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.

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.

“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.”