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.
• Senate GOP Lobs an Obamacare Grenade Into Tax Reform Plans
Senate Republicans tied the repeal of a key part of the Affordable Care Act to their plans for tax reform, in a move makes an already tricky process more complex. According to the Congressional Budget Office, repealing the individual mandate would cut an estimated $338 billion from the projected federal deficit over the next decade, but would also leave an additional 13 million Americans without health insurance. Opinion polls over the last year have shown a big, but narrowing, majority opposed to such mandates.
• Airbus and Boeing Reel in Mammoth Orders
Airbus signed one of the biggest aircraft deals in history Wednesday, a contract to deliver 430 aircraft to Bill Franke’s Indigo Partners, which holds stakes in low cost carries from Frontier Airlines and JetSmart to Mexico’s Volaris and Hungarian-based Wizz Air. The deal carries a sticker price of $49 billion and will soften the blow of losing out to Boeing in a $15 billion deal for Emirates. Also at the Dubai Air Show Wednesday, Boeing inked a contract to sell 225 more planes to Flydubai, in a deal with a list value of $27 billion.
• Stock Sell-Off Gathers Pace
The stock market has gotten tired of so much winning, for now. A telecoms-driven sell-off in junk bond markets and a pullback from an overextended rally in energy and commodities stocks have been largely responsible. While economic data out of the Eurozone and, this morning, Japan have been supportive, there have been signs of a slowdown in China. U.S. indexes are marked to open 0.5% lower, with an eye on U.S. inflation and retail sales data later Wednesday.
• ‘Energy Dominance’ Made Flesh
The U.S. is on the threshold of the biggest oil and gas boom in history, according to the International Energy Agency. That’s a message that may come as a surprise to those predicting the imminent death of the fossil fuel industry. Improvements in the shale sector’s technology and competitiveness will allow output to rise to over 17 million barrels a day, making the U.S. a net exporter for the first time since the 1950s. The trend means that the Middle East, which will remain the world’s most important exporting region, will be more of a problem for China and India than the U.S. in the long run.
Around the Water Cooler
• Oh, THAT Meeting. Well, Now That You Come to Mention It…
Attorney General Jeff Sessions admitted that he had indeed been present at a Trump campaign meeting where campaign aide George Papadopoulos boasted of his connections to Russia and suggested arranging a meeting in Moscow for their candidate. Sessions, who has twice amended sworn testimony about his contacts to Russian officials, told the House Judiciary Committee that he had forgotten about the meeting until being reminded of it by news reports. He denied lying in his previous testimony. Elsewhere, Roy Moore, the GOP’s candidate to fill the Alabama Senate seat vacated by Sessions, again said he won’t step down from the race over sexual harassment allegations.
• HSBC Finally Settles French Tax Evasion Probe
HSBC will pay French authorities 300 million euros to settle a nine year-long investigation into how its private bank in Switzerland helped wealthy Europeans to evade taxes. Talks between the French authorities and UBS on a similar case broke down earlier this year, which may leave the Swiss bank facing a much heavier penalty.
• Off Target
Target stock fell 3% in premarket trade after it issued an underwhelming profit forecast for the key holiday quarter. It indicated that per share earnings could be 20% below what the market had pencilled in for the three months to January. That overshadowed an otherwise respectable quarter to end-October, in which it beat expectations for both sales and profits.
• The Last of the Liberators
It seems that Robert Mugabe’s 37-year hold on power in Zimbabwe has been broken. Army units loyal to Emmerson Mnangagwa, the man who did much of Mugabe’s dirty work over decades said they had “secured” the 93 year-old. According to Sky News, Mugabe’s wife Grace, who had been trying to engineer a dynastic succession under her control, has been allowed safe passage to neighboring Namibia. Mugabe is the last of the generation of African rulers to take over from colonial rule; once feted as a ‘liberator’ and educator, his latter record of corruption, economic misrule, and human rights violations bears comparison with the likes of Zaire’s Mobutu Sese Seko and Nigeria’s Sani Abacha, his plundering constrained only by Zimbabwe’s smaller mineral wealth. As ever, the succession period promises a stern test of the “things can only get better” maxim commonly bandied about at such times.
Summaries by Geoffrey Smith; firstname.lastname@example.org