Connect with us

Finance

Chinese businesses rush to try DeepSeek AI at ‘unprecedented’ scale

Published

on

BEIJING — Chinese businesses are tapping DeepSeek’s newest artificial intelligence model to see how it can improve productivity.

The Chinese AI model took the world by storm in recent weeks after showcasing its reasoning process and claims to undercut rival OpenAI’s ChatGPT on cost — despite U.S. restrictions on Chinese access to the advanced semiconductors needed to develop the tech.

Eight automakers including BYD, at least nine financial securities companies, three state-owned telecommunications operators and smartphone brand Honor are among the many that have rushed in the last week to integrate with DeepSeek. Cloud computing operators Alibaba, Huawei, Tencent and Baidu have all offered ways for clients to access DeepSeek’s latest model.

“This is quite unprecedented,” Wei Sun, principal analyst of artificial intelligence at Counterpoint Research, said in an email Monday. She pointed to the rate of adoption, scale of business integration and breadth of specific industries covered.

“When we have all of these, we know it’s making a big social and economic impact,” she said.

DeepSeek is a 'wake-up moment,' IBM CEO says

Optimism over artificial intelligence has spread to Chinese stocks. UBS said Wednesday that AI-related Chinese stocks are up by 15% since the start of the year, outperforming the broader MSCI China Index by 9%.

A big factor in the widespread interest is timing. DeepSeek released its latest R1 model on Jan. 20, and news of its low-cost reasoning capabilities prompted a global tech stock sell-off on Jan. 27 — just as millions of urban workers in China were returning to their hometowns to celebrate the eight-day Lunar New Year holiday.

As a result, less developed parts of China gained greater understanding of AI and its impact, a topic previously limited to conversations in China’s largest cities, said Wenhao Zhang, CEO of the Beijing-based consumer marketing consultancy Doodod.

“It’s a major education of the market. This will push the entire ecosystem’s development,” he said Tuesday in Mandarin, translated by CNBC.

Zhang, who studied AI at Tsinghua University, founded Doodod in 2012 to build customer engagement through social media analysis. He said the company — which counts China Merchant’s Bank and Toyota as clients — started looking at DeepSeek’s offerings late last year, and began using it more after the R1 release in late January.

DeepSeek, founded in 2023 out of a quantitative hedge fund, had released a basic version of R1 in November, and a V3 model in December. It launched a smartphone chatbot app in January.

Open-source local deployment

Another attractive factor for businesses is that DeepSeek’s models are open-source, allowing individuals and companies to download and customize it.

DeepSeek also advertised drastically lower prices for applications to use its tech versus that of OpenAI. ChatGPT is not officially available in mainland China and requires users to provide an overseas phone number and payment method from a supported country such as the U.S.

DeepSeek changed the perception that AI models only belong to big companies and have high implementation costs, said James Tong, CEO of Movitech, an enterprise software company which says its clients include Danone and China’s State Grid.

He said Movitech started integrating an earlier version of DeepSeek in the fourth quarter of last year, helping boost sales by about 25% from the same period in 2023. The company plans to launch a new DeepSeek-integrated application by the end of March to improve clients’ ability to make decisions, he said.

Many recent videos on Chinese social media have showed off how to run a local version of DeepSeek on Apple’s Mac mini.

Apple Mac mini online sales in China climbed significantly from November to January, versus the same period the year prior, according to data from consultancy WPIC. The electronics-focused JD.com site recorded unit sales of around 20,200 in January, up from nearly 19,400 in December and around 12,250 in November, the data showed.

DeepSeek’s affordability is pressuring more expensive AI models to cut prices, enabling more businesses to adopt the tech, said Chim Lee, senior Asia analyst at the Economist Intelligence Unit. He added that open-source models allow finance, banking and healthcare businesses — which are subject to stringent data protection rules in China — to develop AI applications locally.

“It is still very early to point to concrete business applications, but a key takeaway is that DeepSeek will accelerate the commoditization of AI,” Lee said.

Beijing is also increasing support. China’s national supercomputing network announced Tuesday that eligible companies and individuals can obtain three free months of DeepSeek access, along with subsidized computing power.

The network is similar to OpenAI’s Trump-backed Stargate project in the U.S. for building AI infrastructure — with the potential for “even faster scaling,” Winston Ma, adjunct professor at NYU School of Law said Wednesday. He is also the author of “The Digital War: How China’s Tech Power Shapes the Future of AI, Blockchain and Cyberspace.” 

Not centered on DeepSeek

The rush to try out DeepSeek doesn’t mean it will be the only AI provider for Chinese companies. Developers in the U.S. and China are regularly releasing new models.

Movitech also uses Alibaba’s Qwen AI model, Tong said, noting that the market wants the tech that can lower costs and produce results the most, whether it’s OpenAI or DeepSeek.

HangHang AI, which has invested several hundred million yuan to develop AI solutions for companies across 20 industries, uses a range of models, said partner and COO Shu Weibing.

Many people first used “Baidu, then realized it wasn’t as good as Kimi, then it wasn’t as good as [ByteDance’s] Doubao, which also cut prices,” Shu said in Mandarin, translated by CNBC. “Now it’s DeepSeek.”

It remains to be seen how much generative AI can boost productivity and profits.

Shu predicts that small businesses and companies that integrate AI with hardware will benefit more than large, consumer-facing internet platforms, whose AI work so far, he said, has focused more on boosting efficiency rather than creating new consumer services.

Despite AI models’ falling prices, “small and medium-sized businesses may still be in a period of wait-and-see” for adopting the tech due to the relatively high cost for a full deployment, including computing power and customization, Mike Fang, senior director analyst at Gartner, said Wednesday in Mandarin translated by CNBC.

But the consulting firm predicts that by 2027, the average price to access a generative AI model will be less than 1% of what it costs now — and that by 2029, 60% of Chinese businesses will have incorporated AI into their primary products and services, forming the top drivers of revenue growth.

Continue Reading

Finance

China retail sales, industrial output, fixed asset investment in May

Published

on

Huge waiting lines are seen in front of jewelry retailer stores at Yu Garden in Shanghai, China, on May 17, 2025, as the city offers consumption vouchers to stimulate consumer spending.

Nurphoto | Nurphoto | Getty Images

China’s retail sales in May grew at their fastest rate since late 2023, data from National Bureau of Statistics showed Monday, in part helped by Labor Day and Dragon Boat holidays.

Retail sales last month jumped 6.4% from a year earlier, sharply beating analysts’ estimates for a 5% growth in a Reuters poll and rising from the 5.1% growth in the previous month.

Growth in industrial output slowed to 5.8% year on year in May from 6.1% in the prior month. The latest reading came in slightly weaker than analysts’ expectations for a 5.9% rise.

Fixed-asset investment, reported on a year-to-date basis, expanded 3.7% as of May from a year earlier, undershooting Reuters’ forecast for a 3.9% growth and slowing from a 4% growth in the first four months.

The urban survey-based unemployment rate in May came in at 5.0%, easing from 5.1% in April to the lowest level since November last year.

A tariff deal reached by Beijing and Washington in mid-May gave temporary relief to the country’s exports, prompting some businesses to frontload shipment while doubling down on alternative markets. Both sides struck a 90-day truce to roll back most of the triple-digit levies added on each other’s goods in early April.

Commerce Secretary Howard Lutnick told CNBC last week that U.S. tariffs on Chinese imports will stay at their current level of 55%.

China’s exports grew less than expected in May, though surging shipments to Southeast Asian nations, European Union countries and Africa helped offset the sharp decline in U.S.-bound goods. China’s exports to the U.S. plunged over 34% from a year ago, their sharpest drop since February 2020.

The past two months’ trade data indicated resilience in China’s exports, according to Goldman Sachs, as they highlighted “the difficulty for bilateral tariffs to meaningfully reduce total Chinese exports.”

Sluggish domestic demand stuck out as a more pressing issue for Chinese policymakers. Consumer prices have seen an year-on-year decline for four consecutive months, slumping 0.1% in May. Deflation in the factory-gate or producer prices has also deepened, falling 3.3% from a year ago.

However, Beijing may feel less urgency in rolling out additional easing steps as exports appear more resilient than expected and the GDP growth is on track to exceed 5% in the first half-year, Goldman said.

This is breaking news. Please check back later for updates.

Continue Reading

Finance

Why aren’t Chinese consumers spending enough

Published

on

Customers look at clothes advertising discounts of 80% or 70% in a supermarket in Hangzhou, Zhejiang province, China, on June 9, 2025.

Cfoto | Future Publishing | Getty Images

BEIJING — China’s consumer spending shows little sign of picking up soon, given uncertainty about future wealth, changing preferences and lack of a social safety net.

It’s been four straight months of declining consumer prices, consumer confidence is hovering near historic lows, and the real estate market is struggling to turn around. Analysts repeatedly point to one main factor: stagnant income.

Disposable income in China has halved its pace of growth since the pandemic hit in 2020, now growing only by an average of 5% a year, Jeremy Stevens, Beijing-based Asia economist at Standard Bank, said in a report Wednesday.

Most jobs aren’t giving much of a raise. Out of 16 sectors, only three — mining, utilities and information technology services — have seen wage growth exceed that of gross domestic product since 2020, he said.

Monthly business surveys for May showed contraction in the labor market across the board, especially as factories navigate U.S. tariffs. The unemployment rate among young people aged 16 to 24 and not in school remained high in April at 15.8%. The official jobless rate in cities has hovered around 5%.

China market rally and Hang Seng bull run are supported by fundamentals and sentiment: CIO

A record high of 64% Chinese households said in the third quarter of 2024 that they would rather save money rather than spend or invest it, according to a quarterly survey by the People’s Bank of China.

While that moderated to 61.4% in the fourth quarter, according to the latest survey released in March, it reflected a trend of more than 60% of respondents preferring to save that’s been recorded since late 2023.

And for the respondents who planned to increase spending, education was the top category, followed by health care and tourism, according to the PBOC’s fourth-quarter survey released in March.

More than half of respondents viewed the job market as becoming more difficult or hard to tell.

People in China have been culturally inclined to save, especially since limited insurance coverage means individuals must often bear most of the cost of a hospital treatment, higher education and retirement. The real estate slump of the last few years has also weighed on spending since property accounts for most of household wealth in China.

One way to make people more willing to spend is to more than double pension payouts, by increasing the share of state assets paid to the Ministry of Finance, Luo Zhiheng, chief economist at Yuekai Securities, said in a note.

He added that increasing public holidays and offering services sector consumption vouchers could also help.

In the last few weeks, Chinese authorities have stepped up plans to further support employment and improve social welfare. But policymakers have avoided the mass cash handouts that the U.S. and Hong Kong gave residents to stimulate spending after the pandemic.

Coming out of the pandemic, analysts cautioned that retail sales in China would recover very slowly as major uncertainties for consumers remained unresolved.

In the decade before the pandemic, “Chinese consumers were willing and able to buy any innovation, even innovations that were not that really innovations,” said Bruno Lannes, Shanghai-based senior partner with Bain & Company’s consumer products and retail practices.

“In today’s world they are more rational. They know what they want,” he said on a webinar Thursday.

China is scheduled to report retail sales for May on Monday. Analysts polled by Reuters predict a slowdown to 4.9% year-on-year growth, down from 5.1% in April.

A shift out of big cities

Another factor behind negative CPI reads is that Chinese consumers are turning to lower-priced products, either partly benefiting from the overproduction of relatively high-quality goods, or moving away from big cities to places where the cost of living is lower.

Shanghai lost 72,000 permanent residents last year, while Beijing saw a 26,000 drop, Worldpanel and Bain & Company pointed out in a report Thursday. The two cities are typically categorized as “tier 1” cities in China.

As a result of the population shift, smaller cities categorized as “tier 3” and “tier 4” experienced far higher growth in the volume and value of daily necessities sold last year — helping offset a decline in the tier 1 cities, the report said. The study covered packaged food, beverages, personal care and home care.

It found that while the overall volume of such goods sold in China rose by 4.4% last year, average selling prices fell by 3.4%, as consumers preferred lower-priced products and businesses increased promotions.

The trend is even influencing flower sales.

The Kunming International Flora Auction Trading Center in Yunnan province, Asia’s largest flower market, said in May that more demand is coming from less affluent lower-tier cities, resulting in higher volumes but lower average selling prices.

Business has quieted down after the busy May holiday season, Li Shenghuan, a flower seller near the trading center, said Friday. She said flower prices have come down slightly, partly because more people have been growing flowers. She expects demand to pick up around the National Day holiday in early October.

For a sense of the disparity, rural per capita disposable income has been less than half that of cities for years, according to official data. Per capita disposable income in urban areas last year was 54,188 yuan ($7,553). That’s far less than the $64,474 reported for the U.S. as of December.

Weekly analysis and insights from Asia’s largest economy in your inbox
Subscribe now

Standard Bank’s Stevens pointed out that the ratio of consumption to income in rural areas has “substantially increased” and surpassed pre-pandemic levels, while that of urban households has declined. But he noted that lower-income households don’t have the scale of wealth that higher-income groups do in order to meaningfully increase consumption in the near term.

The top 20% accounts for half of total income and consumption in China, and 60% of total savings, he said. “Policy support for low-income groups, while well-meaning, is insufficient without structural wage reform.”

In addition, China’s “common prosperity” rhetoric “has introduced institutional realignments and policy shifts that, while well-intentioned, have added to the uncertainty,” Stevens said, noting the changes have “yet to fully find a new equilibrium.”

Continue Reading

Finance

New ETF gives investor chance to act like a private equity giant

Published

on

VanEck moves first to target alternative asset managers themselves

The S&P 500 is less than 3% from an all-time high. Six of its 11 sectors are within 5% of an all-time high. But even as the U.S. stock market index proves its resilience during a volatile stretch for investors, more money from within portfolios is expected to shift in to privately traded companies.

Jan Van Eck, CEO of ETF and mutual fund manager VanEck, says the trend of companies staying private for longer rather than seeking an initial public offering is here to stay and it offers new opportunities.

High-profile examples include Elon Musk’s SpaceX, Sam Altman’s OpenAI and fintech Stripe.

According to Van Eck, allocations to private assets will jump from a current average portfolio holding level of approximately 2% to 10% in the years ahead.

Some ETFs have begun to invest small portions of their assets in privately held company shares, including SpaceX, such as the ERShares Private-Public Crossover ETF (XOVR). VanEck has launched an ETF tackling the private opportunity in a different way: taking big positions in the publicly traded shares of the investment giants, including private equity firms and other alternative asset managers, that own many private companies.

The VanEck Alternative Asset Manager ETF (GPZ), which launched this month, has a portfolio holdings list that includes Brookfield, Blackstone, KKR, Brookfield Asset Management and Apollo, which combined make up almost 50% of the fund. TPG, Ares and Carlyle are also big positions, in the 5% range each.

The new ETF extends an existing focus on private markets for VanEck. For over a decade, it has offered investors access to private credit, through the VanEck BDC Income ETF (BIZD), which invests in the business development companies that lend to small- and mid-sized private companies. That ETF has a high level of exposure to Ares, Blue Owl, Blackstone, Main Street and Golub Capital, which make up about half of the fund. It pays a hefty dividend of 11%. 

Stock Chart IconStock chart icon

hide content

Investing private through a publicly traded ETF

“You have to believe this is a secular trend and growth will be higher than that for normal money managers, including ETF and mutual fund managers,” said Van Eck.

He cautions, however, there is more volatility in these funds compared to the public equity market overall.  “You have to size it appropriately,” he added.

Continue Reading

Trending