The Impact of Advancing AI Industry on Economic Growth -- Taking Chinese Economy as an Example

The AI industry has become increasingly significant in the economy. The paper tries to explore the effect of AI industry development on Chinas economic growth. It studies aggregate supply (AS) and aggregate demand (AD) sides. For the AS side, the paper analyzes how the AI industry increases the productivity of factors of production. And how the increase in productivity will increase economic growth, according to the production function. Then it cites the Solow paradox and restructuring lags to analyze the time-lag of the effect of AI on economic growth. For the AD side, the paper points out that the AI industry development may boost low consumer confidence and therefore increase aggregate demand, which might be helpful to the current Chinas economy. Finally, this paper provides policies for developing Chinas AI industries to encourage economic growth. The policies include continuing to subsidize firms that buy chips and providing AI career subsidies.