AI will help the US maintain its economic dominance over China, strategists say

• Artificial intelligence will give the US economy a massive boost, according to Capital Economics.
• No country is better positioned to benefit from the technology's rise, the research firm said in a report published in September.
• China's tech crackdown means it'll be left behind, its strategists added.

Artificial intelligence could transform the global economy – and it's the US that's best placed to benefit, according to Capital Economics.

In a report published in September, the research firm assessed the countries set to receive the biggest boost from the technology, which has seen its popularity explode following the rise of ChatGPT.

The US topped the leaderboard, which strategists attributed to the country's high levels of investment and top-quality universities and colleges. Singapore and the UK were ranked second and third place respectively.

"AI has the potential to be a game-changer for productivity growth, but a host of factors will determine whether countries can reap the benefits," wrote a team led by Capital Economics' chief Asia economist, Mark Williams.

"The US ranks first. This suggests that it will once again assume the role of the global technological leader as it has done for much of the past 100 or so years. This reflects its size, the rise in both private and public investment in research and development, and the rapid expansion of the higher education system," they added.

Here's the full ranking:

China is unlikely to benefit to the same extent, according to the report.

Beijing's strict approach to regulating tech will stop AI from spreading as fast as it potentially could – and that means the US is likely to retain its position as the world's largest economy, Williams' team said.

"AI is likely to help the US economy sustain its primacy over China in terms of GDP measured at market exchange rates," the strategists wrote. "The AI revolution is another reason to think that expectations of China's economy streaking ahead of the US will have to be further reined back."

The two countries' economic fortunes have diverged in 2023 – with US growth remaining resilient despite the Federal Reserve's aggressive interest-rate hikes, but China grappling with deflation, surging youth unemployment, and a property-market crisis that's fueled the financial collapse of major developers including Country Garden and Evergrande.

This article was originally published on September 30, 2023.