Morgan Stanley Says China's AI Sector Is Entering 2.0 Era Focused on Inference and Value Capture

China designated artificial intelligence as a national strategy in 2017, with government policy, its vast market and low-cost open-source models jointly driving commercialization. In a May 2025 report, Morgan Stanley estimated that China's AI and related industries could reach $1.4 trillion by 2030. The focus has now shifted to whether the technology can generate revenue, profits and productivity gains.

In a report released on May 10, 2026, Morgan Stanley said China's AI sector had entered its 2.0 phase, with the market shifting from training to inference and from technology to applications. The bank estimates that AI could raise China's total factor productivity by about 3 percentage points cumulatively over the next 10 years, lifting potential GDP in 2035 by 3.5%. However, job displacement could outpace the creation of new positions over the next two to three years.