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How Artificial Intelligence Can Drive China’s Growth




OVERVIEW

Globally, there has been marked decline in the ability of increases in capital investment and in labor to propel economic progress. These two levers are the traditional drivers of production, yet they are no longer able to sustain the steady march of prosperity enjoyed in previous decades in many economies.

China is no exception. The economy has slowed significantly, labor shortages and a capital crunch have disrupted the old growth model, and productivity has dwindled.

But long-term pessimism is unwarranted. Actually, a recent analysis by Accenture revealed that AI has the potential to add as much as 1.6 percentage points to China’s economic growth rate by 2035.

THE NEW FACTOR OF PRODUCTION

Based on our analysis and modeling, we can illustrate what happens when AI is seen as a new factor of production rather than just a productivity enhancer. In China’s case, this translates into a significant increase in projected growth.


THREE GROWTH SCENARIOS FOR CHINA’S ECONOMY

Image

China’s GVA in 2035 (US$ billion)

Source: Accenture and Frontier Economics

THREE CHANNELS OF AI-LED GROWTH

Intelligent automation

  1. The first feature is its ability to automate complex physical world tasks that require agility and adaptability.

  2. Whereas traditional automation technology is task specific, the second distinct feature of AI-powered intelligent automation is its ability to solve problems across industries and job titles.

  3. The third and most powerful feature of intelligent automation is self-learning, enabled by repeatability at scale.

Labor and capital augmentation

  1. A significant part of the economic growth from AI will come not from replacing existing labor and capital, but in enabling them to be used much more effectively.

  2. Moreover, AI augments labor by complementing human capabilities, offering employees new tools to enhance their natural intelligence.

  3. AI can also improve capital efficiency—a crucial factor in industries where it represents a large sunk cost.

Innovation diffusion

One of the least-discussed benefits of artificial intelligence is its ability to stimulate innovation as it diffuses through the economy.

FACTORING IN AI

Boosting national economic growth

THE ECONOMIC IMPACT OF AI

AI has the potential to increase China’s annual growth rate by 1.6 percentage points by 2035 in terms of gross value added (a close approximation of GDP).

Real gross value added (GVA) by 2035 (%, growth)

Real gross value added (GVA) by 2035 (%, growth)
Source: Accenture and Frontier Economics

Labor productivity revival

Revitalizing China’s industries

AI’S IMPACT ON CHINA’S INDUSTRIES

Percentage difference of annual GVA growth rates between baseline and AI steady state by 2035 (%)

Percentage difference of annual GVA growth rates between baseline and AI steady state by 2035 (%)

Source: Accenture

NEXT STEPS FOR POLICY MAKERS AND BUSINESS LEADERS

 
To fully exploit AI’s potential for reigniting China’s economic growth and the revitalization of its industries, policymakers must be thoroughly prepared to address the challenges—intellectual, technological, political, ethical and social—that will inevitably arise as artificial intelligence becomes more embedded in our lives. Business leaders will need to integrate AI into their strategies and create a new AI playbook that empowers people to do what they do best—imagine, innovate and create.

For policymakers: Clearing the path to an AI future

  • Prepare the next generation for the AI future

  • Advocate a code of ethics for AI

  • Address the redistribution effects

For business leaders: Creating a new playbook for an AI world

  • Step beyond automation, and towards new innovations

  • Take a strategic approach to data management

  • Invent new business capabilities for an AI-powered organization


Authors

Mark Purdy

Managing Director
Accenture Research

Mail to Mark Purdy. This opens a new window.

Serena Jing Qiu

Thought Leadership Senior Principal
Accenture Research

Mail to Serena Jing Qiu. This opens a new window.

Frank Chen

Managing Director
Accenture Technology Lead, Greater China

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