By Alan Murray and Geoffrey Smith
November 15, 2017

Good morning.

I had dinner this week with Dr. Kai-Fu Lee, who may have the most comprehensive view of the global technology scene of any living person, having earned a Ph.D. at Carnegie Mellon and worked at Apple, Microsoft, and Google, before moving back to China and devoting himself to venture investing there. Lee’s specialty is artificial intelligence, and he is quick to acknowledge that the U.S. has the lead in that technology. But he also is firmly convinced that China will quickly catch up, and surpass.

“The copy-cat era is behind us,” he says.

As I mentioned in a post earlier this week, the Chinese change is especially evident in the realm of mobile payments, where Chinese companies have leap-frogged the credit card business and now have 600 million consumers using sophisticated mobile payments systems.

All those payments spew out massive amounts of data, which feed the development of AI. “Data drives AI,” Lee says. While Google clearly leads the global development of AI technology, he believes Tencent—whose WeChat platform is a leader in online payments—is in second place and rising: “China will become a challenger, if not a leader.”

One huge advantage Chinese companies have is a supportive government, at a time when U.S. giants increasingly face regulatory threats. Attacks against the big tech companies in the U.S. and Europe will be “a big advantage for China,” he believes. In an area like autonomous vehicles, China is “two years behind the U.S. companies,” but every regulatory action against those companies “will help China catch up.”

Separately, I was visited yesterday by Christian Hogg, CEO of Hutchinson China Meditech, which is about to win FDA approval for a lung cancer drug that will be the first synthetic drug ever created in China to make it through the U.S. regulatory process. He expects many more to come. And he, too, credits the Chinese government for the strong support it provides to innovative companies. “China is leap-frogging the way industries have developed in the past,” he says. “China is going to catch up very quickly.”

Asked why government involvement doesn’t stifle innovation in China, as they argue it does in the U.S., both Lee and Hogg have similar answers. The Chinese government is clearly focused on encouraging innovation, and takes a relentless trial-and-error approach to ensuring their success.

More news below. And if you are interested in learning more about the frontiers of Chinese technology, join us at Fortune Brainstorm Tech International in Guangzhou December 5 & 6, right before the Fortune Global Forum.

Alan Murray


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