China’s biotechnology sector has emerged as a formidable force, shaking off a four-year slump to become one of Asia’s hottest markets. The Hang Seng Biotech Index has surged by approximately 60% in 2025, a rally that has outstripped the 17% gain in China’s tech stocks, driven by the release of DeepSeek’s breakthrough artificial-intelligence model in January. This phenomenon, dubbed the “DeepSeek moment” for biotech, reflects China’s growing prowess in innovation, positioning the country as a global contender in drug development and biotechnology. The sector’s rise is underpinned by significant financial investments, strategic partnerships with global pharmaceutical giants, and a robust pipeline of innovative drugs, particularly in oncology.

The term “DeepSeek moment” draws from the success of DeepSeek’s R1 artificial-intelligence model, which propelled the Chinese AI startup to global prominence earlier this year. In biotech, this analogy captures the sector’s rapid ascent and its potential to disrupt global markets. “China biotech is no longer just an emerging story — unlike 10 years ago — it is now a disruptive force reshaping global drug innovation,” Yiqi Liu, senior investment analyst at Exome Asset Management LLC in New York told Bloomberg. This sentiment is echoed in the flurry of high-value licensing deals and initial public offerings (IPOs) that have invigorated investor confidence.

A notable example is the performance of companies like Akeso, a Chinese drug developer that has seen its shares climb 6.5 times their IPO price from five years ago, despite a temporary 11.8% drop following a second marketing IP for its lung cancer drug ivonescimab in April 2025. Ivonescimab, a bispecific antibody, has outperformed Merck’s blockbuster drug Keytruda in phase three trials, marking a significant milestone. “The development of the new antibody drug was hailed by the mainland media last month as the biotech industry’s ‘DeepSeek moment’,” reported the South China Morning Post, highlighting the drug’s potential to challenge global oncology standards. Akeso’s partnership with Summit Therapeutics in the US to advance ivonescimab’s clinical trials across 108 locations in 12 nations underscores China’s ambition to compete on the global stage.

The financial momentum is equally striking. In May 2025, eight licensing deals were reached in China’s biopharma sector, with five cross-border out-licensing agreements generating over £1 billion upfront and a potential £6.5 billion including milestones, according to posts on X. This represents a significant increase from April 2025, which saw six deals with £141 million upfront and £2.35 billion in total potential value. These figures reflect a growing appetite among global pharmaceutical companies for Chinese-developed drugs. For instance, Bristol-Myers Squibb agreed to pay Germany’s BioNTech SE up to £8.45 billion to license a cancer drug originally developed by China’s Biotheus Inc, which BioNTech had acquired for £590 million in 2023. Such deals highlight the economic allure of China’s biotech innovations.

Investor enthusiasm is further evidenced by the performance of recent IPOs. Shares of Duality Biotherapeutics Inc, a company focused on cancer treatments, more than doubled on their first day of trading in Hong Kong on 15 April 2025. Similarly, companies like 3SBio and RemeGen Co. have seen stratospheric gains, with 3SBio surging 283% and RemeGen climbing over 270% after announcing potential licensing deals with multinational firms. “Chinese biotech companies are having ‘their own DeepSeek moment’,” said Dong Chen, chief Asia strategist at Pictet Wealth Management in Hong Kong, pointing to the sector’s ability to attract significant capital and deliver promising pipelines.

The role of venture capital is pivotal in this transformation. Hong Kong-based ORI Capital is planning a £260 million fund to invest in Chinese healthcare startups, capitalising on the sector’s momentum. “Hong Kong-based venture capital firm ORI Capital plans to launch a new fund to invest in Chinese healthcare start-ups, as the domestic biotechnology industry experiences its own ‘DeepSeek moment’,” noted Simone Song, the firm’s founder, in an interview with the South China Morning Post. The fund aims to leverage artificial intelligence to enhance drug development, reflecting the integration of cutting-edge technologies in biotech innovation.

China’s biotech sector is not without challenges. The development of drugs like ivonescimab remains uncertain, with many candidates still in preclinical or early clinical stages, requiring years and hundreds of millions of dollars to reach market approval. Approximately 90% of compounds entering human trials fail, a reality that tempers optimism. Moreover, geopolitical tensions and US concerns about China’s biotech dominance add complexity. A US congressional report warned that “China is quickly ascending to biotechnology dominance,” urging Congress to invest £11 billion over five years to bolster US biotech, including £890 million through the Defence Department for applications like shelf-stable blood and advanced explosives. The report highlighted fears that China’s advances could have national security implications, potentially complicating cross-border collaborations.

Despite these hurdles, China’s biotech sector is capitalising on its domestic strengths. Companies like Innovent Biologics are accelerating clinical development, producing six to eight assets annually and maintaining a robust pipeline of clinical-stage drugs. “We are developing at a very fast speed and to demonstrate a clinical concept and derisking it,” a representative from Innovent told Bloomberg, emphasising the “China speed” in research and clinical trials. This efficiency, combined with substantial financial reserves (Akeso, for example, held 7.34 billion RMB in cash at the end of 2024) enables sustained innovation.

The global implications of China’s biotech rise are profound. The sector’s ability to produce cost-effective, innovative drugs is attracting Big Pharma, as seen in Merck & Co’s £82 million upfront deal with Hansoh Pharma to develop an obesity drug, with potential milestones up to £1.4 billion. Such partnerships signal a shift in the global pharmaceutical landscape, with China transitioning from a manufacturing hub to a centre of innovation. “The surge in China-listed biotech firms is further evidence that the mainland is becoming a centre for global innovation,” noted a Bloomberg report, underscoring the sector’s competitive edge.

The integration of artificial intelligence is another driver of this transformation. AI is being used to streamline drug discovery and optimise clinical trials, reducing costs and timelines. This technological synergy is particularly appealing to investors, as evidenced by ORI Capital’s AI-focused fund. The combination of biotech and AI is not only enhancing China’s domestic capabilities but also positioning its companies to compete with Western giants like Merck and Bristol-Myers Squibb.

The competitive landscape is also shaped by China’s regulatory environment, which has become more conducive to innovation. The approval of ivonescimab by China’s National Medical Products Administration (NMPA) in April 2025 for two indications demonstrates regulatory agility, contrasting with the longer timelines in markets like the US, where the drug remains in clinical trials. This regulatory efficiency, coupled with China’s large patient population for clinical studies, provides a strategic advantage.

As China’s biotech sector continues to mature, its global influence is undeniable. The success of companies like Akeso, Innovent, and Duality Biotherapeutics reflects a broader trend of Chinese firms moving beyond generic drug production to pioneering novel therapies. The financial backing from venture capital, coupled with strategic partnerships with global players, ensures that this momentum is likely to persist. However, the sector must navigate the complexities of global regulatory frameworks and geopolitical scrutiny to sustain its trajectory.

The “DeepSeek moment” for China’s biotech sector is more than a fleeting rally; it signals a structural shift in global innovation. With a combination of financial strength, technological integration, and strategic partnerships, China is redefining its role in the biotechnology landscape, challenging Western dominance and setting the stage for a new era of drug development.

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China’s new patent extensions: A game-changer for innovators

Exclusivity for pharmaceuticals in China has taken a giant leap forward with the introduction of new patent term extension (PTE), a concept that originated in the US with the Hatch-Waxman Act of 1984. This move, part of an economic agreement with the US in January 2020, became effective with the new Chinese Patent Law and detailed guidelines published in January 2024.

The law allows for up to five years additional term for patents covering new drugs, with the total effective term not exceeding 14 years from the drug’s marketing approval date. The new PTE provisions apply to product patents, preparation method patents, and medical use patents of an active pharmaceutical ingredient in a “new drug”.

To qualify for PTE, the patent must be valid, not previously extended, and include drug-related technical solutions. Only one patent term can be extended per drug. The China National Intellectual Property Administration (CNIPA) examines PTE requests, allowing for observations or amendments before making a decision, which can be challenged.

The protection scope of PTE is narrower than the original patent, limited to the new drug for an approved indication. A new indication can support a new PTE but will only cover the new indication underlying the PTE.

China’s AI tool revolutionises copyright protection

China has unveiled the Copyright AI Intelligent Review Tool (版权AI智审), a groundbreaking advancement in IP law. This innovative system uses artificial intelligence to assist in the review and protection of copyrighted works, offering a robust digital solution to the challenges faced by courts and legal professionals. The tool streamlines the process of assessing originality, innovation, and potential copyright infringement.

One of the tool’s standout features is its advanced image recognition capability, which performs “image-to-image” searches to trace the origins of visual works and identify original creators, essential for establishing copyright ownership. Additionally, it evaluates the degree of innovation in a work and quantitatively assesses the similarity between images, aiding in potential copyright infringement determinations. Integrated within court management platforms, the tool provides judges with analytical resources during proceedings, enhancing decision-making and streamlining case resolutions with a high success rate in identifying similar designs.

The tool offers several benefits, including ease of use and cost efficiency. Its user-friendly interface is easy for judges and court staff to navigate, reducing the need for extensive training and lowering litigation costs by streamlining the evidence-gathering process. By automating the analysis of copyright cases, the tool significantly reduces the time required for assessments and minimises human error, leading to more precise rulings. Furthermore, it strengthens copyright law enforcement, empowering legal professionals to protect creators’ rights and combat infringement effectively.

In conclusion, the Copyright AI Intelligent Review Tool emerges as a vital resource for enhancing copyright litigation processes in today’s landscape where technology converges with law. Currently focused on image copyright infringement cases, it is anticipated that the tool will expand into broader applications in the future.

CNIPA’s good faith rule: Ensuring fair play in patents and trade marks

Revised Rules for the Implementation of the Patent Law came into effect on 20 January 2024. Article 11 of these Rules provides that “The patent application shall be made in accordance with the good-faith principle”. This principle, introduced to ensure ethical behaviour in intellectual property applications, aims to prevent the abuse of patent and trademark rights.

In patent examination, the principle, effective since June 2021, requires genuine invention activities and prohibits falsified applications or those intended to harm public interests. The 2024 implementation rules further emphasise adherence to good faith.

For trademarks, the principle has been in place since 2013 to prevent dishonest behaviours such as registering trademarks without intent to use or imitating well-known trademarks. Specific provisions published in 2019 detail behaviours that violate this principle.

The CNIPA can reject applications violating the good faith principle, maintaining a fair and transparent IP system in China. This helps promote ethical practices and strengthens the integrity of patent and trademark examinations.

CNIPA unveils new guidelines on trade mark license recordal procedure

On October 29, 2024, the China Intellectual Property Administration (CNIPA) released the Guidelines on Trade Mark License Recordal Procedure to help entities understand the law provisions and procedures related to the trade mark license recordal, and to clarify the validity of trade mark licenses.

A trade mark license is an agreement where the licensor (the trade mark owner) allows another party (the licensee) to use their registered trade mark under certain conditions.

According to the Guidelines, the licensor shall report the license to the CNIPA for recordal.  A trade mark license not filed for recordal shall not be used against a third party in good faith. The CNIPA shall announce the recordal of trade mark licenses that meet relevant regulations, and the public can search for specific information at https://sbj.cnipa.gov.cn/sbj/index.html.

Moreover, the two parties of a license may expressly stipulate in the trade mark license on the following matters, including, but not limited to: the basic information of the trade mark, information on the items of goods or services, form of license, term of license, type and restriction of license, goods quality guarantee, and contract breach liabilities.

PPH improvement initiative: A boost for patent processing

In a bid to further enhance the user experience of the Patent Prosecution Highway (PPH), April 2024 saw the China National Intellectual Property Administration (CNIPA) join the “PPH Improvement Initiative”, which involves cooperation between the world’s five leading IP offices in China, the United States, Europe, Japan and the Republic of Korea.

The objective of this initiative is for patent offices to strive for an average response time from examiner to applicant to be three months (including from grant of a PPH request to the first official action), thereby providing PPH users with a more predictable examination cycle.

The Patent Prosecution Highway (PPH) Improvement Initiative offers several benefits for businesses and applicants. It aims to expedite patent processing, reducing the average duration for PPH requests to about three months, and provides a more predictable examination cycle. Enhanced cooperation between leading IP offices, including those in Europe and the UK, and work sharing between patent offices can streamline and make the patent application process more efficient. This initiative ultimately helps applicants by making patent applications in China and other jurisdictions involved faster, more predictable, and more efficient.

Lydia Topping is a trainee patent attorney and Peter Mumford is a senior associate with Potter Clarkson LLP, a full-service European intellectual property law firm.

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Founded in 2023 by Liang Wenfeng and headquartered in Hangzhou, DeepSeek specialises in developing open-source large language models (LLMs) – advanced AI models trained on vast amounts of data to understand and generate everything from poetry to Java code. Its flagship model, DeepSeek-R1, has garnered significant attention for its performance and cost-efficiency, challenging established Western AIs like OpenAI’s ChatGPT and Google Gemini.

A new AI contender

DeepSeek’s chatbot offers capabilities comparable to leading platforms like ChatGPT but distinguishes itself through its development efficiency. The company claims the model was trained at a cost of approximately $6 million, a stark contrast to the estimated $100 million expenditure for OpenAI’s GPT-4 in 2023. Moreover, DeepSeek-R1 requires only a tenth of the computing power of similar models, highlighting its resource efficiency.

Early users have found that the model performs as well as ChatGPT and Gemini, although many have raised questions about censorship (which will be explored further below). Performance and news headlines have brought a lot of attention as a result, and DeepSeek’s first free chatbot app for iOS and Android platforms surpassed ChatGPT as the most-downloaded free application on the US iOS App Store on 27 January.

Market disruption and economic implications

The swift rise of DeepSeek has had profound effects on global markets. DeepSeek’s open source model and lower development and computing costs undercut a common belief in Silicon Valley that AI can only advance with the input of huge budgets and top-tier chips.

As a result, shares of major technology companies, particularly those heavily invested in AI infrastructure, experienced sharp declines when markets opened on Monday, 27 January. For example, chip manufacturer Nvidia saw its stock price drop by 18% over concerns that DeepSeek’s efficient models could reduce the demand for chips, thereby impacting Nvidia’s future revenue streams.

Strategic implications for countries looking for AI supremacy

DeepSeek’s emergence underscores China’s rapid progress in AI. This has raised concerns about the effectiveness of bans on advanced chip and technology exports to China and prompted discussions about the need for strategic investments to maintain a competitive edge.

The company’s success also challenges long-held stereotypes about Chinese innovation, demonstrating that China is capable of being a leader rather than a follower and producing high-performance, cost-effective AI solutions. Chinese media have widely praised DeepSeek for its small yet formidable team, primarily comprised of young graduates from China’s top universities who have been deeply immersed in the tech field from a young age.

And it is not the only Chinese company purporting to be breaking new ground in the AI field. On 29 January, Alibaba (owner of Taobao, Tmall and Alipay, among others) announced a new version of its Qwen 2.5 AI model that it claims surpasses DeepSeek, OpenAI and Meta’s latest models.

Ethical and regulatory considerations

Despite its achievements, DeepSeek has faced scrutiny over data privacy and censorship concerns. The company’s models reportedly adhere to Chinese censorship laws, avoiding politically sensitive topics, which has raised questions about the ethical implications of such restrictions.

Moreover, there have been allegations that DeepSeek illicitly used OpenAI’s models to train its own through a technique called “distillation”, potentially infringing on intellectual property rights. This has caused some to question DeepSeek’s claims about how it produced its model so cheaply, although it should be noted that models like ChatGPT have also been criticised for infringing on intellectual property rights.

Finally, in the wake of the US Supreme Court upholding a law that could ban TikTok in the US over national security concerns (since being pushed back by an executive order from Trump), some have raised similar questions about DeepSeek’s collection, use and storage of data. As The Guardian reports, DeepSeek’s privacy policy states that the personal information it collects is held on secure servers in China.

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Key provisions of the new guidelines on AI regulation

1. Ethical standards for AI development
   • The guidelines set specific ethical standards that companies must follow, emphasising that AI systems should respect human rights and avoid discrimination. AI developers are required to ensure that their algorithms do not result in biased or unfair treatment, particularly in critical applications like healthcare, finance, and employment. This requirement aims to foster fair and ethical AI usage across industries.
     
2. Data security and privacy protections
   • AI systems that handle sensitive data are now subject to more rigorous data security standards. Companies must implement robust safeguards to protect personal and sensitive information used by AI systems. This includes measures for secure data storage, controlled access, and regular audits. Compliance with these standards is essential to prevent data breaches and misuse.
     
3. Transparency in AI decision-making
   • The guidelines stress the importance of transparency in AI decision-making processes. Companies are required to document how their AI systems make decisions, especially in areas that directly affect individuals. This transparency requirement ensures that AI-generated outcomes are explainable, allowing for greater accountability and user trust in AI applications.
     
4. Safety and risk assessment protocols
   • To address safety concerns, companies must conduct regular risk assessments of their AI systems, particularly those used in high-stakes settings like autonomous vehicles, healthcare and public services. Risk assessment protocols include evaluating the potential risks of AI malfunctions or unintended outcomes. By implementing these assessments, businesses can minimise the likelihood of AI-related incidents.
     
5. User consent and control mechanisms
   • AI applications that interact with individuals must include features that allow users to understand, consent to, and control how AI interacts with them. This includes clearly informing users of AI’s role in decision-making processes and providing options to adjust or limit AI interactions. Such controls are designed to empower users and enhance transparency in AI-driven engagements.
     
6. Increased regulatory oversight and penalties for non-compliance
   • The guidelines provide for increased regulatory oversight, with authorities conducting periodic reviews of AI applications to ensure compliance. Non-compliance may result in penalties, including fines, operational restrictions, or even prohibitions on the deployment of non-compliant AI systems. These enforcement measures highlight the importance of adhering to the regulatory framework for AI development in China.

How can businesses comply with the new guidelines on AI regulation?

1. Develop ethical AI practices
   • Companies should establish internal ethical guidelines for AI development and deployment, ensuring that their systems align with the government’s ethical standards. Regular reviews of AI models can help detect and correct biases, fostering fairer and more inclusive AI solutions.
     
2. Implement advanced data security protocols
   • Businesses should invest in state-of-the-art data security technologies to protect sensitive information used by AI systems. Regular audits and real-time monitoring systems can enhance data protection and help companies stay compliant with data security requirements.
     
3. Ensure transparency in algorithm design
   • To meet transparency requirements, companies should document their AI algorithms and decision-making processes, making them accessible and understandable to both users and regulators. Clear documentation also allows businesses to demonstrate accountability and address user concerns effectively.
     
4. Conduct regular AI risk assessments
   • Routine risk assessments should be part of a company’s AI management strategy. Identifying potential risks and implementing mitigation measures can reduce the likelihood of unintended AI outcomes and enhance system reliability.
     
5. Integrate user consent and control options
   • Developing user-friendly consent and control options within AI applications can improve compliance with the guidelines’ user protection requirements. By making AI systems more user-centric, companies can strengthen trust and transparency in their AI interactions.

Conclusion

China’s new guidelines on AI regulation set a higher bar for ethical, secure and transparent AI development. For businesses, compliance with these guidelines is essential for maintaining regulatory approval and building trust with users. By integrating robust ethical standards, data protection, transparency and user control mechanisms, companies can navigate China’s AI regulatory landscape effectively and contribute to a responsible AI ecosystem.

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At the conclusion of the Third Plenum in Beijing this week, innovation and the balancing of development and security were set out as some of China’s core strategic priorities. Meanwhile, in Westminster, there has been much speculation over the omission of a dedicated AI bill at the state opening of parliament, despite indications that the draft bill is largely complete. It seems China and the UK are on the same page in this regard as, while the EU AI Act is set to come into force at the start of August, China’s Draft Artificial Intelligence Law has also been pushed further back.

Delivering the keynote speech at the China Internet Rule of Law conference last week, Wang Hongyu, Director of China’s Legislative Affairs Committee (LAC), made this clear in confirming that China’s plans for implementing AI regulation are still under development. Comparing the legislative approaches of China, the US and the EU, he contended that, although there are undoubted risks in the early stages of development of AI, an over-emphasis on security hinders development and can lead to a loss of competitive advantage, adding that “not developing is the greatest risk”.

This phrase may be familiar to followers of Chinese politics, as it forms an integral part of the logic underpinning tech policy and reform. After what has become known domestically as the “century of humiliation”, during which China was subject to foreign intervention, annexation and subjugation by a host of industrialised nations, technology and innovation are seen as a cornerstone of national security in modern China. Symbolic of strength, competence and prosperity, they are a key policy priority throughout China’s five-year plans. Innovation is as much a matter of national pride as it is security.

Against the backdrop of a difficult economy – with slower than expected growth in the second quarter of this year, cooling consumer demand and a faltering property market – Wang’s comments come as part of a broader trend toward relaxation of regulations around innovation in support of “high-quality development”. At the end of March, we saw the Cybersecurity Administration of China (CAC) announce relaxations to cross-border data transfer, creating exemptions where it is necessary for the performance of a contract, e.g. in cross-border e-commerce, international payments and tourism, and also in the transfer of HR data (for more details, see CBBC member Bird & Birds’s take on the changes here.)

At the same time, pilot programmes lifting foreign investment restrictions in telecommunications services kicked off in Beijing, Shanghai, Hainan and Shenzhen earlier this year. Moreover, reports indicate that China’s National Health Commission is set to revise stringent regulations on the use and management of human genetic resources in a bid to boost R&D in China’s biotech sector.

These measures mark a change in the tide for regulation in innovative industries after the crackdowns seen on tech giants in 2021 as China moves to place innovation front and centre in its plans to stimulate growth, striking a balance between safety and innovation. On the ground at CBBC, we are seeing significant opportunities for grant funding for companies in innovative industries looking to China for manufacturing and R&D. While there are still clear red lines for engagement in sensitive sectors, taken together, these changes present a host of new opportunities for companies in the tech and healthcare space to capitalise on, and we expect to see further easing of regulations in these industries.

Elinor Greenhouse is CBBC’s sector lead for tech & innovation, healthcare & life sciences. For more information and to discuss your strategy in China’s knowledge economy contact Elinor at Elinor.Greenhouse@cbbc.org.

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The rise and rise of artificial intelligence doesn’t just have technological implications; it is also giving new impetus to age-old dreams of societal equity and abundance. China’s technological might and the UK’s innovative spirit are converging in many areas of technology, promising a future that gives life to the ideas of visionary thinkers and the aspirations of modern leaders. With the right combination of technology and international collaboration, AI could present a comprehensive blueprint for a world free of want and labour exploitation.

The digital revolution: Could AI realise Marx’s dream?

In the annals of history, few thinkers have envisioned a societal transformation as profound as Karl Marx. His dream of a world where the proletariat reigned supreme, free from the chains of capitalist exploitation, has attracted many thinkers over the years. Yet, for all its philosophical allure, the practical realisation of Marx’s utopia has remained elusive. But some think that the rise of AI could be a force so transformative that it might just be the missing piece in Marx’s grand puzzle.

At its core, Marxism revolves around the collective ownership of the means of production. In Marx’s time, this referred to factories, land and machinery. Fast forward to today, and the means of production have evolved. In the digital age, robotics and AI algorithms are rapidly becoming the backbone of global industries. These AI systems, with their unparalleled efficiency and scalability, represent the modern means of production. Their potential impact on labour and capital is revolutionary, pushing us closer to a world where goods and services are abundant and accessible to all.

China’s push for AI dominance

China’s ascent as a technological superpower has been both rapid and deliberate. The country has leveraged its centralised governance model to strategically position itself at the forefront of the AI revolution. Integrating AI into the “In recent years China’s middle class has gone from wanting the cheapest products, to the best value, to something much more sophisticated – here’s what you need to know about China’s current consumer landscape Prosperity” campaign could help President Xi Jinping to accelerate its realisation.

China’s approach to AI offers a glimpse into the future of governance, technology and society. By controlling the AI-driven means of production, the Chinese state can, in theory, ensure that the benefits of this technological revolution are more equitably distributed among its vast populace.

Equitable wealth in the age of AI

The transformative power of AI lies in its potential to redefine the economics of production. When labour costs trend towards zero, the traditional barriers to producing goods and services are reduced, which could lead to an era of endless abundance. But abundance doesn’t automatically translate to equitable distribution. As a result, the mechanisms through which this wealth is shared become paramount.

If a state, representing the collective interests of its citizens, controls the AI-driven means of production, it is in a unique position to distribute the generated wealth. In this AI-driven landscape, the state becomes the guarantor of the principle of “from each according to his ability, to each according to his needs”, ensuring that the benefits of AI-driven production cascade down to every stratum of society.

Yet, for a vision like this to transcend borders and resonate globally, international collaboration is essential. And here lies the golden opportunity for the UK. As two nations with rich histories and global influence, China and the UK are poised to lead the AI charge. By combining their strengths, they can not only navigate the challenges of the AI era but also lay the foundation for a future characterised by prosperity, equity and shared values.

Economic opportunities for the UK

In the global AI arena, the UK stands as a beacon of innovation and enterprise. Collaborating with China offers a plethora of economic opportunities. Companies like DeepMind, headquartered in London, have already showcased the UK’s prowess in AI research. The fintech sector, with innovators like Revolut and Monzo, can benefit immensely from partnerships that leverage China’s market opportunities and technological resources. The Wellcome Trust, known for its contributions to healthcare research, can partner with Chinese institutions to revolutionise medical diagnostics and patient care. Furthermore, traditional manufacturing giants, such as Rolls-Royce, can undergo a renaissance by integrating AI-driven processes developed in collaboration with Chinese counterparts.

The UK’s global leadership in ethics and regulation

The UK has always been at the forefront of ethical considerations and regulatory frameworks. Figures such as Lord Chris Holmes, who has been vocal about the ethical implications of emerging technologies, can play a pivotal role in shaping the UK’s stance on AI ethics. Collaborative efforts between institutions like the Alan Turing Institute in the UK and their Chinese counterparts can help set global standards, ensuring AI’s responsible development.

Talent development and brain gain

The fusion of British innovation and Chinese technology could also become a magnet for global talent. Universities like Oxford and Cambridge, known for their research excellence, can establish academic collaborations with Chinese institutions. This synergy can make the UK-China AI corridor a hotspot for global talent, further solidified by initiatives from tech incubators like Tech Nation.

Legacy and vision for the future

For British senior executives and politicians, such collaborations are more than just a technological venture. Decisions made today can shape the UK’s tomorrow, ensuring prosperity, innovation, and global leadership for generations to come.

In conclusion, Sino-British collaboration in the AI realm offers more than just technological dividends; it presents a vision of a shared future. A future where technology, ethics and humanity converge, crafting a world that resonates with the aspirations of both nations and stands as a testament to the power of collaborative endeavour.

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The recent China market entry by Midjourney, a world-renowned AI-generative painting application, through Tencent’s messaging app QQ caused a buzz in China’s digital sphere. However, the news of its landing soon drew questions after the unexplained deletion of an announcement on 17 May through a public account on WeChat under the name of “Midjourney AI” sparked speculation around restrictions on foreign AI services entering China. 

However, a report from 36Kr, a Chinese news media outlet focusing on the new economy, confirmed Midjourney’s foray into China and that “Midjourney AI” is its official account on WeChat, citing “several sources close to the matter”. 

Embedded in the household social networking app QQ, the AI plug-in is yet to undergo an internal beta test. Accessible only after 6pm on Mondays and Fridays, a limited number of users are allowed to use it at any one time. Having launched on 15 May, the official channel is, unsurprisingly, at full capacity, indicating great interest among QQ users, who are predominately from the post-00s generation. 

It is understood that each participating user is allowed to create up to 25 AI-generated images for free through Midjourney’s QQ channel, but QQ is reported to have been doubling its efforts to support the commercialisation of Midjourney on its platform.

Like QQ, Xiaohongshu has recently embraced AI-based painting technology. The platform introduced an AI-assisted content creation tool known as Trik AI in early April, which is currently followed by around 6,800 fans. 

Trik AI’s account on Xiaohongshu

Users can get AI-generative images either by uploading their own photos, which can then be converted into different styles such as manga, vintage and watercolour paintings, or by sending text prompts, such as “imaginative”. While fashion chasers have jumped at the chance to use the new feature, sharing their AI portraits, it has also fanned enthusiasm for the “AI digital makeup” trend, which has attracted over 624,000 views on Xiaohongshu, becoming a powerful tool for facilitating beauty-related content creation (one of Xiaohongshu’s main niches).

Viral short video platform Douyin (aka Chinese TikTok) unveiled an AI-powered virtual being user-generated content platform known as Virtual Kaka in late April in collaboration with its sister department PICO, a VR device maker under parent company ByteDance.

Touted as the first of its kind in the world and dedicated to people of the Asian diaspora, the platform integrates digital provisions, including AI, virtual human beings and virtual reality live streams, showing Douyin’s intention to level up its video-sharing space with some of the latest technologies while bringing about new digital experiences to keep digitally savvy users entertained. 

Users can create “hyper-realistic” virtual avatars, and their digital replicas are believed to be able to perform in exactly the same way as real-life human beings without the assistance of any external motion-capturing devices. Equipped with Audio2Face, an AI tool that realises seamless conversion between voices and facial expressions, the platform incorporates the Chinese version of ChatGPT, which is set to power up the virtual being’s ability to provide real-time responses in live sessions. 

Alibaba’s e-commerce giants Taobao and its sister Tmall are also trying to leverage AI to transform e-commerce and live streams. On 10 April 2023, Tmall Digital (a digital innovation incubator) launched a programme looking for partners with expertise in AI-generated content (AIGC) video content creation and live streaming strategies. Alibaba has tested the waters for this idea with the birth of the first AI-operated mock Taobao clothing shop, LumiWink, which debuted in April. A video introducing the AI creation process garnered more than 2.7 million views on China’s YouTube-like platform Bilibili. Having borrowed the intelligence of ChatGPT, which was incorporated into the branding, store set-up, product design, and marketing, the online outlet is made up entirely of the fruits of AI. 

AI tools on Douyin

Soon after the launch, the store recorded its first sale, with Taobao sending a welcome message on Weibo, which made another splash in the digital space. The store’s first AI-designed product is also expected to be revealed during the upcoming 618 mid-year e-commerce shopping festival. 

These developments show that China’s digital platforms are actively embracing AI technology in various domains, including painting applications, virtual beings and e-commerce. These efforts are targeted at enhancing user experiences and exploring new possibilities in the digital landscape, contributing to the ongoing trend of industry digitalisation. As AI continues to advance, China’s digital platforms are likely to maintain their leading position in adopting and utilising this transformative technology.

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“Metaverse” has become a new buzzword in China, bringing about a host of new and exciting business opportunities. Chinese technology companies have begun testing the water by developing metaverse-type apps, trademarking metaverse-related phrases, and investing in the VR/AR segment.

The official attitude toward the metaverse has been mixed so far, but it is clear that the Chinese government increasingly sees the metaverse as a powerful technology of great potential and intends to promote the metaverse as a major innovation and revenue source.

On 1 November 2022, the Ministry of Industry and Information Technology (MIIT) jointly released a four-year action plan with five other regulators to integrate virtual reality tech with industrial applications. This action plan is regarded as China’s first national-level policy that supports metaverse development. While the policy does not explicitly mention the metaverse, it urges authorities to create the fundamental technologies that support immersive AR, VR and mixed-reality experiences. The plan’s top objective is to achieve significant technological advances in virtual reality by 2026. This calls for innovation in fields like full-body motion capture, gesture, eye, and expression tracking, and technologies for rendering graphics.

Which Chinese tech giants are investing in the metaverse?

Whether it is about creating a parallel, computerised version of reality, or enhancing the sensorial perception of human experience in the real world, both VR and AR technology represent the premises upon which China is strengthening its version of the metaverse – which is the natural next step for businesses and startups especially in (but not limited to) the tech world.

According to a recently published report by Morgan Stanley, Chinese netizens seem to be particularly intrigued by the metaverse (in Chinese: 元宇宙 yuányǔzhòu), and leading Chinese tech firms have already begun to invest in a market that may be worth up to US$8 trillion in the future.

Baidu

Baidu was the first company to launch a metaverse app in December 2021, under the name “Land of Hope” (in Chinese: 希壤 xīrǎng), which signalled the entry of the Chinese tech giant into the global metaverse rivalry. Through the creation of avatars, the software allows users to engage in a virtual environment. The app debuted in January 2022, introducing users to several virtual scenarios that combine Chinese history and futuristic designs – a sci-fi-inspired version of the ancient Shaolin Temple is a brilliant example of this.

Tencent

Tencent, the Chinese world-leading internet and technology company behind WeChat, has done several things to make its social offerings more virtual – for example, with the launch on the QQ platform of a new feature called Super QQ Show, which introduced a 3D interactive space where users can interact and play games together. Sounds familiar? The idea was earlier launched by the company and restored with the necessity to resist upcoming competitors in the field.

In 2022, an app called Jelly (in Chinese: 啫喱 zhě lí), which is developed and owned by Beijing Yidian Entertainment Technology Co., Ltd., allows users to create online avatars of themselves and engage with up to 50 friends. It surpassed WeChat to become the most downloaded app in China’s iOS store on 8 February 2022, becoming the first social media app to beat WeChat in several years. Even though the programme encountered delays and crashed due to the large number of users connecting at the same time, leading to the temporary suspension of new account requests, it still represents a valuable lesson for the tech giant on the direction where it is wiser to invest.

ByteDance

The parent firm of TikTok, ByteDance has designed two metaverse apps: Party Island (in Chinese: 派对岛 pàiduì dǎo), for the Chinese market, and Pixsoul for the Southeast Asian one. The two programmes allow users to create virtual avatars with which they can communicate with their friends. The company clarified its vision for these projects, which are intended to represent an alternative to the metaverse since they are undergoing modifications and are only available with a unique invitation code.

Are Chinese consumers interested in the metaverse?

The metaverse continues to pique the imagination of Chinese consumers. According to Newzoo, 78% of them are interested in interacting within gaming worlds — in contrast to 57% in the United States and 47% in the United Kingdom. Moreover, data indicate that 82% of those who are interested in the sector also feel very optimistic about the metaverse’s potential benefits (again, the numbers sharply surpass those in Western countries).

In addition, virtual reality and virtual idols are already booming in China, comprising an industry that is worth RMB 51 billion (£6 billion) and RMB 3.5 billion (£413.6 million), respectively. Their success lies in the fact that Gen-Z consumers relate more easily to these intermediaries, who resemble familiar anime characters. Moreover, they are also a safer alternative for traditional influencers as they eliminate human errors and are easier to deal with. This is the case for Ayayi, China’s first meta-human, who was launched in May 2021 by Ranmai Technology and who has already joined Alibaba, recently taking on the role of digital manager of Tmall Super Brand. Another example is Luo Tianyi, a 15-year-old virtual performer whose Weibo account (@Vsinger_洛天依) has more than 5 million followers. In view of this, more companies and content-sharing platforms are employing this medium to attract younger generations of users.

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A version of this article was first published as ‘China’s debut in the Metaverse: Trends to Watch’ by Dezan Shira & Associates’ China Briefing 

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