China has approved the first batch of generative artificial intelligence services for public rollout, allowing domestic technology companies like Baidu Inc. and SenseTime Group Inc. to compete openly with companies like OpenAI Inc. and Microsoft Corp. The Cyberspace Administration of China has given the green light to a number of firms in the field, including both major players and emerging startups. Baidu and SenseTime were among the first to receive approval from Beijing's top internet watchdog. ByteDance Ltd. has also made its AI chatbot available to the public. Baidu has announced that its ChatGPT rival, Ernie Bot, will be available to the public on August 31, along with a batch of new applications for users to experience generative AI.

The news has been well-received by investors, with Baidu's shares rising as much as 4.8% in Hong Kong, and SenseTime's shares rising as much as 7.3% in Hong Kong trading. Jefferies analyst Thomas Chong commented that the approval is a positive surprise and a significant milestone for Baidu's ERNIE Bot, as it can be further upgraded based on user feedback and strengthen its competitive position. Additionally, three startups - Baichuan Intelligence, Zhipu AI, and MiniMax - have confirmed that they have gained government approval.

The Chinese Academy of Sciences has also received the government's approval for its TaiChu service, although it has not been introduced yet. These approvals, which come shortly after the implementation of new regulations governing AI, officially bring ChatGPT-style services to over one billion internet users for the first time. This is seen as a major milestone for China's AI industry and its potential leaders, who have invested billions of dollars in developing services to compete with global tech giants like Microsoft and Google.

Beijing considers AI to be both a business and political imperative, given its transformative nature. Baidu has been in the spotlight since the launch of Ernie Bot in March, but other companies like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. have also been promoting their own foundation models. It remains unclear which companies will receive approval in the future, as the Cyberspace Administration of China did not respond to requests for comment.

China has designated AI as one of its top tech priorities, and after a two-year regulatory crackdown, the government is seeking private sector assistance to support the economy. The country has quickly implemented regulatory oversight of AI, similar to Europe, while the US has yet to seriously consider legislation in this area, despite industry leaders warning of the risks associated with AI. The recent Chinese regulations require generative AI services to obtain clearance before being made available to domestic users, in order to control content while allowing companies to compete with their US counterparts.

Services that have the potential to influence public perception are required to undergo a security review and file their algorithms for record-keeping. However, these guidelines are part of a watered-down version of the regulations that were first introduced in April, indicating Beijing's support for the AI industry. Baidu's co-founder Robin Li stated in August that the company is working closely with regulators to ensure the proper use of generative AI.

It is still uncertain whether Chinese-made generative AI services will reach the level of popularity of apps like Tencent's WeChat. The US sanctions have also hindered Chinese tech firms by limiting their access to the best chips for training AI models, potentially widening the gap between Chinese services like Ernie and their Western counterparts. Companies like Baidu, Tencent, and Alibaba are all striving to integrate AI into their cloud-computing platforms and make it an integral part of their offerings, as these enterprise services are subject to less government scrutiny.