Rethinking China’s productivity prospects in the era of AI

Adverse demographic trends imply that the only alternative for sustaining China’s longer-term growth momentum would be to sharply accelerate productivity growth. The timely emergence of generative AI could partially close this gap.

What you will learn:

• Institutionally, China appears set up to reap the productivity gains of AI. However, this undoubtedly comes up against the rising, and persistent, external headwind posed by Western allies’ restrictions on the access and transfer of technology and knowledge into China.
• We had previously underestimated the impact of AI in our longer-term China macro forecasts. Following a reassessment, we now expect the Chinese economy to be more than 6% larger than in our June baseline by 2050, slowing towards but staying above a 2% annual growth pace until then.
• These upgrades to the medium-term China forecast are still just a sobering fraction of the growth exceptionalism baked into our US team’s recent forecast changes, reflecting primarily the US’ more advanced infrastructure and human capital levels that necessarily drives higher AI preparedness and a faster adoption timeline compared to China.