What Drives Chinese AI Startups to Relocate from China?

Many Chinese AI firms are shifting to other countries and Wu Cunsong and Chen Binghui have also shifted their AI startup from Hangzhou, China to Singapore. Singapore offers Wu and Chen better investors and customers as many geopolitical tensions prevent US firms from coming to China. The US controls its exports in China and that’s why new Chinese startups cannot buy chips or cutting edge technologies from American companies. Now that Wu and Chen have brought their startup to Singapore, they will be able to buy Nvidia Corp.’s chips and other cutting edge technologies. Wu said in an interview that they wanted to go to a place where they could easily get funds and investments.

Singapore has become a favorite city-state for many Chinese AI startups which want to go global. The USA has imposed blocks on trade to China that do not make AI startups access newest technologies. Even though there are many ethnic Chinese in Singapore, many people distance themselves from their Chinese origins by “Singapore-washing”. But this doesn’t always work as Beijing based ByteDance moved its TikTok headquarters to Singapore but it is still hit by a US law that is asking for the app ban in the USA because of security concerns. Shein. A Chinese fashion company, also moved to Singapore but now it is going to go public in London instead of New York.

Many Chinese AI startups do not want to come as Chinese companies because if they do, they wouldn’t be able to access the latest cutting edge-chips which are used to train AI systems. The US is already not selling any latest chip and other technology to China as they are afraid that they can be used by the Chinese military. OpenAI has also only given limited access to their tools to China. China also has very strict rules for AI generation because of Communist Party’s policies and propaganda. This means that AI startups cannot explore and create new algorithms before registering them to the government.

A consulting firm, Linkloud, says that 70% to 80% AI and software startups in China want to target customers globally and many of them are now skipping China to build a community which could help them explore global markets. Chan Ih-Ming, executive vice president of the Singapore Economic Development Board says that Singapore is a good location for many startups and it can act as a bridge between entrepreneurs and multinational companies. Singapore is a hub for Southeast Asia. The AI regulations in Singapore are not strict and by the end of 2023, Singapore was home to more than 1100 AI startups.

Image: DIW-Aigen

Fundraising in China has become difficult because of its slowing economy and tensions with the US. Wu and Chen were having a hard time finding backers in China so chose Singapore based Kamet Capital instead which raised $5.6 million from the firm last year. Singapore’s government also offers financial and technical support to startup companies because of political stability.

Researcher at Linkee.ai ranked Singapore the second best AI hub globally with $158,000 average salary for AI specialists. China itself has many big AI and tech startups but these companies cannot push globally. The more successful a startup is in China, the more difficult it is for them to go global. The startups in China can only choose one of two options– To stay in China under Chinese rules or go abroad. Choosing both is impossible.

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