China Bets Big on an AI Leap Forward While Its Economy Sinks into Trouble

Chinese establishment economists are issuing rare public warnings: the government is pouring too many resources into AI, which creates relatively few jobs, while doing too little to boost the broader economy. Youth unemployment hit 18.9% in August; car sales fell 20% and home sales dropped 14% in the first half of the year, deepening a deflationary spiral. The Stanford AI Index Report estimates government-linked investment funds channeled $184 billion into AI firms from 2000 to 2023, and Bloomberg reports China is preparing another roughly $295 billion over five years for data centers. Former central bank adviser Li Daokui noted fixed-asset investment shrank 4.1% in the first five months—a contraction seen only during the Great Famine and the height of the Cultural Revolution. Xi Jinping has said GDP growth alone is not the yardstick; what matters is hard power and “new quality productive forces.” Economist Xu Chenggang put it bluntly: every yuan spent on state-backed tech is a yuan not spent on jobs and consumption, and AI itself may worsen unemployment by reducing demand for labor. The Politburo’s July meeting stuck with gradual stimulus and did not publish a growth target; the article does not report a clear policy pivot since.