China could surpass the US in artificial intelligence tech. Here's how

China's rise in artificial intelligence
China's rise in artificial intelligence
Key Points
  • Global GDP is set to increase by 14 percent because of artificial intelligence, according to PwC.
  • China's vast amount of data collected along with its massive population gives it an advantage over the U.S.
  • Some 48 percent of all AI venture funding globally went to China in 2017.

Artificial intelligence has the potential to transform many industries: Cars that drive themselves, facial recognition that enhances security, or systems that could detect cancer better than a doctor.

In fact, global GDP is set to increase by 14 percent because of AI, according to PwC. The tech's deployment in the decade ahead will add $15.7 trillion to global GDP, with China predicted to take $7 trillion and North America $3.7 trillion, according to the multinational company.

"Data is the new oil, so China is the new Saudi Arabia," Kai-Fu Lee, venture capitalist and author of "AI Superpowers: China, Silicon Valley, and the New World Order," told CNBC's "Squawk Box."

"If you measure by research — basic research papers published, excellence of research — U.S. is and will be ahead for the next decade," he said. "But if you measure by value created, how much market capitalization, how many users, how much revenue, China probably is already ahead."

Lee said AI could replace 40 to 50 percent of all jobs in the U.S. in the next 15 years.

China's development plan

AI development reached a symbolic moment in May 2017 during a match of Go, considered to be the world's most complex game.

Ke Jie, a Chinese player known as the world's best, competed against a program from Google parent company Alphabet in a three-game match. The young pro lost all three games.

Less than two month after the defeat, China's central government announced its ambitious plans to build its AI capabilities, where it aims to create "a next generation artificial intelligence development plan."

The plan is broken up into three benchmarks: Keep pace with AI technologies by 2020, achieve AI breakthroughs by 2025, and to actually be the world leader in AI by 2030.

In 2017, Chinese venture capital investors poured record sums of money into AI — making up 48 percent of all AI venture funding globally.

Chinese start-ups raised $4.9 billion in 2017 made up of just 19 investments, while their U.S. counterparts raised $4.4 billion from 155 investments.

Some critics have said, however, that the sector is over-invested and they've expressed skepticism about the industry's ability to monetize.

Data and regulation

China has several advantages when it comes to the artificial intelligence field, but chief among them is Chinese companies' access to troves of data.

"(China has) done a fantastic job of moving its economy to cashless and when you can pay with everything with your phone, you amass a huge amount of data," author and columnist Thomas Friedman told CNBC.

"When you can get these giant data sets, and then apply artificial intelligence to them," he said. "You're going to see better and better and more deep insight patterns than anyone else and I think it'll be a great advantage for China."

On top of that, China doesn't have the same restrictive privacy laws as many other countries, making it easier for companies to collect data. Its government buys technologies to capture unprecedented amounts of information on its citizens.

We visited Alibaba's new retail store, sweeping through China
We visited Alibaba's new retail store, sweeping through China

The talent race

Still, China is not yet the dominant force in the world of AI.

"The innovation is still coming from the U.S. and that's thanks to, obviously, a huge network of universities that are fed by the world's greatest talent — not just Chinese engineers coming to the U.S., and computer scientists, but also from India and everywhere else," Ben Harburg, managing partner at MSA Capital, told CNBC at the East Tech West conference last month. "That advantage, for the next few years at least, stays with the U.S."

Still, Harburg noted China's large data sets, and the country's large number of graduates in STEM fields.

"China will be where you monetize and, by nature of the beast, eventually they will start to innovate far beyond the U.S. — but a couple years away," he added.

Meanwhile, Friedman said the race in AI could potentially come down to politics. More specifically, U.S. President Donald Trump's stance on immigration.

"What really drove our economy forward, what drives any economy, is that we had a higher percentage than any other country of high-IQ risk takers ... people who start new companies, and new businesses, and create new medical and new engineering breakthroughs," he said. "Trump basically has put out a sign in our front yard that says, 'Get off my lawn.'"

WATCH: Chinese tech is going global

Chinese tech is going global
Chinese tech is going global