ChatGPT in spotlight

Editor's Note: This week's CCCEU Weekly Update keeps you up to date on China-EU dynamics. Enjoy reading and have a lovely weekend.

ChatGPT has witnessed a surge in online popularity and garnered acclaim from the esteemed New York Times as the preeminent AI chatbot ever to be made available to the wider public.

In addition to the typical Q&A interaction, ChatGPT is capable of carrying out more difficult tasks like information summarization, code generation, article creation, emotional analysis, and even "understanding" user guidance provided through text in order to improve the interaction's accuracy and suitability.

According to a Stanford University study, GPT3.5, the homologous model of ChatGPT, can solve 93% of theory of mind tasks and has the ability to understand the psychological state of itself and others around it that 9-year-old children have. According to some experts, the fourth industrial revolution has occurred, and ChatGPT is the landmark achievement of this industrial revolution.

OpenAI, based in the United States, created ChatGPT. In just seven years since its founding at the end of 2015, the company has grown into a unicorn in the field 

of artificial intelligence. The technological breakthrough would not have been possible without the assistance of business patterns.

OpenAI started out as a non-profit organisation. Silicon Valley technology tycoons such as Musk (founder of Tesla), Altman (former president of Y Combinator), Hoffman (co-founder of Linkin), and Thiel contributed $1 billion in the first round of funding (co-founder of Paypal). The reason it was established as a non-profit organisation could be attributed to the goals of realising AGI in a safer manner that benefits all people equally rather than only creating profits for shareholders.

Despite this, OpenAI was unable to avoid the common dilemma of all early-stage technology innovation enterprises: high risk, high demand, but very limited profitability. As a result, OpenAI was forced to seek external financial investment, and in March 2019, it was restructured as a hybrid of OpenAI LP, a for-profit institution, and OpenAI Inc, a non-profit institution.

OpenAI LP investors and employees can receive a maximum return under this so-called "capped profit" governance structure (the maximum return in the first round will not exceed 100 times of the investment, and the rate in the next round will be lower). Any excess return will be donated to OpenAI Inc's non-profit entities. 

Following that, Microsoft invested in OpenAI twice and collaborated extensively. Microsoft's Azure cloud service provided OpenAI with powerful computing power, and OpenAI tools started to integrate with Microsoft's own products.

According to Mr. Zhou Hongyi, founder of China 360 Group, the success of ChatGPT is a model of collaborative innovation of "large scientific and technological enterprises + key scientific research institutions," and it serves as a model for China.

Microsoft offers large enterprises assistance with products, projects, scenarios, business, and data. In this way, OpenAI could concentrate on academic research while adhering to the long-term principle of the technical route and pushing the technical boundary forward. The two sides complement each other and are indispensable in supporting this major technological innovation.

The success of ChatGPT also reflects the long-term accumulation of the US in cloud computing, big data, AI and other information and communication technology (ICT) frontier fields. Compared with the US, the EU still has more room to catch up in this field. 

According to the EU's 2030 Digital Compass report, the EU's position in digital technologies such as processors, network platforms, cloud infrastructure, and so on lags far behind its economic position. 90% of the EU's data is managed by US companies, Europeans account for less than 4% of the top online platforms, and European-made microchips account for only 10% of the EU market.

The EU Industrial R&D Investment Scoreboard 2022 released by the Commission also showed that among the top 10 global R&D investment enterprises in 2022, seven are from ICT industries, including five from the US (Alphabet, the parent company of Google; Meta, with social products such as Facebook, Instagram, WhatsApp; Microsoft; Apple; Intel) The other two belong to Huawei from China and Samsung from Korea. 

Volkswagen, ranked the seventh, is the only one from the EU among the top 10 global R&D investment enterprises. Besides, all the top 5 R&D enterprises in the EU are automobile manufacturers, while all the top 5 in the US and 4 of the top 5 in China are ICT enterprises. 

The total R&D of the US in the ICT service industry is more than four times that of China, while the EU is only half that of China; in the ICT producer industry, the total R&D of the US is more than twice that of China, while the EU is about two-thirds that of China. This also reflects China's technological, talent, and industrial resources in the field of ICT, and cooperation between China and the EU in the field of digital economy is promising.

However, ChatGPT has also raised concerns among legislators about potential risks such as false information, copyright infringement, prejudice dissemination and data privacy. Anna Felländer, a Swedish AI ethical researcher, stated in the European Commission website that compared with other AI solutions, the generative AI systems represented by ChatGPT have a higher degree of ethical risk exposure than other AI solutions. 

One reason is that the use of generative AI systems is frequently done through APIs, which provides a low level of transparency and control over the solution's development. To address the risks, EU Commissioner for Internal Market Thierry Breton stated on February 3 that the Commission is working closely with the Council and the European Parliament to clarify the rules in the AI Act for general purpose AI systems.

The European Parliament, on the other hand, has yet to reach an agreement on the AI Act. The debate centres on whether regulation will stifle innovation, or how to balance data privacy while not stifling AI innovation and investment. One of the most controversial areas is to determine which AI systems will be classified as "high risk".

Obviously, if an AI technology is deemed high risk, it will face increased compliance costs and uncertainty risks. According to a survey on the potential impact of the European AI Act, nearly 67% of enterprises surveyed believed that the Act would have a negative impact on their AI innovation, and 73% believed that the Act would reduce the competitiveness of EU start-ups in the AI field, and that turning to non-AI fields might become a response for enterprises.

With the diversification of AI application scenarios, there is no doubt that necessary supervision will be required in the future. However, the EU is still in the ICT catch-up phase and needs to provide more room for growth and trial and error for start-ups, use the high-risk classification with caution, and improve the transparency and operability of regulatory requirements. After all, the primary goal of AI regulation is to ensure the industry's healthy development, rather than to erect barriers that stifle technological innovation.

Sticky inflation fuels some of ECB's worst fears

According to Reuters, a surprise surge in underlying inflation across the 20-nation euro zone bolstered bets for more oversized European Central Bank rate hikes this spring, with policymakers fretting that price growth could be even more sticky than feared.

G20 talks end in India with no consensus

Top diplomats from the Group of 20 industrialized and developing nations ended their contentious meeting in New Delhi on Thursday with no consensus on the Ukraine war, India's foreign minister said, as discussions of the Russia-Ukraine conflict and China's widening global influence dominated much of the talks.

Finland's MPs approve legislation paving way for country to join Nato

According to Helsinki Times, THE FINNISH PARLIAMENT on Wednesday reiterated its support for joining Nato.

Members of the Parliament voted 184 for and 7 against a government bill regarding the membership, with one lawmaker casting a blank vote and seven being absent from the vote. President Sauli Niinistö has announced his intention to approve the national legislation without delay after the vote in the Parliament.

EU agrees 10th package of sanctions against Russia

The EU has adopted further sanctions against Russia. The new measures include asset freezes on new individuals and banks, additional export bans on dual-use goods and advanced technologies along with expanded import bans on high-revenue Russian goods. To combat circumvention, the new sanctions also introduce new enforcement and anti-circumvention provisions such as a ban on the transit of dual use goods and firearms via the territory of Russia to third countries.

President von der Leyen to visit Canada and the US next week

According to European Commission, President von der Leyen will meet Prime Minister Justin Trudeau and President Joe Biden next week as she visits Canada and the US to discuss transatlantic relations, trade, strategic sectoral partnerships and cooperation in support of Ukraine.

WTO goods trade barometer declines further in Q4

The World Trade Organization's (WTO) barometer for global goods trade declined to 92.2, the WTO said on Wednesday, pointing to a further weakening of trade growth in terms of volume.

"World merchandise trade growth appears to have lost momentum in the fourth quarter of 2022 and is likely to remain weak in the first quarter of 2023," the WTO said in a statement after the release of the Goods Trade Barometer reading.

What are experts talking about?

"Feng Zhongping: One year after the Ukraine crisis, where is Europe going?" is an interview published by the Chinese Academy of Social Sciences. The article points out that February 24 marks one year since the full escalation of the crisis in Ukraine. As Russia and Ukraine are mired in war and Western military aid continues to increase, the crisis in Ukraine is developing in a protracted direction. Feng pointed out that the year-long crisis has not only had a serious impact on Russia and Ukraine, but also on European countries. Since February 24 of last year, Europe has formed a unified position to support Ukraine against Russia. The trend of this year shows that there will be no major shift in the way Europe responds to the crisis. In the future, Europe and the United States will continue to implement sanctions against Russia, and there is even the possibility of further escalation of mutual confrontation.

"How Europe should answer the US Inflation Reduction Act" by David Kleimann, etc. This policy brief released by the Bruegel. This policy brief explains what is in the IRA, the impact on the EU and other economies, and how the EU should react. The brief noted that in responding to the IRA, the EU should not just seek to protect its competitiveness relative to the US but to pursue broader aims, including competitiveness in general, speedy decarbonisation and broad foreign policy and development policy goals.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.