China Now Has the Most Valuable AI Startup in the World

  • It becomes the world’s richest-valued private AI startup
  • The company drives China’s ambition to dominate global AI

SenseTime Group Ltd. has raised $600 million from Alibaba Group Holding Ltd. and other investors at a valuation of more than $3 billion, becoming the world’s most valuable artificial intelligence startup.

The company, which specializes in systems that analyze faces and images on an enormous scale, said it closed a Series C round in recent months in which Singaporean state investment firm Temasek Holdings Pte and retailer Suning.com Co. also participated. SenseTime didn’t outline individual investments, but Alibaba was said to have sought the biggest stake in the three-year-old startup.

With the deal, SenseTime has doubled its valuation in a few months. Backed by Qualcomm Inc., it underscores its status as one of a crop of homegrown firms spearheading Beijing’s ambition to become the leader in AI by 2030. And it’s a contributor to the world’s biggest system of surveillance: if you’ve ever been photographed with a Chinese-made phone or walked the streets of a Chinese city, chances are your face has been digitally crunched by SenseTime software built into more than 100 million mobile devices.

The latest financing will bankroll investments in parallel fields such as autonomous driving and augmented reality, cover the growing cost of AI talent and shore up its computing power. It’s developing a service code-named “Viper” to parse data from thousands of live camera feeds — a platform it hopes will prove invaluable in mass surveillance. And it’s already in talks to raise another round of funds and targeting a valuation of more than $4.5 billion, according to people familiar with the matter.

“We’re going to explore several new strategic directions and that’s why we shall spend more money on building infrastructure,” SenseTime co-founder Xu Li said in an interview. The company turned profitable in 2017 and wants to grow its workforce by a third to 2,000 by the end of this year. “For the past three years the average revenue growth has been 400 percent.”

Read more: China’s Plan for World Domination in AI Isn’t So Crazy After All

AI Supremacy

China houses some of the world's largest privately backed artificial intelligence startups

Source: CB Insights, Bloomberg

Note: Mobvoi's valuation is based on a 2015 investment

Alibaba, the e-commerce giant that’s also the country’s biggest cloud service provider, could help with its enormous infrastructure needs. SenseTime plans to build at least five supercomputers in top-tier cities over the coming year to drive Viper and other services. As envisioned, it streams thousands of live feeds into a single system that’re automatically processed and tagged, via devices from office face-scanners to ATMs and traffic cameras (so long as the resolution is high enough). The ultimate goal is to juggle 100,000 feeds simultaneously.

Police can use Viper to track everything from vice and accidents to suspects on blacklists. While civil libertarians say such systems have been used to track activists and oppress minorities in places like the Western region of Xinjiang, Xu believes the technology is essential and deployed in various ways by authorities around the world. China’s police forces and surveillance footage are also important sources of training data for SenseTime’s image recognition systems — it claims to work with 40 city authorities in the country.

“It will not affect privacy because only authorized persons can access it,” he said.

SenseTime claims some 400 clients and partners including Qualcomm, chipmaker Nvidia Corp. and smartphone maker Xiaomi Corp. For 2018, it’s projecting several billion yuan in revenues, Xu said. The startup’s expanding its reach across augmented reality, popularized by services like Snapchat that impose digital stickers and images on the real world. And it’s working with Honda Motor Co. to develop autonomous driving systems and is in talks to work with health institutions.

“In China there is an advantage in areas like facial recognition because of the privacy that exists in the U.S. and elsewhere in the EU, and some of the very best facial recognition technology in the world that I’ve seen is in China,” said Breyer Capital founder Jim Breyer, an indirect investor in SenseTime through IDG.

SenseTime is the largest, according to CB Insights, of a plethora of private AI outfits. Fellow facial-recognition startup Megvii Inc. raised $460 million last year, while smaller niche players from Yitu to Malong Technologies have also won funding. A key partner, Hangzhou Hikvision Digital Technology, is one of the world’s biggest suppliers of security cameras and developing its own competing AI technology.

Xu says its ability to work across wide datasets and diverse products sets it apart from rivals. “What is difficult is if you’re dealing with different video streams in different formats,” he said. While the company has long considered an initial public offering, Xu said those plans are on hold pending rules that facilitate tech listings in mainland China.

“We are still waiting for a fixed rule to come up with a new strategy,” he said. “Probably not this year.”

Read more: http://www.bloomberg.com/news/articles/2018-04-09/sensetime-snags-alibaba-funding-at-a-record-3-billion-valuation

For Chinas Wealthy, Singapore Is the New Hong Kong

When more than 80 of China’s wealth managers gathered recently at the Shangri-La hotel on Singapore’s resort island of Sentosa, the chatter during tea breaks kept returning to one theme: Hong Kong is starting to be eclipsed by Singapore as the favorite destination for the wealth of China’s rich.

At stake for banks in both cities is a huge pile of money. China’s high-net-worth individuals control an estimated $5.8 trillion—almost half of it already offshore, according to consulting firm Capgemini SE. For some, the city-state of Singapore is preferable because it’s at a safer distance from any potential scrutiny from authorities in Beijing, according to interviews with several wealth managers. Multiple private banking sources in Singapore, who would not comment on the record because of the sensitivity of the subject, report seeing increased flows at the expense of Hong Kong.

The rich may be feeling exposed by changing banking practices. Hong Kong has signed tax transparency agreements that for the first time last year required all banks to report their account holders’ information to Hong Kong tax officials, in preparation for giving that information to 75 jurisdictions, including mainland China. Singapore will have similar agreements with 61 jurisdictions. But they don’t include either Hong Kong or Beijing, meaning its accounts and account holders aren’t visible to the Chinese government. “Many rich people from the mainland believe Hong Kong is still a part of China, after all,” says Xia Chun, chief research officer at Noah Holdings Ltd. of Hong Kong, an asset management service provider. “They think there’s no difference in putting money in Hong Kong, compared to Beijing.”

At the same time, more Chinese banks in Hong Kong are “trying to synchronize their internal systems with those on the mainland to improve service efficiency,” says Eva Law, the Hong Kong-based founder of the Association of Private Bankers in Greater China Region. “This also means the clients’ information will become more transparent and the mainland can identify fund flows more easily, or will have fuller and faster access to your asset holdings, thus enabling easier investigation and tracing.”

Overall, Hong Kong remains the primary destination for China’s offshore money, according to a Capgemini survey, followed by Singapore and New York. Yet the number of Chinese high-net-worth individuals who view Hong Kong as their preferred overseas place of investment is down to 53 percent, from 71 percent two years ago, according to a survey in July by Bain & Co. More than 20 percent favor Singapore, up from 15 percent two years ago. “Singapore is the Zurich of the East,” says Xiao Xiao, the Beijing-based chief operating officer of Chinese wealth manager Fortunes Capital.

“We see Singapore, not Hong Kong, as the bridgehead of China’s investment overseas,” says Li Qinghao, co-founder of NewBanker Tech Consulting, which organized the Sentosa conference last year. About 78 percent of S$2.7 trillion ($1.9 trillion) in assets under management in Singapore comes from overseas sources. Morgan Stanley, JPMorgan Chase & Co., and other firms with big private banking operations are building up their teams of China relationship managers in Singapore.

China has been tightening its grip on Hong Kong. A year ago, Chinese financier Xiao Jianhua was reported by local media to have been seized from a Hong Kong hotel by Chinese authorities and taken to the mainland. The incident followed the disappearance of several Hong Kong booksellers who sold books critical of China’s Communist Party and were reported to have been taken involuntarily across the border.

Then there are the increased restrictions on Hong Kong’s financial practices, such as a 2016 crackdown on sales of certain types of insurance products to mainland Chinese. The products pay dividends over a number of years and are essentially viewed as investments—and potentially a way to send money out of China and evade capital controls. “The Hong Kong market is now heavily affected by mainland China,” says Guan Huanyu, president of Beijing-based wealth manager Zhenghe Holdings, who attended the Sentosa event.

While Hong Kong’s Securities & Futures Commission doesn’t break down the origin of funds, its data show that growth in the city’s private banking business has been slowing. Hong Kong logged 10.7 percent growth in private banking assets under management in 2016, down from 18 percent in 2015.

Singapore has additional attractions for the wealthy of China. Mandarin is one of its four official languages, and it has world-class health facilities and international schools. Not far from the Shangri-La Hotel, Sentosa’s casinos are a popular draw for Chinese tourists. Mainland Chinese were the largest foreign buyers of luxury properties in Singapore during the first half of last year, according to consultancy Cushman & Wakefield. Real estate is far cheaper than in Hong Kong.

But mainly, the rich like to diversify—not only among asset classes, but among political regimes. “Most of our clients have undergone a shift from poor to rich,” says Kou Quan, vice president at Tianjin-based Xinmao S&T Investment Group. “And they’re all worried about becoming poor again.”

    BOTTOM LINE – Hong Kong’s financial sector is becoming more entwined with the mainland, prompting more and more of China’s rich to turn to Singapore.

    Read more: http://www.bloomberg.com/news/articles/2018-02-06/for-china-s-wealthy-singapore-is-the-new-hong-kong