AI: China's potential trump card or its biggest crisis? Foreign media reveal Beijing faces 'greatest crisis' and risks backlash

Artificial intelligence is rapidly reshaping global industries and has become a new battleground in the US-China tech competition. China has been actively developing AI models, expanding data centers, and integrating robots into its industries, appearing poised to catch up with the United States. However, as AI accelerates the replacement of human labor, China faces a complex problem: the faster its technology develops, the higher the risk of unemployment and social unrest.

The Economist notes that AI is not merely a tool to compare technological prowess but a 'litmus test' for both American and Chinese political systems. China possesses strengths in concentrating resources and driving large-scale infrastructure projects. Yet, how it will manage the social impact of AI displacing a vast workforce is a challenge Beijing cannot avoid. While China's AI models were once considered low-cost and significantly behind top US models, Chinese AI companies are continuously releasing new models, narrowing the technological gap.

Despite having only about one-tenth of the data center capacity of the US, China's ability to rapidly build infrastructure, coupled with its substantial power generation capacity and the availability of open-weight models that can run on overseas servers, means its actual computing power may not lag as much as surface numbers suggest. Facing US export restrictions on advanced chips, China is seeking alternatives, including acquiring Nvidia chips abroad, leasing overseas data centers, and increasing domestic production of chips by companies like Huawei. Although China still lags in cutting-edge extreme ultraviolet (EUV) lithography technology, it is gradually reducing its reliance on foreign technology.

The true driver of AI-driven economic growth lies not just in creating powerful models but in their widespread industrial application, a direction China is actively pursuing. AI is already transforming traditional work in logistics, media, and manufacturing. China is also accelerating the deployment of humanoid robots, with local governments and state-owned enterprises tasked to integrate 10,000 humanoid robots into practical work by the end of 2026, with expectations for significantly increased sales in the future. These developments present both opportunities and risks for China.

With China's working-age population projected to decrease by 25% by 2050, AI and robots could theoretically compensate for the labor shortage. However, AI may replace jobs much faster than the population declines. With China's youth unemployment rate around 15% and over 300 million people in the gig economy, the mass replacement of entry-level jobs by AI and robots could create new unemployment pressures. This is particularly sensitive for the Chinese government, as it involves not only economic but also social stability. Some Chinese economists and government advisors have proposed measures like taxing AI companies and establishing a universal basic income to redistribute AI-generated economic benefits, with such discussions even appearing in the Communist Party's official journal.

However, President Xi Jinping has long opposed excessive reliance on welfare. The government currently favors requiring companies to reassign employees rather than implementing large-scale layoffs, potentially even tasking state-owned enterprises with absorbing some surplus labor. But if the government restricts AI use to prevent unemployment, it could undermine productivity gains, thereby stifling the technology that should be an engine of economic growth. The risk is that oscillating AI policies between 'encouraging development' and 'preventing risks' could dampen corporate investment and innovation, ultimately leaving China at a disadvantage in the AI race. Thus, AI is a true double-edged sword for China. It can help address an aging population and labor shortages while increasing industrial efficiency. Conversely, its rapid proliferation could accelerate unemployment and exacerbate social pressures.

In the US-China AI race, China's real challenge may no longer be 'can it catch up to the US,' but rather, can its government maintain a balance between employment, economic growth, and social stability as AI rapidly transforms its economy and society? If AI develops too slowly, China risks falling behind the US; if it develops too quickly, it could first impact its own job market. For Beijing, navigating the balance between these two risks is likely the most difficult test of the AI era.