China’s next growth engine? An AI-powered intelligence dividend

As China enters its 15th five-year plan, policymakers face a structural constraint that cannot be eased with another round of infrastructure spending or property stimulus. The demographic dividend that powered four decades of expansion is fading. Industrial competition has intensified. The central economic question is no longer how fast China can grow, but how productively.Artificial intelligence, specifically the rise of AI agents, may offer part of the answer. Deployed at scale, these systems could reshape factory operations, corporate innovation and urban governance. The shift would move China from a population dividend to what might be called an intelligence dividend.AI has moved well beyond chatbots. AI agents can perceive environments, reason through problems, call on external tools and execute tasks autonomously. Powered by large language models, they do not follow pre-written scripts but adapt and learn from data, refining decisions based on feedback. They can conduct research, write and debug code, analyse supply chains, design products or manage workflows – often at minimal cost.This evolution matters because China’s growth model increasingly depends on productivity rather than factor accumulation. With a shrinking labour supply and diminishing returns on capital, the only sustainable lever left is productivity.AI agents potentially affect all three variables: they raise capital efficiency by optimising investment strategy, enhance labour productivity by augmenting or substituting knowledge-based tasks, and improve total factor productivity by reallocating resources more intelligently across complex systems.China’s advantage lies not only in algorithm development but in application scale. While the global AI competition often focuses on model size and computing power, China’s industrial depth provides an expansive testing ground. The AI Plus initiative signals an official intent to embed AI across manufacturing, services and governance. Companies including Huawei Technologies, Alibaba Group Holding (which owns the South China Morning Post) and Baidu are building integrated ecosystems that combine models, user platforms and computing infrastructure.