Goldman Sachs Predicts AI Boost for China’s Economy with Workforce Caution
Goldman Sachs forecasts that artificial intelligence (AI) will contribute to China’s economic growth in the coming years, particularly with the arrival of local generative AI tools like DeepSeek. However, the firm also signals that the workforce may face challenges as AI adoption increases, particularly in sectors less prone to automation.
AI to Boost China’s Economic Growth
Goldman Sachs’ recent research note suggests that AI will play a vital role in China’s economic future, starting to enhance the nation’s growth trajectory by 2024. The bank estimates that by 2030, AI-driven advancements could add between 0.2 and 0.3 percentage points to the country’s GDP. This prediction surpasses previous estimates, marking a positive outlook for AI’s economic impact in the world’s second-largest economy.
Key Insights into AI Adoption and Workforce Impact
While AI’s potential is evident, Goldman Sachs has pointed out that nearly half of China’s workforce is employed in industries like agriculture, manufacturing, and construction—sectors where automation is less likely to be adopted quickly. As a result, Goldman Sachs lowered its original forecast for AI-driven economic uplift to 8 percent, down from 9 percent.
- Affected Sectors: Agriculture, manufacturing, and construction employ nearly half of China’s workforce, limiting the potential for AI adoption.
- Revised Economic Impact: The economic uplift from AI adoption has been downgraded from 9% to 8% due to limited automation in these sectors.
DeepSeek’s Impact on AI Advancements
The report further highlights the rise of DeepSeek, a Hangzhou-based start-up that is positioning itself as a global competitor to U.S.-based AI firms. DeepSeek has introduced innovative AI models that require significantly less computing power and fewer financial resources compared to similar initiatives by major tech giants. These advancements suggest that China’s AI development is progressing more quickly than anticipated, which could lead to faster AI adoption across the country.
- Innovative Models: DeepSeek has developed open-source AI models that use less computing power and require fewer resources, making them more accessible.
- Competitive Edge: DeepSeek’s rapid advancements have positioned the company as a competitor to U.S.-based AI firms, accelerating AI adoption in China.
AI Adoption to Drive Economic Growth
Goldman Sachs projects that the growing adoption of AI in China will contribute to economic growth through increased automation, reduced labor costs, and boosted productivity. The firm predicts AI-related expenditures will rise sharply by 2027, with GDP growing nearly 1 percent by 2030. The adoption rate of AI is expected to exceed 30 percent by 2030, with full integration likely within the next 15 years.
- Automation Benefits: AI will drive growth by automating tasks, reducing labor costs, and increasing productivity.
- Investment Growth: AI-related expenditures are projected to increase sharply by 2027.
- GDP Impact: AI adoption could contribute nearly 1% to China’s GDP by 2030.
- Adoption Rate: AI adoption in China is expected to surpass 30% by 2030, with full integration in 15 years.
Challenges and Job Market Disruptions
Despite the promising economic outlook, Goldman Sachs warns that AI’s impact on industries may be limited, and its widespread use could disrupt the job market. With China’s already struggling housing sector and high youth unemployment rate of over 15 percent, AI’s introduction could lead to additional job losses, especially in real estate, finance, and civil service sectors. The firm also points out the potential for AI and robotics to help manage the challenges posed by China’s aging population, but stresses the need for a carefully managed approach to mitigate the risks of labor displacement.
- Job Market Disruption: AI could exacerbate job losses, particularly in industries like real estate, finance, and civil services.
- Youth Unemployment: China’s youth unemployment rate is already over 15%, and AI-driven disruptions could worsen the situation.
- Aging Population: AI and robotics could help address challenges posed by an aging population, but careful management is required to avoid labor displacement.
Important Highlights:
- AI’s Economic Contribution: Goldman Sachs projects AI could add 0.2 to 0.3 percentage points to China’s GDP by 2030.
- AI’s contribution to GDP growth is expected to begin as early as 2024.
- Workforce Concerns: About 50% of the workforce is in sectors less prone to AI automation, which could limit the overall economic impact.
- Agriculture, manufacturing, and construction are the sectors least likely to adopt AI automation.
- DeepSeek’s Role: DeepSeek has introduced low-cost, open-source AI models, contributing to faster AI adoption in China.
- These models require less computing power and financial resources than those from other tech giants.
- AI Adoption Rate: Goldman Sachs estimates AI adoption will exceed 30% by 2030, with GDP growing by nearly 1% due to AI contributions.
- AI expenditures are expected to rise sharply by 2027, driving economic growth.
- Job Market Impact: AI could lead to labor displacement in sectors like real estate and finance, further challenging an already unstable job market in China.
- China’s youth unemployment rate is already high, and AI adoption could intensify job losses.
As AI technology continues to evolve, its integration into China’s economy promises both opportunities and challenges. The financial sector, businesses, and policymakers must prepare for the changes AI will bring, particularly regarding its workforce impact.
