Latest news with #DingShuang
Qatar Tribune
a day ago
- Business
- Qatar Tribune
China's AI expansion adds to existing employment crisis
Agencies New York China's rapid AI adoption is reshaping its labour market, with analysts debating whether it will alleviate workforce shortages or deepen deflationary pressures. Morgan Stanley's latest report warns that AI-driven automation could exacerbate China's employment challenges, particularly given its high youth unemployment rate (over 15 percent) and prolonged deflationary trends. AI's ability to replace junior-level cognitive tasks may encourage companies to invest more in technology while reducing hiring, potentially leading to slower wage growth and economic stagnation. However, Ding Shuang, chief Greater China economist at Standard Chartered, argues that AI is not the primary driver of deflation. Instead, overcapacity in key industries and weak domestic demand are the main culprits. Despite concerns, AI's economic potential remains significant. The International Monetary Fund estimates that 40 percent of jobs in emerging markets are exposed to AI, with 16 percent complemented by automation and 24 percent fully replaced. To mitigate disruptions, policymakers should enhance social protections, expand AI-focused education, and encourage job creation in sectors less susceptible to automation. Ultimately, AI's impact on China's economy will depend on balanced policy measures and strategic workforce adaptation. China's rapid AI adoption is reshaping its labour market, sparking debate over whether it will alleviate workforce shortages or deepen deflationary pressures. While AI-driven automation offers long-term productivity gains, concerns persist about its immediate impact on employment and wage growth. China has been battling prolonged deflationary risks, with its producer price index contracting for 30 consecutive months, including a 2.7 percent drop in April. The employment market remains sluggish, with urban youth unemployment exceeding 15 percent. AI could generate a labour equivalent value of 6.7 trillion yuan ($931 billion)—approximately 5 percent of China's nominal GDP. To mitigate disruptions, policymakers should enhance social protections, expand AI-focused education, and encourage job creation in sectors less susceptible to automation. While AI may eliminate some roles, it also fosters new employment opportunities. The future of China's labour market will depend on balanced policy measures and strategic workforce adaptation. Despite optimism surrounding AI's potential, its widespread adoption may not significantly enhance China's productivity. While automation can streamline operations, it does not directly address deeper structural issues such as declining birth rates, shrinking workforce, and weak domestic demand. In 2023, China recorded only 9 million births, the lowest since 1949, with the population dropping for the second consecutive year to 1.4 billion, a decline of over 2 million. AI's displacement of junior-level cognitive jobs could worsen China's employment crisis, particularly as urban youth unemployment exceeds 15 percent. While AI may create new roles, the transition requires extensive reskilling, which China's current education system struggles to accommodate. Additionally, over investment in AI could exacerbate economic stagnation, as companies prioritize automation over workforce expansion. To mitigate these risks, policymakers must strengthen social protections, invest in AI-focused education, and promote job creation in sectors less vulnerable to automation. Without balanced policy measures, AI's rapid integration may deepen economic instability rather than drive sustainable growth. China's deflationary pressures stem from multiple economic factors, with AI playing only a minor role in the broader downturn. The country's weak property market and sluggish domestic demand have been the primary drivers of deflation, overshadowing the impact of AI adoption. Despite concerns about automation displacing workers, recent data suggests that AI's effect on employment remains limited. A UBS survey conducted between March 18 and April 17 among 404 senior executives in China revealed that 73 percent of respondents had integrated AI technologies into their businesses, primarily to enhance efficiency and improve product quality. While 15 percent reported workforce reductions, 22 percent stated they had created new positions due to AI adoption. Additionally, 46 percent of executives noted salary increases linked to productivity gains, whereas 18 percent reported wage cuts for certain employees. These findings indicate that AI has not yet caused widespread disruption in China's labour market or household income. However, as AI adoption accelerates, policymakers must ensure balanced economic strategies that address employment shifts, wage stability, and broader economic challenges. The future of AI's role in China's economy will depend on how businesses and regulators navigate technological advancements alongside existing structural issues.
Business Times
3 days ago
- Business
- Business Times
China consumer rush for subsidies overloads stimulus programme
[BEIJING] China is testing the limits of what its consumer stimulus can accomplish by subsidising purchases of select goods, fuelling a shopping spree that boosted retail sales growth to the strongest in more than a year but threatening to overwhelm authorities even in the richest regions. Consumer participation in the home goods trade-in programme has seen provinces quickly running out of funds the national government has so far distributed to pay for the subsidies. Henan and Chongqing have been forced to suspend the granting of subsidies or receiving applications for the handouts, according to recent local government announcements and Chinese media reports, while Jiangsu and Guangdong imposed restrictions on the programme such as managing its daily quota. The disruptions are putting Beijing at a crossroads as it looks for a longer-term fix to a crisis of confidence among households. Officials have made expanding consumption their top economic priority this year in anticipation of US tariffs, doubling the amount of ultra-long special sovereign bonds to finance subsidies for the cash-for-clunkers drive from last year to 300 billion yuan (S$54 billion). Just over half of the total has been distributed or is in the process of being disbursed to local governments. 'The rapid use of the subsidies suggests the programme is effective in expanding sales of the products it targets,' said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered. 'However, considering limitations to the country's fiscal capabilities, we still need sustainable measures to carry on the traction in the long run after sentiment is boosted by the subsidies in the short term,' Ding said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The programme has been key to encouraging household purchases of a slew of consumer goods this year. In May alone, home appliances and electronics saw growth in excess of 50 per cent. The trade-in programme 'should remain supportive for some durable goods sales', according to economists at Goldman Sachs, who also warned in a note that 'its boost may be disrupted in June due to funding shortages in some regions'. The authorities have said they will distribute a total of 162 billion yuan in two tranches to provinces, with the second allocation announced in late April. Some seven weeks later, the central bank-backed Financial News reported that money is still in the process of being made available to provinces. While the government may soon roll out the remaining funds planned for this year, economists cautioned that Beijing needs to come up with more sustainable measures to put consumption on track to recovery for the long haul. Another approach Beijing is taking is relying more on policies aimed at lifting business confidence to encourage private investment and hiring, a shift likely to translate into stronger consumption if sustained over time. Such steps include meeting government arrears to companies and the recent appeal to major electric vehicle makers to make timely bill payments. Unlike the consumer subsidies, such measures offer no quick payoff but could help consumption in the longer term, according to Ding. For now, he expects speedy follow-up subsidy allocations by the national government to 'maintain confidence' since Beijing is front-loading fiscal incentives this year. Concern over-reliance on subsidies is also spreading to official circles. A newspaper backed by the State Council, China's cabinet, has said the government 'must improve the income distribution system and try all means to increase income' for residents. 'Boosting consumption cannot just rely on policy stimulus,' according to a front-page editorial carried earlier this month in The Economic Daily. Mounting fiscal stress is another reason why Beijing's options are narrowing. With tax and land sales revenues in decline, Chinese authorities accelerated borrowing in recent years to fund stimulus measures to support the economy. Beijing raised its official fiscal deficit – mostly shouldered by the central government – to the highest level in more than three decades this year, and increased the amount of special sovereign bond issuance to 1.8 trillion yuan, 80 per cent more than in 2024. As a result, China's interest bill is increasing quickly, in turn eroding the government's spending power. But as Donald Trump's tariffs hurt overseas demand and put China's industrial production under pressure, it's unlikely that Beijing will change course on its flagship policy of consumer subsidies any time soon, despite recent hiccoughs. Some regions may have had to announce a partial suspension of the programme after running out of trade-in funds because of promotions offered during the '618' shopping festival, Morgan Stanley economists including Robin Xing wrote in a note. Local authorities may also be attempting to smooth the pace of subsidy rollout and prevent 'arbitrage,' they added, in response to efforts by some retailers to benefit from the consumer subsidies by inflating prices. 'These glitches in the consumer goods trade-in programme may be fine-tuned or remedied, but they may also reflect inherent limitations of such stimulus,' the Morgan Stanley economists said. 'Given continued external uncertainty and deflationary pressures, we see a very low risk of the consumer trade-in programme being suspended altogether.' BLOOMBERG
South China Morning Post
05-06-2025
- Business
- South China Morning Post
AI might be answer to China's labour woes, but could also fuel deflation, report says
While the rise of artificial intelligence (AI) is set to mitigate an expected shortage of labour in China in the long run, market observers differ on its impact on deflationary pressures in the near term. Advertisement The wider adoption of AI in China could exacerbate 'China's prevailing deflationary pressures' by disrupting an already-weak employment market, as the labour displacement effects of the technology might dominate in the short term, Morgan Stanley analysts said in a research report published last month. 'In China, the AI-induced labour market disruption could potentially prove more acute, given that the economy has a weak starting point of high youth unemployment problems and deflation,' they said. With AI potentially taking over 'junior-level cognitive work', companies might be encouraged to spend more on adopting the technology, with reduced hiring 'leading to more severe wage growth deceleration', the report said. But Ding Shuang, chief Greater China economist at Standard Chartered, said AI would not be a driving force of deflationary pressure in China as the main causes were overcapacity in some industries and sluggish domestic demand. Advertisement 'To combat deflationary pressure, China should curb overinvestment and excessive competition, but not hesitate to develop AI for fear of deflation, as AI is a strategically important industry,' Ding said.
South China Morning Post
19-05-2025
- Business
- South China Morning Post
China's economic resilience muffles speculations over imminent fiscal stimulus
Beijing may be less likely to enact aggressive fiscal stimulus measures in the coming quarter, analysts said, as April's macroeconomic data has proven China's economic resilience against US tariff headwinds. Major investment banks have already raised their growth outlook for the world's second-largest economy after a 90-day tariff truce with the United States and a supportive policy package announced by China's central bank this month. 'The economic growth slowed in April compared with the first quarter, but not by much,' said Ding Shuang, chief Greater China economist at Standard Chartered Bank. China's industrial output grew by 6.1 per cent from a year earlier in April, marking a slight deceleration from 6.5 per cent recorded in the first quarter, the National Bureau of Statistics said on Monday. However, the reading was higher than the 5.21 per cent growth forecast polled by financial data provider Wind. China's retail sales increased by 5.1 per cent during the same period, up from 4.6 per cent in the first quarter, while overall fixed-asset investment rose by 4 per cent in the first four months of 2025 – compared with a rise of 4.2 per cent for the period from January to March. The country's exports beat market expectations in April, growing by 8.1 per cent, year on year, to US$315.69 billion – despite the impact of tariffs from the US.
South China Morning Post
14-02-2025
- Business
- South China Morning Post
With DeepSeek, China's economic growth suddenly seems tied to AI
While artificial intelligence (AI) start-up DeepSeek surprised the world with its latest low-cost reasoning model – dubbed R1 – the revelation reignited overseas interest in Chinese tech and capital market investments while raising expectations that a subsequent surge in AI-fuelled productivity will serve to elevate the national economy. Advertisement From analysts to economists, many point to its commercialisation and potential applications in domestic industries. And they have noted how China's rapid tech progress has defied mounting curbs from Washington, thereby instilling confidence that Beijing will manage to shrug off market concerns stemming from a property crisis, demographic upheavals, and a debt-fuelled growth model to eventually overtake the United States as the world's No 1 economy. 'This could ignite a wave of innovation and accelerate the pace of AI development, which is important for enhancing total factor productivity,' said Ding Shuang, chief Greater China economist at Standard Chartered. Just like how it has lowered the barrier to entry in the AI field, DeepSeek could catalyse the emergence of low-cost solutions, he said. Advertisement 'While China's demographic dividend is diminishing, technological innovation holds the key to boosting labour productivity, which will remain critical for sustaining the country's medium- to high-speed economic growth.'
