AI and economic transformation: Growth, adoption, and who captures the gains

AI-driven economic transformation hinges on the interplay between technological advancement, domestic adoption, and global trade integration. While China pursues an indigenous, self-reliant AI ecosystem, US models currently maintain a competitive edge on the cost-capability frontier. Future economic outcomes remain highly uncertain, ranging from modest growth to extreme scenarios where AI-led automation significantly displaces knowledge workers and shifts income from labor to capital. Although international trade facilitates the transmission of productivity gains through cheaper intermediate goods, domestic infrastructure and the ability to integrate AI into local sectors are essential for countries to avoid widening income disparities. Ultimately, the distribution of AI gains depends on whether the technology functions primarily to augment human labor or automate tasks, necessitating flexible policy frameworks that prepare for a broad range of potential economic trajectories.