China’s AI Industry and Innovation Governance in East Asia

Speaker: Herman Hounong Li, Research Fellow, Shenzhen Financial Stability and Development Institute

Moderators: Austin Lentsch and Richard Yarrow, Harvard Kennedy School

Abstract: Government support in China’s AI industry has been the focus of recent years’ strategic competition. In 2017, China’s government defined its long-term strategy for artificial intelligence as becoming a global AI leader to boost its technological and economic progress. Eight years later, Chinese central and local governments have developed varying models of innovation policy to accommodate business efforts. As China and the world evaluate the results of Chinese AI developments, what is the structure of China’s fast-evolving AI industry? As cities like Shenzhen and Hangzhou catch global attention for cultivating AI startups like Deep Seek, how are different regional models of innovation policy incorporated into the national development campaign?

This study examines the AI industry in Shenzhen and Hangzhou and their different models of innovation governance, with comparisons to innovation ecosystems elsewhere in East Asia. Relying on regional tax data on companies, the study uses Natural Language Processing to identify key commodities in a typical AI company. Then, by examining business transactions, the study presents the inter-firm networks of the AI industry to evaluate its growth and resilience, using Shenzhen and Hangzhou as case studies to discuss different innovation network structures and the management of the AI industry across China.