Chen Changhua: What Insights Does DeepSeek Offer for China’s Economy? (AI Translation)

【周刊提前读】陈昌华专栏：DeepSeek对中国经济有何启示

[para. 1] On the eve of Lunar New Year, DeepSeek launched its groundbreaking AI model, capturing global attention and inadvertently causing a moderate stock market crash on Wall Street. While much of the discourse has focused on its technological merits and broader impacts on the global tech landscape, this article shifts the lens towards its potential implications for Chinese society and its economy.

[para. 2] The introduction of DeepSeek has significantly bolstered national confidence within China. Data suggests that during the Spring Festival, DeepSeek's appearances in Baidu search results surpassed those of traditional festival-related terms such as holiday movies and commute patterns. This marked interest reveals DeepSeek’s resonance with the Chinese public. In the ongoing technological rivalry with the United States, China's recent accomplishments, including DeepSeek, have often remained peripheral to everyday life. However, this AI development taps into an industry foundational to future tech evolution, especially significant amidst Western-imposed technology export restrictions. Unique to DeepSeek is its growth from minimal government support, largely developed by a grassroots team from domestic universities, symbolizing a classic 'David versus Goliath' narrative.

[para. 3] Emboldened by this surge in national morale, the Chinese government gains strategic latitude in countering challenges from the U.S., especially as economic interdependency with the U.S. has waned over recent years. Following the Trump administration's proposal of a 10% tariff hike on Chinese goods and further anticipated restrictions, China's government is positioned to maneuver with greater composure, responding in ways that align with its broader national interests.

[para. 4] The emergence of DeepSeek is poised to catalyze AI and ancillary industries within China. Although DeepSeek might not claim the title of the world's foremost AI model and the prohibition on U.S. chips could hinder its progress, the creation of a globally competitive open-source AI model signifies a pivotal step forward. The potential for AI demand is immense given China’s large, increasingly affluent, and aging demographic, suggesting opportunities in sectors such as healthcare, manufacturing, and entertainment education. The sheer volume of available data further augments China’s capacity for AI development and model training. Historically, U.S. tech controls hindered investment in this space, but DeepSeek’s success is likely to trigger increased investment from domestic enterprises.

[para. 5] On the talent front, DeepSeek's team, made up largely of young professionals from local universities, exemplifies the potential for homegrown innovation. Following the precedent set by foreign enterprises, some team members are expected to venture into new start-ups or join other related firms, echoing the cascading innovation effect seen with Bell Labs in the U.S.

[para. 6] DeepSeek’s achievement could revitalize China’s R&D landscape, urging more companies to prioritize foundational research and pursue innovative breakthroughs rather than follow existing technology trends.

[para. 7] Uniquely, DeepSeek's development originates from a hedge fund rooted in quantitative trading, highlighting the financial sector's potential contributions to technological progress. A healthy modern economy thrives on the synchronized progress of various sectors, with the fundamental goal of any enterprise being the delivery of consumer-desired goods and services for profit.

[para. 8] While embracing AI is beneficial for China's long-term economic and social trajectory, its immediate economic impact remains limited. China's short-term growth targets and moderate inflationary pressures largely hinge on real estate and consumption performance. Although the AI model enlivens national spirit, it has not yet demonstrated a significant boost to immediate consumer confidence.

[para. 9] In China's capital markets, whether in A-shares or Hong Kong stocks, AI-focused companies like those in the U.S. are scarce, and large internet or semiconductor firms lack significant "AI premium" valuations. However, in the wake of DeepSeek’s buzz, major Chinese companies, especially those with extensive user databases, are expected to delve deeper into AI sectors, paving the way for a potential surge in AI-centric enthusiasm should favorable market conditions persist. Ultimately, the revaluation of these enterprises is contingent upon whether their AI investments drive fundamental transformative changes.