China, Europe and the race to the bottom

China, Europe and the race to the bottom

China has been on the news quite a bit during these past few weeks. The now famous coronavirus  (2019-nCoV) which originated in Wuhan, China has spread to 22 more countries alarming health officials across the world.

Airports are screening passengers with symptoms, trading is halted in the Shanghai stock exchange, and the S&P 500 index tumbled on Monday (after a historical bull run) amidst concerns that the coronavirus is a global pandemic.

I like to play “expert” on the internet, but I’m not an infectology specialist. So I’m not going to dive into the coronavirus. You should trust the experts on that. Today’s words are reminder that this news cycle shouldn’t put the real China issue on the back-burner.

The real China issue

A few months ago, Atomico released the 2019 State of European Tech report. Every news outlet out there (including Seedtable) highlighted and praised Europe’s growth.

I’m guilty as charged as well – heck, that edition was called Europe has Major Bragging Rights. But I also dedicated a few paragraphs to Europe and China.

Those paragraphs went unnoticed because it’s more fun to celebrate billions than talk China. But “fun” is not an indicator for what we should pay attention to. So today’s I'm issuing an updated version of that write-up.

Here’s the foreword celebrating 5 years of the report contains this seemingly forgettable paragraph:

“That said, we do need to make sure we don't fixate on the US or even China. We need to chart our own course and build our own tech ecosystem upon our own strengths and values. Our strong investor base, developing from seed to growth stage, has contributed to a real diversification of European tech. As you'll see, where once we were mostly consumer, we've developed a strength in areas like enterprise software and frontier tech too.”

I get it. And I sort of agree: let’s focus on what we can control – European tech – and not get distracted by the US and China.

Our tech ecosystem is growing, and the path to more growth isn’t to blindly copy their playbook because what worked for them won’t work for us. And we don’t want to be like them either.

As I said, I get it. But also I sort of disagree. Europe needs to chart its own course, but turning our backs to geopolitical dynamics and whatever we want to call what’s happening between the US and China is, frankly, irresponsible.

Washington and Beijing

Behind the trade conversations between Trump and Xi Jinping, there’s a technological war. The US and China are racing for global domination, and technology is the battlefield.

China wants to be the dominant economic and military power of the world, spreading its authoritarian vision for society so it’ll do whatever it takes to win.

The problem is that China holds different non-Western values and a do-what-it-takes mentality than when combined, becomes a race to the bottom.

What does this even mean? Two examples among many.

The “almost harmless” example: China’s moral compass isn’t particularly concerned about competitive practices that the West considers no-go, like corporate espionage. Just one example is DiDi Chuxing sending their own software engineers to apply and work for Uber, effectively infiltrating their rankings.

The “oh shit” example: the Chinese government and Chinese companies are tremendously invested in, and intrigued by, AI. One way in which China is applying artificial intelligence is taking the idea of a credit score to the extreme, using big data to track and rank what you do—your purchases, your hobbies, and your mistakes.

That is bad on its own. But China going full-Black-Mirror is not the biggest concern. They are taking it even further:

“Recent research found there was a sudden increase in facial recognition research in China’s AI research community shortly before the government began its frightening crackdown on Uighur Muslims, interning more than a million of them, most of whom have not been heard from since. ”

Yes, I know. That escalated quickly.

Then the real question becomes: when one side of the fight isn’t constrained by Western values, how do we avoid a race to the bottom in AI, competition, ethics, etc.?

Europe’s role in this party

Many people think Europe should play a brokerage role and remain neutral. But as Matt Clifford mentioned in our interview, this favours China and the way Xi Jinping sees the world.

"At what point does it become a geopolitical strategic question for Europe about… does it pick a side? Does it continue to say it’s gonna produce local champions? Which as I said, I do not think it’s credible in the consumer internet space. Or does it somehow try and play a broker role? Which I think would be a strategic mistake. My view is that plays very much to the way China views the world.”

It always did because it shares different values, and values inform priorities and priorities inform decisions.

To be honest, I’m not sure the US with its thirst for winning can avoid it (particularly under Trump). The DiDi Chuxing vs. Uber battle is a perfect metaphor on how.

  1. Uber tries to land in China, investing billions of dollars in recruiting, advertising and subsidies.
  2. DiDi tries to stop Uber not with a better product, but by playing dirty, committing fraud and infiltrating Uber rankings with DiDi employees.
  3. Kalanick gets pissed off and creates a counterintelligence team to fight back.
  4. DiDi wins anyway. Uber leaves China in exchange for a 17.7% stake in DiDi, but the counter intelligence team and “dark arts” spirit remains.
  5. Shit blows up after the Susan Fowler debacle and, among other reasons, ends up contributing to Kalanick’s resignation.

This is exactly what Europe needs to avoid, which turns itself into a geopolitical strategic question.

Europe needs to set and enforce global standards

From my (rather ignorant) position, I think Europe should be the glue that holds the rest of the World, but mostly the West and the US, in check. This will, in turn, stop China from playing dirty.

There is one thing the West got right and we should never lose – the value of the individual. This is something that China woefully ignores. But something that China doesn’t ignore is money.

At the end of the day, “communist” China is (ironically) driven by dollar signs, and Europe has 740 million consumers, 629 of which are connected to the Internet. China doesn’t want to be in a position where it can’t access either the US or the European market.

This means that Europe has the background and the numbers to set and enforce global standards for artificial intelligence, facial recognition, competitions, ethics and new technology.

And apparently now we have the willingness as well. Here’s Politico analyzing how the Ursula von der Leyen nomination can play out in Europe’s favor.

“Under former European Commission President Jean-Claude Juncker, the EU took a decidedly firmer stance against China, agreeing to a new investment screening mechanism and labeling China a “systemic rival.” His successor Ursula von der Leyen has promised a more “geopolitical” Commission.”

I’m not saying Europe is going to do an A-level job. We rarely do. It tried to implement GDPR and hold the world accountable to privacy, and we know how that ended.

But someone needs to set global standards and monitor compliance for what is acceptable in the World, and Europe is at the perfect place to do it. Of course, if we all die this whole point is invalid. But I don’t think we will.