US body: China’s data dominance gives it AI edge

A US congressional advisory body has stated that China is leveraging data as a strategic national asset to bolster its AI and technology ambitions, potentially providing it with an edge over the United States in the AI race. The US-China Economic and Security Review Commission's report, released on Tuesday, highlights how Beijing is harnessing data to boost productivity, enhance intelligence gathering, and bolster military capabilities.

China's National Data Administration has not yet commented on the matter. However, the report points out that China's approach to data collection differs significantly from that of major US AI companies, which have largely relied on data from the open internet for training language models. In contrast, China is systematically gathering enterprise, operational, and real-world data that cannot be easily scraped, which is crucial for developing AI tools tailored for business applications, autonomous vehicles, and humanoid robots.

This data strategy has enabled China to capitalize on its advanced manufacturing and industrial robotics sectors, which offer a wealth of high-quality data for use in embodied AI applications—systems that operate in the physical world, such as robots. According to Mike Kuiken, the commission's vice chair, China has managed to consolidate, label, refine, and consistently make new data accessible to various entities, giving it a competitive advantage in developing robotics software for both commercial and military uses.

Over the past five years, China has effectively consolidated, labeled, and refined data, while also amassing new data sources to ensure its availability to relevant parties. This data-driven approach has not only propelled China's innovation ecosystem but also enhanced the control of the Chinese Communist Party.

In recent years, China has tightened its regulations on cross-border data transfers, resulting in numerous compliance challenges for foreign multinational corporations operating within the country. To comply with China's stringent data and cyber governance regulations, these firms have had to localize their China subsidiaries and separate their China customer data from their global operations. However, Beijing has since introduced limited exemptions for certain firms.

The report emphasizes that China has treated data as a core "factor of production," alongside land, labor, capital, and technology. In 2023, China established the National Data Administration to oversee nationwide data standardization and classification, with the ultimate goal of creating a unified national market for data trading. Furthermore, Beijing has pursued the commercialization and deployment of data across various industries, including manufacturing, transportation, finance, and healthcare.

The commission recommends that the US Congress consider developing a national data strategy and treat data as an economic asset, as the top priority in addressing this issue.