Future in the balance
By Anand S. Rao; John Hawksworth |
chinawatch.cn |
Updated: 2019-04-03 09:37
Artificial Intelligence and related technologies such as robots, drones and autonomous vehicles have great potential to boost economic growth.
According to a study by PricewaterhouseCoopers, AI could contribute up to $15.7 trillion (or 14 percent higher) to the global economy in 2030, more than the current output of China and India combined. Of this, $6.6 trillion (5.8 percent) is likely to come from increased productivity and $9.1 trillion (8 percent) is likely to come from consumption effects. The greatest gains from AI are likely to be in China (a predicted 26-percent boost to GDP in 2030) followed by North America (potential 14 percent boost). The biggest sector gains will be in retail, financial services and healthcare as AI increases productivity and product quality and drives consumption.
The increased boost to economic growth will also be accompanied by a shift in employment from repetitive manual and cognitive tasks in blue collar and white collar jobs toward more highly skilled technical jobs as well as jobs requiring greater human interaction. AI will also create many additional jobs as productivity and real incomes rise and new and better products are brought to market.
It is estimated that AI and related technologies could displace around 26 percent of existing jobs in China over the next two decades, but could create significantly more additional jobs in China through boosting productivity and real income levels. It is estimated that the net impact could be a boost to employment in China of around 12 percent, equivalent to around 90 million additional jobs over the next two decades.
However, the net job gains will not be evenly spread across sectors. Most of the net job gains in China are projected to be in services sectors, where we estimate a 29 percent net job increase (around 97 million) with sub-sectors such as healthcare likely to see particularly large increases. More modest net gains in construction (14 million) and a broadly neutral net jobs impact for industrial sectors is forecast. These gains will be offset by net job losses in agriculture estimated at around 10 percent (22 million).
Although the long-term net effect of AI on jobs will be positive for China, there are many factors that could tip the balance toward a more optimistic or pessimistic scenario. There will also be considerable disruption to current labor markets as millions of workers need to switch careers and possibly locations.
There will be great opportunities for businesses from investing in AI and related technologies in China, covering all aspects of operations from marketing and product personalization to R&D, production efficiency, human resource processes and cybersecurity. But there will also be great disruption to existing business models in all parts of the economy, as it has already been seen in sectors like the media, entertainment, finance and retail.
From both a business and a government policy perspective, there is no room for complacency. For the government, the challenge is to maximize the benefits while mitigating the costs in terms of impacts on jobs and income inequality. Only in this way can the great benefits from AI and related technologies be spread as widely as possible across society.
At the 19th National Congress of the Communist Party of China in October 2017, China's leadership stated their intent to put innovation at the core of their strategic development plan, potentially steering the economy toward an outcome closer to our high impact scenario. To do so, the government needs to maximize the benefits of AI while mitigating the costs of the displacement effect. Namely, the benefits of AI should be maximized and the displacement effect of AI should be mitigated.
In order to maximize the benefits, the next generation AI plan should be implemented. Specifically, in 2017 China's leadership launched the Next Generation AI Plan, a detailed road map of how China intends to become the world leader in AI, tackling areas from R&D and industrialization to education, skills acquisition and the setting of standards.
On the other hand, the rapid urban expansion in China by putting AI and related technologies at the heart of smart city planning should be capitalized. The government, scientists and city planners have long seen the potential for AI to transform the way that cities operate. China's booming construction industry, fueled by the construction of entirely new cities and city clusters, provides an unprecedented opportunity to embed smart principles into the fundamental infrastructure of cities. Embedding these principles into energy, water and transport systems should ultimately result in higher standards of living and worker productivity, as well as reduced pollution and traffic congestion.
In terms of mitigating the displacement effects of AI. Since the rapid economic growth in China has come at the cost of widening income and wealth inequality, as well as a widening gap between rural and urban areas, it is advisable to ensure the benefits of AI are shared more equally.
In addition, nurturing an adaptable labor force by investing in skills that will be most useful to people in this increasingly automated world. China's Ministry of Education recently launched its AI Innovation Action Plan for Colleges and Universities, which lays out how infrastructure investment in AI will trigger a process that brings China's universities to the global frontiers of science and technology by 2030.
At the same time, facilitating geographic labor mobility is helpful to achieve the goal of mitigating the displacement effects of AI. Based on their industrial composition, some regions will be more exposed to the displacement effect of AI than others. Rural areas, due to their large share of agriculture, could be at particularly high risk. This is a key factor explaining why around 250 million new migrants are projected to move to Chinese cities by 2050 according to the United Nations.
If China can maximize the benefits from AI and spread the economic benefits as widely as possible across Chinese society, it will mitigate the ensuing costs.
Anand S. Rao is global AI lead at PricewaterhouseCoopers; John Hawksworth is chief economist at PricewaterhouseCoopers UK. Euan Cameron, Jonathan Gillham, Yuval Fertig and James Chang contributed to this story.
The authors contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Artificial Intelligence and related technologies such as robots, drones and autonomous vehicles have great potential to boost economic growth.
According to a study by PricewaterhouseCoopers, AI could contribute up to $15.7 trillion (or 14 percent higher) to the global economy in 2030, more than the current output of China and India combined. Of this, $6.6 trillion (5.8 percent) is likely to come from increased productivity and $9.1 trillion (8 percent) is likely to come from consumption effects. The greatest gains from AI are likely to be in China (a predicted 26-percent boost to GDP in 2030) followed by North America (potential 14 percent boost). The biggest sector gains will be in retail, financial services and healthcare as AI increases productivity and product quality and drives consumption.
The increased boost to economic growth will also be accompanied by a shift in employment from repetitive manual and cognitive tasks in blue collar and white collar jobs toward more highly skilled technical jobs as well as jobs requiring greater human interaction. AI will also create many additional jobs as productivity and real incomes rise and new and better products are brought to market.
It is estimated that AI and related technologies could displace around 26 percent of existing jobs in China over the next two decades, but could create significantly more additional jobs in China through boosting productivity and real income levels. It is estimated that the net impact could be a boost to employment in China of around 12 percent, equivalent to around 90 million additional jobs over the next two decades.
However, the net job gains will not be evenly spread across sectors. Most of the net job gains in China are projected to be in services sectors, where we estimate a 29 percent net job increase (around 97 million) with sub-sectors such as healthcare likely to see particularly large increases. More modest net gains in construction (14 million) and a broadly neutral net jobs impact for industrial sectors is forecast. These gains will be offset by net job losses in agriculture estimated at around 10 percent (22 million).
Although the long-term net effect of AI on jobs will be positive for China, there are many factors that could tip the balance toward a more optimistic or pessimistic scenario. There will also be considerable disruption to current labor markets as millions of workers need to switch careers and possibly locations.
There will be great opportunities for businesses from investing in AI and related technologies in China, covering all aspects of operations from marketing and product personalization to R&D, production efficiency, human resource processes and cybersecurity. But there will also be great disruption to existing business models in all parts of the economy, as it has already been seen in sectors like the media, entertainment, finance and retail.
From both a business and a government policy perspective, there is no room for complacency. For the government, the challenge is to maximize the benefits while mitigating the costs in terms of impacts on jobs and income inequality. Only in this way can the great benefits from AI and related technologies be spread as widely as possible across society.
At the 19th National Congress of the Communist Party of China in October 2017, China's leadership stated their intent to put innovation at the core of their strategic development plan, potentially steering the economy toward an outcome closer to our high impact scenario. To do so, the government needs to maximize the benefits of AI while mitigating the costs of the displacement effect. Namely, the benefits of AI should be maximized and the displacement effect of AI should be mitigated.
In order to maximize the benefits, the next generation AI plan should be implemented. Specifically, in 2017 China's leadership launched the Next Generation AI Plan, a detailed road map of how China intends to become the world leader in AI, tackling areas from R&D and industrialization to education, skills acquisition and the setting of standards.
On the other hand, the rapid urban expansion in China by putting AI and related technologies at the heart of smart city planning should be capitalized. The government, scientists and city planners have long seen the potential for AI to transform the way that cities operate. China's booming construction industry, fueled by the construction of entirely new cities and city clusters, provides an unprecedented opportunity to embed smart principles into the fundamental infrastructure of cities. Embedding these principles into energy, water and transport systems should ultimately result in higher standards of living and worker productivity, as well as reduced pollution and traffic congestion.
In terms of mitigating the displacement effects of AI. Since the rapid economic growth in China has come at the cost of widening income and wealth inequality, as well as a widening gap between rural and urban areas, it is advisable to ensure the benefits of AI are shared more equally.
In addition, nurturing an adaptable labor force by investing in skills that will be most useful to people in this increasingly automated world. China's Ministry of Education recently launched its AI Innovation Action Plan for Colleges and Universities, which lays out how infrastructure investment in AI will trigger a process that brings China's universities to the global frontiers of science and technology by 2030.
At the same time, facilitating geographic labor mobility is helpful to achieve the goal of mitigating the displacement effects of AI. Based on their industrial composition, some regions will be more exposed to the displacement effect of AI than others. Rural areas, due to their large share of agriculture, could be at particularly high risk. This is a key factor explaining why around 250 million new migrants are projected to move to Chinese cities by 2050 according to the United Nations.
If China can maximize the benefits from AI and spread the economic benefits as widely as possible across Chinese society, it will mitigate the ensuing costs.
Anand S. Rao is global AI lead at PricewaterhouseCoopers; John Hawksworth is chief economist at PricewaterhouseCoopers UK. Euan Cameron, Jonathan Gillham, Yuval Fertig and James Chang contributed to this story.
The authors contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
