expand the GBA’s positioning as a regional technology
hub include an agreement between Hong Kong and Shenzhen to develop
the Lok Ma Chau Loop into one of the world’s largest innovation and
technology parks on the border of the two cities.
“For countries and companies participating in the Belt Road Initiative,
leveraginginnovationandtechnologyintheGBAwillsupporttheacceleration
of their economic growth and development,” says the KPMG report.
Businesses overwhelmingly support China’s Greater Bay Area initiative,
according to a 2017 YouGov survey of 614 businesses located in GBA cities
commissioned jointly by KPMG and the Hong Kong General Chamber of
Commerce. Respondents highlighted improved corporate synergies, a freer
flow of talent and enhanced abilities to penetrate markets as the leading
benefits to arise from the initiative.
To create greater cohesion GBA’s cities are becoming more connected in
multiple ways. A new 55-kilometer, $20 billion Hong Kong-Zhuhai-Macau
Bridge, the world’s longest sea-crossing bridge, is expected to slash journey
times between the three cities from three hours to 30 minutes, putting
them all within an hour’s commute of each other. And the Hong Kong stretch
of the Guangzhou-Shenzhen-Hong Kong Express Rail Link will open on
September 23. And, in March, the Tencent CEO and founder Pony Ma

29. — P.29
proposed an electronic identification scheme for residents in the Greater
Bay Area to facilitate mobile payments. The service would allow Hong Kong
and Macau residents to link their mainland travel permits to a mobile phone
to enable mobile payments, according to press reports.
The company is working with the Chinese authorities to develop an “E-card”
system, which would allow residents in the region to use WeChat, Tencent’s
social media app, as a travel permit at border crossings between the mainland
and Hong Kong or Macau. The E-card could also be used as identification
to set up bank accounts or check into hotels, Tencent said in June. There
are, however, challenges to be overcome in order for the GBA to fulfill its
ambitions, according to the YouGov survey. Those surveyed identified
protectionism and other measures that hinder cooperation as the biggest
hurdles to the area’s development, followed closely by silos between and
within GBA governments.
While the Greater Bay Area has four different official languages, many
different cultures and different legal systems, “it is not just an idea on a
piece of paper – it has been an organic reality for years and is real whether
legislation is there or not,” says Tony Á. Verb, a Hungarian serial entrepreneur
turned venture capitalist who has lived in the area for seven years. He plans
to launch a bridge fund between Europe and Asia called GreaterBay Ventures.
“The growth in this region, the economic diversity in this region, is simply
unparalleled,” says Verb, explaining why he decided to launch a fund based
in the GBA. “It has been growing at 10% annually for like 30 years and is
expected to keep on growing at that pace for another 20 to 30 years. In an
environment like this where you have all the resources in the world – there
is capital, e-commerce, logistics and three of the top 10 global ports plus
an incredible entrepreneurial hunger and spirit – there is nothing that cannot
be done here.”
J.L.S.
Comparison of the major delta regions Tokyo New York San Francisco Pearl River Delta
of the world ( region/statistics) Delta Delta Delta Greateer Bay Area
Area / 1,000 km 36.8 17.4 17.9 56.0
Population / Million 43.47 23.40 7.15 66.71
GDP / trillion US$ 1.80 1.40 0.76 1.36
Per-capita GDP / US$ 41,000 69,000 99,000 20,000
Tertiary industry share / % 82.3% 89.4% 82,8% 62.2%
GPD share to country / % 41% 7.7% 4.4% 10.8%
Freight turnover / million 766 465 227 6,520
Flight passenger turnover / million 112 130 71 175
Number of World 100 best universities 2 2 2 4
Number of Fortune 100 companies 60 28 22 16
Greater Bay Ventures, based on data from The Economist, Guandong-Hong Kong-Macao
Greater Bay Forum and Tencent
THE GREATER BAY AREA’S
STRENGTHS
— P.29
6,520227465766Freight turnover / million
“By2030GreaterBay’sGDPis
expectedtoamounttoRMB
30.4trillion(USD4.62trillion),
surpassingtheeconomicsizeof
theTokyoBayArea($3.24trillion)
andtheNewYorkBayArea
($2.18trillion).”
REGIONS

30. P.30 — THE INNOVATOR
Traffic efficiency has increased by 15% and response time for
emergency vehicles cut in half in the Chinese city of Hangzhou thanks to City
Brain, a cloud-based set of artificial intelligence (AI) technologies developed
by Alibaba Group, a giant online retailer which, among other things, has
branchedoutintosmartcitytechnology.AlibabaGroupisamongfourcompanies
chosen by the Chinese government to leverage their respective strengths to
build AI “open innovation platforms” in different fields. It is not surprising
that smart cities is one of those sectors. Over 1,000 smart city pilot projects
are underway worldwide and China is home to about 500 of them, according
to a recent report by the consultancy Deloitte. The global smart city market
is expected to grow to over $2 trillion by 2025 and AI is expected to play a
key role in areas such as smart mobility, smart energy grids, adaptive signal
controlandwastemanagement,accordingtoarecentreportfromtheresearch
firm Frost & Sullivan.
Smart city projects in China alone are expected to generate $320 billion for
the nation’s economy by 2025, the report says. Governments are embracing
smart city technologies, which promise to make municipalities more efficient,
safer and environmentally friendly, because the projection is that by 2050
over 80%ofthepopulationindevelopedcountriesand60%inthedeveloping
world will live in urban areas. Alibaba Group’s stated ambition is to optimize
urban resources by correcting defects in city operations in real time. It uses
Face++facialrecognitiontechnologydevelopedbyChina’sMegviiTechnology
to give cities more control. And, thanks to CCTV video footage, City Brain
TakingSmartCities
tothe
NextLevel
— The global smart city market is expected to grow
to over $2 trillion by 2025, and AI is expected to play
a key role in areas such as smart mobility,
smart energy grids, adaptive signal control and
waste management.
SMART CITIES
can instantly perceive traffic incidents throughout the city. When it spots
accidents, for example, it integrates dispatching commands for police, fire,
rescue and other vehicles and coordinates traffic lights to give emergency
response vehicles priority passage. The technology was first testedinAlibaba’s
hometown of Hangzhou and has since been adopted by some other Chinese
municipalities as well as by Kuala Lumpur, the capital of Malaysia. Separately,
Alibaba Group has announced plans to bring voice and facial recognition
technologiestotheShanghaisubwaysystemthroughitsaffiliateAntFinancial
Services. Other technologies being tested in Chinese smart cities include
autonomous cars and people-carrying drones. (See the examples on page
31.)Smart city technologies such as these will be discussed at the World
EconomicForum’sAnnualMeetingofNewChampionsinTianjinfromSeptember
18 to 20. The future of cities will be, either directly or indirectly, the focus of
some 24 sessions at the conference. Decision-makers from at least 10 major
cities as well as dozens of startups specializing in smart city technologies are
expected to attend. “Today there are a plethora of smart cities but about 75%
of them die at the pilot stage, so the question is how do you scale smart city
technology in an inclusive and sustainable manner?” says Alice Charles, the
World Economic Forum’s project lead, Cities. Connecting with the right
startups isnottheonlyissue.Decision-makersincitiesneedtobeuptoscratch
with the latest technologies and understand how they might impact the way
municipalities operate.To that end, UNESCO has teamed with the Paris-based
observatory Netexplo, the French Ministry of Transport and four universities
– the French engineering school Télécom ParisTech, ESCP Europe business
school, Peking University and Shanghai Jiao Tony University – to create
Netexplo Smart Cities Accelerator, a certified training program. In line with
the program, Netexplo is creating a yearbook that will give an overview of
the state-of-the-art technologies in use in smart cities today, as well as “Smart
City Foresight,” a book published with UNESCO outlining the next generation
of technologies and issues. Both books will be distributed at a meeting at
UNESCO in Paris on April 18 and 19 that will gather about 1,000 city officials
from around the world. Some of the conference content will be turned into
an online course for city officials that would allow them to earn a smart cities
managementcertificatefromoneofthefourinvolveduniversities.Theprogram
will be offered in English, French and Mandarin.
J.L.S.
Hangzhou,oneofChina’ssmartcities.

31. — P.31
EXAMPLES OF SMART CITY INNOVATIONS
BEING TESTED IN CHINA
LIUZHOU
MORETREESTHAN
PEOPLE
Tohelpabsorbcarbonemissions,
architectsaredesigninganeigh
borhoodwhereplantsareintegrated
intothebuildings.Theproject,which
willcoveraneighborhoodof
30,000residents,willusenearlya
millionplantsand40,000trees,onthe
groundandonroofsandterraces.
Source:Netexploandpressreports
YINCHUAN
SMARTBUILDINGSAND
GARBAGEBINS
InFutureCity,oneofYinchuan’s20
”smartcommunities,”entrancesto
buildingsarecontrolledbyfacial
recognition,password-protected
refrigeratedboxesreceivefood
deliveriesandsolar-poweredgarbage
binsopenautomatically,compacting
wasteandnotifyingmunicipalservices
whentheyarefull.
SHANGHAI
BIOMETRICSUNDERGROUND
TheShanghaisubwayplanstousevoice
andfacialrecognitiontechnologies
developedbythee-commercefirm
AlibabaGroup.“Far-field”voice
recognitiontechnologywillbeusedin
ticketmachinesinallstations,aswellas
facialrecognitionsystemsatthe
entranceofstationstoverifythe
identitiesofcommuters.
CHENGDU
AFULLYPEDESTRIAN
MUNICIPALITY
TheGreatCityproject,whichis
expectedtoattract80,000inhabitants,
isbeingdesignedasChina’sfirstfully
pedestriancity.Thecityisexpectedto
consumefarlesswaterandenergyand
generatefarlesswasteandCO2than
traditionalcities.
CHONGQING
CITYINTHESKY
RafflesCityChongqingwillfeature
134,000squaremetersofhomes,
shops,offices,entertainment,
transportationlinksandapublicpark
–allonthe42ndfloor.Thanksto
skybridgesresidentswillbeabletolive
theirlivesintheeight-tower
developmentwithouttheneedto
returntogroundlevel.
HANGZHOU
SMARTROAD
A161-kilometersmartroadwill
connecttheChinesecitiesof
Hangzhou,ShaoxingandNingboby
2022.Thehighwaywillusetechnology
toeasecongestionandreducetravel
timebyathird,tojust60minutes.
Photovoltaiccellswillpowerlighting
andsigns,andonedayrechargeelectric
cars.
SHANGHAI
SPONGECITY
China’sSpongeCitiesprogramaimsto
reduceurbanfloodingandtheneedfor
airconditioning.Theprojectismost
advancedinShanghai’snewLingang
neighborhood.Theroofsarecoveredin
plantsandsidewalksarepermeable,in
ordertoabsorbexcesswaterandlower
temperaturesthroughevaporation.
GUANGZHOU
PILOTLESS
PEOPLE-CARRYINGDRONES
TheChinesedronecompanyEhang,
makerofanautonomousquadricopter
builtforhumantransport,carried
about40passengersduringpublic
tests in2018.Poweredbyanelectric
motor,thepeople-carryingdronecan
flyatupto130kmperhourfor
25minutes.
BEIJING
AI-EQUIPPEDTOILETPAPER
DISPENSERS
Sinceusersofpublictoiletstendtosteal
toiletpaperforlateruseelsewhere,
leavingdispensersempty,theTemple
ofHeaveninstalledatoilet-paper
dispenserinpublicrestrooms
equippedwithfacialrecognition
technology.Thevisitor’sfaceis
scannedand60centimetersofpaperis
dispensed.Thereisanine-minutewait
togetmore.