While artificial intelligence (AI) start-up DeepSeek surprised the world with its latest low-cost reasoning model – dubbed R1 – the revelation reignited overseas interest in Chinese tech and capital market investments while raising expectations that a subsequent surge in AI-fueled productivity will raise economic growth. From analysts to economists, many point to its commercialization and potential applications in domestic industries, and they have noted how China’s rapid tech progress has defied mounting curbs from Washington, thereby instilling confidence that Beijing will manage to shrug off market concerns stemming from a property crisis, demographic upheavals, and a debt-fueled growth model to eventually overtake the United States as the world’s No 1 economy. “This could ignite a wave of innovation and accelerate the pace of AI development, which is important for enhancing total factor productivity,” said Ding Shuang, Chief Greater China Economist at Standard Chartered. Like lowering the barrier to entry in the AI field, DeepSeek could catalyze the emergence of low-cost solutions, he said. “While China’s demographic dividend is diminishing, technological innovation holds the key to boosting labor productivity, which will remain critical for sustaining the country’s medium- to high-speed economic growth,” he added.
A growing number of local governments in China are rushing to adopt DeepSeek’s artificial intelligence (AI) models to enhance administration and governance, reflecting the rising adoption of AI in lower levels of public management. Authorities in Longgang district in Shenzhen, Guangdong province, have utilized DeepSeek’s latest model to improve the governance of its 4 million residents living in an area larger than Singapore. It is the first Chinese district government to widely embrace the start-up’s low-cost, high-performance reasoning model.
DeepSeek’s R1 model, released last month, improved governance efficiency on multiple fronts since its adoption on February 8, officials said. The Longgang government had worked overtime to deploy the model on Huawei Technologies’ Ascend servers. Authorities “boldly” fed government data into the model, the local official in charge of the deployment was quoted as saying. An AI assistant for word processing has helped save time in drafting and proofreading documents, according to a report on the Longgang government website. In the past, it usually took a government official four to five minutes to proofread 1,000 Chinese characters, but DeepSeek’s model could achieve that “in seconds”, the South China Morning Post reports.
Meanwhile, Chinese President Xi Jinping hosted a meeting with some of the nation’s top entrepreneurs – including six Hangzhou-based start-ups known as the “Six Little Dragons” – to recognize progress in critical areas of technological advancement and show support to the private sector. Between 20 and 30 founders and chief executives from China’s largest technology companies met the President in Beijing. The meeting comes at a critical time for China before the national legislature and the political advisory body hold their annual meetings to formulate the nation’s strategies to regain economic growth and chart a course through the evolving trade war and technological race with the U.S. The “two sessions” are also expected to enact legislation to better protect the private sector, the Ministry of Justice said last October. The draft law tries to address the concerns of private entrepreneurs, including protections of private property and personal rights, as well as restrictions on criminal investigations. Against headwinds, companies such as DeepSeek and Huawei have broken through with new services and products that have mitigated the impact from U.S. restrictions, the sources said.
