China Boosts Incomes to Drive Spending

FINANCE
China Boosts Incomes to Drive Spending

China plans to boost consumption by increasing incomes, according to Xinhua News Agency, as part of efforts to counter the economic slowdown caused by U.S. tariffs. The State Council’s guidelines also focus on stabilizing real estate and stock markets while offering incentives to raise birth rates.

At recent parliamentary meetings, leaders prioritized consumption growth for the first time in over a decade. However, specifics on how spending will increase remain unclear. The plan, covering eight areas, includes improving childcare and enforcing paid leave policies. Local governments, such as Hohhot, have already introduced childcare subsidies.

China has set an ambitious 5% growth target for 2025, despite weak retail sales and deflationary pressures. Policymakers aim to boost wages and establish a minimum wage adjustment mechanism. Investors reacted positively, with stocks rallying on expectations of new stimulus measures, including trade-in extensions and maternity support in select cities.

TECH
AI Adoption Slow, Jobs Unaffected

Goldman Sachs’ analysis shows AI has yet to impact key labor market indicators like unemployment, layoffs, and productivity. While AI adoption is rising, the labor market remains stable, with unemployment hovering around 4% since late 2023. Goldman expects AI’s economic effects to emerge by 2027, driving productivity and GDP growth.

Companies have been slow to integrate AI due to costs, workflow overhauls, and security concerns. Some industries, like programming and customer service, have seen hiring slow, but widespread labor shifts haven’t materialized.

Goldman forecasts AI adoption could boost U.S. labor productivity by 15% and global GDP by 7%, though major labor market disruptions may take years. The AI industry is working on cheaper solutions, with companies like DeepSeek challenging market leaders.

For now, AI’s impact on hiring and productivity remains limited. As adoption expands and costs drop, businesses will adapt, leading to broader economic changes in the coming years.

FINANCE
Baidu Unveils Powerful AI Models

Baidu has introduced two new AI models, aiming to compete in the intense AI race. One model, ERNIE X1, focuses on reasoning and reportedly matches DeepSeek R1’s performance at half the price. Baidu claims X1 excels in understanding, planning, and autonomous tool use.

The company also unveiled ERNIE 4.5, highlighting its strong multimodal capabilities, improved logic, memory, and natural language generation. Baidu emphasized its model’s ability to comprehend internet culture, including memes and satire.

Despite launching one of China’s first ChatGPT-style chatbots, Baidu has struggled to achieve widespread adoption of its Ernie model, facing stiff competition from both local and global AI firms.

Multimodal AI, like ERNIE 4.5, can process and convert different data types, including text, video, images, and audio. As China’s AI race intensifies, Baidu aims to carve a stronger position with its latest advancements.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.