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Ji Siqi

Unlike the US, artificial intelligence (AI) may not be a panacea for China’s economy amid its deep property crisis, as the technology can further widen the country’s economic bifurcation, an economist said.
“AI isn’t boosting China’s economy as much [as it is in the US], and we also have to worry about some of the negative side effects,” said Lu Ting, chief China economist at Nomura, at a media briefing in Beijing on Thursday.
Currently, AI drives about half of the US economy, Lu said, and its capital markets have mostly been propelled by the boom in the technology.
US investment in AI has grown at roughly four times the pace of consumer spending, he added, showing that it had already made a massive impact on the world’s largest economy.
For China, the annual investment in AI roughly exceeds one trillion yuan (US$147.82 billion) per year – still much less than the scale of property investment during the 2010s. The share of AI investment in China’s overall economy is also much smaller, with the ratio only about one-third of that in the US, Lu said.
“The US has well-developed capital markets, so it’s easy for companies like OpenAI to raise money,” he said. “And even if we, in China, want to invest in, for example, buying chips in bulk, we don’t have the means – [other countries] simply won’t sell to us. We’ve hit a major bottleneck here.”
Besides the US, Asian economies like South Korea and Taiwan were also among the biggest beneficiaries from the global AI boom in recent months due to their semiconductor production and exports.
In the first quarter of the year, the growth rate of Taiwan’s GDP was 14.55 per cent, while mainland China’s GDP grew by 5 per cent in the same quarter. On Thursday, the World Bank forecast the full year growth of 4.2 per cent for China, a downward revision of 0.2 percentage points from its January forecast.
“One could even argue that without TSMC [Taiwan Semiconductor Manufacturing Company], and without the memory chips from South Korea’s Samsung and SK Hynix, it would be very difficult for US AI to advance into this era of large-scale investment,” Lu said.
“In this process, we are witnessing a genuine realignment of global geopolitics. While the US and Europe may be drifting further apart, the US and certain East Asian economies are drawing closer together due to industrial complementarity,” he added.

For China, even as a main exporter of legacy chips, the AI-driven export boom may not be measurably beneficial, as it is also a major importer of high-end processing and memory chips.
In May, China exported US$35.5 billion worth of integrated circuits, an increase of 110.9 per cent year on year, while export volume rose by only 2.1 per cent. For imports, values hit US$56.6 billion, increasing by 68 per cent despite a 1 per cent drop in volume.
“Therefore, looking at it from an AI export angle, sure, some of the Chinese companies are winning. But a lot more businesses in China are having to pay higher prices for the same old things. So in the end, when you look at its overall contribution to GDP, it doesn’t really move the needle,” Lu said.
Meanwhile, the AI era may result in wider economic bifurcation between the rich and the poor, as well as between the top-tier cities and lower-tier ones, Lu added.
Compared to previous economic engines like the real estate boom and new energy industry surge, AI development will be highly concentrated in just a few large cities – like Beijing, Shanghai and Hangzhou, capital of Zhejiang province – due to the industry’s exceptionally high entry barriers, Lu said.
“When large language model providers in top-tier hubs begin replacing lower-end white-collar professionals, such as junior lawyers in small and medium-sized cities, the economic dynamic is no longer a positive outward spillover. Instead, it results in displacement.”
That would be further complicated by the uneven recovery of China’s property sector. While metropolises like Shanghai are seeing initial signs of recovery in secondary real estate sales and prices, a vast number of smaller cities are still deeply mired in a property downturn.
“When wealth and income are heavily concentrated among a small group of people in just a few cities,” Lu added, “it’s very hard for domestic demand to drive the broader Chinese economy the way past booms used to.”


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Tech

AI might be an economic panacea for the US, but it may not be one for China and the recovery of its real estate industry, one analyst says


AI might be an economic panacea for the US, but it may not be one for China and the recovery of its real estate industry, one analyst says.


As China’s economy lumbers amid property crisis, why hasn’t AI helped pick up the slack?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}AI might be an economic panacea for the US, but it may not be one for China and the recovery of its real estate industry, one analyst says

AI might be an economic panacea for the US, but it may not be one for China and the recovery of its real estate industry, one analyst says