[TIANJIN] China’s advantages in developing artificial intelligence are about to unleash a wave of innovation that will generate more than 100 DeepSeek-like breakthroughs in the coming 18 months, according to a former top official.
The new software products “will fundamentally change the nature and the tech nature of the whole Chinese economy,” Zhu Min, who was previously a deputy governor of the People’s Bank of China, said during the World Economic Forum in Tianjin on Tuesday (Jun 24).
Zhu, who also served as the deputy managing director at the International Monetary Fund, sees a transformation made possible by harnessing China’s pool of engineers, massive consumer base and supportive government policies.
The bullish take on China’s AI future promises no letup in the competition for dominance in cutting-edge technologies with the US, just as the world’s two biggest economies are also locked in a trade war. The US sees China as a key rival in the field of AI, especially after DeepSeek shocked the global tech industry in January with its low-cost but powerful model.
In addition to efforts to prevent China from securing advanced semiconductor manufacturing equipment, Washington is blocking Chinese companies from acquiring Nvidia’s high-end AI chips for training, citing national security concerns. Beijing is now pinning its hopes on domestic tech giants like Huawei Technologies when it comes to advanced chipmaking.
The emergence of DeepSeek triggered a rally in China’s tech stocks, fuelling optimism over Chinese competitiveness despite tensions over trade with the Trump administration and economic challenges at home.
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Bloomberg Economics estimates the contribution of high-tech to China’s gross domestic product climbed to about 15 per cent in 2024 – from near 14 per cent a year earlier – and could exceed 18 per cent in 2026.
The World Economic Forum’s annual meeting in Tianjin, also known as “Summer Davos,” has attracted global business executives and world leaders.
Singaporean Prime Minister Lawrence Wong and Vietnamese Prime Minister Pham Minh Chinh are scheduled to speak at the three-day event. Chinese Premier Li Qiang is expected to address the conference during the opening plenary on Wednesday and meet with participants.
Despite a tariff truce negotiated a month ago with the US, American levies are still at high levels, with a more lasting deal still in question. Analysts polled by Bloomberg forecast GDP growth will slip to 4.5 per cent this year, significantly below the official target of around 5 per cent. It expanded 5.4 per cent in the first quarter.
“The uncertainty brought by US tariff policy is an important factor that may lead to negative growth in global trade this year,” Zhu told reporters on the sidelines of the forum. “The entire trade industrial chain has begun to slow, investments has begun to stop, so the impact is greater than the actual tariff rate.”
Zhu said the US will likely see inflation pick up starting in August, as it takes some time for tariffs to feed through to the economy and for companies to use up stockpiles they accumulated before Trump hiked duties.
Despite shocks from abroad, China’s GDP likely grew faster than 5 per cent in the second quarter, according to Huang Yiping, a member of the Chinese central bank’s monetary policy committee. Speaking at the Tianjin forum, he pointed to the economy’s solid performance in April and May and early positive signs from high-frequency indicators in June.
But despite unexpectedly strong retail sales in May, when they grew at the fastest pace since December 2023, Huang said China still needs to address the issue of insufficient consumption.
“Boosting consumption is still a big challenge, partly because the global external market is less open as before,” said Huang, who’s also dean of the National School of Development at Peking University.
“For a large country, you can’t continuously export your excess capacity,” Huang said. “That’s why I think the policy priority now is to first focus on domestic circulation.”
Huang said there’s a perception that China’s stimulus policy during the global financial crisis was too aggressive given some of the subsequent problems such as asset bubbles and local government debt.
But the lesson isn’t necessarily that China should hold back this time around.
“I personally would still support decisive policy action today, and then quickly turn around to deal with the problems later,” he said. BLOOMBERG
