China's Rapid spend in Tech (while erasing US lead in AI) causes Economy to fall behind

Some decent meat info in a NYT article. I'd like to c/p but mods don't like it (and I can understand the copyright concerns).

To make matters worse, it (may be) behind a paywall. So what to do? Use AI on an article which is about China spending on AI.

I want to highlight this point -

quote:

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Li Daokui warned the economy was "running too cold". He highlighted a 4.1 percent drop in fixed-asset investment, noting similar contractions only occurred during the Great Famine in 1961 and the Cultural Revolution in 1967. (and also a third time, 1989 following Tiananmen Square... a subject forbidden to discuss)

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Also, the $295 billion (over 5 years) spending on datacenters, compares to $500 billion for Anthropic, $750 billion for Open AI and (near) $1 Trillion Google projected over 5 years.

But China has no customers, except for the state.

This is the way...



NYTimes.com -- China's AI makes a great Leap but Economy is falling behind.

Recent reports highlight that China has made rapid progress in artificial intelligence, significantly closing or erasing the U.S. lead. However, this surge in technological ambition is taking place against the backdrop of China's severe economic crisis, raising critical questions about state resource allocation

Key Points from the Source

.....o Severe Macroeconomic Strains: China's economy is trapped in a deflationary spiral marked by weak consumer spending. In August, youth unemployment (excluding students) reached 18.9 percent. During the first half of the year, domestic car sales dropped 20 percent year-over-year, and housing sales fell 14 percent

.....o Massive State Capital Directed into AI: Stanford's AI Index Report estimates state-backed funds deployed $184 billion into AI firms between 2000 and 2023. Furthermore, Beijing is preparing to spend approximately $295 billion over the next five years on state-operated data centers, alongside tax breaks, direct financing, and government contracts ordered by Xi Jinping

.....o Unprecedented Warnings from State Economists: Top establishment economists openly warned prior to the July Politburo meeting that pouring resources into AI—a sector that creates relatively few jobs—endangers broader economic stability:

............Li Daokui warned the economy was "running too cold". He highlighted a 4.1 percent drop in fixed-asset investment, noting similar contractions only occurred during the Great Famine in 1961 and the Cultural Revolution in 1967.

............Liu Shijin urged raising basic rural pensions from $30 to $150 per month to revive consumer demand.

............Huang Haizhou stated that "a country mired in deflation cannot achieve technological innovation," arguing Beijing must restore corporate profitability and mild inflation first

.....o Xi Jinping’s Focus on "Hard Power": China’s leadership largely bypassed these warnings at its July 30 Politburo meeting, maintaining incremental stimulus while committing to an "intelligent new economy" without announcing a domestic growth target. Xi argued that China "cannot look only at G.D.P. growth," prioritizing national "hard power" and high-tech advancement over social safety net expansions or direct consumer vouchers
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.....o Commercial Risks and Soviet Parallels: Analysts point out that AI firms ultimately require solvent domestic businesses and consumers to purchase their products. Sociologist Sun Liping drew a parallel to the Soviet Union—which rivaled the U.S. scientifically and reached 70 percent of its economic size before stalling—warning that producing advanced technological goods is unsustainable if ordinary citizens lack the income to buy them




PS - Hey China, suck on this banana...