Deepseek's promise in China comes with a workforce warning: Goldman Sachs

Goldman Sachs anticipates that by 2030, it estimated that AI-driven advancements could contribute an additional 0.2 to 0.3 percentage points to the expansion of China's economy

Global broking firm Goldman Sachs has projected that artificial intelligence (AI) will provide a modest boost to China’s economy in the coming years, particularly with the introduction of domestic generative AI tools by DeepSeek, according to a report by the South China Morning Post.

 

In a research note released on Sunday, the New York-based financial institution stated that AI would begin to enhance China’s potential economic growth by next year. By 2030, it estimated that AI-driven advancements could contribute an additional 0.2 to 0.3 percentage points to the expansion of the world’s second-largest economy, a figure that surpasses earlier predictions.

 

However, Goldman Sachs pointed out that nearly half of the country’s workforce is employed in sectors such as agriculture, manufacturing, and construction, which are less likely to integrate AI automation. As a result, it revised its overall projected economic uplift from AI adoption downward to 8 per cent, compared with an earlier estimate of 9 per cent.

 

Goldman Sachs noted that DeepSeek’s emergence as a global competitor to leading US-based AI firms suggest that AI development and adoption in China was progressing at a faster pace than previously anticipated. It also pointed out that recent advancements had demonstrated the capability of Chinese companies to continuously improve AI performance while simultaneously lowering computing power requirements, which could accelerate AI adoption in the country.

 

DeepSeek, a Hangzhou-based start-up, has introduced two sophisticated open-source AI models that require significantly less computing power and financial resources compared to similar projects undertaken by major technology firms.

 

AI adoption rate to increase in coming years

 

According to Goldman Sachs, China’s AI adoption is expected to drive economic growth by automating tasks, thereby reducing labour costs and increasing productivity. The bank predicted that AI-related expenditures would rise sharply in the coming years, extending into 2027, with the resulting increase in the gross domestic product (GDP) expected to reach nearly 1 per cent by 2030. The investment bank also projected that AI adoption rates would exceed 30 per cent by 2030, with full integration of the technology likely within the next 15 years.

 

The research note further highlighted that greater capital expenditures and investments were anticipated in the pursuit of AI applications and agents across the ecosystem, including in areas such as semiconductors, data centres, and software.

 

AI will impact China’s job market

 

However, the investment bank indicated that the technology’s impact on industries would be limited, while it could pose challenges to an already volatile job market.

 

It also cautioned that while AI and robotics might offer solutions to the challenges posed by an ageing population, the widespread use of such technologies could disrupt employment at a critical juncture. China is already grappling with a severe downturn in the housing sector, a youth unemployment rate exceeding 15 per cent, and reports of job losses in real estate, finance, and civil service sectors. Given these conditions, Goldman Sachs emphasised the need for a carefully managed approach to AI-driven labour displacement, SCMP said.