DeepSeek is part of the Chinese economy’s shift in focus. It raises many important issues, but perhaps the most important is how this advance in AI will power the digitalisation of the Chinese economy.
Cheap, accessible AI is a seismic game changer because it empowers an escape from an economic trap. The China bears argue that the country is destined to fall into the middle-income trap, where growth and prosperity inevitably stall.
An improvement in productivity enables escape from this trap. For China, the expansion of productivity rests on the digital economy that AI powers. This is not the expensive, power-hungry multi-hectare data centre-based AI but the cheap, affordable AI demonstrated by DeepSeek.
The media commentary around DeepSeek did not recognise the role that this most efficient technology could play in increasing productivity. The DeepSeek commentary didn’t understand the economic and social impact of these features.
These critics also do not appreciate one of DeepSeek’s outstanding features: It is bilingual, and English is not its native language. It is “trained” on both Chinese and English data and draws from these sources, which can be argued to make it more intelligent and formidable.
Is there a Chinese version of ChatGPT that will respond to prompts written in Chinese or draw upon Chinese language data sources? In a hegemonic world conceived by the US, there is only one language and one worldview. It is a view that is white, middle class and deeply conservative. Just ask “President” Elon Musk.
See also: China's bull decade — inspiration and reinforcement
DeepSeek is deeply uncomfortable to Western commentators who believed that US sanctions and tariffs had hobbled China’s progress. It smashes complacent assumptions about China’s capacity to innovate and develop new economic directions.
It confirms the directions foreshadowed in President Xi Jinping’s New Year address, which provided insights into global business. China is preparing for a strategic economic realignment.
For international companies, this means new levels of competition in emerging markets with shifting supply chain dynamics. It also signals new types of opportunities as China’s domestic market undergoes a digital transformation.
See also: China's five-year plan bearing fruit
China’s middle class is expected to reach 550 million by 2025. These consumers are the trendsetters, and they demand premium, innovative and sustainable products. This creates a higher barrier for foreign businesses to export to China.
The rapidly developing digital ecosystem, of which DeepSeek is a part, is driving an AI- and big data-driven hyper-personalised consumer experience. Businesses must prepare for the tech-enabled future of retail, which will inevitably spill into markets outside of China.
The country’s investment in tech innovation will redefine industries from AI and robotics to green energy and smart cities. Companies aligning with this innovation will thrive in a collaborative ecosystem of growth. Despite global economic challenges, including sanctions and tariffs, China has demonstrated resilience in its policies and adaptability to new markets.
DeepSeek reveals a transformed China of the future, indicating that businesses’ engagement with the country has changed.
Technical outlook for the Shanghai market
The daily chart of the Shanghai Index shows a market trading in a broad sideways trading band. The market pullback in reaction to US President Donald Trump’s rapid use of tariffs is within the context of the uptrend that developed before the Spring Festival holiday break, with the rebound from 3,160. Any further fall is most likely to be contained by the long-term support near 3,160. This is the lower edge of the trading band, and it is a support area rather than an exact value.
The reaction is always from the upper edge of the long-term Guppy Multiple Moving Average. This is a typical behaviour pattern as a rebound and breakout rally develops.
The index may overshoot support, but the market is likely to hold around this level and use it as a base for a rebound recovery moving towards the upper edge of the trading band, near 3,430. A sustained fall below the lower edge of the trading band has downside support near 3,000.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of the Australia-China Business Council. The writer owns China stock and index ETFs
