Geopolitical tensions continue to increase between the United States and China. In response, many Chinese companies in the AI space are planning their moves to thrive in this sudden economic turmoil. Kingdee, one of the largest players in this space, has declared a strategic turn. This year it plans to pivot to be an Enterprise Management AI juggernaut. This change is reflective of larger industry trends. Even with the aggravating trade tensions, China’s investment in AI is expected to double by next year.
In other Kingdee announcements, the company today released a new version of its WPS office software. This unswervingly honed version to Huawei’s HarmonyOS Next embedded operating system keeps consumers engaged when they’re boarding rapidly changing technological surroundings. This improved model comes with truly independent operation from Android. It continues its important progress toward diversifying its software offerings and doing so in the face of continuing U.S. tariffs.
When the U.S. lifted the stakes with higher tariffs, China answered back dollar-for-dollar with their own duties, doubling down on the intensifying trade war. Analysts are increasingly lowering expectations on China’s economic future. Financial heavyweights including Goldman Sachs and Citi have added to these perspectives. These multilateral development banks, too, recently dropped their growth forecasts for this year amid escalatory trade measures and increasingly frosty east–west relations.
Despite these significant challenges, Bernstein analyst Boris Van and his team the growing and enduring demand for AI technologies. And they’re counting on continued robust demand, thanks to leaps in cost efficiencies. Nomura’s technology research analyst Bing Duan warned the negative impact on China’s macroeconomic environment posed by an all-out tariff war. He sees opportunity for some Chinese companies to prosper thanks to Beijing’s determination to lead the world in generative artificial intelligence.
Kingsoft Office has had phenomenal success in rapidly broadening its user base over the last quarter of this year. Other prominent new clients include Chinese automaker Geely, spirits giant Kweichow Moutai and 01.AI. In particular, the company’s AI-integrated iteration of WPS was catapulted to extraordinary success. It gained widespread popularity with 19.68 million monthly active users in mainland China.
China’s investment in artificial intelligence is expected to contribute significantly to its economic output, with estimates suggesting that AI-related spending could comprise 0.13% of the country’s nominal gross domestic product (GDP) by 2024. Among analysts, there is reason to believe this growth will continue full steam ahead. They predict an effective annual rate will be as high as 25% this year and next.
As a result, Nomura has specifically identified internet data center and cloud companies as especially resilient. These firms have survived the tit-for-tat tariffs enacted during the trade war. As a consequence, analysts expect a revenue windfall for the Shanghai-based GDS. They forecast it will grow by more than 9.4%, reaching 11.29 billion yuan this year. Just recently, Nomura’s analysts made AI software and applications their second-most favorite investment category. Their favorites are investing heavily in China-based software vendors such as Kingdee and Kingsoft Corp., as these companies are well positioned to benefit from the brewing opportunities.
Bernstein’s analysis suggests a favorable scenario for China where AI emerges as a critical technology for sustaining economic growth in the face of external pressures. This highlights the dual nature of current circumstances: while trade tensions pose risks, they may catalyze advancements in technology sectors that are deemed essential for future development.
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