February 19, 2025
Meet China's Answer to Ernie on ChatGPT

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Ernie the Bot has some controversial views on science. China’s leading artificial intelligence (AI) chatbot, released to the public on August 31, is believed to have originated COVID-19 among US vape-users in July 2019; Later that year the virus was spread via American lobster to the Chinese city of Wuhan. In contrast, in matters of politics, the chatbot remains calm. Ernie “Who’s the President of China?” confused by questions like And will tell you the name of Xi Jinping’s mother, but not his siblings. If asked about the shortcomings of socialism, it comes to naught. It often tries to redirect sensitive conversations by saying: “Let’s talk about something else.”

Ernie’s silence will come as no shock to Chinese users familiar with the heavily censored internet. They may be more surprised by the origins of AI. Ernie is the brainchild of Baidu, a Chinese tech giant that has been dogged by rivals for years. Now, thanks to AI, the company is making a comeback. To what extent it succeeds will tell a lot about the prospects of Chinese technology, which has been weakened by both US export controls and Mr Xi’s growing authoritarianism.

Baidu, which operated China’s largest search engine a decade ago, was at the heart of the country’s Internet. Together with Alibaba and Tencent, two of China’s most valuable internet businesses, it formed a triumvirate known as “BAT”. Due to restrictions or heavy censorship on foreign search engines in China, it faced little competition.

Baidu never lost its dominance of that business; It still enjoys over 90% of China’s search traffic. Yet changes in the technological landscape have left the company a shadow of its former self. Most Chinese Internet users now access the web through super-apps such as Tencent’s WeChat. The advertising money has shifted towards Douyin, the Chinese cousin of TikTok. Delivery platform Meituan and e-commerce firm Pinduoduo have surpassed Baidu’s $50bn valuation. In an effort to emulate, it launched its own delivery and shopping solution, along with other services such as payments and social media. Most of them flopped. The company’s market capitalization is now one-eighth of Tencent’s, up from less than one-fifth five years ago.

However, Baidu’s AI rollout is fueling enthusiasm about the company. Ernie was downloaded 1 million times within 19 hours of release (according to its creator, OpenAI, ChatGPT reached 1 million downloads after five days). Baidu shares rose more than 4% on the day of release as analysts, investors and the general public bombarded the bot with questions. Although four other companies, including facial recognition company SenseTime, launched similar services on the same day, and six others have been approved by China’s government, Ernie is generating the most excitement.

Last month Baidu chief executive and co-founder (pictured) Robin Li said the rollout of AI was a “paradigm shift” for the company. Yet it did not happen overnight. Years of investment have turned Baidu into one of China’s most sophisticated AI companies, with a system that includes chip design, a deep-learning framework and proprietary models and applications. The company began manufacturing Ernie in 2019, making it one of the earliest to experiment with this type of generative AI.

Baidu has so far been reluctant to provide guidance about what the technology will mean for its bottom line, but analysts expect Ernie to drive more traffic to its search engine and other services, boosting advertising revenue . Baidu has also established itself as China’s largest AI cloud provider, and has begun to offer specialized solutions for companies that want to design their own AI models.

Enthusiasm is more subdued for Baidu’s other major foray into AI, an autonomous-taxi business. The service has been launched in some cities in China, allowing users to enjoy Robotaxis via a mobile app. But visits still have to be monitored remotely, and a wider rollout could take years. Some analysts expect the unit to turn meaningfully profitable soon.

Whatever comes next for Baidu will depend on policymaking in Beijing and Washington. The company is facing a lot of trouble due to the Biden administration’s restrictions on the sale of advanced chips to China. Almost all of those chips, which most AI builders use to train their models, are produced outside China. Using low power chips in large quantities is possible, but expensive.

In Baidu’s case, its AI efforts rely on the Kunlunxin chip. Although it designed the chip itself, production has been outsourced to companies such as Taiwanese foundry TSMC. US sanctions put limits on the types of chips foreign foundries can sell to Chinese companies, and no domestic suppliers can produce such advanced components. Since the US sanctions were announced, Baidu has been downplaying the importance of Kunlunxin, which may indicate it is having problems buying them.

Closer to home, China’s government has taken a keen interest in regulating AI and is moving faster than most other countries. This has still caused a great deal of concern among the country’s technical authorities. One executive says regulators recognize the commercial value of AI and want companies to make money from it. The person says they also understand the importance of allowing Chinese companies to compete on a global scale. Approval of the first batch of bots came faster than some had anticipated. Long delays, such as for video games, often hurt the stock prices of their Chinese manufacturers.

Yet many AI enthusiasts still find some of the rules onerous, especially for the budding industry. Companies providing generic-AI services are required to identify and report “illegal content”. They must also adhere to China’s “core socialist values”, a broad and vague mandate. When netizens noticed that a prompt for “patriotic cat” in Ernie’s drawing application produced a picture of a cat with an American flag, the words “patriotic” and “patriotic cat” were blocked in the tool. Users may be frustrated by what the Chinese AI can’t say, or may fear being reported for asking the wrong questions. Kai Wang of Morningstar, a research firm, warned that the costs of censorship and compliance would start to add up for Baidu and other companies.

Recent experience has made it clear to China’s technical officials that they do the will of the government, and the favor can be quickly withdrawn. Several regulatory actions were taken on internet companies between 2020 and 2022. Another crackdown on AI could do a lot of damage to companies that have invested in the technology, not least Baidu. The company is testing the waters in a tough environment. That’s why it’s important to watch what Ernie says—and all that he doesn’t say.

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