Nomura’s chief China economist Lu Ting warned that artificial intelligence development, heavily concentrated in a handful of major cities, will worsen the “K-shaped” divergence already emerging between China’s largest cities and smaller ones amid a prolonged property downturn.
Speaking at a media briefing, Lu noted that while AI is driving K-shaped economic divergence globally—benefiting capital owners and highly skilled workers while threatening many mid-to-low-end white-collar jobs—China’s situation is compounded by five years of negative growth in real estate investment, which turned negative in 2022 and has remained so since, though cities like Shanghai and Hangzhou have recently shown signs of stabilizing.
Lu explained that lower-tier cities saw steeper home price declines, hitting lower-income residents and migrant workers hardest. As major cities relaxed home purchase restrictions, wealth and talent have increasingly concentrated in top-tier cities, deepening regional divergence.
He said AI development is concentrated in cities like Beijing, Shanghai, Shenzhen, and Hangzhou, with extremely high barriers in large models and chip design and manufacturing making it unlikely smaller cities will benefit, unlike the export boom from electric vehicles, batteries, and solar panels that lifted cities such as Ningde and Changzhou. AI-driven prosperity is unlikely to spread to lower-tier cities and could instead displace white-collar jobs there.
This worsening divergence also undermines China’s push to boost domestic consumption, as wealth concentration among a small population and few cities limits demand growth.
Lu urged the government to avoid blind optimism about AI, support region-specific AI development so smaller cities can share in the benefits, strengthen the social safety net, and moderate the pace of technologies like autonomous driving that threaten blue-collar jobs.
Source: Central News Agency (Taiwan), June 14, 2026
https://www.cna.com.tw/news/acn/202606140068.aspx