Can China and India Turn the AI Boom Into Lasting Growth Without Deepening Jobs and Debt Risks?

AI demand is supporting growth in China and India, offering opportunities for Chinese industry and Indian technology services while creating risks for investment and employment. Policymakers must turn the boom into lasting productivity gains through skills, infrastructure and financial oversight so its benefits reach smaller businesses and workers.

Artificial intelligence is supporting growth in China and India, but the economic benefits will depend on decisions extending well beyond technology investment. Policymakers must balance opportunities for businesses with questions about employment, public spending, infrastructure and financial exposure.

IMF chief economist Silvana Tenreyro said strong AI demand had bolstered growth in China, India and other Asian economies, according to Reuters. Speaking at the IMF and World Bank annual meetings in Bangkok on October 13, she said global trade would have expanded considerably more slowly without the AI boost.

For China and India, that assessment raises a practical question: can stronger demand translate into lasting productivity gains and better livelihoods? Their opportunities overlap, but their industrial structures mean businesses and workers may experience the expansion differently.

China's AI Opportunity: More Orders, Greater Exposure

China could benefit through demand for technology-related production, infrastructure investment and the adoption of AI across businesses. These are potential channels of impact, rather than a verified breakdown of the growth contribution identified by Tenreyro.

For manufacturers and technology suppliers, increased orders can support immediate activity. For companies adopting AI, the longer-term opportunity lies in improving production planning, managing resources and developing services. Productivity gains would make the expansion more durable than investment spending alone.

Policymakers face the challenge of distinguishing commercially useful capacity from projects dependent on optimistic demand forecasts. Investment announcements reveal spending commitments; they do not establish whether projects will earn adequate returns.

Supply concentration also matters. Where businesses depend on a limited number of suppliers or customers, disruptions can affect production and profitability. Diversification may improve resilience, but additional suppliers and capacity can increase costs.

Chinese companies, lenders and public authorities therefore have different responsibilities within the same investment cycle. Businesses must establish viable markets, lenders must examine repayment capacity, and governments must assess whether support produces wider economic benefits. Smaller firms' ability to adopt affordable tools will also influence how widely gains spread.

India's Services Advantage Faces a Jobs Test

India's services economy presents another route to benefit. Companies adopting AI may require software development, integration, consulting and specialised support. Indian technology providers could capture part of that demand, although the scale of the opportunity remains uncertain.

The same technology can also change what clients purchase. Automation may reduce demand for some routine tasks while increasing demand for complex work requiring technical expertise and industry knowledge. Higher company revenues would therefore not automatically mean proportionate increases in recruitment.

This places employees, universities and training providers at the centre of India's response. Workers able to combine AI tools with professional judgement may gain opportunities. Others may need assistance moving into changing roles.

IMF analysis of India identifies skills shortages, inadequate tools and integration difficulties as barriers to effective AI adoption. It also emphasises digital infrastructure, training and protection for workers who may lose employment.

For policymakers, attracting investment is only part of the task. Helping smaller businesses adopt technology could broaden productivity gains beyond large enterprises. Monitoring recruitment, wages and changes in entry-level work would provide a clearer picture of household outcomes than investment totals alone.

Governments Face a Growth-and-Debt Balancing Act

Tenreyro also warned about high debt levels and urged countries to reduce budget deficits, Reuters reported. She advocated more restrictive monetary policies, including interest-rate increases, to bring inflation back towards target.

Those comments describe a broader policy concern; they should not be presented as specific instructions for China and India. Decisions in each country must reflect domestic inflation, growth, financing conditions and fiscal pressures.

AI creates competing claims on public resources. Infrastructure, research and training may support productive adoption, while financial incentives can encourage investment. However, assistance to commercially weak projects could leave governments with costs that exceed the resulting benefits.

Businesses seeking support, workers needing retraining and citizens relying on public services may consequently have different priorities. Policymakers must weigh these interests when allocating limited funds.

Financial regulators also need to understand how investment is financed. If expected profits disappoint, losses could affect shareholders, borrowers or lenders. Wider consequences would depend on leverage and financial connections, rather than falling technology valuations alone.

The Real Test Is Productivity People Can Share

For both countries, the next evidence to watch is whether AI spending improves output, business performance and earnings. China's industrial adoption and India's evolving services demand offer different windows into that process.

Infrastructure planning will matter too. Reliable electricity, operating costs and cybersecurity affect whether projects remain sustainable and whether businesses can use new capacity effectively. These considerations bring utilities, regulators and local communities into the policy debate.

A slowdown in demand could expose projects built around continuous expansion. Conversely, effective adoption could strengthen firms and create opportunities beyond technology suppliers.

The challenge for China and India is to convert today's demand into returns that businesses can sustain, workers can access and public finances can accommodate.