Commentary: China’s AI Applications Should Match Its Strengths

China is making significant progress in industries such as artificial intelligence (AI), robotics, animation, and gaming. Developing AI models is costly, so finding commercial applications that can generate revenue will be vital to sustaining investment in these areas. [para. 1]

The commercialization of AI in China can be influenced by several factors. The country has a relatively low per capita GDP compared to developed countries, which suggests potential for higher long-term growth and improvements in living standards. [para. 2] Another factor is the rapidly growing elderly population. In 2020, the ratio of people aged 65 and above to the working-age population in China was 18.2%. This is projected to nearly double to 41.6% by 2040. [para. 3][para. 4]

China's economy is structured differently from developed countries. It has a smaller services sector but a larger manufacturing sector. For example, in 2023, China had a GDP of over $18 trillion compared to the U.S.'s nearly $28 trillion. However, China's GDP from services was less than half that of the U.S. In contrast, its agricultural and manufacturing sectors generated significantly more GDP than the U.S., 4.6 times and 1.4 times respectively. [para. 5][para. 6] This economic structure suggests that AI applications in China are likely to thrive first in the industrial and agricultural sectors. [para. 6]

Labor-intensive subsectors in China, such as mining, food, textiles, automotive, and electronics, generate higher value-added compared to the U.S. However, many jobs in these sectors are hazardous and repetitive. An aging population necessitates the replacement of some of the workforce with industrial robots. These new robots will need to be more "human-like" and capable of performing tasks with some level of thinking, accurate mimicry, and extended working hours. [para. 7][para. 8]

China is currently a leader in AI and battery technologies and is quickly catching up in component technologies needed for robotics. This suggests that China's early AI applications will be evident in the form of new-generation robots, particularly useful in both industrial and agricultural sectors. [para. 9] In addition to industrial uses, AI robots may also replace labor in some service sectors such as warehousing and catering. AI is also expected to be pivotal in education and healthcare due to demographic shifts like declining birth rates and an aging population. [para. 10]

The central government has focused on boosting domestic demand, especially household consumption, as China produces about one-third of the world's manufactured goods but accounts for only 13% of global consumer spending. This disparity contributes to long-term overcapacity and the low-profit margins of China's manufacturing sector. [para. 11] The future success of Chinese manufacturers will depend significantly on their ability to integrate AI and robotics into production. Additionally, the sustainability of high-tech industries will require sufficient domestic demand, which is critical for maintaining profits amid external economic protectionism. [para. 12]