China’s rise as an economic power has been relentless. State leaders have pulled every lever to maintain at least high single-digit growth.
Now, the emerging superpower has secured a powerful technological and economic advantage over the West.
Since 2015, its Ministry of Public Security has been amassing a facial-recognition system capable of recognizing any one of its 1.3 billion citizens within three seconds.
In the big data era, this system’s database could eventually hold incredibly valuable raw material – details like where these people go, what they do, what they buy and what they eat.
It’s not the first time China has ramped up innovation to spur commerce and security. Historically, the Land of the Dragon has been at the vanguard of technology.
In the early age of metallurgy, it was the leading producer of steel. By 1588, when Britain was building the world’s largest navy, China was constructing commercial ships seven-times larger than their Brit counterparts.
This facial-recognition system is different, though. The next era of commerce will be governed by data.
It has become glib to call data the new oil, or steel. It’s more than that. In a world consumed by computer software, data is the new code.
That makes it the feed for powerful artificially intelligent systems. The AIs absorb information, make sense of it, then write new problem-solving algorithms on the fly.
AI is the future of economic growth.
Chinese state officials know this. They believe AI is worth $150 billion directly, and $1.5 trillion in related economic activity.
Given the stakes, they want to lead. So, they’re putting systems into place now. The facial-recognition system is just part of the plan.
Other parts of the plan include reduced regulations for self-driving cars, new incentives for Industry 4.0 smart factories and standardized protocols for e-commerce.
But it all begins with data collection. The facial-recognition system will become a treasure trove of raw information.
According to the South China Morning Post, the project is expected to achieve 90% accuracy.
It will store portrait information of every Chinese man, woman and child. And that is just the start.
It will also perform real-time data analytics, tracking and other unspecified actions.
Commercial applications are currently not permitted. But, in China, privacy has always taken a back seat to economic development.
Imagine what is possible. And, it helps when Chinese citizens have embraced facial recognition.
Ant Financial, a spinoff from Alibaba (BABA), recently announced a partnership to let customers use facial scans to buy meals via digital payments at Chinese KFC restaurants. China Southern Airlines ditched boarding passes for facial recognition. University students sign-in to classes, office workers push through security lines, all with a smile. The technology is widespread, and popular.
For investors, there is plenty of opportunity. China is clearly rising. Wall Street is paying attention.
This week, two Chinese firms are listing their shares on U.S. stock exchanges – lender Qudian (QD) and school chain Rise Education (Pending: REDU).
But domestic investors have other options.
Many American companies have recently formed new partnerships with Chinese public and private companies. These new alliances will strengthen their lead in the development of AI technologies. That’s because they’ll get vital needed access to data and to an environment open to experimentation.
This is a big advantage that should not be ignored.
While one of these firms has already performed very well, another has been out of favor for several quarters. Investors are missing its potential as they focus on yesterday’s news. The time to begin making investments is now.
Finding these opportunities, and making structured investments, will reward investors handsomely.
Best wishes,
Jon Markman
