How China thrives in the technology race
Excerpts from the “Thriving with innovation and technology in China” session at the Greater China Conference 2024
Many Chinese technology companies have found success domestically and internationally because of their strong commitment and investment in research and development (R&D). Many are quick to adapt to external challenges in this volatile environment while advancing their technology, and IT solutions services provider Chinasoft International is a standout example.
I had the pleasure to talk to CHEN Yuhong, Chairman and CEO of Chinasoft at the Greater China Conference in Shanghai. Our conversation centered on the company’s key development partnerships, which offered telling insights into where the Chinese technology sector is headed in the next few years. The following are excerpts from that conversation.
On the technology race and China’s push toward self-reliance
Bin SHI: I believe the competition between China and the US is ultimately a technology battle. China excels in manufacturing, dominating high impact areas such as advanced materials and manufacturing, energy and environment, biotechnology, gene technology and vaccines, as well as sensing, timing and navigation. But when it comes to technological breakthroughs, or software and hardware, China has some ways to go before reaching a world-leading position.
CHEN Yuhong: China is behind in the race and the difference is significant, but we are catching up. Twenty years ago Chinasoft earned RMB 50 million in revenue, and we have been growing ever since. As Chinasoft reached RMB 20 billion in revenue, we raised our target to RMB 100 billion, aiming to be among the largest 10 information services companies in the world. When we got there, however, Chinasoft only cracked the top 20. Competition is formidable, but we keep pushing forward.
Software development is growing at great speed, partly as a result of the government’s strategic plan in targeting key industries to become less dependent on foreign suppliers. The key industries are using homegrown software, and that is where Chinasoft comes in. We developed our first operating system on LINUX 30 years ago. The West has walked this development path, and it is time China walks down the same path. I see this as an exciting opportunity and a new era for Chinese software – as well as for technology overall.
On the role of software development in the technology race
Bin SHI: Software cannot be siloed from hardware; software is not a standalone existence. However, the pace of software development is quite different from hardware development. It appears that China can look to software to help close the race gap.
CHEN Yuhong: Software for sure helps us compete better because unlike hardware, it does not mandate an advanced, full-scale industrial infrastructure. When product performance is constrained by hardware limitations, it is possible for software to step in and make up the difference. For example, Harmony OS, a distributed operating system for smart devices developed by Huawei, is the third largest operating system behind iOS and Android mobile OS. Chinasoft with its more than 30,000 certified developers has worked with Huawei on various Harmony OS projects over the years.
In a lot of ways, Harmony OS is a product born out of limitations. Originally designed as a cross-device system in 2016, the operating system takes into account the less sophisticated hardware and tries to make up for the performance deficit. The end product is extraordinary because it is not a mere replacement or substitution but an advanced piece of software that supports the ongoing development of Huawei devices. It is not a me-too product. Harmony OS goes beyond mitigating the hardware issue – it adds additional value.
Due to its cross-device roots, Harmony OS is not device-first. It is designed for end users, not smart devices, and it is outfitted to take the end user experience to a whole new level. For example, as I walked into the Greater China Conference, the operating system was able to identify my surroundings and curate a list of relevant apps and services on my phone for me. This type of customization feature can drive business growth.
On geopolitics
Bin SHI: Promoting Harmony OS overseas can be a political hurdle too great to overcome at this time, no matter how high quality and affordable the product is. Geopolitical factors have become more problematic in the last few years, and they sometimes are the deciding factors. Many international companies have relocated parts of their supply chains away to reduce dependence on China.
Nonetheless, Huawei has survived the US sanctions against all odds and continues to thrive. It has a strong hand in operating systems, servers, microchips, graphics processing units (GPUs) as well as autonomous driving technology. Dominance in any one of these areas would make a powerful standalone company outside of China. Huawei is like Intel, NVIDIA, Microsoft and SAP all rolled into one.
CHEN Yuhong: Huawei is the leader of our time, and its impact reaches beyond the company and industry. From what I can see, most Chinese companies including Chinasoft are opportunistic; when faced with a problem, we try to find ways around it. Huawei in stark contrast does not shy away and tackles the problem head-on, which I believe is the main reason Huawei exists in rarefied air today.
Circling back to the topic of geopolitical tensions, the growth and development of a country like China is never without difficulties and complications. When presented with an opportunity, we fight to move upward and forward, in the same way a company like Huawei would. There is a lot of pressure to break Huawei apart, but the company’s perseverance puts China in a better position to compete in the technology race with the US.
On generative artificial intelligence (AI)
Bin SHI: China is catching up in so many sectors, and I believe technology is key to the country’s long-term development. For generative AI, 2023 marked the beginning of a new direction, perhaps of a new era. I expect to see many exciting Chinese applications this year, serving businesses and consumers. Some of the early use cases involve using AI to lower costs on administrative works, which improves operational efficiency.
CHEN Yuhong: Business-facing or customer-facing, to me AI at the core is a tool that assists people. It can help people to do their job faster and better, and any quantifiable improvement, however small, has the potential to yield significant savings for a company, and therefore it is a product I want to develop.
Building and training large language models (LLMs) that power chatbots and the like requires a tremendous amount of resources, and China is behind there. Our main advantage however is in developing applications of these LLMs and offering a solution that is full stack. Chinese tech companies can cover the entire depth of a computer system application, straddling the front end and the back end. Huawei for one works with its largest clients in identifying issues and inefficiencies in production and processes, then tailors a client-specific, full stack solution to improve processes and achieve cost savings.
Generative AI is a work-in-progress, but the rise in efficiency and the amount of measurable success that come with it is a certainty. Although Chinese tech companies are lagging currently, I believe they will catch up in time. Some jobs will inevitably be phased out or replaced, so it is not all bad for the pace of progress to be less hurried, giving society time to digest the problems AI could bring.
Bin SHI: We need to have patience and give the AI push some time. Where there is a will, there is a way. I believe China will get there, which in time could lift the economy and markets in the long run.
