China Softens Proposed Regulations on Generative AI, Becomes One of the First Countries to Regulate the Industry

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China has made adjustments to its proposed regulations on generative AI, marking a shift in its approach to governing emerging technology. The Cyberspace Administration of China, the country’s top internet watchdog, has recently released an updated version of its artificial intelligence guidelines. Notably, certain specific restrictions that were present in the initial draft, which was published in April and subjected to public comment, have been either removed or clarified.

The new regulations focusing on generative AI are expected to come into effect on August 15th. This move positions China as one of the first countries to establish regulatory frameworks for this nascent industry. Several leading Chinese internet companies such as Alibaba, Baidu, and JD have already announced their own AI bots as competitors to OpenAI’s ChatGPT.

Here are some key changes observed in China’s updated AI guidelines:

  1. Application Scope: Beijing’s regulations will now apply to all generative AI services offered publicly within the country. However, generative AI technology developed exclusively for use outside China is exempt from these rules.

  2. Fines: The language about fines has been removed altogether from the latest version of the guidelines. Initially, the first draft stated that fines ranging from 10,000 yuan ($1,400) to 100,000 yuan ($14,000) would be imposed.

  3. Data Authenticity and Quality: In the initial draft, providers of generative AI services were required to “guarantee the authenticity, accuracy, objectivity, and diversity of data.” However, in the updated version, this requirement has been refined to emphasize that providers must take effective measures to improve data quality and enhance its authenticity, accuracy, objectivity, and diversity through training.

Several other original rules remain unchanged in the latest version of China’s AI guidelines. Providers of generative AI services still need to undergo a security assessment process while ensuring adherence to socialist values in their AI tools. China’s current stance on AI regulation highlights the ongoing global efforts by countries to establish guidelines for new technologies, balancing the need for regulation with the encouragement of innovation.

This move by China is particularly significant given the intensifying tech rivalry between the US and China. In 2022, US-based AI startups reportedly received five times more funding than their Chinese counterparts, according to market research firm CB Insights. By loosening government regulations, China aims to stimulate domestic development and potentially bridge this funding gap.

While China has taken steps towards regulating generative AI, many proposed AI regulations worldwide, such as the EU’s AI Act, remain in a state of uncertainty. This poses challenges for businesses, particularly startups when it comes to developing their AI products.

The rise of remote work and the interest shown by venture capital funds in geographies beyond Silicon Valley supports the idea that nascent AI companies have greater flexibility in terms of moving as needed. Consequently, governments may face pressure to establish rules that are less restrictive to retain innovative startups and attract those from other regions.