China’s Economy Leans on AI for Growth

Capital Economics reports that artificial intelligence is now a key driver of China’s economic growth, contributing over half of the expansion during the April-to-June period. As China’s economy faces challenges, including a downturn in construction, AI-related industries are performing strongly, with electronics and information technology contributing 1.4 percentage points to last quarter’s GDP expansion.

AI-related exports accounted for 1.1 percentage points of nominal GDP growth in the first four months, nearly tripling last year’s full-year share. This growth differs from the US, where AI spending primarily impacts domestic capital expenditures.

China’s vast industrial base is also receiving a boost. Chinese President Xi Jinping is actively seeking to shape global AI rules and influence through a new coalition of nearly 30 countries.

However, analysts caution that AI growth isn’t a complete fix for China’s economic issues and could falter if investment slows. High-tech and green industries are projected to account for about a fifth of GDP this year, potentially surpassing the property sector.