Thursday, 1 May 2025
27.1 C
Singapore
34 C
Thailand
21.2 C
Indonesia
29.7 C
Philippines

Chinese tech companies face higher costs due to new EU AI rules

New EU AI rules, effective August 1, will raise compliance costs for Chinese tech firms, affecting innovation. Learn the implications.

The European Union (EU) is set to implement the world’s first comprehensive artificial intelligence (AI) regulations on August 1. These new rules are expected to significantly increase compliance and assessment costs for Chinese tech companies operating within the EU’s 27 member states. Industry experts have highlighted the challenges of these regulations, especially in terms of innovation.

New rules and their implications

The Artificial Intelligence Act was approved by the EU Council in May, following its passage by the European Parliament in March. The Act aims to protect fundamental rights, democracy, the rule of law, and environmental sustainability from high-risk AI applications. At the same time, it seeks to boost innovation and establish Europe as a leader in AI technology.

Some Chinese AI firms, such as Hong Kong-based Dayta AI, are already preparing for the financial impact of these regulations. Patrick Tu, co-founder and chief executive of Dayta AI, predicts compliance and assessment requirements will increase the company’s research and development (R&D) and testing costs by 20 to 40 percent. This increase will cover additional documentation, audits, and technological measures.

Balancing regulation and innovation

The introduction of the AI Act reflects a global push to establish AI regulations amidst the rise of generative AI (GenAI) services. GenAI refers to algorithms that create new content, such as audio, code, images, text, and videos, in response to short prompts. Despite concerns about overregulation, Tanguy Van Overstraeten, a partner at Linklaters and head of the law firm’s technology, media, and telecommunications (TMT) group in Brussels, believes the EU’s goal is to create an environment of trust.

The AI Act categorises AI technology based on potential risks and impacts. It covers prohibited practices, high-risk systems, transparency obligations, governance, post-market monitoring, information sharing, and market surveillance. The regulation also requires member states to establish regulatory sandboxes for real-world testing, which allow companies to test AI applications within set boundaries for up to 12 months.

Non-compliance with certain AI practices can lead to administrative fines of up to 35 million euros (US$38 million) or up to 7 percent of the offending firm’s total worldwide annual turnover, whichever is higher.

Comparing global regulations

Dayta AI’s Tu noted that the EU’s focus on data quality will ultimately enhance the performance and fairness of AI solutions. He also compared the EU’s user rights-focused approach with the regulations in China and Hong Kong, which he believes focus more on enabling technological progress and aligning with government priorities.

China’s GenAI regulations, implemented on August 15 last year, require AI service providers to adhere to core socialist values and avoid generating content that threatens national security or promotes terrorism, extremism, or other harmful ideologies. Alex Roberts, a partner at Linklaters in Shanghai, pointed out that these regulations can confuse multinational corporations that are unfamiliar with such requirements.

Roberts also mentioned that China’s AI regulations are more state-led, whereas the EU’s regulations focus on user rights. Despite these differences, he believes the core principles of both regulatory frameworks are similar, including transparency, data protection, accountability, and providing clear guidance on AI products.

The State Council, China’s cabinet, has listed a comprehensive AI law in its legislation plans for 2023 and 2024, though a draft law has yet to be proposed. Other Asian countries, like South Korea, are also working on AI regulations. South Korea’s draft “Act on Promotion of AI Industry and Framework for Establishing Trustworthy AI” is still under review.

Roberts concluded that governments in the Asia-Pacific region increasingly look to the EU’s AI regulations as a model for their legislation. This trend allows businesses to advocate for more consistent and harmonised cross-market rules.

Hot this week

Bluesky outage raises questions about decentralisation in practice

Bluesky, a decentralised social platform, went offline briefly, raising fresh questions about how decentralisation works.

Samsung chip profits fall sharply due to US export controls and price drops

Samsung chip profits dropped 40% due to US export rules and price cuts as the company raced to catch up in AI memory production.

Hugging Face launches budget-friendly 3D-printed robotic arm starting at US$100

Hugging Face unveils the SO-101, a new 3D-printed robotic arm starting at US$100 that offers faster assembly, smart learning, and wider availability.

Honor 400 Lite brings an AI camera button and Google Gemini to budget smartphones

Honour 400 Lite lands in Singapore with AI camera features, Google Gemini, and a bright display, all at a budget-friendly price.

Xiaomi enters China’s AI race with new model to power smart devices

Xiaomi joins China’s AI race with its new MiMo model, aiming to power devices with smarter tech and compete with big tech firms.

Garmin introduces Instinct 3 – Tactical Edition smartwatch in Singapore

Garmin launches the Instinct 3 – Tactical Edition in Singapore, combining durability, tactical tools, health tracking, and solar power.

Verizon report reveals 80% of APAC breaches caused by system intrusions

System intrusions caused 80% of data breaches in APAC, according to Verizon’s 2025 report, with malware and ransomware threats on the rise.

Asia Pacific’s AI progress held back by network limitations, says IDC report

APAC’s AI ambitions are limited by poor network infrastructure, with 94% of firms saying their networks can’t support large-scale AI projects.

Borderlands 4 reveals first look at new gameplay and characters

Borderlands 4 reveals extended gameplay, two new Vault Hunters, and co-op features ahead of its launch on 12 September 2025.

Related Articles

Popular Categories