Julius Baer Bank of Switzerland: The adoption of AI could lead to stronger productivity growth and make China's growth prospects more optimistic.

Recently, Julius Baer Bank of Switzerland released its latest market research report. The bank's Emerging Markets economist and strategist, Mali Chivakul, pointed out that there have been some encouraging signs of government support for the economy in China, including positive credit impulse over the past two months, as well as workshops with top executives of private enterprises that have boosted the confidence of these companies. The timing of the workshops shows that the government aims to further develop the positive momentum brought by the release of the DeepSeek AI model. The emergence of DeepSeek not only supports the Chinese stock market but also makes Julius Baer Bank more optimistic about China's mid-term growth prospects as the adoption of AI is expected to stronger productivity growth. Credit data shows positive momentum, government commits to support private enterprises Credit data for January exceeded expectations, showing positive momentum for the second consecutive month. Credit growth in January was mainly driven by strong government bond issuances and higher inflows of new loans (including to businesses and households). The mainland government held a workshop with leaders of private enterprises on February 17, further confirming the government's broad support for these companies. The companies participating in the meeting were mainly high-tech enterprises, including Alibaba, Huawei, Contemporary Amperex Technology, BYD Company Limited, Xiaomi, Weix Semi, and Yushu Technology. New Hope Liuhe Group (agriculture, food, and energy), Firmus (food and dairy products), and Hengli Group (petrochemical) also attended the meeting. The timing of the workshop shows that the Chinese government hopes to build on the momentum generated by DeepSeek. Recent data has been generally positive, with strong growth in tourism and box office revenues during the Lunar New Year period. To maintain the positive momentum, the government must provide sufficient fiscal support and significant structural reforms. Providing fiscal support and structural reforms at the National People's Congress annual meeting on March 5 remains key to improving consumer confidence and sustaining recent growth momentum. The issue of weak consumer and business confidence still needs to be addressed. AI applications accelerate, impacting labor market, expected mid-term potential growth rate of China to reach 3.5% Looking ahead, the emergence of DeepSeek has made Julius Baer Bank more optimistic about China's potential growth. China is already a leader in the adoption of AI across industries, thanks to government prioritization and private companies using AI for specific purposes. The AI Plus program launched at last year's National People's Congress aims to integrate AI with the real economy, particularly through industrial upgrades. The low-cost model of DeepSeek could facilitate the faster and wider adoption of GenAI in China. Julius Baer Bank's baseline forecast for China's mid-term potential growth rate is 3.5%. The acceleration of AI applications will have an impact on the labor market. AI-driven technologies are expected to create new businesses and job opportunities, but also to replace some existing jobs. Recent job vacancy data has shown a significant increase in job openings in industries related to AI, such as computer hardware, semiconductors, Siasun Robot & Automation, and drones.