China Central Bank Adviser Says AI Could Deepen Supply-Demand Imbalance

Artificial intelligence could deepen and prolong China’s economic imbalance between strong supply and weak domestic demand, a policy adviser to the People’s Bank of China said on Saturday, highlighting concerns about the longer-term effects of the country’s technology-driven industrial expansion.

Huang Yiping, a member of the PBOC’s monetary policy committee, said the growing adoption of AI and faster technological innovation could cause the gap between production capacity and consumption to widen further. He added that the imbalance between total supply and total demand may persist for some time.

Huang’s comments come as Chinese policymakers seek to strengthen domestic demand amid a prolonged property downturn, local government debt pressures and cautious household spending. At the same time, the global AI boom has supported demand for Chinese technology products and helped exports provide a buffer for the wider economy.

Recent economic data illustrates the divide. China’s industrial output grew 5.2% year-on-year in August, helped by high-tech manufacturing, while retail sales increased only 0.4%. Investment in the property sector fell 19.9% during the first eight months of the year, underscoring the weakness in domestic demand and the housing market.

The strong performance of advanced manufacturing reflects Beijing’s push to strengthen technological self-sufficiency and reduce reliance on property investment. Production of lithium-ion batteries and industrial robots rose sharply in August, while investment in high-tech industries also expanded. However, the increase in manufacturing activity has not yet translated into a comparable improvement in household spending or economic confidence.

Huang said China should advance market-oriented reforms and give markets a greater role in allocating resources. He also argued that increasing the share of household income in the economy could help strengthen consumption.

The adviser suggested that China could also consider deeper overseas investment and industrial cooperation rather than relying primarily on exports. His comments come amid growing international criticism that excess Chinese industrial capacity is contributing to trade tensions and increasing exports of relatively inexpensive manufactured goods.

Huang also called for greater central government borrowing to help repair the balance sheets of local governments, financial institutions and companies. He argued that restoring their ability to undertake new economic activity would improve the effectiveness of economic stimulus.

The comments highlight a challenge facing China as AI and advanced manufacturing become increasingly important growth engines: expanding production capacity may not be sufficient unless domestic consumption and household incomes grow alongside it.